<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 23, 1997)
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 33-96378
[LOGO]
$1,355,381,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-LL I
The Commercial Mortgage Pass-Through Certificates, Series 1997-LL I (the
"Certificates") will represent beneficial ownership interests in a trust fund
(the "Trust Fund") to be created by Structured Asset Securities Corporation (the
"Depositor"). The Trust Fund will consist primarily of a pool (the "Mortgage
Pool") of eight mortgage loans (the "Mortgage Loans") with original terms to
maturity of not more than 34 years (the "Mortgage Loans,") secured by first
liens on 99 commercial properties (the "Mortgaged Properties"). The Mortgaged
Properties include retail properties (including power centers, an urban
marketplace and a regional mall), office buildings (including suburban office
buildings and a Manhattan office tower), hotels, industrial properties and
manufactured housing communities. The Mortgage Loans were all originated by or
on behalf of Lehman Brothers Holdings Inc. ("LB Holdings"). See "Mortgage Pool
Characteristics--General."
(COVER PAGE CONTINUED ON NEXT PAGE)
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE INITIAL
PRINCIPAL OR CERTIFICATE RATINGS % OF INITIAL
NOTIONAL INTEREST MOODY'S/S&P/ POOL
CLASS AMOUNT(1) RATE DESCRIPTION DCR(2) BALANCE
<S> <C> <C> <C> <C> <C>
Class A-1......... $612,000,000 6.790% Fixed Aaa/AAA/NR 42.9%
Class A-2......... 204,000,000 6.840% Fixed Aaa/AAA/NR 14.3
Class A-3......... 168,434,000 6.900% Fixed Aaa/AAA/NR 11.8
Class X-1......... 1,376,717,068 0.956%(3) Interest Only Aaa/NR/AAA N/A
Class B........... 114,138,000 6.950% Fixed Aa2/AA/NR 8.0
Class C-1......... 49,870,000 7.000% Fixed A2/A/NR 3.5
Class C-2......... 50,000,000 LIBOR+0.43%(4) LIBOR A2/A/NR 3.5
Class X-2(5)...... 50,000,000 0.102%(3) Interest Only A2/A/NR N/A
Class D........... 114,137,000 7.150% Fixed Baa2/NR/BBB 8.0
Class E........... 42,802,000 7.300%(6) Fixed/WAC Baa3/NR/BBB- 3.0
<CAPTION>
CLASS CUSIP NO.
<S> <C>
Class A-1......... 863572 PN7
Class A-2......... 863572 PP2
Class A-3......... 863572 PQ0
Class X-1......... 863572 PR8
Class B........... 863572 PS6
Class C-1......... 863572 PT4
Class C-2......... 863572 PU1
Class X-2(5)...... 863572 PV9
Class D........... 863572 PW7
Class E........... 863572 PX5
</TABLE>
(1) Approximate, subject to adjustment as described herein.
(2) The Rated Final Distribution Date for the Offered Certificates will be the
Distribution Date occuring in October 2034.
(3) The Certificate Interest Rate shown in the table above for the Class X-1 and
Class X-2 Certificates is the rate for the Distribution Date occurring in
November 1997. The Certificate Interest Rate for such Classes for each
subsequent Distribution Date will be calculated as provided herein. See
"Description of the Offered Certificates--Distributions--Payment Priorities"
herein.
(4) LIBOR for the Distribution Date occurring in November 1997 will be set on
October 10, 1997.
(5) The Class X-2 Certificates will not be outstanding later than the
Distribution Date in July 2004. See "Description of the Offered
Certificates-- General" herein.
(6) The Class E Certificates bear interest at a rate equal to the lower of the
fixed rate specified in the table above and the Group 1 WAC Rate. The
Certificate Interest Rate shown in the table above for such Class is the
rate for the Distribution Date occurring in November 1997. The Certificate
Interest Rate for such Class for each subsequent Distribution Date will be
calculated as provided herein. See "Description of the Offered
Certificates--Distributions--Payment Priorities" herein.
SEE "RISK FACTORS" BEGINNING ON PAGE S-41 HEREIN AND ON PAGE 25 OF THE
PROSPECTUS FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE OFFERED
CERTIFICATES.
The Offered Certificates will be purchased by Lehman Brothers Inc. (the
"Underwriter") from the Depositor and will be offered by the Underwriter from
time to time to the public in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Depositor from the
sale of the Offered Certificates will be $1,433,113,031 plus accrued interest
from October 11, 1997 before deducting expenses payable by the Depositor.
------------------------------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR,
LB HOLDINGS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE
UNDERWRITER, THE FISCAL AGENT OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The Offered Certificates are offered by the Underwriter subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriters. It
is expected that delivery of the Offered Certificates will be made through the
facilities of The Depository Trust Company ("DTC") on or about October 14, 1997
against payment therefor in immediately available funds.
------------------------------
LEHMAN BROTHERS
FIRST UNION CAPITAL MARKETS CORP.
The date of this Prospectus Supplement is October 10, 1997.
<PAGE>
A. The inside front cover of the paper version of the prospectus
supplement shows the logos of the following entities:
a. The Macerich Company;
b. Courtyard by Marriott;
c. Arden Realty, Inc.;
d. Sun Communities, Inc.;
e. Prentiss Properties Trust;
f. The Blackstone Group;
g. Developers Diversified Realty Corporation; and
h. DRA Advisors, Inc.
B. The inside front cover contains a map of the contiguous United States
showing the concentration of the Mortgaged Properties in the pool by state as
follows:
Percentage
State of Total
- ---------------- ----------
Arizona 0.6%
Alabama 0.5%
California 23.8%
Colorado 1.5%
Connecticut 0.5%
Florida 3.7%
Georgia 7.2%
Illinois 5.8%
Indiana 0.3%
Kansas 0.4%
Maryland 1.0%
Massachusetts 5.6%
Michigan 4.1%
Missouri 2.8%
New York 19.8%
North Carolina 2.8%
Ohio 1.5%
Pennsylvania 0.5%
Tennessee 0.8%
Texas 8.4%
Virginia 6.2%
Wisconsin 2.0%
C. The inside front cover contains a pie graph showing Allocated Loan
Amount by Property Type in the following amounts:
Manufactured Housing 3.2%
Urban Marketplace 4.1%
Power Center 22.6%
Hotel 22.5%
CBD Office 19.2%
Suburban Office 19.0%
Industrial 5.9%
Regional Mall 3.6%
D. The inside front cover contains a pie graph showing Allocated Loan
Amount by Sponsor in the following amounts:
Sun 3.2%
DDR/DRA 22.6%
Courtyard 22.5%
Blackstone 19.2%
Prentiss 12.6%
Arden 12.3%
Macerich 7.6%
E. The inside front cover of the paper version of the prospectus
supplement contains pictures of the following properties under the following
company names:
Prentiss Properties Trust:
(a) Dulles Corner Park, Herndon, Virginia; and
(b) O'Hare Plaza II, Chicago Illinois.
Developers Diversified Realty Corporation/DRA Advisors, Inc.
(a) Woodfield Village Green, Schaumberg, Illinois; and
(b) Fairfax Towne Center, Fairfax, Virginia.
The Blackstone Group
(a) Worldwide Plaza, 825 Eighth Avenue, New York, New York.
The inside back cover of the paper version of the prospectus
supplement contains pictures of the following properties under the following
company names:
Courtyard by Marriott
(a) typical hotel
The Macerich Company
(a) Valley View Mall, Dallas, Texas; and
(b) Villa Marina Marketplace, Marina Del Rey, California (two
photographs)
Arden Realty Inc.
(a) The New Wilshire, Los Angeles, California;
(b) Anaheim City Centre, Anaheim, California; and
(c) 400 Corporate Pointe, Culver City, California
Sun Communities, Inc.
(a) Sherman Oaks, Jackson, Michigan
<PAGE>
(CONTINUATION OF COVER PAGE)
The Certificates will consist of 14 classes (each a "Class"), designated as
the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates,
Class X-1 Certificates, Class B Certificates, Class C-1 Certificates, Class C-2
Certificates, Class X-2 Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class T Certificates, Class R Certificates
and Class LR Certificates. Only the Class A-1, Class A-2, Class A-3, Class X-1,
Class B, Class C-1, Class C-2, Class X-2, Class D and Class E Certificates
(collectively, the "Offered Certificates") are offered hereby. The Class F,
Class T, Class R and Class LR Certificates (collectively, the "Private
Certificates") are not offered hereby.
The Mortgage Pool consists of two groups: "Loan Group 1," which consists of
the fixed rate components of the Worldwide Plaza Loan and the other Mortgage
Loans, and "Loan Group 2" which consists of the floating rate component of the
Worldwide Plaza Loan. The characteristics of the Mortgage Loans and the
Mortgaged Properties are more fully described herein under "Mortgage Pool
Characteristics" and "Description of the Mortgage Loans and Mortgaged
Properties."
Distributions on the Offered Certificates will be made, to the extent of
Available Funds (as defined herein), on the second Business Day immediately
following the 10th day of the month (or if the 10th day of the month is not a
Business Day, on the third Business Day immediately following the 10th day of
the month), beginning in November 1997 (each, a "Distribution Date"). As more
fully described herein, distributions allocable to interest on the Certificates
on each Distribution Date will be based on the certificate interest rate for the
respective Class (the "Certificate Interest Rate") and the aggregate principal
balance (the "Certificate Principal Amount") or notional balance (the "Notional
Amount"), as applicable, of such Class outstanding immediately prior to such
Distribution Date. Distributions in respect of principal of the Offered
Certificates will be made as described herein under "Description of the Offered
Certificates--Distributions--Payment Priorities."
THE YIELD TO MATURITY ON EACH CLASS OF THE OFFERED CERTIFICATES WILL BE
SENSITIVE TO, AND THE YIELD TO MATURITY ON THE CLASS X-1 CERTIFICATES WILL BE
EXTREMELY SENSITIVE TO, THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING
BOTH VOLUNTARY AND INVOLUNTARY PREPAYMENTS, DELINQUENCIES, DEFAULTS AND
LIQUIDATIONS) ON THE MORTGAGE LOANS AND PAYMENTS WITH RESPECT TO REPURCHASES
THEREOF THAT HAVE THE EFFECT OF REDUCING THE CERTIFICATE PRINCIPAL AMOUNT OR
NOTIONAL AMOUNT, AS THE CASE MAY BE, OF SUCH CLASS. THE YIELD TO MATURITY ON THE
CLASS X-2 CERTIFICATES WILL BE EXTREMELY SENSITIVE TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING VOLUNTARY PREPAYMENTS, DELINQUENCIES, DEFAULTS AND
LIQUIDATIONS) ON THE WORLDWIDE PLAZA LIBOR COMPONENT AND PAYMENTS WITH RESPECT
TO REPURCHASES THEREOF THAT HAVE THE EFFECT OF REDUCING THE NOTIONAL AMOUNT OF
SUCH CLASS. THE YIELD TO INVESTORS, IN PARTICULAR THE INVESTORS IN SUBORDINATE
CLASSES, WILL BE SENSITIVE TO THE TIMING AND MAGNITUDE OF DELINQUENCIES AND
LOSSES ON THE MORTGAGE LOANS. The rights of the holders of the Class B, Class
C-1, Class D, Class E and Class F Certificates to receive distributions will be
subordinated to such rights of the holders of Certificates with an earlier
sequential designation and the Class X-1 Certificates. In addition, with respect
to any Class of Certificates entitled to principal distributions, to the extent
losses on the Mortgage Loans exceed the principal amount of all Classes of
Certificates subordinate to such Class, such Class will bear a loss equal to the
amount of such excess up to an amount equal to the remaining principal amount
thereof. Holders of the Class C-2 Certificates will be entitled to receive
distributions of principal only from principal payments on the floating rate
component of the Worldwide Plaza Loan. See "Description of the Offered
Certificates-- Distributions" and "Description of the Mortgage Loans and
Mortgaged Properties--The Worldwide Plaza Loan and Property" herein. Therefore,
the Class C-2 Certificates will be extremely sensitive to the rate and timing of
principal payments on the Worldwide Plaza Loan (including those resulting from
voluntary prepayments, delinquencies, defaults, liquidations and/or any
repurchase of the Worldwide Plaza Loan). No representation is made as to the
rate, timing or magnitude of any such event with respect to any of the Mortgage
Loans or as to the anticipated yield to maturity of any Offered Certificate. In
addition, although the Certificate Interest Rate on the Class C-2 Certificates
is based on LIBOR, as described under "Description of the Offered
Certificates--Distributions--Payment Priorities" herein, after the Distribution
Date in July 2004, the Certificate Interest Rate on Class C-2 Certificates will
be a fixed rate. See "Yield, Prepayment and Maturity Considerations" herein.
GMACCM will act as master servicer of the Mortgage Loans (in such capacity,
the "Master Servicer"). The obligations of the Master Servicer with respect to
the Certificates will be limited to its
S-3
<PAGE>
contractual servicing obligations and the obligation under certain circumstances
to make Advances (as defined herein) in respect of the Mortgage Loans. See "The
Pooling Agreement--Advances" herein. The Master Servicer will not act as an
insurer or credit enhancer of the Mortgage Pool. If the Master Servicer fails to
make a required Advance, LaSalle National Bank (the "Trustee") will be required
to make such Advance in accordance with the terms of the Pooling Agreement. If
the Trustee fails to make a required Advance, ABN AMRO Bank N.V., as the fiscal
agent of the Trustee (the "Fiscal Agent") will be required to make such Advance
in accordance with the terms of the Pooling Agreement. The obligation of the
Master Servicer, the Trustee and the Fiscal Agent to make Advances is subject to
a determination of recoverability.
Elections will be made to treat designated portions of the Trust Fund (such
portions of the Trust Fund, the "Trust REMICs"), exclusive of the Reserve
Accounts, the Lock Box Accounts, the Excess Interest, the Default Interest, the
Excess Interest Distribution Account and the Class T Distribution Account (each
as defined herein), and the Trust REMICs, in the opinion of counsel, will
qualify, as two separate "real estate mortgage investment conduits" (each, a
"REMIC" or, alternatively, the "Upper-Tier REMIC" and the "Lower-Tier REMIC,"
respectively) for federal income tax purposes. The Class A-1, Class A-2, Class
A-3, Class X-1, Class B, Class C-1, Class C-2, Class X-2, Class D, Class E and
Class F Certificates will represent "regular interests" in the Upper-Tier REMIC.
The Class R and Class LR Certificates will constitute the sole Classes of
"residual interests" in the Upper-Tier REMIC and the Lower-Tier REMIC,
respectively. In addition, the Class A-1, Class A-2, Class A-3, Class B, Class
C-1, Class C-2, Class D, Class E and Class F Certificates will represent
undivided beneficial interests in designated portions of the Excess Interest,
which portion of the Trust Fund will be treated as part of a grantor trust for
federal income tax purposes. The Offered Certificates, together with the Class F
Certificates, are sometimes collectively referred to herein as the "Regular
Certificates". See "Federal Income Tax Consequences" herein and "Federal Income
Tax Considerations" in the Prospectus.
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF THE DEPOSITOR'S CERTIFICATES AND ARE BEING OFFERED
PURSUANT TO ITS PROSPECTUS DATED SEPTEMBER 23, 1997, OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT
CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND
THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
There is currently no secondary market for the Offered Certificates. The
Underwriter currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will continue. See
"Underwriting" herein.
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to read carefully, and should rely solely
on, the detailed information appearing elsewhere in this Prospectus Supplement
and the Prospectus relating to the Offered Certificates in making their
investment decision. The following Executive Summary does not include all
relevant information relating to the Offered Certificates or Mortgage Loans,
particularly with respect to the risks and special considerations involved with
an investment in the Offered Certificates and is qualified in its entirety by
reference to the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus. Prior to making any investment decision, a
prospective investor should carefully review this Prospectus Supplement and the
Prospectus. Capitalized terms used and not otherwise defined herein have the
respective meanings assigned to them in this Prospectus Supplement and the
Prospectus.
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
% C/E % OF DEAL
<S> <C> <C> <C> <C> <C> <C>
Class A-1
31.0% 42.9% Aaa/AAA/ NR
Class X-1
Aaa/NR/ AAA Class A-2
31.0% 14.3% 10 Aaa/AAA/ NR
Class A-3
31.0% 11.8% Aaa/AAA/ NR
Class B
23.0% 8.0% Aa2/AA/ NR
Class C-1 % of Deal Class C-2 Class X-2
16.0% 3.5% A2/A/NR 3.5% A2/A/NR A2/A/NR
Worldwide
Fixed
Component B
Class D *
8.0% 8.0% Baa2/NR/ BBB ($105 mm)
Class E
Baa3/NR/
5.0% 3.0% BBB-
Class F
5.0% Ba2/BB/ NR
* The Worldwide Plaza Fixed Component B, which has a principal
balance as of the Cut-off Date of $105,000,000, is an asset of Loan
Group 1. See "Description of the Mortgage Loans and Mortgaged
Properties--The Worldwide Plaza Loan and Property" and "Description
of the Offered Certificates-- Distributions."
</TABLE>
Not offered hereby: Class F
(Class T, Class R and Class LR Certificates not represented by this diagram.)
Ratings: (Moody's/S&P/DCR)
S-5
<PAGE>
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE INITIAL % OF WEIGHTED CASH FLOW
PRINCIPAL OR CERTIFICATE INITIAL AVERAGE OR
NOTIONAL INTEREST RATING POOL LIFE PRINCIPAL
CLASS AMOUNT RATE DESCRIPTION MOODY'S/S&P/DCR BALANCE (YEARS)* WINDOW*
<S> <C> <C> <C> <C> <C> <C> <C>
SENIOR CERTIFICATES
A-1 $612,000,000 6.790% Fixed Rate Aaa/AAA/NR 42.9% 5.04 11/97-06/04
A-2 204,000,000 6.840% Fixed Rate Aaa/AAA/NR 14.3 6.90 06/04-09/06
A-3 168,434,000 6.900% Fixed Rate Aaa/AAA/NR 11.8 9.13 09/06-03/07
X-1 1,376,717,068 0.956% Interest Only Aaa/NR/AAA N/A 7.75 11/97-04/12
SUBORDINATE CERTIFICATES
B 114,138,000 6.950% Fixed Rate Aa2/AA/NR 8.0 9.41 03/07-03/07
C-1 49,870,000 7.000% Fixed Rate A2/A/NR 3.5 9.73 03/07-09/07
C-2 50,000,000 LIBOR+0.43% Floating A2/A/NR 3.5 6.74 07/04-07/04
Interest
X-2 50,000,000 0.102% Only** A2/A/NR N/A 6.74 07/04-07/04
D 114,137,000 7.150% Fixed Rate Baa2/NR/BBB 8.0 12.48 09/07-04/12
E 42,802,000 7.300% Fixed/WAC*** Baa3/NR/BBB- 3.0 14.49 04/12-04/12
F 71,336,068 7.300% Fixed/WAC*** Ba2/BB/NR 5.0 14.49 04/12-04/12
</TABLE>
- ------------------------
Class T, Class R and Class LR Certificates not represented by this diagram.
* Based on Scenario 1 as defined on page S-248 and the Mortgage Loan
Assumptions beginning on page S-247.
** The Class X-2 Certificates will not be outstanding later than the
Distribution Date in July 2004.
*** The Class E and Class F Certificates bear interest at a rate equal to the
lesser of the fixed rate specified above or the Group 1 WAC Rate.
MORTGAGE LOAN SUMMARY
<TABLE>
<CAPTION>
ORIGINAL
AMORTIZ-
CUT-OFF DATE ANTICIPATED FINAL ATION MORT-
NO. OF PRINCIPAL REPAYMENT MATURITY TERM GAGE
MORTGAGE LOAN PROPER- TIES BALANCE DATE (ARD) DATE (MONTHS) RATE DSCR
<S> <C> <C> <C> <C> <C> <C> <C>
DDR/DRA Loan 10 $322,500,000 N/A June 10, 2002 N/A 7.378% 1.97X
Courtyard Loan 50 $321,577,850 April 10, April 10, 240 7.865% 2.08X
2012 2017
Worldwide Plaza Loan
FIXED COMPONENT A $118,576,031 240 7.920%
LIBOR COMPONENT 1 $ 50,000,000 July 10, 2004 July 10, 2017 240 LIBOR+ 1.45X
0.55%
FIXED COMPONENT B $105,000,000 NA 7.920%
Prentiss Loan 12 $180,100,000 February 26, February 26, N/A 7.579% 1.93X
2007 2027
Arden Loan 17 $175,000,000 June 11, 2004 June 10, 2029 N/A 7.520% 2.02X
Villa Marina Loan 1 $ 58,000,000 October 10, October 10, N/A 7.225% 1.95X
2006 2031
Valley View Loan 1 $ 51,000,000 October 10, October 10, N/A 7.890% 1.90X
2006 2031
Sun Communities Loan 7 $ 44,963,187 September 10, September 10, 360 7.010% 1.92X
2007 2027
Total/Weighted Average 99 $1,426,717,068 7.575%** 1.89X
<CAPTION>
CUT-
OFF
DATE ARD
MORTGAGE LOAN WALTV WALTV
<S> <C> <C>
DDR/DRA Loan 61.2% 61.2%*
Courtyard Loan 56.5% 23.7%
Worldwide Plaza Loan
FIXED COMPONENT A
LIBOR COMPONENT 65.8% 50.3%
FIXED COMPONENT B
Prentiss Loan 60.9% 60.9%
Arden Loan 51.4% 51.4%
Villa Marina Loan 57.4% 57.4%
Valley View Loan 53.3% 53.3%
Sun Communities Loan 60.3% 51.9%
Total/Weighted Average 59.3% 48.7%
</TABLE>
- ------------------------
* Indicates the Final Maturity Date LTV.
** Includes Worldwide Plaza LIBOR Component.
S-6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXECUTIVE SUMMARY.................................................................... S-5
SUMMARY OF PROSPECTUS SUPPLEMENT..................................................... S-9
RISK FACTORS......................................................................... S-41
The Mortgage Loans................................................................. S-41
Conflicts of Interest.............................................................. S-68
The Offered Certificates........................................................... S-69
DESCRIPTION OF THE OFFERED CERTIFICATES.............................................. S-74
General............................................................................ S-74
Distributions...................................................................... S-75
Excess Prepayment Interest Shortfalls.............................................. S-86
Subordination...................................................................... S-86
Appraisal Reductions............................................................... S-86
Delivery, Form and Denomination.................................................... S-87
Book-Entry Registration............................................................ S-88
Definitive Certificates............................................................ S-89
Transfer Restrictions.............................................................. S-90
MORTGAGE POOL CHARACTERISTICS........................................................ S-91
General............................................................................ S-91
Security for the Mortgage Loans.................................................... S-92
Certain Characteristics of the Mortgage Loans...................................... S-92
Underwriting Standards............................................................. S-106
Additional Information............................................................. S-107
DESCRIPTION OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES........................... S-108
The DDR/DRA Loan and Properties.................................................... S-108
The Courtyard Loan and Properties.................................................. S-129
The Worldwide Plaza Loan and Property.............................................. S-145
The Prentiss Loan and Properties................................................... S-156
The Arden Loan and Properties...................................................... S-169
The Villa Marina Loan and Property................................................. S-183
The Valley View Loan and Property.................................................. S-193
The Sun Communities Loan and Properties............................................ S-204
THE POOLING AGREEMENT................................................................ S-214
General............................................................................ S-214
Assignment of the Mortgage Loans................................................... S-214
Representations and Warranties; Repurchase......................................... S-214
Servicing of the Mortgage Loans; Collection of Payments............................ S-215
Advances........................................................................... S-217
Accounts........................................................................... S-219
Withdrawals From the Collection Account............................................ S-221
Successor Manager.................................................................. S-222
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses...................... S-222
Inspections........................................................................ S-223
Evidence as to Compliance.......................................................... S-223
Certain Matters Regarding the Depositor, the Master Servicer and the Special
Servicer......................................................................... S-224
Events of Default.................................................................. S-225
Rights upon Event of Default....................................................... S-226
Amendment.......................................................................... S-227
Realization upon Mortgage Loans; Modifications..................................... S-228
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
Optional Termination; Optional Mortgage Loan Purchase.............................. S-233
The Trustee........................................................................ S-233
Duties of the Trustee.............................................................. S-234
The Fiscal Agent................................................................... S-235
Duties of the Fiscal Agent......................................................... S-235
The Master Servicer................................................................ S-236
Servicing Compensation and Payment of Expenses..................................... S-236
Special Servicer................................................................... S-237
Master Servicer and Special Servicer Permitted to Buy Certificates................. S-238
Reports to Certificateholders; Available Information............................... S-238
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS.......................................... S-242
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS........................................ S-244
Yield.............................................................................. S-244
Yield on the Offered Certificates.................................................. S-246
Rated Final Distribution Date...................................................... S-254
Weighted Average Life of Offered Certificates...................................... S-254
USE OF PROCEEDS...................................................................... S-259
ERISA CONSIDERATIONS................................................................. S-259
FEDERAL INCOME TAX CONSEQUENCES...................................................... S-261
UNDERWRITING......................................................................... S-263
LEGAL INVESTMENT..................................................................... S-263
EXPERTS.............................................................................. S-264
LEGAL MATTERS........................................................................ S-264
RATINGS.............................................................................. S-264
INDEX OF SIGNIFICANT DEFINITIONS..................................................... S-267
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Financial Information
DDR/DRA Properties........................................................... Exhibit
A-1
Courtyard Properties......................................................... Exhibit
A-2
BRE/Worldwide Plaza L.L.C. and New York Communications Center Associates, Exhibit
L.P........................................................................ A-3
Prentiss Properties.......................................................... Exhibit
A-4
Arden Properties............................................................. Exhibit
A-5
Representations and Warranties and Schedule Thereto............................ Exhibit B
Form of Master Servicer Reports................................................ Exhibit C
Schedule of Weighted Average Net Mortgage Rates................................ Exhibit D
Mortgaged Property Characteristics............................................. Annex A
Marketing Memorandum........................................................... Annex B
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SUMMARY OF PROSPECTUS SUPPLEMENT
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN
THE ACCOMPANYING PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE
DEFINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS. AN INDEX
OF SIGNIFICANT DEFINITIONS INCLUDED AT THE END OF THIS PROSPECTUS SUPPLEMENT
SETS FORTH THE PAGES ON WHICH THE DEFINITIONS OF CERTAIN PRINCIPAL TERMS APPEAR.
<TABLE>
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TITLE OF CERTIFICATES............. Structured Asset Securities Corporation, Commercial
Mortgage Pass-Through Certificates, Series 1997-LL I
(the "Certificates").
CERTIFICATE PRINCIPAL AND NOTIONAL
AMOUNT.......................... Each Class of Offered Certificates has the approximate
aggregate initial Certificate Principal Amount or
Notional Amount set forth on the cover page of this
Prospectus Supplement, subject to a variance of plus or
minus 5%. The Offered Certificates, together with the
Private Certificates, will be issued pursuant to a
Pooling and Servicing Agreement, to be dated as of the
Cut-Off Date (the "Pooling Agreement"), among the
Depositor, the Master Servicer, the Special Servicer,
the Trustee and the Fiscal Agent.
DEPOSITOR......................... Structured Asset Securities Corporation, a Delaware
corporation (the "Depositor"), an affiliate of Lehman
Brothers Holdings Inc. ("LB Holdings") and the
Underwriter. See "The Issuer--The Company" in the
Prospectus.
MASTER SERVICER................... GMAC Commercial Mortgage Corporation, a California
corporation ("GMACCM" and, in its capacity as master
servicer, the "Master Servicer"), will serve as the
master servicer of the Mortgage Loans. See "The Pooling
Agreement--The Master Servicer" herein and "Servicing of
Mortgage Loans" in the Prospectus.
SPECIAL SERVICER.................. The initial special servicer (in such capacity, the
"Special Servicer") will be GMACCM. See "The Pooling
Agreement-- Special Servicer" herein.
TRUSTEE........................... LaSalle National Bank, a national banking association
(the "Trustee"). See "The Pooling Agreement--The
Trustee" herein.
FISCAL AGENT...................... ABN AMRO Bank N.V., a Netherlands banking corporation
(the "Fiscal Agent"), and the indirect corporate parent
of the Trustee.
CUT-OFF DATE...................... October 11, 1997.
CLOSING DATE...................... On or about October 14, 1997.
DISTRIBUTION DATE................. The second Business Day immediately following the 10th
day of each month (or if the 10th day of the month is
not a Business Day, on the third Business Day
immediately following the 10th day of the month),
commencing in November 1997.
"Business Day" means any day other than a Saturday, a
Sunday or any day on which banking institutions in the
City of New York, New York, the cities in which the
principal servicing offices of the Master Servicer or
the Special Servicer are located, or the city in which
the corporate trust office of the Trustee is located,
are authorized or obligated by law, executive order or
governmental decree to be closed.
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RECORD DATE....................... With respect to each Distribution Date and each Class of
Offered Certificates, other than the Class C-2
Certificates, the close of business on the last day of
the month immediately preceding the month in which such
Distribution Date occurs, or if such day is not a
Business Day, the immediately preceding Business Day;
with respect to each Distribution Date and the Class C-2
and Class X-2 Certificates, the close of business on the
9th day of the month in which such Distribution Date
occurs, or if such day is not a Business Day, the
immediately preceding Business Day.
INTEREST ACCRUAL PERIOD........... With respect to any Distribution Date and with respect
to each Class of Certificates, other than the Class C-2
and Class X-2 Certificates, the period commencing on and
including the 10th day of the month preceding the month
in which such Distribution Date occurs and ending on and
including the 9th day of the month in which such
Distribution Date occurs.
With respect to the Class C-2 and Class X-2
Certificates, the Interest Accrual Period with respect
to any Distribution Date is the period commencing on and
including the 12th day of the month preceding the month
in which such Distribution Date occurs and ending on and
including the eleventh day of the month in which such
Distribution Date occurs.
RATED FINAL DISTRIBUTION DATE..... As to each Class of Offered Certificates, the
Distribution Date in October 2034, which is the
Distribution Date occurring three years after the latest
maturity date of any Mortgage Loan.
DUE DATE.......................... With respect to any Mortgage Loan, the day each month
set forth in the related Note on which the Scheduled
Payment is due and payable, and with respect to any
Distribution Date, the Due Date occurring in the month
in which such Distribution Date occurs. All of the
Mortgage Loans have Due Dates that occur on the 10th day
of each month, or, if such day is not a business day,
the immediately preceding or succeeding business day.
COLLECTION PERIOD................. With respect to a Distribution Date and each Mortgage
Loan, the period beginning on the day after the Due Date
in the month preceding the month in which such
Distribution Date occurs and ending at the close of
business on the Due Date in the month in which such
Distribution Date occurs.
DENOMINATIONS..................... The Offered Certificates, other than the Class X-1 and
Class X-2 Certificates, will be issuable in registered
form, in minimum denominations of Certificate Principal
Amount of $10,000 and multiples of $1 in excess thereof,
and the Class X-1 and Class X-2 Certificates will be
issuable in registered form, in minimum denominations of
Notional Amount of $250,000 and multiples of $1 in
excess thereof.
CLEARANCE AND SETTLEMENT.......... Holders of Offered Certificates may hold their
Certificates through The Depository Trust Company
("DTC"). Transfers within DTC will be in accordance with
the usual rules and operating procedures of the such
system. The Depositor may elect to terminate the
book-entry system through DTC with respect to all or any
portion of any Class of the Offered Certificates. See
"Description of the Offered Certificates--
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Delivery, Form and Denomination," "--Book-Entry
Registration" and "--Definitive Certificates" herein and
"Description of the Securities--General" in the
Prospectus.
THE MORTGAGE POOL................. The "Mortgage Pool" will consist of 8 Mortgage Loans,
each evidenced by one or more promissory notes (each, a
"Note") secured by first mortgages, deeds of trust or
similar security instruments ("Mortgages") on 99
commercial properties (the "Mortgaged Properties"). See
"Description of the Mortgage Loans and Mortgaged
Properties" herein. Although the Prentiss Properties are
generally described herein as consisting of 12
commercial properties, several of the Prentiss
Properties actually consist of multiple Mortgaged
Properties. See "Description of the Mortgage Loans and
Mortgaged Properties--The Prentiss Loan and Properties."
The Mortgage Loans will be acquired by the Depositor on
or before the Closing Date. In connection with its
transfer of the Mortgage Loans to the Trustee, the
Depositor will make certain representations and
warranties described herein. See "Mortgage Pool
Characteristics--General" and "The Pooling Agreement--
Representations and Warranties; Repurchase." As of the
Cut-Off Date, the Mortgage Loans will have the following
approximate characteristics:
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Aggregate Principal Balance............. $1,426,717,068
Lowest Mortgage Loan Principal
Balance............................... $ 44,963,187
Highest Mortgage Loan Principal
Balance............................... $ 322,500,000
Average Mortgage Loan Principal
Balance............................... $ 178,339,634
Range of Remaining Terms to
Anticipated Repayment Date(1)......... 56-174 mos.
Weighted Average Remaining Term to
Anticipated Repayment Date(1)......... 103 mos.
Range of Mortgage Rates(2).............. 7.010%-7.920%
Weighted Average Mortgage Rate.......... 7.575%
Range of Cut-Off Date LTV Ratios........ 51.4%-65.8%
Weighted Average Cut-Off Date
LTV Ratio............................. 59.3%
Range of Debt Service Coverage
Ratios(3)............................. 1.45X-2.08X
Weighted Average Debt Service
Coverage Ratio(3)..................... 1.89X
- ------------------------------
(1) In the case of the DDR/DRA Loan, its maturity date.
(2) Excludes the Worldwide Plaza LIBOR Component.
(3) The DSCR for the Worldwide Plaza Loan assumes LIBOR
of 5.656%.
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DESCRIPTION OF THE MORTGAGE LOANS
AND PROPERTIES.................. Set forth below is a summary of the Mortgage Loans and
Mortgaged Properties. For a further description of the
Mortgage Loans and Mortgaged Properties, see
"Description of the Mortgage Loans and Mortgaged
Properties" and "Mortgage Pool Characteristics" herein.
The "occupancy rate" disclosed with respect to the
Mortgaged Properties that are retail properties include
as "occupied" (i) space that is leased but not occupied
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and (ii) anchor space that is occupied but not owned by
the related borrower.
A. THE DDR/DRA LOAN
AND PROPERTIES................ The "DDR/DRA Loan" has a principal balance as of the
Cut-Off Date of $322,500,000 and is evidenced by three
separate Notes issued by three related borrowers. The
first two Notes, having principal balances of
$42,750,000 (the "DDR/DRA Note A") and $153,000,000 (the
"DDR/DRA Note B"), were issued by Community Centers One
L.L.C. (the "DDR/DRA I Borrower"). The third Note (the
"DDR/DRA Note C," and together with the DDR/DRA Note A
and the DDR/DRA Note B, the "DDR/DRA Notes"), having a
principal balance of $126,750,000, was issued jointly by
Community Centers Two L.L.C. (the "DDR/DRA II Borrower")
and Shoppers World Community Center, L.P. (the "DDR/DRA
III Borrower," together with the DDR/DRA I Borrower and
the DDR/DRA II Borrower, the "DDR/DRA Borrowers"). The
DDR/DRA Borrowers are jointly owned by Developers
Diversified Realty Corporation ("DDRC") (the common
stock of which is traded on the NYSE under the listing
symbol "DDR"), affiliates of DDR and affiliates of DRA
Advisors, Inc. Each of the DDR/ DRA Notes is secured by
first Mortgages (the "Non-Florida DDR/DRA Mortgages")
encumbering 9 retail power centers in the following
locations: Framingham, Massachusetts; Schaumburg,
Illinois; San Diego, California; Durham, North Carolina;
Fairfax, Virginia; Atlanta, Georgia; Denver, Colorado;
Marietta, Georgia; and Independence, Missouri
(collectively, the "Non-Florida DDR/DRA Properties").
The DDR/DRA Note B is also secured by a first Mortgage
(the "Florida DDR/ DRA Mortgage," and together with the
Non-Florida DDR/ DRA Mortgages, the "DDR/DRA Mortgages")
in a 10th retail power center (the "Carillon Place
Property," and together with the Non-Florida DDR/DRA
Properties, the "DDR/DRA Properties") located in Naples,
Florida. The Florida DDR/DRA Mortgage does not secure
the DDR/DRA Note A or the DDR/ DRA Note C. All of the
DDR/DRA Notes are cross-defaulted. Each of the DDR/DRA
Notes bears interest at a fixed rate per annum of 7.378%
(the "DDR/DRA Base Interest Rate") through and including
June 10, 2002. Interest on the DDR/DRA Notes is
calculated on the basis of the actual number of days
elapsed and a 360-day year.
The DDR/DRA Notes are scheduled to mature on June 10,
2002 (the "DDR/DRA Maturity Date"), but may be repaid
without the payment of a yield maintenance premium on or
after the commencement of the period beginning 6 months
prior to the DDR/DRA Maturity Date (such period, the
"DDR/DRA Permitted Prepayment Period"). The DDR/DRA
Notes require monthly payments of interest (the "DDR/DRA
Monthly Debt Service Payments") and a single Balloon
Payment of the principal balance of the DDR/DRA Loan
together with all accrued and unpaid interest on the
DDR/DRA Maturity Date.
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The amounts of the monthly payments of interest on the
three DDR/DRA Notes are approximately $2,010,377.
The DDR/DRA Properties contain approximately 4,217,942
square feet of gross leasable area ("GLA") of retail
space. As of June 27, 1997, the occupancy rate of the
DDR/DRA Properties ranged from approximately 83% to 100%
and the annualized base rent for such properties was
approximately $11.91 per square foot of GLA. The 5
largest tenants (based on annual base rental payments)
for the DDR/DRA Properties are Wal-Mart, Barnes & Noble,
General Cinema, Office Max and Builders Square.
Appraisals performed for the DDR/DRA Properties between
July 1, 1997 and August 1, 1997 determined an aggregate
value of approximately $529,500,000.
B. THE COURTYARD LOAN AND
PROPERTIES.................... The "Courtyard Loan" has a principal balance as of the
Cut-Off Date of approximately $321,577,850 and is
secured by Mortgages (the "Courtyard Mortgages")
encumbering 50 hotels located in 16 states (the
"Courtyard Properties"). The Courtyard Mortgages are
cross-collateralized and cross-defaulted. The borrower
under the Courtyard Loan is Courtyard by Marriott
Limited Partnership (the "Courtyard Borrower"). The
general partner of the Courtyard Borrower is indirectly
owned by Host Marriott Corporation, whose common stock
is traded on the NYSE under the listing symbol "HMT".
The Courtyard Loan bears interest at a fixed rate per
annum equal to 7.865% (the "Courtyard Base Interest
Rate") through April 9, 2012. From and after April 10,
2012 (the "Courtyard Anticipated Repayment Date"), the
Courtyard Loan accrues interest at a rate per annum (the
"Courtyard Adjusted Interest Rate") which is fixed on
the Courtyard Anticipated Repayment Date as the greater
of (a) the Courtyard Base Interest Rate plus 2% and (b)
the average yield calculated by linear interpolation of
U.S. Treasury Constant Maturities with terms (one longer
and one shorter) most nearly approximating those of U.S.
Obligations having maturities as close as possible to
the 15th anniversary of the Courtyard Anticipated
Repayment Date, plus 2%. The interest accrued at the
excess of the Courtyard Adjusted Interest Rate over the
Courtyard Base Interest Rate will be deferred and added
to the principal amount of the Courtyard Loan and will
bear interest at the Courtyard Adjusted Interest Rate
(such accrued and deferred interest and interest
thereon, the "Courtyard Excess Interest"). Interest on
the Courtyard Loan is calculated on the basis of the
actual number of days elapsed and a 360-day year.
The Courtyard Loan matures on April 10, 2017 (the
"Courtyard Maturity Date") but may be prepaid in whole
or in part without payment of a yield maintenance
premium on or after October 10, 2011 provided there is
no event of default. Commencing on May 9, 1997, the
Courtyard Loan requires 240 monthly payments of
principal and interest (calculated based on the basis of
the actual number of days elapsed and a 360-day year) of
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approximately $2,720,157 each (the "Courtyard Monthly
Debt Service Payment") (based on a 240-month
amortization schedule and the Courtyard Base Interest
Rate). Commencing on the first Due Date after the
Courtyard Anticipated Repayment Date, in addition to the
Courtyard Monthly Debt Service Payments, the Courtyard
Borrower is required to apply 100% of the Courtyard
Excess Cash Flow (as defined herein under "Description
of the Mortgage Loans and Mortgaged Properties--The
Courtyard Loan and Properties--The Loan-- Payment
Terms") for all Courtyard Accounting Periods for which
the operating profit payment date occurred during the
Courtyard Debt Service Period relating to such Due Date
for application in the following order of priority: (a)
to the outstanding principal balance of the Courtyard
Loan until such principal is reduced to zero (b) to
unpaid default interest and (c) to the Courtyard Excess
Interest. The scheduled principal balance of the
Courtyard Loan as of the Courtyard Anticipated Repayment
Date is approximately $134,955,706.
The Courtyard Properties consist of 50 limited service
hotels operated as Courtyard by Marriott hotels under
management of Courtyard Management Corporation (the
"Courtyard Manager"), a wholly owned subsidiary of
Marriott International, Inc. The properties contain in
the aggregate 7,223 guest rooms, with each individual
Courtyard Property having between 127 guest rooms and
154 guest rooms and averaging 145 guest rooms per
Courtyard Property. All of the Courtyard Properties were
built between 1983 and 1987. The average occupancy rate
of the hotels for the 13 accounting periods ending
December 1996 (calculated for the trailing thirteen
Courtyard Accounting Periods) ranged from 68% to 93%,
with a weighted average of 80%, weighted based on
Allocated Loan Amount. The ADRs for the 13 accounting
periods ending December 1996 (calculated for the
trailing thirteen Courtyard Accounting Periods) for the
Courtyard Properties ranged from approximately $59 to
$100 with a weighted average of $78. The appraisals
dated January 1, 1997 determined an aggregate market
value of $574,900,000 for all of the Courtyard
Properties held as a portfolio.
C. THE WORLDWIDE PLAZA LOAN AND
PROPERTY...................... The "Worldwide Plaza Loan" had a principal balance as of
the Cut-Off Date of approximately $273,576,031, and is
secured by a mortgage (the "Worldwide Plaza Mortgage")
encumbering a 47-story office tower in New York, New
York (the "Worldwide Plaza Property"). The Worldwide
Plaza Loan is comprised of three principal components
(each a "Worldwide Plaza Component"). Two of such
principal components bear interest at a fixed rate; the
first in the amount of $118,576,031 (the "Worldwide
Plaza Fixed Component A") and the second in the amount
of $105,000,000 (the "Worldwide Plaza Fixed Component B"
and, together with the Worldwide Plaza Fixed Component
A, the "Worldwide Plaza Fixed Components"). The third
principal component bears interest at a variable rate
and
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has a principal amount of $50,000,000 (the "Worldwide
Plaza LIBOR Component"). Scheduled payments of principal
will be applied to reduce the outstanding principal
balance of the Worldwide Plaza Loan in the following
order; first, to the payment of the Worldwide Plaza
Fixed Component A until such amount is paid in full;
second, to the Worldwide Plaza LIBOR Component, until
such amount is paid in full; and third, to the Worldwide
Plaza Fixed Component B until such amount is paid in
full. The borrower under the Worldwide Plaza Loan is
BRE/ Worldwide L.L.C. (the "Worldwide Plaza Borrower").
The Worldwide Plaza Borrower is an affiliate of
Blackstone Real Estate Advisors L.P.
The Worldwide Plaza Fixed Components bear interest at a
fixed rate per annum of 7.920% (the "Worldwide Plaza
Fixed Interest Rate") until July 10, 2004 (the
"Worldwide Plaza Anticipated Repayment Date"). The
Worldwide Plaza Borrower has provided a $2,000,000
letter of credit from The Chase Manhattan Bank, N.A. The
Worldwide Plaza Borrower is also required, pursuant to
the terms of the Worldwide Plaza Loan, to fund an
additional $2,000,000 in cash or by an additional letter
of credit on each August 1 starting in 1998 and ending
in 2003 (such deposits, the "Worldwide Plaza Additional
Collateral"). The scheduled principal balance of the
Worldwide Plaza Loan as of the Worldwide Plaza
Anticipated Repayment Date after taking into account
application of the Worldwide Plaza Additional Collateral
to reduction of the principal amount of the Worldwide
Plaza Loan will be approximately $209,107,025. The
Worldwide Plaza LIBOR Component bears interest at LIBOR
plus 0.55% (the "Worldwide Plaza LIBOR Rate") until the
Worldwide Plaza Anticipated Repayment Date. On and after
the Worldwide Plaza Anticipated Repayment Date, the
Worldwide Plaza LIBOR Rate will be equal to the
Worldwide Plaza Fixed Interest Rate. On and after the
Worldwide Plaza Anticipated Repayment Date, all 3
components of the Worldwide Plaza Loan will accrue
interest at a per annum rate (the "Worldwide Plaza
Adjusted Interest Rate") which is fixed on the Worldwide
Plaza Anticipated Repayment Date as the greater of (i)
the Worldwide Plaza Fixed Interest Rate plus 2% or (ii)
the average yield, calculated by linear interpolation of
the yields on U.S. Treasury Obligations with terms (one
longer and one shorter) most nearly approximating those
of U.S. Obligations having maturities as close as
possible to the Worldwide Plaza Maturity Date plus 2%.
All interest accrued at the excess of the Worldwide
Plaza Adjusted Interest Rate over the Worldwide Plaza
Fixed Interest Rate (the "Worldwide Plaza Excess
Interest") will be deferred without interest and will
not be paid until after the principal balance of the
Worldwide Plaza Pool Loan has been reduced to zero.
Interest on the Worldwide Plaza Fixed Components is
calculated based on the actual number of days elapsed
and a 360-day year.
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The Worldwide Plaza Borrower has entered into an
interest rate cap agreement in a notional amount equal
to the initial aggregate principal amount of the
Worldwide Plaza LIBOR Component with a term of 7 years,
requiring payment by a counterparty approved by the
Ratings Agencies of all interest on such notional amount
in excess of 9%. See "Risk Factors--The Mortgage
Loans--Risks Relating to the Worldwide Plaza Interest
Rate Cap Agreement" and "Description of the Mortgage
Loans and Mortgaged Properties--The Worldwide Plaza Loan
and Property--The Loan--Payment Terms".
The Worldwide Plaza Loan is scheduled to mature on July
10, 2017. The Worldwide Plaza Fixed Components may be
prepaid, in whole or in part, without payment of any
yield maintenance charge or prepayment premium on the
Worldwide Plaza Anticipated Repayment Date and on any
Due Date thereafter. The Worldwide Plaza LIBOR Component
is prepayable without payment of any prepayment premium
on any Due Date upon at least 15 Business Days' prior
written notice. Commencing on August 10, 1997, the
Worldwide Plaza Loan requires 240 monthly payments of
principal and interest of approximately $2,238,964 each
(based on a 240-month amortization schedule, the
Worldwide Plaza Fixed Interest Rate and an assumed
Worldwide Plaza LIBOR Rate of 6.20625%).
Additionally, provided that no event of default under
the Worldwide Plaza Loan documents shall have occurred
and be continuing, the Master Servicer will cause the
funds held in the Worldwide Plaza Cash Management
Account to be distributed on a monthly basis in the
following order: (a) to fund the tax and insurance
escrow fund, (b) to fund payment of interest on the
Worldwide Plaza Fixed Component A at the Worldwide Plaza
Fixed Interest Rate, (c) to fund payment of interest on
the Worldwide Plaza LIBOR Component at the Worldwide
Plaza LIBOR Rate, (d) to fund payment of interest on the
Worldwide Plaza Fixed Component B at the Worldwide Plaza
Fixed Interest Rate, (e) to fund payment of the
Worldwide Plaza Principal Reduction Payment, (f) to pay
other amounts due under the Worldwide Plaza loan
documents, (g) if after the Worldwide Plaza Anticipated
Repayment Date, to fund payments for monthly cash
expenses incurred in accordance with the related
approved annual budget, (h) if after the Worldwide Plaza
Anticipated Repayment Date, to fund payments for
extraordinary expenses approved by the Master Servicer,
(i) if after the Worldwide Plaza Anticipated Repayment
Date, to pay principal until the outstanding principal
balance of the Worldwide Plaza Loan is reduced to zero,
(j) if on or after the Worldwide Plaza Anticipated
Repayment Date, to pay the Worldwide Plaza Excess
Interest, and (k) to make payment to the Worldwide Plaza
Borrower of any excess amount.
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Upon the occurrence of an event of default under the
Worldwide Plaza Loan documents, the Master Servicer will
be required by the Pooling Agreement to apply the funds
in the Worldwide Plaza Cash Management Account in the
following order: (a) to fund the tax and insurance
escrow fund in accordance with the Servicing Standard
(b) to fund payment of interest on the Worldwide Plaza
Fixed Component A at the Worldwide Plaza Fixed Interest
Rate, (c) to fund payment of interest on the Worldwide
Plaza LIBOR Component at the Worldwide Plaza LIBOR Rate,
(d) to fund payment of interest on the Worldwide Plaza
Fixed Component B at the Worldwide Plaza Fixed Interest
Rate, (e) to fund payment of principal on the Worldwide
Plaza Fixed Component A, (f) to fund payment of
principal on the Worldwide Plaza LIBOR Component, (g) to
fund payment of principal on the Worldwide Plaza Fixed
Component B, (h) to fund payment of the Worldwide Plaza
default interest and (i) to pay other amounts due under
the Worldwide Plaza Loan documents.
The Worldwide Plaza Property consists of a 47-story
office tower completed in 1989, and located in New York,
New York. The Worldwide Plaza Property has a GLA of
approximately 1,816,525 square feet. The occupancy rate
of the Worldwide Plaza Property, as of June 12, 1997 was
approximately 98.3%. Major tenants of the Worldwide
Plaza Property include Ogilvy & Mather Worldwide, Inc.,
Cravath, Swaine & Moore and Polygram Holding Inc. An
appraisal performed as of July 25, 1997 determined a
combined value of $416,000,000 for the Worldwide Plaza
Property and the Worldwide Plaza Amenities Parcel.
D. THE PRENTISS LOAN AND
PROPERTIES.................... The "Prentiss Loan" has a principal balance as of the
Cut-Off Date of $180,100,000 and is secured by Mortgages
(the "Prentiss Mortgages") encumbering 8 office
properties located in Illinois, Virginia, Texas, and
Michigan, and 4 industrial and warehouse properties
located in Illinois, California, Missouri, and Wisconsin
(the "Prentiss Properties"). Certain of the Prentiss
Properties consist of multiple Mortgaged Properties, as
described herein under "Description of the Mortgage
Loans and Mortgaged Properties--The Prentiss Loan and
Properties." The Prentiss Mortgages are
cross-collateralized and cross-defaulted. The borrower
under the Prentiss Loan is Prentiss Properties Real
Estate Fund I, L.P. (the "Prentiss Borrower"). The
Prentiss Borrower is owned by affiliates of Prentiss
Properties Trust (the "Prentiss REIT"), whose common
stock is traded on the NYSE under the listing symbol
"PP." The Prentiss Loan bears interest at a fixed rate
per annum equal to 7.579% (the "Prentiss Base Interest
Rate") through February 25, 2007. From and after
February 26, 2007 (the "Prentiss Anticipated Repayment
Date"), the Prentiss Loan accrues interest at a rate per
annum (the "Prentiss Adjusted Interest Rate"), which is
fixed on the
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Prentiss Anticipated Repayment Date, equal to the
greater of (a) the Prentiss Base Interest Rate plus 2%
and (b) the yield calculated by linear interpolation of
noncallable U.S. Treasury Obligations with terms (one
longer and one shorter) most nearly approximating the
period from such date of determination to the Prentiss
Maturity Date plus 2%. The interest accrued at the
excess of the Prentiss Adjusted Interest Rate over the
Prentiss Base Interest Rate will be deferred until the
principal balance of the Prentiss Loan has been reduced
to zero. The interest accrued at the excess of the
Prentiss Adjusted Interest Rate over the Prentiss Base
Interest Rate will be deferred and will bear interest at
the Prentiss Adjusted Interest Rate (such accrued and
deferred interest and interest thereon, the "Prentiss
Excess Interest"). Interest on the Prentiss Loan is
calculated on the basis of the actual number of days
elapsed and a 360-day year.
The Prentiss Loan is scheduled to mature on February 26,
2027 (the "Prentiss Maturity Date") but may be prepaid
in whole or in part without payment of a yield
maintenance premium on or after November 26, 2006. The
Prentiss Loan requires monthly payments of interest (the
"Prentiss Monthly Debt Service Payments") of
approximately $1,153,280 until the Prentiss Anticipated
Repayment Date. Commencing on the first Due Date after
the Prentiss Anticipated Repayment Date, the Prentiss
Loan requires 240 monthly payments of principal and
interest (calculated based on the actual number of days
elapsed and a 360-day year) based on a 240-month
amortization schedule and the Prentiss Base Interest
Rate which is scheduled to be equal to approximately
$1,459,586 (the "Prentiss ARD Monthly Debt Service
Payments"). Beginning on the first Due Date after the
Prentiss Anticipated Repayment Date, in addition to the
payment of the Prentiss ARD Monthly Debt Service
Payments, the Prentiss Borrower is required to apply
100% of the Prentiss Excess Cash Flow (as defined herein
under "Description of the Mortgage Loans and Mortgaged
Properties--The Prentiss Loan and Properties--The Loan--
Payment Terms") for the month preceding the month in
which the Due Date occurs in the following order of
priority: (a) to the outstanding principal balance of
the Prentiss Loan until such principal is reduced to
zero and (b) to the Prentiss Excess Interest. The
scheduled principal balance of the Prentiss Loan as of
the Prentiss Anticipated Repayment Date is $180,100,000.
The Prentiss Properties contain approximately 1,451,486
square feet of GLA that is office space and
approximately 4,350,148 square feet of GLA that is
industrial/warehouse space. The occupancy rate of the
properties as of June 30, 1997 was approximately 95% for
the office space and 99% for the industrial/warehouse
space. The Prentiss Properties had an annualized base
rent for office and industrial/warehouse space of $16.60
and $3.38 per square foot of GLA, respectively. The 5
largest tenants of the office properties based on
annualized base
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rent are Hoechst Celanese Corp., CIGNA, Grumman Data
Systems Corp., Premark International, and The Wyatt
Company. The 5 largest tenants based on annualized based
rent of the industrial/warehouse properties are Nippon
Express U.S.A., C&H Distributors, Dunlop Tire Corp.,
Michelin Tire Corp., and the U.S. Postal Sevice. The
aggregate value of the Prentiss Properties has been
determined by LB Holdings, based on financial and other
information provided by the Prentiss Borrower and on
information prepared on LB Holdings' behalf by third
parties, to be approximately $300,100,000.
E. THE ARDEN LOAN AND
PROPERTIES.................... The "Arden Loan" has a principal balance as of the
Cut-Off Date of $175,000,000 and is secured by a
Mortgage (the "Arden Mortgage") encumbering 17 suburban
office properties located in the Los Angeles and Orange
County region of California (the "Arden Properties").
The borrower under the Arden Loan is Arden Realty
Finance Partnership, L.P. (the "Arden Borrower"). The
Arden Borrower is owned by Arden Realty, Inc. (the
"Arden REIT"), whose common stock is traded on the NYSE
under the listing symbol "ARI," and an affiliate of the
Arden REIT. The Arden Loan bears interest at a fixed
rate per annum equal to 7.520% (the "Arden Base Interest
Rate") through June 10, 2004. From June 11, 2004 (the
"Arden Anticipated Repayment Date"), the Arden Loan
bears interest at a rate per annum (the "Arden Adjusted
Interest Rate"), which is fixed on the Arden Anticipated
Repayment Date, equal to the greater of (a) the Arden
Base Interest Rate plus 2% and (b) the yield calculated
by linear interpolation of noncallable U.S. Treasury
Obligations with terms (one longer and one shorter) most
nearly approximating the period from such date of
determination to the 25th anniversary of the Arden
Anticipated Repayment Date plus 2%. The interest accrued
at the excess of the Arden Adjusted Interest Rate over
the Arden Base Interest Rate will be deferred until the
principal balance of the Arden Loan has been reduced to
zero. The interest accrued at the excess of the Arden
Adjusted Interest Rate over the Arden Base Interest Rate
will be deferred and will bear interest at the Arden
Adjusted Interest Rate (such accrued and deferred
interest and interest thereon, the "Arden Excess
Interest"). Interest on the Arden Loan is calculated on
the basis of the actual number of days elapsed and a
360-day year.
The Arden Loan is scheduled to mature on June 10, 2029
(the "Arden Maturity Date") but may be prepaid in whole
or in part without payment of a yield maintenance
premium on or after 3 months prior to the Arden
Anticipated Repayment Date (the "Arden Permitted
Prepayment Date"). The Arden Loan requires monthly
payments of interest (the "Arden Monthly Debt Service
Payments") of approximately $1,111,898 until the Arden
Anticipated Repayment Date. Commencing on the first Due
Date after the Arden Anticipated Repayment Date, the
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Arden Loan requires 300 monthly payments of principal
and interest (calculated based on the actual number of
days elapsed and a 360-day year) based on a 300-month
amortization schedule and the Arden Base Interest Rate,
which is scheduled to be equal to approximately
$1,295,512 (the "Arden ARD Monthly Debt Service
Payments"). Beginning on the first Due Date after the
Arden Anticipated Repayment Date, in addition to the
payment of the Arden ARD Monthly Debt Service Payments,
the Arden Borrower is required to apply 100% of the
Arden Excess Cash Flow (as defined below under
"Description of the Mortgage Loans and Mortgaged
Properties--The Arden Loan and Properties--The
Loan--Payment Terms") for the month preceding the month
in which the Due Date occurs in the following order of
priority: (a) to the outstanding principal balance of
the Arden Loan until such principal is reduced to zero
and (b) to the Arden Excess Interest. The scheduled
principal balance of the Arden Loan as of the Arden
Anticipated Repayment Date is expected to be
$175,000,000.
The Arden Properties contain approximately 2,695,356
square feet of GLA. The weighted average occupancy rate
of the properties as of July 1997 was approximately
91.3%. The Arden Properties had an annualized base rent
of $17.69 per square foot of GLA. The 5 largest tenants
based on annualized base rent of the Arden Properties
are the State Compensation Insurance Fund, Pepperdine
University, Southern Pacific Transportation Company,
RDA/Logicon, Inc. and Earth Technology Corp. The
aggregate value of the Arden Properties has been
determined by LB Holdings, based on financial and other
information provided by the Arden Borrower and on
information prepared on LB Holdings' behalf by third
parties, to be approximately $342,000,000.
F. THE VILLA MARINA LOAN AND
PROPERTY...................... The "Villa Marina Loan" has a principal balance as of
the Cut-Off Date of $58,000,000 and is secured by a Deed
of Trust (the "Villa Marina Mortgage") encumbering 2
adjoining retail properties which form an urban
marketplace in the Marina del Rey area of Los Angeles,
California (the "Villa Marina Property"). The borrower
under the Villa Marina Loan is Macerich Marina Limited
Partnership (the "Villa Marina Borrower"). The Villa
Marina Borrower is an affiliate of The Macerich Company,
whose common stock is traded on the NYSE under the
listing symbol "MAC." The Villa Marina Loan bears
interest at a fixed rate per annum equal to 7.225% (the
"Villa Marina Base Interest Rate") through October 9,
2006. From October 10, 2006 (the "Villa Marina
Anticipated Repayment Date"), the Villa Marina Loan
bears interest at a fixed rate per annum (the "Villa
Marina Adjusted Interest Rate") set on the Villa Marina
Anticipated Repayment Date as the greater of (a) the
Villa Marina Base Interest Rate plus 2% or (b) the yield
on the U.S. Treasury Obligation (primary issue)
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with a maturity date closest to October 10, 2031, such
yield being based on the bid price for such issue as
published in The Wall Street Journal on September 27,
2006, plus 2%. The interest accrued at the excess of the
Villa Marina Adjusted Interest Rate over the Villa
Marina Base Interest Rate will be deferred until the
principal balance of the Villa Marina Loan has been
reduced to zero. The interest accrued at the excess of
the Villa Marina Adjusted Interest Rate over the Villa
Marina Base Interest Rate will be deferred and will bear
interest at the Villa Marina Adjusted Interest Rate
(such accrued and deferred interest and interest
thereon, the "Villa Marina Excess Interest"). Interest
on the Villa Marina Loan is calculated on the basis of
the actual number of days elapsed and a 360-day year.
The Villa Marina Loan is scheduled to mature on October
10, 2031 (the "Villa Marina Maturity Date") but may be
prepaid in whole or in part without payment of a yield
maintenance premium on or after the Villa Marina
Anticipated Repayment Date. The Villa Marina Loan
requires monthly payments of interest (the "Villa Marina
Monthly Debt Service Payment") of approximately $354,058
until the Villa Marina Anticipated Repayment Date.
Commencing on the first Due Date after the Villa Marina
Anticipated Repayment Date, the Villa Marina Loan
requires 300 monthly payments of principal and interest
(calculated based on the actual number of days elapsed
and a 360-day year) based on a 300-month amortization
schedule and the Villa Marina Base Interest Rate which
is scheduled to be approximately $418,294 (the "Villa
Marina ARD Monthly Debt Service Payments"). Beginning on
the first Due Date after the Villa Marina Anticipated
Repayment Date, in addition to the payment of the Villa
Marina ARD Monthly Debt Service Payments, the Villa
Marina Borrower is required to apply 100% of the Villa
Marina Excess Cash Flow (as defined below under
"Description of the Mortgage Loans and Mortgaged
Properties--The Villa Marina Loan and Property--The
Loan-- Payment Terms") for the month preceding the month
in which the Due Date occurs in the following order of
priority: (a) to the outstanding principal balance of
the Villa Marina Loan until such principal is reduced to
zero and (b) to the Villa Marina Excess Interest. The
scheduled principal balance of the Villa Marina Loan as
of the Villa Marina Anticipated Repayment Date is
expected to be approximately $58,000,000.
The Villa Marina Property contains retail tenant space
with a GLA of approximately 448,579 square feet. The
occupancy rate of the property as of June 30, 1997 was
approximately 96%. The Villa Marina Property had an
annualized base rent of approximately $20.05 per square
foot of occupied GLA. The aggregate value of the Villa
Marina Property has been determined by LB Holdings,
based on financial and other information provided to LB
Holdings and on information
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prepared on LB Holdings' behalf by third parties to be
approximately $101,100,000.
G. THE VALLEY VIEW LOAN AND
PROPERTY...................... The "Valley View Loan" has a principal balance as of the
Cut-Off Date of $51,000,000 and is secured by a Deed of
Trust (the "Valley View Mortgage") encumbering the
Valley View Borrower's interest in a regional mall in
Dallas, Texas (the "Valley View Property"). The borrower
under the Valley View Loan is Macerich Valley View
Limited Partnership (the "Valley View Borrower"). The
Valley View Borrower is an affiliate of The Macerich
Company, whose common stock is traded on the NYSE under
the listing symbol "MAC." The Valley View Loan bears
interest at a fixed rate per annum equal to 7.890% (the
"Valley View Base Interest Rate") through October 9,
2006. From October 10, 2006 (the "Valley View
Anticipated Repayment Date"), the Valley View Loan bears
interest at a fixed rate per annum (the "Valley View
Adjusted Interest Rate") set on the Valley View
Anticipated Repayment Date as the greater of (a) the
Valley View Base Interest Rate plus 2% or (b) the yield
on the U.S. Treasury Obligation (primary issue) with a
maturity date closest to October 10, 2031, such yield
being based on the bid price for such issue as published
in The Wall Street Journal on September 27, 2006, plus
2%. The interest accrued at the excess of the Valley
View Adjusted Interest Rate over the Valley View Base
Interest Rate will be deferred until the principal
balance of the Valley View Loan has been reduced to
zero. The interest accrued at the excess of the Valley
View Adjusted Interest Rate over the Valley View Base
Interest Rate will be deferred and will bear interest at
the Valley View Adjusted Interest Rate (such accrued and
deferred interest and interest thereon, the "Valley View
Excess Interest"). Interest on the Valley View Loan is
calculated on the basis of the actual number of days
elapsed and a 360-day year.
The Valley View Loan is scheduled to mature on October
10, 2031 (the "Valley View Maturity Date") but may be
prepaid in whole or in part without payment of a yield
maintenance premium on or after the Valley View
Anticipated Repayment Date. The Valley View Loan
requires monthly payments of interest (the "Valley View
Monthly Debt Service Payment") of approximately $339,982
until the Valley View Anticipated Repayment Date.
Commencing on the first Due Date after the Valley View
Anticipated Repayment Date, the Valley View Loan
requires 300 monthly payments of principal and interest
(calculated based on the actual number of days elapsed
and a 360-day year) based on a 300-month amortization
schedule and the Valley View Base Interest Rate which is
scheduled to be approximately $389,917 (the "Valley View
ARD Monthly Debt Service Payments"). Beginning on the
first Due Date after the Valley View Anticipated
Repayment Date, in addition to the payment of the Valley
View ARD Monthly Debt Service
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Payments, the Valley View Borrower is required to apply
100% of the Valley View Excess Cash Flow (as defined
below under "Description of the Mortgage Loans and
Mortgaged Properties--The Valley View Loan and
Property--The Loan-- Payment Terms") for the month
preceding the month in which the Due Date occurs in the
following order of priority: (a) to the outstanding
principal balance of the Valley View Loan until such
principal is reduced to zero and (b) to the Valley View
Excess Interest. The scheduled principal balance of the
Valley View Loan as of the Valley View Anticipated
Repayment Date is approximately $51,000,000.
The Valley View Property contains approximately 686,296
square feet of GLA, which includes approximately 220,000
square feet leased by JC Penney and does not include the
approximately 838,000 square feet of owner occupied
space located in the Valley View mall. The occupancy
rate of the Valley View Property as of June 30, 1997 was
approximately 94%, which includes leased but not
occupied space and owner occupied space. The Valley View
Property had an annualized base rent of approximately
$21.69 per square foot of occupied GLA (excluding anchor
tenants). The aggregate value of the Valley View
Property has been determined by LB Holdings, based on
financial and other information provided to LB Holdings
and on information prepared on LB Holdings' behalf by
third parties to be approximately $95,700,000.
H. THE SUN COMMUNITIES LOAN AND
PROPERTY...................... The "Sun Communities Loan" has a principal balance as of
the Cut-Off Date of approximately $44,963,187 and is
evidenced by two separate notes issued by two related
borrowers. The first Note, having a principal balance of
approximately $25,978,730 (the "Sun Communities Note
A"), was issued by Sun Communities Funding Limited
Partnership (the "Sun Communities Borrower A"). The
second Note (the "Sun Communities Note B" and together
with the Sun Communities Note A, the "Sun Communities
Notes"), having a principal balance of approximately
$18,984,457, was issued by Miami Lakes Venture
Associates (the "Sun Communities Borrower B" together
with the Sun Communities Borrower A, the "Sun
Communities Borrowers"). The Sun Communities Borrowers
are controlled by Sun Communities, Inc., whose common
stock is traded on the NYSE under the listing symbol
"SUI." The Sun Communities Note B is guaranteed pursuant
to a guaranty of payment executed by the Sun Communities
Borrower A (the "Sun Guaranty"). The Sun Communities
Note A and the Sun Guaranty are secured by first
Mortgages (the "Sun Communities A Mortgages")
encumbering six manufactured housing communities (the
"Sun Communities A Properties") in the following
locations: Edwardsville, Kansas; Bristol, Indiana;
Perry, Michigan; Battle Creek, Michigan; Jackson,
Michigan; and Grand Rapids, Michigan. The Sun
Communities Note B is
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secured by a first Mortgage (the "Sun Communities B
Mortgage," and together with the Sun Communities A
Mortgages, the "Sun Communities Mortgages") encumbering
a manufactured housing community (the "Royal Country
Property" and, together with the Sun Communities A
Properties, the "Sun Communities Properties") located in
Miami, Florida. All of the Sun Communities Mortgages are
cross-defaulted. Each of the Sun Communities Notes bears
interest at a fixed rate per annum of 7.010% (the "Sun
Communities Base Interest Rate") through and including
September 9, 2007. From and after September 10, 2007
(the "Sun Communities Anticipated Repayment Date"), the
Sun Communities Loan accrues interest at an interest
rate which is fixed on the Sun Communities Anticipated
Repayment Date at the greater of (a) the Sun Communities
Base Interest Rate plus 2% and (b) the yield on the U.S.
Treasury (primary issue) with a maturity date closest to
September 10, 2027 plus 2% (the "Sun Communities
Adjusted Interest Rate"). Interest accrued at the excess
of the Sun Communities Adjusted Interest Rate over the
Sun Communities Base Interest Rate will be deferred and
will be added to the Sun Communities Loan and will bear
interest at the Sun Communities Adjusted Interest Rate
to the extent permitted by applicable law (such accrued
and deferred interest thereon, the "Sun Communities
Excess Interest"). Interest on the Sun Communities Notes
is calculated on the basis of the actual number of days
elapsed and a 360-day year.
The Sun Communities Notes are scheduled to mature on
September 10, 2027 (the "Sun Communities Maturity
Date"), but may be repaid without the payment of a yield
maintenance premium on or after the commencement of the
period beginning 6 months prior to the Sun Communities
Anticipated Repayment Date (such period, the "Sun
Communities Permitted Prepayment Period"). The Sun
Communities Notes require monthly payments of principal
and interest (the "Sun Communities Monthly Debt Service
Payments"). The amount of the monthly payments on the
two Sun Communities Notes are approximately $303,319 per
month.
The Sun Communities Properties contain approximately
3,375 developed manufactured housing sites. As of June
30, 1997 the occupancy rate of the Sun Communities
Properties ranged from approximately 89.0% to 99.4%. The
aggregate value of the Sun Communities Properties has
been determined by LB Holdings, based on financial and
other information provided by the Sun Communities
Borrowers and on information prepared on LB Holding's
behalf by third parties, to be approximately
$77,200,000.
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I. ORIGINATORS.................. LB Holdings originated the DDR/DRA Loan, the Courtyard
Loan, the Worldwide Plaza Loan, the Valley View Loan and
the Sun Communities Loan. To facilitate loan closings of
Mortgage Loans secured by California properties, LB
Holdings engaged Lehman Brothers Realty Corporation ("LB
Realty") to originate the Prentiss Loan, the Arden Loan
and the Villa Marina Loan on LB Holdings' behalf. After
origination, LB Holdings acquired such Mortgage Loans
from LB Realty. LB Holdings and LB Realty are
collectively referred to herein as the "Originators".
PREPAYMENT, SALE, SUBSTITUTION AND
RELEASE PROVISIONS.............. The Mortgage Loans generally prohibit the transfer or
sale of the Mortgaged Properties (except (a) to certain
permitted transferees and (b) in connection with a
release and related permitted defeasance or prepayment)
unless the Master Servicer has consented thereto and
there shall have been received written confirmation from
each Rating Agency that such transfer or sale will not,
in and of itself, cause a downgrade, qualification or
withdrawal of any of the then current ratings assigned
to the Certificates. The Prentiss Loan and the Arden
Loan permit substitution of Mortgaged Properties if
certain conditions are met, including written
confirmation from each Rating Agency that such
substitution will not, in and of itself, result in a
downgrade, qualification or withdrawal of any of the
then current ratings assigned to the Certificates. See
"Description of the Mortgage Loans and Mortgaged
Properties--The Prentiss Loan and Properties--The
Loan--Substitution of Mortgaged Properties" and "--The
Arden Loan and Properties--The Loan--Substitution of
Mortgaged Properties" herein.
The terms of the DDR/DRA Loan permit the DDR/DRA
Borrowers to obtain the release from the lien of the
related Mortgage the unimproved, non-revenue producing
outparcel on a portion of the DDR/DRA Properties known
as (i) the Independence Commons Property and (ii) the
Fairfax Town Center Property. A condition precedent to
such release of any such portion of the DDR/DRA
Properties is that the DDR/ DRA II Borrower deliver
written confirmation from the Rating Agencies that such
release will not result in a downgrade, withdrawal or
qualification of the rating then assigned to the
Certificates by the Rating Agencies. See "Description of
the Mortgage Loans and Mortgaged Properties--The DDR/DRA
Loan and Properties--The Loan--Other Releases" herein.
The terms of the Villa Marina Loan and the Valley View
Loan permit the related borrowers to obtain the release
from the lien of the related Mortgages of one or more
outparcels or anchor pads (which are unimproved as of
the Closing Date) in connection with an expansion of the
related Mortgaged Property. See "Description of the
Mortgage Loans and Mortgaged Properties--The Villa
Marina Loan and Property-- The Loan--Transfers of
Property and Interest in the Borrower;
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Encumbrance", and "--The Valley View Loan and Property--
The Loan--Transfers of Property and Interest in the
Borrower; Encumbrance" herein.
All of the Mortgage Loans (other than the Worldwide
Plaza LIBOR Component) provide that after a specified
period (a "Defeasance Lockout Period") and prior to the
related Anticipated Repayment Date (or in the case of
the DDR/DRA Loan, prior to its maturity date), the
applicable borrower may obtain the release of one or
more of the Mortgaged Properties from the lien of the
related Mortgage upon the pledge to the Trustee of
noncallable U.S. Treasury obligations. Such U.S.
Treasury obligations will generally provide for payments
on or prior to all successive scheduled Due Dates upon
which interest and principal payments are due under the
related Note through and including the respective
Anticipated Repayment Date (or in the case of the
DDR/DRA Loan, its maturity date), in amounts equal to
the portion of the scheduled payments due on such dates
(or, in the case of an Anticipated Repayment Date, an
amount determined as if the related Mortgage Loans were
to mature on such Anticipated Repayment Date) that are
attributable to the portion of the Mortgage Loan
required to be paid with respect to the Mortgaged
Property or Properties to be released. In the event of a
release in connection with a partial defeasance, the
Mortgage Loans secured by multiple Mortgaged Properties
generally require that the principal amount defeased
equal at least a specified amount which is greater than
the Allocated Loan Amount of the Mortgaged Property so
released with certain exceptions (such as in the event
of a partial prepayment in connection with a casualty or
condemnation). Such Mortgage Loans also generally
require that the debt service coverage ratio (as such
term is defined in the related loan agreements) of the
remaining Mortgaged Property or Properties, after giving
effect to such release, be greater than both the debt
service coverage ratio at origination of the related
Mortgage Loan and the debt service coverage ratio
immediately prior to such release.
All of the Mortgage Loans (except the DDR/DRA Loan)
provide that on and after the related Anticipated
Repayment Date, in connection with a prepayment, the
related borrower may obtain the release of one or more
of the related Mortgaged Properties from the lien of the
related Mortgage and in the case of Mortgage Loans
secured by multiple Mortgaged Properties, the Mortgage
Loans generally require that the related borrower prepay
a specified amount which is greater than the Allocated
Loan Amount of the Mortgaged Property released in
connection with such partial prepayment, subject to
certain exceptions such as in the event of a partial
prepayment in connection with a casualty or
condemnation. Such Mortgage Loans also require that the
debt service coverage ratio (as that term is defined in
the respective loan agreements) of the remaining
Mortgaged
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Properties, after giving effect to such release, be at
least equal to the greater of each of the debt service
coverage ratio at origination and the debt service
coverage ratio immediately prior to the release.
THE OFFERED CERTIFICATES.......... The Class A-1 Certificates will have an initial
Certificate Principal Amount of $612,000,000.
The Class A-2 Certificates will have an initial
Certificate Principal Amount of $204,000,000.
The Class A-3 Certificates will have an initial
Certificate Principal Amount of $168,434,000.
The Class X-1 Certificates will have an initial Notional
Amount of $1,376,717,068. The Notional Amount of the
Class X-1 Certificates will be equal to the sum of the
Certificate Principal Amounts of the Class A-1, Class
A-2, Class A-3, Class B, Class C-1, Class D, Class E and
Class F Certificates, plus the amount of any unpaid
Interest Shortfalls on such Classes.
The Class B Certificates will have an initial
Certificate Principal Amount of $114,138,000.
The Class C-1 Certificates will have an initial
Certificate Principal Amount of $49,870,000.
The Class C-2 Certificates will have an initial
Certificate Principal Amount of $50,000,000.
The Class X-2 Certificates will have an initial Notional
Amount of $50,000,000. The Notional Amount of the Class
X-2 Certificates through and including the Distribution
Date in July 2004 will be equal to the Certificate
Principal Amount of the Class C-2 Certificates, plus the
amount of any unpaid Interest Shortfall on such Class.
Unless the Notional Amount of the Class X-2 Certificates
has been reduced to zero prior to such date, the Class
X-2 Certificates will be retired following distributions
on the Distribution Date in July 2004. The Class X-2
Certificates will not be entitled to any distributions
after such date.
The Class D Certificates will have an initial
Certificate Principal Amount of $114,137,000.
The Class E Certificates will have an initial
Certificate Principal Amount of $42,802,000.
THE PRIVATE CERTIFICATES.......... The Class F Certificates will have an initial
Certificate Principal Amount of $71,336,068.
The Class T, Class R and Class LR Certificates will not
have Certificate Principal Amounts or Notional Amounts.
The Class F, Class T, Class R and Class LR Certificates
are not offered hereby.
The Class A-1, Class A-2, Class A-3, Class B, Class C-1,
Class C-2, Class D, Class E and Class F Certificates are
collectively referred to herein as the "P&I
Certificates."
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GROUP 1 CERTIFICATES.............. The Class A-1, Class A-2, Class A-3, Class X-1, Class B,
Class C-1, Class D, Class E and Class F Certificates are
collectively referred to as the "Group 1 Certificates."
GROUP 2 CERTIFICATES.............. The Class C-2 and Class X-2 Certificates are
collectively referred to as the "Group 2 Certificates."
CERTIFICATE INTEREST RATES........ The per annum rate at which interest accrues (the
"Certificate Interest Rate") on each Class of Offered
Certificates during any Interest Accrual Period will be
as follows:
The Certificate Interest Rate on the Class A-1, Class
A-2, Class A-3, Class B and Class C-1 Certificates will
be equal to 6.790%, 6.840%, 6.900%, 6.950% and 7.000%,
respectively.
The Certificate Interest Rate on the Class C-2
Certificates will be equal to (i) for each Distribution
Date through the Distribution Date in July 2004, LIBOR
plus 0.43% and (ii) for each Distribution Date
thereafter, the Net Mortgage Rate of the Worldwide Plaza
LIBOR Component (which will be a fixed rate from and
after such time). See "Description of the Mortgage Loans
and Mortgaged Properties--The Worldwide Plaza Loan and
Property--The Loan--Payment Terms" herein for a
description of the Worldwide Plaza LIBOR Component on
which distributions on the Class C-2 Certificates are
generally based.
The Certificate Interest Rate on the Class D
Certificates will be equal to 7.150%.
The Certificate Interest Rate on the Class E
Certificates will be equal to the lesser of (i) the
Group 1 WAC Rate and (ii) 7.300%.
The Certificate Interest Rate on the Class F
Certificates will be equal to the lesser of (i) the
Group 1 WAC Rate and (ii) 7.300%.
For convenience in describing interest distributions,
the Class X-1 Certificates will be deemed to consist of
8 components, the "Class A-1 Component," the "Class A-2
Component," the "Class A-3 Component," the "Class B
Component," the "Class C-1 Component," the "Class D
Component," the "Class E Component" and the "Class F
Component," each of which will have a notional amount
(each, a "Component Notional Amount") equal to, and
which will reduce proportionally with, the Certificate
Principal Amounts of the Class A-1, Class A-2, Class
A-3, Class B, Class C-1, Class D, Class E and Class F
Certificates, respectively, outstanding from time to
time (without giving effect to any Appraisal Reduction
Amounts), plus the amount of any unpaid Interest
Shortfall on such Classes.
The Certificate Interest Rate on the Class X-1
Certificates is a per annum rate equal to the weighted
average of the Certificate Interest Rates on the Class
A-1 Component, Class A-2 Component, Class A-3 Component,
the Class B Component, the
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Class C-1 Component, the Class D Component, the Class E
Component and the Class F Component, weighted on the
basis of their respective Component Notional Amounts.
The Certificate Interest Rate on the Class A-1 Component
is a per annum rate equal to the Group 1 WAC Rate minus
the Certificate Interest Rate on the Class A-1
Certificates. The Certificate Interest Rate on the Class
A-2 Component is a per annum rate equal to the Group 1
WAC Rate minus the Certificate Interest Rate on the
Class A-2 Certificates. The Certificate Interest Rate on
the Class A-3 Component is a per annum rate equal to the
Group 1 WAC Rate minus the Certificate Interest Rate on
the Class A-3 Certificates. The Certificate Interest
Rate on the Class B Component is a per annum rate equal
to the Group 1 WAC Rate minus the Certificate Interest
Rate on the Class B Certificates. The Certificate
Interest Rate on the Class C-1 Component is a per annum
rate equal to the Group 1 WAC Rate minus the Certificate
Interest Rate on the Class C-1 Certificates. The
Certificate Interest Rate on the Class D Component is a
per annum rate equal to the Group 1 WAC Rate minus the
Certificate Interest Rate on the Class D Certificates.
The Certificate Interest Rate on the Class E Component
is a per annum rate equal to the Group 1 WAC Rate minus
the Certificate Interest Rate on the Class E
Certificates. The Certificate Interest Rate on the Class
F Component is a per annum rate equal to the Group 1 WAC
Rate minus the Certificate Interest Rate on the Class F
Certificates.
The Certificate Interest Rate on the Class X-2
Certificates for each Distribution Date through the
Distribution Date in July 2004, is a per annum rate
equal to the Net Mortgage Rate on the Worldwide Plaza
LIBOR Component minus the Certificate Interest Rate on
the Class C-2 Certificates. The Class X-2 Certificates
will not be outstanding later than the Distribution Date
in July 2004.
Calculations of interest on the Group 1 Certificates
will be made on the basis of a 360-day year consisting
of twelve 30-day months. Calculations of interest on the
Group 2 Certificates will be made based on the actual
number of days in the applicable Interest Accrual Period
and a 360-day year.
The "Group 1 WAC Rate" with respect to any Distribution
Date is a per annum rate equal to the weighted average
of the Net Mortgage Rates in effect for the Group 1
Loans as of their respective Due Dates in the month
preceding the month in which such Distribution Date
occurs weighted on the basis of their respective Stated
Principal Balances (as defined herein) on such Due
Dates.
The "Net Mortgage Rate" with respect to any Group 1
Mortgage Loan is a per annum rate equal to the related
Mortgage Rate in effect from time to time minus the
Servicing Fee Rate. The Net Mortgage Rate of the
Worldwide Plaza LIBOR Component is a per annum rate
equal to the Mortgage
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Rate thereof, in effect from time to time, minus the
Effective Servicing Fee Rate. For purposes of
calculating Certificate Interest Rates, the Net Mortgage
Rate of any Mortgage Loan will be determined without
regard to any modification, waiver or amendment of the
terms, whether agreed to by the Special Servicer or
resulting from a bankruptcy, insolvency or similar
proceeding involving the related borrower.
The "Mortgage Rate" with respect to any Mortgage Loan or
Worldwide Plaza Component is the per annum rate in
effect from time to time at which interest accrues on
such Mortgage Loan or Worldwide Plaza Component as
stated in the related Note, in each case without giving
effect to the Excess Rate or the Default Rate.
Notwithstanding the foregoing, for purposes of
calculating Certificate Interest Rates of the Group 1
Certificates, the Mortgage Rates of the Group 1 Mortgage
Loans (each of which accrues interest on the basis of a
360-day year and actual days elapsed in each month) for
any one-month period preceding a Due Date will be deemed
to be the annualized rate at which interest would have
to accrue in respect of such Group 1 Mortgage Loan on
the basis of a 360-day year consisting of twelve 30-day
months in order to produce the aggregate amount of
interest actually accrued in respect of such Group 1
Mortgage Loan during such one-month period at the
related Mortgage Rate; provided, however, that with
respect to the DDR/DRA Loan, the Prentiss Loan, the
Arden Loan, the Villa Marina Loan and the Sun
Communities Loan, (i) the Mortgage Rate for the
Collection Period preceding the Due Dates in January and
February in each year that is not a leap year or in
February only in each year that is a leap year will be
determined net of the Withheld Amount with respect to
each such Mortgage Loan and (ii) the Mortgage Rate for
the Collection Period preceding the Due Date in each
March will be determined after taking into account the
addition of the Withheld Amount with respect to each
such Mortgage Loan.
DISTRIBUTIONS..................... The Mortgage Pool consists of two groups (each, a "Loan
Group"): "Loan Group 1" consists of the Worldwide Plaza
Fixed Components and the other Mortgage Loans
(collectively, the "Group 1 Loans") and "Loan Group 2"
consists of the Worldwide Plaza LIBOR Component (the
"Group 2 Loan"). The aggregate distribution to be made
on the Group 1 Certificates on any Distribution Date
will equal the Available Funds (as defined herein under
"Description of the Offered
Certificates--Distributions--Method, Timing and Amount")
with respect to Loan Group 1. The aggregate distribution
to be made on the Group 2 Certificates on any
Distribution Date will equal the Available Funds with
respect to Loan Group 2. On each Distribution Date, each
Class of Offered Certificates will be entitled to
receive distributions of interest in an amount equal to
the Interest Distribution Amount for such Class and
Distribution Date, to the extent of Available Funds with
respect to the related Loan Group, if any, remaining
after payment to each other outstanding Class of
Certificates, if any, entitled to
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receive distributions from such Available Funds prior to
such Class of all amounts to which it is entitled on
such Distribution Date. The Group 1 Certificates are
entitled to receive distributions in order of their
sequential designation. References herein to the
sequential designation of the Classes of Group 1
Certificates means such Classes in alphabetical and
numerical order (or such Classes in reverse alphabetical
and numerical order) (except in respect of the Class X-1
Certificates, which will have the same priority as the
Class A-1, Class A-2 and Class A-3 Certificates under
the circumstances described herein). With respect to the
Group 2 Certificates, the Class C-2 and Class X-2
Certificates will be treated pro rata (except where
noted otherwise).
The "Interest Distribution Amount" with respect to any
Distribution Date and each Class of Offered Certificates
will equal (A) the sum of (i) the Interest Accrual
Amount for such Distribution Date and (ii) the Interest
Shortfall, if any, for such Class and such Distribution
Date, less (B) any Excess Prepayment Interest Shortfall
allocated to such Class on such Distribution Date as
described under "--Excess Prepayment Interest
Shortfalls" below.
The "Interest Accrual Amount" with respect to any
Distribution Date and any Class of P&I Certificates, is
equal to interest for the related Interest Accrual
Period at the Certificate Interest Rate for such Class
on the related Certificate Principal Amount; and with
respect to any Distribution Date and the Class X-1 and
Class X-2 Certificates is equal to interest for the
related Interest Accrual Period at the Certificate
Interest Rate for such Class for such Interest Accrual
Period on the Notional Amount of such Class.
An "Interest Shortfall" with respect to any Distribution
Date for any Class of Offered Certificates is the sum of
(a) the excess, if any, of (i) the Interest Distribution
Amount for such Class for the immediately preceding
Distribution Date over (ii) all distributions of
interest (other than any Excess Interest) made with
respect to such Class of Certificates on the immediately
preceding Distribution Date and (b), to the extent
permitted by applicable law, (i) other than in the case
of the Class X-1 and Class X-2 Certificates, one month's
interest on any such excess at the Certificate Interest
Rate applicable to such Class of Certificates for the
current Distribution Date, (ii) in the case of the Class
X-1 Certificates, one month's interest on any such
excess at the Group 1 WAC Rate and (iii) in the case of
the Class X-2 Certificates, one month's interest on any
such excess at the Mortgage Rate on the Worldwide Plaza
LIBOR Component.
For purposes of calculating the Interest Accrual Amount
for any Class of Offered Certificates and any
Distribution Date, any reduction of Certificate
Principal Amount or Notional Amount, as applicable, as a
result of distributions to such Class or any related
Class, respectively, and reductions in Certificate
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Principal Amount or Notional Amount, as applicable, as a
result of the occurrence and allocations of Realized
Losses on the Distribution Date occurring in the related
Interest Accrual Period will be deemed to have been made
on the first day of such Interest Accrual Period.
On each Distribution Date prior to the Cross-over Date
an amount equal to the Principal Distribution Amount (as
such term is defined herein under "Description of the
Offered Certificates--Distributions--Payment
Priorities") with respect to Loan Group 1 will be
distributed, to the extent of related Available Funds
remaining therefor, to the Group 1 Certificates as
follows:
FIRST, to the Class A-1 Certificates, in reduction of
the Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
SECOND, to the Class A-2 Certificates, in reduction of
the Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
THIRD, to the Class A-3 Certificates, in reduction of
the Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
FOURTH, to the Class B Certificates, in reduction of the
Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
FIFTH, to the Class B Certificates, for the unreimbursed
amounts of Realized Losses, if any, up to an amount
equal to the aggregate of such unreimbursed Realized
Losses previously allocated to such Class, plus interest
thereon at the Certificate Interest Rate for such Class
compounded monthly from the date the related Realized
Loss was allocated to such Class;
SIXTH, to the Class C-1 Certificates, in reduction of
the Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
SEVENTH, to the Class C-1 Certificates, for the
unreimbursed amounts of Realized Losses, if any, up to
an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class, plus
interest thereon at the Certificate Interest Rate for
such Class compounded monthly from the date the related
Realized Loss was allocated to such Class;
EIGHTH, to the Class D Certificates, in reduction of the
Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
NINTH, to the Class D Certificates, for the unreimbursed
amounts of Realized Losses, if any, up to an amount
equal to the aggregate of such unreimbursed Realized
Losses previously allocated to such Class, plus interest
thereon at the Certificate Interest Rate for such Class
compounded monthly from the date the related Realized
Loss was allocated to such Class;
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TENTH, to the Class E Certificates in reduction of the
Certificate Principal Amount thereof, until the
Certificate Principal Amount thereof is reduced to zero;
and
ELEVENTH, to the Class E Certificates, for the
unreimbursed amounts of Realized Losses, if any, up to
an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class, plus
interest thereon at the Certificate Interest Rate for
such Class compounded monthly from the date the related
Realized Loss was allocated to such Class.
On each Distribution Date occurring on and after the
Cross-over Date, regardless of the allocation of
principal payments described in priorities FIRST, SECOND
and THIRD in the preceding sentence, an amount equal to
the Principal Distribution Amount with respect to Loan
Group 1 will be distributed, first, to the Class A-1
Certificates, Class A-2 Certificates and Class A-3
Certificates, pro rata, based on their respective
Certificate Principal Amounts, in reduction of their
respective Certificate Principal Amounts, until the
Certificate Principal Amount of each such Class is
reduced to zero; and second, to the Class A-1
Certificates, Class A-2 Certificates and Class A-3
Certificates, for unreimbursed amounts of Realized
Losses previously allocated to such Classes, plus
interest thereon at the Certificate Interest Rate for
such Class compounded monthly from the date the related
Realized Loss was allocated to such Class, pro rata in
accordance with the amount of such unreimbursed Realized
Losses previously allocated.
The "Cross-over Date" is the Distribution Date on which
the Certificate Principal Amount of each Class of Group
1 Certificates entitled to distributions of principal
other than the Class A-1, Class A-2 and Class A-3
Certificates has been reduced to zero.
On each Distribution Date an amount equal to the
Principal Distribution Amount with respect to Loan Group
2 will be distributed, to the extent of related
Available Funds remaining therefor to the Class C-2
Certificates (i) in reduction of the Certificate
Principal Amount thereof, until the Certificate
Principal Amount thereof is reduced to zero and (ii) for
the unreimbursed amounts of Realized Losses, if any, up
to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class C-2
Certificates, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the
date the related Realized Loss was allocated to such
Class.
All references to "pro rata" in the preceding clauses,
unless otherwise specified, mean pro rata based upon the
amount distributable pursuant to such clause.
Any Prepayment Premium actually collected with respect
to a Mortgage Loan during any particular Collection
Period will be distributed on the related Distribution
Date to the holders of each Class of Group 1
Certificates entitled to distributions of principal on
such Distribution Date in an aggregate amount up
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to the product of (a) such Prepayment Premium and (b)
the Discount Rate Fraction (as defined herein). See
"Description of the Offered
Certificates--Distributions--Prepayment Premiums."
Any Excess Interest received with respect to any
Mortgage Loan will be distributed to Certificateholders
in the manner set forth under "Description of the
Offered Certificates--Distributions-- Excess Interest"
herein.
Except as described in this paragraph, the holders of
the Class T, Class R and Class LR Certificates will not
be entitled to distributions of interest or principal.
The holders of the Class T Certificates will be entitled
to distributions of Net Default Interest, to the extent
set forth in the Pooling Agreement. The holders of the
Class R Certificates will be entitled to receive any
Available Funds remaining in the Upper-Tier Distribution
Account on any Distribution Date after all distributions
with respect to the Regular Certificates on such
Distribution Date have been made. The Class LR
Certificateholders will be entitled to receive any funds
remaining in the Lower-Tier Distribution Account on any
Distribution Date after all distributions with respect
to the regular interests in the Lower-Tier REMIC on such
Distribution Date have been made. The Class LR
Certificateholders will also be entitled to receive the
proceeds of the remaining assets in the Lower-Tier
REMIC, if any, after the Certificate Principal Amounts
of the Regular Certificates have been reduced to zero
and the holders of the Regular Certificates have
received all other distributions to which they are
entitled. It is not anticipated that there will be any
assets remaining in the Lower-Tier REMIC on such date.
See "Description of the Offered
Certificates--Distributions."
P&I ADVANCES...................... The Master Servicer is required to make an advance
(each, a "P&I Advance") in respect of delinquent
Scheduled Payments on the Mortgage Loans, subject to the
limitations described herein. P&I Advances will
generally equal the delinquent portion of the Scheduled
Payment as specified in the related Note (with interest
calculated at the Net Mortgage Rate) plus the portion of
the Trustee Fee related to such Mortgage Loan. The
Master Servicer will not be required to advance Default
Interest, Excess Interest, Prepayment Premiums or
Balloon Payments. The amount required to be advanced in
respect of any Distribution Date and any delinquent
Scheduled Payments on a Mortgage Loan that has been
subject to an Appraisal Reduction Event (as defined
herein) will equal (i) the amount required to be
advanced by the Master Servicer without giving effect to
the related Appraisal Reduction Amount, less (ii) the
product of (a) the amount required to be advanced by the
Master Servicer in respect of delinquent payments of
interest without giving effect to the related Appraisal
Reduction Amount and (b) a fraction, the numerator of
which is the Appraisal Reduction Amount and the
denominator of which is the Stated Principal Balance of
such Mortgage Loan as of the last day of the related
Collection Period. If the Master Servicer fails to
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make a required P&I Advance, the Trustee will be
required to make the P&I Advance, and if the Trustee
fails to make a required P&I Advance, the Fiscal Agent
will be required to make such P&I Advance, each subject
to a determination of recoverability. See "The Pooling
Agreement--Advances" herein.
SUBORDINATION..................... Except as described below, as a means of providing a
certain amount of protection to the holders of certain
Classes of Group 1 Certificates against losses
associated with delinquent and defaulted Mortgage Loans,
the rights of the holders of the Class B, Class C-1,
Class D, Class E and Class F Certificates to receive
distributions of principal and/or interest (other than
Excess Interest), as applicable, will be subordinated to
such rights of the holders of the Class A-1, Class A-2,
Class A-3 and Class X-1 Certificates. The Class B
Certificates will likewise be protected by the
subordination of the Class C-1, Class D, Class E and
Class F Certificates. The Class C-1 Certificates will be
likewise protected by the subordination of the Class D,
Class E and Class F Certificates. The Class D
Certificates will be likewise protected by the
subordination of the Class E and Class F Certificates.
The Class E Certificates will likewise be protected by
the subordination of the Class F Certificates. This
subordination will be effected in two ways: (i) by the
preferential right of holders of a Class of Certificates
to receive on any Distribution Date the amounts of
interest (other than Excess Interest) and principal
distributable in respect of such Certificates on such
date prior to any distribution being made on such
Distribution Date in respect of any Classes of
Certificates subordinate thereto and (ii) by the
allocation of Group 1 Realized Losses (as defined under
"Description of the Offered
Certificates--Distributions--Realized Losses" herein)
generally first, to the Class F Certificates; second, to
the Class E Certificates; third, to the Class D
Certificates; fourth to the Class C-1 Certificates;
fifth, to the Class B Certificates; and finally, to the
Class A-1, Class A-2 and Class A-3 Certificates, pro
rata, based on their respective outstanding Certificate
Principal Amounts.
Any Group 2 Realized Losses will be allocated directly
to the Class C-2 Certificates. No Group 2 Realized
Losses will occur until losses on the Worldwide Plaza
Loan exceed the principal balance of the Worldwide Plaza
Fixed Component B (see "Description of the Mortgage
Loans and Mortgaged Properties--The Worldwide Plaza Loan
and Property--The Loan--Application of Funds Held in
Cash Management Account").
No other form of credit enhancement will be available
for the benefit of the holders of the Offered
Certificates.
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EXCESS PREPAYMENT
INTEREST SHORTFALLS............. Shortfalls in Available Funds related to Loan Group 1
resulting from Excess Prepayment Interest Shortfalls
with respect to the Group 1 Loans will be allocated to
reduce the interest entitlement of each Class of Group 1
Certificates, pro rata, based upon the amount of
interest that would otherwise be distributable to such
Class. Shortfalls in Available Funds related to Loan
Group 2 resulting from Excess Prepayment Interest
Shortfalls with respect to the Group 2 Loan will be
allocated to reduce the interest entitlement of each
Class of Group 2 Certificates, pro rata, based upon the
amount of interest that would otherwise be distributable
to such Class. See "Description of the Offered
Certificates--Excess Prepayment Interest Shortfalls"
herein.
OPTIONAL TERMINATION; OPTIONAL
MORTGAGE LOAN PURCHASE.......... The Depositor, and if the Depositor does not exercise
the option, the Master Servicer and, if neither the
Master Servicer nor the Depositor exercises the option,
the holders of the most Subordinate Class of
Certificates then outstanding representing greater than
a 50% Percentage Interest of such Class of Certificates,
will have the option to purchase, at the purchase price
specified herein, all of the Mortgage Loans, and all
property acquired through exercise of remedies in
respect of any Mortgage Loan, remaining in the Trust
Fund, and thereby effect the termination of the Trust
Fund and early retirement of the then outstanding
Certificates, on any Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans
remaining in the Trust Fund is less than 1% of the
aggregate Stated Principal Balance of the Mortgage Loans
as of the Cut-Off Date.
See "The Pooling Agreement--Optional Termination;
Optional Mortgage Loan Purchase."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.................... The Trust Fund will include two separate real estate
mortgage investment conduits (each, a "REMIC"). One
REMIC (the "Lower-Tier REMIC") will hold the Mortgage
Loans and any related property. Collections in the
Lower-Tier REMIC will be used to make payments of
principal and interest on regular interests in the
Lower-Tier REMIC held by the second REMIC (the
"Upper-Tier REMIC"), and which in turn are used to make
distributions on the Certificates (other than the Class
LR and Class T Certificates), which represent interests
in the Upper-Tier REMIC. For ease of presentation,
distributions will generally be described herein as if
made directly from collections on the Mortgage Loans to
the holders of the Certificates.
Elections will be made to treat each of the Lower-Tier
REMIC and the Upper-Tier REMIC as a REMIC and in the
opinion of counsel, each will qualify as a REMIC for
federal income tax
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purposes. The Class A-1, Class A-2, Class A-3, Class
X-1, Class B, Class C-1, Class C-2, Class X-2, Class D,
Class E and Class F Certificates (collectively, the
"Regular Certificates") will represent "regular
interests" in the Upper-Tier REMIC, and the Class R and
Class LR Certificates (collectively, the "Residual
Certificates") will be designated as the sole Classes of
"residual interests" in the Upper-Tier REMIC and
Lower-Tier REMIC, respectively. In addition, Class A-2,
Class A-3, Class B, Class C-1, Class C-2, Class D, Class
E, and Class F Certificates also represent undivided
beneficial interests in portions of the Excess Interest,
which portions of the Trust Fund will be treated as part
of a grantor trust for federal income tax purposes.
Furthermore, the Class T Certificates will represent the
right to receive Net Default Interest, which portion of
the Trust Fund will be treated as part of the grantor
trust for federal income tax purposes.
The regular interests represented by the Offered
Certificates will be treated as newly originated debt
instruments for federal income tax purposes. Beneficial
owners will be required to report income thereon in
accordance with the accrual method of accounting. The
Class X-1 and Class X-2 Certificates will be considered
to be issued with original issue discount in an amount
equal to the excess of all distributions of interest
expected to be received thereon over their respective
issue prices (including accrued interest). It is
anticipated that the regular interests represented by
the Class A-1, Class A-2, Class A-3, Class B, Class C-1,
and Class D Certificates will be issued at a premium,
that the regular interests represented by the Class E
Certificates will be issued with DE MINIMIS original
issue discount and that the Class C-2 Certificates will
be issued without original issue discount for federal
income tax purposes. See "Federal Income Tax
Consequences" herein and "Federal Income Tax
Considerations--Taxation of Regular Interest Securities"
in the Prospectus.
Although not free from doubt, it is anticipated that any
Prepayment Premiums allocable to the Offered
Certificates will be ordinary income to a
Certificateholder as such amounts accrue. See "Federal
Income Tax Consequences" herein.
ERISA CONSIDERATIONS.............. The United States Department of Labor has issued an
individual prohibited transaction exemption, Prohibited
Transaction Exemption 91-14, 56 Fed. Reg. 7414 (February
22, 1991) (the "Exemption"), to the Underwriter, which
generally exempts from the application of certain of the
prohibited transaction provisions of Sections 406 and
407 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the excise taxes imposed
by Sections 4975(a) and (b) of the Internal Revenue Code
of 1986, as amended (the "Code") and the civil penalties
imposed by 502(i) of ERISA, transactions relating to the
purchase, sale and holding of pass-through certificates
such as the Class A-1, Class A-2, Class A-3 and Class
X-1 Certificates
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by employee benefit plans and certain other retirement
arrangements, including individual retirement accounts
and Keogh plans, which are subject to Title I of ERISA
or Section 4975 of the Code (each of which is
hereinafter referred to as a "Plan"), collective
investment funds in which such Plans are invested, and
insurance companies using assets of separate accounts or
general accounts which include assets of Plans (or which
are deemed pursuant to ERISA to include assets of Plans)
and the servicing and operation of mortgage pools such
as the Mortgage Pool, provided that certain conditions
are satisfied. See "ERISA Considerations" herein and in
the Prospectus.
The Underwriter believes that the conditions to the
applicability of the Exemption will generally be met
with respect to the Class A-1, Class A-2, Class A-3 and
Class X-1 Certificates, other than possibly those
conditions which are dependent on facts unknown to the
Underwriter or which they cannot control, such as those
relating to the circumstances of the Plan purchaser or
the Plan fiduciary making the decision to purchase any
such Class of Certificates. However, before purchasing a
Class A-1, Class A-2, Class A-3 or Class X-1
Certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive
relief provided by the Exemption or the availability of
any other exemption and whether the conditions of any
such exemption will be met with respect to the such
Class of Certificates.
The Exemption does not apply to the purchasing or
holding of Certificates by Plans sponsored by the
Depositor, the Underwriters, the Trustee, the Master
Servicer, the Special Servicer, any obligor with respect
to Mortgage Loans included in the Trust Fund
constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust
Fund, or any affiliate of such parties (the "Restricted
Group"). Borrowers who are acting on behalf of Plans or
who are investing assets of Plans, and any affiliates of
any such borrowers, should not purchase any of the
Certificates.
THE CLASS B, CLASS C-1, CLASS C-2, CLASS X-2, CLASS D
AND CLASS E CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN OR ANY PERSON ACTING ON BEHALF OF
OR INVESTING THE ASSETS OF ANY SUCH PLAN, UNLESS SUCH
PERSON IS AN INSURANCE COMPANY INVESTING THE ASSETS OF
ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE
PURCHASE AND HOLDING OF ANY SUCH CERTIFICATE WOULD BE
EXEMPT FROM THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA AND SECTION 4975 OF THE CODE UNDER PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60.
RATINGS........................... It is a condition to the issuance of the Offered
Certificates that (i) each of the Class A-1, Class A-2
and Class A-3 Certificates be
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rated "Aaa" by Moody's Investors Service, Inc.
("Moody's") and "AAA" by Standard and Poor's Ratings
Group ("S&P"); (ii) the Class X-1 Certificates be rated
"AAA" by Duff & Phelps Credit Rating Co. ("DCR") and
"Aaa" by Moody's (S&P, DCR, and Moody's, each referred
to herein as a "Rating Agency" and collectively, the
"Rating Agencies"); (iii) the Class B Certificates be
rated "Aa2" by Moody's and "AA" by S&P; (iv) the Class
C-1, Class C-2 and Class X-2 Certificates be rated "A2"
by Moody's and "A" by S&P; (v) the Class D Certificates
be rated "BBB" by DCR and "Baa2" by Moody's; (vi) the
Class E Certificates be rated "BBB-" by DCR and "Baa3"
by Moody's; and (vii) the Class F Certificates be rated
"Ba" by Moody's and "BB" by S&P. A security rating does
not address the frequency of prepayments (both voluntary
and involuntary) or the possibility that
Certificateholders might suffer a lower than anticipated
yield, nor does a security rating address the likelihood
of receipt of Prepayment Premiums, Excess Interest or
Default Interest or the tax treatment of the
Certificates. The Rating Agencies' ratings on the
Offered Certificates address the likelihood of the
timely payment of interest and the ultimate repayment of
principal by the Rated Final Distribution Date. A
security rating does not represent any assessment of the
yield to maturity that investors may experience or the
application of Realized Losses. The ratings do not
address the fact that the Certificate Interest Rates of
the Offered Certificates, to the extent that they are
based on the Group 1 WAC Rate, will be affected by
changes therein.
The Rating Agencies' ratings on mortgage pass-through
certificates address the likelihood of the receipt by
holders of payments to which they are entitled by the
Rate Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of
the mortgage pool, structural and legal aspects
associated with the Certificates, and the extent to
which the payment stream in the mortgage pool is
adequate to make payments required under the
Certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of
the likelihood, timing or frequency of principal
prepayments (both voluntary and involuntary) by
mortgagors, or the degree to which such prepayments
might differ from those originally anticipated. In
general, the ratings thus address credit risk and not
prepayments risk. Also, a security rating does not
represent any assessment of the yield to maturity that
investors may experience.
The Rating Agencies rating of the Offered Certificates
does not address possibility that the holders of the
Class X-1 and Class X-2 Certificates might not fully
recover their investment in the event of rapid
prepayments of the Mortgage Loans (including both
voluntary and involuntary prepayments). In general, the
ratings thus address credit risk and not prepayment
risk. As described herein, the amounts payable with
respect to the Class
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
X-1 and Class X-2 Certificates consist only of interest.
If the entire pool were to prepay in the initial month,
with the result that the Class X-1 and Class X-2
Certificateholders receive only a single month's
interest and thus suffer a nearly complete loss of their
investment, all amounts "due" to such Holders will
nevertheless have been paid, and such result is
consistent with the "Aaa" and "AAA" rating received on
the Class X-1 Certificates by Moody's and DCR,
respectively, or the "A2" and "A" rating received on the
Class X-2 Certificates by Moody's and S&P, respectively.
The Notional Amount of the Class X-1 and Class X-2
Certificates upon which interest is calculated is
reduced by the allocation of Realized Losses and
prepayments, whether voluntary or involuntary. The
rating does not address the timing or magnitude of
reductions of such notional amount, but only the
obligation to pay interest timely on the notional amount
as so reduced from time to time. Accordingly, the
ratings of the Class X-1 and Class X-2 Certificates
should be evaluated independently from similar ratings
on other types of securities.
There can be no assurance as to whether any rating
agency not requested to rate the Offered Certificates
will nonetheless issue a rating and, if so, what such
rating would be. A rating assigned to the Offered
Certificates by a rating agency that has not been
requested by the Depositor to do so may be lower than
the rating assigned by the Rating Agencies pursuant to
the Depositor's request. See "Ratings" herein and "Yield
and Prepayment Considerations" in the Prospectus.
LEGAL INVESTMENT.................. The appropriate characterization of the Offered
Certificates under various legal investment
restrictions, and thus the ability of investors subject
to these restrictions to purchase the Offered
Certificates, may be subject to significant
interpretative uncertainties. The Class A-1, Class A-2,
Class A-3, Class X-1 and Class B Certificates will
constitute "mortgage related securities" within the
meaning of the Secondary Mortgage Market Enhancement Act
of 1984, as amended ("SMMEA"), so long as they are rated
in one of the two highest rating categories by one or
more Rating Agencies and the Mortgage Loans are secured
by liens on real property. THE CLASS C-1, CLASS C-2,
CLASS X-2, CLASS D AND CLASS E CERTIFICATES WILL NOT
CONSTITUTE "MORTGAGE RELATED SECURITIES" WITHIN THE
MEANING OF SMMEA. Accordingly, investors should consult
their own legal advisors to determine whether and to
what extent the Offered Certificates constitute legal
investments for them. See "Legal Investment" herein and
in the Prospectus.
</TABLE>
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<PAGE>
RISK FACTORS
Prospective holders of Offered Certificates should consider, among other
things, the following factors in connection with the purchase of the Offered
Certificates.
THE MORTGAGE LOANS
BORROWER DEFAULT; NONRECOURSE MORTGAGE LOANS. The Mortgage Loans are not
insured or guaranteed, in whole or in part, by any governmental entity, by any
private mortgage or other insurer, or by the Depositor, the Originators, the
Underwriter, the Master Servicer, the Trustee, the Fiscal Agent or any of their
respective subsidiaries, shareholders, partners, directors, officers, employees
or other affiliates.
Each Mortgage Loan is a nonrecourse loan (subject to certain exceptions) as
to which, in the event of a default under such Mortgage Loan, recourse generally
may be had only against the specific properties and other assets that have been
pledged to secure the Mortgage Loan. See "Description of the Mortgage Loans and
Mortgaged Properties" herein. Consequently, payment on each Mortgage Loan prior
to maturity is dependent primarily on the sufficiency of the net operating
income of the related Mortgaged Property, and at maturity (whether at scheduled
maturity, if applicable, or, in the event of a default under the related
Mortgage Loan, upon the acceleration of such maturity) upon the then market
value of the related Mortgaged Property or the ability of the related borrower
to refinance the Mortgaged Property.
LIMITED PAYMENT HISTORY. All of the Mortgage Loans were originated within 8
months prior to the Cut-Off Date. Consequently, the Mortgage Loans do not have a
long-standing payment history. In the case of the Sun Communities Loan (which
was originated in September 1997), the first regular scheduled payment will not
occur under the terms of such Mortgage Loan until October 10, 1997. See
"Description of the Mortgage Loans and Mortgaged Properties--The Sun Communities
Loan and Properties--The Loan-- Payment Terms" herein.
LIMITATIONS WITH RESPECT TO REPRESENTATIONS AND WARRANTIES. The Depositor
will make certain limited representations and warranties regarding the Mortgage
Loans to the Trustee for the benefit of the Certificateholders. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and Exhibit B
hereto for a summary of such representations and warranties. A material breach
of such representations and warranties that is not cured within a specified time
period may, under certain circumstances described herein, obligate the Depositor
to repurchase the related Mortgage Loan.
Certain exceptions to the representations and warranties have been taken
with respect to certain Mortgage Loans, certain of which are listed on Exhibit B
hereto. A breach of a representation or warranty as to which an exception has
been taken will not give rise to an obligation to repurchase on the part of the
Depositor. If the Depositor is required to but does not cure or remedy a breach
of a representation or warranty, payments on the Offered Certificates may be
substantially less than such payments would be if the Depositor had cured or
remedied such a breach. In addition, in the event that the Depositor repurchases
a Mortgage Loan, the Repurchase Price will be passed through to the holders of
the Class or Classes of Certificates then entitled to principal distributions
with the same effect as if such Mortgage Loan had been prepaid in full (but
without any prepayment premium or yield maintenance charge), which may adversely
affect the yield to maturity on such Certificates. Any such principal
distributions with respect to any Group 1 Loans will adversely affect the yield
to maturity on the Class X-1 Certificates and any such distribution with respect
to the Worldwide Plaza Loan will adversely affect the yield to maturity of the
Class X-2 Certificates. See "--The Offered Certificates--Special Prepayment,
Yield and Loss Considerations" below.
The obligation of the Depositor to repurchase a Mortgage Loan may constitute
the sole remedy available to holders of Certificates or the Trustee for a breach
of a representation or warranty by the Depositor. None of the Underwriter, the
Master Servicer, the Special Servicer, the Trustee or the Fiscal
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<PAGE>
Agent will be obligated to purchase a Mortgage Loan if the Depositor defaults on
its obligation to repurchase or cure, and no assurance can be given that the
Depositor will fulfill such obligations. If such obligation is not met with
respect to a breach that would cause a Mortgage Loan not to be a "qualified
mortgage" under the REMIC provisions of the Code, the Upper-Tier REMIC and
Lower-Tier REMIC may be disqualified as REMICs. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein.
COMMERCIAL LENDING GENERALLY. The Mortgage Loans are secured by retail
properties (including power centers, an urban marketplace and a regional mall),
office buildings (including suburban office buildings and a Manhattan office
tower), hotels, industrial properties and manufactured housing communities. A
power center is generally considered to be any multi-tenanted open-air shopping
center that contains at least 4 "big box" merchants and generally contains less
than 15% "small shops" by GLA. An urban marketplace is generally considered to
be a retail shopping center that is comprised of specialty retail and food shops
of the kind found in better quality malls, an entertainment component and
street-front retail. Commercial lending is generally viewed as exposing a lender
to a greater risk of loss than residential one-to-four family lending since it
typically involves larger loans to a single obligor than residential one-to-four
family lending. Lenders typically look to the debt service coverage ratio of a
loan secured by income-producing property as an important measure of the risk of
default on such a loan. See "--Concentration of Mortgage Loans and Mortgaged
Property Types."
Commercial property values and net operating income are subject to
volatility, and net operating income may be sufficient or insufficient to cover
debt service on the related Mortgage Loan at any given time. The repayment of
loans secured by income-producing properties is typically dependent upon the
successful operation of the related real estate project, the business operated
by the tenants and the creditworthiness of such tenants (i.e., the ability of
the applicable property to produce net operating income) rather than upon the
liquidation value of the underlying real estate. The volatility of property
values and net operating income depends upon a number of factors, including (i)
the volatility of property revenue, determined primarily by (a) the length of
tenant lease commitments, (b) the creditworthiness of tenants, (c) in the case
of retail properties characterized by rentals based all or in part on tenant
sales, the volume of those sales, (d) in the case of hotel properties, the
continued existence, reputation and financial strength of the franchisor or
hotel manager and the public perception of the franchise or chain service mark
and (e) the variability of other property revenue sources; and (ii) the
property's "operating leverage," which generally refers to (a) the percentage of
total property operating expenses in relation to property revenue, (b) the
breakdown of property operating expenses between those that are fixed and those
that vary with revenue and (c) the level of capital expenditures required to
maintain the property and retain or replace tenants. Even when the current net
operating income is sufficient to cover debt service, there can be no assurance
that this will continue to be the case in the future. The net operating income
and value of the Mortgaged Properties may be adversely affected by a number of
factors, including, but not limited to, national, regional and local economic
conditions (which may be adversely impacted by plant closings, industry
slowdowns and other factors); local real estate conditions (such as an
oversupply of retail space, office space, industrial space, housing or hotel
rooms); changes or continued weakness in specific industry segments; perceptions
by prospective tenants and, in the case of retail properties, retailers and
shoppers, of the safety, convenience, condition, services and attractiveness of
the property; the proximity and availability of competing alternatives to the
Mortgaged Property; the willingness and ability of the property's owner to
provide capable management and adequate maintenance; demographic factors;
consumer confidence, unemployment rates, customer tastes and preferences;
retroactive changes to building or similar codes; and increases in operating
expenses (such as energy costs).
Net operating income from a real estate project may be reduced, and the
borrower's ability to repay the loan impaired, as a result of, among other
things, an increase in vacancy rates for the project, a decline in rental rates
as leases are renewed or entered into with new tenants, an increase in operating
expenses of
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<PAGE>
the project and/or an increase in capital expenditures needed to maintain the
project and make improvements required by tenants. In the case of Mortgage Loans
that are secured by Mortgaged Properties leased to a single tenant or a small
number of tenants, a deterioration in the financial condition of one or more of
such tenants, resulting in a failure to pay rent, may have a disproportionately
greater effect on the net operating income from such Mortgaged Properties than
would be the case with respect to Mortgaged Properties with numerous tenants.
Mortgage Loans secured by Mortgaged Properties with respect to which a single
tenant or small number of tenants represent a significant portion of the cash
flow for such properties are also more susceptible to interruptions of cash flow
if such tenants decide not to renew their leases, since the impact of such a
decision is proportionately greater, the time required to re-lease the space may
be longer and greater capital costs may be incurred in making the space
appropriate for replacement tenants than would be the case with Mortgaged
Properties having a larger number of relatively smaller tenants. Three of the
tenants of the Worldwide Plaza Property comprise greater than 10% of the
underwritten cash flow for the Worldwide Plaza Loan. These tenants are Ogilvy &
Mather Worldwide, Inc., Cravath, Swaine & Moore and Polygram Holding, Inc. In
the case of Mortgage Loans secured by Mortgaged Properties having multiple
tenants, expenditures for re-leasing may be more frequent than would be the case
with respect to Mortgaged Properties with single tenants, thereby reducing cash
flow available for debt service payments. In addition, multi-tenanted Mortgaged
Properties may experience higher continuing vacancy rates and greater volatility
in rental income and expenses than single-tenanted Mortgaged Properties.
The age, construction quality and design of a particular property may affect
the occupancy level as well as the rents that may be charged for individual
leases. The effects of poor construction quality will increase over time in the
form of increased maintenance and capital improvements needed to maintain the
property. Even good construction will deteriorate over time if the property
managers do not schedule and perform adequate maintenance in a timely fashion.
For example, an architectural and engineering report performed on behalf of the
Originator for the Valley View Property in connection with the underwriting of
the Valley View Loan has indicated that approximately $3.2 million of
maintenance and repairs should be performed on the Valley View Property. See
"Description of the Mortgage Loans and Mortgaged Properties--The Valley View
Loan and Property--The Property" herein. If, during the terms of the Mortgage
Loans, competing properties of a similar type are built in the areas where the
Mortgaged Properties are located or similar properties in the vicinity of the
Mortgaged Properties are substantially updated and refurbished, the value and
net operating income of such Mortgaged Properties could be reduced.
Additionally, some of the Mortgaged Properties may not readily be
convertible to alternative uses if such Mortgaged Properties were to become
unprofitable due to competition, age of the improvements, decreased demand,
regulatory changes or other factors. The conversion of commercial properties
(particularly industrial properties) to alternate uses generally requires
substantial capital expenditures. Thus, if the operation of any such Mortgaged
Properties becomes unprofitable such that the borrower becomes unable to meet
its obligations on the related Mortgage Loan, the liquidation value of any such
Mortgaged Property may be substantially less, relative to the amount owing on
the related Mortgage Loan, than would be the case if such Mortgaged Property
were readily adaptable to other uses.
A decline in the real estate market, in the financial condition of a major
tenant or a general decline in the local, regional or national economy will tend
to have a more immediate effect on the net operating income of properties with
short-term revenue sources and may lead to higher rates of delinquency or
defaults. Historical operating results of the Mortgaged Properties may not be
comparable to future operating results. (See "--Borrowers' Recent Acquisitions
of the Mortgaged Properties"). In addition, other factors may adversely affect
the Mortgaged Properties' value without affecting their current net operating
income, including changes in governmental regulations, fiscal policy and zoning
or tax laws; potential environmental legislation or liabilities or other legal
liabilities; the availability of refinancing; and changes in interest rate
levels. There is no assurance that the value of any Mortgaged Property during
the
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term of the related Mortgage Loan will equal or exceed the appraised value used
in connection with the origination of such Mortgage Loan.
Other retail properties, power centers, suburban office buildings, central
business district office buildings, hotels, industrial properties, urban
marketplaces, regional malls and manufactured housing communities located in the
areas of the Mortgaged Properties compete with the Mortgaged Properties of such
types to attract retailers, tenants, guests and customers. Increased competition
could adversely affect income from and market value of the Mortgaged Properties.
The availability of credit for obligors to refinance the Mortgage Loans or
sell Mortgaged Properties will be significantly dependent upon economic
conditions in the markets where the Mortgaged Properties are located, as well as
the willingness and ability of lenders to make such loans. Such lenders
typically include banks, insurance companies, finance companies and real estate
investment trusts. The availability of funds in the credit markets changes over
time and there can be no assurance that the availability of such funds will
increase above, or will not contract below, current levels. In addition, the
availability of assets similar to the Mortgaged Properties, and the competition
for available credit, may affect the ability of potential purchasers to obtain
financing for the acquisition of the Mortgaged Properties. The ability of the
Trust Fund to make distributions to the Certificateholders will depend
significantly on the ability of the obligors to refinance the Mortgage Loans or
sell the Mortgaged Properties.
CONCENTRATION OF MORTGAGE LOANS AND MORTGAGED PROPERTY TYPES. The aggregate
principal balance of the Mortgage Loans as of the Cut-Off Date was approximately
$1,426,717,068. The DDR/DRA Loan, the Courtyard Loan, the Worldwide Plaza Loan,
the Prentiss Loan, the Arden Loan, the Villa Marina Loan, the Valley View Loan
and the Sun Communities Loan represent approximately 22.6%, 22.5%, 19.2%, 12.6%,
12.3%, 4.1%, 3.6% and 3.1%, respectively, of the aggregate principal balance of
the Mortgage Pool as of the Cut-Off Date. Suburban office buildings, the
Manhattan office tower, power centers, the urban marketplace, the regional mall,
industrial properties, hotels and manufactured housing communities represent
approximately 19.0%, 19.2%, 22.6%, 4.1%%, 3.6%, 5.9%, 22.5% and 3.1%,
respectively, of the aggregate principal balance of the Mortgage Pool as of the
Cut-Off Date (based on the primary property type for combined office/industrial
and office/retail properties).
A mortgage pool consisting of fewer loans, each having a relatively higher
outstanding principal balance, may result in losses that are more severe,
relative to the size of the pool, than would be the case if the pool consisted
of a greater number of mortgage loans each having a relatively smaller
outstanding principal balance. In addition, the concentration of any mortgage
pool in one or more loans that have outstanding principal balances that are
substantially larger than the other mortgage loans in such pool can result in
losses that are substantially more severe, relative to the size of the pool,
than would be the case if the aggregate balance of the pool were more evenly
distributed among the mortgage loans in such pool. Because there are only 8
Mortgage Loans, losses on any 1 Mortgage Loan, particularly 1 of the larger
Mortgage Loans, may have a substantial negative effect on the Offered
Certificates.
GEOGRAPHIC CONCENTRATION. Repayments by borrowers and the market value of
the Mortgaged Properties could be adversely affected by economic conditions
generally or in regions where the Mortgaged Properties are located, conditions
in the real estate markets where the Mortgaged Properties are located, changes
in governmental rules and fiscal policies, acts of nature, including
earthquakes, floods and hurricanes (which may result in uninsured losses), and
other factors which are beyond the control of the borrowers. The Mortgaged
Properties are located in 22 states. The economy of any state or region in which
a Mortgaged Property is located may be adversely affected to a greater degree
than that of other areas of the country by certain developments affecting
industries concentrated in such state or region. For example, improvements on
Mortgaged Properties located in California and Florida may be more susceptible
to certain types of special hazards not fully covered by insurance (such as
earthquakes and hurricanes) than properties located in other parts of the
country. In addition, the economy of the State of California would be adversely
affected to a greater degree than that of other areas of the country by certain
developments
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affecting industries concentrated in that state. A decline in the general
economic condition in regions in which Mortgaged Properties securing a
significant portion of the Mortgage Loans are located could result in a decrease
in commercial property, housing or consumer demand in the region and the income
from and market value of the Mortgaged Properties may be adversely affected. See
the table of Mortgaged Property Characteristics attached as Annex A to this
Prospectus Supplement for the geographic locations of the Mortgaged Properties.
All of the Mortgaged Properties securing the Arden Loan and the Villa Marina
Loan are located in the State of California. The table below sets forth the
states in which 5% or more of the Mortgaged Properties are located (by Cut-Off
Date Allocated Loan Amount).
GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENT OF
CUT-OFF DATE CUT-OFF DATE WEIGHTED WEIGHTED
ALLOCATED ALLOCATED NUMBER OF AVERAGE AVERAGE
STATE LOAN AMOUNT LOAN AMOUNT PROPERTIES LTV DSCR
- ------------------------------------------------- -------------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
California....................................... $ 339,546 23.8% 26 54.9% 2.01X
New York......................................... 282,439 19.8 2 65.4 1.47
Texas............................................ 119,440 8.4 10 55.4 1.99
Georgia.......................................... 102,871 7.2 11 61.8 1.97
Virginia......................................... 89,034 6.2 9 57.6 2.17
Illinois......................................... 82,989 5.8 5 60.0 2.07
Massachusetts.................................... 80,250 5.6 1 61.0 1.72
</TABLE>
RISKS ASSOCIATED WITH OFFICE PROPERTIES. The Worldwide Plaza Loan, the
Prentiss Loan and the Arden Loan are all, in whole or part, secured by office
properties. Significant factors determining the value of office properties are
the quality of the tenants in the building, the characteristics and terms of the
leases, the physical attributes of the building in relation to competing
buildings and the strength and stability of the market area as a desirable
business location. Office properties may be adversely affected if there is an
economic decline in the businesses operated by the tenants. The risk of such an
adverse effect is increased if revenue is dependent on a single tenant or if
there is a significant concentration of tenants in a particular business or
industry. See " -- Commercial Lending Generally." For example, 4 of the major
tenants of the Worldwide Plaza Property are concentrated in 2 industries.
Cravath, Swaine & Moore and Roberts and Holland, which together account for
approximately 30.3% of the in-place total rent (which includes base rent for the
twelve months subsequent to June 30, 1997 plus operating expense and real estate
tax recoveries for the twelve months ended December 31, 1996) of the Worldwide
Plaza Property, are both law firms and may be similarly affected by a downturn
in the legal profession. Similarly, Ogilvy & Mather Worldwide, Inc. and D'Arcy
Masius Benton & Bowles Inc., which together account for approximately 43.6% of
the in-place total rent (as explained above) of the Worldwide Plaza Property,
are both advertising agencies and may also be similarly affected by a downturn
in the advertising industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation and
ability to offer certain amenities to its tenants, including sophisticated
building systems (such as fiberoptic cables, high-speed computer data
transmission lines, satellite communications or other base building
technological features). The success of an office property also depends on the
local economy. A company's decision to locate in a given area may be affected by
such factors as labor cost and quality, tax environment and quality of life
issues such as schools and cultural amenities. The local economy will impact on
an office property's ability to attract stable tenants on a consistent basis.
Finally, the cost of refitting office space for a new tenant is often more
costly than for other property types.
RISKS ASSOCIATED WITH HOTELS. The Courtyard Loan is secured by 50 hotels.
Various factors, including location, quality and franchise or hotel management
company affiliation affect the economic performance
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of a hotel. Adverse economic and social conditions, either local, regional or
national, may limit the amount that can be charged for a room and may result in
a reduction in occupancy levels. The construction of competing hotels or resorts
can have similar effects. To meet competition in the industry and to maintain
economic values, continuing expenditures must be made for modernizing,
refurbishing, and maintaining existing facilities prior to the expiration of
their anticipated useful lives. Because hotel rooms generally are rented for
short periods of time, hotels tend to respond more quickly to adverse economic
conditions and competition than do other commercial properties. Furthermore, the
financial strength and capabilities of the owner and operator of a hotel may
have an impact on such hotel's quality of service and economic performance.
Additionally, the hotel and lodging industry is generally seasonal in nature and
this seasonality can be expected to cause periodic fluctuations in a hotel
property's room and other hotel revenues, occupancy levels, room rates and
operating expenses. The demand for particular accommodations may also be
affected by changes in travel patterns caused by changes in access, energy
prices, strikes, relocation of highways, the construction of additional highways
and other factors.
The Courtyard Properties securing the Courtyard Loan are managed by
Courtyard Management Corporation, a wholly-owned subsidiary of Marriott
International, Inc. ("MII") as part of the Courtyard by Marriott system. The
performance of any hotel property which is affiliated with a franchise or hotel
management company depends in part on the continued existence, reputation and
financial strength of the franchisor or hotel management company, the public
perception of the franchise or hotel chain service mark and the duration of the
franchise licensing or management agreements.
The Courtyard Borrower is dependent upon the Courtyard Manager, a wholly
owned subsidiary of MII, to manage and operate the Courtyard Properties. In
addition, an affiliate of MII is the ground lessor with respect to the land on
which 31 hotels are located (collectively, the 'Marriott Ground Leases'). Under
certain limited circumstances, including the revocation of any material licenses
or permits, failure to provide adequate working capital or funds for required
FF&E and building alterations, or the occurrence of material casualty or force
majeure events, the Courtyard Manager may terminate the Courtyard Management
Agreement with respect to one or more Courtyard Properties, and in that event
the Courtyard Borrower would lose the right to use the Courtyard by Marriott
name with respect to such Courtyard Properties, its access to the Courtyard
Manager's central reservation system, and the other benefits under the Courtyard
Management Agreement. See 'Description of the Mortgage Loans and Mortgaged
Properties--The Courtyard Loan and Properties--The Properties--Property
Management.' Because the Courtyard Borrower has no independent management
capability, a new manager for the Courtyard Properties would have to be
obtained. There can be no assurance that a new manager would be able to generate
as much net operating cash flow from the Courtyard Properties as the Courtyard
Manager. Additionally, the possible desire of the Courtyard Borrower from time
to time to finance, refinance, or effect a sale of any of the Courtyard
Properties may, depending upon the structure of such transactions, result in a
need to modify the Courtyard Management Agreement and/or any Marriott Ground
Leases with respect to such Courtyard Property. Any such modification proposed
by the Courtyard Borrower may not be acceptable to the Courtyard Manager or the
applicable Marriott Ground Lessors, and the lack of consent from such party
could adversely affect the Courtyard Borrower's ability to consummate such
financing or sale. In addition, the Courtyard Manager or the affiliates of the
Courtyard Manager, in their capacities as managers or franchisors of competing
lodging properties, may take actions which may not necessarily be in the best
interests of the Courtyard Borrower. Moreover, any provision in a franchise
agreement or management agreement providing for termination because of a
bankruptcy of a franchisor or manager will generally not be enforceable. No
assurance can be given that the Trust Fund could renew a franchise or management
agreement or obtain a new franchise or management contract. Further, in the
event of a foreclosure on a Courtyard Property, it is unlikely that the Trustee
on behalf of the Trust Fund or purchaser of such Courtyard Property would be
entitled to the rights under any liquor license for such Courtyard Property and
such party would be required to apply in its own right for such license or
licenses. There can be no assurance that a new license could be obtained.
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RISKS ASSOCIATED WITH RETAIL PROPERTIES. The DDR/DRA Properties, the Villa
Marina Property and the Valley View Property are retail properties. The value of
retail properties is significantly affected by the quality of the tenants as
well as fundamental aspects of real estate, such as location and market
demographics. The correlation between the success of tenant businesses and
property value may be more direct with respect to retail properties than other
types of commercial property because a significant component of the total rent
paid by retail tenants is often tied to a percentage of gross sales. Whether a
retail property is "anchored" or "unanchored" is also an important distinction.
Anchor tenants in shopping centers and power centers traditionally have been a
major factor in the public's perception of a shopping center or a power center.
The anchors at a retail center play an important part in generating customer
traffic and making a center a desirable location for other tenants of the
center. The failure of an anchor tenant to renew its lease, the termination of
an anchor tenant's lease, the bankruptcy or economic decline of an anchor
tenant, or the cessation of the business of an anchor tenant (notwithstanding
its continued payment of rent) can have a material negative effect on the
economic performance of a retail property. In addition, there can be no
assurance that if anchor stores in the Mortgaged Properties were to close, the
related borrower would be able to replace such anchors in a timely manner or
without incurring additional costs and adverse economic effects. See also
"--Risks Relating to Tenants; Reserves" below. Furthermore, the correlation
between the success of tenant businesses and property value is increased when
the property is a single tenant property.
Regardless of whether a tenant is paying rent in accordance with the terms
of its lease, Mortgaged Properties that contain retail space may be adversely
affected in their ability to draw shoppers if tenant space in such retail
properties is unoccupied, regardless of whether the tenant is paying rent. In
addition, even if such tenant is paying base rent, such tenant will not be
paying percentage rent, if any, that would ordinarily be due. The Wiz, a tenant
at the DDR/DRA Property known as the Shoppers World Property, under a lease that
covers 6.4% of GLA for such property, no longer occupies the space that it
leases from the DDR/DRA III Borrower and is no longer paying any rent under such
lease. See "Description of the Mortgaged Loans and Mortgaged Properties--The
DDR/DRA Loan and Properties--The Properties" herein. Currently, space formerly
used as a movie theater on the Valley View Property, comprised of approximately
13,200 square feet of GLA, is unoccupied. This space has been unoccupied for a
number of years as a result of the prior tenant vacating such space. See
"Description of the Mortgage Loans and Mortgaged Properties--The Valley View
Loan and Property--The Property" herein.
Three of the 4 anchors of the Valley View Mall are subject to operating
covenants, which provide that they are required to operate until October 2006,
provided, among other things, at least two of the other anchor stores are
operating. The fourth anchor is not subject to any operating covenant and can
discontinue its operations at the Valley View Mall at any time. See "Description
of the Mortgage Loans and Mortgaged Properties--The Valley View Loan and
Property--The Operating Agreement" herein.
Unlike office or industrial properties, retail properties also face
competition from sources outside a given real estate market. Factory-outlet
centers, discount shopping centers and clubs, video shopping networks, catalogue
retailers, home shopping networks, direct mail and telemarketing all compete
with more traditional retail properties for consumer dollars. Continued growth
of these alternative retail outlets (which are often characterized by lower
operating costs) could adversely affect the rents collectible at the retail
properties included in the Mortgage Pool. Increased competition could adversely
affect income from and market value of the Mortgaged Properties. For example, a
new regional shopping center, known as Crossroads of Independence Shopping
Center, in Independence, Missouri, was opened in 1996 near the DDR/DRA Property
known as Independence Commons. See "Description of the Mortgage Loans and
Mortgaged Properties--The DDR/DRA Loan and Properties" herein.
RISKS ASSOCIATED WITH INDUSTRIAL PROPERTIES. The Prentiss Loan is secured
in part by industrial properties. Significant factors determining the value of
industrial properties are the quality of tenants, the characteristics and terms
of the leases, building design, and adaptability and the location of the
property. Concerns
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about the quality of tenants, particularly major tenants, are similar in both
office properties and industrial properties, although industrial properties are
more frequently dependent on a single tenant. Several of the Prentiss Properties
are industrial properties leased to a single tenant.
RISKS ASSOCIATED WITH MANUFACTURED HOUSING COMMUNITIES. The Sun Communities
Properties are operated as manufactured housing communities. Loans secured by
liens on properties of these types pose risks not associated with loans secured
by liens on other types of income-producing real estate.
The successful operation of a Sun Communities Property will generally depend
upon the number of competing manufactured housing communities and other
residential developments in the local market, such as apartment buildings, other
manufactured housing communities, and site-built single family homes, as well as
upon other factors such as its location, age, appearance, reputation, the
ability of management to provide adequate maintenance and insurance, and the
types of services it provides.
The Sun Communities Properties are "special purpose" properties that could
not be readily converted to general residential, retail or office use. Thus, if
the operation of any of the Sun Communities Properties becomes unprofitable due
to competition, age of the improvements or other factors such that the borrower
becomes unable to meet its obligations on the related Sun Communities Loan, the
liquidation value of that Sun Communities Property may be substantially less,
relative to the amount owing on the Sun Communities Loan, than would be the case
if the Sun Communities Property were readily adaptable to other uses.
Certain states regulate the relationship of a manufactured housing community
owner and its tenants. Commonly, these laws require a written lease, good cause
for eviction, disclosure of fees, and notification to residents of changed land
use, while prohibiting unreasonable rules, retaliatory evictions, and
restrictions on a resident's choice of unit vendors. For example, there are
provisions that limit the basis on which a landlord may terminate a manufactured
home owner's tenancy or increase its rent and generally prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's manufactured
home.
In addition to state regulation of the landlord tenant relationship,
numerous counties and municipalities impose rent control on manufactured housing
communities. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through mediation
or binding arbitration. In many cases, the rent control laws do not permit
vacancy decontrol, or permit vacancy decontrol only in the relatively rare event
that the manufactured home is removed from the manufactured housing sites. Local
authority to impose rent control on manufactured housing communities is
preempted by state law in certain states and rent control is not imposed at the
state level in those states. In some states, however, local rent control
ordinances are not preempted for tenants having short-term or month-to-month
leases, and the Mortgaged Properties in such states may be subject to various
forms of rent control with respect to those tenants. Any limitations on the Sun
Communities Borrowers' ability to raise property rents may impair their ability
to repay the Sun Communities Loan from their net operating income or the
proceeds of a sale or refinancing of the related Sun Communities Properties.
The location and construction quality of common area improvements to a
manufactured housing community may affect the occupancy level as well as the
rents that may be charged for the individual manufactured housing sites. The
characteristics of a manufactured housing community may change over time or in
relation to other developments. The effects of poor construction quality on
common area improvements will increase over time in the form of increased
maintenance and capital improvements. Even good construction will deteriorate
over time if the property manager does not schedule and perform adequate
maintenance in a timely fashion.
RISKS RELATING TO TENANTS Income from, and the market value of, the
Mortgaged Properties would be adversely affected if space in the Mortgaged
Properties could not be leased or re-leased, if tenants were unable to meet
their lease obligations, if a significant tenant (or a significant number of
smaller tenants) were to become a debtor in a bankruptcy case under Title 11 of
the United States Code (the "Bankruptcy
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Code"), or if for any other reason rental payments could not be collected. Any
tenant may, from time to time, experience a downturn in its business, which may
weaken its financial condition and result in a reduction or failure to make
rental payments when due. For example, with respect to Mortgaged Properties that
contain retail space, if tenants' sales were to decline, percentage rents may
decline and tenants may be unable to pay their rent or other occupancy costs. If
a tenant defaults in its obligations to a borrower, the borrower may experience
delays in enforcing its rights as lessor and may incur substantial costs and
experience significant delays associated with protecting its investment,
including costs incurred in renovating and reletting the property.
Repayment of the Mortgage Loans secured by retail, industrial and office
properties will be affected by the expiration of space leases and the ability of
the respective borrowers to renew the leases or relet the space on comparable
terms. Tables containing information regarding the expiration dates of certain
leases are set forth under "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans" herein. Even if vacated space is
successfully relet, the costs associated with reletting, including tenant
improvements and leasing commissions, could be substantial and could reduce cash
flow from the Mortgaged Properties.
The bankruptcy or insolvency of a major tenant or a number of smaller
tenants in retail, office and industrial properties may have an adverse impact
on the Mortgaged Properties affected and the income produced by such Mortgaged
Properties. Under the Bankruptcy Code, a tenant has the option of assuming or
rejecting or, subject to certain conditions, assuming and assigning to a third
party, any unexpired lease. If the tenant assumes its lease, the tenant must
cure all defaults under the lease and provide the landlord with adequate
assurance of its future performance under the lease. If the tenant rejects the
lease, the landlord's claim for breach of the lease would (absent collateral
securing the claim) be treated as a general unsecured claim against the tenant.
The amount of the claim would be limited to the amount owed for the unpaid rent
reserved under the lease for the periods prior to the bankruptcy petition (or
earlier surrender of the leased premises) which are unrelated to the rejection,
plus the greater of one year's rent or 15% of the remaining rent reserved under
the lease (but not to exceed three years' rent). If the tenant assigns its
lease, the tenant must cure all defaults under the lease and the proposed
assignee must demonstrate adequate assurance of future performance under the
lease.
No assurance can be given that tenants of the Mortgaged Properties will
continue making payments under their leases or that other tenants will not file
for bankruptcy protection in the future or, if any tenants so file, that they
will continue to make rental payments in a timely manner.
RESERVES. Certain of the Mortgage Loans required that reserves be
established upon the closing of the loan to fund identified capital expenditure
items and certain leasing costs. Certain of the Mortgage Loans also require that
reserves be funded on a monthly basis from cash flow of the applicable Mortgaged
Property or Properties which may be used by the applicable borrower to fund
ongoing capital improvements and leasing costs. There can be no assurance that
the reserve amounts established at the closing of a loan will be sufficient to
offset the actual costs of the items for which the reserves were established, or
that cash flow from the properties will be sufficient in the future to fully
fund the ongoing monthly reserve requirements or that such ongoing monthly
reserves will be sufficient to offset the future capital expenditure and leasing
costs of the properties. See "Description of the Mortgage Loans and Mortgaged
Properties" herein for a discussion of the reserve accounts for each Mortgage
Loan.
BORROWERS' RECENT ACQUISITIONS OF THE MORTGAGED PROPERTIES. The borrowers
under certain of the Mortgage Loans acquired their related Mortgaged Properties
contemporaneously with or within 1 year prior to the origination of the related
Mortgage Loan. Accordingly, these borrowers have limited experience operating
the particular Mortgaged Properties, and, therefore there is a risk that the net
operating income and cash flow of such Mortgaged Properties may vary
significantly from their operations, net operating income and cash flow
generated by the Mortgaged Properties under prior ownership and management.
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ENVIRONMENTAL LAW CONSIDERATIONS. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under, adjacent to, or in such property.
Such laws often impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic substances. The
cost of any required remediation and the owner's liability therefor generally is
not limited under such circumstances and could exceed the value of the property
and/or the aggregate assets of the owner. In addition, the presence of hazardous
or toxic substances, or the failure to properly remediate such property, may
adversely affect the owner's or operator's ability to refinance using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility. Certain
laws impose liability for release of asbestos-containing materials ("ACMs") into
the air or require the removal or containment of ACMs, and third parties may
seek recovery from owners or operators of real properties for personal injury
associated with ACMs or other exposure to chemicals or other hazardous
substances. For all of these reasons, the presence of, or strong potential for
contamination by, hazardous substances at, on, under, adjacent to, or in a
property can materially adversely affect the value of the property and a
borrower's ability to repay its Mortgage Loan.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the Trust
Fund) may be liable, as an "owner" or "operator," for the costs of responding to
a release or threat of a release of hazardous substances on or from a borrower's
property if (i) agents or employees of a lender are deemed to have participated
in the management of the borrower or (ii) the lender actually takes possession
of a borrower's property or control of its day-to-day operations as, for
example, through the appointment of a receiver.
Although recently enacted legislation clarifies the activities in which a
lender may engage without becoming subject to liability under CERCLA and similar
federal laws, such legislation has no applicability to state environmental law.
See "Certain Legal Aspects of Mortgage Loans--Environmental Matters" in the
Prospectus.
All of the Mortgaged Properties have been subject to either Phase I site
assessments or updates of previously performed Phase I site assessments (and in
several cases, Phase II site assessments where recommended by the Phase I site
assessment) within twelve months preceding the date of the closing of the
related Mortgage Loan. Such assessments were intended to evaluate the
environmental condition of and potential environmental liabilities associated
with the Mortgaged Properties and included a visual observation of the Mortgaged
Properties during a site visit, a review of certain records concerning the
Mortgaged Properties and publicly available information concerning known
conditions at the Mortgaged Properties or in the vicinity of the Mortgaged
Properties, consideration of the likely presence of ACMs or radon gas in the
buildings on the Mortgaged Properties and of polychlorinated biphenyls ("PCBs")
in the electrical transformers, a discussion of the presence of underground or
above-ground storage tanks, and the preparation of a written report. The
assessments generally did not include sampling or analysis of soil, groundwater
or other environmental media or subsurface investigations. There can be no
assurance that all environmental conditions and risks have been identified in
such environmental assessments.
Certain of the Phase I reports identified environmental conditions impacting
the Mortgaged Properties, including the presence of ACMs, leaks from chemical
storage tanks and on-site spills. The environmental assessments did not reveal
any continuing environmental condition which the Depositor expects to have a
material adverse effect on the revenues or value of the Mortgaged Properties.
Certain of the Mortgaged Properties are in the vicinity of leaking
underground storage tanks ("LUST") sites or other potential sources of
groundwater contamination. The environmental assessments do not anticipate that
the borrower will have to undertake remedial investigations or actions at these
sites.
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Further, CERCLA and many state environmental laws provide for a third party
defense that generally would preclude liability for a party whose property is
contaminated by off-site sources. In addition, in its final "Policy Toward
Owners of Property Containing Contaminated Aquifers," dated May 24, 1995, the
United States Environmental Protection Agency (the "EPA") stated its position
that, with respect to federal enforcement actions and subject to certain
conditions specified therein, where hazardous substances have come to be located
on or in a property solely as a result of subsurface migration in an aquifer
from a source or sources outside the property, the EPA will not take enforcement
actions against the owner of such property to require the performance of
response actions or the payment of response costs. However, though the owners of
such Mortgaged Properties and the Trust Fund may not be liable for such
contamination, enforcement of the related borrower's or the Trust Fund's rights
against third parties may result in additional transaction costs and the
presence of such contamination or potential contamination may affect the utility
of such Mortgaged Properties, the related borrower's ability to refinance using
such property as collateral or the related borrower's ability to sell the
property to a third party.
The DDR/DRA Properties known as Shoppers World and Town Center Prado are
adjacent to wetlands areas. Local and state environmental and conservation
agencies have required that the DDR/ DRA III Borrower performs certain
monitoring and maintenance projects at the Shoppers World Property in order to
avoid damage to the adjacent wetlands areas. In an environmental indemnity
agreement, the respective DDR/DRA Borrower for the Shoppers World Property and
the Town Center Prado Property have each represented that it has and will comply
with all environmental laws and governmental requirements with respect to
adjacent wetlands area, and each such DDR/DRA Borrower has indemnified the
lender against any losses resulting therefrom.
Phase II site assessments were conducted at the DDR/DRA Properties known as
New Hope Commons and Town Center Prado. The Phase II site assessments did not
indicate the presence of contamination.
The Phase I report for the Courtyard Property known as the San
Antonio-Airport Property indicated that sampling revealed minor groundwater
contamination from an unidentified source. Environmental insurance was purchased
from American International Specialty Lines Insurance Company ("AIG") to cover
any environmental liability including specific coverage for the known
groundwater contamination condition. See "Description of the Mortgage Loans and
Mortgaged Properties--The Courtyard Loan and Properties--The Loan--Insurance."
Non-friable ACMs were found on five of the Mortgaged Properties securing the
Prentiss Loan. Operations and maintenance programs were implemented in each
instance.
The land ("Plant Site") in the vicinity of and underlying the Prentiss
Property known as Pacific Gateway Center was formerly the site of a synthetic
rubber manufacturing plant (the "Plant") owned by the United States Government
and subsequently owned or operated by numerous companies, including the Shell
Oil Company ("Shell") and Dow Chemical Company ("Dow"). During the operation of
the Plant, wastes were disposed of in pits and ponds located just to the south
of the Pacific Gateway Center (the "Plant Site Affected Area"). In 1994, the
Plant Site Affected Area was deeded back to Shell by GP Holdings, Inc., the
affiliate of the Prentiss Borrower that owned the property at the time. Shell
has agreed to indemnify such affiliate and any successors in interest against
(i) any costs of remediation of the Plant Site Affected Area and (ii) any suit
for damages for personal injury or property damage brought by neighboring
landowners.
In addition, Pacific Gateway Center is located less than one mile east of an
existing Superfund site, the Montrose Chemical Superfund Site. Contaminants
associated with this site have been detected in the groundwater in the vicinity
of the Pacific Gateway Center Property. Contamination also has been found in
groundwater to the south of the Plant Site Affected Area. According to reports
prepared by or on behalf of Shell and Dow this contamination appears to be
associated with leaks from pipelines located in that area.
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Environmental studies conducted by Shell and Dow have detected the presence
of groundwater contamination about 60 feet below the surface of the Plant Site,
which appears to be related to the operation of the Plant. Limited soil
contamination has also been found in parcels in the area, including parcels
within the Pacific Gateway Center. In July 1991, the EPA proposed that the Plant
Site be listed on the National Priorities List ("NPL") of Superfund sites.
Comments were submitted to the EPA challenging the proposal, and no action was
taken by the EPA. On June 17, 1996, the EPA re-proposed that the Plant Site
Affected Area be listed on the NPL. At that time, numerous comments were
submitted to the EPA challenging the proposal. On September 25, 1997, the EPA
listed a site known as the "Del Amo Site," which includes contaminated areas on
the Plant Site Affected Area and may include areas on the Plant Site, on the NPL
effective October 17, 1997. At this time, the EPA has not indicated the precise
boundaries of the listed site. In the Hazard Ranking System documentation
record, the EPA has only documented the Plant Site Affected Area as a source,
and the release to groundwater as an area where hazardous substances have come
to be located. NPL listing increases the likelihood that the EPA will continue
to investigate if, and to what extent, remediation is required to be performed,
and that any such remediation will be subject to EPA supervision. EPA listing
also allows the government to perform the cleanup using Superfund money and seek
reimbursement of such costs from potentially responsible parties.
All past and present owners of the land underlying the Pacific Gateway
Center, including the United States Government, Dow, Shell and the Prentiss
Borrower are potentially responsible parties for the investigation and
remediation of the Plant Site. Shell has executed an indemnification agreement,
whereby it has agreed to (i) indemnify and hold harmless the Prentiss Borrower
and any successor of the Prentiss Borrower and any subsequent purchasers,
tenants and lenders, from any liability relating to clean up or remediation
costs for the Plant Site or for any contamination resulting from the
interrelationship of (a) the Montrose Chemical Superfund Site and/or the area
south of the Plant Site Affected Area where groundwater contamination has been
found and (b) the Plant Site, and (ii) indemnify and hold harmless the Prentiss
Borrower and any successor of the Prentiss Borrower from any liability arising
out of any third party tort claims for personal injury or property damage. This
indemnity does not extend to claims for diminution in value or consequential
damages resulting from the remediation of the property or Shell's actions, such
as damages resulting from interruption of the use of, or revenues from, any of
the buildings included in the Pacific Gateway Center affected by any
contamination or remediation. While no assurances can be given that no
diminution in value or consequential damages would result from any such
remediation, any affected party, including the Prentiss Borrower and the Trust
Fund, would have the right to make a claim for any such damages against the
responsible party. Shell has also agreed, pursuant to such indemnification
agreement, to perform or cause to be performed such remedial work on the Plant
Site as may be required under Federal, state or local laws or regulations. The
senior unsecured debt of Shell is currently rated "AAA" by S&P and "AA1" by
Moody's and its short-term unsecured debt is currently rated "A1+" by S&P and
"P1" by Moody's. Neither its senior nor short-term debt is currently rated by
DCR. In addition, the Prentiss Borrower and Prentiss L.P. have entered into an
indemnification agreement whereby they have agreed to indemnify LB Realty for
environmental liabilities that might arise with respect to the Pacific Gateway
Center Properties and such indemnification has been assigned to the Trust Fund.
The Depositor has been advised by the Prentiss Borrower that the Prentiss
Borrower believes that its effective share, if any, of any costs to remediate
the Plant Site will not have a material adverse effect on the Prentiss Borrower
and that despite its possible technical liability as an owner or operator of
contaminated property, existing evidence makes clear that the contamination of
concern to the regulatory agencies did not result from the present use of the
Plant Site as an industrial park.
Friable and/or non-friable ACMs were found on 3 Mortgaged Properties
securing the Arden Loan. Operations and maintenance programs were implemented in
each instance.
Perchloroethylene ("PCE") has been detected at the Villa Marina Property in
the vicinity of a dry cleaning establishment. Soil remediation operations were
conducted in June of 1996. A subsequent review letter from the Los Angeles
Regional Water Quality Control Board ("LARWQCB") indicated that no
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further assessment and remediation actions were required in connection with such
soil remediation, subject to the completion and submission of subsequent
scheduled reports and remediation of groundwater. Quarterly groundwater
monitoring reports have had consistently detectable concentrations of
contaminants. An April 1997 review letter of LARWQCB determined that additional
groundwater monitoring is required, and at the completion of such monitoring
activities, the need to conduct further assessment and/or review will be
determined.
The Phase I report for the Valley View Property identified mostly
non-friable and some friable ACMs and lead in some paint chip samples on the
Mortgaged Property securing the Valley View Loan. In both instances, an
operations and maintenance program was implemented in accordance with the
recommendations made by the site assesser. Additionally, an area impacted by
hydraulic leaks has been remediated and a final report submitted to the State of
Texas for approval in November 1996.
For several Mortgaged Properties, the environmental assessments recommend
further limited investigations or minor repairs; however, based on the
information currently available to the Depositor and a review performed by the
related Originator's environmental consultants, the Depositor does not believe
any of such other issues would have a material adverse effect on the related
Mortgaged Properties. There can be no assurance that all environmental
conditions and risks have been identified in such environmental assessments.
The Pooling Agreement requires that the Special Servicer obtain an
environmental site assessment of a Mortgaged Property prior to acquiring title
thereto on behalf of the Trust Fund or assuming its operation. Such requirement
may effectively preclude enforcement of the security for the related Note until
a satisfactory environmental site assessment is obtained (or until any required
remedial action is thereafter taken), but will decrease the likelihood that the
Trust Fund will become liable under any environmental law. However, there can be
no assurance that the requirements of the Pooling Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws. See
"The Pooling Agreement--Realization Upon Mortgage Loans;
Modifications--Standards for Conduct Generally in Effecting Foreclosure or the
Sale of Defaulted Loans" herein and "Certain Legal Aspects of Mortgage
Loans--Environmental Matters" in the Prospectus.
LACK OF CERTAIN APPRAISALS--LIMITATIONS OF APPRAISALS. In connection with
the origination of each Mortgage Loans, the Originator obtained appraisals or
market studies for each Mortgaged Property. Appraisals were obtained for the
DDR/DRA Properties, the Courtyard Properties and the Worldwide Plaza Property.
While independent appraisals were not performed with respect to the Mortgaged
Properties securing the Prentiss Loan, the Arden Loan, the Villa Marina Loan,
the Valley View Loan, and the Sun Communities Loan, which, based on the
respective Cut-Off Date principal balances for the related Mortgage Loans,
represent in the aggregate approximately 35.7% of the principal balance of the
Mortgage Pool as of the Cut-Off Date, market surveys were performed within the
last 6 months with respect to such Mortgaged Properties. Copies of such
appraisals and market studies are included on the CD-ROM attached to the back
cover of this Prospectus Supplement. The appraisals and market studies were all
performed by independent MAI appraisers. In general, appraisals represent the
analysis and opinion of qualified appraisers and are not guarantees of present
or future value. One appraiser may reach a different conclusion than the
conclusion that would be reached if a different appraiser were appraising such
property or conducting a market survey. Moreover, appraisals seek to establish
the amount a typically motivated buyer would pay a typically motivated seller
and, in certain cases, may have taken into consideration the purchase price paid
by the borrower. Such amount could be significantly higher than the amount
obtained from the sale of a Mortgaged Property under a distress or liquidation
sale.
The loan-to-value ratio of the related loans set forth herein was based on
the loan amount and either (i) the appraised value of the related Mortgaged
Properties or (ii) the aggregate value of the related Mortgaged Properties as
determined by the Originator based on financial and other information provided
by the borrowers and on information prepared on behalf of the Originator by
third parties (such amounts,
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the "Capitalized Value"). No assurance can be given that such Capitalized Value
represents the actual fair market value of such Mortgaged Properties or that
such value could be realized upon foreclosure or forced sale. Information
regarding the Capitalized Values of the Mortgaged Properties presented under
"Mortgage Pool Characteristics" herein is not intended to be a representation as
to the past, present or future market values of the Mortgaged Properties.
RISK OF DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION. If and as principal
payments or prepayments are made on a Mortgage Loan, the remaining Mortgage Pool
will be subject to more concentrated risk with respect to the diversity of
Mortgaged Properties, types of Mortgaged Properties, Mortgaged Property
characteristics and the number of borrowers. Because principal on the Offered
Certificates is generally payable in sequential order, and generally no Class
entitled to distributions of principal receives principal until the Certificate
Principal Amount of the preceding Class or Classes so entitled has been reduced
to zero, Classes that have a later sequential designation (other than the Class
T, Class R and Class LR Certificates as described under "Description of the
Offered Certificates--Distributions" herein) are more likely to be exposed to
the risk of concentration discussed in the preceding sentence than Classes with
higher priority.
REPAYMENT DATE PRINCIPAL BALANCES. All of the Mortgage Loans (other than
the DDR/DRA Loan) are expected to have substantial remaining principal balances
as of their respective Anticipated Repayment Dates and the DDR/DRA Loan is
expected to have a substantial remaining principal balance as of its maturity
date. See "Mortgage Pool Characteristics--Certain Characteristics of the
Mortgage Loans" and "Description of the Mortgage Loans and Mortgaged Properties"
herein. No representation or warranty is made by the Depositor as to the ability
of any of the related borrowers to make required Mortgage Loan payments on a
full and timely basis or as to whether a borrower will repay or have the ability
to repay the remaining principal at the Anticipated Repayment Dates or maturity
dates of these Mortgage Loans. Mortgage loans like the DDR/DRA Loan, with a
substantial remaining principal balance at its maturity date, involve greater
degrees of risk at its final maturity date than amortizing loans. The ability of
a borrower to repay a loan on its Anticipated Repayment Date or in the case of
the DDR/DRA Loan, on its maturity date, typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to repay the loan on the Anticipated
Repayment Date or maturity date, as the case may be. The ability of a borrower
to accomplish either of these goals will be affected by a number of factors at
the time of attempted refinancing or sale, including the level of available
mortgage credit, the prevailing interest rates, the fair market value of the
related properties, the borrower's equity in the related properties, the
financial condition of the borrower and operating history of the properties, the
occupancy level of the Mortgaged Property, tax laws, prevailing general and
regional economic conditions and the availability of credit for commercial real
estate projects.
OTHER FINANCING. The existence of indebtedness other than the Mortgage
Loans incurred by borrowers could adversely affect the financial viability of
such borrowers. Additional debt increases the likelihood that a borrower would
lack the resources to perform on its Mortgage Loan and would seek the protection
of a bankruptcy court. In a bankruptcy proceeding, the Trustee would face
certain limitations (see "-- Bankruptcy Limitations on Lenders" below), and the
holders of such additional debt would likely contest the Trustee's attempt to
foreclose on the related Mortgaged Properties.
The DDR/DRA Loan permits any DDR/DRA Borrower to incur indebtedness with
respect to a DDR/DRA Property so long as such indebtedness: (a) does not, in the
aggregate, exceed 5% of the DDR/ DRA Allocated Loan Amount applicable to the
related DDR/DRA Property, (b) is not secured by the DDR/DRA Property and (c) is
either (i) payable by the DDR/DRA Borrower in respect of the operation of the
DDR/DRA Property within 60 days of the date such obligations were incurred; or
(ii) payable or reimbursable to any tenant on account of work performed at the
DDR/DRA Property by such tenant or for costs incurred by such tenant in
connection with its occupancy of space in the DDR/DRA Property. In addition,
each DDR/DRA Borrower may incur such unsecured indebtedness as may be incurred
to its
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members or partners, as applicable, pursuant to its limited liability company
agreement or limited partnership agreement, as applicable, subject to the terms
and provisions of a subordination agreement with respect to such debt. The
operating agreements and limited partnership agreement for the respective
DDR/DRA Borrowers provide that (i) payments made by members or partners in
response to capital calls shall be treated as loans to the DDR/DRA Borrowers,
(ii) payments made to the DDR/DRA Borrowers by members or partners on behalf of
a member or partner that has defaulted in its obligation to make a capital
contribution in response to a capital call, shall each be treated as a loan from
such member or partner to the defaulting member or partner, (iii) an advisory
fee of 0.5% of gross income shall be paid to the DRA Entities and (iv) members
or partners which have incurred expense to third parties on behalf of the
DDR/DRA Borrowers shall be reimbursed by the respective DDR/DRA Borrowers. The
subordination agreements executed by the DDR/DRA Borrowers and each member and
partner thereof provide that all of the items described in (i), (ii), (iii) and
(iv) (the "DDR/DRA Subordinate Debt") above are subordinate in all respects to
the DDR/DRA Loan, and provide further, among other things, that, (a) no member
or partner shall declare a default under, accelerate, or take any enforcement
action with respect to the DDR/DRA Subordinate Debt, (b) no member or partner
shall accept any collateral or take a security interest in any collateral with
respect to such DDR/DRA Subordinate Debt, (c) no member or partner shall
institute or acquiesce in any bankruptcy proceeding against the DDR/DRA
Borrowers or the other members or partners thereof, and (d) no member or partner
will accept payments on account of the DDR/DRA Subordinate Debt except out of
excess cash flow after payment of debt service, operating expenses and funding
of required reserves, and, after an event of default, no member or partner shall
accept any payments on account of the DDR/DRA Subordinate Debt. See "Description
of the Mortgage Loans and Mortgaged Properties--The DDR/DRA Loan and
Properties--The Loan--Permitted Indebtedness."
The Courtyard Loan permits the Courtyard Borrower to incur the following
indebtedness under the following conditions: (a) provided no default or event of
default has occurred and is continuing under the Mortgage Loan, purchase money
debt and capitalized lease obligations up to an aggregate amount of $4 million
outstanding at any one time, for the purchase or lease of FF&E in the ordinary
course of business; (b) indebtedness in respect of Courtyard Subordinated
Obligations, provided such indebtedness is unsecured and subordinated to the
Courtyard Loan; (c) provided no event of default has occurred and is continuing
under the Mortgage Loan, indebtedness solely in respect of surety and appeal
bonds, performance bonds and other obligations of a like nature, all in the
ordinary course of business in accordance with customary industry practices; and
(d) certain subordinate debt, as described below. See "Description of the
Mortgage Loans and Mortgaged Properties--The Courtyard Loan and Properties--The
Loan--Permitted Indebtedness.
The Courtyard Borrower had approximately $13,297,000 in unsecured
subordinated debt outstanding as of June 20, 1997 from an affiliate of the
Courtyard Borrower. The maximum amount of such debt that may be outstanding is
$16,250,000. Such affiliate has agreed to subordinate its rights to payment
under such obligations to the rights of the Courtyard Borrower. See "Description
of the Mortgage Loans and Mortgaged Properties--The Courtyard Loan and
Properties--Subordinate Debt" below.
The Worldwide Plaza Amenities Parcel is subject to 4 subordinate mortgages
in the aggregate principal amount of $263,763,363 (the "Worldwide Plaza
Guarantor Subordinate Mortgages"). Pursuant to an Intercreditor and
Subordination Agreement dated June 11, 1997 among the Worldwide Plaza Guarantor,
the subordinate mortgagees and LB Holdings, the subordinate mortgagees have
agreed that the liens of such subordinate mortgages are subordinate to the lien
of the Worldwide Plaza Guaranty Mortgage.
The subordinate mortgagees have agreed that if an event of default occurs
under the Worldwide Plaza loan documents, no payment with respect to the
Worldwide Plaza Guarantor Subordinate Mortgages will be made by the Worldwide
Plaza Guarantor or accepted by the subordinate mortgagees. In addition, the
subordinate mortgagees have agreed to refrain from exercising the following
enforcement actions, among others, without prior consent from the Master
Servicer for so long as any portion of the Worldwide Plaza
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Loan remains unpaid with respect to the Worldwide Plaza Guarantor Subordinate
Mortgages: (a) acceleration of the subordinate debt, (b) foreclosure
proceedings, (c) exercise of any power of sale and (d) acceptance of a deed in
lieu of foreclosure. The Worldwide Plaza Borrower is the holder of the Second
Amended and Restated Second Mortgage Note in the amount of $40,000,000 given by
the Worldwide Plaza Guarantor and BRE/Worldwide II L.L.C. is the holder of that
certain Second Amended and Restated Third Mortgage Note in the amount of
$30,000,000 given by the Worldwide Plaza Guarantor. The Worldwide Plaza Borrower
and BRE/Worldwide II L.L.C. have pledged their interest in the second and third
mortgage to the Master Servicer pursuant to that certain Pledge and Security
Agreement dated June 11, 1997, by and among the Worldwide Plaza Borrower,
BRE/Worldwide II L.L.C. and LB Holdings. The remaining subordinate mortgages are
held by the Youth Renewal Fund, whose rights to transfer such mortgages are
restricted and are not pledged as collateral for the Worldwide Plaza Loan. See
"Description of the Mortgage Loans and Mortgaged Properties--The Worldwide Plaza
Loan and Properties--The Loan--Subordinate Debt."
The Prentiss Loan permits the Prentiss Borrower to incur indebtedness
relating solely to the financing of construction of capital improvements, tenant
improvements or building equipment or leasing costs payable to third parties or
the Prentiss Manager in accordance with the Prentiss Management Agreement and
incurred with respect to one or more of the Prentiss Properties and costs
associated with such indebtedness, either unsecured or secured only by
subordinate liens, and subject to, among other things, the following
limitations: (a) that the aggregate amount of such indebtedness does not exceed
an amount equal to 5% of the outstanding principal amount of the Prentiss Loan
at any time; (b) that the terms of such indebtedness shall require that the
principal amount of such indebtedness will be repaid from net operating income
prior to any distributions to any direct beneficial owner of an interest in the
Prentiss Borrower (other than for income, franchise, or other taxes imposed on
the Prentiss Borrower for the privilege of doing business in the jurisdictions
in which the property is located); and (c) such indebtedness is subject to a
subordination and standstill agreement satisfactory in form and substance to the
Master Servicer. See "Description of the Mortgage Loans and Mortgaged
Properties--The Prentiss Loan and Properties--The Loan--Security."
The Villa Marina Borrower and the Valley View Borrower may each incur
indebtedness with respect to the related Mortgage Property without consent, so
long as no event of default under the respective loan documents has occurred and
is continuing and as long as such indebtedness is not secured by the related
Mortgaged Property and is payable by the related borrower in respect of the
operation of the related Mortgaged Property in the ordinary course of operating
such borrower's business, is paid within 60 days after its respective due date,
or is payable or reimbursable to any tenant on account of work performed at the
related Mortgaged Property by such tenant or for costs incurred by such tenant
in connection with its occupancy of space in the related Mortgaged Property.
Each of the Villa Marina Borrower and the Valley View Borrower may also incur
other unsecured indebtedness with respect to the related Mortgaged Property
without consent, so long as no event of default under the related loan documents
has occurred and is continuing and such indebtedness is related solely to the
financing of capital improvements, tenants improvements or building equipment or
leasing costs relating solely to the related Mortgaged Property and provided
that (a) such indebtedness does not, in the aggregate, exceed $2,000,000; (b)
the proceeds of such indebtedness are not distributed to the related borrower or
any indirect beneficiary of the related borrower except as reimbursements for
the financing of capital improvements, tenants improvements or building
equipment or leasing costs relating solely to the related Mortgaged Property;
(c) such indebtedness is evidenced by a note or other written instrument on
terms no less favorable to the related borrower than the terms of the related
loan documents; and (d) the terms of such indebtedness require repayment from
operating income in excess of operating expenses and the Villa Marina Monthly
Debt Service Payment or the Valley View Monthly Debt Service Payment, as the
case may be, or the Villa Marina ARD Monthly Debt Service Payment or the Valley
View ARD Monthly Debt Service Payment, as the case may be. See "Description of
the Mortgage Loans and Mortgaged Properties--The Villa Marina Loan and
Property--
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The Loan--Other Financing" and "--The Valley View Loan and Property--The
Loan--Other Financing" herein.
RISKS RELATING TO THE WORLDWIDE PLAZA INTEREST RATE CAP AGREEMENT. In
connection with the Worldwide Plaza Loan, the Worldwide Plaza Borrower has
entered into the Worldwide Plaza Interest Rate Cap Agreement with a counterparty
acceptable to the Ratings Agencies. There can be no assurance, however, that the
counterparty will maintain such rating or have sufficient assets or otherwise be
able to fulfill its obligations under the Worldwide Plaza Interest Rate Cap
Agreement. In the event that the rating of the counterparty is qualified,
withdrawn or downgraded, the Worldwide Borrower is required to immediately
replace the Worldwide Plaza Interest Rate Cap Agreement with a new cap agreement
acceptable to the Master Servicer. However, any downgrading, withdrawal or
qualification of the rating of the counterparty below the then current rating on
the Class C-2 Certificates could, if the Worldwide Borrower fails to provide a
substitute cap agreement, result in the downgrading, withdrawal or qualification
of the ratings on such Class of Certificates.
LIMITATIONS ON LOCK BOXES. The Worldwide Plaza Loan, the Prentiss Loan and
the Sun Communities Loan provide throughout the term of each such Mortgage Loan
for collection of revenues from the related Mortgaged Properties in collection
accounts and the payment of debt service and reserves through a lock box or cash
collateral account held by the Master Servicer.
No lock box is required to be maintained under any of the DDR/DRA Notes
until after the occurrence of a DDR/DRA Primary Event or a DDR/DRA Secondary
Event. A DDR/DRA Primary Event generally means the occurrence of certain events
relating to a decline in the performance of the DDR/DRA Properties or a decline
in the ratings of the DDR/DRA Manager. After the occurrence of a DDR/DRA Primary
Event, the DDR/DRA Borrowers will no longer have access to the DDR/DRA Operating
Account and the Master Servicer will make monthly allocations as described in
"Description of the Mortgage Loans and Mortgaged Properties--The DDR/DRA Loan
and Properties--The Loan-- Operating Accounts" herein. Under certain
circumstances, following each such allocation, the Master Servicer is required
to make available to the DDR/DRA Borrowers the amounts in excess of such
allocations. However, upon the occurrence of a DDR/DRA Secondary Event, the
DDR/DRA Borrowers will not be entitled to any amounts deposited in the DDR/DRA
Operating Account and the Master Servicer will apply all such amounts as
described in "Description of the Mortgage Loans and Mortgaged Properties--The
DDR/DRA Loan and Properties--The Loan--Operating Accounts" herein. A "DDR/ DRA
Secondary Event" generally means the occurrence of an event of default or
acceleration under the DDR/DRA Loan documents or the failure of the DDR/DRA
Borrower to maintain DDR/DRA Minimum Balance in the DDR/DRA Operating Account.
The Courtyard Loan currently does not require a lock box for the collection
of revenues. As described under "Description of the Mortgage Loans and Mortgaged
Properties--The Courtyard Loan and Properties--The Loan--Cash Management
Procedures," the collection of revenues and payment of expenses will occur
through the operation of a cash management system maintained by MII, the parent
company of Courtyard Management Corporation (the "Courtyard Manager"), pursuant
to a cash management agreement. MII's senior long term unsecured debt is
currently rated by S&P as "BBB+." Under this cash management system, all
revenues (other than amounts permitted to be deposited in Local Accounts and
customary amounts held as petty cash) with respect to the Courtyard Properties
are transferred to a separate account (the "Courtyard Manager's Account") for
accounting purposes only and, except as described below, may be swept
immediately into the cash management system maintained by MII for properties
managed by MII and its subsidiaries, which includes the Courtyard Properties and
other properties. Operating profits from Courtyard Properties are transferred
every two weeks into a segregated cash collateral account maintained by the
Master Servicer from which monthly payments on the Courtyard Loan are paid. The
Courtyard Manager's Account does not serve as security for the Courtyard Loan
and funds in the Courtyard Manager's Account are not separately segregated as to
any property. If (a) the Courtyard Properties are not managed by the Courtyard
Manager, (b) the Courtyard Manager is not a
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wholly-owned, direct or indirect, subsidiary of MII, (c) the S&P rating of MII's
long term unsecured debt is not at least "BBB+" or the DCR rating is not at
least "BBB," (provided that MII is then rated by DCR) or (d) the Courtyard
Manager no longer maintains the Courtyard Manager's Account or the Courtyard
Manager's Account no longer satisfies certain criteria as set forth in the
Courtyard Loan documents, a lock box, in the name of the Master Servicer, is
required to be established. For so long as the S&P rating of MII's senior long
term unsecured debt is "BBB+," as is currently the case or the DCR rating of
such debt is "BBB" (provided that MII is then rated by DCR), the Courtyard
Borrower is required to fund a tax and insurance subaccount.
No lock box is required to be maintained under the Arden Loan until after
the occurrence of an Arden Lock Box Event. An Arden Lock Box Event generally
means the occurrence of certain events relating to a payment default, a decline
in the performance of the Arden Properties or the failure of the Arden Borrower
to obtain refinancing on or before the Arden Anticipated Repayment Date. After
the occurrence of an Arden Lock Box Event the Master Servicer will make monthly
allocations as described in "Description of the Mortgage Loans and the Mortgaged
Property--The Arden Loan and Properties--The Loan--Lock Box" herein.
No lock box is required to be maintained under either the Villa Marina Loan
or the Valley View Loan until after the occurrence of, and during the
continuation of, either a Villa Marina Lock Box Event or a Valley View Lock Box
Event, respectively. A Villa Marina Lock Box Event or a Valley View Lock Box
Event generally means the occurrence of certain events relating to a payment
default, a decline in the performance of the related property or the failure of
the related borrower to obtain refinancing on or before the Villa Marina
Anticipated Repayment Date or the Valley View Anticipated Repayment Date, as
applicable. After the occurrence of, and during the continuation of, either a
Villa Marina Lock Box Event or a Valley View Lock Box Event with respect to the
Villa Marina Loan or the Valley View Loan, respectively, the Master Servicer
will make monthly distributions as described in "Description of the Mortgage
Loans and the Mortgaged Property--The Villa Marina Loan and Property--The
Loan--Lock Box" and "--The Valley View Loan and Property--The Loan--Lock Box"
herein.
See "Description of the Mortgage Loans and Mortgaged Properties--The DDR/DRA
Loan and Properties--The Loan--Operating Account," "--The Courtyard Loan and
Properties--The Loan--Cash Management Procedures," "--The Arden Loan and
Properties--The Loan--Lock Box," "--The Villa Marina Loan and Property--The
Loan--Lock Box," and "--The Valley View Loan and Property--The Loan--Lock Box."
BANKRUPTCY LIMITATIONS ON LENDERS. Under the Bankruptcy Code, the filing of
a petition in bankruptcy by or against an obligor will stay the exercise of a
power of sale and the commencement or continuation of a foreclosure action
against the real property owned by that obligor. The resulting delay may be
significant. In addition, a court which determines the value of a mortgaged
property to be less than the principal balance of the loan it secures may
(subject to certain protections available to the lender) stop a lender from
foreclosing on the mortgaged property and, as a part of a restructuring plan,
reduce the amount of secured indebtedness to the value of the mortgaged property
as it exists at the time of the proceeding (leaving the lender as a general
unsecured creditor for the difference between that value and the amount of its
outstanding mortgage indebtedness). A bankruptcy court may also grant a debtor a
reasonable time to cure a payment default, reduce monthly payments due under a
mortgage loan, change the rate of interest due on a mortgage loan or otherwise
alter the mortgage loan's repayment schedule.
Creditors of obligors in bankruptcy are also generally prohibited from
taking any action to obtain repayment of a loan while the bankruptcy case is
pending. Also, under the Bankruptcy Code, the filing of a petition in bankruptcy
by or on behalf of a junior lienholder may stay the senior lienholder from
taking action to foreclose on such junior lien. In addition, the obligor's
trustee or the obligor, as debtor-in-possession, has certain special powers to
avoid, subordinate or disallow debts. Even if a claim against a debtor is not
avoided or subordinated, a lender's recovery with respect to obligors in
bankruptcy
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proceedings may be significantly delayed, and the aggregate amount ultimately
collected may be substantially less than the amount owed. In certain
circumstances, the claims of the Trustee may be subordinated to financing
obtained by a debtor-in-possession subsequent to its bankruptcy.
The Bankruptcy Code may also interfere with or affect the ability of the
Trustee to enforce an assignment by an obligor of rents and leases related to
the Mortgaged Property if the related obligor is in a bankruptcy proceeding.
Under Section 362 of the Bankruptcy Code, a mortgagee will be stayed from
enforcing the assignment, and the legal proceedings necessary to resolve the
issue can be time consuming and may result in significant delays in the receipt
of the rents. Rents may also escape an assignment thereof (i) to the extent such
rents are used by the obligor to maintain the mortgaged property or for other
court authorized expenses or (ii) to the extent other collateral may be
substituted for the rents.
The ability of the borrowers to repay the Mortgage Loans is, in many cases,
dependent on leases of the Mortgaged Properties. To the extent a borrower's
ability to make payment on a Mortgage Loan is dependent upon a lease of the
related Mortgaged Property, such ability may be impaired by the commencement of
a bankruptcy proceeding relating to a lessee under such lease. See "--Risks
Relating to Tenants" and "--Reserves."
As a result of the foregoing factors, the amount and timing of receipts with
respect to the Mortgage Loans may be materially adversely affected.
RISK OF BANKRUPTCY OF THE COURTYARD MANAGER OR MII. For so long as the
Courtyard Manager is a wholly owned subsidiary of MII and manages the Courtyard
Properties and the senior long-term unsecured debt of MII is rated at least
"BBB+" by S&P and at least "BBB" by DCR (provided that MII is then rated by
DCR), and so long as the Courtyard Manager maintains the Courtyard Manager's
Account and the Courtyard Manager's Account satisfies the requirements set forth
in the Courtyard Loan documents, all revenues from the operation of the
Courtyard Properties will be deposited into local bank accounts or the Courtyard
Manager's Account, and thereafter may be commingled in such accounts with funds
from other hotels managed by MII or its affiliates. The Courtyard Manager's
Account will be controlled by the Courtyard Manager or MII and will not be
pledged as security for the Courtyard Loan. The Courtyard Manager will make
disbursements on behalf of the Courtyard Borrower from the funds in the local
accounts, the Courtyard Manager's Account, or MII's cash management system to
pay all operating expenses of the hotels, other than subordinated management
fees, subordinated FF&E Reserve Contributions and subordinated ground rent, make
certain deposits in the FF&E Reserve Account, and, biweekly, transfer funds to
the Courtyard Cash Collateral Account. In the event of a bankruptcy or
insolvency proceeding involving the Courtyard Manager or MII, there is a risk
that the Courtyard Borrower may be unable to utilize or otherwise have the
benefit of funds previously turned over to the Courtyard Manager and that any
payments made within 90 days of bankruptcy to third party vendors with respect
to the Courtyard Properties or within 1 year of such a bankruptcy to the Trust
Fund or the Courtyard Borrower for payment of the Courtyard Loan could, under
certain circumstances, be recovered as preferential payments.
TAX CONSIDERATIONS RELATED TO FORECLOSURE. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Any net income from such operation and
management, other than qualifying "rents from real property," or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
service that is non-customary in the area and for the type of property involved,
will subject the Lower-Tier REMIC to federal (and possibly state or local) tax
on such income at the highest marginal corporate tax rate (currently 35%),
thereby reducing net proceeds available for distribution to Certificateholders.
The Pooling Agreement provides that the Special Servicer will be permitted to
cause the Lower-Tier REMIC to earn "net income from foreclosure property" that
is subject to tax if it determines that the net after-tax benefit to
Certificateholders is greater than another method of operating
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or net leasing the Mortgaged Property. See "Federal Income Tax
Considerations--Taxation of Holders of Residual Interest Securities" in the
Prospectus.
RISKS ASSOCIATED WITH TAX ASSESSMENT OF ARDEN PROPERTIES. In the State of
California, assessed property values may increase only 2% per year, with few
exceptions. Events such as transfer of ownership or significant new construction
will trigger a reassessment of the property. The county assessor usually accepts
the sales price or cost of the improvements in calculating assessed value.
Therefore, assessed values are usually poor indicators of actual value, and are
useful only to estimate effective tax rates. The Depositor has been advised by
the Arden Borrower that the Arden Borrower believes that the assessed values for
some of the Arden Properties will be adjusted because of past events which
should have triggered a reassessment. However, in the event that such assessed
values are readjusted, the Arden Borrower believes that such revised assessed
values will not have a significant negative effect upon the Arden Borrower's
ability to make payments on the Arden Loan because, although some of the
adjustments will result in additional tax liability (including liabilities with
respect to prior years), other adjustments may result in reduced tax liabilities
(including a credit with respect to taxes paid in prior years). The Depositor
has been advised by the Arden Borrower that the Arden Borrower has made
provisions for the possibility of the payment of taxes relating to prior years
and believes it will have adequate funds to satisfy such tax obligations, if
any.
WORLDWIDE PLAZA PROPERTY TAX ABATEMENT. The Worldwide Plaza Property
benefitted from a temporary exemption of real estate taxes under the Industrial
and Commercial Incentive Program of the City of New York (the "ICIP Program")
which has expired. Under the ICIP Program, a portion of the real estate taxes
otherwise payable with respect to the Worldwide Plaza Property was deferred.
Commencing with the fiscal tax year that begins on July 1, 1998, the aggregate
deferred taxes will be payable over a ten year period. Therefore, commencing in
the 1998/99 tax year, the annual real estate taxes with respect to the Worldwide
Plaza Property will be equal to the sum of (i) 10% of the aggregate taxes
deferred under the ICIP Program (estimated to be $4.6 million per year) and (ii)
the taxes attributable to such year. The two largest tenants in the Worldwide
Plaza Property (Ogilvy & Mather Worldwide, Inc. and Cravath, Swaine & Moore) are
responsible for their PRO RATA share (which share is approximately 62%) of all
real estate taxes payable each year. Other tenants in the Worldwide Plaza
Property, including Polygram Holdings, Inc., pay only their PRO RATA share of
increases in real estate taxes above a base year excluding any increases
resulting from the payment of deferred taxes under the ICIP Program. To the
extent increases in real estate taxes attributable to the ICIP Program are not
payable by tenants in the Worldwide Plaza Property, the net operating income
from the Worldwide Plaza Property will be diminished.
MANAGEMENT. The successful operation of a real estate project is dependent
on the performance and viability of the property manager of such project.
Different property types vary as to the extent a property manager is involved in
property marketing and operations on a daily basis. Properties deriving revenues
primarily from short-term sources are generally more management intensive than
properties leased to creditworthy tenants under long-term leases. The property
manager is responsible for responding to changes in the local market, planning
and implementing the rental structure, including establishing levels of rent
payments, and advising the borrowers so that maintenance and capital
improvements can be carried out in a timely fashion. There is no assurance
regarding the performance of any operators and/or managers or persons who may
become operators and/or managers upon the expiration or termination of
management agreements or following any default or foreclosure under a Mortgage
Loan. In addition, third party property managers are typically operating
companies and, unlike limited-purpose entities, may not be restricted from
incurring debt and other liabilities in the ordinary course of business or
otherwise. Consequently, there can be no assurance that the property managers
will at all times be in a financial condition to continue to fulfill their
management responsibilities under the related management agreements throughout
the terms thereof. See "--Conflicts of Interest--Conflicts Between Managers and
the Borrowers."
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ENFORCEABILITY. All of the Mortgages include debt-acceleration clauses,
which permit the lender to accelerate the debt upon a monetary or non-monetary
default of the borrower. The courts of all states will enforce clauses providing
for acceleration in the event of a material payment default after the giving of
appropriate notices. The equity courts of any jurisdiction, however, may refuse
to permit the foreclosure of a mortgage or deed of trust when an acceleration of
the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
All of the Mortgage Loans on Mortgaged Properties that have tenants are
secured by an assignment of leases and rents pursuant to which the borrower
typically assigns its right, title and interest as landlord under the leases on
the related Mortgaged Property and the income derived therefrom to the lender as
further security for the related Mortgage Loan, while retaining a license to
collect rents for so long as there is no default. In the event the borrower
defaults, upon the election of, and following notice from, the lender, the
license terminates and the lender is entitled to collect rents. In certain
jurisdictions, such assignments may not be enforceable unless the lender
complies with applicable state law for taking actual possession of the property
or the cash by the lender until the lender secures the appointment of a receiver
before achieving a priority relative to other persons with interests in the
rents related to the Mortgaged Property. In addition, if bankruptcy or similar
proceedings are commenced by or in respect of the borrower, the lender's ability
to collect the rents may be adversely affected. See "Certain Legal Aspects of
Mortgage Loans" in the Prospectus.
STATE LAW LIMITATIONS ON REMEDIES. Several jurisdictions (including
California) have laws that prohibit more than one "judicial action" to enforce a
mortgage obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling Agreement will require the Master Servicer or
Special Servicer, as applicable, to obtain advice of counsel prior to enforcing
any of the Trust Fund's rights under any of the Mortgage Loans that include
properties where the rule could be applicable. In addition, with respect to any
Mortgage Loan, the Master Servicer, or Special Servicer, as applicable, may be
required to foreclose first on the Mortgaged Properties securing such Mortgage
Loan located in states where such "one action" rules apply (and where
non-judicial foreclosure is permitted) before foreclosing on properties located
in states where judicial foreclosure is the only permitted method of
foreclosure. See "Certain Legal Aspects of Mortgage Loans--Foreclosure of
Mortgage" in the Prospectus.
As a result of the foregoing considerations, among others, the ability of
the Master Servicer or the Special Servicer, as applicable, to realize upon the
Mortgage Loans, may be limited by the application of state laws. Such actions
may also, in certain circumstances, subject the Trust Fund to liability as a
"mortgagee-in-possession" or result in the equitable subordination of the claims
of the Trustee to the claims of other creditors of the borrower. Under the terms
of the Pooling Agreement, the Master Servicer or the Special Servicer, as
applicable, may take these state laws into consideration in deciding which
remedy to choose following a default by a borrower.
LEASEHOLD INTERESTS. Thirty-one of the Courtyard Properties are ground
leased from affiliates of MII, one of the Courtyard Properties is ground leased
from a third party and a portion of one of the Courtyard Properties is ground
leased from a third party. The Marriott Ground Lessors have joined in the
mortgages that secure the Courtyard Loan and have subjected their fee interest
in the relevant Courtyard Properties to the lien of such mortgages. A discussion
of the underlying leases is provided under "Description of the Mortgage Loans
and Mortgaged Properties--The Courtyard Loan and Properties." The Prentiss Loan
is secured in part by a first Mortgage on the Prentiss Borrower's leasehold
estate in a substantial portion of the land underlying the Prentiss Property
known as One Northwestern Plaza. A discussion of the Prentiss Loan underlying
lease is provided under "Description of the Mortgage Loans and Mortgaged
Properties-- The Prentiss Loan and Properties." The Arden Loan is secured in
part by a first Mortgage on the Arden Borrower's leasehold estate in the land
underlying the parking facility for the Arden Property known as 222 South Harbor
Boulevard. A discussion of the Arden Loan underlying lease is provided under
"Description of the Mortgage Loans and Mortgaged Properties--The Arden Loan and
Properties."
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On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume or reject the lease. Pursuant to Section 365(h)
of the Bankruptcy Code, a lessee whose lease is rejected by a debtor lessor has
the right to remain in possession of its leased premises under the rent reserved
in the lease for the term of the lease (including renewals). In the event of a
lessee/borrower bankruptcy in which such debtor rejects any or all of its
leases, the leasehold mortgagee would have the right to succeed to the
lessee/borrower's position under the lease only if the lessor had specifically
granted the mortgagee such right. In the event of concurrent bankruptcy
proceedings involving the lessor and the lessee/borrower, the Trustee may be
unable to enforce the bankrupt lessee/borrower's obligation to refuse to treat a
ground lease rejected by a bankrupt lessor as terminated. In such circumstances,
a lease could be terminated notwithstanding lender protection provisions
contained therein or in the mortgage.
ZONING COMPLIANCE; INSPECTIONS. Certain of the Mortgaged Properties qualify
as legally permissible non-conforming uses. Such status may limit the ability of
the borrowers to rebuild the premises "as is" in the event of a substantial
casualty loss with respect thereto. For example, with respect to the Sun
Communities Loan, the Bedford Hills Property may be legally non-conforming and
in the event of a casualty, may be rebuilt if the restoration does not exceed
60% of the structure's assessed valuation, exclusive of foundation. With respect
to the Sun Communities Loan, the Royal Country Property may be legally
non-conforming and if the infrastructure or amenities become substantially
destroyed, such infrastructure or amenities may be rebuilt to the same
conditions as existed before the casualty, subject to compliance with an
approved plan and subject to compliance with code requirements. The Sun
Communities Loan documents require that the Sun Communities obtain and maintain
all risk insurance containing an "Ordinance or Law Coverage" or "Enforcement"
endorsement for all properties which constitute non-conforming uses, and the Sun
Communities Borrower has obtained the required coverage.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing, interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance that
all conditions requiring repair or replacement were identified in such
inspections. See "Mortgage Pool Characteristics--Underwriting
Standards--Property Condition Assessments" herein for further information
regarding the inspections on the Mortgaged Properties.
An architectural and engineering report performed on behalf of the
Originator in connection with the underwriting of the Valley View Loan
identified approximately $3,200,000 of maintenance and repairs. See "Description
of the Mortgage Loans and Mortgaged Properties--The Valley View Loan and
Property-- The Property" herein.
AVAILABILITY OF EARTHQUAKE, FLOOD AND OTHER INSURANCE. Although the
Mortgaged Properties are required to be insured against certain risks, there is
a possibility of casualty loss with respect to each Mortgaged Property for which
insurance proceeds may not be adequate (such as floods, windstorms or
earthquakes) or which may result from risks not covered by insurance (such as
supplemental hurricane insurance). In addition, certain of the Mortgaged
Properties are located in California, Florida and Texas, which are states that
have been historically at greater risk to acts of nature (such as floods,
windstorms and earthquakes) than properties located in other states. There can
be no assurance that the borrowers have complied or will in the future be able
to comply with requirements to maintain adequate insurance with respect to the
Mortgaged Properties. As with all real estate, if reconstruction (for example,
following fire or other casualty) or any major repair or improvement is required
to the property, changes in laws and governmental regulations may be applicable
and may materially affect the cost to, or ability of, the borrower to effect
such reconstruction, major repair or improvement. As a result of the occurrence
of any of these events, the amount realized with respect to the Mortgage Loans,
and the amount available to make distributions on the Certificates, could be
reduced.
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The DDR/DRA I Borrower maintains earthquake insurance for the DDR/DRA
Property located in California known as the Carmel Mountain Property in a total
amount of $20,000,000. The first $5,000,000 of insurance (subject to a
deductible of 5% of replacement value at risk) is provided by Glencoe Insurance,
which has a claims paying ability rating of "AAA" by S&P and "A++" by Best's Key
Rating Guide ("Best's"). Additional earthquake insurance in the amount of
$15,000,000 is provided: (1) $5,000,000 by Royal Surplus Lines, which has a
claims paying ability rating of "A" by S&P and "A-" by Best's, (2) $5,000,000 by
Pacific Insurance Company, which has a claims paying ability rating of "AAA" by
S&P and "A++" by Best's, (3) $2,500,000 jointly by United Fire & Casualty
Company, which has a claims paying ability rating of "A" by S&P and "A" by
Best's and Western Reinsurance, which is not rated by S&P and has a rating of
"A" by Best's, and (4) $2,500,000 jointly by Lloyds of London, which is not
rated by S&P or Best's and Western Reinsurance, which is not rated by S&P and
has a claims paying ability rating of "A" by Best's.
The DDR/DRA Property known as the Carrillon Place Property is located in a
flood hazard zone. The DDR/DRA I Borrower maintains flood insurance for the
Carrillon Place Property in the amount of $15,000,000 (subject to a $25,000
deductible), provided by Royal Surplus Lines, which has a claims paying ability
rating of "A" by S&P and "A-" by Best's.
For any Courtyard Property on which improvements are located within a
federally designated special flood hazard area, the Courtyard Borrower is
required to maintain flood insurance as is available under the National Flood
Insurance Program. Six of the Courtyard Properties are located in federally
designated flood hazard zones. Flood insurance in the amount of replacement cost
(with a deductible of up to $25,000 per occurrence per location) has been
provided under a blanket "all risk" policy by American Home Assurance Company.
American Home Assurance Company has a claims paying ability rating of "AAA" by
S&P and "A++" by Best's. See "--Risks Associated with Blanket Insurance
Policies." See "Description of the Mortgage Loans and Mortgaged Properties--The
Courtyard Loan and Property--The Loan-- Insurance".
With respect to the Courtyard Properties located in California, the
Courtyard Borrower has procured earthquake insurance in a total amount of
$25,000,000. The first $2,500,000 of insurance is provided by American Home
Assurance Company which has a claims paying ability rating of "AAA" by S&P and
"A++" by Best's. The next $2,500,000 of loss is covered by Lexington Insurance
Company, which has a claims paying ability rating of "AAA" by S&P and "A++" by
Best's. The next $5,000,000 of loss is provided: (1) $2,500,000 by Pacific
Insurance Co., Ltd., which has a claims paying ability rating of "AAA" by S&P
and "A++" by Best's and (2) $2,500,000 by Agricultural Insurance Co., which has
a claims paying ability rating of "BBB" by S&P and "A" by Best's. The next
$10,000,000 of loss is provided: (1) $2,500,000 by RLI Insurance Co., which has
a claims paying ability rating of "BBB" by S&P and "A" by Best's, (2) $5,000,000
by General Star Indemnity Co., which has a claims paying ability rating of "AAA"
by S&P and "A++" by Best's and (3) $2,500,000 by Pacific Insurance Co., Ltd. The
remaining $5,000,000 in coverage is provided by United States Fidelity and
Guaranty Co., which has a claims paying ability rating of "A" by Best's and is
not rated by S&P.
The Prentiss Property known as the Pacific Gateway Center Property is
located within a federally designated seismic zone. The Prentiss Borrower
maintains earthquake insurance for the Pacific Gateway Center Property in a
total amount of $20,000,000. Such insurance is maintained under a blanket policy
that also covers other properties owned by the Prentiss REIT and its
subsidiaries. The first $2,500,000 of insurance is provided by Continental
Casualty Company, having a claims paying ability rating of "A+" by S&P and "A-"
by Best's. The next $5,000,000 of loss is provided: (1) $2,500,000 by General
Star Indemnity Company, which has a claims paying ability rating of "AAA" by S&P
and "A++" by Best's and (2) $2,500,000 by Essex Insurance Co., which has a
claims paying ability rating of "A" by S&P and "A" by Best's. The next
$2,500,000 of loss is provided by Associated International Insurance Co., which
has a claims paying ability rating of "BBB" by S&P and "A" by Best's. The next
$5,000,000 of loss is provided jointly by (1) United Fire & Casualty Company,
which has a claims paying ability rating of "A" by S&P and
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"A" by Best's and (2) Western Reinsurance, which is not rated by S&P and has a
claims paying ability rating of "A" by Best's. The next $5,000,000 of loss is
covered by RLI Insurance Company, which has a claims paying ability rating of
"BBB" by S&P and a rating of "A" by Best's.
All of the Arden Properties are located within federally designated seismic
zones in California. The Arden Borrower is required to maintain earthquake
insurance for all of the Arden Properties in an aggregate amount of not less
than $26,615,000 (with a deductible of not more than five percent per each
individual building subject to a $100,000 minimum), which amount was determined
by engineering and seismic analysis as the aggregate probable maximum loss on
the Arden Properties based on a 100-year study at an 80% confidence level. Such
insurance is required to be maintained by insurance carriers having a claims
paying ability rating of at least "AA" by S&P and an equivalent rating from at
least one other Rating Agency. The Arden Properties are currently covered by a
blanket policy which insures all of the approximately 40 properties owned by the
Arden Borrower and the Arden REIT (the "Arden Portfolio") (including the Arden
Properties) in an annual aggregate maximum amount of $100 million. The coverage
is provided by a group of insurers whose claims-paying obligations are
guaranteed by Federal Insurance Company, an affiliate of the Chubb Corporation,
which has a claim paying ability rating of "AAA" by S&P, and "A++" by Best's and
Hartford Fire, which has a claims paying ability of "AA" by S&P and "A+" by
Best's.
The Villa Marina Property is located within federally designated seismic
zones in California. The Macerich REIT currently maintains earthquake insurance
for certain California properties in which the Macerich REIT and its
subsidiaries own a 50% or greater interest, (including the Villa Marina Property
and 13 other regional shopping centers), in a total blanket amount of
$100,000,000 (subject to a deductable of 5% of insured value per occurence per
location). 75% of the first $10,000,000 of such insurance is provided by 2
insurers having a claims paying ability rating of "AAA" by S&P and "A++" by
Best's and the remaining 25% is provided by an insurance company having a claims
paying ability rating of "A+" by S&P and "A" by Best's. The next $5,000,000 of
coverage is provided: (1) 50% by an insurance company having a claims paying
ability rating of "BB" by S&P and "A" by Best's and (2) 50% by an insurance
company having a claims paying ability rating of "AAA" by S&P and "A++" by
Best's. The next $10,000,000 of coverage is provided: (1) 25% by an insurance
company having a claims paying ability rating of "A" by S&P and "A" by Best's,
(2) 25% by an insurance company having a claims paying ability rating of "AAA"
by S&P and "A++" by Best's and (3) 50% by an insurance company having a claims
paying ability rating of "A-" by S&P and "A" by Best's. In addition to the
coverage described above, the Macerich REIT maintains an additional $75,000,000
of earthquake insurance coverage provided by a consortium of insurers.
The Royal Country Property securing the Sun Communities Loan is located in a
flood zone and the required flood insurance has been obtained from Auto-Owners
Insurance Company, which has a claims paying ability rating of "AAA" by S&P and
"A++" by Best's.
There can be no assurance that the amount of earthquake or flood insurance
currently required or provided would be sufficient to cover damages caused by an
earthquake, windstorm or flood, or that such insurance will be commercially
available in the future. In addition, earthquake insurance coverage is often not
obtainable from "AA" or higher-rated insurers and the loan documents generally
permit such insurance to be obtained from such lower rated insurance companies.
The Courtyard Loan also permits an earthquake casualty reserve account in lieu
of insurance.
The Rating Agencies generally require that the property insurance maintained
with respect to each of the Mortgaged Properties be provided by insurers whose
claims paying ability is rated at least "AA" or the equivalent. Not all of the
Mortgage Loans require property insurance to be maintained by companies having
such ratings. In addition, in some cases where the Mortgage Loans require such
insurance, the related borrowers maintain property insurance with insurers whose
claims paying ability is either not rated by certain of the Rating Agencies or
is rated lower than "AA" or the equivalent. See "Description of the Mortgage
Loans and Mortgaged Properties--The Prentiss Loan and Properties," "--The Villa
Marina
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Loan and Property," "--The Valley View Loan and Property" and "--The Sun
Communities Loan and Properties."
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public accommodations
are required to meet certain federal requirements related to access and use by
disabled persons. To the extent the Mortgaged Properties do not comply with the
ADA, the borrowers are likely to incur costs of complying with the ADA. In
addition, noncompliance could result in the imposition of fines by the federal
government or an award of damages to private litigants. In connection with the
origination of the Mortgage Loans, the related Originator obtained an inspection
report which generally included limited information regarding ADA compliance. In
addition, certain of the Mortgage Loans have reserve funds for capital
improvements which include improvements mandated by the ADA. There can be no
assurance that the related Mortgaged Properties will comply with the ADA in all
respects once the related conditions are remedied, that such property-inspection
reports identified all risks or conditions relating to the ADA or that amounts
reserved (if any) are sufficient to pay such costs.
LIMITED CROSS-GUARANTEES OR CROSS-COLLATERALIZATION; LIMITATIONS ON
ENFORCEABILITY OF CROSS-COLLATERALIZATION LIMITATIONS OF ENFORCEABILITY-PLEDGES
BY GROUND LESSORS AND PLEDGE OF SUBORDINATE DEBT. As described in greater
detail under "Description of the Mortgage Loans and the Mortgaged
Properties--The DDR/DRA Loan and Properties--The Loan--Security," the DDR/DRA
Loan is evidenced by three notes; the DDR/ DRA Note A, the DDR/DRA Note B, and
the DDR/DRA Note C. All 3 Notes are secured by all of the DDR/DRA Properties
owned by each of the DDR/DRA Borrowers other than the Carillon Place Property,
which only secures the DDR/DRA Note B. Additionally, to some extent, cash flows
from the Non-Florida DDR/DRA Properties support payment of the obligations under
the DDR/DRA Note B and cash flows from the Carillon Place Property support
payment of the obligations under the DDR/DRA Note A and the DDR/DRA Note C. Such
cross-support arrangements are designed primarily to ensure that all of the
collateral (other than the Carillon Place Property) pledged to secure the
DDR/DRA Loan, and the cash flow generated thereby, is available to support debt
service on, and ultimate repayment of, all of the aggregate indebtedness
evidenced by the DDR/DRA Notes. The DDR/DRA Notes are not the joint and several
obligations of the three DDR/DRA Borrowers, although each has pledged its
properties (other than the Carrillon Place Property) to secure all of the
indebtedness. The DDR/DRA Borrowers have not entered into any contribution
agreement or other similar agreement and therefore, in the event that one
DDR/DRA Borrower's properties are foreclosed upon and the proceeds of the sale
thereof are applied to satisfy the other Borrowers' obligations, the DDR/DRA
Borrower whose properties were foreclosed upon will have no claim for
reimbursement against the other two DDR/DRA Borrowers. Any payment by a DDR/DRA
Borrower or satisfaction of indebtedness from such DDR/DRA Borrower's properties
in excess of such DDR/DRA Borrower's direct obligation could be challenged as a
fraudulent conveyance by creditors of such DDR/DRA by the representatives of a
DDR/DRA Borrower in an action brought outside a bankruptcy case, or, if a
DDR/DRA Borrower were to become a debtor in a bankruptcy case.
Under the Courtyard Loan, each of the 31 Marriott Ground Lessors has
subjected its fee interests in the respective Courtyard Properties to the liens
of the Courtyard Loan as additional security for the obligations of the
Courtyard Borrower. Such arrangements could be challenged as fraudulent
conveyances by creditors of the related Marriott Ground Lessor, in an action
brought outside a bankruptcy case, or, if the Courtyard Borrower were to become
a debtor in a bankruptcy case.
The Sun Communities Loan is comprised of the obligations of 2 related
entities, each of which owns at least 1 Sun Communities Property. The interest
of the Sun Communities Borrower A will provide security for the entire
indebtedness represented by the Sun Communities Loan. These arrangements are
designed primarily to ensure that all of the collateral pledged to secure the
Sun Communities A Mortgages, and the cash flow generated thereby, is available
to support debt service on, and ultimate repayment of, all of the aggregate
indebtedness evidenced by the Sun Communities Notes. However, an enforcement
action against the Sun Communities Mortgage securing the Edwardsville Property
would currently be limited to $12,000,000, which amount could be increased
through the payment of additional
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mortgage tax. The arrangements thus seek to reduce the risk that the inability
of one or more Mortgaged Properties securing the Sun Communities Loan to
generate net operating income sufficient to pay debt service will result in
defaults and ultimate losses. Any payment by a Sun Communities Borrower or
satisfaction of indebtedness from such Sun Communities Borrower's properties in
excess of such Sun Communities Borrower's direct obligation could be challenged
as a fraudulent conveyance by creditors of such Sun Communities Borrower or by
the representatives of a Sun Communities Borrower in an action brought outside a
bankruptcy case, or, if a Sun Communities Borrower were to become a debtor in a
bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property or an interest in
property (including the granting of a lien) by a person will be subject to
avoidance under certain circumstances if the person did not receive fair
consideration or reasonably equivalent value in exchange for such obligation or
transfer and (a) was insolvent or was rendered insolvent by such obligation or
transfer, (b) was engaged in business or a transaction, or was about to engage
in business or a transaction, for which any property remaining with the person
was an unreasonably small capital or (c) intended to, or believed that it would
incur, debts that would be beyond that person's ability to pay as such debts
matured. Accordingly, a lien (or right to receive credit support) granted by the
DDR/DRA Borrower, the Marriott Ground Lessor or a Sun Communities Borrower to
secure repayment of the DDR/DRA Note, the Courtyard Loan or the Sun Communities
Loan, respectively, could be avoided if a court were to determine that (a) such
entity was insolvent at the time of granting the lien or right, was rendered
insolvent by the granting of a lien or right or was left with inadequate
capital, or was not able to pay its debts as they matured and (b) such entity
did not, when it allowed its fee estate or estates to be encumbered by a lien
securing the entire indebtedness represented by the DDR/DRA Loan, the Courtyard
Loan or the Sun Communities Loan (or granted a right to credit support from
revenues from its properties), receive fair consideration or reasonably
equivalent value for pledging its fee estate or estates, for the benefit of the
DDR/DRA Borrower, the Courtyard Borrower or respective Sun Communities Borrower,
as the case may be (or granting such interest in its cash flow).
Among other things, a legal challenge to the granting of the liens and/or
the incurring of the obligation by the Marriott Ground Lessors may focus on the
benefits realized by such Marriott Ground Lessor from the Courtyard Loan. If a
court were to find or conclude that the granting of liens or the incurring of
the obligations associated with the Courtyard Loan was an avoidable fraudulent
conveyance, that court could subordinate all or part of the Courtyard Loan, to
existing or future indebtedness of that Marriott Ground Lessor, recover payments
made under the Courtyard Loan, or take other actions detrimental to the holders
of the Certificates, including under certain circumstances, invalidating the
Mortgages securing such loans.
Although the Sun Communities and DDR/DRA Borrowers have agreed to enter into
the Sun Communities Loan and DDR/DRA Loans, respectively and the Sun Communities
Mortgages and DDR/ DRA Mortgages, respectively, there can be no assurance that
such a fraudulent conveyance challenge would not be made or, if such an action
were made, that it would not be successful. In addition, fraudulent
conveyance-related claims against the Trust Fund are not covered by title
insurance policies obtained in connection with the origination of the Sun
Communities Loan or DDR/DRA Loan.
RISKS ASSOCIATED WITH BLANKET INSURANCE POLICIES. Certain of the Mortgaged
Properties are covered by blanket insurance policies which also cover other
properties of the related borrower or its affiliates. In the event that such
policies are drawn on to cover losses on such other properties, the amount of
insurance coverage available under such policies would thereby be reduced and
could be insufficient to cover each Mortgaged Property's insurable risks.
ATTORNMENT CONSIDERATIONS. Some of the operating leases and tenant leases,
including the anchor tenant leases, contain provisions that require the tenant
to attorn to (that is, recognize as landlord under the lease) a successor owner
of the Mortgaged Property following foreclosure. Some of the leases may be
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either subordinate to the liens created by the Mortgages or contain a provision
that requires the tenant to subordinate the lease if the mortgagee agrees to
enter into a non-disturbance agreement. Not all leases were reviewed to
ascertain the existence of attornment or subordination provisions. In some
jurisdictions, if tenant leases are subordinate to the liens created by the
mortgage and such leases do not contain attornment provisions, such leases may
terminate upon the transfer of the property to a foreclosing lender or purchaser
at foreclosure. Accordingly, in the case of the foreclosure of a Mortgaged
Property located in such a jurisdiction and leased to one or more desirable
tenants under leases that do not contain attornment provisions, such Mortgaged
Property could experience a further decline in value if such tenants' leases
were terminated (e.g., particularly if such tenants were paying above-market
rents or could not be replaced). If a Mortgage is subordinate to a lease, the
Trust Fund will not (unless it has otherwise agreed with the tenant) possess the
right to dispossess the tenant upon foreclosure of the property, and if the
lease contains provisions inconsistent with the Mortgage (e.g., provisions
relating to application of insurance proceeds or condemnation awards), the
provisions of the lease will take precedence over the provisions of the
Mortgage.
LITIGATION. There may be pending or threatened legal proceedings against
the borrowers and managers of the Mortgaged Properties and their respective
affiliates arising out of the ordinary business of the borrowers, managers and
affiliates. There can be no assurance that such litigation will not have a
material adverse effect on distribution to Certificateholders.
In particular, the Depositor is aware that there are various outstanding
lawsuits against the DDR/ DRA Borrowers, the Worldwide Plaza Guarantor and the
Worldwide Plaza Manager. Such lawsuits are unlikely to have any material adverse
effect on any Certificateholder.
BANKRUPTCY PROCEEDINGS. The Worldwide Plaza Guarantor is operating under an
"Order Confirming Debtor's Plan of Reorganization" (the "Worldwide Plaza
Reorganization Order") signed and entered by the U.S. Bankruptcy Court for the
District of Delaware on March 4, 1997.
The Worldwide Plaza Guarantor consists of a sole general partner,
BRE/Worldwide Inc. (the "Worldwide Plaza Guarantor GP"), and numerous limited
partners consisting of WZ Garden Corp., Oldegard Corp., WW West "A" Associates
L.P., Thomas G. Fergusson Associates, Inc., HLS Corp. and Cravath, Swaine &
Moore (Thomas G. Fergusson Associates, Inc. and HLS Corp. are affiliates of
Ogilvy & Mather Worldwide, Inc.).
Pursuant to an Amended and Restated Loan Purchase Agreement dated September
5, 1996 between the Worldwide Plaza Borrower and Deutsche Bank, A.G., the
Worldwide Plaza Borrower agreed to purchase certain mortgage loans from Deutsche
Bank, secured by mortgage liens of the Worldwide Plaza Property and the
Worldwide Plaza Amenities Parcel. In accordance with such agreement, the
Worldwide Plaza Borrower designated LB Holdings as the purchaser of the first
mortgage loan, and Deutsche Bank assigned such loan to LB Holdings in the amount
of $290,000,000. Pursuant to the Worldwide Plaza Reorganization Order, the
Worldwide Plaza Guarantor transferred the Worldwide Plaza Property to the
Worldwide Plaza Borrower, and the Worldwide Plaza Borrower assumed the Worldwide
Plaza Guarantor's liability with respect to the $290,000,000 first mortgage
encumbering the Worldwide Plaza Property. Pursuant to the Worldwide Plaza Loan
documents, the amount due to LB Holdings under such mortgage was reduced and
restated to $275,000,000.
The Worldwide Plaza Borrower has represented that as of closing, there had
been no appeal and no appeal was pending with respect to the Worldwide Plaza
Reorganization Order.
RISKS RELATING TO UNDERWRITTEN NET CASH FLOW. As described under "Mortgage
Pool Characteristics-- Certain Characteristics of the Mortgage Loans,"
Underwritten Net Cash Flow means cash flow, as adjusted based on a number of
assumptions used by the Depositor. No representation is made that the
Underwritten Net Cash Flow set forth herein represents future net cash flows.
Each investor should review
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these assumptions and make its own determination of the appropriate assumptions
to be used in determining Underwritten Net Cash Flow.
Underwritten Net Cash Flow reflects calculations and assumptions used by the
Depositor and should not be used as a substitute for cash flow as determined in
accordance with GAAP as a measure of the results of a Mortgaged Property's
operation or as a substitute for cash flows from operating activities determined
in accordance with GAAP as a measure of liquidity. For example, the DSCRs set
forth herein for the Mortgage Loans and the Mortgaged Properties vary, and may
vary substantially, from the debt service coverage ratios for the Mortgage Loans
and the Mortgaged Properties as calculated pursuant to the definition of such
ratios as set forth in the related loan documents. See "Mortgage Pool
Characteristics-- Certain Characteristics of the Mortgage Loans" for a
discussion of the assumptions used in determining Underwritten Net Cash Flow.
In addition, Underwritten Net Cash Flow is based in part on the related
Originator's estimates, which in turn are based in part on information provided
to the related Originator by the related borrower, and which are also based in
part on the past and expected future financial performance of the related
Mortgaged Property.
CONFLICTS OF INTEREST
GENERAL. The potential for various conflicts of interest exists with
respect to the offering of the Certificates, including conflicts of interests
among certain of the borrowers and the property or asset managers. In addition,
one or more affiliates of Lehman Brothers has entered into, and may in the
future enter into other, financing arrangements with affiliates of some or all
of the borrowers.
CONFLICTS BETWEEN THE MASTER SERVICER AND THE TRUST FUND. The Master
Servicer is in the business of servicing mortgage loans, including existing and
new mortgage loans for third parties similar to the Mortgage Loans. These
mortgage loans may be in the same markets or have common owners, obligors and/or
property managers as certain of the Mortgage Loans and Mortgaged Properties
securing the Mortgage Loans. Certain personnel of the Master Servicer and its
affiliates may, on behalf of the Master Servicer, perform services with respect
to the Mortgage Loans at the same time as they are performing services, on
behalf of other persons, with respect to other mortgage loans in the same
markets as the Mortgaged Properties securing the Mortgage Loans. In such a case,
the interests of the Master Servicer and its affiliates and their other clients
may differ from and compete with the interests of the Trust Fund and such
activities may adversely affect the amount and timing of collections on the
Mortgage Loans.
CONFLICTS BETWEEN MANAGERS AND THE BORROWERS. Substantially all of the
third party and borrower affiliated property managers for the Mortgaged
Properties (or their affiliates) manage additional properties, including
properties that may compete with the Mortgaged Properties. Moreover, affiliates
of the managers, and certain of the managers themselves, may also own or manage
other properties, including competing properties. Accordingly, the managers of
the Mortgaged Properties may experience conflicts of interest in the management
of such Mortgaged Properties.
CONFLICTS RELATED TO THE COURTYARD LOAN. Because Host Marriott, the parent
of the general partner of the Courtyard GP, and MII and their respective
affiliates own and/or operate hotels other than the Courtyard Properties, and
because MII and its affiliates license others to operate hotels under the
various brand names owned by MII and its affiliates, potential conflicts of
interest exist. With respect to these potential conflicts of interest, Host
Marriott and MII retain the right to compete with the Courtyard Properties,
including the right to develop competing hotels in markets in which the
Courtyard Properties are located, as well as to operate existing hotels which
may currently compete directly or indirectly with the Courtyard Properties.
In addition, Host Marriott and MII share two common directors --J.W.
Marriott, Jr. and Richard E. Marriott. J.W. Marriott, Jr. serves as Chairman of
the Board of Directors, Chief Executive Officer, and
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President of MII and also serves as a director of Host Marriott. Richard E.
Marriott is a director of MII and Chairman of the Board of Directors of Host
Marriott. Messrs. J.W. Marriott, Jr. and Richard E. Marriott, as well as certain
other officers and directors of MII and Host Marriott, also own shares (and/or
options or other rights to acquire shares) in both companies. Policies and
procedures have been established by the Board of Directors of Host Marriott and
MII to limit the involvement of Messrs. J.W. Marriott, Jr. and Richard E.
Marriott (and, if appropriate, other officers and directors of such companies)
in conflict situations, including requiring them to abstain from voting as
directors of either Host Marriott or MII (or as directors of any of their
subsidiaries) on certain matters which present a conflict between the companies.
THE OFFERED CERTIFICATES
SPECIAL PREPAYMENT, YIELD AND LOSS CONSIDERATIONS. The yield to maturity on
the Offered Certificates will depend, among other things, on the rate and timing
of principal payments (including both voluntary prepayments, in the case of the
Mortgage Loans that permit voluntary prepayment, and involuntary prepayments,
such as prepayments resulting from casualty or condemnation, defaults and
liquidations) on the Mortgage Loans and the allocation thereof to reduce the
Certificate Principal Amounts of the Certificates entitled to distributions of
principal. In addition, in the event of any repurchase of all or a portion of a
Mortgage Loan from the Trust Fund under the circumstances described under "The
Pooling Agreement--Representations and Warranties; Repurchase" herein, the
Repurchase Price paid would be passed through to the holders of the Certificates
with the same effect as if such Mortgage Loan had been prepaid in part or in
full (except that no prepayment premium or yield maintenance charge would be
payable with respect to any such repurchase). In addition, with respect to any
Class of Offered Certificates, to the extent losses on the Mortgage Loans exceed
the aggregate Certificate Principal Amount of the Classes of Certificates
subordinated to such Class, such Class will bear a loss equal to the amount of
such excess up to an amount equal to the outstanding Certificate Principal
Amount thereof. No representation is made as to the anticipated rate of
prepayments (voluntary or involuntary) or rate or amount of liquidations or
losses on the Mortgage Loans or as to the anticipated yield to maturity of any
Offered Certificate. See "Yield, Prepayment and Maturity Considerations--Yield"
herein.
Investors in the Class C-2 Certificates will generally be entitled to
receive distributions of principal from principal payments on the Worldwide
Plaza LIBOR Component. See "Description of the Offered
Certificates--Distributions--Payment Priorities" herein. Therefore, the Class
C-2 Certificates will be extremely sensitive to the rate and timing of principal
payments (including both voluntary prepayments, which are permitted under the
Worldwide Plaza LIBOR Component, and delinquencies, defaults and liquidations)
attributable to the Worldwide Plaza LIBOR Component and any repurchase with
respect to breaches of representations and warranties with respect to such
Mortgage Loan.
The Notional Amount of the Class X-1 Certificates is based upon the
Certificate Principal Amounts of the Class A-1, Class A-2, Class A-3, Class B,
Class C-1, Class D, Class E and Class F Certificates, which in turn are based on
the Stated Principal Balances of the Group 1 Loans. Therefore, the yield to
maturity on the Class X-1 Certificates will be extremely sensitive to the rate
and timing of prepayments of principal (including both voluntary and involuntary
prepayments, delinquencies, defaults and liquidations) on the Group 1 Loans and
any repurchase with respect to breaches of representations and warranties with
respect to the Group 1 Loans to the extent such payments of principal are
allocated to each such Class in reduction of the Certificate Principal Amount
thereof.
The Notional Amount of the Class X-2 Certificates is based upon the
Certificate Principal Amount of the Class C-2 Certificates, which is in turn
based on the Stated Principal Balance of the Worldwide Plaza LIBOR Component.
The Worldwide Plaza LIBOR Component is prepayable at any time without the
imposition of any Prepayment Premium. Therefore, the yield to maturity on the
Class X-2 Certificates will be extremely sensitive to the rate and timing of
voluntary prepayments of principal (as well as delinquencies, defaults and
liquidations) on the Worldwide Plaza LIBOR Component and any repurchase with
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respect to breaches of representations and warranties with respect to the
Worldwide Plaza LIBOR Component.
No Mortgage Loan (other than the Worldwide Plaza LIBOR Component, and the
Worldwide Plaza Fixed Components in certain limited circumstances described
herein under "Description of the Mortgage Loans and Mortgaged Properties--The
Worldwide Plaza Loan and Properties--The Loan--Prepayment Terms and Special
Lease Payments") permits voluntary prepayment earlier than 3 months prior to the
related Anticipated Repayment Date (or, in the case of the DDR/DRA Loan, any
time prior to 6 months of its maturity date and in the case of the Courtyard
Loan and the Sun Communities Loan, 6 months prior to the Courtyard Anticipated
Repayment Date or the Sun Communities Anticipated Repayment Date, respectively).
See "Description of the Mortgage Loans and Mortgaged Properties." However, there
is no assurance that involuntary prepayments will not occur or that the
restrictions contained in the related Mortgage Loans would ultimately be
enforceable in legal proceedings. Voluntary prepayments are permitted with
respect to the Worldwide Plaza LIBOR Component. The rate at which voluntary
prepayments occur on the Worldwide Plaza LIBOR Component will be affected by a
variety of factors, including, without limitation, the terms of the Mortgage
Loans, the level of prevailing interest rates, the availability of mortgage
credit, the occurrence of casualties or natural disasters and economic,
demographic, tax, legal and other factors.
The Mortgage Loans may be prepaid, in whole or in part without payment of a
yield maintenance charge and/or prepayment premium, on any Due Date on or after
the dates set forth in the following table:
<TABLE>
<CAPTION>
FIRST PERMITTED ANTICIPATED
MORTGAGE LOAN PREPAYMENT DATE REPAYMENT DATE
- -------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
DDR/DRA Loan ............................................................. December 10, 2001 June 10, 2002*
Courtyard Loan............................................................ October 10, 2011 April 10, 2012
Worldwide Plaza Loan**.................................................... July 10, 2004 July 10, 2004
Prentiss Loan............................................................. November 26, 2006 February 26, 2007
Arden Loan................................................................ March 11, 2004 June 11, 2004
Villa Marina Loan......................................................... October 10, 2006 October 10, 2006
Valley View Loan.......................................................... October 10, 2006 October 10, 2006
Sun Communities Loan...................................................... March 10, 2007 September 10, 2007
</TABLE>
- ------------------------
* The DDR/DRA Loan maturity date.
** The Worldwide Plaza LIBOR Component is fully prepayable without premium or
penalty, and the Worldwide Plaza Fixed Components are prepayable in certain
limited situations during the first two years after the Closing Date.
No yield maintenance charge and/or prepayment premium will be required under
the Mortgage Loans for prepayments in connection with a casualty or condemnation
unless, in the case of most of the Mortgage Loans, an event of default has
occurred and is continuing.
Provisions requiring yield maintenance charges and/or prepayment premiums
may not be enforceable in some states and under federal bankruptcy law, and may
constitute interest for usury purposes. Accordingly, no assurance can be given
that the obligation to pay a yield maintenance charge and/or prepayment premium
will be enforceable under applicable state or federal law or, if enforceable,
that the foreclosure process will be sufficient to pay such yield maintenance
charge and/or prepayment premium. Additionally, although the collateral
substitution provisions related to defeasance are not intended to be, and do not
have the same effect on the Certificateholders as prepayment, there can be no
assurance that a court would not interpret such provisions as requiring a yield
maintenance charge and/or prepayment premium and thus not enforceable under
applicable law or as being usurious. See "Certain Legal Aspects of Mortgage
Loans--Applicability of Usury Laws" in the Prospectus.
In general, if an Offered Certificate is purchased by an investor at a
premium and principal distributions thereon occur at a rate faster than
anticipated at the time of purchase, to the extent that the required yield
maintenance charge and/or prepayment premium, if any, are not received by such
investor,
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such investor's actual yield to maturity may be lower than that assumed at the
time of purchase. Conversely, if an Offered Certificate is purchased at a
discount and principal distributions thereon occur at a rate slower than that
assumed at the time of purchase, the investor's actual yield to maturity may be
lower than that assumed at the time of purchase.
Each Mortgage Loan (other than the DDR/DRA Loan which does not have an
Anticipated Repayment Date) requires that commencing on the first Due Date after
the related Anticipated Repayment Date, certain cash flow in excess of that
required for debt service and other items with respect to the related Mortgaged
Properties (as described more fully herein "Excess Cash Flow") will be applied
towards the payment of principal until the principal balance of the related
Mortgage Loan has been reduced to zero. Each Mortgage Loan (other than the
DDR/DRA Loan) also provides that principal outstanding after the related
Anticipated Repayment Date will bear interest at an adjusted rate (the "Adjusted
Interest Rate") which will be higher (except with respect to the Worldwide Plaza
LIBOR Component for which the Adjusted Interest Rate may be lower) than the
interest rate previously in effect (the "Base Interest Rate"). While interest at
the Base Interest Rate accrues and is payable on a current basis on such loans,
interest at the excess of the Adjusted Interest Rate over the Base Interest Rate
for such loans ("Excess Interest") will be deferred and will be paid only after
the outstanding principal balance of the related loan and other amounts owing
under the applicable loan documents has been paid in full. The foregoing
features, to the extent applicable, are designed to increase the likelihood that
a Mortgage Loan will be prepaid by the borrower on the applicable Anticipated
Repayment Dates; however no assurance can be given that any Mortgage Loan will
be repaid on its applicable Anticipated Repayment Date.
See "Yield, Prepayment and Maturity Considerations" and "Federal Income Tax
Consequences" herein and "Yield and Prepayment Considerations" and "Federal
Income Tax Considerations" in the Prospectus.
EFFECT OF MORTGAGOR DEFAULTS. The aggregate amount of distributions on the
Offered Certificates, the yield to maturity of the Offered Certificates, the
rate of principal payments on the Offered Certificates and the weighted average
life of the Offered Certificates will be affected by the rate and the timing of
delinquencies and defaults on the Mortgage Loans. If a purchaser of an Offered
Certificate of any Class calculates its anticipated yield based on an assumed
rate of default and amount of losses on the Mortgage Loans that is lower than
the default rate and amount of losses actually experienced and such losses are
allocable to such Class of Certificates, such purchaser's actual yield to
maturity will be lower than that so calculated and could, under certain extreme
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Offered Certificates to
which all or a portion of such loss is allocable, even if the rate of defaults
and severity of losses are consistent with an investor's expectations. In
general, the earlier a loss borne by an investor occurs, the greater is the
effect on such investor's yield to maturity.
As and to the extent described herein, the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, will be entitled to
receive interest on unreimbursed Advances and unreimbursed servicing expenses.
Such interest will accrue from (and including) the date on which the related
Advance is made or the related expense incurred through the date of
reimbursement, less any amount of interest previously paid in respect thereof.
The Master Servicer's, the Special Servicer's, the Trustee's or the Fiscal
Agent's right, as applicable, to receive such payments of interest is prior to
the rights of Certificateholders to receive distributions on the Offered
Certificates and, consequently, may result in losses being allocated to the
Offered Certificates that would not otherwise have resulted absent the accrual
of such interest. In addition, certain circumstances, including delinquencies in
the payment of principal and interest, will result in a Mortgage Loan being
specially serviced. The Special Servicer is entitled to compensation for special
servicing activities which may result in losses being allocated to the Offered
Certificates that would not otherwise have resulted. See "The Pooling
Agreement--Special Servicer" herein.
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Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such Certificates. Losses on the Mortgage
Loans, to the extent not allocated to such Class of Offered Certificates, may
result in a higher percentage ownership interest evidenced by such Certificates
than would otherwise have resulted absent such loss. The consequent effect on
the weighted average life and yield to maturity of the Offered Certificates will
depend upon the characteristics of the remaining Mortgage Loans.
Delinquencies and defaults on the Mortgage Loans may significantly delay the
receipt of distributions by the holder of an Offered Certificate, to the extent
that Advances or the subordination of another Class of Certificates does not
fully offset the effects of any such delinquency or default.
RELATED PARTIES MAY PURCHASE CERTIFICATES. Related parties, including the
Master Servicer, the Special Servicer or affiliates of the borrowers may
purchase all or part of one or more Classes of Certificates. A purchase by the
Master Servicer or Special Servicer, as the case may be, could cause a conflict
between such entity's duties pursuant to the Pooling Agreement and its interest
as a holder of a Certificate, especially to the extent that certain actions or
events have a disproportionate effect on one or more Classes of Certificates.
The Pooling Agreement provides that the Mortgage Loans shall be administered in
accordance with the Servicing Standard without regard to ownership of any
Certificate by the Master Servicer, the Special Servicer or any affiliate
thereof. Additionally, the Pooling Agreement provides that an affiliate of a
borrower may not vote with respect to matters where there is a potential
conflict of interest. Under the Pooling Agreement, in the event that a
Certificateholder becomes a lender under any of the partner loans or parent
loans referred to in "--The Mortgage Loans--Other Financing" above, such
Certificateholder will not be entitled to vote for the selection of the Special
Servicer or in connection with directing the Special Servicer's actions.
BOOK-ENTRY REGISTRATION. Each Class of Offered Certificates will be
initially represented by one or more certificates registered in the name of Cede
& Co., as the nominee for DTC, and will not be registered in the names of the
related holders of Certificates or their nominees. As a result, holders of
Offered Certificates will not be recognized as "Certificateholders" for certain
purposes. Hence, those beneficial owners will be able to exercise the rights of
holders of Certificates only indirectly through DTC and its participating
organizations. See "Description of the Offered Certificates--Delivery, Form and
Denomination" and "--Book-Entry Registration" herein. A beneficial owner holding
a Certificate through the book-entry system will be entitled to receive the
reports and notices described under the Pooling Agreement (to the extent that
its name and address has been provided to the Certificate Registrar) only
through the facilities of DTC and its respective participants (except that the
reports will be made available directly from the Trustee upon request).
Additionally, certain information made available on the monthly reports to
Certificateholders can be retrieved via facsimile through LaSalle National
Bank's ASAP System by calling (312) 904-2200, and requesting statement number
283.
LIMITED LIQUIDITY AND MARKET VALUE. There is currently no secondary market
for the Offered Certificates. While the Underwriter has advised the Depositor
that they currently intend to make a secondary market in the Offered
Certificates, they are under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Offered Certificates will develop.
Moreover, if a secondary market does develop, there can be no assurance that it
will provide holders of Offered Certificates with liquidity of investment or
that it will continue for the life of the Offered Certificates. The Offered
Certificates will not be listed on any securities exchange. Lack of liquidity
could result in a substantial decrease in the market value of the Offered
Certificates. In addition, the market value of the Offered Certificates at any
time may be affected by many factors, including then prevailing interest rates,
and no representation is made by any person or entity as to the market value of
any Offered Certificate at any time.
CERTIFICATE INTEREST RATE CONSIDERATIONS. After the Distribution Date in
July 2004, the Certificate Interest Rate on the Class C-2 Certificates will be a
fixed rate equal to the Net Mortgage Rate on the
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Worldwide Plaza LIBOR Component (which will be a fixed rate from and after such
time) and, therefore, the yield to investors in such Class of Certificates may
not be as high as that offered by other LIBOR-based investments which are not
subject to such interest rate restrictions. The Certificate Interest Rate on the
Class X-1 Certificates is based on the Group 1 WAC Rate of the Mortgage Loans
and will be affected by disproportionate principal payments on the Mortgage
Loans. Because certain Mortgage Loans will amortize their principal more quickly
than others, such rate will fluctuate over the life of such Classes of
Certificates. The Group 1 WAC Rate for each Distribution Date, assuming that
each Mortgage Loan prepays on its Anticipated Repayment Date (and that all
scheduled monthly payments are timely made and that no other prepayments occur),
is set forth in Exhibit D hereto. See "Yield, Prepayment and Maturity
Considerations--Yield" herein.
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<PAGE>
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling Agreement and will
consist of 14 classes (each, a "Class") to be designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
X-1 Certificates, the Class B Certificates, the Class C-1 Certificates, the
Class C-2 Certificates, the Class X-2 Certificates, the Class D Certificates,
the Class E Certificates, the Class F Certificates, the Class T Certificates,
the Class R Certificates and the Class LR Certificates. The Class F, Class T,
Class R and Class LR Certificates (collectively, the "Private Certificates") are
not offered hereby.
The Certificates represent in the aggregate the entire beneficial ownership
interest in a Trust Fund consisting of: (i) the Mortgage Loans and all payments
under and proceeds of the Mortgage Loans due after the Cut-Off Date; (ii) any
Mortgaged Property acquired on behalf of the Trust Fund through foreclosure or
deed in lieu of foreclosure (upon acquisition, an "REO Property"); (iii) such
funds or assets as from time to time are deposited in the Collection Account,
the Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Interest Reserve Account, the Excess Interest Distribution Account, the Class T
Distribution Account and any account established in connection with REO
Properties (an "REO Account"); (iv) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans; (v) certain rights and
remedies under the Loan Sale Agreement; and (vi) all of the mortgagee's right,
title and interest in the Reserve Accounts and the Lock Box Accounts. The
Certificates do not represent an interest in or obligation of the Depositor, the
Originators, the Master Servicer, the Trustee, the Fiscal Agent, the
Underwriter, the borrowers, the property managers or any of their respective
affiliates.
Upon initial issuance, the Class A-1, Class A-2, Class A-3, Class B, Class
C-1, Class C-2, Class D, Class E and Class F Certificates (collectively, the
"P&I Certificates") and the Class X-1 and Class X-2 Certificates will have the
following Certificate Principal Amount or Notional Amount (in each case, subject
to a variance of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE
PRINCIPAL OR
CLASS NOTIONAL AMOUNT
- ------------------------------------------------------------------------------ ------------------
<S> <C>
Class A-1..................................................................... $ 612,000,000
Class A-2..................................................................... 204,000,000
Class A-3..................................................................... 168,434,000
Class X-1..................................................................... 1,376,717,068
Class B....................................................................... 114,138,000
Class C-1..................................................................... 49,870,000
Class C-2..................................................................... 50,000,000
Class X-2(1).................................................................. 50,000,000
Class D....................................................................... 114,137,000
Class E....................................................................... 42,802,000
Class F....................................................................... 71,336,068
</TABLE>
- ------------------------
(1) The Class X-2 Certificates will not be outstanding later than the
Distribution Date in July 2004.
The Certificate Principal Amount of any Class of P&I Certificates
outstanding at any time represents the maximum amount which the holders thereof
are entitled to receive as distributions allocable to principal from the cash
flow on the Mortgage Loans and the other assets in the Trust Fund; provided,
however, that in the event that Realized Losses previously allocated to a Class
of Certificates in reduction of their Certificate Principal Amounts are
recovered subsequent to the reduction of the Certificate Principal Amount of
such Class to zero, such Class may receive distributions in respect of such
recoveries in accordance with the priorities set forth under
"--Distributions--Payment Priorities" herein.
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The Class X-1 and Class X-2 Certificates will not have Certificate Principal
Amounts. Such Classes will represent the right to receive distributions of
interest accrued as described herein on a notional principal amount (the
"Notional Amount").
The Notional Amount of the Class X-1 Certificates will equal the aggregate
Certificate Principal Amounts of the Class A-1, Class A-2, Class A-3, Class B,
Class C-1, Class D, Class E and Class F Certificates outstanding from time to
time, plus the amount of any unpaid Interest Shortfalls on such Classes as of
the first day of the related Interest Accrual Period.
The Notional Amount of the Class X-2 Certificates through and including the
Distribution Date in July 2004 will equal the Certificate Principal Amount of
the Class C-2 Certificates, plus the amount of any unpaid Interest Shortfall on
such Class as of the first day of the related Interest Accrual Period. Unless
the Notional Amount of the Class X-2 Certificates has been reduced to zero prior
to such date, the Class X-2 Certificates will be retired following distributions
on the Distribution Date in July 2004. The Class X-2 Certificates will not be
entitled to any distributions after such date.
The Certificate Principal Amount of each Class of Certificates entitled to
distributions of principal will in each case be reduced by amounts actually
distributed thereon that are allocable to principal and by any Realized Losses
allocated to such Class of Certificates. The Notional Amount of the Class X-1
Certificates will be reduced to the extent of all reductions in the aggregate of
the Certificate Principal Amounts of the Class A-1, Class A-2, Class A-3, Class
B, Class C-1, Class D, Class E and Class F Certificates. The Notional Amount of
the Class X-2 Certificates will be reduced to the extent of all reductions of
the Certificate Principal Amount of the Class C-2 Certificates.
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT. Distributions on the Certificates will be made
on the second Business Day following the 10th day of each month (or if the 10th
day of the month is not a Business Day, on the third Business Day immediately
following the 10th day of the month), commencing in November 1997 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Offered Certificate) will be made by or on behalf of the Trustee to the
persons in whose names the Certificates are registered at the close of business
on the last day of the month immediately preceding the month in which the
related Distribution Date occurs, or if such day is not a Business Day, the
immediately preceding Business Day (the "Record Date"); provided, that the
Record Date with respect to holders of the Class C-2 Certificates will be the
close of business on the 9th day of the month in which the related Distribution
Date occurs, or if such day is not a Business Day, the immediately preceding
Business Day. Such distributions will be made (a) by wire transfer in
immediately available funds to the account specified by the Certificateholder at
a bank or other entity having appropriate facilities therefor, if such
Certificateholder provides the Trustee with wiring instructions no less than
five Business Days prior to the related Record Date, or otherwise (b) by check
mailed to such Certificateholder. The final distribution on any Offered
Certificates will be made in like manner, but only upon presentment or surrender
(for notation that the Certificate Principal Amount thereof has been reduced to
zero) of such Certificate at the location specified in the notice to the
Certificateholder thereof of such final distribution. All distributions made
with respect to a Class of Certificates on each Distribution Date will be
allocated pro rata among the outstanding Certificates of such Class based on
their respective Percentage Interests. The "Percentage Interest" evidenced by
any Offered Certificate is equal to the initial denomination thereof as of the
Closing Date divided by the initial Certificate Principal Amount of the related
Class.
The Mortgage Pool consists of two groups (each, a "Loan Group"): "Loan Group
1" consists of the Worldwide Plaza Fixed Components and the other Mortgage Loans
(collectively, the "Group 1 Loans") and "Loan Group 2" consists of the Worldwide
Plaza LIBOR Component (the "Group 2 Loan"). The aggregate distribution to be
made on the Group 1 Certificates on any Distribution Date will equal the
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Available Funds with respect to Loan Group 1. The aggregate distribution to be
made on the Group 2 Certificates on any Distribution Date will equal the
Available Funds with respect to Loan Group 2. The "Available Funds" for a
Distribution Date and either Loan Group will be the sum of (i) all Scheduled
Payments, Extended Scheduled Payments, Balloon Payments or other receipts on
account of principal and interest on or in respect of the Mortgage Loans in such
Loan Group (including Unscheduled Payments and Net REO Proceeds, if any)
received by the Master Servicer in the related Collection Period, (ii) all other
amounts required to be deposited in the Collection Account by the Master
Servicer pursuant to the Pooling Agreement in respect of such Distribution Date
that are allocable to the Mortgage Loans in such Loan Group, including all P&I
Advances made by the Master Servicer, the Trustee or the Fiscal Agent, as
applicable, in respect of such Distribution Date, and any interest or other
income earned on funds in the Interest Reserve Account, (iii) with respect to
the Group 1 Loans, for the Distribution Date occurring in each March, the
Withheld Amounts as described herein under "The Pooling Agreement--Accounts--
Interest Reserve Account" and required to be deposited in the Lower-Tier
Distribution Account pursuant to the Pooling Agreement and (iv) any late
payments of Scheduled Payments received with respect to the Mortgage Loans in
such Loan Group after the end of the Collection Period relating to such
Distribution Date but prior to the related Master Servicer Remittance Date, but
excluding the following:
(a) amounts permitted to be used to reimburse the Master Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, for previously
unreimbursed Advances and interest thereon as described herein under "The
Pooling Agreement--Advances";
(b) the aggregate amount of the Servicing Fee (which includes the fees for
both the Trustee and the Master Servicer) payable to the Master Servicer and the
amounts payable to the Special Servicer described herein under "The Pooling
Agreement--Special Servicer" in each case in respect of such Distribution Date,
and all amounts in the nature of late fees, loan modification fees, extension
fees, loan service transaction fees, demand fees, beneficiary statement charges,
assumption fees, modification fees and similar fees, and reinvestment earnings
on payments received with respect to the Mortgage Loans which the Master
Servicer or Special Servicer is entitled to receive as additional servicing
compensation pursuant to the terms of the Pooling Agreement (together with the
Servicing Fee, "Servicing Compensation");
(c) all amounts representing Scheduled Payments due after the related Due
Date;
(d) to the extent permitted by the Pooling Agreement, that portion of
liquidation proceeds, insurance proceeds and condemnation proceeds with respect
to a Mortgage Loan which represents any unpaid Servicing Compensation as
described herein, to which the Master Servicer, the Special Servicer or the
Trustee is entitled;
(e) all amounts representing certain unanticipated or default related
expenses reimbursable or payable to the Master Servicer, the Special Servicer,
the Trustee or Fiscal Agent and other amounts permitted to be retained by the
Master Servicer or withdrawn pursuant to the Pooling Agreement in respect of
various items, including indemnities;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) with respect to any Distribution Date occurring in each February, and in
any January occurring in a year that is not a leap year, the Withheld Amounts
with respect to the DDR/DRA Loan, the Prentiss Loan, the Arden Loan, the Villa
Marina Loan and the Sun Communities Loan to be deposited in the Interest Reserve
Account and held for future distribution;
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<PAGE>
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling Agreement during the related
Collection Period and subsequent to the date as of which the amount required to
effect such purchase or repurchase was determined; and
(k) the amount reasonably determined by the Trustee to be necessary to pay
any applicable federal, state or local taxes imposed on the Upper-Tier REMIC or
the Lower-Tier REMIC under the circumstances and to the extent described in the
Pooling Agreement.
"Scheduled Payment" with respect to any Mortgage Loan (other than any REO
Mortgage Loan) or Worldwide Plaza Component and any Due Date is the scheduled
monthly payment of principal (if any) and interest at the related Mortgage Rate
that is payable by the related borrower on such Due Date, but not including any
Balloon Payment. The Scheduled Payment with respect to an REO Mortgage Loan for
any Distribution Date is the monthly payment that would otherwise have been
payable on the related Due Date had the related Note not been discharged,
determined as set forth in the Pooling Agreement.
"Balloon Payment" means the principal portion of the scheduled payment due
on the stated maturity date of any Mortgage Loan that does not fully amortize
over its term to maturity.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, any
Principal Prepayment, any Repurchase Price received with respect to a Mortgage
Loan and any other payments under or with respect to the Mortgage Loans not
scheduled to be made, but excluding Prepayment Premiums, Excess Interest,
Default Interest, the Repurchase Price paid under the circumstances described
under "The Pooling Agreement--Representations and Warranties; Repurchase" herein
and any amount paid in connection with the release of the related Mortgaged
Property through defeasance.
"Prepayment Premiums" are payments received on a Mortgage Loan as the result
of the receipt of certain Unscheduled Payments (other than any amount paid in
connection with the release of the related Mortgaged Property through
defeasance), which are intended to compensate the mortgagee for an early and
unscheduled receipt of principal.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan are all revenues received by the Special Servicer with respect to
such REO Property or REO Mortgage Loan (other than the proceeds of a liquidation
thereof) net of any insurance premiums, taxes, assessments and other costs and
expenses permitted to be paid therefrom pursuant to the Pooling Agreement.
"Principal Prepayments" are unscheduled payments of principal permitted to
be made by a borrower under the terms of a Mortgage Loan and received from the
borrower.
"Collection Period" with respect to a Distribution Date and each Mortgage
Loan is the period beginning on the day after the Due Date in the month
preceding the month in which such Distribution Date occurs and ending on the Due
Date in the month in which such Distribution Date occurs.
"Net Default Interest" with respect to any Mortgage Loan or Worldwide Plaza
Component is any Default Interest accrued on such Mortgage Loan or Worldwide
Plaza Component less amounts required to pay any unpaid Servicing Fee, Special
Servicing Fee, Rehabilitation Fee and Liquidiation Fee and to pay the Master
Servicer, the Special Servicer, the Trustee or Fiscal Agent, as applicable,
interest on Advances at the Advance Rate.
"Default Interest" with respect to any Mortgage Loan or Worldwide Plaza
Component is interest accrued on such Mortgage Loan or Worldwide Plaza Component
at the excess of (i) the related Default Rate over (ii) the sum of the related
Mortgage Rate plus, if applicable, the related Excess Rate.
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"Default Rate" with respect to any Mortgage Loan or Worldwide Plaza
Component is the per annum rate at which interest accrues on such Mortgage Loan
following any event of default on such Mortgage Loan or Worldwide Plaza
Component including a default in the payment of a Scheduled Payment.
"Excess Rate" with respect to each of the Mortgage Loans (other than the
DDR/DRA Loan) and each Worldwide Plaza Component is the excess of the related
Adjusted Interest Rate over the related Base Interest Rate (or with respect to
the Worldwide Plaza LIBOR Component, the excess of the Adjusted Interest Rate
thereof over 7.920% per annum).
"Excess Interest" with respect to each of the Mortgage Loans (other than the
DDR/DRA Loan) and each Worldwide Plaza Component is the interest accrued at the
related Excess Rate in respect of such Mortgage Loan, plus interest thereon, to
the extent permitted by applicable law, at the related Adjusted Interest Rate.
PAYMENT PRIORITIES. As used below in describing the priorities of
distribution of Available Funds for each Loan Group and each Distribution Date,
the terms set forth below will have the following meanings.
The "Interest Accrual Amount," with respect to any Distribution Date and any
Class of P&I Certificates, is equal to interest for the related Interest Accrual
Period at the Certificate Interest Rate for such Class on the related
Certificate Principal Amount (provided, that for interest accrual purposes any
distributions in reduction of Certificate Principal Amount or reductions in
Certificate Principal Amount as a result of allocations of Realized Losses on
the Distribution Date occurring in an Interest Accrual Period will be deemed to
have been made on the first day of such Interest Accrual Period); and "Interest
Accrual Amount" with respect to any Distribution Date and the Class X-1 and
Class X-2 Certificates is equal to interest for the related Interest Accrual
Period at the Certificate Interest Rate for such Class for such Interest Accrual
Period on the Notional Amount of such Class (provided, that for interest accrual
purposes any distributions in reduction of Notional Amount or reductions in
Notional Amount as a result of allocations of Realized Losses on the
Distribution Date occurring in an Interest Accrual Period will be deemed to have
been made on the first day of such Interest Accrual Period).
Calculations of interest on the Group 1 Certificates will be made on the
basis of a 360-day year consisting of twelve 30-day months. Calculations of
interest due in respect of the Group 2 Certificates will be made based on the
actual number of days in the related Interest Accrual Period and a 360-day year.
The "Interest Distribution Amount" with respect to any Distribution Date and
each Class of Regular Certificates will equal (A) the sum of (i) the Interest
Accrual Amount for such Distribution Date and (ii) the Interest Shortfall, if
any, for such Distribution Date, less (B) any Excess Prepayment Interest
Shortfall allocated to such Class on such Distribution Date.
The "Interest Accrual Period" with respect to any Distribution Date and (a)
with respect to each Class of Group 1 Certificates is the period commencing on
and including the tenth day of the month preceding the month in which such
Distribution Date occurs and ending on and including the ninth day of the month
in which such Distribution Date occurs and (b) with respect to the Group 2
Certificates is the period commencing on and including the twelfth day of the
month preceding the month in which such Distribution Date occurs and ending on
and including the eleventh day of the month in which such Distribution Date
occurs.
Each Interest Accrual Period with respect to each Class of Group 1
Certificates is assumed to consist of 30 days and with respect to the Group 2
Certificates to consist of the actual number of days occurring in such Interest
Accrual Period.
An "Interest Shortfall" with respect to any Distribution Date for any Class
of Regular Certificates is the sum of (a) the excess, if any, of (i) the
Interest Distribution Amount for such Class for the immediately preceding
Distribution Date over (ii) all distributions of interest (other than Excess
Interest) made with
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respect to such Class of Certificates on the immediately preceding Distribution
Date and (b) to the extent permitted by applicable law, (i) other than in the
case of the Class X-1 and Class X-2 Certificates, one month's interest on any
such excess at the Certificate Interest Rate applicable to such Class of
Certificates for the current Distribution Date, (ii) in the case of the Class
X-1 Certificates, one month's interest on any such excess at the Group 1 WAC
Rate for such Distribution Date and (iii) in the case of the Class X-2
Certificates, one month's interest on any such excess at the Mortgage Rate on
the Worldwide Plaza LIBOR Component.
The "Certificate Interest Rate" for any Class of Regular Certificates for
any Interest Accrual Period is the per annum rate at which interest accrues on
the Certificates of such Class during such Interest Accrual Period.
The Certificate Interest Rate on the Class A-1 Certificates is equal to
6.790%.
The Certificate Interest Rate on the Class A-2 Certificates is equal to
6.840%.
The Certificate Interest Rate on the Class A-3 Certificates is equal to
6.900%.
The Certificate Interest Rate on the Class B Certificates is equal to
6.950%.
The Certificate Interest Rate on the Class C-1 Certificates is equal to
7.000%.
The Certificate Interest Rate on the Class C-2 Certificates will be equal to
(i) for each Distribution Date through the Distribution Date in July 2004, LIBOR
plus 0.43% and (ii) for each Distribution Date thereafter, the Net Mortgage Rate
of the Worldwide Plaza LIBOR Component (which will be a fixed rate from and
after such time). See "Description of the Mortgage Loans and Mortgaged
Properties--The Worldwide Plaza Loan and Property--The Loan--Payment Terms"
herein for a description of the Worldwide Plaza LIBOR Component on which
distributions on the Class C-2 Certificates are generally based.
The Certificate Interest Rate on the Class D Certificates will be equal to
7.150%.
The Certificate Interest Rate on the Class E Certificates will be equal to
the lesser of (i) the Group 1 WAC Rate and (ii) 7.300%.
The Certificate Interest Rate on the Class F Certificates will be equal to
the lesser of (i) the Group 1 WAC Rate and (ii) 7.300%.
For convenience in describing interest distributions, the Class X-1
Certificates will be deemed to consist of 8 components (each a "Component"), the
"Class A-1 Component," "Class A-2 Component," "Class A-3 Component," the "Class
B Component," the "Class C-1 Component," the "Class D Component," the "Class E
Component" and the "Class F Component," each of which will have a notional
amount (each, a "Component Notional Amount") equal to, and which will reduce
proportionally with, the Certificate Principal Amounts of the Class A-1, Class
A-2, Class A-3, Class B, Class C-1, Class D, Class E and Class F Certificates,
respectively, outstanding from time to time (without giving effect to any
Appraisal Reduction Amounts), plus the amount of any unpaid Interest Shortfall
on such Classes.
The Certificate Interest Rate on the Class X-1 Certificates is a per annum
rate equal to the weighted average of the Certificate Interest Rates on the
Class A-1 Component, the Class A-2 Component, the Class A-3 Component, the Class
B Component, the Class C-1 Component, the Class D Component, the Class E
Component and the Class F Component, weighted on the basis of their respective
Component Notional Amounts.
The Certificate Interest Rate on the Class A-1 Component is a per annum rate
equal to the Group 1 WAC Rate minus the Certificate Interest Rate on the Class
A-1 Certificates. The Certificate Interest Rate on the Class A-2 Component is a
per annum rate equal to the Group 1 WAC Rate minus the Certificate
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Interest Rate on the Class A-2 Certificates. The Certificate Interest Rate on
the Class A-3 Component is a per annum rate equal to the Group 1 WAC Rate minus
the Certificate Interest Rate on the Class A-3 Certificates. The Certificate
Interest Rate on the Class B Component is a per annum rate equal to the Group 1
WAC Rate minus the Certificate Interest Rate on the Class B Certificates. The
Certificate Interest Rate on the Class C-1 Component is a per annum rate equal
to the Group 1 WAC Rate minus the Certificate Interest Rate on the Class C-1
Certificates. The Certificate Interest Rate on the Class D Component is a per
annum rate equal to the Group 1 WAC Rate minus the Certificate Interest Rate on
the Class D Certificates. The Certificate Interest Rate on the Class E Component
is a per annum rate equal to the Group 1 WAC Rate minus the Certificate Interest
Rate on the Class E Certificates. The Certificate Interest Rate on the Class F
Component is a per annum rate equal to the Group 1 WAC Rate minus the
Certificate Interest Rate on the Class F Certificates.
The Certificate Interest Rate on the Class X-2 Certificates for each
Distribution Date through the Distribution Date in July 2004, is a per annum
rate equal to the Net Mortgage Rate on the Worldwide Plaza LIBOR Component minus
the Certificate Interest Rate on the Class C-2 Certificates. The Class X-2
Certificates will not be outstanding later than the Distribution Date in July
2004.
The "Group 1 WAC Rate" with respect to any Distribution Date is a per annum
rate equal to the weighted average of the Net Mortgage Rates in effect for the
Group 1 Loans as of their respective Due Dates in the month preceding the month
in which such Distribution Date occurs, weighted on the basis of their
respective Stated Principal Balances on such Due Dates.
The "Regular Certificates" are the Class A-1, Class A-2, Class A-3, Class B,
Class C-1, Class C-2, Class D, Class E, Class F, Class X-1 and Class X-2
Certificates.
The "Net Mortgage Rate" with respect to any Group 1 Mortgage Loan is a per
annum rate equal to the related Mortgage Rate in effect from time to time minus
the Servicing Fee Rate. The Net Mortgage Rate of the Worldwide Plaza LIBOR
Component is a per annum rate equal to the Mortgage Rate thereof in effect from
time to time minus the Effective Servicing Fee Rate. For purposes of calculating
Certificate Interest Rates, the Net Mortgage Rate of any Mortgage Loan or
Worldwide Plaza Component will be determined without regard to any modification,
waiver or amendment of the terms, whether agreed to by the Special Servicer or
resulting from a bankruptcy, insolvency or similar proceeding involving the
related borrower.
The "Mortgage Rate" with respect to any Mortgage Loan or Worldwide Plaza
Component is the per annum rate in effect from time to time at which interest
accrues on such Mortgage Loan or Worldwide Plaza Component as stated in the
related Note, in each case without giving effect to the Excess Rate or the
Default Rate. Notwithstanding the foregoing, for purposes of calculating
Certificate Interest Rates of the Group 1 Certificates, the Mortgage Rates of
the Group 1 Mortgage Loans (each of which accrues interest on the basis of a
360-day year and actual days elapsed in each month), for any one-month period
preceding a related Due Date will be deemed to be the annualized rate at which
interest would have to accrue in respect of such Group 1 Mortgage Loan on the
basis of a 360-day year consisting of twelve 30-day months in order to produce
the aggregate amount of interest actually accrued in respect of such Group 1
Mortgage Loan during such one-month period at the related Mortgage Rate;
provided, however, that with respect to the DDR/DRA Loan, the Prentiss Loan, the
Arden Loan, the Villa Marina Loan and the Sun Communities Loan, (i) the Mortgage
Rate for the Collection Period preceding the Due Dates in January and February
in each year that is not a leap year or in February only in each year that is a
leap year will be determined net of the Withheld Amounts and (ii) the Mortgage
Rate for the Collection Period preceding the Due Date in March will be
determined after taking into account the addition of the Withheld Amount with
respect to each such Mortgage Loan.
The "Stated Principal Balance" of any Mortgage Loan or Worldwide Plaza
Component at any date of determination will equal (a) the principal balance as
of the Cut-Off Date of such Mortgage Loan or
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Worldwide Plaza Component, minus (b) the sum of (i) the principal portion of
each Scheduled Payment or, if applicable, Extended Scheduled Payment due on such
Mortgage Loan or applied to such Worldwide Plaza Component after the Cut-Off
Date and prior to such date of determination, if received from the borrower or
advanced by the Master Servicer, Trustee or Fiscal Agent, (ii) all Balloon
Payments, voluntary and involuntary principal prepayments and other unscheduled
collections of principal received with respect to such Mortgage Loan or applied
to such Worldwide Plaza Component, to the extent distributed to holders of the
Certificates or applied to other payments required under the Pooling Agreement
before such date of determination and (iii) any adjustment thereto as a result
of a reduction of principal by a bankruptcy court or as a result of a
modification reducing the principal amount due on such Mortgage Loan or
Worldwide Plaza Component. The Stated Principal Balance of a Mortgage Loan or
Worldwide Plaza Component with respect to which title to the related Mortgaged
Property has been acquired by the Trust Fund is equal to the principal balance
thereof outstanding on the date on which such title is acquired less any Net REO
Proceeds allocated to principal on such Mortgage Loan or Worldwide Plaza
Component. The Stated Principal Balance of a defaulted Mortgage Loan or
Worldwide Plaza Component with respect to which the Master Servicer or the
Special Servicer has determined that it has received all payments and recoveries
which it expects to be finally recoverable on such Mortgage Loan or Worldwide
Plaza Component is zero.
The "Principal Distribution Amount" for any Distribution Date and either
Loan Group will be equal to the sum, without duplication, of:
(i) the principal component of all Scheduled Payments (other than
Balloon Payments) due on the Due Date immediately preceding such
Distribution Date (if received, or advanced by the Master Servicer, Trustee
or Fiscal Agent, in respect of such Distribution Date) with respect to the
Mortgage Loans or Worldwide Plaza Components, as applicable, in such Loan
Group;
(ii) the principal component of all Extended Scheduled Payments due on
the related Due Date (if received, or advanced by the Master Servicer,
Trustee or Fiscal Agent, in respect of such Distribution Date) with respect
to the Mortgage Loans or Worldwide Plaza Components, as applicable, in such
Loan Group;
(iii) the principal component of any payment (including any Balloon
Payment) on any Mortgage Loan or Worldwide Plaza Component in such Loan
Group received on or after the maturity date thereof in the related
Collection Period;
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan or Worldwide Plaza Component in such Loan Group received or
applied during the related Collection Period, net of the principal portion
of any unreimbursed P&I Advances related to such Mortgage Loan or Worldwide
Plaza Component;
(v) the principal portion of the Repurchase Price with respect to each
Mortgage Loan or Worldwide Plaza Component in such Loan Group purchased,
during the related Collection from the Trust Fund; and
(vi) the Principal Shortfall, if any, for such Distribution Date and
such Loan Group.
For purposes of the foregoing definition of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date and any Loan Group
means the amount, if any, by which (i) the Principal Distribution Amount for
such Loan Group for the preceding Distribution Date exceeds (ii) the aggregate
amount actually distributed with respect to principal on such preceding
Distribution Date in respect of such Principal Distribution Amount.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
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On each Distribution Date prior to the Cross-over Date, the Available Funds
with respect to the Group 1 Loans for such Distribution Date will be distributed
in the following amounts and order of priority:
(i) FIRST, pro rata, in respect of interest, to the Class A-1, Class
A-2, Class A-3 and Class X-1 Certificates, up to an amount equal to, and pro
rata as among such Classes in accordance with, the aggregate Interest
Distribution Amounts of such Classes;
(ii) SECOND, to the Class A-1 Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1, until the Certificate
Principal Amount thereof is reduced to zero;
(iii) THIRD, to the Class A-2 Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to the prior clause,
until the Certificate Principal Amount thereof is reduced to zero;
(iv) FOURTH, to the Class A-3 Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Principal Amount thereof is reduced to zero;
(v) FIFTH, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount of such Class;
(vi) SIXTH, to the Class B Certificates, in reduction of the Certificate
Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Principal Amount thereof is reduced to zero;
(vii) SEVENTH, to the Class B Certificates, for the unreimbursed amounts
of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses, an
amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class;
(viii) EIGHTH, to the Class C-1 Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
(ix) NINTH, to the Class C-1 Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Principal Amount thereof is reduced to zero;
(x) TENTH, to the Class C-1 Certificates, for the unreimbursed amounts
of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses, an
amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class;
(xi) ELEVENTH, to the Class D Certificates in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
(xii) TWELFTH, to the Class D Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the
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portion of such Principal Distribution Amount distributed pursuant to all
prior clauses, until the Certificate Principal Amount thereof is reduced to
zero;
(xiii) THIRTEENTH, to the Class D Certificates, for the unreimbursed
amounts of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses, an
amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class;
(xiv) FOURTEENTH, to the Class E Certificates in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
(xv) FIFTEENTH, to the Class E Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Principal Amount thereof is reduced to zero;
(xvi) SIXTEENTH, to the Class E Certificates, for the unreimbursed
amounts of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses, an
amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class;
(xvii) SEVENTEENTH, to the Class F Certificates in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
(xviii) EIGHTEENTH, to the Class F Certificates in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Principal Amount thereof is reduced to zero;
(xix) NINETEENTH, to the Class F Certificates, for the unreimbursed
amounts of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 1 less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses, an
amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class; and
(xx) TWENTIETH, to the Class R Certificates, any amounts relating to
Group 1 Loans remaining in the Upper-Tier Distribution Account and to the
Class LR Certificates, any amounts relating to Group 1 Loans remaining in
the Lower-Tier Distribution Account.
On each Distribution Date occurring on and after the Cross-over Date,
regardless of the allocation of principal payments described in priorities
SECOND, THIRD and FOURTH in the preceding sentence, an amount equal to the
Principal Distribution Amount with respect to Loan Group 1 will be distributed,
first, to the Class A-1 Certificates, Class A-2 Certificates and Class A-3
Certificates, pro rata, based on their respective Certificate Principal Amounts,
in reduction of their respective Certificate Principal Amounts, until the
Certificate Principal Amount of each such Class is reduced to zero; and second,
to the Class A-1 Certificates, Class A-2 Certificates and Class A-3
Certificates, for unreimbursed amounts of Realized Losses previously allocated
to such Classes, plus interest thereon at the Certificate Interest Rate for such
Class compounded monthly from the date the related Realized Loss was allocated
to such Class, pro rata in accordance with the amount of such unreimbursed
Realized Losses previously allocated.
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The "Cross-over Date" is the Distribution Date on which the Certificate
Principal Amount of each Class of Group 1 Certificates entitled to distributions
of principal other than the Class A-1, Class A-2 and Class A-3 Certificates has
been reduced to zero.
On each Distribution Date, the Available Funds with respect to the Group 2
Loan for such Distribution Date will be distributed in the following amounts and
order of priority:
(i) FIRST, (i) through and including the Distribution Date in July 2004,
pro rata, (A) to the Class C-2 Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class and (B) to
the Class X-2 Certificates, in respect of interest, up to an amount equal to
the Interest Distribution Amount of such Class and (ii) after the
Distribution Date in July 2004, to the Class C-2 Certificates, in respect of
interest, up to an amount equal to the Interest Distribution Amount of such
Class;
(ii) SECOND, to the Class C-2 Certificates, in reduction of the
Certificate Principal Amount thereof, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 2, until the Certificate
Principal Amount thereof is reduced to zero;
(iii) THIRD, to the Class C-2 Certificates for the unreimbursed amounts
of Realized Losses, if any, up to an amount equal to the Principal
Distribution Amount with respect to Loan Group 2 less the portion of such
Principal Distribution Amount distributed as described in clause SECOND
above, an amount equal to the aggregate of such unreimbursed Realized Losses
previously allocated to such Class, plus interest thereon at the Certificate
Interest Rate for such Class compounded monthly from the date the related
Realized Loss was allocated to such Class; and
(iv) FOURTH, to the Class R Certificates, any amounts relating to Group
2 Loan remaining in the Upper-Tier Distribution Account and to the Class LR
Certificates, any amounts relating to Group 2 Loan remaining in the
Lower-Tier Distribution Account.
All references to "pro rata" in the preceding clauses or the clauses above,
unless otherwise specified, mean pro rata based upon the amount distributable
pursuant to such clause.
PREPAYMENT PREMIUMS. Any Prepayment Premium actually collected with respect
to a Mortgage Loan during any particular Collection Period will be distributed
on the related Distribution Date to the holders of each Class of Group 1
Certificates entitled to distributions of principal on such Distribution Date in
an aggregate amount up to the product of (a) such Prepayment Premium and (b) the
Discount Rate Fraction. The "Discount Rate Fraction" is a fraction (a) the
numerator of which is equal to the excess of (x) the Certificate Interest Rate
for such Class of Certificates over (y) the relevant Discount Rate (as defined
below) and (b) the denominator of which is equal to the excess of (x) the
Mortgage Rate of the related Mortgage Loan over (y) the relevant Discount Rate;
provided, that if there are two or more of such Classes of Certificates entitled
to principal distributions on such Distribution Date, the Certificate Interest
Rate for purposes of clause (a)(x) above will be the Certificate Interest Rate
for the Class with the earlier payment priority and the portion of the
Prepayment Premium calculated as described above, will be allocated among such
Classes of Certificates entitled to principal distributions on a pro rata basis
in accordance with the relative amount of principal distributions made thereto
on such Distribution Date. The "Discount Rate" shall equal the discount rate
used to calculate the Prepayment Premium pursuant to the terms of the related
Mortgage Loan. The portion of the Prepayment Premium remaining after the payment
of the amount calculated as described above will be distributed to the holders
of the Class X-1 Certificates.
The Prepayment Premiums, if any, collected on the Group 1 Loans during any
Collection Period may not be sufficient to fully compensate Certificateholders
of any Class for any loss in yield attributable to the related prepayments of
principal.
See "Certain Legal Aspects of Mortgage Loans--Enforceability of Prepayment
and Late Payment Fees" in the Prospectus regarding the enforceability of
Prepayment Premiums.
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EXCESS INTEREST. On each Distribution Date, the Trustee will distribute any
Excess Interest received during the related Collection Period to the holders of
the Certificates as follows: (i) any Excess Interest received with respect to
the Arden Loan and the Worldwide Plaza Fixed Components, to the holders of the
Class A-2, Class A-3, Class B, Class C-1, Class D, Class E and Class F
Certificates, pro rata, based on their initial Certificate Principal Amounts;
(ii) any Excess Interest received with respect to the Prentiss Loan, the Villa
Marina Loan and the Valley View Loan, to the holders of the Class A-3, Class B,
Class C-1, Class D, Class E and Class F Certificates, pro rata, based on their
initial Certificate Principal Amounts; (iii) any Excess Interest received with
respect to the Sun Communities Loan, to the holders of the Class C-1, Class D,
Class E and Class F Certificates, pro rata, based on their initial Certificate
Principal Amounts; (iv) any Excess Interest received with respect to the
Courtyard Loan, to the holders of the Class D, Class E and Class F Certificates,
pro rata, based on their initial Certificate Principal Amounts; and (v) any
Excess Interest received with respect to the Worldwide Plaza LIBOR Component, to
the holders of to the Class C-2 Certificates.
CLASS T DISTRIBUTIONS. On each Distribution Date, Net Default Interest
received in the related Collection Period with respect to a default on a
Mortgage Loan received in such Collection Period will be distributed solely to
the Class T Certificates, to the extent set forth in the Pooling Agreement.
REALIZED LOSSES AND OTHER SHORTFALLS. The Certificate Principal Amount of
each Class of Certificates entitled to distributions of principal will be
reduced without distribution on any Distribution Date as a write-off to the
extent of any Realized Loss allocated to such Class on such Distribution Date.
As referred to herein, "Realized Loss" means either a Group 1 Realized Loss or a
Group 2 Realized Loss. A "Group 1 Realized Loss" with respect to any
Distribution Date means the amount, if any, by which the aggregate Certificate
Principal Amount of the Group 1 Certificates after giving effect to
distributions made on such Distribution Date exceeds the aggregate Stated
Principal Balance of the Group 1 Loans after giving effect to any payments of
principal received or advanced with respect to the Due Date occurring
immediately prior to such Distribution Date. Any Group 1 Realized Losses will be
applied to the Classes of Certificates in the following order, until each is
reduced to zero: first, to the Class F Certificates; second, to the Class E
Certificates; third, to the Class D Certificates; fourth, to the Class C-1
Certificates; fifth, to the Class B Certificates and, finally, pro rata, to the
Class A-1, Class A-2 and Class A-3 Certificates, based on their respective
Certificate Principal Amounts. The Notional Amount of the Class X-1 Certificates
will be reduced to reflect reductions in the Certificate Principal Amounts of
the Class A-1, Class A-2, Class A-3, Class B, Class C-1, Class D and Class E
Certificates resulting from allocations of Realized Losses. A "Group 2 Realized
Loss" with respect to any Distribution Date means the amount, if any, by which
the aggregate Certificate Principal Amount of the Class C-2 Certificates after
giving effect to distributions made on such Distribution Date exceeds the
aggregate Stated Principal Balance of the Worldwide Plaza LIBOR Component as of
the first day of the Interest Accrual Period commencing immediately prior to
such Distribution Date. Any Group 2 Realized Losses will be applied directly to
the Class C-2 Certificates until the Certificate Principal Amount thereof has
been reduced to zero. The Notional Amount of the Class X-2 Certificates will be
reduced to reflect reductions in the Certificate Principal Amount of the Class
C-2 Certificates. Any amounts recovered in respect of any amounts previously
written off as Realized Losses will be distributed to the Classes of
Certificates described above in reverse order of allocation of Realized Losses
thereto.
Shortfalls in Available Funds resulting from (i) additional servicing
compensation other than the Servicing Fee, (ii) unanticipated, non-Mortgage Loan
specific expenses of the Trust Fund, including indemnities and expense
reimbursements to the Trustee, indemnities and expense reimbursements to the
Master Servicer, the Special Servicer and the Depositor and federal, state and
local taxes, and tax-related expenses, specifically payable out of the Trust
Fund, and (iii) any other default-related or unanticipated expense of the Trust
Fund not specifically included in the calculation of Realized Loss for which
there is no corresponding collection from a borrower, will be allocated to each
Class of Certificates in the following order, until each is reduced to zero:
first, to the Class F Certificates; second, to the Class E Certificates;
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third, to the Class D Certificates; fourth, pro rata, to the Class C-1 and Class
C-2 Certificates, based on their respective Certificate Principal Amounts;
fifth, to the Class B Certificates and, finally, pro rata, to the Class A-1,
Class A-2 and Class A-3 Certificates, based on their respective Certificate
Principal Amounts.
EXCESS PREPAYMENT INTEREST SHORTFALLS
Excess Prepayment Interest Shortfalls with respect to the Group 1 Loans will
be allocated to each Class of Group 1 Certificates, pro rata, based upon the
amount of interest which would have otherwise been distributable to such Class.
Excess Prepayment Interest Shortfalls with respect to the Group 2 Loan will be
allocated to reduce the interest entitlement of each Class of Group 2
Certificates, pro rata, based upon the amount of interest that would otherwise
be distributable to such Class.
The "Prepayment Interest Shortfall," with respect to any Distribution Date
and any Mortgage Loan, is equal to the amount of any shortfall in collections of
interest, adjusted to the applicable Net Mortgage Rate, resulting from a
Principal Prepayment on such Mortgage Loan during the related Collection Period
and prior to the Due Date in such Collection Period. Such shortfall may result
because interest on a Principal Prepayment in full is paid by the related
borrower only to the date of prepayment.
The "Excess Prepayment Interest Shortfall" with respect to either Loan Group
and any Distribution Date, is the aggregate amount by which the Prepayment
Interest Shortfall with respect to all Principal Prepayments received during the
related Collection Period with respect to such Loan Group exceeds the aggregate
Servicing Fee (minus the Trustee Fee) available to be paid to the Master
Servicer with respect to such Loan Group for such Distribution Date.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
certain Classes of Group 1 Certificates against losses associated with
delinquent and defaulted Mortgage Loans, the rights of the holders of the Class
B, Class C-1, Class D, Class E and Class F Certificates to receive distributions
of interest (other than Excess Interest) and principal, as applicable, will be
subordinated to such rights of the holders of the Class A-1, Class A-2, Class
A-3 and Class X-1 Certificates. The Class B Certificates will likewise be
protected by the subordination of the Class C-1, Class D, Class E and Class F
Certificates. The Class C-1 Certificates will be likewise protected by the
subordination of the Class D, Class E and Class F Certificates. The Class D
Certificates will likewise be protected by the subordination of the Class E and
Class F Certificates. The Class E Certificates will likewise be protected by the
subordination of the Class F Certificates. This subordination will be effected
in two ways: (i) by the preferential right of the holders of a Class of
Certificates to receive on any Distribution Date the amounts of interest and
principal distributable in respect of such Certificates on such date prior to
any distribution being made on such Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii) by the allocation of Group 1
Realized Losses as described above under "--Distributions--Realized Losses."
Any Group 2 Realized Losses will be allocated directly to the Class C-2
Certificates. No Group 2 Realized Losses will occur until losses on the
Worldwide Plaza Loan exceed the principal balance of the Worldwide Plaza Fixed
Component B (see "Description of the Mortgage Loans--The Worldwide Plaza Loan
and Property--The Loan--Application of Funds Held in Cash Management Account").
APPRAISAL REDUCTIONS
With respect to the first Distribution Date following the earliest of (i)
the third anniversary of the date on which an extension of the maturity date of
a Mortgage Loan becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer, which extension does not change the amount of
Scheduled Payments on the Mortgage Loan, (ii) 90 days after an uncured
delinquency occurs in respect of a Mortgage Loan, (iii) 90 days after the date
on which a reduction in the amount of Scheduled Payments on a Mortgage Loan, or
a change in any other material economic term of the Mortgage Loan, becomes
effective as a result of a modification of such Mortgage Loan by the Special
Servicer, (iv) 60 days after a
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receiver has been appointed, (v) immediately after a borrower declares
bankruptcy and (vi) immediately after a Mortgage Loan becomes an REO Mortgage
Loan (each, an "Appraisal Reduction Event"), an Appraisal Reduction Amount will
be calculated. The "Appraisal Reduction Amount" for any Distribution Date and
for any Mortgage Loan as to which any Appraisal Reduction Event has occurred
will be an amount equal to the excess of (a) the outstanding Stated Principal
Balance of such Mortgage Loan as of the last day of the related Collection
Period over (b) the excess of (i) 90% of the sum of the appraised values of the
related Mortgaged Properties as determined by independent MAI appraisals (the
costs of which shall be paid by the Master Servicer as an Advance) over (ii) the
sum of (A) to the extent not previously advanced by the Master Servicer, the
Trustee or the Fiscal Agent, all unpaid interest on such Mortgage Loan at a per
annum rate equal to the Mortgage Rate, (B) all unreimbursed Advances and
interest thereon at the Advance Rate in respect of such Mortgage Loan and (C)
all currently due and unpaid real estate taxes and assessments and insurance
premiums and all other amounts, including, if applicable, ground rents, due and
unpaid under the Mortgage Loan (which taxes, premiums and other amounts have not
been the subject of an Advance). If no independent MAI appraisal has been
obtained within twelve months prior to the first Distribution Date on or after
an Appraisal Reduction Event has occurred, the Master Servicer will be required
to estimate the value of the related Mortgaged Properties (the "Master
Servicer's Appraisal Reduction Estimate") and such estimate will be used for
purposes of determining the Appraisal Reduction Amount. Within 30 days after the
Master Servicer receives notice or is otherwise aware of an Appraisal Reduction
Event, the Master Servicer will be required to obtain an independent MAI
appraisal, the cost of which will be paid by the Master Servicer as a Property
Advance; provided, however, that with respect to the Appraisal Reduction Event
enumerated in clause (v) above, in the event that the Master Servicer is
diligently proceeding to obtain an independent MAI appraisal but can not do so
within such 30 day period, the Master Servicer will have an additional 30 days
to obtain an independent MAI appraisal. On the first Distribution Date occurring
on or after the delivery of such independent MAI appraisal, the Master Servicer
will be required to adjust the Appraisal Reduction Amount to take into account
such appraisal (regardless of whether the independent MAI appraisal is higher or
lower than the Master Servicer's Appraisal Reduction Estimate). Annual updates
of such independent MAI appraisal will be obtained during the continuance of an
Appraisal Reduction Event and the Appraisal Reduction Amount will be adjusted
accordingly.
In the event that an Appraisal Reduction Event occurs with respect to a
Mortgage Loan, (i) the amount advanced by the Master Servicer with respect to
delinquent payments of interest with respect to the related Mortgage Loan will
be reduced as described under "The Pooling Agreement--Advances" herein and (ii)
the Voting Rights of certain Classes will be reduced as described under "The
Pooling Agreement--Amendment" herein.
Appraisal Reduction Amounts with respect to the Group 1 Loans will be
notionally allocated to the Group 1 Certificates in the following order of
priority: first, to the Class F Certificates, until the Certificate Principal
Amount thereof has been reduced to zero; second, to the Class E Certificates,
until the Certificate Principal Amount thereof has been reduced to zero; third,
to the Class D Certificates, until the Certificate Principal Amount thereof has
been reduced to zero; fourth, to the Class C-1 Certificates, until the
Certificate Principal Amount thereof has been reduced to zero; and finally to
the Class B Certificates, until the Certificate Principal Amount thereof has
been reduced to zero. Appraisal Reduction Amounts with respect to the Worldwide
Plaza LIBOR Component will be notionally allocated to the Class C-2
Certificates.
Upon payment in full or liquidation of any Mortgage Loan for which an
Appraisal Reduction Amount has been determined, such Appraisal Reduction Amount
will be eliminated.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates (other than the Class X-1 and Class X-2
Certificates) will be issued, maintained and transferred in book-entry form only
in denominations of $10,000 initial Certificate Principal Amount, and in
multiples of $1 in excess thereof, and the Class X-1 and Class X-2 Certificates
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will be issued, maintained and transferred in book-entry form only in
denominations of $250,000 initial Notional Amount, and in multiples of $1 in
excess thereof.
The Offered Certificates will initially be represented by one or more Global
Certificates for each such Class registered in the name of the nominee of DTC.
The Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
holder of an Offered Certificate will be entitled to receive a certificate
issued in fully registered, certificated form (each, a "Definitive Certificate")
representing its interest in such Class, except under the limited circumstances
described below under "--Definitive Certificates." Unless and until Definitive
Certificates are issued, all references to actions by holders of the Offered
Certificates will refer to actions taken by DTC upon instructions received from
holders of Offered Certificates through its participating organizations (the
"Participants"), and all references herein to payments, notices, reports,
statements and other information to holders of Offered Certificates will refer
to payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to holders of
Offered Certificates through its Participants in accordance with DTC procedures;
provided, however, that to the extent that the party to the Pooling Agreement
responsible for distributing any report, statement or other information has been
provided with the name of the beneficial owner of a Certificate (or the
prospective transferee of such beneficial owner), such report, statement or
other information will be provided to such beneficial owner (or prospective
transferee).
Until Definitive Certificates are issued in respect of the Offered
Certificates, interests in the Offered Certificates will be transferred on the
book-entry records of DTC and its Participants. The Trustee will initially serve
as certificate registrar (in such capacity, the "Certificate Registrar") for
purposes of recording and otherwise providing for the registration of the
Offered Certificates.
A "Certificateholder" or "holder" under the Pooling Agreement will be the
person in whose name a Certificate is registered in the certificate register
maintained pursuant to the Pooling Agreement, except that solely for the purpose
of giving any consent or taking any action pursuant to the Pooling Agreement,
any Certificate registered in the name of the Depositor, the Trustee, the Master
Servicer, the Special Servicer, a manager of a Mortgaged Property, a mortgagor
or any person affiliated with the Depositor, the Trustee, the Master Servicer,
or the Special Servicer, such Certificate will be deemed not to be outstanding
and the Voting Rights to which it is entitled will not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent or take any such action has been obtained; provided,
however, that for purposes of obtaining the consent of Certificateholders to an
amendment to the Pooling Agreement, any Certificates beneficially owned by the
Master Servicer, the Special Servicer or an affiliate of the Master Servicer or
the Special Servicer will be deemed to be outstanding, provided that such
amendment does not relate to compensation of the Master Servicer or the Special
Servicer, or otherwise benefit the Master Servicer or the Special Servicer in
any material respect; and, provided, further, that for purposes of obtaining the
consent of Certificateholders to any action proposed to be taken by the Special
Servicer with respect to a Specially Serviced Mortgage Loan, any Certificates
beneficially owned by the Master Servicer or an affiliate thereof will be deemed
to be outstanding, provided that the Special Servicer is not the Master
Servicer. The Percentage Interest of any Offered Certificate of any Class will
be equal to the percentage obtained by dividing the denomination of such
Certificate by the aggregate initial Certificate Principal Amount of such Class
of Certificates. See "Description of the Securities" in the Prospectus.
BOOK-ENTRY REGISTRATION
Holders of Offered Certificates may hold their Certificates through DTC if
they are Participants of such system, or indirectly through organizations that
are participants in such systems. DTC is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions
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between Participants through electronic computerized book-entries, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, holders of Offered Certificates will receive
all distributions of principal and interest from the Trustee through the
Participants who in turn will receive them from DTC. Under a book-entry format,
holders of Offered Certificates may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede & Co., as
nominee for DTC. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or beneficial owners of
Offered Certificates.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling Agreement only at
the direction of one or more Participants to whose accounts with DTC the Offered
Certificates are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
None of the Depositor, the Trustee, the Fiscal Agent, the Master Servicer,
the Special Servicer or the Underwriter will have any responsibility for the
performance by DTC or their respective direct or indirect Participants of their
respective obligations under the rules and procedures governing their
operations. The information herein concerning DTC and its book-entry systems has
been obtained from sources believed to be reliable, but the Depositor takes no
responsibility for the accuracy or completeness thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of Offered
Certificates ("Certificate Owners") (or their nominees) only if (i) DTC is no
longer willing or able properly to discharge its responsibilities as depository
with respect to the Offered Certificates and the Depositor is unable to locate a
qualified successor, (ii) the Depositor or the Trustee, at its sole option,
elects to terminate the book-entry system through DTC, or (iii) after the
occurrence of an event of default under the Pooling Agreement, Certificate
Owners representing a majority in principal amount of the Offered Certificates
of any Class then outstanding advise DTC through DTC Participants in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interest of such Certificate Owners.
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Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, DTC is required to notify all
affected DTC Participants of the availability through DTC of Definitive
Certificates. Upon delivery of Definitive Certificates, the Trustee, Certificate
Registrar and Master Servicer will recognize the holders of such Definitive
Certificates as holders under the Pooling Agreement ("Holders"). Distributions
of principal of and interest on the Definitive Certificates will be made by the
Trustee directly to Holders of Definitive Certificates in accordance with the
procedures set forth in the Prospectus and the Pooling Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the forms
which will appear on the back of the certificate representing a Definitive
Certificate), signed by the Holder or such Holder's legal representative and
accompanied by the Definitive Certificate or Certificates for which transfer is
being requested.
TRANSFER RESTRICTIONS
The Class B, Class C-1, Class C-2, Class X-2, Class D and Class E
Certificates (each, an "ERISA-Restricted Certificate") will bear a legend
substantially to the effect that such Certificate may not be purchased by a
transferee that is (A) an employee benefit plan or other retirement arrangement,
including an individual retirement account or a Keogh plan, which is subject to
Title I of ERISA or Section 4975 of the Code, or a "governmental plan" (as
defined in Section 3(32) of ERISA) that is subject to any federal, state or
local law ("Similar Law") which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (each, a "Plan"), or (B) a collective
investment fund in which Plans are invested, an insurance company using assets
of separate accounts or general accounts which include assets of Plans (or which
are deemed pursuant to ERISA or any Similar Law to include assets of Plans) or
other person acting on behalf of any such Plan or using the assets of any such
Plan, other than an insurance company using the assets of its general account
under circumstances whereby the purchase and holding of such Certificate by such
insurance company would be exempt from the prohibited transaction provisions of
ERISA and Section 4975 of the Code under Prohibited Transaction Class Exemption
95-60.
Holders of the ERISA-Restricted Certificates that are in book-entry form
will be deemed to have represented that they are not persons or entities
referred to in clause (A) or (B) of the legend described in the preceding
paragraph. In the event that holders of the ERISA-Restricted Certificates become
entitled to receive Definitive Certificates under the circumstances described
under "--Definitive Certificates," each prospective transferee of an
ERISA-Restricted Certificate that is a Definitive Certificate will be required
to either deliver to the Depositor, the Certificate Registrar and the Trustee a
representation letter substantially in the form set forth as an exhibit to the
Pooling Agreement stating that such transferee is not a person or entity
referred to in clause (A) or (B) of the legend or provide an opinion of counsel
to the Depositor, the Certificate Registrar and the Trustee as described in the
Pooling Agreement. Any transfer of an ERISA-Restricted Certificate that would
result in a prohibited transaction under ERISA or Section 4975 of the Code, or a
materially similar characterization under Similar Law will be deemed absolutely
null and void AB INITIO.
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MORTGAGE POOL CHARACTERISTICS
GENERAL
The Trust Fund will consist primarily of 8 Mortgage Loans with an aggregate
principal balance as of the Cut-Off Date, after deducting payments of principal
due on such date, of $1,426,717,068 (the "Initial Pool Balance"). All of the
numerical information provided herein with respect to the Mortgage Loans is
provided on an approximate basis. The Mortgage Loans are evidenced by one or
more promissory notes (each, a "Note") and secured by one or more mortgages,
deeds of trust or other similar security instruments (each, a "Mortgage")
creating a first lien on the interests of the related borrower's fee and/or
leasehold estate in one or more commercial or multifamily properties (each, a
"Mortgaged Property") as set forth on the following table:
INTEREST IN PROPERTY ENCUMBERED
<TABLE>
<CAPTION>
NO. OF
INTEREST IN PROPERTY ENCUMBERED PROPERTIES
- -------------------------------------------------------------------------------------- ---------------
<S> <C>
Fee(*)................................................................................ 65
Leasehold w/Subordinated Fee.......................................................... 31
Leasehold............................................................................. 3
---
Total:................................................................................ 99
---
</TABLE>
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* Includes one property for which the parking structure is subject to a
ground lease.
The Mortgaged Properties consist of retail properties (including power
centers, a regional mall and an urban marketplace), office buildings (including
suburban office buildings and a Manhattan office tower), hotels, industrial
properties and manufactured housing communities. All of the Mortgage Loans are
generally non-recourse loans so that in the event of a borrower default on any
Mortgage Loan, recourse is limited to the Mortgaged Property or Mortgaged
Properties securing such Mortgage Loan, as well as such limited other assets as
may have been specifically pledged to secure such Mortgage Loan, and not against
the borrower's other assets or any assets of the borrower's affiliates. Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc. ("LB Holdings") originated the DDR/DRA Loan, the Courtyard Loan,
the Sun Communities Loan, the Valley View Loan and the Worldwide Plaza Loan. To
facilitate the loan closings of Mortgage Loans secured by California properties,
LB Holdings engaged Lehman Brothers Realty Corporation ("LB Realty") to
originate the Prentiss Loan, the Arden Loan and the Villa Marina Loan on LB
Holdings' behalf. After origination, LB Holdings acquired such Mortgage Loans.
LB Holdings and LB Realty are collectively referred to herein as the
"Originators." All of the Mortgage Loans were underwritten by the Originators in
accordance with the underwriting criteria described herein. Legal title to the
Mortgage Loans originated by LB Realty will have been acquired by LB Holdings
before the Closing Date and the Depositor will purchase the Mortgage Loans on or
before the Closing Date from LB Holdings pursuant to the Mortgage Loan Purchase
and Sale Agreement (the "Loan Sale Agreement") between LB Holdings and the
Depositor. The Depositor will cause the Mortgage Loans in the Mortgage Pool to
be assigned to LaSalle National Bank, as Trustee (the "Trustee"), pursuant to
the Pooling Agreement. GMACCM, in its capacity as Master Servicer, will service
the Mortgage Loans pursuant to the Pooling Agreement.
The Depositor will make certain representations and warranties to the
Trustee with respect to the Mortgage Loans and may be obligated to repurchase
such Mortgage Loans in the event of a material breach of a representation or
warranty. See "The Pooling Agreement--Representations and Warranties;
Repurchase" herein. The Depositor will have no obligations with respect to the
Certificates other than pursuant to the representations, warranties and
covenants made by it pursuant to the Pooling Agreement. See "The Pooling
Agreement--Representations and Warranties; Repurchase" herein and "Security for
the Bonds and Certificates--Mortgage Loans--Determination of Compliance with
Pool Requirements and Underwriting Procedures" in the Prospectus.
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SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by a Mortgage or
Mortgages encumbering the related borrower's or borrowers' interest in the
related Mortgaged Property or Properties. Each Mortgage Loan is also secured by
an assignment of the related borrower's or borrowers' interest in the leases,
rents and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities, collateral
assignments of interest rate cap agreements and the establishment and pledge of
one or more reserve or escrow accounts or letters of credit for necessary
repairs, replacements and environmental remediation, real estate taxes and
insurance premiums, tenant improvements, leasing commissions, deferred
maintenance and/or scheduled capital improvements (such accounts, "Reserve
Accounts"). All of the Mortgage Loans provide for the indemnification of the
related mortgagee by the related borrower(s) for the presence of any hazardous
substances affecting the Mortgaged Property.
Each Mortgage constitutes a first lien on the related Mortgaged Properties,
subject generally only to (i) liens for real estate and other taxes and special
assessments and (ii) covenants, conditions, restrictions, rights of way,
easements and other encumbrances, whether or not of public record as of the date
of recording of the related Mortgage, all of which were determined to have been
acceptable to the related Originator in connection with the origination of the
related Mortgage Loan.
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
All of the Mortgage Loans have Due Dates that occur on the 10th day of each
month, or, if such day is not a business day, the next or preceding business
day. As of the Cut-Off Date, the Mortgage Loans had the following
characteristics:
<TABLE>
<S> <C>
Aggregate Principal Balance....................................................................... $1,426,717,068
Lowest Mortgage Loan Principal Balance............................................................ $ 44,963,187
Highest Mortgage Loan Principal Balance........................................................... $ 322,500,000
Average Mortgage Loan Principal Balance........................................................... $ 178,339,634
Range of Remaining Terms to Anticipated Repayment Date(1)......................................... 56-174 mos.
Weighted Average Remaining Term to Anticipated Repayment Date(1).................................. 103 mos.
Range of Mortgage Rates per annum(2).............................................................. 7.010%-7.920%
Weighted Average Mortgage Rate.................................................................... 7.575%
Range of Cut-Off Date Loan-to-Appraised Value ("LTV") Ratios...................................... 51.4%-65.8%
Weighted Average Cut-Off Date LTV Ratios.......................................................... 59.3%
Range of Debt Service Coverage Ratios(3).......................................................... 1.45X-2.08X
Weighted Average Debt Service Coverage Ratio(3)................................................... 1.89X
</TABLE>
- ------------------------
(1) In the case of the DDR/DRA Loan, its maturity date.
(2) Excludes the Worldwide Plaza LIBOR Component.
(3) The DSCR for the Worldwide Plaza Loan assumes LIBOR of 5.656%
Each Mortgage Loan, with the exception of the DDR/DRA Loan, requires that
after a specified date (each, an "Anticipated Repayment Date"), Excess Cash Flow
will be applied towards the reduction of principal, as more fully described
under "Description of the Mortgage Loans and Mortgaged Properties." The
Courtyard Loan, the Worldwide Plaza Loan and the Sun Communities Loan require
the payment of both principal and interest on their respective Due Dates. The
DDR/DRA Loan, the Prentiss Loan, the Arden Loan, the Villa Marina and the Valley
View Loan each require the payment of interest only on their respective Due
Dates occurring prior to their respective Anticipated Repayment Dates (or in the
case of the DDR/DRA Loan, until its maturity date).
No yield maintenance premium is required for any voluntary prepayments on
the Mortgage Loans after the period for each Mortgage Loan during which such
Mortgage Loan may not be voluntarily prepaid
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(each, a "Prepayment Lockout Period"). See "Risk Factors--The Offered
Certificates--Special Prepayment, Yield and Loss Considerations." No yield
maintenance premium will be required under the Mortgage Loans for prepayments in
connection with a casualty or condemnation unless, in the case of most of the
Mortgage Loans, an event of default has occurred and is continuing.
All of the Mortgage Loans provide that after the applicable Defeasance
Lockout Period (as defined herein) and prior to the related Anticipated
Repayment Date (or, with respect to the DDR/DRA Loan, prior to its maturity
date), the borrower may obtain the release of one or more of the related
Mortgaged Properties from the lien of the related Mortgage upon, among other
things, a pledge to the Trustee of noncallable U.S. Treasury Obligations. Such
U.S. Treasury Obligations will provide payments, on or prior to all successive
scheduled Due Dates upon which interest and principal payments are due under the
related note through and including the applicable Anticipated Repayment Date
(or, with respect to the DDR/DRA Loan, its maturity date), in amounts due on
such dates under the related Note or, in the case of an Anticipated Repayment
Date, an amount determined as if the related Mortgage Loan were to mature on
such Anticipated Repayment Date. In addition, certain Mortgage Loans permit
release of less than all of the related Mortgaged Properties in connection with
a partial defeasance upon the satisfaction of certain debt service coverage
ratio tests. All of the Mortgage Loans secured by two or more Mortgaged
Properties permit the release of the lien of the Mortgage on less than all of
the Mortgaged Properties by pledging U.S. Treasury Obligations providing for
payment of principal and interest with respect to a portion of the Mortgage Loan
allocable to the Mortgaged Properties to be released from the Mortgage lien. The
Mortgage Loans also permit (or provide that the Master Servicer may require) the
related borrower, under certain circumstances, to transfer the pledged U.S.
Treasury Obligations together with the related Note or the portion of the
related Note secured by such U.S. Treasury Obligations to a successor mortgagor.
See "Description of the Mortgage Loans and Mortgaged Properties" herein.
The following tables set forth certain information with respect to the
Mortgage Loans and Mortgaged Properties. The statistics in the following tables
were primarily derived from information provided to the Originators by the
respective borrowers. Some of the calculations of the statistics in the tables
were not made with adjustments which would be required under generally accepted
accounting principles ("GAAP"). For purposes of the tables, the defined terms
have the meanings described below:
(1) "Total Revenue" as used herein with respect to any Mortgaged Property or
group of Mortgaged Properties generally means, for the period stated, total
revenue generated at such Mortgaged Property or Properties. Total Revenue may be
based on historical information provided to the related Originator by the
related borrower (which may have been adjusted by the related Originator
consistent with its origination practices) and may also be based on partial
historical information provided by the related borrower (which may have been
similarly adjusted).
(2) "Total Operating Expenses" as used herein with respect to any Mortgaged
Property or group of Mortgaged Properties generally means, for the period
stated, total operating expenses at such Mortgaged Property or Properties. Total
Operating Expenses may be based on historical financial information provided to
the related Originator by the related borrower (which may have been adjusted by
the related Originator consistent with its origination practices) and may also
be based on partial historical information provided by the related borrower
(which may have been similarly adjusted).
(3) "NOI" or "Net Operating Income" as used herein with respect to any
Mortgaged Property or group of Mortgaged Properties means, for the period
stated, the excess of the Total Revenue for such Mortgaged Property or
Properties for the period referenced in item (1) above less the Total Operating
Expenses of such Mortgaged Property or Properties incurred during such period,
other than any deductions for debt service, depreciation, amortization, capital
expenditures, tenant improvements, leasing commissions or reserves therefor.
NOI and the revenues and expenses used to determine NOI for each Mortgaged
Property are derived from information furnished by the related borrowers. There
can be no assurance that the components of
S-93
<PAGE>
net operating income for any Mortgaged Property (i.e., revenues and expenses) as
determined under GAAP would be the same as those used in computing the stated
NOI for such Mortgaged Property. Moreover, NOI is not a substitute for net
income as determined in accordance with GAAP as a measure of the results of a
Mortgaged Property's operations or a substitute for cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
(4) "Underwritten Net Cash Flow" as used herein with respect to any
Mortgaged Property or group of Mortgaged Properties generally means cash flow
(as determined by the related Originator) for the indicated twelve month period
based upon the following assumptions:
a. Leases in Place: In calculating Underwritten Net Cash Flow, base
rent was generally determined by using Annualized Base Rent and percentage
rent was generally determined by using the percentage rent that was actually
collected during, and actual sales figures for, the most recent 12 month
time period.
b. Management Fees: Management fees used in the calculation of
Underwritten Net Cash Flow, which in all cases equal or exceed the
contractual base rate under the management agreements currently in effect,
are generally as follows: DDR Properties: 3% of Total Revenue; Courtyard
Properties: 5% of Total Revenue; Worldwide Plaza Property: 1% of Total
Revenue; Prentiss Properties: 3% of Total Revenue; Arden Properties; 4% of
Total Revenue; Villa Marina Property: 3% of Total Revenue; Valley View
Property: 3% of Total Revenue; and Sun Communities Properties: 5% of Total
Revenue.
c. Capital Reserves: Annual reserves assumed in calculating
Underwritten Net Cash Flow are as follows: DDR Properties: $0.10psf;
Courtyard Properties: 5% of gross revenue; Worldwide Plaza Property:
$0.25psf; Prentiss Properties: $0.16psf; Arden Properties: $0.19psf; Villa
Marina Property: $0.18psf; Valley View Property: $0.18psf; and Sun
Communities Properties: $50.00/pad.
d. Rollover Expenses: Annual expenses of tenant rollover (i.e., tenant
improvements ("TI") and leasing commissions ("LC")) assumptions used in
calculating Underwritten Net Cash Flow are generally calculated by
estimating an average lease term for a particular property based on
available historical and market data and deriving tenant improvement and
leasing commission costs based on assumptions regarding tenant renewal
probability (which are also based on available historical and market data).
e. Occupancy: In calculating Underwritten Net Cash Flow, adjustments
were made to Total Revenues or Annualized Base Rent to reflect maximum
occupancies of the lower of actual or 95% (except with respect to the
Worldwide Plaza Loan) for multi-tenant retail, industrial, office properties
and manufactured housing communities, except with respect to certain
industrial properties leased by credit tenants with long-term leases, which
were underwritten as 100% occupied.
f. Expenses: In calculating expenses, adjustments were made to
generally incorporate actual 1996 expenses and actual year to date expenses
through June 30, 1997 as well as budgeted 1997 expenses provided by
applicable borrowers.
The management fees and reserves used in calculating Underwritten Net Cash
Flow differ in many cases from the management fees and reserves provided for
under the loan documents for the Mortgage Loans. Further, actual conditions at
the Mortgaged Properties will differ, and may differ substantially, from the
assumed conditions used in calculating Underwritten Net Cash Flow. In
particular, the assumptions regarding tenant vacancies, renewal rates, tenant
improvements and leasing commissions and other conditions used in calculating
Underwritten Net Cash Flow for the retail and office properties may differ
substantially from actual conditions. Such assumptions may also differ from
those used by the Rating Agencies or by investors. Each investor should make its
own determination of the appropriate assumptions to be used in determining
Underwritten Net Cash Flow.
S-94
<PAGE>
Underwritten Net Cash Flow reflects the calculations and assumptions used by
the Depositor and may or may not reflect the amounts calculated and adjusted by
the Rating Agencies for their own analysis. Underwritten Net Cash Flow and the
Debt Service Coverage Ratios derived therefrom are not a substitute for cash
flow as determined in accordance with GAAP as a measure of the results of the
Mortgaged Property's operations or a substitute for cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial properties. Each investor should make its own assessment of the level
of reletting costs and capital expenditures of the Mortgaged Properties, and the
consequent effect of such costs and expenditures on the actual net operating
income and debt service coverage ratios of the Mortgage Loans.
No representation is made as to the future net cash flow of the properties,
nor is Underwritten Net Cash Flow set forth herein intended to represent such
future net cash flow.
(5) "Value" means, for each of the Mortgaged Properties, the appraised value
of such Mortgaged Property as determined by the appraisal or based upon the
market survey thereof reviewed in connection with the origination of the related
Mortgage Loan and LB Holdings' internal valuation. "Total Value" is the
aggregate Value for all of the Mortgaged Properties.
(6) "Allocated Loan Amount" means, for each Mortgaged Property, the portion
of the principal amount of the related Mortgage Loan allocated to such Mortgaged
Property for certain purposes (including, without limitation, determining the
release prices of properties, if the Mortgage Loan permits such releases) under
such Mortgage Loan. The Allocated Loan Amount for each Mortgaged Property
securing a Mortgage Loan was determined generally based on the ratio of the
Underwritten Net Cash Flow or net operating income (calculated as provided in
the related Mortgage Loan) or appraised value, or some combination thereof, of
such Mortgaged Property to the aggregate Underwritten Net Cash Flow, net
operating income or appraised value, or some combination thereof, of all the
Mortgaged Properties securing such Mortgage Loan. The Allocated Loan Amount for
each Mortgaged Property may be adjusted upon the payment of principal of the
related Mortgage Loan, whether upon amortization, prepayment, defeasance or
otherwise. "Cut-Off Date Allocated Loan Amount" means for each Mortgaged
Property the Allocated Loan Amount of such Mortgaged Property as of the Cut-Off
Date.
(7) "Annual Debt Service" means on any Mortgage Loan, the annual debt
service (interest, including interest allocable to payment of the Servicing Fee
and, if applicable, principal) on such Mortgage Loan for the twelve month period
commencing on the Cut-Off Date (using an assumed Worldwide Plaza LIBOR Rate of
6.200%).
(8) "Anticipated Repayment Date" for each Mortgage Loan (other than the
DDR/DRA Loan) is the date on which (i) such Mortgage Loan commences to accrue
interest at the Adjusted Interest Rate for such Mortgage Loan, (ii) all Excess
Cash Flow for such Mortgage Loan is required to be applied to payment of
principal of such Mortgage Loan and (iii) such Mortgage Loan may be voluntarily
repaid by the borrower without payment of a yield maintenance charge or
prepayment premium. There can be no assurance that any Mortgage Loan will be
repaid on its Anticipated Repayment Date. With respect to the DDR/DRA Loan, for
the purpose of the statistics presented in this section, the DDR/DRA Maturity
Date was used as the Anticipated Repayment Date.
(9) "DSCR" or "Debt Service Coverage Ratio" means (i) the aggregate
Underwritten Net Cash Flow for all of the related Mortgaged Properties divided
by (ii) Annual Debt Service.
The DSCRs set forth herein for the Mortgage Loans and Mortgaged Properties
vary (and may vary substantially) from the debt service coverage ratios for such
Mortgage Loans and Mortgaged Properties as calculated pursuant to the definition
of such ratio as set forth in the related loan documents. The debt service
calculation for each Mortgage Loan as set forth in its related loan documents is
set forth in the
S-95
<PAGE>
description of such Mortgage Loan herein under the heading "Description of the
Mortgage Loans and Mortgaged Properties" herein.
(10) "Loan-to-Value Ratio" or "LTV" or "Cut-Off Date LTV" means with respect
to any Mortgage Loan, the principal balance of such Mortgage Loan as of the
Cut-Off Date divided by the aggregate Value of the Mortgaged Properties securing
such Mortgage Loan.
(11) "Anticipated Repayment Date Balance," for each of the Mortgage Loans,
is equal to the outstanding principal amount of such Mortgage Loan as of its
Anticipated Repayment Date (or in the case of the DDR/DRA Loan, its maturity
date), taking into account scheduled amortization, and in the case of the
Worldwide Plaza Loan, taking into account application of the Worldwide Plaza
Additional Collateral to the reduction of the principal amount of the Worldwide
Plaza Loan, assuming no prepayments or defaults.
(12) "Anticipated Repayment Date LTV" or "ARD LTV" means with respect to any
Mortgage Loan, the Anticipated Repayment Date Balance for such Mortgage Loan
divided by the aggregate Value of the Mortgaged Properties securing such
Mortgage Loan. Such calculation thus assumes that the appraised value or LB
Holdings' internally prepared valuation of the Mortgaged Property or Mortgaged
Properties securing a Mortgage Loan on the Anticipated Repayment Date (or in the
case of the DDR/DRA Loan, its maturity date) is the same as the Value or Values
thereof as of the Cut-Off Date. There can be no assurance that the value of any
particular Mortgaged Property will not have declined or increased from its Value
as of the Cut-Off Date.
(13) "SF/Units" means, in the case of office, industrial or retail
properties, total square footage or GLA (as provided by the borrower), and in
the case of manufactured housing communities, the number of developed
manufactured housing sites.
(14) "GLA" means the square footage of the gross leasable area.
(15) "Occupancy" or "OCC" means the percentage of SF/Units of the property
that are leased as of the date indicated in the column with the heading "As of
Date." The "occupancy rate" disclosed with respect to the Mortgaged Properties
that are retail properties include as "occupied" (i) space that is leased but
not occupied and (ii) anchor space that is occupied but not owned by the related
borrower.
(16) "Annualized Base Rent" is calculated by multiplying by twelve the
contractual monthly base rent, as of the point in time for which "Occupancy" was
calculated for the related property, as reflected in the rent rolls provided by
the related borrower.
(17) "Average Base Rent Per Square Foot" is calculated by dividing
Annualized Base Rent by total GLA as of the same date as of which the Annualized
Base Rent was calculated.
(18) "First P&I Date" means the first Due Date on which the borrower is
required to pay both principal and interest.
(19) "Original Principal Balance" means the principal balance of the
Mortgage Loan at origination.
(20) "Anticipated Term" means the term of the Mortgage Loan in months from
the date of the first full monthly payment thereon to the related Anticipated
Repayment Date (or in the case of the DDR/ DRA Loan, its maturity date).
(21) "Sales Per SF" means sales, based on the most recent sales data
provided by the applicable borrower to the related Originator, for the previous
applicable 12 month period, or if 12 months of sales data was not available,
such sales data as was available, annualized.
(22) The term "psf" means per square foot.
(23) "Occupancy Costs" means the sum of minimum rent, percentage rent, and
tenant reimbursements divided by sales.
S-96
<PAGE>
In addition to the tables set forth below, investors should review the
accompanying notes in the prior section when reading the following information.
A table of Mortgaged Property characteristics is attached as Annex A to this
Prospectus Supplement and is also contained on the diskette attached to the back
cover of this Prospectus Supplement.
MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<CAPTION>
REMAINING
ORIGINAL TERM TO
AMORTI- ANTICIPATED ANTICIPATED ANTICIPATED
NO. OF MORTGAGE ZATION REPAYMENT FIRST P&I REPAYMENT STATED
LOAN PROPERTIES RATE (MOS.) DATE (MOS.) PAYMENT DATE DATE MATURITY
- ------------------- --------- -------- ------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DDR/DRA Loan....... 10 7.378% N/A 56 Jul-10-1997 Jun-10-2002 Jun-10-2002
Courtyard Loan..... 50 7.865 240 174 May-10-1997 Apr-10-2012 Apr-10-2017
Worldwide Plaza
Loan............. 1 7.607 240 81 Aug-10-1997 Jul-10-2004 Jul-10-2017
Prentiss Loan...... 12 7.579 N/A 113 Mar-10-1997 Feb-26-2007 Feb-26-2027
Arden Loan......... 17 7.520 N/A 80 Aug-10-1997 Jun-11-2004 Jun-10-2029
Villa Marina
Loan............. 1 7.225 N/A 108 Oct-10-1997 Oct-10-2006 Oct-10-2031
Valley View Loan... 1 7.890 N/A 108 Jun-10-1997 Oct-10-2006 Oct-10-2031
Sun Communities
Loan............. 7 7.010 360 119 Oct-10-1997 Sep-10-2007 Sep-10-2027
--- -------- ---
Total/Weighted
Average........ 99 7.575% 103
--- -------- ---
--- -------- ---
<CAPTION>
ORIGINAL CURRENT
PRINCIPAL PRINCIPAL
LOAN BALANCE BALANCE
- ------------------- -------------- --------------
<S> <C> <C>
DDR/DRA Loan....... $ 322,500,000 $ 322,500,000
Courtyard Loan..... 325,000,000 321,577,850
Worldwide Plaza
Loan............. 275,000,000 273,576,031
Prentiss Loan...... 180,100,000 180,100,000
Arden Loan......... 175,000,000 175,000,000
Villa Marina
Loan............. 58,000,000 58,000,000
Valley View Loan... 51,000,000 51,000,000
Sun Communities
Loan............. 45,000,000 44,963,187
-------------- --------------
Total/Weighted
Average........ $1,431,600,000 $1,426,717,068
-------------- --------------
-------------- --------------
</TABLE>
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PRINCIPAL
% OF BALANCE AT
CUT-OFF DATE CUT-OFF DATE ANTICIPATED
PRINCIPAL PRINCIPAL REPAYMENT UNDERWRITTEN ANNUAL UNDERWRITTEN
LOAN BALANCE BALANCE DATE VALUE DEBT SERVICE CASH FLOW
- ------------------ -------------- ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DDR/DRA Loan...... $322,500,000 23% $322,500,000 $529,500,000 $24,124,523 $47,518,089
Courtyard Loan.... 321,577,850 23 134,955,706 574,900,000 32,641,879 67,771,675
Worldwide Plaza
Loan............ 273,576,031 19 209,107,026 416,000,000 26,867,569 38,995,953
Prentiss Loan..... 180,100,000 13 180,100,000 300,100,000 13,839,359 26,665,385
Arden Loan........ 175,000,000 12 175,000,000 342,000,000 13,342,778 27,009,467
Villa Marina
Loan............ 58,000,000 4 58,000,000 101,100,000 4,248,701 8,270,376
Valley View
Loan............ 51,000,000 4 51,000,000 95,700,000 4,079,788 7,754,132
Sun Communities
Loan............ 44,963,187 3 38,698,278 77,200,000 3,639,831 6,983,632
-------------- --- -------------- -------------- ------------ ------------
Total/Weighted
Average....... $1,426,717,068 100% $1,169,361,010 $2,436,500,000 $122,784,427 $230,968,709
-------------- --- -------------- -------------- ------------ ------------
-------------- --- -------------- -------------- ------------ ------------
<CAPTION>
ANTICIPATED
CUT-OFF REPAYMENT
LOAN DSCR DATE LTV DATE LTV
- ------------------ ----- -------- -----------
<S> <C> <C> <C>
DDR/DRA Loan...... 1.97 X 61.2% 61.2%
Courtyard Loan.... 2.08 56.5 23.7
Worldwide Plaza
Loan............ 1.45 65.8 50.3
Prentiss Loan..... 1.93 60.9 60.9
Arden Loan........ 2.02 51.4 51.4
Villa Marina
Loan............ 1.95 57.4 57.4
Valley View
Loan............ 1.90 53.3 53.3
Sun Communities
Loan............ 1.92 60.3 51.9
----- -------- -----------
Total/Weighted
Average....... 1.89 X 59.3% 48.7%
----- -------- -----------
----- -------- -----------
</TABLE>
S-97
<PAGE>
MORTGAGED PROPERTIES BY LOCATION
<TABLE>
<CAPTION>
CUT-OFF % OF % OF
DATE CUT-OFF DATE TOTAL
NO. OF ALLOCATED ALLOCATED UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN
STATE PROPERTIES LOAN AMOUNT LOAN AMOUNT CASH FLOW CASH FLOW VALUE
- ----------------- ---------- -------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
California....... 26 $339,546,201 23.8% $53,768,333 23.3% $624,100,000
New York......... 2 282,438,591 19.8 40,846,760 17.7 432,400,000
Texas............ 10 119,440,366 8.4 21,090,876 9.1 216,700,000
Georgia.......... 11 102,871,216 7.2 17,912,421 7.8 168,000,000
Virginia......... 9 89,034,138 6.2 16,365,073 7.1 157,500,000
Illinois......... 5 82,989,272 5.8 13,301,950 5.8 140,300,000
Massachusetts.... 1 80,250,000 5.6 10,346,866 4.5 131,600,000
Michigan......... 9 58,966,009 4.1 10,755,243 4.7 107,900,000
Florida.......... 5 52,767,360 3.7 8,204,967 3.6 83,500,000
Missouri......... 2 40,450,000 2.8 6,005,801 2.6 67,200,000
North Carolina... 3 39,645,383 2.8 6,824,683 3.0 64,700,000
Wisconsin........ 1 28,300,000 2.0 3,798,023 1.6 42,600,000
Colorado......... 1 22,000,000 1.5 3,386,294 1.5 34,500,000
Ohio............. 3 21,776,137 1.5 4,488,045 1.9 40,500,000
Maryland......... 3 14,611,198 1.0 3,497,135 1.5 28,900,000
Tennessee........ 2 11,687,180 0.8 2,221,322 1.0 20,300,000
Arizona.......... 1 8,254,543 0.6 1,762,015 0.8 16,000,000
Pennsylvania..... 1 7,575,952 0.5 1,747,350 0.8 14,300,000
Alabama.......... 1 6,782,755 0.5 1,330,404 0.6 12,300,000
Connecticut...... 1 6,539,601 0.5 1,330,336 0.6 11,700,000
Kansas........... 1 5,995,092 0.4 1,122,653 0.5 12,100,000
Indiana.......... 1 4,796,073 0.3 862,157 0.4 9,400,000
--- -------------- ------------- ------------ ------------ --------------
Total/Weighted
Average...... 99 $1,426,717,068 100.0% $230,968,709 100.0% $2,436,500,000
--- -------------- ------------- ------------ ------------ --------------
--- -------------- ------------- ------------ ------------ --------------
<CAPTION>
WEIGHTED
AVERAGE
CUT-OFF WEIGHTED
% OF DATE AVERAGE
STATE TOTAL VALUE LTV DSCR
- ----------------- ----------- ------- --------
<S> <C> <C> <C>
California....... 25.6% 54.9 % 2.01X
New York......... 17.7 65.4 1.47
Texas............ 8.9 55.4 1.99
Georgia.......... 6.9 61.8 1.97
Virginia......... 6.5 57.6 2.17
Illinois......... 5.8 60.0 2.07
Massachusetts.... 5.4 61.0 1.72
Michigan......... 4.4 55.4 2.05
Florida.......... 3.4 64.1 1.81
Missouri......... 2.8 60.6 1.96
North Carolina... 2.7 61.5 2.05
Wisconsin........ 1.7 66.4 1.75
Colorado......... 1.4 63.8 2.06
Ohio............. 1.7 53.9 2.03
Maryland......... 1.2 50.9 2.36
Tennessee........ 0.8 57.6 1.87
Arizona.......... 0.7 51.6 2.10
Pennsylvania..... 0.6 53.0 2.27
Alabama.......... 0.5 55.1 1.93
Connecticut...... 0.5 55.9 2.00
Kansas........... 0.5 49.5 2.31
Indiana.......... 0.4 51.0 2.22
----------- ------- --------
Total/Weighted
Average...... 100.0% 59.3 % 1.89X
----------- ------- --------
----------- ------- --------
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED
% OF AVERAGE WEIGHTED WEIGHTED
NO. OF CUT-OFF DATE CUT-OFF DATE MORTGAGE AVERAGE AVERAGE
LOAN-TO-VALUE RATIO MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE RATE DSCR LTV
- --------------------- --------------- ----------------- ----------------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
50%-55%.............. 2 $226,000,000 15.8% 7.603% 2.00X 51.8%
55%-60%.............. 2 379,577,850 26.6 7.767 2.06 56.7
60%-65%.............. 3 547,563,187 38.4 7.414 1.95 61.0
65%-70%.............. 1 273,576,031 19.2 7.607 1.45 65.8
--- ----------------- ------- ------ -------- --------
Total/Weighted
Average.......... 8 $ 1,426,717,068 100.0% 7.575% 1.89X 59.3%
--- ----------------- ------- ------ -------- --------
--- ----------------- ------- ------ -------- --------
</TABLE>
S-98
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
PRINCIPAL % OF
BALANCE AT BALANCE AT WEIGHTED
NO. OF ANTICIPATED ANTICIPATED AVERAGE WEIGHTED WEIGHTED
ANTICIPATED REPAYMENT DATE MORTGAGE REPAYMENT REPAYMENT MORTGAGE AVERAGE AVERAGE
LOAN-TO-VALUE RATIO LOANS DATE DATE RATE DSCR LTV
- --------------------------------------- --------- -------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
20%-30%................................ 1 $135,869,713 11.4% 7.865% 2.08X 56.5%
50%-60%................................ 5 548,251,157 46.1 7.524 1.74 59.3
60%+................................... 2 505,255,589 42.5 7.450 1.95 61.1
--- -------------- ------ -------- -------- --------
Total/Weighted Average............. 8 $1,189,376,459 100.0% 7.575% 1.89X 59.3%
--- -------------- ------ -------- -------- --------
--- -------------- ------ -------- -------- --------
</TABLE>
REMAINING TERM TO ANTICIPATED REPAYMENT DATE AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT- OFF WA
REMAINING TERM TO NO. OF PRINCIPAL PRINCIPAL MORTGAGE CUT-OFF
ANTICIPATED REPAYMENT LOANS BALANCE BALANCE RATE DATE LTV DSCR
- ---------------------------------------------- ----------- -------------- ------------ -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
56............................................ 1 $322,500,000 22.6% 7.378% 61.2% 1.97X
80............................................ 1 175,000,000 12.3 7.520 51.4 2.02
81............................................ 1 273,576,031 19.2 7.607 65.8 1.45
108........................................... 2 109,000,000 7.6 7.536 55.5 1.93
113........................................... 1 180,100,000 12.6 7.579 60.9 1.93
119........................................... 1 44,963,187 3.2 7.010 60.3 1.92
174........................................... 1 321,577,850 22.5 7.865 56.5 2.08
--- -------------- ----- -------- --- ----
Total/Weighted Average:................... 8 $1,426,717,068 100.0% 7.575% 59.3% 1.89X
--- -------------- ----- -------- --- ----
--- -------------- ----- -------- --- ----
</TABLE>
REMAINING PREPAYMENT LOCKOUT PERIODS AS OF THE CUT-OFF DATE
(IN MONTHS)
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF WA
REMAINING LOCKOUT NO. OF PRINCIPAL PRINCIPAL MORTGAGE CUT-OFF
MONTHS LOANS BALANCE BALANCE RATE DATE LTV DSCR
- --------------------------------------------- ----------- -------------- ------------ -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
50........................................... 1 $322,500,000 22.6% 7.378% 61.2% 1.97X
77........................................... 1 175,000,000 12.3 7.520 51.4 2.02
81........................................... 1 273,576,031 19.2 7.607 65.8 1.45
108.......................................... 2 109,000,000 7.6 7.536 55.5 1.93
109.......................................... 1 180,100,000 12.6 7.579 60.9 1.93
113.......................................... 1 44,963,187 3.2 7.010 60.3 1.92
168.......................................... 1 321,577,850 22.5 7.865 56.5 2.08
--- -------------- ----- -------- --- ----
Total/Weighted Average:.................. 8 $1,426,717,068 100.0% 7.575% 59.3% 1.89X
--- -------------- ----- -------- --- ----
--- -------------- ----- -------- --- ----
</TABLE>
S-99
<PAGE>
MORTGAGED PROPERTIES BY PRIMARY PROPERTY TYPE
<TABLE>
<CAPTION>
% OF
CUT-OFF DATE CUT-OFF DATE
NO. OF % OF ALLOCATED ALLOCATED UNDERWRITTEN
PROPERTY TYPE PROPERTIES PROPERTIES LOAN AMOUNT LOAN AMOUNT SF/UNITS VALUE
- ------------------------------ --------- ------------- -------------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Power Center.................. 10 10.1% $322,500,000 22.6% 4,217,942 $529,500,000
Hotel......................... 50 50.5 321,577,850 22.5 7,223 574,900,000
CBD Office.................... 1 1.0 273,576,031 19.2 1,816,525 416,000,000
Suburban Office............... 25 25.3 271,100,000 19.0 4,146,842 512,400,000
Industrial.................... 4 4.0 84,000,000 5.9 4,350,148 129,700,000
Urban Marketplace............. 1 1.0 58,000,000 4.1 448,579 101,100,000
Regional Mall................. 1 1.0 51,000,000 3.6 465,918 95,700,000
Manufactured Housing.......... 7 7.1 44,963,187 3.2 3,375 77,200,000
--- ----- -------------- ----- ---------- --------------
Total/Weighted Average.... 99 100.0% $1,426,717,068 100.0% 15,456,552 $2,436,500,000
--- ----- -------------- ----- ---------- --------------
--- ----- -------------- ----- ---------- --------------
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE
ALLOCATED % OF
LOAN AMOUNT MOST RECENT MOST RECENT UNDERWRITTEN UNDERWRITTEN
PROPERTY TYPE PER SF/UNIT PERIOD REVENUE PERIOD NOI CASH FLOW CASH FLOW DSCR
- ----------------------------- ------------ -------------- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Power Center................. $81 $65,413,552 $48,261,992 $47,518,089 20.6 % 1.97 X
Hotel........................ 46,652 187,811,626 67,771,675 67,771,675 29.3 2.08
CBD Office................... 151 66,412,443 39,959,953 38,995,953 16.9 1.45
Suburban Office.............. 69 80,867,108 48,781,772 42,344,314 18.3 2.04
Industrial................... 20 17,310,649 12,805,734 11,330,538 4.9 1.76
Urban Marketplace............ 129 11,852,249 8,596,143 8,270,376 3.6 1.95
Regional Mall................ 109 14,251,765 8,134,732 7,754,132 3.4 1.90
Manufactured Housing......... 15,339 10,543,885 7,152,430 6,983,632 3.0 1.92
-------------- ------------ ------------- ----- ---
Total/Weighted Average... $454,463,277 $241,464,430 $230,968,709 100.0% 1.89X
-------------- ------------ ------------- ----- ---
-------------- ------------ ------------- ----- ---
</TABLE>
COURTYARD PROPERTIES BY STATE
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
NO. OF PRINCIPAL PRINCIPAL UNDERWRITTEN
STATE PROPERTIES BALANCE BALANCE CASH FLOW
- ---------------------- ---------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Georgia............... 9 $56,121,216 17.5% $10,554,638
Texas................. 7 48,440,366 15.1 10,456,216
California............ 6 37,746,201 11.7 8,880,561
Virginia.............. 5 31,084,138 9.7 6,678,970
Michigan.............. 4 25,978,444 8.1 5,470,317
Ohio.................. 3 21,776,137 6.8 4,488,045
Florida............... 3 17,032,903 5.3 3,419,116
Maryland.............. 3 14,611,198 4.5 3,497,135
North Carolina........ 2 12,395,383 3.9 2,786,669
Tennessee............. 2 11,687,180 3.6 2,221,322
New York.............. 1 8,862,560 2.8 1,850,807
Arizona............... 1 8,254,543 2.6 1,762,015
Pennsylvania.......... 1 7,575,952 2.4 1,747,350
Alabama............... 1 6,782,755 2.1 1,330,404
Illinois.............. 1 6,689,272 2.1 1,297,774
Connecticut........... 1 6,539,601 2.0 1,330,336
--
------------ ----- ------------
Total/Weighted
Average............. 50 $321,577,850 100.0% $67,771,675
--
--
------------ ----- ------------
------------ ----- ------------
<CAPTION>
% OF TOTAL
UNDERWRITTEN UNDERWRITTEN % OF
STATE CASH FLOW VALUE TOTAL VALUE
- ---------------------- ------------ ------------ -----------
<S> <C> <C> <C>
Georgia............... 15.6% $87,500,000 15.2%
Texas................. 15.4 87,800,000 15.3
California............ 13.1 68,400,000 11.9
Virginia.............. 9.9 57,100,000 9.9
Michigan.............. 8.1 50,400,000 8.8
Ohio.................. 6.6 40,500,000 7.0
Florida............... 5.0 29,800,000 5.2
Maryland.............. 5.2 28,900,000 5.0
North Carolina........ 4.1 21,200,000 3.7
Tennessee............. 3.3 20,300,000 3.5
New York.............. 2.7 16,400,000 2.9
Arizona............... 2.6 16,000,000 2.8
Pennsylvania.......... 2.6 14,300,000 2.5
Alabama............... 2.0 12,300,000 2.1
Illinois.............. 1.9 12,300,000 2.1
Connecticut........... 2.0 11,700,000 2.0
----- ------------ -----
Total/Weighted
Average............. 100.0% $574,900,000 100.0%
----- ------------ -----
----- ------------ -----
</TABLE>
S-100
<PAGE>
The following table sets forth scheduled lease expirations of the DDR/DRA
Properties for the twelve months ending December 31, 1997 and for each calendar
year thereafter through 2002. The table assumes that none of the tenants
exercise early termination or renewal options.
ANNUAL RETAIL LEASE EXPIRATION--DDR/DRA PROPERTIES
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NO. OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDED DEC. 31 OF LEASES SQUARE FEET OCCUPIED SF BASE RENT BASE RENT PER SF
- ---------------------------------------- ------------- ----------- --------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997.................................... 6 4,050 0.1% $ 86,065 0.2% $ 21.25
1998.................................... 13 54,992 1.3 1,072,849 2.1 19.51
1999.................................... 32 80,807 1.9 1,072,849 2.1 19.51
2000.................................... 31 104,450 2.5 1,960,799 3.9 18.77
2001.................................... 29 78,760 1.9 1,371,261 2.7 17.41
2002.................................... 11 86,655 2.1 1,284,028 2.6 14.82
--- ----------- ----- ---------- ----- ------
Total/Weighted Average.................. 122 409,714 9.8% $7,480,886 14.9% $ 18.26
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
SHOPPING CENTERS BY STATE--DDR/DRA PROPERTIES
<TABLE>
<CAPTION>
% OF
CUT-OFF CUT-OFF
DATE DATE
ALLOCATED ALLOCATED % OF
NO. OF LOAN LOAN SUM OF NET TOTAL NET % OF
STATE PROPERTIES AMOUNT AMOUNT CASH FLOW CASH FLOW APPRAISED VALUE TOTAL VALUE
- ----------------------- --------------- ----------- ----------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
IL..................... 1 $45,500,000 14.1% $6,874,588 14.5% $ 72,300,000 13.7%
CA..................... 1 37,500,000 11.6 5,642,373 11.9 65,000,000 12.3
GA..................... 2 46,750,000 14.5 7,357,783 15.5 80,500,000 15.2
VA..................... 1 25,250,000 7.8 3,939,632 8.3 36,100,000 6.8
FL..................... 1 16,750,000 5.2 2,577,050 5.4 28,000,000 5.3
NC..................... 1 27,250,000 8.4 4,038,014 8.5 43,500,000 8.2
MO..................... 1 21,250,000 6.6 3,355,489 7.1 38,000,000 7.2
CO..................... 1 22,000,000 6.8 3,386,294 7.1 34,500,000 6.5
MA..................... 1 80,250,000 24.9 10,346,866 21.8 131,600,000 24.9
--
----------- ----- ----------- ----- --------------- -----
Total/Weighted
Average.............. 10 $322,500,000 100.0% 4$7,518,089 100.0% $ 529,500,000 100.0%
--
--
----------- ----- ----------- ----- --------------- -----
----------- ----- ----------- ----- --------------- -----
</TABLE>
S-101
<PAGE>
The following table sets forth certain information regarding the ten largest
tenants (based on Annualized Base Rent) of the retail portion of the DDR/DRA
Properties and information regarding the remaining GLA of the retail portion of
such properties.
RETAIL TENANTS BASED ON ANNUALIZED BASE RENT--DDR/DRA PROPERTIES
<TABLE>
<CAPTION>
% OF % OF ANNUALIZED
NO. OF SUM OF TOTAL OCCUPIED ANNUALIZED ANNUALIZED BASE RENT
TENANT LEASES SQUARE FT SF BASE RENT BASE RENT PER SF
- ---------------------------------------- ----------- ----------- ----------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
TJMaxx/Marshalls........................ 8 289,581 6.9% $3,351,467 6.7% $ 11.57
Kmart/Builders Square................... 3 326,076 7.8 2,788,380 5.6 8.55
Wal-Mart/Sam's Warehouse................ 2 263,986 6.3 2,301,375 4.6 8.72
Barnes & Noble.......................... 5 119,057 2.9 2,293,640 4.6 19.27
OfficeMax............................... 5 123,848 3.0 1,921,379 3.8 15.51
General Cinema.......................... 1 85,000 2.0 1,912,500 3.8 22.50
Sports Authority........................ 2 86,025 2.1 1,402,530 2.8 16.30
Home Place Stores....................... 2 107,448 2.6 1,390,568 2.8 12.94
United Artists.......................... 2 82,596 2.0 1,353,765 2.7 16.39
Circuit City............................ 3 85,266 2.0 1,089,775 2.2 12.78
--- ----------- ----- ---------- ----- ------
Total/Weighted Average
(10 Largest).......................... 33 1,568,883 37.6 19,805,379 39.4 12.62
Remaining GLA........................... 246 2,598,968 62.4 30,416,266 60.6 11.70
--- ----------- ----- ---------- ----- ------
Total/Weighted Average.................. 279 4,167,851 100.0% $50,221,645 100.0% $ 12.05
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
The following table sets forth scheduled lease expirations at the Worldwide
Plaza Property for the twelve months ending December 31, 1997 and for each
calendar year thereafter through 2013. The table assumes that none of the
tenants exercise early termination or renewal options.
ANNUAL LEASE EXPIRATION--WORLDWIDE PLAZA PROPERTY
<TABLE>
<CAPTION>
SUM OF % OF % OF TOTAL
NO. OF OCCUPIED TOTAL TOTAL TOTAL RENT
YEAR ENDING DEC. 31 LEASES SQUARE FT OCCUPIED SF RENT RENT PER SF
- ----------------------------------- ----------------- ----------- --------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997............................... 0 -- 0.0% $ 0 0.0% --
1998............................... 2 2,010 0.1 52,800 0.1 $ 26.27
1999............................... 2 6,016 0.3 669,300 1.0 111.26
2000............................... 0 -- 0.0 0 0.0 --
2001............................... 0 -- 0.0 0 0.0 --
2002............................... 0 -- 0.0 0 0.0 --
2003............................... 3 65,150 3.7 2,329,669 3.5 35.76
2004............................... 0 -- 0.0 0 0.0 --
2005............................... 1 1,387 0.1 41,774 0.1 30.12
2006............................... 0 -- 0.0 0 0.0 --
2007............................... 3 163,827 9.3 1,690,189 2.6 10.32
2008............................... 1 6,489 0.4 210,991 0.3 32.52
2009............................... 5 1,053,238 59.5 47,497,115 71.7 45.10
2010............................... 1 104,349 5.9 2,952,097 4.5 28.29
2011............................... 4 311,516 17.6 8,934,270 13.5 28.68
2012............................... 0 -- 0.0 0 0.0 --
2013 and thereafter................ 1 56,934 3.2 1,890,455 2.9 33.20
--
----------- ----- ---------- ----- -----------
Total(1)........................... 23 1,770,916 100.0% $66,268,720 100.0%
--
--
----------- ----- ---------- -----
----------- ----- ---------- -----
</TABLE>
(1) Includes the sum of (i) the first twelve month's base rent that each tenant
must pay pursuant to its leases subsequent to June 30, 1997 (full credit is
given to any rent steps occurring during the twelve months following June
30, 1997 and free rent periods currently in effect as of June 30, 1997 have
been ignored), and (ii) operating expense and real estate tax recoveries
paid by each tenant under its lease for the twelve months ended December 31,
1996 (except that such income has not been included for certain tenants
whose leases were renegotiated in 1996 such that they will not pay expense
recoveries in 1997).
S-102
<PAGE>
The following table sets forth scheduled lease expirations at the Prentiss
Properties for the twelve months ending December 31, 1997 and for each calendar
year thereafter through 2012. The table assumes that none of the tenants
exercise early termination or renewal options.
ANNUAL LEASE EXPIRATION--PRENTISS PROPERTIES
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NO. OF OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDING DEC. 31 LEASES(1) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- ----------------------------------- ----------------- ----------- --------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MTM and 1997....................... 18 235,776 4.2% $1,174,754 3.0% $ 4.98
1998............................... 40 1,169,770 20.8 4,419,061 11.4 3.78
1999............................... 54 843,722 15.0 6,103,914 15.7 7.23
2000............................... 43 1,153,012 20.5 5,629,905 14.5 4.88
2001............................... 46 674,662 12.0 5,947,183 15.3 8.82
2002............................... 25 453,000 8.0 3,833,699 9.9 8.46
2003............................... 4 188,718 3.4 2,551,068 6.6 13.52
2004............................... 16 429,252 7.6 3,836,327 9.9 8.94
2005............................... 5 77,035 1.4 717,003 1.8 9.31
2006............................... 7 53,839 1.0 726,162 1.9 13.49
2007............................... 15 253,209 4.5 3,551,616 9.2 14.03
2008............................... 1 100,250 1.8 300,750 0.8 3.00
2012............................... 1 0 0.0 10,800 0.0 0.00
--- ----------- ----- ---------- ----- ------
Total/Weighted Average......... 275 5,632,245 100.0% $38,802,240 100.0% $ 6.89
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
(1) Number of Leases refers to the number of occupied tenant spaces.
The following table sets forth certain information regarding the fifteen
largest tenants (based on Annualized Base Rent) of the Prentiss Properties and
information regarding the remaining occupied GLA of such properties.
TENANTS BASED ON ANNUALIZED BASE RENT--PRENTISS PROPERTIES
<TABLE>
<CAPTION>
SUM OF % OF ANNUALIZED
NUMBER OF OCCUPIED % OF TOTAL ANNUALIZED ANNUALIZED BASE RENT
TENANT LEASES(1) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- ------------------------------- --------------------- ----------- --------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nippon Express USA............. 5 499,019 8.9% $1,914,000 4.9% $ 3.84
C & H Distributors............. 1 330,000 5.9 858,000 2.2 2.60
Dunlop Tire Corp............... 1 229,824 4.1 525,336 1.4 2.29
Hoechst Celanese............... 15 205,828 3.7 3,442,507 8.9 16.73
Midland Brake.................. 1 200,000 3.6 550,000 1.4 2.75
United States Postal Service... 3 181,374 3.2 538,882 1.4 2.97
Sprint Communication........... 6 125,966 2.2 1,259,660 3.2 10.00
Pepsico Food Systems........... 1 120,000 2.1 354,000 0.9 2.95
Bradley Corp................... 1 119,160 2.1 327,690 0.8 2.75
Lanter Company................. 1 112,520 2.0 281,300 0.7 2.50
Distribution Specialists....... 1 112,000 2.0 330,400 0.9 2.95
Michelin Tire.................. 1 110,000 2.0 385,000 1.0 3.50
Container Packaging............ 1 101,223 1.8 266,534 0.7 2.63
Ambrosia Chocolate............. 1 100,800 1.8 326,984 0.8 3.24
Northwestern Mutual Life Co.... 1 100,250 1.8 300,750 0.8 3.00
--- ----------- ----- ---------- ----- ------
Totals/Weighted Average (15
largest)................... 40 2,647,964 47.0 11,661,043 30.1 4.40
Remaining Occupied GLA....... 235 2,984,281 53.0 27,141,197 69.9 9.09
Totals/Weighted Averages..... 275 5,632,245 100.0% $38,802,240 100.0% $ 6.89
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
(1) Number of Leases refers to the number of occupied tenant spaces.
S-103
<PAGE>
The following table sets forth scheduled lease expirations at the Arden
Properties for the twelve months ending December 31, 1997 and for each calendar
year thereafter through 2013. The table assumes that none of the tenants
exercise early termination or renewal options.
ANNUAL LEASE EXPIRATION--ARDEN PROPERTIES
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NO. OF OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDING DEC. 31 LEASES(2) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- ----------------------------------- ----------------- ----------- --------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MTM(1)............................. 73 124,663 5.1% $2,390,753 5.0% $ 19.18
1998............................... 85 422,600 17.3 8,827,915 18.5 20.89
1999............................... 69 429,516 17.6 8,531,877 17.9 19.86
2000............................... 57 254,091 10.4 4,642,678 9.7 18.27
2001............................... 49 296,911 12.1 5,680,388 11.9 19.13
2002............................... 30 485,768 19.9 9,032,738 18.9 18.59
2003............................... 7 79,621 3.3 1,609,237 3.4 20.21
2004............................... 9 100,547 4.1 2,020,416 4.2 20.09
2005............................... 13 117,486 4.8 1,978,625 4.1 16.84
2006............................... 6 98,773 4.0 2,088,487 4.4 21.14
2007............................... 4 19,242 0.8 407,923 0.9 21.20
2008............................... 1 6,730 0.3 117,000 0.2 17.38
2010............................... 1 7,404 0.3 203,329 0.4 27.46
2013............................... 1 1,426 0.1 150,000 0.3 105.19
--- ----------- ----- ---------- ----- ------
Total/Weighted Average......... 405 2,444,778 100.0% $47,681,366 100.0% $ 19.50
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
- ------------------------------
(1) MTM indicates total space occupied as of the occupancy date on a month to
month basis, including under expired leases not yet renewed.
(2) Number of Leases refers to the number of occupied tenant spaces.
The following table sets forth certain information regarding the fifteen
largest tenants (based on Annualized Base Rent) of the Arden Properties and
information regarding the remaining occupied GLA of such properties.
TENANTS BASED ON ANNUALIZED BASE RENT--ARDEN PROPERTIES
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NUMBER OF OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
TENANT LEASES(1) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- -------------------------------- --------------------- ----------- --------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
State Compensation Ins.......... 7 113,513 4.6% $2,633,859 5.5% $ 23.20
GTE California Inc.............. 3 113,124 4.6 1,830,948 3.8 16.19
Pepperdine University........... 6 89,752 3.7 2,075,572 4.4 23.13
So. Pacific Transportation...... 1 83,017 3.4 1,942,598 4.1 23.40
RDA/Logicon..................... 1 74,174 3.0 1,575,456 3.3 21.24
Intracorp....................... 1 54,179 2.2 691,039 1.4 12.75
Hewlett Packard................. 1 53,700 2.2 579,960 1.2 10.80
Candle Corporation.............. 1 52,130 2.1 625,560 1.3 12.00
Grey Advertising................ 2 51,148 2.1 993,013 2.1 19.41
DIC Entertainment, L.P.......... 1 50,472 2.1 992,794 2.1 19.67
AT&T Corp....................... 2 46,385 1.9 779,268 1.7 16.80
Learning Tree International..... 2 45,687 1.9 607,281 1.3 13.29
Earthtech....................... 2 44,122 1.8 1,138,231 2.4 25.80
American Tours Int'l, Inc....... 1 32,586 1.3 430,135 0.9 13.20
Inchcape Shipping............... 6 31,003 1.3 625,553 1.3 20.18
--- ----------- ----- ---------- ----- ------
Total/Weighted Average........ 37 934,992 38.2 17,521,267 36.7 18.74
Remaining GLA................. 368 1,509,786 61.8 30,160,099 63.3 19.98
Portfolio Total............... 405 2,444,778 100.0% $47,681,366 100.0% $ 19.50
--- ----------- ----- ---------- ----- ------
--- ----------- ----- ---------- ----- ------
</TABLE>
(1) Number of Leases refers to the number of occupied tenant spaces.
S-104
<PAGE>
The following table sets forth scheduled lease expirations at the Villa
Marina Property for the twelve months ending December 31, 1997 and for each
calendar year thereafter through 2008. The table assumes that none of the
tenants exercise early termination or renewal options.
ANNUAL RETAIL LEASE EXPIRATION--VILLA MARINA PROPERTY
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NO. OF OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDING DEC. 31 LEASES(2) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- --------------------------------------- ------------- ----------- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MTM(1)................................. 5 8,731 2.0% $89,671 1.0% $ 10.27
1997................................... 1 3,000 0.7 139,178 1.6 46.39
1998................................... 4 8,850 2.1 284,776 3.3 32.18
1999................................... 16 96,306 22.5 1,844,123 21.4 19.15
2000................................... 9 22,587 5.3 450,867 5.2 19.96
2001................................... 6 13,333 3.1 445,539 5.2 33.42
2002................................... 5 6,431 1.5 229,800 2.7 35.73
2003................................... 12 49,514 11.5 677,872 7.9 13.67
2004................................... 9 61,338 14.3 888,498 10.3 14.49
2005................................... 7 16,407 3.8 449,666 5.2 27.41
2006................................... 6 44,972 10.5 1,114,033 13.0 24.77
2007................................... 4 22,262 5.2 536,861 6.2 24.12
2008................................... 1 34,318 8.0 948,661 11.0 27.64
2009................................... 2 40,872 9.5 499,680 5.8 12.23
--- ----------- ----- ----------- ----- ------
Total/Weighted Average............... 87 428,921 100.0% $8,599,225 100.0% $ 20.05
--- ----------- ----- ----------- ----- ------
--- ----------- ----- ----------- ----- ------
</TABLE>
- ------------------------
(1) MTM indicates total space occupied as of the occupancy date on a month to
month basis, including under expired leases not yet renewed.
(2) Number of Leases refers to the occupied tenant spaces.
The following table sets forth scheduled lease expirations at the Valley
View Property for the twelve months ending December 31, 1997 and for each
calendar year thereafter through 2009. The table assumes that none of the
tenants exercise early termination or renewal options.
ANNUAL RETAIL LEASE EXPIRATION--VALLEY VIEW PROPERTY
<TABLE>
<CAPTION>
SUM OF % OF % OF ANNUALIZED
NO. OF OCCUPIED TOTAL ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDING DEC. 31 LEASES(2) SQUARE FT OCCUPIED SF BASE RENT BASE RENT PER SF
- --------------------------------------- ------------- ----------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MTM(1)................................. 28 57,389 15.4% $592,291 7.4% $ 10.68
1997................................... 14 29,344 7.9 309,430 3.8 10.33
1998................................... 13 29,314 7.9 688,972 8.5 23.34
1999................................... 11 33,605 9.0 676,490 8.4 20.14
2000................................... 9 21,982 5.9 603,713 7.5 27.46
2001................................... 5 12,639 3.4 337,824 4.2 26.73
2002................................... 8 14,604 3.9 501,325 6.2 34.33
2003................................... 7 16,600 -4.5 385,903 4.8 20.16
2004................................... 16 72,367 19.5 1,683,994 20.9 23.27
2005................................... 16 34,760 9.4 830,094 10.3 23.88
2006................................... 10 31,877 8.6 727,978 9.0 22.84
2007................................... 1 701 0.2 210,044 2.6 47.45
2008................................... 1 2,229 0.6 46,809 0.6 21.00
2009................................... 2 14,242 3.8 464,840 5.8 21.83
--- ----------- ------ ----------- ------ ------
Total/Weighted Average............... 141 371,653 100.0% $8,059,707 100.0% $ 21.00
--- ----------- ------ ----------- ------ ------
--- ----------- ------ ----------- ------ ------
</TABLE>
- ------------------------
(1) MTM indicates total space occupied as of the occupancy date on a month to
month basis, including under expired leases not yet renewed.
(2) Number of Leases refers to the occupied tenant spaces.
S-105
<PAGE>
UNDERWRITING STANDARDS
GENERAL. The underwriting standards utilized in connection with the
origination of the Mortgage Loans addressed, with respect to each Mortgaged
Property, property valuations and property financial performance, environmental
conditions and physical conditions, as described below.
APPRAISALS. An appraisal was performed with respect to the DDR/DRA
Properties, the Courtyard Properties and the Worldwide Plaza Property. Market
studies were conducted for the Prentiss Properties, the Arden Properties, the
Valley View Property, the Villa Marina Property and the Sun Community
Properties. The appraisals and market studies were performed by independent MAI
appraisers and (i) in the case of the appraisals, determined that at the time of
the appraisal the aggregate value of the related Mortgaged Properties covered by
such appraisals or (ii) in the case of the market studies, LB Holdings
determined, based on the information set forth in such market study, that the
aggregated value of the related Mortgaged Properties covered by such market
studies, exceeded the original principal amount of each Mortgage Loan. In
general, appraisals represent the analysis and opinion of qualified experts and
are not guarantees of present or future value. Moreover, appraisals seek to
establish the amount a typically motivated buyer would pay a typically motivated
seller. Such amount could be significantly higher than the amount obtained from
the sale of a Mortgaged Property under a distress or liquidation sale. See "Risk
Factors--The Mortgage Loans--Lack of Certain Appraisals-Limitations of
Appraisals" herein. Information regarding the value of each Mortgaged Property
as of the Cut-Off Date presented under "--Certain Characteristics of the
Mortgage Loans" above is not intended to be a representation as to the past,
present or future market values of the Mortgaged Properties.
OPERATING STATEMENTS, FINANCIAL DATA, OCCUPANCY STATEMENTS. In connection
with the origination of the Mortgage Loans, the related Originator reviewed
operating statements, financial data, rent rolls and related information or
statements of occupancy rates provided by borrowers and, with respect to the
Mortgage Loans secured by office properties and retail properties, certain major
tenant leases.
ENVIRONMENTAL ASSESSMENTS. As part of the origination, all of the Mortgaged
Properties have been subject to either Phase I site assessments, updates of
previously performed Phase I site assessments, or other site assessments which
were updated and upgraded to comply with Phase I standards through follow up
investigations, within the last eighteen months. Additionally, all borrowers
were required to provide certain environmental representations, warranties,
covenants and indemnities relating to the existence and use of hazardous
substances on the Mortgaged Properties. For a discussion of environmental issues
identified on the Mortgaged Properties, see "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PROPERTY CONDITION ASSESSMENTS. Property condition assessments of the
Mortgaged Properties were generally conducted by licensed engineers or
architects prior to origination of the Mortgage Loans. Such inspections were
generally commissioned to assess the structure, exterior walls, roofing,
interior construction, mechanical and electrical systems and general conditions
of the site, buildings and other improvements located at each Mortgaged
Property. The resulting reports of the inspecting engineers (the "Property
Condition Reports") indicated, where appropriate, a variety of deferred
maintenance items and recommended capital improvements with respect to each
Mortgaged Property, as well as the estimated cost of such items and
improvements. In each instance, the related Originator either determined that
such items and improvements were being addressed by the related borrowers in a
satisfactory manner, or required that they be addressed post-closing and, in
some instances, that reserves be established to cover the related costs. See
"Description of the Mortgage Loans and Mortgaged Properties" herein for
descriptions of the reserves or other security provided for deferred maintenance
and capital improvements related to each Mortgaged Property.
There are violations of the ADA at some of the Mortgaged Properties that are
not expected to have a material impact on the value of or earnings from such
properties.
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ZONING AND BUILDING CODE COMPLIANCE. Each of the borrowers has, under its
related Mortgage or loan agreement, generally represented as of the date on
which the Mortgage Loan was originated and/or provided a legal opinion, a title
insurance policy endorsement and/or other evidence, to the effect that the use
and operation of the related Mortgaged Properties are in compliance in all
material respects with applicable zoning, land-use, environmental, building,
fire and health ordinances, rules, regulations and orders applicable to the
related Mortgaged Properties.
PROPERTY MANAGEMENT. The manager for each Mortgaged Property was approved
by the related Originator in connection with the origination of the related
Mortgage Loan. Generally, a manager is responsible for responding to changes in
the local market, planning and implementing the rental rate or operating
structure, which may include establishing levels of rent payments or rates, and
insuring that maintenance and capital improvements are carried out in a timely
fashion. Upon the occurrence of certain events specified in each Mortgage Loan,
the related management agreement is terminable by the Master Servicer or
terminates unless the Master Servicer otherwise elects. For a discussion of the
management contracts and the Master Servicer's rights thereunder, see
"Description of the Mortgage Loans and Mortgaged Properties" herein. Neither the
Master Servicer nor the Special Servicer manages any of the Mortgaged Properties
and they are not expected to manage any REO Properties (as defined herein).
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-Off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the Cut-Off
Date. The Depositor believes that the information set forth herein will be
representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Certificates are issued.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling Agreement, with the Securities and Exchange Commission
within fifteen days after the initial issuance of the Offered Certificates.
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DESCRIPTION OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
THE DDR/DRA LOAN AND PROPERTIES
THE LOAN. The DDR/DRA Loan has a principal balance as of the Cut-Off Date
of $322,500,000 and is evidenced by three separate notes issued by three related
borrowers. The first two Notes, having principal balances of $42,750,000 (the
"DDR/DRA Note A") and $153,000,000 (the "DDR/DRA Note B"), respectively, were
issued by Community Centers One L.L.C. (the "DDR/DRA I Borrower"). The third
Note (the "DDR/DRA Note C" and, together with the DDR/DRA Note A and the DDR/DRA
Note B, the "DDR/DRA Notes"), having a principal balance of $126,750,000, was
issued jointly by Community Centers Two L.L.C. (the "DDR/DRA II Borrower") and
Shoppers World Community Center, L.P. (the "DDR/DRA III Borrower," together with
the DDR/DRA I Borrower and the DDR/DRA II Borrower, the "DDR/DRA Borrowers").
Each of the DDR/DRA Notes is secured by first Mortgages (the "Non-Florida
DDR/DRA Mortgages") encumbering 9 retail power centers in the following
locations: Framingham, Massachusetts (the "Shoppers World Property");
Schaumburg, Illinois (the "Woodfield Village Green Property"); San Diego,
California (the "Carmel Mountain Plaza Property"); Durham, North Carolina (the
"New Hope Commons Property"); Fairfax, Virginia (the "Fairfax Towne Center
Property"); Atlanta, Georgia (the "Perimeter Pointe Property"); Denver, Colorado
(the "Broadway Marketplace Property"); Marietta, Georgia (the "Town Center Prado
Property"); and Independence, Missouri (the "Independence Commons Property"; and
together with the Carmel Mountain Plaza Property, the Broadway Marketplace
Property, the Perimeter Pointe Property, the Town Center Prado Property, the
Woodfield Village Green Property, the Shoppers World Property, the Fairfax Towne
Center Property, and the New Hope Commons Property, the "Non-Florida DDR/DRA
Properties"). The DDR/DRA Note B is also secured by a first Mortgage (the
"Florida DDR/DRA Mortgage," and together with the Non-Florida DDR/DRA Mortgages,
the "DDR/ DRA Mortgages") in a 10th retail power center (the "Carillon Place
Property," and together with the Non-Florida DDR/DRA Properties, the "DDR/DRA
Properties") located in Naples, Florida. The Florida DDR/DRA Mortgage does not
secure the DDR/DRA Note A or the DDR/DRA Note C. All of the DDR/ DRA Notes are
cross-defaulted.
THE BORROWERS. The DDR/DRA I Borrower and the DDR/DRA II Borrower are each
Delaware limited liability companies and the DDR/DRA III Borrower is a Delaware
limited partnership. The DDR/ DRA I Borrower is the owner of the Carmel Mountain
Plaza Property, the Broadway Marketplace Property, the Carillon Place Property,
the Town Center Prado Property, the Woodfield Village Green Property, the New
Hope Commons Property, and the Fairfax Towne Center Property (collectively, the
"DDR/DRA I Properties"); the DDR/DRA II Borrower is the owner of the Perimeter
Pointe Property and the Independence Commons Property (collectively, the
"DDR/DRA II Properties"); and, the DDR/DRA III Borrower is the owner of the
Shoppers World Property (the "DDR/DRA III Property").
The DDR/DRA Borrowers are limited in their respective purposes to owning,
operating and managing their respective DDR/DRA Properties. The DDR/DRA I
Borrower has no material assets other than the DDR/DRA I Properties and related
interests, the DDR/DRA II Borrower has no material assets other than the DDR/DRA
II Properties and related interests and the DDR/DRA III Borrower has no material
assets other than the DDR/DRA III Property and related interests.
The managing member of the DDR/DRA I Borrower is DD Community Centers One,
Inc. (the "DDR/DRA I Managing Member"), an Ohio corporation, that is limited in
its purposes to acting as managing member of the DDR/DRA I Borrower. The DDR/DRA
I Managing Member is a wholly-owned direct subsidiary of Developers Diversified
Realty Corporation ("DDRC"), an Ohio corporation. DDRC operates as a real estate
investment trust for Federal income tax purposes, DDRC's stock is traded on the
New York Stock Exchange and it is a reporting company under the Exchange Act.
The managing member of the DDR/DRA II Borrower is DD Community Centers Two, Inc.
(the "DDR/DRA II Managing
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Member"), an Ohio corporation, that is limited in its purposes to acting as
managing member of the DDR/ DRA II Borrower. The DDR/DRA II Managing Member is a
wholly-owned direct subsidiary of DDRC. The general partners of the DDR/DRA III
Borrower are DD Community Centers Three, Inc., an Ohio corporation, and SW OPP
SUB, Inc., a Delaware Corporation (collectively, the "DDR/DRA III General
Partner") , both of which are limited in their purposes to acting as a general
partner of the DDR/DRA III Borrower. DD Community Centers Three, Inc. is a
wholly-owned direct subsidiary of DDRC. SW OPP SUB, Inc. is a wholly-owned
direct subsidiary of DRA Opportunity Fund ("DRA"), a Delaware corporation which
operates as a real estate investment trust for Federal income tax purposes. DDRC
has been a NYSE-listed company since 1993 and owns a portfolio of over 120
shopping centers consisting of approximately 30.4 million square feet of GLA.
The regular members of both the DDR/DRA I Borrower and the DDR/DRA II
Borrower are: (i) DRA, (ii) DD Retail Partners II, L.P. ("DDR II"), a Delaware
limited partnership, (iii) DD Retail Partners III, L.P. ("DDR III"), a Delaware
limited partnership, and (iv) DD Retail Partners IV, L.P. ("DDR IV"), a Delaware
limited partnership. The limited partners of the DDR/DRA III Borrower are (i)
DDRC, (ii) DRA, (iii) DDR II, (iv) DDR III and (v) DDR IV.
An affiliate of the Originators, LB Holdings, has made a loan in the amount
of approximately $28,687,500 to DDRA Community Centers Four L.P. ("DDRACC").
DDRACC is 35% owned by DDRC and 65% owned by DRA.
SECURITY. The DDR/DRA Notes are non-recourse notes. The DDR/DRA Note A and
the DDR/ DRA Note C are secured as described above by the fee estate of each of
the DDR/DRA Borrowers in the Non-Florida DDR/DRA Properties and certain
collateral therefor (including an assignment of leases and rents and the funds
in certain accounts). The DDR/DRA Note B is secured as described above by the
fee estate of each of the DDR/DRA Borrowers in the Non-Florida DDR/DRA
Properties, the DDR/DRA I Borrower's fee estate in the Carillon Place Property,
and certain collateral therefor (including an assignment of leases and rents and
the funds in certain accounts). Subject to exceptions for, among other things,
fraud, intentional misrepresentation, gross negligence, willful misconduct,
breach of certain environmental indemnities and covenants, or misapplication of
funds, none of the DDR/DRA Borrowers nor any of their respective affiliates is
personally liable for payment of the DDR/DRA Loan. The DDR/DRA Notes provide for
full recourse to all the assets of the related DDR/DRA Borrower if, among other
things, any of the related DDR/DRA Properties or any part thereof securing such
DDR/DRA Note become subject to (i) a voluntary bankruptcy or insolvency
proceeding or (ii) an involuntary bankruptcy or insolvency proceeding which is
not dismissed within 90 days of filing. Each of the DDR/DRA Borrowers has made
certain environmental representations and has represented that it has good,
marketable and insurable fee simple title to the DDR/DRA Property or Properties
it owns, subject only to encumbrances described in the applicable title
insurance policies. In addition, the DDR/DRA Borrowers have deposited with the
Master Servicer an amount equal to $425,495 (the "DDR/DRA Lease-Up Reserve"), to
be held in escrow as additional security for their obligations under the DDR/DRA
Loan documents in connection with certain leases under which required rental
payments have not yet commenced. Provided that no default under the DDR/DRA Loan
documents exists, the Master Servicer is required to return to the respective
DDR/DRA Borrower that portion of the DDR/DRA Lease-Up Reserve related to a
particular lease upon the commencement of the payment of rent for such lease. LB
Holdings is the named insured under title insurance policies which insure that
each of the related Mortgages constitutes a valid and enforceable first lien on
the applicable DDR/DRA Properties, subject to certain exceptions and exclusions
from coverage set forth therein.
PAYMENT TERMS. The DDR/DRA Loan was originated by LB Holdings on May 15,
1997. Each of the DDR/DRA Notes matures on June 10, 2002 (the "DDR/DRA Maturity
Date") and bears interest at a fixed rate per annum of 7.378% (the "DDR/DRA Base
Interest Rate") through the DDR/DRA Maturity Date. Interest on the DDR/DRA Notes
is calculated on the basis of the actual number of days elapsed and a 360-day
year.
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The DDR/DRA Notes require monthly payments of interest (the "DDR/DRA Monthly
Debt Service Payments") and a single Balloon Payment of the principal balance of
the loan together with all accrued and unpaid interest on the DDR/DRA Maturity
Date.
Upon the occurrence of an event of default under the DDR/DRA Loan documents,
interest will accrue on the entire unpaid principal balance of the DDR/DRA Loan
and any other amounts, including interest, then due thereon at a default rate
equal to the lesser of (a) the maximum rate permitted by applicable law and (b)
the greater of (i) the DDR/DRA Base Interest Rate plus 4% or (ii) the prime rate
plus 4%. In addition, upon the acceleration of the DDR/DRA Loan in connection
with an event of default, the DDR/DRA Borrowers must pay prepayment
consideration (the "DDR/DRA Yield Maintenance Premium") equal to the present
value of a series of payments (each equal to an amount based on the excess of
the DDR/DRA Base Interest Rate over the yield that would be earned on the U.S.
Treasury issue with a maturity date closest to the DDR/DRA Maturity Date)
payable on each Due Date scheduled through and including the DDR/DRA Maturity
Date discounted at the relevant U.S. Treasury rate.
ALTERATIONS AND EXPANSIONS. The DDR/DRA Loan documents provide that each
DDR/DRA Borrower has the right, provided that no event of default under the
DDR/DRA Loan documents has occurred and is continuing, without consent of the
Master Servicer, to undertake any alteration, improvement, demolition or
removal, including in connection with a DDR/DRA Expansion (any such alteration,
improvement, demolition or removal other than a DDR/DRA Restoration a "DDR/DRA
Alteration") of its DDR/DRA Properties or any portion thereof so long as such
DDR/DRA Alteration is permitted by the leases and related operating agreements
with respect to the related DDR/DRA Property and does not, among other things,
(i) materially impair the utility and operation of the DDR/DRA Property or
materially adversely affect the value of the DDR/DRA Property taken as a whole,
(ii) reduce the DDR/DRA Property DSCR below 1.563X or (iii) have a materially
adverse effect on the ability of the related DDR/ DRA Borrower to perform its
obligations under the DDR/DRA Loan documents. Any DDR/DRA Alteration that does
not meet the foregoing criteria may be undertaken only with the Master
Servicer's prior written consent. If at any time during any DDR/DRA Alteration
such DDR/DRA Borrower decides not to complete such alteration, it is obligated
to restore the affected portion of the DDR/DRA Property to at least the level of
utility and value that existed as of the commencement of such DDR/DRA
Alteration.
The DDR/DRA Borrowers have agreed not to undertake or continue any DDR/DRA
Alteration (other than an alteration the cost of which a tenant is obligated to
pay directly), the cost of which individually or in the aggregate with all other
related DDR/DRA Alterations, would exceed an amount equal to the greater of (i)
$1,175,000 or (ii) 5% of the DDR/DRA Allocated Loan Amount (the "DDR/ DRA
Threshold Amount"), unless the DDR/DRA Borrower has delivered to the Master
Servicer security (in the form of cash or cash equivalent) in the amount by
which the total costs of such alteration exceeds the DDR/DRA Threshold Amount.
The amount of such security may be changed from time to time based upon updates
on the progress of the DDR/DRA Alteration by an independent architect setting
forth, among other things, the actual stages of completion of the DDR/DRA
Alteration, the corresponding amounts expected to be due and payable and, as the
alteration progresses, the actual amounts due and payable by the DDR/DRA
Borrower in connection with such completion.
Provided that no event of default has occurred and is continuing under the
DDR/DRA Loan documents, the DDR/DRA Borrowers have the right, without consent of
the Master Servicer, to expand the improvements on the respective DDR/DRA
Properties from time to time through the addition of one or more anchor stores
or the addition of one or more peripheral stores (a "DDR/DRA Expansion"),
provided that, among other things, the related DDR/DRA Borrower certifies to the
Master Servicer that, among other things, such DDR/DRA Expansion (A) will not
materially impair the utility, operation or the value of the respective DDR/DRA
Property, including any anchor pad or peripheral parcels, taken as a whole, (B)
does not result in any material violation of the terms of any material lease,
(C) does not result
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in any material violation of the terms of any operating agreements and (D) will
not reduce the DDR/DRA Property DSCR below 1.563X for the immediately ensuing
twelve-month period.
No DDR/DRA Expansion or DDR/DRA Alteration is permitted to be undertaken
unless either (i) the related DDR/DRA Borrower certifies to the Master Servicer
that such DDR/DRA Expansion or DDR/DRA Alteration is not a "DDR/DRA
Reconfiguration Project" or (ii) the Master Servicer consents thereto in
writing. The term "DDR/DRA Reconfiguration Project" means any DDR/DRA Expansion
or DDR/DRA Alteration which: (A) requires the closing or relocation of a tenant
under an anchor lease; (B) adversely affects in any significant manner the use
of any material portion of the parking spaces for the DDR/DRA Property; or (C)
materially impairs pedestrian traffic through the common areas of the DDR/ DRA
Property.
If any DDR/DRA Expansion or DDR/DRA Alteration would cause the DDR/DRA
Property DSCR for the twelve months following commencement of such construction
to be less than 1.563X (a "DDR/ DRA Debt Service Alteration"), then the DDR/DRA
Borrower is required to post letters of credit with the Master Servicer in an
amount sufficient to maintain, at all times during such twelve month period, the
DDR/DRA Property DSCR for such DDR/DRA Property of 1.563X. The DDR/DRA
Borrower's obligation to deliver, maintain and renew such letters of credit will
not terminate until (i) an event of default under the DDR/DRA Loan documents has
occurred and is continuing and (ii) on the earlier of (1) the date of repayment
of the DDR/DRA Notes in full and (2) when the DDR/DRA Property DSCR is equal to
or greater than 1.563X for twelve consecutive months.
The "DDR/DRA Property DSCR" means the ratio of (i) 97.5% of the net
operating income produced by the operation of the DDR/DRA Property during such
period to (ii) the payments that would be due under the portion of the DDR/DRA
Note related to such DDR/DRA Property equal to the DDR/DRA Allocated Loan Amount
of such DDR/DRA Property for such period, assuming for the purposes of this
calculation a loan constant of 9.50%.
PREPAYMENT. Voluntary prepayment is prohibited under the DDR/DRA Loan prior
to the period commencing six months prior to the DDR/DRA Maturity Date (such
period, the "DDR/DRA Permitted Prepayment Period"). Thereafter, provided that
there is no event of default under the DDR/DRA Loan documents, the DDR/DRA Loan
may be voluntarily prepaid in whole, but not in part, without payment of DDR/DRA
Yield Maintenance Premium, on a Due Date pursuant to the terms of the DDR/DRA
Loan documents.
All insurance proceeds or condemnation awards not required to be made
available for the DDR/DRA Restoration of any of the DDR/DRA Properties or
returned to the related DDR/DRA Borrower in accordance with the terms of the
DDR/DRA Loan documents, will be retained and applied by the Master Servicer to
prepay the amounts due under the related DDR/DRA Note(s) whether or not then due
and payable in accordance with the terms of the Pooling Agreement. If the Master
Servicer receives and retains such insurance proceeds or condemnation awards,
the lien of the related Mortgage will be reduced only by the amount thereof
received and retained by the Master Servicer and actually applied by the Master
Servicer in reduction of such amounts due under the related DDR/DRA Note(s).
Unless an event of default has occurred and is continuing, such prepayment will
be made without payment of DDR/DRA Yield Maintenance Premium.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. Each DDR/DRA Borrower is
permitted on any Due Date at any time after October 10, 1999, which is the
second anniversary from the "startup day" (the "Closing Date") within the
meaning of Section 860G(a)(9) of the Code, of the Trust REMICs to obtain a
release of all or a portion of its respective DDR/DRA Property, provided that,
among other conditions, such DDR/DRA Borrower delivers on such Due Date DDR/DRA
Defeasance Collateral with DDR/DRA Collateral Value sufficient, without
consideration of any reinvestment of interest therefrom, to pay: (i) all amounts
then due relating to such portion of the DDR/DRA Notes, including interest
thereon; (ii) the portion of the outstanding principal amount of the DDR/DRA
Notes equal to the lesser of (a) 125% of
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DDR/DRA Allocated Loan Amounts of each such DDR/DRA Property to be released or
(b) the then-aggregate unpaid principal balance of the DDR/DRA Notes (such
lesser amount, the "DDR/DRA Defeasance Amount"); and (iii) the portion of the
interest that will become due under such portion of the DDR/DRA Notes prior to
and including the DDR/DRA Maturity Date.
"DDR/DRA Allocated Loan Amount" means the amount of the DDR/DRA Loan
allocated to such DDR/DRA Property, as set forth in the DDR/DRA Loan documents.
"DDR/DRA Defeasance Collateral" means non-callable and non-redeemable securities
evidencing an obligation to pay principal and interest in a full and timely
manner that are direct obligations of the United States of America for the
payment of which its full faith and credit is pledged. "DDR/DRA Collateral
Value" means as of any date with respect to DDR/DRA Defeasance Collateral
delivered to the Master Servicer, the aggregate amount of payments of income
from such DDR/DRA Defeasance Collateral that will be payable to the Master
Servicer by the business day prior to each day on which payments are due on the
related DDR/DRA Note, without consideration of any reinvestment of such income.
In addition, in connection with the defeasance of all or a portion of the
DDR/DRA Loan, such DDR/ DRA Borrower is required to deliver to the Master
Servicer, among other things: (a) for each of the U.S. Treasury obligations that
is part of the DDR/DRA Defeasance Collateral, a written instrument of transfer
in form and substance wholly satisfactory to the Master Servicer in order to
perfect upon the delivery of the DDR/DRA Defeasance Collateral the first
priority security interest therein in favor of the Trustee, (b) an opinion of
counsel for the related DDR/DRA Borrower in form satisfactory to the Master
Servicer stating that the Trustee will have a perfected first priority security
interest in such U.S. Treasury obligations and that the transfer of such U.S.
Treasury obligations will not adversely affect the status of either Trust REMIC
as a REMIC and (c) confirmation from each of the Rating Agencies that the
defeasance will not result in a withdrawal, qualification or reduction of the
then-existing ratings of the Certificates.
Upon such defeasance, the DDR/DRA Borrowers will have the right, to obtain a
release of DDR/ DRA Property from the lien of the related DDR/DRA Mortgage,
provided that, among other things: (i) no material default under the DDR/DRA
Loan documents has occurred and is continuing; (ii) ownership of the related
DDR/DRA Property is simultaneously transferred to an entity other than any
DDR/DRA Borrower, the managing member of any DDR/DRA Borrower, or any general
partner of any DDR/DRA Borrower, or any person, party, or entity owned or
controlled by any of the foregoing, unless the related DDR/DRA Borrower is an
entity with a long term unsecured debt rating from the Rating Agencies which is
the same as the then current rating on the highest rated Certificates; and (iii)
for the twelve-month period immediately after the release, the DDR/DRA Aggregate
DSCR with respect to the DDR/DRA Properties remaining encumbered by the liens of
the DDR/DRA Mortgages will be equal to or greater than the greater of (A) the
DDR/DRA Aggregate DSCR with respect to all of the DDR/DRA Properties for the
four fiscal quarters immediately preceding the date of the origination of the
DDR/DRA Loan and (B) the DDR/DRA Aggregate DSCR with respect to the DDR/DRA
Properties then encumbered by the liens of the DDR/DRA Mortgages immediately
prior to such release, for the four fiscal quarters immediately preceding the
proposed release.
The "DDR/DRA Aggregate DSCR" means the ratio of (a) the product of (i) the
net operating income (as defined in the related DDR/DRA Loan documents) during
the applicable period of each of the DDR/DRA Properties other than the DDR/DRA
Property to be released (if the calculation is being made in connection with a
release of a DDR/DRA Property) and any DDR/DRA Property which has previously
been released and (ii) 97.5% to (b) the payments that would be due under the
DDR/DRA Notes (excluding payments due on any portion of the principal balance of
the DDR/DRA Notes that has been previously defeased) after giving effect to the
defeasance of principal in connection with such release for the applicable
period, assuming for the purposes of this calculation a loan constant of 9.50%.
Upon the satisfaction of the foregoing conditions precedent, the applicable
DDR/DRA Property will be released from the lien of the Trust Fund.
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OTHER RELEASES. The DDR/DRA Borrowers are permitted to obtain the release
from the lien of the related Mortgage the unimproved, non-revenue producing
outparcel on a portion of (i) the Independence Commons Property and (ii) the
Fairfax Town Center Property (each such portion a "DDR/DRA Outparcel") if, among
other things, (a) no event of default exists under the DDR/DRA Loan documents;
(b) the related DDR/DRA Borrower has obtained: (x) all governmental approvals
necessary so that upon such release the DDR/DRA Outparcel and the related
DDR/DRA Property remaining after the release of the DDR/DRA Outparcel (the
"DDR/DRA Remaining Property"), together and separately, satisfy and comply with
all applicable laws and requirements or the related DDR/DRA Borrower has
obtained a legal opinion to the effect that the DDR/DRA Outparcel and the
DDR/DRA Remaining Property are each entitled to be used and occupied as of right
without reference to or reliance on the other parcel; and (y) either a legal
opinion stating that, or an endorsement to the related title insurance policy
insuring that, the DDR/DRA Outparcel has been designated as a separate tax lot
independent from the DDR/DRA Remaining Property; (c) all leases demising any
part of the DDR/DRA Remaining Property and all operating agreements affecting
all or any part of the DDR/DRA Remaining Property or the DDR/DRA Outparcel shall
remain unaffected as a result of the release; and (d) the related DDR/DRA
Borrower (x) certifies that the use of the related DDR/DRA Outparcel will not
cause a material decrease in the net operating income of the applicable DDR/DRA
Property and (y) delivers written confirmation from the Rating Agencies that
such release will not result in a downgrade, withdrawal or qualification of the
rating then assigned to the Certificates by the Rating Agencies. With respect to
the Shoppers World Property, an outparcel was released prior to the Closing Date
which parcel, as of the Closing Date, is not expected to be a separate tax
parcel. If a separate tax lot has not been created on the Closing Date, the
DDR/DRA III Borrower has agreed to deposit an amount equal to 125% of the
estimated real estate taxes for such outparcel for a period of six (6) months in
an escrow account to be controlled by the Servicer. The DDR/ DRA III Borrower is
required to have the separate tax lot created prior to December 1, 1997, subject
to a six month extension if the DDR/DRA III Borrower is diligently proceeding to
have the tax lot created.
OPERATING ACCOUNTS. No lock box account is initially required to be
maintained under any of the DDR/DRA Notes. Instead, each of the DDR/DRA
Borrowers has established one or more interest-bearing operating accounts in the
name of the Master Servicer (collectively, the "DDR/DRA Operating Accounts") at
National City Bank, located in Cleveland, Ohio, or at another bank which is a
DDR/DRA Eligible Institution (the "DDR/DRA Depository"). Each DDR/DRA Borrower
has directed that all moneys in respect of the DDR/DRA Properties or the DDR/DRA
Mortgages and in respect of all rents from any leases and operating agreements
and all other operating income and all income or other gains from investment or
reinvestment thereof to be directly deposited by the obligor or tenant
thereunder or the DDR/DRA Property Manager into the related DDR/DRA Operating
Account. A "DDR/DRA Eligible Institution" means a depository institution or
trust company, the long-term unsecured debt obligations of which (or, in the
case of a depository institution or trust company that is the principal
subsidiary of a holding company, the long-term unsecured debt obligations of
which) have been rated by the Rating Agencies in a rating category of not less
than "A+" or "Aa3", as applicable, or the short-term deposits or commercial
paper of which are rated in a rating category of not less than "A-1" or "P1", as
applicable.
Prior to the occurrence of a DDR/DRA Primary Event or a DDR/DRA Secondary
Event, the DDR/ DRA Borrowers will be the only parties entitled to withdraw any
funds from the respective DDR/DRA Operating Account. The Master Servicer will
deliver to the DDR/DRA Depository an authorization naming each DDR/DRA Borrower
as an authorized signatory under the respective DDR/DRA Operating Account.
Pursuant to the DDR/DRA Loan documents, the DDR/DRA Borrowers have granted a
security interest in, and have assigned, the DDR/DRA Operating Account to the
Trust Fund to secure the obligations under the DDR/DRA Loan documents.
Upon the occurrence of a DDR/DRA Primary Event or a DDR/DRA Secondary Event,
the Master Servicer (or its designated agent) will be the only party entitled to
withdraw any funds from the DDR/DRA
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Operating Account. A "DDR/DRA Primary Event" means the occurrence of one or more
of the following: (i) the DDR/DRA Aggregate DSCR for any four consecutive
quarters falls below 1.375X (unless such fall in the DDR/DRA Aggregate DSCR is
due solely to a DDR/DRA Debt Service Alteration and the related DDR/DRA Borrower
has posted a letter of credit in accordance with the terms of related DDR/DRA
Loan documents); (ii) the long-term unsecured debt rating of the DDR/DRA
Property Manager or of the substitute property manager appointed in accordance
with the DDR/DRA Loan documents (such substitute property manager, a "DDR/DRA
Qualified Manager") falls to "BB+" or "Ba1"; (iii) if the DDR/ DRA Qualified
Manager's long-term unsecured debt is not assigned a rating of at least "BBB-"
or "Baa3" by the Rating Agencies and the Rating Agencies have required that a
lock box be established or (iv) if the DDR/DRA Qualified Manager does not have a
rating of "BBB-" or "Baa3" or better and the Rating Agencies did not require the
establishment of a lock box as a condition to confirming that the employment of
the DDR/DRA Qualified Manager would not result in a downgrade, withdrawal or
qualification of the ratings then assigned to the Certificates, any notice that
the continued employment of such DDR/DRA Qualified Manager without the
establishment of a lock box would result in the ratings then assigned to the
Certificates being downgraded, withdrawn or qualified by the Rating Agencies. A
DDR/DRA Primary Event cannot be cured.
After the occurrence of a DDR/DRA Primary Event, the Master Servicer will
make monthly withdrawals from the DDR/DRA Operating Account equal to the sum of
(i) the monthly installments of interest due under the DDR/DRA Notes and (ii) an
amount sufficient to satisfy all other payment obligations of the DDR/DRA
Borrowers pursuant to the DDR/DRA Loan documents. The amounts withdrawn by the
Master Servicer on each Due Date will be applied to the interest payment then
due and payable and, if applicable, applied toward any other payment
obligations, including the deposit of such sums in the respective escrow
accounts established by the Master Servicer in accordance with the terms of the
DDR/DRA Loan documents, including, without limitation, the DDR/DRA Escrow Fund.
Provided that no DDR/DRA Secondary Event has occurred, following each such Due
Date, the Master Servicer will withdraw on behalf of the DDR/DRA Borrowers any
amounts on deposit in the DDR/DRA Operating Account that are in excess of the
DDR/DRA Minimum Balance. Prior to each such withdrawal the DDR/ DRA Borrowers
are required to certify to the DDR/DRA Depository and the Master Servicer that
as of the date of withdrawal: (i) all payments then due to its creditors and all
operating expenses (as defined in the DDR/DRA Loan documents) then due have been
paid in full, or are no more than 60 days delinquent; and (ii) the DDR/DRA
Borrowers will use the amounts withdrawn first to pay such past due amounts to
its creditors and then for operating expenses.
Upon the occurrence of a DDR/DRA Secondary Event, the DDR/DRA Borrowers will
not be entitled to any moneys deposited into the DDR/DRA Operating Account and
the Master Servicer will be entitled to all such moneys and may apply such
moneys to the payment of the obligations under the DDR/DRA Notes and the other
DDR/DRA Loan documents in the order and priority required or permitted by the
DDR/DRA Notes, the other DDR/DRA Loan documents and applicable law. A "DDR/DRA
Secondary Event" means (i) the occurrence of an event of default under any of
the DDR/DRA Loan documents, if the Master Servicer so elects after the
occurrence thereof (prior to the Master Servicer making such election, any such
event will constitute a DDR/DRA Primary Event), (ii) the DDR/DRA Borrower fails
at any time to maintain the DDR/DRA Minimum Balance in the DDR/DRA Operating
Account or (iii) the acceleration of the obligations under the DDR/DRA Loan
documents.
RESERVES. The DDR/DRA Borrowers are required at all times to maintain a
minimum balance in the Operating Account equal to $2,747,205.42 (subject to the
adjustments discussed below, the "DDR/DRA Minimum Balance"), which is equal to
the sum of (i) one-twelfth of the taxes on the DDR/DRA Properties payable, or
reasonably estimated by the Master Servicer to be payable, during the next
twelve months (the "DDR/DRA Monthly Tax Escrow"), (ii) one-twelfth of the
insurance premiums due for the renewal of the coverage afforded by the policies
on the DDR/DRA Properties (the "DDR/DRA Monthly Insurance Escrow") and (iii) one
regularly scheduled payment of interest due under the DDR/DRA Notes. The
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DDR/DRA Minimum Balance will be adjusted by the Master Servicer from time to
time based upon increases or decreases in taxes and insurance premiums as
determined by the Master Servicer in its reasonable discretion.
Upon the occurrence of a DDR/DRA Primary Event (upon which the DDR/DRA
Borrowers will no longer have access to the DDR/DRA Operating Account), the
DDR/DRA Borrowers will be required to deposit with the Master Servicer, and to
make monthly deposits of, with respect to each DDR/DRA Property, the DDR/DRA
Monthly Insurance Escrow and the DDR/DRA Monthly Tax Escrow (with respect to
each DDR/DRA Property, a "DDR/DRA Escrow Fund") to be held by the Master
Servicer in an interest bearing account (the "DDR/DRA Taxes and Insurance
Reserve Account") to be applied by the Master Servicer to the payment of taxes
and insurance premiums required to be made by the DDR/DRA Loan documents with
respect to each DDR/DRA Property. If the DDR/DRA Escrow Fund for any DDR/ DRA
Property is not sufficient to pay the taxes and insurance premiums for such
property, the related DDR/DRA Borrower is required promptly to pay to the Master
Servicer an amount sufficient to make up the deficiency.
In addition, the DDR/DRA Borrowers have deposited with the Master Servicer
an amount equal to $425,495, to be held in escrow as additional security for
their obligations under the DDR/DRA Loan documents in connection with certain
leases under which required rental payments have not yet commenced. See
"--Security" above.
TRANSFER OF PROPERTIES AND INTEREST IN BORROWER. The DDR/DRA Loan generally
prohibits, without the consent of the Master Servicer, the transfer of the
DDR/DRA Properties, except as described in the following paragraphs under this
heading and above under "--Prepayment," "--Release in Exchange for Substitute
Collateral," and "--Other Releases." Other transfers prohibited under the
DDR/DRA Loan documents include, but are not limited to: (a) for the DDR/DRA I
Managing Member, the DDR/DRA II Managing Member, the DDR/DRA III General
Partner, or any other member of any of the DDR/DRA I Borrower or the DDR/DRA II
Borrower that is a corporation, the voluntary or involuntary sale, conveyance,
transfer or pledge of such corporation's stock (or the stock of any corporation
directly or indirectly controlling such corporation by operation of law or
otherwise) or the issuance of new stock which would cause more than 10% of such
corporation's stock to be vested in a party or parties who were not stockholders
at origination of the DDR/DRA Loan; (b) for the DDR/DRA III Borrower, or any
member of the DDR/DRA I Borrower or the DDR/DRA II Borrower that is a limited or
general partnership or joint venture, the change, removal or resignation of a
general partner or managing partner, or the transfer or pledge of the
partnership interest of any general partner or managing partner or any profits
or proceeds relating to such partnership interest or the transfer of more than
49% in the aggregate of any limited partnership interests in such DDR/DRA
Borrower whether in one transfer or a series of transfers; and (c) for the
DDR/DRA I or the DDR/DRA II Borrower, the change, removal or resignation of a
member or managing member or the transfer or pledge of the interest of any
member or managing member or any profits or proceeds relating to such interest.
Notwithstanding the foregoing, none of the following transfers will be
considered a prohibited transfer: (i) the transfer by devise or descent or by
operation of law upon the death of a partner, member or stockholder of the
DDR/DRA Borrower or any general partner or member thereof or (ii) a sale or
transfer of a membership interest, partnership interest or stock, as the case
may be, in a DDR/DRA Borrower, any member or limited partner of a DDR/DRA
Borrower or in any entity owning any interest in any of the foregoing if the
following conditions, among other things, are met:
(i) DDRC and its affiliates (other than any of the DDR/DRA Borrowers)
(collectively, the "DDR/DRA Entities") and any of DRA, DDR II, DDR III, DDR
IV or any other entity managed and advised by DRA Advisors, Inc.
(collectively, the "DRA Entities") together, in any combination, maintain at
least a 51% membership or partnership interest, as the case may be, in the
related DDR/ DRA Borrower;
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(ii) after any such transfer, a DDR/DRA Entity or a DRA Entity, which
will be a single purpose, bankruptcy remote corporation, will be the
managing member or general partner, as the case may be, of the related
DDR/DRA Borrower; and
(iii) for a transfer that results in either: (A) a new managing member or
general partner of a DDR/DRA Borrower or of any managing member or general
partner of a DDR/DRA Borrower or (B) an entity owning, for the first time,
more than a 49% interest in a DDR/DRA Borrower, any managing member or
general partner of a DDR/DRA Borrower, or any managing member or general
partner of any DDR/DRA Borrower's managing members or general partners
(collectively, the "SPE Entities"), the DDR/DRA Borrower or any such
transferee obtains and delivers to the Master Servicer (1) written
confirmation from the Rating Agencies that such transfer will not result in
the withdrawal, qualification or downgrade of the ratings then assigned to
the Certificates and (2) an opinion of counsel rendered by an independent
law firm satisfactory to the Rating Agencies, that if such transferee is the
subject of a bankruptcy case, a bankruptcy court would not substantively
consolidate the assets and liabilities of the affected SPE Entity or SPE
Entities necessary to effect such transfer.
The organizational documents of each DDR/DRA Borrower provide that (i) any
time after November 1999, (ii) in the event the DDR/DRA Property Manager's (as
defined below) right to perform under the respective DDR/DRA Management
Agreement (defined below) is terminated for any reason, or (iii) if a member or
partner of such DDR/DRA Borrower fails to make its capital contribution as and
when required under the respective organizational documents of such DDR/DRA
Borrower, any member or partner of such DDR/DRA Borrower (other than a
withdrawing member or partner, or the member or partner who has failed to make
such capital contribution) or in the case of (ii), the member or partner who
caused the termination of such DDR/DRA Management Agreement, may elect to
purchase the rights and interests of any other member or partner in the DDR/DRA
Borrower for a price specified in the respective organizational documents of
such DDR/DRA Borrower. The member or partner to whom such member or partner
makes such offer may either accept such offer or elect to purchase the entire
membership or partnership interest of such offering member or partner. In
addition, the organizational documents of each DDR/DRA Borrower provide, subject
only to compliance by DDRC with certain provisions of the Code related to REITs,
each DRA Entity, at any time after November 1998, by written notice given to
DDRC to convert all or a portion of its respective partnership or membership
interests in the respective DDR/DRA Borrower into common shares of DDRC, subject
to DDRC's right to substitute cash. Upon such conversion, DDRC shall succeed to
the portion of the DRA Entity's membership or partnership interests in the
respective DDR/DRA Borrower.
Under the DDR/DRA Loan documents, the DDR/DRA Borrowers may transfer legal
title to the DDR/DRA Property to a single Permitted Transferee, provided that,
among other things, the following conditions are met: (i) the Permitted
Transferee assumes in writing all of the obligations under the related DDR/DRA
Loan documents (provided, however, if the Permitted Transferee meets the
requirements of part (ii)(B) below, it will not be required to assume the
obligations with respect to its status as a single purpose entity); (ii) the
Permitted Transferee (A) has been formed exclusively and solely for the purpose
of owning and operating the related DDR/DRA Property or (B) has a long term
unsecured debt rating from the Rating Agencies which is the same as the then
current rating on the highest rated Certificates; and (iii) the Master Servicer
receives written confirmation from the Rating Agencies that the transfers and
assumption by the Permitted Transferee will not result in the downgrading,
withdrawal or qualification of the ratings then assigned to the Certificates.
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"Permitted Transferee" means (y) a newly formed corporation, limited
partnership or limited liability company that meets the requirements set forth
in the DDR/DRA Loan documents for single purpose entities or (z) an entity that
meets the requirements set forth in (ii)(B) in the preceding paragraph, and in
the case of (y) the entity controlling such entity, directly or indirectly, and
in the case of (z) such entity, have, exclusive of the DDR/DRA Property, a net
worth of at least $125,000,000, and aggregate total assets of at least
$300,000,000.
PERMITTED INDEBTEDNESS. Each DDR/DRA Borrower is precluded from incurring
any other indebtedness, without the consent of the Master Servicer, except for
indebtedness which: (a) does not, in the aggregate, exceed five percent of the
DDR/DRA Allocated Loan Amount applicable to the DDR/DRA Property; (b) is not
secured by the DDR/DRA Property; and (c) is either (i) payable by the DDR/DRA
Borrower in respect of the operation of the DDR/DRA Property within 60 days of
the date such obligations were incurred; or (ii) payable or reimbursable to any
tenant on account of work performed at the DDR/DRA Property by such tenant or
for costs incurred by such tenant in connection with its occupancy of space in
the DDR/DRA Property.
In addition, each DDR/DRA Borrower may, without the consent of the Master
Servicer, incur such indebtedness, not secured by the DDR/DRA Property, as may
be incurred to its members or partners, as applicable, pursuant to its limited
liability company agreement or limited partnership agreement, as applicable,
subject to the terms and provisions of a subordination agreement with respect to
such debt. The operating agreements and limited partnership agreement for the
respective DDR/DRA Borrowers provide that (i) payments made by members or
partners in response to capital calls shall be treated as loans to the DDR/DRA
Borrowers, (ii) payments made to the DDR/DRA Borrowers by members or partners on
behalf of a member or partner that has defaulted in its obligation to make a
capital contribution in response to a capital call, shall each be treated as a
loan from such member or partner to the defaulting member or partner, (iii) an
advisory fee of 0.5% of gross income shall be paid to the DRA Entities, and (iv)
members or partners which have incurred expense to third parties on behalf of
the DDR/DRA Borrowers shall be reimbursed by the respective DDR/DRA Borrowers.
The subordination agreements executed by the DDR/DRA Borrowers and each member
and partner thereof provide that all of the items described in (i), (ii), (iii),
and (iv) (the "DDR/DRA Subordinate Debt") above are subordinate in all respects
to the DDR/DRA Loan, and provide further, among other things, that, (a) no
member or partner is permitted to declare a default under, accelerate, or take
any enforcement action with respect to the DDR/DRA Subordinate Debt, (b) no
member or partner shall accept any collateral or take a security interest in any
collateral with respect to such DDR/DRA Subordinate Debt, (c) no member or
partner shall institute or acquiesce in any bankruptcy proceeding against the
DDR/DRA Borrowers or the other members or partners thereof, and (d) no member or
partner will accept payments on account of the DDR/ DRA Subordinate Debt except
out of excess cash flow after payment of debt service, operating expenses and
funding of required reserves, and, after an event of default, no member or
partner shall accept any payments on account of the DDR/DRA Subordinate Debt.
See "Risk Factors--The Mortgage Loans-- Other Financing" herein.
INSURANCE. The DDR/DRA Borrowers are required to maintain (a) comprehensive
"all risk" insurance on the improvements and personal property associated with
the DDR/DRA Properties in an amount equal to not less than the full insurable
value of the applicable property, (b) flood insurance with respect to any part
of the DDR/DRA Properties that is located within a federally designated flood
hazard zone (the Carillon Place Property is located in a flood hazard zone;
portions of the DDR/DRA Properties known as New Hope Commons and Town Center
Prado lie within flood hazard zones but no improvements lie within those zones)
and earthquake insurance with respect to any part of the DDR/DRA Properties that
is located in an area with a high degree of seismic activity, (c) commercial
general liability insurance against claims for personal injury, bodily injury,
death or property damage occurring upon, in or about any part of the DDR/DRA
Properties, (d) business income insurance, providing coverage for the period
until such income either returns to the same level it was at prior to the loss,
or the expiration of 24-months from the
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date that the property is repaired or replaced and operations are resumed,
whichever first occurs, (e) at all times during which structural constructions,
repairs or alterations are being made with respect to the improvements, and only
if the property coverage form does not otherwise apply, (i) the owner's
contingent or protective liability insurance covering claims not covered by or
under the terms or provisions of the general liability insurance policy and (ii)
comprehensive "all risk" insurance written in a "builder's risk completed value"
form, (f) statutory workers compensation insurance, (g) comprehensive boiler and
machinery insurance, (h) umbrella liability insurance, (i) motor vehicle
liability coverage for all owned and non-owned vehicles and (j) such other
insurance requested by the Master Servicer against other insurable hazards which
at the time are commonly insured against for property similar to the property
located in or around the region in which the property is located.
Any such insurance may be under a blanket policy so long as the portion of
the total policy that is allocated to each of the DDR/DRA Properties is not less
than the required amount of such insurance. The DDR/DRA Loan requires the
DDR/DRA Borrowers to obtain the insurance described in the previous paragraph
from insurers that are approved in writing by the Master Servicer or which have
(or a syndicate of insurers through which at least 75% of the coverage (if there
are 4 or fewer members of the syndicate) or at least 60% of the coverage (if
there are 5 or more members of the syndicate) is with carriers having) a
claims-paying ability rating of not less than "AA" or "Aa", as applicable, by
the Rating Agencies. Property insurance in an amount of $879,617,569 (subject to
a $25,000 deductible) is being provided by Federal Insurance Co., which has a
claims paying ability rating of "AAA" by S&P and a claims paying ability rating
of "A++" by Best's. General liability insurance in an amount of $2,000,000 for
general aggregate, $1,000,000 for personal injury and $1,000,000 for fire damage
is being provided by Fireman's Fund, which has a claims paying ability rating of
"Aq" by S&P and a rating of "A" by Best's, and additional liability insurance is
provided in an amount of $30,000,000 in excess thereof is being provided by
Federal Insurance Co.
The DDR/DRA Borrower maintains earthquake insurance for the DDR/DRA Property
known as Carmel Mountain Plaza Property, which is located in California in a
total amount of $20,000,000. The first $5,000,000 of insurance (subject to a
deductible of 5% of value at risk) is provided by Glencoe Insurance, which has a
claims paying ability rating of "AAA" by S&P and a rating of "A++" by Best's.
Additional earthquake insurance in the amount of $15,000,000 is provided: (1)
$5,000,000 by Royal Surplus Lines, which has a claims paying ability rating of
"A" by S&P and "A-" by Best's, (2) $5,000,000 of the $15,000,000 excess of
$5,000,000 by Pacific Insurance Company, which has a claims paying ability
rating of "AAA" by S&P and "A++" by Best's, (3) $2,500,000 jointly by United
Fire & Casualty Company, which has a claims paying ability rating of "A" by S&P
and "A" by Best's, and Western Reinsurance, which is not rated by S&P and is
rated "A" by Best's, and (4) $2,500,000 jointly by Lloyds of London, which is
not rated by S&P and is not rated by Best's, and Western Reinsurance, which is
not rated by S&P and is rated "A" by Best's.
The DDR/DRA Property known as the Carrillon Place Property is located in a
flood hazard zone. The DDR/DRA I Borrower maintains flood insurance for the
Carrillon Place Property in the amount of $15,000,000 (subject to a $25,000
deductible), provided by Royal Surplus Lines, which has a claims paying ability
rating of "A" by S&P and "A-" by Best's.
CONDEMNATION AND CASUALTY. If any of the DDR/DRA Properties are damaged or
destroyed, in whole or in part, by fire or other casualty, the respective
DDR/DRA Borrower is required under the related DDR/DRA Loan documents to
promptly commence the repair and restoration of the affected DDR/DRA Property to
as nearly as possible to the condition that such property was in immediately
prior to such fire or other casualty, with such alterations as may be approved
by the Master Servicer (the "DDR/DRA Restoration") and otherwise in accordance
with the provisions set forth below. The related DDR/DRA Borrower will pay all
costs of such DDR/DRA Restoration whether or not such costs are covered by the
insurance.
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The Master Servicer is obligated to make casualty insurance or condemnation
proceeds available for
the DDR/DRA Restoration of the DDR/DRA Properties if the following conditions,
among others, are met: (i) (a) in the case of insurance proceeds, less than 50%
of the total floor area of the improvements on the property has been damaged,
destroyed or rendered unusable as a result of such fire or other casualty and
(b) in the case of condemnation proceeds, less than 25% of the land constituting
the property is taken; (ii) leases in effect as of the date of the occurrence of
such fire, other casualty or condemnation, demising rentable space of 50% or
more in the case of fire or other casualty and 10% or more in the case of
condemnation, shall remain in full force and effect during the DDR/DRA
Restoration and shall not terminate as a direct result of the fire, other
casualty or the DDR/DRA Restoration; (iii) no operating agreement is terminated
as a result of such casualty or taking; (iv) the Master Servicer is reasonably
satisfied that any operating deficits, including all scheduled payments under
the DDR/DRA Notes, with respect to the property will be covered out of (a) net
proceeds of insurance or condemnation, (b) the business income insurance
coverage on the property or (c) by other funds of the DDR/DRA Borrowers; and
(iv) the DDR/DRA Restoration is capable of being completed on the earliest to
occur of: (a) six-months prior to the DDR/DRA Maturity Date, (b) the earliest
date required for such completion under the terms of any operating agreement,
(c) such time as may be required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the property and (d) the expiration of
business income insurance.
The related DDR/DRA Borrower is required to deposit with the Master Servicer
cash or cash equivalents in an amount equal to the deficiency in the net
insurance or condemnation proceeds to pay the total costs which are estimated by
an independent architect to be incurred in connection with the completion of the
DDR/DRA Restoration before any further disbursement of the net proceeds is made.
The amount deposited with the Master Servicer will be held by the Master
Servicer and disbursed for costs actually incurred in connection with the
DDR/DRA Restoration on the same conditions applicable to the disbursement of the
net proceeds, and until so disbursed will constitute additional security for the
obligations.
To the extent that the proceeds of any casualty or condemnation are not
required to be made available for the DDR/DRA Restoration, the Master Servicer
may apply the proceeds to the payment of the DDR/ DRA Loan and the other
obligations under the DDR/DRA Loan documents. See "--Prepayment" above.
FINANCIAL REPORTING. Each DDR/DRA Borrower is required to keep and maintain
accurate books and records on a calendar year basis in accordance with GAAP.
Each DDR/DRA Borrower is required to furnish to the Master Servicer, among other
things, (a) within 60 days following the end of each fiscal year, a complete
copy of its annual financial statements audited by a nationally recognized
accounting firm, including a balance sheet, statement of revenues and expenses
and operating statements for each DDR/ DRA Property, (b) not later than 30 days
after the end of each fiscal quarter unaudited financial statements covering
such accounting period, including a balance sheet as of the end of such quarter,
a statement of revenues and expenses for such quarter and operating statements
for each DDR/DRA Property, (c) not later than 45 days after the end of each
calendar quarter, rent rolls for the DDR/DRA Properties and (d) an annual
operating budget on a monthly basis.
THE PROPERTIES. The DDR/DRA Properties consist of 10 retail power centers:
the Shoppers World Property is located in Framingham, Massachusetts; the
Woodfield Village Green Property is located in Schaumburg, Illinois; the Carmel
Mountain Plaza Property is located in San Diego, California; the New Hope
Commons Property is located in Durham, North Carolina; the Fairfax Towne Center
Property is located in Fairfax, Virginia; the Perimeter Pointe Property is
located in Atlanta, Georgia; the Broadway Marketplace Property is located in
Denver, Colorado; the Town Center Prado Property is located in Marietta,
Georgia; the Independence Commons Property is located in Independence, Missouri;
and the Carrillon Place Property is located in Naples, Florida.
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All of the DDR/DRA Properties were developed and owned by Homart Community
Centers Inc. prior to their acquisition by the respective DDR/DRA Borrower. The
DDR/DRA Properties have GLAs ranging from 253,941 square feet to 786,196 square
feet, with an average GLA of 421,794 square feet and an aggregate GLA of
4,217,942 square feet. The DDR/DRA Properties were built and/or renovated
between 1993 and 1997. The occupancy rate of the properties as of June 27, 1997
ranged from 83% to 100%, with a weighted average occupancy rate, as of June 27,
1997, of 97%. (The "occupancy rate" disclosed with respect to the DDR/DRA
Properties include "occupied" (i) space that is leased but not occupied and (ii)
anchor space that is occupied but not owned by the related borrower.) The 1996
NOI of the properties ranged from $1,814,389 to $8,398,537 and aggregated
$41,526,524. The appraised values of the properties based on recent appraisals
ranged from $28,000,000 to $131,600,000 with an aggregate appraised value of
$529,500,000. The five largest tenants (based on annual base rental payments)
for the DDR/DRA Properties are TJMaxx/Marshall's, Kmart/Builder's Square,
Wal-Mart/Sam's Warehouse, Barnes & Noble, and OfficeMax which contribute 6.7%,
5.6%, 4.6%, 4.6% and 3.8%, of the aggregate base rent, respectively.
SHOPPERS WORLD. This retail power center is located on approximately 170.7
acres at the intersection of I-90 and Route 9 in the towns of Framingham and
Natick, Massachusetts. Framingham, Massachusetts is located approximately 20
miles west of Boston, Massachusetts. The Shoppers World Property contains
786,196 square feet of GLA, and was built in 1951 and redeveloped in 1994
through 1997. As of June 27, 1997, the center was approximately 96% leased.
The following table sets forth certain data regarding the major tenants at
the Shoppers World Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Bradlees(1)....................................................... 2005 102,555 13.0% 0.9%
General Cinema.................................................... 2014 85,000 10.8 17.4
Toys R Us/Kids R Us(1)............................................ 2020 63,300 8.1 1.2
Marshall's........................................................ 2011 50,081 6.4 7.0
Bobs.............................................................. 2011 50,059 6.4 5.9
The Wiz(2)........................................................ 2011 50,000 6.4 0.0
Sports Authority.................................................. 2015 43,629 5.5 7.1
Linens 'N Things.................................................. 2011 40,159 5.1 5.6
Macy's Furniture(1)(3)............................................ 2020 40,000 5.1 0.0
TJMaxx............................................................ 2010 39,884 5.1 5.2
Sears Homelife.................................................... 2004 36,108 4.6 2.5
OfficeMax......................................................... 2011 30,000 3.8 7.1
Barnes & Noble.................................................... 2011 29,963 3.8 8.0
Designer Shoe Warehouse........................................... 2007 27,089 3.4 4.1
A.C. Moore........................................................ 2002 24,560 3.1 3.2
Mass Port(4)...................................................... 2005 0 0.0 2.5
Mikasa............................................................ 2006 18,011 2.3 2.9
</TABLE>
- ------------------------
(1) Tenant leases pad from DDR/DRA III Borrower (Monthly rent from Bradlees is
$8,333.33 plus maintenance and other related expenses and monthly rent from
Toys R Us/Kids R Us is $12,500 plus maintenance and other related expenses);
building owned by tenant.
(2) The tenant no longer occupies the space, and has discontinued making
payments under its lease. See "Risk Factors--The Mortgage Loans--Risks
Associated With Retail Properties" herein.
(3) Tenant does not pay rent; only pays maintenance and other related expenses.
(4) Used for commuter shuttle bus stop and commuter parking.
Based on an appraisal dated July 11, 1997, the appraised value of the
property was $131,600,000.
S-120
<PAGE>
There are 4 shopping centers located within a one mile radius from Shoppers
World, 2 of which, Natick Mall and Cloverleaf Marketplace, are adjacent to it.
Natick Mall was built in 1966 and renovated in 1994, contains more than
1,100,000 square feet of GLA, and has Filene's, Lord & Taylor, Macy's, and Sears
as anchor tenants.
The Shoppers World Property is adjacent to wetlands and may be subject to
certain federal and state laws and requirements with respect thereto. See "Risk
Factors--The Mortgage Loans--Environmental Law Considerations".
WOODFIELD VILLAGE GREEN. This retail power center is located on
approximately 51.5 acres on the northeast corner of Meacham and Golf Roads, and
is adjacent to Interstate 90, Interstate 290 and Highway 53, in Schaumburg,
Illinois. Schaumburg, Illinois is located approximately 20 miles west of
downtown Chicago, Illinois. The Woodfield Village Green Property contains
508,092 square feet of GLA, and was built in 1994. As of June 27, 1997, the
center was approximately 100% leased.
The following table sets forth certain data regarding the major tenants at
the Woodfield Village Green Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Builders Square(1)................................................ 2019 110,400 21.7% 20.0%
Service Merchandise(1)............................................ 2014 50,000 9.8 4.9
Sports Authority.................................................. 2013 42,396 8.3 7.4
Marshall's........................................................ 2009 40,000 7.9 6.7
Nordstrom Rack.................................................... 2009 40,000 7.9 7.2
Circuit City...................................................... 2009 33,008 6.5 6.6
Saks Off 5th...................................................... 2011 30,273 6.0 6.4
Borders Books..................................................... 2009 30,000 5.9 5.8
Container Store................................................... 2011 24,969 4.9 6.2
OfficeMax......................................................... 2010 23,500 4.6 4.4
R Strouds......................................................... 2004 15,000 3.0 4.4
Old Navy.......................................................... 2000 11,500 2.3 3.7
</TABLE>
- ------------------------
(1) Tenant leases pad from the DDR/DRA I Borrower (Monthly rent from Builders
Square is $119,865 plus maintenance and other related expenses and monthly
rent from Service Merchandise is $29,166.67 plus maintenance and other
related expenses); building owned by tenant.
Based on an appraisal dated July 11, 1997, the appraised value of the
property was $72,300,000, not including an adjacent parcel not included as
collateral for this loan with an appraised value of $5,900,000.
There are 3 shopping centers located within 2.5 miles of the Woodfield
Village Green Property, one of which, the Woodfield Mall, is located directly
across the street to the Woodfield Village Green. The Woodfield Mall was built
in 1971 and renovated in 1995, contains over 2,300,000 square feet of GLA, has
J.C. Penney, Lord & Taylor, Marshall Fields, Nordstrom and Sears as anchor
tenants, and as of July 15, 1997 was reported to be 96% leased. One Schaumburg
Place was built in 1991 and contains over 500,000 square feet of GLA. One
Schaumburg Place is a hybrid regional mall and community center, and due in part
to this unconventional structure, has failed to find its niche in the trade
area. It is currently 15% leased and has been foreclosed upon by its lender.
There is also an additional shopping center that is located within a five mile
radius from the Woodfield Village Green.
S-121
<PAGE>
CARMEL MOUNTAIN PLAZA. This retail power center is located on approximately
41 acres located on Rancho Carmel Drive, approximately 1/4 mile from its
interchange with Interstate 15, in San Diego, California, approximately 20 miles
northeast from downtown San Diego. The Carmel Mountain Plaza shopping center
contains 532,129 square feet of GLA, and was built between 1993 and 1994. As of
June 27, 1997, the Carmel Mountain Plaza Property was approximately 100% leased.
The following table sets forth certain data regarding the major tenants at
the Carmel Mountain Plaza Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ----------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Kmart(1).......................................................... 2018 107,870 20.3% 5.8%
Mervyn's(2)....................................................... 2052 80,000 15.0 0.0
Sportmart......................................................... 2018 40,672 7.6 6.5
Pacific Theatres.................................................. 2010 34,561 6.5 9.8
Circuit City...................................................... 2008 30,973 5.8 6.6
Marshall's........................................................ 2009 28,760 5.4 5.9
Ross Dress For Less............................................... 2004 24,000 4.5 4.5
Michael's......................................................... 2004 22,969 4.3 4.7
Blockbuster Music/Video........................................... 1998/1999 20,048 3.8 6.3
Barnes & Noble.................................................... 2003 13,916 2.6 5.0
</TABLE>
- ------------------------
(1) Tenant leases pad from DDR/DRA Borrower (Monthly rent from Kmart is
$28,333.33 plus maintenance and other related expenses); building owned by
tenant.
(2) Tenant-owned store. Tenant does not pay rent; only pays maintenance and
other related expenses.
Based on an appraisal dated July 1, 1997, the appraised value of the
property was $65,000,000.
The Carmel Mountain Plaza Property is the largest of 5 other retail centers
located within 2.5 miles of the Carmel Mountain Plaza Property.
NEW HOPE COMMONS. This retail power center is located on approximately 39.5
acres at the intersection of US 15-501 and Interstate 40 in Durham, North
Carolina, located in the Research Triangle Area of North Carolina, which
includes the cities of Durham, Raleigh, and Chapel Hill. New Hope Commons is
approximately 4 miles northeast of Duke University. The center contains 466,916
square feet of GLA, and was built in 1995. The New Hope Commons Property
currently requires repairs which are under warranty from a third party
contractor who is responsible for making such repairs.
There have been problems at New Hope Commons concerning the collapse of a
retaining wall. A $1,000,000 reserve has been provided as security for the
repair of the retaining wall pursuant to the terms of a Completion/Repair and
Security Agreement. As of June 27, 1997, the center was approximately 98%
leased.
A Phase II site assessment was conducted with respect to the New Hope
Commons Property, but there was no indication of the presence of contamination.
See "Risk Factors--The Mortgage Loans-- Environmental Law Considerations".
S-122
<PAGE>
The following table sets forth certain data regarding the major tenants at
the New Hope Commons Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Wal-Mart.......................................................... 2015 149,929 32.1% 28.1%
Uptons(1)......................................................... N/A 58,845 12.6 0.0
Best Buy.......................................................... 2011 45,000 9.6 13.0
Linens 'N Things.................................................. 2011 31,999 6.9 7.6
Marshall's........................................................ 2011 30,090 6.4 6.3
Barnes & Noble.................................................... 2010 25,200 5.4 8.5
OfficeMax......................................................... 2010 23,248 5.0 5.6
Michaels.......................................................... 2005 19,064 4.1 4.0
Old Navy.......................................................... 2000 17,512 3.8 4.9
Zany Brainy....................................................... 2006 13,010 2.8 4.7
</TABLE>
- ------------------------
(1) Tenant-owned store. Tenant does not pay rent; only pays maintenance and
other related expenses.
Based on an appraisal dated July 11, 1997, the appraised value of the
property was $43,500,000.
There are 3 shopping centers located within 8 miles of New Hope Commons. One
of these shopping malls, the South Square Mall, was built in 1975 and renovated
in 1985, contains more than 700,000 square feet of GLA, and has Belk-Legget,
Dillard's and J.C. Penney as anchor tenants. There is an additional shopping
center that is located within 5 miles of New Hope Commons, three others that are
within ten miles, and one that is just beyond ten miles of New Hope Commons.
FAIRFAX TOWNE CENTER. This retail power center is located on approximately
22.8 acres on the southwest quadrant of West Ox Road and Route 50 (Lee Jackson
Memorial Highway) in Fairfax, Virginia. The Fairfax Towne Center Property
contains 253,941 square feet of GLA, and was built in 1994. As of June 27, 1997,
the center was approximately 100% leased. Based on an appraisal dated July 6,
1997, the appraised value of the property was $36,100,000.
The following table sets forth certain data regarding the major tenants at
the Fairfax Towne Center Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Safeway Stores.................................................... 2019 61,322 24.1% 17.8%
United Artists.................................................... 2014 47,230 18.6 18.1
Bed Bath & Beyond................................................. 2010 39,669 15.6 13.9
TJMaxx............................................................ 2009 37,246 14.7 7.5
Tower Records..................................................... 2009 23,000 9.1 13.1
Zany Brainy....................................................... 2005 15,344 6.0 8.0
</TABLE>
There are 5 shopping centers located within 2.5 miles of the Fairfax Towne
Center Property. One of these shopping centers, the Fair Oaks Mall, is located
directly across from the Fairfax Towne Center Property and contains
approximately 1.4 million square feet of GLA, and has Sears, Woodward & Lothrop,
and Hecht's as anchor tenants. The Fair Lakes Center, which is located 1.5 miles
to the west of the Fairfax Towne Center, was built in 1993 and contains over
800,000 square feet of GLA, has Food Lion, Wal-Mart, BJ's Wholesale Club,
Hechingers, Best Buy, Toys R Us, Kids Warehouse, Uptons, and Petsmart as anchor
tenants, and as of July 27, 1997 was 100% leased.
S-123
<PAGE>
TOWN CENTER PRADO. This retail power center is located on approximately
39.8 acres at the northwest corner of Barrett Parkway and Bells Ferry Road in
Marietta, Georgia. Marietta, Georgia is located approximately 20 miles northwest
from Atlanta, Georgia. The Town Center Prado Property contains 270,440 square
feet of GLA, and was built in 1994. Substantial expansions were made in 1997. As
of June 27, 1997, the center was approximately 95% leased.
The following table sets forth certain data regarding the major tenants at
the Town Center Prado Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Publix............................................................ 2015 56,146 20.8% 12.9%
Home Place........................................................ 2011 53,000 19.6 14.9
SportsLife........................................................ 2011 40,000 14.8 14.2
Stein Mart........................................................ 2007 36,538 11.6 6.0
Barnes & Noble.................................................... 2011 19,978 6.4 7.2
Sport Shoe........................................................ 2005 15,000 4.8 6.1
Coomers Craft..................................................... 2002 14,500 4.6 3.4
Zany Brainy....................................................... 2006 13,500 4.3 5.7
</TABLE>
Based on an appraisal dated July 3, 1997, the appraised value of the
property was $33,000,000.
There are 8 shopping centers all located within 1.5 miles from the Town
Center Prado Property. One of these shopping centers, known as the Town Center
Mall, was built in 1986 and renovated in 1992, contains more than 1,200,000
square feet of GLA, has Macy's, Parisian, Rich's and Sears as anchor tenants,
and as of July 3, 1997 was 97% leased. Another of these shopping centers, known
as Cobb Place Center, was built in 1986 and contains over 300,000 square feet of
GLA, has AMC Theaters, Service Merchandise, Uptons and Bed, Bath & Beyond as
anchor tenants, and as of July 3, 1997 was 85% leased.
The Town Center Prado Property is adjacent to wetlands and may be subject to
certain Federal and state laws and requirements with respect thereto.
Additionally, a Phase II site assessment was conducted with respect to the Town
Center Prado Property, but there was no indication of the presence of
contamination. See "Risk Factors--The Mortgage Loans--Environmental Law
Considerations."
PERIMETER POINTE. This retail power center is located on approximately 31.2
acres located at the corner of Mount Vernon Highway and Perimeter Center West
Parkway, the area's retail thoroughfare, in Atlanta, Fulton County, Georgia. The
center contains 353,652 square feet of GLA, and was built between 1995 and 1996.
As of June 27, 1997, the center was approximately 83% leased.
The following table sets forth certain data regarding the major tenants at
the Perimeter Pointe Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ---------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Homeplace Stores, Inc............................................. 2011 54,448 15.4% 19.7%
Babies R Us....................................................... 2007 36,900 10.4 8.3
United Artists Theatre............................................ 2015 35,390 10.0 13.7
Stein Mart........................................................ 2010 35,000 9.9 6.3
Goody's Family Clothing(1)........................................ 2007 30,000 8.5 5.9
St. Joseph's Hospital............................................. 2006 22,580 6.4 13.0
Michael's......................................................... 2010 18,122 5.1 5.9
</TABLE>
- ------------------------
(1) Goody's Family Clothing has requested consent to the assignment of its lease
to Office Depot. Goody's Family Clothing currently occupies the space
covered by its lease and is currently paying rent.
Based on an appraisal dated July 13, 1997, the appraised value of the
property was $47,500,000.
S-124
<PAGE>
There are 5 other shopping centers located within a one mile radius from the
Perimeter Pointe Property, 2 of which are also located on the Perimeter Center
West Parkway. One such shopping center, the Perimeter Mall was built in 1971 and
renovated in 1991 and 1997, contains over 450,000 square feet of GLA, has
Rich's, JC Penney, Macy's and Nordstrom's (under construction) as its anchor
tenants, and as of July 10, 1997 was 94% leased.
BROADWAY MARKETPLACE. This retail power center is located on approximately
38.6 acres located off I-25 at the southwest corner of Alameda Avenue and South
Broadway Street in the southwest quadrant of Denver, Colorado. The Broadway
Marketplace shopping center contains 382,576 square feet of GLA and was built
between 1993 and 1995. As of June 27, 1997 the Broadway Marketplace Property was
approximately 100% leased.
The following table sets forth certain data regarding the major tenants at
the Broadway Marketplace Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Wal-Mart/Sam's Club............................................... 2018 114,057 29.8% 30.5%
Kmart............................................................. 2019 107,806 28.2 28.4
Albertson's....................................................... 2019 50,645 13.2 11.2
OfficeMax......................................................... 2010 23,500 6.1 6.9
Pep Boys(1)....................................................... 2014 22,356 5.8 4.0
</TABLE>
- ------------------------
(1) Tenant leases pad from DDR/DRAI Borrower (Monthly rent from Pep Boys is
$143,302 plus maintenance and other related expenses); building owned by
tenant.
Based on an appraisal dated July 9, 1997 the appraised value of the property
was $34,500,000.
The 16th Street Mall is located within 2.5 miles of the Broadway Marketplace
Property. The 16th Street Mall was built in 1982 and contains over 1,000,000
square feet of GLA and has TJMaxx, Media Play, Walgreens and Office Depot as
anchor tenants. In addition, there are 3 other shopping centers located within 5
miles from the Broadway Marketplace, with one, the Cinderella City Mall, built
in 1968 and renovated in 1984, containing over 1,250,000 square feet of GLA,
with JC Penney, Joslins, May D&F, and Montgomery Ward as anchor tenants.
INDEPENDENCE COMMONS. This retail power center is located on approximately
39.6 acres at the northeast corner of 39th Street and Arrowhead Drive in
Independence, Missouri, less than a mile from the intersection of I-70 and
I470/Rt. 291, which are two major roadways providing easy access to all major
points in the Kansas City area. Independence, Missouri is located approximately
five miles from Kansas City, Missouri. The area immediately surrounding and
directly influencing the subject property contains a mixture of retail, office
and residential land uses. The Independence Commons Property contains 382,162
square feet of GLA, and was built in 1996. As of June 27, 1997, the Independence
Commons shopping center was approximately 97% leased.
S-125
<PAGE>
The following table sets forth certain data regarding the major tenants at
the Independence Commons Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Kohl's Department................................................. 2016 80,684 21.1% 15.2%
American Multi-Cinema............................................. 2015 63,800 16.7 24.8
Rhodes Furniture.................................................. 2016 50,640 13.3 11.7
Bed Bath & Beyond................................................. 2012 40,000 10.5 10.4
Marshall's........................................................ 2012 30,439 8.0 6.8
Barnes & Noble.................................................... 2011 30,000 7.9 11.4
Coomers Craft..................................................... 2011 15,003 3.9 3.6
Nills Bros. Sports................................................ 2006 12,033 3.2 3.8
</TABLE>
Based on an appraisal dated July 2, 1997, the appraised value of the
property was $38,000,000.
There are 7 shopping centers located within 3.5 miles from the Independence
Commons Property, one of which, the Crossroads of Independence Shopping Center,
was built in 1996, contains 408,000 square feet of GLA, is located 0.25 miles
from the Independence Commons Property on the other side of Route 291 on 39th
Street, has Wal-Mart, Home Quarters warehouse store, and Petsmart as anchor
tenants, and as of June 30, 1997 was 100% leased. The Independence Center, a
regional mall that is not considered direct competition for the Independence
Commons Property because of its different tenant mix, is located 0.25 miles from
the Independence Commons shopping center and was built in 1974 and renovated in
1988, contains over 850,000 square feet of GLA, has Dillard's, The Jones Store,
and Sears as anchor tenants, and as of July 21, 1997 was 90% leased.
CARILLON PLACE. This retail power center is located on approximately 29.2
acres at the southeast corner of Airport-Pulling Road and Pine Ridge Road, in
Naples, Florida. The center contains 281,838 square feet of GLA, and was built
in 1994. As of June 27, 1997, the center was approximately 96% leased.
The following table sets forth certain data regarding the major tenants at
the Carillon Place Property as of June 27, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Winn-Dixie........................................................ 2014 50,540 17.9% 14.7%
Service Merchandise............................................... 2015 50,061 17.8 15.9
TJMaxx(1)......................................................... 2009 32,900 11.7 10.9
Ross Dress For Less............................................... 2005 25,500 9.1 9.0
OfficeMax......................................................... 2010 23,500 8.3 8.7
Circuit City...................................................... 2015 21,285 7.6 8.0
</TABLE>
- ------------------------
(1) Includes 6,650 square feet of expansion space representing $72,219 in
annualized base rent; lease is signed and expected to commence by November,
1997.
Based on an appraisal dated July 14, 1997, the appraised value of the
property was $28,000,000.
S-126
<PAGE>
There are 2 shopping centers located within 2.5 miles of the Carillon Place
Property. The Pine Ridge Crossing shopping center is located directly across the
street from the Carillon Place shopping center. The Pine Ridge Crossing shopping
center was built in 1994 and contains 280,000 square feet of GLA, has Publix,
Beall's and Target as anchor tenants, and as of August 1, 1997 was 99% leased.
The Naples Shopping Center, which was built in 1962 and renovated in 1989,
contains over 200,000 square feet of GLA, with Publix, Marshall's, Linens 'N
Things, Walgreen's and Office Depot as anchor tenants, and as of August 1, 1997
was 92% leased.
PROPERTY MANAGEMENT. DDRC is the property manager for the DDR/DRA
Properties (in such capacity, the "DDR/DRA Property Manager"). Each of the
DDR/DRA Borrowers is 50% owned by a wholly owned affiliate of DDRC. All
management activities with respect to the DDR/DRA Properties are performed by
employees who are also engaged in the management activities relating to other
properties that are owned by DDRC. DDRC has retained a third party to provide
property maintenance services at the Carmel Mountain Plaza Property.
The DDR/DRA Properties are managed by DDRC pursuant to three separate
property management agreements (each, a "DDR/DRA Management Agreement" and
collectively, the "DDR/DRA Management Agreements"). Pursuant to each agreement,
DDRC is responsible for the management of the DDR/ DRA Properties and the
administration of the leases with respect thereto. Under the DDR/DRA Management
Agreements, DDRC is entitled to (a) an annual management fee equal to 3.5% of
gross receipts of the DDR/DRA Properties, payable monthly, (b) all third party
costs advanced by DDRC for the respective DDR/DRA Borrower pursuant to such
agreement, (c) a leasing fee equal to 5% of the net base rent earned on the
lease over its term (not to exceed $3.00/square foot) for new leases entered
into with new tenants, (d) a modification fee of 3% of the net base rent earned
on the lease over its term (not to exceed $1.80/square foot) for extensions,
expansions or renewals of an existing lease and (e) for temporary kiosks or
concessionaires having a term of not more than four weeks and aimed at either
promotions or special holidays, 50% of the rent for such kiosk or
concessionaire.
Each DDR/DRA Management Agreement provides that DDRC will manage the
properties until terminated with or without cause by the election of any DRA
Entity, the related DDR/DRA Borrower or DDRC. If DDRC is terminated for cause,
DDRC will receive a full explanation of the reasons for the termination and
shall have 30 days to cure the problem that was the basis for the termination.
If such problem is cured, the DDR/DRA Management Agreement will not terminate.
The DDR/DRA Management Agreements will terminate, but only with respect to a
specific property and not with respect to all DDR/DRA Properties, upon the date
of any of any damage or destruction of such property which, in the reasonable
opinion of the respective DDR/DRA Borrower or the DDR/DRA Property Manager,
materially affects the operation of any DDR/DRA Property for its intended
purpose and such property ceases to so be operated. The DDR/DRA Management
Agreement will also terminate upon the taking of any DDR/ DRA Property or any
portion thereof by condemnation which, in the reasonable opinion of either
party, materially affects the operation of the DDR/DRA Property for its intended
purpose and such property ceases so to be operated.
In addition, pursuant to three separate agreements, each among the lender, a
DDR/DRA Borrower and DDRC (the "Manager's Subordination"), the Master Servicer
will have the right to terminate the DDR/DRA Management Agreement and cause a
new property manager to be engaged upon the occurrence of any of the following
events: (1) DDRC becomes insolvent or (2) an event of default occurs under the
DDR/DRA Loan documents.
Pursuant to each of the Manager's Subordinations, DDRC has also agreed that
all fees and all other amounts payable to DDRC pursuant to the DDR/DRA
Management Agreements are and will be, in all respects, subordinate and inferior
to the liens and security interests created by the DDR/DRA Loan.
S-127
<PAGE>
THE COURTYARD LOAN AND PROPERTIES
THE LOAN. The Courtyard Loan has a principal balance as of the Cut-Off Date
of $321,577,850. The Courtyard Loan is secured by Mortgages (the "Courtyard
Mortgages") encumbering the Courtyard Borrower's fee and leasehold interests in
50 hotels (the "Courtyard Properties") located in 16 states. The Courtyard
Mortgages are cross-collateralized and cross-defaulted. The Courtyard Loan is
evidenced by a mortgage note given by the Courtyard Borrower in favor of LB
Holdings (the "Courtyard Mortgage Note").
THE BORROWER. Courtyard by Marriott Limited Partnership (the "Courtyard
Borrower") is a Delaware limited partnership. The Courtyard loan documents limit
the activities of the Courtyard Borrower to owning and operating the Courtyard
Properties. The general partner of the Courtyard Borrower is CBM One Corporation
(the "Courtyard GP"), a Delaware corporation whose corporate authority is
limited to acting as the general partner of the Courtyard Borrower. The
Courtyard GP is a wholly-owned subsidiary of Host Marriott Corporation, a
Delaware corporation whose common stock is traded on the NYSE under the listing
symbol "HMT". The Courtyard GP owns a 1.3% limited partnership interest in the
Courtyard Borrower in addition to its 5% general partnership interest. The
Courtyard Borrower has approximately 1,200 other limited partners.
SECURITY. The Courtyard Loan is a non-recourse loan, secured by 50 limited
service hotels operated under the "Courtyard by Marriott" name and certain
related collateral (including an assignment of leases and rents and funds in
certain accounts). Seventeen of the Courtyard Properties are owned in fee simple
by the Courtyard Borrower and 31 of such properties are located on land that the
Courtyard Borrower leases from affiliates of Marriott International, Inc.
("MII"), a Delaware corporation whose common stock is traded on the NYSE under
the listing symbol "MAR". One of the Courtyard Properties is located on land
that the Courtyard Borrower leases from a third party, and 1 is partly owned in
fee by the Courtyard Borrower and is partly leased from a third party (see
"--Ground Leases" below). Each of the MII affiliates that have leased land on
which a Courtyard Property is located to the Courtyard Borrower (the "Marriott
Ground Lessors") have subjected their fee interest in such land to the lien of
the relevant mortgage that secures the Courtyard Loan. Subject to exceptions for
fraud, material misrepresentation or misappropriation of funds and certain
environmental matters, neither the Courtyard Borrower nor any of its partners or
affiliates is personally liable for the payment of the Courtyard Loan. The
Courtyard Borrower has agreed, pursuant to an Environmental Indemnity Agreement,
to indemnify the lender and its successors and assigns with respect to
liabilities arising from or in connection with certain environmental matters.
The Courtyard Borrower has made certain environmental representations and has
represented that it has good and marketable fee simple or leasehold title to the
Mortgaged Properties, subject to certain encumbrances permitted by LB Holdings.
LB Holdings is the named insured under the title policies (which will be
assigned to the Trustee) which insure that each Courtyard Mortgage constitutes a
valid and enforceable first lien on the applicable Courtyard Property, subject
to certain exceptions and exclusions from coverage set forth therein.
PAYMENT TERMS. The Courtyard Loan was originated by LB Holdings on March
21, 1997 (the "Courtyard Closing Date"). The Courtyard Loan matures on April 10,
2017 (the "Courtyard Maturity Date"). The Courtyard Loan bears interest at a
fixed rate per annum of 7.865% (the "Courtyard Base Interest Rate") until April
10, 2012 (the "Courtyard Anticipated Repayment Date"). The scheduled principal
balance of the Courtyard Loan as of the Courtyard Anticipated Repayment Date is
$134,955,706.48. On and after the Courtyard Anticipated Repayment Date, the
Courtyard Loan will bear interest at a rate per annum which is fixed on the
Courtyard Anticipated Repayment Date (the "Courtyard Adjusted Interest Rate")
equal to the greater of (i) 9.865% or (ii) the average, calculated by linear
interpolation, of the yields of the U.S. Treasury Constant Maturities with terms
(one longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the fifteenth anniversary of the
Courtyard Anticipated Repayment Date, plus 2%. "U.S. Obligations" means
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direct obligations of, or obligations fully guaranteed by, the United States of
America which are not subject to call, prepayment or early redemption. The
Courtyard Adjusted Interest Rate will be determined by the Master Servicer by
reference to the yields as reported in Federal Reserve Statistical Release H.15
on the last business day of the week immediately prior to the Courtyard
Anticipated Repayment Date. The Courtyard Borrower will only be required to make
current interest payments at the Courtyard Base Interest Rate and the interest
accrued at the excess of the Courtyard Adjusted Interest Rate over the Courtyard
Base Interest Rate will (a) be deferred and added to the principal amount of the
Courtyard Loan and (b) bear interest at the Courtyard Adjusted Interest Rate
(such accrued and deferred interest and interest thereon, the "Courtyard Excess
Interest"). Interest on the Courtyard Loan is calculated based on the actual
number of days elapsed and a 360-day year.
The Courtyard Borrower made a payment of interest only on the Courtyard
Closing Date. The Courtyard Loan requires 240 monthly payments of principal and
interest commencing on May 10, 1997 of approximately $2,720,157 based on a
240-month amortization schedule and the Courtyard Base Interest Rate (the
"Courtyard Monthly Debt Service Payment"). Payment of the balance of the
principal together with all accrued and unpaid interest (including Courtyard
Excess Interest) is required on the Courtyard Maturity Date. Commencing on the
first Due Date after the Courtyard Anticipated Repayment Date and continuing on
each monthly Due Date thereafter, in addition to the Courtyard Monthly Debt
Service Payment, 100% of Courtyard Excess Cash Flow for each of the Courtyard
Operating Profit Payment Dates occurring during the Courtyard Accounting Period
or Periods ending during the Courtyard Debt Service Period relating to the
payment will be applied first to prepay principal on the Courtyard Loan until
the principal balance of the Courtyard Loan is paid in full, then to Courtyard
Default Interest, and then to pay the Courtyard Excess Interest. As used herein,
"Courtyard Excess Cash Flow" means, for each period of determination, the
difference between (i) net operating income from the Courtyard Properties and
(ii) the sum of (a) the Courtyard Monthly Debt Service Payment, (b) other debt
payable under the Courtyard Loan documents and (c) to the extent not duplicative
of clauses (a)-(b), (i) amounts required to be funded into any required tax and
insurance escrow, (ii) amounts required to be funded into the Debt Service
Reserve Account, (iii) amounts required to be funded into the FF&E Reserve
Account, (iv) amounts due in respect of current Courtyard Subordinated
Obligations, (v) Subordinated FF&E Reserve Contributions, (vi) reserves for
certain administrative expenses of the Courtyard Borrower, not to exceed
$300,000 per year (as adjusted by CPI), (vii) amounts owed to the Courtyard
Manager in respect of certain incentive management fees, (viii) payments for
certain repairs, alterations, improvements, renewals or replacements with
respect to the Courtyard Properties, and (ix) an amount equal to 1/60(th) of the
amount of certain operating expenses paid by the Courtyard Manager that were not
previously reimbursed by the Courtyard Borrower. A "Courtyard Operating Profit
Payment Date" means the last Business Day of the third week of each Courtyard
Accounting Period. A "Courtyard Accounting Period" generally means each period
of four consecutive weeks having the same beginning and ending dates as the
Courtyard Manager's corresponding four week accounting periods. There are
thirteen Courtyard Accounting Periods in the Courtyard Manager's fiscal year,
some of which have five weeks in order to adjust the fiscal year to the calendar
year. A "Courtyard Debt Service Period" means the period from and including the
tenth day of the month immediately preceding each respective Due Date to the
ninth day of the month in which such Due Date date occurs.
Any interest payment or principal payment not paid when due will bear
interest at a default rate equal to the greater of (a) 2% plus the Courtyard
Base Interest Rate or the Courtyard Adjusted Interest Rate, as applicable, and
(b) the prime rate, as defined in the Wall Street Journal.
PREPAYMENT. Voluntary prepayment of the Courtyard Loan is prohibited prior
to the date that is 6 months prior to the Courtyard Anticipated Repayment Date.
On such date and thereafter, the Courtyard Borrower will be permitted to prepay
the Courtyard Loan, in whole or in part, on any Due Date, without payment of a
yield maintenance premium, provided that no event of default exists under the
Courtyard Loan documents and the Courtyard Borrower pays all sums due on the
Courtyard Loan through such Due
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Date. Principal prepayments on the Courtyard Loan are required to occur on
regularly scheduled Due Dates. The Courtyard Loan may also be prepaid at any
time prior to the Courtyard Defeasance Period as a result of certain events with
respect to condemnation or casualty (without penalty or premium), as described
below under "Condemnation and Casualty" and in connection with a release of a
Courtyard Property as described below under "--Other Releases".
If, prior to the last day of the Courtyard Defeasance Period, all or any
part of the principal amount of the Courtyard Loan is prepaid as a result of the
acceleration of the maturity of the Courtyard Mortgage Note after an event of
default, the Courtyard Borrower will be required to make a payment (the
"Courtyard Yield Maintenance Payment") equal to the greater of (A) 1% of the
principal prepayment and (B) the present value as of the end of the Courtyard
Debt Service Period of a series of monthly payments each equal to an amount
equal to the product of (x) 1/12th of the Courtyard Base Interest Rate minus
1/12th of the Reinvestment Yield, and (y) the amount of the principal prepayment
on each of the remaining Due Dates prior to and including the Courtyard
Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the prepayment date. Such present
value will be discounted at a rate equal to the lesser of (A) the annual yield
on the United States Treasury issue (primary issue) with a maturity date closest
to the Courtyard Maturity Date and (B) the yield on the United States Treasury
issue (primary issue) with a maturity equal to the remaining average life of the
Courtyard Mortgage Note (the "Treasury Rate") (as converted to a monthly
compounded nominal annual yield, the "Reinvestment Yield"). No Courtyard Yield
Maintenance Payment will be required in connection with prepayments made after
the last day of the period starting two years after the Closing Date and ending
on October 10, 2011 (such period, the "Courtyard Defeasance Period.")
In the event that, prior to the first day of the Courtyard Defeasance
Period, a Courtyard Property has suffered a total or substantial Courtyard
Taking or Courtyard Casualty (in each case, as to which restoration is not
required or permitted under the applicable Mortgage), the Courtyard Borrower is
required to cause the release of such Courtyard Property from the lien of the
security documents upon the satisfaction of the following conditions:
(a) the Courtyard Borrower provides not less than 30 days' notice to the
Master Servicer specifying a Due Date on which the amount set forth in clause
(c) below is to be provided to Master Servicer, which notice shall be
accompanied by a certificate of the Courtyard Borrower and the Courtyard GP,
signed by a duly authorized officer of the Courtyard GP, to the effect that no
default or event of default has occurred and is continuing;
(b) the Courtyard Borrower pays all interest that is accrued and unpaid on
the principal balance of the Courtyard Note and all other sums due under the
Courtyard Loan documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of LB Holdings associated
with the prepayment, including release of the lien of the security documents and
reasonable attorneys' fees and expenses;
(c) the Courtyard Borrower pays, to be applied to prepayment of the
scheduled principal payments due on each Due Date, in the inverse order of their
scheduled maturities, an amount equal to the greater of (a) and (b), in which
(a) is the Allocated Loan Amount for such Courtyard Property and (b) is the
lesser of (x) the Courtyard Release Price for such Courtyard Property and (y)
the sum of the net sales proceeds received by the Courtyard Borrower from the
sale of the Courtyard Property or the part thereof that remains following the
Courtyard Taking or Courtyard Casualty, plus the remaining Courtyard
Condemnation Award or Courtyard Insurance Proceeds not previously applied to
repayment of the Courtyard Loan or Courtyard Restoration; and
(d) the Courtyard Borrower delivers to the Master Servicer, for execution,
forms of release of such Courtyard Property from the lien of the security
documents appropriate for the jurisdiction in which such Courtyard Property is
located.
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RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Courtyard Borrower is
permitted at any time during the Courtyard Defeasance Period, to defease the
lien of the security documents to cause the release of one or more Courtyard
Properties (each such defeasance, a "Courtyard Release") provided that, among
other conditions, no event of default has occurred and the Courtyard Borrower
pays (a) all interest accrued and unpaid on the principal balance of the
Courtyard Loan, (b) all other sums due under the Courtyard Loan documents and
(c) the Courtyard Defeasance Deposit. The "Courtyard Defeasance Deposit" is the
amount sufficient to purchase U.S. Obligations that provide payments equal to
the payments due on the Courtyard Loan on or prior to, but as close as possible
to, all successive Due Dates under the Courtyard Loan (or, in the case of a
release of less than all of the Courtyard Properties, with respect to a
principal balance equal to the Courtyard Release Price for the Courtyard
Properties to be released) or, in the case of a casualty or taking, a principal
balance equal to the greater of (a) the Allocated Loan Amount for such Courtyard
Property and (b) the lesser of (x) the Courtyard Release Price for such
Courtyard Property and (y) the sum of the net sales proceeds received by the
Courtyard Borrower from the sale of the Courtyard Property or the part thereof
that remains following the Courtyard Taking or Courtyard Casualty, plus the
remaining Courtyard Condemnation Award or Courtyard Insurance Proceeds not
previously applied to repayment of the Courtyard Loan or Courtyard Restoration,
together with (i) except in connection with a casualty or condemnation or the
release of all of the Courtyard Properties, additional U.S. Obligations that may
be necessary to cause the Debt Service Release Conditions to be satisfied, (ii)
accrued and unpaid interest and (iii) any costs and expenses incurred in
connection with the purchase of such U.S. Obligations and with the release of
the security documents. The Courtyard Defeasance Deposit will be calculated
based on the assumption that the relevant portion of the principal balance of
the Courtyard Loan is required to be repaid in full on the Courtyard Anticipated
Repayment Date. The Master Servicer will be required to use the Courtyard
Defeasance Deposit to purchase such U.S. Obligations.
In addition, the Courtyard Borrower is required to deliver to the Master
Servicer, among other things, (a) a security agreement granting the Trustee a
first priority lien on the U.S. Obligations purchased with the Courtyard
Defeasance Deposit (the "Courtyard Defeasance Collateral"), (b) an opinion of
counsel for the Courtyard Borrower stating that (i) the Trustee has a perfected
first priority security interest in the Courtyard Defeasance Collateral, (ii)
the transfer of the Courtyard Defeasance Collateral in exchange for the release
of the Courtyard Property will not constitute an avoidable preference under the
Bankruptcy Code, (iii) the Courtyard Defeasance Collateral has been duly and
validly transferred to the Trust, (iv) such transfer will not result in a deemed
exchange of the Certificates pursuant to Section 1001 of the Code, (v) such
transfer will not by itself, adversely affect the status of the Courtyard Loan
as indebtedness for federal income tax purposes and (vi) such transfer will not
affect the status of either Trust REMIC as a REMIC, (c) a certificate by a "Big
6" accounting firm concerning the sufficiency of the Courtyard Defeasance
Collateral and (d) confirmation from each Rating Agency that requires
confirmation to be obtained that the defeasance will not result in a withdrawal,
qualification or reduction of the then existing ratings of the Certificates. In
the event only a portion of the Courtyard Loan is subject to the defeasance, the
Courtyard Borrower will be required to execute replacement notes evidencing the
principal amount of the Courtyard Mortgage Note that is not to be defeased (the
"Courtyard Undefeased Note"), and another note having a principal balance equal
to the amount of the Courtyard Mortgage Note to be defeased by payment of the
Courtyard Defeasance Deposit the ("Courtyard Defeased Note").
As a condition to any release of any Courtyard Properties in connection with
a partial defeasance, the Courtyard Borrower must also provide evidence that,
after giving effect to the release, the following conditions (the "Debt Service
Release Conditions") are met:
(1) If the Post-Release DSCR for the thirteen full consecutive Courtyard
Accounting Periods (or 12 full consecutive calendar months if the fiscal
year is based on 4 calendar quarters) immediately preceding the date of
determination and for which internal financial statements of the Courtyard
Borrower are available (the "Reference Period") applicable to the proposed
Courtyard Release is less
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than 2.60X, the Post-Release DSCR for the Reference Period applicable to the
proposed Courtyard Release cannot be less than the greater of (a) 1.935X and
(b) the Pre-Release DSCR for such Reference Period; or
(2) If the Post-Release DSCR for the Reference Period applicable to the
proposed Courtyard Release is greater than or equal to 2.60X, the following
conditions are satisfied:
(x) the Pre-Release DSCR with respect to the proposed Courtyard
Release shall not have exceeded the Post-Release DSCR with respect to the
proposed Courtyard Release by more than .05X, and
(y) (i) the sum of the Pre-Release DSCRs with respect to the proposed
Courtyard Release and the respective Pre-Release DSCRs with respect to
each prior Courtyard Release during the Reference Period applicable to
the proposed Courtyard Release each, (a "Prior Reference Period Release")
shall not have exceeded (ii) the sum of the Post-Release DSCR with
respect to the proposed Courtyard Release and the respective Post-Release
DSCRs with respect to each Prior Reference Period Release by more than
.05X.
For purposes of the foregoing, "Post-Release DSCR" means, with respect to
any proposed Courtyard Release, the ratio of (x) the Net Operating Income for
the applicable Reference Period, (calculated on a PRO FORMA basis after giving
effect to the proposed Courtyard Release as if the proposed Courtyard Release
had occurred on the first day of such Reference Period) to (y) the Post-Release
Debt Service for such Reference Period. "Post-Release Debt Service" means, with
respect to any proposed Courtyard Release, the aggregate amount of principal and
interest scheduled to be payable on the Courtyard Undefeased Note during the
applicable Reference Period, after giving effect to the reduction in the
principal balance of the Courtyard Mortgage Note that is proposed to occur as a
result of such Courtyard Release, as if such reduction in principal balance had
occurred on the first day of such Reference Period. "Pre-Release DSCR" means,
with respect to any proposed Courtyard Release, the ratio of (x) Net Operating
Income for the applicable Reference Period, to (y) the Pre-Release Debt Service
for such Reference Period. "Pre-Release Debt Service" means, with respect to any
proposed Courtyard Release, the aggregate amount of principal and interest
scheduled to be payable on the Courtyard Undefeased Note during the applicable
Reference Period, without giving effect to the proposed Courtyard Release (or
other Courtyard Releases being made on the date as of which the proposed
Courtyard Release is to be made).
If all of the Courtyard Properties have been released as a result of a
defeasance, the Courtyard Borrower will be permitted to assign all of its
obligations and rights under the Courtyard Mortgage Note, together with the
Courtyard Defeasance Collateral, to a successor mortgagor designated by the
Master Servicer. In such event, the successor mortgagor will assume the
Courtyard Borrower's obligations under the related Note and the security
agreement referred to above and thereupon the Courtyard Borrower will be
relieved of its obligations thereunder, subject to certain exceptions such as
material inaccuracies of representations and warranties made under the Courtyard
Loan documents, the environmental indemnity agreement and the cooperation
agreement between the Courtyard Borrower and LB Holdings and certain indemnities
relating to defaults given by the Courtyard Borrower.
OTHER RELEASES. On any monthly payment date on or after the end of the
Courtyard Defeasance Period, the Courtyard Borrower may also obtain the release
of a Courtyard Property upon the sale of such property if (a) no default or
event of default has occurred and is continuing, (b) the Courtyard Borrower has
paid, (i) all accrued and unpaid interest and all other sums due through and
including such payment date and (ii) an amount to be applied to prepayment of
the Courtyard Monthly Debt Service Payments in the inverse order of scheduled
maturities (the "Courtyard Release Price") equal to (A) 125% of the Allocated
Loan Amount of the Courtyard Property to be released minus (B) an amount equal
to (x) all scheduled principal payments paid by the Courtyard Borrower
multiplied by (y) a fraction, the numerator of which is the Allocated Loan
Amount for such Courtyard Property and the denominator of which is the Allocated
Loan Amount of all the Courtyard Properties, except that if a Courtyard Property
is released
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due to a casualty or taking, the payment shall instead be an amount equal to the
greater of (a) the Allocated Loan Amount of the Courtyard Property to be
released and (b) the lesser of (x) the Courtyard Release Price for such
Courtyard Property and (y) the sum of net sales proceeds received by the
Courtyard Borrower from the sale of the Courtyard Property or the part thereof
that remains following the Courtyard Taking or Courtyard Casualty, plus the
remaining Courtyard Condemnation Award or Courtyard Insurance Proceeds, not
previously applied to repayment of the Courtyard Loan or to a Courtyard
Restoration and (c) the Debt Service Release Conditions are met (unless the
Courtyard Release is in connection with a condemnation or casualty).
TRANSFER OF PROPERTIES AND INTEREST IN BORROWER; ENCUMBRANCE. The Courtyard
Borrower is prohibited from transferring any of the Courtyard Properties, except
(a) to LB Holdings, (b) pursuant to a Permitted Reorganization or (c) in
connection with a Courtyard Release.
The Courtyard Borrower is prohibited from further encumbering the Courtyard
Properties except for standard permitted liens such as taxes not yet due and
payable or taxes being contested, mechanic's liens in the ordinary course of
business and easements.
An entity that owns 95% of the equity interests of the Courtyard Borrower
(the "Courtyard Parent") may incur certain indebtedness in connection with
certain Permitted Reorganizations.
RESERVES. Pursuant to the terms of the Courtyard Loan, the Courtyard
Borrower has established a capital expenditures and furniture, fixtures and
equipment reserve fund (the "FF&E Reserve Account"), which account is required
to be funded within three weeks after the end of each Courtyard Accounting
Period by deposits equal to 5% (or such greater percentage as permitted by the
Courtyard Management Agreement) of gross revenues from the Courtyard Properties
for the Courtyard Accounting Period immediately preceding the related funding
date (except that the amount to be funded on March 21, 1997 was approximately
$7,000,000). The balance of the FF&E Reserve Account as of July 18, 1997 was
$10,493,235. In the event the funds in the FF&E Reserve Account are insufficient
to make the repairs necessary to repair the property, the Courtyard Manager may
increase the deposits to the account to 6% of gross revenues from the Courtyard
Properties in the years 1999 and 2000, and to 7% of gross revenues from the
Courtyard Properties in 2001 and thereafter. Any amounts required to be
deposited in the FF&E Reserve Account in any year that exceed 5% of gross
revenues from the Courtyard Properties for such year, plus any amounts of the
required FF&E reserve that were not paid in any prior fiscal year because of
insufficient cash flow, are considered "Subordinated FF&E Reserve
Contributions."
CASH MANAGEMENT PROCEDURES. The procedures to be used for the collection of
revenues generated by the Courtyard Properties and the payment of debt service
and other expenses of the Courtyard Loan and the expenses of the operation of
the Courtyard Properties will depend primarily upon the S&P rating of MII, the
corporate parent of Courtyard Management Corporation, a Delaware corporation and
the property manager for the Courtyard Properties (the "Courtyard Manager").
MII's senior long term unsecured debt is currently rated "BBB+" by S&P.
So long as (i) the senior long term unsecured debt of MII is rated at least
"A-" by S&P and "BBB+" by DCR (provided that MII is then rated by DCR), (ii) the
Courtyard Properties are managed by the Courtyard Manager under the Courtyard
Management Agreement, (iii) the Courtyard Manager maintains the Courtyard
Manager's Account, (iv) the Courtyard Manager's Account satisfies certain
criteria as set forth in the Courtyard Loan documents and (v) the Courtyard
Manager is a wholly owned subsidiary of MII, the following cash management
procedures will be in effect. The Courtyard Manager has established and will be
required to maintain a segregated bank account (the "Courtyard Manager's
Account"), which may be a subaccount in MII's cash management system (the "MII
Master Account") maintained for various hotels and other properties managed by
MII and its subsidiaries, provided that separate accounting of deposits into and
withdrawals from the Courtyard Manager's Account be made. The Courtyard Manager
may transfer funds from the Courtyard Manager's Account into the MII Master
Account in accordance with the Courtyard Manager's and MII's customary cash
management practices.
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The Courtyard Manager is required to notify all third parties from which the
Courtyard Borrower has accounts receivable that all payments owing to the
Courtyard Borrower should be sent directly to the Courtyard Manager's Account.
All other revenues are required to be deposited in the Courtyard Manager's
Account or in a segregated account established by the Courtyard Manager at a
financial institution proximate to an individual Courtyard Property (each, a
"Local Account"). At least twice each week, the Courtyard Manager is required to
transfer into the Courtyard Manager's Account all available funds in each Local
Account, less amounts (a) required to pay management expenses customarily paid
out of the Local Accounts and (b) held as petty cash. However, the aggregate
amount of such petty cash and reserves for all of the Local Accounts may not
exceed $725,000 (subject to adjustment at the end of each year for increases in
the Consumer Price Index and subject to reduction by $10,000 for each Courtyard
Property that is released from the applicable Courtyard Mortgage).
The Master Servicer is required to maintain a segregated account in its name
(the "Courtyard Cash Collateral Account"). On the last business day of the first
week of each Courtyard Accounting Period, the Courtyard Manager will transfer
from the Courtyard Manager's Account or the MII Master Account 50% of the
budgeted operating profit (calculated by deducting certain delineated deductions
but without deducting Subordinated Rental Obligations and Subordinated
Management Obligations, collectively, the "Courtyard Subordinated Obligations")
for the preceding Courtyard Accounting Period (the "First Week Transfer"). On
the last business day of the third week of each Courtyard Accounting Period, the
Courtyard Manager is required to transfer from the Courtyard Manager's Account
or the MII Master Account to the Courtyard Cash Collateral Account for
application by the Master Servicer on the next Due Date an amount equal to the
actual operating profit (calculated by deducting certain delineated deductions
but without deduction of Courtyard Subordinated Obligations) of the Courtyard
Borrower for the immediately preceding Courtyard Accounting Period minus the
preceding First Week Transfer. On each Due Date up to and including the
Courtyard Anticipated Repayment Date, the Master Servicer will apply the
operating profit in the following order of priority: (a) to pay the Courtyard
Monthly Debt Service Payment, certain expenses of the Trust (including initial
Servicing Fees) and to pay any other debt due (excluding Courtyard Default
Interest), (b) to fund real estate taxes and insurance escrows (if required),
(c) to fund any shortfall in the FF&E Reserve Account so that the actual payment
into the FF&E Reserve Account equals 5% of gross revenues from the Courtyard
Properties, (d) to pay any Default Interest, (e) to pay the amount of any
Subordinated Rental Obligations, (f) to pay certain Subordinated Management
Obligations, (g) to pay the Subordinated FF&E Reserve Contribution, (h) to make
payments to the Courtyard Borrower, an amount equal to 10 percent of the
cumulative capital contribution of the Courtyard Borrower plus certain amounts
funded by the Courtyard Borrower under the Courtyard Management Agreement for
building alterations, casualty repairs and excess working capital, (the "Owner's
Priority Return") (i) to remit to the Courtyard Borrower and the Courtyard
Manager equal amounts based on certain incentive management fees owed the
Courtyard Manager (j) to pay any to other amounts the Courtyard Manager is
entitled to under the Courtyard Management Agreement, and (k) all remaining
amounts to the Courtyard Borrower.
On each payment date after the Courtyard Anticipated Repayment Date, the
Master Servicer will apply the operating profit in the following order of
priority: (a) to pay the Courtyard Monthly Debt Service payment, certain
expenses of the Trust (including initial Servicing Fees) and to pay any other
debt due (excluding Courtyard Excess Interest and Default Interest), (b) to fund
real estate taxes and insurance escrows, if required, (c) to remit to the Master
Servicer an amount equal to Courtyard Excess Interest and Default Interest
accrued and unpaid during the immediately preceding Courtyard Debt Service
Period, to be applied in the manner described in clause (m) below, (d) to fund
any shortfall in the FF&E Reserve Account, so that the actual payment into the
FF&E Reserve Account equals 5% of gross revenues from the Courtyard Properties,
(e) to pay the amount of any Subordinated Rental Obligations in respect of the
current fiscal year, (f) to pay certain Subordinated Management Obligations in
respect of the current fiscal year, (g) to pay the Subordinated FF&E Reserve
Contribution, (h) to remit to the Courtyard Borrower the amount of certain
partnership administrative expenses, not to exceed $300,000 per year (as
adjusted by CPI), (i) to remit to the Master Servicer the Owner's Priority
Return, to be applied in the manner
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described in clause (m) below, (j) to remit to the Master Servicer and the
Courtyard Manager equal amounts based on certain incentive management fees owed
the Courtyard Manager (any such amounts remitted to the Master Servicer to be
applied in the manner described in clause (m) below), (k) to remit to the
Courtyard Manager certain amounts reasonably satisfactory to the Master Servicer
for major repairs, alterations, improvements, renewals or replacements required
by law or otherwise agreed to by the Master Servicer, (l) to remit to the
Courtyard Manager 1/60th of any other amounts due to the Courtyard Manager, and
(m) to the extent of any Courtyard Excess Cash Flow for each Courtyard Debt
Service Period to which such Due Date relates, to prepayment of the Courtyard
Loan in the following order: (A) first to prepayment of the scheduled principal
payments due following the Courtyard Anticipated Repayment Date, in inverse
order of maturity, until the principal balance of the Courtyard Mortgage Note is
zero, (B) to the payment of Default Interest, and (C), to payment of Courtyard
Excess Interest.
If the S&P rating of MII falls below "A-" or the DCR Rating falls below
"BBB+" (provided that MII is then rated by DCR) (a "Tax and Insurance Escrow
Event") the following cash management procedures will be in effect. The Master
Servicer will be required to maintain subaccounts of the Courtyard Cash
Collateral Account for payments of the next succeeding payments of insurance
premiums and real estate taxes (together, "Courtyard Impositions"). The
subaccounts will be funded (a) initially, by transfers from the Courtyard
Manager's Account or the MII Master Account to the Courtyard Cash Collateral
Account of amounts previously deducted by the Courtyard Manager from gross
revenues for payment of future Courtyard Impositions, but not expended and (b)
thereafter, by transfers from the Courtyard Cash Collateral Account in
accordance with the priority described above on each payment date so that
sufficient funds are accumulated in the subaccount to pay the next succeeding
payment of each Courtyard Imposition when due.
If (i) the S&P rating of MII's senior long term unsecured debt falls below
"BBB+" or the DCR rating falls below "BBB" (provided that MII is then rated by
DCR), (ii) the Courtyard Properties are no longer managed by the Courtyard
Manager under the Courtyard Management Agreement, (iii) the Courtyard Manager no
longer maintains the Courtyard Manager's Account, (iv) the Courtyard Manager's
Account no longer satisfies certain criteria as set forth in the Courtyard loan
documents or (v) the Courtyard Manager is no longer a wholly owned subsidiary of
MII (a "Courtyard Lock Box Event"), then the following procedures will apply:
(a) the name on the Courtyard Manager's Account will be changed to the
Master Servicer and the account will be changed to the lock box account, over
which the Master Servicer will maintain sole control (the "Courtyard Manager's
Lock Box Account"). If the Courtyard Manager's Account cannot be maintained as
the Courtyard Manager's Lock Box Account, the Master Servicer will open a new
account which will be the lock box account (the "Courtyard Substitute Lock Box
Account"), and the Master Servicer will be required to take sole control of the
Courtyard Manager's Lock Box Account and the Courtyard Substitute Lock Box
Account (the Courtyard Manager's Lock Box Account and the Courtyard Substitute
Lock Box Account, as applicable, the "Courtyard Lock Box Account"). If the
Courtyard Manager's Lock Box Account does not become the Courtyard Lock Box
Account, the Courtyard Manager is required to notify credit card companies and
third party payors (other than third party payors that in the ordinary course
pay their bills by cash or check to the Courtyard Manager or at the hotel) to
send all future payments owing to the Courtyard Borrower to the Courtyard
Substitute Lock Box Account. All payments from credit card companies and other
third party payors for which it is not feasible to redirect their next scheduled
payments will be required to be sent to the Courtyard Substitute Lock Box
Account at the earliest practicable date (but no later than 120 days from the
institution of Courtyard Lock Box Account procedures) and, until such point, to
the Courtyard Manager's Lock Box Account (which amounts will be required to be
transferred within one Business Day of receipt into the Courtyard Cash
Collateral Account). The Courtyard Manager will deposit into the Courtyard Lock
Box Account, within one business day after receipt and identification as revenue
from the Courtyard Properties all gross revenues received by the Courtyard
Manager except for amounts permitted to be deposited in local accounts and petty
cash and payments made directly to the Courtyard Manager's Account. The
Courtyard Manager will be required to
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transfer into the Courtyard Lock Box Account, at least twice each week, funds in
each Local Account, less amounts (a) required to pay operating expenses
customarily paid out of the Local Accounts and (b) held as petty cash or as a
reserve for operating expenses customarily paid out of the Local Accounts.
However, the aggregate amount of such petty cash and reserves for all of the
Local Accounts may not exceed $725,000 (subject to adjustment at the end of each
year for increases in the Consumer Price Index and subject to reduction by
$10,000 for each Courtyard Property that is released from the applicable
Courtyard Mortgage);
(b) In addition to the escrow accounts for Courtyard Impositions described
above, the Master Servicer is required to establish an escrow account as a
subaccount of the Courtyard Cash Collateral Account to be funded in an amount
equal to one Courtyard Monthly Debt Service Payment (the "Debt Service Reserve
Account") from gross revenues of the Courtyard Properties;
(c) The Master Servicer will be required to transfer, within one Business
Day of receipt, all gross revenues received in the Courtyard Lock Box Account
(and the Courtyard Manager's Account, if applicable) to the Courtyard Cash
Collateral Account. The Master Servicer will be required to establish a
segregated account (the "Courtyard Operating Account") in its name, and upon the
establishment of such account the Courtyard Manager will be required to transfer
all funds (less amounts required to cover outstanding checks) of the Courtyard
Borrower then held in the MII Master Account or the Courtyard Manager's Account
to such account. Thereafter, the Master Servicer will be required to apply daily
funds in the Courtyard Cash Collateral Account first, to fund shortfalls in the
subaccounts established for Courtyard Impositions, second, to fund any shortfall
in the Debt Service Reserve Account and third, to the Courtyard Operating
Account. The Courtyard Manager will have the authority to write checks on, and
make other transfers from, the Courtyard Operating Account for payment of
certain expenses, except for Courtyard Subordinated Obligations and taxes and
insurance premiums for which escrows are being maintained;
(d) At least one business day prior to each Due Date, the Courtyard Manager
will be required to transfer from the Courtyard Operating Account to the
Courtyard Cash Collateral Account an amount equal to the operating profit
(calculated without deduction for Courtyard Subordinated Obligations) of the
Courtyard Borrower for the immediately preceding full Courtyard Accounting
Period, less any amount of such operating profit which was previously
transferred to the Debt Service Reserve Account. On each Due Date prior to and
including the Courtyard Anticipated Repayment Date, the Master Servicer will be
required to apply the funds in the Courtyard Cash Collateral Account (excluding
funds in escrow, reserve or other subaccounts) in the following order of
priority: (a) (i) to pay the Courtyard Monthly Debt Service Amount, (ii) to pay
certain servicing expenses and (iii) to pay any other amounts due under the
Courtyard Loan documents, (except Default Interest) (b) to fund any shortfall in
the FF&E Reserve Account so that the actual payment into the FF&E Reserve
Account equals 5% of gross revenues from the Courtyard Properties, (c) to pay
any Default Interest, (d) to remit to the Courtyard Manager the amount of unpaid
Subordinated Rental Obligations, (e) to pay certain Subordinated Management
Obligations, (f) to pay any Subordinated FF&E Reserve Contribution, (g) to remit
to the Courtyard Borrower the Owner's Priority Return, (h) to remit to the
Courtyard Manager and the Courtyard Borrower equal amounts based on certain
incentive management fees owed to the Courtyard Manager, until the Courtyard
Manager has been paid for the year, (i) to reimburse the Courtyard Manager for
certain advances of operating expenses under the Courtyard Management Agreement;
and (j) to remit to the Courtyard Borrower amounts remaining in the Courtyard
Cash Collateral Account. On each Due Date after the Courtyard Anticipated
Repayment Date, the Master Servicer will be required to apply the operating
profit in the following order of priority: (a) (i) to pay the Courtyard Monthly
Debt Service Amount, (ii) to pay certain servicing expenses and (iii) to pay any
other amount due under the Courtyard Loan documents (except amounts described in
clauses (b) and (l) below), (b) to remit to the Master Servicer an amount equal
to Courtyard Excess Interest and any Default Interest accrued and unpaid during
the immediately preceding Courtyard Debt Service Period to be applied in the
manner described in clause (l) below, (c) to fund any Shortfall in the FF&E
Reserve Account so that the actual payment into the FF&E Reserve Account equals
5% of
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gross revenues from the Courtyard Properties, (d) to remit to the Courtyard
Manager any Subordinated Rental Obligation due in respect of the current fiscal
year, (e) to pay certain Subordinated Management Obligations in respect of the
current fiscal year, (f) to pay any Subordinated FF&E Reserve Contribution, (g)
to pay the Courtyard Borrower the amount of certain partnership administrative
expenses, not to exceed $300,000 per year (as adjusted by CPI), (h) to the
Master Servicer, the Owner's Priority Return (to be applied in the manner
described in clause (l) below), (i) to remit to the Courtyard Manager and the
Master Servicer equal amounts based on certain incentive management fees owed
the Courtyard Manager until the Courtyard Manager has been paid for the year
(any such amounts remitted to the Master Servicer to be applied in the manner
described in clause (l) below), (j) to remit payment to the Courtyard Manager
certain amounts reasonably satisfactory to the Master Servicer for major
repairs, alterations, improvements, renewals or replacements required by law or
otherwise agreed to by the Master Servicer, (k) to reimburse the Courtyard
Manager for 1/60th of certain advances made under the Courtyard Management
Agreement for operating expenses, and (l) to the extent of Courtyard Excess Cash
Flow for each Courtyard Debt Service Period to which such due date related, to
prepayment of the Courtyard Loan in the following order: (A) first, to
prepayment of the scheduled principal payments due following the Courtyard
Anticipated Repayment Date, in inverse order of maturity, until the principal
balance of the Courtyard Mortgage Note is zero, (B) next, to the payment of any
Default Interest and (C) next, to payment of Courtyard Excess Interest.
INSURANCE. The Courtyard Borrower is required to maintain (a) fire and
extended coverage insurance, including windstorm, explosion and such other risks
as are typically insured against by owners of like properties in the area in
which the Mortgaged Property is located in an amount no less than 100% of the
full replacement cost of the Mortgaged Property (excluding foundation and
excavation), and in no event less than the amount required to prevent the
Courtyard Borrower from becoming a co-insurer under the terms of the insurance
policies, (b) if the improvements are located within an area designated as a
flood hazard area, flood insurance as is available through the National Flood
Insurance Program, (c) business interruption insurance in an amount equal to not
less than one year's profits and necessary expenses from the Mortgaged Property
and in an amount equal to eighteen month's profits and necessary expenses from
the Mortgaged Property as long as such insurance is available on commercially
reasonable terms, (d) comprehensive public liability insurance on an "occurrence
basis" with a combined single limit of not less than $1,000,000 with respect to
personal injury or death to one or more persons plus "umbrella" liability
coverage of not less than $19,000,000, or such greater amounts as may be
required by other institutional lenders for similar loans, (e) broad form boiler
and machinery insurance on a comprehensive form in an amount adequate to provide
protection against the maximum amount of damage possible to the Mortgaged
Property resulting from explosion or other covered occurrences relating to
boilers, pressure vessels, machinery and equipment on or about the Mortgaged
Property, (f) workers' compensation as may be required by the laws of the state
in which the property is located and (g) such other insurance as is generally
available on commercially reasonable terms and is generally required by
institutional lenders for properties similar to the Courtyard Properties.
All primary insurers providing coverage as described above must be
authorized to issue in the states which the insured Mortgaged Property is
located. The insurance described in clauses (a), (c) and (e) above are required
to be maintained with one or more primary insurers having a claims-paying
ability (published or unpublished) rated by S&P of not less than "AA". If
permitted by the laws of the state in which the Courtyard Property is located,
the insurance required by clause (f) above may be provided by a state-approved
and regulated employer's self-insurance fund. All primary insurance coverage
required by other clauses above (other than flood insurance, earthquake
insurance and worker's compensation) is required to be provided by one or more
insurers having a Best's rating of "A-/10" or better or "B/5" or better for
earthquake insurers, and the primary insurer for the issuer of the primary
insurance required by clause (d) above is required to be rated by S&P not less
than "A". The property insurance for the Courtyard Properties is currently
issued by American Home Assurance Co., which currently has a claims paying
ability rating of "AAA" by S&P and "A++" by Best's.
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With respect to the Courtyard Properties located in California, the
Courtyard Borrower has procured the required earthquake insurance. See "Risk
Factors--The Mortgage Loans--Availability of Earthquake, Flood and Other
Insurance".
With respect to the Courtyard Property located in San Antonio, Texas, the
Courtyard Borrower is required to maintain environmental insurance with limits
and coverage reasonably acceptable to Master Servicer from an insurance company
having a minimum Best's rating of "B+/VIII" and an S&P rating of not less than
"AA," for an initial period of not less than ten (10) years after the Courtyard
Closing Date, which is required to be renewed annually so as to remain in effect
for the full term of the Courtyard Loan; PROVIDED, HOWEVER, that if such
insurance is not available from an insurer having an S&P rating of "AA" then
such insurance will then be required to be obtained from an insurer having the
highest S&P rating available among insurers that issue such insurance; and
PROVIDED FURTHER that, if such insurance is at any time not available at
commercially reasonable rates, the Courtyard Borrower may cease carrying such
coverage if, but only if, each of the Rating Agencies confirms that such
reaction will not result in a withdrawal, qualification or reduction of the then
existing ratings of the Certificates, or placement on credit watch with negative
implications. The Courtyard Borrower has obtained such policy from American
International Specialty Lines Insurance Company. The policy has been prepaid for
a ten (10) year period, and the Courtyard Borrower is required to pay premiums
on such policy to ensure that such policy remains in effect for the full term of
the Courtyard Loan.
CONDEMNATION AND CASUALTY. In case of any material damage to or destruction
of any Courtyard Property or any part thereof (each, a "Courtyard Casualty"),
the Courtyard Borrower is required, promptly upon becoming aware thereof, to
give written notice to the Master Servicer describing the nature and extent of
such damage or destruction.
In case of a Courtyard Casualty, the Courtyard Borrower is generally
required, whether or not the proceeds of insurance (hereafter "Courtyard
Insurance Proceeds") on account of such Courtyard Casualty is sufficient for
such purpose, at its expense, to promptly commence and complete the restoration,
replacement or rebuilding of the Courtyard Property as nearly as possible to its
value, condition and character immediately prior to such Courtyard Casualty
(such restoration, replacement and rebuilding, a "Courtyard Restoration").
However, in the event that either (i) a Courtyard Restoration materially and
adversely affects the cash flow from the Courtyard Property and cannot
reasonably be expected to be completed within a period of 18 months (or, if
shorter, by the date on which the proceeds of business interruption insurance
will no longer be available) or (ii) the extent of the damage makes it
impracticable in the Courtyard Borrower's good faith business judgment, to
restore the Courtyard Property to substantially the same condition as existed
prior to the Courtyard Casualty, then such Courtyard Restoration will not be
required or permitted (unless required by any applicable Courtyard Ground Lease)
and, in such event, the Courtyard Insurance Proceeds will be collected and paid
over to the Master Servicer (net of the amounts necessary to avoid or eliminate
any hazardous condition on the Courtyard Property and/or to prevent imminent and
substantial physical deterioration of the Courtyard Property) and the amount
thereof will be held and applied by the Master Servicer (a) (i) if applied prior
to the first day of the Courtyard Defeasance Period or after the Courtyard
Defeasance Period, to prepayment of the scheduled principal payments due on each
due date, in the inverse order of their scheduled maturities without the
requirement of a Yield Maintenance Payment or (ii) if applied during the
Courtyard Defeasance Period, to the purchase of U.S. Obligations in accordance
with the Courtyard Loan documents, and then (b) to the payment of all other
indebtedness secured by the relevant Courtyard Mortgage in the priority
contemplated by the Courtyard Loan documents. Any such amount applied as a
prepayment must be in an amount at least equal to the greater of (A) the
Allocated Loan Amount of such Courtyard Property and (B) the lesser of (x) the
Courtyard Release Price for such Courtyard Property and (y) the sum of the net
sales proceeds received by the Courtyard Borrower from the sale of the Courtyard
Property (plus any remaining Courtyard Insurance Proceeds not previously applied
to repayment or defeasance of the Courtyard Loan or to fund the Courtyard
Restoration).
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The ground lease on the Courtyard Property located at the San Francisco
Airport, California requires that in the event of a casualty, Courtyard
Insurance Proceeds be applied to the cost of repair or restoration of all or
part of such Courtyard Property or to the conversion of such Courtyard Property
to a non-hotel use. The Master Servicer is required to hold and disburse such
Courtyard Insurance Proceeds under the circumstances and in the manner provided
in the lease, PROVIDED, HOWEVER, that if the Courtyard Borrower, as lessee, is
in default under the Courtyard Mortgage or any act, condition or event has
occurred which would permit the Master Servicer to declare any portion of the
indebtedness secured by the related Courtyard Mortgage immediately due and
payable, the Master Servicer may elect to have the Courtyard Insurance Proceeds
applied first to the balance due on the Courtyard Loan and then the Courtyard
Borrower's repair or restoration costs.
The ground lease on the Courtyard Property located in Atlanta/Northlake,
Georgia requires that, in the event of a casualty, Courtyard Insurance Proceeds
be applied to the cost of repair or restoration of all or part of such Courtyard
Property, PROVIDED, HOWEVER, that (1) if the Courtyard Borrower elects to
terminate the lease because the Courtyard Property is destroyed beyond repair,
Courtyard Insurance Proceeds are to be applied, first, to the cost of clearing
the land, next, to the Master Servicer to the extent of the debt secured by the
Courtyard Property and the balance, if any, to the landlord and (2) if the
landlord terminates the lease pursuant to a default and the failure of the
Master Servicer to exercise its option to enter into a new lease, the Courtyard
Insurance Proceeds become the property of the landlord.
In case of any taking during the term of the Courtyard Loan of all or any
part of any Courtyard Property by condemnation or the exercise of the right of
eminent domain by any governmental authority (each, a "Courtyard Taking"), if
such Courtyard Taking (i) is a taking of the fee or leasehold of an entire
Courtyard Property, (ii) results in the imposition of a perpetual easement on
any entire Courtyard Property, (iii) materially adversely affects the cash flow
from the related Courtyard Property and would necessitate a restoration that
cannot reasonably be expected to be completed within one year (and restoration
is not required under any applicable ground lease) or (iv) results in a
termination of any related ground lease pursuant to its terms, then, in any such
event, any award or payment on account of any Courtyard Taking (a "Courtyard
Condemnation Award") will be required to be collected and paid over to the
Master Servicer to be held by the Master Servicer, (net of any amounts necessary
to avoid or eliminate any hazardous condition on the relevant Courtyard Property
and/or to prevent imminent and substantial physical deterioration of the
relevant Courtyard Property) and the amount thereof is required to be applied by
the Master Servicer as follows: (a) (i) if applied prior to the Courtyard
Defeasance Period or after the Courtyard Defeasance Period, to prepayment of the
scheduled principal payments due on each due date, in the inverse order of their
scheduled maturities without the requirement of a Yield Maintenance Payment or
(ii) if applied during the Courtyard Defeasance Period to the purchase of U.S.
Obligations in accordance with the Courtyard Loan documents and (b) to the
payment of all other indebtedness under the Courtyard Loan documents in such
order as is contemplated under the Courtyard Loan documents. Any such amount
applied as a prepayment must be in an amount at least equal to the greater of
(A) the Allocated Loan Amount of such Courtyard Property and (B) the lesser of
(x) the Courtyard Release Price for such Courtyard Property and (y) the sum of
the net sales proceeds received by the Courtyard Borrower from the sale of the
Courtyard Property (plus any remaining Courtyard Condemnation Award not
previously applied to repayment or defeasance of the Courtyard Loan or to fund
the Courtyard Restoration).
In the case of any Courtyard Taking other than a Courtyard Taking referred
to above, and in case such Courtyard Taking requires repairs to or restoration
of the Courtyard Property in order to maintain the quality of the Courtyard
Property operations, any Courtyard Condemnation Award must be paid over to the
Courtyard Borrower or the Master Servicer, as applicable, to be used or to be
held and distributed in accordance with the Courtyard Loan documents in the same
manner as if such Courtyard Taking were a Courtyard Casualty affecting the
Courtyard Property and as if such Courtyard Condemnation Award constituted
Courtyard Insurance Proceeds relating thereto, except that any amount of the
Courtyard
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Condemnation Award not used to pay for any necessary Courtyard Restoration is
required to be applied by the Master Servicer to the prepayment of the Courtyard
Mortgage Note, without the requirement of a Yield Maintenance Payment, and to
the payment of all other indebtedness under the Courtyard Mortgage all in the
manner contemplated by the Courtyard Loan documents.
FINANCIAL REPORTING. The Courtyard Borrower is required to keep and
maintain accurate books and records on a fiscal year basis in accordance with
GAAP. The Courtyard Borrower must provide copies of any report filed on Form
10-K within 15 days of filing. For any year where the Courtyard Borrower is not
subject to reporting obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Courtyard Borrower is required to furnish
annually to the Master Servicer, within 120 days following the end of each
fiscal year, a complete copy of its annual financial statements, audited by
Arthur Andersen LLP or another accounting firm acceptable to the Master
Servicer, including a balance sheet, statement of income, partners' capital or
deficit and statement of cash flows setting forth comparative figures for the
preceding fiscal year. The Courtyard Borrower is required to submit an annual
report, describing occupancy and room rate statistics (on an individual property
basis). The Courtyard Borrower must provide copies of any Report on Form 10-Q
within 15 days of filing or if not required to file such report, then the
Courtyard Borrower is also required within 60 days after the end of each
accounting quarter, to furnish to the Master Servicer unaudited financial
statements including a balance sheet, statement of income and expense and cash
flow setting forth comparative figures for the preceding fiscal quarter
(accompanied by an officer's certificate that the financial statements fairly
reflect the Courtyard Borrower's financial condition and operations and have
been prepared in accordance with GAAP). The Courtyard Borrower is also required
to provide, within 30 days after the end of each Courtyard Accounting Period,
statements setting forth the gross sales and Net Operating Income for each
Courtyard Property for the immediately preceding 13 Courtyard Accounting
Periods, and the occupancy rates, average daily room rates and revenues per
available room ("REVPAR") for each Courtyard Property for such Courtyard
Accounting Period and the 13 immediately preceding Courtyard Accounting Periods.
The Courtyard Borrower is also required to provide quarterly reports
including detailed profit and loss statements, including average occupancy,
average daily room rates and REVPAR.
PERMITTED INDEBTEDNESS. The Courtyard Borrower is precluded from incurring
any indebtedness other than the Courtyard Loan except for the following: (a)
provided no default or event of default has occurred and is continuing, purchase
money debt and capitalized lease obligations up to an aggregate amount of $4
million outstanding at any one time, for the purchase or lease of FF&E in the
ordinary course of business; (b) indebtedness in respect of Subordinated
Management Obligations and Subordinated Rental Obligations, provided such
indebtedness is unsecured and subordinated to the Courtyard Loan; (c) provided
no event of default has occurred and is continuing, indebtedness solely in
respect of surety and appeal bonds, performance bonds and other obligations of a
like nature, all in the ordinary course of business in accordance with customary
industry practices; and (d) certain subordinate debt, as described below under
"--Subordinate Debt."
SUBORDINATE DEBT. As of June 20, 1997, the Courtyard Borrower had
outstanding approximately $13,297,000 of unsecured subordinated loans from CBM
One Holdings, Inc. (the "Courtyard Junior Lender") (a wholly owned subsidiary of
Host Marriott Corporation), which indebtedness is evidenced by a promissory note
by the Courtyard Borrower to the Courtyard Junior Lender (the "Courtyard Junior
Note"). The maximum amount that may be outstanding under the Courtyard Junior
Note is $16,250,000. Pursuant to an intercreditor agreement, the Courtyard
Junior Lender has agreed that all indebtedness due under the Courtyard Junior
Note is expressly subject, subordinate and junior in right of payment to the
Courtyard Loan, and that all liens and security interests, if any, related to
the Courtyard Junior Note are subordinated to the rights of the Trust in those
assets of the Courtyard Borrower. The Courtyard Junior Lender further agreed
that it would not institute any judicial or other remedial proceeding (including
any bankruptcy or insolvency proceeding) against the Courtyard Borrower or any
interests, rights, assets or
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properties of the Courtyard Borrower to collect any moneys due with respect to
the Courtyard Junior Loan until the Courtyard Loan has been paid in full. The
Courtyard Junior Lender granted a security interest to LB Holdings in the
Courtyard Junior Note as security for its obligations under the intercreditor
agreement, and delivered such Courtyard Junior Note to LB Holdings, endorsed in
blank.
PERMITTED REORGANIZATION. The Courtyard Loan documents provide that the
structure of the Courtyard Borrower may be reorganized in one of the following
transactions (each a "Permitted Reorganization"): (a) a merger wherein a new
limited partner is admitted to the Courtyard Borrower that, together with the
general partner of the Courtyard Borrower which may be a different entity than
the Courtyard GP, holds 100% of the partnership interest of the Courtyard
Borrower; (b) a new general partner replaces the Courtyard GP; (c) the Courtyard
Properties are transferred to a newly created limited partnership or limited
liability company (in which the Courtyard Borrower holds at least 95% of the
outstanding equity interests, subject to the Courtyard Loan documents and such
transferee assumes the obligations of the Courtyard Borrower under the Courtyard
Loan documents); or (d) the Courtyard Borrower enters into a lease, as lessor,
of the Courtyard Properties.
All of the Permitted Reorganizations are subject to certain conditions
precedent, which generally include the following: (a) no default or event of
default may exist under the Courtyard Loan documents; (b) the surviving entity
or entities are required to be single purpose; (c) appropriate substantive non-
consolidation, enforceability and other relevant opinions are required to be
delivered; (d) all obligations of the transferor entity are required to be
assumed by the surviving entity; and (e) the Courtyard Borrower provides a
written confirmation from the Rating Agencies that no rating assigned by such
Rating Agencies to any of the Certificates will be downgraded, qualified or
withdrawn, or placed on a credit watch with negative implications as a result of
such Permitted Reorganization.
GROUND LEASES. Thirty-one of the Courtyard Properties are located on land
that is leased to the Courtyard Borrower by Host Restaurants, Inc., Newark
Properties, Inc. Essex House Condominium Corporation or Casa Maria of Maryland,
Inc. (collectively the "Marriott Ground Lessors"), each of which is a subsidiary
of MII, pursuant to various ground leases (each, a "Marriott Ground Lease"). The
Courtyard Borrower has a leasehold interest in the property at San Francisco
Airport, California pursuant to a ground lease between AE Properties, Inc., as
landlord, and Marriott Corporation, as tenant, the tenant's interest having been
assigned to the Courtyard Borrower (the "San Francisco Ground Lease"). The
Courtyard Borrower has a leasehold interest in a portion of the Courtyard
Property known as Atlanta/ Northlake pursuant to a ground lease between Cox
Communications, Inc., as landlord, and Crow-Atlanta Retail, Ltd., as sublet to
Marriott Corporation, the tenant's interest in which was assigned to the
Courtyard Borrower (as assigned, the "Atlanta/Northlake Ground Lease").
Each Marriott Ground Lease expires on December 31, 2081 and requires the
Courtyard Borrower to pay annual rent ("Courtyard Rent") equal to the greater of
a minimum rent (the "Courtyard Minimum Rent") or a percentage rent (the
"Courtyard Percentage Rent"). The annual Courtyard Minimum Rental varies from
$60,000 to $437,000 per Courtyard Property. The Courtyard Percentage Rent ranges
from 2% to 9.75% of annual total hotel sales, as defined in the leases. For the
year ended December 31, 1996, the Courtyard Borrower paid aggregate Courtyard
Minimum Rent of $7.1 million and aggregate Courtyard Percentage Rent (in
addition to Courtyard Minimum Rent) of $364,000. Generally, as of the beginning
of the sixth year after the opening of the hotel on each Courtyard Property, and
as of every five years thereafter, the annual Courtyard Minimum Rent increases
to the greater of (i) 100% of the average rent per year during the three
preceding years and (ii) the then-existing Courtyard Minimum Rental increased in
accordance with the Consumer Price Index for the preceding five years.
The Marriott Ground Lessors have agreed to subordinate their right to
receive Courtyard Rent payments under the Marriott Ground Leases (such payments,
the "Subordinated Rental Obligations") to the payment of the Courtyard Loan and
the Courtyard Mortgage Note and qualified refinancings thereof (together,
"Courtyard Qualifying Debt Service") and not to terminate the leases solely
because payments
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of Courtyard Rent are deferred in accordance with such subordination agreement.
All deferred Courtyard Rent payments must be paid out of the Courtyard
Borrower's cash flow after payment of Courtyard Qualifying Debt Service and the
funding of certain escrows. The Marriott Ground Lessors have granted the Trust
certain recognition and cure rights including, without limitation, (i) the right
to notice of any default by the Courtyard Borrower under a Marriott Ground Lease
and an opportunity and reasonable period of time to cure such default, (ii) the
right to obtain a new ground lease from the Marriott Ground Lessor if the ground
lease is terminated, (iii) the right to assign the lessee's interest under the
Marriott Ground Lease following foreclosure of the Courtyard Borrower's
leasehold interest (if the fee interest is not also foreclosed or is not
foreclosable), without the consent of the Marriott Ground Lessor.
The Marriott Ground Lessors have subjected their fee interest in the
relevant Courtyard Properties to the lien of the relevant Courtyard Mortgage to
secure the Courtyard Loan.
If, during the term of any Marriott Ground Lease, a Courtyard Property is
damaged or destroyed by fire or other casualty, the Courtyard Borrower is
required, under such Marriott Ground Lease, at its expense, to repair or restore
such Courtyard Property. If such damage exceeds 30% of the fair market value of
such Courtyard Property immediately before such damage or destruction, the
Courtyard Borrower may, subject to certain restrictions in the Courtyard Loan
documents and fulfillment by the Courtyard Borrower of its lease obligations
arising prior to termination, terminate the lease and return the leased premises
to the Marriott Ground Lessor. Rent will not abate under a Marriott Ground Lease
following a casualty unless the lease is terminated.
Under the Marriott Ground Leases, in the event of condemnation of the fee
estate: (i) if all the land subject to the Marriott Ground Lease is materially
impaired, such lease will terminate, (ii) if a portion of the land subject to
such Marriott Ground Lease is materially impaired such that the Courtyard
Borrower's ability to conduct business on the leased premises is materially
impaired or the cost of restoring the improvements exceeds 30% of their fair
market value before such condemnation, the Courtyard Borrower may, subject to
certain restrictions in the Courtyard Loan documents, either terminate such
Marriott Ground Lease or pay a proportionately reduced Courtyard Minimum Rent or
(iii) if a portion of the land subject to such Marriott Ground Lease is
materially impaired such that the Courtyard Borrower's ability to conduct
business on the leased premises is not materially impaired, the Courtyard
Borrower will pay a proportionately reduced Courtyard Minimum Rent. If all or
any portion of the leased premises subject to a Marriott Ground Lease is taken
for temporary use, such lease will continue in full force and effect and
Courtyard Rent will continue to be paid. Notwithstanding anything described
above, the Courtyard Borrower may not terminate or materially amend any Marriott
Ground Lease or waive any material rights thereunder without the consent of the
Trustee or the Master Servicer in accordance with the Pooling and Servicing
Agreement.
During the term of the ground lease, the landlord has agreed that it will
not convey or encumber its fee interest in the land under the related Courtyard
Property unless (a) the transfer is both subject to and subordinate to the
ground lease, the applicable Courtyard Mortgage and the rental subordination
agreement with respect to the ground lease, and (b) the transferee assumes the
landlord's obligations under the subordination agreement with respect to the
ground lease.
SAN FRANCISCO AIRPORT. The San Francisco Hotel is subject to a ground lease
executed on May 6, 1985, which expires on January 2, 2017 and is automatically
extended for three fifteen year periods. Such ground lease provides for an
annual rent equal to the greater of (i) an annual minimum rental (currently
$484,000 per year) which rental is increased to $560,400 for the years
2006-2016, is increased in 2017 by 75% of the increase in the CPI over the past
10 years, and thereafter will be adjusted every five years by an increase
equivalent to 75% of the increase in the CPI over the past 5 years and (ii) a
percentage rental equal to 9.75% of the tenant's annual gross sales for such
year.
The San Francisco Ground Lease provides that, if any default has occurred by
the Courtyard Borrower that would permit the Trust to accelerate the
indebtedness secured thereby, the landlord has the
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option, upon receipt of notice from the Trust that it intends to commence
foreclosure on the leasehold mortgage, to purchase the leasehold mortgage from
the Trust for the greater of (i) the fair market value of the leasehold estate
under the San Francisco Ground Lease and the Courtyard Borrower's investment
(defined as buildings, improvements and all other items of personal property
located on the land) or (ii) the outstanding principal amount of, plus accrued
and unpaid interest on, (x) all notes or bonds secured by the Courtyard Mortgage
and (y) that portion of any note or notes which represents capitalization or
funding of any interest accrued on the notes or bond referred to in clause (x)
above and (z) the amount of all advances made by the Trust to cure Courtyard
Borrower defaults or otherwise protect the Trust's security interest, plus all
accrued and unpaid interest on such advances. In addition, the San Francisco
Ground Lease provides that, if (a) the Courtyard Borrower decides to demolish
the hotel located on the Mortgaged Property and replace it with improvements of
a different type or (b) a casualty occurs which causes substantial destruction
or damage to the hotel located on the Mortgaged Property and the Courtyard
Borrower decides to convert such hotel to a non-hotel use, the Courtyard
Borrower is required to notify the landlord and for a period of 60 days from
such notice, the landlord has the option to acquire the Courtyard Borrower's
leasehold estate and the Courtyard Borrower's interest in the improvements for
an amount equal to their appraised value.
ATLANTA, NORTHLAKE. A portion of the Courtyard Property known as the
Atlanta, Northlake Hotel is subject to a ground lease which will expire on April
30, 2028. Tenant has the right to extend the term of this ground lease for 2
terms of 15 years each unless terminated at the option of the Courtyard
Borrower. Such ground lease currently provides for an annual rent of
approximately $60,000. The annual rental is adjusted every 5 years to equal the
product of ground rent in the preceding 5 year period and 115%.
THE PROPERTIES. The Courtyard Properties securing the Courtyard Loan
consist of 50 limited service hotels, all of which are operated under the name
"Courtyard by Marriott," and are located in 16 states. All of the hotels
securing the Courtyard Loan were built between 1983 and 1987. The average
occupancy rate of the hotels ranged from 68% to 93%, with a weighted average of
80% as of December 31, 1996 (calculated for the trailing thirteen Courtyard
Accounting Periods). The ADRs for the hotels ranged from $62 to $100, a weighted
average of $78 as of December 31, 1996 (calculated for the trailing thirteen
Courtyard Accounting Periods). The 1996 NOI of the properties ranged from
$724,113 to $1,882,354 and aggregated $64,251,884. The Courtyard Properties
contain in the aggregate 7,223 rooms, ranging from 127 rooms to 154 rooms, and
averaging 144 rooms. Based on appraisals dated January 1, 1997, the aggregate
appraised market value of the Courtyard Properties is $574,900,000.
Seventeen of the Courtyard Properties are owned in fee simple by the
Courtyard Borrower. The land on which 32 of the remaining Courtyard Properties
are built is leased by the Courtyard Borrower as described above under "--Ground
Leases", and one property is partly leased by the Courtyard Borrower and is
partly owned in fee.
PROPERTY MANAGEMENT. All of the Courtyard Properties are managed by the
Courtyard Manager under a single management agreement (the "Courtyard Management
Agreement"). Pursuant to this agreement, as amended, the Courtyard Manager is
responsible for managing each Courtyard Property under standards comparable to
those prevailing for other properties in the "Courtyard by Marriott" system.
Each Courtyard Property will be part of the Courtyard by Marriott system and
will be entitled to so identify itself. The Courtyard Manager will provide
certain services which are furnished generally on a central or regional basis to
all Courtyard properties in the Courtyard chain that are managed by the
Courtyard Manager or any Marriott affiliate, including: national and central
sales office services; central operational support for rooms, food and beverage
and engineering; central training services; career development; relocation of
central management personnel; central safety and loss prevention services;
central advertising and promotion (including direct and image media and
advertising administration); centralized consumer affairs; the national and
regional reservations system service and inventory and revenue management
services; centralized computer payroll and accounting services; centralized
computer
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system development, support and operating costs; central monitoring and
management support from "line management" personnel such as area managers, and
such additional central or regional services as may from time to time be
furnished for the benefit of the properties in the Courtyard by Marriott system.
The Courtyard Borrower is responsible for all operating costs of the Courtyard
Properties, as well as an allocable share of the Courtyard Manager's costs for
the services described in this paragraph.
The Courtyard Manager is entitled to receive as compensation for its
services three fees: (a) a "Base Management Fee" equal to 3% of gross revenues;
(b) a "Courtyard Management Fee" equal to 3% of gross revenues; and (c) an
"Incentive Management Fee" equal to fifty percent of operating profit minus debt
service and the Owner's Priority Return not to exceed a maximum of 15% of the
operating profit of the Courtyard Properties.
If there has been an event of default and title to the Courtyard Property
has been conveyed to the Trustee, the Master Servicer shall have certain rights
to terminate the Courtyard Management Agreement. The Master Servicer may also
terminate the Courtyard Management Agreement with respect to a specific hotel in
the event a foreclosure results in the conveyance of title of such hotel to the
Master Servicer. The Courtyard Manager may not assign the Courtyard Management
Agreement without consent of the Master Servicer, which consent may not be
withheld if (a) the assignee is MII or a wholly owned subsidiary of MII and the
Rating Agencies confirm that the assignment will not result in a withdrawal,
qualification or downgrade of the then existing ratings of the Certificates or
the placement on credit watch with negative implications, or (b) the assignee is
a nationally recognized hotel operator, provided the assignment would not result
in an event of default and the Rating Agencies confirm that the assignment will
not result in a withdrawal, qualification or downgrade of the then existing
ratings of the Certificates or the placement on credit watch with negative
implications. The Courtyard Manager is prohibited from terminating (other than
for cause) or modifying the Courtyard Management Agreement in any material
respect without the consent of the Lender, except as expressly provided in the
Courtyard Management Agreement, the Collateral Assignment of Management
Agreement or agreements with the Lender. The Courtyard Manager has the right to
terminate the Courtyard Management Agreement with respect to all Courtyard
Properties if the Courtyard Borrower fails to provide specified amounts of
working capital, FF&E replacements or funds necessary to maintain the Courtyard
Properties as required by the Courtyard Management Agreement, subject to the
right, but not the obligation, of the Master Servicer to provide such funds. The
Courtyard Manager may terminate the Courtyard Management Agreement with respect
to any Courtyard Property on the occurrence of a Courtyard Casualty or Courtyard
Condemnation, or the withdrawal by any governmental authority of any license to
operate the Courtyard Property, in each case which would materially and
adversely affect the operation of the hotel in accordance with the Courtyard
Management Agreement. To the extent the Courtyard Manager has other termination
rights, such rights may be exercised on a property by property basis.
The term of the Courtyard Management Agreement expires December 31, 2017 and
is automatically renewed, unless the Courtyard Manager is in default, for 4
successive periods of 10 years each.
LB Holdings, the Courtyard Borrower and the Courtyard Manager have entered
into an agreement which modifies the Courtyard Management Agreement. Among other
things, under such agreement (a) the Courtyard Manager agreed to comply with the
procedures described above under "--Cash Management Procedures," (b) consented
to the collateral assignment of the Courtyard Management Agreement to the lender
and (c) subordinated its rights to certain payments under the Courtyard
Management Agreement to the lien of the Courtyard Mortgages (such fees, the
"Subordinated Management Obligations"). The Subordinated Management Obligations
include the Incentive Management Fee and 1% of the Courtyard System Fee. Subject
to the rights of the Master Servicer to terminate the Courtyard Management
Agreement described above, the Courtyard Management Agreement is binding upon
any successor owner of a Courtyard Property (including the lender) taking title
by foreclosure or deed in lieu of foreclosure, but such successor owner is not
liable for any obligations of the Courtyard Borrower with respect to management
fees under the Courtyard Management Agreement which accrued prior to taking
title.
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It is an event of default under the Courtyard Loan (subject to certain
notice and cure periods) if (a) the Courtyard Manager ceases to be the manager
of all the Courtyard Properties or the Courtyard Management Agreement terminates
with respect to one or more Courtyard Properties unless prior thereto (i) the
Courtyard Borrower causes the properties to come under management by a
nationally recognized hotel operator acceptable to the Master Servicer, (ii) the
properties continue to be part of a comparable nationally recognized hotel
system acceptable to the Master Servicer and (iii) each of the Rating Agencies
confirms that the events will not result in the withdrawal, qualification or
reduction of the then existing ratings of the Certificates or them being placed
on credit watch with negative implications.
The Courtyard Manager manages approximately 204 hotels containing
approximately 29,900 rooms, including the Courtyard Properties.
THE WORLDWIDE PLAZA LOAN AND PROPERTY
THE LOAN. The Worldwide Plaza Loan was originated by LB Holdings on June
11, 1997 (the "Worldwide Plaza Closing Date") and had a principal balance at
origination of $275,000,000. Its principal balance as of the Cut-Off Date is
$273,576,031. The Worldwide Plaza Loan is secured by an Amended and Restated
Mortgage and Security Agreement (the "Worldwide Plaza Mortgage") encumbering the
fee interest of the Worldwide Plaza Borrower in the property known as Worldwide
Plaza, a 47-story office tower, located between Eighth and Ninth Avenues,
between 49th and 50th Streets, New York, New York (the "Worldwide Plaza
Property"). The Worldwide Plaza Loan is evidenced by an amended and restated
note given by the Worldwide Plaza Borrower in favor of LB Holdings (the
"Worldwide Plaza Mortgage Note").
THE BORROWER. BRE/Worldwide L.L.C. (the "Worldwide Plaza Borrower") is a
special purpose Delaware limited liability company; its limited liability
company agreement, as amended, limits its activities to owning, managing and
operating the Worldwide Plaza Property and holding subordinate mortgages which
encumber the Worldwide Plaza Amenities Parcel. The special purpose member of the
Worldwide Plaza Borrower is BRE/WW L.P. (the "Worldwide Plaza SPM"), a Delaware
limited partnership whose authority is limited to holding a membership interest
in the Worldwide Plaza Borrower. The general partner of the Worldwide Plaza SPM
is BRE/WW Inc., a special purpose Delaware corporation. The Worldwide Plaza
Borrower is an affiliate of Blackstone Real Estate Advisors L.P.
SECURITY. The Worldwide Plaza Loan is a non-recourse loan, secured by the
fee interest of the Worldwide Plaza Borrower in the Worldwide Plaza Property and
certain additional collateral (including an assignment of leases and rents and
funds in certain accounts).
The payment of the Worldwide Plaza Loan is guaranteed by an amended and
restated limited recourse guarantee (the "Worldwide Plaza Guarantee") dated as
of June 11, 1997, by New York Communications Center Associates L.P. (the
"Worldwide Plaza Guarantor") in favor of LB Holdings. The Worldwide Plaza
Guarantee is secured by a Guaranty Mortgage and Security Agreement (the
"Worldwide Plaza Guaranty Mortgage"), dated as of June 11, 1997, given by the
Worldwide Plaza Guarantor to LB Holdings. The Worldwide Plaza Guaranty Mortgage
encumbers the fee interest of the Worldwide Plaza Guarantor in certain property
located adjacent to the Worldwide Plaza Property, including retail shops, a
movie theater, a health club and a parking garage (the "Worldwide Plaza
Amenities Parcel"). In addition, the Worldwide Plaza Borrower is required to
provide additional collateral for the repayment of the Worldwide Plaza Loan, as
described below under "--Additional Collateral".
The Worldwide Plaza Property is owned in fee simple by the Worldwide Plaza
Borrower. Subject to exceptions for fraud, material misrepresentation or
misappropriation of funds and certain environmental matters, neither the
Worldwide Plaza Borrower nor any of its affiliates is personally liable for the
payment of the Worldwide Plaza Loan. The Worldwide Plaza Borrower has agreed,
pursuant to an Environmental Indemnity Agreement, to indemnify the lender and
its successors and assigns (including the Trust) with
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respect to liabilities arising from or in connection with certain environmental
matters. Such indemnification covers both the Worldwide Plaza Property and the
Worldwide Plaza Amenities Parcel. The Worldwide Plaza Borrower has represented
that it has good and marketable fee simple title to the Mortgaged Property,
subject to certain encumbrances permitted by LB Holdings. LB Holdings is the
named insured under the title policy (which will be assigned to the Trustee)
which insures that the Worldwide Plaza Mortgage constitutes a valid and
enforceable first lien on the Worldwide Plaza Property, subject to certain
exceptions and exclusions from coverage set forth therein. LB Holdings is the
named insured under the title policy (which will be assigned to trustee) which
insures the Worldwide Plaza Amenities Parcel.
PAYMENT TERMS. The Worldwide Plaza Loan matures on July 10, 2017 (the
"Worldwide Plaza Maturity Date"). There are three principal components of the
Worldwide Plaza Loan (each a "Worldwide Plaza Component"). Two of such principal
components bear interest at a fixed rate; the first in the amount of
$118,576,031 as of the Cut-Off Date (the "Worldwide Plaza Fixed Component A"),
and the second in the amount of $105,000,000 (the "Worldwide Plaza Fixed
Component B", and together with the Worldwide Plaza Fixed Component A, the
"Worldwide Plaza Fixed Components"). The third principal component bears
interest at a variable rate and has a principal amount of $50,000,000 (the
"Worldwide Plaza LIBOR Component").
The Worldwide Plaza Fixed Components bear interest at a fixed rate per annum
of 7.92% (the "Worldwide Plaza Fixed Interest Rate") until July 10, 2004 (the
"Worldwide Plaza Anticipated Repayment Date"). The scheduled principal balance
of the Worldwide Plaza Loan as of the Worldwide Plaza Anticipated Repayment Date
after taking into account application of the Worldwide Plaza Additional
Collateral in reduction of the principal balance of the Worldwide Plaza Loan
will be approximately $209,107,025. The Worldwide Plaza LIBOR Component bears
interest at LIBOR plus 0.55% (the "Worldwide Plaza LIBOR Rate") until the
Worldwide Plaza Anticipated Repayment Date and bears interest at the same rate
as the Worldwide Plaza Fixed Components after the Worldwide Plaza Anticipated
Repayment Date. "LIBOR" shall mean, with respect to each Worldwide Plaza
Interest Period, the rate (expressed as a percentage per annum and rounded
upward, if necessary, to the next nearest 1/1000 of 1%) for deposits in U.S.
dollars, for a one-month period, that appears on Telerate Page 3750 (or the
successor thereto) as of 11:00 a.m., London time, on the related LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750 as of
11:00 a.m., London time, on such LIBOR Determination Date, LIBOR shall be the
arithmetic mean of the offered rates (expressed as a percentage per annum) for
deposits in U.S. dollars for a one-month period that appear on the Reuters
Screen LIBOR Page as of 11:00 a.m., London time, on such LIBOR Determination
Date, if at least two such offered rates so appear. If fewer than two such
offered rates appear on the Reuters Screen LIBOR Page as of 11:00 a.m., London
time, on such LIBOR Determination Date, the Master Servicer shall request the
principal London Office of any four major reference banks in the London
interbank market selected by the Master Servicer to provide such bank's offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one-month period as of 11:00
a.m., London time, on such LIBOR Determination Date for the amounts of not less
than U.S. $1,000,000. If at least two such offered quotations are so provided,
LIBOR shall be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Master Servicer shall request any three major
banks in New York City selected by the Master Servicer to provide such bank's
rate (expressed as a percentage per annum) for loans in U.S. dollars to leading
European banks for a one-month period as of approximately 11:00 a.m., New York
City time, on the applicable LIBOR Determination Date for amounts of not less
than U.S. $1,000,000. If at least two such rates are so provided, LIBOR shall be
the arithmetic mean of such rates. LIBOR shall be determined by the Master
Servicer or its agent. "LIBOR Business Day" means any day on which dealings in
foreign currencies and exchange are carried on in London, England, and in New
York, New York. "LIBOR Determination Date" means, with respect to each Interest
Accrual Period, the tenth day of the month in which such Interest Accrual Period
commences, or if such day not a LIBOR Business Day, the prior LIBOR Business
Day. "Reuters Screen LIBOR Page" means the display page designated as "LIBO" on
the Reuters Monitor Money Rates Service. The Worldwide Plaza Interest Period is
the period commencing on the tenth day of each calendar month and ending on the
ninth day of the next occurring calendar month. On and after the Worldwide Plaza
Anticipated Repayment Date, all three principal
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components of the Worldwide Plaza Loan will accrue interest at an interest rate
(the "Worldwide Plaza Adjusted Interest Rate") which is fixed on the Worldwide
Plaza Anticipated Repayment Date as the greater of (i) the Worldwide Plaza Fixed
Interest Rate plus 2% or (ii) the average yield, calculated by linear
interpolation of the yields on U.S. Treasury obligations with terms (one longer
and one shorter) most nearly approximating those of U.S. Obligations having
maturities as close as possible to the Worldwide Plaza Maturity Date plus 2%.
After the Worldwide Plaza Anticipated Repayment Date, the Worldwide Plaza
Borrower will only be required to make current interest payments on the
Worldwide Plaza Fixed Components and the Worldwide Plaza LIBOR Component at the
Worldwide Plaza Fixed Interest Rate, and the interest accrued at the excess of
the Worldwide Plaza Adjusted Interest Rate over the Worldwide Plaza Fixed
Interest Rate will be deferred and added to the principal amount of the
Worldwide Plaza Loan (such accrued and deferred interest, the "Worldwide Plaza
Excess Interest").
Interest on the Worldwide Plaza Loan is calculated based on the actual
number of days elapsed and a 360-day year.
The Worldwide Plaza Loan requires 240 monthly payments of interest at the
Worldwide Plaza Fixed Interest Rate or the Worldwide Plaza LIBOR Rate, as
applicable, and scheduled principal (the "Worldwide Plaza Monthly Debt Service
Payment") commencing on August 10, 1997 in the amount of $2,238,964 (based on a
240-month amortization schedule, the Worldwide Plaza Fixed Interest Rate and an
assumed Worldwide Plaza LIBOR Rate of 6.200%). The principal portion of each
payment (the "Worldwide Plaza Principal Reduction Payment") will be applied in
the following order: first, to reduction of the Worldwide Plaza Fixed Component
A, until such amount is paid in full; second, to the Worldwide Plaza LIBOR
Component, until such amount is paid in full; and third, to the Worldwide Plaza
Fixed Component B until such amount is paid in full.
Payment of the balance of the principal together with all accrued and unpaid
interest (including Worldwide Plaza Excess Interest) is required on the
Worldwide Plaza Maturity Date.
Commencing on the first Due Date after an event of default and continuing on
each Due Date thereafter, in addition to the Worldwide Plaza Monthly Debt
Service Payment, 100% of Worldwide Plaza Excess Cash Flow for the prior month
will be required to be paid to the Master Servicer. As used herein, "Worldwide
Plaza Excess Cash Flow" means, for each period of determination, the sum of all
income from the Worldwide Plaza Property plus disbursements from the tax and
insurance escrow fund and the rollover reserve fund minus the sum of (a) debt
service on the Worldwide Plaza Loan; (b) payments to a tax and insurance escrow
fund; (c) payments to a rollover reserve fund; (d) operation expenses of the
property (all expenditures related to the operation, maintenance and management
of the Worldwide Plaza Property incurred on a regular basis, as approved by
Master Servicer); and (e) capital expenditures. A "Worldwide Plaza Debt Service
Period" means the period from and including the tenth day of the month
immediately preceding each respective Due Date to the ninth day of the month in
which such Due Date occurs.
Any interest payment or principal payment not paid when due will bear
interest at a default rate equal to the lesser of (a) 4% plus the Worldwide
Plaza Fixed Interest Rate, the Worldwide Plaza LIBOR Rate or the Worldwide Plaza
Adjusted Interest Rate, as applicable, and (b) the maximum amount allowed by law
(the "Worldwide Plaza Default Rate").
As additional collateral for the Worldwide Plaza Loan, the Worldwide Plaza
Borrower has collaterally assigned to the Trustee all of the Worldwide Plaza
Borrower's right title and interest in and to the Worldwide Plaza Interest Rate
Cap Agreement. The "Worldwide Plaza Interest Rate Cap Agreement" is an interest
rate cap agreement in a notional amount equal to the initial aggregate principal
amount of the Worldwide Plaza LIBOR Component between the Worldwide Plaza
Borrower and a counterparty acceptable to the Ratings Agencies and which
agreement (i) has a term of not less than 7 years and (ii) requires payment by
the counterparty of all interest in such notional amount in excess of 9%. See
"Risk Factors-- The Mortgage Loans--Risks Relating to the Worldwide Plaza
Interest Rate Cap Agreement" herein.
ADDITIONAL COLLATERAL. The Worldwide Plaza Borrower provided a $2,000,000
letter of credit from The Chase Manhattan Bank, and must also provide $2,000,000
in cash or by an additional letter of credit
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on each August 1 starting in 1998 and ending in 2003 (such deposits, the
"Worldwide Plaza Additional Collateral"). The Worldwide Plaza Additional
Collateral will be released to the Worldwide Plaza Borrower if the Worldwide
Plaza LIBOR Component has been reduced through voluntary prepayments (other than
voluntary prepayments in connection with the release of the Worldwide Plaza
Amenities Parcel or Special Lease Payments) by $14,000,000 by the Worldwide
Plaza Borrower prior to the Worldwide Plaza Anticipated Repayment Date.
Upon failure of the Worldwide Plaza Borrower to deliver any of the required
Worldwide Plaza Additional Collateral, the Master Servicer has the right to
apply any balance of the Worldwide Plaza Additional Collateral to the repayment
of the Worldwide Plaza LIBOR Component. Upon such application, the Worldwide
Plaza Borrower will then be required to pay to the Master Servicer the amount of
$166,667 per month to reduce any remaining Worldwide Plaza LIBOR Component until
the Worldwide Plaza LIBOR Component has been reduced by $14,000,000.
Upon any event of default under the Worldwide Plaza Loan documents, the
Master Servicer has the right to apply the Worldwide Plaza Additional Collateral
to payments of any amounts then due and payable under the Worldwide Plaza Loan
documents, and the remainder will be required to be used to reduce the Worldwide
Plaza LIBOR Component and the Worldwide Plaza Fixed Components. If the Worldwide
Plaza Loan is not repaid on or prior to the Worldwide Plaza Anticipated
Repayment Date, the Master Servicer will be required to apply the Worldwide
Plaza Additional Collateral in the following priority: (a) payment of accrued
and unpaid interest; (b) payment of the outstanding Worldwide Plaza LIBOR
Component; and (c) payment of the Worldwide Plaza Fixed Components.
PREPAYMENT. The Worldwide Plaza LIBOR Component is prepayable on any Due
Date without penalty upon 15 days written notice to the Master Servicer (each, a
"Voluntary LIBOR Payment"). Voluntary LIBOR Payments, Special Lease Payments,
payments of the release price for the Worldwide Amenities Parcel and any
application of the Additional Collateral are collectively "Unscheduled Principal
Payments." On or before the Worldwide Plaza Anticipated Repayment Date, any
Unscheduled Principal Payments are required to be applied to reduce the
outstanding principal balance of the Worldwide Plaza LIBOR Component until such
component is paid in full, any excess amounts will be applied to reduce the
balance of the Worldwide Plaza Fixed Components as described below.
Voluntary prepayment of the Worldwide Plaza Fixed Component is prohibited
prior to the Worldwide Plaza Anticipated Repayment Date. On such date and
thereafter, the Worldwide Plaza Borrower will be permitted to prepay the
Worldwide Plaza Fixed Components, in whole or in part, on any Due Date, without
payment of a yield maintenance premium, provided that the Worldwide Plaza
Borrower pays all sums due on the Worldwide Plaza Loan through such Due Date.
Principal prepayments on the Worldwide Plaza Loan are required to occur on Due
Dates. The Worldwide Plaza Loan may also be prepaid as a result of certain
events with respect to condemnation or casualty, as described below under
"--Condemnation and Casualty" and in connection with a release as described
below under "--Release in Exchange for Substitute Collateral".
If, prior to the second anniversary of the Closing Date, all or any part of
the principal amount of the Worldwide Plaza Fixed Components is prepaid, as a
result of Special Lease Payments and payment of the release price for the
Worldwide Plaza Amenities Parcel or any Additional Collateral Payments, the
Worldwide Plaza Borrower will be required to make a payment (the "Worldwide
Plaza Lockout Yield Maintenance Payment") equal to the greater of (A) 1% of the
outstanding principal amount of the Worldwide Plaza Fixed Components to be
prepaid and (B) the Worldwide Plaza Yield Maintenance Premium that would be
required if a Worldwide Plaza Defeasance Event had occurred in an amount equal
to the outstanding principal amount of the Worldwide Plaza Fixed Components to
be prepaid. The "Worldwide Plaza Yield Maintenance Premium" is the amount (if
any) which, when added to that portion of the Worldwide Plaza Fixed Component to
be prepaid will be sufficient to purchase U.S. Obligations which provide payment
on or prior to, but as close as possible to, all successive Worldwide Plaza Due
Dates and in amounts equal to the payments due on such dates with respect to the
portion of the Worldwide Plaza Fixed Component subject to the Worldwide Plaza
Defeasance Event. No Worldwide
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Plaza Lockout Yield Maintenance Payment will be required in connection with
prepayments made on or after the Worldwide Plaza Anticipated Repayment Date.
If any part of the Worldwide Plaza Fixed Component is prepaid during the
Worldwide Plaza Defeasance Period as a result of Unscheduled Principal Payment,
such payment will be treated as a Worldwide Defeasance Event, and will be
subject to the Worldwide Plaza Defeasance Conditions with the amount of the
related Worldwide Plaza Defeasance Deposit being equal to the amount so prepaid,
PROVIDED, HOWEVER, that if the Unscheduled Principal Payment causing the
Worldwide Plaza Defeasance Event is the payment of all or any portion of the
release price for the Worldwide Plaza Amenities Parcel (such amount, the
"Worldwide Plaza Defeasance Release Amount"), the amount of principal subject to
the defeasance will equal the Worldwide Plaza Defeasance Release Amount, and the
Worldwide Plaza Borrower will be required to increase the Worldwide Plaza
Defeasance Deposit as necessary to defease a portion of the Worldwide Plaza Loan
equal to the Worldwide Plaza Defeasance Release Amount.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Worldwide Plaza Borrower
is permitted at any time during the Worldwide Plaza Defeasance Period, to
defease all or a portion of the Worldwide Plaza Fixed Component (each such
defeasance, a "Worldwide Plaza Defeasance Event") provided that, among other
conditions, the holder of the Worldwide Plaza Loan has not accelerated the
Worldwide Plaza Maturity Date and the Worldwide Plaza Borrower pays (a) all
interest accrued and unpaid on the principal balance of the Worldwide Plaza
Loan, (b) all other sums due under the Worldwide Plaza Loan documents and (c)
the Worldwide Plaza Defeasance Deposit. The "Worldwide Plaza Defeasance Period"
is the period running from the day after the date that is two years after the
Closing Date until the Worldwide Plaza Anticipated Repayment Date. The
"Worldwide Plaza Defeasance Deposit" is the amount sufficient to purchase U.S.
Obligations that provide payments on or prior to, but as close as possible to,
all successive Due Dates with respect to the Worldwide Plaza Fixed Component
subject to the defeasance, together with accrued and unpaid interest, all
transfer taxes and related transfer costs, and any costs and expenses incurred
in connection with the purchase of such U.S. Obligations. The Master Servicer
will be required to use the Worldwide Plaza Defeasance Deposit to purchase such
U.S. Obligations.
In addition, the Worldwide Plaza Borrower is required to deliver to the
Master Servicer (a) a security agreement granting the Trustee a first priority
lien on the Worldwide Plaza Defeasance Deposit and the U.S. Obligations
purchased with the Worldwide Plaza Defeasance Deposit (the "Worldwide Plaza
Defeasance Collateral"), (b) an opinion of counsel for the Worldwide Plaza
Borrower stating that (i) the Trustee has a perfected first priority security
interest in the Worldwide Plaza Defeasance Collateral, (ii) the Worldwide Plaza
Defeasance Collateral has been duly and validly transferred to the Trust and
(iii) such transfer will not affect the status of either Trust REMIC as a REMIC,
(c) a certificate by a "Big 6" accounting firm or other accountant approved by
the Master Servicer concerning the sufficiency of the Worldwide Plaza Defeasance
Collateral and (d) confirmation from each of the Rating Agencies that the
defeasance will not result in a withdrawal, qualification or downgrading of the
then existing ratings of the Certificates (clauses a-d, the "Worldwide Plaza
Defeasance Conditions"). In the event only a portion of the Worldwide Plaza
Fixed Components is the subject of the defeasance, the Worldwide Plaza Borrower
will be required to execute replacement notes evidencing the remaining amount
outstanding under the Worldwide Plaza Loan (the "Worldwide Plaza Undefeased
Note"), and another note having a balance equal to the amount of the Worldwide
Plaza Mortgage Note to be defeased by payment of the Worldwide Plaza Defeasance
Deposit the ("Worldwide Plaza Defeased Note").
If the Worldwide Plaza Property has been released as a result of a
defeasance, the Worldwide Plaza Borrower will be permitted, and the Master
Servicer will have the right to require the Worldwide Plaza Borrower, to assign
all of its obligations and rights under the Worldwide Plaza Mortgage Note
together with the Worldwide Plaza Defeasance Collateral to a successor mortgagor
approved by the Master Servicer. In such event, the successor mortgagor will
assume the Worldwide Plaza Borrower's obligations under the related note and the
security agreement and thereupon the Worldwide Plaza Borrower will be relieved
of its obligations thereunder.
RELEASE OF WORLDWIDE PLAZA AMENITIES PARCEL. The Worldwide Plaza Borrower,
on behalf of the Worldwide Plaza Guarantor, may obtain the release of the
Worldwide Plaza Amenities Parcel, upon the
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payment of a release price of $30,000,000. The Worldwide Plaza Borrower will
also be required to pay all costs of the Master Servicer in connection with such
release. On or before the Worldwide Plaza Anticipated Repayment Date, such
release price will be applied to reduce the Worldwide Plaza LIBOR Component,
until paid in full. If the Worldwide Plaza LIBOR Component has been paid in
full, and the release price is paid prior to the second anniversary of the
Closing Date, the release price will be applied first to the Worldwide Plaza
Fixed Component A and if the Worldwide Plaza Fixed Component A has been paid in
full, then to the Worldwide Plaza Fixed Component B, in each case subject to a
Worldwide Plaza Lockout Yield Maintenance Payment. If such payment is made after
the second anniversary of the Closing Date, the payment will be treated as a
Worldwide Plaza Defeasance Event, the amount of principal subject to the
defeasance will equal the Worldwide Plaza Defeasance Release Amount, and the
Worldwide Plaza Borrower will be required to increase the Worldwide Plaza
Defeasance Deposit as necessary to defease a portion of the Worldwide Plaza Loan
equal to the Worldwide Plaza Defeasance Release Amounts and meet Worldwide Plaza
Defeasance Requirements. All such payments applied after the Worldwide Plaza
Anticipated Repayment Date, such amount will be applied first, to the Worldwide
Plaza Fixed Component A until such amount is paid in full; second, to the
Worldwide Plaza LIBOR Component until such amount is paid in full; and third, to
the Worldwide Plaza Fixed Component B, until such amount is paid in full.
SPECIAL LEASE PAYMENTS. The Worldwide Plaza Loan documents provide that
certain special lease payments (the "Special Lease Payments") made to the
Worldwide Plaza Borrower will be paid by the Worldwide Plaza Borrower and will
be treated as prepayments on the Worldwide Plaza Loan. These payments include
payments approved by the Master Servicer in connection with any modification,
surrender or termination of any lease for space which exceeds 20,000 square feet
(net of costs or expenditures by the Worldwide Plaza Borrower to re-tenant the
related space). On or before the Worldwide Plaza Anticipated Repayment Date,
such release price will be applied to reduce the Worldwide Plaza LIBOR
Component, until paid in full. If the Worldwide Plaza LIBOR Component has been
paid in full, and the release price is paid prior to the second anniversary of
the Closing Date, the release price will be applied first to the Worldwide Plaza
Fixed Component A and if the Worldwide Plaza Fixed Component A has been paid in
full, then to the Worldwide Plaza Fixed Component B, in each case subject to a
Worldwide Plaza Lockout Yield Maintenance Payment. If such payment is made after
the second anniversary of the Closing Date, the payment will be treated as a
defeasance of the amount so paid and the Worldwide Plaza Borrower will be
required to make a Worldwide Defeasance Deposit and the Worldwide Plaza
Defeasance Conditions. All such payments applied after the Worldwide Plaza
Anticipated Repayment Date, such amount will be applied first, to the Worldwide
Plaza Fixed Component A until such amount is paid in full; second, to the
Worldwide Plaza LIBOR Component until such amount is paid in full; and third, to
the Worldwide Plaza Fixed Component B, until such amount is paid in full.
TRANSFER OF PROPERTIES AND INTEREST IN BORROWER; ENCUMBRANCE. The Worldwide
Plaza Borrower is generally prohibited from transferring or encumbering the
Worldwide Plaza Property without the consent of the Master Servicer, which
consent is not to be unreasonably withheld if the Worldwide Plaza Borrower
obtains confirmation from the Rating Agencies that any such transfer or
encumbrance will not result in a downgrade, qualification or withdrawal of the
initial, or if higher, then-current ratings of the Certificates.
Notwithstanding the foregoing, transfers of any interest in any member of
the Worldwide Plaza Borrower to an entity which is directly or indirectly in
control of, under common control with or controlled by Blackstone Real Estate
Advisors L.P. (a "Blackstone Affiliate") may be made, provided that after such
transfer, such member continues to be a Blackstone Affiliate. "Control" of an
entity, for purposes of this section, means the exclusive power (directly or
indirectly) to direct or cause the direction of the management and policies of
such entity whether by contract or otherwise (it being understood that the
requirement of another person to approve or otherwise consent to one or more
actions shall not, in and of itself, be deemed to be a failure of such exclusive
power by such entity), provided, a Person exercising such power has an economic
interest in the entity being controlled. Transfers of the interest of any member
of the Worldwide Plaza Borrower that is not a Blackstone Affiliate, or of any
interest in any limited partner of the Worldwide Plaza Guarantor are also
permitted.
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In addition, certain other transfers are permitted with respect to the
Worldwide Plaza Borrower's affiliates or the Worldwide Plaza Property without
Master Servicer approval or Rating Agency confirmation upon satisfaction of
certain conditions. Such permitted transfers include: (i) transfers of
membership interests in the Worldwide Plaza Borrower (other than transfers by
the Worldwide Plaza SPM) to certain existing members of the Worldwide Plaza
Borrower, (ii) transfers of or the issuance of membership or partnership
interests, as the case may be, in the Worldwide Plaza Borrower or any guarantor
of the Worldwide Plaza Loan (other than transfers by the Worldwide Plaza SPM) to
any Blackstone Affiliate or the transfer of the Worldwide Plaza Property to a
Blackstone Affiliate; (iii) the transfer or issuance of any membership interests
in the Worldwide Plaza Borrower to any party or entity that is not a Blackstone
Affiliate (a "Non-Blackstone Membership Change") if, after giving effect to any
such Non-Blackstone Membership Change(s), (A) less than thirty percent (30%) of
the membership interests in Worldwide Plaza Borrower are vested in a party or
parties who are not Blackstone Affiliates; (B) one or more Blackstone Affiliates
retains management control of the Worldwide Plaza Borrower and (C) the Worldwide
Plaza SPM's interest has not been transferred; (iv) the transfer of the
Worldwide Plaza Property or interest in the Worldwide Plaza Borrower to an
entity 100% of the beneficial interests of which are owned (directly or
indirectly) by an Approved Transferee; or (v) the transfer of the Worldwide
Plaza Property to (A) a Blackstone REIT; (B) a partnership, the sole general
partner of which is the Blackstone REIT (the "Operating Partnership") or (C) an
entity, 100% of the beneficial interests of which are owned by a Blackstone REIT
or the Operating Partnership.
An "Approved Transferee" means a Person with an equity market capitalization
or net worth of $250 million or more that controls office properties having a
value of $500 million or more or, if such Person is a pension fund advisor, one
that controls $500 million or more of office properties (in each case without
giving consideration to the acquisition of the Property), and such Person is (A)
a publicly traded real estate investment trust or the operating partnership
thereof; (B) a pension fund, pension trust or pension account, (C) an insurance
company, (D) a national money-center bank or (E) a Person with a long-term
unsecured debt rating from the Rating Agencies of at least investment grade. A
"Blackstone REIT" means a publicly traded real estate investment trust in which
(A) Blackstone Affiliates own no less than 20% of the beneficial ownership
interests and can direct or cause the direction of no less than 20% of the
members of the board of directors and (B) at least 33% of the assets
constituting the properties in the real estate investment trust were contributed
by Blackstone Affiliates.
The requirements for the transfers described in the second preceding
paragraph include, (i) that no event of default or event which with the giving
of notice or the passage of time would constitute an event of default under the
Worldwide Plaza Loan documents has occurred and remains uncured; (ii) that the
Master Servicer has received a non-consolidation opinion with respect to the
transferee, any new manager and any relevant constituent entities; (iii) that
the Master Servicer has received evidence reasonably satisfactory to it that the
single purpose nature and bankruptcy remoteness of such transferee and its
constituent parties following such sale or transfer are in accordance with the
standards of the Rating Agencies; and (iv) with respect to any transfers of the
Worldwide Plaza Property, that the transferee has executed an assumption of the
Worldwide Plaza Loan documents evidencing such transferee's agreement to abide
by and be bound by the terms of the Worldwide Plaza Loan documents, together
with such legal opinions and title insurance endorsements as may be reasonably
requested by Master Servicer.
RESERVES. Pursuant to the terms of the Worldwide Plaza Loan, the Worldwide
Plaza Borrower has established a rollover reserve fund into which the Worldwide
Plaza Borrower deposited, as of the date of origination, $4,000,000 for tenant
improvement and leasing commission obligations, tenant work allowances or other
expenses incurred in connection with the leasing of the Worldwide Plaza
Property. As of September 16, 1997, the balance of the rollover reserve fund was
$3,838,674. The Worldwide Plaza Borrower has also established a tax and
insurance account to be funded monthly by an amount equal to 1/12th of the
aggregate insurance premiums and taxes in respect of the Worldwide Plaza
Property payable in the succeeding twelve months.
CASH MANAGEMENT. All rents and other income with respect to the Worldwide
Plaza Property is required to be deposited directly by the Worldwide Plaza
Borrower, the tenants, and the managers of the Worldwide Plaza Property in a
segregated cash management account (the "Worldwide Plaza Cash
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Management Account"). The Worldwide Plaza Cash Management Account will be
subject to the sole dominion, control and discretion of the Master Servicer.
APPLICATION OF FUNDS HELD IN CASH MANAGEMENT ACCOUNT. Provided that no
event of default under the Worldwide Plaza Loan documents shall have occurred
and be continuing, the Master Servicer will cause the funds held in the
Worldwide Plaza Cash Management Account to be distributed on a monthly basis in
the following order: (a) to fund the tax and insurance escrow fund, (b) to fund
payment of interest on the Worldwide Plaza Fixed Component A, (c) to fund
payment of interest on the Worldwide Plaza LIBOR Component, (d) to fund payment
of interest on the Worldwide Plaza Fixed Component B, (e) to fund payment of the
Worldwide Plaza Principal Reduction Payment, (f) to pay other amounts due under
the Worldwide Plaza loan documents, (g) if after the Worldwide Plaza Anticipated
Repayment Date, to fund payments for monthly cash expenses incurred in
accordance with the related approved annual budget, (h) if after the Worldwide
Plaza Anticipated Repayment Date, to fund payments for extraordinary expenses
approved by the Master Servicer, (i) if on or after the Worldwide Plaza
Anticipated Repayment Date, to pay principal until the outstanding principal
balance of the Worldwide Plaza Loan is reduced to zero, (j) if on or after the
Worldwide Plaza Anticipated Repayment Date, to pay the Worldwide Plaza Excess
Interest, and (k) to make payment to the Worldwide Plaza Borrower of any excess
amount. The Chase Manhattan Bank is the cash management bank under the cash
management agreement for the Worldwide Plaza Property.
Upon the occurrence of an event of default under the Worldwide Plaza Loan
documents, the Master Servicer will be required by the Pooling Agreement to
apply the funds in the Worldwide Plaza Cash Management Account in the following
order: (a) to fund the tax and insurance escrow fund in accordance with the
Servicing Standard, (b) to fund payment of interest on the Worldwide Plaza Fixed
Component A at the Worldwide Plaza Fixed Interest Rate, (c) to fund payment of
interest on the Worldwide Plaza LIBOR Component at the Worldwide Plaza LIBOR
Rate, (d) to fund payment of interest on the Worldwide Plaza Fixed Component B
at the Worldwide Plaza Fixed Interest Rate, (e) to fund payment of principal on
the Worldwide Plaza Fixed Component A, (f) to fund payment of principal on the
Worldwide Plaza LIBOR Component, (g) to fund payment of principal on the
Worldwide Plaza Fixed Component B, (h) to fund payment of the Worldwide Plaza
default interest, and (i) to pay other amounts due under the Worldwide Plaza
Loan documents.
All rents and other income with respect to the Worldwide Plaza Amenities
Parcel are required to be deposited directly by the Worldwide Plaza Guarantor,
the tenants, and the managers of the Worldwide Plaza Amenities Parcel in a
segregated cash management account, which account will be subject to the sole
dominion, control and discretion of the Master Servicer. On the occurrence of an
Event of Default under the Worldwide Plaza Loan, the amounts in such account
will be required to be paid to a sub-account for payment of amounts due under
the Worldwide Plaza Loan.
INSURANCE. The Worldwide Plaza Borrower is required to maintain (a)
comprehensive all risk insurance, in an amount no less than 100% of the full
replacement cost of the Mortgaged Property, and containing an endorsement
waiving all co-insurance provisions, (b) business interruption insurance in an
amount equal to not less than eighteen months profits and necessary expenses
from the Mortgaged Property, (c) comprehensive public liability insurance on an
"occurrence basis" with a combined single limit of not less than $5,000,000 with
respect to personal injury or death to one or more persons, (d) "umbrella"
liability coverage of not less than $100,000,000 per occurrence, (e)
comprehensive boiler and machinery insurance in an amount equal to full
replacement cost, (f) workers' compensation as required by the laws of New York,
(g) at all times during which structural construction, repairs or alterations
are being made, owner's contingent liability policy and builder's risk insurance
providing the same coverage as described under clause (a) of this paragraph, and
(h) such other insurance as is generally available on commercially reasonable
terms and is generally required by institutional lenders for properties similar
to the Worldwide Plaza Properties.
All primary insurers providing coverage as described above must be
authorized to issue in the states which the insured Mortgaged Property is
located. The insurance described above are required to be maintained with one or
more primary insurers having a claims-paying ability (published or unpublished)
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rated at least "AA" or its equivalent by S&P and one other Rating Agency. The
property insurer for the Worldwide Plaza Property is AIG, which has a claims
paying ability rating of "AAA" by S&P and "A++" by Best's. The Worldwide Plaza
Borrower maintains liability insurance with an excess liability loss of
$150,000,000. AIG provides the primary $1,000,000 of coverage and $10,000,000 in
excess of the primary $1,000,000. The next $15,000,000 of coverage is provided
by American National Fire, which is rated "B" by S&P and "A" by Best's. The next
$50,000,000 of coverage is provided by Great American Insurance Co., which is
rated "B" by S&P and "A" by Best's. The next $50,000,000 of coverage is provided
by Firemen's Fund, which is rated "A" by S&P and "A" by Best's. The final
$25,000,000 of coverage is provided by AIG.
CONDEMNATION AND CASUALTY. In case of any material damage to the Worldwide
Plaza Property or any part thereof (each, a "Worldwide Plaza Casualty"), the
Worldwide Plaza Borrower is required, promptly upon becoming aware of such
damage, to give written notice to the Master Servicer describing the nature and
extent of such damage.
In case of a Worldwide Plaza Casualty, the Worldwide Plaza Borrower is
generally required, whether or not the proceeds of insurance (hereafter
"Worldwide Plaza Insurance Proceeds") on account of such Worldwide Plaza
Casualty are sufficient for such purpose, at its expense, promptly to commence
and complete the restoration, replacement or rebuilding of the Worldwide Plaza
Property as nearly as possible to its condition immediately prior to such
Worldwide Plaza Casualty (such restoration, replacement and rebuilding, a
"Worldwide Plaza Restoration").
In the event of a Worldwide Plaza Casualty where the Worldwide Plaza
Insurance Proceeds are less than $2.5 million, the Master Servicer is required
to remit such Worldwide Plaza Insurance Proceeds to the Worldwide Plaza Borrower
provided certain requirements are met. Where the Worldwide Plaza Insurance
Proceeds exceed $2.5 million, the Master Servicer will be required to provide
such Worldwide Plaza Insurance Proceeds to the Worldwide Plaza Borrower provided
certain conditions are met, including, without limitation, that no Event of
Default has occurred and is continuing, the leases that may be terminated as a
result of the Worldwide Plaza Casualty account for less than 40% of the rents
for the Worldwide Plaza Property, and the Master Servicer is satisfied that the
operating deficit resulting from the Worldwide Plaza Casualty will be made up
from other sources of income to the Worldwide Plaza Borrower.
The Worldwide Plaza Borrower is required to give the Master Servicer notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting any portion of the Property. Notwithstanding any taking by
any public or quasi-public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), the Worldwide Plaza Borrower is required to
continue to pay the amounts due under the Worldwide Plaza Loan at the time and
in the manner provided for its payment in the Worldwide Plaza Loan documents and
such amounts will not be reduced until any award or payment therefor (a
"Worldwide Plaza Award") is actually received and applied by the Master
Servicer, after the deduction of expenses of collection, to the reduction or
discharge of such amount. The Master Servicer will not be limited to the
interest paid on the Worldwide Plaza Award by the condemning authority but will
be entitled to receive out of the award interest at the rate or rates provided
under the Worldwide Plaza Loan documents. If the Worldwide Plaza Property or any
portion thereof is taken by a condemning authority, the Worldwide Plaza Borrower
is required to promptly commence and diligently prosecute the Restoration of the
property. The Worldwide Plaza Borrower is required to pay all costs of such
Restoration whether or not such costs are covered by the Worldwide Plaza Award.
FINANCIAL REPORTING. The Worldwide Plaza Borrower is required to keep and
maintain accurate books and records on a fiscal year basis for both the
Worldwide Plaza Property and the Worldwide Plaza Amenities Parcel and is
required to prepare and deliver certain financial statements. The Worldwide
Plaza Borrower is required to furnish to the Master Servicer, among other
things, (a) not later than 20 days after the end of each fiscal quarter, a
balance sheet for the Worldwide Plaza Property and the Worldwide Plaza Amenities
Parcel, and statements of income and cash flows, (b) not later than 40 days
after the end of each fiscal year, a balance sheet for the Worldwide Plaza
Property and the Worldwide Plaza Amenities Parcel, and statements of income and
cash flows, (c) within 120 days following the end of each fiscal year, a
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complete copy of its annual financial statements prepared in accordance with
GAAP, including statements of profit and loss for the Worldwide Plaza Borrower,
the Worldwide Plaza Property and the Worldwide Plaza Amenities Parcel, and a
balance sheet for the Worldwide Plaza Borrower and (d) on or before 20 days
after the end of each calendar month, a rent roll for such month, a monthly and
year-to-date operating statement and a calculation of debt service coverage
ratio.
SUBORDINATE DEBT. The Worldwide Plaza Amenities Parcel is subject to four
subordinate mortgages in the combined amount of $263,763,363 (the "Worldwide
Plaza Guarantor Subordinate Mortgages"). Pursuant to an Intercreditor and
Subordination Agreement dated June 11, 1997 among the Worldwide Plaza Guarantor,
the subordinate mortgagees and LB Holdings, the subordinate mortgagees have
agreed that the liens of such subordinate mortgages are subordinate to the lien
of the Worldwide Plaza Guaranty Mortgage.
The subordinate mortgagees have agreed that if an event of default occurs
under the Worldwide Plaza Loan documents, no payment with respect to the
Worldwide Plaza Guarantor Subordinate Mortgages will be made by the Worldwide
Plaza Guarantor or accepted by the subordinate mortgagees. In addition, the
subordinate mortgagees have agreed to refrain from exercising the following
enforcement actions among others with respect to the Worldwide Plaza Guarantor
Subordinate Mortgages: (a) acceleration of the subordinate debt, (b) foreclosure
proceedings, (c) exercise of any power of sale, and (d) acceptance of a deed in
lieu of foreclosure. The Worldwide Plaza Borrower is the holder of the Second
Amended and Restated Second Mortgage Note in the amount of $40,000,000 given by
the Worldwide Plaza Guarantor and BRE/Worldwide II L.L.C. is the holder of that
certain Second Amended and Restated Third Mortgage Note in the amount of
$30,000,000 given by the Worldwide Plaza Guarantor. The Worldwide Plaza Borrower
and BRE/Worldwide II L.L.C. have pledged their interest in the second and third
mortgage to the Master Servicer, pursuant to that certain Pledge and Security
Agreement dated June 11, 1997, by and among the Worldwide Plaza Borrower,
BRE/Worldwide II L.L.C. and LB Holdings. The remaining subordinate mortgages are
held by the Youth Renewal Fund whose right to transfer the mortgages is
restricted and are not pledged to the Master Servicer.
BANKRUPTCY PROCEEDINGS. The Worldwide Plaza Guarantor is operating under
the Worldwide Plaza Reorganization Order. See "Risk Factors--The Mortgage
Loans--Bankruptcy Proceedings".
THE PROPERTY. The Mortgaged Property securing the Worldwide Plaza Loan is
improved by a forty-seven story office building (the "Worldwide Plaza Building")
completed in 1989 and located on a lot of approximately 4.0 acres. The Worldwide
Plaza Building is an approximately 1.8 million square foot Class A Office Tower.
The occupancy rate, as of September 1, 1997, was approximately 98.0% for the
office portion of the Worldwide Plaza Building. The two largest tenant leases
are net leases which require that the respective lessees, rather than the
Worldwide Plaza Borrower, are responsible for payment of certain expenses such
as real estate and personal property taxes, maintenance charges and insurance
expenses. The remaining leases have base year expense stops to protect the
Worldwide Plaza Borrower in the event of increases in the costs of providing
services to tenants. The 1996 NOI of the property was $41,911,462 prepared in
accordance with GAAP.
The following table sets forth certain data regarding the major tenants at
the Worldwide Plaza Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE RENTABLE % OF TOTAL(1)
TENANT EXPIRATION (SQ FT) PROPERTY GLA RENTS
- ------------------------------------------------------------------ ------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Ogilvy & Mather Worldwide, Inc.................................... 2009 585,460 32.2% 39.1%
Cravath, Swaine & Moore........................................... 2009 400,333 22.0% 29.0%
Polygram Holding, Inc. ........................................... 2011 307,121 16.9% 13.3%
</TABLE>
(1) Includes the sum of (i) the first twelve month's base rent that each tenant
must pay pursuant to its leases subsequent to June 30, 1997 (full credit is
given to any rent steps occurring during the twelve months following June
30, 1997 and free rent periods currently in effect as of June 30, 1997 have
been ignored), and (ii) operating expense and real estate tax recoveries
paid by each tenant under its lease for the twelve months ended December 31,
1990 (except that such income has not been included for certain tenants
whose leases were renegotiated in 1996 such that they will not pay expense
recoveries in 1997).
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Based on an appraisal as of July 25, 1997, the appraised value of the
Worldwide Plaza Property and the Worldwide Plaza Amenities Parcel was
$416,000,000.
PROPERTY MANAGEMENT. The Worldwide Plaza Property is managed by Zeckendorf
Realty L.P., a Delaware limited partnership (the "Worldwide Plaza Manager"),
pursuant to a management agreement (the "Worldwide Plaza Management Agreement")
between the Guarantor, the Worldwide Plaza Borrower, Blackstone Real Estate
Advisors L.P. (the "Worldwide Plaza Subagent") and the Worldwide Plaza Manager,
dated October 23, 1996. The Worldwide Plaza Management Agreement provides for
payment during 1997 of $44,167 per month to the Worldwide Plaza Manager and of
$18,333 per month to the Worldwide Plaza Subagent. The above fees are increased
annually by mutual agreement. The Worldwide Plaza Management Agreement is
terminable at the option of any party on 30 days notice.
The Worldwide Plaza Borrower, the Worldwide Plaza Guarantor and the
Worldwide Plaza Manager have also entered into an Exclusive Leasing Agreement
(the "Worldwide Plaza Leasing Agreement"). The Worldwide Plaza Manager is
entitled to a commission based on the fixed rent payable under each signed lease
under the following schedule: 5% of first year's fixed rent, 4% of second year's
fixed rent, 3.5% of the third through fifth year's fixed rent, 2.5% of the sixth
through tenth year's fixed rent and 2% of the eleventh and all succeeding year's
rent. Fifty percent of such commissions are payable on execution and delivery of
the lease, and fifty percent is due upon commencement of the payment of rent by
tenant.
The Worldwide Plaza Management Agreement and the Worldwide Plaza Leasing
Agreement were assigned to LB Holdings by an assignment of management agreement
dated June 11, 1997 by and among the Worldwide Plaza Borrower, the Worldwide
Plaza Guarantor, LB Holdings, the Worldwide Plaza Manager and the Worldwide
Plaza Subagent (the "Worldwide Plaza Assignment of Management Agreement")
Except as permitted under the Worldwide Plaza Loan documents, the Worldwide
Plaza Borrower has agreed not to surrender the Worldwide Plaza Management
Agreement, consent to the assignment by the Worldwide Plaza Manager of its
interest under the Worldwide Plaza Management Agreement, or terminate, cancel,
modify or amend the Worldwide Plaza Management Agreement. Notwithstanding the
foregoing, the Worldwide Plaza Borrower may terminate the Worldwide Plaza
Management Agreement and replace the Worldwide Plaza Manager provided the
following conditions are met: (a) the replacement management agreement complies
with the provisions of the Worldwide Plaza loan documents; (b) the new manager
executes an assignment of management agreement substantially similar to the
Worldwide Plaza Assignment of Management Agreement; (c) Master Servicer receives
a substantive non-consolidation opinion with respect to the new manager; (d) the
new manager has sufficient experience in owning and managing similar properties;
and (e) the Rating Agencies confirm that such termination and replacement will
not result in a qualification, downgrade or withdrawal of the ratings then
applicable to the Certificates.
In addition to the foregoing, prior to June 11, 1999, the Worldwide Plaza
Borrower may terminate the Worldwide Plaza Management Agreement and replace the
Worldwide Plaza Manager with BREA Property Management of New York, L.L.C., or
affiliates of Insignia/Edward S. Gordon Inc., Cushman & Wakefield Inc. or
LaSalle Partners, provided that the conditions in clauses (a), (b) and (c) in
the preceding paragraph have been met.
If the Worldwide Plaza Manager becomes insolvent, or an event of default
under the Worldwide Plaza Loan documents occurs and is continuing, then the
Master Servicer may require the Worldwide Plaza Borrower to engage a bona-fide,
independent third party management agent to manage the Worldwide Plaza Property,
subject to confirmation from the Rating Agencies that the management of the
Worldwide Plaza Property by such new manager will not result in a downgrade,
qualification or withdrawal of the initial, or if higher, the then current
ratings of the Certificates.
Pursuant to Assignment of Management Agreement between the Worldwide Plaza
Manager and the lender with respect to the Worldwide Plaza Management Agreement,
the Worldwide Plaza Manager has agreed that its rights under the Worldwide Plaza
Management Agreement are in all respects subordinate to the rights of the
lender. The Worldwide Plaza Manager has also agreed that, upon the occurrence of
an event of default under the Worldwide Plaza Loan, all payments owed or to
become due to it under the Worldwide Plaza Management Agreement will be deferred
and the lender may terminate the Worldwide Plaza Management Agreement.
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THE PRENTISS LOAN AND PROPERTIES
THE LOAN. The Prentiss Loan has a principal balance as of the Cut-Off Date
of $180,100,000 and is secured by Mortgages (the "Prentiss Mortgages")
encumbering 8 office properties located in Illinois, Virginia, Texas, and
Michigan, and 4 industrial and warehouse properties, containing multiple
Mortgaged Properties, located in Illinois, California, Missouri, and Wisconsin
(the "Prentiss Properties"). The Prentiss Mortgages are cross-collateralized and
cross-defaulted.
THE BORROWER. Prentiss Properties Real Estate Fund I, L.P. (the "Prentiss
Borrower") is a Delaware limited partnership formed on December 31, 1996, to own
and to operate the Prentiss Properties. The Prentiss Borrower has no material
assets other than the Prentiss Properties and related interests. The general
partner of the Prentiss Borrower is Prentiss Properties Real Estate Fund I, LLC,
(the "Prentiss G.P."), a Delaware limited liability company. Prentiss G.P.'s
managing member is Prentiss Properties II, Inc. (the "Prentiss G.P. Managing
Member"), a Delaware corporation formed solely for the purpose of acting as
managing member of the Prentiss G.P., and a wholly owned subsidiary of Prentiss
Properties Trust (the "Prentiss REIT"). The Prentiss REIT is a Maryland real
estate investment trust, the stock of which is traded on the New York Stock
Exchange, and is a reporting company under the Exchange Act. The other member of
the Prentiss Borrower is Prentiss Properties Acquisition Partners, L.P. (the
"Prentiss L.P."), a Delaware limited partnership which is 100% owned by the
Prentiss REIT and its affiliates, employees and directors.
SECURITY. The Prentiss Loan is a non-recourse loan, secured only by the fee
estate, or, in the case of a portion of the One Northwestern Plaza property, the
leasehold estate, of the Prentiss Borrower in each Prentiss Property and certain
other collateral (including an assignment of leases and rents and the funds in
certain accounts). Subject to exceptions for, among other things, fraud,
intentional misrepresentation, breach of certain environmental indemnities and
covenants and misapplication of funds, and except as described below, neither
the Prentiss Borrower nor any of its affiliates is personally liable for payment
of the Prentiss Loan. Prentiss L.P. has agreed to indemnify the lender with
respect to certain environmental liabilities in connection with the Prentiss
Property known as Pacific Gateway Center. See "Risk Factors-- The Mortgage
Loans--Environmental Law Considerations."
The Prentiss Borrower has made certain environmental representations and has
represented that it has good and marketable fee simple title to all of the
Prentiss Properties, except for a portion of the One Northwestern Plaza property
as to which it has represented that it also has a leasehold interest, subject
only to encumbrances (the "Prentiss Permitted Encumbrances") permitted by the
lender under the loan documents, which include among other things indebtedness
relating solely to the financing of construction of capital improvements, tenant
improvements or building equipment or leasing costs payable to third parties or
the Prentiss Manager in accordance with the Prentiss Management Agreement and
incurred with respect to one or more of the Prentiss Properties and costs
associated with such indebtedness, either unsecured or secured only by
subordinate liens, and subject to, among other things, the following
limitations: (i) that the aggregate amount of such indebtedness does not exceed
an amount equal to 5% of the outstanding principal amount of the Prentiss Loan
at any time, (ii) that the terms of such indebtedness shall require that the
principal amount of such indebtedness will be repaid from net operating income
prior to any distributions to any direct beneficial owner of an interest in the
Prentiss Borrower (other than for income, franchise, or other taxes imposed on
the Prentiss Borrower for the privilege of doing business in the jurisdictions
in which the property is located) and (iii) such indebtedness is subject to a
subordination and standstill agreement satisfactory in form and substance to the
Master Servicer. LB Realty is the named insured under title insurance policies
(which will be assigned to the Trust Fund) which insure that each of the
Prentiss Mortgages constitutes a valid and enforceable first lien on the
Prentiss Properties, subject to certain exceptions and exclusions from coverage
set forth therein.
PAYMENT TERMS. The Prentiss Loan was originated by LB Realty on February
26, 1997, with a subsequent advance made on March 26, 1997, pursuant to an
amendment to the original Prentiss Loan
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documents. The Prentiss Loan matures on February 26, 2027 (the "Prentiss
Maturity Date") and bears interest at a fixed rate per annum equal to 7.579%
(the "Prentiss Base Interest Rate") through February 25, 2007, and from February
26, 2007 (the "Prentiss Anticipated Repayment Date") at a rate per annum (the
"Prentiss Adjusted Interest Rate"), determined on the Prentiss Anticipated
Repayment Date, equal to the greater of (a) the Prentiss Base Interest Rate plus
2% and (b) the yield calculated by linear interpolation of noncallable U.S.
Treasury obligations with terms (one longer and one shorter) most nearly
approximating the period from such date of determination to the Prentiss
Maturity Date plus 2%. However, as described below, until the principal balance
of the Prentiss Loan has been reduced to zero, the Prentiss Borrower will only
be required to pay interest at the Prentiss Base Interest Rate. The interest
accrued at the excess of the Prentiss Adjusted Interest Rate over the Prentiss
Base Interest Rate will be deferred and will bear interest at the Prentiss
Adjusted Interest Rate (such accrued and deferred interest and interest thereon,
the "Prentiss Excess Interest"). Interest on the Prentiss Loan is calculated on
the basis of the actual number of days elapsed and a 360-day year.
The Prentiss Loan requires monthly payments of interest (the "Prentiss
Monthly Debt Service Payments") of approximately $1,153,280 until the Prentiss
Anticipated Repayment Date. Commencing on the first Due Date after the Prentiss
Anticipated Repayment Date, the Prentiss Loan requires 240 constant monthly
payments of principal and interest (calculated based on the actual number of
days elapsed and a 360-day year) based on a 240-month amortization schedule and
the Prentiss Base Interest Rate, which is scheduled to be equal to approximately
$1,459,586 (the "Prentiss ARD Monthly Debt Service Payments"). Beginning on the
first Due Date after the Prentiss Anticipated Repayment Date, in addition to the
payment of the Prentiss ARD Monthly Debt Service Payments, the Prentiss Borrower
is required to apply 100% of the Prentiss Excess Cash Flow (as defined below)
for the month preceding the month in which the Due Date occurs in the following
order of priority: (a) to the outstanding principal balance of the Prentiss Loan
until such principal is reduced to zero, and (b) to the Prentiss Excess
Interest. "Prentiss Excess Cash Flow," for any period after the Prentiss
Anticipated Repayment Date, means net operating income (calculated for this
purpose, as indicated in the Prentiss Loan documents) for all of the Prentiss
Properties, minus: (a) Prentiss ARD Monthly Debt Service Payments, and (b)
payments into a tax and insurance escrow fund, a ground lease escrow fund and
other reserves required under the Prentiss Loan documents.
Upon the occurrence of an event of default under the Prentiss Loan, the
entire principal amount will bear interest at a default rate equal to the lesser
of (a) the maximum rate permitted by New York law and (b) the applicable
interest rate (the Prentiss Base Interest Rate or the Prentiss Adjusted Interest
Rate) on the loan plus 3%.
PREPAYMENT. Voluntary prepayment is prohibited under the Prentiss Loan
prior to November 26, 2006 (the "Prentiss Permitted Prepayment Date"). On the
Prentiss Permitted Prepayment Date, or on any scheduled payment date thereafter,
the Prentiss Borrower may prepay the Prentiss Loan and all other amounts due in
connection therewith in whole or part without payment of a yield maintenance
premium.
In connection with any prepayment in part after the Prentiss Permitted
Prepayment Date, the Prentiss Borrower may obtain a release of a particular
Prentiss Property or a separately identifiable subparcel forming a part of a
particular Prentiss Property (a "Prentiss Subparcel") from the lien of the
related Mortgage if, among other things, (i) the Prentiss Borrower pays an
amount equal to 115% of the Prentiss Pro Rata Release Amount (as defined below)
for the related property and (ii) after giving effect to the release, the
Prentiss DSCR (as defined below) for all of the Prentiss Properties (or portion
thereof) then remaining subject to the liens of the Mortgages calculated with
respect to the 12 full calendar months immediately preceding the release of such
Prentiss Property or Prentiss Subparcel and projected with respect to the 12
full calendar months immediately following the release of such Prentiss Property
or Prentiss Subparcel shall be no less than 2.05X. With respect to each of the
Prentiss Properties, the term "Prentiss DSCR" shall mean a ratio for the
applicable period of which the numerator is the net operating income for such
period (calculated as provided in the Prentiss Loan documents) and the
denominator is the aggregate amount of principal and interest due and payable on
the Prentiss Loan. The "Prentiss Pro
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Rata Release Amount" with respect to any of the Prentiss Properties or Prentiss
Subparcels is the product of (a) the quotient obtained by dividing the portion
of the principal amount of the Prentiss Loan allocated to such property for such
purpose, as set forth in the Prentiss Loan documents (the "Prentiss Release
Amount"), by the sum of the Prentiss Release Amounts for all Prentiss Properties
and (b) the outstanding principal balance of the Prentiss Loan.
Principal payments on the Prentiss Loan are required to occur on Due Dates
on or after the Prentiss Anticipated Repayment Date through the application of
the Prentiss ARD Monthly Debt Service Payments and the Prentiss Excess Cash Flow
as described above under "--Payment Terms." The Prentiss Loan may also be
prepaid as a result of certain events with respect to condemnation or casualty,
as described below under "--Condemnation and Casualty." Upon the occurrence of
an event of default under the Prentiss Loan, the Master Servicer may apply
certain amounts to the prepayment of the Prentiss Loan.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Prentiss Borrower is
permitted at any time after September 30, 1999 and prior to the Prentiss
Anticipated Repayment Date, provided no event of default exists, to defease all
or a portion of the Prentiss Loan, provided that, among other conditions, the
Prentiss Borrower pays on such Due Date (the "Prentiss Defeasance Date"): (i)
all interest accrued and unpaid on the principal balance of the Prentiss Loan;
(ii) all other sums then due and payable under the Prentiss Loan; and (iii) the
Prentiss Defeasance Collateral. In addition, the Prentiss Borrower is required
to deliver to the Master Servicer, among other things: (a) a security agreement
in form and substance satisfactory to the Master Servicer creating a first
priority lien on the Prentiss Defeasance Collateral and the U.S. Obligations
purchased with the Prentiss Defeasance Collateral; (b) an opinion of counsel for
the Prentiss Borrower in form reasonably satisfactory to the Master Servicer
stating that the Trustee has a perfected first priority security interest in the
Prentiss Defeasance Collateral and the U.S. Obligations delivered by the
Prentiss Borrower, and that neither REMIC Trust will fail to maintain its status
as a REMIC; and (c) evidence in writing from the applicable Rating Agencies to
the effect that such release will not result in a downgrade, withdrawal or
qualification of their respective ratings of the Certificates which are then
outstanding. The Master Servicer will be responsible for purchasing the U.S.
Obligations on behalf of the Prentiss Borrower.
The "Prentiss Defeasance Collateral" is an amount sufficient to purchase
direct noncallable U.S. Obligations providing payments on or prior to, but as
close as possible to, all successive scheduled Due Dates after the Prentiss
Defeasance Date upon which payments are required under the Prentiss Loan after
the Prentiss Defeasance Date and through and including the Prentiss Anticipated
Repayment Date and in amounts equal to (a) the proportionate share, based on the
amount of principal defeased, of scheduled payments due on such dates under the
Prentiss Loan and (b) the unpaid principal balance of the Prentiss Loan (or the
allocable portion with respect to a partial defeasance), together with accrued
interest, on the Prentiss Anticipated Repayment Date. If less than all of the
Prentiss Properties will have been released as of such Prentiss Defeasance Date,
the principal balance of Prentiss Defeasance Collateral shall equal 115% of the
Prentiss Pro Rata Release Amount for the related property, and if all of the
Prentiss Properties will have been released as of such Prentiss Defeasance Date,
the principal amount of the Prentiss Defeasance Collateral will be equal to 100%
of the principal amount of the Prentiss Loan. In addition, it will also include
any costs and expenses incurred in connection with the purchase of such U.S.
Obligations.
In connection with a partial defeasance of the Prentiss Loan, the Prentiss
Borrower will be entitled to secure the release of a particular Prentiss
Property or Prentiss Subparcel from the lien of the related Mortgage in
connection with a defeasance if, among other things, after giving effect to the
release, the Prentiss DSCR for all of the Prentiss Properties (or portion
thereof) then remaining subject to the liens of the Mortgages calculated with
respect to the twelve full calendar months immediately preceding the release of
such Prentiss Property or Prentiss Subparcel and projected with respect to the
twelve full calendar months immediately following the release of such Prentiss
Property or Prentiss Subparcel shall be
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no less than 2.05X. Upon satisfaction of such conditions, such Prentiss Property
or Prentiss Subparcel will be released from the lien of the Prentiss Loan and
the pledged U.S. Obligations will serve as collateral securing the Prentiss
Loan.
SUBSTITUTION OF MORTGAGED PROPERTIES. The Prentiss Borrower is permitted at
any time prior to the Prentiss Anticipated Repayment Date to substitute
additional office or industrial property (each, a "Prentiss Substitute
Property") for one or more of the Prentiss Properties, provided that, among
other conditions: (a) such substitution shall not be allowed more than three
times during the term of the Prentiss Loan and (b) all of the Prentiss
Properties released do not represent in the aggregate more than 25% of (i) the
aggregate net operating income of all of the Prentiss Properties for the
twelve-month period immediately preceding March 30, 1997 (the "Prentiss Outside
Closing Date") or for the twelve-month period immediately preceding the date of
substitution as set forth in the Prentiss Loan documents, and (ii) the value of
the Prentiss Properties as of the Closing Date, as specified in the Prentiss
Loan documents.
As a condition to any such substitution, the Prentiss Borrower is required
to have provided evidence in writing from the Rating Agencies to the effect that
such substitution will not result in a withdrawal, qualification or downgrade of
the respective ratings of the Certificates then outstanding. In addition, any
such office or industrial property substitution will not be permitted unless,
among other things, (1) after giving effect to the substitution, the Prentiss
DSCR for all of the Prentiss Properties is not less than the Prentiss DSCR for
all of the Prentiss Properties as of the Prentiss Outside Closing Date and as of
the date immediately preceding the substitution, (2) an appraisal of the
Prentiss Substitute Property has been received that is dated no more than 60
days prior to the substitution and was prepared by an appraiser acceptable to
the Rating Agencies, indicating an appraised value that is equal to or greater
than the value of the substituted Prentiss Property at the time of its original
encumbrance under the Prentiss Mortgage, (3) the net operating income for the
Prentiss Substitute Properties does not show a downward trend for the
immediately preceding three years, or, with respect to a Prentiss Substitute
Property for which information regarding the net operating income for such
property for the three years immediately prior to the date of substitution
cannot be obtained by the Prentiss Borrower after it exercises diligent efforts,
the net operating income shall not show a downward trend for such period of time
immediately prior to the date of substitution as may be determined from the
information regarding such net operating income available and (4) the net
operating income and Prentiss DSCR (for the twelve-month period immediately
preceding the substitution) for the Prentiss Substitute Properties is greater
than 125% of the net operating income and Prentiss DSCR (for the twelve-month
period immediately preceding the substitution) for the Prentiss Properties for
which the Prentiss Substitute Properties are being substituted.
Upon the satisfaction of the foregoing conditions precedent, the Prentiss
Property will be released from the lien of the Trust Fund.
RESERVES. Pursuant to the terms of the Prentiss Loan, the Prentiss Borrower
has established (a) a ground lease escrow fund for the making of monthly ground
rent payments for the ground lease on a portion of the One Northwestern Plaza
property, provided that this reserve need not be funded on a monthly basis if
the Prentiss Borrower maintains a balance in the ground lease escrow fund of an
amount not less than three-month's estimated ground rents with respect to the
relevant Prentiss Properties and (b) a tax and insurance account to be funded
monthly by an amount equal to 1/12th of the aggregate insurance premiums and
taxes in respect of the Prentiss Properties payable in the succeeding twelve
months.
LOCK BOX ACCOUNT. All rents and other income with respect to the Prentiss
Properties are required to be deposited directly by the Prentiss Borrower, the
tenants, and the managers of the Prentiss Properties to a clearing account.
Funds in the clearing account will be swept on the first business day of each
week and on every second business day thereafter during such week into a
collection account (the "Prentiss Lock Box Account"). Provided that no event of
default under the Prentiss Loan documents shall have occurred and be continuing,
the Master Servicer will cause the funds held in the Prentiss Cash Collateral
Account to
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be distributed on a monthly basis in the following order: (a) to fund the ground
lease escrow fund, (b) to fund the tax and insurance escrow fund, (c) to fund
the Prentiss Monthly Debt Service Payments, or, after the Prentiss Anticipated
Repayment Date, the Prentiss ARD Monthly Debt Service Payments, (d) if after the
Prentiss Anticipated Repayment Date, to fund payments for monthly cash expenses
incurred in accordance with the related approved annual budget, (e) if after the
Prentiss Anticipated Repayment Date, to fund payments for extraordinary expenses
approved by the Master Servicer, (f) to fund payment of any amounts then due and
payable under the Prentiss Loan documents, (g) prior to the Prentiss Anticipated
Repayment Date, to fund payment of any excess amounts to the Prentiss Borrower,
(h) if on or after the Prentiss Anticipated Repayment Date, to pay principal
until the outstanding principal balance of the Prentiss Loan is reduced to zero,
and (i) if on or after the Prentiss Anticipated Repayment Date, to pay the
Prentiss Excess Interest.
TRANSFER OF PROPERTY AND INTEREST IN BORROWER; ENCUMBRANCE. The Prentiss
Borrower is permitted to transfer a Prentiss Property only following a release
in connection with a defeasance (as described above under "--Release in Exchange
for Substitute Collateral") or, upon the substitution with a Prentiss Substitute
Property in accordance with the terms for such substitution (as described above
under "-- Substitution of Mortgaged Properties"), or on or after the Prentiss
Permitted Prepayment Date in connection with a prepayment (as described above
under "--Prepayment") of a portion of the Prentiss Loan. Prior to release, the
Prentiss Borrower may not encumber the Prentiss Properties, other than by the
Prentiss Permitted Encumbrances.
In addition, the Prentiss Loan prohibits transfers or encumbrances of the
partnership interests in the Prentiss Borrower and in the ownership interest in
the Prentiss G.P. Managing Member without the consent of the Master Servicer;
provided, however, that: (i) such consent is not required if, among other
things, after such transfer, the Prentiss REIT shall hold no less than 51% of
all of the ownership interests in the Prentiss Borrower and no less than 51%
ownership interest in the Prentiss G.P. Managing Member, (ii) such consent is
not required for any transfer by devise or descent or by operation of law upon
the death or dissolution of a partner, member or stockholder of the Prentiss
Borrower or any general partner or member thereof. The partnership agreement of
the Prentiss Borrower prohibits transfers or encumbrances of the partnership
interests such that the transferee owns more than a 49% interest in the Prentiss
Borrower (or such other interest as specified by the Rating Agencies) unless
such transfer is conditioned upon the delivery to the Master Servicer and the
Rating Agencies of an acceptable non-consolidation opinion relating to such
transfer concerning, as applicable, the Prentiss Borrower, the new transferee
and/ or their respective owners.
INSURANCE. The Prentiss Borrower is required to maintain (a) comprehensive
"all risk" insurance on the improvements and personal property associated with
the Prentiss Properties in an amount equal to not less than the full insurable
value of the applicable property, (b) flood insurance with respect to any part
of the Prentiss Properties that is located within a federally designated flood
hazard zone and earthquake insurance with respect to any part of the Prentiss
Properties that is located in an area with a high degree of seismic activity
(the Prentiss Property known as Pacific Gateway Center is located in a federally
designated seismic zone), (c) commercial general liability insurance against
claims for personal injury, bodily injury, death or property damage occurring
upon, in or about any part of the Prentiss Properties, (d) business income
insurance, providing coverage for the period no less than either twelve months
from the date of the occurrence of the casualty or until such date that income
returns to the same level it was at prior to the loss, whichever first occurs,
(e) at all times during which structural construction, repairs or alterations
are being made with respect to the improvements, and only if the property
coverage form does not otherwise apply, (1) owner's contingent or protective
liability insurance covering claims not covered by or under the terms or
provisions of the general liability insurance policy and (2) comprehensive "all
risk" insurance written in a "builder's risk completed value" form, (f)
statutory workers compensation insurance, (g) comprehensive boiler and machinery
insurance, (h) umbrella liability insurance, (i) motor vehicle liability
coverage for all owned and non-owned vehicles, and (j) such other insurance as
is requested by the
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Master Servicer provided such insurance is of the kind from time to time
commonly insured against for property similar to the property located in or
around the region in which the property is located.
Any such insurance may be under a blanket policy so long as the portion of
the total policy that is allocated to each of the Prentiss Properties is not
less than the required amount of such insurance. The Prentiss Loan requires the
Prentiss Borrower to obtain the insurance described above from insurance
carriers having claims paying abilities rated not less than "AA" by S&P and "AA"
or its equivalent by any one of the other Rating Agencies. The property
insurance provided by the insurer of the Prentiss Properties is provided under a
blanket policy that covers all of the properties owned by the Prentiss REIT and
its subsidiaries. Such insurance is in an amount of $871,225,888 and is being
provided by National Surety Corporation which has a rating of "A" by Best's.
Notwithstanding that the Prentiss Loan requires that the claims paying ability
rating of such insurer be "AA" by S&P, National Surety Corporation has a claims
paying ability rating of "A" by S&P. General liability insurance in an amount of
$2,000,000 for general aggregate, $1,000,000 for personal injury and $1,000,000
for fire damage is also being provided by National Surety Corporation, and
amounts in excess of such coverage are being provided by National Union Fire
Insurance Co. of Pittsburgh, which has a claims paying ability rating of "AAA"
by S&P and a rating of "A++" by Best's.
The Prentiss Borrower maintains earthquake insurance for the Prentiss
Property located in California known as the Pacific Gateway Center Property in a
total amount of $20,000,000. Such insurance is maintained under a blanket policy
that also covers other properties owned by the Prentiss REIT and its
subsidiaries. The first $2,500,000 of insurance is provided by Continental
Casualty Company, having a claims paying ability rating of "A+" by S&P and "A-"
by Best's. The next $5,000,000 of loss is provided: (1) $2,500,000 by General
Star Indemnity Company, which has a claims paying ability rating of "AAA" by S&P
and "A++" by Best's and (2) $2,500,000 by Essex Insurance Co., which has a
claims paying ability rating of "A" by S&P and "A" by Best's. The next
$2,500,000 of loss is provided by Associated International Insurance Co., which
has a claims paying ability rating of "BBB" by S&P and "A" by Best's. The next
$5,000,000 of loss is provided jointly by (1) United Fire & Casualty Company,
which has a claims paying ability rating of "A" by S&P and "A" by Best's and (2)
Western Reinsurance, which is not rated by S&P, and has a rating of "A" by
Best's. The next $5,000,000 of loss is covered by RLI Insurance Company, which
has a claims paying ability rating of "BBB" by S&P and "A" by Best's.
CONDEMNATION AND CASUALTY. The Master Servicer is obligated to make
casualty insurance or condemnation proceeds available for the restoration of the
Prentiss Properties if the following conditions, among others, are met: (i) no
event of default exists; (ii) in the case of: (A) insurance proceeds, less than
50% of the total floor area of the improvements on the property has been
damaged, destroyed or rendered unusable as a result of such fire or other
casualty or (B) condemnation proceeds, less than ten percent of the land
constituting the property is taken, such land is located along the perimeter or
periphery of the property, and no portion of the improvements is located on such
land; (iii) leases demising, in the aggregate, a percentage amount equal to or
greater than 25% with respect to insurance proceeds, and 10% with respect to
condemnation proceeds, of the total rentable space in the property which has
been demised under leases in effect as of the date of the occurrence of such
fire or other casualty or taking shall remain in full force and effect during
and after the completion of the restoration, notwithstanding the occurrence of
any such fire or other casualty or taking, whichever the case may be; (iv) the
Master Servicer shall be reasonably satisfied that any operating deficits,
including all scheduled payments of principal and interest under the Prentiss
Loan, which will be incurred with respect to the property as a result of the
occurrence of any such fire or other casualty or taking, whichever the case may
be, will be covered out of (A) net proceeds of insurance or condemnation, (B)
the insurance coverage on the property or (C) by other funds of the Prentiss
Borrower; and (v) the Master Servicer is satisfied that the property can be
restored to substantially the same condition and utility as that immediately
prior to the casualty or condemnation and such restoration shall be capable of
being completed on the earliest to occur of: (A) the Prentiss Maturity Date, (B)
the earliest date required for such completion under the terms of any leases
which are required
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to remain in effect subsequent to the occurrence of such fire or other casualty
or taking, whichever the case may be, before the Master Servicer can make
casualty insurance or condemnation proceeds available for the restoration of the
Prentiss Properties, (C) such time as may be required under applicable zoning
law, ordinance, rule or regulation in order to repair and restore the property,
and (D) the expiration of business interruption insurance.
All plans and specifications required in connection with the restoration are
required to be subject to the prior review and acceptance in all respects by the
Master Servicer and by an independent consulting engineer selected by the Master
Servicer. If at any time the net insurance or condemnation proceeds or the
undisbursed balance thereof shall not, in the reasonable opinion of the Master
Servicer in consultation with the independent consulting engineer, be sufficient
to pay in full the balance of the costs which are estimated by the independent
consulting engineer to be incurred in connection with the completion of the
restoration, the Prentiss Borrower will be required to deposit the deficiency
with the Master Servicer before any further disbursement of net insurance or
condemnation proceeds shall be made. Such additional deposit shall be held by
the Master Servicer and will be disbursed for costs actually incurred in
connection with the restoration on the same conditions applicable to
disbursement of net insurance and condemnation proceeds, as described above, and
until so disbursed shall constitute additional security for the Prentiss Loan
and other obligations under the Prentiss Loan documents.
To the extent that the proceeds of any casualty or condemnation are not
required to be made available for restoration, the Master Servicer may at its
option, either (x) apply the proceeds to a full or partial prepayment of the
Prentiss Loan and the other obligations under the Prentiss Loan documents or (y)
at the discretion of the Master Servicer, in whole or in part, disburse the
proceeds to the Prentiss Borrower for such purposes as the Master Servicer shall
designate, in its discretion. Any such prepayment of any portion of the Prentiss
Loan will made without any premium or penalty in connection with such
prepayment.
Net proceeds of insurance or condemnation retained and applied by the Master
Servicer towards the Prentiss Loan and all other obligations in connection
therewith shall be applied: (A) first, to the payment of all interest then due
and owing under the Prentiss Loan, (B) second, to the payment of all other
amounts then due and owing under the Prentiss Loan and the loan documents with
respect thereto, and (C) third, to the outstanding principal amount of the
Prentiss Loan and the reduction of the Prentiss Pro Rata Release Amount with
respect to the specific property affected by the related casualty or
condemnation. If the net proceeds of insurance or condemnation applied as set
forth in clause (C) above exceed the Prentiss Pro Rata Release Amount of the
Prentiss Property affected by the related casualty or condemnation, the Prentiss
Pro Rata Release Amount of each Prentiss Property other than the affected
property shall be reduced by the product of (1) such excess net proceeds of
insurance or condemnation multiplied by (2) the quotient of the Prentiss Pro
Rata Release Amount of such other Prentiss Property divided by the total of the
Prentiss Pro Rata Release Amounts of all of the Prentiss Properties other than
the affected property.
FINANCIAL COVENANTS AND REPORTING. The Prentiss Borrower is required to
furnish to the Master Servicer, among other things: (a) the monthly operating
statement of each Prentiss Property, together with a property balance sheet for
such month, delivered on a quarterly basis prior to the Prentiss Anticipated
Repayment Date and delivered on a monthly basis after the Prentiss Anticipated
Repayment Date, (b) within 90 days after the end of each fiscal year, an audited
annual consolidated operating statement, an annual audited balance sheet and a
profit and loss statement of the Prentiss Borrower, prepared and certified by a
"Big Six" accounting firm, (c) within 30 days following the end of each fiscal
quarter, certified updated rent rolls, (d) at least 15 days prior to the start
of each calendar year prior to the Prentiss Anticipated Repayment Date and at
least 30 days prior to the start of each calendar year after the Prentiss
Anticipated Repayment Date, an annual operating budget presented on a monthly
basis, and (e) such other information as the Master Servicer may reasonably
request.
S-162
<PAGE>
THE PROPERTIES. The Prentiss Properties consist of 8 office properties and
4 industrial and warehouse properties (such industrial and warehouse properties
consisting of 45 Mortgaged Properties). One of the properties is located in an
industrial park in Torrance, California, which is located in the Los Angeles,
California metropolitan area; one of the properties is located in Deerfield,
Illinois, which is located in the Chicago, Illinois, metropolitan area; one of
the properties is located in Chicago, Illinois; one of the properties is located
in DuPage County, Illinois, which is located in the Chicago, Illinois
metropolitan area; one of the properties is located in Southfield, Michigan,
which is located in the Detroit, Michigan metropolitan area; one of the
properties is located in the Kansas City, Missouri, metropolitan area; two of
the properties are located in Farmers Branch, Texas, which is located in the
Dallas/Ft. Worth, Texas metropolitan area; three of the properties are located
in Fairfax County, Virginia, which is located in the Washington, D.C.
metropolitan area; and one of the properties is located in the Milwaukee,
Wisconsin, metropolitan area.
The Prentiss Properties have GLAs ranging from approximately 58,621 square
feet to approximately 1,252,708 square feet, with an average GLA of
approximately 109,465 square feet and an aggregate GLA of approximately
5,801,634 square feet. Approximately 1,451,486 square feet of aggregate GLA of
the Prentiss Properties is comprised of office space and approximately 4,350,148
square feet of GLA of industrial/warehousing space. The Prentiss Properties were
built between 1970 and 1995. The occupancy rate of the Prentiss Properties as of
June 24 to September 10, ranged from approximately 87% to 100%, with a weighted
average occupancy rate, of approximately 97%. The Prentiss Properties had an
annualized base rent for office and industrial/warehouse space of $3.38 and
$16.60 per square foot of GLA, respectively. The 1996 NOI of the properties
ranged from $500,778 to $4,289,477 and aggregated $27,339,025. Most leases have
an initial term of 3 to 10 years and provide for periodical rent increases that
are either fixed or based on the Consumer Price Index. The 5 largest tenants of
the office properties, Hoechst Celanese Corp., CIGNA, Grumman Data Systems
Corp., Premark International, Inc., and The Wyatt Company represent 8.9%, 4.4%,
4.1%, 3.9% and 3.8% of the annualized base rent, respectively. No other single
tenant of office property for the Prentiss Properties represents more than 3.8%
of the annualized base rent for the properties. The 5 largest tenants of the
industrial/warehouse properties, Nippon Express U.S.A., C&H Distributors, Dunlop
Tire Corp., Michelin Tire Corp. and the U.S. Postal Service, represent 4.9%,
2.2%, 1.4%, 1.0% and 0.9% of the annualized base rent respectively. No other
single tenant of industrial/warehouse property of the Prentiss Properties
represents more than 0.9% of the annualized base rent of the properties. The
aggregate value of the Prentiss Properties has been determined by LB Holdings,
based on financial and other information provided by the Prentiss Borrower and
or information prepared on LB Holdings' behalf by third parties, to be
$300,100,000. Appraisals were not conducted with respect to the Prentiss
Properties. For additional considerations with respect thereto, See "Risk
Factors--The Mortgage Loans--Lack of Certain Appraisals-Limitation of
Appraisals" herein.
1717 DEERFIELD ROAD. The 1717 Deerfield Road Building, built in 1985, is
located in Deerfield, Illinois. The building is a three-story office building,
with 137,904 square feet of GLA. As of June 30, 1997, the property was 100%
leased.
The following table sets forth certain data regarding the major tenants at
the 1717 Deerfield Road Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Premark International Inc.......................................... 2003 91,801 66.6% 65.9%
Dade International................................................. 2003 46,103 33.4% 34.1%
</TABLE>
After recent downsizing, Premark International Inc. has subleased the first
floor of the building to Dade International, a diagnostic laboratory, which is
also the direct tenant of the second floor of the building under a lease that
expires in 2003.
S-163
<PAGE>
2411 DULLES CORNER. The 2411 Dulles Corner Road building, built in 1990, is
located at the western edge of Fairfax County, Virginia in the town of Herndon.
The building is an eight-story, suburban office building with 190,723 square
feet of GLA. As of June 30, 1997, the property was 100% leased.
The following table sets forth certain data regarding the major tenants at
the 2411 Dulles Corner Road Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ----------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Grumman Data Systems Corp.......................................... 2001 91,159 47.8% 45.3%
Scitor Corporation(1).............................................. Various 41,794 21.91% 14.6%
</TABLE>
- ------------------------
(1) Scitor Corporation occupies 5 suites. Leases covering 29,304 square feet of
GLA expire in August 1999 and leases covering 12,490 square feet of GLA
expire in May 2002.
The building is part of a one hundred acre office park known as Dulles
Corner. The office park currently consists of four office buildings and a Hyatt
Hotel, totaling approximately 1,000,000 square feet. Rental rates in the Fairfax
County area have been increasing at a strong rate due to strong demand.
3141 FAIRVIEW PARK DRIVE. The 3141 Fairview Park Drive building, built in
1987 by an affiliate of the Prentiss Borrower, is located in the Fairfax County,
Virginia. The building is an eight-story, suburban office building and contains
192,108 square feet of GLA. The property is the centerpiece of Fairview Park, a
master-planned office community. As of June 30, 1997, the property was 91.9%
leased.
The following table sets forth certain data regarding the major tenants at
the 3141 Fairview Park Drive Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Hewlett-Packard.................................................... 2001 21,386 11.1% 10.5%
Equitable Life Assurance........................................... 2002 16,814 8.8% 9.0%
R.R. Donnelley & Sons.............................................. 1999 16,554 8.6% 15.5%
</TABLE>
Rental rates in the Fairfax County area have been increasing at a strong
rate due to strong demand. As a result, there are a number of buildings planned
or under construction which, when completed, will compete with the 3141 Fairview
Park Drive building.
4401 FAIR LAKES COURT. The 4401 Fair Lakes Court building was built in 1987
in the Fair Lakes office park in Fairfax, Virginia. The building is a
four-story, suburban office building. and contains 58,621 square feet of GLA.
The Fair Lakes office park is approximately twenty miles west of Washington,
D.C. As of September 9, 1997, the property was 95.6% leased.
The following table sets forth certain data regarding the major tenants at
the 4401 Fair Lakes Court Property as of September 9, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
C.C. Pace Resources................................................ 2001 18,005 30.7% 34.4%
Cort Furniture Rental.............................................. 1999 10,159 17.3% 16.1%
Lee Technologies................................................... 2001 8,807 15.0% 17.1%
</TABLE>
Rental rates in the Fairfax County area have been increasing at a strong
rate due to strong demand. As a result, there are a number of buildings planned
or under construction in the vicinity of the 4401 Fair Lakes Court building
which, when completed, will compete with the 4401 Fair Lakes Court Building.
S-164
<PAGE>
CHICAGO INDUSTRIALS. The Chicago Industrial properties consist of
industrial, distribution, warehouse and servicing buildings containing an
aggregate of 226,076 square feet of GLA. The properties consist of Wood Dale 1,
Wood Dale 2 and 155 Alexandra Way.
WOOD DALE 1 AND WOOD DALE 2. The Wood Dale 1 and 2 buildings, built by an
affiliate of the Prentiss Borrower in 1987, are located in Wood Dale (DuPage
County), Illinois. The Wood Dale 1 building is a Class B, 1-story
industrial/warehouse building. The Wood Dale 2 building is a Class B,
1-story industrial/warehouse building. The Wood Dale 1 and 2 buildings
contain a total of 116,076 square feet of GLA. The buildings are part of a
single complex and as of September 10, 1997 are 100% leased. The property is
generally used for storage, distribution and light manufacturing.
155 ALEXANDRA WAY. The Alexandra Way building, built in 1988, is located in
Carol Stream (DuPage County), Illinois. The building is a Class B, warehouse
building with 110,000 square feet of GLA. Generally, the property is used
for storage and distribution. As of September 10, 1997, the building was
100% leased.
The following table sets forth certain data regarding the major tenants at
the Chicago Industrials Properties as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION BUILDING (SQ FT) PROPERTY GLA BASE RENT
- --------------------------------------------------- ------------- ------------ --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Michelin Tire Corp................................. 2004 Alexandra 110,000 48.7% 41.0%
RS Express......................................... 2004 Wood Dale 2 26,429 11.7% 13.3%
Vacumet Corp....................................... 2002 Wood Dale 1 24,923 11.0% 13.4%
</TABLE>
While rental rates in the vicinity of the Chicago Industrial Properties
remain relatively stable, there is a considerable amount of new and planned
construction in the area of the Chicago Industrial Properties.
KANSAS CITY INDUSTRIALS. The Prentiss Borrower owns seven industrial
properties containing 1,341,880 square feet of GLA in four locations throughout
Kansas City, Missouri. The Kansas City Industrial Properties consist of
Northland Park, North Topping Street, Airworld Drive and 107th Terrace.
NORTHLAND PARK. Northland Park is an industrial complex composed of four
Class B warehouse/ distribution facilities, built between 1972 and 1978, and
located in North Kansas City, Missouri, in the Paseo Industrial District.
Northland Park contains 925,007 square feet of GLA. The Paseo Industrial
District contains over 13 million net rentable square feet of industrial and
warehouse space with minimal land available for future development. North
Kansas City has access to all three of the interstate highways in Kansas
City. As of June 24, 1997, the property was 100% leased.
NORTH TOPPING STREET. The North Topping Street building was built in 1975 on
5.85 acres of land located at 1501-1599 North Topping Street, in Executive
Park, an industrial area four miles northeast of the central business
district, in Kansas City, Missouri. The building is a single-story
industrial warehouse building containing 119,118 square feet of GLA. As of
June 24, 1997, the property was 100% leased. Generally, the property is used
for storage, distribution and light manufacturing.
AIRWORLD DRIVE. The Airworld Drive building was built in 1976 and is located
in Kansas City, Missouri. The building is a single-story, single-tenant
industrial building containing 200,000 square feet of GLA. Airworld Drive is
part of the Airworld Center, which is a master planned office and industrial
park located in the Airport Industrial submarket in the northern industrial
area of Kansas City, Missouri. Generally, the property is used for storage
and distribution. As of June 24, 1997, the property was 100% leased. The
Prentiss Borrower has budgeted approximately $5,000,000 to build
improvements on this building that will add an additional 150,000 square
feet of GLA. The Prentiss Borrower has entered into a lease with Bunzl Corp.
for 48,000 square feet of GLA in this new space under a five year lease that
will commence in February 1998 for $3.65 per square foot.
S-165
<PAGE>
107TH TERRACE. The 107th Terrace building was built in 1978 and is located
at 107th Terrace in Airworld Center, Kansas City, Missouri. The property is
also part of the Airworld Center. The building is a single-story,
single-tenant industrial building containing 97,755 square feet of GLA.
Generally, the property is used for storage and distribution. As of June 24,
1997, the property was 100% leased.
The following table sets forth certain data regarding the tenants at the
Kansas City Industrials Properties as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION BUILDING (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------- ------------- -------------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Dunlop Tire Group................................ 2000 Northland Park 229,824 17.1% 14.5%
Midland Brake.................................... 2002 Airworld 200,000 14.9% 9.9%
U.S. Postal Service.............................. 1998 Northland Park 131,769 9.8% 10.1%
</TABLE>
MILWAUKEE INDUSTRIALS. The Prentiss Borrower owns 17 industrial properties
containing approximately 1,529,484 square feet of GLA in 3 locations in
Milwaukee, Wisconsin. The buildings were built between the years of 1970 to
1982. The Milwaukee Industrial Properties are made up of 3 groups of properties:
the Airport Properties, the Oak Creek Properties and the North West Properties.
As of September 9, 1997, the occupancy rate of the Milwaukee Industrial
Properties was 92.7%.
AIRPORT PROPERTIES. The Airport Properties consist of 13 industrial
facilities and are located adjacent to General Mitchell International
Airport in Milwaukee, Wisconsin. Generally, the property is used for
storage, distribution and light manufacturing.
OAK CREEK PROPERTIES. The Oak Creek Properties consist of 2
warehouse/distribution centers, Buildings 7 and 13 and are located in the
Airport/Oak Creek submarket, just southwest of the General Mitchell
International Airport in Milwaukee, Wisconsin. Generally, the property is
used for storage, distribution and light manufacturing.
NORTH WEST PROPERTIES. The North West Properties consist of 2 warehouse/
distribution centers, Buildings 14 and 15 and are located in the Bradley
Industrial Park which is located in northwestern suburban Milwaukee,
Wisconsin, near the town of Brown Deer. Generally, the property is used for
storage, distribution and light manufacturing.
The following table sets forth certain data regarding the major tenants at
the Milwaukee Industrial Properties as of September 9, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
C & H Distributors................................................ 1998 330,000 21.6% 19.0%
Pepsico Food Systems.............................................. 1998 120,000 7.8% 7.8%
Bradley Corporation............................................... 2000 119,160 7.8% 7.0%
</TABLE>
O'HARE PLAZA II. The O'Hare Plaza II building was built in 1986 and is
located in Chicago, Illinois. The building is an eleven-story office building,
with 233,650 square feet of GLA and is part of a five building complex commonly
referred to as O'Hare Plaza. The development of O'Hare Plaza was built in two
phases. The first phase consists of three buildings owned by All State Insurance
Corporation, which was completed in 1972. The second phase, in which the O'Hare
Plaza II building is a part, consists of two office buildings which were
constructed in 1986. The other building of this second phase is owned by The
Lutheran Church of America. All five buildings are connected by covered
walkways. The occupancy rate of O'Hare Plaza II as of June 30, 1997, was 87.2%.
S-166
<PAGE>
The following table sets forth certain data regarding the major tenants at
the O'Hare Plaza II Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
CIGNA.............................................................. 2002 67,465 28.9% 33.6%
Sybase, Inc........................................................ 1999 41,017 17.6% 19.5%
Compuserve......................................................... 2006 18,098 7.7% 8.4%
</TABLE>
ONE NORTHWESTERN PLAZA. One Northwestern Plaza is a 13-story, suburban
office building in Southfield, Michigan. The building was developed in 1989 and
contains 241,751 square feet of GLA with heated underground parking facilities.
The building is located at the intersection of I-696 and Northwestern Highway.
As of June 30, 1997, the property was 90.3% leased.
The following table sets forth certain data regarding the major tenants at
the One Northwestern Plaza Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
The Wyatt Company.................................................. 2004 61,800 25.6% 33.2%
Intergraph Corporation............................................. 1998 22,124 9.2% 9.5%
WLIT Radio......................................................... 2002 10,460 4.3% 5.4%
</TABLE>
Rental rates in the vicinity of the One Northwestern Plaza Property have
been increasing. As a result, new construction is taking place in the immediate
area.
The interest of the Prentiss Borrower in One Northwestern Plaza consists of
a fee interest for a portion of the parking lot and a leasehold interest for the
remainder of the property created under a ground lease with Satfield Company
(the "One Northwestern Plaza Ground Lease"). The One Northwestern Plaza Ground
Lease expires on the last day of June, 2054. From July 1, 1994 and during the
succeeding five lease years, and commencing July 1 of each succeeding sixth
lease year and the five lease years thereafter, the monthly rent under the One
Northwestern Plaza Ground Lease shall be the greater of: (1) the minimum ground
rent equal to:
<TABLE>
<CAPTION>
FOR PERIOD AMOUNT
- ---------------------------------------------------------------------------------------------- ----------
<S> <C>
July 1, 1994 through June 1, 1999............................................................. $ 8,966.97
July 1, 1999 through June 1, 2004............................................................. $ 9,963.32
July 1, 2004 through June 1, 2009............................................................. $10,959.29
July 1, 2009 through June 1, 2014............................................................. $11,955.98
July 1, 2014 through June 1, 2019............................................................. $12,952.31
July 1, 2019 through June 1, 2024............................................................. $13,948.64
July 1, 2024 through June 1, 2029............................................................. $14,944.47
July 1, 2029 through June 1, 2034............................................................. $15,941.31
July 1, 2034 through June 1, 2039............................................................. $16,937.64
July 1, 2039 through June 1, 2044............................................................. $17,933.96
July 1, 2044 through June 1, 2049............................................................. $18,930.30
July 1, 2049 through June 1, 2054............................................................. $19,926.63
</TABLE>
and (2) the monthly ground rent during the immediately preceding five lease
years multiplied by the percentage equal to the lesser of: (a) 115% and (b) the
consumer price index seasonally adjusted for all items for all urban consumers
(1967=100). The ground lessor has agreed (a) that in the event the lender under
the Prentiss Loan should foreclose, the lender would have the right to assign
the leasehold estate to another entity, (b) to send the lender notice of any
event of default under the One Northwestern Plaza Ground Lease and to grant to
the lender a right and additional time to cure any such default, and (c) if the
ground lessor terminates the One Northwestern Plaza Ground Lease, to enter into
a new lease with the lender on the same terms as the present lease provided that
the lender has cured any defaults.
S-167
<PAGE>
PACIFIC GATEWAY CENTER. Pacific Gateway Center is an industrial complex
composed of 18 buildings built between 1972 and 1983 containing 1,252,708 square
feet of GLA. As of June 30, 1997, the property was 100% leased.
The following table sets forth certain data regarding the major tenants at
the Pacific Gateway Center Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Nippon Express USA(1)............................................. Various 499,019 39.8% 34.1%
Fujitsu-Ten Corporation........................................... 1999 76,416 6.1% 5.3%
King's Hawaiian Bakery............................................ 2000 72,000 5.7% 6.6%
</TABLE>
- ------------------------
(1) Nippon Express USA occupies 5 suites: 145,536 square feet of GLA are leased
until September 2001 and 353,483 square feet of GLA are leased until
December 2000.
The properties are located in Torrance, California, approximately 14 miles
south of downtown Los Angeles and approximately 10 miles from the ports of Long
Beach and Los Angeles International Airport. Pacific Gateway Center is within
one mile from each of the San Diego (405) Freeway, the Harbor (110) Freeway and
the Artesia (91) Freeway. Generally, the property is used for storage,
distribution and light manufacturing. The Pacific Gateway Center Property is
part of an area that has recently been designated by the EPA as a Superfund
site. In addition, there has been certain groundwater and soil contamination
found on the land underlying the Pacific Gateway Center Property. Shell Oil
Company has previously entered into an agreement in which it has agreed to
indemnify the Prentiss Borrower, and any subsequent purchasers, tenants and
lenders, from certain liabilities related thereto. In addition, the Prentiss
Borrower and the Prentiss L.P. have entered into an indemnification agreement,
whereby they have agreed to indemnify LB Realty, for environmental liabilities
that might arise with respect to the Pacific Gateway Center Properties and such
indemnification has been assigned to the Trust Fund. For a more in depth
discussion of this situation, see "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
PARK WEST. Park West consists of two office buildings, Park West E1 and
Park West E2, containing a total of 396,729 square feet of GLA, which are
located in the Park West Office Park in Farmer's Branch, Texas. The Park West
Office Park is part of the Park West Master Plan, which consists of 170 acres
located along the LBJ Freeway less than one mile west of I-35. The location
provides direct access along the LBJ Freeway to DFW Airport, and to downtown
Dallas and Love Field via I-35.
The Park West E1 building is an eight-story, office building. The property
was developed in 1980 by an affiliate of the Prentiss Borrower and contains
196,139 square feet of GLA.
Park West E2 is an eight story, office building located adjacent to Park
West E1. The property contains 200,590 square feet of GLA and was developed in
1981. As of June 30, 1997, the building was 99.7% leased.
The following table sets forth certain data regarding the major tenants at
the Park West Properties as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Hoechst Celanese Corporation(1)................................... Various 205,828 51.9% 64.6%
Sprint Communication.............................................. 2004 125,966 31.8% 23.6%
1-2 Technologies.................................................. 1998 23,019 5.8% 4.8%
</TABLE>
- ------------------------
(1) Hoechst Celanese Corporation occupies 182,739 square feet of GLA in Park
West E1 and 23,089 square feet of GLA in Park West E2; the lease for The
Park West E1 space expires in July 2007 and the lease for 20,450 square feet
of GLA in Park West E2 expires in February 1999 and for the remaining 2,639
square feet of GLA in Park West E2, in July 2007.
Hoechst Celanese Corporation, a large multinational textile, chemical and
pharmaceutical company, is the only tenant that leases more than 32% of the net
rentable area in the Park West Properties.
Rental rates in the vicinity of the Park West Properties are increasing at a
strong rate due to strong demand. As a result, there are a number of buildings
planned for construction in the immediate area, which when completed will
compete with the Park West Properties.
S-168
<PAGE>
PROPERTY MANAGEMENT. The Prentiss Properties are managed by Prentiss
Properties Management, L.P. (in such capacity, the "Prentiss Manager"), pursuant
to a property management agreement (the "Prentiss Management Agreement") between
the Prentiss Manager and the Prentiss Borrower. The Prentiss Manager is
responsible for the management of the Prentiss Properties and the administration
of the leases with respect thereto. Under the Prentiss Management Agreement, the
Prentiss Manager is entitled to (a) an annual management fee equal to 3% of
gross receipts of the Prentiss Properties, payable monthly, (b) all third party
costs advanced by the Prentiss Manager for the Prentiss Borrower pursuant to
such agreement, and (c) a leasing fee in respect of renewals, extensions and
expansions of leasehold interests in the Prentiss Properties equal to the then
current market rate for commissions for leases in properties of similar size,
age, type and use in the respective metropolitan area for such property.
The Prentiss Management Agreement provides that the Prentiss Manager will
manage the properties for an initial term of fifteen years beginning February
16, 1997, unless the Prentiss Management Agreement is earlier terminated. The
Prentiss Management Agreement may be terminated upon, among other things: (A)
the mutual consent of the Prentiss Borrower and the Prentiss Manager or (B) upon
cause, at the election of the Prentiss Borrower. The Prentiss Borrower may
terminate the Prentiss Management Agreement for cause: (i) upon the failure of
the Prentiss Manager to comply with the terms of the Prentiss Management
Agreement which failure has a material adverse effect upon the Prentiss Borrower
or any of the Prentiss Properties, and which the Prentiss Manager has failed to
cure within 30 days after receiving written notice from the Prentiss Borrower of
such failure to comply (or if such cure cannot be effected within such 30 day
period, then upon failure to commence such cure within such 30 day period), (ii)
if the Prentiss Manager commits a fraud, material misrepresentation or a breach
of fiduciary duty with respect to its obligations under the Prentiss Management
Agreement in a manner which constitutes (either explicitly or implicitly) a
course of unauthorized conduct or (iii) upon certain events of insolvency of the
Prentiss Manager.
Pursuant to an Assignment of Management Agreement and Subordination of
Management Fees, among LB Realty, as lender, the Prentiss Borrower and the
Prentiss Manager (the "Manager's Subordination"), the Master Servicer will have
the right to terminate the Prentiss Management Agreement and cause a new
property manager to be engaged upon the occurrence of any of the following
events: (1) the Prentiss Manager becomes insolvent, (2) either of the following
events of default under the Prentiss Loan: (a) any payment of principal or
interest under the Prentiss Loan is not paid when due or any other amount
payable under the Prentiss Loan documents is not paid within five days after
written notice to the Prentiss Borrower from the Master Servicer or (b) if any
taxes or other assessments, rents, maintenance charges, impositions other than
taxes, and any other charges with respect to any of the Prentiss Properties are
not paid prior to the same becoming delinquent or the imposition of any penalty
with respect to the payment of such amounts, subject to the Prentiss Borrower's
right under the Prentiss Loan documents to contest such amounts; or (3) the
acceleration of the Prentiss Loan pursuant to the Prentiss Loan documents upon
the occurrence or continuance of any other event of default thereunder.
In addition, pursuant to the Manager's Subordination, the Prentiss Manager
has also agreed that all fees and all other amounts payable to the Prentiss
Manager pursuant to the Prentiss Management Agreement are and will be, in all
respects, subordinate and inferior to the liens and security interests created
by the Prentiss Loan.
The Prentiss Manager is owned by PPAP, which is the general partner of the
Prentiss Manager, and Prentiss Properties Ltd, Inc. ("PPLI") which is the
limited partner of the Prentiss Manager. Affiliates of PPLI directly manage all
of the other properties owned by the Prentiss REIT and its subsidiaries.
THE ARDEN LOAN AND PROPERTIES
THE LOAN. The Arden Loan has a principal balance as of the Cut-Off Date of
$175,000,000 and is secured by a Mortgage (the "Arden Mortgage") encumbering 17
office properties located in the Los Angeles and Orange County region of
California (the "Arden Properties").
THE BORROWER. Arden Realty Finance Partnership, L.P. (the "Arden Borrower")
is a California limited partnership formed on June 5, 1997 to operate the Arden
Properties. The Arden Borrower has no material
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assets other than the Arden Properties and related interests. The general
partner of the Arden Borrower is Arden Realty Finance, Inc. (the "Arden GP"), a
California corporation, that was formed solely for the purpose of acting as
general partner of the Arden Borrower and is a wholly owned subsidiary of Arden
Realty, Inc. (the "Arden REIT"). The Arden REIT is a Maryland corporation and a
real estate investment trust, the common stock of which is traded on the New
York Stock Exchange under the listing symbol "ARI". The Arden REIT is a
reporting company under the Exchange Act. The limited partner of the Arden
Borrower is Arden Realty Limited Partnership (the "Arden LP"), a California
limited partnership which is 92% owned by the Arden REIT.
SECURITY. The Arden Loan is a non-recourse loan, secured only by the fee
estate, or, in the case of the parking facility for the 222 South Harbor
Boulevard property, the leasehold estate, of the Arden Borrower in each Arden
Property and certain other collateral (including an assignment of leases and
rents and the funds in certain accounts). Subject to exceptions for, among other
things, fraud, intentional misrepresentation, breach of certain environmental
indemnities and covenants and misapplication of funds, and except as described
below, neither the Arden Borrower nor any of its affiliates is personally liable
for payment of the Arden Loan.
The Arden Borrower has made certain environmental representations and has
represented that it has good, marketable and insurable fee simple title to all
of the Arden Properties (except for the parking facility for the 222 South
Harbor Boulevard property as to which it has represented that it has a leasehold
interest) subject only to specified permitted encumbrances (the "Arden Permitted
Encumbrances") permitted by the lender under the loan documents. LB Realty is
the named insured under title insurance policies (which will be assigned to the
Trust Fund) which insure that each of the Arden Mortgages constitutes a valid
and enforceable first lien on the Arden Properties, subject to certain
exceptions and exclusions from coverage set forth therein.
PAYMENT TERMS. The Arden Loan was originated by LB Realty on June 11, 1997,
matures on June 10, 2029 (the "Arden Maturity Date") and bears interest at a
fixed rate per annum equal to 7.52% (the "Arden Base Interest Rate") through
June 10, 2004, and from June 11, 2004 (the "Arden Anticipated Repayment Date")
at a rate per annum (the "Arden Adjusted Interest Rate"), determined on the
Arden Anticipated Repayment Date, equal to the greater of (a) the Arden Base
Interest Rate plus 2% and (b) the yield calculated by linear interpolation of
noncallable U.S. Treasury obligations with terms (one longer and one shorter)
most nearly approximating the period from such date of determination to the
twenty-fifth anniversary of the Arden Anticipated Repayment Date plus 2%.
However, as described below, until the principal balance of the Arden Loan has
been reduced to zero, the Arden Borrower will only be required to pay interest
at the Arden Base Interest Rate. The interest accrued at the excess of the Arden
Adjusted Interest Rate over the Arden Base Interest Rate will be deferred and
will bear interest at the Arden Adjusted Interest Rate (such accrued and
deferred interest and interest thereon, the "Arden Excess Interest"). Interest
on the Arden Loan is calculated on the basis of the actual number of days
elapsed and a 360-day year.
The Arden Loan requires monthly payments of interest (the "Arden Monthly
Debt Service Payments" of approximately $1,111,898 until the Arden Anticipated
Repayment Date. Commencing on the first Due Date after the Arden Anticipated
Repayment Date, the Arden Loan requires 300 constant monthly payments of
principal and interest (calculated based on the actual number of days elapsed
and a 360-day year) based on a 300-month amortization schedule and the Arden
Base Interest Rate, which is scheduled to be equal to approximately $1,295,512
(the "Arden ARD Monthly Debt Service Payments"). Beginning on the first Due Date
after the Arden Anticipated Repayment Date, in addition to the payment of the
Arden ARD Monthly Debt Service Payments, the Arden Borrower is required to apply
100% of the Arden Excess Cash Flow for the month preceding the month in which
the payment date occurs in the following order of priority: (a) to the
outstanding principal balance of the Arden Loan until such principal is reduced
to zero and (b) to the Arden Excess Interest. "Arden Excess Cash Flow," for any
period after the Arden Anticipated Repayment Date, means the excess of (i) net
operating income (as calculated under the Arden Loan documents) for such period
over (ii) the sum of (A) Arden ARD Monthly Debt Service Payments for
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such period and (B) certain other obligations under the Arden Loan documents
then due and payable to the Trust.
Upon the occurrence of an event of default under the Arden Loan, the entire
amount due under the Arden Loan documents will bear interest at a default rate
equal to the lesser of (a) the greater of (i) the Arden Base Interest Rate plus
3% (or on and after the Arden Anticipated Repayment Date, the Arden Adjusted
Interest Rate plus 3%) and (ii) the prime rate that is published in The Wall
Street Journal listing of "Money Rates" plus 2% and (b) the maximum rate allowed
to be collected under applicable law.
ALTERATIONS. The Arden Borrower may, provided no event of default under the
Arden Loan documents has occurred or is continuing, undertake any alteration,
expansion, improvement, demolition or removal (each, an "Arden Alteration") of
any individual Arden Property or any portion thereof so long as such Arden
Alteration, among other things, (i) is undertaken with the Master Servicer's
prior written consent where the estimated cost of the Arden Alteration exceeds
5% of the Allocated Loan Amount applicable to such property, (ii) is paid for
from reserves (other than the Arden Reserve Account) established by the Arden
Borrower or from capital contributions by the partners of the Arden Borrower
that are deposited with the Master Servicer prior to the commencement of such
work, which amounts (including, in either case, additional deposits made from
time to time to prevent a deficiency between the amount then on deposit with the
Master Servicer and the amount reasonably estimated at such time to complete the
Arden Alteration) will be held by the Master Servicer and (iii) could not
reasonably be expected (A) to decrease the value, utility and operation of the
property or (B) to adversely affect the ability of the Arden Borrower to pay and
perform its obligations under the Arden Loan documents. Any Arden Alteration
which involves an estimated cost of more than 5% of the Allocated Loan Amount
applicable to the property is required to be conducted under the supervision of
a qualified architect or engineer selected by the Master Servicer, to oversee
such Arden Alteration.
PREPAYMENT. Voluntary prepayment is prohibited under the Arden Loan prior
to three months prior to the Arden Anticipated Repayment Date (the "Arden
Permitted Prepayment Date"). On the Arden Permitted Prepayment Date, or on any
scheduled payment date thereafter, the Arden Borrower may prepay all or any
portion of the Arden Loan and all other amounts due in connection therewith in
whole or part without payment of any penalty or premium. The Arden Loan may also
be prepaid as a result of certain events with respect to condemnation or
casualty, as described below under "--Condemnation and Casualty."
In connection with any prepayment in part after the Arden Permitted
Prepayment Date, the Arden Borrower may obtain a release of a particular Arden
Property from the lien of the related Mortgage if, among other things, (a) no
default or event of default has occurred and is continuing (other than a default
that will be cured by such release), (b) the Arden Borrower pays (i) all accrued
and unpaid interest and all other sums due under the Arden Loan and all other
Arden Loan documents executed in connection therewith, through and including
such Due Date and (ii) an amount equal to 125% of the Allocated Loan Amount of
the Arden Property to be released and (c) after giving effect to the release,
the Arden DSCR for all of the Arden Properties then remaining subject to the
liens of the Arden Mortgages are at least equal to the greater of (i) 2.052X and
(ii) the DSCR for the remaining Arden Properties and the Arden Property to be
released for the twelve full calendar months immediately preceding the release
of the Arden Property to be released. With respect to each of the Arden
Properties, the term "Arden DSCR" means a ratio for the applicable period of
which the numerator is the net operating income for such period (calculated as
provided in the Arden Loan documents) and the denominator is the aggregate
amount of interest due and payable on the Arden Loan or, in the event an Arden
Defeasance Event has occurred, the undefeased portion of the Arden Loan.
Principal payments on the Arden Loan are required to occur on payment dates
on or after the Arden Anticipated Repayment Date through the application of the
Arden ARD Monthly Debt Service Payments and the Arden Excess Cash Flow as
described above under "--Payment Terms." Upon the occurrence of an event of
default under the Arden Loan, the Master Servicer may apply certain amounts to
the prepayment of the Arden Loan.
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RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Arden Borrower is
permitted at any time after the second anniversary of the Closing Date and prior
to the Arden Anticipated Repayment Date (the "Arden Defeasance Period"),
provided no event of default exists, to defease all or a portion of the Arden
Loan, provided that, among other conditions, the Arden Borrower pays on such
payment date (the "Arden Defeasance Date"): (i) all interest accrued and unpaid
on the principal balance of the Arden Loan; (ii) all other sums then due and
payable under the Arden Loan; and (iii) the Arden Defeasance Collateral. The
"Arden Defeasance Collateral" is an amount sufficient to purchase U.S.
Obligations providing payments on or prior to, but as close as possible to, all
successive scheduled Due Dates after the Arden Defeasance Date upon which
payments are required under the Arden Loan after the Arden Defeasance Date and
through and including the Arden Anticipated Repayment Date and in amounts equal
to (a) the proportionate share, based on the amount of principal defeased, of
scheduled payments due on such dates under the Arden Loan and (b) the unpaid
principal balance of the Arden Loan (or the allocable portion with respect to a
partial defeasance), together with accrued interest, on the Arden Anticipated
Repayment Date. If less than all of the Arden Properties will have been released
as of such Arden Defeasance Date, the principal balance of Arden Defeasance
Collateral is required to equal 125% of the Allocated Loan Amount for each Arden
Property to be released, and if all of the of the Arden Properties will have
been released as of such Arden Defeasance Date, the principal amount of the
Arden Defeasance Collateral will be equal to 100% of the principal amount of the
Arden Loan. In addition, the Arden Defeasance Collateral will also include any
costs and expenses incurred in connection with the purchase of such U.S.
Obligations. The Master Servicer will be responsible for purchasing the U.S.
Obligations on behalf of the Arden Borrower.
In addition, the Arden Borrower is required to deliver to the Master
Servicer, among other things: (a) a security agreement in form and substance
satisfactory to the Master Servicer creating a first priority lien on the Arden
Defeasance Collateral and the U.S. Obligations purchased with the Arden
Defeasance Collateral; (b) an opinion of counsel for the Arden Borrower in form
reasonably satisfactory to the Master Servicer stating that the Trustee has a
perfected first priority security interest in the Arden Defeasance Collateral
and the U.S. Obligations delivered by the Arden Borrower and that neither Trust
REMIC will fail to maintain its status as a REMIC as a result of such
defeasance; and (c) evidence in writing from the applicable Rating Agencies to
the effect that such release will not result in a downgrade, withdrawal or
qualification of their respective ratings of the Certificates which are then
outstanding.
In connection with the defeasance of the Arden Loan, the Arden Borrower will
be entitled to secure the release of a particular Arden Property from the lien
of the Arden Mortgage in connection with a defeasance if, among other things,
after giving effect to the release, the Arden DSCRfor all of the Arden
Properties (or portion thereof) then remaining subject to the liens of the
Mortgages calculated with respect to the 12 full calendar months immediately
preceding the release of such Arden Property and projected with respect to the
12 full calendar months immediately following the release of such Arden Property
is at least equal to the greater of (i) 2.052X and (ii) the DSCR for the
remaining Arden Properties (including the Arden Property to be released) for the
twelve full calendar months immediately preceding the release of the Arden
Property to be released. Upon satisfaction of such conditions, such Arden
Property will be released from the lien of the Arden Loan and the pledged U.S.
Obligations will serve as collateral securing the Arden Loan.
SUBSTITUTION OF MORTGAGED PROPERTIES. The Arden Borrower is permitted at
any time after the second anniversary of the Closing Date and prior to the Arden
Anticipated Repayment Date to substitute additional office or industrial
property (each, a "Arden Substitute Property") for one or more of the Arden
Properties, provided that, among other conditions: (a) such substitution will
not be allowed for more than two times during the term of the Arden Loan and (b)
not more than five of the Arden Properties may be released from the lien of the
Arden Mortgage during the term of the Arden Loan.
As a condition to any such substitution, the Arden Borrower is required to
have provided evidence in writing from the Rating Agencies to the effect that
such substitution will not result in a withdrawal, qualification or downgrade of
the respective ratings of the Certificates then outstanding. In addition, any
such office property substitution will not be permitted unless, among other
things, (1) after giving effect to the substitution, the Arden DSCR for all of
the Arden Properties (including the Arden Substitute
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Property, but excluding the substituted properties) will be at least equal to
the greater of (i) 2.052X and (ii) the Arden DSCR for all of the Arden
Properties immediately preceding the substitution (including the Arden Property
to be substituted), (2) an appraisal of the Arden Substitute Property has been
received that is dated no more than 60 days prior to the substitution and was
prepared by an appraiser acceptable to the Rating Agencies, indicating an
appraised value that is equal to or greater than the value of the substituted
Arden Property at the time of its original encumbrance under the Arden Mortgage,
(3) the net operating income for the Arden Substitute Properties does not show a
downward trend for the immediately preceding 3 years, or, with respect to an
Arden Substitute Property for which information regarding the net operating
income for such property for the three years immediately prior to the date of
substitution cannot be obtained by the Arden Borrower after it exercises
diligent efforts, the net operating income will not show a downward trend for
such period of time immediately prior to the date of substitution as may be
determined from the information regarding such net operating income available
and (4) the net operating income and Arden DSCR (for the twelve-month period
immediately preceding the substitution) for the Arden Substitute Property is
greater than 125% of the net operating income and Arden DSCR (for the
twelve-month period immediately preceding the substitution) for the Arden
Property for which the Arden Substitute Properties are being substituted. Upon
the satisfaction of the foregoing conditions precedent, the applicable Arden
Property will be released from the lien of the Arden Mortgage.
RESERVES. Pursuant to the terms of the Arden Loan, the Arden Borrower has
established a reserve account (the "Arden Reserve Account"), which has been
funded with $4,000,000 at the origination of the Arden Loan which is available,
so long as no event of default under the Arden Loan has occurred or is
continuing, to pay for (i) leasing commissions or tenant improvements under
leases entered into pursuant to the Arden Loan documents or (ii) to pay for
capital expenditures approved by the Master Servicer for which, among other
things, the Arden Borrower has insufficient funds to pay such expenditures. The
Arden Borrower has also established a tax and insurance escrow account to be
funded monthly generally in an amount equal to 1/12th of the aggregate insurance
premiums and taxes in respect of the Arden Properties payable in the succeeding
twelve months. The Arden Loan requires that in the event any amounts are
disbursed from the Arden Reserve Account prior to the occurrence of an Arden
Lock Box Event, the Arden Borrower may not make any distributions to its
partners and all excess cash flow must be deposited in the Arden Reserve Account
until the amount on deposit in the reserve account equals at least $4,000,000.
Following the occurrence of an Arden Lock Box Event, the Arden Reserve Account
shall be replenished in accordance with the provisions of the Arden Loan, as
described below under the heading "--Lock Box."
LOCK BOX. No lock box is required to be maintained under the Arden Loan
prior to the occurrence of an Arden Lock Box Event with respect to such Arden
Loan. An "Arden Lock Box Event" with respect to the Arden Loan occurs if: (i)
the Arden DSCR for any four consecutive fiscal quarters falls below 1.5X; (ii)
the Arden Borrower fails to deliver to the Master Servicer a written commitment
for the refinancing of the Arden Loan from a financial institution or other
lender with a long-term unsecured debt rating that is not lower than "BBB" by
S&P and an equivalent rating from each of the other Rating Agencies on or before
the date that is three months prior to the Arden Anticipated Repayment Date;
(iii) the Arden Borrower fails to repay the Arden Loan on or before the Arden
Anticipated Repayment Date; or (iv) the occurrence of an event of default under
the Arden Loan documents.
If an Arden Lock Box Event occurs, the Arden Borrower will be obligated to
notify tenants under leases for any portion of the Arden Properties and for any
other accounts receivables of the Arden Borrower that all payments owing to the
Arden Borrower should be sent to a lock box account established for such Arden
Property, in the name of the Trust, with a bank the long-term debt obligations
of which (or the holding company of which) are rated in the two highest rating
categories by each Rating Agency and the short-term debt obligations of which
are rated not lower than "A-1+" by S&P and the equivalent rating by the other
Rating Agencies (or such other bank as will not result in a downgrade,
withdrawal or qualification of their respective ratings of the Certificates) (an
"Arden Eligible Account"). The Arden Borrower and the Arden Manager are each
required to cause all amounts received directly by them or any other person on
behalf of the Arden Borrower to be deposited within one business day after the
receipt thereof into the lock box account. Funds in the local lock box accounts
for the Arden Properties will be swept on a daily basis into a collection
account held by the Master Servicer with respect to the Arden Loan (the "Arden
Deposit Account").
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On each payment date after the occurrence of an Arden Lock Box Event, the
Master Servicer will distribute funds held in the Arden Deposit Account in the
following order: (a) to fund any deficiency in the tax and insurance escrow fund
with respect to the Arden Properties; (b) to pay (i) the Arden Monthly Debt
Service Payment or, after the Arden Anticipated Repayment Date, the Arden ARD
Monthly Debt Service Payment, due and payable on such Due Date, (ii) the
reimbursement of expenses required to be reimbursed pursuant to the Arden Loan
documents and (iii) all other amounts then due and payable under the Arden Loan
documents (other than amounts set forth in items (c) through (j) below); (c) to
the Arden Reserve Account, to the extent that the balance of the reserve account
is less than $4,000,000; (d) if prior to the Arden Anticipated Repayment Date,
to pay default interest, if any, and late payment fees, if any, then due and
owing; (e) on or after the Arden Anticipated Repayment Date, payments for
monthly cash expenses incurred in accordance with the related approved annual
budget; (f) on or after the Arden Anticipated Repayment Date, payments for
extraordinary expenses approved by the Master Servicer; (g) prior to the Arden
Anticipated Repayment Date, payment of any excess amounts to the Arden Borrower;
(h) on or after the Arden Anticipated Repayment Date, payments to the Master
Servicer in reduction of the outstanding principal balance of the Arden Loan, as
Arden Excess Cash Flow (as described above under "--Payment Terms"), until the
outstanding principal balance of the Arden Loan has been reduced to zero; (i) on
or after the Arden Anticipated Repayment Date and after the outstanding
principal balance of the Arden Loan has been reduced to zero, to the Master
Servicer in reduction of the outstanding amount of interest accrued at the Arden
Base Interest Rate; and (j) on or after the Arden Anticipated Repayment Date, to
pay the Arden Excess Interest, if any, and late payment fees, if any, then due
and owing.
TRANSFER OF PROPERTY AND INTEREST IN BORROWER; ENCUMBRANCE. The Arden
Borrower is permitted to transfer an Arden Property only following a release in
connection with a defeasance (as described above under "--Release in Exchange
for Substitute Collateral") or, upon the substitution of such Arden Property for
an Arden Substitute Property in accordance with the terms for such substitution
(as described above under "--Substitution of Mortgaged Properties"), or on or
after the Arden Permitted Prepayment Date in connection with a prepayment (as
described above under "--Prepayment") of a portion of the Arden Loan. Prior to
release, the Arden Borrower may not encumber the Arden Properties, other than by
the Arden Permitted Encumbrances.
In addition, the limited partnership agreement of the Arden Borrower
prohibits transfers or encumbrances of the partnership interests in the Arden
Borrower and in the ownership interest in the Arden GP. At all times, the Arden
Loan requires that the Arden GP must be the general partner of the Arden
Borrower and the Arden GP must at all times be controlled by the Arden REIT.
INSURANCE. The Arden Borrower is required to maintain (a) casualty
insurance commonly referred to as "extended coverage" which includes loss and
damage by fire and other casualties (including, without limitation, windstorm,
explosion and such other risks as are typically insured against by owners of
like properties in the area in which the Arden Properties are located) in no
event less than 100% of the full replacement cost of the Arden Properties; (b)
comprehensive public liability insurance on an "occurrence basis" against claims
for personal injury, including, without limitation, bodily injury, death or
property damage occurring on, in or about each Arden Property; (c) business
interruption insurance for an amount not less than the greater of (x)
twenty-four months' gross income from the property and (y) estimated operating
expenses (including debt service) for each Arden Property for a twenty-four
month period that commences on the effective date of such insurance policy or
each renewal thereof, as applicable; (d) flood insurance, if the land is located
within a federally designated flood hazard zone; (e) broad form boiler and
machinery insurance on a "comprehensive" form in an amount adequate to provide
protection against the maximum amount of damage possible to building,
improvements and contents resulting from explosion or other occurrences relating
to boilers, pressure vessels, machinery and equipment on or about the Property;
(f) workers' compensation insurance in such forms and in such amounts as may be
required by the laws of each state in which any building on any Arden Property
is located; (g) a blanket policy of insurance insuring each Arden Property
against damage by earthquake in an aggregate insured amount not less than
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$26,615,000 and having a deductible of not more than 5% per each building on an
individual Arden Property subject to a $100,000 minimum (which amount was
determined by engineering and seismic analysis as the aggregate probable maximum
loss on the Arden Properties based on a 100-year study at an 80% confidence
level); and (h) such other insurance as is generally available on commercially
reasonable terms and is generally required by institutional lenders on loans
secured by properties similar to the individual Arden Properties.
The insurance described in clauses (a), (b), (c), (d) and (e) of the
preceding paragraph may be under a blanket policy so long as the portion of the
total policy that is allocated to each of the Arden Properties is not less than
the required amount of such insurance. The Arden Loan requires the Arden
Borrower to obtain the insurance described above from insurance carriers
authorized to issue insurance in the State of California. The Arden Loan
documents require that all primary insurance coverage required thereunder (other
than flood insurance and workers' compensation insurance) be provided by
insurers having claims paying abilities rated not less than "AA" by S&P and an
equal or equivalent rating from at least one other Rating Agency.
The Arden Properties are currently covered by a blanket policy which insures
the entire Arden Portfolio of approximately 40 properties (including the Arden
Properties) in an annual aggregate maximum amount of $100 million. The coverage
is provided by a group of insurers whose claims-paying obligations are
guaranteed by Federal Insurance Company, an affiliate of the Chubb Corporation,
which has a claim paying ability of "AAA" by S&P and "A++" by Best's.
CONDEMNATION AND CASUALTY. In case of a casualty to one or more of the
Arden Properties, the Arden Borrower, whether or not the insurance proceeds are
sufficient for such purpose, is required to promptly commence and complete the
restoration, replacement or rebuilding of such property as nearly as possible to
its value, condition and character immediately prior to such casualty (such
restoration, replacement, and rebuilding, together with any temporary repairs
and property protection pending completion of the work, being herein referred to
as the "Arden Restoration"), except in the event that, among other things, (i)
the Arden Restoration materially adversely affects the cash flow from the
property and cannot reasonably be expected to be completed within a period of
twelve-months after the date of the casualty (or, if shorter, by the date on
which the proceeds of business interruption insurance will no longer be
available), (ii) the extent of the damage makes it impracticable to restore the
property to substantially the same condition as existed prior to the casualty,
(iii) the property and the use thereof after the Arden Restoration would not be
in material compliance with all applicable laws or (iv) the insurance proceeds
payable on account of such casualty equal or exceed the Allocated Loan Amount
applicable to the respective Arden Property, then the Arden Restoration will not
be required or permitted and instead the insurance proceeds are required to be
collected and paid over to the Master Servicer up to the amount of the Allocated
Loan Amount for such Arden Property.
In the case of (i) a condemnation of an Arden Property (including a
condemnation resulting in the imposition of a perpetual easement on an entire
Arden Property that materially impairs the operation of such property), (ii) a
condemnation that adversely affects the cash flow from an Arden Property in any
material respect and as to which any necessary Arden Restoration cannot
reasonably be expected to be completed within twelve-months from the date of the
condemnation and the Arden Restoration is not permitted under Arden Loan
documents and is not required under the ground lease affecting the parking
facility for the 222 South Harbor Boulevard property or (iii) a taking occurs
that results in a termination of the ground lease affecting the parking facility
for the 222 South Harbor Boulevard property pursuant to its terms, then, in any
such event, any condemnation award is required to be collected and paid over to
the Master Servicer.
All insurance proceeds received on account of any casualty affecting the
Arden Property that are required to be made available for an Arden Restoration
are required to be delivered to and held by the Arden Borrower if such insurance
proceeds total 2.5% or less of the Allocated Loan Amount applicable to the
affected Arden Property and, if the amount of such insurance proceeds is more
than 2.5% of the
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Allocated Loan Amount of the affected Arden Property, to the Master Servicer to
be held and applied in accordance with the terms of the Arden Loan documents.
Other than as described above, all insurance proceeds are required to be used
and applied, so long as no default or event of default has occurred and is
continuing, to reimburse the Arden Borrower for the cost of the Arden
Restoration. If the cost of the Arden Restoration is expected to exceed 2.5% of
the Allocated Loan Amount applicable to the affected Arden Property, the Master
Servicer will have the right, among other things, to approve the plans and
specifications for such Arden Restoration before the restoration work begins and
to appoint a qualified architect or engineer to oversee the restoration.
In the case of any condemnation whereby the proceeds thereof are not
required to be paid over to the Master Servicer, pursuant to the terms of the
Arden Loan Agreement, and in case such condemnation requires repairs to or
restoration of the affected property in order to maintain the quality of the
operations of the property, any condemnation award is required to be used or
distributed in accordance with the provisions of the Arden Loan documents in the
same manner as if such taking were a casualty affecting such property and as if
such condemnation award constituted insurance proceeds relating thereto, except
that any amount of the condemnation award not used to pay for any necessary
Arden Restoration are required to be applied by the Master Servicer to the
prepayment of the Arden Loan.
To the extent that the proceeds of any casualty or condemnation are not
required to be made available for an Arden Restoration, the Master Servicer is
required to apply such proceeds to (a) (i) if applied prior to the first day of
or after the Arden Defeasance Period, to prepayment of the outstanding principal
balance of the Arden Loan, without the requirement of a yield maintenance
premium, (ii) if applied during the Arden Defeasance Period, to the purchase of
U.S. obligations in accordance with the provisions on defeasance under the Arden
Loan Agreement (see "--Release in Exchange for Substitute Collateral" above),
and (iii) if applied after the Arden Defeasance Period, to prepayment of the
outstanding principal balance of the Arden Loan, in accordance with the
provisions regarding prepayment under the Arden Loan Agreement, without the
requirement of a yield maintenance payment (see "--Prepayment" above) and (b) to
the payment of all other indebtedness under the Arden Loan Documents. Any such
prepayment must be in an amount at least equal to the greater of (A) the
Allocated Loan Amount for such Arden Property and (B) the sum of such insurance
proceeds or condemnation awards and the proceeds received by the Arden Borrower
from the sale of the property or the part thereof that remains following the
casualty or condemnation, but will not be more than 125% of the Allocated Loan
Amount of such Arden Property.
In the event that, prior to the first day of the Arden Defeasance Period, an
Arden Property has suffered a total or substantial condemnation or casualty (in
each case, as to which an Arden Restoration is not required or permitted under
the Arden Mortgage), the Arden Borrower is required to cause the release of such
property from the lien of the Arden Mortgage by satisfying, among other things,
the following conditions: (a) the Arden Borrower must pay to the Master Servicer
all interest that is accrued and unpaid on the principal balance of the Arden
Loan and all other sums due under the Arden Loan documents; (b) the Arden
Borrower must pay to the Master Servicer, to be applied to prepayment of the
outstanding principal balance of the Arden Loan, an amount equal to the greater
of (i) the Allocated Loan Amount for such Arden Property and (ii) the lesser of
(x) 125% of the Allocated Loan Amount of such Arden Property and (y) the sum
such insurance proceeds and condemnation awards and the net proceeds received by
the Arden Borrower from the sale of the related property or the part thereof
that remains following the condemnation or casualty; and (c) the Arden Borrower
must provide to the Master Servicer an opinion of counsel in form and substance,
and from a firm, acceptable to the Master Servicer, that such release would not
adversely affect the status of either Trust REMIC and that such release will not
result in a deemed exchange of the Certificates pursuant to Section 1001 of the
Code.
FINANCIAL COVENANTS AND REPORTING. The Arden Borrower is required to
furnish to the Master Servicer, among other things: (a) the monthly operating
statement of each Arden Property, together with rent rolls for such month,
delivered within 15 days following the end of such calendar month, (b) within 90
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<PAGE>
days after the end of each fiscal year, an audited annual consolidated balance
sheet, statement of income, partners' capital or deficit and consolidated cash
flow of the Arden Borrower, prepared and certified by a "Big 6" accounting firm,
(c) within 45 days following the end of each fiscal quarter, an unaudited
consolidated balance sheet, statement of income and expenses, and a statement of
cash flow of the Arden Borrower and (d) at least 30 days prior to the
commencement of the partial year period commencing on the Arden Anticipated
Repayment Date and each fiscal year thereafter an annual operating budget
presented on a monthly basis.
THE PROPERTIES. The Arden Properties consist of 17 suburban office
properties of which 15 are located in Los Angeles County and of which two are
located in Orange County.
The Arden Properties have GLAs ranging from 42,292 square feet to 391,675
square feet, with an average GLA of 158,550 square feet and an aggregate GLA of
2,695,356 square feet. The Arden Properties were built between 1972 and 1989.
The occupancy rate of the properties as of July 1997 ranged from 82.7% to 100%,
with a weighted average occupancy rate, as of July 1997, of 91.3%. The 1996 NOI
of the properties ranged from $350,328 to $5,425,390 and aggregated $31,017,875.
Most leases have an initial term of three to six years. The largest tenants of
the properties, State Compensation Insurance Fund, Southern Pacific
Transportation Company, Pepperdine University, GTE California Inc. and
RDA/Logicon, Inc. represent 5.5%, 4.1%, 3.9%, 3.8% and 3.3% of the annualized
base rent, respectively. No other single tenant represents more than 3.3% of the
annualized base rent of the properties. The aggregate value of the Arden
Properties has been determined by LB Holdings, based on financial and other
information provided by the Arden Borrower and on information prepared on LB
Holding's behalf by third parties, to be $342,000,000. Appraisals were not
conducted with respect to the Prentiss Properties. For additional considerations
with respect thereto, see "Risk Factors--The Mortgage Loans-- Lack of Certain
Appraisals-Limitation of Appraisals" herein.
The Depositor has been advised by the Arden Borrower that the Arden Borrower
believes that assessed property values for California property tax, of some of
the Arden Properties may be adjusted because of past events which should have
triggered a readjustment. See "Risk Factors--The Mortgage Loans--Risks
Associated with Tax Assessment of Arden Properties."
70 SOUTH LAKE AVENUE. The 70 South Lake Avenue building, built in 1982, is
located on approximately 0.9 acres of land in Pasadena, California. The building
is an eleven-story office building with 100,133 square feet of GLA. Four floors
of the building are parking floors. The remainder is conventional office space.
As of July 13, 1997, the property was 91.9% leased.
The following table sets forth certain data regarding major tenants at the
70 South Lake Avenue as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA (SQ % OF IN-PLACE
TENANT EXPIRATION FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ----------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Union Bank(1)...................................................... Various 18,481 18.5% 23.9%
Countrywide Funding................................................ 2000 16,726 16.7% 14.1%
Smith Barney, Inc.................................................. 2005 9,415 9.4% 10.9%
</TABLE>
- ------------------------
(1) Union Bank occupies 2 suites containing 10,716 square feet of GLA and 7,765
square feet of GLA under leases expiring August 1999 and July 1999,
respectively.
S-177
<PAGE>
100 WEST BROADWAY. The 100 West Broadway property, built in 1986, is
located in the Long Beach area of Los Angeles County, California. The property
contains two six story office buildings, connected by an atrium and has 191,727
square feet of GLA. As of July 14, 1997, the property was 96.1% leased.
The following table sets forth certain data regarding major tenants at the
100 West Broadway Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ. FT.) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Earth Technology Corp.(1)......................................... 2004 44,122 23.0% 28.7%
Inchcape Shipping(2).............................................. 2002 31,003 16.2% 15.6%
General Services Admin............................................ 2002 16,738 8.7% 7.6%
</TABLE>
- ------------------------
(1) Earth Technology Corp. occupies 2 suites containing 37,494 square feet of
GLA and 6,628 square feet of GLA under leases expiring in January 2004 and
in September 1998, respectively.
(2) Inchcape Shipping occupies suites containing 31,003 GLA; lease expirations
are as follows: 792 square feet of GLA is month-to-month, 1,182 square feet
of GLA expires in April 1999, 433 square feet of GLA expires in August 1999,
2,437 square feet of GLA expires in September 1999, and 26,159 square feet
of GLA expires in February 2002.
222 SOUTH HARBOR BOULEVARD. The 222 South Harbor Boulevard building, built
in 1986, is located in Anaheim, California. The building is a ten story office
building with 175,391 square feet of GLA. As of July 13, 1997, the property was
94.7% leased.
The following table sets forth certain data regarding major tenants at the
222 South Harbor Boulevard Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Intracorp.......................................................... 1998 54,179 30.9% 25.2%
Computer Learning Centers.......................................... 1999 22,042 12.6% 15.1%
McGladrey & Pullen................................................. 2002 18,032 10.3% 11.8%
</TABLE>
The interest of the Arden Borrower in 222 South Harbor Boulevard consists of
a fee interest in the property in which the office building is located and a
leasehold interest in the property on which the parking facility is located. The
leasehold interest was created under a ground lease with The Anaheim
Redevelopment Agency (the "222 South Harbor Boulevard Ground Lease"). The 222
South Harbor Boulevard Ground Lease expires on June 30, 2034, or earlier if the
building on the 222 South Harbor Boulevard property is abandoned or no longer
used for office purposes. The current rent due under the 222 South Harbor
Boulevard Ground Lease is $128,706 per year. The 222 South Harbor Boulevard
Ground Lease provides for a rent increase on July 1, 2008 to $173,753 per year;
an increase on July 1, 2003 to $234,506, and for the twenty-five years from June
30, 2008, at a rent to be determined every five years thereafter by an appraisal
process described in the 222 South Harbor Boulevard Ground Lease. The ground
lessor has agreed (a) that in the event the lender under the Arden Loan should
foreclose, the lender would have the right to assign the leasehold estate to
another entity as long as the assignee of the leasehold estate has also acquired
the fee estate for the 222 South Harbor Boulevard property, (b) to send the
lender notice of any event of default under the 222 South Harbor Boulevard
Ground Lease and to grant to the lender a right and additional time to cure any
such default and (c) if the ground lessor terminates the 222 South Harbor
Boulevard Ground Lease, to enter into a new lease with the lender on the same
terms as the present lease provided that the lender has cured any defaults.
303 NORTH GLENOAKS BOULEVARD. The 303 North Glenoaks Boulevard building,
built in 1983 and renovated in 1996, is located on approximately 1.44 acres of
land in Burbank, California. The building is a ten story office building with
175,449 square feet of GLA. As of July 14, 1997, the property was 98.3% leased.
S-178
<PAGE>
The following table sets forth certain data regarding major tenants at the
303 North Glenoaks Boulevard Property as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
DIC Entertainment.................................................. 2002 50,472 28.8% 27.6%
Insurance Co. of the West.......................................... 2001 23,450 13.4% 14.5%
New Wave Entertainment............................................. 1999 20,993 12.0% 12.8%
</TABLE>
400 CORPORATE POINTE. The 400 Corporate Pointe property (also known as
Pepperdine University Plaza) was built in 1988 and is located on approximately
1.30 acres of land in Culver City in Los Angeles, California. The building is an
eight story office building with 164,598 square feet of GLA. As of July 15,
1997, the property was 99% leased.
The following table sets forth certain data regarding major tenants at the
400 Corporate Pointe Property as of July 15, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Pepperdine University.............................................. 2002 89,752 54.5% 49.3%
Crawford & Company................................................. 1998 20,347 12.4% 17.7%
Investment Technology.............................................. 2005 13,696 8.3% 6.1%
</TABLE>
425 WEST BROADWAY. The 425 West Broadway building, built in 1985 and
renovated in 1996, is located in Glendale in Los Angeles, California. The
building is a four story office building with 71,589 square feet of GLA. As of
July 13, 1997, the property was 97.6% leased.
The following table sets forth certain data regarding major tenants at the
425 West Broadway Property as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Cal. Community News................................................ 1999 18,189 25.4% 26.1%
Trans. Insurance Brokers........................................... 1998 14,075 19.7% 20.6%
Scan Health Plan................................................... 1999 5,026 7.0% 7.3%
</TABLE>
5601 LINDERO CANYON BOULEVARD. The 5601 Lindero Canyon Boulevard building,
built in 1989, is located in Westlake Village in Los Angeles, California. The
building is a two-story office building with 105,830 square feet of GLA. As of
July 13, 1997, the property was 100% leased.
The following table sets forth certain data regarding major tenants at the
5601 Lindero Canyon Boulevard Property as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Hewlett Packard.................................................... 2002 53,700 50.7% 48.1%
Candle Corporation................................................. 2002 52,130 49.3% 49.8%
</TABLE>
5832 BOLSA AVENUE. The 5832 Bolsa Avenue building, built in 1985, is
located on approximately 3.1 acres of land in Huntington Beach, California. The
building is a two-story office building with 49,355 square feet of GLA. As of
July 14, 1997, the 5832 Bolsa Avenue Property was 100% leased.
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<PAGE>
The following table sets forth certain data regarding major tenants at the
5832 Bolsa Avenue Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
GTE California Inc................................................. 2000 49,355 100.0% 92.0%
</TABLE>
10350 SANTA MONICA BOULEVARD. The 10350 Santa Monica Boulevard building,
built in 1978, is located in Los Angeles, California. The building is a
three-story office building with 42,292 square feet of GLA. As of July 14, 1997,
the 10350 Santa Monica Boulevard Property was 100% leased.
The following table sets forth certain data regarding major tenants at the
10350 Santa Monica Boulevard Property as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Performing Arts Network............................................ 2000 6,090 14.4% 14.9%
Friends Medical Science............................................ 2000 4,675 11.1% 10.4%
Edward A. Dreyfus, PhD............................................. 1998 4,647 11.0% 13.2%
</TABLE>
An architectural/engineering condition report that was recently conducted
has indicated that in order to intercept water infiltration and prevent further
damage, a new drain system or waterproofing was necessary for the parking
structure that is part of the property. The Arden Borrower has budgeted for
these improvements, which are expected to be completed by year end 1997.
However, there can be no assurances that the Arden Borrower will have sufficient
funds to complete such repairs.
12501 EAST IMPERIAL HIGHWAY. The 12501 East Imperial Highway building,
built in 1977 and renovated in 1994, is located on approximately 7.0 acres of
land in Norwalk in Los Angeles, California. The building is a six story office
building with 122,175 square feet of GLA. As of July 14, 1997, the 12501 East
Imperial Highway Property was 95.7% leased.
The following table sets forth certain data regarding major tenants at the
12501 East Imperial Highway Boulevard Property as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
GTE Real Estate Services........................................... 1999 63,769 52.2% 55.3%
The Meade Corporation.............................................. 1998 27,913 22.8% 25.2%
IBM................................................................ 2001 20,620 16.9% 16.9%
</TABLE>
BEVERLY ATRIUM. The Beverly Atrium building, built in 1989, is located on
approximately 0.73 acres of land in Beverly Hills in Los Angeles, California.
The building is a three story office building with 61,314 square feet of GLA. As
of July 13, 1997, the Beverly Atrium Property was 85.0% leased.
The following table sets forth certain data regarding major tenants at the
Beverly Atrium Property as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
GE Capital......................................................... 2002 18,489 30.2% 31.1%
Unigem International............................................... 1998 8,394 13.7% 15.3%
Islands Restaurant................................................. 2010 7,404 12.1% 14.0%
</TABLE>
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<PAGE>
BRISTOL PLAZA. The Bristol Plaza building, built in 1982, is located in
Culver City in Los Angeles, California. The building is a four-story office
building with 84,014 square feet of GLA. As of July 13, 1997, the Bristol Plaza
Property was 79.8% leased.
The following table sets forth certain data regarding major tenants at the
Bristol Plaza Property as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Bristol A/R Inc.................................................... 1998 12,163 14.5% 24.0%
State of California................................................ 2001 10,083 12.0% 16.8%
First Colony Financial............................................. 1999 6,347 7.6% 7.4%
</TABLE>
BURBANK EXECUTIVE PLAZA PROPERTY. The Burbank Executive Plaza Property
consist of two office buildings, 333 Glenoaks Boulevard, constructed in 1978,
and 300 Magnolia Boulevard, constructed in 1983, containing a total of 142,862
square feet of GLA, located on 1.5 acres of land in Burbank, California. As of
July 14, 1997, the property for the Burbank Executive Plaza Property was 85.4%
leased.
A recent building evaluation report has indicated, among other things, that
the 333 Glenoaks Boulevard building requires a new generator and an upgrade of
the elevators. These, along with other various structural improvements with
respect to the Burbank Executive Plaza Property have been budgeted for in the
1998 budget of the Arden Borrower. However, there can be no assurances that the
Arden Borrower will have sufficient funds to complete such repairs.
A recent building evaluation report has indicated, among other things, that
the 300 Magnolia Boulevard building requires an upgrade of the elevators to
bring the building in compliance with the ADA. These, along with other various
structural improvements with respect to the 300 Magnolia Boulevard building,
have been budgeted for in the 1998 budget for the Arden Borrower. However, there
can be no assurances that the Arden Borrower will have sufficient funds to
complete such repairs.
The following table sets forth certain data regarding major tenants at the
Burbank Executive Plaza Properties as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
First Health Strategies............................................ 1999 24,098 16.9% 18.6%
Axium Enterprises, Inc............................................. 2007 14,962 10.5% 13.0%
Rich Animation..................................................... 2001 14,158 9.9% 11.0%
</TABLE>
L.A. CORPORATE CENTER PROPERTY. The L.A. Corporate Center Property consist
of four office buildings, 900, 1000, 1200 and 1255 Corporate Center Drive, the
oldest of which was constructed in 1984, containing a total of 389,293 square
feet of GLA in Monterey Park in Los Angeles, California. As of July 14, 1997,
the L.A. Corporate Center Property was 84.9% leased.
The following table sets forth certain data regarding major tenants at the
L.A. Corporate Center Property as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------ ------------- --------- --------------- -------------
<S> <C> <C> <C> <C>
State Compensation Insurance Fund................................. 1998 113,513 29.2% 36.9%
So. Pacific Transportation........................................ 1999 83,017 21.3% 27.4%
AT&T Corp......................................................... 2001 46,385 11.9% 11.0%
</TABLE>
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<PAGE>
THE NEW WILSHIRE. The New Wilshire Building, built in 1986, is located on
approximately 0.91 acres of land in Los Angeles, California. The building is a
sixteen story office building with 202,704 square feet of GLA. As of July 13,
1997, the property rate was 82.7% leased.
The following table sets forth certain data regarding major tenants at the
New Wilshire Property as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACES
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ---------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Grey Advertising(1)................................................ 2006 51,148 25.2% 26.2%
Muse, Cordero, Chen, Inc. ......................................... 2001 15,551 7.7% 11.4%
Allied Communications, Inc. ....................................... 2001 13,241 6.5% 7.0%
</TABLE>
- ------------------------------
(1) Grey Advertising occupies two suites: one suite containing 47,652 square
feet of GLA under lease expiring in March 2006 and another suite containing
3,496 square feet of GLA under a month-to-month lease.
SKYVIEW CENTER. The Skyview Center Property consist of two office
buildings, 6033 W. Century Boulevard, constructed in 1981, and 6053 W. 98th
Street, constructed in 1986, containing a total of 391,675 square feet of GLA,
located on 18.3 acres of land in Los Angeles, California. As of July 14, 1997,
the Skyview Center Property was 88.7% leased.
The following table sets forth certain data regarding major tenants at the
Skyview Center Property as of July 14, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ---------- --------- --------------- -------------
<S> <C> <C> <C> <C>
RDA/Logicon........................................................ 2002 74,174 18.9% 27.4%
Learning Tree International........................................ 2005 34,145 8.7% 7.8%
American Tours Int'l, Inc. ........................................ 2004 32,586 8.3% 6.8%
</TABLE>
WOODLAND HILLS FINANCIAL CENTER. The Woodland Hills Financial Center
Properties consist of two office buildings, 21021 and 21031 Ventura Boulevard,
constructed in 1972 and renovated in 1996, containing a total of 224,955 square
feet of GLA, located in Woodland Hills in Los Angeles, California. As of July
13, 1997, the Woodland Hills Financial Center Properties were 88.8% leased.
The following table sets forth certain data regarding major tenants at the
Woodland Hills Financial Center as of July 13, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ---------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Presidential Mortgage Co. ......................................... 2003 19,600 8.7% 11.4%
Dennison, Bennett & Press.......................................... 2000 14,386 6.4% 10.7%
Pacific Homes...................................................... 1998 13,989 6.2% 6.4%
</TABLE>
PROPERTY MANAGEMENT. The Arden Properties are managed by the Arden LP (in
such capacity, the "Arden Manager"), pursuant to a property management agreement
(the "Arden Management Agreement") between the Arden Manager and the Arden
Borrower. The Arden Manager is responsible for the management of the Arden
Properties and the administration of the leases with respect thereto. Under the
Arden Management Agreement, the Arden Manager is entitled to (a) an annual
management fee equal to 3% of gross receipts of the Arden Properties, payable
monthly, (b) reimbursement of all third party costs advanced by the Arden
Manager for the Arden Borrower and compensation for services rendered by the
Arden Manager as a construction manager in connection with construction work
performed on the Arden Properties pursuant to the Arden Management Agreement and
(c) a fee in respect of extensions and expansions of leasehold interests of 6%
of such lease and a fee for renewals at 4% of such lease.
S-182
<PAGE>
The Arden Management Agreement provides that the Arden Manager will manage
the properties for an initial term of 36 months beginning June 11, 1997, and
will automatically be renewed for five additional terms of one year each unless
one party notifies the other that it elects not to renew. The Arden Management
Agreement may be terminated upon: (A) cause, upon the occurrence of certain
events with respect to the Arden Manager, at the election of the Arden Borrower;
(B) cause, upon the occurrence of certain events with respect to the Arden
Borrower, at the election of the Arden Manager; or (C) 30 days notice from
either of the Arden Borrower and the Arden Manager, with or without cause. The
Arden Borrower may terminate the Arden Management Agreement for cause upon,
among other things: (i) any material breach of the Arden Manager to comply with
the terms of the Arden Management Agreement, and which the Arden Manager has
failed to cure within 10 days after receiving written notice from the Arden
Borrower of such failure to comply (or if such cure cannot be effected within
such 10 day period, then upon failure to commence such cure within such 10 day
period) or (ii) certain events of insolvency of the Arden Manager. The Arden
Manager may terminate the Arden Management Agreement for cause upon, among other
things: (i) any material breach of the Arden Borrower in the punctual payment of
any material amount payable by the Arden Borrower to the Arden Manager pursuant
to the Arden Management Agreement when such amount becomes due and payable, and
which the Arden Manager has failed to cure within 10 days after receiving
written notice from the Arden Manager of such failure to comply (or if such cure
cannot be effected within such 10 day period, then upon failure to commence such
cure within such 10 day period) or (ii) certain events of insolvency of the
Arden Borrower.
Pursuant to a Collateral Assignment of Management Agreement and
Subordination Agreement, among LB Realty, as lender, the Arden Borrower and the
Arden Manager (the "Manager's Subordination") the Arden Borrower has assigned to
LB Realty (which will be assigned to the Trustee) all of its rights, pursuant to
the Arden Management Agreement, including its rights thereunder to terminate the
Arden Management Agreement and cause a new property manager to be engaged. In
addition, pursuant to the Manager's Subordination, the Master Servicer has the
right to terminate the Arden Manager upon the occurrence of an even of default
under the Arden Loan documents. In addition, pursuant to the Manager's
Subordination, the Arden Manager has also agreed that all fees and all other
amounts payable to the Arden Manager pursuant to the Arden Management Agreement
are and will be, in all respects, subordinate and inferior to the liens and
security interests created by the Arden Loan.
The Arden Manager is a 92% owned by the Arden REIT. The Arden Manager
directly manages all of the properties owned by the Arden REIT and its
subsidiaries (including the Arden Properties).
THE VILLA MARINA LOAN AND PROPERTY
THE LOAN. The Villa Marina Loan has a principal balance as of the Cut-Off
Date of $58,000,000 and is secured by an Amended, Restated and Extended Deed of
Trust, Assignment of Leases and Rents and Security Agreement (the "Villa Marina
Mortgage") encumbering 2 adjacent retail properties which form an urban
marketplace in the Marina del Rey area of the City of Los Angeles, California
(the "Villa Marina Property"). The aggregate value of the Villa Marina Property
has been determined by LB Holdings, based on financial and other information
provided to LB Holdings and on information prepared on LB Holding's behalf by
third parties to be approximately $101,100,000. Appraisals were not conducted
with respect to the Villa Marina Property. For additional considerations with
respect thereto, see "Risk Factors--The Mortgage Loans--Lack of Certain
Appraisals-Limitation of Appraisals" herein.
THE BORROWER. Macerich Marina Limited Partnership (the "Villa Marina
Borrower") is a California limited partnership formed in December 1995 solely to
own and operate the Villa Marina Property. The Villa Marina Borrower has no
material assets other than the Villa Marina Property and related interests. The
general partner of the Villa Marina Borrower is Macerich Marina GP Corp. (the
"Villa Marina GP"), a Delaware corporation, the sole purpose of which is to act
as general partner of the Villa Marina Borrower and is a wholly owned subsidiary
of The Macerich Company (the "Macerich REIT"). The Macerich REIT is a Maryland
corporation and a real estate investment trust, the stock of which is traded
S-183
<PAGE>
on the New York Stock Exchange. The Macerich REIT is a reporting company under
the Exchange Act. The limited partner of the Villa Marina Borrower is The
Macerich Partnership, L.P. (the "Macerich Limited Partner"), a Delaware limited
partnership which, as of June 30, 1997, was approximately 68% owned by the
Macerich REIT.
SECURITY. The Villa Marina Loan is a non-recourse loan, secured only by the
fee estate of the Villa Marina Borrower in the Villa Marina Property and certain
other collateral (including an assignment of leases and rents and the funds in
certain accounts). Subject to exceptions for misapplication of (i) insurance and
condemnation proceeds and (ii) rental income or security deposits under any
lease after the occurrence of and during the continuance of an event of default
under the Villa Marina Loan documents, neither the Villa Marina Borrower nor any
of its affiliates is personally liable for payment of the Villa Marina Loan.
The Villa Marina Borrower has made certain environmental representations and
has represented that it has good, marketable and insurable fee simple title to
the Villa Marina Property subject only to specified permitted encumbrances (the
"Villa Marina Permitted Encumbrances") permitted by the lender under the loan
documents. LB Realty is the named insured under a title insurance policy (which
will be assigned to the Trust Fund) which insures that the Villa Marina Mortgage
constitutes a valid and enforceable first lien on the Villa Marina Property,
subject to certain exceptions and exclusions from coverage set forth therein.
PAYMENT TERMS. The Villa Marina Loan was originated by LB Realty on August
29, 1997, and matures on October 10, 2031 (the "Villa Marina Maturity Date").
The proceeds of the Villa Marina Loan were used to repay previously existing
indebtedness to LB Realty. The Villa Marina Loan bears interest at a fixed rate
per annum equal to 7.225% (the "Villa Marina Base Interest Rate") through
October 9, 2006 and from and after October 10, 2006 (the "Villa Marina
Anticipated Repayment Date") at a rate per annum (the "Villa Marina Adjusted
Interest Rate") which will be fixed on the Villa Marina Anticipated Repayment
Date as the greater of (a) the Villa Marina Base Interest Rate plus 2% and (b)
the yield on the U.S. Treasury obligation (primary issue) with a maturity date
closest to October 10, 2031, with such yield being based on the bid price for
such issue as published in The Wall Street Journal on September 27, 2006, or, if
such bid price is not published on that date, the next preceding date on which
such bid price is published, converted to a monthly compounded nominal yield,
plus 2%. However, as described below, until the principal balance of the Villa
Marina Loan has been reduced to zero, the Villa Marina Borrower will only be
required to pay interest at the Villa Marina Base Interest Rate. The interest
accrued at the excess of the Villa Marina Adjusted Interest Rate over the Villa
Marina Base Interest Rate will be deferred and added to the indebtedness secured
by the Villa Marina Loan documents and will bear interest at the Villa Marina
Adjusted Interest Rate (such accrued and deferred interest and interest thereon,
the "Villa Marina Excess Interest"). Interest on the Villa Marina Loan is
calculated on the basis of the actual number of days elapsed and a 360-day year.
The Villa Marina Loan requires monthly payments of interest (the "Villa
Marina Monthly Debt Service Payments") of approximately $354,058 until the Villa
Marina Anticipated Repayment Date. Commencing on the first Due Date after the
Villa Marina Anticipated Repayment Date, the Villa Marina Loan requires 300
monthly payments of principal and interest (calculated based on the actual
number of days elapsed and a 360-day year) based on a 300-month amortization
schedule and the Villa Marina Base Interest Rate which is scheduled to be
approximately $418,294 (the "Villa Marina ARD Monthly Debt Service Payments").
Beginning on the first Due Date after the Villa Marina Anticipated Repayment
Date, in addition to the payment of the Villa Marina ARD Monthly Debt Service
Payment, the Villa Marina Borrower is required to apply 100% of the Villa Marina
Excess Cash Flow (as defined below) for the month preceding the month in which
the Due Date occurs in the following order of priority: (a) to the outstanding
principal balance of the Villa Marina Loan until such principal is reduced to
zero and (b) to the Villa Marina Excess Interest. "Villa Marina Excess Cash
Flow," for any period after the Villa Marina Anticipated Repayment Date, means
the excess of (i) sums received in the Villa Marina Lock Box over (ii) the sum
of (A) Villa Marina ARD Monthly Debt Service Payments for such period, (B)
amounts
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required to fund any required tax and insurance reserves, (C) Villa Marina
Borrower monthly operating expenses which have been calculated in accordance
with an annual budget approved by the Master Servicer and other extraordinary
operating expenses which must be approved by the Master Servicer if in excess of
$1,000,000 annually, incurred in the ordinary course of business and of a type
that is incurred by owners of super regional shopping centers and urban
marketplaces of a similar type and quality to the Villa Marina Property and (D)
any other obligations under the Villa Marina Loan documents then due and
payable.
Upon the occurrence of an event of default under the Villa Marina Loan, the
entire amount due under the Villa Marina Loan documents will bear interest at a
default rate equal to the lesser of (a) the Villa Marina Base Interest Rate plus
3% (or on and after the Villa Marina Anticipated Repayment Date, the Villa
Marina Adjusted Interest Rate plus 3%) and (b) the maximum rate allowed to be
collected under applicable law.
ALTERATIONS. The Villa Marina Borrower may, provided no event of default
under the Villa Marina Loan documents has occurred or is continuing, undertake
any alteration, expansion, improvement, demolition or removal (each, a "Villa
Marina Alteration") of the Villa Marina Property or any portion thereof so long
as such Villa Marina Alteration, among other things, (i) is undertaken in
accordance with the Villa Marina Loan documents, any applicable major space
leases or operating agreements and (ii) does not have a material adverse effect
on the financial condition of the Villa Marina Borrower or the value of the
Villa Marina Property. Any Villa Marina Alteration that involves an estimated
cost of more $250,000 is required to be conducted under the supervision of a
qualified architect or engineer to oversee such Villa Marina Alteration. In
connection with any Villa Marina Alteration which involves an estimated cost,
individually or in the aggregate with any other related Villa Marina
Alterations, the cost of which is not reimbursed to the Villa Marina Borrower by
any tenant of the Villa Marina Property, of more than $2,850,000, the Villa
Marina Borrower is required to deliver to the Master Servicer (i) an estimate of
the cost of such Villa Marina Alteration, approved by an independent architect
and (ii) security in an amount equal to the difference between such estimated
cost and $2,850,000.
PREPAYMENT. Voluntary prepayment is prohibited under the Villa Marina Loan
prior to the Villa Marina Anticipated Repayment Date. On the Villa Marina
Anticipated Repayment Date, or on any scheduled Due Date thereafter, the Villa
Marina Borrower may prepay all or any portion of the Villa Marina Loan and all
other amounts due in connection therewith in whole or part without payment of
any penalty or premium.
Principal payments on the Villa Marina Loan are required to occur on Due
Dates on or after the Villa Marina Anticipated Repayment Date through the
application of the Villa Marina ARD Monthly Debt Service Payments and the Villa
Marina Excess Cash Flow as described above under "--Payment Terms." The Villa
Marina Loan may also be prepaid as a result of certain events with respect to
condemnation or casualty, as described below under "--Condemnation and
Casualty." Upon the occurrence of an event of default under the Villa Marina
Loan, the Master Servicer may apply certain amounts to the prepayment of the
Villa Marina Loan. Upon the occurrence of a prepayment as a result of an event
of default which occurs prior to the Villa Marina Anticipated Repayment Date,
the Villa Marina Borrower is required to pay prepayment consideration in an
amount equal to the present value of a series of payments (a) that are each
equal to the product of (i) 1/12th of the rate equal to the excess of the Villa
Marina Base Interest Rate over the Villa Marina Reinvestment Yield Rate and (ii)
the principal amount of the Villa Marina Loan due on such prepayment date, and
(b) that are payable on each monthly Due Date through and including the Villa
Marina Anticipated Repayment Date, such present value to be discounted at the
Villa Marina Reinvestment Yield Rate for the number of months remaining from
such prepayment date to each such Due Date through and including the Villa
Marina Anticipated Repayment Date. The "Villa Marina Reinvestment Yield Rate"
means the sum of .25% and the yield on U.S. Treasury issue (primary issue) with
a maturity closest to October 10, 2006 with such yield being based on a bid
price for such issue as published in The Wall Street Journal on the date which
is 14 days prior to the date of such prepayment as set forth in a notice of
prepayment (or, if such bid price is not published on that date, the next
preceding date on which such bid price is so published), converted to a monthly
compounded nominal yield.
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RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Villa Marina Borrower is
permitted at any time after the second anniversary of the Closing Date and prior
to the Villa Marina Anticipated Repayment Date (the "Villa Marina Defeasance
Period"), provided no event of default exists, to defease the Villa Marina
Property, provided that, among other conditions, the Villa Marina Borrower
delivers on such Due Date (the "Villa Marina Defeasance Date") Villa Marina
Defeasance Collateral with an aggregate amount of payments of principal and
predetermined and certain income therefrom sufficient to pay (i) all interest
accrued and unpaid on the principal balance of the Villa Marina Loan; (ii) all
other sums then due and payable under the Villa Marina Loan; and (iii) the
outstanding principal amount of the Villa Marina Loan. The "Villa Marina
Defeasance Collateral" must be U.S. Obligations providing payments on or prior
to, but as close as possible to, the business day prior to each successive
scheduled Due Date after the Villa Marina Defeasance Date upon which payments
are required under the Villa Marina Loan after the Villa Marina Defeasance Date
and through and including the Villa Marina Anticipated Repayment Date and in
amounts equal to (a) the scheduled payments due on such dates under the Villa
Marina Loan and (b) the unpaid principal balance of the Villa Marina Loan,
together with accrued interest, on the Villa Marina Anticipated Repayment Date.
In addition, the Villa Marina Borrower is required to deliver to the Master
Servicer, among other things: (a) all documents necessary to amend and restate
the note for the Villa Marina Loan (the "Villa Marina Defeasance Note"); (b) a
security agreement in form and substance satisfactory to the Master Servicer
creating a first priority lien on the Villa Marina Defeasance Collateral; (c) an
opinion of counsel for the Villa Marina Borrower in form reasonably satisfactory
to the Master Servicer stating, among other things, that the Trustee has a
perfected first priority security interest in the Villa Marina Defeasance
Collateral delivered by the Villa Marina Borrower and that neither the tax
qualification nor the status of the Trust REMIC as a REMIC will be adversely
affected or impaired as a result of the defeasance; (d) a certificate of an
independent certified public accountant certifying that the Villa Marina
Defeasance Collateral generates monthly amounts equal to or greater than each
monthly installment of interest required to be paid under the Villa Marina Loan
through and including the Villa Marina Anticipated Repayment Date and to pay the
unpaid principal balance thereof on the Villa Marina Anticipated Repayment Date;
and (e) evidence in writing from the Rating Agencies to the effect that such
release will not result in a downgrade, withdrawal or qualification of their
respective ratings of the Certificates.
In connection with any such defeasance, either the Villa Marina Borrower, or
at the Villa Marina Borrower's expense, the Master Servicer, will cause all
obligations, rights and duties under and to the Villa Marina Defeasance Note and
the Villa Marina Defeasance Collateral to be transferred to a successor entity
which must be a single purpose entity (the "Villa Marina Defeasance Obligor").
The Villa Marina Defeasance Obligor is required to assume all obligations under
the Villa Marina Defeasance Note and any security agreement executed in
connection with the Villa Marina Defeasance, and the Villa Marina Borrower will
be relieved of its obligations under such documents.
Upon satisfaction of such conditions, such Villa Marina Property will be
released from the lien of the Villa Marina Loan and the pledged U.S. Obligations
will serve as collateral securing the Villa Marina Loan.
LOCK BOX. No lock box is required to be maintained under the Villa Marina
Loan until the Master Servicer notifies the Villa Marina Borrower upon the
occurrence of a Villa Marina Lock Box Event with respect to such Villa Marina
Loan, until such Villa Marina Lock Box Event is cured. A "Villa Marina Lock Box
Event" with respect to the Villa Marina Loan occurs if: (i) the Villa Marina
DSCR falls below 1.5X; (ii) on or before the date that is 30 days prior to the
Villa Marina Anticipated Repayment Date, the Villa Marina Borrower fails to
deliver to the Master Servicer a binding commitment for the refinancing of the
Villa Marina Loan from a institutional lender together with evidence that all
commitment fees associated therewith have been paid and there are no conditions
to the closing of the refinancing other than customary closing conditions
acceptable to the Master Servicer; (iii) the Villa Marina Borrower fails to
repay the Villa Marina Loan on or before the Villa Marina Anticipated Repayment
Date; or (iv) the
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occurrence of an event of default under the Villa Marina Loan documents which
can be cured by the payment of money only. The "Villa Marina DSCR" is the ratio
of (a) operating income over operating expenses for the preceding twelve-month
period to (b) the amount of principal and interest due on the Villa Marina Loan
and the debt service on certain additional indebtedness of the Villa Marina
Borrower permitted under the terms of the Villa Marina Loan documents for the
preceding twelve-month period.
Upon the occurrence of a Villa Marina Lock Box Event and notice from the
Master Servicer, the Villa Marina Borrower will be obligated to notify tenants
under leases for any portion of the Villa Marina Property and counterparties
under operating agreements that all payments owing to the Villa Marina Borrower
should be sent to a lock box account established for the Villa Marina Property
(the "Villa Marina Lock Box"), in the name of the Trust, generally with a
depository institution or trust company the long-term debt obligations of which
are rated "AA" by S&P and "Aaa" by Moody's and the short-term debt obligations
of which are rated not lower than "A-1" by S&P (a "Villa Marina Eligible
Account"). Upon notice from the Master Servicer of a Villa Marina Lock Box
Event, the Macerich Property Manager is required to cause all amounts received
directly by it on behalf of the Villa Marina Borrower to be delivered to the
Master Servicer. Funds in the Villa Marina Lock Box will be swept every other
day into a collection account held by the Master Servicer with respect to the
Villa Marina Loan (the "Villa Marina Deposit Account").
On each Due Date prior to the Villa Marina Anticipated Repayment Date, the
Master Servicer is required to distribute funds held in the Villa Marina Deposit
Account in the following order: (a) to pay all interest accrued and payable
under the Villa Marina Loan documents; (b) to the payment of the outstanding
principal balance of the Villa Marina Loan; (c) if a Villa Marina Lock Box Event
has occurred, to the payment of any insurance and tax escrow deposits with
respect to the Villa Marina Property; and (d) to the payment of any other
amounts then due and payable under the Villa Marina Loan documents, with any
excess being reimbursed to the Villa Marina Borrower. On each Due Date on or
after the Villa Marina Anticipated Repayment Date, the Master Servicer will
distribute funds held in the Villa Marina Deposit Account in the following
order: (a) to fund the tax and insurance deposits with respect to the Villa
Marina Property; (b) to pay the Villa Marina ARD Monthly Debt Service Payment
due and payable on such Due Date; (c) to pay all other amounts then due and
payable under the Villa Marina Loan documents; (d) to payments of monthly cash
expenses incurred in accordance with the related approved annual budget; (f) to
payments for extraordinary expenses approved by the Master Servicer; (g) to
payments to the Master Servicer in reduction of the outstanding principal
balance of the Villa Marina Loan, as Villa Marina Excess Cash Flow (as described
above under "--Payment Terms") until the outstanding principal balance of the
Villa Marina Loan has been reduced to zero; (h) to pay the Villa Marina Excess
Interest, if any, and late payment fees, if any, then due and owing; and (i) to
payment of any remaining amounts to the Villa Marina Borrower.
RESERVES. Pursuant to the terms of the Villa Marina Loan, a payment reserve
has been established in an amount equal to a Villa Marina Monthly Debt Service
Payment which, upon the occurrence of a Villa Marina Lock Box Event, the Master
Servicer, upon written notice to the Borrower, may apply to amounts due under
the Villa Marina Loan. Upon the occurrence of, and during the continuation of, a
Villa Marina Lock Box Event, the Master Servicer may elect to require the Villa
Marina Borrower to fund an escrow account on a monthly basis generally in an
amount equal to 1/12th of the aggregate insurance premiums and taxes in respect
of the Villa Marina Property payable in the succeeding 12 months. The Villa
Marina Borrower may satisfy its obligation to fund such escrow account by
providing to the Master Servicer access to a credit facility or cash equivalents
in an amount sufficient to discharge all insurance and tax obligations for the
succeeding year, provided that the Villa Marina Borrower delivers, at its own
expense, all security agreements and other documents necessary, in the
reasonable opinion of the Master Servicer, to grant the Trust a perfected
security interest in such credit facility or cash equivalents.
TRANSFER OF PROPERTY AND INTEREST IN BORROWER; ENCUMBRANCE. The Villa
Marina Borrower is permitted to transfer the Villa Marina Property (i) following
a release in connection with a defeasance (as described above under "--Release
in Exchange for Substitute Collateral"), (ii) on or after the Villa Marina
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Anticipated Repayment Date in connection with a prepayment (as described above
under "--Prepayment") of the Villa Marina Loan or (iii) under certain other
circumstances described in the following paragraph.
The Villa Marina Borrower may transfer all or a portion of its interests in
the Villa Marina Property if: (A) after giving effect to such transfer (i) the
Villa Marina Property is beneficially owned by a single purpose entity (a "Villa
Marina Transferee") which has assumed in writing the terms, covenants and
conditions set forth in the Villa Marina Mortgage, (ii) the Villa Marina
Transferee is controlled by a Villa Marina Permitted Owner, (iii) the manager of
the Villa Marina Property is either the Macerich Property Manager or meets
certain qualifications set forth in the Villa Marina Loan documents, including,
but not limited to written confirmation from the Rating Agencies to the effect
that the management of the Villa Marina Property by such manager will not result
in a downgrade, withdrawal or qualification of their respective ratings of the
Certificates, and (iv) no event of default under the Villa Marina Loan documents
has occurred and is continuing; (B) the Villa Marina Borrower has furnished an
opinion to the effect that such transfer will not adversely affect federal
income status of the Trust REMIC or result in the imposition of a tax on the
Trust REMIC to be treated as, or includable in, a "taxable mortgage pool" as
defined in Section 7701(i) of the Code; and (C) the Villa Marina Borrower has
obtained evidence in writing from the Rating Agencies to the effect that such
transfer will not result in a downgrade, withdrawal or qualification of their
respective ratings of the Certificates.
Additionally, the Villa Marina Borrower, without the consent of the Master
Servicer, may: (i) make immaterial transfers to governmental authorities in
connection with takings; (ii) modify certain existing, or grant similar,
easements, restrictions, covenants, reservations and rights of way included in
the Villa Marina Permitted Encumbrances (in each case, the lien of the Villa
Marina Mortgage will be subordinate to such easements, restrictions, covenants,
reservations and rights of way); and (iii) transfer or lease to a retail user
one or more anchor pads or outparcels (which are unimproved as of the Closing
Date) in connection with an expansion of the Villa Marina Marketplace in
accordance with the Villa Marina Loan documents. Each transfer described in
clauses (i) through (iii) above may only be made if it does not materially
impair the utility and operation of the Villa Marina Property, materially
adversely affect the value of the Villa Marina Property, violate requirements of
law or result in the violation of any lease or operating agreement with respect
to the Villa Marina Property.
The limited partnership agreement of the Villa Marina Borrower prohibits
transfers or encumbrances of the partnership interests in the Villa Marina
Borrower. If, for any reason, a transfer or encumbrance of a partnership
interest in the Villa Marina Borrower is required to be given effect by
operation of law, the transferee/assignee may not be admitted to the partnership
as a partner, but will be an assignee of such partnership interest. However, the
Villa Marina Loan documents allow for the transfer of direct or indirect
beneficial ownership interests in the Villa Marina Borrower if (i) after giving
effect to the proposed transaction a Villa Marina Permitted Owner or an
affiliate of the Villa Marina Borrower will be, individually or acting in
concert, the managing or co-managing general partner of, or control the Villa
Marina Borrower or will be the Villa Marina Borrower and (ii) the Rating
Agencies confirm in writing that such proposed transaction will not result in
the downgrading, withdrawal or qualification of the then current ratings of the
Certificates. A "Villa Marina Permitted Owner" may be (i) the Macerich REIT,
(ii) the Macerich Limited Partner, (iii) any other entity which is, directly or
indirectly, a wholly owned subsidiary of the Macerich REIT or the Macerich
Limited Partner or (iv) a person or entity that is or that owns or controls or
is a general partner of (A) a person or entity which, together with its
affiliates, exclusive of the Villa Marina Property, has a current net worth of
at least $100 million and total assets of at least $200 million, (B) a pension
fund, account or trust or an investment established by such entity which has
total assets of at least $100 million, exclusive of the Villa Marina Property
and which is managed by a person or entity which manages at least $200 million
in real estate assets exclusive of the Villa Marina Property or (C) an entity
which in any combination of clause (A) and clause (B) is a general partner or
controls at least a 25% interest.
Under the Villa Marina Loan documents, a transfer of the publicly traded
securities of the Macerich REIT or the general or limited partnership interests
of the Macerich Limited Partner will be permitted so
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long as the Villa Marina GP continues to be directly or indirectly owned by the
Macerich REIT or the Macerich Limited Partner and the Villa Marina Borrrower
continues to own the Villa Marina Property.
OTHER FINANCING. The Villa Marina Borrower may incur indebtedness with
respect to the Villa Marina Property without the consent of the Master Servicer,
so long as no event of default under the Villa Marina Loan documents has
occurred and is continuing as long as such indebtedness is not secured by the
Villa Marina Property and is payable by the Villa Marina Borrower in respect of
the operation of the Villa Marina Property in the ordinary course of operating
the Villa Marina Borrower's business, is paid within 60 days after its
respective due date (subject to the Villa Marina Borrower's right to contest),
or is payable or reimbursable to any tenant on account of work performed at the
Villa Marina Property by such tenant or for costs incurred by such tenant in
connection with its occupancy of space in the Villa Marina Property. The Villa
Marina Borrower may also incur unsecured indebtedness with respect to the Villa
Marina Property without the consent of the Master Servicer, so long as no event
of default under the Villa Marina Loan documents has occurred and is continuing
which is related solely to the financing of capital improvements, tenants
improvements or building equipment or leasing costs relating solely to the Villa
Marina Property and: (a) does not, in the aggregate, exceed $2,000,000; (b) the
proceeds of which are not distributed to the Villa Marina Borrower or any
indirect beneficiary of the Villa Marina Borrower except as reimbursements for
the financing of capital improvements, tenants improvements or building
equipment or leasing costs relating solely to the Villa Marina Property; (c) is
evidenced by a note or other written instrument on terms no less favorable to
the Villa Marina Borrower than the terms of the Villa Marina Loan documents; and
(d) the terms of which require repayment from operating income in excess of
operating expenses and the Villa Marina Monthly Debt Service Payments or the
Villa Marina ARD Monthly Debt Service Payments, as applicable.
INSURANCE. The Villa Marina Borrower is required to maintain (a) property
insurance insuring the improvements and building equipment against any peril
included within the classification "All Risks of Physical Loss" with extended
coverage which includes loss and damage in an amount no less than 100% of the
actual replacement cost of the Villa Marina Property; (b) comprehensive general
liability insurance against claims for personal injury, including, without
limitation, bodily injury, death or property damage occurring on, in or about
the Villa Marina Property in such amounts as are generally available at
commercially reasonable rates and are generally required by institutional
lenders for properties comparable to the Villa Marina Property, but in no event
for a combined single limit of less than $10,000,000; (c) statutory workers
compensation insurance to the extent such risks are not already covered by other
policies of the Villa Marina Borrower with respect to the Villa Marina
Borrower's employees, (d) business interruption and or loss of "rental value"
insurance for an amount sufficient to avoid any co-insurance penalty and to
provide proceeds which will cover either (i) beginning at the casualty through 1
year from the completion of the restoration or (ii) a lesser period if the
coverage provided for in clause (i) above is not reasonably commercially
available , with "rental value" to mean the sum of (A) total rents paid under
Villa Marina leases and (B) the total of all other amounts to be received by the
Villa Marina Borrower or third parties which are the legal obligation of tenants
or anchors of the Villa Marina Property which would not be reduced due to a
non-occupancy of the Villa Marina Property that results in the reduction of
operating expenses; (e) flood insurance, if available, if the land is located
within a federally designated flood hazard zone; (f) broad form boiler and
machinery insurance (without exclusion for explosion) covering all boilers,
pressure vessels, machinery and equipment on or about the Villa Marina Property
and loss of occupancy or use resulting from such breakdowns in such amounts as
are generally available at commercially reasonable rates and are generally
required by institutional lenders for properties comparable to, and in the
general vicinity of, the Villa Marina Property; (g) earthquake insurance in such
coverage amounts and deductibles as are commercially reasonable if any of the
Villa Marina Property is currently or at any time in the future located within a
federally designated "seismic zone", if (i) required by the Rating Agencies and
(ii) available at commercially reasonable rates; and (h) such other insurance as
is generally available on commercially reasonable terms and is generally
required by institutional lenders on loans secured by properties similar to, and
in the general vicinity of, the Villa Marina Property.
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The insurance described in clauses (a) and (d) of the preceding paragraph
must be provided by insurers rated not less than "A/IX" by Best's Rating Service
or an "A-" by Best's Rating Service and not less than an "A" from at least S&P
or Moody's. The insurance described in clauses (b), (c) and (f) of the preceding
paragraph must be provided by insurers rated not less than "A-/X" by Best's
Rating Service, or, in the case of the insurance described in clause (c) of the
preceding paragraph, the applicable state workers compensation fund. The
insurance described in the preceding paragraph may be effected under a blanket
policy covering the Villa Marina Property and other property and assets,
provided that such policy must specify any sublimits (other than with respect to
the insurance described in clause (b)) and such sublimits must comply in all
other respects with the above described insurance requirements. The Villa Marina
Borrower may place any insurance required under the Villa Marina Loan documents
with insurers having ratings lower than those required under the Villa Marina
Loan documents if such lower rating will not result in the downgrading,
withdrawal or qualification of the then current rating of the Certificates. The
Macerich REIT currently maintains property insurance for all of the properties
in which the Macerich REIT or its subsidiaries owns a 50% or greater interest,
including the Villa Marina Property, in the total blanket amount of $250,000,000
(subject to a deductible of $10,000 per occurence); 25% of the first $10,000,000
of such insurance is provided with an insurer having a claims paying ability
rating of "A+" by S&P and a rating of "A" by Best's and 75% of such insurance is
with insurers having a claims paying ability rating of "AAA" by S&P and a rating
of "A++" by Best's. Additional blanket property insurance is provided in the
amount of $240,000,000 in excess of the $10,000,000 limit by an insurer having a
claims paying ability rating of "A+" by S&P and a rating of "A" by Best's.
CONDEMNATION AND CASUALTY. In case of a casualty or condemnation which is
not a Villa Marina Total Loss to the Villa Marina Property, the Villa Marina
Borrower, whether or not the insurance proceeds are sufficient for such purpose,
is required to promptly commence and complete the restoration, replacement or
rebuilding of such property in compliance with all legal requirements, insurance
requirements and any applicable lease or operating agreements, which
noncompliance could or would have a material adverse effect on the Villa Marina
Property or any material portion thereof, or the utility or operation thereof
(such restoration, replacement and rebuilding, together with any temporary
repairs and property protection pending completion of the work, being herein
referred to as the "Villa Marina Restoration"). A "Villa Marina Total Loss" with
respect to any casualty is damage or destruction to the Villa Marina Property
which the Villa Marina Borrower is not required to restore under the terms of
certain leases or operating agreements, and, with respect to any taking, a
permanent taking such that it would be impracticable, even after restoration, to
operate the Villa Marina Property as an economically viable shopping center and
for which such leases and operating agreements do not require restoration.
In the event of a Villa Marina Total Loss, if the estimated cost is in
excess of $2,850,000 and cannot reasonably be expected to be completed by the
date on which the proceeds of business interruption insurance will no longer be
available (or a credit facility posted in lieu thereof), or the Villa Marina
Borrower elects not to restore the Villa Marina Property, the Master Servicer
must apply all insurance and condemnation proceeds first to the repayment of the
Master Servicer's reasonable costs and expenses in connection with the recovery
and disbursement of such proceeds, and then to the prepayment of the Villa
Marina Loan, with any excess being paid to the Villa Marina Borrower.
Additionally, in the case of a casualty or condemnation less than 6 months prior
to the Villa Marina Maturity Date, the Master Servicer must apply all insurance
and condemnation proceeds first to the repayment of the Master Servicer's
reasonable costs and expenses in connection with the recovery and disbursements
of such proceeds, and then to the prepayment of the Villa Marina Loan, with any
excess being paid to the Villa Marina Borrower. No prepayment consideration will
be due in connection with any total or partial prepayment of the Villa Marina
Loan resulting from such application of insurance or condemnation proceeds.
In the case of any casualty or taking for which the proceeds exceed
$2,850,000, such proceeds are required to be collected and paid over to the
Master Servicer. All such proceeds received on account of any casualty affecting
the Villa Marina Property that are required to be made available for a Villa
Marina Restoration are required to be delivered to and held by the Villa Marina
Borrower if such insurance proceeds total $2,850,000 or less and, if the amount
of such insurance proceeds is more than $2,850,000, to
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the Master Servicer to be held and applied in accordance with the terms of the
Villa Marina Loan documents. Any amount of insurance or condemnation proceeds
remaining after a Villa Marina Restoration will be paid to the Villa Marina
Borrower, except that any amount of condemnation proceeds for a partial taking
not used to pay for any necessary Villa Marina Restoration (other than
condemnation proceeds which were for a temporary use or which are not in respect
of a diminution in the value of the Villa Marina Property) are required to be
applied by the Master Servicer to the prepayment of the Villa Marina Loan.
FINANCIAL COVENANTS AND REPORTING. The Villa Marina Borrower is required to
furnish to the Master Servicer, among other things: (a) the unaudited quarterly
operating statement of the Villa Marina Property, together with rent rolls for
such quarter, delivered within 60 days following the end of such fiscal quarter
of the Villa Marina Borrower, (b) within 120 days after the end of each fiscal
year of the Villa Marina Borrower, an audited annual balance sheet (including
combined operating statements for the Villa Marina Property) and a statement of
revenue and expenses for the Villa Marina Borrower prepared and certified by a
"Big 6" accounting firm, and a comparative sales report by major tenant category
on a comparable store basis for such year, (c) within 60 days following the end
of each fiscal quarter of the Villa Marina Borrower, an unaudited balance sheet
and statement of income and expenses together with an officer's certificate
certifying that to the best of such officer's knowledge, such statements are
true and correct and that as of such date, no event of default exists under the
terms of the Villa Marina Loan documents, and (d) at least 30 days prior to the
commencement of the partial year period commencing on the Villa Marina
Anticipated Repayment Date and at least 45 days prior to the end of the Villa
Marina Borrower's fiscal year thereafter, all documentation and other
information required by the Master Servicer as determined in its reasonable
discretion, to prepare an annual operating budget and an annual capital budget
for the Villa Marina Borrower's expenses.
THE PROPERTY. The Villa Marina Property is comprised of the Villa Marina
Borrower's fee simple interest in 2 adjoining properties which have been
marketed together to form an urban marketplace (the "Villa Marina Marketplace")
in the Marina del Rey area of Los Angeles, California. An urban marketplace is
generally considered to be a retail shopping center which is comprised of
specialty retail and food shops of the kind found in better quality malls, an
entertainment component and street front retail. Villa Marina Marketplace was
built in two phases, phase I ("Villa Marina Phase I") was built in 1976 and
renovated in 1993, while phase II ("Villa Marina Phase II") was built in 1989.
Villa Marina Phase I consists of 11 separate buildings and is anchored by Vons
Supermarket, Sav-on Drugs and UA Theaters. Villa Marina Phase II consists of a 2
and 3 story shopping center anchored by Gelson's Supermarket and Sports Chalet
on the lower level, and by Cineplex Odeon Theater, L.A. Fitness Health Club and
Souplantation restaurant on the upper level. Villa Marina Marketplace consists
of approximately 448,579 square feet of rentable area situated on approximately
17.3 acres with approximately 2,179 total parking spaces, both surface and in a
covered parking structure.
Villa Marina Phase I as of July 24, 1997 was approximately 95.3% occupied
and the major tenants include the Good Guys, Barnes & Noble, Tower Records,
Wherehouse Records, Marie Calendar's Restaurant, Men's Wearhouse, Carl Jr. and
Radio Shack. Villa Marina Phase II as of June 30, 1997 was 96% occupied and
major tenants include The Gap, Victoria's Secret, Express/Bath & Body Works,
Structure and Chin Chin Restaurant. Together the Villa Marina Marketplace as of
July 24, 1997 was approximately 95.6% occupied. The Villa Marina Property had an
annualized base rent of $20.05 per square foot of occupied GLA. Most leases have
an initial term of 3 to 10 years. The 1996 NOI of the Villa Marina Property was
$7,922,789. The retail leases usually provide for minimum rents, percentage
rents based on gross sales and the recovery from tenants of a portion of common
area expenses, real estate taxes and other property related costs.
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The following table shows certain data regarding the major tenants at the
Villa Marina Marketplace as of July 24, 1997:
<TABLE>
<CAPTION>
% OF
LEASE GLA % OF IN-PLACE
TENANT EXPIRATION (SQ FT) PROPERTY GLA BASE RENT
- ------------------------------------------------------------------- ---------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Sports Chalet...................................................... 1999 42,276 9.42% 8.42%
Gelson's........................................................... 2009 37,012 8.25% 5.23%
Cineplex Odeon..................................................... 2008 34,318 7.65% 11.03%
Von's.............................................................. 2003 28,900 6.44% 1.16%
Sav-On Drugs....................................................... 2004 25,500 5.68% 0.93%
UA Theatres........................................................ 1999 21,365 4.76% 1.26%
La Fitness......................................................... 2004 18,558 4.14% 3.54%
Good Guys.......................................................... 2006 14,700 3.28% 4.87%
Barnes & Noble..................................................... 2004 12,000 2.68% 3.97%
Tower Records...................................................... 2007 12,000 2.68% 2.99%
</TABLE>
The primary competitor of the Villa Marina Marketplace is Marina Waterside
Shopping Center, an approximately 124,101 square foot shopping center located
within approximately 1 mile of the Villa Marina Property. The Marina Waterside
Shopping Center was built in 1967 and renovated in 1990 has an occupancy rate of
approximately 96% and is anchored by Ralph's Marina Market, Pier I and
California Pizza Kitchen. Rents at the Marina Waterside Shopping Center range
from approximately $24.00 to approximately $51.00 per square foot annually, plus
common area maintenance charges of approximately $5.40 per square foot. Other
competitors include Lincoln Center (approximately 161,381 square feet, occupancy
rate of approximately 95%, anchored by Lucky's Supermarket, rents ranging from
approximately $18.00 to approximately $21.00 per square foot and located within
approximately 2 miles of the property) and Ralph's/Thrifty Center (approximately
155,450 square feet, occupancy rate of approximately 100% anchored by Ralph's
Supermarket and Thrifty Drugs and located within approximately 3 miles of the
property).
A recent building evaluation report prepared on behalf of the Originator in
connection with the underwriting of the Villa Marina Loan indicates that the
Villa Marina Property requires approximately $61,500 of repairs and maintenance
over the next year and approximately $993,100 of repairs are recommended over
the course of 12 years. Under the Villa Marina Loan documents the Villa Marina
Borrower is obligated to maintain the Villa Marina Property in a first class
manner and keep every part thereof in good repair subject to ordinary wear and
tear. However, there can be no assurances that the Villa Marina Borrower will
have sufficient funds to complete such repairs.
The Villa Marina Property has been the subject of certain environmental
assessments and remediations. See "Risk Factors--Environmental Law
Considerations" herein.
PROPERTY MANAGEMENT. The Villa Marina Property is managed by Macerich
Property Management Company (the "Macerich Property Manager"), pursuant to a
property management agreement (the "Villa Marina Management Agreement") between
the Villa Marina Borrower and the Macerich Property Manager. The Macerich
Property Manager is responsible for the management of the Villa Marina Property
and the administration of the leases with respect thereto. Under the Villa
Marina Management Agreement, the Macerich Property Manager is entitled to (a) an
annual management fee equal to 2.5% of gross receipts of the Villa Marina
Property, payable monthly, (b) reimbursement of all third party costs advanced
by the Macerich Property Manager for the Villa Marina Borrower and (c)
reimbursement of certain out-of-pocket expenses.
The Villa Marina Management Agreement provides that the Macerich Property
Manager will manage the Villa Marina Property beginning January 17, 1996. The
Villa Marina Management Agreement may be terminated upon: (A) any material
breach of the Macerich Property Manager under the terms of the Villa Marina
Management Agreement, and which the Macerich Property Manager has failed to
cure, or commenced to cure, within 15 days after receiving written notice from
the Villa Marina Borrower of such breach; (B) any material breach of the Villa
Marina Borrower under the terms of the Villa Marina Management Agreement, and
which the Villa Marina Borrower has failed to cure, or commenced to cure,
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within 15 days after receiving written notice from the Macerich Property Manager
of such breach; (C) 30 days notice from either of the Villa Marina Borrower or
the Macerich Property Manager, with or without cause; (D) certain events of
insolvency of either the Macerich Property Manager or the Villa Marina Borrower;
(E) by the Villa Marina Borrower if the Macerich Property Manager assigns,
transfer or otherwise alienates its rights or obligations under the Villa Marina
Management Agreement; or (F) notice from either of the Villa Marina Borrower or
the Macerich Property Manager if the Villa Marina Property is damaged or
destroyed to the extent of 25% or more of the Villa Marina Property and the
Villa Marina Borrower elects not to rebuild or condemnation of or a deed in lieu
thereof of 10% or more of the Villa Marina Property.
Pursuant to a Manager's Consent and Subordination Agreement of Management
Agreement, among LB Realty, as lender, the Villa Marina Borrower and the
Macerich Property Manager (the "Villa Marina Manager's Subordination"), the
Macerich Property Manager has (i) consented to the Villa Marina Mortgage, (ii)
agreed not to terminate the Villa Marina Management Agreement without first
obtaining the Master Servicer's consent, provided that the Master Servicer's
consent is not required if the Villa Marina Borrower fails to pay management
fees due and owing and the Master Servicer fails to cure such failure after 30
days notice, (iii) agreed to subordinate any rights to receive payment under the
Villa Marina Management Agreement to the security interest of the Villa Marina
Loan documents and (iv) acknowledged the Master Servicer's right to terminate
the Macerich Property Manager for certain events, including but not limited to
an event of default under the Villa Marina Management Agreement and for cause,
and upon the occurrence of an event of default under the Villa Marina Loan
documents, subject to the Master Servicer's using its reasonable efforts to
provide reasonable prior notice and a cure period in certain instances.
The Macerich Property Manager, as of June 30, 1997, was approximately 95%
owned by the Macerich REIT. The Macerich Property Manager, as of June 30, 1997,
directly managed 23 of the 27 properties owned by the Macerich REIT and its
subsidiaries (including the Villa Marina Property).
THE VALLEY VIEW LOAN AND PROPERTY
THE LOAN. The Valley View Loan has a principal balance as of the Cut-Off
Date of $51,000,000 and is secured by an Amended, Restated and Extended Deed of
Trust, Assignment of Leases and Rents and Security Agreement (the "Valley View
Mortgage") encumbering the Valley View Borrower's interest in a regional mall in
Dallas, Texas (the "Valley View Property"). The aggregate value of the Valley
View Property has been determined by LB Holdings, based on financial and other
information provided to LB Holdings and on information prepared on LB Holding's
behalf by third parties to be approximately $95,700,000. Appraisals were not
conducted with respect to the Valley View Property. For additional
considerations with respect thereto, see "Risk Factors--The Mortgage Loans--Lack
of Certain Appraisals-Limitations of Appraisals" herein.
THE BORROWER. Macerich Valley View Limited Partnership (the "Valley View
Borrower") is a California limited partnership formed in September 1996 solely
to own and operate the Valley View Property. The Valley View Borrower has no
material assets other than the Valley View Property and related interests. The
general partner of the Valley View Borrower is Macerich Valley View GP Corp.
(the "Valley View GP"), a Delaware corporation, the sole purpose of which is to
act as general partner of the Valley View Borrower and is a wholly owned
subsidiary of The Macerich Company (the "Macerich REIT"). The Macerich REIT is a
Maryland corporation and a real estate investment trust, the stock of which is
traded on the New York Stock Exchange. The Macerich REIT is a reporting company
under the Exchange Act. The limited partner of the Valley View Borrower is The
Macerich Partnership, L.P. (the "Macerich Limited Partner"), a Delaware limited
partnership which, as of June 30, 1997, was approximately 68% owned by the
Macerich REIT.
SECURITY. The Valley View Loan is a non-recourse loan, secured only by the
fee estate of the Valley View Borrower in the Valley View Property and certain
other collateral (including an assignment of leases
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and rents and the funds in certain accounts). Subject to exceptions for
misapplication of (i) insurance and condemnation proceeds and (ii) rental income
or security deposits under any lease after the occurrence of and during the
continuance of an event of default under the Valley View Loan documents, neither
the Valley View Borrower nor any of its affiliates is personally liable for
payment of the Valley View Loan.
The Valley View Borrower has made certain environmental representations and
has represented that it has good, marketable and insurable fee simple title to
the Valley View Property subject only to specified permitted encumbrances (the
"Valley View Permitted Encumbrances") permitted by the lender under the loan
documents. LB Holdings is the named insured under a title insurance policy
(which will be assigned to the Trust Fund) which insures that the Valley View
Mortgage constitutes a valid and enforceable first lien on the Valley View
Property, subject to certain exceptions and exclusions from coverage set forth
therein.
PAYMENT TERMS. The Valley View Loan was originated by LB Holdings as of
April 16, 1997, and matures on October 10, 2031 (the "Valley View Maturity
Date"). The proceeds of the Valley View Loan were used to repay previously
existing indebtedness to LB Holdings. The Valley View Loan bears interest at a
fixed rate per annum equal to 7.89% (the "Valley View Base Interest Rate")
through October 9, 2006 and from and after October 10, 2006 (the "Valley View
Anticipated Repayment Date") at a rate per annum (the "Valley View Adjusted
Interest Rate") which will be fixed on the Valley View Anticipated Repayment
Date as the greater of (a) the Valley View Base Interest Rate plus 2% and (b)
the yield on the U.S. Treasury obligation (primary issue) with a maturity date
closest to October 10, 2031, such yield being based on the bid price for such
issue as published in The Wall Street Journal on September 27, 2006 or, if such
bid price is not published on that date, the next preceeding date on which such
bid price is published, converted to a monthly compounded nominal yield, plus
2%. However, as described below, until the principal balance of the Valley View
Loan has been reduced to zero, the Valley View Borrower will only be required to
pay interest at the Valley View Base Interest Rate. The interest accrued at the
excess of the Valley View Adjusted Interest Rate over the Valley View Base
Interest Rate will be deferred and added to the indebtedness secured by the
Valley View Loan documents and will bear interest at the Valley View Adjusted
Interest Rate (such accrued and deferred interest and interest thereon, the
"Valley View Excess Interest"). Interest on the Valley View Loan is calculated
on the basis of the actual number of days elapsed and a 360-day year.
The Valley View Loan requires monthly payments of interest (the "Valley View
Monthly Debt Service Payment") of approximately $335,325 until the Valley View
Anticipated Repayment Date. Commencing on the first Due Date after the Valley
View Anticipated Repayment Date, the Valley View Loan requires 300 monthly
payments of principal and interest (calculated based on the actual number of
days elapsed and a 360-day year) based on a 300-month amortization schedule and
the Valley View Base Interest Rate which is scheduled to be approximately
$389,917 (the "Valley View ARD Monthly Debt Service Payments"). Beginning on the
first Due Date after the Valley View Anticipated Repayment Date, in addition to
the payment of the Valley View ARD Monthly Debt Service Payment, the Valley View
Borrower is required to apply 100% of the Valley View Excess Cash Flow (as
defined below) for the month preceding the month in which the Due Date occurs in
the following order of priority: (a) to the outstanding principal balance of the
Valley View Loan until such principal is reduced to zero and (b) to the Valley
View Excess Interest. "Valley View Excess Cash Flow," for any period after the
Valley View Anticipated Repayment Date, means the excess of (i) sums received in
the Valley View Lock Box over (ii) the sum of (A) Valley View ARD Monthly Debt
Service Payments for such period, (B) amounts required to fund any required tax
and insurance reserves, (C) Valley View Borrower monthly operating expenses
which have been calculated in accordance with an annual budget approved by the
Master Servicer and other extraordinary operating expenses which must be
approved by the Master Servicer if in excess of $1,000,000 annually, incurred in
the ordinary course of business and of a type that is incurred by owners of
super regional shopping centers and urban marketplaces of similar type and
quality to the Valley View Property and (D) any other obligations under the
Valley View Loan documents then due and payable.
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Upon the occurrence of an event of default under the Valley View Loan, the
entire amount due under the Valley View Loan documents will bear interest at a
default rate equal to the lesser of (a) the Valley View Base Interest Rate plus
3% (or on and after the Valley View Anticipated Repayment Date, the Valley View
Adjusted Interest Rate plus 3%) and (b) the maximum rate allowed to be collected
under applicable law.
ALTERATIONS. The Valley View Borrower may, provided no event of default
under the Valley View Loan documents has occurred or is continuing, undertake
any alteration, expansion, improvement, demolition or removal (each, a "Valley
View Alteration") of the Valley View Property or any portion thereof so long as
such Valley View Alteration, among other things, (i) is undertaken in accordance
with the Valley View Loan documents, any applicable major space leases or
operating agreements and (ii) does not have a material adverse effect on the
financial condition of the Valley View Borrower or the value of the Valley View
Property. Any Valley View Alteration that involves an estimated cost of more
$250,000 is required to be conducted under the supervision of a qualified
architect or engineer to oversee such Valley View Alteration. In connection with
any Valley View Alteration which involves an estimated cost, individually or in
the aggregate with any other related Valley View Alterations, the cost of which
is not reimbursed to the Valley View Borrower by any tenant of the Valley View
Property, of more than $2,850,000, the Valley View Borrower is required to
deliver to the Master Servicer (i) an estimate of the cost of such Valley View
Alteration, approved by an independent architect and (ii) security in an amount
equal to the difference between such estimated cost and $2,850,000.
Notwithstanding the foregoing, Rating Agency approval and the Master Servicer's
consent is not required for any expansion undertaken in connection with the
Valley View Borrower's development of a multiplex cinema which is owned or
leased by an entity which owns or operates (alone or with affiliates) at least
300 screens nationwide.
PREPAYMENT. Voluntary prepayment is prohibited under the Valley View Loan
prior to the Valley View Anticipated Repayment Date. On the Valley View
Anticipated Repayment Date, or on any scheduled Due Date thereafter, the Valley
View Borrower may prepay all or any portion of the Valley View Loan and all
other amounts due in connection therewith in whole or part without payment of
any penalty or premium.
Principal payments on the Valley View Loan are required to occur on Due
Dates on or after the Valley View Anticipated Repayment Date through the
application of the Valley View ARD Monthly Debt Service Payments and the Valley
View Excess Cash Flow as described above under "--Payment Terms." The Valley
View Loan may also be prepaid as a result of certain events with respect to
condemnation or casualty, as described below under "--Condemnation and
Casualty." Upon the occurrence of an event of default under the Valley View
Loan, the Master Servicer may apply certain amounts to the prepayment of the
Valley View Loan. Upon the occurrence of a prepayment as a result of an event of
default which occurs prior to the Valley View Anticipated Repayment Date, the
Valley View Borrower is required to pay prepayment consideration in an amount
equal to the present value of a series of payments (a) that are each equal to
the product of (i) 1/12th of the rate equal to the excess of the Valley View
Base Interest Rate over the Valley View Reinvestment Yield Rate and (ii) the
principal amount of the Valley View Loan due on such prepayment date, and (b)
that are payable on each monthly Due Date through and including the Valley View
Anticipated Repayment Date, such present value to be discounted at the Valley
View Reinvestment Yield Rate for the number of months remaining from such
prepayment date to each such Due Date through and including the Valley View
Anticipated Repayment Date. The "Valley View Reinvestment Yield Rate" means the
sum of .25% and the yield on U.S. Treasury issue (primary issue) with a maturity
closest to October 10, 2006 with such yield being based on a bid price for such
issue as published in The Wall Street Journal on the date which is 14 days prior
to the date of such prepayment as set forth in a notice of prepayment (or, if
such bid price is not published on that date, the next preceding date on which
such bid price is so published), converted to a monthly compounded nominal
yield.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. The Valley View Borrower is
permitted at any time after the second anniversary of the Closing Date and prior
to the Valley View Anticipated Repayment Date (the
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"Valley View Defeasance Period"), provided no event of default exists, to
defease the Valley View Property, provided that, among other conditions, the
Valley View Borrower delivers on such payment date (the "Valley View Defeasance
Date") Valley View Defeasance Collateral with an aggregate amount of payments of
principal and predetermined and certain income therefrom sufficient to pay (i)
all interest accrued and unpaid on the principal balance of the Valley View
Loan; (ii) all other sums then due and payable under the Valley View Loan; and
(iii) the outstanding principal amount of the Valley View Loan. The "Valley View
Defeasance Collateral" must be U.S. Obligations providing payments on or prior
to, but as close as possible to, the business day prior to each successive
scheduled Due Date after the Valley View Defeasance Date upon which payments are
required under the Valley View Loan after the Valley View Defeasance Date and
through and including the Valley View Anticipated Repayment Date and in amounts
equal to (a) the scheduled payments due on such dates under the Valley View Loan
and (b) the unpaid principal balance of the Valley View Loan, together with
accrued interest, on the Valley View Anticipated Repayment Date.
In addition, the Valley View Borrower is required to deliver to the Master
Servicer, among other things: (a) all documents necessary to amend and restate
the note for the Valley View Loan (the "Valley View Defeasance Note"); (b) a
security agreement in form and substance satisfactory to the Master Servicer
creating a first priority lien on the Valley View Defeasance Collateral; (c) an
opinion of counsel for the Valley View Borrower in form reasonably satisfactory
to the Master Servicer stating, among other things, that the Trustee has a
perfected first priority security interest in the Valley View Defeasance
Collateral delivered by the Valley View Borrower and that neither the tax
qualification nor the status of the Trust REMIC as a REMIC will be adversely
affected or impaired as a result of the defeasance; (d) a certificate of an
independent certified public accountant certifying that the Valley View
Defeasance Collateral generates monthly amounts equal to or greater than each
monthly installment of interest required to be paid under the Valley View Loan
through and including the Valley View Anticipated Repayment Date and to pay the
unpaid principal balance thereof on the Valley View Anticipated Repayment Date;
and (e) evidence in writing from the Rating Agencies to the effect that such
release will not result in a downgrade, withdrawal or qualification of their
respective ratings of the Certificates.
In connection with any such defeasance, either the Valley View Borrower, or
at the Valley View Borrower's expense, the Master Servicer, will cause all
obligations, rights and duties under and to the Valley View Defeasance Note and
the Valley View Defeasance Collateral to be transferred to a successor entity
which must be a single purpose entity (the "Valley View Defeasance Obligor").
The Valley View Defeasance Obligor is required to assume all obligations under
the Valley View Defeasance Note and any security agreement executed in
connection with the Valley View Defeasance, and the Valley View Borrower will be
relieved of its obligations under such documents.
Upon satisfaction of such conditions, such Valley View Property will be
released from the lien of the Valley View Loan and the pledged U.S. Obligations
will serve as collateral securing the Valley View Loan.
LOCK BOX. No Lock Box is required to be maintained under the Valley View
Loan until the Master Servicer notifies the Valley View Borrower upon the
occurrence of a Valley View Lock Box Event with respect to such Valley View
Loan, until such Valley View Lock Box Event is cured. A "Valley View Lock Box
Event" with respect to the Valley View Loan occurs if: (i) the Valley View DSCR
falls below 1.5X; (ii) on or before the date that is 30 days prior to the Valley
View Anticipated Repayment Date, the Valley View Borrower fails to deliver to
the Master Servicer a binding commitment for the refinancing of the Valley View
Loan from a institutional lender together with evidence that all commitment fees
associated therewith have been paid and there are no conditions to the closing
of the refinancing other than customary closing conditions acceptable to the
Master Servicer; (iii) the Valley View Borrower fails to repay the Valley View
Loan on or before the Valley View Anticipated Repayment Date; or (iv) the
occurrence of an event of default under the Valley View Loan documents which can
be cured by the payment of money only. The "Valley View DSCR" is the ratio of
(a) operating income over operating expenses for the preceding twelve-month
period to (b) the amount of interest and principal due on the
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Valley View Loan and debt service on certain additional indebtedness of the
Valley View Borrower permitted under the terms of the Valley View Loan documents
for the preceding twelve-month period.
Upon the occurrence of a Valley View Lock Box Event and notice from the
Master Servicer, the Valley View Borrower will be obligated to notify tenants
under leases for any portion of the Valley View Property and counterparties
under operating agreements that all payments owing to the Valley View Borrower
should be sent to a lock box account established for the Valley View Property
(the "Valley View Lock Box"), in the name of the Trust, generally with a
depository institution or trust company the long-term debt obligations of which
are rated "AA" by S&P and "Aaa" by Moody's and the short-term debt obligations
of which are rated not lower than "A-1" by S&P (a "Valley View Eligible
Account"). Upon notice from the Master Servicer of a Valley View Lock Box Event,
the Macerich Property Manager is required to cause all amounts received directly
by it on behalf of the Valley View Borrower to be delivered to the Master
Servicer. Funds in the Valley View Lock Box will be swept every other day into a
collection account held by the Master Servicer with respect to the Valley View
Loan (the "Valley View Deposit Account").
On each Due Date prior to the Valley View Anticipated Repayment Date, the
Master Servicer is required to distribute funds held in the Valley View Deposit
Account in the following order: (a) to pay all interest accrued and payable
under the Valley View Loan documents; (b) to the payment of the outstanding
principal balance of the Valley View Loan; (c) if a Valley View Lock Box Event
has occurred, to the payment of the insurance and tax escrow deposits with
respect to the Valley View Property; and (d) to the payment of any other amounts
then due and payable under the Valley View Loan documents, with any excess being
reimbursed to the Valley View Borrower. On each Due Date on or after the Valley
View Anticipated Repayment Date, the Master Servicer will distribute funds held
in the Valley View Deposit Account in the following order: (a) to fund the tax
and insurance deposits with respect to the Valley View Property; (b) to pay the
Valley View ARD Monthly Debt Service Payment due and payable on such Due Date;
(c) to pay all other amounts then due and payable under the Valley View Loan
documents; (d) to payments of monthly cash expenses incurred in accordance with
the related approved annual budget; (f) to payments for extraordinary expenses
approved by the Master Servicer; (g) to payments to the Master Servicer in
reduction of the outstanding principal balance of the Valley View Loan, as
Valley View Excess Cash Flow (as described above under "--Payment Terms") until
the outstanding principal balance of the Valley View Loan has been reduced to
zero; (h) to pay the Valley View Excess Interest, if any, and late payment fees,
if any, then due and owing; and (i) to payment of any remaining amounts to the
Valley View Borrower.
RESERVES. Pursuant to the terms of the Valley View Loan, a payment reserve
has been established in an amount equal to a Valley View Monthly Debt Service
Payment which, upon the occurrence of a Valley View Lock Box Event, the Master
Servicer, upon written notice to the Borrower, may apply to amounts due under
the Valley View Loan. Upon the occurrence of, and during the continuation of, a
Valley View Lock Box Event, the Master Servicer may elect to require the Valley
View Borrower to fund an escrow account on a monthly basis generally in an
amount equal to 1/12th of the aggregate insurance premiums and taxes in respect
of the Valley View Property payable in the succeeding 12 months. The Valley View
Borrower may satisfy its obligation to fund such escrow account by providing to
the Master Servicer access to a credit facility or cash equivalents in an amount
sufficient to discharge all insurance and tax obligations for the succeeding
year, provided that the Valley View Borrower delivers, at its own expense, all
security agreements and other documents necessary, in the reasonable opinion of
the Master Servicer, to grant the Trust a perfected security interest in such
credit facility or cash equivalents.
TRANSFER OF PROPERTY AND INTEREST IN BORROWER; ENCUMBRANCE. The Valley View
Borrower is permitted to transfer the Valley View Property (i) following a
release in connection with a defeasance (as described above under "--Release in
Exchange for Substitute Collateral"), (ii) on or after the Valley View
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Anticipated Repayment Date in connection with a prepayment (as described above
under "--Prepayment") of the Valley View Loan or (iii) under certain other
circumstances described in the following paragraph.
The Valley View Borrower may transfer all or a portion of its interests in
the Valley View Property if: (A) after giving effect to such transfer (i) the
Valley View Property is beneficially owned by a single purpose entity (a "Valley
View Transferee") which has assumed in writing the terms, covenants and
conditions set forth in the Valley View Mortgage, (ii) the Valley View
Transferee is controlled by a Valley View Permitted Owner, (iii) the manager of
the Valley View Property is either the Macerich Property Manager or meets
certain qualifications set forth in the Valley View Loan documents, including,
but not limited to written confirmation from the Rating Agencies to the effect
that the management of the Valley View Property by such manager will not result
in a downgrade, withdrawal or qualification of their respective ratings of the
Certificates, and (iv) no event of default under the Valley View Loan documents
has occurred and is continuing; (B) the Valley View Borrower has furnished an
opinion to the effect that such transfer will not adversely affect federal
income status of the Trust REMIC or result in the imposition of a tax on the
Trust REMIC to be treated as, or includable in, a "taxable mortgage pool" as
defined in Section 7701(i) of the Code; and (C) the Valley View Borrower has
obtained evidence in writing from the Rating Agencies to the effect that such
transfer will not result in a downgrade, withdrawal or qualification of their
respective ratings of the Certificates.
Additionally, the Valley View Borrower, without the consent of the Master
Servicer, may: (i) make immaterial transfers to governmental authorities in
connection with takings; (ii) modify certain existing, or grant similar,
easements, restrictions, covenants, reservations and rights of way included in
the Valley View Permitted Encumbrances (in each case, the lien of the Valley
View Mortgage will be subordinate to such easements, restrictions, covenants,
reservations and rights of way); (iii) transfer or lease to a retail user one or
more anchor pads or outparcels (which are unimproved as of the Closing Date) in
connection with an expansion of the Valley View Mall in accordance with the
Valley View Loan documents; and (iv) transfer its interest with respect to that
portion of the Valley View Property intended to be purchased pursuant to the
purchase option contained in the lease agreement between the Valley View
Borrower and J.C. Penney Company, Inc. ("JC Penney"), as described below under
"--Purchase Option". Each transfer described in clauses (i) through (iv) above
may only be made if it does not materially impair the utility and operation of
the Valley View Property, materially adversely affect the value of the Valley
View Property, violate requirements of law or result in the violation of any
lease or operating agreement with respect to the Valley View Property. In
connection with the transfer described in clause (iv) above, such portion of the
Valley View Property will be released from the lien of the Valley View Mortgage.
The limited partnership agreement of the Valley View Borrower prohibits
transfers or encumbrances of the partnership interests in the Valley View
Borrower. If, for any reason, a transfer or encumbrance of a partnership
interest in the Valley View Borrower is required to be given effect by operation
of law, the transferee/assignee may not be admitted to the partnership as a
partner, but will be an assignee of such partnership interest. However, the
Valley View Loan documents allow for the transfer of direct or indirect
beneficial ownership interests in the Valley View Borrower if (i) after giving
effect to the proposed transaction a Valley View Permitted Owner or an affiliate
of the Valley View Borrower will be, individually or acting in concert, the
managing or co-managing general partner of, or control the Valley View Borrower
or will be the Valley View Borrower and (ii) the Rating Agencies confirm in
writing that such proposed transaction will not result in the downgrading,
withdrawal or qualification of the then current ratings of the Certificates. A
"Valley View Permitted Owner" may be (i) the Macerich REIT, (ii) the Macerich
Limited Partner, (iii) any other entity which is, directly or indirectly, a
wholly owned subsidiary of the Macerich REIT or the Macerich Limited Partner or
(iv) a person or entity that is or that owns or controls or is a general partner
of (A) a person or entity which, together with its affiliates, exclusive of the
Valley View Property, has a current net worth of at least $100 million and total
assets of at least $200 million, (B) a pension fund, account or trust or an
investment established by such entity which has total assets of at least $100
million, exclusive of the Valley View Property and which is managed by a person
or entity which
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manages at least $200 million in real estate assets exclusive of the Valley View
Property or (C) an entity which in any combination of clause (A) and clause (B)
is a general partner or controls at least a 25% interest.
Under the Valley View Loan documents, a transfer of the publicly traded
securities of the Macerich REIT or the general or limited partnership interests
in the Macerich Limited Partner will be allowed, so long as the Valley View GP
continues to be directly or indirectly owned by the Macerich REIT or the
Macerich Limited Partner and the Valley View Borrower continues to own the
Valley View Property.
OTHER FINANCING. The Valley View Borrower may incur indebtedness with
respect to the Valley View Property without the consent of the Master Servicer,
so long as no event of default under the Valley View Loan documents has occurred
and is continuing as long as such indebtedness is not secured by the Valley View
Property and is payable by the Valley View Borrower in respect of the operation
of the Valley View Property in the ordinary course of operating the Valley View
Borrower's business, is paid within 60 days after its respective due date
(subject to the Valley View Borrower's right to contest) or is payable or
reimbursable to any tenant on account of work performed at the Valley View
Property by such tenant or for costs incurred by such tenant in connection with
its occupancy of space in the Valley View Property. The Valley View Borrower may
also incur other unsecured indebtedness with respect to the Valley View Property
without the consent of the Master Servicer, so long as no event of default under
the Valley View Loan documents has occurred and is continuing which is related
solely to the financing of capital improvements, tenants improvements or
building equipment or leasing costs relating solely to the Valley View Property
and: (a) does not, in the aggregate, exceed $2,000,000; (b) the proceeds of
which are not distributed to the Valley View Borrower or any indirect
beneficiary of the Valley View Borrower except as reimbursements for the
financing of capital improvements, tenants improvements or building equipment or
leasing costs relating solely to the Valley View Property; (c) is evidenced by a
note or other written instrument on terms no less favorable to the Valley View
Borrower than the terms of the Valley View Loan documents; and (d) the terms of
which require repayment from operating income in excess of operating expenses
and the Valley View Monthly Debt Service Payments or the Valley View ARD Monthly
Debt Service Payments, as applicable.
INSURANCE. The Valley View Borrower is required to maintain (a) property
insurance insuring the improvements and building equipment against any peril
included within the classification "All Risks of Physical Loss" with extended
coverage which includes loss and damage in an amount no less than 100% of the
actual replacement cost of the Valley View Property; (b) comprehensive general
liability insurance against claims for personal injury, including, without
limitation, bodily injury, death or property damage occurring on, in or about
the Valley View Property in such amounts as are generally available at
commercially reasonable rates and are generally required by institutional
lenders for properties comparable to the Valley View Property, but in no event
for a combined single limit of less than $10,000,000; (c) statutory workers
compensation insurance to the extent such risks are not already covered by other
policies of the Valley View Borrower with respect to the Valley View Borrower's
employees, (d) business interruption and or loss of "rental value" insurance for
an amount sufficient to avoid any co-insurance penalty and to provide proceeds
which will cover either (i) beginning at the casualty through 1 year from the
completion of the restoration or (ii) a lesser period if the coverage provided
for in clause (i) above is not reasonably commercially available, with "rental
value" to mean the sum of (A) total rents paid under Valley View leases and (B)
the total of all other amounts to be received by the Valley View Borrower or
third parties which are the legal obligation of tenants or anchors of the Valley
View Property which would not be reduced due to a non-occupancy of the Valley
View Property that results in the reduction of operating expenses; (e) flood
insurance, if available, if the land is located within a federally designated
flood hazard zone; (f) broad form boiler and machinery insurance (without
exclusion for explosion) covering all boilers, pressure vessels, machinery and
equipment on or about the Valley View Property and loss of occupancy or use
resulting from such breakdowns in such amounts as are generally available at
commercially reasonable rates and are generally required by institutional
lenders for properties comparable to, and in the general vicinity of, the Valley
View Property; and (g) such other insurance as is generally available on
commercially reasonable terms and is generally required by institutional lenders
on loans secured by properties similar to, and in the general vicinity of, the
Valley View Property.
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The insurance described in clauses (a) and (d) of the preceding paragraph
must be provided by insurers rated not less than "A/IX" by Best's Rating Service
or an "A-" by Best's Rating Service and not less than an "A" from at least S&P
or Moody's. The insurance described in clauses (b), (c) and (f) of the preceding
paragraph must be provided by insurers rated not less than "A-/X" by Best's
Rating Service, or, in the case of the insurance described in clause (c) of the
preceding paragraph, the applicable state workers compensation fund. The
insurance described in the preceding paragraph may be effected under a blanket
policy covering the Valley View Property and other property and assets, provided
that such policy must specify any sublimits (other than with respect to the
insurance described in clause (b)) and such sublimits must comply in all other
respects with the above described insurance requirements. The Valley View
Borrower may place any insurance required under the terms of the Valley View
Loan documents with insurers having ratings lower than required under the Valley
View Loan documents if such lower rating would not result in the downgrade,
withdrawal or qualification of the then current rating of the Certificates. The
Macerich REIT currently maintains property insurance for all of the properties
in which Macerich REIT or its subsidiaries own a 50% or greater interest,
including the Valley View Property, in the total blanket amount of $250,000,000
(subject to a deductible of $10,000 per occurence) 25% of the first $10,000,000
of such insurance provided with an insurer having a claims paying ability rating
of "A+" by S&P and a rating of "A" by Best's and 75% of such insurance is with
insurors having a claims paying ability rating of "AAA" by S&P and a rating of
"A++" by Best's. Additional blanket property insurance is provided in the amount
of $240,000,000 in excess of the $10,000,000 limit by an insurer having a claims
paying ability rating of "A" by S&P and a rating of "A" by Best's.
CONDEMNATION AND CASUALTY. In case of a casualty or condemnation which is
not a Valley View Total Loss to the Valley View Property, the Valley View
Borrower, whether or not the insurance proceeds are sufficient for such purpose,
is required to promptly commence and complete the restoration, replacement or
rebuilding of such property in compliance with all legal requirements, insurance
requirements and any applicable lease or operating agreements, which
noncompliance could or would have a material adverse effect on the Valley View
Property or any material portion thereof, or the utility or operation thereof
(such restoration, replacement and rebuilding, together with any temporary
repairs and property protection pending completion of the work, being herein
referred to as the "Valley View Restoration"). A "Valley View Total Loss" with
respect to any casualty is damage or destruction to the Valley View Property
which the Valley View Borrower is not required to restore under the terms of
certain leases or operating agreements, and, with respect to any taking, a
permanent taking such that it would be impracticable, even after restoration, to
operate the Valley View Property as an economically viable shopping center and
for which such leases and operating agreements do not require restoration.
In the event of a Valley View Total Loss, if the estimated cost is in excess
of $2,850,000 and cannot reasonably be expected to be completed by the date on
which the proceeds of business interruption insurance will no longer be
available (or a credit facility posted in lieu thereof), or the Valley View
Borrower elects not to restore the Valley View Property, the Master Servicer
must apply all insurance and condemnation proceeds first to the repayment of the
Master Servicer's reasonable costs and expenses in connection with the recovery
and disbursement of such proceeds, and then to the prepayment of the Valley View
Loan, with any excess being paid to the Valley View Borrower. Additionally, in
the case of a casualty or condemnation less than 6 months prior to the Valley
View Maturity Date, the Master Servicer must apply all insurance and
condemnation proceeds first to the repayment of the Master Servicer's reasonable
costs and expenses in connection with the recovery and disbursements of such
proceeds, and then to the prepayment of the Valley View Loan, with any excess
being paid to the Valley Vew Borrower. No prepayment consideration will be due
in connection with any total or partial prepayment of the Valley View Loan
resulting from such application of insurance or condemnation proceeds.
In the case of any casualty or taking for which the proceeds exceed
$2,850,000, such proceeds are required to be collected and paid over to the
Master Servicer. All such proceeds received on account of any casualty affecting
the Valley View Property that are required to be made available for a Valley
View
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Restoration are required to be delivered to and held by the Valley View Borrower
if such insurance proceeds total $2,850,000 or less and, if the amount of such
insurance proceeds is more than $2,850,000, to the Master Servicer to be held
and applied in accordance with the terms of the Valley View Loan documents. Any
amount of insurance or condemnation proceeds remaining after a Valley View
Restoration will be paid to the Valley View Borrower, except that any amount of
condemnation proceeds for a partial taking not used to pay for any necessary
Valley View Restoration (other than condemnation proceeds which were for a
temporary use or which are not in respect of a diminution in the value of the
Valley View Property) are required to be applied by the Master Servicer to the
prepayment of the Valley View Loan.
FINANCIAL COVENANTS AND REPORTING. The Valley View Borrower is required to
furnish to the Master Servicer, among other things: (a) the unaudited quarterly
operating statement of the Valley View Property, together with rent rolls for
such quarter, delivered within 60 days following the end of such fiscal quarter
of the Valley View Borrower, (b) within 120 days after the end of each fiscal
year of the Valley View Borrower, an audited annual balance sheet (including
combined operating statements for the Valley View Property) and a statement of
revenue and expenses for the Valley View Borrower prepared and certified by a
"Big 6" accounting firm, and a comparative sales report by major tenant category
on a comparable store basis for such year, (c) within 60 days following the end
of each fiscal quarter of the Valley View Borrower, an unaudited balance sheet
and statement of income and expenses together with an officer's certificate
certifying that to the best of such officer's knowledge, such statements are
true and correct and that as of such date, no event of default exists under the
terms of the Valley View Loan documents. and (d) at least 30 days prior to the
commencement of the partial year period commencing on the Valley View
Anticipated Repayment Date and at least 45 days prior to the end of the Valley
View Borrower's fiscal year thereafter, all documentation and other information
required by the Master Servicer as determined in its reasonable discretion, to
prepare an annual operating budget and an annual capital budget for the Valley
View Borrower's expenses.
THE PROPERTY. The Valley View Property is comprised of the Valley View
Borrower's fee simple interest in the Valley View Mall, a two-level super
regional shopping center located in Dallas, Texas which was built in 1973, and
was renovated in 1993. Valley View Mall is anchored by JC Penney, the anchor pad
for which is owned by the Valley View Borrower and by three owner occupied
national retail franchises: Dillard's; Sears; and Foleys. Valley View Mall is
situated on approximately 94.72 acres and contains over approximately 1.5
million square feet of retail and related space, of which approximately 838,000
square feet is occupied by owner occupied anchors, approximately 220,000 square
feet is occupied by JC Penney, and 465,918 square feet are non-anchor mall
tenant GLA. As of August 14, 1997, the Valley View Mall was 93.8% occupied and
provided parking for approximately 7,847 vehicles. Major mall store tenants
include Lane Bryant, Lerner New York, Foot Action USA, Oshman's Sporting Goods,
Luby's Cafeteria, Express, Pier One Imports, Jos. A. Bank Clothiers and
Limited/Limited Too/Bath & Body.
The anchor stores (other than JC Penney's) and related land are owned by the
anchor tenants and not by the Valley View Borrower. Accordingly, only the
portion of the property on which the mall stores are located secures the Valley
View Loan.
Currently, space formerly used as a movie theater, comprised of
approximately 13,200 square feet of GLA, is unoccupied. This space has been
unoccupied for a number of years as a result of the prior tenant vacating such
space. See "Risk Factors--The Mortgage Loans--Risks Associated with Retail
Properties" herein.
The Valley View Property had an annualized base rent of $21.69 per square
foot of occupied GLA (excluding anchor tenants). Most leases have an initial
term of 3 to 10 years. The 1996 NOI of the Valley View Property was $8,299,479.
The retail leases usually provide for minimum rents, percentage rents based on
gross sales and the recovery from tenants of a portion of common area expenses,
real estate taxes and
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other property related costs. The weighted average retail sales per square foot
were approximately $209 in 1995 and approximately $230 in 1996.
The following table shows certain data regarding the major tenants at the
Valley View Property as of June 30, 1997:
<TABLE>
<CAPTION>
% OF % OF
LEASE GLA PROPERTY IN-PLACE
TENANT EXPIRATION (SQ FT) GLA BASE RENT
- ------------------------------------------------------------ ------------- --------- ----------- ------------------
<S> <C> <C> <C> <C>
Dillards(1)................................................. N/A 302,268 19.84% CAM (Pro-rata)
Foley's(1).................................................. N/A 300,196 19.70 CAM (Pro-rata)
Sears(1).................................................... N/A 235,055 15.43 CAM (Pro-rata)
JC Penney(1)................................................ N/A 220,378 14.46 CAM (Pro-rata)
Limited/Limited Too/Bath & Body............................. 2009 14,242 0.93 3.53%
Lane Bryant................................................. 2004 13,873 0.91 3.44
Lerner New York............................................. 2004 12,189 0.80 3.02
Foot Action USA............................................. 2004 11,325 0.74 2.39
Oshman's Sporting Goods..................................... 1998 9,852 0.65 1.15
Luby's Cafeteria............................................ 2003 9,718 0.64 0.78
Express..................................................... 2006 9,048 0.59 2.19
Pier One Imports............................................ 1999 8,942 0.59 1.89
Jos. A. Bank Clothiers...................................... 1999 8,717 0.57 1.38
</TABLE>
- ------------------------
(1) 3 of 4 anchors are owner occupied and JC Penney has a purchase option on its
anchor space. See "--The Purchase Option" herein.
The following table shows certain information for each of Valley View Mall's
anchors (and/or its corporate parent):
<TABLE>
<CAPTION>
CREDIT RATING
OF
PARENT OPERATING
PARENT COMPANY(1) ANCHOR--OWNED/ COVENANT
ANCHORS COMPANY (S&P)(MOODY'S) GLA LEASED EXPIRATION
- ----------------- ----------------------------------- --------------- --------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Dillard's........ Dillard Dept. Stores Inc. A+/A2 302,268 Anchor--Owned 10/2006
JC Penney........ JC Penney Co., Inc. A/A2 220,378 Leased 10/2006
Sears............ Sears, Roebuck and Co. A-/A2 235,055 Anchor--Owned N/A
Foleys........... The May Department Stores Company A/A2 300,196 Anchor--Owned 10/2006
</TABLE>
- ------------------------
Notes: (1) Reflects long-term debt rating as of September, 1997.
The primary competitor of the Valley View Mall is the Galleria, an
approximately 1.1 million square foot mall located within approximately 1 mile
of the Valley View Property. The Galleria was built in 1982 and renovated in
1996, has an occupancy rate of approximately 88%, and is anchored by Macy's,
Saks Fifth Avenue, Nordstroms and Marshall Fields. Other competitors include
Prestonwood Mall (approximately 1.1 million square feet, occupancy rate of
approximately 90% anchored by Dillard's, Lord & Taylor, Neiman Marcus and JC
Penney, and located within approximately 1.5 miles of the property) and
Northpark Mall (approximately 1.4 million square feet, occupancy rate of
approximately 98%, anchored by Dillard's, Lord & Taylor, Neiman Marcus and JC
Penney, and located within approximately 3 miles of the property). The operating
covenants for JC Penney and Dillards at Prestonwood Mall expire as of August
1999.
An architectural and engineering report performed on behalf of the
Originator in connection with the underwriting of the Valley View Loan has
indicated that approximately $3.2 million of maintenance and repairs should be
performed on the Valley View Property. The Valley View Borrower has advised the
Depositor that the Valley View Borrower anticipates this work will be budgeted
for in the Valley View
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Borrower's annual budgets. However, there can be no assurances that the Valley
View Borrower will have sufficient cash flow to cover these costs.
The Valley View Property has been the subject of certain environmental
assessments and remediations. See "Risk Factors--The Mortgage
Loans--Environmental Law Considerations" herein.
THE PURCHASE OPTION. JC Penney opened a new "flagship" store in the Valley
View Mall on October 19, 1996 after renovating the site of the new JC Penney.
Pursuant to a lease, dated as of April 18, 1996 (the "JC Penney Lease"), the
yearly rent payable by JC Penney is $1.00 and JC Penney has an option to
purchase that portion of the Valley View Property which comprises the JC Penney
anchor pad for $1.00 at any time after the permanent closure of the JC Penney
store in the Prestonwood Mall, as described above under "--The Property". JC
Penney is currently operating at Prestonwood Mall under an operating
covenant which expires on August 31, 1999. At that time, the terms of the JC
Penney Lease provide that the rent payable by JC Penney will increase to $1
million per year for the anchor pad in the Valley View Mall if JC Penney is
operating a store in excess of 20,000 square feet in the Prestonwood Mall.
THE OPERATING AGREEMENT. Each of J.C. Penney Company, Inc., The May
Department Stores Company, Dillard Texas Operating Limited Partnership and
Sears, Roebuck and Co. (collectively, the "Valley View Anchor Stores") is a
party to an operating agreement and supplements (collectively, the "Valley View
Operating Agreement") with the Valley View Borrower. Pursuant to a letter
agreement among the Valley View Anchor Stores, the Valley View Borrower and JC
Penney, the parties have agreed to amend the operating agreement to permit JC
Penney to become a party in the event JC Penney exercises its purchase option.
The Valley View Operating Agreement provides that Foleys (under such name,
or another trade name) is required to operate continuously for 10 years after
October 19, 1996, provided: (i) the developer maintains the Valley View Mall as
a "first-class enclosed mall regional shopping center"; (ii) tenants comprising
at least 70% of the square footage of the Valley View Mall (excluding anchor
pads) are open and operating for business and are reasonably balanced throughout
the Valley View Mall; and (iii) Dillard and either Sears or JC Penney are
operating under their respective names (or other trade name under which they
operate the majority of their retail department store in Texas).
The Valley View Operating Agreement provides that Dillard (under such name,
or another trade name) is required to operate continuously for 10 years after
October 19, 1996, provided: (i) there is no material event of default by the
Valley View Borrower under the Operating Agreement; (ii) at least 70% of the
square footage of the Valley View Mall (excluding anchor pads) is being operated
by tenants under valid leases and represents a tenant mix traditionally found in
first-class regional enclosed mall shopping centers; (iii) Foleys and either
Sears or JC Penney is operating under their respective names (or other trade
name under which they operate the majority of their retail department store in
Texas); (iv) the Valley View Borrower is not able to make certain monetary
payments to Dillard due to an insolvency event; (v) at least 3 of the anchor
pads are connected to the Valley View Mall (except in certain instances due to
damage or destruction); and (vi) the operating covenants of any of Sears, JC
Penney or Foleys have been amended, terminated, canceled or released by
agreement, acquiescence or sufferance by the Valley View Borrower. The Valley
View Operating Agreement also provides that in exchange for a $2 million
contribution from the Valley View Borrower, Dillard will permanently close the
Dillard's store in the Prestonwood Mall no later than September 30, 1999 and not
operate any store at the Prestonwood Mall after September 30, 1999. The Valley
View Borrower has advised the Depositor that the Valley View Borrower
anticipates that it will have sufficient cash on hand to pay this obligation.
However no assurances can be given that the Valley View Borrower will be able
pay this obligation in a timely manner.
Pursuant to a supplemental agreement between the Valley View Borrower and JC
Penney, JC Penney (under such name, or another trade name) is required to
operate continuously for 10 years after October 19, 1996 provided: (i) tenants
comprising at least 70% of the square footage of the Valley View Mall (excluding
anchor pads) are open and operating for business and are equally distributed
between the
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upper and lower level of the Valley View Mall; and (ii) Foleys and either Sears
or Dillard is operating under their respective names (or other trade name under
which they operate the majority of their retail department store in Texas).
PROPERTY MANAGEMENT. The Valley View Property is managed by Macerich
Property Management Company (the "Macerich Property Manager"), pursuant to a
property management agreement (the "Valley View Management Agreement") between
the Valley View Borrower and the Macerich Property Manager. The Macerich
Property Manager is responsible for the management of the Valley View Property
and the administration of the leases with respect thereto. Under the Valley View
Management Agreement, the Macerich Property Manager is entitled to (a) an annual
management fee equal to 2.5% of gross receipts of the Valley View Property,
payable monthly, (b) reimbursement of all third party costs advanced by the
Macerich Property Manager for the Valley View Borrower and (c) reimbursement of
certain out-of-pocket expenses.
The Valley View Management Agreement provides that the Macerich Property
Manager will manage the Valley View Property beginning October 3, 1996. The
Valley View Management Agreement may be terminated upon: (A) any material breach
of the Macerich Property Manager under the terms of the Valley View Management
Agreement, and which the Macerich Property Manager has failed to cure, or
commenced to cure within 15 days after receiving written notice from the Valley
View Borrower of such breach; (B) any material breach of the Valley View
Borrower to comply with the terms of the Valley View Management Agreement, and
which the Valley View Borrower has failed to cure, or commenced to cure within
15 days after receiving written notice from the Macerich Property Manager of
such breach; (C) 30 days notice from either of the Valley View Borrower or the
Macerich Property Manager, with or without cause; (D) certain events of
insolvency of either the Macerich Property Manager or the Valley View Borrower;
(E) by the Valley View Borrower if the Macerich Property Manager assigns,
transfer or otherwise alienates its rights or obligations under the Valley View
Management Agreement; or (F) notice from either of the Valley View Borrower or
the Macerich Property Manager if the Valley View Property is damaged or
destroyed to the extent of 25% or more of the Valley View Property and the
Valley View Borrower elects not to rebuild or condemnation of or a deed in lieu
thereof of 10% or more of the Valley View Property.
Pursuant to a Manager's Consent and Subordination Agreement of Management
Agreement, among LB Holdings, as lender, the Valley View Borrower and the
Macerich Property Manager (the "Valley View Manager's Subordination"), the
Macerich Property Manager has (i) consented to the Valley View Mortgage, (ii)
agreed not to terminate the Valley View Management Agreement without first
obtaining the Master Servicer's consent, provided that the Master Servicer's
consent is not required if the Valley View Borrower fails to pay management fees
due and owing and the Master Servicer fails to cure such failure after 30 days
notice, (iii) agreed to subordinate any rights to receive payment under the
Valley View Management Agreement to the security interest of the Valley View
Loan documents and (iv) acknowledged the Master Servicer's right to terminate
the Macerich Property Manager for certain events, including but not limited to
an event of default under the Valley View Management Agreement, for cause, and
upon the occurrence of an event of default under the Valley View Loan documents,
subject to the Master Servicer's using its reasonable efforts to provide
reasonable prior notice and a cure period in certain instances.
The Macerich Property Manager, as of June 30, 1997, was approximately 95%
owned by the Macerich REIT. The Macerich Property Manager, as of June 30, 1997
directly managed 23 of the 27 properties owned by the Macerich REIT and its
subsidiaries (including the Valley View Property).
THE SUN COMMUNITIES LOAN AND PROPERTIES
THE LOAN. The Sun Communities Loan has a principal balance as of the
Cut-Off Date of approximately $44,963,187 and is evidenced by two separate notes
issued by two related borrowers. The first note,
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having a principal balance of approximately $25,978,730 (the "Sun Communities
Note A"), was issued by Sun Communities Funding Limited Partnership (the "Sun
Communities Borrower A"). The second note (the "Sun Communities Note B," and
together with the Sun Communities Note A, the "Sun Communities Notes"), having a
principal balance of approximately $18,984,457, was issued by Miami Lakes
Venture Associates (the "Sun Communities Borrower B", and together with the Sun
Communities Borrower A, the "Sun Communities Borrowers"). The Sun Communities
Note B is guaranteed pursuant to a guaranty of payment executed by the Sun
Communities Borrower A (the "Sun Guaranty").
The Sun Communities Note A and the Sun Guaranty are secured by first
Mortgages (the "Sun Communities A Mortgages") encumbering six manufactured
housing communities (the "Sun Communities A Properties") in the following
locations: Perry, Michigan (the "Countryside Village Property"); Edwardsville,
Kansas (the "Edwardsville Property"); Jackson, Michigan (the "Sherman Oaks
Property"); Bristol, Indiana (the "Timberbrook Property"); Battle Creek,
Michigan (the "Bedford Hills Property"); and Grand Rapids, Michigan (the "Cutler
Estates Property"). The Sun Communities Note B is secured by a first mortgage
(the "Sun Communities B Mortgage," and together with the Sun Communities A
Mortgages, the "Sun Communities Mortgages") encumbering a manufactured housing
community (the "Royal Country Property," and together with the Sun Communities A
Properties, the "Sun Communities Properties") located in Miami, Florida. All of
the Sun Communities Mortgages are cross-defaulted. Through the Sun Guaranty, the
Sun Communities A Mortgages secure the Sun Communities Note B, although the Sun
Communities B Mortgage, in the amount of $19,000,000, does not secure the Sun
Communities Note A.
THE BORROWERS. The Sun Communities Borrower A is a limited partnership and
the Sun Communities Borrower B is a general partnership. The Sun Communities
Borrower A is the owner of the Sun Communities A Properties, and the Sun
Communities Borrower B is the owner of the Royal Country Property.
The Sun Communities Borrower A owns a 99% general partnership interest in
the Sun Communities Borrower B. Other than its ownership interest in the Sun
Communities A Properties and its partnership interest in the Sun Communities
Borrower B, the Sun Communities Borrower A has no material assets. The Sun
Communities Borrower B has no material assets other than the Royal Country
Property and related interests.
The Sun Communities Borrowers are limited in their respective purposes to
owning, operating and managing their respective Sun Communities Properties, and
in the case of the Sun Communities Borrower A, to owning a 99% general
partnership interest in the Sun Communities Borrower B.
Sun Communities Funding GP L.L.C. ("Sun Communities Funding"), a Michigan
limited liability company, is general partner of the Sun Communities Borrower A
and holds a 1% general partnership interest in Sun Communities Borrower B. Sun
Communities Funding is limited in its purposes to acting as general partner of
the Sun Communities Borrower A and holding a 1% general partnership interest in
the Sun Communities Borrower B. The members of Sun Communities Funding are Sun
Communities Operating Limited Partnership, a 99% member, and SCF Manager, Inc.,
a 1% member who is also the managing member. SCF Manager Inc. is wholly owned by
Sun Communities, Inc. ("Sun"). The 99% limited partner of the Sun Communities
Borrower A is Sun Communities Operating Limited Partnership.
The Sun Communities Borrower B is a Florida general partnership, whose
general partners are the Sun Communities Borrower A and Sun Communities Funding.
Sun is a publicly traded real estate investment trust, which has been a
NYSE-listed company since 1993 and owns a portfolio of 85 manufactured housing
communities consisting of approximately 30,400 developed manufactured housing
sites.
SECURITY. The Sun Communities Notes are non-recourse notes. The Sun
Communities Note A is secured as described above by the fee estate of the Sun
Communities Borrower A in the Sun Communities A Properties and certain
collateral therefor (including an assignment of leases and rents and the funds
in
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certain accounts). The Sun Communities Note B is secured as described above by
the fee estate of the Sun Communities Borrower B in the Royal Country Property,
and the Sun Guaranty of the Sun Communities Note B is secured as described above
by the fee estate of the Sun Communities Borrower A in the Sun Communities A
Properties, and certain collateral therefor (including an assignment of leases
and rents and the funds in certain accounts). Subject to exceptions for, among
other things, fraud, intentional misrepresentation, breach of certain
environmental indemnities and covenants, or misapplication of funds, none of the
Sun Communities Borrowers or their general partners is personally liable for
payment of the Sun Communities Loan. The Sun Communities Notes provide for full
recourse to all the assets of the related Sun Communities Borrower if, among
other things, any of the related Sun Communities Properties or any part thereof
securing such Sun Communities Note become subject to a voluntary bankruptcy.
Each of the Sun Communities Borrowers has made certain environmental
representations and has represented that it has good, marketable and insurable
fee simple title to the Sun Communities Property or Properties it owns, subject
only to encumbrances described in the applicable title insurance policies. LB
Holdings is the named insured under title insurance policies which insure that
each of the related Mortgages constitutes a valid and enforceable first lien on
the applicable Sun Communities Properties, subject to certain exceptions and
exclusions from coverage set forth therein.
PAYMENT TERMS. The Sun Communities Loan was originated by LB Holdings on
September 4, 1997 (the "Sun Communities Closing Date") and matures on September
10, 2027 (the "Sun Communities Maturity Date") and bears interest at a fixed
rate per annum equal to 7.01% (the "Sun Communities Base Interest Rate") through
September 9, 2007, and from September 10, 2007 (the "Sun Communities Anticipated
Repayment Date") at a fixed rate per annum (the "Sun Communities Adjusted
Interest Rate") which is fixed on the Sun Communities Anticipated Repayment Date
at the greater of (a) the Sun Communities Base Interest Rate plus 2% and (b) the
yield on the U.S. Treasury (primary issue) with a maturity date closest to
September 10, 2027, based on the bid price for such issue published in the Wall
Street Journal fourteen days prior to the Sun Communities Anticipated Repayment
Date plus 2%. However, as described below, until the principal balance of the
Sun Communities Loan has been reduced to zero, the Sun Communities Borrower will
only be required to pay interest at the Sun Communities Base Interest Rate. The
interest accrued at the excess of the Sun Communities Adjusted Interest Rate
over the Sun Communities Base Interest Rate will be deferred and will bear
interest at the Sun Communities Adjusted Interest Rate to the extent permitted
by applicable law (such accrued and deferred interest and interest thereon, the
"Sun Communities Excess Interest"). Interest on the Sun Communities Loan is
calculated on the basis of the actual number of days elapsed and a 360-day year.
The Sun Communities Borrower made a payment of interest only on the Sun
Communities Closing Date. Through the Sun Communities Anticipated Repayment
Date, the Sun Communities Loan requires
120 scheduled monthly payments of principal and interest which are approximately
$303,319 per month commencing on October 10, 1997 (the "Sun Communities Monthly
Debt Service Payment") (based on a 360-month amortization schedule and the Sun
Communities Base Interest Rate). Payment of the balance of the principal, if
any, together with all accrued and unpaid interest (including Sun Communities
Excess Interest) is required on the Sun Communities Maturity Date. Commencing on
the first Due Date after the Sun Communities Anticipated Repayment Date and
continuing on each Due Date thereafter all proceeds received with respect to the
Sun Communities Loan and all funds on deposit in the Sun Communities Cash
Collateral Account will be required to be applied in the following priority: (a)
to pay taxes and insurance premiums for the property; (b) to payment of the Sun
Communities Monthly Debt Service Payment; (c) to payment of any other amounts
due under the Sun Communities loan documents; (d) to payment of operating
expenses incurred in accordance with an approved annual budget; (e) to payment
of the outstanding principal balance of the Sun Communities Notes; (f) to
payment of Sun Communities Excess Interest; and (g) to the Sun Communities
Borrower.
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Upon the occurrence of an event of default under the Sun Communities Loan,
the entire amount due under the Sun Communities Loan documents will bear
interest at a default rate equal to the lesser of (a) the Sun Communities Base
Interest Rate plus 5% and (b) the maximum rate allowed to be collected under
applicable law.
PREPAYMENT. Voluntary prepayment is prohibited under the Sun Communities
Loan prior to the period commencing 6 months prior to the Sun Communities
Anticipated Repayment Date (such period, the "Sun Communities Permitted
Prepayment Period"). Thereafter, provided that there is no event of default
under the Sun Communities Loan documents, the Sun Communities Loan may be
voluntarily prepaid in whole, or in part, without payment of any prepayment
consideration, on a Due Date pursuant to the terms of the Sun Communities Loan
documents.
All insurance proceeds or condemnation awards not required to be made
available for the Sun Communities Restoration of any of the Sun Communities
Properties or returned to the related Sun Communities Borrower in accordance
with the terms of the Sun Communities Loan documents, will be required to be
paid by the related Sun Communities Borrower as a prepayment on the Sun
Communities Loan, in an amount equal to the lesser of 100% of such proceeds and
the Sun Communities Allocated Loan Amount for the related Sun Communities
Property. Such prepayments will be required to be applied first to the payment
of all interest accrued and payable under the related Sun Communities Note
computed at the Sun Communities Base Interest Rate and the balance to the
payment of the outstanding principal balance of the related Sun Communities
Note. Such prepayment will be made without payment of any prepayment
consideration.
If a Sun Communities Default Prepayment occurs, the defaulting Sun
Communities Borrower is required to pay the entire Sun Communities Loan,
including the Sun Communities Prepayment Consideration. A Sun Communities
Default Prepayment means a prepayment of the principal amount of the Sun
Communities Loan after the occurrence of any event of default or an acceleration
of the Sun Communities Maturity Date under any circumstances. The Sun
Communities Prepayment Consideration means an amount equal to the present value
of a series of payments each equal to an amount equal to (a) the Sun Communities
Base Interest Rate minus the Sun Communities Reinvestment Yield, (b) divided by
12, and (c) multiplied by the principal sum due on such prepayment date, and
payable on each monthly payment date through and including the Sun Communities
Anticipated Repayment Date discounted at the Sun Communities Reinvestment Yield
for the number of months remaining from the date of such prepayment to each such
monthly payment date through and including the Sun Communities Anticipated
Repayment Date. The Sun Communities Reinvestment Yield means an amount equal to
the sum of 0.25% and the yield on the U.S. Treasury issue with a maturity date
closest to the Sun Communities Anticipated Repayment Date, with such yield based
on the bid price for such issue as published in the Wall Street Journal on the
date that is 14 days prior to the prepayment date converted to a monthly
compounded nominal yield.
RELEASE IN EXCHANGE FOR SUBSTITUTE COLLATERAL. Provided no event of default
under the Sun Communities loan documents has occurred and is continuing, the Sun
Communities Borrower A is permitted on any Due Date at any time after (A) the
earlier of the second anniversary of the Closing Date or (B) the third
anniversary of the Sun Communities Closing Date to obtain a release of all or a
portion of its respective Sun Communities Property (a "Sun Communities A Release
Property"), provided that, among other conditions, such Sun Communities Borrower
delivers on such Due Date Sun Communities Defeasance Collateral with Sun
Communities Collateral Value sufficient, without consideration of any
reinvestment of interest therefrom, to pay: (i) all amounts then due relating to
Sun Communities Note A, including accrued interest thereon; (ii) an amount equal
to the lesser of (a) the Sun Communities Release Price for each such Sun
Communities Property to be released or (b) the then-aggregate unpaid principal
balance of the Sun Communities Notes after giving effect to all prior
defeasances (such lesser amount, the "Sun Communities A Defeasance Amount"); and
(iii) the portion of the interest that will become due on the
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Sun Communities A Defeasance Amount under the Sun Communities Notes prior to and
including the Sun Communities Anticipated Repayment Date.
Provided no event of default under the Sun Communities Loan documents has
occurred and is continuing, the Sun Communities Borrower B is permitted on any
Due Date at any time after (A) the earlier of the second anniversary of the
Closing Date or (B) the third anniversary of the Sun Communities Closing Date to
obtain a release of the Royal Country Property (a "Sun Communities B Release
Property"), provided that, among other conditions, the Sun Communities Borrower
B delivers on such Due Date Sun Communities Defeasance Collateral with Sun
Communities Collateral Value sufficient, without consideration of any
reinvestment of interest therefrom, to pay: (i) all amounts then due relating to
Sun Communities Note B, including accrued interest thereon; (ii) an amount equal
to the lesser of (a) $19,000,000.00 or (b) the then-aggregate unpaid principal
balance of the Sun Communities Notes after giving effect to all prior
defeasances (such lesser amount, the "Sun Communities B Defeasance Amount"); and
(iii) the portion of the interest that will become due on the Sun Communities B
Defeasance Amount under the Sun Communities Note B prior to and including the
Sun Communities Anticipated Repayment Date.
"Sun Communities Release Price" means the release price for each Sun
Communities Property, as set forth in the Sun Communities Loan documents. "Sun
Communities Defeasance Collateral" means non-callable and non-redeemable
securities evidencing an obligation to timely pay principal and interest in a
full and timely manner that are direct obligations of the United States of
America for the payment of which its full faith and credit is pledged. "Sun
Communities Collateral Value" means as of any date with respect to Sun
Communities Defeasance Collateral delivered to the Master Servicer, the
aggregate amount of payments of principal from such Sun Communities Defeasance
Collateral and the predetermined and certain income therefrom that will be paid
or payable to Master Servicer on or before the Business Day prior to each day on
which payments are due on the obligations in respect of which such Sun
Communities Defeasance Collateral was delivered, without consideration of any
reinvestment of such income.
In addition, such Sun Communities Borrower is required to deliver to the
Master Servicer, among other things: (a) all necessary documents to reflect that
a portion of the Sun Communities Notes has been defeased, (b) an opinion of
counsel for the related Sun Communities Borrower in form satisfactory to the
Master Servicer stating that the Trustee will have a perfected first priority
security interest in the Sun Communities Defeasance Collateral and that the
transfer of the Sun Communities Defeasance Collateral will not adversely affect
the status of either Trust REMIC as a REMIC, (c) confirmation from each of the
Rating Agencies that the defeasance and release of the property will not result
in a withdrawal, downgrade or qualification of the then-existing ratings of the
Certificates, and (d) evidence satisfactory to Master Servicer that the
aggregate Sun Communities DSCR with respect to the Sun Communities Properties
remaining encumbered by the lien of the Sun Communities Mortgage is equal to or
greater than the greater of (1) 2.20X, and (2) the aggregate Sun Communities
DSCR with respect to all of the Sun Communities Properties (including the Sun
Communities Release Property) and the Royal Country Property for the 12 full
calendar months immediately prior to the release of the Sun Communities Release
Property.
"Sun Communities DSCR" means for any Sun Communities Property, the ratio for
the applicable period in which (a) the numerator is the net operating income
(excluding interest on credit accounts) for such period as set forth in the
statements required under the Sun Communities loan documents (adjusted by
subtracting the greater of assumed management fees of 5% of gross income or
actual management fees and replacement reserve payments); and (b) the
denominator is the aggregate amount of principal and interest due and payable on
the Note for such period.
Upon the satisfaction of the foregoing conditions precedent, the applicable
Sun Communities Property will be released from the lien of the Trust Fund.
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CASH COLLATERAL ACCOUNT. All rents and other income with respect to the Sun
Communities Properties are required to be deposited directly by the Sun
Communities Borrower to accounts maintained at financial institutions approved
by the Master Servicer (the "Sun Communities Local Accounts"). The Master
Servicer will be required to sweep the Sun Communities Local Accounts two times
during the first through the tenth day of each month and thereafter not less
than once per week for the remainder of the month or more frequently as
necessary if at any time the balance in the local account exceeds $15,000. All
sums so swept shall be deposited by the Master Servicer into a cash collateral
account (the "Sun Communities Cash Collateral Account"). The Sun Communities
Borrower is required to make such deposits on a daily basis between the first
day of each month and the tenth day of each month and otherwise no less
frequently than two times per week. Provided that no event of default under the
Sun Communities Loan documents shall have occurred and be continuing, the Master
Servicer will cause the funds held in the Sun Communities Cash Collateral
Account to be distributed on a monthly basis in the following order: (a) to fund
the tax and insurance escrow fund, (b) to fund the Sun Communities Monthly Debt
Service Payments, (c) to fund payment of any amounts then due and payable under
the Sun Communities Loan documents, (d) if after the Sun Communities Anticipated
Repayment Date, to fund payments for monthly cash expenses incurred in
accordance with the related approved annual budget, (e) prior to the Sun
Communities Anticipated Repayment Date, to pay any excess amounts to the Sun
Communities Borrower, (f) if on or after the Sun Communities Anticipated
Repayment Date, to pay principal until the outstanding principal balance of the
Sun Communities Loan is reduced to zero, (g) if on or after the Sun Communities
Anticipated Repayment Date, to pay the Sun Communities Excess Interest and (h)
to pay any excess amounts to the Sun Communities Borrower.
RESERVES. The Sun Communities Borrowers have established a tax and
insurance escrow account to be funded monthly generally in an amount equal to
1/12th of the aggregate insurance premiums and taxes in respect of the Sun
Communities Properties payable in the succeeding twelve months. A replacement
reserve escrow, to be funded monthly at a rate of $4.17 per manufactured housing
site, for repairs and maintenance of the Sun Communities Properties will be
required if the senior unsecured debt rating of Sun Communities Operating
Limited Partnership is not maintained at "BBB-" or better by S&P and "Baa3" by
Moody's.
TRANSFER OF PROPERTIES AND INTEREST IN BORROWER. The Sun Communities Loan
generally prohibits, without the consent of the Master Servicer, the transfer of
the Sun Communities Properties, except as described in the following paragraphs
under this heading and above under "--Prepayment," and
"--Release in Exchange for Substitute Collateral".
PERMITTED INDEBTEDNESS. Each Sun Communities Borrower is precluded from
incurring any other indebtedness, without the consent of the Master Servicer,
except for indebtedness which is incurred in the ordinary course of business.
INSURANCE. The Sun Communities Borrowers are required to maintain (a)
comprehensive "all risk" insurance on the improvements and personal property
associated with the Sun Communities Properties in an amount equal to 100% of the
actual replacement value of the applicable property, with a maximum deductible
of $50,000, and which contains an Ordinance or Law Coverage for any properties
that are legal non-conforming uses, (b) flood insurance with respect to any Sun
Communities Properties that are located within a federally designated "special
flood hazard area" and earthquake insurance with respect to any part of the Sun
Communities Properties that is located in an area with a high degree of seismic
activity, (c) commercial general liability insurance against claims for personal
injury, bodily injury, death or property damage occurring upon, in or about any
part of the Sun Communities Properties, (d) business income insurance, providing
coverage for the period until such income either returns to the same level it
was at prior to the loss, or the expiration of 12 months from the date of the
loss, whichever first occurs, (e) at all times during which structural
constructions, repairs or alterations are being made with respect to the
improvements, and only if the property coverage form does not otherwise apply,
(i) owner's contingent
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or protective liability insurance covering claims not covered by or under the
terms or provisions of the general liability insurance policy and (ii)
comprehensive "all risk" insurance written in a "builder's risk completed value"
form, (f) statutory workers compensation insurance, (g) comprehensive boiler and
machinery insurance, if applicable, (h) umbrella liability insurance, (i) motor
vehicle liability coverage for all owned and non-owned vehicles and (j) such
other insurance as is requested by the Master Servicer provided such insurance
is of the kind from time to time commonly insured against for property similar
to the property located in or around the region in which the property is
located.
Any such insurance may be under a blanket policy only if such policy is
approved by the Master Servicer in advance. The Sun Communities Loan requires
the Sun Communities Borrowers to obtain the insurance described above, as
applicable, from insurance carriers having claims paying abilities by each
Rating Agency of not less than one category below the highest rating at any time
assigned to the Certificates. Auto-Owners Insurance Company, the property
insurer for the Sun Communities A Properties, has a claims paying ability rating
of "AAA" by S&P and "A++" by Best's. The Royal Country Property is located
within a special flood hazard area and flood insurance has been obtained with
Auto-Owners Insurance Company. American Modern Home Insurance Company, the
property insurer for the Royal Country Property, has a claims paying ability
rating of "BBq" by S&P. As long as the rating does not fall below "BBq" by S&P,
such policies may remain in effect. In the event such ratings fall below "BBq",
the Sun Communities Borrower B is required to obtain new policies from a carrier
whose rating is no less than "BBq" by S&P, provided, however, that if policies
are then available from a carrier with a higher rating and the insurance
premiums do not exceed the current insurance premiums by more than 10%, the Sun
Communities Borrower B is required to obtain the policies from the highest rated
carrier that meets the above-mentioned criteria. If at any time during the term
of the Sun Communities Loan, the policies become available from a carrier who is
rated "AA" by S&P and the insurance premiums for such policies do not exceed the
insurance premiums for the then existing policies by more than ten percent, the
Sun Communities Borrower B will be required to obtain new policies from such
insurer upon the expiration of the then existing policies.
CONDEMNATION AND CASUALTY. If any of the Sun Communities Properties are
damaged or destroyed, in whole or in part, by fire or other casualty, the
respective Sun Communities Borrower is required under the related Sun
Communities Loan documents to promptly commence the repair and restoration of
the affected Sun Communities Property to as nearly as possible to the condition
that such property was in immediately prior to such fire or other casualty, with
such alterations as may be approved by the Master Servicer (the "Sun Communities
Restoration") and otherwise in accordance with the provisions set forth below.
The related Sun Communities Borrower will be required to pay all costs of such
Sun Communities Restoration whether or not such costs are covered by the
insurance.
The Master Servicer is obligated to make casualty insurance or condemnation
proceeds available for the Sun Communities Restoration of the Sun Communities
Properties if the following conditions, among others, are met: (i) no default
has occurred and is continuing under the Sun Communities loan documents; (ii) in
the case of condemnation proceeds, less than 10% of the land constituting the
property is taken; (iii) the Sun Communities Borrower commences such repair
within 30 days after such damage or destruction; (iv) the Master Servicer is
reasonably satisfied that any operating deficits, including all scheduled
payments under the Sun Communities Notes, with respect to the property will be
covered out of (A) net proceeds of insurance or condemnation, (B) the business
income insurance coverage on the property or (C) by other funds of the Sun
Communities Borrowers; (v) the Master Servicer is satisfied that upon completion
of the Sun Communities Restoration, the aggregate Sun Communities DSCR for the
Sun Communities Properties will be at least 2.00X; (vi) the Sun Communities
Restoration is capable of being completed on the earliest to occur of: (A)
twelve months prior to the Sun Communities Maturity Date, (B) twelve months
after the occurrence of such fire or other casualty or taking, (C) such time as
may be required under applicable zoning law, ordinance, rule or regulation in
order to repair and restore the property; and (vii) the property will be in
compliance with all applicable zoning laws, ordinances, rules and
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regulations, provided that if the property or use thereof was legally
non-conforming prior to such casualty or condemnation, the property and the use
thereof may be legally non-conforming after the Sun Communities Restoration.
All plans and specifications required in connection with the restoration
shall be subject to the prior review and acceptance in all respects by the
Master Servicer and by an independent consulting engineer selected by the Master
Servicer. If at any time the net insurance or condemnation proceeds or the
undisbursed balance thereof shall not, in the reasonable opinion of the Master
Servicer in consultation with the independent consulting engineer, be sufficient
to pay in full the balance of the costs which are estimated by the independent
consulting engineer to be incurred in connection with the completion of the
restoration, the Sun Communities Borrower shall deposit the deficiency with the
Master Servicer before any further disbursement of net insurance or condemnation
proceeds shall be made. Such additional deposit shall be held by the Master
Servicer and shall be disbursed for costs actually incurred in connection with
the restoration on the same conditions applicable to disbursement of net
insurance and condemnation proceeds, as described above, and until so disbursed
shall constitute additional security for the Sun Communities Loan and other
obligations under the Sun Communities Loan documents. Any excess net insurance
or condemnation proceeds and any additional deposit remaining after the
completion of the restoration will be released to the Sun Communities Borrower.
To the extent that the proceeds of any casualty or condemnation are not
required to be made available for the Sun Communities Restoration or released to
the Sun Communities Borrower, the Master Servicer may apply the proceeds to the
payment of the Sun Communities Loan and the other obligations under the Sun
Communities Loan documents. See "--Prepayment" above.
ZONING. The Bedford Hills Property may be legally non-conforming and in the
event of a casualty, may be rebuilt if the restoration does not exceed 60% of
the structure's assessed valuation, exclusive of foundation. The Royal Country
Property may be legally non-conforming and if the infrastructure or amenities
become substantially destroyed, such infrastructure or amenities may be rebuilt
to the same conditions as existed before the casualty, subject to compliance
with an approved plan and subject to compliance with code requirements. The Sun
Communities Loan documents require that the Sun Communities obtain and maintain
all risk insurance containing an "Ordinance or Law Coverage" or "Enforcement"
endorsement for all properties which constitute non-conforming uses, and the Sun
Communities Borrower has obtained the required coverage.
FINANCIAL REPORTING. Each Sun Communities Borrower is required to keep and
maintain adequate books and records in accordance with GAAP. Each Sun
Communities Borrower is required to furnish to the Master Servicer, among other
things, (a) within 60 days after the end of each fiscal quarter, (i) quarterly
operating statements for each Sun Communities Property; (ii) quarterly certified
rent rolls; (iii) quarterly financial statements in the form required by Master
Servicer; (b) within 90 days after the close of each fiscal year, an annual
operating statement of each Sun Communities Property, detailing revenues and
expenses; (c) within 90 days after the close of each fiscal year, an annual
balance sheet profit and loss statement; and (d) at least 15 days prior to the
start of each calendar year, an annual operating and cash budget on a monthly
basis.
THE PROPERTIES. The Sun Communities Properties are manufactured housing
communities that consist of land that is divided into "spaces" or "homesites"
that are leased to home owners. The Sun Community Mortgages encumber real estate
upon which the manufactured homes are situated, but not the manufactured homes
themselves. The manufactured home owner often invests in site-specific
improvements such as carports, steps, fencing, skirts around the base of the
manufactured home, and landscaping. The Sun Communities Manager provides private
roads within the community, common facilities and in many cases, utilities.
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The Sun Communities Properties consist of seven manufactured housing
communities, as described in the following paragraphs:
COUNTRYSIDE VILLAGE. The Countryside Village Property, located on
approximately 120 acres of land in Perry, Michigan, is a manufactured housing
community with 360 developed sites, a clubhouse, pool, playground, laundry and
storage for boats and RVs. The facility was developed in 1967. As of June 30,
1997, the occupancy rate was 97.4%, and the average monthly rental per
manufactured housing site was $270.
SHERMAN OAKS. The Sherman Oaks property, located on approximately 90 acres
of land in Jackson, Michigan, is a manufactured housing community with 366
developed sites, a clubhouse, pool, playground, laundry and storage. The
facility was developed in 1978 and 1994. As of June 30, 1997, the occupancy rate
was 99.2%, and the average monthly rental per manufactured housing site was
$255.
EDWARDSVILLE VILLAGE. The Edwardsville Village Property, located on
approximately 120 acres of land in Edwardsville, Kansas, is a manufactured
housing community with 597 developed sites, an office, playground and storage
for boats and RVs. The facility was developed in 1978. As of June 30, 1997, the
occupancy rate was 93%, and the average monthly rental per manufactured housing
site was $231.
CUTLER ESTATES. The Cutler Estates Property, located on approximately 48
acres of land in Cutlerville, Michigan, is a manufactured housing community with
281 developed sites, an office, pool, playground, laundry and storage. The
facility was developed in 1970. As of June 30, 1997, the occupancy rate was 99%,
and the average monthly rental per manufactured housing site was $290.
BEDFORD HILLS. The Bedford Hills Property, located on approximately 67
acres of land in Battle Creek, Michigan, is a manufactured housing community
with 340 developed sites, a clubhouse, playground and laundry. The facility was
developed in 1960. As of June 30, 1997, the occupancy rate was 96%, and the
average monthly rental per manufactured housing site was $245.
TIMBERBROOK. The Timberbrook Property, located on approximately 103 acres
of land in Bristol, Indiana, is a manufactured housing community with 567
developed sites, a clubhouse, pools, playground and storage. The facility was
developed in 1976, 1993, 1994 and 1995. As of June 30, 1997, the occupancy rate
was 89%, and the average monthly rental per manufactured housing site was $222.
ROYAL COUNTRY. The Royal Country Property, located on approximately 187
acres of land in Miami, Florida, is a manufactured housing community with 864
developed sites, two community centers, three pools, playgrounds and storage.
The facility was developed in 1981 and 1986. As of June 30, 1997, the occupancy
rate was 99.4%, and the average monthly rental per manufactured housing site was
$330.
The 1996 NOI of the Sun Communities Properties ranged from $643,965 to
$2,254,339 and aggregated $6,991,557. The aggregate value of the Sun Communities
Properties has been determined by LB Holdings, based on financial and other
information provided by the Sun Communities Borrower, and on information
prepared on LB Holding's behalf by third parties, to be approximately
$77,200,000.
In connection with the origination of the Sun Communities Loan, an outside
engineering firm was hired to perform a detailed structural inspection of the
common area improvements of each manufactured housing community. These
inspections usually covered, if present, the clubhouse, pool and spas,
maintenance buildings, tennis courts, other common areas, manufactured housing
sites, driveways and roadways.
PROPERTY MANAGEMENT. The Sun Communities Properties are managed by Sun
Communities Operating Limited Partnership (in such capacity, the "Sun
Communities Manager"), pursuant to property
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management agreements dated August 28, 1997 (collectively, the "Sun Communities
Management Agreement") between the Sun Communities Manager and the Sun
Communities Borrowers. The Sun Communities Manager is responsible for the
management of the Sun Communities Properties and the administration of the
leases with respect thereto. Under the Sun Communities Management Agreement, the
Sun Communities Manager is entitled to (a) an annual management fee equal to 5%
of all amounts collected from tenants with respect to each property, including
taxes, insurance, maintenance, telephone and utility charges.
The Sun Communities Management Agreement provides that the Sun Communities
Manager will manage the properties for an initial term of one year beginning
August 28, 1997, and will continue for successive one year periods, unless the
Sun Communities Management Agreement is earlier terminated. The Sun Communities
Management Agreement may be terminated upon, among other things, the mutual
consent of the Sun Communities Borrower and the Sun Communities Manager.
Pursuant to a Manager's Consent and Subordination of Management Agreement
among the Sun Communities Borrower and the Sun Communities Manager (the "Sun
Communities Manager's Subordination"), the Master Servicer will have the right
to terminate the Sun Communities Management Agreement and cause a new property
manager to be engaged upon the occurrence of any of the following events: (1)
the Sun Communities Manager becomes insolvent, (2) either of the following
events of default under the Sun Communities Loan: (A) a monetary default or (B)
any non-monetary default that is continuing, or (3) a default by the Sun
Communities Manager under the Sun Communities Management Agreement beyond the
expiration of notice and cure periods. In addition, the purchaser of all or any
part of the Sun Communities Property at a foreclosure sale has the right to
terminate the Sun Communities Management Agreement within thirty (30) days of
taking possesson of the purchased property.
In addition, pursuant to the Manager's Subordination, the Sun Communities
Manager has also agreed that all fees and all other amounts payable to the Sun
Communities Manager pursuant to the Sun Communities Management Agreement are and
will be, in all respects, subordinate and inferior to the liens and security
interests created by the Sun Communities Loan.
The Sun Communities Manager is controlled by Sun. The Sun Communities
Manager directly manages all of the properties owned by Sun and its subsidiaries
(including the Sun Communities Properties).
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THE POOLING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-Off Date (the "Pooling Agreement"), by and
among the Depositor, the Master Servicer, the Special Servicer, the Trustee and
the Fiscal Agent.
Reference is made to the Prospectus for important information in addition to
that set forth herein regarding the terms of the Pooling Agreement and terms and
conditions of the Offered Certificates. The Depositor will provide to a
prospective or actual holder of an Offered Certificate without charge, upon
written request, a copy (without exhibits) of the Pooling Agreement. Requests
should be addressed to Structured Asset Securities Corporation, 3 World
Financial Center, 200 Vesey Street, New York, New York 10285; Attention: Michael
R. Treanor.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise convey,
assign or cause the assignment of the Mortgage Loans, without recourse, to the
Trustee for the benefit of the holders of Certificates. On or prior to the
Closing Date, the Depositor will cause to be delivered to the Trustee, with
respect to each Mortgage Loan (i) the original Note endorsed without recourse to
the order of the Trustee, as trustee; (ii) the original Mortgage(s) or
counterpart(s) thereof; (iii) the assignment(s) of the Mortgage(s) in recordable
form in favor of the Trustee; (iv) to the extent not contained in the Mortgages,
the original assignment of leases and rents or counterpart thereof; (v) if
applicable, the original assignment of assignment of leases and rents to the
Trustee; (vi) where applicable, a copy of the UCC-1 financing statements, if
any, including UCC-3 assignments; (vii) the original lender's title insurance
policy (or marked commitments to insure); and (viii) originals or copies of
environmental indemnities, collateral assignments of management agreements and
such other loan documents as are in the possession of the Depositor, including
original assignments thereof to the Trustee, unless the Depositor is delayed in
making such delivery by reason of the fact that such documents shall not have
been returned by the appropriate recording office in which case it shall notify
the Trustee in writing of such delay and shall deliver such documents to the
Trustee promptly upon the Depositor's receipt thereof.
The Trustee, or any custodian for the Trustee, will hold such documents in
trust for the benefit of the holders of Certificates. The Trustee is obligated
to review such documents for each Mortgage Loan (in certain cases only to the
extent such documents are identified by the Depositor as being part of the
related mortgage file) within 45 days after the later of delivery or execution
of the Pooling Agreement and report any missing documents or certain types of
defects therein to the Depositor and LB Holdings. The Depositor is itself
required to, or to cause LB Holdings to, supply the missing document or cure the
defect within 90 days or to repurchase the related Mortgage Loan at the
Repurchase Price if the failure to deliver an executed, recorded or undamaged
document, as applicable, has a material adverse effect on the security provided
by the related Mortgaged Property.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling Agreement, the Depositor will make the representations and
warranties set forth on Exhibit B, subject to the exceptions listed on Schedule
1 thereto, to this Prospectus Supplement to the Trustee for the benefit of the
Certificateholders.
The Pooling and Servicing Agreement requires that the Master Servicer, the
Special Servicer or the Trustee notify LB Holdings, the Depositor and each
Rating Agency upon its becoming aware of (a) any breach of any representation or
warranty contained in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (xi), (xii), (xv), (xvi), (xvii), (xviii), (xix), (xx), (xxii), (xxiv),
(xxix) or (xxx) of Exhibit B hereto and (b) any breach of any representation or
warranty contained in clauses (x), (xiii), (xiv), (xxi), (xxiii), (xxv), (xxvi),
(xxvii), (xxviii), (xxxi), (xxxii), (xxxiii), (xxxiv), (xxxv) and (xxxvi) of
Exhibit B hereto that materially and
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adversely affects the value of such Mortgage Loan or the interests of the
holders of the Certificates therein. The Pooling Agreement provides that, with
respect to any such Mortgage Loan, within 90 days after notice from the Master
Servicer, the Special Servicer or the Trustee, the Depositor is required either
(a) to repurchase such Mortgage Loan at an amount equal to (i) the outstanding
principal balance of the Mortgage Loan as of the Due Date as to which a payment
was last made by the borrower (less any P&I Advances previously made on account
of principal), (ii) accrued interest up to the Due Date in the month following
the month in which such repurchase occurs (less P&I Advances previously made on
account of interest), (iii) the amount of any unreimbursed Advances (with
interest thereon) and any unreimbursed servicing compensation (with interest
thereon) and other reimbursable expenses relating to such Mortgage Loan and (iv)
any expenses reasonably incurred or to be incurred by the Master Servicer, the
Special Servicer or the Trustee in respect of the breach or defect giving rise
to the repurchase obligation (such price the "Repurchase Price") or (b) to
promptly cure such breach in all material respects; provided, however, that in
the event that such breach is capable of being cured but not within such 90-day
period and the Depositor has commenced and is diligently proceeding with the
cure of such breach, the Depositor will have an additional 90 days to complete
such cure; provided, further, that with respect to such additional 90-day period
the Depositor shall have delivered an officer's certificate to the Trustee and
the Master Servicer setting forth the reason such breach is capable of being
cured within the initial 90-day period and what actions the Depositor is
pursuing in connection with the cure thereof and stating that the Depositor
anticipates that such breach will be cured within the additional 90-day period;
and, provided, further, that in the event the Depositor fails to cure such
breach within such additional 90-day period, the Repurchase Price shall include
interest on any Advances made in respect of the related Mortgage Loan during
such period.
Notwithstanding the foregoing, upon discovery by the Trustee, the Custodian,
the Special Servicer or the Master Servicer of a breach of a representation or
warranty that causes any Mortgage Loan not to be a "qualified mortgage" within
the meaning of the REMIC provisions of the Code, such person shall give prompt
notice thereof to the Depositor and within 90 days after such discovery, if such
breach cannot be cured within such period, the Depositor shall repurchase such
Mortgage Loan from the Trust Fund at the Repurchase Price.
The obligations of the Depositor to repurchase or cure constitute the sole
remedies available to holders of Certificates or the Trustee for a breach of a
representation or warranty by the Depositor. None of the Underwriter, the Master
Servicer, the Special Servicer nor the Trustee or the Fiscal Agent will be
obligated to purchase a Mortgage Loan if the Depositor defaults on its
obligation to repurchase or cure, and no assurance can be given that the
Depositor will fulfill such obligations. If such obligation is not met, as to a
Mortgage Loan that is not a "qualified mortgage," the Upper-Tier REMIC and
Lower-Tier REMIC may be disqualified.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling Agreement requires each of the Master Servicer and the Special
Servicer to service and administer the Mortgage Loans on behalf of the Trust
Fund in the best interests of and for the benefit of all of the holders of
Certificates (as determined by the Master Servicer or the Special Servicer in
the exercise of its good faith and reasonable judgment) in accordance with
applicable law, the terms of the Pooling Agreement and the Mortgage Loans, and
to the extent not inconsistent with the foregoing, in the same manner in which,
and with the same care, skill and diligence as is normal and usual in its
general mortgage servicing and REO property management activities on behalf of
third parties or on behalf of itself, whichever is higher, with respect to
mortgage loans and REO properties that are comparable to the Mortgaged
Properties, and in each event with a view to the timely collection of all
scheduled payments of principal and interest under the Mortgage Loans or, if a
Mortgage Loan comes into and continues in default and if, in the good faith and
reasonable judgment of the Special Servicer, no satisfactory arrangements can be
made for the collection of the delinquent payments, the maximization of the
recovery on such Mortgage Loan to the Certificateholders (as a collective whole)
on a present value basis (the
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relevant discounting of anticipated collection that will be distributable to
Certificateholders to be performed at the related Net Mortgage Rate), but
without regard to (i) any known relationship that the Master Servicer or the
Special Servicer, or an affiliate of the Master Servicer or the Special
Servicer, as applicable, may have with the borrowers or any other parties to the
Pooling Agreement; (ii) the ownership of any Certificate by the Master Servicer
or the Special Servicer or any affiliate of the Master Servicer or the Special
Servicer, as applicable, (iii) the Master Servicer's or the Special Servicer's
obligation, as applicable, to make Advances; (iv) the right of the Master
Servicer (or any affiliate thereof) or the Special Servicer (or any affiliate
thereof), as the case may be, to receive reimbursement of costs, or the
sufficiency of any compensation for its services under the Pooling Agreement or
with respect to any particular transaction; or (v) the ownership, servicing or
management for others or itself, by the Master Servicer or the Special Servicer
of any other mortgage loans or properties (the "Servicing Standard"). The Master
Servicer and the Special Servicer are permitted, at their own expense, to employ
subservicers, agents or attorneys in performing any of their respective
obligations under the Pooling Agreement. Notwithstanding any subservicing
agreement, the Master Servicer or Special Servicer, as applicable, shall remain
primarily liable to the Trustee and Certificateholders for the servicing and
administering of the Mortgage Loans in accordance with the provisions of the
Pooling Agreement without diminution of such obligation or liability by virtue
of such subservicing agreement. Any subservicing agreement entered into by the
Master Servicer or Special Servicer, as applicable, will provide that it may be
assumed or terminated by the Trustee, or any successor Master Servicer or
Special Servicer if the Trustee or any successor Master Servicer or Special
Servicer, has assumed the duties of the Master Servicer or Special Servicer,
respectively. The Pooling Agreement provides, however, that none of the Master
Servicer, the Special Servicer, or any of their respective directors, officers,
employees or agents shall have any liability to the Trust Fund or the
Certificateholders for taking any action or refraining from taking any action in
good faith, or for errors in judgment. The foregoing provision would not protect
the Master Servicer or the Special Servicer for the breach of its
representations or warranties in the Pooling Agreement, the breach of certain
specified covenants therein or any liability by reason of willful misconduct,
bad faith, fraud or negligence in the performance of its duties or by reason of
its reckless disregard of its obligations or duties under the Pooling Agreement.
The Trustee or any other successor Master Servicer assuming the obligations of
the Master Servicer under the Pooling Agreement will be entitled to the
compensation to which the Master Servicer would have been entitled after the
date of the assumption of the Master Servicer's obligations. If no successor
Master Servicer can be obtained to perform such obligations for such
compensation, additional amounts payable to such successor Master Servicer will
be treated as Realized Losses.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. The duties of the Special Servicer
relate to Specially Serviced Mortgage Loans and to any REO Property. The Pooling
Agreement will define a "Specially Serviced Mortgage Loan" to include any
Mortgage Loan with respect to which: (i) the related borrower has not made two
consecutive Scheduled Payments (and has not cured at least one such delinquency
by the next due date under the related Mortgage Loan); (ii) the Master Servicer,
the Trustee and/or the Fiscal Agent has made four consecutive P&I Advances
(regardless of whether such P&I Advances have been reimbursed); (iii) the
borrower has expressed to the Master Servicer an inability to pay or a hardship
in paying the Mortgage Loan in accordance with its terms; (iv) the Master
Servicer has received notice that the borrower has become the subject of any
bankruptcy, insolvency or similar proceeding, admitted in writing the inability
to pay its debts as they come due or made an assignment for the benefit of
creditors; (v) the Master Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgaged Property securing the
Mortgage Loan; (vi) a default of which the Master Servicer has notice (other
than a failure by the borrower to pay principal or interest) and which
materially and adversely affects the interests of the Certificateholders has
occurred and remained unremedied for the applicable grace period specified in
the Mortgage Loan (or, if no grace period is specified, 60 days); or (vii) in
the opinion of the Master Servicer (consistent with the Servicing Standard) a
default under a Mortgage Loan is imminent and such Mortgage Loan deserves the
attention of the Special Servicer; provided however, that a Mortgage Loan will
cease to be a Specially Serviced Mortgage Loan (a) with respect to the
circumstances described in clauses (i) and
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(ii) above, when the borrower thereunder has brought the Mortgage Loan current
and thereafter made three consecutive full and timely monthly payments,
including pursuant to any workout of the Mortgage Loan, (b) with respect to the
circumstances described in clause (iii), (iv), (v) and (vii) above, when such
circumstances cease to exist in the good faith judgment of the Master Servicer,
or (c) with respect to the circumstances described in clause (vi) above, when
such default is cured; provided, in any case, that at that time no circumstance
exists (as described above) that would cause the Mortgage Loan to continue to be
characterized as a Specially Serviced Mortgage Loan. With respect to any
Specially Serviced Mortgage Loan, the Master Servicer will transfer its
servicing responsibilities to the Special Servicer, but will continue to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), to make certain calculations with respect to such Mortgage Loan and
to make remittances and prepare certain reports to the Certificateholders with
respect to such Mortgage Loan and upon the curing of such events the servicing
of such Mortgage Loan will be returned to the Master Servicer.
The Pooling Agreement requires the Master Servicer or the Special Servicer,
as applicable, to make reasonable efforts to collect all payments called for
under the terms and provisions of the Mortgage Loans consistent with the
Servicing Standard. Consistent with the above, the Master Servicer or the
Special Servicer may, in its discretion, waive any late payment charge or
penalty fee in connection with any delinquent Scheduled Payment with respect to
any Mortgage Loan. For any Mortgage Loan with respect to which, under the terms
of the related loan documents, the mortgagee may, in its discretion, apply
insurance proceeds, condemnation awards or escrowed funds to the prepayment of
such loan prior to the expiration of the related Prepayment Lockout Period, the
Master Servicer or Special Servicer, as applicable, may only require such a
prepayment if the Master Servicer or Special Servicer, as applicable, has
determined in accordance with the Servicing Standard that such prepayment is in
the best interest of all Certificateholders. The Master Servicer and the Special
Servicer will be directed in the Pooling Agreement not to take any enforcement
action other than requests for payment with respect to payment of Excess
Interest or principal in excess of the principal component of the Scheduled
Payment prior to the final maturity date. The Master Servicer will also be
permitted to forgive the payment of Excess Interest under the circumstances
described under "--Realization Upon Mortgage Loans; Modifications" below. With
respect to any defaulted Mortgage Loan, subject to the restrictions set forth
below under "--Realization Upon Mortgage Loans; Modifications," the Special
Servicer will be entitled to pursue any of the remedies set forth in the related
Mortgage, including the right to acquire, through foreclosure, all or any of the
Mortgaged Properties securing such Mortgage Loan. The Special Servicer may elect
to extend a Specially Serviced Mortgage Loan (subject to conditions described
herein) notwithstanding its decision to foreclose on certain of the Mortgaged
Properties.
ADVANCES
The Master Servicer will be obligated to advance, on the Business Day
immediately preceding a Distribution Date (the "Master Servicer Remittance
Date"), an amount (each such amount, a "P&I Advance") equal to the total or any
portion of the Scheduled Payment on a Mortgage Loan (with interest calculated at
the Net Mortgage Rate plus the portion of the Trustee Fee related to such
Mortgage Loan) that was delinquent as of the close of business on the
immediately preceding Due Date (and which delinquent payment has not been cured
as of the Master Servicer Remittance Date), or, with respect to a Mortgage Loan
for which the Special Servicer has elected to extend the payments as described
in "-- Realization Upon Mortgage Loans; Modifications" herein, the amount equal
to the lesser of (a) the related Extended Scheduled Payment or (b) the Scheduled
Payment (in each case with interest calculated at the Net Mortgage Rate plus the
portion of the Trustee Fee related to such Mortgage Loan) that was due prior to
the maturity date; provided, however, that the Master Servicer will not be
required to make a P&I Advance to the extent it determines that such Advance
would not ultimately be recoverable out of related late payments, net insurance
proceeds, net condemnation proceeds, net liquidation proceeds and certain other
collections with respect to such Mortgage Loan as to which such Advances were
made. The Master Servicer will not be required or permitted to make an advance
for Excess Interest, Default Interest,
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Prepayment Premiums or Balloon Payments. The amount required to be advanced by
the Master Servicer with respect to any Distribution Date in respect of
scheduled payments (or Extended Scheduled Payments) on Mortgage Loans that have
been subject to an Appraisal Reduction Event will equal (i) the amount required
to be advanced by the Master Servicer without giving effect to such Appraisal
Reduction Amounts less (ii) an amount equal to the product of (x) the amount
required to be advanced by the Master Servicer in respect to delinquent payments
of interest without giving effect to such Appraisal Reduction Amounts, and (y) a
fraction, the numerator of which is the Appraisal Reduction Amount with respect
to such Mortgage Loan and the denominator of which is the Stated Principal
Balance as of the last day of the related Collection Period. As such term is
used in the Prospectus, the "Determination Date" will be the Master Servicer
Remittance Date.
In the event that the Worldwide Plaza Loan is subject to an Appraisal
Reduction Event, (i) the interest portion of any P&I Advance made with respect
to the Worldwide Plaza Loan will be applied first, to the Worldwide Plaza Fixed
Component A, second, to the Worldwide Plaza LIBOR Component and finally to the
Worldwide Plaza Fixed Component B, and (ii) the principal portion of any P&I
Advance made with respect to the Worldwide Plaza Loan will be applied first, to
the Worldwide Plaza Fixed Component A, to the extent outstanding, second, to the
Worldwide Plaza LIBOR Component, to the extent outstanding, and finally, to the
Worldwide Plaza Fixed Component B.
The Master Servicer will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances," and together with
P&I Advances, "Advances") to pay delinquent real estate taxes, ground lease rent
payments, assessments and hazard insurance premiums and to cover other similar
costs and expenses necessary to preserve the priority of or enforce the related
Mortgage or to maintain such Mortgaged Property. In addition, the Special
Servicer may be obligated to make certain Property Advances with respect to
Specially Serviced Mortgage Loans.
The obligation of the Master Servicer, the Special Servicer, the Trustee or
the Fiscal Agent, as applicable, to make Advances with respect to any Mortgage
Loan pursuant to the Pooling Agreement continues through the foreclosure of such
Mortgage Loan and until the liquidation of the Mortgage Loan or related
Mortgaged Properties. Advances are intended to provide a limited amount of
liquidity, not to guarantee or insure against losses. None of the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent will be required
to make any Advance that it determines in its good faith business judgment will
not be ultimately recoverable by the Master Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, as applicable, out of related late payments, net
insurance proceeds, net condemnation proceeds, net liquidation proceeds and
certain other collections with respect to the Mortgage Loan as to which such
Advances were made. In addition, if the Master Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, determines in its good faith
business judgment that any Advance previously made will not be ultimately
recoverable from the foregoing sources, then the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, will be entitled to be
reimbursed for such Advance, plus interest thereon at the Advance Rate, out of
amounts payable on or in respect of all of the Mortgage Loans prior to
distributions on the Certificates. Any such judgment or determination with
respect to the recoverability of Advances must be evidenced by an officers'
certificate delivered to the Trustee (or in the case of the Trustee or Fiscal
Agent, the Depositor) setting forth such judgment or determination of
nonrecoverability and the procedures and considerations of the Master Servicer,
the Special Servicer, the Trustee or the Fiscal Agent, as applicable, forming
the basis of such determination (including but not limited to information
selected by the Master Servicer or the Special Servicer in its good faith
discretion such as related income and expense statements, rent rolls, occupancy
status, property inspections, inquiries by the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, and an independent
appraisal performed in accordance with MAI standards and methodologies on the
applicable Mortgaged Properties).
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To the extent the Master Servicer or Special Servicer fails to make an
Advance it is required to make under the Pooling Agreement, the Trustee, subject
to a determination of recoverability, will make such required Advance or, in the
event the Trustee fails to make such Advance, the Fiscal Agent, subject to a
determination of recoverability, will make such Advance, in each case pursuant
to the terms of the Pooling Agreement. The Trustee and the Fiscal Agent (or the
Master Servicer with respect to a Property Advance required to be made by the
Special Servicer) will be entitled to rely conclusively on any
non-recoverability determination of the Master Servicer (or the Special
Servicer). See "--Duties of the Trustee" and "--Duties of the Fiscal Agent"
below.
The Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent,
as applicable, will be entitled to reimbursement for any Advance made by it
equal to the amount of such Advance and interest accrued thereon at the Advance
Rate from (i) late payments on the Mortgage Loan by the Mortgagor, (ii)
insurance proceeds, condemnation proceeds or liquidation proceeds from the sale
of the defaulted Mortgage Loan or the related Mortgaged Property or (iii) upon
determining in good faith that such Advance or interest is not recoverable in
the manner described in the preceding two clauses, from any other amounts from
time to time on deposit in the Collection Account.
The Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent
will each be entitled to receive interest on Advances at the Prime Rate (the
"Advance Rate"), compounded monthly, as of each Master Servicer Remittance Date
and the Master Servicer will be authorized to pay itself, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, such interest monthly from
general collections with respect to all of the Mortgage Loans prior to any
payment to holders of Certificates. If the interest on such Advance is not
recovered from Default Interest on such Mortgage Loan, a shortfall will result
which will have the same effect as a Realized Loss. The "Prime Rate" is the
rate, for any day, set forth as such in The Wall Street Journal, New York
edition.
ACCOUNTS
LOCK BOX ACCOUNTS. With respect to each Mortgage Loan other than the
Courtyard Loan, the Arden Loan and the DDR/DRA Loan, one or more accounts in the
name of the mortgagee (the "Lock Box Accounts") have been established into which
rents or other revenues from the related Mortgaged Properties are deposited by
the related tenants or borrower. See "Description of the Mortgage Loans and
Mortgaged Properties." Agreements governing the Lock Box Accounts provide that
the borrower has no withdrawal or transfer rights with respect thereto and that
funds on deposit in the Lock Box Accounts are periodically swept into the
Collection Account with the balance, if any, to be remitted to the related
borrower. With respect to the Arden Loan, upon the occurrence of an Arden Lock
Box Event the Arden Borrower is required to establish a Lock Box Account. Upon
the occurrence of a DDR/DRA Primary Event, the DDR/DRA Borrowers will no longer
have access to the DDR/DRA Operating Account and upon the occurrence of a
DDR/DRA Secondary Event, will no longer be entitled to any such funds, and in
both cases the Master Servicer will make monthly allocations as described in
"Description of the Mortgage Loans and Mortgaged Properties--The DDR/DRA Loan
and Properties--The Loan--Operating Accounts" herein. Upon the occurrence of
certain triggering events, including a decrease in the long term debt rating of
MII, the Courtyard Borrower is required to establish a Lock Box Account. The
Lock Box Accounts will not be assets of the REMICs.
COLLECTION ACCOUNT. On each Due Date, the Master Servicer will be required
to withdraw from each Lock Box Account an amount equal to the Scheduled Payment
on the related Mortgage Loan and deposit such amount into a segregated account
(the "Collection Account") established pursuant to the Pooling Agreement for
application towards the Scheduled Payment due on the related Mortgage Loan. With
respect to the Courtyard Loan, Arden Loan and DDR/DRA Loan, to the extent the
borrowers thereunder are not required to maintain a Lock Box Account, the Master
Servicer will direct such borrower to pay their Scheduled Payments on each Due
Date directly into the Collection Account. Any excess funds in the Lock Box
Accounts over the amount necessary to fund the Scheduled Payment, the Reserve
Accounts and
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any other amounts due under the Mortgage Loans will be returned to or retained
by the related borrower, provided no event of default of which the Master
Servicer is aware has occurred and is continuing with respect to such Mortgage
Loan. However, after the Anticipated Repayment Date for a Mortgage Loan, all
amounts in the related Lock Box Account in excess of the amount necessary to
fund the Scheduled Payment and Reserve Accounts will be applied to (i) operating
and capital expenses (except to the extent such expenses will be met through
disbursements from the Reserve Accounts), (ii) the reduction of the principal
balance of the related Mortgage Loan until such principal is paid in full and
(iii) if applicable, Excess Interest, in that order and the Master Servicer will
be required to withdraw the amounts referred to in clauses (ii) and (iii) above
from the Lock Box Accounts and deposit them into the Collection Account on each
Due Date. The Master Servicer shall also deposit into the Collection Account
within one Business Day of receipt all other payments in respect of the Mortgage
Loans, other than amounts deposited into any Reserve Account.
DISTRIBUTION ACCOUNTS. The Trustee will establish and maintain two
segregated accounts (the "Lower-Tier Distribution Account" and the "Upper-Tier
Distribution Account") in the name of the Trustee for the benefit of the holders
of Certificates entitled to distributions therefrom. With respect to each
Distribution Date, the Master Servicer will disburse from the Collection Account
and deposit into the Lower-Tier Distribution Account, to the extent of funds on
deposit in the Collection Account, on the Master Servicer Remittance Date an
aggregate amount of immediately available funds equal to the sum of (i) the
Available Funds, and (ii) the portion of the Servicing Compensation representing
the Trustee Fee. In addition, the Master Servicer will deposit all P&I Advances
into the Lower-Tier Distribution Account on the related Master Servicer
Remittance Date. To the extent the Master Servicer fails to do so, the Trustee
or the Fiscal Agent will deposit all P&I Advances into the Lower-Tier
Distribution Account as described herein. On each Distribution Date, the Trustee
will withdraw amounts distributable on such date on the Regular Certificates and
on the Class R Certificates (which are expected to be zero) from the Lower-Tier
Distribution Account and deposit such amounts in the Upper-Tier Distribution
Account. See "Description of the Offered Certificates--Distributions" herein.
INTEREST RESERVE ACCOUNT. The Trustee will establish and maintain an
"Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. On each Master Servicer Remittance Date occurring
in February and on any Master Servicer Remittance Date occurring in any January
which occurs in a year that is not a leap year, the Master Servicer will be
required to deposit, in respect of the DDR/DRA Loan, the Prentiss Loan, the
Arden Loan, the Villa Marina Loan and the Sun Communities Loan, an amount equal
to one day's interest at the related Mortgage Rate on the respective Stated
Principal Balance, as of the Due Date in the month preceding the month in which
such Master Servicer Remittance Date occurs, to the extent a Scheduled Payment
or P&I Advance is made in respect thereof (all amounts so deposited in any
consecutive January (if applicable) and February, "Withheld Amounts"). On each
Master Servicer Remittance Date occurring in March, the Master Servicer will be
required to direct the Trustee to withdraw from the Interest Reserve Account an
amount equal to the Withheld Amounts from the preceding January (if applicable)
and February, if any, and deposit such amount into the Lower-Tier Distribution
Account.
The Trustee will also establish and maintain one or more segregated accounts
for the "Excess Interest Distribution Account" in the name of the Trustee for
the benefit of the Certificateholders entitled to distributions therefrom and
the "Class T Distribution Account" in the name of the Trustee for the benefit of
the holders of the Class T Certificates.
The Collection Account, the Lower-Tier Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account, the Excess Interest
Distribution Account and the Class T Distribution Account will be held in the
name of the Trustee (or the Master Servicer on behalf of the Trustee) on behalf
of the holders of Certificates and the Master Servicer will be authorized to
make withdrawals from the Collection Account and the Interest Reserve Account.
Each of the Collection Account, any REO Account, the Lower-Tier Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account,
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any escrow account, the Excess Interest Distribution Account and the Class T
Distribution Account will be either (i) (A) an account maintained with either a
federal or state chartered depository institution or trust company the long term
unsecured debt obligations (or short-term unsecured debt obligations if the
account holds funds for less than 30 days) or commercial paper of which are
rated by each of the Rating Agencies no less than one rating category less than
the rating of the highest-rated Class of Certificates, but in no event less than
"A" or (B) as to which the Master Servicer or the Trustee, as applicable, has
received written confirmation from each of the Rating Agencies which rates such
depository institution in a rating category lower than that required by clause
(A), that holding funds in such account would not cause any Rating Agency to
qualify, withdraw or downgrade any of its ratings on the Certificates, or (ii) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity (an "Eligible Bank"). Amounts on deposit in the Collection Account, the
Interest Reserve Account and any REO Account may be invested in certain United
States government securities and other high-quality investments specified in the
Pooling Agreement ("Permitted Investments"). Interest or other income earned on
funds in the Collection Account will be paid to the Master Servicer as
additional servicing compensation and interest or other income earned on funds
in any REO Account will be payable to the Special Servicer. Interest or other
income earned on funds in the Interest Reserve Account will be deposited into
the Collection Account.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling Agreement: (i) to remit on or before each Master Servicer Remittance
Date (A) to the Lower-Tier Distribution Account an amount equal to the sum of
(I) Available Funds and any Prepayment Premiums and (II) the Trustee Fee for
such Distribution Date, (B) to the Class T Distribution Account an amount equal
to the Net Default Interest received in the related Collection Period, if any,
(C) to the Excess Interest Distribution Account an amount equal to the Excess
Interest received in the related Collection Period, if any, and (D) to the
Interest Reserve Account an amount required to be withheld as described above
under "--Accounts--Interest Reserve Account"; (ii) to pay or reimburse the
Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, pursuant to the terms of the Pooling Agreement for Advances made by
any of them and interest on Advances, the Master Servicer's, the Trustee's or
the Fiscal Agent's right, as applicable, to reimbursement for items described in
this clause (ii) being limited as described above under "--Advances"; (iii) to
pay on or before each Master Servicer Remittance Date to the Master Servicer and
the Special Servicer as compensation, the aggregate unpaid Servicing
Compensation (not including the portion of the Servicing Compensation
representing the Trustee Fee) in respect of the immediately preceding Interest
Accrual Period; (iv) to pay on or before each Distribution Date to any person
with respect to each Mortgage Loan or REO Property that has previously been
purchased or repurchased by such person pursuant to the Pooling Agreement, all
amounts received thereon during the related Collection Period and subsequent to
the date as of which the amount required to effect such purchase or repurchase
was determined; (v) to the extent not reimbursed or paid pursuant to any of the
above clauses, to reimburse or pay the Master Servicer, the Special Servicer,
the Trustee, the Fiscal Agent and/or the Depositor for unpaid Servicing
Compensation (in the case of the Master Servicer, the Special Servicer or the
Trustee), and certain other unreimbursed expenses incurred by such person
pursuant to and to the extent reimbursable under the Pooling Agreement and to
satisfy any indemnification obligations of the Trust Fund under the Pooling
Agreement; (vi) to pay to the Trustee amounts requested by it to pay any taxes
imposed on the Upper-Tier REMIC or the Lower-Tier REMIC; (vii) to withdraw any
amount deposited into the Collection Account that was not required to be
deposited therein; and (viii) to clear and terminate the Collection Account
pursuant to a plan for termination and liquidation of the Trust Fund.
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SUCCESSOR MANAGER
With respect to each Mortgage Loan, the Master Servicer or the Special
Servicer, as applicable, will enforce the Trustee's rights with respect to the
manager under the related Mortgage Loan and management agreement. In the event
the Master Servicer or the Special Servicer is entitled itself to terminate, or
to cause the related borrower to terminate, the manager under the Mortgage Loan,
the Master Servicer or the Special Servicer, as the case may be, will promptly
give notice of its right to terminate the manager to the Trustee (who will copy
the holders of Certificates and the Rating Agencies). The most subordinate Class
of Certificates then outstanding (provided, however, that for purposes of
determining the most subordinate Class, in the event that the Class A-1, Class
A-2 and Class A-3 Certificates are the only Classes outstanding (other than any
Class X-1 Certificates), the Class A-1, Class A-2 and Class A-3 Certificates and
the Class X-1 Certificates together will be treated as the most subordinate
Class of Certificates) will have the right to recommend termination of the
manager, and if so, to recommend a Successor Manager (as defined below). Holders
of Certificates representing Voting Rights of greater than 50% of such
subordinate Class of Certificates will have ten Business Days from the receipt
of such notice to respond to such notice. Upon receipt of a recommendation to
terminate the manager and appoint a Successor Manager, the Master Servicer or
the Special Servicer, as the case may be, will give notice of such
recommendation to the Trustee (who will copy the holders of Certificates) and
effect such recommendation unless: (i) within five business days of the receipt
of notice of such recommendation holders of Certificates representing Voting
Rights of greater than 50% of any Class of Certificates which is assigned a
rating by any Rating Agency on the Closing Date reject such proposed Successor
Manager; or (ii) the Master Servicer or the Special Servicer, as the case may
be, determines that effecting such recommendation to terminate is not consistent
with the Servicing Standard and therefore the Master Servicer or Special
Servicer elects not to effect such recommendation. If the Master Servicer or the
Special Servicer, as the case may be, does not receive a required response (or
if the response received is inconsistent) and the Master Servicer or the Special
Servicer, as the case may be, determines it is consistent with the Servicing
Standard to terminate the manager or in the event the manager is otherwise
terminated or resigns under the related Mortgage or management agreement, the
Master Servicer or the Special Servicer, as applicable, shall use its best
efforts, or if applicable cause the related borrower, to retain a Successor
Manager (or the recommended Successor Manager, if any) on terms substantially
similar to the existing management agreement or, failing that, on terms as
favorable to the Trust Fund as can reasonably be obtained. For purposes of this
paragraph, a "Successor Manager" shall be reasonably acceptable to the Master
Servicer or the Special Servicer, as applicable, shall not cause a
qualification, withdrawal or downgrading of any of the ratings assigned to the
Certificates by the Rating Agencies, as evidenced in writing, and shall be a
professional management corporation or business entity which manages, and is
experienced in managing, other comparable commercial properties and meets any
criteria in the related loan documents.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgage Loans and Mortgaged Properties"), the Mortgage
Loans contain provisions in the nature of "due-on-sale" clauses, which by their
terms (a) provide that the Mortgage Loans shall, at the mortgagee's option,
become due and payable upon the sale or other transfer of an interest in the
related Mortgaged Property or (b) provide that the Mortgage Loans may not be
assumed without the consent of the related mortgagee in connection with any such
sale or other transfer. The Master Servicer or the Special Servicer, with
respect to Specially Serviced Mortgage Loans, will not be required to enforce
such due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an assumption
if (x) such provision is not exercisable under applicable law or such provision
is reasonably likely to result in meritorious legal action by the borrower or
(y) the Master Servicer or the Special Servicer, as applicable, determines, in
accordance with the Servicing Standard, that granting such consent would be
likely to result in a greater recovery, on a present value basis (discounting at
the related Mortgage Rate), than would enforcement of such clause. If the Master
Servicer or the
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Special Servicer, as applicable, determines that granting such consent would be
likely to result in a greater recovery, the Master Servicer or the Special
Servicer, as applicable, is authorized to take or enter into an assumption
agreement from or with the proposed transferee as obligor thereon, provided that
(a) the proposed transfer is in compliance with the terms of the related
Mortgage and (b) the Master Servicer or the Special Servicer, as applicable, has
received written confirmation from each Rating Agency that such assumption or
substitution would not, in and of itself, cause a downgrade, qualification or
withdrawal of any of the then current ratings assigned to the Certificates.
Subject to certain exceptions in the case of certain of the Mortgage Loans
(see "Description of the Mortgage Loans and Mortgaged Properties"), the Mortgage
Loans contain provisions in the nature of a "due-on-encumbrance" clause which by
their terms (a) provide that the Mortgage Loans shall, at the mortgagee's
option, become due and payable upon the creation of any lien or other
encumbrance on the related Mortgaged Property, or (b) require the consent of the
related mortgagee to the creation of any such lien or other encumbrance on the
related Mortgaged Property. The Master Servicer or the Special Servicer, as
applicable, will not be required to enforce such due-on-encumbrance clauses and
in connection therewith will not be required to (i) accelerate payments thereon
or (ii) withhold its consent to such lien or encumbrance if the Master Servicer
or the Special Servicer, as applicable, (x) determines, in accordance with the
Servicing Standard, that such enforcement would not be in the best interests of
the Trust Fund and (y) receives prior written confirmation from each Rating
Agency that granting such consent would not, in and of itself, cause a
downgrade, qualification or withdrawal of any of the then current ratings
assigned to the Certificates.
See "Certain Legal Aspects of Mortgage Loans--Due On-Sale Clauses in
Mortgage Loans" and "--Secondary Financing; Due-on Encumbrance Provisions" in
the Prospectus.
INSPECTIONS
The Master Servicer (or with respect to any Specially Serviced Mortgage
Loan, the Special Servicer) is required to inspect or cause to be inspected each
Mortgaged Property at such times and in such manner as are consistent with the
Servicing Standards, but in any event (i) the Master Servicer is required to
inspect each Mortgaged Property with an Allocated Loan Amount of (a) $5,000,000
or more at least once every 12 months and (b) less than $5,000,000 at least once
every 24 months, in each case commencing in September 1998 (or at such other
times, provided each Rating Agency has confirmed in writing to the Master
Servicer that such schedule will not result in the withdrawal, downgrading or
qualification of the then current ratings assigned to the Certificates) and (ii)
if the Mortgage Loan (a) becomes a Specially Serviced Mortgage Loan, (b) is
delinquent for 60 days or (c) has a debt service coverage ratio of less than
1.0, the Master Servicer (or with respect to Specially Serviced Mortgage Loans,
the Special Servicer) is required to inspect the related Mortgaged Properties as
soon as practicable and thereafter at least every twelve months until such
condition ceases to exist. The cost of any such inspection shall be borne by the
Master Servicer unless the related Mortgage Loan is a Specially Serviced
Mortgage Loan, in which case such cost will be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement requires that each of the Master Servicer and the
Special Servicer cause a nationally recognized firm of independent public
accountants (which may render other services to the Master Servicer), which is a
member of the American Institute of Certified Public Accountants, to furnish to
the Trustee on or before April 15 of each year, beginning April 15, 1998, a
report which expresses an opinion to the effect that on the basis of an
examination of certain documents and records relating to servicing of the
Mortgage Loans, conducted in accordance with generally accepted accounting
principles in the mortgage banking industry, the Master Servicer's and the
Special Servicer's, if applicable, duties have been conducted in compliance with
the provisions of the Pooling Agreement, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other exceptions as are set forth
in such statement.
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The Pooling Agreement also requires each of the Master Servicer and the
Special Servicer to deliver to the Trustee, on or before April 15 of each year,
beginning April 15, 1998, an officers' certificate of the Master Servicer or the
Special Servicer, as the case may be, stating that, to the best of each such
officer's knowledge (i) a review of the activities of the Master Servicer or the
Special Servicer, as applicable, during the preceding calendar year and of
performance under the Pooling Agreement has been made under the supervision of
such officer and (ii) the Master Servicer and the Special Servicer, as
applicable, has fulfilled all its obligations under the Pooling Agreement
throughout such year, and, to the best of such officer's knowledge, based on
such review, the Master Servicer, or Special Servicer, as applicable, has
fulfilled its obligations under the Pooling Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL
SERVICER
Each of the Master Servicer and Special Servicer may assign its rights and
delegate its duties and obligations under the Pooling Agreement, provided that
certain conditions are satisfied including obtaining the consent of the
Depositor, the Trustee and written confirmation of each of the Rating Agencies
that such assignment or delegation will not cause a qualification, withdrawal or
downgrading of the then current ratings assigned to the Certificates. The
Pooling Agreement provides that the Master Servicer or Special Servicer, as the
case may be, may not otherwise resign from its obligations and duties as Master
Servicer or Special Servicer, as the case may be, thereunder, except upon the
determination that performance of its duties is no longer permissible under
applicable law and provided that such determination is evidenced by an opinion
of counsel delivered to the Trustee. No such resignation may become effective
until a successor Master Servicer or Special Servicer has assumed the
obligations of the Master Servicer or the Special Servicer under the Pooling
Agreement. The Trustee or any other successor Master Servicer or Special
Servicer assuming the obligations of the Master Servicer or the Special Servicer
under the Pooling Agreement will be entitled to the compensation to which the
Master Servicer or the Special Servicer would have been entitled. If no
successor Master Servicer or Special Servicer can be obtained to perform such
obligations for such compensation, additional amounts payable to such successor
Master Servicer or Special Servicer will be treated as Realized Losses.
The Pooling Agreement also provides that none of the Depositor, the Master
Servicer, the Special Servicer, nor any director, officer, employee or agent of
the Depositor, the Master Servicer or the Special Servicer will be under any
liability to the Trust Fund or the holders of Certificates for any action taken
or for refraining from the taking of any action in good faith pursuant to the
Pooling Agreement, or for errors in judgment; provided, however, that neither
the Depositor, the Master Servicer, the Special Servicer nor any such person
will be protected against any liability which would otherwise be imposed by
reason of (i) any breach of warranty or representation, or other representation
or specific liability provided in the Pooling Agreement, or (ii) any willful
misconduct, bad faith, fraud or negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations or duties
thereunder. The Pooling Agreement further provides that the Depositor, the
Master Servicer, the Special Servicer and any director, officer, employee or
agent of the Depositor, the Master Servicer or the Special Servicer will be
entitled to indemnification by the Trust Fund for any loss, liability or expense
incurred in connection with or relating to the Pooling Agreement or the
Certificates, other than any loss, liability or expense (i) incurred by reason
of willful misconduct, bad faith, fraud or negligence in the performance of
duties thereunder or by reason of reckless disregard of obligations and duties
thereunder, in each case by the person being indemnified; (ii) imposed by any
taxing authority if such loss, liability or expense is not specifically
reimbursable pursuant to the terms of the Pooling Agreement, or (iii) with
respect to any such party, resulting from the breach by such party of any of its
representations or warranties contained in the Pooling Agreement.
In addition, the Pooling Agreement provides that none of the Depositor, the
Master Servicer, nor the Special Servicer will be under any obligation to appear
in, prosecute or defend any legal action unless such
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action is related to its duties under the Pooling Agreement and which in its
opinion does not expose it to any expense or liability. The Depositor, the
Master Servicer or the Special Servicer may, however, in its discretion
undertake any such action which it may deem necessary or desirable with respect
to the Pooling Agreement and the rights and duties of the parties thereto and
the interests of the holders of Certificates thereunder. In such event, the
legal expenses and costs of such action and any liability resulting therefrom
will be expenses, costs and liabilities of the Trust Fund, and the Depositor,
the Master Servicer and the Special Servicer will be entitled to be reimbursed
therefor from the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Master Servicer, the Special Servicer or the Trustee under the Pooling
Agreement. The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer or the Special Servicer under the Pooling Agreement and
may, but is not obligated to, perform or cause a designee to perform any
defaulted obligation of the Master Servicer or the Special Servicer or exercise
any right of the Master Servicer or the Special Servicer under the Pooling
Agreement. In the event the Depositor undertakes any such action, it will be
reimbursed and indemnified by the Trust Fund in accordance with the standard set
forth above. Any such action by the Depositor will not relieve the Master
Servicer or the Special Servicer of its obligations under the Pooling Agreement.
Any person into which the Depositor or the Master Servicer may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the Depositor or the Master Servicer is a party, or any person succeeding to the
business of the Depositor or the Master Servicer, will be the successor of the
Depositor or the Master Servicer, as the case may be, under the Pooling
Agreement, and shall be deemed to have assumed all of the liabilities and
obligations of the Depositor or the Master Servicer under the Pooling Agreement.
EVENTS OF DEFAULT
Events of default of the Master Servicer (each, with respect to the Master
Servicer, an "Event of Default") under the Pooling Agreement consist, among
other things, of (i) any failure by the Master Servicer to remit to the
Collection Account or any failure by the Master Servicer to remit to the Trustee
for deposit into the Upper-Tier Distribution Account, Lower-Tier Distribution
Account, Interest Reserve Account, Excess Interest Distribution Account, Class T
Distribution Account any amount required to be so remitted at the time required
to be remitted pursuant to the Pooling Agreement; or (ii) any failure by the
Master Servicer duly to observe or perform in any material respect any of its
other covenants or agreements or the material breach of its representations or
warranties under the Pooling Agreement which continues unremedied for thirty
(30) days, or ten (10) days in the case of a failure to maintain any insurance
policy required to be maintained pursuant to the Pooling Agreement, after the
giving of written notice of such failure to the Master Servicer by the Depositor
or the Trustee, or to the Master Servicer and to the Depositor and the Trustee
by the holders of Certificates evidencing Percentage Interests of at least 25%
of any affected Class and if such default is not capable of being cured within
such 30-day period or 10-day period, as applicable, and the Master Servicer is
diligently pursuing such cure, the Master Servicer shall be entitled to an
additional 30-day period or (iii) any failure by the Master Servicer to make any
Advances as required pursuant to the Pooling Agreement; or (iv) confirmation in
writing by any Rating Agency that not terminating the Master Servicer would, in
and of itself, cause the then-current rating assigned to any Class of
Certificates to be qualified, withdrawn or downgraded; or (v) certain events of
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Master Servicer indicating its insolvency or inability to pay its
obligations.
Events of default of the Special Servicer (each, with respect to the Special
Servicer, an "Event of Default") under the Pooling Agreement consist, among
other things, of (i) any failure by the Special Servicer to remit to the
Collection Account any amount so required under the Pooling Agreement; or (ii)
any failure by the Special Servicer duly to observe or perform in any material
respect any of its other
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covenants or agreements, or the material breach of its representations or
warranties under the Pooling Agreement which continues unremedied for a period
of 30 days after the giving of written notice of such failure to the Special
Servicer by the Master Servicer, the Depositor or the Trustee, or to the Special
Servicer, the Master Servicer, the Depositor and the Trustee by the holders of
Certificates evidencing Percentage Interests of at least 25% of any affected
Class; or (iii) confirmation in writing by any Rating Agency that not
terminating the Special Servicer would, in and of itself, cause the then-current
rating assigned to any Class of Certificates to be qualified, withdrawn or
downgraded; or (iv) certain events of bankruptcy, insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings and certain
actions by, on behalf of or against the Special Servicer indicating its
insolvency or inability to pay its obligations.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Master Servicer (acting as Master
Servicer or Special Servicer) occurs, then the Trustee may, and at the direction
of the holders of Certificates evidencing at least 25% of the aggregate Voting
Rights of all Certificateholders, the Trustee will, terminate all of the rights
and obligations of the Master Servicer as Master Servicer under the Pooling
Agreement and in and to the Trust Fund. If an Event of Default with respect to
the Master Servicer (acting as Master Servicer or Special Servicer) described in
clause (v) in the second preceding paragraph occurs, the rights and obligations
of the Master Servicer under the Pooling Agreement shall automatically
terminate. Notwithstanding the foregoing, upon any termination of the Master
Servicer under the Pooling Agreement, the Master Servicer will continue to be
entitled to receive all accrued and unpaid servicing compensation through the
date of termination plus reimbursement for all Advances and interest on such
Advances as provided in the Pooling Agreement. In the event that the Master
Servicer is also the Special Servicer and the Master Servicer is terminated, the
Master Servicer will also be terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Master Servicer, the Trustee will succeed to all authority and power of the
Master Servicer (and the Special Servicer if the Special Servicer is also the
Master Servicer) under the Pooling Agreement and will be entitled to the
compensation arrangements to which the Master Servicer (and the Special Servicer
if the Special Servicer is also the Master Servicer) would have been entitled.
If the Trustee is unwilling or unable so to act, or if the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders so request, or if the long-term unsecured debt rating of the
Trustee or the Fiscal Agent is not at least "AA" by S&P and DCR and "Aa2" by
Moody's or if the Rating Agencies do not provide written confirmation that the
succession of the Trustee as Master Servicer or Special Servicer, will not cause
a qualification, withdrawal or downgrading of the then current ratings assigned
to the Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution with
a net worth of at least $15,000,000, the appointment of which will not result in
the downgrading, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates as evidenced in writing by each Rating
Agency to act as successor to the Master Servicer or Special Servicer under the
Pooling Agreement. Pending such appointment, the Trustee is obligated to act in
such capacity. The Trustee and any such successor may agree upon the servicing
compensation to be paid. If the compensation payable to such successor exceeds
that to which the predecessor Master Servicer was entitled, the additional
servicing compensation will be allocated to the Certificates in the same manner
as Realized Losses.
If the Special Servicer is not the Master Servicer and an Event of Default
with respect to the Special Servicer occurs, the Trustee may, and at the
direction of the holders of at least 25% of the aggregate Voting Rights of all
Certificateholders, the Trustee will, terminate the Special Servicer and the
Trustee will succeed to all the power and authority of the Special Servicer
under the Pooling Agreement, unless such termination and succession would result
in the downgrading, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates, as evidenced in writing by each Rating
Agency, in
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which case, a successor Special Servicer shall be appointed in accordance with
the Pooling Agreement, provided that each Rating Agency shall have confirmed in
writing that the appointment of such successor Special Servicer will not result
in a downgrade, qualification or withdrawal of the then current ratings assigned
to any Class of Certificates. The Trustee or other successor Special Servicer
which succeeds to the power and authority of the Special Servicer will be
entitled to the compensation to which the Special Servicer would have been
entitled.
No Certificateholder will have any right under the Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement or the Mortgage
Loans, unless, with respect to the Pooling Agreement, such holder previously
shall have given to the Trustee a written notice of a default under the Pooling
Agreement, and of the continuance thereof, and unless also the holders of
Certificates of each Class affected thereby evidencing Percentage Interests of
at least 25% of such Class shall have made written request of the Trustee to
institute such proceeding in its own name as Trustee under the Pooling Agreement
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute such
proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling Agreement or to institute, conduct or defend any
litigation thereunder or in relation thereto at the request, order or direction
of any of the holders of Certificates, unless such holders of Certificates shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
The Pooling Agreement may be amended at any time by the Depositor, the
Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent without
the consent of any of the holders of Certificates (i) to cure any ambiguity;
(ii) to correct or supplement any provisions therein which may be defective or
inconsistent with any other provisions therein; (iii) to amend any provision
thereof to the extent necessary or desirable to maintain the status of each of
the Upper-Tier REMIC and Lower-Tier REMIC as a REMIC, or to prevent the
imposition of any material state or local taxes; (iv) to amend or supplement a
provision which will not adversely affect in any material respect the interests
of any Certificateholder not consenting thereto, as evidenced in writing by an
opinion of counsel or confirmation in writing from each Rating Agency that such
amendment will not result in a qualification, withdrawal or downgrading of the
then current ratings assigned to the Certificates; (v) to amend or supplement
any provisions therein to the extent necessary or desirable to maintain the
rating assigned to each of the Classes of Certificates by each Rating Agency;
and (vi) to make any other provisions with respect to matters which are not
inconsistent with any other provisions therein and will not result in a
qualification withdrawal or downgrading of the then current ratings assigned to
the Certificates. The Pooling Agreement provides that no such amendment shall
cause the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a
REMIC.
The Pooling Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent with the consent of the holders of Certificates evidencing at least 66
2/3% of the Percentage Interests of each Class of Certificates affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling Agreement or modifying in any
manner the rights of the holders of Certificates; provided, however, that no
such amendment may (i) reduce in any manner the amount of, or delay the timing
of, payments received on the Mortgage Loans which are required to be distributed
on any Certificate; (ii) alter the obligations of the Master Servicer, the
Special Servicer, the Trustee or the Fiscal Agent to make a P&I Advance or
Property Advance or alter the servicing standards set forth in the Pooling
Agreement; (iii) change the percentages of Voting Rights of holders of
Certificates which are required to consent to any action or inaction under the
Pooling Agreement; or (iv) amend the section in the Pooling
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Agreement relating to the amendment of the Pooling Agreement, in each case
without the consent of the holders of all Certificates representing all the
Percentage Interests of the Class or Classes affected thereby.
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class T, Class R and Class LR Certificates, (b) 1% in the case of the Class
X-1 Certificates and 0% in the case of the Class X-2 Certificates, provided that
the Voting Rights of the Class X-1 and Class X-2 Certificates will be reduced to
zero upon the reduction of the Notional Amount of such Class to zero; (the sum
of such percentages for each such Class outstanding is the "Fixed Voting Rights
Percentage"), (c) in the case of the P&I Certificates, a percentage equal to the
product of (i) 100% minus the Fixed Voting Rights Percentage multiplied by (ii)
a fraction, the numerator of which is equal to the aggregate outstanding
Certificate Principal Amount of any such Class (which will be reduced for this
purpose by the amount of any Appraisal Reduction Amounts notionally allocated to
such Class, if applicable) and the denominator of which is equal to the
aggregate outstanding Certificate Principal Amounts of all Classes of
Certificates. The Voting Rights of any Class of Certificates shall be allocated
among holders of Certificates of such Class in proportion to their respective
Percentage Interests.
REALIZATION UPON MORTGAGE LOANS; MODIFICATIONS
SPECIALLY SERVICED MORTGAGE LOANS; APPRAISALS; EXTENSIONS. Within 30 days
following with the occurrence of an Appraisal Reduction Event, the Master
Servicer will be required to obtain an appraisal of the Mortgaged Property or
REO Property, as the case may be, from an independent appraiser in accordance
with MAI standards (an "Updated Appraisal"); provided, however, that the Master
Servicer will not be required to obtain an Updated Appraisal of any Mortgaged
Property with respect to which there exists an appraisal which is less than
twelve months old. The cost of any Updated Appraisal shall be a Property Advance
to be paid by the Master Servicer.
Following a default in the payment of any principal balance and accrued
interest remaining unpaid on the maturity date of a Mortgage Loan, the Special
Servicer may either foreclose or elect to grant up to two consecutive one-year
extensions of the Specially Serviced Mortgage Loan; provided that the Special
Servicer may only extend such Mortgage Loan if (i) immediately prior to the
default on the maturity date (or the first anniversary thereof in the case of
the second extension), the related borrower had made twelve consecutive
Scheduled Payments (or Extended Scheduled Payments in the case of the second
extension) on or prior to their Due Dates, (ii) the Special Servicer determines
that (A) extension of such Mortgage Loan is consistent with the servicing
standard described herein and (B) extension of such Mortgage Loan is likely to
result in a recovery which on a net present value basis would be greater than
the recovery that would result from a foreclosure, such determination to be
evidenced by an officer's certificate delivered to the Rating Agencies and
accompanied by all supporting documentation, (iii) such extension requires that
all cash flow on all related Mortgaged Properties in excess of amounts required
to operate and maintain such Mortgaged Properties be applied to payments of
principal and interest on such Mortgage Loan, (iv) the Special Servicer
terminates the related manager unless the Special Servicer determines that
retaining such manager is conducive to maintaining the value of such Mortgaged
Properties and (v) such extension requires the related borrower to make Extended
Scheduled Payments. The Special Servicer's determination to extend shall be
based on an Updated Appraisal.
The Special Servicer will not agree to any extension of a Mortgage Loan
beyond the date that is two years prior to the Rated Final Distribution Date or,
in the case of a Mortgage Loan secured by a leasehold interest (other than those
Mortgage Loans secured by Mortgaged Properties with respect to which the related
fee interest is also subject to the lien of the related Mortgage), the date that
is ten years prior to the expiration of the leasehold interest securing such
Mortgage Loan. If such borrower fails to make an Extended Scheduled Payment
during the initial extension period, no further extensions will be granted. The
"Extended Scheduled Payment" with respect to any extension of a Mortgage Loan
that is delinquent in the payment of any principal balance and accrued interest
remaining unpaid on its maturity date, is equal to (a) the principal portion of
a revised monthly payment (which will be calculated based on an
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amortization schedule which would fully amortize such principal balance and
accrued interest over a term that does not extend past the date occurring two
years prior to the Rated Final Distribution Date (commencing on the maturity
date of such Mortgage Loan) and an interest rate no less than the Mortgage Rate
with respect to such Mortgage Loan), and (b) interest at the applicable Default
Rate; provided, however, that the Special Servicer may agree that the Extended
Scheduled Payments may include interest at a rate lower than the related Default
Rate (but, except as otherwise provided in the Pooling Agreement, not lower than
the related Mortgage Rate). In no event will the Special Servicer be permitted
to extend any Mortgage Loan at a rate lower than the Mortgage Rate.
The Master Servicer or Special Servicer shall be permitted, in its
discretion, to waive all or any accrued Excess Interest if, prior to the related
maturity date, the related borrower has requested the right to prepay the
Mortgage Loan in full together with all payments required by the Mortgage Loan
in connection with such prepayment except for all or a portion of accrued Excess
Interest, provided that the Master Servicer or Special Servicer, as applicable,
determines that (i) in the absence of the waiver of such Excess Interest, there
is a reasonable likelihood that the Mortgage Loan will not be paid in full on
the related Maturity Date and (ii) a waiver of the right to such accrued Excess
Interest is reasonably likely to produce a greater payment in the aggregate to
Certificateholders on a present value basis than a refusal to waive the right to
such Excess Interest. Any such waiver shall not be effective until such
prepayment is tendered.
STANDARDS FOR CONDUCT GENERALLY IN EFFECTING FORECLOSURE OR THE SALE OF
DEFAULTED LOANS. In connection with any foreclosure, enforcement of the loan
documents, or other acquisition, the cost and expenses of any such proceeding
shall be paid by the Special Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure in
accordance with the laws of the state where the Mortgaged Property is located,
the Special Servicer shall not be required to pursue a deficiency judgment
against the related Mortgagor, if available, or any other liable party if the
laws of the state do not permit such a deficiency judgment after a non-judicial
foreclosure or if the Special Servicer determines, in its best judgment, that
the likely recovery if a deficiency judgment is obtained will not be sufficient
to warrant the cost, time, expense and/or exposure of pursuing the deficiency
judgment and such determination is evidenced by an officers' certificate
delivered to the Trustee.
Notwithstanding anything herein to the contrary, the Pooling Agreement will
provide that the Special Servicer will not, on behalf of the Trust Fund, obtain
title to a Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, and will not otherwise acquire possession of, or take any other
action with respect to, any Mortgaged Property if, as a result of any such
action, the Trustee, or the Trust Fund or the holders of Certificates, would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of, such Mortgaged Property within the meaning of CERCLA
or any comparable law, unless the Special Servicer has previously determined,
based on an environmental assessment report prepared by an independent person
who regularly conducts environmental audits, that: (i) such Mortgaged Property
is in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such Mortgaged Property relating to the use, management
or disposal of any hazardous materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
currently effective federal, state or local law or regulation, or that, if any
such hazardous materials are present for which such action could be required,
after consultation with an environmental consultant it would be in the best
economic interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in foreclosure
or by deed in lieu of foreclosure, the deed or certificate of sale shall be
issued to the Trustee, to a co-trustee or to its nominee, on behalf of holders
of Certificates. Notwithstanding any such acquisition of title and cancellation
of the
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related Mortgage Loan, such Mortgage Loan shall be considered to be an REO
Mortgage Loan held in the Trust Fund until such time as the related REO Property
shall be sold by the Trust Fund and shall be reduced only by collections net of
expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
Agreement provides that the Trustee (or the Special Servicer, on behalf of the
Trustee), must administer such Mortgaged Property so that it qualifies at all
times as "foreclosure property" within the meaning of Code Section 860G(a)(8).
The Pooling Agreement also requires that any such Mortgaged Property be managed
and operated by an "independent contractor," within the meaning of applicable
Treasury regulations, who furnishes or renders services to the tenants of such
Mortgaged Property. Generally, the Lower-Tier REMIC will not be taxable on
income received with respect to a Mortgaged Property to the extent that it
constitutes "rents from real property," within the meaning of Code Section
856(c)(3)(A) and Treasury regulations thereunder. "Rents from real property" do
not include the portion of any rental based on the net income or gain of any
tenant or sub-tenant. No determination has been made whether rent on any of the
Mortgaged Properties meets this requirement. "Rents from real property" include
charges for services customarily furnished or rendered in connection with the
rental of real property, whether or not the charges are separately stated.
Services furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located, tenants
in buildings which are of similar class are customarily provided with the
service. No determination has been made whether the services furnished to the
tenants of the Mortgaged Properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a Mortgaged Property owned by the Lower-Tier REMIC,
presumably allocated based on the value of any non-qualifying services, would
not constitute "rents from real property." In addition to the foregoing, any net
income from a trade or business operated or managed by an independent contractor
on a Mortgaged Property owned by the Lower-Tier REMIC, will not constitute
"rents from real property." Any of the foregoing types of income may instead
constitute "net income from foreclosure property," which would be taxable to the
Lower-Tier REMIC at the highest marginal federal corporate rate (currently 35%)
and may also be subject to state or local taxes. Any such taxes would be
chargeable against the related income for purposes of determining the Net REO
Proceeds available for distribution to holders of Certificates. The Pooling
Agreement provides that the Special Servicer will be permitted to cause the
Lower-Tier REMIC to earn "net income from foreclosure property" that is subject
to tax if it determines that the net after-tax benefit to Certificateholders is
greater than another method of operating or net leasing the Mortgaged Property.
See "Federal Income Tax Considerations--Taxation of Holders of Residual Interest
Securities--Prohibited Transactions and Contributions Tax" in the Prospectus.
The Pooling Agreement will provide that the Special Servicer may offer to
sell to any person any defaulted Mortgage Loan or any REO Property, or may offer
to purchase any Specially Serviced Mortgage Loan or any REO Property, if and
when the Special Servicer determines, consistent with the Servicing Standard,
that no satisfactory arrangements can be made for collection of delinquent
payments thereon and such a sale would be in the best economic interests of the
Trust Fund, but shall, in any event, so offer to sell any REO Property no later
than the time determined by the Special Servicer to be sufficient to result in
the sale of such REO Property within the period specified in the Pooling
Agreement, including extensions thereof. The Special Servicer is required to
give the Trustee not less than five days' prior written notice of its intention
to sell any Specially Serviced Mortgage Loan or REO Property, in which case the
Special Servicer is required to accept the highest offer (of at least three
offers) received from any person for any Specially Serviced Mortgage Loan or any
REO Property in an amount at least equal to the Repurchase Price or, at its
option, if it has received no offer at least equal to the Repurchase Price
therefor, purchase the Specially Serviced Mortgage Loan or REO Property at such
Repurchase Price.
In the absence of any such offer (or purchase by the Special Servicer), the
Special Servicer shall accept the highest offer received from any person that is
determined by the Special Servicer to be a fair price for
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such Specially Serviced Mortgage Loan or REO Property, if the highest offeror is
a person not affiliated with the Special Servicer, or is determined to be a fair
price by the Trustee (based solely upon updated independent appraisals received
by the Trustee), if the highest offeror is affiliated with the Special Servicer.
Neither the Trustee, in its individual capacity, nor any of its affiliates may
make an offer for or purchase any Specially Serviced Mortgage Loan or any REO
Property.
The Pooling Agreement will not obligate the Special Servicer to accept the
highest offer if the Special Servicer determines, in accordance with the
Servicing Standard, that rejection of such offer would be in the best interests
of the holders of Certificates. In addition, the Special Servicer may accept a
lower offer if it determines, in accordance with the Servicing Standard, that
acceptance of such offer would be in the best interests of the holders of
Certificates (for example, if the prospective buyer making the lower offer is
more likely to perform its obligations, or the terms offered by the prospective
buyer making the lower offer are more favorable), provided that the offeror is
not a person affiliated with the Special Servicer. The Special Servicer is
required to use its best efforts to sell all Specially Serviced Mortgage Loans
and REO Property prior to the Rated Final Distribution Date.
Following a default in the payment of principal or interest on a Mortgage
Loan, the Special Servicer, after consultation and agreement by the Master
Servicer, may elect not to foreclose or institute similar proceedings or modify
the loan (as described below) and instead the Master Servicer shall continue to
make P&I Advances with respect to such delinquencies so long as the Special
Servicer, in its reasonable judgment, after consultation and agreement by the
Master Servicer, concludes (a) that the election not to foreclose or modify
would likely result in a greater recovery, on a present value basis, than would
foreclosure or modification and (b) such P&I Advances will not be Nonrecoverable
Advances. With respect to such conclusions, the Master Servicer may conclusively
rely (absent manifest error) on the Special Servicer's computations and
analysis.
MODIFICATIONS. During the term of a Mortgage Loan, the Special Servicer,
may, consistent with the Servicing Standard, agree to modify such Specially
Serviced Mortgage Loan to reduce the amount of principal (but, except as
otherwise provided below, not interest) payable monthly on such Mortgage Loan
provided that (a) a material default in respect of payment on such Mortgage Loan
has occurred or, in the Special Servicer's reasonable and good faith judgment, a
default in respect of payment on such Mortgage Loan is reasonably foreseeable,
and such modification is reasonably likely to produce a greater recovery to
Certificateholders, on a net present value basis, than would liquidation, such
determination to be evidenced by an Officer's Certificate delivered to the
Rating Agencies; (b) the Special Servicer terminates the related manager (unless
the Special Servicer determines that retaining such manager is conducive to
maintaining the value of the related Mortgaged Properties); and (c) the Special
Servicer may only agree to reductions of principal lasting a period of no more
than twelve consecutive months and, in the aggregate, to no more than three
reductions of twelve months or less each; provided, however, Certificateholders
representing greater than 66 2/3% of all Voting Rights may direct the Special
Servicer not to agree to any such modification. The Special Servicer will
promptly provide a copy of such proposed modification to the Master Servicer,
the Rating Agencies and the Trustee. The Trustee will, within five Business
Days, notify, in writing, all of the Certificateholders that have Voting Rights
of such proposed modification. For purposes of determining whether
Certificateholders representing 66 2/3% of all Voting Rights have directed the
Special Servicer not to agree to such modification, each Certificateholder will
have 15 days to respond to such notice, and any Certificateholder that has not
responded within such time period will be deemed to have consented to such
modification. In the event that the Special Servicer is directed not to agree to
such modification, the Special Servicer will continue to have the options
described elsewhere herein, including foreclosure, subject to the following
paragraph, or, if applicable, extension of the related Mortgage Loan.
Additionally, the Special Servicer may, consistent with the Servicing
Standard, agree to any modification, waiver or amendment of any term or forgive
or defer interest on and principal of, and/or add collateral for, any Specially
Serviced Mortgage Loan with the consent of Certificateholders representing
66 2/3% of the Percentage Interests of the most subordinate Class of
Certificates then outstanding (or if the
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Certificate Principal Amount of such Class is less than 25% of the initial
Certificate Principal Amount thereof, the next most subordinate Class) (the
"Directing Class"), subject, however, to each of the following limitations,
conditions and restrictions: (a) a material default in respect of such Mortgage
Loan has occurred or, in the Special Servicer's reasonable and good faith
judgment, a default in respect of payment on such Mortgage Loan is reasonably
foreseeable, and such modification, waiver, amendment or other action is
reasonably likely to produce a greater recovery to Certificateholders on a net
present value basis, than would liquidation, such determination to be evidenced
by an Officer's Certificate delivered to the Rating Agencies; (b) no reduction
in the scheduled monthly payment of interest on any Mortgage Loan as a result of
such modification, waiver or amendment may result in an Interest Shortfall to
any Class other than the Directing Class, determined as of the date of such
modification, waiver or amendment; (c) any reduction in the scheduled monthly
payment of principal and/or interest on any Mortgage Loan must require that all
cash flow on all related Mortgaged Properties in excess of amounts required to
operate and maintain such Mortgaged Properties be applied to payments of
principal and interest on such Mortgage Loan; (d) the Special Servicer may only
agree to reductions of principal and/or interest lasting a period of no more
than twelve consecutive months and, in the aggregate, to no more than three
periods of twelve months or less each; (e) the Special Servicer may not reduce
any Prepayment Premium or Prepayment Lockout Period other than in connection
with the default of the related Mortgage Loan; (f) the Special Servicer may not
forgive an aggregate amount of principal of the Mortgage Loans in excess of the
Certificate Principal Amount of the Directing Class less the sum of (x) the
aggregate amount of Appraisal Reduction Amounts then outstanding and (y) the
aggregate amount of Interest Shortfalls then outstanding (other than with
respect to the Directing Class); and (g) the Special Servicer will not permit
any borrower to add any collateral unless the Special Servicer has first
determined in accordance with the Servicing Standard, based upon an
environmental assessment prepared by an independent person who regularly
conducts environmental assessments, at the expense of the borrower, that such
additional collateral is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions present with
respect to such new collateral relating to the use, management or disposal of
any hazardous materials for which investigation, testing, monitoring,
containment, clean-up or remediation would be required under any then applicable
environmental laws and/or regulations. If the Certificateholders representing
100% of the Percentage Interests of the second most subordinate Class of
Certificates then outstanding consent to such modification, waiver or amendment,
the Directing Class for purposes of the determinations made in clauses (b) and
(f) shall include the second most subordinate Class of Certificates and the
amount by which principal can be reduced shall not be in excess of 80% of the
aggregate principal balance of both such Classes less the items specified in
clauses (f)(x) and (y) above. A modification pursuant to this paragraph is not
subject to the veto of Certificateholders set forth in the preceding paragraph.
The Master Servicer or the Special Servicer, as applicable, shall be
permitted to modify, waive or amend any term of a Mortgage Loan that is not in
default or as to which default is not reasonably foreseeable if, and only if,
such modification, waiver or amendment (a) would not be "significant" as such
term is defined in Code Section 1001 or Treasury Regulations Section
1.860G-2(b)(3), as evidenced by an Opinion of Counsel, (b) would be in
accordance with the Servicing Standard and (c) would not adversely affect in any
material respect the interest of any Certificateholder not consenting thereto.
The consent thereto of the majority of Percentage Interests of each Class of
Certificates affected thereby or written confirmation from each Rating Agency
that such modification, waiver or amendment will not result in a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates shall not be required but shall be conclusive evidence that such
modification, waiver or amendment would not adversely affect in any material
respect the interest of any Certificateholder not consenting thereto. The Master
Servicer or the Special Servicer, as applicable, shall provide copies of any
modifications, waiver or amendment to each Rating Agency.
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OPTIONAL TERMINATION; OPTIONAL MORTGAGE LOAN PURCHASE
The Depositor and, if the Depositor does not exercise its option, the Master
Servicer and, if neither the Depositor nor the Master Servicer exercises its
option, the holders of the most subordinate Class of Certificates representing
greater than a 50% Percentage Interest of such Class of Certificates will have
the option to purchase all of the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, and thereby effect
termination of the Trust Fund and early retirement of the then outstanding
Certificates, on any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans remaining in the Trust Fund is less than 1% of the
aggregate Stated Principal Balance of such Mortgage Loans as of the Cut-Off
Date. The purchase price payable upon the exercise of such option on such a
Distribution Date will be an amount equal to the greater of (i) the sum of (A)
100% of the outstanding principal balance of each Mortgage Loan included in the
Trust Fund as of the last day of the month preceding such Distribution Date; (B)
the fair market value of all other property included in the Trust Fund as of the
last day of the month preceding such Distribution Date, as determined by an
independent appraiser as of a date not more than 30 days prior to the last day
of the month preceding such Distribution Date; (C) all unpaid interest accrued
on such principal balance of each such Mortgage Loan (including any Mortgage
Loans as to which title to the related Mortgaged Property has been acquired) at
the Mortgage Rate (plus the Excess Rate, to the extent applicable) to the last
day of the Interest Accrual Period preceding such Distribution Date, and (D)
unreimbursed Property Advances, and unpaid servicing compensation, special
servicing compensation, Trustee Fees and Trust Fund expenses, in each case to
the extent permitted under the Pooling Agreement with interest on all
unreimbursed Advances at the Advance Rate and (ii) the aggregate fair market
value of the Mortgage Loans and all other property acquired in respect of any
Mortgage Loan in the Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser acceptable to the
Master Servicer, together with one month's interest thereon at the related
Mortgage Rates. There can be no assurance that payment of the Certificate
Principal Amount, if any, of each outstanding Class of Certificates plus accrued
interest would be made in full in the event of such a termination of the Trust
Fund. See "The Trust Agreement-- Termination" in the Prospectus.
Any Mortgage Loan purchased under the circumstances described in the
preceding paragraph will be purchased subject to a continuing right of (i) the
holders of the Class T Certificates to receive from the purchaser(s), from time
to time, payments corresponding to Default Interest with respect to such
Mortgage Loan and (ii) the holders of the Classes of Certificates entitled to
receive the Excess Interest with respect to such Mortgage Loan, to receive from
the purchaser(s), from time to time, payments corresponding to Excess Interest
with respect to such Mortgage Loan.
THE TRUSTEE
LaSalle National Bank, a national banking association with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling
Agreement. The Trustee's corporate trust office is located at 135 South LaSalle
Street, Chicago, Illinois 60674-4107, Attention: Asset Backed Securities Trust
Services Group-Series 1997-LLI.
The Trustee may resign at any time by giving written notice to the
Depositor, the Master Servicer and the Rating Agencies, provided that no such
resignation shall be effective until a successor has been appointed. Upon such
notice, the Depositor will appoint a successor trustee reasonably acceptable to
the Master Servicer. If no successor trustee is appointed within one month after
the giving of such notice of resignation, the resigning Trustee may petition the
court for appointment of a successor trustee.
The Depositor may remove the Trustee and the Fiscal Agent if, among other
things, the Trustee ceases to be eligible to continue as such under the Pooling
Agreement or if at any time the Trustee becomes incapable of acting, or is
adjudged bankrupt or insolvent, or a receiver of the Trustee or its property is
appointed or any public officer takes charge or control of the Trustee or of its
property, or,
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subject to the Trustee's ability to cure (as set forth in the Pooling
Agreement), if a tax is imposed or threatened with respect to the Trust Fund by
any state in which the Trustee or the Trust Fund held by the Trustee pursuant to
the Pooling Agreement is located. The holders of Certificates evidencing
aggregate Voting Rights of at least 50% of all Certificateholders may remove the
Trustee and the Fiscal Agent upon thirty days prior written notice to the
Depositor, the Master Servicer, the Trustee and the Fiscal Agent. Any
resignation or removal of the Trustee and the Fiscal Agent and appointment of a
successor trustee and, if such trustee is not rated at least "AA" by S&P and DCR
and "Aa2" by Moody's, fiscal agent, will not become effective until acceptance
of the appointment by the successor trustee and, if necessary, fiscal agent.
Notwithstanding the foregoing, upon any termination of the Trustee and the
Fiscal Agent under the Pooling Agreement, the Trustee and the Fiscal Agent will
continue to be entitled to receive all accrued and unpaid compensation through
the date of termination plus reimbursement for all Advances made by them and
interest thereon as provided in the Pooling Agreement. Any successor trustee
must have a combined capital and surplus of at least $50,000,000 and such
appointment must not result in the downgrade, qualification or withdrawal of the
then-current ratings assigned to the Certificates, as evidenced in writing by
the Rating Agencies.
Pursuant to the Pooling Agreement, the Trustee will be entitled to receive a
monthly fee (the "Trustee Fee") at a specified rate (the "Trustee Fee Rate"),
payable by the Master Servicer out of the Servicing Fee.
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling
Agreement or the Certificates other than those resulting from the negligence,
bad faith or willful misconduct of the Trustee or the Fiscal Agent, as
applicable. Neither the Trustee nor the Fiscal Agent will be required to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties under the Pooling Agreement, or in the exercise of any of
its rights or powers, if in the Trustee's or the Fiscal Agent's opinion, as
applicable, the repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. The Master Servicer and the
Special Servicer each indemnify the Trustee, the Fiscal Agent, and certain
related parties for similar losses incurred related to the willful misconduct,
bad faith, fraud and/or negligence in the performance of the Master Servicer's
or the Special Servicer's duties as applicable, under the Pooling Agreement or
by reason of negligent disregard of its respective obligations and duties under
the Pooling Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the same
is located, the Depositor and the Trustee acting jointly will have the power to
appoint one or more persons or entities approved by the Trustee to act (at the
expense of the Trustee) as co-trustee or co-trustees, jointly with the Trustee,
or separate trustee or separate trustees, of all or any part of the Trust Fund,
and to vest in such co-trustee or separate trustee such powers, duties,
obligations, rights and trusts as the Depositor and the Trustee may consider
necessary or desirable. Except as required by applicable law, the appointment of
a co-trustee or separate trustee will not relieve the Trustee of its
responsibilities, obligations and liabilities under the Pooling Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of "--The
Trustee") and the Master Servicer (except for the information under "--The
Master Servicer") will make no representation as to the validity or sufficiency
of the Pooling Agreement, the Certificates or the Mortgage Loans, this
Prospectus Supplement or related documents.
In the event that the Master Servicer fails to make a required Advance, the
Trustee (or with respect to a Property Advance required to be made by the
Special Servicer, the Master Servicer, and if the Master Servicer so fails, the
Trustee), will be obligated to make such Advance, provided that the Trustee
shall not be obligated to make any Advance it deems to be nonrecoverable. The
Trustee shall be entitled to rely conclusively on any determination by the
Master Servicer or Special Servicer, as applicable, that an
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Advance, if made, would not be recoverable. The Trustee will be entitled to
reimbursement for each Advance made by it in the same manner and to same extent
as the Master Servicer or Special Servicer, as applicable.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only those
duties specifically required under the Pooling Agreement. Upon receipt of the
various certificates, reports or other instruments required to be furnished to
it, the Trustee is required to examine such documents and to determine whether
they conform on their face to the requirements of the Pooling Agreement to the
extent set forth therein.
In addition, pursuant to the Pooling Agreement, the Trustee, at the cost and
expense of the Depositor, based upon reports, documents, and other information
provided to the Trustee, will file with the Securities and Exchange Commission
(the "Commission"), in respect of the Trust and the Certificates, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934, as
amended, and any other Form 8-K reports required to be filed pursuant to the
Pooling Agreement.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling Agreement. The
Fiscal Agent's office is located at 135 South LaSalle Street, Chicago, Illinois
60674-4107.
The Fiscal Agent may not resign except (i) in the event of the resignation
or removal of the Trustee (in which event, the Fiscal Agent shall be deemed to
have been removed), (ii) upon determination that it may no longer perform such
obligations and duties under applicable law, or (iii) upon written confirmation
from the Rating Agencies that such resignation, without the appointment of a
successor Fiscal Agent, will not in and of itself result in a downgrade
qualification or withdrawal of the then current rating of any Class of
Certificates. Any such determination is required to be evidenced by an opinion
of counsel to such effect delivered to the Depositor and the Trustee. Except as
provided in (iii) above, no resignation or removal of the Fiscal Agent shall
become effective until a successor fiscal agent acceptable to each Rating
Agency, as evidenced in writing (which may be the Trustee) shall have assumed
the Fiscal Agent's obligations and duties under the Pooling Agreement.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling Agreement, the Certificates, the Mortgage Loan, this
Prospectus Supplement (except for the information in the first sentence under
the preceding section with the heading "--The Fiscal Agent") or related
documents. The duties and obligations of the Fiscal Agent consist only of making
Advances as described below and in "--Advances" above; the Fiscal Agent shall
not be liable except for the performance of such duties and obligations. The
Fiscal Agent will not be accountable for the use or application by the
Depositor, the Master Servicer or the Special Servicer of any Certificates
issued to it or of the proceeds of such Certificates, or for the use of or
application of any funds paid to the Depositor, the Master Servicer or the
Special Servicer in respect of the assignment of the Mortgage Loans to the Trust
Fund, or any funds deposited in or withdrawn from the Lock Box Accounts, Cash
Collateral Accounts, Reserve Accounts, Collection Account, Upper-Tier
Distribution Account, Lower-Tier Distribution Account, Interest Reserve Account,
Excess Interest Distribution Account, Class T Distribution Account or any other
account maintained by or on behalf of the Master Servicer or the Special
Servicer, nor will the Fiscal Agent be required to perform, or be responsible
for the manner of performance of, any of the obligations of the Master Servicer
or the Special Servicer under the Pooling Agreement.
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In the event that the Master Servicer and the Trustee fail to make a
required Advance, the Fiscal Agent will be obligated to make such Advance,
provided that the Fiscal Agent will not be obligated to make any Advance that it
deems to be nonrecoverable. The Fiscal Agent shall be entitled to rely
conclusively on any determination by the Master Servicer, Special Servicer or
the Trustee, as applicable, that an Advance, if made, would not be recoverable.
The Fiscal Agent will be entitled to reimbursement for each Advance made by it
in the same manner and to the same extent as the Trustee and the Master
Servicer.
THE MASTER SERVICER
GMAC Commercial Mortgage Corporation ("GMACCM") will initially act as the
Master Servicer. The following information has been provided by GMACCM. None of
the Depositor, the Trustee, the Underwriter, or any of their respective
affiliates takes any responsibility therefor or makes any representation or
warranty as to the accuracy or completeness thereof.
GMACCM, a corporation organized under the laws of the State of California,
is a wholly-owned direct subsidiary of GMAC Mortgage Group, Inc., which in turn
is a wholly-owned direct subsidiary of General Motors Acceptance Corporation.
The principal offices of GMACCM are located at 650 Dresher Road, Horsham,
Pennsylvania 19044. Its telephone number is (215) 328-4622. As of December 31,
1996, GMACCM was the servicer of a portfolio of multifamily and commercial
mortgage loans totaling approximately $24.8 billion in aggregate outstanding
principal amounts. Neither the Master Servicer, its parent nor any of its
affiliates will guarantee the Certificates or the assets included in the Trust
Fund.
Pursuant to the terms of the Pooling Agreement, the Master Servicer will be
required to indemnify the Depositor and the Trustee for any losses, fines,
judgments, costs and expenses incurred by them as a result of the Master
Servicer's willful misfeasance, bad faith or negligent failure to comply with
its duties and obligations under the Pooling Agreement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling Agreement, the Master Servicer will be entitled to
withdraw monthly from the Collection Account its portion of the Servicing Fee.
The Servicing Fee includes the compensation payable to the Master Servicer and
the Trustee Fee. The monthly servicing fee (the "Servicing Fee") for any
Distribution Date is an amount per Interest Accrual Period equal to the sum for
each Mortgage Loan or Worldwide Plaza Component of the product of (i) 1/12th of
.019% (the "Servicing Fee Rate") and (ii) the Stated Principal Balance of such
Mortgage Loan or Worldwide Plaza Component.
The "Effective Servicing Fee Rate" means, with respect to the Worldwide
Plaza LIBOR Component (i) for Collection Periods commencing in the months of
April, June, September, November and (for years preceding a non-leap year)
December, the Servicing Fee Rate and (ii) for Collection Periods, commencing in
the months of January, February, March, May, July, August, October and (for
years preceding a leap year) December, the rate PER ANNUM (which may be higher
or lower than the Servicing Fee Rate) at which the Servicing Fee (which is
calculated on a 30/360 basis) would have to accrue on the Stated Principal
Balance of the Worldwide Plaza LIBOR Component during the related Collection
Period in order to produce an amount equal to the Servicing Fee to be paid with
respect to the Worldwide Plaza LIBOR Component with respect to such Collection
Period.
With respect to any Distribution Date, to the extent that there are
Prepayment Interest Shortfalls with respect to Principal Prepayments received
during the related Collection Period, the Servicing Fee payable to the Master
Servicer with respect to all Mortgage Loans (but not the fees payable to the
Trustee) for the related Distribution Date shall be reduced up to the amount
sufficient to fully offset such Prepayment Interest Shortfalls. The Master
Servicer's portion of the Servicing Fee relating to each Mortgage Loan will be
retained by the Master Servicer from payments and collections (including
insurance proceeds, condemnation proceeds and liquidation proceeds) in respect
of such Mortgage Loan. The Master Servicer will also
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be entitled to retain as additional servicing compensation all investment income
earned on amounts on deposit in the Collection Account and the Reserve Accounts
(to the extent not payable to the related borrower under the related Mortgage
Loan or applicable law).
In addition, the Master Servicer shall be entitled to receive, as additional
servicing compensation, to the extent permitted by applicable law and the
related Mortgage Loans, any late payment charges, assumption fees, loan
modification fees, extension fees, loan service transaction fees, beneficiary
statement charges or similar items (but not including any yield maintenance
charge or prepayment premiums), in each case to the extent received and not
required to be deposited or retained in the Collection Account pursuant to the
Pooling Agreement.
The Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling Agreement (subject to reimbursement as
described herein), including all fees of any subservicers retained by it.
SPECIAL SERVICER
GMACCM will initially be appointed as special servicer of the Mortgage
Loans, (GMACCM in such capacity or any party succeeding GMACCM in such capacity
the "Special Servicer"). The Special Servicer will, among other things, oversee
the resolution of non-performing Mortgage Loans and act as disposition manager
of REO Properties. The Pooling Agreement will provide that although more than
one Special Servicer may be appointed, only one Special Servicer may specially
service any Mortgage Loan.
The Special Servicer will, among other things, oversee the resolution of
non-performing Mortgage Loans and act as disposition manager of REO Properties.
The Pooling Agreement provides that holders of Certificates evidencing greater
than 50% of the Percentage Interests of the most subordinate Class of
Certificates then outstanding (provided, however, that for purposes of
determining the most subordinate Class, in the event that the Class A-1, Class
A-2 and Class A-3 Certificates and the Class X-1 Certificates are the only
Classes outstanding, the Class A-1, Class A-2 and Class A-3 Certificates and the
Class X-1 Certificates together will be treated as the subordinate Class) may
replace the Special Servicer, provided that each Rating Agency confirms to the
Trustee in writing that such replacement, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to any Class of
Certificates.
Pursuant to the Pooling Agreement, the Special Servicer will be entitled to
certain fees, including a special servicing fee (and if the Special Servicer is
the Master Servicer, such fees will be in addition to the Servicing Fee),
payable with respect to each Interest Accrual Period, equal to the product of
(i) 1/12 times 0.35% and (ii) the Stated Principal Balance of each related
Specially Serviced Mortgage Loan (the "Special Servicing Fee"). The Special
Servicer will be entitled, in addition to the Special Servicing Fee, to receive
a "Liquidation Fee" equal to 0.75% of the amount equal to (x) the proceeds of
the sale of any Mortgage Loan or REO Property minus (y) any broker's commission
and related brokerage referral fees and to receive a "Rehabilitation Fee" with
respect to any Mortgage Loan which ceases to be specially serviced and has made
three consecutive Scheduled Payments on or prior to the related Due Dates after
the Mortgage Loan has ceased to be a Specially Serviced Mortgage Loan in an
amount equal to 0.75% of the highest Stated Principal Balance of such Mortgage
Loan during the period in which it was specially serviced; provided, however,
that such Rehabilitation Fee shall be due only once for each Mortgage Loan
during the term of the Pooling Agreement. However, no Liquidation Fee will be
payable in connection with, or out of, liquidation proceeds resulting from the
purchase of any Specially Serviced Mortgage Loan or REO Property (i) by the
Depositor as described herein under "--Representations and Warranties;
Repurchase," (ii) by the Master Servicer, the Depositor or the
Certificateholders as described herein under "--Optional Termination; Optional
Mortgage Loan Purchase," or (iii) in certain other limited circumstances. Each
of the foregoing fees, along with certain expenses related to special servicing
of a Mortgage Loan, shall be payable out of funds otherwise available to make
payments on the Certificates.
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MASTER SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Master Servicer and the Special Servicer will be permitted to purchase
any Class of Certificates. Such a purchase by the Master Servicer or the Special
Servicer could cause a conflict relating to the Master Servicer's or the Special
Servicer's duties pursuant to the Pooling Agreement and the Master Servicer's or
the Special Servicer's interest as a holder of Certificates, especially to the
extent that certain actions or events have a disproportionate effect on one or
more Classes of Certificates. The Pooling Agreement provides that the Master
Servicer or Special Servicer shall administer the Mortgage Loans in accordance
with the servicing standard set forth therein without regard to ownership of any
Certificate by the Master Servicer or the Special Servicer or any affiliate
thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
TRUSTEE REPORTS.
Based on information provided in monthly reports prepared by the Master
Servicer and the Special Servicer and delivered to the Trustee, the Trustee will
prepare and forward on each Distribution Date to each Certificateholder, the
Depositor, the Master Servicer, the Special Servicer, the Underwriter, each
Rating Agency and, if requested, any potential investors in the Certificates:
1. A statement (a "Distribution Date Statement") setting forth, among other
things: (i) the amount of distributions, if any, made on such Distribution
Date to the Holders of each Class of Certificates applied to reduce the
respective Certificate Principal Amounts thereof; (ii) the amount of
distributions, if any, made on such Distribution Date to Holders of each
Class of Certificates allocable to (A) the Interest Accrual Amount less any
Excess Prepayment Interest Shortfalls and/or (B) Prepayment Premiums; (iii)
the number of outstanding Mortgage Loans, the aggregate Stated Principal
Balance of the Mortgage Loans at the close of business on the related Due
Date; (iv) the number and aggregate Stated Principal Balance of Mortgage
Loans (A) delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent
90 or more days, (D) that are Specially Serviced Mortgage Loans that are not
delinquent, or (E) as to which foreclosure proceedings have been commenced;
(v) with respect to any Mortgage Loan as to which the related Mortgaged
Property became a REO Property during the preceding calendar month, the
scheduled principal balance and Stated Principal Balance of such Mortgage
Loan as of the date such Mortgaged Property became a REO Property; (vi) as
to any Mortgage Loan repurchased by the LB Holdings or otherwise liquidated
or disposed of during the related Collection Period, the loan number thereof
and the amount of proceeds of any repurchase of a Mortgage Loan, liquidation
proceeds and/or other amounts, if any, received thereon during the related
Collection Period and the portion thereof included in the Available Funds
for such Distribution Date; (vii) with respect to any REO Property included
in the Trust Fund as of the close of business on the related Due Date, the
loan number of the related Mortgage Loan, the value of such REO Property
based on the most recent appraisal or valuation and the amount of any other
income collected with respect to any REO Property net of related expenses
and other amounts, if any, received on such REO Property during the related
Collection Period and the portion thereof included in the Available Funds
for such Distribution Date; (viii) with respect to any REO Property sold or
otherwise disposed of during the related Collection Period, (A) the loan
number of the related Mortgage Loan and the amount of sale proceeds and
other amounts, if any, received in respect of such REO Property during the
related Collection Period and the portion thereof included in the Available
Funds for such Distribution Date and (B) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Principal Amount of each
Class of Certificates before and after giving effect to the distributions
made on such Distribution Date, separately identifying any reduction in the
aggregate Certificate Principal Amount of each such Class due to Realized
Losses and/or Trust Fund expenses; (x) the aggregate amount of Principal
Prepayments made during the related Collection Period and the aggregate
amount of any Excess
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Prepayment Interest Shortfalls for such Distribution Date; (xi) the
Certificate Interest Rate applicable to each Class of Certificates for such
Distribution Date; (xii) the aggregate amount of the Servicing Fee, Special
Servicing Fee, Liquidation Fee, Rehabilitation Fee and any other servicing
or special servicing compensation retained by or paid to the Master Servicer
and the Special Servicer during the related Collection Period; (xiii) the
amount of Realized Losses, Trust Fund expenses and Interest Shortfalls, if
any, incurred with respect to the Mortgage Loans during the related
Collection Period and in the aggregate for all prior Collection Periods
(except to the extent reimbursed or paid); (xiv) the aggregate amount of
Property Advances and P&I Advances outstanding which have been made by the
Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent;
(xv) the amount of any Appraisal Reduction Amounts allocated during the
related Collection Period on a loan-by-loan basis and the total Appraisal
Reduction Amounts as of such Distribution Date on an loan-by-loan basis. In
the case of information furnished pursuant to subclauses (i), (ii) and (ix)
above, the amounts shall be expressed as a dollar amount in the aggregate
for all Certificates of each applicable Class and per single Certificate of
a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the end
of the related Collection Period, which report shall contain substantially
the categories of information regarding the Mortgage Loans set forth in this
Prospectus Supplement in the tables under the caption "Mortgage Pool
Characteristics--Certain Characteristics of the Mortgage Loans" (calculated,
where applicable, on the basis of the most recent relevant information
provided by the borrowers to the Master Servicer or the Special Servicer and
by the Master Servicer or the Special Servicer, as the case may be, to the
Trustee) and such information shall be presented in a tabular format
substantially similar to the format utilized in this Prospectus Supplement
under such caption and a loan-by-loan listing (in descending balance order)
showing loan name, property type, location, unpaid principal balance,
Mortgage Rate, paid through date, maturity date, net interest portion of the
Scheduled Payment, principal portion of the Scheduled Payment and any
Prepayment Premiums received. Such loan-by-loan listing will be made
available electronically in the form of the standard CSSA loan file and CSSA
property file; provided, however, the Trustee will provide Certificateholder
with a written copy of such report upon request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle National Bank's
ASAP System at (312) 904-2200 and requesting statement number 283 or such other
mechanism as the Trustee may have in place from time-to-time.
MASTER SERVICER REPORTS.
The Master Servicer is required to deliver to the Trustee prior to each
Distribution Date, and the Trustee is to deliver to each Certificateholder, the
Depositor, the Underwriter, each Rating Agency and, if requested, any potential
investor in the Certificates, on each Distribution Date, the following six
reports:
(a) A "Comparative Financial Status Report" substantially containing the content
in EXHIBIT C-1 attached hereto, setting forth, to the extent such
information is provided by the related borrowers, among other things, the
occupancy, revenue, net operating income and DSCR for each Mortgaged
Property as of the current Due Date for each of the following three periods;
(i) the most current available trailing twelve months, which information
shall be updated only once per calendar quarter (ii) the previous two full
fiscal years, which information shall be updated within 45 days of receipt
of the annual information provided by the related borrowers and (iii) the
"base year" (representing the original underwriting information used as of
the Cut-Off Date).
(b) A "Delinquent Loan Status Report" substantially containing the content in
EXHIBIT C-2 attached hereto, setting forth, among other things, those
Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, were delinquent 30-59
days, delinquent 60-89 days and delinquent 90 or more days, current but
specially serviced, or in foreclosure but not REO Property.
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(c) An "Historical Loan Modification Report" substantially containing the
content in Exhibit C-3 attached hereto, setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, have been modified
pursuant to the Pooling Agreement (i) during the related Collection Period
and (ii) since the Cut-Off Date, showing the original and the revised terms
thereof.
(d) An "Historical Loss Estimate Report" substantially containing the content in
EXHIBIT C-4 attached hereto, setting forth, among other things, as of the
close of business on the Due Date immediately preceding the preparation of
such report, (i) the aggregate amount of liquidation proceeds and
liquidation expenses, both for the current period and historically, and (ii)
the amount of Realized Losses occurring during the related Collection
Period, set forth on a Mortgage Loan-by-Mortgage Loan basis.
(e) An "REO Status Report" substantially containing the content in EXHIBIT C-5
attached hereto, setting forth, among other things, with respect to each REO
Property that was included in the Trust Fund as of the close of business on
the Due Date immediately preceding the preparation of such report, (i) the
acquisition date of such REO Property, (ii) the amount of income collected
with respect to any REO Property net of related expenses and other amounts,
if any, received on such REO Property during the related Collection Period
and (iii) the value of the REO Property based on the most recent appraisal
or other valuation thereof available to the Master Servicer as of such date
of determination (including any prepared internally by the Special
Servicer).
(f) A "Watch List" substantially containing the content in EXHIBIT C-6 attached
hereto, setting forth, among other things, any Mortgage Loan that is in
jeopardy of becoming a Specially Serviced Mortgage Loan.
The information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Master Servicer at least one business
day prior to the Master Servicer Remittance Date. None of the Master Servicer,
the Special Servicer or the Trustee shall be responsible for the accuracy or
completeness of any information supplied to it by a borrower or third party that
is included in any reports, statements, materials or information prepared or
provided by the Master Servicer, the Special Servicer or the Trustee, as
applicable.
The Master Servicer is also required to deliver to the Trustee the following
materials:
(a) Quarterly, within thirty days of the Master Servicer's receipt of the
related borrower's operating statements and rent rolls, commencing with the
first fiscal quarter ending after March 1, 1998, with respect to each
Mortgaged Property and REO Property, and "Operating Statement Analysis"
substantially containing the content in EXHIBIT C-7 attached hereto as of
the end of the preceding fiscal quarter, together with copies of the
operating statements and rent rolls (but only to the extent the related
borrower is required by the Mortgage to deliver, or otherwise agrees to
provide such information) for such Mortgaged Property or REO Property as of
the end of the preceding fiscal quarter. The Master Servicer (or the Special
Servicer in the case of Specially Serviced Mortgage Loans and REO
Properties) is required to use its best reasonable efforts to obtain said
quarterly operating statements and rent rolls.
(b) Within thirty days of receipt by the Master Servicer (or within ten days of
receipt by the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of quarterly operating statements, if any,
with respect to any Mortgaged Property or REO Property, an "NOI Adjustment
Worksheet" substantially containing the content in EXHIBIT C-8 attached
hereto, for such Mortgaged Property (with the annual operating statements
attached thereto as an exhibit), presenting the computations made in
accordance with the methodology described in the Pooling Agreement to
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"normalize" the full year net operating income and debt service coverage
numbers used by the Master Servicer in the other reports referenced above.
The Trustee will be required to deliver the Operating Statement Analysis and
NOI Adjustment Worksheet upon request to any Certificateholder, the Depositor,
the Underwriter, each Rating Agency and the Special Servicer and will be
required to deliver to each Rating Agency on September 30 of each year,
commencing on September 30, 1998, copies of the Operating Statement Analysis for
each Mortgaged Property or REO Property that were prepared with respect to the
previous four fiscal quarters (or, with respect to September 1998, all of the
Operating Statement Analysis prepared since the Closing Date).
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report summarizing
on an annual basis (if appropriate) the items provided to Certificateholders in
the monthly Distribution Date Statements and such other information as may be
required to enable such Certificateholders to prepare their federal income tax
returns. Such information is to include the amount of original issue discount
accrued on each Class of Certificates held by persons other than holders
exempted from the reporting requirements and information regarding the expenses
of the Trust Fund.
OTHER INFORMATION.
The Pooling Agreement requires that the Trustee make available at its
offices, during normal business hours, for review by any Holder of a
Certificate, the Depositor, the Special Servicer, the Master Servicer, any
Rating Agency, any potential investor in the Certificates or any other Person to
whom the Depositor believes such disclosure is appropriate, originals or copies
of, among other things, the following items (except to the extent not permitted
by applicable law or under any of the Mortgage Loan documents): (i) the Pooling
Agreement and any amendments thereto, (ii) all Distribution Date Statements
delivered to holders of the relevant Class of Offered Certificates since the
Closing Date, (iii) all annual officers' certificates and accountants' reports
delivered by the Master Servicer and Special Servicer to the Trustee since the
Closing Date regarding compliance with the relevant agreements (see "The Pooling
Agreement--Evidence as to Compliance"), (iv) the most recent property inspection
report prepared by or on behalf of the Master Servicer or the Special Servicer
with respect to each Mortgaged Property and delivered to the Trustee, (v) the
most recent annual operating statements, rent rolls (to the extent such rent
rolls have been made available by the related borrower) and retail "sales
information", if any, collected by or on behalf of the Master Servicer or the
Special Servicer with respect to each Mortgaged Property and delivered to the
Trustee, (vi) any and all modifications, waivers and amendments of the terms of
a Mortgage Loan entered into by the Master Servicer and/or the Special Servicer
and delivered to the Trustee, (vii) any and all officers' certificates and other
evidence delivered to or by the Trustee to support the Master Servicer's, the
Trustee's or the Fiscal Agent's, as the case may be, determination that any
Advance, if made, would not be recoverable, and (viii) any other materials not
otherwise referred to in this paragraph that are in the possession of the
Trustee. Copies of any and all of the foregoing items will be available from the
Trustee upon request; however, the Trustee will be permitted to require payment
of a sum sufficient to cover the reasonable costs and expenses of providing such
copies.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans in California (approximately 23.8% of the Mortgage Loans by
Cut-Off Date Allocated Loan Amount), New York (approximately 19.8% of the
Mortgage Loans by Cut-Off Date Allocated Loan Amount) and Texas (approximately
8.4% of the Mortgage Loans by Cut-Off Date Allocated Loan Amount) which are
general in nature. The summaries do not purport to be complete and are qualified
in their entirety by reference to the applicable federal and state laws
governing the Mortgage Loans.
California, New York, Texas and various other states have imposed statutory
prohibitions or limitations that limit the remedies of a mortgagee under a
mortgage or a beneficiary under a deed of trust. All of the Mortgage Loans are
nonrecourse loans as to which, in the event of default by a borrower, recourse
may be had only against the specific property pledged to secure the Mortgage
Loan and not against the borrower's other assets. Even if recourse is available
pursuant to the terms of the Mortgage Loan, certain states have adopted statutes
which impose prohibitions against or limitations on such recourse. The
limitations described below and similar or other restrictions in other
jurisdictions where Mortgaged Properties are located may restrict the ability of
the Master Servicer or the Special Servicer, as applicable, to realize on the
Mortgage Loans and may adversely affect the amount and timing of receipts on the
Mortgage Loans.
California statutes limit the right of the beneficiary to obtain a
deficiency judgment against the trustor (i.e., obligor) following the
non-judicial foreclosure sale under a deed of trust. A deficiency judgment is a
personal judgment against the obligor in most cases equal to the difference
between the amount due to the beneficiary and the fair market value of the
collateral. No deficiency judgment is permitted under California law following a
nonjudicial sale under the power of sale provision in a deed of trust. Other
California statutes require the beneficiary to exhaust the security afforded
under the deed of trust by foreclosure in an attempt to satisfy the full debt
before bringing a personal action (if otherwise permitted) against the obligor
for recovery of the debt except in certain cases involving environmentally
impaired real property. California case law has held that acts such as an offset
of an unpledged account or the application of rents from secured property prior
to foreclosure, under some circumstances, constitute violations of such
statutes. Violations of such statutes may result in the loss of some or all of
the security under the loan. Finally, other statutory provisions in California
limit any deficiency judgment (if otherwise permitted) against the former
trustor following a judicial sale to the excess of the outstanding debt over the
greater of (i) the fair market value of the property at the time of the public
sale or (ii) the amount of the winning bid in the foreclosure, and give the
borrower a one-year period within which to redeem the property. California
statutes also provide priority to certain tax liens over the lien of previously
recorded deeds of trust.
Under New York law, while a foreclosure may proceed either judicially or
non-judicially, nonjudicial foreclosures are virtually unused today. Under New
York law, upon default of a mortgage, a mortgagee is generally presented with
the choice of either proceeding in equity to foreclose upon the mortgaged
property or to proceed at law and sue on the note. New York law does not require
that the mortgagee must bring a foreclosure action before being entitled to sue
on the note. However, once having begun a foreclosure action or an action to sue
on the note or guaranty, a mortgagee is generally not permitted to initiate the
other without leave of court. New York does not restrict a mortgagee from
seeking a deficiency judgment. In order to obtain a deficiency judgment, a
series of procedural and substantive requirements must be satisfied. In New
York, liens for unpaid real estate taxes take priority over the lien of a
previously recorded mortgage.
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In some states, foreclosure may result in automatic termination of
subordinate leases in the absence of either (i) an agreement to the contrary
between the foreclosing lender and the tenant or (ii) circumstances in which it
would be inequitable to permit such termination. In addition, in all states,
real property taxes have priority over the lien of previously recorded mortgages
or deeds of trust and in some states and under certain circumstances, mechanics'
liens and materialmen's liens may also take priority over the lien of previously
recorded mortgages or deeds of trust.
Foreclosure under either a mortgage or a deed of trust or the sale by the
referee or other designated official or by the trustee is often a public sale.
However, because of the difficulty a potential buyer at the sale might have in
determining the exact status of title to the property subject to the lien of the
mortgage or deed of trust and the redemption rights that may exist, and because
the physical condition and financial performance of the property may have
deteriorated during the foreclosure proceedings and/or for a variety of other
reasons, a third party may be unwilling to purchase the property at the
foreclosure sale. Some states require that the lender disclose to potential
bidders at a trustee's sale all known facts materially affecting the value of
the property. Such disclosure may have an adverse effect on the trustee's or
mortgagee's ability to sell the property or upon the sale price.
S-243
<PAGE>
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the price
paid by the Certificateholders, the rate and timing of the distributions in
reduction of Certificate Principal Amounts or Notional Amounts, as applicable,
of the related Classes of Certificates and the rate, timing and severity of
losses on the Mortgage Loans and the extent to which such losses are allocable
in reduction of the Certificate Principal Amounts or Notional Amounts, as
applicable, of such Classes of Certificates, as well as prevailing interest
rates at the time of payment or loss realization.
The yield to maturity on the Class C-2 Certificates through and including
the Distribution Date in July 2004 will be highly sensitive to changes in the
level of the LIBOR such that decreasing levels of LIBOR will have a negative
effect to investors in the Class C-2 Certificates. Investors in the Class C-2
Certificates should consider the risk that lower than anticipated levels of
LIBOR could result in lower yields to investors than the anticipated yields. The
Pass-Through of the Class C-2 Certificates for Distribution Dates occurring
after July 2004 will equal the Net Mortgage Rate of the Worldwide Plaza LIBOR
Component, which will be a fixed rate. See "Description of the Mortgage Loans
and Mortgaged Properties--The Worldwide Plaza Loan and Property--The
Loan--Payment Terms" herein.
Holders of the Class C-2 Certificates generally will be entitled to receive
distributions of principal from principal payments on the Worldwide Plaza LIBOR
Component. Pursuant to the terms of the Worldwide Plaza Loan, scheduled payments
of principal on such Mortgage Loan will not be applied to reduce the principal
balance of the Worldwide Plaza LIBOR Component until after the Worldwide Plaza
Anticipated Repayment Date (which will occur in July 2004); provided, however,
that any Principal Prepayment received with respect to the Worldwide Plaza Loan
prior to the Anticipated Repayment Date thereof will be applied to reduce the
principal balance of the Worldwide Plaza LIBOR Component to zero prior to
applying any such Principal Prepayment to either of the Worldwide Plaza Fixed
Components. As described under "Description of the Mortgage Loans and Mortgaged
Properties--The Worldwide Plaza Loan and Property--The Loan--Prepayment" herein,
the Worldwide Plaza LIBOR Component can be prepaid in whole or part at any time
without payment of any prepayment premium or penalty. Therefore, the Class C-2
Certificates will be extremely sensitive to the rate and timing of unscheduled
principal payments (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the Worldwide Plaza Loan and any
repurchase of the Worldwide Plaza Loan due to breaches of representations and
warranties with respect to such Mortgage Loan.
The rate of distributions in reduction of the Certificate Principal Amount
or Notional Amount, as applicable, of any Class of Offered Certificates, the
aggregate amount of distributions on any Class of Offered Certificates and the
yield to maturity of any Class of Offered Certificates will be directly related
to the rate of payments of principal (both scheduled and unscheduled) on the
Mortgage Loans and the amount and timing of borrower defaults. In addition, such
distributions in reduction of Certificate Principal Amount or Notional Amount,
as applicable, may result from repurchases of Mortgage Loans made by the
Depositor or LB Holdings due to missing or defective documentation or breaches
of representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling Agreement--Representations and Warranties;
Repurchase" or purchases of the Mortgage Loans in the manner described under
"The Pooling Agreement--Optional Termination; Optional Mortgage Loan Purchase."
Disproportionate principal payments (whether resulting from differences in
amortization terms, prepayments following expirations of the respective
Prepayment Lockout Periods or otherwise) on the Mortgage Loans will affect the
Certificate Interest Rate of the Class X-1 Certificates for one or more future
periods and therefore the yield on such Class.
S-244
<PAGE>
The Certificate Principal Amount or Notional Amount, as applicable, of any
Class of Offered Certificates may be reduced without distributions thereon as a
result of the occurrence and allocation of Realized Losses, reducing the maximum
amount distributable in respect of Certificate Principal Amount, if applicable,
as well as the amount of interest that would have accrued on such Certificates
in the absence of such reduction. In general, a Realized Loss occurs when the
aggregate principal balance of a Mortgage Loan is reduced without an equal
distribution to applicable Certificateholders in reduction of the Certificate
Principal Amounts of the Certificates. Realized Losses are likely to occur only
in connection with a default on a Mortgage Loan and the liquidation of the
related Mortgaged Properties or a reduction in the principal balance of a
Mortgage Loan by a bankruptcy court.
Because the Notional Amount of the Class X-1 Certificates is based upon the
Certificate Principal Amounts of the Class A-1, Class A-2, Class A-3, Class B,
Class C-1, Class D, Class E and Class F Certificates, the yield to maturity on
the Class X-1 Certificates will be extremely sensitive to the rate and timing of
prepayments of principal (including both voluntary and involuntary prepayments,
delinquencies, defaults and liquidations) on the Mortgage Loans and any
repurchase with respect to breaches of representations and warranties with
respect to the Mortgage Loans to the extent such payments of principal are
allocated to each such Class in reduction of the Certificate Principal Amount
thereof.
The Notional Amount of the Class X-2 Certificates is based upon the
Certificate Principal Amount of the Class C-2 Certificates, which in turn is
based upon the Stated Principal Balance of the Worldwide Plaza LIBOR Component.
Therefore, the yield to maturity on the Class X-2 Certificates will be extremely
sensitive to the rate and timing of prepayments of principal (including
voluntary prepayments, delinquencies, defaults and liquidations) on the
Worldwide Plaza LIBOR Component and any repurchase with respect to breaches of
representations and warranties with respect to the Worldwide Plaza Loan. The
rate at which voluntary prepayments occur on the Worldwide Plaza LIBOR Component
will be affected by a variety of factors, including, without limitation, the
level of prevailing interest rates, the availability of mortgage credit, the
occurrence of casualties or natural disasters and economic, demographic, tax,
legal and other factors, and no representation is made as to the anticipated
rate of prepayments on the Worldwide Plaza LIBOR Component.
Certificateholders are not entitled to receive distributions of Scheduled
Payments when due except to the extent they are either covered by an Advance or
actually received. Consequently, any defaulted Scheduled Payment for which no
such Advance is made will tend to extend the weighted average lives of the
Certificates, whether or not a permitted extension of the due date of the
related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, geographic,
social and other factors, including the level of mortgage interest rates and the
rate at which borrowers default on their mortgage loans. The terms of the
Mortgage Loans (in particular, the term of any Prepayment Lockout Period, the
extent to which Prepayment Premiums are due with respect to any principal
prepayments, the right of the mortgagee to apply condemnation and casualty
proceeds to prepay the Mortgage Loan, the availability of certain rights to
defease all or a portion of the Mortgage Loan, and any increase in the interest
rate and the application of Excess Cash Flow, if applicable, to prepay the
related Mortgage Loan) may affect the rate of principal payments on Mortgage
Loans, and consequently, the yield to maturity of the Classes of Offered
Certificates. See "Mortgage Pool Characteristics" and "Description of the
Mortgage Loans and Mortgaged Properties" herein.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans, the greater the effect on such
investor's yield to maturity. As a result, the effect on such investor's yield
of principal payments occurring at a rate higher (or lower) than the rate
S-245
<PAGE>
anticipated by the investor during the period immediately following the issuance
of the Offered Certificates would not be fully offset by a subsequent like
reduction (or increase) in the rate of principal payments.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Offered
Certificates. In addition, although Excess Cash Flow is applied to reduce
principal of the respective Mortgage Loans (other than with respect to the
DDR/DRA Loan) after their respective Anticipated Repayment Dates, there can be
no assurance that any of such Mortgage Loans will be prepaid on that date or any
date prior to maturity. Investors are urged to make an investment decision with
respect to any Class of Offered Certificates based on the anticipated yield to
maturity of such Class of Offered Certificates resulting from its purchase price
and such investor's own determination as to anticipated Mortgage Loan prepayment
rates under a variety of scenarios. The extent to which any Class of Offered
Certificates is purchased at a discount or a premium and the degree to which the
timing of payments on such Class of Offered Certificates is sensitive to
prepayments will determine the extent to which the yield to maturity of such
Class of Offered Certificates may vary from the anticipated yield. An investor
should carefully consider the associated risks, including, in the case of any
Offered Certificates purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Offered Certificates purchased at a premium, the risk that a
faster than anticipated rate of principal payments could result in an actual
yield to such investor that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of the
principal balance of Offered Certificates entitled to distributions of
principal, may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest such amounts distributed to it may be lower than the
applicable Certificate Interest Rate. Conversely, slower rates of prepayments on
the Mortgage Loans, and therefore, of amounts distributable in reduction of
principal balance of the Offered Certificates entitled to distributions of
principal, may coincide with periods of high prevailing interest rates. During
such periods, the amount of principal distributions resulting from prepayments
available to an investor in such Certificates for reinvestment at such high
prevailing interest rates may be relatively small.
The effective yield to holders of Group 1 Certificates will be lower than
the yield otherwise produced by the applicable Certificate Interest Rate and
applicable purchase prices because while interest will accrue during each
Interest Accrual Period, the distribution of such interest will not be made
until the Distribution Date immediately following such Interest Accrual Period,
and principal paid on any Distribution Date will not bear interest during the
period from the end of such Interest Accrual Period to the Distribution Date
that follows.
YIELD ON THE OFFERED CERTIFICATES
The yield to maturity of Offered Certificates will be sensitive to the rate
and timing of principal payments (including voluntary and involuntary
prepayments and repurchases), delinquencies and liquidations on the Mortgage
Loans.
The following tables indicate the assumed purchase price (before adding
accrued interest, if any), expressed as a percentage of the applicable
Certificate Principal Amount, and (a) the hypothetical pre-tax yield to maturity
on the Offered Certificates (other than the Class C-2 Certificates), stated on a
corporate bond equivalent basis, based on certain hypothetical scenarios, or (b)
the hypothetical discounted margin, as described below, on the Class C-2
Certificates. The pre-tax yields to maturity set forth in the tables below were
calculated by determining the monthly discount rate that, when applied to the
assumed stream of cash flows to be paid on the Offered Certificates (other than
the Class C-2 Certificates), would cause the discounted present value of such
assumed cash flows to equal the assumed purchase price thereof, plus
S-246
<PAGE>
accrued interest, if any, as basis points and by converting such monthly rates
to corporate bond equivalent rates. The discounted margins set forth in the
tables below for the Class C-2 Certificates were calculated in accordance with
standard formulas for mortgage-backed securities published by the Public
Securities Association to represent the increment over LIBOR that causes the
assumed purchase price of the Class C-2 Certificates to equal the discounted
present value of its cash flows, compounded monthly. Such calculations of yield
and discounted margin do not take into account variations that may occur in the
interest rates at which investors may be able to reinvest funds received by them
as distributions on the Offered Certificates and consequently, do not purport to
reflect the return on any investment in the Offered Certificates when such
reinvestment rates are considered.
For purposes of preparing the tables, it was assumed that (i) the Mortgage
Loans have the following characteristics as of the Cut-Off Date:
<TABLE>
<CAPTION>
REMAINING
TERM TO
ANTICIPATED REMAINING
CUT-OFF DATE REPAYMENT TERM TO
PRINCIPAL DATE MATURITY
MORTGAGE LOAN BALANCE (MONTHS) (MONTHS)
-------------------------------------------------------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
DDR/DRA Loan.................................................. 3$22,500,000 N/A 56
Courtyard Loan................................................ 321,577,850 174 234
Worldwide Plaza Loan..........................................
a. Worldwide Plaza Fixed Component A.......................... 118,576,031 81 237
b. Worldwide Plaza LIBOR Component............................ 50,000,000 81 237
c. Worldwide Plaza Fixed Component B.......................... 105,000,000 81 237
Prentiss Loan................................................. 180,100,000 113 413
Arden Loan.................................................... 175,000,000 80 380
Villa Marina Loan............................................. 58,000,000 108 408
Valley View Loan.............................................. 51,000,000 108 408
Sun Communities Loan.......................................... 44,963,187 119 359
<CAPTION>
ASSUMED
NET CASH
FLOW
-----------
<S> <C>
NA
$49,500,000
39,000,000
26,600,000
27,000,000
8,270,000
7,350,000
6,980,000
</TABLE>
(ii) the Classes of P & I Certificates have the Certificate Interest Rates
set forth on the cover page of this Prospectus Supplement.
(iii) each Mortgage Loan will pay principal and interest and scheduled
payments will be timely received on the 10th day of each month, commencing in
November 1997; (iv) the Depositor does not repurchase any Mortgage Loan as
described herein under "The Pooling Agreement--Representations and Warranties;
Repurchase"; (v) none of the Depositor, Master Servicer or the Class LR
Certificateholders exercise the right to cause early termination of the Trust
Fund; (vi) 1 month LIBOR remains constant at 5.625% per annum; (vii) investors
will settle their purchase of the Offered Certificates on October 15, 1997;
(viii) there are no delinquencies; (ix) partial prepayments on the Mortgage
Loans are permitted, but are assumed not to affect the amortization schedules;
(x) no Prepayment Premiums are collected; (xi) there are no Prepayment Interest
Shortfalls or Appraisal Reduction Amounts; (xii) distributions on the Offered
Certificates are made on the 12th day of the month, commencing in November 1997
(each assumed to be a Business Day); (xiii) no Balloon Payment is extended
beyond its maturity date; and (xiv) unless otherwise specified in the Scenarios
described below, the Mortgage Loans do not prepay (assumptions (i) through (xiv)
above are collectively referred to as the "Mortgage Loan Assumptions").
In the case of Scenario 1 below, it is assumed that all of the Mortgage
Loans (other than the DDR/ DRA Loan) are paid in full on their respective
Anticipated Repayment Dates and the Balloon Payment due on the DDR/DRA Loan is
paid on its final maturity date. In the case of Scenario 2, it is assumed that
(i) the Mortgage Loans begin to prepay on the first date that such Mortgage
Loans may be voluntarily prepaid without penalty (other than through
defeasance), (ii) such prepayments are made at a rate of 25% CPR through their
Anticipated Repayment Dates or, with respect to the DDR/DRA Loan, its final
maturity date, (iii) such Mortgage Loans (other than the DDR/DRA Loan and the
Worldwide Plaza LIBOR Component) are paid in full on their Anticipated Repayment
Dates, (iv) the Balloon Payment on
S-247
<PAGE>
the DDR/DRA Loan is paid in full on its final maturity date and (v) the
Worldwide Plaza LIBOR Component is paid in full on the Due Date in July 2003. In
the case of Scenario 3, it is assumed that (i) the Mortgage Loans begin to
prepay on the first date that such Mortgage Loans may be voluntarily prepaid
without penalty (other than through defeasance), (ii) such prepayments are made
at a rate of 50% CPR through their Anticipated Repayment Dates or, with respect
to the DDR/DRA Loan, its final maturity date, (iii) the outstanding principal
balance of such Mortgage Loans (other than the DDR/DRA Loan and the Worldwide
Plaza LIBOR Component) are paid in full on their Anticipated Repayment Dates,
(iv) the Balloon Payment on the DDR/DRA Loan is paid in full on its final
maturity date and (v) the Worldwide Plaza LIBOR Component is paid in full on the
Due Date in July 2002. In the case of Scenario 4, it is assumed that (i) the
Mortgage Loans begin to prepay on the first date that such Mortgage Loans may be
voluntarily prepaid without penalty (other than through defeasance), (ii) such
prepayments are made at a rate of 75% CPR through their Anticipated Repayment
Dates or, with respect to the DDR/DRA Loan, its final maturity date, (iii) the
outstanding principal balance of such Mortgage Loans (other than the DDR/ DRA
Loan and the Worldwide Plaza LIBOR Component) are paid in full on their
Anticipated Repayment Dates, (iv) the Balloon Payment on the DDR/DRA Loan is
paid in full on its final maturity date and (v) the Worldwide Plaza LIBOR
Component is paid in full on the Due Date in July 2001. In the case of Scenario
5, it is assumed that (i) the Mortgage Loans (other than the Worldwide Plaza
LIBOR Component) are fully paid on the first date that such Mortgage Loans may
be voluntarily prepaid without penalty (other than through defeasance) and (ii)
the Worldwide Plaza LIBOR Component is paid in full on the Due Date in July
2000. In the case of Scenario 6, it is assumed that (i) the outstanding
principal balance of the Worldwide Plaza LIBOR Component is paid in full on its
Anticipated Repayment Date and the Balloon Payment due on the DDR/DRA Loan is
paid in full on its final maturity date, (ii) the remaining Mortgage Loans
receive prepayments of principal after their respective Anticipated Repayment
Dates in an amount equal to (a) 100% of assumed net cash flow less (b) scheduled
debt service coverage payments, (iii) the loans are extended until the earlier
of (a) 5 years after their Anticipated Repayment Dates, and thereupon any
remaining unpaid principal balance is paid in full or (b) the date on which the
unpaid principal balance is paid in full, (iv) any Excess Interest will accrue
at the excess of the Mortgage Loan's Adjusted Interest Rate over the Mortgage
Loan's Base Interest Rate and will be deferred and will bear interest at the
Mortgage Loan's Adjusted Interest Rate, (v) the Adjusted Interest Rate for any
Mortgage Loan which has Excess Interest is 2% per annum above such Mortgage
Loan's Base Interest Rate and (vi) Excess Interest, if any, is received on the
Due Date described in clause (iii) above. Scenarios 1, 2, 3, 4, 5 and 6 are
collectively referred to herein as the "Scenarios."
S-248
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS A-1 CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
------------------------- ------------------------ ------------------------ ------------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- -------------------- ---------- ------------- --------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100-24.............. 6.695 4.10 6.694 4.08 6.693 4.06 6.692 4.03
100-28.............. 6.665 4.10 6.664 4.09 6.663 4.06 6.661 4.03
101-00.............. 6.635 4.10 6.634 4.09 6.633 4.07 6.631 4.03
101-04.............. 6.605 4.11 6.604 4.09 6.602 4.07 6.600 4.04
101-08.............. 6.575 4.11 6.573 4.09 6.572 4.07 6.569 4.04
101-12.............. 6.545 4.11 6.543 4.09 6.542 4.07 6.539 4.04
101-16.............. 6.515 4.11 6.513 4.09 6.511 4.07 6.508 4.04
101-20.............. 6.485 4.11 6.483 4.09 6.481 4.07 6.478 4.04
101-24.............. 6.455 4.11 6.453 4.10 6.451 4.07 6.448 4.04
101-28.............. 6.425 4.11 6.423 4.10 6.421 4.08 6.417 4.05
102-00.............. 6.395 4.12 6.393 4.10 6.391 4.08 6.387 4.05
102-04.............. 6.366 4.12 6.364 4.10 6.361 4.08 6.357 4.05
102-08.............. 6.336 4.12 6.334 4.10 6.331 4.08 6.327 4.05
Weighted Average
Life (yrs.)....... 5.04 5.01 4.98 4.94
First Principal
Distribution
Date.............. 11/12/97 11/12/97 11/12/97 11/12/97 11/12/97
Last Principal
Distribution
Date.............. 06/12/04 06/12/04 06/12/04 06/12/04 06/12/04
<CAPTION>
SCENARIO 5 SCENARIO 6
------------------------ ------------------------
CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS)
- -------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
100-24.............. 6.684 3.87 6.707 4.37
100-28.............. 6.652 3.87 6.679 4.37
101-00.............. 6.620 3.87 6.650 4.37
101-04.............. 6.588 3.87 6.622 4.38
101-08.............. 6.556 3.87 6.594 4.38
101-12.............. 6.524 3.87 6.566 4.38
101-16.............. 6.492 3.88 6.538 4.38
101-20.............. 6.461 3.88 6.510 4.38
101-24.............. 6.429 3.88 6.482 4.39
101-28.............. 6.397 3.88 6.454 4.39
102-00.............. 6.366 3.88 6.426 4.39
102-04.............. 6.334 3.88 6.398 4.39
102-08.............. 6.303 3.88 6.370 4.39
Weighted Average
Life (yrs.)....... 4.70 5.50
First Principal
Distribution
Date.............. 11/12/97
Last Principal
Distribution
Date.............. 06/12/07
</TABLE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS A-2 CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
------------------------- ------------------------ ------------------------ ------------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- -------------------- ---------- ------------- --------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100-00.............. 6.931 5.33 6.931 5.33 6.931 5.33 6.931 5.33
100-08.............. 6.884 5.33 6.884 5.33 6.884 5.33 6.884 5.33
100-16.............. 6.838 5.34 6.838 5.34 6.838 5.34 6.838 5.34
100-24.............. 6.791 5.34 6.791 5.34 6.791 5.34 6.791 5.34
101-00.............. 6.745 5.34 6.745 5.34 6.745 5.34 6.745 5.34
101-08.............. 6.699 5.35 6.699 5.35 6.699 5.35 6.699 5.35
101-16.............. 6.652 5.35 6.652 5.35 6.652 5.35 6.652 5.35
101-24.............. 6.607 5.35 6.607 5.35 6.607 5.35 6.607 5.35
102-00.............. 6.561 5.36 6.561 5.36 6.561 5.36 6.561 5.36
102-08.............. 6.515 5.36 6.515 5.36 6.515 5.36 6.515 5.36
102-16.............. 6.470 5.36 6.470 5.36 6.470 5.36 6.470 5.36
102-24.............. 6.424 5.36 6.424 5.36 6.424 5.36 6.424 5.36
103-00.............. 6.379 5.37 6.379 5.37 6.379 5.37 6.379 5.37
Weighted Average
Life (yrs.)....... 6.90 6.90 6.90 6.90
First Principal
Distribution
Date.............. 06/12/04 06/12/04 06/12/04 06/12/04 06/12/04
Last Principal
Distribution
Date.............. 09/12/06 09/12/06 09/12/06 09/12/06 09/12/06
<CAPTION>
SCENARIO 5 SCENARIO 6
------------------------ ------------------------
CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS)
- -------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
100-00.............. 6.931 5.33 7.187 7.40
100-08.............. 6.884 5.33 7.154 7.41
100-16.............. 6.838 5.34 7.120 7.41
100-24.............. 6.791 5.34 7.087 7.42
101-00.............. 6.745 5.34 7.053 7.42
101-08.............. 6.699 5.35 7.020 7.43
101-16.............. 6.652 5.35 6.987 7.44
101-24.............. 6.607 5.35 6.954 7.44
102-00.............. 6.561 5.36 6.921 7.45
102-08.............. 6.515 5.36 6.888 7.45
102-16.............. 6.470 5.36 6.855 7.46
102-24.............. 6.424 5.36 6.823 7.46
103-00.............. 6.379 5.37 6.790 7.47
Weighted Average
Life (yrs.)....... 6.90 10.74
First Principal
Distribution
Date.............. 06/12/07
Last Principal
Distribution
Date.............. 06/12/09
</TABLE>
S-249
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS A-3 CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
------------------------- ------------------------ ------------------------ ------------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- -------------------- ---------- ------------- --------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100-00.............. 6.994 6.56 6.994 6.56 6.994 6.55 6.994 6.54
100-08.............. 6.956 6.57 6.956 6.56 6.956 6.55 6.956 6.54
100-16.............. 6.918 6.57 6.918 6.57 6.918 6.56 6.918 6.55
100-24.............. 6.880 6.58 6.880 6.57 6.880 6.56 6.880 6.55
101-00.............. 6.843 6.58 6.843 6.58 6.842 6.57 6.842 6.55
101-08.............. 6.805 6.59 6.805 6.58 6.805 6.57 6.805 6.56
101-16.............. 6.768 6.59 6.768 6.58 6.767 6.58 6.767 6.56
101-24.............. 6.731 6.60 6.730 6.59 6.730 6.58 6.730 6.57
102-00.............. 6.694 6.60 6.693 6.59 6.693 6.58 6.692 6.57
102-08.............. 6.656 6.60 6.656 6.60 6.656 6.59 6.655 6.58
102-16.............. 6.620 6.61 6.619 6.60 6.619 6.59 6.618 6.58
102-24.............. 6.583 6.61 6.582 6.61 6.582 6.60 6.581 6.58
103-00.............. 6.546 6.62 6.546 6.61 6.545 6.60 6.544 6.59
Weighted Average
Life (yrs.)....... 9.13 9.12 9.10 9.07
First Principal
Distribution
Date.............. 09/12/2006 09/12/2006 09/12/2006 09/12/2006 09/12/2006
Last Principal
Distribution
Date.............. 03/12/2007 03/12/2007 03/12/2007 02/12/2007 12/12/2006
<CAPTION>
SCENARIO 5 SCENARIO 6
------------------------ ------------------------
CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS)
- -------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
100-00.............. 6.994 6.52 7.480 7.96
100-08.............. 6.956 6.53 7.449 7.97
100-16.............. 6.918 6.53 7.418 7.97
100-24.............. 6.880 6.54 7.386 7.98
101-00.............. 6.842 6.54 7.355 7.99
101-08.............. 6.804 6.55 7.324 7.99
101-16.............. 6.766 6.55 7.294 8.00
101-24.............. 6.729 6.55 7.263 8.01
102-00.............. 6.692 6.56 7.232 8.01
102-08.............. 6.654 6.56 7.202 8.02
102-16.............. 6.617 6.57 7.171 8.02
102-24.............. 6.580 6.57 7.141 8.03
103-00.............. 6.543 6.58 7.111 8.04
Weighted Average
Life (yrs.)....... 9.05 11.93
First Principal
Distribution
Date.............. 06/12/2009
Last Principal
Distribution
Date.............. 10/12/2010
</TABLE>
WEIGHTED AVERAGE LIFE, FIRST DISTRIBUTION DATE, LAST DISTRIBUTION DATE
AND PRE-TAX YIELD TO MATURITY OF CLASS X-1 CERTIFICATES UNDER VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
----------- ----------- ----------- ----------- ----------- -----------
CBE CBE CBE CBE CBE CBE
YIELD YIELD YIELD YIELD YIELD YIELD
PRICE (32NDS) (%) (%) (%) (%) (%) (%)
- ----------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
4-10................................................. 8.528 8.486 8.435 8.361 7.933 11.948
4-11................................................. 8.325 8.284 8.232 8.159 7.730 11.764
4-12................................................. 8.125 8.084 8.032 7.959 7.530 11.583
4-13................................................. 7.927 7.886 7.835 7.761 7.332 11.403
4-14................................................. 7.732 7.691 7.639 7.566 7.136 11.226
4-15................................................. 7.539 7.498 7.446 7.373 6.943 11.051
4-16................................................. 7.349 7.307 7.256 7.182 6.752 10.878
4-17................................................. 7.161 7.119 7.067 6.994 6.564 10.707
4-18................................................. 6.974 6.933 6.881 6.808 6.377 10.538
4-19................................................. 6.790 6.749 6.697 6.624 6.193 10.371
4-20................................................. 6.609 6.567 6.515 6.442 6.011 10.206
4-21................................................. 6.429 6.387 6.335 6.262 5.831 10.043
4-22................................................. 6.251 6.209 6.158 6.084 5.652 9.882
Weighted Average
Life (yrs.)........................................ 7.75 7.73 7.71 7.68 7.50 9.72
First
Distribution Date.................................. 11/12/97 11/12/97 11/12/97 11/12/97 11/12/97 11/12/97
Last
Distribution Date.................................. 04/12/2012 04/12/2012 04/12/2012 04/12/2012 10/12/2011 05/12/2015
</TABLE>
S-250
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS B CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
------------------------- ------------------------ ------------------------ ------------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- -------------------- ---------- ------------- --------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100-00.............. 7.046 6.69 7.046 6.69 7.046 6.69 7.046 6.69
100-08.............. 7.008 6.70 7.008 6.70 7.008 6.70 7.008 6.70
100-16.............. 6.971 6.70 6.971 6.70 6.971 6.70 6.971 6.70
100-24.............. 6.934 6.71 6.934 6.71 6.934 6.71 6.934 6.71
101-00.............. 6.897 6.71 6.897 6.71 6.897 6.71 6.897 6.71
101-08.............. 6.861 6.72 6.861 6.72 6.861 6.72 6.861 6.72
101-16.............. 6.824 6.72 6.824 6.72 6.824 6.72 6.824 6.72
101-24.............. 6.787 6.73 6.787 6.73 6.787 6.73 6.787 6.73
102-00.............. 6.751 6.73 6.751 6.73 6.751 6.73 6.751 6.73
102-08.............. 6.715 6.73 6.715 6.73 6.715 6.73 6.715 6.73
102-16.............. 6.678 6.74 6.678 6.74 6.678 6.74 6.678 6.74
102-24.............. 6.642 6.74 6.642 6.74 6.642 6.74 6.642 6.74
103-00.............. 6.606 6.75 6.606 6.75 6.606 6.75 6.606 6.75
Weighted Average
Life (yrs.)....... 9.41 9.41 9.41 9.41
First Principal
Distribution
Date.............. 03/12/2007 03/12/2007 03/12/2007 02/12/2007 12/12/2006
Last Principal
Distribution
Date.............. 03/12/2007 03/12/2007 03/12/2007 03/12/2007 12/12/2006
<CAPTION>
SCENARIO 5 SCENARIO 6
------------------------ ------------------------
CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS)
- -------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
100-00.............. 7.046 6.57 7.492 8.62
100-08.............. 7.008 6.57 7.463 8.63
100-16.............. 6.970 6.57 7.434 8.64
100-24.............. 6.932 6.58 7.405 8.65
101-00.............. 6.894 6.58 7.376 8.65
101-08.............. 6.857 6.59 7.348 8.66
101-16.............. 6.819 6.59 7.319 8.67
101-24.............. 6.782 6.60 7.291 8.68
102-00.............. 6.745 6.60 7.263 8.68
102-08.............. 6.708 6.61 7.235 8.69
102-16.............. 6.671 6.61 7.207 8.70
102-24.............. 6.634 6.61 7.179 8.71
103-00.............. 6.598 6.62 7.151 8.71
Weighted Average
Life (yrs.)....... 9.16 13.77
First Principal
Distribution
Date.............. 10/12/2010
Last Principal
Distribution
Date.............. 10/12/2011
</TABLE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS C-1 CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
------------------------- ------------------------ ------------------------ ------------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- -------------------- ---------- ------------- --------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
99-16............... 7.170 6.83 7.171 6.81 7.171 6.79 7.171 6.76
99-24............... 7.134 6.83 7.134 6.81 7.134 6.80 7.134 6.77
100-00.............. 7.097 6.84 7.097 6.82 7.097 6.80 7.097 6.77
100-08.............. 7.061 6.84 7.061 6.82 7.060 6.81 7.060 6.78
100-16.............. 7.024 6.84 7.024 6.83 7.024 6.81 7.024 6.78
100-24.............. 6.988 6.85 6.988 6.83 6.987 6.82 6.987 6.79
101-00.............. 6.952 6.85 6.952 6.84 6.951 6.82 6.951 6.79
101-08.............. 6.916 6.86 6.916 6.84 6.915 6.83 6.914 6.80
101-16.............. 6.880 6.86 6.880 6.85 6.879 6.83 6.878 6.80
101-24.............. 6.844 6.87 6.844 6.85 6.843 6.83 6.842 6.81
102-00.............. 6.809 6.87 6.808 6.86 6.807 6.84 6.806 6.81
102-08.............. 6.773 6.88 6.772 6.86 6.771 6.84 6.770 6.82
102-16.............. 6.738 6.88 6.737 6.87 6.736 6.85 6.734 6.82
Weighted Average
Life (yrs.)....... 9.73 9.70 9.66 9.60
First Principal
Distribution
Date.............. 03/12/2007 03/12/2007 03/12/2007 03/12/2007 12/12/2006
Last Principal
Distribution
Date.............. 09/12/2007 09/12/2007 09/12/2007 09/12/2007 03/12/2007
<CAPTION>
SCENARIO 5 SCENARIO 6
------------------------ ------------------------
CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS)
- -------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
99-16............... 7.172 6.64 7.638 8.77
99-24............... 7.135 6.64 7.609 8.78
100-00.............. 7.097 6.65 7.581 8.79
100-08.............. 7.059 6.65 7.552 8.80
100-16.............. 7.022 6.66 7.524 8.80
100-24.............. 6.985 6.66 7.496 8.81
101-00.............. 6.948 6.67 7.468 8.82
101-08.............. 6.911 6.67 7.440 8.83
101-16.............. 6.874 6.67 7.412 8.84
101-24.............. 6.837 6.68 7.384 8.84
102-00.............. 6.800 6.68 7.356 8.85
102-08.............. 6.764 6.69 7.329 8.86
102-16.............. 6.727 6.69 7.301 8.87
Weighted Average
Life (yrs.)....... 9.35 14.30
First Principal
Distribution
Date.............. 10/12/2011
Last Principal
Distribution
Date.............. 03/12/2012
</TABLE>
S-251
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE
AND DISCOUNT MARGIN OF CLASS C-2 CERTIFICATES UNDER VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
DISCOUNT DISCOUNT DISCOUNT DISCOUNT DISCOUNT DISCOUNT
MARGIN MARGIN MARGIN MARGIN MARGIN MARGIN
PRICE (32NDS) (%) (%) (%) (%) (%) (%)
- --------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
99-20.......... 0.497 0.507 0.520 0.541 0.577 0.497
99-22.......... 0.486 0.494 0.505 0.522 0.553 0.486
99-24.......... 0.475 0.481 0.490 0.504 0.528 0.475
99-26.......... 0.464 0.468 0.475 0.485 0.503 0.464
99-28.......... 0.452 0.455 0.460 0.467 0.479 0.452
99-30.......... 0.441 0.443 0.445 0.448 0.454 0.441
100-0.......... 0.430 0.430 0.430 0.430 0.430 0.430
100-2.......... 0.419 0.417 0.415 0.411 0.405 0.419
100-4.......... 0.408 0.404 0.400 0.393 0.381 0.408
100-6.......... 0.396 0.392 0.385 0.375 0.357 0.396
100-8.......... 0.385 0.379 0.370 0.356 0.332 0.385
100-10......... 0.374 0.366 0.355 0.338 0.308 0.374
100-12......... 0.363 0.354 0.340 0.319 0.283 0.363
Weighted
Average
Life (yrs.)... 6.74 5.74 4.74 3.74 2.74 6.74
First Principal
Distribution
Date.......... 07/12/2004 07/12/2003 07/12/2002 07/12/2001 07/12/2000 07/12/2004
Last Principal
Distribution
Date.......... 07/12/2004 07/12/2003 07/12/2002 07/12/2001 07/12/2000 07/12/2004
</TABLE>
WEIGHTED AVERAGE LIFE, FIRST DISTRIBUTION DATE, LAST DISTRIBUTION DATE
AND PRE-TAX YIELD OF CLASS X-2 CERTIFICATES UNDER VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
----------- ----------- ----------- ----------- ----------- -----------
CBE CBE CBE CBE CBE CBE
YIELD YIELD YIELD YIELD YIELD YIELD
PRICE (32NDS) (%) (%) (%) (%) (%) (%)
- -------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
0-6................. 58.421 56.794 53.671 47.283 32.889 58.421
0-7................. 48.049 45.998 42.254 34.951 19.248 48.049
0-8................. 40.190 37.757 33.474 25.404 8.642 40.190
0-9................. 33.967 31.193 26.440 17.716 0.079 33.967
0-10................ 28.875 25.796 20.629 11.340 -7.033 28.875
0-11................ 24.604 21.249 15.715 5.933 -13.071 24.604
0-12................ 20.947 17.344 11.481 1.263 -18.286 20.947
0-13................ 17.767 13.938 7.779 -2.827 -22.855 17.767
0-14................ 14.965 10.929 4.501 -6.454 -26.905 14.965
0-15................ 12.467 8.242 1.569 -9.702 -30.530 12.467
0-16................ 10.221 5.820 -1.077 -12.636 -33.802 10.221
0-17................ 8.184 3.621 -3.484 -15.306 -36.778 8.184
0-18................ 6.325 1.610 -5.686 -17.750 -39.501 6.325
Weighted Average
Life (yrs.)....... 6.74 5.74 4.74 3.74 2.74 6.74
First Distribution
Date.............. 07/12/2004 07/12/2003 07/12/2002 07/12/2001 07/12/2000 07/12/2004
Last Distribution
Date.............. 07/12/2004 07/12/2003 07/12/2002 07/12/2001 07/12/2000 07/12/2004
</TABLE>
S-252
<PAGE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS D CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO
SCENARIO 1 SCENARIO 2 SCENARIO 3 4
-------------------------- -------------------------- -------------------------- ---------
CBE MODIFIED CBE MODIFIED CBE MODIFIED CBE
YIELD DURATION YIELD DURATION YIELD DURATION YIELD
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS) (%)
- --------------------------- --------- --------------- --------- --------------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
99-00...................... 7.379 7.93 7.379 7.91 7.379 7.90 7.379
99-08...................... 7.347 7.94 7.347 7.92 7.347 7.91 7.347
99-16...................... 7.315 7.95 7.315 7.93 7.316 7.92 7.316
99-24...................... 7.284 7.95 7.284 7.94 7.284 7.92 7.284
100-00..................... 7.252 7.96 7.252 7.94 7.252 7.93 7.252
100-08..................... 7.221 7.97 7.221 7.95 7.221 7.94 7.221
100-16..................... 7.190 7.97 7.190 7.96 7.190 7.95 7.190
100-24..................... 7.159 7.98 7.158 7.96 7.158 7.95 7.158
101-00..................... 7.128 7.99 7.127 7.97 7.127 7.96 7.127
101-08..................... 7.097 8.00 7.096 7.98 7.096 7.97 7.096
101-16..................... 7.066 8.00 7.066 7.99 7.065 7.97 7.065
101-24..................... 7.035 8.01 7.035 7.99 7.034 7.98 7.034
102-00..................... 7.005 8.02 7.004 8.00 7.004 7.99 7.004
Weighted Average
Life (yrs.).............. 12.48 12.44 12.40 12.38
First Principal
Distribution Date........ 09/12/07 09/12/07 09/12/07 09/12/07
Last Principal
Distribution Date........ 04/12/12 04/12/12 01/12/12 11/12/11
<CAPTION>
SCENARIO 5 SCENARIO 6
-------------------------- --------------------------
MODIFIED CBE MODIFIED CBE MODIFIED
DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (YEARS) (%) (YEARS) (%) (YEARS)
- --------------------------- --------------- --------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
99-00...................... 7.90 7.380 7.88 7.910 8.78
99-08...................... 7.90 7.348 7.89 7.882 8.79
99-16...................... 7.91 7.316 7.89 7.853 8.79
99-24...................... 7.92 7.284 7.90 7.824 8.80
100-00..................... 7.92 7.252 7.91 7.796 8.81
100-08..................... 7.93 7.221 7.91 7.768 8.82
100-16..................... 7.94 7.189 7.92 7.740 8.83
100-24..................... 7.95 7.158 7.93 7.711 8.84
101-00..................... 7.95 7.127 7.93 7.683 8.84
101-08..................... 7.96 7.096 7.94 7.656 8.85
101-16..................... 7.97 7.065 7.95 7.628 8.86
101-24..................... 7.97 7.034 7.96 7.600 8.87
102-00..................... 7.98 7.003 7.96 7.572 8.88
Weighted Average
Life (yrs.).............. 12.34 14.54
First Principal
Distribution Date........ 03/12/07 03/12/12
Last Principal
Distribution Date........ 10/12/11 10/12/12
</TABLE>
WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL DISTRIBUTION DATE, LAST PRINCIPAL
DISTRIBUTION DATE,
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF CLASS E CERTIFICATES UNDER
VARIOUS SCENARIOS
<TABLE>
<CAPTION>
SCENARIO 1 SCENARIO 2 SCENARIO 3
------------------ ------------------ ------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- ---------------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
98-16................. 7.582 8.61 7.582 8.61 7.583 8.58
98-24................. 7.553 8.61 7.553 8.61 7.553 8.59
99-00................. 7.523 8.62 7.523 8.62 7.524 8.60
99-08................. 7.494 8.63 7.494 8.63 7.494 8.61
99-16................. 7.465 8.64 7.465 8.64 7.465 8.62
99-24................. 7.436 8.65 7.436 8.65 7.436 8.63
100-00................ 7.407 8.66 7.407 8.66 7.407 8.63
100-08................ 7.378 8.67 7.378 8.67 7.378 8.64
100-16................ 7.350 8.67 7.350 8.67 7.350 8.65
100-24................ 7.321 8.68 7.321 8.68 7.321 8.66
101-00................ 7.293 8.69 7.293 8.69 7.292 8.67
101-08................ 7.264 8.70 7.264 8.70 7.264 8.68
101-16................ 7.236 8.71 7.236 8.71 7.235 8.68
Weighted Average
Life (yrs.)......... 14.49 14.49 14.42 14.25
First Principal
Distribution Date... 04/12/12 04/12/12 01/12/12 11/12/11
Last Principal
Distribution Date... 04/12/12 04/12/12 04/12/12 03/12/12
<CAPTION>
SCENARIO 4 SCENARIO 5 SCENARIO 6
------------------ ------------------ ------------------
CBE MODIFIED CBE MODIFIED CBE MODIFIED
YIELD DURATION YIELD DURATION YIELD DURATION
PRICE (32NDS) (%) (YEARS) (%) (YEARS) (%) (YEARS)
- ---------------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
98-16................. 7.584 8.52 7.585 8.44 8.095 8.97
98-24................. 7.554 8.53 7.555 8.44 8.067 8.98
99-00................. 7.524 8.54 7.526 8.45 8.039 8.98
99-08................. 7.495 8.55 7.496 8.46 8.011 8.99
99-16................. 7.466 8.56 7.466 8.47 7.983 9.00
99-24................. 7.436 8.57 7.436 8.48 7.955 9.01
100-00................ 7.407 8.58 7.407 8.49 7.927 9.02
100-08................ 7.378 8.58 7.378 8.49 7.900 9.03
100-16................ 7.349 8.59 7.348 8.50 7.872 9.04
100-24................ 7.320 8.60 7.319 8.51 7.845 9.05
101-00................ 7.291 8.61 7.290 8.52 7.817 9.06
101-08................ 7.263 8.62 7.261 8.53 7.790 9.07
101-16................ 7.234 8.62 7.232 8.53 7.763 9.08
Weighted Average
Life (yrs.)......... 13.99 15.53
First Principal
Distribution Date... 10/12/11 10/12/12
Last Principal
Distribution Date... 10/12/11 11/12/13
</TABLE>
S-253
<PAGE>
It is highly unlikely that principal of the Mortgage Loans will be repaid
consistent with the assumptions underlying any one of the Scenarios. The
Mortgage Loans will not have all of the characteristics assumed for purposes of
the Scenarios. Yield and discounted margin will be affected by prepayment rates,
Balloon Payment extensions, and, in the case of the Class C-2 Certificates,
LIBOR levels that actually occur during the life of the Offered Certificates,
all of which may differ, and may differ significantly, from the Mortgage Loan
Assumptions. There can be no assurance that the pre-tax yields or discounted
margins, as applicable, on the Offered Certificates will correspond to any of
the pre-tax yields or discounted margins, as applicable, shown herein or that
the aggregate purchase prices of the Offered Certificates will be as assumed.
Investors must make their own decisions as to the appropriate prepayment
assumptions to be used in deciding whether to purchase the Offered Certificates.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date" is the Distribution Date occurring three
years after the latest maturity date of any Mortgage Loan. Because certain of
the Mortgage Loans have maturity dates that occur earlier than the latest
maturity date, and because certain of the Mortgage Loans may be prepaid prior to
maturity, it is possible that the Certificate Principal Amount of each Class of
Offered Certificates will be reduced to zero significantly earlier than the
Rated Final Distribution Date. However, delinquencies on Mortgage Loans could
result in final distributions in reduction of the Certificate Principal Amount
of one or more Classes after the Rated Final Distribution Date of such Class or
Classes.
WEIGHTED AVERAGE LIFE OF OFFERED CERTIFICATES
Weighted average life refers to the average amount of time that will elapse
from the date of determination to the date of distribution or allocation to the
investor of each dollar in reduction of Certificate Principal Amount. The
weighted average lives of the Offered Certificates will be influenced by, among
other things, the rate at which principal of the Mortgage Loans is paid, which
may occur as a result of scheduled amortization, voluntary or involuntary
prepayments or liquidations.
The weighted average lives of the Offered Certificates may also be affected
to the extent that additional distributions in reduction of the Certificate
Principal Amount of such Certificates occur as a result of the repurchase or
purchase of Mortgage Loans from the Trust Fund as described under "The Pooling
Agreement--Representations and Warranties; Repurchase" or "--Optional
Termination; Optional Mortgage Loan Purchase" herein. Such a repurchase or
purchase from the Trust Fund will have the same effect on distributions to the
holders of Certificates as if the related Mortgage Loans had prepaid in full,
except that no Prepayment Premiums are made in respect thereof. The tables of
"Percentage of Initial Certificate Principal Amount Outstanding For Each
Designated Scenario" set forth below indicate the weighted average life of each
Class of Offered Certificates and set forth the percentage of the initial
Certificate Principal Amount of such Offered Certificates that would be
outstanding after each of the dates shown based on the assumptions for each of
the designated Scenarios described above under "--Yield on the Offered
Certificates." The tables have also been prepared on the basis of the Mortgage
Loan Assumptions described under "--Yield on the Offered Certificates." The
Mortgage Loan Assumptions made in preparing the previous and following tables
are expected to vary, and may vary significantly, from the actual performance of
the Mortgage Loans. It is highly unlikely that principal of the Mortgage Loans
will be repaid consistent with the assumptions underlying any one of the
Scenarios. Investors are urged to conduct their own analysis concerning the
likelihood that the Mortgage Loans may pay or prepay on any particular date.
S-254
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial Percent................................... 100 100 100 100 100
October 12, 1998.................................. 98 98 98 98 98
October 12, 1999.................................. 95 95 95 95 95
October 12, 2000.................................. 93 93 93 93 93
October 12, 2001.................................. 90 90 90 90 90
October 12, 2002.................................. 34 34 34 34 34
October 12, 2003.................................. 31 31 31 31 31
October 12, 2004.................................. 0 0 0 0 0
October 12, 2005.................................. 0 0 0 0 0
October 12, 2006.................................. 0 0 0 0 0
October 12, 2007 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 5.04 5.01 4.98 4.94 4.70
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -------------
Initial Percent................................... 100
October 12, 1998.................................. 98
October 12, 1999.................................. 95
October 12, 2000.................................. 93
October 12, 2001.................................. 90
October 12, 2002.................................. 34
October 12, 2003.................................. 31
October 12, 2004.................................. 26
October 12, 2005.................................. 17
October 12, 2006.................................. 7
October 12, 2007 and thereafter................... 0
Weighted Average Life (years)*.................... 5.50
</TABLE>
- ------------------------
* The weighted average life of the Class A-1 Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-2
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial Percent................................... 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100
October 12, 2004.................................. 13 13 13 13 13
October 12, 2005.................................. 6 6 6 6 6
October 12, 2006.................................. 0 0 0 0 0
October 12, 2007.................................. 0 0 0 0 0
October 12, 2008.................................. 0 0 0 0 0
October 12, 2009 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 6.90 6.90 6.90 6.90 6.90
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -----------
Initial Percent................................... 100
October 12, 1998.................................. 100
October 12, 1999.................................. 100
October 12, 2000.................................. 100
October 12, 2001.................................. 100
October 12, 2002.................................. 100
October 12, 2003.................................. 100
October 12, 2004.................................. 100
October 12, 2005.................................. 100
October 12, 2006.................................. 100
October 12, 2007.................................. 83
October 12, 2008.................................. 37
October 12, 2009 and thereafter................... 0
Weighted Average Life (years)*.................... 10.74
</TABLE>
- ------------------------
* The weighted average life of the Class A-2 Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
S-255
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-3
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial........................................... 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100
October 12, 2004.................................. 100 100 100 100 100
October 12, 2005.................................. 100 100 100 100 100
October 12, 2006.................................. 34 34 34 34 34
October 12, 2007.................................. 0 0 0 0 0
October 12, 2008.................................. 0 0 0 0 0
October 12, 2009.................................. 0 0 0 0 0
October 12, 2010 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 9.13 9.12 9.10 9.07 9.05
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -----------
Initial........................................... 100
October 12, 1998.................................. 100
October 12, 1999.................................. 100
October 12, 2000.................................. 100
October 12, 2001.................................. 100
October 12, 2002.................................. 100
October 12, 2003.................................. 100
October 12, 2004.................................. 100
October 12, 2005.................................. 100
October 12, 2006.................................. 100
October 12, 2007.................................. 100
October 12, 2008.................................. 100
October 12, 2009.................................. 28
October 12, 2010 and thereafter................... 0
Weighted Average Life (years)*.................... 11.93
</TABLE>
- ------------------------
* The weighted average life of the Class A-3 Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial........................................... 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100
October 12, 2004.................................. 100 100 100 100 100
October 12, 2005.................................. 100 100 100 100 100
October 12, 2006.................................. 100 100 100 100 100
October 12, 2007.................................. 0 0 0 0 0
October 12, 2008.................................. 0 0 0 0 0
October 12, 2009.................................. 0 0 0 0 0
October 12, 2010.................................. 0 0 0 0 0
October 12, 2011 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 9.41 9.41 9.41 9.41 9.16
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -----------
Initial........................................... 100
October 12, 1998.................................. 100
October 12, 1999.................................. 100
October 12, 2000.................................. 100
October 12, 2001.................................. 100
October 12, 2002.................................. 100
October 12, 2003.................................. 100
October 12, 2004.................................. 100
October 12, 2005.................................. 100
October 12, 2006.................................. 100
October 12, 2007.................................. 100
October 12, 2008.................................. 100
October 12, 2009.................................. 100
October 12, 2010.................................. 99
October 12, 2011 and thereafter................... 0
Weighted Average Life (years)*.................... 13.77
</TABLE>
- ------------------------
* The weighted average life of the Class B Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
S-256
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS C-1
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial........................................... 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100
October 12, 2004.................................. 100 100 100 100 100
October 12, 2005.................................. 100 100 100 100 100
October 12, 2006.................................. 100 100 100 100 100
October 12, 2007.................................. 0 0 0 0 0
October 12, 2008.................................. 0 0 0 0 0
October 12, 2009.................................. 0 0 0 0 0
October 12, 2010.................................. 0 0 0 0 0
October 12, 2011.................................. 0 0 0 0 0
October 12, 2012 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 9.73 9.70 9.66 9.60 9.35
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -----------
Initial........................................... 100
October 12, 1998.................................. 100
October 12, 1999.................................. 100
October 12, 2000.................................. 100
October 12, 2001.................................. 100
October 12, 2002.................................. 100
October 12, 2003.................................. 100
October 12, 2004.................................. 100
October 12, 2005.................................. 100
October 12, 2006.................................. 100
October 12, 2007.................................. 100
October 12, 2008.................................. 100
October 12, 2009.................................. 100
October 12, 2010.................................. 100
October 12, 2011.................................. 89
October 12, 2012 and thereafter................... 0
Weighted Average Life (years)*.................... 14.30
</TABLE>
- ------------------------
* The weighted average life of the Class C-1 Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
PERCENTAGE OF INITIAL NOTIONAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS C-2
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5
- -------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Initial........................................... 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 0
October 12, 2001.................................. 100 100 100 0 0
October 12, 2002.................................. 100 100 0 0 0
October 12, 2003.................................. 100 0 0 0 0
October 12, 2004.................................. 0 0 0 0 0
October 12, 2005.................................. 0 0 0 0 0
October 12, 2006.................................. 0 0 0 0 0
October 12, 2007.................................. 0 0 0 0 0
October 12, 2008.................................. 0 0 0 0 0
October 12, 2009.................................. 0 0 0 0 0
October 12, 2010.................................. 0 0 0 0 0
October 12, 2011.................................. 0 0 0 0 0
October 12, 2012.................................. 0 0 0 0 0
October 12, 2013.................................. 0 0 0 0 0
October 12, 2014.................................. 0 0 0 0 0
October 12, 2015 and thereafter................... 0 0 0 0 0
Weighted Average Life (years)*.................... 6.74 5.74 4.74 3.74 2.74
<CAPTION>
<S> <C>
DISTRIBUTION DATE SCENARIO 6
- -------------------------------------------------- -------------
Initial........................................... 100
October 12, 1998.................................. 100
October 12, 1999.................................. 100
October 12, 2000.................................. 100
October 12, 2001.................................. 100
October 12, 2002.................................. 100
October 12, 2003.................................. 100
October 12, 2004.................................. 0
October 12, 2005.................................. 0
October 12, 2006.................................. 0
October 12, 2007.................................. 0
October 12, 2008.................................. 0
October 12, 2009.................................. 0
October 12, 2010.................................. 0
October 12, 2011.................................. 0
October 12, 2012.................................. 0
October 12, 2013.................................. 0
October 12, 2014.................................. 0
October 12, 2015 and thereafter................... 0
Weighted Average Life (years)*.................... 6.74
</TABLE>
- ------------------------
* The weighted average life of the Class C-2 Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal or Notional Amount of such Class by the number of
years from the date of determination to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate distributions
or allocations in reduction of Certificate or Notional Principal Amount
referred to in clause (i).
S-257
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Initial........................................... 100 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100 100
October 12, 2004.................................. 100 100 100 100 100 100
October 12, 2005.................................. 100 100 100 100 100 100
October 12, 2006.................................. 100 100 100 100 100 100
October 12, 2007.................................. 89 89 89 89 89 100
October 12, 2008.................................. 75 75 75 75 75 100
October 12, 2009.................................. 60 60 60 60 60 100
October 12, 2010.................................. 44 44 44 44 44 100
October 12, 2011.................................. 26 23 19 12 0 100
October 12, 2012 and thereafter................... 0 0 0 0 0 0
Weighted Average Life (years)*.................... 12.48 12.44 12.40 12.38 12.34 14.54
</TABLE>
- ------------------------
* The weighted average life of the Class D Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL AMOUNT
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS E
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6
- -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Initial........................................... 100 100 100 100 100 100
October 12, 1998.................................. 100 100 100 100 100 100
October 12, 1999.................................. 100 100 100 100 100 100
October 12, 2000.................................. 100 100 100 100 100 100
October 12, 2001.................................. 100 100 100 100 100 100
October 12, 2002.................................. 100 100 100 100 100 100
October 12, 2003.................................. 100 100 100 100 100 100
October 12, 2004.................................. 100 100 100 100 100 100
October 12, 2005.................................. 100 100 100 100 100 100
October 12, 2006.................................. 100 100 100 100 100 100
October 12, 2007.................................. 100 100 100 100 100 100
October 12, 2008.................................. 100 100 100 100 100 100
October 12, 2009.................................. 100 100 100 100 100 100
October 12, 2010.................................. 100 100 100 100 100 100
October 12, 2011.................................. 100 100 100 100 0 100
October 12, 2012.................................. 0 0 0 0 0 98
October 12, 2013.................................. 0 0 0 0 0 0
October 12, 2014 and thereafter................... 0 0 0 0 0 0
Weighted Average Life (years)*.................... 14.49 14.49 14.42 14.25 13.99 15.53
</TABLE>
- ------------------------
* The weighted average life of the Class E Certificates is determined by (i)
multiplying the amount of each distribution or allocation in reduction of
Certificate Principal Amount of such Class by the number of years from the
date of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions or
allocations in reduction of Certificate Principal Amount referred to in
clause (i).
S-258
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans.
ERISA CONSIDERATIONS
The purchase by or transfer to an employee benefit plan or other retirement
arrangement, including an individual retirement account or a Keogh plan, which
is subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code, or a "governmental plan" (as
defined in Section 3(32) of ERISA) that is subject to any federal, state or
local law ("Similar Law") which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (each, a "Plan"), or a collective
investment fund in which such Plans are invested, an insurance company using the
assets of separate accounts or general accounts which include assets of Plans
(or which are deemed pursuant to ERISA or any Similar Law to include assets of
Plans) or other persons acting on behalf of any such Plan or using the assets of
any such Plan of the Class B, Class C-1, Class C-2, Class X-2, Class D and Class
E Certificates (the "ERISA-Restricted Certificates") is restricted. See
"Description of the Offered Certificates--Transfer Restrictions." Accordingly,
except as specifically referenced herein, the following discussion does not
purport to discuss the considerations under ERISA or Section 4975 of the Code
with respect to the purchase, holding or disposition of the ERISA-Restricted
Certificates. For purposes of the following discussion all references to the
Offered Certificates, unless otherwise indicated, shall be deemed to exclude the
ERISA-Restricted Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a Plan
in the Offered Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by the
United States Department of Labor (the "Department") that may be applicable to
an investment by a Plan in the Offered Certificates. The Department has granted
to the Underwriter an individual prohibited transaction exemption (Prohibited
Transaction Exemption 91-14, 56 Fed. Reg. 7414 (1991)), referred to herein as
the "Exemption," that might be applicable to the initial purchase, the holding,
and the subsequent resale by a Plan of certain certificates, such as the Offered
Certificates, underwritten by the Underwriter, representing interests in
pass-through trusts that consist of certain receivables, loans and other
obligations, provided that the conditions and requirements of the Exemption are
satisfied. For purposes of this discussion, the term "Underwriter" shall include
(a) Lehman Brothers, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Lehman
Brothers, and (c) any member of the underwriting syndicate or selling group of
which Lehman Brothers or a person described in (b) is a manager or co-manager
with respect to the Offered Certificates. The loans described in the Exemption
include mortgage loans such as the Mortgage Loans. However, it should be noted
that in issuing the Exemption, the Department may not have considered interests
in pools of the exact nature as some of the Offered Certificates.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of Offered Certificates by a Plan is on terms (including
the price for the Offered Certificates) that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by Offered Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
Certificates of the Trust Fund;
(3) The Offered Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic rating
categories from any of DCR, Fitch Investors Service, L.P. ('Fitch'), Moody's or
S&P;
S-259
<PAGE>
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Offered Certificates represents not more
than reasonable compensation for underwriting the Offered Certificates. The sum
of all payments made to and retained by the Depositor pursuant to the assignment
of the Mortgage Loans to the Trust Fund represents not more than the fair market
value of such Mortgage Loans. The sum of all payments made to and retained by
the Master Servicer and any other servicer represents not more than reasonable
compensation for such person's services under the Pooling Agreement and
reimbursement of such person's reasonable expenses in connection therewith; and
(6) The Plan investing in the Offered Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and
Exchange Commission under the Securities Act of 1933.
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the type
that have been included in other investment pools;
(b) certificates evidencing interests in such other investment pools must
have been rated in one of the three highest rating categories of DCR, Fitch,
Moody's or S&P for at least one year prior to the Plan's acquisition of the
Offered Certificates pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior to
any Plan's acquisition of the Offered Certificates pursuant to the Exemption.
If all of the conditions of the Exemption are met, whether or not a Plan's
assets would be deemed to include an ownership interest in the Mortgage Loans in
the Mortgage Pool, the acquisition, holding and resale of the Offered
Certificates by Plans would be exempt from certain of the prohibited transaction
provisions of ERISA and the Code.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (a) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each class of certificates in which
Plans have invested is acquired by persons independent of the Restricted Group
and at least fifty percent of the aggregate interest in the trust is acquired by
persons independent of the Restricted Group; (b) such fiduciary (or its
affiliate) is an obligor with respect to five percent or less of the fair market
value of the obligations contained in the trust; (c) the Plan's investment in
certificates of any class does not exceed twenty-five percent of all of the
certificates of that class outstanding at the time of the acquisition; and (d)
immediately after the acquisition no more than twenty-five percent of the assets
of the Plan with respect to which such person is a fiduciary are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity.
The Exemption does not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Depositor, the Underwriter, the Trustee,
the Master Servicer, any obligor with respect to Mortgage Loans included in the
Trust Fund constituting more than five percent of the aggregate unamortized
principal balance of the assets in the Trust Fund, or any affiliate of such
parties (the "Restricted Group"). Borrowers who are acting on behalf of Plans or
who are investing assets of Plans, and any affiliates of any such borrowers,
should not purchase any of the Offered Certificates.
The Underwriter believes that the conditions to the applicability of the
Exemption will generally be met with respect to the Class A-1, Class A-2, Class
A-3 and Class X-1 Certificates, other than possibly those conditions which are
dependent on facts unknown to the Underwriter or which it cannot control,
S-260
<PAGE>
such as those relating to the circumstances of the Plan purchaser or the Plan
fiduciary making the decision to purchase any such Class of Offered
Certificates. However, before purchasing an Offered Certificate, a fiduciary of
a Plan should make its own determination as to the availability of the exemptive
relief provided by the Exemption or the availability of any other prohibited
transaction exemptions, and whether the conditions of any such exemption will be
applicable to the Offered Certificates. THE ERISA-RESTRICTED CERTIFICATES MAY
NOT BE PURCHASED BY OR TRANSFERRED TO A PLAN OR ANY PERSON ACTING ON BEHALF OF
OR INVESTING THE ASSETS OF A PLAN, UNLESS SUCH PERSON IS AN INSURANCE COMPANY
INVESTING THE ASSETS OF ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE
PURCHASE AND HOLDING OF ANY SUCH CERTIFICATE WOULD BE EXEMPT FROM THE PROHIBITED
TRANSACTION PROVISIONS OF ERISA AND THE CODE UNDER PROHIBITED TRANSACTION CLASS
EXEMPTION 95-60.
Any fiduciary of a Plan considering whether to purchase an Offered
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus. A fiduciary of a governmental plan should make its own determination
as to the need for and the availability of any exemptive relief under any
Similar Law.
The sale of Certificates to a Plan is in no respect a representation by the
Depositor or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
FEDERAL INCOME TAX CONSEQUENCES
Elections will be made to treat the portion of the Trust Fund exclusive of
the Reserve Accounts, the Lock Box Accounts, the Excess Interest, the Excess
Interest Distribution Account, the Default Interest, and the Class T
Distribution Account, and, in the opinion of Cadwalader, Wickersham & Taft,
special tax counsel to the Depositor, such portion of the Trust Fund will
qualify, as two separate REMICs (the "Upper-Tier REMIC" and the "Lower-Tier
REMIC," respectively) within the meaning of Code Section 860D. The Reserve
Accounts and the Lock Box Accounts will be treated as beneficially owned by the
respective borrowers for federal income tax purposes. The Lower-Tier REMIC will
hold the Mortgage Loans (exclusive of the Excess Interest and the Default
Interest, proceeds therefrom, the Collection Account, the Lower-Tier
Distribution Account and any REO Property, and will issue (i) certain
uncertificated classes of regular interests (the "Lower-Tier Regular Interests")
to the Upper-Tier REMIC and (ii) the Class LR Certificates, which will represent
the sole class of residual interests in the Lower-Tier REMIC. The Upper-Tier
REMIC will hold the Lower-Tier Regular Interests and the Upper-Tier Distribution
Account in which distributions thereon will be deposited and will issue (i)
classes of regular interests represented by the Regular Certificates and (ii)
the Class R Certificates, which will represent the sole class of residual
interests in the Upper-Tier REMIC. In addition, the Class A-1, Class A-2, Class
A-3, Class B, Class C-1, Class D, Class E and Class F Certificates will also
represent undivided beneficial interests in designated portions of the Excess
Interest, which portion of the Trust Fund will be treated as part of a grantor
trust for federal income tax purposes. Although holders of these Classes of
Certificates will be required to allocate their purchase price between their
interests in the regular interests in the Upper-Tier REMIC and their beneficial
interests in Excess Interest based on the relative fair market values of each,
it is anticipated that the rights to Excess Interest will have negligible value
as of the Closing Date. The Class T Certificates will represent pro rata
undivided beneficial interests in the portion of the Trust Fund consisting of
Default Interest (subject to an obligation to pay interest on Advances to the
Master Servicer, Special Servicer or Trustee, as the case may be) in respect of
the Mortgage Loans, and such portion will be treated as part of the grantor
trust for federal income tax purposes.
The Offered Certificates will be treated as "real estate assets" under Code
Section 856(c)(5)(A), to the extent that the assets of the REMICs are so
treated. The interest on the Offered Certificates will be
S-261
<PAGE>
"interest on obligations secured by mortgages on real property" described in
Code Section 856(c)(3)(B) for a real estate investment trust, in the same
proportion that the income of the REMICs is so treated.
A beneficial owner's interest in an Offered Certificate will qualify for the
foregoing treatments under Sections 856(c)(5)(A) and 856(c)(3)(B) in their
entirety if at least 95% of the REMICs' assets qualify for such treatment, and
otherwise will qualify to the extent of the REMICs' percentage of such assets. A
beneficial owner's interest in an Offered Certificate will constitute "loans . .
. secured by an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a)(19)(C)(v) in the case of a
domestic building and loan association, but only to the extent of the portion of
the Mortgage Loans (based on the Lower-Tier REMIC's adjusted basis) secured by
manufactured housing properties. A Mortgage Loan will not qualify for the
foregoing treatments to the extent it has been defeased by United States
Treasury obligations. The Lower-Tier REMIC and the Upper-Tier REMIC will be
treated as one REMIC solely for the purpose of making the foregoing
determinations.
The regular interests represented by the Offered Certificates generally will
be treated as newly originated debt instruments for federal income tax purposes.
Beneficial owners of the Offered Certificates will be required to report income
on the regular interests represented by the Offered Certificates in accordance
with the accrual method of accounting and any income from Excess Interest as
such amounts are received or accrued by the Trust Fund, based on their own
methods of accounting. See "Federal Income Tax Considerations--Taxation of
Regular Interest Securities" in the Prospectus.
It is anticipated that the regular interests represented by the Class A-1,
Class A-2, Class A-3, Class B, Class C-1 and Class D Certificates will be issued
at a premium, that the regular interests represented by the Class E Certificates
will be issued with DE MINIMIS original issue discount and that the Class C-2
Certificates will be issued without original issue discount for federal income
tax purposes. The prepayment assumption applicable for purposes of determining
whether any original issue discount is DE MINIMIS and amortizing premium is
Scenario 1, as described above under "Yield, Prepayment and Maturity
Considerations--Yield on the Offered Certificates."
Although unclear for federal income tax purposes, it is anticipated that the
Class X-1 and Class X-2 Certificates will be considered to be issued with
original issue discount in an amount equal to the excess of all distributions of
interest expected to be received thereon over their respective issue prices
(including accrued interest). Any "negative" amounts of original issue discount
on the Class X-1 and Class X-2 Certificates attributable to rapid prepayments
with respect to the Mortgage Loans will not be deductible currently, but may be
offset against future positive accruals of original issue discount, if any.
Finally, a holder of a Class X-1 and Class X-2 Certificate may be entitled to a
loss deduction to the extent it becomes certain that such holder will not
recover a portion of its basis in such Certificate, assuming no further
prepayments. In the alternative, it is possible that rules similar to the
"noncontingent bond method" of the contingent interest rules in the OID
Regulations, as amended on June 12, 1996, may be promulgated with respect to the
Class X-1 and Class X-2 Certificates. See "Federal Income Tax
Considerations--Taxation of Regular Interest Certificates" in the Prospectus.
Under the noncontingent bond method, if the interest payable for any period is
greater or less than the amount projected, the amount of income included for
that period would be either increased or decreased accordingly. Any net
reduction in the income accrual for the taxable year below zero (a "Negative
Adjustment") would be treated by a Certificateholder as ordinary loss to the
extent of prior income accruals and would be carried forward to offset future
interest accruals. At maturity, any remaining Negative Adjustment would be
treated as a loss on retirement of the Certificate. The legislative history of
relevant Code provisions indicates, however, that negative amounts of original
issue discount on an instrument such as a REMIC regular interest may not give
rise to taxable losses in any accrual period prior to the instrument's
disposition or retirement. Thus, it is not clear whether any losses resulting
from a Negative Adjustment would be recognized currently or carried forward
until disposition of retirement of the debt obligation.
S-262
<PAGE>
Although not free from doubt, it is anticipated that any prepayment premiums
will be treated as ordinary income to the extent allocable to beneficial owners
of the Offered Certificates as such amounts become due to such beneficial
owners.
See "Federal Income Tax Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and the Underwriter, the Offered Certificates will be
purchased from the Depositor by the Underwriter upon issuance. Proceeds to the
Depositor from the sale of the Offered Certificates will be 105.74% of the
initial aggregate Certificate Principal Amount thereof as of the Cut-Off Date,
plus accrued interest, if any, from October 11, 1997, before deducting expenses
payable by the Depositor.
The Underwriter is an affiliate of the Depositor and LB Holdings. One or
more affiliates of the Underwriter have entered into and may, in the future,
enter into other financing arrangements with affiliates of some or all of the
borrowers.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
secure compensation in the form of undertaking discounts, concessions or
commissions from the Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. The
Underwriter and any dealers that participate with the Underwriter in the
distribution of the Offered Certificate may be deemed to be "Underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). The Underwriter expects to sell a portion of the Offered Certificates to
or through First Union Capital Markets Corp.
The Depositor has been advised by the Underwriter that, subject to
applicable laws and regulations, it currently intends to make a market in the
Offered Certificates following completion of the offering. However, it is not
obligated to do so and any market making may be discontinued at any time without
notice. There can be no assurance that an active trading market will develop or
be sustained following the completion of the offering.
The Depositor has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities, including
liabilities under the Securities Act.
This Prospectus Supplement and the Prospectus may only be issued or passed
on in the United Kingdom to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom this Prospectus Supplement and the Prospectus
may otherwise lawfully be issued or passed on.
The Trust Fund described in this Prospectus Supplement may only be promoted
(whether by the issuing or passing on of documents as referred to in the
foregoing restriction or otherwise) by an authorized person under Chapter III of
the Financial Services Act 1986 of the United Kingdom ("FSA") to a person in the
United Kingdom if that person is of a kind described in section 76(2) of the FSA
or as permitted by the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991 (as amended).
LEGAL INVESTMENT
The Class A-1, Class A-2, Class A-3, Class X-1 and Class B Certificates will
constitute "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended ("SMMEA"), so long as they are rated
in one of the two highest rating categories by one or more Rating Agencies and
the Mortgage Loans are secured by liens on real property. THE CLASS C-1, CLASS
C-2,
S-263
<PAGE>
CLASS X-2, CLASS D AND CLASS E CERTIFICATES WILL NOT CONSTITUTE "MORTGAGE
RELATED SECURITIES" WITHIN THE MEANING OF SMMEA.
Except as to the status of certain Classes of Offered Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase the Offered Certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Offered Certificates. Accordingly, all institutions
whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements or review by regulatory authorities
should consult with their own legal advisors in determining whether and to what
extent the Offered Certificates constitute a legal investment or are subject to
investment, capital or other restrictions.
See "Legal Investment" in the Prospectus.
EXPERTS
The financial statements of DDR/DRA Borrower as of December 31, 1996 and
1995, and for the year ended December 31, 1996 and for the period November 17,
1995 (date of inception) to December 31, 1995, included in this Prospectus
Supplement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of the Courtyard Borrower as of December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996
included in this Prospectus Supplement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
The financial statements of Worldwide Plaza Guarantor as of December 31,
1996 and 1995, and for each of the three years in the period ended December 31,
1996 appearing in this Prospectus Supplement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of such
firm as experts in accounting and auditing in giving said report.
Cushman & Wakefield, Inc., Cushman & Wakefield of California, Koeppel Tener
Real Estate Services, and CB Commercial are each an independent real estate
brokerage, appraisal, management and consulting firm, and have either conducted
a market survey or appraised the current fair market value of the Mortgaged
Properties. The results of such market surveys and appraisals and references to
such firms are set forth in the information included in this Prospectus
Supplement under the heading "Description of the Mortgage Loans and Mortgaged
Properties" and in the complete report available for inspection at the corporate
trust office of the Trustee, and such summary report, together with information
based on the complete report included in this Prospectus Supplement, have been
included in this Prospectus Supplement in reliance upon the authority of Cushman
& Wakefield, Inc., Cushman & Wakefield of California, Koeppel Tener Real Estate
Services, and CB Commercial as experts on real estate appraisals.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and for the
Underwriter by Cadwalader, Wickersham & Taft, New York, New York.
RATINGS
It is a condition to the issuance of the Offered Certificates that (i) each
of the Class A-1, Class A-2 and Class A-3 Certificates be rated "Aaa" by Moody's
Investors Service, Inc. ("Moody's") and "AAA" by
S-264
<PAGE>
Standard and Poor's Ratings Group ("S&P"); (ii) the Class X-1 Certificates be
rated "AAA" by Duff & Phelps Credit Rating Co. ("DCR") and "Aaa" by Moody's
(S&P, DCR, and Moody's, each referred to herein as a "Rating Agency" and
collectively, the "Rating Agencies"); (iii) the Class B Certificates be rated
"Aa2" by Moody's and "AA" by S&P; (iv) the Class C-1, Class C-2 and Class X-2
Certificates be rated "A2" by Moody's and "A" by S&P; (v) the Class D
Certificates be rated "BBB" by DCR and "Baa2" by Moody's; (vi) the Class E
Certificates be rated "BBB-" by DCR and "Baa3" by Moody's; and (vii) the Class F
Certificates be rated "Ba" by Moody's and "BB" by S&P. A security rating is not
a recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating organization. A security
rating does not address the frequency of prepayments (both voluntary and
involuntary) or the possibility that Certificateholders might suffer a lower
than anticipated yield, nor does a security rating address the likelihood of
receipt of Prepayment Premiums, Net Default Interest or Excess Interest or the
tax treatment of the Certificates. The Rating Agencies' ratings on the Offered
Certificates address the likelihood of the timely payment of interest to which
each Class is entitled and, other than with respect to the Class X-1 and Class
X-2 Certificates, the ultimate repayment of principal by the Rated Final
Distribution Date. The ratings do not address the fact that the Certificate
Interest Rates of the Offered Certificates, to the extent that they are based on
the Group 1 WAC Rate, will be affected by changes therein due to variations in
the rates of amortization of the Mortgage Loans. See "Risk Factors" herein and
"Yield and Prepayment Considerations" in the Prospectus.
The Rating Agencies' ratings take into consideration the credit quality of
the mortgage pool, structural and legal aspects associated with the
Certificates, and the extent to which the payment stream in the mortgage pool is
adequate to make payments required under the Certificates. Ratings on mortgage
pass-through certificates do not, however, represent an assessment of the
likelihood, timing or frequency of principal prepayments (both voluntary and
involuntary) by mortgagors, or the degree to which such prepayments might differ
from those originally anticipated. In general, the ratings thus address credit
risk and not prepayment risk. Also, a security rating does not represent any
assessment of the yield to maturity that investors may experience.
The Rating Agencies' ratings of the Offered Certificates do not address the
possibility that the holders of the Class X-1 and Class X-2 Certificates might
not fully recover their investment in the event of rapid prepayments of the
Mortgage Loans (including both voluntary and involuntary prepayments). In
general, the ratings thus address credit risk and not prepayment risk. As
described herein, the amounts payable with respect to the Class X-1 and Class
X-2 Certificates consist only of interest. If the entire pool were to prepay in
the initial month, with the result that the Class X-1 and Class X-2
Certificateholders receive only a single month's interest and thus suffer a
nearly complete loss of their investment, all amounts "due" to such Holders will
nevertheless have been paid, and such result is consistent with the "Aaa" and
"AAA" rating received on the Class X-1 Certificates by Moody's and DCR,
respectively, or the "A2" and "A" rating received on the Class X-2 Certificates
by Moody's and S&P, respectively. The Notional Amount of the Class X-1 and Class
X-2 Certificates upon which interest is calculated is reduced by the allocation
of Realized Losses and prepayments, whether voluntary or involuntary. The rating
does not address the timing or magnitude of reductions of such Notional Amount,
but only the obligation to pay interest timely on the Notional Amount as so
reduced from time to time. Accordingly, the ratings of the Class X-1 and Class
X-2 Certificates should be evaluated independently from similar ratings on other
types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so, what
such rating would be. A rating assigned to the Offered Certificates by a rating
agency that has not been requested by the Depositor to do so may be lower than
the rating assigned by the Rating Agencies pursuant to the Depositor's request.
The rating of the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
S-265
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
--2--
<TABLE>
<S> <C>
222 South Harbor Boulevard Ground Lease............................................................. S-178
</TABLE>
--A--
<TABLE>
<S> <C>
ACMs........................................................................ S-50
ADA......................................................................... S-65
Adjusted Interest Rate...................................................... S-71
Advance Rate................................................................ S-219
Advances.................................................................... S-218
AIG......................................................................... S-51
Allocated Loan Amount....................................................... S-95
Annual Debt Service......................................................... S-95
Annualized Base Rent........................................................ S-96
Anticipated Repayment Date.................................................. S-92, 95
Anticipated Repayment Date Balance.......................................... S-96
Anticipated Repayment Date LTV.............................................. S-96
Anticipated Term............................................................ S-96
Appraisal Reduction Amount.................................................. S-87
Appraisal Reduction Event................................................... S-87
Approved Transferee......................................................... S-151
ARD LTV..................................................................... S-96
Arden Adjusted Interest Rate................................................ S-19, 170
Arden Alteration............................................................ S-171
Arden Anticipated Repayment Date............................................ S-19, 170
Arden ARD Monthly Debt Service Payments..................................... S-20, 170
Arden Base Interest Rate.................................................... S-19, 170
Arden Borrower.............................................................. S-19, 169
Arden Defeasance Collateral................................................. S-172
Arden Defeasance Date....................................................... S-172
Arden Defeasance Period..................................................... S-172
Arden Deposit Account....................................................... S-173
Arden DSCR.................................................................. S-171
Arden Eligible Account...................................................... S-173
Arden Excess Cash Flow...................................................... S-170
Arden Excess Interest....................................................... S-19, 170
Arden GP.................................................................... S-170
Arden Loan.................................................................. S-19
Arden Lock Box Event........................................................ S-173
Arden LP.................................................................... S-170
Arden Management Agreement.................................................. S-182
Arden Manager............................................................... S-182
Arden Maturity Date......................................................... S-19, 170
Arden Monthly Debt Service Payments......................................... S-19, 170
Arden Mortgage.............................................................. S-19, 169
Arden Permitted Encumbrances................................................ S-170
Arden Permitted Prepayment Date............................................. S-19, 171
</TABLE>
S-266
<PAGE>
<TABLE>
<S> <C>
Arden Portfolio............................................................. S-64
Arden Properties............................................................ S-19, 169
Arden REIT.................................................................. S-19, 170
Arden Reserve Account....................................................... S-173
Arden Restoration........................................................... S-175
Arden Substitute Property................................................... S-172
Atlanta/Northlake Ground Lease.............................................. S-141
Available Funds............................................................. S-76
Average Base Rent Per Square Foot........................................... S-96
</TABLE>
--B--
<TABLE>
<S> <C>
Balloon Payment....................................................... S-77
Bankruptcy Code....................................................... S-48
Base Interest Rate.................................................... S-19, 74
Base Management Fee................................................... S-144
Bedford Hills Property................................................ S-205
Best's................................................................ S-63
Blackstone Affiliate.................................................. S-150
Blackstone REIT....................................................... S-151
Broadway Marketplace Property......................................... S-108
Business Day.......................................................... S-9
</TABLE>
--C--
<TABLE>
<S> <C>
Capitalized Value........................................................... S-53
Carillon Place Property..................................................... S-12, 108
Carmel Mountain Plaza Property.............................................. S-108
CERCLA...................................................................... S-50
Certificate Interest Rate................................................... S-3, 28, 79
Certificate Owners.......................................................... S-89
Certificate Principal Amount................................................ S-3
Certificate Registrar....................................................... S-88
Certificateholder........................................................... S-88
Certificateholders.......................................................... S-72
Certificates................................................................ Cover, S-9
Class....................................................................... S-3, 74
Class T Distribution Account................................................ S-220
Closing Date................................................................ S-111
Code........................................................................ S-37
Collection Account.......................................................... S-219
Collection Period........................................................... S-77
Commission.................................................................. S-235
Component Notional Amount................................................... S-28, 79
Countryside Village Property................................................ S-205
Courtyard Accounting Period................................................. S-129
Courtyard Adjusted Interest Rate............................................ S-13, 128
Courtyard Anticipated Repayment Date........................................ S-13, 128
Courtyard Base Interest Rate................................................ S-13, 128
Courtyard Borrower.......................................................... S-13, 128
Courtyard Cash Collateral Account........................................... S-134
Courtyard Casualty.......................................................... S-138
Courtyard Closing Date...................................................... S-128
</TABLE>
S-267
<PAGE>
<TABLE>
<S> <C>
Courtyard Condemnation Award................................................ S-139
Courtyard Debt Service Period............................................... S-129
Courtyard Defeasance Collateral............................................. S-131
Courtyard Defeasance Deposit................................................ S-131
Courtyard Defeasance Period................................................. S-130
Courtyard Defeased Note..................................................... S-131
Courtyard Excess Cash Flow.................................................. S-129
Courtyard Excess Interest................................................... S-13, 129
Courtyard GP................................................................ S-128
Courtyard Impositions....................................................... S-135
Courtyard Insurance Proceeds................................................ S-138
Courtyard Junior Lender..................................................... S-140
Courtyard Junior Note....................................................... S-140
Courtyard Loan.............................................................. S-13
Courtyard Lock Box Account.................................................. S-135
Courtyard Lock Box Event.................................................... S-135
Courtyard Management Agreement.............................................. S-143
Courtyard Manager........................................................... S-14, 57, 133
Courtyard Manager's Account................................................. S-57, 133
Courtyard Manager's Lock Box Account........................................ S-135
Courtyard Maturity Date..................................................... S-13, 128
Courtyard Minimum Rent...................................................... S-141
Courtyard Monthly Debt Service Payment...................................... S-14, 129
Courtyard Mortgage Note..................................................... S-128
Courtyard Mortgages......................................................... S-13, 128
Courtyard Operating Account................................................. S-136
Courtyard Operating Profit Payment Date..................................... S-129
Courtyard Parent............................................................ S-133
Courtyard Percentage Rent................................................... S-141
Courtyard Properties........................................................ S-13, 128
Courtyard Qualifying Debt Service........................................... S-141
Courtyard Release........................................................... S-131
Courtyard Release Price..................................................... S-132
Courtyard Rent.............................................................. S-141
Courtyard Restoration....................................................... S-138
Courtyard Subordinated Obligations.......................................... S-134
Courtyard Substitute Lock Box Account....................................... S-135
Courtyard Taking............................................................ S-139
Courtyard Undefeased Note................................................... S-131
Courtyard Yield Maintenance Payment......................................... S-130
Cross-over Date............................................................. S-33, 84
Cutler Estates Properties................................................... S-205
Cut-Off Date................................................................ S-95
Cut-Off Date Allocated Loan Amount.......................................... S-95
Cut-Off Date LTV............................................................ S-96
</TABLE>
--D--
<TABLE>
<S> <C>
DCR......................................................................... S-39, 265
DDR......................................................................... S-12
DDR II...................................................................... S-109
DDR III..................................................................... S-109
DDR IV...................................................................... S-109
DDRACC...................................................................... S-109
DDR/DRA Aggregate DSCR...................................................... S-112
</TABLE>
S-268
<PAGE>
<TABLE>
<S> <C>
DDR/DRA Allocated Loan Amount............................................... S-112
DDR/DRA Alteration.......................................................... S-110
DDR/DRA Base Interest Rate.................................................. S-12, 109
DDR/DRA Borrowers........................................................... S-12, 108
DDR/DRA Collateral Value.................................................... S-112
DDR/DRA Debt Service Alteration............................................. S-111
DDR/DRA Defeasance Amount................................................... S-112
DDR/DRA Defeasance Collateral............................................... S-112
DDR/DRA Depository.......................................................... S-113
DDR/DRA Eligible Institution................................................ S-113
DDR/DRA Entities............................................................ S-115
DDR/DRA Escrow Fund......................................................... S-115
DDR/DRA Expansion........................................................... S-110
DDR/DRA I Borrower.......................................................... S-12, 108
DDR/DRA I Managing Member................................................... S-108
DDR/DRA I Properties........................................................ S-108
DDR/DRA II Borrower......................................................... S-12, 108
DDR/DRA II Managing Member.................................................. S-108
DDR/DRA II Properties....................................................... S-108
DDR/DRA III Borrower........................................................ S-12, 108
DDR/DRA III General Partner................................................. S-109
DDR/DRA III Property........................................................ S-108
DDR/DRA Lease-Up Reserve.................................................... S-109
DDR/DRA Loan................................................................ S-12
DDR/DRA Management Agreement................................................ S-127
DDR/DRA Management Agreements............................................... S-127
DDR/DRA Maturity Date....................................................... S-12, 109
DDR/DRA Minimum Balance..................................................... S-114
DDR/DRA Monthly Debt Service Payments....................................... S-12, 110
DDR/DRA Monthly Insurance Escrow............................................ S-114
DDR/DRA Monthly Tax Escrow.................................................. S-114
DDR/DRA Mortgages........................................................... S-12, 108
DDR/DRA Note A.............................................................. S-12, 108
DDR/DRA Note B.............................................................. S-12, 108
DDR/DRA Note C.............................................................. S-12, 108
DDR/DRA Notes............................................................... S-12, 108
DDR/DRA Operating Accounts.................................................. S-113
DDR/DRA Outparcel........................................................... S-113
DDR/DRA Permitted Prepayment Period......................................... S-12, 111
DDR/DRA Primary Event....................................................... S-114
DDR/DRA Properties.......................................................... S-12, 108
DDR/DRA Property DSCR....................................................... S-111
DRR/DRA Property Manager.................................................... S-127
DDR/DRA Qualified Manager................................................... S-114
DDR/DRA Reconfiguration Project............................................. S-111
DDR/DRA Remaining Property.................................................. S-113
DDR/DRA Restoration......................................................... S-118
DDR/DRA Secondary Event..................................................... S-57, 114
DDR/DRA Subordinate Debt.................................................... S-55, 117
DDR/DRA Taxes and Insurance Reserve Account................................. S-115
DDR/DRA Threshold Amount.................................................... S-110
</TABLE>
S-269
<PAGE>
<TABLE>
<S> <C>
DDR/DRA Yield Maintenance Premium........................................... S-110
DDRC........................................................................ S-12, 108
Debt Service Coverage Ratio................................................. S-95
Debt Service Release Conditions............................................. S-131
Debt Service Reserve Account................................................ S-136
Default Interest............................................................ S-77
Default Rate................................................................ S-78
Defeasance Lockout Period................................................... S-26
Definitive Certificate...................................................... S-88
Department.................................................................. S-259
Depositor................................................................... Cover, S-9
Determination Date.......................................................... S-218
Directing Class............................................................. S-232
Distribution Date........................................................... S-3, 75
Distribution Date Statement................................................. S-238
Dow......................................................................... S-51
DRA......................................................................... S-109
DRA Entities................................................................ S-115
DSCR........................................................................ S-95
DTC......................................................................... Cover, S-10
Due Date.................................................................... S-10
</TABLE>
--E--
<TABLE>
<S> <C>
Edwardsville Property................................................. S-205
Effective Servicing Fee Rate.......................................... S-236
Eligible Bank......................................................... S-221
EPA................................................................... S-51
ERISA................................................................. S-37, 259
ERISA-Restricted Certificate.......................................... S-90
Event of Default...................................................... S-225
Excess Cash Flow...................................................... S-71
Excess Interest....................................................... S-71, 78
Excess Interest Distribution Account.................................. S-220
Excess Prepayment Interest Shortfall.................................. S-86
Excess Rate........................................................... S-78
Exchange Act.......................................................... S-140
Exemption............................................................. S-37, 259
Extended Coverage..................................................... S-174
Extended Scheduled Payment............................................ S-228
</TABLE>
--F--
<TABLE>
<S> <C>
Fairfax Towne Center Property............................................... S-108
FF&E Reserve Account........................................................ S-133
Final Recovery Determination................................................ S-238
First P&I Date.............................................................. S-96
First Week Transfer......................................................... S-134
Fiscal Agent................................................................ S-4, S-9
Fitch....................................................................... S-259
Fixed Voting Rights Percentage.............................................. S-228
</TABLE>
S-270
<PAGE>
<TABLE>
<S> <C>
Florida DDR/DRA Mortgage.................................................... S-12, 108
Form 8-K.................................................................... S-107
FSA......................................................................... S-263
</TABLE>
--G--
<TABLE>
<S> <C>
GAAP........................................................................ S-93
GLA......................................................................... S-13, 96
GMACCM...................................................................... S-9, 236
Group 1 Certificates........................................................ S-28
Group 1 Loans............................................................... S-30, 75
Group 1 Realized Loss....................................................... S-85
Group 1 WAC Rate............................................................ S-29, 80
Group 2 Certifcates......................................................... S-28
Group 2 Loan................................................................ S-30, 75
Group 2 Realized Loss....................................................... S-85
</TABLE>
--H--
<TABLE>
<S> <C>
Holder...................................................................... S-88
Holders..................................................................... S-90
</TABLE>
--I--
<TABLE>
<S> <C>
ICIP Program................................................................ S-60
Incentive Management Fee.................................................... S-144
Independence Commons Property............................................... S-108
Indirect Participants....................................................... S-89
Initial Pool Balance........................................................ S-91
Interest Accrual Amount..................................................... S-31, 78
Interest Accrual Period..................................................... S-78
Interest Distribution Amount................................................ S-31, 78
Interest Reserve Account.................................................... S-220
Interest Shortfall.......................................................... S-31, 78
</TABLE>
--J--
<TABLE>
<S> <C>
JC Penney................................................................... S-198
JC Penney Lease............................................................. S-203
</TABLE>
--L--
<TABLE>
<S> <C>
LARWQCB..................................................................... S-52
LB Holdings................................................................. Cover, S-9, 91
LB Realty................................................................... S-25, 91
LC.......................................................................... S-94
LIBOR....................................................................... S-146
LIBOR Business Day.......................................................... S-146
LIBOR Determination Date.................................................... S-146
Liquidation Fee............................................................. S-237
</TABLE>
S-271
<PAGE>
<TABLE>
<S> <C>
Loan Group.................................................................. S-30, 75
Loan Group 1................................................................ S-3, 30, 75
Loan Group 2................................................................ S-3, 30, 75
Loan Sale Agreement......................................................... S-91
Loan-to-Value Ratio......................................................... S-96
Local Account............................................................... S-134
Lock Box Accounts........................................................... S-219
Lower-Tier Distribution Account............................................. S-220
Lower-Tier Regular Interests................................................ S-261
Lower-Tier REMIC............................................................ S-4, 36, 261
LTV......................................................................... S-92, 96
LUST........................................................................ S-50
</TABLE>
--M--
<TABLE>
<S> <C>
Macerich Limited Partner.................................................. S-184, 193
Macerich Property Manager................................................. S-192, 204
Macerich REIT............................................................. S-183, 193
Manager's Subordination................................................... S-127, 169, 183
Marriott Ground Lease..................................................... S-141
Marriott Ground Leases.................................................... S-46
Marriott Ground Lessors................................................... S-128, 141
Master Servicer........................................................... S-3, 9
Master Servicer Remittance Date........................................... S-217
MII....................................................................... S-46, 128
MII Master Account........................................................ S-133
Moody's................................................................... S-39, 265
Mortgage.................................................................. S-91
Mortgage Loan Assumptions................................................. S-248
Mortgage Loans............................................................ Cover
Mortgage Pool............................................................. Cover, S-11
Mortgage Rate............................................................. S-30, 80
Mortgaged Properties...................................................... Cover, S-11
Mortgaged Property........................................................ S-91
Mortgages................................................................. S-11
</TABLE>
--N--
<TABLE>
<S> <C>
Negative Adjustment......................................................... S-262
Net Default Interest........................................................ S-77
Net Mortgage Rate........................................................... S-29, 80
Net Operating Income........................................................ S-93
Net REO Proceeds............................................................ S-77
New Hope Commons Property................................................... S-108
NOI......................................................................... S-93
Non-Blackstone Membership Change............................................ S-151
Non-Florida DDR/DRA Mortgages............................................... S-12, 108
Non-Florida DDR/DRA Properties.............................................. S-12, 108
Note........................................................................ S-11, 91
Notional Amount............................................................. S-3, 75
NPL......................................................................... S-52
</TABLE>
S-272
<PAGE>
--O--
<TABLE>
<S> <C>
OCC......................................................................... S-96
Occupancy................................................................... S-96
Occupancy Costs............................................................. S-96
Offered Certificates........................................................ S-3
One Northwestern Plaza Ground Lease......................................... S-167
Operating Partnership....................................................... S-151
Original Principal Balance.................................................. S-96
Originators................................................................. S-25, 91
Owner's Priority Return..................................................... S-134
</TABLE>
--P--
<TABLE>
<S> <C>
P&I Advance................................................................. S-34, 217
P&I Certificates............................................................ S-27, 74
Participants................................................................ S-88
PCBs........................................................................ S-50
PCE......................................................................... S-52
Percentage Interest......................................................... S-75
Perimeter Pointe Property................................................... S-108
Permitted Investments....................................................... S-221
Permitted Reorganization.................................................... S-141
Permitted Transferee........................................................ S-117
Plan........................................................................ S-38, 90, 259
Plant....................................................................... S-51
Plant Site.................................................................. S-51
Plant Site Affected Area.................................................... S-51
Pooling Agreement........................................................... S-9, 214
Post-Release Debt Service................................................... S-132
Post-Release DSCR........................................................... S-132
PPLI........................................................................ S-169
Prentiss Adjusted Interest Rate............................................. S-17, 157
Prentiss Anticipated Repayment Date......................................... S-17, 157
Prentiss ARD Monthly Debt Service Payments.................................. S-18, 157
Prentiss Base Interest Rate................................................. S-17, 157
Prentiss Borrower........................................................... S-17, 156
Prentiss Defeasance Collateral.............................................. S-158
Prentiss Defeasance Date.................................................... S-158
Prentiss DSCR............................................................... S-157
Prentiss Excess Cash Flow................................................... S-18, 157
Prentiss Excess Interest.................................................... S-18, 157
Prentiss G.P................................................................ S-156
Prentiss G.P. Managing Member............................................... S-156
Prentiss L.P................................................................ S-156
Prentiss Loan............................................................... S-17
Prentiss Lock Box Account................................................... S-159
Prentiss Management Agreement............................................... S-169
Prentiss Manager............................................................ S-169
Prentiss Maturity Date...................................................... S-18, 157
Prentiss Monthly Debt Service Payments...................................... S-18, 157
</TABLE>
S-273
<PAGE>
<TABLE>
<S> <C>
Prentiss Mortgages.......................................................... S-17, 156
Prentiss Outside Closing Date............................................... S-159
Prentiss Permitted Encumbrances............................................. S-156
Prentiss Permitted Prepayment Date.......................................... S-157
Prentiss Pro Rata Release Amount............................................ S-157
Prentiss Properties......................................................... S-17, 156
Prentiss REIT............................................................... S-17, 156
Prentiss Release Amount..................................................... S-158
Prentiss Subparcel.......................................................... S-157
Prentiss Substitute Property................................................ S-159
Prepayment Interest Shortfall............................................... S-86
Prepayment Lockout Period................................................... S-93
Prepayment Premiums......................................................... S-77
Pre-Release Debt Service.................................................... S-132
Pre-Release DSCR............................................................ S-132
Prime Rate.................................................................. S-219
Principal Distribution Amount............................................... S-81
Principal Prepayments....................................................... S-77
Principal Shortfall......................................................... S-81
Prior Reference Period Release.............................................. S-132
Private Certificates........................................................ S-3, 74
Property Advances........................................................... S-218
Property Condition Reports.................................................. S-106
psf......................................................................... S-96
</TABLE>
--Q--
<TABLE>
<S> <C>
qualified mortgage.......................................................... S-42, 215
</TABLE>
--R--
<TABLE>
<S> <C>
Rated Final Distribution Date............................................... S-254
Rating Agencies............................................................. S-39, 265
Rating Agency............................................................... S-39, 265
Realized Loss............................................................... S-85
Record Date................................................................. S-75
Reference Period............................................................ S-131
Regular Certificates........................................................ S-4, 37, 80
Rehabilitation Fee.......................................................... S-237
Reinvestment Yield.......................................................... S-130
REMIC....................................................................... S-4, 36
REO Account................................................................. S-74
REO Mortgage Loan........................................................... S-81
REO Property................................................................ S-74
Repurchase Price............................................................ S-215
Reserve Accounts............................................................ S-92
Residual Certificates....................................................... S-37
Restricted Group............................................................ S-38, 260
Reuters Screen LIBOR Page................................................... S-146
REVPAR...................................................................... S-140
</TABLE>
S-274
<PAGE>
<TABLE>
<S> <C>
Royal Country Property...................................................... S-24, 205
Rules....................................................................... S-89
</TABLE>
--S--
<TABLE>
<S> <C>
S&P......................................................................... S-39, 265
Sales Per SF................................................................ S-96
San Francisco Ground Lease.................................................. S-141
Scenarios................................................................... S-248
Scheduled Payment........................................................... S-77
Securities Act.............................................................. S-263
Servicing Compensation...................................................... S-76
Servicing Fee............................................................... S-236
Servicing Fee Rate.......................................................... S-236
Servicing Standard.......................................................... S-216
SF/Units.................................................................... S-96
Shell....................................................................... S-51
Sherman Oaks Property....................................................... S-205
Shoppers World Property..................................................... S-108
Similar Law................................................................. S-90, 259
SMMEA....................................................................... S-40, 264
SPE Entities................................................................ S-116
Special Lease Payments...................................................... S-150
Special Servicer............................................................ S-9, 237
Special Servicing Fee....................................................... S-237
Specially Serviced Mortgage Loan............................................ S-216
Stated Principal Balance.................................................... S-80
Subordinated Management Obligations......................................... S-144
Subordinated Rental Obligations............................................. S-141
Successor Manager........................................................... S-222
Sun Communities A Defeasance Amount......................................... S-207
Sun Communities Defeasance Collateral....................................... S-208
Sun Communities A Mortgages................................................. S-23, 205
Sun Communities A Properties................................................ S-23, 205
Sun Communities A Release Property.......................................... S-207
Sun Communities Adjusted Interest Rate...................................... S-24, 206
Sun Communities Anticipated Repayment Date.................................. S-24, 206
Sun Communities B Defeasance Amount......................................... S-208
Sun Communities B Mortgage.................................................. S-24, 205
Sun Communities B Release Property.......................................... S-208
Sun Communities Base Interest Rate.......................................... S-24, 206
Sun Communities Borrower A.................................................. S-23, 205
Sun Communities Borrower B.................................................. S-23, 205
Sun Communities Borrowers................................................... S-23, 205
Sun Communities Cash Collateral Account..................................... S-209
Sun Communities Closing Date................................................ S-206
Sun Communities Collateral Value............................................ S-208
Sun Communities Defeasance Collateral....................................... S-208
Sun Communities DSCR........................................................ S-208
Sun Communities Excess Interest............................................. S-24, 206
Sun Communities Funding..................................................... S-205
</TABLE>
S-275
<PAGE>
<TABLE>
<S> <C>
Sun Communities Loan........................................................ S-23
Sun Communities Local Accounts.............................................. S-209
Sun Communities Management Agreement........................................ S-213
Sun Communities Manager..................................................... S-212
Sun Communities Manager's Subordination..................................... S-213
Sun Communities Maturity Date............................................... S-24, 206
Sun Communities Monthly Debt Service Payment................................ S-206
Sun Communities Monthly Debt Service Payments............................... S-24
Sun Communities Mortgages................................................... S-24, 205
Sun Communities Note A...................................................... S-23, 205
Sun Communities Note B...................................................... S-23, 205
Sun Communities Notes....................................................... S-23, 205
Sun Communities Permitted Prepayment Period................................. S-24, 207
Sun Communities Properties.................................................. S-24, 205
Sun Communities Release Price............................................... S-208
Sun Communities Restoration................................................. S-210
Sun Guaranty................................................................ S-23, 205
</TABLE>
--T--
<TABLE>
<S> <C>
Tax and Insurance Escrow Event.............................................. S-135
TI.......................................................................... S-94
Timberbrook Property........................................................ S-205
Total Revenue............................................................... S-93
Total Value................................................................. S-95
Town Center Prado Property.................................................. S-108
Treasury Rate............................................................... S-130
Trust Fund.................................................................. Cover
Trust REMICs................................................................ S-4
Trustee..................................................................... S-4, 9, 91
Trustee Fee................................................................. S-234
Trustee Fee Rate............................................................ S-234
</TABLE>
--U--
<TABLE>
<S> <C>
U.S. Obligations............................................................ S-128
Underwriter................................................................. Cover, S-259
Underwritten Net Cash Flow.................................................. S-94
Unscheduled Payments........................................................ S-77
Unscheduled Principal Payments.............................................. S-148
Updated Appraisal........................................................... S-228
Upper-Tier Distribution Account............................................. S-220
Upper-Tier REMIC............................................................ S-4, 36, 261
</TABLE>
--V--
<TABLE>
<S> <C>
Valley View Adjusted Interest Rate.......................................... S-22, 194
Valley View Alteration...................................................... S-195
Valley View Anchor Stores................................................... S-203
Valley View Anticipated Repayment Date...................................... S-22, 194
Valley View ARD Monthly Debt Service Payments............................... S-22, 194
</TABLE>
S-276
<PAGE>
<TABLE>
<S> <C>
Valley View Base Interest Rate.............................................. S-22, 194
Valley View Borrower........................................................ S-22, 193
Valley View Defeasance Collateral........................................... S-196
Valley View Defeasance Date................................................. S-196
Valley View Defeasance Note................................................. S-196
Valley View Defeasance Obligor.............................................. S-196
Valley View Defeasance Period............................................... S-196
Valley View Deposit Account................................................. S-197
Valley View DSCR............................................................ S-196
Valley View Eligible Account................................................ S-197
Valley View Excess Cash Flow................................................ S-194
Valley View Excess Interest................................................. S-22, 194
Valley View GP.............................................................. S-193
Valley View Loan............................................................ S-22
Valley View Lock Box........................................................ S-197
Valley View Lock Box Event.................................................. S-196
Valley View Management Agreement............................................ S-204
Valley View Manager's Subordination......................................... S-204
Valley View Maturity Date................................................... S-22, 194
Valley View Monthly Debt Service Payment.................................... S-22, 194
Valley View Mortgage........................................................ S-22, 193
Valley View Operating Agreement............................................. S-203
Valley View Permitted Encumbrances.......................................... S-194
Valley View Permitted Owner................................................. S-198
Valley View Property........................................................ S-22, 193
Valley View Reinvestment Yield Rate......................................... S-195
Valley View Restoration..................................................... S-200
Valley View Total Loss...................................................... S-200
Valley View Transferee...................................................... S-198
Value....................................................................... S-95
Villa Marina Adjusted Interest Rate......................................... S-20, 184
Villa Marina Alteration..................................................... S-185
Villa Marina Anticipated Repayment Date..................................... S-20, 184
Villa Marina ARD Monthly Debt Service Payments.............................. S-21, 184
Villa Marina Base Interest Rate............................................. S-20, 184
Villa Marina Borrower....................................................... S-20, 183
Villa Marina Defeasance Collateral.......................................... S-186
Villa Marina Defeasance Date................................................ S-186
Villa Marina Defeasance Note................................................ S-186
Villa Marina Defeasance Obligor............................................. S-186
Villa Marina Defeasance Period.............................................. S-186
Villa Marina Deposit Account................................................ S-187
Villa Marina DSCR........................................................... S-187
Villa Marina Eligible Account............................................... S-187
Villa Marina Excess Cash Flow............................................... S-184
Villa Marina Excess Interest................................................ S-21, 184
Villa Marina GP............................................................. S-183
Villa Marina Loan........................................................... S-20
Villa Marina Lock Box....................................................... S-187
Villa Marina Lock Box Event................................................. S-186
Villa Marina Management Agreement........................................... S-192
</TABLE>
S-277
<PAGE>
<TABLE>
<S> <C>
Villa Marina Manager's Subordination........................................ S-193
Villa Marina Marketplace.................................................... S-191
Villa Marina Maturity Date.................................................. S-21, 184
Villa Marina Monthly Debt Service Payments.................................. S-21, 184
Villa Marina Mortgage....................................................... S-20, 183
Villa Marina Permitted Encumbrances......................................... S-184
Villa Marina Permitted Owner................................................ S-188
Villa Marina Phase I........................................................ S-191
Villa Marina Phase II....................................................... S-191
Villa Marina Property....................................................... S-20, 183
Villa Marina Reinvestment Yield Rate........................................ S-185
Villa Marina Restoration.................................................... S-190
Villa Marina Total Loss..................................................... S-190
Villa Marina Transferee..................................................... S-188
Voluntary LIBOR Payment..................................................... S-148
Voting Rights............................................................... S-228
</TABLE>
--W--
<TABLE>
<S> <C>
Withheld Amounts............................................................ S-220
Woodfield Village Green Property............................................ S-108
Worldwide Plaza Additional Collateral....................................... S-15, 148
Worldwide Plaza Adjusted Interest Rate...................................... S-15, 147
Worldwide Plaza Amenities Parcel............................................ S-145
Worldwide Plaza Anticipated Repayment Date.................................. S-15, 146
Worldwide Plaza Assignment of Management Agreement.......................... S-155
Worldwide Plaza Award....................................................... S-153
Worldwide Plaza Borrower.................................................... S-15, 145
Worldwide Plaza Building.................................................... S-154
Worldwide Plaza Cash Management Account..................................... S-151
Worldwide Plaza Casualty.................................................... S-153
Worldwide Plaza Closing Date................................................ S-145
Worldwide Plaza Component................................................... S-14, 146
Worldwide Plaza Debt Service Period......................................... S-147
Worldwide Plaza Default Rate................................................ S-147
Worldwide Plaza Defeasance Collateral....................................... S-149
Worldwide Plaza Defeasance Conditions....................................... S-149
Worldwide Plaza Defeasance Deposit.......................................... S-149
Worldwide Plaza Defeasance Event............................................ S-149
Worldwide Plaza Defeasance Period........................................... S-149
Worldwide Plaza Defeasance Release Amount................................... S-149
Worldwide Plaza Defeased Note............................................... S-149
Worldwide Plaza Excess Cash Flow............................................ S-147
Worldwide Plaza Excess Interest............................................. S-15, 147
Worldwide Plaza Fixed Component............................................. S-14
Worldwide Plaza Fixed Component A........................................... S-14, 146
Worldwide Plaza Fixed Component B........................................... S-14, 146
Worldwide Plaza Fixed Components............................................ S-14, 146
Worldwide Plaza Fixed Interest Rate......................................... S-15, 146
Worldwide Plaza Guarantee................................................... S-145
Worldwide Plaza Guarantor................................................... S-145
Worldwide Plaza Guarantor GP................................................ S-67
</TABLE>
S-278
<PAGE>
<TABLE>
<S> <C>
Worldwide Plaza Guarantor Subordinate Mortgages............................. S-55, 154
Worldwide Plaza Guaranty Mortgage........................................... S-145
Worldwide Plaza Insurance Proceeds.......................................... S-153
Worldwide Plaza Interest Rate Cap Agreement................................. S-147
Worldwide Plaza Leasing Agreement........................................... S-155
Worldwide Plaza LIBOR Component............................................. S-15, 146
Worldwide Plaza LIBOR Rate.................................................. S-15, 146
Worldwide Plaza Loan........................................................ S-14
Worldwide Plaza Lockout Yield Maintenance Payment........................... S-148
Worldwide Plaza Management Agreement........................................ S-155
Worldwide Plaza Manager..................................................... S-155
Worldwide Plaza Maturity Date............................................... S-146
Worldwide Plaza Monthly Debt Service Payment................................ S-147
Worldwide Plaza Mortgage.................................................... S-14, 145
Worldwide Plaza Mortgage Note............................................... S-145
Worldwide Plaza Principal Reduction Payment................................. S-147
Worldwide Plaza Property.................................................... S-14, 145
Worldwide Plaza Reorganization Order........................................ S-67
Worldwide Plaza Restoration................................................. S-153
Worldwide Plaza SPM......................................................... S-145
Worldwide Plaza Subagent.................................................... S-155
Worldwide Plaza Undefeased Note............................................. S-149
Worldwide Plaza Yield Maintenance Premium................................... S-148
</TABLE>
S-279
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT A
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Statements for Community Centers One L.L.C., Community Centers Two
L.L.C. and Shoppers World Joint Venture (the borrowers under the DDR/DRA
Loan)...................................................................... EXHIBIT A-1
Financial Statements for Courtyard by Marriott Limited Partnership (the
borrower under the Courtyard Loan)......................................... EXHIBIT A-2
Financial Statements for BRE/Worldwide L.L.C. (the borrower under the
Worldwide Plaza Loan) and for New York Communications Center Associates
Limited Partnership (the guarantor under the Worldwide Plaza Loan)......... EXHIBIT A-3
Summary Financial Information for Prentiss Properties Real Estate Fund I,
L.P. (the borrower under the Prentiss Loan)................................ EXHIBIT A-4
Summary Financial Information for Arden Realty Finance Partnership, L.P. (the
borrower under the Arden Loan)............................................. EXHIBIT A-5
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT A-1
COMMUNITY CENTERS ONE L.L.C.,
COMMUNITY CENTERS TWO L.L.C.
AND
SHOPPERS WORLD COMMUNITY CENTER, L.P.
COMBINED INTERIM FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1997
and June 30, 1996
(Unaudited)
A-1-1
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and Shoppers World Community Center, L.P.
Combined Balance Sheets
(Unaudited)
June 30, 1997 June 30, 1996
------------- -------------
Assets
Real estate rental property:
Land $ 116,411,168 $ 112,922,187
Buildings 366,644,301 340,219,448
Trucks and equipment 56,481 46,688
Construction in progress 11,137,427 30,697,323
------------- -------------
494,249,377 483,885,646
Less accumulated depreciation (13,290,750) (4,714,947)
------------- -------------
Real estate, net 480,958,627 479,170,699
Cash and cash equivalents 2,367,001 2,566,024
Accounts receivable, net 11,783,257 10,925,742
Deferred financing costs, net 5,427,449 1,754,286
Other assets 2,828,189 247,480
------------- -------------
Total assets $ 503,364,523 $ 494,664,231
============= =============
Liabilities and Members' Capital
Mortgage payable $ 322,500,000 $ 190,000,000
Construction loan -- 123,565,243
Accrued real estate taxes 5,502,981 7,861,524
Accrued interest 1,454,081 1,645,528
Accounts payable and other accrued expenses 980,320 7,878,301
Tenant security deposits 486,513 344,530
Accounts payable, net - Managers 343,837 759,516
------------- -------------
Total liabilities 331,267,732 332,054,642
Members' capital 172,096,791 162,609,589
------------- -------------
Total liabilities and members' capital $ 503,364,523 $ 494,664,231
============= =============
A-1-2
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Statements of Operations
(Unaudited)
For the For the
Six Month Six Month
Period Ended Period Ended
June 30, June 30,
1997 1996
----------- -----------
Revenues
Minimum rent $25,773,179 $21,226,763
Percentage rent 25,641 238,737
Recoveries from tenants 7,088,557 6,011,231
Other income 579,753 453,071
----------- -----------
33,467,130 27,929,802
----------- -----------
Expenses
Interest 11,079,337 8,598,716
Depreciation and amortization 4,551,970 3,793,163
Real estate taxes 4,047,619 3,764,180
Operating and maintenance 2,804,399 2,535,917
Management fees 1,317,395 1,024,719
General and administrative 104,061 134,070
----------- -----------
23,904,781 19,850,765
----------- -----------
Net income $ 9,562,349 $ 8,079,037
=========== ===========
A-1-3
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
June 30, June 30,
1997 1996
------------- ------------
<S> <C> <C>
Operating activities:
Net income $ 9,562,349 $ 8,079,037
Adjustments to reconcile net income to net cash
provided by (used) for operating activities:
Depreciation and amortization 4,562,624 3,793,568
Amortization of deferred finance costs 601,296 589,915
Changes in operating assets and liabilities, net
of assets and liabilities acquired:
Accounts receivable (596,022) 18,645
Other assets (2,358,957) 2,208,199
Accounts payable and accrued expenses 265,276 533,583
------------- ------------
Total adjustments 2,474,217 7,143,910
------------- ------------
Net cash provided by operating activities 12,036,566 15,222,947
------------- ------------
Investing activities:
Purchase and construction of real estate and
related assets (9,732,313) (32,175,679)
Proceeds from sales of land -- 840,724
------------- ------------
Net cash used in investing activities (9,732,313) (31,334,955)
------------- ------------
Financing activities:
Proceeds from mortgage borrowings 322,500,000 --
Payment of mortgage and construction loans (326,000,000) --
Proceeds from construction loans 6,521,884 10,247,475
Payment of deferred financing costs (4,381,773) (653,094)
Distribution to Members (7,500,000) (4,000,000)
Capital contributions from Members 7,000,000 10,850,000
------------- ------------
Net cash provided by (used) for
financing activities (1,859,889) 16,444,381
------------- ------------
Net increase in cash and cash equivalents 444,364 332,373
Cash and cash equivalents at beginning of period 1,922,637 2,233,651
------------- ------------
Cash and cash equivalents at end of period $ 2,367,001 $ 2,566,024
============= ============
</TABLE>
A-1-4
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Notes to Combined Interim Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is engaged in the business of owning and operating ten
community power shopping centers. The tenant base includes primarily
national retail chains and local retailers, consequently the Company's credit
risk is concentrated in the retail industry.
INTERIM STATEMENTS
The interim financial data for the six months ended June 30, 1997 and 1996
is unaudited; however, in the opinion of the Company, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim period. The
results for the period presented are not necessarily indicative of the
results for the full year.
2. MORTGAGE PAYABLE
In May 1997, the Company refinanced its existing mortgage and construction
agreements. The new mortgage, aggregating $322.5 million, bears interest at
a fixed coupon rate of 7.378% and matures in June 2002. The loan requires
monthly payments of interest and a single balloon payment at maturity. The
loan is secured by the ten shopping centers.
A-1-5
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
A-1-6
<PAGE>
COMMUNITY CENTERS ONE L.L.C.,
COMMUNITY CENTERS TWO L.L.C.
AND SHOPPERS WORLD COMMUNITY CENTER, L.P.
COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 1996
and for the Period November 17, 1995
(date of inception) to December 31, 1995
with Report of Independent Accountants
A-1-7
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Financial Statements
For the Year Ended December 31, 1996 and
for the Period from November 17, 1995 (date of inception)
to December 31, 1995
Contents
Report of Independent Accountants .................................... A-1-9
Combined Balance Sheets .............................................. A-1-10
Combined Statements of Operations .................................... A-1-11
Combined Statements of Members' Capital .............................. A-1-12
Combined Statements of Cash Flows .................................... A-1-13
Notes to Combined Financial Statements ............................... A-1-14
A-1-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Developers Diversified Realty Corporation
and DRA Advisors, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of managers' capital and of cash flows
present fairly, in all material respects, the financial position of Community
Centers One, L.L.C., Community Centers Two, L.L.C. and Shoppers World
Community Center, L.P. at December 31, 1996 and 1995, and the results of
their operations and their cash flows for the year ended December 31, 1995,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of management; our responsibility is to
express an opinion on these financial statements based on our audited. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Cleveland, Ohio
February 21, 1997
A-1-9
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Balance Sheets
December 31,
1996 1995
------------- -------------
Assets
Real estate rental property:
Land $ 109,981,671 $ 114,062,909
Buildings 363,637,590 296,589,269
Trucks and equipment 56,480 --
Construction in progress 10,841,324 41,898,513
------------- -------------
484,517,065 452,550,691
Less accumulated depreciation (8,733,184) (926,842)
------------- -------------
Real estate, net 475,783,881 451,623,849
Cash and cash equivalents 1,922,637 2,233,651
Accounts receivable, net 11,187,235 10,944,387
Deferred financing costs, net 1,646,972 1,691,107
Other assets 474,289 2,461,112
------------- -------------
Total assets $ 491,015,014 $ 468,954,106
============= =============
Liabilities and Members' Capital
Mortgage payable $ 190,000,000 $ 190,000,000
Construction loan 129,478,116 113,317,768
Note payable -- 700,000
Accrued real estate taxes 4,066,126 4,979,214
Accrued interest 1,755,771 1,726,881
Accounts payable and other accrued expenses 1,769,747 9,611,435
Tenant security deposits 458,859 311,940
Accounts payable, net - Managers 451,952 626,316
------------- -------------
Total liabilities 327,980,571 321,273,554
Members' capital 163,034,443 147,680,552
------------- -------------
Total liabilities and members' capital $ 491,015,014 $ 468,954,106
============= =============
The accompanying notes are an integral part of these combined financial
statements.
A-1-10
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Statements of Operations
For the Period
November 17,
For the 1995 (date of
Year Ended inception) to
December 31, December 31,
1996 1995
----------- -----------
Revenues
Minimum rent $45,045,472 $ 4,801,644
Percentage rent 283,540 --
Recoveries from tenants 12,773,523 1,281,802
Other income 901,467 18,337
----------- -----------
59,004,002 6,101,783
----------- -----------
Expenses
Interest 18,536,932 2,139,707
Depreciation and amortization 7,816,458 927,967
Real estate taxes 7,308,944 706,780
Operating and maintenance 5,147,851 679,495
Management fees 2,227,146 135,815
General and administrative 256,504 68,863
----------- -----------
41,293,835 4,658,627
----------- -----------
Net income $17,710,167 $ 1,443,156
=========== ===========
The accompanying notes are an integral part of these combined financial
statements.
A-1-11
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Statements of Members' Capital
<TABLE>
<CAPTION>
DDCC DRA Total
------------- ------------- -------------
<S> <C> <C> <C>
Balance at November 17, 1995 (inception) $ -- $ -- $ --
Capital contributions 73,118,698 73,118,698 146,237,396
Net income 721,578 721,578 1,443,156
------------- ------------- -------------
Balance at December 31, 1995 73,840,276 73,840,276 147,680,552
Capital contributions 5,421,862 5,421,862 10,843,724
Distributions (6,600,000) (6,600,000) (13,200,000)
Net income 8,855,083 8,855,084 17,710,167
------------- ------------- -------------
Balance at December 31, 1996 $ 81,517,221 $ 81,517,222 $ 163,034,443
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
A-1-12
<PAGE>
Community Centers One L.L.C.,
Community Centers Two L.L.C.
and
Shoppers World Community Center, L.P.
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
For the Period
November 17,
For the 1995 (date of
Year Ended inception) to
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Operating activities:
Net income $ 17,710,167 $ 1,443,156
Adjustments to reconcile net income to net cash
provided by (used) for operating activities:
Depreciation and amortization 7,816,458 927,967
Amortization of deferred finance costs 1,200,450 97,063
Changes in operating assets and liabilities, net
of assets and liabilities acquired:
Accounts receivable (119,358) (7,949,385)
Other assets 1,976,707 (543,913)
Accounts payable and accrued expenses (1,586,095) 5,969,676
------------- -------------
Total adjustments 9,288,162 1,498,592
------------- -------------
Net cash provided by (used) for operating activities 26,998,329 (55,436)
------------- -------------
Investing activities:
Purchase and construction of real estate and
related assets (41,021,845) (445,159,965)
Proceeds from sales of land 1,664,745 --
Construction deposits -- (917,942)
------------- -------------
Net cash used in investing activities (39,357,100) (446,077,907)
------------- -------------
Financing activities:
Proceeds from mortgage borrowings -- 190,000,000
Proceeds from construction loans 16,160,348 113,317,768
Payment of deferred financing costs (1,756,315) (1,188,170)
Distributions to Members (13,200,000) --
Capital contributions from Members 10,843,724 146,237,396
------------- -------------
Net cash provided by financing activities 12,047,757 448,366,994
------------- -------------
Net (decrease) increase in cash and cash equivalents (311,014) 2,233,651
Cash and cash equivalents at beginning of period 2,233,651 --
------------- -------------
Cash and cash equivalents at end of period $ 1,922,637 $ 2,233,651
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-1-13
<PAGE>
Community Centers One L.L.C.,
Community Center Two L.L.C.
and
Shoppers World Community Center, L.P.
Notes to Combined Financial Statements
December 31, 1996
1. Organization of Company
Community Centers One L.L.C., Community Centers Two L.L.C. and Shoppers World
Community Center, L.P. (collectively, referred as the "Company") are joint
ventures each individually formed on November 17, 1995 to acquire certain
assets of the Homart Community Center Division ("Homart") of Homart
Development Co. (a subsidiary of Sears, Roebuck and Co. -"Sears") from an
affiliate of General Growth Properties, Inc., ("General Growth'). General
Growth had contracted to purchase Homart as part of its acquisition of Homart
Development Co. Community Centers One L.L.C., Community Centers Two L.L.C.
and Shoppers World Community Center, L.P. were all formed in the State of
Delaware.
The combined financial statements reflect the assets and liabilities of all
three entities as each has the same members and management, and ownership
interest. All significant intercompany accounts and transactions have been
eliminated.
The Company's members are DD Community Centers One, Inc., DD Community Centers
Two, Inc. and DD Community Centers Three, Inc., wholly owned subsidiaries of
Developers Diversified Realty Corporation ("DDR"), and a consortium of third
party investors, including a private REIT, owned by institutional investors
advised by DRA Advisors, Inc. ("DRA"), three limited partnerships whose
respective limited partners are pension funds and whose general partners are
affiliates of DRA and one corporation whose owners are affiliates of DRA. DDR is
the managing member and is responsible for the day-to-day management of the
centers. DDR and DRA are referred to herein as the "Managers".
The Company acquired ten power centers, aggregating in excess of four million
square feet of gross leasable area ("GLA"), located in major metropolitan areas
throughout the United States as well as several outlots and pad sites adjacent
to the ten power centers and certain other power centers previously sold by
Sears.
A-1-14
<PAGE>
The ten shopping center properties held by the Company ("Community Center
Properties") are summarized as follows:
Year Company
Built/Construction Owned Total
Center Location Commenced GLA GLA
- --------------------------------------------------------------------------------
Carmel Mountain Plaza San Diego, CA 1993 446,484 534,843
Broadway Market Place Denver, CO 1993 369,386 382,576
Carillon Place Naples, FL 1994 266,438 281,773
Town Center Prado Marietta, GA 1995 270,440 326,218
Woodfield Village Green Schaumburg, IL 1993 501,092 516,092
New Hope Commons Durham, NC 1995 408,292 470,947
Fairfax Towne Center Fairfax, VA 1994 253,941 253,941
Perimeter Pointe Atlanta, GA 1995 262,191 380,334
Shoppers World Framingham, MA 1994 716,393 777,332
Independence Commons Independence, MO 1995 365,062 378,662
--------- ---------
3,859,719 4,302,718
========= =========
The total purchase price, as adjusted in 1996, for the Community Center
Properties aggregated $444.1 million and was funded using proceeds from $300.1
million of secured indebtedness, $4.7 million of assumed net liabilities and
$139.3 million of cash, of which one-half each was provided by DDR and DRA in
1995 and 1996.
DDR and DRA each have the right to trigger a purchase or sale of its interest
in any of the individual joint ventures comprising the Company (the
"Reciprocal Purchase Rights"). The Reciprocal Purchase Rights give both
Managers the right, under certain circumstances, to establish a price,
following which the other party has the right to purchase the interest of the
other party, or sell its interest to the other party, at that price. The
Reciprocal Purchase Rights may be invoked by the Managers (i) at any time
after November 17, 1999 or (ii) prior to the expiration of such four-year
period if the management and leasing agreement with DDR is terminated or
either Manager is in default under the governing documents of the Community
Center Community Center, L.P.
The Managers also each have the right to initiate a purchase and sale of the
Community Center Properties (the "Property Purchase Rights"). The Property
Purchase Rights give both the Managers the right, under certain circumstances
after November 17, 1999 or upon default of any community center joint venture
partner under the governing documents of each joint venture agreement to
establish a price for one or more of such properties, following which the
other party has the option to (i) purchase one or more of such properties
from the Company at such price or (ii) permit either to (A) purchase from the
Company all such properties which the other party elects not to purchase, at
such price and/or (B) cause the Company to sell to a third party all such
properties which the other party elects not to purchase.
A-1-15
<PAGE>
In addition, at any time after November 17, 1998, DRA may convert all or a
portion of its respective interests in the Company into common shares of DDR,
in accordance with the terms set forth in the governing documents of the
joint venture. However, if DRA elects to convert its respective interest into
common shares of DDR, DDR will have the sole option to pay cash instead of
issuing common shares. If DDR agrees to the issuance of common shares, the
agreement provides that DRA will execute a lock-up arrangement acceptable to
DDR.
2. Summary of Significant Accounting Principles
Nature of Business
The Company is engaged in the business of owning and operating the ten community
power shopping centers discussed in Note 1. The tenant base includes primarily
national retail chains and local retailers, consequently the Company's credit
risk is concentrated in the retail industry.
Revenues derived from the Company's largest tenant aggregated 7.4% and 8.1% of
total revenues, respectively, for the year ended December 31, 1996 and for the
period November 17, 1995 through December 31, 1995. The Company's ten largest
tenants comprise 39.3% and 39.2% of total revenues, respectively, for the year
ended December 31, 1996 and for the period November 17, 1995 through December
31, 1995. The Managers believe the Company's portfolio is diversified in terms
of location of its shopping centers and its tenant profile. Adverse changes in
general or local economic conditions could result in the inability of some
existing tenants of the Company to meet their lease obligations and could
otherwise adversely affect the Company's ability to attract and retain tenants.
During 1995 and 1996, certain national and regional retailers have experienced
financial difficulties and several have filed for protection under bankruptcy
laws. However, no significant bankruptcies have occurred through February 21,
1997 affecting the Company's portfolio of tenants.
Real Estate
Real estate assets are stated at cost less accumulated depreciation, which, in
the opinion of the Company, is not in excess of the individual properties'
estimated gross undiscounted future cash flows. This assessment was made on the
basis of the Company's continued ownership and use of such properties as well as
considering the current and future expected occupancy levels. Depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of the assets as follows:
Buildings 40 years
Furniture/Fixtures Useful lives, which approximate
and Tenant Improvements lease terms, where applicable
A-1-16
<PAGE>
Depreciation expense was $7,806,342 and $926,842, respectively, for the year
ended December 31, 1996 and for the period November 17, 1995 to December 31,
1995. Expenditures for maintenance and repairs are charged to operations as
incurred. Renovations which improve or extend the life of the asset are
capitalized.
Included in land is undeveloped real estate, generally outlots or expansion
pads, with a net book value of approximately $11.9 million, adjacent to the
shopping centers owned by the Company. These outlots or expansion pads are not
collateralized by the current mortgage payable or construction loan.
Construction in progress includes shopping center development projects. The
Company capitalizes interest on funds used for the construction or expansion of
shopping centers. Capitalization of interest ceases when construction activities
are complete and the property is available for occupancy by tenants. For the
year ended December 31, 1996 and for the period November 17, 1995 to December
31, 1995, the Company capitalized interest of $2,660,143 and $502,173,
respectively.
Deferred Financing Costs
Costs incurred in obtaining long-term financing are amortized over the terms of
the related debt agreements and is reflected as interest expense in the
statement of operations.
Organization Cost
Costs incurred in the formation of the Company have been capitalized and are
being amortized on a straight-line basis over a sixty month period.
Revenue Recognition
Minimum rents from tenants are recognized monthly based upon total fixed cash
flow over the initial term of the lease, using the straight line method.
Percentage and overage rents are recognized after the reported tenant sales have
exceeded the applicable sales breakpoint. Revenues associated with tenant
reimbursements are recognized in the period in which the expenses are incurred
based upon provisions of tenant leases.
Interest and Real Estate Taxes
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the building life. Interest paid during the
year ended December 31, 1996 and for the period November 17, 1995 to December
31, 1995, aggregated $19,967,673 and $817,936, respectively.
A-1-17
<PAGE>
Statement of Cash Flows and Supplemental Disclosure of Non-Cash Investing and
Financing Information
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
For the period November 17, 1995 through December 31, 1995, the Company
assumed receivables aggregating $4.1 million and liabilities aggregating
approximately $11.5 million (including $.7 million of notes payable) in
conjunction with the acquisition of the shopping centers. In addition,
included in accounts payable at December 31, 1995 is $0.6 million of deferred
finance costs. The foregoing transactions did not provide or use cash and,
accordingly, are not reflected in the statement of cash flows.
Income Taxes
No provision has been made in the accompanying financial statements for any
Federal income taxes since each item of income, gain, loss, deduction or credit
is reportable by the members in their respective income tax returns.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements accounted for as anticipatory hedges are
related to planned refinances of certain of the Company's variable rate
indebtedness. Upon refinance of such indebtedness, any gain or loss
associated with the termonation of the interest rate swap agreement is
deferred and recognized over the life of the refinanced indebtedness.
Impairment of Long-Lived Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of (SFAS 121), on January 1, 1996. SFAS 121
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of SFAS 121 did not have an
impact on financial position, results of operations, or liquidity of the
Company.
A-1-18
<PAGE>
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Managers to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
3. Accounts Receivable
Accounts receivable in the balance sheet are principally due from tenants and
are expected to be collected within one year except for receivables associated
with the recognition of straight-line rental income which will be collected over
the terms of the related tenant leases (Note 1). The following is a summary of
the components of accounts receivable:
December 31,
1996 1995
------------ ------------
Currently due $ 9,367,657 $ 10,680,137
Straight-line rents, net 2,596,033 395,455
------------ ------------
11,963,690 11,075,592
Less - allowance for uncollectible
amounts (776,455) (131,205)
------------ ------------
$ 11,187,235 $ 10,944,387
============ ============
4. Deferred Financing Costs
Deferred financing costs consist of the following:
December 31,
1996 1995
----------- -----------
Deferred financing costs - construction and
bridge loan $ 1,709,644 $ 1,088,170
Deferred financing costs - long term financing 1,234,841 700,000
----------- -----------
2,944,485 1,788,170
Less-accumulated amortization (1,297,513) 97,063
----------- -----------
$ 1,646,972 $ 1,691,107
=========== ===========
The Company incurred deferred finance costs aggregating $1,709,644 associated
with obtaining the Company's initial construction financing (Notes 6 and 7).
Accordingly, the amortization of deferred financing costs associated with the
construction financing and initial mortgage debt is based on an eighteen
month period. The Company and a financial institution are in the process of
arranging long term financing through a securitization. The Company has
incurred an additional $1,234,841 of deferred costs associated with the
securitization. Costs associated with this financing will be amortized over
the term of the long term financing which is scheduled to be completed in May
1997.
A-1-19
<PAGE>
5. Other Assets
Other assets are comprised of the following at December 31,:
1996 1995
---------- ----------
Prepaid insurance $ 152,662 $ --
Construction deposits 136,682 2,317,942
Other deposits 144,851 99,295
Organization costs, net 40,086 43,875
---------- ----------
$ 474,289 $2,461,112
========== ==========
6. Construction Loan
The Company entered into a construction loan agreement with a financial
institution, which provides for maximum borrowings of $140 million, the proceeds
of which have or will be used for the acquisition and completion of construction
of three shopping centers. At December 31, 1996, $129,478,116 had been borrowed.
Interest is payable monthly at a rate per annum equal to LIBOR (5.6172% at
December 31, 1996) plus 1.0%. The principal is payable on or before May 15, 1997
and is secured by the three shopping centers having a net book value of $185.4
million at December 31, 1996, and related tenant leases. The loan requires
monthly payments of interest only.
7. Mortgage Payable
The Company entered into two loan agreements with a financial institution,
aggregating $190 million, with interest at a rate per annum equal to LIBOR
(5.5625% at December 31, 1996) plus .75%. The loans have a maturity date of May
31, 1997, and are secured by seven shopping centers, having a net book value of
$287 million at December 31, 1996, and related tenant leases. The loan requires
monthly payments of interest only.
8. Note Payable
At December 31, 1995, the Company had a note payable of $700,000 which
represented a portion of the net liabilities assumed in the initial purchase
price. The note did not bear interest and was paid in full in February 1996.
A-1-20
<PAGE>
9. Other Income
Other income is comprised of the following:
1996 1995
-------- --------
Lease termination fees $491,852 $ --
Interest income 306,367 17,179
Other 103,248 1,158
-------- --------
$901,467 $ 18,337
======== ========
10. Transactions with Related Parties
Management fees and capitalized development fees earned by DDR aggregated
$1,948,754 and $1,343,246, respectively, for the year ended December 31, 1996
and $108,603 and $483,892, respectively, for the period from November 17, 1995
through December 31, 1995. Management fees earned by DRA aggregated $278,394 and
$14,810, respectively, for the year ended December 31, 1996 and for the period
November 17, 1995 through December 31, 1995.
Fees earned by DDR and DRA are determined pursuant to provisions set forth in
the joint venture agreements. The management fee payable to DDR and DRA is
determined at an amount equal to 3.5% and 0.5%, respectively, of gross
income, as defined in the Management Agreement. The development fee payable
to DDR is equal to 5% of 95% of the funds expended or reserved for
construction. The management fees are charged to operations while development
fees covering the supervision of construction activities are capitalized as a
cost of buildings.
DDR may earn leasing fees equal to 5% of net base rent, up to $3.00 per square
foot, for any new leases signed. DDR may also earn a fee equal to 3% of net base
rent, not to exceed $1.80 per square foot, for any lease extensions, expansions
or renewals. DRA may receive a leasing advisory fee equal to fifty percent of
the 5% leasing fee for any new leases registered by or on behalf of any DRA
entity. DDR earned leasing fees of $62,763 in 1996. No leasing fees or advisory
fees were earned in 1995.
DDR may earn sales commissions relating to the sale of outlots or residual land
equal to 10% of the net proceeds. Commissions payable to outside brokers are to
be deducted from the 10% due DDR. DDR earned a commission of $44,500 relating to
the sale of an out parcel in 1996; no commissions were earned in 1995.
In accordance with the Management Agreement, insurance coverage is provided
through DDR's insurance policies which provides liability and property coverage.
The Company remits to DDR, through an independent insurance agent, a premium
which aggregated $941,414 in 1996 and $109,568 in 1995, to fund an insurance
escrow account relating to deductibility clauses associated with DDR's insurance
policies.
A-1-21
<PAGE>
At December 31, 1996 and 1995 accounts payable (net) to DDR and DRA consisted of
the following:
1996 1995
--------- ---------
Leasing and commission fees $ 107,263 $ --
Development fees 202,550 453,843
Acquisition costs 13,663 49,060
Insurance premiums 216,688 --
Management fees -- 123,413
--------- ---------
540,164 626,316
Less - insurance premiums receivable (88,212) --
--------- ---------
$ 451,952 $ 626,316
========= =========
11. Commitments
Shopping center space is leased to tenants pursuant to agreements which provide
for terms ranging generally from one to 30 years and, in some cases, for annual
rentals which are subject to upward adjustments based on operating expense
levels, sales volume, or contractual increases as defined in the lease
agreements.
The scheduled future minimum revenues from rental property under the terms of
all noncancelable tenant leases, assuming no new or renegotiated leases or
option extensions for such premises, for the five years ending December 31, and
thereafter, were as follows:
1997 $ 49,415,935
1998 49,801,703
1999 48,898,364
2000 47,949,266
2001 45,788,401
Thereafter 462,474,436
------------
$704,328,105
============
In conjunction with the development and expansion of the shopping centers, the
Company has entered into construction agreements aggregating approximately $4.8
million.
12. Fair Value of Financial Instruments
Considerable judgment is necessary to develop estimated fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts the
Company could realize on disposition of the financial instruments. The following
methods and assumptions were used by the Company in estimating its fair value
disclosures of financial instruments:
A-1-22
<PAGE>
Cash and cash equivalents, accounts receivable, accounts payable, notes payable,
accruals and other liabilities:
The carrying amounts reported in the balance sheet for these financial
instruments approximated fair value because of the short maturity of those
instruments.
Debt:
The carrying amounts of the Company's mortgage approximates fair value because
such borrowing is at variable rates.
Interest rate swap:
During 1996, the Company entered into interest rate hedge agreements to manage
interest costs and risks associated with the Company's proposed refinancing.
At December 31, 1996, the estimated fair value of the interest rate swap
agreement was an obligation of approximately $3,720,130 representing an
unrealized loss. The Company is exposed to credit losses to the extent of
counterparty nonperformance, but does not anticipate that it will incur any such
losses.
The fair value refinancing is based upon the estimated amount that the
Company would pay to terminate the contract at the reporting date.
A-1-23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT A-2
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONDENSED BALANCE SHEET
(UNAUDITED)
June 20, December 31,
1997 1996
-------- ----------
(in thousands)
ASSETS
Property and equipment, net. . . . . . $300,646 $300,939
Due from Courtyard Management
Corporation. . . . . . . . . . . . . 9,244 5,325
Other assets . . . . . . . . . . . . . 18,327 11,536
Cash and cash equivalents. . . . . . . 10,051 12,709
-------- --------
$338,268 $330,509
-------- --------
-------- --------
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt. . . . . . . . . . . . $323,874 $288,975
Due to Marriott International, Inc.
and affiliates . . . . . . . . . . 19,741 19,848
Due to Host Marriott Corporation . . 13,297 12,975
Incentive management fees due to
Courtyard Management Corporation . 6,500 25,596
Accounts payable and accrued
liabilities. . . . . . . . . . . . 1,437 2,445
-------- --------
Total Liabilities. . . . . . . . 364,849 349,839
-------- --------
PARTNERS' CAPITAL (DEFICIT)
General Partner. . . . . . . . . . . (3) 474
Limited Partners . . . . . . . . . . (26,578) (19,804)
-------- --------
Total Partners' Deficit. . . . . (26,581) (19,330)
-------- --------
$338,268 $330,509
-------- --------
-------- --------
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Twenty-Four Weeks Ended
June 20, June 14,
1997 1996
---------- ----------
(in thousands)
REVENUES . . . . . . . . . . . . . . . . . . $46,190 $41,946
------- -------
OPERATING COSTS AND EXPENSES
Interest. . . . . . . . . . . . . . . . 11,693 10,755
Depreciation. . . . . . . . . . . . . . 8,040 9,117
Base and Courtyard management fees . . 5,392 5,022
Incentive management fees . . . . . . . 4,512 4,371
Ground rent, taxes and other. . . . . . 5,893 6,382
------- -------
35,530 35,647
------- -------
NET INCOME BEFORE
EXTRAORDINARY ITEMS . . . . . . . . . . 10,660 6,299
EXTRAORDINARY ITEMS
Gain on forgiveness of deferred fees. . 14,896 --
Loss on extinguishment of debt. . . . . (2,423) --
------- -------
12,473 --
------- -------
NET INCOME . . . . . . . . . . . . . . . . . $23,133 $6,299
------- -------
------- -------
Twelve Weeks Ended
June 20, June 14,
1997 1996
---------- ----------
(in thousands)
REVENUES . . . . . . . . . . . . . . . . . . $24,502 $23,040
------- -------
OPERATING COSTS AND EXPENSES
Interest. . . . . . . . . . . . . . . . 6,113 5,360
Depreciation. . . . . . . . . . . . . . 3,933 4,559
Base and Courtyard management fees . . 2,785 2,638
Incentive management fees . . . . . . . 4,512 2,474
Ground rent, taxes and other. . . . . . 2,380 3,188
------- -------
19,723 18,219
------- -------
NET INCOME . . . . . . . . . . . . . . . . . $ 4,779 $ 4,821
------- -------
------- -------
A-2-1
<PAGE>
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
Twenty-Four Weeks Ended
June 20, June 14,
1997 1996
---------- ---------
(in thousands)
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . $ 23,133 $ 6,299
Extraordinary items . . . . . . . . . . . . (12,473) --
--------- --------
Net income before extraordinary items . . . 10,660 6,299
Noncash items . . . . . . . . . . . . . . . 8,789 14,284
Changes in operating accounts . . . . . . . (9,234) (4,777)
--------- --------
Cash provided by operations. . . . . . . . 10,215 15,806
--------- --------
INVESTING ACTIVITIES
Additions to property and
equipment, net . . . . . . . . . . . . . . (7,747) (8,452)
Change in property improvement fund. . . . . (3,752) 4,261
--------- --------
Cash used in investing activities . . . . (11,499) (4,191)
--------- --------
FINANCING ACTIVITIES
Proceeds from mortgage debt . . . . . . . . 325,000 --
Repayments of mortgage debt . . . . . . . . (290,101) (13,727)
Capital distributions . . . . . . . . . . . (30,384) --
Payment of financing costs. . . . . . . . . (5,889) --
--------- --------
Cash used in financing activities . . . . (1,374) (13,727)
--------- --------
DECREASE IN CASH
AND CASH EQUIVALENTS. . . . . . . . . . . . (2,658) (2,112)
CASH AND CASH EQUIVALENTS
at beginning of period. . . . . . . . . . . 12,709 11,013
--------- --------
CASH AND CASH EQUIVALENTS
at end of period. . . . . . . . . . . . . . $ 10,051 $ 8,901
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for mortgage interest . . . . . . $ 11,945 $ 11,292
--------- --------
--------- --------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed financial statements have been prepared by the
Courtyard by Marriott Limited Partnership (the "Partnership") without
audit. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
statements. The Partnership believes the disclosures made are adequate to
make the information presented not misleading. However, the condensed
financial statements should be read in conjunction with the Partnership's
financial statements and notes thereto included in the Partnership's Annual
Report for the fiscal year ended December 31, 1996. Interim results are
not necessarily indicative of fiscal year performance because of seasonal
and short-term variations.
For financial reporting purposes, the net income of the Partnership is
allocated 95% to the Limited Partners and 5% to the General Partner.
Significant differences exist between the net income for financial
reporting purposes and the net income reported for Federal income tax
purposes. These differences are due primarily to the use for income tax
purposes of accelerated depreciation methods, shorter depreciable lives for
the assets, difference in the timing of recognition of certain fees and
straight-line rent adjustments.
2. Revenues consist of Hotel operating results as follows (in thousands):
Twenty-Four Weeks Ended
June 20, June 14,
1997 1996
-------- --------
HOTEL SALES
Rooms . . . . . . . . . . . . . . . . $80,694 $74,366
Food and beverage . . . . . . . . . . 6,078 6,124
Other . . . . . . . . . . . . . . . . 3,100 3,209
------- -------
89,872 83,699
------- -------
HOTEL EXPENSES
Departmental direct costs
Rooms. . . . . . . . . . . . . . . . 16,958 16,325
Food and beverage. . . . . . . . . . 5,114 5,156
Other hotel operating expenses. . . . 21,610 20,272
------- -------
43,682 41,753
------- -------
REVENUES. . . . . . . . . . . . . . . . $46,190 $41,946
------- -------
------- -------
Twelve Weeks Ended
June 20, June 14,
1997 1996
-------- --------
HOTEL SALES
Rooms . . . . . . . . . . . . . . . . $41,793 $39,104
Food and beverage . . . . . . . . . . 3,055 3,184
Other . . . . . . . . . . . . . . . . 1,576 1,682
------- -------
46,424 43,970
------- -------
HOTEL EXPENSES
Departmental direct costs
Rooms. . . . . . . . . . . . . . . . 8,704 8,391
Food and beverage. . . . . . . . . . 2,614 2,605
Other hotel operating expenses. . . . 10,604 9,934
------- -------
21,922 20,930
------- -------
REVENUES. . . . . . . . . . . . . . . . $24,502 $23,040
------- -------
------- -------
A-2-2
<PAGE>
- --------------------------------------------------------------------------------
3. On March 21, 1997, the Partnership completed a refinancing of both the 49
Hotels and Hartford Hotel mortgage loan. The total amount of the debt was
increased from $280.8 million to $325 million. The net proceeds from the
refinancing was used to (i) repay the 49 Hotels and Hartford Hotel mortgage
loans of $280.8 million; (ii) make a $7 million contribution to the
property improvement fund to cover anticipated shortfalls; (iii) reserve $7
million to pay financing costs; and (iv) make a $30.2 million partial
return of capital distribution to the partners.
The remaining balance of $2.4 million in financing costs related to the 49
Hotels and Hartford Hotel mortgage loans was fully amortized in connection
with the refinancing and has been reflected as an extraordinary loss on the
statement of operations.
In connection with this refinancing, a new management agreement was
negotiated with Courtyard Management Corporation (the "Manager"). Under the
new agreement, in exchange for payment of $4.2 million of deferred
management fees at closing, the Manager agreed to forgive $14.9 million of
deferred fees leaving a $6.5 million balance of accrued incentive
management fees. The forgiveness of deferred fees of $14.9 million has been
reflected as an extraordinary gain on the statement of operations.
A-2-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE PARTNERS OF COURTYARD BY MARRIOTT LIMITED PARTNERSHIP:
We have audited the accompanying balance sheet of Courtyard by Marriott Limited
Partnership (a Delaware limited partnership) as of December 31, 1996 and 1995,
and the related statements of operations, changes in partners' capital (deficit)
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the General
Partner's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Courtyard by Marriott Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
April 11, 1997
A-2-4
<PAGE>
STATEMENT OF OPERATIONS
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands, except per Unit amounts)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
REVENUES
HOTEL (NOTE 3). . . . . . . . . . . . $90,300 $83,043 $76,087
OTHER . . . . . . . . . . . . . . . 1,035 1,262 876
------- ------- -------
91,335 84,305 76,963
------- ------- -------
OPERATING COSTS AND EXPENSES
INTEREST. . . . . . . . . . . . . . . 23,529 27,001 22,461
DEPRECIATION. . . . . . . . . . . . . 19,258 19,753 21,075
BASE AND COURTYARD MANAGEMENT FEES. . 10,898 10,248 9,710
INCENTIVE MANAGEMENT FEE. . . . . . . 9,365 8,615 7,616
GROUND RENT . . . . . . . . . . . . . 7,246 7,066 6,948
PROPERTY TAXES. . . . . . . . . . . . 5,977 5,381 5,868
INSURANCE AND OTHER . . . . . . . . . 1,608 1,253 1,369
------- ------- -------
77,881 79,317 75,047
------- ------- -------
NET INCOME BEFORE EXTRAORDINARY ITEM . . 13,454 4,988 1,916
EXTRAORDINARY ITEM
GAIN ON FORGIVENESS OF DEFERRED
MANAGEMENT FEES. . . . . . . . . . . - - 51,493
------- ------- -------
NET INCOME . . . . . . . . . . . . . . . $13,454 $ 4,988 $53,409
------- ------- -------
------- ------- -------
ALLOCATION OF NET INCOME
GENERAL PARTNER . . . . . . . . . . . $673 $250 $2,671
LIMITED PARTNERS. . . . . . . . . . . 12,781 4,738 50,738
------- ------- -------
$13,454 $ 4,988 $53,409
------- ------- -------
------- ------- -------
NET INCOME PER LIMITED PARTNER UNIT
(1,150 UNITS) . . . . . . . . . . . . $11,114 $ 4,120 $44,120
------- ------- -------
------- ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
A-2-5
<PAGE>
BALANCE SHEET
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
DECEMBER 31, 1996 AND 1995
(in thousands)
- --------------------------------------------------------------------------------
1996 1995
---- ----
ASSETS
Property and equipment, net. . . . . . $300,939 $301,117
Property improvement fund. . . . . . . 8,449 17,940
Due from Courtyard Management
Corporation . . . . . . . . . . . . . 5,325 4,772
Deferred financing costs, net of
accumulated amortization. . . . . . . 3,087 3,898
Cash and cash equivalents. . . . . . . 12,709 11,013
-------- --------
$330,509 $338,740
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Mortgage debt. . . . . . . . . . . . . $288,975 $317,763
Management fees due to Courtyard
Management Corporation. . . . . . . . 25,596 16,231
Straight-line and deferred ground rent
due to affiliates of Marriott
International, Inc. . . . . . . . . . 19,848 20,116
Debt service guaranty and accrued
interest payable to Host Marriott
Corporation . . . . . . . . . . . . . 12,975 12,366
Accounts payable and accrued liabilities 2,445 2,748
-------- --------
Total Liabilities. . . . . . . . . . 349,839 369,224
-------- --------
PARTNERS' CAPITAL (DEFICIT)
General Partner
Capital contributions. . . . . . . . 28,218 28,218
Capital distributions. . . . . . . . (1,464) (1,464)
Cumulative net losses. . . . . . . . (26,280) (26,953)
-------- --------
474 (199)
-------- --------
Limited Partners
Capital contributions, net of offering
costs of $12,912. . . . . . . . . . 100,845 100,845
Investor notes receivable. . . . . . (98) (98)
Capital distributions. . . . . . . . (30,108) (27,808)
Cumulative net losses. . . . . . . . (90,443) (103,224)
-------- --------
(19,804) (30,285)
-------- --------
Total Partners' Deficit. . . . (19,330) (30,484)
-------- --------
$330,509 $338,740
-------- --------
-------- --------
The accompanying notes are an integral part of these financial statements.
A-2-6
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(DEFICIT)
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
- --------------------------------------------------------------------------------
General Limited
Partner Partners Total
------- -------- --------
Balance, December 31, 1993. . . . . . . . $(3,120) $(85,761) $(88,881)
Net Income . . . . . . . . . . . . . 2,671 50,738 53,409
------- -------- --------
Balance, December 31, 1994. . . . . . . . (449) (35,023) (35,472)
Net Income . . . . . . . . . . . . . 250 4,738 4,988
------- -------- --------
Balance, December 31, 1995. . . . . . . . (199) (30,285) (30,484)
Capital Distributions. . . . . . . . - (2,300) (2,300)
Net Income . . . . . . . . . . . . . 673 12,781 13,454
------- -------- --------
Balance, December 31, 1996. . . . . . . . $ 474 $(19,804) $(19,330)
------- -------- --------
------- -------- --------
The Accompanying Notes Are an Integral Part of These Financial Statements.
A-2-7
<PAGE>
STATEMENT OF CASH FLOWS
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . $ 13,454 $ 4,988 $ 53,409
Extraordinary Item . . . . . . . . . . - - 51,493
-------- -------- --------
Income Before Extraordinary Item . . . 13,454 4,988 1,916
Noncash Items:
Depreciation . . . . . . . . . . . . 19,258 19,753 21,075
Deferred Incentive Management Fees . 9,365 8,615 7,616
Amortization of Deferred Financing
Costs as Interest Expense . . . . . 1,126 1,123 773
Deferred Interest on Guaranty
Advances . . . . . . . . . . . . . 609 648 533
Straight-line and Deferred Ground
Rent. . . . . . . . . . . . . . . . - 192 765
Changes in Operating Accounts:
Due from Courtyard Management
Corporation . . . . . . . . . . . . (553) (355) (923)
Straight-line and Deferred Ground
Rent Due to Affiliates of
Marriott International, Inc. . . . . (268) - -
Accounts Payable and Accrued
Liabilities . . . . . . . . . . . . (303) (263) 1,370
-------- -------- --------
Cash Provided by Operations. . . . . 42,688 34,701 33,125
-------- -------- --------
Investing Activities
Additions to Property and Equipment, Net (19,080) (7,942) (4,186)
Change in Property Improvement Fund. . 9,491 (1,467) (4,360)
Change in Contingency Reserve Fund . . - - 1,643
-------- -------- --------
Cash Used in Investing Activities. . (9,589) (9,409) (6,903)
-------- -------- --------
Financing Activities
Payment of Mortgage Debt . . . . . . . (28,788) (25,081) (27,896)
Capital Distributions. . . . . . . . . (2,300) - -
Payment of Financing Costs . . . . . . (315) (54) (4,381)
Change in Refinancing Escrow Account . - - 10,013
-------- -------- --------
Cash Used in Financing Activities. . (31,403) (25,135) (22,264)
-------- -------- --------
Increase in Cash and Cash Equivalents. . 1,696 157 3,958
Cash and Cash Equivalents at Beginning of
Year. . . . . . . . . . . . . . . . . 11,013 10,856 6,898
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 12,709 $ 11,013 $ 10,856
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Cash Paid for Mortgage Interest. . . . $ 22,122 $ 25,493 $ 19,735
-------- -------- --------
-------- -------- --------
The Accompanying Notes Are an Integral Part of These Financial Statements.
A-2-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
NOTE 1. THE PARTNERSHIP
DESCRIPTION OF THE PARTNERSHIP
Courtyard by Marriott Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed to acquire and own 50 Courtyard by Marriott
hotels (the "Hotels") and the land on which certain of the Hotels are located.
The Partnership's 50 Hotels are located in 16 states in the United States: nine
in Georgia; seven in Texas; six in California; five in Virginia; four in
Michigan and three or less in each of the other 11 states. On December 29,
1995, Host Marriott Corporation's operations were divided into two separate
companies: Host Marriott Corporation ("Host Marriott") and Host Marriott
Services Corporation. The sole general partner of the Partnership, with a 5%
interest, is CBM One Corporation (the "General Partner"), a wholly-owned
subsidiary of Host Marriott. The Hotels are operated as part of the Courtyard
by Marriott hotel system by Courtyard Management Corporation (the "Operator" or
"Manager"), a wholly-owned subsidiary of Marriott International, Inc. ("MII").
On August 20, 1986 (the "Closing Date"), 1,150 limited partnership interests
(the "Units"), representing a 95% interest in the Partnership, had been sold
pursuant to a private placement offering at $100,000 per Unit. The General
Partner made capital contributions consisting of $1,211,000 in cash and land on
which certain of the Hotels are located valued at $4,842,000 for its 5% general
partner interest.
On the Closing Date, the Partnership executed a purchase agreement (the
"Purchase Agreement") with Host Marriott to acquire the Hotels and the land on
which certain of the Hotels are located for a total fixed price of $448,184,000.
Of the total purchase price, $374,656,000 was paid in cash from the proceeds of
the mortgage financing and the initial installment on the sale of the Units with
the remaining $73,528,000 evidenced by a note payable to Host Marriott.
Twenty-eight of the Hotels were conveyed to the Partnership in 1986, twenty-one
Hotels in 1987 and the final Hotel in January 1988.
PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS
Partnership allocations and distributions are generally made as follows:
a. Cash available for distribution will be distributed (i) first, 5% to the
General Partner and 95% to the limited partners until the General Partner
and limited partners (collectively, the "Partners") have received
cumulative distributions of sale or refinancing proceeds ("Capital
Receipts") equal to $60,526,500; (ii) next, 15% to the General Partner and
85% to the limited partners until the Partners have received cumulative
distributions of Capital Receipts equal to $121,053,000; and (iii)
thereafter, 30% to the General Partner and 70% to the limited partners.
b. Capital Receipts, other than from the sale or other disposition of
substantially all of the assets of the Partnership, not retained by the
Partnership will be distributed (i) first, 5% to the General Partner and
95% to the limited partners until the Partners have received cumulative
distributions of Capital Receipts equal to $121,053,000 and (ii)
thereafter, 30% to the General Partner and 70% to the limited partners.
c. Proceeds from the sale of substantially all of the assets of the
Partnership or from a related series of Hotel sales leading to the sale of
substantially all of the assets of the Partnership will be distributed to
the Partners pro-rata in accordance with their capital account balances.
d. Net profits are generally allocated in the same ratio in which cash
available for distribution is distributed. Net losses are generally
allocated to the General Partner. To the extent the General Partner makes
debt service advances to the Partnership and other loans as outlined in the
partnership agreement, the General Partner will be allocated net losses
equal to the amounts advanced.
A-2-9
<PAGE>
- --------------------------------------------------------------------------------
e. In general, gain recognized by the Partnership will be allocated, with
respect to any year, in the following order of priority: (i) to all
Partners whose capital accounts have negative balances until such negative
balances are brought to zero; (ii) to all Partners up to the amount
necessary to bring their respective capital account balances to an amount
equal to their invested capital, as defined; and (iii) thereafter, 30% to
the General Partner and 70% to the limited partners.
Gain arising from the sale or other disposition (or from a related series
of sales or dispositions) of substantially all of the assets of the
Partnership will be allocated (i) to the limited partners in an amount
equal to the excess, if any, of (1) the sum of 15% times the weighted
average of the limited partners' invested capital each year, over (2) the
sum of distributions to the limited partners of Capital Receipts and cash
available for distribution each year; and (ii) next, to the General Partner
until it has been allocated an amount equal to 30/70 times the amount
allocated to the limited partners under clause (i); and (iii) thereafter,
30% to the General Partner and 70% to the limited partners.
f. For financial reporting purposes, profits and losses are allocated among
the Partners based on their stated interests in cash available for
distribution.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership records are maintained on the accrual basis of accounting and
its fiscal year coincides with the calendar year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUES AND EXPENSES
Hotel revenues represent house profit of the Partnership's Hotels since the
Partnership has delegated substantially all of the operating decisions related
to the generation of house profit of the Hotels to the Operator. House profit
reflects Hotel operating results which flow to the Partnership as property owner
and represents Hotel sales less property-level expenses, excluding depreciation,
Courtyard, base and incentive management fees, real and personal property taxes,
ground and equipment rent, insurance and certain other costs, which are
disclosed separately in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as follows:
Building and improvements 40 years
Leasehold improvements 40 years
Furniture and equipment 4-10 years
All property and equipment is pledged to secure the mortgage debt described in
Note 6 and Note 9.
The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties will be
less than their net book value. If a property is impaired, its basis is
adjusted to fair market value.
DEFERRED FINANCING COSTS
Deferred financing costs represent the costs incurred in connection with
obtaining the mortgage debt (see Note 6 and Note 9) and are amortized, using the
straight-line method, over the term of the loan including available extensions.
During 1996, the Partnership paid $315,000 in financing costs related to
refinancing the Partnership's mortgage debt as discussed in Note
A-2-10
<PAGE>
- --------------------------------------------------------------------------------
9. Refinancing costs as of December 31, 1996 and 1995 were $6,107,000 and
$5,792,000, respectively. Accumulated amortization of financing costs as of
December 31, 1996 and 1995 totalled $3,019,000 and $1,893,000, respectively.
GROUND RENT
The land leases with affiliates of MII (see Note 7) include scheduled increases
in minimum rents per property. These scheduled rent increases, which are
included in minimum lease payments, are being recognized by the Partnership on a
straight-line basis over the 95 year term of the leases. The adjustment
included in ground rent expense to reflect minimum lease payments on a
straight-line basis was ($232,000) for 1996, $166,000 for 1995 and $765,000 for
1994.
INCOME TAXES
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the Partnership does not pay income
taxes, but rather, allocates its profits and losses to the individual Partners.
Significant differences exist between the net income for financial reporting
purposes and the net income as reported in the Partnership's tax return. These
differences are due primarily to the use, for income tax purposes, of
accelerated depreciation methods, shorter depreciable lives for the assets,
differences in the timing of recognition of certain fees and straight-line rent
adjustments. As a result of these differences, the excess of the tax basis in
net Partnership liabilities over the net Partnership liabilities reported in the
accompanying financial statements is $20,483,000 and $29,190,000 as of December
31, 1996 and 1995, respectively.
NEW STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Adoption of
SFAS No. 121 did not have an effect on its financial statements.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.
RECLASSIFICATIONS
Certain reclassifications were made to prior year financial statements to
conform to the 1996 presentation.
NOTE 3. REVENUES
Hotel revenues consist of Hotel operating results for the three years ended
December 31 as follows (in thousands):
1996 1995 1994
-------- -------- --------
HOTEL SALES
Rooms . . . . . . . . . . . . . . . . $162,126 $151,571 $141,894
Food and beverage . . . . . . . . . . 12,975 12,787 13,313
Other . . . . . . . . . . . . . . . . 6,538 6,441 6,633
-------- -------- --------
181,639 170,799 161,840
-------- -------- --------
HOTEL EXPENSES
Departmental direct costs
Rooms. . . . . . . . . . . . . . . 36,059 34,244 31,975
Food and beverage. . . . . . . . . 11,165 10,726 10,785
Other hotel operating expenses. . . . 44,115 42,786 42,993
-------- -------- --------
91,339 87,756 85,753
-------- -------- --------
HOTEL REVENUES. . . . . . . . . . . . . $ 90,300 $ 83,043 $ 76,087
-------- -------- --------
-------- -------- --------
A-2-11
<PAGE>
- --------------------------------------------------------------------------------
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
1996 1995
--------- ---------
Land and improvements $ 30,797 $ 30,797
Leasehold improvements 199,595 195,320
Building and improvements 133,728 130,481
Furniture and equipment 144,869 133,311
--------- ---------
508,989 489,909
Less accumulated depreciation (208,050) (188,792)
--------- ---------
$ 300,939 $ 301,117
--------- ---------
--------- ---------
NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments are shown below. The fair
values of financial instruments not included in this table are estimated to be
equal to their carrying amounts:
<TABLE>
<CAPTION>
As of December 31, 1996 As of December 31, 1995
------------------------- -------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ----------- ---------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Mortgage debt . . . . . . . . . . . $288,975 $288,975 $317,763 $317,763
Management fees due to Courtyard
Management Corporation. . . . . . $ 25,596 $ 7,777 $ 16,231 $ 7,497
Debt service guaranty and accrued
interest payable to Host Marriott
Corporation . . . . . . . . . . . $ 12,975 $ 9,918 $ 12,366 $ -
</TABLE>
The estimated fair value of mortgage debt obligations is based on the expected
future debt service payments discounted at estimated market rates, adjusted for
the presence of the debt service guaranties. Management fees due to Courtyard
Management Corporation and debt service guaranty payable to Host Marriott
Corporation including accrued interest are valued based on the expected future
payments from operating cash flow discounted at risk adjusted rates.
NOTE 6. DEBT
The 49 Hotels Loan and the Windsor Loan as discussed below were refinanced on
March 21, 1997 and the lenders were repaid in full (see Note 9).
49 HOTELS LOAN
On June 15, 1988, the Partnership restructured the 49 hotels loan (the "Original
49 Hotels Loan") of $373,149,000 with a group of banks (the "Lenders"). The
Original 49 Hotels Loan matured on June 15, 1993 with the entire $373,149,000
balance due. The Partnership did not have sufficient cash to repay the Original
49 Hotels Loan at maturity and defaulted on the loan. On December 15, 1993, the
Partnership entered into a forbearance agreement whereby the Lenders agreed not
to exercise their rights and remedies for nonpayment of the Original 49 Hotels
Loan. In exchange, the Partnership and the Lenders agreed that the Original 49
Hotels Loan would bear interest at LIBOR plus 1.5 percentage points from June
15, 1993 through April 17, 1994. In connection with the restructuring of the
loan, the Partnership repaid $20 million of principal leaving a balance of
$353,149,000.
On April 18, 1994, the Partnership entered into a restated loan agreement (the
"49 Hotels Loan") with the Lenders for the 49 Hotels. The 49 Hotels Loan bore
interest at floating rates at the Partnership's option equal to the following:
A-2-12
<PAGE>
- --------------------------------------------------------------------------------
Time Period Interest Rate
----------------------------------- -----------------------------------
Closing through June 15, 1996 (1) LIBOR plus 1.5 percentage
points OR the higher of (2) .5
percentage points plus (a) prime,
or (b) .5 percentage points plus
(i) the three week average 3-month
CD rate or (ii) the federal funds
rate
June 16, 1996 through June 15, 1997 (1) LIBOR plus 1.75 percentage
points OR the higher of (2) .75
percentage points plus (a) prime,
or (b) .5 percentage points plus
(i) the three week average 3-month
CD rate or (ii) the federal funds
rate
The 49 Hotels Loan required minimum annual principal payments of $7,000,000.
Additionally, while the loan balance was above $300,000,000, 100% of Available
Cash Flow (equal to operating profit, as defined, less the sum of (1) interest
expense, (2) the $7,000,000 annual principal payment, (3) partnership
administrative expenses of up to $250,000, as adjusted annually for the consumer
price index, and (4) ground rent payments to MII) was used to pay additional
principal on the 49 Hotels Loan. While the loan balance was between
$250,000,000 and $299,999,999, 80% of Available Cash Flow was used to pay
additional principal on the 49 Hotels Loan and once the loan balance was less
than $250,000,000, 75% of Available Cash Flow would have been used to pay
additional principal on the loan.
For 1996 and 1995, the Partnership paid $28,416,000 and $24,584,000,
respectively, in principal payments on the 49 Hotels Loan leaving a balance of
$282,686,000 at December 31, 1996. The weighted average interest rate on the 49
Hotels Loan was 7.08% in 1996, 7.62% in 1995 and 5.92% in 1994. The interest
rate on the 49 Hotels Loan was 7.25% at December 31, 1996. The 49 Hotels Loan
would have matured on June 15, 1997; however, the term could have been extended
for two one-year periods if certain operating profit levels, as defined, were
met.
As security for the 49 Hotels Loan, the Lenders had a mortgage on the
Partnership's fee or leasehold interest in each of the Hotels, except the
Windsor, Connecticut Hotel. In addition, all of the Lenders had a security
interest in certain personal property associated with each Hotel and granted a
security interest in the Partnership's rights under the operating agreement (see
Note 8) and Purchase Agreement. Thirty of the 49 hotels covered by the 49
Hotels Loan lease land (see Note 7) from affiliates of MII. These affiliates
agreed to subject their ownership interests as well as subordinate their receipt
of ground rent to the payment of debt service on the 49 Hotels Loan. Deferred
ground rent payable to affiliates of MII bore interest at two percentage points
under the base rate announced by Citibank, N.A. Deferred ground rent and
related accrued interest could not be repaid until the 49 Hotels Loan balance
was less than $300,000,000. There was no deferred ground rent related to the 49
Hotels Loan during 1996 and 1995.
WINDSOR HOTEL LOAN
On February 9, 1988, the Partnership entered into a loan agreement to provide
non-recourse mortgage debt of $8,274,000 (the "Windsor Loan") to pay
approximately 80% of the purchase price of the Windsor, Connecticut Hotel (the
"Windsor Hotel"). The Windsor Loan bore interest at a floating rate equal to
the adjusted CD rate or LIBOR plus 2.0 percentage points. The Windsor Loan
matured on August 15, 1996 with the remaining principal balance of $6,289,000
plus accrued interest due at that time. In exchange for Host Marriott providing
a guaranty of repayment of the loan at maturity, the lender agreed to extend the
Windsor Loan maturity to March 31, 1997. The Partnership agreed to continue to
pay interest on the Windsor Loan at LIBOR plus 200 basis points until the
earlier of repayment or March 31, 1997. No principal amortization on the
Windsor Loan was required until maturity. The weighted average interest rate on
the Windsor Loan was 7.46%, 8.23% and 6.44% for 1996, 1995 and 1994,
respectively. The interest rate on the Windsor Loan was 7.50% on December 31,
1996 and 7.94% on December 31, 1995.
As security for the Windsor Loan, the bank had a mortgage on the Partnership's
leasehold interest in the Windsor Hotel. Additionally, the bank had a security
interest in the Partnership's interest in the personal property associated with
the Windsor Hotel and a security interest in the Partnership's rights under the
operating agreement and Purchase Agreement.
The Windsor Hotel land is also leased from an affiliate of MII, which agreed to
subject their ownership interest as well as their receipt of ground rent to the
payment of debt service on the Windsor Loan. Deferred ground rent payable to
the affiliate of MII bore interest at two percentage points under the base rate
announced by Citibank, N.A. Deferred ground rent and accrued interest related
to the Windsor Loan was repaid with available funds from the Windsor Hotel after
A-2-13
<PAGE>
- --------------------------------------------------------------------------------
payment of debt service. The deferred ground rent as of December 31, 1995 in
the amount of $36,000 was paid in 1996. As of December 31, 1996, there was no
deferred ground rent related to the Windsor Hotel.
49 HOTELS LOAN GUARANTIES
Host Marriott provided additional security to the Lenders in the form of a debt
guaranty (the "Debt Service Guaranty") of aggregate interest and principal of up
to $40 million. Host Marriott's performance under the Debt Service Guaranty was
backed by a $40 million guaranty of aggregate principal and interest from MII
(the "Backup Guaranty"). Payments by Host Marriott under the Debt Service
Guaranty or MII under the Backup Guaranty would have been treated as advances to
the Partnership and bore interest at the base rate announced by The First
National Bank of Chicago. The Debt Service Guaranty replaced the original
guarantee of $37.3 million under the Original 49 Hotels Loan. No amounts have
been advanced under the Debt Service Guaranty or the Backup Guaranty covering
the 49 Hotels Loan. As of December 31, 1996 and 1995, $7,341,000 had been
advanced by the General Partner under the Original 49 Hotels Loan guaranty. The
weighted average interest rate on the Original 49 Hotel Loan guaranty advances
was 8.3%, 8.8% and 7.15% for 1996, 1995 and 1994, respectively. The interest
rate at December 31, 1996 was 8.25% and 8.5% at December 31, 1995. Accrued
interest on the guaranty advance as of December 31, 1996 and 1995, was
$5,634,000 and $5,025,000, respectively.
MII provided two additional guaranties to the Lenders: the debt and tenant
change guaranty (the "Debt and Tenant Change Guaranty") and the Marriott
International Guaranty (the "MII Guaranty").
The Debt and Tenant Change Guaranty provided that in the event of nonpayment of
principal and interest when due or upon loan maturity, MII would have advanced
amounts, in addition to amounts advanced under the Backup Guaranty for principal
and interest not to exceed the following:
From closing through June 15, 1997 $10.0 million
From June 16, 1997 through June 15, 1998 $12.5 million
Thereafter $15.0 million
Additionally, the Debt and Tenant Change Guaranty provided that if the Operator
ceases to be a wholly-owned subsidiary of MII, then MII would have advanced $15
million (the "Tenant Change Payment") for principal and interest on the 49
Hotels Loan. However, if MII would have paid $15 million to the Lenders prior
to the occurrence of a tenant change, then MII would have no further obligation
to fund the Tenant Change Payment.
The MII Guaranty provided that in the event of nonpayment of principal and
interest when due or upon loan maturity, MII had the option of (1) remaining the
Operator of the 49 Hotels by advancing amounts to the Lenders for principal and
interest equal to the lesser of (i) $40 million minus amounts advanced under the
Debt and Tenant Change Guaranty or (ii) the amount necessary to reduce the
outstanding principal balance on the 49 Hotels Loan to $180 million or (2)
conveying its rights, title and interest in the 49 Hotels operating agreement to
the Lenders.
In the event of nonpayment of principal and interest when due or upon maturity,
for Courtyard Management Corporation to remain as the Operator of the 49 Hotels,
MII could have been required to advance as much as $80 million ($40 million
pursuant to the Backup Guaranty if Host Marriott failed to perform under the
Debt Service Guaranty and, at its option, $40 million, collectively, under the
MII Guaranty and the Debt and Tenant Change Guaranty). However, in the event
that MII conveyed its rights, title and interest in the 49 Hotels operating
agreement to the Lenders, the maximum amount that MII would have been required
to advance to the Lenders would have been $55 million ($40 million under the
Backup Guaranty if Host Marriott failed to perform under the Debt Service
Guaranty and $15 million under the Debt and Tenant Change Guaranty). Payments
by MII under the Debt and Tenant Change Guaranty and the MII Guaranty,
respectively, would have been treated as advances to the Partnership and bore
interest at the base rate announced by The First National Bank of Chicago. No
amounts were advanced pursuant to the Debt and Tenant Change Guaranty and the
MII Guaranty.
WINDSOR LOAN GUARANTY
Host Marriott directly or through the General Partner provided additional
security to the Windsor Loan lenders in the form of a debt service guaranty of
aggregate interest and principal on the Windsor Loan of up to $706,000.
Payments by Host Marriott or the General Partner under the debt service guaranty
were treated as advances to the Partnership and bore interest at the base rate
announced by The First National Bank of Chicago. No amounts were advanced under
the Windsor Loan guaranty. However, in exchange for Host Marriott providing a
guaranty of repayment of the loan at maturity, the lender agreed to extend the
Windsor Loan maturity to March 31, 1997.
Upon the refinancing of the Partnership's debt, Host Marriott and
MII were released from these guaranties as discussed in Note 9.
A-2-14
<PAGE>
- --------------------------------------------------------------------------------
NOTE 7. LAND LEASES
The land on which 31 of the Hotels are located is leased from affiliates of MII.
In addition, two of the Hotels are located on land leased from third parties.
The ground leases have remaining terms (including all renewal options) expiring
between the years 2058 and 2081. The MII ground leases and one of the third
party ground leases provide for rent based on specific percentages (from 2% to
9.75%) of certain sales categories, subject to minimum amounts. The minimum
rentals are adjusted at various anniversary dates throughout the lease terms, as
defined in the agreements.
Minimum future rental payments during the term of the ground leases are as
follows (in thousands):
Lease Ground
Year Leases
---------- --------
1997 $ 7,068
1998 7,068
1999 7,068
2000 7,140
2001 7,140
Thereafter 546,703
--------
$582,187
--------
--------
Total ground rent expense was $7,478,000 in 1996, $7,569,000 in 1995, and
$7,675,000 in 1994.
NOTE 8. MANAGEMENT AGREEMENT/OPERATING AGREEMENT
In connection with the debt refinancing, the Operating Agreements, as defined
below, were terminated as of January 3, 1997. A new management agreement (the
"Management Agreement") was executed as of January 4, 1997 for the management of
the 50 Partnership Hotels.
On the Closing Date, the Partnership entered into a long-term management
agreement (the "Original Management Agreement") with Courtyard Management
Corporation to operate the Hotels as part of the Courtyard by Marriott hotel
system. Effective January 1, 1994, in connection with the 49 Hotels Loan
agreement, the Original Management Agreement was converted into two long-term
operating agreements (the "Operating Agreement(s)") with the Operator, one for
the 49 Hotels and one for the Windsor Hotel. The Operating Agreements had
initial terms expiring on December 31, 2007 for a majority of the Hotels. The
Operator could renew the term, for one or more of the Hotels, at its option, for
up to five successive terms of 10 years each.
Effective July 1, 1989, the Original Management Agreement was amended to defer
the Courtyard management fee and base management fee to the extent that cash
flow provided to the Partnership was less than $2,945,000 for 1989 and
$6,973,000 per year in 1990 through 1993 (the "Partnership Objective"). The
Partnership Objective provided a 3% per annum return on Partners' invested
capital, as defined, for 1989 and 6% per annum from 1990 through 1993. In order
to meet the Partnership Objective, the Courtyard management fee was first
subject to deferral followed by the base management fee. As of December 31,
1993, the balance of deferred incentive, Courtyard and base management fees
totalled $51.5 million. During 1994, these fees were extinguished pursuant to
the 49 Hotels Loan and the forgiveness of these fees is recorded as an
extraordinary item in the statement of operations.
The 49 Hotels Operating Agreement provided for annual payments to the
Partnership equal to 85% of operating profit, as defined (75% of operating
profit after the Partners have received cumulative distributions of loan
proceeds equal to $60,526,500). However, until the 49 Hotels Loan balance was
below $300 million, 100% of Available Cash Flow from the 49 Hotels would have
been paid by the Operator to the Partnership. The additional payment to the
Partnership of 15% or 25% of operating profit accrued as deferred incentive
management fees. As of December 31, 1996 and 1995, $25,076,000 and $15,899,000,
respectively, of incentive management fees related to the 49 Hotels were
deferred. Once the 49 Hotels Loan balance was between $250,000,000 and
$299,999,999, the incentive management fee was payable out
A-2-15
<PAGE>
- --------------------------------------------------------------------------------
of 20% of Available Cash Flow after the payment of the following: (i)
deferred MII ground rent; (ii) interest and principal on advances under the
Backup Guaranty; (iii) interest and principal on advances under the Debt
Service Guaranty; (iv) interest and principal under the Debt and Tenant
Change Guaranty and the MII Guaranty; and (v) a priority return to the
Partnership equal to 10% of cumulative capital less sales proceeds and loan
proceeds, as defined. Additionally, once the 49 Hotels Loan balance was below
$250,000,000, the incentive management fee was payable out of 25% of
Available Cash Flow after the payment of items (i) through (v) above.
The Windsor Hotel Operating Agreement also provided for annual payments to the
Partnership equal to 85% of operating profit, as defined, for the Windsor Hotel
(75% of operating profit after the Partners have received cumulative
distributions of loan proceeds equal to $60,526,500). However, if 85% or 75% of
operating profit from the Windsor Hotel was insufficient to cover debt service
on the Windsor Hotel, then the 15% or 25% of operating profit, as defined, was
paid to the Partnership. This additional payment to the Partnership of 15% or
25% of operating profit, as defined, accrued as deferred incentive management
fees. As of December 31, 1996 and 1995, $520,000 and $332,000, respectively, of
incentive management fees related to the Windsor Hotel were deferred.
The Operating Agreements provided for annual payments to the Operator of (i) the
base management fee equal to 3% of gross sales from the Hotels, (ii) the
Courtyard management fee equal to 3% of gross sales from the Hotels, and (iii)
the incentive management fee equal to 15% of operating profit, as defined, (25%
of operating profit after the Partners have received distributions of aggregate
refinancing proceeds equal to $60,526,500).
The Operator was required to furnish certain services ("Chain Services") which
are furnished generally on a central or regional basis to all managed, owned or
leased hotels in the Courtyard by Marriott hotel system. Effective January 1,
1994, the Operating Agreements provided that charges for certain Chain Services
cannot exceed 5% of gross Hotel sales. The Operator will be responsible for any
Chain Services in excess of the 5% of gross Hotel sales limit from its own
funds. Chain Services charges for 1996, 1995 and 1994 did not exceed the
limitation. The total amount of Chain Services was $6,540,000 in 1996,
$6,412,000 in 1995 and $6,265,000 in 1994.
The Partnership is required to provide the Operator with working capital and
fixed asset supplies to meet the operating needs of the Hotels. Upon
termination of the Operating Agreements, the working capital and supplies will
be returned to the Partnership. Of the $3,213,000 originally advanced to the
Operator for working capital, $2,000,000 of excess working capital was returned
to the Partnership in 1988, leaving a balance of $1,213,000 as of December 31,
1996 and 1995.
The Operating Agreements provided for a property improvement fund to be
maintained to ensure that the physical condition and product quality of the
Hotels are maintained. Contributions to the property improvement fund were 5%
of gross Hotel sales through 1996. Beginning in 1997 contributions to the
property improvement fund could have been increased to 6% of gross Hotel sales
if certain operating profit levels were met. For the years ended December 31,
1996, 1995 and 1994, the Partnership contributed $9,082,000, $8,540,000 and
$8,092,000, respectively, to the property improvement fund.
NOTE 9. SUBSEQUENT EVENT
MORTGAGE DEBT
On March 21, 1997 (the "Refinancing Date") both the 49 Hotels Loan and the
Windsor Loan were refinanced. The total amount of the debt was increased from
$280.8 million to $325.0 million. The $44.2 million of excess refinancing
proceeds were used to: (i) make a $7 million contribution to the property
improvement fund to cover anticipated shortfalls; (ii) pay approximately $7
million of refinancing costs; and (iii) make a $30.2 million partial return of
capital distribution to the Partners. The new loan continues to be non-recourse
and requires monthly payments of interest at a fixed rate of 7.865% and
principal based on a 20 year amortization schedule. The loan has a scheduled
maturity in April 2012; however, the loan maturity can be extended for an
additional five years. During the extended loan term, the loan bears interest
at an adjusted rate, as defined, and all cash flow from Partnership operations
is used to amortize the principal balance of the loan.
Debt maturities under the refinanced loan are as follows (in thousands):
1997 $ 4,593
1998 7,356
1999 7,955
2000 8,604
2001 9,306
Thereafter 287,186
--------
$325,000
--------
--------
A-2-16
<PAGE>
- --------------------------------------------------------------------------------
The refinanced mortgage loan is secured by first mortgages on all of the Hotels,
related personal property, and the land on which they are located or an
assignment of the Partnership's interest under the land leases. All obligations
under the debt guaranties (see Note 6) expired with the repayment of the 49
Hotels Loan and the Windsor Loan. No new guaranties have been provided by Host
Marriott or MII.
The lender is currently working on the securitization of the mortgage debt
through the issuance and sale of commercial mortgage-backed securities.
MANAGEMENT AGREEMENT
As part of the refinancing, the two Operating Agreements (see Note 8) were
converted into a single management agreement (the "Management Agreement")
effective January 4, 1997. The initial term of the Management Agreement expires
at the end of 2017. The Manager can extend the Management Agreement for up to
four successive periods of ten years. Under the Management Agreement, the
Manager has agreed to subordinate a portion of the Courtyard system fee equal to
1% of gross Hotel sales to debt service on the mortgage loan. In addition, in
exchange for payment of $4.2 million of deferred incentive management fees at
closing, the Manager agreed to forgive approximately $15 million of deferred
fees leaving a $6.5 million balance of accrued incentive management fees. The
$15 million of forgiven fees will be recognized as extraordinary income in the
first quarter of 1997. Incentive management fees are equal to 15% of operating
profit. Deferred and current year incentive management fees will be payable
from 50% of available cash after the payment of: (i) debt service; (ii)
deferred Courtyard system fees, if any; (iii) deferred MII ground rent, if any;
and (iv) a priority return to the Partnership equal to 10% of cumulative capital
less sale and refinancing proceeds. In addition, incentive management fees paid
are capped at 15% of operating profit and no longer increase to 25% of operating
profit once cumulative distributions of refinancing proceeds equal $60.5
million. Deferred management fees are not payable to the Manager from sale or
refinancing proceeds. Future unpaid incentive management fees will not accrue.
In addition, contributions to the property improvement fund will remain at 5% of
gross Hotel sales through 1998. However, contributions can be increased to 6%
of gross Hotel sales for 1999 and 2000 and 7% thereafter.
LAND LEASES
Additionally, affiliates of MII, as the land lessors, agreed to continue to
subordinate their ownership interest as well as receipt of ground rent to debt
service on the mortgage loan.
A-2-17
<PAGE>
COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP HOTELS
- --------------------------------------------------------------------------------
ALABAMA MICHIGAN
Montgomery Dearborn
Southfield
ARIZONA Troy
Phoenix Airport Warren
CALIFORNIA NORTH CAROLINA
Buena Park Charlotte-Arrowood Road
Fremont Raleigh-Wake Forest Road
Pleasanton
Sacramento-Rancho Cordova NEW YORK
San Francisco Airport Tarrytown
Santa Ana
OHIO
CONNECTICUT Cincinnati-Blue Ash
Windsor Columbus-Dublin
Columbus-Worthington
FLORIDA
Melbourne PENNSYLVANIA
Miami Airport-West Valley Forge
Tallahassee
TENNESSEE
GEORGIA Brentwood
Atlanta-Delk Road Memphis-Park Avenue East
Atlanta-Executive Park
Atlanta-Northlake TEXAS
Atlanta-Peachtree Corners Arlington
Atlanta-Peachtree Dunwoody Bedford
Atlanta-Windy Hill Dallas-Addison
Augusta Dallas-Las Colinas
Columbus Dallas-LBJ Northwest
Savannah San Antonio Airport
San Antonio-Medical Center
ILLINOIS
Naperville VIRGINIA
Fair Oaks
MARYLAND Herndon
Hunt Valley Hampton
Landover Richmond
Rockville Virginia Beach
A-2-18
<PAGE>
EXHIBIT A-3
BRE/WORLDWIDE L.L.C.
FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
(UNAUDITED)
A-3-1
<PAGE>
BRE/WORLDWIDE L.L.C.
BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
ASSETS
BUILDING, net of accumulated depreciation of $508,531 $384,904,593
MORTGAGE RECEIVABLE 11,027,081
ACCRUED INTEREST RECEIVABLE 228,430
DEFERRED FINANCING COSTS, net of accumulated
amortization of $8,025 3,033,106
ESCROW DEPOSIT 4,000,000
DUE FROM AFFILIATES 637,097
DUE FROM NYCCA L.P. 1,520,514
CASH 6,176,996
------------
Total assets $411,527,817
============
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES
Mortgage note payable $275,000,000
Accrued real estate taxes-ICIP 22,935,617
Accrued interest payable 1,105,167
------------
Total liabilities 299,040,784
MEMBERS' CAPITAL 112,487,033
------------
Total liabilities and members' capital $411,527,817
============
A-3-2
<PAGE>
BRE/WORLDWIDE L.L.C.
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
REVENUES:
Rent $2,721,478
Interest-mortgage 4,440,406
Other 131,666
----------
Total revenues 7,293,550
EXPENSES:
Real estate taxes 643,808
Property operating expenses 559,411
Interest expense 1,340,647
Depreciation and amortization 516,556
General and administrative 23,097
Other 7,317
----------
Total expenses 3,090,836
----------
Net income $4,202,714
==========
A-3-3
<PAGE>
BRE/WORLDWIDE L.L.C.
STATEMENT OF MEMBERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
MEMBERS' CAPITAL, December 31, 1996 $ 88,284,319
Capital contributions 20,000,000
Net income for the six months ended June 30, 1997 4,202,714
------------
MEMBERS' CAPITAL, June 30, 1997 $112,487,033
============
A-3-4
<PAGE>
BRE/WORLDWIDE L.L.C.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,202,714
-------------
Adjustment to reconcile net income to net cash
used in operating activities-
Depreciation and amortization 516,556
Increase interest receivable (228,430)
Increase in due from NYCCA LP (374,549)
Increase in due from affiliate (637,097)
Increase in accounts payable and accrued expenses 1,080,394
-------------
Total adjustments 356,874
-------------
Net cash provided by operating activities 4,559,588
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (919,364)
Escrow deposit (4,000,000)
-------------
Net cash used by operating activities (4,919,364)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage refinancing 275,000,000
Repayment of mortgage (290,000,000)
Loan financing costs paid (3,041,131)
Member contributions 20,000,000
-------------
Net cash provided by financing activities 1,958,869
-------------
Net increase in cash and cash equivalents 1,599,093
CASH AND CASH EQUIVALENTS - beginning of period 4,577,903
-------------
CASH AND CASH EQUIVALENTS - end of period $ 6,176,996
=============
Supplemental schedule of noncash investing activities:
On June 11, 1997 in a preapproved plan of reorganization of NYCCA LP,
the Company obtained title to the land and building known as Worldwide Plaza
Office Tower. In connection with the transfer the following mortgage
receivable was cancelled and liabilities assumed:
Mortgage assumed upon acquisition of land and building $ 290,000,000
Mortgage receivable capitalized into acquisition cost 72,347,507
Deferred real estate tax liability assumed: 22,935,617
-------------
Total $ 385,283,124
=============
A-3-5
<PAGE>
BRE/WORLDWIDE L.L.C.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION
BRE/Worldwide L.L.C. (the "Company") was formed on October 9, 1996 as a
Delaware limited liability company. The term of the Company, which
consists of twelve members, shall continue until December 31, 2046 unless
sooner dissolved, wound up and terminated in accordance with the Limited
Liability Company Agreement (the "Agreement").
BASIS OF PRESENTATION
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting principles
for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustment (consisting solely of normal recurring matters)
necessary for a fair presentation of the financial statements for this
interim period have been included. The results for the six months ended
June 30, 1997, are not necessarily indicative of the results to be obtained
for the full fiscal year. On June 11, 1997, the Company acquired from New
York Communications Center Associates Limited Partnership ("NYCCA") all
the right title and interest in a 47-story office tower consisting of
office and retail space and the underlying land (the "Office Tower").
Accordingly, these financial statements should be read in conjunction with
the December 31, 1996 financial statements and notes thereto of NYCCA.
2. MORTGAGE RECEIVABLE
As of October 25, 1996, the Company purchased the following mortgage notes
secured by the Office Tower and certain retail space, a health club, a movie
theater, an underground parking facility and an outdoor plaza together with
the underlying land (collectively, the "Amenities"):
Principal
Description Amount
----------- ---------
Second Mortgage Loan $ 55,000,000
Third Mortgage Loan 40,000,000
Fourth Mortgage Loan 30,000,000
Fifth Mortgage Loan 153,894,804
Sixth Mortgage Loan 39,868,958
------------
$318,763,762
============
A-3-6
<PAGE>
2. MORTGAGE RECEIVABLE (CONTINUED)
The Purchase price of $66,234,481 included the principal amount and
$19,740,649 of accrued interest of the Sixth Mortgage Loan. The Company's
right to acquire the $290 million First Mortgage Note was assigned to Lehman
Brothers Holdings Inc.
Concurrent with the purchase, The Fourth through Sixth Mortgage Loans were
assigned to an affiliate of the Company. The Fifth and Sixth Mortgage Loans
were then assigned by the affiliate to a not-for-profit organization. On
June 11, 1997 the original $55 million second mortgage note was cancelled
upon the transfer of the Office Tower to the Company (See Note 3). In
addition, the original third mortgage held by the Company was cancelled and
restated as the Amended and Restated Second Mortgage. This mortgage
receivable, with a face amount of $40 million has been shown at its
discounted purchase price of $11,027,081 and is secured by the Amenities.
The Office Tower has been removed as security for the Second through Sixth
Mortgage Loans.
Interest income from the mortgages for the six months ended June 30, 1997
consists of $2,483,617 of interest on the Second Mortgage Note through June
11, 1997, the date cancelled, and $1,956,789 of interest on the Third
Mortgage Note.
3. LAND AND BUILDING
On March 4, 1997, a pre-approved plan of reorganization for NYCCA was
approved by the Bankruptcy Court. Pursuant to the approved plan, NYCCA, on
June 11, 1997, transferred all of its right, title and interest in the Office
Tower to the Company in exchange for the cancellation of the $55 million
second mortgage note held by the Company. NYCCA retained ownership of the
Amenities.
As part of the transfer of title, the Company assumed a $290 million first
mortgage note. Concurrently, the first mortgage note was refinanced with $275
million of loan proceeds (the "Note") and $15 million of member capital. The
Amenities have been removed as security for the first mortgage note. The
Office Tower has been removed as security for the Third through Sixth
mortgage notes payable by NYCCA.
The Building is depreciated over 40 years using the straight-line method of
depreciation.
4. LONG-TERM DEBT
The Note matures July 10, 2017, requires self-liquidating monthly payments of
interest and principal, and is secured solely by the Office Tower. Through
July 10, 2004, $225 million of the Note bears interest at 7.92% per annum and
$50 million bears interest at LIBOR + .55% per annum. Thereafter, to
maturity, the entire Note bears interest at the greater of 9.92% or the
average yield on U.S. Treasury Obligations maturing nearest July 10, 2017 +
2% per annum. Payment of any increase in interest payments due after July
10, 2004 may be deferred until July 10, 2017. The Company is required to pay
$2 million or post a $2 million letter of credit each
A-3-7
<PAGE>
4. LONG-TERM DEBT (CONTINUED)
August 1 through 2003. The Company and its affiliate have pledged their
interest in the Third and Fourth Mortgage Notes receivable (See Note 2) as
additional collateral for repayment of the Note. The Note is non-recourse to
the members of the Company and is guaranteed by NYCCA.
Future principal payments on the Note are due as follows:
Twelve months ended June 30,
----------------------------
1998 $5,361,512
1999 6,308,825
2000 6,827,027
2001 7,387,794
2002 7,994,621
A-3-8
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
(UNAUDITED)
A-3-9
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
ASSETS
------
RETAIL PROPERTY, net of accumulated depreciation
of $7,623,709 $28,772,731
DEFERRED LEASING COSTS, net of accumulated
amortization of $141,729 886,460
DEFERRED FINANCING COSTS, net of accumulated
amortization of $13,232,445 4,171,947
RENTAL INCOME RECORDED IN ADVANCE OF RECEIPT 1,972,704
PREPAID EXPENSES AND OTHER ASSETS 531,584
ACCOUNTS RECEIVABLE FROM TENANTS, net of reserve
for uncollectible accounts of $258,398 426,039
CASH AND CASH EQUIVALENTS 3,904,984
-----------
Total assets $40,666,449
===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Mortgage Loans-Related Party $ 70,000,000
Mortgage Loans 193,763,762
Accrued real estate taxes - ICIP - amenities 399,800
Accounts payable, accrued expenses and other liabilities 4,348,898
Accrued interest payable 11,634,272
Due to BRE/Worldwide, L.L.C 1,520,514
-------------
Total liabilities 281,667,246
PARTNERS' DEFICIT (241,000,797)
-------------
Total liabilities and partners' deficit $ 40,666,449
=============
A-3-10
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
STATEMENT OF LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
REVENUES:
Rent
Office tower $ 26,706,745
Retail property 2,255,509
Interest 20,696
Other 204,754
------------
Total revenues 29,187,704
EXPENSES:
Real estate taxes-
Office tower 5,489,314
Retail property 564,012
Property operating expenses-
Office tower 4,430,346
Retail property 269,128
Interest expense 23,309,627
Depreciation and amortization 742,000
General and administrative and other 245,989
Write-down of real estate and related assets 799,573
------------
Total expenses 35,849,989
------------
Net Loss ($ 6,662,285)
============
A-3-11
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
BRE/WW Inc. WZG Oldegard WW O&M Cravath
----------- --- -------- -- --- -------
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' DEFICIT, December 31, 1996 ($420,473) ($55,706,134) ($56,422,450) ($56,315,647) ($45,831,167) ($19,642,641)
Net loss for the period from January 1, 1997
through June 30, 1997 (66,623) (1,543,385) (1,543,385) (1,543,385) (1,371,898) (593,609)
--------- ------------ ------------ ------------ ------------ ------------
PARTNERS' DEFICIT, June 30, 1997 ($487,096) ($57,249,519) ($57,965,835) ($57,859,032) ($47,203,065) ($20,236,250)
========= ============ ============ ============ ============ ============
</TABLE>
Total
-----
PARTNERS' DEFICIT, December 31, 1996 ($234,338,512)
Net loss for the period from January 1, 1997
through June 30, 1997 (6,662,285)
-------------
PARTNERS' DEFICIT, June 30, 1997 ($241,000,797)
=============
A-3-12
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 6,662,285)
------------
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 742,000
Write-down of real estate and related assets 799,573
Increase in rental income recorded in advance (215,280)
Decrease in prepaid expenses and other assets 6,331,583
Decrease in accounts receivable from tenants 235,473
Increase in accounts payable, accrued expenses and
other liabilities 1,167,722
Increase in accrued interest payable 5,192,041
Increase in due to BRE/Worldwide, L.L.C 1,520,514
Decrease in prepaid rent (3,853,908)
------------
Total adjustments 11,919,718
------------
Net cash provided by operating activities 5,257,433
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred leasing costs (669,498)
Capital expenditures for building and tenant improvements (799,573)
------------
Net cash used in investing activities (1,469,071)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in deposits held in escrow 99,290
Paydown of advances from general partner (1,145,964)
------------
Net cash used in financing activities (1,046,674)
------------
Net increase in cash 2,741,688
CASH AND CASH EQUIVALENTS - Beginning of period 1,163,296
------------
CASH AND CASH EQUIVALENTS - End of period $ 3,904,984
============
A-3-13
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. BACKGROUND, RECAPITALIZATION,
DEBT RESTRUCTURING AND
BANKRUPTCY FILING
Background
New York Communications Center Associates Limited Partnership ("NYCCA" or the
"Partnership") and ZCWK Associates L.P. ("ZCWK") (together, the "Partnerships")
were initially organized under Delaware law on November 21, 1985, among (a) WZ
Garden Corp., a New York corporation ("WZG"); (b) Oldegard Corp., a New York
corporation ("Oldegard"); (c) WW West "A" Associates, a New York limited
partnership ("WW"); (d) KG MS Garden Corp., a New York corporation ("KG"), as
general partners; and (e) Ogilvy & Mather World-Wide, Inc., a New York
corporation, as limited partner. Subsequent to 1985, the partnership agreements
were amended and restated several times to admit KG; Cravath, Swaine & Moore
("Cravath"), a New York partnership; and N. W. Ayer & Son, Inc. ("Ayer"), a
Delaware corporation, as limited partners. On September 3, 1991, Ogilvy & Mather
World-Wide, Inc. assigned its interest to two affiliates (collectively "O&M")
which transaction took place outside of the Partnerships.
Prior to 1996, the percentage interests of the partners were as follows:
NYCCA ZCWK
----------------------- -----------------------
General Limited General Limited
Partnership Partnership Partnership Partnership
Interest Interest Interest Interest
----------- ----------- ----------- -----------
WZG 10.83% 5.42% 14.667% 1.583%
Oldegard 10.83 5.42 14.667 1.583
WW 10.83 5.42 14.667 1.583
KG 10.83 5.42 14.667 1.583
O&M - 17.50 - 17.500
Cravath - 7.50 - 7.500
Ayer - 10.00 - 10.000
A-3-14
<PAGE>
On July 30, 1996, Ayer assigned its limited partnership interests in the
Partnerships, in equal amounts, to WZG, Oldegard, WW and KG. These transactions
took place outside of the Partnerships.
The purpose of the Partnerships was to manage, operate, improve, rent, lease,
finance, encumber or dispose of property between Eighth and Ninth Avenues and
49th and 50th Streets in New York City. NYCCA developed a 47-story office
building consisting of approximately 1,600,000 gross square feet (the "Office
Tower"). The remainder of the site, consisting of a residential condominium and
commercial complex including retail stores, a theater, a health club and a
parking garage (the "Amenities"), was developed by ZCWK. In 1991, the unsold
condominium units of ZCWK were sold to an affiliate of KG and WW. The Office
Tower and the Amenities are collectively referred to as the Project.
Recapitalization
Pursuant to a recapitalization agreement between BRE/Worldwide Inc. ("BRE/WW
Inc."), its affiliates, NYCCA, the partners of NYCCA, ZCWK and the partners of
ZCWK (the "Recapitalization Agreement") dated August 21, 1996, the following
transactions occurred:
a. KG withdrew as a partner from both NYCCA and ZCWK and assigned
interests previously assigned to it by Ayer to WZG, Oldegard and WW.
b. The partners of ZCWK assigned all of their respective interests in
ZCWK to NYCCA (the "ZCWK Assignment") and ZCWK was liquidated. As a
result, all rights and title to the assets of ZCWK were transferred
to NYCCA and the liabilities of ZCWK were assumed by NYCCA. In
connection with the ZCWK Assignment, NYCCA assumed net liabilities
of ZCWK of approximately $45.5 million in the aggregate. Prior to
the Recapitalization Agreement, all partners of ZCWK were also
partners of NYCCA in similar proportions.
c. BRE/WW Inc. was admitted as a 1% general partner in NYCCA and the
general partnership interests of WZG, Oldegard and WW were converted
to limited partnership interests so that BRE/WW Inc. is the sole
general partner in NYCCA.
On August 21, 1996, the NYCCA agreement was amended (the "Amended Partnership
Agreement") to reflect the terms and conditions of the Recapitalization
Agreement.
The amended percentage interests of the partners of NYCCA as of August 21, 1996
are as follows:
General Limited
Partnership Partnership
Interest Interest
----------- -----------
BRE/WW Inc. 1% - %
WZG - 23.166
Oldegard - 23.166
WW - 23.166
O&M - 20.592
Cravath - 8.910
A-3-15
<PAGE>
Pursuant to the Amended Partnership Agreement, no partner is required to make
additional capital contributions to NYCCA. The term of NYCCA will continue until
December 31, 2046, unless NYCCA is sooner dissolved pursuant to certain
provisions outlined in the Amended Partnership Agreement.
On August 26, 1996, Oldegard assigned its interest to an affiliate, Oldegard,
L.L.C., a New York limited liability company, which transaction took place
outside of NYCCA.
Debt Restructuring
NYCCA and ZCWK previously had loan facilities from Deutsche Bank A.G. ("DB")
(the "DB Loans"). In accordance with the terms of the Recapitalization
Agreement, amounts owed by ZCWK pursuant to the Loans were assigned to NYCCA. On
October 25, 1996, pursuant to the amended and restated loan agreement between DB
and NYCCA, the DB Loans and all accrued interest thereon were consolidated and
restructured into six individual mortgages (the "Restructuring"). Additionally,
on October 25, 1996, the DB Loans were purchased by affiliates of BRE/WW Inc
and, contemporaneously, the First Mortgage Loan A and the First Mortgage Loan B
(together, the "First Mortgage Loans") were, in turn, sold to a third party. The
Fifth and the Sixth Mortgage Loans were subsequently assigned to a charitable
organization.
Bankruptcy Filing
On November 20, 1996, NYCCA filed a voluntary plan for bankruptcy under Chapter
11 of the U.S. Bankruptcy Code (the "Bankruptcy Plan"). On March 4, 1997, the
Bankruptcy Plan was confirmed by the bankruptcy court and, under the protection
of the bankruptcy court, NYCCA transferred the Office Tower to an affiliate of
BRE/WW Inc. subject to the First Mortgage Loans and in full satisfaction of the
Second Mortgage Loan on June 11, 1997. This transaction represents a non cash
financing and investing activity and, as such, has been excluded from the
statement of cash flows. Additionally, NYCCA executed a nonrecourse guaranty of
the First Mortgage Loans secured by a First Mortgage lien on the Amenities and
the maturity dates of the Subordinate Loans were extended to November 30, 2026.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles and are
in conformity with the rules and regulations of the Securities and Exchange
Commission for interim financial information.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and the results for the six
months ended June 30, 1997 are not necessarily indicative of the results that
would be obtained for the full fiscal year.
A-3-16
<PAGE>
The financial information contained herein is unaudited, however, in the opinion
of management, all adjustments (which include normal recurring adjustments)
necessary for a fair presentation of financial information have been included.
The accompanying financial statements and related notes should be read in
conjunction with the Partnership's 1996 audited financial statements.
Real Estate and Related Assets
The retail property is carried at cost and is periodically reviewed for
impairment.
Expenditures for maintenance and repairs are charged to operations as incurred.
Significant renovations or betterments which extend the economic useful life of
the assets are capitalized.
Depreciation and Amortization
Building and improvements are depreciated on a straight-line basis over their
estimated useful lives of 31.5 years. Tenant improvements are amortized on a
straight-line basis over the term of the related lease beginning at the lease
commencement date. Deferred financing costs are amortized on a straight-line
basis over the term of the related debt. Deferred leasing costs represent legal
fees, brokerage commissions and other lease inducements relating to leasing of
tenant space. Deferred leasing costs are amortized on a straight-line basis over
the term of the respective leases beginning at the lease commencement date.
Revenues
Base rental revenue is recognized on a straight-line basis over the life of the
related lease when collectibility is reasonably assured. Differences between
recognized base rental income amounts and the contractual amounts due are
recorded on the balance sheet as rental income recorded in advance of receipt.
Escalation revenue is recorded as earned on the accrual basis of accounting.
Statement of Cash Flows
For purposes of presenting cash flows, cash and cash equivalents include cash on
hand, demand deposits and highly liquid debt instruments purchased with a
maturity of three months or less.
Income Taxes
Income taxes have not been provided for in the accompanying financial
statements. Each partner is responsible for reporting its allocable share of the
Partnership's income, deductions, gains, losses and credits.
A-3-17
<PAGE>
3. RETAIL PROPERTY
The components of the Amenities as of June 30, 1997 are as follows:
Land $ 6,627,491
Building and improvements 26,669,054
Tenant improvements 3,099,895
------------
36,396,440
Less- Accumulated depreciation (7,623,709)
------------
$ 28,772,731
============
4. MORTGAGE LOANS
The mortgage loans are nonrecourse and bear interest at a fixed rate equal to
the Applicable Federal Rate for Long-Term Debt, as of the Restructuring date,
beginning on December 1, 1996, and are payable in arrears. Such rate was 7.13%
as of the Restructuring date. Interest is payable only from Available Cash Flow
of NYCCA, as defined. As of June 30, 1997, interest accrued on the mortgage
loans was $11,634,272. The mortgage loans mature on November 30, 2026.
5. PARTNERSHIP LIQUIDITY
NYCCA has experienced significant operating losses in prior years, has a
partners' deficit of $241,000,797 at June 30, 1997 and is projecting a
substantial loss in 1997. As a result of payment deferral provisions of NYCCA's
restructured mortgage loans, management projects that it will have sufficient
cash flow to meet its working capital requirements in the coming year.
At any time after the 78th month following the Restructuring, if BRE/WW Inc.
determines that the aggregate indebtedness encumbering the Amenities exceeds the
fair market value of the Amenities, BRE/WW Inc. will have the option of
delivering notice to NYCCA of its intent to cause title to the Amenities to be
transferred to a designee of the holders of the mortgage loans in connection
with BRE/WW Inc.'s sale of its interest in NYCCA.
A-3-18
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
A-3-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BRE/Worldwide Inc.:
We have audited the accompanying balance sheets of New York Communications
Center Associates Limited Partnership ("NYCCA") (Note 2), debtor-in-possession
in 1996 (the "Partnership"), as of December 31, 1996 and 1995, and the related
statements of loss, partners' deficit and cash flows for each of the three years
in the period then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As further discussed in Note 1, the Partnership filed a voluntary plan for
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in November 1996. Under
the protection of the bankruptcy court, the Partnership transferred its office
tower to an affiliate of the general partner, subject to the first mortgage
loans and in full satisfaction of the second mortgage loan, on June 11, 1997
(Note 12). The Partnership has experienced significant operating losses in prior
years, has a partners' deficit of $234,338,512 at December 31, 1996, and is
projecting a substantial loss in 1997. As more fully discussed in Notes 4 and
11, as a result of payment deferral provisions of the Partnership's newly
restructured second mortgage loan and subordinate loan obligations, management
projects that it will have sufficient cash flow to meet its working capital
requirements in the coming year.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period then ended in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
March 15, 1997 (except with respect
to the matter discussed in Note 12,
as to which the date is June 11, 1997)
A-3-20
<PAGE>
<TABLE>
<CAPTION>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
------ -------------- --------------
<S> <C> <C>
OFFICE PROPERTY (held for disposition in 1996), net of $ 367,935,617 $ 444,550,792
accumulated depreciation of $92,866,423 in 1995
RETAIL PROPERTY, net of accumulated depreciation of 29,261,731 30,773,824
$7,134,709 and $6,155,448 in 1996 and 1995, respectively
DEFERRED LEASING COSTS, net of accumulated amortization of 223,962 229,334
$134,729 and $120,654 in 1996 and 1995, respectively
DEFERRED FINANCING COSTS, net of accumulated amortization of 4,417,947 14,419,760
$12,986,445 and $26,356,730 in 1996 and 1995, respectively
RENTAL INCOME RECORDED IN ADVANCE OF RECEIPT 1,757,424 1,408,820
PREPAID EXPENSES AND OTHER ASSETS 6,863,167 7,336,962
ACCOUNTS RECEIVABLE FROM TENANTS, net of reserve for 661,512 293,442
uncollectible accounts of $285,300 and $220,300
DEPOSITS HELD IN ESCROW 99,290 328,654
CASH AND CASH EQUIVALENTS 1,163,296 1,570,684
-------------- --------------
Total assets $ 412,383,946 $ 500,912,272
============== ==============
<CAPTION>
LIABILITIES AND PARTNERS' DEFICIT 1996 1995
<S> <C> <C>
LIABILITIES (SUBJECT TO COMPROMISE IN 1996):
Mortgage loan obligations-
First mortgage loan $ 290,000,000 $ -
Second mortgage loan - related party 55,000,000 -
Third and fourth mortgage loans - related party 70,000,000 -
Fifth and sixth mortgage loans 193,763,762 -
Deutsche Bank loan facilities-
Carrying amount including deferred interest of - 558,457,197
$26,407,751
Option deposit and participating interest liabilities - 83,447,487
Accrued real estate taxes - ICIP - office tower 22,935,617 21,002,832
Accrued real estate taxes - ICIP - amenities 399,800 365,264
Accounts payable, accrued expenses and other liabilities 3,181,176 4,655,397
Accrued interest payable 4,783,515 5,233,216
Accrued interest payable-related party 1,658,716 -
Advance from general partner 1,145,964 -
Notes payable to affiliates - 311,075
Prepaid rent 3,853,908 3,534,267
-------------- --------------
Total liabilities 646,722,458 677,006,735
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT (234,338,512) (176,094,463)
-------------- --------------
Total liabilities and partners' deficit $ 412,383,946 $ 500,912,272
============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
A-3-21
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
STATEMENTS OF LOSS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- -------------- --------------
REVENUES:
<S> <C> <C> <C>
Rent-
Office tower $ 62,231,803 $ 71,530,536 $ 67,091,092
Retail property 5,203,245 5,254,790 4,914,357
Interest 206,362 219,529 149,097
Other 193,695 76,483 3,026,328
------------- -------------- --------------
Total revenues 67,835,105 77,081,338 75,180,874
------------- -------------- --------------
EXPENSES:
Real estate taxes-
Office tower 13,303,944 12,276,941 11,086,186
Retail property 1,165,104 1,202,839 1,183,224
Property operating expenses-
Office tower 9,336,699 9,052,504 8,906,283
Retail property 1,368,491 1,289,024 1,292,621
Interest expense 49,725,712 61,192,195 59,407,711
Interest expense - related party 1,658,716 - -
Depreciation and amortization 19,957,997 20,243,650 20,059,752
General and administrative 263,474 235,985 286,643
Other 214,569 411,292 222,367
Provision for uncollectible accounts 65,000 80,000 105,000
Loss on lease abandonment 23,717,724 - 953,880
Write-down of real estate and related assets 48,389,243 - -
------------- -------------- -------------
Total expenses 169,166,673 105,984,430 103,503,667
------------- -------------- --------------
Net loss before reorganization item (101,331,568) (28,903,092) (28,322,793)
REORGANIZATION ITEM:
Gain on debt restructuring 42,487,519 - -
------------- -------------- -------------
Net loss $ (58,844,049) $ (28,903,092) $ (28,322,793)
============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
A-3-22
<PAGE>
<TABLE>
<CAPTION>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
STATEMENTS OF PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
BRE/WW Inc. WZG Oldegard WW KG
----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
PARTNERS' DEFICIT, December 31, 1993 $ - $ (20,960,715) $ (21,570,920) $ (21,560,065) $ (20,020,176)
Capital contributions - 106,111 - 95,948 95,948
Net loss for 1994 - (4,602,453) (4,602,453) (4,602,453) (4,602,453)
-------------- -------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1994 - (25,457,057) (26,173,373) (26,066,570) (24,526,681)
Net loss for 1995 - (4,696,752) (4,696,752) (4,696,752) (4,696,752)
-------------- -------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1995 - (30,153,809) (30,870,125) (30,763,322) (29,223,433)
Net loss for the period from January 1,
1996 through July 30, 1996 - (2,388,244) (2,388,244) (2,388,244) (2,388,244)
Assignment by Ayer - (5,726,074) (5,726,074) (5,726,074) -
Net loss for the period from July 31, 1996
through August 21, 1996 - (411,218) (411,218) (411,218) (341,224)
Deemed capital contributions - 150,000 150,000 150,000 150,000
Withdrawal of KG - (7,436,106) (7,436,106) (7,436,106) 31,802,901
Net loss for the period from August 22,
1996 through December 31, 1996 (420,473) (9,740,683) (9,740,683) (9,740,683) -
-------------- -------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1996 $ (420,473) $ (55,706,134) $ (56,422,450) $ (56,315,647) $ -
============= ============= ============= ============= =============
<CAPTION>
O&M Cravath Ayer Total
-------------- ------------- ------------- --------------
<C> <C> <C> <C>
PARTNERS' DEFICIT, December 31, 1993 $ (17,572,594) $ (7,496,171) $ (9,985,944) $ (119,166,585)
Capital contributions - - - 298,007
Net loss for 1994 (4,956,492) (2,124,209) (2,832,280) (28,322,793)
-------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1994 (22,529,086) (9,620,380) (12,818,224) (147,191,371)
Net loss for 1995 (5,058,043) (2,167,732) (2,890,309) (28,903,092)
-------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1995 (27,587,129) (11,788,112) (15,708,533) (176,094,463)
Net loss for the period from January 1,
1996 through July 30, 1996 (2,571,956) (1,102,266) (1,469,689) (14,696,887)
Assignment by Ayer - - 17,178,222 -
Net loss for the period from July 31, 1996
through August 21, 1996 (367,471) (157,488) - (2,099,837)
Deemed capital contributions - - - 600,000
Withdrawal of KG (6,646,226) (2,848,357) - -
Net loss for the period from August 22,
1996 through December 31, 1996 (8,658,385) (3,746,418) - (42,047,325)
-------------- -------------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1996 $ (45,831,167) $ (19,642,641) $ - $ (234,338,512)
============= ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
A-3-23
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (58,844,049) $ (28,903,092) $ (28,322,793)
------------- ------------- -------------
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 19,957,997 20,243,650 20,059,752
Accretion of Deutsche Bank debt discount - 8,117,422 8,591,759
Provision for uncollectible accounts 65,000 80,000 105,000
Loss on lease abandonment 23,717,724 - 953,880
Write-down of real estate and related assets 48,389,243 - -
Gain on debt restructuring (42,487,519) - -
Increase in rental income recorded in (348,604) (5,301,373) (4,864,689)
advance of receipt
Decrease (increase) in prepaid expenses and 473,795 (1,395,464) (843,249)
other assets
Decrease (increase) in due from escrow agent 229,364 3,000,000 (3,000,000)
(Increase) decrease in accounts receivable (433,070) (182,921) 798,629
from tenants
(Decrease) increase in accounts payable, (235,462) (5,729,723) 1,204,590
accrued expenses and other liabilities
(Decrease) increase in accrued interest (449,701) (420,341) 280,141
payable
Increase in accrued interest payable - 1,658,716 - -
related party
Increase (decrease) in prepaid rent 319,641 (1,039,159) 1,776,132
Increase in accrued real estate taxes - 1,967,321 2,328,013 3,140,817
------------- ------------- -------------
ICIP
Total adjustments 52,824,445 19,700,104 28,202,762
------------- ------------- -------------
Net cash used in operating activities (6,019,604) (9,202,988) (120,031)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for building and improvements (1,622,959) (2,665,188) (1,271,511)
Capital expenditures for tenant improvements (1,490,749) - (2,907,152)
Deferred leasing costs (830,334) (224,953) (310,163)
Principal repayment of loan receivable from tenant - 6,719 6,265
------------- ------------- -------------
Net cash used in investing activities (3,944,042) (2,883,422) (4,482,561)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Deutsche Bank loan facilities 8,180,930 8,147,379 4,739,325
Paydown of Deutsche Bank loan facilities - (3,000,000) -
Decrease in deposits held in escrow 229,364 203,435 1,262,705
Repayment of notes payable - - (258,250)
Capital contributions by partners - - 298,007
Increase in deferred financing costs - (22,246) -
Advances from general partner 1,145,964 - -
------------- ------------- ------------
Net cash provided by financing 9,556,258 5,328,568 6,041,787
------------- ------------- -------------
activities
Net decrease in cash and cash (407,388) (6,757,842) 1,439,195
equivalents
CASH AND CASH EQUIVALENTS, beginning of year 1,570,684 8,328,526 6,889,331
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 1,163,296 $ 1,570,684 $ 8,328,526
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
A-3-24
<PAGE>
NEW YORK COMMUNICATIONS CENTER ASSOCIATES
LIMITED PARTNERSHIP (debtor-in-possession in 1996)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. BACKGROUND, RECAPITALIZATION,
DEBT RESTRUCTURING AND
BANKRUPTCY FILING
BACKGROUND
New York Communications Center Associates Limited Partnership ("NYCCA") and ZCWK
Associates L.P. ("ZCWK") (together, the "Partnerships") were initially organized
under Delaware law on November 21, 1985, among (a) WZ Garden Corp., a New York
corporation ("WZG"); (b) Oldegard Corp., a New York corporation ("Oldegard");
(c) WW West "A" Associates, a New York limited partnership ("WW"); (d) KG MS
Garden Corp., a New York corporation ("KG"), as general partners; and (e) Ogilvy
& Mather World-Wide, Inc., a New York corporation, as limited partner.
Subsequent to 1985, the partnership agreements were amended and restated several
times to admit KG; Cravath, Swaine & Moore ("Cravath"), a New York partnership;
and N. W. Ayer & Son, Inc. ("Ayer"), a Delaware corporation, as limited
partners. On September 3, 1991, Ogilvy & Mather World-Wide, Inc. assigned its
interest to two affiliates (collectively "O&M") which transaction took place
outside of the Partnerships.
Prior to 1996, the percentage interests of the partners were as follows:
<TABLE>
<CAPTION>
NYCCA ZCWK
------------------------ ------------------------
General Limited General Limited
Partnership Partnership Partnership Partnership
Interest Interest Interest Interest
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
WZG 10.83% 5.42% 14.667% 1.583%
Oldegard 10.83 5.42 14.667 1.583
WW 10.83 5.42 14.667 1.583
KG 10.83 5.42 14.667 1.583
O&M - 17.50 - 17.500
Cravath - 7.50 - 7.500
Ayer - 10.00 - 10.000
</TABLE>
On July 30, 1996, Ayer assigned its limited partnership interests in the
Partnerships, in equal amounts, to WZG, Oldegard, WW and KG. These
transactions took place outside of the Partnerships.
A-3-25
<PAGE>
The purpose of the Partnerships is to manage, operate, improve, rent, lease,
finance, encumber or dispose of property between Eighth and Ninth Avenues and
49th and 50th Streets in New York City. NYCCA developed a 47-story office
building consisting of approximately 1,600,000 gross square feet (the "Office
Tower"). The remainder of the site, consisting of a residential condominium and
commercial complex including retail stores, a theater, a health club and a
parking garage (the "Amenities"), was developed by ZCWK. In 1991, the unsold
condominium units of ZCWK were sold to an affiliate of KG and WW. The Office
Tower and the Amenities are collectively referred to as the Project. As of
December 31, 1996, the Office Tower and the Amenities were 98% occupied.
Recapitalization
Pursuant to a recapitalization agreement between BRE/Worldwide Inc. ("BRE/WW
Inc."), its affiliates, NYCCA, the partners of NYCCA, ZCWK and the partners of
ZCWK (the "Recapitalization Agreement") dated August 21, 1996, the following
transactions occurred:
a. KG withdrew as a partner from both NYCCA and ZCWK and assigned
interests previously assigned to it by Ayer to WZG, Oldegard and WW.
b. The partners of ZCWK assigned all of their respective interests in ZCWK
to NYCCA (the "ZCWK Assignment") and ZCWK was liquidated. As a result,
all rights and title to the assets of ZCWK were transferred to NYCCA
and the liabilities of ZCWK were assumed by NYCCA. In connection with
the ZCWK Assignment, NYCCA assumed net liabilities of ZCWK of
approximately $45.5 million in the aggregate. Prior to the
Recapitalization Agreement, all partners of ZCWK were also partners of
NYCCA in similar proportions. Due to the financial statement
presentation of NYCCA and ZCWK on a combined basis prior to August 21,
1996 (Note 2), the ZCWK Assignment has no financial statement impact on
the accompanying financial statements.
c. BRE/WW Inc. was admitted as a 1% general partner in NYCCA and the
general partnership interests of WZG, Oldegard and WW were converted
to limited partnership interests so that BRE/WW Inc. is the sole
general partner in NYCCA.
On August 21, 1996, the NYCCA agreement was amended (the "Amended Partnership
Agreement") to reflect the terms and conditions of the Recapitalization
Agreement.
The amended percentage interests of the partners of NYCCA as of August 21, 1996
are as follows:
General Limited
Partnership Partnership
Interest Interest
-------------- -------------
BRE/WW Inc. 1% - %
WZG - 23.166
Oldegard - 23.166
WW - 23.166
O&M - 20.592
Cravath - 8.910
A-3-26
<PAGE>
Pursuant to the Amended Partnership Agreement, no partner is required to make
additional capital contributions to NYCCA. The term of NYCCA will continue until
December 31, 2046, unless NYCCA is sooner dissolved pursuant to certain
provisions outlined in the Amended Partnership Agreement.
On August 26, 1996, Oldegard assigned its interest to an affiliate, Oldegard,
L.L.C., a New York limited liability company, which transaction took place
outside of NYCCA.
DEBT RESTRUCTURING
As more fully discussed on Note 4, NYCCA and ZCWK previously had loan facilities
from Deutsche Bank A.G. ("DB") (the "DB Loans"). In accordance with the terms of
the Recapitalization Agreement, amounts owed by ZCWK pursuant to the Loans were
assigned to NYCCA. On October 25, 1996, pursuant to the amended and restated
loan agreement between DB and NYCCA, the DB Loans and all accrued interest
thereon were consolidated and restructured into six individual mortgages (the
"Restructuring") (Note 4).
BANKRUPTCY FILING
On November 20, 1996, NYCCA filed a voluntary plan for bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Plan") (Note 12).
Under the protection of the bankruptcy court, NYCCA plans to transfer the
Office Tower to an affiliate of BRE/WW Inc. subject to the First Mortgage
Loans and in full satisfaction of the Second Mortgage Loan (Note 4) no later
than July 31, 1997 (Note 12). Additionally, NYCCA will execute a nonrecourse
guaranty of the First Mortgage Loans secured by a First Mortgage lien on the
Amenities and the maturity dates of the Subordinate Loans (Note 4) will be
extended to November 30, 2026.
In connection with the Bankruptcy Plan, NYCCA recognized a gain of $42,487,519
representing the excess of the carrying amount of the DB Loans, accrued interest
and certain participating interest and purchase option deposit liabilities
associated with the DB Loans over the total amounts allowed under the Bankruptcy
Plan. Additionally, NYCCA recorded a nonrecurring charge of $48,389,243 to
write-down the Office Tower and related assets to their estimated fair value,
which approximated the level of debt they will be transferred in satisfaction
of, under the Bankruptcy Plan.
Under Chapter 11, certain claims against NYCCA in existence prior to the filing
of the Bankruptcy Plan under the federal bankruptcy laws are stayed while NYCCA
continues business operations as debtor-in-possession. Pursuant to the
Bankruptcy Plan, however, in order to ensure the continued operations of the
Partnership, NYCCA was granted the right to utilize funds, approved by its
lender under the First Mortgage Loans, to pay when due all operating and other
expenditures during the pendency of NYCCA's Chapter 11 filing.
A-3-27
<PAGE>
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements are prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles and
include the combined accounts of NYCCA and ZCWK through August 21, 1996. As
discussed in Note 1, on such date, ZCWK was liquidated and the net assets and
liabilities of ZCWK were transferred to NYCCA. Prior to August 21, 1996, all
material intercompany accounts and transactions were eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REAL ESTATE AND RELATED ASSETS
In connection with NYCCA's filing of the Bankruptcy Plan, the Office Tower and
related assets are classified as office property-held for disposition on the
accompanying balance sheets in 1996.
The retail property is carried at cost and is periodically reviewed for
impairment.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the economic
useful life of the assets are capitalized.
LIABILITIES SUBJECT TO COMPROMISE
In connection with the Bankruptcy Plan, NYCCA's liabilities are classified as
subject to compromise in 1996 as they may be affected by the outcome of the
Bankruptcy Plan.
DEPRECIATION AND AMORTIZATION
Building and improvements are depreciated on a straight-line basis over their
estimated useful lives of 31.5 years. Tenant improvements are amortized on a
straight-line basis over the term of the related lease beginning at the lease
commencement date. Deferred financing costs are amortized on a straight-line
basis over the term of the related debt. Deferred leasing costs represent legal
fees, brokerage commissions and other lease inducements relating to leasing of
tenant space. Deferred leasing costs are amortized on a straight-line basis over
the term of the respective leases beginning at the lease commencement date.
REVENUES
Base rental revenue is recognized on a straight-line basis over the life of
the related lease when collectibility is reasonably assured. Differences
between recognized base rental income amounts
A-3-28
<PAGE>
and the contractual amounts due are recorded on the balance sheets as rental
income recorded in advance of receipt. Escalation revenue is recorded as
earned on the accrual basis of accounting.
Included in rent-retail property is parking garage income of $1,816,248,
$1,808,749 and $1,677,806 pursuant to a management agreement with a third party
for the years ended December 31, 1996, 1995 and 1994, respectively.
DEUTSCHE BANK LOAN FACILITIES
As discussed in Note 4, the difference between the face amounts of the DB Loans
and their discounted present value was recorded by the Partnerships as option
deposit and participating interest liabilities. The participating interest
liability was reduced as payments were due by the Partnerships under the
participation clause of the debt agreement and the option deposit liability was
to be maintained by the Partnerships until either the option was exercised, had
lapsed or was terminated.
DEPOSITS HELD IN ESCROW
Deposits held in escrow represent cash held by third parties which is not
controlled by the Partnerships.
STATEMENTS OF CASH FLOWS
For purposes of presenting cash flows, cash and cash equivalents include cash on
hand, demand deposits and highly liquid debt instruments purchased with a
maturity of three months or less. Cash payments for interest were approximately
$38.4 million, $51.6 million and $49.1 million for the years ended December 31,
1996, 1995 and 1994, respectively.
DISCLOSURE ABOUT FAIR VALUES
OF FINANCIAL INSTRUMENTS
In December 1991, Statement of Financial Accounting Standards ("SFAS") No.
107, "Disclosures about Fair Values of Financial Instruments," was issued.
SFAS No. 107 requires all entities to disclose the fair value of financial
instruments, for which it is practicable to estimate fair value.
NYCCA's financial instruments include cash equivalents, deposits held in escrow,
notes payable and advances from the general partner, whose carrying amounts in
1996 and 1995, due to their short-term nature, approximate fair value. Due to
the variable rate nature of the First Mortgage Loan A, its carrying amount
approximates fair value. The First Mortgage Loan B and the Second Mortgage Loan
(Note 4) have fixed interest rates; however, due to the close proximity of the
Restructuring to year end and the fact that there has been no significant change
in interest rates, their carrying amounts approximate fair value. An estimate of
the fair value of the Subordinate Loans (Note 4) could not be practicably made
due to the significant deficiency in the underlying collateral.
A-3-29
<PAGE>
An estimate of the fair value of the DB Loans in 1995, which included the option
deposit and participating interest liabilities, could not be practicably made as
the carrying amount of the DB Loans exceeded the estimated current fair value of
the collateral.
INCOME TAXES
Income taxes have not been provided for in the accompanying financial
statements. Each partner is responsible for reporting its allocable share of
the Partnership's income, deductions, gains, losses and credits.
3. REAL ESTATE AND RELATED ASSETS
In connection with the Restructuring, the Office Tower and related assets were
combined as office property on the accompanying balance sheets in 1996 and were
written down to their estimated fair value, which approximated the level of debt
they will be transferred in satisfaction of under the Bankruptcy Plan. The
Office Tower and related assets were reclassified in 1995 to conform with the
current year's presentation.
In 1995, the components of the Office Tower and related assets were as follows:
1995
------------
Land $ 79,822,989
Building and improvements 292,396,110
Tenant improvements 86,825,092
Deferred leasing costs 11,620,762
Rental income recorded in advance of
receipt 66,752,262
-------------
537,417,215
Less- Accumulated depreciation (92,866,423)
-------------
$ 444,550,792
-------------
-------------
The components of the Amenities as of December 31, 1996 and 1995 are as follows:
1996 1995
------------- -------------
Land $ 6,627,491 $ 6,627,491
Building and improvements 26,669,054 27,251,886
Tenant improvements 3,099,895 3,049,895
------------- --------------
36,396,440 36,929,272
Less- Accumulated depreciation (7,134,709) (6,155,448)
------------- --------------
$29,261,731 $ 30,773,824
=========== ============
A-3-30
<PAGE>
4. LONG-TERM DEBT
1996 RESTRUCTURING
As a result of the Restructuring, NYCCA had outstanding mortgage obligations at
December 31, 1996, as follows:
PRINCIPAL
DESCRIPTION AMOUNT
-------------- -------------
First Mortgage Loan A $ 215,000,000
First Mortgage Loan B 75,000,000
Second Mortgage Loan 55,000,000
Third Mortgage Loan 40,000,000
Fourth Mortgage Loan 30,000,000
Fifth Mortgage Loan 153,894,804
Sixth Mortgage Loan 39,868,958
--------------
$ 608,763,762
--------------
--------------
The loans are collateralized by respective lien positions on the Office Tower
and the Amenities.
On October 25, 1996, the DB Loans were purchased by affiliates of BRE/WW Inc.
and, contemporaneously, the First Mortgage Loan A and the First Mortgage Loan B
(together, the "First Mortgage Loans") were, in turn, sold to a third party. The
Fifth and the Sixth Mortgage Loans were subsequently assigned to a charitable
organization.
FIRST MORTGAGE LOANS
The terms of the First Mortgage Loans are as follows:
<TABLE>
<CAPTION>
DESCRIPTION INTEREST RATE MATURITY
------------- ------------- ----------------
<S> <C> <C>
First Mortgage Loan A LIBOR plus 1.8% November 1, 1998
First Mortgage Loan B 13.5% November 1, 1998
</TABLE>
Interest on the First Mortgage Loans is payable monthly. As of December
31, 1996, accrued interest on the First Mortgage Loans was $2,212,330.
Upon the occurrence of an Event of Default, as defined, at the option of
the lender, all principal and unpaid interest is immediately due and
payable and interest accrues until the First Mortgage Loans are paid in
full at the applicable interest rates plus 4% (Note 12).
The Partnership incurred an additional fee of $750,000 in connection
with entering into the First Mortgage Loan B, which fee is recorded as a
reduction of the gain recognized in connection with the Restructuring.
A-3-31
<PAGE>
SECOND MORTGAGE LOAN AND SUBORDINATE LOANS
The Second Mortgage Loan and the Third through the Sixth Mortgage Loans
(the "Subordinate Loans") are nonrecourse and bear interest at a fixed
rate equal to the Applicable Federal Rate for Long-Term Debt, as of the
Restructuring date, beginning on December 1, 1996, and are payable in
arrears. Such rate was 7.13% as of the Restructuring date. Interest is
payable only from Available Cash Flow of NYCCA, as defined. As of
December 31, 1996, interest accrued on the Second Mortgage Loan and the
Subordinate Loans was $4,229,901. The Second Mortgage Loan and the
Subordinate Loans mature on May 31, 2002 (Note 12).
DEUTSCHE BANK LOAN FACILITIES
On May 25, 1989, NYCCA and ZCWK obtained the DB Loans which provided for maximum
commitments of $498,311,114 and $55,388,886, respectively. The DB Loans accrued
interest at a rate of 8.175% per annum through May 31, 1994, at which time they
began accruing interest at a rate of 8.675% per annum. The DB Loans were to
accrue interest at this rate until May 31, 1999, at which time they were to
begin accruing interest at 2% above the 3-year Treasury Note Rate and would
continue to do so until maturity on May 31, 2002. The Partnerships were only
required to make monthly interest payments at the rate of 8% per annum
throughout the term of the DB Loans. The difference between the cash payment
rate and accrual rate was deferred until maturity. The deferred interest on the
DB Loans was compounded semiannually on June 1 and December 1 at a rate of
8.675% per annum. At December 31, 1995, the deferred interest balance was
$12,739,730.
On July 28, 1992, the DB Loans were restructured whereby DB loaned an additional
$10 million to NYCCA (the "Additional Loan") and DB allowed the Partnerships to
defer interest payments due under the original DB Loans and the Additional Loan
up to an aggregate amount of $22,200,000 through December 31, 1995. The
Additional Loan had the same terms as the DB Loans. Pending a mutual agreement
between DB and the Partnerships with respect to (i) extending the deferral
period, (ii) DB formally approving the 1996 operating budget and (iii) other
stipulations outlined by DB to the Partnerships, DB continued to fund operating
shortfalls of NYCCA on a month to month basis. The deferred interest was
evidenced by promissory notes (the "Interest Shortfall Notes"), which bore
interest at LIBOR plus 2% and was payable monthly. To the extent the
Partnerships could not pay interest on the Interest Shortfall Notes, it was
added to the principal of the Interest Shortfall Notes. As of December 31, 1995,
the balance of the Interest Shortfall Notes was $17,148,012. The weighted
average interest rate on the Interest Shortfall Notes was 8.2% in 1995.
The DB Loans were cross-collateralized, fully cross-defaulted and were secured
by an assignment of their interest in all leases and rents of the Office Tower
and Amenities, as well as creating first, second, and third mortgages on the
land and the building and improvements.
The original carrying amount of the DB Loans was recorded by the Partnerships at
their present value discounted at a rate of 11%. The difference between the face
amounts of the DB Loans and their present value was allocated to the NYCCA and
ZCWK option deposit and the participating
A-3-32
<PAGE>
interest liabilities. The following is a reconciliation between the face amounts
of the DB Loans and their carrying amounts at December 31, 1995:
<TABLE>
<CAPTION>
NYCCA ZCWK Total
----------- ----------- ------------
<S> <C> <C> <C>
Face amount of the DB Loans and Additional Loan $508,311,114 $ 55,388,886 $563,700,000
Less- Original amount of option deposit and
participating interest liabilities 77,412,957 8,612,522 86,025,479
------------ ------------ ------------
Original carrying amount of the
DB Loans and Additional Loan
before accretion of debt discount 430,898,157 46,776,364 477,674,521
Plus- Cumulative accretion of debt discount,
including $7,297,961 and $819,461 for NYCCA
and ZCWK, respectively, in 1995 45,731,158 5,163,776 50,894,934
------------ ------------ ------------
Carrying amount of the DB Loans and
Additional Loan 476,629,315 51,940,140 528,569,455
Deferred interest 26,407,751 3,479,991 29,887,742
------------ ------------ ------------
Carrying amount of the DB Loans and
Additional Loan including
deferred interest $503,037,066 $ 55,420,131 $558,457,197
============ ============ ============
</TABLE>
The Partnerships were also obligated to pay additional interest equal to a
percentage of Net Cash Flow, as defined. As a result of the July 28, 1992
restructuring, the percentage of Net Cash Flow was increased from 43% to 49.9%.
Net Cash Flow interest was calculated for the DB Loans on a combined basis. The
following is a reconciliation of the option deposit and participating interest
liabilities at December 31, 1995:
<TABLE>
<CAPTION>
NYCCA ZCWK TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Original amount of option deposit and $77,412,957 $ 8,612,522 $ 86,025,479
participating interest liabilities
Less- Cumulative amount of Net Cash Flow
participation due to DB 1,340,331 1,237,661 2,577,992
------------ ------------ -------------
Amount reflected as option deposit
and participating interest
liabilities $76,072,626 $ 7,374,861 $ 83,447,487
=========== =========== ============
</TABLE>
5. RECONCILIATION OF NET
LOSS TO TAXABLE LOSS
The following table reconciles net loss for financial reporting proposes to
taxable loss for federal income tax reporting purposes for the years ended 1996,
1995 and 1994. The differences are due primarily to (i) differences between the
tax and financial statement bases of buildings and improvements, (ii) the
depreciating of real estate on a straight-line basis for financial reporting
purposes while using accelerated methods for tax reporting purposes, (iii)
recognition of rental income on a straight-line basis for financial reporting
purposes and based upon the contractual minimum rental payments for tax
reporting purposes, and (iv) recording of certain adjustments in
A-3-33
<PAGE>
connection with the Restructuring for financial reporting purposes but not
for tax reporting purposes.
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Net loss for financial reporting purposes $ (58,844,049) $(28,903,092) $(28,322,793)
------------- ------------ ------------
Difference between tax and financial
statement depreciation and amortization 4,613,965 6,257,097 3,983,812
Adjustment for straight-line rent (2,240,452) (5,417,353) (5,492,974)
Debt restructuring adjustments 18,438,480 - -
Reversal of financial statement write-down
of real estate and related assets 48,389,243 - -
Reversal of financial statement gain on
Restructuring (42,487,519) - -
Adjustments for original issue discount
accretion and interest accruals (2,736,979) 393,800 6,409,978
Real estate tax escalations and interest
income - (493,819) 2,476,067
Other 665,221 687,360 (1,774,369)
------------- ----------- -----------
Net loss for income tax
reporting purposes $ (34,202,090) $(27,476,007) $(22,720,279)
============= ============ ============
</TABLE>
6. ALLOCATION OF NET PROFITS
AND LOSSES
Prior to the Recapitalization, the partnership agreements stipulated that net
income and loss were to be allocated in the following manner:
a. All net losses will be allocated as follows: (i) first, to the partners
with a positive capital account, as defined, in the proportion the
positive capital accounts have to each other, until they have received
sufficient allocations of losses to reduce their capital accounts to
zero; and (ii) second, to the partners in accordance with their
interests in the Partnerships.
b. All net income will be allocated as follows: (i) first, to the partners
in accordance with any prior allocations of net losses; (ii) second, to
the partners with negative capital accounts, in the proportion of the
negative capital accounts have to each other, until the balance of each
partner's capital account is zero; (iii) third, to the extent such net
income is derived from a Capital Transaction, as defined, to the
Partnerships in the amounts and the proportions necessary to cause their
respective capital accounts to bear the same ratios as their respective
interests in the Partnerships; and (iv) fourth, to the partners in
accordance with their interests in the Partnerships.
c. Notwithstanding any other provision in the partnership agreements, the
general partners will be allocated or distributed at least 1% of the
net income or net loss and distributions from the Partnerships.
After the Recapitalization, the Amended Partnership Agreement of NYCCA
stipulates that net income and loss will be allocated in accordance with the
partners' percentage interests. Net income or loss resulting from a sale or
disposition of all or substantially all of NYCCA's assets or otherwise
associated with a liquidation of NYCCA shall be allocated first, in order to
cause the
A-3-34
<PAGE>
capital accounts of each partner to agree with its percentage
interests, and thereafter, in accordance with the partners' percentage
interests.
7. DISTRIBUTIONS
Prior to the Recapitalization, Distributable Funds from Operations, as defined,
were to be distributed at least on a quarterly basis to the partners in the
ratio of their interests in the Partnerships.
Pursuant to the Amended Partnership Agreement, distributions of Capital
Proceeds, as defined, and Non-Capital Proceeds, as defined, shall be distributed
to the partners in the ratio of their NYCCA partnership interests.
During 1996 and 1995, no cash was available for distribution.
Distributions from a final dissolution of NYCCA shall be allocated first, to the
extent of a partner's positive capital account balance after making all
adjustments to that balance pursuant to the Amended Partnership Agreement and
thereafter, in accordance with the partners' percentage interests.
8. RELATED PARTY TRANSACTIONS
The Partnerships have entered into various transactions with related parties,
including the following:
a. General and administrative services including accounting, construction
and leasing services were provided to the Partnerships by Zeckendorf
Realty L.P. ("Zeckendorf"), a WZG affiliate. Approximately $25,800,
$15,400 and $32,500 was paid by the Partnerships to Zeckendorf for
services provided during 1996, 1995 and 1994, respectively. Total
property management fees and asset management fees charged by Zeckendorf
in 1996, 1995 and 1994, respectively, were $738,333, $850,000 and
$775,000, respectively.
b. NYCCA has lease agreements with O&M and Cravath, who are limited
partners in the Partnerships, for approximately 585,000 and 370,000
square feet, respectively. NYCCA has expended approximately $56.6
million for tenant improvements in the NYCCA Project for these two
tenants. The lease agreements stipulate fixed annual rent per square
foot, as well as reimbursement from each tenant for its proportionate
share of operating expenses and real estate taxes. Total rent, including
escalations for operating expenses and real estate taxes, from these
tenants amounted to approximately $43.7 million, $39.4 million and $43.0
million in 1996, 1995 and 1994, respectively. Of the aggregate future
minimum lease payments disclosed in Note 10, approximately $450 million
relates to these tenants.
c. NYCCA had a lease agreement with Ayer, who was a limited partner in the
Partnerships through July 30, 1996, for approximately 227,000 square
feet. NYCCA had expended approximately $17.8 million for tenant
improvements in the NYCCA Project for Ayer. The lease agreement
stipulated fixed annual rent per square foot, as well as reimbursement
for Ayer's proportionate share of operating expenses and real estate
taxes. Total rent,
A-3-35
<PAGE>
including escalations for operating expenses and real estate taxes, from
Ayer amounted to approximately $5.0 million, $12.3 million and $13.4
million in 1996, 1995 and 1994, respectively.
On December 9, 1994, Ayer surrendered two floors to NYCCA in connection
with the third amendment to its lease. As a condition of the surrender,
Ayer was required to pay additional rent in the amount of $250,000 per
annum, for the period from January 1, 1995 to September 30, 1995 and
$500,000 per annum for the period from October 1, 1995 through lease
termination. Ayer paid $3,000,000 representing an early termination
payment in 1994, which amount is included in other income. During 1994,
NYCCA re-leased the first of Ayer's surrendered floors, and as of the
beginning of 1995, the new tenant occupied the space.
As a result of Ayer's surrender of these two floors, NYCCA wrote off
leasing commissions in 1994 associated with the floors in the amount of
$953,880, which were included as loss on lease abandonment on the
accompanying statements of loss.
On October 16, 1996, Ayer surrendered its remaining floors and NYCCA
wrote-off all related lease costs associated with the Ayer lease. The
write-off of $23,717,724 is included in loss on lease abandonment on
the accompanying statements of loss in 1996.
d. BRE/WW Inc. periodically advances amounts to NYCCA to fund working
capital shortfalls. The advances bear no interest and are payable on
demand. Such amounts totaled $1,145,964 as of December 31, 1996 and are
included as advance from general partner on the accompanying balance
sheets.
e. Pursuant to the original partnership agreements, the original general
partners collectively were due an annual fee of $100,000 for overseeing
the Partnerships' affairs. Such unpaid amounts totaling $600,000,
originally included in accounts payable, were forgiven in connection
with the Recapitalization and treated as deemed capital contributions by
the original general partners in 1996. Such contributions represent
noncash financing activities for the purpose of the statements of cash
flows.
9. INDUSTRIAL AND COMMERCIAL
INCENTIVE PROGRAM
The Project has been granted a real estate tax deferral under the Industrial and
Commercial Incentive Program ("ICIP") of the City of New York. The benefits
available for commercial projects are based on an exemption base which is the
increased assessed value due to the improvements made during the first four
years of the benefit period. Real estate tax deferrals and exemptions are
calculated by multiplying the eligible assessed value of the building by the
Exemption Percentage, as defined, for each year. The ICIP extends over a 20-year
benefit period with tax deferred benefits to NYCCA and ZCWK as follows:
In benefit year 1, there is a 100% abatement of the increase in assessed
value due to improvements. In benefit years 2 to 3, the Exemption
Percentage is 100% of the increase in assessed value. In years 4 to 7,
the Exemption Percentage is decreased by 20% per year. In
A-3-36
<PAGE>
years 8 to 10, there are no deferral benefits, but previously deferred
taxes are not due. During years 11 to 20, the total amount of deferred real
estate taxes (applicable to years 2 to 7) is repaid at the rate of 10% per
year. The first year of tax deferral benefits for NYCCA and ZCWK was the
tax authority's fiscal year ended June 30, 1989.
The accrued real estate tax liability for the ICIP has been recorded in the
accompanying combined financial statements at its discounted present value
using interest rates ranging from 9% to 11%. At December 31, 1996 and 1995,
the accrued liabilities related to the Office Tower and the Amenities were
$22,935,617 and $399,800 and $21,002,832 and $365,264, respectively.
10. COMMITMENTS AND CONTINGENCIES
FUTURE MINIMUM LEASE PAYMENTS
The following is a summary of approximate future minimum lease payments due to
NYCCA on all noncancellable leases:
OFFICE
TOWER AMENITIES
------------- -------------
For the year ending
December 31:
1997 $ 45,649,000 $ 2,174,000
1998 47,314,000 2,275,000
1999 48,449,000 2,408,000
2000 50,482,000 2,472,000
2001 51,431,000 2,518,000
Thereafter 439,949,000 34,148,000
------------- -------------
$ 683,274,000 $ 45,995,000
============= =============
Minimum lease payments do not provide for any renewals of space when the related
leases expire. In addition to the minimum lease payments described above, the
tenants are required to reimburse the Partnerships for certain operating
expenses and real estate taxes, for which approximately $20.6 million, $21.2
million and $18.9 million is included as rent in the accompanying statements of
loss for the years ended December 31, 1996, 1995 and 1994, respectively.
11. PARTNERSHIP LIQUIDITY
The Partnerships have experienced significant operating losses in prior years,
NYCCA has a partners' deficit of $234,338,512 at December 31, 1996 and NYCCA is
projecting a substantial loss in 1997. As a result of payment deferral
provisions of NYCCA's newly restructured second mortgage loan and subordinate
loan obligations (Note 4), management projects that it will have sufficient cash
flow to meet its working capital requirements in the coming year.
A-3-37
<PAGE>
At any time after the 78th month following the Restructuring, if BRE/WW Inc.
determines that the aggregate indebtedness encumbering the Amenities exceeds the
fair market value of the Amenities, BRE/WW Inc. will have the option of
delivering notice to NYCCA of its intent to cause title to the Amenities to be
transferred to a designee of the holders of the Third, Fourth and Fifth Mortgage
Loans in connection with BRE/WW Inc.'s sale of its interest in NYCCA.
12. SUBSEQUENT EVENTS
On March 4, 1997, the Bankruptcy Plan was confirmed by the bankruptcy court and,
among other things, the maturity dates of the Subordinate Loans were extended to
November 30, 2026. On June 11, 1997, as stipulated by the Bankruptcy Plan, the
Office Tower was transferred to an affiliate of BRE/WW Inc. subject to the First
Mortgage Loans and in full satisfaction of the Second Mortgage Loan.
A-3-38
<PAGE>
EXHIBIT A-4
SUMMARY FINANCIAL INFORMATION
PRENTISS PROPERTIES REAL ESTATE FUND I, L.P.
(UNAUDITED)
(IN THOUSANDS)
The information presented below for Prentiss Properties Real Estate Fund I,
L.P. is a summary of certain balance sheet and income statement items presented
as of June 30, 1997 and December 31, 1996, in the case of balance sheet
information, and for the period ending June 30, 1997 and December 31, 1996, in
the case of income statement information.
<TABLE>
<CAPTION>
AS OF 6/30/97 AS OF 12/31/96
------------------- --------------------
<S> <C> <C>
Assets................................................................. $ 284,136 $ 263,793
Liabilities............................................................ 188,784 8,281
Equity................................................................. 95,352 255,512
<CAPTION>
6 MONTHS ENDED 12 MONTHS ENDED
6/30/97 12/31/97
------------------- --------------------
<S> <C> <C>
Revenues............................................................... $ 22,805 $ 15,218
Operating Expenses..................................................... 8,560 4,810
-------- --------
-------- --------
Net Operating Income................................................... $ 14,245 $ 10,408
</TABLE>
A-4-1
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT A-5
THE ARDEN PROPERTIES
COMBINED SCHEDULES OF REVENUE AND CERTAIN EXPENSES
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- ------------------
<S> <C> <C>
REVENUE:
Rental...................................................................... $ 23,477 $ 44,053
Tenant reimbursements....................................................... 1,222 1,911
Parking-net of expenses..................................................... 1,906 3,776
Other....................................................................... 784 1,796
------------- -------
TOTAL REVENUE............................................................. 27,389 51,536
CERTAIN EXPENSES:
Property operating and maintenance.......................................... 6,064 11,158
Real estate taxes........................................................... 1,405 2,746
Insurance................................................................... 431 1,983
Other....................................................................... 128 128
------------- -------
TOTAL CERTAIN EXPENSES.................................................... 8,028 16,015
------------- -------
EXCESS OF REVENUE OVER CERTAIN EXPENSES....................................... $ 19,361 $ 35,521
------------- -------
------------- -------
</TABLE>
SEE ACCOMPANYING BASIS OF PRESENTATION TO THE COMBINED SCHEDULES OF REVENUE AND
CERTAIN EXPENSES
A-5-1
<PAGE>
The accompanying combined schedule of revenue and certain expenses includes
the combined operations of 17 commercial office properties located in southern
California which are owned by Arden Realty, Inc. and included as collateral in
the offering. The schedule was assembled on a combined basis as the properties
are presently controlled by Arden and used as collateral for a $175,000,000 loan
from Lehman Brothers Realty Corporation. There are no interproperty accounts to
be eliminated.
The accompanying schedule is not representative of the actual operations for
the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by Arden in the future operations of the
Properties have been excluded for the entire year. Excluded expenses consist of
interest, depreciation and amortization, management fees and property general
and administrative costs not directly comparable to the future operations of the
properties.
A-5-2
<PAGE>
EXHIBIT B
SCHEDULE OF REPRESENTATIONS AND WARRANTIES
With respect to each Mortgage Loan, as of the Closing Date (except as may be
specified in the representation and warranty or on Schedule 1 to this Exhibit B:
(i) immediately prior to the transfer and assignment to the Depositor,
each related Note and Mortgage were not subject to an assignment or pledge,
LB Holdings has good title to, and is the sole owner of, each Mortgage Loan;
(ii) LB Holdings has full right and the authority to sell, assign and
transfer such Mortgage Loan;
(iii) LB Holdings is transferring such Mortgage Loan free and clear of
any and all liens, pledges, charges or security interests of any nature
encumbering such Mortgage Loan (subject to matters described in clause (xi)
below);
(iv) each related Note, Mortgage, Assignment of Leases and Rents (if
any) and other agreement executed in connection with such Mortgage Loan are
legal, valid and binding obligations of the related borrower, enforceable in
accordance with their terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(v) each related Assignment of Leases and Rents, if any, creates a
valid, first priority assignment of, or a valid first priority security
interest in, certain rights under the related leases, subject only to a
license granted to the related borrower to exercise certain rights and to
perform certain obligations of the lessor under such leases, including the
right to operate the related Mortgaged Property; no person other than the
related borrower owns any interest in any payments due under such leases
that is superior to or of equal priority with the mortgagee's interest
therein;
(vi) each related Assignment of Mortgage from LB Holdings to the
Depositor constitutes the legal, valid and binding assignment of such
Mortgage from LB Holdings to the Depositor, and any related Reassignment of
Assignment of Leases and Rents, if any, or assignment of any other agreement
executed in connection with such Mortgage Loan, from LB Holdings to the
Depositor constitutes the legal, valid and binding assignment from LB
Holdings to the Depositor, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other laws relating to or affecting creditor's rights
generally, or by general principles or equity (regardless of whether such
enforcement is considered in a proceeding in equity or law);
(vii) since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been waived, modified, altered, satisfied,
canceled, subordinated or rescinded and, each related Mortgaged Property has
not been released from the lien of the related Mortgage in any manner which
materially interferes with the security intended to be provided by such
Mortgage;
(viii) each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property, and such Mortgaged Property (subject to the
matters discussed in clause (xi) below), as of the date of origination of
such Mortgage Loan, is free and clear of any "mechanics" and materialmen's
liens which are prior to or equal with the lien of the related Mortgage,
except those which are insured against by a lender's title insurance policy
(as set forth in the Loan Sale Agreement);
(ix) LB Holdings has not taken any action that would cause the
representations and warranties made by each related borrower in the Mortgage
Loan not to be true;
(x) LB Holdings has no knowledge that the representations and warranties
made by each related borrower in such Mortgage Loan are not true in any
material respect;
B-1
<PAGE>
(xi) the lien of each related Mortgage is insured by an ALTA lender's
title insurance policy (or a binding commitment therefor), or its equivalent
as adopted in the applicable jurisdiction, insuring the Originator, its
successors and assigns, as to a valid and first priority lien of the
Mortgage in the original principal amount of such Mortgage Loan or Allocated
Loan Amount of the related Mortgaged Property (as set forth on the Mortgage
Loan Schedule which is an exhibit to the Pooling and Servicing Agreement)
after all advances of principal, subject only to (a) the lien of current
real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, materially interferes with
the current use or operation of the Mortgaged Property or the security
intended to be provided by such Mortgage or with the borrower's ability to
pay its obligations when they become due or the value of the Mortgaged
Property and (c) the exceptions (general and specific) set forth in such
policy, none of which, individually or in the aggregate, materially
interferes with the security intended to be provided by such Mortgage or
with the borrower's ability to pay its obligations when they become due or
the value, use or operation of the Mortgaged Property; the Originator or its
successors or assigns is the sole named insured of such policy; such policy
is in full force and effect upon the consummation of the transactions
contemplated by the Loan Sale Agreement; no claims have been made under such
policy and the Originator has not done anything, by act or omission, and the
Originator has no knowledge of any matter, which would impair or diminish
the coverage of such policy; to the extent required by applicable law the
insurer issuing such policy is qualified to do business in the jurisdiction
in which the related Mortgaged Properties are located;
(xii) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and LB Holdings
covenants that it will not make any future advances under the Mortgage Loan
to the related borrower;
(xiii) Based on the inspection reports contained in the mortgage file,
which have been performed within 12 months of the Closing Date, each related
Mortgaged Property is free of any material damage for which amounts at least
sufficient to cure such damage have not been reserved or that would affect
materially and adversely the value of such Mortgaged Property as security
for the Mortgage Loan and is in good repair and there is no proceeding
pending for the total or partial condemnation of such Mortgaged Property;
(xiv) each of the related borrowers is in possession of all material
licenses, permits and other authorizations necessary and required by all
applicable laws for the conduct of its business that if not obtained would
have a material adverse effect on the conduct of its business or its ability
to repay the related Mortgage Loan and all such licenses, permits and
authorizations are valid and in full force and effect and if a related
Mortgaged Property is improved by a hotel, the most recent inspection or
review by the franchiser, if any, did not cite such Mortgaged Property for
material violations of the related franchise agreement which have not been
cured;
(xv) LB Holdings has inspected or caused to be inspected each related
Mortgaged Property within the past twelve months preceding the Cut-Off Date;
(xvi) such Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization;
(xvii) such Mortgage Loan is a whole loan and no other party holds a
participation interest in the Mortgage Loan; neither LB Holdings nor any of
its affiliates has or is entitled to any preferred equity interest in a
borrower;
(xviii) the Mortgage Rate (exclusive of any default interest or yield
maintenance charges) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; any and all other
requirements
B-2
<PAGE>
of any federal, state or local laws applicable to such Mortgage Loan have
been complied with as of the date of origination of such Mortgage Loan;
(xix) no fraudulent acts were committed by the Originator during the
origination process of such Mortgage Loan;
(xx) all taxes and governmental assessments that prior to the Closing
Date became due and owing in respect of each related Mortgaged Property have
been paid, are being appealed, or an escrow of funds in an amount sufficient
to cover such payments has been established;
(xxi) all escrow deposits and payments required pursuant to the Mortgage
Loan are in the possession, or under the control, of LB Holdings or its
agent, and there are no deficiencies in connection therewith;
(xxii) to the extent required under applicable law, as of the Cut-Off
Date, the Originator was authorized to transact and do business in the
jurisdiction in which each related Mortgaged Property is located at all
times when it held the Mortgage Loan;
(xxiii) except as disclosed herein, each related Mortgaged Property is
insured by a fire and extended perils insurance policy, issued by an insurer
or reinsured by a reinsurer meeting the requirements of the Mortgage Loans,
in an amount not less than the replacement cost and the amount necessary to
avoid the operation of any co-insurance provisions with respect to the
Mortgaged Property; each related Mortgaged Property is also covered by
business interruption insurance and comprehensive general liability
insurance in amounts generally required by institutional lenders for similar
properties; all premiums on such insurance policies required to be paid as
of the date hereof have been paid; such insurance policies require prior
notice to the insured of termination or cancellation, and no such notice has
been received; each related Mortgage obligates the related borrower to
maintain all such insurance and, at such borrower's failure to do so,
authorizes the mortgagee to maintain such insurance at the borrower's cost
and expense and to seek reimbursement therefor from such borrower;
(xxiv) there is no default, breach, violation or event of acceleration
existing under the related Mortgage or the related Note and, to LB Holdings'
knowledge, no event (other than payments due but not yet delinquent) which,
with the passage of time or with notice and the expiration of any grace or
cure period, would and does constitute a default, breach, violation or event
of acceleration;
(xxv) such Mortgage Loan has not been more than one month past due (as
determined from the Due Date without giving effect to grace periods) since
origination and as of the Cut-Off Date was not more than one month past due;
(xxvi) each related Mortgage contains customary and enforceable provisions
(subject to the matters described in clause (iv) above) such as to render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security, including
realization by judicial or, if applicable, non-judicial foreclosure, and
there is no exemption available to the borrower which would interfere with
such right to foreclose;
(xxvii) in each related Mortgage, Loan Agreement or other agreement
assigned to the Trustee, the related borrower represents and warrants that,
except as set forth in certain environmental reports or other documents
previously provided to the Rating Agencies and to the best of its knowledge,
it has not used, caused or permitted to exist and will not use, cause or
permit to exist on the related Mortgaged Property any Hazardous Materials in
any manner which violates federal, state or local laws, ordinances,
regulations, orders, directives or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials; the related borrower agrees to indemnify,
defend and hold the mortgagee and its successors and assigns harmless from
and against any and all losses, liabilities, damages, injuries, penalties,
fines,
B-3
<PAGE>
expenses, and claims of any kind whatsoever (including reasonable attorneys'
fees and costs) paid, incurred or suffered by any such party resulting from
a breach of any representation, warranty or covenant given by the borrower
in such Mortgage or Loan Agreement; a Phase I environmental report was
conducted by a reputable environmental consultant in connection with such
Mortgage Loan, which report did not indicate any material non-compliance or
material existence of Hazardous Materials except as disclosed herein; to the
extent such Phase I environmental report identified any material
non-compliance, such material non-compliance either has been remediated or
an escrow of funds sufficient to effect such remediation has been
established; to the best of LB Holdings' knowledge, each related Mortgaged
Property, except as disclosed herein, is in material compliance with all
applicable federal, state and local laws pertaining to environmental
hazards, and to the best of LB Holdings' knowledge, except as disclosed
herein, no notice of violation of such laws has been issued by any
governmental agency or authority; LB Holdings has not taken any action which
would cause the related Mortgaged Property not to be in compliance with all
federal, state and local laws pertaining to environmental hazards;
(xxviii) each related Mortgage or Loan Agreement contains provisions for
the acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without the prior written consent of the mortgagee or the
satisfaction of certain conditions, the related Mortgaged Property, or any
interest therein, is directly or indirectly transferred or sold, or
encumbered in connection with subordinate financing;
(xxix) to LB Holdings' knowledge, and in reliance upon an opinion of
counsel, (A) when the related UCC financing statements are filed and indexed
in the appropriate state and local offices for such filing and indexing,
such filings shall be sufficient to perfect a lien on the Mortgaged Property
described therein to the extent a security interest can be perfected under
the UCC and (B) no re-filing of such financing statements will be necessary
for the perfection of the lien intended to be created or the enforcement of
such Mortgage Loan against the related borrower, other than filing UCC
continuation statements with the appropriate state and local offices as
required under the law of the applicable state to continue the perfection of
the liens perfected by UCC financing statements;
(xxx) (A) the Mortgage Loan is directly secured by a Mortgage on a
commercial property, and (B) the fair market value of such real property was
at least equal to 80% of the principal amount of the Mortgage Loan (I) at
origination (or if the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time when
the Mortgage Loan was not in default or default with respect thereto was not
reasonably foreseeable, the date of the last such modification) or (II) at
the Closing Date; provided that the fair market value of the real property
interest must first be reduced by (1) the amount of any lien on the real
property interest that is senior to the Mortgage Loan (unless such senior
lien also secures a Mortgage Loan, in which event the computation described
in (I) and (II) shall be made on an aggregated basis) and (2) a
proportionate amount of any lien that is in parity with the Mortgage Loan
(unless such other lien secures a Mortgage Loan that is cross-collateralized
with such Mortgage Loan, in which event the computation described in (I) and
(II) shall be made on an aggregate basis); and
(xxxi) with respect to each Mortgaged Property where the estate of the
related borrower therein is a leasehold estate, that
(A) the related lease or a memorandum thereof has been or will be
duly recorded; such lease or an estoppel letter or lender protective
agreement between LB Holdings and the lessor under such lease permits the
interest of the lessee thereunder to be encumbered by the related
Mortgage; and there has been no material amendment or modification of
such lease since its recordation, with the exception of written
amendments or modifications which are part of the related Mortgage File;
B-4
<PAGE>
(B) except as indicated in the related title insurance policy, to the
best of LB Holdings' knowledge, the lessee's interest in the related
lease and the leasehold estate created thereby is not subject to any
liens or encumbrances superior to, or of equal priority with, the related
Mortgage;
(C) LB Holdings and, subsequent to any assignment of the related
Mortgage, LB Holdings' successors and assigns, have the right to succeed
to the borrower's interest in the related lease upon notice to, but
without the consent of, the lessor thereunder (or, if any such consent is
required, it has been obtained prior to the Closing Date), provided, in
the event that LB Holdings, or its successors and assigns, shall have
succeeded to the interest of the borrower, as lessee under the lease, by
foreclosure of the related Mortgage or acceptance of an assignment in
lieu thereof, the consent of such lessor may be required for any
subsequent assignment;
(D) as of the date the related Mortgage Loan was made, the related
lease was in full force and effect and, to such lessor's knowledge, no
default had occurred under such lease, nor, to such lessor's knowledge,
was there any then existing condition which, but with the passage of time
or the giving of notice, would result in a default under the terms of
such lease and, as of the date hereof, LB Holdings has received no
written notice of a default or event of default on the part of a borrower
from the lessor of such borrower's lease;
(E) the related lease or an estoppel letter or lender protective
agreement requires the lessor thereunder to give notice of any default by
the lessee to the mortgagee, provided that the mortgagee has provided the
lessor with notice of its lien in accordance with the provisions of such
lease, estoppel letter or lender protective agreement; the mortgagee has
provided the lessor with such notice;
(F) the related lease, estoppel letter or lender protective agreement
provides a mortgagee with a reasonable opportunity (including, where
necessary, sufficient time to gain possession of the interest of the
lessee under such ground lease) to cure any default under such lease,
which is curable after the receipt of notice of any such default before
the lessor thereunder may terminate such lease;
(G) (1) the related lease has a term (including renewals, if
exercised) which extends not less than ten years beyond the maturity date
of the related Mortgage Loan and (2) to the extent that the
representation under the foregoing clause (1) is based on the existence
of renewal options, the terms on which the related borrower has the right
to enter into such renewals, and any conditions to the related borrower's
right to enter into such renewals, are commercially reasonable;
(H) under the terms of the related lease and the related Mortgage,
taken together, any insurance proceeds other than in respect of a total
or substantially total loss will be applied either (I) to the repair or
restoration of all or part of the related Mortgaged Property, with the
lessor, mortgagee or a depository appointed pursuant to the terms of such
lease having the right to hold and disburse such proceeds as the repair
or restoration progresses or (II) to the payment of the outstanding
principal balance of the applicable Mortgage Loan together with any
accrued interest thereon;
(I) the related lease does not impose restrictions on subletting of
all or portions of the Mortgaged Property by lessee which would be
viewed, as of the date of origination of such Mortgage Loan, as
commercially unreasonable by LB Holdings; and
(J) the related lease or an estoppel letter provides that in the
event that a lessee in bankruptcy rejects any or all of its leases, the
leasehold mortgagee will have the right to succeed to the lessee's
position under the lease, provided that written notice has been sent to
the lessor and all defaults with respect to the lease are cured.
B-5
<PAGE>
(xxxii) The information set forth in the mortgage loan schedule attached to
the Loan Sale Agreement as to the Mortgage Loan is complete and accurate in
all respects;
(xxxiii) No advance of funds has been made, directly or indirectly, by the
Seller to any borrower and no funds have been received from any person other
than the borrower for or on account of payments due on a Note or Mortgage;
(xxxiv) No Mortgage Loan is secured by collateral that is not included in
the Trust Fund;
(xxxv) Each Mortgage Loan that is cross-collateralized is
cross-collateralized only with Notes included in the Trust Fund; and
(xxxvi) Each Mortgaged Property that is located in a federally designated
flood hazard area is covered by an insurance policy covering flood losses.
B-6
<PAGE>
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<TABLE>
<CAPTION>
CLAUSE EXCEPTION
- --------------- ------------------------------------------------------------------------------------------------
<S> <C>
(xiv) No certificates of occupancy were obtainable for the Villa Marina Property.
(xx) With respect to the DDR/DRA Properties known as the Broadway Marketplace Property, the Perimeter
Pointe Property, and the Shoppers World Property, affirmative insurance has been provided in the
related title policy to cover such taxes and governmental assessments.
(xxi) Such amounts required under the DDR/DRA Loan are provided for as the requirement of the minimum
balance in the operating accounts for the DDR/DRA Borrowers.
(xxvii) One of the Mortgaged Properties securing the Prentiss Loan known as the Pacific Gateway Center
Property was formerly part of the site of a synthetic rubber manufacturing plant (the "Plant")
and owned and operated by, among others, Shell Oil Company ("Shell") and related wastes were
disposed of near the Pacific Gateway Center Property. In connection with a conveyance of this
disposal area back to Shell by an affiliate of the Prentiss Borrower, Shell agreed to indemnify
the Prentiss affiliate and any successors in interest against (i) any costs of remediation of
the affected areas and (ii) any suit for damages for personal injury or property damage brought
by neighboring landowners. Environmental studies have detected the presence of groundwater
contamination and limited soil contamination on parcels near the disposal area, including
parcels that form a part of the Pacific Gateway Center Property. On September 25, 1997, the
Prentiss Borrower was notified that an undefined area associated with the operation of the Plant
will be listed on the NPL of Superfund sites effective October 27, 1997. In addition, the
Pacific Gateway Center Property is located near an existing Superfund site and contaminants
associated with this site have been detected in the groundwater in the vicinity of the Pacific
Gateway Center Property. Pursuant to an agreement (the "Shell Indemnity") between Shell and an
affiliate of the Prentiss Borrower, Shell has agreed to (i) indemnify and hold harmless any
successor of the affiliate of the Prentiss Borrower and any subsequent purchasers, tenants and
lenders, from any liability relating to clean up or remediation costs for the affected area or
for any contamination resulting from the interrelationship of the nearby Superfund site and the
affected area and (ii) indemnify and hold harmless any successor of the Prentiss Borrower from
any liability arising out of any third party tort claims for personal injury or property damage.
(Shell has confirmed that the Prentiss Borrower and LB Realty and its successors in interest
(and their successors in interest) are indemnified parties under the Shell Indemnity.) In
addition, the Prentiss Borrower and the Prentiss L.P. have entered into an indemnification
agreement, whereby they have agreed to indemnify LB Holdings for environmental liabilities that
might arise with respect to the Pacific Gateway Center Property to the extent LB Holdings and
its successors in interest do not recover under the Shell Indemnity.
(xxvii) With respect to the Courtyard Loan, the Courtyard Borrower is not required to indemnify the
mortgagee and its successors and assigns from any liability for damages arising out of bodily
injury to persons or damage to property caused by or resulting from the gross negligence or
willful misconduct of the mortgagee or its successors and assigns (or with respect to the
Courtyard Properties located in Georgia, resulting from the sole negligence or willful
misconduct of mortgagee or its successors and assigns).
(xxxi)(G)(1) With respect to the Arden Loan, the lease covering an immaterial portion of the property known
as 222 South Harbor Boulevard, which consists of the parking facility for such property, has a
term of five years beyond the maturity date of the Arden Loan.
(xxxi)(J) With respect to the ground lease entered into in connection with an immaterial portion of the
Arden Property known as 222 South Harbor Boulevard, the estoppel letter provides that the
leasehold mortgagee will have the right to enter into a new lease with the lessor on the same
terms and conditions as such ground lease.
</TABLE>
B-7
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT C-1
FORM OF COMPARATIVE FINANCIAL STATUS REPORT
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
COMPARATIVE FINANCIAL STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
S4 S57 S58 P7 P8 S72 S69 S70 S65 S66
- ---------------------------------------------------------------------------------------------------------------
Original Underwriting
- ---------------------------------------------------------------------------------------------------------------
Information
- ---------------------------------------------------------------------------------------------------------------
Basis Year
- ---------------------------------------------------------------------------------------------------------------
Last
Property Scheduled Paid Annual Financial
Prospectus Inspect Loan Thru Debt Info as of % Total $ (1)
ID City State Date Balance Date Service Date Occ Revenue NOI DSCR
yy/mm yy/mm
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans currently in deal with or with out information largest to smallest loan
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total: $ $ WA $ $ WA
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
Received
- ---------------------------------------------------------------------------------------------------------------
Financial Information: Loans Balance
- ---------------------------------------------------------------------------------------------------------------
# % $ %
- ---------------------------------------------------------------------------------------------------------------
Current Full Year:
- ---------------------------------------------------------------------------------------------------------------
Current Full Yr. received with DSC LESS THAN 1:
- ---------------------------------------------------------------------------------------------------------------
Prior Full Year:
- ---------------------------------------------------------------------------------------------------------------
Prior Full Yr. received with DSC LESS THAN 1:
- ---------------------------------------------------------------------------------------------------------------
Quarterly Financials:
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
S4 P65 P64 P59 P61 P63 P58 P57 P52 P54 P56
- ------------------------------------------------------------------------------------------------
2nd Preceding Annual Operating Preceding Annual Operating
- ------------------------------------------------------------------------------------------------
Information Information
- ------------------------------------------------------------------------------------------------
as of ___________ Normalized as of ___________ Normalized
- ------------------------------------------------------------------------------------------------
Financial Financial
Prospectus Info as of % Total $ (1) Info as of % Total $ (1)
ID Date Occ Revenue NOI DSCR Date Occ Revenue NOI DSCR
yy/mm yy/mm
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total: WA $ $ WA WA $ $ WA
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
================================================================================================
Required
- ------------------------------------------------------------------------------------------------
Loans Balance
- ------------------------------------------------------------------------------------------------
# % $ %
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
S4 P72 P73 P66 P68 P70 (2)
- -------------------------------------------------------------------------------
Trailing Financial Net Change
- -------------------------------------------------------------------------------
Information
- -------------------------------------------------------------------------------
Month Reported "Actual" Preceding & Basis
- -------------------------------------------------------------------------------
%
Prospectus FS Start FS End Total $ (%) % Total (1)
ID Date Date Revenue NOI DSCR Occ Rev DSC
yy/mm yy/mm
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total: WA $ $ WA WA $ WA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
C-1
<PAGE>
EXHIBIT C-2
FORM OF DELINQUENT LOAN STATUS REPORT
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
DELINQUENT LOAN STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 or S63 P8 P7 P37 P39
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short Name Paid Scheduled Total P&I Total
Prospectus (When Property Sq Ft or Thru Loan Advances Expenses
ID Appropriate) Type City State Units Date Balance To Date To Date
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
- ------------------------------------------------------------------------------------------------------------------------------------
* Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification,
DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan,
TBD - To Be Determined etc...)
- ------------------------------------------------------------------------------------------------------------------------------------
It is possible to combine the status codes if the loan is going in more
than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
- ------------------------------------------------------------------------------------------------------------------------------------
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 P38 P25 P10 P11 P58 P54 P55 P74
- ------------------------------------------------------------------------------------------------------------------------------------
(d) (e)=a+b+c+d (f)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Value
Advances Current Current using NOI
Prospectus (Taxes & Total Monthly Interest Maturity LTM NOI Cap Rate & Cap Valuation
ID Escrow) Exposure P&I Rate Date Date LTM NOI LTM DSCR Assigned Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2-1
<PAGE>
FORM OF DELINQUENT LOAN STATUS REPORT (continued)
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
DELINQUENT LOAN STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P75 P77 P79 P42 P76
- -----------------------------------------------------------------------------------------------------------------------------------
(g)=(.92*f)-e (h)=(g/e)
- -----------------------------------------------------------------------------------------------------------------------------------
Appraisal
Short Name BPO or Loss using Estimated Expected
Prospectus (When Property City State Internal 92% Appr. Recovery Transfer Closing Date NOI FCL Sale Workout
ID Appropriate) Type Value** or BPO (f) % Date Date Filed Date Strategy Comments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
- ------------------------------------------------------------------------------------------------------------------------------------
* Workout Strategy should match the CSSA Loan file using abreviated etc...
- ------------------------------------------------------------------------------------------------------------------------------------
It is possible to combine the status codes if the loan is going in more than on
- ------------------------------------------------------------------------------------------------------------------------------------
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2-2
<PAGE>
EXHIBIT C-3
FORM OF HISTORICAL LOAN MODIFICATION REPORT
Structured Asset Securities Corporation
Commercial Mortgate Pass-Through Certificates, Series 1997-LLI
HISTORICAL LOAN MODIFICATION REPORT
as of _________________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
S4 S57 S58 P49 P48 P7* P7* P50* P50* P25*
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Balance Balance at
When the
Mod / Sent to Effective # Mths
Prospectus Extention Effect Speical Date of Old for Rate New Old
ID City State Flag Date Servicer Rehabilitation Rate Change Rate P&I
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- ---------------------------------------------------------------------------------------------------------------------------
Information is as of modification each line it should not change in the future only new modifications should be added.
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
===========================================================================================================================
Total For All Loans:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total For Loans in Current Month:
- ---------------------------------------------------------------------------------------------------------------------------
# of Loans $ Balance
- ---------------------------------------------------------------------------------------------------------------------------
Modifications:
- ---------------------------------------------------------------------------------------------------------------------------
Maturity Date Extentions:
- ---------------------------------------------------------------------------------------------------------------------------
Total:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
* The information in these columns is from a particular point in time and should not change on this report once assigned.
- ---------------------------------------------------------------------------------------------------------------------------
(1) Actual principal loss taken by bonds
- ---------------------------------------------------------------------------------------------------------------------------
(2) Expected future loss due to a rate reduction. This is just an estimate calculated at the time of the modification.
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
S4 P25* P11* P11* P47
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(2) Est.
Future
Total # Interest
Mths (1) Loss to
for Realized Trust $
Prospectus New Old New Change Loss to (Rate
ID P&I Maturity Maturity of Mod Trust $ Reduction) COMMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
C-3
<PAGE>
EXHIBIT C-4
FORM OF HISTORICAL LOSS ESTIMATE REPORT
Structural Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates
Series 1997-LLI
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD or DISCOUNTED PAYOFF)
as of ______________________
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P45/P7 P75 P45 P7 P37 P39+P38
- -----------------------------------------------------------------------------------------------------------------------------------
(c)=b/a (a) (b) (d) (e) (f) (g)
- -----------------------------------------------------------------------------------------------------------------------------------
Latest
Appraisal
Short Name % or Effect Net Amt
Prospectus (When Property Received Brokers Date of Sales Received Scheduled Total P&I Total
ID Appropriate) Type City State From Sale Opinion Sale Price from Sale Balance Advanced Expense
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
- -----------------------------------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated.
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
Total all Loans:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Current Month Only:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
S4
- ---------------------------------------------------------------------------------------------------------
(h) (i)=d-(f+g+h) (k)=i-e (m) Date (n)=k+m (o)=n/e
- ---------------------------------------------------------------------------------------------------------
Date Minor
Loss Adj Total Loss Loss % of
Prospectus Servicing Actual Losses Passed Minor Adj Passed with Scheduled
ID Fees Expense Net Proceeds Passed thru thru to Trust thru Adjustment Balance
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
- ---------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Total all Loans:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Current Month Only:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
C-4
<PAGE>
EXHIBIT C-5
FORM OF REO STATUS REPORT
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through, Series 1997-LLI
REO STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 or P8 P7 P37 P39 P38
- -------------------------------------------------------------------------------------------------------------------------
S63 (a) (b) (c) (d)
- -------------------------------------------------------------------------------------------------------------------------
Prospectus Short Name Prope City State Sq Ft Paid Scheduled Total Total Other
ID (When rty or Thru Loan P&I Expenses Advances
Appropriate) Type Units Date Balance Advances To Date (Taxes &
To Date Escrow)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
S4 P25 P11 P58 P54 P74 P75
- ---------------------------------------------------------------------------------------------------------------------
(e)=a+b+c+d (f)
- ---------------------------------------------------------------------------------------------------------------------
Prospectus Total Current Maturity LTM LTM Cap Valuation Value Appraisal
ID Exposure Monthly Date NOI NOI / Rate Date using BPO or
P&I Date DSC Assign NOI & Internal
Cap Rate Value**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
S4
- -----------------------------------------------------------------------------------------------------
(g)=(.92*f)-(h)=(g/e)
- -----------------------------------------------------------------------------------------------------
Prospectus Loss Estimated Transfer REO Pending Pending
ID using Recovery Date Aquisition Closing Offers Comments
92% % Date Date
Appr. or
BPO (f)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int -
Internal Value
</TABLE>
C-5
<PAGE>
EXHIBIT C-6
FORM OF WATCH LIST
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
SERVICER WATCH LIST
as of ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P7 P8 P11 P54
- ------------------------------------------------------------------------------------------------------------------------------------
Prospectus Short Name Property City State Scheduled Paid Maturity LTM Comment / Reason on Watch List
ID (When Type Loan Thru Date DSCR
Appropriate) Balance Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
List all loans on watch list and reason sorted in decending balance order.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $
- ------------------------------------------------------------------------------------------------------------------------------------
*LTM - Last 12 months either trailing or last annual
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-6
<PAGE>
EXHIBIT C-7
Form of OPERATING STATEMENT ANALYSIS REPORT
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
OPERATING STATEMENT ANALYSIS REPORT
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
--------------
LB Control Number
--------------
-------------
Current Balance/Paid to Date
---------------------------------------------------------------------------------------------------
Property Name
---------------------------------------------------------------------------------------------------
Property Type
---------------------------------------------------------------------------------------------------
Property Address, City, State
---------------------------------------------------------------------------------------------------
Net Rentable Square Feet
--------------------------
Year Built/Year Renovated
-----------------------------------------------------------------
Year of Operations Underwriting 1994 1995 1996 Trailing
-----------------------------------------------------------------
Occupancy Rate *
-----------------------------------------------------------------
Average Rental Rate
-----------------------------------------------------------------
* Occupancy rates are year end or the ending date of the financial statement for the period.
INCOME: No. of Mos.
--------------
Number of Mos. Prior Year Current Yr.
------------------------------------------------------------------------------------------
Period Ended Underwriting 1994 1995 1996 97 Trailing** 1996-Base 1996-1995
--------------
Statement Classification Base Line Normalized Normalized Normalized as of / /97 Variance Variance
------------------------------------------------------------------------------------------
Rental Income (Category 1)
------------------------------------------------------------------------------------------
Rental Income (Category 2)
------------------------------------------------------------------------------------------
Rental Income (Category 3)
------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Effective Gross Income $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the underwriter or
Servicer
** Servicer will not be expected to "Normalize" these YTD numbers.
OPERATING EXPENSES:
------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------
Property Insurance
------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------
General & Administration
------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------
Payroll & Benefits Expense
------------------------------------------------------------------------------------------
Advertising & Marketing
------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Operating Expense Ratio
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net Operating Income $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------
Replacement Reserve
------------------------------------------------------------------------------------------
Total Capital Items $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
Cash Flow after debt service $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) DSCR: (NOI/Debt Service)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DSCR: (after reserves\Cap exp.)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Source of Financial Data:
------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
Notes and Assumptions:
===========================================================================================================================
</TABLE>
The years shown above will roll always showing a three year history. 1995 is the
current year financials; 1994 is the prior year financials.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Rental Income need to be broken down whenever possible differently for each
property type as follows: Retail: 1) Base Rent 2)Percentage rents on cashflow
Hotel: 1)Room Revenue 2)Food/Beverage Nursing Home: 1)Private 2) Medicaid
3) Medicare
Income: Comment
Expense: Comment
Capital Items: Comment
(1) Used in the Comparative Financial Status Report
C-7
<PAGE>
EXHIBIT C-8
Form of NOI ADJUSTMENT WORKSHEET for "year"
Structured Asset Securities Corporation
Commercial Mortgage Pass-Through Certificates, Series 1997-LLI
NOI ADJUSTMENT WORKSHEET FOR "year"
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------
LB Control Number
-------------
Current Balance/Paid to Date
--------------------------------------------------------------------------------------------
Property Name
--------------------------------------------------------------------------------------------
Property Type
--------------------------------------------------------------------------------------------
Property Address, City, State
--------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------
Year Built/Year Renovated
-----------------------------------------
Year of Operations Borrower Adjustment Normalized
-----------------------------------------
Occupancy Rate *
-----------------------------------------
Average Rental Rate
-----------------------------------------
* Occupancy rates are year end or the ending date of the financial statement for the period.
INCOME:
Number of Mos.Annualized "Year"
-------------------------------------------------------------------
Period Ended Borrower Adjustment Normalized
Statement Classification Actual
-------------------------------------------------------------------
Rental Income (Category 1)
-------------------------------------------------------------------
Rental Income (Category 2)
-------------------------------------------------------------------
Rental Income (Category 3)
-------------------------------------------------------------------
Pass Throughs/Escalations
-------------------------------------------------------------------
Other Income
-------------------------------------------------------------------
-------------------------------------------------------------------
Effective Gross Income $0.00 $0.00 $0.00
-------------------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the underwriter or
Servicer
OPERATING EXPENSES:
-------------------------------------------------------------------
Real Estate Taxes
-------------------------------------------------------------------
Property Insurance
-------------------------------------------------------------------
Utilities
-------------------------------------------------------------------
General & Administration
-------------------------------------------------------------------
Repairs and Maintenance
-------------------------------------------------------------------
Management Fees
-------------------------------------------------------------------
Payroll & Benefits Expense
-------------------------------------------------------------------
Advertising & Marketing
-------------------------------------------------------------------
Professional Fees
-------------------------------------------------------------------
Other Expenses
-------------------------------------------------------------------
Ground Rent
-------------------------------------------------------------------
Total Operating Expenses $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
Operating Expense Ratio
-------------------------------------------------------------------
-------------------------------------------------------------------
Net Operating Income $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
Leasing Commissions
-------------------------------------------------------------------
Tenant Improvements
-------------------------------------------------------------------
Replacement Reserve
-------------------------------------------------------------------
Total Capital Items $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
N.O.I. After Capital Items $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
Debt Service (per Servicer) $0.00 $0.00 $0.00
-------------------------------------------------------------------
Cash Flow after debt service $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
(1)DSCR: (NOI/Debt Service)
-------------------------------------------------------------------
-------------------------------------------------------------------
DSCR: (after reserves\Cap exp.)
-------------------------------------------------------------------
-------------------------------------------------------------------
Source of Financial Data:
-------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
</TABLE>
Notes and Assumptions:
================================================================================
This report should be completed by the Servicer for any "Normalization" of the
Borrowers numbers.
The "Normalized" column is used in the Operating Statement Analysis Report.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Income: Comments
Expense: Comments
Capital Items: Comments
(1) Used in the Comparative Financial Status Report
C-8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT D
GROUP 1 WEIGHTED AVERAGE NET MORTGAGE PASS-THROUGH RATES
<TABLE>
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 12TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
<S> <C> <C>
November 12, 1997........................ = 7.860
December 12, 1997........................ = 7.605
January 12, 1998......................... = 7.719
February 12, 1998........................ = 7.719
March 12, 1998........................... = 7.378
April 12, 1998........................... = 7.859
May 12, 1998............................. = 7.604
June 12, 1998............................ = 7.858
July 12, 1998............................ = 7.604
August 12, 1998.......................... = 7.858
September 12, 1998....................... = 7.858
October 12, 1998......................... = 7.603
November 12, 1998........................ = 7.857
December 12, 1998........................ = 7.603
January 12, 1999......................... = 7.715
February 12, 1999........................ = 7.715
March 12, 1999........................... = 7.379
April 12, 1999........................... = 7.856
May 12, 1999............................. = 7.602
June 12, 1999............................ = 7.856
July 12, 1999............................ = 7.602
August 12, 1999.......................... = 7.855
September 12, 1999....................... = 7.855
October 12, 1999......................... = 7.601
November 12, 1999........................ = 7.855
December 12, 1999........................ = 7.600
January 12, 2000......................... = 7.854
February 12, 2000........................ = 7.710
March 12, 2000........................... = 7.489
April 12, 2000........................... = 7.853
May 12, 2000............................. = 7.599
June 12, 2000............................ = 7.853
July 12, 2000............................ = 7.599
August 12, 2000.......................... = 7.852
September 12, 2000....................... = 7.852
October 12, 2000......................... = 7.598
November 12, 2000........................ = 7.852
December 12, 2000........................ = 7.597
January 12, 2001......................... = 7.706
February 12, 2001........................ = 7.706
March 12, 2001........................... = 7.380
April 12, 2001........................... = 7.850
May 12, 2001............................. = 7.596
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 12TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
<S> <C> <C>
June 12, 2001............................ = 7.850
July 12, 2001............................ = 7.596
August 12, 2001.......................... = 7.849
September 12, 2001....................... = 7.849
October 12, 2001......................... = 7.595
November 12, 2001........................ = 7.848
December 12, 2001........................ = 7.594
January 12, 2002......................... = 7.701
February 12, 2002........................ = 7.700
March 12, 2002........................... = 7.380
April 12, 2002........................... = 7.847
May 12, 2002............................. = 7.593
June 12, 2002............................ = 7.846
July 12, 2002............................ = 7.669
August 12, 2002.......................... = 7.925
September 12, 2002....................... = 7.925
October 12, 2002......................... = 7.668
November 12, 2002........................ = 7.924
December 12, 2002........................ = 7.667
January 12, 2003......................... = 7.807
February 12, 2003........................ = 7.806
March 12, 2003........................... = 7.388
April 12, 2003........................... = 7.922
May 12, 2003............................. = 7.666
June 12, 2003............................ = 7.922
July 12, 2003............................ = 7.665
August 12, 2003.......................... = 7.921
September 12, 2003....................... = 7.921
October 12, 2003......................... = 7.664
November 12, 2003........................ = 7.920
December 12, 2003........................ = 7.664
January 12, 2004......................... = 7.919
February 12, 2004........................ = 7.800
March 12, 2004........................... = 7.526
April 12, 2004........................... = 7.918
May 12, 2004............................. = 7.662
June 12, 2004............................ = 7.918
July 12, 2004............................ = 7.698
August 12, 2004.......................... = 7.893
September 12, 2004....................... = 7.893
October 12, 2004......................... = 7.638
November 12, 2004........................ = 7.893
December 12, 2004........................ = 7.637
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 12TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
<S> <C> <C>
January 12, 2005......................... = 7.774
February 12, 2005........................ = 7.773
March 12, 2005........................... = 7.363
April 12, 2005........................... = 7.891
May 12, 2005............................. = 7.636
June 12, 2005............................ = 7.890
July 12, 2005............................ = 7.635
August 12, 2005.......................... = 7.890
September 12, 2005....................... = 7.889
October 12, 2005......................... = 7.634
November 12, 2005........................ = 7.889
December 12, 2005........................ = 7.633
January 12, 2006......................... = 7.767
February 12, 2006........................ = 7.767
March 12, 2006........................... = 7.364
April 12, 2006........................... = 7.887
May 12, 2006............................. = 7.632
June 12, 2006............................ = 7.886
July 12, 2006............................ = 7.631
August 12, 2006.......................... = 7.885
September 12, 2006....................... = 7.885
October 12, 2006......................... = 7.630
November 12, 2006........................ = 7.912
December 12, 2006........................ = 7.656
January 12, 2007......................... = 7.789
February 12, 2007........................ = 7.789
March 12, 2007........................... = 7.389
April 12, 2007........................... = 7.977
May 12, 2007............................. = 7.719
June 12, 2007............................ = 7.976
July 12, 2007............................ = 7.718
August 12, 2007.......................... = 7.975
September 12, 2007....................... = 7.975
October 12, 2007......................... = 7.846
November 12, 2007........................ = 8.108
December 12, 2007........................ = 7.846
January 12, 2008......................... = 8.108
February 12, 2008........................ = 8.108
March 12, 2008........................... = 7.584
April 12, 2008........................... = 8.108
May 12, 2008............................. = 7.846
June 12, 2008............................ = 8.108
July 12, 2008............................ = 7.846
August 12, 2008.......................... = 8.108
<CAPTION>
DISTRIBUTION DATE
(ASSUMING THAT THE 12TH
DAY OF EACH MONTH
IS THE DISTRIBUTION DATE) WAC
<S> <C> <C>
September 12, 2008....................... = 8.108
October 12, 2008......................... = 7.846
November 12, 2008........................ = 8.108
December 12, 2008........................ = 7.846
January 12, 2009......................... = 8.108
February 12, 2009........................ = 8.108
March 12, 2009........................... = 7.322
April 12, 2009........................... = 8.108
May 12, 2009............................. = 7.846
June 12, 2009............................ = 8.108
July 12, 2009............................ = 7.846
August 12, 2009.......................... = 8.108
September 12, 2009....................... = 8.108
October 12, 2009......................... = 7.846
November 12, 2009........................ = 8.108
December 12, 2009........................ = 7.846
January 12, 2010......................... = 8.108
February 12, 2010........................ = 8.108
March 12, 2010........................... = 7.322
April 12, 2010........................... = 8.108
May 12, 2010............................. = 7.846
June 12, 2010............................ = 8.108
July 12, 2010............................ = 7.846
August 12, 2010.......................... = 8.108
September 12, 2010....................... = 8.108
October 12, 2010......................... = 7.846
November 12, 2010........................ = 8.108
December 12, 2010........................ = 7.846
January 12, 2011......................... = 8.108
February 12, 2011........................ = 8.108
March 12, 2011........................... = 7.322
April 12, 2011........................... = 8.108
May 12, 2011............................. = 7.846
June 12, 2011............................ = 8.108
July 12, 2011............................ = 7.846
August 12, 2011.......................... = 8.108
September 12, 2011....................... = 8.108
October 12, 2011......................... = 7.846
November 12, 2011........................ = 8.108
December 12, 2011........................ = 7.846
January 12, 2012......................... = 8.108
February 12, 2012........................ = 8.108
March 12, 2012........................... = 7.584
April 12, 2012........................... = 8.108
</TABLE>
D-2
<PAGE>
<TABLE>
<CAPTION>
LOAN TOTAL UNDERWRITTEN
NUMBER PROPERTY NAME PROPERTY TYPE YEAR BUILT ROOMS AS OF DATE
- --------------- ------------------------------------- ----------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
COURTYARD BY MARRIOTT
1 Courtyard Atlanta Metro-1 Hotel 1987 145 TTM June 1997
2 Courtyard Atlanta Metro-2 Hotel 1986 146 TTM June 1997
3 Courtyard Atlanta Metro-3 Hotel 1985 131 TTM June 1997
4 Courtyard Atlanta Metro-4 Hotel 1983 128 TTM June 1997
5 Courtyard Atlanta Metro-5 Hotel 1983 127 TTM June 1997
6 Courtyard Atlanta Metro-6 Hotel 1984 128 TTM June 1997
7 Courtyard Florida-1 Hotel 1987 154 TTM June 1997
8 Courtyard Florida-2 Hotel 1987 145 TTM June 1997
9 Courtyard Florida-3 Hotel 1987 146 TTM June 1997
10 Courtyard Georgia-1 Hotel 1986 144 TTM June 1997
11 Courtyard Georgia-2 Hotel 1985 139 TTM June 1997
12 Courtyard Georgia-3 Hotel 1985 130 TTM June 1997
13 Courtyard Maryland-1 Hotel 1987 147 TTM June 1997
14 Courtyard Maryland-2 Hotel 1986 152 TTM June 1997
15 Courtyard Maryland-3 Hotel 1986 146 TTM June 1997
16 Courtyard Michigan-1 Hotel 1987 147 TTM June 1997
17 Courtyard Michigan-2 Hotel 1986 147 TTM June 1997
18 Courtyard Michigan-3 Hotel 1986 147 TTM June 1997
19 Courtyard Michigan-4 Hotel 1986 147 TTM June 1997
20 Courtyard Northeast-1 Hotel 1987 139 TTM June 1997
21 Courtyard Northeast-2 Hotel 1987 150 TTM June 1997
22 Courtyard Northeast-3 Hotel 1987 149 TTM June 1997
23 Courtyard Illinois\Ohio-1 Hotel 1986 147 TTM June 1997
24 Courtyard Illinois\Ohio-2 Hotel 1986 149 TTM June 1997
25 Courtyard Illinois\Ohio-3 Hotel 1987 145 TTM June 1997
26 Courtyard Illinois\Ohio-4 Hotel 1986 147 TTM June 1997
27 Courtyard Southeast-1 Hotel 1987 146 TTM June 1997
28 Courtyard Southeast-2 Hotel 1986 153 TTM June 1997
29 Courtyard Southeast-3 Hotel 1987 146 TTM June 1997
30 Courtyard Southeast-4 Hotel 1986 145 TTM June 1997
31 Courtyard Southeast-5 Hotel 1986 146 TTM June 1997
32 Courtyard Texas-1 Hotel 1986 147 TTM June 1997
33 Courtyard Texas-2 Hotel 1987 145 TTM June 1997
34 Courtyard Texas-3 Hotel 1986 147 TTM June 1997
35 Courtyard Texas-4 Hotel 1987 145 TTM June 1997
36 Courtyard Texas-5 Hotel 1987 146 TTM June 1997
37 Courtyard Texas-6 Hotel 1987 145 TTM June 1997
38 Courtyard Texas-7 Hotel 1987 146 TTM June 1997
39 Courtyard Virginia-1 Hotel 1986 145 TTM June 1997
40 Courtyard Virginia-2 Hotel 1987 146 TTM June 1997
41 Courtyard Virginia-3 Hotel 1986 144 TTM June 1997
42 Courtyard Virginia-4 Hotel 1987 146 TTM June 1997
43 Courtyard Virginia-5 Hotel 1987 146 TTM June 1997
44 Courtyard West-1 Hotel 1987 146 TTM June 1997
45 Courtyard West-2 Hotel 1987 145 TTM June 1997
46 Courtyard West-3 Hotel 1986 147 TTM June 1997
47 Courtyard West-4 Hotel 1986 145 TTM June 1997
48 Courtyard West-5 Hotel 1987 144 TTM June 1997
49 Courtyard West-6 Hotel 1986 145 TTM June 1997
50 Courtyard West-7 Hotel 1987 145 TTM June 1997
-----------
TOTAL/WEIGHTED AVERAGE: 7,223
<CAPTION>
LOAN 1995 1996 UNDERWRITTEN
NUMBER OCCUPANCY OCCUPANCY OCCUPANCY
- --------------- ------------- ------------- -----------------
<S> <C> <C> <C>
COURTYARD BY MA
1 84.8% 82.3% 81.5%
2 81.8% 72.7% 74.3%
3 82.7% 74.1% 73.1%
4 82.5% 77.9% 75.1%
5 82.4% 76.6% 76.2%
6 84.9% 82.2% 80.2%
7 81.4% 79.7% 78.5%
8 89.6% 82.4% 82.5%
9 83.2% 79.4% 79.6%
10 83.2% 79.5% 81.4%
11 82.1% 78.4% 79.8%
12 79.3% 77.0% 77.8%
13 76.3% 77.0% 80.2%
14 68.2% 68.0% 70.4%
15 73.2% 69.9% 72.9%
16 84.1% 83.2% 83.8%
17 80.5% 82.7% 83.4%
18 76.0% 79.9% 81.1%
19 76.8% 78.8% 81.2%
20 83.5% 87.3% 86.3%
21 79.4% 79.3% 80.0%
22 79.8% 78.7% 78.8%
23 81.0% 80.6% 81.7%
24 78.7% 75.4% 74.2%
25 79.2% 79.0% 79.5%
26 78.9% 80.1% 81.2%
27 79.9% 73.9% 75.9%
28 81.8% 80.8% 82.7%
29 82.1% 81.3% 80.5%
30 81.9% 78.2% 78.8%
31 83.5% 80.3% 81.3%
32 83.8% 81.7% 83.4%
33 84.4% 84.1% 83.6%
34 86.4% 82.9% 82.3%
35 83.2% 83.6% 82.3%
36 82.3% 83.6% 84.6%
37 74.5% 75.6% 79.1%
38 72.6% 69.4% 71.0%
39 80.2% 78.4% 79.8%
40 77.4% 78.4% 79.4%
41 80.9% 80.8% 83.4%
42 80.3% 75.5% 76.6%
43 78.1% 76.3% 79.3%
44 85.6% 85.8% 84.0%
45 80.9% 79.5% 78.1%
46 90.8% 92.9% 94.0%
47 87.0% 85.1% 86.7%
48 82.4% 77.4% 79.2%
49 77.0% 74.6% 77.7%
50 78.7% 78.8% 78.7%
----- ----- ---
81.4% 79.8% 80.4%
</TABLE>
<PAGE>
ANNEX A
MORTGAGED PROPERTY CHARACTERISTICS
<TABLE>
<CAPTION>
ALLOCATED CUT-OFF
1995 1996 UNDERWRITTEN 1995 1996 UNDERWRITTEN LOAN DATE
ADR ADR ADR REVPAR REVPAR REVPAR AMOUNT VALUE LTV
- --------- --------- ------------- ----------- ----------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 80.71 $ 89.22 $ 88.54 $ 68.41 $ 73.44 $ 72.14 $ 9,297,953 $ 14,800,000 63%
74.13 83.04 80.25 60.61 60.39 59.62 7,652,088 11,200,000 68%
70.38 83.98 82.43 58.23 62.23 60.29 6,559,051 9,800,000 67%
75.00 86.07 86.72 61.88 67.03 65.16 6,276,237 8,700,000 72%
74.46 78.40 76.72 61.34 60.08 58.47 5,787,229 9,300,000 62%
71.44 81.55 83.02 60.68 67.07 66.60 5,564,760 8,100,000 69%
73.05 76.78 79.17 59.44 61.18 62.14 7,388,436 13,500,000 55%
72.75 74.23 77.99 65.20 61.13 64.34 5,504,975 8,800,000 63%
55.35 59.25 62.97 46.04 47.06 50.09 4,139,492 7,500,000 55%
64.59 69.98 71.23 53.77 55.62 57.96 5,993,371 9,900,000 61%
55.23 62.84 62.66 45.33 49.28 50.03 4,913,182 8,500,000 58%
58.48 62.79 64.47 46.37 48.33 50.14 4,077,345 7,200,000 57%
79.89 84.20 86.99 60.97 64.81 69.77 7,326,479 14,200,000 52%
61.86 66.89 69.59 42.18 45.48 48.97 3,653,226 6,500,000 56%
59.53 61.89 64.09 43.57 43.25 46.75 3,631,493 8,200,000 44%
71.28 76.10 76.06 59.95 63.32 63.76 7,749,008 14,300,000 54%
67.51 72.81 75.08 54.37 60.21 62.64 6,568,724 12,300,000 53%
72.85 76.57 79.29 55.37 61.16 64.26 6,295,198 12,100,000 52%
67.04 73.72 76.75 51.49 58.11 62.29 5,365,514 11,700,000 46%
96.20 99.77 104.20 80.33 87.12 89.94 8,862,560 16,400,000 54%
80.49 89.04 94.77 63.89 70.56 75.79 7,575,952 14,300,000 53%
72.64 75.08 78.59 57.94 59.08 61.91 6,539,601 11,700,000 56%
72.16 77.53 80.06 58.46 62.47 65.43 7,555,380 13,000,000 58%
73.18 77.78 80.34 57.60 58.62 59.65 7,212,153 13,700,000 53%
73.80 79.01 81.30 58.42 62.44 64.62 7,008,604 13,800,000 51%
72.34 74.43 78.05 57.07 59.62 63.35 6,689,272 12,300,000 54%
74.24 78.27 78.25 59.34 57.81 59.36 6,782,755 12,300,000 55%
63.15 67.07 70.29 51.65 54.17 58.13 6,283,410 11,600,000 54%
62.54 67.01 69.52 51.36 54.46 55.97 6,111,974 9,600,000 64%
66.87 74.85 76.11 54.79 58.50 59.99 6,053,913 10,600,000 57%
67.34 70.66 70.72 56.26 56.71 57.46 5,633,267 9,700,000 58%
77.18 80.52 81.04 64.71 65.82 67.59 8,582,097 15,900,000 54%
75.27 80.20 83.18 63.52 67.44 69.58 7,802,628 12,500,000 62%
79.27 82.59 85.00 68.47 68.45 69.98 7,770,944 12,900,000 60%
75.55 78.35 80.23 62.89 65.53 66.06 7,194,169 13,500,000 53%
65.76 70.46 73.93 54.09 58.89 62.53 6,387,132 13,900,000 46%
81.93 76.76 74.24 61.03 58.00 58.70 6,007,824 10,700,000 56%
71.72 68.65 68.40 52.09 47.67 48.53 4,695,571 8,400,000 56%
74.48 78.98 82.41 59.72 61.93 65.73 8,053,372 14,500,000 56%
76.09 81.64 84.89 58.91 63.98 67.39 7,271,485 13,900,000 52%
68.09 71.43 74.49 55.07 57.69 62.14 5,825,491 10,700,000 54%
59.41 63.37 66.37 47.72 47.82 50.83 5,012,690 8,600,000 58%
58.86 60.88 61.55 45.96 46.46 48.83 4,921,101 9,400,000 52%
76.31 88.73 97.00 65.34 76.09 81.51 8,933,609 15,100,000 59%
84.31 95.20 101.02 68.24 75.68 78.86 8,254,543 16,000,000 52%
85.89 93.11 100.39 77.95 86.46 94.35 7,827,337 12,000,000 65%
75.02 83.83 88.02 65.26 71.34 76.32 6,958,405 13,900,000 50%
68.75 72.73 75.87 56.66 56.33 60.06 6,413,090 11,000,000 58%
64.51 67.78 70.62 49.67 50.55 54.90 4,205,050 8,700,000 48%
56.88 63.88 68.15 44.75 50.33 53.61 3,408,709 7,700,000 44%
- --------- --------- ------------- ----------- ----------- ------------- ------------- ------------- ---
$ 72.57 $ 77.87 $ 80.21 $ 59.17 $ 62.28 $ 64.63 $ 321,577,850 $ 574,900,000 57%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1996 UNDERWRITTEN 1995 1996 UNDERWRITTEN
TOTAL TOTAL TOTAL NET CASH NET CASH NET CASH LOAN
REVENUE REVENUE REVENUE FLOW FLOW FLOW DSCR FEE/LEASEHOLD NUMBER
- ------------- ------------- ------------- ------------ ------------ ------------- ----------- -------------- ---------------
<C> <C> <C> <C> <C> <C> <C> <S> <C>
$ 3,935,879 $ 4,313,946 $ 4,271,577 $ 1,552,677 $ 1,792,621 $ 1,762,870 1.87x Leasehold-Sbd 1
3,540,314 3,580,788 3,536,935 1,332,102 1,335,355 1,313,059 1.69x Leasehold-Sbd 2
3,152,657 3,404,608 3,301,431 1,107,498 1,154,459 1,031,034 1.55x Fee 3
3,182,528 3,528,690 3,385,083 1,127,677 1,231,690 1,127,618 1.77x Fee 4
3,137,800 3,157,638 3,099,656 1,065,990 1,060,501 1,027,078 1.75x Fee 5
3,159,558 3,547,095 3,527,961 967,047 1,119,504 1,120,749 1.98x Leasehold 6
3,686,005 3,864,971 3,878,799 1,464,328 1,534,716 1,547,571 2.06x Leasehold-Sbd 7
3,940,355 3,719,815 3,874,754 1,214,345 941,093 900,368 1.61x Leasehold-Sbd 8
2,760,830 2,857,943 3,007,682 733,487 795,623 971,177 2.31x Leasehold-Sbd 9
3,112,525 3,304,276 3,434,059 1,064,608 1,202,487 1,292,593 2.13x Fee 10
2,578,163 2,798,190 2,838,840 830,677 961,758 960,897 1.93x Fee 11
2,483,080 2,595,585 2,691,254 727,444 825,055 918,739 2.22x Fee 12
3,867,855 4,153,174 4,434,304 1,352,620 1,533,813 1,698,205 2.28x Leasehold-Sbd 13
2,710,383 2,972,888 3,193,208 583,452 790,255 919,332 2.48x Fee 14
2,785,318 2,762,208 2,946,171 707,249 732,547 879,598 2.39x Leasehold-Sbd 15
3,599,399 3,876,170 3,869,355 1,382,959 1,526,289 1,479,405 1.88x Leasehold-Sbd 16
3,251,777 3,610,490 3,746,116 1,164,331 1,357,408 1,360,706 2.04x Fee 17
3,286,927 3,699,368 3,866,435 1,011,000 1,281,824 1,349,187 2.11x Fee 18
2,980,658 3,446,225 3,697,984 780,177 1,165,602 1,281,018 2.35x Fee 19
4,544,643 4,983,436 5,135,536 1,456,983 1,769,316 1,850,807 2.06x Fee 20
3,952,822 4,369,906 4,662,531 1,321,868 1,626,312 1,747,350 2.27x Leasehold-Sbd 21
3,723,073 3,867,314 3,961,046 1,218,146 1,289,093 1,330,336 2.00x Leasehold-Sbd 22
3,580,692 3,853,670 4,014,782 1,293,566 1,535,289 1,624,746 2.12x Leasehold-Sbd 23
3,516,023 3,628,976 3,661,878 1,336,135 1,395,262 1,424,866 1.95x Leasehold-Sbd 24
3,466,147 3,729,715 3,833,224 1,250,573 1,399,408 1,438,433 2.02x Leasehold-Sbd 25
3,429,668 3,657,299 3,871,391 1,287,184 1,276,139 1,297,774 1.91x Leasehold-Sbd 26
3,570,840 3,543,647 3,636,797 1,321,352 1,238,816 1,330,404 1.93x Leasehold-Sbd 27
3,201,936 3,393,753 3,636,856 1,194,637 1,346,846 1,512,094 2.37x Fee 28
3,043,379 3,294,304 3,365,364 1,073,226 1,272,619 1,274,575 2.05x Leasehold-Sbd 29
3,306,614 3,603,201 3,681,237 1,076,164 1,190,874 1,207,476 1.97x Leasehold-Sbd 30
3,308,226 3,370,245 3,407,797 1,087,874 973,673 1,013,846 1.77x Leasehold-Sbd 31
3,846,367 4,033,984 4,018,700 1,681,432 1,781,149 1,775,047 2.04x Fee 32
3,742,108 4,000,502 4,093,938 1,429,784 1,588,778 1,671,333 2.11x Leasehold-Sbd 33
4,104,534 4,175,694 4,245,720 1,455,933 1,472,732 1,563,214 1.98x Fee 34
3,789,895 4,008,587 4,021,084 1,310,337 1,765,659 1,790,296 2.45x Leasehold-Sbd 35
3,187,638 3,534,163 3,732,650 1,103,024 1,343,281 1,481,122 2.29x Leasehold-Sbd 36
3,662,576 3,563,398 3,583,663 1,282,677 1,240,113 1,219,493 2.00x Leasehold-Sbd 37
3,102,183 2,891,684 2,930,109 1,076,082 933,260 955,712 2.01x Leasehold-Sbd 38
3,408,644 3,622,696 3,850,057 1,380,283 1,528,986 1,707,712 2.09x Leasehold-Sbd 39
3,542,273 3,902,102 4,109,008 1,271,385 1,393,614 1,529,701 2.07x Leasehold-Sbd 40
3,227,851 3,400,745 3,614,115 1,106,111 1,135,230 1,282,531 2.17x Fee 41
2,804,441 2,837,128 3,009,329 875,082 950,606 1,126,149 2.21x Leasehold-Sbd 42
2,679,440 2,763,770 2,905,140 927,090 900,001 1,032,877 2.07x Leasehold-Sbd 43
4,282,553 4,895,984 5,129,703 1,573,206 1,882,354 2,041,948 2.25x Leasehold-Sbd 44
4,136,904 4,642,882 4,826,560 1,341,890 1,628,010 1,762,015 2.10x Leasehold-Sbd 45
4,694,417 5,222,468 5,643,668 1,369,670 1,651,306 1,910,446 2.40x Leasehold 46
3,813,947 4,173,765 4,453,582 1,369,883 1,491,151 1,664,635 2.36x Fee 47
3,280,443 3,293,844 3,511,029 1,284,426 1,217,243 1,356,319 2.08x Fee 48
2,971,264 3,060,600 3,288,553 1,069,162 968,055 1,111,920 2.61x Leasehold-Sbd 49
2,725,621 3,125,017 3,374,975 950,432 724,113 795,293 2.30x Leasehold-Sbd 50
- ------------- ------------- ------------- ------------ ------------ ------------- -----------
$ 170,799,173 $ 181,638,547 $ 187,811,626 $ 58,945,265 $ 64,251,884 $67,771,674 2.08X
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN
NUMBER PROPERTY NAME PROPERTY TYPE
- ---------- ------------------------------- ----------------------
<C> <S> <C> <C>
DEVELOPERS DIVERSIFIED REALTY/DRA ADVISORS
51 Shoppers World Power Center Power Center
52 Woodfield Village Green Power Center
53 Carmel Mountain Plaza Power Center
54 New Hope Commons Power Center
55 Perimeter Pointe Center Power Center
56 Fairfax Towne Center Power Center
57 Broadway Marketplace Power Center
58 Town Center Prado Power Center
59 Independence Commons Power Center
60 Carillon Place Power Center
TOTAL:
<CAPTION>
WORLDWIDE PLAZA
<C> <S> <C> <C>
61 Worldwide Plaza CBD Office
<CAPTION>
PRENTISS PROPERTIES
<C> <S> <C> <C>
62 Pacific Gateway Center Industrial
63 Milwaukee Industrials Industrial
64 Kansas City Industrials Industrial
65 One Northwestern Plaza Suburban Office
66 Dulles Corner Park Suburban Office
67 1717 Deerfield Road Suburban Office
68 3141 Fairview Suburban Office
69 Park West E-1 Suburban Office
70 O'Hare Plaza II Suburban Office
71 Park West E-2 Suburban Office
72 Chicago Industrials Industrial
73 Fairwood Building Suburban Office
TOTAL:
<CAPTION>
ARDEN REALTY
<C> <S> <C> <C>
74 Skyview Center Suburban Office
75 L.A. Corporate Center Suburban Office
76 400 Corporate Pointe Suburban Office
77 100 West Broadway Suburban Office
78 Woodland Hills Financial Center Suburban Office
79 Glenoaks Plaza Suburban Office
80 The New Wilshire Suburban Office
81 Anaheim City Centre Suburban Office
82 Burbank Executive Center Suburban Office
83 12501 East Imperial Highway Suburban Office
84 70 South Lake Avenue Suburban Office
85 5601 Lindero Canyon Suburban Office
86 Beverly Atrium Suburban Office
87 425 West Broadway Suburban Office
88 Bristol Plaza Suburban Office
89 5832 Bolsa Avenue Suburban Office
90 10350 Santa Monica Suburban Office
TOTAL:
<CAPTION>
MACERICH VILLA MARINA MARKETPLACE
<C> <S> <C> <C>
91 Villa Marina Marketplace Urban Marketplace
<CAPTION>
MACERICH VALLEY VIEW MALL
<C> <S> <C> <C>
92 Valley View Mall Regional Mall
<CAPTION>
SUN COMMUNITIES
<C> <S> <C> <C>
93 Royal Country Manufactured Housing
94 Edwardsville Village Manufactured Housing
95 Timberbrook Manufactured Housing
96 Countryside Village Manufactured Housing
97 Bedford Hills Manufactured Housing
98 Sherman Oaks Manufactured Housing
99 Cutler Estates Manufactured Housing
TOTAL/WEIGHTED AVERAGE:
<CAPTION>
LOAN
NUMBER ADDRESS
- ---------- ----------------------------------------------------------------------------
<C> <C>
DEVELOPERS
51 One Worcester Road & 417 Cochituate Road
52 Meacham and Golf Roads
53 Carmel Mountain Road and Rancho Carmel Drive
54 US 501-15 & Interstate 40
55 Mount Vernon Hwy & Perimeter Center West Parkway
56 West Ox Road and Route 50
57 Alameda Avenue & South Broadway Street
58 Barrett Parkway at Bells Ferry Road
59 39th Street & Arrowhead Drive
60 Airport-Pulling Road & Pine Ridge Road
WORLDWIDE
<C> <C>
61 825 Eighth Avenue
PRENTISS P
<C> <C>
62 18 Industrial Properties
63 17 Industrial Properties
64 7 Industrial Properties
65 28411 Northwestern Plaza
66 2411 Dulles Corner Park
67 1717 Deerfield Road
68 3141 Fairview
69 1601 LBJ Freeway
70 8755 West Higgins Road
71 1603 LBJ Freeway
72 3 Industrial Properties
73 4401 Fair Lakes Court
ARDEN REAL
<C> <C>
74 6033-6053 West Century Boulevard
75 900, 1000, 1200 & 1255 Corporate Center Drive
76 400 Corporate Pointe
77 100 West Broadway
78 21021-21031 Ventura Boulevard
79 303 Glenoaks Boulevard
80 6100 Wilshire Boulevard
81 222 South Harbor Boulevard
82 300 East Magnolia and 333 North Glenoaks Boulevard
83 12501 East Imperial Highway
84 70 South Lake Avenue
85 5601 Lindero Canyon Road
86 350 South Beverly Drive
87 425 West Broadway
88 6167 Bristol Parkway
89 5832 Bolsa Avenue
90 10350 Santa Monica Boulevard
MACERICH V
<C> <C>
91 Marina Freeway & Lincoln Blvd, Glencoe Avenue & Maxella Avenue
MACERICH V
<C> <C>
92 Preston Road & IH-635
SUN COMMUN
<C> <C>
93 555 N.W. 202nd Terrace
94 301 Beach Street
95 54686 County Road 19
96 4600 West Britton Road
97 110 Bejac Circle Drive
98 1144 Sherman Boulevard
99 6471 South Division Avenue
</TABLE>
<PAGE>
ANNEX A
MORTGAGED PROPERTY CHARACTERISTICS
<TABLE>
<CAPTION>
YEAR BUILT/ TOTAL OCCUPANCY
CITY STATE ZIP RENOVATED SF/SITES OCCUPANCY AS OF DATE
- ------------------ ----------- --------- ----------------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Framingham MA 01701 1994/1997 786,196 95.9% 6/27/97
Schaumburg IL 60173 1994 508,092 100.0% 6/27/97
San Diego CA 91219 1993-94 532,129 100.0% 6/27/97
Durham NC 27707 1995 466,916 98.5% 6/27/97
Atlanta GA 30338 1995-96 353,652 83.2% 6/27/97
Fairfax VA 22033 1994 253,941 100.0% 6/27/97
Denver CO 80223 1993-1995 382,576 100.0% 6/27/97
Marietta GA 30066 1994 270,440 94.6% 6/27/97
Independence MO 64057 1996 382,162 97.3% 6/27/97
Naples FL 33902 1994 281,838 96.4% 6/27/97
----------- ------
4,217,942 96.8%
New York NY 10019 1989 1,816,525 98.3% 9/01/97
Torrence CA 90502 1972-1983 1,252,708 100.0% 6/30/97
Milwaukee WI Various 1970-1982 1,529,484 95.8% 9/09/97
Kansas City MO Various 1972-1978 1,341,880 100.0% 6/24/97
Southfield MI 48034 1989 241,751 90.3% 6/30/97
Herndon VA 22071 1990 190,723 100.0% 6/30/97
Deerfield IL 60015 1985 137,904 100.0% 6/30/97
Falls Church VA 22042 1987 192,108 91.9% 6/30/97
Farmers Branch TX 75234 1980/1982 196,139 100.0% 6/30/97
Chicago IL 60631 1986 233,650 87.2% 6/30/97
Farmers Branch TX 75234 1981-85 200,590 99.7% 6/30/97
Woodale IL Various 1987-1988 226,076 100.0% 9/10/97
Fairfax VA 22033 1987 58,621 95.6% 9/09/97
----------- ------
5,801,634 96.9%
Los Angeles CA 90045 1981 & 1986 391,675 88.7% 7/14/97
Monterey Park CA 91754 1984 & 1986 389,293 84.9% 7/14/97
Culver City CA 90230 1988 164,598 99.0% 7/15/97
Long Beach CA 90802 1987 191,727 96.1% 7/14/97
Woodland Hills CA 91364 1972-1996 224,955 88.8% 7/13/97
Burbank CA 91502 1983-1996 175,449 98.3% 7/14/97
Los Angeles CA 90048 1986/91 202,704 82.7% 7/13/97
Anaheim CA 92805 1986 175,391 94.7% 7/13/97
Burbank CA 91502 1978 & 1983 142,862 85.4% 7/14/97
Norwalk CA 90650 1977 122,175 95.7% 7/14/97
Pasadena CA 91101 1982 100,133 91.9% 7/13/97
Westlake Village CA 91362 1989 105,830 100.0% 7/13/97
Beverly Hills CA 90212 1989 61,314 85.0% 7/13/97
Glendale CA 91203 1984-1996 71,589 97.6% 7/13/97
Culver City CA 90230 1982 84,014 79.8% 7/13/97
Huntington Beach CA 92683 1985 49,355 100.0% 7/14/97
Los Angeles CA 90025 1978 42,292 99.9% 7/14/97
----------- ------
2,695,356 91.3%
Marina del Rey CA 90292 1974-1976/1989 448,579 95.6% 7/24/97
Dallas TX 75240 1973-1979/1993 465,918 93.8% 6/30/97
Miami FL 33055 1981 & 1986 864 99.4% 6/30/97
Edwardsville KS 66113 1978 597 93.0% 6/30/97
Bristol IN 46507 1976, 1993-1995 567 89.0% 6/30/97
Perry MI 48872 1967 360 97.4% 6/30/97
Battle Creek MI 49017 1960 340 96.0% 6/30/97
Jackson MI 49201 1978 & 1994 366 99.2% 6/30/97
Grand Rapids MI 49548 1970 281 99.0% 6/30/97
----------- ------
3,375 96.9%
<CAPTION>
CUT-OFF DATE
ALLOCATED CUT-OFF
LOAN DATE
CITY AMOUNT VALUE LTV
- ------------------ ---------------- ---------------- -------------
<S> <C> <C> <C>
Framingham $ 80,250,000 $ 131,600,000 61%
Schaumburg 45,500,000 72,300,000 63%
San Diego 37,500,000 65,000,000 58%
Durham 27,250,000 43,500,000 63%
Atlanta 25,250,000 47,500,000 53%
Fairfax 25,250,000 36,100,000 70%
Denver 22,000,000 34,500,000 64%
Marietta 21,500,000 33,000,000 65%
Independence 21,250,000 38,000,000 56%
Naples 16,750,000 28,000,000 60%
--
---------------- ----------------
$ 322,500,000 $ 529,500,000 61%
New York $ 273,576,031 $ 416,000,000 66%
Torrence $ 31,300,000 $ 47,600,000 66%
Milwaukee 28,300,000 42,600,000 66%
Kansas City 19,200,000 29,200,000 66%
Southfield 17,800,000 27,500,000 65%
Herndon 16,700,000 31,200,000 54%
Deerfield 14,200,000 21,300,000 67%
Falls Church 12,800,000 26,100,000 49%
Farmers Branch 12,100,000 19,400,000 62%
Chicago 11,400,000 24,100,000 47%
Farmers Branch 7,900,000 13,800,000 57%
Woodale 5,200,000 10,300,000 50%
Fairfax 3,200,000 7,000,000 46%
--
---------------- ----------------
$ 180,100,000 $ 300,100,000 61%
Los Angeles $ 27,603,591 $ 52,400,000 53%
Monterey Park 21,042,910 39,700,000 53%
Culver City 15,582,711 35,000,000 45%
Long Beach 15,120,231 30,300,000 50%
Woodland Hills 14,563,963 30,100,000 48%
Burbank 13,103,726 26,100,000 50%
Los Angeles 11,566,547 21,700,000 53%
Anaheim 8,913,666 16,800,000 53%
Burbank 8,375,844 16,100,000 52%
Norwalk 7,186,370 12,500,000 57%
Pasadena 6,676,585 11,400,000 59%
Westlake Village 6,225,312 12,100,000 51%
Beverly Hills 5,267,874 10,800,000 49%
Glendale 4,733,575 8,900,000 53%
Culver City 4,082,066 7,600,000 54%
Huntington Beach 2,674,631 5,900,000 45%
Los Angeles 2,280,398 4,600,000 50%
--
---------------- ----------------
$ 175,000,000 $ 342,000,000 51%
Marina del Rey $ 58,000,000 $ 101,100,000 57%
Dallas $ 51,000,000 $ 95,700,000 53%
Miami $ 18,984,457 $ 25,700,000 74%
Edwardsville 5,995,092 12,100,000 50%
Bristol 4,796,073 9,400,000 51%
Perry 4,196,564 8,300,000 51%
Battle Creek 3,796,891 7,500,000 51%
Jackson 3,796,891 7,400,000 51%
Grand Rapids 3,397,219 6,800,000 50%
--
---------------- ----------------
$ 44,963,187 $ 77,200,000 60%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1996 UNDERWRITTEN UNDERWRITTEN
TOTAL TOTAL TOTAL 1995 1996 UNDERWRITTEN NET CASH
REVENUE REVENUE REVENUE TOTAL NOI TOTAL NOI TOTAL NOI FLOW DSCR FEE/LEASEHOLD
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 11,175,628 $15,414,738 $ -- $ 8,398,537 $10,437,341 $10,346,866 1.72x Fee
-- 10,347,398 10,830,159 -- 6,276,298 6,968,643 6,874,588 2.02x Fee
-- 7,802,851 7,823,469 -- 5,617,885 5,756,648 5,642,373 2.01x Fee
-- 5,120,248 5,249,420 -- 4,096,940 4,131,474 4,038,014 1.98x Fee
-- 2,440,469 4,990,492 -- 1,814,389 4,105,385 4,049,929 2.14x Fee
-- 4,831,491 5,107,704 -- 3,685,977 3,972,116 3,939,632 2.09x Fee
-- 4,813,201 4,541,614 -- 3,555,954 3,447,890 3,386,294 2.06x Fee
-- 3,442,813 4,149,175 -- 2,731,148 3,380,396 3,307,854 2.06x Fee
-- 3,447,101 4,324,720 -- 2,800,890 3,420,308 3,355,489 2.11x Fee
-- 3,301,525 3,365,139 -- 2,548,506 2,641,791 2,577,050 2.06x Fee
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ---------
$ -- $ 56,722,725 $65,796,630 $ -- $ 41,526,524 $48,261,992 $47,518,089 1.97X
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 76,785,326 $ 67,435,048 $66,412,443 $ 52,313,224 $ 41,911,462 $39,959,953 $38,995,953 1.45x Fee
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5,498,455 $ 5,407,786 $ 6,458,215 $ 4,023,178 $ 3,955,605 $ 4,762,101 $3,965,557 1.65x Fee
5,649,299 5,835,068 5,762,901 4,123,796 4,289,477 4,127,743 3,798,023 1.75x Fee
3,482,527 3,157,658 3,824,156 2,707,012 2,412,559 2,947,287 2,650,312 1.80x Fee
5,494,690 5,233,748 5,025,310 3,379,752 2,981,192 2,745,868 2,494,905 1.82x Leasehold
3,778,868 3,994,397 4,437,355 2,545,208 2,725,770 3,039,198 2,812,519 2.19x Fee
2,520,148 2,559,874 2,547,039 2,213,654 2,254,077 2,186,628 2,048,305 1.88x Fee
4,042,908 3,983,021 4,165,923 2,410,998 2,390,892 2,541,706 2,322,328 2.36x Fee
2,896,713 3,274,551 3,458,395 1,565,824 1,756,486 1,944,379 1,799,069 1.94x Fee
-- 4,684,698 5,152,308 -- 1,906,274 2,466,511 2,164,637 2.47x Fee
1,737,877 2,561,552 2,839,880 279,080 1,289,425 1,241,916 1,081,459 1.78x Fee
1,265,035 1,266,152 1,353,576 895,482 876,491 968,603 916,646 2.29x Fee
842,288 862,322 1,085,434 451,053 500,778 684,500 611,625 2.49x Fee
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ---------
$ 37,208,808 $ 42,820,827 $46,110,492 $ 24,595,037 $ 27,339,025 $29,656,441 $26,665,385 1.93X
$ -- $ 7,996,657 $ 8,318,162 $ -- $ 5,425,390 $ 5,024,622 $4,534,166 2.15x Fee
-- 7,380,571 7,581,274 -- 4,344,154 3,749,320 2,758,720 1.72x Fee
4,071,168 4,175,062 4,822,495 2,567,768 2,872,465 3,074,398 2,804,680 2.36x Fee
-- 3,524,308 4,410,192 -- 2,284,493 2,841,316 2,566,850 2.23x Fee
5,088,638 4,689,644 4,882,999 3,299,955 2,920,742 2,556,696 2,141,499 1.93x Fee
-- 3,136,902 3,970,474 -- 1,796,795 2,455,548 2,141,695 2.14x Fee
4,272,119 3,700,895 4,031,313 2,436,983 2,032,026 2,079,774 1,781,423 2.02x Fee
2,859,321 2,507,512 2,965,776 1,421,382 1,212,559 1,607,098 1,256,686 1.85x Fee
-- 2,561,120 2,684,210 -- 1,457,286 1,581,230 1,325,726 2.08x Fee
-- 1,967,049 1,980,473 -- 1,248,038 1,262,439 950,085 1.73x Fee
-- 1,690,356 2,062,638 -- 825,838 1,108,984 926,944 1.82x Fee
1,420,594 1,432,879 1,449,325 1,135,114 1,191,106 1,132,079 998,867 2.10x Fee
1,680,029 1,793,646 1,682,117 1,064,328 1,112,964 976,040 856,184 2.13x Fee
1,161,626 1,418,131 1,503,925 717,301 812,477 868,794 690,304 1.91x Fee
1,867,650 1,297,209 1,323,290 1,169,329 661,929 662,909 483,264 1.55x Fee
-- 586,769 737,907 -- 469,286 544,618 477,849 2.34x Fee
-- 702,400 787,095 -- 350,328 405,201 314,524 1.81x Fee
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ---------
$ 22,421,145 $ 50,561,110 $ 55,193,665 $ 13,812,151 $ 31,017,875 $ 31,931,065 $27,009,467 2.02X
$ 11,337,755 $ 11,055,486 $ 11,861,182 $ 7,861,194 $ 7,922,789 $ 8,596,143 $8,270,376 1.95x Fee
$ 14,216,038 $ 15,165,473 $ 14,701,715 $ 7,479,884 $ 8,229,479 $ 8,134,732 $7,754,132 1.90x Fee
$ -- $ 3,301,347 $ 3,487,558 $ -- $ 2,254,339 $ 2,252,001 $2,208,801 1.44x Fee
-- 1,631,562 1,718,558 -- 1,079,096 1,152,552 1,122,653 2.31x Fee
-- 1,218,736 1,323,140 -- 796,809 890,507 862,157 2.22x Fee
-- 1,098,706 1,123,696 -- 787,182 788,453 770,453 2.27x Fee
-- 939,040 987,816 -- 694,218 715,979 698,980 2.27x Fee
-- 1,077,789 1,103,944 -- 735,948 705,445 687,145 2.24x Fee
-- 1,081,446 1,101,428 -- 643,965 647,493 633,443 2.30x Fee
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ---------
$ -- $ 10,348,626 $ 10,846,140 $ -- $ 6,991,557 $ 7,152,430 $6,983,632 1.92X
<CAPTION>
1995
TOTAL LOAN
REVENUE NUMBER
- ------------- ----------
<S> <C> <C>
$ -- 51
-- 52
-- 53
-- 54
-- 55
-- 56
-- 57
-- 58
-- 59
-- 60
- -------------
$ --
<S> <C> <C>
$ 76,785,326 61
<S> <C> <C>
$ 5,498,455 62
5,649,299 63
3,482,527 64
5,494,690 65
3,778,868 66
2,520,148 67
4,042,908 68
2,896,713 69
-- 70
1,737,877 71
1,265,035 72
842,288 73
- -------------
$ 37,208,808
$ -- 74
-- 75
4,071,168 76
-- 77
5,088,638 78
-- 79
4,272,119 80
2,859,321 81
-- 82
-- 83
-- 84
1,420,594 85
1,680,029 86
1,161,626 87
1,867,650 88
-- 89
-- 90
- -------------
$ 22,421,145
$ 11,337,755 91
$ 14,216,038 92
$ -- 93
-- 94
-- 95
-- 96
-- 97
-- 98
-- 99
- -------------
$ --
</TABLE>
<PAGE>
Annex B
[LOGO]
Lehman Brothers
$1,355,381,215
Offered Certificates
[LOGO] [LOGO] [LOGO]
THE MACERICH COMPANY COURTYARD ARDEN REALTY, INC.
-Registered Trademark-
DRA . ADVISORS, INC. [LOGO]
SUN COMMUNITIES, INC.
[LOGO]
The Blackstone Group [LOGO]
PRENTISS PROPERTIES TRUST
[LOGO]
Developers Diversified Realty Corporation
LEHMAN BROTHERS
FIRST UNION CAPITAL MARKETS CORP.
B-1
<PAGE>
Prospective investors are advised to read carefully, and should rely solely
on, the detailed information in the Prospectus Supplement and the Prospectus
relating to the Offered Certificates in making their investment decision. The
following Annex B does not include all relevant information relating to the
Offered Certificates or Mortgage Loans, particularly with respect to the risks
and special considerations involved with an investment in the Offered
Certificates and is qualified in its entirety by reference to the detailed
information appearing in the Prospectus Supplement and the Prospectus. Prior
to making any investment decision, a prospective investor should carefully
review the Prospectus Supplement and the Prospectus.
B-2
<PAGE>
Large Loan
Mortgage Pass-Through Certificates, Series 1997-LL I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
% C/E % OF DEAL
31.0% 42.9% CLASS A-1
AAA/Aaa
31.0% 14.3% CLASS X-1 CLASS A-2
Aaa/AAA AAA/Aaa
31.0% 11.8% IO CLASS A-3
AAA/Aaa
23.0% 8.0% CLASS B
AA/Aa2 % OF DEAL
16.0% 3.5% CLASS C-1 3.5% CLASS C-2 CLASS X-2
A/A2 A/A2 A/A2
8.0% 8.0% CLASS D
Baa2/BBB WORLDWIDE PLAZA
5.0% 3.0% CLASS E FIXED COMPONENT B*
Baa3/BBB- ($105 mm)
5.0% CLASS F
BB/Ba2
* THE WORLDWIDE PLAZA FIXED COMPONENT B, WHICH HAS A
PRINCIPAL BALANCE AS OF THE CUT-OFF DATE OF $105,000,000,
IS AN ASSET OF LOAN GROUP I.
</TABLE>
<TABLE>
<CAPTION>
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
Original Rating Avg Principal Legal
Class Face Rating Agencies Description Coupon Life(1) Window(1) Status
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $612,000,000 AAA/Aaa S&P/Moody's Fixed 6.7900% 5.038 11/97-06/04 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
A-2 $204,000,000 AAA/Aaa S&P/Moody's Fixed 6.8400% 6.902 06/04-09/06 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
A-3 $168,434,000 AAA/Aaa S&P/Moody's Fixed 6.9000% 9.128 09/06-03/07 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
B $114,138,000 AA/Aa2 S&P/Moody's Fixed 6.9500% 9.408 03/07-03/07 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
C-1 $49,870,000 A/A2 S&P/Moody's Fixed 7.0000% 9.728 03/07-09/07 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
C-2 $50,000,000 A/A2 S&P/Moody's Floating LIBOR + 0.43% 6.742 07/04-07/04 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
D $114,137,000 Baa2/BBB Moody's/DCR Fixed 7.1500% 12.484 09/07-04/12 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
E $42,802,000 Baa3/BBB- Moody's/DCR Fixed/WAC 7.3000% 14.492 04/12-04/12 Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
F $71,336,068 BB/Ba2 S&P/Moody's Fixed/WAC 7.3000% 14.492 04/12-04/12 144A
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
X-1 $1,376,717,068(2) Aaa/AAA Moody's/DCR IO 0.9599%(3) 7.748(3) N/A Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
X-2 $50,000,000(2) A/A2 S&P/Moody's IO 0.1016%(4) 6.742(3) N/A Public
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
Total $1,426,717,068 7.713
- --------- -------------------- -------------- ----------------- ------------- ------------ --------- -------------- ---------
</TABLE>
(1) ASSUMING 0% CPR, NO LOSSES.
(2) REPRESENTS NOTIONAL AMOUNT.
(3) REPRESENTS PER ANNUM RATE EQUAL TO THE WEIGHTED AVERAGE OF THE CERTIFICATE
INTEREST RATE ON THE COMPONENTS OF THE CLASS X-1 NOTIONAL AMOUNT.
(4) REPRESENTS PER ANNUM RATE EQUAL TO THE NET MORTGAGE RATE ON THE WORLDWIDE
PLAZA LIBOR COMPONENT MINUS THE CERTIFICATE INTEREST RATE ON THE CLASS C-2
CERTIFICATE.
(5) REPRESENTS AVERAGE LIFE OF RELATED PRINCIPAL NOTIONAL AMOUNTS.
RATING AGENCIES: Standard and Poor's, Moody's Investors Service,
Inc., and Duff and Phelps Credit Rating Co.
TRUSTEE: LaSalle National Bank
MASTER SERVICER: GMAC Commercial Mortgage Corporation
SPECIAL SERVICER: GMAC Commercial Mortgage Corporation
SETTLEMENT DATE: On or about October 15, 1997
B-3
<PAGE>
LARGE LOAN 1997-LL I Offering Highlights:
- NEWLY ORIGINATED COLLATERAL. The collateral consists of 8 newly
originated Mortgage Loans with a principal balance of approximately
$1.43 billion.
<TABLE>
<CAPTION>
MORTGAGE LOAN SUMMARY
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
ORIGINAL
AMORTIZ- CUT-
CUT-OFF DATE ANTICIPATED FINAL ATION OFF
# OF PRINCIPAL REPAYMENT MATURITY TERM MORTGAGE DATE ARD
MORTGAGE LOAN PROPERTIES BALANCE DATE (ARD) DATE (MONTHS) RATE DSCR WALTV WALTV
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DDR/DRA Loan 10 $322,500,000 N/A June 10, N/A 7.378% 1.97x 61.2% 61.2%*
2002
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Courtyard Loan 50 $321,577,850 April 10, April 10, 240 7.865% 2.08x 56.5% 23.7%
2012 2017
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
WORLDWIDE PLAZA LOAN 1 $273,576,031 JULY 10, JULY 10, 240 1.45X 65.8% 50.3%
- -------------------- ------------ --------- --------- --- ----- ----- -----
Fixed Component A $118,576, 031 2004 2017 7.920%
---- ----
LIBOR Component $50,000,000 L+55 bp
Fixed Component B $105,000,000 7.920%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Prentiss Loan 12 $180,100,000 Feb 26, 2007 Feb 26, 2027 N/A 7.579% 1.93x 60.9% 60.9%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Arden Loan 17 $175,000,000 June 10, June 10, N/A 7.520% 2.02x 51.4% 51.4%
2004 2029
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Villa Marina Loan 1 $58,000,000 Oct 10, 2006 Oct 10, 2031 N/A 7.225% 1.95x 57.4% 57.4%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Valley View Loan 1 $51,000,000 Oct 10, 2006 Oct 10, 2031 N/A 7.890% 1.90x 53.3% 53.3%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Sun Communities Loan 7 $44,963,187 Sep 10, 2007 Sep 10, 2027 360 7.010% 1.92x 60.3% 51.9%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
Total/Weighted Average 99 $1,426,717,068 7.575% 1.89x 59.3% 48.7%
- -------------------------- ----------- ---------------- ------------- ------------- ---------- -------- ------- -------- ========
</TABLE>
* INDICATES THE FINAL MATURITY DATE WALTV.
** INCLUDES WORLDWIDE PLAZA LIBOR COMPONENT.
- CALL PROTECTION.
100% OF THE FIXED RATE LOANS ARE LOCKED OUT INITIALLY (SUBJECT TO
CERTAIN LIMITED EXCEPTIONS WITH RESPECT TO THE WORLDWIDE PLAZA LOAN)
WITH THE ABILITY FOR DEFEASANCE OF THE MORTGAGE LOAN WITH US TREASURY
SECURITIES UNTIL 0 - 6 MONTHS PRIOR TO THE ANTICIPATED REPAYMENT DATE.
<TABLE>
<CAPTION>
======================================== ======================================== ========================================
Mortgage Loan Lock Out End Date Defeasance End Date
---------------------------------------- ---------------------------------------- ----------------------------------------
<S> <C> <C>
DDR/DRA October 10, 1999 December 10, 2001
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Courtyard October 10, 1999 October 10, 2011
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Worldwide Fixed Components October 10, 1999 July 10, 2004
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Worldwide Floating Component N/A N/A
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Prentiss October 10, 1999 November 26, 2006
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Arden October 10, 1999 March 10, 2004
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Villa Marina October 10, 1999 October 10, 2006
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Valley View October 10, 1999 October 10, 2006
---------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ---------------------------------------- ----------------------------------------
Sun Communities October 10, 1999 March 10, 2007
---------------------------------------- ---------------------------------------- ----------------------------------------
</TABLE>
- ALL LOANS ARE CURRENT AS TO SCHEDULED PAYMENTS AS OF THE CUT-OFF DATE.
- 1.89X WEIGHTED AVERAGE DEBT SERVICE COVERAGE AS OF THE CUT-OFF DATE.
- 59.3% WEIGHTED AVERAGE LOAN-TO-VALUE AS OF THE CUT-OFF DATE.
- DIVERSIFIED PROPERTY TYPES AND GEOGRAPHIC DIVERSIFICATION.
<TABLE>
<S> <C> <C>
Urban Marketplace Mgf. Housing 3.2% 15 Other CA
4.1% Regional Mall 3.6% States 23.8%
23.1%
Industrial Power Center
5.9% 22.6%
[PIE CHART] [PIE CHART]
Suburban
Office MA
19.0% 5.6%
IL
5.8% VA NY
CBD Office Hotel 6.2% GA TX
19.2% 22.5% 7.2% 8.4%
- CASH FLOWS WILL BE MODELED ON BLOOMBERG.
</TABLE>
B-4
<PAGE>
LARGE LOAN 1997-LL I STRUCTURAL SUMMARY:
ERISA: Classes A-1, A-2, A-3 and X-1 are expected to be eligible
for Lehman Brothers Inc.'s individual prohibited transaction
exemption with respect to ERISA.
SMMEA: Classes A-1, A-2, A-3 and B are "mortgage related
securities" for purposes of SMMEA.
PAYMENT: Pays on the second business day after the 10th of each
month, or if the 10th is not a business day, then the third
business day thereafter.
THE CLASS X-1: The Class X-1 comprises eight components, one relating to
each class of Group 1 Sequential Pay Certificates.
THE CLASS X-2: The Class X-2 is stripped off Class C-2.
THE CLASS C-2: The Class C-2 is backed solely by the Worldwide Plaza LIBOR
Component. The coupon for Class C-2 will be determined on
the 10th of each month or if the 10th is not a business day,
the immediately preceding business day. Principal payments
on the LIBOR Component will be allocated to Class C-2.
OPTIONAL CALL: 1% Clean-up Call.
COLLATERAL: The Certificates are backed by eight mortgage loans secured
by first liens on 99 commercial properties, such mortgage
loans having been originated by affiliates of Lehman
Brothers Inc.
ACCRUAL PERIOD: The Certificates, other than the LIBOR Certificates, accrue
interest from the 10th of the month to the 9th of the
following month. 2 days delay. The Certificates, other than
the LIBOR Certificates, accrue interest on the basis of
30/360. The LIBOR Certificates accrue interest from the
Distribution Date of one month to the date prior to the
Distribution Date of the following month (October 12, 1997
for the initial accrual period). The LIBOR Certificates
accrue interest on the basis of actual/360.
MORTGAGE LOAN
GROUPS: The underlying collateral consists of 2 Mortgage Loan
Groups. Mortgage Loan Group 1 consists of all the fixed rate
loans, including Worldwide Plaza Component A and Component
B. Mortgage Loan Group 2 consists solely of the floating
rate LIBOR Component of the Worldwide Plaza Loan.
CASH FLOW
STRUCTURE: Bond classes will pay sequentially.
DISTRIBUTIONS: Principal and interest payments will generally be made to
Certificateholders in the following order: Interest and
principal from Group 1 will be distributed in the following
order:
1) INTEREST TO THE SENIOR CLASSES: CLASS A-1, CLASS A-2,
CLASS A-3 AND CLASS X-1, PRO RATA,
2) PRINCIPAL TO CLASS A-1 UNTIL SUCH CLASS IS RETIRED,*
3) PRINCIPAL TO CLASS A-2 UNTIL SUCH CLASS IS RETIRED,*
4) PRINCIPAL TO CLASS A-3 UNTIL SUCH CLASS IS RETIRED,*
5) INTEREST TO CLASS B, THEN PRINCIPAL TO CLASS B UNTIL SUCH
CLASS IS RETIRED,
6) INTEREST TO CLASS C-1 THEN PRINCIPAL TO CLASS C-1 UNTIL
SUCH CLASS IS RETIRED,
7) INTEREST TO CLASS D, THEN PRINCIPAL TO CLASS D UNTIL SUCH
CLASS IS RETIRED,
8) INTEREST TO CLASS E, THEN PRINCIPAL TO CLASS E UNTIL SUCH
CLASS IS RETIRED,
9) INTEREST AND PRINCIPAL TO THE PRIVATE CLASS.
* PRO RATA IF CLASSES B THROUGH F WERE RETIRED AS A RESULT
OF LOSSES.
Interest and principal from Mortgage Loan Group 2
will be distributed in the following order:
1) INTEREST TO CLASS C-2 AND CLASS X-2 PRO RATA,
THEN PRINCIPAL TO CLASS C-2 UNTIL SUCH CLASS IS
RETIRED.
B-5
<PAGE>
LARGE LOAN 1997-LL I Structural Summary (continued):
Priority and Timing of Cash Flows *
[GRAPHIC OMITTED]
------------------
* Assuming 0% CPR, no losses.
CREDIT
ENHANCEMENT: Credit enhancement for each class of Certificates will be
provided by the classes of Certificates which are
subordinate in priority with respect to payments of interest
and principal.
REALIZED LOSSES: Realized Losses on Mortgage Loan Group 1 will be allocated
in reverse sequential order (i.e. F, E, D, C-1, B and then
pro-rata to Classes A-1, A-2, and A-3). Realized Losses on
Mortgage Loan Group 2 will be allocated solely to Class C-2.
APPRAISAL
REDUCTIONS: With respect to certain Mortgage Loans as to which an
appraisal is required (including any Mortgage Loan that
becomes 60 days delinquent), an Appraisal Reduction Amount
may be created, in the amount, if any, by which the Stated
Principal Balance of such Mortgage Loan, together with
unadvanced interest, unreimbursed advances of certain other
items, exceeds 90% of the appraised value of the related
Mortgaged Property. The Appraisal Reduction Amount will
reduce proportionately the amount of any P&I Advance for
such loan, which reduction may result in a shortfall of
interest to the most subordinate class of Sequential Pay
Certificates outstanding. The Appraisal Reduction Amount
will be reduced to zero as of the date the related Mortgage
Loan has been brought current for three months, paid in
full, repurchased or otherwise liquidated, and any
shortfalls borne by the subordinate classes may be made
whole.
ADVANCING: The Master Servicer will be obligated to make advances of
scheduled principal and interest payments (excluding balloon
payments) and certain servicing expenses ("Advances"), to
the extent that such Advances are deemed to be recoverable.
If the Master Servicer fails to make a required Advance, the
Trustee will be obligated to make such advances.
DIRECTING CLASS: The Directing Class will generally be the most
subordinate class with a Certificate Balance outstanding
that is at least 25% of the initial Certificate Balance of
such Class. Holders of at least 2/3 of the Directing Class
will, subject to certain limitations, direct the Special
Servicer on how to resolve delinquent or defaulted loans.
SPECIAL SERVICER See "The Pooling Agreement - Realization upon Mortgage
FLEXIBILITY: Loans; Modifications" in the Prospectus Supplement.
B-6
<PAGE>
LARGE LOAN 1997-LL I Structural Summary (continued):
MINIMUM DENOMINATIONS:
<TABLE>
<CAPTION>
MINIMUM INCREMENTS
CLASSES DENOMINATION THEREAFTER DELIVERY
- ---------------------------------------- ------------------------- ------------------------- --------------------------
- ---------------------------------------- ------------------------- ------------------------- --------------------------
<S> <C> <C> <C>
A-1, A-2, A-3, B, C, D, E and F $10,000 $1 DTC
- ---------------------------------------- ------------------------- ------------------------- --------------------------
- ---------------------------------------- ------------------------- ------------------------- --------------------------
X-1 $250,000 $1 DTC
</TABLE>
DETAILED MONTHLY INVESTOR REPORTING:
Updated collateral summary information will be a part of the monthly
remittance report in addition to detailed P&I payment and delinquency
information. Quarterly NOI and Occupancy data, to the extent delivered by
the borrowers, will be available to Certificateholders through the Trustee.
The following is a list of all the reports that will be available to
Certificateholders:
<TABLE>
<CAPTION>
NAME OF REPORT DESCRIPTION (INFORMATION PROVIDED)
<S> <C> <C>
1 REMITTANCE REPORT PRINCIPAL AND INTEREST DISTRIBUTIONS, PRINCIPAL BALANCES
-------- ------------------------------------------ ----------------------------------------------------------------
2 MORTGAGE LOAN STATUS REPORT PORTFOLIO STRATIFICATIONS
-------- ------------------------------------------ ----------------------------------------------------------------
3 COMPARATIVE FINANCIAL STATUS REPORT REVENUE, NOI, DSCR TO THE EXTENT AVAILABLE
-------- ------------------------------------------ ----------------------------------------------------------------
4 DELINQUENT LOAN STATUS REPORT LISTING OF DELINQUENT MORTGAGE LOANS
-------- ------------------------------------------ ----------------------------------------------------------------
5 HISTORICAL LOAN MODIFICATION REPORT INFORMATION ON MODIFIED MORTGAGE LOANS
-------- ------------------------------------------ ----------------------------------------------------------------
6 HISTORICAL LOSS ESTIMATE REPORT LIQUIDATION PROCEEDS, EXPENSES, AND REALIZED LOSSES
-------- ------------------------------------------ ----------------------------------------------------------------
7 REO STATUS REPORT NOI AND VALUE OF REO
-------- ------------------------------------------ ----------------------------------------------------------------
8 WATCH LIST LISTING OF LOANS IN JEOPARDY OF BECOMING SPECIALLY SERVICED
-------- ------------------------------------------ ----------------------------------------------------------------
</TABLE>
B-7
<PAGE>
LARGE LOAN 1997-LL I The Mortgage Loans:
MORTGAGE LOANS: The collateral consists of an approximately $1.43 billion
pool of 8 mortgage loans secured by first liens on 99
commercial and multifamily properties in 22 different
states. As of the Cut-off Date, the Mortgage Loans have a
WAC of 7.575%, a WAM of 103 months, a DSCR of 1.89x and an
LTV of 59.3%.
SEE THE PROSPECTUS SUPPLEMENT OR COLLATERAL SUMMARY TABLES
at the end of this memo for more Mortgage Loan details.
LOCKOUT AND
DEFEASANCE: All the fixed rate loans are locked out until October 10,
1999 (subject to certain exceptions with respect to the
Worldwide Plaza Loan) and allow for defeasance prior to the
Anticipated Repayment Date.
LOCKOUT AND DEFEASANCE DATES
[GRAPHIC OMITTED]
ANTICIPATED
REPAYMENT DATE On the Anticipated Repayment of every loan (other than the
& HYPER- DDR/DRA), if the borrower does not repay the full amount of
AMORTIZATION & the mortgage loan, the Mortgage Rate will step up to the
EXCESS INTEREST: greater of i) the then related Treasury Note + 2% or ii) the
Mortgage Rate plus 2%. The additional interest above the
Mortgage Rate will accrue at the revised rate until the loan
is paid off in full. Additionally, any excess cash flow net
of operating expenses will be applied to pay down principal
on the Mortgage Loan. The then related Treasury Note is the
Treasury Note closest to the maturity date of the loan.
Excess interest received with respect to each loan due to
hyperamortization will be distributed in the following
manner for each loan:
<TABLE>
<CAPTION>
============================== ================================== =========================== =================================
Mortgage Loan Anticipated Repayment Date Step Up Rate Class Receiving Excess Interest
------------------------------ ---------------------------------- --------------------------- ---------------------------------
<S> <C> <C> <C>
DDR/DRA N/A N/A N/A
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Courtyard April 10, 2012 9.865% or UST+2% D,E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Worldwide Plaza Fixed July 10, 2004 9.920% or UST+2% A-2, A-3, B, C-1, D, E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Worldwide Plaza Floating July 10, 2004 9.920% or UST+2% C-2
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Prentiss February 26, 2007 9.579% or UST+2% A-3, B, C-1, D, E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Arden June 10, 2004 9.520% or UST+2% A-2, A-3, B, C-1, D, E, and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Villa Marina October 10, 2006 9.225% or UST+2% A-3, B, C-1, D, E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Valley View October 10, 2006 9.890% or UST+2% A-3, B, C-1, D, E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
------------------------------ ---------------------------------- --------------------------- ---------------------------------
Sun Communities September 10, 2007 9.010% or UST+2% C-1, D, E and F
------------------------------ ---------------------------------- --------------------------- ---------------------------------
</TABLE>
For each loan, excess interest received will be distributed to the holders
of the respective classes pro-rata based on their initial Certificate
Principal Amounts.
B-8
<PAGE>
LARGE LOAN 1997-LL1 The Mortgage Loans (continued):
WORLDWIDE PLAZA LOAN: The Worldwide Plaza Loan is comprised of three
components:
<TABLE>
<CAPTION>
----------------------------- ------------------ ------------------
ANTICIPATED
COMPONENT COUPON REPAYMENT DATE
----------------------------- ------------------ ------------------
<S> <C> <C>
Fixed Component A 7.920% July 10, 2004
----------------------------- ------------------ ------------------
----------------------------- ------------------ ------------------
LIBOR Component LIBOR+0.55% July 10, 2004
----------------------------- ------------------ ------------------
----------------------------- ------------------ ------------------
Fixed Component B 7.920% July 10, 2004
----------------------------- ------------------ ------------------
</TABLE>
A portion of the Worldwide Plaza Loan can be prepaid with
yield maintenance until the end of the lockout period,
October 1, 1999 under the following conditions:
1) Release of Amenities Parcel. The Worldwide Plaza borrower
may obtain the release of the Worldwide Plaza Amenities
Parcel, upon the payment of a release price of $30,000,000.
2) Special Lease Payments. The Worldwide Plaza
Loan documents provide that certain special lease payments
made to the Worldwide Plaza Borrower will be paid by the
Worldwide Plaza Borrower and will be treated as prepayments
on the Worldwide Plaza Loan. These payments include payments
approved by the Master Servicer in connection with any
modification, surrender or termination of any lease for
space which exceeds 20,000 square feet (net of costs or
expenditures by the Worldwide Plaza Borrower to re-tenant
the related space.)
Prior to the Anticipated Repayment Date, such payments will
be applied to the LIBOR Component, until paid in full. Once
the LIBOR Component is paid in full, the payment will be
applied to Fixed Component A, then to Fixed Component B.
After the Anticipated Repayment Date, such payment will be
applied first to Fixed Component A, then to the LIBOR
Component, then to the Fixed Component B.
In the event of such a payment, the yield maintenance
payment will be allocated to Class A-1 and Class X-1 in the
following manner:
<TABLE>
<CAPTION>
---------------------------------------------------- ----------------------------------------------
CLASS A-1 CLASS X-1
---------------------------------------------------- ----------------------------------------------
<S> <C>
(Class A-1 Coupon - Treasury Rate) / All excess yield maintenance penalties.
(Worldwide Fixed Rate - Treasury Rate)
---------------------------------------------------- ----------------------------------------------
</TABLE>
After the lockout end date such payments will be treated as
a defeasance of the amount so paid and the Worldwide Plaza
Borrower will be required to make a Worldwide Defeasance
Deposit.
Losses on the Worldwide Plaza Loan are first allocated to
Component B, then the LIBOR Component, then Component A.
B-9
<PAGE>
LARGE LOAN 1997-LL I Collateral Summary:
<TABLE>
<CAPTION>
------------------------------------------------------------- ------------------------------------------------------------
SPONSOR BREAKDOWN LOAN BREAKDOWN
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Sun Villa Marina Valley View Sun
Macerich 3.2% DDR/DRA 4.1% 3.6% Communities
7.6% 22.6% 3.2%
DDR/DRA
Arden Arden 22.6%
12.3% 12.3%
[PIE CHART] [PIE CHART]
Prentiss Prentiss
12.6% 12.6%
Courtyard Courtyard
Blackstone 22.5% Worldwide 22.5%
19.2% 19.2%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------- ------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION STATE DISTRIBUTION
- ------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Urban Marketplace Mfg. Housing 3.2% 15 Other CA
4.1% Regional Mall 3.6% Power Center States 23.8%
22.6% 23.1%
Industrial
5.9%
[PIE CHART] [PIE CHART]
Suburban
Office MA
19.0% 5.6%
IL
Hotel 5.8% VA NY
CBD Office 22.5% 6.2% GA TX 19.8%
19.2% 7.2% 8.4%
- --------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------- ------------------------------------------------------------
DSCR DISTRIBUTION WALTV DISTRIBUTION
- --------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
- --------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
B-10
<PAGE>
LARGE LOAN 1997-LLI COLLATERAL SUMMARY (CONTINUED):
- -------------------------------------------------
[GRAPHIC OMITTED]
% of Pool Balance by Cut-Off Date Balance
B-11
<PAGE>
DDR/DRA LOAN
Loan Information
Original Loan Balance: $322,500,000
Cut-Off Date Principal Balance: $322,500,000
Mortgage Rate: 7.378%
Final Maturity Date: June 10, 2002
Amortization: None
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date:December 10, 2002
DSCR:(1) 1.97x
Cut-off Date WALTV: 61.2%
Up-Front Reserves: Tenants not yet in
occupancy: $425,495
Ongoing Reserves: Tax and Insurance Reserve: Must
maintain minimum balance of
$2,747,205.
Collateral: 10 power centers in 9 states
containing approximately 4,217,942
square feet. The 5 largest tenants
(based on annual base rental
payments) are Wal-Mart, Barnes &
Noble, General Cinema, Office
Max and Builders Square.
- ------------------
(1) Based upon Underwritten Net Cash Flow.
B-12
<PAGE>
COURTYARD LOAN
Loan Information
Original Principal Balance: $325,000,000
Cut-Off Date Principal Balance: $321,577,850
Mortgage Rate: 7.865%
Anticipated Repayment Date: April 10, 2012
Final Maturity Date: April 10, 2017
Amortization: 20 years
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.865% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: October 10, 2011
DSCR:(1) 2.08x
Cut-Off Date WALTV: 56.5%
Ongoing Reserves: FF&E Reserve: 5% of gross revenues.
Balance of $10,493,235 as of July
18, 1997.
Collateral: 50 limited service hotels in 16
states containing 7,223 rooms. 31
of the hotels are situated on land
that is owned by affiliates of
Marriott Internatonal, Inc. The
Ground Leases are fully subordinated
to the Mortgages.
- ----------------
(1) Based upon Underwritten Net Cash Flow.
B-13
<PAGE>
WORLDWIDE PLAZA LOAN
Loan Information
Original Principal Balance: $275,000,000
Cut-Off Date Principal Balance:
Fixed A $118,576,031
Floating 50,000,000
Fixed B 105,000,000
------------
Total $273,576,031
Mortgage Rate:
Fixed A 7.920%
Floating LIBOR + 0.55%
Fixed B 7.920%
Interest Rate Cap: LIBOR strike at 9.00%
Anticipated Repayment Date: July 10, 2004
Final Maturity Date: July 10, 2017
Amortization: 20 years applied first to the Fixed
A Component, second to the Floating
component and third to the Fixed B
Component
Hyperamortization: After the Anticipated Repayment Date,
the interest rate for all three
Components is fixed and increases to
the greater of 9.920% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: The Floating Component is freely
prepayable with all unscheduled
principal payments applied to it
first. The Fixed Components are
generally locket out from prepayment.
<TABLE>
<CAPTION>
LOCK OUT END DATE DEFEASANCE END DATE
----------------- --------------------
<S> <C> <C>
Fixed A October 10, 1999 July 10, 2004
Floating N/A N/A
Fixed B October 10, 1999 July 10, 2004
</TABLE>
DSCR:(1) 1.45x
Cut-Off Date LTV: 65.8%
Up- Front Reserves:(2) Tenant Rollover Reserve: $3,838,674
Ongoing Reserves: Letter of credit for
reduction of Floating Component:
Initial balance of $2,000,000 to be
increased by $2,000,000 annually on
each August 1 starting in 1998 and
ending in 2003 (final balance of
$14,000,000 as of Anticipated
Repayment Date).
Tax and Insurance Reserve: 1/12th
of the aggregate insurance premiums
and taxes payable in the succeeding
twelve months funded monthly.
Collateral: Worldwide Plaza, a 47-story Manhattan
office tower completed in 1989
containing approximately 1,816,525
square feet consisting of 1,568,434
square feet office and 248,091 square
feet retail.
- --------------------
(1) Based upon Underwritten Net Cash Flow.
(2) Balance at September 16, 1997.
B-14
<PAGE>
PRENTISS LOAN
Loan Information
Original Principal Balance: $180,100,000
Cut-Off Date Principal Balance: $180,100,000
Mortgage Rate: 7.579%
Anticipated Repayment Date: February 26, 2007
Final Maturity Date: February 26, 2027
Amortization: None
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.579% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: November 26,2006
DSCR:(1) 1.93x
Cut-Off Date WALTV: 60.9%
Ongoing Reserves: Ground Lease Escrow Fund: One month
ground rent funded monthly unless
balance is greater than or equal to
three months estimated ground rents.
Tax and Insurance Reserve: 1/12 of
the aggregate insurance premiums and
taxes payable in the succeeding
twelve months funded monthly.
Collateral: 8 office and 4 industrial / warehouse
properties in 7 states, consisting of
45 individual buildings and
containing approximately 5,801,634
square feet (approximately 1,451,486
square feet of office and 4,350,148
square feet of industrial /
warehouse).
- -------------------
(1) Based upon Underwritten Net Cash Flow.
B-15
<PAGE>
ARDEN LOAN
Loan Information
Original Principal Balance: $175,000,000
Cut-Off Date Principal Balance: $175,000,000
Mortgage Rate: 7.520%
Anticipated Repayment Date: June 11, 2004
Final Maturity Date: June 10, 2029
Amortization: None
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.520% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: March 10, 2004
DSCR:(1) 2.02x
Cut-Off Date WALTV: 51.4%
Up- Front Reserves:(2) Tenant Rollover Reserve: $4,000,000
Ongoing Reserves: Tax and Insurance Reserve: 1/12 of
the aggregate insurance premiums and
taxes payable in the succeeding
twelve months funded monthly.
Collateral: 17 suburban office properties
located in the Los Angeles and Orange
County region of California,
containing approximately 2,695,356
square feet.
- ----------------
(1) Based upon Underwritten Net Cash Flow.
(2) Balance at origination of loan on June 11, 1997.
B-16
<PAGE>
VILLA MARINA LOAN
Loan Information
Original Principal Balance: $58,000,000
Cut-Off Date Principal Balance: $58,000,000
Mortgage Rate: 7.225%
Anticipated Repayment Date: October 10, 2006
Final Maturity Date: October 10, 2031
Amortization: None
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.225% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: October 10, 2006
DSCR:(1) 1.95x
Cut-Off Date WALTV: 57.4%
Ongoing Reserves: Payment Reserve: One month debt
service payment.
Collateral: An urban marketplace located in
Marina Del Rey, California consisting
of approximately 448,579 square
feet and 2,179 parking spaces.
- -----------------
(1) Based upon Underwritten Net Cash Flow.
B-17
<PAGE>
VALLEY VIEW LOAN
Loan Information
Original Principal Balance: $51,000,000
Cut-Off Date Principal Balance: $51,000,000
Mortgage Rate: 7.890%
Anticipated Repayment Date: October 10, 2006
Final Maturity Date: October 10, 2031
Amortization: None
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.890% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: October 10, 2006
DSCR:(1) 1.90x
Cut-Off Date LTV: 53.3%
Ongoing Reserves: Payment Reserve: One month debt
service payment.
Collateral: A two-level regional shopping center
located in Dallas, Texas containing
over 1.7 million square feet of
retail and related space of which
approximately 838,000 square feet is
occupied by owner occupied anchors,
approximately 220,000 square feet is
occupied by J.C. Penney and
approximately 466,000 square feet is
non-anchor mall tenant GLA.
- -----------------
(1) Based upon Underwritten Net Cash Flow.
B-18
<PAGE>
SUN COMMUNITIES LOAN
Loan Information
Original Principal Balance: $45,000,000
Cut-Off Date Principal Balance: $44,963,187
Mortgage Rate: 7.010%
Anticipated Repayment Date: September 10, 2007
Final Maturity Date: September 10, 2027
Amortization: 30 years
Hyperamortization: After the anticipated repayment date,
the interest rate increases to the
greater of 9.010% and the U.S.
Treasury most closely approximating
the remaining term to maturity of the
loan plus 2%. All excess cash flow is
used to reduce the outstanding
principal balance; the additional
interest is added to the principal
balance.
Call Protection: Lock Out End Date: October 10, 1999
Defeasance End Date: March 10, 2007
DSCR:(1) 1.92x
Cut-Off Date LTV: 60.3%
Ongoing Reserves: Tax and Insurance Reserve: 1/12 of
the aggregate insurance premiums and
taxes payable in the succeeding
twelve months funded monthly.
Collateral: Seven manufactured housing
communities containing 3,375 sites
leased to home owners.
- -----------------
(1) Based upon Underwritten Net Cash Flow.
B-19
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(This page has been left blank intentionally.)
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
MORTGAGE-BACKED SECURITIES, ISSUABLE IN SERIES
This Prospectus relates to Collateralized Mortgage Obligations (the "Bonds") and
Mortgage-Backed Certificates (the "Certificates," together with the Bonds, the
"Securities") which may be issued from time to time in one or more series
("Series") under this Prospectus and the related Prospectus Supplement
("Prospectus Supplement"). As specified in the related Prospectus Supplement,
the Securities of each Series will be either Bonds issued pursuant to an
Indenture and representing indebtedness of Structured Asset Securities
Corporation (the "Company") or an owner trust (the "Owner Trust") established by
it, or Certificates which will evidence a beneficial ownership interest in
assets deposited into a trust (a "Trust Fund") by the Company as depositor
pursuant to a Trust Agreement, as described herein. The issuer (the "Issuer")
with respect to a Series of Bonds will be the Company or the Owner Trust
established to issue such Bonds, and, with respect to a Series of Certificates,
will be the Trust Fund established in respect of such Certificates. Capitalized
terms not otherwise defined herein or the related Prospectus Supplement have the
meanings specified in the Glossary attached hereto.
The Securities will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and as described in the
related Prospectus Supplement. Each Series will consist of one or more Classes,
one or more of which may be Compound Interest Securities, Variable Interest
Securities, Individual Investor Securities, Planned Amortization Class ("PAC")
Securities, Zero Coupon Securities, Principal Only Securities, Interest Only
Securities, Participating Securities or another particular Class of Securities,
if any, included in such Series of Securities. Zero Coupon Securities and
Principal Only Securities will not accrue and will not be entitled to receive
any interest. Payments or distributions of interest on each Class of Securities,
other than Zero Coupon Securities, Principal Only Securities and Compound
Interest Securities will be made on each Payment Date or Distribution Date as
specified in the related Prospectus Supplement. Interest will not be paid or
distributed on Compound Interest Securities on a current basis until all
Securities of the related Series having a Stated Maturity or Final Scheduled
Distribution Date prior to the Stated Maturity or Final Scheduled Distribution
Date of such Class of Compound Interest Securities have been paid in full or
until such other date or period as may be specified in the related Prospectus
Supplement. Prior to such time, interest on such Class of Compound Interest
Securities will accrue and the amount of interest so accrued will be added to
the principal thereof on each Payment Date or Distribution Date. The amount of
principal and interest available and payable on each Series on each Payment Date
or Distribution Date will be applied to the Classes of such Series in the order
and as otherwise specified in the related Prospectus Supplement. Principal
payments or distributions on each Class of a Series will be made on either a pro
rata or a random lot basis among Securities of such Class, as specified in the
related Prospectus Supplement Any Series may include one or more Classes of
"Subordinate Securities," which are subordinated in right and priority to the
extent described in the related Prospectus Supplement to payment of principal
and interest, and may be allocated losses and shortfalls prior to the allocation
thereof to all other Classes of Securities of such Series (the "Senior
Securities"). Securities of a Series will be subject to redemption or repurchase
only under the circumstances and according to the priorities described herein
and in the related Prospectus Supplement.
Each Series will be secured by or offer a beneficial interest in one or more
types of mortgage assets ("Mortgage Assets") and other assets, including any
reserve funds established with respect to such Series, insurance policies or
other enhancement described in the related Prospectus Supplement. The Mortgage
Assets may consist of a pool of multifamily or commercial mortgage loans or
participation interests therein (collectively, "Mortgage Loans") and may include
FHA Loans. Mortgage Assets may also consist of mortgage participations or
pass-through certificates or collateralized mortgage obligations ("Private
Mortgage-Backed Securities") issued with respect to or secured by a pool of
Mortgage Loans. The Private Mortgage-Backed Securities and Mortgage Loans
securing a Series will not be guaranteed or insured by any agency or
instrumentality of the United States Government unless otherwise stated in the
related Prospectus Supplement. Some Mortgage Loans comprising or underlying the
Mortgage Assets may be delinquent or non-performing as specified in the related
Prospectus Supplement. The Mortgage Assets securing a Series or comprising the
Trust Fund may consist of a single Mortgage Loan or obligations of a single
obligor or related obligors as specified in the related Prospectus Supplement.
The Mortgage Loans underlying or comprising the Mortgage Assets may be
originated by or acquired from an affiliate of the Issuer and an affiliate of
the Issuer may be an obligor with respect to any such Mortgage Loans. See
"SECURITY FOR THE BONDS OR CERTIFICATES."
Bonds of a Series constitute non-recourse obligations of the Issuer, and
Certificates of a Series evidence an interest in the related Trust Fund only.
Neither the Bonds or Certificates of a Series are insured or guaranteed by any
governmental agency or instrumentality, by any person or entity affiliated with
the Company or Issuer, or, unless otherwise specified in the related Prospectus
Supplement, by any other person or entity. The Issuer has no significant assets
other than the Mortgage Assets and certain other assets pledged to secure the
Bonds or in which the Certificates represent a beneficial interest. See "RISK
FACTORS."
An election may be made, with respect to any Series of Securities, to treat
all or a specified portion of the assets securing such Series or comprising the
Trust Fund as a "real estate mortgage investment conduit" (a "REMIC"), or an
election may be made to treat the arrangement by which a Series of Securities is
issued as a REMIC. If such an election is made, each Class of Securities of a
Series will be either Regular Interest or Residual Interest, as specified in the
related Prospectus Supplement. See "FEDERAL INCOME TAX CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities offered by this Prospectus and by the related Prospectus
Supplement are offered by Lehman Brothers and the other underwriters, if any,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by Lehman Brothers and the other
underwriters, if any, and certain further conditions. Retain this Prospectus for
future reference. This Prospectus may not be used to consummate sales of the
securities offered hereby unless accompanied by a Prospectus Supplement.
LEHMAN BROTHERS
SEPTEMBER 23, 1997
<PAGE>
TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT..................................................................................... 5
ADDITIONAL INFORMATION.................................................................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... 6
SUMMARY OF TERMS.......................................................................................... 7
RISK FACTORS.............................................................................................. 25
DESCRIPTION OF THE SECURITIES............................................................................. 31
General............................................................................................... 31
The Bonds--General.................................................................................... 31
The Certificates--General............................................................................. 32
Book-Entry Registration............................................................................... 34
Valuation of Mortgage Assets.......................................................................... 35
Payments or Distributions of Interest................................................................. 36
Payments or Distributions of Principal................................................................ 37
Special Redemption.................................................................................... 38
Optional Redemption................................................................................... 39
Mandatory Redemption.................................................................................. 39
Optional Termination.................................................................................. 39
Optional Repurchase of Certificates................................................................... 40
Other Repurchases..................................................................................... 40
YIELD AND PREPAYMENT CONSIDERATIONS....................................................................... 40
Timing of Payment or Distribution of Interest and Principal........................................... 40
Principal Prepayments................................................................................. 40
Prepayments and Weighted Average Life................................................................. 41
Other Factors Affecting Weighted Average Life......................................................... 42
SECURITY FOR THE BONDS AND CERTIFICATES................................................................... 43
General............................................................................................... 43
Mortgage Loans........................................................................................ 44
Private Mortgage-Backed Securities.................................................................... 48
Substitution of Mortgage Assets....................................................................... 50
Collection Account.................................................................................... 50
Other Funds or Accounts............................................................................... 51
Investment of Funds................................................................................... 51
Guaranteed Investment Contract........................................................................ 51
Enhancement........................................................................................... 51
SERVICING OF MORTGAGE LOANS............................................................................... 52
General............................................................................................... 52
Collection Procedures................................................................................. 52
Payments on Mortgage Loans; Deposits to Custodial Accounts............................................ 53
Advances.............................................................................................. 54
Maintenance of Insurance Policies and Other Servicing Procedures...................................... 54
Enforcement of Due-On-Sale Clauses.................................................................... 55
Modification; Waivers................................................................................. 55
Servicing Compensation and Payment of Expenses........................................................ 55
Evidence as to Compliance............................................................................. 56
Certain Matters Regarding the Master Servicer and Special Servicer.................................... 56
ENHANCEMENT............................................................................................... 56
General............................................................................................... 56
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2
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PAGE
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Subordinate Securities................................................................................ 57
Cross-Support Features................................................................................ 58
Insurance on the Mortgage Loans....................................................................... 58
Letter of Credit...................................................................................... 58
Bond Guarantee Insurance.............................................................................. 58
Reserve Funds......................................................................................... 59
DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS............................................................ 59
Mortgage Insurance on the Mortgage Loans.............................................................. 59
Hazard Insurance on the Mortgage Loans................................................................ 60
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS................................................................... 60
Mortgages............................................................................................. 61
Interest in Real Property............................................................................. 61
Junior Mortgages; Rights of Senior Mortgages or Beneficiaries......................................... 61
Foreclosure of Mortgage............................................................................... 63
Leasehold Risks....................................................................................... 65
Rights of Redemption.................................................................................. 65
Environmental Matters................................................................................. 66
Certain Laws and Regulations.......................................................................... 68
Leases and Rents...................................................................................... 68
Personality........................................................................................... 68
Anti-Deficiency Legislation and Other Limitations on Lenders.......................................... 69
Federal Bankruptcy and other Loans affecting Creditors' Rights........................................ 69
Due on Sale Clauses in Mortgage Loans................................................................. 71
Enforceability of Prepayment and Late Payment Fees.................................................... 71
Equitable Limitations on Remedies..................................................................... 72
Applicability of Usury Laws........................................................................... 72
Alternative Mortgage Instruments...................................................................... 72
Secondary Financing; Due-on-Encumbrance Provisions.................................................... 73
Americans with Disabilities Act....................................................................... 73
Soldiers' and Sailors' Civil Relief Act of 1940....................................................... 74
Forfeitures in Drug and RICO Proceedings.............................................................. 74
THE INDENTURE............................................................................................. 74
Certain Covenants..................................................................................... 74
Modification of Indenture............................................................................. 75
Events of Default..................................................................................... 76
Authentication and Delivery of Bonds.................................................................. 78
Satisfaction and Discharge of the Indenture........................................................... 78
Issuer's Annual Compliance Statement.................................................................. 78
List of Bondholders................................................................................... 78
Meetings of Bondholders............................................................................... 78
Fiscal Year........................................................................................... 79
Trustee's Annual Report............................................................................... 79
The Trustee........................................................................................... 79
THE TRUST AGREEMENT....................................................................................... 79
Assignment of Mortgage Assets......................................................................... 79
Repurchase of Non-Conforming Loans.................................................................... 80
Reports to Certificateholders......................................................................... 81
Event of Default...................................................................................... 82
Rights Upon Event of Default.......................................................................... 82
The Trustee........................................................................................... 83
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3
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PAGE
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Resignation of Trustee................................................................................ 84
Amendment of Trust Agreement.......................................................................... 84
Voting Rights......................................................................................... 85
List of Certificateholders............................................................................ 85
REMIC Administrator................................................................................... 85
Termination........................................................................................... 85
THE ISSUER................................................................................................ 86
The Company........................................................................................... 86
Owner Trust........................................................................................... 86
Administrator......................................................................................... 86
USE OF PROCEEDS........................................................................................... 87
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES.............................................................. 87
FEDERAL INCOME TAX CONSIDERATIONS......................................................................... 88
General............................................................................................... 88
Characterization of Securities........................................................................ 88
Taxation of Regular Interest Securities............................................................... 89
Sale or Exchange of Regular Interest Securities....................................................... 94
REMIC Expenses........................................................................................ 95
Taxation of the REMIC................................................................................. 95
Taxation of Holders of Residual Interest Securities................................................... 96
Excess Inclusion Income............................................................................... 98
Restrictions on Ownership and Transfer of Residual Interest Securities................................ 98
Administrative Matters................................................................................ 99
Tax Status as a Grantor Trust......................................................................... 99
Miscellaneous Tax Aspects............................................................................. 103
Tax Treatment of Foreign Investors.................................................................... 103
STATE AND LOCAL TAX CONSIDERATIONS........................................................................ 104
ERISA CONSIDERATIONS...................................................................................... 104
LEGAL INVESTMENT.......................................................................................... 107
PLAN OF DISTRIBUTION...................................................................................... 109
LEGAL MATTERS............................................................................................. 110
GLOSSARY.................................................................................................. 111
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a)
whether such Securities are Bonds or Certificates, (b) the initial aggregate
principal amount, the Bond Interest Rate or Certificate Interest Rate (or method
for determining it) and authorized denominations of each Class of such Series;
(c) certain information concerning the Primary Assets securing such Series or
assets comprising the Trust Fund, including the principal amount, type and
characteristics of the Primary Assets securing such Bonds or assets comprising
the Trust Fund on the date of issue, and, if applicable, the amount of any
Reserve Funds for such Series; (d) in the case of Mortgage Assets consisting in
whole or in part of Private Mortgage-Backed Securities, information concerning
the issuer thereof or sponsor thereof, the PMBS Trustee, the Master Servicer, if
any, and the Underlying Collateral; (d) the circumstances, if any, under which
the Securities of such Series are subject to redemption prior to maturity or
repurchase prior to the Final Scheduled Distribution Date; (e) the Stated
Maturity of each Class of Bonds or Final Scheduled Distribution Date of the
Certificates; (f) the method used to calculate the aggregate amount of principal
available and required to be applied to the Securities of such Series on each
Payment Date or Distribution Date, as applicable, the timing of the application
of principal and the order of priority of the application of such principal to
the respective classes and the allocation of the principal to be so applied; (g)
the extent of subordination of any Subordinate Securities; (h) the identity of
each Class of Compound Interest Securities, Variable Interest Securities,
Planned Amortization Class Securities, Subordinate Securities, Individual
Investor Securities, Zero Coupon Securities, Principal Only Securities, Interest
Only Securities and Participating Securities included in such Series, if any, or
such other type of Clss of Securities; (i) the principal amount of each Class of
such Series that would be outstanding on specified Payment Dates or Distribution
Dates, if the Mortgage Loans underlying or comprising the Mortgage Assets
pledged as security for such Series or comprising the Trust Fund were prepaid at
various assumed rates; (j) the Payment Dates or Distribution Dates, as
applicable for the respective Classes; (k) the Assumed Reinvestment Rate, if
any, and (if applicable) the percentage of Excess Cash Flow to be applied to
payments of principal of the Series; (l) relevant financial information with
respect to the Mortgagor(s) and the Mortgaged Property underlying the Mortgage
Assets, if applicable; (m) information with respect to any required Insurance
Policies relating to any Mortgage Loans comprising Mortgage Assets or Underlying
Collateral; (n) additional information with respect to any Enhancement,
Guaranteed Investment Contract or other agreement relating to the Series; (o)
the plan of distribution of such Series; and (p) whether the Securities are to
be issuable in registered form or bearer form or both, and if bearer securities
are issued, whether bearer securities may be exchanged for registered securities
and the circumstances and places for such exchange, if permitted.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part of
the Registration Statement, omits certain information contained in such
Registration Statement pursuant to the Rules and Regulations of the Commission.
The Registration Statement and the exhibits thereto can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at certain of its Regional Offices
located as follows: Chicago Regional Office, Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, 75 Park Place, 14th Floor, New York, New York 10007. Copies of
such material can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Issuer and Company do not intend to send any financial reports to holders of
Securities.
5
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the documents incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to the office of the Secretary, Structured Asset Securities
Corporation, 200 Vesey Street, New York, New York 10285, telephone number (212)
526-5594.
6
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the Prospectus
Supplement with respect to the Series offered thereby and to the Trust Indenture
(the "Trust Indenture") or Trust Agreement (the "Trust Agreement"), as
applicable and the supplemental or terms indenture or agreement with respect to
such Series (the "Series Supplement") between the Company and Bankers Trust
Company of California, N.A., a national banking association, or Marine Midland
Bank, N.A., a national banking association (or another bank or trust company
qualified under the TIA and named in the Prospectus Supplement for the related
Series), as trustee (the "Trustee") or a Trust and the Trustee (collectively,
the Trust Indenture and any Series Supplement relating to Bonds are sometimes
referred to as the "Indenture," and the Trust Agreement and any Series
Supplement relating to Certificates are sometimes referred to as the "Trust
Agreement").
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SECURITIES OFFERED
A. THE BONDS............... Collateralized Mortgage Obligations (the "Bonds"). The Bonds
may be issued from time to time in separately secured Series
pursuant to the Indenture and a related Series Supplement.
Each Series will consist of one or more Classes, one or
more of which may be Classes of Compound Interest
Securities, Planned Amortization Class ("PAC") Securities,
Variable Interest Securities, Zero Coupon Securities,
Principal Only Securities, Interest Only Securities,
Participating Securities, Senior Securities or Subordinate
Securities. Each Class may differ in, among other things,
the amounts allocated to and the priority of principal and
interest payments, maturity date, Payment Dates and Bond
Interest Rate. Additionally, one or more Classes may
consist of Subordinate Securities which are subordinated
to other Classes of Bonds with respect to the right to
receive payments of principal, interest, or both, and may
be allocated losses and shortfalls prior to the allocation
thereof to other Classes of Bonds under the circumstances
and in such amounts as described herein and in the related
Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, the Bonds of each Class
will be issued in fully registered form in the minimum
denominations specified in the related Prospectus Sup-
plement. If so specified in the related Prospectus
Supplement, the Bonds or certain Classes of such Bonds
offered thereby may be available in book-entry form only.
The Bonds may be issued in registered form or bearer form
with coupons attached. Bonds in bearer form will be
offered only outside the United States to non- United
States persons and to offices located outside the United
States of certain United States financial institutions.
See "DESCRIPTION OF THE SECURITIES--The Bonds--General"
and "ENHANCEMENT--Subordinated Securities."
B. THE CERTIFICATES........ Mortgage-Backed Certificates (the "Certificates"). The
Certificates are issuable from time to time in separate
Series pursuant to separate Trust Agreements and a related
Series Supplement. Each Certificate of a Series will
evidence a beneficial ownership interest in the Trust Fund
for such Series. Each Series of Certificates will consist
of one or more Classes of Certificates, one or more of
which may be Classes of Compound Interest Securities, PAC
Securities, Variable Interest Securities, Zero Coupon
Securities, Principal Only
</TABLE>
7
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<TABLE>
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Securities, Interest Only Securities, Participating
Securities, Subordinate Securities or Senior Securities.
If a Series consists of multiple Classes, the respective
Classes may differ with respect to the amount, percentage
and timing of distributions or principal, interest or
both. Additionally, one or more Classes may consist of
Subordinate Securities which are subordinated to other
Classes of Certificates with respect to the right to
receive distributions of principal, interest, or both
under the circumstances and in such amounts as described
herein and in the related Prospectus Supplement. The
Certificates will be issuable in fully registered form in
the authorized minimum denominations and multiples thereof
specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the
Certificates or certain Classes of such Certificates
offered thereby may be available in book-entry form only.
ISSUER....................... The Issuer with respect to a Series of Bonds will be
Structured Asset Securities Corporation (the "Company") or
an owner trust established by it ("Owner Trust") for the
purpose of issuing one or more Series of Bonds. Each such
Owner Trust will be created by an agreement (the "Deposit
Trust Agreement") between the Company, acting as
depositor, and a bank, trust company or other fiduciary,
acting as owner trustee (the "Owner Trustee"). The Bonds
will be non-recourse obligations of the Issuer. The Series
Supplement for a particular Series of Bonds may permit the
assets pledged to secure the related Bonds to be
transferred by the Issuer to a trust or other limited
purpose affiliate of the Company, subject to the
obligations of the Bonds of such Series, thereby relieving
the Issuer of its obligations with respect to such Bonds.
The Issuer with respect to a Series of Certificates will be
a trust fund (the "Trust Fund") established by the Company
for the purpose of issuing one or more Series of
Certificates. Such Trust Fund will be created by an
agreement (the "Trust Agreement") between the Company,
acting as depositor, and a bank, trust company or other
fiduciary, acting as trustee (the "Trustee").
The Issuer will not have, nor be expected in the future to
have, any significant assets available for payments on a
Series of Bonds or distributions on a Series of
Certificates, other than the assets pledged as security
for a specific Series of Bonds issued by it, or assets
deposited into a Trust Fund, the Certificates issued by
such Trust Fund as Issuer representing a beneficial
ownership interest in such assets. Unless otherwise
specified in the related Prospectus Supplement, (i) each
Series of Bonds will be separately secured and no Series
of Bonds will have any claim against or security interest
in the assets pledged to secure any other Series, and (ii)
no Series of Certificates will have a beneficial ownership
interest in any other Series.
The Company, a Delaware corporation, is a limited-purpose
finance subsidiary organized for the purpose of issuing
one or more Series and other similar obligations directly
or through one or more
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Trust Funds established by it. Although all of the
outstanding capital stock of the Company is owned by
Lehman Commercial Paper Inc. ("LCPI"), a wholly owned
subsidiary of Lehman Brothers Inc. ("Lehman Brothers"),
neither LCPI nor Lehman Brothers nor any of their
affiliates has guaranteed or is otherwise obligated with
respect to any Series, except with respect to any
representations and warranties given by any such affiliate
as originator, seller or servicer of Mortgage Assets
relating to a Series.
The Company's principal office is located at 200 Vesey
Street, New York, New York 10285 and its telephone number
is (212) 526-5594. See "RISK FACTORS" and "THE ISSUER."
INTEREST PAYMENTS ON
THE BONDS.................. Each Class of a Series of Bonds (other than a Class of Zero
Coupon Securities or Principal Only Securities) will accrue
interest at the rate set forth in (or, in the case of
Variable Interest Securities, as determined by the method
described in) the related Prospectus Supplement (the "Bond
Interest Rate"). Interest on all Bonds which bear
interest, other than Compound Interest Securities, will be
due and payable on the Payment Dates specified in the
related Prospectus Supplement. However, failure to pay
interest on a current basis may not necessarily be an
Event of Default with respect to a particular Series of
Bonds. Payments of interest on a Class of Variable
Interest Securities will be made on the dates set forth in
the related Prospectus Supplement (the "Variable Interest
Payment Dates"). Interest on any Class of Compound
Interest Securities will not be paid currently, but will
accrue and the amount of interest so accrued will be added
to the principal thereof on each Payment Date through the
Accrual Termination Date specified in the related
Prospectus Supplement. Following the applicable Accrual
Termination Date, interest payments on such Bonds will be
made on the Compound Value thereof. Interest Only Bonds
may be assigned a "Notional Amount" which is used solely
for convenience in expressing the calculation of interest
and for certain other purposes. Unless otherwise specified
in the related Prospectus Supplement, the Notional Amount
will be determined at the time of issuance of such Bonds
based on the principal balances or Bond Value of the
Mortgage Loans attributable to the Bonds of a Series
entitled to receive principal, and will be adjusted
monthly over the life of the Bonds based upon adjustments
to the Bond Value of such Mortgage Loans. Reference to the
Notional Amount is solely for convenience in certain
calculations and does not represent the right to receive
any distributions allocable to principal. Zero Coupon
Securities and Principal Only Securities will not accrue,
and will not be entitled to reeive, any interest.
Each payment of interest on each Class of Bonds (or addition
to principal of a Class of Compound Interest Securities)
on a Payment Date will include all interest accrued during
the Interest Accrual Period specified in the related
Prospectus Supplement preceding such Payment Date. If the
Interest Accrual Period for a Series ends on a date other
than a Payment Date for such Series, the yield
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realized by the Holders of such Bonds may be lower than
the yield that would result if the Interest Accrual Period
ended on such Payment Date. Additionally, if so specified
in the related Prospectus Supplement, interest accrued for
an Interest Accrual Period for one or more Classes may be
calculated on the assumption that principal payments (and
additions to principal of the Bonds), and allocations of
losses on the Mortgage Assets (if so specified in the
related Prospectus Supplement), are made on the first day
of the preceding Interest Accrual Period and not on the
Payment Date for such preceding Interest Accrual Period
when actually made or added. Such method would produce a
lower effective yield than if interest were calculated on
the basis of the actual principal amount outstanding. See
"YIELD AND PREPAYMENT CONSIDERATIONS."
With respect to any Class of Variable Interest Securities,
the related Prospectus Supplement will set forth: (a) the
initial Bond Interest Rate (or the manner of determining
the initial Bond Interest Rate); (b) the formula, index or
other method by which the Bond Interest Rate will be
determined from time to time; (c) the periodic intervals
at which such determination will be made; (d) the interest
rate cap (the "Maximum Variable Interest Rate") or the
interest rate floor (the "Minimum Variable Interest Rate")
on the Bond Interest Rate, if any, for such Variable
Interest Securities; and (e) the Variable Interest Period
and any other terms relevant to such Class of Bonds. See
"DESCRIPTION OF THE SECURITIES-- Payments and
Distributions of Interest."
INTEREST DISTRIBUTIONS ON THE
CERTIFICATES............... Interest distributions on the Certificates of a Series
(other than Certificates that are Zero Coupon Securities or
Principal Only Securities) will be made from amounts
available therefor on each Distribution Date at the
applicable rate specified in (or determined in the manner
set forth in) the related Prospectus Supplement. The
interest rate on Certificates of a Series may be variable
or change with changes in the mortgage rates or annual
percentage rates of the Mortgage Assets included in the
related Trust Fund and/or as prepayments occur with
respect to such Mortgage Assets. Zero Coupon Securities
and Principal Only Securities may not be entitled to
receive any interest distributions or may be entitled to
receive only nominal interest distributions. Compound
Interest Securities will not receive distributions of
interest but accrued interest will be added to the
principal balance thereof on each Distribution Date until
the Accrual Termination Date. Following the Accrual
Termination Date, interest distributions with respect to
such Compound Interest Securities will be made on the
basis of their Compound Value.
PRINCIPAL PAYMENTS ON THE
BONDS...................... All payments of principal of a Series will be allocated
among the Classes of such Series in the order and amounts,
and will be applied either on a pro rata or a random lot
basis among all Bonds of any such Class, as specified in
the related Prospectus Supplement.
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Except with respect to Zero Coupon Securities, Compound
Interest Securities and Interest Only Securities, unless
specified otherwise in the related Prospectus Supplement,
on each Payment Date principal payments will be made on
the Bonds of each Series in an amount (the "Principal
Payment Amount") as determined by a formula specified in
the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, if the
Series of Bonds has a Class of Compound Interest
Securities, additional principal payments on the Bonds
will be made on each Payment Date in an amount equal to
the interest accrued, but not then payable, on such Bonds
for the related Interest Accrual Period. If the Series of
Bonds has a Class of PAC Securities, such PAC Securities
will have certain priorities of payment with respect to
principal to the extent of certain targeted amounts with
respect to each Payment Date, as set forth in the related
Prospectus Supplement.
PRINCIPAL DISTRIBUTIONS ON
THE CERTIFICATES........... Principal distributions on the Certificates of a Series will
be made from amounts available therefor on each Distribution
Date, unless otherwise specified in the related Prospectus
Supplement, in an aggregate amount determined as set forth
in the related Prospectus Supplement and will be allocated
among the respective Classes of a Series of Certificates
at the times, in the manner and in the priority (which
may, in certain cases, include allocation by random lot)
set forth in the related Prospectus Supplement.
Except with respect to Zero Coupon Securities, Compound
Interest Securities and Interest Only Securities, unless
specified otherwise in the related Prospectus Supplement,
on each Distribution Date principal payments will be made
on the Certificates of each Series in the Principal
Payment Amount as determined by a formula specified in the
related Prospectus Supplement. Unless otherwise specified
in the related Prospectus Supplement, if the Series of
Certificates has a Class of Compound Interest Securities,
additional principal payments on the Certificates will be
made on each Distribution Date in an amount equal to the
interest accrued, but not then payable, on such
Certificates for the related Interest Accrual Period. If
the Series of Certificates has a Class of PAC Securities,
such PAC Securities will have certain priorities of
distribution with respect to principal to the extent of
certain targeted amounts with respect to each Distribution
Date, as set forth in the related Prospectus Supplement.
ALLOCATION OF LOSSES......... If so specified in the related Prospectus Supplement, on any
Payment Date or Distribution Date, as applicable, on which
the principal balance of the Mortgage Assets is reduced
due to losses on the Mortgage Assets, (i) the amount of
such losses will be allocated first, to reduce the
Aggregate Outstanding Principal of the Subordinate
Securities or other subordination, if any, and, thereaf-
ter, to reduce the Aggregate Outstanding Principal of the
remaining Securities in the priority and manner specified
in such Prospectus Supplement until the Aggregate
Outstanding Principal of each
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Class of Securities so specified has been reduced to zero
or paid in full, thus reducing the amount of principal
payable or distributable on each such Class of Securities
or (ii) such losses may be allocated in any other manner
set forth in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement,
such reductions of principal of a Class or Classes of
Securities shall be allocated to the Holders of the
Securities of such Class or Classes pro rata in the
proportion which the outstanding principal of each Bond or
Certificate of such Class or Classes bears to the
Aggregate Outstanding Principal of all Securities of such
Class. See "DESCRIPTION OF THE SECURITIES--Payments and
Distributions of Principal."
STATED MATURITY OF THE
BONDS...................... The "Stated Maturity" for each Class of a Series is the date
specified in the related Prospectus Supplement no later than
which all the Bonds of such Class will be fully paid,
calculated on the basis of the assumptions set forth in
the related Prospectus Supplement. However, the actual
maturity of the Bonds is likely to occur earlier and may
occur significantly earlier than their Stated Maturity.
The rate of prepayments on the Mortgage Assets pledged as
security for any Series will depend on a variety of
factors, including the characteristics of the Mortgage
Loans underlying or comprising the Mortgage Assets and the
prevailing level of interest rates from time to time, as
well as on a variety of economic, demographic, geographic,
tax, legal and other factors. No assurance can be given as
to the actual prepayment experi ence of such Mortgage
Assets. See "YIELD AND PREPAYMENT CONSIDERATIONS."
FINAL SCHEDULED DISTRIBUTION
DATE OF THE CERTIFICATES... The Final Scheduled Distribution Date for each Class of
Certificates of a Series is the date after which no
Certificates of such Class will remain outstanding,
assuming timely payments or distributions are made on the
Mortgage Assets in the related Trust Fund in accordance
with their terms. The Final Scheduled Distribution Date of
a Class may equal the maturity date of the Mortgage Asset
in the related Trust Fund which has the latest stated
maturity or will be determined as described herein and in
the related Prospectus Supplement.
The actual maturity date of the Certificates of a Series
will depend primarily upon the level of prepayments with
respect to the Mortgage Loans comprising the Mortgage
Assets in the related Trust Fund. The actual maturity of
any Certificate is likely to occur earlier and may occur
substantially earlier than its Final Scheduled Distri-
bution Date as a result of the application of prepayments
to the reduction of the principal balances of the
Certificates. The rate of prepayments on the Mortgage
Loans comprising Mortgage Assets in the Trust Fund for a
Series will depend on a variety of factors, including
certain characteristics of such Mortgage Loans and the
prevailing level of interest rates from time to time, as
well as on a variety of economic, demographic, tax, legal,
social and other factors. No assurance can be given as to
the actual prepayment experience with respect to a Series.
See "RISK FACTORS" and
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"DESCRIPTION OF THE SECURITIES--Weighted Average Life of
the Securities" herein.
REDEMPTION OF BONDS.......... The Bonds will be redeemable only as follows:
A. SPECIAL REDEMPTION
If specified in the related Prospectus Supplement, Bonds of
a Series will be subject to special redemption, in whole
or in part, if, as a result of principal payments on the
Mortgage Assets securing such Series or low reinvestment
yields or both, the Trustee determines (based on
assumptions, if any, specified in the Indenture and after
giving effect to the amounts, if any, available to be
withdrawn from any Reserve Fund for such Series) that the
amount anticipated to be available in the Collection
Account for such Series on the date specified in the
related Prospectus Supplement will be insufficient to meet
debt service requirements on any portion of the Bonds. Any
such redemption would be limited to the aggregate amount
of all scheduled principal payments and prepayments on the
Mortgage Assets received since the last Payment Date or
Special Redemption Date, whichever is later, and may
shorten the maturity of any Bond so redeemed by no more
than the period between the date of such special
redemption and the next Payment Date. Unless otherwise
specified in the related Prospectus Supplement, special
redemptions of Bonds of a Series will be made in the same
priority and manner as principal payments are made on a
Payment Date. Bonds subject to special redemption shall be
redeemed on the applicable Special Redemption Date at 100%
of their unpaid principal amount plus accrued interest on
such principal to the date specified in the related
Prospectus Supplement. To the extent described in the
related Prospectus Supplement, Bonds of a Series may be
subject to special redemption in whole or in part
following certain defaults under an Enhancement Agreement
or other agreement, and in certain other events at the
Redemption Price. See "DESCRIPTION OF THE
SECURITIES--Special Redemption."
B. OPTIONAL REDEMPTION
To the extent specified in the related Prospectus
Supplement, one or more Classes of any Series may be
redeemed in whole, or in part, at, unless otherwise
specified in the related Prospectus Supplement, the
Issuer's option on any Payment Date on or after the date
specified in the related Prospectus Supplement and at the
Redemption Price. See "DESCRIPTION OF THE SECURITIES--
Optional Redemption."
C. MANDATORY REDEMPTION
If specified in the related Prospectus Supplement for a
Series, the Bonds of one or more Classes ("Individual
Investor Bonds") may be subject to mandatory redemptions
by lot or by such other method set forth in the Prospectus
Supplement. The related Prospectus Supplement relating to
a Series of Bonds with Individual Investor Securities will
set forth Class priorities, if any, and conditions with
respect to redemptions. Individual Investor Securities to
be redeemed shall be selected by random lot in $1,000
units, after
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making all permitted redemptions requested by holders of
Individual Investor Securities or by such other method set
forth in the Prospectus Supplement. See "DESCRIPTION OF
THE SECURITIES--Mandatory Redemption."
OPTIONAL TERMINATION OF TRUST
FUND....................... If so specified in the related Prospectus Supplement, the
Company, as depositor of the Primary Assets into the Trust
Fund (acting in such capacity, and in such capacity in
respect of an Owner Trust the "Depositor"), the Servicer,
or such other entity that is specified in the related
Prospectus Supplement, may, at its option, cause an early
termination of the related Trust Fund by repurchasing all
of the Primary Assets remaining in the Trust Fund on or
after a specified date, or on or after such time as the
aggregate principal balance of the Certificates of any
Class of the Series is less than the amount or percentage
specified in the related Prospectus Supple-ment. See
"DESCRIPTION OF THE SECURITIES--Optional Termination."
REPURCHASES OF
CERTIFICATES............... If so specified in the related Prospectus Supplement, one or
more classes of the Certificates of such Series may be
repurchased, in whole or in part, at the option of the
Depositor, at such times and under the circumstances
specified in such Prospectus Supplement and at the
repurchase price set forth therein. See "DESCRIPTION OF
THE SECURITIES--Optional Repurchase of Certificates"
herein.
If so specified in the related Prospectus Supplement, any
Class of the Certificates may be subject to repurchase at
the request of the holders of such Class or to mandatory
repurchase by the Depositor (including by random lot). See
"DESCRIPTION OF THE SECURITIES--Other Repurchases" herein.
SECURITY FOR THE BONDS,
OR THE TRUST FUND FOR THE
CERTIFICATES............... Each Series of Bonds will be separately secured by Primary
Assets consisting of one or more of the assets described
below, as specified in the Prospectus Supplement. The
Trust Fund for a Series of Certificates will consist of
one or more of the assets described below, as specified in
the related Prospectus Supplement.
A. MORTGAGE ASSETS
The Primary Assets for a Series may consist of any
combination of the following, to the extent and as
specified in the related Prospectus Supplement:
(1) Mortgage Loans
Mortgage Assets for a Series may consist, in whole or in
part, of Mortgage Loans, including participation interests
therein owned by the Issuer. Some Mortgage Loans or
Mortgage Loans underlying such participation interests may
be delinquent or non-performing as specified in the
related Prospectus Supplement. The Mortgage Assets may
consist of a single Mortgage Loan or obligations of a
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single obligor or related obligors as specified in the
related Prospectus Supplement. Mortgage Loans comprising
or underlying the Mortgage Assets may be originated by or
acquired from an affiliate of the Issuer and an affiliate
of the Issuer may be an obligor with respect to any such
Mortgage Loan. Payments on such Mortgage Loans will be
collected by the Trustee or by the Servicer or Master
Servicer with respect to a Series and remitted to the
Trustee as described in the related Prospectus Supplement
and will be available in the priority described in the
related Prospectus Supplement to make payments on the
Bonds of that Series. To the extent specified in the
related Prospectus Supplement, Mortgage Loans owned by the
Issuer will be serviced by Servicers, and, if applicable,
a Master Servicer, either of which may be affiliates or
shareholders of the Issuer.
Mortgaged Properties securing Mortgage Loans may consist of
multifamily residential rental property or cooperatively
owned multifamily property consisting of five or more
dwelling units, mixed multifamily/commercial property or
commercial property. Mortgage Loans secured by Multifamily
Property may consist of FHA Loans. Mortgage Loans may, as
specified in the related Prospectus Supplement, have
various payment characteristics and may consist of fixed
rate loans or ARMs or Mortgage Loans having balloon or
other irregular payment features. Unless otherwise
specified in the related Prospectus Supplement, the
Mortgage Loans will be secured by first mortgages or deeds
of trust or other similar security instruments creating a
first lien on Mortgaged Property. If so specified in the
related Prospectus Supplement, Mortgage Loans relating to
real estate projects under construction may be included in
the Mortgage Assets for a Series. The related Prospectus
Supplement will describe certain characteristics of the
Mortgage Loans comprising the Mortgage Assets for a
Series, including, without limitation, (a) the aggregate
unpaid principal balance of the Mortgage Loans comprising
the Mortgage Assets; (b) the weighted average Mortgage
Rate on the Mortgage Loans, and, in the case of adjustable
Mortgage Rates, the weighted average of the current
adjustable Mortgage Rates, the minimum and maximum
permitted adjustable Mortgage Rates, if any, and the
weighted average thereof; (c) the average outstanding
principal balance of the Mortgage Loans; (d) the weighted
average remaining scheduled term to maturity of the
Mortgage Loans and the range of remaining scheduled terms
to maturity; (e) the range of Loan-to-Value Ratios of the
Mortgage Loans; (f) the relative percentage (by principal
balance as of the Cut-off Date) of Mortgage Loans that are
ARMs, fixed interest rate, FHA Loans or other types of
Mortgage Loans; (g) any enhancement relating to the
Mortgage Assets; (h) the relative percentage (by principal
balance as of the Cut-Off Date)of Mortgage Loans that are
secured by Multifamily Property or Commercial Property;
(i) the geographic dispersion of Mortgaged Properties
securing the Mortgage Loans; and (j) the use or type of
each Mortgaged Property securing a Mortgage Loan.
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If permitted by applicable law, the Mortgage Pool may also
include Mortgaged Properties acquired by foreclosure or by
deed-in-lieu of foreclosure ("REO Property"). To the
extent specified in the related Prospectus Supplement, the
Servicer or the Master Servicer or the Special Servicer,
if any, may establish and maintain a trust account or
accounts to be used in connection with REO Properties and
other Mortgaged Properties being operated by it or on its
behalf on behalf of the Trust Estate, by the mortgagor as
debtor-in- possession or otherwise. See "SECURITY FOR THE
BONDS AND CERTIFICATES--Mortgage Loans" and "--Maintenance
of Insurance Policies and Other Servicing Procedures;
Presentation of Claims; Realization Upon Defaulted
Mortgage Loans."
(2) Private Mortgage-Backed Securities
Private Mortgage-Backed Securities may include (a) mortgage
participations or pass-through certificates representing
beneficial interests in certain Mortgage Loans, (b) debt
obligations interest payments on which may be tax-exempt
in whole or in part secured by mortgages or (c)
participations or other interests in any of the foregoing.
Although individual Mortgage Loans underlying a Private
Mortgage-Backed Security may be insured or guaranteed by
the United States or an agency or instrumentality thereof,
they need not be, and the Private Mortgage-Backed
Securities themselves will not be, so insured or
guaranteed. Unless otherwise specified in the Prospectus
Supplement relating to a Series, payments on the Private
Mortgage-Backed Securities will be distributed directly to
the Trustee (on behalf of the Trust Estate) as registered
owner of such Private Mortgage-Backed Securities. Unless
otherwise specified in the Prospectus Supplement relating
to a Series, if payments with respect to interest on the
underlying obligations are tax-exempt, such Prospectus
Supplement will disclose the relevant federal income tax
characteristics relating to the tax-exempt status of such
obligations.
The related Prospectus Supplement for a Series will specify,
to the extent applicable, (i) the aggregate approximate
principal amount and type of any Private Mortgage-Backed
Securities to be included in the Trust Estate or Trust
Fund for such Series; (ii) certain characteristics of the
Mortgage Loans, participations or other interests which
comprise the underlying assets for the Private Mortgage-
Backed Securities including (A) the payment features of
such Mortgage Loans, participations or other interests
(i.e., whether they are fixed interest rate or adjustable
rate and whether they provide for fixed level payments,
negative amortization, or other payment features), (B) the
approximate aggregate principal amount, if known, of the
underlying Mortgage Loans, participations or other
interests which are insured or guaranteed by a
governmental entity, (C) the servicing fee or range of
servicing fees with respect to the Mortgage Loans, and (D)
the stated maturities of the Mortgage Loans, partic-
ipations or other interests at origination; (iii) the
maximum original term-to-stated maturity of the Private
Mortgage-Backed Securities; (iv) the weighted average
term-to-stated maturity of the Private
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Mortgage-Backed Securities; (v) the pass-through or bond
rate or ranges thereof for the Private Mortgage-Backed
Securities or formula therefor; (vi) the weighted average
pass-through or certificate rate of the Private
Mortgage-Backed Securities or formula therefor; (vii) the
issuer of the Private Mortgage-Backed Securities (the
"PMBS Issuer"), the Servicer or Master Servicer of the
Private Mortgage-Backed Securities and the trustee of the
Private Mortgage-Backed Securities (the "PMBS Trustee");
(viii) certain characteristics of credit support, if any,
such as reserve funds, insurance policies, letters of
credit, guarantees or overcollateralization, relating to
the Mortgage Loans underlying the Private Mortgage-Backed
Securities, or to such Private Mortgage-Backed Securities
themselves; (ix) the terms on which underlying Mortgage
Lans, participations or other interests for such Private
Mortgage-Backed Securities or the Private Mortgage-Backed
Securities may, or are required to, be repurchased prior
to maturity; and (x) the terms on which substitute
Mortgage Loans, participations or other interests may be
delivered to replace those initially deposited with the
PMBS Trustee.
(3) Determination of Asset Value
If provided in the applicable Prospectus Supplement, each
item of Mortgage Assets for a Series will be assigned an
Asset Value. Unless otherwise specified in the related
Prospectus Supplement, the aggregate of the Asset Values
of the Primary Assets securing a Series of Bonds or
comprising a Trust Fund will equal not less than the
original Aggregate Outstanding Principal of such Series.
The Asset Value of an item of Primary Assets securing any
Series of Bonds or comprising a Trust Fund is intended to
represent the principal amount of Securities of such
Series that, based on certain assumptions stated in the
related Series Supplement, can be supported by payments on
such item of Primary Assets, irrespective of prepayments
thereon, together with, depending on the type of Primary
Assets and method used to determine its Asset Value,
reinvestment earnings at the related Assumed Reinvestment
Rate, if any, and amounts in any Reserve Fund established
for that Series. In such a case, the related Prospectus
Supplement will set forth the method or methods and
related assumptions used to determine Asset Value, if such
method is used, for the Primary Assets securing the
related Series. See "DESCRIPTION OF THE SECU
RITIES--Valuation of Mortgage Collateral."
B. COLLECTION ACCOUNT
Unless otherwise provided in the related Prospectus
Supplement, all payments on the Primary Assets pledged as
security for a Series or comprising the assets of a Trust
Fund will be remitted to a Collection Account to be
established with the Trustee, or if the Trustee is not
also the Paying Agent, with the Paying Agent, for such
Series. Unless otherwise provided in the related
Prospectus Supplement, such payments, together with the
Reinvestment Income thereon, if any, the amount of cash,
if any, initially deposited in the Collection Account by
the Issuer together with Reinvestment Income thereon,
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if any, and any amounts withdrawn from any Reserve Fund
established for such Series, will be available to make
payments or distributions of principal of and interest on
such Series on the next Payment Date or Distribution Date,
as applicable. Any funds remaining in the Collection
Account for a Series immediately following a Payment Date
or Distribution Date, as applicable (unless required to be
deposited into one or more Reserve Funds, as described
below, or applied to pay certain expenses or other pay-
ments provided for in the Indenture or Trust Agreement, as
applicable) will be promptly paid as provided in the
Indenture or Trust Agreement to the Issuer or, in certain
circumstances, to owners of residual interests and, upon
such payment, will be released from the lien of the
Indenture or Trust Agreement, as applicable. See "SECURITY
FOR THE BONDS AND CERTIFICATES--Collection Account."
C. GUARANTEED INVESTMENT CONTRACTS AND OTHER AGREEMENTS
The Issuer may obtain and deliver to the Trustee Guaranteed
Investment Contracts pursuant to which moneys held in the
funds and accounts established for such Series will be
invested at a specified rate for the Series. The Issuer
may also obtain and deliver to the Trustee certain other
agreements such as interest rate swap agreements, interest
rate cap or floor agreements or similar agreements issued
by a bank, insurance company, savings bank, savings and
loan association or other entity which reduce the effects
of interest rate fluctuations on the Mortgage Assets or
the Securities. The principal terms of any such Guaranteed
Investment Contract or other agreement, including, without
limitation, provisions relating to the timing, manner and
amount of payments thereunder and provisions relating to
the termination thereof, will be described in the Prospec-
tus Supplement for the related Series. Additionally, the
related Prospectus Supplement will provide certain
information with respect to the issuer of such Guaranteed
Investment Contract or other agreement.
ENHANCEMENT.................. Enhancement in the form of reserve funds, subordination,
overcollateralization, insurance policies, letters of credit
or other types of credit support may be provided with
respect to the Mortgage Assets or with respect to one or
more Classes of Securities of a Series. If the Mortgage
Assets are divided into separate Mortgage Groups, each
securing or supporting a separate Class or Classes of a
Series, credit support may be provided by a cross-support
feature which requires that distributions be made with
respect to Securities secured by one Mortgage Group prior
to distributions to Subordinate Securities secured by
another Mortgage Group within the Trust Estate or Trust
Fund.
The type, characteristics and amount of enhancement will be
determined based on the characteristics of the Mortgage
Loans underlying or comprising the Mortgage Assets and
other factors and will be established on the basis of
requirements of each Rating Agency rating the Securities
of such Series. If so specified in the related Prospectus
Supplement, any such enhancement may apply only in
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the event of certain types of losses or delinquencies and
the protection against losses or delinquencies provided by
such enhancement will be limited. See "ENHANCEMENT" and
"RISK FACTORS" herein.
A. SUBORDINATE SECURITIES
A Series of Securities may include one or more Classes of
Subordinate Securities. The rights of holders of such
Subordinate Securities to receive distributions on any
Payment Date or Distribution Date, as applicable, will be
subordinate in right and priority to the rights of holders
of Senior Securities of the Series, but only to the extent
described in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement,
subordination may apply only in the event of certain types
of losses not covered by other enhancement. Unless
otherwise specified in the related Prospectus Supplement,
such subordination will be in lieu of providing insurance
policies or other credit support with respect to losses
arising from such events. Unless otherwise specified in
the related Prospectus Supplement, the related Series
Supplement may require a trustee that is not the Trustee
to be appointed to act on behalf of holders of Subordinate
Securities.
The related Prospectus Supplement will set forth information
concerning the amount of subordination of a Class or
Classes of Subordinate Securities in a Series, the
circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of
subordination will decrease over time, the manner of
funding any related Reserve Fund and the conditions under
which amounts in any related Reserve Fund will be used to
make distributions to holders of Senior Securities and/or
to holders of Subordinate Securities or be released from
the related Trust Estate or Trust Fund. If cash flows
otherwise distributable to holders of Subordinate
Securities secured by a Mortgage Group will be used as
credit support for Senior Securities secured by another
Mortgage Group within the Trust Estate or Trust Fund, the
related Prospectus Supplement will specify the manner and
conditions for applying such a cross-support feature. See
"ENHANCEMENT-- Subordinate Securities."
B. INSURANCE
If so specified in the related Prospectus Supplement,
certain insurance policies will be required to be
maintained with respect to the Mortgage Loans included in
the Trust Estate or Trust Fund for a Series. Such
insurance policies may include, but are not limited to, a
standard hazard insurance policy or, with respect to FHA
Loans, FHA Insurance. See "ENHANCEMENT" and "DESCRIPTION
OF INSURANCE ON THE MORTGAGE LOANS" herein. The Prospectus
Supplement for a Series will provide information con-
cerning any such insurance policies, including (a) the
types of coverage provided by each, (b) the amount of such
coverage and (c) conditions to payment under each. To the
extent described in the related Prospectus Supplement,
certain insurance policies to be
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maintained with respect to the Mortgage Loans may be
terminated, reduced or replaced following the occurrence
of certain events affecting the authority or
creditworthiness of the insurer. Additionally, such
insurance policies may be terminated, reduced or replaced
by the Servicer or Master Servicer, if any, provided that
no rating assigned to Securities of the related Series
offered hereby and by the related Prospectus Supplement is
adversely affected and such insurance policies may apply
only in the event of certain types of losses, all as set
forth in the related Prospectus Supplement.
C. LETTER OF CREDIT
If so specified in the related Prospectus Supplement, credit
support may be provided by one or more letters of credit.
A letter of credit may provide limited protection against
certain losses in addition to or in lieu of other credit
support. The issuer of the letter of credit (the "L/C
Bank") will be obligated to honor demands with respect to
such letter of credit, to the extent of the amount
available thereunder, to provide funds under the
circumstances and subject to such conditions as are
specified in the related Prospectus Supplement. The
liability of the L/C Bank under its letter of credit may
be reduced by the amount of unreimbursed payments
thereunder.
The maximum liability of an L/C Bank under its letter of
credit will be an amount equal to a percentage specified
in the related Prospectus Supplement of the initial
aggregate outstanding principal balance of the Mortgage
Loans in the Trust Estate or Trust Fund or one or more
Classes of Securities of the related Series (the "L/C
Percentage"). The maximum amount available at any time to
be paid under a letter of credit will be determined in the
manner specified therein and in the related Prospectus
Supplement. See "ENHANCEMENT--Letter of Credit."
D. BOND GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, credit
support for a Series may be provided by an insurance
policy (the "Bond Guarantee Insurance") issued by one or
more insurance companies. Such Bond Guarantee Insurance
may guarantee timely distributions of interest and full
distributions of principal on the basis of a schedule of
principal distributions set forth in or determined in the
manner specified in the related Prospectus Supplement. See
"ENHANCEMENT--Bond Guarantee Insurance."
E. RESERVE FUNDS
The Issuer may deposit in one or more reserve funds
(collectively, the "Reserve Funds") for any Series cash,
Eligible Investments, demand notes or a combination
thereof in the aggregate amount, if any, specified in the
related Prospectus Supplement. Any Reserve Funds for a
Series may also be funded over time through application of
a specified amount of cash flow, to the extent described
in the related Prospectus Supplement. Such a Reserve Fund
may be established to increase the likelihood of the
timely distributions on the Securities of such Series or
to reduce the likelihood of a special redemption with
respect to any Series. Reserve Funds may be
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established to provide protection against certain losses
or delinquencies in addition to or in lieu of other credit
support. Amounts on deposit in the Reserve Funds for a
Series, together with (unless otherwise specified in the
related Prospectus Supplement) the reinvestment income
thereon, if any, will be applied for the purposes, in the
manner and to the extent provided by the related
Prospectus Supplement.
On each Payment Date or Distribution Date, as applicable,
for a Series, all amounts on deposit in any Reserve Funds
for the Series in excess of the amounts required to be
maintained therein by the related Indenture or Trust
Agreement, as applicable, and specified in the related
Prospectus Supplement may be released from the Reserve
Funds and will not be available for future payments or
distributions on the Securities of such Series.
Additional information concerning any Reserve Funds,
including whether any such Reserve Fund is a part of the
Trust Estate or Trust Fund, the circumstances under which
moneys therein will be applied to make distributions to
Bondholders or Certificateholders, the balance required to
be maintained in such Reserve Funds, the manner in which
such required balance will decrease over time and the
manner of funding any such Reserve Fund, will be set forth
in the related Prospectus Supplement. See "ENHANCEMENT--
Reserve Funds."
F. OVERCOLLATERALIZATION
To the extent applicable and as specified in the related
Prospectus Supplement, a Series may be structured such
that the outstanding principal balances or Aggregate Asset
Value of the Mortgage Assets securing a Series may exceed
the Aggregate Outstanding Principal of such Series,
thereby resulting in overcollateralization. See
"DESCRIPTION OF THE SECURITIES--Valuation of Mortgage
Assets."
SERVICING AGREEMENTS......... Various Servicers will perform certain servicing functions
with respect to any Mortgage Loans comprising Mortgage
Assets or Underlying Collateral for a Series. In addition,
if so specified in the related Prospectus Supplement, a
Master Servicer identified in the related Prospectus
Supplement may service Mortgage Loans directly or
administer and supervise the performance by the Servicers
of their duties and responsibilities under separate
servicing agreements. Each Servicer must meet the
requirements of the Master Servicer, if any, and be
approved by the Issuer, and, if specified in the related
Prospectus Supplement, the Master Servicer and each
Servicer must be approved by either FNMA or FHLMC as a
seller-servicer of mortgage loans and, in the case of FHA
Loans, by HUD as an FHA mortgagee. Each Servicer will be
obligated under a servicing agreement to perform customary
servicing functions and may be obligated to advance funds
to cover certain payments not made by the Mortgagors to
the extent described herein and in the related Prospectus
Supplement. The Master Servicer, if any, may, if so speci-
fied in the related Prospectus Supplement, be obligated to
advance
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funds to cover any required Advances not made by the
Servicers to the extent that, in the judgment of the
Master Servicer, such Advances are recoverable under the
Insurance Policies, any Enhancement or from the proceeds
of liquidation of the Mortgage Loans or as provided in the
related Prospectus Supplement. The related Prospectus
Supplement will specify the conditions to and any
limitations on such Advances and the conditions under
which such Advances will be recoverable. With respect to
any such Series, the Issuer may (i) enter into a standby
agreement with an independent standby Servicer acceptable
to each Rating Agency rating such Securities providing
that such standby Servicer will assume the Servicer's or
Master Servicer's obligations in the event of a default by
the Master Servicer or Servicer or (ii) obtain a servicer
performance bond acceptable to ech Rating Agency rating
such Securities that will guarantee certain of the
Servicer's or Master Servicer's obligations. The Issuer
will assign to the Trustee its rights under any Master
Servicing Agreement and any servicing agreements so pro-
vided with respect to a Series as security for the Series.
See "SERVICING OF MORTGAGE LOANS" and "SECURITY FOR THE
BONDS AND CERTIFICATES--Mortgage Loans" herein.
SPECIAL SERVICER............. If so specified in the related Prospectus Supplement, to the
extent a Mortgage Loan on or after the Closing Date meets
certain criteria set forth in the related Prospectus
Supplement, (i) all or a portion of the servicing
responsibilities with respect to such Mortgage Loan may be
transferred to a Special Servicer or (ii) the Special
Servicer will provide advisory services with respect to
the servicing of such Mortgage Loan. See "SERVICING OF
MORTGAGE LOANS" herein.
FEDERAL INCOME TAX
CONSIDERATIONS............. Unless otherwise stated in the applicable Prospectus
Supplement, a real estate mortgage investment conduit (a
"REMIC") election will be made with respect to each Series
of Securities. Securities of such Series will be
designated as "regular interests" in a REMIC ("Regular
Interest Securities") or as "residual interests" in a
REMIC ("Residual Interest Securities").
If the applicable Prospectus Supplement so specifies with
respect to a Series of Securities, the Securities of such
Series will not be treated as regular or residual
interests in a REMIC for federal income tax purposes but
instead will be treated as (i) indebtedness of the Issuer,
(ii) an undivided beneficial ownership interest in the
Mortgage Loans (and the arrangement pursuant to which the
Mortgage Loans will be held and the Securities will be
issued will be treated as a grantor trust under Subpart E,
part I of subchapter J of the Code and not as an
association taxable as a corporation for federal income
tax purposes); (iii) equity interests in an association
that will satisfy the requirements for qualification as a
real estate investment trust; (iv) interests in an entity
that will be treated as a partnership for federal income
tax purposes; or (v) interests in an entity or a pool of
assets that will satisfy the requirements for
qualification as a
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financial asset securitization investment trust (a
"FASIT") for federal income tax purposes. The federal
income tax consequences to Bondholders or
Certificateholders of any such Series will be described in
the applicable Prospectus Supplement.
Compound Interest Securities and Zero Coupon Securities
will, and certain other Classes of Securities may, be
issued with original issue discount that is not DE
MINIMIS. In such cases, the Bondholder or
Certificateholder will be required to include the original
issue discount in gross income as it accrues, which may be
prior to the receipt of cash attributable to such income.
If a Security is issued at a premium, the holder will be
entitled to make an election to amortize such premium on a
constant yield method. Securities constituting regular or
residual interests in a REMIC will generally represent
"loans secured by an interest in real property" for domes-
tic building and loan associations and "real estate
assets" for real estate investment trusts to the extent
that the underlying mortgage loans and interest thereon
qualify for such treatment. Non-REMIC Securities (other
than interests in grantor trusts and certain interests in
a FASIT) will not qualify for such treatment.
A holder of a Residual Interest Security will be required to
include in its income its pro rata share of the taxable
income of the REMIC. In certain circumstances, the holder
of a Residual Interest Security may have REMIC taxable
income or tax liability attributable to REMIC taxable
income for a particular period in excess of cash
distributions for such period or have an after-tax return
that is less than the after-tax return on comparable debt
instruments. In addition, a portion (or, in some cases,
all) of the income from a Residual Interest Security (i)
may not be subject to offset by losses from other
activities, (ii) for a holder that is subject to tax under
the Code on unrelated business taxable income, may be
treated as unrelated business taxable income and (iii) for
a foreign holder, may not qualify for exemption from or
reduction of withholding. Further, individual holders are
subject to limitations on the deductibility of expenses of
the REMIC. See "FEDERAL INCOME TAX CONSIDERATIONS."
ERISA CONSIDERATIONS......... A fiduciary of any employee benefit plan or other retirement
arrangement subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, should carefully review with its
own legal advisors whether the purchase or holding of
Securities could give rise to a transaction prohibited or
otherwise impermissible under ERISA or the Code. See
"ERISA CONSIDERATIONS."
LEGAL INVESTMENT............. The related Prospectus Supplement will specify whether any
Class of the Securities of the particular Series offered by
this Prospectus and the related Prospectus Supplement will
constitute "mortgage related securities" under the
Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA"). Investors whose investment authority is
subject to legal restrictions should consult their own
legal advisors to determine whether and to what
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extent the Securities constitute legal investments for
them. See "LEGAL INVESTMENT."
USE OF PROCEEDS.............. The Issuer will use the net proceeds from the sale of each
Series to (i) purchase Mortgage Loans and/or Private
Mortgage-Backed Securities comprising the Mortgage Assets
securing such Securities, (ii) repay indebtedness which
has been incurred to acquire Mortgage Assets to be pledged
by the Issuer as security for the Bonds or to be deposited
into a Trust Fund, (iii) establish any Reserve Funds
described in the related Prospectus Supplement, or (iv)
pay costs of structuring, guaranteeing and issuing such
Securities. If so specified in the related Prospectus
Supplement, the purchase of the Mortgage Assets for a
Series may be effected by an exchange of Securities with
the seller of such Mortgage Assets. See "USE OF PRO-
CEEDS."
RATINGS...................... It will be a condition to the issuance of any Securities
offered by this Prospectus and the related Prospectus
Supplement that they be rated in one of the four highest
applicable rating categories by at least one Rating
Agency. The rating or ratings applicable to Securities of
each Series will be as set forth in the related Prospectus
Supplement.
A security rating should be evaluated independently of
similar ratings of different types of securities. A
security rating does not address the effect that the rate
of prepayment on Mortgage Loans comprising or underlying
the Mortgage Assets or the effect that reinvestment rates
may have on the yield to investors in the Securities. A
rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at
any time by the assigning rating organization. Each rating
should be evaluated independently of any other rating. See
"RISK FACTORS."
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Securities.
LIMITED LIQUIDITY. There can be no assurance that a secondary market for
the Securities of any Series will develop or, if it does develop, that it will
provide holders with liquidity of investment or will continue while Securities
of such Series remain outstanding. The market value of Securities will fluctuate
with changes in prevailing rates of interest. Consequently, sale of the
Securities by a holder in any secondary market which may develop may be at a
discount from par value or from their purchase price. Furthermore, secondary
purchasers may look only to the Prospectus Supplement attached hereto and to the
reports to Bondholders or Certificateholders, as applicable, delivered pursuant
to the Indenture or Trust Agreement, as applicable and as described herein under
the heading "DESCRIPTION OF THE SECURITIES--General," "--The Bonds--General,"
and "--The Certificates--General" for information concerning the Securities.
Except to the extent described in the related Prospectus Supplement, Bondholders
or Certificateholders, as applicable, will have no optional redemption or early
termination rights, respectively. The Bonds are subject to redemption, and the
Certificates are subject to early termination or repurchase, by the Issuer only
under certain specified circumstances described herein and in the related
Prospectus Supplement. See "DESCRIPTION OF THE SECURITIES--Special Redemption,"
"--Optional Redemption," "--Optional Termination," "--Optional Repurchase of
Certificates," and "--Other Repurchases." Shearson Lehman Brothers Inc. ("Lehman
Brothers"), through one or more of its affiliates, and the other underwriters,
if any, presently expect to make a secondary market in the Securities, but have
no obligation to do so.
LIMITED ASSETS. The Issuer will not have, nor be expected in the future to
have, any significant assets available for payments on a Series of Securities
other than the assets pledged as security or deposited into a Trust Fund for a
specific Series. The Bonds will be non-recourse obligations of the Issuer and
each Series of Bonds will be separately secured. Unless otherwise specified in
the related Prospectus Supplement, no Series will have any claim against or
security interest in the Primary Assets pledged to secure any other Series. If
the Primary Assets securing a Series of Bonds is insufficient to make payments
on such Bonds, no other assets of the Issuer will be available for payment of
the deficiency.
Unless otherwise set forth in the Prospectus Supplement for a Series of
Certificates, the Trust Fund for such Series will be the only available source
of funds to make distributions on the Certificates of such Series. The only
obligations, if any, of the Depositor with respect to the Certificates of any
Series will be pursuant to certain representation and warranties. The Depositor
does not have, and is not expected in the future to have, any significant assets
with which to meet any obligation to repurchase Mortgage Assets with respect to
which there has been a breach of any representation or warranty. If, for
example, the Depositor were required to repurchase a Mortgage Loan which
constitutes a Mortgage Asset, its only sources of funds to make such repurchase
would be from funds obtained from the enforcement of a corresponding obligation,
if any, on the part of the originator of the Mortgage Loans or the Servicer, as
the case may be, or from a reserve fund established to provide funds for such
repurchases.
Additionally, certain amounts remaining in certain funds or accounts,
including the Collection Account and any Reserve Funds, may be withdrawn under
certain conditions and circumstances described in the related Prospectus
Supplement. In the event of such withdrawal, such amounts will not be pledged
to, or available for, future payment or distribution of principal of or interest
on the Securities. If so specified in the related Prospectus Supplement, on any
Payment Date or Distribution Date on which the principal balance of the Mortgage
Assets is reduced due to losses on the Mortgage Assets, (i) the amount of such
losses will be allocated first, to reduce the Aggregate Outstanding Principal of
the Subordinate Securities or other subordination, if any, and, thereafter, to
reduce the Aggregate Outstanding Principal of the remaining Securities in the
priority and manner specified in such Prospectus Supplement until the Aggregate
Outstanding Principal of each Class of Securities so specified has been reduced
to zero or paid
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in full, thus, reducing the amount of principal payable on each such Class of
Securities or (ii) such losses may be allocated in any other manner set forth in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, such reductions of principal of a Class or Classes of
Securities shall be allocated to the Holders of the Securities of such Class or
Classes pro rata in the proportion which the outstanding principal of each
Security of such Class or Classes bears to the Aggregate Outstanding Principal
of all Securities of such Class.
YIELD AND PREPAYMENT CONSIDERATIONS. Prepayments on the Mortgage Loans
comprising or underlying the Mortgage Assets securing a Series or deposited into
a Trust Fund, as the case may be, generally will result in a faster rate of
principal payments on such Securities than if payments on such Mortgage Assets
were made as scheduled. Thus, the prepayment experience on the Mortgage Loans
comprising or underlying the Mortgage Assets will affect the average life of
each Class secured thereby and the extent to which each such Class is paid prior
to its Stated Maturity or Final Scheduled Distribution Date. The rate of
principal payments on pools of mortgage loans varies between pools and from time
to time is influenced by a variety of economic, demographic, geographic, social,
tax, legal and other factors. There can be no assurance as to the rate of
prepayment on the Mortgage Assets securing any Series of Bonds or deposited into
a Trust Fund, as the case may be, or that the rate of payments will conform to
any model described herein or in any Prospectus Supplement. If prevailing
interest rates fall significantly below the applicable mortgage rates, principal
prepayments are likely to be higher than if prevailing rates remain at or above
the rates borne by the Mortgage Loans comprising or underlying the Primary
Assets securing a Series of Bonds or deposited into a Trust Fund, as the case
may be. As a result, the actual maturity of or final distribution on any Class
could occur significantly earlier than its Stated Maturity or Final Scheduled
Distribution Date. The actual maturity of the Bonds or final distribution on the
Certificates will also be affected by the extent to which Excess Cash Flow is
applied to payments or distributions of principal on the Securities. A Series of
Securities may include Classes of PAC Securities or other Securities with
priorities of payment and, as a result, yields on other Classes of Securities of
such Series may be more sensitive to prepayments on Mortgage Loans. A Series may
include a Class offered at a significant premium or iscount. Yields on such
Class of Securities will be sensitive, and in some cases extremely sensitive, to
prepayments on Mortgage Loans and, in the case of a premium Class, where the
amount of interest payable with respect to such Class is extremely
disproportionate to principal, a holder might, in some prepayment scenarios,
fail to recoup its original investment. See "YIELD AND PREPAYMENT
CONSIDERATIONS."
LIMITED NATURE OF RATING. Any rating assigned to the Securities by a Rating
Agency will reflect such Rating Agency's assessment solely of the likelihood
that holders of such Securities will receive payments required to be made under
the Indenture or Trust Agreement, as the case may be. Such rating will not
constitute an assessment of the likelihood that principal prepayments on the
Mortgage Loans underlying or comprising the Mortgage Assets will be made by
Mortgagors or of the degree to which the rate of such prepayments might differ
from that originally anticipated. Such rating will not address the possibility
that prepayment at higher or lower rates than anticipated by an investor may
cause such investor to experience a lower than anticipated yield or that
investors purchasing a Security at a significant premium might fail to recoup
their initial investment under certain prepayment scenarios.
The amount of Primary Assets, including any applicable Enhancement, required
to support a Series of Securities will be determined on the basis of criteria
established by each Rating Agency rating such Series. Such criteria are
sometimes based upon actuarial analysis of the behavior of mortgage loans in a
larger group. Such analysis is often the basis upon which each Rating Agency
determines the amount of Enhancement required with respect to each Series of
Securities. There can be no assurance that the historical data supporting such
actuarial analysis will accurately reflect future experience generally nor any
assurance that the data derived from a large pool of mortgages will accurately
predict the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Loans. In other cases, such analysis may be based upon the value of
the property underlying the Mortgage Assets. There can be no assurance that
26
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such value will accurately reflect the future value of the property and,
therefore, whether or not the Securities will be paid in full.
Certain legal aspects of the Mortgage Loans comprising or underlying
Mortgage Assets for a Series will be described in the related Prospectus
Supplement.
Certain Mortgage Loans and Mortgaged Property; Obligor Default. Mortgage
Loans made with respect to Multifamily or Commercial Property may entail risks
of loss in the event of delinquency and foreclosure that are greater than
similar risks associated with traditional single-family property. Many of the
Mortgage Loans may be nonrecourse loans as to which, in the event of an obligor
default, recourse may be had only against the specific Commercial or Multifamily
Property and such limited other assets as have been pledged to secure such
Mortgage Loan, and not against the obligor's other assets. Furthermore, the
repayment of loans secured by income producing properties is typically dependent
upon the successful operation of the related real estate project rather than
upon the liquidation value of the underlying real estate. If the net operating
income from the project is reduced (for example, if rental or occupancy rates
decline or real estate and personal property tax rates or other operating
expenses increase), the obligor's ability to repay the loan may be impaired. A
number of the Mortgage Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the obligor or single tenant, as
applicable, may have a disproportionately greater effect on the net operating
income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants. Furthermore, the liquidation value
of any Mortgaged Property may be adversely affected by risks generally incident
to interests in real property, including changes in general or local economic
conditions and/or specific industry segments; declines in real estate values;
declines in rental or occupancy rates; increases in interest rates, real estate
and personal property tax rates and other operating expenses including energy
costs; changes in governmental rules, regulations and fiscal policies, including
environmental legislation; acts of God; and other factors which are beyond the
Master Servicer's orthe Special Servicer's, if any, control. Although the
Servicer or the Master Servicer is obligated to cause standard hazard insurance
to be maintained with respect to each Mortgage Loan, insurance with respect to
extraordinary hazards such as earthquakes and floods is generally not required
to be maintained, and insurance is not available with respect to many of the
other risks listed above.
Certain of the Mortgage Loans as of the Cut-Off Date may not be fully
amortizing over their terms to maturity, and, thus, will have substantial
principal balances due at their stated maturity. Mortgage Loans with balloon
payments involve a greater degree of risk because the ability of an obligor to
make a balloon payment typically will depend upon its ability either to
refinance the loan or to sell the related Mortgaged Property. The ability of an
obligor to accomplish either of these goals will be affected by a number of
factors, including the level of available mortgage rates at the time of sale or
refinancing, the obligor's equity in the related Mortgaged Property, the
financial condition and operating history of the obligor and the related
Mortgaged Property, tax laws, prevailing general economic conditions and the
availability of credit for commercial or multifamily, as the case may be, real
estate projects generally.
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Mortgage Loans, the Special Servicer, if any, will have
considerable flexibility under the Special Servicing Agreement to extend and
modify Mortgage Loans which are in default or as to which a payment default is
reasonably foreseeable, including in particular with respect to balloon
payments. In addition, the Special Servicer may receive a workout fee based on
receipts from or proceeds of such Mortgage Loans. While the Special Servicer
generally will be required to determine that any such extension or modification
is likely to produce a greater recovery on a present value basis than
liquidation, there can be no assurance that such flexibility with respect to
extensions or modifications or payment of a workout fee to the Special Servicer
will increase the present value of receipts from or proceeds of Mortgage Loans
which are in default or as to which a default is reasonably foreseeable. To the
extent losses on such Mortgage Loans exceed levels of available enhancement, the
Holders of the Bonds of a Series may experience a loss. See "SERVICING OF
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MORTGAGE LOANS--Maintenance of Insurance Policies and Other Servicing
Procedures" and "ENHANCEMENT."
ENHANCEMENT LIMITATIONS. The amount, type and nature of Insurance Policies,
subordination, Bond Guarantee Insurance, letters of credit,
overcollateralization, Reserve Funds and other enhancement, if any, required
with respect to a Series will be determined on the basis of criteria established
by each Rating Agency rating such Series. Such criteria are sometimes based upon
an actuarial analysis of the behavior of mortgage loans in a larger group. Such
analysis is often the basis upon which each Rating Agency determines the amount
of Enhancement required with respect to each Series of Securities. There can be
no assurance that the historical data supporting any such actuarial analysis
will accurately reflect future experience nor any assurance that the data
derived from a large pool of mortgage loans accurately predicts the delinquency,
foreclosure or loss experience of any particular pool of Mortgage Loans.
In addition, if principal payments on Securities of a Series are made in a
specified order of priority, any limits with respect to the aggregate amount of
claims under any related insurance policy, letters of credit or other
enhancement may be exhausted before the principal of the lower priority Classes
has been repaid. As a result, the impact of significant losses on the Mortgage
Loans may bear primarily upon the Securities of the later maturing Classes.
The Prospectus Supplement for a Series will describe any Reserve Funds,
Insurance Policies, letter of credit, subordination, Bond Guarantee Insurance,
over collateralization or other credit support relating to the Mortgage Assets
or to the Securities of such Series. Use of such Reserve Funds and payments
under such Insurance Policies, Bond Guarantee Insurance, letter of credit or
other third-party credit support will be subject to the conditions and
limitations described herein and in the related Prospectus Supplement. Moreover,
such Reserve Funds, Insurance Policies, letter of credit or other credit support
may not cover all potential losses or risks; for example, Enhancement may or may
not cover fraud or negligence by the Issuer, the Master Servicer or other
parties. Moreover, if a form of enhancement covers more than one Series of
Securities (each, a "Covered Trust"), holders of Securities issued by any of
such Covered Trusts will be subject to the risk that such credit support will be
exhausted by the claims of other Covered Trusts prior to such Covered Trust
receiving any of its intended share of such coverage. The obligations of the
issuers of any credit support will not be guaranteed or insured by the United
States, or by any agency or instrumentality thereof. A Series of Bonds may
include a Class or multiple Classes of Subordinate Securities to the extent
described in the related Prospectus Supplement. Although such subordination is
intended to reduce the risk of delinquent distributions or ultimate losses to
Holders of Senior Securities, the amount of subordination will be limited and
will decline under certain circumstances and any related Reserve Fund could be
depleted in certain circumstances. See "DESCRIPTION OF THE SECURITIES,"
"SECURITY FOR THE BONDS AND CERTIFICATES" and "ENHANCEMENT."
OVERCOLLATERALIZATION AND SUBORDINATION. To provide Bondholders and
Certificateholders with a degree of protection against loss, Mortgage Assets
having an Asset Value in excess of the principal amount of the Securities may be
pledged to secure a Series or deposited into the related Trust Fund, as the case
may be, or Excess Cash Flow may be applied to create overcollateralization.
Alternatively, a Series of Securities may include one or more Classes of
Subordinate Securities to the extent described in the related Prospectus
Supplement. Such overcollateralization or subordination will be at amounts
established by the Rating Agency rating the Series based on an assumed level of
defaults, delinquencies, other losses, application of Excess Cash Flow or other
factors. There can, however, be no assurance that the loss experience on the
Mortgage Assets securing the Securities will not exceed such assumed levels,
adversely affecting the ability of the Issuer to meet debt service or
distribution requirements on the Securities.
Although overcollateralization and subordination are intended to reduce the
risk of delinquent payments or losses to holders of Senior Securities, the
amount of overcollateralization or subordination, as the case may be, will be
limited and will decline under certain circumstances and any related Reserve
Fund could be depleted in certain circumstances.
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Delinquent and Non-Performing Mortgage Loans. As set forth in the related
Prospectus Supplement, the Mortgage Pool for a particular Series may include, as
of the Cut-Off Date, REO Properties or Mortgage Loans that are past due or are
non-performing. If so specified in the related Prospectus Supplement, management
of such REO Properties or servicing with respect to such Mortgage Loans will be
transferred to the Special Servicer as of the Closing Date. Enhancement provided
with respect to a particular Series may not cover all losses related to such
delinquent or non-performing Mortgage Loans or to such REO Properties. Investors
should consider the risk that the inclusion of such Mortgage Loans or such REO
Properties in the Mortgage Pool may affect the rate of defaults and prepayments
on such Mortgage Pool and the yield on the Securities of such Series. See
"SECURITY FOR THE BONDS AND CERTIFICATES--Mortgage Loans."
Remedies Following Default. The market value of the Mortgage Assets securing
a Series will fluctuate as general interest rates fluctuate. Following an Event
of Default with respect to a Series of Bonds, there is no assurance that the
market value of the Mortgage Assets securing the Series, will be equal to or
greater than the unpaid principal and accrued interest due on the Bonds of such
Series, together with any other expenses or liabilities payable thereon. If the
Mortgage Assets securing a Series are sold by the Trustee following an Event of
Default, the proceeds of such sale may be insufficient to pay in full the
principal of and interest on such Bonds. However, in certain events the Trustee
may be restricted from selling the Mortgage Assets securing a Series. See "THE
INDENTURE--Events of Default."
In addition, upon an Event of Default with respect to a Series and a
resulting sale of the Mortgage Assets securing such Bonds, unless otherwise
specified in the related Prospectus Supplement, the proceeds of such sale will
be applied, first, to the payment of certain amounts due to the Trustee, second,
to the payment of accrued interest on, and then to the payment of the then
Aggregate Outstanding Principal of, such Bonds (including interest on and the
Aggregate Outstanding Principal of any Residual Interest Bond) (as specified in
the related Prospectus Supplement), third, to the payment of the remaining
Administration Fee, if any, and, fourth, to the payment of any additional
amounts due the Issuer or to the holders of the Residual Interest Bonds as
applicable. Consequently, in the event of any such Event of Default and sale of
Mortgage Assets, any Classes on which principal payments have previously been
made may have, in the aggregate, a greater proportion of their principal repaid
than will Classes on which principal payments have not previously been made.
In the event the principal of the Securities of a Series is declared due and
payable, the holders of any such Securities issued at a discount from par
("original issue discount") may be entitled, under applicable provisions of the
federal Bankruptcy Code, to receive no more than an amount equal to the unpaid
principal amount thereof less unamortized original issue discount ("accreted
value"). There is no assurance as to how such accreted value would be determined
if such event occurred.
ENFORCEABILITY. As specified in the related Prospectus Supplement, the
Mortgages may contain due-on-sale clauses, which permit the lender to accelerate
the maturity of the Mortgage Loan if the borrower sells, transfers or conveys
the related Mortgaged Property or its interest in the Mortgaged Property. Such
clauses are generally enforceable subject to certain exceptions.
As specified in the related Prospectus Supplement, the Mortgage Loans may
include a debt-acceleration clause, which permits the lender to accelerate the
debt upon a monetary or non-monetary default of the borrower. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default. The equity courts of any state, however, may refuse to
foreclose a mortgage or deed of trust when an acceleration of the indebtedness
would be inequitable or unjust or the circumstances would render the
acceleration unconscionable.
To the extent specified in the related Prospectus Supplement, the Mortgage
Loans will be secured by an assignment of leases and rents pursuant to which the
obligor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so
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long as there is no default. In the event the obligor defaults, the license
terminates and the lender is entitled to collect rents. Such assignments must
usually be recorded to be perfected as security interests. In addition, some
state laws require that the lender take possession of the Mortgaged Property
and/or obtain a judicial appointment of a receiver before becoming entitled to
collect the rents. See also "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Anti-Deficiency Legislation and Other Limitations on Lenders."
ENVIRONMENTAL RISKS. Real property pledged as security to a lender may be
subject to certain environmental risks. Under the laws of certain states,
contamination of a property may give rise to a lien on the property to assure
the costs of clean-up. In several states, such a lien has priority over the lien
of an existing mortgage against such property. In addition, under the laws of
some states and under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), a lender may be liable, as
an "owner" or "operator," for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents or
employees of the lender have become sufficiently involved in the operations of
the borrower, regardless of whether or not the environmental damage or threat
was actually caused or exacerbated by the lender's agents or employees. A lender
also risks such liability on and following foreclosure of the Mortgaged
Property. Unless otherwise specified in the related Prospectus Supplement, the
Servicing Agreement, Master Servicing Agreement or Special Servicing Agreement,
as applicable, provides that the Servicer, the Master Servicer or the Special
Servicer, as applicable, acting on behalf of the Trust Estate, may not acquire
title to a Mortgaged Property underlying a Mortgage Loan or take over its
operation unless the Servicer, the Master Servicer or the Special Servicer, as
applicable, has previously determined, based upon a report prepared by a person
who regularly conducts environmental audits, that (i) the Mortgaged Property is
in compliance with applicable environmental laws and regulations or, if not,
that taking such actions as are necessary to bring the Mortgaged Property in
compliance therewith is reasonably likely to produce a greater recovery on a
present value basis than not taking such actions and (ii) there are no
circumstances or conditions present that have resulted in any contamination or
if such circumstances or conditions are present for which sch action could be
required, taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis than
not taking such actions. See "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Environmental Matters."
ERISA CONSIDERATIONS. Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the assets of such plans. Due
to the complexity of regulations which govern such plans, prospective investors
that are subject to ERISA are urged to consult their own counsel regarding
consequences under ERISA of acquisition, ownership and disposition of the
Securities of any Series. See "ERISA CONSIDERATIONS."
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL INTEREST BONDS AND
RESIDUAL INTEREST CERTIFICATES. Holders of Residual Interest Bonds and Residual
Interest Certificates will be required to report on their federal income tax
returns as ordinary income their pro rata share of the taxable income of the
REMIC regardless of the amount or timing of their receipt of cash payments as
described in "FEDERAL INCOME TAX CONSIDERATIONS--Residual Interests in a REMIC."
Accordingly, under certain circumstances, holders of Securities which constitute
Residual Interest Bonds and Residual Interest Certificates may have taxable
income and tax liabilities arising from such investment during a taxable year in
excess of the cash received during such period. The requirement that holders of
Residual Interest Bonds and Residual Interest Certificates report their pro rata
share of the taxable income and net loss of the REMIC will continue until the
principal balances of all Classes of Bonds or Certificates of the related Series
have been reduced to zero, even though holders of Residual Interest Bonds and
Residual Interest Certificates have received full payment of their stated
interest and principal (if any). A portion (or, in certain circumstances, all)
of a holder of a Residual Interest Bond's or Residual Interest Certificate's
share of the REMIC taxable income may be treated as "excess inclusion" income to
such holder which (i) generally, will not be subject to offset by losses from
other activities, (ii) for a tax-exempt holder, will be
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treated as unrelated business taxable income and (iii) for a foreign holder,
will not qualify for exemption from withholding tax. Individual holders of
Securities constituting Residual Interest Bonds and Residual Interest
Certificates may be limited in their ability to deduct servicing fees and other
expenses of the REMIC. In addition, Residual Interest Bonds and Residual
Interest Certificates are subject to certain restrictions on transfer. Because
of the special tax treatment of Residual Bonds, the taxable income arising in a
given year on a Residual Interest Bond and Residual Interest Certificates will
no be equal to the taxable income associated with investment in a corporate bond
or stripped instrument having similar cash flow characteristics and pre-tax
yield. Therefore, the after-tax yield on the Residual Interest Bond and Residual
Interest Certificates may be significantly less than that of a corporate bond or
stripped instrument having similar cash flow characteristics, or may be
negative.
DESCRIPTION OF THE SECURITIES
GENERAL
The following summaries describe certain provisions common to each Series.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the provisions of the Indenture or
Trust Agreement and the Prospectus Supplement relating to each Series. When
particular provisions or terms used in the Indenture or Trust Agreement are
referred to, such provisions or terms shall be as specified in the Indenture or
Trust Agreement.
THE BONDS--GENERAL
The Bonds will be issued in Series pursuant to a Trust Indenture between the
Company and Bankers Trust or Marine Midland (or another bank or trust company
qualified under the TIA and named in the related Prospectus Supplement for a
Series), as Trustee, or a Trust and the Trustee, each as supplemented by or as
incorporated by reference by a Series Supplement with respect to each Series. A
copy of the form of Trust Indenture has been filed with the Commission as an
exhibit to the Registration Statement of which the Prospectus forms a part. A
copy of the Series Supplement for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Bonds of the related Series.
The Indenture does not limit the amount of Bonds that can be issued
thereunder and provides that any Series may be issued thereunder up to the
aggregate principal amount specified in the related Series Supplement that may
be authorized from time to time by the Issuer. Each Series will consist of one
or more Classes, one or more of which may be Compound Interest Securities,
Variable Interest Securities, Individual Investor Securities, Planned
Amortization Class Securities, Zero Coupon Securities, Principal Only
Securities, Interest Only Securities or Participating Securities. A Series may
also include one or more Classes of Subordinate Securities. If so specified in
related Prospectus Supplement, such Subordinate Securities may be offered hereby
and by the related Prospectus Supplement. Each Class of a Series will be issued
in registered or bearer form, as designated in the related Prospectus Supplement
for a Series, in the minimum denominations specified in the related Prospectus
Supplement. See "--Bearer Securities and Registered Securities." Bonds of a
Series may be issued in whole or part in book-entry form. The transfer of the
Bonds may be registered and the Bonds may be exchanged without the payment of
any service charge payable in connection with such registration of transfer or
exchange.
Payments of principal of and interest on the Bonds which are registered
securities will be made by the Trustee, or if the Trustee is not the paying
agent, the Paying Agent. Payments of principal of and interest on a Series will
be made on the Payment Dates specified in the related Prospectus Supplement, to
Bondholders of such Series registered as such on the close of business on the
record date specified in the related Prospectus Supplement at their addresses
appearing on the Bond Register. All payments will be made by check mailed to the
Bondholder or by wire transfer to accounts maintained by such Bondholder as
specified in the related Prospectus Supplement, except that final payments of
principal in retirement of
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each Bond will be made only upon presentation and surrender of such Bond at the
office of the New York Presenting Agent. Notice will be mailed to the holder of
such Bond before the Payment Date on which the final principal payment in
retirement of the Bond is expected to be made.
The Trustee will include with each payment on a Bond a statement showing
among other things, the allocation of such payment to interest, if any, and
principal, if any, and the remaining unpaid principal amount of a Bond of each
Class having the minimum denomination for Bonds of such Class of that Series,
the amount of Advances made by the Primary Servicer, the amount of servicing
compensation paid with respect to the Mortgage Assets, the aggregate principal
balance of delinquent, foreclosed Mortgage Loans and REO Property, the realized
losses for the Mortgage Assets, if applicable, the number and aggregate
principal balance of Deleted and Substitute Mortgage Loans, and on each Payment
Date prior to the commencement of principal payments on a Class of Compound
Interest Bonds, the aggregate unpaid principal amount of each Class of Bonds,
the interest accrued since the prior Payment Date and added to the principal of
a Compound Interest Bond having the minimum denomination for Bonds of such Class
and the new principal balance of such Bond.
THE CERTIFICATES--GENERAL
The Certificates will be issued in Series pursuant to separate Trust
Agreements between the Depositor and Bankers Trust or Marine Midland (or another
bank or trust company qualified under the TIA and named in the Prospectus
Supplement for a Series). A form of Trust Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement relating to each Series of Certificates will be filed as an exhibit to
a report on Form 8-K to be filed with the Commission within 15 days following
the issuance of such Series of Certificates. The following summaries describe
certain provisions common to each Series of Certificates. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, the provisions of the Trust Agreement and the Prospectus
Supplement relating to each Series of Certificates. When particular provisions
or terms used in the Trust Agreement are referred to, such provisions or terms
shall be as specified in the Trust Agreement.
Each Series of Certificates will consist of one or more Classes, one or more
of which may consist of Compound Interest Securities, Variable Interest
Securities, Interest Only Certificates, Principal Only Certificates, Zero Coupon
Securities or Planned Amortization Class Securities ("PACs"). A Series of
Certificates may also include one or more Classes of Subordinate Securities.
Each Series will be issued in fully registered form or bearer form, in the
minimum original amount or notional amount for Certificates of each Class
specified in the related Prospectus Supplement. The transfer of the Certificates
may be registered, and the Certificates may be exchanged, without the payment of
any service charge payable in connection with such registration of transfer or
exchange. If specified in the related Prospectus Supplement, one or more Classes
of a Series may be available in book-entry form only. See "--Bearer Securities
and Registered Securities."
Commencing on the date specified in the related Prospectus Supplement,
distributions of principal and interest on the Certificates will be made on each
Distribution Date as set forth in the related Prospectus Supplement.
Distribution of principal of and interest on Certificates of a Series in
registered form will be made by check mailed to Certificateholders of such
Series registered as such on the close of business on the record date specified
in the related Prospectus Supplement at their addresses appearing on the
Certificate Register, except that (a) distributions may be made by wire transfer
(at the expense of the Certificateholder requesting payment by wire transfer) in
certain circumstances described in the related Prospectus Supplement and (b) the
final distribution in retirement of a Certificate will be made only upon
presentation and surrender of such Certificate at the corporate trust office of
the Trustee for such Series or such
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other office of the Trustee as specified in the Prospectus Supplement. Notice of
the final distribution on a Certificate will be mailed to the Holder of such
Certificate before the Distribution Date on which such final distribution in
retirement of the Certificate is expected to be made.
The Trustee will include with each distribution on a Certificate a statement
showing among other things, the allocation of such payment to interest, if any,
and principal, if any, and the remaining unpaid principal amount of a
Certificate of each Class having the minimum denomination for Certificates of
such Class of that Series, the amount of Advances made by the Primary Servicer,
the amount of servicing compensation paid with respect to the Mortgage Assets,
the aggregate principal balance of delinquent, foreclosed Mortgage Loans and REO
Property, the realized losses for the Mortgage Assets, if applicable, the number
and aggregate principal balance of Deleted and Substitute Mortgage Loans, and on
each Distribution Date prior to the commencement of principal payments on a
Class of Compound Interest Securities, the aggregate unpaid principal amount of
each Class of Certificates, the interest accrued since the prior Distribution
Date and added to the principal of a Compound Interest Certificate having the
minimum denomination for Certificates of such Class and the new principal
balance of such Certificate. See "THE TRUST AGREEMENT--Reports to
Certificateholders."
BEARER SECURITY AND REGISTERED SECURITIES
Unless otherwise provided with respect to a Series of Securities, the
Securities will be issuable as registered securities without coupons. If so
provided with respect to a Series of Securities, Securities of such Series will
be issuable solely as bearer securities with coupons attached or as both
registered securities and bearer securities. Any such bearer securities will be
issued in accordance with U.S. tax and securities laws then applicable to the
sale of such securities.
Unless applicable law at the time of issuance of any bearer securities
provides otherwise, in connection with the sale during the "restricted period'
as defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury
Regulations (generally, the first 40 days after the Closing Date and, with
respect to unsold allotments, until sold) no bearer security shall be mailed or
otherwise delivered to any location in the United States (as defined under
"LIMITATIONS ON ISSUANCE OF BEARER SECURITIES"). A bearer security in definitive
form may be delivered only if the Person entitled to receive such bearer
security furnishes written certification, in the form required by the Indenture,
to the effect that such bearer security is not owned by or on behalf of a United
States person (as defined under "LIMITATIONS ON ISSUANCE OF BEARER SECURITIES"),
or, if a beneficial interest in such bearer security is owned by or on behalf of
a United States person, that such United States person (i) acquired and holds
the bearer security through a foreign branch of a United States financial
institution, (ii) is a foreign branch of a United States financial institution
purchasing for its own account or resale (and in either case (i) or (ii), such
financial institution agreed to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder) or (iii) is a financial institution purchasing for
resale during the restricted period only to non-United States persons outside
the United States. See "LIMITATION ON ISSUANCE OF BEARER SECURITIES."
Registered securities of any Series (other than in book-entry form) will be
exchangeable for other registered securities of the same Series and of a like
aggregate principal amount and tenor but of different authorized denominations.
In addition, if specified in the related Prospectus Supplement, if Securities of
any Series are issuable as both registered securities and as bearer securities,
at the option of the Holder, upon request confirmed in writing, and subject to
the terms of the Indenture or Trust Agreement, as the case may be, bearer
securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such Series will be exchangeable into registered
securities of the same Series of any authorized denominations and of a like
aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any bearer security surrendered in exchange
for a registered security between the relevant record date and the relevant date
for payment of interest shall be surrendered without the coupon relating to such
date for payment of interest and interest will not be
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payable in respect of the registered security issued in exchange for such bearer
security, but will be payable only to the holder of such coupon when due in
accordance with the terms of the Indenture or Trust Agreement, as the case may
be. Except as provided in an applicable Prospectus Supplement, bearer securities
will not be issued in exchange for registered securities. If Securities of a
Series are issuable as bearer securities, the Issuer will be required to
maintain a transfer agent for such Series outside the United States.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
or distribution of principal of and interest on bearer securities will be
payable or distributable, subject to any applicable laws and regulations, at the
offices of such Paying Agents outside the United States as the Issuer may
designate from time to time by check or by wire transfer, at the option of the
holder, to an account maintained by the payee with a bank located outside the
United States. Unless otherwise indicated in an applicable Prospectus
Supplement, payment or distribution of interest on bearer securities on any
Payment Date or Distribution Date, as applicable, will be made only against
surrender of the coupon relating to such Payment Date or Distribution Date, as
applicable. No payment or distribution of interest on a bearer security will be
made unless on the earlier of the date of the first such payment by the Paying
Agent or the delivery by the Issuer of the bearer security in definitive form
(the "Certification Date"), a written certificate in the form and to the effect
described above is provided to the Issuer. No payment or distribution with
respect to any bearer security will be made at any office or agency in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Notwithstanding the foregoing, payment or distribution of principal of and
interest on bearer securities denominated and payable in U.S. dollars will be
made at the office of the Issuer's Paying Agent in the Borough of Manhattan, The
City of New York if, and only if, payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, the Securities will be
issued in book-entry form in the minimum denominations specified in such
Prospectus Supplement and integral multiples thereof, and each Class will be
represented by one or more single Securities registered in the name of the
nominee of the depository, The Depository Trust Company ("DTC"), a
limited-purpose trust company organized under the laws of the State of New York.
Unless otherwise specified in the related Prospectus Supplement, no person
acquiring an interest in book-entry Securities (a "Securities Owner") will be
entitled to receive Securities representing such person's interest in the
Securities except in the event that Definitive Securities (as defined herein)
are issued under the limited circumstances set forth below. Unless and until
Definitive Securities are issued, it is anticipated that the only holder of
book-entry Securities will be Cede & Co., as nominee of DTC. Securities Owners
will not be "Holders," "Bondholders" or "Certificateholders" under the Indenture
or Trust Agreement, as applicable, and Securities Owners will only be permitted
to exercise the rights of Bondholders or Certificateholders, as applicable,
indirectly through DTC and its Participants.
DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to entities that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Securities Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of book-entry
Securities may do so only through Participants and Indirect Participants.
Because DTC can only act on behalf of Participants and Indirect Participants,
the ability of a Securities Owner to pledge such owner's interest in a
book-entry Security to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest in a book-entry
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Security, may be limited. In addition, under a book-entry format, Securities
Owners may experience some delay in their receipt of principal and interest
distributions with respect to the book-entry Securities since such distributions
will be forwarded to DTC and DTC will then forward such distributions to its
Participants which in turn will forward them to Indirect Participants or
Securities Owners.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the book-entry Securities
and is required to receive and transmit principal and interest distributions and
other distributions with respect to the book-entry Securities. Participants and
Indirect Participants with which Securities Owners have accounts with respect to
book-entry Securities similarly are required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective Securities
Owners. Accordingly, although Securities Owners will not possess book-entry
Securities, the Rules provide a mechanism by which Securities Owners will
receive distributions and will be able to transfer their interests.
The Issuer understands that DTC will take any action permitted to be taken
by a Bondholder or Certificateholder under the Indenture or Trust Agreement, as
applicable, only at the direction of one or more Participants to whose account
with DTC ownership of the book-entry Securities is credited. Additionally, the
Issuer understands that DTC will take such actions with respect to Securities
Owners who are holders of a certain specified interest in book-entry Securities
or holders having a certain specified voting interest only at the direction of
and on behalf of Participants whose holdings represent that specified interest
or voting interest. DTC may take conflicting actions with respect to other
Securities Owners to the extent that such actions are taken on behalf of
Participants whose holdings represent that specified interest or voting
interest.
Unless otherwise specified in the related Prospectus Supplement, Securities
of a Series issued initially in book-entry form only will be issued in fully
registered, certificated form ("Definitive Securities") to Securities Owners,
rather than to DTC, only if (i) DTC advises the Trustee in writing that DTC is
no longer willing or able properly to discharge its responsibilities as
depository with respect to the Securities, and the Issuer is unable to locate a
qualified successor, (ii) the Issuer, at its sole option, elects to terminate
the book-entry system through DTC or (iii) after the occurrence of an Event of
Default under the Indenture or Trust Agreement, as applicable, Bond owners
representing a majority of the aggregate outstanding principal amount of the
Securities advise DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of Securities Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Securities. Upon surrender by DTC of the
Securities registered in the name of its nominee and instructions for
registration, the Trustee will issue all, but not less than all, of the
principal amount of the formerly DTC-held Securities then outstanding in the
form of Definitive Securities, and thereafter the Trustee will recognize the
holders of such Definitive Securities as Bondholders under the Indenture, or
Certificateholders under the Trust Agreement, as applicable.
VALUATION OF MORTGAGE ASSETS
If stated in the applicable Prospectus Supplement, each item of Mortgage
Assets securing a Series, or comprising the Trust Fund, as the case may be, will
be assigned an initial Asset Value determined in the manner and subject to the
assumptions specified in the related Prospectus Supplement. If so specified in
the related Prospectus Supplement, the aggregate of the Asset Values of the
Mortgage Assets pledged to secure a Series or comprising the Trust Fund, as the
case may be, will not be less than the initial Aggregate Outstanding Principal
of the related Series at the date of issuance thereof.
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With respect to the Mortgage Assets pledged to collateralize the Bonds of a
Series, or comprising the Trust Fund, as the case may be, as of any date, the
Aggregate Asset Value, unless otherwise specified in the related Prospectus
Supplement, shall be equal to the aggregate of the Asset Values for each
Mortgage Loan or Private Mortgage-Backed Security or other Mortgage Assets in
the Trust Estate or Trust Fund, as applicable, for a Series of Securities plus
the amount, if any, remaining in the Collection Account and any other Pledged
Fund or Account subsequent to an initial deposit therein on the Delivery Date,
together with Reinvestment Income thereon, if any, at the Assumed Reinvestment
Rate, if any.
There are a number of alternative means of determining Asset Value of the
Mortgage Assets, including determinations based on the discounted present value
of the remaining scheduled payments on such Mortgage Assets, determinations
based on the relationship between the interest rate borne by such Mortgage
Assets and the Bond Interest Rate or Rates or Certificate Interest Rate or Rates
for the related Classes of Securities, or based upon the aggregate outstanding
principal balances of the Mortgage Assets. If applicable, the Prospectus
Supplement for a Series will specify the method or methods and summarize the
related assumptions used to determine the Asset Values of the Mortgage Assets
for such Series of Securities.
The Assumed Reinvestment Rate, if any, for a Series will be the rate on
which amounts deposited in the Collection Account will be assumed to accrue
interest or a rate insured or guaranteed by means of a surety bond, Guaranteed
Investment Contract, or similar arrangement. If the Assumed Reinvestment Rate is
insured or guaranteed, the related Prospectus Supplement will set forth the
terms of such arrangement.
PAYMENTS OR DISTRIBUTIONS OF INTEREST
Each Class of a Series (other than a Class of Zero Coupon Securities or
Principal Only Securities) will accrue interest at the rate per annum specified,
or in the manner determined and set forth, in the related Prospectus Supplement
(calculated on the basis of a 360-day year of twelve 30-day months, unless
otherwise specified in the related Prospectus Supplement). Interest on all
Securities which accrue interest, other than Compound Interest Securities, will
be due and payable on the Payment Dates or Distribution Dates specified in the
related Prospectus Supplement. However, failure to pay interest on a current
basis may not necessarily be an Event of Default with respect to a particular
Series of Securities. Unless otherwise specified in the related Prospectus
Supplement, payment of interest on a Class of Compound Interest Securities will
commence only following the Accrual Termination Date. Prior to such time,
interest on such Class of Compound Interest Securities will accrue and the
amount of interest so accrued will be added to the principal thereof on each
Payment Date or Distribution Date. Following the applicable Accrual Termination
Date, interest payments will be made on such Class on the Compound Value of such
Class. The Compound Value of a Class of Compound Interest Securities equals the
original principal amount of the Class, plus accrued and unpaid interest added
to such Class through the immediately preceding Payment Date or Distribution
Date, less any principal payments previously made on that Class, and if
specified in the related Prospectus Supplement, losses allocable thereto. Each
payment of interest on each Class of Securities (or addition to principal of a
Class of Compound Interest Securities) on a Payment Date or Distribution Date
will include all interest accrued during the related Interest Accrual Period
preceding such Payment Date or Distribution Date, which Interest Accrual Period
will end on the day preceding each Payment Date or Distribution Date or such
earlier date as may be specifie in the related Prospectus Supplement. If the
Interest Accrual Period for a Series ends on a date other than a Payment Date or
Distribution Date for such Series, the yield realized by the holders of such
Securities may be lower than the yield that would result if the Interest Accrual
Period ended on such Payment Date or Distribution Date. Additionally, if so
specified in the related Prospectus Supplement, interest accrued for an Interest
Accrual Period for one or more Classes may be calculated on the assumption that
principal payments (and additions to principal of the Securities), and
allocations of losses on the Primary Assets (if so specified in the related
Prospectus Supplement), are made on the first day of the preceding Interest
Accrual Period and not on the Payment Date or Distribution Date for such
preceding Interest Accrual
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Period when actually made or added. Such method would produce a lower effective
yield than if interest were calculated on the basis of the actual principal
amount outstanding.
To the extent provided in the related Prospectus Supplement, a Series may
include one or more Classes of Variable Interest Securities. The Variable
Interest Rate of Variable Interest Securities will be a variable or adjustable
rate, subject to a Maximum Variable Interest Rate and a Minimum Variable
Interest Rate. It is the Issuer's present intention, subject to changing market
conditions, that the Variable Interest Rate formula or index be based on an
established financial index in the national or international financial markets.
The Variable Interest Payment Dates or Variable Interest Distribution Dates, as
applicable, for Variable Interest Securities will be set forth in the related
Prospectus Supplement and need not be the same as the Payment Dates or
Distribution Dates for other Securities in such Series, but may be either more
or less frequent. Unless otherwise specified in the related Prospectus
Supplement or herein, references to Payment Date or Distribution Dates include
Variable Interest Payment Dates or Variable Interest Distribution Dates, as
applicable. For each Class of Variable Interest Securities, the related
Prospectus Supplement will set forth the initial Bond Interest Rate or
Certificate Interest Rate, as applicable, (or the method of determining it), the
Variable Interest Period and the formula, index or other method by which the
Bond Interest Rate or Certificate Interest Rate, as applicable, for each
Variable Interest Period will be determined.
Interest Only Securities or Interest Weighted Securities, among others, may
be assigned a "Notional Amount" which is used solely for convenience in
expressing the calculation of interest and for certain other purposes. Unless
otherwise specified in the related Prospectus Supplement, the Notional Amount
will be determined at the time of issuance of such Securities based on the
principal balances or Bond Value of the Mortgage Loans attributable to the
Securities of a Series entitled to receive principal, and will be adjusted
monthly over the life of the Securities based upon adjustments to the Asset
Value or principal amounts of such Mortgage Loans. Reference to the Notional
Amount is solely for convenience in certain calculations and does not represent
the right to receive any distributions allocable to principal.
If so specified in the related Prospectus Supplement, if funds in the
Collection Account are insufficient to make required payments of interest to
Bondholders or Certificateholders on any Payment Date or Distribution Date, as
applicable, amounts available for payment to the Bondholders or
Certificateholders of each Class will be allocated pro rata in the proportion in
which the outstanding principal balance of each Bond or Certificate bears to the
aggregate outstanding principal balance of all Bonds or Certificates of such
Class, except that Subordinate Bondholders or Subordinate Certificateholders, if
any, will not, unless otherwise specified in the related Prospectus Supplement,
receive any payments of interest on the Subordinate Bonds or Subordinate
Certificates until Senior Bondholders or Senior Certificateholders receive
payments of interest due them (in each case as described in the related
Prospectus Supplement).
PAYMENTS OR DISTRIBUTIONS OF PRINCIPAL
On each Payment Date or Distribution Date for a Series, the Issuer will make
principal payments to the holders of the Securities of such Series on which
principal is then due and payable. Payments of principal on a Series will be
allocated among Classes of such Series in the order of priority and amounts
specified in the related Prospectus Supplement. All payments or distributions of
principal of Securities of a Class will be applied either on a pro rata or
random lot basis, as specified in the related Prospectus Supplement.
Except as specified otherwise in the related Prospectus Supplement, the
total amount of principal payments or distributions required to be made on the
Securities of any Series on a Payment Date or Distribution Date (the "Principal
Payment Amount") will be determined as specified in the related Prospectus
Supplement. If the Series of Bonds has a Class of PAC Securities, such PAC
Securities will have certain priorities of payment with respect to principal to
the extent of certain targeted amounts with respect to each Payment Date or
Distribution Date, as set forth in the related Prospectus Supplement.
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There can be no assurance that the Principal Payment Amount on any Payment Date
or Distribution Date will be sufficient to pay in full the PAC Amount payable on
such Payment Date or Distribution Date. The failure to pay in full the PAC
Amount payable on a Payment Date or Distribution Date shall not constitute an
Event of Default under the Indenture or Trust Agreement.
If so specified in the related Prospectus Supplement, on any Payment Date or
Distribution Date on which the principal balance of the Mortgage Assets is
reduced due to losses on the Mortgage Assets, (i) the amount of such losses will
be allocated first, to reduce the Aggregate Outstanding Principal of the
Subordinate Bonds or Subordinate Certificates or other subordination, if any,
and, thereafter, to reduce the Aggregate Outstanding Principal of the remaining
Securities in the priority and manner specified in such Prospectus Supplement
until the Aggregate Outstanding Principal of each Class of Securities so
specified has been reduced to zero or paid in full, thus, reducing the amount of
principal payable on each such Class of Securities or (ii) such losses may be
allocated in any other manner set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, such reductions
of principal of a Class or Classes of Securities shall be allocated to the
holders of the Securities of such Class or Classes pro rata in the proportion
which the outstanding principal of each Security of such Class or Classes bears
to the Aggregate Outstanding Principal of all Securities of such Class.
One or more Classes of a Series may consist of Subordinate Bonds or
Subordinate Certificates. Subordinate Bonds or Subordinate Certificates may be
included in a Series to provide credit support as described herein under
"ENHANCEMENT" in lieu of or in addition to other forms of credit support. The
extent of subordination of a Class of Subordinate Bonds or Subordinate
Certificates may be limited as described in the related Prospectus Supplement.
See "ENHANCEMENT." If the Mortgage Assets are divided into separate Mortgage
Groups securing separate Classes of a Series, credit support may be provided by
a cross-support feature which requires that distributions be made to Senior
Bonds or Senior Certificates secured by one Mortgage Group prior to making
distributions on Subordinate Bonds or Senior Certificates secured by another
Mortgage Group within the Trust Estate or Trust Fund. Subordinate Bonds or
Subordinate Certificates will be offered hereby and by the related Prospectus
Supplement so long as such Bonds or Certificates are rated in one of the four
highest rating categories by at least one Rating Agency.
SPECIAL REDEMPTION
If specified in the related Prospectus Supplement, the Bonds of a Series may
be subject to special redemption on the day of any month specified therein if,
as a result of the prepayment experience on the Mortgage Assets securing such
Bonds or the low yield available for reinvestment or both, the Trustee
determines (based on assumptions specified in the Indenture and after giving
effect to the amounts, if any, available to be withdrawn from any Reserve Fund
for such Series) that the amount anticipated to be available in the Collection
Account on the date specified in the related Prospectus Supplement for such
Series, is anticipated to be insufficient to pay debt service on the Bonds of
such Series on such Payment Date. The principal amount of Bonds of such Series
required to be so redeemed will not exceed the Principal Payment Amount
otherwise required to be paid on the next Payment Date. Therefore, the primary
result of such a special redemption of Bonds is payment of principal prior to
the next scheduled Payment Date.
To the extent described in the related Prospectus Supplement, Bonds of a
Series may be subject to special redemption in whole or in part following
certain defaults under an Enhancement Agreement and, in certain other events, at
the Redemption Price.
All payments of principal pursuant to any special redemption will be made in
the order of priority and in the manner specified in the related Prospectus
Supplement. Notice of any special redemption will be mailed by the Issuer or the
Trustee prior to the Special Redemption Date. Unless otherwise specified in the
related Prospectus Supplement, the Redemption Price for any Bonds so redeemed
will be equal to
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100% of the principal amount of such Bonds (or 100% of the Compound Value of any
Compound Interest Securities) or portions thereof so redeemed, together with
interest accrued thereon to the date specified in the related Prospectus
Supplement.
In the event that Mortgage Assets having an Aggregate Bond Value at least
equal to the original Aggregate Outstanding Principal of a Series is not pledged
and delivered to the Trustee on the related Closing Date, the Issuer will
deposit cash or Eligible Investments on an interim basis with the Trustee on
such Closing Date in lieu of such Undelivered Mortgage Assets. If Mortgage
Assets are not subsequently delivered within 90 days of issuance of the Bonds,
the amount of such deposit corresponding to principal may be used to pay a
corresponding amount of principal of the Bonds to the extent set forth, and on
the Payment Dates specified, in the Prospectus Supplement.
OPTIONAL REDEMPTION
The Issuer, or such other Person specified in the related Prospectus
Supplement, may, at its option and if so specified in the related Prospectus
Supplement, redeem, in whole or in part, one or more Classes of any Series on
any Payment Date for such Series on or after the dates, if any, specified in
such Prospectus Supplement. Notice of such redemption will be given by the
Issuer or Trustee prior to the Redemption Date. In the case of a REMIC, the
Issuer may effect an optional redemption only if it qualifies as a "qualified
liquidation" under Section 860F of the Code. The Redemption Price for any Bond
so redeemed will be equal to 100% of the outstanding principal amount of such
Bond, together with interest accrued thereon to the date specified in the
related Prospectus Supplement.
MANDATORY REDEMPTION
If specified in the related Prospectus Supplement, Bonds of one or more
Classes of a Series ("Individual Investor Bonds") may be subject to mandatory
redemption by lot or by such other method set forth in the Prospectus
Supplement. Except as otherwise specified in the related Prospectus Supplement,
no Bonds of a particular Class will be redeemed until all Bonds in each Class
having a higher priority of redemption have been paid in full. Residual Interest
Bonds will not be redeemed except in connection with the liquidation of the
applicable REMIC, in which event the Residual Interest Bonds of the applicable
Series will be redeemed in full.
Individual Investor Bonds within a Class will be selected for redemption by
random lot in $1,000 units after all redemptions requested by holders of
Individual Investor Bonds in the Class have been made or by such other method
set forth in the Prospectus Supplement. Procedures relating to optional
redemptions requested by holders of Individual Investor Bonds and to mandatory
redemptions by the Issuer of Individual Investor Bonds, and the Class
priorities, if any, and conditions with respect to such redemptions, will be
described in the related Prospectus Supplement.
OPTIONAL TERMINATION
If so specified in the related Prospectus Supplement for a Series, the
Depositor, the Servicer, or another entity designated in the related Prospectus
Supplement may, at its option, cause an early termination of a Trust Fund by
repurchasing all of the Mortgage Assets from such Trust Fund on or after a date
specified in the related Prospectus Supplement, or on or after such time as the
aggregate outstanding principal amount of the Certificates is less than a
specified percentage of their initial aggregate principal amount. In the case of
a Trust Fund for which one or more REMIC elections have been made, the Trustee
must conduct the optional termination so as to constitute a "qualified
liquidation" under Section 860F of the Code. See "THE TRUST
AGREEMENT--Termination."
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OPTIONAL REPURCHASE OF CERTIFICATES
If so specified in the related Prospectus Supplement for a Series, one or
more Classes of the Certificates of such Series may be repurchased, in whole or
in part, at the option of the Depositor, at such times and under the
circumstances specified in such Prospectus Supplement. Notice of any such
repurchase must be given by the Trustee prior to the optional repurchase date,
as specified in the related Prospectus Supplement. The repurchase price for any
Certificate so repurchased will be set forth in the related Prospectus
Supplement.
OTHER REPURCHASES
If so specified in the related Prospectus Supplement for a Series, any Class
of the Certificates of such Series may be subject to repurchase at the request
of the holders of such Class or to mandatory repurchase by the Depositor. Any
such redemption at the request of holders or mandatory repurchase with respect
to a Class of a Series of the Certificates will be described in the related
Prospectus Supplement and will be on such terms and conditions as described
therein.
YIELD AND PREPAYMENT CONSIDERATIONS
TIMING OF PAYMENT OR DISTRIBUTION OF INTEREST AND PRINCIPAL
Each payment or distribution of interest on the Securities (or addition to
principal of a Class of Compound Interest Securities) on a Payment Date or
Distribution Date will include all interest accrued during the Interest Accrual
Period specified in the related Prospectus Supplement preceding such Payment
Date or Distribution Date. If the Interest Accrual Period for a Series ends on a
date other than a Payment Date or Distribution Date for such Series, the yield
realized by the holders of such Securities may be lower than the yield that
would result if the Interest Accrual Period ended on such Payment Date or
Distribution Date. Additionally, if so specified in the related Prospectus
Supplement, interest accrued for an Interest Accrual Period for one or more
Classes may be calculated on the assumption that principal payments or
distributions (and additions to principal of the Securities) and allocations of
losses on the Mortgage Assets are made on the first day of the preceding
Interest Accrual Period and not on the Payment Date or Distribution Date with
respect to such preceding Interest Accrual Period. Such method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during such Interest Accrual Period.
PRINCIPAL PREPAYMENTS
The yield to maturity or final distribution on the Securities will be
affected by the rate of principal payments on the Mortgage Loans (including
principal prepayments resulting from both voluntary prepayments by the
Mortgagors and involuntary liquidations). The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, tax, legal and other factors. The rate of principal payments or
distributions on the Securities will correspond to the rate of principal
payments on the Mortgage Assets. Principal prepayments on the Mortgage Assets
are likely to be affected by the existence of provisions prohibiting prepayment
of a Mortgage Loan underlying or comprising the Mortgage Assets for a defined
period of time (a "Lock-Out Period") or provisions requiring the payment of a
prepayment premium in the event of a prepayment (a "Yield Maintenance Payment"),
and by the extent to which the Primary Servicer is able to enforce such
provisions. Mortgage Loans with a Lock-Out Period or a Yield Maintenance
Payment, to the extent enforceable, generally would be expected to experience a
lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-Out Periods or with lower Yield
Maintenance Payments.
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If the purchaser of a Security offered at a discount calculates its
anticipated yield to maturity or final distribution based on an assumed rate of
distributions of principal that is faster than that actually experienced on the
Mortgage Loans, the actual yield to maturity or final distribution will be lower
than that so calculated. Conversely, if the purchaser of a Security offered at a
premium calculates its anticipated yield to maturity or final distribution based
on an assumed rate of distributions of principal that is slower than that
actually experienced on the Mortgage Loans, the actual yield to maturity or
final distribution will be lower than that so calculated.
The timing of changes in the rate of principal prepayments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal prepayment is received on the
Mortgage Loans and paid on an investor's Securities, the greater the effect on
such investor's yield to maturity or final distribution. The effect on an
investor's yield of principal payments or distributions occurring at a rate
higher (or lower) than the rate anticipated by the investor during a given
period may not be offset by a subsequent like decrease (or increase) in the rate
of principal payments or distributions.
PREPAYMENTS AND WEIGHTED AVERAGE LIFE
The Stated Maturity for a Class is the date specified in the related
Prospectus Supplement, calculated on the basis of the assumptions applicable to
such Series set forth therein, no later than which the entire Aggregate
Outstanding Principal thereof will be fully paid.
The rate of return on reinvestment of distributions of principal and
interest on the Mortgage Assets securing a Series, the rates at which principal
payments are received on such Mortgage Assets and the rate at which payments are
made from any Reserve Fund or other Enhancement for such Series may affect the
ultimate maturity of each Class of such Series. Prepayments on the Mortgage
Assets will accelerate the rate at which principal is paid or distributed on the
Securities. High reinvestment rates tend to increase the amount of Excess Cash
Flow, which, to the extent applied to principal payments or distributions on the
Securities, will accelerate principal payments or distributions on such
Securities.
Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. The weighted average life of the
Securities of a Series will be influenced by the rate at which principal on the
Mortgage Loans comprising or underlying the Mortgage Assets pledged as security
for such Bonds, or deposited in the Trust Fund, as the case may be, is paid,
which may be in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes prepayments, in whole or in part, and
liquidations due to default).
The rate of principal prepayments on pools of mortgages is influenced by a
variety of economic, demographic, geographic, tax, legal and other factors. The
rate of prepayments of housing loans has fluctuated significantly in recent
years. In general, however, if prevailing interest rates fall significantly
below the interest rates on the Mortgage Loans comprising or underlying the
Mortgage Assets pledged as security for a Series, such Mortgage Loans are likely
to be the subject of higher principal prepayments than if prevailing rates
remain at or above the rates borne by such mortgages. In this regard, it should
be noted that certain Mortgage Assets pledged as security for a Series may be
backed by Mortgage Loans with different interest rates and the stated
pass-through or pay-through interest rate of certain Mortgage Assets may be a
number of percentage points less than the underlying Mortgage Loans. In
addition, the weighted average life of the Securities may be affected by the
varying maturities of the Mortgage Loans comprising or underlying the Mortgage
Assets. If any Mortgage Loans comprising or underlying the Mortgage Assets for a
Series have actual terms to maturity of less than those assumed in calculating
Stated Maturity or the Final Scheduled Distribution Date, one or more Classes of
the Series may be fully paid prior to their
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respective Stated Maturities or the Final Scheduled Distribution Dates, even in
the absence of prepayments and a reinvestment return higher than the Assumed
Reinvestment Rate, if any. Accordingly, the prepayment experience of the
Mortgage Assets will, to some extent, be a function of the mix of interest rates
and maturities of the Mortgage Loans comprising or underlying such Mortgage
Assets. See "SECURITY FOR THE BONDS AND CERTIFICATES."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model
or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans for the
life of such loans. SPA represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Thus, it is likely that
prepayment of any Mortgage Loans comprising or underlying the Mortgage Assets
for any Series will not conform to any particular level of CPR or SPA.
The Issuer is not aware of any publicly available statistics that set forth
prepayment experience or prepayment forecasts of commercial or multifamily
mortgage loans over an extended period of time.
Except with respect to Interest Only Securities, the Prospectus Supplement
will contain tables setting forth the projected weighted average life of each
Class of such Series and the percentage of the original principal amount of each
Class of such Series that would be outstanding on specified Payment Dates or
Distribution Dates for such Series based on the assumptions stated in such
Prospectus Supplement, including assumptions that prepayments on the Mortgage
Loans comprising or underlying the related Mortgage Assets are made at rates
corresponding to various percentages of CPR, SPA or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Securities to various prepayment rates and will not be intended to predict or to
provide information which will enable investors to predict the actual weighted
average life of the Securities or prepayment rates of the Mortgage Loans
comprising or underlying the related Mortgage Assets. It is unlikely that
prepayment of any Mortgage Loans comprising or underlying the Mortgage Assets
for any Series will conform to any particular level of CPR, SPA or any other
rate specified in the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE LOAN. Mortgage Loans comprising or underlying the Mortgage
Assets may consist of ARMs. The rate of principal prepayments with respect to
ARMs has fluctuated in recent years. ARMs may be subject to a greater rate of
principal prepayments in a declining interest rate environment. For example, if
prevailing interest rates fall significantly below the then current mortgage
interest rates on the Mortgage Loans, the rate of prepayment on the Mortgage
Loans would be expected to increase. Conversely, if prevailing interest rates
rise significantly above the then current mortgage interest rates on the
Mortgage Loans, the rate of prepayment on the Mortgage Loans would be expected
to decrease. No assurances can be given as to the rate of prepayments on the
Mortgage Loans in stable or changing interest rate environments.
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A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a borrower to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the Servicer, the Master
Servicer or the Special Servicer, if any, may extend the maturity of such a
Mortgage Loan in connection with a workout. In the case of defaults, recovery of
proceeds may be delayed by, among other things, bankruptcy of the borrower or
adverse conditions in the market where the property is located. In order to
minimize losses on defaulted Mortgage Loans, the Servicer, the Master Servicer
or the Special Servicer, if any, may, to the extent and under the circumstances
set forth in the related Prospectus Supplement, be given considerable
flexibility to modify Mortgage Loans which are in default or as to which a
default is reasonably foreseeable. Any defaulted balloon payment or modification
which extends the maturity of a Mortgage Loan will tend to extend the weighted
average life of the Securities thereby lengthening the period of time elapsed
from the date of issuance of a Security until each dollar of principal will be
repaid to the investor.
FORECLOSURES AND PAYMENT PLANS. The number of foreclosures and the
principal amount of the Mortgage Loans comprising or underlying the Mortgage
Assets which are foreclosed in relation to the number of Mortgage Loans which
are repaid in accordance with their terms will affect the weighted average life
of the Mortgage Loans comprising or underlying the Mortgage Assets and that of
the related Series of Securities. Servicing decisions made with respect to the
Mortgage Loans, including the use of payment plans prior to a demand for
acceleration and the restructuring of Mortgage Loans in bankruptcy proceedings,
may also have an impact upon the payment patterns of particular Mortgage Loans.
The return to Holders of Securities may be adversely affected by servicing
policies and decisions relating to foreclosures.
DUE ON SALE CLAUSES. Acceleration of mortgage payments as a result of
certain transfers of underlying Mortgaged Property is another factor affecting
prepayment rates that may not be reflected in the prepayment standards or models
used in the relevant Prospectus Supplement. A number of the Mortgage Loans
underlying Private Mortgage-Backed Securities and Mortgage Loans in a Mortgage
Pool may include "due-on-sale" clauses which allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of the underlying Mortgaged
Property. Except as otherwise described in the Prospectus Supplement for a
Series, the Primary Servicer of Mortgage Loans comprising or underlying Mortgage
Assets securing such Series will not exercise its right to enforce any
"due-on-sale" clause applicable to the related Mortgage Loan so long as the new
mortgagor satisfies the applicable underwriting criteria for similar loans
serviced by the Primary Servicer. The Primary Servicer will not enforce such
clause to the extent enforcement would be unlawful or would prejudice recovery
under any applicable Insurance Policy. If the Primary Servicer determines not to
enforce such "due-on-sale" clause, it will enter into an assumption and
modification agreement with the person to whom the Mortgaged Property is to be
conveyed. FHA Loans are not permitted to contain "due-on-sale" clauses and are
freely assumable by qualified persons.
SINGLE MORTGAGE LOAN OR SINGLE OBLIGOR. The Mortgage Assets securing a
Series may consist of a single Mortgage Loan or obligations of a single obligor
or related obligors as specified in the related Prospectus Supplement.
Assumptions used with respect to the prepayment standards or models based upon
analysis of the behavior of mortgage loans in a larger group will not
necessarily be relevant in determining prepayment experience on a single
Mortgage Loan or with respect to a single obligor.
SECURITY FOR THE BONDS AND CERTIFICATES
GENERAL
Each Series of Bonds will be secured by a pledge by the Issuer to the
Trustee of all right, title and interest of the Issuer in the Primary Assets for
such Series, and each Series of Certificates will represent a
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beneficial interest in a Trust Fund comprised of Primary Assets transferred to
the Trustee by the Depositor. The Primary Assets may include (a) Mortgage Assets
directly owned by the Issuer, (b) amounts payable under the Mortgage Assets, (c)
funds, instruments or securities deposited or held from time to time in any
Reserve Fund, (d) funds, instruments or securities initially deposited in the
Collection Account for such Series, (e) an assignment of leases and rents, if
any, (f) reinvestment income, if any, on moneys deposited in any Pledged Fund or
Account, (g) Enhancement Agreements, if any, (h) Servicing Agreements, if any,
related to the Mortgage Loans of such Series, and (i) other funds, instruments
or securities specified as Primary Assets in the related Prospectus Supplement.
To the extent specified in the related Prospectus Supplement, certain
amounts received by the Trustee or a Servicer with respect to a Private
Mortgage-Backed Security or Mortgage Loan securing a Series may not be pledged
as Mortgage Assets for such Series or deposited into the Trust Fund for such
Series, as the case may be, but will be payable to the seller of such Private
Mortgage-Backed Security or Mortgage Loan or to a Servicer free and clear of the
lien of the Indenture, or interest granted under the Trust Agreement.
Mortgage Assets for a Series may consist of any combination of the following
to the extent and as specified in the related Prospectus Supplement: (a)
Mortgage Loans or participation interests therein and (b) Private
Mortgage-Backed Securities. Mortgage Loans for a Series will be purchased by the
Issuer directly or through an affiliate in the open market or in privately
negotiated transactions. Private Mortgage-Backed Securities will in turn be
secured by Underlying Collateral which will consist of Mortgage Loans.
Participation interests pledged as Mortgage Assets for a Series may be acquired
by the Issuer pursuant to a Participation Agreement or may be purchased in the
open market.
The Trustee or its agents or nominees will have possession of any Mortgage
Loans constituting Mortgage Assets and will be the registered owner of any
Private Mortgage-Backed Security which constitutes Mortgage Assets. The Trustee
will not, unless otherwise specified in the related Prospectus Supplement, be in
possession of or be the registered owner of any Underlying Collateral for any
Private Mortgage-Backed Security. See "Private Mortgage-Backed Securities"
below.
Unless otherwise specified in the related Prospectus Supplement for a
Series, scheduled distributions of principal of and interest on the Mortgage
Assets pledged to secure a Series or deposited into the Trust Fund for such
Series, as the case may be, the amounts available to be withdrawn from any
related Reserve Fund, the amount of cash, if any, initially deposited in the
related Collection Account and any other Mortgage Assets pledged to secure such
Series or deposited into the Trust Fund for such Series, as the case may be,
together with the Reinvestment Income thereon at the Assumed Reinvestment Rate,
if any, will be sufficient irrespective of the rate of prepayments on the
Mortgage Assets to make required payments of interest on the Securities of such
Series and to retire each Class of such Series not later than its Stated
Maturity or Final Scheduled Distribution Date, as applicable. See "YIELD AND
PREPAYMENT CONSIDERATIONS." The Mortgage Assets for a Series will equally and
ratably secure each Class of such Series, or will represent beneficial interest
in the Trust Fund, as the case may be, without priority of one Class over the
other (subject to any subordination of Subordinate Securities of a Series as set
forth in the related Prospectus Supplement), and the Mortgage Assets securing
each Series, or comprising the Trust Fund, will serve as Mortgage Assets only
for that Series.
MORTGAGE LOANS
GENERAL. Mortgage Loans for a Series may consist of Mortgage Loans or
participation interests therein. Mortgage Loans comprising the Mortgage Assets,
Mortgage Loans in which participation interests are conveyed to the Trustee, and
Mortgage Loans underlying Private Mortgage-Backed Securities are referred to
herein as the "Mortgage Loans." Some of the Mortgage Loans may have been
originated by or acquired from an affiliate of the Issuer and an affiliate of
the Issuer may be an obligor with respect to a Mortgage Loan. Mortgage Loans
may, as specified in the related Prospectus Supplement, consist of fixed
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rate, level payment, fully amortizing Mortgage Loans, ARMs or Mortgage Loans
having balloon or other payment characteristics as described in the related
Prospectus Supplement. ARMs may have a feature which permits the borrower to
convert the rate thereon to a fixed rate. Unless otherwise specified in the
applicable Prospectus Supplement, the Mortgage Loans will be secured by first
mortgages or deeds of trust or other similar security instruments creating a
first lien on Mortgaged Property.
The Mortgaged Properties may include Multifamily Property (i.e., multifamily
residential rental properties or cooperatively owned properties consisting of
five or more dwelling units) or Commercial Property. Multifamily Property may
include mixed commercial and residential structures and may consist of property
securing FHA-insured Mortgage Loans made by private lending institutions to help
finance construction or substantial rehabilitation of the related multifamily
rental or cooperative housing for moderate-income or displaced families. See
"DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS--FHA Insurance."
Each Mortgaged Property will be located on land owned in fee simple by the
Mortgagor or on land leased by the Mortgagor for a term at least two years
greater than the term of the related Mortgage Loan. Unless otherwise specified
in the related Prospectus Supplement, the fee interest in leased land will be
subject to the lien securing the related Mortgage Loan. Mortgage Loans secured
by Multifamily Property or Commercial Property will generally also be secured by
an assignment of leases and rents and/or operating or other cash flow guarantees
relating to the Mortgage Loan.
If so specified in the related Prospectus Supplement, Mortgage Loans
relating to real estate projects under construction may be included in the
Mortgage Assets for a Series. The related Prospectus Supplement will set forth
the procedures and timing for making disbursements from construction reserve
funds as portions of the related real estate project are completed. If permitted
by applicable law, the Mortgage Pool may also include Mortgaged Properties
acquired by foreclosure or by deed-in-lieu of foreclosure ("REO Property"). To
the extent specified in the related Prospectus Supplement, the Servicer, the
Master Servicer or the Special Servicer, if any, may establish and maintain a
trust account or accounts to be used in connection with REO Properties and other
Mortgaged Properties being operated by it or on its behalf on behalf of the
Trust Estate or the Trust Fund, as the case may be, by the mortgagor as debtor-
in-possession or otherwise. See "SECURITY FOR THE BONDS AND
CERTIFICATES--Maintenance of Insurance Policies and Other Servicing Procedures;
Presentation of Claims; Realization Upon Defaulted Mortgage Loans." In addition,
the Mortgage Pool for a particular Series may include Mortgage Loans which
consist of cash flow mortgages, installment contracts, mortgage loans with
equity features or other mortgage loans described in the related Prospectus
Supplement.
The related Prospectus Supplement for each Series will provide information
with respect to the Mortgage Pool as of the Cut-Off Date, including, among other
things, (a) the aggregate unpaid principal balance of the Mortgage Loans
comprising the Mortgage Pool; (b) the weighted average Mortgage Rate on the
Mortgage Loans, and, in the case of adjustable Mortgage Rates, the weighted
average of the current adjustable Mortgage Rates, the minimum and maximum
permitted adjustable Mortgage Rates, if any, and the weighted average thereof;
(c) the average outstanding principal balance of the Mortgage Loans; (d) the
weighted average remaining scheduled term to maturity of the Mortgage Loans and
the range of remaining scheduled terms to maturity; (e) the range of
Loan-to-Value Ratios of the Mortgage Loans; (f) the relative percentage (by
principal balance as of the Cut-Off Date) of Mortgage Loans that are ARMs, fixed
interest rate, FHA Loans or other types of Mortgage Loans; (g) any Enhancement
relating to the Mortgage Pool; (h) the relative percentage (by principal balance
as of the Cut-Off Date) of Mortgage Loans that are secured by Multifamily
Property or Commercial Property; (i) the geographic dispersion of Mortgaged
Properties securing the Mortgage Loans; and (j) the use or type of each
Mortgaged Property securing a Mortgage Loan. The related Prospectus Supplement
will also specify other characteristics of Mortgage Loans which may be included
in the Mortgage Pool for a Series. If Private Mortgage-Backed Securities
representing ownership interests in multiple mortgage pools constitute Mortgage
Assets for a Series, the
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Prospectus Supplement will set forth, to the extent available, the
above-specified information on an aggregate basis for the respective mortgage
pools. If specific information respecting the Mortgage Loans is not known to the
Issuer at the time the related Series is initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and final specific inforation will be set forth in a Current Report
on Form 8-K to be available to investors on the date of issuance of the Series
and to be filed with the Commission within 15 days after the initial issuance of
such Series.
If so specified in the related Prospectus Supplement, the terms of a
Mortgage Loan may provide that upon the sale of the Mortgaged Property, the
obligor may, in lieu of the payment in full of the amount of principal and
interest then outstanding or accrued on the related Mortgage Loan, irrevocably
deposit cash or other specified obligations into an account with the Trustee in
an amount which, together with interest thereon, will be sufficient to make
timely payments or distributions of principal and interest on the Mortgage Loan
and, therefore, on the Securities according to their terms.
The characteristics of the Mortgage Loans comprising or underlying the
Mortgage Assets may affect the rate of prepayment of Securities and the risk of
delinquencies, foreclosures and losses. See "RISK FACTORS" and "YIELD AND
PREPAYMENT CONSIDERATIONS."
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES. The underwriting procedures
and standards for Mortgage Loans included in a Mortgage Pool will be specified
in the related Prospectus Supplement to the extent such procedures and standards
are known or available. Such Mortgage Loans may be originated in contemplation
of the transactions contemplated by this Prospectus and the related Prospectus
Supplement. If stated in the related Prospectus Supplement, the originator of
the Mortgage Loans (or another entity specified in the related Prospectus
Supplement) will make representations and warranties concerning compliance with
such underwriting procedures and standards.
Except as otherwise set forth in the related Prospectus Supplement for a
Series, the originator of a Mortgage Loan will have applied underwriting
procedures intended to evaluate, among other things, the income derived from the
Mortgaged Property, the capabilities of the management of the project, including
a review of management's past performance record, its management reporting and
control procedures (to determine its ability to recognize and respond to
problems) and its accounting procedures to determine cash management ability,
the obligor's credit standing and repayment ability and the value and adequacy
of the Mortgaged Property as collateral. FHA Loans will have been originated by
mortgage lenders which are approved by HUD as an FHA mortgagee in the ordinary
course of their real estate lending activities and will comply with the
underwriting policies of FHA. Except as described below or in the related
Prospectus Supplement, the Issuer believes that underwriting procedures used
were consistent with those utilized by mortgage lenders generally during the
period of origination.
Unless otherwise specified in the related Prospectus Supplement, the
adequacy of a Mortgaged Property as security for repayment will generally have
been determined by appraisal by appraisers selected in accordance with
preestablished guidelines established by or acceptable to the loan originator
for appraisers. Unless otherwise specified in the related Prospectus Supplement,
the appraiser must personally inspect the property and verify that it was in
good condition and that construction, if new, has been completed. Unless
otherwise stated in the applicable Prospectus Supplement, the appraisal will
have been based upon a cash flow analysis or a market data analysis of recent
sales of comparable properties and, when deemed applicable, a replacement cost
analysis based on the current cost of constructing or purchasing a similar
property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that appreciation of real
estate values generally will limit loss experiences on Commercial Property or on
non-traditional housing such as Multifamily Property. If the residential real
estate market should experience an overall decline in property values such that
the outstanding balances of the Mortgage Loans and any additional financing on
the Mortgaged Properties in a particular Mortgage Pool become equal to or
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greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now generally
experienced in the mortgage lending industry. To the extent that such losses are
not covered by the methods of Enhancement or the insurance policies described
herein, the ability of the Issuer to pay principal of and interest on the
Securities may be adversely affected. Even where credit support covers all
losses resulting from defaults and foreclosure, the effect of defaults and
foreclosures may be to increase prepayment experience on the Mortgage Assets,
thus shortening weighted average life and affecting yield to maturity. See
"YIELD AND PREPAYMENT CONSIDERATIONS."
DETERMINATION OF COMPLIANCE WITH POOL REQUIREMENTS AND UNDERWRITING
PROCEDURES. As more specifically set forth in the related Prospectus
Supplement, the Issuer will represent and warrant, upon pledge of the Mortgage
Loans to the Trustee under the Indenture or deposit of such Mortgage Loans into
the Trust Fund, as applicable, among other things, as to the accuracy of the
information in the related Mortgage Loan Schedule. If specified in the related
Prospectus Supplement, the originator of a Mortgage Loan may make
representations and warranties with respect to such Mortgage Loan. If so
specified in the related Prospectus Supplement, the Issuer will assign its
rights and the seller's obligations under the agreement pursuant to which the
Issuer acquired the Mortgage Assets for the related Series to the Trustee.
If so specified in the related Prospectus Supplement, upon the discovery of
the breach of certain representations or warranties made by the Issuer in
respect of a Mortgage Loan that materially and adversely affects the interests
of the Bondholders or Certificateholders of the related Series, the Issuer will
be obligated to cause the seller of such Mortgage Loans to repurchase such
Mortgage Loan or deliver a substitute conforming Mortgage Loan as described
below under "Repurchase and Substitution of Non-Conforming Mortgage Loans." The
Trustee will be required to enforce this obligation for the benefit of the
Bondholders or Certificateholders, following the practices it would employ in
its good faith business judgment were it the owner of such Mortgage Loan. If so
specified in the related Prospectus Supplement, the Master Servicer, if any, may
be obligated to enforce such obligations rather than the Trustee.
REPURCHASE AND SUBSTITUTION OF NON-CONFORMING MORTGAGE LOANS. The Trustee,
or if so specified in the related Prospectus Supplement, a custodian, will
review Mortgage Loan documents after receipt thereof. Unless otherwise provided
in the related Prospectus Supplement, if any such document is found to be
defective in any material respect, or if it is determined that the Issuer has
breached any representation or warranty, the Trustee or the custodian shall
immediately notify the Issuer and the Master Servicer, if any, and the Trustee,
if the custodian. Unless otherwise specified in the related Prospectus
Supplement, if the Issuer cannot cure such defect thereafter, the Issuer will be
obligated to cause the seller of such Mortgage Loan to repurchase within 90 days
of the execution of the related Series Supplement, or within such other period
specified in the related Prospectus Supplement, the related Mortgage Loan or any
property acquired in respect thereof from the Trustee at a purchase price equal
to the unpaid principal balance of the Mortgage Loan (or, in the case of a
foreclosed Mortgage Loan, the unpaid principal balance of such Mortgage Loan
immediately prior to foreclosure) plus accrued interest.
Unless otherwise provided in the related Prospectus Supplement, the Issuer
may, rather than cause the repurchase of the Mortgage Loan as described above,
remove such Mortgage Loan from the Trust Estate ("Deleted Mortgage Loan") or
Trust Fund, as applicable, and substitute in its place one or more other
Mortgage Loans (each, a "Substitute Mortgage Loan"); provided, however with
respect to a Series for which no REMIC election is made, such substitution must
be effected within the period specified in the related Prospectus Supplement.
Any Substitute Mortgage Loan will, on the date of substitution, have the
characteristics specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation constitutes the sole remedy available to the Bondholders,
Certificateholders or the Trustee for a material defect in a Mortgage Loan
document or for breach of representations and warranties with respect to any
Mortgage Loan. With respect to Mortgage Loans underlying Private Mortgage-Backed
Securities, the PMBS
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Agreement may have terms relating to the repurchase or substitution obligations
which differ from those set forth above.
The Master Servicer, if any, may also make certain warranties with respect
to the Mortgage Loans comprising the Mortgage Pool for a Series. See "SERVICING
OF MORTGAGE LOANS--Certain Matters Regarding the Master Servicer." Upon a breach
of any such warranty that materially and adversely affects the interests of
Bondholders or Certificateholders of the related Series, the related Mortgage
Loan will be required to be repurchased, subject to the conditions described in
the preceding paragraph and in the related Prospectus Supplement. If the Master
Servicer fails to repurchase such a Mortgage Loan, payment to Bondholders or
Certificateholders could be reduced to the extent payments are not made on the
Mortgage Loan.
Various Servicers will provide certain customary servicing functions with
respect to any Mortgage Loans pursuant to servicing agreements. Such Servicers
may include affiliates of the Issuer. If so specified in the related Prospectus
Supplement, a Master Servicing Agreement may be entered into between the Issuer
and a Master Servicer. The Master Servicer will supervise the performance by the
Servicers of their duties and responsibilities under the servicing agreements
with respect to Mortgage Loans for the related Series. Alternatively, if so
specified in the related Prospectus Supplement, the Master Servicer may be
obligated to service Mortgage Loans directly or through one or more Servicers.
In such a case, the Master Servicer will be primarily responsible for servicing
of the Mortgage Loans. The specific duties to be performed by any Servicers and
Master Servicer, if any, with respect to the Mortgage Loans of a particular
Series will be set forth in the Prospectus Supplement to the extent they differ
from the servicing obligations described herein under "SERVICING OF THE MORTGAGE
LOANS." Servicers and the Master Servicer, if any, may be required to advance
funds to cover delinquent payments on Mortgage Loans, to the extent specified in
the related Prospectus Supplement. The Prospectus Supplement also will specify
criteria to be met by each Servicer and the Master Servicer. Such criteria will
be determined by the Issuer consistent with the requirements of each Rating
Agency rating such Series. See "SERVICING OF MORTGAGE LOANS."
PRIVATE MORTGAGE-BACKED SECURITIES
GENERAL. Private Mortgage-Backed Securities may consist of (a) mortgage
participations and pass-through certificates, evidencing an undivided interest
in a pool of Mortgage Loans, (b) debt obligations (interest payments on which
may be tax-exempt in whole or in part), secured by mortgages or (c)
participations or other interests in any of the foregoing. Private
Mortgage-Backed Securities will have been issued pursuant to a pooling and
servicing agreement, an indenture or similar agreement, or a participation
agreement or similar agreement (a "PMBS Agreement"). The seller or servicer of
the underlying Mortgage Loans will have entered into the PMBS Agreement with the
trustee under such PMBS Agreement (the "PMBS Trustee"). The PMBS Trustee or its
agent, or a custodian, will possess the Mortgage Loans, participations or other
interest, underlying such Private Mortgage-Backed Security. Mortgage Loans
underlying a Private Mortgage-Backed Security will be serviced by the Master
Servicer directly or by one or more Servicers who may be subject to the
supervision of the Master Servicer. Unless otherwise specified in the Prospectus
Supplement relating to a Series, if payments with respect to interest on the
underlying obligations are tax-exempt, such Prospectus Supplement will disclose
the relevant federal tax characteristics relating to the tax-exempt status of
such obligations.
The issuer of the Private Mortgage-Backed Securities (the "PMBS Issuer") may
be a financial institution or other entity engaged generally in the business of
mortgage lending, a public agency or instrumentality of a state, local or
federal government or a limited purpose corporation organized for the purpose
of, among other things, establishing trusts and acquiring and selling housing
loans to such trusts, and selling beneficial interests in such trusts. If so
specified in the Prospectus Supplement, the PMBS Issuer may be an affiliate of
the Issuer. The obligations of the PMBS Issuer will generally be limited to
certain representations and warranties with respect to the assets conveyed by it
to the related trust. Unless
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otherwise specified in the related Prospectus Supplement, the PMBS Issuer will
not have guaranteed any of the assets conveyed to the related trust or any of
the Private Mortgage-Backed Securities issued under the PMBS Agreement.
Additionally, although the Mortgage Loans, participations or other interest,
underlying the Private Mortgage-Backed Securities may be guaranteed by an agency
or instrumentality of the United States, the Private Mortgage-Backed Securities
themselves will not be so guaranteed.
Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the PMBS Trustee or the Servicer. The PMBS Issuer or the Servicer
or another person specified in the related Prospectus Supplement may have the
right or obligation to repurchase or substitute assets underlying the Private
Mortgage-Backed Securities after a certain date or under other circumstances
specified in the related Prospectus Supplement.
UNDERLYING MORTGAGE LOANS. The Mortgage Loans underlying the Private
Mortgage-Backed Securities may consist of fixed rate, level payment, fully
amortizing Mortgage Loans, ARMs, or Mortgage Loans having balloon or other
special payment features. Mortgage Loans underlying the Private Mortgage-Backed
Securities will be secured primarily by Multifamily Property or Commercial
Property. Unless otherwise stated in the related Prospectus Supplement, the
underwriting procedures set forth above will also apply to Underlying Mortgage
Loans.
ENHANCEMENT RELATING TO PRIVATE MORTGAGE-BACKED SECURITIES. Enhancement in
the form of reserve funds, subordination of other private mortgage certificates
issued under the PMBS Agreement, letters of credit, insurance policies or other
types of credit support may be provided with respect to the Mortgage Loans,
participations or other interest, underlying the Private Mortgage-Backed
Securities or with respect to the Private Mortgage-Backed Securities themselves.
The type, characteristics and amount of enhancement, if any, will be a function
of certain characteristics of the Mortgage Loans, participations or other
interest, and other factors and will have been established for the Private
Mortgage-Backed Securities on the basis of requirements of the Rating Agency
which assigned a rating to the Private Mortgage-Backed Securities.
ADDITIONAL INFORMATION. The Prospectus Supplement for a Series which
includes Private Mortgage-Backed Securities will specify, to the extent
available, (i) the aggregate approximate principal amount and type of the
Private Mortgage-Backed Securities to be included in the Trust Estate or Trust
Fund, as applicable, (ii) certain characteristics of the Mortgage Loans,
participations or other interests which comprise the underlying assets for the
Private Mortgage-Backed Securities including (A) the payment features of such
Mortgage Loans, participations or other interests (i.e., whether they are fixed
rate or adjustable rate and whether they provide for fixed level payments,
adjustable payments or other payment features), (B) the approximate aggregate
principal balance, if known, of Underlying Mortgage Loans, participations or
other interests insured or guaranteed by a governmental entity, (C) the
servicing fee or range of servicing fees with respect to the Mortgage Loans, and
(D) the minimum and maximum stated maturities of the underlying Mortgage Loans,
participations or other interests at origination, (iii) the maximum original
term-to-stated maturity of the Private Mortgage-Backed Securities, (iv) the
weighted average pass-through or bond rate of the Private Mortgage-Backed
Securities or formula therefor, (v) the pass-through or bond rate or ranges
thereof for the Private Mortgage-Backed Securities or formula therefor, (vi) the
PMBS Issuer, Master Servicer and the PMBS Trustee for such Private
Mortgage-Backed Securities, (vii) certain characteristics of enhancement, if
any, such as subordination, reserve funds, insurance policies, letters of credit
or guarantees relating to the Mortgage Loans, participations or other interests
underlying the Private Mortgage-Backed Securities or to such Private
Mortgage-Backed Securities themselves, (viii) the terms on which the Underlying
Mortgage Loans, participations or other interests for such Private
Mortgage-Backed Securities or the Private Mortgage-Backed Securities may, or are
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required to, be purhased prior to their maturity or the maturity of the Private
Mortgage-Backed Securities and (ix) the terms on which Mortgage Loans,
participations or other interests may be substituted for those originally
underlying the Private Mortgage-Backed Securities.
SUBSTITUTION OF MORTGAGE ASSETS
Unless otherwise provided in the related Prospectus Supplement, subject to
the limitations set forth in the Indenture or Trust Agreement for a Series, the
Issuer or Depositor may deliver to the Trustee other Mortgage Assets in
substitution for any Mortgage Assets originally pledged as security for a
Series, or deposited in the Trust Fund for a Series, as the case may be. Any
such Substitute Mortgage Assets will have an outstanding principal balance or
Asset Value (determined in a manner consistent with the Mortgage Assets for
which it is substituted) that is less than or equal to the outstanding principal
balance or Aggregate Asset Value of the Mortgage Assets for which it is
substituted, unless otherwise specified in the related Prospectus Supplement,
and will otherwise have such characteristics as shall be necessary to cause the
Mortgage Assets, upon such substitution, to conform more fully to the
description thereof set forth in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, (1) no substitution
will be permitted which would delay the Stated Maturity or Final Scheduled
Distribution Date, of any Class of Securities of the related Series, (2) no more
than 40% of the Mortgage Assets (including any cash deposited on the Closing
Date) securing a Series may be substituted for, (3) only like kind Mortgage
Assets may be substituted for Mortgage Assets (or, with respect to a
substitution for cash deposited in any Pledged Fund or Account on the Closing
Date, the Substitute Mortgage Assets must be of like kind as the Mortgage Assets
securing the related Series) and (4) there can be no substitutions for
Substitute Mortgage Assets. No substitution may be made (1) if such substitution
would result in the Issuer becoming required to register as an "Investment
Company" for purposes of the Investment Company Act of 1940, (2) if the Rating
Agencies will, as a result of such substitution, downgrade the rating on the
related Series of Securities or any Class thereof or (3) in th event that the
Issuer has elected to be treated as a REMIC and such substitution would cause
the REMIC to lose its status as a REMIC or result in a tax on "prohibited
contributions" to or "prohibited transactions" of the REMIC.
If the Issuer elects to treat the Mortgage Assets securing a Series of
Bonds, or deposited into the Trust Fund, as a REMIC or an election is made to
treat the arrangement by which a Series of Securities is issued as a REMIC, no
Substitute Mortgage Assets may be pledged by the Issuer (a) in the case of the
substitution for a "defective obligation" (within the meaning of Section
860G(a)(4)(B) of the Code), more than two years after the "Start Up Day" (as
defined in Section 860G(a)(9) of the Code) of the REMIC, or (b) in the case of
any other Mortgage Assets, more than three months after the Start Up Day.
COLLECTION ACCOUNT
Unless otherwise provided in the related Series Supplement, a separate
Collection Account for each Series will be established by the Trustee, or if the
Trustee is not also the Paying Agent, by the Paying Agent, for receipt of all
monthly principal and interest payments on the Primary Assets securing such
Series and the amount of cash, if any, to be initially deposited therein by the
Issuer, Reinvestment Income, if any, thereon and any amounts withdrawn from any
Reserve Funds for such Series. If specified in the related Prospectus
Supplement, Reinvestment Income, if any, or other gain from investments of
moneys in the Collection Account will be credited to the Collection Account for
such Series and any loss resulting from such investments will be charged to such
Collection Account. Funds on deposit in the Collection Account will be available
for application to the payment of principal of and interest on the Securities of
the related Series and for certain other payments provided for in the Indenture
or Trust Agreement and described in the related Prospectus Supplement. To the
extent that amounts remaining on deposit in the Collection Account on each
Payment Date or Distribution Date represent Excess Cash Flow not required to be
applied to such payments or distributions, unless otherwise specified in the
related Prospectus Supplement,
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such amounts may be paid as provided in the Indenture or Trust Agreement to the
Issuer (or, in the case of a REMIC, to the holder of the residual interest
therein).
OTHER FUNDS OR ACCOUNTS
A Series may also be secured by certain other funds and accounts for the
purpose of, among other things, (i) paying certain administrative fees and
operating expenses and (ii) accumulating funds that are credited to the Issuer's
account pending their distribution to the Issuer. See "Enhancement."
INVESTMENT OF FUNDS
The Collection Account, Servicing Accounts and certain other funds and
accounts for a Series are to be invested by the Trustee or the Paying Agent, as
directed by the Issuer, in certain Eligible Investments acceptable to each
Rating Agency rating such Series, which may include, without limitation, (a)
direct obligations of, and obligations fully guaranteed by, the United States of
America, FHLMC, FNMA or any agency or instrumentality of the United States of
America, the obligations of which are backed by the full faith and credit of the
United States of America, (b) demand and time deposits, certificates of deposit
or bankers' acceptances, (c) repurchase obligations pursuant to a written
agreement with respect to (1) any security described in clause (a) above or (2)
any other security issued or guaranteed by an agency or instrumentality of the
United States of America, (d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States of
America or any state, (e) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof), (f) a
Guaranteed Investment Contract, (g) certificates or receipts representing
ownership interests in future interest or principal payments on obligations
described in clause (a) above, and (h) any other demand, money market or time
deposit obligation, security or investment acceptable to the Rating Agencies.
Eligible Investments with respect to a Series will include only obligations
or securities that mature on or before the date on which the Collection Account
or any other Pledged Fund or Account for such Series are required or may be
anticipated to be required to be applied for the benefit of the holders of such
Series. Any gain or loss from such investments for a Series will be credited or
charged to the appropriate fund or account for such Series unless otherwise
specified in the related Prospectus Supplement.
GUARANTEED INVESTMENT CONTRACT
If specified in the related Prospectus Supplement, on or prior to the
Delivery Date the Issuer and the Trustee will enter into a Guaranteed Investment
Contract with a guarantor acceptable to the Rating Agencies rating the
Securities (the "Guarantor"), pursuant to which all distributions on the
Mortgage Assets will be invested by the Trustee with the Guarantor, and the
Guarantor will pay to the Trustee interest at the rate per annum set forth in
such Guaranteed Investment Contract on all amounts invested. Whenever funds are
required under the Indenture to be paid to Bondholders or under the Trust
Agreement to be paid to the Certificateholders, the Guarantor, upon the request
of the Trustee, will remit such funds to the Trustee.
ENHANCEMENT
Enhancement may be provided with respect to a Series, or with respect to any
Mortgage Loans or Private Mortgage-Backed Securities securing a Series. See
"ENHANCEMENT."
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SERVICING OF MORTGAGE LOANS
GENERAL
The servicing obligations with respect to a particular Series may be
performed by various Servicers or by the Trustee. If so specified in the related
Prospectus Supplement, a Master Servicer or a Special Servicer may be appointed.
The related Prospectus Supplement for each Series will describe the extent, if
any, such rights, duties and obligations vary or differ with respect to such
Series from those described herein.
If so specified in the related Prospectus Supplement, pursuant to a Master
Servicing Agreement or Trust Agreement, customary servicing functions with
respect to Mortgage Loans which comprise Mortgage Assets for a Series, or which
constitute Underlying Collateral for a Private Mortgage-Backed Security will be
provided by the Master Servicer directly or by one or more Servicers subject to
supervision by the Master Servicer. To the extent specified in the related
Prospectus Supplement, a special servicer (the "Special Servicer") may be
appointed. The related Prospectus Supplement will describe the duties and
obligations of such Special Servicer. To the extent specified in the related
Prospectus Supplement, the Master Servicer or Special Servicer, if any, may have
the authority to sell or otherwise dispose of Mortgage Loans or the related REO
Property in order to maximize the value of such Mortgage Loans or property. The
entity which has primary liability for servicing Mortgage Loans directly is
sometimes referred to herein as the "Primary Servicer." If the Master Servicer
is not required under the Master Servicing Agreement, Trust Agreement or PMBS
Agreement, as applicable, to act as Primary Servicer, then the Master Servicer,
if any, will (i) administer and supervise the performance by the Servicers (who
will act as Primary Servicers) of their servicing responsibilities under the
Servicing Agreements, (ii) to the extent not maintained by a Primary Servicer,
maintain any insurance policy required for the related Mortgage Pool and (iii)
advance funds as described below under "Advances" and in the related Prospectus
Supplement. If a Master Servicer undertakes to service Mortgage Loans directly
it may do so through Servicers as its agents. In such case, the Master Servicer
will be responsible for all aspects of the servicing of the related Mortgage
Loans notwithstanding such use of Servicers. The Master Servicer or a Servicer
may be an affiliate of the Issuer. Unless otherwise specified in the related
Prospectus Suppleent, in the case of FHA Loans, the Master Servicer and each
Servicer will be required to be approved by HUD as an FHA mortgagee. The Master
Servicer will only be responsible for the duties and obligations of the Special
Servicer to the extent set forth in the related Prospectus Supplement.
To the extent applicable, Master Servicing Agreements (direct or
supervisory), Servicing Agreements and Special Servicing Agreements, if any,
with respect to a Series will be filed as exhibits to a Current Report on Form
8-K within 15 days following the issuance of the Securities of a Series.
The Master Servicer will be paid a servicing fee for the performance of its
services and duties under each Master Servicing Agreement, as specified in the
related Prospectus Supplement. Each Servicer, if any, will be entitled to
receive a servicing fee. The Special Servicer, if any, will also be entitled to
a servicing fee. In addition, the Master Servicer, Special Servicer or Servicer
may be entitled to retain late charges, assumption fees and similar charges to
the extent collected from Mortgagors. If a Servicer or the Special Servicer is
terminated by the Master Servicer, the servicing function of the Servicer or the
Special Servicer will be either transferred to a substitute Servicer or Special
Servicer, as the case may be, or performed by the Master Servicer. The Master
Servicer will be entitled to retain the portion of the Servicing Fee paid to a
Servicer, under a terminated Servicing Agreement, or the Special Servicer, under
the Special Servicing Agreement, if the Master Servicer elects to perform such
servicing functions itself. See "Servicing Compensation and Payment of Expenses"
below.
COLLECTION PROCEDURES
The Primary Servicer or, if so specified in the related Prospectus
Supplement, the Trustee, will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will follow such
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collection procedures as it follows with respect to mortgage loans serviced by
it that are comparable to the Mortgage Loans.
Unless otherwise specified in the related Prospectus Supplement, the Primary
Servicer, to the extent permitted by law and the terms of the related Mortgage
Loans, will establish and maintain an escrow account (the "Escrow Account") in
which payments by Mortgagors to pay taxes, assessments, mortgage and hazard
insurance premiums, and other comparable items will be deposited. Withdrawals
from the Escrow Account are to be made to effect timely payment of taxes,
assessments and hazard insurance premiums, to refund to Mortgagors amounts
determined to be overages, to pay interest to Mortgagors on balances in the
Escrow Account to the extent required by law, to repair or otherwise protect the
Mortgaged Property and to clear and terminate such account. Alternatively, the
terms of the related Mortgage Loan may require, upon the occurrence of a
delinquency or default by the obligor, an impound account ("Impound Account") to
be established and maintained and into which payments by Mortgagors to pay
taxes, assessments, mortgage and hazard insurance premiums and other comparable
items will be deposited pending distribution of such items. The Primary Servicer
will be responsible for the administration of the Escrow Account or the Impound
Account and may be obligated to make escrow or impound advances to the relevant
account when a deficiency exists therein if so specified in the related
Prospectus Supplement.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO CUSTODIAL ACCOUNTS
With respect to any Series, the Master Servicer, if any, will establish an
account (the "Custodial Account") in the name of the Trustee, unless otherwise
specified in the related Prospectus Supplement. The Custodial Account will be
established so as to comply with the standards of each Rating Agency rating the
Securities of a Series. Amounts to be remitted to the Trustee shall be remitted
by the Master Servicer to the Trustee from the Custodial Account for deposit in
the Collection Account for the related Series.
In those cases where a Servicer is servicing Mortgage Loans pursuant to a
Servicing Agreement, the Servicer will establish and maintain an account (the
"Servicing Account") that will comply with the standards set forth below for the
Custodial Account and that is otherwise acceptable to the Master Servicer, if
any. The Servicer will be required to deposit into the Servicing Account on a
daily basis (or upon identification) all mortgage related receipts received by
it with respect to Mortgage Loans serviced by such Servicer subsequent to the
Cut-Off Date less its servicing fee and certain other amounts specified in the
Servicing Agreement. On each Servicer Remittance Date, the Servicer shall remit
all funds held in the Servicing Account (other than payments due on or before
the Cut-Off Date and other amounts permitted to be withdrawn from or held in the
Servicing Account pursuant to the Servicing Agreement) with respect to each
Mortgage Loan together with any Advances made by such Servicer for deposit to
the Custodial Account, or if a Custodial Account has not been established,
directly to the Collection Account. See "Advances" below.
If so specified in the related Prospectus Supplement, the Custodial Account
and each Servicing Account may be maintained as an interest-bearing account, or
the funds held therein may be invested pending remittance to the Trustee in
Eligible Investments. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or the Servicer will be entitled to receive any
such interest or other income earned on funds in the Custodial Account or
Servicing Account as additional compensation.
The Master Servicer will deposit in the Custodial Account on a daily basis
all mortgage related receipts (including amounts remitted by the Servicer)
received by it subsequent to the Cut-off Date (other than payments of principal
and interest due on or before the Cut-off Date).
With respect to any other type of Mortgage Loan which provides for payments
other than on the basis of level payments, an account may be established as
described in the related Prospectus Supplement.
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ADVANCES
GENERAL. To the extent provided in the related Prospectus Supplement, the
Primary Servicer may make periodic advances of cash ("Advances") from its own
funds or, if so specified in the related Prospectus Supplement, from excess
funds in the Custodial Account or Servicing Account, but only to the extent such
Advances are, in the good faith business judgment of the Servicer or the Master
Servicer, as the case may be, ultimately recoverable from future payments and
collections on the Mortgage Loans or otherwise. Neither the Master Servicer nor
the Servicers will be required to make such Advances, unless otherwise specified
in the related Prospectus Supplement. The Master Servicer's obligation to make
Advances, if any, may, as specified in the related Prospectus Supplement, be
limited in amount or may be limited to Advances received from Servicers. If so
specified in the related Prospectus Supplement, the Master Servicer will not be
obligated to make Advances until all or a specified portion of a Reserve Fund is
depleted. Advances are intended to enable the Issuer to make timely payment of
the scheduled principal and interest payments or distributions on the Securities
of such Series, not to guarantee or insure against losses. Accordingly, any
funds so advanced are recoverable by the Servicer or the Master Servicer, as the
case may be, out of amounts received on particular Mortgage Loans which
represent late recoveries of principal or interest respecting which any such
Advance was made. If an Advance is made and subsequently determined to be
nonrecoverable from late collections, Insurance Proceeds or Liquidation Proceeds
from the related Mortgage Loans, or any other source described in the related
Prospectus Supplement, the Servicer or Master Servicer will be entitled to
reimbursements from other funds in the Custodial Account or Servicing Account,
as applicable.
ADJUSTMENTS TO SERVICING FEE OR ADVANCES IN CONNECTION WITH PREPAID MORTGAGE
LOANS. With respect to each Mortgage Pool, if an obligor makes a principal
prepayment between scheduled payment dates, the obligor may be required to pay
interest on the principal balance only to the date of prepayment in full. If and
to the extent provided in the related Prospectus Supplement, the amount of the
servicing fee may be reduced, or the Primary Servicer may be otherwise obligated
to advance moneys from its own funds or any reserve maintained for such purpose,
to the extent necessary to include an amount equal to a full month's interest
payment at the applicable Mortgage Rate. Partial principal prepayments may be
treated as having been received on the next Due Date, and, if so, no reduction
in interest remitted for deposit to the Collection Account will occur. See
"YIELD AND PREPAYMENT CONSIDERATIONS."
MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING PROCEDURES
GENERAL. To the extent specified in the related Prospectus Supplement and
the Servicing Agreement, the Primary Servicer will be required to cause to be
maintained a standard hazard insurance policy with respect to each Mortgaged
Property. In addition, all or a portion of the Mortgage Loans comprising a
Mortgage Pool or constituting Underlying Collateral may be insured by the FHA.
The Primary Servicer will be required to take such steps as are reasonably
necessary to keep such insurance in full force and effect. See "DESCRIPTION OF
INSURANCE."
PRESENTATION OF CLAIMS; REALIZATION UPON DEFAULTED MORTGAGE LOANS. The
market value of any property obtained in foreclosure or by deed in lieu of
foreclosure may be based substantially on the operating income obtained by
renting the applicable property. As a default on a Mortgage Loan secured by
Multifamily Property or Commercial Property is likely to have occurred because
operating income, net of expenses, is insufficient to make debt service payments
on the related Mortgage Loan, it can be anticipated that the market value of
such property generally will be less than anticipated when such Mortgage Loan
was originated. To the extent that equity does not cushion the loss in market
value upon any liquidation and such loss is not covered by other credit support,
a loss may be experienced by the related Bondholders or Certificateholders, as
applicable.
The Primary Servicer, on behalf of itself, the Trustee, the Bondholders or
Certificateholders, as applicable and the Issuer, will be required to present,
or cause to be presented, claims with respect to any
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insurance policy. The Primary Servicer will be required to present claims and
take such reasonable steps as are necessary to permit recovery under any FHA
insurance respecting defaulted Mortgage Loans.
The Primary Servicer may foreclose upon or otherwise comparably convert the
ownership of properties securing such of the related Mortgage Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with such foreclosure or
other conversion, the Primary Servicer will follow such practices and procedures
as it shall deem necessary or advisable and as shall be normal and usual in its
general mortgage servicing activities.
ENFORCEMENT OF DUE-ON SALE CLAUSES
Unless otherwise specified in the related Prospectus Supplement, when any
Mortgaged Property is about to be conveyed by the Mortgagor, the Primary
Servicer will not exercise its rights to accelerate the maturity of such
Mortgage Loan under the applicable "due-on-sale" clause, if any, so long as the
new mortgagor satisfies the applicable underwriting criteria for similar loans
serviced by the Primary Servicer. If such conditions are met or the Primary
Servicer reasonably believes enforcement of a due-on-sale clause will not be
enforceable, the Primary Servicer is authorized to take or enter into an
assumption agreement from or with the person to whom such Mortgaged Property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Mortgage Note and pursuant to which the original Mortgagor is released
from liability and such person is substituted as Mortgagor and becomes liable
under the Mortgage Note. Unless otherwise specified in the related Prospectus
Supplement, any fee collected in connection with an assumption will be retained
as additional servicing compensation.
MODIFICATION; WAIVERS
As set forth in the related Prospectus Supplement, the Master Servicer or
Special Servicer, if any, may have the discretion, subject to certain conditions
set forth therein, to modify, waive or amend the terms of any Mortgage Loan
without the consent of the Trustee, or any Bondholder or Certificateholders, as
applicable.
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer or the Special Servicer, if any, will not agree to any modification,
waiver or amendment of the payment terms of a Mortgage Loan unless the Master
Servicer or the Special Servicer, if any, has determined that such modification,
waiver or amendment is reasonably likely to produce a greater recovery on a
present value basis than liquidation of the Mortgage Loan.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer, the Special Servicer, if any, and each Servicer will be
entitled to a servicing fee in an amount specified or to be calculated in a
manner described in the related Prospectus Supplement. The servicing fee may be
fixed or variable, as specified in the related Prospectus Supplement. In
addition, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer, the Special Servicer, if any, or a Servicer will be entitled to
additional servicing compensation in the form of assumption fees, late payment
charges and modification fees.
The Primary Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with the liquidation of defaulted Mortgage Loans.
The ability of the Issuer of the related Series to pay principal of and interest
on the Securities will not be affected to the extent claims are paid under the
related insurance policies. If claims are either not made or paid under such
insurance policies or if coverage thereunder has ceased or is insufficient, the
ability of the Issuer to meet debt service requirements on the related Series
may be adversely affected. In addition, the Primary Servicer will be entitled to
reimbursement of expenditures incurred by it in connection with the restoration
of Mortgaged Property, such right of reimbursement being prior to the rights of
the Bondholders to receive any related Insurance Proceeds or Liquidation
Proceeds.
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EVIDENCE AS TO COMPLIANCE
The Master Servicer and the Special Servicer, if any, will deliver to the
Trustee, on or before 120 days after the end of each fiscal year of the Master
Servicer and the Special Servicer, if applicable, an officer's certificate
stating that (i) a review of the activities of the Master Servicer, the Special
Servicer and the Servicers during the preceding calendar year and of performance
under the Master Servicing Agreement, Special Servicing Agreement, if
applicable, and the Servicing Agreements has been made under the supervision of
such officer and (ii) the Master Servicer and the Special Servicer, if
applicable, has fulfilled all its obligations under the Master Servicing
Agreement and Special Servicing Agreement, if applicable, throughout such year,
and, to the best of such officer's knowledge, based on such review, each
Servicer has fulfilled its obligations under the related Servicing Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Such officer's certificate shall be accompanied by a
statement of a firm of independent public accountants to the effect that, on the
basis of an examination of certain documents and records relating to servicing
of the Mortgage Loans, conducted in accordance with generally accepted
accounting principles in the mortgage banking industry, the Master Servicer's
and the Special Servicer's, if applicable, duties and duties of the Servicers
have been conducted in compliance with the provisions of the applicable
agreement, except for (i) such exceptions as such firm believes to be immaterial
and (ii) such other exceptions as are set forth in such statement. Copies of the
annual officer's certificate and accountants' statement may be obtained without
charge upon written request to the Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND SPECIAL SERVICER
The Master Servicer and any Special Servicer for each Series will be
specified in the related Prospectus Supplement. The Master Servicer and any
Special Servicer may be an affiliate of the Issuer and may have other business
relationships with the Issuer and its affiliates.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer may not resign from its obligations and duties except with the consent
of the Trustee or upon a determination that its duties thereunder are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor servicer has assumed the Master Servicer's
obligations and duties under such Master Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, each Master
Servicing Agreement will also provide that neither the Master Servicer, nor any
director, officer, employee or agent of the Master Servicer, will be under any
liability to the Bondholders or Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the Master
Servicing Agreement, or for errors in judgment; provided, however, that neither
the Master Servicer nor any such person will be protected against any liability
which would otherwise be imposed by reason of failure to perform its obligations
in compliance with the standards of care set forth in the Master Servicing
Agreement. The Master Servicer may, in its discretion, undertake any such action
which it may deem necessary or desirable with respect to the rights and duties
of the parties to the Master Servicing Agreement and the interests of the
Bondholders, or Certificateholders thereunder. In such event, the Master
Servicer will be entitled to be reimbursed for legal expenses and costs of such
action out of the related Custodial Account.
ENHANCEMENT
GENERAL
For any Series, Enhancement may be provided with respect to one or more
Classes thereof or the related Mortgage Assets. Enhancement may be in the form
of a letter of credit, the subordination of one or more Classes of the
Securities of such Series, the establishment of one or more reserve funds,
overcollateralization, guarantee insurance, the use of cross-support features or
another method of Enhancement described in the related Prospectus Supplement, or
any combination of the foregoing. If so
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specified in the related Prospectus Supplement, any form of Enhancement
(including but not limited to insurance, letters of credit or guarantee
insurance) may be structured so as to be drawn upon by more than one Series to
the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Securities and interest thereon. If losses occur which exceed the amount covered
by Enhancement or which are not covered by the Enhancement, Bondholders or
Certificateholders, as applicable will bear their allocable share of
deficiencies. Moreover, if a form of Enhancement covers more than one Series of
Securities (each, a "Covered Trust"), holders of Securities issued by any of
such Covered Trusts will be subject to the risk that such Enhancement will be
exhausted by the claims of other Covered Trusts prior to such Covered Trust
receiving any of its intended share of such coverage.
If Enhancement is provided with respect to a Series, or the related Mortgage
Assets, the related Prospectus Supplement will include a description of (a) the
amount payable under such Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Enhancement may be reduced and under which such
Enhancement may be terminated or replaced and (d) the material provisions of any
agreement relating to such Enhancement. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the issuer of any
third-party Enhancement, including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policyholders' surplus, if applicable, as
of the date specified in the Prospectus Supplement.
SUBORDINATE SECURITIES
If so specified in the related Prospectus Supplement, one or more Classes of
a Series may be Subordinate Securities. If so specified in the related
Prospectus Supplement, the rights of the Holders of Subordinate Securities to
receive distributions of principal and interest from the Collection Account on
any Payment Date or Distribution Date will be subordinated to such rights of the
Holders of Senior Securities to the extent specified in the related Prospectus
Supplement. Unless otherwise provided in the Prospectus Supplement, the amount
of subordination will decrease whenever amounts otherwise payable to the Holder
of Subordinate Securities are paid to the Holders of Senior Securities
(including amounts withdrawn from any related Reserve Fund and paid to the
Holders of Senior Securities), and will (unless otherwise specified in the
related Prospectus Supplement) increase whenever there is distributed to the
Holders of Subordinate Securities amounts in respect of which subordination
payments have previously been paid to the Holders of Senior Securities. Unless
otherwise specified in the related Prospectus Supplement, the related Series
Supplement may require a trustee that is not the Trustee to be appointed to act
on behalf of Holders of Subordinate Securities.
A Series may include one or more Classes of Subordinate Securities entitled
to receive cash flows remaining after distributions are made to all other
Classes designated as being senior thereto. Such right will effectively be
subordinate to the rights of other Holders of Senior Securities, but will be not
be limited to a specified dollar amount of subordination. If so specified in the
related Prospectus Supplement, the subordination of a Class may apply only in
the event of (or may be limited to) certain types of losses not covered by
Insurance Policies or other credit support, such as losses arising from damage
to property securing a Mortgage Loan not covered by standard hazard insurance
policies.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a Class or Classes of Subordinate Securities in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the amount of subordination will decrease over time,
the manner of funding any related Reserve Fund and the conditions under which
amounts in any related
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Reserve Fund will be used to make distributions to Holders of Senior Securities
and/or to Holders of Subordinate Securities or be released from the related
Trust Estate or Trust Fund. If cash flows otherwise distributable to holders of
Subordinate Securities secured by a Mortgage Group will be used as credit
support for Senior Securities secured by another Mortgage Group within the Trust
Estate or Trust Fund, the related Prospectus Supplement will specify the manner
and conditions for applying such a cross-support feature.
CROSS-SUPPORT FEATURES
If the Mortgage Assets for a Series are divided into separate Mortgage
Groups, each securing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions be
made on Senior Securities secured by one Mortgage Group prior to distributions
on Subordinate Securities secured by another Mortgage Group within the Trust
Estate or Trust Fund. The related Prospectus Supplement for a Series which
includes a cross-support feature will describe the manner and conditions for
applying such cross-support feature.
INSURANCE ON THE MORTGAGE LOANS
Credit support with respect to a Series may be provided by insurance
policies that include standard hazard insurance and may, if specified in the
related Prospectus Supplement, include FHA Insurance. See "DESCRIPTION OF
INSURANCE ON THE MORTGAGE LOANS."
LETTER OF CREDIT
The letter of credit, if any, with respect to a Series of Securities will be
issued by the bank or financial institution specified in the related Prospectus
Supplement (the "L/C Bank"). Under the letter of credit, the L/C Bank will be
obligated to honor drawings thereunder in an aggregate fixed dollar amount, net
of unreimbursed payments thereunder, equal to the percentage specified in the
related Prospectus Supplement of the aggregate principal balance of the Mortgage
Loans on the related Cut-Off Date or of one or more Classes of Securities (the
"L/C Percentage"). If so specified in the related Prospectus Supplement, the
letter of credit may permit drawings in the event of losses not covered by
insurance policies or other credit support, such as losses arising from damage
not covered by standard hazard insurance policies. The amount available under
the letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder. The obligations of the L/C Bank under the
letter of credit for each Series of Securities will expire at the earlier of the
date specified in the related Prospectus Supplement or the termination of the
Trust Estate or Trust Fund, as applicable. A copy of the letter of credit for a
Series, if any, will be filed with the Commission as an exhibit to a Current
Report on Form 8-K to be filed within 15 days of issuance of the Securities of
the related Series.
BOND GUARANTEE INSURANCE
Bond guarantee insurance, if any, with respect to a Series of Bonds will be
provided by one or more insurance companies. Such bond guarantee insurance will
guarantee, with respect to one or more Classes of Bonds of the related Series,
timely distributions of interest and full distributions of principal on the
basis of a schedule of principal distributions set forth in or determined in the
manner specified in the related Prospectus Supplement. If so specified in the
related Prospectus Supplement, the bond guarantee insurance will also guarantee
against any payment made to a Bondholder which is subsequently recovered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the bond
guarantee insurance for a Series, if any, will be filed with the Commission as
an exhibit to a Current Report on Form 8-K to be filed with the Commission
within 15 days of issuance of the Bonds of the related Series.
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RESERVE FUNDS
One or more Reserve Funds may be established with respect to a Series, in
which cash, a letter of credit, Eligible Investments, a demand note or a
combination thereof, in the amounts, if any, so specified in the related
Prospectus Supplement will be deposited. The Reserve Funds for a Series may also
be funded over time by depositing therein a specified amount of the
distributions received on the related Mortgage Assets as specified in the
related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified in the related Prospectus
Supplement. A Reserve Fund may be provided to increase the likelihood of timely
payments or distributions of principal of and interest on the Securities, if
required as a condition to the rating of such Series by each Rating Agency, or
to reduce the likelihood of special redemptions with respect to any Series. If
so specified in the related Prospectus Supplement, Reserve Funds may be
established to provide limited protection, in an amount satisfactory to each
Rating Agency, against certain types of losses not covered by Insurance Policies
or other credit support, such as losses arising from damage not covered by
standard hazard insurance policies. Following each Payment Date or Distribution
Date amounts in such Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application by the Trustee.
Moneys deposited in any Reserve Funds will be invested in Eligible
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such Series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to the Master Servicer or a Servicer as additional servicing
compensation. See "SERVICING OF MORTGAGE LOANS". The Reserve Fund, if any, for a
Series will not be a part of the Trust Estate or Trust Fund, as applicable,
unless otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in the
related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make payments or distributions to Bondholders or Certificateholders and use of
investment earnings from the Reserve Fund, if any.
DESCRIPTION OF INSURANCE ON THE MORTGAGE LOANS
The following descriptions of standard hazard insurance policies and FHA
insurance and the respective coverages thereunder are general descriptions only
and do not purport to be complete.
MORTGAGE INSURANCE ON THE MORTGAGE LOANS
GENERAL. Each Mortgaged Property will be covered by a standard hazard
insurance policy, as described in the related Prospectus Supplement. The
coverage under standard hazard insurance policies will be subject to conditions
and limitations described in the Prospectus Supplement and under "Hazard
Insurance on the Mortgage Loans" below. Certain hazard risks will, therefore,
not be insured and the occurrence of such hazards could adversely affect
payments or distributions to Holders. Additionally, to the extent that losses on
a defaulted or foreclosed Mortgage Loan are not covered by other credit support
for such Series, such losses, if any, would affect payments or distributions to
Holders.
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HAZARD INSURANCE ON THE MORTGAGE LOANS
STANDARD HAZARD INSURANCE POLICIES. The standard hazard insurance policies
will provide for coverage at least equal to the applicable state standard form
of fire insurance policy with extended coverage. In general, the standard form
of fire and extended coverage policy will cover physical damage to or
destruction of, the improvements on the Mortgaged Property caused by fire,
lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion,
subject to the conditions and exclusions particularized in each policy. Because
the standard hazard insurance policies relating to the Mortgage Loans will be
underwritten by different insurers and will cover Mortgaged Properties located
in various states, such policies will not contain identical terms and
conditions. The basic terms, however, generally will be determined by state law
and generally will be similar. Most such policies typically will not cover any
physical damage resulting from war, revolution, governmental actions, floods and
other water-related causes, earth movement (including earthquake, landslides,
and mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. Uninsured risks not covered by a special hazard insurance policy
or other form of credit support may adversely affect the ability of the Issuer
to make payments of principal or interest on the Bonds. When a Mortgaged
Property is located in a flood area identified by FEMA pursuant to the Flood
Disaster Protection Act of 1973, the Master Servicer or the Servicer will be
required to cause flood insurance to be maintained with respect to such
Mortgaged Property.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which will
require the insured at all times to carry hazard insurance of a specified
percentage (generally 80% to 90%) of the actual cash value of the improvements
on the Mortgaged Property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, such
clause will provide that the hazard insurer's liability in the event of partial
loss will not exceed the greater of (i) the actual cash value (the replacement
cost less physical depreciation) of the improvements damaged or destroyed or
(ii) such proportion of the loss as the amount of insurance carried bears to the
specified percentage of the actual cash value of such improvements.
In the event of partial loss, hazard insurance proceeds may be insufficient
to restore fully the damaged property. Under the terms of the Mortgage Loans,
Mortgagors are required to present claims to insurers under hazard insurance
policies maintained on the Mortgaged Properties. The Primary Servicer, on behalf
of the Trustee, Bondholders, and Certificateholders, is obligated to present or
cause to be presented claims under any blanket insurance policy insuring against
hazard losses on Mortgaged Properties; however, the ability of the Primary
Servicer to present or cause to be presented such claims is dependent upon the
extent to which information in this regard is furnished to the Primary Servicer
by Mortgagors.
FHA INSURANCE. The FHA is responsible for administering various federal
programs, including mortgage insurance, authorized under the Housing Act, as
amended, and the United States Housing Act of 1937, as amended. To the extent
specified in the related Prospectus Supplement, all or a portion of the Mortgage
Loans may be insured by the FHA. The Primary Servicer will be required to take
such steps as are reasonably necessary to keep such insurance in full force and
effect.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans that are general in nature. Because such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete nor to reflect the laws of any
particular state, nor to encompass the laws of all states in which the Mortgaged
Properties are situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage Loans.
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MORTGAGES
Each Mortgage Loan will be secured by a mortgage, a deed of trust or a deed
to secure debt, depending upon the prevailing practice and law in the state in
which the related Mortgaged Property is located. The filing of a mortgage, deed
of trust or deed to secure debt creates a lien on title interest upon the real
property covered by such instrument and represents the security for the
repayment of an obligation that is customarily evidenced by a promissory note.
It is generally not prior to the lien for real estate taxes and assessments or
other charges imposed under governmental police powers. Priority with respect to
such instruments depends on their terms, the knowledge of the parties to the
mortgage and generally on the order of recording with the applicable state,
county or municipal office. There are two parties to a mortgage: the mortgagor,
who is the owner of the property and usually the borrower, and the mortgagee,
who is the lender. Under the mortgage instruments, the mortgagor delivers to the
mortgagee a note or bond evidencing the loan and the mortgage to secure the
indebtedness. In the case of a land trust, there are three parties because title
to the property is held by a land trustee under a land trust agreement of which
the borrower is the beneficiary at origination of a mortgage loan involving a
land trust, the borrower executes a separate undertaking to make payments on the
mortgage note. A deed of trust has three parties: the owner of the property and
usually the borrower, called the trustor (similar to a mortgagor), a lender,
called the beneficiary (similar to the mortgagee), and a third-party grantee,
called the trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale, to
the trustee to secure payment of the mortgage loan. The trustee's authority
under a deed of trust and the mortgagee's authority under a mortgage are
governed by the express provisions of the deed of trust or mortgage, the law of
the state in which the real property is located and, in some cases, in deed of
trust transactions, the directions of the beneficiary. Some states use a
security deed or deed to secure debt which is similar to a deed of trust except
it has only two parties: a grantor (similar to a mortgagor) and a grantee
(similar to a mortgagee).
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES OR BENEFICIARIES
If specified in the applicable Prospectus Supplement, some of the Mortgage
Loans included in the Mortgage Pool will be secured by junior mortgages or deeds
of trust which are subordinate to senior mortgages or deeds of trust held by
other lenders or institutional investors. The rights of the Trust Fund (and
therefore the Certificateholders), as beneficiary under a junior deed of trust
or as mortgagee under a junior mortgage, are subordinate to those of the
mortgagee or beneficiary under the senior mortgage or deed of trust, including
the prior rights of the senior mortgagee or beneficiary to receive rents, hazard
insurance and condemnation proceeds and to cause the property securing the
Mortgage Loan to be sold upon default of the mortgagor or trustor, thereby
extinguishing the junior mortgagee's or junior beneficiary's lien unless the
Special Servicer asserts its subordinate interest in a property in foreclosure
litigation or satisfies the defaulted senior loan. As discussed more fully
below, in many states a junior mortgagee or beneficiary may satisfy a defaulted
senior loan in full, or may cure such default and bring the senior loan
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current, in either event adding the amounts expended to the balance due on the
junior loan. Absent a provision in the senior mortgage, no notice of default is
required to be given to the junior mortgagee.
The form of the mortgage or deed of trust used by many institutional lenders
confers on the mortgagee or beneficiary the right both to receive all proceeds
collected under any hazard insurance policy and all awards made in connection
with any condemnation proceedings, and to apply such proceeds and awards to any
indebtedness secured by the mortgage or deed of trust, in such order as the
mortgage or beneficiary may determine. Thus, in the event improvements on the
property are damaged or destroyed by fire or other casualty, or in the event the
property is taken by condemnation, the mortgagee or beneficiary under the senior
mortgage or deed of trust will have the prior right to collect any insurance
proceeds payable under a hazard insurance policy and any award of damages in
connection with the condemnation and to apply the same to the indebtedness
secured by the senior mortgage or deed of trust. Proceeds in excess of the
amount of senior mortgage indebtedness will, in most cases, by applied to the
indebtedness of a junior mortgage or trust deed. The laws of certain states may
limit the ability of mortgagees or beneficiaries to apply the proceeds of hazard
insurance and partial condemnation awards to the secured indebtedness. In such
states, the mortgagor or trustor must be allowed to use the proceeds of hazard
insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments on the property and, when due,
all encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to perform
any of these obligations, the mortgagee or beneficiary is given the right under
the mortgage or deed of trust to perform the obligation itself, at its election,
with the mortgagor or trustor agreeing to reimburse the mortgagee or beneficiary
for any sums expended by the mortgagee or beneficiary on behalf of the trustor.
All sums so expended by the mortgagee or beneficiary become part of the
indebtedness secured by the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting
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the mortgaged property, including, without limitation, leasing activities
(including new leases and termination or modification of existing leases),
alterations and improvements to buildings forming a part of the mortgaged
property and management and leasing agreements for the mortgaged property.
Tenants will often refuse to execute a lease unless the mortgagee or beneficiary
executes a written agreement with the tenant not to disturb the tenant's
possession of its premises in the event of a foreclosure. A senior mortgagee or
beneficiary may refuse to consent to matters approved by a junior mortgagee or
beneficiary with the result that the value of the security for the junior
mortgage or deed of trust is diminished. For example, a senior mortgagee or
beneficiary may decide not to approve a lease or to refuse to grant a tenant a
non-disturbance agreement. If, as a result, the lease is not executed, the value
of the mortgaged property may be diminished.
FORECLOSURE OF MORTGAGE
Foreclosure of a deed of trust or deed to secure debt is generally
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust which authorizes the trustee to sell the property upon any default
by the borrower under the terms of the note or deed of trust or deed to secure
debt. In some states, prior to such sale, the trustee must record a notice of
default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee in some states must provide notice of any other individual
having an interest in the real property, including any junior lienholders. In
some states there is a reinstatement period. The trustor, borrower, or any
person having a junior encumbrance on the real estate may, during a
reinstatement period, cure the default by paying the entire amount in arrears
plus the costs and expenses incurred in enforcing the obligation. In other
states, after acceleration of the debt, the borrower is not provided with a
period to reinstate the loan, but has only the right to pay off the entire debt
to prevent the foreclosure sale. Generally, state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of sale
must be posted in a public place and, in most states, published for a specified
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property, recorded and sent
to all parties having an interest in the real property.
An action to foreclose a mortgage is an action to recover the mortgage debt
by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable powers.
Generally, a borrower is bound by the terms of the mortgage note and the
mortgage and cannot be relieved from his default if the mortgagee has exercised
his rights in a commercially reasonable manner. However, since a foreclosure
action historically was equitable in nature, the court may exercise equitable
powers to relieve a mortgagor of a default and deny the mortgagee foreclosure on
proof that either the mortgagor's default was neither willful nor in bad faith
or the mortgagee's action established a waiver, fraud, bad faith, or oppressive
or unconscionable conduct such as to warrant a court of equity refusing
affirmative relief to the mortgagee. Under certain circumstances, a court of
equity may relieve the borrower from an entirely technical default where such
default was not willful.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring up to
several years to complete. Moreover, a non-collusive, regularly conducted
foreclosure sale may be challenged as a fraudulent conveyance, regardless of the
parties' intent, if a court determines that the sale was for less than fair
consideration and such sale occurred while the mortgagor was insolvent and
within the state statute of limitations (which is tolled by the filing of a
bankruptcy case). Similarly, in some states, a suit against the debtor on the
mortgage note may take several years and, generally, is a remedy alternative to
foreclosure, the mortgagee being precluded from pursuing both at the same time.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the referee or other designated officer or by the trustee is a public sale.
However, because of the difficulty potential third-party
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purchasers at the sale have in determining the exact status of title and because
the physical condition of the property may have deteriorated during the
foreclosure proceedings, it is uncommon for a third party to purchase the
property at a foreclosure sale. Rather, it is common for the lender to purchase
the property from the trustee or referee for an amount which may be equal to the
principal amount of the mortgage or deed of trust plus accrued and unpaid
interest and the expenses of foreclosure, in which event the borrower's debt
will be extinguished or the lender may purchase for a lesser amount in order to
preserve its right against a borrower to seek a deficiency judgment in states
where such a judgment is available. Thereafter, and subject in some states to
the right of the borrower to stay in possession during a redemption period, the
lender will assume the burdens of ownership, including obtaining casualty
insurance, paying taxes and making such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
obtain the services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Moreover, a lender typically incurs substantial
legal fees and court costs in acquiring a mortgaged property through contested
foreclosure. Furthermore, certain states require that any environmental hazards
be eliminated before a property may be resold. In addition, a lender may be
responsible under federal or state law for the cost of cleaning up a mortgaged
property that is environmentally contaminated. As a result, a lender could
realize an overall loss on a mortgage loan even if the related mortgaged
property is sold at foreclosure or resold after it is acquired through
foreclosure for an amount equal to the full outstanding principal amount of the
mortgage loan, plus accrued interest. Any loss may be reduced by the receipt of
any mortgage guaranty insurance proceeds.
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders, the Master Servicer or any related Sub-servicer or the
Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property for more than two years after its
acquisition will not result in the imposition of a tax on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the Master
Servicer or any related Sub-servicer or the Special Servicer will generally be
required to solicit bids for any Mortgaged Property so acquired in such a manner
as will be reasonably likely to realize a fair price for such property. The
Master Servicer or any related Sub-servicer or the Special Servicer may retain
an independent contractor to operate and manage any REO Property; however, the
retention of an independent contractor will not relieve the Master Servicer or
any related Sub-servicer or the Special Servicer of its obligations with respect
to such REO Property.
In general, the Master Servicer or any related Sub-servicer or the Special
Servicer or an independent contractor employed by the Master Servicer or any
related Sub-servicer or the Special Servicer at the expense of the Trust Fund
will be obligated to operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Master
Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). The determination as to whether income from an REO
Property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO Property. Any
REO Tax imposed on the Trust Fund's income from an REO Property would
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reduce the amount available for distribution to Certificateholders.
Certificateholders are advised to consult their tax advisors regarding the
possible imposition of REO Taxes in connection with the operation of commercial
REO Properties by REMICs.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these risks
is that the ground lease creating the leasehold estate could terminate, leaving
the leasehold mortgagee without its security. The ground lease may terminate if,
among other reasons, the ground lessee breaches or defaults in is obligations
under the ground lease or there is a bankruptcy of the ground lessee or the
ground lessor. This risk may be minimized if the ground lease contains certain
provisions protective of the mortgagee, but the ground leases that secure
Mortgage Loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include the right of the leasehold mortgagee
to receive notices from the ground lessor of any defaults by the mortgagor; the
right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the leasehold mortgagee, the right to acquire the
leasehold estate through foreclosure or otherwise; the ability of the ground
lease to be assigned to and by the leasehold mortgagee or purchaser at a
foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease with the ground lessor on the same terms and conditions as the
old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may require
that the ground lease or leasehold mortgage prohibit the ground lessee from
treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code), although the enforceability of such clause has
not been established. Without the protections described above, a leasehold
mortgagee may lose the collateral securing its leasehold mortgage. In addition,
terms and conditions of a leasehold mortgage are subject to the terms and
conditions of the ground lease. Although certain rights given to a ground lessee
can be limited by the terms of a leasehold mortgage, the rights of a ground
lessee or a leasehold mortgagee with respect to, among other things, insurance,
casualty and condemnation will be governed by the provisions of the ground
lease.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the trustor or borrower and foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. The
right of redemption should be distinguished from the equity of redemption, which
is a nonstatutory right that must be exercised prior to the foreclosure sale. In
some states, redemption may occur only upon payment of the foreclosure sales
price and expenses of foreclosure. In other states, redemption may be authorized
if the former borrower pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the lender to sell
the foreclosed property. The right of redemption would defeat the title of any
purchaser from the lender subsequent to foreclosure or sale under a deed of
trust. Consequently, the practical effect of a right of redemption is to force
the lender to retain the property and pay expenses of ownership until the
redemption period has run. In some states, there is no right to redeem property
after a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held for more than two years. Unless otherwise
provided in the related Prospectus Supplement, with respect to a series of
Certificates for which an election is made to qualify the Trust Fund or a part
thereof
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as a REMIC, the Agreement will permit foreclosed property to be held for more
than two years if the Internal Revenue Service grants an extension of time
within which to sell such property or independent counsel renders an opinion to
the effect that holding such property for such additional period is permissible
under the REMIC Provisions.
ENVIRONMENTAL MATTERS
Real property pledged as security to a lender may be subject to
environmental risks. For example, certain environmental liabilities may (1)
cause a diminution in the value of the Mortgaged Property; (2) limit the
lender's foreclosure rights; and (3) subject the lender to liability for
clean-up costs or other remedial actions which could exceed the value of the
principal balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of certain states, contamination of a property may give rise to a
lien on the property to assure the costs of clean-up. In several states, such a
lien has priority over the lien of an existing mortgage against such property.
The presence of hazardous or toxic substances, or the failure to remediate
such property properly, may adversely affect the market value of the property,
as well as the owner's ability to sell or use the real estate or to borrow using
the real estate as collateral. In addition, certain environmental laws and
common law principles govern the responsibility for the removal, encapsulation
or disturbance of asbestos containing materials ("ACMs") when these ACMs are in
poor condition or when a property with ACMs is undergoing repair, renovation or
demolition. Such laws could also be used to impose liability upon owners and
operators of real properties for release of ACMs into the air that cause
personal injury or other damage. In addition to cleanup and natural resource
damages actions brought by federal, state, and local agencies and private
parties, the presence of hazardous substances on a property may lead to claims
of personal injury, property damage, or other claims by private plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and under the laws of certain
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a Mortgaged Property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state statutes may not be
limited to the original or unamortized principal balance of a loan or to the
value of the property securing a loan. CERCLA imposes strict, as well as joint
and several, liability on several classes of potentially responsible parties,
including current owners and operators of the property, regardless of whether
they caused or contributed to the contamination. Many states have laws similar
to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. Excluded
from CERCLA's definition of "owner or operator," however, is a person "who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such an encroachment on
the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the
"Asset Conservation Act"), signed into law by
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President Clinton on September 30, 1996, which lists permissible actions that
may be undertaken by a lender holding security in a contaminated facility
without exceeding the bounds of the secured creditor exemption, subject to
certain conditions and limitations. The Asset Conservation Act provides that in
order to be deemed to have participated in the management of a secured property,
a lender must actually participate in the operational affairs of the property or
the borrower. The Asset Conservation Act also provides that a lender will
continue to have the benefit of the secured creditor exemption even if it
forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms. The protections afforded lenders under the Asset
Conservation Act are subject to terms and conditions that have not been
clarified by the courts.
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. In addition, the
secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA. CERCLA's jurisdiction extends to the
investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal statute of particular significance is
Subtitle I of the Resource Conservation and Recovery Act ("RCRA"), which governs
the operation and management of underground petroleum storage tanks. Under the
Asset Conservation Act, the protections accorded to lenders under CERCLA are
also accorded to the holders of security interests in underground storage tanks.
It should be noted, however, that liability for cleanup of petroleum
contamination may be governed by state law, which may not provide for any
specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned upon
clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
in such cases, unanticipated or uninsurable liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
Mortgaged Properties was conducted.
Unless otherwise specified in the related Prospectus Supplement, the
Servicing Agreement, Master Servicing Agreement or Special Servicing Agreement,
as applicable, provides that the Servicer, the Master Servicer or the Special
Servicer, as applicable, acting on behalf of the Trust Estate or Trust Fund, as
applicable, may not acquire title to a Mortgaged Property underlying a Mortgage
Loan or take over its operation unless the Servicer, the Master Servicer or the
Special Servicer, as applicable, has previously determined, based upon a report
prepared by a person who regularly conducts environmental audits, that (i) the
Mortgaged Property is in compliance with applicable environmental laws and
regulations or, if not, that taking such actions as are necessary to bring the
Mortgaged Property in compliance therewith is reasonably likely to produce a
greater recovery on a present value basis than not taking such actions and (ii)
there are no circumstances or conditions present that have resulted in any
contamination or if such
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circumstances or conditions are present for which such action could be required,
taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis than
not taking such actions.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties are subject to compliance with various federal,
state and local statutes and regulations. Failure to comply (together with an
inability to remedy any such failure) could result in material diminution in the
value of a Mortgaged Property which could, together with the limited alternative
uses for such Mortgaged Property, result in a failure to realize the full
principal amount of the Mortgage Loans.
For instance, Mortgaged Properties which are hospitals, nursing homes or
convalescent homes may present special risks in large part due to significant
governmental regulation of the operation, maintenance, control and financing of
health care institutions. Mortgaged Properties which are hotels or motels may
present additional risk in that: (i) hotels and motels are typically operated
pursuant to franchise, management and operating agreements which may be
terminable by the operator, and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchase or foreclosure is subject to the vagaries of local law
requirements.
LEASES AND RENTS
Multifamily and commercial mortgage loan transactions often provide for an
assignment of the leases and rents pursuant to which the borrower typically
assigns its right, title and interest, as landlord under each lease and the
income derived therefrom, to the lender while either obtaining a license to
collect rents for so long as there is no default or providing for the direct
payment to the lender. The manner of perfecting the mortgagee's interest in
rents may depend on whether the mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect the
rents. In most states, hotel and motel room revenues are considered accounts
receivable under the UCC; generally these revenues are either assigned by the
mortgagor, which remains entitled to collect such revenues absent a default, or
pledged by the mortgagor, as security for the loan. In general, the lender must
file financing statements in order to perfect its security interest in the
revenues and must file continuation statements, generally every five years, to
maintain perfection of such security interest. Even if the lender's security
interest in room revenues is perfected under the UCC, the lender will generally
be required to commence a foreclosure or otherwise take possession of the
property in order to collect the room revenues after a default.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and industrial
plants, are likely to derive a significant part of their value from personal
property which does not constitute "fixtures" under applicable state real
property law and, hence, would not be subject to the lien of a mortgage. Such
property is generally pledged or assigned as security to the lender under the
UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or
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mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment is a personal
judgment against the former borrower equal in most cases to the difference
between the amount due to the lender and the net amount realized upon the
foreclosure sale. Other statutes may require the beneficiary or mortgagee to
exhaust the security afforded under a deed of trust or mortgage by foreclosure
in an attempt to satisfy the full debt before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting such
security; however, in some of these states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and may be
precluded from exercising remedies with respect to the security. Consequently,
the practical effect of the election requirement, when applicable, is that
lenders will usually proceed first against the security rather than bringing
personal action against the borrower. Finally, other statutory provisions may
limit any deficiency judgment against the former borrower following a
foreclosure sale to the excess of the outstanding debt over the fair market
value of the property at the time of such sale. The purpose of these statutes is
to prevent a beneficiary or a mortgagee from obtaining a large deficiency
judgment against the former borrower as a result of low or no bids at the
judicial sale. In some states, exceptions to the anti-deficiency statutes are
provided for in certain instances where the value of the lender's security has
been impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.
In addition, substantive requirements are imposed upon lenders in connection
with the origination and the servicing of mortgage loans by numerous federal and
some state consumer protection laws. The laws include the federal
Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit
Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related
statutes and regulations. These federal laws impose specific statutory
liabilities upon lenders who originate loans and who fail to comply with the
provisions of the law. In some cases, this liability may affect assignees of the
loans.
FEDERAL BANKRUPTCY AND OTHER LAWS AFFECTING CREDITORS' RIGHTS
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including the federal bankruptcy laws (the
"Bankruptcy Code") and state laws affording relief to debtors, may interfere
with or affect the ability of the secured lender to realize upon collateral
and/or enforce a deficiency judgment. For example, with respect to federal
bankruptcy law, the filing of a petition acts as a stay against the enforcement
of remedies (including the right of foreclosure) for collection of a debt. Also,
the filing of a petition in bankruptcy by or on behalf of a junior lienor may
stay a senior lender from taking action to foreclose out the junior lien.
In a Chapter 11 case under the Bankruptcy Code, the lender's lien may be
transferred to other collateral and/or be limited in amount to the value of the
lender's interest in the collateral as of the date of the bankruptcy. The loan
term may be extended, the interest rate may be adjusted to market rates and the
priority of the loan may be subordinated to bankruptcy court-approved financing.
The bankruptcy court can reinstate accelerated indebtedness and also, in effect,
invalidate due-on-sale clauses through confirmed Chapter 11 plans of
reorganization. Under Section 363(b) and (f) of the Bankruptcy Code, a trustee
for a lessor, or a lessor as debtor-in-possession, may, despite the provisions
of the related Mortgage Loan to the contrary, sell the Mortgaged Property free
and clear of all liens, which liens would then attach to the proceeds of such
sale.
The Bankruptcy Code has recently been amended to provide that a lender's
perfected pre-petition security interest in leases, rents and hotel revenues
continues in the post-petition leases, rents and hotel revenues, unless a
bankruptcy court orders to the contrary "based on the equities of the case."
Thus, unless a court orders otherwise, revenues from a Mortgaged Property
generated after the date the bankruptcy petition is filed will constitute "cash
collateral" under the Bankruptcy Code. Debtors may only use cash collateral upon
obtaining the lender's consent or a prior court order finding that the lender's
interest in the Mortgaged Properties and the cash collateral is "adequately
protected" and such term is defined and
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interpreted under the Bankruptcy Code. It should be noted, however, that the
court may find that the lender has no security interest in either pre-petition
or post-petition revenues if the court finds that the loan documents do not
contain language covering accounts, room rents, or other forms of personalty
necessary for a security interest to attach to hotel revenues.
Lessee bankruptcies at the Mortgaged Properties could have an adverse impact
on the Mortgagors' ability to meet their obligations. For example, Section
365(e) of the Bankruptcy Code provides generally that rights and obligations
under an unexpired lease may not be terminated or modified at any time after the
commencement of a case under the Bankruptcy Code solely because of a provision
in the lease conditioned upon the commencement of a case under the Bankruptcy
Code or certain other similar events. In addition, Section 362 of the Bankruptcy
Code operates as an automatic stay of, among other things, any act to obtain
possession of property of or from a debtor's estate, which may delay the
Trustee's exercise of such remedies in the event that the lessee becomes the
subject of a proceeding under the Bankruptcy Code.
Section 365(a) of the Bankruptcy Code generally provides that a trustee or a
debtor-in-possession in a case under the Bankruptcy Code has the power to assume
or to reject an executory contract or an unexpired lease of the debtor, in each
case subject to the approval of the bankruptcy court administering such case. If
the trustee or debtor-in-possession rejects an executory contract or an
unexpired lease, such rejection generally constitutes a breach of the executory
contract or unexpired lease immediately before the date of the filing of the
petition. As a consequence, the other party or parties to such executory
contract or unexpired lease, such as the Mortgagor, as lessor under a lease,
would have only an unsecured claim against the debtor for damages resulting from
such breach, which could adversely affect the security for the related Mortgage
Loan. Moreover, under Section 502(b)(6) of the Bankruptcy Code, the claim of a
lessor for such damages from the termination of a lease of real property will be
limited to the sum of (i) the rent reserved by such lease, without acceleration,
for the greater of one year or 15 percent, not to exceed three years, of the
remaining term of such lease, following the earlier of the date of the filing of
the petition and the date on which such lender repossessed, or the lessee
surrendered, the leased property, and (ii) any unpaid rent due under such lease,
without acceleration, on the earlier of such dates.
Under Section 365(f) of the Bankruptcy Code, if a trustee or
debtor-in-possession assumes an executory contract or an unexpired lease of the
debtor, the trustee or debtor-in-possession generally may assign such executory
contract or unexpired lease, notwithstanding any provision therein or in
applicable law that prohibits, restricts or conditions such assignment, provided
that the trustee or debtor-in-possession provides "adequate assurance of future
performance" by the assignee. The Bankruptcy Code specifically provides,
however, that adequate assurance of future performance for purposes of a lease
of real property in a shopping center includes adequate assurance of the source
of rent and other consideration due under such lease, and in the case of an
assignment, that the financial condition and operating performance of the
proposed assignee and its guarantors, if any, shall be similar to the financial
condition and operating performance of the debtor and its guarantors, if any, as
of the time the debtor became the lessee under the lease, that any percentage
rent due under such lease will not decline substantially, that the assumption
and assignment of the lease is subject to all the provisions thereof, including
(but not limited to) provisions such as a radius location, use or exclusivity
provision, and will not breach any such provision contained in any other lease,
financing agreement, or master agreement relating to such shopping center, and
that the assumption or assignment of such lease will not disrupt the tenant mix
or balance in such shopping center. Thus, an undetermined third party may assume
the obligations of the lessee under a lease in the event of commencement of a
proceeding under the Bankruptcy Code with respect to the lessee.
Under Section 365(h) of the Bankruptcy Code, if a trustee for a lessor, or a
lessor as a debtor-in-possession, rejects an unexpired lease of real property,
the lessee may treat such lease as terminated by such rejection or, in the
alternative, may remain in possession of the leasehold for the balance of such
term and for any renewal or extension of such term that is enforceable by the
lessee under applicable
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nonbankruptcy law. The Bankruptcy Code provides that if a lessee elects to
remain in possession after such a rejection of a lease, the lessee may offset
against rents reserved under the lease for the balance of the term after the
date of rejection of the lease, and any such renewal or extension thereof, any
damages occurring after such date caused by the nonperformance of any obligation
of the lessor under the lease after such date.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its costs
and expenses in preserving or selling the mortgaged property ahead of payment to
the lender. In certain circumstances, a debtor in bankruptcy may have the power
to grant liens senior to the lien of a mortgage, and analogous state statutes
and general principles of equity may also provide a mortgagor with means to halt
a foreclosure proceeding or sale and to force a restructuring of a mortgage loan
on terms a lender would not otherwise accept. Moreover, the laws of certain
states also give priority to certain tax liens over the lien of a mortgage or
deed of trust. Under the Bankruptcy Code, if the court finds that actions of the
mortgagee have been unreasonable, the lien of the related mortgage may be
subordinated to the claims of unsecured creditors.
DUE ON-SALE CLAUSES IN MORTGAGE LOANS
A note, mortgage or deed of trust relating to the Mortgage Loans generally
contains a "due-on-sale" clause permitting acceleration of the maturity of a
loan if the borrower transfers its interest in the property. In recent years,
court decisions and legislative actions placed substantial restrictions on the
right of lenders to enforce such clauses in many states. By virtue, however, of
the Garn St. Germain Depository Institutions Act of 1982 (the "Garn Act")
effective October 15, 1982 (which purports to preempt state laws which prohibit
the enforcement of due-on-sale clauses by providing among other matters, that
"due-on-sale" clauses in certain loans made after the effective date of the Garn
Act are enforceable, within certain limitations as set forth in the Garn Act and
the regulations promulgated thereunder) the Servicer or the Master Servicer may
nevertheless be able to accelerate many of the Mortgage Loans that contain a
"due-on-sale" provision upon transfer of an interest in the property subject to
the Mortgage Loans, regardless of the Servicer's or the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon an involuntary
prepayment is unclear, and no assurance can be given that, at the time a
prepayment fee or penalty is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment
will be enforceable under applicable state law. Late charges and prepayment fees
are typically retained by servicers as additional servicing compensation. The
absence of a restraint on prepayment, particularly with respect to Mortgage
Loans having higher mortgage rates, may increase the likelihood of refinancing
or other early retirements of the Mortgage Loans.
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EQUITABLE LIMITATIONS ON REMEDIES
In connection with lenders' attempts to realize upon their security, courts
have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes for the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the property or the borrower's
execution of secondary financing affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under security agreements receive notices in addition to the
statutorily prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that, in cases involving the
sale by a trustee under a deed of trust or by a mortgagee under a mortgage
having a power of sale, there is insufficient state action to afford
constitutional protections to the borrower.
The Mortgage Loans may include a debt-acceleration clause, which permits the
lender to accelerate the debt upon a monetary default of the borrower, after the
applicable cure period. The courts of all states will enforce clauses providing
for acceleration in the event of a material payment default. However, courts of
any state, exercising equity jurisdiction, may refuse to allow a lender to
foreclose a mortgage or deed of trust when an acceleration of the indebtedness
would be inequitable or unjust and the circumstances would render the
acceleration unconscionable.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control Act
of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. Similar federal statutes
were in effect with respect to mortgage loans made during the first three months
of 1980. The OTS, as successor to the Federal Home Loan Bank Board, is
authorized to issue rules and regulations and to publish interpretations
governing implementation of Title V. Title V authorizes any state to reimpose
interest rate limits by adopting, before April 1, 1983, a state law, or by
certifying that the voters of such state have voted in favor of any provision,
constitutional or otherwise, which expressly rejects an application of the
federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V.
In any state in which application of Title V has been expressly rejected or
a provision limiting discount points or other charges is adopted, no Mortgage
Loan originated after the date of such state action will be eligible as Mortgage
Assets unless (i) such Mortgage Loan provides for such interest rate, discount
points and charges as are permitted in such state or (ii) such Mortgage Loan
provides that the terms thereof shall be construed in accordance with the laws
of another state under which such interest rate, discount points and charges
would not be usurious and the Mortgagor's counsel has rendered an opinion that
such choice of law provision would be given effect. No Mortgage Loan originated
prior to January 1, 1980 will bear interest or provide for discount points or
charges in excess of permitted levels.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including ARMs originated by non-federally
chartered lenders, have historically been subject to a variety of restrictions.
Such restrictions differed from state to state,
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resulting in difficulties in determining whether a particular alternative
mortgage instrument originated by a state-chartered lender complied with
applicable law. These difficulties were alleviated substantially as a result of
the enactment of Title VIII of the Garn St. Germain Act ("Title VIII"). Title
VIII provides that, notwithstanding any state law to the contrary,
state-chartered banks may originate "alternative mortgage instruments"
(including ARMs) in accordance with regulations promulgated by the Comptroller
of the Currency with respect to origination of alternative mortgage instruments
by national banks; state chartered credit unions may originate alternative
mortgage instruments in accordance with regulations promulgated by the National
Credit Union Administration with respect to origination of alternative mortgage
instruments by federal credit unions and all other non-federally chartered
housing creditors, including state-chartered savings and loan associations; and
state-chartered savings banks and mortgage banking companies may originate
alternative mortgage instruments in accordance with the regulations promulgated
by the Federal Home Loan Bank Board, as succeeded by the OTS, with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of the
provisions of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may not restrict secondary financing, thereby
permitting the borrower to use the Mortgaged Property as security for one or
more additional loans. Certain of the Mortgage Loans may preclude secondary
financing (by permitting the first lender to accelerate the maturity of its loan
if the borrower further encumbers the Mortgaged Property or in some other
fashion) or may require the consent of the senior lender to any junior or
substitute financing; however, such provisions may be unenforceable in certain
jurisdictions under certain circumstances.
Where the borrower encumbers the Mortgaged Property with one or more junior
liens, the senior lender is subjected to additional risk. For example, the
borrower may have difficulty servicing and repaying multiple loans or acts of
the senior lender which prejudice the junior lender or impair the junior
lender's security may create a superior equity in favor of the junior lender.
For example, if the borrower and the senior lender agree to an increase in the
principal amount of or the interest rate payable on the senior loan, the senior
lender may lose its priority to the extent any existing junior lender is harmed
or the borrower is additionally burdened. In addition, if the borrower defaults
on the senior loan and/or any junior loan or loans, the existence of junior
loans and actions taken by junior lenders can impair the security available to
the senior lender and can interfere with, delay and in certain circumstances
even prevent the taking of action by the senior lender. In addition, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the Mortgagor in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the Mortgagor as owner or landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord,
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a foreclosing lender who is financially more capable than the Mortgagor of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the Mortgagor is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
THE INDENTURE
The following summaries describe certain provisions of the Indenture. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Indenture. Where
particular provisions or terms used in the Indenture are referred to, such
provisions or terms are as specified in the Indenture.
CERTAIN COVENANTS
The Issuer may not liquidate or dissolve, without the consent of the holders
of not less than 66 2/3% of the Aggregate Outstanding Principal of each Series.
The Issuer also may not consolidate or merge with or into any other Person or
convey or transfer its properties and assets substantially as an entirety
without the consent of holders of not less than 66 2/3% of the Aggregate
Outstanding Principal of each Series, and
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unless (a) the Person (if other than the Issuer) formed or surviving such merger
or consolidation or acquiring such assets is a Person organized under the laws
of the United States of America or any State and shall have expressly assumed,
by supplemental indenture in form satisfactory to the Trustee, the due and
punctual payment of principal of and interest on all Bonds and the performance
of every applicable covenant of the Indenture to be performed, by the Issuer,
(b) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred, and be continuing, (c) the Trustee shall have
received a letter from each Rating Agency rating any outstanding Bonds to the
effect that the rating issued with respect to such Bonds is confirmed
notwithstanding the consummation of such transaction and (d) the Trustee shall
have received from the Issuer an Officers' Certificate and an Opinion of
Counsel, each to the effect that, among other things, such transaction complies
with the foregoing requirements.
The Issuer may incur, assume, have outstanding or guarantee any indebtedness
other than pursuant to the Indenture only subject to certain conditions and
limitations.
MODIFICATION OF INDENTURE
Except as set forth below, with the consent of the holders of not less than
a majority of the then Aggregate Outstanding Principal of each Series or Class
of such Series to be affected, the Trustee and the Issuer may amend the
Indenture or execute a supplemental indenture, to add provisions to or change or
eliminate any provisions of the Indenture or Trust Agreement, as applicable,
relating to such Series, or modify the rights of the holders of the Bonds of
that Series.
Without the consent of the holder of each outstanding Bond affected,
however, except as provided below, no such amendment or supplemental indenture
shall (i) change the Stated Maturity of the principal of or any installment of
principal of or interest on any Bond or reduce the principal amount thereof, the
Bond Interest Rate for any Bond or the Redemption Price with respect thereto, or
change the provisions of the Trust Indenture or the related Series Supplement
relating to the application of the Trust Estate to payment principal of or
interest on the affected Bonds, or change any place of payment where, or the
coin or currency in which, any affected Bond or any interest thereon is payable,
or impair the right to institute suit for the enforcement of the provisions of
the Indenture regarding payment, (ii) reduce the percentage of Aggregate
Outstanding Principal of the Bonds of the affected Series or Class of such
Series, the consent of the holders of which is required for the authorization of
any such amendment or supplemental indenture or for any waiver of compliance
with certain provisions of the Indenture or certain defaults thereunder and
their consequences, (iii) modify or alter the provisions of the Indenture
defining the term "Outstanding," (iv) permit the creation of any lien ranking
prior to or on a parity with the lien of the Indenture with respect to any part
of the property subject to the lien of the Indenture or terminate the lien of
the Indenture on any property at any time subject thereto or deprive the holder
of any Bond of the security afforded by the lien of the Indenture, (v) reduce
the percentage of the Aggregate Outstanding Principal of any Series (or Class of
such Series), the consent of the holders of which is required to direct the
Trustee to liquidate the Mortgage Assets for such Series, (vi) modify any of the
provisions of the Indenture if such modification affects the calculation of the
amount of any payment of interest or principal due and payable on any Bond on
any Payment Date or to ffect the rights of the holders of Bonds of any Series
(or Class of such Series) to the benefit of any provisions for the mandatory
redemption of Bonds of such Series (or Class of such Series) contained therein
or in the related Series Supplement or (vii) modify the provisions of the
Indenture regarding any modifications of such Indenture requiring consent of the
holders of Bonds, except to increase the percentage or number of holders
required to consent to such modification of such Indenture or Trust Agreement,
as applicable, or to provide that additional provisions of the Indenture cannot
be modified or waived without the consent of the holder of each Bond affected
thereby.
The Issuer and the Trustee may also amend the Indenture or enter into
supplemental indentures, without obtaining the consent of holders of any Series,
to cure any ambiguity or to correct or supplement any provision of the Indenture
or any supplemental indenture which may be defective or inconsistent with
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any other provision, or to make or to amend any other provisions with respect to
matters or questions arising under the Indenture or any supplemental indenture,
provided that such action shall not materially adversely affect the interests of
the holders of the Bonds. Such amendments may also be made and such supplemental
indentures may also be entered into without the consent of Bondholders or
Certificateholders to set forth the terms of and security for additional Series,
to evidence the succession of another person to the Issuer, to add to the
conditions, limitations and restrictions on certain terms of any Series and to
the covenants of the Issuer, to surrender any right or power conferred upon the
Issuer, to convey, transfer, assign, mortgage or pledge any property to the
Trustee, to correct or amplify the description of any property subject to the
lien of the Indenture to modify the Indenture to the extent necessary to effect
the Trustee's qualification under the TIA or comply with the requirements of the
TIA, to provide for the issuance of Bonds of any Series, to make any amendment
necessary or desirable to maintain the status of a REMIC as a REMIC and to amend
the provisions of the Indenture relating to authentication and delivery of a
Series with respect to which a supplemental indenture has not theretofore been
authorized or to evidence and provide for the acceptance of appointment by a
successor trustee.
EVENTS OF DEFAULT
Unless otherwise stated in the related Prospectus Supplement, an "Event of
Default" with respect to any Series is defined in the Indenture as being: (i) a
continuing default for 5 days in the payment of interest on any Bond of such
Series; (ii) a continuing default for five days in the payment of principal,
when due, of any Bond of such Series; (iii) the impairment of the validity or
effectiveness of the Indenture or any grant thereunder, or the subordination,
termination or discharge of the lien of the Indenture with respect to such
Series, or the release of any Person from any covenants or obligations under the
Indenture with respect to such Series, unless otherwise expressly permitted, or
the creation of any lien, charge, security interest, mortgage or other
encumbrance with respect to any part of the property subject to the lien of the
Indenture, or any interest in or proceeds of such property, or the failure of
the lien of the Indenture to constitute a valid first priority security interest
in the property subject to the lien of the Indenture and the continuation of any
of such defaults for a period of 30 days after notice to the Issuer by the
Trustee or to the Issuer and the Trustee by the Holders of at least 25% of the
then Aggregate Outstanding Principal of such Series; (iv) a default in the
observance of, or breach of, any covenant or negative covenant of the Issuer
made in the Indenture, or a material breach of any representation or warranty of
the Issuer made in the Indenture or in any certificate or other document
delivered pursuant thereto or in connection therewith as of the time when the
same shall have been made, and the continuation of any such default or breach
for a period of 60 days after notice to the Issuer by the Trustee or to the
Issuer and the Trustee by the holders of at least 25% of the then Aggregate
Outstanding Principal of such Series (unless the default or breach is with
respect to certain covenants specified in the Indenture not requiring such
continuation or notice); and (v) certan events of bankruptcy, insolvency,
receivership or reorganization of the Issuer. Notwithstanding the foregoing, if
a Series includes a Class of Subordinate Bonds, the Series Supplement for such a
Series may provide that certain defaults which relate only to such Subordinate
Securities shall not constitute an Event of Default with respect to the Bonds,
under certain circumstances, and may limit the rights of holders of Subordinate
Securities to direct the Trustee to pursue remedies with respect to such
defaults, or other Events of Default. Such limitations, if any, will be
specified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, in case an
Event of Default with respect to any Series should occur and be continuing, the
Trustee may and, upon the written request of the holders of at least 25% of the
then Aggregate Outstanding Principal of such Series shall, declare all Bonds of
such Series to be due and payable, together with accrued and unpaid interest
thereon. Such declaration may under certain circumstances be rescinded by the
holders of a majority of the then Aggregate Outstanding Principal of such
Series.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of an Event of Default with respect to a Series, mail to the holders
of such Series notice of all uncured or unwaived
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defaults known to it; provided that, except in the case of an Event of Default
in the payment of the principal or purchase price of or interest on any Bond,
the Trustee shall be protected in withholding such notice if it determines in
good faith that the withholding of such notice is in the interest of the
Bondholders of such Series, and provided, further, that, in the case of a
default specified in clause (iv) of the first paragraph of this "Events of
Default" subsection the Trustee is not required to give such notice until at
least 30 days after the occurrence of such default or breach and that, in the
case of any default or breach specified in clause (v) of the first paragraph of
this "Events of Default" subsection, the Trustee is not required to give such
notice until at least 60 days after the occurrence of such default or breach.
An Event of Default with respect to one Series will not necessarily be an
Event of Default with respect to any other Series.
Unless otherwise provided in the related Prospectus Supplement, if following
an Event of Default with respect to any Series, the Bonds of such Series have
been declared to be due and payable, the Trustee may, but shall not be obligated
to, in its sole discretion, refrain from liquidating the related Mortgage Assets
if (i) the Trustee determines that the amounts receivable with respect to such
Mortgage Assets and any Enhancement will be sufficient to pay (a) all principal
of and interest on the Bonds in accordance with their terms without regard to
the declaration of acceleration and (b) all sums due the Trustee and any other
administrative amounts required to be paid under the Indenture and (ii) Holders
of the requisite percentage of the Securities of such Series have not directed
the Trustee to sell the related Mortgage Assets as so specified in the
Indenture. In addition, unless otherwise specified in the related Prospectus
Supplement, the Trustee is prohibited from selling the Trust Estate following
certain Events of Default unless (a) the amounts receivable with respect to the
Mortgage Assets and any Enhancement are not sufficient to pay in full the
principal of and accrued interest on the Bonds of such Series and to pay sums
due the Trustee and other administrative expenses specified in the Indenture and
the Trustee obtains the consent of holders of 66 2/3% of the Aggregate
Outstanding Principal of such Series or (b) the Trustee obtains the consent of
100% of the Aggregate Outstanding Principal of such Series, and subject to the
provisions of the related Prospectus Supplement, the obligor under the
Enhancement. Unless otherwise provided in the related Prospectus Supplement, the
proceeds of a sale of Mortgage Assets will be applied to the payment of amounts
due the Trustee and other administrative expenses specified in the Indenture and
then distributed pro rata among the Bondholders of such Series (without regard
to Class, provided that Subordinate Securities will be subordinate to Senior
Securities of the Sries to the extent provided in the related Prospectus
Supplement) according to the amounts due and payable on the Bonds for principal
and interest at the time such proceeds are distributed by the Trustee.
The Trustee shall not be deemed to have knowledge of any Event of Default or
Default described in clauses (iv) through (vi) of the first paragraph of this
"Events of Default" subsection unless an officer in the Trustee's corporate
trust department has actual knowledge thereof. Subject to the provisions of the
Indenture relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the Bondholders of a Series, unless such Bondholders shall
have offered to the Trustee reasonable security or indemnity. Subject to such
provisions for indemnification and certain limitations contained in the
Indenture the holders of a majority of the then Aggregate Outstanding Principal
of a Series (or of such Classes specified in the related Prospectus Supplement)
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Series. In addition, the
Holders of a majority of the then Aggregate Outstanding Principal of a Series
(or of such Classes specified in the related Prospectus Supplement) may, in
certain cases, waive any default with respect to such Series, except a default
in payment of principal or interest or in respect of a covenant or provision
which cannot be modified without the consent of all Bondholders affected.
Unless otherwise specified in the related Prospectus Supplement, no holder
of Bonds of a Series will have the right to institute any Proceeding with
respect to the Indenture, unless (i) such Holder previously
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has given to the Trustee written notice of a continuing Event of Default with
respect to such Series and has offered the Trustee satisfactory indemnity, (ii)
the Holders of not less than 25% of the then Aggregate Outstanding Principal of
such Series have made written request upon the Trustee to institute such
Proceeding as Trustee and have offered satisfactory indemnity, (iii) the Trustee
has, for 60 days after receipt of such notice, request and offer of indemnity,
failed to institute any such Proceeding and (iv) no direction inconsistent with
such written request has been given to the Trustee during such 60-day period by
the Holders of a majority of the then Aggregate Outstanding Principal of such
Series; provided, however, that in the event that the Trustee receives
conflicting requests and indemnities from two or more groups of Bondholders,
each representing less than a majority of the Aggregate Outstanding Principal of
such Series, the Trustee may in its sole discretion determine what action with
respect to the Proceeding, if any, shall be taken.
AUTHENTICATION AND DELIVERY OF BONDS
The Issuer may from time to time deliver Bonds executed by it to the Trustee
and order that the Trustee authenticate such Bonds. Upon the receipt of such
Bonds and such order and subject to the Issuer's compliance with certain
conditions specified in the Indenture the Trustee will authenticate and deliver
such Bonds as the Issuer may direct. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will be authorized to appoint an agent for
purposes of authenticating and delivering any Series of Bonds (the
"Authenticating Agent").
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will be discharged as to a Series (except with respect to
certain continuing rights specified in the Indenture or Trust Agreement, as
applicable), (a)(1) upon the delivery to the Trustee for cancellation of all of
the Bonds of such Series other than Bonds which have been mutilated, lost or
stolen and have been replaced or paid and Bonds for which money has been
deposited in trust for the full payment thereof (and thereafter repaid to the
Issuer and discharged from such trust) as provided in of the Indenture, or (2)
at such time as all Bonds of such Series not previously cancelled by the Trustee
have become, or, within one year, will become, due and payable or called for
redemption and the Issuer shall have deposited with the Trustee an amount
sufficient to repay all of the Bonds and (b) the Issuer shall have paid all
other amounts payable under the Indenture or Trust Agreement, as applicable,
with respect to such Series.
ISSUER'S ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Trustee a written
statement as to fulfillment of its obligations under the Indenture.
LIST OF BONDHOLDERS
Three or more Holders of a Series which have each owned the Bonds for at
least six months may, by written application to the Trustee, request access to
the list maintained by the Trustee of all holders of the same Series or of all
Bonds, as specified in the request, for the purpose of communicating with other
Bondholders with respect to their rights under the Indenture.
MEETINGS OF BONDHOLDERS
Meetings of Bondholders or Certificateholders may be called at any time and
from time to time to (i) give any notice to the Issuer or to the Trustee, give
directions to the Trustee, consent to the waiver of any Default or Event of
Default under the Indenture, or to take any other action authorized to be taken
by Bondholders in connection therewith, (ii) remove the Trustee and to appoint a
successor Trustee, (iii) consent to the execution of supplemental indentures or
(iv) take any other action authorized to be taken by or on behalf of the
Bondholders of any specified percentage of the Aggregate Outstanding
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Principal of the Bonds. Such meetings may be called by the Trustee, the Issuer
or by the holders of 10% in Aggregate Outstanding Principal of any such Series.
FISCAL YEAR
The fiscal year of each Issuer ends on December 31.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Bondholders a brief
report relating to its eligibility and qualification to continue as the Trustee
under the Indenture any amounts advanced by it under the Indenture which remain
unpaid on the date of the report, the amount, interest rate and maturity date of
certain indebtedness owing by the Issuer (or any other obligor on such Series)
to the Trustee in its individual capacity, the property and funds physically
held by the Trustee as such, any release or release and substitution of property
subject to the lien of the Indenture which has not been previously reported, any
additional issuance of Bonds not previously reported and any action taken by it
which materially affects the Bonds and which has not been previously reported.
THE TRUSTEE
Bankers Trust or Marine Midland (or another bank or trust company qualified
under the TIA and named in the Prospectus Supplement related to a Series) will
be the Trustee under the Indenture for the Bond. The Issuer may maintain other
banking relationships in the ordinary course of business with the Trustee. If
Bankers Trust Company of California, N.A. serves as Trustee, the Trustee's
"Corporate Trust Office" is 3 Park Plaza, 16th Floor, Irvine, California 92714,
and if Marine Midland Bank, N.A. serves as Trustee, the Trustee's "Corporate
Trust Office" is 140 Broadway, New York, New York 10015, or at such other
addresses as the Trustee may designate from time to time by notice to the
Bondholders and the Issuer. With respect to the presentment and surrender of
Bonds for final payment of principal in retirement thereof on any Payment Date,
Redemption Date, Special Payment Date or Special Redemption Date and, with
respect to any other presentment and surrender of such Bonds and for all other
purposes, unless otherwise specified in the related Prospectus Supplement, such
Bonds may be presented at the Corporate Trust Office of the Trustee or at the
office of the Issuer's agent in the State of New York (the "New York Presenting
Agent"), which (if Bankers Trust Company of California, N.A. is the Trustee)
will be Bankers Trust Company, Four Albany Street, New York, New York 10006. If
another bank or trust company serves as Trustee or as the New York Presenting
Agent, the address of its Corporate Trust Office or such office of the New York
Presenting Agent will be specified in the related Prospectus Supplement.
THE TRUST AGREEMENT
The following summaries describe certain provisions of the Trust Agreement.
The summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Trust Agreement. Where
particular provisions or terms used in the Trust Agreement are referred to, such
provisions or terms are as specified in the Trust Agreement.
ASSIGNMENT OF MORTGAGE ASSETS
GENERAL. The Depositor will transfer, convey and assign to the Trustee all
right, title and interest of the Depositor in the Mortgage Assets and other
property to be included in the Trust Fund for a Series. Such assignment will
include all principal and interest due on or with respect to the Mortgage Assets
after the Cut-off Date specified in the related Prospectus Supplement. The
Trustee will, concurrently with such assignment, execute and deliver the
Certificates.
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ASSIGNMENT OF MORTGAGE LOANS. The Depositor will, as to each Mortgage Loan,
deliver or cause to be delivered to the Trustee, or, as specified in the related
Prospectus Supplement, the Custodian, the Mortgage Note endorsed without
recourse to the order of the Trustee or in blank, the original Mortgage with
evidence of recording indicated thereon (except for any Mortgage not returned
from the public recording office, in which case a copy of such Mortgage will be
delivered, together with a certificate that the original of such Mortgage was
delivered to such recording office) and an assignment of the Mortgage in
recordable form. The Trustee, or, if so specified in the related Prospectus
Supplement, the Custodian, will hold such documents in trust for the benefit of
the Certificateholders.
If so specified in the related Prospectus Supplement, the Depositor will, at
the time of delivery of the Certificates, cause assignments to the Trustee of
the Mortgage Loans to be recorded in the appropriate public office for real
property records, except in states where, in the opinion of counsel acceptable
to the Trustee, such recording is not required to protect the Trustee's interest
in the Mortgage Loan. If specified in the related Prospectus Supplement, the
Depositor will cause such assignments to be so recorded within the time after
delivery of the Certificates as is specified in the related Prospectus
Supplement, in which event, the Trust Agreement may, as specified in the related
Prospectus Supplement, require the Depositor to repurchase from the Trustee any
Mortgage Loan required to be recorded but not recorded within such time, at the
price described below with respect to repurchase by reason of defective
documentation. Unless otherwise provided in the related Prospectus Supplement,
the enforcement of the repurchase obligation would constitute the sole remedy
available to the Certificateholders or the Trustee for the failure of a Mortgage
Loan to be recorded.
Each Mortgage Loan will be identified in a schedule appearing as an exhibit
to the Trust Agreement (the "Mortgage Loan Schedule"). Such Mortgage Loan
Schedule will specify with respect to each mortgage loan: the original principal
amount and unpaid principal balance as of the Cut-off Date; the current interest
rate; the current Scheduled Payment of principal and interest; the maturity date
of the related mortgage note; if the Mortgage Loan is an adjustable rate
mortgage, the lifetime mortgage rate cap, if any, and the current index; and, if
the Mortgage Loan is a loan with other than fixed Scheduled Payments and level
amortization, the terms thereof.
REPURCHASE OF NON-CONFORMING LOANS
Unless otherwise provided in the related Prospectus Supplement, if any
document in the Mortgage Loan file delivered by the Depositor to the Trustee is
found by the Trustee within 45 days of the execution of the related Trust
Agreement (or promptly after the Trustee's receipt of any document permitted to
be delivered after the Closing Date) to be defective in any material respect and
the Depositor does not cure such defect within 90 days, or within such other
period specified in the related Prospectus Supplement, the Depositor will, not
later than 90 days or within such other period specified in the related
Prospectus Supplement, after the Trustee's notice to the Depositor or the Master
Servicer, as the case may be, of the defect, repurchase the related Mortgage
Loan or any property acquired in respect thereof from the Trustee at a price
equal to (a) the outstanding principal balance of such Mortgage Loan (or, in the
case of a foreclosed Mortgage Loan, the outstanding principal balance of such
Mortgage Loan immediately prior to foreclosure) and (b), accrued and unpaid
interest to the date of the next scheduled payment on such Mortgage Loan at the
related Certificate Interest Rate (less any unreimbursed Advances respecting
such Mortgage Loan).
Unless otherwise provided in the related Prospectus Supplement, the
above-described repurchase obligation constitute the sole remedies available to
the Certificateholders or the Trustee for a material defect in a Mortgage Loan
document.
The Depositor or another entity will make representations and warranties
with respect to Mortgage Loans which comprise the Mortgage Assets for a Series.
If the Depositor or such entity cannot cure a breach of any such representations
and warranties in all material respects within 90 days after notification
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by the Trustee of such breach, and if such breach is of a nature that materially
and adversely affects the value of such Mortgage Loan, the Depositor or such
entity is obligated to repurchase the affected Mortgaged Loan or, if provided in
the related Prospectus Supplement, provide a Substitute Mortgage Loan therefor,
subject to the same conditions and limitations on purchases and substitutions as
described above.
The Depositor's only source of funds to effect any cure, repurchase or
substitution will be through the enforcement of the corresponding obligations of
the responsible originator or seller of such Mortgage Loans. See "RISK FACTORS".
REPORTS TO CERTIFICATEHOLDERS
The Trustee will prepare and forward to each Certificateholder on each
Distribution Date, or as soon thereafter as is practicable, a statement setting
forth, to the extent applicable to any Series, among other things:
(i) with respect to a Series the amount of such distribution allocable to
principal on the Mortgage Assets, separately identifying the aggregate amount of
any principal prepayments included therein and the amount, if any, advanced by
the Servicer or by a Servicer;
(ii) with respect to a Series, the amount of such distribution allocable to
interest on the Mortgage Assets and the amount, if any, advanced by a Servicer;
(iii) the amount of servicing compensation with respect to the Mortgage
Assets and paid during the Due Period commencing on the Due Date to which such
distribution relates and the amount of servicing compensation during such period
attributable to penalties and fees;
(iv) the aggregate outstanding principal balance of the Mortgage Assets as
of the opening of business on the Due Date, after giving effect to distributions
allocated to principal and reported under (i) above;
(v) the aggregate outstanding principal amount of the Certificates of such
series as of the Due Date, after giving effect to distributions allocated to
principal reported under (i) above;
(vi) with respect to Compound Interest Securities, prior to the Accrual
Termination Date in addition to the information specified in (i)(B) above, the
amount of interest accrued on such Securities during the related Interest
Accrual Period and added to the Compound Value thereof;
(vii) in the case of Variable Rate Securities, the Variable Interest Rate
applicable to the distribution being made;
(viii) if applicable, the amount of any shortfall (i.e., the difference
between the aggregate amounts of principal and interest which Certificateholders
would have received if there were sufficient eligible funds to distribute and
the amounts actually distributed);
(ix) if applicable, the number and aggregate principal balances of Mortgage
Loans delinquent for (A) two consecutive payments and (B) three or more
consecutive payments, as of the close of the business on the Determination Date
to which such distribution relates;
(x) if applicable, the book value of any REO Property acquired on behalf of
Certificateholders through foreclosure, grant of a deed in lieu of foreclosure
or repossession as of the close of the business on the Business Day preceding
the Distribution Date to which such distribution relates;
(xi) if applicable, the amount of coverage under any pool insurance policy
as of the close of business on the applicable Distribution Date;
(xii) if applicable, the amount of coverage under any special hazard
insurance policy as of the close of business on the applicable Distribution
Date;
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(xiii) if applicable, the amount of coverage under any bankruptcy bond as of
the close of business on the applicable Distribution Date;
(xiv) in the case of any other Enhancement described in the related
Prospectus Supplement, the amount of coverage of such credit support as of the
close of business on the applicable Distribution Date;
(xv) in the case of any Series which includes a Subordinate Securities, the
subordinated amount, if any, determined as of the related Determination Date and
if the distribution to the Holders Senior Securities is less than their required
distribution, the amount of the shortfall;
(xvi) the amount of any withdrawal from any applicable reserve fund included
in amounts actually distributed to Certificateholders and the remaining balance
of each reserve fund, if any, on such Distribution Date, after giving effect to
distributions made on such date; and
(xvii) such other information as specified in the related Trust Agreement.
In addition, within a reasonable period of time after the end of each
calendar year the Trustee, unless otherwise specified in the related Prospectus
Supplement, will furnish to each Certificateholder of record at any time during
such calendar year: (a) the aggregate of amounts reported pursuant to (i)
through (iv), (vi), (viii) and (xvi) above for such calendar year and (b) such
information specified in the Trust Agreement to enable Certificateholders to
prepare their tax returns including, without limitation, the amount of original
issue discount accrued on the Certificates, if applicable. Information in the
Distribution Date and annual reports provided to the Certificateholders will not
have been examined and reported upon by an independent public accountant.
However, the Master Servicer will provide to the Trustee a report by independent
public accountants with respect to the Master Servicer's servicing of the
Mortgage Loans. See "SERVICING OF MORTGAGE LOANS--Evidence as to Compliance"
herein.
EVENT OF DEFAULT
Events of Default under the Trust Agreement for each Series include (i) any
failure by the Master Servicer to distribute to Certificateholders of such
Series any required payment which continues unremedied for five days after the
giving of written notice of such failure to the Master Servicer by the Trustee
for such Series, or to the Master Servicer and the Trustee by the Holders of
Certificates of such Series evidencing not less than 25% of the aggregate
outstanding principal amount of the Certificates for such Series, (ii) any
failure by the Servicer duly to observe or perform in any material respect any
other of its covenants or agreements in the Trust Agreement which continues
unremedied for 30 days after the giving of written notice of such failure to the
Master Servicer by the Trustee, or to the Master Servicer and the Trustee by the
Holders of Certificates of such Series evidencing not less than 25% of the
aggregate outstanding principal amount of the Certificates and (iii) certain
events in insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by the Master Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default remains unremedied under the Trust Agreement
for a Series, the Trustee for such Series or Holders of Certificates of such
Series evidencing not less than 25% of the aggregate outstanding principal
amount of the Certificates for such Series may terminate all of the rights and
obligations of the Master Servicer as servicer under the Trust Agreement and in
and to the Mortgage Loans (other than its right to recovery of other expenses
and amounts advanced pursuant to the terms of the Trust Agreement which rights
the Master Servicer will retain under all circumstances), whereupon the Trustee
will succeed to all the responsibilities, duties and liabilities of the Master
Servicer under the Trust Agreement and will be entitled to reasonable servicing
compensation not to exceed the applicable servicing fee, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in the Trust Agreement.
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In the event that the Trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a housing and
home finance institution, bank or mortgage servicing institution with a net
worth of at least $15,000,000 to act as successor Master Servicer under the
provisions of such Trust Agreement relating to the servicing of the Mortgage
Loans. The successor Servicer would be entitled to reasonable servicing
compensation in an amount not to exceed the servicing fee as set forth in the
related Prospectus Supplement, together with the other servicing compensation in
the form of assumption fees, late payment charges or otherwise, as provided in
the Trust Agreement.
During the continuance of any Event of Default under the Trust Agreement for
a Series, the Trustee for such Series will have the right to take action to
enforce its rights and remedies and to protect and enforce the rights and
remedies of the Certificateholders of such Series, and Holders of Certificates
evidencing not less than 25% of the aggregate outstanding principal amount of
the Certificates for such Series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred upon that Trustee. However, the Trustee will not be
under any obligation to pursue any such remedy or to exercise any of such trusts
or powers unless such Certificateholders have offered the Trustee reasonable
security or indemnity against the cost, expenses and liabilities which may be
incurred by the Trustee therein or thereby. Also, the Trustee may decline to
follow any such direction if the Trustee determines that the action or
proceeding so directed may not lawfully be taken or would involve it in personal
liability or be unjustly prejudicial to the nonassenting Certificateholders.
No Certificateholder of a Series, solely by virtue of such Holder's status
as a Certificateholder, will have any right under the Trust Agreement for such
Series to institute any proceeding with respect to the Trust Agreement, unless
such Holder previously has given to the Trustee for such Series written notice
of default and unless the Holders of Certificates evidencing not less than 25%
of the aggregate outstanding principal amount of the Certificates for such
Series have made written request upon the Trustee to institute such proceeding
in its own name as Trustee thereunder and have offered to the Trustee reasonable
indemnity, and the Trustee for 60 days has neglected or refused to institute any
such proceeding.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or trust
company named as the Trustee for each Series of Certificates will be set forth
in the related Prospectus Supplement, and such Trustee may be Bankers Trust or
Marine Midland. The entity serving as Trustee may have normal banking
relationships with the Depositor or the Master Servicer. In addition, for the
purpose of meeting the legal requirements of certain local jurisdictions, the
Trustee will have the power to appoint co-trustees or separate trustees of all
or any part of the Trust Fund relating to a Series of Certificates. In the event
of such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the Trust Agreement relating to such Series will be
conferred or imposed upon the Trustee and each such separate trustee or
co-trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of the Trustee. The Trustee may also
appoint agents to perform any of the responsibilities of the Trustee, which
agents shall have any or all of the rights, powers, duties and obligations of
the Trustee conferred on them by such appointment; provided that the Trustee
shall continue to be responsible for its duties and obligations under the Trust
Agreement.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Trust Agreement, the Certificates or of any Mortgage Asset or related
documents. If no Event of Default (as defined in the related Trust Agreement)
has occurred, the Trustee is required to perform only those duties specifically
required of it under the Trust Agreement. Upon receipt of the various
certificates, statements, reports or other instruments required to be furnished
to it, the Trustee is required to examine them to determine
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whether they are in the form required by the related Trust Agreement, however,
the Trustee will not be responsible for the accuracy or content of any such
documents furnished by it or the Certificateholders to the Master Servicer under
the Trust Agreement.
The Trustee may be held liable for its own grossly negligent action or
failure to act, or for its own willful misconduct; provided, however, that the
Trustee will not be personally liable with respect to any action taken, suffered
or omitted to be taken by it in good faith in accordance with the direction of
the Certificateholders in an Event of Default, see "Rights Upon Event of
Default" above. The Trustee is not required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
under a Trust Agreement, or in the exercise of any of its rights or powers, if
it has reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
RESIGNATION OF TRUSTEE
The Trustee may, upon written notice to the Depositor, resign at any time,
in which event the Depositor will be obligated to use its best efforts to
appoint a successor Trustee. If no successor Trustee has been appointed and has
accepted the appointment within 30 days after giving such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
appointment of a successor Trustee. The Trustee may also be removed at any time
(i) by the Depositor, if the Trustee ceases to be eligible to continue as such
under the Trust Agreement, (ii) if the Trustee becomes insolvent, (iii) if a tax
is imposed or threatened with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund held by the Trustee pursuant to the Trust
Agreement is located, or (iv) by the Holders of Certificates evidencing over 50%
of the aggregate outstanding principal amount of the Certificates in the Trust
Fund upon 30 days' advance written notice to the Trustee and to the Depositor.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
AMENDMENT OF TRUST AGREEMENT
Unless otherwise specified in the Prospectus Supplement, the Trust Agreement
for each Series of Certificates may be amended by the Depositor, the Master
Servicer, and the Trustee with respect to such Series, without notice to or
consent of the Certificateholders (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein which may be inconsistent with any other
provision therein or in the Prospectus Supplement, (iii) to make any other
provisions with respect to matters or questions arising under such Trust
Agreement or (iv) to comply with any requirements imposed by the Code; provided
that any such amendment pursuant to clause (iii) above will not adversely affect
in any material respect the interests of any Certificateholders of such Series
not consenting thereto. Any such amendment pursuant to clause (iii) of the
preceding sentence shall be deemed not to adversely affect in any material
respect the interests of any Certificateholder if the Trustee receives written
confirmation from each Rating Agency rating such Certificates that such
amendment will not cause such Rating Agency to reduce the then current rating
thereof. The Trust Agreement for each Series may also be amended by the Trustee,
the Master Servicer and the Depositor with respect to such Series with the
consent of the Holders possessing not less than 66 2/3% of the aggregate
outstanding principal amount of the Certificates of each Class of such Series
affected thereby, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Trust Agreement or modifying
in any manner the rights of Certificateholders of such Series; provided,
however, that no such amendment may (a) reduce the amount or delay the timing of
payments on any Certificate without the consent of the Holder of such
Certificate; or (b) reduce the aforesaid percentage of aggregate outstanding
principal amount of Certificates of each Class, the Holders of which are
required to consent to any such amendment without the cnsent of the Holders of
100% of the aggregate outstanding principal amount of each Class of Certificates
affected thereby.
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VOTING RIGHTS
The related Prospectus Supplement will set forth the method of determining
allocation of voting rights with respect to a Series, if other than set forth
herein.
LIST OF CERTIFICATEHOLDERS
Upon written request of three or more Certificateholders of record of a
Series for purposes of communicating with other Certificateholders with respect
to their rights under the Trust Agreement or under the Certificates for such
Series, which request is accompanied by a copy of the communication which such
Certificateholders propose to transmit, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders of that Series held by the Trustee.
No Trust Agreement will provide for the holding of any annual or other
meeting of Certificateholders.
REMIC ADMINISTRATOR
With respect to any Series, preparation of certain reports and certain other
administrative duties with respect to the Trust Fund may be performed by a REMIC
administrator, who may be an affiliate of the Depositor.
TERMINATION
The obligations created by the Trust Agreement for a Series will terminate
upon the distribution to Certificateholders of all amounts distributable to them
pursuant to such Trust Agreement after (i) the later of the final payment or
other liquidation of the last Mortgage Loan remaining in the Trust Fund for such
Series or the disposition of all REO Property or (ii) the repurchase, as
described below, by the Servicer from the Trustee for such Series of all Loans
at that time subject to the Trust Agreement and all REO Property. The Trust
Agreement for each Series permits, but does not require, the Servicer to
repurchase from the Trust Fund for such Series all remaining Mortgage Loans at a
price equal to 100% of the Aggregate Asset Value of such Mortgage Loans plus,
with respect to REO Property, if any, the outstanding principal balance of the
related Mortgage Loan, less, in either case, related unreimbursed Advances (in
the case of the Mortgage Loans, only to the extent not already reflected in the
computation of the Aggregate Asset Value of such Mortgage Loans) and
unreimbursed expenses (that are reimburseable pursuant to the terms of the Trust
Agreement) plus, in either case, accrued interest thereon at the weighted
average Mortgage Rate through the last day of the Due Period in which such
repurchase occurs; provided, however, that if an election is made for treatment
as a REMIC under the Code, the repurchase price may equal the greater of (a)
100% of the Aggregate Asset Value of such Loans, plus accrued interest thereon
at the applicable net Mortgage Rates through the last day of the month of such
repurchase and (b) the aggregate fair market value of such Mortgage Loans; plus
the fair market value of any property acquired in respect of a Mortgage Loan and
remaining in the Trust Fund. The exercise of such right will effect early
retirement of the Certificates of such Series, but the Servicer's right to so
purchase is subject to the Aggregate Value of the Mortgage Loans at the time of
repurchase being less than a fixed percentage, to be set forth in the related
Prospectus Supplement, of the Cut-off Date Aggregate Asset Value. In no event,
however, will the trust created by the Trust Agreement continue beyond the
expiration of 21 years from the death of the last survivor of certain persons
identified therein. For each Series, the Servicer or the Trustee, as applicable,
will give written notice of termination of the Trust Agreement to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency specified in the
notice of termination. If so provided in the related Prospectus Supplement for a
Series, the Depositor or another entity may effect an optional termination of
the Trust Fund or repurchase all or certain Classes of Certificates of a Series
under the circumstances described in such Prospectus Supplement. See
"DESCRIPTION OF THE SECURITIES--Optional Termination," "Optional Repurchase of
Certificates," and "--Other Repurchases" herein.
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THE ISSUER
THE COMPANY
The Company was incorporated in the State of Delaware on January 2, 1987.
The principal office of the Company is located at 200 Vesey Street, New York,
New York 10285. Its telephone number is (212) 526-5594.
The Certificate of Incorporation of the Company provides that the Company
may not conduct any activities other than those related to the issue and sale of
one or more Series and to serve as depositor of one or more trusts that may
issue and sell Bonds or Certificates. The Certificate of Incorporation of the
Company provides that any Securities, except for subordinated Securities, issued
by the Company must be rated in one of the three highest categories available by
any Rating Agency rating the Series. Pursuant to the terms of the Indenture or
Trust Agreement, as applicable, the Company may not issue any Securities which
would result in the lowering of the then current ratings of the outstanding
Securities of any Series.
The Series Supplement for a particular Series may permit the Primary Assets
pledged to secure the related Series of Bonds to be transferred by the Issuer to
a trust, subject to the obligations of the Bonds of such Series, thereby
relieving the Issuer of its obligations with respect to such Bonds.
OWNER TRUST
Each owner trust established to act as Issuer of a Series of bonds (each, an
"Owner Trust") will be created pursuant to a deposit trust agreement (the
"Deposit Trust Agreement") between the Company which will act as Depositor and
the bank, trust company or other fiduciary named in the related Prospectus
Supplement which will act solely in its fiduciary capacity as Owner Trustee.
Under the terms of each Deposit Trust Agreement, the Company will convey to the
Owner Trustee Mortgage Assets and other Primary Assets to secure one or more
Series in return for certificates or other instruments evidencing beneficial
ownership of the Owner Trust and the net proceeds of the sale of the Bonds. The
Company may in turn sell or assign the certificates of beneficial interest to
another entity or entities, including affiliates of the Company.
The Owner Trust will pledge the Mortgage Assets and other Primary Assets to
the Trustee under the related Indenture as security for a Series. The Trustee
will hold such Mortgage Assets as security only for that Series, and Holders of
the Bonds of such Series will be entitled to the equal and proportionate
benefits of such security, subject to the express subordination of certain
Classes thereof, as if the same had been granted by a corporate issuer.
Each Deposit Trust Agreement will provide that the related Trust may not
conduct any activities other than those related to the issuance and sale of the
particular Series. No Deposit Trust Agreement will be subject to amendment
without the prior written consent of the Owner Trustee, the holders representing
a majority of the beneficial interest of the Owner Trust and the Trustee, except
that the holders of not less than 66 2/3% of the Aggregate Outstanding Principal
of each Series must consent to any amendment of, among other provisions, the
limitation on activities of the Owner Trust and the provision regarding
amendments to the Deposit Trust Agreement. The holders of the beneficial
interests in an Owner Trust which issues a Series will not be liable for payment
of principal of or interest on the Bonds and each holder of Bonds of such Series
will be deemed to have released such beneficial owners from any such liability.
ADMINISTRATOR
Unless otherwise specified in the related Prospectus Supplement, it is
expected that the Issuer will enter into an administration agreement with an
administrator acceptable to the Rating Agencies rating the applicable Series of
Securities (the "Administrator") pursuant to which advisory, administrative,
accounting and clerical services will be provided to the Issuer with respect to
the Securities. The Trustee or the Master Servicer may serve as the Securities
Administrator. In addition, under the Indenture or Trust Agreement, as
applicable, the Issuer is responsible for certain administrative and accounting
matters
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relating to the Securities. It is intended that the Administrator will perform
these services on behalf of the Issuer, and amounts payable with respect to such
services, unless otherwise provided in the related Prospectus Supplement, will
be subordinate to the Issuer's obligations to pay principal and interest to the
Bondholders or Certificateholders (including any Residual Interest Bondholders
or Residual Interest Certificateholders) but, unless otherwise specified in the
related Prospectus Supplement, will be senior to the Issuer's obligation to pay
any Excess Cash Flow to the Residual Interest Bondholders or Residual Interest
Certificateholders.
USE OF PROCEEDS
The Issuer will apply all or substantially all of the net proceeds from the
sale of each Series offered hereby and by the related Prospectus Supplement to
purchase the Mortgage Assets securing each Series simultaneously with the
issuance and sale of such Securities. The proceeds may also be used to repay
indebtedness which has been incurred to acquire Mortgage Assets, to establish
the Reserve Funds, if any, for the Series and to pay costs of structuring,
guaranteeing and issuing the Securities. If so specified in the related
Prospectus Supplement, the purchase of the Mortgage Assets for a Series may be
effected by an exchange of Securities with the Seller of such Mortgage Assets.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Any bearer securities will be issued in compliance with United States
federal tax laws and regulations applicable at the time of issuance. Under
current law, bearer securities may not be offered or sold during the restricted
period, or delivered in definitive form in connection with a sale during the
restricted period (as defined under "DESCRIPTION OF THE SECURITIES--Bearer
Securities and Registered Securities"), in the United States or to United States
persons other than to (a) the United States office of (i) an international
organization (as defined in Section 7701(a)(18) of the Code), (ii) a foreign
central bank (as defined in Section 895 of the Code), or (iii) any underwriter,
agent, or dealer offering or selling bearer securities during the restricted
period (a "Distributor") pursuant to a written contract with the Issuer or with
another Distributor, that purchases bearer securities for resale or for its own
account and agrees to comply with the requirements of Section 165(j)(3)(A), (B),
or (C) of the Code, or (b) the foreign branch of a United States financial
institution purchasing for its own account or for resale, which institution
agrees to comply with the requirements of Section 165(j)(3)(A), (B), or (C) of
the Code. In addition, a sale of a bearer security may be made during the
restricted period to a United States person who acquired and holds the bearer
security on the certification date through a foreign branch of a United States
financial institution that agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code. Any Distributor (including an affiliate of
a Distributor) offering or selling bearer securities during the restricted
period must agree not to offer or sell bearer securities in the United States or
to United States persons (except as discussed above) and must employ procedures
reasonably designed to ensure that its employees or agents directly engaged in
selling bearer securities are aware of these restrictions.
Bearer securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate the income of which is
subject to United States federal income taxation regardless of its source or a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust,
and "United States" means the United States of America (including the States and
the District of Columbia) and its possessions including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands.
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FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain anticipated federal income tax
consequences of the purchase, ownership, and disposition of the Securities. The
summary is based upon the provisions of the Code, the regulations promulgated
thereunder, including, where applicable, proposed regulations, and the judicial
and administrative rulings and decisions now in effect, all of which are subject
to change or possible differing interpretations. The statutory provisions,
regulations, and interpretations on which this interpretation is based are
subject to change, and such a change could apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special treatment
under the federal income tax laws. This summary focuses primarily upon investors
who will hold Securities as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code, but much of the
discussion is applicable to other investors as well. Potential purchasers of
Securities are advised to consult their own tax advisers concerning the federal,
state or local tax consequences to them of the purchase, holding and disposition
of the Securities.
CHARACTERIZATION OF SECURITIES
Unless otherwise stated in the applicable Prospectus Supplement, a REMIC
election will be made with respect to each Series of Securities. In such a case,
special counsel to the Issuer will deliver its opinion to the effect that the
arrangement by which the Securities of that Series are issued will be treated as
a REMIC as long as all of the provisions of the applicable Indenture or Trust
Agreement, as applicable, are complied with and the statutory and regulatory
requirements are satisfied. Securities of such Series will be designated as
"regular interests" or "residual interests" in a REMIC, as specified in the
related Prospectus Supplement.
If the applicable Prospectus Supplement so specifies with respect to a
Series of Securities, the Securities of such Series will not be treated as
regular or residual interests in a REMIC for federal income tax purposes but
instead will be treated as (i) indebtedness of the Issuer; (ii) an undivided
beneficial ownership interest in the Mortgage Loans (and the arrangement
pursuant to which the Mortgage Loans will be held and the Securities will be
issued will be treated as a grantor trust under Subpart E, part I of subchapter
J of the Code and not as an association taxable as a corporation for federal
income tax purposes); (iii) equity interests in an association that will satisfy
the requirements for qualification as a real estate investment trust; (iv)
interests in an entity that will be treated as a partnership for federal income
tax purposes, or (v) interests in an entity or a pool of assets that will
satisfy the requirements for qualification as a financial asset securitization
investment trust (a "FASIT") for federal income tax purposes. The federal income
tax consequences to Bondholders or Certificateholders of any such Series will be
described in the applicable Prospectus Supplement.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement or Indenture with respect to each REMIC will
include provisions designed to maintain the Trust Fund's status as a REMIC under
the REMIC Provisions. It is not anticipated that the status of any Trust Fund as
a REMIC will be terminated.
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Except to the extent the related Prospectus Supplement specifies otherwise,
if a REMIC election is made with respect to a Series of Securities, (i)
Securities held by a domestic building and loan association will constitute "a
regular or a residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets consist of
cash, government securities, "loans . . . secured by an interest in real
property which is . . . residential real property," and other types of assets
described in Code Section 7701(a)(19)(C)); and (ii) Securities held by a real
estate investment trust will constitute "real estate assets" within the meaning
of Code Section 856(c)(6)(B), and income with respect to the Securities will be
considered "interest on obligations secured by mortgages on real property or on
interest in real property" within the meaning of Code Section 856(c)(3)(B)
(assuming, for both purposes, that at least 95% of the REMIC's assets are
qualifying assets). If less than 95% of the REMIC's assets consist of assets
described in (i) or (ii) above, then Securities will qualify for the tax
treatment described in (i) or (ii) in the proportion that such REMIC assets are
qualifying assets. In general, Mortgage Loans secured by non-residential real
property will not constitute "loans . . . secured by an interest in real
property which is . . . residential real property" within the meaning of Section
7701(a)(19)(C). The Small Business Job Protection Act of 1996 (the "SBJPA of
1996") repealed the reserve method for bad debts of domestic building and loan
associations and mutual savings banks, and thus has eliminated the asset
category of "qualifying real property loans" in former Code Section 593(d) for
taxable years beginning after December 31, 1995. The requirement in the SBJPA of
1996 that such institutions must "recapture" a portion of their existing bad
debt reserves is suspended if a certain portion of their assets are maintained
in "residential loans" under Code Section 7701(a)(19)(C)(v), but only if such
loans were made to acquire, construct or improve the related real property and
not for the purpose of refinancing. However, no effort will be made to identify
the portion of the Mortgage Loans of any Series meeting this requirement, and no
representation is made in this regard.
It is possible that various reserves or funds will reduce the proportion of
REMIC assets which qualify under the standards described above.
TAXATION OF REGULAR INTEREST SECURITIES
INTEREST AND ACQUISITION DISCOUNT. Securities that qualify as regular
interests in a REMIC ("Regular Interest Securities") are generally treated as
indebtedness for federal income tax purposes. Stated interest on a Regular
Interest Security will be taxable as ordinary income using the accrual method of
accounting, regardless of the Bondholder's or Certificateholder's normal
accounting method. Reports will be made annually to the IRS and to holders of
Regular Interest Securities that are not excepted from the reporting
requirements regarding amounts treated as interest (including accrual of
original issue discount) on Regular Interest Securities.
Compound Interest Securities, Interest Weighted Securities, and Zero Coupon
Securities will, and other Securities constituting Regular Interest Securities
may, be issued with "original issue discount" ("OID") within the meaning of Code
Section 1273. Rules governing original issue discount are set forth in sections
1271-1275 of the Code and the Treasury regulations thereunder (the "OID
Regulations"). Treasury regulations (the "Contingent Regulations") governing the
treatment of contingent payment obligations also have been adopted. As described
more fully below, Code Section 1272(a)(6) requires the use of an income tax
accounting methodology that utilizes (i) a single constant yield to maturity and
(ii) the Prepayment Assumptions. Under Section 1272(a)(6) of the Code, special
rules apply to the computation of OID on instruments, such as the Regular
Interest Securities, on which principal is prepaid based on prepayments of the
underlying assets. Neither the OID Regulations nor the Contingent Regulations
contain rules applicable to instruments governed by Section 1272(a)(6). Although
technically not applicable to prepayable securities, the Contingent Regulations
may represent a possible method to be applied in calculating OID on certain
Classes of Certificates. Until the Treasury Department issues guidance to the
contrary, the Servicer or other person responsible for computing the amount of
original issue discount to be reported to a Regular Interest Securityholder each
taxable year (the "Tax Administrator") intends to
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base its computations on Code Section 1272(a)(6), the OID Regulations and the
Contingent Regulations as described below. However, because no regulatory
guidance currently exists under Code Section 1272(a)(6), there can be no
assurance that the methodology described below represents the correct manner of
calculating original issue discount on the Regulr Interest Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Regular Interest Security and its issue price.
A holder of a Regular Interest Security must include such OID in gross income as
ordinary interest income as it accrues under a method taking into account an
economic accrual of the discount. In general, OID must be included in income in
advance of the receipt of the cash representing that income. The amount of OID
on a Regular Interest Security will be considered to be zero if it is less than
a DE MINIMIS amount determined under the Code, generally less than 0.25% of the
stated redemption price at maturity of the Regular Interest Security multiplied
by the weighted average maturity of the Regular Interest Security. For this
purpose, the weighted average maturity of the Regular Interest Security is
computed as the sum of the amounts determined by multiplying the number of full
years (I.E., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the Regular Interest
Security and the denominator of which is the stated redemption price at maturity
of the Regular Interest Security. The schedule of such distributions should be
determined in accordance with the assumed rate of prepayment of the Mortgage
Loans used in pricing the Regular Interest Securities (the "Prepayment
Assumption") relating to the Regular Interest Securities. The Prepayment
Assumption with respect to a Series of Regular Interest Securities will be set
forth in the applicable Prospectus Supplement. However, the amount of any DE
MINIMIS OID must be included in income as principal payments are received on a
Regular Interest Security, in the proportion that each such payment bears to the
original principal balance of the Security.
The issue price of a Regular Interest Security of a Class will generally be
the initial offering price at which a substantial amount of the Securities in
the Class are sold, and will be treated by the Issuer as including, in addition,
the amount paid by the Bondholder or Certificateholder for accrued interest that
relates to a period prior to the Closing Date of such Regular Interest Security.
Under the OID Regulations, the stated redemption price at maturity is the sum of
all payments on the Security other than any "qualified stated interest"
payments. Qualified stated interest is defined as any one of a series of
payments equal to the product of the outstanding principal balance of the
Security and a single fixed rate, or certain variable rates of interest, that is
unconditionally payable at least annually. See "Variable Rate Securities" below.
In the case of the Compound Interest Securities, and certain of the other
Regular Interest Securities, none of the payments under the instrument will be
considered "qualified stated interest," and thus the aggregate amount of all
payments will be included in the stated redemption price. For example, any
securities upon which interest can be deferred and added to principal ("Deferred
Interest Securities") will not be "qualified stated interest." In addition,
because Securities Owners are entitled to receive interest only to the extent
that payments are made on the Mortgage Loans, interest on all Regular Interest
Securities may not be "unconditionally payable." In that case, all of the yield
on a Regular Interest Security will be taxed as OID, but interest would not then
be includable in income again when received. Unless otherwise specified in the
related Prospectus Supplement, the Issuer intends to take the position that
interest on the Regular Interest Securities is "unconditionally payable."
The holder of a Regular Interest Security issued with OID must include in
gross income, for all days during its taxable year on which it holds such
Regular Interest Security, the sum of the "daily portions" of such OID. Such
daily portions are computed by allocating to each day during a taxable year a
pro rata portion of the OID that accrued during the relevant accrual period. In
the case of a debt instrument, subject to Section 1272(a)(6) of the Code, such
as a Regular Interest Security, that is subject to acceleration due to
prepayments on other debt obligations securing such instrument, OID is computed
by taking into account the Prepayment Assumption. The amount of OID that will
accrue during an accrual
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period (generally the period between interest payments or compounding dates) is
the excess (if any) of (i) the sum of (a) the present value of all payments
remaining to be made on the Regular Interest Security as of the close of the
accrual period and (b) the payments during the accrual period of amounts
included in the stated redemption price of the Regular Interest Security, over
(ii) an "adjusted issue price" of the Regular Interest Security at the beginning
of the accrual period. The adjusted issue price of a Regular Interest Security
is the sum of its issue price plus prior accruals of OID, reduced by the total
payments made with respect to such Regular Interest Security in all prior
periods, other than qualified stated interest payments. The present value of the
remaining payments is determined on the basis of three factors: (i) the original
yield to maturity of the Regular Interest Security (determined on the basis of
compounding at the end of each accrual period and properly adjusted for the
length of the accrual period), (ii) events which have occurred before the end of
the accrual period and (iii) the assumption that the remaining payments will be
made in accordance with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a Bondholder or Certificateholder to take into account
prepayments with respect to the Mortgage Loans at a rate that exceeds the
Prepayment Assumption, and to decrease (but not below zero for any period) the
portions of OID required to be included in income by a Bondholder or
Certificateholder to take into account prepayments with respect to the Mortgage
Loans at a rate that is slower than the Prepayment Assumption. Although original
issue discount will be reported to Bondholders or Certificateholders based on
the Prepayment Assumption, no representation is made to Bondholders or
Certificateholders that Mortgage Loans will be prepaid at that rate or at any
other rate.
The Issuer may adjust the accrual of OID on a Class of Regular Interest
Securities (or other regular interests in a REMIC) in a manner that it believes
to be appropriate, to take account of realized losses on the Mortgage Assets,
although the OID Regulations do not provide for such adjustments. If the Service
challenges the method adopted by the Issuer, the rate of accrual of OID for a
Class of Regular Interest Securities could increase.
Certain classes of Regular Interest Securities may represent more than one
class of REMIC regular interests. Unless the applicable Prospectus Supplement
specifies otherwise, the Trustee intends, based on the OID Regulations, to
calculate OID on such Regular Interest Securities as if, solely for the purposes
of computing OID, the separate regular interests were a single debt instrument.
Certain Series of Securities may be structured to include two or more
REMICs, one or more of which (each, an "Upper Tier REMIC") hold regular
interests ("Lower Tier Interests") in other REMICs (each, a "Lower Tier REMIC").
Under the OID Regulations, OID on all of the Lower Tier Interests issued by a
single Lower Tier REMIC that are held by a second REMIC will be calculated by
treating all of such Lower Tier Interests as a single debt instrument.
A holder of a Regular Interest Security, which acquires the Regular Interest
Security for an amount that exceeds its stated redemption price, will not
include any original issue discount in gross income. A subsequent holder of a
Regular Interest Security which acquires the Regular Interest Security for an
amount that is less than its stated redemption price, will be required to
include original issue discount in gross income, but such a holder who purchases
such Regular Interest Security for an amount that exceeds its adjusted issue
price will be entitled (as will an initial holder who pays more than a Regular
Interest Security's issue price) to offset such original issue discount by
comparable economic accruals of portions of such excess.
INTEREST WEIGHTED SECURITIES. It is not clear how income should be accrued
with respect to Regular Interest Securities the payments on which consist solely
or primarily of a specified portion of the interest payments on qualified
mortgages held by a REMIC ("Interest Weighted Securities"). Absent guidance to
the contrary, the Issuer intends to take the position that all of the income
derived from Interest Weighted Securities should be treated as OID and that the
amount and rate of accrual of such OID should be calculated in the same manner
as for a Compound Interest Security. However, the Internal Revenue
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Service could assert that income derived from an Interest Weighted Security
should be calculated as if the Interest Weighted Security were a bond purchased
at a premium equal to the excess of the price paid by such holder for the
Interest Weighted Security over its stated principal amount, if any. Under this
approach, a holder would be entitled to amortize such premium only if it has in
effect an election under Section 171 of the Code with respect to all taxable
debt instruments held by such holder, as described below. Alternatively, the
Internal Revenue Service could assert that the Interest Weighted Security should
be taxable under the rules governing bonds issued with contingent principal
payments or otherwise treated as contingent payment instruments. Under the
Contingent Regulations, if they were applicable to Interest Weighted Securities
(which, as 1272(a)(6) instruments, are specifically excluded from the scope of
the Contingent Regulations) income on certain Certificates would be computed
under the "noncontingent bond method." The noncontingent bond method would
generally apply in a manner similar to the method prescribed by the Code under
Section 1272(a)(6). See "--Variable Rate Regular Securities." Under the
noncontingent bond method, however, if the interest payable for any period is
greater or less than the amount projected, the amount of income included for
that period would be either increased or decreased accordingly. Any reduction in
the income accrual for a period below zero (a "Negative Adjustment") would be
treated by a Certificateholder as ordinary loss to the extent of prior income
accruals and may be carried forward to offset future interest accruals. At
maturity, any remaining Negative Adjustment would be treated as a loss on
retirement of the Certificate. The legislative history or relevant Code
provisions indicates, however, that negative amount of OID on an instrument such
as a REMIC regular interest may not give rise to taxable losses in any accrual
period prior to the instrument's disposition or retirement. Thus, it is not
clear whether any losses resulting from a Negative Adjustment could be
recognized currently or would be carried forward until disposition or retirement
of the debt obligation.
VARIABLE RATE REGULAR SECURITIES. The REMIC regulations (the "REMIC
Regulations") permit REMICs to issue regular interests bearing a variety of
variable rates including rates based on (i) "qualified floating rates" or (ii) a
weighted average of the interest rates on some or all of the qualified mortgages
held by the REMIC (a "Variable Rate Security"). Under the OID Regulations,
interest is treated as payable at a variable rate if, generally, (i) the issue
price does not exceed the original principal balance by more than a specified
amount and (ii) the interest compounds or is payable at least annually at
current values of (a) one or more "qualified floating rates," (b) a single fixed
rate and one or more qualified floating rates, (c) a single "objective rate," or
(d) a singled fixed rate and a single objective rate that is a "qualified
inverse floating rate." A floating rate is a qualified floating rate if
variations in the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, where such rate is subject to a
fixed multiple that is greater than 0.65 but not more than 1.35. Such rate may
also be increased or decreased by a fixed spread or subject to a fixed cap or
floor, or a cap or floor that is not reasonably expected as of the issue date to
affect the yield of the instrument significantly. An objective rate is any rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on objective financial or economic information,
provided that such information is not (i) within the control of the issuer or a
related party or (ii) unique to the circumstances of the issuer or a related
party. A qualified inverse floating rate is a rate equal to a fixed rate minus a
qualified floating rate that inversely reflects contemporaneous variations in
the cost of newly borrowed funds; an inverse floating rate that is not a
qualified inverse floating rate may nevertheless be an objective rate.
Under the OID Regulations, the amount and accrual of OID on a Variable Rate
Security that qualifies for treatment under the rules applicable to variable
rate debt instruments (a "VRDI Security") is determined, in general, by
converting the VRDI Security into a hypothetical fixed rate security and
applying the rules applicable to fixed rate securities described above to the
hypothetical fixed rate security. A VRDI Security providing for a qualified
floating rate or rates or a qualified inverse floating rate is converted to a
hypothetical fixed rate security by assuming that each qualified floating rate
or the qualified inverse floating rate will remain at its value as of the issue
date. A VRDI Security providing for an objective rate or rates is converted to a
hypothetical fixed rate security by assuming that each objective rate will equal
a fixed rate that reflects the yield that reasonably is expected for the
instrument. Such
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hypothetical fixed rate securities are assumed to have terms identical to those
provided under the related VRDI Securities, except for the substitution of fixed
rates for the qualified floating rates, objective rates, or qualified inverse
floating rate as described above. In the case of a VRDI Security that does not
provide for the payment of interest at least annually, appropriate adjustments
to the OID accruals and the qualified stated interest payments are made in each
accrual period to the extent that the interest actually accrued or paid during
the accrual period is greater or less than the interest assumed to be accrued or
paid under the hypothetical fixed rate security.
Regular Interest Securities of certain Series may provide for interest based
on a weighted average of the interest rates on some or all of the Mortgage Loans
of the related Trust ("Weighted Average Securities"). Under the OID Regulations,
it appears that Weighted Average Securities bear interest at an "objective
rate."
EFFECT OF DEFAULTS AND DELINQUENCIES. Each holder of a Regular Interest
Security will be required to accrue interest and original issue discount on such
Security without giving effect to any reductions in distributions attributable
to defaults or delinquencies on the Mortgage Loans, until it can be established
that any such reduction ultimately will not be recoverable. As a result, the
amount of taxable income reported in any period by the holder of a Regular
Interest Security could exceed the amount of economic income actually realized
by the holder in such period. Although the holder of a Regular Interest Security
eventually will recognize a loss or reduction in income attributable to
previously accrued and included income that, as a result of such loss,
ultimately will not be paid, the law is unclear with respect to the timing and
character of such losses or reduction in income.
Under Section 166 of the Code, both corporate and noncorporate holders of
Regular Interest Securities that hold such Securities in connection with a trade
of business should be allowed to deduct, as ordinary losses, any losses
sustained during a taxable year in which their Regular Interest Securities
become wholly or partially worthless as the result of one or more realized
losses on the Mortgage Loans. However, it appears that a noncorporate holder
that does not acquire a Regular Interest Security in connection with a trade or
business will not be entitled to deduct a loss under Section 166 of the Code
until such holder's Regular Interest Security becomes wholly worthless (that is,
until its outstanding principal balance has been reduced to zero) and that the
loss will be characterized as a short-term capital loss.
MARKET DISCOUNT AND PREMIUM. A purchaser of a Regular Interest Security may
also be subject to the market discount rules of the Code. Such purchaser
generally will be required to recognize accrued market discount as ordinary
income as payments of principal are received on such Regular Interest Security,
or upon sale or exchange of the Regular Interest Security. In general terms,
until regulations are promulgated, market discount may be treated as accruing,
at the election of the holder, either (i) under a constant yield method, taking
into account the Prepayment Assumption, or (ii) in the ratio of (a) in the case
of a Regular Interest Security not originally issued with original issue
discount, stated interest payable in the relevant period to total stated
interest remaining to be paid at the beginning of the period or (b) in the case
of a Regular Interest Security originally issued at a discount, original issue
discount in the relevant period to total original issue discount remaining to be
paid. A holder of a Regular Interest Security having market discount may also be
required to defer a portion of the interest deductions attributable to any
indebtedness incurred or continued to purchase or carry the Regular Interest
Security. As an alternative to the inclusion of market discount in income on the
foregoing basis, the holder may elect to include such market discount in income
currently as it accrues on all market discount instruments acquired by such
holder in that taxable year or thereafter, in which case the interest deferral
rule will not apply.
A holder who purchases a Regular Interest Security (other than an Interest
Weighted Security, to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an offset
to interest income on such Security (and not as a separate deduction item) on a
constant yield method. Although no regulations addressing the computation of
premium accrual on collateralized mortgage
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obligations or REMIC regular interests have been issued, applicable legislative
history indicates that premium is to be accrued in the same manner as market
discount. Accordingly, it appears that the accrual of premium on a Regular
Interest Security will be calculated using the prepayment assumption used in
pricing such Regular Interest Security. If a holder makes an election to
amortize premium on a Security, such election will apply to all taxable debt
instruments (including all REMIC regular interests) held by the holder at the
beginning of the taxable year in which the election is made, and to all taxable
debt instruments acquired thereafter by such holder, and will be irrevocable
without the consent of the Internal Revenue Service. Purchasers who pay a
premium for the Regular Interest Security should consult their tax advisers
regarding the election to amortize premium and the method to be employed.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD. A holder of
a debt instrument such as a Regular Interest Security may elect to treat all
interest that accrues on the instrument using the constant yield method, with
none of the interest being treated as qualified stated interest. For purposes of
applying the constant yield method to a debt instrument subject to such an
election, (i) "interest" includes stated interest, original issue discount, DE
MINIMIS original issue discount, market discount and DE MINIMIS market discount,
as adjusted by any amortizable bond premium or acquisition premium and (ii) the
debt instrument is treated as if the instrument were issued on the holder's
acquisition date in the amount of the holder's adjusted basis immediately after
acquisition. It is unclear whether, for this purpose, the initial Prepayment
Assumption would continue to apply or if a new prepayment assumption as of the
date of the holder's acquisition would apply. A holder generally may make such
an election on an instrument by instrument basis or for a class or group of debt
instruments. However, if the holder makes such an election with respect to a
debt instrument with amortizable bond premium or with market discount, the
holder is deemed to have made elections to amortize bond premium or to report
market discount income currently as it accrues under the constant yield method,
respectively, for all premium bonds held or market discount bonds acquired by
the holder in the same taxable year or thereafter. The election is made on the
holder's federal income tax return for the year in which the debt instrument is
acquired and is irrevocable except with the approval of the Internal Revenue
Service. Investors should consult their own tax advisors regarding the
advisability of making such an election.
SALE OR EXCHANGE OF REGULAR INTEREST SECURITIES
A Regular Bondholder's or Regular Certificateholder's tax basis in its
Regular Interest Securities is the price such holder pays for a Security, plus
amounts of original issue discount and market discount included in income and
reduced by any payments received (other than qualified periodic interest
payments), any amortized premium, and any prior losses. Gain or loss recognized
on a sale, exchange, or redemption of a Regular Interest Securities, measured by
the difference between the amount realized and the Regular Interest Security's
basis as so adjusted, will generally be capital gain or loss, assuming that the
Regular Interest Security is held as a capital asset. If, however, a Regular
Bondholder or Regular Certificateholder is a bank, thrift, or similar
institution described in Section 582 of the Code, gain or loss realized on the
sale or exchange of a Regular Interest Security will be taxable as ordinary
income or loss. In addition, gain from the disposition of a Regular Interest
Security that might otherwise be capital gain will be treated as ordinary income
to the extent of the excess, if any, of (i) the amount that would have been
includable in the holder's income if the yield on such Regular Interest Security
had equaled 110% of the applicable federal rate as of the beginning of such
holder's holding period, over (ii) the amount of ordinary income actually
recognized by the holder with respect to such Regular Interest Security. The
Taxpayer Relief Act of 1997 (the "1997 Act") has reduced the maximum capital
gains tax rate to 20% for non-corporate taxpayers with respect to sales or
exchanges of certain capital assets held for more than 18 months. Non-corporate
investors should consult their tax advisors regarding the consequences to them
of the 1997 Act.
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REMIC EXPENSES
As a general rule, all of the expenses of a REMIC will be taken into account
by holders of the Residual Interest Securities or the REMIC residual interest.
In the case of a "single class REMIC," however, the expenses will be allocated,
under temporary Treasury regulations, among the holders of the Regular Interest
Securities and the holders of the Residual Interest Securities on a daily basis
in proportion to the relative amounts of income accruing to each Bondholder or
Certificateholder on that day. In the case of a holder of a Regular Interest
Security who is an individual or a "pass-through interest holder" (including
certain pass-through entities but not including real estate investment trusts),
such expenses will be deductible only to the extent that such expenses, plus
other "miscellaneous itemized deductions" of the Bondholder or Certificateholder
exceed 2% of such Bondholder's or Certificateholder's adjusted gross income and
will not be deductible in computing alternative minimum taxable income. In
addition, Code Section 68 provides that the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds the applicable amount (for 1991, $100,000, or $50,000 in the case
of a separate return by a married individual within the meaning of Code Section
7703, which amounts will be adjusted annually for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount, or (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. The disallowance of this deduction may have a significant
impact on the yield of the Regular Interest Security to such a holder. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as debt for federal income tax purposes) or (ii) is similar to such a trust and
which s structured with the principal purpose of avoiding the single class REMIC
rules.
TAXATION OF THE REMIC
GENERAL. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the holders of
residual interests. The regular interests are generally taxable as debt of the
REMIC.
CALCULATION OF REMIC INCOME. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income produced
by the REMIC's assets, including stated interest and any original issue discount
or market discount on loans and other assets, income from amortization of
premium on Regular Interest Securities issued at a premium and income from
write-off of Regular Interest Securities, and (ii) deductions, including stated
interest and original issue discount accrued on a Regular Interest Security,
amortization of any premium with respect to loans, losses on Mortgage Loans, and
servicing fees and other expenses of the REMIC. A holder of a Residual Interest
Security that is an individual or a "pass-through interest holder" (including
certain pass-through entities, but not including real estate investment trusts)
will be unable to deduct servicing fees payable on the loans or other
administrative expenses of the REMIC for a given taxable year, to the extent
that such expenses, when aggregated with the Residual Interest Securityholder's
other miscellaneous itemized deductions for that year, do not exceed two percent
of such holder's adjusted gross income. In addition, Code Section 68 provides
that the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds the applicable amount (for
1997, $121,200, or $60,600 in the case of a separate return by a married
individual within the meaning of Code Section 7703, which amounts are adjusted
annually for inflation) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount, or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. See "REMIC
Expenses" above.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the regular interests and the residual
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interests on the Start Up Day (generally, the day that the interests are
issued). That aggregate basis will be allocated among the assets of the REMIC in
proportion to their respective fair market values.
The original issue discount provisions of the Code apply to loans of
individuals originated on or after March 2, 1984, and the market discount
provisions apply to all loans. Subject to possible application of the DE MINIMIS
rules, the method of accrual by the REMIC of original issue discount on such
loans will be equivalent to the method under which holders of Regular Interest
Securities accrue original issue discount (i.e., under the constant yield method
taking into account the Prepayment Assumption). The REMIC will deduct original
issue discount on the Regular Interest Securities in the same manner that the
holders of the Securities include such discount in income, but without regard to
the DE MINIMIS rules. See "Taxation of Regular Interest Securities" above.
However, a REMIC that acquires loans at a market discount must include such
market discount in income currently, as it accrues, on a constant interest
basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (taking into account the Prepayment Assumption) on a constant yield
method. Although the law is somewhat unclear regarding recovery of premium
attributable to loans originated on or before such date, it is possible that
such premium may be recovered in proportion to payments of loan principal.
INCOME FROM FORECLOSURE PROPERTY. To the extent that the Lower Tier REMIC
derives income from Foreclosed Properties that is treated as "net income from
foreclosure property," that income will be subject to taxation at the highest
corporate tax rate. Net income from foreclosure property generally includes gain
from the sale of a foreclosure property that is inventory property and net
income from the property that would not be treated as "rents from real property"
or other certain other qualifying income for a real estate investment trust. A
trust agreement or indenture may permit the Servicer to operate a Foreclosed
Property in a manner that produces income subject to the foregoing tax if
certain conditions are satisfied. In addition, if the operation of the
Foreclosed Property is treated as a trade or business carried on by the REMIC,
then unless the property is operated through an independent contractor, the
income from the foreclosed property will be subject to tax on "net income from
foreclosure property" at a rate of 100%. Accordingly, operation of Foreclosed
Properties generally will be required to be conducted through an independent
contractor.
PROHIBITED TRANSACTIONS AND CONTRIBUTIONS TAX. The REMIC will be subject to
a 100% tax on any net income derived from a "prohibited transaction." For this
purpose, net income will be calculated without taking into account any losses
from other prohibited transactions or any deductions attributable to any
prohibited transaction that resulted in a loss. In general, prohibited
transactions include (i) subject to limited exceptions, the sale or other
disposition of any qualified mortgage transferred to the REMIC; (ii) subject to
a limited exception, the sale or other disposition of a cash flow investment;
(iii) the receipt of any income from assets not permitted to be held by the
REMIC pursuant to the Code; or (iv) the receipt of any fees or other
compensation for services rendered by the REMIC. It is anticipated that a REMIC
will not engage in any prohibited transactions in which it would recognize a
material amount of net income. In addition, subject to a number of exceptions, a
tax is imposed at the rate of 100% on amounts contributed to a REMIC after the
close of the three-month period beginning on the Start Up Day. Unless chargeable
to the servicer or trustee under the applicable Trust Agreement or Indenture,
such taxes will be paid out of the assets of the REMIC and, unless otherwise
specified in the related Prospectus Supplement, will be allocated pro rata to
all outstanding Classes of Securities of such REMIC.
TAXATION OF HOLDERS OF RESIDUAL INTEREST SECURITIES
The Holder of a Security representing a REMIC residual interest (a "Residual
Interest Security") will take into account the "daily portion" of the taxable
income or net loss of the REMIC for each day during the taxable year on which
such holder held the Residual Interest Security. The daily portion is determined
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by allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the holders (on such day) of the Residual Interest Securities in
proportion to their respective holdings on such day.
The holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMIC issues in which the loans held by the REMIC were issued or
acquired at a discount, since mortgage prepayments cause recognition of discount
income, while the corresponding portion of the prepayment could be used in whole
or in part to make principal payments on Regular Interest Securities issued
without any discount or at an insubstantial discount. (If this occurs, it is
likely that cash distributions will exceed taxable income in later years.)
Taxable income may also be greater in earlier years of certain REMIC issues as a
result of the fact that interest expense deductions, as a percentage of
outstanding principal on Regular Interest Securities, will typically increase
over time as lower yielding Securities are paid, whereas interest income with
respect to loans will generally remain constant over time as a percentage of
loan principal.
In any event, because the holder of a residual interest is taxed on the net
income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond or
instrument, or may be negative.
LIMITATION ON LOSSES. The amount of the REMIC's net loss that a holder may
take into account currently is limited to the holder's adjusted basis at the end
of the calendar quarter in which such loss arises. A holder's basis in a
Residual Interest Security will initially equal such holder's purchase price,
and will subsequently be increased by the amount of the REMIC's taxable income
allocated to the holder, and decreased (but not below zero) by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
holder. Any disallowed loss may be carried forward indefinitely, but may be used
only to offset income generated by the same REMIC. The ability of Residual
Bondholders or Residual Certificateholders to deduct net losses may be subject
to additional limitations under the Code, as to which such holders should
consult their tax advisers.
DISTRIBUTIONS. Distributions on a Residual Interest Security (whether at
their scheduled times or as a result of prepayments) will generally not result
in any additional taxable income or loss to a holder of a Residual Interest
Security. If the amount of such payment exceeds a holder's adjusted basis in the
Residual Interest Security, however, the holder will recognize gain (treated as
gain from the sale of the Residual Interest Security) to the extent of such
excess.
MARK-TO-MARKET RULES. A Residual Interest Security is not treated as a
security and thus may not be marked to market under Treasury regulations that
generally require a securities dealer to mark to market securities held for sale
to customers.
SALE OR EXCHANGE. A holder of a Residual Interest Security will recognize
gain or loss on the sale or exchange of a Residual Bond equal to the difference,
if any, between the amount realized and such Bondholder's or Certificateholder's
adjusted basis in the Residual Interest Security at the time of such sale or
exchange. Except to the extent provided in regulations, which have not yet been
issued, any loss upon disposition of a Residual Interest Security will be
disallowed if the selling Bondholder or Certificateholder acquires any residual
interest in a REMIC or similar mortgage pool within six months before or after
such disposition.
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EXCESS INCLUSION INCOME
The portion of a Residual Bondholder's or Residual Certificateholder's REMIC
taxable income consisting of "excess exclusion" income may not be offset by
other deductions or losses, including net operating losses, on such Bondholder's
or Certificateholder's federal income tax return. Further, if the holder of a
Residual Interest Security is an organization subject to the tax on unrelated
business income imposed by Code Section 511, such Residual Bondholder's or
Residual Certificateholder's excess inclusion income will be treated as
unrelated business taxable income of such Bondholder or Certificateholder's. In
addition, under Treasury regulations yet to be issued, if a real estate
investment trust, a regulated investment company, a common trust fund, or
certain cooperatives were to own a Residual Interest Security, a portion of
dividends (or other distributions) paid by the real estate investment trust (or
other entity) would be treated as excess inclusion income. If a Residual
Interest Security is owned by a foreign person, excess inclusion income is
subject to tax at a rate of 30% which may not be reduced by treaty and is not
eligible for treatment as "portfolio interest."
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Interest Security, over the daily accruals for such quarterly period of
(i) 120% of the long term applicable federal rate on the Start Up Day multiplied
by (ii) the adjusted issue price of such Residual Interest Security at the
beginning of such quarterly period. The adjusted issue price of a Residual
Interest Security at the beginning of each calendar quarter will equal its issue
price (calculated in a manner analogous to the determination of the issue price
of a Regular Interest Security), increased by the aggregate of the daily
accruals for prior calendar quarters, and decreased (but not below zero) by the
amount of loss allocated to a holder and the amount of distributions made on the
Residual Interest Security before the beginning of the quarter. The long-term
federal rate, which is announced monthly by the Treasury Department, is an
interest rate that is based on the average market yield of outstanding
marketable obligations of the United States government having remaining
maturities in excess of nine years.
Under the REMIC Regulations, in certain circumstances, transfers of Residual
Interest Securities may be disregarded. See "Restrictions on Ownership and
Transfer of Residual Interest Securities" and "Tax Treatment of Foreign
Investors" below.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF RESIDUAL INTEREST SECURITIES
As a condition to qualification as a REMIC, reasonable arrangements must be
made to prevent the ownership of a REMIC residual interest by any "Disqualified
Organization." Disqualified Organizations include the United States, any State
or political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, a rural
electric or telephone cooperative described in Section 1381(a)(2)(C) of the
Code, or any entity exempt from the tax imposed by Sections 1-1399 of the Code,
if such entity is not subject to tax on its unrelated business income.
Accordingly, the Indenture or Trust Agreement, as applicable, will prohibit
Disqualified Organizations from owning a Residual Interest Security. In
addition, no transfer of a Residual Interest Security will be permitted unless
the proposed transferee shall have furnished to the Issuer an affidavit
representing and warranting that it is neither a Disqualified Organization nor
an agent or nominee acting on behalf of a Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a substantial
tax will be imposed on the transferor of such Residual Interest Security at the
time of the transfer. In addition, if a Disqualified Organization holds an
interest in a pass-through entity (including, among others, a partnership,
trust, real estate investment trust, regulated investment company, or any person
holding as nominee), that owns a Residual Interest Security, the pass-through
entity will be required to pay an annual tax on its share of the excess
inclusion income of the REMIC allocable to such Disqualified Organization.
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Under the REMIC Regulations, if a Residual Interest Security is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Security to a United States person will be disregarded for all Federal
tax purposes unless no significant purpose of the transfer was to impede the
assessment or collection of tax. A Residual Interest Security is a "noneconomic
residual interest" unless, at the time of the transfer (i) the present value of
the expected future distributions on the Residual Interest Security at least
equals the product of the present value of the anticipated excess inclusions and
the highest rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes. The
present value is calculated based on the Prepayment Assumption, using a discount
rate equal to the "applicable federal rate" at the time of transfer. If a
transfer of a residual interest is disregarded, the transferor would be liable
for any Federal income tax imposed upon taxable income derived by the transferee
from the REMIC. A significant purpose to impede the assessment or collection of
tax exists if the transferor, at the time of transfer, knew or should have known
that the transferee would be unwilling or unable to pay taxes on its share of
the taxable income of the REMIC. A similar limitation exists with respect to
certain transfers of residual interests by foreign persons to United States
persons. See "Tax Treatment of Foreign Investors" below.
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the REMIC
must file an annual federal income tax return. The REMIC will also be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC income, gain, loss, deduction, or credit, by the Internal Revenue Service
in a unified administrative proceeding. The holder of the Residual Interest
Security holding the largest percentage interest will be designated as "tax
matters person" of the related REMIC for purposes of any such proceeding.
TAX STATUS AS A GRANTOR TRUST
GENERAL. If the applicable Prospectus Supplement so specifies with respect
to a Series of Securities, the Securities of such Series will not be treated as
regular or residual interests in a REMIC for federal income tax purposes but
instead, special tax counsel to the Issuer will deliver its opinion to the
effect that the arrangement by which the Securities of that Series are issued
will be treated as a "grantor" or "fixed investment" trust as long as all of the
provisions of the applicable Trust Agreement are complied with and the statutory
and regulatory requirements are satisfied. In some Series ("Pass-Through
Certificates"), there will be no separation of the principal and interest
payments on the Mortgage Loans. In such circumstances, a Certificateholder will
be considered to have purchased an undivided interest in each of the Mortgage
Loans. In other cases ("Stripped Certificates"), sale of the Certificates will
produce a separation in the ownership of the principal payments and interest
payments on the Mortgage Loans.
Each Certificateholder must report on its federal income tax return its pro
rata share of the gross income derived from the Mortgage Loans (not reduced by
the amount payable as fees to the Trustee and the Master Servicer and similar
fees (collectively, the "Servicing Fee")), at the same time and in the same
manner as such items would have been reported under the Certificateholder's tax
accounting method had it held its interest in the Mortgage Loans directly,
received directly its share of the amounts received with respect to the Mortgage
Loans, and paid directly its share of the Servicing Fees. In the case of Pass-
Through Certificates, such gross income will consist of a pro rata share of all
of the income derived from all of the Mortgage Loans and, in the case of
Stripped Certificates, such income will consist of a pro rata share of the
income derived from each stripped bond or stripped coupon in which the
Certificateholder owns an interest. The holder of a Certificate will generally
be entitled to deduct such Servicing Fees under Section 162 or Section 212 of
the Code to the extent that such Servicing Fees represent "reasonable"
compensation for the services rendered by the Trustee, the Master Servicer, and
any other service
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providers. In the case of a noncorporate holder, however, Servicing Fees (to the
extent not otherwise disallowed, e.g., because they exceed reasonable
compensation) will be deductible in computing such holder's regular tax
liability only to the extent that such fees, when added to other miscellaneous
itemized deductions, exceed 2% of adjusted gross income and may not be
deductible to any extent in computing such holder's alternative minimum tax
liability. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds the applicable amount (for 1997, $121,200, or
$60,600 in the case of a separate return by a married individual, which amounts
are adjusted annually for inflation) will be reduced by the lesser of (i) 3% of
the excess of adjusted gross income over the applicable amount, or (ii) 80% of
the amount of itemized deductions otherwise allowable for such taxable year.
DISCOUNT OR PREMIUM ON PASS-THROUGH CERTIFICATES. The holder's purchase
price of a Pass-Through Certificate is to be allocated among the Mortgage Loans
in proportion to their fair market values, determined as of the time of purchase
of the Certificates. In the typical case, the Trustee believes it is reasonable
for this purpose to treat each Mortgage Loan as having a fair market value
proportional to the share of the aggregate principal balances of all of the
Mortgage Loans that it represents, to the extent that the Mortgage Loans
underlying a series have a relatively uniform interest rate and other common
characteristics. To the extent that the portion of the purchase price of a
Certificate allocated to a Mortgage Loan (other than to a right to receive any
accrued interest thereon and any undistributed principal payments) is less than
or greater than the portion of the principal balance of the Mortgage Loan
allocable to the Certificate, the interest in the Mortgage Loan allocable to the
Certificate will be deemed to have been acquired at a discount or premium,
respectively.
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. In the case of a Mortgage Loan with
original issue discount in excess of a prescribed DE MINIMIS amount, a holder of
a Certificate will be required to report as interest income in each taxable year
its share of the amount of original issue discount that accrues during that
year, determined under a constant yield method by reference to the initial yield
to maturity of the Mortgage Loan, in advance of receipt of the cash attributable
to such income and regardless of the method of federal income tax accounting
employed by that holder. Original issue discount with respect to a Mortgage Loan
could arise for example by virtue of the financing of points by the originator
of the Mortgage Loan, or by virtue of the charging of points by the originator
of the Mortgage Loan in an amount greater than a statutory de minimis exception,
in circumstances under which the points are not currently deductible pursuant to
applicable Code provisions. However, the OID Regulations provide that if a
holder acquires an obligation at a price that exceeds its stated redemption
price, the holder will not include any original issue discount in gross income.
In addition, if a subsequent holder acquires an obligation for an amount that
exceeds its adjusted issue price, the subsequent holder will be entitled to
offset the original issue discount with economic accruals of portions of such
excess. Accordingly, if the Mortgage Loans acquired by a Certificateholder are
purchased at a price that exceeds the adjusted issue price of such Mortgage
Loans, any original issue discount will be reduced or eliminated.
Certificateholders also may be subject to the market discount rules of
Sections 1276-1278 of the Code. A Certificateholder that acquires an interest in
Mortgage Loans with more than a prescribed DE MINIMIS amount of "market
discount" (generally, the excess of the principal amount of the Mortgage Loans
over the purchaser's purchase price) will be required under Section 1276 of the
Code to include accrued market discount in income as ordinary income in each
month, but limited to an amount not exceeding the principal payments on the
Mortgage Loans received in that month and, if the Certificates are sold, the
gain realized. Such market discount would accrue in a manner to be provided in
Treasury regulations. The relevant legislative history of the 1986 Act indicates
that, until such regulations are issued, such market discount would in general
accrue either (i) on the basis of a constant interest rate or (ii) in the ratio
of (a) in the case of Mortgage Loans not originally issued with original issue
discount, stated interest payable in the relevant period to total stated
interest remaining to be paid at the beginning of the period or (b) in
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the case of Mortgage Loans originally issued at a discount, original issue
discount in the relevant period to total original issue discount remaining to be
paid.
Section 1277 of the Code provides that the excess of interest paid or
accrued to purchase or carry a loan with market discount over interest received
on such loan is allowed as a current deduction only to the extent such excess is
greater than the market discount that accrued during the taxable year in which
such interest expense was incurred. In general, the deferred portion of any
interest expense will be deductible when such market discount is included in
income, including upon the sale, disposition, or repayment of the loan. A holder
may elect to include market discount in income currently as it accrues, on all
market discount obligations acquired by such holder during the taxable year such
election is made and thereafter, in which case the interest deferral rule
discussed above will not apply.
A Certificateholder who purchases a Certificate at a premium generally will
be deemed to have purchased its interest in the underlying Mortgage Loans at a
premium. A Certificateholder who holds a Certificate as a capital asset may
generally elect under Section 171 of the Code to amortize such premium as an
offset to interest income on the Mortgage Loans (and not as a separate deduction
item) on a constant yield method. The legislative history of the 1986 Act
suggests that the same rules that will apply to the accrual of market discount
(described above) will generally also apply in amortizing premium with respect
to Mortgage Loans originated after September 27, 1985. If a holder makes an
election to amortize premium, such election will apply to all taxable debt
instruments held by such holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the Internal Revenue
Service. Purchasers who pay a premium for the Certificates should consult their
tax advisers regarding the election to amortize premium and the method to be
employed. Although the law is somewhat unclear regarding recovery of premium
allocable to Mortgage Loans originated before September 28, 1985, it is possible
that such premium may be recovered in proportion to payments of Mortgage Loan
principal.
Discount or Premium on Stripped Certificates. A Stripped Certificate may
represent a right to receive only a portion of the interest payments on the
Mortgage Loans, a right to receive only principal payments on the Mortgage
Loans, or a right to receive certain payments of both interest and principal.
Certain Stripped Certificated ("Ratio Strip Certificates") may represent a right
to receive differing percentages of both the interest and principal on each
Mortgage Loan. Pursuant to Section 1286 of the Code, the separation of ownership
of the right to receive some or all of the interest payments on an obligation
from ownership of the right to receive some or all of the principal payments
results in the creation of "stripped bonds" with respect to principal payments
and "stripped coupons" with respect to interest payments. Section 1286 of the
Code applies the original issue discount rules to stripped bonds and stripped
coupons. For purposes of computing original issue discount, a stripped bond or a
stripped coupon is treated as a debt instrument issued on the date that such
stripped interest is purchased with an issue price equal to its purchase price
or, if more than one stripped interest is purchased, the ratable share of the
purchase price allocable to such stripped interest. The Code, the OID
Regulations, and judicial decisions provide no direct guidance as to how the
interest and original issue discount rules are to apply to Stripped
Certificates. Under the method described above for REMIC Regular Interest
Certificates (the "Cash Flow Bond Method"), a prepayment assumption is used and
periodic recalculations are made which take into account with respect to each
accrual period the effect of prepayments during such period. The 1986 Act
prescribed the same method for debt instruments "secured by" other debt
instruments, the maturity of which may be affected by prepayments on the
underlying debt instruments. However, the 1986 Act does not, absent Treasury
regulations, appear specifically to cover instruments such as the Stripped
Certificates which technically epresent ownership interests in the underlying
Mortgage Loans, rather than being debt instruments "secured by" those loans.
Nevertheless, it is believed that the Cash Flow Bond Method is a reasonable
method of reporting income for such Certificates, and it is expected that
original issue discount will be reported on that basis except in the case of
Certificates which it determines should more appropriately be treated as
contingent payment instruments. In applying the calculation to a class of
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Certificates, the Trustee will treat all payments to be received with respect to
the Certificates, whether attributable to principal or interest on the loans, as
payments on a single installment obligation, in the case of a Class of
Certificates that has no right, or a nominal right, to receive principal, and as
includable in the stated redemption price at maturity. In the case of a
"stripped bond" which is entitled to a significant amount of principal, the
Trustee intends to take the position that interest payments are "qualified
stated interest." The Internal Revenue Service could, however, assert that
original issue discount must be calculated separately for each Mortgage Loan
underlying a Certificate. In addition, in the case of Ratio Strip or similar
Certificates, the Internal Revenue Service could assert that original issue
discount must be calculated separately for each stripped coupon or stripped bond
underlying a Certificate.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Certificateholder's recognition of income. If, however, the
Mortgage Loans prepay at a rate slower than the prepayment assumption, in some
circumstances the use of this method may decelerate a Certificateholder's
recognition of income.
A Stripped Certificate which either embodies only interest payments on the
underlying loans or (if it embodies some principal payments on the Mortgage
Loans) is issued at a price that exceeds the principal payments (an "Interest
Weighted Certificate"), may be taxed as a contingent payment instrument.
Under Treasury Regulations applicable to contingent payment instruments (the
"Contingent Regulations"), income on Stripped Certificates would be calculated
by determining a projected payment schedule and a projected yield, and reporting
income accruals on that basis. If the amount payable for a period were, however,
greater or less than the amount projected, the income included for that period
would be increased or decreased accordingly. Any reduction in the income accrual
for a period below zero (a "Negative Adjustment") would be treated by a
Certificateholder as an ordinary loss to the extent of prior income accruals and
may be carried forward to offset future interest accruals. At maturity, any
remaining Negative Adjustment would be treated as a loss on retirement of the
Certificate.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS. The characterizations of the
Stripped Certificates described above are not the only possible interpretations
of the applicable Code provisions. Among other possibilities, the Internal
Revenue Service could contend that (i) in certain Series, each non-Interest
Weighted Certificate is composed of an unstripped undivided ownership interest
in Mortgage Loans and an installment obligation consisting of stripped principal
payments; (ii) the non-Interest Weighted Certifi-cates are subject to the OID
Regulations; (iii) each Interest Weighted Certificate is composed of an
unstripped undivided ownership interest in the Mortgage Loans and an installment
obligation consisting of stripped interest payments; or (iv) there are as many
stripped bonds or stripped coupons as there are scheduled payments of principal
and/or interest on each Mortgage Loan.
Given the variety of alternatives for treatment of the Certificates and the
different federal income tax consequences that result from each alternative,
potential purchasers are urged to consult their own tax advisers regarding the
proper treatment of the Certificates for federal income tax purposes.
CHARACTER AS QUALIFYING MORTGAGE LOANS. In the case of Stripped
Certificates there is no specific legal authority existing regarding whether the
character of the Certificates, for federal income tax purposes, will be the same
as the Mortgage Loans. The IRS could take the position that the Mortgage Loans'
character is not carried over to the Certificates in such circumstances.
Pass-Through Certificates will be, and, although the matter is not free from
doubt, Stripped Certificates should be considered to represent "real estate
assets" within the meaning of Section 856(c)(6)(B) of the Code, and "loans . . .
secured by an interest in real property which is . . . residential real
property" within the meaning of Section 7701(a)(19)(C)(v) of the Code, and
interest income attributable to the Certificates should be considered to
represent "interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Section 856(c)(3)(B) of the
Code, in each case to the extent the underlying Mortgage Loans qualify for such
treatments. However, Mortgage Loans secured by non-residential real property
will not constitute "loans . . . secured by an interest in real property which
is . . . residential real property" within the meaning
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of Section 7701(a)(19)(C)(v) of the Code. In addition, it is possible that
various reserve funds underlying the Certificates may cause a proportionate
reduction in the above-described qualifying status categories of Certificates.
SALE OF CERTIFICATES. As a general rule, if a Certificate is sold, gain or
loss will be recognized by the holder thereof in an amount equal to the
difference between the amount realized on the sale and the Certificateholder's
adjusted tax basis in the Certificate. Such gain or loss will generally be
capital gain or loss if the Certificate is held as a capital asset. In the case
of Pass-Through Certificates, such tax basis will generally equal the holder's
cost of the Certificate increased by any discount income with respect to the
loans represented by such Certificate previously included in income, and
decreased by the amount of any distributions of principal previously received
with respect to the Certificate. Such gain, to the extent not otherwise treated
as ordinary income, will be treated as ordinary income to the extent of any
accrued market discount not previously reported as income. In the case of
Stripped Certificates, the tax basis will generally equal the
Certificateholder's cost for the Certificate, increased by any discount income
with respect to the Certificate previously included in income, and decreased by
the amount of all payments previously received with respect to such Certificate.
MISCELLANEOUS TAX ASPECTS
BACKUP WITHHOLDING. A Bondholder or Certificateholder, other than a
Residual Bondholder or Residual Certificateholder, may, under certain
circumstances, be subject to "backup withholding" at the rate of 31% with
respect to distributions or the proceeds of a sale of certificates to or through
brokers that represent interest or original issue discount on the Securities.
This withholding generally applies if the holder of a Security (i) fails to
furnish the Issuer with its taxpayer identification number ("TIN"); (ii)
furnishes the Issuer an incorrect TIN; (iii) fails to report properly interest,
dividends or other "reportable payments" as defined in the Code; or (iv) under
certain circumstances, fails to provide the Issuer or such holder's securities
broker with a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that the holder is not subject to backup
withholding. Backup withholding will not apply, however, with respect to certain
payments made to Bondholders or Certificateholders, including payments to
certain exempt recipients (such as exempt organizations) and to certain
Nonresidents (as defined below). Holders of the Securities should consult their
tax advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining the exemption.
The Issuer will report to the Securityholders and to the Internal Revenue
Service for each calendar year the amount of any "reportable payments" during
such year and the amount of tax withheld, if any, with respect to payments on
the Securities.
TAX TREATMENT OF FOREIGN INVESTORS
Under the Code, unless interest (including OID) paid on a Security (other
than a Residual Interest Security) is considered to be "effectively connected"
with a trade or business conducted in the United States by a nonresident alien
individual, foreign partnership or foreign corporation ("Nonresidents"), such
interest will normally qualify as portfolio interest (except where (i) the
recipient is a holder, directly or by attribution, of 10% or more of the capital
or profits interest in the Issuer or (ii) the recipient is a controlled foreign
corporation to which the Issuer is a related person) and will be exempt from
federal income tax. Upon receipt of appropriate ownership statements, the Issuer
normally will be relieved of the obligation to withhold federal income tax from
such interest payments. These provisions supersede the generally applicable
provisions of the Code that would otherwise require the Issuer to withhold at a
30% rate (unless such rate were reduced or eliminated by an applicable tax
treaty) on, among other things, interest and original issue discount paid to
Nonresidents.
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Interest and original issue discount of Bondholders or Certificateholders
who are foreign persons are not subject to withholding if they are effectively
connected with a United States business conducted by the Bondholder or
Certificateholders. In such case, however, they will generally be subject to the
regular United States income tax.
Payments to holders of Residual Interest Securities who are foreign persons
will generally be treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Holders should assume that such income does
not qualify for exemption from United States withholding tax as "portfolio
interest." To the extent that a payment represents a portion of REMIC taxable
income that constitutes excess inclusion income, a holder of a Residual Interest
Security will not be entitled to an exemption from or reduction of the 30% (or
lower treaty rate) withholding tax rule. If the payments are subject to United
States withholding tax, they generally will be taken into account for
withholding tax purposes only when paid or distributed (or when the Residual
Interest Security is disposed of). The Treasury has statutory authority,
however, to promulgate regulations which would require such amounts to be taken
into account at an earlier time in order to prevent the avoidance of tax. Under
the REMIC Regulations, if a Residual Interest Security has tax avoidance
potential, a transfer of a Residual Interest Security to a Nonresident will be
disregarded for all Federal tax purposes. A Residual Interest Security has tax
avoidance potential unless, at the time of the transfer the transferor
reasonably expects that the REMIC will distribute to the transferee residual
holder amounts that will equal at least 30% of each excess inclusion, and that
such amounts will be distributed at or after the time at which the excess
inclusion accrues and not later than the close of the calendar year following
the calendar year of accrual. If a Nonresident transfers a Residual Interest
Security to a United States person, and if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions, then the
transfer is disregarded and the ransferor continues to be treated as the owner
of the Residual Interest Security for purposes of the withholding tax provisions
of the Code. See "Excess Inclusion Income."
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "FEDERAL
INCOME TAX CONSIDERATIONS," potential investors should consider the state income
tax consequences of the acquisition, ownership, and disposition of the
Securities. State and local income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of investment in the Bonds or Certificates. In
particular, potential investors in Residual Interest Securities should consult
their tax advisers regarding the taxation of the Residual Interest Securities in
general and the effect of foreclosure on the Mortgaged Properties on such
taxation.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") subject to
ERISA and persons who have certain specified relationships to such Plans
("Parties in Interest"). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions between
a Plan and Parties in Interest with respect to such Plans ("Prohibited
Transactions"). Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a Plan is considered
to be a fiduciary of such Plan (subject to certain exceptions not here
relevant). Similar restrictions also apply to Plans and other retirement
arrangements, such as individual retirement accounts and Keogh plans, that are
subject to Section 4975 of the Code.
The Issuer, the Master Servicer, if any, the Servicer, the Trustee or the
provider of Enhancement, if any, because of their activities or the activities
of their respective affiliates, may be considered to be or may become Parties in
Interest with respect to certain Plans. If the Securities are acquired by a Plan
with
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respect to which the Issuer, the Master Servicer, if any, the Servicer, the
Trustee or the provider of Enhancement, if any, is a Party in Interest, such
transaction might be considered to violate the Prohibited Transaction rules of
ERISA and the Code unless such transaction were subject to one or more statutory
or administrative exemptions such as: Prohibited Transaction Class Exemption
("PTCE") 75-1, which exempts certain transactions involving employee benefit
plans and certain broker-dealers, reporting dealers and banks; PTCE 90-1, which
exempts certain transactions between insurance company pooled separate accounts
and Parties in Interest; PTCE 91-38, which exempts certain transactions between
bank collective investment funds and Parties in Interest; PTCE 95-60, which
exempts certain transactions between insurance company general accounts and
Parties in Interest; PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified plan asset manager"; PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager"; or any other available exemption. Accordingly, prior to making an
investment in the Securities, investing Plans should determine whether the
Issuer is a Party in Interest with respect to such Plan and, if so, whether such
transaction is subject to one or more statutory or administrative exemptions.
Special caution should be exercised before the assets of a Plan (including
assets that may be held in an insurance company's separate or general accounts
where assets in such accounts may be deemed Plan assets for purposes of ERISA)
are used to purchase a Security if the Issuer, the Master Servicer, if any, the
Servicer, the Trustee, the provider of Enhancement, if any, or an affiliate
thereof is a fiduciary with respect to such assets.
The Certificates of a Series will, and the Bonds of a Series could, be
treated as "equity" for purposes of ERISA. Under regulations issued by the
Department of Labor ("DOL") (the "Plan Asset Regulations"), if a Plan makes an
"equity" investment in a corporation, partnership, trust or certain other
entities, the underlying assets and properties of such entity will be deemed for
purposes of ERISA to be assets of the investing Plan unless certain exceptions
set forth in the regulation apply. If a particular Series is treated as "equity"
for purposes of the Plan Asset Regulations such that the underlying assets of
the Issuer could be treated as assets of a Plan purchasing Securities of such
Series and the Mortgage Assets securing such Series consists of a single
Mortgage Loan or obligations of a single obligor or related obligors as
specified in the related Prospectus Supplement (e.g., affiliates of the Issuer),
and Securities of such Series are acquired by a Plan with respect to which the
obligor or related obligors are Parties in Interest, such transaction would
violate the Prohibited Transaction rules of ERISA and the Code unless such
transaction were subject to one or more statutory or administrative exemptions
such as those described above or any other available exemption. Accordingly,
prior to making an investment in Securities of such Series, a Plan investor
should determine whether such obligor or related obligors are Parties in
Interest with respect to such Plan and, if so, whether such transaction is
subject to one or more of the statutory or administrative exemptions.
If a particular Series is treated as "equity" for purposes of the Plan Asset
Regulations such that the underlying assets of the Issuer could be treated as
assets of a Plan purchasing Securities of such Series and the Mortgage Assets
securing such Series consists of multiple Mortgage Loans or obligations of
multiple unrelated obligors as specified in the related Prospectus Supplement,
an investing Plan may not be able to determine whether any of the obligors is a
Party in Interest with respect to such Plan. In that event, prior to making an
investment in Securities of such Series, such Plan investor should determine
whether (i) one or more statutory or administrative exemptions is applicable or
(ii) one or more exceptions to the Plan Asset Regulations is applicable such
that the underlying assets of the Issuer will not be treated as assets of such
investing Plan.
One such exception applies if the class of "equity" interests in question is
(i) held by 100 or more investors who are independent of the Issuer and each
other, (ii) freely transferable, and (iii) sold as part of an offering pursuant
to (a) an effective registration statement under the Securities Act of 1933, and
then subsequently registered under the Securities Exchange Act of 1934 or (b) an
effective registration statement under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934 ("Publicly Offered Securities"). In addition, the
regulation provides that if at all times more than 75% of the value of all
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classes of equity interests in the Issuer are held by investors other than
"benefit plan investors" (which is defined as including plans subject to ERISA,
individual retirement accounts, certain plans not subject to ERISA, and entities
whose underlying assets include plan assets by reason of plan investment in such
entities), the investing Plan's assets will not include any of the underlying
assets of the Issuer.
Furthermore, if the Issuer were deemed to hold plan assets by reason of a
Plan's investment in a Security, the persons providing services with respect to
the assets of the Issuer, including the Mortgage Loans, may be subject to the
fiduciary responsibility provisions of Title I of ERISA and be subject to the
prohibited transactions provisions of ERISA and Section 4975 of the Code with
respect to transactions involving such assets unless such transactions are
subject to a statutory or administrative exemption, such as those described
above.
An additional exemption may also be available if the Issuer is a trust. The
DOL granted to Shearson Lehman Hutton, Inc. an administrative exemption (the
"Exemption") from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by Plans
of certificates representing interests in asset-backed pass through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The obligations covered by the
Exemption include obligations such as the Mortgage Assets. The Exemption will
apply to the acquisition, holding and resale of the Securities by a Plan,
provided that certain conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply are
the following:
1. The acquisition of the Securities by a Plan is on terms (including the
price for the Securities) that are at least as favorable to the Plan as they
would be in an arm's-length transaction with an unrelated party;
2. The rights and interests evidenced by the Securities acquired by the Plan
are not subordinated to the rights and interests evidenced by other certificates
of the trust;
3. The Securities acquired by the Plan have received a rating at the time of
such acquisition that is in one of the three highest generic rating categories
from either Standard & Poor's Ratings Group ("Standard & Poor's"), Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or
Fitch Investors Service, L.P. ("Fitch");
4. The sum of all payments made to the underwriter in connection with the
distribution of the Securities represents not more than reasonable compensation
for underwriting the Securities. The sum of all payments made to and retained by
the seller pursuant to the sale of the obligations to the trust represents not
more than the fair market value of such obligations. The sum of all payments
made to and retained by the servicer represents not more than reasonable
compensation for the servicer's services under the related servicing agreement
and reimbursement of the servicer's reasonable expenses in connection therewith;
5. The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below); and
6. The Plan investing in the Securities is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The trust also must meet the following requirements:
(i) the corpus of the trust must consist solely of assets of the type which
have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated in one
of the three highest rating categories of Standard & Poor's, Moody's, DCR or
Fitch for at least one year prior to the Plan's acquisition of certificates; and
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(iii) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior to
any Plan's acquisition of Securities.
Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when the Plan fiduciary
causes a Plan to acquire certificates in a trust in which the fiduciary (or its
affiliate) is an obligor on the receivables held in the trust provided that,
among other requirements: (i) in the case of an acquisition in connection with
the initial issuance of Securities, at least fifty (50) percent of each class of
Securities in which Plans have invested is acquired by persons independent of
the Restricted Group and at least fifty (50) percent of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group; (ii)
such fiduciary (or its affiliate) is an obligor with respect to five (5) percent
or less of the fair market value of the obligations contained in the trust;
(iii) the Plan's investment in Securities does not exceed twenty-five (25)
percent of all of the Securities outstanding after the acquisition; and (iv) no
more than twenty-five (25) percent of the assets of the Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Issuer, the Underwriter, the Trustee, the Servicer, the Master
Servicer, if any, the Special Servicer, if any, any obligor with respect to
obligations included in a Trust constituting more than five (5) percent of the
aggregate unamortized principal balance of the assets in a Trust, provider of
Enhancement, if any or any affiliate of such parties (the "Restricted Group").
There can be no assurance that the Securities will not be treated as equity
interests in the Issuer for purposes of the Plan Asset Regulations. Moreover, if
the Securities are treated as equity interests for purposes of ERISA, there can
be no assurance that any of the exceptions set forth in the Plan Asset
Regulations will apply to the purchase of Securities offered hereby.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code and the potential consequences to
their specific circumstances, prior to making an investment in the Securities.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification an investment in
the Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Section 4975 of the Code. However, such a governmental plan may be
subject to a federal, state, or local law which is, to a material extent,
similar to the provisions of ERISA or Section 4975 of the Code ("Similar Law").
A fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
The sale of Securities to a Plan is in no respect a representation by the
Issuer or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that this investment is appropriate for Plans generally or for any
particular Plan.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Securities will specify which,
if any, of the Classes of Securities offered thereby will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"). The appropriate characterization of those
Securities not qualifying as "mortgage related securities" ("Non-SMMEA
Securities") under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase such Securities, may be
subject to significant interpretive uncertainties. Accordingly, investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether and to what extent the Non-SMMEA Securities
constitute legal investments for them.
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Those Classes of Securities that (i) are rated in one of the two highest
rating categories by one or more Rating Agencies and (ii) are part of a Series
representing interests in, or secured by, a Trust Fund consisting of Mortgage
Loans or Private Mortgage-Backed Securities, provided that such Mortgage Loans
(or the Mortgage Loans underlying the Private Mortgage-Backed Securities) are
secured by first liens on Mortgaged Property and were originated by certain
types of originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA. As "mortgage related securities," such
Classes will constitute legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities (including,
but not limited to, state-chartered savings banks, commercial banks, savings and
loan associations and insurance companies, as well as trustees and state
government employee retirement systems) created pursuant to or existing under
the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to SMMEA, a number of states enacted legislation, on or before the October 3,
1991 cutoff for such enactments, limiting to varying extents the ability of
certain entities (in particular, insurance companies) to invest in "mortgage
related securities" secured by liens on residential, or mixed residential and
commercial properties, in most cases by requiring the affected investors to rely
solely upon existing state law, and not SMMEA. Pursuant to Section 347 of the
Riegle Community Development and Regulatory Improvement Act of 1994, which
amended the definition of "mortgage related security" (effective December 31,
1996) to include, in relevant part, Securities satisfying the rating, first lien
and qualified originator requirements for "mortgage related securities," but
representing interests in, or secured by, a Trust Fund consisting, in whole or
in part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to Section
347 and prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of Securities. Accordingly, the investors
affected by such legislation will be authorized to invest in Securities
qualifying as "mortgage related securities" only to the extent provided in such
legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage related
securities without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. Section 1.5), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage-related security"
within the meaning of SMMEA, PROVIDED THAT, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of loans
to NUMEROUS OBLIGORS." In the absence of any rule or administrative
interpretation by the OCC defining the term "numerous obligors," no
representation is made as to whether any Class of Securities will qualify as
"commercial mortgage-related securities," and thus as "Type IV securities," for
investment by national banks. Federal credit unions should review National
Credit Union Administration ("NCUA") Letter to Credit Unions No. 96, as modified
by Letter to Credit Unions No. 108, which includes guidelines to assist federal
credit unions in making investment decisions for mortgage related securities.
The NCUA has
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adopted rules, codified as 12 C.F.R. SectionSection 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain Series or Classes of Securities), except
under limited circumstances. Effective January 1, 1998, the NCUA has amended its
rules governing investments by federal credit unions at 12 C.F.R. Part 703; the
revised rules will permit investments in "mortgage related securities" under
certain limited circumstances, but will prohibit investments in stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the Securities
should review the "Supervisory Policy Statement on Securities Activities" dated
January 28, 1992, as revised April 15, 1994 (the "Policy Statement") of the
Federal Financial Institutions Examination Council. The Policy Statement, which
has been adopted by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the OCC and the Office of Thrift
Supervision, and by the NCUA (with certain modifications), prohibits depository
institutions from investing in certain "high-risk mortgage securities"
(including securities such as certain Series or Classes of the Securities),
except under limited circumstances, and sets forth certain investment practices
deemed to be unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Securities,
as certain Series or Classes may be deemed unsuitable investments, or may
otherwise be restricted, under such rules, policies or guidelines (in certain
instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Securities issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Classes of Securities as "mortgage
related securities," no representation is made as to the proper characterization
of the Securities for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase Securities under applicable legal investment restrictions.
The uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Securities) may adversely affect the liquidity of the Securities.
Investors should consult their own legal advisors in determining whether and
to what extent the Securities constitute legal investments for such investors.
PLAN OF DISTRIBUTION
The Issuer may sell the Securities offered hereby through Lehman Brothers,
as agent or as underwriter, or through underwriting syndicates represented by
Lehman Brothers (collectively, the "Underwriters") or by one or more other
underwriters, in each case, to be specified in the related Prospectus
Supplement. The Prospectus Supplement relating to a Series will set forth the
terms of the offering of such Series and each Class within such Series,
including the name or names of the Underwriters, the proceeds to and their
intended use by the Issuer, and either the initial public offering price, the
discounts and commissions to the Underwriters and any discounts or concessions
allowed or reallowed to certain dealers, or the method by which the price at
which the Underwriters will sell the Securities will be determined.
The Underwriters will be obligated, subject to certain conditions, to
purchase all of the Securities described in the Prospectus Supplement relating
to a Series if any such Securities are purchased. The Securities may be acquired
by the Underwriters for their own account and may be resold from time to time
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in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. If
specified in the related Prospectus Supplement, a Series may be offered in whole
or in part in exchange for the Mortgage Assets that would be pledged to secure
such Series. In such event, the Prospectus Supplement will specify the amount of
compensation to be paid to the Underwriters and expenses, if any, in connection
with such distribution. If so indicated in the Prospectus Supplement, the Issuer
will authorize Underwriters or other persons acting as the Issuer's agents to
solicit offers by certain institutions to purchase the Securities on such terms
and subject to such conditions as so specified.
The Issuer may also sell the Securities offered hereby and by means of the
related Prospectus Supplements from time to time in negotiated transactions or
otherwise, at prices determined at the time of sale. The Issuer may effect such
transactions by selling Securities to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Issuer and any purchasers of Securities for whom they may
act as agents.
If any Certificates are offered other than through underwriters pursuant to
such underwriting agreements, the related Prospectus Supplement or Prospectus
Supplements will contain information regarding the terms of such offering and
any agreements to be entered into in connection with such offering.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
connection with reoffers and sales by them of Certificates. Certificateholders
should consult with their legal advisors in this regard prior to any such
reoffer and sale.
If specified in the Prospectus Supplement relating to a Series of
Certificates, the Depositor, any affiliate thereof or any other person or
persons specified therein may purchase some or all of one or more Classes of
Certificates of such Series from the underwriter or underwriters of such other
person or persons specified in such Prospectus Supplement. The consideration for
such purchase may be cash or Mortgage Assets. Such purchaser may thereafter from
time to time offer and sell, pursuant to this Prospectus and the related
Prospectus Supplement, some or all of such Certificates so purchased, directly,
through one or more underwriters to be designated at the time of the offering of
such Certificates, through dealers acting as agent and/or principal as in such
other manner as may be specified in the related Prospectus Supplement. Such
offering may be restricted in the manner specified in such Prospectus
Supplement. Such transactions may be effected at market prices prevailing at the
time of sale, at negotiated prices or at fixed prices. Any underwriters and
dealers participating in such purchaser's offering of such Certificates may
receive compensation in the form of underwriting discounts or commissions from
such purchaser and such dealers may receive commissions from the investors
purchasing such Certificates for whom they may act as agent (which discounts or
commissions will not exceed those customary in those types of transactions
involved). Any dealer that participates in the distribution of such Certificates
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any commissions and discounts received by such dealer and any profit on the
resale of such Certificates by such dealer might be deemed to be underwriting
discounts and commissions under the Securities Act.
The place and time of delivery for the Series in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Issuer and for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom, New York, New York, Weil, Gotshal and Manges, New York, New
York, Cadwalader, Wickersham & Taft, New York, New York or Thacher Proffitt &
Wood, New York, New York.
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GLOSSARY
The following are abbreviated definitions of certain capitalized terms used
in this Prospectus. Unless otherwise provided in the Prospectus Supplement for a
Series, such definitions shall apply to capitalized terms used in such
Prospectus Supplement. The definitions may vary from those in the Indenture or
Trust Agreement, as applicable, and the Indenture or Trust Agreement, as
applicable, generally provides a more complete definition of certain of the
terms. Reference should be made to the Indenture or Trust Agreement, as
applicable, for a more complete definition of such terms.
"Accrual Date" means, with respect to any Series, the date upon which
interest begins accruing on the Securities of the Series, as specified in the
related Prospectus Supplement.
"Accrual Payment Amount" means, with respect to any Payment Date or
Distribution Date for a Series that occurs prior to or on the Accrual
Termination Date, the aggregate amount of interest which has accrued on the
Compound Interest Securities of such Series during the Interest Accrual Period
relating to such Payment Date or Distribution Date and which is not then
required to be paid.
"Accrual Termination Date" means, with respect to a Class of Compound
Interest Securities, the Payment Date or Distribution Date on which all
Securities of the related Series with Stated Maturities or Final Scheduled
Termination Dates earlier than that of such Class of Compound Interest
Securities have been fully paid, or such other date or period as may be
specified in the related Prospectus Supplement.
"Administration Agreement" means, with respect to a Series, an agreement
pursuant to which the Administrator agrees to perform certain ministerial,
administrative, accounting and clerical duties on behalf of the Issuer with
respect to such Series.
"Administration Fee" means the fee specified as such in the Administration
Agreement.
"Advances" means, unless otherwise specified in a Prospectus Supplement,
cash advances with respect to delinquent payments of principal and interest on
any Mortgage Loan made by the Primary Servicer from its own funds or, if so
specified in the related Prospectus Supplement, from excess funds in the
Custodial Account or Servicing Account, but only to the extent that such
advances are, in the good faith business judgment of the Servicer or the Master
Servicer, as the case may be, ultimately recoverable from future payments and
collections on the Mortgage Loans or otherwise.
"Aggregate Asset Value" means, with respect to any Series, the aggregate
amount obtained by adding the Asset Value of each Mortgage Loan or Private
Mortgage-Backed Security or other Mortgage Assets in the Trust Estate for such
Series, plus the Asset Value, as determined in the related Series Supplement, of
any cash remaining in the Collection Account or any other Pledged Fund or
Account subsequent to an initial deposit therein by the Issuer.
"Aggregate Outstanding Principal" means, with respect to any Series or Class
thereof, the principal amount of all Securities of such Series or Class
outstanding at the date of determination, including, in respect of any Class of
Compound Interest Securities of such Series (or other Class of Securities on
which interest accrues and is added to the outstanding principal amount
thereof), the Compound Value (or accreted value) of such Securities through the
Payment Date or Distribution Date immediately preceding the date of
determination.
"Appraised Value" means, unless otherwise specified in a Prospectus
Supplement, the lesser of the appraised value determined in an appraisal
obtained at origination or the sales price of a Mortgaged Property.
"ARM," "ARM Loan," or "Adjustable Rate Mortgage Loan" means a Mortgage which
provides for adjustment from time to time to the Mortgage Rate in accordance
with an approved index.
"Asset Value" means, unless specified otherwise in the related Prospectus
Supplement, with respect to each Private Mortgage-Backed Security or Mortgage
Loan or other Mortgage Assets included in the Trust
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Estate or Trust Fund for a Series, its Scheduled Principal Balance. In addition,
the related Series Supplement shall set forth, for purposes of calculating the
Asset Value of Mortgage Assets, the dates on which the scheduled principal and
interest payments with respect to such Mortgage Assets are assumed to be
deposited in the Collection Account. The Asset Value of any cash deposited in
any Pledged Fund or Account shall be as set forth in the related Series
Supplement.
"Assumed Deposit Date" means the date specified therefor in the Series
Supplement for a Series, upon which distributions on the Primary Assets are
assumed to be deposited in the Collection Account for purposes of calculating
Reinvestment Income thereon.
"Assumed Reinvestment Rate" means, with respect to a Series, the per annum
rate or rates specified in the related Prospectus Supplement or the related
Guaranteed Investment Contract for a particular period or periods as the
"Assumed Reinvestment Rate" for funds held in Pledged Funds and Accounts for the
Series.
"Bankers Trust" means Bankers Trust Company of California, N.A., a national
banking association.
"BIF" means Bank Insurance Fund.
"Bondholder" means the Person in whose name a Bond is registered in the Bond
Register.
"Bond Interest Rate" means the interest rate on the outstanding principal
amount of a Bond payable on the applicable Payment Date for such Bond, as
specified in the related Prospectus Supplement.
"Bond Register" means the register maintained pursuant to the Trust
Indenture for a Series, providing for the registration of the Bonds of a Series
and the transfers and exchanges thereof.
"Bonds" means Collateralized Mortgage Obligations sold by the Issuer
pursuant to this Prospectus and a related Prospectus Supplement.
"Business Day" means, with respect to any Series that does not include any
Class of Variable Interest Securities, any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in New York, New York, or in
the cities in which the Corporate Trust Office or, if applicable, the offices of
the Servicer or the Special Servicer, are then located, are authorized or
obligated by law or executive order to be closed, and with respect to any Series
that includes any Class of Variable Interest Securities, a day that is not a
Saturday or Sunday, and that is not a legal holiday nor a day on which banking
institutions are authorized or obligated by law, regulation or executive order
to close in either London or New York City or in the city in which the Corporate
Trust Office is then located.
"Cash Liquidation" means as to any defaulted Mortgage Loan other than a
Mortgage Loan with respect to which the related Mortgaged Property became REO
Property, the recovery of all Insurance Proceeds, Liquidation Proceeds and other
payments or recoveries that the Master Servicer or Servicer, as applicable,
expects to be finally recoverable.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Certificateholder" means the Person in whose name a Certificate is
registered in the Certificate Register.
"Certificate Interest Rate" means the per annum interest rate on the
outstanding principal amount of a Certificate payable on the applicable
Distribution Date for such Certificate, as specified in the related Prospectus
Supplement.
"Certificate Register" means the register maintained pursuant to the Trust
Agreement for a Series, providing for the registration of the Certificates of a
Series and the transfers and exchanges thereof.
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"Certificates" means the Mortgage-Backed Certificates sold by the Issuer
pursuant to this Prospectus and a related Prospectus Supplement.
"Class" means a class of Securities of a Series.
"Closing Date" means, with respect to a Series, the date specified in the
related Series Supplement as the date on which Securities of such Series are
first issued.
"Code" means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
"Collection Account" means, with respect to a Series, the account designated
as such and created pursuant to the Trust Indenture or Trust Agreement, as
applicable.
"Commercial Property" means any property securing a Mortgage Loan that used
for commercial purposes.
"Commission" means the Securities and Exchange Commission.
"Company" means Structured Asset Securities Corporation.
"Compound Interest Security" means any Security of a Series on which
interest accrues and is added to the principal of such Security periodically,
but with respect to which no interest or principal shall be payable except
during the period or periods specified in the related Prospectus Supplement.
"Compound Value" means, with respect to a Class of Compound Interest
Securities, as of any determination date, the original principal amount of such
Class, plus all accrued and unpaid interest, if any, previously added to the
principal thereof and reduced by any payments of principal previously made on
such Class of Compound Interest Securities and by any losses allocated to such
Class.
"Condemnation Proceeds" means any awards resulting from the full or partial
condemnation or any eminent domain proceeding or any conveyance in lieu or in
anticipation thereof with respect to a Mortgaged Property by or to any
governmental or quasi-governmental authority other than amounts to be applied to
the restoration, preservation or repair of such Mortgaged Property or released
to the related Mortgagor in accordance with the terms of the Mortgage Loan.
"Corporate Trust Office" means the corporate trust office of the Trustee,
which, unless otherwise specified in the related Prospectus Supplement, shall be
the office of Bankers Trust Company of California, N.A., 3 Park Plaza, 16th
Floor, Irvine, California 92714, if Bankers Trust Company of California, N.A. is
the Trustee, or Marine Midland Bank, N.A., 140 Broadway, New York, New York
10015, if Marine Midland Bank, N.A. is the Trustee.
"Covered Trust" means a Trust Estate or Trust Fund covered by a form of
credit support.
"CPR" means the Constant Prepayment Rate prepayment model.
"Custodial Account" means an account established by a Master Servicer, a
Servicer, or a Special Servicer in the name of the Trustee for the deposit on a
daily basis of all Mortgage Loan related receipts received by it subsequent to
the Cut-Off Date.
"Custodian" means any bank, savings and loan association, trust company or
other entity appointed to hold documentation with respect to any Mortgage Loans.
"Cut-Off Date" means, with respect to a Series, the date specified in the
related Series Supplement on which, as of the close of business on such date,
the Mortgage Loans securing or included in such Series are sold to a Trust or
subject to the lien of the Indenture.
"Deferred Interest" means the excess resulting when the amount of interest
required to be paid by a Mortgagor on a Mortgage Loan on any Due Date for such
Mortgage Loan is less than the amount of
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interest accrued on the Scheduled Principal Balance thereof, to the extent such
excess is added to the Scheduled Principal Balance of such Mortgage Loan.
"Deferred Interest Securities" means Bonds or Certificates on which interest
accrued during an Interest Accrual Period may be added to the principal amount
of such Bonds or Certificates rather than being paid in cash on the related
Distribution Date.
"Definitive Securities" means the Bonds or the Certificates for a Series
when and if issued in definitive form to the Securities Owners of such Series or
their nominees.
"Deleted Mortgage Loan" means a Mortgage Loan removed from the Trust Estate
or Trust Fund in order to substitute a Substitute Mortgage Loan.
"Delivery Date" means with respect to a Series, the date specified in the
related Prospectus Supplement as the date on which the Securities of such Series
are to be delivered to the original purchasers thereof.
"Depositor" means the Company (i) when acting in such capacity under a
Deposit Trust Agreement to deposit Primary Assets into an Owner Trust relating
to a Series of Bonds, or (ii) when acting in such capacity under a Trust
Agreement to deposit Primary Assets into a Trust Fund relating to a Series of
Certificates.
"Deposit Trust Agreement" means a deposit trust agreement between the
Company and an Owner Trustee pursuant to which an Owner Trust is created and
Primary Assets are deposited therein.
"Designated Interest Accrual Date" means, as specified in the related
Prospectus Supplement, (a) the day preceding a Redemption Date or Special
Redemption Date as the date through which accrued interest is paid upon
redemption or special redemption, or (b) the date through which accrued interest
is paid upon the occurrence of an Event of Default.
"Determination Date" means the date specified in the related Prospectus
Supplement.
"Disqualified Organization" means the United States, any State or political
subdivision thereof, any possession of the United States, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, a rural electric or telephone cooperative described in
section 1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income.
"Distribution Date" means the date on which distributions of principal of
and interest on Certificates of a Series will be made.
"DOL" means Department of Labor.
"Due Date" means each date on which a payment is due and payable on any
Mortgage Assets.
"Due Period" means, unless other specified in the related Prospectus
Supplement, for each Payment Date or Distribution Date, as applicable, the
period beginning on the second day of the month preceding the month in which
such Payment Date or Distribution Date, as applicable, occurs and ending on the
first day of the month in which such Payment Date or Distribution Date, as
applicable, occurs.
"Eligible Investments" means any one or more of the obligations or
securities described herein under "SECURITY FOR THE BONDS AND
CERTIFICATES--Investment of Funds."
"Enhancement" means the Enhancement for a Series, if any, specified in the
related Prospectus Supplement.
"Enhancement Agreement" means the agreement or instrument pursuant to which
any Enhancement is issued or the terms of any Enhancement are set forth.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means qualified employee benefit plans established under ERISA
or the Code.
"Escrow Account" means an escrow account established and maintained by the
Primary Servicer in which payments by Mortgagors to pay taxes, assessments,
mortgage and hazard insurance premiums and other comparable items will be
deposited.
"Event of Default" unless otherwise specified in the Prospectus Supplement
shall have the meaning set forth herein under "THE INDENTURE AND TRUST
AGREEMENT--Events of Default."
"Excess Cash Flow" shall have the meaning set forth in the related
Prospectus Supplement.
"Exchange Act" means the Securities Exchange Act of 1934.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHA" means the Federal Housing Administration, a division of HUD. "FHA
Loan" means a fixed-rate mortgage loan insured by the FHA. "FHLMC" means the
Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"Final Scheduled Distribution Date" means the Distribution Date on which
principal of and interest on a Series of Certificates is scheduled to be paid in
full.
"First Mandatory Principal Distribution Date" means the date specified in
the related Prospectus Supplement as the Distribution Date on which the Issuer
must begin paying installments of principal of the Certificates of the related
Series or Class if the Issuer has not already begun making such distributions.
"First Mandatory Principal Payment Date" means the date specified in the
related Prospectus Supplement as the Payment Date on which the Issuer must begin
paying installments of principal of the Bonds of the related Series or Class if
the Issuer has not already begun making such payments.
"First PAC Paydown Date" means the date on which the initial PAC Principal
Payment is applied to the PAC Bonds, as set forth in the related Prospectus
Supplement.
"Garn-St. Germain Act" means the Garn-St. Germain Depository Institutions
Act of 1982.
"Guarantor" means a guarantor acceptable to the Rating Agencies rating the
Securities.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate, remise,
convey, assign, transfer, create and grant a lien upon and a security interest
in and right of setoff against, deposit, set over and confirm.
"Guaranteed Investment Contract" means a guaranteed investment contract
providing for the investment of all distributions on the Mortgage Assets
guaranteeing a minimum or a fixed rate of return on the investment of moneys
deposited therein.
"Highest Bond Interest Rate" means, unless specified otherwise in the
related Prospectus Supplement, with respect to any Series of Bonds, the highest
Bond Interest Rate borne by outstanding Bonds of the Series.
"Highest Certificate Interest Rate" means, unless otherwise specified in the
related Prospectus Supplement, with respect to any Series of Certificates, the
highest Certificate Interest Rate borne by outstanding Certificates of a Series.
"Holder" means a Bondholder or Certificateholder, as applicable.
"Housing Act" means the National Housing Act of 1934, as amended.
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"HUD" means the United States Department of Housing and Urban Development.
"Indenture" means, with respect to any Series of Bonds, collectively the
Trust Indenture and any related Series Supplement.
"Individual Investor Bonds" means each of the Bonds of a Class identified as
such in the related Prospectus Supplement.
"Individual Investor Certificates" means each of the Certificates of a Class
identified as such in the related Prospectus Supplement.
"Insurance Proceeds" means amounts received by the Trustee from the Master
Servicer or a Servicer in connection with sums paid or payable under any
insurance policies, to the extent not applied to the restoration or repair of
the Mortgaged Property.
"Insurance Policies" means hazard insurance and other insurance policies
required to be maintained with respect to Mortgage Loans.
"Interest Accrual Period" means the period specified in the related
Prospectus Supplement for a Series, during which interest accrues on Securities
of the related Series or Class with respect to any Payment Date, Distribution
Date, Redemption Date, or Special Redemption Date.
"Interest Only Securities" means a Security entitled to receive payments of
interest only based upon the Notional Amount of the Security.
"Interest Weighted Securities" means, with respect to Certificates issued by
a grantor Trust, Certificates that embody only interest payments on the
underlying Mortgage Loans or which consist in whole or in part of stripped
coupons or, in the case of a regular interest in a REMIC, which qualify as such
pursuant to Section 860G(a)(1)(B)(ii) of the Code.
"IRS" means the Internal Revenue Service.
"Issuer" means the Company Owner Trust, or a separate trust established by
the Company as issuer of a Series of Securities.
"L/C Bank" means the issuer of the letter of credit.
"LCPI" means Lehman Commercial Paper Inc.
"Lehman Brothers" means Lehman Brothers Inc.
"Liquidation Proceeds" means amounts (other than Insurance Proceeds)
received and retained in connection with liquidation of defaulted Mortgage Loans
whether through foreclosure or otherwise, net of related liquidation expenses
and certain other expenses.
"Loan-to-Value Ratio" means, as of any date of determination, the ratio of
the then outstanding principal amount to the lesser of the appraised value and
the purchase price of the Mortgaged Property at the time of origination.
"Marine Midland" means Marine Midland Bank, N.A., a national banking
association.
"Master Servicer" means, with respect to a Series secured by Mortgage Loans
or Private Mortgage-Backed Securities, the Person, if any, designated in the
related Prospectus Supplement to manage and supervise the administration and
servicing by the Servicers of the Mortgage Loans comprising Mortgage Assets or
Underlying Collateral for that Series, or the successors or assigns of such
Person.
"Master Servicing Agreement" means the Master Servicing Agreement between
the Issuer and the Master Servicer, if any, specified in the related Prospectus
Supplement.
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"Maximum Variable Interest Rate" means the interest rate cap on the Bond
Interest Rate or Certificate Interest Rate for Variable Interest Securities.
"Minimum Variable Interest Rate" means the interest rate floor on the Bond
Interest Rate or Certificate Interest Rate for Variable Interest Securities.
"Mortgage" means a mortgage, deed of trust or other security instrument
evidencing the lien on the Mortgaged Property.
"Mortgage Assets" means the Mortgage Loans, including participation
interests therein, REO Property and Private Mortgage-Backed Securities which are
Granted to the Trustee as security for a Series of Bonds or deposited into the
Trust Fund in respect of a Series of Certificates; an item of Mortgage Assets
refers to a specific Mortgage Loan, REO Property or Private Mortgage-Backed
Security.
"Mortgaged Properties" means the real properties on which liens are created
pursuant to Mortgages for purposes of securing the Mortgage Loans.
"Mortgage Loan Group" means groups of Mortgage Assets.
"Mortgage Loan" means a mortgage loan or participation interest therein that
is owned by the Issuer and constitutes a part of the Mortgage Assets for a
Series, or that is Underlying Collateral for a Private Mortgage-Backed Security
that constitutes a part of the Mortgage Assets for a Series.
"Mortgage Note" means the note or other evidence of indebtedness of a
Mortgagor with respect to a Mortgage Loan.
"Mortgage Pool" means, with respect to a Series, the pool of Mortgage Loans.
"Mortgage Rate" means, with respect to each Mortgage Loan, the annual
interest rate required to be paid by the Mortgagor under the terms of the
related Mortgage Note.
"Mortgagor" means the Person indebted under the Mortgage Note relating to a
Mortgage Loan.
"Multifamily Property" means any property securing a Mortgage Loan
consisting of multifamily residential rental property or cooperatively owned
multifamily property consisting of five or more dwelling units.
"New York Presenting Agent" means the Issuer's agent in the State of New
York, which, unless otherwise specified in the Prospectus Supplement for a
Series, will be Bankers Trust Company, Four Albany Street, New York, New York
10006. "Nonresidents" means a nonresident alien individual, foreign partnership
or foreign corporation.
"OID" means "original issue discount" within the meaning of section 1273 of
the Code.
"OTS" means the Office of the Thrift Supervision.
"Owner Trust" means the trust fund established by the Company pursuant to a
Deposit Trust Agreement to hold Primary Assets and issue a Series of Bonds.
"Owner Trustee" means the bank or trust company named in the Prospectus
Supplement related to a Series of Bonds, not in its individual capacity but
solely as trustee pursuant to a Deposit Trust Agreement, and its successors and
assigns.
"PAC" means Planned Amortization Class Securities.
"PAC Amount" means the scheduled amounts of principal payments to be applied
on each Payment Date or Distribution Date to the PAC Securities, as set forth in
the related Prospectus Supplement.
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"PAC Security" or "Planned Amortization Class Security" means a Security on
which the Principal Amortization Amount in an amount equal to the PAC Principal
Payment or PAC Principal Distribution will be applied to such Securities
commencing on the First PAC Paydown Date, and each Payment Date or Distribution
Dates thereafter.
"PAC Paydown Date" means the date on which each PAC Amount is applied to the
PAC Securities as set forth in the related Prospectus Supplement.
"PAC Principal Payment" means, with respect to a particular Payment Date,
the scheduled PAC Amount, if any, for such Payment Date less any principal
payments made on the PAC Securities due to a special redemption subsequent to
the preceding Payment Date.
"Participating Securities" means a Security entitled to receive payments of
principal and interest and an additional return on investment as described in
the related Prospectus Supplement.
"Participation Agreement" means the agreement through which participation
interests in a Series will be acquired.
"Pass-Through Certificates" means, in respect of Certificates issued by a
grantor trust, Certificates in which there is no separation of the principal and
interest payments on the underlying Mortgage Loans.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Paying Agent specified in the Indenture or Trust
Agreement, as applicable and is authorized and appointed pursuant to the
Indenture or Trust Agreement, as applicable by the Issuer to pay the principal
of or interest on any Securities on behalf of the Issuer.
"Payment Date" means the date on which payments of principal of and interest
on the Bonds will be made.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization, or government or any agency or political
subdivision thereof.
"Pledged Fund or Account" means any fund or account, including, without
limitation, the Collection Account or any Reserve Fund established with respect
to, and Granted as security for, a Series.
"PMBS Agreement" means the pooling and servicing agreement, indenture or
similar agreement pursuant to which Private Mortgage-Backed Securities have been
issued.
"PMBS Issuer" means the issuer of the Private Mortgage-Backed Securities.
"PMBS Trustee" means the trustee of the Private Mortgage-Backed Securities.
"Policy Statement" means the supervisory policy statement adopted by the
Federal Financial Institution Examination Council.
"Prepayment Assumption" means the anticipated rate of prepayments assumed in
pricing the Securities.
"Prepayment Period" means, if specified in any Prospectus Supplement with
respect to any Series, the calendar month preceding the month in which the
related Payment Date occurs.
"Primary Assets" means that portion of the Trust Estate pledged to secure a
Series of Bonds, or comprising the Trust Fund relating to a Series of
Certificates.
"Primary Servicer" means the entity which has primary liability for
servicing Mortgage Loans directly.
"Principal Balance" means, unless otherwise specified in a Prospectus
Supplement, with respect to any Mortgage Loan or related REO Property, for any
Due Date and the Due Period with respect thereto, the principal balance of such
Mortgage Loan (or, in the case of REO Property, of the related Mortgage Loan
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on the last date on which a payment was made thereon) outstanding as of the
Cut-Off Date, after application of principal payments due on or before the
Cut-Off Date, whether or not received, plus all amounts of Deferred Interest
accrued on such Mortgage Loan to the Due Date in the Due Period immediately
preceding the date of determination minus the sum of (a) the principal portion
of the Scheduled Payment due on or prior to such Due Date, but only if received
from or on behalf of the Mortgagor, (b) all Principal Prepayments, and all
Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds and other
amounts applied as recoveries of principal to the extent identified and applied
by the Master Servicer, Special Servicer or Servicer, as applicable, as
recoveries of principal through the close of the related Prepayment Period for
the Master Servicer or Servicer, as applicable, and (c) any Realized Loss on
such Mortgage Loan to the extent treated as a principal loss and which is
realized during such Prepayment Period.
"Principal Determination Date" means the day specified in the related
Prospectus Supplement.
"Principal Payment Amount" means, with respect to any Payment Date or
Distribution Date related to a particular Series, the amount that is specified
in the related Prospectus Supplement.
"Principal Payment Dates" means, with respect to a Class, the dates
specified in the related Prospectus Supplement on which principal of the
Securities of such Class is to be paid.
"Principal Prepayment" means, with respect to any Private Mortgage-Backed
Security or Mortgage Loan, any payment of principal on such Private
Mortgage-Backed Security or Mortgage Loan in excess of the Scheduled Payment,
resulting from prepayment, partial prepayment, (other than Liquidation Proceeds,
Condemnation Proceeds or Insurance Proceeds) with respect to the Mortgage Loan
or Mortgage Loans underlying such Private Mortgage-Backed Security but not
including any Scheduled Payment received prior to the Due Period in which it was
scheduled to be paid.
"Principal Only Securities" means a Security entitled to receive payments of
principal only.
"Private Mortgage-Backed Security" means a mortgage participation or other
interest, pass-through certificate or collateralized mortgage obligation.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"PTE" means Prohibited Transactions Exemption.
"Rating Agency" means a nationally recognized statistical rating agency.
"Realized Losses" means, unless otherwise specified in a Prospectus
Supplement, with respect to each Mortgage Loan or REO Property, as the case may
be, as to which a Cash Liquidation or REO Disposition has occurred, an amount
equal to (i) the Principal Balance of the Mortgage Loan as of the date of Cash
Liquidation or REO Disposition, plus (ii) interest at the applicable Mortgage
Rate, from the date as to which interest was last paid up to the Due Date in the
period in which such Cash Liquidation or REO Disposition has occurred on the
Principal Balance of such Mortgage Loan outstanding during each Due Period that
accrued interest was not paid, minus (iii) Liquidation Proceeds received during
the month in which such Cash Liquidation or REO Disposition occurred, net of
related expenses, including but not limited to, amounts that are payable to a
Master Servicer, Servicer, or Special Servicer, as applicable, with respect to
such Mortgage Loan and (iv) any other amounts applied as a recovery of principal
or interest on the Mortgage Loan.
"Redemption Date" means, with respect to any Series, the Payment Date
specified by the Issuer for the redemption of Bonds of such Series pursuant to
the Indenture.
"Redemption Price" means, with respect to any Bond of a Series or Class to
be redeemed, an amount equal to the percentage specified in the related
Prospectus Supplement of the principal amount (or of the Compound Value of any
Compound Interest Security) of such Security so redeemed, together with accrued
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<PAGE>
and unpaid interest thereon at the applicable Bond Interest Rate to the
Designated Interest Accrual Date for such Series.
"Regular Bondholder" means a Holder of a Regular Interest Bond.
"Regular Certificateholder" means a Holder of a Regular Interest
Certificate.
"Regular Interest Bonds" means Classes of Bonds constituting regular
interests in a REMIC.
"Regular Interest Certificates" means Classes of Certificates constituting
regular interests in a REMIC.
"Regular Interest Securities" means Regular Interest Bonds, Regular Interest
Certificates or Uncertificated Regular Interests, as applicable.
"Reinvestment Income" means any interest or other earnings on Pledged Funds
or Accounts that are part of the Primary Assets for a Series.
"REMIC Provisions" means the provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder.
"REMIC Regulations" means final Treasury regulations under Sections 860A
through 860G of the Code or related provisions.
"REO Disposition" means the receipt by the Master Servicer, Servicer, or
Special Servicer, as applicable, of Liquidation Proceeds, Insurance Proceeds and
other payments and recoveries (including proceeds of a final sale) from the sale
or other disposition of the REO Property.
"REO Property" means Mortgaged Properties the beneficial interest in which
has been acquired by a Trust Fund or by a Trustee on behalf of Bondholders by
foreclosure, by deed-in-lieu of foreclosure or otherwise.
"Reserve Fund" means, with respect to a Series, any reserve fund described
in the applicable Prospectus Supplement, including a Subordination Reserve Fund.
"Reserve Funds" means, collectively, more than one reserve fund.
"Residual Bondholder" means the Holder of a Residual Interest Bond.
"Residual Certificateholder" means the Holder of a Residual Interest
Certificate.
"Residual Interest Bonds" means Classes of Bonds constituting the residual
interest in a REMIC.
"Residual Interest Certificates" means Classes of Certificates constituting
residual interests in a REMIC.
"Residual Interest Securities" means Residual Interest Bonds or Residual
Interest Certificates, as applicable.
"SAIF" means Savings Association Insurance Fund.
"Scheduled Payments" means the scheduled payments of principal and interest
to be made by the Mortgagor on a Mortgage Loan in accordance with the terms of
the related Mortgage Note, as modified by any permitted modification of a
Mortgage Note.
"Scheduled Principal Balance" means the principal balance of a Mortgage Loan
outstanding as of the Cut-Off Date, after application of principal payments due
on or before the Cut-Off Date, whether or not received, plus all amounts of
Deferred Interest accrued on such Mortgage Loan to the Due Date in the Due
Period immediately preceding the date of determination, minus the sum of (a) the
principal portion of all Scheduled Payments due on or prior to such Due Date,
irrespective of any delinquency in payment by
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<PAGE>
the Mortgagor, (b) all Principal Prepayments and all Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds and other amounts applied as
recoveries of principal to the extent identified and applied by the Master
Servicer, Special Servicer, or Servicer, as applicable, as recoveries of
principal through the close of the related Prepayment Period, and (c) any
Realized Loss on such Mortgage Loan to the extent treated as a principal loss
and that is realized during such Prepayment Period.
"Securities" means Bonds of Certificates.
"Securities Owners" means the owners of the beneficial interests in a Series
of Bonds or Certificates.
"Senior Securities" means a Class of Securities which are senior in right
and priority to the extent described in the related Prospectus Supplement to
payment of principal and interest to certain other Classes of Securities of such
Series.
"Series" means a separate series of Bonds sold pursuant to this Prospectus
and the related Prospectus Supplement.
"Series Supplement" means the supplemental indenture to or terms indenture
incorporating by reference the Trust Indenture or Trust Agreement, as
applicable, between the Issuer of a Series of Securities and the Trustee
relating to such Series of Securities.
"Servicer" means, for any Mortgage Loan, the Person approved by the Issuer
and by the Master Servicer, if any, as servicer of such Mortgage Loan, which
Person shall also be a FNMA or FHLMC-approved seller and servicer.
"Servicer Remittance Date" means with respect to each Mortgage Loan, the
date on which the Servicer shall remit all funds held in the Servicing Account
together with any Advances made by such Servicer for deposit to the Collection
Account.
"Servicing Account" means an account established by a Servicer which
complies with the standards set forth herein for a Custodial Account.
"Servicing Agreements" means the Master Servicing Agreement, Servicing
Agreement and Special Servicing Agreement, if any.
"Servicing Fee" means for any Series, the aggregate fees paid to the
Trustee, Master Servicer or other similar fees.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SPA" means the Standard Prepayment Assumption prepayment model.
"Special Redemption Date" means, with respect to a Series, the date each
month (other than any month in which a Payment Date occurs) on which Bonds of
that Series may be redeemed pursuant to the Trust Indenture or the related
Series Supplement; such date shall be the same day of the month as the day on
which the Payment Date for the Bonds of that Series occurs.
"Special Servicer" means a special servicer identified in the related
Prospectus Supplement appointed to perform the activities set forth in the
related Prospectus Supplement.
"Start Up Day" means the "startup day" of the REMIC as defined in section
860G(a)(9) of the Code.
"Stated Maturity" means the date specified in the related Prospectus
Supplement no later than which all the Bonds of such Class will be fully paid,
calculated on the basis of the assumptions set forth in the related Prospectus
Supplement.
"Stripped Certificates" means, in respect of Certificates issued by a
grantor trust, Certificates in which there is considered to be a separate
ownership of the payments of principal and interest on the underlying Mortgage
Loans. "Subordinate Securities" means a Class of Securities which are
subordinate in right and
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<PAGE>
priority to the extent described in the related Prospectus Supplement to payment
of principal and interest to Senior Classes of Securities of such Series.
"Substitute Mortgage Asset" means any Mortgage Asset that is Granted to the
Trustee as security for a Series of Bonds or deposited into the Trust Fund in
respect of a Series of Certificates in lieu of any Mortgage Assets then pledged
as security.
"Substitute Mortgage Loan" means a Mortgage Loan substituted for one or more
Deleted Mortgage Loans in the Trust Estate or Trust Fund.
"TIN" means Taxpayer Identification Number.
"Trust Agreement" means the trust agreement between the Company and a
Trustee pursuant to which a Series of Certificates is issued.
"Trust Estate" means, with respect to any Series of Bonds, all money,
instruments, securities and other property, including all proceeds thereof,
which are subject or intended to be subject to the lien of the Indenture for the
benefit of the Series as of any particular time (including, without limitation,
all property and interests Granted to the Trustee pursuant to the Series
Supplement for such Series).
"Trust Fund" means the trust fund established pursuant to a Trust Agreement
into which Primary Assets are deposited for the purpose of issuing a Series of
Certificates.
"Trust Indenture" means the trust indenture between the Company and the
Trustee or a Trust and the Trustee pursuant to which a Series of Bonds are
issued.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 and
rules and regulations promulgated by the Commission with respect thereto.
"Trustee" means Bankers Trust or Marine Midland or another bank or trust
company qualified under the TIA and named in the Prospectus Supplement for a
Series as trustee or the Trustee for any series of Certificates named in the
Prospectus Supplement.
"Uncertificated Regular Interest" means a regular interest in a REMIC that
is not represented by a physical Certificate.
"Unavailable Amount" means, with respect to a Series, the amount, if any,
remaining in the related Collection Account on a related Payment Date that
represents (1) payments of scheduled payments of principal of and interest on
the Mortgage Assets due subsequent to the Principal Determination Date
immediately preceding the related Payment Date or Distribution Date, (2) the
amount of all related prepayments received or deemed received subsequent to the
Principal Determination Date immediately preceding such Payment Date or
Distribution Date, or (3) any investment income that has accrued subsequent to
the Principal Determination Date immediately preceding such Payment Date or
Distribution Date.
"Undelivered Mortgage Assets" means Mortgage Assets that are not pledged and
delivered to the Trustee on the related Closing Date.
"Underwriters" means, collectively, Lehman Brothers, as agent or as
underwriter, or underwriting syndicates represented by Lehman Brothers.
"Underlying Collateral" means, with respect to a Private Mortgage-Backed
Security, the underlying Mortgage Loans.
"VRDI Security" means a Regular Interest Security that qualifies as a
"variable rate debt instrument" under Section 1.7275-5 of the Treasury
Regulations.
"Variable Interest Distribution Date" means, with respect to a Class of
Variable Interest Securities issued as part of a Series of Certificates, the
date specified in the related Prospectus Supplement, it being
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<PAGE>
expressly provided herein that Variable Interest Distribution Dates may be
monthly, quarterly, semi-annual or annual.
"Variable Interest Payment Date" means, with respect to any Class of
Variable Interest Securities issued as part of a Series of Bonds, the date
specified in the related Prospectus Supplement, it being expressly provided
herein that Variable Interest Payment Dates may be monthly, quarterly,
semi-annual or annual.
"Variable Interest Period" means, with respect to any Class of Variable
Interest Securities, the period commencing immediately subsequent to the
preceding Variable Interest Period (or, in the case of the Variable Interest
Period appliable to the first Variable Interest Payment Date with respect to
such Class of Variable Interest Securities, commencing on the Accrual Date for
such Class) and ending on the date specified in the related Prospectus
Supplement, during which such Class of Variable Interest Securities shall accrue
interest, payable on the immediately succeeding Variable Interest Payment Date
or Variable Interest Distribution Date, at the Bond Interest Rate or Certificate
Interest Rate determined on the immediately preceding Determination Date.
"Variable Interest Rate" means the interest rate in respect of a Variable
Interest Security.
"Variable Interest Security" means a Security on which interest accrues at a
Bond Interest Rate or Certificate Interest Rate that is adjusted, based upon a
predetermined index, at fixed periodic intervals, all as set forth in the
related Prospectus Supplement.
"Weighted Average Securities" means Regular Interest Securities that bear
interest at a rate based on a weighted average of the interest rates on some or
all of the Mortgage Loans of the related trust.
"Zero Coupon Bonds" means a Security entitled to receive payments or
distributions of Principal only. "1986 Act" means the Tax Reform Act of 1986, as
amended.
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<PAGE>
- --------------------------------------------------------------------------------
COMPLETE APPRAISAL OF
REAL PROPERTY
Shoppers World Power Center
One Worcester Road and 417 Cochituate Road,
Framingham, Middlesex County, Massachusetts
and
342 Speen Street and 1391 Worcester Road
Natick, Middlesex County, Massachusetts
- --------------------------------------------------------------------------------
IN A SUMMARY REPORT
As of July 11,1997
Master Realty Inc.
Managing Member of Shoppers World, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Cushman & Wakefield, Inc.
Valuation Advisory Services
101 Arch Street, 21st Floor
Boston, MA 02110
<PAGE>
CUSHMAN &
WAKEFIELD(R)
Improving your place
in the world.
Cushman & Wakefield of Massachusetts, Inc.
101 Arch Street, 21st Floor
Boston, MA 02110
Tel: (617) 330-6966
Fax: (617) 951-1349
July 30,1997
Mr. Brian Summers
Vice President
Master Realty Inc.
Managing Member of Shoppers World, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Re: Shoppers World
One Worcester Road and 417 Cochituate Road, Framingham, MA
and 342 Speen Street and 1391 Worcester Street, Natick, MA
Gentlemen:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our report estimating the
market value of the leased fee estate in the above referenced real property.
As specified in the Letter of Engagement, the value opinion reported
herein 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. The results of the appraisal are being conveyed in a Summary Report
according to our agreement. The accompanying report summarizes the pertinent
data, analysis and conclusions secured in our investigation, rather than provide
a self-contained narrative within the report. It is noted that this report
incorporates by reference our previous Complete Appraisal prepared in a
Self-Contained report format with a date of value of November 1,1995.
This report was prepared for Master Realty Inc., Managing Member of
Shoppers World, LLC and Lehman Brothers, Inc. (Client) and it is intended only
for the specified use of the Client. Susan R. Balogh, MAI inspected the property
and prepared the report.
<PAGE>
Mr. Brian Summers
July 30,1997
Page 2
As a result of our total analysis, we have formed an opinion that the
market value of the leased fee estate in the subject property, as of July
11, 1997, the date of inspection, was:
ONE HUNDRED THIRTY ONE MILLION SIX HUNDRED THOUSAND DOLLARS
$131,6000,000
At the client's request, we have separately valued two parcels of land
presently incorporated into the overall site: the 9.22 acre parcel located at
342 Speen Street in Natick and what is known as the Route 30 parcel, a 4.6 acre
parcel, located at the intersection of Burr Road and Route 30. Both of these
land parcels are subject to purchase and sale agreements with closings
anticipated at some future date. It is our opinion that the present value of the
Speen Street parcel is $3,000,000. We estimate the value of the Route 30 parcel
is $1,650,000.
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, INC.
/s/ Susan R. Balogh, MAI
Susan R. Balogh, MAI
Senior Appraiser
MA Certified General Appraiser No. 549
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Shoppers World
Location: The subject property is located in the
triangle formed by Routes 9, 30 and Speen
Street.
Date of Inspection: July 11, 1997
Ownership: Shoppers World, LLC
Total Land Area:
Gross Area: 170.67+- acres
Zoning:
Framingham Parcels Business District (B)
Natick Parcels Industrial II (I-II)
Improvements
Type: Single-level power center constructed of
concrete block with masonry exterior and
flat roof.
Gross Leasable Area (Owned):
----------------------------------------
Bradlees 102,555+- SF
----------------------------------------
General Cinema 85,000+- SF
----------------------------------------
Toys 'R Us/Kids 'R Us 63,300+- SF
----------------------------------------
Marshalls 50,081+- SF
----------------------------------------
Bob's 50,059+- SF
----------------------------------------
The Wiz 50,000+- SF
----------------------------------------
Sports Authority 43,629+- SF
----------------------------------------
Linens 'N Things 40,159+- SF
----------------------------------------
Macy's Furniture 40,000+- SF
----------------------------------------
TJ Maxx 39,884+- SF
----------------------------------------
Sears Homelife 36,108+- SF
----------------------------------------
Office Max 30,100+- SF
----------------------------------------
Barnes & Noble 29,963+- SF
----------------------------------------
Designer Shoe Warehouse 27,089+- SF
----------------------------------------
A.C. Moore 24,560+- SF
----------------------------------------
Mikasa 18,007+- SF
----------------------------------------
In-Line Shops 47,798+- SF
========================================
Total 778,292+- SF
----------------------------------------
Total Building Area: 778,292+- square feet
Year Built: Phase I completed November 1994
Phase II completed early 1997
Condition: New/Excellent
Land-to-Building Ratio: 9.54:1
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Site Coverage: 10.5%
Parking Spaces Provided: 5,071 spaces (6.5 cars per 1,000 square feet
of total building area)
Highest and Best Use
If Vacant: Commercial/retail utilization built to its
maximum feasible FAR.
As Improved: Continued retail use as a power/community
center.
Operating Data and Forecasts
Current Occupancy: 100% (The Wiz will soon vacate 50,000 SF
which will result in an occupancy rate of
93.5%)
Forecasted Stabilized
Occupancy: 97% (based on in-line shop and outparcel GLA
and net of downtime provisions).
Operating Expenses Annual Amount Unit Rate*
------------- ----------
1996 Actual (Owners): $2,654,784 $3.41
1997 Budget: $3,560,286 $4.57
FY1998 C&W Forecast $4,505,381 $5.79
================
Value Indicators
================
Sales Comparison Approach: $128,400,000 to $132,300,000
Income Approach
Direct Capitalization: $131,600,000
Discounted Cash Flow: $131,600,000
Investment Assumptions
Holding Period: 10 years
Income Growth Rate: +3.5%
Expense Growth Rate: +3.5 %
Sales Growth Rate: +3.5%
Tenant Improvements None
Commissions
New Tenants: 6% Y1, 3% thereafter
Renewing Tenants: One half of new commissions
Vacancy Between Tenants: 6 months
Renewal Probability: 75%
Terminal Capitalization Rate: 9.0%
Cost of Sale at Reversion: 2.0%
Discount Rate: 11.0%
Value Conclusion: $131,600,000
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Resulting Indicators
Unit Rate: $169.09/SF of owned GLA
Net Income (FY 1998): $11,843,750
Implicit Overall Capitalization
Rate: 9.0%
Exposure Time Implicit
in Market Value Conclusion: Not to exceed 12 months
Special Risk Factors:
o Asbestos materials were found to have been used in the construction
process for the demolished Shoppers World Center and an abatement program
was reportedly undertaken by Homart Development, the previous owner and
developer of Shoppers World. The estimated cost of abatement was
$1,100,000. Removing transite panels on the former General Cinema
building, drywall joint compound and pipe insulation in all of the
buildings comprised the majority of the cost associated with the abatement
program. A ground-water and soils study detected 11 underground storage
tanks (USTs) and varying levels of soil and groundwater contamination. We
understand the USTs have been removed and the contaminated soil has been
either removed or treated.
o The detection of hazardous substances is beyond the expertise of the
appraisers and the scope of this assignment. The estimated value reported
herein reflects the total value of the property as if unaffected by
hazardous substances. The presence of hazardous substances may have a
negative influence on the value of the subject and the costs to clean the
site may exceed the total value reported herein, but consideration of the
effects on value is beyond the purpose and scope of this appraisal. The
appraisers caution against the use of this appraisal without the knowledge
of the intended purpose and limited scope of this appraisal.
Special Assumptions:
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This information
was provided in the form of a rent roll, budgets, sales reports and other
property specific information. We were also provided with a Pro-Ject
diskette for the property which ownership has portrayed as containing the
actual lease terms. It is noted that we audited lease abstracts for
several of the major tenants during the course of our Complete Appraisal
in November 1995. Based upon the current information provided, minor
discrepancies were noted which we have reconciled to our satisfaction.
2. We have made a visual inspection of building improvements and local
environs in the process of this analysis. Our comments are limited to
those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of improvements
are beyond the scope of our engagement and are best made by a professional
engineer.
3. The forecasts of income and expenses contained herein are not predictions
of the future. Rather, these projections are our best estimates of current
market thinking on future income, expenses, growth rates, and demand. No
warranty or representation is made with regard to materialization of these
forecasts.
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
4. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report. We believe, based on the assumptions
employed in our cash flow analysis and based on our selection of
investment parameters for the subject, the value conclusion represents a
market price achievable within one year's exposure time on the open
market.
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
PHOTOGRAPHS OF SUBJECT PROPERTY ............................................ 1
INTRODUCTION ............................................................... 6
PROPERTY OWNERSHIP AND RECENT HISTORY ................................... 6
PURPOSE AND INTENDED USE OF THE APPRAISAL ............................... 7
EXTENT OF THE APPRAISAL PROCESS ......................................... 7
DATE OF VALUE AND PROPERTY INSPECTION ................................... 8
PROPERTY RIGHTS APPRAISED ............................................... 8
DEFINITIONS OF VALUE, INTEREST APPRAISED, AND OTHER PERTINENT TERMS ..... 8
LEGAL DESCRIPTION ....................................................... 9
REGIONAL ANALYSIS .......................................................... 10
NEIGHBORHOOD DESCRIPTION ................................................... 15
RETAIL MARKET ANALYSIS ..................................................... 17
PROPERTY DESCRIPTION ....................................................... 39
REAL PROPERTY TAXES AND ASSESSMENTS ........................................ 45
ZONING ..................................................................... 48
HIGHEST AND BEST USE ....................................................... 49
VALUATION PROCESS .......................................................... 52
SALES COMPARISON APPROACH .................................................. 53
INCOME APPROACH ............................................................ 61
OUTPARCEL LAND VALUATION ................................................... 88
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 93
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 96
CERTIFICATION OF APPRAISAL ................................................. 98
ADDENDA .................................................................... 99
SUBJECT RENT ROLL
1996 OPERATING BUDGET
SUBJECT SALES REPORTS
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
View of western portion of the center.
[GRAPHIC OMITTED]
View of northwestern portion of the center.
================================================================================
-1-
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
View of north portion of the center.
[GRAPHIC OMITTED]
View of northeastern portion of the center.
================================================================================
-2-
<PAGE>
Photographs of Subject Property
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View of the Route 9 end cap
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View along Route 9 looking northeast
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Photographs of Subject Property
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View of Olive Garden Restaurant looking west.
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View of General Cinema looking north.
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SHOPPERS WORLD
FRAMINGHAM, MASSACHUSETTS
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INTRODUCTION
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Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
I, LLC, a joint venture between Developers Diversified Realty Corporation (DDR)
and DRA Advisors, Inc. (DRA). The subject was acquired as part of the former
Homart Community Center Division for a total purchase price of approximately
$500.0 million from General Growth Properties, Inc. The date of transfer was
November 17,1995.
A history of the project shows that the primary Shoppers World parcel
totals 86.72 acres originally acquired by Homart Community Centers, Inc. from
the Equitable Life Assurance Society of the United States and Melvin Simon &
Associates, Inc. The purchase price at closing was $13,500,000. In addition, an
earn-out payment was made to the owner for all approvals of space exceeding
550,000 square feet (excluding the existing Bradlees facility). According to the
previous owners this payment was approximately $6,346,000, thus the total price
of the parcel was $19,846,000 million.
The secondary parcel consists of 83.7 acres of contiguous land situated in
the towns of Framingham and Natick. This parcel houses the General Cinema and
three out parcels. Of the 83.7 acres only approximately 22 acres are usable as a
result of significant wetlands on the site. This parcel was purchased by Homart
Development Company from Allied Stores General Real Estate Company on November
18,1993. The purchase price at closing was $7,700,000. In addition, Homart
purchased an option agreement between Allied and The New Brendon Corporation in
the amount of $100,000. Also, $800,000 was paid in additional consideration for
the New Brendon Group's option on the property. Thus, the total purchase price
was $8,600,000. The transfer was recorded at the Middlesex County Registry of
Deeds in Deed Book 23934, page 440.
Based on the purchase of the two above parcels, the total price paid for
the subject site was $28,446,000 or $36.55 per square foot of building area.
It is our understanding that one of the three out parcels mentioned above,
a 9.22 acre site, located at 342 Speen Street is subject to a current purchase
and sale agreement to Homestead Village Inc., a developer of suite hotels. The
agreed purchase price is $3,000,000. Homestead Village Inc. plans to develop a
141 unit extended-stay lodging facility on the site. The agreement is contingent
upon obtaining approvals for the hotel from the Town of Natick. It is our
understanding that the approval process is moving forward and a closing is
anticipated by early September 1997.
A second agreement to purchase is in effect for the 4.6 acre Route 30
parcel situated at the intersection of Route 30 and the Burr Street extension.
The prospective purchaser is Candlewood Hotel Company. The purchase price is
$1,650,000. This parcel is situated in the Town of Framingham and thus is
subject to a different set of planning guidelines than the previously described
parcel. The purchaser plans to develop a 130 suite lodging facility on the site.
According to the Framingham Planning Board, as of the writing of this report, no
request for approval has been submitted but they are aware of the project and
anticipate an application soon.
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Introduction
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Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the subject property. The function of this appraisal is to
provide an independent valuation and analysis of the property and to assist the
client in evaluating the asset for underwriting purposes in connection with a
proposed financing.
Extent of the 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.
o Interviewed representatives of ownership and the property management
company including Howard Porter and Loren Henry, the leasing
representative.
o Reviewed leasing policy, concessions, tenant build-out allowances
and history of recent rental rates and occupancy.
o Reviewed a 1997 budget of income and expense as well as actual 1996
operating data.
o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Conducted market inquiries into recent sales of similar retail
centers 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.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems.
o In the course of this assignment we did not review actual lease
documents. We were provided with a Pro-Ject model prepared as of
July 1997, a current rent roll and other tenant specific data.
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and the
current market thinking relative to growth in market rents and
market absorption.
o Developed a value estimate of the center through direct sales
comparison.
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject +plus software for the purpose of discounting the
forecasted net income stream to a present value of the leased fee
estate for the center.
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes.
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition.
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Introduction
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o For this assignment, a Complete Appraisal of the subject property
was performed with the results conveyed in this summary report. A
Complete Appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. A summary appraisal
report format provides a summary of the data, analyses, and
conclusions rather than presenting a self-contained narrative within
the report. Other pertinent data is retained in our files. This
report also incorporates our previous Complete Appraisal prepared in
a self-contained report format with a date of value of November 1,
1995 by reference.
Date of Value and Property Inspection
The property has been valued as of July 11, 1997. On that date, Susan R.
Balogh, MAI inspected the property and its environs.
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
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Introduction
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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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
A complete legal description of the property is provided in the Addenda to
this report. Included within this legal description are the two parcels
currently under agreement for sale.
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Area Map
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REGIONAL ANALYSIS
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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 metropolitan Boston market
and the New England region focusing on some of its more important
characteristics.
Overview
The subject of this appraisal, Shoppers World, is located in two suburban
communities approximately 20 miles west of the city of Boston. The subject area,
generally known as the Metrowest submarket, consists of the towns of Framingham
and Natick. The area is best described as those towns bordering the intersection
of the Massachusetts Turnpike (I-90), exit 13, and State Route 30. Area wide
economic trends have a direct impact on real estate values and, as a result, we
have included a brief discussion of regional trends as the foundation for our
discussion of the subject area.
The city of Boston is the capital of the Commonwealth of Massachusetts and
the economic, educational, cultural and transportation focal point of New
England. During the mid-1980s, the metropolitan Boston area experienced
unprecedented growth, which was often referred to as the "Massachusetts
Miracle". In Eastern Massachusetts, particularly the greater Boston area, the
economic characteristics of the area were very favorable resulting in an
expanding population created by in-migration for employment opportunities.
Consequently, construction increased to accommodate the expansion of the
population and growth in the technology, defense, services and medical
businesses.
The 1990s arrived with the largest national recession since the Great
Depression of the 1920s and 1930s. National defense spending, a regional
mainstay, has been cut dramatically and will continue to decline for the
remainder of the decade. The computer industry, formerly heavily focused on
micro- and main-frame computers, experienced a structural shift to personal
computers causing substantial job losses. Computer networking and software
development has picked up some of the slack in the past two to three years,
however, computer-related employment has declined overall. Even the previously
thriving healthcare industry has begun realignment resulting in consolidations
and job losses. Fortunately, financial services, in particular the mutual fund
business, has been responsible for much of the "re-employment" and vacant space
absorption which has occurred during the area's recovery.
Population
The 1990 U.S. Census indicated a total population for the Commonwealth of
Massachusetts of approximately 6,016,425, up 4.9 percent from the 1980 Census
estimates. According to the 1990 Census, more than 20 percent of the entire New
England population is included in the Boston Primary Metropolitan Statistical
Area (PMSA) which had a total population of 2,870,669.
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Regional Analysis
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Regional Population Statistics
and Forecasts
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1990 1997 % Change
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Boston PMSA 2,870,669(1) 2,928,082 2.0%(2)
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Boston CMSA 4,171,643(1) 4,255,076 2.0%(2)
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Massachusetts 6,014,425(1) 6,030,700 0.3%(3)
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New England 13,200,000(2) 13,292,000 0.7%(3)
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SOURCES: (1) 1990 U.S. Census Reports
(2) Equifax National Decision Systems
(3) New England Economic Project
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The New England Economic Project (NEEP), a consortium of regional
economists, estimated that the Massachusetts population would increase
approximately 0.2 percent from 1990 to 1997 versus an estimated increase for the
New England Region of approximately 0.7 percent. The low rate of change in
population is primarily attributed by regional economists to a lack of
in-migration which is a structural, not a cyclical, issue. Data provided by
Equifax National Decision Systems (ENDS) indicates an expected increase in the
Boston PMSA and CMSA of approximately 2.0 percent during the same period. The
disparity in the increases points to the overall strength of the Boston economy
versus other areas of Massachusetts and New England where economies are more
heavily reliant on defense spending and manufacturing, industries that are
expected to continue to decline.
A dramatic surge in regional income levels during the early to middle
1980s was one of the driving forces behind the rapidly expanding New England
economy at that time. Income growth from 1989 through 1993 slowed to an annual
compound rate of approximately 3.9 percent, more typical of inflation trends of
the extended past. NEEP currently projects that income growth for Massachusetts
through 2000 will increase at a compound rate of approximately 2.3 percent.
Employment and Economic Trends
The following table depicts the breakdown of non-agricultural employment
for the Boston PMSA as of January 1997.
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1997 Non-Agricultural Employment Distribution
By Industry Group
Boston PMSA
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Industry Distribution
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Government 11.9%
Construction 2.7%
Manufacturing 11.8%
Transportation, Communication
and Utilities 4.4%
Wholesale & Retail Trade 21.8%
Finance, Ins. & Real Estate 8.4%
Services 39.0%
Total Employment 100.0%
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Source: Massachusetts Dept. of Employment &
Training
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Regional Analysis
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Massachusetts reportedly lost 11.3 percent of its jobs between 1989 and
1992, more than any other state in the nation. The losses came from all sectors,
but the manufacturing, high technology and construction trades were considered
the hardest hit. In addition, many white collar positions were lost in the
computer, finance, real estate and banking services industries.
According to the Massachusetts Department of Employment and Training, the
state apparently reversed this trend during 1995 by reportedly gaining more than
100,000 jobs. Job growth during 1996 continued with an additional 70,000 jobs,
increasing at about the same rate as job growth nationally. Jobs were reportedly
created primarily by the service sector, with software and engineering
professions showing the greatest gains. In addition, jobs have been created in
both construction and retailing, signs that the overall economy continues to
improve. The recovery over the past three years has allowed Massachusetts to
regain approximately 80 percent of the 350,000 jobs lost during the recession.
Assuming the economy continues its improvement, we expect to reach full recovery
within the next two years.
The May 1997 seasonally unadjusted unemployment rate for Massachusetts was
3.8 percent and for the United States was 4.7 percent. The May report for
greater Boston was 3.3 percent and for Framingham was 2.5 percent. These rates
represent dramatic declines in the unemployment rates since the peak in 1991
when unemployment for the state reached 11.0 percent.
In support of a positive outlook for the Boston area, both the 1996 and
1997 editions of Emerging Trends in Real Estate published jointly by Equitable
Real Estate Investment Management and Real Estate Research Corporation ranked
Boston third of sixteen major metropolitan areas, a significant jump from 1995's
eighth place ranking. Boston was the "survey's biggest mover". Trends also
projects a market peak by 1998.
Retail Sales
The following table summarizes retail sales for Middlesex County and
metropolitan Boston over the period 1988 through 1995.
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Regional Analysis
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Historic Retail Sales
Middlesex County and Metropolitan Boston
1988 through 1995
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Year Middlesex County Metro Boston
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1988 $11,442,142 $32,195,958
1989 12,154,324 32,596,223
1990 12,030,520 32,453,768
1991 12,429,158 33,301,185
1992 11,451,078 30,341,790
1993 11,358,245 30,957,095
1994 12,291,888 33,239,908
1995 12,659,466 34,159,389
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Compound Growth Rate
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1988-1995 1.27% 0.74%
1993-1995 1.37% 1.24%
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Source: Sales & Marketing Management: Survey of Buying Power-
1988-1995
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As shown in the table, retail sales growth for Middlesex county has
exceeded the metropolitan area's composite growth for the past eight years. It
also depicts the decline in sales in the early 1990s resulting from the severe
recession that plagued the region. Despite historical slow average annual growth
throughout the region, we note that retail sales in Middlesex County grew at
higher rate than the metro area between 1993 and 1995 to approximately $12.7
billion. This estimate represents approximately 37.0 percent of the total sales
in the MSA.
Transportation
The Boston Metropolitan area is served by four major interstate highways:
I-90/Mass. Turnpike, I-93, I-95/Route 128 and I-495. Boston truly provides the
hub of this highway network with I-95 serving as the inner circumferential
highway with extensions north and south, I-495 acting as the outer
circumferential highway, I-90 representing the radial extending to the west and
I-93 to the northwest. The series of state highways supplementing the interstate
system is generally adequate from a directional basis but all of these highways
are overburdened. Commuter traffic far exceeds the design and construction
capacities and congestion in the downtown Boston and I-95 areas continues to
increase. To alleviate the congestion, the State and Federal government are
funding a 10 year highway program which includes the recent completion of the
third harbor tunnel to provide additional airport access, and the depression of
the Central Artery that travels through downtown Boston.
Conclusion
The New England region appears to be growing steadily in most economic
sectors. Economists associated with both private and public agencies believe
that a lasting recovery began in 1993, and employment growth rates in most major
sectors have increased in support of this contention. While a few segments of
the economy continue to contract, others are showing strong signs of growth and,
in most cases, offsetting losses as evidenced by declining unemployment rates.
Population projections are for a stable population base with moderate
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Regional Analysis
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income gains through the end of the decade. These positive economic indicators
lead us to conclude that a retail center such as the subject can be supported by
underlying demographics barring any significant downturn in the economy.
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SHOPPERS WORLD
VICINITY MAP
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NEIGHBORHOOD DESCRIPTION
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Overview
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, or a mixture
of commercial and residential properties, is called a neighborhood.
General
The subject market, generally defined as the Metrowest submarket, is
located at Exit 13 (Speen Street) of the Massachusetts Turnpike (I-90) between
Boston's inner and outer circumferential highways, Routes 128/I-95 and I-495. In
addition to these primary arteries, secondary access to the area is provided by
Massachusetts Routes 9, 27, 30 and 126. Framingham and Natick are the two
adjacent towns surrounding Exit 13 and, as a result of their proximity to these
major highways, they enjoy exceptional access to other parts of the region.
The subject site is situated between Massachusetts Routes 9 (Worcester
Road) and 30 (Cochituate Road), in the towns of Framingham and Natick. The
general area surrounding the subject, which stretches from Route 27 to Route 126
along east/west Routes 9 and 30, is known as the "Golden Triangle", an area
dominated by retail development with a mixture of both office and residential
development interspersed. It is considered a desirable location within the
greater Boston metropolitan area because of its easy access and the proximity of
the more rural residential areas to the west.
The 1990 U.S. Census reported a total population of 30,510 for the town of
Natick and 64,989 for the town of Framingham. These estimates represent a gain
of about 3.5 percent over the 1980 U.S. Census. While this increase does not
appear to be significant, many other towns throughout the state experienced
declines in population with the state showing an overall increase of 4.9
percent.
The area has been a leader in growth of those communities located 20 or
more miles from Boston. In addition to sharing boundary lines, Framingham and
Natick jointly experienced dramatic growth in the commercial real estate market
during the mid-1980s. New office projects led the way during this growth period
followed by hotel and retail development. The growth was spurred by lower land
prices and proximity to residential areas which attracted companies from more
congested locations nearer Boston.
The onset of the recession in the early 1990s severely impacted the
Metrowest market resulting an office vacancy rate of over 30 percent. As a
result, many prominent office buildings in the neighborhood were foreclosed as
the free fall in rents made it impossible for owners to cover debt service
payments. As the recession "bottomed out" in late 1992/early 1993, however, many
of the vacant office buildings were purchased by owner/users such as Blue
Cross/Blue Shield, Lumberman's Insurance, and most notably Boston Scientific who
purchased the former 500,000 square foot Prime Computer building. With the
economic recovery well underway, the Metrowest market has recovered completely
with office vacancy rates now at 6.7 percent as of second quarter 1997 and rents
averaging $23.78 per square foot. For the first time in almost a decade there is
new office construction underway in the market.
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Neighborhood Description
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Retail development, typically situated along Routes 9 and 30, varies from
free-standing facilities to regional malls. The three primary regional malls
include: 1) the 1.2 million square foot Natick Mall, anchored by Filene's,
Sears, Macy's and Lord and Taylor; 2) Framingham Mall, anchored by Lechmere and
Filene's Basement; and, 3) the subject, Shoppers World. During the early 1990s,
the Natick Mall along with Shoppers World were redeveloped into the dominant
retail facilities they now represent. The retail market will be discussed in
detail in the following section.
As a result of the increased interest in the submarket, town planners from
Natick and Framingham implemented new zoning regulations in 1993 designed to
make the area more accessible and attractive. The regulations provide incentives
for developers to construct new buildings or consolidate lots using more
landscaping and fewer driveways. Developers can build with greater density than
zoning allows in exchange for such public amenities as pedestrian walkways,
parks and service roads.
Commuter rail facilities and an intercity bus system service the area.
These transportation features have enhanced the area's desirability as a
commercial and industrial location. The expansion created by these features has
been significant enough to result in very heavy traffic during peak commuting
hours.
In conclusion, the Metrowest submarket continues to be a dominant force in
west suburban Boston and was one of the first areas of the region to begin to
rebound after the recession. The area's convenient location and excellent access
place it in a position to be a provider of both employment and services for
neighboring towns. The recent new development points to optimism by land owners
and lenders that this submarket will remain strong in the future.
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RETAIL MARKET ANALYSIS
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Property Profile
The subject property is anchored by a number of national retail tenants
some who have only recently entered the Boston area retail market. Provided
below is a summary of the credit profile of several of these major tenants.
Combined, they account for in excess of 69.3 percent of contractual base rents.
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Anchor Tenants Parent Company S&P(1)/Moodys(2) % of Base Rents
Rating
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Toys 'R Us/Kids 'R Us Toys 'R Us A1r(2) 1.2%
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TJ Maxx TJX Companies Baa 2r(2) 5.2%
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Linens 'N Things Melville Corp. NR 5.6%
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Marshalls CVS Co. BBB+(1) 6.4%
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Bob's Melville Corp. NR 5.9%
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Barnes & Noble Barnes & Noble BB(1) 8.0%
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OfficeMax OfficeMax Ba3r(2) 7.1%
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AC Moore A.C. Moore NR 3.2%
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Sports Authority Kmart Corp. Ba3r(2) 7.1%
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Designer Shoe Warehouse Shonac Corp. NR 4.0%
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General Cinema Pepsico, Inc. A1r(2) 15.6%
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Total 69.3%
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(1) Ratings current as of February 1997
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It should be noted that The Wiz is also a strong anchor tenant which
contributes a sizable percentage of income to the center. They are not included
in the above list because they have recently announced plans to leave the New
England market. We expect this space to be released soon.
Trade Area Analysis
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 major 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.
In order to define and analyze the subject's market potential, it is
important to first establish the boundaries of the trade area from which the
subject draws 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.
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Retail Market Analysis
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The subject is one of only two power centers in the region, the other
being South Bay in Boston. It is so designated by virtue of the larger
destination tenants such as Marshalls, Barnes & Noble, TJ Maxx, Bob's, Sports
Authority, Linens 'N Things and Office Max.
As such, a clear understanding of the property type is important in order
to place the subject in its proper competitive context. The subject meets the
definition of a power center as defined in the following:
o The power center is a loosely defined term that can generally be
characterized as a grouping of retail stores that:
o collectively totals at least 250,000 square feet;
o includes at least one major anchor containing 100,000 square
feet or more, that is either a discount department store or
warehouse club;
o includes at least four smaller, category specific anchor
tenants of 25,000 square feet or more. These anchor stores
will typically have a narrow focus but deep selection in
specific merchandise lines such as building supplies/home
improvement goods, consumer electronics, off-price apparel,
sporting goods, books, personal computer hardware and
software, office supplies, toys, pet supplies, deep discount
drugs, bulk foods, or tapes and records;
o should contain a minimum of smaller shop space (10 percent or
so of the center's total gross leasable area); and
o will typically be configured in an open-air strip, "L" or "U"
shaped layout.
We have not been provided with any customer survey reports or shopper zip
code lists that would help identify the boundaries of the primary and secondary
trade areas. Therefore, we have made certain reasonable assumptions of the
extent of this area based upon other physical, demographic, and geographic data
available.
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 to the subject's position.
Retail Structure
In order to examine the subject property in its proper context, we must
examine the nature of the competition. As described in our Neighborhood
Analysis, there are also various nodes of retail concentration throughout the
"Golden Triangle" area including those found along Route 9 near the subject.
These consist primarily of strip centers as well as certain freestanding
department stores, supermarkets and specialty stores and also include the
adjacent Natick Mall. While some cross-shopping does occur, these stores act
more as a draw to the area, creating an image for the area as a prime
destination shopping location and generating more retail traffic than would
exist in their absence. Nonetheless, we do recognize and mention these centers
to the extent that they provide a complete understanding of the area's retail
structure.
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Retail Market Analysis
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Locally, the area of Framingham/Natick surrounding Routes 9 and 30 near
the subject site is considered a primary retail area, thus earning the name the
"Golden Triangle". Route 9 traverses several towns in its east/west direction
and has been heavily developed with retail facilities especially from Natick
westward through Framingham and again from Shrewsbury to Worcester. The primary
competing properties in the immediate neighborhood are discussed in the
following paragraphs.
o Natick Mall, reopened in October 1994 as a super-regional mall. With
approximately 1.156 million square feet and 176 tenants, the redeveloped
mall targets the upper income population in the region. Anchor tenants
include Filene's, Macy's, Lord & Taylor and Sears. The property opened
originally in 1966 with Filene's, Sears and Woolworth's as anchors. Homart
Development purchased the original mall in 1992 and demolished all but
Filene's as part of its restructuring and redevelopment. In a simultaneous
closing, they also purchased the original Shoppers World Mall.
o The Framingham Mall is a 195,000 square foot enclosed community center
anchored by Filene's Basement (36,750 square feet) and Lechmere (60,950
square feet). It is located at 400 Cochituate Road in Framingham
immediately across from the subject.
o Cloverleaf Marketplace is a 184,250 square foot community center located
on Speen Street immediately across from the Natick Mall. It is presently
anchored by Burlington Coat Factory, Service Merchandise, The Guitar
Center and Michaels. The property was sold in May 1994 for $4,035,000 to
Forest Properties who renovated and repositioned the center.
o Sherwood Plaza is a 229,000 square foot community center located on Route
9 across from the Natick Mall. It is anchored by Ames, Pet Supply Depot
and MVP Sports. Other tenants in the center include a recently expanded
Bed & Bath, Discovery Zone and Kitchens, etc. There is currently one large
vacancy that has recently been leased by a health club. OfficeMax
relocated from this center to the subject property.
The following table illustrates the proximity of those shopping centers
within a five mile radius of the subject.
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<PAGE>
Retail Market Analysis
================================================================================
<TABLE>
<CAPTION>
=============================================================================================================
Metrowest Shopping Center Summary Existing Inventory
=============================================================================================================
Miles From No. of Year Size
Subject Name/Location Type stores Opened (SF)
=============================================================================================================
3- Mile Radius
=============================================================================================================
<S> <C> <C> <C> <C> <C>
0.0 Shoppers World, Framingham, MA Regional 56 1951/96 778,292
- -------------------------------------------------------------------------------------------------------------
0.0 Natick Mall, Natick, MA Regional 60 1994 1,156,000
- -------------------------------------------------------------------------------------------------------------
0.0 Cloverleaf Marketplace, Natick, MA Community N/A 1970 184,000
- -------------------------------------------------------------------------------------------------------------
0.5 Sherwood Plaza, Natick, MA Community 31 1960 229,000
- -------------------------------------------------------------------------------------------------------------
0.9 Framingham Mall, Framingham, MA Community 30 1978 195,000
- -------------------------------------------------------------------------------------------------------------
1.0 Natick 9/27, Natick, MA Neighborhood 12 1957 79,000
- -------------------------------------------------------------------------------------------------------------
1.4 Colonial Shopping Center, Framingham, MA Neighborhood 10 N/A N/A
- -------------------------------------------------------------------------------------------------------------
1.5 Cochituate Center, Wayland, MA Community 6 N/A N/A
- -------------------------------------------------------------------------------------------------------------
1.8 Round-up Shopping Center, Framingham, MA Neighborhood 10 N/A 29,000
- -------------------------------------------------------------------------------------------------------------
1.8 Route 30 Mall, Framingham, MA Neighborhood 10 1960 59,000
- -------------------------------------------------------------------------------------------------------------
2.2 Pinefleld Shopping Center, Framingham, MA Neighborhood 14 1967 39,000
- -------------------------------------------------------------------------------------------------------------
2.8 Old Trolley Square, Framingham, MA Neighborhood 19 1979 54,000
- -------------------------------------------------------------------------------------------------------------
Sub Total 2,802,292
=============================================================================================================
3-to 5+- Mile Radius
=============================================================================================================
3.6 Framingham Plaza, Framingham, MA Neighborhood N/A N/A 89,000
- -------------------------------------------------------------------------------------------------------------
3.6 Nobscott Shopping Center, Framingham, MA Neighborhood 13 N/A 41,000
- -------------------------------------------------------------------------------------------------------------
4.2 The Galleria @ Wellesley, Wellesley, MA Neighborhood 3 1989 13,000
- -------------------------------------------------------------------------------------------------------------
4.5 Wayland Village Shopping Center, Wayland, MA Neighborhood 10 N/A 28,000
- -------------------------------------------------------------------------------------------------------------
4.7 Wellesley Shopping Center, Wellesley, MA Neighborhood 6 1958 31,000
- -------------------------------------------------------------------------------------------------------------
4.7 Mill Village Shopping Center, Sudbury, MA Neighborhood 30 1972 43,000
- -------------------------------------------------------------------------------------------------------------
4.8 Shaw's Townline Plaza, Ashland, MA Community 14 1985 90,000
- -------------------------------------------------------------------------------------------------------------
4.8 King's Crossing, Ashland, MA Community 11 1991 120,000
- -------------------------------------------------------------------------------------------------------------
4.8 1776 Plaza, Sudbury, MA Community 6 1963 224,000
- -------------------------------------------------------------------------------------------------------------
4.8 Sudbury Plaza, Sudbury, MA Neighborhood 30 1962 73,000
- -------------------------------------------------------------------------------------------------------------
4.8 Sudbury Crossing, Sudbury, MA Neighborhood N/A 1984 81,000
- -------------------------------------------------------------------------------------------------------------
Sub Total 833,000
- -------------------------------------------------------------------------------------------------------------
Total 3,635,292
=============================================================================================================
Source: National Research Bureau Shopping Center Database
=============================================================================================================
</TABLE>
At the present time, these properties are considered the most competitive
to the subject in the neighborhood because of their proximity. In terms of
tenant mix, the Natick Mall's mix is
================================================================================
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
more upscale than the remainder of the competitive supply although all
properties compete on some level.
Other Competition
There exists various nodes of retail development throughout the immediate
area that also offer varying degrees of competition to the subject. There are a
number of strip centers that, because of their major tenants and merchandising,
do offer themselves as some competition, albeit limited, to the subject.
In addition to the above, there has been significant activity in the past
several years by other "box" retail and home improvement users such as BJ's
Wholesale Club, Sam's, Home Depot, Computer City, Circuit City, Walgreens and
others for several sites both in Natick and Framingham. Some of these other
retail projects in the neighborhood include:
o Sams (Walmart), during 1993, acquired the lease of the former Pace
Warehouse store at the intersection of Speen Street and Route 9 as part of
Walmart's buyout of the Pace chain. The store totals 117,200 square feet
and is situated immediately across from the Natick Mall.
o BJ's Wholesale Club opened a 116,000 square foot building on Newbury
Street in Framingham immediately behind the Framingham Mall in late 1993.
o Super Stop & Shop expanded an existing store by 11,000 square feet at
Temple Street and Worcester Road in Framingham. In addition, the company
completed in 1994 a new 65,000 square foot store on Old Connecticut Path
adjacent to the BJ's site. There is also an additional 15,000 square feet
of ancillary retail adjacent to the new Stop & Shop.
o A new 55,000 square foot shopping center adjacent to the Walgreens
pharmacy which opened in late 1993 on Route 9 in Framingham has been
constructed. The site is owned by Beckenstein Enterprises who developed a
strip retail center anchored by Staples Office Supplies, Trader Joe's and
Ruby Tuesdays.
o Home Depot assembled an 11 acre site on Speen Street 1/4 mile east of the
subject. Their 168,000 square foot home improvements store was completed
in 1996. The strength of the Home Depot name and the location of the site
caused Home Quarters to leave the submarket. They had constructed a store
south of Route 9 across from Shoppers World and were open about a year
before Home Depot entered the market. Home Quarters does not have a strong
presence in the Boston area and the store was not well received, primarily
because of its hilltop location and its distance off Route 9. Within six
months of the opening of Home Depot, the HQ store was closed.
o Home Town Center is a 31,000 square foot retail center targeting the home
furnishing trade. The property is situated on the westbound side of Route
9 about one two miles east of the subject. The center's tenant mix
includes New York Carpet World, Calico Fabrics and Jennifer Leather
Furniture.
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Secondary competition derives from smaller, mainly neighborhood shopping
centers with only one or two competing anchors to the subject (i.e. discount
apparel stores). These centers compete to some degree with Shoppers World but
more or less help to balance the mix of retail infill for the Metrowest
submarket. The existence of the secondary centers is considered a benefit,
rather than a hindrance, reinforcing the commercial draw of the Golden Triangle.
New/Proposed Development
The early-1990s brought a flurry of new development and redevelopment of
existing centers into the metropolitan Boston region. By the mid-1990s the
market became somewhat saturated and flagging retail demand further dampened the
desires of retail developers. The only retail development underway in the
submarket that we are aware of it the redevelopment of a small retail strip
anchored by a Farm Stand grocery located at the intersection of Route 9 and
Prospect Street. The new center will house a Wild Harvest grocery and a few
other small retailers. This property is not anticipated to compete directly with
the subject.
The only other retailer of significance to the subject that is expected to
enter the market in the near future is Jordan's Furniture, a local home
furnishings retailer. They have purchased the former Home Quarters building and
plan to open the new store in December 1997. This retailer is expected to be
directly competitive with Home Life and Macy's Furniture at the subject.
Trade Area Definition
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
transportation provides the basis for regional access to the area. Second,
regional competition and geographic boundaries help to define the potential size
of the trade area as a measure of distance from the property. Third, the
merchandising mix and anchor alignment provide the basic draw of customers that
are likely to patronize the property.
Shoppers World is located in a fully developed area of the metropolitan
Boston. It is located at the intersection of State Highways 9 and 30 and
Interstate 90. These routes provide excellent east/west access to the property.
As discussed, the location and accessibility of competing centers has
direct bearing on the formation and make-up of the subject's trade area as well.
The subject competes most directly with Sherwood Plaza and the Cloverleaf,
Framingham and Natick Malls, although none have truly comparable configurations.
The Natick Mall actually helps provide exposure for the subject, because the
exit for the mall off I-90 is the Routes 9 and 30 exits as well.
Finally, it is important to note that other neighborhood centers,
free-standing "category killers", and outlet malls all represent a strong force
in the market's competitive environment. Certainly there is a place for both in
most retail environments, including the subject region.
To summarize, the foundation of our analysis in the delineation of the
subject's trade area may be summarized as follows:
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Retail Market Analysis
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1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers and the strength and
composition of the retail infill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Given all of the above, a primary trade area for the subject property
would likely span an area encompassing about 3 to 5 miles around the center. The
subject's secondary trade area might span up to 10 or 15 miles from the site due
to its unique merchandising.
Based on these observations, together with our discussions with ownership,
we believe that the primary trade area for the subject would extend outward to a
radius of approximately 5+- miles from the property. To add perspective to this
analysis, we have segregated our survey into 5, 10 and 15 mile concentric
circles. The report on the following page presents this data.
Community and Power Centers tend to have trade areas which extend roughly
six miles in any direction and contain approximately 150,000 to 200,000
residents with 60,000 to 70,000 households and income levels in excess of
$35,000 per household. As such, it is our opinion that the 5 mile radius
surrounding the subject property comprises the primary trade area from which 70
to 80 percent of its sales originate.
Population
Once the market has been established, the focus of our analysis centers on
the statistical data of the trade area, including population. Equifax National
Decision Systems (ENDS) provides historical, current and forecasted population
estimates for the trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. A detailed profile of
the trade area is included in the Addenda of this report.
Population statistics for the trade area are summarized in the following
chart.
<TABLE>
<CAPTION>
=====================================================================================================
Population Growth and Forecasts
=====================================================================================================
Compound Projected Compound
Trade Area Projected Annual Change Annual Change
Component 1980 1990 1997 2002 1980-1997 1995-2000
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5 Mile Radius * 131,197 133,737 133,189 135,241 0.09% 0.31%
- -----------------------------------------------------------------------------------------------------
10 Mile Radius * 393,130 397,123 407,486 413,861 0.21% 0.31%
- -----------------------------------------------------------------------------------------------------
15 Mile Radius 1,263,465 1,288,505 1,301,953 1,331,960 0.18% 0.46%
=====================================================================================================
* Primary Market
=====================================================================================================
Source: Equifax National Decision Systems
=====================================================================================================
</TABLE>
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<PAGE>
Mon Jul 14, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 135,241 413,861 1,331,960
1997 ESTIMATE 133,189 407,486 1,301,953
1990 CENSUS 131,737 397,123 1,288,505
1980 CENSUS 131,197 393,130 1,263,465
GROWTH 1980 - 1990 0.41% 1.02% 1.98%
HOUSEHOLDS
2002 PROJECTION 52,704 157,933 522,851
1997 ESTIMATE 51,740 154,382 508,660
1990 CENSUS 49,604 145,598 484,001
1980 CENSUS 45,559 134,295 450,639
GROWTH 1980 - 1990 8.88% 8.42% 7.40%
1997 ESTIMATED POPULATION BY RACE 133,189 407,486 1,301,953
WHITE 89.42% 91.52% 83.47%
BLACK 3.65% 2.72% 8.77%
ASIAN & PACIFIC ISLANDER 4.44% 4.24% 5.25%
OTHER RACES 2.49% 1.52% 2.52%
1997 ESTIMATED POPULATION 133,189 407,486 1,301,953
HISPANIC ORIGIN 5.59% 3.87% 5.70%
OCCUPIED UNITS 49,604 145,598 484,001
OWNER OCCUPIED 64.40% 67.59% 56.01%
RENTER OCCUPIED 35.60% 32.41% 43.99%
1990 AVERAGE PERSONS PER HH 2.52 2.61 2.52
1997 EST. HOUSEHOLDS BY INCOME 51,740 154,382 508,660
$150,000 OR MORE 11.97% 13.79% 9.18%
$100,000 TO $149,999 11.90% 13.06% 10.76%
$ 75,000 TO $ 99,999 15.52% 15.64% 13.43%
$ 50,000 TO $ 74,999 23.39% 22.32% 22.58%
$ 35,000 TO $ 49,999 12.11% 11.72% 13.13%
$ 25,000 TO $ 34,999 8.21% 7.49% 9.31%
$ 15,000 TO $ 24,999 7.30% 7.19% 9.04%
$ 5,000 TO $ 15,000 7.91% 7.18% 9.99%
UNDER $ 5,000 1.69% 1.61% 2.58%
1997 EST. AVERAGE HOUSEHOLD INCOME $ 91,895 $ 98,207 $ 80,393
1997 EST. MEDIAN HOUSEHOLD INCOME $ 63,667 $ 66,591 $ 56,588
1997 EST. PER CAPITA INCOME $ 37,001 $ 38,277 $ 32,571
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Between 1980 and 1997, ENDS reports that the population within the primary
trade area increased by 1,992 residents to 133,737 reflecting a 1.52 percent
increase or a compound annual increase of 0.09 percent. Through 2000, the trade
area is expected to continue to increase to 135,241 residents which is equal to
an additional 1.54 percent increase or 0.21 percent growth per annum. These
population growth estimates reflect an area that has a relatively stable
population and the fact that the area is largely fully developed which further
limits population growth. Based on the projections made by ENDS, it appears the
population is expected to continue its slow but steady growth.
Provided on the following page is a graphic representation of the
population change forecasted for the subject's trade area through 2000. It
indicates that communities south of the subject should experience the highest
growth rates, with those north of the subject experiencing the lowest growth
rates. The areas to the south are the least developed parts of the trade area
and thus have more room for growth than the communities north of the subject.
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 is living longer on average. This results in an
increase of single and two person households.
o The divorce rate increased dramatically during the 1980s, again
resulting in an increase in single person households.
o Many individuals have postponed marriage, also resulting in more
single person households.
================================================================================
Household Data and Forecasts
<TABLE>
<CAPTION>
========================================================================================
Compound Projected Compound
Projected Annual Change Annual Change
Component 1980 1990 1997 2002 1980-1997 1997-2000
========================================================================================
<C> <C> <C> <C> <C> <C> <C>
5 Mile Radius * 45,559 49,604 51,740 52,704 0.75% 0.37%
- ----------------------------------------------------------------------------------------
10 Mile Radius * 134,295 145,598 154,382 157,933 0.82% 0.46%
- ----------------------------------------------------------------------------------------
15 Mile Radius 450,639 484,001 508,660 522,851 0.71% 0.55%
========================================================================================
* Primary Market
========================================================================================
Source: Equifax National Decision Systems
========================================================================================
</TABLE>
================================================================================
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<PAGE>
NATICK MALL
NATICK, MA
5, 10 & 15 MILE RADII
[GRAPHIC OMITTED]
<PAGE>
Retail Market Analysis
================================================================================
According to ENDS, the primary trade area added 6,181 households between
1980 and 1997, an increase of 13.57 percent to 51,740 units. Consistent with the
national trend, the trade area is experiencing household growth at a rate in
excess of population changes. Between 1997 and 2000 the area is expected to
continue household formation, but at a slightly slower pace of 0.46 percent per
year. The faster household growth relative to population growth is consistent
with the data for the Boston area.
Correspondingly, a greater number of smaller households with fewer
children generally indicates more disposable income. In 1980, there were 2.88
persons per household in the primary trade area and by 1997, it is estimated to
have decreased to 2.57.
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.
Trade area income figures for the subject support the profile of a upper
income market. According to ENDS, average household income within the primary
trade area in 1997 is approximately $91,895.
A comparison of the trade area's relative ranking is shown on the
following chart.
===================================================
Average Household Income Comparison
===================================================
Area Income
===================================================
5 Mile Radius * $91,895
---------------------------------------------------
10 Mile Radius * $98,207
---------------------------------------------------
15 Mile Radius $80,393
---------------------------------------------------
Boston Metropolitan $65,328
---------------------------------------------------
State of Massachusetts $62,801
===================================================
Source: Equifax National Decision Systems
===================================================
*Primary Trade Area
===================================================
================================================================================
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Retail Market Analysis
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The distribution of income within the primary trade area (10 miles) can be
summarized as follows:
=========================================================
Household by Income
=========================================================
Category % of Households
=========================================================
Greater Than $150,000 13.79%
---------------------------------------------------------
$100,000 - $149,999 13.06%
---------------------------------------------------------
$ 75,000 - $ 99,999 15.64%
---------------------------------------------------------
$ 50,000 - $ 74,999 22.32%
---------------------------------------------------------
$ 35,000 - $ 49,999 11.72%
---------------------------------------------------------
$ 25,000 - $ 34,999 7.49%
---------------------------------------------------------
Less Than $ 25,000 15.98%
=========================================================
Provided on the following page is a graphic presentation of the average
household income distribution throughout the trade area. As can be seen, the
subject is situated in the heart of one of the region's most affluent areas
where 64.81 percent of the household incomes exceed $50,000 annually and 42.5
percent exceed $75,000 annually. Generally, the lower income areas are found to
the southwest or closer to Boston to the east. The higher income areas
essentially surround the subject.
Market Overview
Through our survey of the Boston retail market, we found four centers
within the primary trade area which compete with the subject. None of these
centers has a significant vacancy nor do any of the centers in the market.
Sherwood Plaza has one large (over 30,000 square feet) vacant space and two
small vacancies of under 2,000 square feet. There are also a few small space
vacancies at the Natick Mall, but most of the space would not be considered
competitive with the subject. We estimate vacancy in the overall market to be
less than 5 percent. At the time of this valuation the only vacancies at the
subject are the leased A.C. Moore space which is not fully built-out and the
upcoming vacancy of The Wiz space which in essence remains fully leased but will
shortly be unoccupied.
Rents at the competing centers for in-line tenants range from $9.00 to
$30.00 per square foot. The majority of the rents fall between $14.00 and $18.00
per square foot. Signed in-line rents at the subject property are generally
between $15.00 and $32.00 per square foot, with most ranging from $18.00 to
$25.00 per square foot. The subject rents appear to be at market and at the
upper end of the comparable retail centers in the neighborhood.
Subject Sales Productivity
The subject began opening in the fourth quarter 1994 and has only recently
signed its last tenant. As such, sales history exists for several tenants, but
not all. Provided in the following table is a summary of reported sales for the
subject.
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<PAGE>
NATICK MALL
NATICK, MA
5, 10 & 15 MILE RADII
[GRAPHIC OMITTED]
<PAGE>
Retail Market Analysis
================================================================================
================================================================================
Shoppers World
1996 Sales Performance*
================================================================================
Tenant GLA(SF) Sales Sales PSF
================================================================================
Toys 'R Us 45,000 $17,590,000 $391
- --------------------------------------------------------------------------------
Macy's Furniture 40,000 $7,414,094 $185
- --------------------------------------------------------------------------------
TJ Maxx 39,884 $8,701,138 $218
- --------------------------------------------------------------------------------
Jewelry Depot 6,071 $926,175 $153
- --------------------------------------------------------------------------------
Marshalls 50,081 $11,757,863 $235
- --------------------------------------------------------------------------------
Corning at Home 10,775 $851,240 $79
- --------------------------------------------------------------------------------
Linens 'N Things 40,159 $5,974,776 $149
- --------------------------------------------------------------------------------
Sports Authority 43,629 $8,442,891 $194
- --------------------------------------------------------------------------------
Barnes & Noble 29,963 $7,114,178 $237
- --------------------------------------------------------------------------------
Cambridge Soundworks 2,196 $1,179,025 $537
- --------------------------------------------------------------------------------
Snip-Its 1,871 $314,535 $168
- --------------------------------------------------------------------------------
General Cinema 85,000 $10,497,672 $124
- --------------------------------------------------------------------------------
TGI Fridays 6,300 $4,195,048 $666
- --------------------------------------------------------------------------------
Total 400,929 $84,958,635 $212
================================================================================
*Only tenants reporting full year sales.
================================================================================
In 1996, the subject achieved sales of approximately $84.9 million. This
sales figure excludes tenants who did not report full year sales because they
were not open for the full year but includes annualized sales for those open the
full year. The top producer both in total sales and on a unit basis (major
tenants) for the center was Toys 'R Us with $17.6 million in sales. The most
productive store on a unit rate basis was TGI Fridays which generated sales of
$666 per square foot.
On an overall basis, the center reported sales of approximately $212 per
square foot in 1996. We can compare its performance to industry averages as
shown below.
Industry Average Sales
Sales at the subject property can be analyzed in comparison to industry
averages. In our initial appraisal in late 1995 we felt the subject had the
potential to perform above regional and even national benchmarks. The following
chart presents a comparison of average sales by center category for both power
centers and community centers in the U.S.
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Retail Market Analysis
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<TABLE>
<CAPTION>
====================================================================================================================================
Comparison of Sales and Rent
Power Center and Community Center Tenants
====================================================================================================================================
U.S. Median* U.S. Median* U.S. Median**
Retail Power Center Super Community Centers Community Center
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Rent % of Sales Rent % of Sales Rent % of
Tenant Classification PSF PSF Sales PSF PSF Sales PSF PSF Sales
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Department Store $180.00 $ 3.42 1.9% $165.00 $ 3.50 2.1% $142.00 $ 4.41 3.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Superstore (Food) $285.00 $ 4.58 1.6% N/A N/A N/A $372.00 $ 5.79 1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant (w/liquor) $234.00 $15.90 6.8% $223.00 $13.99 6.3% $210.00 $12.58 6.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Shoes $187.00 $12.00 6.4% $180.00 $12.00 6.7% $159.00 $13.00 8.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Cards & Gift $105.00 $12.50 11.9% $136.00 $12.62 9.3% $127.00 $12.36 9.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Women's Ready to Wear $122.00 $10.20 8.4% $167.00 $13.48 8.1% $146.00 $12.16 8.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Overall Average $197.00 $ 7.22 3.7% $188.00 $ 6.85 3.6% $210.00 $ 7.19 3.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Median $200.00 $ 6.33 3.2% $183.00 $ 6.80 3.7% $199.00 $ 6.90 3.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Lower Decile $ 87.00 $ 3.60 4.1% $107.00 $ 3.21 3.0% $117.00 $ 3.36 2.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Upper Decile $292.00 $14.36 4.9% $314.00 $12.33 3.9% $371.00 $12.71 3.4%
====================================================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
====================================================================================================================================
</TABLE>
Overall, average sales performance may be refined further as shown in the
following chart.
<TABLE>
<CAPTION>
===========================================================================================================================
Sales Performance Indices
U.S. Power Centers and Community Centers
===========================================================================================================================
Power Centers* Super Community Centers* Community Centers**
- ---------------------------------------------------------------------------------------------------------------------------
Eastern Eastern Eastern
United States Region United States Region United States Region
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Overall Average $197 No Data $188 $201 $210 $228
- ---------------------------------------------------------------------------------------------------------------------------
Median $200 Available $183 $169 $199 $218
- ---------------------------------------------------------------------------------------------------------------------------
Lower Decile $ 87 $107 $137 $117 $111
- ---------------------------------------------------------------------------------------------------------------------------
Upper Decile $292 $314 $375 $371 $390
===========================================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
===========================================================================================================================
</TABLE>
From the above we see that industry averages and medians range from
approximately $197 to $200 per square foot for power centers and $169 to $201
per square foot for super community centers. The power center information is
based on the 1995 ULI publication. More recently, ULI has put forth its 1997
version of operating results for standard community centers. Displayed above is
a range of $199 to $228 per square foot as average/median performance ranges.
Upper and lower decile levels show more dramatic swings as would be expected.
Nonetheless, with sales of $212 per square foot, the subject falls within the
range of average/median industry benchmarks.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market Analysis
================================================================================
Rental Rates
On the following pages is a survey of rental rates both locally and in the
Northeast. Based upon the survey, rental rates in the subject region range from
about $10.00 to $30.00 per square foot. For larger tenants in the region, lease
rates range from $15.00 to $30.00 per square foot. The survey shows an average
low of $5.33 per foot and an average high of $22.00 per foot. Neighborhood and
smaller community centers with smaller tenants show rents of $9.00 to $27.00 per
square foot. The wide variation in rents is attributable both to tenant size and
also to location. The Metrowest comparable leases show the widest variations
based on whether the center is located along Route 9 or off Route 9 in a less
densely developed retail area. As discussed, these smaller centers are
considered to be less competitive with the subject which has superior anchor
stores that provide a better customer draw than the traditional community or
neighborhood shopping center. In this sense, the subject acts similar to
regional mall developments. From the data, with consideration given to the
subject's market position and comparison to competing properties, we believe
that projected pro-forma in-line shop rents at the subject are above market
levels. This is not troubling, however, as the subject is one of the dominant
power centers in Boston (see Income Approach for further discussion).
Vacancy Rates
A recent survey performed by Finard & Company, a large retail brokerage
and development firm in Boston, found an overall market vacancy rate of about
7.0 percent (mean) for all centers in the metropolitan area. For centers which
will compete most directly with the subject (large community centers), vacancy
rates range from about 2.2 to 10.0 percent. Some of these centers, however, are
considered to be inferior to proposed subject improvements.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
RETAIL LEASES - Metrowest
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
================================================================================================================
Lease Term/ Leased Area Rent/* Landlord
No. Property/Location Date Tenant Options (Sq/Ft) Sq/Ft Responsibil
ities
================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
1 Cloverleaf Mall 1/97 The Guitar Center 10 yrs. 15,524 $14.45 NNN
Natick
- ----------------------------------------------------------------------------------------------------------------
2 Town Paint Plaza 1/96 Confidential 5 yrs. 1,200 $10.00 Taxes, ins.,
Edgell Road water and
Framingham sewer, snow
removal
- ----------------------------------------------------------------------------------------------------------------
3 Natick Crossing 7/96 Plaster Funtime 5 yrs. 1,680 $9.00 NNN
251 West Central Street
Natick
- ----------------------------------------------------------------------------------------------------------------
4 Natick Crossing 1/97 Legends Frozen Yogurt 3 yrs. 987 $9.00 NNN
251 West Central Street
Natick
- ----------------------------------------------------------------------------------------------------------------
5 Price Chopper Plaza 3/97 NAMCO 5 yrs./two 7,638 $9.03 Y1-3 NNN
Framingham 5 yr. $8.20 Y4-5
renewal
options
- ----------------------------------------------------------------------------------------------------------------
6 Sherwood Plaza Available 5-10 yrs. 5,000 $27.00 NNN
Natick, MA
- ----------------------------------------------------------------------------------------------------------------
7 375 Cochituate Road Available 5-10 yrs. 5,000 $25.00 NNN
Framingham
- ----------------------------------------------------------------------------------------------------------------
8 Westpark Available 5-10 yrs. 23,000 $24.00 NNN
Framingham
- ----------------------------------------------------------------------------------------------------------------
9 Framingham One Available 5-10 yrs. 17,000 $22.00 NNN
Route 9
Framingham
- ----------------------------------------------------------------------------------------------------------------
================================================================================================================
Survey Low: 440 $9.00
Survey High: 23,000 $27.00
================================================================================================================
Survey Mean: 2,482 $11.60
================================================================================================================
</TABLE>
======================================================================
No. Property/Location Comments
======================================================================
1 Cloverleaf Mall Located across from the Natick Mall
Natick in a 184,000 SF center anchored by
Service Merchandise and Burlington
Coat Factory.
- ----------------------------------------------------------------------
2 Town Paint Plaza New lease in a small retail plaza in the
Edgell Road Nobscot section of Framing-ham.
Framingham
- ----------------------------------------------------------------------
3 Natick Crossing Less desirable space near the middle
251 West Central Street of the "L".
Natick
- ----------------------------------------------------------------------
4 Natick Crossing Proposal in a center that has 30,000
251 West Central Street SF of retail and 30,000 SF of office
Natick space.
- ----------------------------------------------------------------------
5 Price Chopper Plaza Located in a neighborhood center off
Framingham Route 9.
- ----------------------------------------------------------------------
6 Sherwood Plaza Located across from the Natick Mall
Natick, MA in a 229,000 SF center anchored by
MVP Sports, Petco and Ames.
- ----------------------------------------------------------------------
7 375 Cochituate Road Space in the new REI building located
Framingham at the Route 30 entrance to Shoppers
World.
- ----------------------------------------------------------------------
8 Westpark Space available adjacent to the new
Framingham Jordan's Furniture store across Route
9 from Shoppers World.
- ----------------------------------------------------------------------
9 Framingham One Located in a new structure to be
Route 9 constructed west of Shoppers World
Framingham on Route 9.
- ----------------------------------------------------------------------
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======================================================================
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<PAGE>
===========================================================================
BIG BOX RETAIL LEASES
Northeastern U.S.
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
===================================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft Steps
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Cloverleaf Mall Available 60,000 $1,320,000 $22.00 None
Natick, MA
- -----------------------------------------------------------------------------------------------------------------------------------
2 Caldor Spr-96 Caldor 25 yrs. 113,275 $1,699,125 $15.00 None
Everett, MA
- -----------------------------------------------------------------------------------------------------------------------------------
3 Caldor Spr-96 Caldor 25 yrs. 124,500 $1,992,000 $16.00 None
Huntington,NY
- -----------------------------------------------------------------------------------------------------------------------------------
4 Bradlees Apr-95 Bradlees 20 yrs. 105,000 $1,375,500 $14.98 $13.10 Y1-5
Danvers, MA $14.35 Y6-10
$15.60 Y11-15
$16.85 Y16-20
- -----------------------------------------------------------------------------------------------------------------------------------
5 BJ's Wholesale Club Jul-95 BJ's Wholesale 20 yrs. 119,600 $1,011,816 $8.46 N/A
Stoneham, MA
- -----------------------------------------------------------------------------------------------------------------------------------
6 Caldor 1995 Caldor 25 yrs. 113,275 $1,800,000 $15.89 Fixed increases
Westbury, New York every 5 years.
- -----------------------------------------------------------------------------------------------------------------------------------
7 Caldor 1995 Caldor 25 yrs. 167,508 $2,550,000 $15.22 $180,000 every
Brooklyn, New York 5 years.
- -----------------------------------------------------------------------------------------------------------------------------------
8 Caldor 1995 Caldor 25 yrs. 113,275 $1,359,300 $12.00 None
Newington, Connecticut
- -----------------------------------------------------------------------------------------------------------------------------------
9 Home Depot Apr-95 Home Depot 20 yrs. 103,000 $1,300,000 $12.62 Increases every
656 Reservoir Avenue 5 years.
Bridgeport, Connecticut
- -----------------------------------------------------------------------------------------------------------------------------------
10 Riverside Mall Mar-95 Wal-Mart 25 yrs. 116,197 $928,414 $7.99 None
Route 12 & Route 49 4 5-yr opt.
Utica, New York
- -----------------------------------------------------------------------------------------------------------------------------------
11 Hornell Shopping Plaza Jun-95 Wal-Mart 20 yrs. 128,268 $741,389 $5.78 None
Hornell, New York
- -----------------------------------------------------------------------------------------------------------------------------------
12 Caldor 1995 Caldor 25 yrs. 113,000 $1,469,000 $13.00 None
Salem, New Hampshire
- -----------------------------------------------------------------------------------------------------------------------------------
13 Caldor 1995 Caldor 20 yrs. 113,275 $1,302,663 $11.50 Fixed increases
Dedham, Massachusetts every 10 years.
<CAPTION>
===========================================================================================================================
Rent-
Estimated Sales
No. Property/Location % Rent Sales Ratio Comments
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
1 Cloverleaf Mall No Current offering for space available in
Natick, MA 1997.
- ---------------------------------------------------------------------------------------------------------------------------
2 Caldor No $26,000,000 6.5% Triple net lease of Caldor located in
Everett, MA Everett, MA. Lease started in early
1996.
- ---------------------------------------------------------------------------------------------------------------------------
3 Caldor No $23,000,000 8.7% Semi net Caldor lease which began
Huntington, NY in early 1996.
- ---------------------------------------------------------------------------------------------------------------------------
4 Bradlees No N/A N/A Adjacent to Peabody Place S/C
Danvers, MA Building has 95,886 SF and a 9,114
SF mezzanine.
- ---------------------------------------------------------------------------------------------------------------------------
5 BJ's Wholesale Club No N/A N/A Owner had very low basis in the land
Stoneham, MA and could rent building at a low level.
- ---------------------------------------------------------------------------------------------------------------------------
6 Caldor No $25,000,000 7.2% Caldor store in Westbury, New York
Westbury, New York which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------------------------------------------
7 Caldor No $45,000,000 5.7% Caldor store in Brooklyn, New York
Brooklyn, New York which opened in 1995. Sales
projected. Semi net lease.
- ---------------------------------------------------------------------------------------------------------------------------
8 Caldor No $16,000,000 8.5% Caldor store in Newington,
Newington, Connecticut Connecticut which opened in 1995.
Sales projected. Triple net lease.
- ---------------------------------------------------------------------------------------------------------------------------
9 Home Depot No $41,612,000 3.1% Home Depot store on triple net lease
656 Reservoir Avenue in Fairfield County. Sales based on
Bridgeport, Connecticut chain avg. in '94.
- ---------------------------------------------------------------------------------------------------------------------------
10 Riverside Mall 0.5% of sales in $39,042,192 2.4% Enclosed mall. P/R share of CAM,
Route 12 & Route 49 yr. 8; capped at taxes, ins., utilities, & repairs of
Utica, New York $1.00/sf; 7th yr mech.systems. Sales based on Wal
sales as break. Mart/Sam's avg.
- ---------------------------------------------------------------------------------------------------------------------------
11 Hornell Shopping Plaza 0.5% of sales in $43,098,048 1.7% New 250,000sf ctr. Turn-key. P/R
Hornell, New York yr. 8; capped at share taxes, ins.; CAM cap at $.50/sf
$1.00/sf; 7th yr yrs 1-10; $.70/sf yrs 11-20. Sales
sales as break. based on Wal-Mart/Sam's avg.
- ---------------------------------------------------------------------------------------------------------------------------
12 Caldor No $20,000,000 7.3% Caldor store in Salem, New
Salem, New Hampshire Hampshire which opened in 1995.
Sales projected. Triple net lease.
- ---------------------------------------------------------------------------------------------------------------------------
13 Caldor No $16,000,000 8.1% Caldor store in Dedham,
Dedham, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
leases.
</TABLE>
<PAGE>
===========================================================================
BIG BOX RETAIL LEASES
Northeastern U.S.
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
===================================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft Steps
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14 Caldor 1995 Caldor 25 yrs. 113,275 $1,359,300 $12.00 None
Braintree, Massachusetts
- -----------------------------------------------------------------------------------------------------------------------------------
15 Caldor 1995 Caldor 25 yrs. 113,275 $1,302,663 $11.50 Lesser of 10%
Brockton, Massachusetts or CPI every 5
years.
- -----------------------------------------------------------------------------------------------------------------------------------
16 Caldor 1994 Caldor 25 yrs. 113,275 $1,250,000 $11.04 Fixed increases
Deer Park, New York every 5 years.
- -----------------------------------------------------------------------------------------------------------------------------------
17 Crossgates Commons Oct-94 Home Depot 20 yrs. 102,680 $1,129,480 $11.00 $12.65 - 3/99
1-87 & Washington Avenue $14.17 - 3/04
Albany, New York $15.87 - 3/09
- -----------------------------------------------------------------------------------------------------------------------------------
18 Penn Can Mall Sep-94 Caldor 25 yrs. 113,275 $889,209 $7.85 None
Interstate 81 & 481 2 10-yr opt.
Cicero, Syracuse, New York
- -----------------------------------------------------------------------------------------------------------------------------------
19 Wal-Mart/Sam's Club Fall-94 Sam's Club 20 yrs. 114,036 $843,866 $7.40 None
Niagara Falls Blv/Willowridge 5 5-yr opt.
Amherst, New York
- -----------------------------------------------------------------------------------------------------------------------------------
20 Wal-Mart/Sam's Club Fall-94 Wal-Mart 20 yrs. 125,137 $893,478 $7.14 None
Niagara Falls Blv/Willowridge 5 5-yr opt.
Amherst, New York
- -----------------------------------------------------------------------------------------------------------------------------------
21 Fayetteville Mall Fall-94 Caldor 25 yrs. 113,360 $889,876 $7.85 None
Onondaga County 2 10-yr opt.
Syracuse, New York
- -----------------------------------------------------------------------------------------------------------------------------------
22 Eastview Mall Fall-94 Caldor 25 yrs. 113,275 $889,209 $7.85 None
Town of Victor 2 10-yr opt.
Rochester, New York
- -----------------------------------------------------------------------------------------------------------------------------------
23 Aroostook Mall Nov-93 Kmart 15 yrs. 86,479 $460,933 $5.33 None
U.S. Route 1
Presque Isle, Maine
- -----------------------------------------------------------------------------------------------------------------------------------
24 Riverside Mall Nov-93 BJ's Wholesale 20 yrs. 109,015 $730,400 $6.70 Increases every
Route 12 & Route 49 4 5-yr opt. 5 yrs. based
Utica, New York upon lesser of
CPI or 8%.
- -----------------------------------------------------------------------------------------------------------------------------------
25 Silver City Galleria Nov-92 Bradlee's 20 yrs. 94,957 $564,000 $5.94 None
Routes 24 & 140 1 10-yr opt.
Taunton, Massachusetts 2 5-yr opt.
- -----------------------------------------------------------------------------------------------------------------------------------
Survey Low: 60,000 $460,933 $5.33
Survey High: 167,508 $2,550,000 $22.00
- -----------------------------------------------------------------------------------------------------------------------------------
Survey Mean: 112,088 $1,202,065 $10.88
<CAPTION>
===========================================================================================================================
Rent-
Estimated Sales
No. Property/Location % Rent Sales Ratio Comments
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
14 Caldor No $14,000,000 9.7% Caldor store in Braintree,
Braintree, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
lease.
- -----------------------------------------------------------------------------------------------------------------------------
15 Caldor No $19,000,000 6.9% Caldor store in Brockton,
Brockton, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
lease.
- -----------------------------------------------------------------------------------------------------------------------------
16 Caldor No $24,000,000 5.2% Caldor store in Deer Park, New York
Deer Park, New York which opened in 1995. Sales
projected. Triple net lease.
- -----------------------------------------------------------------------------------------------------------------------------
17 Crossgates Commons No $41,482,720 2.7% Home Depot store in power center
1-87 & Washington Avenue adjacent to mall. Triple net lease.
Albany, New York Sales based on chain avg. in '94.
- -----------------------------------------------------------------------------------------------------------------------------
18 Penn Can Mall 1.0% of sales in $14,000,000 6.4% P/R share of exerior CAM, taxes,
Interstate 81 & 481 excess of max. contr. of $0.15/SF for interior
Cicero, Syracuse, New York $21,000,000. CAM, & utilities. Bldg cost @
$61.76/SF. Off-price mall location.
- -----------------------------------------------------------------------------------------------------------------------------
19 Wal-Mart/Sam's Club No $38,316,096 2.2% New construction along with Wal-
Niagara Falls Blv/Willowridge Mart store. Lease signed 6/93. Sales
Amherst, New York based on Wal-Mart/Sam's chain avg.
- -----------------------------------------------------------------------------------------------------------------------------
20 Wal-Mart/Sam's Club No $42,046,032 2.1% New construction along with Sam's
Niagara Falls Blv/Willowridge Club store. Lease signed 6/93. Sales
Amherst, New York based on Wal-Mart/Sam's chain avg.
- -----------------------------------------------------------------------------------------------------------------------------
21 Fayetteville Mall 1.0% of sales in $14,000,000 6.4% P/R share of CAM, tax, insur., &
Onondaga County excess of utilities. Former Kaufman's location
Syracuse, New York $21,000,000. in mall. Lease signed in Fall 1993.
- -----------------------------------------------------------------------------------------------------------------------------
22 Eastview Mall 1.0% of sales in $15,000,000 5.9% Net lease with CAM & tax provisions.
Town of Victor excess of Tenant pays utilities. Lease signed
Rochester, New York $25,000,000. in Fall 1993.
- -----------------------------------------------------------------------------------------------------------------------------
23 Aroostook Mall No $8,781,078 5.2% New regional mall with Sears, JC
U.S. Route 1 Penney, Porteous. Tenant pays CAM
Presque Isle, Maine of $0.50/sf & taxes. Sales based on
state avg. for Kmart in '94.
- -----------------------------------------------------------------------------------------------------------------------------
24 Riverside Mall No $36,700,000 2.0% Single-level encl. mall. Tenant pays
Route 12 & Route 49 p/r share of exterior CAM, taxes,
Utica, New York insur, utilities, & repairs of mech.
systems. Opts. have rent incr.
- -----------------------------------------------------------------------------------------------------------------------------
25 Silver City Galleria 1.0% of hard line $14,500,000 3.9% Tenant pays p/r share taxes, insur,
Routes 24 & 140 & 2.0% of misc. utilities, & mech. repair. CAM is
Taunton, Massachusetts sales in excess $0.65/SF incr. by $0.10/SF every 5
of $23,000,000 yrs. Enclosed mall location.
- -----------------------------------------------------------------------------------------------------------------------------
Survey Low: 1.7%
Survey High: 9.7%
- -----------------------------------------------------------------------------------------------------------------------------
Survey Mean: 5.4%
</TABLE>
<PAGE>
Retail Market Analysis
================================================================================
Also some of the Centers are quoting vacancies that are under construction and
thus not Completed. In general, centers with strong anchors and good locations
have very low vacancy rates. This is evidenced by the centers along Routes 9 and
30. These low vacancy rates support local brokers opinions that there is very
little space available in the well-located, better quality centers, especially
large tenant suites. In fact, the only large space available in the Golden
Triangle is the 60,000 square foot space at Cloverleaf Mall. This space is not
yet constructed but, according to the owners, the center can be expanded to
accommodate a tenant of that size.
Market Terms, Concessions and Commission Structure
Our survey of market participants included a broad cross section of
shopping center owner/developers and leasing agents. Typical lease terms in the
Boston area for local tenants vary from five to ten years with larger regional
and national tenants commanding longer terms of 10 to upwards of 25 years.
Typically, retail leases are structured on a net basis with the tenant
responsible for a full pro-rata share of taxes and operating expenses. Rental
increases in the form of a CPI increase or a fixed step-up are usually sought
but not always achieved. The strength of a particular property or location
generally dictates the ability of a landlord to command rental increases.
In addition to the minimum base rent, many retail tenants will contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. It is most common for leases to have a natural breakpoint
although many do have stipulated breakpoints. The average overage percentage for
small space retail tenants is in a range of 5 to 8 percent. Anchor tenants
typically have the lowest percentage clause with ranges of .5 to 3 percent being
most common.
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 rent typically becomes a larger percentage of
total revenue. It is a major ingredient protecting an investor against
inflation.
Similarly, concessions will vary considerably by property and tenant type.
Anchor tenants are generally in a better negotiating position to extract
concessions in the form of free rent or improvement allowances. However, if an
anchor is strongly motivated to be in a particular market, it is not unusual for
an owner to be able to maintain a firm bargaining position, yielding little or
no concessions.
In our view, the subject's location is considered to be very desirable. As
such, we would be inclined to conclude that prospective tenants would expect
little in the way of concessions if looking to do a deal for this site.
================================================================================
-35-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market Analysis
================================================================================
Leasing commissions in the Boston area typically vary. Brokers we
interviewed indicated each transaction was different depending on tenant quality
and the specific property in which it is placed. Generally commissions are about
18 percent of the aggregate rent with commissions generally paid out up front.
There are also certain variations to the commission structure that are commonly
found. One typical structure is based on 6 percent of year 1, and 3 percent of
the following years. A second structure involves a flat amount such as $3.00 per
square foot. Sometimes a landlord or owner will pay commissions for renewal or
rollover tenants. If this is achieved, the common schedule is 50 percent of the
base lease rate.
Conclusion
We have analyzed the retail trade history and profile of the Boston MSA as
well as for the Metrowest submarket 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 were presented. The trade area profile discussed encompassed a
radii based analysis that was established based upon a study of the competitive
retail structure. Marketing information relating to these sectors was presented
and analyzed in order to determine patterns of change and growth as it impacts
the subject. The given data is useful in establishing quantitative dimensions of
the total trade area, while our comments serve to provide qualitative insight
into this market. A compilation of this data provides the basis for our
projections and forecasts particular to the subject property. The following
summarizes our key conclusions.
o The neighborhood has good vehicular access via Routes 9 and 30 and
Interstate 90, as well as several neighborhood arterials. The
subject enjoys a visible location and is centered in the principal
commercial hub for this quadrant of the city.
o The existing trade area structure is largely characterized by
traditional neighborhood centers as well as community centers
anchored by grocery or discount stores. There are two regional malls
in the trade area, the Natick Mall adjacent to the subject and the
Solomon Pond Mall in Marlborough which is in the secondary market.
o The subject benefits from an affluent local population. Average
household income within a 5 mile radius of the property is currently
estimated at $91,895. Expanding into the full 10 mile trade area,
the income level increases slightly to $98,207. These figures are
well above state and metro area levels.
o The subject will benefit from its tenant mix which is unique to
market area, as well as its location in the Golden Triangle.
o The center is well positioned in an area that is forecasted to
continue to witness slow but steady population and household growth.
The population within a 10 mile radius is currently estimated at
407,486 and by 2000 it is expected to increase by 1.56 percent to
nearly 414,000.
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-36-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market Analysis
================================================================================
Our analysis concludes that the merchandising mix of the center, the
location along two major arterials, and the popularity and uniqueness of the
major tenants, all combine to establish Shoppers World as a viable retail center
in its trade area. We believe that, with competent management, aggressive
marketing, and a responsive maintenance program, it should continue to maintain
a strong position in the market throughout the foreseeable future.
================================================================================
-37-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
[Map of Shoppers World]
<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: One Worcester Road
Framingham, Middlesex County, Massachusetts
Shape: Irregular
Area:
Shoppers World Parcel 86.72 acres
General Cinema Parcel* 83.70 acres
------
Total Site 170.42 acres
*Of the 83.7 acres in the General
Cinema parcel, only about 22 acres are
usable.
Frontage: The site has frontage on both Routes 9 and
30.
Topography/Terrain: The subject site is relatively level and at
grade with abutting streets. Visibility of
the center is very good.
Wetlands: We were not provided a Wetlands survey.
Based on an Order of Conditions issued by
the Framingham Conservation Commission, we
understand that there are protected wetlands
on portions of the General Cinema parcel.
Guidelines for development were set forth in
DEP File No. 158-604 dated March 2, 1994. We
assume the developer has constructed the
subject improvements in accordance with
these guidelines.
Street Improvements: Typical street improvements include concrete
and asphalt paving, curbing, sidewalks and
pole mounted lighting.
Access: Access to the site is excellent. Shoppers
World is located at the confluence of the
Massachusetts Turnpike (1-90) and State
Highways 9, 30 and 126. Primary east/west
access is provided by the Massachusetts
Turnpike and State Highways 9 and 30.
North/south access is provided by State
Highways 126 and 27 and Speen Street.
The subject neighborhood, generally defined
as the Metrowest submarket, is directly
accessed by Exit 13 (Speen Street) of the
Massachusetts Turnpike. This neighborhood is
strategically located between Boston's inner
and outer circumferential highways, Route I
2811-95 and I-495.
================================================================================
-39-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Property Description
================================================================================
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 and proposed
structures. We did not observe any evidence
to the contrary during our physical
inspection of the property. The tract's
drainage is assumed to be adequate. Please
see our comments under Hazardous Substances
section of this site description.
Utilities
Water and Sewer: Town of Framingham
Electricity: Boston Edison
Gas: Commonwealth Gas
Telephone: New England Telephone
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: We are advised that the property is located
in an area designated "Zone C" - areas not
prone to flooding in accordance with FEMA
Map No. 250207-0002 B, effective February
1,1980.
Site Improvements: Parking is provided via surface lots. Other
site improvements include minimal
landscaping, concrete sidewalks, concrete
pads and curbing, yard lighting, signage and
all underground and overhead utilities.
Hazardous Substances: A comprehensive environmental study was
prepared prior to Homart's acquisition of
the property. Asbestos materials were found
to have been used in the construction
process for the mall and 11 underground
storage tanks (USTs) were found to have
contaminated certain areas of the ground
water. An abatement program was implemented
by Homart Development during demolition of
the former improvements. As of the appraisal
date, the USTs have reportedly been removed
and the contaminated soil has been either
removed or treated.
Please refer to our complete list of
Assumptions and Limiting Conditions with
particular attention to No. 10 provided at
the end of our appraisal report.
================================================================================
-40-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SHOPPERS WORLD - Framingham, MA
[GRAPHIC OMITTED]
<PAGE>
Property Description
================================================================================
Comments: Overall, the site is of sufficient size to
accommodate the existing improvements. It
offers a utilitarian shape, relatively level
topography and has very good access and
visibility. We conclude that it is conducive
for its continued use as a retail site.
Improvements Description
The subject improvements will consist of U-shaped structure that forms
what is commonly known as a power center. The Center was constructed in phases
and now totals approximately 778,292 square feet, including out parcel pads.
Please refer to the site plan on a previous page for the location of the
improvements on the subject tract. A detailed description of the improvements
follows.
General Data
Year Built
Existing (Bradlees) 1975+-
Phase I November 1994
Phase II Early 1997
Property Summary
----------------------------------------
Bradlees 102,555+-SF
----------------------------------------
Genemi Cinema 85,000+-SF
----------------------------------------
Toys 'R Us/Kids 'R Us 63,300+-SF
----------------------------------------
Marshalls 50,081+-SF
----------------------------------------
Bob's 50,059+-SF
----------------------------------------
The Wiz 50,000+-SF
----------------------------------------
Sports Authority 43,629+-SF
----------------------------------------
Linens 'N Things 40,159+-SF
----------------------------------------
Macy's Furniture 40,000+-SF
----------------------------------------
TJ Maxx 39,884+-SF
----------------------------------------
Sears Homelife 36,108+-SF
----------------------------------------
OfficeMax 30,100+-SF
----------------------------------------
Barnes & Noble 29,963+-SF
----------------------------------------
Designer Shoe Warehouse 27,089+-SF
----------------------------------------
A.C. Moore 24,560+-SF
----------------------------------------
Mikasa 18,007+-SF
----------------------------------------
Total Anchors 730,494+-SF
========================================
In-Line Shops 47,798+-SF
========================================
Total Center 778,292+-SF
----------------------------------------
Construction Detail
Foundations: Reinforced 8 inch concrete block foundation
and spread reinforced concrete footings on
engineered fill.
Framing: Structural steel columns and beams.
================================================================================
-41-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Property Description
================================================================================
Ceiling Height: Building height is approximately 16.5 feet
to the roof. An average 14+- feet finished
ceiling heights.
Floor System: The grade level floor slab is reinforced
concrete with wire mesh over compacted fill.
Exterior Walls: Exterior walls are 8 inch concrete block
with insulated inserts and split face brick.
Roof Structure/Roofing: The roof is a metal deck supported by steel
bar joists. The cover is a single-ply
rubberized membrane roof.
Doors - Interior/Exterior: Customer entrances are anodized aluminum and
glass. Receiving and service doors are
hollow metal and steel roll-up.
Loading: Each tenant space has at least one loading
area.
Mechanical Detail
Heating, Ventilation and
Air Conditioning: HVAC is provided by roof mounted,
electrically operated package units.
Plumbing: A complete sanitary sewer system and
domestic water service serve all
required fixtures of each tenant and
are tapped into the municipal water
and sewer distribution lines. All
roof areas are drained to rain water
conductors which are connected to
the site storm water system. Supply
and waste lines are assumed to be of
code conforming materials.
Electric: Electricity is metered directly by the local
supplier. Tenants pay for their own electric
usage directly. All electric work assumed to
be in accordance with National Electric
Code.
Life Safety/Security: The buildings are fully sprinklered and
there are smoke detectors throughout the
entire property.
Interior Detail
Layout: The property is designed in two parallel
strips with an end strip on the northern
edge facing Cochituate Road (Route 30). Thus
it is oriented more toward Worcester Road
(Route 9) but has excellent visibility from
Route 30. Surface parking is provided
between the two strips. Phase I is on the
east side of the
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<PAGE>
Property Description
================================================================================
property and Phase II is on the west Other
out parcels that are part of Phase II are
either ground leased or are currently under
agreement for sale.
The General Cinema building, part of Phase
I, fronts along the north side of Flutie
Pass which connects Shoppers World with the
Natick Mall.
The tenant spaces range in size from
approximately 1,871 to 102,555 square feet
and while the exteriors of the buildings are
consistent in design, each interior tenant
space is improved in keeping with tenant
specifications.
Floor Coverings: Floors are a mixture of marble, ceramic tile
and carpet.
Ceilings: Suspended acoustical tile.
Lighting: Lighting is a mixture of fluorescent tube
and high intensity discharge lighting.
Restrooms: Each tenant space has public and employees'
toilet facilities with provisions for
handicapped. Generally, each tenant has
toilet facilities that do not have to be
made available for public use by code. Large
shops and eating establishments have
additional facilities as necessary to meet
health code requirements.
Hazardous Substances: Please refer to our list of Assumptions and
Limiting Conditions (Item #10) which
identifies our position on this matter.
Site Improvements
On-Site Parking: On-site parking is provided by surface lots
and described as follows:
Compact Spaces 310
Handicap Spaces 65
Regular Spaces 3,292
-----
Primary Spaces 3,667
General Cinema Spaces 1,404
-----
Total Spaces 5,071
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Property Description
================================================================================
5,071 spaces is equal to 6.37 spaces per
1,000 square feet of GLA (as proposed).
Landscaping: Attractive landscaping has been provided.
Other: Other site improvements consist of concrete
and asphalt paving, curbing, yard lighting,
all underground and overhead utilities and
mall signage.
Comments: The construction features quality materials
and workmanship. Furthermore, the layout and
design of the power center is considered
good from a visibility and shopper movement
perspective. Analysis of the structural
integrity of the improvements is beyond our
expertise and best made by a professional
engineer. It is our assumption that the
existing construction, including fit-out of
tenant areas has been done in conformance
with quality standards consistent with
modern retailing concepts.
Our review of the local environs reveals
that there are no extraordinary external
influences which negatively impact the value
of the subject property.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is assessed by the Towns of Framingham and Natick.
The property's assessed value on January 1,1997 established the basis for the
1998 fiscal tax year which began in July 1,1997 and ends June 30, 1998. The
FY1997-1998 tax rates will not be established until the end of 1997 and thus
shown below are the assessments as of January 1, 1997 using the FY1997 tax rate.
The millage rate for FY1996-97 for Framingham was $30.61 per $1,000 of assessed
value for all commercial property. The millage rate for Natick was $15.90 per
$1,000 of assessed value and is not separated between residential and commercial
property.
<TABLE>
<CAPTION>
===============================================================================================
Current Assessment Data 1997-98
===============================================================================================
Map Block/Lot Address Site Area Total A.V. Tax Liability
===============================================================================================
<S> <C> <C> <C> <C> <C>
344 108/0020 1 Worcester Rd., Framingham 86.83 ac. $38,921,600 $1,191,390.17
- -----------------------------------------------------------------------------------------------
345 109/0022 419 Cochituate Rd., Framingham 68.60 ac. $9,957,100 $304,786.83
- -----------------------------------------------------------------------------------------------
23 73 1459 Worcester St., Natick .0352 ac. $4,000 $63.60
- -----------------------------------------------------------------------------------------------
16 03 342 Speen St., Natick 9.22 ac. $230,500 $3,664.95
- -----------------------------------------------------------------------------------------------
24 94 1391 Worcester St., Natick 4.89 ac. $594,500 $9,452.55
- -----------------------------------------------------------------------------------------------
Total $49,707,700 $1,509,358.10
===============================================================================================
</TABLE>
The total land size for 1 Worcester Road reported by the Framingham
Assessor is approximately .18 acres smaller than reported for our 1995
appraisal. The land size for the Cochituate Road parcel is 10.186 acres smaller
than reported in our 1995 appraisal. The total acreage shown is 169.57 acres
versus the total acreage we reported in the property description section of
170.42 acres, or .845 acres less. We were unable to reconcile the differences.
Massachusetts law requires a tri-annual revaluation. The most recent
revaluation in both Framingham and Natick occurred in the 1995 fiscal tax year
thus the next revaluation will occur in 1998 and become effective for the 1999
fiscal tax year.
A review of growth in tax rates does not present a clear picture of trends
for tax increases in greater Boston due to the tri-annual revaluations and
recent value declines which have been common-place with respect to commercial
real estate in the past few years. Changes in tax rates for the past six years
are as follows:
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Real Property Taxes and Assessments
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==========================================================
Historic Tax Rates
==========================================================
Fiscal
Year Framingham % Change Natick % Change
==========================================================
1992 $26.43 -- $12.84 --
----------------------------------------------------------
1993 $27.23 7.2% $13.33 3.8%
----------------------------------------------------------
1994 $27.72 1.8% $15.52 16.4%
----------------------------------------------------------
1995 $28.71 3.6% $15.38 (-0.1%)
----------------------------------------------------------
1996 $29.69 3.4% $15.38 0.0%
----------------------------------------------------------
1997 $30.61 3.1% $15.90 3.4%
==========================================================
Our overall experience in the Boston area is that a 3.5 to 4.0 percent
increase in total tax liability for commercial real estate is a reasonable
forecast. Therefore, we have projected that tax rates will increase at the rate
of 3.5 percent per annum.
Assessments for new projects are generally phased in over time to reflect
the construction and lease-up period. Inspections are conducted in January of
each year for valuation purposes in the next fiscal year (i.e. a January 1997
inspection provides the basis for assessed values for the fiscal year which
began in July 1997). Thus, the state of completion of the subject improvements
on the date of inspection is the basis of that year's tax liability. On January
1, 1997, the property was essentially complete with the exception of tenant
fit-up for DSW and A.C. Moore, which has yet to be completed.
When the new assessment is in effect as of January 1, 1998, the assessed
value of the property will reflect a completed property at stabilized occupancy
and therefore it will likely be taxed thereafter based on its ability to
generate income. The assessor's office will then calculate the assessment via
the Income Approach. Our projection of property taxes beginning in 1998 has been
estimated using this method. A projected FY 1998 net operating income, excluding
the influence of taxes either in the form of recoveries or expenses, is
estimated to total $11,936,490. This NOI is capitalized into value using the
assessor's capitalization rate of 13.3 percent. The assessed value of the
subject property can therefore be estimated at $89,748,045 (rounded:
$89,800,000).
Based on the owned improvements in the center, all of which are in
Framingham, the allocated value of land and improvements for tax purposes using
the projected total assessed value of $89,800,000 would be as shown in the
following table:
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Real Property Taxes and Assessments
================================================================================
========================================================================
Estimate 1998/1999 Taxes
========================================================================
Town Assessed Value Tax Rate Tax
========================================================================
Framingham $89,800,000 $31.68 $2,844,864
========================================================================
We have not included the Natick parcels in the future taxes because they
are presently under agreement for sale.
After fiscal 1998, we assume the property will continue to be assessed
based on the income it generates and have increased taxes thereafter based on a
3.5 percent annual growth rate.
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ZONING
================================================================================
The Shoppers World site is subject to the zoning regulations of the Towns
of Framingham and Natick as monitored by the respective Town Planning Boards. In
Framingham, the area surrounding the site lies within a Business (B) District
and is expected to conform to the restrictions of this district as outlined by
the Town of Framingham zoning ordinance. The portions of the site lying in
Natick are zoned Industrial II.
On December 1, 1992, a special highway overlay district, known as the
Golden Triangle Plan, was approved by both the Towns of Framingham and Natick
for the area surrounding the subject from the intersection of Cochituate Road
with Worcester Road in Framingham to the west side of Lake Cochituate in Natick.
It was designed to regulate growth along this heavily developed retail corridor
by ensuring that adequate landscaping, traffic improvements, parks and
pedestrian circulation were considered during any new development. As a result
of the enactment of this overlay district, if the subject site were vacant and
available for development the requirements of development would be further
restricted as follows:
Maximum FAR Lowered to .32 with the possibility of an
increase to .40 under certain guidelines for
traffic and pedestrian circulation
improvement.
Open Space Requirements Base landscape surface ratio increased to 20
percent for retail development and 40
percent for office development.
For projects of the subject's magnitude and caliber, specific site plan
review is required for the numerous array of factors that would come to bear
within the approval process. Accordingly, while certain bulk area requirements
may come into consideration, it is the full plan review that considers all
influencing factors that has the primary weight.
We are not experts in the interpretation of complex zoning ordinances,
however, we assume the subject has been constructed within the confines of the
highway overlay district regulations. As such, we assume that all general
requirements have been met and that the existing improvements conform to code.
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
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.
We have evaluated the site's highest and best use improved and as if
vacant. In both cases 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. Because the site is improved with
improvements that generate an important return, the focus of the highest and
best use is on the site as improved.
Highest and Best Use of Property as Improved6
Physical Factors
The first constraint imposed on the possible use of the site is dictated
by the physical aspects of the parcel itself. As noted in our "Property
Description" section of the report, the site is of sufficient size to
accommodate the improvements by virtue of the use and access easements to
Shoppers World and Flutie Pass. The site is level and has all necessary
utilities available. It also has good visibility and accessibility. Its location
on a principal arterial strongly supports its regional accessibility. The
improvements have been designed as a viable power center complex. The anchor
alignment is unique to the market and serves to extend its draw beyond the
immediate neighborhood. The layout and design are adequate for its use as a
shopping center. Finally, compatibility with existing neighboring uses is also
an important consideration. In the case of the subject, Shoppers World is
uniquely positioned as the only "power center" in this sector of the MSA. It is
well positioned to service both the resident and visitor population. This letter
segment is expected to be the recipient of a strong economy. With all of this in
mind, we are of the opinion that the current use of the site is physically
possible.
Legal Factors
Legal restrictions, as they apply to the subject property, are the public
restrictions of zoning. To the best of our knowledge, the property complies with
all of the zoning requirements under the Business B and Golden Triangle plan. As
noted, there are no private restrictions which are known to adversely affect the
utilization of the site. Furthermore, we are not aware of any environmental
constraints which might impact the property. Finally, it is recognized that the
property has been in continuous operation as a retail use since the early 1950s.
As such, the existing leases which are in place dictate a retail use for the
property.
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Highest and Best Use
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Financial Feasibility/Maximum Productivity
After analyzing the physically possible and legally permissible aspects of
the property, the highest and best use must be considered in light of financial
feasibility and maximum productivity. 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.
As discussed in the "Neighborhood and Retail Market Analysis" sections of
this report, the subject is an important shopping destination for a substantial
trade area that includes over 130,000 people in its primary market. In the
"Income Approach" to the valuation of the subject property, we have provided a
detailed analysis of the subject's revenue producing ability as a shopping
center. These projections have relied upon certain market based assumptions
that, in our opinion, closely mirror the subject's position in the marketplace.
Consideration has been given to competitive properties in the surrounding market
and their potential effects on the subject property. Accordingly, we find that
the property, under the concept of continued use, will produce a sufficient
income stream to an investor. An alternative use 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. Therefore, we have concluded that the highest and best use of the site
as improved is for retail utilization as a shopping center.
As Vacant
Physical Factors
The subject parcel is large enough to accommodate a variety of uses,
including office, retail, hotel and residential. The subject's highway and
interstate access greatly enhance its appeal for a use that relies upon the
ability of patrons to be afforded quick and easy access. This is particularly
true for a destination retail property which, by necessity, must attract
consumers from points beyond its immediate neighborhood. As articulated, both
1-90 and Routes 9 and 30 are principal commercial arterials that are major
connectors for regional travel in the metropolitan Boston area. Accordingly, we
would find that a retail use of the site would be the most compatible with the
environs. Overall, we view the site as being free of any physical limiting
conditions that may restrict its development and as such, a large scale
commercial project would be a potential use for the site as if vacant.
Legal Factors
The second test concerns permitted uses. Legal restrictions, as they apply
to the subject are public restrictions of zoning. The Business B and Golden
Triangle Overlay designations are designed primarily for commercial utilization.
The requirements of this zone are very site specific and governed by review
procedures of the Towns of Framingham and Natick. Based on the site's size and
layout, with consideration given to parking constraints, a retail development of
similar size to the existing improvements may be a permitted use. Due to the
site's frontage and proximity to other commercial uses, we believe that retail
uses would be a legally conforming use for the site.
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Highest and Best Use
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Financial Feasibility/Maximum Productivity
After determining those uses which are physically possible and legally
permissible, the remaining uses must be analyzed in light of their financial
feasibility. As indicated in the "Regional", "Neighborhood" and "Retail Market
Analysis" sections of this report, the Boston MSA is characterized by economic
conditions that have been favorable over the past several years. The retail
market has not been as negatively affected by the over-building and concessions
which have plagued other commercial markets. In addition, we see no significant
changes in the local demographics which might threaten the economic viability of
the subject site.
The last test of highest and best use is that of maximum productivity.
While this implies a quantitative analysis, it is often most qualitative and
sensitive to community, social, political, and governmental standards. In this
case, the site is located in a strong retail area of high average household
incomes. In addition to the retail facilities in the Metrowest area, there is a
strong commercial component surrounded by substantial residential activity.
Existing neighborhood uses further compliment the site. The subject's size,
location and proximity to regional road networks and residential nodes, lead us
to the conclusion that the Highest and Best Use for the subject property, as if
vacant, would be for a new shopping center.
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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 power and large
community centers. The estimation of obsolescence for functional and economic
conditions as well as depreciation on improvements makes this approach sometimes
problematic. Furthermore, the Cost Approach fails to fully consider the value of
anchor store commitments and the difficulty of site assemblages for such
properties. As such, the 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 subject. 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. The 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 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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 unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The chart of the following page presents an overview of the improved
property sales used in this analysis.
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POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
==============================================================================================================================
Anchor Sale
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as Price/
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total Sq.Ft.
==============================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. Pending 1981 $76,200,000 1,643,083 23.0% 377,965 153,355 40.6% $201.61
NEC/Sepulveda Blvd. & Marina Jul-97 Good
Los Angeles County,
Manhattan Beach, California
- ------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7% $112.19
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center Jun-97 N/A $39,174,000 -- -- 213,603 87,813 41.1% $183.40
Metro Center Good
San Mateo County,
Colma, California
- ------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226 45.0% $99.06
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461 55.8% $91.41
Fremont Blvd. & Monry Ave. Good
Alameda County,
Fremont, California
- ------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village Mar-97 1979/94 $73,500,000 -- -- 418,356 -- -- $175.69
LaJolla, California Good
- ------------------------------------------------------------------------------------------------------------------------------
7 Aboretum Crossing (Phs.I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000 84.2% $131.15
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Autin, Texas
- ------------------------------------------------------------------------------------------------------------------------------
8 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404 84.1% $96.98
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- ------------------------------------------------------------------------------------------------------------------------------
9 Lawrenceville Market Center Nov-96 1995 $34,600,000 499,129 459,209 92.0% $69.32
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------
10 Saugus Plaza Oct-96 N/A $12,175,000 722,225 23.3% 168,076 138,000 82.1% $72.44
156 Main Street Good
Saugus, MA
- ------------------------------------------------------------------------------------------------------------------------------
11 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200 41.9% $99.85
1-85 @ W.T. Harris Blvd. Excellent
Charlotte, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------
12 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837 73.2% $128.83
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- ------------------------------------------------------------------------------------------------------------------------------
13 Middlesex Mall Jun-96 1976/87 $13,050,000 1,354,716 16.0% 217,363 133,435 61.4% $60.04
43 Middlesex Turnpike Good
Burlington, MA
- ------------------------------------------------------------------------------------------------------------------------------
14 Villa Marina Marketplace Jan-96 1976/91 $80,000,000 1,000,573 45.9% 459,703 218,929 47.6% $174.03
Mexella & Lincoln Blvd., Good
Marina Freeway
Marina Del Rey, California
- ------------------------------------------------------------------------------------------------------------------------------
15 Corbins Corner Nov-95 1970/89 $29,500,000 867,846 21.5% 186,734 96,833 51.9% $157.98
Route 71 & I-84 Good
Hartford County
West Hartford, Connecticut
==============================================================================================================================
Survey High: $80,0000,000 2,938,558 -- 788,826 663,404 $201.61
Survey Low: $12,175,000 722,225 -- 168,076 87,813 $60.04
==============================================================================================================================
Survey Average: $43,418,400 1,405,649 25.4% 357,216 224,641 62.9% $123.60
==============================================================================================================================
<CAPTION>
=================================================================================================================================
Sale NOI/ Occupancy
No. Name/Location Sq.Ft. OAR Anchor Tenants At Sale Comments
=================================================================================================================================
<C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. $15.87 7.87% Ralph's, Sav-On, 93.3%
NEC/Sepulveda Blvd. & Marina Mann Theaters,
Los Angeles County, Macy's Mens
Manhattan Beach, California
- ---------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. $11.21 9.99% Bed Bath & Beyond, 100.0% New power-oriented center in tourist
International Drive & Touch One Ross, Old Navy, T.J. area. Incl. $650,000 outpad site. Anchor
Orange County A Maxx, Books-A-Million, rents $10/sf; in-line $15/sf.IRR appx.
Orlando, Florida Shoe Carnival 11.0%; term. cap 10.0%.
- ---------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center $15.50 8.45% Marshalls, Nordstrom 99.0% 351,632sf ctr. known as the country's
Metro Center Rack, Kids R Us, Old first "power" ctr. IRR appx. 10.76% w/
San Mateo County, Navy, Barnes & Noble term. cap. Of 9.5%. UACinema, vacant
Colma, California Home Depot, & NYFabric not incl.
- ---------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station $10.13 10.23% Lowes Home Center, 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth Shoppers Food Whse, hub for county. Anchor rents $8.40/sf;in-
Prince William County, Best Buy line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- ---------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. $8.00 8.75% Safeway, Ross, Longs 661,140sf ctr. originally constructed as
Fremont Blvd. & Monry Ave. Drug, Old Navy, regional ctr. Converted b/w '92-'94.
Alameda County, OfficeMax, Anchors not incl. in GLA sold are Mont-
Fremont, California Tower Records gomery Ward & Home Express.
- ---------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village $15.81 9.00% Smith's Food King, Solus to Prudential.
LaJolla, California AMC Theaters, Ross,
Marshalls, Super Crown
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7 Aboretum Crossing (Phs.I) $13.70 10.45% Circuit City, Cost Plus,98.0% Presale of promotional center. Sale
U.S. Highway 183 & Baby Superstore, Design expected to close by Jan. 31, 1997.
N. Mopac Blvd. Shoe Whse, Just For REIT purchase based on direct cap.
Autin, Texas Feet, Mikasa
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8 Jantzen Beach Supercenter $8.87 9.15% Kmart,Home Depot,Toys 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave RUs, REI,Ross,Comp. gomery Ward & Kmart anchor enclosed
Portland, Oregon City,Copelands,Linens, mall of 87,500 square feet. Montgomery
OldNavy,Barnes&Noble Ward on ground lease.
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9 Lawrenceville Market Center $6.59 9.50% Target *, Home Depot *, 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 AMC, Goody's, Linens N Estate Investment Management.
Lawrenceville, Georgia Things, Marshalls, MJ * Ground Lease
Design, PetsMart
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10 Saugus Plaza $7.97 11.00% K-Mart, Super Stop & 94.0% Purchased as part of a 27 property bulk
156 Main Street Shop, PJ's Pet Center sale which reportedly had an overall
Saugus, MA capitalization rate of 11.0%.
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11 The Village at University Place$9.84 9.85% Best Buy, Office Depot, 100.0% Other anchors at center are Wal-Mart
1-85 @ W.T. Harris Blvd. TJ Maxx, Rhodes and Sam's Club. This is a pre-sale of
Charlotte, North Carolina Furniture new center developed by Hawn.
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12 Preston Shepard Place $12.11 9.40% Marshalls, Steinmart, 100.0% New ctr. in affluenct area. Traffic counts
SWC/Preston & Park Blvd. Office Depot, Baby >37,000 & 45,000/day. Buyer used
Colling County, Superstore, MJ Des., 10.5% IRR & 9.25% terminal cap in analysis.
Plano, Texas Borders, HomePlace Avg. rent = $15.73/sf.
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13 Middlesex Mall $6.30 10.50% Caldor, Market Basket, 80.0% Older center north of Boston. Purchaser
43 Middlesex Turnpike Loehmanns, Linens 'N planned to reorient towards a power
Burlington, MA Things center format.
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14 Villa Marina Marketplace $18.43 10.59% Vons, Sav-On, 92.0% Project consists of 2 properties; 2nd
Mexella & Lincoln Blvd., UA Theatres, Sport largest retail ctr. west of San Diego Fwy
Marina Freeway Chalet, Cineplex b/w Ventura Fwy & Manhattan. Sales=
Marina Del Rey, California Odeon, Gelson's $347/sf; rents=$12-45/sf.
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15 Corbins Corner $14.98 9.48% Filene's Basement 96.1% Specialty retail center located across
Route 71 & I-84 Toys R Us from Westfarms Mall at I-84. Strong
Hartford County Kids R Us trade area. Renovated in 1989.
West Hartford, Connecticut Old Navy
=================================================================================================================================
Survey High: $18.43 11.00% 100.0%
Survey Low: $6.30 7.87% 80.0%
=================================================================================================================================
Survey Average: $11.69 9.61% 95.7%
=================================================================================================================================
</TABLE>
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, 15 comparable sales
have been analyzed for this analysis. These represent large community and power
center sales across the United States. We broadened our search to a national
basis because there were insufficient sales of similar properties in the local
market. The sales range between $60.04 and $201.64 per square foot of GLA sold
with overall capitalization rates ranging from a low of 7.87 percent to a high
of 11.0 percent. These transactions occurred between November, 1995 and June
1997, thus they are considered current sales.
For the sales surveyed, the mean overall sale price is calculated to be
$43.4 million. The mean gross leasable area sold is 357,216 square feet, with
the mean overall price per square foot calculated at $123.60 per square foot.
Finally, the survey shows a mean NOI of $11.69 per square foot, with an overall
capitalization rate of 9.61 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Discussion of Most Recent Comparable Sales
Sale No. 1, the most recent comparable transaction surveyed, is the sale
of Manhattan Village Shopping Center in Manhattan Beach, California. This is a
pending sale of a 377,965 square foot center anchored by Ralph's Sav-on, Mann
Theaters and Macy's Mens Shops. The property was built in 1981 and is in good
condition. Its strong location results in high rental rates and a resulting high
net operating income of $15.87 per square foot, similar to the subject's at
$15.22 per square foot. The property was at stabilized occupancy of 93.3 percent
at the time of the sale. These strong locational and income factors resulted in
the property selling at an overall rate of only 7.87 percent, the lowest of the
surveyed properties.
Sale No. 2, is the pending sale of a 186,081 square foot center located on
International Drive in Orlando, Florida. The property was developed in 1995 and
is in excellent condition. The power center is located in a tourist area and
includes a $650,000 pad site. Anchor tenant rents average approximately $10.00
per square foot with in-line tenants averaging $15.00 per square foot. This
smaller center is anchored by strong national tenants such as TJ Maxx, Old Navy
and Bed, Bath and Beyond. The sale price per square foot of owned GLA was
$112.19. This price results in a going-in capitalization rate of 9.99 percent.
Sale No. 3, is located in Colma California. The 213,603 square foot center
sold in June 1997 for $183.40 per square foot based on an NOI per square foot of
$15.50, similar to the subject's NOI. The center has strong anchor tenants in
Marshalls, Nordstrom Rack, Kids 'R Us, Old Navy and Barnes & Noble. Total square
footage of the property is 351,632 and includes other space occupied by UA
Cinema, NY Fabric and a vacant Home Depot. The property sold based on an overall
capitalization rate of 8.45 percent.
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Sales Comparison Approach
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Sale No. 4, took place in May 1997. The 469,392 square foot center is
adjacent to Potomac Mills Mall in a strong local retail area of Woodbridge
Virginia. Rental rates at the center average about $5.00 per square foot lower
than the subject's and thus the property sold on a unit basis below $100 per
square foot. At 10.23 percent, it also sold at a slightly higher OAR than the
previous sales.
Sale No. 5, is a Freemont California sale of a 492,392 square foot center
with a total of 661,140 square feet of building area. The property was
originally constructed as a regional mall and redeveloped in the early 1990s
into is current configuration. The property sold at an OAR of 8.75 percent with
an average NOI of $8.00 per square foot.
Sale 6 is a 418,356 square foot center located in LaJolla California that
sold in March 1997. The property's anchors included an AMC Theaters, Marshalls,
Ross and Smith's Food King. Like the subject, the property's NOI is high which
resulted in a high price paid for the center of $175.69 per square foot.
Only two sales in the selection are geographically proximate to the
subject. They include Sale No. 10 (Saugus Plaza), and Sale No. 13 (Middlesex
Mall). Saugus Plaza is a 168,076 square foot center located north of Boston in
a strong retail area. It is anchored by K-Mart, Super Stop & Shop and PJ's Pet
Center. This property was purchased along with 26 other properties in
metropolitan Boston as part of a bulk purchase. The buyer indicated the
portfolio was purchased based on an overall rate of 11.0 percent but would not
divulge any specific information about individual properties. Since the sale, a
number of tenants have left the center as part of a repositioning strategy.
The second local sale is the Middlesex Mall in Burlington Massachusetts.
This center was developed as a regional mall in 1976 but has been slowly
transformed into a power center in the past few years. There was considerable
in-line vacancy at the time of the sale and the purchaser planned to eliminate
the in-line tenants and redevelop the interior space for larger users. The low
NOI per square foot reflects the condition of the center at the time of the
sale.
We would also note Sale No. 8 as it represents the largest center in the
survey, with strong anchor alignments which make up a majority of GLA. This
center reflects a sale price of $96.98 per square foot with an overall rate of
9.15 percent. The lower unit sale price results from the lower NOI per square
foot when compared to the subject's. The property is a redevelopment of a failed
regional mall situated near the Oregon-Washington border along Interstate 5 in
north Portland.
The balance of comparable shopping center sales are situated in varying
markets across the country. They have been included because of their
comparability to the subject by virtue of anchor alignment, merchandising mix,
size, etc, although only one is similar in terms of its size. We believe that
these sales provide a better indication of value for the subject than the
local/regional center sales.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or
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Sales Comparison Approach
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motivations surrounding the sale, changes in market conditions since the sale,
the location of the real estate, its physical traits and the economic
characteristics of the property. The first adjustment made to the market data
takes into account differences between the subject property and the comparable
property sales with regard to the legal interest transferred. Advantageous
financing terms or peculiar conditions of sale are then adjusted to reflect a
normal market transaction. Next, changes in market conditions must be accounted,
thereby creating a time adjusted normal unit of comparison. Lastly, adjustments
for location, the physical traits, and the economic characteristics of the
market data are made in order to generate the final adjusted unit rate which is
appropriate for the subject property.
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. The comparables were all encumbered by
a number of leases with varying sized tenants and expiration dates. We believe,
then, that no adjustment to the market data is necessary for the property rights
conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis
were accomplished with cash and/or cash and market oriented financing.
Therefore, no adjustment for financial terms is required for the comparables.
Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale may
significantly affect transaction prices. However, all sales used in this
analysis are considered to be "arms-length" market transactions between both
knowledgeable buyers and sellers on the open market. Therefore, no adjustment
for conditions of sale are required for the comparables with the exception of
Sale 10 which was part of a bulk purchase. Typically in bulk purchases,
properties are purchased based on an overall average of prices rather than
applying specific investment parameters to an individual stronger or weaker
property. As a result, we believe Sale 10 warrants a positive adjustment for the
bulk purchase consideration.
Market Conditions
As discussed in the "Trade Area Analysis" section of this report, the
subject property is expected to continue capturing a substantial share in its
market area. Many retail markets are now considered to be over-built. For
instance, many markets have experienced a flood of new big box users over the
past several years. This has been the direct result of the explosive retail
market in the mid to late 1980s and following the recession of the early 1990s.
As such, fewer transactions have transpired over the last few years as a result
of the inability of knowledgeable buyers and sellers to come to terms. High
vacancy rates, declining rental and growth rates, expected expense growth, and
an abundance of competition, combined with competition from alternative
investments and general lack of financing, have served to depress the market for
retail space. For this reason, negative adjustments might be considered
appropriate for older sales in this analysis.
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Sales Comparison Approach
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Still, well performing retail projects have become an attractive
investment to such entities as foreign and domestic insurance companies, pension
funds and syndication's. Moreover, the majority of sales presented have all
taken place within the last 12 to 18 months. Adjustments for market conditions
are difficult at best in this kind of analysis. Thus, no market condition
adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed in the
"Regional" and "Retail Market" sections of this report, metropolitan Boston has
experience slow but steady growth in the past few years and has recovered well
from the deep recession New England suffered in the early 1990s. Thus it is
poised for continued vitality into the foreseeable future.
From a review of the sales, there appear to be no glaring locational
differences between comparables. It is noted, however, that several of the sales
are located in areas which are experiencing somewhat better population and
income growth, which would be considered superior to the subject location.
Likewise, some of the properties are in markets which are experiencing either
negative or slower growth and could be considered inferior to the subject.
Several of the properties are also situated in significantly smaller trade
areas/regions which would be considered inferior to Boston. The strength of the
subject's trade area income places it in a positive locational position.
Physical Traits
Most sales presented were constructed or renovated during the mid-1980s to
the early 1990s. Some involved the reconfiguration of an older strip center into
a power center format. All sales were considered to be in good condition at sale
and no measurable physical adjustments can be readily quantified.
Economic Characteristics
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to
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Sales Comparison Approach
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the pro-forma income of the individual sale properties. The table below adjusts
each property's sale price per square foot on this basis. The derivation of the
subject's projected first year net operating income (FY1998 $15.22 per square
foot) is presented in the "Income Approach" section of this report and is based
on first year NOI.
================================================================================
Price Per SQ/FT Adjustment Chart
================================================================================
Comp.
Sale Subject Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
================================================================================
1 $15.87 $15.22 0.9590 $201.61 $193.35
- --------------------------------------------------------------------------------
2 $11.21 $15.22 1.3577 $112.19 $152.32
- --------------------------------------------------------------------------------
3 $15.50 $15.22 0.9819 $183.40 $180.09
- --------------------------------------------------------------------------------
4 $10.13 $15.22 1.5025 $99.06 $148.83
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5 $8.00 $15.22 1.9025 $91.41 $173.91
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6 $15.81 $15.22 0.9627 $175.69 $169.13
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7 $13.70 $15.22 1.1110 $131.15 $145.70
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8 $8.87 $15.22 1.7159 $96.98 $166.41
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9 $6.59 $15.22 2.3096 $69.32 $160.10
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10 $7.97 $15.22 1.9097 $72.44 $138.34
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11 $9.84 $15.22 1.5468 $99.85 $154.44
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12 $12.11 $15.22 1.2568 $128.83 $161.92
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13 $6.30 $15.22 2.4159 $60.04 $145.05
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14 $18.43 $15.22 0.8258 $174.03 $143.72
- --------------------------------------------------------------------------------
15 $14.98 $15.22 1.0160 $157.98 $160.51
================================================================================
Survey
Mean: $11.69 $15.22 1.3020 $123.60 $160.92
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $138 to $193 per square foot with a mean of
approximately $161 per square foot on a stabilized basis. The subject's
"stabilized" net operating income per square foot of $15.22 is considered to be
most comparable to Sales Nos. 1, 3, 8, and 15. These improved property sales
show adjusted unit rates ranging between $161 and $193 per square foot of gross
leasable area.
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, however, do not explicitly convey by
themselves 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.
The subject is viewed as being the dominant power center in an area with
excellent demographics and limited competition. It is well leased with several
tenants that are unique to the market. Continued upside exists through the
potential for overage rents as the center matures.
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Sales Comparison Approach
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Considering the characteristics of the subject relative to the above, we
believe that a unit rate at the middle of the range of $165 to $170 per square
foot is appropriate. Applying this unit rate range to 778,292 square feet
results in a value of approximately $128,400,000 to $132,300,000 for the subject
property.
Based upon a net income of $11,843,750, a range of overall capitalization
rates extending from 9.0 to 9.2 percent is generated by the indicated value.
This range is considered to be reasonable for a property of the subject's
caliber.
Conclusion
In light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the range of $128,400,000
to $132,300,000, as of August 1, 1997.
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<PAGE>
INCOME APPROACH
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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, the discounted cash flow analysis is the
most applicable.
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 of 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 on the capitalization of the next year's projected
net income.
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 market value of the subject, operations are considered to be
at stabilization. Thus, the direct capitalization method will provide additional
support in the valuation process.
Discounted Cash Flow
The Discounted Cash Flow 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 indicative of the subject property's current value in the marketplace.
In this Income Approach to the valuation of Shoppers World, we have
utilized a 10 year holding period for the investment with the cash flow analysis
commencing on August 1, 1997. Investors typically look at holding periods
between 10 and 15 years. We have tested the sensitivity of the present value
over a 10 to 15 year time horizon and chosen a 10 year period as being a
realistic time to sell. Although an asset such as the subject has a much longer
useful life, an 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
considered long enough to model the asset's performance and profit from a
focused effort on maximizing its tenant mix, but short enough to
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Income Approach
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reasonably estimate the expected income and expenses of the real estate. Please
note that our cash flows are provided on a fiscal year basis.
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 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
expectations of the investment universe for this type of real estate. Cushman &
Wakefield regularly surveys these market participants. The results of our most
recent Investor Survey are found in the Addenda.
By forecasting the anticipated income stream and discounting future value
at reversion to 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 interests similar to the subject. In this regard we see the
subject as an important long term investment opportunity for a competent
shopping center owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software 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 following page is a summary of
the expected annual cash flows from the operation of the subject over the stated
investment holding period. Following is a detailed discussion of the components
which form the basis of this analysis.
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, and
reimbursement of certain expenses incurred in the ownership and operation of the
real estate.
The minimum base rent represents a legal contract establishing a return to
the investors in the real estate, while the passing of certain expenses on to
tenants serves to maintain this return in an era of continually rising costs of
operation. The 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. In the initial year of the
investment, fiscal year 1998, it is projected that the subject property will
generate approximately $16,411,630 in potential gross revenues, equivalent to
$21.09 square foot of
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<PAGE>
SHOPPERS WORLD 1997 UPDATE
PROJECT DESIGNATOR: SW97
ANNUAL CASH FLOW REPORT
BEGINNING 8/1/97 FOR 10 YEARS
7/31/97 @ 15:26
FY1998 FY1999 FY2000 FY2001
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 12,296,586 12,701,378 12,788,898 13,310,526
----------- ----------- ----------- -----------
TOTAL MINIMUM RENT 12,296,586 12,701,378 12,788,898 13,310,526
RECOVERIES:
CAM 1,564,377 1,630,860 1,687,732 1,746,963
REAL ESTATE TAXES 2,271,916 2,922,664 3,024,961 3,130,833
INSURANCE 176,546 183,996 190,435 197,102
----------- ----------- ----------- -----------
TOTAL RECOVERIES 4,012,839 4,737,520 4,903,128 5,074,898
OVERAGE RENT 102,205 246,478 257,555 269,020
SALES VOLUME (000) 89,599 92,735 95,980 99,340
----------- ----------- ----------- -----------
GROSS RENTAL
INCOME 16,411,630 17,685,376 17,949,580 18,654,444
VACANCY ALLOWANCE (62,499) (66,218) (67,543) (69,136)
----------- ----------- ----------- -----------
TOTAL INCOME 16,349,131 17,619,158 17,882,036 18,585,308
EXPENSES
- --------
TOTAL CENTER CAM 1,398,667 1,447,620 1,498,287 1,550,727
TOTAL CTR TAXES 2,265,926 2,903,967 3,005,606 3,110,801
TOTAL CTR INSURANCE 184,324 190,775 197,452 204,363
MANAGEMENT FEE 656,464 707,415 717,983 746,177
----------- ----------- ----------- -----------
TOTAL EXPENSES 4,505,381 5,249,777 5,419,328 5,612,068
----------- ----------- ----------- -----------
NET OPERATING
INCOME 11,843,750 12,369,381 12,462,708 12,973,240
COMMISSIONS 0 0 0 0
STRUCTRUAL RESERVE 77,734 80,455 83,271 86,186
----------- ----------- ----------- -----------
CASH FLOW 11,766,016 12,288,926 12,379,437 12,887,054
<TABLE>
<CAPTION>
FY2002 FY2003 FY2004 FY2005 FY2006 FY2007
INCOME
- ------
<S> <C> <C> <C> <C> <C> <C>
MINIMUM RENT:
ALL TENANTS 13,579,052 13,703,448 13,737,000 13,798,666 14,545,456 14,792,214
----------- ----------- ----------- ----------- ----------- -----------
TOTAL MINIMUM RENT 13,579,052 13,703,448 13,737,000 13,798,666 14,545,456 14,792,214
RECOVERIES:
CAM 1,805,896 1,864,100 1,925,917 1,993,672 2,061,990 2,130,532
REAL ESTATE TAXES 3,240,412 3,353,826 3,471,209 3,592,700 3,716,788 3,848,589
INSURANCE 204,000 211,139 218,532 226,179 233,955 242,288
----------- ----------- ----------- ----------- ----------- -----------
TOTAL RECOVERIES 5,250,308 5,429,065 5,615,658 5,812,551 6,012,733 6,221,409
OVERAGE RENT 280,885 293,166 305,876 319,032 332,648 346,742
SALES VOLUME (000) 102,817 106,415 110,140 113,995 117,946 122,007
----------- ----------- ----------- ----------- ----------- -----------
GROSS RENTAL
INCOME 19,110,244 19,425,678 19,658,534 19,930,248 20,890,836 21,360,366
VACANCY ALLOWANCE (73,243) (74,494) (75,495) (76,540) (78,171) (83,753)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCOME 19,037,000 19,351,184 19,583,040 19,853,708 20,812,664 21,276,612
EXPENSES
- --------
TOTAL CENTER CAM 1,605,002 1,661,177 1,719,318 1,779,494 1,841,777 1,906,239
TOTAL CTR TAXES 3,219,679 3,332,368 3,449,001 3,569,716 3,694,655 3,823,968
TOTAL CTR INSURANCE 211,516 218,919 226,581 234,512 242,719 251,215
MANAGEMENT FEE 764,409 777,027 786,341 797,210 835,633 854,415
----------- ----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES 5,800,606 5,989,491 6,181,241 6,380,932 6,614,784 6,835,837
----------- ----------- ----------- ----------- ----------- -----------
NET OPERATING
INCOME 13,236,394 13,361,693 13,401,799 13,472,776 14,197,880 14,440,775
COMMISSIONS 0 0 0 0 16,052 0
STRUCTRUAL RESERVE 89,202 92,324 95,555 98,900 102,361 105,944
----------- ----------- ----------- ----------- ----------- -----------
CASH FLOW 13,147,192 13,269,369 13,306,244 13,373,876 14,079,467 14,334,831
</TABLE>
<PAGE>
Income Approach
================================================================================
total appraised GLA of 778,292 square feet. These forecasted revenues may be
allocated to the following components:
================================================================================
Shoppers World
Revenue Summary
Initial Year of Investment - FY 1998
================================================================================
Revenue Component Amount Unit Rate Income Ratio
================================================================================
Minimum Rent $12,296,586 $ 15.80 74.9%
- --------------------------------------------------------------------------------
Overage Rent $ 102,205 $ .13 0.6%
- --------------------------------------------------------------------------------
Expense Recoveries $ 4,012,839 $ 5.16 24.5%
- --------------------------------------------------------------------------------
Total $16,411,630 $ 21.09 100.0%
================================================================================
Minimum Rental Income
The 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
vacant space (if applicable) market rent growth, and renewal/turnover
probability.
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. The 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.
The minimum rents forecasted at the subject property are essentially
derived from various tenant categories: anchor tenant revenues consisting of
base rent obligations, tenant revenues consisting of all in-line shops and
ground rent paid by outparcel tenants.
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 the
trade area. Consequently, the best measure of minimum rental income can
sometimes be its actual rent roll leasing schedule.
Rent from the tenants consists of contractual obligations of the space
leases. Aggregate rent in the initial year of the holding period is shown to be
$12,296,586 or $15.80 per square foot based upon a total appraisal GLA of
778,292 square feet. As such, our analysis of recently negotiated leases for
tenants at the subject provides important insight into perceived market rent
levels for the center. This is of particular importance since tenants are
cognizant of the center's position in the market and are factoring this
knowledge into their lease negotiations. Inasmuch as a tenant's ability to pay
rent is based upon expected sales achievement, the level of negotiated rents is
directly related to the tenant's perception of expected performance at the
property. The following chart summarizes the various components of minimum rent.
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Income Approach
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================================================================================
Minimum Rent Allocation
================================================================================
Minimum Rent FY1998 Revenue Applicable GLA Unit Rate
================================================================================
Anchors $10,273,896 712,487 SF $14.42
- --------------------------------------------------------------------------------
Tenants < 1,000 SF $-0- 00 SF $0.00
- --------------------------------------------------------------------------------
Tenants 1,000 - 2,999 SF $260,992 6,002 SF $43.48
- --------------------------------------------------------------------------------
Tenants 3,000 - 4,999 SF $-0- 00 SF $0.00
- --------------------------------------------------------------------------------
Tenants 5,000 - 10,000 SF $463,032 14,571 SF $31.78
- --------------------------------------------------------------------------------
Tenants > 10,000 SF $618,740 28,782 SF $21.50
- --------------------------------------------------------------------------------
Owned Outparcels $679,926 16,450 SF $41.33
- --------------------------------------------------------------------------------
Subtotal $12,296,586 778,292 SF $15.80
================================================================================
Represents stabilized revenue.
================================================================================
From the chart, we would expect to see a general pattern of an inverse
relationship between suite size and rent. That is, as the suite size increases,
the average unit base rent achieved declines. The objective here is to
demonstrate a reasonably quantifiable pattern between suite size and rent.
Anchors have attained the lowest base rent while the in-line tenant suites have
achieved rents ranging from $21.50 to $43.48 per square foot. As such, a
declining rent trend relative to suite size is generally in evidence. It should
be noted that the anchor tenant revenue is skewed downward because of the below
market rents being paid by tenants such as Bradlees, Macy's Furniture, Sears
Homelife and Toys and Kids 'R Us.
These lease transactions implicitly support the assumption that,
typically, there is an inverse correlation between unit rates and the amount of
space being leased, and they reflect average rates. We recognize that, in
practice, there are unit rate gradations within tenant categories based on such
attributes as location within the center, unit frontage and depth, tenant type
and credit worthiness, concessions/tenant allowances, etc. However, as the
tenant mix and configuration may not be fixed over time, it is more appropriate
to estimate what the average base rental levels paid at the property would be
for the different tenant categories.
Anchor Tenant Leases
The table on the following page illustrates the anchor tenant alignment
along with contract rental rates for each.
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<TABLE>
<CAPTION>
==========================================================================================
Anchor Tenant Revenue Summary
==========================================================================================
Tenant GLA(SF) Primary Term Annual Rent Unit Rate(SF) % Rent
==========================================================================================
<S> <C> <C> <C> <C> <C>
General Cinema (OP) 85,000 20 yrs. Yrs. 1-2 $1,700,000 $20.00 9.0%
from 1/95 Yrs. 3-20 $1,912,500 $22.50
- ------------------------------------------------------------------------------------------
Kids 'R us 18,300 25 yrs. $45,000 $2.46 0.0%
(Ground Lease) from 10/94
- ------------------------------------------------------------------------------------------
Toys 'R Us 45,000 25 yrs. $105,000 $2.33 0.0%
(Ground Lease) from 10/94
- ------------------------------------------------------------------------------------------
Macy's Furniture 40,000 25 yrs. $-0- $-0- 3.0%
(Ground Lease) from 9/94
- ------------------------------------------------------------------------------------------
TJ Maxx 39,884 15 yrs. Yrs. 1-5 $638,144 $16.00 2.0%
from 8/95 Yrs. 6-10 $701,958 $17.60
Yrs. 11-15 $772,154 $19.36
- ------------------------------------------------------------------------------------------
Sears Homelife 36,108 l0 yrs. Yrs. 1-5 $306,918 $8.50 0.0%
from 11/94 Yrs. 6-10 $353,784 $9.80
- ------------------------------------------------------------------------------------------
Bradlees 102,555 30 yrs. Yrs. 20-30 $100,000 $.98 0.0%
(Existing-OP) from 10/75
- ------------------------------------------------------------------------------------------
A.C. Moore 24,560 l0 yrs. Yrs. 1-5 $392,960 $16.00 0.0%
from 10/97 Yrs. 6-8 $417,520 $17.00
Yrs. 9-10 $442,080 $18.00
- ------------------------------------------------------------------------------------------
Marshalls 50,081 15 yrs. Yrs. 1-5 $771,247 $15.40 2.5%
from 7/95 Yrs. 6-10 $848,372 $16.94
Yrs. 11-15 $933,009 $18.00
- ------------------------------------------------------------------------------------------
Bob's 50,059 15 yrs. Yrs. 1-5 $730,861 $14.60 0.0%
from 9/95 Yrs. 6-10 $803,948 $16.06
Yrs. 11-15 $884,042 $17.66
- ------------------------------------------------------------------------------------------
Linens 'N Things 40,159 15 yrs. Yrs. 1-5 $692,743 $17.25 2.5%
from 8/95 Yrs. 6-10 $762,218 $18.98
Yrs. 11-15 $838,118 $20.87
- ------------------------------------------------------------------------------------------
Sports Authority 43,629 20 yrs. Yrs. 1-2.5 $872,580 $20.00 1.0%
from 5/95 Yrs. 2.5-5 $916,209 $21.00
Yrs. 6-10 $959,838 $22.00
Yrs. 11-15 $1,003,467 $23.00
Yrs. 16-20 $1,047,096 $24.00
- ------------------------------------------------------------------------------------------
Barnes & Noble 29,963 15 yrs. Yrs. 1-5 $988,779 $33.00 2.0%
from 10/95 Yrs. 6-10 $1,137,096 $37.95
Yrs. 11-15 $1,307,585 $43.64
- ------------------------------------------------------------------------------------------
Designer Shoe whse. 27,089 10 yrs. Yrs. 1-5 $487,602 $18.00 2.0%
from 6/97 Yrs. 6-10 $541,708 $20.00
- ------------------------------------------------------------------------------------------
OfficeMax 30,100 15 Yrs. Yrs. 1-5 $872,400 $28.98 0.0%
from 3/96 Yrs. 6-10 $902,400 $29.98
Yrs. 11-15 $932,400 $30.98
- ------------------------------------------------------------------------------------------
The Wiz 50,000 15 yrs. Yrs. 1-2.5 $1,198,000 $23.96 0.0%
from 3/96?? Yrs. 2.5-5 $1,448,000 $28.96
Yrs. 6-10 $1,523,000 $30.46
Yrs. 11-15 $1,465,000 $29.30
- ------------------------------------------------------------------------------------------
Total 712,487
==========================================================================================
</TABLE>
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Income Approach
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Of the anchors at Shoppers World, Bradlee's is the largest at 102,555
square feet and they also pay the lowest unit rate of $.98 per square foot per
year. They lease an outparcel building which is a sublease from Stop and Shop
dating back to 1974. The current lease extends to 2005 and the tenant has three
additional five year renewals remaining with rents to increase based upon
changes in CPI from the initial lease date in 1974.
The second largest anchor is General Cinema with 85,000 square feet. They
are located on an outparcel situated on Flutie Pass between Shoppers World and
the Natick Mall. Their initial lease is for 20 years and they have four five
year renewal options. Adequate parking has been an issue for the Cinema and
effective September 1, 1997, they will be leasing an additional outparcel site
along Route 9 for $225,000 annually.
Both Macy's (formerly Jordan Marsh) and Toys 'R Us were in the existing
Shoppers World mall and were granted ground lease arrangements that are
considered very favorable to the tenant. As a concession to moving the Macy's
department store to the Natick Mall, the developer agreed to lease the Macy's
Furniture pad at no rent for the entire 25 year lease term. The tenant will,
however, pay a portion of CAM expenses and taxes. Sears' main department store
is also at the Natick Mall, and, as a result, the space for Sears Homelife was
leased at rates considered below market for similar space.
The Wiz recently announced plans to leave the New England market and thus
their 50,000 square foot space will soon be vacant. The company is not going out
of business therefore we assume they will continue to pay their $23.96 per
square foot annual rent until another tenant is found for the space. Mr. Loren
Henry of DDR indicates there are several tenants interested in the space, thus
we assumed the space will continue to generate rent at the same level despite
the departure of The Wiz.
The Designer Shoe Warehouse (DSW) and A.C. Moore are the two newest
anchors at the center. They complete the center's construction by leasing the
end cap spaces along Route 30. DSW opened earlier this year and A.C. Moore is
expected to be open in October, 1997. Both spaces are leased for 10 years with
three consecutive five year renewal options thereafter. DSW is paying $18.00 per
square foot for their 27,089 square foot space and A.C. Moore is paying $16.00
per square foot for their 24,560 square foot space. Both contribute to CAM and
tax recoveries. A.C. Moore also pays a 5 percent administrative fee above CAM.
DSW pays a 10 percent admin fee over CAM and a 15 percent fee over taxes and
insurance.
The remaining six anchor leases range from $14.60 to $33.00 per square
foot and are for 15 to 20 years, each with several five year options.
In-Line Tenant Revenue
In addition to the anchor spaces, there are also seven in-line shops
totaling approximately 49,355 square feet, and ranging in size from 1,871 to
18,007 square feet. The following table depicts the rental terms for the in-line
shops.
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<TABLE>
<CAPTION>
===============================================================================================
In-Line Tenant Revenue Summary
===============================================================================================
Tenant GLA (SF) Primary Term Annual Rent Unit Rate (SF) % Rent
===============================================================================================
<S> <C> <C> <C> <C> <C>
Jewelry Depot 6,071 7 yrs. Yrs. 1-2 $212,485 $35.00 4.0%
from 12/96 Yr. 3 $218,556 $36.00
Yr. 4 $224,627 $37.00
Yr. 5 $230,698 $38.00
Yr. 6 $236,769 $39.00
Yr. 7 $242,840 $40.00
- -----------------------------------------------------------------------------------------------
John Harvard Brewhouse 8,500 10 yrs. Yrs. 1-5 $246,500 $29.00 5.0%
from 8/96 Yrs. 6-10 $283,475 $33.35
- -----------------------------------------------------------------------------------------------
Cambridge Soundworks 2,196 10 yrs. Yr. 1 $87,840 $40.00 0.0%
From 9/95 Yr. 2 $91,354 $41.60
Yr. 3 $95,007 $43.26
Yr. 4 $98,808 $44.99
Yr. 5 $102,760 $46.79
Yr. 6 $106,870 $48.67
Yr. 7 $111,146 $50.61
Yr. 8 $115,591 $52.64
Yr. 9 $120,215 $54.74
Yr. 10 $125,024 $56.93
- -----------------------------------------------------------------------------------------------
Snip-Its 1,871 5 yrs. Yr. 1 $84,195 $45.00 0.0%
from 10/95 Yr. 2 $86,721 $46.35
Yr. 3 $89,322 $47.74
Yr. 4 $91,997 $49.17
Yr. 5 $94,766 $50.65
- -----------------------------------------------------------------------------------------------
Corning At Home 10,775 5 yrs. Yrs. 1-5 $258,600 $24.00 3.0%
from 12/95
- -----------------------------------------------------------------------------------------------
Bruegger's Bagel 1,935 10 yrs. Yrs. 1-5 $77,400 $40.00 6.0%
from 7/96 Yrs. 6-10 $89,010 $46.00
- -----------------------------------------------------------------------------------------------
Mikasa 18,007 l0 yrs. Yrs. 1-2.5 $360,140 $20.00 3.0%
from 11/96 Yrs. 2.5-5 $414,161 $23.00
Yrs. 6-10 $450,175 $25.00
- -----------------------------------------------------------------------------------------------
Total 49,355
===============================================================================================
</TABLE>
The in-line tenant leases range from $20.00 to $45.00 per square foot with
lease terms ranging from 5 to 10 years. Five of the seven in-line tenants also
have percentage rent clauses as part of their rent package along with prorata
share of operating expenses. Jewelry Depot is reportedly not faring well and may
ultimately have to be replaced. Their sales through May 1997 were down about 50
percent from 1996 levels.
Out Parcel Revenue
There are a total of eight out parcels situated in various locations on
the site. The General Cinema and existing Bradlees parcels were discussed as
part of the discussion for anchor tenants. As mentioned, General Cinema will be
leasing a second outparcel beginning in September.
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Income Approach
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Two of the out parcels, Speen Street and Route 30, are currently under
agreement for sale. These sites will be discussed more fully in the land
valuation analysis in a following section.
The remaining four parcels are ground leased to the tenants shown in the
following table:
================================================================================
Out Parcel Tenant Revenue Summary
<TABLE>
<CAPTION>
=====================================================================================================
Tenant GLA (SF) Primary Term Annual Rent Unit Rate (SF) % Rent
=====================================================================================================
<S> <C> <C> <C> <C> <C>
TGI Friday's Restaurant 6,300 10 yrs. Yrs. 1-10 $175,000 $27.78 2.0%
from 1/96
- -----------------------------------------------------------------------------------------------------
Olive Garden Restaurant 9,200 15 yrs. Yrs. 1-5 $175,000 $19.02 0.0%
from 6/96 Yrs. 6-10 $201,250 $21.88
Yrs. 11-15 $231,438 $25.16
- -----------------------------------------------------------------------------------------------------
Metrowest Bank ATM 950 10 yrs. Yrs. 1-10 $7,525 $7.92
from 1/97
- -----------------------------------------------------------------------------------------------------
Mass Port - Airport Express 2,000 10 yrs. Yr. 2 $312,000 $156.00 0.0%
Bus Terminal from 10/95 Yr. 3 $324,480 $162.24
Yr. 4 $337,459 $168.73
Yr. 5 $350,958 $175.50
Yr. 6 $364,996 $182.49
Yr. 7 $379,596 $189.80
Yr. 8 $394,779 $197.39
Yr. 9 $410,571 $205.29
Yr. 10 $426,993 $213.50
- -----------------------------------------------------------------------------------------------------
Total 18,450
=====================================================================================================
</TABLE>
Analysis of Market Leases
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 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 the
trade area. Due to its location and overall uniqueness to the Boston area, it is
difficult to compare the subject to other local centers.
A survey of local retail properties was presented in the Market Analysis
section for comparison with the subject property. These are retail centers of
various sizes and quality located throughout the subject's immediate competitive
market. The centers detailed in the chart are all within the secondary trade
area of the subject. As previously discussed, the four most competitive centers
are Cloverleaf Marketplace (184,000 SF community shopping center), Framingham
Mall (195,000 SF community shopping center), Sherwood Plaza (229,000 SF
community shopping center) and the Natick Mall (1.156 SF super-regional mall).
The average in-line rents at these centers currently range from $10.00 to $60.00
per square foot, obviously with the Natick Mall commanding the highest rental
rates for in-line space.
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o Natick Mall, reopened in October 1994 as a super-regional mall. With
approximately 1.156 million square feet and 176 tenants, the
redeveloped mall targets the upper income population in the region.
Anchor tenants include Filene's, Macy's, Lord & Taylor and Sears.
In-line rental rates at the property range from $25 to $125 per
square foot. The tenant mix is more upscale than the tenant mix at
the subject since they do not target off-price shoppers.
o The Framingham Mall is a 195,000 square foot enclosed community
center anchored by Filene's Basement (36,750 square feet) and
Lechmere (60,950 square feet). It is located at 400 Cochituate Road
in Framingham immediately across from the subject. This property is
an older enclosed format and the in-line space is tenanted largely
by local and regional tenants thus rental rates at the property are
generally lower, ranging from $14.00 to $18.00 per square foot.
o Cloverleaf Marketplace is a 184,250 square foot community center
located on Speen Street immediately across from the Natick Mall. It
is presently anchored by Burlington Coat Factory, Service
Merchandise and Michaels. This former enclosed center has been
reorienting toward larger users and has changed the layout of the
property in the last few years. In-line rental rates average $15.00
to $20.00 per square foot.
o Sherwood Plaza is a 229,000 square foot community center located on
Route 9 across from the Natick Mall. It is anchored by Ames (62,500
square feet), Petco and MVP Sports. The owners of this center are
reluctant to quote asking rents but provide a range of $16.00 to
$20.00 per square foot.
Thus market rental rates for in-line spaces at the primary competition
range between $14.00 and $125.00 per square foot annually. Typical leases are
triple net and run for three to ten years with annual CPI escalation's or set
increases every three to five years. The rates at these malls generally support
the in-line rents reported at the subject, but on average are somewhat lower,
with the exception of the Natick Mall.
To determine market standards for the leasing of anchor spaces, we
surveyed comparable centers in metropolitan Boston. In the Market Analysis
section we presented rental rates both locally and in the region. Unfortunately,
due to the competitive nature of retail establishments, anchor leases were not
always reported by property managers. A national survey of anchor tenants at
malls and power centers across the country is presented in the Addenda of this
report. As can be seen in the national survey, leases typically range from $7.00
to $15.00 per square foot, with 10 to 20 year terms being typical. The overall
average for the 1,292,956 square feet surveyed is $8.42 per square foot,
substantially lower than the anchor tenant leases at the subject.
The subject has 16 anchor spaces leased to good national tenants. As
mentioned, however, The Wiz will soon be vacating. In our opinion, the signed
anchor tenant leases at Shoppers World are the best indications of market rates
for the subject.
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Income Approach
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The subject has seven in-line tenant spaces which compete in the market
for tenants, however, again the uniqueness of the subject property in the market
coupled with its strong retail location results in higher rental rates for
in-line space as well.
Conclusion
From the data, it is clear that current market rents at Shoppers World are
well supported by other competing properties as well as recent leasing activity
in the center itself. The property enjoys an excellent location within a
high-income trade area which should only be strengthened by future commercial
development along Routes 9 and 30. Shoppers World is fully leased with no
absorption of vacant space necessary for this analysis. On balance, we believe
that the subject property should remain a viable shopping destination to a
healthy trade area into the foreseeable future.
After considering all of the above, relative to the subject's position in
the market, we have utilized the following market rental rate assumptions for
space at Shoppers World.
======================================================
Market Rent Projections
======================================================
Suite Size Rental Rate Range Market Rate
======================================================
Anchors $.98 to $33.00 $18.00
Under 1,000 SF -0- $0.00
------------------------------------------------------
1,000 - 2,999 SF $40.00 to $45.00 $40.00
------------------------------------------------------
3,000 - 4,999 SF -0- $0.00
------------------------------------------------------
5,000 - 10,000 SF $35.00 $35.00
------------------------------------------------------
Over 10,000 SF $20.00 to $24.00 $24.00
======================================================
Lease Terms
The typical lease term for new in-line tenant leases in centers such as
the subject generally ranges from five to ten years. For anchor tenants, typical
lease terms range from 10 to 25 years. Market practice dictates that it is not
uncommon to receive rent bumps throughout the lease term 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 (3.5 to 4.0 percent) and be capped at a higher maximum
(6 to 7 percent) amount. Many leases at the subject property have set increases
which escalate rent either annually or on specified dates throughout the lease
term. We have reflected an annual escalation method in our analysis for new
in-line leases based upon a CPI factor which in this case is 3.5 percent.
Concessions
Free Rent
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 large, retail centers shows that free rent is
generally limited to new projects
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Income Approach
================================================================================
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.
A review of competing centers reveals that one to two months are
occasionally being offered for three to five year deals but it is not common.
The subject has achieved 100 percent occupancy and is viewed as a premier retail
center in the area. As such, we do not believe that it is necessary to offer
free rent.
Tenant Workletter
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that the tenant workletter is not typically
offered but often times is given as part of tenant negotiation. Some tenants at
the subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. For this analysis, we assumed the space would be leased on an
"as is" basis given the limited amount of work that should be required upon
expiration of the current in-line tenant leases. The anchor leases extend beyond
the ten year analysis and thus require no consideration for tenant workletters.
Absorption
The subject property is presently 100 percent leased. We are aware of only
one upcoming vacancy, the 50,000 square foot Wiz space. As mentioned, we believe
the tenant will continue to pay rent until such time as a new tenant is found
for the space and thus no consideration of vacancy for this space is warranted.
No other vacancies are anticipated at this time.
Releasing Assumptions
It is our best estimate that there is a 75 percent probability that an
existing tenant will renew their lease, while the remaining 25 percent will
vacate their space at expiration.
Many tenants have set options to renew their leases. Option renewals have
been compared to projected market rents in order to forecast the probability of
tenant options being exercised. In this analysis, all options are assumed to be
exercised.
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's Autumn 1996 survey of
pension fund, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 4.0 percent. The low and high mean is shown to be 3.3 and 3.5
percent, respectively. (see Addenda for survey results).
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Income Approach
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The Peter F. Korpacz Investor Survey (Second Quarter 1997) shows slightly
more conservative results with average annual rent growth of 2.88 percent.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and management's
desire to attract and keep certain tenants that increase the center's synergy
and appeal. With virtually no lease-up to contend with as well as having the
newest, most dominant center in the market aside from Natick Mall, management is
in a formidable position to command higher rents. After considering the above,
we have utilized a rent growth rate of 3.5 percent per year over the holding
period.
Commissions
Based upon our analysis of competing properties within the market as well
as historic leasing activity at the subject, we have made an allowance for
leasing commissions for this assignment. For new leases, a commission of 6
percent of the first year's rent and 3 percent of the remaining year's rent on
five year leases will be charged, while renewal leases will be at 50 percent of
those amounts. With the 75/25 probability assumption, the blended commission
rate is 3.75 percent the first lease year and 1.875 percent the following years.
Overage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most leases have a natural breakpoint. In a few instances, the
lease provides for a specified breakpoint sales level. The average overage
percentage for small space retail tenants is in a range of 0 percent to 6
percent. Anchor tenants' overage percentage ranges from 0 to 2.5 percent, with
the exception of General Cinema whose percentage rent is 9.0 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 one measure for protecting the equity investor against
inflation.
Based on the existing lease structure, some tenants will be into
percentage rent during their lease term. Thus far only two tenants have reached
their breakpoints, Macy's Furniture and TGI Friday's Restaurant. A summary of
current sales for the tenants at Shopper's World can be found in the Addenda. In
our analysis, we have estimated 1997 sales based upon a 3.5 percent increase
over 1996 sales except for those tenants whose sales through May 1997 are
clearly far below those in 1996. Thus, we feel that our conservative analysis
warrants some upside to the projections.
Expense Reimbursement
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, insurance, management and common area maintenance (CAM). In the first
year of the investment, it is projected that the subject property will generate
approximately $4,012,839 in reimbursements
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Income Approach
================================================================================
for these operating expenses. This estimate is equal to approximately $5.16 per
square foot of GLA and represents approximately 24.5 percent of potential gross
revenues.
Common Area Maintenance
Common area maintenance is recovered from tenants on a pro-rata share
basis. Most tenants are charged an administrative fee between 5 and 15 percent.
In some instances, management fees are also passed through to tenants through
CAM billings. This is viewed as an aggressive leasing structure but most often
affects the smaller tenants or those viewed as more risky in terms of their
credit profile. Since these leases are relatively recent, we have continued the
format of including management in CAM for those tenants whose leases include it.
Real Estate Taxes
Real estate taxes are recovered on a pro-rata share basis for tenants at
the center. The estimated FY1998 real estate tax recovery indicated for typical
in-line tenants is $3.23 per square foot. Several tenants have administrative
fees added to their tax obligation.
Insurance
Insurance expenses are recovered based upon a pro-rata share. In FY1998,
the expense is estimated to be $0.24 per square foot. Bradlees' and Macy's pay
their own liability insurance. Bradlee's, General Cinema, Macy's Furniture, Toys
'R Us and Kids 'R Us also pay their own property insurance, therefore these
items are not shown as expense recoveries on the cash flow. The remaining
tenants pay a pro-rata share of both liability and property insurance.
Allowance for Vacancy and Credit Loss
Both the investor and the appraiser are 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 and all the tenants were actually 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 provision for permanent vacancy and
credit loss of 3.0 percent among the existing non-anchor tenants.
In this analysis we have forecasted that there is a 75 percent probability
that an existing tenant will renew their lease and a 25 percent probability that
the space will turnover. Upon turnover, we have forecasted rent loss equivalent
to two months to be incurred to account for the time and/or costs associated
with bringing the space back on line. Thus, minimum rent as well as all
reimbursable income has been reduced by this forecasted probability. For tenants
exercising options, we have tested the option rent against projected market rent
as a means of forecasting the option probability. Where an option rent exceeds
the forecasted market rent, it would be assumed that the tenant will not
exercise its option. In this analysis, all tenant options are assumed to be
exercised.
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
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Income Approach
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investor would allow for credit loss. The remaining sum is effective gross
income which an informed investor may anticipate the subject property to
produce.
Effective Gross Income
In the initial year of the investment, effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately
$16,349,131, equivalent to $21.01 per square foot of appraised GLA.
================================================================================
Effective Gross Revenue Summary
Initial Year of Investment - FY1998
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $ 16,411,630 $21.09 100.00%
- --------------------------------------------------------------------------------
Less: Vacancy and credit Loss ($ 62,499) $ 0.08 0.38%
- --------------------------------------------------------------------------------
Effective Gross Income $ 16,349,131 $21.01 99.62%
================================================================================
Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. The non-reimbursable expenses associated with the
subject property include the management fee and miscellaneous expenses. We do
note that under many of the existing lease contracts, management is deemed
recoverable. Other expenses include a reserve for the replacement of short-lived
capital components, leasing commissions and alteration costs associated with
leasing space. Generally, it is our assumption that expenses will increase by
3.5 percent per year unless otherwise stated.
The table on the following page presents management's 1996 actual and 1997
budgeted expense items along with Cushman & Wakefield's adjusted figures.
In total, Cushman & Wakefield has projected operating expenses of $5.79
per square foot. The primary variation between management's budgeted expenses
and those estimated by Cushman & Wakefield lies in the category of real estate
taxes. As discussed in an earlier section, we expect the property to be fully
assessed for the next fiscal year and have adjusted the taxes accordingly. For
FY1998 they reflect a blended rate between the current taxes based on a
incomplete shopping center and the estimated completed rate beginning in January
1998.
Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than necessarily with competitive market forces. The Autumn
1996 Cushman & Wakefield survey of power centers found the low and high mean
from each respondent to be 3.4 percent and 3.7 percent, respectively. The Second
Quarter 1997 Korpacz survey reports that the range in expense growth rates was
from 3.0 percent to 5.0 percent with an average of 4.04 percent, down 37 basis
points from one year ago. Unless otherwise cited, expenses are forecasted to
grow by 3.5 percent per annum over the holding period.
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<CAPTION>
- --------------------------------------------------------------------------------------------------
Historical Operating Statements
Shoppers World, Framingham, MA
==================================================================================================
1996 1997 Budget C&W Forecast
=====================================================================
Total Per SF Total Per SF Total Per SF
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Income
Base Rent $8,927,220 $11.47 $11,674,715 $15.00 $12,296,586 $15.80
CAM Reimbursement $897,681 $1.15 $3,083,745 $3.96 $1,564,377 $2.01
Real Estate Tax Reimb. $1,146,555 $1.47 See Above $2,271,916 $2.92
Insurance Reimb. $180,299 $0.23 See Above $176,546 $0.23
Other Income $23,874 $78,082 $0.10 $102,205 $0.13
Reserves/Vacancy ($122,305) ($0.16) ($87,560) ($0.11) ($62,499) ($0.08)
Effective Gross Income $11,053,324 $14.20 $14,748,982 $18.95 $16,349,131 $21.01
Operating Expenses
Administrative $4,550 $0.01 $193,441 $0.25
Utilities $147,057 $0.19 $135,000 $0.17 $0 $0
Repairs & Maintenance $1,014,396 $1.30 $1,042,241 $1.34 $0 $0
Total CAM Expenses $1,166,003 $1.50 $1,370,682 $1.76 $1,398,667 $1.80
Management Fee $420,043 $0.54 $562,967 $0.72 $656,464 $0.84
------ ------
Fixed Expenses
Real Estate Taxes $899,238 $1.16 $1,446,000 $1.86 $2,265,926 $2.91
Insurance $169,500 $0.22 $180,637 $0.23 $184,324 $0.24
Total Expenses $2,654,784 $3.41 $3,560,286 $4.57 $4,505,381 $5.79
---------------------------------------------------------------------
Net Operating Income $8,398,540 $10.79 $11,188,696 $14.38 $11,843,750 $15.22
Non-Reimbursables $17,060 $0.02 $12,646 $0.02
CASH FLOW $8,398,540 $10.79 $11,188,696 $14.38 $11,843,750 $15.22
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Approach
================================================================================
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property.
Common Area Maintenance - This expense category includes the annual cost
of miscellaneous building maintenance contracts, parking lot maintenance,
recoverable labor and benefits, landscaping, window cleaning,
exterminating, supplies, exterior lighting, trash removal, utilities
including common area energy, and other miscellaneous charges. As
described, ownership can, in some instances, recover the cost of the
property management fee which is estimated at 4.0 percent of minimum and
percentage rent. In our analysis, we have forecasted a CAM expense of
$1,398,667, equal to $1.80 per square foot which is consistent with
ownership's budget.
Insurance - Insurance projections have been calculated at $0.24 per square
foot annually, based upon property and liability insurance costs for the
property, which we are advised, is equal to $184,324 per year. This unit
rate is consistent with the property's budget as well as the comparable
data reviewed.
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. Our FY1998 estimate is based upon a blend of the
partial valuation for 1997 and a full valuation in 1998. For FY1999, the
completed assessed value affects the cash flow and is increased thereafter
at the rate of 3.50 percent.
Non-Reimbursable Expenses
Total annual 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 projected operations, informed opinion and experience. The following is a
summary and discussion of non-reimbursable expenses incurred in the operation of
subject property for the initial year.
Management - The annual cost of managing the subject property is projected
to be 4.0 percent of minimum rental and percentage income. In the initial
year of our analysis, this amount is shown to be $656,464, equivalent to
$0.84 per square foot of appraised GLA. This is recoverable for some
tenants. Our estimate is reflective of a typical management agreement
with a firm in the business of providing professional management services.
This amount is also considered typical for a retail complex of this size.
Our investigation into the market for this property type indicates an
overall range of fee of 3 to 5 percent. We have chosen the mid-point of
the range as we have reflected leasing commissions separately.
Alterations - As mentioned, market convention is for second generation
space to be leased on an as is basis and thus no tenant alteration costs
have been included in this analysis.
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Income Approach
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Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject, we
have made an allowance for leasing commissions for this assignment. For
new leases, a commission of 6 percent of the first year's income and 3
percent of the remaining years will be charged, while renewal leases will
be charged at half that rate. With the 75/25 probability assumption, the
blended commission rate for is 3.75 percent for the first year and 1.875
percent for the remaining years.
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. We have forecasted a
replacement reserve estimate of $77,734. On the basis of appraised GLA,
less the ATM outparcel. This amount is equal to $0.10 per square foot,
consistent with industry figures.
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
investor 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 $15.22
per square foot which is equivalent to 72.4 percent of effective gross income.
Deducting other expenses including capital items results in a net cash flow of
$15.12 per square foot, equivalent to 72.0 percent of effective gross income.
================================================================================
Operating Summary
Initial Year of Investment - FY1998
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Effective Gross Income $16,349,131 $21.01 100.0%
- --------------------------------------------------------------------------------
Operating Expenses $ 4,505,381 $ 5.79 27.6%
- --------------------------------------------------------------------------------
Net Income $11,843,750 $15.22 72.4%
- --------------------------------------------------------------------------------
Other Expenses $ 77,734 $ .10 0.4%
- --------------------------------------------------------------------------------
Cash Flow $11,766,016 $15.12 72.0%
================================================================================
*Based on total appraised GLA of 778,292+/- SF
================================================================================
Our cash flow model has forecasted the following compound annual growth
rates over the ten year holding period FY1998-FY2007.
Net Operating Income 2.00%
Cash Flow 1.99%
Growth rates in net income and cash flow are forecasted to approximate 2.0
percent per annum which is typical of a center such as the subject where its
income from anchor tenants is a principal revenue source with lease structures
that contain only modest rent bumps.
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Income Approach
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- ---------------------
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retailers to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A [Neighborhood and Community] centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
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<TABLE>
<CAPTION>
==============================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1998
==============================================================================================
Power centers and Big Box Neighborhood/Community
Investment --------------------------------------------------------------------------
Parameters Low High Low High
==============================================================================================
<S> <C> <C> <C> <C>
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- ----------------------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50-10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- ----------------------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00-15.00%
11.50% 11.70% 11.90% 12.10%
==============================================================================================
</TABLE>
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.58
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & clear Equity IRR
================================================================================
RANGE 9.50-12.50% 9.00-12.50% N/A
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75-10.50% 8.50-10.50% N/A
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00-11.50% 8.50-11.50% N/A
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second
Qtr. 1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
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Income Approach
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Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owner's standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 7.87 percent to 11.00 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.61 percent.
We have also considered the subject's position in the market and its
anchor tenancy. Shoppers World is a well-located specialty power center in a
market with particularly high trade area income. It has a solid tenant alignment
and well-matched merchandising mix with several good credit tenants. By virtue
of the lease structure with many of the major tenants, rental growth will tend
to lag general inflation. The upside will be through the ultimate attainment of
overage rent, which has not yet become fully realized at the center.
Nonetheless, an investor will recognize this real short term potential in the
selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen strong retail interest for more
than 40 years.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 8.75 and 9.25
percent.
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Income Approach
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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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years.
Therefore, a projected terminal capitalization rate ranging from 8.75 to
9.25 percent is indicated for the subject property. 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.
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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.33 percent for national power centers in their
Second Quarter 1997 survey, with a range between 9.00-12.50 percent.
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
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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 (%) July 30, 1997
===================================================
Reserve Bank Discount Rate 5.00%
---------------------------------------------------
Prime Rate (Monthly Average) 8.50%
---------------------------------------------------
3-Month Treasury Bills 5.12%
---------------------------------------------------
U.S. 10-Year Notes 5.91%
---------------------------------------------------
U.S. 30-Year Bonds 6.38%
---------------------------------------------------
Telephone Bonds 7.20%
---------------------------------------------------
Municipal Bonds 5.15%
===================================================
Source: Wall Street Journal
===================================================
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 5.12 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.20 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 5.91 percent, while 30-year bonds are at 6.38 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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
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Income Approach
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We note, however, 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 83.6 percent of base rental income
will, on average, come from anchor major/tenants whose creditworthiness adds
stability to the cash flow.
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 10.75 and 11.25 percent for the
center if it were operating on a stabilized basis.
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 10-year period commencing on August 1, 1997.
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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.
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- ---------------------
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:
================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
================================================================================
SUBJECT PROPERTY Shoppers World
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL GROSS LEASABLE AREA 778,292+- SF
- --------------------------------------------------------------------------------
MAJOR/MAJOR TENANT GLA 712,487+- SF
- --------------------------------------------------------------------------------
IN-LINE SHOP GLA 49,355+- SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997/98)
- --------------------------------------------------------------------------------
TENANTS 0 - 3,000 SF $40.00/SF
- --------------------------------------------------------------------------------
TENANTS 3,001 - 5,000 SF $0.00/SF
- --------------------------------------------------------------------------------
TENANTS 5,001 - 10,000 SF $35.00/SF
- --------------------------------------------------------------------------------
TENANTS 10,001 - 20,000 SF $24.00/SF
- --------------------------------------------------------------------------------
TENANTS OVER 20,000 SF/ANCHORS $18.00/SF
- --------------------------------------------------------------------------------
RENTAL BASIS NNN
- --------------------------------------------------------------------------------
MARKET RENTAL GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
CREDIT RISK LOSS (In-Line Space) 3.0%
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM (In-Line Space) 5-10 Years
- --------------------------------------------------------------------------------
RENEWAL PROBABILITY 75.0 %
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE DOWNTIME 2 Months
- --------------------------------------------------------------------------------
STABILIZED OCCUPANCY 97.0%
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
- --------------------------------------------------------------------------------
NEW TENANTS 18.0% of Minimum Rent
- --------------------------------------------------------------------------------
RENEWAL TENANTS 9.0% of Minimum Rent
- --------------------------------------------------------------------------------
TENANT IMPROVEMENT ALLOWANCE None
- --------------------------------------------------------------------------------
EXPENSE GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
TAX GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
MANAGEMENT FEE 4.0%
- --------------------------------------------------------------------------------
CAPITAL RESERVES (PSF OF GLA) $0.10/SF
================================================================================
================================================
RATES OF RETURN AS IS
================================================
CASH FLOW START DATE 8/1/97
------------------------------------------------
DISCOUNT RATE 10.75-11.25%
------------------------------------------------
GOING-IN CAPITALIZATION RATE N/A
------------------------------------------------
TERMINAL CAPITALIZATION RATE 8.75-9.25%
------------------------------------------------
REVERSIONARY SALES COSTS 2.00%
------------------------------------------------
HOLDING PERIOD 10 Years
================================================
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<PAGE>
Income Approach
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- --------------------
Discounted Cash Flow
- --------------------
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 10.75 to 11.25 percent
on an "as is" operating basis. 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 10.75 to 11.25 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. A valuation matrix for the subject appears on the below.
======================================================================
Market Value at Completion and Stabilization
Valuation Matrix
======================================================================
Discount Rate
----------------------------------------------------------------------
Terminal Rate 10.75% 11.00% 11.25%
======================================================================
8.75% $135,335,000 $134,886,000 $132,757,000
----------------------------------------------------------------------
9.00% $133,703,000 $131,602,000 $129,546,000
----------------------------------------------------------------------
9.25% $132,160,000 $128,664,000 $128,071,000
======================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $128.1 to $135.3 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 11.0 percent and a
terminal rate around 9.0 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 for the subject property
as of July 11, 1997 was $131,600,000.
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.
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<PAGE>
Income Approach
================================================================================
- ---------------------
Direct Capitalization
- ---------------------
To further support our value conclusion derived via the discounted cash
flow, 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 9.0 to 9.5 percent applied to first year income. Applying these
rates to first stabilized year net operating income before reserves,
alterations, and other expenses for the subject of $11,843,750 results in a
value of approximately $124.7 to $131.6 million. From this range, we would be
inclined to conclude at a Market Value of $131,600,000 via Direct Capitalization
as of July 11, 1997.
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<PAGE>
OUTPARCEL LAND VALUATION
================================================================================
In addition to valuing the Shoppers World retail facility, we have
estimated the value of the two vacant outparcels situated on Route 30 and Speen
Street. Both of these land parcels are under agreement with closings pending
approval by local planning boards. In addition, both are expected to be
developed with suite hotels. The terms of the sales were discussed in the
Introduction section of this report and have been included in the land sale
summary chart on the following page.
In the valuation of the subject outparcels, the Sales Comparison Approach
was used to establish prices being paid for land zoned for retail development
both on a local and regional basis. In making comparisons we adjusted the sale
prices for differences between the subject and the comparable properties. 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
foot of gross leasable area (GLA), which in the case of the power centers
essentially equates to gross building area (GBA). All transactions utilized in
this analysis are computed on this basis.
Commercial real estate developers make qualitative and quantitative
judgments in the acquisition of a site with retail potential. Subjectively, a
developer considers the nature of surrounding land uses and proximity of
complementary services to a potential project. Objectively, the physical and
functional attributes of the site, and the cost of preparing it for construction
must be calculated. Lying between these two considerations are the many
aesthetic and economic factors which come to influence the final product.
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
conditions must be accounted for, thereby creating a time adjusted normal unit
of comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
All of the sales utilized in this analysis involved the transfer of the
fee simple interest in the real property. These sales were reportedly
accomplished on a cash basis or with cash and market oriented financing so that
no adjustment for special terms was required. To the best of our knowledge, the
sales utilized here represent arm's-length transactions between a willing and
knowledgeable buyer and seller.
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<PAGE>
================================================================================
Retail Land Sale Summary Chart
Suburban Boston
<TABLE>
<CAPTION>
=================================================================================================================
Size Potential Price Per
Sale Acres/ Building Actual Sale -------------------------------
No. Location Date Sq.Ft. Area (SF) FAR Price Sq.Ft. Acre SF GBA
=================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Speen Street 1/20/95 11.00 168,000 0.35 12,200,000 25.46 1,109,091 72.62
Natick, MA 479,160
2 659 Worcester Road 10/5/95 7.52 44,833 0.14 3,350,000 10.23 445,479 74.72
Framingham, MA 327,571
3 375 Cochituate Road 1996 3.41 41,144 0.28 4,000,000 26.90 1,171,818 97.22
Framingham, MA 148,692
4 575 Worcester Road 1/24/97 4.13 43,828 0.24 3,500,000 19.45 847,458 79.86
Framingham, MA 179,903
5 1600 Worcester Road 2/13/97 6.3 37,000 0.13 2,700,000 9.84 428,571 72.97
Framingham, MA 274,428
6 Worcester Road Under 1.38 17,600 0.29 1,250,000 20.78 905,797 71.02
Framingham, MA Agreement 60,150
Subj. 342 Speen Street Under 6.0 40,000 0.15 3,000,000 11.48 500,000 75.00
Natick, MA Agreement 261,360
Subj. Route 30 @ Burr Street Under 4.6 66,987 0.33 1,650,000 8.23 358,696 24.63
=================================================================================================================
<CAPTION>
=======================================================================================================
No. Location Grantor/Grantee Comments
=======================================================================================================
<C> <S> <C> <C>
1 Speen Street Various Developed with a Home Depot store.
Natick, MA Home Depot Price includes $1.2 million for demolition,
off-site improvements and lease buyouts.
2 659 Worcester Road Shaw's Realty Trust Prior sale on 8/31/93 for $2,700,000 to
Framingham, MA Worcester Road, LP Shaws. They determined it was not
feasible to construct on the site due to
strong nearby competition. A retail strip
anchored by Staples was constructed.
3 375 Cochituate Road International Data Group Developed with an REI sporting goods store.
Framingham, MA REI Sports
4 575 Worcester Road J&P Framingham Trust Property was improved with a 19,950 SF
Framingham, MA 575 Worcester Road, LLC grocery occupied by Farm Stand. There
were also other retail buildings on the site
which totaled 12,502 SF. These are
currently being demolished.
5 1600 Worcester Road 1600 Worcester Road LP Sold by Framingham Ford to Carney
Framingham, MA Sluggo LLC Management. A 37,000 auto dealership is
under construction.
6 Worcester Road Confidential A proposed center located west of Shoppers
Framingham, MA World on Route 9. A 17,600 multi-tenant
retail building will be developed.
Subj. 342 Speen Street Developers Diversified The site totals 9.22 acres but only about 6
Natick, MA Homestead Village, Inc. acres are usable due to wetlands on the site.
the buyer plans to construct a 141 unit suite
hotel at a price per unit of $21,277.
Subj. Route 30 @ Burr Street Developers Diversified The purchaser plans to develop a 130 unit
Candlewood Hotel Co. suite hotel on the site.
=======================================================================================================
</TABLE>
<PAGE>
Outparcel Land Valuation
================================================================================
Description of Sales
Sale No. 1, is an 11.0+/- acre, five parcel assemblage situated
immediately east of the Natick Mall on Speen Street across from the 342 Speen
Street outparcel. The purchaser, Home Depot home improvements store, constructed
a 168,000 square foot building on the site. In addition to the $11 million
purchase price, demolition cost approximately $500,000; off-site improvements
were $350,000; and approximately $300,000 to $400,000 was spent in leasehold
buy-outs. Thus, the total price of the land ready for development was
$12,150,000 to $12,250,000 or $72.32 to $72.91 per square foot. This site is
generally level and has no wetlands on the site.
Sale No. 2, is located approximately two miles west of the subject on
Worcester Road in Framingham. The 7.52 acre site sold in February 1993 to Shaw's
Supermarkets for a price per square foot of gross building area of $60.22. The
purchaser planned to construct a 44,833 square foot supermarket on the site,
however, several supermarkets in the neighborhood either expanded or opened
after the purchase of this parcel and Shaw's determined it was infeasible to
construct a store on the site. As a result, it was sold to Beckenstein
Enterprises who developed a strip retail center anchored by Staples Office
Supplies, Trader Joe's and Ruby Tuesdays. This parcel is not situated in the
Golden Triangle and thus would be considered inferior to the subject parcels.
Sale No. 3 is located immediately north of the Massport transportation
facility at the Cochituate Road entrance to Shoppers World. The 3.41 acre parcel
was improved with a 41,144 square foot office building at the time of the sale.
All but the foundation and exterior walls of the building were demolished to
construct a two-story retail building on the site. According to the broker there
were six offers for the site ranging from $3.5 to $4.0 million. Because there
were improvements on the site at the time of the sale, it must be adjusted
downward for the contribution of the improvements to the site. We estimate
approximately $20.00 per square foot for those improvements, thus the adjusted
land value is $77.22 per square foot of building area, bringing it more in line
with the remaining sales.
Sale No. 4 is a January 1997 sale of an improved site situated across from
Sale 2. The property was improved with several small retail buildings including
a 19,950 square foot grocery store. The site is currently being cleared for the
construction of a 43,828 square foot retail center anchored by Wild Harvest, a
division of Star Market. The grocery will lease 31,500 square feet and the
remainder will be leased to a variety of tenants including MetroWest Bank.
Sale No. 5 is the sale of a 6.3 acre parcel situated at the intersection
of I-495 and Route 9 in west Framingham. The site has excellent visibility and
access from both highways. It was vacant at the time of the sale. The purchaser
is in the process of developing a auto dealership on the site. Although the site
has excellent access and visibility, it is not in a traditional retail location
and thus would be considered inferior to the subject parcels.
Sale No. 6 has been under agreement for approximately one year. The Town
of Framingham has reportedly made many demands on the developers which has
delayed the closing several times. The 1.38 acre parcel is situated one block
west of Shoppers World on the north side of Worcester Road. The developer plans
to develop a 17,600 square foot retail
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<PAGE>
Outparcel Land Valuation
================================================================================
building on the site. The property's location is highly comparable to that of
the subject outparcels.
Analysis of the Sales
The local retail land sale activity described above indicates unadjusted
prices ranging from $71.02 to $97.22 per square foot of gross building area for
approved development ranging from 17,600 to 168,000 square feet. Actual or
proposed development densities (FAR) range from 13 percent to 35 percent of the
site.
Sales 1, 2, 4, 5 and 6 support a price per square foot of allowable gross
building area of $71.02 to $79.86 per square foot. The subject Speen Street
outparcel is under agreement for an estimated $75.00 per square foot of gross
building area. Thus it appears the contract price for this parcel is well
supported.
Typical retail developments utilize the ground floor and perhaps the
second floor and thus for the parcels developed with more than one or two
stories, an adjustment must be made to the price for the portion of the building
above the first floor. In the case of the sale price for the subject Route 30
parcel, the proposed building is four stories. Assuming only half would
typically be used for retail purposes, the adjusted contract price per square
foot of building area increases to $49.26. If one assumes only one floor can be
used, the adjusted price per square foot of building area becomes $98.53 per
square foot, assuming only one fourth of the site could be developed. The
building base at that point could more than likely be larger due to a lower
parking requirement for the smaller building thereby bringing the contract price
more in line with the comparable land sales.
Other issues affecting the comparable land sales include existing
buildings on the site and wetland areas. Sale 3 was improved with a structure,
portions of which were used in the redevelopment. As a result, adjustments to
this sale was necessary. As mentioned, the adjusted price is $77.22, in line
with the remaining sales.
The subject, Speen Street parcel, is 9.22 acres but because of wetlands,
we estimate only about 6 acres can be developed. At the writing of this report,
however, the development has not been approved and thus the exact dimensions are
not known.
We have not attempted to apply specific adjustments to the land sales but
have used them to support the contract prices being paid for the subject
outparcels. Both parcels are proposed to be developed with hotels and thus may
be developed more densely than the typical retail buildings developed on the
sale parcels because of variations in parking requirements for retail buildings
versus hotels. As a result, these sales provide us with an indication of prices
being paid in the market for commercial land but cannot on a feature-by-feature
basis be compared directly with the subject outparcels.
The 9.22 acre Speen Street parcel is presently under agreement for
$3,000,000 and the sales presented appear to well support the price being paid
for this parcel. The 4.6 acre Route 30 parcel is under agreement for $1,650,000.
The price being paid for this site appears from the sales to be lower but when
adjusting for the four story height of the proposed building, brings the price
more in line with the sales.
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<PAGE>
Outparcel Land Valuation
================================================================================
Based on the above analysis, we have concluded the contract prices for the
subject outparcels appear reasonable. Thus our conclusion of value for the
parcels is as follows:
342 Speen Street $3,000,000
Route 30 @ Burr Street $1,650,000
----------
Total Outparcel Value $4,650,000
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as it relates to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below.
=======================================================================
Value Summary
-----------------------------------------------------------------------
Sales Comparison Approach $128,400,000 - $132,300,000
-----------------------------------------------------------------------
Income Approach
Discounted Cash Flow $131,600,000
Direct Capitalization $131,600,000
-----------------------------------------------------------------------
Outparcel Land Value $4,650,000
=======================================================================
Two approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complementary results, each approach or
technique supporting the other. Between the high and low range supported by each
methodology, we see a variance of about 3 percent.
Cost Approach
The Cost Approach is based on the principle of substitution which
maintains that the 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 developer's profit requires
judgment, based upon cost services and interviews. Investors in existing
properties do not typically use cost analysis when purchasing existing real
estate and thus this methodology has not been used in valuing the subject. Land
value which is typically a part of the cost approach has been estimated for the
two outparcel pads which are currently under agreement. The methodology uses a
market comparison approach based upon comparable transactions.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
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, this methodology is best suited as support for the
conclusions of the "Income Approach". It provides 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 (DCF) 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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific characteristics of the property, as well as being the tool used by many
purchasers.
Direct 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is sometimes purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis, due to
the subject's stabilized operations.
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
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 methodologies. The ranges in
value exhibited by the Income Approach are consistent with the leasing profiles.
Each 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 leased fee estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
11, 1997, was:
ONE HUNDRED THIRTY ONE MILLION SIX HUNDRED THOUSAND DOLLARS
$131,600,000
In addition to estimating the value of the Shoppers World center we have
also estimated the value of the two vacant outparcel sites. The value estimate
attributed to these parcels is as follows:
342 Speen Street $3,000,000
Route 30 @ Burr Street $1,650,000
----------
Total Estimate Outparcel Value $4,650,000
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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 Standard Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice for a Summery Appraisal
Report. As such, it might not include full 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
information contained in this report is specific to the needs of the
client and for the intended use stated in this report. The appraiser is
not responsible for unauthorized use of this report.
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.
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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 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 has 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.
10. 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.
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.
================================================================================
-97-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Susan R. Balogh, MAI 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, Susan R. Balogh, MAI has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Susan R. Balogh, MAI
----------------------------------------
Susan R. Balogh, MAI
Senior Appraiser
Valuation Advisory Services
MA Certified General Appraiser No. 549
================================================================================
-98-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
COMPARABLE RENTALS
SUBJECT RENT ROLL
1996 OPERATING BUDGET
SUBJECT SALES REPORTS
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
================================================================================
-99-
<PAGE>
SHOPPERS' WORLD MAIN PARCELS
EXHIBIT A
Legal Description of the Land
The land in Framingham and Natick, Middlesex County, Massachusetts shown
as Parcel D and Parcel C on a plan entitled "Plan of Land in Framingham and
Natick, Mass.," dated May 27, 1992, scale: 120 feet to an inch, drawn by
Guerriere & Halnon, Inc. Engineering & Land Surveying, which plan is recorded
with the Middlesex South District Registry of Deeds as Plan No. 424 of 1992,
said land being more particularly described as follows (the "Equitable Tract"):
Beginning at the southwesterly corner of the premises on the northerly
sideline of Worcester Road (Route 9) in said Framingham, thence running:
N02(degrees) 06'21"W by land of Hanna Enterprises, 226.00 feet to
a point; thence turning and running
S87(degrees) 53'40"W by said land of Hanna Enterprises, 100.00
feet to a point at land of Ken's Steak
House, Inc.; thence turning and running
N02(degrees) 06'2l"W by said land of Ken's Steak House, Inc.,
219.76 feet to a point; thence turning and
running
S87(degrees) 43'l0"W by said land of Ken's Steak House, Inc.,
129.96 feet to a point; thence turning and
running
N43(degrees) 2l'37"W by said land of Ken's Steak House, Inc.,
171.15 feet to a point at land of Eleanor
Realty Company; thence turning and running
N63(degrees) 01'l0"E by said land of Eleanor Realty Company,
166.60 feet to a point; thence turning and
running
N38(degrees) 20'48"W by said land of Eleanor Realty Company and
land of Victorian Realty Trust and of
McDonalds Realty Trust, 1005.10 feet to a
point; thence turning and running
N36(degrees) 12'4l"W by said land of McDonalds Realty Trust,
205.12 feet to a stone bound found in the
1
<PAGE>
southeasterly sideline of Cochituate Road; thence turning
and running
N64(degrees) 13'53"E by said Cochituate Road, 261.49 feet to an
iron rod found at the corner of land of
Shoppers' World, Inc. shown as Parcel E on
said plan; thence turning and running
S25(degrees) 46'15"E by said land of Shoppers' World, Inc.,
112.08 feet to a point; thence turning and
running
N64(degrees) 13'45"E by said land of Shoppers' World, Inc., 94.00
feet to a point; thence turning and running
N25(degrees) 46'15"W by said land of Shoppers' World, Inc.,
112.08 feet to a drill hole stone bound
found in the southeasterly sideline of
Cochituate Road; thence turning and running
N64(degrees) l3'53"E by said Cochituate Road, 1312.13 feet to a
point at the corner of land of C. W.
Communications, Inc., said point being
N64(degrees) 13'53"E a distance of 12.66
feet from a stone bound found in the
southeasterly sideline of said Cochituate
Road; thence turning and running
S24(degrees) 06'20"E by said land of C. W. Communications, Inc.
and land of Shoppers' World, Inc., 287.02
feet to a point; thence turning and running
N65(degrees) 53'40"E by said land of Shoppers' World, Inc. and
said land of C. W. Communications, Inc.,
490.00 feet to a point at land of Shoppers'
World, Inc.; thence turning and running
S24(degrees) 06'20"E by said land of Shoppers' World, Inc.,
1012.80 feet to a point; thence turning and
running
S12(degrees) 26'59"W by said land of Shoppers' World, Inc., and
by other land of Shoppers' World, Inc. shown
as Parcel B and Parcel A on said plan,
1312.63 feet to a point in the northerly
sideline of Worcester Street (Route 9) in
said Natick; thence turning and running
S87(degrees) 02'20"W by said Worcester Street in Natick and
Worcester Road in Framingham, 120.40 feet to
a point; thence turning and running
2
<PAGE>
S87(degrees) 53'40"W by said Worcester Road, 204.76 feet to a
point of nontangency; thence turning and
running
by a curve to the right having a radius of 45.00 feet, a distance of
49.27 feet to a point of nontangency; thence turning and running
N02(degrees) 06'20"W by said Worcester Road 15.00 feet to a
point; thence turning and running
S87(degrees) 53'40"W by said Worcester Road, 62.00 feet to a
point; thence turning and running
S02(degrees) 06'20"E by said Worcester Road, 25.00 feet to a
point of nontangency; thence turning and
running
by a curve to the right having a radius of 45.00 feet, a distance of
32.84 feet to a point of nontangency; thence turning and running
S87(degrees) 53'40"W by said Worcester Road, 814.90 feet to the
point of beginning.
Containing, according to said plan, 86.6846 acres within Framingham
(shown as Parcel D on said plan) and 1532+/- square feet in Natick (shown as
Parcel C on said plan).
Being the same premises, as affected by subsequent takings as shown on
said plan, conveyed to The Equitable Life Assurance Society of the United States
by two deeds, one from Middlesex Center, Inc., dated March 7, 1951, recorded
with said Deeds in Book 7713, Page 441, and the other from Shoppers' World, Inc.
dated June 27, 1957, recorded with said Deeds in Book 8976, Page 66.
3
<PAGE>
EXHIBIT A
Legal Description of the Land
Two parcels of land in Framingham, Middlesex County, Massachusetts, more
particularly described as Parcel I and Parcel II, below (collectively, the
"Shoppers' Tract") :
Parcel I
The land in Framingham, Middlesex County, Massachusetts shown as Parcel E
on a plan entitled "Plan of Land in Framingham and Natick, Mass.," dated May 27,
1992, scale: 120 feet to an inch, drawn by Guerriere & Halnon, Inc. Engineering
& Land Surveying, which plan is recorded with the Middlesex South District
Registry of Deeds as Plan No. 424 of 1992, said land being more particularly
described as follows:
Beginning at the most northerly corner of the premises at a drill hole
stone bound found on the southeasterly sideline of Cochituate Road, thence
running:
S64(degrees) 13'53"W by said Cochituate Road, 94.00 feet to an
iron rod found; thence turning and running
S25(degrees) 46'15"E by land of The Equitable Life Assurance
Society of the United States shown as Parcel
D on said plan, 112.08 feet to a point;
thence turning and running
N64(degrees) 13'45"E by said land of The Equitable Life Assurance
Society of the United States, 94.00 feet to
a point; thence turning and running
N25(degrees) 46'15"W by said land of The Equitable Life Assurance
Society of the United States, 112.08 feet to
the point of beginning.
Containing, according to said plan, 10,535+/- square feet of land.
Being the same premises, as affected by subsequent takings as shown on
said plan, conveyed to Shoppers' World, Inc. by deed of Floyd J. Allen and Golda
C. Allen, dated February 24, 1960, recorded with said Deeds in Book 9552, Page
348. (Allied Stores General Real Estate Company is the surviving corporation by
merger with said Shoppers' World, Inc.).
<PAGE>
Parcel II
The land in Framingham, Middlesex County, Massachusetts shown as "Area =
1,800 sq. ft." on a plan entitled "Plan of Land in Framingham, Mass.," scale: 30
feet to an inch, dated July 11, 1963, revised August 16, 1963, prepared by
William S. Crocker, Inc. Civil Engineers and Surveyors, which plan is recorded
with the Middlesex South District Registry of Deeds as Plan No. 1540 of 1963 at
Book 10396, Page 559, said land being more particularly described as follows:
Beginning at the most northerly corner of the premises, which is a corner
at land shown as "Area = 148,692+/- sq. ft." on said plan, thence running:
S65(degrees) 53'57"W by said other land shown on said plan
located within a Boston Edison Co. easement
as shown on said plan, 20.00 feet to a
point; thence turning and running
S24(degrees) 06'03"E by land shown as Parcel C-2 on said plan,
90.00 feet to a point; thence turning and
running
N65(degrees) 53'57"E by said Parcel C-2, 20.00 feet to a point;
thence turning and running
N24(degrees) 06'03"W by said other land shown on said plan as
"Area = 148,692+/- sq. ft.", 90.00 feet to the
point of beginning.
Being the same premises conveyed to Shopper's World, Inc. by deed of Harry
Bergson and W. Arthur Garrity, Jr., Trustees in Reorganization of Middlesex
Center, Inc., dated February 29, 1956, recorded with said Deeds in Book 8680,
Page 226. (Allied Stores General Real Estate Company is the surviving
corporation by merger with said Shoppers' World, Inc.)
<PAGE>
GENERAL CINEMA PARCEL
A certain parcel of land situated on the northerly side of Route 9, also
known as Worcester Turnpike, in the Towns of Framingham and Natick, Middlesex
County, Commonwealth of Massachusetts, bounded and described as follows and
shown as Lot 1 on the survey entitled "Subdivision Plan of Land, Map 345 Block
109 Lot 21" dated November 15, 1993 prepared by Rizzo Associates, Inc. for the
New Brendon Corp., Framingham, MA recorded on November 22, 1993 as Instrument
No. 988 (the "Plan"):
Beginning at a point on the northerly sideline of Route 9 in the
Town of Natick, said point being sixty and seventy two hundredths feet
(60.72') northeast of the intersection of the town line and said Route 9;
thence
N l2(degrees) 27' 53" E a distance of one thousand three hundred
twelve and forty eight hundredths feet
(1312.48') passing into Framingham, by land,
now or formerly, of Equitable Life Assurance
to a point; thence
N 24(degrees) 07' 01" W a distance of one thousand twelve and ninety
six hundredths feet, (1012.96') by land, now
or formerly, of Equitable Life Assurance to
a point; thence
N 24(degrees) O5' 50" W a distance of two hundred ninety six and
ninety seven hundredths feet (296.97') by
land, now or formerly, of CW Communications,
Inc. and intersecting with the southerly
sideline of Route 30; thence
Northeasterly and curving to the right along the arc of a
curve having a radius of nine thousand nine
hundred forty seven and ninety six
hundredths feet (9947.96') a length of four
hundred sixty three and sixteen hundredths
(463.16') along the southerly sideline of
Route 30 to a point; thence
N 68(degrees) 35' 05" E a distance of one hundred forty six and
forty two hundredths feet (146.42')
continuing along the southerly sideline of
Route 30 to a point; thence
S 19(degrees) 32' 58" E a distance of twenty eight and sixty three
hundredths feet (28.63') by land, nor or
formerly, of the Massachusetts Turnpike
Authority to a point; thence
<PAGE>
DESCRIPTION SHEET POLICY NO. 9351-00651
Northeasterly and curving to the right along the arc of a
curve having a radius of one thousand one
hundred sixty five and no hundredths feet
(1165.00') a length of two hundred thirty
four and seventy seven hundredths feet
(234.77') by land, now or formerly, of the
Massachusetts Turnpike Authority to a point;
thence
Northeasterly and curving to the right along the arc of a
curve having a radius of two hundred fifteen
and one hundredths feet (215.01') a length
of one hundred thirty nine and sixty two
hundredths feet (139.62') by land, now or
formerly, of the Massachusetts Turnpike
Authority to a point; thence
S 44(degrees) 59' 44" E a distance of five hundred two and twenty
four hundredths feet (502.24') by land of,
now or formerly, Massachusetts Turnpike
Authority; thence
S 89(degrees) 59' 44" E a distance of one thousand thirty six and
sixty four hundredths feet (1036.64') by
land, now or formerly, Massachusetts
Turnpike Authority and Lot 2 on said Plan to
a point; thence
N 30(degrees) 02' 30" E a distance of eight hundred thirty one and
forty three hundredths feet (831.43') by
land shown as Lot 2 on said Plan; thence
S 17(degrees) 03' 39" E a distance of nine hundred seven and thirty
eight hundredths feet (907.38') in the Town
of Natick along the westerly sideline of
Speen Street to a point; thence
S 67(degrees) 20' 29" W a distance of six and forty two hundredths
feet (6.42') by land, now or formerly of
Nolan Inc. to a point; thence
S 80(degrees) 14' 06" W a distance of eight hundred fifty nine and
seventy seven hundredths feet (859.77') by
land, now or formerly, of Nolan Inc. to a
point; thence
S 30(degrees) 02' 30" W a distance of one thousand one hundred two
and nineteen hundredths (1102.19') along the
Framingham-Natick town line and land, now or
formerly, of William G. Finard Et Al to a
point, thence
<PAGE>
DESCRIPTION SHEET POLICY NO. 9351-00651
S 51(degrees) 49' 07" W a distance of nine hundred twenty two and
forty eight hundredths feet (922.48')
continuing along the town line by the land,
now or formerly, of William G. Finard et al,
and Worcester-Natick Properties to a point;
thence
S 02(degrees) 49' 00" E a distance of four hundred twenty eight and
fifty two hundredths feet (428.52') by the
land, now or formerly, of Worcester-Natick
Properties to a point; thence
N 87(degrees) 01' 22" E a distance of four hundred and no hundredths
feet (400.00') by the land, now or formerly,
of Worcester-Natick Properties to a point;
thence
S 03(degrees) 06' 28" E a distance of seventy six and eighteen
hundredths feet (76.18') by the land of
Worcester-Natick Properties to a point of
intersection with Route 9; thence
S 87(degrees) 0l' 44" W a distance of six hundred seventy two and
eighty five hundredths feet (672.85') along
the northerly sideline of Route 9 to a point
of curvature; thence
Northerly along the arc of a curve having a radius of
one hundred thirty five and no hundredths
feet (135.00') a distance of eighty nine and
fifty seven hundredths feet (89.57') to a
point; thence
S 87(degrees) 0l' 44" W a distance of forty nine and no hundredths
feet (49.00') along the side line of Route 9
to a point; thence
S l8(degrees) 28' 17" W a distance of eleven and five hundredths
feet (11.05') along the side line of Route 9
to a point; thence
Southwesterly and curving to the right along the arc of a
curve having a radius of thirty five and no
hundredths feet (35.00') a distance of forty
five and fifty hundredths feet (45.50') to a
point of tangency with Route 9; thence
S 87(degrees) 0l' 44" W a distance of two hundred forty six and
forty nine hundredths feet (246.49') along
the northerly side line of Route 9 to the
point of beginning.
<PAGE>
DESCRIPTION SHEET POLICY NO. 9351-00651
Subject to easements, restrictions, reservations, conditions, covenants,
agreements and other matters of record affecting the conveyed premises, possible
encroachments and matters shown on the Plan.
The above described parcel of land contains an area of 81.7 acres more or
less.
<PAGE>
4/29/97 Community Centers One LLC 3:58 pm
User: KRAUSE Commercial Rent Roll Page: 24
Report Date From : 5/01/97 To : 5/31/97
Property : Shoppers World Community Ctr
Framingham, MA 01701
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT -------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kids R Us #1332 970-501 18300 8/23/94 1/31/20 3750.00 45000.00 2.46 11/01/94 3,750.00
Toys "R" Us #7505 970-502 45000 9/22/94 1/31/20 8750.00 105000.00 2.33 11/01/94 8,750.00
Jordan Marsh-Store #140 970-503 40000 9/09/94 1/31/20 0.00 0.00 0.00 0.00
T. J. Maxx #147 970-504 39884 7/30/95 7/31/10 53178.67 638144.04 16.00 10/01/95 53,178.67
8/01/00 58,496.53
8/01/05 64,346.19
Sears Homelife #4464 970-505 36108 11/12/94 12/31/04 25576.50 306918.00 8.50 12/01/94 25,576.50
1/01/00 29,428.02
Jewelry Depot 970-506 6071 11/09/95 11/30/02 17707.08 212484.96 35.00 12/01/95 17,707.08
12/01/97 18,213.00
12/01/98 18,718.92
12/01/99 19,224.83
12/01/00 19,730.75
12/01/0l 20,236.67
Vacant 970-511 27089 0.00 0.00 0.00 0.00
Vacant 970-512 24560 0.00 0.00 0.00 0.00
Brew House 970-513 8500 7/30/96 7/31/06 20541.67 246500.04 29.00 8/01/96 20,541.67
8/01/01 23,622.92
Marshalls #612 970-514 50081 7/30/95 1/31/11 64270.62 771247.44 15.40 10/01/95 64,270.62
8/01/00 70,697.68
8/01/05 77,750.75
Bobs 970-515 50059 8/08/95 1/31/11 60905.12 730861.44 14.60 10/01/95 60,905.12
8/01/00 66,995.63
8/01/05 73,670.16
Corning At Home 970-516 10775 11/18/95 11/30/00 21550.00 258600.00 24.00 5/01/96 21,550.00
Linens 'N Things#436 970-517 40159 8/02/95 1/31/11 57728.56 692742.72 17.25 10/01/95 57,728.56
9/01/00 63,518.15
9/01/05 69,843.19
Sports Authority#858 970-518 43629 4/03/95 8/31/15 72715.00 872580.00 20.00 10/01/95 72,715.00
3/01/98 76,390.75
9/01/00 79,986.50
9/01/05 83,622.25
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX---- --INS EXPENSE----- -----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kids R Us #1332 2,616.01 1.72 0.00 0.00 0.00 0.00 4.17 6,366.01
Toys "R" Us #7505 6,432.81 1.72 0.00 0.00 0.00 0.00 4.05 15,182.81
Jordan Marsh-Store #140 3,333.33 1.00 0.00 0.00 0.00 0.00 1.00 3,333.33
T. J. Maxx #147 5,701.47 1.72 0.00 0.00 0.00 0.00 17.72 58,880.14
Sears Homelife #4464 5,205.57 1.73 4,997.39 1.66 902.70 0.30 12.19 36,682.16
Jewelry Depot 1,308.91 2.59 966.27 1.91 174.54 0.34 39.84 20,156.80
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Brew House 1,832.60 2.59 1,352.87 1.91 244.38 0.35 33.84 23,971.92
Marshalls #612 6,716.65 1.61 0.00 0.00 1252.03 0.30 17.31 72,239.30
Bobs 6,713.79 1.61 0.00 0.00 1251.48 0.30 16.91 68,870.39
Corning At Home 1,715.02 1.91 1,491.27 1.66 269.38 0.30 27.87 25,025.67
Linens 'N Things#436 5,427.23 1.62 0.00 0.00 0.00 0.00 18.87 63,155.79
Sports Authority#858 6,066.73 1.67 0.00 0.00 0.00 0.00 21.67 78,781.73
</TABLE>
<PAGE>
4/29/97 Community Centers One LLC 3:58 pm
User: KRAUSE Commercial Rent Roll Page: 25
Report Date From : 5/01/97 To : 5/31/97
Property : Shoppers World Community Ctr
Framingham, MA 01701
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT -------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/01/10 87,258.00
OfficeMax, Inc. #121 970-519 30000 12/14/96 9/30/11 72700.00 872400.00 29.08 1/01/97 72,700.00
10/01/01 75,200.00
10/01/06 77,700.00
Nobody Beats The Wiz 970-520 50000 9/01/96 8/31/11 99852.17 1198226.04 23.96 9/01/96 99,852.17
9/01/98 120,685.50
9/01/01 126,935.50
9/01/06 122,083.33
Mikasa, Inc. 970-521 18011 10/19/96 10/31/06 30011.67 360140.04 20.00 11/01/96 30,011.67
11/01/98 34,513.42
11/01/00 37,514.58
Barnes & Noble #2645 970-522 29963 9/29/95 2/01/11 82398.25 988779.00 33.00 11/01/95 82,398.29
10/01/00 94,757.99
10/01/05 108,965.44
Cambridge Soundworks, Inc. 970-523 2196 8/09/95 8/31/05 7612.80 91353.60 41.60 9/01/96 7,612.80
9/01/97 7,917.31
9/01/98 8,234.00
9/01/99 8,563.36
9/01/00 8,905.89
9/01/01 9,262.13
9/01/02 9,632.62
9/01/03 10,017.92
9/01/04 10,418.64
Snip-Its 970-524 1871 9/22/95 9/30/00 7226.75 86721.00 46.35 10/01/96 7,226.75
10/01/97 7,443.50
10/01/98 7,666.42
10/01/99 7,897.17
Bruegger's Fresh Bagel Baker 970-525 1935 6/15/96 6/30/06 6450.00 77400.00 40.00 7/01/96 6,450.00
7/01/01 7,417.50
General Cinema Theatres #972 970-600 85000 12/16/94 12/31/14 159375.00 1912500.00 22.50 1/01/97 159,375.00
TGI Fridays 970-601T 6300 12/18/95 12/31/05 14583.34 175000.08 27.78 1/01/96 14,583.34
Olive Garden #1511 970-601U 9200 5/13/96 5/31/11 14583.34 175000.08 19.02 6/01/96 14,583.34
6/01/01 16,770.83
6/01/06 19,286.46
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX---- --INS EXPENSE----- -----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OfficeMax, Inc. #121 4,197.71 1.68 0.00 0.00 751.19 0.30 31.06 77,648.90
Nobody Beats The Wiz 10,329.88 2.48 6,932.51 1.66 1252.25 0.30 28.41 118,366.81
Mikasa, Inc. 3,882.31 2.59 2,492.19 1.66 450.18 0.30 24.54 36,836.35
Barnes & Noble #2645 4,477.94 1.79 0.00 0.00 0.00 0.00 34.79 86,876.19
Cambridge Soundworks, Inc. 473.46 2.59 349.52 1.91 63.14 0.35 46.44 8,498.92
Snip-Its 403.39 2.59 297.79 1.91 53.79 0.34 51.19 7,981.72
Bruegger's Fresh Bagel Baker 417.19 2.59 267.81 1.66 48.38 0.30 44.55 7,183.38
General Cinema Theatres #972 14,166.67 2.00 0.00 0.00 0.00 0.00 24.50 173,541.67
TGI Fridays 941.53 1.79 0.00 0.00 0.00 0.00 29.57 15,524.87
Olive Garden #1511 1,983.52 2.99 1,273.29 1.66 230.00 0.30 23.57 18,070.15
</TABLE>
<PAGE>
4/29/97 Community Centers One LLC 3:58 pm
User: KRAUSE Commercial Rent Roll Page: 26
Report Date From : 5/01/97 To : 5/31/97
Property : Shoppers World Community Ctr
Framingham, MA 01701
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT -------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vacant 970-601W 8000 0.00 0.00 0.00 0.00
MetroWest Bank-ATM 970-9920 950 10/27/82 5/31/95 627.08 7524.96 7.92 12/01/94 627.08
Bradlee's 970-9940 102555 11/15/74 10/31/05 8333.33 99999.96 0.98 10/01/94 8,333.33
Logan Express - Massport 970-9970 0 7/01/90 9/30/05 26000.00 312000.00 0.00 10/01/96 26,000.00
10/01/97 27,040.00
10/01/98 28,121.60
10/01/99 29,246.46
10/01/00 30,416.32
10/01/01 31,632.97
10/01/02 32,898.29
10/01/03 34,214.22
10/01/04 35,582.79
Framingham/Natick Park-and-R 970-9980 0 8/01/88 3/31/99 5833.33 69999.96 0.00 4/01/96 5,833.33
Misc. Income 970-99999 0 0.00 0.00 0.00 0.00
- ---------------------------- --------- ------- ---------- ---------- ---------- ------------ ------- -------- ------------
T 0 T A L S : 786196 942260.28 11307123.36 14.38
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX---- --INS EXPENSE----- -----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
MetroWest Bank-ATM 0.00 0.00 0.00 0.00 0.00 0.00 7.92 627.08
Bradlee's 10,798.26 1.26 0.00 0.00 0.00 0.00 2.24 19,131.59
Logan Express - Massport 0.00 0.00 0.00 0.00 0.00 0.00 0.00 26,000.00
Framingham/Natick Park-and-R 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,833.33
Misc. Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------- ---------- --------- ---------- ----------- ---------- --------- ----------- ------------
T 0 T A L S : 105,141.98 1.60 20,420.91 0.31 6943.44 0.11 16.40 1,074,766.61
</TABLE>
Total Occupied Square Feet: 786196
Total Vacant Square Feet: 0
<PAGE>
Framingham, Mass. - 970
Budget Comparison Report
12/31/96
Budget Comparison Report
<TABLE>
<CAPTION>
December Actual December Budget YTD Actual YTD Budget
--------------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME
RENTAL INCOME:
Income-Base Rent Billed $ 964,785 $1,017,754 $ 8,927,220 $ 9,691,551.69
Income - Strght Line Rent 201,707 60,791 919,884 733,727.10
Income Shuttle Service 1,250 0 8,750 0.00
Income-CAM Billed 86,754 114,498 805,355 1,373,970.00
Income-CAM Accrued (2,729) 0 92,326 0.00
Income-R E Taxes Billed 24,910 109,395 116,089 1,312,734.00
Income-R E Taxes Accrued 70,742 0 1,030,466 0.00
Income-Insurance Billed 4,700 15,276 35,709 183,306.00
Income-Insurance Accrued 54,524 0 144,590 0.00
Income - Late Fees 2,846 0 6,725 0.00
Income - Bad Debt Reserve 19,044 0 (122,305) 0.00
St Line Rent Reserve (50,427) 0 (229,971) 0.00
----------- ---------- ------------ ---------------
SUB TOTAL - Rental Income $ 1,378,106 $1,317,714 $ 11,734,838 $ 13,295,288.79
Income - Interest 1,277 0 7,047 0.00
Income - Telephone 0 0 1,352 0.00
----------- ---------- ------------ ---------------
TOTAL INCOME $ 1,379,383 $1,317,714 $ 11,743,237 $ 13,295,288.79
EXPENSES
Depreciation 154,777 143,182 1,741,354 1,718,178.96
Management Fees 71,000 51,656 420,043 619,866.96
Office Supplies 0 333 0 3,999.96
Office Supplies - R1 15 0 2,699 0.00
Office Supplies - R2 5 0 866 0.00
Pressure Washing 0 1,750 0 21,000.00
Pressure Washing - R1 0 0 12,500 0.00
Pest Control - R1 0 1,250 90 15,000.00
Pest Control - R2 0 200 30 2,400.00
R & M Supplies - R1 0 206 1,337 2,475.00
R & M Supplies - R2 0 69 414 825.00
Parking Lot Contract - R1 10,633 10,707 132,570 128,483.04
Parking Lot Contract - R2 1,953 4,744 45,887 56,922.00
Trash Removal - R1 113 513 2,328 6,150.00
Trash Removal - R2 38 171 794 2,049.96
Repairs to Curbs/Sidewalk 0 833 0 9,999.96
Snow Removal - R1 53,544 14,583 343,060 174,999.96
</TABLE>
<PAGE>
Framingham, Mass. - 970
Budget Comparison Report
12/31/96
Budget Comparison Report
<TABLE>
<CAPTION>
December Actual December Budget YTD Actual YTD Budget
<S> <C> <C> <C> <C>
Snow Removal - R2 $ 15,614 $ 6,250 $ 97,968 $ 75,000.00
Landscaping Center - R1 6,091 13,500 116,750 162,000.00
Landscaping Center - R2 600 6,483 36,891 77,799.96
Striping/ADA 0 667 0 8,000.04
Striping/ADA - R1 0 0 8,719 0.00
Striping/ADA - R2 0 0 2,341 0.00
Retention Area Maintenance 0 8,533 0 102,399.96
Retention Area Maint - R1 0 0 32,694 0.00
Retention Area Maint - R2 0 0 14,490 0.00
R & M Security - R1 6,814 11,678 79,884 140,130.96
R & M Security - R2 0 3,092 0 37,100.04
Shuttle Service 1,403 0 10,022 0.00
Elec Expense R1 8,283 9,295 123,146 111,540.00
Elec Expense - R2 1,785 4,837 22,036 58,040.04
Gas Expense 96 0 96 0.00
Gas Expense - R1 0 375 936 4,500.00
Gas Expense - R2 32 125 344 1,500.00
Water/Sewer - R1 0 1,083 438 12,999.96
Water/Sewer - R2 0 0 61 0.00
Telephone 66 270 66 3,240.00
Telephone - R1 181 0 4,308 0.00
Telephone - R2 60 0 1,436 0.00
R & M Parking Lot - R1 0 500 7,645 6,000.00
R & M Parking Lot - R2 0 250 0 3,000.00
Signage 0 917 1,067 11,000.04
R & M Electrical - R1 494 667 4,744 8,000.04
R & M Electrical - R2 0 100 1,058 1,200.00
Irrigation Repairs 0 1,817 0 21,800.04
Irrigation Repairs - R1 425 0 1,024 0.00
Irrigation Repairs - R2 0 0 2,212 0.00
R & M Other - R1 70 1,268 1,135 15,219.96
R & M Other - R2 0 0 102 0.00
Insurance - Liability 8,562 17,758 14,110 213,092.40
Liability Ins - Escrow 70,974 0 129,580 0.00
Property Insurance (73,078) 0 9,382 0.00
Property Insurance - Escr 14,791 0 16,428 0.00
Fire Protection - R1 0 250 0 3,000.00
Misc. - Non. Reim. 0 0 1,318 0.00
R & M HVAC - Non Reimb 0 0 1,050 0.00
R & M (Non Cam) 80 0 14,692 0.00
Legal Fees 0 0 630 0.00
Advertising & Promotions 0 0 105 0.00
Property Taxes - Center 112,602 125,000 899,238 1,500,000.00
Salaries 15,029 5,833 126,188 69,999.96
Maint Ext Out Svce - R1 0 5,625 40,320 67,500.00
Maint Ext Out Svce - R2 0 1,875 16,320 22,500.00
Capitalization/Oper Costs 0 0 (132,023) 0.00
</TABLE>
<PAGE>
Framingham, Mass. - 970
Budget Comparison Report
12/31/96
Budget Comparison Report
<TABLE>
<CAPTION>
December Actual December Budget YTD Actual YTD Budget
<S> <C> <C> <C> <C>
Travel Exp - Chargeable $ 0 $ 0 $ 175 $ 0.00
Copier Supplies 0 0 82 0.00
Other G & A Expense 0 0 18 0.00
----------- ---------- ------------ ---------------
TOTAL OPERATING EXPENSES $ 483,052 $ 458,245 $ 4,413,198 $ 5,498,914.20
----------- ---------- ------------ ---------------
NET OPERATING INCOME $ 896,331 $ 859,469 $ 7,330,039 $ 7,796,374.59
CAPITAL IMPROVEMENTS:
----------- ---------- ------------ ---------------
----------- ---------- ------------ ---------------
----------- ---------- ------------ ---------------
NET CASH FLOW $ 896,331 $ 859,469 $ 7,330,039 $ 7,796,374.59
=========== ========== ============ ===============
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:12 am
User: KUSHNER Retail Sales Detail Report Page: 1
Reported Sales : 1996 - 1997
Property : Shoppers World Community Ctr Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-501 Kids R Us #1332
Sq Ft 18,300 1997 -- No Sales
Rent 3,750.00 1996 -- No Sales
Store Opened 8/23/94
Lease Exp 1/31/20
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-502 Toys "R" Us #7505
Sq Ft 45,000 1997 843,000 841,000 1,134,000 1,272,000 1,128,000
Rent 8,750.00 1996 975,000 750,000 1,024,000 1,296,000 1,074,000 1,165,000 1,286,000 902,000
Store Opened 9/22/94
Lease Exp 1/31/20
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-503 Jordan Marsh-Store #140
Sq Ft 40,000 1997 293,469 740,070 678,420 564,685 563,507
Rent 0.00 1996 256,689 621,270 710,646 469,450 565,287 615,742 388,376 710,773
Store Opened 9/09/94
Lease Exp 1/31/20
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-504 T. J. Maxx #147
Sq Ft 39,884 1997 750,916
Rent 53,178.67 1996 441,062 750,916 750,916 750,916 750,916 750,916 750,916 750,916
Store Opened 7/30/95
Lease Exp 7/31/10
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-505 Sears Homelife #4464
Sq Ft 36,108 1997 -- No Sales
Rent 25,576.50 1996 -- No Sales
Lease Eff 12/12/94
Lease Exp 12/31/04
Departments No
<CAPTION>
Tenant Year September October November December Yr. SPSF Yr. Total
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-501 Kids R Us #1332
Sq Ft 18,300 1997
Rent 3,750.00 1996
Store Opened 8/23/94
Lease Exp 1/31/20
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-502 Toys "R" Us #7505
Sq Ft 45,000 1997 116 5,218,000
Rent 8,750.00 1996 0 960,000 1,373,000 2,337,000 4,448,000 391 17,590,000
Store Opened 9/22/94
Lease Exp 1/31/20
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-503 Jordan Marsh-Store #140
Sq Ft 40,000 1997 71 2,840,150
Rent 0.00 1996 3 822,167 634,699 911,728 707,266 185 7,414,094
Store Opened 9/09/94
Lease Exp 1/31/20
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-504 T. J. Maxx #147
Sq Ft 39,884 1997 19 750,916
Rent 53,178.67 1996 750,916 750,916 750,916 750,916 218 8,701,138
Store Opened 7/30/95
Lease Exp 7/31/10
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-505 Sears Homelife #4464
Sq Ft 36,108 1997
Rent 25,576.50 1996
Lease Eff 11/12/94
Lease Exp 12/31/04
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:12 am
User: KUSHNER Retail Sales Detail Report Page: 2
Reported Sales : 1996 - 1997
Property : Shoppers World Community Ctr Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-506 Jewelry Depot
Sq Ft 6,071 1997 25,035 39,595 34,930 35,296 48,901
Rent 17,707.08 1996 53,381 68,867 55,092 87,617 111,378 73,422 56,897 44,458
Store Opened 11/09/95
Lease Exp 11/30/95
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-511 DSW Shoe Warehouse
Sq Ft 27,089 1997 -- No Sales
Rent 0.00 1996 -- No Sales
Store Opened 5/29/97
Lease Exp 5/31/07
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-513 Brew House
Sq Ft 8,500 1997 -- No Sales
Rent 20,541.67 1996
Store Opened 7/30/96
Lease Exp 7/31/06
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-514 Marshalls #612
Sq Ft 50,081 1997 -- No Sales
Rent 64,270.62 1996 979,822 979,822 979,822 979,822 979,822 979,822 979,822 979,822
Store Opened 7/30/95
Lease Exp 1/31/11
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-516 Corning At Home
Sq Ft 10,775 1997 61,203 48,372 54,299 55,612 68,008
Rent 21,550.00 1996 54,697 54,649 54,983 56,299 56,690 59,630 62,657 82,330
Store Opened 11/18/95
Lease Exp 11/30/00
Departments No
<CAPTION>
Tenant Year September October November December Yr. SPSF Yr. Total
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-506 Jewelry Depot
Sq Ft 6,071 1997 30 183,757
Rent 17,707.08 1996 64,598 44,375 68,830 197,260 153 926,175
Store Opened 11/09/95
Lease Exp 11/30/95
Departments No
- -----------------------------------------------------------------------------------------------------------------
0-511 DSW Shoe Warehouse
Sq Ft 27,089 1997
Rent 0.00 1996
Store Opened 5/29/97
Lease Exp 5/31/07
Departments No
- -----------------------------------------------------------------------------------------------------------------
0-513 Brew House
Sq Ft 8,500 1997
Rent 20,541.67 1996 199,899 387,487 310,092 106 897,478
Store Opened 7/30/96
Lease Exp 7/31/06
Departments No
- -----------------------------------------------------------------------------------------------------------------
0-514 Marshalls #612
Sq Ft 50,081 1997
Rent 64,270.62 1996 979,822 979,822 979,822 979,822 235 11,757,863
Store Opened 7/30/95
Lease Exp 1/31/11
Departments No
- -----------------------------------------------------------------------------------------------------------------
0-516 Corning At Home
Sq Ft 10,775 1997 27 287,495
Rent 21,550.00 1996 67,062 62,905 94,103 145,234 79 851,240
Store Opened 11/18/95
Lease Exp 11/30/00
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:12 am
User: KUSHNER Retail Sales Detail Report Page: 3
Reported Sales : 1996 - 1997
Property : Shoppers World Community Ctr Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-517 Linens 'N Things#436
Sq Ft 40,159 1997 428,777 407,711 539,283 384,594 440,042
Rent 57,728.56 1996 537,241 411,733 456,940 654,038 565,287 624,404
Store Opened 8/02/95
Lease Exp 1/31/11
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-518 Sports Authority - Store #858
Sq Ft 43,629 1997 497,989 476,802
Rent 72,715.00 1996 477,503 415,900 454,384 830,075 609,938 754,295 885,227 664,751
Store Opened 8/13/95
Lease Exp 8/31/15
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-521 Mikasa, Inc.
Sq Ft 18,011 1997 -- No Sales
Rent 30,011.67 1996 -- No Sales
Store Opened 10/19/96
Lease Exp 10/31/06
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-522 Barnes & Noble #2645
Sq Ft 29,963 1997 632,310 583,682 664,693 523,689 534,808
Rent 82,398.25 1996 414,758 477,931 517,311 417,127 609,805 495,819 499,574 634,214
Store Opened 9/29/95
Lease Exp 2/01/11
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-523 Cambridge Soundworks, Inc.
Sq Ft 2,196 1997 83,655
Rent 7,612.80 1996 105,147 110,398 126,028 67,434 75,837 124,283 76,497 97,877
Store Opened 6/01/95
Lease Exp 8/31/05
Departments No
<CAPTION>
Tenant Year September October November December Yr. SPSF Yr. Total
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-517 Linens 'N Things#436
Sq Ft 40,159 1997 55 2,200,407
Rent 57,728.56 1996 722,552 427,711 608,899 965,971 149 5,974,776
Store Opened 8/02/95
Lease Exp 1/31/11
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-518 Sports Authority - Store #858
Sq Ft 43,629 1997 22 974,791
Rent 72,715.00 1996 592,690 552,359 585,444 1,620,325 194 8,442,891
Store Opened 8/13/95
Lease Exp 8/31/15
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-521 Mikasa, Inc.
Sq Ft 18,011 1997
Rent 30,011.67 1996
Store Opened 10/19/96
Lease Exp 10/31/06
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-522 Barnes & Noble #2645
Sq Ft 29,963 1997 98 2,939,182
Rent 82,398.25 1996 492,939 492,939 604,051 1,457,711 237 7,114,178
Store Opened 9/29/95
Lease Exp 2/01/11
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-523 Cambridge Soundworks, Inc.
Sq Ft 2,196 1997 38 83,655
Rent 7,612.80 1996 136,114 62,905 447 982,521
Store Opened 6/01/95
Lease Exp 8/31/05
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:12 am
User: KUSHNER Retail Sales Detail Report Page: 4
Reported Sales : 1996 - 1997
Property : Shoppers World Community Ctr Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-524 Snip-Its
Sq Ft 1,871 1997 -- No Sales
Rent 7,226.75 1996 20,739 22,100 26,016 25,581 27,270 27,926 26,888 33,171
Store Opened 9/22/95
Lease Exp 9/30/00
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-525 Bruegger's Fresh Bagel Bakery
Sq Ft 1,935 1997 40,574 40,162 41,252 42,698 40,849
Rent 6,450.00 1996
Store Opened 9/20/96
Lease Exp 6/30/06
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-600 General Cinema Theatres #972
Sq Ft 85,000 1997 938,537 1,052,127 1,041,845 778,919
Rent 159,375.00 1996 906,868 898,531 640,392 693,057 857,860 903,974 1,292,620 991,800
Store Opened 12/16/94
Lease Exp 12/31/14
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-601T TGI Fridays
Sq Ft 6,300 1997 328,835 274,639 269,155
Rent 14,583.34 1996 449,473 346,189 408,823 337,122 330,406 411,185 327,340 322,300
Store Opened 12/18/95
Lease Exp 12/31/05
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-9940 Bradlee's
Sq Ft 102,555 1997 -- No Sales
Rent 8,333.33 1996 -- No Sales
Store Opened 11/15/74
Lease Exp 10/31/05
Departments No
<CAPTION>
Tenant Year September October November December Yr. SPSF Yr. Total
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-524 Snip-Its
Sq Ft 1,871 1997
Rent 7,226.75 1996 112 209,690
Store Opened 9/22/95
Lease Exp 9/30/00
Departments No
- ------------------------------------------------------------------------------------------------------------------
0-525 Bruegger's Fresh Bagel Bakery
Sq Ft 1,935 1997 106 205,535
Rent 6,450.00 1996 20,617 50,121 54,464 64,739 98 189,941
Store Opened 9/20/96
Lease Exp 6/30/06
Departments No
- ------------------------------------------------------------------------------------------------------------------
0-600 General Cinema Theatres #972
Sq Ft 85,000 1997 45 3,811,428
Rent 159,375.00 1996 639,872 605,206 1,084,699 982,792 124 10,497,672
Store Opened 12/16/94
Lease Exp 12/31/14
Departments No
- ------------------------------------------------------------------------------------------------------------------
0-601T TGI Fridays
Sq Ft 6,300 1997 139 872,629
Rent 14,583.34 1996 349,655 267,622 272,348 372,583 666 4,195,048
Store Opened 12/18/95
Lease Exp 12/31/05
Departments No
- ------------------------------------------------------------------------------------------------------------------
0-9940 Bradlee's
Sq Ft 102,555 1997
Rent 8,333.33 1996
Store Opened 11/15/74
Lease Exp 10/31/05
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:12 am
User: KUSHNER Retail Sales Detail Report Page: 5
Reported Sales : 1996 - 1997
Property : Shoppers World Community Ctr Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-9970 Logan Express - Massport
Sq Ft 0 1997 -- No Sales
Rent 26,000.00 1996 -- No Sales
Store Opened 10/01/95
Lease Exp 9/30/05
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
0-9980 Framingham/Natick Park-and-Rid
Sq Ft 0 1997
Rent 5,833.33 1996
Store Opened 8/01/88
Lease Exp 3/31/99
Departments No
Property Totals 1997 4,840,645 4,504,161 4,457,877 3,741,148 2,824,114 0 0
1996 5,135,139 5,496,574 6,285,654 6,422,233 6,506,149 7,016,052 7,198,101 6,838,816
<CAPTION>
Tenant Year September October November December Yr. SPSF Yr. Total
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-9970 Logan Express - Massport
Sq Ft 0 1997
Rent 26,000.00 1996
Store Opened 10/01/95
Lease Exp 9/30/05
Departments No
- -------------------------------------------------------------------------------------------------------------------
0-9980 Framingham/Natick Park-and-Rid
Sq Ft 0 1997
Rent 5,833.33 1996
Store Opened 8/01/88
Lease Exp 3/31/99
Departments No
Property Totals 1997 0 0 0 0 20,367,945
1996 6,798,903 6,692,067 8,662,396 12,692,620 85,744,704
</TABLE>
<PAGE>
SHOPPERS WORLD 1997 UPDATE
PROJECT DESIGNATOR: SW97
LEASE ABSTRACT REPORT
FOR ALL TENANTS
7/31/97 @ 15:27
<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 ANCHORS
# 2-SUITE 9940 1 102,555 11/74 10/05 - 0.98 100,000
BRADLEE'S 1
1- 60 2.44 250,000
2- 60 2.83 290,000
3- 60 3.28 336,000
# 3-SUITE 501 1 18,300 10/94 1/20 - 2.46 45,000
KID R US 1
1- 60 2.46 45,000
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1 ANCHORS
# 2-SUITE 9940 NATURAL CENTER CAM ZERO
BRADLEE'S SW TAXES ZERO
NATURAL CENTER CAM ZERO
SW TAXES ZERO
NATURAL CENTER CAM ZERO
SW TAXES ZERO
NATURAL CENTER CAM ZERO
SW TAXES ZERO
# 3-SUITE 501 NATURAL CENTER CAM W/10% ZERO
KID R US SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 2
<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- 60 2.46 45,000
3- 60 2.46 45,000
4- 60 2.46 45,000
5- 60 2.46 45,000
6- 60 2.46 45,000
7- 60 2.46 45,000
8- 12 2.46 45,000
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 3
<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>
# 4-SUITE 502 1 45,000 10/94 1/20 - 2.33 105,000
TOYS R US 1
1- 60 2.33 105,000
2- 60 2.33 105,000
3- 60 2.33 105,000
4- 60 2.33 105,000
5- 60 2.33 105,000
6- 60 2.33 105,000
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 4-SUITE 502 NATURAL CENTER CAM W/10% ZERO
TOYS R US SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 4
<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>
7- 60 2.33 105,000
8- 12 2.33 105,000
# 5-SUITE 503 1 40,000 10/94 1/20 - 0.00 0 3.00
MACY'S FURNITURE 1 2.00
1-120 0.00 0 3.00
2.00
2-120 0.00 0 3.00
2.00
3-120 0.00 0 3.00
2.00
# 6-SUITE 504 1 39,884 8/95 7/10 - 16.00 638,144 2.00
TJ MAXX 1 8/00 17.60 701,958
8/05 19.36 772,154
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
# 5-SUITE 503 16,000 ZERO MACY'S CAM
MACY'S FURNITURE UNLIMITED SW TAXES ZERO
16,000 ZERO MACY'S CAM
UNLIMITED SW TAXES ZERO
16,000 ZERO MACY'S CAM
UNLIMITED SW TAXES ZERO
16,000 ZERO MACY'S CAM
UNLIMITED SW TAXES ZERO
# 6-SUITE 504 UNLIMITED 32,000 CENTER CAM W/10% ZERO
TJ MAXX SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 5
<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- 60 21.30 849,530 2.00
2- 60 23.43 934,482 2.00
# 8-SUITE 512 1 24,560 10/97 12/07 - 16.00 392,960
AC MOORE 1 10/00 17.00 417,520
10/02 18.00 442,080
1- 60 19.50 478,920
2- 60 21.00 515,760
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM W/10% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 8-SUITE 512 NATURAL SW CAM + MGMT + 5% ZERO
AC MOORE SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL SW CAM + MGMT + 5% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL SW CAM + MGMT + 5% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 6
<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>
3-60 22.50 552,600
# 9-SUITE 514 1 50,081 8/95 1/11 - 15.40 771,247 2.50
MARSHALL'S 1 8/00 16.94 848,372
8/05 18.63 933,009
1- 60 20.50 1,026,660 2.50
2- 60 22.55 1,129,327 2.50
3- 60 24.80 1,242,009 2.50
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NATURAL SW CAM + MGMT + 5% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 9-SUITE 514 UNLIMITED NATURAL CENTER CAM ZERO
MARSHALL'S CAM ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
CAM ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
CAM ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
CAM ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 7
<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>
# 10-SUITE 515 1 50,059 9/95 1/11 - 14.60 73O,861
BOB'S 1 9/00 16.06 803,948
9/05 17.66 884,042
1- 60 19.43 972,643
2- 60 21.37 1,069,760
3- 60 23.51 1,176,887
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 10-SUITE 515 NATURAL CENTER CAM ZERO
BOB'S BOB'S ADMIN FEE
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM ZERO
BOB'S ADMIN FEE
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM ZERO
BOB'S ADMIN FEE
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM ZERO
BOB'S ADMIN FEE
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 8
<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>
# 11-SUITE 517 1 40,159 9/95 1/11 - 17.25 692,743 2.50
LINENS N THINGS 1 9/00 18.98 762,218
9/05 20.87 838,118
1- 60 22.96 922,051 2.50
2- 60 25.25 1,014,015 2.50
3- 60 27.78 1,115,617 2.50
# 12-SUITE 522 1 29,963 10/95 1/11 - 33.00 988,779 2.00
BARNES & NOBLE 1 10/00 37.95 1,137,096
10/05 43.64 1,307,585
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 11-SUITE 517 UNLIMITED NATURAL CENTER CAM ZERO
LINENS N THINGS LINENS ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
LINENS ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
LINENS ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL CENTER CAM ZERO
LINENS ADMIN
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 12-SUITE 522 UNLIMITED 14,000 CENTER CAM W/15% ZERO
BARNES & NOBLE 10/00 16,100 SW TAXES ZERO
10/05 18,515 LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 9
<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- 60 50.19 1,503,843 2.00
2- 60 57.72 1,729,464 2.00
3- 60 66.38 1,988,944 2.00
# 15-SUITE 518 1 43,629 5/95 8/15 - 20.00 872,580 1.00
SPORTS AUTHORITY 1 3/98 21.00 916,209
9/00 22.00 959,838
9/05 23.00 1,003,467
9/10 24.00 1,047,096
1- 60 25.00 1,090,725 1.00
2- 60 26.00 1,134,354 1.00
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED 21,292 CENTER CAM w/15% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
UNLIMITED 24,488 CENTER CAM w/15% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
UNLIMITED 28,159 CENTER CAM W/15% ZERO
SW TAXES ZERO
LIAB INSURANCE ZERO
# 15-SUITE 518 UNLIMITED 20,000 CENTER CAM W/7% ZERO
SPORTS AUTHORITY SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED 20,000 CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED 20,000 CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 10
<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>
3- 60 27.00 1,177,983 1.00
4- 60 27.00 1,177,983 1.00
# 16-SUITE 505 1 36,108 12/94 12/04 - 8.50 306,918
SEARS HOMELIFE 1 1/00 9.78 353,214
1- 60 11.27 406,874
2- 60 12.93 466,876
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED 20,000 CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED 20,000 CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 16-SUITE 505 NATURAL SEARS CAM
SEARS HOMELIFE SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 11
<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>
3- 60 14.87 536,926
4- 60 17.10 617,447
# 24-SUITE 519 1 30,100 2/97 1/12 - 28.98 872,400
OFFICE MAX 1 2/02 29.98 902,400
2/07 30.98 932,400
1- 60 27.91 840,000
2- 60 28.90 870,000
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NATURAL CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 24-SUITE 519 NATURAL CENTER CAM W/7% ZERO
OFFICE MAX SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 12
<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>
3- 60 29.90 900,000
# 25-SUITE 520 1 50,000 9/96 8/11 - 23.96 1,198,226
THE WIZ 1 9/98 28.96 1,448,226
9/01 30.46 1,523,226
9/06 29.30 1,465,000
# 27-SUITE 511 1 27,089 6/97 5/07 - 18.00 487,602 2.00
SHOE WAREHOUSE 1 6/02 20.00 541,708
1- 60 21.00 568,869 2.00
2- 60 22.00 595,958 2.00
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NATURAL CENTER CAM W/7% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 25-SUITE 520 NATURAL SWCAM + MGMT W/10% ZERO
THE WIZ SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 27-SUITE 511 UNLIMITED 12,190 CENTER CAM W/10% ZERO
SHOE WAREHOUSE 6/02 13,543 SW TAX W/15% ADMIN ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
MANAGEMENT FEES ZERO
UNLIMITED 14,222 SWCAM + MGMT W/10% ZERO
SW TAX W/15% ADMIN ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
UNLIMITED 14,899 SWCAM + MGMT W/10% ZERO
SW TAX W/15% ADMIN ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
</TABLE>
<PAGE>
PAGE 13
<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>
3-60 23.00 623,047 2.00
-------
627,487
2 IN LINE SHOPS
# 7-SUITE 506 2 6,071 12/96 11/02 - 35.00 212,485 4.00
JEWELRY DEPOT 5 12/97 36.00 218,556
12/98 37.00 224,627
12/99 38.00 230,698
12/00 39.00 236,769
12/01 40.00 242,840
1- 60 41.00 248,911 4.00
12/03 42.00 254,982
12/04 43.00 261,053
12/05 44.00 267,124
12/06 45.00 273,195
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED 15,576 SWCAM + MGMT W/10% ZERO
SW TAX W/15% ADMIN ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
2 IN LINE SHOPS
# 7-SUITE 506 UNLIMITED 3,036 SWCAM + MGMT W/15% ZERO
JEWELRY DEPOT 12/97 3,122 SW TAXES W/15% ZERO
12/98 3,209 PROP INS W/15% ZERO
12/99 3,296 LIAB INS W/15% ZERO
12/00 3,382
UNLIMITED 3,556 SWCAM + MGMT W/15% ZERO
12/03 3,643 SW TAXES W/15% ZERO
12/04 3,729 PROP INS W/15% ZERO
12/05 3,816 LIAB INS W/15% ZERO
12/06 3,921
</TABLE>
<PAGE>
PAGE 14
<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>
# 13-SUITE 523 2 2,196 9/95 8/05 - 41.60 91,354
CAMBRIDGE SOUNDWKS 3 9/97 43.26 95,007
9/98 44.99 98.808
9/99 46.79 102,760
9/00 48.67 106,870
9/01 50.61 111,145
9/02 52.64 115,591
9/03 54.74 120,215
9/04 56.93 125,024
1- 60 59.21 130,025
9/06 61.58 135,226
9/07 64.04 140,635
9/08 66.60 146,260
9/09 69.27 152,110
# 14-SUITE 524 2 1,871 10/95 9/00 - 46.35 86,721
SNIP ITS 3 10/97 47.74 89,322
10/98 49.17 91,997
10/99 50.65 94,766
1- 60 52.17 97,610
10/01 53.73 100,529
10/02 55.34 103,541
10/03 57.00 106,647
10/04 58.71 109,846
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 13-SUITE 523 NATURAL SWCAM + MGMT W/15% ZERO
CAMBRIDGE SOUNDWKS SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 14-SUITE 524 NATURAL SWCAM + MGMT W/15% ZERO
SNIP ITS SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
</TABLE>
<PAGE>
PAGE 15
<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>
# 17-SUITE 516 2 10,775 12/95 11/00 - 24.00 258,600 3.00
CORNING AT HOME 6
1- 60 26.00 280,150 3.00
2- 60 28.00 301,700 3.00
# 18-SUITE 525 2 1,935 7/96 6/06 - 40.00 77.400 6.00
BRUEGGER'S BAGELS 3 7/01 46.00 89,010
1- 60 52.90 102,361 6.00
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 17-SUITE 516 UNLIMITED NATURAL CORNING CAM
CORNING AT HOME SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 18-SUITE 525 UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
BRUEGGER'S BAGELS SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 16
<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- 60 60.83 117,706 6.00
# 22-SUITE 513 2 8,500 8/96 7/06 29.00 246,500 5.00
JOHN HARVARD BREW 5 8/01 33.35 283,475
1- 60 38.35 325,975 5.00
2- 60 44.10 374,850 5.00
# 23-SUITE 521 2 18,007 11/96 10/06 - 20.00 360,140 3.00
MIKASA 6 11/98 23.00 414,161
11/01 25.00 450,175
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 22-SUITE 513 UNLIMITED 5,000 SWCAM + MGMT W/15% ZERO
JOHN HARVARD BREW SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
UNLIMITED 5,000 SWCAM + MGMT W/15% ZERO
SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
UNLIMITED 5,000 SWCAM + MGMT W/15% ZERO
SW TAXES W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 23-SUITE 521 UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
MIKASA SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 17
<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- 60 27.00 486,189 3.00
2- 60 29.00 522,203 3.00
-------
49,355
3 OUTPARCEL (OWNED)
#19-SUITE 601T 3 6,300 1/96 12/05 - 27.78 175,000 2.00
FRIDAY'S 7
1- 60 33.33 210,000 2.00
2-60 40.00 252,000 2.00
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
3 OUTPARCEL (OWNED)
#19-SUITE 601T UNLIMITED 3,500 CENTER CAM W/15% ZERO
FRIDAY'S SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED 3,500 CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
UNLIMITED 3,500 CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 18
<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>
3- 60 48.00 302,400 2.00
# 20-SUITE 601U 3 9,200 6/96 5/11 - 19.02 175,000
OLIVE GARDEN 7 6/01 21.88 201,250
6/06 25.16 231,438
1- 60 28.93 266,153
2- 60 33.27 306,076
3- 60 38.26 351,987
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED 3,500 CENTER CAM W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 20-SUITE 601U NATURAL SWCAM + MGMT W/15% ZERO
OLIVE GARDEN SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL SWCAM + MGMT W/15% ZERO
SW TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 19
<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>
# 21-SUITE 0000 3 1 10/95 9/05 - %312000.00 312,000
LOGAN EXPRESS 7 10/97 %324480.00 324,480
10/98 %337459.19 337,459
10/99 %350957.53 350,958
10/00 %364995.81 364,996
10/01 %379595.62 379,596
10/02 %394779.44 394,779
10/03 %410570.59 410,571
10/04 %426993.41 426,993
1-60 %540283.00 540,283
10/06 %561894.31 561,894
10/07 %584370.06 584,370
10/08 %607744.81 607,745
10/09 %632054.56 632,055
# 26-SUITE 9920 3 1 1/97 12/11 - 7525.00 7,525
FRAMINGHAM ATM 7
------
15,502
5 GENERAL CINEMA
# 1-SUITE 600 5 85,000 1/95 12/14 - 22.50 1,912,500 9.00
GENERAL CINEMA 1 9/97 25.15 2,137,500
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 21-SUITE 0000 NATURAL NONE
LOGAN EXPRESS
NATURAL NONE
# 26-SUITE 9920 NATURAL NONE
FRAMINGHAM ATM
5 GENERAL CINEMA
# 1-SUITE 600 UNLIMITED NATURAL GEN CINEMA CAM ZERO
GENERAL CINEMA GEN CINEMA TAXES ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
PAGE 20
<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- 60 31.93 2,713,800 9.00
2- 60 34.96 2,971,350 9.00
3- 60 38.08 3,236,550 9.00
4- 60 38.08 3,236,550 9.00
-------
85,000
-------
777,344
=======
<CAPTION>
CEILING BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------------- ------- ------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
UNLIMITED NATURAL GEN CINEMA CAM ZERO
GEN CINEMA TAXES ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL GEN CINEMA CAM ZERO
GEN CINEMA TAXES ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL GEN CINEMA CAM ZERO
GEN CINEMA TAXES ZERO
LIAB INSURANCE ZERO
UNLIMITED NATURAL GEN CINEMA CAM ZERO
GEN CINEMA TAXES ZERO
LIAB INSURANCE ZERO
</TABLE>
<PAGE>
SHOPPERS WORLD 1997 UPDATE
PROJECT DESIGNATOR: SW97
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
7/31/97 @ 15:21
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF SHOPPERS WORLD 1997 UPDATE BEGINNING 8/1997
FOR 20 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
TGLA
DESCRIBED AS TOTAL CENTER GLA
1997 VALUE - 777,344
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA
1997 VALUE - 745,129
1998 VALUE - 777,344
1999 VALUE - 777,344
2000 VALUE - 777,344
2001 VALUE - 777,344
2002 VALUE - 777,344
2003 VALUE - 777,344
2004 VALUE - 777,344
2005 VALUE - 777,032
2006 VALUE - 777,344
2007 VALUE - 776,838
2008 VALUE - 776,838
2009 VALUE - 777,344
2010 VALUE - 775,558
2011 VALUE - 755,883
2012 VALUE - 764,371
2013 VALUE - 763,359
2014 VALUE - 764,371
2015 VALUE - 764,371
2016 VALUE - 756,549
THEREAFTER - CONSTANT
GCGL
DESCRIBED AS GENERAL CINEMA GLA
1997 VALUE - 85,000
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
CMGL
DESCRIBED AS GLA FOR CAM AND TAX ALLOCATION (EXCLUDES GEN CINEMA)
+100.0% OF TGLA-100.0% OF GCGL
LIEX
DESCRIBED AS GLA EXCLUDED FOR LIAB INSURANCE ALLOCATION (BRADLEE'S)
1997 VALUE - 102,555
THEREAFTER - CONSTANT
LIGL
DESCRIBED AS GLA FOR LIAB INS ALLOCATION
+100.0% OF TGLA-100.0% OF LIEX
PIEX
DESCRIBED AS GLA EXCLUDED FOR PROP INS ALLOCATION (GEN CINEMA, BRADLEE'S,
KID R US, TOYS R US, MACY'S FURNITURE, BARNES & NOBLE)
1997 VALUE - 320,818
THEREAFTER - CONSTANT
PIGL
DESCRIBED AS GLA FOR PROP INS ALLOCATION
+100.0% OF TGLA-100.0% OF PIEX
GROWTH RATES
GREN
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GCPI
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GEXP
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GSAL
1997 VALUE - 3.50
THEREAFTER - CONSTANT
MARKET RATES
STRU
<PAGE>
PAGE 3
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE GEXP
MK35
1997 VALUE - 35.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MK45
1997 VALUE - 45.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MK25
1997 VALUE - 25.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MK10
1997 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MISCELLANEOUS INCOMES
NONE
EXPENSES
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS SHOPPERS WORLD MGMT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 480,361
1998 VALUE - 517,795
1999 VALUE - 531,153
2000 VALUE - 544,197
2001 VALUE - 565,395
2002 VALUE - 576,236
2003 VALUE - 581,472
2004 VALUE - 586,944
2005 VALUE - 601,611
2006 VALUE - 624,261
THEREAFTER - CONSTANT
MGMT FEE EXPENSE , REFERRED TO AS MGM1
DESCRIBED AS GENERAL CINEMA MGMT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 620,777
<PAGE>
PAGE 4
1998 VALUE - 695,565
1999 VALUE - 712,328
2000 VALUE - 729,008
2001 VALUE - 754,498
2002 VALUE - 770,493
2003 VALUE - 781,123
2004 VALUE - 790,483
2005 VALUE - 810,531
2006 VALUE - 846,627
2007 VALUE - 858,999
2008 VALUE - 872,833
2009 VALUE - 885,255
2010 VALUE - 890,583
2011 VALUE - 878,804
2012 VALUE - 923,275
2013 VALUE - 933,622
2014 VALUE - 948,918
2015 VALUE - 992,527
2016 VALUE - 1,014,860
THEREAFTER - CONSTANT
TOTAL CENTER CAM , REFERRED TO AS CAME
DESCRIBED AS TOTAL CENTER CAM
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 1,370,682
THEREAFTER - GROWING AT GROWTH RATE GEXP
GEN CINEMA CAM , REFERRED TO AS GCAM
DESCRIBED AS GENERAL CINEMA CAM
AN INFORMATIONAL EXPENSE
1997 VALUE - 290,856
THEREAFTER - GROWING AT GROWTH RATE GEXP
CENTER CAM , REFERRED TO AS CCAM
DESCRIBED AS SHOPPERS WORLD CAM
AN INFORMATIONAL EXPENSE
- -100.0% OF GCAM+100.0% OF CAME
CENTER CAM W/7% , REFERRED TO AS CC07
DESCRIBED AS SHOPPERS WORLD CAM W/7% ADMIN
AN INFORMATIONAL EXPENSE
+107.0% OF CCAM
CENTER CAM W/10% , REFERRED TO AS CC10
DESCRIBED AS SHOPPERS WORLD CAM W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF CCAM
<PAGE>
PAGE 5
CENTER CAM W/12% , REFERRED TO AS CC12
DESCRIBED AS SHOPPERS WORLD CAM W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF CCAM
CENTER CAM W/15% , REFERRED TO AS CC15
DESCRIBED AS SHOPPERS WORLD CAM W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF CCAM
SW CAM + MGMT , REFERRED TO AS 1CAM
DESCRIBED AS SHOPPERS WORLD CAM PLUS SHOPPERS WORLD MGMT FEES
AN INFORMATIONAL EXPENSE
+100.0% OF CCAM+100.0% OF MGMT
SWCAM + MGMT W/10%, REFERRED TO AS 1C10
DESCRIBED AS SHOPPERS WORLD CAM PLUS SHOPPERS WORLD MGMT FEES W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 1CAM
SWCAM + MGMT W/15%, REFERRED TO AS 1C15
DESCRIBED AS SHOPPERS WORLD CAM PLUS SHOPPERS WORLD MGMT FEES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 1CAM
SW RE TAX , REFERRED TO AS SWTX
DESCRIBED AS SHOPPERS WORLD TAXES
AN INFORMATIONAL EXPENSE
1997 VALUE - 1,138,559
1998 VALUE - 2,519,369
THEREAFTER - GROWING AT GROWTH RATE GEXP
GENERAL CINEMA , REFERRED TO AS GCTX
DESCRIBED AS GENERAL CINEMA TAXES
AN INFORMATIONAL EXPENSE
1997 VALUE - 315,454
THEREAFTER - GROWING AT GROWTH RATE GEXP
TOTAL CTR TAXES , REFERRED TO AS CTAX
DESCRIBED AS TOTAL CENTER TAXES
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF SWTX+100.0% OF GCTX
SW TAXES W/15% , REFERRED TO AS ST15
DESCRIBED AS SHOPPERS WORLD TAXES W/15%
AN INFORMATIONAL EXPENSE
+115.0% OF SWTX
<PAGE>
PAGE 6
PROPERTY INSURANCE, REFERRED TO AS PINS
DESCRIBED AS PROPERTY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 45,661
THEREAFTER - GROWING AT GROWTH RATE GEXP
LIAB INSURANCE , REFERRED TO AS LINS
DESCRIBED AS LIABILITY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 134,975
THEREAFTER - GROWING AT GROWTH RATE GEXP
TOTAL CTR INSURANC, REFERRED TO AS INSE
DESCRIBED AS TOTAL CENTER INSURANCE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PINS+100.0% OF LINS
PROP INS W/15% , REFERRED TO AS PI15
DESCRIBED AS PROPERTY INS W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF PINS
LIAB INS W/15% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY INS W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF LINS
SW CAM + MGMT + 5%, REFERRED TO AS 1C05
AN INFORMATIONAL EXPENSE
+105.0% OF 1CAM
SW TAX W/15% ADMIN, REFERRED TO AS TX15
AN INFORMATIONAL EXPENSE
+115.0% OF SWTX
VACANCY ALLOWANCE
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 3.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
<PAGE>
PAGE 7
PERCENTAGE OF GROSS RENTAL INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGM1
1997 VALUE - 4.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
STANDARD METHOD #1 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 6.000%
YEAR 2 - 3.000%
YEAR 3 - 3.000%
YEAR 4 - 3.000%
YEAR 5 - 3.000%
STANDARD METHOD #2 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 3.000%
YEAR 2 - 1.500%
YEAR 3 - 1.500%
YEAR 4 - 1.500%
YEAR 5 - 1.500%
STANDARD METHOD #3 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 3.750%
YEAR 2 - 1.875%
YEAR 3 - 1.875%
YEAR 4 - 1.875%
YEAR 5 - 1.875%
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
<PAGE>
PAGE 8
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
STRUCTRUAL RESERVE
MARKET RATE STRU MULTIPLIED BY AREA MEASURE TGLA
PRIMARY CLASSIFICATION CODES
1 - ANCHORS
2 - IN LINE SHOPS
3 - OUTPARCEL (OWNED)
4 - OUTPARCEL (SOLD)
5 - GENERAL CINEMA
SECONDARY CLASSIFICATION CODES
1 - ANCHORS
2 - IN LINE < 1000
<PAGE>
PAGE 9
3 - IN LINE 1000-2999
4 - IN LINE 3000-4999
5 - IN LINE 5000-10000
6 - IN LINE > 10000
7 - OUTPARCEL (OWNED)
8 - OUTPARCEL (SOLD)
COST CENTERS
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
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
NONE
TENANT PROLOGUE
MINIMUM RENTS:
<PAGE>
PAGE 10
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/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>
SHOPPERS WORLD 1997 UPDATE
PROJECT DESIGNATOR: SW97
TENANT REGISTER
7/31/97 @ 15:23
TENANT SQUARE FEET BEGIN DATE END DATE
- -------------------------------------- ----------- ---------- --------
1 - ANCHORS
# 2 - SUITE 9940 BRADLEE'S 102,555 11/1974 10/2005
# 3 - SUITE 501 KID R US 18,300 10/1994 1/2020
# 4 - SUITE 502 TOYS R US 45,000 10/1994 1/2020
# 5 - SUITE 503 MACY'S FURNITURE 40,000 10/1994 1/2020
# 6 - SUITE 504 TJ MAXX 39,884 8/1995 7/2010
# 8 - SUITE 512 AC MOORE 24,560 10/1997 12/2007
# 9 - SUITE 514 MARSHALL'S 50,081 8/1995 1/2011
# 10 - SUITE 515 BOB'S 50,059 9/1995 1/2011
# 11 - SUITE 517 LINENS N THINGS 40,159 9/1995 1/2011
# 12 - SUITE 522 BARNES & NOBLE 29,963 10/1995 1/2011
# 15 - SUITE 518 SPORTS AUTHORITY 43,629 5/1995 8/2015
# 16 - SUITE 505 SEARS HOMELIFE 36,108 12/1994 12/2004
# 24 - SUITE 519 OFFICE MAX 30,100 2/1997 1/2012
# 25 - SUITE 520 THE WIZ 50,000 9/1996 8/2011
# 27 - SUITE 511 SHOE WAREHOUSE 27,089 6/1997 5/2007
---------
15 TENANTS 627,487
2 - IN LINE SHOPS
# 7 - SUITE 506 JEWELRY DEPOT 6,071 12/1996 11/2002
# 13 - SUITE 523 CAMBRIDGE SOUNDWKS 2,196 9/1995 8/2005
# 14 - SUITE 524 SNIP ITS 1,871 10/1995 9/2000
# 17 - SUITE 516 CORNING AT HOME 10,775 12/1995 11/2000
# 18 - SUITE 525 BRUEGGER'S BAGELS 1,935 7/1996 6/2006
# 22 - SUITE 513 JOHN HARVARD BREW 8,500 8/1996 7/2006
# 23 - SUITE 521 MIKASA 18,007 11/1996 10/2006
---------
7 TENANTS 49,355
3 - OUTPARCEL (OWNED)
# 19 - SUITE 601T FRIDAY'S 6,300 1/1996 12/2005
# 20 - SUITE 601U OLIVE GARDEN 9,200 6/1996 5/2011
# 21 - SUITE 0000 LOGAN EXPRESS 1 10/1995 9/2005
# 26 - SUITE 9920 FRAMINGHAM ATM 1 1/1997 12/2011
---------
4 TENANTS 15,502
5 - GENERAL CINEMA
<PAGE>
SHOPPERS WORLD 1997 UPDATE PAGE 2
TENANT SQUARE FEET BEGIN DATE END DATE
- -------------------------------------- ----------- ---------- --------
# 1 - SUITE 600 GENERAL CINEMA 85,000 1/1995 12/2014
-------
1 TENANTS 85,000
-------
27 TENANTS 777,344
=======
<PAGE>
SHOPPERS WORLD 1997 UPDATE
PROJECT DESIGNATOR: SW97
TENANT AGING REPORT
7/31/97 @ 15:25
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- ----------------------------- --------- --------- ----------
14 524 SNIP ITS 1,871 Sep 2000 #1-60 mos
17 516 CORNING AT HOME 10,775 Nov 2000 #1-60 mos
#2-60 mos
-------
2000 Total 12,646
7 506 JEWELRY DEPOT 6,071 Nov 2002 #1-60 mos
-------
2002 Total 6,071
16 505 SEARS HOMELIFE 36,108 Dec 2004 #1-60 mos
#2-60 mos
#3-60 mos
#4-60 mos
-------
2004 Total 36,108
13 523 CAMBRIDGE SOUNDWKS 2,196 Aug 2005 #1-60 mos
21 0000 LOGAN EXPRESS 1 Sep 2005 #1-60 mos
2 9940 BRADLEE'S 102,555 Oct 2005 #1-60 mos
#2-60 mos
#3-60 mos
19 601T FRIDAY'S 6,300 Dec 2005 #1-60 mos
#2-60 mos
#3-60 mos
-------
2005 Total 111,052
18 525 BRUEGGER'S BAGELS 1,935 Jun 2006 #1-60 mos
#2-60 mos
22 513 JOHN HARVARD BREW 8,500 Jul 2006 #1-60 mos
#2-60 mos
23 521 MIKASA 18,007 Oct 2006 #1-60 mos
#2-60 mos
2006 Total 28,442
27 511 SHOE WAREHOUSE 27,089 May 2007 #1-60 mos
#2-60 mos
#3-60 mos
8 512 AC MOORE 24,560 Dec 2007 #1-60 mos
#2-60 mos
<PAGE>
SHOPPERS WORLD 1997 UPDATE PAGE 2
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- ----------------------------- --------- --------- ----------
#3-60 mos
-------
2007 Total 51,649
6 504 TJ MAXX 39,884 Jul 2010 #1-60 mos
#2-60 mos
-------
2010 Total 39,884
11 517 LINENS N THINGS 40,159 Jan 2011 #1-60 mos
#2-60 mos
#3-60 mos
12 522 BARNES & NOBLE 29,963 Jan 2011 #1-60 mos
#2-60 mos
#3-60 mos
9 514 MARSHALL'S 50,081 Jan 2011 #1-60 mos
#2-60 mos
#3-60 mos
10 515 BOB'S 50,059 Jan 2011 #1-60 mos
#2-60 mos
#3-60 mos
20 601U OLIVE GARDEN 9,200 May 2011 #1-60 mos
#2-60 mos
#3-60 mos
25 520 THE WIZ 50,000 Aug 2011
26 9920 FRAMINGHAM ATM 1 Dec 2011
-------
2011 Total 229,463
24 519 OFFICE MAX 30,100 Jan 2012 #1-60 mos
#2-60 mos
#3-60 mos
-------
2012 Total 30,100
1 600 GENERAL CINEMA 85,000 Dec 2014 #1-60 mos
#2-60 mos
#3-60 mos
#4-60 mos
-------
2014 Total 85,000
15 518 SPORTS AUTHORITY 43,629 Aug 2015 #1-60 mos
#2-60 mos
#3-60 mos
<PAGE>
SHOPPERS WORLD 1997 UPDATE PAGE 3
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- ----------------------------- --------- --------- ----------
#4-60 mos
-------
2015 Total 43,629
4 502 TOYS R US 45,000 Jan 2020 #1-60 mos
#2-60 mos
#3-60 mos
#4-60 mos
#5-60 mos
#6-60 mos
#7-60 mos
#8-12 mos
5 503 MACY'S FURNITURE 40,000 Jan 2020 #1-120 mos
#2-120 mos
#3-120 mos
3 501 KID R US 18,300 Jan 2020 #1-60 mos
#2-60 mos
#3-60 mos
#4-60 mos
#5-60 mos
#6-60 mos
#7-60 mos
#8-12 mos
-------
2020 Total 103,300
-------
Report Total 777,344
=======
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
1 Austin Power Center Jan-99 Home Depot 20 yrs. 103,680 $2,025,000 $19.53
Austin Avenue & NYS Thruway
Yonkers, NY
- -------------------------------------------------------------------------------------------------------------------------
2 Austin Power Center Jan-99 Costco 25 yrs. 134,632 $2,019,480 $15.00
Austin Avenue & NYS Thruway
Yonkers, NY
- -------------------------------------------------------------------------------------------------------------------------
3 Lowe's Home Center Oct-97 Lowe's 20 yrs. 130,316 $977,370 $7.50
W/S of Grant Avenue 1 1-yr. opt.
Town of Sennett 4 5-yr. opt.
Cayuga County, NY 1 6-yr. opt.
- -------------------------------------------------------------------------------------------------------------------------
4 Springhurst Towne Center Fall-97 Kohl's 20 yrs. 86,584 $671,026 $7.75
Westport & I-265 4 5-yr. opt.
Louisville, Kentucky
- -------------------------------------------------------------------------------------------------------------------------
5 Hudson Valley Plaza Spr-97 Wal-Mart 20 yrs. 201,000 $1,396,950 $6.95
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
6 Hudson Valley Plaza Spr-97 Sam's Club 20 yrs. 114,547 $670,100 $5.85
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
7 Hudson Valley Plaza Spr-97 Lowe's 20 yrs. 130,019 $1,170,171 $9.00
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
8 Hillview Shopping Center 1997 Home Place 15 yrs. 40,000 $800,000 $20.00
Route 38 Proposed
Cherry Hill, New Jersey
- -------------------------------------------------------------------------------------------------------------------------
9 Lowes Home Center Oct-96 Lowe's 20 yrs. 131,645 $999,318 $7.59
Sycamre, Ash, & Shippers 4 5-yr. opt.
Vestal, Broome Cty., NY 1 7-yr. opt.
- -------------------------------------------------------------------------------------------------------------------------
10 Brandywine Square Aug-96 BJ's Wholesale 20 yrs. 108,242 $1,190,662 $11.00
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
11 Brandywine Square Aug-96 Hechinger 20 yrs. 99,000 $1,242,450 $12.55
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
12 Walmart Supercenter Spr-96 Wal-Mart 20 yrs. 202,590 $1,243,903 $6.14
I-85 & I-575
Newman, GA
- -------------------------------------------------------------------------------------------------------------------------
13 Caldor Spr-96 Caldor 25 yrs. 113,275
Everett, MA $1,699,125 $15.00
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
1 Austin Power Center $21.48/sf yr. 6 1.0% of sales $36,184,320
Austin Avenue & NYS Thruway $23.63/sf yr. 11 over a natural
Yonkers, NY $26.00/sf yr. 16 breakpoint
- -----------------------------------------------------------------------------------------
2 Austin Power Center $16.13/sf yr. 6 1.0% of sales $80,779,200
Austin Avenue & NYS Thruway $17.39/sf yr. 11 over a natural
Yonkers, NY $18.97/sf yr. 16 breakpoint
$20.42/sf yr. 21
- -----------------------------------------------------------------------------------------
3 Lowe's Home Center $7.50/sf yr. 21 N/A $40,000,000
W/S of Grant Avenue $8.25/sf yrs. 22-26
Town of Sennett $9.08/sf yrs. 27-31
Cayuga County, NY $9.98/sf yrs. 32-36
- -----------------------------------------------------------------------------------------
4 Springhurst Towne Center $8.50/sf yr.11 2.5% of sales $18,000,000
Westport & I-265 over a natural
Louisville, Kentucky breakpoint
- -----------------------------------------------------------------------------------------
5 Hudson Valley Plaza None No $45,000,000
Route 9W & 199
Town of Ulster, NY
- -----------------------------------------------------------------------------------------
6 Hudson Valley Plaza None No $35,000,000
Route 9W & 199
Town of Ulster, NY
- -----------------------------------------------------------------------------------------
7 Hudson Valley Plaza 10% increase every 2% of sales over $50,000,000
Route 9W & 199 5 years $32,000,000;
Town of Ulster, NY capped at
$0.95/sf
- -----------------------------------------------------------------------------------------
8 Hillview Shopping Center $21.00/sf yr. 6 N/A
Route 38 $22.00/sf yr.11
Cherry Hill, New Jersey
- -----------------------------------------------------------------------------------------
9 Lowes Home Center None 2% of sales over $47,500,000
Sycamre, Ash, & Shippers natural
Vestal, Broome Cty., NY breakpoint
- -----------------------------------------------------------------------------------------
10 Brandywine Square $11.88/sf yr. 6 N/A
SS/ Route 30 at Quarry Road $12.83/sf yr. 11
Chester County, Pennsylvania $13.86/sf yr. 16
- -----------------------------------------------------------------------------------------
11 Brandywine Square $13.18/sf yr. 11 N/A
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -----------------------------------------------------------------------------------------
12 Walmart Supercenter None No $68,070,240
I-85 & I-575
Newman, GA
- -----------------------------------------------------------------------------------------
13 Caldor
Everett, MA None No $26,000,000
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
1 Austin Power Center 5.6% Anchor in 427,256 SF proposed ctr.
Austin Avenue & NYS Thruway which will also include Costco. Con-
Yonkers, NY struction expected to be completed by
Jan-99. Sales '95 chain avg.
- -------------------------------------------------------------------------------------
2 Austin Power Center 2.5% Anchor in 427,256 SF proposed ctr.
Austin Avenue & NYS Thruway which also incl. HomeDepot. Con-
Yonkers, NY strcution expected to be completed by
Jan-99. Sales '96 chain avg.
- -------------------------------------------------------------------------------------
3 Lowe's Home Center 2.4% New Lowe's Home Center with Fall
W/S of Grant Avenue 97 completion. New lease with
Town of Sennett landlord only responsible for structural
Cayuga County, NY repairs.
- -------------------------------------------------------------------------------------
4 Springhurst Towne Center 3.7% Freestanding discount dept. store as
Westport & I-265 anchor in proposed power center.
Louisville, Kentucky Kohl's to pay CAM+5% Fee, insur.,
and taxes. Sales are chain avg.
- -------------------------------------------------------------------------------------
5 Hudson Valley Plaza 3.1% Wal-Mart Supercenter to open in May
Route 9W & 199 97. Adjacent to Hudson Valley Mall.
Town of Ulster, NY NNN lease in planned power center
w/ Sam's club, Lowe's.
- -------------------------------------------------------------------------------------
6 Hudson Valley Plaza 1.9% Sam's club to open in March 97.
Route 9W & 199 Adjacent to Hudson Valley Mall.NNN
Town of Ulster, NY lease in planned power center w/ Wal-
Mart, Lowe's.
- -------------------------------------------------------------------------------------
7 Hudson Valley Plaza 2.3% Lowe's to open March 97. Adjacent
Route 9W & 199 to Hudson Valley Mall. NNN lease in
Town of Ulster, NY planned power center w/Wal-Mart,
Sam's Club. Sales proj.
- -------------------------------------------------------------------------------------
8 Hillview Shopping Center Proposed triple net lease in existing
Route 38 shopping center.
Cherry Hill, New Jersey
- -------------------------------------------------------------------------------------
9 Lowes Home Center 2.1% New $5.1M freestanding store.
Sycamre, Ash, & Shippers Tenant pays all expenses except
Vestal, Broome Cty., NY structural repairs in 1st 10 yrs. Sale
projected b/w $45.0-50.0M.
- -------------------------------------------------------------------------------------
10 Brandywine Square New 590,000sf power ctr. On site of
SS/ Route 30 at Quarry Road former Dowington Inn. NNN lease.
Chester County, Pennsylvania Other tenants include PetsMart,
Dick's, Hechinger. Opened 8/96.
- -------------------------------------------------------------------------------------
11 Brandywine Square New 590,000sf power ctr. On site of
SS/ Route 30 at Quarry Road former Dowington Inn. NNN lease.
Chester County, Pennsylvania Other tenants include PetsMart,
Dick's, BJ's Whole. Opened 8/96.
- -------------------------------------------------------------------------------------
12 Walmart Supercenter 1.8% New Wal-Mart scheduled opened in
I-85 & I-575 Spring 1996. Sales are based on Wal
Newman, GA Mart/Sam's chain average.
- -------------------------------------------------------------------------------------
13 Caldor
Everett, MA 6.5% Triple net lease of Caldor located in
Everett, MA. Lease started in early
1996.
- -------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
14 Caldor Spr-96 Caldor 25 yrs. 124,500 $1,992,000 $16.00
Huntington, NY
- -------------------------------------------------------------------------------------------------------------------------
15 Super Kmart Feb-96 Super Kmart 25 yrs. 178,189 $1,514,607 $8.50
Confidential West 10 5-yr. opt.
Virginia location
- -------------------------------------------------------------------------------------------------------------------------
16 Builders Square Dec-95 Builders Square 25 yrs. 109,800 $1,170,468 $10.66
Confidential Midwest 10 5-yr. opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
17 Wal-Mart Supercenter Nov-95 Wal-Mart 20 yrs. 202,590 $1,096,012 $5.41
Highway 41
Cartersville, GA
- -------------------------------------------------------------------------------------------------------------------------
18 Builders Square Nov-95 Builders Square 25 yrs. 109,800 $933,300 $8.50
Confidential Midwest 10 5-yr. opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
19 New Hope Commons Oct-95 Wal-Mart 10 yrs. 149,929 $1,215,924 $8.11
I-40 & Highway 501-15 4 5-yr opt.
Durham, North Carolina
- -------------------------------------------------------------------------------------------------------------------------
20 Independence Commons Sep-95 Kohl's 20 yrs. 80,684 $526,867 $6.53
Independence, Missouri
(Homart)
- -------------------------------------------------------------------------------------------------------------------------
21 Kmart Sep-95 Kmart 25 yrs. 124,157 $1,075,000 $8.66
Confidential West Coast 5 5-yr opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
22 Kmart Sep-95 Kmart 20 yrs. 145,780 $2,988,490 $20.50
Confidential NE Location
- -------------------------------------------------------------------------------------------------------------------------
23 Hornell Shopping Plaza Jun-95 Wal-Mart 20 yrs. 128,268 $741,389 $5.78
Hornell, New York
- -------------------------------------------------------------------------------------------------------------------------
24 Builders Square May-95 Builders Square 25 yrs. 109,800 $1,305,212 $11.89
Confidential Midwest 10 5-yr opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
25 Kmart May-95 Kmart 25 yrs. 178,189 $1,514,607 $8.50
Confidential Mid-Atlantic 10 5-yr opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
26 Hunting Park Avenue May-95 Caldor 25 yrs. 113,275 $1,302,663 $11.50
"G" Street Road
Philadelphia, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
14 Caldor None No $23,000,000
Huntington, NY
- -----------------------------------------------------------------------------------------
15 Super Kmart None No $60,000,000
Confidential West
Virginia location
- -----------------------------------------------------------------------------------------
16 Builders Square None No $18,446,400
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
17 Wal-Mart Supercenter None No $68,070,240
Highway 41
Cartersville, GA
- -----------------------------------------------------------------------------------------
18 Builders Square None No $18,446,400
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
19 New Hope Commons None 5% of sales in $50,376,144
I-40 & Highway 501-15 excess of
Durham, North Carolina stipulated
breakpoint
- -----------------------------------------------------------------------------------------
20 Independence Commons $7.15/sf yr. 3 $15,000,000
Independence, Missouri $7.40/sf yr. 11
(Homart) $7.65/sf yr.16
- -----------------------------------------------------------------------------------------
21 Kmart None No $17,754,451
Confidential West Coast
Location
- -----------------------------------------------------------------------------------------
22 Kmart 5% increase 1% of sales $34,112,520
Confidential NE Location every 5 years in excess of
$60,000,000
- -----------------------------------------------------------------------------------------
23 Hornell Shopping Plaza None 0.5% of sales in $43,098,048
Hornell, New York yr. 8; capped at
$1.00/sf; 7th yr
sales as break.
- -----------------------------------------------------------------------------------------
24 Builders Square None No $16,689,600
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
25 Kmart None No $28,510,240
Confidential Mid-Atlantic
Location
- -----------------------------------------------------------------------------------------
26 Hunting Park Avenue $12.65/sf yr. 6
"G" Street Road $13.92/sf yr. 11
Philadelphia, Pennsylvania $15.31/sf yr. 16
$16.84/sf yr. 21
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
14 Caldor 8.7% Semi net Caldor lease which began in
Huntington, NY early 1996.
- ---------------------------------------------------------------------------------------
15 Super Kmart 2.5% New Super Kmart on NNN lease. No
Confidential West % rent or steps. Sales based on
Virginia location projection by Kmart.
- ---------------------------------------------------------------------------------------
16 Builders Square 6.3% New Builders Square which opened
Confidential Midwest beginning 1996. Lease is on a NET
Location basis. Sales based on Builders
Square state average.
- ---------------------------------------------------------------------------------------
17 Wal-Mart Supercenter 1.6% Wal-Mart Supercenter which opened
Highway 41 in November 1995. Sales based on
Cartersville, GA Wal-Mart/Sam's chain average.
- ---------------------------------------------------------------------------------------
18 Builders Square 5.1% NET lease of Builders Square which
Confidential Midwest opened in Nov-95. No percentage
Location rents or steps. Sales based on
B.S. state avg.
- ---------------------------------------------------------------------------------------
19 New Hope Commons 2.4% New 407,360sf power center. Opts. at
I-40 & Highway 501-15 $8.11/sf. Tenant pays utilities & p/r
Durham, North Carolina taxes, CAM, & insur. Sales based on
Wal-Mart/Sam's avg.
- ---------------------------------------------------------------------------------------
20 Independence Commons 3.5% New 363,853 sf power center. No %
Independence, Missouri rent clause. P/R CAM & taxes.
(Homart) Kohl's received $30/sf in workletter.
Sales based on chain avg./unit.
- ---------------------------------------------------------------------------------------
21 Kmart 6.1% New Super Kmart which opened in
Confidential West Coast November 1995. Lease is on a NET
Location basis with no steps. Sales are based
on Kmart state average.
- ---------------------------------------------------------------------------------------
22 Kmart 8.8% New Super Kmart due to open 2nd
Confidential NE Location quarter 1996. Lease includes 4-5
year options. Sales estimated based
on 150% of Kmart state avg.
- ---------------------------------------------------------------------------------------
23 Hornell Shopping Plaza 1.7% New 250,000sf ctr. Turn-key. P/R
Hornell, New York share taxes, ins.; CAM cap at $.50/sf
yrs 1-10; $.70/sf yrs 11-20. Sales
based on Wal-Mart/Sam's avg.
- ---------------------------------------------------------------------------------------
24 Builders Square 7.8% Builders Square which opened in
Confidential Midwest November 1995. Lease is on a net
Location basis with no steps or % rent. Sales
based on B.S. state average.
- ---------------------------------------------------------------------------------------
25 Kmart 5.3% Net lease for Kmart which opened
Confidential Mid-Atlantic Feb-95. Sales are based on Kmart
Location state average. No percentage rent or
steps.
- ---------------------------------------------------------------------------------------
26 Hunting Park Avenue Caldor pays P/R CAM+10%, plus
"G" Street Road taxes and insurance.
Philadelphia, Pennsylvania
- ---------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
27 Key Stone Plaza May-95 Kohl's 15 yrs. 80,684 $564,788 $7.00
Erie, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
28 Kmart Apr-95 Kmart 25 yrs. 130,753 $3,007,319 $23.00
Confidential NE location 4 5-yr opt.
- -------------------------------------------------------------------------------------------------------------------------
29 Home Depot Apr-95 Home Depot 20 yrs. 103,000 $1,300,000 $12.62
656 Reservoir Avenue
Bridgeport, Connecticut
- -------------------------------------------------------------------------------------------------------------------------
30 New Hartford Consumer Sq. Apr-95 Builders Square 20 yrs. 109,800 $861,930 $7.85
Route 5A
New Hartford, New York
- -------------------------------------------------------------------------------------------------------------------------
31 Hunting Park Avenue Mar-95 Caldor 25 yrs. 113,275 $1,302,663 $11.50
"G" Street Road
Philadelphia, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
32 Riverside Mall Mar-95 Wal-Mart 25 yrs. 116,197 $928,414 $7.99
Route 12 & Route 49 4 5-yr opt.
Utica, New York
- -------------------------------------------------------------------------------------------------------------------------
33 Builders Square Mar-95 Builders Square 25 yrs. 109,800 $1,021,140 $9.30
Confidential SE Location 10 5-yr opt.
- -------------------------------------------------------------------------------------------------------------------------
34 Kmart Feb-95 Kmart 25 yrs. 118,242 $1,138,252 $9.63
Confidential NE Location 10 5-yr opt.
- -------------------------------------------------------------------------------------------------------------------------
35 Kmart Feb-95 Kmart 25 yrs. 91,266 $461,608 $5.06
Confidential SW Location 10 5-yr opt.
- -------------------------------------------------------------------------------------------------------------------------
36 Walmart Feb-95 Wal-Mart 20 yrs. 126,249 $916,568 $7.26
Highway 92 & I-575
Woodstock, GA
- -------------------------------------------------------------------------------------------------------------------------
37 Kmart Jan-95 Kmart 20 yrs. 137,113 $3,850,187 $28.08
Confidential NE Location
- -------------------------------------------------------------------------------------------------------------------------
38 Builders Square Jan-95 Builders Square 25 yrs. 109,800 $1,338,462 $12.19
Mall Blvd. Off Route 202
King of Prussia, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
39 Caldor 1995 Caldor 25 yrs. 113,000 $1,469,000 $13.00
Salem, New Hampshire
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
27 Key Stone Plaza None 1% of sales in $15,000,000
Erie, Pennsylvania excess of
$18,000,000
- -----------------------------------------------------------------------------------------
28 Kmart 10% increase 1% of sales in $30,596,202
Confidential NE location every 5 years excess of
$50,000,000
- -----------------------------------------------------------------------------------------
29 Home Depot Every 5 years No $41,612,000
656 Reservoir Avenue
Bridgeport, Connecticut
- -----------------------------------------------------------------------------------------
30 New Hartford Consumer Sq. None 1.0% over $20,752,200
Route 5A $30,000,000
New Hartford, New York
- -----------------------------------------------------------------------------------------
31 Hunting Park Avenue $12.65/sf yr. 6 N/A N/A
"G" Street Road $13.92/sf yr.11
Philadelphia, Pennsylvania $15.31/sf yr. 16
$16.84/sf yr.21
- -----------------------------------------------------------------------------------------
32 Riverside Mall None 0.5% of sales in $39,042,192
Route 12 & Route 49 yr. 8; capped at
Utica, New York $1.00/sf; 7th yr
sales as break.
- -----------------------------------------------------------------------------------------
33 Builders Square None No $17,458,200
Confidential SE Location
- -----------------------------------------------------------------------------------------
34 Kmart None No $15,703,720
Confidential NE Location
- -----------------------------------------------------------------------------------------
35 Kmart None No $14,328,762
Confidential SW Location
- -----------------------------------------------------------------------------------------
36 Walmart None No $42,419,664
Highway 92 & I-575
Woodstock, GA
- -----------------------------------------------------------------------------------------
37 Kmart $30.27/sf yr. 11 1% of sales in $32,084,442
Confidential NE Location $32.46/sf yr. 16 excess of
$63,000,000
- -----------------------------------------------------------------------------------------
38 Builders Square None None $18,335,502
Mall Blvd. Off Route 202
King of Prussia, Pennsylvania
- -----------------------------------------------------------------------------------------
39 Caldor None No $20,000,000
Salem, New Hampshire
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
27 Key Stone Plaza 3.8% Power center anchored by Wal-Mart.
Erie, Pennsylvania Tenant pays own taxes and nominal
CAM charge. Lease signed 1994.
Sales based on chain avg./unit.
- ---------------------------------------------------------------------------------------
28 Kmart 9.8% Super Kmart which opened Nov-95.
Confidential NE location Lease is on Net basis. Sales are
based on 150% of Kmart state
average.
- ---------------------------------------------------------------------------------------
29 Home Depot 3.1% Home Depot store on triple net lease
656 Reservoir Avenue in Fairfield County.Sales based on
Bridgeport, Connecticut chain avg. in ' 94.
- ---------------------------------------------------------------------------------------
30 New Hartford Consumer Sq. 4.2% 561,140 SF power ctr. anchored by
Route 5A Wal-Mart, Sam's, & Builder's Sq.;
New Hartford, New York opened 9/94; 95% pre leased. Sales
based on chain average.
- ---------------------------------------------------------------------------------------
31 Hunting Park Avenue N/A Caldor pays P/R share of CAM + 10%
"G" Street Road fee, as well as taxes & insurance.
Philadelphia, Pennsylvania
- ---------------------------------------------------------------------------------------
32 Riverside Mall 2.4% Enclosed mall. P/R share of CAM,
Route 12 & Route 49 taxes, ins., utilities, & repairs of mech.
Utica, New York systems. Sales based on Wal-
Mart/Sam's avg.
- ---------------------------------------------------------------------------------------
33 Builders Square 5.8% Net lease of Builders Square which
Confidential SE Location opened in June 1995. Sales are
based on Builders Square state
average.
- ---------------------------------------------------------------------------------------
34 Kmart 7.2% Net lease signed in Feb-95 with
Confidential NE Location anticipated store opening of early
1996. Sales are based on Kmart
state average.
- ---------------------------------------------------------------------------------------
35 Kmart 3.2% 1995 lease of store which opened in
Confidential SW Location March 1992. Lease is on a Net basis.
Sales are based on Kmart state average.
- ---------------------------------------------------------------------------------------
36 Walmart 2.2% Triple net lease of Wal-Mart which
Highway 92 & I-575 opened in February 1995. Sales
Woodstock, GA based on Wal-Mart/Sam's chain avg.
- ---------------------------------------------------------------------------------------
37 Kmart 12.0% Kmart which opened in November
Confidential NE Location 1995. Sales based on 150% of
Kmart state average. Lease is on a
triple net basis.
- ---------------------------------------------------------------------------------------
38 Builders Square 7.3% Builder's Square on triple net lease
Mall Blcd. Off Route 202 which is flat over term. Sales based
King of Prussia, Pennsylvania on state avg. for B.S.
- ---------------------------------------------------------------------------------------
39 Caldor 7.3% Caldor store in Salem, New
Salem, New Hampshire Hampshire which opened in 1995.
Sales projected. Triple net lease.
- ---------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
40 Caldor 1995 Caldor 25 yrs. 113,275 $1,359,300 $12.00
Newington, Connecticut
- -------------------------------------------------------------------------------------------------------------------------
41 Caldor 1995 Caldor 20 yrs. 113,275 $1,302,663 $11.50
Dedham, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------
42 Caldor 1995 Caldor 25 yrs. 113,275 $1,359,300 $12.00
Braintree, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------
43 Caldor 1995 Caldor 25 yrs. 113,275 $1,302,663 $11.50
Brockton, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------
44 Caldor 1995 Caldor 25 yrs. 113,275 $1,225,078 $10.82
Largo, Maryland
- -------------------------------------------------------------------------------------------------------------------------
45 Caldor 1995 Caldor 25 yrs. 140,616 $1,920,000 $13.65
Silver Spring, Maryland
- -------------------------------------------------------------------------------------------------------------------------
46 Caldor 1995 Caldor 20 yrs. 113,261 $1,245,671 $11.00
Fairfax, Virginia
- -------------------------------------------------------------------------------------------------------------------------
47 Caldor 1995 Caldor 20 yrs. 113,275 $1,127,086 $9.95
Portsmouth, Virginia
- -------------------------------------------------------------------------------------------------------------------------
48 Caldor 1995 Caldor 20 yrs. 113,275 $1,127,086 $9.95
Virginia Beach, Virginia
- -------------------------------------------------------------------------------------------------------------------------
49 Caldor 1995 Caldor 20 yrs. 113,275 $1,013,811 $8.95
Langley, Virginia
- -------------------------------------------------------------------------------------------------------------------------
50 Caldor 1995 Caldor 20 yrs. 113,275 $1,008,148 $8.90
York County, Virginia
- -------------------------------------------------------------------------------------------------------------------------
51 Caldor 1995 Caldor 25 yrs. 113,275 $1,800,000 $15.89
Westbury, New York
- -------------------------------------------------------------------------------------------------------------------------
52 Caldor 1995 Caldor 25 yrs. 167,508 $2,550,000 $15.22
Brooklyn, New York
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
40 Caldor None No $16,000,000
Newington, Connecticut
- -----------------------------------------------------------------------------------------
41 Caldor Fixed steps every 10 No $16,000,000
Dedham, Massachusetts years
- -----------------------------------------------------------------------------------------
42 Caldor None No $14,000,000
Braintree, Massachusetts
- -----------------------------------------------------------------------------------------
43 Caldor Lesser of 10% or No $19,000,000
Brockton, Massachusetts CPI every 5 years
- -----------------------------------------------------------------------------------------
44 Caldor Fixed steps every 5 No $20,000,000
Largo, Maryland years
- -----------------------------------------------------------------------------------------
45 Caldor Greater of 10% or No $25,000,000
Silver Spring, Maryland CPI every 5 years
- -----------------------------------------------------------------------------------------
46 Caldor None No $20,000,000
Fairfax, Virginia
- -----------------------------------------------------------------------------------------
47 Caldor None No $15,000,000
Portsmouth, Virginia
- -----------------------------------------------------------------------------------------
48 Caldor None No $16,000,000
Virginia Beach, Virginia
- -----------------------------------------------------------------------------------------
49 Caldor None No $16,000,000
Langley, Virginia
- -----------------------------------------------------------------------------------------
50 Caldor None No $16,000,000
York County, Virginia
- -----------------------------------------------------------------------------------------
51 Caldor Fixed steps every 5 No $25,000,000
Westbury, New York years
- -----------------------------------------------------------------------------------------
52 Caldor $180,000 every 5 No $45,000,000
Brooklyn, New York years
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
40 Caldor 8.5% Caldor store in Newington,
Newington, Connecticut Connecticut which opened in 1995.
Sales projected. Triple net lease.
- ---------------------------------------------------------------------------------------
41 Caldor 8.1% Caldor store in Dedham,
Dedham, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
lease.
- ---------------------------------------------------------------------------------------
42 Caldor 9.7% Caldor store in Braintree,
Braintree, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
lease.
- ---------------------------------------------------------------------------------------
43 Caldor 6.9% Caldor store in Brockton,
Brockton, Massachusetts Massachusetts which opened in
1995. Sales projected. Triple net
lease.
- ---------------------------------------------------------------------------------------
44 Caldor 6.1% Caldor store in Largo, Maryland which
Largo, Maryland opened in 1995. Sales projected.
Triple net lease.
- ---------------------------------------------------------------------------------------
45 Caldor 7.7% Caldor store in Silver Spring,
Silver Spring, Maryland Maryland which opened in 1995.
Sales projected. Triple net lease.
- ---------------------------------------------------------------------------------------
46 Caldor 6.2% Caldor store in Fairfax, Virginia which
Fairfax, Virginia opened in 1995. Sales projected.
Semi net lease.
- ---------------------------------------------------------------------------------------
47 Caldor 7.5% Caldor store in Portsmouth, Virginia
Portsmouth, Virginia which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
48 Caldor 7.0% Caldor store in Virginia Beach,
Virginia Beach, Virginia Virginia which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
49 Caldor 6.3% Caldor store Langley, Virginia
Langley, Virginia which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
50 Caldor 6.3% Caldor store in York County, Virginia
York County, Virginia which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
51 Caldor 7.2% Caldor store in Westbury, New York
Westbury, New York which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
52 Caldor 5.7% Caldor store in Brooklyn, New York
Brooklyn, New York which opened in 1995. Sales
projected. Semi net lease.
- ---------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
53 Wal-Mart/Sam's Club Nov-94 Sam's Club 20 yrs. 114,036 $843,866 $7.40
Niagara Falls Blv/Willowridge 5 5-yr opt
Amherst. New York
- -------------------------------------------------------------------------------------------------------------------------
54 Wal-Mart/Sam's Club Nov-94 Wal-Mart 20 yrs. 125,137 $893,478 $7.14
Niagara Falls Blv/Willowridge 5 5yr opt.
Amherst, New York
- -------------------------------------------------------------------------------------------------------------------------
55 Builders Square Nov-94 Builders Square 25 yrs. 109,800 $1,226,285 $11.17
Confidential Midwest 10 5-yr. opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
56 Builders Square Nov-94 Builders Square 25 yrs. 109,800 $984,906 $8.97
Confidential 10 5-yr. opt.
New Jersey Location
- -------------------------------------------------------------------------------------------------------------------------
57 Greece Ridge Center Nov-94 Lechmere 20 yrs. 74,772 $555,556 $7.43
Rochester, New York + opt.
(Wilmorite, Inc.)
- -------------------------------------------------------------------------------------------------------------------------
58 Crossgates Commons Oct-94 Home Depot 20 yrs. 102,680 $1,129,480 $11.00
I-87 & Washington Avenue
Albany, New York
- -------------------------------------------------------------------------------------------------------------------------
59 Penn Can Mall Sep-94 Caldor 25 yrs. 113,275 $889,209 $7.85
Interstate 81 & 481 2 10-yr opt.
Cicero, Syracuse, New York
- -------------------------------------------------------------------------------------------------------------------------
60 Fayetteville Mall Fall-94 Caldor 25 yrs. 113,360 $889,876 $7.85
Onondaga County 2 10-yr.opt.
Syracuse, New York
- -------------------------------------------------------------------------------------------------------------------------
61 Eastview Mall Fall-94 Caldor 25 yrs. 113,275 $889,209 $7.85
Town of Victor 2 10-yr opt.
Rochester, New York
- -------------------------------------------------------------------------------------------------------------------------
62 Westfall Towne Center Fall-94 Kmart 25 yrs. 107,806 $663,007 $6.15
Pike County 10 5-yr opt.
Westfall, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
63 Lowe's Home Center Fall-94 Lowe's 20 yrs. 121,148 $739,003 $6.10
646 Midway
Elyria, Ohio
- -------------------------------------------------------------------------------------------------------------------------
64 New Hartford Consumer Sq. Jul-94 Wal-Mart 20 yrs. 124,996 $668,729 $5.35
Route 5A
New Hartford, New York
- -------------------------------------------------------------------------------------------------------------------------
65 New Hartford Consumer Sq. Jul-94 Sam's Club 20 yrs. 114,036 $592,987 $5.20
Route 5A
New Hartfore, New York
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
53 Wal-Mart/Sam's Club None No $38,316,096
Niagara Falls Blv/Willowridge
Amherst. New York
- -----------------------------------------------------------------------------------------
54 Wal-Mart/Sam's Club None No $42,046,032
Niagara Falls Blv/Willowridge
Amherst, New York
- -----------------------------------------------------------------------------------------
55 Builders Square None No $20,752,200
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
56 Builders Square None No $24,641,316
Confidential
New Jersey
- -----------------------------------------------------------------------------------------
57 Greece Ridge Center None 1.0% of sales in
Rochester, New York excess of $25,000,000
(Wilmorite, Inc.) $25,000,000
- -----------------------------------------------------------------------------------------
58 Crossgates Commons $12.65 - 3/99 No $41,482,720
I-87 & Washington Avenue $14.17 - 3/04
Albany, New York $15.87 - 3/09
- -----------------------------------------------------------------------------------------
59 Penn Can Mall None 1.0% of sales in $14,000,000
Interstate 81 & 481 excess of
Cicero, Syracuse, New York $21,000,000.00
- -----------------------------------------------------------------------------------------
60 Fayetteville Mall None 1.0% of sales in $14,000,000
Onondaga County excess of
Syracuse, New York $21.000,000.
- -----------------------------------------------------------------------------------------
61 Eastview Mall None 1.0% of sales in $15,000,000
Town of Victor excess of
Rochester, New York $25,000,000
- -----------------------------------------------------------------------------------------
62 Westfall Towne Center None 1.0% of sales $17,778,611
Pike County over
Westfall, Pennsylvania $16,875,000
- -----------------------------------------------------------------------------------------
63 Lowe's Home Center None No $39,736,544
646 Midway
Elyria, Ohio
- -----------------------------------------------------------------------------------------
64 New Hartford Consumer Sq. None 0.05% over $41,998,656
Route 5A $24,000,000
New Hartford, New York
- -----------------------------------------------------------------------------------------
65 New Hartford Consumer Sq. None 0.05% over $38,316,096
Route 5A $24,000,000
New Hartfore, New York
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
53 Wal-Mart/Sam's Club 2.2% New construction along with Wal-Mart
Niagara Falls Blv/Willowridge store. Lease signed 6/93. Sales
Amherst. New York based on Wal-Mart/Sam's chain avg.
- ---------------------------------------------------------------------------------------
54 Wal-Mart/Sam's Club 2.1% New construction along with Sam's
Niagara Falls Blv/Willowridge Club store. Lease signed 6/93. Sales
Amherst, New York based on Wal-Mart/Sam's chain avg.
- ---------------------------------------------------------------------------------------
55 Builders Square 5.9% Builders Square which opened in
Confidential Midwest Spring 1995. Lease is on a Net basis
Location with sales estimated based on B.S.
state average.
- ---------------------------------------------------------------------------------------
56 Builders Square 4.0% New Builders Square. Lease is on a
Confidential Net basis with sales esimated based
New Jersey on B.S. state average.
- ---------------------------------------------------------------------------------------
57 Greece Ridge Center
Rochester, New York 2.2% Renovated/expanded super-regional
(Wilmorite, Inc.) mall. Lechmere pays CAM & P/R
taxes. Occupies floor of former
JCPenney store.
- ---------------------------------------------------------------------------------------
58 Crossgates Commons 2.7% Home Depot store in power center
I-87 & Washington Avenue adjacent to mall. Triple net lease.
Albany, New York Sales based on chain avg. in '94.
- ---------------------------------------------------------------------------------------
59 Penn Can Mall 6.4% P/R share of exterior CAM,taxes, max.
Interstate 81 & 481 contr. of $0.15/SF for interior CAM , &
Cicero, Syracuse, New York utilities. Bldg cost @61.76/SF. Off-
price mall location.
- ---------------------------------------------------------------------------------------
60 Fayetteville Mall 6.4% P/R share of CAM, taxes, insur. &
Onondaga County utilities. Former Kaufman's location in
Syracuse, New York mall. Lease signed in Fall 1993.
- ---------------------------------------------------------------------------------------
61 Eastview Mall 5.9% Net lease with CAM & tax provisions.
Town of Victor Tenant pays utilities. Lease signed in
Rochester, New York Fall 1993.
- ---------------------------------------------------------------------------------------
62 Westfall Towne Center 3.7% Lease signed 4/93. Sales based on
Pike County Kmart state avg. for '94. Completion
Westfall, Pennsylvania of store in late-1994.
- ---------------------------------------------------------------------------------------
63 Lowe's Home Center 1.9% Lowe's Home Center in Cleveland
646 Midway suburb. Triple net lease. Sales based
Elyria, Ohio on chain average.
- ---------------------------------------------------------------------------------------
64 New Hartford Consumer Sq. 1.6% 561,140 SF power ctr. anchored by
Route 5A Wal-Mart, Sam's, & Builder's Sq.;
New Hartford, New York opened 9/94; 95% pre-leased. Sales
based on chain average.
- ---------------------------------------------------------------------------------------
65 New Hartford Consumer Sq. 1.5% 561,140 SF power ctr. anchored by
Route 5A Wal-Mart, Sam's & Builder's Sq.;
New Hartfore, New York opened 9/94; 95% pre-leased. Sales
based on chain average.
- ---------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
66 Shopping Center Apr-94 Kmart 25 yrs. 117,162 $805,216 $6.87
Condifential SE location 10 5-yr opt.
- ------------------------------------------------------------------------------------------------------------------------
67 Builders Square Apr-94 Builders Square 25 yrs. 109,800 $852,048 $7.76
Highway 42 & Sprague Rd.
Strongsville, Ohio
- ------------------------------------------------------------------------------------------------------------------------
68 Broadway Marketplace Mar-94 Kmart 25 yrs. 107,806 $1,010,142 $9.37
SWC/ Alameda & S. Broadway
Denver, Colorado
- ------------------------------------------------------------------------------------------------------------------------
69 Caldor 1994 Caldor 25 yrs. 113,275 $1,250,000 $11.04
Deer Park, New York
- ------------------------------------------------------------------------------------------------------------------------
70 Kmart 1994 Kmart 25 yrs. 117,587 $723,160 $6.15
Route 49/Rome-Taberg Rd. 10 5-yr opt.
Rome, New York
- ------------------------------------------------------------------------------------------------------------------------
71 Lowe's Home Center 1994 Lowe's 20 yrs. 125,357 $764,678 $6.10
3600 Park Mill
Hilliard, Columbus, Ohio
- ------------------------------------------------------------------------------------------------------------------------
72 Lowe's Home Center 1994 Lowe's 20 yrs. 125,357 $803,538 $6.41
2888 Brice Road
Columbus, Ohio
- ------------------------------------------------------------------------------------------------------------------------
73 Aroostook Mall Nov-93 Kmart 15 yrs. 86,479 $460,933 $5.33
U.S. Route 1
Presque Isle, Maine
- ------------------------------------------------------------------------------------------------------------------------
74 Riverside Mall Nov-93 BJ's Wholesale 20 yrs. 109,015 $730,400 $6.70
Route 12 & Route 49 4 5-yr opt.
Utica, New York
- ------------------------------------------------------------------------------------------------------------------------
75 Super Kmart Center Nov-93 Super Kmart 25 yrs. 192,929 $1,381,372 $7.16
3300 North 27th Street
Lincoln, Nebraska
- ------------------------------------------------------------------------------------------------------------------------
76 Super Kmart Center Oct-93 Super Kmart 25 yrs. 177,775 $1,182,204 $6.65
Route 66 & Stadium Drive
Defiance, Ohio
- ------------------------------------------------------------------------------------------------------------------------
77 Builders Square Sep-93 Builders Square 25 yrs. 106,400 $1,069,320 $10.05
Confidential Allentown, 10 5-yr. opt
Pennsylvania Location
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
66 Shopping Center None No $16,988,490
Condifential SE location
- ------------------------------------------------------------------------------------------
67 Builders Square None No $18,479,340
highway 42 & Sprague Rd.
Strongsville, Ohio
- ------------------------------------------------------------------------------------------
68 Broadway Marketplace None 1.0% over $15,970,812
SWC/ Alameda & S. Broadway $23,178,290
Denver, Colorado
- ------------------------------------------------------------------------------------------
69 Caldor Fixed steps every 5 No $24,000,000
Deer Park, new York years
- ------------------------------------------------------------------------------------------
70 Kmart None No $18,510,898
Route 49/Rome-Taberg Rd.
Rome, New York
- ------------------------------------------------------------------------------------------
71 Lowe's Home Center None No $41,117,096
3600 park Mill
Hilliard, Columbus, Ohio
- ------------------------------------------------------------------------------------------
72 Lowe's Home Center None 0.5% over first $41,117,096
2888 Brice Road breakpoint; 1.0%
Columbus, Ohio over second
- ------------------------------------------------------------------------------------------
73 Aroostook mall None No $8,781,164
U.S. Route 1
Presque Isle, Maine
- ------------------------------------------------------------------------------------------
74 Riverside Mall Lesser of 8% or CPI No $36,700,000
Route 12 & Route 49 every 5 years
Utica, New York
- ------------------------------------------------------------------------------------------
75 Super Kmart Center None No $27,386,272
3300 North 27th Street
Lincoln, Nebraska
- ------------------------------------------------------------------------------------------
76 Super Kmart Center None No $27,859,120
Route 66 & Stadium Drive
Defiance, Ohio
- ------------------------------------------------------------------------------------------
77 Builders Square None No $18,700,000
Confidential Allentown,
Pennsylvania Location
- ------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
66 Shopping Center 4.7% Kmart within new shopping center
Condifential SE location which opened late 1994. Sales
estimated based on Kmart state
average.
- ---------------------------------------------------------------------------------------
67 Builders Square 4.6% Reportedly has purchased opt. at
highway 42 & Sprague Rd. $8,111,333 ($73.87/sf) based on
Strongsville, Ohio 10.5% OAR. NNN in new store. Sales
based on state avg. for B.S.
- ---------------------------------------------------------------------------------------
68 Broadway Marketplace 6.3% Homart ctr. opened in late-93.
SWC/ Alameda & S. Broadway 370,000sf ctr. Includes Albertson's,
Denver, Colorado Sam's Club. P.R share of CAM &
taxes. Sales are '94 state avg.
- ---------------------------------------------------------------------------------------
69 Caldor 5.2% Caldor store in Deer Park, New York
Deer Park, new York which opened in 1995. Sales
projected. Triple net lease.
- ---------------------------------------------------------------------------------------
70 Kmart 3.9% NNN lease; CAM, tax, ins., struc.
Route 49/Rome-Taberg Rd. repairs/maint. Land/bldg. Costs
Rome, New York reportedly $6,522,789. Sales based
on state avg. for Kmart in '94
- ---------------------------------------------------------------------------------------
71 Lowe's Home Center 1.9% Lowe's Home Center in Columbus
3600 park Mill suburb. Triple net lease. Sales based
Hilliard, Columbus, Ohio on chain average.
- ---------------------------------------------------------------------------------------
72 Lowe's Home Center 2.0% Lowe's Home Center in Columbus
2888 Brice Road suburb. Triple net lease. Sales based
Columbus, Ohio on chain average.
- ---------------------------------------------------------------------------------------
73 Aroostook Mall 5.2% New regional mall with Sears, JC
U.S. Route 1 Penney, Porteous. Tenant pays CAM
Presque Isle, Maine of $0.50/sf & taxes. Sales based on
state avg. for Kmart in '94.
- ---------------------------------------------------------------------------------------
74 Riverside Mall 2.0% Single-level encl. mall. Tenant pays
Route 12 & Route 49 p/r share of exterior CAM, taxes,
Utica, New York insur, utilities, & repairs of mech.
systems. Opts. have rent incr.
- ---------------------------------------------------------------------------------------
75 Super Kmart Center 5.0% New Super Kmart Center completed
3300 North 27th Street in Nov-93. Center has since sold to
Lincoln, Nebraska Canadian investor. Sales based on
state avg. for Kmart in '94.
- ---------------------------------------------------------------------------------------
76 Super Kmart Center 4.2% New store building under triple net
Route 66 & Stadium Drive lease with no % rent clause or rent
Defiance, Ohio escalations. Sales based on state
avg. for Kmart in '94.
- ---------------------------------------------------------------------------------------
77 Builders Square 5.7% New Builder's Square on NNN lease
Confidential Allentown, with no rent steps or % rent clause.
Pennsylvania Location Sales based on actual first year.
- ---------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
78 Super Kmart Center Jul-93 Super Kmart 25 yrs. 169,957 $1,065,630 $6.27
919 Lexington Spring Rd.
Mansfield, Ohio
- -------------------------------------------------------------------------------------------------------------------------
79 Silver City Galleria Nov-92 Bradlee's 20 yrs. 94,957 $564,000 $5.94
Routes 24 & 140 1 10-yr opt
Taunton, Massachusets 2 5-yr opt.
- -------------------------------------------------------------------------------------------------------------------------
80 Kmart Nov-89 Kmart 30 yrs. 84,146 $577,556 $6.86
Turkey Lake & Sand Lake Rds. 10 5-yr opt.
Orlando, Florida
=========================================================================================================================
Survey Low: 40,000 $460,933 $5.06
Survey High: 202,590 $3,850,187 $28.08
- -------------------------------------------------------------------------------------------------------------------------
Survey mean: 120,574 $1,177,363 $9.85
=========================================================================================================================
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <S> <C> <C> <C>
78 Super Kmart Center None No $26,633,961
919 Lexington Spring Rd.
Mansfield, Ohio
- ------------------------------------------------------------------------------------------
79 Silver City Galleria None 1.0% of hard line $14,500,000
Routes 24 & 140 & 2.0% of misc.
Taunton, Massachusets sales in excess of
$23,000,000
- ------------------------------------------------------------------------------------------
80 Kmart None 1% of sales over $18,425,975
Turkey Lake & Sand Lake Rds. $15,900,000
Orlando, Florida
==========================================================================================
Survey Low:
Survey High:
- ------------------------------------------------------------------------------------------
Survey mean:
==========================================================================================
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <S> <C> <C>
78 Super Kmart Center 4.0% New Kmart completed in July 1993.
919 Lexington Spring Rd. Build-to-suit arrangement. Triple net
Mansfield, Ohio lease terms. Sales based onstate
avg. for Kmart in '94.
- --------------------------------------------------------------------------------------
79 Silver City Galleria 3.9% Tenant pays p/r share taxes, insur,
Routes 24 & 140 utilities, & mech. repair. CAM is
Taunton, Massachusets $0.65/SF incr. by $0.10/SF every 5
yrs. Enclosed mall location.
- --------------------------------------------------------------------------------------
80 Kmart 3.1% Community ctr. in west Orlando. P/R
Turkey Lake & Sand Lake Rds. CAM & taxes. Publix is other anchor.
Orlando, Florida Sales are actual 1993.
======================================================================================
Survey Low: 1.5%
Survey High: 12.0%
- --------------------------------------------------------------------------------------
Survey mean: 4.8%
======================================================================================
</TABLE>
Page 7
<PAGE>
Mon Jul 14, 1997 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1997 ESTIMATED POPULATION BY SEX 133,189 407,486 1,301,953
MALE 47.02% 47.77% 47.78%
FEMALE 52.98% 52.23% 52.22%
MARITAL STATUS 109,727 326,805 1,076,810
SINGLE MALE 15.20% 15.79% 19.33%
SINGLE FEMALE 16.97% 15.91% 19.15%
MARRIED 52.89% 54.15% 46.76%
PREVIOUSLY MARRIED MALE 4.19% 3.94% 4.15%
PREVIOUSLY MARRIED FEMALE 10.75% 10.20% 10.61%
HOUSEHOLDS WITH CHILDREN 14,956 46,906 139,835
MARRIED COUPLE FAMILY 80.97% 83.12% 76.93%
OTHER FAMILY-MALE HEAD 2.62% 2.67% 3.34%
OTHER FAMILY-FEMALE HEAD 15.73% 13.62% 19.04%
NON FAMILY 0.68% 0.59% 0.69%
1997 ESTIMATED POPULATION BY AGE 133,189 407,486 1,301,953
UNDER 5 YEARS 6.44% 6.77% 6.50%
5 TO 9 YEARS 5.38% 5.79% 5.54%
10 TO 14 YEARS 4.94% 5.30% 4.98%
15 TO 17 YEARS 2.82% 3.03% 2.83%
18 TO 20 YEARS 3.66% 3.53% 4.27%
21 TO 24 YEARS 5.27% 4.85% 6.05%
25 TO 29 YEARS 8.33% 7.62% 9.01%
30 TO 34 YEARS 8.01% 7.59% 8.61%
35 TO 39 YEARS 8.79% 8.87% 8.99%
40 TO 49 YEARS 16.74% 17.72% 15.99%
50 TO 59 YEARS 11.66% 11.42% 10.15%
60 TO 64 YEARS 4.20% 3.96% 3.61%
65 TO 69 YEARS 4.09% 3.88% 3.64%
70 TO 74 YEARS 3.29% 3.14% 3.08%
75 + YEARS 6.39% 6.53% 6.73%
MEDIAN AGE 37.93 38.11 36.22
AVERAGE AGE 38.76 38.48 37.83
<PAGE>
Mon Jul 14, 1997 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1997 ESTIMATED FEMALE POP. BY AGE 70,568 212,833 679,945
UNDER 5 YEARS 5.79% 6.18% 6.02%
5 TO 9 YEARS 5.00% 5.48% 5.27%
10 TO 14 YEARS 4.71% 5.13% 4.86%
15 TO 17 YEARS 2.61% 2.75% 2.58%
18 TO 20 YEARS 4.42% 3.81% 4.27%
21 TO 24 YEARS 5.77% 4.92% 5.91%
25 TO 29 YEARS 7.71% 7.20% 8.54%
30 TO 34 YEARS 7.48% 7.19% 8.12%
35 TO 39 YEARS 8.57% 8.81% 8.80%
40 TO 49 YEARS 16.51% 17.53% 15.88%
50 TO 59 YEARS 11.45% 11.25% 10.15%
60 TO 64 YEARS 4.10% 3.91% 3.65%
65 TO 69 YEARS 4.22% 3.99% 3.84%
70 TO 74 YEARS 3.40% 3.31% 3.32%
75 + YEARS 8.26% 8.53% 8.79%
FEMALE MEDIAN AGE 38.80 39.16 37.51
FEMALE AVERAGE AGE 39.94 39.84 39.35
POPULATION BY HOUSEHOLD TYPE 131,737 397,123 1,288,505
FAMILY HOUSEHOLDS 79.29% 81.17% 75.14%
NON-FAMILY HOUSEHOLDS 15.58% 14.66% 19.49%
GROUP QUARTERS 5.13% 4.17% 5.37%
HOUSEHOLDS BY TYPE 49,604 145,598 484,001
SINGLE MALE 9.71% 8.37% 9.99%
SINGLE FEMALE 15.36% 14.51% 17.00%
MARRIED COUPLE 55.98% 58.24% 49.14%
OTHER FAMILY-MALE HEAD 2.70% 2.78% 3.09%
OTHER FAMILY-FEMALE HEAD 9.27% 9.00% 10.73%
NON FAMILY-MALE HEAD 3.86% 3.84% 5.19%
NON FAMILY-FEMALE HEAD 3.13% 3.27% 4.86%
POPULATION BY URBAN VS. RURAL 131,740 397,036 1,289,035
URBAN 96.06% 91.66% 94.06%
RURAL 3.94% 8.34% 5.94%
<PAGE>
Mon Jul 14, 1997 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BAS 58,727 171,816 566,860
WORKING WITH CHILD 0 - 5 4.71% 4.86% 4.31%
NOT WORKING WITH CHILD 0 - 5 0.36% 0.33% 0.32%
NOT IN LABOR FORCE WITH CHILD 0 - 2.72% 2.85% 2.70%
WORKING WITH CHILD 6 - 17 9.55% 10.32% 8.85%
NOT WORKING WITH CHILD 6 - 17 0.34% 0.43% 0.44%
NOT IN LAB. FORCE WITH CHILD 6 - 2.51% 2.87% 2.75%
WORKING WITH CHILD 0 - 5 & 6 - 18 2.35% 2.71% 2.47%
NOT WORKING WITH CHILD 0-5 & 6-18 0.12% 0.12% 0.15%
NOT IN LAB. FORCE WICHILD 0-5 &6- 1.86% 2.16% 1.88%
WORKING WITH NO CHILDREN 43.63% 42.52% 44.31%
NOT WORKING WITH NO CHILDREN 2.15% 2.00% 1.99%
NOT IN LAB. FORCE WITH NO CHILD. 29.72% 28.84% 29.83%
HH BY AGE BY POVERTY STATUS 49,576 145,535 483,724
ABOVE POVERTY UNDER AGE 65 76.49% 76.14% 73.21%
ABOVE POVERTY AGE 65 + 18.60% 19.44% 19.03%
BELOW POVERTY UNDER AGE 65 3.18% 2.79% 5.77%
BELOW POVERTY AGE 65 + 1.72% 1.62% 1.99%
POPULATION 16+ BY EMPLOYMENT STATUS 108,132 322,129 1,064,591
EMPLOYED IN ARMED FORCES 0.18% 0.13% 0.26%
EMPLOYED CIVILIANS 67.98% 68.21% 65.67%
UNEMPLOYED CIVILIANS 3.72% 3.53% 3.74%
NOT IN LABOR FORCE 28.13% 28.14% 30.34%
POPULATION 16+ BY OCCUPATION 73,508 219,715 699,104
EXECUTIVE AND MANAGERIAL 19.88% 19.91% 17.93%
PROFESSIONAL SPECIALTY 22.26% 24.24% 24.02%
TECHNICAL SUPPORT 4.39% 4.40% 5.03%
SALES 15.05% 13.43% 11.43%
ADMINISTRATIVE SUPPORT 15.10% 14.71% 16.34%
SERVICE: PRIVATE HOUSEHOLD 0.42% 0.40% 0.40%
SERVICE: PROTECTIVE 1.60% 1.42% 1.68%
SERVICE: OTHER 8.21% 7.55% 9.00%
FARMING FORESTRY & FISHING 0.87% 0.92% 0.66%
PRECISION PRODUCTION & CRAFT 6.41% 6.88% 6.62%
MACHINE OPERATOR 2.37% 2.69% 2.95%
TRANS. AND MATERIAL MOVING 1.79% 1.75% 1.96%
LABORERS 1.63% 1.70% 1.98%
<PAGE>
Mon Jul 14, 1997 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 33,961 102,717 307,262
NO WORKERS 7.03% 7.38% 9.39%
ONE WORKER 22.99% 23.03% 24.22%
TWO WORKERS 50.89% 50.68% 48.34%
THREE + WORKERS 19.10% 18.91% 18.05%
HISPANIC POPULATION BY TYPE 131,737 397,123 1,288,505
NOT HISPANIC 95.13% 96.69% 95.36%
MEXICAN 0.32% 0.29% 0.31%
PUERTO RICAN 2.23% 1.29% 1.61%
CUBAN 0.17% 0.13% 0.26%
OTHER HISPANIC 2.15% 1.59% 2.46%
1997 HISPANICS BY RACE: BASE 7,451 15,787 74,151
WHITE 49.68% 55.41% 41.35%
BLACK 5.27% 5.32% 13.43%
ASIAN 1.19% 1.35% 1.48%
OTHER 43.87% 37.92% 43.74%
POPULATION BY TRANSPORTATION TO WORK 72,251 216,152 688,146
DRIVE ALONE 78.59% 77.27% 65.97%
CAR POOL 9.06% 8.75% 9.00%
PUBLIC TRANSPORTATION 4.79% 5.72% 14.18%
DRIVE MOTORCYCLE 0.04% 0.04% 0.06%
WALKED ONLY 4.00% 3.94% 6.57%
OTHER MEANS 0.70% 0.74% 1.11%
WORKED AT HOME 2.83% 3.54% 3.10%
POPULATION BY TRAVEL TIME TO WORK 72,251 216,152 688,146
UNDER 10 MINUTES / WORK AT HOME 16.28% 17.44% 15.76%
10 TO 29 MINUTES 45.27% 46.21% 47.08%
30 TO 59 MINUTES 32.63% 31.38% 32.15%
60 TO 89 MINUTES 4.83% 4.27% 4.33%
90+ MINUTES 0.98% 0.71% 0.69%
AVERAGE TRAVEL TIME IN MINUTES 23.94 23.06 23.40
HOUSEHOLDS BY NO. OF VEHICLES 49,629 145,683 484,006
NO VEHICLES 6.51% 6.24% 14.54%
1 VEHICLE 32.82% 30.82% 36.58%
2 VEHICLES 44.12% 45.03% 35.76%
3+ VEHICLES 16.55% 17.91% 13.11%
ESTIMATED TOTAL VEHICLES 86,362 259,578 726,327
<PAGE>
Mon Jul 14, 1997 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 89,690 269,140 864,565
ELEMENTARY (0-8) 3.68% 3.58% 5.20%
SOME HIGH SCHOOL (9-11) 6.98% 6.63% 8.01%
HIGH SCHOOL GRADUATE (12) 22.34% 22.19% 23.44%
SOME COLLEGE (13-15) 16.07% 14.81% 14.35%
ASSOCIATES DEGREE ONLY 6.83% 6.81% 6.41%
BACHELORS DEGREE ONLY 25.51% 25.43% 23.35%
GRADUATE DEGREE 18.57% 20.55% 19.24%
POPULATION ENROLLED IN SCHOOL 32,355 100,787 349,860
PUBLIC PRE- PRIMARY 4.24% 4.46% 3.42%
PRIVATE PRE- PRIMARY 5.13% 5.45% 3.93%
PUBLIC ELEM/HIGH 46.53% 46.52% 39.47%
PRIVATE ELEM/HIGH 5.42% 6.58% 6.97%
ENROLLED IN COLLEGE 38.68% 36.98% 46.20%
HOUSING UNITS BY OCCUPANCY STATUS 52,021 151,706 507,440
OCCUPIED 95.35% 95.97% 95.38%
VACANT 4.65% 4.03% 4.62%
VACANT UNITS 2,417 6,109 23,439
FOR RENT 50.80% 45.68% 48.58%
FOR SALE ONLY 18.32% 20.86% 16.14%
SEASONAL 6.26% 8.16% 6.19%
OTHER 24.62% 25.30% 29.09%
OWNER OCCUPIED PROPERTY VALUES 27,239 82,710 198,594
UNDER $25,000 0.18% 0.17% 0.22%
$25,000 TO $49,999 0.17% 0.17% 0.26%
$50,000 TO $74,999 0.36% 0.33% 0.49%
$75,000 TO $99,999 1.32% 1.09% 1.62%
$100,000 TO $149,999 11.72% 9.39% 12.78%
$150,000 TO $199,999 34.42% 26.77% 30.34%
$200,000 TO $299,999 27.91% 32.41% 30.90%
$300,000 TO $399,999 11.50% 14.83% 12.27%
$400,000 TO $499,999 5.17% 6.67% 5.03%
$500,000 + 7.25% 8.17% 6.11%
MEDIAN PROPERTY VALUE $238,552 $257,052 $237,625
TOTAL RENTAL UNITS 17,021 45,185 205,863
MEDIAN RENT $606 $633 $606
<PAGE>
Mon Jul 14, 1997 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 49,604 145,598 484,001
1 PERSON UNITS 25.06% 22.88% 27.00%
2 PERSON UNITS 33.35% 32.63% 31.89%
3 PERSON UNITS 17.93% 18.24% 17.30%
4 PERSON UNITS 15.37% 16.80% 14.55%
5 PERSON UNITS 5.86% 6.64% 6.15%
6 PERSON UNITS 1.72% 1.99% 2.06%
7 + UNITS 0.72% 0.84% 1.06%
YEAR ROUND UNITS IN STRUCTURE 52,021 151,706 507,440
SINGLE UNITS DETACHED 59.57% 62.36% 43.98%
SINGLE UNITS ATTACHED 3.71% 3.46% 3.81%
DOUBLE UNITS 7.25% 9.37% 14.17%
3 TO 9 UNITS 10.06% 10.60% 16.87%
10 TO 19 UNITS 6.79% 5.60% 7.21%
20 TO 49 UNITS 4.29% 3.38% 6.48%
50 + UNITS 7.54% 3.98% 6.13%
MOBILE HOME OR TRAILER 0.03% 0.40% 0.27%
ALL OTHER 0.76% 0.84% 1.09%
SINGLE/MULTIPLE UNIT RATIO 1.76 2.00 0.94
HOUSING UNITS BY YEAR BUILT 49,629 145,683 484,006
BUILT 1989 TO MARCH 1990 0.58% 0.78% 0.94%
BUILT 1985 TO 1988 3.45% 4.41% 4.11%
BUILT 1980 TO 1984 6.46% 6.03% 4.62%
BUILT 1970 TO 1979 16.94% 13.75% 11.87%
BUILT 1960 TO 1969 17.72% 16.05% 14.07%
BUILT 1950 TO 1959 21.89% 18.19% 14.19%
BUILT 1940 TO 1949 8.32% 8.80% 9.22%
BUILT 1939 OR EARLIER 24.63% 31.99% 40.98%
<PAGE>
Mon Jul 14, 1997 Page 1
CUSTOM SUMMARY REPORT
(RETAIL TRADE POTENTIAL REPORT - CURRENT YEAR SALES BY STORE TYPE)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
TOTAL RETAIL SALES $1,377 $4,174 $13,318
APPAREL & ACCESSORY STORES $98 $293 $958
AUTOMOTIVE DEALERS $305 $941 $2,785
AUTOMOTIVE & HOME SUPPLY STORES $11 $33 $99
DRUG & PROPRIETARY STORES $62 $186 $612
EATING & DRINKING PLACES $131 $390 $1,534
FOOD STORES $237 $719 $2,274
FURNITURE & HOME FURNISHINGS STORES $40 $124 $377
HOME APPLIANCE, RADIO, & T.V. STORES $39 $115 $366
GASOLINE SERVICE STATIONS $75 $229 $699
GENERAL MERCHANDISE $140 $424 $1,298
DEPARTMENT STORES $104 $308 $956
(INCLUDING LEASED DEPTS.)
HARDWARE, LUMBER & GARDEN STORES $57 $174 $514
($'S IN MILLIONS)
<PAGE>
Mon Jul 14, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-02, HH 80-02, INC 80-02)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
NATICK MALL
NATICK, MA COORD: 42:17.97 71:22.76
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 15.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POP_80: TOTAL 131,197 393,130 1,263,465
POP_90: TOTAL 131,737 397,123 1,288,505
POP_97: TOTAL (EST.) 133,189 407,486 1,301,953
POP_02: TOTAL (PROJ.) 135,241 413,861 1,331,960
HH_80: TOTAL 45,559 134,295 450,639
HH_9O: TOTAL 49,604 145,598 484,001
HH_97: TOTAL (EST.) 51,740 154,382 508,660
HH_02: TOTAL (PROJ.) 52,704 157,933 522,851
INC_80: PER CAPITA (EST.) $10,086 $10,180 $8,897
INC_90: PER CAPITA $24,183 $25,563 $21,578
INC_97: PER CAPITA (EST. $37,001 $38,277 $32,571
INC_02: PER CAPITA (PROJ $51,292 $53,149 $45,187
HH_80_BY INCOME_79: MEDIAN $0 $0 $0
HH_90_BY INCOME_89: MEDIAN $50,054 $53,269 $44,472
HH_97_BY INCOME: MEDIAN $63,667 $66,591 $56,588
HH_02_BY INCOME: MEDIAN $78,959 $84,234 $69,659
HH_80_BY INCOME_79: AVERAGE $29,045 $29,801 $24,945
HH_90_BY INCOME_89: AVERAGE $63,662 $68,950 $56,432
HH_97_BY INCOME: AVERAGE $91,895 $98,207 $80,393
HH_02_BY INCOME: AVERAGE $125,117 $133,569 $109,611
<PAGE>
CUSHMAN & WAKEFIELD INVESTOR SURVEY
================================================================================
OFFICES-URBAN, CLASS A
<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>
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>
-1-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
OFFICES-SUBURBAN
<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>
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>
-2-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
INDUSTRIAL
<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>
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>
-3-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
RETAIL, COMMUNITY AND NEIGHBOHOOD CENTERS
<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>
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>
-4-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
RETAIL, POWER CENTERS AND "BIG BOX"
<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>
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>
-5-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
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>
-6-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
LODGING, FULL SERVICE
<TABLE>
<CAPTION>
Blended Equity
Going-In Cap Rate Terminal Cap Rate IRR IRR Income Growth Expense Growth
=======================================================================================================================
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------
Luxury
- ----------------
<S> <C> <C> <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% 4.00% 4.00%
5.00% 7.00% 10.50% 11.00% 12.50% 13.00% 4.00% 5.00% 3.00% 4.00%
11.00% 13.00% 11.00% 13.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00% 4.00% 4.00%
10.50% 10.50% 10.00% 10.00% 3.50% 5.00%
11.00% 11.00% 13.00% 13.00% 5.00% 6.00% 3.00% 4.00%
9.00% 9.00% 10.00% 10.00% 13.00% 13.00% 16.00% 16.00% 4.00% 4.50% 3.00% 3.00%
11.00% 12.00% 10.00% 11.00% 12.00% 16.00% 19.00% 23.00% 3.00% 4.00% 4.00% 4.00%
8.00% 8.00% 10.00% 10.00% 12.00% 14.00% 15.00% 20.00% 8.00% 8.00% 6.00% 6.00%
6.00% 8.00% 8.00% 9.00% 20.00% 25.00% 5.00% 5.00% 3.00% 4.00%
8.50% 8.50% 9.00% 9.00% 5.00% 5.00% 4.00% 4.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00% 4.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------
No. of Responses 10 10 11 11 7 7 7 7 9 9 11 11
Average 8.80% 9.60% 9.95% 10.55% 13.50% 15.57% 18.29% 22.29% 4.89% 5.72% 3.77% 4.18%
- ------------------------------------------------------------------------------------------------------------------------
First Class
- ----------------
11.00% 11.00% 11.00% 11.00% 15.00% 20.00% 20.00% 20.00% 4.00% 4.00% 4.00% 4.00%
11.00% 11.00% 13.00% 13.00% 5.00% 6.00% 3.00% 4.00%
10.00% 10.00% 11.00% 11.00% 15.00% 15.00% 18.00% 18.00% 4.00% 4.50% 3.00% 3.00%
10.00% 10.00% 11.00% 11.00% 15.00% 18.00% 15.00% 20.00% 10.00% 10.00% 5.00% 5.00%
10.00% 10.00% 10.50% 10.50% 16.00% 16.00% 25.00% 25.00% 4.00% 4.00% 3.00% 3.00%
8.00% 9.00% 10.00% 10.00% 20.00% 25.00% 5.00% 5.00% 3.00% 4.00%
10.00% 10.00% 10.50% 10.50% 22.00% 22.00% 4.00% 4.00% 4.00% 4.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00% 4.00% 4.00%
5.00% 5.00% 10.00% 11.00% 15.00% 15.00% 4.00% 4.00% 3.00% 3.00%
8.00% 8.00% 10.00% 10.00% 14.50% 14.50% 20.00% 20.00% 3.50% 3.50% 3.50% 3.50%
10.50% 10.50% 11.00% 11.00% 13.00% 13.00% 20.00% 23.00% 4.50% 4.50% 3.50% 3.50%
- ------------------------------------------------------------------------------------------------------------------------
No. of Responses 10 10 11 11 8 8 9 9 10 10 11 11
Average 9.35% 9.45% 10.55% 10.82% 14.81% 16.19% 19.78% 21.67% 4.80% 4.95% 3.55% 3.73%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Projection Management
Period Fees Reserves
Years % Revenue % Revenue
- --------------------------------------------------
Luxury
- ----------------
7 2.50% 4.00%
10 3.50% 4.00%
5 4.00% 5.00%
10 4.50% 5.00%
5 3.00% 4.00%
10 2.50% 3.00%
5 3.00% 3.50%
10 4.50% 5.50%
5 4.00% 4.00%
5 3.00% 3.00%
5 3.50% 4.00%
- --------------------------------------------------
No. of Responses 11 11 11
Average 7 3.45% 4.09%
- --------------------------------------------------
First Class
- ----------------
7 2.50% 3.00%
5 3.00% 4.00%
10 2.50% 3.00%
10 3.50% 4.50%
7 2.50% 4.00%
5 3.00% 4.00%
5 3.00% 4.00%
5 3.50% 4.00%
5 3.00% 4.50%
10 2.00% 4.00%
10 3.50% 4.00%
- --------------------------------------------------
No. of Responses 11 11 11
Average 7 2.91% 3.91%
- --------------------------------------------------
- ----------
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.
-7-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
-8-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
LODGING, LIMITED SERVICE
<TABLE>
<CAPTION>
Blended Equity
Going-In Cap Rate Terminal Cap Rate IRR IRR Income Growth Expense Growth
=======================================================================================================================
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>
Mid-Rate
- ----------------
10.00% 10.00% 12.00% 12.00% 20.00% 20.00% 4.00% 4.00% 4.00% 4.00%
10.00% 12.00% 10.00% 12.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00% 4.00% 4.00%
11.00% 11.00% 10.00% 10.00% 3.50% 5.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00% 3.50% 3.50%
12.00% 12.00% 14.00% 14.00% 2.00% 3.00% 3.00% 4.00%
12.00% 12.00% 13.00% 13.00% 19.00% 19.00% 22.00% 22.00% 3.50% 4.00% 3.00% 3.00%
10.50% 10.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00% 4.00% 4.00%
10.00% 11.00% 22.00% 22.00% 6.00% 6.00% 4.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------
No. of Responses 7 7 8 8 4 4 6 6 7 7 8 8
Average 10.79% 11.50% 11.63% 12.25% 14.75% 16.50% 19.00% 20.50% 4.07% 4.86% 3.63% 3.94%
- ------------------------------------------------------------------------------------------------------------------------
Economy
- ----------------
10.00% 12.00% 12.00% 12.00% 18.00% 25.00% 4.00% 4.00% 4.00% 4.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00% 3.50% 3.50%
12.50% 12.50% 14.00% 14.00% 2.00% 3.00% 3.00% 4.00%
13.00% 13.00% 14.00% 14.00% 21.00% 21.00% 24.00% 24.00% 2.50% 4.00% 3.00% 3.00%
11.50% 11.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00% 4.00% 4.00%
- ------------------------------------------------------------------------------------------------------------------------
No. of Responses 5 5 5 5 3 3 4 4 5 5 5 5
Average 11.40% 12.40% 12.80% 13.20% 15.33% 17.67% 18.00% 20.75% 3.50% 4.00% 3.50% 3.70%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Projection Management
Period Fees Reserves
Years % Revenue % Revenue
- --------------------------------------------------
Mid-Rate
- ----------------
7 2.50% 3.00%
5 4.00% 4.50%
10 4.00% 5.00%
5 4.00% 4.50%
5 3.00% 6.00%
5 3.00% 3.00%
10 2.50% 4.00%
5 5.00% 4.00%
- --------------------------------------------------
No. of Responses 8 8 8
Average 7 3.50% 4.25%
- --------------------------------------------------
Economy
- ----------------
7 2.50% 3.00%
5 4.00% 4.50%
5 3.00% 6.00%
5 4.00% 3.00%
10 2.50% 4.00%
- --------------------------------------------------
No. of Responses 5 5 5
Average 6 3.20% 4.10%
- --------------------------------------------------
- ----------
The blended lRR 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.
-9-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
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% 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>
-10-
<PAGE>
Cushman & Wakefield Investor Survey
================================================================================
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
Number of Units Sales Price Per Unit
---------------------------- ----------------------------
No. Sales No. Sales
Reported Average Median Reported Average Median
---------------------------- ----------------------------
Apartments 50 201 190 50 $47,975 $46,458
<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)
Going-in Cap Rate
---------------------------
No. Sales
Reported Average Median
---------------------------
Apartments 41 9.19% 9.30%
</TABLE>
-11-
<PAGE>
QUALIFICATIONS
================================================================================
SUSAN R. BALOGH, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designation No. 10,126)
Admissions Committee, Greater Boston Chapter of the Appraisal Institute
Massachusetts Certified Real Estate Appraiser No. 549
Real Estate and Appraisal Experience:
Senior Appraiser, Cushman and Wakefield of Massachusetts, Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. October 1989-present.
Staff Appraiser, Cushman and Wakefield of Georgia, Inc., Valuation
Advisory Services. October 1988 to September 1989.
Senior Consultant, Laventhol & Horwath, CPA's in the Atlanta Real Estate
Appraisal and Consulting Division. April 1987 to September 1988.
Southeast Regional Commercial Appraiser/Underwriter, Colwell Financial
Corporation (not affiliated with Coldwell Banker), a commercial mortgage
brokerage firm. February 1983 to April 1987.
Real Estate Research Assistant, American Appraisal Company, Atlanta, GA.
January 1981 to January 1983.
Residential Real Estate Sales Associate, Clover Realtors, Atlanta GA.
September 1978 to December 1980.
Appraisal experience includes appraisal of the following property types:
Office Buildings Residential Income
Major Hotels Residential Condominiums
Regional Malls Residential Tracts
Shopping Centers Leasehold/Leased Fee Interests
Commercial Land Commercial Freezer Facilities
Industrial Land Special Purpose Properties
Industrial Facilities
<PAGE>
QUALIFICATIONS
================================================================================
SUSAN R. BALOGH, MAI
Education:
Attended University of Georgia with an emphasis in Business
Administration.
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles, 1982
#1A2 - Basic Valuation Procedures, 1982
#1B-A - Capitalization Theory & Techniques, Part A, 1984
#1B-B - Capitalization Theory & Techniques, Part B, 1984
#6 - Real Estate Investment Analysis, 1986
#2-1 - Case Studies in Real Estate Valuation, 1988
#2-2 - Report Writing & Valuation Analysis, 1990
#SPP - Standards of Professional Practice, 1987,1992
Appraiser's Complete Review Seminar, 1993
Continuing Education Courses:
Understanding Limited Appraisals, 1994
Appraising Affordable Housing, 1994
Appraisal Practices for Litigation, 1995
Experience Review Training, 1995
Rates, Ratios & Reasonableness, 1996
Business Valuation, Parts A & B, 1996
The Abatement Process, 1997
Certified in the Appraisal Institute's voluntary program of continuing
education for designated members.
<PAGE>
================================================================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Woodfield Village Green
Northeast Corner of Meacham and Golf Roads
Schaumburg, Cook County, Illinois
================================================================================
IN A SUMMARY REPORT
As of August 1, 1997
Prepared For:
Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
And
Lehman Brothers
3 World Financial Center
New York, New York 10285
Prepared By:
Cushman & Wakefield of Illinois, Inc.
Valuation Advisory Services
455 North Cityfront Plaza Drive, Suite 2800
Chicago, IL 60611
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[LETTERHEAD OF CUSHMAN & WAKEFIELD OF ILLINOIS, INC.]
July 15,1997
Mr. Brian Summers
Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
And
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Re: Complete Appraisal of Real Property in a Summary Format
Woodfield Village Green
Schaumburg, Cook County, Illinois
Dear Messers Summers and Burke:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Illinois, Inc. is pleased to transmit our summary
appraisal report estimating the market value of the leased fee estate in
Woodfield Village Green and the fee simple interest in the excess land parcel.
As specified in the Letter of Engagement, the value opinion reported
herein 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. The results of the appraisal are being conveyed in a Summary Report
according to our agreement. The accompanying report summarizes the pertinent
data, analysis and conclusions secured in our investigation, rather than provide
a self-contained narrative within the report. It is noted that this report
incorporates by reference our previous Complete Appraisal prepared in a
Self-Contained report format with a date of value of February 12, 1996.
This report was prepared for the Client, and it is intended only for the
specified use of the Client. This report was prepared in accordance with the
Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and the Code of Ethics and Uniform
Standards of Professional Appraisal Practice (USPAP). Additionally, this report
was prepared in accordance with the requirements established by the August, 1990
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Page 2 of 2
July 15, 1997
The property was inspected by Kelleen M. Bodine and the report was
prepared by Kelleen M. Bodine, under the supervision of Stanley R. Dennis, Jr.,
MAI.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in Woodfield Village Green, subject to the
assumptions, limiting conditions, certifications, and definitions, as of August
1, 1997, will be:
SEVENTY-TWO MILLION THREE HUNDRED THOUSAND DOLLARS
$72,300,000
Further, we have formed an opinion that the market value of the fee simple
estate in excess land parcel measuring 11.19-acres, subject to the assumptions,
limiting conditions, certifications, and definitions, as of August 1, 1997, will
be:
FIVE MILLION NINE HUNDRED THOUSAND DOLLARS
$5,900,000
Therefore, the combined value of the leased fee estate in Woodfield
Village Green and the fee simple estate of the excess land parcel, subject to
the assumptions, limiting conditions, certifications, and definitions, as of
August 1, 1997, will be:
SEVENTY-EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS
$78,200,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda. The above market value of the
subject property was not based on a requested minimum valuation, a specific
valuation, or the approval of a loan. Also, the market value was estimated
assuming a normal marketing time estimated to be approximately 12 months.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF ILLINOIS, INC.
/s/ Kelleen M. Bodine /s/ Stanley R. Dennis, Jr., MAI
- ------------------------------------ ------------------------------------
Kelleen M. Bodine Stanley R. Dennis, Jr., MAI
Associate Director Director, Manager
Illinois Certification No.153-000825 Illinois Certification No.153-000686
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Property Name: Woodfield Village Green
Location: Northeast corner of Golf and Meacham Roads,
Schaumburg, Cook County, Illinois
Assessor's Parcel Number: The subject site is identified by six parcel
numbers, which are detailed in the Real Estate
Tax and Assessments section of the report.
Interest Appraised: Leased fee and fee simple estate
Date of Inspection: July 8, 1997
Date of Value: August 1, 1997
Ownership: As of the appraisal date, ownership in the
subject property is vested with Community
Centers One LLC.
Land Area: The total owned land parcel at Woodfield Village
Green measures 62.648-acres, or 2,728,949 square
feet and has been allocated as the main parcel
and excess land parcel. The main land parcel
underlying the improvements and the non-owned
7,000 square foot pad site occupied by
California Pizza Kitchen measures 51.46-acres,
or 2,241,649 square feet, and the excess land
parcel measures 11.19-acres, or 487,300 square
feet.
Zoning: B-5, Planned Regional Business District
Highest and Best Use
If Vacant: Commercial/retail utilization built to its
maximum feasible FAR.
As Proposed: Retail development, as presently improved.
Improvements
Type: Woodfield Village Green is a 501,092 square foot
regional power center, excluding the 7,000
square foot non-owned outparcel, that was 100.0
percent occupied by 27 tenants as of the
inspection date. The center was completed in
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
1994 and is in excellent condition. The retail
complex includes two pad sites and an 11-acre
land parcel with the development potential for a
100,000 square foot anchor tenant. One pad site
was sold to and developed by California Pizza
Kitchen. According to information provided by
ownership, the second pad site, measuring 8,000
square feet, and the 11-acre land parcel will be
sold to Prairie Rock Brewery and Costco,
respectively, during 1997.
Operating Data and Forecasts
Occupancy: The subject property was 100 percent occupied as
of July 8, 1997, the inspection date; however,
Performance Cycle has signed a termination
agreement to vacate their space as of July 31,
1997. AT&T will occupy 2,500 square feet, or
50.0 percent, of their space as of August 1,
1997. Therefore, as of August 1, 1997, the
occupancy will be 99.50 percent.
Gross Leasable Area:
================================================
Tenants Square Footage
================================================
Builders Square 110,400 SF
------------------------------------------------
Circuit City 33,008 SF
------------------------------------------------
Saks Off Fifth 30,273 SF
------------------------------------------------
Service Merchandise 50,000 SF
------------------------------------------------
Office Max 23,500 SF
------------------------------------------------
Container Store 24,969 SF
------------------------------------------------
Sports Authority 42,396 SF
------------------------------------------------
Marshall's 40,000 SF
------------------------------------------------
Nordstrom Rack 40,000 SF
------------------------------------------------
Borders Books 30,000 SF
------------------------------------------------
Old Navy 11,500 SF
------------------------------------------------
Strouds 15,000 SF
------------------------------------------------
Outparcel 7,000 SF
------------------------------------------------
In-Line < 10,000 SF 50,046 SF
================================================
Total GLA 508,092 SF
================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Value Indicators
Sales Comparison Approach:
Woodfield Village Green $71,700,000
Excess Land Parcel $5,900,000
Income Approach
Woodfield Village Green $72,300,000
Excess Land Parcel N/A
Investment Assumptions
Holding Period: 10 years
Income Growth Rate: 3.5%, annually
Expense Growth Rate: 3.5%, annually
Sales Growth Rate: 3.5%, annually
Tenant Improvements-
New Tenants: $5.OO/SF for in-line tenants and
$10.00/SF for anchor tenants
Renewing Tenants: 25% of the preceding schedule
Commissions
New Tenants: $3.50/SF
Renewing Tenants: 50% of the new commission rate
Vacancy Between Tenants: 9 months for anchor tenants and 6 months
for in-line tenants
Renewal Probability: 70%
Terminal Capitalization Rate: 9.75%
Cost of Sale at Reversion: 2.0%
Discount Rate: 10.75%
Value Conclusion: $72,300,000
Resulting Indicators
Unit Rate: $144.2815F of GLA
Net Income (FY 1998): $6,988,661
Implicit Overall Capitalization
Rate: 9.67%
Concluded Value of Excess Land: $5,900,000, or $12.1 1/SF of land area
Exposure Time Implicit
in Market Value Conclusion: Not to exceed 12 months
Special Assumptions: 1. This appraisal report was prepared
in conformity with the requirements of
the Code of Ethics and Standards of
Professional Appraisal Practice of the
Appraisal Institute. Additionally,
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
the appraisal report was prepared in
accordance with the requirements
established by the August, 1990 Financial
Institution's Reform, Recovery, and
Enforcement Act (FlRREA).
2. The projections of income and
expenses, including the reversion at time
of resale, are not predictions of the
future. Rather, they are the best
estimate of current market thinking of
what future trends will be. No warranty
or representation is made that these
projections will materialize. The real
estate market is constantly fluctuating
and changing. It is not the task of the
appraiser to estimate the conditions of a
future real estate market, but rather to
reflect what the investment community
envisions for the future in terms of
expectations of growth in rental rates,
expenses, and supply and demand.
3. We have made a visual inspection of
building improvements and local environs
in the process of this analysis. Our
comments are limited to those items which
were readily observable and apparent to
such an inspection. Comments regarding
the structural integrity of improvements
are beyond the scope of our engagement
and are best made by a professional
engineer.
4. Throughout the analysis we have relied
on information provided by ownership and
management which we assume to be
accurate. This information was provided
in the form of a rent roll, budgets,
sales reports and other property specific
information. We were also provided with a
Pro-Ject diskette for the property which
ownership has portrayed as containing the
actual lease terms. It is noted that we
audited actual lease documents for
several of the major tenants during the
course of our initial Complete Appraisal
in January 1996. Based upon the current
information provided, minor discrepancies
were noted which we have reconciled to
our satisfaction.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
5. Our cash flow analysis and valuation
has recognized that all signed, as well
as any pending leases with a high
probability of being consummated are
implemented according to the terms
presented to us by management.
6. The actual owned site area of the
subject property is 2,728,949 square
feet, or 62.648 acres. However, due to
the presence of excess development
capacity at the subject property, we have
divided the subject site into a primary
site (the site area required to support
the existing building improvements,
including the non-owned 7,000 square foot
pad site) and a secondary site, or excess
land parcel, required to support the
excess development capacity. In summary,
the primary site area is estimated to
equate to 2,241,649 square feet, and the
excess land area has been estimated at
487,300 square feet.
7. Our valuation assumes the improvements
comply with the requirements of the
Americans with Disabilities Act of 1990
(ADA). Although our analysis assumes no
additional costs associated to comply
with the Americans with Disabilities Act
of 1990, Cushman & Wakefield assumes no
responsibility or opinion if the subject
property will comply with the
requirements of the Americans with
Disabilities Act of 1990. Cushman &
Wakefield recommends that an expert in
this field be employed in the final
determination if the proposed development
complies with the Americans with
Disabilities Act of 1990.
8. Please refer to the complete list of
assumptions and limiting conditions
included at the end of this report.
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TABLE OF CONTENTS
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Page
PHOTOGRAPHS OF SUBJECT PROPERTY ............................................. 1
INTRODUCTION ................................................................ 7
REGIONAL ANALYSIS ........................................................... 11
NEIGHBORHOOD ANALYSIS ....................................................... 17
RETAIL TRADE AREA ANALYSIS .................................................. 19
PROPERTY DESCRIPTION ........................................................ 37
REAL PROPERTY TAXES AND ASSESSMENTS ......................................... 43
ZONING ...................................................................... 44
HIGHEST AND BEST USE ........................................................ 45
VALUATION PROCESS ........................................................... 48
SALES COMPARISON APPROACH ................................................... 49
INCOME APPROACH ............................................................. 56
SUPPLEMENTAL VALUATION ...................................................... 71
RECONCILIATION AND FINAL VALUE ESTIMATE ..................................... 73
ASSUMPTIONS AND LIMITING CONDITIONS ......................................... 75
CERTIFICATION OF APPRAISAL .................................................. 77
ADDENDA ..................................................................... 78
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PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
Woodfield Village Green - Borders Books
[GRAPHIC OMITTED]
Woodfield Village Green - Nordstrom Rack
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Photographs of Subject Property
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Woodfield Village Green - Old Navy
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Woodfield Village Green - Marshalls
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Photographs of Subject Property
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[GRAPHIC OMITTED]
Woodfield Village Green - Sports Authority
[GRAPHIC OMITTED]
Woodfield Village Green - The Container Store, Office Max & Service Merchandise
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Photographs of Subject Property
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Woodfield Village Green - Saks Off 5th
[GRAPHIC OMITTED]
Woodfield Village Green - Builders Square
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Photographs of Subject Property
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Woodfield Village Green - Multi-Tenant Retail Building
[GRAPHIC OMITTED]
Woodfield Village Green - California Pizza Kitchen
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Photographs of Subject Property
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Woodfield Village Green - Circuit City
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Woodfield Village Green - Multi-Tenant Retail Building
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INTRODUCTION
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Identification of Property
The subject property, known as Woodfield Village Green, is located at the
northeast corner of Meacham and Golf Roads, in Schaumburg, Cook County,
Illinois. The shopping center is situated approximately 20 miles northwest of
the Chicago CBD in the heart of the Schaumburg retail corridor. Constructed in
1994, the property consists of one big-box retail user of 110,400 square feet,
seven primary anchor tenants ranging in size from 30,000 to 50,000 square feet,
four secondary anchor tenants ranging from 10,000 to 29,999 square feet and 14
in-line tenant spaces. The total gross leasable area of the center, excluding
the non-owned pad site, is 501,092 square feet. The subject property is
identified by six parcel numbers by the Cook County Tax Assessor's office.
Woodfield Village Green also includes two pad sites and an 11-acre development
parcel. One of the pad sites, measuring 7,000 square feet, has been sold and
improved with a California Pizza Kitchen. According to information provided by
ownership, the remaining excess land is currently under contract for sale to
Prairie Rock Brewery and Costco.
Property Ownership and Recent History
Woodfield Village Green was originally developed and owned by Homart
Community Centers, Inc. Title to the subject property is currently vested with
Community Centers I, LLC, a joint venture between Developers Diversified Realty
Corporation (DDR) and DRA Advisors, Inc. (DRA). The subject was acquired as part
of the former Homart Community Center Division for a total purchase price of
approximately $500.0 million from General Growth Properties, Inc. The date of
transfer was November 17, 1995.
A history of the project shows that the subject site was originally
acquired by Homart Community Centers, Inc. in March, 1993 for a recorded
consideration of $16,738,380. Subsequent to the sale, Homart developed the
subject center to its present configuration with the first tenants taking
occupancy in December, 1993. Subsequent to its opening, Homart sold a 7,000
square foot pad-site to California Pizza Kitchen. According to information
provided by current ownership, the remaining two development parcels are
currently under contract for sale and are anticipated to close by year-end 1997.
The 11.00-acre land parcel is under contract to Costco for $5,000,000 and the
8,000 square foot pad site is under contract to Prairie Rock Brewery for
$950,000.
Competency Provision
We are aware of the competency provision of the USPAP and the authors of
this report meet the standards. Kelleen M. Bodine inspected the subject
property, researched, and analyzed the pertinent market information, wrote and
reviewed the appraisal report, under the supervision of Stanley R. Dennis, Jr.,
MAI. Stanley R. Dennis Jr., MAI and Kelleen M. Bodine have extensive appraisal
experience with retail properties nationally, as well as in the Chicago
Metropolitan Area.
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Introduction
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It is our opinion that we are fully competent to perform this appraisal,
due to the fact that:
1. The appraisers have full knowledge and experience in the nature of
this assignment.
2. All necessary and appropriate steps have been taken in order to
complete the assignment competently.
3. There is no lack of knowledge or experience that would prohibit this
assignment to be completed in a professional competent manner or
where a biased or misleading opinion of value would be rendered.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the improvements and the fee simple estate in the excess
land as of August 1, 1997. The intended use of this appraisal is to provide an
independent valuation and analysis of the property and to assist the client in
evaluating the asset for underwriting purposes in connection with a proposed
financing.
Scope of the Appraisal
In the process of preparing the appraisal, we:
o Inspected the site and site improvements.
o Conducted market research into occupancies, operating
expenses, asking rents and actual leases recently negotiated
at comparable retail centers, including interviews with
on-site personnel and a review of our own database from
previous appraisal files.
o Reviewed the rent roll and PRO-JECT disk for the tenants at
the retail complex.
o Conducted market inquiries into recent sales of power and
community shopping centers to ascertain sales price per square
foot and capitalization rates.
o Prepared a detailed discounted cash flow analysis for the
purpose of discounting a forecasted net income stream to a
present value estimate for the subject property.
o Prepared the Sales Comparison and Income Approaches to value.
o Reconciled the value indications and concluded a final value
estimate for the subject.
o Prepared a complete appraisal of the subject property with the
results conveyed in this summary report. A complete appraisal
involves an estimate of market value without any departure
from the Uniform Standards of Professional Appraisal Practice
maintained by the Appraisal Foundation. A summary report makes
a summary presentation of the data and analyses which serve as
the basis of our conclusion of value for the subject property.
Date of Value and Property Inspection
The date of our valuation is August 1, 1997 and our date of
inspection is July 8, 1997.
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Introduction
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Property Rights Appraised
Leased fee and fee simple 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.
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
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Introduction
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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 have estimated a normal marketing and exposure time of approximately 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.
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.
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.
Legal Description
The subject property is identified by six parcel numbers: 07-12-400-024,
07-12-400-025, 07-12-400-026, 07-12-400-027, 07-12-400-028 and 07-12-400-029 by
the Cook County Assessor's Office.
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AREA MAP
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REGIONAL ANALYSIS
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Chicago Metropolitan Area
This section evaluates general demographic and economic trends in the
property's regional location to determine the outlook for the overall market
based upon comparison of projected population, employment and other trends with
actual historical data. The Chicago Consolidated Metropolitan Statistical Area
(CMSA), located at the southwestern tip of Lake Michigan, is the midwest's
financial, commercial, transportation, and industrial center. As defined by the
United States Census Bureau, the Chicago CMSA includes a total of eleven
counties: eight in Illinois, two in Indiana, and one in Wisconsin. As a whole,
the Chicago CMSA covers a territory of 5,660 square miles. An area map is
included on the facing page.
Population
The population of the Chicago Metropolitan Area is the third largest in
the nation, behind New York and greater Los Angeles. The historical and
projected population growth trends for the six primary counties in the Chicago
Metropolitan area are summarized in Table A below.
================================================================================
TABLE A
CHICAGO METROPOLITAN AREA
POPULATION STATISTICS - 1980 THRU 2006
- --------------------------------------------------------------------------------
Annual Annual
% Change % Change
County 1980 1996 1980-1996 2006 1996-2006
- --------------------------------------------------------------------------------
Cook 5,254,000 5,136,800 -0.14% 5,086,800 -0.08%
Chicago 3,005,000 2,762,000 -0.53% N/A N/A
Suburban 2,249,000 2,374,800 0.34% N/A N/A
DuPage 659,000 857,800 1.66% 925,800 0.90%
Kane 278,000 353,300 1.51% 374,800 0.37%
Lake 440,000 570,600 1.64% 624,000 0.88%
McHenry 148,000 225,700 2.67% 273,600 1.27%
Will 324,000 415,800 1.57% 499,600 1.21%
Total 7,103,000 7,560,000 0.39% 7,784,600 0.25%
- --------------------------------------------------------------------------------
Source: Woods & Poole Economics, Inc.
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As summarized in Table A, the City of Chicago had an estimated population
of 2.762 million in 1996, a decrease of 243,000 residents since 1980, when the
population was estimated at approximately 3.005 million people. However, the
decline in urban population since 1980 was more than offset by a significant
growth in the suburban population. The population shift from the city to the
suburbs becomes evident when one looks at the county population as a percentage
of the total population. These figures, as well as projections for the year
2006, are presented below in Table B as follows:
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REGIONAL ANALYSIS
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TABLE B
POPULATION AS A PERCENTAGE OF THE TOTAL
- --------------------------------------------------------------------------------
County 1980 1996 2006(1)
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Cook: 74.0% 68.0% 65.8%
Chicago 42.3% 36.5% --
Suburbs 31.6% 31.4% --
DuPage 9.3% 11.4% 12.1%
Kane 3.9% 4.7% 4.7%
Lake 6.2% 7.6% 8.0%
McHenry 2.1% 3.0% 3.3%
Will 4.6% 5.5% 6.1%
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(1) Projected
================================================================================
The preceding table shows a steady migration from the city toward the
suburbs. The collar counties of DuPage, Kane, Lake, McHenry, and Will increased
their share of the regional population from 26.1 percent in 1980 to 32.2 percent
in 1996. Their share of the population is expected to further increase to 34.2
percent by the year 2006. The population shift from the city to suburban areas,
is common among most major cities located throughout the Great Lakes and
Northeastern regions, and is expected to continue for the foreseeable future.
Transportation
Air Transportation
Chicago is one of the primary transportation hubs in the United States.
O'Hare International Airport is the busiest in the world, handling approximately
67.25 million passengers in 1995. The substantial increase in air traffic is
attributed to several factors, which include the deregulation of the airline
industry, the establishment of regional "hubs" by major airlines, and the
economic expansion into global markets. United Airlines rebuilt their terminal
in 1987 at a cost of $500 million; American Airlines also expanded and upgraded
their facility in 1990, the $329 million project was intended to provide more
space for airline operations and to provide greater convenience and comfort for
their passengers. Finally, the new 1.1 million square foot International
Terminal at O'Hare was completed in 1992. The new terminal increased
international passenger travel from 6.76 million in 1993 to 9.89 million in
1995, or 15.0 percent.
Midway Airport, located in the southwest portion of the city, serves as a
secondary airport which has become an increasingly popular alternative to
O'Hare. From 1980 to 1990, passenger volumes increased significantly, rising
from 600,000 passengers to nearly 9.0 million passengers. Passenger volumes fell
to 7.3 million in 1991 and to 4.6 million in 1992 as Midway Airlines, the
primary carrier at the time, filed for bankruptcy. In 1991, Midway Airport was
serviced by four only carriers, Comair, Northwest, Southwest and USAir; however,
during 1992 and 1993, twelve new airline carriers were added, including America
West, Midway Airlines, MarkAir, TWA, and Continental. According to information
compiled by the Chicago
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Regional Analysis
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Department of Aviation, 6.76 million passengers traveled through Midway Airport
in 1993, 9.54 million in 1994 and 9.89 in 1995.
Ground Transportation
Several major expressways and interstate highways pass through the Chicago
area. Interstate 88 and 290 are the main routes to cities along the East-West
corridor. Interstate 55 provides access to the southwestern cities. Cities to
the north and northwest are accessed via Interstates 90 and 94; and finally,
north-south travel between the western suburbs is facilitated by Interstate 294
and 355. In total, the Chicago area has over 630 miles of expressways. Within
the metropolitan area, commuter transportation is facilitated by rail lines,
rapid transit systems, bus lines, and expressway systems.
Suburban Chicago is served by eleven radial Metra rail lines originating
from the Central Business District. The 507-mile Metra system serves 227
stations in six counties in Illinois: Cook, Lake, DuPage, Will, McHenry and Kane
and Kenosha County in Wisconsin. Ridership on Metra totaled 73.2 million in
1995, a slight decrease from the 74.7 million riders in 1994. The urban areas of
Chicago are served by sixteen elevated rail lines and a number of bus routes.
Just over 135.3 million people used the "El" and 306 million used the bus routes
as a mode of transportation in 1995. According to the RTA, 442.7 million people
utilized some form of public transportation in 1995; a 5.9 percent decrease from
1994.
Employment
The Chicago economy, like most major metropolitan areas, began as a
manufacturing center. However, today the Chicago economic growth is no longer
primarily based on the manufacturing sector, but is distributed among wholesale
and retail trade, health care, education, and financial services. Table C, on
the next page, summarizes the diversity of employment for the eleven county
Consolidated Metropolitan Statistical Area.
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Regional Analysis
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TABLE C
CHICAGO METROPOLITAN AREA EMPLOYMENT STATISTICS: 1996 - 2006
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Compound
1996 Percent 2006 Percent Growth
Industry Group Employment of Total Employment Of Total 1996-2006
- --------------------------------------------------------------------------------
Mining/Agriculture 40,160 0.8% 47,710 0.9% 1.74%
Manufacturing 728,980 14.5% 701,260 13.1% -0.39%
Construction 236,610 4.7% 244,450 4.6% 0.33%
TCU(1) 285,860 5.7% 307,410 5.7% 0.73%
Trade 1,106,870 22.0% 1,162,370 21.7% 0.49%
FIRE 468,730 9.3% 532,870 10.0% 1.29%
Services 1,592,010 31.7% 1,803,700 33.7% 1.26%
Government 558,340 11.1% 545,920 10.1% -0.22%
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Total 5,030,540 100.00% 5,357,150 100.0% 0.63%
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Source: Woods & Poole Economics, Inc.
(1) Transportation, Communications & Utilities
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The local employment picture is expected to follow historical trends as
the Chicago MSA enters the next decade. The service sector will continue to lead
employment, the manufacturing sector will shrink and overall job growth will
remain steady. Employment increases in the communications sector are considered
a sure bet; however, expected utility deregulation will dampen long-term growth
prospects for this industry. According to Woods & Poole, the services and FIRE
industries should continue to lead employment growth during the next ten years.
These projections are supported by the steady increase in the number of area
small businesses, the contribution of local universities and MSA's ability to
capitalize on increased international trade.
In 1996, the number of jobs in Cook County accounted for 62.8 percent of
total employment for the eleven county area. Similar to the population trends
previously discussed, the collar counties are also projected to increase their
share of total employment. This distribution is summarized in Table D on the
next page.
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TABLE D
CHICAGO METROPOLITAN AREA
EMPLOYMENT STATISTICS: 1996 - 2006
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1996 2006
Industry Group Employment Employment
- --------------------------------------------------------------------------------
Cook County 62.8% 59.8%
DuPage County 12.3% 13.5%
Kane County 3.7% 3.8%
Lake County 6.3% 7.3%
McHenry County 2.0% 2.2%
Will County 3.0% 3.2%
Other Counties 9.9% 10.1%
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Total(1) 100% 100%
- --------------------------------------------------------------------------------
(1) For the 11-county CSMA
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Chicago is a leading corporate headquarters location. A number of Fortune
500 firms are headquartered in the Chicago area. Many other firms also have
regional headquarters in the Chicago area. Among the largest firms headquartered
in Chicago are: Sears, Roebuck & Company, Amoco, Sara Lee, United Airlines, and
Motorola. Chicago's top five public company employers in 1995 were the Sears,
Roebuck & Company, McDonald's Corporation, Sara Lee Corporation, Motorola, Inc.,
and UAL Corporation.
Unemployment
The average annual unemployment rates for the six-county metropolitan area
are summarized below in Table E.
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TABLE E
AVERAGE ANNUAL EMPLOYMENT RATE
SIX-COUNTY CHICAGO METROPOLITAN AREA
================================================================================
Cook DuPage Kane Lake McHenry Will U.S.
Year County County County County County County Illinois Avg.
- --------------------------------------------------------------------------------
1988 6.7% 3.8% 5.4% 4.3% 4.8% 7.3% 6.8% 5.5%
1988 5.9% 3.3% 5.5% 3.9% 4.5% 6.3% 6.0% 5.3%
1990 6.3% 3.6% 5.9% 3.9% 5.3% 6.4% 6.2% 5.5%
1991 7.2% 4.8% 7.5% 4.6% 7.1% 7.4% 7.1% 6.7%
1992 7.8% 5.1% 8.0% 4.8% 6.6% 7.8% 7.5% 7.4%
1993 7.8% 5.1% 7.6% 4.9% 6.4% 7.4% 7.4% 6.4%
1994 4.2% 2.8% 4.6% 3.8% 3.9% 4.8% 4.2% 5.1%
1995 5.5% 3.4% 5.0% 4.0% 4.1% 5.3% 5.2% 5.6%
1996 5.6% 3.6% 5.0% 4.0% 3.9% 5.2% 5.5% 5.3%
- --------------------------------------------------------------------------------
Source: Illinois Department of Employment Security
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Regional Analysis
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After three years of relatively high unemployment rates throughout the
Chicago Metropolitan Area, the labor market improved significantly during 1994.
According to Crain's Chicago Business, economic recovery in the Chicago area is
expected to be stronger than other areas of the country, largely due to the
strong export of capital goods.
Summary
In summary, Chicago's status as a world class city is due to a variety of
inherent strengths, including: its excellent transportation system, central
geographic location, well educated work force, commodities and futures
exchanges, and its numerous cultural, educational and recreational amenities. In
addition, the municipality of the City of Chicago is generally healthy
financially, and the administration under Mayor Richard M. Daley, Jr. is
considered helpful toward business and development.
Although the Chicago 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 swings. Overall, the Chicago area is expected to continue
its trend of economic growth. The continuation of Chicago'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.
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NEIGHBORHOOD MAP
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NEIGHBORHOOD ANALYSIS
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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, or a mixture
of commercial and residential properties, is called a neighborhood. The subject
property is located at the northeast corner of Golf and Meacham Roads in
Schaumburg, Illinois. The boundaries of the subject neighborhood can generally
be defined as Interstate 90 to the north, Highway 53 to the east, Woodfield Road
to the south and Plum Grove Road to the west. A neighborhood map is included on
the facing page.
Woodfield Mall, located directly south of the subject property across Golf
Road, is the most intensive commercial use in the subject neighborhood.
Woodfield Mall consists of a two-level enclosed super-regional shopping mall
with a total gross leasable area of 2.3 million square feet. The total GLA is
delineated as 1.3 million square feet of anchor tenant GLA and 1.0 million
square feet of mall shop GLA. Woodfield Mall opened in September 1971 with three
anchor tenants: Sears, JC Penney and Marshall Fields. The Lord & Taylor
department store was completed in August 1973. The last expansion occurred in
October 1995, when the 200,000 square foot Nordstrom department store and
218,000 square feet of mall shop space was added.
During the past 26 years since Woodfield Mall was completed, the
combination of the Mall's presence, the availability of vacant developable land,
excellent access and favorable pro-growth policies on the part of local
government officials, has resulted in the evolution of the subject neighborhood
as not only the primary retail and office destination point in Schaumburg, but
for the entire northwest suburbs. According to Schaumburg's 1996 Comprehensive
Plan, the village houses 9.6 million square feet of retail space in 66 shopping
centers and 11.1 million square feet of office space.
Surrounding land uses include retail, office and restaurant uses. Directly
south of Woodfield Mall across Higgins Road is One Schaumburg Place.
Architecturally, One Schaumburg Place has a two-story hybrid format, which is
enclosed in the front, but allows relatively quick access to specific stores
from the parking area. Originally developed and owned by Tucker Cos., One
Schaumburg Place has suffered from an exodus of anchor stores, including Child's
World, Phar-Mor, Highland Appliance and Montgomery Wards, since it opened in
late 1990. The center was foreclosed upon in early 1995 by the lender, Bank of
America. Because the front of the center is enclosed with tinted glass,
visibility of the stores within the center is obscured. The mall was originally
conceived to house 80 to 100 stores, however, One Schaumburg Place is expected
to make a comeback as a two-level power center with 10 to 15 tenants. As of July
1997, the center was substantially vacant and the current ownership is
considering plans to redevelop or dispose of the property. A two-story
restaurant owned by Lettuce Entertain You Corporation was recently completed as
an outlot to One Schaumburg Place.
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Neighborhood Analysis
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At the northwest corner of Golf Road and Meacham Road, directly west of
Woodfield Village Green, is the most recent addition to the neighborhood's
retail base, the Marshall Field's Home Store. The 100,000 square foot store
opened in late 1996.
In addition to the major retail centers, office and restaurant uses are
found to the west, south and east of the subject property. Major office
complexes in the neighborhood include Century Center I & II, Citibank Office
Plaza, Embassy Plaza, One, Two and Three National Plaza, One Woodfield Place,
Zurich American Insurance Towers, Woodfield Corporate Center I, II, III & IV,
Southwick Office Center, Woodfield Executive Center and Woodfield Executive
Plaza. Restaurants in the area include: Chevy's, Hooters, The Crab Shack, Olive
Garden, St. Louis Bread Company, Pizzeria Uno, Rainforest Cafe, Champs and
Italianni's. The high concentration of office development provides additional
traffic flow to the subject neighborhood, and serves to expand the subject's
trade radius. As a result, the area land uses compliment the subject's retail
utilization, and serve to expand its trade area.
Access to and from the subject's neighborhood is excellent, by way of
Interstate 90 and Highway 53. Interstate 90 provides direct access to downtown
Chicago, 20 miles to the southeast, and interchanges with Interstate 294 and 94.
Highway 53 provides north-south travel to the western and southwestern suburbs
of Chicago. Golf Road, which borders Woodfield Village Green to the south, is
the primary retail artery in Schaumburg. The six-lane roadway has a center
median and numerous center turning lanes to facilitate access to the commercial
uses that line the roadway.
The subject neighborhood provides the primary retail destination point for
Schaumburg and the northwest suburbs. The village of Schaumburg offers over 9.6
million square feet of retail space, of which, over 50 percent is located along
Golf Road. The local government has long provided a pro-development front, which
has attracted over 20.0 million square feet of commercial uses to the area.
According to the Planning Department, as of 1995, 5.2 percent of the total land
area in the Village was vacant; by 2020, this figure is projected to decrease to
1.0 percent. The neighborhood has excellent highway and local street access and
benefits from the increased traffic created by the density of office
development. The vitality of the neighborhood's retail component is further
supported by the new retail development, including the subject property,
Marshall Fields Home Store and a number of new restaurants.
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RETAIL TRADE AREA ANALYSIS
================================================================================
Trade Area Analysis
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. The center's fundamental
drawing power comes from the strength of the anchor tenants. A successful
combination of anchor tenants creates a destination for customers seeking a
variety of goods and services. In order to define and analyze the subject's
market potential, it is important to first establish the boundaries of the trade
area from which the subject draws 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. As such, a clear understanding of
the property type is important in order to place the subject in its proper
competitive context. The subject meets the definition of both a community center
and a power center to some degree. Each can be defined as follows:
o A community center provides a wider range of facilities for the sale
of soft lines (wearing apparel for men, women, and children) and
hard lines (hardware and appliances). The community center makes a
greater variety of merchandise available-in sizes, styles, colors,
and prices. It is built around a junior department store, variety
store, or discount department store as the major tenant, in addition
to a supermarket. It does not have a full-line department store,
though it may have a strong specialty store or stores. In theory,
its typical size is 150,000 square feet of gross leasable area, but
in practice, it may range in size from 100,000 to 450,000 square
feet.
o The power center is a type of large community center that tends to
range in size from 150,000 square feet to more than 500,000 square
feet. It contains at least one discount department store "super
anchor" of 100,000 square feet or more and at least four
category-specific, off-price anchors of 20,000 square feet or more.
These anchors typically emphasize hard goods such as consumer
electronics, sporting goods, office supplies, home furnishings, home
improvement goods, bulk foods, drugs, health and beauty aids, toys,
and personal computer hardware/software. These anchors tend to be
narrowly focused but deeply merchandised "category killers" together
with the more broadly merchandised, price-oriented warehouse club
and discount department stores. It should contain a minimum of
smaller shop space (10 percent or so of the center's total gross
leasable area); and will typically be configured in an open-air
strip, "L" or "U" shaped layout.
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Retail Market Analysis
================================================================================
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 to the subject's position.
Retail Structure
In order to examine the subject property in its proper context, we must
examine the nature of the competition. By virtue of the market structure, the
subject competes with certain retail establishments throughout the general area.
Within the subject's immediate area there is an abundance of retail development.
While Woodfield Mall is the primary retail destination in the area, practically
the entire area along Golf Road, between Highway 53 to the east and Gammon Road
to the west, is improved with retail structures, including freestanding retail
stores, neighborhood shopping centers and community shopping centers. While
there is no power-center competition in the area, there are a couple of shopping
centers that can be considered competition for the subject property. Profiles of
each of the centers are presented on the following pages. As will be seen, the
subject's primary competition takes various forms, from older community shopping
centers to a newly renovated super-regional mall. Significantly, the subject
property is a unique property within this market whereby no existing centers
truly present a similar competitive stance to Woodfield Village Green.
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Retail Market Analysis
================================================================================
Competitive Retail Center No. 1
Name: Woodfield Plaza
Location: N/W/C Golf Road & Basswood Drive
Schaumburg, Illinois
Owner/Developer: Virginia Retirement Systems
Distance from Subject: 1.0+/- miles (less than 5+/- min. drive time)
Year Opened/Renovated: 1992
Total GLA. 177,418+/- SF
Anchor Tenants: Barnes & Noble Books 22,720+/- SF
Linens 'N Things 32,249+/- SF
Kohl's 82,691+/- SF
-------
Total 137,660+/- SF
In-Line Shop GLA: 39,758+/- SF
Number of Small Shops: 10+/- stores
Land Area: 18+/- acres
Parking/Ratio: 1,000 spaces (5.64:1)
Comments:
Woodfield Plaza opened in 1992 on an 18+/- acre site located approximately
1.0 miles west of the subject property, along the north side of Golf Road. As
indicated above, this center is anchored by a Barnes & Noble Book Store, Linens
'N Things and Kohl's. The seven existing in-line tenants are generally local
stores. The center is reportedly 100 percent occupied. While Linens 'N Things
competes with Strouds, Barnes & Noble competes with Border's, and Kohl's
competes (to a lesser degree) with Marshalls, this center is inferior in size,
resulting in an inferior mix of merchandise and national tenants.
Rental rates at this center currently range from approximately $14.00 to
$16.00 per square foot, net, for the anchor spaces (excluding Kohl's) and from
$17.00 to $20.00 per square foot, net, for the in-line tenants. Free rent is not
currently quoted in the marketplace, and tenant improvement allowances are
negotiable.
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Retail Market Analysis
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Competitive Retail Center No. 2
Name: Woodfield Commons (East and West)
Location: S/W/Q Golf Road and Meacham Road
Owner/Developer: Klaff-Joss Realty
Distance from Subject: Directly southwest of the subject property,
across Golf Road
Year Opened/Renovated: 1973-1979
Total GLA: 150,004+/- SF
Anchor Tenants: Tower Records 23,OOO+/- SF
Comp USA 25,000+/- SF
------
Total 48,OOO+/- SF
In-Line Shop GLA: 102,004+/- SF
Number of Mall Shops: N/A
Land Area: 14+/- acres
Parking/Ratio: 935 cars/6.23 per 1,000 square feet
Comments:
Woodfield Commons East and West are located within two blocks of the
subject property, to the southwest. These are technically two separate centers
separated by a freestanding Toys 'R Us. However, since they are generally of the
same vintage and design, and are owned, managed and leased by the same group, we
have treated this retail development as a single entity in this analysis. Comp
USA is currently expanding at Woodfield Commons West. A new free-standing store
is under construction on the west side of the center. Relative to the subject
property, Woodfield Commons is an older shopping center, with an inferior tenant
mix. According to the current leasing agent, rental rates for the anchor tenants
typically range between $12.00 and $15.00 per square foot, net, while in-line
tenant rents typically range from $16.00 to $19.00 per square foot, net.
Occupancy at this development is currently at 100.0 percent. Access to and
visibility of this center are considered inferior to the subject.
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Retail Market Analysis
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Competitive Retail Center No. 3
Name: Woodfield Mall
Location: S/E/Q Golf Road and Meacham Road
Schaumburg, Illinois
Owner/Developer: The Taubman Company
Distance from Subject: Across Golf Road from the subject
Year Opened/Renovated: 1971/1995
Total GLA: 2,300,000+/- SF
Anchor Tenants: J.C. Penny 315,498+/- SF
Lord & Taylor 125,000+/- SF
Marshall Fields 319,363+/- SF
Nordstrom 200,000+/- SF
Sears 364,772+/- SF
---------
Total 1,324,633+/- SF
Mall Shop GLA: 958,786+/- SF
Number of Mall Shops: 240+/- stores
Land Area: 169+/- acres
Parking/Ratio: 10,087 cars/5.04 per 1,000 square feet
Comments:
Woodfield Mall, located just south of the subject property, is the largest
mall in the Chicago area, and one of the largest in the country. This mall,
characterized as an upscale/fashion super-regional retail center, is generally
occupied by specialty shops and boutiques. As a result, this center is not
directly competitive with the subject property, which is generally occupied by
discount retailers and "category killers". In fact, Woodfield Mall has the
positive effect of increasing the effective trade area for the subject property.
Occupancy costs at malls are typically significantly higher than their
community center counterparts due to higher common area and security costs, as
well as the premium that is paid to be part of a center with such popular anchor
tenants. Occupancy at this center is reported to be 96 percent.
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Retail Market Analysis
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Competitive Retail Center No. 4
Name: One Schaumburg Place
Location: North of Higgins Road, west of Illinois Route 53
Schaumburg, Illinois
Owner/Developer: Bank of America
Distance from Subject: 4+/- blocks south (3+/- min. drive time)
Year Opened/Renovated: 1991
Total GLA: 574,075+/- SF
Anchor Tenants*: Vacant 23,744+/- SF
Cineplex Odeon 49,545+/- SF
Vacant 27,840+/- SF
Vacant 29,892+/- SF
Vacant 19,664+/- SF
Vacant 115,491+/- SF
Vacant 26,816+/- SF
Vacant 10,352+/- SF
-------
Total 303,344+/- SF
Mall Shop GLA*: 270,731+/- SF
Number of Mall Shops*: 69+/- stores
Land Area: 39+/- acres
Parking/Ratio: 4,400 cars/ 7.66 per 1,000 square feet
Comments:
One Schaumburg Place is a two-story hybrid of a community shopping center
and a mall. This hybrid format, which is enclosed in the front (like a mall) but
allows relatively quick access to specific stores from the parking area (like a
community shopping center), has failed to find its niche in the Schaumburg
retail market. Because the front of the center is enclosed with tinted glass,
visibility of the stores within the center is obscured. The center was
foreclosed upon by Bank of America and is currently about 15 percent occupied.
Montgomery Wards and Office Max have both closed their stores at One Schaumburg
Place during the past year. Leases range from $10.00 to $60.00 per square foot.
Ownership is considering redeveloping the property.
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Retail Market Analysis
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Other Competition
As indicated previously, there is a variety of non-shopping center
competition in the subject's immediate neighborhood. Namely, Golf Road is lined
with a variety of single-tenant retail facilities and un-named strip shopping
centers that typically have tenants that are in direct competition with tenants
at the subject property. Such competitors include Best Buy, Sportmart, Computer
City, Toys R Us, Venture, the Marshall Fields Home Store and Bed, Bath & Beyond.
While not located in the immediate vicinity of the subject property, there
is additional secondary shopping center competition at the intersection of
Schaumburg Road and Barrington Road, in the west portion of Schaumburg,
approximately five miles west of the subject. At this intersection there are
four shopping centers, including Prairie Town Center, Shops at Schaumburg Court,
Scharrington Square Shopping Center, and Target Greatland Center. In total, the
centers were constructed between 1989 and 1995, and contain a total of
approximately 834,000 square feet. Rental rates at these centers typically range
from $12.00 to $20.00 per square foot, net.
Outside of Schaumburg, the nearest competition for the subject property
would be Meadows Town Mall, a regional shopping center located approximately
three miles east of the subject at the intersection of Golf Road and Algonquin
Road. Meadows Town Mall, constructed in 1990, contains approximately 382,000
square feet, and is anchored by Elek-Tek Computer Store, Value Club and Waccamaw
Pottery. Although the anchor tenant spaces are similar in size to those at the
subject, the tenancy is generally inferior to that of the subject.
Property Profile
As of the inspection date, the subject property was 100 percent occupied
by 27 tenants. Approximately 90.0 percent of the total GLA is occupied by anchor
tenants. According to information provided by ownership, the credit rating, as
available, and expiration date for each of the anchor tenants is summarized in
the following table.
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Retail Market Analysis
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================================================================================
Tenant Square Footage S&P Credit Rating Expiration Year
================================================================================
Builders Square 110,400 SF B+ 2019
- --------------------------------------------------------------------------------
Circuit City 33,008 SF NR 2009
- --------------------------------------------------------------------------------
Saks Off Fifth 30,273 SF NR 2011
- --------------------------------------------------------------------------------
Service Merchandise 50,000 SF BB 2014
- --------------------------------------------------------------------------------
Office Max 23,500 SF NR 2010
- --------------------------------------------------------------------------------
container Store 24,969 SF NR 2011
- --------------------------------------------------------------------------------
Sports Authority 42,396 SF BB- 2013
- --------------------------------------------------------------------------------
Marshall's 40,000 SF BBB+ 2009
- --------------------------------------------------------------------------------
Nordstrom Rack 40,000 SF A+ 2009
- --------------------------------------------------------------------------------
Borders Books 30,000 SF NR 2009
- --------------------------------------------------------------------------------
Old Navy 11,500 SF NR 2000
- --------------------------------------------------------------------------------
Strouds 15,000 SF NR 2004
================================================================================
Total GLA 451,046 SF
================================================================================
Trade Area Definition
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
transportation provides the basis for access to the area. Second, regional
competition and geographic boundaries help to define the potential size of the
trade area as a measure of distance from the property. Third, the merchandising
mix and anchor alignment provide the basic draw of customers that are likely to
patronize the property. Based on these observations, we believe that the primary
trade area for the subject would extend outward to a radius of approximately
5-miles from the subject property. To add perspective to this analysis, we have
segregated our survey into 3-, 5- and 10-mile concentric circles.
Population
Once the market has been established, the focus of our analysis centers on
the statistical data of the trade area, including population. Equifax National
Decision Systems (ENDS) provides historical, current and forecasted population
estimates for the trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. A detailed profile of
the trade area is included in the Addenda of this report. The current and
projected population for the trade area and the Chicago MSA is summarized in the
following table.
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[GRAPHIC OMITTED]
Meacham and Golf
Schaumberg, Illinois
3, 5 & 10 Mile Radii
POPULATION % GROWTH 1996-2001
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Retail Market Analysis
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POPULATION
- --------------------------------------------------------------------------------
1996 2001 Compound Annual
Region Population Population Change
- --------------------------------------------------------------------------------
3-Mile 79,911 82,296 0.74%
5-Mile 275,605 279,836 0.38%
10-Mile 881,193 906,726 0.72%
Chicago MSA 7,748,902 7,911,503 0.42%
================================================================================
Between 1980 and 1996, ENDS reports that the population within the subject
5-mile trade area increased from 237,839 to 275,605 residents. Through 2001, the
population of the primary trade area is expected to continue its upward trend,
and increase moderately to 279,836 individuals. The Chicago MSA has also
experienced positive population growth during the studied time period; however,
at rates which are approximately 50 percent of the trade area. Over the next
five years, population growth within the subject trade area will outpace the
Chicago MSA. As illustrated in the graphic on the facing page, the greatest
percentage growth in the trade area will occur in the area immediately
surrounding the subject property and to the south and west.
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 is 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,
o The population is living longer on average. This results in an
increase of single and two person households.
o The divorce rate increased dramatically during the 1980s, again
resulting in an increase in single person households.
o Many individuals have postponed marriage, also resulting in more
single person households.
The current and projected households for the trade area and the Chicago
MSA is summarized in the following table.
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[GRAPHIC OMITTED]
Meacham and Golf
Schaumberg, Illinois
3, 5 & 10 Mile Radii
HOUSEHOLD % GROWTH 1996-2001
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Retail Market Analysis
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HOUSEHOLDS
- --------------------------------------------------------------------------------
1996 2001 Compound Annual
Region Households Households Change
- --------------------------------------------------------------------------------
3-Mile 33,160 34,317 0.86%
5-Mile 105,875 108,419 0.59%
10-Mile 329,672 341,071 0.85%
Chicago MSA 2,836,769 2,888,589 0.36%
================================================================================
According to ENDS, the subject's 5-mile trade area gained 37,736
households between 1980 and 1996. During the same time period, the Chicago MSA
gained 302,879 households. Going forward, the rate of household formation within
the subject trade area will outperform the projected overall household growth
rate for the Chicago MSA, of 0.36 percent, annually, through 2001. The projected
number of households in the subject's market area is presented in graphic form
on the facing page. According to ENDS, the areas to the southwest and north are
expected to experience the greatest growth in household formation during the
next five years. The rate of household formations for the area immediately
surrounding Woodfield Village Green is projected at 2.40 to 4.60 percent over
the next five years.
The residential population in the subject 5-mile trade area has a median
age of 34.80 years and an average age of 35.44 years. The age group from 21 to
49 years is a critical target market for many retailers, and the subject primary
trade area population has a significant percentage of residents within this age
range. Within the subject trade area, approximately 49.72 percent of the
population is within the age range of 21 to 49 years and 35.71 percent is within
the age range of 30 to 49 years. This percentage distribution is slightly higher
than the Chicago MSA, where 45.34 percent of the population falls within the age
range of 21 to 49 years.
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.
Trade area income figures for the subject support the profile of a middle-
to upper-middle income market. A comparison of the trade area's relative ranking
is shown on the following chart.
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Retail Market Analysis
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================================================================================
INCOME CHARACTERISTICS
- --------------------------------------------------------------------------------
Compound Annual
Region 1996 2001 Change
================================================================================
AVERAGE INCOME
- --------------------------------------------------------------------------------
3-Mile $74,288 $99,444 6.08%
5-Mile $74,680 $100,888 6.36%
10-Mile $75,567 $101,223 6.13%
Chicago MSA $65,413 $87,766 6.06%
================================================================================
MEDIAN INCOME
- --------------------------------------------------------------------------------
3-Mile $54,779 $64,691 3.67%
5-Mile $56,305 $66,049 3.47%
10-Mile $56,659 $66,565 3.43%
Chicago MSA $46,059 $57,508 4.54%
================================================================================
Income figures in the subject trade area are generally above the figures
for the Chicago MSA. Over the next five years, the median household income in
the subject primary trade area is projected to increase at compound average
annual rates ranging from 3.43 to 3.67 percent, as compared to an average growth
expectations of 6.08 to 6.36 percent for the median income figure. The projected
increase in the median and average household income figures within the subject
trade area through the year 2001, which is in excess of historical inflationary
figures, should benefit the subject property and projected retail sales during
the ensuing five year period. The distribution of income within the subject
5-mile trade area can be summarized as follows:
================================================================================
1996 Household by Income
================================================================================
Category % of Households
================================================================================
Greater Than $150,000 6.70%
- --------------------------------------------------------------------------------
$100,000 - $149,999 9.15%
- --------------------------------------------------------------------------------
$ 75,000 - $ 99,999 13.36%
- --------------------------------------------------------------------------------
$ 50,000 - $ 74,999 27.81%
- --------------------------------------------------------------------------------
$ 35,000 - $ 49,999 16.52%
- --------------------------------------------------------------------------------
$ 25,000 - $ 34,999 10.14%
- --------------------------------------------------------------------------------
$ 15,000 - $ 24,999 8.14%
- --------------------------------------------------------------------------------
$ 5,000 - $ 15,000 6.76%
- --------------------------------------------------------------------------------
Less Than $ 5,000 1.43%
================================================================================
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[GRAPHIC OMITTED]
Meacham and Golf
Schaumberg, Illinois
3, 5 & 10 Mile Radii
HH 96 BY INCOME: MEDIAN (EST.)
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Retail Market Analysis
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As shown in the table on the previous page, the household income
distribution in the subject trade area is concentrated in the $50,000 to $74,999
category. According to the statistics, over 15.0 percent of the households in
the subject 5-mile trade area have an income in excess of $100,000 annually. The
income characteristics of the trade area represent a significant base of
purchasing power for the area. Provided on the facing page is a graphic
presentation of the median household income distribution throughout the trade
area. Note that the areas to the north of the subject property display the
highest estimated median household income, ranging between $62,348 to $210,772.
Subject Sales
According to information provided by DRA Advisors, the year-end 1996
retail sales for the subject anchor tenants, range from $110 per square foot for
Builders Square to $488 per square foot for Nordstrom Rack. Woodfield Village
Green had comparable retail sales of $237 per square foot as of year-end 1996.
Industry Average Sales
Sales at the subject property can be analyzed in comparison to industry
averages. In our initial appraisal in early 1996 we felt the subject had the
potential to perform above regional and even national benchmarks. The following
chart presents a comparison of average sales by center category for both power
centers and community centers in the U.S.
<TABLE>
<CAPTION>
====================================================================================================
Comparison of Sales and Rent
Power Center and Community Center Tenants
====================================================================================================
U.S. Median* U.S. Median* U.S. Median**
Retail Power Center Super Community Centers Community Center
- ----------------------------------------------------------------------------------------------------
Sales Rent % of Sales Rent % of Sales Rent % of
Tenant Classification PSF PSF Sales PSF PSF Sales PSF PSF Sales
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Department Store $180.00 $ 3.42 1.9% $165.00 $ 3.50 2.1% $142.00 $ 4.41 3.1%
- ----------------------------------------------------------------------------------------------------
Superstore (Food) $285.00 $ 4.58 1.6% N/A N/A N/A $372.00 $ 5.79 1.6%
- ----------------------------------------------------------------------------------------------------
Restaurant (w/liquor) $234.00 $15.90 6.8% $223.00 $13.99 6.3% $210.00 $12.58 6.0%
- ----------------------------------------------------------------------------------------------------
Shoes $187.00 $12.00 6.4% $180.00 $12.00 6.7% $159.00 $13.00 8.2%
- ----------------------------------------------------------------------------------------------------
Cards & Gift $105.00 $12.50 11.9% $136.00 $12.62 9.3% $127.00 $12.36 9.7%
- ----------------------------------------------------------------------------------------------------
Women's Ready to Wear $122.00 $10.20 8.4% $167.00 $13.48 8.1% $146.00 $12.16 8.3%
- ----------------------------------------------------------------------------------------------------
Overall Average $197.00 $ 7.22 3.7% $188.00 $ 6.85 3.6% $210.00 $ 7.19 3.4%
- ----------------------------------------------------------------------------------------------------
Median $200.00 $ 6.33 3.2% $183.00 $ 6.80 3.7% $199.00 $ 6.90 3.5%
- ----------------------------------------------------------------------------------------------------
Lower Decile $ 87.00 $ 3.60 4.1% $107.00 $ 3.21 3.0% $117.00 $ 3.36 2.9%
- ----------------------------------------------------------------------------------------------------
Upper Decile $292.00 $14.36 4.9% $314.00 $12.33 3.9% $371.00 $12.71 3.4%
====================================================================================================
</TABLE>
* Urban Land institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
================================================================================
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Retail Market Analysis
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Overall, average sales performance may be refined further as shown in the
following chart.
<TABLE>
<CAPTION>
==========================================================================================
Sales Performance Indices
U.S. Power Centers and Community Centers
==========================================================================================
Power Centers* Super Community Centers* Community Centers**
- ------------------------------------------------------------------------------------------
Southern Southern Southern
United States Region United States Region United States Region
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
Overall Average $197 $189 $188 $174 $210 $192
- ------------------------------------------------------------------------------------------
Median $200 $200 $183 $176 $199 $189
- ------------------------------------------------------------------------------------------
Lower Decile $ 87 -- $107 $116 $117 $117
- ------------------------------------------------------------------------------------------
Upper Decile $292 -- $314 $234 $371 $312
==========================================================================================
</TABLE>
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
================================================================================
From the above we see that industry averages and medians range from
approximately $189 to $200 per square foot for power centers and $174 to $188
per square foot for super community centers. This is based on the 1995 ULI
publication. More recently, ULI has put forth its 1997 version of operating
results for standard community centers. Displayed above is a range of $189 to
$210 per square foot as average/median performance ranges. Upper and lower
decile levels show more dramatic swings as would be expected. Nonetheless, with
sales of $237 per square foot, the subject falls above average/median industry
benchmarks.
Retail Inventory - Chicago Metropolitan Area
According to the 1996 Reis Reports, Inc., the six-county metropolitan area
retail base is currently estimated to contain in excess of 140,000,000 square
feet of gross leasable area (GLA), including approximately 27,000,000 square
feet of regional mall space. Furthermore, the retail market in the Chicago
metropolitan area has rapidly expanded over the past several years, adding
almost 19.0 million square feet since 1992. Significantly, most of the new
construction was pre-leased, with minimal speculative development having taken
taking place.
Based on statistics compiled in the 1997 Shopping Center Report, prepared
by Mid-America Real Estate Corporation, total retail development during 1996
comprised 4.915 million square feet in 45 shopping centers. The following table
illustrates the total retail development square footage in the Chicago MSA
through 1996, as well as projected new additions for 1997 and 1998.
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ADDITIONS TO SUPPLY OF RETAIL SPACE
CHICAGO METROPOLITAN AREA
================================================================================
Number Number Total
Of Shopping Of Shopping Shopping Center
Year Centers Opening Centers Expanding Construction
- --------------------------------------------------------------------------------
1983 9 0 1,078,000
1984 9 0 1,622,000
1985 18 1 3,084,800
1986 22 1 5,080,000
1987 21 4 3,773,000
1988 28 5 4,713,000
1989 31 7 5,925,000
1990 22 9 5,637,700
1991 17 6 5,561,350
1992 25 5 4,140,000
1993 31 14 5,964,000
1994 23 18 6,825,000
1995 16 12 3,567,000
1996 30 15 4,915,000
1997 36 26 6,040,500
1998 22 7 4,702,000
TBA --- --- 10,479,000
- --------------------------------------------------------------------------------
Total 360 133 83,107,350
================================================================================
Source: Mid-America Real Estate Corporation: 1997 Shopping Center Report.
================================================================================
Much of the growth in shopping center inventory during the 1980's was
related to the entrance of new retailers to the Chicago market, including stores
like Wal-Mart, Cub Foods, Omni, and Office Max. This trend continued into the
early 1990's as a new group of retailers entered Chicago and the existing
retailers expanded. The retailers leading the way in terms of expansion in the
Chicago Metropolitan Area during the early 1990's were Builders Square with 1.0
million square feet, Target Greatland with 875,000 square feet and Super Kmart
with 760,000 square feet of new space. However, according to an October 1996
article in Crain's Chicago Business, the expansion of the major big-box
retailers has slowed during 1996. Many major retailers, including Target
Greatland, Super Kmart, Home Depot and Circuit City, appear to be filling in
existing vacancies rather than pursuing the aggressive expansion plans of recent
years. In a relative sense, the slowdown quoted by the Crain's survey may be
true; however, the actual and projected expansion plans by the big-box retailers
is still significant.
According to the same survey, Home Depot led the industry in retail
expansion during 1996 by adding 1.2 million square feet and 11 new stores to
their existing Chicago MSA inventory. Home Depot was followed by Menard's with
five stores and 800,000 square feet; Jewel with 6 stores and 525,000 square
feet; Dominick's with five stores and 500,000 square
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feet and Target Greatland with five stores and 450,000 square feet. According to
the February 1997 Big Box Vacancy Study completed by Mid-America, 2,476,200
square feet of big box space was absorbed during 1996; as compared to 2,548,041
square feet of new available big box space that was placed on the market. As of
February 1997, there were approximately 275 big box spaces comprising 9,489,001
square feet of retail space available for lease in the Chicago MSA.
Based on Mid-America's 1997 Shopping Center Report, the fastest growing
category of retail space continues to be power centers. Power centers eliminate
mall shop space and cluster big-box users, which have come to be known as
"category killers", because they to come into a market with numerous locations
and have a greater selection of merchandise and lower prices than most
competitors, often forcing them out of the market. Low pricing is accomplished
through rapid inventory turnover, efficient distribution networks, and
deep-pocketed financial backing. Information provided by CB Commercial indicates
that more than 80 percent of the metropolitan area's 4.2 million square feet of
power center space has come on-line since 1990.
Competitive pressures continue to produce retail casualties. As of October
1996, Handy Andy Home Improvement Centers, Inc., a Schaumburg-based hardware
store chain, which filed for Chapter 11 bankruptcy protection in the Fall of
1995, had closed 23 stores comprising 1.7 million square feet. Handy Andy was
followed by Today's Man, who closed seven stores with 155,000 square feet,
Quill's Office Furniture with four stores and 100,000 square feet and Sportmart
who closed two stores measuring 85,000 square feet during 1996.
Specialty stores have enjoyed increasing success attracting consumers from
traditional department stores and other mass merchandisers. To compete with
these expanding discount retailers, as well as to promote the continuing
popularity of specialty stores, the majority of regional malls in the
metropolitan area have upgraded and expanded their existing facilities.
Vacancy Rates
The retail vacancy rate in the six-county metropolitan area has fluctuated
between 2.3 and 10.3 percent since 1980. The following table reflects historical
retail vacancy rates over the last 16 years.
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Retail Market Analysis
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HISTORICAL VACANCY RATE
SIX COUNTY METROPOLITAN AREA
- --------------------------------------------------------------------------------
Year Vacancy Rate
- --------------------------------------------------------------------------------
1980 2.3%
1981 6.5%
1982 6.4%
1983 6.0%
1984 7.0%
1985 9.9%
1986 8.3%
1987 8.0%
1988 8.0%
1989 9.5%
1990 10.3%
1991 9.0%
1992 8.6%
1993 9.2%
1994 7.8%
1995 7.2%
1996 9.9%
First Quarter 1997 10.2%
- --------------------------------------------------------------------------------
*1990-1st QTR 1997 rates supplied by CB Commercial Real Estate Group, Inc. and
The REIS Reports, Chicago Retail Market Report 1990 provided earlier historical
data.
================================================================================
The Fourth Quarter, 1996 retail market survey prepared by CB Commercial
indicates that the retail vacancy rate for the Chicago metropolitan area rose
270 basis point from 1995 to 1996. As of First Quarter 1997, the overall vacancy
rate had further increased 30 basis points. The survey was based on an inventory
of 86.7 million square feet of community/neighborhood and strip-shopping centers
in excess of 50,000 square feet. The increase in the amount of vacant retail
space was primarily a function of the neighborhood/community center category.
While vacancy rates for strip/in-line and free standing centers remained
relatively stable, the amount of vacant space in community/neighborhood centers
increased from about 7.0 to 10.4 percent during the studied time period. As
previously discussed, one reason for the dramatic rise in the vacancy rate is
the recent closings of several big box discount retailers, such as Today's Man
and Handy Andy. The following table summarizes the vacancy rate for each
submarket as of Fourth Quarter 1996 and First Quarter 1997.
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RETAIL SUBMARKET VACANCY RATES - CHICAGO MSA
- --------------------------------------------------------------------------------
Submarket 4th Quarter 1st Quarter Basis Point
1996 1997 Change
- --------------------------------------------------------------------------------
Far Northwest Suburbs 8.9% 9.1% +20
- --------------------------------------------------------------------------------
Far North Suburbs 7.9% 10.4% +250
- --------------------------------------------------------------------------------
Northwest Suburbs 12.9% 13.4% +50
- --------------------------------------------------------------------------------
North Suburbs 9.7% 8.1% -160
- --------------------------------------------------------------------------------
Far West Suburbs(1) 11.2% 11.6% +40
- --------------------------------------------------------------------------------
West Suburbs 10.2% 10.9% +70
- --------------------------------------------------------------------------------
North City 3.7% 4.1% +40
- --------------------------------------------------------------------------------
Kane County 7.4% 7.0% -40
- --------------------------------------------------------------------------------
South City 9.2% 9.2% ---
- --------------------------------------------------------------------------------
Far Southwest Suburbs 5.3% 5.7% +40
- --------------------------------------------------------------------------------
Southwest Suburbs 7.3% 7.8% +50
- --------------------------------------------------------------------------------
South Suburbs 15.0% 14.6% -40
- --------------------------------------------------------------------------------
(1) Subject Submarket
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As indicated above, the North City retail submarket had the lowest vacancy
rate in the Chicago MSA as of First Quarter 1997. Vacancy rates in the
submarkets showed mixed results between Fourth Quarter 1996 and First Quarter
1997. As defined by CB Commercial, the Far West Suburbs submarket contains
17,969,960 square feet of retail space, or 20.7 percent of the total MSA
inventory.
Vacancy rates in anchored community/neighborhood shopping centers, the
largest segment of the inventory with approximately 70.9 million square feet of
space, showed an increase from 10.0 percent in the Fourth Quarter of 1996 to
10.4 percent as of First Quarter 1997. Also included in the survey are 5.2
million square feet of freestanding centers, which have a current vacancy rate
of 3.9 percent, unchanged from Fourth Quarter 1996. For the 10.5 million square
feet of unanchored strip centers tracked by the survey, vacancy rates decreased
from 12.2 to 11.8 percent during the studied time period.
Market Terms, Concessions and Commission Structure
Our survey of market participants included a broad cross section of
shopping center owner/developers and leasing agents. Typical lease terms in the
Chicago area for regional and national tenants range from 10 to upwards of 25
years. Typically, retail leases are structured on a net basis with the tenant
responsible for a full pro-rata share of taxes and
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operating expenses. Rental increases in the form of a CPI increase, or a fixed
step-up, are usually sought, and generally achieved on the longer lease terms.
The strength of a particular property or location generally dictates the ability
of a landlord to command rental increases.
In addition to the minimum base rent, many retail tenants will contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. It is most common for leases to have a natural breakpoint
although many do have stipulated breakpoints. The average overage percentage for
medium sized retail tenants is in a range of 3 to 5 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 an investor against inflation.
Similarly, concessions will vary considerably by property and tenant type.
Anchor tenants are generally in a better negotiating position to extract
concessions in the form of free rent or improvement allowances. However, if an
anchor is strongly motivated to be in a particular market, it is not unusual for
an owner to be able to maintain a firm bargaining position, yielding little or
no concessions. In our view, the subject's location is considered to be very
desirable. As such, we would be inclined to conclude that prospective tenants
would expect little in the way of concessions if looking to lease space at the
subject property.
Leasing commissions in Chicago are typically charged on the basis of a
flat amount per square foot, with the commission rate representing an inverse
relationship relative to the size of the space leased. For instance, for retail
leases ranging between 10,000 to 20,000 square feet, the rate is quoted between
$2.00 and $3.00 per square foot. For the smaller spaces, with less than 10,000
square feet, the commission rate is quoted at $3.00 to $4.00 per square foot.
When outside brokers are involved, the commission rate increases by 25 to 50
percent. Renewals of retail leases are typically charged at 50 percent of the
new commission rate.
Conclusion
The trade area profile discussed encompassed a radii based analysis that
was established based upon a study of competitive retail developments. Marketing
information relating to these sectors was presented and analyzed in order to
determine patterns of change and growth as it impacts the subject. A compilation
of this data provides the basis for our projections and forecasts particular to
the subject property. The following summarizes our key conclusions:
o The subject property benefits by having visibility and accessibility
along Golf Road and its proximity to Route 53 and Interstate 90. The
center further benefits from its proximity to Woodfield Mall and the
surrounding retail development. Woodfield Village Green is located
in the heart of the retail
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destination area for the northwest suburban communities within the
Chicago MSA.
o The basic demographics of the primary trade area outperform that of
the Chicago MSA, and population is expected to increase during the
next five years. The population within the subject's primary
five-mile trade radius is significant at 275,605. Household incomes
in the subject's trade radii are strong, compared to the household
income characteristics for the entire Chicago MSA.
o The subject property appeared to be in excellent physical condition,
with no evidence of deferred maintenance, at the time of inspection.
o Each of the major tenants at the subject property appears to have
competition in the neighborhood. However, the subject's tenants
benefit by their presence in a superior power center setting and
their generally superior locations, compared to their competition.
o The subject has been in existence since 1994. Although the subject
property is relatively new, it is located in a retail hub that has
been firmly established since 1971, when Woodfield Mall opened. The
success of retailers in the area is well documented. Although
population and household growth in the subject's trade radii are
anticipated to moderate over the next five years, the trade area
will remain one of the strongest in the Chicago metropolitan area.
Only the Oak Brook area and the north suburbs are thought to have a
similarly desirable trade area, compared to the subject's
neighborhood.
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PROPERTY DESCRIPTION
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Site Description
Location: Northeast corner of Golf and Meacham Road
Schaumburg, Cook County, Illinois
Shape: Irregular
Site Area: The total site area is 62.648-acres, allocated as
51.461+/- acres to the improvements and 11.19-
acres of excess land.
Frontage: The subject land parcel has good frontage along
Golf Road, Meacham Road and Central Park
Boulevard.
Topography/Terrain: Generally level and at street grade
Street Improvements: Golf Road and Meacham Road are two-way, six-
lane arterials with left-hand turn lanes adjacent
to the subject. Golf Road is asphalt paved while
Meacham Road is of concrete construction.
Both roadways are further improved with
concrete curbing, sidewalks, and street lighting.
Central Park Boulevard is a two-lane side street
that is concrete paved and improved with
concrete curbs and gutters, as well as street
lights.
Soil Conditions: No study of soils was conducted as part of this
appraisal and no opinion is rendered on sub-soil
conditions. 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.
Utilities
Water: City of Schaumburg
Sewer: City of Schaumburg
Electricity: Com Ed
Telephone: Ameritech
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[GRAPHIC OMITTED]
LEASING PLAN
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Property Description
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Access: Primary access is gained via Golf Road and Meacham
Road. Ingress/egress to the subject's primary site is
gained via curb-cut entrances along Golf Road (2),
Meacham Road (3), and Central Park Boulevard (3).
Land Use Restrictions: We were provided with an A.L.T.A. title commitment
from the Chicago Title Insurance Co. dated September
18,1995 for our previous appraisal report. The title
report cites various utility and reciprocal easement
agreements which seem to be typical for such a land
use. We do not know of any other easements,
encroachments or restrictions that would adversely
affect the site's use.
Flood Hazard: The subject property lies in Flood Zone C according to
flood map number 170054-0065B, effective April 1,1981.
Flood Zone C is defined as an area that experiences
minimal flooding.
Wetlands: No wetlands study has been provided for this
analysis. If a subsequent engineering survey reveals
the presence of regulated wetlands, we reserve the
right to amend this valuation.
Hazardous Substances: Please refer to our Assumptions and Limiting
Conditions with an explanation as to our disclaimer
regarding hazardous substances.
Comments: Overall, the size, topography and site configuration
appear functionally adequate and conducive for retail
utilization. The site is serviced by all public
utilities and the curb appeal of site improvements is
good.
Improvements Description
The subject site has been improved with a single-level retail center with
a total GLA of 501,092 square feet (excluding the non-owned outparcel). A more
complete description of these improvements follows. Please refer to the leasing
plan on the facing page for the location of the improvements on the subject
tract.
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Property Description
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General Description
Type: Power/community center
Year Built: 1994
Size: 501,092 square feet, excluding the 7,000 non-
owned square foot outparcel
===========================================
Tenants Square Footage
===========================================
Builders Square 110,400 SF
-------------------------------------------
Circuit City 33,008 SF
-------------------------------------------
Saks Off Fifth 30,273 SF
-------------------------------------------
Service Merchandise 50,000 SF
-------------------------------------------
Office Max 23,500 SF
-------------------------------------------
Container Store 24,969 SF
-------------------------------------------
Sports Authority 42,396 SF
-------------------------------------------
Marshall's 40,000 SF
-------------------------------------------
Nordstrom Rack 40,000 SF
-------------------------------------------
Borders Books 30,000 SF
-------------------------------------------
Old Navy 11,500 SF
-------------------------------------------
Strouds 15,000 SF
-------------------------------------------
Outparcel 7,000 SF
-------------------------------------------
In-Line < 10,000 SF 50,046 SF
===========================================
Total GLA 508,092 SF
===========================================
Original Developer: Homart Development Company
Construction Detail
Foundations: Poured reinforced concrete.
Framing: Structural steel frame, column and beam
construction.
Floors: Poured concrete slab
Exterior Walls: Brick, concrete block and dryvit
Roof Structure: Steel deck.
Storefronts: Plate glass set in aluminum framing.
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Property Description
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Pedestrian Doors: Safety glass in aluminum frame; mixture of manual
and electrically operated tempered glass doors.
Loading/Rear
Service Doors: In-line shops have flush type single metal doors
at grade. Anchors have depressed drive-way
loading docks with hollow metal overhead doors.
Mechanical Detail
Heating and Cooling: Rooftop units provide heating, insulation, and
air conditioning in each of the tenant spaces.
Plumbing: Water and sanitary sewer connections for each
tenant suite (required for one lavatory and one
water closet in restroom) are installed. Water
and sewer usage is metered individually and
billed to tenants by the local utility.
Electrical Service: Adequate commercial service is provided for each
tenant space and billed directly by Com Ed for
usage.
Fire Protection: The buildings are completely sprinklered in
accordance with local regulations. Fire hydrants
are provided throughout the property.
Interior Detail
Layout and Design: The layout of the shopping center is somewhat
unconventional. By its sheer size alone,
Builder's Square would be considered the major
anchor tenant. However, the Builder's Square,
situated along the east side of Meacham Road, is
tucked behind the other retail tenants of the
center, which are generally oriented east-to-west
along the north side of Golf Road. As a result,
Builder's Square is not visible from Golf Road
and, in fact, appears to be a separate stand-
alone retail building that is not part of the
subject shopping center. Additionally, Builder's
Square is considered a destination-oriented
retailer. As a result, it is not likely that
Builder's Square contributes much to the other
tenants of the
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Property Description
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center in terms of increased traffic flow.
Instead, the quantity, quality and diversity of
the subject's minor anchor tenants serves to
create substantial retail synergy at the center.
The buildings' interior sales areas include both
exposed painted ceilings and dropped acoustical
tile ceilings. Floor coverings include vinyl
tile, ceramic tile and commercial grade
carpeting. Ceiling heights range from 12 to 18
feet. On an overall basis, the building
characteristics are functional for their current
retail uses.
Outparcels: Currently, there is one separate 7,000 square
foot outparcel that has been sold off to
California Pizza kitchen. As will be discussed in
the Supplemental Valuation section at the end of
this report, the excess land measures
11.19-acres.
Site Improvements
On-Site Parking: There are a total of 3,065 parking spaces at
Woodfield Village Green. However, we have
estimated that 546 spaces have been developed for
the vacant pad-sites. Therefore, the number of
parking spaces serving the primary site of the
subject property, including the non-owned pad
site, is estimated at 2,519 spaces, or
approximately 5.0 spaces per 1,000 square feet of
GLA. Parking areas are graded and asphalt-paved.
The lot is striped throughout.
Landscaping: Landscaping is primarily comprised of grass,
ground cover, small trees and shrubs, and various
plants.
Other: Parking lot lighting is provided with anodized
aluminum high intensity lighting.
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Property Description
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Comments: Overall, the site and building improvements
appear to be well designed and configured for
retail utilization. Site configuration appears
well suited for vehicular movement and
visibility.
Analysis of the structural integrity of each
building is beyond our expertise and best made by
a professional engineer.
Our review of the subject's neighborhood reveals
that there are no extraordinary external
influences which negatively impact the value of
the subject property.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is assessed for real estate tax purposes by the Cook
County, Illinois, Assessors Office. Assessments are subject to a state
equalization factor to make assessments uniform throughout the state. The state
equalization factor is reset every year and is applied to the concluded assessed
value to determine the equalized value, to which the tax rate is applied. The
1995 equalization factor for Cook County is 2.12. Real estate taxes are paid in
arrears; taxes are payable in two installments before March 1st and September
1st of the respective year. The subject improvements are identified by six tax
parcel numbers. The tax parcel numbers, equalized value and real estate tax
liability for 1995 are summarized in the following table.
================================================================================
REAL ESTATE TAXES & ASSESSMENT
Woodfield Village Green
- --------------------------------------------------------------------------------
Assessors State 1995 Tax Liability
Opinion of Fair Equalization Payable in 1996
Parcel Number Market Value Valuation
07-12-400-024 $ 141,578 $ 300,754 $ 26,968.61
07-12-400-025 $ 860,599 $ 1,828,170 $ 163,932.00
07-12-400-026 $ 1,904,531 $ 4,045,795 $ 362,786.44
07-12-400-027 $ 3,295,536 $ 7,000,707 $ 627,753.40
07-12-400-028 $ 1,933,529 $ 4,107,396 $ 368,310.20
07-12-400-029 $ 7,747,416 $16,457,836 $1,475,774.15
----------- ----------- -------------
Total $15,883,189 $33,740,658 $3,025,524.80
================================================================================
Based on the above, the total real estate taxes payable in 1996, for the
subject property, amount to $3,025,525, or $6.04 per square foot of gross
leasable area. The 1996 assessments and real estate tax liability payable in
1997 were not available as of the appraisal date. According to ownership, the
current real estate tax liability is under protest.
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ZONING
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The subject property is zoned B-5, a Planned Regional Center designation,
by the City of Schaumburg. This district is intended to permit the orderly
development, redevelopment and continued maintenance of regional commercial
centers, and uses compatible therewith, including, but not limited to banks,
restaurants, offices, theaters, and hotels, which are located in one or more
structures or included in an integrated complex of structures.
Based on discussions with a Schaumburg City Planner, the subject has been
constructed within the confines of the B-5 regulations. As such, we assume that
all general requirements have been met and that the existing as well as the
proposed improvements conform to code.
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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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.
We have evaluated the site's highest and best use improved and as if
vacant. In both cases 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. Because the site is improved with
improvements that generate an important return, the focus of the highest and
best use is on the site as improved.
Highest and Best Use of Property as Improved
Physical Factors
The first constraint imposed on the possible use of the site is dictated
by the physical aspects of the parcel itself. As noted in our Property
Description section of the report, the site is of sufficient size to accommodate
the improvements. The site is level, all necessary utilities are available and
it has good visibility and accessibility. The improvements have been designed as
a viable community shopping complex. The anchor alignment is unique to the
market and serves to extend its draw beyond the immediate neighborhood. The
layout and design are adequate for its use as a shopping center. Finally,
compatibility with existing neighboring uses is also an important consideration.
Based on our analysis, the current use of the site is physically possible.
Legal Factors
To the best of our knowledge, the property complies with all of the zoning
requirements under the B-5, Planned Regional Center classification. As noted,
there are no private restrictions which are known to adversely affect the
utilization of the site. As such, the existing leases and REA's which are
in-place dictate a retail use for the property.
Financial Feasibility/Maximum Productivity
After analyzing the physically possible and legally permissible aspects of
the property, the highest and best use must be considered in light of financial
feasibility and maximum productivity. 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 Neighborhood and Retail Market Analysis sections of
this report, the subject is part of a regional retail destination that serves a
significant trade area. Based on our analysis, we find that the property, under
the concept of continued use, will produce a sufficient income stream to an
investor. An alternative use would not be economically justifiable and, as a
result, fail the test of financial feasibility and maximum productivity.
Therefore, we have concluded that the highest and best use of the site as
improved is for retail utilization as a shopping center.
In addition, ownership has indicated that the development plan that has
been submitted to and approved by the City permits the addition of approximately
110,000 square feet of retail GLA. Given the fact that parking and other site
improvements for this additional GLA is already in-place, we believe the highest
and best use, as improved, would be to either sell off the additional land area
of continue to improve it will additional retail GLA. An analyses and valuation
of this excess land as presented in the Supplemental Valuation section of this
report.
Highest and Best Use, As Vacant
Physical Factors
The subject parcel is large enough to accommodate a variety of uses,
including office, retail, hotel and other miscellaneous commercial uses. The
subject's highway and interstate access greatly enhance its appeal for a use
that relies upon the ability of patrons to be afforded quick and easy access.
This is particularly true for a destination retail property which, by necessity,
must attract consumers from points beyond its immediate neighborhood. As
articulated, both Golf Road and Meacham Road are principal commercial arterials
that are characterized by numerous shopping centers, free-standing retail
stores, automobile dealerships, and service-oriented retail buildings.
Accordingly, we would find that a retail use of the site would be the most
compatible with the environs. Overall, we view the site as being free of any
physical limiting conditions that may restrict its development and as such, a
large scale commercial project would be a potential use for the site as if
vacant.
Legal Factors
The second test concerns permitted uses. Legal restrictions, as they apply
to the subject are public restrictions of zoning. The B-5, Planned Regional
Center designation is designed primarily for commercial utilization. The
requirements of this zone are general guidelines, with final plans requiring
formal approval from the City. Based on the site's size and layout, with
consideration given to parking constraints, a retail building of similar size to
the existing improvements may be a permitted use. Due to the site's frontage and
proximity to other commercial uses, we believe that retail uses would be a
legally conforming use for the site.
Financial Feasibility/Maximum Productivity
After determining those uses which are physically possible and legally
permissible, the remaining uses must be analyzed in light of their financial
feasibility. The Chicago MSA is
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Highest and Best Use
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characterized by economic conditions that have been favorable over the past
several years. The retail market has not been as negatively affected by the
over-building and concessions which have plagued other commercial markets. In
addition, we see no significant changes in the local demographics which might
threaten the economic viability of the subject site.
The last test of highest and best use is that of maximum productivity.
While this implies a quantitative analysis, it is often most qualitative and
sensitive to community, social, political, and governmental standards. In this
case, the site is located in an area dominated by regional retail uses,
particularly in the form of Woodfield Mall, located directly south of the
subject property. Other existing neighborhood uses further compliment a retail
use of the site. The subject's size, location and proximity to regional road
networks and residential nodes, leads us to the conclusion that the Highest and
Best Use for the subject property, as if vacant, would be for a
commercial/retail utilization built to its maximum feasible FAR.
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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 power and large
community centers. The estimation of obsolescence for functional and economic
conditions as well as depreciation on improvements makes this approach sometime
problematic. Furthermore, the Cost Approach fails to fully consider the value of
anchor store commitments and the difficulty of site assemblages for such
properties. As such, the 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 subject. 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 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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.
Since this approach relies primarily on physical units of comparison, it
requires an adequate sample of recently sold properties that possess physical,
economical and financial comparability to the proposed subject property.
Implicit in this definition of comparability is the concept of utility, in that
the motivation and needs of a particular segment of market demand are comparably
met or served.
Sales Comparison Approach Analysis
The most widely-used and market-oriented units of comparison for
properties such as the proposed subject property are the sales price per square
foot or gross leasable area (GLA) purchased and the overall capitalization rate
extracted from an analysis of the sales.
Comparability in both physical and economic characteristics are the most
important criteria in analyzing these sales in relation to the subject property.
However, it is also
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POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Anchor
Sale Sale Yr. Built/ Site Area Site Anchor GLA as %
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage GLA Sold GLA of Total
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Maple Park Place Jan-97 1992 $15,262,150 1,089,000 20.21% 220,095 165,700 75.29%
NWC Boughton & Naperville Rd ----
Will County Good
Bolingbrook, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
2 Village Square of Northbrook Aug-96 1996 $65,000,000 1,219,680 20.3% 334,190 293,543 87.8%
45-303 Skokie Blvd. ----
Cook County Excellent
Northbrook, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
3 Market Square S.C. Oct-95 1990 $14,000,000 923,472 20.3% 187,168 114,086 61.0%
SEC/Route 53 & Briarcliff Rd. ----
DuPage County Good
Bolingbrook, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
4 Prairie Town Center Aug-95 1992 $14,125,000 678,665 23.87% 162,000 74,499 45.99%
2450-2590 Schaumburg Rd. ----
Cook County Excellent
Schaumburg, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
5 Woodland Commons S.C. Apr-95 1991 $21,000,000 1,184,334 14.4% 170,406 88,807 52.1%
NEC/Route 22 & Buffalo Gr. ----
Lake County Very Good
Buffalo Grove, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
6 Meridian Retail Center Mar-95 1994 $12,300,000 875,164 18.4% 160,965 135,216 84.0%
Route 59 & Glacier Park Ave. ----
DuPage County Good
Aurora, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
7 Maple Park Place Jan-95 1992 $15,403,352 1,089,000 20.21% 220,095 165,700 75.29%
NWC Boughton & Naperville Rd ----
Will County Good
Bolingbrook, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
8 The Commons of Oak Brook Oct-94 1994 $19,970,000 602,009 17.32% 104,278 104,278 100%
NEC Route 83 & 16th Street ----
DuPage County Excellent
Oak Brook, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
9 Orland Town Center Sep-94 1994 $12,000,000 871,200 15.4% 134,000 55,873 41.7%
SEC/159th & 95th Avenue ----
Cook County Excellent
Orland Hills, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
10 Darien Towne Center Sep-94 1994 $21,800,000 1,089,000 21.1% 230,000 127,267 55.3%
Lyman Avenue & 75th Street ----
DuPage County Excellent
Darien, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
11 Woodfield Plaza S.C. Feb-94 1993 $17,245,688 777,000 22.8% 177,308 138,958 78.4%
NWC/Golf & Basswood ----
Cook County Good
Schaumburg, Illinois
- ---------------------------------------------------------------------------------------------------------------------------------
Average $21,180,535 945,321 19.48% 190,955 133,085 68.81%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sale Sale Price/Sq. NOI/ Occupancy
No. Name/Location Ft. Sq. Ft. OAR Anchor Tenants At Sale Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Maple Park Place $69.34 $7.07 10.20% Kmart 98% Notable tenants include
NWC Boughton & Naperville Rd Eagle Foods McDonald's, GNC and
Will County Builders Square Boston Market.
Bolingbrook, Illinois (non-owned)
- ------------------------------------------------------------------------------------------------------------------------------------
2 Village Square of Northbrook $194.50 $17.51 9.00% Circuit City 100.0% Additional tenants
45-303 Skokie Blvd. Container Store include: Nordstrom
Cook County Super Crown Rack, Sports Authority,
Northbrook, Illinois Marshalls Petsmart, Linens &
Fresh Fields Things and Zany Brainy.
- ------------------------------------------------------------------------------------------------------------------------------------
3 Market Square S.C. $74.80 $7.75 10.36% Wal-Mart 96.0% Wal-Mart has option to
SEC/Route 53 & Briarcliff Rd. expand 30,000. Other
DuPage County tenants include Aldi
Bolingbrook, Illinois Food Store, Bedding
Experts.
- ------------------------------------------------------------------------------------------------------------------------------------
4 Prairie Town Center $87.19 $8.33 9.56% Kmart 100% Other tenants include
2450-2590 Schaumburg Rd Kohl's Cosmetic Center, Old
Cook County Navy Clothing, Co.,
Schaumburg, Illinois Famous Footwear.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Woodland Commons S.C. $123.24 $11.53 9.36% Dominick's 98.0% Property includes three
NEC/Route 22 & Buffalo Gr. Sears Hardware outlots, one of which
Lake County was zoned industrial
Buffalo Grove, Illinois (5.03 ac.). Also
includes income from
ground leases.
- ------------------------------------------------------------------------------------------------------------------------------------
6 Meridian Retail Center $76.41 $7.63 9.99% Builders Square 100% Sale of subject
Route 59 & Glacier Park Ave. PETSMART property.
DuPage County
Aurora, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
7 Maple Park Place $69.99 $7.46 10.66% Kmart 98% This center was
NWC Boughton & Naperville Rd Eagle Foods purchased as a part of
Will County Builders Square a 4-property portfolio
Bolingbrook, Illinois (non-owned) and was never officially
listed on the market.
Other tenants include
McDonald's, Boston
Chicken, and GNC.
- ------------------------------------------------------------------------------------------------------------------------------------
8 The Commons of Oak Brook $191.51 $18.08 9.44% Borders Books 100% This is a pre-sale of a
NEC Route 83 & 16th Street Today's Man quality infill shopping
DuPage County Office Max center to an institutional
Oak Brook, Illinois The Container client.
Store
- ------------------------------------------------------------------------------------------------------------------------------------
9 Orland Town Center $89.55 $8.58 9.58% Office Max 100% Purchased on existing
SEC/159th & 95th Avenue Circuit City income. Wal-Mart not
Cook County PETSMART included in sale. Site
Orland Hills, Illinois Wal-Mart had potential for
additional bldg. Buyer
quoted IRR of 10.8%.
- ------------------------------------------------------------------------------------------------------------------------------------
10 Darien Towne Center $94.78 $9.16 9.66% Home Depot 100% Power center opened in
Lyman Avenue & 75th Street Circuit City Summer '94. Wal-Mart
DuPage County PETSMART not included in sale.
Darien, Illinois Wal-Mart Majority of tenants have
set options. Buyer
suggested 10.7% IRR.
- ------------------------------------------------------------------------------------------------------------------------------------
11 Woodfield Plaza S.C. $97.26 $9.51 9.78% Kohl's 94.0% Good quality center one
NWC/Golf & Basswood Linens 'N mile west of Woodfield
Cook County Things Mall. Barnes & Noble
Schaumburg, Illinois Barnes & Noble not included in sale.
Located in high retail
demand area.
- ------------------------------------------------------------------------------------------------------------------------------------
Average $107.57 $10.35 9.78% 98.5% -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Sales Comparison Approach
================================================================================
important to recognize that shopping centers are distinct entities by virtue of
age and design, visibility and accessibility, the market segmentation created by
certain anchor tenants 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's, can at best only
outline the parameters in which a typical investor operates.
Our investigations revealed numerous transactions involving community and
power centers located in the Chicago MSA. A summary of the improved sales we
utilized in our analysis is included on the facing page. A map identifying the
location of the sales in relation to the subject property is presented on the
following facing page.
Improved Property Sale I-1, is located at the northwest corner of Boughton
Road and Naperville Road, in Bolingbrook, Will County, Illinois. This
power center was purchased in January, 1997 for $15,262,150, or $69.34 per
square foot of gross leasable area. The center, known as Maple Park Place,
was developed in 1992 by Kmart International Headquarters. The center is
anchored by Kmart, Eagle Foods, and Builders Square (non-owned). The
property was 98 percent occupied at the time of sale, with 75.29 percent
of the GLA occupied by the three primary anchor tenants. Since the terms
of sale were all cash to the seller, a cash equivalent sales price
adjustment was not required. At the time of sale, the net operating income
was estimated at $1,557,000, indicating an overall capitalization rate of
10.20 percent.
Improved Property Sale I-2, is located on the east side of Skokie
Boulevard, between Lake Cook Road and Interstate 94 in Northbrook, Cook
County, Illinois. This power center was purchased in August 1996, for
$65,000,000, or $194.50 per square foot of gross leasable area. The
center, known as Village Square of Northbrook, was completed in Fall 1996
by ORIX Real Estate Equities, Inc. The center has ten anchor tenants
including, Circuit City, The Container Store, Super Crown, Marshalls,
fresh Fields, Nordstrom Rack, Sports Authority, PetsMart, Linens & Things
and Zany Brainy. The property was 100.0 percent occupied at the time of
sale, with 87.8 percent of the GLA occupied by the primary anchor tenant.
Since the terms of sale were all cash to the seller, a cash equivalent
sales price adjustment was not required. At the time of sale, the net
operating income was estimated at $5,850,000, indicating an overall
capitalization rate of 9.00 percent.
Improved Property Sale I-3, is located at the southeast corner of Route 53
and Briarcliff Road, in Bolingbrook, DuPage County, Illinois. This power
center was purchased in October, 1995, for $14,000,000, or $74.80 per
square foot of gross leasable area. The center, known as Market Square
Shopping Center, was developed in 1990 by GLS Development, Inc. The center
is anchored by Wal-Mart, which consists of 114,086 square feet of GLA. The
property was approximately 96.0 percent occupied at the time of sale, with
61.0 percent of the GLA occupied by the primary anchor tenant. Since the
terms of sale were all cash to the seller, a cash
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[GRAPHIC OMITTED]
IMPROVED SALES LOCATION MAP
<PAGE>
Sales Comparison Approach
================================================================================
equivalent sales price adjustment was not required. At the time of sale,
the net operating income was estimated at $1,450,000, indicating an
overall capitalization rate of 10.36 percent.
Improved Property Sale I-4, is located at the northwest corner of
Schaumburg Road and Barrington Road, in Schaumburg, Cook County, Illinois.
This power center was purchased in August, 1995 for $14,125,000, or $87.19
per square foot of gross leasable area. The center, known as Prairie Town
Center, was developed in 1992 by Kmart International Headquarters. The
center is anchored by Kmart and Kohl's. The property was 100 percent
occupied at the time of sale. Since the terms of sale were all cash to the
seller, a cash equivalent sales price adjustment was not required. At the
time of sale, the net operating income was estimated at $1,350,350,
indicating an overall capitalization rate of 9.56 percent.
Improved Property Sale I-5, is located at the northeast corner of Route 22
and Buffalo Grove Road, in Buffalo Grove, Lake County, Illinois. This
center was purchased in April, 1995 for $21,000,000, or $123.24 per square
foot of gross leasable area. The center, known as Woodland Commons
Shopping Center, was developed in 1991 and was in very good condition at
the time of sale. The center is anchored by Dominick's and Sears Hardware.
The property was approximately 98.0 percent occupied at the time of sale,
with 52.1 percent of the GLA occupied by the two primary anchor tenants.
Since the terms of sale were all cash to the seller, a cash equivalent
sales price adjustment was not required. At the time of sale, the net
operating income was estimated at $1,965,600, indicating an overall
capitalization rate of 9.36 percent.
Improved Property Sale I-6, is located at the intersection of Route 59 and
Glacier Park Avenue, in Aurora, DuPage County, Illinois. This power center
was purchased in March, 1995 for $12,300,000, or $76.41 per square foot of
gross leasable area. The center, known as Meridian Retail Center, was
developed in 1994, and was in good condition at the time of sale. The
center is anchored by Builders Square, PETSMART, and Super Trak Auto. The
property was 100 percent occupied at the time of sale, with 84.0 percent
of the GLA occupied by the three primary anchor tenants. Since the terms
of sale were all cash to the seller, a cash equivalent sales price
adjustment was not required. At the time of sale, the net operating income
was estimated at $1,228,249, indicating an overall capitalization rate of
9.99 percent.
Improved Property Sale I-7, is a previous sale of I-1. Maple Park Place
was purchased in January, 1995 for $15,403,352, or $69.99 per square foot
of gross leasable area. The property was 98 percent occupied at the time
of sale, with 75.29 percent of the GLA occupied by the three primary
anchor tenants. Since the terms of sale were all cash to the seller, a
cash equivalent sales price adjustment was not required. At the time of
sale, the net operating income was estimated at $1,642,000, indicating an
overall capitalization rate of 10.66 percent.
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Sales Comparison Approach
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Improved Property Sale I-8, is located at the northeast corner of Route 83
and 16th Street, in Oak Brook, DuPage County, Illinois. This power center
was a pre-sale to an institutional client, as of October, 1994. The
purchase price was reportedly $19,970,000, or $191.51 per square foot of
gross leasable area. The center, known as The Commons of Oak Brook, was
developed in 1994 by the John Buck Development Company. At the time of
sale, the center was comprised of four anchor tenants inclusive of Borders
Books, Today's Man, Office Max, and The Container Store. The property was
100 percent occupied at the time of sale, with 100 percent of the GLA
occupied by the four anchor tenants. Since the terms of sale were all cash
to the seller, a cash equivalent sales price adjustment was not required.
At the time of sale, the net operating income was estimated at $1,884,844,
indicating an overall capitalization rate of 9.44 percent.
Improved Property Sale I-9, is located at the southeast corner of 159th
Street and 95th Avenue, in Orland Hills, Cook County, Illinois. This power
center was purchased in September, 1994, for $12,000,000, or $89.55 per
square foot of gross leasable area. The center, known as Orland Town
Center, was developed in 1994 and was in excellent condition at the time
of sale. The center is anchored by OfficeMax, Circuit City, PETSMART, and
Wal-Mart (not included in the sale). The property was 100 percent occupied
at the time of sale, with 41.7 percent of the GLA occupied by the four
primary anchor tenants. Since the terms of sale were all cash to the
seller, a cash equivalent sales price adjustment was not required. At the
time of sale, the net operating income was estimated at $1,149,600,
indicating an overall capitalization rate of 9.58 percent.
Improved Property Sale I-10, is located at the intersection of Lyman
Avenue and 75th Street, in Darien, DuPage County, Illinois. This power
center was purchased in September, 1994, for $21,800,000, or $94.78 per
square foot of gross leasable area. The center, known as Darien Towne
Center, was developed in 1994 and was in excellent condition at the time
of sale. The center is anchored by Home Depot, Circuit City, PETSMART, and
Wal-Mart (not included in the sale). The property was 100 percent occupied
at the time of sale, with 55.3 percent of the GLA occupied by the four
primary anchor tenants. Since the terms of sale were all cash to the
seller, a cash equivalent sales price adjustment was not required. At the
time of sale, the net operating income was estimated at $2,105,880,
indicating an overall capitalization rate of 9.66 percent.
Improved Property Sale I-11, is located at the northwest corner of Golf
Road and Basswood Roads, in Schaumburg, Cook County, Illinois. This power
center was purchased in February, 1994 for $17,245,688, or $97.26 per
square foot of gross leasable area. The center, known as Woodfield Plaza
Shopping Center, was developed in 1993, and was in good condition at the
time of sale. The center is anchored by Kohl's, Linens 'N Things, Barnes &
Noble (not included in the sale). The property was 94.0 percent occupied
at the time of sale, with 78.4 percent of the GLA
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Sales Comparison Approach
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occupied by the primary anchor tenants. Since the terms of sale were all
cash to the seller, a cash equivalent sales price adjustment was not
required. At the time of sale, the net operating income was estimated at
$1,686,000, indicating an overall capitalization rate of 9.78 percent.
Analysis of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, 11 comparable sales
have been included in our analysis. For the enclosed sales, the mean overall
sale price is calculated to be $21,180,535. The mean gross leasable area sold is
190,955 square feet, with the mean overall price per square foot calculated at
$107.57 per square foot. Finally, the survey shows a mean NOI of $10.35 per
square foot, with an average overall capitalization rate of 9.78 percent.
As can be seen, the sale prices vary from property to property, based on
various characteristics of each property. Some of the most notable differences
between the comparable sales include site coverage, anchor GLA as a component of
GLA sold, occupancy, tenant merchandising and anchor credit, and the net
operating income achieved per square foot.
Net Income Multiplier Method
In this case, we have identified a relationship between the net operating
income and the sales price of the property. The sales price per square foot
generally increases as the productivity ($NOI per square foot of GLA) of a
particular property increases. This is shown more clearly in the table below
where sales are arrayed according to net income per square foot.
================================================================================
NOI AS A FUNCTION OF $/SF
- --------------------------------------------------------------------------------
Sale Number NOI/SF Sales Price/SF
- --------------------------------------------------------------------------------
I-8 $18.08 $191.51
I-2 $17.51 $194.50
I-5 $11.53 $123.24
I-11 $ 9.51 $ 97.26
I-10 $ 9.16 $ 94.78
I-9 $ 8.58 $ 89.55
I-4 $ 8.33 $ 87.19
I-3 $ 7.75 $ 74.80
I-6 $ 7.63 $ 76.41
I-7 $ 7.46 $ 69.99
I-1 $ 7.07 $ 69.34
================================================================================
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Sales Comparison Approach
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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
The range of net income multipliers and going-in capitalization rates
exhibited by the comparable shopping center sales are summarized below:
================================================================================
Sale Going-In OAR Net Income
Multiplier
- --------------------------------------------------------------------------------
I-1 10.20% 9.80
I-2 9.00% 11.11
I-3 10.36% 9.65
I-4 9.56% 10.47
I-5 9.36% 10.69
I-6 9.99% 10.01
I-7 10.66% 9.38
I-8 9.44% 10.59
I-9 9.58% 10.44
I-10 9.66% 10.35
I-11 9.78% 10.23
================================================================================
Valuation of the subject property utilizing the net income multipliers
(NIM) from the comparable properties accounts for the disparity of the net
operating income per square foot between the comparables and the subject. Within
the technique, each of the adjusted NIM's are multiplied by the subject's net
operating income for the fiscal year beginning August 1, 1997, which produces an
adjusted value indication for the subject. The fiscal year net operating income
for the subject property is calculated in the Income Approach section of this
report.
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Sales Comparison Approach
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================================================================================
Net Income Multiplier NOI $/SF Indicated Price
$/SF
- --------------------------------------------------------------------------------
I-1 9.80 $13.95 $136.71
I-2 11.11 $13.95 $154.98
I-3 9.65 $13.95 $134.62
I-4 10.47 $13.95 $146.06
I-5 10.69 $13.95 $149.13
I-6 10.01 $13.95 $139.64
I-7 9.38 $13.95 $130.85
I-8 10.59 $13.95 $147.73
I-9 10.44 $13.95 $145.64
I-10 10.35 $13.95 $144.38
I-11 10.23 $13.95 $142.71
- --------------------------------------------------------------------------------
Overall Average $142.95
================================================================================
The adjusted market range is from $130.85 to $154.98 per square foot, with
an average of $142.95 per square foot. Based on our analysis, we have concluded
that the market value of Woodfield Village Green would be near the mid-aspect of
the range, or from $141.00 to $145.00 per square foot. The market value range
for the subject property is calculated in the following table.
================================================================================
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
Unit Sales
GLA x Price/SF = Estimated Value
- --------------------------------------------------------------------------------
501,092 SF x $141.00/SF = $70,650,000
501,092 SF x $145.00/SF = $72,700,000
================================================================================
Based on the subject's gross leasable area of 501,092 square feet, and our
estimation of the market value at $143.00 per square foot, the indicated value
of Woodfield Village Green by the Sales Comparison Approach, is $71,656,156, or
$71,700,000, as rounded.
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INCOME APPROACH
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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, the discounted cash flow analysis is the
most applicable.
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 of 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 on the capitalization of the next year's projected
net income.
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 market value of the subject, operations are considered to be
at stabilization. Thus, the direct capitalization method will provide additional
support in the valuation process.
Discounted Cash Flow
The discounted cash flow 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 indicative of the subject property's current value in the marketplace.
In this Income Approach to the valuation of Woodfield Village Green, we
have utilized a 10-year holding period for the investment with the cash flow
analysis commencing on August 1, 1997. 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 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
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================================================================================
ANNUAL CASH FLOW REPORT
WOODFIELD VILLAGE GREEN
<TABLE>
<CAPTION>
===========================================================================================================================
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
------ ------ ------ ------ ------ ------ ------ ------
YEAR ENDING JUNE 30TH 1998 1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING INCOME
MINIMUM RENT $ 7,267,461 $ 7,276,181 $ 7,481,804 $ 7,513,091 $ 7,652,659 $ 7,685,045 $ 7,848,808 $ 7,992,912
RECOVERIES $ 3,648,584 $ 3,738,610 $ 3,880,940 $ 4,008,147 $ 4,162,082 $ 4,303,393 $ 4,458,701 $ 4,601,368
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
GROSS RENTAL INCOME $10,916,045 $11,014,791 $11,362,744 $11,521,238 $11,814,741 $11,988,438 $12,307,509 $12,594,280
OVERAGE RENT $ 7,812 $ 7,135 $ 13,161 $ 14,188 $ 15,262 $ 16,385 $ 17,558 $ 18,786
SALES VOLUME(000'S) $ 90,556 $ 92,765 $ 96,861 $ 99,600 $ 103,998 $ 107,613 $ 111,405 $ 114,731
PLUS: MISC INCOME $ 6,735 $ 6,970 $ 7,214 $ 7,467 $ 7,728 $ 7,999 $ 8,279 $ 8,568
LESS: CREDIT LOSS $ 45,820 $ 48,334 $ 51,285 $ 51,960 $ 54,097 $ 54,974 $ 56,849 $ 58,110
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
EGI $10,881,772 $10,980,562 $11,331,834 $11,490,933 $11,783,634 $11,957,848 $12,276,497 $12,563,524
OPERATING EXPENSES
CAM $ 419,085 $ 433,753 $ 448,934 $ 464,647 $ 480,910 $ 497,742 $ 515,163 $ 533,193
INSURANCE $ 109,851 $ 113,695 $ 117,675 $ 121,793 $ 126,056 $ 130,468 $ 135,034 $ 139,761
REAL ESTATE TAXES $ 3,087,296 $ 3,195,351 $ 3,307,189 $ 3,422,940 $ 3,542,743 $ 3,666,739 $ 3,795,075 $ 3,927,903
MANAGEMENT FEE $ 271,777 $ 274,514 $ 283,296 $ 287,273 $ 294,591 $ 298,946 $ 306,913 $ 314,087
OTHER EXPENSE $ 5,102 $ 5,281 $ 5,465 $ 5,657 $ 5,855 $ 6,060 $ 6,272 $ 6,491
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL OPERATING $ 3,893,111 $ 4,022,594 $ 4,162,559 $ 4,302,310 $ 4,450,155 $ 4,599,955 $ 4,758,457 $ 4,921,435
NOI $ 6,988,661 $ 6,957,968 $ 7,169,275 $ 7,188,623 $ 7,333,479 $ 7,357,893 $ 7,518,040 $ 7,642,089
ALTERATIONS $ 57,500 $ 23,088 $ 50,962 $ 31,342 $ 5,642 $ 14,351 $ 4,167 $ 20,954
LEASING COMMISSIONS $ 17,500 $ 20,646 $ 45,482 $ 26,162 $ 4,550 $ 11,374 $ 3,137 $ 15,242
STRUCTURAL RESERVE $ 50,809 $ 52,588 $ 54,428 $ 56,333 $ 58,305 $ 60,345 $ 62,457 $ 64,643
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
SUBTOTAL $ 125,809 $ 96,322 $ 150,872 $ 113,837 $ 68,497 $ 86,070 $ 69,761 $ 100,839
NET CASH FLOW $ 6,862,852 $ 6,861,646 $ 7,018,403 $ 7,074,786 $ 7,264,982 $ 7,271,823 $ 7,448,279 $ 7,541,250
===========================================================================================================================
</TABLE>
==========================================================
Year 9 Year 10 Year 11
------ ------- -------
YEAR ENDING JUNE 30TH 2006 2007 2008
OPERATING INCOME
MINIMUM RENT $ 8,039,021 $ 8,133,742 $ 8,255,046
RECOVERIES $ 4,757,217 $ 4,905,190 $ 5,091,222
----------- ----------- -----------
GROSS RENTAL INCOME $12,796,238 $13,038,932 $13,346,268
OVERAGE RENT $ 20,069 $ 15,087 $ 18,212
SALES VOLUME(000'S) $ 118,709 $ 122,204 $ 126,382
PLUS: MISC INCOME $ 8,868 $ 9,179 $ 9,500
LESS: CREDIT LOSS $ 59,153 $ 60,091 $ 62,688
----------- ----------- -----------
EGI $12,766,022 $13,003,107 $13,311,292
OPERATING EXPENSES
CAM $ 551,855 $ 571,170 $ 591,161
INSURANCE $ 144,652 $ 149,715 $ 154,955
REAL ESTATE TAXES $ 4,065,379 $ 4,207,668 $ 4,354,936
MANAGEMENT FEE $ 319,150 $ 325,078 $ 332,782
OTHER EXPENSE $ 6,718 $ 6,954 $ 7,197
----------- ----------- -----------
TOTAL OPERATING $ 5,087,754 $ 5,260,585 $ 5,441,031
NOI $ 7,678,268 $ 7,742,522 $ 7,870,261
ALTERATIONS $ 29,375 $ 64,839 $ 39,875
LEASING COMMISSIONS $ 20,646 $ 45,482 $ 26,162
STRUCTURAL RESERVE $ 66,906 $ 69,248 $ 71,671
----------- ----------- -----------
SUBTOTAL $ 116,927 $ 179,569 $ 137,708
NET CASH FLOW $ 7,561,341 $ 7,562,953 $ 7,732,553
==========================================================
<PAGE>
Income Approach
================================================================================
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 expectations of the investment universe for this
type of real estate.
By forecasting the anticipated income stream and discounting future value
at reversion to 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 an important long term investment opportunity for a competent
shopping center owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software 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. Following is a detailed discussion of the components
which form the basis of this analysis.
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, and
reimbursement of certain expenses incurred in the ownership and operation of the
real estate.
Minimum Rental Income
The 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
vacant space, market rent growth, and renewal / turnover probability.
The minimum rents forecasted at the subject property are essentially
derived from two tenant categories: anchor tenant revenues consisting of base
rent obligations and tenant revenues consisting of all in-line 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 the trade area. Consequently,
the best measure of minimum rental income is typically the actual rent roll and
leasing schedule.
67
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Rent from the tenants consists of contractual obligations of the space
leases. As such, our analysis of recently negotiated leases for tenants at the
subject provides important insight into perceived market rent levels for the
center. This is of particular importance since tenants are cognizant of the
centers position in the market and are factoring this knowledge into their lease
negotiations. Inasmuch as a tenant's ability to pay rent is based upon expected
sales achievement, the level of negotiated rents is directly related to the
tenant's perception of expected performance at the property. The following chart
summarizes the various components of minimum rent.
================================================================================
Minimum Rent Allocation For Tenants With Full Year Occupancy
================================================================================
Minimum Rent FY 1998 Revenue Applicable GLA Unit Rate
- --------------------------------------------------------------------------------
Tenants
less than 2,000 SF $272,591 8,735 SF $31.21
- --------------------------------------------------------------------------------
Tenants 2,001 - 3,999 SF $303,981 11,277 SF $26.96
- --------------------------------------------------------------------------------
Tenants 4,000- 19,999 SF $1,193,317 54,451 SF $21.92
- --------------------------------------------------------------------------------
Tenants 20,000 - 39,999 SF $2,128,485 141,750 SF $15.02
- --------------------------------------------------------------------------------
Tenants
greater than 40,000 SF $3,318,462 282,796 SF $11.73
================================================================================
Subtotal $7,216,836 499,009 SF $14.46
================================================================================
As indicated in the chart above, there is typically an inverse
relationship between suite size and rent. That is, as the suite size increases,
the average unit base rent achieved declines. Overall, for the 499,009+/- square
feet of GLA surveyed, the average attained base rent for the center is shown to
be $14.46 per square foot in fiscal year 1998.
Analysis of Market Rents
A survey of local retail properties was previously presented in the Retail
Trade Area Analysis. These are retail centers of various sizes and quality
located throughout the subject's neighborhood. While most of these properties
are similarly located along major arterials in areas of dense commercial-retail
development, they are vastly different from the subject property in terms of
property type. For instance, the smallest center contains approximately
177,418+/- square feet and is considered to be a community-oriented facility.
The largest center is Woodfield Mall, a two million square foot super-regional
mall. Neither the traditional community center nor the super-regional mall are
considered directly competitive with the power center format of the subject
property. However, the retail centers chosen are useful in establishing a rental
rate range for the subject's neighborhood. Indeed, the anchor tenant rates at
the subject property are generally in-line with anchor tenant rents at the
competing centers. In addition, it becomes apparent, when comparing the subject
property to its competition, that rental rates for in-line stores at the subject
are generally higher than in-line rents at the comparable centers.
68
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SINGLE AND LARGE-TENANT RETAIL LEASES IN CHICAGO MSA
====================================================================================================================================
Tenant Lease Size Base Rental Rate
Shopping Center Date Term (SF) Escalations Basis Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Chernins 12/97 10 Years 15,213 $10.00/SF Net Percentage rent of 2.0% over a
Westridge Court To $11.00/SF in Yr 6 (10.0%) stated breakpoint.
Naperville, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
2 Best Buy 6/97 10 Years 50,000 $7.50/SF Net Former Builders Square space.
Yorkshire Plaza To $8.50/SF in Yr 6 (13.3%) TI's = $15.00/SF.
Aurora, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
3 OfficeMax 5/97 20 Years 23,500 $10.25/SF Net Build-to-Suit by Developer.
Twin Ponds Marketplace $10.75/SF-Yr 6 (4.9%); $11.25/SF-
Crystal Lake, Illinois Yr 11(4.7%) and $11.75/SF - Yr
16(4.4%)
- ------------------------------------------------------------------------------------------------------------------------------------
4 Super Crown Books 5/97 10 Years 15,000 $13.00/SF Net Build-to-Suit by Developer.
Twin Ponds Marketplace To $14.00/SF in Yr 6 (7.7%)
Crystal Lake, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
5 Super Trak Auto 5/97 10 Years 14,250 $11.00/SF Net Build-to-Suit by Developer.
Twin Ponds Marketplace To $12.00/SF in Yr 6 (9.1%)
Crystal Lake, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
6 Comp USA 10/96 10 Years 25,650 $11.00/SF Net No Percentage Rent.
Westridge Court To $12.00/SF in Yr 6 (9.1%)
Naperville, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
7 Linens & Things 9/95 15 Years 35,000 $9.90/SF Net Percentage rent of 2.0% over a
Westridge Court To $10.90/SF in Yr 6 (10.1%) natural breakpoint.
Naperville, Illinois To $12.00 in Yr 11 (10.1%)
- ------------------------------------------------------------------------------------------------------------------------------------
8 Marshalls 9/95 15 Years 31,479 $10.00/SF Net Percentage rent of 2.0% over a
Westridge Court Increase $1.00/SF every Three natural breakpoint.
Naperville, Illinois years (10.0%)
- ------------------------------------------------------------------------------------------------------------------------------------
9 Pier 1 Imports 8/95 10 Years, 1 9,496 $12.70/SF Net ---
The Shops of Schaumburg month To $14.70/SF in Year 5 (15.8%)
Court
Schaumburg, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
10 Zany Brainy 6/95 10 Years, 3 15,000 $15.00/SF Net ---
Shops of Schaumburg Court months To $16.50/SF in Year 5 (10.0%)
Schaumburg, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
11 Super Crown Books 12/95 8 Years 14,400 $13.29/SF Net ---
Shops of Schaumburg Court To $14.29/SF in Year 5 (7.5%)
Schaumburg, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGES 11.64 Yrs 22,635 $11.24/SF
9.8% Average Escalation
====================================================================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
In addition to the competing centers located in the immediate vicinity of
the subject property, we have also analyzed rents at another power center
developments in the Chicago area. A summary of the rental rates at comparable
power center is presented on the facing page. The rental rates at the comparable
power centers are generally lower than those being achieved at the subject
property due to the fact that the subject property is situated in a superior
retail destination. In fact, there are few other power centers in the Chicago
metropolitan area that are located in equally desirable locations. Therefore, in
our analysis we estimated the subject's market rents by analyzing leasing
activity at the subject property. Since the subject property is only three years
old, the actual leases in-place at the subject property are believed to be
highly reflective of current market rental rates.
Subject Leasing Activity
Leasing at the subject property has been significant, being 99.5 percent
leased as of August 1, 1997. The rent analysis chart, presented on the following
facing page, represents the leasing activity at the subject property. This
summary shows lease rates which range from $20.00 to $35.00 per square foot,
net, for in-line tenants and $7.00 to $18.00 per square foot, net, for anchor
tenants. While rental rates at competing shopping centers were considered in our
analysis of the subject's market rent levels, greatest emphasis was given to the
actual leases signed at the subject property. Based on the previous discussion,
we have made the following market rental rate assumptions for the subject
property:
==============================================================
Market Rent Projections
==============================================================
Suite Size Rental Rate Range Market Rate
--------------------------------------------------------------
Under 2,000 SF $25.00 to $35.00 $31.00
--------------------------------------------------------------
2,000 - 3,999 SF $21.50 to $32.00 $27.00
--------------------------------------------------------------
4,000 - 19,999 SF $21.00 to $25.00 $22.00
--------------------------------------------------------------
20,000 - 39,999 SF $12.00 to $18.00 $15.00
--------------------------------------------------------------
Over 40,000 SF $7.00 to $13.00 $11.75
==============================================================
Outparcel Leases
California Pizza Kitchen owns an outparcel at the Woodfield Village Green
and contributes its pro-rata share of common area maintenance and insurance
expenses and the real estate taxes associated with the parcel.
Lease Terms
The typical lease term for new retail leases in centers such as the
subject generally ranges from five to 25 years, depending on the size of the
tenant space. For the anchor tenant spaces, defined as tenant spaces exceeding
20,000 square feet, we have assumed a lease term of 15 years. With regard to the
in-line tenant spaces, we have assumed an average lease term of seven years.
70
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
WOODFIELD VILLAGE GREEN
RECENT LEASING ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------------------
START SPACE ANNUAL INITIAL EXPENSE %
SUITE TENANT DATE SIZE BASE RENT BASE RENT ESCALATION TERM BASIS RENT OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
SF YRS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IN-LINE TENANTS LESS THAN 2,000 SF
1562 BEN & JERRY'S Mar-95 1,120 $33,600 $30.00 1.63% 5.0 NNN 3.00% ONE 5-YR
1404 HABANA CIGARS Jun-96 1,136 $37,488 $33.00 5.00% 3.0 NNN 6.00% NONE
1480 DAN HOWARD MATERNITY Jun-94 1,379 $34,475 $25.00 0.00% 5.0 NNN 6.00% ONE 5-YR
1560 STARBUCKS COFFEE Jul-94 1,400 $36,400 $26.00 1.60% 10.0 NNN NONE ONE 5-YR
1564 SCHLOTZKY'S Nov-94 1,700 $51,000 $30.00 2.24% 10.0 NNN 6.00% NONE
1402 FUNCOLAND May-97 2,000 $70,000 $35.00 1.40% 5.0 NNN NONE ONE 5-YR
------- ---------- ------ ---- ----- ----
WEIGHTED AVERAGE 8,735 262,983 $30.10 1.98% 6.33 3.50%
IN-LINE TENANTS 2,001 - 3,999 SF
1478 PAYLESS Mar-94 2,130 $45,795 $21.50 2.79% 5.0 NNN 3.00% ONE 5-YR
1408-A AT&T Aug-97 2,500 $80,000 $32.00 1.53% 5.0 NNN NONE ONE 5-YR
1400 CASUAL MALE May-94 3,000 $84,000 $28.00 0.88% 5.0 NNN 3.00% ONE 5-YR
1472 WORK N GEAR Dec-93 3,647 $78,410 $21.50 2.47% 5.5 NNN 3.00% ONE 5-YR
------- ---------- ------ ---- ----- ----
WEIGHTED AVERAGE 11,277 288,206 $25.56 1.92% 5.13 2.25%
IN-LINE TENANTS 4,000-19,999 SF
1522 LAND'S END OUTLET Dec-93 9,075 $181,500 $20.00 1.23% 5.0 NNN NONE TWO 5-YR
1408 PERFORMANCE CYCLE Jul-94 5,000 $100,000 $20.00 2.65% 10.0 NNN 6.00% TWO 5-YR
1484 ULTA 3 Jul-94 8,959 $179,180 $20.00 0.62% 5.0 NNN NONE THREE 5-YR
1570 STROUDS Oct-94 15,000 $315,000 $21.00 1.02% 10.0 NNN 2.00% TWO 5-YR
1410 JEWELRY 3 Nov-94 5,000 $125,000 $25.00 3.01% 10.0 NNN NONE TWO 5-YR
1500 OLD NAVY Nov-95 11,500 $264,500 $23.00 0.00% 5.0 NNN 2.00% TWO 5-YR
1510 FOOTQUARTERS Aug-96 4,500 $94,500 $21.00 0.77% 10.0 NNN 3.00% TWO 5-YR
------- ---------- ------ ---- ----- ----
WEIGHTED AVERAGE 59,034 1,259,680 $21.34 1.33% 7.86 1.86%
ANCHOR TENANTS - 20,000 TO 39,999 SF
1450 OFFICEMAX Apr-94 23,500 $317,250 $13.50 0.99% 15.0 NNN 1.00% TWO 5-YR
1460 CONTAINER STORE Dec-95 24,969 $449,442 $18.00 0.76% 15.0 NNN NONE THREE 5-YR
1540 BORDERS BOOKS Apr-94 30,000 $420,000 $14.00 1.32% 15.0 NNN NONE FOUR 5-YR
1430 SAKS OFF FIFTH Oct-96 30,273 $463,177 $15.30 1.22% 15.0 NNN 1.50% THREE 5-YR
1420 CIRCUIT CITY Dec-93 33,008 $396.095 $12.00 2.05% 15.0 NNN NONE THREE 5-YR
------- ---------- ------ ---- ----- ----
WEIGHTED AVERAGE 141,750 2,046,965 $14.43 1.27% 15.0 0.50%
ANCHOR TENANTS - GREATER THAN 40,000 SF
1488 MARSHALL'S Dec-93 40,000 $400,000 $10.00 2.00% 15.0 NNN 2.50% THREE 5-YR
1520 NORDSTROM RACK Apr-94 40,000 $400,000 $10.00 2.56% 15.0 NNN 1.00% THREE 5-YR
1470 SPORTS AUTHORITY Dec-93 42,396 $438,799 $10.36 2.01% 20.0 NNN NONE FOURS 5-YR
1440 SERVICE MERCHANDISE Dec-93 50,000 $330,000 $7.00 0.00% 20.0 NNN NONE SEVEN 5-YR
1325 BUILDERS SQUARE Sep-94 110,400 $1,438,380 $13.03 0.00% 25.0 NNN 1.00% FIVE 5-YR
------- ---------- ------ ---- ----- ----
WEIGHTED AVERAGE 282,796 3,027,179 $10.70 1.32% 19.00 0.90%
====================================================================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
Market practice dictates that it is not uncommon to get rent bumps
throughout the lease term either in the form of fixed dollar amounts or a
percentage increase based upon changes in some index, usually the Consumer Price
Index (CPI). On average, it appears as if rent escalations at the subject
property typically equate to approximately 2.0 percent, per year. Therefore,
with regard to new leases, we have assumed that each will include annual minimum
rent escalations equating to 2.0 percent.
Concessions
Free rent is an inducement offered by developers to entice a tenant to
locate in their project over a competitor's. Our experience with large, retail
centers 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. Given
the strength of the subject's retail market area, as well as the fact that the
subject is one of the premier retail centers in the northwest Chicago suburbs,
we do not believe free rent has to be offered at the subject property in order
to attract new tenants.
Tenant build-out allowances are another form of inducement to tenants. A
review of the local market suggests that tenant workletters is not typically
offered but are often given as part of tenant negotiation. Some tenants at the
subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. At the subject property, primary anchor tenants (40,000+ SF)
typically pay a lower minimum rent per square foot, but were less inclined to
ask for, or receive, a build-out allowance. Secondary anchor tenants
(20,000-39,999 SF), however, appeared to be more likely to receive a substantial
tenant improvement allowance, in return for signing leases with higher minimum
rents and longer terms than in-line tenants. Placing greatest emphasis on the
leasing activity at the subject property, as well as, market practice, we have
assumed a new primary anchor tenant would receive no allowance, a new secondary
anchor tenant would receive a $10.00 per square foot allowance, and all new
in-line tenants would receive a tenant improvement allowance of $5.00 per square
foot. For renewal leases, we estimated that the tenant improvement allowance
would equate to 25 percent of the new tenant improvement rate. No allowance is
provided for tenants exercising options.
Absorption
As of the inspection date, the subject property was 100.0 percent
occupied; however, Performance Cycle has signed an agreement to vacate their
space as of July 31, 1997, with a two month termination fee. AT&T will take
occupancy of 2,500 square feet as of August 15,1997 and the remaining 2,500
square feet will be available for lease. Therefore, as of August 1,1997, the
subject property will be 99.5 percent leased. Based on conversations with market
participants, we believe the vacant space, of 2,500 square feet, will be leased
for a November 1, 1997 occupancy.
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<PAGE>
Income Approach
================================================================================
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's Winter 1996 survey of
pension fund, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 4.0 percent. The low and high mean is shown to be 2.91 and 3.55
percent, respectively.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and management's
desire to attract and keep certain tenants that increase the center's synergy
and appeal. With literally no lease-up to contend with as well as having the
newest, most dominant non-mall shopping center in the market, management is a
formidable position to command higher rents. After considering the above, we
have utilized a rental growth rate of 3.5 percent per year over the holding
period.
Releasing Assumption
Upon lease expiration, it is our best estimate that 70 percent of the
existing tenants will renew their lease, while the remaining 30 percent will
vacate their space at expiration. Many tenants have set options to renew their
leases. Option renewals have been compared to projected market rents in order to
forecast the probability of tenant options being exercised. In this analysis,
all options are assumed to be exercised if the option rent is less than 90
percent of the projected market rent.
Overage Rent
In addition to the minimum base rent, many tenants will typically contract
to pay a percentage of their gross annual sales over a pre-established base
amount as overage rent. Such leases typically have a natural breakpoint. In a
few instances, the lease provides for a specified breakpoint sales level. 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 one measure for protecting the equity investor against
inflation.
Expense Reimbursement
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, insurance, and common area maintenance (CAM). Most leases call for an
administrative surcharge to be added to reimbursable expenses. For anchor
tenants (20,000+S F), this fee typically ranges from 3.0 to 15.0 percent of some
or all of the common area maintenance expenses. For the in-line tenants, the
administrative fee is typically 15 percent of all reimbursable expenses.
73
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<PAGE>
================================================================================
WOODFIELD VILLAGE GREEN
SCHAUMBURG, ILLINOIS
HISTORICAL OPERATING STATEMENTS
501,092 SF OF GLA
==========================================================
---------------------- ----------------------
ACTUAL 1996 BUDGET 1997
---------------------- ----------------------
==========================================================
INCOME
Minimum Rent $ 6,771,180 $13.51 $ 7,193,563 $14.36
Recovery Income $ 3,465,019 $ 6.91 $ 3,566,274 $ 7.12
Miscellanous Income $ 6,597 $ 0.01 6,597 $ 0.01
------------ ------------
EGI $ 10,242,796 $20.44 $ 10,766,434 $21.49
OPERATING EXPENSES
CAM $ 274,444 $ 0.55 $ 410,700 $ 0.82
Management Fee $ 438,640 $ 0.88 $ 258,687 $ 0.52
Insurance $ 135,590 $ 0.27 $ 107,652 $ 0.21
Real Estate Taxes $ 3,030,525 $ 6.05 $ 3,025,525 $ 6.04
Other $ 87,299 $ 0.17 $ 5,000 $ 0.01
TOTAL EXPENSES $ 3,966,498 $ 7.92 $ 3,807,564 $ 7.60
NET OPERATING INCOME $ 6,276,298 $12.53 $ 6,958,870 $13.89
================================================================================
<PAGE>
Income Approach
================================================================================
For speculative leases, we have assumed that anchor tenants would be responsible
for an administrative fee equivalent to 7.5 percent of the total CAM expense.
For speculative in-line tenants, we have assumed the administrative fee would
equate to 15.0 percent of all reimbursable expenses, including CAM and
insurance.
Allowance for Vacancy and Credit Loss
Investors are 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
and all the tenants were actually 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 provision for permanent vacancy and credit loss of
1.5 percent among all tenants. Upon turnover, we have forecasted a weighted
average downtime between leases equivalent to three months for anchor tenants
and two months for in-line tenants.
Operating Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. The non-reimbursable expenses associated with the
subject property include the management fee and a minor miscellaneous expense.
We do note that under a few of the existing lease contracts, management is
deemed recoverable. Our analysis assumes that operating expenses will increase
by 3.5 percent per year unless otherwise stated.
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property. A summary of the historical and budgeted
operating expenses is included on the facing page.
Common Area Maintenance - This expense category includes the annual cost
of miscellaneous building maintenance contracts, parking lot maintenance,
recoverable labor and benefits, landscaping, window cleaning,
exterminating, supplies, exterior lighting, trash removal, utilities
including common area energy, and other miscellaneous charges such as snow
removal. As described, ownership can, in some instances, recover the cost
of the property management fee, which is estimated at 2.5 percent of
effective gross income. In our analysis, we have stabilized the 1997 CAM
expense at $410,700, equal to $0.82 per square foot, which is consistent
with ownership's budget.
Insurance - The insurance expense is projected at $107,652, or $0.21 per
square foot of GLA.
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<PAGE>
Income Approach
================================================================================
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. According to ownership, the current real estate tax
liability is being contested and the 1997 budgeted real estate taxes have
been projected consistent with the 1996 level. Our projected real estate
taxes for calendar year 1997 are consistent with the 1997 budget.
Non-Reimbursable Expenses
The following is a summary and discussion of non-reimbursable expenses
incurred in the operation of subject property for the initial year.
Management - The annual cost of managing the subject property is projected
to be 2.50 percent of effective gross income. In the initial year of our
analysis, this amount is shown to be $271,777, equivalent to $0.54 per
square foot of appraised GLA. Our estimate is reflective of a typical
management agreement with a firm in the business of providing professional
management services.
Other - For calendar year 1997, the other expenses are projected at
$5,000, or $0.01 per square foot of GLA.
Alterations - 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. As discussed previously, we have stabilized this
expense in 1997 at a cost of zero to $10.00 per square foot, depending on
the size of the tenant. For renewal leases, the alterations expense is
estimated at 25 percent of the new lease rate. At lease turnover, the
alteration cost is weighted by our probability of renewal.
Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject, we
have made an allowance for leasing commissions for this assignment. For
new leases, a commission of $3.50 per square fool will be charged, while
renewal leases will be charged at 50 percent of the new lease rate.
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. We have forecasted a
replacement reserve of $0.10 per square foot of GLA.
Net Operating Income
Our cash flow model has forecasted the following compound annual growth
rates over the ten year holding period 1997-2006.
Net Operating Income 1.14%
Cash Flow 1.09%
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Income Approach
================================================================================
Growth rates in net income and cash flow are forecasted to approximate
1.10 percent per annum which is typical of a center such as the subject, where
the income from anchor tenants is the dominant source of revenue.
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A Neighborhood and Community centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
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Income Approach
================================================================================
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Power Centers and Big Box Neighborhood/Community
Investment -----------------------------------------------------------------
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50 - 10.50% 9.00 - 10.50% 8.50 - 10.50% 9.00 - 10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50 - 10.50% 9.50 - 10.50% 9.50 - 10.50% 10.00 - 11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50 - 15.00% 10.50 - 15.00% 10.00 - 15.00% 10.00 -15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
===============================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1991
===============================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
===============================================================================
Free & Clear Equity IRR
===============================================================================
RANGE 9.50 - 12.50% 9.00 - 12.50% N/A
AVERAGE 11.33% 11.25%
-------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
===============================================================================
Free & Clear Going-In Cap Rate
===============================================================================
RANGE 8.75 - 10.50% 8.50 - 10.50% N/A
AVERAGE 9.58% 9.58%
-------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
===============================================================================
Residual Cap Rate
===============================================================================
RANGE 9.00 - 11.50% 8.50 - 11.50% N/A
AVERAGE 9.96% 9.88%
-------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
===============================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second
Qtr. 1997
===============================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics
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Income Approach
================================================================================
with income and population growth projected at or above regional norms, and the
"A+" location in that particular market. The most desirable center in a
particular market is the dominant property which has created a true barrier to
entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.00 percent to 10.66 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.78 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.50 and 10.00 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. Woodfield Village Green is a well-located specialty power center
in an attractive growth market. It has a unique tenant alignment and well
matched merchandising mix with several good credit tenants. By virtue of the
lease structure with many of the major tenants, rental growth will tend to lag
general inflation. Nonetheless, an investor has recognized this real short term
potential in the selection of a capitalization rate. In our selection of cap
rates for the subject property, we have placed specific emphasis on the quality
and durability of the forecasted income stream. On balance, we find that the
subject can be classified as a good quality, well-located center in an area
which has seen recent retail interest.
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Income Approach
================================================================================
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.50 and 10.00
percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years. Therefore, a projected terminal capitalization rate
ranging from 9.50 to 10.00 percent is indicated for the subject property. 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.
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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.33 percent for national
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Income Approach
================================================================================
power center in their Second Quarter 1997 survey, with a range between
9.50-12.50 percent.
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 (%) July 10,1997
=========================================================
Reserve Bank Discount Rate 5.00%
---------------------------------------------------------
Prime Rate (Monthly Average) 8.50%
---------------------------------------------------------
3-Month Treasury Bills 4.96%
---------------------------------------------------------
U.S. 10-Year Notes 6.24%
---------------------------------------------------------
U.S. 30-Year Bonds 6.56%
---------------------------------------------------------
Telephone Bonds 7.63%
---------------------------------------------------------
Municipal Bonds 5.56%
=========================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 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.
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<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
- ----------------------------------
WOODFIELD VILLAGE GREEN
SCHAUMBURG, ILLINOIS
- ----------------------------------
AS OF AS OF
AUGUST 1, 1997 FEB 1, 1996
- -------------------------------------------------------------------------------------------------
SQUARE FOOTAGE FIGURES:
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL GLA 508,092 SF 507,819 SF
ANCHOR TENANTS 424,546 SF 424,273 SF
IN-LINE TENANTS 76,546 SF 76,546 SF
OUTPARCEL 7,000 SF 7,000 SF
- -------------------------------------------------------------------------------------------------
MARKET RENT CONCLUSIONS:
- -------------------------------------------------------------------------------------------------
MARKET RENT
IN-LINE TENANT LESS THAN 2,000 SF $31.00 PER SF $28.50 PER SF
IN-LINE TENANT 2,001 - 3,999 SF $27.00 PER SF $24.50 PER SF
IN-LINE TENANT 4,000 - 19,999 SF $22.00 PER SF $21.50 PER SF
ANCHOR TENANT 20,000 - 39,999 SF $15.00 PER SF $14.00 PER SF
ANCHOR TENANT GREATER THAN 40,000 SF $11.75 PER SF $11.00 PER SF
ESCALATION FREQUENCY ANNUALLY ANNUALLY
ESCALATION BASIS 2.00% 2.00%
RENTAL BASIS NNN NNN
MARKET RENTAL GROWTH RATE 3.50% 3.50%
CONSUMER PRICE INDEX 3.50% 3.50%
- -------------------------------------------------------------------------------------------------
VACANCY & TYPICAL LEASE TERM
- -------------------------------------------------------------------------------------------------
AVERAGE LEASE TERM 16-YEARS ANCHOR TENANT 15-YEARS ANCHOR TENANTS
7-YEARS IN-LINE TENANTS 5 TO 9-YRS IN-LINE TENANTS
VACANCY BETWEEN TENANTS 9-MONTHS ANCHOR TENANT 9-MONTHS ANCHOR TENANTS
6-MONTHS IN-LINE TENANTS 6-MONTHS IN-LINE TENANTS
WEIGHTED AVERAGE DOWNTIME 3-MONTHS ANCHOR TENANT 3-MONTHS ANCHOR TENANTS
2-MONTHS IN-LINE TENANTS 2-MONTHS IN-LINE TENANTS
CREDIT RISK LOSS 1.50% 1.50%
VACANT SPACE 2,500 SQUARE FEET 1,136 SQUARE FEET
OCCUPANCY ON APPRAISAL DATE 99.5% 99.8%
RENEWAL PROBABILITY 70.0% 67.0%
- -------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------
LEASING COMMISSIONS
NEW TENANT $3.50 PER SF $3.50 PER SF
RENEWAL TENANT $1.75 PER SF $1.75 PER SF
WEIGHTED AVERAGE $2.28 PER SF $2.33 PER SF
TENANT IMPROVEMENT ALLOWANCE
NEW TENANT
ANCHOR TENANT $10.00 PER SF $10.00 PER SF
IN-LINE TENANT $5.00 PER SF $5.00 PER SF
RENEWAL TENANT
ANCHOR TENANT $2.50 PER SF $2.50 PER SF
IN-LINE TENANT $1.25 PER SF $1.25 PER SF
EXPENSE GROWTH RATE 3.50% 3.50%
MANAGEMENT FEE 2.50% OF EGI 4.00% OF EGI
CAPITAL RESERVES (PSF OF GLA) $0.10 PER SF $0.10 PER SF
- -------------------------------------------------------------------------------------------------
RATES OF RETURN:
- -------------------------------------------------------------------------------------------------
CASH FLOW START DATE 1-Aug-97 1-Feb-96
DISCOUNT RATE 10.50% 10.75%
GOING-IN OAR 9.67% 9.73%
TERMINAL OAR 9.75% 9.75%
REVERSIONARY SALES COSTS 2.00% 2.00%
HOLDING PERIOD 10-YEARS 10-YEARS
- -------------------------------------------------------------------------------------------------
INDICATED VALUE:
- -------------------------------------------------------------------------------------------------
INDICATED VALUE $72,300,000 $66,500,000
VALUE PSF OF OWNED GLA $144.28 $132.78
=================================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
Investors have suggested that the retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 75.0 percent of base rental income will, on
average, come from anchor major/tenants whose creditworthiness adds stability to
the cash flow. We have briefly discussed the investment risks associated with
the subject. On balance, it is our opinion that an investor in Woodfield Village
Green would require an internal rate of return between 10.25 to 10.75 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 10-year period commencing on August 1,1997.
Our cash flows forecasted for the power center have been presented. To
reiterate, the assumptions utilized in our cash flow are summarized on the
facing page and the discounted cash flow analysis is included on the following
facing page. 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 from 10.25 to 10.75 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 yields and
terminal rates now being required by participants in the market for this type of
real estate places additional perspective upon our analysis. A valuation matrix
for the subject property is also presented on the following facing page.
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $70,500,000 to $74,200,000.
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 mid-aspect of the IRR range outlined above for this property.
Accordingly, we believe that, based upon all of the assumptions inherent in our
cash
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================================================================================
DISCOUNTED CASH FLOW ANALYSIS
WOODFIELD VILLAGE GREEN
Cushman & Wakefield of Illinois, Inc.
================================================================================
DISCOUNT PRESENT ANNUAL CASH
YEAR FISCAL NET CASH FACTOR VALUE OF COMPOSITION ON CASH
NO. YEAR FLOW 10.50% CASH FLOWS OF YIELD RETURN
================================================================================
1 1998 $6,862,852 x 0.904977 = $6,210,726 8.59% 9.49%
2 1999 $6,861,646 x 0.818984 = $5,619,579 7.77% 9.49%
3 2000 $7,018,403 x 0.741162 = $5,201,774 7.20% 9.71%
4 2001 $7,074,786 x 0.670735 = $4,745,306 6.56% 9.79%
5 2002 $7,264,982 x 0.607000 = $4,409,843 6.10% 10.05%
6 2003 $7,271,823 x 0.549321 = $3,994,566 5.53% 10.06%
7 2004 $7,448,279 x 0.497123 = $3,702,712 5.12% 10.30%
8 2005 $7,541,250 x 0.449885 = $3,392,697 4.69% 10.43%
9 2006 $7,561,341 x 0.407136 = $3,078,494 4.26% 10.46%
10 2007 $7,562,953 x 0.368449 = $2,786,561 3.85% 10.46%
- --------------------------------------------------------------------------------
TOTAL PRESENT VALUE OF CASH FLOWS: $43,142,259 59.68% 10.02%
Total Average
- --------------------------------------------------------------------------------
REVERSION YR NOI / TERMINAL OAR = REVERSION
- ------------ --- ------------ ---------
11 2008 $7,870,261 9.75% $80,720,626
LESS: COST OF SALE 2.00% $1,614,413
-----------
NET REVERSION $79,106,213
x DISCOUNT FACTOR 0.368449
-----------
TOTAL PRESENT VALUE OF REVERSION $29,146,594 40.32%
PRESENT VALUE OF CASH FLOWS & REVERSION $72,288,853 100.00%
----------------------------------------------------
ROUNDED VALUE via
DISCOUNTED CASH FLOW $72,300,000
----------------------------------------------------
====================================================
NRA 501,092
VALUE PER SQUARE FOOT $144.28
YEAR ONE NOI $ 6,988,661
IMPLICIT GOING-IN CAPITALIZATION RATE 9.67%
====================================================
===============================================================
SENSITIVITY ANALYSIS
TERMINAL CAP RATE
DISCOUNT 9.50% 9.75% 10.00%
RATE 10.25% 74,200,000 73,400,000 72,700,000
----------
10.50% 73,100,000 72,300,000 71,600,000
----------
10.75% 71,900,000 71,200,000 70,500,000
===============================================================
================================================================================
<PAGE>
Income Approach
================================================================================
flow analysis, an investor would look toward an IRR of approximately 10.50
percent, and a terminal rate of 9.75 percent, as being most representative of
the subject's value in the market.
In view of the analysis presented, it is our opinion that the discounted
cash flow analysis indicates a market value for the subject property near the
mid-aspect of the indicated range, or at $72,300,000, as rounded, as of August
1,1997. The yield matrix indicates a unit value of $144.28 per square foot, and
an indicated overall rate of 9.67 percent.
Direct Capitalization
To further support our value conclusion as 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. We anticipate that the subject would trade at an overall rate
of approximately 9.50 to 10.00 percent, applied to the first year income.
Applying these rates to first year net operating income before reserves,
alterations and other expenses for the subject, of $6,988,661, results in a
value of approximately $69,900,000 to $73,600,000. From this range we would be
inclined to conclude at a value of $71,800,000, by direct capitalization. This
is indicative of a capitalization rate of 9.73 percent, which is toward the
middle of the range applied.
The value indicated by the direct capitalization method is supported of
the discounted cash flow analysis. Therefore, we have concluded a market value
for Woodfield Village Green, of $72,300,000, by the Income Approach.
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<CAPTION>
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SUMMARY OF COMPARABLE LARGE COMMERCIAL LAND SALES
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Sale Site Area (SF)
No. Location Sale Price Site Area (AC Price/SF Zoning Comments
Buyer/Seller
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJ NEC Golf & Meacham Roads Under $5,950,000 487,300 SF $12.21/SF B-5 The subject excess land parcels
Schaumburg, Illinois Contract 11.19 AC are under contract for sale to
Costco and Prairie Rock
Brewery. Ownership anticipates
a Fourth Quarter 1997 closing.
- ------------------------------------------------------------------------------------------------------------------------------------
L-1 42 Ogden Avenue 12/96 $3,650,000(1) 459,990 SF $7.93/SF B-3 Intended use is for development
Downers Grove, Illinois 10.56 AC of a 110,000 SF shopping
Trust Land Properties/Confidential center.
- ------------------------------------------------------------------------------------------------------------------------------------
L-2 N/S of Butterfield Road, East of I-355 1/96 $5,734,721 750,669 SF $7.64/SF B-3 Intended use is for development
Downers Grove, Illinois 17.23 AC of a 130,000 SF Home Depot.
Home Depot/Confidential
- ------------------------------------------------------------------------------------------------------------------------------------
L-3 S/S of 22nd St., East of Grace St. 11/95 $5,500,000 696,524 SF $7.90/SF B-2 Intended use is for development
Lombard, Illinois 15.99 AC of a Target retail store.
Dayton Hudson Corp/Yorktown Peripheral
Development LP
- ------------------------------------------------------------------------------------------------------------------------------------
L-4 SEC 22nd St. & Midwest Road 10/95 $11,761,000 873,378 SF $13.47/SF B-3 Intended use is for the
Oak Brook, Illinois 20.05 AC development of a shopping
Orix/Illinois State Tollway Authority center.
- ------------------------------------------------------------------------------------------------------------------------------------
L-5 W/S Finley Rd, N of 35th Street 7/95 $10,028,570 1,001,880 SF $10.01/SF B-3 Intended use is for the
Downers Grove, Illinois 23.00 AC development of a 185,000 SF
Incredible Universe Land Trust/ electronics warehouse.
Esplanade East Land LP
- ------------------------------------------------------------------------------------------------------------------------------------
L-6 SWC Higgins & Meacham Road 7/95 $2,115,468 261,122 SF $8.10/SF B-2 Intended use is for the
Schaumburg, Illinois 6.00 AC development of a 70,000 SF
Ryan Construction of MN/ANB Trust #108- supermarket.
30305
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Sale price after demolition costs of $300,000 were added
====================================================================================================================================
</TABLE>
<PAGE>
SUPPLEMENTAL VALUATION
================================================================================
As summarized in our previous report, the excess land parcel has been
estimated at 487,300 square feet, or 11.19 acres. As the vacant pad-sites are
situated in the northwest portion of the subject site, north of the Builder's
Square, we have assumed that the excess land area is located in the same portion
of the subject site.
Our search for commercial land sales revealed six sales within the Chicago
MSA. The six sales ranged from 6.00 to 23.00 acres and from $7.64 to $13.47 per
square foot of land area. A summary of the sales utilized is presented on the
facing page. The chart below represents an adjustment grid of our comparable
sales in relation to the subject site.
================================================================================
LAND SALES ADJUSTMENT GRID
SALES COMPARED TO SUBJECT EXCESS LAND PARCEL
- --------------------------------------------------------------------------------
Sale Sale Market Location Utility Size Overall Net
No. Price/SF Conditions Adjustment
- --------------------------------------------------------------------------------
Subj $12.21 Similar Similar Similar Similar Similar
- --------------------------------------------------------------------------------
L-1 $7.93 Similar Inferior Similar Similar Inferior
- --------------------------------------------------------------------------------
L-2 $7.64 Similar Inferior Similar Similar Inferior
- --------------------------------------------------------------------------------
L-3 $7.90 Similar Inferior Similar Similar Inferior
- --------------------------------------------------------------------------------
L-4 $13.47 Similar Superior Similar Similar Superior
- --------------------------------------------------------------------------------
L-5 $10.01 Similar Inferior Similar Similar Inferior
- --------------------------------------------------------------------------------
L-6 $8.10 Similar Inferior Similar Similar Inferior
================================================================================
(1) Includes Property Right, Financing, Conditions of Sale and Market conditions
================================================================================
With the exception of Sale L-4, the overall locational characteristics of
the enclosed land sales is considered inferior to the subject property. After
considering all of the above factors in relation to the subject site, we believe
the value of the subject's excess land parcel, measuring 487,300 square feet,
would range from $11.50 to $12.50 per square foot, as indicated below.
============================================================
LAND VALUATION
------------------------------------------------------------
Unit Sales
Land Area x Price/SF = Estimated Value
------------------------------------------------------------
487,300 SF x $11.50/SF = $5,600,000
487,300 SF x $12.50/SF = $6,100,000
============================================================
Based on the above, we believe the market value of the excess land parcel
would lie near the mid-aspect of the above indicated range, or at $5,900,000.
The concluded market value of the excess land is consistent with the current
contract price.
87
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based on
the appropriateness of each value indication. A summary of the value indications
for the subject is set forth below.
=======================================================
Value Summary
Sales Comparison Approach
Woodfield Village Green $71,700,000
Excess Land $ 5,900,000
-------------------------------------------------------
Income Approach
Woodfleld Village Green $72,300,000
Excess Land N/A
=======================================================
Two approaches to value have been utilized for this analysis. In general,
the approaches included provide complimentary results, each approach or
technique supporting the other.
Sales Comparison Approach
The Sales Comparison Approach estimates the value for the subject property
by analyzing historical arms-length transactions, 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
area.
The process of comparing historical sales data to assess what purchasers
have been paying for similar type properties is somewhat subjective 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, this methodology is best suited as support
for the conclusions of the Income Approach. This approach, however, provides
useful market extracted rates of return, such as overall rates, to simulate
investor behavior applied to the Income Approach.
Income Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method (DCF) 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.
88
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Reconciliation and Final Value Estimate
================================================================================
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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers. Essentially, the DCF can model
many of the dynamics of a complex shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given consideration in our final analysis.
Conclusions
We have briefly discussed the applicability of each of the approaches
presented. The Sales Comparison Approach and Income Approach are supportive of
each other, 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 leased fee estate in Woodfield Village Green, subject to the
assumptions, limiting conditions, certifications, and definitions, as of August
1, 1997, will be:
SEVENTY-TWO MILLION THREE HUNDRED THOUSAND DOLLARS
$72,300,000
Further, we have formed an opinion that the market value of the fee simple
estate in excess land parcel measuring 11.19-acres, subject to the assumptions,
limiting conditions, certifications, and definitions, as of August 1, 1997, will
be:
FIVE MILLION NINE HUNDRED THOUSAND DOLLARS
$5,900,000
89
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Therefore, the combined value of the leased fee estate in Woodfield
Village Green and the fee simple estate of the excess land parcel, subject to
the assumptions, limiting conditions, certifications, and definitions, as of
August 1,1997, will be:
SEVENTY-EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS
$78,200,000
90
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.
91
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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. 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 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.
92
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WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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.
93
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Kelleen M. Bodine inspected the property and Stanley R. Dennis, Jr., MAI
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, Stanley R. Dennis, Jr., MAI has completed
the requirements of the continuing education program of the Appraisal
Institute.
/s/ Kelleen M. Bodine /s/ Stanley R. Dennis, Jr.
Kelleen M. Bodine Stanley R. Dennis, Jr., MAI
Associate Director Director, Manager
Illinois Certification No. 153-000825 Illinois Certification
No. 153-000888
94
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
================================================================================
PRO-JECT ASSUMPTIONS REPORT
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
95
<PAGE>
WOODFIELD VILLAGE GREEN
PROJECT DESIGNATOR: SC07
REVISION: 7/10/97 @ 13:00
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
7/10/97 @ 14:57
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF WOODFIELD VILLAGE GREEN BEGINNING 8/1996
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
TGLA
DESCRIBED AS TOTAL CENTER GLA
1996 VALUE - 508,092
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA
1996 VALUE - 480,289
1997 VALUE - 506,800
1998 VALUE - 507,336
1999 VALUE - 504,190
2000 VALUE - 505,989
2001 VALUE - 508,092
2002 VALUE - 506,925
2003 VALUE - 508,092
2004 VALUE - 507,579
2005 VALUE - 507,259
2006 VALUE - 503,434
2007 VALUE - 507,905
2008 VALUE - 506,175
2009 VALUE - 504,609
2010 VALUE - 507,675
THEREAFTER - CONSTANT
BSGL
DESCRIBED AS BUILDER'S SQUARE GLA
1996 VALUE - 110,400
THEREAFTER - CONSTANT
CMGL
DESCRIBED AS GLA FOR CAM AND LIAB INS ALLOCATION (EXCLUDES BLDRS SQUARE)
+100.0% OF TGLA-100.0% OF BSGL
<PAGE>
Page 2
TXEX
DESCRIBED AS GLA EXCLUDED FOR TAX ALLOCATION (BUILDERS SQR & CALIF PIZZA)
1996 VALUE 117,400
THEREAFTER - CONSTANT
TXGL
DESCRIBED AS OLA FOR TAX ALLOCATION
+100.0% OF TGLA-100.0% OF TXEX
PIEX
DESCRIBED AS GLA EXCLUDED FOR PROP INS ALLOCATION (BLDRS SQRE, SERV MERCH,
SPORTS AUTHORITY, BORDERS BOOKS, CIRCUIT CITY)
1996 VALUE - 265,804
THEREAFTER - CONSTANT
PIGL
DESCRIBED AS GLA FOR PROP INS ALLOCATION
+100.0% OF TGLA-100.0% OF PIEX
GROWTH RATES
MKTG
DESCRIBED AS MARKET RENTAL GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
CPIG
DESCRIBED AS CPI GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
SALE
DESCRIBED AS RETAIL SALES GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
EXPG
DESCRIBED AS OPERATING EXPENSE GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
STEP
DESCRIBED AS ANNUAL CONTRACT RENTAL ESCALATION
1996 VALUE - 2.00
THEREAFTER - CONSTANT
<PAGE>
Page 3
MARKET RATES
RREV
DESCRIBED AS STRUCTURAL RESERVE PER SF
1996 VALUE - 0.10
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE CPIG
NCOM
DESCRIBED AS NEW LEASING COMMISSION RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
RCOM
DESCRIBED AS RENEWAL LEASING COMMISSION RATE
+50.0% OF NCOM
SCOM
DESCRIBED AS WEIGHTED AVERAGE LEASING COMMISSION RATE
+30.0% OF NCOM +70.0% OF RCOM
NTIA
DESCRIBED AS NEW TENANT ALLOWANCE FOR ANCHOR TENANTS
1996 VALUE - 10.00
1997 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
RTIA
DESCRIBED AS RENEWAL TENANT ALLOWANCE FOR ANCHOR TENANTS
+25.0% OF NTIA
STIA
DESCRIBED AS WEIGHTED AVERAGE TENANT ALLOWANCE FOR ANCHOR TENANTS
+30.0% OF NTIA +70.0% OF RTIA
ANC1
DESCRIBED AS MARKET RENTAL RATE FOR ANCHOR TENANTS 20,000 - 39,999 SF
1996 VALUE - 15.00
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
ANC2
DESCRIBED AS MARKET RENTAL RATE FOR ANCHOR TENANTS > 40,000 SF
1996 VALUE - 11.75
1997 VALUE - 11.75
THEREAFTER - GROWING AT GROWTH RATE MKTG
<PAGE>
Page 4
INL1
DESCRIBED AS MARKET RENTAL RATE FOR IN-LINE TENANTS < 2,000 SF
1996 VALUE - 31.00
1997 VALUE - 31.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
INL2
DESCRIBED AS MARKET RENTAL RATE FOR IN-LINE TENANTS 2,001 - 3,999 SF
1996 VALUE - 27.00
1997 VALUE - 27.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
INL3
DESCRIBED AS MARKET RENTAL RATE FOR IN-LINE TENANTS 4,000 - 19,999 SF
1996 VALUE - 22.00
1997 VALUE - 22.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
SALE
DESCRIBED AS AVERAGE RETAIL SALES PER SF
1996 VALUE - 237
THEREAFTER - GROWING AT GROWTH RATE SALE
NTIL
DESCRIBED AS NEW TENANT ALLOWANCE FOR IN-LINE TENANTS
1996 VALUE - 5.00
1997 VALUE - 5.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
RTIL
DESCRIBED AS RENEWAL TENANT ALLOWANCE FOR IN-LINE TENANTS
+25.0% OF NTIL
STIL
DESCRIBED AS WEIGHTED AVERAGE TENANT ALLOWANCE FOR IN-LINE TENANTS
+30.0% OF NTIL +70.0% OF RTIL
MISCELLANEOUS INCOMES
MISCELLANEOUS INCO
1996 VALUE - 6,600
1997 VALUE - 6,600
THEREAFTER - GROWING AT GROWTH RATE CPIG
PERF BYCLE TERM FE
1996 VALUE - 0.00
<PAGE>
Page 5
1997 VALUE - 18,333
1998 VALUE - 0.00
1999 VALUE - 0.00
THEREAFTER - CONSTANT
EXPENSES
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEES
AN INFORMATIONAL EXPENSE
1996 VALUE - 173,725
1997 VALUE - 268,114
1998 VALUE - 273,640
1999 VALUE - 277,469
2000 VALUE - 283,977
2001 VALUE - 291,284
2002 VALUE - 295,648
2003 VALUE - 301,809
2004 VALUE - 310,808
2005 VALUE - 316,219
2006 VALUE - 319,022
2007 VALUE - 330,789
2008 VALUE - 335,338
2009 VALUE - 348,722
2010 VALUE - 363,156
THEREAFTER - CONSTANT
TOTAL CENTER CAM , REFERRED TO AS CAME
DESCRIBED AS TOTAL CENTER CAM
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 1.00
1997 VALUE - 410,700
THEREAFTER - GROWING AT GROWTH RATE EXPG
TOTAL CAM W/3% AD , REFERRED TO AS CAO3
DESCRIBED AS TOTAL CENTER CAM W/3% ADMIN
AN INFORMATIONAL EXPENSE
+103.0% OF CAME
TOTAL CAM W/5% AD , REFERRED TO AS CAO5
DESCRIBED AS TOTAL CENTER CAM W/5% ADMIN
AN INFORMATIONAL EXPENSE
+105.0% OF CAME
TOTAL CAM W/7% AD , REFERRED TO AS CAO7
DESCRIBED AS TOTAL CENTER CAM W/7% ADMIN
<PAGE>
Page 6
AN INFORMATIONAL EXPENSE
+107.0% OF CAME
TOTAL CAM W/1O% AD, REFERRED TO AS CAl0
DESCRIBED AS TOTAL CENTER CAM W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF CAME
TOTAL CAM W/12% AD, REFERRED TO AS CA12
DESCRIBED AS TOTAL CENTER CAM W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF CAME
TOTAL CAM W/15% AD, REFERRED TO AS CAl5
DESCRIBED AS TOTAL CENTER CAM W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF CAME
CENTER TAXES , REFERRED TO AS CTAX
DESCRIBED AS SMALL SHOP TAXES
AN INFORMATIONAL EXPENSE
1996 VALUE - 1.00
1997 VALUE - 2,370,803
THEREAFTER - GROWING AT GROWTH RATE EXPG
RE TAX W/12% , REFERRED TO AS RE12
DESCRIBED AS REAL ESTATE TAXES W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF CTAX
RE TAX W/15% , REFERRED TO AS RE15
DESCRIBED AS REAL ESTATE TAXES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF CTAX
PROPERTY INSURANCE, REFERRED TO AS PINS
DESCRIBED AS PROPERTY INSURANCE
AN INFORMATIONAL EXPENSE
1996 VALUE - 1.00
1997 VALUE - 18,172
THEREAFTER - GROWING AT GROWTH RATE EXPG
LIAB INSURANCE , REFERRED TO AS LINS
DESCRIBED AS LAIBILITY INSURANCE
AN INFORMATIONAL EXPENSE
1996 VALUE - 1.00
1997 VALUE - 89,481
THEREAFTER - GROWING AT GROWTH RATE EXPG
<PAGE>
Page 7
TOTAL INSURANCE , REFERRED TO AS INSE
DESCRIBED AS TOTL CENTER INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PINS+100.0% OF LINS
PROP INS w/12% , REFERRED TO AS PI12
DESCRIBED AS PROPERTY INSURANCE W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF PINS
LIAB INS w/12% , REFERRED TO AS LI12
DESCRIBED AS LIABILITY INSURANCE W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF LINS
PROP INS W/15% , REFERRED TO AS PI15
DESCRIBED AS PROPERTY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF PINS
LIAB INS W/15% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF LINS
CAM + MGMT , REFERRED TO AS CM00
DESCRIBED AS TOTAL CAM PLUS MGMT FEE
AN INFORMATIONAL EXPENSE
+100.0% OF MGMT+100.0% OF CAME
CAM + MGMT W/15% , REFERRED TO AS CM15
DESCRIBED AS TOTAL CAM PLUS MGMT FEE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF CM00
CAM + MGMT W/12% , REFERRED TO AS CM12
DESCRIBED AS TOTAL CAM PLUS MGMT FEE W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF CM00
MGMT FEE EXPNESE , REFERRED TO AS MGM1
AN INFORMATIONAL EXPENSE
1996 VALUE - 276,760
1997 VALUE - 429,471
1998 VALUE - 6,751,082
1999 VALUE - %130,409,800
2000 VALUE - %203,060,096
2001 VALUE - %317,990,784
<PAGE>
Page 8
2002 VALUE - %319,983,008
2003 VALUE - %321,624,384
2004 VALUE - %363,056,384
2005 VALUE - %559,000,192
2006 VALUE - %580,023,424
2007 VALUE - %591,368,832
2008 VALUE - %584,786,816
2009 VALUE- %3,460,257,024
2010 VALUE- %4,180,908,032
THEREAFTER - CONSTANT
SEP TAX PARCELS , REFERRED TO AS PTAX
DESCRIBED AS OUTPARCEL TAXES
AN INFORMATIONAL EXPENSE
1996 VALUE - 1.00
1997 VALUE - 654,722
THEREAFTER - GROWING AT GROWTH RATE EXPG
TOTAL TAXES , REFERRED TO AS TTAX
DESCRIBED AS TOTAL CENTER TAXES
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PTAX+100.0% OF CTAX
LIAB INS + 5% , REFERRED TO AS LI05
AN INFORMATIONAL EXPENSE
+105.0% OF LINS
TOTAL CAM W/ 7.5% , REFERRED TO AS CA75
AN INFORMATIONAL EXPENSE
+107.5% OF CAME
OTHER EXPENSE , REFERRED TO AS OTHE
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 1.00
1997 VALUE - 5,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
VACANCY ALLOWANCE
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 1.50
THEREAFTER - CONSTANT
<PAGE>
Page 9
MANAGEMENT FEE
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1996 VALUE - 2.50
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
NONE
ALTERATION 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
COMMON AREA MAINTENANCE POOL
NONE
CAPITAL EXPENDITURES
STRUCTURAL RESERVE
MARKET RATE RREV MULTIPLIED BY AREA MEASURE TGLA
PRIMARY CLASSIFICATION CODES
1 - ANCHORS
2 - IN LINE SHOPS
3 - OUTPARCELS (OWNED)
4 - OUTPARCELS (SOLD)
5 - SEP CAM PARCEL
SECONDARY CLASSIFICATION CODES
1 - ANCHOR 20000-39999
2 - ANCHOR > 40,000 SF
3 - IN LINE < 2,000 SF
4 - IN LINE 2001-3999
5 - IN LINE 4000-19999
6 - NONOWNED OOTPARCEL
7 -
8 -
COST CENTERS
<PAGE>
Page 11
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
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
TOTAL CAM W/15% AD, REFERRED TO AS CM15
ASSIGNED TO COST CENTER 1 - CAM
PRO RATA SHARE RECOVERY OF EXPENSE CA15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CMGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CENTER TAXES , REFERRED TO AS TAX1
ASSIGNED TO COST CENTER 2 - REAL ESTATE TAXES
PRO RATA SHARE RECOVERY OF EXPENSE CTAX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TXGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
PROP INS W/15% , REFERRED TO AS PI15
ASSIGNED TO COST CENTER 3 - INSURANCE
<PAGE>
Page 12
PRO RATA SHARE RECOVERY OF EXPENSE P115
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE PIGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIAB INS w/15% , REFERRED TO AS LI15
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CMGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GOP1
GLOBAL GROUPING
GLOBAL RECOVERY CM15
GLOBAL RECOVERY TAX1
GLOBAL RECOVERY PI15
GLOBAL RECOVERY LI15
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 - SUITE 1 , VACANT
BASE LEASE DATES: 1/1997 TO 2/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
<PAGE>
Page 13
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 7.00 2 NONE NONE YES YES
2 7.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE INL3 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE STEP PER YEAR DURING EACH RENEWAL TERM
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GOP1
RENEWAL COMMISSIONS: MARKET RATE SCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE STIL
RENEWAL PAYOUT: CASHED OUT
<PAGE>
WOODFIELD VILLAGE GREEN
PROJECT DESIGNATOR: SC07
REVISION: 7/10/97 @ 13:00
LEASE ABSTRACT REPORT
FOR ALL TENANTS
7/10/97 @ 14:57
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1325 5 110,400 9/94 8/19 - 13.03 1,438,512 1.00 UNLIMITED 142,000 SEP TAX PARCELS
BUILDER'S SQUARE 2
1- 60 13.03 1,438,512 1.00 UNLIMITED 156,200 SEP TAX PARCELS
# 2-SUITE 1400 2 3,000 5/94 5/99 - 28.00 84,000 3.00 UNLIMITED NATURAL TOTAL CAM W/15% AD
CASUAL MALE 4 6/97 29.00 87,000 RE TAX W/15%
PROP INS W/15%
LIAB INS W/15%
# 3-SUITE 140 2 2,000 5/97 4/02 - 35.00 70,000 NATURAL TOTAL CAM W/15% AD
FUNCOLAND 3 5/98 35.50 71,000 CENTER TAXES
5/99 36.00 72,000 PROP INS W/15%
5/00 36.50 73,000 LIAB INS W/15%
5/01 37.00 74,000
# 4-SUITE 1404 2 1,136 6/96 5/99 - 33.00 37,488 6.00 UNLIMITED NATURAL CAM + MONT W/15%
HABANA CIGARS 3 6/97 34.65 39,362 RE TAX W/15%
6/98 36.38 41,328 PROP INS W/15%
LIAB INS W/15%
# 5-SUITE 1408 2 5,000 7/94 7/97 - 20.00 100,000 6.00 UNLIMITED 3,000 TOTAL CAM W/15% AD
PERFORMANCE CYCLE 5 7/97 22.00 110,000 7/97 3,300 REAL ESTATE TAXES
7/01 3,795 PROPERTY INSURANCE
LIAB INSURANCE
# 6-SUITE 1410 2 5,000 11/94 12/04 - 25.00 125,000 NATURAL TOTAL CAM W/15% AD
JEWELRY 3 5 1/98 27.60 138,000 REAL ESTATE TAXES
1/00 29.60 148,000 PROPERTY INSURANCE
1/03 32.66 163,300 LIAB INSURANCE
# 7-SUITE 1420 1 33,008 12/93 1/09 - 14.50 478,616 NATURAL TOTAL CAM W/10% AD
CIRCUIT CITY 1 2/04 15.95 526,478 REAL ESTATE TAXES
LIAB INSURANCE
1- 60 17.55 579,125 NATURAL TOTAL CAM W/1O% AD
REAL ESTATE TAXES
LIAB INSURANCE
</TABLE>
PRO RATA % OF RENT
TENANT SHARE BASE SUBJ TO CPI
- --------------- -------- ------------
# 1-SUITE 1325 ZERO
BUILDER'S SQUARE
ZERO
# 2-SUITE 1400 ZERO
CASUAL MALE ZERO
ZERO
ZERO
# 3-SUITE 140 ZERO
FUNCOLAND ZERO
ZERO
ZERO
# 4-SUITE 1404 ZERO
HABANA CIGARS ZERO
ZERO
ZERO
# 5-SUITE 1408 ZERO
PERFORMANCE CYCLE ZERO
ZERO
ZERO
# 6-SUITE 1410 ZERO
JEWELRY 3 ZERO
ZERO
ZERO
# 7-SUITE 1420 ZERO
CIRCUIT CITY ZERO
ZERO
ZERO
ZERO
ZERO
<PAGE>
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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 8-SUITE 1430 1 30,273 10/96 9/11 - 15.30 463,177 1.50 UNLIMITED 12,000 TOTAL CAM W/15% AD
SAKS OFF FIFTH AVE 1 10/01 16.65 504,045 REAL ESTATE TAXES
10/06 16.13 548,849 PROPERTY INSURANCE
LIAB INSURANCE
1- 60 19.00 575,187 1.50 UNLIMITED 12,000 TOTAL CAM W/15% AD
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 9-SUITE 1440 1 50,000 12/93 2/14 - 7.00 350,000 NATURAL TOTAL CAM W/5% AL
SERVICE MERCH 2 REAL ESTATE TAXES
LIAB INS + 5%
1- 60 8.05 402,500 NATURAL TOTAL CAM W/5% AD
REAL ESTATE TAXES
LIAB INS + 5%
# 10-SUITE 1450 1 23,500 4/94 1/10 - 13.50 317,250 NATURAL TOTAL CAM W/ 7.5%
OFFICE MAX 1 4/99 14.50 340,750 REAL ESTATE TAXES
4/04 15.50 364,250 PROPERTY INSURANCE
LIAB INSURANCE
1- 60 17.00 399,500 NATURAL TOTAL CAM W/ 7.5%
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 11-SUITE 1460 1 24,969 12/95 1/11 - 18.00 449,442 NATURAL TOTAL CAM W/ 7.5%
CONTAINER STORE 1 2/01 19.00 474,411 REAL ESTATE TAXES
2/06 20.00 499,380 PROPERTY INSURANCE
LIAB INSURANCE
1- 60 21.00 524,349 NATURAL TOTAL CAM W/ 7.5%
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 12-SUITE 1470 1 42,396 12/93 11/13 - 12.50 529,950 NATURAL TOTAL CAM W/7 AD
SPORTS AUTHORITY 2 12/03 13.75 582,945 REAL ESTATE TAXES
12/08 15.12 641,028 PROPERTY INSURANCE
</TABLE>
PRO RATA % OF RENT
TENANT SHARE BASE SUBJ TO CPI
- --------------- ---------- -----------
# 8-SUITE 1430 ZERO
SAKS OFF FIFTH AVE ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
# 9-SUITE 1440 ZERO
SERVICE MERCH ZERO
ZERO
ZERO
ZERO
ZERO
# 10-SUITE 1450 ZERO
OFFICE MAX ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
# 11-SUITE 1460 ZERO
CONTAINER STORE ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
# 12-SUITE 1470 ZERO
SPORT AUTHORITY ZERO
ZERO
<PAGE>
Page 3
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1- 60 16.63 705,045 NATURAL TOTAL CAM W/7% AD
REAL ESTATE TAXES
LIAB INSURANCE
# 13-SUITE 1472 2 3,647 12/93 5/99 - 24.00 87,528 NATURAL TOTAL CAM W/15% AD
WORK N GEAR 4 RE TAX W/15%
PROP INS W/15%
LIAB INS W/15%
# 14-SUITE 1478 2 2,130 3/94 5/99 - 24.00 51,120 3.00 UNLIMITED NATURAL TOTAL CAM W/15% AD
PAYLESS SHOESURCE 4 RE TAX W/15%
PROP INS W/15%
LIAB INS W/15%
# 15-SUITE 1480 2 1,379 6/94 3/99 - 25.00 34,475 6.00 UNLIMITED NATURAL CAM + MGMT W/15%
HOWARD MATERNITY 3 RE TAX W/15%
PROP INS W/15%
LIAB INS W/15%
1- 60 28.24 38,939 6.00 UNLIMITED NATURAL CAM + MGMT W/15%
4/02 31.48 43,411 RE TAX W/15%
PROP INS W/15%
LIAB INS W/15%
# 16-SUITE 1484 2 8,959 7/94 6/99 - 20.00 179,180 NATURAL TOTAL CAM W/12% AD
ULTA 3 COSMETICS 5 7/97 20.50 183,660 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 17-SUITE 1488 1 40,000 12/93 1/09 - 12.00 480,000 2.50 UNLIMITED NATURAL TOTAL CENTER CAM
MARSHALL'S 2 12/98 13.20 528,000 CAM ADMIN
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1- 60 14.50 580,000 2.50 UNLIMITED NATURAL TOTAL CENTER CAM
CAM ADMIN
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
</TABLE>
PRO RATA % OF RENT
TENANT SHARE BASE SUBJ TO CPI
- --------------- ---------- -----------
ZERO
ZERO
ZERO
# 13-SUITE 1472 ZERO
WORK N GEAR ZERO
ZERO
ZERO
# 14-SUITE 1478 ZERO
PAYLESS SHOESURCE ZERO
ZERO
ZERO
# 15-SUITE 1480 ZERO
HOWARD MATERNITY ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
# 16-SUITE 1484 ZERO
ULTA 3 COSMETICS ZERO
ZERO
ZERO
# 17-SUITE 1488 ZERO
MARSHALL'S
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
ZERO
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S)
- --------------- -------- ------ ----- ----- ------ ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 18-SUITE 1500 2 11,500 11/95 10/00 - 23.00 264,500 2.00 UNLIMITED
OLD NAVY 5
# 19-SUITE 1510 2 4,500 8/96 7/06 - 21.00 94,500 3.00 UNLIMITED
FOOTQUARTERS 5 8/01 22.50 101,250
1- 60 24.00 108,000 3.00 UNLIMITED
# 20-SUITE 1520 1 40,000 4/94 1/09 - 13.00 520,000 1.00 UNLIMITED
NORDSTROM RACK 2 2/04 14.25 570,000
1- 60 15.25 610,000 1.00 UNLIMITED
# 21-SUITE 1522 2 9,075 12/93 11/98 - 21.00 190,575
LAND'S END OUTLET 5
# 22-SUITE 1540 1 30,000 4/94 3/09 - 14.00 420,000
BORDERS BOOKS 1 4/99 15.35 460,500
4/04 16.83 504,900
1- 60 18.46 553,800
# 23-SUITE 1550 4 7,000 1/93 12/44 - 0.00 0
CALIF PIZZA KITCHE 6
</TABLE>
BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- ------------ ------------------ ---------- -----------
# 18-SUITE 1500 NATURAL TOTAL CAM W/15% AD ZERO
OLD NAVY REAL ESTATE TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 19-SUITE 1510 NATURAL CAM + MGMT W/15% ZERO
FOOTQUARTERS REAL ESTATE TAXES ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
NATURAL CAM + MGMT W/15% ZERO
REAL ESTATE TAXES ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 20-SUITE 1520 18,000 TOTAL CAM W/3% AD ZERO
NORDSTROM RACK REAL ESTATE TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
18,000 TOTAL CAM W/3% AD ZERO
REAL ESTATE TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 21-SUITE 1522 NATURAL CAM + MGMT W/12% ZERO
LAND'S END OUTLET RE TAX W/12% ZERO
PROP INS W/12% ZERO
LIAB INS W/12% ZERO
# 22-SUITE 1540 NATURAL TOTAL CAM W/7% AD ZERO
BORDERS BOOKS REAL ESTATE TAXES ZERO
LIAB INSURANCE ZERO
NATURAL TOTAL CAM W/7% AD ZERO
REAL ESTATE TAXES ZERO
LIAB INSURANCE ZERO
# 23-SUITE 1550 NATURAL TOTAL CAM W/15% AD ZERO
CALIF PIZZA KITCHE PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
SEP TAX PARCELS ZERO
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S)
- --------------- -------- ------ ----- ----- ------ ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 24-SUITE 1560 2 1,400 7/94 6/04 - 26.00 36,400
STARBUCKS COFFEE 3 7/97 28.00 39,200
7/01 30.00 42,000
1- 60 33.50 46,900
# 25-SUITE 1562 2 1,120 3/95 2/00 - 30.00 33,600 3.00 UNLIMITED
BEN & JERRY'S 3 3/98 32.00 35,840
# 26-SUITE 1564 2 1,700 11/94 10/04 - 30.00 51,000 6.00 UNLIMITED
SCHLOTZKY'S 3 11/97 32.70 55,590
11/01 36.62 62,254
# 27-SUITE 1570 2 15,000 10/94 9/04 - 21.00 315,000 2.00 UNLIMITED
R STROUDS 5 10/97 22.00 330,000
10/01 23.00 345,000
1- 60 25.00 375,000 2.00 UNLIMITED
# 28-SUITE 1408-A 2 2,500 8/97 7/02 - 32.00 80,000 - -
AT&T 4 8/98 32.50 81,250
8/99 33.00 82,500
8/00 33.50 83,750
8/01 34.00 85,000
# 29-SUITE 1408-B 2 2,500 11/97 10/02 - 27.00 67,500 6.00 UNLIMITED
VACANT 4 11/98 27.54 68,850
11/99 28.09 70,227
11/00 28.65 71,632
11/01 29.23 73,064
</TABLE>
BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- ---------- ------------------ ---------- -----------
# 24-SUITE 1560 NATURAL TOTAL CAM W/15% AD ZERO
STARBUCKS COFFEE RE TAX W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
NATURAL TOTAL CAM W/15% AD ZERO
RE TAX W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 25-SUITE 1562 NATURAL TOTAL CAM W/15% AD ZERO
BEN & JERRY'S RE TAX W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 26-SUITE 1564 NATURAL CAM + MGMT W/15% ZERO
SCHLOTZKY'S RE TAX W/15% ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 27-SUITE 1570 NATURAL TOTAL CAM W/15% AD ZERO
R STROUDS REAL ESTATE TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
NATURAL TOTAL CAM W/15% AD ZERO
REAL ESTATE TAXES ZERO
PROPERTY INSURANCE ZERO
LIAB INSURANCE ZERO
# 28-SUITE 1408-A - TOTAL CAM W/15% AD ZERO
AT&T CENTER TAXES ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
# 29-SUITE 1408-B NATURAL TOTAL CAM W/15% AD ZERO
VACANT CENTER TAXES ZERO
PROP INS W/15% ZERO
LIAB INS W/15% ZERO
<PAGE>
PACE 6
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S)
- --------------- -------- -------- ----- ----- ------ ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
513,092
=======
</TABLE>
BREAKPOINT PRO RATA % OF RENT
TENANT (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- ---------- ------------------ ---------- -----------
<PAGE>
WOODFIELD VILLAGE GREEN
PROJECT DESIGNATOR: SCO7
REVISION: 7/10/97 @ 13:00
TENANT AGING REPORT
7/10/97 @ 14:57
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- -------------------------------- ---------- --------- -------------
5 1408 PERFORMANCE CYCLE 5,000 Jul 1997
-------
1997 Total 5,000
21 1522 LAND'S END OUTLET 9,075 Nov 1998
-------
1998 Total 9,075
15 1480 HOWARD MATERNITY 1,379 Mar 1999 #1- 60 mos
13 1472 WORK N GEAR 3,647 May 1999
14 1478 PAYLESS SHOESURCE 2,130 May 1999
4 1404 HABANA CIGARS 1,136 May 1999
2 1400 CASUAL, MALE 3,000 May 1999
16 1484 ULTA 3 COSMETICS 8,959 Jun 1999
-------
1999 Total 20,251
25 1562 BEN & JERRY'S 1,120 Feb 2000
18 1500 OLD NAVY 11,500 Oct 2000
-------
2000 Total 12,620
3 1402 FUNCOLAND 2,000 Apr 2002
28 1408-A AT&T 2,500 Jul 2002
29 1408-B VACANT 2,500 Oct 2002
-------
2002 Total 7,000
24 1560 STARBUCKS COFFEE 1,400 Jun 2004 #1- 60 mos
27 1570 R STROUDS 15,000 Sep 2004 #1- 60 mos
26 1564 SCHLOTZKY'S 1,700 Oct 2004
6 1410 JEWELRY 3 5,000 Dec 2004
-------
2004 Total 23,100
19 1510 FOOTQUARTERS 4,500 Jul 2006 #1- 60 mos
-------
2006 Total 4,500
17 1488 MARSHALL'S 40,000 Jan 2009 #1- 60 mos
20 1520 NORDSTROM RACK 40,000 Jan 2009 #1- 60 mos
<PAGE>
WOODFIELD VILLAGE GREEN PAGE 2
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- -------------------------------- ---------- --------- -------------
7 1420 CIRCUIT CITY 33,008 Jan 2009 #1- 60 mos
22 1540 BORDERS BOOKS 30,000 Mar 2009 #1 60 mos
-------
2009 Total 143,008
10 1450 OFFICE MAX 23,500 Jan 2010 #1- 60 mos
-------
2010 Total 23,500
11 1460 CONTAINER STORE 24,969 Jan 2011 #1- 60 mos
8 1430 SAKS OFF FIFTH AVE 30,273 Sep 2011 #1- 60 mos
-------
2011 Total 55,242
12 1470 SPORTS AUTHORITY 42,396 Nov 2013 #1- 60 mos
-------
2013 Total 42,396
9 1440 SERVICE MERCH 50,000 Feb 2014 #1- 60 mos
-------
2014 Total 50,000
1 1325 BUILDER'S SQUARE 110,400 Aug 2019 #1- 60 mos
-------
2019 Total 110,400
23 1550 CALIF PIZZA KITCHE 7,000 Dec 2044
-------
2044 Total 7,000
-------
Report Total 513,092
=======
<PAGE>
Wed Jul 2, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 82,296 279,836 906,726
1996 ESTIMATE 79,911 275,605 881,193
1990 CENSUS 76,454 265,273 831,273
1980 CENSUS 63,231 237,839 702,750
GROWTH 1980 - 1990 20.91% 11.53% 18.29%
HOUSEHOLDS
2001 PROJECTION 34,317 108,419 341,071
1996 ESTIMATE 33,160 105,878 329,672
1990 CENSUS 30,804 99,845 303,822
1980 CENSUS 22,887 82,107 238,328
GROWTH 1980 - 1990 34.59% 21.60% 27.48%
1996 ESTIMATED POPULATION BY RACE 79,911 275,605 881,193
WHITE 86.99% 88.89% 88.17%
BLACK 3.19% 2.32% 2.30%
ASIAN & PACIFIC ISLANDER 7.71% 7.11% 6.99%
OTHER RACES 2.11% 1.68% 2.54%
1996 ESTIMATED POPULATION 79,911 275,605 881,193
HISPANIC ORIGIN 9.22% 7.80% 8.66%
OCCUPIED UNITS 30,804 99,845 303,822
OWNER OCCUPIED 64.84% 70.50% 72.75%
RENTER OCCUPIED 35.16% 29.5O% 27.25%
1990 AVERAGE PERSONS PER HH 2.45 2.63 2.71
1996 EST. HOUSEHOLDS BY INCOME 33,160 105,878 329,672
$150,000 OR MORE 6.78% 6.70% 6.88%
$100,000 TO $149,999 9.51% 9.15% 9.29%
$ 75,000 TO $ 99,999 12.39% 13.36% 13.53%
$ 50,000 TO $ 74,999 26.36% 27.81% 27.66%
$ 35,000 TO $ 49,999 17.31% 16.52% 16.80%
$ 25,000 TO $ 34,999 10.99% 10.14% 10.11%
$ 15,000 TO $ 24,999 8.48% 8.14% 8.14%
$ 5,000 TO $ 15,000 6.69% 6.76% 6.28%
UNDER $ 5,000 1.49% 1.43% 1.30%
1996 EST. AVERAGE HOUSEHOLD INCOME $74,288 $74,680 $75,567
1996 EST. MEDIAN HOUSEHOLD INCOME $54,779 $56,305 $56,659
1996 EST. PER CAPITA INCOME $31,203 $28,986 $28,500
<PAGE>
Wed Jul 2, 1997 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 79,911 275,605 881,193
MALE 49.38% 49.08% 49.37%
FEMALE 50.62% 50.92% 50.63%
MARITAL STATUS 62,685 211,736 654,131
SINGLE MALE 16.49% 14.86% 14.37%
SINGLE FEMALE 13.04% 12.10% 11.58%
MARRIED 54.82% 58.77% 60.32%
PREVIOUSLY MARRIED MALE 4.94% 4.29% 4.22%
PREVIOUSLY MARRIED FEMALE 10.70% 9.98% 9.51%
HOUSEHOLDS WITH CHILDREN 9,223 35,021 113,611
MARRIED COUPLE FAMILY 82.48% 85.05% 85.11%
OTHER FAMILY-MALE HEAD 3.64% 3.01% 3.12%
OTHER FAMILY-FEMALE HEAD 13.15% 11.28% 11.10%
NON FAMILY 0.73% 0.65% 0.66%
1996 ESTIMATED POPULATION BY AGE 79,911 275,605 881,193
UNDER 5 YEARS 6.33% 6.98% 7.80%
5 TO 9 YEARS 5.83% 6.57% 7.04%
10 TO 14 YEARS 5.63% 6.44% 6.55%
15 TO 17 YEARS 3.63% 3.94% 3.79%
18 TO 20 YEARS 3.35% 3.19% 3.19%
21 TO 24 YEARS 6.16% 5.34% 5.25%
25 TO 29 YEARS 10.51% 8.67% 8.89%
30 TO 34 YEARS 9.96% 9.26% 9.56%
35 TO 39 YEARS 9.33% 9.38% 9.39%
40 TO 49 YEARS 16.43% 17.07% 16.40%
50 TO 59 YEARS 9.88% 10.43% 10.06%
60 TO 64 YEARS 3.55% 3.48% 3.37%
65 TO 69 YEARS 2.86% 2.99% 2.96%
70 TO 74 YEARS 2.13% 2.22% 2.23%
75 + YEARS 4.41% 4.06% 3.52%
MEDIAN AGE 34.29 34.80 33.92
AVERAGE AGE 35.77 35.44 34.57
<PAGE>
Wed Jul 2, 1997 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 ESTIMATED FEMALE POP. BY AGE 40,454 140,340 446,184
UNDER 5 YEARS 6.12% 6.68% 7.51%
5 TO 9 YEARS 5.80% 6.40% 6.82%
10 TO 14 YEARS 5.14% 6.06% 6.19%
15 TO 17 YEARS 3.45% 3.76% 3.68%
18 TO 20 YEARS 3.12% 2.96% 3.01%
21 TO 24 YEARS 5.83% 5.19% 5.15%
25 TO 29 YEARS 10.01% 8.38% 8.75%
30 TO 34 YEARS 9.51% 8.93% 9.29%
35 TO 39 YEARS 9.24% 9.31% 9.31%
40 TO 49 YEARS 16.59% 17.37% 16.67%
50 TO 59 YEARS 9.93% 10.35% 10.07%
60 TO 64 YEARS 3.65% 3.50% 3.40%
65 TO 69 YEARS 2.94% 3.05% 3.06%
70 TO 74 YEARS 2.33% 2.45% 2.41%
75 + YEARS 6.35% 5.60% 4.68%
FEMALE MEDIAN AGE 35.55 35.88 34.78
FEMALE AVERAGE AGE 37.24 36.67 35.60
POPULATION BY HOUSEHOLD TYPE 76,454 265,273 831,273
FAMILY HOUSEHOLDS 80.17% 85.14% 86.89%
NON-FAMILY HOUSEHOLDS 18.63% 13.95% 12.33%
GROUP QUARTERS 1.20% 0.91% 0.78%
HOUSEHOLDS BY TYPE 30,804 99,845 303,822
SINGLE MALE 13.26% 10.19% 9.42%
SINGLE FEMALE 15.69% 13.36% 11.96%
MARRIED COUPLE 53.09% 60.08% 62.46%
OTHER FAMILY-MALE HEAD 2.92% 2.72% 2.89%
OTHER FAMILY-FEMALE HEAD 7.28% 7.52% 7.67%
NON FAMILY-MALE HEAD 4.75% 3.76% 3.45%
NON FAMILY-FEMALE HEAD 3.02% 2.37% 2.14%
POPULATION BY URBAN VS. RURAL 76,481 264,820 831,496
URBAN 100.00% 100.00% 99.71%
RURAL 0.00% 0.00% 0.29%
<PAGE>
Wed Jul 2, 1997 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BAS 31,253 106,946 329,390
WORKING WITH CHILD 0 - 5 4.47% 4.91% 5.68%
NOT WORKING WITH CHILD 0 - 5 0.23% 0.22% 0.26%
NOT IN LABOR FORCE WITH CHILD 0 - 3.71% 3.79% 3.98%
WORKING WITH CHILD 6 - 17 11.04% 12.27% 12.81%
NOT WORKING WITH CHILD 6 - 17 0.27% 0.29% 0.38%
NOT IN LAB. FORCE WITH CHILD 6 - 3.09% 3.64% 3.68%
WORKING WITH CHILD 0 - 5 & 6 - 18 3.30% 3.36% 3.74%
NOT WORKING WITH CHILD 0-5 & 6-18 0.00% 0.08% 0.19%
NOT IN LAB. FORCE W/CHILD 0-5 &6- 2.04% 2.63% 2.83%
WORKING WITH NO CHILDREN 47.18% 44.59% 43.03%
NOT WORKING WITH NO CHILDREN 1.16% 1.16% 1.25%
NOT IN LAB. FORCE WITH NO CHILD. 23.51% 23.06% 22.17%
HH BY AGE BY POVERTY STATUS 30,720 99,444 303,950
ABOVE POVERTY UNDER AGE 65 84.96% 84.04% 84.49%
ABOVE POVERTY AGE 65 + 12.13% 12.96% 12.57%
BELOW POVERTY UNDER AGE 65 1.97% 2.00% 2.08%
BELOW POVERTY AGE 65 + 0.94% 1.00% 0.86%
POPULATION 16+ BY EMPLOYMENT STATUS 61,726 208,408 643,827
EMPLOYED IN ARMED FORCES 0.21% 0.14% 0.12%
EMPLOYED CIVILIANS 74.85% 74.02% 74.16%
UNEMPLOYED CIVILIANS 2.16% 2.12% 2.44%
NOT IN LABOR FORCE 22.78% 23.71% 23.29%
POPULATION 16+ BY OCCUPATION 46,205 154,266 477,458
EXECUTIVE AND MANAGERIAL 19.64% 18.80% 18.26%
PROFESSIONAL SPECIALTY 13.75% 14.43% 13.50%
TECHNICAL SUPPORT 4.39% 3.79% 3.72%
SALES 16.69% 16.08% 15.63%
ADMINISTRATIVE SUPPORT 18.67% 19.97% 19.66%
SERVICE: PRIVATE HOUSEHOLD 0.14% 0.11% 0.14%
SERVICE: PROTECTIVE 0.88% 1.01% 1.00%
SERVICE: OTHER 8.12% 7.23% 7.25%
FARMING FORESTRY & FISHING 0.61% 0.48% 0.57%
PRECISION PRODUCTION & CRAFT 8.47% 9.02% 9.76%
MACHINE OPERATOR 3.92% 3.96% 4.78%
TRANS. AND MATERIAL MOVING 1.98% 2.36% 2.66%
LABORERS 2.74% 2.76% 3.08%
<PAGE>
Wed Jul 2, 1997 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 19,563 70,277 222,692
NO WORKERS 5.23% 5.51% 5.40%
ONE WORKER 23.03% 22.85% 22.81%
TWO WORKERS 53.77% 52.59% 53.27%
THREE + WORKERS 17.97% 19.05% 18.52%
HISPANIC POPULATION BY TYPE 76,454 265,273 831,273
NOT HISPANIC 93.64% 95.39% 93.81%
MEXICAN 4.70% 3.19% 4.56%
PUERTO RICAN 0.37% 0.33% 0.38%
CUBAN 0.18% 0.13% 0.17%
OTHER HISPANIC 1.11% 0.96% 1.07%
1996 HISPANICS BY RACE: BASE 7,366 21,485 76,327
WHITE 75.44% 76.60% 68.82%
BLACK 0.68% 0.52% 0.62%
ASIAN 2.53% 2.78% 2.49%
OTHER 21.35% 20.09% 28.07%
POPULATION BY TRANSPORTATION TO WORK 45,687 152,398 470,714
DRIVE ALONE 83.05% 81.59% 81.02%
CAR POOL 8.59% 8.61% 9.43%
PUBLIC TRANSPORTATION 3.99% 5.47% 5.17%
DRIVE MOTORCYCLE 0.02% 0.05% 0.O5%
WALKED ONLY 2.08% 1.76% 1.70%
OTHER MEANS 0.67% 0.68% 0.67%
WORKED AT HOME 1.59% 1.83% 1.97%
POPULATION BY TRAVEL TIME TO WORK 45,687 152,398 470,714
UNDER 10 MINUTES / WORK AT HOME 13.61% 13.32% 12.67%
10 TO 29 MINUTES 49.34% 47.51% 45.35%
30 TO 59 MINUTES 29.13% 30.01% 32.69%
60 TO 89 MINUTES 5.95% 7.12% 7.19%
90+ MINUTES 1.97% 2.04% 2.09%
AVERAGE TRAVEL TIME IN MINUTES 25.09 25.95 26.68
HOUSEHOLDS BY NO. OF VEHICLES 30,835 99,686 303,825
NO VEHICLES 3.84% 4.17% 3.65%
1 VEHICLE 35.79% 31.96% 30.50%
2 VEHICLES 44.76% 46.18% 47.92%
3+ VEHICLES 15.61% 17.69% 17.93%
ESTIMATED TOTAL VEHICLES 54,044 180,369 558,175
<PAGE>
Wed Jul 2, 1997 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 51,859 175,500 543,289
ELEMENTARY (0-8) 4.46% 4.24% 5.12%
SOME HIGH SCHOOL (9-11) 6.55% 7.27% 8.06%
HIGH SCHOOL GRADUATE (12) 24.49% 25.38% 26.42%
SOME COLLEGE (13-15) 22.96% 23.34% 23.03%
ASSOCIATES DEGREE ONLY 7.76% 7.32% 6.85%
BACHELORS DEGREE ONLY 24.47% 23.39% 21.92%
GRADUATE DEGREE 9.31% 9.05% 8.60%
POPULATION ENROLLED IN SCHOOL 17,740 65,886 208,332
PUBLIC PRE- PRIMARY 5.40% 5.51% 5.66%
PRIVATE PRE- PRIMARY 3.81% 4.06% 4.17%
PUBLIC ELEM/HIGH 52.47% 55.13% 55.59%
PRIVATE ELEM/HIGH 7.13% 6.81% 7.41%
ENROLLED IN COLLEGE 31.19% 28.49% 27.17%
HOUSING UNITS BY OCCUPANCY STATUS 33,028 105,161 317,422
OCCUPIED 93.27% 94.94% 95.72%
VACANT 6.73% 5.06% 4.28%
VACANT UNITS 2,224 5,317 13,599
FOR RENT 57.68% 61.64% 52.96%
FOR SALE ONLY 11.14% 12.57% 18.91%
SEASONAL 9.44% 6.47% 5.56%
OTHER 21.74% 19.31% 22.57%
OWNER OCCUPIED PROPERTY VALUES 15,657 59,200 183,756
UNDER $25,000 0.12% 0.13% 0.15%
$25,000 TO $49,999 0.28% 0.26% 0.37%
$50,000 TO $74,999 2.15% 2.70% 3.71%
$75,000 TO $99,999 15.36% 12.08% 14.20%
$100,000 TO $149,999 43.61% 43.20% 41.78%
$150,000 TO $199,999 17.87% 23.94% 22.46%
$200,000 TO $299,999 17.15% 14.18% 12.49%
$300,000 TO $399,999 2.97% 2.59% 2.73%
$400,000 TO $499,999 0.38% 0.48% 1.01%
$500,000 + 0.10% 0.43% 1.09%
MEDIAN PROPERTY VALUE $149,166 $150,130 $150,085
TOTAL RENTAL UNITS 10,675 28,938 81,086
MEDIAN RENT $676 $642 $608
<PAGE>
Wed Jul 2, 1997 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 30,804 99,845 303,822
1 PERSON UNITS 28.95% 23.54% 21.38%
2 PERSON UNITS 32.63% 31.79% 31.68%
3 PERSON UNITS . 15.80% 17.48% 18.08%
4 PERSON UNITS 14.00% 16.92% 17.55%
5 PERSON UNITS 5.71% 7.04% 7.59%
6 PERSON UNITS 1.92% 2.25% 2.46%
7 + UNITS 1.00% 0.97% 1.25%
YEAR ROUND UNITS IN STRUCTURE 33,028 105,161 317,422
SINGLE UNITS DETACHED 40.81% 52.82% 53.85%
SINGLE UNITS ATTACHED 13.00% 11.17% 11.93%
DOUBLE UNITS 0.14% 0.35% 0.67%
3 TO 9 UNITS 10.33% 9.38% 11.75%
10 TO 19 UNITS 9.73% 6.34% 6.44%
20 TO 49 UNITS 11.92% 9.03% 7.17%
50 + UNITS 12.27% 9.73% 6.63%
MOBILE HOME OR TRAILER 0.05% 0.29% 0.92%
ALL OTHER 1.75% 0.90% 0.65%
SINGLE/MULTIPLE UNIT RATIO 1.21 1.84 2.01
HOUSING UNITS BY YEAR BUILT 30,835 99,686 303,825
BUILT 1989 TO MARCH 1990 2.33% 1.72% 2.49%
BUILT 1985 TO 1988 12.84% 10.26% 12.25%
BUILT 1980 TO 1984 9.47% 8.02% 8.65%
BUILT 1970 TO 1979 37.65% 36.33% 34.57%
BUILT 1960 TO 1969 23.25% 25.44% 24.00%
BUILT 1950 TO 1959 13.64% 14.37% 13.02%
BUILT 1940 TO 1949 0.49% 1.96% 2.56%
BUILT 1939 OR EARLIER 0.34% 1.90% 2.45%
<PAGE>
Wed Jul 2, 1997 Page 1
CUSTOM SUMMARY REPORT
(RETAIL TRADE POTENTIAL REPORT - CURRENT YEAR SALES BY STORE TYPE)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
Cushman & Wakefield
Meacham and Golf
Schaumburg, Illinois COORD: 42:03.03 88:02.69
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
TOTAL RETAIL SALES $813 $2,620 $9,038
APPAREL & ACCESSORY STORES $53 $171 $594
AUTOMOTIVE DEALERS $175 $572 $2,226
AUTOMOTIVE & HOME SUPPLY STORES $8 $25 $78
DRUG & PROPRIETARY STORES $44 $141 $447
EATING & DRINKING PLACES $95 $301 $955
FOOD STORES $128 $411 $1,339
FURNITURE & HOME FURNISHINGS STORES $26 $85 $307
HOME APPLIANCE, RADIO, & T.V. STORES $30 $97 $340
GASOLINE SERVICE STATIONS $38 $122 $447
GENERAL MERCHANDISE $86 $277 $979
DEPARTMENT STORES $79 $256 $907
(INCLUDING LEASED DEPTS.)
HARDWARE, LUMBER & GARDEN STORES $31 $99 $371
($'S IN MILLIONS)
<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>
STATEMENT OF QUALIFICATIONS
================================================================================
KELLEEN M. BODINE
Real Estate Experience
Ms. Bodine has been active in the appraisal of real estate since 1989. Ms.
Bodine has been involved in numerous mixed-use projects and multi-property
portfolios. She has provided valuation and investment analysis services for a
variety of property types including land, office buildings, regional malls,
shopping centers, apartment complexes, subsidized housing units, industrial
buildings, hotels, proposed income-producing properties, and various special
purpose properties. Ms. Bodine has appraisal experience in major first- and
second-tier metropolitan markets in twenty-two states, including Illinois,
California, Colorado, Arizona, Minnesota, Michigan and Maryland.
Education
University of Wisconsin - Madison
Bachelor of Business Administration
Real Estate/Urban Land Economics and Finance/Investment Banking
Real Estate Education
The following courses sponsored by the Appraisal Institute have been
successfully completed:
Real Estate Appraisal Principles 1A-1
Basic Valuation Procedures 1A-2
Standards of Professional Practice
Capitalization Theory and Techniques 1BA
Capitalization Theory and Techniques 1BB
Advanced Applications
Ms. Bodine has also attended numerous lectures and seminars sponsored by the
Appraisal Institute.
Ms. Bodine is currently a candidate for the MAI designation of the Appraisal
Institute.
Current Position
Associate Director, Cushman & WakefieId Valuation Advisory Services, Chicago,
Illinois.
<PAGE>
STATEMENT OF QUALIFICATIONS
================================================================================
STANLEY R DENNIS, JR., MAI
Real Estate Experience
Director, Manager, Cushman & Wakefield Valuation Advisory Services, Chicago,
Illinois. Division is responsible for the appraisal and consultation function of
Cushman & Wakefield, Inc., a national full service real estate organization,
1989.
Vice President, Manager, Cushman & Wakefield Appraisal Services, Portland,
Oregon, 1983.
Principal, Stanley R. Dennis & Associates, Portland, Oregon 1982.
Education
Portland State University, Portland, Oregon
Bachelor of Science Degree, 1977, Finance and Real Estate
Appraisal Institute
Course I-A Fundamentals and Principles of Real Estate Appraisal
Course I-B Capitalization Theory and Techniques
Course II-I Case Studies in Real Estate Valuation
Course II-2 Valuation Analysis and Report Writing
Course II-3 Standards of Professional Practice
Course IV Litigation/Condemnation Valuation
Course VI Investment Analysis
Course VIII Residential Case Studies
Course X Market Analysis
Seminar Feasibility Analysis and Highest and Best Use
Seminar Discounted Cash Flow Analysis
Seminar Cash Equivalency
Seminar Subdivision Analysis
Seminar Rates, Ratios and Reasonableness
Professional Affiliations
American Institute of Real Estate Appraisers, Member (Designation #6754)
Building Owners and Managers Association (BOMA)
National Association of Corporate Real Estate Executives (NACORE)
<PAGE>
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COMPLETE APPRAISAL OF
REAL PROPERTY
Carmel Mountain Plaza
Carmel Mountain Road and Rancho Carmel Drive
Community of Carmel Mountain Ranch
City of San Diego, San Diego County, California
================================================================================
IN SUMMARY REPORT
As of July 1, 1997
Master Realty Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial
20th Floor
New York, New York 10285
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
1920 Main Street, Suite 100
Irvine, CA 92614
CUSHMAN &
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Cushman & Wakefield of California, Inc. CUSHMAN &
1920 Main Street, Suite 100 WAKEFIELD(R)
Irvine, CA 92614 Improving your place
Tel: (714) 474-4004 in the world.
Fax: (714) 474-0405
July 15,1997
Mr. Brian Summers
Vice President
Master Realty Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Re: Carmel Mountain Plaza
Carmel Mountain Ranch Road at Rancho
Carmel Drive, Carmel Mountain Ranch
City of San Diego, San Diego County, California
Gentlemen:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our report estimating the
market value of the leased fee estate in the above referenced real property.
As specified in the Letter of Engagement, the value opinion reported
herein 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. The results of the appraisal are being conveyed in a Summary Report
according to our agreement. The accompanying report summarizes the pertinent
data, analysis and conclusions secured in our investigation, rather than provide
a self- contained narrative within the report. It is noted that this report
incorporates by reference our previous Complete Appraisal prepared in a
Self-Contained report format with a date of value of February 1, 1996.
This report was prepared for Master Realty Inc., Managing Member of
Community Centers, I, LLC and Lehman Brothers, Inc. (Client) and it is intended
only for the specified use of the Client. The property was inspected by and the
report prepared by Sean M. Crosby under the direct supervision of Robert W.
Bell, MAI, who has previously inspected the property.
<PAGE>
Mr. Brian Summers
July 15, 1997
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, as of July 1, 1997, the
date of inspection, was:
SIXTY FIVE MILLION DOLLARS
$65,000,000
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 CALIFORNIA, INC.
Valuation Advisory Services - Orange County Office
/s/ Sean M. Crosby
Sean M. Crosby
Associate Director
State Cert. No. AG009283
/s/ Robert W. Bell
Robert W. Bell, MAI
Operating Manager, Pacific Southwest Region
State Cert. No. AG001951
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Carmel Mountain Plaza
Location: Carmel Mountain Road and Rancho Carmel
Drive, Community of Carmel Mountain Ranch,
City of San Diego, County of San Diego,
State of California.
Date of Inspection: July 1,1997
Date of Value: July 1,1997
Ownership: Community Centers I, LLC
Total Land Area (Owned): 41.0+/- acres (1,785,906+/- square feet)
Zoning: NC, Neighborhood Commercial (in conformance
with the Carmel Mountain Ranch Community
Plan), City of San Diego
Improvements
Type: Single-level community/power center
constructed of concrete block with
structural steel frame and masonry
exterior.
Gross Leasable Area (Owned):
============================================
Kmart (ground lease) 107,870+/-SF
--------------------------------------------
Sportmart 40,672+/-SF
--------------------------------------------
Circuit City 30,973+/-SF
--------------------------------------------
Pacific Theaters 34,561+/-SF
--------------------------------------------
Marshalls 28,760+/-SF
--------------------------------------------
Ross 24,000+/-SF
--------------------------------------------
Michaels 22,969+/-SF
--------------------------------------------
Blockbuster Music 14,000+/-SF
--------------------------------------------
Barnes & Noble 13,916+/-SF
--------------------------------------------
Blockbuster Video 6,048+/-SF
============================================
Total Majors 323,769+/-SF
============================================
Shop Space 118,708+/-SF
============================================
Total 442,477+/-SF
============================================
Total Center Building Area: 532,129+/- square feet (including
non-owned outparcel buildings to Mervyns,
Texaco, Chevys, and Boston Market)
Year Built: 1993/1994
Condition: Good
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Summary of Salient Facts and Conclusions
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Land-to-Building Ratio: 4.04:1 (owned)
Site Coverage: 24.8% (owned)
Parking Spaces Provided: 3,000 stalls are provided (6.8 cars
per 1,000 square feet of total
building area)
Highest and Best Use
If Vacant: Commercial/retail utilization built to
its maximum feasible FAR.
As Improved: Continued retail use as a
power/community shopping center.
Operating Data and Forecasts
Current Occupancy: 100%
Forecasted Stabilized Occupancy: 95% (based on in-line shop and
outparcel GLA and net of downtime
provisions).
Operating Expenses Annual Amount Unit Rate *
------------- -----------
1996 Actual $2,057,555 $4.65
1997 Budget (Owners): $2,022,465 $4.57
FY 1998 C&W Forecast: $2,004,598 $4.53
* Per square foot of owned GLA
- ----------------
Value Indicators
- ----------------
Cost Approach: N/A
Sales Comparison Approach: $64,160,000 to $66,370,000
Income Approach
Direct Capitalization: $63,350,000
Discounted Cash Flow: $65,580,000
Investment Assumptions
Holding Period: 10 years
Income/CPI Growth Rate: +3.5%
Expense Growth Rate: +3.5% (Taxes @ 2% per Proposition 13)
Sales Growth Rate: +3.5%
Tenant Improvements-
New Tenants: $5.00/SF
Renewing Tenants: $5.00/SF
Commissions
New Tenants: 6% of aggregate rent
Renewing Tenants: 3% of aggregate rent
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Summary of Salient Facts and Conclusions
================================================================================
Vacancy Between Tenants: 6 months
Renewal Probability (In-line): 50%
Terminal Capitalization Rate: 9.5%
Cost of Sale at Reversion: 3.0%
Discount Rate: 11.50%
Value Conclusion: $65,000,000
Resulting Indicators
Unit Rate: $146.90/SF of owned GLA
Net Income (FY 1998): $5,701,463
Implicit Overall Capitalization Rate: 8.77%
Exposure Time Implicit
in Market Value Conclusion: Not to exceed 12 months
Special Risk Factors: None
Special Assumptions:
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll, budgets, sales
reports and other property specific information. We were also
provided with a Pro-Ject diskette for the property which ownership
has portrayed as containing the actual lease terms. It is noted that
we audited actual lease documents for several of the major tenants
during the course of our initial Complete Appraisal in February
1996. Based upon the current information provided, minor
discrepancies were noted which we have reconciled to our
satisfaction.
2. We have made a visual inspection of building improvements and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. Our cash flow analysis and valuation has recognized that all signed,
as well as any pending leases with a high probability of being
consummated are implemented according to the terms presented to us
by management. To the extent such leases exist, they are identified
within the body of this report.
4. The forecasts of income and expenses contained herein are not
predictions of the future. Rather, these projections are our best
estimates of current market thinking on future income, expenses,
growth rates, and demand. No warranty or representation is made with
regard to materialization of these forecasts.
5. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report. We believe, based on
the assumptions employed in our cash flow analysis and based on our
selection of investment parameters for the subject, the value
conclusion represents a market price achievable within one year's
exposure time on the open market.
CUSHMAN &
WAKEFIELD(R)
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PHOTOGRAPHS OF SUBJECT PROPERTY
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On site view of the subject
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Another on-site view of the subject
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Photographs of Subject Property
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[GRAPHIC OMITTED]
On site view of the subject property
[GRAPHIC OMITTED]
On site view of the subject property
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Photographs of Subject Property
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[GRAPHIC OMITTED]
On site view of the subject property
[GRAPHIC OMITTED]
On site view of the subject property
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Photographs of Subject Property
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[GRAPHIC OMITTED]
View looking south along Carmel Mountain Road; Subject at right
[GRAPHIC OMITTED]
View looking east along Rancho Carmel Drive; Subject at left
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INTRODUCTION
================================================================================
Identification of the Subject Property
The subject property is identified as a 442,477 square foot portion of
Carmel Mountain Plaza, a larger 539,129 square foot community/power shopping
center located on the northwest corner of Carmel Mountain Road and Rancho Carmel
Drive in the masterplanned community of Carmel Mountain Ranch, City of San
Diego, County of San Diego, California. Completed in 1993/1994, the property is
situated on a +/-41 acre site (assemblage of 20 parcels). It is identified by
the San Diego County Tax Assessor as Parcel Nos. 313-730-19 through 21, 24
through 29, 31, and 32 and 313-731-10 and 12 through 18. The subject is
approximately 20 miles northeast of downtown San Diego. As of the date of value,
the subject is 100% occupied. Anchor tenants include Kmart, Barnes & Noble,
Pacific Theaters, Circuit City, Marshalls, Michaels, Ross and Sportmart. The
subject does not include the Mervyns anchor space and outparcel buildings
occupied by Texaco, Chevy's Restaurant and Boston Market.
Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
I, LLC, a joint venture between Developers Diversified Realty Corporation (DDR)
and DRA Advisors, Inc. (DRA). The subject was acquired as part of the former
Homart Community Center Division for a total purchase price of approximately
$500.0 million from General Growth Properties, Inc. The date of transfer was
November 17,1995.
A history of the subject shows that the 49.26 net acre site was originally
acquired by Homart Community Centers, Inc. for a recorded consideration of
$19,691,500. Subsequent to the sale, Homart sold a 7 acre portion of the site to
Mervyns in June 1992. The remaining acreage was used to develop the subject
center to its present configuration with the project opening in 1994. It is
currently 100 percent occupied.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the subject property. The function of this appraisal is to
provide an independent valuation and analysis of the property and to assist the
client in evaluating the asset for portfolio valuation purposes.
Extent of the 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.
o Interviewed representatives of ownership and the property management
company including Loren Henry, property manager with Developers
Diversified Company.
o Reviewed leasing policy, concessions, tenant build-out allowances
and a history of recent rental rates and occupancy.
o Reviewed a 1997 budget of income and expense as well as
actual/budgeted 1996 operating data.
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Introduction
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o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Conducted market inquiries into recent sales of similar retail
centers 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.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems.
o In the course of this assignment we did not review actual lease
documents. We were provided with a Pro-Ject model prepared as of
July 1997, a current rent roll and other tenant specific data.
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and the
current market thinking relative to growth in market rents and
market absorption.
o Developed a value estimate of the center through direct sales
comparison.
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject +plus software for the purpose of discounting the
forecasted net income stream to a present value of the leased fee
estate for the center.
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes.
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition.
o For this assignment, a Complete Appraisal of the subject property
was performed with the results conveyed in this summary report. A
Complete Appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. A summary appraisal
report format provides a summary of the data, analyses, and
conclusions rather than presenting a self-contained narrative
within the report. Other pertinent data is retained in our files.
This report also incorporates our previous Complete Appraisal
prepared in a self-contained report format with a date of value of
February 1, 1996 by reference.
Date of Value and Property Inspection
The property has been valued as of July 1, 1997. On that date, Sean M.
Crosby inspected the property and its environs.
Property Rights Appraised
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 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.
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.
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Introduction
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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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
A complete legal description of the property is provided within the body
of the A.L.T.A. Title Policy dated September 20, 1995 which is provided in the
original report.
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REGIONAL LOCATION
<PAGE>
REGIONAL ANALYSIS
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The subject property is located within the masterplanned community of
Carmel Mountain Ranch in the northeastern of the City of San Diego, San Diego
County, California. The following discussion of the locational influences on the
subject's value is divided into state, county, and local analyses.
REGIONAL INFLUENCES - State of California
California endured a strong recession in between 1991 and 1993. This had a
significantly negative effect on general real estate demand. Between 1994 and
1996, California saw a mild and uneven economic recovery with a similar recovery
in real estate demand. However, California's economic outlook for 1997 and
beyond is optimistic. The state's on-going population gains, huge and diverse
economy, and world-class technological capability, combined with the national
economic recovery and international free trade agreements, have resulted in a
strong recovery of general real estate demand over the past 12 to 18 months.
As an example of the state's economic recovery, unemployment has dropped
from over 10 percent in 1993 to 6.5 percent as of April 1997. The state added
about 350,000 new jobs in 1996, and is projected to do so again in 1997.
Defense-related employment dropped during the recession and has now stabilized,
and employment in the high tech and entertainment industries is growing. With
the unemployment rate dropping and a forecast of employment growth, real estate
demand should be positively affected.
One of California's most significant factors is its projected population
growth. The state grew by about six million people in the 1980s and is expected
to do so again in the 1990s. Additionally, the state's economic base is so large
that its gross product is larger than all but five nations. The state's gross
product represents 13 percent of the U.S. gross national product; and is higher
than any other state. The state's size helps support its real estate demand.
As a final note, a recent study by the Center for the Continuing Study of
the California Economy indicates that the state's long-term outlook is very
positive. They predict that the state will grow faster than the U.S. in total
jobs, income, number of households and population between 1993 and 2005; all of
which are positive factors for real estate demand.
COUNTY INFLUENCES-San Diego County
San Diego County is located in the southwesterly portion of the State of
California, and is bounded on the north by the Counties of Orange and Riverside,
on the east by Imperial County, on the south by Mexico, and on the west by the
Pacific Ocean. San Diego County is comprised of 18 incorporated cities and 33
unincorporated communities, and covers an area of 4,255 square miles. Its
topography is a broad coastal plan (where urbanization has occurred), with hills
in the central portion and desert area to the east. The urbanized areas of the
county enjoy a Mediterranean climate which is one of the finest in the country.
San Diego County's economy is performing similarly to the state. San Diego
County advantages versus the state include disproportionately high population
growth, numerous tourist destinations, and innovative transportation systems.
However, San Diego was unusually hard hit by financial institution failures,
construction layoffs, and defense spending cuts during the 1990-93 recession.
San Diego also has a reputation for comparatively high housing costs.
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Regional Analysis
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Population Characteristics
San Diego County ranks second in population among California's 58
counties. The January 1997 population estimate for the county was 2,839,500 (per
the California Department of Finance). The recent and projected population
trends in the five largest counties in Southern California are listed below. The
county's large and growing population base is a positive factor for future real
estate demand.
SOUTHERN CALIFORNIA'S LARGEST COUNTIES' POPULATIONS
Population 1993-2003
State ---------------------------------- Percent
Rank County 1993 1997 2003 Increase Increase
- --------------------------------------------------------------------------------
1 Los Angeles 9,198,400 9,768,600 10,359,900 1,161,500 12.6%
2 San Diego 2,667,500 2,839,500 2,999,600 332,100 12.4%
3 Orange 2,579,300 2,798,500 2,947,200 367,900 14.3%
5 SanBernardino 1,576,800 1,826,700 2,101,700 524,900 33.3%
7 Riverside 1,356,700 1,618,700 1,945,800 589,100 43.4%
Source: Kiplinger California Letter
San Diego County is expected to gain 50,500 residents in 1997; the largest
one-year increase since 1990. The county's residents are forecast to enjoy a
3.0% real per capita income gain in 1997, after a similar estimated gain in
1996.
Transportation
Transportation facilities in the county include a growing freeway network,
an international airport, public bus services, Amtrak passenger rail service,
several freight rail lines, and deep water ports. The county is contemplating
relocating its main commercial airport and expanding it to provide international
service. The county has immediate access to all major modes of transportation,
which is a very positive factor for the county's real estate.
Like most of Southern California, San Diego County suffers from rush hour
freeway congestion. However, compared to the state's other urbanized areas, rush
hour commute times are low. This is due to the county's well planned and
expanding freeway network, and other unique transportation solutions.
The county's unique transportation facilities include "reversible flow"
lanes within Interstate 15, an expansive and growing trolley system that is
centered downtown, and proposed light rail commuter service to Los Angeles. The
county's transportation network is considered to be a very positive factor for
real estate demand.
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Regional Analysis
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County Employment
As of April 1997, the county's total civilian employment was 1,190,900.
The San Diego Association of Governments estimates that net job growth was
16,500 in 1996 and will be 18,000 in 1997.
San Diego County has a slightly lower unemployment rate than the state or
nation. As of April 1997, the county unemployment rate was 4.1 percent versus
6.5 percent for California and 4.9 percent for the nation. The county's recent
unemployment rates have been dropping since the end of the recession. The
county's improving employment picture is a positive factor for the county's real
estate demand.
County Commerce
Chamber of Commerce figures indicate a 1996 Gross Regional Product
estimate of $80 billion for San Diego County, which they project to increase by
4.8% in 1997. This would be the strongest gain since 1989-90. In descending
order of size, the county's economic base is anchored by manufacturing, defense
spending, and tourism. Manufacturing industries are strong and benefiting from
international trade. The county is steadily diversifying away from
defense-related industries, which were hard hit in the 1990-93 recession.
San Diego County's tourism figures further indicate an ongoing recovery.
The number of visitors to San Diego increased about three percent between 1993
and 1994 (to 13.0 million). The Chamber of Commerce estimated a two percent
tourist increase during 1996.
Military spending is also a significant part of San Diego's economy. No
significant bases are to be closed or realigned in San Diego County, which will
help support the present level of military spending. Overall, the county's
diversifying economic base is considered a positive factor for future real
estate demand.
County Education, Recreation and Culture
San Diego County is home to the San Diego campus of the University of
California, San Diego State University, several junior colleges, and several
private and specialized colleges. The county has over 175 public beaches,
recreation centers and parks, as well as several public golf courses. Outdoor
activities are an integral part of the San Diego lifestyle.
Amusement centers such as the San Diego Zoo, San Diego Wild Animal Park
and Sea World are also located in San Diego County. Performing arts are
available in downtown San Diego, civic centers, and private theaters throughout
the county. The county is also home to museums, San Diego Jack Murphy Stadium, a
sports arena, etc. The county's abundance of educational, recreational and
cultural opportunities is a positive factor for real estate demand.
Political Environment
San Diego County residents have historically been viewed as pro-business,
pro-growth and anti-tax. However, the county's rapid growth during the 1980s
affected the county's political outlook. In the late 1980s, several slow growth
initiatives were placed on county ballots. All were defeated, but a significant
public sentiment remains for growth management. In general, residents have
consistently resisted passing initiatives that could restrict growth to
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Regional Analysis
================================================================================
the point that it would be harmful to the county's economy. However, citizens
often elect "slow growth" and "managed growth" county supervisors and city
council members.
Conclusion
Similar to California as a whole, San Diego County saw unprecedented drops
in real estate values and market activity from 1990 to 1994. The degree of value
decline varied by location and property type, but all real estate was affected.
Most forecasts show that 1997 will be a positive year for the county's economy.
This is leading to an increase in general real estate demand. However, real
estate demand will vary greatly by product type.
CITY INFLUENCES - City of San Diego
San Diego County includes fewer than 20 incorporated cities. By virtue of
its size and diversity, the city of San Diego dominates the county's commerce
and culture. The city has about half of the county's population. The city is
also geographically large, consisting of over 400 square miles.
As of 1996 year end, San Diego had an estimated population of 1.2 million.
In 1996, the city ranked second as the state's most populated city. It is also
the nation's sixth most populated city. The city's growth corridors are located
to the north and east. The Pacific Ocean is to the west, and other incorporated
cities are to the south. The city has ample land for future expansion.
The city is accessed by the county's three regional freeways: Interstate
5, Interstate 8, and Interstate 15. As a result, the city has good regional
access characteristics. Local access is provided by numerous primary/secondary
roads, the trolleys, bus services, local roads and freeways, etc. which provide
convenient access within the city. The future light rail system will serve the
city's regional public transportation need along with Amtrak, both of which
service downtown. Other transportation modes includes air transportation via the
San Diego International Airport, and freight transportation via the Southern
Pacific Railroad. Overall, the city's transportation network is a positive
factor for the subject real estate.
San Diego is a city of mixed land uses. Most of the city consists of
public vacant uses. The privately developed areas are mostly residential uses
(20.7 percent of the city's area), with 10.1 percent devoted to agricultural
uses. Industrial and commercial developments occupy 3.6 and 3.0 percent of the
city, respectively.
The Kearny Mesa subarea is a highly desirable location for an industrial
development, as it is strategically situated near transportation routes that
access all Southern California. The Kearny Mesa industrial submarket area (which
includes the subject) contains about 8.66 million square feet of industrial
space, with a current vacancy estimate of 5.40 percent.
San Diego has a very diverse economic base. The largest segments are
retail and wholesale trades, followed by professional services and
manufacturing. The San Diego Chamber of Commerce predicts that
telecommunications, biotechnology, software development and electronics will be
San Diego's leading industries over the next five years. Technology based firms
are attracted to San Diego for its highly educated work force (25% of population
hold undergraduate degrees), its advanced telecommunication infrastructure
(75,000 miles of
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Regional Analysis
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underground fiber optic cable), and research capabilities (five universities
including the highly esteemed University of California San Diego (UCSD)).
Currently, telecommunications is San Diego's fastest growing industry. San
Diego is the nation's second leading center of communications research and
development. Over seventy telecommunication firms currently exist. A few of the
firms include: Qualcomm, General Instruments and Datron Systems. Most of these
firms are situated in Sorrento Valley, which is better known locally as the
"Telecom Valley". The Sorrento Valley/Sorrento Mesa subareas are San Diego's
premiere R&D locations which have the highest R&D property values.
San Diego is strategically located for international commerce. San Diego's
proximity to Mexico and the Pacific Rim provides a distinct advantage to the
region's economic activity. World Trade magazine indicated that the greater San
Diego area is one of the top ten regions for international business. To promote
international business a World Trade Center was recently opened in downtown San
Diego to assist importers and exporters.
Additionally, the recent passages of NAFTA and GATT have propelled
international trade in San Diego. Most notably, trade volume with Mexico has
increased two-fold and is expected to continue increasing; this, in turn,
increases economic and employment growth. International companies are realizing
the benefits of nearby low cost labor available in Tijuana (Mexico's fourth
largest city), and many have split operations in Mexico and the U.S. (San Diego)
through the maquiladora program. The result has been a strong demand for twin
industrial facilities in the Otay Mesa (San Diego, CA) area and Tijuana
(Mexico). This has positively influenced the industrial real estate market in
these areas.
Local and international businesses in San Diego benefit from a large pool
of well educated workers. Over 25 percent of the population holds an
undergraduate degree. This highly educated workforce earns a median income of
about $53,000, which is significantly more than the national average. Overall,
San Diego business is well positioned for growth into the next millennium.
San Diego is also considered a tourist and business destination point. The
tourism industry is the city's third largest economic sector generating
approximately 5 percent of the city's $75 billion gross regional product in
1996. The city has a new convention center, an international airport, the world
famous San Diego Zoo, Sea World, a downtown commercial district, an old town
area known as the gaslight district which offers boutique shopping and fine
dining restaurants, numerous spas and resorts (e.g. La Costa, Coronado, La
Jolla, etc.), world class golf courses, miles of public beaches, etc.
The city political environment is pro-growth and pro-business. City
services include a typical public school system, police and fire services, etc.
The city has several hospitals, five regional shopping malls and numerous
shopping centers, and several first rate universities including the University
of California San Diego. Overall, San Diego has a reputation as a large-sized,
diverse, middle class city in San Diego County.
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NEIGHBORHOOD MAP
<PAGE>
NEIGHBORHOOD DESCRIPTION
================================================================================
Overview
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, or a mixture
of commercial and residential properties, is called a neighborhood.
Carmel Mountain Ranch Planned Community
The subject property is located in the community of Carmel Mountain Ranch,
a masterplanned community encompassing approximately 1,500 acres. The community
is delineated by Interstate 15 Freeway to the west, Camino Del Norte to the
north, Ted Williams Parkway to the south, and Pomerado Road to the east.
Bordering the community is the community of Rancho Penasquitos to the west, the
community of Rancho Bernardo to the north, and the City of Poway to the east and
south.
The community of Carmel Mountain Ranch is still in the early stage of its
life cycle. It is comprised primarily of several recently developed residential
subdivisions, community shopping centers, and business parks. Upon buildout, the
Carmel Mountain Ranch Planned Community will consist of approximately 1,500
gross acres in total. The development will be comprised of 634 acres of
residential development including 5,420 dwelling units of which 2,355 units will
be multifamily and 3,065 will be single family; 189 acres of industrial/R&D
development; 190 acres of commercial development; 346 acres of parks, 32 acres
of community facilities; and 98 acres of roads. The community also includes a
golf course.
Carmel Mountain Ranch is characterized as an upper/middle class community
with an average age of 35 years old and an average household income in excess of
$70,000. The community is attractive with good quality residential and
commercial development. The primary arterials providing access throughout the
community are Rancho Carmel Drive, extending in a north-south direction into
Rancho Bernardo and Poway, and Carmel Mountain Road, intersecting Rancho Carmel
Drive, and extending westerly across interstate 15 into Rancho Penasquitos.
The subject's retail center, Carmel Mountain Plaza, is located within the
core of retail development in the community. It is the largest and the most
prominent shopping center in Carmel Mountain Ranch. The majority of the retail
developments within the area formed by Rancho Carmel Drive to the west and
Carmel Mountain Road to the east are described below.
North of the subject property is Price Club Plaza. Price Club Plaza is a
neighborhood shopping center anchored by a Price Club grocery warehouse.
West of the subject property is a community shopping center, The
Courtyard, that is anchored by Staples, Linens & Things, PetCo, Border
Books & Music and Daley's (restaurant). This is the most recently
developed retail project in Carmel Mountain Ranch, completed in mid-1996.
Southeast of the subject property is the Carmel Mountain Gateway Plaza.
This neighborhood shopping center is anchored by Wherehouse, Good Guys,
Discovery Zone, Olive Garden (restaurant) and a Carl's Jr. (fast-food
restaurant).
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Neighborhood Description
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East of the subject property are two neighborhood shopping centers: (1)
the Carmel Mountain Ranch Town Center, which is anchored by Ralph's
(grocery store), Payless Drug, McDonald's and Trader Joe's; and, (2) the
Carmel Mountain Ranch Home Center which is anchored by Home Depot.
These centers are further described in our Market Analysis and as
comparable rentals.
Other development within the subject's immediate surroundings include R&D
and multifamily residential development further north along Carmel Mountain
Drive. The R&D development includes facilities for Scripps Clinic and TRW among
other high technology companies. South of the subject, across Stoney Peak Drive,
are Carmel Terrace and Carmel Summit, two single-family residential
subdivisions. East of the subject, across World Trade Drive, is The Windham
residential subdivision.
In summary, the subject is situated in a masterplanned community within a
growing area of North San Diego County. The quality and conformity of the
surrounding development is good. Street and freeway access is excellent.
Overall, the subject is expected to benefit over the short and long term given
its superior locational demographics.
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RETAIL MARKET ANALYSIS
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Property Profile
The subject property is anchored by a number of national retail tenants.
These major tenants include Kmart, Mervyns (not part of subject), Sportmart,
Pacific Theaters, Circuit City, Marshalls, Ross, Michaels, and Barnes & Noble.
Provided below is a summary of the credit profile of several of these
major tenants. Combined, they account for in excess of 55 percent of contractual
base rents.
================================================================================
Anchor Tenants Parent Company S&P Rating(1) % of Base Rents
================================================================================
K-Mart Kmart B+ 5.7%
- --------------------------------------------------------------------------------
Sportmart Sportmart NR 6.6%
- --------------------------------------------------------------------------------
Pacific Theaters Nationwide Theaters NR 9.8%
- --------------------------------------------------------------------------------
Marshalls Melville Corp. BBB+ 5.9%
- --------------------------------------------------------------------------------
Barnes & Noble Barnes & Noble BB 5.0%
- --------------------------------------------------------------------------------
Ross Ross Stores NR 4.5%
- --------------------------------------------------------------------------------
Circuit City Circuit City NR 6.6%
- --------------------------------------------------------------------------------
Michaels Michaels BB- 4.7%
- --------------------------------------------------------------------------------
Blockbuster Music Viacom BB+ 4.3%
- --------------------------------------------------------------------------------
Blockbuster Video Viacom BB+ 2.0%
- --------------------------------------------------------------------------------
55.1%
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(1) Ratings current as of February 1997
================================================================================
Historical Retail Sales
The tables below summarize retail sales growth for San Diego County as a
whole and the City of San Diego over the period 1989 through 1995. (Retail sales
figures were not specifically available for Carmel Mountain Ranch).
====================================================
Retail Sales (in $000)
Year San Diego County
====================================================
1989 14,883,857
----------------------------------------------------
1990 15,099,328
----------------------------------------------------
1991 14,599,366
----------------------------------------------------
1992 15,083,222
----------------------------------------------------
1993 15,241,382
----------------------------------------------------
1994 15,718,773
----------------------------------------------------
1995 16,181,283
====================================================
Source: EDD and Sales and Marketing Management
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Retail Market Analysis
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=============================================
Retail Sales (in $000)
Year City of San Diego
=============================================
1989 6,501,645
---------------------------------------------
1990 6,700,198
---------------------------------------------
1991 6,578,858
---------------------------------------------
1992 6,830,548
---------------------------------------------
1993 6,916,952
---------------------------------------------
1994 7,082,343
---------------------------------------------
1995 7,390,369
=============================================
Source: EDD and Sales and Marketing
Management. *Estimated
=============================================
As shown, the sales figures for San Diego County and the City of San Diego
show stable to increasing sales figures in 1989 and 1990. However, with the
onset of the recession in late-1990/early-1991, sales figures dipped as consumer
confidence slowed. But over the past three years, sales figures have rebounded
with the slow recovery of the economy. Continued improvement in total retail
sales is projected over the near future with the continued improvement in the
regional and local economies.
Trade Area Analysis
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 major 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.
In order to define and analyze the subject's market potential, it is
important to first establish the boundaries of the trade area from which the
subject draws 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 serves a dual purpose in the community. That is to say that it
acts as both a convenience center for the residents living in the immediate
neighborhood as well as a community/power center by virtue of the larger
destination tenants such as Marshalls, Kmart, Pacific Theaters, Circuit City,
Ross, Michaels, Mervyns, and Barnes & Noble.
As such, a clear understanding of the property type is important in order
to place the subject in its proper competitive context. The subject meets the
definition of both a community center and a power center to some degree. Each
can be defined as follows:
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Retail Market Analysis
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o A community center provides a wider range of facilities for the sale of
soft lines (wearing apparel for men, women, and children) and hard lines
(hardware and appliances). The community center makes a greater variety of
merchandise available-in sizes, styles, colors, and prices. It is built
around a junior department store, variety store, or discount department
store as the major tenant, in addition to a supermarket. It does not have
a full-line department store, though it may have a strong specialty store
or stores. In theory, its typical size is 150,000 square feet of gross
leasable area, but in practice, it may range in size from 100,000 to
450,000 square feet.
o The power center is a loosely defined term that can generally be
characterized as a grouping of retail stores that:
o collectively totals at least 250,000 square feet;
o includes at least one major anchor containing 100,000 square feet or
more, that is either a discount department store or warehouse club;
o includes at least four smaller, category specific anchor tenants of
25,000 square feet or more. These anchor stores will typically have
a narrow focus but deep selection in specific merchandise lines such
as building supplies/home improvement goods, consumer electronics,
off-price apparel, sporting goods, books, personal computer hardware
and software, office supplies, toys, pet supplies, deep discount
drugs, bulk foods, or tapes and records;
o should contain a minimum of smaller shop space (10 percent or so of
the center's total gross leasable area); and
o will typically be configured in an open-air strip, "L" or "U" shaped
layout.
We have not been provided with any customer survey reports or shopper zip
code lists that would help identify the boundaries of the primary and secondary
trade areas. Therefore, we have made certain reasonable assumptions of the
extent of this area based upon other physical, demographic, and geographic data
available.
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 to the subject's position.
Retail Market Conditions - San Diego County
We will first examine the overall retail market within the larger San
Diego County area, then within the more defined Interstate 15 Corridor
submarket. The following market statistics are provided by TURI Commercial
Services Retail Space Summary Report - San Diego County (January - April 1997).
As of April 1997, the County of San Diego had a total retail inventory
(inclusive of retail centers greater than 7,000 SF) of 60,848,314 square feet.
The San Diego County market is divided into seven submarkets. Total inventory
figures as well as vacancy levels for the each of the submarkets are on the
following chart.
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Retail Market Analysis
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Planned/
Submarket Inventory SF Vacant SF - % UnderConstruction
- --------- ------------ ------------- -----------------
North Coastal 9,660,504 SF 745,043 SF - 7.7% 779,000 SF
I-78 Corridor 4,133,444 SF 532,070 SF - 12.9% 204,000 SF
I-15 Corridor 8,950,000 SF 743,603 SF - 8.3% 188,899 SF
East County 9,711,654 SF 908,001 SF - 9.3% 375,000 SF
South Bay 8,177,514 SF 519,755 SF - 6.4% 718,000 SF
North Central 14,361,458 SF 658,458 SF - 4.6% 7,200 SF
South Central 5,853,112 SF 532,056 SF - 9.1% 0 SF
------------- ------------------- ------------
Total 60,848,314 SF 4,639,346 SF - 7.6% 2,272,099 SF
During 1996, the San Diego County retail market experienced positive net
absorption of 848,083 square feet. During the first quarter of 1997, this trend
continued with total positive net absorption of 115,700 square feet. Positive
absorption was experienced in four of the seven submarkets with only the 1-78
Corridor (-25,239 SF), East County (-91,806 SF) and South Central (-1,432 SF)
submarkets experiencing negative absorption.
Local Market Conditions
As outlined within the original report, the retail inventory within Carmel
Mountain Ranch area is comprised primarily of recently developed strip,
neighborhood, and community/power centers. In researching general market
conditions for the local retail market, we utilized the TURI Commercial Services
- - Commercial Activity and Availability Report; January - April 1997.
The subject is located in Carmel Mountain Ranch which is part of the I-15
Corridor submarket. In addition to Carmel Mountain Ranch, this submarket
includes the cities/communities of Rancho Bernardo, Rancho Penasquitos, Poway,
Escondido, and Ramona. As shown from the previous chart, this submarket has a
total retail inventory of 8,950,000 square feet of retail space with
approximately 743,603 square feet, or 8.3 percent, of space available. During
1996, this submarket experienced negative net absorption of 30,099 square feet
with 31,370 square feet of positive net absorption during the first quarter of
1997. Overall, this submarket is considered to be stable given its growth
oriented nature and considerable amount of newer product released to market over
the past five years.
Based on inventory figures compiled by TURI (Torrey Urban Research
Institute), Carmel Mountain Ranch had a total inventory of retail product
(inclusive of strip retail product greater than 7,000 SF; exclusive of single
tenant storefront retail properties) as of April 1997 of 1,287,273 square feet.
Of that total, approximately 14,050 square feet, or 1.1 percent, was available.
This total inventory figure is comprised of approximately 826,871 square feet of
community shopping center space, 172,522 square feet of neighborhood shopping
center space, 130,000 square feet of specialty retail space, and 157,880 square
feet of strip/convenience center space.
As previously noted, Carmel Mountain Plaza is a community shopping center
in Carmel Mountain Ranch with a gross building area of 532,129 square feet.
According to TURI, the subject is the largest of six community/neighborhood
centers within the Carmel Mountain Ranch
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Retail Market Analysis
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market. These six centers, outlined further within this section, have a combined
inventory of 999,393 square feet, of which only 8,035 square feet (0.8 percent)
was available as of the date of this appraisal. Based on conversations with the
various leasing brokers, average rents for in-line space within these centers
typically ranges from $1.75 to $2.25 per square foot (NNN) with 3 to 5 year
lease terms and annual CPI increases applied.
Trade Area Definition
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
transportation provides the basis for regional access to the area. Second,
regional competition and geographic boundaries help to define the potential size
of the trade area as a measure of distance from the property. Third, the
merchandising mix and anchor alignment provide the basic draw of customers that
are likely to patronize the property.
Carmel Mountain Plaza is located in the masterplanned community of Carmel
Mountain Ranch within the northeastern region of the city of San Diego in the
central/eastern region of San Diego County. It is located on the west side of
Carmel Mountain Road just east of Interstate 15. These routes provide excellent
to and throughout the community.
As discussed, the location and accessibility of competing centers has
direct bearing on the formation and make-up of the subject's trade area as well.
The subject competes most directly with the numerous neighborhood and community
shopping centers previously outlined. Secondary competition is seen in other
area community and neighborhood centers within the adjacent communities of
Rancho Penasquitos, Poway, and Rancho Bernardo.
Finally, it is important to note that other neighborhood/community
centers, along with freestanding "category killers", and outlet malls all
represent a strong force in the market's competitive environment. Certainly
there is a place for both in most retail environments, including the subject
region. Collectively, they 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 in the delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers and the strength and
composition of the retail infill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Given all of the above, a primary trade area for the subject property
would likely span an area encompassing about 3 to 5 miles around the center. The
subject's secondary trade area might span up to 10 miles from the site.
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Retail Market Analysis
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Based on these observations, together with our discussions with ownership,
we believe that the primary trade area for the subject would extend outward to a
radius of approximately 5+/- miles from the property. To add perspective to this
analysis, we have segregated our survey into 2.5-, 5-, and 10-mile concentric
circles. The report on the facing page presents this data.
Community and Power Centers tend to have trade areas which extend roughly
six miles in any direction and contain approximately 150,000 to 200,000
residents with 60,000 to 70,000 households and income levels in excess of
$35,000 per household. As such, it is our opinion that the 5 mile radius
surrounding the subject property comprises the primary trade area from which 70
to 80 percent of its sales originate.
Population
Once the market has been established, the focus of our analysis centers on
the statistical data of the trade area, including population. Equifax National
Decision Systems (ENDS) provides historical, current and forecasted population
estimates for the trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. A detailed profile of
the trade area is included in the Addenda of this report.
Population statistics for the trade area are summarized in the chart on
the following page.
<TABLE>
<CAPTION>
============================================================================================
Population Growth and Forecasts
============================================================================================
Compound Projected Compound
Trade Area Projected Annual Change Annual Change
Component 1980 1990 1996 2001 1980-1990 1990-1996
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
2.5 Mile Radius* 24,552 56,150 63,334 63,394 +8.62% +2.03%
- --------------------------------------------------------------------------------------------
5 Mile Radius* 77,334 147,548 165,194 163,112 +6.67% +1.90%
- --------------------------------------------------------------------------------------------
10 Mile Radius 175,041 304,539 335,409 331,933 +5.69% +1.62%
============================================================================================
* Primary Market
============================================================================================
Source: Equifax National Decision Systems
============================================================================================
</TABLE>
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 is living longer on average. This results in an
increase of single and two person households.
o The divorce rate increased dramatically during the 1980s, again
resulting in an increase in single person households.
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o Many individuals have postponed marriage, also resulting in more
single person households.
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Household Data and Forecasts
================================================================================
Compound Projected Compound
Projected Annual Annual Change
Component 1980 1990 1996 2001 Change 1990-1996
1980-1990
================================================================================
2.5 Mile Radius* 8,073 20,043 23,565 24,184 +9.52% +2.73%
- --------------------------------------------------------------------------------
5 Mile Radius* 25,541 51,190 59,218 60,293 +2.73% +2.46%
- --------------------------------------------------------------------------------
10 Mile Radius 57,290 105,043 120,555 122,438 +6.25% +2.32%
================================================================================
*Primary Market
================================================================================
Source: Equifax National Decision Systems
================================================================================
As shown, the Carmel Mountain Ranch area, along with the 5- and 10-mile
trade areas experienced a significant amount of population and household growth
between 1980 and 1990. The rate of growth, although still showing positive
growth, has slowed over the six years given the impact of the past recession and
affiliated slow rate of residential development. Given the increased buildout of
the immediate area and lower rate of residential development planned over the
near term with the 5- and 10-mile radii, the rate of growth over the short term
ranges from nearly zero growth to 0.5 percent compounded annually.
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.
Trade area income figures for the subject support the profile of a
middle-upper income market. According to ENDS, average household income within
the immediate primary trade area in 1996 was approximately $64,171 compared to
$76,031 within the 5-mile radius. A comparison of the trade area's relative
ranking is shown on the following chart. These estimates indicate a fairly
affluent resident population within the subject's primary trade areas,
significantly above the county average.
=======================================================
Average Household Income Comparison
=======================================================
Area Income
=======================================================
2.5 Mile Radius * $64,171
-------------------------------------------------------
5 Mile Radius * $76,031
-------------------------------------------------------
10 Mile Radius $83,328
-------------------------------------------------------
County of San Diego $53,622
=======================================================
Source: Equifax National Decision Systems
=======================================================
*Primary Trade Area
=======================================================
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Retail Market Analysis
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Market Overview
Through our survey of the Carmel Mountain Ranch retail market, we found
five centers within the primary trade area which compete with the subject
The subject is situated in a growing residential area in the masterplanned
community of Carmel Mountain Ranch. The majority of retail development is
located in the western portion of the community near interstate 15 along Carmel
Mountain Road. Over the past five to seven years, six neighborhood/community
shopping centers were developed (including the subject). Vacancies in these
centers ranged from zero to less than 1 percent. At the time of this valuation
there were no vacancies within the subject property. Of these developments, the
most prominent shopping center for this area is the subject property; it has the
most gross leasable area and the greatest number of anchor tenants. The other
five developments are highlighted below.
o Carmel Mountain Ranch Town Center, a 175 000+/- square foot
neighborhood center anchored by a Ralphs (subject) and Payless Drug;
o Carmel Mountain Ranch Home Center, a 100,000+/- square foot
neighborhood center anchored by a Home Depot;
o Price Club Plaza, a 100,000+/- square foot neighborhood center
anchored by a Price Club;
o Gateway Plaza, a 100,00+/- square foot neighborhood center anchored
by Good Guys and Discovery Zone;
o Courtyard at Carmel Mountain Ranch, a 130,000+/- square foot
neighborhood shopping center situated at the northeast corner of
Carmel Mountain Road and Interstate 15. This center is anchored by
Staples, Linen 'n Things, PetCo, Borders Books & Music and Daley's
(restaurant).
Similar to the subject, all of these centers have local and national
retailers. The immediate area also has a number of strip retail centers that are
predominantly occupied by local tenants.
New/Proposed Development
Currently, there are no proposed retail projects planned for the subject's
neighborhood or primary trade area. According to sources at the San Diego
Planning Department, the subject's neighborhood is nearly fully built out with
no available land zoned for commercial development.
Subject Sales Productivity
The subject opened in the fourth quarter 1995. As such, sales history
exists for several tenants. Provided below is a summary of reported sales for
the subject's anchor or credit tenants.
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Retail Market Analysis
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Carmel Mountain Plaza
1996 Sales Performance
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Tenant GLA (SF) Sales Sales PSF
=====================================================================
Kmart 107,870 $11,903,417 $110
---------------------------------------------------------------------
Sportmart 40,672 $7,539,327 $185
---------------------------------------------------------------------
Marshalls 28,760 $5,246,899 $182
---------------------------------------------------------------------
Barnes & Noble 13,916 $3,438,617 $247
---------------------------------------------------------------------
Pacific Theaters 34,561 $4,545,893 $131
---------------------------------------------------------------------
Circuit City 30,973 $12,684,536 $409
---------------------------------------------------------------------
Ross 24,000 $4,377,624 $182
---------------------------------------------------------------------
Michaels 22,969 $3,295,417 $143
---------------------------------------------------------------------
Total/Avg. 303,719 $53,031,730 $175
=====================================================================
A complete summary of tenant sales is included in the Addenda. As shown,
the top producers include Barnes & Noble and Circuit City, two specialty
retailers. Overall, the average sales/SF among the anchor tenants equates to
$175 per square foot in 1996. We were not provided with the average for all of
the subject tenants.
Rental Rates
Based upon our survey, rental rates for in-line space in the subject's
market generally ranges from about $15.00 to $24.00 per square foot. For more
directly competing power and community centers, lease rates range from $18.00 to
$28.00 per square foot. As discussed, the smaller centers are considered to be
less competitive with the subject which will have superior anchor stores that
provide a better customer draw than the traditional community or neighborhood
shopping center. In this sense, the subject will act similar to regional mall
developments. From the data, with consideration given to the subject's market
position and comparison to competing properties, we believe that projected
pro-forma in-line shop rents at the subject are at the upper end of the market.
This is considered appropriate given that the subject is the largest, most
well-anchored center in Carmel Mountain Ranch.
Vacancy Rates
The survey undertaken estimates an overall market vacancy rate of about
1.1 percent (mean) for all centers within the Carmel Mountain Ranch area. For
centers which will compete most directly with the subject (large community
centers), the average vacancy rate is less than 1 percent with only two centers
reporting available units. Carmel Mountain Ranch Home Center reported one unit
available measuring 3,200 square feet with Carmel Mountain Ranch Towne Center
reporting three units available (4,835 SF total). These low vacancy rates
support local brokers' opinions that there is very little space available in the
well-located, better quality centers, especially large tenant suites.
Tenant Improvements/Rent Concessions
For second generation space, typical tenant allowances range from $3.00 to
$10.00 per square foot depending upon lease terms with one to two months free
rent given in some cases for a three to five year lease for fixturization
purposes.
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Retail Market Analysis
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Lease Terms, Concessions and Commission Structure
Our survey of market participants included a broad cross section of
shopping center owner/developers and leasing agents. Typical lease terms in the
San Diego County/Southern California area for local tenants vary from three to
five years with larger regional and national tenants commanding longer terms of
10 to 25 years. Typically, retail leases are structured on a net basis with the
tenant responsible for a full pro-rata share of taxes and operating expenses.
Rental increases in the form of a CPI increase or a fixed step-up are usually
sought but not always achieved. The strength of a particular property or
location generally dictates the ability of a landlord to command rental
increases.
In addition to the minimum base rent, many retail tenants will contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. It is most common for leases to have a natural breakpoint
although many do have stipulated breakpoints. The average overage percentage for
small space retail tenants is in a range of 5 to 8 percent. Anchor tenants
typically have the lowest percentage clause with ranges of .5 to 3 percent being
most common.
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 an investor against
inflation.
Similarly, concessions will vary considerably by property and tenant type.
Anchor tenants are generally in a better negotiating position to extract
concessions in the form of free rent or improvement allowances. However, if an
anchor is strongly motivated to be in a particular market, it is not unusual for
an owner to be able to maintain a firm bargaining position, yielding little or
no concessions.
In our view, the subject's location is considered to be very desirable. As
such, we would be inclined to conclude that prospective tenants would expect
little in the way of concessions if looking to do a deal for this site.
Leasing commissions in the local retail market typically vary from 3
percent to 6 percent of the aggregate rent with commissions generally paid out
up front. There are also certain variations to the commission structure that are
commonly found. One typical structure is based on 6 percent of year 1, 5 percent
of year 2, and 4 percent thereafter. A second structure involves a flat amount
such as 5 to 6 percent of the aggregate rent (over the term of the lease) for
new leases and 2.5 to 3 percent for renewal leases.
Conclusion
We have analyzed the retail trade history and profile of the Carmel
Mountain Ranch area and made reasonable assumptions as to the expected
performance of the subject's trade area. Important points about the subject's
study area and demographic and economic data specific to the trade area were
presented. The trade area profile discussed encompassed a radius-based analysis
that was established based upon a study of the competitive retail structure.
Marketing information relating to these sectors was presented and analyzed in
order to determine patterns of change and growth as it impacts the subject. The
given data are useful in establishing
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Retail Market Analysis
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quantitative dimensions of the primary trade area, while our comments serve to
provide qualitative insight into this market. A compilation of this data
provides the basis for our projections and forecasts particular to the subject
property. The following summarizes our key findings:
1. The subject is well located in a protected retail market area within a
masterplanned community and is the dominant retail center in the Carmel
Mountain Ranch community.
2. The subject is benefited by having a visible and accessible location in a
major retail area in a growing masterplanned community. In addition, it is
further enhanced by its proximity to Interstate 15, which increases its
regional accessibility.
3. The local demographics appear to be healthy and provide the subject with a
future strong demand for retail space. Briefly, the population within the
primary trade area of a five-mile radius is 165,194 residents. This figure
is forecasted to grow at a healthy rate over the near term. Income levels
are above regional norms and household growth is projected to be strong.
4. The Carmel Mountain Ranch area has experienced tremendous growth over the
past ten years. Continued development in the residential and retail
sectors has contributed to the area's strong demand from residents and
businesses. The low housing costs combined with the aesthetic appeal of
the area have attracted residents which has in turn attracted local and
regional retailers to take advantage of the growing trade area.
5. The subject improvements appear to be in excellent condition with no signs
of deferred maintenance.
6. The subject is the largest and most prominent retail center in Carmel
Mountain Ranch.
7. The subject is fully occupied. It appears to be well patronized within
perhaps one of the fastest growing submarkets within the San Diego retail
arena.
8. Future competition is limited given the lack of available land for
development and a moratorium for further retail development within the
Carmel Mountain Ranch area.
9. Market rents are expected to increase over the short and long term.
10. Occupancy levels are extremely high and are expected to remain above 95
percent.
11. Despite the past recession, the retail market within Carmel Mountain Ranch
has remained more resilient in relation to the majority of retail markets
in the Southern California area. Currently, most brokers describe the
local retail market conditions as healthy with continued growth
anticipated throughout the remainder of the decade.
Future market conditions appear favorable. Population growth and household
formation in Carmel Mountain Ranch is expected to increase and provide continued
growth in total retain sales. Income levels in the primary trade are well above
average, leading to excellent retail sales per household in all categories of
typical community shopping center stores. As a result, sale
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Retail Market Analysis
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volume levels are expected to grow at rates above those expected for the Carmel
Mountain Ranch area as a whole. The retail centers with big box tenants (such as
the subject) will benefit the most from the population growth. These trends
indicate that the demand by retail tenants for the area will continue to be
strong keeping vacancy rates to an absolute minimum and likely rental rate
increases with fewer concessions.
Overall, the subject property is well located for expected growth. It is
located on a protected retail market area within a masterplanned community and
it is the dominant retail center in Carmel Mountain Ranch. The local, as well as
regional, retail market is expected to continue growing throughout the remainder
of the decade. With the recovery of the overall economy combined with the strong
attraction of residents and businesses to the subject's area, the subject's area
is expected to remain a viable business location well into the future.
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<PAGE>
PROPERTY DESCRIPTION
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Site Description
Location: Carmel Mountain Road at Rancho Carmel Drive,
Community of Carmel Mountain Ranch, City of
San Diego, San Diego County, California
Shape: Irregular
Site Area (owned): 41.0+/- acres (1,785,960+/- square feet)
Frontage: West side of Carmel Mountain Road (5,000
feet)
South side of Rancho Carmel Drive (350 feet)
Topography/Terrain: Relatively level
Street Improvements: Carmel Mountain Road is an east-west,
two-way, six lane arterial with a center
median. Rancho Carmel Drive is a north-south,
two-way, four-lane arterial. The streets are
macadam paved with concrete curbing,
sidewalks, street lighting and overhead
utilities.
Soil Conditions: No study of soils was conducted as part of
this appraisal and no opinion is rendered on
sub-soil conditions. 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.
Utilities: The subject is adequately served by existing
utility companies as highlighted below.
Water: San Dieguito Water District
Sewer: San Dieguito Water District
Electricity: Southern California Edison
Gas: Southern California Gas
Telephone: Pacific Bell
Access: Primary access is gained via Carmel Mountain
Road and Rancho Carmel Drive. Ingress/egress
is gained via curb-cut entrances along Carmel
Mountain Road (5) and Rancho Carmel Drive
(2).
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[GRAPHIC OMITTED]
CARMEL MOUNTAIN PLAZA - San Diego, CA
<PAGE>
Property Description
================================================================================
Land Use Restrictions: For the original appraisal, we were provided
with an A.L.T.A. title commitment from the
Chicago Title Insurance Co. dated September
14, 1995. The report cites various utility
and reciprocal easement agreements which seem
to be typical for such a land use. We do not
know of any other easements, encroachments or
restrictions that would adversely affect the
site's use.
Flood Hazard: The subject property lies in Flood Zone C,
according to National Flood Insurance Rate
Map No.060295-0052, considered an area of
minimal flooding. No flood insurance is
required under this designation.
Wetlands: No wetlands study has been provided for this
analysis. If a subsequent engineering survey
reveals the presence of regulated wetlands,
we reserve the right to amend this valuation.
Site Improvements: The subject site has been graded, paved and
improved with all necessary underground and
overhead utilities.
Hazardous Substances: Please refer to our Assumptions and Limiting
Conditions with an explanation as to our
disclaimer regarding hazardous substances.
Comments: Overall, the size, topography and site
configuration appear functionally adequate
and conducive for retail utilization. The
site is serviced by all public utilities and
the curb appeal of site improvements is good.
Improvements Description
The subject property consists of a 442,477 square foot portion of Carmel
Mountain Plaza, a larger 532,129 community shopping center development (Mervyns,
Texaco, Boston Market, and Chevy's Restaurant not included in subject property).
Please refer to the site plan on the facing page for the location of the
improvements on the subject tract.
General Description
Type: Power/community center comprised of eight
major anchor suites (excluding Mervyns),
numerous in-line multi-tenant suites, five
multi-tenant outparcel buildings, and seven
freestanding single tenant outparcel
buildings (excluding Boston Market, Texaco,
and Chevy's).
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Property Description
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Year Built: 1993/94
Size:
==========================================
Kmart (ground lease) 107,870+/-SF
------------------------------------------
Sportmart 40,672+/-SF
------------------------------------------
Circuit City 30,973+/-SF
------------------------------------------
Pacific Theaters 34,561+/-SF
------------------------------------------
Marshalls 28,760+/-SF
------------------------------------------
Ross 24,000+/-SF
------------------------------------------
Michaels 22,969+/-SF
------------------------------------------
Blockbuster Music 14,000+/-SF
------------------------------------------
Barnes & Noble 13,916+/-SF
------------------------------------------
Blockbuster Video 6,048+/-SF
==========================================
Total Majors 323,769+/-SF
==========================================
Shop Space 118,708+/-SF
==========================================
Total 442,477+/-SF
==========================================
Developer: Homart Development Company
Construction Detail
Foundations: Poured reinforced concrete.
Framing: Structural steel frame, column and beam
construction.
Floors: Poured concrete slab on porous fill and vapor
barrier.
Exterior Walls: Pink brick on concrete block.
Roof Structure: Wood frame for smaller buildings; steel deck
for the anchor spaces.
Storefronts: Safety glass with aluminum framing. Most
store-fronts are uniform in appearance.
Pedestrian Doors: Safety glass in aluminum frame; mixture of
manual and electrically operated tempered
glass doors.
Loading/Rear Service Doors: In-line shops have flush type single metal
doors at grade. Anchors have depressed
drive-way loading docks with hollow metal
overhead doors. Circuit City has a customer
service area to accommodate installation
services.
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Property Description
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Mechanical Detail
Heating and Cooling: HVAC is provided via individual roof-mounted
heat pumps for which tenants are responsible
for maintenance and operational costs. A
standard distribution system of ducts,
ceiling diffusers, grills, register,
thermostats, etc. has been designed and
constructed by landlord, based on open
space and interior partitions.
Plumbing: Water and sanitary sewer connections for each
tenant suite (required for one lavatory and
one water closet in restroom) are installed.
Water and sewer usage is metered individually
and billed to tenants by the local utility.
Electrical Service: Adequate commercial service is provided for
each tenant space.
Fire Protection: The buildings are completely sprinklered in
accordance with local regulations. Fire
hydrants are provided throughout the
property.
Interior Detail
Layout and Design: The center has been constructed in an
elongated shape which has been designed to
conform to the site. Kmart and Michaels
anchor the north end of the center while
Pacific Theaters, Sportmart, Circuit City,
and Marshalls anchor the southern end.
Mervyns, Ross, and Barnes & Noble are located
toward the middle portion of the center.
Fifteen outparcel buildings are located along
the perimeter of the site with good to
moderate exposure from Carmel Mountain Road.
Interior finishes have been completed per
specification of the current tenants. Anchor
suites typically are built out with vinyl
composite tile over concrete slab, painted
drywall, recessed fluorescent light fixtures,
and exposed ceiling deck with beams and joist
exposed.
Other tenants have suspended acoustical tile
ceilings, painted drywall, recessed
fluorescent lighting, 12 to 14 foot ceiling
height, and various floor coverings,
including carpet and ceramic tile.
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Property Description
================================================================================
Outparcels: Interior finishes to those outparcels
owned by the subject are unique to the
tenant. The restaurant units have
specialized improvements including
superior grade carpeting or ceramic
tile, tile ceilings, incandescent and
halogen light fixtures.
Hazardous Substance: Please refer to the Assumptions and
Limiting Conditions (No. 10) for a more
complete discussion of our disclaimer
concerning hazardous substances.
Site Improvements
On-Site Parking: 3,000 spaces, or 6.8 spaces per 1,000 SF
of owned building area.
Parking areas are graded and surfaced
with bituminous concrete paving suitable
to local conditions. The lot is striped
throughout.
Landscaping: Extensive landscaping is located
throughout the site primarily comprised
of native plant species, including sable
palm and other shrubbery and grass.
Other: Parking lot lighting is provided with
anodized aluminum high intensity
lighting.
Comments: Overall, the site and building
improvements appear to be well designed
and configured for retail utilization.
Site configuration appears well suited
for vehicular movement and visibility.
Analysis of the structural integrity of
each building is beyond our expertise
and best made by a professional
engineer.
Our review of the local environs reveals
that there are no extraordinary external
influences which negatively impact the
value of the subject property.
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SUMMARY OF CURRENT TAX ASSESSMENTS
1996-1997 Fiscal Tax Year
Carmel Mountain Plaza
- --------------------------------------------------------------------------------
Assessed Value
--------------------------------------------- Recorded
Assessor's ID No. Land Improvements Total Taxes*
- --------------------------------------------------------------------------------
313-730-19 $ 2,350,000 $ 3,210,000 $ 5,560,000 $ 55,220.00
313-730-20 $ 420,000 $ 680,000 $ 1,100,000 $ 5,241.00
313-730-21 $ 276,552 $ - $ 276,552 $ 2,980.00
313-730-24 $ 775,000 $ 845,000 $ 1,620,000 $ 4,646.00
313-730-25 $ 600,000 $ 730,000 $ 1,330,000 $ 8,144.00
313-730-26 $ 400,000 $ 250,000 $ 650,000 $ 5,726.00
313-730-27 $ 4,566,237 $ 5,889,208 $ 10,455,445 $ 109,172.00
313-730-28 $ 840,000 $ 2,600,000 $ 3,440,000 $ 10,346.00
313-730-29 $ 1,660,000 $ 5,940,000 $ 7,600,000 $ 30,601.00
313-730-31 $ 1,730,000 $ 2,170,000 $ 3,900,000 $ 22,944.00
313-730-32 $ 550,000 $ 330,000 $ 880,000 $ 7,383.00
313-730-35 $ 780,000 $ 540,000 $ 1,320,000 $ 11,176.00
313-731-10 $ 510,000 $ 880,000 $ 1,390,000 $ 8,501.00
313-731-11 $ 103,283 $ 208,252 $ 311,535 $ 3,372.00
313-731-12 $ 238,424 $ 247,597 $ 486,021 $ 5,073.00
313-731-13 $ 5,089,506 $ 3,531,646 $ 8,621,152 $ 90,700.00
313-731-14 $ 775,000 $ 995,000 $ 1,770,000 $ 8,716.00
313-731-15 $ 1,630,000 $ 2,070,000 $ 3,700,000 $ 21,727.00
313-731-16 $ 1,150,000 $ 3,600,000 $ 4,750,000 $ 20,855.00
313-731-17 $ 375,000 $ 855,000 $ 1,230,000 $ 6,724.00
313-731-18 $ 780,000 $ 2,260,000 $ 3,040,000 $ 13,672.00
------------ ------------ ------------ ------------
$ 25,599,002 $ 37,831,703 $ 63,430,705 $ 452,919.00
Current Tax Rate 1.0207200%
Total Base Taxes $647,449.89
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* The recorded taxes are assumed innacurate based on the published tax rate
<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is currently assessed by San Diego County, whose tax
year runs on a fiscal year basis. In the State of California, assessed property
values may increase only 2 percent per year, with few exceptions. Events such as
transfer of ownership, or significant new construction will trigger a
reassessment of the property. The County Assessor usually accepts the sales
price or cost of the improvements in calculating assessed value. Assessed values
are usually poor indicators of actual value, and are useful only to estimate
effective tax rates.
The 1996/1997 fiscal year is the most recent year for which the county has
published assessed valuation and property tax information. We utilized public to
acquire the provided tax information. The assessed value and taxes for the
subject property are shown on the facing page. As shown, the recorded taxes are
assumed inaccurate given that the total taxes are significantly less than the
base taxes required in accordance with the published tax rate.
For the purposes of our analysis, we have utilized the tax figure included
in the 1997 budget assuming this estimate takes into account special assessments
over and above the base taxes per the published tax rate. We have estimated
taxes for the subject property at $875,447. This estimate is projected to grow
at 2 percent per year.
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<PAGE>
ZONING
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The subject property is zoned NC, Neighborhood Commercial, by the City of
San Diego. The subject's NC zoning is superseded by a PCD Permit which stands
for Planned Commercial Development. The PCD Permit (with amendments) allows
commercial development only in accordance with the requirements contained in the
PCD permit. The requirements include development of commercial retail structures
including retail shops, restaurants, two anchor tenants, and parking/landscaped
area. The permit outlines specific site improvements, architectural design,
traffic control, and parking requirements for the development. According to the
San Diego City Planner, any deviation for the development outlined in the PCD
will likely require an amendment to the PCD. Depending on the nature of the
proposed change, a new PCD could be required
The subject property is considered to be in conformance with the
requirements of the PCD Permit, and is assumed to be in conformance with all
government regulations.
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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<PAGE>
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.
We have evaluated the site's highest and best use improved and as if
vacant. In both cases 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. Because the site is improved with
improvements that generate an important return, the focus of the highest and
best use is on the site as improved.
Highest and Best Use of Property as Improved
Physical Factors
The first constraint imposed on the possible use of the site is dictated
by the physical aspects of the parcel itself. As noted in our "Property
Description" section of the report, the site is of sufficient size to
accommodate the improvements by virtue of the use and access from Carmel
Mountain Road and Rancho Carmel Drive. It is essentially level and has all
necessary utilities available. The site has good visibility and accessibility.
Its location on a principal arterial strongly supports its regional
accessibility. The improvements have been designed as a viable community
shopping complex. The anchor alignment is unique to the market and serves to
extend its draw beyond the immediate neighborhood. The layout and design are
adequate for its use as a shopping center. Finally, compatibility with existing
neighboring uses is also an important consideration. In the case of the subject,
Carmel Mountain Plaza is uniquely positioned in a masterplanned community with
restrictions on future retail development. It is well positioned to service both
the resident and visitor population. With all of this in mind, we are of the
opinion that the current use of the site is physically possible.
Legal Factors
Legal restrictions, as they apply to the subject property, are the public
restrictions of zoning. To the best of our knowledge, the property complies with
all of the zoning requirements under the NC and PCD classifications. As noted,
there are no further restrictions which are known to adversely affect the
utilization of the site. Finally, it is recognized that the property has been in
continuous operation as a retail use since late-1993. As such, the existing
leases and REAs which are in place dictate a retail use for the property.
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Highest and Best Use
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Financial Feasibility/Maximum Productivity
After analyzing the physically possible and legally permissible aspects of
the property, the highest and best use must be considered in light of financial
feasibility and maximum productivity. 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.
As discussed in the "Neighborhood and Retail Market Analysis" sections of
this report, the subject is an important shopping destination for a substantial
trade area that includes in excess of 165,000 people in its primary market. In
the "Income Approach" to the valuation of the subject property, we have provided
a detailed analysis of the subject's revenue producing ability as a shopping
center. These projections have relied upon certain market based assumptions
that, in our opinion, closely mirror the subject's position in the marketplace.
Consideration has been given to competitive properties in the surrounding market
and their potential effects on the subject property. Accordingly, we find that
the property, under the concept of continued use, will produce a sufficient
income stream to an investor. An alternative use 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. Therefore, we have concluded that the highest and best use of the site
as improved is for retail utilization as a shopping center.
As Vacant
Physical Factors
The subject parcel is large enough to accommodate a variety of uses,
including office, retail, hotel and residential. The subject's highway and
freeway access greatly enhance its appeal for a use that relies upon the ability
of patrons to be afforded quick and easy access. This is particularly true for a
destination retail property which, by necessity, must attract consumers from
points beyond its immediate neighborhood. As articulated, Carmel Mountain Road
is the principal commercial arterial within Carmel Mountain Ranch and is
characterized by fast food restaurants, shopping centers and service-oriented
retail buildings. Accordingly, we would find that a retail use of the site would
be the most compatible with the environs. Overall, we view the site as being
free of any physical limiting conditions that may restrict its development and
as such, a large scale commercial project would be a potential use for the site
as if vacant.
Legal Factors
The second test concerns permitted uses. Legal restrictions, as they apply
to the subject are public restrictions of zoning. The NC designation is designed
primarily for commercial utilization. The requirements of this zone and the PCD
permit are very site specific and governed by review procedures of the City of
San Diego. Based on the site's size and layout, with consideration given to
parking constraints, a retail building of similar size to the existing
improvements may be a permitted use. Due to the site's frontage and proximity to
other commercial uses, we believe that retail uses would be a legally conforming
use for the site.
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<PAGE>
Highest and Best Use
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Financial Feasibility/Maximum Productivity
After determining those uses which are physically possible and legally
permissible, the remaining uses must be analyzed in light of their financial
feasibility. As indicated in the "Regional", "Neighborhood" and "Retail Market
Analysis" sections of this report, the Carmel Mountain Ranch area is
characterized by economic conditions that have been favorable over the past
several years. This self contained retail market has not been as negatively
affected by the over-building and concessions which have plagued other
commercial markets. In addition, we see no significant changes in the local
demographics which might threaten the economic viability of the subject site.
The last test of highest and best use is that of maximum productivity.
While this implies a quantitative analysis, it is often most qualitative and
sensitive to community, social, political, and governmental standards. In this
case, the site is located in a centralized region of a growing masterplanned
community that is developing into an expansive commercial/retail hub with
substantial residential activity surrounding the property. Existing neighborhood
uses further complement the site. The subject's size, location and proximity to
regional road networks and residential nodes, lead us to the conclusion that the
Highest and Best Use for the subject property, as if vacant, would be for a new
shopping center.
================================================================================
-37-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
VALUATION PROCESS
================================================================================
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 power and large
community centers. The estimation of obsolescence for functional and economic
conditions as well as depreciation on improvements makes this approach sometime
problematic. Furthermore, the Cost Approach fails to fully consider the value of
anchor store commitments and the difficulty of site assemblages for such
properties. As such, the 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 subject. 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.
================================================================================
-38-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
The Sales Comparison Approach provides an estimate of 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
are an important criteria when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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 unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The charts of the following pages presents an overview of the improved
property sales used in this analysis.
================================================================================
-39-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. Pending 1981 $76,200,000 1,643,083 23.0% 377,965 153,355
NEC/Sepulveda Blvd. & Marina Jul-97 Good
Los Angeles County,
Manhattan Beach, California
- ------------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center Jun-97 N/A $39,174,000 -- -- 213,603 87,813
Metro Center Good
San Mateo County,
Colma, California
- ------------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461
Fremont Blvd. & Monry Ave. Good
Alameda County,
Fremont, California
- ------------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village Mar-97 1979/94 $73,500,000 -- -- 418,356 --
LaJolla, California Good
- ------------------------------------------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. Mar-97 1990 $22,000,000 1,817,759 18.5% 336,670 102,220
SEQ/I-880 & Highway 37 Good
Solano County,
Vallejo, California
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
9 Carrollton Crossroads Jan-97 1987 $18,100,000 -- -- 303,805 234,453
US Hwy. 27 & Hwy. 166 Good
Carrollton, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
10 Westminster Center Dec-96 1991 $51,750,000 1,829,520 20.0% 365,699 --
Golden West Ave. & Westminster Good
Orange County,
Westminster, California
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- ------------------------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129 459,209
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
13 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
======================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
======================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. 40.6% $201.61 $15.87 7.87% Ralph's, Sav-On,
NEC/Sepulveda Blvd. & Marina Mann Theaters,
Los Angeles County, Macy's Mens
Manhattan Beach, California
- ----------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. 79.7% $112.19 $11.21 9.99% Bed Bath & Beyond,
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million,
Orlando, Florida Shoe Carnival
- ----------------------------------------------------------------------------------------------------------------------
3 280 Metro Center 41.1% $183.40 $15.50 8.45% Marshalls, Nordstrom
Metro Center Rack, Kids R Us, Old
San Mateo County, Navy, Barnes & Noble
Colma, California
- ----------------------------------------------------------------------------------------------------------------------
4 Smoketown Station 45.0% $99.06 $10.13 10.23% Lowe's Home Center,
Prince William Pkwy & Worth Shoppers Food Whse,
Prince William County, Best Buy
Woodbridge, Virginia
- ----------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. 55.8% $91.41 $8.00 8.75% Safeway, Ross, Longs
Fremont Blvd. & Monry Ave. Drug, Old Navy,
Alameda County, OfficeMax,
Fremont, California Tower Records
- ----------------------------------------------------------------------------------------------------------------------
6 LaJolla Village -- $175.69 $15.81 9.00% Smith's Food King,
LaJolla, California AMC Theaters, Ross,
Marshalls, Super Crown
- ----------------------------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. 30.4% $65.35 $6.02 9.21% OfficeMax, Ross, PetCo,
SEQ/I-880 & Highway 37 Vacant HomeBase,
Solano County, Service Mer'dise
Vallejo, California (gr.lease)
- ----------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) 84.2% $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just For
Austin, Texas Feet, Mikasa
- ----------------------------------------------------------------------------------------------------------------------
9 Carrollton Crossroads 77.2% $59.58 $6.43 10.80% Wal-Mart, Goody's,
US Hwy. 27 & Hwy. 166 JCPenney, Kroger
Carrollton, Georgia
- ----------------------------------------------------------------------------------------------------------------------
10 Westminster Center -- $141.51 $11.76 8.31% Home Depot, Edwards
Golden West Ave. & Westminster Cinema, Lucky Super-
Orange County, market, Thrifty Drug
Westminster, California
- ----------------------------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter 84.1% $96.98 $8.87 9.15% Kmart,HomeDepot,Toys
N. Jantzen Dr & N. Center Ave RUs,REI,Ross,Comp.
Portland, Oregon City,Copelands,Linens,
OldNavy, Barnes&Noble
- ----------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center 92.0% $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- ----------------------------------------------------------------------------------------------------------------------
13 Centennial Plaza 85.0% $71.37 $7.49 10.50% Home Depot, Best Buy,
N.W. 59 & May Avenue Home Place
Oklahoma City, Oklahoma
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
===============================================================================================
<S> <C> <C> <C>
1 Manhattan Village S.C. 93.3%
NEC/Sepulveda Blvd. & Marina
Los Angeles County,
Manhattan Beach, California
- -----------------------------------------------------------------------------------------------
2 International Drive Value Ctr. 100.0% New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%.
- -----------------------------------------------------------------------------------------------
3 280 Metro Center 99.0% 351,632sf ctr. known as the country's
Metro Center first "power" ctr. IRR appx. 10.76% w/
San Mateo County, term.cap. of 9.5%. UACinema, vacant
Colma, California Home Depot, & NYFabric not incl.
- -----------------------------------------------------------------------------------------------
4 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth hub for county. Anchor rents $8.40/sf; in-
Prince William County, line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- -----------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. -- 661,140sf ctr. originally constructed as
Fremont Blvd. & Monry Ave. regional ctr. Converted b/w '92-'94.
Alameda County, Anchors not incl. in GLA sold are Mont-
Fremont, California gomery Ward & Home Express.
- -----------------------------------------------------------------------------------------------
6 LaJolla Village -- Solus to Prudential.
LaJolla, California
- -----------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. 90.1% Sale of ctr. w/3 future pad sites to
SEQ/I-880 & Highway 37 accomodate 25,600sf additional. Anchors
Solano County, not incl. ToysRUs, Costco, SaveMart,
Vallejo, California Longs, Cinedome, HomeDepot.
- -----------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) 98.0% Presale of promotional center. Sale
U.S. Highway 183 & expected to close by Jan. 31, 1997.
N. Mopac Blvd. REIT purchase based on direct cap.
Austin, Texas
- -----------------------------------------------------------------------------------------------
9 Carrollton Crossroads 98.5% Located 32 miles west of downtown
US Hwy. 27 & Hwy. 166 Atlanta. Renovated in 1993. Within 10-
Carrollton, Georgia mile radius - 20,162 households,
$41,800 avg. household income.
- -----------------------------------------------------------------------------------------------
10 Westminster Center 93.0% Ctr. reportedly developed at cost of $45
Golden West Ave. & Westminster million by IDM Corp. Avg. lease rate for
Orange County, in-line space $15-$27/sf.
Westminster, California
- -----------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave gomery Ward & Kmart anchor enclosed
Portland, Oregon mall of 87,500 square feet. Montgomery
Ward on ground lease.
- -----------------------------------------------------------------------------------------------
12 Lawrenceville Market Center 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management.
Lawrenceville, Georgia * Ground Lease
- -----------------------------------------------------------------------------------------------
13 Centennial Plaza 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue writing. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-
9.25% interest. REIT buyer.
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 1
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14 Prestonwood Village Sep-96 1980 $14,660,000 701,752 27.1% 190,131 123,454
5305 Arapaho Road Good
Dallas County,
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
15 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200
I-85 @ W.T. Harris Blvd. Excellent
Charlotte, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza Jul-96 1992 $12,700,000 653,000 32.2% 210,000 149,760
Mesquite, Good
Dallas County, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
19 Casa Linda Jun-96 1950/86 $33,769,000 1,128,640 28.9% 326,116 --
Garland Rd. & Buckner Blvd. Good
Dallas County,
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center May-96 1970 $58,500,000 1,290,683 26.8% 345,286 104,244
Lee Jackson Hwy. & Majestic Ln. Good
Fairfax County,
Chantilly, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza Mar-96 1972/82/93 $14,375,000 737,906 20.0% 147,396 122,052
NEC/Federal & Candlewood Lake Good
Fairfield County,
Brookfield, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
22 Kmart Center Feb-96 1994/95 $23,134,700 1,224,036 22.6% 276,500 140,221
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace Jan-96 1976/91 $80,000,000 1,000,573 45.9% 459,703 218,929
Mexella & Lincoln Blvd., Good
Marina Freeway
Marina Del Rey, California
- ------------------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center Jan-96 1989 $15,950,000 9,439,450 2.5% 235,892 --
1915 Hurstbourne Parkway Good
Jefferson County
Louisville, Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta Dec-95 1995/96 $46,000,000 -- -- 491,000 440,000
S/E/C Shea Blvd. & Excellent
Pina Co. Road
Scottsdale, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square Dec-95 1983 $24,835,000 1,104,246 28.7% 317,197 190,318
ES/I-45 & at Bay Blvd. Good
Houston
Webster, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
14 Prestonwood Village 64.9% $77.10 $9.27 12.02% Best Buy, ToysRUs,
5305 Arapaho Road KidsRUs, Drug
Dallas County, Emporium
Dallas, Texas
- --------------------------------------------------------------------------------------------------------------------
15 The Village at University Place 41.9% $99.85 $9.84 9.85% Best Buy, Office Depot,
I-85 @ W.T. Harris Blvd. TJ Maxx, Rhodes
Charlotte, North Carolina Furniture
- --------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza 43.6% $78.13 $7.81 10.00% Publix
13898 SW 56th Street Eckerd Drug
Dade County, Theater (gr. lease)
Kendall, Miami, Florida J. Byrons (not owned)
- --------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza 71.3% $60.48 $6.65 11.00% Best Buy, Sears Home
Mesquite, Life, PetsMart, Home
Dallas County, Texas Depot*
- --------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place 73.2% $128.83 $12.11 9.40% Marshalls, Steinmart,
SWC/Preston & Park Blvd. Office Depot, Baby
Colling County, Superstore, MJ Des.,
Plano, Texas Borders, HomePlace
- --------------------------------------------------------------------------------------------------------------------
19 Casa Linda -- $103.55 $9.84 9.50% Albertsons, Blockbuster
Garland Rd. & Buckner Blvd. Music, Ambers Crafts
Dallas County,
Dallas, Texas
- --------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center 30.2% $169.42 $14.94 8.82% CVS, LinensNThings,
Lee Jackson Hwy. & Majestic Ln. Marshalls, Ross, Total
Fairfax County, Beverage, Giant Food
Chantilly, Virginia
- --------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza 82.8% $97.53 $9.00 9.22% OfficeMax, The Wiz,
NEC/Federal & Candlewood Lake Waldbaums, T.J.Maxx
Fairfield County,
Brookfield, Connecticut
- --------------------------------------------------------------------------------------------------------------------
22 Kmart Center 50.7% $83.67 $7.93 9.48% Kmart
10501 Pines Boulevard Food Lion
Broward County,
Pembroake Pines, Florida
- --------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace 47.6% $174.03 $18.43 10.59% Vons, Sav-On,
Mexella & Lincoln Blvd., UA Theatres, Sport
Marina Freeway Chalet, Cineplex
Marina Del Rey, California Odeon, Gelson's
- --------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center -- $67.62 $6.49 9.60% Wal-Mart
1915 Hurstbourne Parkway Staples
Jefferson County Michael's
Louisville, Kentucky Fashion Bug
- --------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta 89.6% $93.69 $9.37 10.00% HomeBase, Kmart,
S/E/C Shea Blvd. & OfficeMax, Smith's,
Pina Co. Road Barnes&Noble, Comp
Scottsdale, Arizona USA, Linens, PetSmart
- --------------------------------------------------------------------------------------------------------------------
26 Baybrook Square 60.0% $78.30 $7.24 9.25% Target
ES/I-45 & at Bay Blvd. Service Merchandise
Houston Palais Royal
Webster, Texas
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
=============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
=============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
=============================================================================================
<S> <C> <C> <C>
14 Prestonwood Village 97.0% Ctr. purchased at high cap due to some
5305 Arapaho Road rents being above mkt., flat income
Dallas County, stream, & 13,770sf of 2nd story space.
Dallas, Texas
- ---------------------------------------------------------------------------------------------
15 The Village at University Place 100.0% Other anchors at center are Wal-Mart
I-85 @ W.T. Harris Blvd. and Sam's Club. This is a pre-sale of
Charlotte, North Carolina new center developed by Hawn.
- ---------------------------------------------------------------------------------------------
16 Miller Square Plaza 92.0% Community center; block & stucco. Fair-
13898 SW 56th Street avg exposure. Anchor rents appx. $7-
Dade County, $9/sf; in-line shops $12-$19/sf.
Kendall, Miami, Florida
- ---------------------------------------------------------------------------------------------
17 Towneast Center & Plaza 100.0% REIT buyer using direct cap only.
Mesquite,
Dallas County, Texas * Home Depot is tenant owned.
- ---------------------------------------------------------------------------------------------
18 Preston Shepard Place 100.0% New ctr. in affluenct area. Traffic counts
SWC/Preston & Park Blvd. >37,000 & 45,000/day. Buyer used
Colling County, 10.5% IRR & 9.25% terminal cap in
Plano, Texas analysis. Avg. rent = $15.73/sf.
- ---------------------------------------------------------------------------------------------
19 Casa Linda 84.0% Older section of eastern Dallas. Good
Garland Rd. & Buckner Blvd. condition at sale. Sale based on existing
Dallas County, income.
Dallas, Texas
- ---------------------------------------------------------------------------------------------
20 Greenbriar Towne Center 84.0% Part of bulk property purchase; price
Lee Jackson Hwy. & Majestic Ln. allocated & adjusted for assumption of
Fairfax County, existing debt at above mkt. inter. rate.
Chantilly, Virginia NOI proj. in '97 results in 9.2% OAR.
- ---------------------------------------------------------------------------------------------
21 White Turkey Plaza 99.0% Property does not have anchor > 50,000
NEC/Federal & Candlewood Lake sf but has good juniors. In-line rents are
Fairfield County, $9-$18/sf; Wiz & OfficeMax $13.50/sf;
Brookfield, Connecticut TJMaxx & Wald. below market.
- ---------------------------------------------------------------------------------------------
22 Kmart Center 97.0% Community center; block & tilt; good
10501 Pines Boulevard exposure. Rental rates range from $8-
Broward County, $20/sf.
Pembroake Pines, Florida
- ---------------------------------------------------------------------------------------------
23 Villa Marina Marketplace 92.0% Project consists of 2 properties; 2nd
Mexella & Lincoln Blvd., largest retail ctr. west of San Diego Fwy
Marina Freeway b/w Ventura Fwy & Manhattan. Sales=
Marina Del Rey, California $347/sf; rents=$12-45/sf.
- ---------------------------------------------------------------------------------------------
24 Town Fair Shopping Center 100.0% Good quality center in prime retail loc-
1915 Hurstbourne Parkway ation. Rents $12-$16 per sq/ft. Wal-Mart
Jefferson County w/sales @ $400/sf. Property in good
Louisville, Kentucky condition at sale.
- ---------------------------------------------------------------------------------------------
25 Scottsdale Fiesta 100.0% Separate take down of Home Base as of
S/E/C Shea Blvd. & 3/96. Total transaction contracted 12/95.
Pina Co. Road New center in developing area.
Scottsdale, Arizona
- ---------------------------------------------------------------------------------------------
26 Baybrook Square 100.0% Price adj. to incl. $1.0M in renovations
ES/I-45 & at Bay Blvd. done prior to sale. Buyer used IRR of
Houston 11.25%-11.50%. Ctr. has good visibility
Webster, Texas and access.
- ---------------------------------------------------------------------------------------------
</TABLE>
Page 2
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
27 Perimeter Village Dec-95 1995 $50,000,000 1,393,920 24.9% 347,699 254,979
WS/Ashford Dunwoody, Under Excellent
North of downtown Atlanta Contract
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner Nov-95 1970/89 $29,500,000 867,846 21.5% 186,734 96,833
Route 71 & I-84 Good
Hartford County
West Hartford, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
29 Center at Baybrook Nov-95 1985/93 $25,675,000 1,742,535 24.5% 426,097 372,987
NEC/Medical Ctr. Blvd. & I-45 Good
Houston
Webster, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. Sep-95 1990 $14,000,000 923,472 20.3% 187,168 114,086
SEC/Route 53 & Briarcliff Rd. Good
DuPage County
Bolingbrook, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavilion, Ph. II Jul-95 1995 $9,655,000 435,600 22.7% 98,954 75,454
NWC/Mt. Zion Blvd. & Zion Under Excellent
Clayton County Contract
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. May-95 1980/89 $19,000,000 583,704 30.7% 179,000 70,566
Route 112 & Bicycle Path Average
Suffolk County
Port Jefferson, New York
- ------------------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square May-95 1980/87 $9,200,000 435,600 22.7% 98,704 58,078
1715 Howell Mill Road Very Good
Fulton County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
34 Cobb Place Apr-95 1987 $21,035,000 1,013,206 23.5% 237,791 133,161
800 Ernest Barrett Pkwy. Good
Cobb County
Kennesaw, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. Apr-95 1991 $21,000,000 1,184,334 14.4% 170,406 88,807
NEC/Route 22 & Buffalo Gr. Very Good
Lake County
Buffalo Grove, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134
Santa Clara County Excellent
Milpitas, California
- ------------------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center Mar-95 1994 $12,300,000 875,164 18.4% 160,965 135,216
Route 59 & Meridian Pkwy Good
DuPage County
Aurora, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center Feb-95 1990 $14,400,000 478,768 24.4% 117,025 97,735
800-850 Playa Avenue Good
Monterey County
Sand City, California
- ------------------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III Feb-95 1995 $9,100,000 415,998 22.1% 92,000 92,000
SS/Steve Reynolds Blvd. Excellent
Gwinnett County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
======================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
======================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
27 Perimeter Village 73.3% $143.80 $16.54 11.50% Wal-Mart
WS/Ashford Dunwoody, Borders Books
North of downtown Atlanta Rhodes Furniture
Atlanta, Georgia Reading China
- ----------------------------------------------------------------------------------------------------------------------
28 Corbins Corner 51.9% $157.98 $14.98 9.48% Filene's Basement
Route 71 & I-84 Toys R Us
Hartford County Kids R Us
West Hartford, Connecticut Old Navy
- ----------------------------------------------------------------------------------------------------------------------
29 Center at Baybrook 87.5% $60.26 $6.03 10.00% Builder's Sq., Bed
NEC/Medical Ctr. Blvd. & I-45 Bath Beyond, Osh-
Houston mans, SteinMart,
Webster, Texas Best Buy, Sears
- ----------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. 61.0% $74.80 $7.75 10.36% Wal-Mart
SEC/Route 53 & Briarcliff Rd.
DuPage County
Bolingbrook, Illinois
- ----------------------------------------------------------------------------------------------------------------------
31 Southlake Pavilion, Ph. II 76.3% $97.57 $9.18 9.41% Michael's
NWC/Mt. Zion Blvd. & Zion Old Navy
Clayton County Baby Superstore
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. 39.4% $106.15 $10.72 10.10% FoodTown
Route 112 & Bicycle Path CVS Drugstore
Suffolk County
Port Jefferson, New York
- ----------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square 58.8% $93.21 $9.09 9.75% Kroger
1715 Howell Mill Road
Fulton County
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------
34 Cobb Place 56.0% $88.46 $9.56 10.81% Service M'dise
800 Ernest Barrett Pkwy. Upton's
Cobb County AMC Theatres
Kennesaw, Georgia
- ----------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. 52.1% $123.24 $11.53 9.36% Dominick's
NEC/Route 22 & Buffalo Gr. Sears Hardware
Lake County
Buffalo Grove, Illinois
- ----------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch 81.1% $113.97 $10.60 9.30% Service M'dise,
Santa Clara County SportsMart, Borders,
Milpitas, California OfficeMax, PetsMart,
Computer City, Ross
- ----------------------------------------------------------------------------------------------------------------------
37 Builders Square Center 84.0% $76.41 $7.63 9.99% Builders Square
Route 59 & Meridian Pkwy PetsMart
DuPage County
Aurora, Illinois
- ----------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center 83.5% $123.05 $12.06 9.80% Office Depot
800-850 Playa Avenue Marshalls
Monterey County Orchard Supply
Sand City, California Costco**
- ----------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III 100.0% $98.91 $9.25 9.35% Ciruit City
SS/Steve Reynolds Blvd. Media Play
Gwinnett County
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
===============================================================================================
<S> <C> <C> <C>
27 Perimeter Village 93.0% Concrete block, brick facade shopping
WS/Ashford Dunwoody, center under construction. Under
North of downtown Atlanta contract as of Dec-95. Shop leases run
Atlanta, Georgia from $18-30/sf; avg $25/sf.
- -----------------------------------------------------------------------------------------------
28 Corbins Corner 96.1% Specialty retail center located across
Route 71 & I-84 from Westfarms Mall at I-84. Strong
Hartford County trade area. Renovated in 1989.
West Hartford, Connecticut
- -----------------------------------------------------------------------------------------------
29 Center at Baybrook 99.0% Former mall renovated/converted in
NEC/Medical Ctr. Blvd. & I-45 1993. Good location, exposure. Anchors
Houston generate over 90% of minimum rent. Avg
Webster, Texas in-line rent=$12.03/sf.
- -----------------------------------------------------------------------------------------------
30 Market Square S.C. 96.0% Wal-Mart has option to expand 30,000.
SEC/Route 53 & Briarcliff Rd. Located in growing retail area. Other
DuPage County tenants incl. Aldi Food Store, Bedding
Bolingbrook, Illinois Experts & fast food restaurants.
- -----------------------------------------------------------------------------------------------
31 Southlake Pavilion, Ph. II 100.0% New community center located next to
NWC/Mt. Zion Blvd. & Zion freestanding Target, Home Depot &
Clayton County Southlake Ph. I. Buyer used 5% vac-
Atlanta, Georgia ancy factor & $.10/sf reserve.
- -----------------------------------------------------------------------------------------------
32 Port Plaza S.C. 99.0% Average quality community center. Other
Route 112 & Bicycle Path tenants include Kay Bee Toy, Dress
Suffolk County Barn, Sam Goody, NYNEX.
Port Jefferson, New York
- -----------------------------------------------------------------------------------------------
33 Howell Mill Square 100.0% Good quality brick & masonry ctr. located
1715 Howell Mill Road in densely populated trade area. Korger
Fulton County provides strong daily draw; ctr. has poor
Atlanta, Georgia visibility.
- -----------------------------------------------------------------------------------------------
34 Cobb Place 96.0% Good quality center with limited expo-
800 Ernest Barrett Pkwy. sure & narrow configuration. Ctr. has
Cobb County high amount of in-line space & lacks
Kennesaw, Georgia drawing power of 4th anchor store.
- -----------------------------------------------------------------------------------------------
35 Woodland Commons S.C. 98.0% Property includes three outlots, one of
NEC/Route 22 & Buffalo Gr. which was zoned industrial (5.03 ac.).
Lake County Also includes income from ground
Buffalo Grove, Illinois leases.
- -----------------------------------------------------------------------------------------------
36 McCarthy Ranch 100.0% Pre-sale of power ctr with good access &
Santa Clara County freeway exposure. Wal-Mart not included
Milpitas, California in sale. Buyer used 11.2% IRR. Anchor
rents $9.70-18.70/sf.
- -----------------------------------------------------------------------------------------------
37 Builders Square Center 100.0% Concrete block, decorative face brick
Route 59 & Meridian Pkwy center; above average quality. Located
DuPage County on the fringe of Meridian Business
Aurora, Illinois Campus.
- -----------------------------------------------------------------------------------------------
38 Sand Dollar Center 96.7% Good quality power ctr along Hwy 1.
800-850 Playa Avenue Costco owns their own land/bldg. Anchor
Monterey County rents $8.00-10.77/sf; shop rents avg
Sand City, California $16.56/sf.
- -----------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III 100.0% Two anchor tenants in power center.
SS/Steve Reynolds Blvd. Both tenants on long-term leases with
Gwinnett County appx. 20 yrs remaining. Located near
Atlanta, Georgia Gwinnett Mall in Northcross area.
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 3
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 Orchard Park S.C. Jan-95 1982 $7,425,000 457,380 17.1% 78,390 41,345
2090 Dunwoody Club Dr. Good
DeKalb County
Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
41 Danbury Square Jan-95 1989 $19,250,000 840,708 22.9% 192,621 78,700
Kenosia Ave. & I-84 Good
Fairfield County
Danbury, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing Dec-94 1994 $34,400,000 1,481,040 21.6% 319,499 202,229
NWC/Georgia 400 & Mansell Excellent
Fulton County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
43 Stewart Plaza Dec-94 1990 $22,000,000 561,924 39.6% 222,500 146,504
650 Stewart Avenue Good
Nassau County
Garden City, New York
- ------------------------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South Nov-94 1989/93 $6,500,000 866,844 18.8% 162,778 134,659
Highway 138 & I-675 Good
Clayton County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza Sep-94 1975/91 $57,350,000 2,178,000 21.8% 475,600 262,236
NW 56th & Sheridan St. Good
Broward County
Hollywood, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
46 Orland Town Center Sep-94 1994 $12,000,000 871,200 15.4% 134,000 55,873
SEC/159th & 95th Ave. Excellent
Cook County
Orland Hills, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center Sep-94 1994 $21,800,000 1,089,000 21.1% 230,000 127,267
Lyman Ave. & 75th St. Excellent
DuPage County
Darien, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
48 Latham Farms Sep-94 1993 $64,600,000 3,920,400 15.4% 603,405 467,000
I-87, U.S. 9, & Rte. 7 Excellent
Albany County, Colonie,
Albany, New York
- ------------------------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center Aug-94 1987 $20,500,000 632,491 33.6% 212,355 53,500
SWC/Ludlam Rd. & Bird Rd. Avg.-Good
Dada County,
Unincorp. Miami, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace Aug-94 1992 $14,850,000 1,785,960 9.7% 173,538 0
SWC/Garland & Jupiter Good
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair Aug-94 1992 $18,650,000 1,724,976 12.1% 209,362 0
SWC/U.S. 190 & Brodie Good
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
52 Southlake Pavilion Aug-94 1994 $12,500,000 539,273 24.8% 133,515 114,800
NWC/Mt. Zion Blvd. & Zion Excellent
Clayton County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
40 Orchard Park S.C. 52.7% $94.72 $9.06 9.56% Kroger
2090 Dunwoody Club Dr.
DeKalb County
Georgia
- --------------------------------------------------------------------------------------------------------------------
41 Danbury Square 40.9% $99.94 $9.52 9.53% Loehmann's
Kenosia Ave. & I-84 Toys R Us
Fairfield County Kids R Us
Danbury, Connecticut
- --------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing 63.3% $107.67 $9.80 9.10% AMC Theatres,
NWC/Georgia 400 & Mansell Uptons, TJMaxx,
Fulton County OfficeMax,
Atlanta, Georgia Sports Authority
- --------------------------------------------------------------------------------------------------------------------
43 Stewart Plaza 65.8% $98.88 $9.89 10.00% Caldor
650 Stewart Avenue Kiddie City
Nassau County
Garden City, New York
- --------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South 82.7% $39.93 $4.06 10.16% Kmart
Highway 138 & I-675 Bruno's
Clayton County
Atlanta, Georgia
- --------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza 55.1% $120.58 $10.97 9.10% Office Depot
NW 56th & Sheridan St. Publix
Broward County J. Byrons
Hollywood, Florida AMC Theatres
- --------------------------------------------------------------------------------------------------------------------
46 Orland Town Center 41.7% $89.55 $8.58 9.58% OfficeMax
SEC/159th & 95th Ave. Ciruit City
Cook County PetsMart
Orland Hills, Illinois Wal-Mart**
- --------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center 55.3% $94.78 $9.16 9.66% Home Depot
Lyman Ave. & 75th St. Circuit City
DuPage County PetsMart
Darien, Illinois Wal-Mart**
- --------------------------------------------------------------------------------------------------------------------
48 Latham Farms 77.4% $107.06 $10.01 9.35% Wal-Mart
I-87, U.S. 9, & Rte. 7 Sam's Club
Albany County, Colonie, Home Quarters
Albany, New York Shop 'N Save
- --------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center 25.2% $96.54 $8.80 9.12% Winn Dixie
SWC/Ludlam Rd. & Bird Rd. Eckerd Drugs
Dada County,
Unincorp. Miami, Florida
- --------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace 0.0% $85.57 $7.70 9.00% Marshall's
SWC/Garland & Jupiter Tom Thumb
Dallas, Texas Taylor Books
- --------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair 0.0% $89.08 $8.79 9.87% PetsMart
SWC/U.S. 190 & Brodie TJMaxx
Austin, Texas Home Depot**
Circuit City**
- --------------------------------------------------------------------------------------------------------------------
52 Southlake Pavilion 86.0% $93.62 $8.72 9.31% Media Play
NWC/Mt. Zion Blvd. & Zion PetsMart
Clayton County Rhodes Furniture
Atlanta, Georgia
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
===============================================================================================
<S> <C> <C> <C>
40 Orchard Park S.C. 80.0% Average-good quality community center.
2090 Dunwoody Club Dr. Sale based on actual income &
DeKalb County expenses, excl. reserves. Seller
Georgia acquired through foreclosure.
- -----------------------------------------------------------------------------------------------
41 Danbury Square 90.0% Good quality community shopping center
Kenosia Ave. & I-84 located adjacent to Danbury Fair
Fairfield County regional mall.
Danbury, Connecticut
- -----------------------------------------------------------------------------------------------
42 Mansell Crossing 99.0% One-story, concrete blk & brick center
NWC/Georgia 400 & Mansell located appx. 0.8 miles south of North
Fulton County Point Mall. Avg shop rent=$15.23/sf. Ctr
Atlanta, Georgia also has Toys R Us, Michaels.
- -----------------------------------------------------------------------------------------------
43 Stewart Plaza 86.0% Good quality community shopping center
650 Stewart Avenue located adjacent to the Roosevelt Field
Nassau County Mall in Garden City.
Garden City, New York
- -----------------------------------------------------------------------------------------------
44 Freeway Junction South 99.0% Average-good quality, concrete retail ctr.
Highway 138 & I-675 on south side Atlanta. Visibility impaired
Clayton County by outpads & setback. Price adjusted to
Atlanta, Georgia reflect repair costs.
- -----------------------------------------------------------------------------------------------
45 Sheridan Plaza 95.0% Power center purchase based on a
NW 56th & Sheridan St. 10.8% IRR, term. cap of 9.25-9.50%.
Broward County Sale included development of 15,000sf
Hollywood, Florida Luria's. Sales b/w $200-300/sf.
- -----------------------------------------------------------------------------------------------
46 Orland Town Center 100.0% Purchased on existing income. Wal-Mart
SEC/159th & 95th Ave. not included in sale. Site had potential
Cook County for additional bldg. Buyer quoted IRR of
Orland Hills, Illinois 10.8%.
- -----------------------------------------------------------------------------------------------
47 Darien Towne Center 100.0% Power center opened in Summer '94.
Lyman Ave. & 75th St. Wal-Mart not included in sale. Majority of
DuPage County tenants have set options. Buyer
Darien, Illinois suggested 10.7% IRR.
- -----------------------------------------------------------------------------------------------
48 Latham Farms 95.0% Good quality power center with trade
I-87, U.S. 9, & Rte. 7 area population reported at 150,000.
Albany County, Colonie, Placed on mkt in March '94. Masonry &
Albany, New York steel constr.
- -----------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center 95.0% Property in avg.-good condition at sale;
SWC/Ludlam Rd. & Bird Rd. minor exterior upgrade needed. Good
Dada County, accessible/visible location. Some 2nd
Unincorp. Miami, Florida story space.
- -----------------------------------------------------------------------------------------------
50 White Rock Marketplace 94.0% Part of larger 325,548sf power center.
SWC/Garland & Jupiter Good condition, relatively new at sale.
Dallas, Texas Purchased by Penn. State Retirement
Trust.
- -----------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair 99.0% Part of larger 352,084sf ctr. Other
SWC/U.S. 190 & Brodie tenants incl. SportsTown, Bookstop,
Austin, Texas Famous Footwear. Home Depot, Circuit
City & Luby's not included.
- -----------------------------------------------------------------------------------------------
52 Southlake Pavilion 100.0% Center located adjacent to Home Depot
NWC/Mt. Zion Blvd. & Zion store w/ 3rd highest sales level in Atlanta
Clayton County MSA. Good access & exposure via I-75.
Atlanta, Georgia
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 4
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
53 Anaheim Hills Festival Jul-94 1991-94 $48,980,000 3,702,600 8.2% 303,661 146,755
8000-82000 E. Santa Ana Very Good
Orange County
Anaheim Hills, California
- ------------------------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavilion Jul-94 1993 $18,400,000 248,292 40.3% 100,161 67,608
Peachtree & Piedmont Very Good
Buckhead County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. Jul-94 1992-93 $51,000,000 2,090,880 27.6% 576,973 279,600
U.S. 101 at Rowland Very Good
Marin County
Novato, California
- ------------------------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavilion Jun-94 1993-94 $31,750,000 153,767 112.8% 173,430 150,570
Hale & Maple Avenues Good
Westchester County
White Plains, New York
- ------------------------------------------------------------------------------------------------------------------------------------
57 Fairlane North S.C. Apr-94 1994 $59,200,000 2,983,860 19.8% 589,688 0
Mercury Drive & Ford Drive Very Good
Michigan 153
Dearborn, Michigan
- ------------------------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza Feb-94 1988 $15,400,000 871,200 24.7% 215,275 94,976
U.S. 30, E of Interstate 65 Good
Merrillville, Indiana
- ------------------------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. Feb-94 1993 $17,245,688 777,000 22.8% 177,308 138,958
NWC/Golf & Basswood Good
Cook County
Schaumburg, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
60 Providence Square Jan-94 1990 $19,200,000 696,960 27.3% 190,378 108,747
Upper Roswell & Good
Johnson Ferry
Marieta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace Dec-93 1987 $44,000,000 980,100 30.5% 299,206
NEC/Birch & Randolph Average
Orange County
Brea, California
- ------------------------------------------------------------------------------------------------------------------------------------
62 The Quarry Dec-93 1992 $24,500,000 2,656,289 16.8% 447,000 325,000
Joliet & LaGrange Roads Very Good
Cook County
Hodgkins, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center Dec-93 1985 $26,380,000 1,611,720 16.2% 261,025 130,077
Harbor & Orangethorpe Very Good
Orange County
Fullerton, California
- ------------------------------------------------------------------------------------------------------------------------------------
64 Townline Square Dec-93 1989 $25,000,000 1,397,405 21.6% 302,081 218,885
S.Broad St. & Route 5 Good
New Haven County
Meriden, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
65 First Colony Commons Dec-93 1992-94 $33,350,000 1,595,102 23.5% 374,472 152,505
U.S. Hwy 59 & Williams Good
Harris County
Sugarland, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
=====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
53 Anaheim Hills Festival 48.3% $161.30 $15.32 9.50% Vons, Marshalls,
8000-82000 E. Santa Ana TJMaxx, Cinema,
Orange County Target**
Anaheim Hills, California Mervyn's**
- ---------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavilion 67.5% $183.70 $16.55 9.01% Sports Authority
Peachtree & Piedmont PetsMart
Buckhead County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. 48.5% $88.39 $8.17 9.24% Macy's Homestore,
U.S. 101 at Rowland Oshmans, Marchalls,
Marin County Costco**
Novato, California Target**
- ---------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavilion 86.8% $183.07 $17.39 9.50% OfficeMax
Hale & Maple Avenues Sports Authority
Westchester County Toys R Us
White Plains, New York Borders Books
- ---------------------------------------------------------------------------------------------------------------------
57 Fairlane North S.C. 0.0% $100.39 $9.54 9.50% Wal-Mart, Sam's,
Mercury Drive & Ford Drive Super Kmart, Sports
Michigan 153 Authority, Builders,
Dearborn, Michigan OfficeMax, Borders
- ---------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza 44.1% $71.54 $6.68 9.34% OfficeMax
U.S. 30, E of Interstate 65 TJMaxx
Merrillville, Indiana F&M Distributors
Kids R Us
- ---------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. 78.4% $97.26 $9.51 9.78% Kohl's
NWC/Golf & Basswood Linens 'N Things
Cook County Barnes & Noble
Schaumburg, Illinois
- ---------------------------------------------------------------------------------------------------------------------
60 Providence Square 57.1% $100.85 $9.07 8.99% Upton's
Upper Roswell & Home Depot
Johnson Ferry Drugs For Less
Marieta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace 0.0% $147.06 $13.69 9.31% Marshall's
NEC/Birch & Randolph Circuit City
Orange County Toys R Us
Brea, California United Artists
- ---------------------------------------------------------------------------------------------------------------------
62 The Quarry 72.7% $54.81 $5.54 10.10% Kohl's, OfficeMax,
Joliet & LaGrange Roads Sam's Club,
Cook County Wal-Mart,
Hodgkins, Illinois Target**
- ---------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center 49.8% $101.06 $10.86 10.75% Toys R Us
Harbor & Orangethorpe Silo
Orange County AMC Theatre
Fullerton, California Price Club**
- ---------------------------------------------------------------------------------------------------------------------
64 Townline Square 72.5% $82.76 $8.26 9.98% Bradlees
S.Broad St. & Route 5 Marshall's
New Haven County The Wiz
Meriden, Connecticut ShopRite
- ---------------------------------------------------------------------------------------------------------------------
65 First Colony Commons 40.7% $89.06 $8.25 9.26% Service M'dise
U.S. Hwy 59 & Wlliams Sportstown
Harris County Sears Homelife
Sugarland, Texas Home Depot**
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
==============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
==============================================================================================
<S> <C> <C> <C>
53 Anaheim Hills Festival 75.0% Good quality power center with stabil-
8000-82000 E. Santa Ana ization guarantee. Buyer purchased
Orange County based on NOI guarantee. Target &
Anaheim Hills, California Mervyn's not part of sale.
- ----------------------------------------------------------------------------------------------
54 Buckhead Pavilion 75.0% Two-bldg center built in 1993. Income
Peachtree & Piedmont projections using 5% vacancy for in-line
Buckhead County space. Acquired subject to $12 million
Atlanta, Georgia loan.
- ----------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. 89.0% Sale involves Phs I & II of power ctr in
U.S. 101 at Rowland affluent North San Francisco Bay area.
Marin County Costco & Target on long-term ground
Novato, California leases. Buyer used 11.1% IRR.
- ----------------------------------------------------------------------------------------------
56 The Westchester Pavilion 92.0% Four-level, enclosed urban power ctr; re-
Hale & Maple Avenues use of former dept. store. Anchor rents
Westchester County $16.00-20.00/sf; in-line rents $20.00-
White Plains, New York 25.00/sf. Incl. devel. rights.
- ----------------------------------------------------------------------------------------------
57 Fairlane North S.C. 100.0% New power center pre-sold in Dec-93.
Mercury Drive & Ford Drive Sale date is when center was completed.
Michigan 153 Also included Service Merchandise as
Dearborn, Michigan anchor.
- ----------------------------------------------------------------------------------------------
58 Merrillville Plaza 95.0% Good quality retail center located across
U.S. 30, E of Interstate 65 from the Southlake regional shopping
Merrillville, Indiana mall.
- ----------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. 94.0% Good quality center one mile west of
NWC/Golf & Basswood Woodfield Mall. Barnes & Noble not
Cook County included in sale. Located in high retail
Schaumburg, Illinois demand area.
- ----------------------------------------------------------------------------------------------
60 Providence Square 100.0% Well-located center contiguous to an
Upper Roswell & 86,640sf Home Depot (not included).
Johnson Ferry Home Depot leases former Phar-Mor
Marieta, Georgia space of 25,600sf. No vacancy.
- ----------------------------------------------------------------------------------------------
61 Brea Marketplace 96.0% Seller guaranteed rental rates on vacant
NEC/Birch & Randolph suites. Buyer neg. opt. to purchase fee
Orange County inter. in land for $6.5m. OAR reflects
Brea, California impact of gr. lease (9.8% w/o).
- ----------------------------------------------------------------------------------------------
62 The Quarry 98.0% Buyer based sale on '94 income; 9.8%
Joliet & LaGrange Roads OAR on existing. Target not included in
Cook County sale. Trade area reported to have popul.
Hodgkins, Illinois of 213,000; avg. hh. inc. of $49,973.
- ----------------------------------------------------------------------------------------------
63 Fullerton Town Center 96.0% Sale included part of 367,000sf ctr. Other
Harbor & Orangethorpe anchor (Price Club) not included. Leases
Orange County range from $12.00-22.00/sf. Occupancy
Fullerton, California 96% at sale.
- ----------------------------------------------------------------------------------------------
64 Townline Square 92.0% Class B type ctr. previously foreclosed
S.Broad St. & Route 5 by Aetna Life. Portion of ctr. has poor
New Haven County visibility. Steel frame, masonry. Price
Meriden, Connecticut based on Buyer's pro forma.
- ----------------------------------------------------------------------------------------------
65 First Colony Commons 100.0% Sale based on actual pro forma. Steel
U.S. Hwy 59 & Wlliams frame & stucco/brick. Home Depot not
Harris County included in sale. Other majors incl.
Sugarland, Texas Bookstop, Sound Whse.
- ----------------------------------------------------------------------------------------------
</TABLE>
Page 5
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
66 Athens Points Dec-93 1993 $4,700,000 442,134 13.8% 60,799 55,999
Mitchell Bridge & Hwy 78 Good
Athens
Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
67 Clairemont Square Nov-93 1956-89 $35,470,000 1,849,558 24.6% 454,650 0
NEC/Clairemont Mesa & Good
Clairemont Drive
San Diego, California
- ------------------------------------------------------------------------------------------------------------------------------------
68 Green Orchard Nov-93 1990/93 $18,400,000 1,200,000 26.7% 320,395 217,826
East of Center Drive & Good
Alpine Avenue
Walker, Michigan
- ------------------------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center Nov-93 1986/90 $9,670,500 784,080 18.6% 145,570 60,000
12501 Shelbyville Road Good
Jefferson County
Louisville, Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook Oct-93 1986 $19,000,000 816,750 26.9% 219,823 130,685
U.S. Hwy 59 & FM Bypass Good
Harris County
Humble, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
71 Plaza at Puente Hills Oct-93 1987-92 $58,000,000 3,049,200 16.9% 516,583 287,351
Fullerton Rd./Pomona Fwy. Good
Los Angeles County
City of Industry, California
- ------------------------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center Oct-93 1993 $45,200,000 2,121,372 14.0% 297,059 138,922
Route 35 & Laurel Ave. Very Good
Monmouth County
Holmdel, New Jersey
- ------------------------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing Oct-93 1989-92 $13,700,000 1,097,712 15.0% 164,997 111,478
Newbury Street & Route 1 Good
Danvers, Massachusetts
- ------------------------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks Sep-93 1991 $11,100,000 1,448,806 12.6% 182,835 0
U.S. Highway 78 Good
Gwinnett County
Snellville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza Aug-93 1993 $19,900,000 1,002,490 27.5% 275,927 240,631
NEQ/Lantana & Jog Road Very Good
Palm Beach County
Lantana, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. Aug-93 1971/87-90 $19,500,000 805,860 26.3% 211,767 173,860
Madison & Manzanita Average
Sacramento County
Carmichael, California
- ------------------------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing Aug-93 1987 $20,000,000 1,089,000 20.1% 219,300 104,915
Coliseum & Cunningham Good
Hampton County
Hampton, Norfolk, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza Aug-93 1989 $20,780,000 771,448 27.6% 212,711 129,075
I-91 & Montowese Exit Good
New Haven County
North Haven, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
=====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
66 Athens Points 92.1% $77.30 $7.75 10.03% Publix
Mitchell Bridge & Hwy 78
Athens
Georgia
- ---------------------------------------------------------------------------------------------------------------------
67 Clairemont Square 0.0% $78.02 $7.80 10.00% Vons
NEC/Clairemont Mesa & Marshall's
Clairemont Drive TJMaxx
San Diego, California Circuit City
- ---------------------------------------------------------------------------------------------------------------------
68 Green Orchard 68.0% $57.43 $5.81 10.11% Builders Square
East of Center Drive & Kohl's
Alpine Avenue Witmark
Walker, Michigan
- ---------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center 41.2% $66.43 $7.09 10.68% Kroger
12501 Shelbyville Road
Jefferson County
Louisville, Kentucky
- ---------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook 59.5% $86.43 $8.11 9.38% Randall's
U.S. Hwy 59 & FM Bypass TJMaxx
Harris County Amber Crafts
Humble, Texas
- ---------------------------------------------------------------------------------------------------------------------
71 Plaza at Puente Hills 55.6% $112.28 $11.70 10.42% IKEA, Silo,
Fullerton Rd./Pomona Fwy. AMC Theatre,
Los Angeles County Circuit City,
City of Industry, California Miller's Outpost
- ---------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center 46.8% $152.16 $14.41 9.47% A&P Food
Route 35 & Laurel Ave. Marshall's
Monmouth County The Wiz
Holmdel, New Jersey OfficeMax
- ---------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing 67.6% $83.03 $8.79 10.59% OfficeMax
Newbury Street & Route 1 Home Quarters
Danvers, Massachusetts Bed, Bath & Beyond
Discovery Zone
- ---------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks 0.0% $60.71 $6.02 9.91% Wal-Mart
U.S. Highway 78 Food Lion
Gwinnett County
Snellville, Georgia
- ---------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza 87.2% $72.12 $7.03 9.75% Kmart
NEQ/Lantana & Jog Road Builders Square II
Palm Beach County Food Lion
Lantana, Florida
- ---------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. 82.1% $92.08 $9.31 10.11% Home Depot
Madison & Manzanita TJMaxx
Sacramento County Longs Drugs
Carmichael, California
- ---------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing 47.8% $91.20 $8.44 9.25% Marshall's
Coliseum & Cunningham Food Lion
Hampton County Phar-Mor
Hampton, Norfolk, Virginia Linen Warehouse
- ---------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza 60.7% $97.69 $8.96 9.17% Home Depot
I-91 & Montowese Exit TJMaxx
New Haven County XPect Discount
North Haven, Connecticut PriceCostco**
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
===============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
===============================================================================================
<S> <C> <C> <C>
66 Athens Points 96.0% Good quality, masonry neighborhood
Mitchell Bridge & Hwy 78 shopping center sale. Actual price was
Athens $5.05m but included outparcel valued at
Georgia $350,000; price adjusted.
- -----------------------------------------------------------------------------------------------
67 Clairemont Square 85.0% Avg-Good quality center. Sav-On Drugs
NEC/Clairemont Mesa & is another major tenants.
Clairemont Drive
San Diego, California
- -----------------------------------------------------------------------------------------------
68 Green Orchard 100.0% Average quality center with only fair
East of Center Drive & visibility. Property includes 55,260 sq. ft.
Alpine Avenue ground lease to Loek's Star Theatre.
Walker, Michigan
- -----------------------------------------------------------------------------------------------
69 Eastgate Shopping Center 92.1% Avg-good quality center. Rents $10-$12
12501 Shelbyville Road per sq/ft at sale. Sale included two out-
Jefferson County parcel lots w/limited frontage. Property
Louisville, Kentucky in good condition at sale.
- -----------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook 98.0% Ctr. adj. to mall. Other majors make up
U.S. Hwy 59 & FM Bypass 15% of ctr. All tenants on long-term
Harris County leases thru 2000. Anchor rents $5.75-
Humble, Texas 7.25/sf; in-line $10.00-12.00/sf.
- -----------------------------------------------------------------------------------------------
71 Plaza at Puente Hills 93.5% Sale of power-oriented ctr. Anchors that
Fullerton Rd./Pomona Fwy. were not included in sale were Home
Los Angeles County Depot, Price Savers, & Toys R Us.
City of Industry, California
- -----------------------------------------------------------------------------------------------
72 Holmdel Towne Center 80.0% Occupancy based on commitments.
Route 35 & Laurel Ave. Other majors incl. Barnes & Noble, Lee
Monmouth County Wards, Pet Food Giant. New ctr. at sale.
Holmdel, New Jersey Purchased during construction.
- -----------------------------------------------------------------------------------------------
73 Danvers Crossing 87.0% Completion of ctr. delayed due to fore-
Newbury Street & Route 1 closure proceedings. Under contract for
Danvers, Massachusetts one yr while buyer secured tenants for
vacant space.
- -----------------------------------------------------------------------------------------------
74 Snellville Oaks 98.0% Average-good quality center; masonry
U.S. Highway 78 construction in good condition. Anchors
Gwinnett County include Wal-Mart & Food Lion.
Snellville, Georgia
- -----------------------------------------------------------------------------------------------
75 Lantana Square/Plaza 99.5% New power ctr. purchased by REIT. In-
NEQ/Lantana & Jog Road line tenants pay avg. $16.00/sf + $2.25
Palm Beach County for NNN. Buyer cited product quality,
Lantana, Florida credit of Kmart, high % of anchor GLA.
- -----------------------------------------------------------------------------------------------
76 Madison Square S.C. 92.0% Buyer noted upside from leasing
Madison & Manzanita 17,000sf store. Sale price based on
Sacramento County appraised value. Leases range from
Carmichael, California $18.00-24.00/sf.
- -----------------------------------------------------------------------------------------------
77 Coliseum Crossing 95.0% Masonry & concrete retail center in good
Coliseum & Cunningham condition at sale. Traditional tenant mix.
Hampton County
Hampton, Norfolk, Virginia
- -----------------------------------------------------------------------------------------------
78 Price Club Plaza 100.0% Sale reportedly based upon appraised
I-91 & Montowese Exit value. 100% leased at sale. Other
New Haven County tenants include Dress Barn, LeeJay.
North Haven, Connecticut PriceCostco not induded in sale.
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 6
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WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
79 Price Club Plaza Aug-93 1986/92 $25,016,000 1,053,280 23.7% 249,325 165,100
SEC/Sunrise Hwy & Bayview Good
Copaigue, Town of
Babylon, New York
- ------------------------------------------------------------------------------------------------------------------------------------
80 Heritage Walk Jun-93 1991 $8,657,624 871,200 18.2% 158,282 141,742
ES/Columbia Street Good
Baldwin County
Milledgeville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center Jun-93 1961/91 $32,500,000 2,862,763 17.8% 510,252 162,512
Crawford Road Good
Indianapolis, Indiana
- ------------------------------------------------------------------------------------------------------------------------------------
82 Loehmann's Plaza Mar-93 1986-89 $33,714,000 1,268,774 19.8% 251,529 151,286
Middle Country Rd. & Good
Morices
Lake Grove, New York
- ------------------------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade Mar-93 1971-91 $27,000,000 827,640 29.0% 239,745 0
I-190 & Hawthorne Blvd. Good
Los Angeles County
Torrance, California
- ------------------------------------------------------------------------------------------------------------------------------------
84 The Brickyard Feb-93 1989-90 $19,575,000 1,675,753 16.3% 273,417 212,758
Wilbur Cross Highway Good
Hartford County
Berlin, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
85 New Park Plaza Dec-92 1979-80 $8,700,000 561,924 33.2% 186,459 100,920
Mowry & Cedar Average
Alameda County
Newark, California
- ------------------------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook Aug-92 1985-89 $31,250,000 1,630,015 22.8% 370,907 190,212
Centerfield Blvd. & FM 1960 Good
Harris County
Houston, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
87 Westward S.C. May-92 1960-88 $18,450,000 794,099 27.9% 221,564 165,508
NEC/Spencer & Okeechobee Good
Palm Beach County
West Palm Beach, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza Apr-92 1989-91 $43,200,000 1,758,082 22.1% 389,000 221,892
NWC/91 Fwy. & Mckinley Good
Riverside County
Corona, California
- ------------------------------------------------------------------------------------------------------------------------------------
89 Broad River Commons Feb-92 1969-86 $7,615,000 761,864 17.8% 135,700 0
Broad River & Marley Drive Good
Richland County
Columbia, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons Dec-91 1991 $30,725,000 1,372,140 22.7% 311,318 207,118
Pines Blvd. & University Dr. Very Good
Broward County
Pembroke Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. Dec-91 1989 $16,500,000 2,831,400 9.4% 265,600 0
San Jose Blvd. & Claire Good
Jacksonville, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
79 Price Club Plaza 66.2% $100.33 $9.03 9.00% Filene's Basement
SEC/Sunrise Hwy & Bayview PriceCostco
Copaigue, Town of
Babylon, New York
- --------------------------------------------------------------------------------------------------------------------
80 Heritage Walk 89.6% $54.70 $5.38 9.84% Kmart
ES/Columbia Street Bi-Lo
Baldwin County Goody's
Milledgeville, Georgia
- --------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center 31.8% $63.69 $5.92 9.30% Kohl's
Crawford Road Kroger
Indianapolis, Indiana Drug Emporium
- --------------------------------------------------------------------------------------------------------------------
82 Loehmann's Plaza 60.1% $134.04 $12.06 9.00% Loehmann's
Middle Country Rd. & Bed & Bath
Morices Filene's Basement
Lake Grove, New York Foodtown
- --------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade 0.0% $112.62 $12.05 10.70% Office Depot
I-190 & Hawthorne Blvd. Marshall's, Silo,
Los Angeles County Ross, Bookstar,
Torrance, California Mann Theatres
- --------------------------------------------------------------------------------------------------------------------
84 The Brickyard 77.8% $71.59 $8.40 11.73% Home Depot
Wilbur Cross Highway Pace
Hartford County
Berlin, Connecticut
- --------------------------------------------------------------------------------------------------------------------
85 New Park Plaza 54.1% $46.66 $5.33 11.42% TJMaxx
Mowry & Cedar Toys R Us
Alameda County Herman's
Newark, California Hancock Fabrics
- --------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook 51.3% $84.25 $8.03 9.53% Marshall's
Centerfield Blvd. & FM 1960 Sportstown
Harris County AMC Theatre
Houston, Texas Phar-Mor
- --------------------------------------------------------------------------------------------------------------------
87 Westward S.C. 74.7% $83.27 $8.36 10.04% Office Depot
NEC/Spencer & Okeechobee Circuit City
Palm Beach County Sports Authority
West Palm Beach, Florida Phar-Mor
- --------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza 57.0% $111.05 $10.75 9.68% Home Depot
NWC/91 Fwy. & Mckinley Ross
Riverside County Levitz Furniture
Corona, California Drug Emporium
- --------------------------------------------------------------------------------------------------------------------
89 Broad River Commons 0.0% $56.12 $5.99 10.67% Home Quarters
Broad River & Marley Drive Phar-Mor
Richland County Herman's
Columbia, South Carolina
- --------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons 66.5% $98.69 $9.44 9.57% Publix Superstore,
Pines Blvd. & University Dr. Office Depot,
Broward County Circuit City, TJMaxx,
Pembroke Pines, Florida Marshall's
- --------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. 0.0% $62.12 $6.21 10.00% SteinMart, TJMaxx,
San Jose Blvd. & Claire Beall's,
Jacksonville, Florida Phar-Mor,
Michael's
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
==============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
==============================================================================================
<S> <C> <C> <C>
79 Price Club Plaza 98.8% Sold from Price Company to Price REIT
SEC/Sunrise Hwy & Bayview based upon 9.0% cap rate on projected
Copaigue, Town of year one income. Property 98.8% leased
Babylon, New York at sale.
- ----------------------------------------------------------------------------------------------
80 Heritage Walk 100.0% Good location fronting 4-lane primary
ES/Columbia Street artery; adjacent to Wal-Mart super
Baldwin County center. Sale included 2 outparcels.
Milledgeville, Georgia
- ----------------------------------------------------------------------------------------------
81 Speedway Super Center 90.0% Community center in central portion of
Crawford Road Indianapolis. Anchor rents=$3-7.25/sf; in
Indianapolis, Indiana line rents=$12-14/sf. Sale did not include
option to purchase outlots.
- ----------------------------------------------------------------------------------------------
82 Loehmann's Plaza 100.0% Expanded power center in excellent
Middle Country Rd. & location. Good condition at sale.
Morices
Lake Grove, New York
- ----------------------------------------------------------------------------------------------
83 Torrance Promenade 98.6% Promotional community ctr. Average
I-190 & Hawthorne Blvd. lease rate in ctr. reported to be $20/sf for
Los Angeles County in-line space. Center repositioned into
Torrance, California new format.
- ----------------------------------------------------------------------------------------------
84 The Brickyard 86.0% Seaman's formerly leased 30,000sf but
Wilbur Cross Highway went into bankruptcy. Lease rates range
Hartford County from $12.00-15.00/sf for in-line tenants.
Berlin, Connecticut Pace also seen as risk.
- ----------------------------------------------------------------------------------------------
85 New Park Plaza 85.0% Community ctr. with avg. lease rates
Mowry & Cedar around $10.00/sf for in-line tenants.
Alameda County Good location with upside potential from
Newark, California new leasing.
- ----------------------------------------------------------------------------------------------
86 Commons at Willowbrook 94.0% Good quality ctr. in suburban Houston.
Centerfield Blvd. & FM 1960 Adj. to mall. Anchor rents $6.00-8.00/sf.
Harris County Other majors include Bed Bath &
Houston, Texas Beyond, Bookstop, Sound Whse.
- ----------------------------------------------------------------------------------------------
87 Westward S.C. 96.0% Reconfigured power ctr. In-line tenant
NEC/Spencer & Okeechobee rents from $11.00-15.00/sf; avg. $12/sf.
Palm Beach County Several outpads on ground lease terms
West Palm Beach, Florida included in sale.
- ----------------------------------------------------------------------------------------------
88 Corona Hills Plaza 94.0% Price Club & Albertson's also anchors;
NWC/91 Fwy. & Mckinley not included in sale. JCPenney Kids &
Riverside County Holiday Spa other majors. Leases range
Corona, California from $12.00-30.00/sf for in-line.
- ----------------------------------------------------------------------------------------------
89 Broad River Commons 100.0% Masonry & concrete center in avg-good
Broad River & Marley Drive condition; renovated in 1986.
Richland County
Columbia, South Carolina
- ----------------------------------------------------------------------------------------------
90 Pembroke Commons 90.4$ Seller provided lease back guarantee on
Pines Blvd. & University Dr. vacant space; estimated value of $500k.
Broward County Price adjusted to reflect. Anchor leases
Pembroke Pines, Florida $6.75-9.00/sf; in-line avg. $15.11/sf.
- ----------------------------------------------------------------------------------------------
91 Riverplace S.C. 82.0%
San Jose Blvd. & Claire
Jacksonville, Florida
- ----------------------------------------------------------------------------------------------
</TABLE>
Page 7
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
92 Commons at Greenpoint Oct-90 1989 $28,000,000 936,104 32.0% 299,709 0
NWC/I-45 & Beltway 8 Very Good
Harris County
Houston, Texas
====================================================================================================================================
Survey High: $80,000,000 9,439,450 - 788,826 663,404
Survey Low: $4,700,000 153,767 - 60,799 0
====================================================================================================================================
Survey Average: $28,030,256 1,375,595 20.2% 278,180 153,131
====================================================================================================================================
<CAPTION>
====================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq. Ft. Sq. Ft. OAR Anchor Tenants
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
92 Commons at Greenpoint 0.0% $93.42 $8.12 8.69% Office Depot
NWC/I-45 & Beltway 8 Marshall's
Harris County Phar-Mor
Houston, Texas Sportstown
====================================================================================================================
Survey High: - $201.61 $18.43 12.02% -
Survey Low: - $39.93 $4.06 7.87% -
====================================================================================================================
Survey Average: 55.0% $99.43 $9.58 9.74% -
====================================================================================================================
<CAPTION>
============================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
============================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
============================================================================================
<S> <C> <C> <C>
92 Commons at Greenpoint 97.0%
NWC/I-45 & Beltway 8
Harris County
Houston, Texas
============================================================================================
Survey High: 100.0%
Survey Low: 75.0%
============================================================================================
Survey Average: 94.9%
============================================================================================
</TABLE>
Page 8
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, 92 comparable sales
have been provided for this analysis. These represent large community and power
center sales throughout the United States purchased between October 1990 and
July 1997 (current listings). The sales range in size from 60,799 to 788,826
square feet with corresponding sale price/SF indicators from $39.93 to $201.61
per square foot of GLA sold with overall capitalization rates ranging from a low
of 7.87 percent to a high of 12.02 percent. The mean overall sale price is
calculated to be $28,030,256. The mean gross leasable area sold is 278,180
square feet with the mean overall price per square foot calculated at $99.43 per
square foot. Finally, the survey shows a mean NOI of $9.58 per square foot, with
an overall capitalization rate of 9.74 percent.
For the purposes of our analysis, we have placed primary emphasis on those
sales occurring since completion of the previous appraisal (Nos. 1 through 26).
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
To our knowledge, these transactions involved the transfer of the leased
fee interest and were arms-length with no adverse conditions of sale. We have
considered the locational demographics of the sales and the income
characteristics (i.e. anchor/shop ratio, creditworthiness) of each sale.
However, a significant level of subjectivity is involved in adjusting for these
characteristics on a direct comparison basis.
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $12.89 per square foot) is presented in the "Income
Approach" section of this report and is based on first year NOI.
================================================================================
-48-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
================================================================================
Price Per SQ/FT Adjustment Chart
================================================================================
Comp.
Subject Sale Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
================================================================================
1 $ 12.89 $ 15.87 0.8122 $201.61 $163.75
- --------------------------------------------------------------------------------
2 $ 12.89 $ 11.21 1.1499 $112.19 $129.00
- --------------------------------------------------------------------------------
3 $ 12.89 $ 15.50 0.8316 $183.40 $152.51
- --------------------------------------------------------------------------------
4 $ 12.89 $ 10.13 1.2725 $ 99.06 $126.05
- --------------------------------------------------------------------------------
5 $ 12.89 $ 8.00 1.6113 $ 91.41 $147.28
- --------------------------------------------------------------------------------
6 $ 12.89 $ 15.81 0.8153 $175.69 $143.24
- --------------------------------------------------------------------------------
7 $ 12.89 $ 6.02 2.1412 $ 65.35 $139.93
- --------------------------------------------------------------------------------
8 $ 12.89 $ 13.70 0.9409 $131.15 $123.40
- --------------------------------------------------------------------------------
9 $ 12.89 $ 6.43 1.0155 $ 59.58 $122.45
- --------------------------------------------------------------------------------
10 $ 12.89 $ 11.76 1.0961 $141.51 $155.11
- --------------------------------------------------------------------------------
11 $ 12.89 $ 8.87 1.4532 $ 96.98 $140.93
- --------------------------------------------------------------------------------
12 $ 12.89 $ 6.59 1.9560 $ 69.32 $135.59
- --------------------------------------------------------------------------------
13 $ 12.89 $ 7.49 1.7210 $ 71.37 $122.83
- --------------------------------------------------------------------------------
14 $ 12.89 $ 9.27 1.3905 $ 77.10 $107.21
- --------------------------------------------------------------------------------
15 $ 12.89 $ 9.84 1.3100 $ 99.85 $130.80
- --------------------------------------------------------------------------------
16 $ 12.89 $ 7.81 1.6504 $ 78.13 $128.95
- --------------------------------------------------------------------------------
17 $ 12.89 $ 6.65 1.9383 $ 60.48 $117.23
- --------------------------------------------------------------------------------
18 $ 12.89 $ 12.11 1.0644 $128.83 $137.13
- --------------------------------------------------------------------------------
19 $ 12.89 $ 9.84 1.3100 $103.55 $135.65
- --------------------------------------------------------------------------------
20 $ 12.89 $ 14.94 0.8628 $169.42 $146.17
- --------------------------------------------------------------------------------
21 $ 12.89 $ 9.00 1.4322 $ 97.53 $139.68
- --------------------------------------------------------------------------------
22 $ 12.89 $ 7.93 1.6255 $ 83.67 $136.00
- --------------------------------------------------------------------------------
23 $ 12.89 $ 18.43 0.6994 $174.03 $121.72
- --------------------------------------------------------------------------------
24 $ 12.89 $ 6.49 1.9861 $ 67.62 $134.30
- --------------------------------------------------------------------------------
25 $ 12.89 $ 9.37 1.3757 $ 93.69 $128.89
- --------------------------------------------------------------------------------
26 $ 12.89 $ 7.24 1.7804 $ 78.30 $139.40
================================================================================
Survey
Mean: $134.82
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $107.21 to $163.75 per square foot with a
mean of approximately $134.82 per square foot. In terms of age, size, occupancy,
tenant mix, and anchor/shop tenant ratio, Sale Nos. 3, 5, 6, and 10 are judged
most comparable to the subject. Each of the comparables is situated in
California with the most comparable locational demographics. After adjustments,
these improved property sales show adjusted unit rates ranging between $143 and
$155 per square foot of gross leasable area.
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, however, do not explicitly convey by
themselves many of the details surrounding a specific income producing property
like the subject. Nonetheless, the process we have undertaken
================================================================================
-49-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
here is an attempt to quantify the unit price based upon the subject's income
producing potential.
The subject is viewed as being the dominant power/community center in an
area with excellent demographics, and limited competition. It is well leased
with several tenants that are unique to the market. Continued upside exists
through the potential for overage rents as the center matures.
Considering the characteristics of the subject relative to the above, we
believe that a unit rate at the middle of the range of $145 to $150 per square
foot is appropriate. Applying this unit rate range to 427,477 square feet
results in a value of approximately $64,160,000 to $66,370,000 for the subject
property.
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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.
There 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, the discounted cash flow analysis is the
most applicable.
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 of 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 on the capitalization of the next year's projected
net income.
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 market value of the subject, operations are considered to be
at stabilization. Thus, the direct capitalization method will provide additional
support in the valuation process.
Discounted Cash Flow
The Discounted Cash Flow 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 indicative of the subject property's current value in the marketplace.
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<PAGE>
CARMEL MTN PLAZA 1997 UPDATE
PROJECT DESIGNATOR: SD07
REVISION: 7/16/97 @ 15:30
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 11 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2OO1 FY2002 FY2003 FY2004 FY2005
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
ALL TENANTS 5,927,633 6,119,215 6,359,796 6,457,564 6,586,452 6,635,966 6,598,733 7,079,454
FREE RENT (10,001) (34,458) (37,276) (20,975) (12,001) (8,541) (98,495) (107,161)
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL MINIMUM RENT 5,917,632 6,084,757 6,322,520 6,436,589 6,574,451 6,627,425 6,500,238 6,972,293
RECOVERIES:
CAM 748,703 766,796 802,567 835,102 867,604 898,158 901,229 954,934
REAL ESTATE TAXES 915,386 922,745 946,538 968,326 990,910 1,010,017 1,001,783 1,025,311
INSURANCE 235,120 240,206 250,182 259,765 269,705 279,054 280,008 291,331
CPI ADJ INDEX:CPI 1,283 16,537 69,235 131,060 210,426 276,033 393,972 799,683
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RECOVERIES 1,900,492 1,946,284 2,068,522 2,194,253 2,338,645 2,463,262 2,576,992 3,071,259
OVERAGE RENT 11,827 12,233 12,096 14,525 16,207 17,941 19,735 14,936
SALES VOLUME (000) 73,639 75,526 78,117 81,500 84,528 87,459 88,752 91,785
--------- --------- --------- --------- --------- --------- --------- ---------
GROSS RENTAL
INCOME 7,829,951 8,043,274 8,403,138 8,645,367 8,929,303 9,108,628 9,096,965 10,058,488
VACANCY ALLOWANCE (123,890) (124,363) (132,779) (139,055) (144,912) (148,516) (143,677) (166,546)
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INCOME 7,706,061 7,918,911 8,270,359 8,506,312 8,784,391 8,960,112 8,953,288 9,891,942
EXPENSES
TOTAL CENTER CAM 578,449 598,694 619,649 641,336 663,783 687,016 711,061 735,948
TOTAL RE TAXES 884,202 901,886 919,923 938,322 957,088 976,230 995,754 1,015,670
TOTAL CENTER INS 228,748 236,754 245,041 253,617 262,494 271,681 281,190 291,032
MANAGEMENT FEE 313,199 321,731 336,124 345,813 357,171 364,345 363,879 402,339
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL EXPENSES 2,004,598 2,059,065 2,120,737 2,179,088 2,240,536 2,299,272 2,351,884 2,444,989
--------- --------- --------- --------- --------- --------- --------- ---------
NET OPERATING
INCOME 5,701,463 5,859,846 6,149,622 6,327,224 6,543,855 6,660,840 6,601,404 7,446,953
ALTERATIONS 11,538 302,388 47,350 26,706 16,834 10,369 422,734 147,184
COMMISSIONS 26,551 91,489 98,967 55,689 31,862 22,676 242,588 284,510
STRUCTURAL RESERVE 66,372 68,695 71,099 73,588 76,163 78,829 81,588 84,444
--------- --------- --------- --------- --------- --------- --------- ---------
CASH FLOW 5,597,002 5,397,274 5,932,206 6,171,241 6,418,996 6,548,966 5,854,494 6,930,815
</TABLE>
FY2006 FY2007 FY2008
INCOME
MINIMUM RENT:
ALL TENANTS 7,347,955 7,452,189 7,512,905
FREE RENT (21,437) (27,746) (23,922)
--------- --------- ---------
TOTAL MINIMUM RENT 7,326,518 7,424,443 7,488,983
RECOVERIES:
CAM 1,014,531 1,055,215 1,091,880
REAL ESTATE TAXES 1,067,180 1,093,504 1,113,231
INSURANCE 307,938 320,125 330,803
CPI ADJ INDEX:CPI 1,019,261 1,203,016 1,411,806
--------- --------- ---------
TOTAL RECOVERIES 3,408,910 3,671,860 3,947,720
OVERAGE RENT 17,248 19,245 16,561
SALES VOLUME (000) 96,681 100,393 103,488
--------- --------- ---------
GROSS RENTAL
INCOME 10,752,676 11,115,548 11,453,264
VACANCY ALLOWANCE (185,287) (194,988) (201,958)
--------- --------- ---------
TOTAL INCOME 10,567,389 10,920,560 11,251,306
EXPENSES
TOTAL CENTER CAM 761,706 788,366 815,959
TOTAL RE TAXES 1,035,983 1,056,702 1,077,837
TOTAL CENTER INS 301,218 311,760 322,672
MANAGEMENT FEE 430,107 444,622 458,130
--------- --------- ---------
TOTAL EXPENSES 2,529,014 2,601,450 2,674,598
NET OPERATING
INCOME 8,038,375 8,319,110 8,576,708
ALTERATIONS 26,409 36,859 28,933
COMMISSIONS 56,910 73,665 63,512
STRUCTURAL RESERVE 87,399 90,458 93,624
--------- --------- ---------
CASH FLOW 7,867,657 8,118,128 8,390,639
<PAGE>
Income Approach
================================================================================
In this Income Approach to the valuation of Carmel Mountain Plaza, we have
utilized a 10 year holding period for the investment with the cash flow analysis
commencing on July 1, 1997. Investors typically look at holding periods between
10 and 15 years. We have tested the sensitivity of the present value over a 10
to 15 year time horizon and chosen a 10 year period as being a realistic time to
sell. Although an asset such as the subject has a much longer useful life, an
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 considered long
enough to model the asset's performance and profit from a focused effort on
maximizing its tenant mix, but short enough to reasonably estimate the expected
income and expenses of the real estate. Please note that our cash flows are
provided on a fiscal year basis.
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 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
expectations of the investment universe for this type of real estate. Cushman &
Wakefield regularly surveys these market participants. The results of our most
recent Investor Survey are found in the Addenda.
By forecasting the anticipated income stream and discounting future value
at reversion to 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 an important long term investment opportunity for a competent
shopping center owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software 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. Following is a detailed discussion of the components
which form the basis of this analysis.
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, and
reimbursement of certain expenses incurred in the ownership and operation of the
real estate.
The minimum base rent represents a legal contract establishing a return to
the 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. The additional rent based upon a
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<PAGE>
Income Approach
================================================================================
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. In the initial year of the investment (Fiscal Year 1998), it is projected
that the subject property will generate approximately $7,829,951 in potential
gross revenues, equivalent to $17.70 square foot of total appraised GLA of
442,477 square feet. These forecasted revenues may be allocated to the following
components:
=======================================================================
Carmel Mountain Plaza
Revenue Summary
Initial Year of Investment - FY 1998
=======================================================================
Revenue Component Amount Unit Rate Income Ratio
=======================================================================
Minimum Rent $5,918,915 $13.38 76%
Overage Rent $ 11,827 $ 0.03 1%
Expense Recoveries $1,899,209 $ 4.29 23%
Total $7,829,951 $17.70 100.0%
=======================================================================
Minimum Rental Income
The 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
vacant space (if applicable) market rent growth, and renewal/turnover
probability.
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. The 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.
The minimum rents forecasted at the subject property are essentially
derived from various tenant categories: anchor tenant revenues consisting of
base rent obligations, tenant revenues consisting of all in-line shops and
ground or base rent paid by outparcel tenants.
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 the
trade area. Consequently, the best measure of minimum rental income can
sometimes be its actual rent roll leasing schedule.
Rent from the tenants consists of contractual obligations of the space
leases. Aggregate rent in the initial year of the holding period is shown to be
$5,930,742 or $13.40 per square foot based upon a total appraisal GLA of 442,477
square feet. As such, our analysis of recently negotiated leases for tenants at
the subject provides important insight into perceived
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<PAGE>
CARMEL MOUNTAIN PLAZA
LEASING OVERVIEW
<TABLE>
<CAPTION>
Tenant Sq. Ft. Rent/Sq. Ft. % Change Term Comments
------ ------- ------------ -------- ---- --------
<S> <C> <C> <C> <C> <C>
First Quarter New Leasing Activity
Thai Go 2,658 $26.25 3.1% 5 years 4% annual rent steps
Wavelines Surf (assignment) 1,985 $25.50 14.5% 10 years
Chop House (assignment) 1,800 $28.25 8.8% 10 years Annual rent step based
on CPI after 2nd year
First Quarter Renewed Leases
Top 10 Athletic Shoes 1,200 $26.00 8.3% 3 years
Current Prospects
Jade Beauty 2,550 $24.00 5 years
Ritz Camera 1,500 $26.00 3 years
Mother's Work 1,200 $26.00 5 years
</TABLE>
<PAGE>
Income Approach
================================================================================
market rent levels for the center. This is of particular importance since
tenants are cognizant of the center's position in the market and are factoring
this knowledge into their lease negotiations. Inasmuch as a tenant's ability to
pay rent is based upon expected sales achievement, the level of negotiated rents
is directly related to the tenant's perception of expected performance at the
property.
We would expect to see a general pattern of an inverse relationship
between suite size and rent. That is, as the suite size increases, the average
unit base rent achieved declines. Overall, for the 442,477 +/- square feet of
GLA surveyed, the average attained base rent for the center is shown to be
$13.38 per square foot in fiscal year 1998. The objective here is to demonstrate
a reasonably quantifiable pattern between suite size and rent. Anchors have
attained the lowest base rent while the in-line tenant suites have achieved
rents ranging from $19.20 to $28.20 per square foot. As such, a declining rent
trend relative to suite size is generally in evidence.
Of the anchors at Carmel Mountain Plaza, Kmart is the largest at 107,870
square feet paying a ground rent of $3.15 per square foot per year. Their lease
is not due to expire until 2018 and includes numerous options at increased
rental rates. Sportmart occupies 40,672 square feet paying a base rent of $9.44
per square foot per year. Their lease is not due to expire until 2018 and
includes numerous options at increased rental rates. Barnes & Noble pays the
highest unit rate of the anchors at $21.00 per square foot on an initial 9 year
lease. The remaining seven anchor leases range from $11.00 to $16.64 per square
foot with lease terms ranging from 10 to 20 years, each with several five year
options.
These lease transactions implicitly support the assumption that,
typically, there is an inverse correlation between unit rates and the amount of
space being leased, and they reflect average rates. We recognize that, in
practice, there are unit rate gradations with tenant categories based on such
attributes as location within the center, unit frontage and depth, tenant type
and credit worthiness, concessions/tenant allowances, etc. However, as the
tenant mix and configuration may not be fixed over time, it is more appropriate
to estimate what the average base rental levels paid at the property would be
for the different tenant categories.
Subject Leasing Activity
Leasing at the subject property has been limited over recent months given
the limited amount of space available over the past two years. As of the date of
value, the subject is 100.0 percent leased. Most leases commenced in 1994 upon
completion. On the facing page is a chart showing the most recent leasing
activity at the subject property. This summary shows lease rates for in-line
space between $24.00 and $28.25 per square foot.
The following is a discussion of the current leasing status for in-line
space with the competitive centers.
Analysis of Market Leases
A survey of local retail properties is presented in the chart on the
facing page for comparison with the subject property. These are retail centers
of various sizes and quality located throughout the Carmel Mountain Ranch area.
Each of the comparables is situated
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<PAGE>
Income Approach
================================================================================
along Carmel Mountain Road, the area's primary commercial-retail arterial. The
smallest center contains approximately 44,272 square feet and is considered to
be a neighborhood-oriented facility. The largest center is Carmel Mountain Ranch
Town Center, a 172,522+/- square foot center anchored by Ralphs Supermarket and
Payless Drug. Larger, community and power-oriented centers will have anchors
such as discount department stores, category killers, big box users, and grocery
outlets, while neighborhood centers will typically only have one grocery type
anchor. Most rates compiled are triple net whereas tenants pay a pro-rata share
of common area maintenance charges.
Rental No. 1 pertains to Carmel Mountain Gateway Plaza, located across the
street from the subject on the southwest corner of Carmel Mountain Road and
Rancho Carmel Drive. This center opened in 1994 and is currently fully occupied.
Triple net charges are running $0.30 per square foot. No new leases have
commenced within the past 6 months. Current in-place rents in the center
reportedly range between $18.00 and $24.00 per square foot. This comparable is
judged similar to the subject in terms of quality, location and exposure.
However, its anchor tenant draw is judged inferior to the subject.
Rental No. 2 applies to Carmel Mountain Ranch Home Center located on the
northeast corner of Carmel Mountain Road and Highland Ranch Road across the
street from the subject. This 122,174 square foot center is anchored by Home
Depot. Triple net charges are estimated at $0.31 per square foot. This
comparable is currently fully occupied. Although no recent transactions have
occurred within the center, actual rents for in-line space typically range from
$18.00 to $27.00 per square foot. This center is currently 97.4 percent occupied
with 3,200 square feet available with an asking rent of $2.00 per square foot
(NNN). This comparable is judged similar to the subject in terms of quality,
location and exposure. However, its anchor tenant draw is judged inferior to the
subject.
Rental No. 3 relates to Carmel Mountain Ranch Town Center located on the
northeast corner of Carmel Mountain Road and Stoney Peak Drive across the street
from the subject. This 172,522 square foot center is anchored by Ralphs
Supermarket and Payless Drug. Leases typically range from $21.00 to $27.00 per
square foot. The center is currently 97.2 percent occupied with 4,835 square
feet available with asking rates between $22.20 and $27.00 per square foot
(NNN). This comparable is judged similar to the subject in terms of quality,
location and exposure. However, its anchor tenant draw is judged inferior to the
subject.
Rental No. 4 applies to Price Club Plaza located on the northwest corner
of Carmel Mountain Road and Conference Way across the street from the subject.
This 157,000 square foot center is anchored by Price Club. Leases in the center
range between $15.00 and $22.20 per square foot. This center is currently fully
occupied. Triple net charges are estimated at $0.29 per square foot.
Overall, market area rental rates presented in the previous discussion
reflect a range between $15.00 and $27.00 per square foot triple net for in-line
space. Typical leases run three to ten years with annual CPI escalations or
fixed increases. Tenant improvement allowances are negotiable, typically ranging
from $4.00 to $8.00 per square foot for new tenants and none to $1.50 per square
foot for renewing tenants, although no real allowances were quoted. Relative to
the subject, these properties represent comparable retail projects in the Carmel
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SUMAMRY OF LARGER TENANT LEASES
GREATER SOUTHERN CALIFORNIA REGION
<TABLE>
<CAPTION>
=================================================================================================================
Item Leased Lease Term
No. Tenant Property Location Area (SF) Date (Yrs.)
=================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
1 Best Buy Ocean Gate & 147th St. Hawthorne, CA 54,700 Jul-95 20
- -----------------------------------------------------------------------------------------------------------------
2 Orchard Supply Hard. The Quad @ Wittier Whittier, CA 50,080 Oct-95 20
- -----------------------------------------------------------------------------------------------------------------
3 Best Buy Marketplace @ The Lakes West Covina, CA 45,000 Nov-94 15
- -----------------------------------------------------------------------------------------------------------------
4 Orchard Supply Hard. SWC PCH & Anza Avenue Torrance, CA 41,000 Jun-95 10
- -----------------------------------------------------------------------------------------------------------------
5 Linens N' Things Janas Marketplace Thousand Oaks, CA 38,000 Jan-95 15
- -----------------------------------------------------------------------------------------------------------------
6 Ofice Max SWC PCH & Torrance Blvd. Torrance, CA 37,000 Apr-96 6.4
- -----------------------------------------------------------------------------------------------------------------
7 Ross Dress For Less Gateway Shopping Center Santa Ana, CA 27,200 Nov-95 10
- -----------------------------------------------------------------------------------------------------------------
8 Petsmart Gateway Shopping Center Santa Ana, CA 26,040 Aug-95 15
- -----------------------------------------------------------------------------------------------------------------
9 Barnes & Noble Free-Standing Building Burbank, CA 25,000 Mar-95 10
- -----------------------------------------------------------------------------------------------------------------
10 Staples Gateway Shopping Center Santa Ana, CA 24,489 Nov-95 15
- -----------------------------------------------------------------------------------------------------------------
11 Staples 8951 Tampa Avenue Northridge, CA 22,886 1995 10
- -----------------------------------------------------------------------------------------------------------------
12 Sav-On Drugs 1615 West Verdugo Avenue Burbank, CA 19,048 Mar-96 20
- -----------------------------------------------------------------------------------------------------------------
13 Michael's Puente Hills Town Center City of Industry, CA 18,000 Sep-95 10
- -----------------------------------------------------------------------------------------------------------------
14 Sav-On Drugs NEC Lyons Ave. & Orchard Village Santa Clarita, CA 18,000 Sep-95 10
- -----------------------------------------------------------------------------------------------------------------
15 Sav-On Drugs SWC Harbor Blvd. & Adams Ave. Costa Mesa, CA 16,853 Apr-96 20
- -----------------------------------------------------------------------------------------------------------------
16 Sav-On Drugs NWC Van Nuys Blvd. & Chase St. Panorama City, CA 16,533 Jun-95 25
- -----------------------------------------------------------------------------------------------------------------
17 Sav-On Drugs 29995 Alicia Parkway Laguna Niguel, CA 15,000 Apr-96 20
- -----------------------------------------------------------------------------------------------------------------
18 Krause's Sofa 8953 Tampa Avenue Northridge, CA 12,500 1995 10
- -----------------------------------------------------------------------------------------------------------------
19 Claim Jumper Rest. Confidential Location South Bay 10,500 Jul-95 20
- -----------------------------------------------------------------------------------------------------------------
20 Pic N Save Norwalk Town Square Norwalk, CA 21,000 Jun-95 10.8
- -----------------------------------------------------------------------------------------------------------------
21 Parts USA/Pep Boys Norwalk Town Square Norwalk, CA 16,288 Jun-95 10
- -----------------------------------------------------------------------------------------------------------------
22 Cost Plus, Inc. SEC Westlake & Thousand Oaks Blvds. Thousand Oaks, CA 18,930 Jan-97 15
- -----------------------------------------------------------------------------------------------------------------
23 Barnes & Noble SEC Westlake & Thousand Oaks Blvds. Thousand Oaks, CA 20,600 Nov-96 10
- -----------------------------------------------------------------------------------------------------------------
24 Club Disney SEC Westlake & Thousand Oaks Blvds. Thousand Oaks, CA 27,910 Feb-97 15
- -----------------------------------------------------------------------------------------------------------------
25 Bristol Farms SEC Westlake & Thousand Oaks Blvds. Thousand Oaks, CA 31,578 Nov-96 20
- -----------------------------------------------------------------------------------------------------------------
26 Old Navy La Cienega & 3rd Los Angeles, CA 15,711 Nov-94 5
- -----------------------------------------------------------------------------------------------------------------
27 Petsmart Robertson & Pico Los Angeles, CA 11,483 Mar-97 15
=================================================================================================================
</TABLE>
================================================================================
Item Annual
No. Tenant Rent/SF Rent Adjustment
================================================================================
1 Best Buy $18.00 Fixed Increases every 5 years
- --------------------------------------------------------------------------------
2 Orchard Supply Hard. $11.78 Jan. 2000: $12.93; Jan. 2011: $14.19
- --------------------------------------------------------------------------------
3 Best Buy $13.75 Yrs. 11-20: $14.25/SF
- --------------------------------------------------------------------------------
4 Orchard Supply Hard. $10.32 Fixed Increases every 5 years
- --------------------------------------------------------------------------------
5 Linens N' Things $9.12 Yrs. 6-10: $9.96; Yrs. 11-15: $10.92
- --------------------------------------------------------------------------------
6 Ofice Max $15.60 None
- --------------------------------------------------------------------------------
7 Ross Dress For Less $11.00 Yrs. 6-10: $12.00/SF
- --------------------------------------------------------------------------------
8 Petsmart $12.12 Yrs. 6-10: $12.72/SF; Yrs. 11-15: $13.32/SF
- --------------------------------------------------------------------------------
9 Barnes & Noble $18.96 Year 6: $21.80
- --------------------------------------------------------------------------------
10 Staples $12.75 Yrs. 6-10: $14.03; Yr. 11: cum. CPI
- --------------------------------------------------------------------------------
11 Staples $18.00 3% cum. CPI @ Yr. 6
- --------------------------------------------------------------------------------
12 Sav-On Drugs $12.72 Yr. 11: $1.17/SF; Yr. 16: $1.28/SF
- --------------------------------------------------------------------------------
13 Michael's $9.48 Yrs. 6-10: $10.56
- --------------------------------------------------------------------------------
14 Sav-On Drugs $13.56 None
- --------------------------------------------------------------------------------
15 Sav-On Drugs $12.12 10% increases in yrs. 11 & 16
- --------------------------------------------------------------------------------
16 Sav-On Drugs $12.46 None
- --------------------------------------------------------------------------------
17 Sav-On Drugs $9.96 $0.92 - $1.06
- --------------------------------------------------------------------------------
18 Krause's Sofa $18.00 Annual CPI
- --------------------------------------------------------------------------------
19 Claim Jumper Rest. $11.85 Cum. CPI every 5 years, capped @ 12.5%
- --------------------------------------------------------------------------------
20 Pic N Save $8.00 Year 6: $8.80
- --------------------------------------------------------------------------------
21 Parts USA/Pep Boys $9.76 Yrs. 6-10 $10.83/SF/Annum
- --------------------------------------------------------------------------------
22 Cost Plus, Inc. $18.00 Yrs. 6-10: $20.25; Yrs. 11-15: $22.78
- --------------------------------------------------------------------------------
23 Barnes & Noble $23.76 None in base term
- --------------------------------------------------------------------------------
24 Club Disney $18.68 15% every 5 years
- --------------------------------------------------------------------------------
25 Bristol Farms $20.10 CPI every 5 years - 20% Cap.
- --------------------------------------------------------------------------------
26 Old Navy $17.04 5 yr. option @ $19.52; 5 yr. option @ $22.37
- --------------------------------------------------------------------------------
27 Petsmart $22.00 Yr. 6: $24.20; Yr. 11: $26.62
================================================================================
<PAGE>
Income Approach
================================================================================
Mountain Ranch area that compete to some degree with Carmel Mountain Plaza.
Although the properties vary by location and configuration with respect to the
subject, the reporting lease rates generally support those at Carmel Mountain
Plaza.
Conclusion - Minimum Rent for In-Line Shops
From the data, it is clear that current market rents at Carmel Mountain
Plaza are well supported by other competing properties as well as recent leasing
activity in the center itself. The property enjoys an accessible location within
a growing trade area which should only be strengthened by future commercial
development along Interstate 15. Carmel Mountain Plaza has a strong occupancy
level with no absorption of vacant space necessary for this analysis. As such,
the subject property should remain a viable shopping destination to a healthy
trade area into the foreseeable future.
After considering all of the above, relative to the subject's position in
the market, we have utilized the following market rental rate assumptions for
in-line space at Carmel Mountain Plaza.
========================================================
Market Rent Projections
========================================================
Suite Size Rental Rate Range Market Rate
--------------------------------------------------------
Under 1,000 SF $22.80 to $84.42 $28.00
--------------------------------------------------------
1,001 - 2,000 SF $22.00 to $28.20 $26.00
--------------------------------------------------------
2,001 - 3,000 SF $21.63 to $26.71 $24.00
--------------------------------------------------------
3,001 - 5,000 SF $19.20 to $24.72 $22.00
--------------------------------------------------------
5,001 - 7,000 SF $16.36 to $19.32 $20.00
--------------------------------------------------------
7,000+ SF N/A $18.00
========================================================
Anchor Tenant Leases
Given the relatively recent commencement and extended terms of the
subject's anchor tenant leases, we have not performed an extensive analysis of
the subject's anchor rents. In the Addenda is a summary chart highlighting lease
rates for anchor type tenants in community and power-oriented retail centers
within the Southern California area. The survey has been expanded to include a
larger regional scope. As can be seen, the leases typically range between $8.00
and $23.76 per square foot on an annual basis with 10 to 20 year terms being
typical. The leasing broker for the Courtyard at Carmel Mountain Ranch (recently
completed; adjacent to the subject) indicated that the contract rents for
Staples, Linens & Things, PetCo, and Borders Books average $1.25 per square foot
(NNN). These rates are make up the high end for the area given that future
retail development is limited. These tenants have therefore paid a premium to
occupy the relatively only remaining larger retail space within the area.
Overall, the anchor tenant leases support the subject's major tenant leases.
The following is a discussion of anchor leases at the subject property.
o Pacific Theaters, a regional theater operator, signed a lease in
July, 1993 for 34,561+/- square feet. Per agreement, the tenant pays
a current monthly rent of $47,917, or $1.39/SF (NNN) for a 20 year
term with annual CPI increases.
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Income Approach
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Tenant is responsible for all CAM charges plus a 10 percent
administrative fee. The tenant is entitled to two successive options
of five years each.
o Sportmart signed a lease for 40,000+/- square feet in November 1993.
This lease is for 15 years with three successive options of five
years each. Sportmart pays a monthly rent of $32,845, or $0.82/SF
(NNN) for the first five years, stepping to $36,045 (0.90/SF) in
year 6 and $39,565 ($0.99/SF) in year 11. Each option incurs an
escalation in rent as well. Sportmart is also obligated to pay a
pro-rata share of CAM, tax, and insurance expenses plus a 7%
administrative fee.
o Circuit City occupies 30,973+/- square feet from a lease which
commenced in November 1993. The tenant's term is for 15.2 years with
three successive five year option periods. The tenant pays a monthly
rent of $32,418, or $1.05/SF with fixed increases every five years
($1.15/SF and $1.27/SF, in years 6 and 11 respectively). Tenant is
required to pay a pro-rata share of CAM, tax, and insurance plus a
12% administrative fee.
o Marshalls signed a lease for a 28,760+/- square feet which commenced
in October 1993 for a 15.3 year term with two five year options. The
tenant pays a current monthly rent of $0.96 per square foot with
fixed increases to $1.00/SF, $1.13/SF, $1.27/SF, and $1.42/SF in
January 1997, 2002, 2005, and 2008, respectively. In addition to
minimum rent, tenant is obligated to pay a pro-rata share of CAM,
tax, and insurance plus a 6 percent administrative fee.
o Ross Dress For Less leased 24,000 square feet under a lease which
commenced in April 1993. The lease runs for 10.8 years with three
five year option periods. The tenant pays a monthly rent of $0.92/SF
with a fixed increase applied to $1.05 in February, 1999. The tenant
pays a pro-rata share of common area expenses, real estate taxes,
and insurance plus a 12 percent administrative fee.
o Michaels signed a July 1993 lease for 22,969 square feet for a 10
year term with two successive option periods of five years each.
Tenant pays a minimum rent of $1.00 per square foot which increases
to $1.13 per square foot in year 6. The tenant is also required to
pay its pro-rata share of CAM, tax, and insurance expenses plus a 15
percent administrative fee.
o Barnes & Noble signed a lease for 13,916 square feet in October 1993
for a 10 year term with two successive option periods of five years
each. Tenant pays a minimum rent of $1.75 per square foot which
increases to $2.01 per square foot in year 6. The tenant is also
required to pay its pro-rata share of CAM, tax, and insurance
expenses plus a 12 percent administrative fee.
Outparcel (Ground) Lease
The subject property has one outparcel site which we have reflected as
being under ground lease terms for this analysis. K-Mart is on a 25-year ground
lease, paying $0.26 per square foot of building area (107,870 square feet). This
rate escalates to $0.29 after five years.
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The tenant also pays a contribution for CAM and a pro-rata share of taxes with a
10.0 percent administrative fee. Tenant has six five-year options to renew.
Lease Terms
The typical lease term for new retail leases in centers such as the
subject generally ranges from three to ten years. Market practice dictates that
it is not uncommon to get rent bumps throughout the lease term 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 (4 percent) annual increase and be capped at a higher maximum (6 to 7
percent) amount. Many leases at the subject property have set increases which
escalate rent either annually or on specified dates throughout the lease term.
We have reflected an annual escalation method in our analysis for new in-line
leases based upon a CPI factor which in this case is 3.50 percent.
Concessions
Free Rent
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 retail space, particularly in view of the
over-building which has occurred in many markets. Over the past few years, one
month free per lease year was prevalent in order to attract tenants.
For the purposes of our analysis, we have assumed a one month
fixturization period on rollover of existing leases. This assumption is a
weighted average over the projected holding period taking into account the
uncertainty of market conditions and typical market practice.
Tenant Improvement Allowance
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that a tenant workletter is not typically
offered but often times given as part of tenant negotiation. Some tenants at the
subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. For this analysis, new tenants to the center are given an
allowance of $5.00 per square foot, with renewal tenants receiving no tenant
improvement allowance. Based on our renewal probability of 50/50 for in-line
space, the tenant allowance at rollover is equal to $2.50 per square foot in FY
1998. No allowance is provided for tenants exercising options.
Absorption
The subject property is presently 100 percent leased. We are not aware of
any pending vacancies. As such, an absorption discussion is not relevant.
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
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Income Approach
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projections generally range between 3.00 and 4.00 percent for retail centers.
Cushman & Wakefield's Autumn 1996 survey of pension fund, REITs, bank and
insurance companies, and institutional advisors reveals that current income
forecasts are utilizing average annual growth rates between zero and 4.0
percent. The low and high mean is shown to be 3.3 and 3.5 percent, respectively
(see Addenda for survey results). The Peter F. Korpacz Investor Survey (2nd
Quarter 1997) shows slightly more conservative results with average annual rent
growth of 2.88 percent.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and management's
desire to attract and keep certain tenants that increase the center's synergy
and appeal. With literally no lease-up to contend with as well as having the
newest, most dominant center in the market, management is a formidable position
to command higher rents. After considering the above, we have utilized a rent
growth rate of 3.5 percent per year over the holding period.
Commissions
Based upon our analysis of competing properties within the market as well
as historic leasing activity at the subject, we have made an allowance for
leasing commissions for this assignment. For new leases, a commission of $1.50
per square foot will be charged while renewal leases will not have commission
charges. With the 70/30 probability assumption, the blended commission rate for
1996 is $0.45 per square foot of leased area.
Releasing Assumption
Upon lease expiration of in-line space (no rollover of anchor space
anticipated during the holding period), it is our best estimate that there is a
50 percent probability that an existing tenant will renew their lease, while the
remaining 50 percent will vacate their space at expiration. Lease terms are for
5 years. Our global market assumptions for non-anchor tenants may be summarized
on the following chart.
================================================================================
Renewal Assumptions
Non-Anchor Tenants
================================================================================
Lease Tenant Alterations
Tenant Type Term Rent Steps Free Rent & Commissions
================================================================================
In-Line Shops 5 yrs. Increasing by CPI 1 month Yes
================================================================================
Overage/Percentage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most leases have a natural breakpoint. In a few instances, the
lease provides for a specified breakpoint sales level. 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 one
measure for protecting the equity investor against inflation. The subject has
been open since late-1993. We have modeled percentage rent parameters in
accordance with historical sales volumes and
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Income Approach
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breakpoints outlined in the actual lease documents. We have assumed 1996 sales
volumes growing annually at a similar rate of inflation, or 3.5 percent.
Expense Reimbursement
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, insurance, and common area maintenance (CAM). In the first year of the
investment, it is projected that the subject property will generate
approximately $1,899,209 in reimbursements for these operating expenses. This
estimate is equal to approximately $4.29 per square foot of GLA and represents
approximately 24 percent of potential gross revenues.
Allowance for Vacancy and Credit Loss
Both the investor and the appraiser are 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 and all the tenants were actually 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 provision for permanent vacancy and
credit loss of 3.0 percent among the existing non-anchor tenants.
In this analysis we have forecasted that there is a 50 percent probability
that an existing tenant will renew their lease and a 50 percent probability that
the space will turnover. Upon turnover, we have forecasted rent loss equivalent
to six months, weighted for the probability of renewal, to be incurred to
account for the time and/or costs associated with bringing the space back on
line. Thus, minimum rent as well as all reimbursable income has been reduced by
this forecasted probability.
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.
Effective Gross Income
In the initial year of the investment, effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately $7,706,061:
equivalent to $17.41 per square foot of appraised GLA.
================================================================================
Effective Gross Revenue Summary
Initial Year of Investment - 1996
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $7,829,951 $17.69 100.00%
- --------------------------------------------------------------------------------
Less: Vacancy and Credit Loss ($123,890) $ 0.28 1.58%
- --------------------------------------------------------------------------------
Effective Gross Income $7,706,061 $17.41 98.42%
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<PAGE>
<TABLE>
<CAPTION>
1996 Operating Results Budget 1997 IN-PLACE(3) (1996) IN-PLACE(4) (1997)
---------------------------------- -------------------- --------------------- ---------------------
Per Square Per Square Per Square
Actual Budget $ Variance Budget Foot Budget Foot Budget Foot
------ ----------------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental Income $5,845,020 $ 5,803,060 $ 41,960 $5,913,753 $13.44 $ 5,892,778 $13.39 $ 5,892,778 $13.39
CAM Recoveries 1,923,824 1,311,115 612,709 1,925,746 4.38 1,923,824 4.37 1,925,741 4.38
Reserves (127,411) (18,007) (109,404) (44,356) (0.10) (127,411) (0.29) (44,356) (0.10)
Other Income 34,007 10,142 23,865 42,967 0.10 34,007 0.08 42,967 0.10
---------- ----------- --------- ---------- ------ ----------- ------ ----------- ------
Total Revenue $7,675,440 $ 7,106,310 $ 569,130 $7,838,110 $17.82 $ 7,723,198 $17.56 $ 7,817,131 $17.77
Expenses
Real Estate Taxes $ 875,448 $ 459,598 $ 415,850 $ 875,448 $ 1.99 $ 875,448 $ 1.99 $ 875,448 $ 1.99
Repairs & Maintenance 472,407 313,000 159,407 506,700 1.15 472,407 1.07 506,700 1.15
Utilities 132,879 136,500 (3,621) 119,400 0.27 132,879 0.30 119,400 0.27
Insurance 225,818 214,104 11,714 223,473 0.51 225,818 0.51 223,473 0.51
Other Expenses 74,992 91,000 (16,008) 5,000 0.01 74,992 0.17 5,000 0.01
Management Fees 276,011 287,799 (11,788) 292,444 0.66 276,011 0.63 292,444 0.66
---------- ----------- --------- ---------- ------ ----------- ------ ----------- ------
Total Expenses $2,057,555 $ 1,502,001 $ 555,554 $2,022,465 $ 4.60 $ 2,057,555 $ 4.68 $ 2,022,465 $ 4.60
---------- ----------- --------- ---------- ------ ----------- ------ ----------- ------
Net Operating Income $5,617,885 $ 5,604,309 $ 13,576 $5,815,645 $13.22 $ 5,665,643 $12.88 $ 5,794,666 $13.17
Other/Structural Reserve
@ $.10/ft.(1) 11,715 43,994 (32,279) 44,648 0.10 43,994 0.10 43,994 0.10
Tenant Improvmt./Leasing
Comm.(2) 0 0 0 0 0.00 70,281 0.16 70,281 0.16
---------- ----------- --------- ---------- ------ ----------- ------ ----------- ------
Cash Flow $5,606,170 $ 5,560,315 $ 45,855 $5,770,997 $13.12 $ 5,551,368 $12.62 $ 5,680,391 $12.91
========== =========== ========= ========== ====== =========== ====== =========== ======
</TABLE>
(1) Stuctural reserve of approximately $0.10/sf for owned space only. Partially
reimbursable up to 9% of CAM.
(2) Ongoing tenant improvements/leasing commissions expense based on actual
average annual turnover over a five year period @ $5/sf.
(3) In Place 1997 budgeted cash flow using 1996 actual expenses/recoveries and
current in-place rents.
(4) In Place 1997 budgeted cash flow using 1997 budgeted expenses/recoveries and
current in-place rents.
<PAGE>
Income Approach
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Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. The non-reimbursable expenses associated with the
subject property include the management fee and miscellaneous expenses. We do
note that under many of the existing lease contracts, management is deemed
recoverable. Other expenses include a reserve for the replacement of short-lived
capital components, leasing commissions and alteration costs associated with
leasing space.
Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than necessarily with competitive market forces. The Autumn
1996 Cushman & Wakefield survey of community centers found the low and high mean
from each respondent to be 3.4 percent and 3.7 percent, respectively. The Second
Quarter 1997 Korpacz survey reports that the range in expense growth rates was
from 2.0 percent to 5.0 percent with an average of 4.04 percent, down 37 basis
points from one year ago. Unless otherwise cited, expenses are forecasted to
grow by 3.5 percent per annum over the holding period.
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property.
Common Area Maintenance - This expense category includes the annual cost
of miscellaneous building maintenance contracts, parking lot maintenance,
recoverable labor and benefits, landscaping, window cleaning,
exterminating, supplies, exterior lighting, trash removal, utilities
including common area energy, and other miscellaneous charges. In our
analysis, we have forecasted a CAM expense of $568,500, equal to $1.28 per
square foot which is consistent with ownership's budget.
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. As previously discussed, we were not provided with
tax bill information from the client. Based on the information provided,
we concluded a total tax expense of $875,447.
Insurance-Insurance projections have been calculated at $0.50 per square
foot annually, based upon property and liability insurance with the
company carrier, which we are advised, is equal to $224,824 per year. This
unit rate is consistent with the property's budget as well as the
comparable data presented.
Non-Reimbursable Expenses
Total annual 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 an property similar to the subject would
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consider reasonable, based upon projected operations, informed opinion and
experience. The following is a summary and discussion of non-reimbursable
expenses incurred in the operation of subject property for the initial year.
Management - The annual cost of managing the subject property is projected
to be 4.0 percent of minimum rental and percentage income. In the initial
year of our analysis, this amount is shown to be $313,199, equivalent to
$0.71 per square foot of appraised GLA. This expense is recoverable as an
"administrative fee" charged to the majority of the subject tenants via a
10 to 15 percent of total CAM expenses. Our estimate is reflective of a
typical management agreement with a firm in the business of providing
professional management services. This amount is also considered typical
for a retail complex of this size. Our investigation into the market for
this property type indicates an overall range of fee of 3 to 5 percent. We
have chosen the mid-point of the range as we have reflected leasing
commissions separately.
Alterations - 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 $5.00
per square foot for turnover space (initial cost growing at expense
inflation rate) weighted by our turnover probability of 50 percent. For
rollover space, the cost is provided for redecorating or moving
allowances. Thus, the blended weighted rate is $2.50 per square foot.
Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject, we
have made an allowance for leasing commissions for this assignment. For
new leases, a commission of 6 percent of the total aggregate rent over the
projected 5 year term while a commission of 3 percent is projected for
renewal leases. With the 50/50 probability assumption, the blended
commission rate for FY 1998 is 4.5 percent.
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. We have forecasted a
replacement reserve estimate of $66,371. On the basis of appraised GLA,
this amount is equal to $0.15 per square foot, consistent with industry
figures. This figure is increased by the rate of expense growth, or 3.5
percent per year.
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
investor 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 $12.89
per square foot which is equivalent to 74 percent of effective gross income.
Deducting other expenses including capital items results in a net cash flow of
$12.65 per square foot, equivalent to 73 percent of effective gross income.
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Operating Summary
Initial Year of Investment - FY 1998
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Effective Gross Income $7,706,061 $17.42 100.0%
- --------------------------------------------------------------------------------
Operating Expenses $2,004,598 $ 4.53 26.0%
- --------------------------------------------------------------------------------
Net Income $5,701,463 $12.89 74.0%
- --------------------------------------------------------------------------------
Other Expenses $ 104,462 $ 0.24 1.4%
- --------------------------------------------------------------------------------
Cash Flow $5,597,002 $12.65 72.6%
================================================================================
* Based on total appraised GLA of 442,477+/- SF
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=====================
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A Neighborhood/Community Centers range between 8.50 and 10.50 percent,
with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
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For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Investment Power Centers and Big Box Neighborhood/Community
Parameters ----------------------------------------------------------------
Low High Low High
================================================================================
OAR/Going-In 8.50 - 10.50% 9.00 - 10.50% 8.50 - 10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50 - 10.50% 9.50 - 10.50% 9.50 - 10.50% 10.00 - 11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50 - 15.00% 10.50 - 15.00% 10.00 - 15.00% 10.00 - 15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
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CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50 - 12.50% 9.00 - 12.50% N/A
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75 - 10.50% 8.50 - 10.50% N/A
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00 - 11.50% 8.50 - 11.50% N/A
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second Qtr.
1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income
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and population growth projected at or above regional norms, and the "A+"
location in that particular market. The most desirable center in a particular
market is the dominant property which has created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 8.87 percent to 12.02 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.74 percent. From the surveys and comparable sales presented, we
conclude that the appropriate going-in capitalization rate is between 9.0 and
9.5 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. Carmel Mountain Plaza is a well-located specialty power center
in an attractive growth market. It has a unique tenant alignment and well
matched merchandising mix with several good credit tenants. By virtue of the
lease structure with many of the major tenants, rental growth will tend to lag
general inflation. The upside will be through the eventual attainment of overage
rent, something we have not forecasted due to lack of adequate sales history.
Nonetheless, an investor has recognized this real short term potential in the
selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen recent retail interest.
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Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.0 percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to achieve percentage
rent in future years.
Therefore, a projected terminal capitalization rate ranging of 9.50
percent is indicated for the subject property. 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.
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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.33 percent for national power center in their
Second Quarter 1997 survey, with a range between 9.50-12.50 percent.
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VALUATION ADVISORY SERVICES
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Income Approach
================================================================================
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 (%) July 10, 1997
===================================================
Reserve Bank Discount Rate 5.00%
---------------------------------------------------
Prime Rate (Monthly Average) 8.50%
---------------------------------------------------
3-Month Treasury Bills 4.96%
---------------------------------------------------
U.S. 10-Year Notes 6.24%
---------------------------------------------------
U.S. 30-Year Bonds 6.56%
---------------------------------------------------
Telephone Bonds 7.63%
---------------------------------------------------
Municipal Bonds 5.56%
===================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 55.0 percent of base rental income
comes from anchor major/tenants whose creditworthiness adds stability to the
cash flow.
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 10.50 and 11.00 percent for the
center if it were operating on a stabilized basis.
For an investment similar to the subject, we believe that a prudent
investor would factor in an additional 25-50 basis points to this spread (11.00
to 11.50 percent). These additional points are utilized to account for projected
lease-up of the property and the added risk of absorption.
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 10-year period commencing on July 1,1997.
A sale or reversion is deemed to occur at the end of the 10th year (June
30, 2007), 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.
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:
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Income Approach
================================================================================
================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
================================================================================
SUBJECT PROPERTY CARMEL MOUNTAIN PLAZA
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL GROSS LEASABLE AREA 442,477+/- SF
- --------------------------------------------------------------------------------
MAJOR/MAJOR TENANT GLA 323,769+/- SF
- --------------------------------------------------------------------------------
IN-LINE SHOP GLA 118,708+/- SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997)
- --------------------------------------------------------------------------------
TENANTS 0 - 1,000 SF $28.00/SF
- --------------------------------------------------------------------------------
TENANTS 1,001 - 2,000 SF $26.00/SF
- --------------------------------------------------------------------------------
TENANTS 2,001 - 3,000 SF $24.00/SF
- --------------------------------------------------------------------------------
TENANTS 3,001 - 5,000 SF $22.00/SF
- --------------------------------------------------------------------------------
TENANTS 5,001 - 7,000 SF $20.00/SF
- --------------------------------------------------------------------------------
TENANTS GREATER THAN 7,001 SF $18.00/SF
- --------------------------------------------------------------------------------
TENANTS OVER 20,000 SF/ANCHORS $9.00-$12.00/SF
- --------------------------------------------------------------------------------
RENTAL BASIS NNN
- --------------------------------------------------------------------------------
MARKET RENTAL GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
CREDIT RISK LOSS 3.0%
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM 5 Years
- --------------------------------------------------------------------------------
RENEWAL PROBABILITY (IN-LINE) 50.0 %
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE DOWNTIME 3 Months
- --------------------------------------------------------------------------------
STABILIZED OCCUPANCY 95.0 %
- --------------------------------------------------------------------------------
FORECASTED START DATE JULY 1, 1997
- --------------------------------------------------------------------------------
FORECASTED DATE OF STABILIZATION Stabilized at date of value
- --------------------------------------------------------------------------------
ABSORPTION PERIOD N/A
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
- --------------------------------------------------------------------------------
NEW TENANTS 6.0% of Minimum Rent
- --------------------------------------------------------------------------------
RENEWAL TENANTS 3.0% of Minimum Rent
- --------------------------------------------------------------------------------
TENANT IMPROVEMENT ALLOWANCE
- --------------------------------------------------------------------------------
NEW TENANT $5.00/SF
- --------------------------------------------------------------------------------
RENEWAL TENANT $0.00/SF
- --------------------------------------------------------------------------------
EXPENSE GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
TAX GROWTH RATE 2.0%/YR
- --------------------------------------------------------------------------------
MANAGEMENT FEE 4% of EGI
- --------------------------------------------------------------------------------
CAPITAL RESERVES (PSF OF GLA) $0.15/SF
================================================================================
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VALUATION ADVISORY SERVICES
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<PAGE>
PURCHASE/SALE YIELD TABLE FOR CARMEL MTN PLAZA 1997 UPDATE
REVISION: 7/16/97 @ 15:30
Purchase Price(000's)/Cap Going In as a function of IRR
ALL Cash analysis (Purchased July 1997 Sold June 2007)
Sale Price(000's)/Terminal Cap
95,080 92,439 89,941 87,574 85,328 83,195 81,166
IRR 8.75 9.00 9.25 9.50 9.75 10.00 10.25
- --------------------------------------------------------------------------------
10.75 71,564 70,613 69,713 68,860 68,051 67,283 66,552
7.97 8.07 8.18 8.28 8.38 8.47 8.57
11.00 70,384 69,454 68,574 67,741 66,950 66,198 65,484
8.10 8.21 8.31 8.42 8.52 8.61 8.71
11.25 69,230 68,321 67,460 66,645 65,872 65,138 64,439
8.24 8.35 8.45 8.56 8.66 8.75 8.85
11.50 68,101 67,212 66,371 65,574 64,818 64,099 63,416
8.37 8.48 8.59 8.69 8.80 8.89 8.99
11.75 66,997 66,127 65,305 64,525 63,786 63,084 62,416
8.51 8.62 8.73 8.84 8.94 9.04 9.13
12.00 65,916 65,066 64,262 63,499 62,776 62,090 61,436
8.65 8.76 8.87 8.98 9.08 9.18 9.28
<PAGE>
Income Approach
================================================================================
=======================================================================
RATES OF RETURN As Is/Stabilized
=======================================================================
CASH FLOW START DATE 7/1/97
- -----------------------------------------------------------------------
DISCOUNT RATE 11.50%
- -----------------------------------------------------------------------
GOING-IN CAPITALIZATION RATE 9.0%
- -----------------------------------------------------------------------
TERMINAL CAPITALIZATION RATE 9.50%
- -----------------------------------------------------------------------
REVERSIONARY SALES COSTS 3.00%
- -----------------------------------------------------------------------
HOLDING PERIOD 10 Years
=======================================================================
Present Value
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 11.00 to 11.50 percent
on an "as is" operating basis. 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 10.75 to 12.00 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. A valuation matrix for the subject appears on the Facing Page.
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $65.57 to $67.74 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 9.50 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 for the subject property
as of July 1, 1997 of $65,574,000, or $65,580,000 (rounded).
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.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
=====================
Direct Capitalization
=====================
To further support our value conclusion derived via the discounted cash
flow, 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 9.0 percent applied to first year income. Applying these rates to
first stabilized year net operating income before reserves, alterations, and
other expenses for the subject of $5,701,463 results in a value of approximately
$63,350,000 (rounded) via Direct Capitalization as of July 1, 1997.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below.
=======================================================
Value Summary
-------------------------------------------------------
Sales Comparison Approach $64,160,000 to $66,370,000
-------------------------------------------------------
Income Approach
Discounted Cash Flow $65,580,000
Direct Capitalization $63,350,000
=======================================================
Two approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complimentary results, each approach or
technique supporting the other. Between the high and low range supported by each
methodology, we see a variance of just over 3 percent.
Cost Approach
The Cost Approach is based on the principle of substitution which
maintains that the 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 developer's profit requires
judgment, based upon cost services and interviews. However, for the purposes of
our analysis, we do not consider the Cost Approach to be a primary indicator of
value given current parameters utilized by investors in the current marketplace.
Consequently, a Cost Approach valuation has not been conducted.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
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, this methodology is best suited as support for the
conclusions of the "Income Approach". It provides useful market extracted rates
of return, such as overall rates, to simulate investor behavior in the "Income
Approach".
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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 (DCF) 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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis, due to
the subject's stabilized operations.
Conclusion
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 methodologies. The ranges in
value exhibited by the Income Approach are consistent with the leasing profiles.
Each 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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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<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, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July 1,
1997, was:
SIXTY FIVE MILLION DOLLARS
$65,000,000
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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.
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 Standard Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice for a Summery Appraisal
Report. As such, it might not include full 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
information contained in this report is specific to the needs of the
client and for the intended use stated in this report. The appraiser is
not responsible for unauthorized use of this report.
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.
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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 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 has 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.
10. 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.
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.
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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. Sean M. Crosby inspected the property and prepared the report. Robert W.
Bell, MAI, Operating Manager, Pacific Southwest Region has reviewed and
approved the report but did not inspect the property for this assignment.
However, he has previously 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, Robert W. Bell, MAI has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Sean M. Crosby /s/ Robert W. Bell
- ---------------------------- -------------------------------
Sean M. Crosby Robert W. Bell, MAI
Associate Director Operating Manager, Pacific Southwest Region
Valuation Advisory Services Valuation Advisory Services
State Cert. No. AG009283 State Cert. No. AG001951
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
=================
SUBJECT RENT ROLL
=================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 1
Report Date From : 5/01/97 To : 5/31/97
Property : CARMEL MOUNTAIN PLAZA
San Diego, CA 92128
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mobilworks 204-100 3200 11/10/95 11/30/00 5768.15 69217.80 21.63 12/01/96 5,768.15
Wicker Wonderland 204-106 2400 11/18/95 11/30/98 4440.00 53280.00 22.20 12/01/96 4,440.00
12/01/97 4,800.00
Planet Wraps 204-120 1356 3/09/94 3/31/04 3052.88 36634.56 27.02 4/01/97 3,052.88
Little Tokyo Restaurant 204-122 1627 3/17/94 3/31/04 3478.36 41740.32 25.65 4/01/97 3,478.36
Athen's Market Cafe 204-124 1356 3/29/94 3/31/04 3052.87 36634.44 27.02 4/01/97 3,052.87
Swensens / The Orchard Compa 204-126 1085 12/10/93 12/31/03 2337.27 28047.24 25.85 1/01/97 2,337.27
Contract Carpet 204-130 1500 7/21/94 7/31/98 2925.00 35100.00 23.40 8/01/96 2,925.00
8/01/97 3,075.00
Wavelines Surf Shop 204-132 1985 11/26/93 11/30/07 3684.21 48215.64 24.29 4/01/97 4,017.97
Artifex 204-134 1500 2/26/94 2/28/98 2795.18 33542.16 22.36 3/01/97 2,795.18
Blockbuster Video #06327 204-150 6048 11/10/93 11/30/98 9737.28 116847.36 19.32 1/01/94 9,737.28
Vacant 204-158 2658 0.00 0.00 0.00 0.00
Carmel Mountain Dental Cente 204-170 2174 10/17/95 10/31/00 3918.63 47023.56 21.63 12/01/96 3,918.63
Carmel Mountain Orthodontics 204-174 1073 12/01/95 11/30/05 2044.65 24535.80 22.87 12/01/96 2,044.65
Departures Travel 204-176 1100 10/15/93 10/31/99 2264.17 27170.04 24.70 11/01/96 2,264.17
11/01/97 2,391.58
11/01/98 2,525.42
Juice Club Inc/Jamba Juice # 204-178 1200 5/21/94 5/31/99 2442.39 29308.68 24.42 6/01/96 2,442.39
6/01/97 2,552.30
6/01/98 2,667.15
Little Cottage Gift Shop 204-180 1200 8/26/94 8/31/97 2491.42 29897.04 24.91 9/01/96 2,491.42
Java Centrale 204-182 1830 8/30/93 8/31/03 4300.50 51606.00 28.20 9/01/96 4,300.50
9/01/00 5,124.00
USA Federal Credit Union 204-190 2065 5/24/94 5/31/99 4467.01 53604.12 25.96 6/01/96 4,467.01
6/01/97 4,645.69
6/01/98 4,831.52
<CAPTION>
----CAM EXPENSE--- --REAL ESTATE TAX-- ---INS EXPENSE--- ----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mobileworks 380.48 1.43 697.34 2.62 195.91 0.73 26.41 7,041.88
Wicker Wonderland 436.01 2.18 523.00 2.62 146.93 0.73 27.73 5,545.94
Planet Wraps 246.35 2.18 295.50 2.62 83.02 0.73 32.55 3,677.75
Little Tokyo Restaurant 295.58 2.18 354.55 2.61 99.61 0.73 31.18 4,228.10
Athen's Market Cafe 161.23 1.43 295.50 2.62 83.02 0.73 31.79 3,592.62
Swensens / The Orchard Compa 197.11 2.18 236.44 2.62 66.42 0.73 31.38 2,837.24
Contract Carpet 272.51 2.18 326.88 2.62 91.83 0.73 28.93 3,616.22
Wavelines Surf Shop 360.62 2.18 432.57 2.62 121.52 0.73 29.82 4,932.68
Artifex 272.51 2.18 326.88 2.62 91.83 0.73 27.89 3,486.40
Blockbuster Video #06327 719.11 1.43 0.00 0.00 321.97 0.64 21.39 10,778.36
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Carmel Mountain Dental Cente 394.95 2.18 411.96 2.27 115.73 0.64 26.72 4,841.27
Carmel Mountain Orthodontics 127.58 1.43 233.83 2.62 57.12 0.64 27.55 2,463.18
Departures Travel 199.84 2.18 239.71 2.62 67.34 0.73 30.23 2,771.06
Juice Club Inc/Jamba Juice # 218.00 2.18 261.50 2.62 73.46 0.73 29.95 2,995.35
Little Cottage Gift Shop 218.00 2.18 261.50 2.62 73.46 0.73 30.44 3,044.38
Java Centrale 332.46 2.18 398.79 2.62 112.03 0.73 33.73 5,143.78
USA Federal Credit Union 375.15 2.18 450.00 2.62 126.42 0.73 31.49 5,418.58
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 2
Report Date From : 5/01/97 To : 5/31/97
Property : CARMEL MOUNTAIN PLAZA
San Diego, CA 92128
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Togo's 204-192 1200 8/05/94 8/31/99 2472.00 29664.00 24.72 9/01/96 2,472.00
Primo Hair Salon 204-194 3622 7/01/94 6/30/04 7461.32 89535.84 24.72 7/01/96 7,461.32
Styles For Less #24 204-210 3500 11/20/93 11/30/03 5600.00 67200.00 19.20 4/01/96 5,600.00
12/01/98 5,985.00
Payless Shoesource #7246 204-212 2500 10/16/93 10/31/98 4916.67 59000.04 23.60 11/01/93 4,916.67
Party Savers 204-214 6333 4/20/94 4/30/99 10699.18 132241.80 20.88 5/01/97 11,020.15
Artventures 204-220 1200 2/09/95 2/28/00 2287.58 27450.96 22.88 2/01/97 2,287.58
Payless Shoesource #4506 204-222 2700 7/31/93 7/31/03 5333.34 64000.08 23.70 8/01/93 5,333.34
Sally Beauty Supply #1581 204-226 1500 12/15/93 12/31/98 2745.00 32940.00 21.96 7/01/96 2,745.00
Gary's Tux Shops 204-228 900 5/01/96 4/30/01 1710.00 20520.00 22.80 5/01/96 1,710.00
5/01/98 1,778.25
5/01/99 1,849.50
5/01/00 1,923.75
Top 10 Athletic Shoes 204-230 1200 5/01/94 4/30/00 2400.00 31200.00 26.00 5/01/97 2,600.00
Imports 1 204-232 2400 12/20/93 12/31/00 4977.31 59727.72 24.89 1/01/97 4,977.31
General Nutrition Center #16 204-236 1200 1/21/94 1/30/99 2450.00 29400.00 24.50 2/01/96 2,450.00
Jennifer Convertibles 204-240 2400 11/08/93 11/30/03 5568.00 66816.00 27.84 12/01/96 5,568.00
12/01/00 6,392.00
3 Day Blinds #011 204-244 1200 10/29/93 10/31/98 2491.48 29897.76 24.91 11/01/96 2,491.48
Universal Boot Shop 204-246 2550 8/07/93 8/31/98 4750.70 57008.40 22.36 9/01/96 4,750.70
Olde Mill Bread Company 204-248 2550 12/29/95 12/31/00 4596.06 55152.72 21.63 1/01/97 4,596.06
Rubio's Restaurant 204-260 2800 12/31/93 12/31/03 6232.80 74793.60 26.71 1/01/96 6,232.80
Garden State Bagels 204-264 1200 12/31/93 12/31/03 2629.04 31548.48 26.29 1/01/97 2,629.04
University Cleaners 204-266 1200 1/01/94 12/31/99 2778.30 33339.60 27.78 1/01/97 2,778.30
1/01/98 2,917.22
Chop House 204-268 1800 1/12/94 1/31/04 3893.76 46725.12 25.96 2/01/97 3,893.76
<CAPTION>
----CAM EXPENSE--- --REAL ESTATE TAX-- ---INS EXPENSE--- ----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Togo's 142.68 1.43 261.50 2.62 73.46 0.73 29.50 2,949.64
Primo Hair Salon 635.12 2.10 761.85 2.52 214.03 0.71 30.06 9,072.32
Styles For Less #24 635.85 2.18 762.72 2.62 214.27 0.73 24.73 7,212.84
Payless Shoesource #7246 289.50 1.39 473.74 2.27 133.09 0.64 27.90 5,813.00
Party Savers 1150.52 2.18 1,380.08 2.62 387.71 0.73 26.41 13,938.46
Artventures 218.00 2.18 261.50 2.62 73.46 0.73 28.41 2,840.54
Payless Shoesource #4506 312.66 1.39 511.64 2.27 143.74 0.64 28.01 6,301.38
Sally Beauty Supply #1581 272.51 2.18 326.86 2.62 91.83 0.73 27.49 3,436.22
Gary's Tux Shops 163.50 2.18 196.13 2.62 55.10 0.73 28.33 2,124.73
Top 10 Athletic Shoes 218.00 2.18 261.50 2.62 73.46 0.73 31.53 3,152.96
Imports 1 436.01 2.18 523.00 2.62 146.93 0.73 30.42 6,083.25
General Nutrition Center #16 218.00 2.18 261.50 2.62 73.46 0.73 30.03 3,002.96
Jennifer Convertibles 436.01 2.18 454.79 2.27 127.76 0.64 32.93 6,586.56
3 Day Blinds #011 142.68 1.43 261.50 2.62 73.46 0.73 29.69 2,969.12
Universal Boot Shop 463.26 2.18 555.69 2.62 156.11 0.73 27.89 5,925.76
Olde Mill Bread Company 463.26 2.18 483.21 2.27 112.42 0.53 26.61 5,654.95
Rubio's Restaurant 469.00 2.01 529.67 2.27 144.67 0.62 31.61 7,376.14
Garden State Bagels 218.00 2.18 261.50 2.62 73.46 0.73 31.82 3,182.00
University Cleaners 218.00 2.18 261.50 2.62 73.46 0.73 33.31 3,331.26
Chop House 327.01 2.18 392.25 2.62 110.20 0.73 31.49 4,723.22
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 3
Report Date From : 5/01/97 To : 5/31/97
Property : CARMEL MOUNTAIN PLAZA
San Diego, CA 92128
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carmel Plaza Chiropractic 204-290 1200 11/19/94 11/30/99 2227.94 26735.28 22.28 12/01/96 2,227.94
Carel Plaza Optical 204-292 1200 1/17/95 1/31/00 2234.85 26818.20 22.35 2/01/97 2,234.85
Haircut Place 204-294 1200 9/26/93 9/30/03 2564.69 30776.28 25.65 10/01/95 2,564.69
Hallmark Pools & Spas 204-296 1500 10/26/93 10/31/98 3032.40 36388.80 24.26 11/01/96 3,032.40
Shaw Carpets Showplace 204-300 4800 9/19/96 9/30/01 8000.00 96000.00 20.00 10/01/96 8,000.00
Weststar Escrow 204-308 1800 12/12/94 12/31/97 3350.11 40201.32 22.33 1/01/97 3,350.11
California Pizza Kitchen, In 204-11602 5500 6/13/94 6/30/14 7500.00 90000.00 16.36 7/01/96 7,500.00
7/01/99 8,250.00
7/01/04 9,075.00
7/01/09 9,982.50
Metropolis/Captron 204-11610 4914 12/04/93 12/31/03 9213.75 110565.00 22.50 1/01/96 9,213.75
1/01/00 10,032.75
Pacific Theatres 204-11620 34561 7/30/93 7/31/10 47916.67 575000.04 16.64 8/01/95 47,916.67
Chevy's #42 204-11630 6598 12/13/94 0.00 0.00 0.00 0.00
TGI Friday's #1940 204-11650 6162 9/01/94 8/31/04 7083.33 84999.96 13.79 9/01/94 7,083.33
9/01/99 7,500.00
Mattress Discounters 204-11670 5000 9/16/94 9/30/04 7916.67 95000.04 19.00 10/01/94 7,916.67
10/01/99 9,104.17
Flowers A La Carte 204-11676 100 11/02/94 11/30/97 703.50 8442.00 84.42 12/01/96 703.50
Taco Bell #5583 204-11688 1974 7/01/93 7/31/13 6250.00 75000.00 37.99 8/01/93 6,250.00
7/01/98 6,875.00
7/01/03 7,562.50
7/01/08 8,318.75
Sportmart #44 204-11690 40672 10/16/93 10/31/18 32000.00 384000.00 9.44 11/01/93 32,000.00
12/01/98 35,200.00
12/01/03 38,720.00
Diamonds 204-11704 1950 10/13/94 10/31/99 3690.96 44291.52 22.71 11/01/96 3,690.96
11/01/97 3,838.60
11/01/98 3,992.14
<CAPTION>
----CAM EXPENSE--- --REAL ESTATE TAX-- ---INS EXPENSE--- ----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carmel Plaza Chiropractic 218.00 2.18 261.50 2.62 73.46 0.73 27.81 2,780.90
Carmel Plaza Optical 218.00 2.18 261.50 2.62 73.46 0.73 27.88 2,787.81
Haircut Place 218.00 2.18 261.50 2.62 73.46 0.73 31.18 3,117.65
Hallmark Pools & Spas 272.51 2.18 326.88 2.62 91.83 0.73 29.79 3,723.62
Shaw Carpets Showplace 872.02 2.18 909.57 2.27 293.86 0.73 25.19 10,075.45
Weststar Escrow 327.01 2.18 392.25 2.62 110.20 0.73 27.86 4,179.57
California Pizza Kitchen, In 878.09 1.92 1,258.67 2.75 101.68 0.22 21.25 9,738.44
Metropolis/Captron 584.28 1.43 1,070.85 2.62 300.84 0.73 27.28 11,169.72
Pacific Theatres 5,133.94 1.78 6,549.12 2.27 1839.87 0.64 21.33 61,439.60
Chevy's #42 844.50 1.54 0.00 0.00 156.00 0.28 1.82 1,000.50
TGI Friday's #1940 576.23 1.12 0.00 0.00 113.92 0.22 15.14 7,773.48
Mattress Discounters 594.50 1.43 1,418.25 3.40 306.10 0.73 24.57 10,235.52
Flowers A La Carte 0.00 0.00 0.00 0.00 0.00 0.00 84.42 703.50
Taco Bell #5583 191.25 1.16 0.00 0.00 105.09 0.64 39.80 6,546.34
Sportmart #44 6,324.03 1.87 0.00 0.00 2165.19 0.64 11.95 40,489.22
Diamonds 354.26 2.18 424.94 2.62 119.38 0.73 28.24 4,589.54
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 4
Report Date From : 5/01/97 To : 5/31/97
Property : CARMEL MOUNTAIN PLAZA
San Diego, CA 92128
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Circuit City #3327 204-11710 30973 11/21/93 1/31/08 32418.41 389020.92 12.56 5/01/94 32,418.41
2/01/99 35,592.97
2/01/04 39,175.47
Marshalls #452 204-11730 28760 10/16/93 1/31/09 28760.00 345120.00 12.00 11/01/96 28,760.00
11/01/01 32,355.00
11/01/04 36,381.40
11/01/07 40,935.07
Barnes & Noble #1976 204-11744 13916 10/22/94 10/31/03 24353.00 292236.00 21.00 11/01/93 24,353.00
11/01/98 28,005.95
Boston Market 204-11846 3054 11/18/96 0.00 0.00 0.00 0.00
Ross Dress #265 204-11850 24000 4/11/93 1/31/04 22000.00 264000.00 11.00 7/01/93 22,000.00
5/01/98 25,300.00
In-N-Out Burger 204-11880 2912 8/01/93 8/31/13 6666.67 80000.04 27.47 8/01/93 6,666.67
Mervyn's 204-11940 80000 6/25/92 6/25/52 0.00 0.00 0.00 0.00
Blockbuster Music #98184 204-12004 14000 7/30/94 7/31/99 21000.00 252000.00 18.00 8/01/94 21,000.00
Michaels Crafts #8704 204-12060 22969 7/27/93 1/31/04 22969.00 275628.00 12.00 8/01/95 22,969.00
8/01/98 25,840.13
KMart #4776 204-12080 107870 6/01/93 5/31/18 28333.33 339999.96 3.15 10/01/93 28,333.33
9/01/98 31,166.67
9/01/03 34,283.33
9/01/08 37,711.67
9/01/13 41,482.83
Oilmax 204-12120 2694 5/21/94 5/31/09 6916.67 83000.04 30.81 6/01/96 6,916.67
6/01/97 7,083.33
Texaco 204-12174 2538 0.00 0.00 0.00 0.00
Misc. Income 204-99999 0 0.00 0.00 0.00 0.00
<CAPTION>
----CAM EXPENSE--- --REAL ESTATE TAX-- ---INS EXPENSE--- -----GROSS RENTS-----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Circuit City #3327 2,765.92 1.07 0.00 0.00 572.62 0.22 13.85 35,756.95
Marshalls #452 2,713.68 1.13 0.00 0.00 0.00 0.00 13.13 31,473.68
Barnes & Noble #1976 1,654.62 1.43 2,637.01 2.27 740.82 0.64 25.34 29,385.45
Boston Market 254.50 1.00 0.00 0.00 0.00 0.00 1.00 254.50
Ross Dress #265 2,325.20 1.16 0.00 0.00 0.00 0.00 12.16 24,325.20
In-N-Out Burger 464.91 1.92 0.00 0.00 53.84 0.22 29.61 7,185.42
Mervyn's 6,691.87 1.00 0.00 0.00 1297.69 0.19 1.20 7,989.56
Blockbuster Music #98184 1,664.61 1.43 0.00 0.00 745.29 0.64 20.07 23,409.90
Michaels Crafts #8704 2,659.78 1.39 4,352.50 2.27 1222.76 0.64 16.30 31,204.04
KMart #4776 7,447.70 0.83 0.00 0.00 1903.28 0.21 4.19 37,684.31
Oilmax 430.11 1.92 647.33 2.88 164.93 0.73 36.34 8,159.04
Texaco 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Misc. Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 5
Report Date From : 5/01/97 To : 5/31/97
Property : CARMEL MOUNTAIN PLAZA
San Diego, CA 92128
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T O T A L S : 532129 486294.46 5845790.28 10.99
Total Occupied Square Feet : 532129
Total Vacant Square Feet : 0
<CAPTION>
----CAM EXPENSE--- --REAL ESTATE TAX-- ---INS EXPENSE--- ----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T O T A L S : 59,316.58 1.34 35,699.97 0.81 17105.27 0.39 13.51 599,271.01
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
========================
TRW TAX RECORDS/PLAT MAP
========================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
MAP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
MAP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C) 1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
--------------------------------------------------------------
18) Situs:11620 CARMEL MOUNTAIN ROAD, CA
Use:THEATER
APN :313-730-19-00 Tax Rate Area:08-141 Assd Land:$2,350,000
County: San Diego CA Property Tax :$55,220 Assd Imp :$3,210,000
Census: 1952.00 Total Val:$5,560,000
Map Pg: Exemption : Assd Year:96
New Pg: %Improved:57%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD;MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date:11/27/95 07/16/91 Bldg/Lvarea:40,178
Doument # :534900 349260 Yrblt/Eff :94
Document Type:GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings:
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company:CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use:633 Lot Size :A4.12 Pool :
Bldg Class: Lot Area :179,467
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
Comments :1 TO 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
--------------------------------------------------------------
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C) 1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
--------------------------------------------------------------
18) Situs:11660 RANCHO CARMEL DRIVE, CA
Use:STORE BUILDING
APN :313-730-20-00 Tax Rate Area:08-141 Assd Land:$420,000
County: San Diego CA Property Tax :$5,241 Assd Imp :$680,000
Census: 1952.00 Total Val:$1,100,000
Map Pg: Exemption : Assd Year:96
New Pg: %Improved:61%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD;MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date:11/27/95 07/16/91 Bldg/Lvarea:5,040
Doument # :534900 349260 Yrblt/Eff :94
Document Type:GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings:
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company:CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use:621 Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
COMMENTS: 1 TO 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
--------------------------------------------------------------
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
19) Situs: 11608 RANCHO CARMEL DRIVE, LAKESIDE CA
Use: COMMERCIAL LOT
APN :313-730-21-00 Tax Rate Area :08-141 Assd Land :$276,552
County : San Diego CA Property Tax :$2,980 Assd Imp :
Census :1952.00 Total Val :$276,552
Map Pg : Exemption : Assd Year :96
New Pg : % Improved :
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 04/28/95 Bldg/Lvarea :5,600
Document # :534900 179332 Yrblt/Eff :
Document Type :GRANT DEED GRANT DEED # Stories :
Price :$52,220,000F $175,000F # Units :
First TD : $157,200H # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 620 Lot Size :A0.53 Pool :
Bldg Class: Lot Area :23,086
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
Legal :L3 /B17251
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
8) Situs: 11650 CARMEL MOUNTAIN ROAD, CA
Use: RESTAURANT BUILDING
APN :313-730-24-00 Tax Rate Area :08-141 Assd Land: $775,000
County : San Diego CA Property Tax :$4,646 Assd Imp : $845,000
Census :1952.00 Total Val: $1,620,000
Map Pg : Exemption : Assd Year: 96
New Pg : %Improved: 52%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :6,714
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 635 Lot Size :A0.89 Pool :
Bldg Class:Lot Area :38,768
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
17) Situs: 11670 CARMEL MOUNTAIN ROAD, CA
Use: COMMERCIAL (NEC)
APN :313-730-25-00 Tax Rate Area :08-141 Assd Land :$600,000
County : San Diego CA Property Tax :$8,144 Assd Imp :$730,000
Census :1952.00 Total Val :$1,330,000
Map Pg : Exemption : Assd Year :96
New Pg : % Improved :54%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :5,525
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 620 Lot Size :A0.68 Pool :
Bldg Class: Lot Area :29,620
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
--------------------------------------------------------------
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
16) Situs: 11688 CARMEL MOUNTAIN ROAD, CA
Use: RESTAURANT BUILDING
APN :313-730-26-00 Tax Rate Area :08-141 Assd Land :$400,000
County : San Diego CA Property Tax :$5,726 Assd Imp :$250,000
Census :1952.00 Total Val :$650,000
Map Pg : Exemption : Assd Year :96
New Pg : % Improved :38%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :1,989
Document # :534900 349260 Yrblt/Eff :94
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 635 Lot Size :A0.54 Pool :
Bldg Class: Lot Area :23,522
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
- -------------------------------------------------------------------------
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
15) Situs: 11640 CARMEL MOUNTAIN ROAD #11730, CA
Use: STORE BUILDING
APN :313-730-27-00 Tax Rate Area :08-141 Assd Land :$4,566,237
County : San Diego CA Property Tax :$109,172 Assd Imp :$5,889,208
Census :1952.00 Total Val :$10,455,445
Map Pg : Exemption : Assd Year :96
New Pg : % Improved :56%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :99,999
Document # :534900 349260 Yrblt/Eff :94
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 621 Lot Size :A8.98 Pool :
Bldg Class: Lot Area :391,168
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type :
Comments : 1 to 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
)) Reported data believed to be reliable but accuracy is not guaranteed ((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
14) Situs: 11720-40 CARMEL MOUNTAIN ROAD, CA
Use: STORE BUILDING
APN :313-730-28-00 Tax Rate Area:08-141 Assd Land :$840,000
County: San Diego CA Property Tax :$10,346 Assd Imp :$2,600,000
Census:1952.00 Total Val :$3,440,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:75%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :15,848
Document # :534900 349260 Yrblt/Eff :94
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 621 Lot Size :A1.07 Pool :
Bldg Class: Lot Area :46,609
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
Comments : 1 to 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
13) Situs: 11738-910 CARMEL MOUNTAIN ROAD, CA
Use: 000
APN :313-730-29-00 Tax Rate Area:08-141 Assd Land :$1,660,000
County: San Diego CA Property Tax :$30,601 Assd Imp :$5,940,000
Census:1952.00 Total Val :$7,600,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:78%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
11)Situs: 11850 CARMEL MOUNTAIN ROAD, CA
Use: SHOPPING CENTER
APN :313-730-31-00 Tax Rate Area:08-141 Assd Land :$1,730,000
County: San Diego CA Property Tax :$22,944 Assd Imp :$2,170,000
Census:1952.00 Total Val :$3,900,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:55%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :25,658
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 623 Lot Size :A2.21 Pool :
Bldg Class: Lot Area :96,267
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
10) Situs: 11880 CARMEL MOUNTAIN ROAD, CA
Use: RESTAURANT BUILDING
APN :313-730-32-00 Tax Rate Area: 08-141 Assd Land :$550,000
County: San Diego CA Property Tax : $7,383 Assd Imp :$330,000
Census:1952.00 Total Val :$880,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:37%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :2,908
Document # :534900 349260 Yrblt/Eff :94
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size :A0.69 Pool :
Bldg Class: Lot Area :30,056
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
1) Situs: 11602 CARMEL MOUNTAIN ROAD, CA
Use: RESTAURANT BUILDING
APN :313-730-35-00 Tax Rate Area:08-141 Assd Land :$780,O00
County: San Diego CA Property Tax :$11,176 Assd Imp :$540,000
Census:1952.00 Total Val :$1,320,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:40%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :5,489
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use:635 Lot Size :A1.04 Pool :
Bldg Class: Lot Area :45,302
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
9) Situs: 12156 CARMEL MOUNTAIN ROAD, CA
Use: SHOPPING CENTER
APN :313-731-10-00 Tax Rate Area:08-141 Assd Land :$510,000
County: San Diego CA Property Tax :$8,501 Assd Imp :$880,000
Census:1952.00 Total Val :$1,390,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:63%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :6,820
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 624 Lot Size :A0.58 Pool :
Bldg Class: Lot Area :25,264
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
7) Situs: 12120 CARMEL MOUNTAIN ROAD, CA
Use: STORE BUILDING
APN :313-731-12-00 Tax Rate Area:08-141 Assd Land :$238,424
County: San Diego CA Property Tax :$5,073 Assd Imp :$247,597
Census:1952.00 Total Val :$486,021
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:50%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :4,760
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
6) Situs: 12080 CARMEL MOUNTAIN ROAD, CA
Use: 000
APN :313-731-13-00 Tax Rate Area:08-141 Assd Land :$5,089,506
County: San Diego CA Property Tax :$90,700 Assd Imp :$3,531,646
Census:1952.00 Total Val :$8,621,152
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:40%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
5) Situs: 12002 CARMEL MOUNTAIN ROAD, CA
Use: STORE BUILDING
APN :313-731-14-00 Tax Rate Area:08-141 Assd Land :$775,000
County: San Diego CA Property Tax :$8,716 Assd Imp :$995,000
Census:1952.00 Total Val :$l,770,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:56%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :7,000
Document # :534900 349260 Yrblt/Eff :94
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: 621 Lot Size :A0.81 Pool :
Bldg Class: Lot Area :35,283
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
Comments :1 TO 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
4) Situs: 12060 CARMEL MOUNTAIN ROAD, CA
Use: 000
APN :313-731-15-00 Tax Rate Area:08-141 Assd Land :$1,630,000
County: San Diego CA Property Tax :$21,727 Assd Imp :$2,070,000
Census:1952.00 Total Val :$3,700,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:55%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
3) Situs: 11946-90 CARMEL MOUNTAIN ROAD, CA
Use: 000
APN :313-731-16-00 Tax Rate Area:08-141 Assd Land :$1,150,000
County: San Diego CA Property Tax :$20,855 Assd Imp :$3,600,000
Census:1952.00 Total Val :$4,750,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:75%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
12) Situs: 12070 CARMEL MOUNTAIN ROAD, CA
Use: 000
APN :313-731-17-00 Tax Rate Area:08-141 Assd Land :$375,00O
County: San Diego CA Property Tax :$6,724 Assd Imp :$855,000
Census:1952.00 Total Val :$1,230,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:69%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller : HOMART DEV CO
Title Company : CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use: Lot Size : Pool :
Bldg Class: Lot Area :
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
(C)1996 TRW REDI Property Data
Prepared For: Prepared By:
Title Representative:
------------------------------------------------------------
2) Situs: 12004 CARMEL MOUNTAIN ROAD, CA
Use: STORE BUILDING
APN :313-731-18-00 Tax Rate Area:08-141 Assd Land :$780,000
County: San Diego CA Property Tax :$13,672 Assd Imp :$2,260,000
Census:1952.00 Total Val :$3,040,000
Map Pg: Exemption : Assd Year :96
New Pg: % Improved:74%
Owner :COMMUNITY CENTERS ONE L L & L/EA
Mail :34555 CHAGRIN BLVD; MORELAND HILLS OH 44022
Last Sale Prior Sale
Transfer Date :11/27/95 07/16/91 Bldg/Lvarea :14,013
Document # :534900 349260 Yrblt/Eff :
Document Type :GRANT DEED # Stories :
Price :$52,220,000F # Units :
First TD : # Buildings :
Junior TD :
Lender :
Seller :HOMART DEV CO
Title Company :CHICAGO TITLE INSURANCE CO
Number of Parcels :+
County Use:621 Lot Size :A0.81 Pool :
Bldg Class: Lot Area :35,283
Flood Panl: - Zoning : Condition :
Flood Zone: ,
Park Type:
Comments :1 TO 3 STORY MISC STORE BLDGS
TRW-REDI (C) 1994
The Page & Grid reference is copyrighted by Thomas Bros. Maps (TM)
---------------------------------------------------------------
))Reported data believed to be reliable but accuracy is not guaranteed((
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
SUBJECT SALES REPORTS
================================================================================
<PAGE>
CARMEL MOUNTAIN PLAZA 1996 MONTHLY SALES REPORTING
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT NAME/ % MONTHLY OPENING ANNUAL JAN. FEB.
CONTACT & PHONE NO. RENT DATE BREAKPOINT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARTIFEX N/A 2,705.30 08/17/90 N/A
Jim 487-0589
- ------------------------------------------------------------------------------------------------------------------------------------
ARTVENTURES - QUARTERLY N/A 2,100.00 02/08/91 N/A
Pam 451-3278
- ------------------------------------------------------------------------------------------------------------------------------------
ATHENS MARKET CAFE - QRTLY N/A 2,935.46 03/28/90 N/A 20,221.00 21,196.00
Nick 675-2225
- ------------------------------------------------------------------------------------------------------------------------------------
BARNES & NOBEL # 1976 - ANL 3.00% 24,353.00 10/21/89 9,741,200.00 306,810.21 316,096.29
Don Row 674-1055
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA PIZZA KITCHEN 3.00% Based on sales 06/12/90 0.00 115,281.26 121,066.80
QRTLY - Mark Carter (310) 575-5720 $7500 Eff. 7/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
CARMEL MOUNTAIN DENTAL CENTER N/A 3,918.63 10/01/95 N/A
Mark Luban 675-1180
- ------------------------------------------------------------------------------------------------------------------------------------
CARMEL MTN ORTHODONTICS N/A 2,044.65 12/01/95 N/A
Jerold/Jill Hennes
- ------------------------------------------------------------------------------------------------------------------------------------
CARMEL PLAZA CHIROPRACTIC N/A 2,227.94 11/20/90 N/A 19,187.00 22,107.00
Dr. Pat Oshea 676-1166 - Quarterly
- ------------------------------------------------------------------------------------------------------------------------------------
CARMEL PLAZA OPTICAL 6.00% 2,163.00 01/16/91 431,550.00 12,212.17 8,739.92
Carolyn Chetister 676-3937 Eff. 2/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
CHICKENEST 5.00% 5,639.75 03/28/90 1,340,398.40 15,360.00
Joe 675-0101 Eff. 5/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
CHOP HOUSE #299-3388 4.00% 3,744.00 01/11/90 1,119,600.00
Joy Fuemi 535-1668/673-9988 Eff. 2/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
CIRCUIT CITY #3327 - ANNUAL 1.00% 32,418.41 11/20/89 25,000,000.00 12,684,536.30
- ------------------------------------------------------------------------------------------------------------------------------------
COCO'S RESTAURANTS 3.00% 7,916.67 01/12/96 3,166,668.00
Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTURES TRAVEL - QRTLY N/A 2,264.17 10/14/89 N/A 10,293.00 8,469.72
Judy Lobred - 674-7600
- ------------------------------------------------------------------------------------------------------------------------------------
DIAMONDS - QUARTLEY N/A 3,690.96 10/12/90 N/A 43,947.50 82,204.83
Jim 427-2500/674-7404
- ------------------------------------------------------------------------------------------------------------------------------------
FLOWERS A LA CARTE - QRTLY N/A 703.50 11/01/90 N/A
Donna 487-5522
- ------------------------------------------------------------------------------------------------------------------------------------
GARDEN STATE BAGELS-QRTLY N/A 2,546.16 12/30/89 N/A 32,631.00 32,559.00
Dot 538-0325
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
============================================================================================================================
TENANT NAME/ MARCH APR. MAY JUNE JULY AUG.
CONTACT & PHONE NO.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARTIFEX
Jim 487-0589
- ----------------------------------------------------------------------------------------------------------------------------
ARTVENTURES - QUARTERLY 41,028.58 37,354.28
Pam 451-3278
- ----------------------------------------------------------------------------------------------------------------------------
ATHENS MARKET CAFE - QRTLY 27,377.44 20,594.00 23,391.00 23,644.00 22,342.00 25,597.00
Nick 675-2225
- ----------------------------------------------------------------------------------------------------------------------------
BARNES & NOBEL # 1976 - ANL 377,145.83 267,790.89 241,371.33 314,298.58 215,341.78 219,370.51
Don Row 674-1055
- ----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA PIZZA KITCHEN 134,155.06 118,021.01 129,450.95 147,356.83 129,415.68 152,007.46
QRTLY - Mark Carter (310) 575-5720
- ----------------------------------------------------------------------------------------------------------------------------
CARMEL MOUNTAIN DENTAL CENTER
Mark Luban 675-1180
- ----------------------------------------------------------------------------------------------------------------------------
CARMEL MTN ORTHODONTICS
Jerold/Jill Hennes
- ----------------------------------------------------------------------------------------------------------------------------
CARMEL PLAZA CHIROPRACTIC 23,904.00 14,717.00 16,070.00 16,386.00 18,854.00 14,862.95
Dr. Pat Oshea 676-1166 - Quarterly
- ----------------------------------------------------------------------------------------------------------------------------
CARMEL PLAZA OPTICAL 12,043.22 4,990.51 12,178.49 9,001.69 9,722.88 12,153.22
Carolyn Chetister 676-3937
- ----------------------------------------------------------------------------------------------------------------------------
CHICKENEST
Joe 675-0101
- ----------------------------------------------------------------------------------------------------------------------------
CHOP HOUSE #299-3388 3,241.68 11,423.70 13,300.00 11,914.76 13,400.00
Joy Fuemi 535-1668/673-9988
- ----------------------------------------------------------------------------------------------------------------------------
CIRCUIT CITY #3327 - ANNUAL
- ----------------------------------------------------------------------------------------------------------------------------
COCO'S RESTAURANTS
- ----------------------------------------------------------------------------------------------------------------------------
DEPARTURES TRAVEL - QRTLY 14,909.86 18,735.57 17,349.04 18,383.93 11,742.40 16,833.53
Judy Lobred - 674-7600
- ----------------------------------------------------------------------------------------------------------------------------
DIAMONDS - QUARTLEY 68,699.56 50,943.72 86,854.50 48,692.06 61,103.12 57,851.64
Jim 427-2500/674-7404
- ----------------------------------------------------------------------------------------------------------------------------
FLOWERS A LA CARTE - QRTLY 3,900.00
Donna 487-5522
- ----------------------------------------------------------------------------------------------------------------------------
GARDEN STATE BAGELS-QRTLY 37,098.00 31,036.00 35,097.00 32,063.00 28,311.00 30,543.00
Dot 538-0325
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================================
TENANT NAME/ SEPT. OCT. NOV. DEC. TOTAL
CONTACT & PHONE NO.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARTIFEX 15,190,022.75
Jim 487-0589
- ---------------------------------------------------------------------------------------------------------
ARTVENTURES - QUARTERLY 43,143.27 53,851.62 175,377.75
Pam 451-3278
- ---------------------------------------------------------------------------------------------------------
ATHENS MARKET CAFE - QRTLY 22,985.00 24,276.00 23,886.00 26,080.00 281,591.44
Nick 675-2225
- ---------------------------------------------------------------------------------------------------------
BARNES & NOBEL # 1976 - ANL 280,424.65 214,066.10 215,681.03 470,221.01 3,438,617.21
Don Row 674-1055
- ---------------------------------------------------------------------------------------------------------
CALIFORNIA PIZZA KITCHEN 134,751.74 113,909.58 134,298.25 123,521.73 1,553,236.35
QRTLY - Mark Carter (310) 575-5720
- ---------------------------------------------------------------------------------------------------------
CARMEL MOUNTAIN DENTAL CENTER 0.00
Mark Luban 675-1180
- ---------------------------------------------------------------------------------------------------------
CARMEL MTN ORTHODONTICS 0.00
Jerold/Jill Hennes
- ---------------------------------------------------------------------------------------------------------
CARMEL PLAZA CHIROPRACTIC 12,916.00 12,595.00 14,325.00 16,072.00 201,995.95
Dr. Pat Oshea 676-1166 - Quarterly
- ---------------------------------------------------------------------------------------------------------
CARMEL PLAZA OPTICAL 15,245.50 10,927.98 9,763.08 8,499.80 125,478.46
Carolyn Chetister 676-3937
- ---------------------------------------------------------------------------------------------------------
CHICKENEST 15,360.00
Joe 675-0101
- ---------------------------------------------------------------------------------------------------------
CHOP HOUSE #299-3388 12,881.48 12,000.00 13,335.19 91,496.81
Joy Fuemi 535-1668/673-9988
- ---------------------------------------------------------------------------------------------------------
CIRCUIT CITY #3327 - ANNUAL 0.00
- ---------------------------------------------------------------------------------------------------------
COCO'S RESTAURANTS 0.00
- ---------------------------------------------------------------------------------------------------------
DEPARTURES TRAVEL - QRTLY 17,588.80 16,205.93 9,087.70 9,994.77 169,594.25
Judy Lobred - 674-7600
- ---------------------------------------------------------------------------------------------------------
DIAMONDS - QUARTLEY 56,728.26 46,757.55 89,494.49 200,452.55 893,729.78
Jim 427-2500/674-7404
- ---------------------------------------------------------------------------------------------------------
FLOWERS A LA CARTE - QRTLY 3,900.00
Donna 487-5522
- ---------------------------------------------------------------------------------------------------------
GARDEN STATE BAGELS-QRTLY 28,853.00 29,371.00 30,617.00 29,847.00 378,026.00
Dot 538-0325
- ---------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MOUNTAIN PLAZA 1996 MONTHLY SALES REPORTING
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT NAME/ % MONTHLY OPENING ANNUAL JAN. FEB.
CONTACT & PHONE NO. RENT DATE BREAKPOINT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GNC #1635 6.00% 2,450.00 01/20/90 486,666.67 2,850.96 29,139.88
Donna Anderson (412) 288-2060 Eff. 2/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
HAIRCUT PLACE 6.00% 2,564.69 08/25/89 512,938.00
Salvatore/Lulu 675-7511 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
HALLMARK POOL & SPA N/A 3,032.40 08/20/89 N/A 16,796.66 18,892.17
Merhyl 674-7676
- ------------------------------------------------------------------------------------------------------------------------------------
IMPORTS 1 5.00% 4,820.40 12/25/89 1,156,896.00 17,934.61 19,631.97
John 592-9881/(714) 643-8991
- ------------------------------------------------------------------------------------------------------------------------------------
JAVA CENTRALE 5.00% 4,300.50 08/29/89 929,640.00 31,315.80 32,021.90
Denise Guardino - 800-551-5282 Eff. 9/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
JENNIFER CONVERTIBLES N/A 5,568.00 11/29/89 N/A 11,896.00 7,991.00
Thersa (516) 371-2200 ext. 2224
- ------------------------------------------------------------------------------------------------------------------------------------
JUICE CLUB #301 4.00% 2,442.39 05/20/90 722,393.25 75,029.92 67,146.95
Bill McCarthy (415) 357-1300 ext 139 Eff. 6/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
K-MART #4476 - ANNUAL 1.00% 28,333.33 08/22/89 20,000,000.00
Jim Reese (313) 643-1000
- ------------------------------------------------------------------------------------------------------------------------------------
LITTLE COTTAGE GIFT SHOP 6.00% 2,491.42 09/10/89 488,608.00 7,320.15 8,911.32
Hal Baker 485-9923 Eff. 9/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
LITTLE TOKYO RESTARAUNT N/A 3,344.58 03/16/90 N/A 31,226.47 29,245.11
Hung Ng 675-1468/291-8518
- ------------------------------------------------------------------------------------------------------------------------------------
MARSHALL'S #452 - ANNUAL 2.00% 28,760.00 09/29/89 16,656,835.00
Candice Cole (508) 474-7016 Eff. 11/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
MATTRESS DISCOUNTERS #12 N/A 7,916.67 09/15/90 N/A 120,367.52 149,791.81
Kim Spear (510) 429-5060 ext.41
- ------------------------------------------------------------------------------------------------------------------------------------
METROPLIS/CAPCOM COIN 6.00% 9,213.75 12/03/89 1,842,750.00
Dan Fweney - (708) 797-6358 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAELS 3.00% 22,969.00 07/26/89 9,187,600.00 216,788.60 208,007.00
Carolyn Clark (214) 714-7286
- ------------------------------------------------------------------------------------------------------------------------------------
MOBILWORKS N/A 5,768.15 11/10/95 N/A 67,032.00 59,277.00
- ------------------------------------------------------------------------------------------------------------------------------------
NIGHT & DAY FORMALWEAR 6.00% 1,710.00 05/01/96 342,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
OIL MAX 5.00% 6,916.67 05/20/90 1,635,000.80 68,731.08 68,390.17
Ethel Green - 360-6242 Eff. 6/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
OLDE MILL BREAD 5.00% 4,462.50 12/29/95 1,071,000.00 21,544.14 26,698.22
Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
============================================================================================================================
TENANT NAME/ MARCH APR. MAY JUNE JULY AUG.
CONTACT & PHONE NO.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GNC #1635 29,384.88 28,368.76 32,042.92 28,182.00 27,767.88 26,321.96
Donna Anderson (412) 288-2060
- ----------------------------------------------------------------------------------------------------------------------------
HAIRCUT PLACE 19,014.00 22,188.00 21,950.00 20,126.00 21,225.00
Salvatore/Lulu 675-7511
- ----------------------------------------------------------------------------------------------------------------------------
HALLMARK POOL & SPA 33,901.00 45,736.00 54,019.78 62,321.32 54,670.11 47,013.17
Merhyl 674-7676
- ----------------------------------------------------------------------------------------------------------------------------
IMPORTS 1 19,097.11 15,587.61 17,091.66 20,245.92 13,759.59 14,320.16
John 592-9881/(714) 643-8991
- ----------------------------------------------------------------------------------------------------------------------------
JAVA CENTRALE 35,588.53 30,197.33 32,589.92 32,123.02 33,289.00 36,271.00
Denise Guardino - 800-551-5282
- ----------------------------------------------------------------------------------------------------------------------------
JENNIFER CONVERTIBLES 7,457.00 24,405.00 13,020.00
Thersa (516) 371-2200 ext. 2224
- ----------------------------------------------------------------------------------------------------------------------------
JUICE CLUB #301 82,999.33 87,325.00 89,296.31 91,264.00 92,150.90 91,916.43
Bill McCarthy (415) 357-1300 ext 139
- ----------------------------------------------------------------------------------------------------------------------------
K-MART #4476 - ANNUAL 11,903,416.84
Jim Reese (313) 643-1000
- ----------------------------------------------------------------------------------------------------------------------------
LITTLE COTTAGE GIFT SHOP 9,069.86 6,355.29 8,782.00 7,280.41 6,181.78 6,275.90
Hal Baker 485-9923
- ----------------------------------------------------------------------------------------------------------------------------
LITTLE TOKYO RESTARAUNT 34,320.14 31,555.90 35,028.43 31,526.54 32,487.27 33,885.26
Hung Ng 675-1468/291-8518
- ----------------------------------------------------------------------------------------------------------------------------
MARSHALL'S #452 - ANNUAL
Candice Cole (508) 474-7016
- ----------------------------------------------------------------------------------------------------------------------------
MATTRESS DISCOUNTERS #12 109,536.42 122,429.22 185,269.53 121,178.04 153,879.97 202,585.66
Kim Spear (510) 429-5060 ext.41
- ----------------------------------------------------------------------------------------------------------------------------
METROPLIS/CAPCOM COIN 49,051.07
Dan Fweney - (708) 797-6358
- ----------------------------------------------------------------------------------------------------------------------------
MICHAELS 213,006.00 271,324.00 190,360.00 214,424.00 241,123.00 200,695.00
Carolyn Clark (214) 714-7286
- ----------------------------------------------------------------------------------------------------------------------------
MOBILWORKS 60,631.00 45,721.00 50,852.00 48,870.00 56,057.00
- ----------------------------------------------------------------------------------------------------------------------------
NIGHT & DAY FORMALWEAR 14,106.25 26,941.43 10,852.90
- ----------------------------------------------------------------------------------------------------------------------------
OIL MAX 78,377.89 68,334.53 65,069.35 65,396.04 68,585.45 73,228.22
Ethel Green - 360-6242
- ----------------------------------------------------------------------------------------------------------------------------
OLDE MILL BREAD 30,290.59 22,458.49 26,172.91 23,978.53 22,932.43 25,324.74
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================================
TENANT NAME/ SEPT. OCT. NOV. DEC. TOTAL
CONTACT & PHONE NO.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GNC #1635 29,183.00 29,134.00 31,150.00 52,523.80 346,050.04
Donna Anderson (412) 288-2060
- ---------------------------------------------------------------------------------------------------------
HAIRCUT PLACE 22,467.00 19,941.00 22,696.00 22,631.00 192,238.00
Salvatore/Lulu 675-7511
- ---------------------------------------------------------------------------------------------------------
HALLMARK POOL & SPA 39,562.41 23,951.88 20,776.69 19,279.32 436,922.51
Merhyl 674-7676
- ---------------------------------------------------------------------------------------------------------
IMPORTS 1 17,209.13 15,083.68 18,427.95 19,201.27 207,590.66
John 592-9881/(714) 643-8991
- ---------------------------------------------------------------------------------------------------------
JAVA CENTRALE 28,861.00 31,795.00 29,711.00 353,763.50
Denise Guardino - 800-551-5282
- ---------------------------------------------------------------------------------------------------------
JENNIFER CONVERTIBLES 64,769.00
Thersa (516) 371-2200 ext. 2224
- ---------------------------------------------------------------------------------------------------------
JUICE CLUB #301 72,096.25 61,126.98 59,041.07 54,158.22 923,551.36
Bill McCarthy (415) 357-1300 ext 139
- ---------------------------------------------------------------------------------------------------------
K-MART #4476 - ANNUAL 11,903,416.84
Jim Reese (313) 643-1000
- ---------------------------------------------------------------------------------------------------------
LITTLE COTTAGE GIFT SHOP 5,771.20 6,417.20 9,582.07 23,561.43 105,508.61
Hal Baker 485-9923
- ---------------------------------------------------------------------------------------------------------
LITTLE TOKYO RESTARAUNT 30,600.13 31,536.55 31,223.06 34,650.00 387,284.86
Hung Ng 675-1468/291-8518
- ---------------------------------------------------------------------------------------------------------
MARSHALL'S #452 - ANNUAL 5,246,899.00
Candice Cole (508) 474-7016
- ---------------------------------------------------------------------------------------------------------
MATTRESS DISCOUNTERS #12 138,485.56 129,693.42 179,168.60 119,798.94 94,877.99
Kim Spear (510) 429-5060 ext.41
- ---------------------------------------------------------------------------------------------------------
METROPLIS/CAPCOM COIN 30,271.57 79,322.64
Dan Fweney - (708) 797-6358
- ---------------------------------------------------------------------------------------------------------
MICHAELS 217,222.00 350,499.00 367,156.00 604,812.45 3,295,417.05
Carolyn Clark (214) 714-7286
- ---------------------------------------------------------------------------------------------------------
MOBILWORKS 388,440.00
- ---------------------------------------------------------------------------------------------------------
NIGHT & DAY FORMALWEAR 9,497.46 9,300.34 10,991.45 10,975.31 92,665.14
- ---------------------------------------------------------------------------------------------------------
OIL MAX 61,214.97 61,843.01 55,464.25 55,889.61 790,524.57
Ethel Green - 360-6242
- ---------------------------------------------------------------------------------------------------------
OLDE MILL BREAD 21,561.05 26,872.68 29,919.07 30,426.14 308,178.99
- ---------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MOUNTAIN PLAZA 1996 MONTHLY SALES REPORTING
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT NAME/ % MONTHLY OPENING ANNUAL JAN. FEB.
CONTACT & PHONE NO. RENT DATE BREAKPOINT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC THEATERS 10.00% 47,916.67 06/29/89 5,750,000.40 415,892.08 349,737.47
Sharon (310) 855-8437
- ------------------------------------------------------------------------------------------------------------------------------------
PARTY SAVERS 7.00% 10,699.18 04/19/90 1,648,935.14 38,824.00 42,905.00
Tawnia 224-7300 Eff. 5/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
PAYLESS SHOES #4506 - QTRLY 5.00% 5,333.34 07/30/89 1,280,001.60 30,954.57 32,997.37
Harold (913) 233-5171
- ------------------------------------------------------------------------------------------------------------------------------------
PLANET WRAPS (Former Guisseppes) 5.00% 2,933.84 03/08/90 697,351.20
Eff. 4/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMO HAIR DESIGN 6.00% 7,461.32 06/30/90 1,470,532.00 66,194.18 68,629.92
Christina 293-7421 Eff. 7/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
ROSS DRESS FOR LESS #265 - ANNUAL 2.00% 22,000.00 03/13/89 9,000,000.00 4,377,624.00
Luz Sabella (510) 505-4562
- ------------------------------------------------------------------------------------------------------------------------------------
ROBIO'S 5.00% 6,232.80 12/28/89 1,495,872.00 60,240.88 62,421.90
Betina 452-1770 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
SALLY BEAUTY SUPPLY #1581 3.00% 2,745.00 12/14/89 1,029,000.00 36,918.00 35,509.00
Michelle (817) 898-7843 - Quarterly Eff. 7/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
SPORTMART #44 - ANNUAL 1.00% 32,000.00 10/15/89 38,400,000.00
Cynthia (708) 966-1700 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
STYLES FOR LESS #24 4.00% 5,600.00 11/19/89 1,627,500.00 26,894.00 41,384.00
Jennifer Espinozoa (714) 774-1010 Eff. 4/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
SWENSEN'S ICE CREAM (PRD Enterprises) 6.00% 2,263.59 12/09/89 452,718.00 11,254.35 12,507.66
Ross 592-4053/Pat 485-7823 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
TGI FRIDAYS #1940 - QUARTERLY 3.00% 7,083.33 03/19/91 3,500,000.00 234,776.00 206,168.00
Mark Walker (602) 852-9000
- ------------------------------------------------------------------------------------------------------------------------------------
TACO BELL #5583 - ANNUAL N/A 6,250.00 07/01/89 N/A
Eva Coddington (714) 863-2123
- ------------------------------------------------------------------------------------------------------------------------------------
TOGO'S - QUARTERLY 5.00% 2,472.00 08/04/90 581,760.00 28,362.00 26,475.90
John 485-7757 Eff. 9/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
TOP 10 - QUARTERLY N/A 2,400.00 05/07/90 N/A 22,732.60 22,765.77
Lee 673-5350/Sang 428-8000
- ------------------------------------------------------------------------------------------------------------------------------------
UNIVERSAL BOOT 6.00% 4,750.70 08/07/89 931,964.00 4,344.28
Betty Handrich 233-6566 Eff. 9/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
UNIVERSITY CLEANERS-QRTLY N/A 2,646.00 12/31/89 N/A 12,800.00 12,100.00
Mr. Quach 283-6167
- ------------------------------------------------------------------------------------------------------------------------------------
WAVELINES SURF SHOP 5.00% 3,684.21 11/25/89 1,066,295.50 36,869.00 60,924.00
Tim 675-9696 Eff. 12/1/96 B/P 4% over AFR
- ------------------------------------------------------------------------------------------------------------------------------------
WICKER WONDERLAND 5.00% 4,400.00 11/18/95 1,012,800.00 20,069.00 40,533.00
<CAPTION>
============================================================================================================================
TENANT NAME/ MARCH APR. MAY JUNE JULY AUG.
CONTACT & PHONE NO.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC THEATERS 331,995.57 333,035.17 382,390.13 444,000.72 585,816.70 351,569.99
Sharon (310) 855-8437
- ----------------------------------------------------------------------------------------------------------------------------
PARTY SAVERS 50,536.00 44,214.00 61,015.00 59,679.00 52,030.92 49,087.00
Tawnia 224-7300
- ----------------------------------------------------------------------------------------------------------------------------
PAYLESS SHOES #4506 - QTRLY 48,219.67 47,800.94 54,779.26 53,582.03 46,018.20 61,243.98
Harold (913) 233-5171
- ----------------------------------------------------------------------------------------------------------------------------
PLANET WRAPS (Former Guisseppes) 11,378.35
- ----------------------------------------------------------------------------------------------------------------------------
PRIMO HAIR DESIGN 71,128.79 57,467.98 69,241.06 63,250.17 62,177.23 74,733.95
Christina 293-7421
- ----------------------------------------------------------------------------------------------------------------------------
ROSS DRESS FOR LESS #265 - ANNUAL
Luz Sabella (510) 505-4562
- ----------------------------------------------------------------------------------------------------------------------------
ROBIO'S 86,113.64 70,757.72 68,951.68 95,358.41 89,487.73 76,105.04
Betina 452-1770
- ----------------------------------------------------------------------------------------------------------------------------
SALLY BEAUTY SUPPLY #1581 40,741.00 35,258.00 38,925.00 38,993.00 39,618.00 43,102.00
Michelle (817) 898-7843 - Quarterly
- ----------------------------------------------------------------------------------------------------------------------------
SPORTMART #44 - ANNUAL
Cynthia (708) 966-1700
- ----------------------------------------------------------------------------------------------------------------------------
STYLES FOR LESS #24 58,335.00 54,171.00 54,920.00 46,735.00 53,495.00
Jennifer Espinozoa (714) 774-1010
- ----------------------------------------------------------------------------------------------------------------------------
SWENSEN'S ICE CREAM (PRD Enterprises) 15,179.58 15,922.07 17,581.62 19,245.43 21,658.71 21,269.22
Ross 592-4053/Pat 485-7823
- ----------------------------------------------------------------------------------------------------------------------------
TGI FRIDAYS #1940 - QUARTERLY 251,847.00 196,362.00 193,516.00 255,192.00 195,515.00 203,911.00
Mark Walker (602) 852-9000
- ----------------------------------------------------------------------------------------------------------------------------
TACO BELL #5583 - ANNUAL
Eva Coddington (714) 863-2123
- ----------------------------------------------------------------------------------------------------------------------------
TOGO'S - QUARTERLY 31,648.00 28,568.00 31,077.18 31,013.00 28,918.58 29,389.24
John 485-7757
- ----------------------------------------------------------------------------------------------------------------------------
TOP 10 - QUARTERLY 26,271.46 26,212.87 25,899.24 28,957.27 20,396.52 27,692.97
Lee 673-5350/Sang 428-8000
- ----------------------------------------------------------------------------------------------------------------------------
UNIVERSAL BOOT 3,469.92 3,656.30 3,067.93 3,967.85
Betty Handrich 233-6566
- ----------------------------------------------------------------------------------------------------------------------------
UNIVERSITY CLEANERS-QRTLY 11,400.00 12,300.00 11,950.00 12,200.00 11,750.00
Mr. Quach 283-6167
- ----------------------------------------------------------------------------------------------------------------------------
WAVELINES SURF SHOP 60,296.00 69,287.00 77,030.00 100,858.00 88,564.00 157,775.00
Tim 675-9696
- ----------------------------------------------------------------------------------------------------------------------------
WICKER WONDERLAND 34,750.00 63,575.00 48,716.63 49,127.67 59,280.00 49,448.38
<CAPTION>
=========================================================================================================
TENANT NAME/ SEPT. OCT. NOV. DEC. TOTAL
CONTACT & PHONE NO.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PACIFIC THEATERS 303,486.58 243,573.57 275,998.38 528,396.50 4,545,892.86
Sharon (310) 855-8437
- ---------------------------------------------------------------------------------------------------------
PARTY SAVERS 50,628.00 65,908.00 44,819.00 61,175.00 620,820.92
Tawnia 224-7300
- ---------------------------------------------------------------------------------------------------------
PAYLESS SHOES #4506 - QTRLY 57,489.62 49,737.23 51,870.08 59,600.12 594,293.07
Harold (913) 233-5171
- ---------------------------------------------------------------------------------------------------------
PLANET WRAPS (Former Guisseppes) 30,446.55 21,479.78 24,945.78 88,250.46
- ---------------------------------------------------------------------------------------------------------
PRIMO HAIR DESIGN 63,194.55 67,453.00 72,303.75 67,523.84 803,298.42
Christina 293-7421
- ---------------------------------------------------------------------------------------------------------
ROSS DRESS FOR LESS #265 - ANNUAL 4,377,624.00
Luz Sabella (510) 505-4562
- ---------------------------------------------------------------------------------------------------------
ROBIO'S 87,020.29 65,472.91 67,798.59 88,253.11 917,981.90
Betina 452-1770
- ---------------------------------------------------------------------------------------------------------
SALLY BEAUTY SUPPLY #1581 39,097.00 39,963.00 37,681.00 47,028.00 472,833.00
Michelle (817) 898-7843 - Quarterly
- ---------------------------------------------------------------------------------------------------------
SPORTMART #44 - ANNUAL 7,539,327.44
Cynthia (708) 966-1700
- ---------------------------------------------------------------------------------------------------------
STYLES FOR LESS #24 68,217.00 79,289.00 483,440.00
Jennifer Espinozoa (714) 774-1010
- ---------------------------------------------------------------------------------------------------------
SWENSEN'S ICE CREAM (PRD Enterprises) 15,768.68 10,075.91 160,463.23
Ross 592-4053/Pat 485-7823
- ---------------------------------------------------------------------------------------------------------
TGI FRIDAYS #1940 - QUARTERLY 231,178.00 177,479.00 184,187.00 158,388.00 2,488,519.00
Mark Walker (602) 852-9000
- ---------------------------------------------------------------------------------------------------------
TACO BELL #5583 - ANNUAL 0.00
Eva Coddington (714) 863-2123
- ---------------------------------------------------------------------------------------------------------
TOGO'S - QUARTERLY 24,850.00 27,331.00 24,302.00 25,541.00 337,475.90
John 485-7757
- ---------------------------------------------------------------------------------------------------------
TOP 10 - QUARTERLY 26,143.75 20,019.02 247,091.47
Lee 673-5350/Sang 428-8000
- ---------------------------------------------------------------------------------------------------------
UNIVERSAL BOOT 4,748.78 23,255.06
Betty Handrich 233-6566
- ---------------------------------------------------------------------------------------------------------
UNIVERSITY CLEANERS-QRTLY 84,500.00
Mr. Quach 283-6167
- ---------------------------------------------------------------------------------------------------------
WAVELINES SURF SHOP 81,693.00 60,103.00 103,157.00 173,452.00 1,070,008.00
Tim 675-9696
- ---------------------------------------------------------------------------------------------------------
WICKER WONDERLAND 365,499.68
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MOUNTAIN PLAZA 1996 MONTHLY SALES REPORTING
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT NAME/ % MONTHLY OPENING ANNUAL JAN. FEB.
CONTACT & PHONE NO. RENT DATE BREAKPOINT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eff. 12/1/96 Natural Breakpoint
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
============================================================================================================================
TENANT NAME/ MARCH APR. MAY JUNE JULY AUG.
CONTACT & PHONE NO.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================================
TENANT NAME/ SEPT. OCT. NOV. DEC. TOTAL
CONTACT & PHONE NO.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* CONTRACT CARPETS, BLOCKBUSTER VIDEO, USA FED CREDIT UNION, 3 DAY BLINDS,
SHAW CARPETS, WESTSTAR ESCROW, CHEVY'S, IN-N-OUT BURGER, MERVYN'S,
BLOCKBUSTER MUSIC, TEXACO DO NOT REPORT SALES.
* KMART & BARNES & NOBLE ANNUAL SALES TO BE REPORTED ON THE LEASE COMMENCEMENT
DATE.
* PAYLESS SHOESOURCE #6120 - TOTALLY THOMAS - SUBLEASE DOES NOT REPORT SALES.
* California Pizza - has until the 20th of each proceeding month.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
========================
PRO-JECT LEASE ABSTRACT
REPORT
========================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MTN PLAZA 1997 UPDATE
PROJECT DESIGNATOR: SDO7
REVISION: 7/15/97 @ 12:04
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-SUITE 12080 1 107,870 6/93 5/18 - 3.15 339,791 1.00 UNLIMITED 20,000
K MART 1 9/98 3.47 374,309
9/03 3.81 410,985
9/08 4.20 453,054
9/13 4.61 497,281
# 2-SUITE 11940 4 80,000 7/92 6/52 - 0.00 0 NATURAL
MERVYN'S 8
# 3-SUITE 11620 1 34,561 8/93 7/13 - 16.64 575,095 10.00 UNLIMITED NATURAL
PACIFIC THEATRES 1 8/98 17.64 609,656
8/01 18.69 645,945
8/04 19.82 684,999
8/07 21.00 725,781
8/10 22.26 769,328
# 4-SUITE 11690 1 40,672 11/93 10/18 - 9.44 383,944 1.00 UNLIMITED NATURAL
SPORTMART 1 11/98 10.39 422,582
11/03 11.42 464,474
# 5-SUITE 11710 1 30,973 12/93 1/09 - 12.56 389,021 1.00 UNLIMITED 25,000
CIRCUIT CITY 1 2/99 13.79 427,118 2/99 27,500
2/04 15.18 470,170 2/04 30,250
# 6-SUITE 11730 1 28,760 11/93 1/09 - 12.00 345,120 2.00 UNLIMITED NATURAL
MARSHALL'S / TJX 1 1/02 13.50 388,260
1/05 15.18 436,577
1/08 17.08 491,221
# 7-SUITE 11850 3 24,000 5/93 1/04 - 11.00 264,000 2.00 UNLIMITED 9,000
ROSS DRESS 7 5/98 12.65 303,600 5/98 10,350
1-60 14.54 348,960 2.00 UNLIMITED 11,903
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 1-SUITE 12080 CAM-OUTP-FIRE ZERO
K MART PAD TAXES ZERO
LIABILITY INS ZERO
# 2-SUITE 11940 CAM-FIRE W/10% ZERO
MERVYN'S LIABILITY INS ZERO
# 3-SUITE 11620 CAM-OUT-FIR+MG 7% ZERO
PACIFIC THEATRES CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 4-SUITE 11690 CAM-OUT-FIR+MG 12% ZERO
SPORTMART CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 5-SUITE 11710 CAM-OUTP-FIR W/6% ZERO
CIRCUIT CITY CENTER TAXES ZERO
LIABILITY INS ZERO
# 6-SUITE 11730 CAM-OUTP-FIR W/12% ZERO
MARSHALL'S / TJX CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 7-SUITE 11850 CAM-OUTP-FIR W/15% ZERO
ROSS DRESS PAD TAXES ZERO
LIABILITY INS ZERO
CAM-OUTP-FIR W/15% ZERO
PAD TAXES ZERO
LIABILITY INS ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
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>
# 8-SUITE 12060 1 22,969 8/93 1/04 - 12.00 275,628 3.00 UNLIMITED 9,188
MICHAEL'S 1 8/98 13.50 310,082 8/98 10,336
1-60 15.52 356,479 3.00 UNLIMITED 11,883
# 9-SUITE 11744 2 13,916 11/93 10/03 - 21.00 292,236 3.00 UNLIMITED 9,741
BARNES & NOBLE 6 11/98 24.15 336,071 11/98 11,202
1-60 27.77 386,447 3.00 UNLIMITED 12,883
# 10-SUITE 106 2 2,400 12/95 11/98 - 22.20 53,280 5.00 UNLIMITED NATURAL
WICKER WONDERLAND 3 12/97 24.00 57,600
# 11-SUITE 11670 2 5,000 10/94 9/04 - 19.00 95,000 NATURAL
MATTRESS DISCOUNT 5 10/99 21.85 109,250
# 12-SUITE 100 2 3,200 12/95 11/00 - 21.63 69,216 NATURAL
MOBILWORKS 4 12/97 22.39 71,648
12/98 23.17 74,144
12/99 23.98 76,736
# 13-SUITE 11688 3 1,974 7/93 6/13 - 37.99 74,992 NATURAL
TACO BELL 7 7/98 41.79 82,493
7/03 45.97 90,745
7/08 50.57 99,825
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 8-SUITE 12060 CAM-OUT+GFIR W/12% ZERO
MICHAEL'S CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CAM-OUT+GFIR W/12% ZERO
CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 9-SUITE 11744 CAM-OUT+GFIR W/15% ZERO
BARNES & NOBLE CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CAM-OUT+GFIR W/15% ZERO
CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 10-SUITE 106 CAM-OUT+GFIR+MG 15 ZERO
WICKER WONDERLAND CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 11-SUITE 11670 CAM-OUT+GFIR W/15% ZERO
MATTRESS DISCOUNT PAD TAXES ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 12-SUITE 100 CAM-OUT+GFIR W/15% ZERO
MOBILWORKS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 13-SUITE 11688 CAM-OUTP-FIR W/15% ZERO
TACO BELL PAD TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 3
<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>
# 14-SUITE 11602 3 5,500 7/94 6/14 - 16.36 89,980 NATURAL
CALIFORNIA PIZZA 7 7/99 18.00 99,000
7/04 19.80 108,900
7/09 21.78 119,790
# 15-SUITE 11650 3 6,162 9/94 8/04 - 13.79 84,974 3.00 UNLIMITED 3,500
FRIDAY'S 7 9/99 14.61 90,027 9/99 3,706
1-60 15.42 95,018 3.00 UNLIMITED 3,912
# 16-SUITE 150 2 6,048 12/93 1/99 - 19.32 116,847 NATURAL
BLOCKBUSTER VIDEO 5
1-60 22.22 134,387 NATURAL
2-60 25.55 154,526 NATURAL
# 17-SUITE 158 2 2,658 7/97 6/07 - 26.28 69,852 5.00 UNLIMITED NATURAL
THAI GO 3 7/99 27.20 72,298
7/00 28.15 74,823
7/01 29.14 77,454
7/02 30.16 80,165
7/03 31.21 82,956
7/04 32.30 85,853
7/05 33.44 88,884
7/06 34.61 91,993
# 18-SUITE 190 2 2,065 6/94 5/99 - 27.00 55,755 NATURAL
USA FED CREDIT 3 6/98 28.08 57,985
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 14-SUITE 11602 CAM-OUT-FIR+MG 15% ZERO
CALIFORNIA PIZZA PAD TAXES ZERO
LIABILITY INS ZERO
# 15-SUITE 11650 CAM-OUTP-FIR W/6% ZERO
FRIDAY'S PAD TAXES ZERO
LIABILITY INS ZERO
CAM-OUTP-FIR W/6% ZERO
PAD TAXES ZERO
LIABILITY INS ZERO
CPI ADJ INDEX:CPI 100.00%
# 16-SUITE 150 CAM-OUT+GFIR W/15% ZERO
BLOCKBUSTER VIDEO CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CAM-OUT+GFIR W/15% ZERO
CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CAM-OUT+GFIR W/15% ZERO
CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 17-SUITE 158 CAM-OUT+GFIR+MG 15 ZERO
THAI GO CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 18-SUITE 190 CAM-OUT+GFIR+MG 15 ZERO
USA FED CREDIT CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 4
<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>
# 19-SUITE 192 2 1,200 9/94 8/99 - 24.72 29,664 5.00 UNLIMITED NATURAL
TOGO'S 3
# 20-SUITE 12004 2 14,000 8/94 7/99 - 18.00 252,000 NATURAL
BLOCKBUSTER MUSIC 6
1-60 20.71 289,940 NATURAL
# 21-SUITE 260 2 2,800 1/94 12/03 - 26.71 74,788 5.00 UNLIMITED NATURAL
RUBIO'S RESTAURANT 3 1/98 28.32 79,296
1/00 30.01 84,028
1/02 31.81 89,068
# 22-SUITE 264 2 1,200 1/94 12/03 - 26.29 31,548 NATURAL
GARDEN STATE BAGEL 3
# 23-SUITE 266 2 1,200 1/94 12/98 - 27.78 33,336 NATURAL
UNIV CLEANERS 3 1/98 29.17 35,004
# 24-SUITE 11880 3 2,912 9/93 8/13 - 27.47 79,993 NATURAL
IN N OUT BURGER 7 9/98 30.22 88,001
# 25-SUITE 12120 3 2,694 6/94 5/09 - 31.55 84,996 5.00 UNLIMITED NATURAL
DILMAX 7
# 26-SUITE 120 2 1,356 4/94 3/04 - 27.02 36,639 5.00 UNLIMITED NATURAL
PLANET WRAPS 3
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 19-SUITE 192 CAM-OUT+GFIR W/15% ZERO
TOGO'S CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 20-SUITE 12004 CAM-OUT+GFIR W/15% ZERO
BLOCKBUSTER MUSIC CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CAM-OUT+GFIR W/15% ZERO
CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 21-SUITE 260 CAM-OUT+GFIR+MG 15 ZERO
RUBIO'S RESTAURANT CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 22-SUITE 264 CAM-OUT+GFIR+MG 15 ZERO
GARDEN STATE BAGEL CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 23-SUITE 266 CAM-OUT+GFIR+MG 15 ZERO
UNIV CLEANERS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 24-SUITE 11880 CAM-OUT-FIR+MG 15% ZERO
IN N OUT BURGER PAD TAXES ZERO
LIABILITY INS ZERO
# 25-SUITE 12120 CAM-OUT-FIR+MG 15% ZERO
OILMAX PAD TAXES ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 26-SUITE 120 CAM-OUT+GFIR+MG 15 ZERO
PLANET WRAPS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 5
<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>
# 27-SUITE 122 2 1,627 4/94 3/04 - 25.65 41,733 NATURAL
LITTLE TOKYO 3 4/98 26.55 43,197
4/99 27.48 44,710
4/00 28.44 46,272
4/01 29.44 47,899
4/02 30.47 49,575
4/03 31.54 51,316
# 28-SUITE 124 2 1,356 4/94 3/04 - 27.02 36,639 NATURAL
ATHENS MARKET CAFE 3 4/98 28.10 38,104
4/99 29.22 39,622
4/00 30.39 41,209
4/01 31.61 42,863
4/02 32.71 44,355
4/03 34.02 46,131
# 29-SUITE 308 2 1,800 1/95 12/97 - 22.33 40,194 NATURAL
WESTAR ESCROW 3
# 30-SUITE 11610 2 4,914 1/94 12/03 - 22.50 110,565 6.00 UNLIMITED 1,106
METROPOLIS 4 1/00 24.50 120,393 1/00 1,204
# 31-SUITE 300 2 4,800 10/96 9/01 - 20.00 96,000 NATURAL
SHAW CARPETS 4
# 32-SUITE 11704 2 1,950 11/94 10/99 - 22.71 44,285 NATURAL
DIAMONDS 3 11/97 23.62 46,059
11/98 24.57 47,912
# 33-SUITE 126 2 1,085 1/94 12/03 - 25.85 28,047 6.00 UNLIMITED NATURAL
SWENSEN ICE CREAM 3 1/98 26.75 29,024
1/99 27.69 30,044
1/00 28.66 31,096
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 27-SUITE 122 CAM-OUT+GFIR+MG 15 ZERO
LITTLE TOKYO CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 28-SUITE 124 CAM-OUT+GFIR W/15% ZERO
ATHENS MARKET CAFE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 29-SUITE 308 CAM-OUT+GFIR+MG 15 ZERO
WESTAR ESCROW CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 30-SUITE 11610 CAM-OUT+GFIR W/15% ZERO
METROPOLIS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 31-SUITE 300 CAM-OUT+GFIR+MG 15 ZERO
SHAW CARPETS CENTER TAXES ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 32-SUITE 11704 CAM-OUT+GFIR+MG 15 ZERO
DIAMONDS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 33-SUITE 126 CAM-OUT+GFIR+MG 15 ZERO
SWENSEN ICE CREAM CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 6
<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>
# 34-SUITE 130 2 1,500 8/94 7/98 - 23.40 35,100 NATURAL
CONTRACT CARPET 3 8/97 24.60 36,900
# 35-SUITE 132 2 1,985 12/93 11/07 - 24.29 48,216 5.00 UNLIMITED NATURAL
WAVELINES SURF 3 12/98 25.14 49,903
12/99 26.02 51,650
12/00 26.93 53,456
12/01 27.87 55,322
12/02 28.85 57,267
12/03 29.86 59,272
12/04 30.90 61,337
12/05 31.99 63,500
12/06 33.10 65,704
# 36-SUITE 170 2 2,174 10/95 9/02 - 21.63 47,024 NATURAL
CARMEL MTN DENTAL 3 10/97 22.39 48,676
10/98 23.17 50,372
10/99 23.98 52,133
10/00 24.82 53,959
10/01 25.69 55,850
# 37-SUITE 174 2 1,073 12/95 11/05 - 22.87 24,540 NATURAL
CARMEL MTN ORTHO 3 12/97 23.67 25,398
12/98 24.49 26,278
12/99 25.35 27,201
12/00 26.24 28,156
12/01 27.16 29,143
12/02 28.11 30,162
12/03 29.09 31,214
12/04 30.11 32,308
# 38-SUITE 176 2 1,100 11/93 10/99 - 24.70 27,170 NATURAL
DEPARTURES TRAVEL 3 11/97 26.09 28,699
11/98 27.55 30,305
# 39-SUITE 180 2 1,200 9/94 8/97 - 24.91 29,892 6.00 UNLIMITED NATURAL
LITTLE COTTAGE 3
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ------------------- ---------- --------------
# 34-SUITE 130 CAM-OUT+GFIR+MG 15 ZERO
CONTRACT CARPET CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 35-SUITE 132 CAM-OUT+GFIR+MG 15 ZERO
WAVELINES SURF CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 36-SUITE 170 CAM-OUT+GFIR+MG 15 ZERO
CARMEL MTN DENTAL CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 37-SUITE 174 CAM-OUT+GFIR W/15% ZERO
CARMEL MTN ORTHO CENTER TAXES W/15% ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 38-SUITE 176 CAM-OUT+GFIR+MG 15 ZERO
DEPARTURES TRAVEL CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 39-SUITE 180 CAM-OUT+GFIR+MG 15 ZERO
LITTLE COTTAGE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 7
<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>
# 40-SUITE 182 2 1,830 9/93 8/03 -- 28.20 51,606 5.00 UNLIMITED NATURAL
JAVA CENTRALE 3 9/00 33.60 61,488
# 41-SUITE 210 2 3,500 12/93 11/03 -- 19.20 67,200 4.00 UNLIMITED NATURAL
STYLES FOR LESS 4 12/98 20.52 71,820
# 42-SUITE 212 2 2,500 11/93 10/98 -- 23.60 59,000 4.00 UNLIMITED NATURAL
PAYLESS SHOESOURCE 3
# 43-SUITE 214 2 6,333 5/94 4/99 -- 20.88 132,233 7.00 UNLIMITED NATURAL
PARTY SAVERS 5 5/98 21.61 136,856
# 44-SUITE 220 2 1,200 3/95 2/00 -- 22.88 27,456 NATURAL
ARTVENTURES 3
# 45-SUITE 226 2 1,500 1/94 12/98 -- 21.96 32,940 4.00 UNLIMITED NATURAL
SALLY BEAUTY 3
# 46-SUITE 194 2 3,622 7/94 6/04 -- 24.72 89,536 6.00 UNLIMITED NATURAL
PRIMO HAR DESIGN 4
# 47-SUITE 228 2 900 5/96 4/01 -- 22.80 20,520 6.00 UNLIMITED NATURAL
NIGHT & DAY FORMAL 2 5/98 23.71 21,339
5/99 24.66 22,194
5/00 25.65 23,085
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 40-SUITE 182 CAM-OUT+GFIR+MG 15 ZERO
JAVA CENTRALE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 41-SUITE 210 CAM-OUT+GFIR+MG 15 ZERO
STYLES FOR LESS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 42-SUITE 212 CAM-OUT+GFIR W/12% ZERO
PAYLESS SHOESOURCE CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 43-SUITE 214 CAM-OUT+GFIR+MG 15 ZERO
PARTY SAVERS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 44-SUITE 220 CAM-OUT+GFIR+MG 15 ZERO
ARTVENTURES CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 45-SUITE 226 CAM-OUT+GFIR+MG 15 ZERO
SALLY BEAUTY CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 46-SUITE 194 CAM-OUT+GFIR+MG 11 ZERO
PRIMO HAR DESIGN CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 47-SUITE 228 CAM-OUT+GFIR+MG 15 ZERO
NIGHT & DAY FORMAL CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 8
<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>
# 48-SUITE 268 2 1,800 2/94 1/04 -- 25.96 46,728 4.00 UNLIMITED NATURAL
CHOP HOUSE 3 2/98 27.00 48,600
2/99 28.08 50,544
2/00 29.20 52,560
2/01 30.37 54,666
2/02 31.58 56,844
2/03 32.85 59,130
# 49-SUITE 230 2 1,200 5/94 4/00 -- 26.00 31,200 NATURAL
TOP TEN ATHLETIC 3
# 50-SUITE 178 2 1,200 6/94 5/99 -- 25.52 30,624 4.00 UNLIMITED NATURAL
JUICE CLUB 3 6/98 26.67 32,004
# 51-SUITE 232 2 2,400 1/94 12/00 -- 24.89 59,736 5.00 UNLIMITED NATURAL
IMPORTS 1 3 1/98 25.76 61,824
1/99 26.66 63,984
1/00 27.59 66,216
# 52-SUITE 236 2 1,200 2/94 1/99 -- 24.50 29,400 6.00 UNLIMITED NATURAL
GENERAL NUTRITION 3
# 53-SUITE 240 2 2,400 12/93 11/03 -- 27.84 66,816 NATURAL
JENNIFER CONVERT 3 12/00 31.96 76,704
# 54-SUITE 244 2 1,200 11/93 10/98 -- 24.92 29,904 NATURAL
3 DAY BLINDS 3 11/97 25.79 30,948
# 55-SUITE 134 2 1,500 3/94 2/98 -- 22.36 33,540 NATURAL
ARTIFEX 3
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 48-SUITE 268 CAM-OUT+GFIR+MG 15 ZERO
CHOP HOUSE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 49-SUITE 230 CAM-OUT+GFIR+MG 15 ZERO
TOP TEN ATHLETIC CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 50-SUITE 178 CAM-OUT+GFIR+MG 15 ZERO
JUICE CLUB CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 51-SUITE 232 CAM-OUT+GFIR+MG 15 ZERO
IMPORTS 1 CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 52-SUITE 236 CAM-OUT+GFIR+MG 15 ZERO
GENERAL NUTRITION CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 53-SUITE 240 CAM-OUT+GFIR+MG 15 ZERO
JENNIFER CONVERT CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 54-SUITE 244 CAM-OUT+GFIR W/15% ZERO
3 DAY BLINDS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 55-SUITE 134 CAM-OUT+GFIR+MG 15 ZERO
ARTIFEX CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 9
<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>
# 56-SUITE 246 2 2,550 9/93 8/98 -- 22.36 57,018 6.00 UNLIMITED NATURAL
UNIVERSAL BOOT 3 9/97 23.14 59,007
# 57-SUITE 248 2 2,550 1/96 12/00 -- 21.63 55,156 5.00 UNLIMITED NATURAL
OLDE MILL BREAD CO 3 1/98 22.39 57,095
1/99 23.17 59,084
1/00 23.98 61,149
# 58-SUITE 290 2 1,200 12/94 11/99 -- 22.28 26,736 NATURAL
CARMEL PLAZA CHIRO 3 12/97 23.06 27,672
12/98 23.87 28,644
# 59-SUITE 292 2 1,200 2/95 1/00 -- 22.35 26,820 6.00 UNLIMITED NATURAL
CARMEL PLAZA OPT 3 2/98 23.13 27,756
2/99 23.94 28,728
# 60-SUITE 294 2 1,200 10/93 9/03 -- 25.65 30,780 6.00 UNLIMITED NATURAL
HAIRCUT PLACE 3 10/97 26.42 31,704
10/98 27.34 32,808
10/99 28.30 33,960
10/00 29.29 35,148
10/01 30.31 36,372
10/02 31.38 37,656
# 61-SUITE 296 2 1,500 11/93 10/98 -- 24.26 36,390 NATURAL
HALLMARK POOLS 3 11/97 25.11 37,665
# 62-SUITE 11846 4 3,054 1/97 12/39 -- 0.00 0 NATURAL
BOSTON MARKET 8
# 63-SUITE 11676 2 100 12/94 12/97 -- 84.42 8,442 NATURAL
FLOWERS A LA CARTE 2
# 64-SUITE 11630 4 6,598 7/93 2/40 -- 0.00 0 NATURAL
CHEVY'S 8
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 56-SUITE 246 CAM-OUT+GFIR+MG 15 ZERO
UNIVERSAL BOOT CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 57-SUITE 248 CAM-OUT+GFIR+MG 15 ZERO
OLDE MILL BREAD CO CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
# 58-SUITE 290 CAM-OUT+GFIR+MG 15 ZERO
CARMEL PLAZA CHIRO CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 59-SUITE 292 CAM-OUT+GFIR+MG 15 ZERO
CARMEL PLAZA OPT CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 60-SUITE 294 CAM-OUT+GFIR+MG 15 ZERO
HAIRCUT PLACE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 61-SUITE 296 CAM-OUT+GFIR+MG 15 ZERO
HALLMARK POOLS CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 62-SUITE 11846 PAD TAXES ZERO
BOSTON MARKET
# 63-SUITE 11676 CAM-OUT+GFIR W/15% ZERO
FLOWERS A LA CARTE CENTER TAXES W/15% ZERO
LIAB INS W/15% ZERO
PROPERTY INS W/15% ZERO
# 64-SUITE 11630 CAM-FIRE ZERO
CHEVY'S
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 10
<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>
# 65-SUITE 12174 4 2,538 7/93 2/40 -- 0.00 0 NATURAL
TEXACO 8
# 66-SUITE 222 2 2,700 11/93 10/03 -- 23.70 63,990 4.00 UNLIMITED NATURAL
PAYLESS SHOE 3 11/98 27.85 75,195
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 65-SUITE 12174 CAM-FIRE ZERO
TEXACO
# 66-SUITE 222 CAM-OUT+GFIR W/12% ZERO
PAYLESS SHOE CENTER TAXES ZERO
PROPERTY INSURANCE ZERO
LIABILITY INS ZERO
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
=================================
PRO-JECT ASSUMPTION REPORT
=================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MTN PLAZA 1997 UPDATE
PROJECT DESIGNATOR: 5D07
REVISION: 7/16/97 @ 17:35
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF CARMEL MTN PLAZA 1997 UPDATE BEGINNING 7/1997
FOR 12 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
TGLA
DESCRIBED AS TOTAL CENTER GLA
1997 VALUE - 532,129
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA
1997 VALUE - 530,500
1998 VALUE - 529,225
1999 VALUE - 527,013
2000 VALUE - 530,508
2001 VALUE - 528,933
2002 VALUE - 531,486
2003 VALUE - 528,942
2004 VALUE - 515,306
2005 VALUE - 529,877
2006 VALUE - 529,688
2007 VALUE - 530,099
2008 VALUE - 527,658
THEREAFTER - CONSTANT
CEXC
DESCRIBED AS GLA EXCLUDED FOR CAM ALLOCATION (MERVYN'S, CHEVY'S, TEXACO AND
BOSTON MARKET)
1997 VALUE - 95,681
THEREAFTER - CONSTANT
CMGL
DESCRIBED AS GLA FOR CAM ALLOCATION
+100.0% OF TGLA-100.0% OF CEXC
TEXC
DESCRIBED AS GLA EXC FOR TAX ALLOC (KMART, MERVYN, ROSS, MATTRESS DISC, TACO
BELL, CALIF PIZZA, FIRDAY'S, IN N OUT, OILMAX, COCO, CHVY, TEX)
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 2
1997 VALUE - 251,793
THEREAFTER - CONSTANT
TXGL
DESCRIBED AS GLA FOR TAX ALLOCATION
+100.0% OF TGLA-100.0% OF TEXC
PIEX
DESCRIBED AS GLA EXLCUDED FOR PROP INS ALLOCATION (KMART, MERVYN'S, ROSS,
CALIF PIZZA, FRIDAY'S, IN N OUT, CHEVY'S, TEXACO)
1997 VALUE - 273,098
THEREAFTER - CONSTANT
PIGL
DESCRIBED AS GLA FOR PROP INS ALLOCATION
+100.0% OF TGLA-100.0% OF PIEX
LIEX
DESCRIBED AS GLA EXCLUDED FOR LIAB INS ALLOCATION (CHEVY'S, TEXACO, BOS MKT)
1997 VALUE - 15,681
THEREAFTER - CONSTANT
LIGL
DESCRIBED AS GLA FOR LIAB INS ALLOCATION
+100.0% OF TGLA-100.0% OF LIEX
GROWTH RATES
GREN
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GEXP
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GSAL
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GCPI
1997 VALUE - 3.50
THEREAFTER - CONSTANT
GTAX
1997 VALUE - 2.00
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 3
THEREAFTER - CONSTANT
MARKET RATES
STRU
1997 VALUE - 0.10
THEREAFTER - CONSTANT
MRT1
1997 VALUE - 18.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MRT2
1997 VALUE - 20.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MRT3
1997 VALUE - 22.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MRT4
1997 VALUE - 24.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MRT5
1997 VALUE - 26.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MRT6
1997 VALUE - 28.00
THEREAFTER - GROWING AT GROWTH RATE GREN
CPI
1997 VALUE - 100
THEREAFTER - GROWING AT GROWTH RATE GCPI
NTTI
1997 VALUE - 5.00
THEREAFTER - GROWING AT GROWTH RATE GEXP
BLTI
1997 VALUE - 2.50
THEREAFTER - GROWING AT GROWTH RATE GEXP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 4
MISCELLANEOUS INCOMES
NONE
EXPENSES
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 311,856
1998 VALUE - 316,537
1999 VALUE - 328,418
2000 VALUE - 343,125
2001 VALUE - 348,934
2002 VALUE - 362,361
2003 VALUE - 365,984
2004 VALUE - 373,015
2005 VALUE - 424,933
2006 VALUE - 436,876
2007 VALUE - 450,288
2008 VALUE - 462,670
THEREAFTER - CONSTANT
TOTAL CENTER CAM , REFERRED TO AS CAME
DESCRIBED AS TOTAL CENTER CAM
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 568,500
THEREAFTER - GROWING AT GROWTH RATE GEXP
OUTPARCEL CONTRIB , REFERRED TO AS OUTP
DESCRIBED AS NON OWNED TENANT CONTRIBUTIONS (MERVYN'S, CHEVY'S, TEXACO)
AN INFORMATIONAL EXPENSE
1997 VALUE - 87,664
THEREAFTER - GROWING AT GROWTH RATE GEXP
FIRE PROTECTION , REFERRED TO AS FIRE
DESCRIBED AS FIRE PROTECTION
AN INFORMATIONAL EXPENSE
1997 VALUE - 29,460
THEREAFTER - GROWING AT GROWTH RATE GEXP
GROSSED UP FIRE , REFERRED TO AS GFIR
DESCRIBED AS GROSSED UP FIRE PROTECTION (/.2872)
AN INFORMATIONAL EXPENSE
1997 VALUE - 102,577
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 5
THEREAFTER - GROWING AT GROWTH RATE GEXP
CAM-FIRE , REFERRED TO AS 1CAM
DESCRIBED AS CAM LESS FIRE PROTECTION
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF FIRE
CAM-FIRE W/10% , REFERRED TO AS 1C10
DESCRIBED AS CAM LESS FIRE PROTECTION W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 1CAM
CAM-OUTP-FIRE , REFERRED TO AS 2CAM
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF OUTP
- -100.0% OF FIRE
CAM-OUTP-FIR W/6% , REFERRED TO AS 2C06
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE W/6% ADMIN
AN INFORMATIONAL EXPENSE
+106.0% OF 2CAM
CAM-OUTP-FIR W/12%, REFERRED TO AS 2C12
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF 2CAM
CAM-OUTP-FIR W/15%, REFERRED TO AS 2C15
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 2CAM
CAM-OUT-FIR+MG , REFERRED TO AS 3CAM
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE PLUS MGMT FEES
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF OUTP
- -100.0% OF FIRE+100.0% OF MGMT
CAM-OUT-FIR+MG 7% , REFERRED TO AS 3C07
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE PLUS MGMT FEES W/7% ADMIN
AN INFORMATIONAL EXPENSE
+107.0% OF 3CAM
CAM-OUT-FIR+MG 12%, REFERRED TO AS 3C12
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE PLUS MGMT FEES W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF 3CAM
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 6
CAM-OUT-FIR+MG 15%, REFERRED TO AS 3C15
DESCRIBED AS CAM LESS OUTP CONT LESS FIRE PLUS MGMT FEES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 3CAM
CAM-OUT+GFIR , REFERRED TO AS 4CAM
DESCRIBED AS CAM LESS OUTP CONT PLUS GROSS FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF OUTP
- -100.0% OF FIRE+100.0% OF GFIR
CAM-OUT+GFIR W/12%, REFERRED TO AS 4C12
DESCRIBED AS CAM LESS OUTP CONT PLUS GROSS FIRE W/12% ADMIN FEE
AN INFORMATIONAL EXPENSE
+112.0% OF 4CAM
CAM-OUT+GFIR W/15%, REFERRED TO AS 4C15
DESCRIBED AS CAM LESS OUTP CONT PLUS GROSS FIRE W/15% ADMIN FEE
AN INFORMATIONAL EXPENSE
+115.0% OF 4CAM
CAM-OUT+GFIR+MG , REFERRED TO AS 5CAM
DESCRIBED AS CAM LESS OUTP CONT PLUS GFIR AND MGMT FEES
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF OUTP
- -100.0% OF FIRE+100.0% OF GFIR
+100.0% OF MGMT
CAM-OUT+GFIR+MG 11, REFERRED TO AS 5C11
DESCRIBED AS CAM LESS OUTP CONT PLUS GFIR AND MGMT FEES W/11% ADMIN
AN INFORMATIONAL EXPENSE
+111.0% OF 5CAM
CAM-OUT+GFIR+MG 15, REFERRED TO AS 5C15
DESCRIBED AS CAM LESS OUTP CONT PLUS GFIR AND MGMT FEES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 5CAM
TOTAL RE TAXES , REFERRED TO AS TTAX
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF CTAX+100.0% OF PTAX
CENTER TAXES , REFERRED TO AS CTAX
AN INFORMATIONAL EXPENSE
1997 VALUE - 645,404
THEREAFTER - GROWING AT GROWTH RATE GTAX
PAD TAXES , REFERRED TO AS PTAX
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 7
AN INFORMATIONAL EXPENSE
1997 VALUE - 230,043
THEREAFTER - GROWING AT GROWTH RATE GTAX
CENTER TAXES W/15%, REFERRED TO AS CT15
AN INFORMATIONAL EXPENSE
+115.0% OF CTAX
PROPERTY INSURANCE, REFERRED TO AS PINS
AN INFORMATIONAL EXPENSE
1997 VALUE - 109,464
THEREAFTER - GROWING AT GROWTH RATE GEXP
LIABILITY INS , REFERRED TO AS LINS
AN INFORMATIONAL EXPENSE
1997 VALUE - 115,350
THEREAFTER - GROWING AT GROWTH RATE GEXP
TOTAL CENTER INS , REFERRED TO AS INSE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PINS+100.0% OF LINS
LIAB INS W/15% , REFERRED TO AS LI15
AN INFORMATIONAL EXPENSE
+115.0% OF LINS
PROPERTY INS W/15%, REFERRED TO AS P115
AN INFORMATIONAL EXPENSE
+115.0% OF PINS
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 3.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF GROSS RENTAL INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 8
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 6.000% OF TOTAL RENT
STANDARD METHOD #2 - 3.000% OF TOTAL RENT
STANDARD METHOD #3 - 4.500% 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
CUSHMAN &
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---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 9
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
STRUCTURAL RESERVE
1997 VALUE - 66,372
THEREAFTER - GROWING AT GROWTH RATE GEXP
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - ANCHORS
2 - IN LINE SHOPS
3 - OUTPARCEL (OWNED)
4 - OUTPARCEL (SOLD)
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - ANCHORS
2 - IN LINE < 1000
3 - IN LINE 1000-2999
4 - IN LINE 3000-4999
5 - IN LINE 5000-10000
6 - IN LINE > 10000
7 - OUTPARCEL (OWNED)
8 - OUTPARCEL (SOLD)
COST CENTERS
- ------------
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
SALES VOLUME PROFILE
- --------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 10
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
- -----------------
CAM-OUT+GFIR+MG 15, REFERRED TO AS CM15
ASSIGNED TO COST CENTER 1 - CAM
PRO RATA SHARE RECOVERY OF EXPENSE 5C15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CMGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CENTER TAXES W/15%, REFERRED TO AS TX15
ASSIGNED TO COST CENTER 2 - REAL ESTATE TAXES
PRO RATA SHARE RECOVERY OF EXPENSE CT15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TXGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIAB INS W/15% , REFERRED TO AS LI15
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE LIGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
PROPERTY INS W/15%, REFERRED TO AS PI15
ASSIGNED TO COST CENTER 3 - INSURANCE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 11
PRO RATA SHARE RECOVERY OF EXPENSE PI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE PIGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GG15
GLOBAL GROUPING
GLOBAL RECOVERY CM15
GLOBAL RECOVERY TX15
GLOBAL RECOVERY LI15
GLOBAL RECOVERY PI15
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
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
====================================
PRO-JECT TENANT REGISTER REPORT
====================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CARMEL MTN PLAZA 1997 UPDATE
PROJECT DESIGNATOR: SD07
REVISION: 7/15/97 @ 12:04
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
# 1 - SUITE 12080 K MART 107,870 6/1993 5/2018
# 2 - SUITE 11940 MERVYN'S 80,000 7/1992 6/2052
# 3 - SUITE 11620 PACIFIC THEATRES 34,561 8/1993 7/2013
# 4 - SUITE 11690 SPORTMART 40,672 11/1993 10/2018
# 5 - SUITE 11710 CIRCUIT CITY 30,973 12/1993 1/2009
# 6 - SUITE 11730 MARSHALL'S / TJX 28,760 11/1993 1/2009
# 7 - SUITE 11850 ROSS DRESS 24,000 5/1993 1/2004
# 8 - SUITE 12060 MICHAEL'S 22,969 8/1993 1/2004
# 9 - SUITE 11744 BARNES & NOBLE 13,916 11/1993 10/2003
# 10 - SUITE 106 WICKER WONDERLAND 2,400 12/1995 11/1998
# 11 - SUITE 11670 MATTRESS DISCOUNT 5,000 10/1994 9/2004
# 12 - SUITE 100 MOBILWORKS 3,200 12/1995 11/2000
# 13 - SUITE 11688 TACO BELL 1,974 7/1993 6/2013
# 14 - SUITE 11602 CALIFORNIA PIZZA 5,500 7/1994 6/2014
# 15 - SUITE 11650 FRIDAY'S 6,162 9/1994 8/2004
# 16 - SUITE 150 BLOCKBUSTER VIDEO 6,048 12/1993 1/1999
# 17 - SUITE 158 THAI GO 2,658 7/1997 6/2007
# 18 - SUITE 190 USA FED CREDIT 2,065 6/1994 5/1999
# 19 - SUITE 192 TOGO'S 1,200 9/1994 8/1999
# 20 - SUITE 12004 BLOCKBUSTER MUSIC 14,000 8/1994 7/1999
# 21 - SUITE 260 RUBIO'S RESTAURANT 2,800 1/1994 12/2003
# 22 - SUITE 264 GARDEN STATE BAGEL 1,200 1/1994 12/2003
# 23 - SUITE 266 UNIV CLEANERS 1,200 1/1994 12/1998
# 24 - SUITE 11880 IN N OUT BURGER 2,912 9/1993 8/2013
# 25 - SUITE 12120 OILMAX 2,694 6/1994 5/2009
# 26 - SUITE 120 PLANET WRAPS 1,356 4/1994 3/2004
# 27 - SUITE 122 LITTLE TOKYO 1,627 4/1994 3/2004
# 28 - SUITE 124 ATHENS MARKET CAFE 1,356 4/1994 3/2004
# 29 - SUITE 308 WESTAR ESCROW 1,800 1/1995 12/1997
# 30 - SUITE 11610 METROPOLIS 4,914 1/1994 12/2003
# 31 - SUITE 300 SHAW CARPETS 4,800 10/1996 9/2001
# 32 - SUITE 11704 DIAMONDS 1,950 11/1994 10/1999
# 33 - SUITE 126 SWENSEN ICE CREAM 1,085 1/1994 12/2003
# 34 - SUITE 130 CONTRACT CARPET 1,500 8/1994 7/1998
# 35 - SUITE 132 WAVELINES SURF 1,985 12/1993 11/2007
# 36 - SUITE 170 CARMEL MTN DENTAL 2,174 10/1995 9/2002
# 37 - SUITE 174 CARMEL MTN ORTHO 1,073 12/1995 11/2005
# 38 - SUITE 176 DEPARTURES TRAVEL 1,100 11/1993 10/1999
# 39 - SUITE 180 LITTLE COTTAGE 1,200 9/1994 8/1997
# 40 - SUITE 182 JAVA CENTRALE 1,830 9/1993 8/2003
# 41 - SUITE 210 STYLES FOR LESS 3,500 12/1993 11/2003
# 42 - SUITE 212 PAYLESS SHOESOURCE 2,500 11/1993 10/1998
# 43 - SUITE 214 PARTY SAVERS 6,333 5/1994 4/1999
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CARMEL MTN PLAZA 1997 UPDATE PAGE 2
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
# 44 - SUITE 220 ARTVENTURES 1,200 3/1995 2/2000
# 45 - SUITE 226 SALLY BEAUTY 1,500 1/1994 12/1998
# 46 - SUITE 194 PRIMO HAR DESIGN 3,622 7/1994 6/2004
# 47 - SUITE 228 NIGHT & DAY FORMAL 900 5/1996 4/2001
# 48 - SUITE 268 CHOP HOUSE 1,800 2/1994 1/2004
# 49 - SUITE 230 TOP TEN ATHLETIC 1,200 5/1994 4/2000
# 50 - SUITE 178 JUICE CLUB 1,200 6/1994 5/1999
# 51 - SUITE 232 IMPORTS 1 2,400 1/1994 12/2000
# 52 - SUITE 236 GENERAL NUTRITION 1,200 2/1994 1/1999
# 53 - SUITE 240 JENNIFER CONVERT 2,400 12/1993 11/2003
# 54 - SUITE 244 3 DAY BLINDS 1,200 11/1993 10/1998
# 55 - SUITE 134 ARTIFEX 1,500 3/1994 2/1998
# 56 - SUITE 246 UNIVERSAL BOOT 2,550 9/1993 8/1998
# 57 - SUITE 248 OLDE MILL BREAD CO 2,550 1/1996 12/2000
# 58 - SUITE 290 CARMEL PLAZA CHIRO 1,200 12/1994 11/1999
# 59 - SUITE 292 CARMEL PLAZA OPT 1,200 2/1995 1/2000
# 60 - SUITE 294 HAIRCUT PLACE 1,200 10/1993 9/2003
# 61 - SUITE 296 HALLMARK POOLS 1,500 11/1993 10/1998
# 62 - SUITE 11846 BOSTON MARKET 3,054 1/1997 12/2039
# 63 - SUITE 11676 FLOWERS A LA CARTE 100 12/1994 12/1997
# 64 - SUITE 11630 CHEVY'S 6,598 7/1993 2/2040
# 65 - SUITE 12174 TEXACO 2,538 7/1993 2/2040
# 66 - SUITE 222 PAYLESS SHOE 2,700 11/1993 10/2003
-------
66 TENANTS 532,129
=======
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PRO-JECT LEASE EXPIRATION
REPORT
====================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
CARMEL MTN PLAZA 1997 UPDATE
PROJECT DESIGNATOR: SD07
REVISION: 7/15/97 @ 12:04
EXPIRATION REPORT
YEARS 1998 TO 2009, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 39-SUITE 180 INITIAL
LITTLE COTTAGE 1,200 8/1997 24.91 5.68 30.59 26.00
# 29-SUITE 308 INITIAL
WESTAR ESCROW 1,800 12/1997 22.33 5.67 28.01 26.91
# 63-SUITE 11676 INITIAL
FLOWERS A LA CARTE 100 12/1997 84.48 4.80 89.28 18.63
# 55-SUITE 134 INITIAL
ARTIFEX 1,500 2/1998 22.36 5.82 28.18 26.91
----- ----- ---- ----- -----
4 FY 98 EXPIRATIONS 4,600 24.37 5.70 30.07 26.49
# 34-SUITE 130 INITIAL
CONTRACT CARPET 1,500 7/1998 24.60 5.82 30.42 26.91
# 56-SUITE 246 INITIAL
UNIVERSAL BOOT 2,550 8/1998 23.14 5.81 28.95 24.84
# 54-SUITE 244 INITIAL
3 DAY BLINDS 1,200 10/1998 25.79 4.98 30.77 26.91
# 61-SUITE 296 INITIAL
HALLMARK POOLS 1,500 10/1998 25.11 5.82 30.93 26.91
# 42-SUITE 212 INITIAL
PAYLESS SHOESOURCE 2,500 10/1998 23.60 4.49 28.09 24.84
# 10-SUITE 106 INITIAL
WICKER WONDERLAND 2,400 11/1998 24.00 5.82 29.82 24.84
# 45-SUITE 226 INITIAL
SALLY BEAUTY 1,500 12/1998 21.96 5.82 27.78 27.85
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PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 23-SUITE 266 INITIAL
UNIV CLEANERS 1,200 12/1998 29.17 5.81 34.98 27.85
# 52-SUITE 236 INITIAL
GENERAL NUTRITION 1,200 1/1999 24.50 5.98 30.48 27.85
# 43-SUITE 214 INITIAL
PARTY SAVERS 6,333 4/1999 21.61 5.98 27.59 21.42
# 18-SUITE 190 INITIAL
USA FED CREDIT 2,065 5/1999 28.08 5.98 34.06 25.71
# 50-SUITE 178 INITIAL
JUICE CLUB 1,200 5/1999 31.89 5.98 37.87 27.85
------ ----- ---- ----- -----
12 FY 99 EXPIRATIONS 25,148 24.32 5.71 30.03 25.01
------ ----- ---- ----- -----
16 CUMULATIVE EXPS 29,748 24.33 5.71 30.04 25.24
# 19-SUITE 192 INITIAL
TOGO'S 1,200 8/1999 24.72 5.11 29.83 27.85
# 38-SUITE 176 INITIAL
DEPARTURES TRAVEL 1,100 10/1999 27.55 5.99 33.53 27.85
# 32-SUITE 11704 INITIAL
DIAMONDS 1,950 10/1999 24.57 5.99 30.56 27.85
# 58-SUITE 290 INITIAL
CARMEL PLAZA CHIRO 1,200 11/1999 23.87 5.98 29.85 27.85
# 59-SUITE 292 INITIAL
CARMEL PLAZA OPT 1,200 1/2000 23.94 6.15 30.09 28.83
# 44-SUITE 220 INITIAL
ARTVENTURES 1,200 2/2000 22.88 6.15 29.03 28.83
# 49-SUITE 230 INITIAL
TOP TEN ATHLETIC 1,200 4/2000 26.00 6.15 32.15 28.83
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VALUATION ADVISORY SERVICES
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PAGE 3
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
7 FY100 EXPIRATIONS 9,050 24.74 5.94 30.68 28.24
------ ----- ---- ----- -----
23 CUMULATIVE EXPS 38,798 24.42 5.76 30.19 25.94
# 12-SUITE 100 INITIAL
MOBILWORKS 3,200 11/2000 23.98 5.25 29.24 24.39
# 51-SUITE 232 INITIAL
IMPORTS 1 2,400 12/2000 27.59 6.16 33.74 27.54
# 57-SUITE 248 INITIAL
OLDE MILL BREAD CO 2,550 12/2000 23.98 5.68 29.67 27.54
# 47-SUITE 228 INITIAL
NIGHT & DAY FORMAL 900 4/2001 25.65 6.32 31.97 20.66
------ ----- ---- ----- -----
4 FY101 EXPIRATIONS 9,050 25.10 5.72 30.82 25.74
------ ----- ---- ----- -----
27 CUMULATIVE EXPS 47,848 24.55 5.76 30.31 25.90
# 31-SUITE 300 INITIAL
SHAW CARPETS 4,800 9/2001 20.00 5.94 25.94 25.25
------ ----- ---- ----- -----
1 FY102 EXPIRATIONS 4,800 20.00 5.94 25.94 25.25
------ ----- ---- ----- -----
28 CUMULATIVE EXPS 52,648 24.14 5.77 29.91 25.84
# 36-SUITE 170 INITIAL
CARMEL MTN DENTAL 2,174 9/2002 25.69 6.00 31.69 28.50
# 39-SUITE 180 RENEWAL 1
LITTLE COTTAGE 1,200 11/2002 30.79 6.50 37.29 30.88
# 29-SUITE 308 RENEWAL 1
WESTAR ESCROW 1,800 3/2003 32.24 6.65 38.89 31.96
# 55-SUITE 134 RENEWAL 1
ARTIFEX 1,500 5/2003 32.42 6.66 39.08 31.96
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VALUATION ADVISORY SERVICES
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PAGE 4
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
4 FY103 EXPIRATIONS 6,674 29.89 6.41 36.30 30.64
------ ----- ---- ----- ----
32 CUMULATIVE EXPS 59,322 24.78 5.84 30.63 26.38
# 40-SUITE 182 INITIAL
JAVA CENTRALE 1,830 8/2003 33.60 6.66 40.26 31.96
# 60-SUITE 294 INITIAL
HAIRCUT PLACE 1,200 9/2003 31.38 6.66 38.04 31.96
# 34-SUITE 130 RENEWAL 1
CONTRACT CARPET 1,500 10/2003 32.90 6.66 39.55 31.96
# 66-SUITE 222 INITIAL
PAYLESS SHOE 2,700 10/2003 27.85 5.13 32.98 29.50
# 53-SUITE 240 INITIAL
JENNIFER CONVERT 2,400 11/2003 31.96 6.15 38.11 29.50
# 56-SUITE 246 RENEWAL 1
UNIVERSAL BOOT 2,550 11/2003 30.45 6.65 37.11 29.50
# 41-SUITE 210 INITIAL
STYLES FOR LESS 3,500 11/2003 20.52 6.65 27.17 27.04
# 21-SUITE 260 INITIAL
RUBIO'S RESTAURANT 2,800 12/2003 31.81 6.66 38.46 30.53
# 33-SUITE 126 INITIAL
SWENSEN ICE CREAM 1,085 12/2003 28.66 6.66 35.31 33.08
# 30-SUITE 11610 INITIAL
METROPOLIS 4,914 12/2003 24.50 5.69 30.19 27.99
# 22-SUITE 264 INITIAL
GARDEN STATE BAGEL 1,200 12/2003 26.29 6.66 32.95 33.08
# 54-SUITE 244 RENEWAL 1
3 DAY BLINDS 1,200 1/2004 34.33 5.85 40.18 33.08
# 42-SUITE 212 RENEWAL 1
PAYLESS SHOESOURCE 2,500 1/2004 31.69 5.28 36.97 30.53
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VALUATION ADVISORY SERVICES
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PAGE 5
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 61-SUITE 296 RENEWAL 1
HALLMARK POOLS 1,500 1/2004 34.33 6.82 41.15 33.08
# 48-SUITE 268 INITIAL
CHOP HOUSE 1,800 1/2004 32.85 6.83 39.67 33.08
# 10-SUITE 106 RENEWAL 1
WICKER WONDERLAND 2,400 2/2004 31.78 6.82 38.61 30.53
# 23-SUITE 266 RENEWAL 1
UNIV CLEANERS 1,200 3/2004 34.53 6.83 41.36 33.08
# 26-SUITE 120 INITIAL
PLANET WRAPS 1,356 3/2004 27.02 6.83 33.85 33.08
# 27-SUITE 122 INITIAL
LITTLE TOKYO 1,627 3/2004 31.54 6.82 38.36 33.08
# 45-SUITE 226 RENEWAL 1
SALLY BEAUTY 1,500 3/2004 34.53 6.82 41.35 33.08
# 28-SUITE 124 INITIAL
ATHENS MARKET CAFE 1,356 3/2004 34.02 5.85 39.87 33.08
# 52-SUITE 236 RENEWAL 1
GENERAL NUTRITION 1,200 4/2004 34.63 6.83 41.46 33.08
# 46-SUITE 194 INITIAL
PRIMO HAR DESIGN 3,622 6/2004 24.72 6.73 31.45 30.53
------- ----- ---- ----- -----
23 FY104 EXPIRATIONS 46,940 29.56 6.38 35.94 30.79
------- ----- ---- ----- -----
55 CUMULATIVE EXPS 106,262 26.89 6.08 32.97 28.33
# 20-SUITE 12004 OPTION 1
BLOCKBUSTER MUSIC 14,000 7/2004 20.71 5.32 26.03 22.90
# 43-SUITE 214 RENEWAL 1
PARTY SAVERS 6,333 7/2004 26.87 6.83 33.70 25.45
# 18-SUITE 190 RENEWAL 1
USA FED CREDIT 2,065 8/2004 32.33 6.82 39.16 30.53
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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PAGE 6
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 50-SUITE 178 RENEWAL 1
JUICE CLUB 1,200 8/2004 45.05 6.83 51.88 33.08
# 11-SUITE 11670 INITIAL
MATTRESS DISCOUNT 5,000 9/2004 21.85 6.72 28.56 25.45
# 19-SUITE 192 RENEWAL 1
TOGO'S 1,200 11/2004 35.33 5.85 41.18 33.08
# 38-SUITE 176 RENEWAL 1
DEPARTURES TRAVEL 1,100 1/2005 36.77 7.12 43.90 34.24
# 32-SUITE 11704 RENEWAL 1
DIAMONDS 1,950 1/2005 36.78 7.12 43.90 34.24
# 58-SUITE 290 RENEWAL 1
CARMEL PLAZA CHIRO 1,200 2/2005 36.89 7.12 44.01 34.24
# 59-SUITE 292 RENEWAL 1
CARMEL PLAZA OPT 1,200 4/2005 37.10 7.12 44.22 34.24
# 44-SUITE 220 RENEWAL 1
ARTVENTURES 1,200 5/2005 37.21 7.12 44.33 34.24
------- ----- ---- ----- -----
11 FY105 EXPIRATIONS 36,448 26.84 6.26 33.09 26.86
------- ----- ---- ----- -----
66 CUMULATIVE EXPS 142,710 26.88 6.12 33.00 27.95
# 49-SUITE 230 RENEWAL 1
TOP TEN ATHLETIC 1,200 7/2005 37.42 7.12 44.54 34.24
# 37-SUITE 174 INITIAL
CARMEL MTN ORTHO 1,073 11/2005 30.11 5.87 35.98 34.24
# 12-SUITE 100 RENEWAL 1
MOBILWORKS 3,200 2/2006 33.44 6.17 39.60 29.98
# 57-SUITE 248 RENEWAL 1
OLDE MILL BREAD CO 2,550 3/2006 36.58 6.77 43.35 32.71
# 51-SUITE 232 RENEWAL 1
IMPORTS 1 2,400 3/2006 36.58 7.32 43.90 32.71
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VALUATION ADVISORY SERVICES
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PAGE 7
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
5 FY106 EXPIRATIONS 10,423 35.04 6.66 41.70 32.21
------- ----- ---- ----- -----
71 CUMULATIVE EXPS 153,133 27.44 6.16 33.60 28.24
# 47-SUITE 228 RENEWAL 1
NIGHT & DAY FORMAL 900 7/2006 27.75 7.32 35.07 24.53
# 31-SUITE 300 RENEWAL 1
SHAW CARPETS 4,800 12/2006 35.61 6.91 42.52 31.03
# 17-SUITE 158 INITIAL
THAI GO 2,658 6/2007 34.61 7.52 42.13 33.85
------- ----- ---- ----- -----
3 FY107 EXPIRATIONS 8,358 34.45 7.15 41.59 31.23
------- ----- ---- ----- -----
74 CUMULATIVE EXPS 161,491 27.80 6.21 34.01 28.40
# 35-SUITE 132 INITIAL
WAVELINES SURF 1,985 11/2007 38.02 7.52 45.54 36.68
# 63-SUITE 11676 RENEWAL 1
FLOWERS A LA CARTE 100 12/2007 84.48 6.36 90.84 26.28
# 36-SUITE 170 RENEWAL 1
CARMEL MTN DENTAL 2,174 12/2007 41.62 6.96 48.58 35.04
# 39-SUITE 180 RENEWAL 2
LITTLE COTTAGE 1,200 2/2008 45.34 7.73 53.07 37.96
# 29-SUITE 308 RENEWAL 2
WESTAR ESCROW 1,800 6/2008 45.87 7.73 53.59 37.96
------- ----- ---- ----- -----
5 FY108 EXPIRATIONS 7,259 42.89 7.42 50.32 36.57
------- ----- ---- ----- -----
79 CUMULATIVE EXPS 168,750 28.45 6.26 34.71 28.75
# 55-SUITE 134 RENEWAL 2
ARTIFEX 1,500 8/2008 46.13 7.73 53.86 37.96
CUSHMAN &
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VALUATION ADVISORY SERVICES
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PAGE 8
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 9-SUITE 11744 OPTION 1
BARNES & NOBLE 13,916 10/2008 27.77 5.94 33.71 0.00
# 40-SUITE 182 RENEWAL 1
JAVA CENTRALE 1,830 11/2008 46.53 7.72 54.26 37.96
# 60-SUITE 294 RENEWAL 1
HAIRCUT PLACE 1,200 12/2008 48.30 7.73 56.03 39.29
------- ----- ---- ----- -----
4 FY109 EXPIRATIONS 18,446 32.46 6.38 38.84 9.41
------- ----- ---- ----- -----
83 CUMULATIVE EXPS 187,196 28.84 6.27 35.12 26.84
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
=====================
ENDS DATA REPORTS
=====================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
DESCRIPTION 2.5 MILE 5.0 MILE 10.0 MILE
RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 63394 163112 331933
1996 ESTIMATE 63334 165194 335409
1990 CENSUS 56150 147548 304539
1980 CENSUS 24552 77344 175041
GROWTH 1980 - 1990 128.69% 90.77% 73.98%
HOUSEHOLDS
2001 PROJECTION 24184 60293 122438
1996 ESTIMATE 23565 59218 120555
1990 CENSUS 20043 51190 105043
1980 CENSUS 8073 25541 57290
GROWTH 1980 - 1990 148.27% 100.43% 83.35%
1996 ESTIMATED POPULATION BY RACE 63334 165194 335409
WHITE 77.99% 78.93% 78.61%
BLACK 2.51% 2.01% 2.12%
ASIAN & PACIFIC ISLANDER 16.62% 16.34% 15.45%
OTHER RACES 2.87% 2.72% 3.82%
1996 ESTIMATED POPULATION 63334 165194 335409
HISPANIC ORIGIN 11.81% 11.62% 13.77%
OCCUPIED UNITS 20043 51190 105043
OWNER OCCUPIED 63.05% 72.82% 70.00%
RENTER OCCUPIED 36.95% 27.18% 30.00%
1990 PERSONS PER HOUSEHOLD 2.78 2.85 2.84
1996 ESTIMATED HOUSEHOLDS BY INCOME 23565 59218 120555
$150,000 + 5.49% 6.95% 8.25%
$100,000 TO $149,999 9.04% 10.30% 9.52%
$ 75,000 TO $ 99,999 14.64% 15.24% 13.75%
$ 50,000 TO $ 74,999 27.32% 27.67% 26.17%
$ 35,000 TO $ 49,999 16.88% 16.05% 16.60%
$ 25,000 TO $ 34,999 10.33% 9.54% 10.33%
$ 15,000 TO $ 24,999 8.02% 7.30% 7.92%
$ 5,000 TO $ 14,999 6.14% 5.05% 5.59%
UNDER $5,000 2.14% 1.91% 1.87%
1996 ESTIMATED AVERAGE HH INCOME $71,579 $77,779 $79,453
1996 ESTIMATED MEDIAN HH INCOME $55,945 $59,183 $57,350
1996 ESTIMATED PER CAPITA INCOME $26,870 $28,208 $29,014
1
CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 63334 165194 335409
MALE 49.54% 49.73% 50.29%
FEMALE 50.46% 50.27% 49.71%
MARITAL STATUS 42999 113665 237319
SINGLE MALE 12.50% 12.21% 14.45%
SINGLE FEMALE 9.91% 9.55% 10.59%
MARRIED 63.61% 64.93% 61.07%
PREVIOUSLY MARRIED MALE 4.40% 4.10% 4.60%
PREVIOUSLY MARRIED FEMALE 9.58% 9.21% 9.29%
HOUSEHOLDS WITH CHILDREN 8559 21754 43195
MARRIED COUPLE FAMILY 81.78% 84.32% 82.09%
OTHER FAMILY - MALE HEAD 3.70% 3.41% 4.19%
OTHER FAMILY - FEMALE HEAD 13.55% 11.33% 12.59%
NON FAMILY 0.97% 0.94% 1.13%
1996 ESTIMATED POPULATION BY AGE 63334 165194 335409
UNDER 5 YEARS 8.75% 8.02% 8.08%
5 TO 9 YEARS 8.17% 8.07% 7.69%
10 TO 14 YEARS 7.74% 7.97% 7.41%
15 TO 17 YEARS 3.99% 4.23% 4.11%
18 TO 20 YEARS 2.73% 2.92% 3.38%
21 TO 24 YEARS 4.30% 3.72% 4.69%
25 TO 29 YEARS 8.17% 6.39% 7.44%
30 TO 34 YEARS 10.34% 9.00% 9.27%
35 TO 39 YEARS 10.33% 10.06% 9.88%
40 TO 49 YEARS 16.82% 17.99% 17.71%
50 TO 59 YEARS 8.17% 8.72% 8.92%
60 TO 64 YEARS 2.50% 2.59% 2.56%
65 TO 69 YEARS 2.65% 3.03% 2.72%
70 TO 74 YEARS 2.14% 2.86% 2.44%
75 + YEARS 3.20% 4.43% 3.69%
MEDIAN AGE 32.97 34.82 33.88
AVERAGE AGE 32.97 34.54 33.91
2
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 EST. FEMALE POPULATION BY AGE 31956 83041 166722
UNDER 5 YEARS 8.39% 7.66% 7.86%
5 TO 9 YEARS 7.64% 7.66% 7.35%
10 TO 14 YEARS 7.45% 7.61% 7.14%
15 TO 17 YEARS 3.84% 4.16% 4.05%
18 TO 20 YEARS 2.81% 2.88% 3.19%
21 TO 24 YEARS 4.47% 3.70% 4.50%
25 TO 29 YEARS 8.25% 6.29% 7.20%
30 TO 34 YEARS 10.30% 9.03% 9.29%
35 TO 39 YEARS 10.58% 10.41% 10.14%
40 TO 49 YEARS 16.54% 17.82% 17.78%
50 TO 59 YEARS 8.08% 8.51% 8.80%
60 TO 64 YEARS 2.69% 2.78% 2.73%
65 TO 69 YEARS 2.90% 3.38% 3.01%
70 TO 74 YEARS 2.25% 3.05% 2.61%
75 + YEARS 3.80% 5.05% 4.36%
FEMALE MEDIAN AGE 33.47 35.49 34.69
FEMALE AVERAGE AGE 33.72 35.37 34.73
POPULATION BY HOUSEHOLD TYPE 56150 147548 304540
FAMILY HOUSEHOLDS 87.90% 88.87% 86.17%
NON FAMILY HOUSEHOLDS 11.28% 10.04% 11.88%
GROUP QUARTERS 0.82% 1.09% 1.95%
HOUSEHOLDS BY TYPE 20043 51190 105043
SINGLE MALE 7.49% 6.13% 7.16%
SINGLE FEMALE 9.13% 9.38% 9.32%
MARRIED COUPLE 65.34% 68.58% 64.75%
OTHER FAMILY - MALE HEAD 2.97% 2.81% 3.26%
OTHER FAMILY - FEMALE HEAD 8.38% 7.34% 7.94%
NON FAMILY - MALE HEAD 4.24% 3.62% 4.70%
NON FAMILY - FEMALE HEAD 2.45% 2.14% 2.88%
POPULATION BY URBAN VS RURAL 56021 147481 304452
URBAN 100.00% 99.21% 95.77%
RURAL 0.00% 0.79% 4.23%
3
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0-17 21827 56849 116771
EMPLOYED/CHILD 0-5 7.55% 6.18% 6.08%
UNEMPLOYED/CHILD 0-5 0.38% 0.26% 0.27%
NOT IN LABOR FORCE/CHILD 0-5 4.53% 3.72% 3.61%
EMPLOYED/CHILD 6-17 13.54% 14.20% 13.16%
UNEMPLOYED/CHILD 6-17 0.65% 0.44% 0.42%
NOT IN LABOR FORCE/CHILD 6-17 3.76% 4.54% 4.23%
EMPLOYED/CHILD 0-5&6-17 4.66% 4.52% 4.10%
UNEMPLOYED/CHILD 0-5&6-17 0.15% 0.15% 0.19%
NOT IN LABOR FORCE/CHILD 0-5&6-17 2.63% 3.07% 3.00%
EMPLOYED/NO CHILDREN 38.25% 34.57% 38.02%
UNEMPLOYED/NO CHILDREN 1.66% 1.37% 1.50%
NOT IN LABOR FORCE/NO CHILDREN 22.25% 26.98% 25.41%
HOUSEHOLDS: AGE BY POVERTY STATUS 20191 51482 105222
ABOVE POVERTY UNDER AGE 65 83.74% 79.39% 81.79%
ABOVE POVERTY AGE 65 + 11.56% 16.79% 13.81%
BELOW POVERTY UNDER AGE 65 4.07% 3.25% 3.84%
BELOW POVERTY AGE 65 + 0.63% 0.57% 0.56%
POPULATION 16+ BY EMPLOYMENT STATUS 42374 111484 232825
EMPLOYED IN ARMED FORCES 2.62% 2.23% 2.99%
EMPLOYED CIVILIANS 69.62% 66.03% 67.30%
UNEMPLOYED CIVILIANS 2.93% 2.69% 2.89%
NOT IN LABOR FORCE 24.82% 29.05% 26.82%
POPULATION 16+ BY OCCUPATION 29502 73612 156686
EXECUTIVE AND MANAGERIAL 20.73% 20.78% 19.25%
PROFESSIONAL SPECIALTY 19.06% 19.80% 19.05%
TECHNICAL SUPPORT 5.12% 5.27% 5.34%
SALES 14.41% 14.20% 14.17%
ADMINISTRATIVE SUPPORT 15.16% 15.22% 15.18%
SERVICE: PRIVATE HOUSEHOLD 0.27% 0.35% 0.58%
SERVICE: PROTECTIVE 1.19% 1.37% 1.41%
SERVICE: OTHER 9.02% 7.90% 7.76%
FARMING FORESTRY & FISHING 0.74% 0.81% 1.20%
PRECISION PRODUCTION & CRAFT 7.45% 7.72% 8.70%
MACHINE OPERATOR 3.32% 2.95% 3.24%
TRANSPORTATION & MATERIAL MOVING 1.79% 1.57% 1.78%
LABORERS 1.75% 2.06% 2.33%
4
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 15395 40667 80268
NO WORKERS 8.63% 11.03% 9.08%
ONE WORKER 24.46% 25.13% 25.19%
TWO WORKERS 53.00% 49.53% 51.11%
THREE + WORKERS 13.91% 14.32% 14.62%
HISPANIC POPULATION BY TYPE 56150 147548 304539
NOT HISPANIC 92.68% 92.95% 90.57%
MEXICAN 5.05% 4.89% 7.16%
PUERTO RICAN 0.42% 0.33% 0.33%
CUBAN 0.12% 0.11% 0.11%
OTHER HISPANIC 1.73% 1.71% 1.83%
1996 HISPANIC RACE BASE 7478 19192 46186
WHITE 5141 13347 30707
BLACK 65 139 325
ASIAN & PACIFIC ISLANDER 480 1270 2458
OTHER 1791 4436 12696
POPULATION BY TRANSPORTATION TO WORK 30203 74950 160820
DRIVE ALONE 78.85% 79.60% 78.81%
CAR POOL 14.64% 13.09% 12.65%
PUBLIC TRANSPORTATION 1.36% 1.20% 1.20%
MOTORCYCLE 0.49% 0.56% 0.52%
WALKED ONLY 1.36% 1.27% 2.00%
OTHER MEANS 0.97% 1.23% 1.36%
WORKED AT HOME 2.33% 3.05% 3.46%
POPULATION BY TRAVEL TIME TO WORK 30203 74950 160820
UNDER 10 MINUTES / WORK AT HOME 13.07% 12.83% 14.31%
10 TO 29 MINUTES 47.06% 48.94% 52.14%
30 TO 59 MINUTES 37.31% 35.55% 30.90%
60 TO 89 MINUTES 1.51% 1.60% 1.53%
90+ MINUTES 1.05% 1.09% 1.12%
AVERAGE TRAVEL TIME IN MINUTES 23.42 23.31 22.06
HOUSEHOLDS BY NUMBER OF VEHICLES 20012 51123 105041
NO VEHICLES 2.73% 2.30% 2.52%
ONE VEHICLE 28.17% 25.66% 25.24%
TWO VEHICLES 49.05% 48.73% 47.50%
THREE + VEHICLES 20.04% 23.31% 24.74%
ESTIMATED TOTAL VEHICLES 38107 101076 209467
5
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION 36139 95758 195601
ELEMENTARY (0-8) 2.57% 2.66% 3.87%
SOME HIGH SCHOOL (9-11) 5.00% 5.15% 5.72%
HIGH SCHOOL GRADUATE (12) 17.79% 17.47% 18.16%
SOME COLLEGE (13-15)NO DEGREE 25.09% 24.17% 24.84%
ASSOCIATE DEGREE ONLY 10.21% 9.30% 9.05%
BACHELOR DEGREE ONLY 26.84% 27.67% 25.26%
GRADUATE DEGREE 12.49% 13.58% 13.09%
POPULATION ENROLLED IN SCHOOL 15970 42854 87589
PUBLIC PRE-PRIMARY 4.44% 4.42% 4.06%
PRIVATE PRE-PRIMARY 5.14% 4.65% 4.57%
PUBLIC ELEMENTARY & HIGH SCHOOL 56.06% 57.47% 54.03%
PRIVATE ELEMENTARY & HIGH SCHOOL 2.24% 3.65% 4.89%
COLLEGE 32.12% 29.82% 32.45%
HOUSING UNITS BY OCCUPANCY STATUS 21874 54878 111879
OCCUPIED 91.63% 93.28% 93.89%
VACANT 8.37% 6.72% 6.11%
VACANT UNITS 1832 3688 6836
FOR RENT 49.92% 45.03% 40.78%
FOR SALE ONLY 31.97% 31.47% 32.62%
SEASONAL 7.26% 9.91% 10.34%
OTHER 10.86% 13.59% 16.26%
OWNER OCCUPIED PROPERTY VALUES 11296 32799 63064
UNDER $25,000 0.10% 0.12% 0.17%
$ 25,000 TO $ 49,999 0.28% 0.25% 0.29%
$ 50,000 TO $ 74,999 0.50% 0.30% 0.50%
$ 75,000 TO $ 99,999 1.86% 1.13% 1.56%
$100,000 TO $149,999 8.94% 8.95% 11.24%
$150,000 TO $199,999 24.28% 22.76% 24.46%
$200,000 TO $299,999 44.37% 41.33% 33.02%
$300,000 TO $399,999 14.31% 15.76% 13.97%
$400,000 TO $499,999 3.01% 4.80% 6.01%
$500,000+ 2.37% 4.59% 8.78%
MEDIAN PROPERTY VALUE $ 231,280 $ 250,296 $ 258,900
TOTAL RENTAL UNITS 7266 13474 30325
MEDIAN RENT $ 668 $ 734 $ 712
6
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Account Number : 235192 Tuesday January 28, 1997
POP-FACTS: FULL DATA REPORT
(CENSUS '90, UPDATES & PROJECTIONS)
BY NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
LEHMAN BROTHERS
CARMEL MOUNTAIN PLAZA SITE: 442166
SAN DIEGO, CA COORD:32:58.74 117:04.88
- --------------------------------------------------------------------------------
2.5 MILE 5.0 MILE 10.0 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 20043 51190 105043
1 PERSON 16.61% 15.51% 16.47%
2 PERSONS 35.03% 34.89% 34.38%
3 PERSONS 19.36% 18.28% 18.66%
4 PERSONS 18.11% 19.12% 18.11%
5 PERSONS 7.08% 7.62% 7.42%
6 PERSONS 2.42% 2.83% 2.89%
7+ PERSONS 1.39% 1.75% 2.06%
YEAR ROUND UNITS IN STRUCTURE 21874 54878 111879
SINGLE UNITS DETACHED 55.53% 64.68% 63.07%
SINGLE UNITS ATTACHED 10.11% 10.52% 10.79%
DOUBLE UNITS 0.40% 0.44% 0.67%
3 TO 9 UNITS 13.85% 8.82% 10.00%
10 TO 19 UNITS 8.44% 5.14% 4.79%
20 TO 49 UNITS 5.21% 3.80% 3.24%
50 + UNITS 5.54% 3.89% 3.70%
MOBILE HOME OR TRAILER 0.36% 1.60% 2.77%
ALL OTHER 0.55% 1.12% 0.97%
SINGLE/MULTIPLE UNIT RATIO 1.96 3.41 3.30
HOUSING UNITS BY YEAR BUILT 20012 51123 105041
BUILT 1989 TO MARCH 1990 6.16% 4.07% 4.52%
BUILT 1985 TO 1988 40.93% 32.41% 28.47%
BUILT 1980 TO 1984 11.57% 13.77% 14.16%
BUILT 1970 TO 1979 28.49% 35.86% 36.40%
BUILT 1960 TO 1969 9.73% 11.08% 10.37%
BUILT 1950 TO 1959 2.83% 2.28% 4.14%
BUILT 1940 TO 1949 0.20% 0.33% 1.04%
BUILT 1939 OR EARLIER 0.09% 0.19% 0.89%
7
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
TIGER SITE MAP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
==============================
CUSHMAN & WAKEFIELD INVESTOR
SURVEY
==============================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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
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% 9.1% 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
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
=========================
APPRAISERS QUALIFICATIONS
=========================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS
================================================================================
Sean Michael Crosby
Professional Affiliation
Candidate for MAI designation - Appraisal Institute
Certified General Real Estate Appraiser - State of California, Office of
Real Estate
Appraisers Number AG009283
Real Estate Experience
Associate Director - Valuation Advisory Services, Cushman & Wakefield of
California, Inc., Orange County Office. Division of full-service real
estate organization, specializing in appraisal and consultation. (February
1992 to present)
Appraiser - George Elkins Company, Mortgage Banking Division of a
full-service real estate organization specializing in the field of real
estate. (January 1989 through February 1992)
Experience includes appraisal of the following types of properties:
Office Buildings Leasehold/Leased Fee Interest
Shopping Centers Service Stations
Industrial Facilities Mini-Storage Facilities
Vacant Land Mobile Home Parks
Apartment Buildings Residential Subdivisions
Automobile Dealerships Mixed Use Properties
Regional Malls
Education
Bachelor of Arts (Economics), 1989
University of California, Los Angeles, CA
Real Estate Courses:
Principles of Real Estate Appraisal
Real Estate Principles
Standards of Professional Practice
Basic Valuation and Procedures
Basic Capitalization Theory & Techniques
Advanced Capitalization Theory & Techniques
Advanced Applications
Report Writing & Valuation Analysis
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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QUALIFICATIONS
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Robert W. Bell, MAI
Professional Affiliations:
Member of the Appraisal Institute since 1986 (MAI Designation No.7408)
Certified General Appraiser - State of California (No. AG001951)
Certified General Appraiser - State of Nevada (No. 02164)
Appraisal Institute Chapter Admissions Committee Member (1989 - Present)
Real Estate Experience:
Director - Valuation Advisory Services, Cushman & Wakefield of California,
Inc. Division of a full-service real estate organization, specializing in
valuation and analysis. Operating Manager for the Southern
California/Arizona offices. (1993 - Present)
Vice President - CB Commercial Appraisal Services, Newport Beach,
California. (1981-1993)
Real Estate Analyst - Daon Corporation, Newport Beach, California. (1980 -
1981)
Real Estate Appraiser - Lea Associates, Inc., Los Angeles, California.
(1978 - 1980)
Experience includes valuation, analysis and consulting assignments on the
following types of properties:
Age-Restricted Housing Mixed-Use Complexes
Agricultural Land Mobile Home Parks
Apartments Movie Theatres
Automobile Dealerships Oil-Producing Land
Biotechnology Research Labs Office Buildings
Condominiums Outlet Malls
Design Studios Protected Species Habitat Land
Discount/Department Stores Raw Acreage
Easements Regional Malls
Golf Courses SRO Hotel/Apartments
Hotels Shopping Centers
Income-Restricted Housing Special Purpose
Leasehold/Leased Fee Interests Subdivisions
Marina Facilities Truck Terminals
Masterplanned Communities TV Production Facilities
Mini-Warehouses Vacant Land
CUSHMAN &
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QUALIFICATIONS
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Robert W. Bell, MAI
Education
Bachelor of Arts (Economics and Business), 1978
Westmont College, Santa Barbara, California
Master of Business Administration (Finance), 1981
University of Southern California, Los Angeles, California
All required coursework for the MAI designation (1982 - 1985)
Additional coursework and continuing education classes (1984- Present),
currently certified under the Appraisal Institute's voluntary program of
continuing education for its designated members.
Expert Testimony
Qualified expert witness, Orange and Los Angeles County Superior Courts
Qualified expert witness, Federal Bankruptcy Court
Qualified expert witness, Orange & Los Angeles County Assessment Appeals
Boards
Qualified expert witness, Orange County Arbitration Board
Qualified expert witness, various cities, Rent Control Boards
Real Estate Speeches
"The Orange County Office Market" - Southern California Chapter, AIREA
Guest lecturer - California State University, Fullerton - Real Estate
Fraternity
Guest lecturer - University of California, Irvine - Real Estate Investment
Class
"Appraising Suburban Multi-Family Land" - Southern California Chapter,
Appraisal Institute
CUSHMAN &
WAKEFIELD(R)
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COMPLETE APPRAISAL OF REAL PROPERTY
New Hope Commons
N/W/C U.S. 501-15 and
Interstate 40
City of Durham
Durham County, North Carolina
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IN A SUMMARY REPORT
As of July 1997
Master Realty Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial
20th Floor
New York, New York 10285
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, NY 10019
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CUSHMAN &
WAKEFIELD(R)
Improving your place
in the world.
Cushman & Wakefield, Inc.
51 West 52nd Street, 9th Floor
New York, NY 10019
(212) 841-7500
July 23, 1997
Mr. Brian Summers
Vice President
Master Realty Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Re: New Hope Commons
N/W/C U.S. 501-15 and
Interstate 40
City of Durham
Durham County, North Carolina
Gentlemen:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our report estimating the
market value of the leased fee estate in the above referenced real property.
As specified in the Letter of Engagement, the value opinion reported
herein 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. The results of the appraisal are being conveyed in a Summary Report
according to our agreement. The accompanying report summarizes the pertinent
data, analysis and conclusions secured in our investigation, rather than provide
a self- contained narrative within the report. It is noted that this report
incorporates by reference our previous Complete Appraisal prepared in a
Self-Contained report format with a date of value of January 30, 1996.
This report was prepared for Master Realty Inc., Managing Member of
Community Centers, I, LLC and Lehman Brothers, Inc. (Client) and it is intended
only for the specified use of the Client. The property was inspected by and the
report prepared by Richard W. Latella, MAI.
<PAGE>
Cushman & Wakefield, Inc.
Mr. Brian Summers
July 23, 1997
Page 2
As a result of our total analysis, we have formed an opinion that the
market value of the leased fee estate in the subject property, as of July 11,
1997, the date of inspection, was:
FORTY THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
$43,500,000
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, INC.
/s/ Richard W. Latella
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
North Carolina Temporary Practice Permit #869
RWL: emf
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[GRAPHIC OMITTED]
Overview of Facility
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[GRAPHIC OMITTED]
Overview of Facility
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Property Name: New Hope Commons
Location: The subject property is located at the
northwest quadrant of U.S. Highway 501-15 and
Interstate 40, City of Durham, Durham County,
North Carolina.
Date of Inspection: July 11, 1997
Ownership: Community Centers I, LLC
Total Land Area:
Net Area (Owned): 39.522 +/- acres
Zoning: Shopping Center District
Improvements
Type: Single-level power center constructed of
concrete block with masonry exterior and flat
roof.
Total Building Area: 467,137 +/- square feet (including non-owned
pad site)
Owned Building Area: 408,292 +/- square feet
Gross Leasable Area (Allocation):
---------------------------------------------
Wal-Mart 149,929+/-SF
---------------------------------------------
Uptons* 58,845+/-SF
---------------------------------------------
Best Buy 45,000+/-SF
---------------------------------------------
Linens N' Things 31,999+/-SF
---------------------------------------------
Marshalls 31,134+/-SF
---------------------------------------------
Barnes & Noble 25,200+/-SF
---------------------------------------------
OfficeMax 23,248+/-SF
---------------------------------------------
Michaels 19,064+/-SF
---------------------------------------------
Old Navy Clothing 17,512+/-SF
---------------------------------------------
In-Line Shops 66,029+/-SF
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Total GLA 467,137+/-SF
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Total Owned GLA 408,292+/-SF
=============================================
* Pad Sale (not included in owned GLA
---------------------------------------------
Year Built: Completed in Fourth Quarter 1995
Condition: New/Excellent
Land-to-Building Ratio: 4.2:1 (owned)
Site Coverage: 23.7% (owned)
Parking Spaces Provided: 2,132 stalls are provided (4.6 cars per
1,000 square feet of total building area)
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Summary of Salient Facts and Conclusions
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Highest and Best Use
If Vacant: Commercial/retail utilization built to its
maximum feasible FAR.
As Improved: Continued retail use as a power/community
center.
Operating Data and Forecasts
Current Occupancy: 100%
Operating Expenses Annual Amount Unit Rate*
------------- ----------
1996 Actual: $1,024,319 $2.51
1997 Budget (Owners): $1,084,627 $2.66
1997 C&W Forecast: $1,060,970 $2.60
(Fiscal Basis)
* Per square foot of owned GLA
================
Value Indicators
================
Cost Approach: N/A
Sales Comparison Approach: $43,000,000 to $44,000,000
Income Approach
Direct Capitalization: $44,000,000
Discounted Cash Flow: $43,200,000
Investment Assumptions
Holding Period: 10 years
Income Growth Rate: +3.0%
Expense Growth Rate: +3.0 %
Sales Growth Rate: +3.0%
Tenant Improvements-
New Tenants: $5.00/SF
Renewing Tenants: None
Commissions
New Tenants: $2.00/SF
Renewing Tenants: $1.00/SF
Vacancy Between Tenants: 6 months
Renewal Probability: 70%
Terminal Capitalization Rate: 10.0%
Cost of Sale at Reversion: 2.0%
Discount Rate: 10.75%
Value Conclusion $43,500,000
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Summary of Salient Facts and Conclusions
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Resulting Indicators
Unit Rate: $106.54/SF of owned GLA
Net Income (FY 1998): $4,275,703
Implicit Overall Capitalization Rate: 9.83%
Exposure Time Implicit
In Market Value Conclusion: Not to exceed 12 months
Special Risk Factors:
In the course of preparing our original appraisal in January 1996, we were
provided with a Phase I Environmental Site Assessment prepared by Professional
Service Industries, Inc., dated January 7, 1994. In addition, a review of the
report was conducted by ALTA Consulting Corp. A copy of their letter is
contained in the Addenda of our original appraisal. Based on our review of these
documents, it is evident that groundwater contamination does exist at the
subject property. The documents did not reach any final conclusion regarding the
exact course of action to take. However, we assume that this issue has been
mitigated to a point where it will not effect operations of the subject property
and will have no impact on the value of the subject property. Anything contrary
to this conclusion may alter the value conclusion within this report.
Special Assumptions:
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll, budgets, sales
reports and other property specific information. We were also
provided with a Pro-Ject diskette for the property which ownership
has portrayed as containing the actual lease terms. It is noted that
we audited actual lease documents for several of the major tenants
during the course of our initial Complete Appraisal in January 1996.
Based upon the current information provided, minor discrepancies
were noted which we have reconciled to our satisfaction.
2. We have made a visual inspection of building improvements and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. Our cash flow analysis and valuation has recognized that all signed,
as well as any pending leases with a high probability of being
consummated are implemented according to the terms presented to us
by management. To the extent such leases exist, they are identified
within the body of this report.
4. The forecasts of income and expenses contained herein are not
predictions of the future. Rather, these projections are our best
estimates of current market thinking on future income, expenses,
growth rates, and demand. No warranty or representation is made with
regard to materialization of these forecasts.
5. Please refer to the complete list of assumptions and limiting
conditions included: at the. end of this report. We believe, based
on the assumptions employed in our cash flow analysis and based on
our selection of investment parameters for the subject, the value
conclusion represents a market price achievable within one year's
exposure time on the open market.
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PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
View of eastern portion of the center showing Uptons store.
[GRAPHIC OMITTED]
View of center portion of the center showing Michaels and Marshalls.
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Photographs of Subject Property
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[GRAPHIC OMITTED]
View of western portion of the center showing Wal-Mart.
[GRAPHIC OMITTED]
Front elevation looking northeast
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Photographs of Subject Property
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[GRAPHIC OMITTED]
View of the Office Max and Best Buy Building.
[GRAPHIC OMITTED]
View of detached building showing units 120-125 and Barnes & Noble.
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TABLE OF CONTENTS
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Page
INTRODUCTION ............................................................... 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 ...................................................... 4
REGIONAL ANALYSIS .......................................................... 5
NEIGHBORHOOD DESCRIPTION ................................................... 12
RETAIL MARKET ANALYSIS ..................................................... 14
PROPERTY DESCRIPTION ....................................................... 30
Site Description ....................................................... 30
Improvements Description ............................................... 32
Site Improvements ...................................................... 34
REAL PROPERTY TAXES AND ASSESSMENTS ........................................ 36
ZONING ..................................................................... 37
HIGHEST AND BEST USE ....................................................... 38
As Vacant .............................................................. 38
As Improved ............................................................ 38
VALUATION PROCESS .......................................................... 39
SALES COMPARISON APPROACH .................................................. 40
INCOME APPROACH ............................................................ 46
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 68
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 70
CERTIFICATION OF APPRAISAL ................................................. 72
ADDENDA .................................................................... 73
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INTRODUCTION
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Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
I, LLC, a joint venture between Developers Diversified Realty Corporation (DDR)
and DRA Advisors, Inc. (DRA). The subject was acquired as part of the former
Homart Community Center Division for a total purchase price of approximately
$500.0 million from General Growth Properties, Inc. The date of transfer was
November 17, 1995.
A history of the project shows that the 86+/- acre site was originally
acquired by Homart Community Centers, Inc. for a recorded consideration of
$7,025,000. Subsequent to the sale, Homart developed the subject center to its
present configuration with the project opening in the Fall of 1995. It is
currently 100 percent occupied. Prior to its opening, Homart had sold one 6.0
acre pad site to Uptons for $3,250,000 which is now classified as a non-owned
site and store situated in an interior location within the subject shopping
center. The appraisers were also informed that in January 1996 Developers
Diversified Realty Corporation transferred approximately 20 acres of unusable
wetlands area to the City of Durham to serve as a greenbelt area. The net area
owned is 39.522 acres, inclusive of a small (.776 acre) strip of land on the
south side of New Hope Commons Drive.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the subject property. The function of this appraisal is to
provide an independent valuation and analysis of the property and to assist the
client in evaluating the asset for underwriting purposes in connection with a
proposed financing.
Extent of the 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.
o Interviewed representatives of ownership and the property management
company.
o Reviewed leasing policy, concessions, tenant build-out allowances
and history of recent rental rates and occupancy.
o Reviewed a 1997 budget of income and expense as well as actual 1996
operating data.
o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Conducted market inquiries into recent sales of similar retail
centers 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.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems.
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Introduction
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o In the course of this assignment we did not review actual lease
documents. We were provided with a Pro-Ject model prepared as of
July 1997, a current rent roll and other tenant specific data.
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and the
current market thinking relative to growth in market rents and
market absorption.
o Developed a value estimate of the center through direct sales
comparison.
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject +plus software for the purpose of discounting the
forecasted net income stream to a present value of the leased fee
estate for the center.
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes.
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition.
o For this assignment, a Complete Appraisal of the subject property
was performed with the results conveyed in this summary report. A
Complete Appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. A summary appraisal
report format provides a summary of the data, analyses, and
conclusions rather than presenting a self-contained narrative within
the report. Other pertinent data is retained in our files. This
report also incorporates our previous Complete Appraisal prepared in
a self-contained report format with a date of value of January 30,
1996 by reference.
Date of Value and Property Inspection
The property has been valued as of July 11,1997. On that date, Richard W.
Latella, MAI inspected the property and its environs.
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;
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Introduction
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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.
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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
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Introduction
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Legal Description
A complete legal description of the property is provided within the body
of the ALTA Title Policy dated September 20, 1995 which was provided in our
original appraisal, as well as on the survey update prepared by Phillip Post and
Associates dated May 7, 1997. The property can generally be described as "New
Hope Commons", Plat Book 133 Page 180 in the Durham County Registry.
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[GRAPHIC OMITTED]
Map indicating location of New Hope Commons
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REGIONAL ANALYSIS
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General
The subject property is located in the Raleigh-Durham metropolitan area at
the southeast quadrant of U.S. Route 501-15 and Interstate 40. The Metropolitan
Statistical Area (MSA) consists of four counties, including Durham, Wake,
Franklin, and Orange. The area is known as the Research Triangle and contains
the cities of Raleigh, Durham, Chapel Hill, Gary and several smaller
unincorporated communities. It is the second largest metropolitan area in North
Carolina, after Charlotte.
Raleigh is the state capital and largest of the three cities comprising
the Triangle area. Durham forms the apex to the Research Triangle and is the
second largest city in the area. This is a central east coast location
approximately 390 miles northeast of Atlanta and 250 miles south of Washington
D.C. The Triangle is unified by the Research Triangle Park, a planned research
and development community, and the Raleigh-Durham International Airport.
Background/History
Research Triangle Park is the largest planned research and
development-oriented industrial park in the United States. It was founded in
1958 as a cooperative effort between Duke University, the University of North
Carolina, and North Carolina State, and has blossomed into a 6,800+/- acre
development with over 9+/- million square feet of space housing high-technology
industries.
Creation of the Park has had a tremendous impact on regional growth
patterns. It now employs over 35,000 people with an annual payroll of
approximately $2 billion. Among the most prestigious of the park's 60
research-oriented firms are IBM, Burrows and Northern Telecom. Over 75 percent
of the Park lies within Durham County with the balance in Wake. It is
approximately 50 percent built out with 2,600+/- acres currently for sale or
development.
The I-40/Research Triangle Park submarket contains 3.4 million square feet
of multi tenant conventional office space. Approximately 9 percent of the space
was available in the fourth quarter of 1996.
Transportation
The Raleigh-Durham area is well served by state routes and interstate
highways. Interstate 40 runs northwest-southeast connecting the Raleigh area and
beltway with Chapel Hill and Durham to the northwest. State Highway 70 runs
parallel to 40 on the north side of Triangle Research Park and the RDU Airport.
Interstate 40 provides access to areas west of Raleigh-Durham and Winston-Salem
and runs south of the Raleigh-Durham Airport. Transportation improvements
underway include the new I-540 Outer Loop which is being designed to eventually
encircle the city. The first phase will extend from I-40 to Glenwood Avenue. The
project is being funded with a $950 million statewide bond.
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Regional Analysis
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The Raleigh-Durham (RDU) International Airport is the second largest strip
in North Carolina, ranking second in number of passengers served and air cargo
tons shipped. The airport handled 6.4 million passengers in 1996, an 8 percent
increase over 1995. It is served by five major passenger airlines and four
commuter lines with over 450 daily flights. As one of the nation's top 30
airports, it provides nearly 4,000 jobs and contributes an estimated $1 billion
per year to the local economy.
Rail freight service is provided locally by the Norfolk Southern Railway,
passenger service via AMTRAK. Both Greyhound and Trailways provide bus service
to the Raleigh-Durham area. Intercity bus service can be found throughout the
triangle region.
Population
Population growth within the Raleigh-Durham region has been substantial
over the past several years. Statistics provided by Equifax National Decision
Systems (ENDS) are presented in the following chart.
<TABLE>
<CAPTION>
================================================================================================================
Population Trends
================================================================================================================
Compound Projected Compound
Projected Annual Change Annual Change
Area 1980 1990 1997 2002 1980-1997 1997-2002
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Raleigh-Durham 665,236 855,545 1,036,154 1,165,187 +2.64% +2.37%
- -----------------------------------------------------------------------------------------------------------
State of North Carolina 5,881,768 6,628,637 7,382,905 7,871,295 +1.35% +1.29%
================================================================================================================
Source: Equifax National Decision Systems
================================================================================================================
</TABLE>
As can be seen, population within the Raleigh-Durham area has grown at a
compound annual rate of 2.64 percent since 1980. The average growth has greatly
exceeded the composite growth for the State of North Carolina and the United
States. This growth has primarily been the result of new residents
(immigration), making the region one of the nation's fastest growing areas. This
contrasts the intra-regional shifts typical of larger metropolitan areas.
Through 2002, Raleigh-Durham is projected to experience a moderate slowing of
the annual population growth to approximately 2.37 percent per annum.
Wake County is home to about 50 percent of the regions 1,036,000 people,
followed by Durham County which is home to approximately 19 percent, or 195,300.
Households
Household formation within the region has outpaced population growth
rates, a phenomenon consistent with national trends in many areas. Household
formation trends have been driven by several factors, including an aging
population, young professionals postponing marriage, and rises in divorce rates,
all of which lead to single and two person households. The following table
tracks household formation for the subject's region.
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Regional Analysis
<TABLE>
<CAPTION>
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Household Trends
=========================================================================================================
Compound Proj. Compound
Projected Annual Change Annual Change
Area 1980 1990 1997 2002 1980-1997 1997-2002
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Raleigh-Durham 236,388 334,508 413,531 471,116 +3.34% +2.64%
State of North Carolina 2,043,292 2,875,026 2,875,170 3,107,619 +2.02% +1.57%
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Source: Equifax National Decision Systems
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</TABLE>
As can be seen, the number of households has increased at rates higher
than regional population growth. For the Raleigh-Durham area, household
formation has increased at an annual rate of 3.34 percent per year since 1980.
Similar to population growth trends, the rate of household formations has
dramatically outpaced state, local and national growth. Growth in households in
Raleigh-Durham is expected to be slightly lower at 2.64 percent through the year
2002. Growth is forecasted to be greater than both the state and a nation as a
whole.
Income Levels
The Raleigh-Durham area can be viewed as an upper-middle income market.
Average household income for the region in 1997 is currently estimated at
$63,670, while median household income is $44,724, and per capita income is
$25,801 . A comparison of regional income levels is shown on the following
chart.
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Income Comparison
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Average Median Per Capita
Area Household Income. Household Income Income
================================================================================
Raleigh-Durham $63,670 $44,724 $25,801
- --------------------------------------------------------------------------------
State of North Carolina $49,749 $33,360 $19,585
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Source: Equifax National Decision Systems
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Through the year 2002, the Raleigh-Durham area is expected to see average
household income growth to $81,475, equal to a compound annual change of 5.05
percent which is expected to be above inflation, yielding real gains in
purchasing power.
Economy
Raleigh-Durham MSA enjoys a relatively diversified economy which has
contributed to its relative stability. No one firm or industry dominates the
local economy, although high technology has clearly taken a firm hold. Three
major universities, manufacturing, trade and government employment sectors help
support that stability. Fortune Magazine recently (1996) ranked Raleigh-Durham
as the country's fifth-best metropolitan area in the country, and a recent
corporate survey of corporate executives conducted by the Development Consellors
International (DCI) showed that North Carolina was the most favored state for
business.
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Regional Analysis
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Some contributing elements to the continued growth of the area's diverse
economy include:
o Research Triangle Park which now encompasses some 6,800+/- acres and
employs an estimated 35,000 people. The park contains more than 60
corporations and institutions whose collective payroll is estimated
at $2 billion. One of the Triangle's largest proposed mixed-use
projects, Brier Creek, recently received approvals from the City of
Raleigh. It sits on 1,800 acres west of Raleigh-Durham International
Airport between I-40 and Glenwood Avenue. Construction is scheduled
to begin this Spring on 150,000 square feet of office and
distribution space. The project's plans call for several industrial
buildings, retail space and a hotel.
o Another mixed-use project, Wakefield Plantation, is on the drawing
boards for a 2,000 acre site between Capital Boulevard and Falls of
the Neuse Road. As currently envisioned, the development would
include an office and light industrial component as well as a golf
course-residential community.
o State government is a prominent component of the economy of Wake
County. Raleigh being the state capital, government has consistently
played a major role in the local market.
o The three major universities -- Duke University in Durham,
University of North Carolina at Chapel Hill, and North Carolina
State University in Raleigh -- have a combined enrollment of over
55,000 students. This substantial population is not measured in the
traditional demographic statistics. These students add substantially
to the purchasing power of the economy. In addition, substantial
economic infusions can be tied to the large number of visitors that
are attracted to the schools consisting of family and friend
visitations, school events, national and regional educational
seminars, and sporting events.
o Increases in the manufacturing base in recent years has separated
the area from state and national trends. Several of the more
prominent manufacturers include Liggett & Meyers Tobacco Company,
Burroughs Wellcome, Mitsubishi, Northern Telecom, Inc., and IBM.
The following is a list of major employers in the Raleigh-Durham area with
2,500 or more employees.
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WAKEFIELD(R)
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<PAGE>
Regional Analysis
================================================================================
================================================================================
Largest Area Employers
================================================================================
State of North Carolina 20,500
- --------------------------------------------------------------------------------
Duke University & Medical Center 20,000
- --------------------------------------------------------------------------------
International Business Machines (IBM) 11,000
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Carolina Power & Light 8,500
- --------------------------------------------------------------------------------
University of North Carolina 8,120
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Wake County Public School System 7,000
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Nortel 8,300
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North Carolina State University 5,500
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North Carolina Memorial Hospital 4,000
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Glaxo, Inc. 3,600
- --------------------------------------------------------------------------------
American Airlines 3,500
================================================================================
Source: The Research Triangle - News & Observer;
Metro Market Facts - National Real Estate Index.
================================================================================
Duke University and Medical Center in Durham is the area's largest private
sector employer, with 20,000 employees in six counties. IBM follows with 11,000.
Employment
The economic strength of the Raleigh-Durham area is fueled by the Research
Triangle. Job growth within the area has been strong in recent years, and
unemployment rates have declined annually for the last four years. According to
the U.S. Department of Labor Statistics, as of March 1997, the Raleigh-Durham
area had a total labor force of 586,600 persons. As of that date, approximately
574,600 people were employed indicating an unemployment rate of 1.9 percent
indicating one of the country's lowest unemployment rates. This compares with
North Carolina's rate of 3.5 percent. The table below shows the distribution of
the workforce since 1986.
================================================================================
Raleigh-Durham Area Workforce
(In Thousands, Annual Averages)
================================================================================
Unemployment Rate (%)
- --------------------------------------------------------------------------------
Year Workforce Employed Unemployed Raleigh-Durham N. Carolina
================================================================================
Mar.1997 585.6 574.6 11.0 1.9 3.5
- --------------------------------------------------------------------------------
1994 544.4 527.1 17.3 3.2 4.5
- --------------------------------------------------------------------------------
1993 458.5 441.4 17.3 3.8 5.1
- --------------------------------------------------------------------------------
1992 449.4 431.8 17.6 3.9 5.9
- --------------------------------------------------------------------------------
1991 428.9 413.5 15.4 3.6 5.8
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1990 420.3 410.0 10.3 2.5 4.1
- --------------------------------------------------------------------------------
1989 420.2 410.0 10.2 2.4 3.5
- --------------------------------------------------------------------------------
1988 399.3 389.1 10.2 2.6 3.6
- --------------------------------------------------------------------------------
1987 395.6 383.6 12.0 3.0 4.5
- --------------------------------------------------------------------------------
1986 375.7 363.3 12.4 3.3 5.3
================================================================================
Source:U.S. Dept. of Labor, Bureau of Labor Statistics; Employment & Earnings
================================================================================
================================================================================
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<PAGE>
Regional Analysis
================================================================================
The current distribution of employment in non-agricultural industries is
shown below. For comparison purposes, we have shown the change over the past
year.
================================================================================
Employment In Non-Agricultural Establishments, by Place of Work
Raleigh-Durham Area (In Thousands, Not Seasonally Adjusted)
================================================================================
Comp.
Category 1997* 1993 1991 Change
================================================================================
Total Statewide (North Carolina) 3,615.4 3,211.7 3,072.2 +17.7%
- --------------------------------------------------------------------------------
Total Non-Agricultural Employment (R-D) 586.4 511.7 472.2 +24.2%
- --------------------------------------------------------------------------------
Construction & Mining 31.9 23.9 22.5 +41.8%
- --------------------------------------------------------------------------------
Manufacturing 81.9 79.6 76.7 + 6.8%
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Trans. & Public Utilities 26.1 24.0 23.5 +11.0%
- --------------------------------------------------------------------------------
Wholesale & Retail Trade 121.9 105.3 98.1 +24.2%
- --------------------------------------------------------------------------------
Finance, Insurance, Real Estate 27.8 24.5 24.0 +15.8%
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Services 175.0 142.4 123.9 +41.2%
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Government 121.8 112.0 103.5 +17.7%
================================================================================
* As of March
================================================================================
Source: U.S. Department of Labor, Bureau of Labor Statistics;
Employment & Earnings
================================================================================
The employment figures through March 1997 show 14.0 percent of total
non-agricultural employment is in manufacturing of durable and non-durable goods
while 86 percent are employed in non-manufacturing employment. Of the
non-agricultrual employment, the government sector accounts for 21 percent and
services account for 30 percent. Wholesale and retail trade accounts for 21
percent. These figures further support the diversity of Raleigh-Durham's
economic base.
Significant new development continues to occur in the region. Some of the
larger projects are discussed below.
o Cisco Systems recently completed a third 80,000 square foot
building, adding to their employment ranks. They plan a fourth,
120,000 square foot building in June 1998.
o The region has a very large number of biotech and pharmaceutical
companies. The North Carolina Biotechnology Center predicts that the
state's biotech payrolls will grow from 15,000 to 100,000 during the
next 20 years. Biogen Inc. and Corning Bio will open a total of
200,000 square feet of additional space during 1997.
o Winn Dixie is building a regional headquarters and distribution in
Clayton. The four building complex is expected to eventually contain
more than 1.0 million square feet.
o Blue Cross/Blue Shield is building a 220,000 square foot customer
service center in Durham and Federal Express plans a new 100,000
square foot sorting facility on Atlantic Avenue in Raleigh. John
Deere is building a 250,000 square foot plant on 60 acres off NC-55.
AT&T, GTE, and MCI hired approximately 2,100 residents in 1996 and
expect to hire more in 1997. MCI alone expects to add 1,000 workers
over the next several years.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
Retail Sales
In an 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 market place. The following table summarizes retail sales in the
Raleigh-Durham area over the past 10 years.
================================================================================
Retail Sales History
================================================================================
Raleigh-Durham South Atlantic
Chapel Hill North Carolina Region
================================================================================
1985 $ 3,973,862 $34,422,973 $238,701,434
- --------------------------------------------------------------------------------
1986 $ 4,251,058 $36,513,521 $253,773,354
- --------------------------------------------------------------------------------
1987 $ 4,291,034 $37,612,644 $272,738,949
- --------------------------------------------------------------------------------
1988 $ 4,795,120 $41,374,913 $295,576,924
- --------------------------------------------------------------------------------
1989 $ 6,161,720 $44,059,284 $306,821,204
- --------------------------------------------------------------------------------
1990 $ 6,093,748 $45,755,966 $325,787,291
- --------------------------------------------------------------------------------
1991 $ 6,216,681 $46,077,984 $328,761,764
- --------------------------------------------------------------------------------
1992 $ 7,703,763 $50,740,976 $357,144,734
- --------------------------------------------------------------------------------
1993 $ 8,523,839 $55,205,958 $388,230,167
- --------------------------------------------------------------------------------
1994 $ 9,231,530 $60,196,014 $418,511,879
- --------------------------------------------------------------------------------
1995 $10,331,943 $65,780,996 $445,367,994
- --------------------------------------------------------------------------------
Compound
Annual Growth 10.0% 6.7% 6.4%
================================================================================
Source: Survey of Buying Power, Sales & Marketing Management
================================================================================
According to the data, retail sales within the Raleigh-Durham-Chapel Hill
area have grown at a compounded annual rate of 10.0 percent, considerably
outpacing both state and regional sales growth.
Conclusion
The outlook for the Raleigh-Durham MSA is generally positive based upon
past performance and projections for future growth. Population growth in the
region has outpaced most areas of the United States, a trend which is expected
to continue above national figures over the next five years. In addition, gains
in average household income and a diversified economy support the relative
stability of the area. Overall, employment levels have been growing at rates
above state and national averages relatively consistent and the area enjoys a
low cost of living. As such, it should continue to be attractive to industry.
High technology's commitment to the area and state government's hub of activity
in Raleigh are clear bonuses to the entire triangle area.
Based on our analysis, we believe that it is reasonable to conclude that
the area should remain relatively stable over the near term, while its long term
prospects are difficult to foresee. On balance, it is our opinion that a
continuation of an optimistic attitude about the economy can be supported over
the foreseeable future.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
[GRAPHIC OMITTED]
Map indicating location of New Hope Commons
<PAGE>
NEIGHBORHOOD DESCRIPTION
================================================================================
Overview
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, or a mixture
of commercial and residential properties, is called a neighborhood.
General
The subject property is situated at the northeast quadrant of U.S. Highway
501-15 and Interstate 40 in the southwest section of the City of Durham. It is
just east of the city limits of Chapel Hill. U.S. Highway 501-15 has its own
exit off of Interstate 40. Heading east on the highway the subject is on the
left and is accessed via a signaled intersection at Mount Moriah Road. The
subject's neighborhood can be defined as an east/west corridor along Highway
501-15, extending from Old Ervin Road and Fordam Boulevard (501-15 Bypass) to
the west, to Academy Road and Valley Road (Highway 751) on the east. The
neighborhood also runs north along Cornwallis Road and south along Route 54.
Access/Linkage
The subject neighborhood is located in the southwestern sector of Durham,
in one of the fastest developing areas in the region. Access to the area is most
easily achieved by Interstate 40 (north/south) and U.S. Highway 501-15
(east/west). Interstate 40 also provides good regional access, as does
Interstate 85, approximately four miles to the north of the subject.
The primary traffic carriers include Highway 501-15, Highway 751, and
Cornwallis Road. Each of these are four to six lane aerials linking the
neighborhood with the majority of Durham. At the time of our inspection, Highway
505-15 was being improved in front of the subject. Highway 501-15 runs east west
past the subject and links Durham with the City of Chapel Hill. Highway 751 is
located just east of the subject and runs north/south through Durham. Cornwallis
Road is accessed off either of the previously mentioned highways and runs from
the northwest corner of Durham, through the city and links Durham with the
Research Triangle Park.
Surrounding Land Use Patterns
Predominant land uses in the subject neighborhood consist of a mixture of
commercial developments, including retail centers, fast food restaurants,
automotive service stations, and various other service-related facilities.
Approximately four miles to the northeast of the subject is Duke University.
East of the subject, across Garett Road is a large residential neighborhood
including both single and multi-family developments. Directly to the north and
northeast of the subject is predominantly land in farm use. There are no major
developments at the subject intersection, however, to both the east and west
along Highway 501-15 are major commercial developments including a new Home
Depot approximately 1/4 mile east and the South Square Mall. This 788,600 square
foot regional mall was constructed in 1975, and the anchors are J.C. Penny,
Dillard's, and Belk-Legget. There has been a substantial amount of peripheral
development in the vicinity of the mall. Currently, Blue Cross/Blue Shield is
constructing a 220,000 square foot customer service center.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Neighborhood Description
================================================================================
The South Square Mall is surrounded by several retail centers including
Oak Creek Village, Westgate Shopping Center, and University Commons. Each of
these centers were constructed within the last 10 years and have attempted to
feature discount stores selling apparel, office equipment, and home improvement
items. The newest development is the Oak Creek Village, located just to the east
of the subject. The center totals 116,665 square feet, and includes a TJ Maxx
and DSG Sports. It was constructed in 1990, and features 25 stores.
The largest retail development in Durham is the Northgate Mall, located
approximately 7 miles to the north, south of Interstate 85, at Gregson Street.
The mall totals 920,000 square feet and was constructed in 1960. Sears and
Harris Teeter have been anchors at the mall since its opening, and Hecht's
recently constructed a separate 150,000 square foot space adjacent to the mall,
with its own parking structure. The mall features a total of 130 tenants.
Summary
The subject property benefits from its location at an easily accessible
intersection in the southwestern quadrant of Durham. From its proximity to
Chapel Hill, to its accessibility from all parts of the region, the subject is
clearly capable of capturing a substantial amount of retail expenditure
potential. Further, the subject is situated in the growth path for Chapel Hill,
increasing the future outlook for the neighborhood. 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 into the
foreseeable future which bodes well for real estate values.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL MARKET ANALYSIS
================================================================================
Property Profile
The subject property is anchored by a number of national retail tenants,
some of which are unique to the Durham area retail market. These major tenants
include Wal-Mart, Marshalls, Uptons, Linens 'N Things, Barnes & Noble, Old Navy,
and Best Buy.
Provided below is a summary of the credit profile of several of these
major tenants. Combined, they account for in excess of 81 percent of contractual
base rents.
================================================================================
Anchor Tenants Parent Company S&P Rating(1) % of Base Rents
================================================================================
Wal-Mart Wal-Mart AA 27.4%
- --------------------------------------------------------------------------------
Best Buy Best Buy NR 12.5%
- --------------------------------------------------------------------------------
Linens 'N Things Linens 'N Things NR 7.4%
- --------------------------------------------------------------------------------
Marshalls CVS Co. BBB+ 6.4%
- --------------------------------------------------------------------------------
Barnes & Noble Barnes & Noble BB 8.0%
- --------------------------------------------------------------------------------
OfficeMax OfficeMax NR 5.6%
- --------------------------------------------------------------------------------
Zany Brainy Zany Brainy NR 4.4%
- --------------------------------------------------------------------------------
Michaels Michaels BB- 4.1%
- --------------------------------------------------------------------------------
Old Navy Clothing Gap Inc. CP-A1 4.8%
- --------------------------------------------------------------------------------
Uptons Uptons NR 0.7%
- --------------------------------------------------------------------------------
81.3%
================================================================================
(1) Ratings current as of February 1997
================================================================================
Trade Area Analysis
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 major 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.
In order to define and analyze the subject's market potential, it is
important to first establish the boundaries of the trade area from which the
subject draws 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 serves a dual purpose in the community. That is to say that it
acts as both a convenience center for the residents living in the immediate
neighborhood as well as a community/power center by virtue of the larger
destination tenants such as Marshalls, Uptons, Barnes & Noble, Old Navy
Clothing, and Office Max.
As such, a clear understanding of the property type is important in order
to place the subject in its proper competitive context. The subject meets the
definition of both a community center and a power center to some degree. Each
can be defined as follows:
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
o A community center provides a wider range of facilities for the sale
of soft lines (wearing apparel for men, women, and children) and
hard lines (hardware and appliances). The community center makes a
greater variety of merchandise available-in sizes, styles, colors,
and prices. It is built around a junior department store, variety
store, or discount department store as the major tenant, in addition
to a supermarket. It does not have a full-line department store,
though it may have a strong specialty store or stores. In theory,
its typical size is 150,000 square feet of gross leasable area, but
in practice, it may range in size from 100,000 to 450,000 square
feet.
o The power center is a loosely defined term that can generally be
characterized as a grouping of retail stores that:
o collectively totals at least 250,000 square feet;
o includes at least one major anchor containing 100,000 square
feet or more, that is either a discount department store or
warehouse club;
o includes at least four smaller, category specific anchor
tenants of 25,000 square feet or more. These anchor stores
will typically have a narrow focus but deep selection in
specific merchandise lines such as building supplies/home
improvement goods, consumer electronics, off-price apparel,
sporting goods, books, personal computer hardware and
software, office supplies, toys, pet supplies, deep discount
drugs, bulk foods, or tapes and records;
o should contain a minimum of smaller shop space (10 percent or
so of the center's total gross leasable area); and
o will typically be configured in an open-air strip, "L" or "U"
shaped layout.
We have not been provided with any customer survey reports or shopper zip
code lists that would help identify the boundaries of the primary and secondary
trade areas. Therefore, we have made certain reasonable assumptions of the
extent of this area based upon other physical, demographic, and geographic data
available.
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 to the subject's position.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Retail Structure
In order to examine the subject property in its proper context, we must
examine the nature of the competition. By virtue of the market structure, the
subject competes with certain retail establishments throughout the general area.
Provided on the following pages are profiles of each of the centers. As will be
seen, the subject's primary competition is seen in local community-oriented
retail centers with similar tenant mixes. The subject also competes to some
degree with existing regional and specialty shopping centers such as the South
Square and Northgate Malls. It is noted, however, that the subject is a unique
property within this market whereas no existing centers truly present a similar
competitive stance to New Hope Commons.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Competitive Retail Center No. 1 (Primary)
Name: Oak Creek Village
Location: U.S. 501 and Garrett Road
Durham, North Carolina
Owner/Developer: Kimco
Distance from Subject: 1+/- miles (2+/- min. drive time)
Year Opened/Renovated: 1985
Total GLA: 116,665+/- SF
Anchor Tenants: T.J. Maxx 23,756+/- SF
DSG Sports 15,976+/- SF
------------
Total 39,732+/- SF
In-Line Shop GLA: 76,933+/- SF
Number of Shops: 25+/- stores
Land Area: 15.5+/- acres
Parking/Ratio: 4.89 spaces per 1,000 SF of GLA
Comments:
Oak Creek Village is located just east of the subject along the north side
of U.S. Highway 501-15. It is an average quality center with 25 tenants built in
1985. The two anchors are T.J. Maxx and DSG Sports. In-Line tenants include more
local type operators such as Salem Sleep, Audio Visions, Phil's Shoes, a
dry-cleaners, Quali-Cuts, Frame Warehouse, and three restaurants. There are no
outparcel tenants. There is currently only one in-line space available,
consisting of 1,600+/- square feet. Rents at this center are currently averaging
$10-14 per square foot.
This center is included as a primary competitor due to its proximity to
the subject as well as the TJ Maxx which has a similar store format and is a
competitor with Marshalls. The subject, however, provides a much broader mix of
merchandise and national retail tenants.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Competitive Retail Center No. 2 (Primary)
Name: Oxford Commons
Location: N/E/C of Roxboro and Oxford Roads
Durham, North Carolina
Owner/Developer: Developers Diversified Realty Corp.
Distance from Subject: 8+/- miles northeast
(15+/- min. drive time)
Year Opened/Renovated: 1991
Total GLA: 325,500+/- SF
Anchor Tenants: Eckerd 9,042+/- SF
Wal-Mart 118,266+/- SF
Lowe's 80,869+/- SF
Food Lion 30,690+/- SF
Brendle's Jewelry 40,8000 SF
-------------
Total 278,867+/- SF
In-Line Shop GLA: 46,633+/- SF
Number of Shops: 25+/- stores
Land Area: 42+/- acres
Parking/Ratio: 1,931 cars/5.9 per 1,000 square feet
Comments:
Oxford Commons is located in northern Durham at the intersection of
Roxboro and Oxford Roads, north of Interstate 85. It was constructed in 1991,
and is anchored by Wal-Mart, Lowe's, Food Lion, and Brendle's Jewelry Showroom.
There is a good number of local tenants at this center which is currently 100
percent occupied. Average rents in this center are quoted from $12.00 to $17.00
per square foot. Oxford Commons has good access and is within close proximity to
the Northgate Mall. Retail sales are reported at $170 per square foot, exclusive
of the majors.
Besides at the subject, the other Wal-Mart located in Durham or Chapel
Hill is at Oxford Commons. The center is the only development in Durham similar
in size to the subject. A tenant which is unique to Durham at Oxford is Lowe's.
However, the location of a newly developed Home Depot with a mile of the
subject, as well as a Michaels at the subject, serves the same purposes to the
subject area. The subject, offers a deeper merchandising mix and more convenient
access in a less congested area of Durham.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Competitive Retail Center No.3 (Secondary)
Name: South Square Mall
Location: U.S. Highway 501-15 and
Chapel Hill Boulevard
Durham, North Carolina
Owner/Developer: Faison/Southsquare Associates
Distance from Subject: 3+/- miles east (5+/- in. drive time)
Year Opened/Renovated: 1975/1985
Total GLA: 788,600+/- SF
Anchor Tenants: Belk-Legget 159,232+/- SF
Dillard's 123,733+/- SF
JC Penney 150,000+/- SF
-------------
Total 432,965+/- SF
Mall Shop GLA: 35,635+/- SF
Number of Mall Shops: 100+/- stores
Land Area: 53+/- acres
Parking/Ratio: 4,481 cars/5.7 per 1,000 square feet
Comments:
The South Square Mall is the second largest retail center in Durham. It
was the first major development in the subject neighborhood, and is credited for
the recent growth of commercial uses along Highway 501-15. The center contains a
blend of national and local fashion-oriented retailers and complimentary
restaurants. JC Penny, Dillard's and Belk-Legget anchor the mall. Mall-shop
tenants include B. Dalton, Camelot Music, Benetton, The Gap, Radio Shack, GNC,
Thom McAn, Ritz Camara Center, and The Limited.
Rental rates reportedly average $20.00 to $30.00 per square foot for
in-line shops, with tenant finish allowances in the $5.00 to $15.00 per square
foot range. Mall shop occupancy is nearly 99 percent, with only one store
currently available.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Other Competition
There exists various nodes of retail development throughout the immediate
area that also offer varying degrees of competition to the subject. There are a
number of strip centers that, because of their major tenants and merchandising,
do offer themselves as some competition, albeit limited, to the subject.
o Westgate Shopping Center - Located to the south of South Square
Mall, this community shopping center contains 203,197+/- square feet
and is currently anchored by Drug Emporium and Toys 'R Us. Circuit
City took the space previously occupied by Home Quarters. The center
has ten other tenants including a Burger King and Applebees, both on
outparcels. Lease rates reportedly range from $11.00 to $14.00 per
square foot. This center benefits from its proximity to the South
Square Mall, however, lacks exposure and good access. The subject is
a considerably superior center when its quality and mix of tenants
is considered.
o Northgate Mall - This 920,000+/- square foot regional mall is
located approximately 7 miles northeast of the subject. It was
constructed in 1960, with a new 150,000+/- SF Hecht's Department
store pad development which opened in 1993. Other anchors at the
mall include Sears (200,000+/- SF), Belk Leggett (104,000+/- SF) and
Harris Teeter (35,OOO+/- SF). The 130 mall-shops contain a mix of
national and local fashion-oriented retailers and a food court.
Occupancy is approximately 97 percent, with in-line leases averaging
$18.00 to $25.00 per square foot. Northgate Mall was constructed in
1960, and has had several upgradings over the years, including 1993.
Shop sales are reported at $300 per square foot.
o University Mall & Plaza - This 353,000 square foot enclosed center
is anchored by Belk Leggett and Dillards. The single level center
was built in 1973 and has approximately 60 mall shops. The center is
owned by North Hills Inc. The mall is located about 3 miles south of
the subject at the intersection of US 501-15 and Estes Drive. The
center is dated and has poor visibility. Occupancy is estimated at
85 percent and sales at $200 per square foot. The agent would not
reveal average rent levels but we estimate them to be in the $10.00
to $14.00 per square foot range.
o The Shoppes at Lakewood - The Shoppes at Lakewood, is a 200,OOO+/-
SF community shopping center located on Chapel Hill Boulevard,
approximately 2.5 miles north of Highway 501-15, in a residential
neighborhood. The center is anchored by Byrd's Foods, Carolina
Office Supply, and Carmike Cinemas. In-line stores include True
Value Hardware, Tuff Fashions, Beach Bingo, Carolina Rent-A-Center,
Piedmont Decorators, and Weaver's Jewelers. The center was
constructed in 1987, and remains in good condition. Occupancy is
reported to be 97.5 percent with leases ranging from $9.00 to $12.00
per square foot for in-line space. This center is situated to draw
the majority of its patrons from the surrounding neighborhood and
does not directly compete with the subject.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
o Kmart Plaza - This 234,490+/- square foot center was constructed in
1968, and is located at Avondale Road near Interstate 85 and the
Northgate Mall. It is approximately 8 miles northeast of the subject
and is anchored by Kmart, Winn-Dixie, Phar-Mor, and Carmike Cinemas,
with a number of local, in-line tenants, with several small
restaurants. Occupancy is reported near 100 percent. The Kmart and
other anchor spaces are dated, with areas of deferred maintenance.
The condition of the in-line shops is good.
o The Village - The Village is a 230,000+/- SF community shopping
center located east of the subject on North Miami Boulevard,
approximately 10 miles from the subject. It is an older center
constructed in 1958 and is anchored by Byrd's Foods, Kerr Drugs, and
Roses Stores. The in-line tenants consist of smaller, local stores
including a record shop, post office, and several restaurants. This
is an average quality community center which caters to the local
neighborhood patron. Occupancy is reported at 84%, with in-line
rents averaging $12 to $14 per square foot.
New Hope Commons is unique to the Durham area. Primary competition to the
subject is seen in Oak Creek Village and South Square Mall due to their
proximity, and to some extent the TJ Maxx at Oak Creek Village. Oxford Commons
is also classified as primary competition because it is the only other power
center in Durham or Chapel Hill, and has the only other Wal-Mart in the area.
Secondary competition derives from smaller, mainly neighborhood shopping centers
with only one or two competing anchors to the subject (i.e. discount apparel
stores). These centers compete to some degree with New Hope Commons but more or
less help to balance the mix of retail infill for this quadrant of Durham.
Northgate Mall is also considered secondary competition due to its location in
north Durham. The existence of the secondary centers is considered a benefit,
rather than a hindrance, reinforcing the commercial draw of the Durham market.
New/Proposed Development
The most significant new retail development in the area is the Gateway at
Northpointe located on I-85 at the Guess Road (Exit 175) interchange. According
to the Durham Planning Department, the 32.5 acre site is approved for 253,150
square feet of retail development. The owner, Sodi Inc., has announced that Home
Depot is signed and under construction (119,020 square feet). The project
envisions two restaurant pads, a 55,000 square foot Hannaford supermarket, and
other retail of 55,000 square feet. The first phase should be completed by the
fall. The second phase is expected to contain retail and about 300 residential
units.
The other most significant new retail development is a new Loews Home
Center on Route 501/15, one and one-half miles south of the subject at Sage
Road. This building was observed to be under construction and is expected to be
completed in August.
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Trade Area Definition
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
transportation provides the basis for regional access to the area. Second,
regional competition and geographic boundaries help to define the potential size
of the trade area as a measure of distance from the property. Third, the
merchandising mix and anchor alignment provide the basic draw of customers that
are likely to patronize the property.
New Hope Commons is located in a developing area of the Durham
metropolitan area, situated just west of Chapel Hill. It is located at the
intersection of U.S. Highway 501-15 and Interstate 40. These routes provide
excellent east-west/north-south access to the property.
As discussed, the location and accessibility of competing centers has
direct bearing on the formation and make-up of the subject's trade area as well.
The subject competes most directly with Oxford Commons and South Square Mall,
although neither have truly comparable configurations. South Square Mall
actually helps provide exposure for the subject, due to the fact the exit for
the mall off I-40 is the US 501-15 exit. Secondary competition is seen in other
area community centers which are anchored by only one or two competing anchor
tenants, namely groceries and off-price or discount retailers.
Finally, it is important to note that other neighborhood centers,
freestanding "category killers", and outlet malls all represent a strong force
in the market's competitive environment. Certainly there is a place for both in
most retail environments, including the subject region. Collectively, they
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 in the delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers and the strength and
composition of the retail infill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Community and Power Centers tend to have trade areas which extend roughly
six miles in any direction and contain approximately 150,000 to 200,000
residents with 60,000 to 70,000 households and income levels in excess of
$35,000 per household. As such, it is our opinion that the 5 mile radius
surrounding the subject property comprises the primary trade area from which 70
to 80 percent of its sales originate.
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<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
DEMOGRAPHIC STATISTICS
New Hope Commons (Durham, N.C.)
Cushman & Wakefield, Inc.
- ------------------------------------------------------------------------------------------------------------
3-Mile 5-Mile 10-Mile Raliegh/ State of United
Radius Radius Radius Durham MSA North Carilina States (000)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
POPULATION STATISTICS
1980 21,125 67,967 190,892 665,236 5,881,768 226,546
1990 29,946 89,985 230,268 855,545 6,628,637 248,710
1996 38,337 104,872 260,170 1,036,154 7,382,905 265,038
2001 44,565 119,323 288,164 1,165,187 7,871,295 277,157
Compound Annual Change
1980 - 1990 3.55% 2.85% 1.89% 2.55% 1.20% 0.94%
1990 - 1996 4.20% 2.58% 2.06% 3.24% 1.81% 1.07%
1996 - 2001 3.06% 2.62% 2.06% 2.38% 1.29% 0.90%
- ------------------------------------------------------------------------------------------------------------
HOUSEHOLD STATISTICS
1980 8,263 23,087 70,015 236,386 2,043,292 80,390
1990 13,071 34,066 91,994 334,506 2,517,026 91,947
1996 16,646 41,288 106,166 413,531 2,875,170 100,131
2001 19,395 47,000 117,952 471,116 3,107,619 105,244
Compound Annual Change
1980 - 1990 4.69% 3.97% 2.77% 3.53% 2.11% 1.35%
1990 - 1996 4.11% 3.26% 2.42% 3.60% 2.24% 1.43%
1996 - 2001 3.10% 2.63% 2.13% 2.64% 1.57% 1.00%
- ------------------------------------------------------------------------------------------------------------
AVERAGE HOUSEHOLD INCOME
1980 $27,093 $22,949 $19,245 $19,258 $17,332 $20,307
1990 $50,670 $45,304 $37,587 $39,369 $33,242 $38,453
1996 $82,069 $74,575 $62,152 $63,670 $49,748 $49,031
2001 $102,708 $94,917 $80,587 $81,475 $62,330 $61,543
Compound Annual Change
1980 - 1990 6.46% 7.04% 6.92% 7.41% 6.73% 6.59%
1990 - 1996 8.37% 8.66% 8.74% 8.34% 6.95% 4.13%
1996 - 2001 4.59% 4.94% 5.33% 5.06% 4.61% 4.65%
- ------------------------------------------------------------------------------------------------------------
PER CAPITA INCOME STATISTICS
1980 $10,597 $7,795 $7,058 $6,958 $6,133 $7,298
1990 $22,267 $17,746 $15,499 $15,629 $12,885 $14,420
1996 $36,305 $30,330 $26,020 $25,801 $19,585 $18,905
2001 $45,643 $39,695 $34,305 $33,558 $25,028 $24,240
Compound Annual Change
1980 - 1990 7.71% 8.57% 8.18% 8.43% 7.71% 7.05%
1990 - 1996 8.49% 9.34% 9.02% 8.71% 8.73% 4.62%
1996 - 2001 4.68% 5.53% 5.68% 5.40% 4.17% 5.10%
- ------------------------------------------------------------------------------------------------------------
SOURCE: Equifax National Decision Systems
============================================================================================================
</TABLE>
<PAGE>
Retail Market Analysis
================================================================================
Given all of the above, a primary trade area for the subject property
would likely span an area encompassing about 3 to 5 miles around the center. The
subject's secondary trade area might span up to 10 miles from the site due to
its unique merchandising which cannot be found in many areas of Durham and
Chapel Hill.
Based on these observations, together with our discussions with ownership,
we believe that the primary trade area for the subject would extend outward to a
radius of approximately 5+/- miles from the property. To add perspective to this
analysis, we have segregated our survey into 3, 5, and 10-mile concentric
circles. The report in the Addenda presents this data.
Population
Once the market has been established, the focus of our analysis centers on
the statistical data of the trade area, including population. Equifax National
Decision Systems (ENDS) provides historical, current and forecasted population
estimates for the trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. A detailed profile of
the trade area is included in the Addenda of this report.
Between 1980 and 1997, ENDS reports that the population within the primary
trade area increased by 36,905 residents to 104,872, reflecting a 54.3 percent
increase or 2.6 percent annual growth. Through 2002, the trade area is expected
to continue to increase to 119,323 residents which is equal to an additional
13.8 percent increase or 2.6 percent growth per annum. Expanding to the total
trade area (10 miles) the population increases to 260,170.
Further analysis shows that the fastest growing quadrant of the trade area
lies within a 5 mile radius of the site. The largest forecasted growth is
located northwest of the subject. This area is projected to see growth between
13 and 20 percent over the next five years.
Provided on the following page are graphic representations of the
population density and change forecasted for the subject's trade area through
2002. Note that the most densely populated areas as well as those communities
forecasted to have the most significant growth are found immediately to the
northwest, west and southwest of the subject. With limited competition to the
west, the subject is expected to focus its marketing efforts on these
communities where it stands to benefit from an increased capture rate of retail
expenditure potential.
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:
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<PAGE>
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HWY 501 & I-40 DURHAM, NC 3, 5, & 10 MILE RINGS
<PAGE>
[GRAPHIC OMITTED]
HWY 501 & I-40 DURHAM, NC 3, 5, & 10 MILE RINGS
<PAGE>
Retail Market Analysis
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o The population is living longer on average. This results in an
increase of single and two person households.
o The divorce rate increased dramatically during the 1980s, again
resulting in an increase in single person households.
o Many individuals have postponed marriage, also resulting in more
single person households.
According to ENDS, the primary trade area added 18,141 households between
1980 and 1997, an increase of 78.6 percent to 41,228 units. Consistent with the
national trend, the trade area is experiencing household growth at a rate in
excess of population changes, or 3.5 percent per annum. Between 1997 and 2002
the area is expected to continue household formation, but at a slightly slower
pace of 2.7 percent per year. The faster household growth relative to
population growth is consistent with the data for the Raleigh-Durham area.
Expanding to the total trade area (10 miles), the number of households
increase to nearly 118,000. Correspondingly, a greater number of smaller
households with fewer children generally indicates more disposable income. In
1980, there were 2.94 persons per household in the primary trade area and by
1997, it is estimated to have decreased to 2.54. We note that the area within
the 3 to 5 mile radius has been, and is expected to continue to be the fastest
growing quadrant.
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.
Trade area income figures for the subject support the profile of a
middle-upper income market. According to ENDS, average household income within
the primary trade area in 1997 is approximately $74,575. Within the closer-in
3-mile radius, the income level is shown to be $82,069.
A comparison of the trade area's relative ranking is shown on the
following chart.
================================================================================
Average Household Income Comparison
================================================================================
1997 2002 Compound
Area Income Income Annual Growth
================================================================================
3 Mile Radius * $82,069 $102,708 4.6%
- --------------------------------------------------------------------------------
5 Mile Radius * $74,575 $ 94,917 4.9%
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10 Mile Radius $62,152 $ 80,587 5.3%
- --------------------------------------------------------------------------------
Raleigh-Durham $63,670 $ 81,475 5.1%
- --------------------------------------------------------------------------------
State of North Carolina $49,748 $ 62,330 4.6%
================================================================================
*Primary Trade Area
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Source: Equifax National Decision Systems
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Retail Market Analysis
================================================================================
From the above we see that the area is forecasted to experience income
growth in excess of long term inflation which is estimated at 3.0 to 3.5
percent, resulting in real income gains. The distribution of income within the
primary trade area can be summarized as follows:
================================================================================
Household by Income
================================================================================
Category % of Households
================================================================================
More Than $150,000 8.1%
- --------------------------------------------------------------------------------
$100,000 - $149,999 10.4%
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$ 75,000 - $ 99,999 11.5%
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$ 50,000 - $ 74,999 21.4%
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$ 35,000 - $ 49,999 12.2%
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$ 25,000 - $ 34,999 10.4%
- --------------------------------------------------------------------------------
Less Than $25,000 26.0%
================================================================================
Provided on the following page is a graphic presentation of the average
household income distribution throughout the trade area. As can be seen, the
subject is situated in the heart of one of the region's most affluent areas.
Generally, the lower income areas are found to the northeast. The higher income
areas of are to the to west and southeast and tend to surround the subject.
Market Overview
Through our survey of the Durham retail market, we found four centers
within the primary trade area which compete with the subject and four in the
secondary trade area. Vacancies in these centers generally ranged under 20
percent. At the time of this valuation there were no vacancies at the subject,
although a couple of tenants were in transition.
Our observations of the subject neighborhood show that the overall vacancy
rate is less than 5 percent. The 2 most proximate centers, Oak Creek Village and
South Square Mall, each located just east of the subject on Highway 501-15, both
have vacancies below 2 percent. In our opinion, due to the high quality of the
subject improvements, its desirable location with good access and exposure, and
the uniqueness of the development to the Durham area, the vacancy rate should
continue to remain below 5 percent for the subject neighborhood.
As previously discussed, rents at the competing centers for in-line
tenants range from $9.00 to $30.00 per square foot. The majority of the rents
fall between $14.00 and $18.00 per square foot. Signed in-line rents at the
subject property are generally between $15.00 and $19.00 per square foot. The
subject rents appear to be at market and at the upper end of the comparable
retail centers in the neighborhood.
Subject Sales Productivity
The subject opened in the fourth quarter 1995. As such, sales history
exists for several tenants. Provided on the following page is a summary of
reported sales for the subject.
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HWY 501 & 1-40 DURHAM, NC 3, 5, & 10 MILE RINGS
<PAGE>
Retail Market Analysis
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================================================================================
New Hope Commons
1996 Sales Performance
================================================================================
Tenant GLA (SF) Sales Sales PSF
================================================================================
Wal-Mart 149,929 $35,804,555 $239
Michaels 19,064 $ 3,225,740 $169
Marshalls 31,134 $ 4,724,625 $152
Shoe Show * 2,635 $ 277,400 $105
Cosmetic Center 6,572 $ 1,229,319 $187
Linens N Things * 31,999 $ 6,405,700 $200
Wire Free Communications 600 $ 178,909 $298
Chesapeake Bagel 2,400 $ 622,368 $259
Omega Sports 6,968 $ 750,956 $108
Old Navy - The Gap 17,512 $ 7,164,404 $409
Part City * 8,000 $ 1,278,400 $160
Shoe Department * 4,125 $ 683,460 $166
Mens Wearhouse 5,000 $ 1,374,508 $275
Great Clips 900 $ 156,894 $174
Barnes & Noble 25,200 $ 5,958,627 $236
Zany Brainy * 13,010 $ 2,591,280 $199
325,048 $72,427,445 $223
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* Annualized based on 10 or 11 months of actuals
================================================================================
In the first full year of operation, the subject achieved sales of
approximately $72.4 million. This figure is annualized for a few tenants who did
not report full year sales. By far, the top producer is Wal-Mart with sales of
$35.8 million or $239 per square foot resulting in close to 50 percent of the
center's sales. Wal-Mart is open 24 hours per day at New Hope Commons. The most
productive store on a unit rate basis is Gap-Old Navy which generated sales of
$409 per square foot. Other majors such as Uptons, Best Buy and Office Max do
not report sales.
On an overall basis, the center reported sales of approximately $223 per
square foot in 1996. We can compare its performance to industry averages as
shown below.
Industry Average Sales
Sales at the subject property can be analyzed in comparison to industry
averages. In our initial appraisal in early 1996 we felt the subject had the
potential to perform above regional and even national benchmarks. The following
chart presents a comparison of average sales by center category for both power
centers and community centers in the U.S.
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Retail Market Analysis
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<TABLE>
<CAPTION>
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Comparison of Sales and Rent
Power Center and Community Center Tenants
==============================================================================================================
U.S. Median * U.S. Median * U.S. Median **
Retail Power Center Super Community Centers Community Center
- --------------------------------------------------------------------------------------------------------------
Sales Rent % of Sales Rent % of Sales Rent % of
Tenant Classification PSF PSF Sales PSF PSF Sales PSF PSF Sales
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Department Store $180.00 $ 3.42 1.9% $165.00 $ 3.50 2.1% $142.00 $ 4.41 3.1%
- --------------------------------------------------------------------------------------------------------------
Superstore (Food) $285.00 $ 4.58 1.6% N/A N/A N/A $372.00 $ 5.79 1.6%
- --------------------------------------------------------------------------------------------------------------
Restaurant (w/Liquor) $234.00 $ 15.90 6.8% $223.00 $ 13.99 6.3% $210.00 $ 12.58 6.0%
- --------------------------------------------------------------------------------------------------------------
Shoes $187.00 $ 12.00 6.4% $180.00 $ 12.00 6.7% $159.00 $ 13.00 8.2%
- --------------------------------------------------------------------------------------------------------------
Cards & Gift $105.00 $ 12.50 11.9% $136.00 $ 12.62 9.3% $127.00 $ 12.36 9.7%
- --------------------------------------------------------------------------------------------------------------
Women's Ready to Wear $122.00 $ 10.20 8.4% $167.00 $ 13.48 8.1% $146.00 $ 12.16 8.3%
- --------------------------------------------------------------------------------------------------------------
Overall Average $197.00 $ 7.22 3.7% $188.00 $ 6.85 3.6% $210.00 $ 7.19 3.4%
- --------------------------------------------------------------------------------------------------------------
Median $200.00 $ 6.33 3.2% $183.00 $ 6.80 3.7% $199.00 $ 6.90 3.5%
- --------------------------------------------------------------------------------------------------------------
Lower Decile $ 87.00 $ 3.60 4.1% $107.00 $ 3.21 3.0% $117.00 $ 3.36 2.9%
- --------------------------------------------------------------------------------------------------------------
Upper Decile $292.00 $ 14.36 4.9% $314.00 $ 12.33 3.9% $371.00 $ 12.71 3.4%
==============================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Center, 1997"
==============================================================================================================
</TABLE>
Overall, average sales performance may be refined further as shown in the
following chart.
<TABLE>
<CAPTION>
=====================================================================================================
Sales Performance Indices
U.S. Power Centers and Community Centers
=====================================================================================================
Power Centers * Super Community Centers * Community Centers **
- -----------------------------------------------------------------------------------------------------
Southern Southern Southern
United States Region United States Region United States Region
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Overall Average $197 $189 $188 $174 $210 $192
- -----------------------------------------------------------------------------------------------------
Median $200 $200 $183 $176 $199 $189
- -----------------------------------------------------------------------------------------------------
Lower Decile $ 87 $107 $116 $117 $117
- -----------------------------------------------------------------------------------------------------
Upper Decile $292 - $314 $234 $371 $312
=====================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
=====================================================================================================
</TABLE>
From the above we see that industry averages and medians range from
approximately $189 to $200 per square foot for power centers and $174 to $188
per square foot for super community centers. This is based on the 1995 ULI
publication. More recently, ULI has put forth its 1997 version of operating
results for standard community centers. Displayed above is a range of $189 to
$210 per square foot as average/median performance ranges. Upper and lower
decile levels show more dramatic swings as would be expected. Nonetheless, with
sales of $223 per square foot, the subject falls above average/median industry
benchmarks.
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WAKEFIELD(R)
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Retail Market Analysis
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Conclusion
We have analyzed the retail trade history and profile of the Durham MSA
and 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 were presented. The trade area profile discussed encompassed a
radii based analysis that was established based upon a study of the competitive
retail structure. Marketing information relating to these sectors was presented
and analyzed in order to determine patterns of change and growth as it impacts
the subject. The given data is useful in establishing quantitative dimensions of
the total trade area, while our comments serve to provide qualitative insight
into this market. A compilation of this data provides the basis for our
projections and forecasts particular to the subject property. The following
summarizes our key conclusions.
o The neighborhood has good vehicular access via Highway 501-15 and
Interstate 40, as well as several neighborhood arterials. The
subject enjoys a visible location and is centered in the principal
commercial hub for this quadrant of the city.
o The existing trade area structure is largely characterized by
traditional neighborhood centers as well as community centers
anchored by grocery or discount stores. There are three regional
malls in Durham/Chapel Hill, the South Square Mall and University
Mall (primary market), and Northgate Mall, (secondary market). The
attraction for South Square is enhanced by its high degree of
peripheral development. University Mall is decidedly inferior and
Northgate is too far away from the subject.
o The subject benefits from an affluent local population. Average
household income within a 5 mile radius of the property is currently
estimated at $74,575. Expanding into the full 10 mile trade area,
the income level declines slightly to $62,152. Nonetheless, this
figure is well above state and county levels.
o The subject benefits from its tenant mix which is unique to the City
of Durham, as well as its location on the border of Durham and
Chapel Hill.
o The center is well positioned in an area that is forecasted to
continue to witness substantial population and household growth. The
population within a 10 mile radius is currently estimated at 260,170
and by 2002 it is expected to increase by 10.8 percent to nearly
288,164.
Because of the high level of population growth, new retail development
will inevitably occur. However, we believe the subject has created a true
barrier to entry for new direct competition within its immediate market area.
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<PAGE>
Retail Market Analysis
================================================================================
Our analysis concludes that the merchandising mix of the center, the
location along two major arterials, and the popularity and uniqueness of the
major tenants, all combine to establish New Hope Commons as a viable retail
center in its trade area. We believe that, with competent management, aggressive
marketing, and a responsive maintenance program, it should continue to maintain
a strong position in the market throughout the foreseeable future.
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: N/W/C of U.S. 501-15 and Interstate 40
City of Durham
Durham County, North Carolina
Shape: Irregular
Site Area (owned): 39.522+/- acres
Frontage: Northwest side of New Hope Commons Drive
South side of Mt. Moriah Road
Topography/Terrain: Relatively level
Street Improvements: New Hope Commons Drive and Mt. Moriah Road
are two-way, two lane arterials fronting over
half the sites' perimeter. They are macadam
paved with concrete curbing, sidewalks,
street lighting and overhead utilities.
Soil Conditions: No study of soils was conducted as part of
this appraisal and no opinion is rendered on
sub-soil conditions. 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.
Utilities
Water: City of Durham
Sewer: City of Durham
Electricity: Duke Power and Light
Gas: Public Service Gas
Telephone: General Telephone Company
Access: Primary access is gained via Mt. Moriah Road,
which intersects with U.S. Highway 501-15
(North/South). lngress/ egress is gained via
curb-cut entrances along Mt. Moriah Road (2)
and New Hope Commons Drive (2). The site has
limited visibility from U.S. Highway 501-15
and is situated one half block north of
Interstate 40.
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Property Description
================================================================================
Land Use Restrictions: We were provided with an ALTA/ACSM Survey
Certification prepared by Phillip Post &
Associates dated May 7, 1997. The report
cites various utility and reciprocal easement
agreements which seem to be typical for such
a land use. We do not know of any other
easements, encroachments or restrictions that
would adversely affect the site's use.
Flood Hazard: The subject property lies in a flood zone.
The undeveloped portion of the property to
the northwest of the building improvements is
low-lying wetlands. The improvements were
constructed at a higher elevation than the
flood plain area and appear to be less prone
to flooding.
Wetlands: No wetlands study has been provided for this
analysis. Our analysis reveals the presence
of regulated wetlands, located in the
northwestern portion of the site which was
deeded to the City of Durham. An extensive
approval process was necessary prior to the
property being eligible for development.
Site Improvements: The subject site has been graded, paved and
improved with all necessary underground
and overhead utilities.
Hazardous Substances: Please refer to our Assumptions and Limiting
Conditions with an explanation as to our
disclaimer regarding hazardous substances.
Comments: Overall, the size, topography and site
configuration appear functionally adequate
and conducive for retail utilization. The
site is serviced by all public utilities and
the curb appeal of site improvements is good.
It should be noted that the extreme western
portion of the site is located in Orange
County. This area is entirely vacant and
contains no building improvements. The City
and County of Durham have been the lead
jurisdictions since all building improvements
are situated in those areas.
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<PAGE>
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WALMART -- "As Constructed" Survey Update
<PAGE>
Property Description
================================================================================
Improvements Description
The subject site has been improved with a single-level retail center with
a total GLA of 467,137+/- square feet (including non-owned parcels). A more
complete description of these improvements follows. Please refer to the site
plan on the previous page for the location of the improvements on the subject
tract.
General Description
Type: Powed/community center comprised of nine
major stores, several in-line retail
tenants. Uptons owns their own pad and
store.
Year Built: 1994-1995
Size: Wal-Mart 149,929+/- SF Uptons* 58,845+/- SF
Best Buy 45,000+/- SF Linens N' Things
31,999+/- SF Marshalls 31,134+/- SF Barnes
& Noble 25,200+/- SF OfficeMax 23,248+/- SF
Michaels 19,064+/- SF Old Navy Clothing
17,512+/- SF In-Line Shops 66,029+/- SF
Total GLA 467,137+/- SF Total Owned GLA
408,292+/- SF * Pad Sale (not included in
owned GLA)
Developer: Homart Development Company
Construction Detail
Foundations: Poured reinforced concrete.
Framing: Structural steel frame, column and beam
construction.
Floors: Poured concrete slab on porous fill and
vapor barrier.
Exterior Walls: Face brick on concrete block.
Roof Structure: Steel deck.
Storefronts: Safety glass with aluminum framing. Most
store-fronts are uniform in appearance.
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Property Description
================================================================================
Pedestrian Doors: Safety glass in aluminum frame; mixture of
manual and electrically operated tempered
glass doors.
Loading/Rear Service Doors: In-line shops have flush type single metal
doors at grade. Anchors have depressed
drive-way loading docks with hollow metal
overhead doors. Wal-Mart has an automotive
customer service area to accommodate
automotive repair services.
Mechanical Detail
Heating and Cooling: HVAC is provided via individual
roof-mounted heat pumps for which tenants
are responsible for maintenance and
operational costs. A standard distribution
system of ducts, ceiling diffusers, grills,
register, thermostats, etc. has been
designed and constructed by landlord, based
on open space and interior partitions.
Plumbing: Water and sanitary sewer connections for
each tenant suite (required for one
lavatory and one water closet in restroom)
are installed. Water and sewer usage is
metered individually and billed to tenants
by the local utility.
Electrical Service: Adequate commercial service is provided for
each tenant space and billed directly by
Duke Power and Light for usage.
Fire Protection: The buildings are completely sprinklered in
accordance with local regulations. Fire
hydrants are provided throughout the
property.
Interior Detail
Layout and Design: The center has been constructed in an
elongated shape containing four
non-contiguous structures which has been
designed to conform to the site. Wal-Mart
anchors the western end of the center,
while Uptons (non-owned) anchors the
eastern end.
Best Buy and Office Max are situated in a
separate building opposite Wal-Mart. Units
120 - 125 contain a number of smaller
tenants in a separate building at the
southeast quadrant of the site. Barnes &
Noble is found in a separate building
opposite this multi tenant unit.
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[GRAPHIC OMITTED]
NEW HOPE COMMONS - Durham, NC
<PAGE>
Property Description
================================================================================
Interior finishes have been completed per
specification of the tenant. Anchor stores
typically are built-out with vinyl
composite tile over concrete, painted
drywall, recessed fluorescent light
fixtures, and exposed ceiling deck with
beams and joist exposed.
Other tenants have suspended acoustical
tile ceilings, painted drywall, recessed
fluorescent lighting, 12 to 14 foot ceiling
height, and various floor coverings,
including carpet and ceramic tile.
Outparcels: There are no owned outparcels.
Hazardous Substance: Please refer to the Assumptions and
Limiting Conditions (No. 10) for a more
complete discussion of our disclaimer
concerning hazardous substances.
Site Improvements
On-Site Parking
Standard 2,084 Stalls
Handicap 48 Stalls
------------
Total 2,132 Stalls
Parking areas are graded and surfaced with
bituminous concrete paving suitable to
local conditions. The lot is striped
throughout.
Parking Ratio: 4.6 spaces per 1,000 SF of
GLA (including non-owned Uptons).
Landscaping: Landscaping is primarily comprised of
native plant species, including sable palm
and other shrubbery and grass.
Other: Parking lot lighting is provided with
anodized aluminum high intensity lighting.
Comments: Overall, the site and building improvements
appear to be well designed and configured
for retail utilization. Site configuration
appears well suited for vehicular movement
and visibility.
Analysis of the structural integrity of
each building is beyond our expertise and
best made by a professional engineer.
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Property Description
================================================================================
Our review of the local environs reveals
that there are no extraordinary external
influences which negatively impact the
value of the subject property.
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REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is currently assessed by Durham County, and
identified as Parcel 477-02-001. A vacant portion of the subject is situated in
Orange County and identified as Parcel No. 752053. The Assessor's office of
Orange County indicated that all assessment and taxation was performed by Durham
County for the subject property.
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Durham County Assessment
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I.D. No. 477-02-001
================================================================================
Land $ 7,904,000
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Building Improvements $19,160,100
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Miscellaneous Improvements $ 489,900
- --------------------------------------------------------------------------------
Total $27,554,000
================================================================================
The current tax rate for property in Durham is 1.6397 per $100 of assessed
valuation. Therefore, taxes for 1997 are estimated to be approximately $451,803.
We have utilized a stabilized 3.0 percent growth rate over the balance of the
holding period to account for changes to the tax burden.
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ZONING
================================================================================
The subject property is zoned in a Shopping Center designation by the City
of Durham. This district allows for a variety of commercial uses, including
retail, and site development is governed by plan review. At the time of
valuation, the City was redefining its zoning ordinances and the subject zone
may be reclassified with a new designation.
We are not experts in the interpretation of complex zoning ordinances. The
subject has been constructed within the confines of the Shopping Center
regulations. As such, we assume that all general requirements have been met and
that the existing improvements conform to code.
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
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.
We have evaluated the site's highest and best use improved and as if
vacant. In both cases 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. Because the site is improved with
improvements that generate an important return, the focus of the highest and
best use is on the site as improved.
As Vacant
The site is large enough to accommodate a variety of uses, including
office and retail development. Its street frontage and good access further
support this view. All utilities are available and the site is relatively level.
Overall, the site appears to have no physically limiting conditions.
The Shopping Center designation is designed primarily for commercial
utilization. Based on the site's size and layout, with consideration given to
parking constraints, a shopping center of similar size to the existing
improvements may be a permitted use. Due to the site's frontage and proximity to
other commercial uses, we believe that retail uses would be a legally conforming
use for the site.
The retail market is improving and is generally in equilibrium in many
markets. In addition, we see no significant changes in the local demographics
which might threaten the economic viability of the subject site.
The last test of highest and best use is that of maximum productivity. In
this case, the site is located in a developing portion of the city. Existing
neighborhood uses further compliment the site. The subject's size, location and
proximity to regional road networks and residential nodes, lead us to the
conclusion that the Highest and Best Use for the subject property, as if vacant,
would be for a new shopping center.
As Improved
An alternative use 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. Therefore, we have
concluded that the highest and best use of the site as improved is for retail
utilization as a shopping center.
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VALUATION PROCESS
================================================================================
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 power and large
community centers. The estimation of obsolescence for functional and economic
conditions as well as depreciation on improvements makes this approach sometime
problematic. Furthermore, the Cost Approach fails to fully consider the value of
anchor store commitments and the difficulty of site assemblages for such
properties. As such, the 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 subject. 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
================================================================================
Methodology
The Sales Comparison Approach provides an estimate of 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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 unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The chart on the Following Page presents an overview of the improved
property sales used in this analysis.
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<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Anchor Sale
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as Price/
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total Sq.Ft.
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7% $112.19
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
2 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129 459,209 92.0% $69.32
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200 41.9% $99.85
I-85 @ W. T. Harris. Blvd. Excellent
Charlotte, North Carolina
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4 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384 43.6% $78.13
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
5 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837 73.2% $128.83
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
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6 Kmart Center Feb-96 1994/1995 $23,134,700 1,224,036 22.6% 276,500 140,221 50.7% $83.67
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
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7 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134 81.1% $113.97
Santa Clara County Excellent
Milpitas, California
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8 Mansell Crossing Dec-94 1994 $34,400,000 1,481,040 21.6% 319,499 202,229 63.3% $107.67
NWC/Georgia 400 & Mansell Excellent
Fulton County
Atlanta, Georgia
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9 Sheridan Plaza Sep-94 1973/91 $57,350,000 2,178,000 21.8% 475,600 262,236 55.1% $120.58
NW 56th & Sheridan St. Good
Broward County
Hollywood, Florida
====================================================================================================================================
Survey High: $57,350,000 2,178,000 -- 499,129 459,209 -- $128.83
Survey Low: $12,240,000 984,456 -- 156,670 68,384 -- $69.32
====================================================================================================================================
Survey Average: $32,544,633 1,384,609 23.1% 319,483 211,192 66.1% $101.58
====================================================================================================================================
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale NOI/ Occupancy
No. Name/Location Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. $11.21 9.99% Bed Bath & Beyond, 100.0% New power-oriented center in tourist
International Drive & Touch One Ross, Old Navy, T.J. area. Incl. $650,000 outpad site. Anchor
Orange County Maxx, Books-A-Million rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida Shoe Carnival 11.0%; term cap 10.0%
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2 Lawrenceville Market Center $6.59 9.50% Target*, Home Depot*, 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 AMC, Goody's, Linens N Estate Investment Management
Lawrenceville, Georgia Things, Marshalls, MJ * Ground Lease
Design, PetsMart
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Village at University Place $9.84 9.85% Best Buy, Office Depot, 100.0% Other anchors at center are Wal-Mart
I-85 @ W. T. Harris. Blvd. TJ Maxx, Rhodes and Sam's Club. This is a pre-sale of
Charlotte, North Carolina Furniture new center developed by Hawn.
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4 Miller Square Plaza $7.81 10.00% Publix 92.0% Community center, block & stucco. Fair=
13898 SW 56th Street Eckerd Drug avg exposure, Anchor rents appx. $7-
Dade County, Theater (gr.lease) $9/sf; in-line shops $12-$19/sf.
Kendall, Miami, Florida J. Byrons (not owned)
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5 Preston Shepard Place $12.11 9.40% Marshalls, Steinmart, 100.0% New ctr. in affluenct area. Traffic counts
SWC/Preston & Park Blvd. Office Depot, Baby >37,000 & 45,000/day. Buyer used
Colling County, Superstore, MJ Des., 10.5% IRR & 9.25% terminal cap in
Plano, Texas Borders, HomePlace analysis. Avg. rent = $15.73/sf.
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6 Kmart Center $7.93 9.48% Kmart 97.0% Community center; block & tilt; good
10501 Pines Boulevard Food Lion exposure. Rental rates range from $8-
Broward County, $20/sf.
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
7 McCarthy Ranch $10.60 9.30% Service M'dise, 100.0% Pre-sale of power ctr with good access &
Santa Clara County SportsMart, Borders, freeway exposure. Wal-Mart not included
Milpitas, California OfficeMax, PetsMart, in sale. Buyer used 11.2% IRR. Anchor
Computer City, Ross rents $9.70-18.70/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
8 Mansell Crossing $9.80 9.10% AMC Theatres, 99.0% One-story, concrete blk & brick center
NWC/Georgia 400 & Mansell Uptons, TJ Maxx, located appx 0.8 miles south of North
Fulton County OfficeMax, Pount Mall. Avg shop rent=$15.23/sf. Ctr
Atlanta, Georgia Sports Authority also has Toys R Us, Michaels.
- ------------------------------------------------------------------------------------------------------------------------------------
9 Sheridan Plaza $10.97 9.10% Office Depot 95.0% Power center purchase based on a
NW 56th & Sheridan St. Publix 10.8% IRR, term. cap of 9.25-9.50%.
Broward County J. Byrons Sale included development of 15,000sf
Hollywood, Florida AMC Theatres Luria's. Sales b/w $200-$300/sf.
====================================================================================================================================
Survey High: $12.11 10.00% -- 100.0%
Survey Low: $6.59 9.10% -- 92.0%
====================================================================================================================================
Survey Average: $9.65 9.52% -- 98.1%
====================================================================================================================================
</TABLE>
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, nine comparable
sales have been analyzed for this analysis. These represent large community and
power center sales in the south, southwest, southeast, and eastern regions of
the United States. The sales range between $69.32 and $128.83 per square foot of
GLA sold with overall capitalization rates ranging from a low of 9.10 percent to
a high of 10.0 percent. These transactions occurred between September 1994 and
include a current agreement of sale, with the majority of sales taking place
over the past two years.
For the nine sales surveyed, the mean overall sale price is calculated to
be $101.58 (rounded). The mean gross leasable area sold is 319,483 square feet,
with the mean overall price per square foot calculated at $101.58 per square
foot. Finally, the survey shows a mean NOI of $9.65 per square foot, with an
overall capitalization rate of 9.52 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
condition must be accounted, thereby creating a time adjusted normal unit of
comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. The comparables were all encumbered by
a number of leases with varying sized tenants and expiration dates. We believe,
then, that no adjustment to the market data is necessary for the property rights
conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis
were accomplished with cash and/or cash and market oriented financing.
Therefore, no adjustment for financial terms is required for the comparables.
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Sales Comparison Approach
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Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale may
significantly affect transaction prices. However, all sales used in this
analysis are considered to be "arms-length" market transactions between both
knowledgeable buyers and sellers on the open market. Therefore, no adjustment
for conditions of sale are required for the comparables.
Market Conditions
As discussed in the "Trade Area Analysis" section of this report, the
subject property is expected to continue capturing a substantial share in its
market area. Many retail markets are now considered to be over-built. For
instance, many markets have experienced a flood of new big box users over the
past several years. This has been the direct result of the explosive retail
market in the mid to late 1980s and following the recession of the early
1990s. As such, fewer transactions have transpired over the last few years as a
result of the inability of knowledgeable buyers and sellers to come to terms.
High vacancy rates, declining rental and growth rates, expected expense growth,
and an abundance of competition, combined with competition from alternative
investments and general lack of financing, have served to depress the market for
retail space. For this reason, negative adjustments might be considered
appropriate for older sales in this analysis.
Still, well performing retail projects have become an attractive
investment to such entities as foreign and domestic insurance companies, pension
funds and syndication's. Moreover, the majority of sales presented have all
taken place within the last 12 to 18 months. Adjustments for market conditions
are difficult at best in this kind of analysis. Thus, no market condition
adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed in the
"Regional" and "Retail Market" sections of this report, Raleigh-Durham has been
the recipient of substantial growth and is poised for continued vitality into
the foreseeable future.
From a review of the sales, there appear to be no glaring locational
differences between comparables. It is noted, however, that several of the sales
are located in areas which are experiencing somewhat better population and
income growth, which would be considered superior to the subject location.
Likewise, some of the properties are in markets which are experiencing either
negative or slower growth and could be considered inferior to the subject.
Several of the properties are also situated in significantly larger trade
areas/regions which would be considered superior to Durham.
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Sales Approach
================================================================================
Physical Traits
Most sales presented were constructed during the mid-1990s with the
exception of Sale No. 9, which involved the reconfiguration of an older strip
center into a power center format. All sales were considered to be in good
condition at sale and no measurable physical adjustments can be readily
quantified. Some upward adjustment would be considered appropriate for Sale No.
9.
Economic Characteristics
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $10.47 per square foot) is presented in the "Income
Approach" section of this report and is based on first year NOI.
================================================================================
Price Per SQ/FT Adjustment Chart
================================================================================
Comp.
Sale Subject Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
================================================================================
1 $11.21 $10.47 .93 $112 $105
- --------------------------------------------------------------------------------
2 $ 6.59 $10.47 1.59 $ 69 $110
- --------------------------------------------------------------------------------
3 $ 9.84 $10.47 1.06 $100 $106
- --------------------------------------------------------------------------------
4 $ 7.81 $10.47 1.34 $ 78 $105
- --------------------------------------------------------------------------------
5 $12.11 $10.47 .86 $129 $112
- --------------------------------------------------------------------------------
6 $ 7.93 $10.47 1.32 $ 84 $111
- --------------------------------------------------------------------------------
7 $10.60 $10.47 .99 $114 $113
- --------------------------------------------------------------------------------
8 $ 9.80 $10.47 1.07 $108 $115
- --------------------------------------------------------------------------------
9 $10.97 $10.47 .95 $121 $115
================================================================================
Survey
Mean: $ 9.65 $10.47 1.12 $102 $110
================================================================================
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Sales Comparison Approach
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $105 to $115 per square foot with a mean of
approximately $110 per square foot. The subject's net operating income per
square foot of $10.47 (FY 1998) is considered to be most comparable to Sales
Nos. 1, 3, 5, 7 and 9. These improved property sales show adjusted unit rates
ranging between $105 and $115 per square foot of gross leasable area.
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, however, do not explicitly convey by
themselves 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.
The subject is viewed as being the dominant power/community center in an
area with excellent demographics, and limited competition. It is well leased
with several tenants that are unique to the market. Continued upside exists
through the potential for overage rents as the center matures.
Considering the characteristics of the subject relative to the above, we
believe that a unit rate at the low to middle of the range of $105 to $108 per
square foot is appropriate. Applying this unit rate range to 408,292 square feet
of owned GLA results in a value of approximately $42.8 to $44.1 million for the
subject property.
Based upon a net income of $4,275,703, a range of overall capitalization
rates extending from 9.70 to 10.0 percent is generated by the indicated value.
This range is considered to be reasonable for a property of the subject's
caliber.
Conclusion
In light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the rounded range of Forty
Three Million Dollars ($43,000,000) to Forty Four Million Dollars ($44,000,000),
as of July 11, 1997.
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<PAGE>
INCOME APPROACH
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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, the discounted cash flow analysis is the
most applicable.
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 of 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 on the capitalization of the next year's projected
net income.
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 market value of the subject, operations are considered to be
at stabilization. Thus, the direct capitalization method will provide additional
support in the valuation process.
Discounted Cash Flow
The Discounted Cash Flow 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 indicative of the subject property's current value in the marketplace.
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<TABLE>
<CAPTION>
ANNUAL CASH FLOW REPORT
New Hope Commons
Cushman & Wakefield, Inc. 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING INCOME
MINIMUM RENT
Anchors $ 3,018,793 $ 3,027,425 $ 3,027,425 $ 3,091,264 $ 3,104,702 $ 3,104,702 $ 3,104,702
Specialty Tenants $ 873,574 $ 911,052 $ 924,929 $ 953,813 $ 972,101 $ 991,775 $ 1,023,735
Junior Anchors $ 607,209 $ 608,906 $ 608,906 $ 639,333 $ 652,862 $ 652,862 $ 652,862
----------- ----------- ----------- ----------- ----------- ----------- -----------
Subtotal: $ 4,499,576 $ 4,547,383 $ 4,561,260 $ 4,684,410 $ 4,729,665 $ 4,749,339 $ 4,781,299
RECOVERIES
Common Area Maint. $ 326,530 $ 337,519 $ 347,047 $ 356,970 $ 367,327 $ 378,486 $ 390,149
Real Estate Taxes $ 464,621 $ 479,762 $ 493,989 $ 508,428 $ 523,616 $ 538,587 $ 555,155
Insurance $ 81,294 $ 84,104 $ 86,629 $ 89,133 $ 91,818 $ 94,130 $ 97,004
----------- ----------- ----------- ----------- ----------- ----------- -----------
Subtotal: $ 872,445 $ 901,385 $ 927,665 $ 954,531 $ 982,761 $ 1,011,203 $ 1,042,308
Overage Rent $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Sales Volume (000) $ 75,582 $ 77,850 $ 80,185 $ 82,557 $ 85,069 $ 87,567 $ 90,249
Gross Rental Income: $ 5,372,021 $ 5,448,768 $ 5,488,925 $ 5,638,941 $ 5,712,426 $ 5,760,542 $ 5,823,607
----------- ----------- ----------- ----------- ----------- ----------- -----------
Credit Loss ($ 60,713) ($ 62,637) ($ 63,428) ($ 65,687) ($ 67,192) ($ 68,227) ($ 69,832)
Miscellaneous $ 25,365 $ 25,999 $ 26,649 $ 27,315 $ 27,998 $ 28,698 $ 29,415
----------- ----------- ----------- ----------- ----------- -----------
Total Income: $ 5,336,673 $ 5,412,130 $ 5,452,146 $ 5,600,569 $ 5,673,232 $ 5,721,013 $ 5,783,190
OPERATING EXPENSES
EXPENSES
Common Area Maint. $ 282,153 $ 290,617 $ 299,336 $ 308,316 $ 317,565 $ 327,092 $ 336,905
Real Estate Taxes $ 459,710 $ 473,501 $ 487,706 $ 502,337 $ 517,407 $ 532,929 $ 548,917
Insurance $ 78,865 $ 81,231 $ 83,668 $ 85,178 $ 88,764 $ 91,427 $ 94,169
Miscellaneous $ 15,263 $ 15,720 $ 16,192 $ 16,678 $ 17,178 $ 17,693 $ 18,224
Management Fee $ 224,979 $ 227,369 $ 228,063 $ 234,220 $ 236,483 $ 237,467 $ 239,065
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses: $ 1,060,970 $ 1,088,438 $ 1,114,965 $ 1,147,729 $ 1,177,397 $ 1,206,608 $ 1,237,280
NET OPERATING INCOME $ 4,275,703 $ 4,323,692 $ 4,337,181 $ 4,452,840 $ 4,495,835 $ 4,514,405 $ 4,545,910
Alterations $ 0 $ 0 $ 0 $ 983 $ 0 $ 4,582 $ 0
Commissions $ 0 $ 0 $ 0 $ 780 $ 0 $ 4,282 $ 0
Replacement Reserve $ 40,829 $ 42,054 $ 43,316 $ 44,615 $ 45,954 $ 47,332 $ 48,752
Subtotal: $ 40,829 $ 42,054 $ 43,316 $ 46,378 $ 45,954 $ 56,196 $ 48,752
NET CASH FLOW $ 4,234,874 $ 4,281,638 $ 4,293,865 $ 4,406,462 $ 4,449,881 $ 4,458,209 $ 4,497,158
<CAPTION>
ANNUAL CASH FLOW REPORT
New Hope Commons CAGR CAGR
Cushman & Wakefield, Inc. 2005 2006 2007 2008 1998-07 2OOO-07
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<S> <C> <C> <C> <C> <C> <C>
OPERATING INCOME
MINIMUM RENT
Anchors $ 3,104,702 $ 3,211,909 $ 3,236,043 $ 3,236,043 0.8% 1.0%
Specialty Tenants $ 1,039,127 $ 1,017,727 $ 1,076,242 $ 1,086,252 2.3% 2.2%
Junior Anchors $ 664,778 $ 720,937 $ 738,600 $ 738,600 2.2% 2.8%
----------- ----------- ----------- ----------- --- ---
Subtotal: $ 4,808,607 $ 4,950,573 $ 6,050,885 $ 5,060,895 1.3% 1.5%
RECOVERIES
Common Area Maint. $ 401,172 $ 410,719 $ 426,720 $ 437,551 3.0% 3.0%
Real Estate Taxes $ 571,634 $ 586,348 $ 606,975 $ 623,517 3.0% 3.0%
Insurance $ 99,913 $ 100,861 $ 104,138 $ 106,554 2.8% 2.7%
----------- ----------- ----------- ----------- --- ---
Subtotal: $ 1,072,719 $ 1,097,928 $ 1,137,833 $ 1,167,622 3.0% 3.0%
Overage Rent $ 0 $ 0 $ 0 $ 3,060 --- ---
Sales Volume (000) $ 92,957 $ 95,535 $ 98,618 $ 101,514 3.0% 3.0%
Gross Rental Income: $ 5,881,326 $ 6,048,501 $ 6,188,718 $ 6,231,577 1.6% 1.7%
----------- ----------- ----------- ----------- --- ---
Credit Loss ($ 70,719) ($ 71,478) ($ 75,119) ($ 75,679)
Miscellaneous $ 30,151 $ 30,904 $ 31,677 $ 32,469 2.5% 2.5%
----------- ----------- ----------- ----------- --- ---
Total Income: $ 5,840,758 $ 6,007,927 $ 6,145,276 $ 6,188,367 1.6% 1.7%
OPERATING EXPENSES
EXPENSES
Common Area Maint. $ 347,012 $ 357,423 $ 358,145 $ 379,190 3.0% 3.0%
Real Estate Taxes $ 565,385 $ 582,346 $ 599,817 $ 617,811 3.0% 3.0%
Insurance $ 96,994 $ 99,904 $ 102,901 $ 105,988 3.0% 3.0%
Miscellaneous $ 18,771 $ 19,334 $ 19,914 $ 20,512 3.0% 3.0%
Management Fee $ 240,430 $ 247,528 $ 252,544 $ 253,198 1.3% 1.5%
----------- ----------- ----------- ----------- --- ---
Total Expenses: $ 1,268,592 $ 1,306,535 $ 1,343,321 $ 1,376,699 2.7% 2.7%
NET OPERATING INCOME $ 4,572,166 $ 4,701,392 $ 4,801,955 $ 4,811,668 1.3% 1.5%
Alterations $ 0 $ 23,958 $ 0 $ 13,635 -- --
Commissions $ 0 $ 20,344 $ 0 $ 13,035 -- --
Replacement Reserve $ 50,215 $ 51,721 $ 53,273 $ 54,871 3.0% 3.0%
--- ---
Subtotal: $ 50,215 $ 96,023 $ 53,273 $ 81,541 3.0% 3.0%
NET CASH FLOW $ 4,521,951 $ 4,605,369 $ 4,748,682 1.3% 1.4%
</TABLE>
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Income Approach
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In this Income Approach to the valuation of New Hope Commons, we have
utilized a 10 year holding period for the investment with the cash flow analysis
commencing on August 1, 1997. Investors typically look at holding periods
between 10 and 15 years. We have tested the sensitivity of the present value
over a 10 to 15 year time horizon and chosen a 10 year period as being a
realistic time to sell. Although an asset such as the subject has a much longer
useful life, an 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
considered long enough to model the asset's performance and profit from a
focused effort on maximizing its tenant mix, but short enough to reasonably
estimate the expected income and expenses of the real estate. Please note that
our cash flows are provided on a fiscal year basis.
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 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
expectations of the investment universe for this type of real estate. Cushman &
Wakefield regularly surveys these market participants. The results of our most
recent Investor Survey are referenced in the report.
By forecasting the anticipated income stream and discounting future value
at reversion to 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 an important long term investment opportunity for a competent
shopping center owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software 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. Following is a detailed discussion of the components
which form the basis of this analysis.
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, and
reimbursement of certain expenses incurred in the ownership and operation of the
real estate.
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Income Approach
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The minimum base rent represents a legal contract establishing a return to
the 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. The 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. In the initial year of the
investment, fiscal year 1998, it is projected that the subject property will
generate approximately $5.4 million in potential gross revenues, equivalent to
$13.22 square foot of total appraised GLA of 408,292 square feet. These
forecasted revenues may be allocated to the following components:
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New Hope Commons
Revenue Summary
Initial Year of Investment - FY 1998
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Revenue Component Amount Unit Rate* Income Ratio
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Minimum Rent $4,499,576 $11.02 83.4%
Overage Rent $ 0 $ 0 0%
Expense Recoveries $ 872,445 $ 2.14 16.2%
Miscellaneous $ 25,365 $ 0.06 .5%
Total $5,397,386 $13.22 100.0%
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* Based on 408,292 square feet of owned GLA
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Minimum Rental Income
The 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
vacant space (if applicable) market rent growth, and renewal/ turnover
probability.
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. The 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.
The minimum rents forecasted at the subject property are essentially
derived from various tenant categories: anchor tenant revenues consisting of
base rent obligations, and tenant revenues consisting of all specialty and
in-line shops, including junior anchors.
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
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Income Approach
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of the trade area. Consequently, the best measure of minimum rental income can
sometimes be its actual rent roll leasing schedule. This is particularly true
for a project of the subject's caliber with very little in the way of true
competition.
Further analysis shows that rents from anchor tenants (defined as tenants
in excess of 20,000 square feet) comprise the majority of minimum rent,
accounting for 67 percent of the total minimum rent. Anchor tenant base rents
can be summarized as follows:
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Tenant Demised Area (SF) Initial Rent (PSF)
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Wal-Mart 149,929 $ 8.12
- --------------------------------------------------------------------------------
Marshalls 30,311 $ 9.00
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Linens N Things 31,999 $10.25
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Best Buy 45,000 $12.50
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Office Max 23,248 $10.50
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Barnes & Noble 25,200 $14.50
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From the above we see base rent ranging from $8.12 to $14.50 per square
foot. Lease terms generally are for 10 to 20 years and most tenants have options
which we deem to be favorable. As such, it is not inherently necessary to
forecast market rents for lease renewal. In the Addenda we have provided
comparable rents for other big box tenants on a regional/national basis which
supports the range of rents achieved at New Hope Commons.
Junior Anchor/Specialty Tenants
The subject has several other large in-line tenants as well as several
smaller regional/local tenants that contribute significant revenues to the
operation of the center. Generally we see an inverse relationship between suite
size and rent. That is, as the suite size increases, the average base rent
starts to decline. Provided below is summary of achieved base rents for the
balance of the space.
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Income Approach
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Tenant Demised Area (SF) Initial Rent (PSF)
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Junior Anchors
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Michaels 19,064 $ 9.10
Old Navy 17,512 $12.00
Zany Brainy 13,010 $15.75
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Other Specialty Tenants
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Under 1,000 SF
Wirefree Communications 600 $21.63
Great Clips 900 $19.06
- --------------------------------------------------------------------------------
1,001 to 3,000 SF
Health Quest* 2,635 $17.00
Chesapeake Bagel 2,400 $18.28
Philly Steak 1,119 $19.06
- --------------------------------------------------------------------------------
3,001 to 5,000 SF
Mattress Firm* 3,150 $18.64
Dollar Tree* 4,050 $16.00
Shoe Department 4,125 $15.50
- --------------------------------------------------------------------------------
5,001 to 10,000 SF
Cosmetic Center 6,572 $15.50
Party City 8,000 $15.00
Omega Sports 6,968 $14.64
Men's Warehouse 5,000 $16.50
Bikes USA* 7,500 $19.10
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* New or Pending Lease
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The subject has been the recipient of some new leasing. Stuarts Plus
(Suite 102) went into bankruptcy and the space has been split between two
tenants as follows:
o Dollar Tree (102B) has signed a lease for 4,050 square to commence
October 1997 for ten years. Initial rent is $16.00 per square foot
and steps to $17.00 per square foot in year six.
o Mattress Firm (102A) - Lease out for signature for the balance of
the 3,150 square feet. Five year deal with 2 five-year options. Rent
is $18.64 per square foot in base term stepping to $21.00 and $22.50
in each option period.
The Mattress Firm lease is expected to be signed shortly. The combined
rent is a substantial increase over the $13.25 per square foot Stuart's Plus was
paying.
o Health Quest (105) - Shoe Show is expected to terminate their lease
and Health Quest will take the space "as is" . Shoe Show is paying
$17.00 per square foot with a step to $18.00 per square foot in
October 1997. The new Health Quest lease is at $17.00 per square
foot with steps to $18.50 and $18.75 per square foot over the five
year term. The lease is currently out for signature.
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Income Approach
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o Bikes USA (123) - Neo Renaissance has signed their lease termination
agreement which will allow Bikes USA to take over the space. The new
lease is expected to commence October 1997 at an initial rent of
$19.10 per square foot with 3 percent annual bumps.
Overall, rents for the junior anchor tenants are in the $9.10 to $15.75
per square foot range while base rents for the smaller specialty tenants range
from $14.64 to $19.10 per square foot.
These lease transactions implicitly support the assumption that,
typically, there is an inverse correlation between unit rates and the amount of
space being leased. We recognize that, in practice, there are unit rate
gradations with tenant categories based on such attributes as location within
the center, unit frontage and depth, tenant type and credit worthiness,
concessions/tenant allowances, etc. However, as the tenant mix and configuration
may not be fixed over time, it is more appropriate to estimate what the average
base rental levels paid at the property would be for the different tenant
categories.
We note that market rental rates for in-line spaces at the primary
competition range between $10-$30 per square foot annually. Typical leases are
triple net and run for three to ten years with annual CPI escalation's or set
increases every three to five years. The rates at these centers, specifically
Oxford Commons and South Square Mall, generally support the in-line rents
reported at the subject. Due to the recent nature of the leasing activity at the
subject, the rents attained at New Hope Commons present the best indication of
current retail market rents.
Conclusion
From the data, it is clear that current market rents at New Hope Commons
are well supported by other competing properties as well as recent leasing
activity in the center itself. The property enjoys an accessible location within
a growing trade area which should only be strengthened by future commercial
development along Highway 501-15 and in southwestern Durham. New Hope Commons is
fully leased with no absorption of vacant space necessary for this analysis. On
balance, we believe that the subject property should remain a viable shopping
destination with a healthy trade area into the foreseeable future.
After considering all of the above, relative to the subject's position in
the market, we have utilized the following market rental rate assumptions for
retail space at New Hope Commons.
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Market Rent Projections
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Suite Size Rental Rate Range Market Rate
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Anchors $ 8.00 to $14.50 $ 9.00
- --------------------------------------------------------------------------------
Under 1,000SF $18.50 to $21.00 $20.00
- --------------------------------------------------------------------------------
1,000 - 2,999 SF $17.00 to $18.50 $18.50
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3,000 - 4,999 SF $15.50 to $16.50 $17.50
- --------------------------------------------------------------------------------
5,000 - 10,000 SF $13.25 to $18.00 $16.50
- --------------------------------------------------------------------------------
Junior Anchors $ 9.00 to $16.00 $12.00
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Income Approach
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Lease Terms
The typical lease term for new non-anchor retail leases in centers such as
the subject generally ranges from three to ten years. Market practice dictates
that it is not uncommon to get rent bumps throughout the lease term 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 (4 percent) annual increase and be capped at a higher maximum (6
to 7 percent) amount. Many leases at the subject property have set increases
which escalate rent either annually or on specified dates throughout the lease
term.
Concessions
Free Rent
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 large, retail centers 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.
The subject has effectively achieved 100 percent occupancy and is viewed
as the premier retail center in the area. As such, we do not feel that it is
necessary to offer free rent.
Tenant Workletter
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that tenant workletter is not typically
offered but often times given as part of tenant negotiation. Some tenants at the
subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. For this analysis, new tenants to the center are given an
allowance of $5.00 per square foot, with renewal tenants receiving no allowance.
Based on our turnover probability of 30 percent, the tenant allowance at
rollover is equal to $1.50 per square foot in 1997. No allowance is provided for
tenants exercising options.
Absorption
The subject property is presently 100 percent leased. We are not aware of
any pending vacancies, other than those mentioned for which replacement leases
are negotiated. As such, an absorption discussion is not relevant.
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's survey of pension fund,
REITs, bank and insurance companies, and institutional
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Income Approach
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advisors reveals that current income forecasts are utilizing average annual
growth rates between zero and 4.0 percent. The low and high mean is shown to be
2.91 and 3.55 percent, respectively
The Peter F. Korpacz Investor Survey (Second Quarter 1997) shows power
centers with average annual rent growth of 2.88 percent and strip centers with
an average of 2.83 percent.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and management's
desire to attract and keep certain tenants that increase the center's synergy
and appeal. With literally no lease-up to contend with as well as having the
newest, most dominant center in the market, management is a formidable position
to command higher rents. After considering the above, we have utilized a rent
growth rate of 3.0 percent per year over the holding period.
Commissions
Based upon our analysis of competing properties within the market as well
as historic leasing activity at the subject, we have made an allowance for
leasing commissions for this assignment. For new leases, a commission of $2.00
per square foot will be charged while renewal leases will be based on 50 percent
of that schedule. With the 30/70 percent turnover/renewal probability
assumption, the blended commission rate for 1997 is $1.30 per square foot of
leased area.
Releasing Assumption
Upon lease expiration, it is our best estimate that there is a 70 percent
probability that an existing tenant will renew their lease, while the remaining
30 percent will vacate their space at expiration. Lease terms are for in-line
specialty tenants are forecasted for 5 years. Our global market assumptions for
non-anchor tenants may be summarized on the following chart.
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Renewal Assumptions
Non-Anchor Tenants
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Lease Free Tenant Alterations
Tenant Type Term Rent Steps Rent Commissions
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Under 1,000 SF 5 yrs. $2.00/SF in Year 4 None Yes
- --------------------------------------------------------------------------------
Over 1,000 SF 5 yrs. $1.50/SF in Year 4 None Yes
================================================================================
Many tenants have set options to renew their leases. Option renewals have
been compared to projected market rents in order to forecast the probability of
tenant options being exercised.
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Income Approach
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Overage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most leases have a natural breakpoint. In a few instances, the
lease provides for a specified breakpoint sales level. The average overage
percentage for small space retail tenants is in a range of 3 percent to 6
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 one measure for protecting the equity investor against
inflation.
We have not initially forecasted any percentage rent for tenants in the
center due to the nature of new construction of the project. We have modeled
actual 1996 tenant sales where provided. Based upon these sales levels, together
with our 3 percent annual growth rate, a very small amount of overage rent is
forecasted at the end of the projection period. Thus, we feel that our
conservative analysis warrants some upside to the projections.
Expense Reimbursement and 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, insurance, and common area maintenance (CAM). In the first year of the
investment, it is projected that the subject property will generate
approximately $872,445 in reimbursements for these operating expenses. This
estimate is equal to approximately $2.14 per square foot of owned GLA.
Miscellaneous revenues in the first fiscal year of the cash flow are
forecasted at $25,365. Revenues in this category include forfeited security
deposits, lease termination fees, construction chargebacks, etc.
Common Area Maintenance
Common area maintenance is recovered from tenants on a pro-rata share
basis. Most tenants are charged an administrative fee between 5 and 15 percent.
In many instances, management fees are also passed through to tenants through
CAM billings. This is viewed as an aggressive leasing structure but one which
appears to have been accepted by most of the specialty tenants, including the
newest leases at the center.
Before being passed through to the tenants, certain deductions are made
from the CAM pool. A portion of Uptons' CAM payment is also excluded. On a
calendar year basis, the 1997 budgeted common area maintenance expense is equal
to $277,300, or $0.60 per square foot of total GLA.
Real Estate Taxes
Real estate taxes are recovered on a pro-rata share basis for tenants at
the center. Utilizing a 1997 tax expense of $451,803, equal to $459,710 in our
fiscal model, the indicated recovery from typical in-line tenants is $1.13 per
square foot.
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INCOME & EXPENSE ANALYSIS
New Hope Commons (Durham, North Carolina) Owned GLA: 408,292
Cushman & Wakefield, Inc.
============================================================================================================
Per Sq/Ft Per Sq/Ft Per Sq/Ft.
Actual of GLA Budget of GLA C&W Forecast of GLA
1996 1996 1997 1997 FY 1998 FY 1998
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OPERATING INCOME
Rental Income: $ 4,286,756 $ 10.50 $ 4,442,479 $ 10.88 $ 4,499,576 $ 11.02
Percentage Rent: $ 0 $ 0.00 $ 0 $ 0.00 $ 0 $ 0.00
Other: $ 14,873 $ 0.04 $ 4,461 $ 0.01 $ 25,365 $ 0.06
Expense Recoveries: $ 819,630 $ 2.01 $ 909.041 $ 2.23 $ 872,445 $ 2.14
----------- ----------- ----------- ----------- ----------- -----------
Potential Gross Income: $ 5,121,259 $ 12.54 $ 5,355,981 $ 13.12 $ 5,397,386 $ 13.22
Vacancy/Credit Loss: $ 0 $ 0.00 $ 0 $ 0.00 ($ 60,713) ($ 0.15)
TOTAL INCOME: $ 5,121,259 $ 12.54 $ 5,355,981 $ 13.12 $ 5,336,673 $ 13.07
OPERATING EXPENSES
Common Area Maintenance: $ 208,640 $ 0.51 $ 277,300 $ 0.68 $ 282,153 $ 0.69
Real Estate Taxes: $ 440,615 $ 1.08 $ 447,285 $ 1.10 $ 459,710 $ 1.13
Insurance: $ 128,220 $ 0.31 $ 130,042 $ 0.32 $ 78,865 $ 0.19
Management Fee: $ 218,082 $ 0.53 $ 225,000 $ 0.55 $ 224,979 $ 0.55
Other Expenses $ 28,763 $ 0.07 $ 5,000 $ 0.01 $ 15,263 $ 0.04
----------- ----------- ----------- ----------- ----------- -----------
Total Expenses: $ 1,024,320 $ 2.51 $ 1,084,627 $ 2.66 $ 1,060,970 $ 2.60
Operating Expense Ratio -- 20.0% -- 20.3% -- 19.9%
NET OPERATING INCOME $ 4,096,939 $ 10.03 $ 4,271,354 $ 10.46 $ 4,275,703 $ 10.47
============================================================================================================
* Includes contingencey for nonrecoverable miscellaneous expenses.
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</TABLE>
<PAGE>
Income Approach
================================================================================
Insurance
Insurance expenses are recovered based upon a pro-rata share with a 15
percent administrative fee. In fiscal year 1998, an expense of $78,865 results
in a recovery of $0.22 per square foot.
Allowance for Vacancy and Credit Loss
Both the investor and the appraiser are 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 and all the tenants were actually 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 provision for permanent vacancy and
credit loss of 4.0 percent among the existing non-anchor tenants.
Effective Gross Income
In the initial year of the investment, effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately $5.3
million, equivalent to $13.07 per square foot of appraised GLA.
================================================================================
Effective Gross Revenue-Summary
Initial Year of Investment - FY 1998
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $5,372,021 $13.16 100.0%
- --------------------------------------------------------------------------------
Less: Vacancy and Credit Loss ($ 60,713) $ 0.15 1.1%
- --------------------------------------------------------------------------------
Effective Gross Income $5,336,673 $13.07 98.9%
================================================================================
Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance, including the management fee. The non-reimbursable
expenses associated with the subject property include a provision for
miscellaneous expenses, as well as other expenses including a reserve for the
replacement of short-lived capital components, leasing commissions and
alteration costs associated with leasing space.
The table on the facing page presents management's actual 1996 and 1997
budgeted expense items along with Cushman & Wakefield's adjusted figures for FY
1998. The table on the following facing page illustrates expenses reported by
the Urban Land Institute (ULI) and the International Council of Shopping Centers
(ICSC). We have compared the owner's budgeted expense items with published data
in order to support our adjusted expense figures.
In total, Cushman & Wakefield has projected operating expenses of $2.60 per
square foot on a fiscal basis. Our forecast of $2.60 per square foot is
consistent with the data presented.
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OPERATING EXPENSE STATISTICS Power & Super-Community Centers
Cushman & Wakefield, Inc. East
===============================================================================================================================
ULI ULI ULI ULI ULI ULI ULI ULI ICSC
--- --- --- --- --- --- --- --- ----
Power Power Super- Super- Super- Super- Community Community Power Ctrs
Centers/ Centers/ Community/ Community Community Community Centers/ Centers/ U.S.
U.S. U.S. U.S. U.S. East East U.S. U.S. Total
Average Median Average Median Average Median Average Median Survey
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Property Profile
- ----------------
Total GLA: 358,619 346,315 316,310 303,896 321,358 294,578 179,931 167,959 --
Total Owned GLA: 295,562 290,533 291,411 285,423 328,159 297,886 167,215 156,543 --
Avg. Sales/sf*: $197.23 $199.81 $187.90 $183.44 $201.01 $169.23 $202.33 $197.73 $127.78
Anchor Sales/sf: -- -- -- -- -- -- -- -- $244.00
- ----------------
Operating Income
- ----------------
Minimum Rent: $7.02 $5.81 $6.35 $5.84 $6.10 $3.87 $6.47 $6.36 $6.92
Overage Rent: $0.50 $0.19 $0.41 $0.29 $0.40 $0.38 $0.38 $0.27 --
CAM Charges: $0.85 $0.68 $0.96 $0.80 $0.89 $0.78 $0.73 $0.61 $0.71
Property Taxes: $0.65 $0.45 $0.63 $0.55 $0.82 $0.76 $0.67 $0.60 $0.80
Insurance: $0.07 $0.07 $0.05 $0.05 $0.04 $0.03 $0.07 $0.06 $0.11
Utilities: $0.27 $0.04 $0.36 $0.07 $0.00 $0.00 $0.19 $0.11 $0.07
Other: $0.00 $0.00 $0.19 $0.12 $0.36 $0.36 $0.17 $0.10 $0.08
- ------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Income: $9.36 $9.01 $9.18 $8.55 $8.82 $6.31 $8.62 $8.27 $8.92
- ------------------
Operating Expenses
- ------------------
Total Maintenance**: $1.29 $0.81 $1.22 $0.99 $1.24 $0.74 $0.87 $0.77 $0.62
Real Estate Taxes: $1.10 $1.05 $0.91 $0.85 $1.14 $0.89 $0.91 $0.83 $1.01
Insurance: $0.15 $0.13 $0.15 $0.13 $0.16 $0.15 $0.14 $0.13 $0.10
Advertising: $0.12 $0.05 $0.19 $0.11 $0.29 $0.10 $0.10 $0.05 $0.06
Administrative***: $0.36 $0.43 $0.50 $0.49 $0.47 $0.38 $0.28 $0.31 $0.22
Management Fee: $0.35 $0.32 $0.33 $0.31 $0.35 $0.33 $0.34 $0.32 $0.29
- --------------- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Expenses: $3.24 $3.21 $3.36 $3.07 $3.34 $3.10 $2.88 $2.72 $2.35
OER: 34.6% 35.6% 36.6% 35.9% 37.9% 49.1% 33.4% 32.9% 26.3%
- --------------------
Net Operating Income $6.13 $5.39 $5.44 $5.22 $5.33 $3.81 $5.67 $5.33 $5.88
- --------------------
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<CAPTION>
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OPERATING EXPENSE STATISTICS Power & Super-Community Centers
Cushman & Wakefield, Inc. East
===============================================================================================
ICSC ICSC ICSC ICSC ICSC
---- ---- ---- ---- ----
Power Ctrs Strip Centers Strip Centers Strip Centers Strip Centers
U.S. U.S. U.S. East East
Centers 100,000- 200,000- Centers Centers
greater than less than less than
200,000sf 199,999sf 399,999sf 100,000sf 100,000sf
===============================================================================================
<S> <C> <C> <C> <C> <C>
- ----------------
Property Profile
- ----------------
Total GLA: -- 137,378 260,677 62,124 182,532
Total Owned GLA: -- 133,557 232,127 62,048 178,373
Avg. Sales/sf*: $118.55 $115.64 $137.23 $128.89 $130.10
Anchor Sales/sf: $254.09 $264.52 $208.79 $343.34 $296.01
- ----------------
Operating Income
- ----------------
Minimum Rent: $7.09 $5.90 $6.50 $10.28 $7.27
Overage Rent: -- -- -- -- --
CAM Charges: $0.68 $0.67 $0.82 $1.04 $0.73
Property Taxes: $0.80 $0.58 $0.84 $1.18 $0.82
Insurance: $0.10 $0.07 $0.07 $0.14 $0.09
Utilities: $0.12 $0.07 $0.08 $0.11 $0.08
Other: $0.10 $0.06 $0.05 $0.26 $0.08
- ------ ----- ----- ----- ------ -----
Total Income: $9.15 $7.35 $8.25 $12.53 $9.19
- ------------------
Operating Expenses
- ------------------
Total Maintenance**: $0.61 $0.72 $0.68 $1.17 $0.86
Real Estate Taxes: $0.89 $0.70 $0.85 $1.48 $0.94
Insurance: $0.10 $0.11 $0.11 $0.20 $0.14
Advertising: $0.05 $0.05 $0.04 $0.04 $0.03
Administrative***: $0.19 $0.09 $0.12 $0.10 $0.06
Management Fee: $0.33 $0.26 $0.29 $0.43 $0.33
- --------------- ----- ----- ----- ----- -----
Total Expenses: $2.23 $1.97 $2.14 $3.67 $2.49
OER: . 24.4% 26.8% 25.9% 29.3% 27.1%
- --------------------
Net Operating Income $6.30 $5.39 $5.96 $9.44 $6.50
- --------------------
* Average sales include all tenants except for ICSC figures which show non-anchor tenants.
** CAM expenses include repairs & maintenance, utilities, and security.
*** Management fees & bad debt allowances have been deducted from administrative costs.
Management has been shown separately.
Source: Urban Land Institute "Dollars & Cents" (1995); International Council of Shopping Centers
"The Score" (1996).
(Because the data are means/medians,detailed amounts do not add to totals).
================================================================================================
</TABLE>
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Income Approach
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Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than necessarily with competitive market forces. Unless
otherwise cited, expenses are forecasted to grow by 3.0 percent per annum over
the holding period.
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property. Expenses are expressed on the basis of our
fiscal model.
Common Area Maintenance - This expense category includes the annual cost
of miscellaneous building maintenance contracts, parking lot maintenance,
recoverable labor and benefits, landscaping, window cleaning,
exterminating, supplies, exterior lighting, trash removal, utilities
including common area energy, and other miscellaneous charges. As
described, ownership can, in some instances, recover the cost of the
property management fee which is estimated at 4.0 percent of minimum and
percentage rent. In our analysis, we have forecasted a CAM expense prior
to management of $282,153, equal to $0.69 per square foot of owned GLA
which is consistent with ownership's budget.
Insurance - Insurance projections of $78,865 have been calculated at $0.19
per square foot annually, based upon property and liability insurance with
the company carrier. This unit rate is consistent with the property's
budget as well as the comparable data presented.
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. In FY 1998, the total tax expense is equal to $1.13
per square foot, or $459,710.
Management - The annual cost of managing the subject property is projected
to be 4.0 percent of minimum rental and percentage income. In the initial
year of our analysis, this amount is shown to be $224,979, equivalent to
$0.55 per square foot of appraised GLA. Our estimate is reflective of a
typical management agreement with a firm in the business of providing
professional management services. This amount is also considered typical
for a retail complex of this size. Our investigation into the market for
this property type indicates an overall range of fee of 3 to 5 percent. We
have chosen the mid-point of the range as we have reflected leasing
commissions separately.
Please note that this expense is not reimbursable by many of the tenants
which primarily include the anchor/junior anchors.
Non-Reimbursable Expenses
Total annual 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 an property similar to the subject would consider reasonable, based
upon projected operations, informed opinion and experience. The
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Income Approach
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following is a summary and discussion of non-reimbursable expenses incurred in
the operation of subject property for the initial year.
Miscellaneous - This catch-all category is provided for various
miscellaneous and sundry expenses that ownership will typically incur.
Such items are unrecovered repair and general and administrative costs,
non-recurring expenses, expenses associated with maintaining vacant space
and bad debts in excess of our credit loss provision would be included
here. In the initial year, these miscellaneous items are forecasted to
amount to approximately $15,263.
Alterations - 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 $5.00
per square foot for turnover space (initial cost growing at expense
inflation rate) weighted by our turnover probability of 30 percent. For
rollover space, no allowance is forecasted. Thus, the weighted rate is
$1.50 per square foot.
Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject, we
have made an allowance for leasing commissions for this assignment. For
new leases, a commission of $2.00 per square foot will be charged, while
renewal leases will be charged $1.00 per square foot. With the 70/30
probability assumption, the blended commission rate for 1997 is $1.30 per
square foot of leased area.
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. We have forecasted a
replacement reserve estimate of $40,829. On the basis of appraised GLA,
this amount is equal to $0.10 per square foot, consistent with industry
figures.
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
investor 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 $10.47
per square foot which is equivalent to 80.1 percent of effective gross income.
Deducting other expenses including capital items results in a net cash flow of
$10.37 per square foot, equivalent to 79.4 percent of effective gross income.
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Income Approach
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================================================================================
Operating Summary
Initial Year of Investment - FY 1998
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Effective Gross Income $5,336,673 $13.07 100.0%
Operating Expenses $1,060,970 $ 2.60 19.9%
Net Income $4,275,703 $10.47 80.1%
Other Expenses $ 40,829 $ 0.10 .8%
Cash Flow $4,234,874 $10.37 79.4%
================================================================================
* Based on total appraised GLA of 408,292+/- SF
================================================================================
Our cash flow model has forecasted the following compound annual growth
rates over the ten year holding period FY 1998-2007.
Net Operating Income 1.3%
Cash Flow 1.3%
Growth rates in net income and cash flow are forecasted to approximate 1.3
percent per annum which is typical of a center such as the subject where its
income from anchor tenants is a principal revenue source with lease structures
that contain only modest rent bumps.
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
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Income Approach
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In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retailers to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A [Neighborhood and Community] centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail - Autumn 1996
================================================================================
Investment Power Centers and Big Box Neighborhood/Community
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50-10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00-15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
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Income Approach
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NATIONAL POWER CENTER MARKET
Second Quarter 1997
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
RANGE 9.50-12.50% 9.00-12.50% N/A
AVERAGE 11.33% 11.25%
CHANGE (Basis Points) -- +8 N/A
Free & Clear Going-in Cap Rate
RANGE 8.75-10.50% 8.50-10.50% N/A
AVERAGE 9.58% 9.58%
CHANGE (Basis Points) -- 0 N/A
Residual Cap Rate
RANGE 9.00-11.50% 8.50-11.50% N/A
AVERAGE 9.96% 9.88%
CHANGE (Basis Points) -- +8 N/A
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Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey -
Second Qtr. 1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
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Income Approach
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A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nevertheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.10 percent to 10.00 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.52 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.75 and 10.00 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. New Hope Commons is a well-located specialty power center in an
attractive growth market. It has a unique tenant alignment and well matched
merchandising mix with several good credit tenants. By virtue of the lease
structure with many of the major tenants, rental growth will tend to lag general
inflation. The upside will be through the ultimate attainment of overage rent,
something we have not forecasted due to lack of adequate sales history.
Nonetheless, an investor has recognized this real short term potential in the
selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen recent retail interest.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.75 and 10.00
percent.
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 pretax 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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
much of a point spread to the terminal rate due to the fact that forecasted
income growth is relatively flat and that the subject has the potential to be
into percentage rent in future years.
Therefore, a projected terminal capitalization rate ranging from 9.75 to
10.25 percent is indicated for the subject property. 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.
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Income Approach
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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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.33 percent for national power center in their
Second Quarter 1997 survey, with a range between 9.50-12.50 percent.
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(%) July 10, 1997
================================================================================
Reserve Bank Discount Rate 5.00%
- --------------------------------------------------------------------------------
Prime Rate (Monthly Average) 8.50%
- --------------------------------------------------------------------------------
3-Month Treasury Bills 4.96%
- --------------------------------------------------------------------------------
U.S. 10-Year Notes 6.24%
- --------------------------------------------------------------------------------
U.S. 30-Year Bonds 6.56%
- --------------------------------------------------------------------------------
Telephone Bonds 7.63%
- --------------------------------------------------------------------------------
Municipal Bonds 5.56%
================================================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 percent.
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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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
In addition, 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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto. Here we see that only 5.5
percent of the GLA expires over the holding period.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 80.0 percent of base rental income
will, on average, come from anchor major/tenants whose creditworthiness adds
stability to the cash flow.
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 10.50 and 11.00 percent for the
center as it is operating on a stabilized basis.
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 10-year period commencing on August 1,1997.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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.
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<PAGE>
Income Approach
================================================================================
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:
================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
================================================================================
SUBJECT PROPERTY NEW HOPE COMMONS
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL GROSS LEASABLE AREA (OWNED) 408,292+/- SF
ANCHOR/JUNIOR ANCHOR TENANT GLA 355,273+/- SF
SPECIALTY SHOP GLA 53,019+/- SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997/98)
TENANTS UNDER 1,000 SF $20.00/SF
TENANTS 1,001 - 3,000 SF $18.50/SF
TENANTS 3,001 - 5,000 SF $17.50/SF
TENANTS 5,001 -10,000 SF $16.50/SF
TENANTS OVER 10,000 SF $12.00/SF
RENTAL BASIS NNN
MARKET RENTAL GROWTH RATE 3.0%/YR
CREDIT RISK LOSS 4.0%
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM (SMALL SHOP) 5 Years
RENEWAL PROBABILITY 70.0%
WEIGHTED AVERAGE DOWNTIME 2 Months
CURRENT OCCUPANCY 100%
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
NEW TENANTS $2.00/SF
RENEWAL TENANTS $1.00/SF
TENANT IMPROVEMENT ALLOWANCE
NEW TENANT $5.00/SF
RENEWAL TENANT NONE
EXPENSE GROWTH RATE 3.0%/YR
TAX GROWTH RATE 3.0%/YR
MANAGEMENT FEE 4%
(BASED ON MINIMUM & PERCENTAGE RENT)
CAPITAL RESERVES (PSF OF GLA) $0.10/SF
================================================================================
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SENSITIVITY ANALYSIS
New Hope Commons 1 2 3 4 5 6 7 8
Cushman & Wakefield, Inc. 1998 1999 2000 2001 2002 2003 2004 2005
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Effective Gross Income: $5,336,673 $5,412,130 $5,452,146 $5,600,569 $5,673,232 $5,721,013 $5,783,190 $5,840,758
Operating Expenses: $1,060,970 $1,088,438 $1,114,965 $1,147,729 $1,177,397 $1,206,608 $1,237,280 $1,268,592
Net Operating Income: $4,275,703 $4,323,692 $4,337,181 $4,452,840 $4,495,835 $4,514,405 $4,545,910 $4,572,166
Net Cash Flow: $4,234,874 $4,281,638 $4,293,865 $4,406,462 $4,449,881 $4,458,209 $4,497,158 $4,521,951
Property Value: $43,200,000
Net Sales Price: $42,372,182 $42,504,374 $43,637,832 $44,059,183 $44,241,169 $44,549,918 $44,807,227 $46,073,642
Net Cash Flow: $4,234,874 $4,281,638 $4,293,865 $4,406,462 $4,449,881 $4,458,209 $4,497,158 $4,521,951
-NOI Return: 9.90% 10.01% 10.04% 10.31% 10.41% 10.45% 10.52% 10.58%
-Cash-On-Cash Return: 9.80% 9.91% 9.94% 10.20% 10.30% 10.32% 10.41% 10.47%
Discounted Income Stream
Discounted Sales Price: $38,259,306 $34,653,424 $32,124,173 $29,286,097 $26,552,653 $24,142,626 $21,925,117 $20,356,479
Discounted Cash Flow: $3,823,814 $3,490,780 $3,160,947 $2,928,971 $2,670,728 $2,416,006 $2,200,554 $1,997,910
Net Present Value: $42,083,120 $41,968,018 $42,599,714 $42,690,609 $42,627,893 $42,633,872 $42,616,917 $43,046,189
<CAPTION>
====================================================================================
SENSITIVITY ANALYSIS
New Hope Commons 9 10 11 CAGR CAGR
Cushman & Wakefield, Inc. 2006 2007 2008 1998-07 2000-07
====================================================================================
<S> <C> <C> <C> <C> <C>
Effective Gross Income: $6,007,927 $6,145,276 $6,188,367 1.6% 1.7%
Operating Expenses: $1,306,535 $1,343,321 $1,376,699 2.7% 2.7%
Net Operating Income: $4,701,392 $4,801,955 $4,811,668 1.3% 1.5%
Net Cash Flow: $4,605,369 $4,748,682 1.3% 1.4%
Property Value: $47,154,346 1.0%
Average Returns
Net Sales Price: $47,059,159 $47,154,346 Over Holding Period
Net Cash Flow: $4,605,369 $4,748,682 -------------------
-NOI Return: 10.88% 11.12% NOI 10.4%
-Cash-On-Cash Return: 10.66% 10.99% Cash 10.3%
Discounted Income Stream Yield Composition
-------------------
Discounted Sales Price: $18,773,729 $16,985,736 Reversion 39.3%
Discounted Cash Flow: $1,837,261 $1,710,550 Cash Flow 60.7%
Net Present Value: $43,300,700 $43,223,258 ------
100.0%
</TABLE>
<TABLE>
<CAPTION>
================================================================================
ASSUMPTIONS & CONCLUSIONS
================================================================================
<S> <C> <C> <C>
Value Range: Low High Conclusion
Discount Rate: 11.25% 10.50% 10.75%
Terminal Cap Rate: 10.50% 9.75% 10.00%
================================================================================
Value Range/Conclusion: $41,147,410 $44,341,252 $43,200,000
- --------------------------------------------------------------------------------
-Going-In Cap Rate: 10.39% 9.64% 9.90%
- --------------------------------------------------------------------------------
-Price/sf Owned GLA: $78.27 $84.35 $82.18
- --------------------------------------------------------------------------------
-Price/sf Mall Shop GLA $211.80 $228.24 $222.37
================================================================================
</TABLE>
[GRAPHIC OMITTED]
NOI vs. Cash Flow
<TABLE>
<CAPTION>
================================================================================
SALE-YIELD MATRIX
- --------------------------------------------------------------------------------
Net Reversion Terminal Discount Rate (IRR)
Cost of Sale: Capitalization --------------------------------------------------
2.00% Rate 10.50% 10.75% 11.00% 11.25%
================================================================================
<C> <C> <C> <C> <C> <C>
$48,363,432 9.75% $44,341,252 $43,658,789 $42,990,817 $42,336,977
- --------------------------------------------------------------------------------
$47,154,346 10.00% $43,895,766 $43,223,258 $42,564,996 $41,920,628
- --------------------------------------------------------------------------------
$46,004,240 10.25% $43,472,011 $42,808,971 $42,159,946 $41,542,590
- --------------------------------------------------------------------------------
$44,908,901 10.50% $43,068,434 $42,414,413 $41,774,185 $41,147,410
================================================================================
</TABLE>
[GRAPHIC OMITTED]
NPV vs. Sales Price By Year
===============================================================================
<PAGE>
Income Approach
================================================================================
================================================================================
RATES OF RETURN AS IS
================================================================================
CASH FLOW START DATE 8/01/97
- --------------------------------------------------------------------------------
DISCOUNT RATE 10.50-11.00%
- --------------------------------------------------------------------------------
GOING-IN CAPITALIZATION RATE 9.75-10.00%
- --------------------------------------------------------------------------------
TERMINAL CAPITALIZATION RATE 9.75-10.25%
- --------------------------------------------------------------------------------
REVERSIONARY SALES COSTS 2.00%
- --------------------------------------------------------------------------------
HOLDING PERIOD 10 Years
================================================================================
Discounted Cash Flow
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 10.50 to 11.00 percent
on an "as is" operating basis. 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 10.50 to 11.00 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. A valuation matrix for the subject appears on the Facing Page.
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $42.1 to $44.3 million "as
is". 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 10.75 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 for the subject property
as of July 11, 1997 of $43,200,000.
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.
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WAKEFIELD(R)
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<PAGE>
Income Approach
================================================================================
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow, 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 9.75 to 10.00 percent applied to first year income. Applying these
rates to first stabilized year net operating income before reserves,
alterations, and other expenses for the subject of $4,275,703 results in a value
of approximately $42.8 to $43.8 million. From this range, we would be inclined
to conclude at a Market Value of $44,000,000 via Direct Capitalization as of
July 11, 1997. This value is indicative of an overall rate of 9.72 percent.
================================================================================
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
A summary of the value indications for the subject is set forth below.
================================================================================
Value Summary
================================================================================
Sales Comparison Approach $43,000,000 - $44,000,000
- --------------------------------------------------------------------------------
Income Approach
Discounted Cash Flow $43,200,000
Direct Capitalization $44,000,000
================================================================================
Three approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complimentary results, each approach or
technique supporting the other. Between the high and low range supported by each
methodology, we see a variance of about 2.3. percent.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
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, this methodology is best suited as support for the
conclusions of the "Income Approach". It provides 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 (DCF) 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 DCF
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
can analyze existing leases, probabilities of future rollovers and turnovers,
and reflect the expectations of overage rents. Essentially, the DCF can model
many of the dynamics of a complex shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis, due to
the subject's stabilized operations.
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 methodologies. The ranges in
value exhibited by the Income Approach are consistent with the leasing profiles.
Each 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 leased fee estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
11,1997, was:
FORTY THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
$43,500,000
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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 Standard Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice for a Summery Appraisal
Report. As such, it might not include full 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
information contained in this report is specific to the needs of the
client and for the intended use stated in this report. The appraiser is
not responsible for unauthorized use of this report.
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.
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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 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 has 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.
10. 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.
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.
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<PAGE>
I certify that, to the best of our knowledge and belief:
1. Richard W. Latella, MAI, Senior Director, Retail Valuation Group 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, Richard W. Latella has completed the
requirements of the continuing education program of the Appraisal
Institute.
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
North Carolina Temporary Practice Permit #869
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<PAGE>
ADDENDA
================================================================================
NATIONAL RETAIL OVERVIEW
COMPARABLE RENTALS
SUBJECT RENT ROLL
SUBJECT SALES REPORTS
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
STATE OF NORTH CAROLINA TEMPORARY APPRAISAL LICENSE
APPRAISERS' QUALIFICATIONS
================================================================================
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WAKEFIELD(R)
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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.
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. We shall first provide a brief overview of broad
economic measures that are important in terms of long range retail sales
forecasting and general investment underwriting. This is followed by a
discussion of retail sales trends along with selected statistics of the shopping
center industry. Also included is a discussion of contemporary industry trends,
valuation issues and a brief overview of the REIT market.
Personal Income and Consumer Spending
Americans' personal income advanced by eight-tenths of a percent in
December, which helped raise income for all of 1996 by 5.5 percent. This was
less than 1995 but it far outpaced the 2.5 percent in 1994.
=====================================================================
Personal Income Consumer Spending
=====================================================================
Year % Change Year % Change
=====================================================================
1993 4.7 1993 5.8
---------------------------------------------------------------------
1994 2.5 1994 5.5
---------------------------------------------------------------------
1995 6.1 1995 4.8
---------------------------------------------------------------------
1996 5.5 1996 4.6
=====================================================================
Source: Commerce Dept.
=====================================================================
American workers won wage gains in 1996 that were the largest since 1990.
Nationwide, average hourly wages rose by 3.8 percent to $11.98 in 1996, about
five-tenths of a percent above the inflation rate. This compares with 3.2
percent in 1995. Personal income grew one-tenth of a percent in April 1997.
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 4.6 percent
in 1996, slightly off of the 4.8 percent rise in 1995. These increases followed
a significant lowering on unemployment and bolstered consumer confidence.
Personal spending grew one-tenth of a percent in April 1997. This was the
smallest increase since September 1996 and was in line with analysts'
expectations.
================================================================================
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National Retail Market Overview
================================================================================
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
Year(1) (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 6.8
- --------------------------------------------------------------------------------
1994 131,056 2.4 123,060 3.1 6.1
- --------------------------------------------------------------------------------
1995 132,337 .98 124,926 1.5 5.6
- --------------------------------------------------------------------------------
1996 135,022 2.0 127,855 2.3 5.3
================================================================================
CAGR 1.32 1.37
1990-1996
================================================================================
(1)Year ending December 31
================================================================================
Source: Bureau of Labor Statistics U.S. Department of Labor
================================================================================
During 1996, the labor force increased by 2,685,000 or approximately 2.0
percent. Correspondingly, the level of employment increased by 2,929,000 or 2.3
percent. As such, the year end unemployment rate dropped by three-tenths of a
percent to 5.3 percent. For 1996, monthly job growth averaged 224,000. On
balance, over 10.0 million jobs have been created since the recovery began.
Preliminary data for April 1997 shows that the unemployment rate slipped to 4.8
percent, near a twenty-year low.
Housing Trends
Housing trends are an important economic measure due to the substantial
economic activity generated when a home changes hands (i.e. spending on repairs
by sellers, redecorating by buyers, fees, commissions and taxes).
For all of 1996, new single family home sales totaled 756,000, up 13.3
percent from 667,000 in 1995. The yearly sales level was the highest since 1978.
The median new home price of new homes sold in 1996 was $140,000, up 4.6 percent
from 1995. Through May 1997, it was tracking at $143,000. Sales of new homes
fell 7.7 percent in April 1997. Builders are currently reporting a 4.5 month
inventory of unsold homes.
Sales of existing single family homes fell in April by 2.4 percent to 4.06
million units. The median price jumped by 4.6 percent to $118,100.
================================================================================
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National Retail Market Overview
================================================================================
New housing starts rose by 8.8 percent for all of 1996 to 1.47 million
units, the most since 1988. Housing starts fell by 4.8 percent in May to an
annual rate of 1.397 million units. This was the third consecutive monthly
decline.
The home ownership rate seems to be rising, after remaining stagnant over
the last decade. For 1996, the share of households that own their homes was 65.4
percent, compared to 64.7 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. Conversely, the fourth quarter
(1996) GDP grew at a surprisingly robust 3.8 percent. As a result, the GDP
posted a 2.4 percent annual gain for all of 1996, topping the 2.0 percent rise
in 1995. Revised first quarter 1996 data shows that the GDP grew at a stunning
5.8 percent annual pace, well above even the most optimistic forecasts.
Preliminary reports are for second quarter growth in the 2+/- percent range. The
Fed foresees a moderation of this trend and expects the U.S. economy will expand
at a 2.0 to 2.50 percent pace during 1997 which is in-line with White House
forecasts and a pace which is viewed as the economy's non-inflationary growth
limit.
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
--------------------------------------------------------------------
1996 2.4
====================================================================
* Reflects new chain weighted system of measurement.
Comparable 1994 measure would be 3.5%
====================================================================
Source: Bureau of Economic Analysis
====================================================================
Wholesale Prices
Soaring energy prices in December drove wholesale costs to a twelve month
high. For the year, the Producer Price Index (PPI) gained 2.8 percent. However,
excluding energy, the PPI rose just 1.4 percent in all of 1996. In 1995, the
index rose 2.3 percent. Projections for 1997 show that most economists expect a
2.5 percent rise and a core increase of 1.5 percent.
================================================================================
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National Retail Market Overview
================================================================================
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.
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
-----------------------------------
1996 158.6(2) 3.3
===================================
(1) All Urban Workers
(2) Preliminary
===================================
Source: Dept. of Labor, Bureau of
Labor Statistics
===================================
Preliminary data for the year shows the consumer prices rose in line with
investor expectations. The index was up three-tenths of a percent in December,
its third consecutive gain at this level. On an annualized basis, the inflation
rate was reported at 3.3 percent for year, the highest rate of increase since
1990. Since then, inflation has eased every year except for 1994 when it was
unchanged. Excluding food and energy, the 77 percent of the index known as the
core index, the underlying inflation rate was 2.6 for the previous twelve
months, the lowest core rate since 1965, with the exception of an increase of
the same size in 1994.
Data for May 1997 shows that the CPI rose only one-tenth of a percent,
while the core rate increased by two-tenths of a percent. The overall index has
risen by only one-tenth of a percentage point in four of the five months this
year, indicative of an annual rate of only 1.4 percent
Recently, a special advisory panel of prominent economists have contended
that the current method of calculating the Consumer Price Index overstates
inflation by 1.1 percentage points annually. The government is currently
reviewing the far ranging implications a change in procedure may have.
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 to
nine months. The Conference Board, an independent business group, reported that
the index held steady in June after rising three-tenths of a percent in May.
================================================================================
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National Retail Market Overview
================================================================================
The Conference Board also reported that Consumer Confidence rose in May
1997 to 127.1 from 118.5 in April, its highest level in twenty-eight years. This
was above the consensus opinion. Accordingly, consumers attitudes about the
economy remain upbeat. Measures of consumer confidence are watched closely for
indications of future consumer spending.
The Employment Cost Index is a measure of overall compensation including
wages, salaries and benefits. Despite a tight labor market, American workers
have not won pay and benefit increases large enough to push inflation higher, at
least for the near term. The Labor Department reported that the index rose by
2.9 percent in 1996, the same as in 1995. For the Second Quarter 1997, the index
rose eight-tenths of a percent. For the 12 months through June l997 it was
tracking at 2.8 percent.
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. Through the first 70 years of this century, non-farm
productivity rose at an annual rate of 2.2 percent. Between 1973 and 1995, a
marked slowdown has been in evidence with only a 1 percent annual rate. The
Labor Department reports that the productivity of American workers grew by
seven-tenths of a percent in 1996, the largest gain since a 3.2 percent advance
in 1992. Productivity increased by three-tenths of a percent in 1995. Data
through the second quarter of 1997 shows that productivity rose six-tenths of a
percent on an annual basis. For the 12 months through the second quarter,
productivity rose at an annual rate of seven-tenths of a percent. Most
economists and analysts greeted the latest report with criticism that insists
the official data greatly understates a flourishing economy seen in today's
workplace.
Consumer Credit The Federal Reserve said consumer credit stalled in June
after rising at a revised rate of $2.5 billion in May 1997 or at a 2.9 percent
annual rate. This was well below most analysts' expectations and is likely a
result of tougher lending standards being imposed by banks and consumers cutting
back on spending. Nonetheless, credit card delinquencies and personal
bankruptcies remain near record levels indicating that consumers may be reaching
a point of saturation with respect to new debt. However, a drop in write-offs
was in evidence from the record levels in 1996 which came about following
aggressive marketing campaigns by card issuers.
New Construction activity dropped 1.1 percent in June to an annual rate of
$591.5 billion. The report showed that spending on residential construction,
which makes up nearly half the total, fell 1.2 percent. Commercial spending also
fell 2.8 percent, while public spending rose seven-tenths of a percent.
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 track at about 2.5 percent through 1998. Over the
longer term, inflation is expected to average 2.7 percent. This will have a
direct influence on consumption (consumer expenditures).
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
================================================================================
-5-
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National Retail Market Overview
================================================================================
U.S. GDP will grow at an average annual rate of 2.3 percent over the next
decade, and slow to about 2.1 percent by 2019.
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 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 1993 at 68.0 percent after averaging about
63.0 percent over much of the post-war period. WEFA estimates that real
consumption expenditure growth will average 2.2 percent per year through 2005
and slows to 2.1 percent thereafter.
Retail Sales
During the period 1980 through 1996, total retail sales in the United
States increased at a compound annual rate of 6.1 percent. Data for the period
1990 through 1996 shows that sales growth has slowed to an annual average of 5.0
percent. This information is summarized on the following chart.
================================================================================
Total U.S. Retail Sales(1)
================================================================================
Amount Annual
Year (Billions) 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 5.2%
- --------------------------------------------------------------------------------
1993 $2,074,499 6.3%
- --------------------------------------------------------------------------------
1994 $2,236,966 7.8%
- --------------------------------------------------------------------------------
1995 $2,340,817 4.6%
- --------------------------------------------------------------------------------
1996(2) $2,465,835 5.3%
- --------------------------------------------------------------------------------
Compound Annual Growth Rate
1980-1996 +6.1%
- --------------------------------------------------------------------------------
CAGR: 1990-1996 +5.0%
================================================================================
(1) 1985-1995 data reflects recent revisions by the U.S.
Department of Commerce: Combined Annual and Revised
Monthly Retail Trade.
(2) Preliminary advance estimates.
================================================================================
Source: Monthly Retail Trade Reports Business Division,
Current Business Reports, Bureau of the Census, U.S.
Department of Commerce.
================================================================================
================================================================================
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National Retail Market Overview
================================================================================
The Census Bureau of the Department of Commerce reports that advance
estimates for U.S. retail sales for 1996 were $2.465 trillion, an increase of
$125.0 billion, or 5.3 percent from 1995. For the month of December 1996, sales
were up six-tenths of a percent.
Census Bureau data for June 1997 shows that sales were up five-tenths of a
percent from May, led by a surprising pick up in new car sales (up 1.1 percent).
Provided on the chart below 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 July 1997
================================================================================
% Change From Previous Year
----------------------------------
Name of Retailer Overall Same Store Basis
================================================================================
Wal-Mart +11.3% + 6.0%
- --------------------------------------------------------------------------------
Kmart + 5.9% + 9.2%
- --------------------------------------------------------------------------------
Sears, Roebuck & Company + 5.9% + 2.4%
- --------------------------------------------------------------------------------
J.C. Penney + 3.0% + 2.0%
- --------------------------------------------------------------------------------
Dayton Hudson Corporation + 9.9% + 5.6%
- --------------------------------------------------------------------------------
May Department Stores +10.6% + 5.7%
- --------------------------------------------------------------------------------
Federated Department Stores + 9.3% + 8.6%
- --------------------------------------------------------------------------------
The Limited Inc. + 9.0% + 1.0%
- --------------------------------------------------------------------------------
Gap Inc. +24.0% + 6.0%
- --------------------------------------------------------------------------------
Ann Taylor - 7.9% - 5.8%
- --------------------------------------------------------------------------------
Woolworths - 7.0% - 9.2%
================================================================================
Source: New York Times/Wall Street Journal
================================================================================
Data for July 1997 shows that sales rebounded strongly, particularly for
apparel retailers. There were some exceptions however, such as Ann Taylor.
Nonetheless American retailers enjoyed one of the strongest months in two
years. The Goldman Sachs index rose 5.7 percent, compared to last year's
1.7 percent increase. Discounters such as Wal-Mart (+6.0%) and Kmart
(+9.2%) as well as traditional department stores such as Federated (+8.6%)
and May Department Stores (+5.6%) did well. Luxury retailers such as
Neiman Marcus (+7.5%) also did well.
The outlook for retail sales growth is one of cautious optimism. It
appears as if the low price department stores and off price apparel segment is
poised to continue to do well, as they tend to be representative of those
industry segments which have gone through mergers and are benefiting from fewer
competitors. 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 continue to rise. 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. GAFO goods
================================================================================
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National Retail Market Overview
================================================================================
comprise the overwhelming bulk of goods and products carried in shopping centers
and department stores and consist of the following categories:
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. The store types that
comprise shopping centers comprised approximately 53 percent of total retail
sales in 1995. The balance were generated by auto dealers, gas stations, food
service facilities and other miscellaneous establishments.
Total retail sales grew by 4.6 percent in the United States in 1995 to
$2.341 trillion, an increase of $104 billion over 1994. This followed an
increase of 7.8 percent or $162 billion over 1993. Automobile dealers captured
$34+/- billion of total retail sales growth last year, while Shopping Center
Inclined Sales accounted for nearly 50.0 percent of the increase ($50 billion).
GAFO sales increased by $32.5 billion. This group was led by department stores
which posted a $14.4 billion increase in sales. The following chart summarizes
the performance for this most recent comparison period.
================================================================================
Retail Sales by Major Store Type
1994-1995 ($Mil.)
================================================================================
Percent of 1994-1995
Store Type 1994 1995 Income(1) % Change
================================================================================
GAFO:
General Merchandise $ 282,541 $ 296,904 5.1%
Apparel & Accessories 109,603 109,962 .3%
Furniture & Furnishings 119,626 129,923 8.6%
Other GAFO 80,533 88,029 9.3%
- --------------------------------------------------------------------------------
GAFO Subtotal $ 592,303 $ 624,818 14.4% 5.5%
- --------------------------------------------------------------------------------
Convenience Stores:
Grocery $ 376,330 $ 389,134 3.4%
Other Food 21,470 21,378 (.4)%
- --------------------------------------------------------------------------------
Subtotal $ 397,800 $ 410,512 9.5% 3.2%
Drug 81,538 84,240 2.0% 3.3%
- --------------------------------------------------------------------------------
Convenience Subtotal $ 479,338 $ 494,752 3.2%
- --------------------------------------------------------------------------------
Other:
Home Improvement &
Building Supplies Stores $ 122,533 $ 124,626 2.9% 1.7%
Shopping Center-Inclined
Subtotal $1,194,174 $1,244,196 28.8% 4.2%
Automobile Dealers 526,319 560,624 6.5%
Gas Stations 142,193 148,192 4.2%
Eating and Drinking Places 228,351 233,606 2.3%
All Other 145,929* 154,199* 5.7%
- --------------------------------------------------------------------------------
Total Retail Sales $2,236,966 $2,340,817 4.6%
================================================================================
* Estimated Sales
- --------------------------------------------------------------------------------
(1) Current Population Report, Page 60. Estimated at 96.8 million households @
$44,100 = 4.3 trillion.
- --------------------------------------------------------------------------------
================================================================================
-8-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Source: U.S. Department of Commerce, Bureau of the Census and Dougal M. Casey:
Various ICSC White Papers.
================================================================================
GAFO sales grew by 5.5 percent in 1995 to $624.8 billion. From the above
it can be calculated that GAFO sales accounted for 26.7 percent of total retail
sales and nearly 50.0 percent of all shopping center-inclined sales. GAFO sales
have also risen relative to household income. In 1990 these sales represented
13.9 percent of average household income. By 1994/1995 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.
================================================================================
Determinants of Retail Sales Growth and U.S. Retail Sales by Key Store Type
================================================================================
1990 1994 2000(P)
================================================================================
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. $5.4 Tril.
- --------------------------------------------------------------------------------
% Allocations of Income to Sales
GAFO Stores 13.9% 14.4% 14.7%
Convenience Stores 12.9% 11.7% 10.7%
Home Improvement Stores 2.8% 3.0% 3.3%
Total Shopping Center-Inclined Stores 29.6% 29.1% 28.8%
Total Retail Stores 54.3% 54.6% 52.8%
- --------------------------------------------------------------------------------
Sales ($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 $2,850
================================================================================
Note: Sales and income figures are for the full year; population and household
figures are as of April 1 in each respective year. (P) = Projected.
================================================================================
Source: U.S. Census of Population, 1990; U.S. Bureau of the Census Current
Population Reports: Consumer Income P6-168, 174, 180, 184 and 188;
Berna Miller with Linda Jacobsen, "Household Futures", American
Demographics, March 1995; Retail Trade sources already cited; and Dougal
M. Casey: ICSC White Paper
================================================================================
GAFO sales have risen at a compound annual rate of approximately 6.8
percent since 1991 based on the following annual change in sales.
===========================
1990/91 2.9%
---------------------------
1991/92 7.0%
---------------------------
1992/93 6.6%
---------------------------
1993/94 7 0%
---------------------------
1994/95 5.5%
===========================
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National Retail Market Overview
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According to a recent study by the lCSC, GAFO sales are expected to grow
by 5.0 percent per annum through the year 2000, which is well above the 4.1
percent growth for all retail sales. This information is presented in the
following chart.
================================================================================
Retail Sales Forecasts in the United States, by Major Store Type
================================================================================
1994 2000(P) Percent Change
- --------------------------------------------------------------------------------
Compound
Store Type ($ 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%
Othe 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 $1,194 $1,555 30.2% 4.5%
Subtotal
- --------------------------------------------------------------------------------
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.
================================================================================
According to the ICSC White Paper: Overstoring - A Look at Retail Space
and Sales Performance; Shopping Center Inclined Sales have grown from $257
billion in 1972 to $1.244 trillion in 1995, a 7.1 percent annual growth rate.
Historical data is shown below.
================================================================================
Shopping Center Inclined Store Sales
1972-1995 (Billions)
================================================================================
1972 1980 1990 1995
================================================================================
Sales $257 $532 $1,000 $1,244
- --------------------------------------------------------------------------------
Compound Annual Growth
- --------------------------------------------------------------------------------
1972-1995 7.1%
- --------------------------------------------------------------------------------
1972-1980 9.5%
- --------------------------------------------------------------------------------
1980-1990 6.6%
- --------------------------------------------------------------------------------
1990-1995 4.3%
================================================================================
Source: U.S. Bureau of The Census and ICSC White Paper: Overstoring - A Look at
Retail Space and Sales Performance.
================================================================================
From the above, we see that the most recent annual rate of growth
(1990-1995) in Shopping Center Inclined Sales of 4.3 percent has decreased to
less than half of what it was
================================================================================
-10-
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National Retail Market Overview
================================================================================
during the 1970s (9.5 percent). Projections through December 2000 are for a
compound growth rate of 4.5 percent.
Shopping centers have stabilized their share of shopping center inclined
sales. In 1972 this share was estimated at 48 percent. Since the early 1980s,
this share has stabilized in the 72 to 73 percent range. For example, the
estimated sales total of $894 billion of shopping center sales in 1995 was equal
to 72 percent of total 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 total sales per square foot rose
by 2.9 percent to $278 per square foot in 1996. This compares to a .5 percent
increase for the period 1994-1995. The following chart identifies the most
recent year-end results. The winners were shown to be Apparel and Accessories
(+4.8%) led by Men's Apparel and Shoes, while Furniture and Furnishings suffered
(-2.8%). The Home Improvement category rose an outstanding 100.0 percent to $302
per square foot.
================================================================================
-11-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
1996 Year End Performance
Non-Anchor Tenant Sales in U.S. Malls
================================================================================
ICSC Index
% Change
Store Type 1996 (SF*) From YE 1995
================================================================================
GAFO Categories:
Apparel and Accessories
Women's Accessories and Specialties $301 3.2%
Women's Ready-To-Wear 195 3.3%
Men's Apparel 270 7.0%
Children's Apparel 350 .5%
Family Apparel 314 4.2%
Women's Shoes 325 5.1%
Men's Shoes 383 5.6%
Family Shoes 279 5.3%
Shoes Miscellaneous 343 3.8%
Apparel and Accessories - Misc. $279 2.9%
- --------------------------------------------------------------------------------
SUBTOTAL $257 4.8%
- --------------------------------------------------------------------------------
Furniture and Furnishings:
Home Furniture & Furnishings $273 1.4%
Home Entertainment & Electronics 303 - 4.3%
Home Furnishings - Misc 300 - 3.4%
- --------------------------------------------------------------------------------
SUBTOTAL $293 - 2.8%
- --------------------------------------------------------------------------------
Other GAFO:
Jewelry $652 4.9%
Stationery/Cards/Gifts/Novelty 275 1.7%
Books 249 - 2.1%
Sporting Goods/Bicycles 246 - 1.1%
Other GAFO - Misc. 311 4.4%
- --------------------------------------------------------------------------------
SUBTOTAL $343 2.2%
- --------------------------------------------------------------------------------
TOTAL GAFO $284 3.2%
- --------------------------------------------------------------------------------
NON GAFO Categories:
Food Services
Fast Food $414 2.3%
Restaurants 280 1.0%
Food Services - Misc. 352 - .8%
- --------------------------------------------------------------------------------
SUBTOTAL $340 1.6%
- --------------------------------------------------------------------------------
OTHER NON-GAFO Categories:
Specialty Food Stores $355 .9%
Supermarkets 433 .8%
Drug/HBA 291 4.7%
Personal Services 283 .7%
Automotive 140 1.2%
Home Improvement 302 100.1%
Mall Entertainment 76 - 3.6%
Other Non-GAFO - Misc. 353 4.9%
- --------------------------------------------------------------------------------
SUBTOTAL $223 1.5%
- --------------------------------------------------------------------------------
TOTAL NON-GAFO $266 1.4%
- --------------------------------------------------------------------------------
OTHER CATEGORIES-MISCELLANEOUS $151 4.4%
- --------------------------------------------------------------------------------
Memo: GAFO & Food Service Total $290 3.1%
- --------------------------------------------------------------------------------
GRAND TOTAL $278 2.9%
================================================================================
* Sales per square foot derived as total non-anchor mall sales divided by
total occupied square footage.
================================================================================
Source: ICSC - Research Quarterly
================================================================================
================================================================================
-12-
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National Retail Market Overview
================================================================================
Non-Store Retailing
In 1995, non-store retailing accounted for $69.7 billion, or 3.92 percent
of total non-automotive retail sales. Of this total, $49.7 billion was
attributed to mail/telephone order catalog retailers. The balance is comprised
of coin-operated vending machines, house-to-house canvassing, party plan (i.e.
tupperware parties) telemarketing and other non-store venues such as home
shopping networks and electronic commerce.
================================================================================
Non-Store and Total Retail Sales
================================================================================
Year Total Mail Order Non-Store Total Non-Auto Sales % of Total
================================================================================
1985 $15,848 mil. $28,275 mil. $1,071,828 2.64%
- --------------------------------------------------------------------------------
1990 $26,577 mil. $45,632 mil $1,457,006 3.13%
- --------------------------------------------------------------------------------
1995 $49,710 mil. $69,667 mil. $1,778,915 3.92%
================================================================================
Source: Department of Commerce
================================================================================
Mail order sales, currently at only 2.8 percent of total retail sales,
continue to grow. Estimates currently place on-line sales at $518.0 million or 1
percent of the mail order tally. Estimates place total on-line sales as high as
$6.6 billion by the year 2000. Since 1990, mail order sales have grown at an
annual rate of 9.9 percent which is double the average growth of non-automotive
retail sales and 1.7 times the average growth of GAFO store sales. One measure
of this growing trend is the November/December ratio of mail order to GAF store
sales. In 1990, the ratio was 5.4 percent. By 1992 it had grown to 6.9 percent
and by 1995 it was 7.6 percent.
Industry Trends
According to the National Research Bureau, there were a total of 42,130
shopping centers in the United States at the end of 1996. During this year, 895
new centers opened, a 3.2 percent increase over the 867 that opened in 1995.
This followed an 18.0 percent increase in 1995. The greatest growth came in the
small center category (less than 100,000 square feet) where 496 centers were
constructed. In terms of GLA added, new construction in 1996 was up 2.7 percent
resulting in an addition of 106.2 million square feet of GLA from approximately
4.97 billion to 5.1 billion square feet. In other important trends, the
development of regional and super-regional malls hit a five year high in 1996
with the opening of eight centers, twice as many as in 1995. This boosted the
nation's total of regionals to 301 and super-regionals to 380. The small center
category (less than 100,000 square feet) was the only one to experience a
decrease in new centers built with 496 centers versus 551 in 1995. The following
chart highlights trends over the period 1987 through 1995.
================================================================================
-13-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
================================================================================================================================
Census Data: 10-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%
- --------------------------------------------------------------------------------------------------------------------------------
1996 42,130 5,100,605,534 $933,918,275 121,068 $183.10 1.75% 895 2.17%
- --------------------------------------------------------------------------------------------------------------------------------
Compound
Annual
Growth +3.60% +3.56% +4.99% N/A +1.39% 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 3.6 percent since 1987. New
construction was up 2.7 percent in 1996, a slight increase over 1995 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 176 new centers opening,
followed by New Jersey (59), North Carolina (48) and Texas (47).
Among the 42,130 centers in 1996, the following breakdown by size can be
shown.
================================================================================
U.S. Shopping Center Inventory, YE December 1996
================================================================================
Number of Centers Square Feet (Millions)
-----------------------------------------------------------
Size Range (SF) Amount Percent Amount Percent
================================================================================
Under 100,000 26,497 62.9% 1,293.3 25.4%
- --------------------------------------------------------------------------------
100,001- 200,000 10,186 24.2% 1,399.2 27.4%
- --------------------------------------------------------------------------------
200,001- 400,000 3,477 8.3% 925.5 18.1%
- --------------------------------------------------------------------------------
400,001- 800,000 1,276 3.0% 711.2 13.9%
- --------------------------------------------------------------------------------
800,001- 1,000,000 309 .7% 278.4 5.5%
- --------------------------------------------------------------------------------
Over 1,000,000 385 .9% 492.9 9.7%
- --------------------------------------------------------------------------------
Total 42,130 100.0% 5,100.6 100.0%
================================================================================
Source: National Research Bureau (some numbers slightly rounded).
================================================================================
Empirical data shows that the average GLA per capita is increasing. In
1996, the average for the nation was 19.23. This was up 19.4 percent from 16.1
in 1988 and more recently, 18.7 square feet per capita in 1995. Among states,
Florida regained its lead and now has the highest GLA per capita with 28.05
square feet. South Dakota has the lowest at 9.07 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 5.6 in 1996. This information is presented
on the following chart.
================================================================================
-14-
<PAGE>
National Retail Market Overview
================================================================================
==================================================================
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
------------------------------------------------------------------
1996 19.2 5.6
==================================================================
Source: International Council of Shopping Center: The Scope of The
Shopping Center Industry and National Research Bureau
==================================================================
While per capita GLA has continued to increase, a key issue is that the
rate of increase has slowed. Per capita space has increased by only one and a
half square feet during the period 1990 through 1996. This trend is manifested
in the pace of inventory increases from 165 million square feet per year between
1972 and 1980, to 143 million square feet per year (1980-1990), and 118 million
square feet per year (1990-1996).
Construction data also indicates that while the overall pace of shopping
center openings has eased, the pace of large store (50,000 to 200,000 square
feet) construction has more than doubled. During the more recent five year
period, big boxes have accounted for 41 percent of inventory additions.
================================================================================
Trends In Inventory Growth*
1972-1995
================================================================================
1972-1980 1980-1990 1990-1995
================================================================================
Shopping Center Space Added 164 143 115
- --------------------------------------------------------------------------------
Free-Standing Stores 36 34 79
(50,000-200,000 SF)
- --------------------------------------------------------------------------------
Total 200 177 194
- --------------------------------------------------------------------------------
Big Box Allocation of Inventory Growth 18% 19% 41%
================================================================================
* Average Annual Increase (Million Square Feet)
================================================================================
Source: NRB and F.W. Dodge
================================================================================
In their publication, NRB/Shopping Centers Today 1996 Shopping Center
Census, the National Research Bureau reports that overall retail conditions were
good in 1996. Total shopping center sales increased 4.5 percent to $933.92
billion in 1996, up from $893.81 billion in 1995.
================================================================================
-15-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
=============================================================================================================================
Selected Shopping Center Statistics
1990-1996
=============================================================================================================================
Compound
Annual
1990 1991 1992 1993 1994 1995 1996 Growth
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Sales in Shopping Centers * $706.40 $716.90 $768.20 $806.60 $851.30 $893.81 $933.92 4.8%
- -----------------------------------------------------------------------------------------------------------------------------
Total Leasable Area** 4.39 4.56 4.68 4.77 4.86 4.97 5.10 2.5%
- -----------------------------------------------------------------------------------------------------------------------------
Unit Rate $160.89 $157.09 $164.20 $169.08 $175.13 $179.94 $183.10 2.2%
=============================================================================================================================
* Billions of Dollars
** Billions of Square Feet
=============================================================================================================================
Source: National Research Bureau
=============================================================================================================================
</TABLE>
According to the National Research Bureau, total sales in shopping centers
have grown at a compound rate of 5.0 percent since 1987. As described, aggregate
sales were up 4.5 percent nationwide from $893.8 billion (1995) to $933.9
billion (1996). In 1996, average sales were $183.10 per square foot, up nearly
2.7 percent over 1995 and 2.2 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 $207.44 per square
foot. Nonetheless, with compound sales growth lagging the growth in GLA, there
is an indication of overbuilding by this broad measure.
The following chart tracks the change in average sales per square foot by
size category between 1993 and 1995.
================================================================================
Sales Trends by Size Category
1993-1996
================================================================================
Average Sales Per Square Foot % Change
================================================================================
Category 1993 1994 1995 1996 1993-96*
================================================================================
Less than 100,000 SF $193.10 $199.70 $204.94 $209.74 +2.8%
- --------------------------------------------------------------------------------
100,001 to 200,000 SF $156.18 $161.52 $166.00 $169.56 +2.8%
- --------------------------------------------------------------------------------
200,001 to 400,000 SF $147.57 $151.27 $153.96 $154.07 +1.4%
- --------------------------------------------------------------------------------
400,001 to 800,000 SF $157.04 $163.43 $168.21 $170.14 +2.7%
- --------------------------------------------------------------------------------
800,001 to 1,000,000 SF $194.06 $203.20 $210.40 $213.93 +3.3%
- --------------------------------------------------------------------------------
More than 1,000,000 SF $183.90 $193.13 $201.05 $207.44 +4.1%
- --------------------------------------------------------------------------------
Total $169.08 $175.13 $179.94 $183.10 +2.7%
================================================================================
* Compound Annual Change
================================================================================
Source: National Research Bureau
================================================================================
Consumers demand for value and selection have led to an unprecedented
growth of the category killer, superstore and warehouse club concepts. In its
annual industry report, Discount Store News has identified the nation's top 200
merchants. Overall, these merchants posted sales of $336.6 billion, up 7.5
percent over 1995. The chart below highlights the year-to-year performance along
with 1997 projections.
================================================================================
-16-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
====================================================================================================
Sales by Segment (in billions $)
====================================================================================================
1995 1996 Market Share % Change 1997 (Proj.)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Full-Line Discount Stores(1) $150.9 $162.3 48% 7.6% $178.5
- ----------------------------------------------------------------------------------------------------
Specialty Discounters(2) 67.5 76.3 23% 13.1% 87.5
- ----------------------------------------------------------------------------------------------------
Warehouse Clubs 41.1 43.5 13% 5.8% 45.9
- ----------------------------------------------------------------------------------------------------
Other Discount Mass Merchants(3) 30.8 31.8 9% 5.0% 33.4
- ----------------------------------------------------------------------------------------------------
Off-Price Apparel Chains 15.8 16.9 5% 6.2% 17.9
- ----------------------------------------------------------------------------------------------------
Jewelry/Hard Lines Retailers 6.9 5.9 2% (15.0%) 5.1
- ----------------------------------------------------------------------------------------------------
Total Market $313.0 $336.6 100% 7.5% $368.5
====================================================================================================
(1) Includes full-line discount department stores, supercenters,
closeouters and single-price retailers
(2) Includes home, automotive, crafts, toys, office supplies, book,
computer superstores, baby superstores, pet supplies, consumer
electronics and sporting goods specialty stores.
(3) Includes Sears, Ward, QVC, HSN and variety stores.
====================================================================================================
Source: DSN Research
====================================================================================================
</TABLE>
As can be seen, the largest segment is comprised of full line discount
stores which was up 7.6 percent to $162.3 billion, or 48 percent of all sales.
Excluding Wal-Mart, by far the industry leader, 75 retailers in the DSN top 200
posted double digit sales gains. The biggest winners were baby superstores
(+47.2%), book superstores (+35.9%), and home furnishing superstores (33.1%).
Among the supercenter categories, Wal-Mart Supercenter's $19.3 billion in sales,
up 67.7 percent over 1995, accounted for more than half of the segment's $36.2
billion in sales.
The Urban Land Institute, in the 1997 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.
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.
Market Shifts - Contemporary Trends In the Retail Industry
The mid 1990s have continued the trend of profound changes in the retail
industry. Department stores have emerged from the troubles of late 1980s and
early 1990s to be stronger than ever. Continued consolidations in this industry
segment should continue. Specialty retailers continue to experience a shakeout
of weaker, out of favor formats while discounters gain market share. Power
centers, the growth vehicle of the last several years have reached a point of
saturation that has undermined investor's interest in this product. Outlet
centers are still struggling, however, the super-regional mega-center appears
poised to be the hot concept for the next few years.
================================================================================
-17-
<PAGE>
National Retail Market Overview
================================================================================
Some of the important developments in the industry over the past year can
be summarized as follows:
o The 1996 Christmas selling season ended on a down note with sales
finishing below most analysts expectations. For most consumer
electronics and computer retailers, the season was horrible with
December sales down 4.8 percent on average. Best Buy, last year's
rising star, was off 13.0 percent. Apparel sales rose 3.3 percent
led in part by Ann Taylor up 8.8 percent following last year's 2.9
percent decline. According to the Department of Commerce, on an
overall basis, department stores registered an average increase of
4.6 percent while discounters had a 7.8 percent rise on average.
Conventional department stores rose 1.9 percent. A summary of some
year over year comparable store sales results is shown below.
================================================================
Comparable Store Sales
(%) Change Over Last 12 Months
================================================================
Discounters
Wal-Mart 4.5
Kmart 2.3
Dayton Hudson 2.4
----------------------------------------------------------------
Department Stores
Sears 6.1
Federated 2.8
JC Penney 2.9
Dillards 2.0
----------------------------------------------------------------
Apparel
Limited 2.0
The Gap 5.0
TJX 7.0
----------------------------------------------------------------
Miscellaneous
Best Buy -4.0
Tandy .4
Woolworth -2.0
Pier 1 12.0
================================================================
Source: Wall Street Journal
================================================================
o Consolidation in the department store industry segment continued,
albeit at a slower pace than seen over the last few years.
o Strawbridge & Clothier - 128 year old Philadelphia based
institution sold 13 unit department store division to May
Company. Its 27 unit discount Clover division went to Kimco
which is putting Kohl's in several of the units, their initial
foray into the East.
o Profitts - Acquired 38 unit Parisian chain for $221 million.
Company now controls 141 stores in 19 states. They have also
announced an agreement to acquire G.R. Herberger's, a 40-unit
department store chain based in St. Cloud, Minnesota for $153
million.
================================================================================
-18-
<PAGE>
National Retail Market Overview
================================================================================
o Rich's - 26 unit New England based regional chain closes.
o Federated - Continues its conversion of Broadway stores in
California to Macy's and Bloomingdales.
o Discounters are being attacked from two sides. Big Box
category killers have rapidly expanded on one side.
Alternatively, full service department stores have become more
promotional, closing the price advantage gap discounters have
traditionally enjoyed. For example, Bradlees and Caldor remain
in bankruptcy and Ames continues to struggle looking for the
right strategy to compete against Wal-Mart, Kmart, Target and
now Kohl's.
o Troubles continues for several specialty retailers as the protracted
shake-out continued with several Chapter 11 filings, downsizings,
and some cases, out-right liquidations. Among the more notable:
o McCrory Corp. - Seeking court approval to close 307 of its 461
remaining stores and liquidate. At one time it ran 820 stores
in 1992 when it filed for protection.
o Limited - Will close 200 of its 4,500 units during 1997.
o Handy Andy - Regional home improvement chain closed remaining
54 stores.
o Herman's - Liquidated all of its sporting goods stores in the
northeast.
o Today's Man - 35 unit apparel super store chain filed Chapter
11.
o Barney's - High profile New York based upscale retailer filed
Chapter 11.
o Merry-Go-Round - Liquidated and closed its remaining 560 units
including Chess King, Dejaiz and Cignal units.
o Jamesway - Regional discount department store chain in the
northeast liquidated.
o Incredible Universe - After aggressive foray into this mega
store format (185,000+/- square feet), Tandy closes division
down. Tandy will also close the remaining 53 units of its
struggling McDuff Electronics chain and 19 of its 108 Computer
City units.
o Ernst Home Centers - Board approved liquidation of 53-unit
chain.
o Kids Mart - 144-unit childrens apparel chain rumored to be
close to filing Chapter 11.
o Sun Television and Appliance - Considering closing 9 of its 50
stores citing losses.
o Best - Closes 81 of its 169 catalog showrooms and agrees to
sell remaining units to Shottenstein Corp.
================================================================================
-19-
<PAGE>
National Retail Market Overview
================================================================================
o Rickel Home Centers - 86 unit home improvement chain filed
Chapter 11.
o House of Fabrics - Filed Chapter 11 and closes 86 of its 361
units.
o Discovery Zone - Fast expanding childrens' entertainment and
recreation oriented concept filed Chapter 11.
o Ben Franklin - Arts and crafts retailer filed Chapter 11.
o Kuppenheimer - Apparel retailer files Chapter 11 and plans to
close half of its 87 units.
o County Seat - 740-unit apparel retailer has filed Chapter 11
and will close 200 units. The Wet Seal has made a proposal to
acquire 508 of the stores.
o All For A Dollar - 111-unit close-out chain has filed Chapter
11.
o Mergers and consolidations among specialty retailers, drug,
supermarket and apparel categories continue.
o Staples merging with Office Depot in a $3.4 billion deal
making it by far the largest in the office superstore
category.
o Toys R Us acquired Baby Superstore in $407 million deal.
o Melville sold Kay Bee Toys to Consolidated Stores adding to
its Toy Liquidators, Toys Unlimited and Amazing Toys close-out
units for $315 million. Melville has officially changed its
name to CVS Corp.
o Safeway to acquire Von's in a $1.65 billion deal, creating an
operation with 1,400 stores, 139,000 employees and $22.0
billion in revenues. They will still trail the industry
leader, Kroger, in size.
o JC Penney, parent of Thrift Drug, announced they will acquire
Fay's Inc., operator of 272 units, making Thrift the nation's
eight largest chain. Penney's acquisition of Eckerd Drug has
been cleared by the FTC.
o Sears & Roebuck acquired the 61 unit Orchard Supply Hardware
chain for $415 million.
o Waban, Inc. - to spin off BJ's Wholesale Club and change its
name to its other wholesale club division, HomeBase.
o Food Lion - announced its pending acquisition of Kash N Karry
in a $341.0 million deal.
o PetsMart - Announced plans to acquire Pet City Holdings, the
largest pet superstore chain in the UK.
o TJX Companies - announced intent to sell its Chadwick's of
Boston catalog to Brylane LP.
o Revco - completed its tender offer for Big B drug store chain.
================================================================================
-20-
<PAGE>
National Retail Market Overview
================================================================================
o Quality Food Centers - Bellevue, WA based supermarket chain to
acquire 56-unit Hughes Family Markets for $360 million.
o REITs ended the year with generally good gains over the thrashing
many of their stock prices took earlier in the year. Through
October, the average mall REIT was up 23.4 percent, while shopping
center REITs were up 16.2 percent. Outlet center REITs were the
notable laggards with a .2 percent loss. The most significant deal
in 1996 involved Simon Property Group's $1.5 billion acquisition of
The DeBartolo Realty Corp. The combined company has a market
capitalization of $7.5 billion and a portfolio of 111 regional
malls, 66 strip centers, and several specialty centers.
o Power center growth has arguably fueled the industry's expansion
over the past few years. With investors having become more
pessimistic due to overbuilding and cannibalization of sales, a new
growth vehicle is emerging, the supercenter. This concept combines
the elements of a neighborhood center, discounter, supermarket, and
drug store into one unit of 150,000 to 200,000 square feet. At the
end of 1995 there were 500 supercenters. A recent ICSC Survey
expects the market to reach buildout in 2003 with 1,800 stores.
Leading chains include Wal-Mart, Kmart, Target and Meyer.
o Despite trends towards consolidation and downsizing, retailers say
they will continue aggressive expansions over the next four years.
These results were tabulated from Shopping Center World's 16th
Annual Retailer's Expansion Plans Survey. Retailers say they will
open 28,000 stores between 1997 and the end of 2000. Among the 148
responding retailers, 83 percent planned their expansions in
shopping centers led by regional malls.
o Regional Malls 72%
o Power Centers 50%
o Neighborhood Centers 46%
o Community Centers 34%
o Outlet Centers 20%
o Off-Price Centers 17%
37 percent cited the southeastern part of the country as the hottest
growth area.
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. The five outlet center REITs
operated 132 centers as of mid-year 1996. By the year 2000 they
expect to operate nearly 175 units. Overall occupancy in 1995 (1996
not available at this writing) slipped to 93.3 percent from 95.5
percent in 1994. 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 .2 percent to $212 per
square foot for the four quarters ended September 30, 1996.
================================================================================
-21-
<PAGE>
National Retail Market Overview
================================================================================
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 other
superstores categories such as in the office products segment where
Office Depot and Staples have announced a merger.
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. Many of the nation's
largest media and entertainment companies are getting into the
retail business in some fashion. AMC Entertainment has formed a
separate subsidiary, Centertainment, Inc., to work with developers
to create entertainment based retail projects.
o Super-regional value-oriented mega malls such as The Mills concept
are expected to be one area of growth over the next several years.
This hybrid concept incorporates the diverse mix of super-regional
malls with the value-oriented aspects of factory outlets, category
killers, off-price merchants and retailer clearance outlets under
one roof. In addition, they add an entertainment component that is
designed to extend the stay of the patron from approximately one to
one and one-half hours in a traditional mall format to three to five
hours. These malls are at least 1.0 million square feet although the
Mills design averages 1.5 million square feet. They can contain
between 7 and 20 anchors and have trade areas stretching upwards to
100 miles.
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
================================================================================
-22-
<PAGE>
National Retail Market Overview
================================================================================
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 - 1997 that their respondents give retail
investments generally poor performance forecasts in their latest survey due to
the protracted merchant shakeout which will continue into 1997 and the general
overbuilding which has had a fundamental change on the industry. While dominant,
Class A malls are still considered to be one of the best real estate investments
anywhere, only 20 percent of the respondents recommended buying malls.
Among the nine real estate categories tracked by Emerging Trends, each had
estimated 1996 and forecasted 1997 value gains except for regional malls and
power centers. Community centers showed a very modest (less than 1 percent)
increase. One of the most daunting tasks facing owners is the competition for
good tenants and the huge capital outlays needed to keep the properties
functional and up-to-date. Emerging Trends views REITs as being buyers but the
capital needs of many of these centers will likely hit FF0 hard over the next
twelve to eighteen months. New REIT IPOs will be limited but consolidations and
follow-up offerings will increase as REIT companies seek to grow capitalizations
for greater operating efficiencies.
Power centers were hit particularly hard in the latest survey. By some
estimates this industry niche now accounts for 25 percent of all retail sales
and not only have they hurt regional malls but their overbuilding has
cannibalized each other. Power centers are now shown to be one of the riskiest
investment classes with only 4 percent of the respondents saying its a good time
to buy. For 1997, the interviewees see community and strip centers as offering
the best investment opportunity in the retail sector.
The following chart summarizes the results of their current survey.
================================================================================
Retail Property Rankings and Forecasts
================================================================================
Investment Potential Predicted Value Gains
Property Type -------------------- --------------------------
1996
Rating(1) Ranking(2) Rent Change 1 Yr. 5 Yrs. 10 Yrs.
================================================================================
Regional Malls 4.9 8th -0.1% -1.7% 12.7% 26.6%
- --------------------------------------------------------------------------------
Power Centers 4.1 9th 0.1% -2.3% 9.1% 19.7%
- --------------------------------------------------------------------------------
Community Centers 5.3 6th (tie) 1.6% 0.3% 12.5% 26.1%
================================================================================
(1) Scale of 1 to 10
(2) Based on 9 property types
Source: Emerging Trends In Real Estate - 1997
================================================================================
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 fourth quarter of 1996 shows that the
retail index posted a positive 5.08 percent increase in total return for the
year. Increased competition in the retail sector from new and
================================================================================
-23-
<PAGE>
National Retail Market Overview
================================================================================
expanding formats and changing locational references has caused the retail index
to trail all other property types. In fact, this was the fifth consecutive
quarter in which retail properties posted the lowest return among the five
NCREIF property types. Overall, It appears also that value write-downs have
continued. The -1.73 percent in negative appreciation for the retail subindex
marked the continuation of this trend. Continuing concerns about overbuilding
competition and capital requirements are cited as the primary factors for the
pessimistic performance.
================================================================================
Retail Property Returns
NCREIF Index
Fourth Quarter 1996 (%)
================================================================================
Period Income Appreciation Total Change in CPI*
================================================================================
4th.Qtr. 1996 2.09 -1.73 .36 .51
- --------------------------------------------------------------------------------
One Year 8.46 -3.18 5.08 3.32
- --------------------------------------------------------------------------------
Three Years 8.26 -2.82 5.27 2.85
- --------------------------------------------------------------------------------
Five Years 7.88 -3.94 3.71 2.84
- --------------------------------------------------------------------------------
Ten Years 7.26 -1.49 5.69 3.68
================================================================================
* Annualized year ending 12/31
================================================================================
Source: Real Estate Performance Report
National Council of Real Estate Investment Fiduciaries
================================================================================
Retail's total return of 5.08 percent for 1996 was substantially behind
the other investment categories including Apartment (11.10%), Office (12.74%),
R&D (17.64%), and Warehouse (12.69%). Among the different retail categories,
neighborhood centers posted the best total performance, while regional malls
were laggards.
=====================================================================
Retail Segment Performance
=====================================================================
Category Income Appreciation Total
=====================================================================
Neighborhood 8.85% - .63% 8.17%
---------------------------------------------------------------------
Community 9.03% -2.10% 6.79%
---------------------------------------------------------------------
Regional Malls 7.74% -3.98% 3.53%
---------------------------------------------------------------------
Super Regional Malls 8.04% -3.29% 4.55%
=====================================================================
From the above, it is clear that value declines were still in evidence
during 1996.
Private investor underwriting has become more conservative with respect to
vacancy allowances, growth rates (rent, sales) and occupancy cost tolerance
levels. The reduced spread between cash returns and internal rate of returns is
evidence that buyers seek a higher proportion of their expected return from
income rather than from appreciation.
The Cushman & Wakefield Investor Survey also confirms trends that
capitalization rates for most retail categories have risen. Regional malls have
been the most affected. This is partly due to the fact that over 75 malls are
currently available for sale.
================================================================================
-24-
<PAGE>
National Retail Market Overview
================================================================================
The Urban Land Institute, in their 1997 Real Estate Forecast - Mid Year
Outlook, projects very small increases in effective rents through mid-1998 for
both regional malls and strip shopping centers. Even though rent increases will
likely be higher than 1996, they will likely not keep pace with inflation. In
fact, retail garnered the bottom two spots in ULI's ranking of 10 property types
in measuring their expected performance change. The downward pressure on rents
has been attributed to the expansion of big-box retailers, which has resulted in
a changing tenant base that requires a different type of space then exists in
much of the older retail stock.
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.
Currently, there are in excess of 300 REITs in the United States, more
than three-quarters of 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 December, equity REITs posted
nearly a 10 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 38.8 percent total return. This
================================================================================
-25-
<PAGE>
National Retail Market Overview
================================================================================
was followed by self-storage (34.9%), hotels (30.8%), triple-net lease (31.6%),
and industrial/self-storage (27.9%). One equity REIT sector was in the red -
outlet centers (-2.80%).
Retail REITs
As of June 30, 1997, there were a total of 45 REITs specializing in
retail, making up sizable percentage of the securities in the REIT market.
Forty-four of these REIT companies are Equity REITs. 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, displays a summary performance of the three
composite categories. Table B identifies the number of companies and market
capitalization for year end 1996 as well as through the second quarter 1997.
- --------------------------------------------------------------------------------
Table A - Retail REIT Performance
- --------------------------------------------------------------------------------
12/31/96 6/30/97
------------------------------------------------
Y-T-D Total Dividend Y-T-D Dividend
Return Yield Total Return Yield
================================================================================
ALL REITs 39.96% 6.59% 6.35% 6.52%
Strip Centers 32.88% 6.50% 7.51% 6.32%
Regional Malls 44.63% 6.60% 7.59% 6.69%
Outlet Centers 3.78% 9.22% (4.01%) 8.53%
- --------------------------------------------------------------------------------
Source: Realty Stock Review
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table B - Market Capitalization
- --------------------------------------------------------------------------------
12/31/96 6/30/97
-----------------------------------------------------------
No. of Market No. of Market
Securities Capitalization* Securities Capitalization
================================================================================
ALL REITs 43 $20,190.7 45 $22,904.3
Strip Centers 26 $11,145.8 25 $12,055.3
Regional Malls 10 $ 7,349.0 12 $ 8,765.3
Outlet Centers 6 $ 1,300.2 6 $ 1,373.5
- --------------------------------------------------------------------------------
* Number reported in thousands.
Source: Realty Stock Review
- --------------------------------------------------------------------------------
As can be seen, the 43 REIT securities at year end 1996 had a market
capitalization of approximately $20.2 billion. Total returns of nearly 40.0
percent were well ahead of the stock market as a whole and also exceeded the
35.8 percent return for all REITs. Regional malls did
================================================================================
-26-
<PAGE>
National Retail Market Overview
================================================================================
exceptionally well with nearly a 45 percent return followed by strip centers at
approximately 33%. Outlet centers, which were posting negative returns through
the third quarter, recovered to show a 3.8 percent return for the year.
Accordingly, dividend yields for this group were 9.22 percent, some 266 basis
points above the composite average return.
Data through the second quarter of 1997 shows that the new forty-five REIT
securities have a market cap of $22.9 billion. Year to date returns for strip
centers and regional malls are around 7.50% respectively. Alternatively, outlet
center REIT's continue to perform poorly with a negative 4% return.
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
nine 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.
The ten 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.
================================================================================
-27-
<PAGE>
National Retail Market Overview
================================================================================
- --------------------------------------------------------------------------------
Table B - REGIONAL MALL REIT ANALYSIS
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
==============================================================================================================================
REIT PORTFOLIO CBL CWN GGP JPR MAC MLS RSE SPG
CBL & Crown General JP Realty The Macerich The Mills Rouse Simon
Assoc. American Growth Inc. Company Corp Company Property
Group
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Company Overview
- ----------------
No. of Retail Centers 105 25 67 n/a 20 18 69 177
No. of Regional Malls 16 25 66 10 17 4 38 113
Mall as % of Portfolio 71% 99% 98% 71% 97% 82% 75% 77%
Avg. Total GLA/Center* 655 545 699 493 735 1,500 873 759
- ------------------------------------------------------------------------------------------------------------------------------
- ---------------
Mall Operations
- ---------------
Reporting Year 1995 1995 1995 1995 1995 1995 1995 1995
Avg. Sales PSF of Mall Shop GLA $232 $206 $235 $208 $290 $297 $289 $276
Avg. Rent on Recent Leases $17.41 $17.96 $21.80 $21.45 $23.00 $25.00 $24.90 $21.92
Minimum Rent/Sales Ratio 7.5% 8.7% 9.3% 10.3% 7.9% 8.4% 8.6% 7.9%
Total Occupancy Cost/Sales Ratio 12.3% 11.1% 12.1% 10.2% 11.3% 11.6% 12.2% 11.0%
Mall Shop Occupancy Level 88.2% 82.0% 86.2% 86.5% 92.2% 90.0% 95.2% 86.4%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------
Share Prices
- ------------
IPO Date 10/27/93 8/9/93 4/8/93 n/a 3/9/94 4/94 1966 12/26/93
IPO Price $19.50 $17.25 $22.00 n/a $19.00 $23.50 n/a $22.25
Current Price (11/29/96) $24.50 $7.63 $27.75 $19.50 $23.25 $20.75 $26.50 $27.38
52-Week High $25.00 $8.75 $28.38 $19.75 $24.00 $22.50 $27.38 $27.88
52-Week Low $19.50 $6.63 $18.50 $15.13 $19.00 $16.50 $18.25 $21.13
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------
Capitalization & Yields
- -----------------------
Market Capitalization** $1,266 $842 $2,744 $661 $1,328 $1,481 $3,936 $5,900
Annual Dividend $1.68 $0.80 $1.72 $1.92 $1.76 $1.89 $0.88 $1.97
Dividend Yield (11/29/96) 6.86% 10.48% 6.20% 9.85% 7.57% 9.11% 3.32% 7.20%
FFO 1996*** $2.03 $1.29 $1.95 $1.83 $1.96 $1.96 $2.42 $2.34
FFO Yield (11/29/96) 8.29% 16.91% 7.03% 9.38% 8.43% 9.45% 9.13% 8.55%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
=======================================================
REIT PORTFOLIO TCO URB
Taubman Urban
Centers Shopping
Centers
=======================================================
- ----------------
Company Overview
- ----------------
No. of Retail Centers 19 12
No. of Regional Malls 19 8
Mall as % of Portfolio 100% 95%
Avg. Total GLA/Center* 1,102 1,040
- -------------------------------------------------------
- ---------------
Mall Operations
- ---------------
Reporting Year 1995 1995
Avg. Sales PSF of Mall Shop GLA $352 $344
Avg. Rent on Recent Leases $41.27 $34.64
Minimum Rent/Sales Ratio 11.7% 10.1%
Total Occupancy Cost/Sales Ratio 15.1% 11.4%
Mall Shop Occupancy Level 88.0% 92.6%
- -------------------------------------------------------
- ------------
Share Prices
- ------------
IPO Date 11/18/92 10/6/93
IPO Price $11.00 $23.50
Current Price (11/29/96) $11.63 $26.50
52 - Week High $12.50 $27.88
52 - Week Low $9.25 $20.13
- -------------------------------------------------------
- -----------------------
Capitalization & Yields
- -----------------------
Market Capitalization** $3,127 $1,072
Annual Dividend $0.88 $1.98
Dividend Yield (11/29/96) 7.57% 7.47%
FFO 1996*** $0.98 $2.41
FFO Yield (11/29/96) 8.43% 9.09%
- -------------------------------------------------------
Source: Salomon Bothers, Realty Stock Review; Annual Reports and Green Street
Advisors, Inc.
* Numbers in thousands (000) includes malls 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 assests and before minority interests in the Operating
Partnership.
- --------------------------------------------------------------------------------
================================================================================
-28-
<PAGE>
National Retail Market Overview
================================================================================
Shopping Center REITs
Shopping center REITs comprise the largest sector of the retail REIT
market accounting for 26 out of the total 43 securities. General characteristics
of seven of the largest shopping center REITs are summarized on Table C. The
public equity market capitalization of the seven companies totaled $6.1 billion
as of October 31, 1996. The two largest, Kimco Realty Corp. and New Plan Realty
Trust have a market capitalization equal to approximately 34.4 percent of the
group total.
Year-to-date returns have been 16.19 percent for all shopping center REITs
including a 7.36 percent dividend yield.
- --------------------------------------------------------------------------------
Table C - SHOPPING CENTER REIT ANALYSIS
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
===========================================================================================================================
REIT PORTFOLIO DDR FRT GRT JPR KIM NPR VNO WRI
Devel. Federal Glimcher JP Kimco New Plan Vornado Weingarten
Diversified Realty Inv Realty Realty Inc Realty Corp Realty Realty Realty
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Company Overview
- ----------------
Total Properties 111 53 84 46 193 123 85 161
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
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------
Mall Operations
- ---------------
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% 94.0% 92.0%
- ---------------------------------------------------------------------------------------------------------------------------
- ------------
Share Prices
- ------------
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
- ---------------------------------------------------------------------------------------------------------------------------
- -----------------------
Capitalization & Yields
- -----------------------
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 (12/15/95) 8.03% 7.01% 10.82% 8.14% 5.11% 6.43% 6.20% 6.64%
FF0 1995*** $2.65 $1.78 $2.25 $1.83 $3.15 $1.44 $2.67 $2.80
FF0 Yield (12/15/95) 8.87% 7.61% 12.68% 8.87% 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,
amortization, other non-cash items, extraordinary items, gains or losses
on sales of assests and before minority interests in the Operating
Partnership.
================================================================================
-29-
<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.
================================================================================
-30-
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C>
1 Austin Power Center Jan-99 Home Depot 20 yrs. 103,680 $2,025,000 $19.53
Austin Avenue & NYS Thruway
Yonkers, NY
- -------------------------------------------------------------------------------------------------------------------------
2 Austin Power Center Jan-99 Costco 25 yrs. 134,632 $2,019,480 $15.00
Austin Avenue & NYS Thruway
Yonkers, NY
- -------------------------------------------------------------------------------------------------------------------------
3 Lowe's Home Center Oct-97 Lowe's 20 yrs. 130,316 $977,370 $7.50
W/S of Grant Avenue 1 1-yr. opt.
Town of Sennett 4 5-yr. opt.
Cayuga County, NY 1 6-yr. opt.
- -------------------------------------------------------------------------------------------------------------------------
4 Springhurst Towne Center Fall-97 Kohl's 20 yrs. 86,584 $671,026 $7.75
Westport & I-265 4 5-yr. opt.
Louisville, Kentucky
- -------------------------------------------------------------------------------------------------------------------------
5 Hudson Valley Plaza Spr-97 Wal-Mart 20 yrs. 201,000 $1,396,950 $6.95
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
6 Hudson Valley Plaza Spr-97 Sam's Club 20 yrs. 114,547 $670,100 $5.85
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
7 Hudson Valley Plaza Spr-97 Lowe's 20 yrs. 130,019 $1,170,171 $9.00
Route 9W & 199 4 5-yr. opt.
Town of Ulster, NY
- -------------------------------------------------------------------------------------------------------------------------
8 Hillview Shopping Center 1997 Home Place 15 yrs. 40,000 $800,000 $20.00
Route 38 Proposed
Cherry Hill, New Jersey
- -------------------------------------------------------------------------------------------------------------------------
9 Lowe's Home Center Oct-96 Lowe's 20 yrs. 131,645 $999,318 $7.59
Sycamore, Ash, & Shippers 4 5-yr. opt.
Vestal, Broome Cty., NY 1 7-yr. opt.
- -------------------------------------------------------------------------------------------------------------------------
10 Brandywine Square Aug-96 BJ's Wholesale 20 yrs. 108,242 $1,190,662 $11.00
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
11 Brandywine Square Aug-96 Hechinger 20 yrs. 99,000 $1,242,450 $12.55
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -------------------------------------------------------------------------------------------------------------------------
12 Walmart Supercenter Spr-96 Wal-Mart 20 yrs. 202,590 $1,243,903 $6.14
I-85 & I-575
Newman, GA
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <C> <C> <C> <C>
1 Austin Power Center $21.48/sf yr. 6 1.0% of sales $36,184,320
Austin Avenue & NYS Thruway $23.63/sf yr. 11 over a natural
Yonkers, NY $26.00/sf yr. 16 breakpoint
- -----------------------------------------------------------------------------------------
2 Austin Power Center $16.13/sf yr. 6 1.0% of sales $80,779,200
Austin Avenue & NYS Thruway $17.39/sf yr. 11 over a natural
Yonkers, NY $18.97/sf yr. 16 breakpoint
$20.42/sf yr. 21
- -----------------------------------------------------------------------------------------
3 Lowe's Home Center $7.50/sf yr. 21 N/A $40,000,000
W/S of Grant Avenue $8.25/sf yrs. 22-26
Town of Sennett $9.08/sf yrs. 27-31
Cayuga County, NY $9.98/sf yrs. 32-36
- -----------------------------------------------------------------------------------------
4 Springhurst Towne Center $8.50/sf yr.11 2.5% of sales $18,000,000
Westport & I-265 over a natural
Louisville, Kentucky breakpoint
- -----------------------------------------------------------------------------------------
5 Hudson Valley Plaza None No $45,000,000
Route 9W & 199
Town of Ulster, NY
- -----------------------------------------------------------------------------------------
6 Hudson Valley Plaza None No $35,000,000
Route 9W & 199
Town of Ulster, NY
- -----------------------------------------------------------------------------------------
7 Hudson Valley Plaza 10% increase every 2% of sales over $50,000,000
Route 9W & 199 5 years $32,000,000;
Town of Ulster, NY capped at
$0.95/sf
- -----------------------------------------------------------------------------------------
8 Hillview Shopping Center $21.00/sf yr. 6 N/A
Route 38 $22.00/sf yr.11
Cherry Hill, New Jersey
- -----------------------------------------------------------------------------------------
9 Lowe's Home Center None 2% of sales over $47,500,000
Sycamore, Ash, & Shippers natural
Vestal, Broome Cty., NY breakpoint
- -----------------------------------------------------------------------------------------
10 Brandywine Square $11.88/sf yr. 6 N/A
SS/ Route 30 at Quarry Road $12.83/sf yr. 11
Chester County, Pennsylvania $13.86/sf yr. 16
- -----------------------------------------------------------------------------------------
11 Brandywine Square $13.18/sf yr. 11 N/A
SS/ Route 30 at Quarry Road
Chester County, Pennsylvania
- -----------------------------------------------------------------------------------------
12 Walmart Supercenter None No $68,070,240
I-85 & I-575
Newman, GA
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <C> <C> <C>
1 Austin Power Center 5.6% Anchor in 427,256 SF proposed ctr.
Austin Avenue & NYS Thruway which will also include Costco. Con-
Yonkers, NY struction expected to be completed by
Jan-99. Sales '95 chain avg.
- -------------------------------------------------------------------------------------
2 Austin Power Center 2.5% Anchor in 427,256 SF proposed ctr.
Austin Avenue & NYS Thruway which also incl. HomeDepot. Con-
Yonkers, NY strcution expected to be completed by
Jan-99. Sales ' 96 chain avg.
- -------------------------------------------------------------------------------------
3 Lowe's Home Center 2.4% New Lowe's Home Center with Fall
W/S of Grant Avenue 97 completion. New lease with
Town of Sennett landlord only responsible for structural
Cayuga County, NY repairs.
- -------------------------------------------------------------------------------------
4 Springhurst Towne Center 3.7% Freestanding discount dept. store as
Westport & I-265 anchor in proposed power center.
Louisville, Kentucky Kohl's to pay CAM+5% Fee, insur.,
and taxes. Sales are chain avg.
- -------------------------------------------------------------------------------------
5 Hudson Valley Plaza 3.1% Wal-Mart Supercenter to open in May
Route 9W & 199 97. Adjacent to Hudson Valley Mall.
Town of Ulster, NY NNN lease in planned power center
w/ Sam's Club, Lowe's.
- -------------------------------------------------------------------------------------
6 Hudson Valley Plaza 1.9% Sam's Club to open in March 97.
Route 9W & 199 Adjacent to Hudson Valley Mall.NNN
Town of Ulster, NY lease in planned power center w/ Wal-
Mart, Lowe's.
- -------------------------------------------------------------------------------------
7 Hudson Valley Plaza 2.3% Lowe's to open March 97. Adjacent
Route 9W & 199 to Hudson Valley Mall. NNN lease in
Town of Ulster, NY planned power center w/Wal-Mart,
Sam's Club. Sales proj.
- -------------------------------------------------------------------------------------
8 Hillview Shopping Center Proposed triple net lease in existing
Route 38 shopping center.
Cherry Hill, New Jersey
- -------------------------------------------------------------------------------------
9 Lowe's Home Center 2.1% New $5.1M freestanding store.
Sycamore, Ash, & Shippers Tenant pays all expenses except
Vestal, Broome Cty., NY structural repairs in 1st 10 yrs. Sale
projected b/w $45.0-50.0M.
- -------------------------------------------------------------------------------------
10 Brandywine Square New 590,000sf power ctr. On site of
SS/ Route 30 at Quarry Road former Dowington Inn. NNN lease.
Chester County, Pennsylvania Other tenants include PetsMart,
Dick's, Hechinger Opened 8/96.
- -------------------------------------------------------------------------------------
11 Brandywine Square New 590,000sf power ctr. On site of
SS/ Route 30 at Quarry Road former Dowington Inn. NNN lease.
Chester County, Pennsylvania Other tenants include PetsMart,
Dick's, BJ's Whole. Opened 8/96.
- -------------------------------------------------------------------------------------
12 Walmart Supercenter 1.8% New Wal-Mart scheduled opened in
I-85 & I-575 Spring 1996. Sales are based on Wal
Newman, GA Mart/Sam's chain average.
- -------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
BIG BOX RETAIL LEASES
Cushman & Wakefield, Inc.
=========================================================================================================================
Lease Term/ Bldg Area Annual Rent/
No. Property/Location Date Tenant Options (Sq/Ft) Rent Sq/Ft
=========================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C>
13 Caldor Spr-96 Caldor 25 yrs. 113,275 $1,699,125 $15.00
Everett, MA
- -------------------------------------------------------------------------------------------------------------------------
14 Caldor Spr-96 Caldor 25 yrs. 124,500 $1,992,000 $16.00
Huntington, NY
- -------------------------------------------------------------------------------------------------------------------------
15 Super Kmart Feb-96 Super Kmart 25 yrs. 178,189 $1,514,607 $8.50
Confidential West 10 5-yr. opt.
Virginia location
- -------------------------------------------------------------------------------------------------------------------------
16 Builders Square Dec-95 Builders Square 25 yrs. 109,800 $1,170,468 $10.66
Confidential Midwest 10 5-yr. opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
17 Wal-Mart Supercenter Nov-95 Wal-Mart 20 yrs. 202,590 $1,096,112 $5.41
Highway 41
Cartersville, GA
- -------------------------------------------------------------------------------------------------------------------------
18 Builders Square Nov-95 Builders Square 25 yrs. 109,800 $933,300 $8.50
Confidential Midwest 10 5-yr. opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
19 New Hope Commons Oct-95 Wal-Mart 10 yrs. 149,929 $1,215,924 $8.11
I-40 & Highway 501-15 4 5-yr opt.
Durham, North Carolina
- -------------------------------------------------------------------------------------------------------------------------
20 Independence Commons Sep-95 Kohl's 20 yrs. 80,684 $526,867 $6.53
Independence, Missouri
(Homart)
- -------------------------------------------------------------------------------------------------------------------------
21 Kmart Sep-95 Kmart 25 yrs. 124,157 $1,075,000 $8.66
Confidential West Coast 5 5-yr opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
22 Kmart Sep-95 Kmart 20 yrs. 145,780 $2,988,490 $20.50
Confidential NE Location
- -------------------------------------------------------------------------------------------------------------------------
23 Hornell Shopping Plaza Jun-95 Wal-Mart 20 yrs. 128,268 $741,389 $5.78
Hornell, New York
- -------------------------------------------------------------------------------------------------------------------------
24 Builders Square May-95 Builders Square 25 yrs. 109,800 $1,305,212 $11.89
Confidential Midwest 10 5-yr opt.
Location
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
Estimated
No. Property/Location Steps % Rent Sales
=========================================================================================
<C> <C> <C> <C> <C>
13 Caldor
Everett, MA None No $26,000,000
- -----------------------------------------------------------------------------------------
14 Caldor None No $23,000,000
Huntington, NY
- -----------------------------------------------------------------------------------------
15 Super Kmart None No $60,000,000
Confidential West
Virginia location
- -----------------------------------------------------------------------------------------
16 Builders Square None No $18,446,400
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
17 Wal-Mart Supercenter None No $68,070,240
Highway 41
Cartersville, GA
- -----------------------------------------------------------------------------------------
18 Builders Square None No $18,446,400
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
19 New Hope Commons None 5% of sales in $50,376,144
I-40 & Highway 501-15 excess of
Durham, North Carolina stipulated
breakpoint
- -----------------------------------------------------------------------------------------
20 Independence Commons $7.15/sf yr. 3 $15,000,000
Independence, Missouri $7.40/sf yr. 11
(Homart) $7.65/sf yr.16
- -----------------------------------------------------------------------------------------
21 Kmart None No $17,754,451
Confidential West Coast
Location
- -----------------------------------------------------------------------------------------
22 Kmart 5% increase 1% of sales $34,112,520
Confidential NE Location every 5 years in excess of
$60,000,000
- -----------------------------------------------------------------------------------------
23 Hornell Shopping Plaza None 0.5% of sales in $43,098,048
Hornell, New York yr. 8; capped at
$1.00/sf; 7th yr
sales as break.
- -----------------------------------------------------------------------------------------
24 Builders Square None No $16,689,600
Confidential Midwest
Location
- -----------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================
Rent-Sales
No. Property/Location Ratio Comments
=====================================================================================
<C> <C> <C> <C>
13 Caldor 6.5% Triple net lease of Caldor located in
Everett, MA everett, MA. Lease started in early
1996.
- ---------------------------------------------------------------------------------------
14 Caldor 8.7% Semi net Caldor lease which began in
Huntington, NY ealry 1996.
- ---------------------------------------------------------------------------------------
15 Super Kmart 2.5% New Super Kmart on NNN lease. No
Confidential West % rent or steps. Sales based on
Virginia location projection by Kmart.
- ---------------------------------------------------------------------------------------
16 Builders Square 6.3% New Builders Square which opened
Confidential Midwest beginning 1996. Lease is on a NET
Location basis. Sales based on Builders
Square state average.
- ---------------------------------------------------------------------------------------
17 Wal-Mart Supercenter 1.6% Wal-Mart Supercenter which opened
Highway 41 in November 1995. Sales based on
Cartersville, GA Wal-Mart/Sam's chain average.
- ---------------------------------------------------------------------------------------
18 Builders Square 5.1% NET lease of Builders Square which
Confidential Midwest opened in Nov-95. No percentage
Location rents or steps. Sales based on
B.S. state average
- ---------------------------------------------------------------------------------------
19 New Hope Commons 2.4% New 407,360sf power center. Opts. At
I-40 & Highway 501-15 $8.11/sf. Tenant pays utilities & p/r
Durham, North Carolina taxes, CAM, & insur. Sales based on
Wal-Mart/Sam's avg.
- ---------------------------------------------------------------------------------------
20 Independence Commons 3.5% New 363,853sf power center. No %
Independence, Missouri rent clause. P/R CAM & taxes.
(Homart) Kohl's received $30/sf in workletter.
Sales based on chain avg./unit.
- ---------------------------------------------------------------------------------------
21 Kmart 6.1% New Super Kmart which opened in
Confidential West Coast November 1995. Lease is on a NET
Location basis with no steps. Sales are based
on Kmart state average.
- ---------------------------------------------------------------------------------------
22 Kmart 8.8% New Super Kmart due to open 2nd
Confidential NE Location quarter 1996. Lease includes 4-5
year options. Sales estimated based
on 150% of Kmart state avg.
- ---------------------------------------------------------------------------------------
23 Hornell Shopping Plaza 1.7% New 250,000sf ctr. Turn-key. P/R
Hornell, New York share taxes, ins.; CAM cap at $.50/sf
yrs 1-10; $.70/sf yrs 11-20. Sales
based on Wal-Mart/Sam's avg.
- ---------------------------------------------------------------------------------------
24 Builders Square 7.8% Builders Square which opened in
Confidential Midwest November 1995. Lease is on a net
Location basis with no steps or % rent. Sales
based on B.S. state average.
- ---------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
Community Centers One LLC
??/13/97 9:12 am
[ILLEGIBLE]: KUSHNER Page: 1
Property: NEW HOPE COMMONS
Retail Sales Detail Report
Reported Sales : 1996 - 1997
Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters: No
<TABLE>
<CAPTION>
Tenant Year January February March April May June
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-101 Wal-Mart #2137
Sq Ft 149,929 1997 3,167,028
Rent 101,389.48 1996 967,545 3,167,028 3,167,028 3,167,028 3,167,028 3,167,028
Store Opened 10/14/95
Lease Exp 10/13/15
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-102 Vacant
Sq Ft 7,200 1997 -- No Sales
Rent 0.00 1996 -- No Sales
Move In
Lease Exp
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-103 Michaels #9502
Sq Ft 19,064 1997 -- No Sales
Rent 14,456.87 1996 268,812 268,812 268,812 268,812 268,812 268,812
Store Opened 8/31/95
Lease Exp 2/28/05
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-104 Marshalls #657
Sq Ft 31,134 1997 -- No Sales
Rent 22,733.25 1996 393,719 393,719 393,719 393,719 393,719 393,719
Store Opened 8/14/95
Lease Exp 1/31/11
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-105 Shoe Show #437
Sq Ft 2,635 1997 22,523 25,185
Rent 3,732.92 1996 14,147 16,931 22,572 26,653 29,104 23,800
Store Opened 9/16/95
Lease Exp 1/31/01
Departments No
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Tenant Year July August September October November December Yr. SPSF Yr. Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-101 Wal-Mart #2137
Sq Ft 149,929 1997 21 3,167,028
Rent 101,389.48 1996 3,167,028 3,167,028 3,167,028 3,167,028 3,167,028 3,167,028 239 35,804,855
Store Opened 10/14/95
Lease Exp 10/13/15
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-102 Vacant
Sq Ft 7,200 1997 -- No Sales
Rent 0.00 1996 -- No Sales
Move In
Lease Exp
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-103 Michaels #9502
Sq Ft 19,064 1997 -- No Sales
Rent 14,456.87 1996 268,812 268,812 268,812 268,812 268,812 268,812 169 3,225,740
Store Opened 8/31/95
Lease Exp 2/28/05
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-104 Marshalls #657
Sq Ft 31,134 1997 -- No Sales
Rent 22,733.25 1996 393,719 393,719 393,719 393,719 393,719 393,719 152 4,724,625
Store Opened 8/14/95
Lease Exp 1/31/11
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-105 Shoe Show #437
Sq Ft 2,635 1997 18 47,709
Rent 3,732.92 1996 21,032 29,307 21,016 25,393 24,297 96 254,255
Store Opened 9/16/95
Lease Exp 1/31/01
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Community Centers One LLC
??/13/97 9:12 am
[ILLEGIBLE]: KUSHNER Page: 2
Property: NEW HOPE COMMONS
Retail Sales Detail Report
Reported Sales : 1996 - 1997
Select By: Unit Ref
Type of Occupant: Current
Include Non Reporters: No
<TABLE>
<CAPTION>
Tenant Year January February March April May June
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-106 Cosmetic Center #73
Sq Ft 6,572 1997 82,732 108,036 92,956 86,893
Rent 8,488.83 1996 61,791 101,044 82,109 85,833 115,825 90,518
Store Opened 8/26/95
Lease Exp 8/31/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-107 Linens 'N Things #460
Sq Ft 31,999 1997 -- No Sales
Rent 27,332.48 1996 479,088 330,066 382,320 617,765
Store Opened 8/25/95
Lease Exp 1/31/11
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-108 WireFree Communications
Sq Ft 600 1997 5,602 7,015 7,116 6,475
Rent 1,081.50 1996 7,327 10,318 15,302 14,274 26,869 23,617
Store Opened 10/10/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-109 Chesapeake Bagel
Sq Ft 2,400 1997 47,896 43,754 52,846 49,309 52,835
Rent 3,656.00 1996 39,180 40,628 51,964 50,878 52,351 54,068
Store Opened 11/09/95
Lease Exp 11/30/05
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-110 Omega Sports
Sq Ft 6,968 1997 56,295 67,612 90,466 70,605
Rent 8,500.00 1996 31,375 32,382 57,622 55,995 48,072 63,010
Store Opened 11/16/95
Lease Exp 11/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Tenant Year July August September October November December Yr. SPSF Yr. Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-106 Cosmetic Center #73
Sq Ft 6,572 1997 56 370,617
Rent 8,488.83 1996 86,619 117,408 76,818 96,244 126,796 188,314 187 1,229,319
Store Opened 8/26/95
Lease Exp 8/31/00
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-107 Linens 'N Things #460
Sq Ft 31,999 1997 -- No Sales
Rent 27,332.48 1996 474,917 629,252 522,164 417,907 554,033 930,590 167 5,338,102
Store Opened 8/25/95
Lease Exp 1/31/11
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-108 WireFree Communications
Sq Ft 600 1997 44 26,208
Rent 1,081.50 1996 12,277 20,213 15,820 15,080 6,778 11,035 298 178,909
Store Opened 10/10/95
Lease Exp 9/30/00
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-109 Chesapeake Bagel
Sq Ft 2,400 1997 103 246,641
Rent 3,656.00 1996 46,209 62,853 45,612 55,002 62,886 60,737 259 622,368
Store Opened 11/09/95
Lease Exp 11/30/05
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-110 Omega Sports
Sq Ft 6,968 1997 41 284,978
Rent 8,500.00 1996 65,804 129,470 53,695 48,832 63,295 101,404 108 750,956
Store Opened 11/16/95
Lease Exp 11/30/00
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Community Centers One LLC
??/13/97 9:12 am
[ILLEGIBLE]: KUSHNER Page: 3
Property: NEW HOPE COMMONS
Retail Sales Detail Report
Reported Sales : 1996 - 1997
Select By: Unit Ref
Type of Occupant: Current
Include Non Reporters: No
<TABLE>
<CAPTION>
Tenant Year January February March April May June
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-111 Old Navy-The Gap#5614
Sq Ft 17,512 1997 349,788 517,671 983,380 551,925 687,880
Rent 17,512.00 1996 238,610 320,927 535,167 481,721 432,824 576,056
Store Opened 8/31/95
Lease Exp 8/31/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-112 Uptons (SALE)
Sq Ft 58,845 1997 -- No Sales
Rent 0.00 1996 -- No Sales
Store Opened 8/04/95
Lease Exp 12/31/43
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-113 Best Buys #160
Sq Ft 45,000 1997 -- No Sales
Rent 46,875.00 1996 -- No Sales
Store Opened 11/09/95
Lease Exp 1/31/11
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-114 OfficeMax, Inc. #376
Sq Ft 23,248 1997 -- No Sales
Rent 20,342.00 1996 -- No Sales
Store Opened 11/16/95
Lease Exp 10/31/10
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-120 Party City #147
Sq Ft 8,000 1997 80,816 92,262 98,524 117,395
Rent 10,000.00 1996 78,085 73,699 91,020 82,807
Store Opened 9/20/95
Lease Exp 9/30/05
Departments No
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Tenant Year July August September October November December Yr. SPSF Yr. Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-111 Old Navy-The Gap#5614
Sq Ft 17,512 1997 176 3,080,643
Rent 17,512.00 1996 360,809 596,392 814,779 627,412 1,000,841 1,181,868 409 7,167,404
Store Opened 8/31/95
Lease Exp 8/31/00
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-112 Uptons (SALE)
Sq Ft 58,845 1997 -- No Sales
Rent 0.00 1996 -- No Sales
Store Opened 8/04/95
Lease Exp 12/31/43
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-113 Best Buys #160
Sq Ft 45,000 1997 -- No Sales
Rent 46,875.00 1996 -- No Sales
Store Opened 11/09/95
Lease Exp 1/31/11
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-114 OfficeMax, Inc. #376
Sq Ft 23,248 1997 -- No Sales
Rent 20,342.00 1996 -- No Sales
Store Opened 11/16/95
Lease Exp 10/31/10
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
0-120 Party City #147
Sq Ft 8,000 1997 49 388,997
Rent 10,000.00 1996 70,136 83,848 91,081 286,057 86,418 122,144 133 1,065,296
Store Opened 9/20/95
Lease Exp 9/30/05
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Community Centers One LLC
??/13/97 9:12 am
[ILLEGIBLE]: KUSHNER Page: 4
Property: NEW HOPE COMMONS
Retail Sales Detail Report
Reported Sales : 1996 - 1997
Select By: Unit Ref
Type of Occupant: Current
Include Non Reporters: No
<TABLE>
<CAPTION>
Tenant Year January February March April May June
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-121 Shoe Department #436
Sq Ft 4,125 1997 44,190 56,302
Rent 5,328.13 1996 44,216 45,826 65,765 68,334 66,652 54,830
Store Opened 9/23/95
Lease Exp 1/31/01
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-122 Men's Wearhouse - Store #3202
Sq Ft 5,000 1997 140,113 109,713 132,186 122,088
Rent 6,875.00 1996 116,861 85,470 123,501 90,428 96,674 107,159
Store Opened 9/30/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-123 Neo Renaissance Restaurant
Sq Ft 7,500 1997 -- No Sales
Rent 11,587.50 1996 -- No Sales
Store Opened 12/09/95
Lease Exp 9/30/05
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-124 Philly Steak Factory
Sq Ft 1,119 1997 26,785 23,360 23,856 26,910
Rent 1,776.88 1996 24,765 24,642 28,642 27,631 29,805 28,052
Store Opened 11/01/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-125 Great Clips/Tar Heel Clippers
Sq Ft 900 1997 13,212 11,410 14,745 13,592
Rent 1,429.50 1996 11,605 13,495 14,610 14,010 13,553 12,254
Store Opened 11/01/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Tenant Year July August September October November December Yr. SPSF Yr. Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-121 Shoe Department #436
Sq Ft 4,125 1997 24 100,492
Rent 5,328.13 1996 47,908 69,793 48,182 58,514 56,489 152 626,509
Store Opened 9/23/95
Lease Exp 1/31/01
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-122 Men's Wearhouse - Store #3202
Sq Ft 5,000 1997 101 504,100
Rent 6,875.00 1996 76,584 93,240 104,185 111,305 127,529 241,573 275 1,374,508
Store Opened 9/30/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-123 Neo Renaissance Restaurant
Sq Ft 7,500 1997 -- No Sales
Rent 11,587.50 1996 -- No Sales
Store Opened 12/09/95
Lease Exp 9/30/05
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-124 Philly Steak Factory
Sq Ft 1,119 1997 90 100,911
Rent 1,776.88 1996 146 163,536
Store Opened 11/01/95
Lease Exp 9/30/00
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-125 Great Clips/Tar Heel Clippers
Sq Ft 900 1997 59 52,958
Rent 1,429.50 1996 15,706 12,636 10,121 12,512 13,423 12,969 174 156,894
Store Opened 11/01/95
Lease Exp 9/30/00
Departments No
</TABLE>
<PAGE>
Community Centers One LLC
??/13/97 9:12 am
[ILLEGIBLE]: KUSHNER Page: 5
Property: NEW HOPE COMMONS
Retail Sales Detail Report
Reported Sales : 1996 - 1997
Select By: Unit Ref
Type of Occupant: Current
Include Non Reporters: No
<TABLE>
<CAPTION>
Tenant Year January February March April May June
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-130 Barnes & Noble #2631
Sq Ft 25,200 1997 644,335 511,002 600,717 497,322
Rent 30,450.00 1996 377,957 376,603 485,546 370,199 388,365 541,303
Store Opened 9/29/95
Lease Exp 8/31/10
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-110A Zany Brainy #325
Sq Ft 13,010 1997 -- No Sales
Rent 17,075.63 1996 72,500 153,200 154,900 208,200
Store Opened 3/28/96
Lease Exp 3/31/06
Departments No
Property Totals 1997 4,614,602 1,558,548 2,096,792 1,624,001 740,715 0
1996 2,597,909 4,897,825 5,942,031 5,672,478 5,757,891 6,312,997
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Tenant Year July August September October November December Yr. SPSF Yr. Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-130 Barnes & Noble #2631
Sq Ft 25,200 1997 89 2,253,376
Rent 30,450.00 1996 398,656 412,305 465,024 437,449 516,234 1,188,987 236 5,958,627
Store Opened 9/29/95
Lease Exp 8/31/10
Departments No
- --------------------------------------------------------------------------------------------------------------------
0-110A Zany Brainy #325
Sq Ft 13,010 1997 -- No Sales
Rent 17,075.63 1996 165,300 149,200 175,000 165,000 302,300 613,800 166 2,159,400
Store Opened 3/28/96
Lease Exp 3/31/06
Departments No
Property Totals 1997 0 0 0 0 0 0 817 10,634,658
1996 5,671,516 6,235,474 6,273,056 6,186,264 6,770,879 8,482,979 5,442 70,801,303
</TABLE>
<PAGE>
NEW HOPE COMMONS 1997 UPDATE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<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> <C>
# 1-SUITE 101 1 149,929 11/95 10/15 - 8.12 1,216,674 0.50
WAL MART 1
1- 60 8.12 1,216,674 0.50
2- 60 8.12 1,216,674 0.50
3- 60 8.12 1,216,674 0.50
4- 60 8.12 1,216,674 0.50
5- 60 8.12 1,216,674 0.50
# 2-SUITE 102A 2 3,150 10/97 9/02 18.64 58,725 3.00
MATTRESS FIRM 4
1- 60 21.00 66,150 3.00
2- 60 22.50 70,875 3.00
# 3-SUITE 102B 2 4,050 10/97 9/07 - 16.00 64,800 4.00
DOLLAR TREE 4 10/02 17.00 68,850
# 4-SUITE 103 4 19,064 8/95 2/05 - 9.10 173,482 3.00
MICHAEL'S 8 9/97 9.25 176,342
9/00 9.75 185,874
1- 60 11.25 214,470 3.00
2- 60 12.25 233,534 3.00
3- 60 12.25 233,534 3.00
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
# 1-SUITE 101 UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
WAL MART REAL ESTATE TAXES
UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
REAL ESTATE TAXES
UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
REAL ESTATE TAXES
UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
REAL ESTATE TAXES
UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
REAL ESTATE TAXES
UNLIMITED 50,000 CAM-UPT-ELE-FIR 5%
REAL ESTATE TAXES
# 2-SUITE 102A UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
MATTRESS FIRM REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 3-SUITE 102B UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
DOLLAR TREE REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 4-SUITE 103 UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
MICHAEL'S REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
<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> <C>
# 5-SUITE 104 1 30,311 9/95 1/11 - 9.00 272,799 2.00
MARSHALL'S 1 9/97 9.15 277,346
9/00 9.50 287,955
9/05 10.50 318,266
1- 60 11.75 356,164 2.00
2- 60 12.75 386,465 2.00
3- 60 13.75 416,776 2.00
# 6-SUITE 105 2 2,635 6/97 9/02 - 17.00 44,795 5.00
SHOE SHOW LESS H.QUEST 3 10/97 18.50 48,748
6/00 18.75 49,406
# 7-SUITE 106 2 6,572 9/95 8/00 - 15.50 101,866 3.00
COSMETIC CENTER 5 9/97 16.50 108,438
1- 60 17.83 117,179 3.00
2- 60 20.50 134,726 3.00
3- 60 23.58 154,968 3.00
# 8-SUITE 107 1 31,999 9/95 1/11 - 10.25 327,990 3.00
LINENS N THINGS 1 9/97 10.55 337,589
9/00 10.85 347,189
9/05 11.45 366,389
1- 60 11.75 375,988 3.00
2- 60 12.37 395,828 3.00
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
# 5-SUITE 104 UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
MARSHALL'S REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 6-SUITE 105 UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
SHOE SHOW LESS REAL ESTATE TAXES
H.QUEST PROP INS W/15%
LIAB INS W/15%
# 7-SUITE 106 UNLIMITED NATURAL CAM-UPT-FIR+GEL 15
COSMETIC CENTER REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT-FIR+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT-FIR+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT-FIR+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
# 8-SUITE 107 UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
LINENS N THINGS REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
<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> <C>
3- 60 12.80 409,587 3.00
# 9-SUITE 108 2 600 10/95 9/00 - 21.63 12,978
WIREFREE COMM 2 10/97 22.28 13,367
10/98 22.95 13,768
10/99 23.64 14,181
# 10-SUITE 109 2 2,400 12/95 11/05 - 18.28 43,872 5.00
CHESAPEAKE BAGEL 3 12/97 18.83 45,192
12/98 19.39 46,536
12/99 19.97 47,928
12/00 20.57 49,368
12/01 21.19 50,856
12/02 21.83 52,392
12/03 22.48 53,952
12/04 23.15 55,560
# 11-SUITE 111 4 17,512 9/95 8/00 - 12.00 210,144 2.00
OLD NAVY 8 9/97 13.00 227,656
1- 60 14.00 245,168 2.00
2- 60 16.00 280,192 2.00
# 12-SUITE 112 4 58,845 7/95 12/45 - 0.00 0
UPTON'S 8
# 13-SUITE 113 1 45,000 12/95 1/11 - 12.50 562,500
BEST BUYS 1 12/97 12.90 580,500
12/00 13.35 600,744
12/05 14.35 645,750
1- 60 15.60 702,000
2- 60 16.85 758,250
3- 60 18.10 814,500
# 14-SUITE 114 1 23,248 11/95 10/10 - 10.50 244,104
OFFICE MAX 1 11/97 10.75 249,916
11/00 11.25 261,540
11/05 11.75 273,164
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
UNLIMITED NATURAL CAM-UPT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 9-SUITE 108 NATURAL CAM-UPT+GE+GF+MG15
WIREFREE COMM RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 10-SUITE 109 UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
CHESAPEAKE BAGEL RE TAX W/15% ADMIN
PROPERTY INSURANCE
LIAB INSURANCE
# 11-SUITE 111 UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
OLD NAVY RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 12-SUITE 112 NATURAL UPTON'S PAYMENT
UPTON'S
# 13-SUITE 113 NATURAL CAM-UPT-FIR+GEL 7
BEST BUYS REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
NATURAL CAM-UPT-FIR+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
NATURAL CAM-UPT-FIR+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
NATURAL CAM-UPT-FIR+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 14-SUITE 114 NATURAL CAM-UPT+GFI+GEL 7
OFFICE MAX REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
<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> <C>
1- 60 12.25 284,788
2- 60 13.50 313,848
3- 60 14.25 331,284
# 15-SUITE 120 2 8,000 10/95 9/05 - 15.00 120,000 1.00
PARTY CITY 5 10/98 15.50 124,000 2.00
10/00 16.00 128,000
10/03 16.50 132,000
1- 60 17.00 136,000 1.00
10/08 17.50 140,000 2.00
# 16-SUITE 110 2 6,968 12/95 11/00 - 14.64 102,000 4.00
OMEGA SPORTS 5 12/97 15.08 105,060
12/98 15.53 108,180
12/99 15.99 111,418
1- 60 16.47 114,763 4.00
12/01 16.96 118,177
12/02 17.47 121,731
12/03 18.00 125,424
12/04 18.54 129,187
2- 60 19.10 133,089 4.00
12/06 19.67 137,061
12/07 20.27 141,241
12/08 20.88 145,492
12/09 21.51 149,882
# 17-SUITE 121 2 4,125 10/95 1/01 - 15.50 63,938 5.00
SHOE DEPT 4 10/97 16.50 68,062
1- 60 17.85 73,631 5.00
1/03 18.85 77,756
2- 60 21.50 88,687 5.00
1/08 22.50 92,812
# 18-SUITE 122 2 5,000 10/95 9/00 - 16.50 82,500 4.00
MEN'S WEARHOUSE 5 10/98 17.00 85,000
10/99 17.50 87,500
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
NATURAL CAM-UPT+GFI+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
NATURAL CAM-UPT+GFI+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
NATURAL CAM-UPT+GFI+GEL 7
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 15-SUITE 120 3,500 2,500 CAM-UPT+GE+GF+MG15
PARTY CITY UNLIMITED RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
3,500 2,500 CAM-UPT+GE+GF+MG15
UNLIMITED RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 16-SUITE 110 UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
OMEGA SPORTS RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 17-SUITE 121 UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
SHOE DEPT REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
# 18-SUITE 122 UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
MEN'S WEARHOUSE REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
<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> <C>
1- 60 19.00 95,000 4.00
10/03 19.50 97,500
10/04 20.00 100,000
2- 60 21.25 106,250 4.00
10/08 22.50 112,500
10/09 23.50 117,500
# 19-SUITE 123 2 7,500 6/97 9/05 - 19.10 143,250
NEO LESS BIKES USA 5 10/98 19.67 147,525
10/99 20.26 151,950
10/00 20.87 156,525
10/01 21.50 161,250
10/02 22.15 166,125
10/03 22.81 171,075
10/04 23.49 176,175
# 20-SUITE 124 2 1,119 10/95 9/00 - 19.06 21,323
PHILLY STEAK 3 10/97 19.63 21,962
10/98 20.22 22,621
10/99 20.82 23,300
1- 60 21.45 24,003
10/01 22.09 24,719
10/02 22.75 25,457
10/03 23.43 26,218
10/04 24.14 27,013
# 21-SUITE 125 2 900 10/95 9/00 - 19.06 17,154 4.00
GREAT CLIPS 2 10/97 19.63 17,667
10/98 20.22 18,198
10/99 20.82 18,738
1- 60 21.45 19,305 4.00
10/01 22.09 19,881
10/02 22.75 20,475
10/03 23.44 21,096
10/04 24.14 21,726
# 22-SUITE 130 1 25,200 10/95 8/10 - 14.50 365,400 3.00
BARNES & NOBLE 1 9/00 15.50 390,600
9/05 16.50 415,800
1- 60 17.25 434,700 3.00
2- 60 19.00 478,800 3.00
3- 60 20.25 510,300 3.00
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
# 19-SUITE 123 NATURAL CAM-UPT+GE+GF+MG15
NEO LESS BIKES USA REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
# 20-SUITE 124 NATURAL CAM-UPT+GE+GF+MG15
PHILLY STEAK RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
NATURAL CAM-UPT+GE+GF+MG15
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 21-SUITE 125 UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
GREAT CLIPS RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
UNLIMITED NATURAL CAM-UPT+GE+GF+MG15
RE TAX W/15% ADMIN
PROP INS W/15%
LIAB INS W/15%
# 22-SUITE 130 UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
BARNES & NOBLE REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
<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> <C>
# 23-SUITE 110A 4 13,010 4/96 3/06 - 15.75 204,908 6.00
ZANY BRAINY 8 4/01 17.05 221,820
1- 60 18.75 243,938 6.00
2- 60 20.63 268,396 6.00
-------
467,137
=======
</TABLE>
CEILING BREAKPOINT
TENANT (000'S) (000'S) RECOVERIES
- --------------- --------- ----------- ------------------
# 23-SUITE 110A UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
ZANY BRAINY REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
UNLIMITED NATURAL CAM-UPT+GFI+GEL 15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
<PAGE>
NEW HOPE COMMONS 1997 UPDATE
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF NEW HOPE COMMONS 1997 UPDATE BEGINNING 8/1997
FOR 20 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
TGLA
DESCRIBED AS TOTAL CENTER GLA (INCLUDES UPTON'S)
1997 VALUE - 467,137
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA (INCLUDES UPTON'S)
1997 VALUE - 457,514
1998 VALUE - 467,137
1999 VALUE - 467,137
2000 VALUE - 467,037
2001 VALUE - 467,137
2002 VALUE - 466,698
2003 VALUE - 467,137
2004 VALUE - 467,137
2005 VALUE - 465,301
2006 VALUE - 466,887
2007 VALUE - 466,242
2008 VALUE - 466,917
2009 VALUE - 467,137
2010 VALUE - 449,359
2011 VALUE - 444,964
2012 VALUE - 448,763
2013 VALUE - 448,848
2014 VALUE - 449,625
2015 VALUE - 447,446
2016 VALUE - 434,849
THEREAFTER - CONSTANT
UGLA
DESCRIBED AS UPTON'S GLA
1997 VALUE - 58,845
THEREAFTER - CONSTANT
OWGL
DESCRIBED AS OWNED CENTER GLA (EXCLUDES UPTON'S)
+100.O% OF TGLA-100.0% OF UGLA
INEX
DESCRIBED AS GLA EXCLUDED FOR INS ALLOCATION (WAL MART & UPTON'S)
1997 VALUE - 208,774
THEREAFTER - CONSTANT
INGL
DESCRIBED AS GLA FOR INS ALLOCATION
+100.0% OF TGLA-100.0% OF INEX
GROWTH RATES
- ------------
GREN
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GSAL
<PAGE>
PAGE 2
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GCPI
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GEXP
1997 VALUE - 3.00
THEREAFTER - CONSTANT
MISG
1997 VALUE - 2.50
THEREAFTER - CONSTANT
MARKET RATES
- ------------
RESR
DESCRIBED AS STRUCTURAL RESERVES
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE GEXP
MKT1
DESCRIBED AS >1000 SF
1997 VALUE - 20.00
THEREAFTER - GROWING AT GROWTH RATE GREN
MKT2
DESCRIBED AS 1001-3000 SF
1997 VALUE - 18.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MKT3
DESCRIBED AS 3001-5000 SF
1997 VALUE - 17.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MKT4
DESCRIBED AS 5001-10,000 SF
1997 VALUE - 16.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MKT5
DESCRIBED AS 10,000-15,000 SF
1991 VALUE - 11.00
THEREAFTER - GROWING AT GROWTH RATE GREN
ALTN
DESCRIBED AS ALTERATION RATE FOR NEW TENANTS
1997 VALUE - 5.00
THEREAFTER - GROWING AT GROWTH RATE GEXP
ALTR
DESCRIBED AS ALTERATION RATE FOR RENEWAL TENANTS
1997 VALUE - 0.00
THEREAFTER - CONSTANT
ALTB
DESCRIBED AS BLENDED ALTERATION RATE BASED UPON 30%/70% PROBABILITY
+30.0% OF ALTN +70.0% OF ALTR
COMN
DESCRIBED AS RATE FOR NEW TENANT COMMISSIONS
1997 VALUE -- 2.00
1998 VALUE - 2.00
1999 VALUE - 2.00
<PAGE>
PAGE 3
2000 VALUE - 2.00
2001 VALUE - 2.00
2002 VALUE - 2.50
2003 VALUE - 2.50
2004 VALUE - 2.50
2005 VALUE - 2.50
2006 VALUE - 2.50
2007 VALUE - 3.00
THEREAFTER - CONSTANT
COMR
DESCRIBED AS RATE FOR RENEWAL COMMISSIONS
1997 VALUE - 1.00
1998 VALUE - 1.00
1999 VALUE - 1.00
2000 VALUE - 1.00
2001 VALUE - 1.00
2002 VALUE - 1.25
2003 VALUE - 1.25
2004 VALUE - 1.25
2005 VALUE - 1.25
2006 VALUE - 1.25
2007 VALUE - 1.50
THEREAFTER - CONSTANT
COMB
DESCRIBED AS BLENDED RATE FOR COMMISSIONS BASED UPON 30%/70% PROBABILITY
+30.0% OF COMN +70.0% OF COMR
MISCELLANEOUS INCOMES
- ---------------------
MISCELLANEOUS
1997 VALUE - 25,000
THEREAFTER. - GROWING AT GROWTH RATE MISG
EXPENSES
- --------
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 222,562
1998 VALUE - 226,878
1999 VALUE - 227,673
2000 VALUE - 229,874
2001 VALUE - 235,930
2002 VALUE - 236,475
2003 VALUE - 238,502
2004 VALUE - 239,415
2005 VALUE - 241,512
2006 VALUE - 251,800
2007 VALUE - 251,971
2008 VALUE - 255,121
2009 VALUE - 257,340
2010 VALUE - 244,348
2011 VALUE - 255,412
2012 VALUE - 260,912
2013 VALUE - 262,931
2014 VALUE - 266,989
2015 VALUE - 265,724
2016 VALUE - 265,985
THEREAFTER - CONSTANT
COMMON AREA MAINT., REFERRED TO AS CAME
DESCRIBED AS TOTAL CAM EXPENSES
<PAGE>
PAGE 4
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 277,300
THEREAFTER - GROWING AT GROWTH RATE GEXP
EXT ELECTRIC EXP , REFERRED TO AS ELEC
DESCRIBED AS ELECTRIC EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 26,000
THEREAFTER - GROWING AT GROWTH RATE GEXP
FIRE PROTECTION , REFERRED TO AS FIRE
DESCRIBED AS FIRE PROTECTION EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 7,000
THEREAFTER - GROWING AT GROWTH RATE GEXP
GROSSED UP ELEC , REFERRED TO AS GELE
DESCRIBED AS GROSSED UP ELECTRIC (/.63279)
AN INFORMATIONAL EXPENSE
1997 VALUE - 41,088
THEREAFTER - GROWING AT GROWTH RATE GEXP
GROSSED UP FIRE , REFERRED TO AS GFIR
DESCRIBED AS GROSSED UP FIRE (/.35722)
AN INFORMATIONAL EXPENSE
1997 VALUE - 19,596
THEREAFTER - GROWING AT GROWTH RATE GEXP
UPTON'S CAM , REFERRED TO AS UCAM
DESCRIBED AS UPTON'S CAM EXPENSE (EXCLUDES MGMT,ELEC,FIRE AND ELEC REPAIR)
AN INFORMATIONAL EXPENSE
1997 VALUE - 242,500
THEREAFTER - GROWING AT GROWTH RATE GEXP
UPTON'S PAYMENT , REFERRED TO AS UPMT
DESCRIBED AS UPTON'S CAM PAYMENT (62662/470025 = 13.3%)
AN INFORMATIONAL EXPENSE
+13.3% OF UCAM
CAM-UPT-ELEC-FIRE , REFERRED TO AS 1CAM
DESCRIBED AS TOTAL CAM LESS UPTONS CONT, ELECTRIC AND FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF ELEC
- -100.0% OF FIRE-100.0% OF UPMT
CAM-UPT-ELE-FIR 5%, REFERRED TO AS 1C05
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT, ELEC AND FIRE W/5% ADMIN
AN INFORMATIONAL EXPENSE
+105.0% OF 1CAM
CAM-UPT-FIR+GELE , REFERRED TO AS 2CAM
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT AND FIRE PLUS GROSS ELEC
AN INFORMATIONAL EXPENSE
+100.0% OF 1CAM+100.0% OF GELE
CAM-UPT-FIR+GEL 5 , REFERRED TO AS 2C05
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT AND FIRE PLUS GROSS ELEC W/5% ADMIN
AN INFORMATIONAL EXPENSE
+105.0% OF 2CAM
CAM-UPT-FIR+GEL 7 , REFERRED TO AS 2C07
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT AND FIRE PLUS GROSS ELEC W/7% ADMIN
AN INFORMATIONAL EXPENSE
+107.0% OF 2CAM
CAM-UPT-FIR+GEL 15, REFERRED TO AS 2C15
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT AND FIRE PLUS GROSS ELEC W/15% ADMIN
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 5
+115.0% OF 2CAM
CAM-UPT+GFI+GEL , REFERRED TO AS 3CAM
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC AND FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF 2CAM+100.0% OF GFIR
CAM-UPT+GFI+GEL 7 , REFERRED TO AS 3C07
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC AND FIRE W/7% ADMIN
AN INFORMATIONAL EXPENSE
+107.0% OF 3CAM
CAM-UPT+GFI+GEL 10, REFERRED TO AS 3C10
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC AND FIRE W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 3CAM
CAM-UPT+GFI+GEL 15, REFERRED TO AS 3C15
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC AND FIRE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 3CAM
CAM-UPT+GEL+GFI+MG, REFERRED TO AS 4CAM
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC, FIRE AND MGMT FEE
AN INFORMATIONAL EXPENSE
+100.0% OF 3CAM+100.0% OF MGMT
CAM-UPT+GE+GF+MG15, REFERRED TO AS 4C15
DESCRIBED AS TOTAL CAM LESS UPTON'S CONT PLUS GROSS ELEC, FIRE AND MGMT FEES
W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 4CAM
REAL ESTATE TAXES , REFERRED TO AS RETX
DESCRIBED AS REAL ESTATE TAXES
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 451,803
THEREAFTER - GROWING AT GROWTH RATE GEXP
RE TAX W/15% ADMIN, REFERRED TO AS RE15
DESCRIBED AS REAL ESTATE TAXES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF RETX
PROPERTY INSURANCE, REFERRED TO AS PINS
DESCRIBED AS PROPERTY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 25,836
THEREAFTER - GROWING AT GROWTH RATE GEXP
LIAB INSURANCE , REFERRED TO AS LINS
DESCRIBED AS LIABILITY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 51,673
THEREAFTER - GROWING AT GROWTH RATE GEXP
INSURANCE , REFERRED TO AS INSE
DESCRIBED AS TOTAL INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PINS+100.0% OF LINS
PROP INS W/15% , REFERRED TO AS PI15
DESCRIBED AS PROPERTY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+l15.0% OF PINS
LIAB INS W/5% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY' INSURANCE W/15% ADMIN
<PAGE>
PAGE 6
AN INFORMATIONAL EXPENSE
+115.0% OF LINS
MISCELLANEOUS , REFERRED TO AS MISE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 15,000
THEREAFTER - GROWING AT GROWTH RATE GEXP
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 4.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 5.00
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
- ----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
<PAGE>
PAGE 7
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
STRUCTURAL RESERVE
MARKET RATE RESR MULTIPLIED BY AREA MEASURE OWGL
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - ANCHOR
2 - IN LINE SHOP
3 - OUTPARCEL (OWNED)
4 - OUTPARCEL (SOLD)
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - ANCHORS
2 - IN LINE < 1000
3 - IN LINE 1000-2999
4 - IN LINE 3000-4999
5 - IN LINE 5000-10000
6 - IN LINE > 10000
7 - OUTPARCEL (OWNED)
8 - OUTPARCEL (SOLD)
COST CENTERS
- ------------
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
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
SEPT 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
----- ----
<PAGE>
PAGE 8
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
CAM-UPT+GE+GF+MG15, REFERRED TO AS CAMG
ASSIGNED TO COST CENTER 1 - CAM
PRO RATA SHARE RECOVERY OF EXPENSE 4C15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OWGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES , REFERRED TO AS RETG
ASSIGNED TO COST CENTER 2 - REAL ESTATE TAXES
PRO RATA SHARE RECOVERY OF EXPENSE RETX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OWGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
PROP INS W/15% , REFERRED TO AS PING
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE PI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OWGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIAB INS W/15% , REFERRED TO AS LING
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OWGL
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GGL1
GLOBAL GROUPING
GLOBAL RECOVERY CAMG
GLOBAL RECOVERY RETG
GLOBAL RECOVERY PING
GLOBAL RECOVERY LING
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/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 4 REFERENCE TENANT(S):
<PAGE>
PAGE 9
- --------------------------------------------------------------------------------
# 1 - REF 1
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
SECONDARY CODE: 2 - IN LINE < 1000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0/YEAR
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 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
WITH /SF/YR STEPS OF
2.00 AFTER MONTH 36
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GGL1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - REF 2
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
SECONDARY CODE: 3 - IN LINE 1000-2999
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0/YEAR
PERCENTAGE RENT:
INITAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
<PAGE>
PAGE 10
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 YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT2 MULTIPLIED BY 1.000
WITH /SF/YR STEPS OF
1.50 AFTER MONTH 36
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GGL1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - REF3
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
SECONDARY CODE: 4 - IN LINE 3000-4999
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0/YEAR
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 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 11
MARKET RATE MKT3 MULTIPLIED BY 1.000
WITH /SF/YR STEPS OF
1.50 AFTER MONTH 36
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GGL1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - REF4
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
SECONDARY CODE: 5 IN LINE 5000-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0/YEAR
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 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT4 MULTIPLIED BY 1.000
WITH /SF/YR STEPS OF
1.50 AFTER MONTH 36
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GGL1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
NEW HOPE COMMON 1997 UPDATE
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------ ----------- ---------- --------
# 1 - SUITE 101 WAL MART 149,929 11/1995 10/2015
# 2 - SUITE 102A MATTRESS FIRM 3,150 10/1997 9/2002
# 3 - SUITE 102B DOLLAR TREE 4,050 10/1997 9/2007
# 4 - SUITE 103 MICHAEL'S 19,064 8/1995 2/2005
# 5 - SUITE 104 MARSHALL'S 30,311 9/1995 1/2011
# 6 - SUITE 105 SHOE SHOW LESS H.QUEST 2,635 6/1997 9/2002
# 7 - SUITE 106 COSMETIC CENTER 6,572 9/1995 8/2000
# 8 - SUITE 107 LINENS N THINGS 31,999 9/1995 1/2011
# 9 - SUITE 108 WIREFREE COMM 600 10/1995 9/2000
# 10 - SUITE 109 CHESAPEAKE BAGEL 2,400 12/1995 11/2005
# 11 - SUITE 111 OLD NAVY 17,512 9/1995 8/2000
# 12 - SUITE 112 UPTON'S 58,845 7/1995 12/2045
# 13 - SUITE 113 BEST BUYS 45,000 12/1995 1/2011
# 14 - SUITE 114 OFFICE MAX 23,248 11/1995 10/2010
# 15 - SUITE 120 PARTY CITY 8,000 10/1995 9/2005
# 16 - SUITE 110 OMEGA SPORTS 6,968 12/1995 11/2000
# 17 - SUITE 121 SHOE DEPT 4,125 10/1995 1/2001
# 18 - SUITE 122 MEN'S WEARHOUSE 5,000 10/1995 9/2000
# 19 - SUITE 123 NEO LESS BIKES USA 7,500 6/1997 9/2005
# 20 - SUITE 124 PHILLY STEAK 1,119 10/1995 9/2000
# 21 - SUITE 125 GREAT CLIPS 900 10/1995 9/2000
# 22 - SUITE 130 BARNES & NOBLE 25,200 10/1995 8/2010
# 23 - SUITE 110A ZANY BRAINY 13,010 4/1996 3/2006
-------
23 TENANTS 467,137
=======
<PAGE>
NEW HOPE COMMONS 1997 UPDATE
EXPIRATION REPORT
YEARS 1998 TO 2008, ALL TENANTS;
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
<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>
# 9-SUITE 108 INITIAL
WIREFREE COMM 600 9/2000 23.64 3.26 26.90 21.85
--------- ------- ------- ------- -------
1 FY101 EXPIRATIONS 600 23.64 3.26 26.90 21.85
# 6-SUITE 105 INITIAL
SHOE SHOW LESS H.QUEST 2,635 9/2002 18.75 2.58 21.33 21.45
--------- ------- ------- ------- -------
1 FY103 EXPIRATIONS 2,635 18.75 2.58 21.33 21.45
--------- ------- ------- ------- -------
2 CUMULATIVE EXPS 3,235 19.66 2.70 22.36 21.52
# 19-SUITE 123 INITIAL
NE0 LESS BIKES USA 7,500 9/2005 23.49 3.29 26.78 20.90
# 20-SUITE 124 OPTION 1
PHILLY STEAK 1,119 9/2005 24.14 3.70 27.84 23.44
# 21-SUITE 125 OPTION 1
GREAT CLIPS 900 9/2005 24.15 3.71 27.85 25.34
# 9-SUITE 108 RENEWAL 1
WIREFREE COMM 600 11/2005 23.86 3.34 27.20 25.34
# 10-SUITE 109 INITIAL
CHESAPEAKE BAGEL 2,400 11/2005 23.15 2.96 26.11 23.44
--------- ------- ------- ------- -------
5 FY106 EXPIRATIONS 12,519 23.55 3.30 26.84 22.15
--------- ------- ------- ------- -------
7 CUMULATIVE EXPS 15,754 22.75 3.18 25.92 22.02
# 3-SUITE 102B INITIAL
DOLLAR TREE 4,050 9/2007 17.00 3.44 20.44 23.52
# 6-SUITE 105 RENEWAL 1
SHOE SHOW LESS H.QUEST 2,635 11/2007 22.95 3.52 26.47 24.86
--------- ------- ------- ------- -------
2 FY108 EXPIRATIONS 6,685 19.35 3.47 22.82 24.05
--------- ------- ------- ------- -------
9 CUMULATIVE EXPS 22,439 21.73 3.26 25.00 22.62
</TABLE>
<PAGE>
Wed Jul 9, 1997 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
HWY 501 & I-40
DURHAM, NC COORD: 35:57.05 78:59.90
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POP_80: TOTAL 21,125 67,967 190,892
POP_90: TOTAL 29,946 89,985 230,268
POP_97: TOTAL (EST.) 38,337 104,872 260,170
POP_02: TOTAL (PROJ.) 44,565 119,323 288,164
HH_80: TOTAL 8,263 23,087 70,015
HH_90: TOTAL 13,071 34,066 91,994
HH_97: TOTAL (EST.) 16,646 41,228 106,166
HH_02: TOTAL (PROJ.) 19,395 47,000 117,952
INC_80: PER CAPITA (EST.) $10,597 $7,795 $7,058
INC_90: PER CAPITA $22,267 $17,746 $15,499
INC_97: PER CAPITA EST. $36,305 $30,330 $26,020
INC_02: PER CAPITA PROJ $45,643 $39,695 $34,305
HH_80_BY INCOME_79: MEDIAN $43,622 $43,741 $0
HH_90_BY INCOME_89: MEDIAN $38,400 $34,365 $29,540
HH_97_BY INCOME: MEDIAN $56,381 $51,634 $41,740
HH_02_BY INCOME: MEDIAN $68,518 $63,060 $52,708
HH_80_BY INCOME_79: AVERAGE $27,093 $22,949 $19,245
HH_90_BY INCOME_89: AVERAGE $50,670 $45,304 $37,587
HH_97_BY INCOME: AVERAG $82,069 $74,575 $62,152
HH_02_BY INCOME: AVERAG $102,708 $94,917 $80,587
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX, NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
HWY 501 & I-40
DURHAM, NC COORD: 35:57.05 78:59.90
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 44,565 119,323 288,164
1997 ESTIMATE 38,337 104,872 260,170
1990 CENSUS 29,946 89,985 230,268
1980 CENSUS 21,125 67,967 190,892
GROWTH 1980 - 1990 41.76% 32.39% 20.63%
HOUSEHOLDS
2002 PROJECTION 19,395 47,000 117,952
1997 ESTIMATE 16,646 41,228 106,166
1990 CENSUS 13,071 34,066 91,994
1980 CENSUS 8,263 23,087 70,015
GROWTH 1980 - 1990 58.20% 47.56% 31.39%
1997 ESTIMATED POPULATION BY RACE 38,337 104,872 260,170
WHITE 77.02% 71.59% 61.80%
BLACK 17.17% 22.43% 34.14%
ASIAN & PACIFIC ISLANDER 4.96% 5.13% 3.17%
OTHER RACES 0.86% 0.85% 0.89%
1997 ESTIMATED POPULATION 38,337 104,872 260,170
HISPANIC ORIGIN 1.91% 1.81% 1.57%
OCCUPIED UNITS 13,071 34,066 91,994
OWNER OCCUPIED 50.30% 48.73% 48.61%
RENTER OCCUPIED 49.70% 51.27% 51.39%
1990 AVERAGE PERSON PER HH 2.26 2.25 2.31
1997 ESTIMATED HH BY INCOME 16,646 41,228 106,166
$150,000 + 9.48% 8.08% 5.85%
$100,000 TO $149,999 13.37% 10.44% 7.20%
$ 75,000 TO $ 99,999 12.20% 11.48% 8.96%
$ 50,000 TO $ 74,999 20.07% 21.40% 20.42%
$ 35,000 TO $ 49,999 11.38% 12.17% 13.74%
$ 25,000 TO $ 34,999 10.58% 10.38% 11.65%
$ 15,000 TO $ 24,999 12.39% 12.54% 13.67%
$ 5,000 TO $ 14,999 7.76% 9.52% 13.22%
UNDER $ 5,000 2.77% 4.00% 5.29%
1997 EST. AVERAGE HH INCOME $82,069 $74,575 $62,152
1997 EST. MEDIAN HH INCOME $56,381 $51,634 $41,740
1997 EST. PER CAPITA INCOME $36,305 $30,330 $26,020
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
RALEIGH DURHAM METROPOLITAN AREA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 1,165,187
1997 ESTIMATE 1,036,154
1990 CENSUS 855,545
1980 CENSUS 665,236
GROWTH 1980 - 1990 28.61%
HOUSEHOLDS
2002 PROJECTION 471,116
1997 ESTIMATE 413,531
1990 CENSUS 334,506
1980 CENSUS 236,386
GROWTH 1980 - 1990 41.51%
1997 ESTIMATED POPULATION BY RACE 1,036,154
WHITE 70.98%
BLACK 25.82%
ASIAN & PACIFIC ISLANDER 2.16%
OTHER RACES 1.04%
1997 ESTIMATED POPULATION 1,036,154
HISPANIC ORIGIN 1.58%
OCCUPIED UNITS 334,506
OWNER OCCUPIED 60.78%
RENTER OCCUPIED 39.22%
1990 AVERAGE PERSON PER HH 2.45
1997 ESTIMATED HH BY INCOME 413,531
$150,000 + 5.69%
$100,000 TO $149,999 7.42%
$ 75,000 TO $ 99,999 9.56%
$ 50,000 TO $ 74,999 21.77%
$ 35,000 TO $ 49,999 15.80%
$ 25,000 TO $ 34,999 11.61%
$ 15,000 TO $ 24,999 12.39%
$ 5,000 TO $ 14,999 11.46%
UNDER $ 5,000 4.30%
1997 EST. AVERAGE HH INCOME $63,670
1997 EST. MEDIAN HH INCOME $44,724
1997 EST. PER CAPITA INCOME $25,801
<PAGE>
Wed Jul 9, 1997 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
RALEIGH DURHAM METROPOLITAN AREA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 665,236
POP_90: TOTAL 855,545
POP_97: TOTAL (EST.) 1,036,154
POP_02: TOTAL (PROJ.) 1,165,187
HH_80: TOTAL 236,386
HH_90: TOTAL 334,506
HH_97: TOTAL (EST.) 413,531
HH_02: TOTAL (PROJ.) 471,116
INC_80: PER CAPITA (EST.) $6,958
INC_90: PER CAPITA $15,629
INC_97: PER CAPITA EST $25,801
INC_02: PER CAPITA PROJ $33,558
HH_80_BY INCOME_79: MEDIAN $0
HH_90_BY INCOME_89: MEDIAN $32,362
HH_97_BY INCOME: MEDIAN $44,724
HH_02_BY INCOME: MEDIAN $54,284
HH_80_BY INCOME_79: AVERAGE $19,258
HH_90_BY INCOME_89: AVERAGE $39,369
HH_97_BY INCOME: AVERAG $63,670
HH_02_BY INCOME: AVERAG $81,475
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
DURHAM, NC
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 160,128
1997 ESTIMATE 147,269
1990 CENSUS 136,611
1980 CENSUS 115,798
GROWTH 1980 - 1990 17.97%
HOUSEHOLDS
2002 PROJECTION 67,554
1997 ESTIMATE 61,858
1990 CENSUS 55,848
1980 CENSUS 43,693
GROWTH 1980 - 1990 27.82%
1997 ESTIMATED POPULATION BY RACE 147,269
WHITE 46.81%
BLACK 49.80%
ASIAN & PACIFIC ISLANDER 2.57%
OTHER RACES 0.82%
1997 ESTIMATED POPULATION 147,269
HISPANIC ORIGIN 1.43%
OCCUPIED UNITS 55,848
OWNER OCCUPIED 44.69%
RENTER OCCUPIED 55.31%
1990 AVERAGE PERSON PER HH 2.30
1997 ESTIMATED HH BY INCOME 61,858
$150,000 + 5.07%
$100,000 TO $149,999 5.17%
$ 75,000 TO $ 99,999 7.69%
$ 50,000 TO $ 74,999 20.79%
$ 35,000 TO $ 49,999 14.64%
$ 25,000 TO $ 34,999 12.63%
$ 15,000 TO $ 24,999 14.45%
$ 5,000 TO $ 14,999 13.70%
UNDER $ 5,000 5.86%
1997 EST. AVERAGE HH INCOME $57,072
1997 EST. MEDIAN HH INCOME $38,443
1997 EST. PER CAPITA INCOME $24,345
<PAGE>
Wed Jul 9, 1997 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
DURHAM, NC
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 115,798
POP_90: TOTAL 136,611
POP_97: TOTAL (EST.) 147,269
POP_02: TOTAL (PROJ.) 160,128
HH_80: TOTAL 43,693
HH_90: TOTAL 55,848
HH_97: TOTAL (EST.) 61,858
HH_02: TOTAL (PROJ.) 67,554
INC_80: PER CAPITA (EST.) $6,720
INC_90: PER CAPITA $14,417
INC_97: PER CAPITA EST. $24,345
INC_02: PER CAPITA PROJ $31,803
HH_80_BY INCOME_79: MEDIAN $0
HH_90_BY INCOME_89: MEDIAN $27,716
HH_97_BY INCOME MEDIAN $38,443
HH_02_BY INCOME: MEDIAN $48,635
HH_80_BY INCOME_79: AVERAGE $17,810
HH_90_BY INCOME_89: AVERAGE $34,401
HH_97_BY INCOME: AVERAG $57,072
HH_02_BY INCOME: AVERAG $74,279
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY 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
2002 PROJECTION 7,871,295
1997 ESTIMATE 7,382,905
1990 CENSUS 6,628,637
1980 CENSUS 5,881,768
GROWTH 1980 - 1990 12.70%
HOUSEHOLDS
2002 PROJECTION 3,107,619
1997 ESTIMATE 2,875,170
1990 CENSUS 2,517,026
1980 CENSUS 2,043,292
GROWTH 1980 - 1990 23.18%
1997 ESTIMATED POPULATION BY RACE 7,382,905
WHITE 73.03%
BLACK 23.91%
ASIAN & PACIFIC ISLANDER 1.04%
OTHER RACES 2.02%
1997 ESTIMATED POPULATION 7,382,905
HISPANIC ORIGIN 1.41%
OCCUPIED UNITS 2,517,026
OWNER OCCUPIED 68.01%
RENTER OCCUPIED 31.99%
1990 AVERAGE PERSON PER HH 2.54
1997 ESTIMATED HH BY INCOME 2,875,170
$150,000 + 3.79%
$100,000 TO $149,999 4.12%
$ 75,000 TO $ 99,999 5.83%
$ 50,000 TO $ 74,999 17.00%
$ 35,000 TO $ 49,999 16.86%
$ 25,000 TO $ 34,999 14.57%
$ 15,000 TO $ 24,999 16.35%
$ 5,000 TO $ 14,999 15.96%
UNDER $ 5,000 5.51%
1997 EST. AVERAGE HH INCOME $49,748
1997 EST. MEDIAN HH INCOME $33,360
1997 EST. PER CAPITA INCOME $19,585
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-O1, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 5,881,768
POP_90: TOTAL 6,628,637
POP_97: TOTAL (EST.) 7,382,905
POP_02: TOTAL (PROJ.) 7,871,295
HH_80: TOTAL 2,043,292
HH_90: TOTAL 2,517,026
HH_97: TOTAL. (EST.) 2,875,170
HH_02: TOTAL (PROJ.) 3,107,619
INC_80: PER CAPITA (EST.) $6,133
INC_90: PER CAPITA $12,885
INC_97: PER CAPITA EST. $19,585
INC_02: PER CAPITA PROJ $25,028
HH_80_BY INCOME_79: MEDIAN $0
HH_90_BY INCOME_89: MEDIAN $26,886
HH_97_BY INCOME: MEDIAN $33,360
HH_O2_BY INCOME: MEDIAN $38,552
HH_80_BY INCOME_79: AVERAGE $17,332
HH_90_BY INCOME_89: AVERAGE $33,242
HH_97_BY INCOME: AVERAG $49,748
HH_02_BY INCOME: AVERAG $62,330
<PAGE>
[LETTERHEAD OF NORTH CAROLINA APPRAISAL BOARD]
Permit No.869
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: Richard Warren Latella
State in which Resident Appraiser
License/Certificate Held: New York
Type and Number of License/
Certificate Held in Resident State: Certified General No.46000003892
Appraisal Assignment: A multi-tenanted shopping Center, New Hope Commons,
located in Durham, Durham County, North Carolina. The
purpose of the appraisal is to estimate fair market
value.
Appraisal Beginning Date: 7/8/97 Ending Date: 9/15/97
Permit Issuance Date: 7/15/97 Expiration Date: 9/15/97
/s/ A. Melton Black
------------------------
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 permittee or his (or her)
qualifications to perform the appraisal assignment herein described.
7/1/94
<PAGE>
QUALIFICATIONS
================================================================================
Richard W. Latella, MAI
Professional Affiliations:
Member, Appraisal Institute (MAI Designation #8346)
Affiliate Member, International Council of Shopping Centers, ICSC
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 #10796
Minnesota Certified General Real Estate Appraiser #20026517
Commonwealth of Virginia Certified General 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
Commonwealth of Massachusetts Certified General Real Estate Appraiser
#4287
General Experience:
Senior Director, Retail Valuation Group, Cushman & Wakefield Valuation
Advisory Services, a national full-service real estate organization. While
Mr. Latella's experience has been in appraising a full array of property
types, his principal focus involves appraisal and counseling clients for
major retail properties and specialty centers on a national basis. As
Senior Director, his responsibilities include coordination of the firm's
national Retail Valuation Group consisting of appraisers who specialize in
regional malls, department stores and other major retail property types.
He has personally appraised and consulted on in excess of 500 malls and
specialty centers 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 (July 1980-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 (June 1977-July
1980).
Associate, Warren W. Orpen & Associates, Trenton, New Jersey, assisting in
the preparation of residential property appraisals and condemnation
analyses (July 1975-April 1977).
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 all
of the requirements under the continuing education program of the
Appraisal Institute.
<PAGE>
================================================================================
COMPLETE UPDATE APPRAISAL OF REAL PROPERTY
Fairfax Towne Center
SWQ West Ox Road and Route 50
Fairfax, Fairfax County, Virginia
================================================================================
IN A SUMMARY REPORT As of July 6,1997
Prepared For:
Master Realty Inc.
Managing Member of Community Centers One L.L.C.
1180 Avenue of the Americas
New York, New York 10036-8401
and
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
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. CUSHMAN &
1875 Eye Street, N.W., Suite 700 WAKEFIELD(R)
Washington, D.C. 20006
(202) 467-0600 A ROCKEFELLER GROUP COMPANY
July 26, 1997
Mr. Brian Summers
Vice President
Master Realty Inc.
Managing Member of Community Centers One L.L.C.
1180 Avenue of the Americas
New York, New York 10036-8401
and
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Re: Complete Update Appraisal of Real Property In A Summary Report
Fairfax Towne Center
SWQ West Ox Road and Route 50
Fairfax, Fairfax County, Virginia
Dear Mssrs Summers and Burke:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Washington, D.C., Inc. is pleased to transmit our
complete update appraisal in a summary report format estimating the market value
of the leased fee estate in the above referenced property as of July 6, 1997.
This appraisal updates the prior appraisal report dated February 15, 1996, and
specifically incorporates the prior report by reference.
The following report is in the form of a Summary Report of a Complete
Appraisal, which is intended to comply with the reporting requirements set forth
under Standards Rule 2-2b of the Uniform Standards of Professional Appraisal
Practice (USPAP). As such, it presents limited discussion 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.
As specified in the Letter of Engagement, the value opinions reported
below are qualified by certain assumptions, limiting conditions, certifications,
and definitions, which are set forth in the report. In particular, we call your
attention to the following:
1. The subject site contains 22.8 acres of land that are part of an
approved mixed use development known as Gateway Center. The 22.8
acres includes an unsubdivided parcel of about two acres that is
intended for development with two multi-story office buildings
containing up to 480,000 gross square feet of and structured
<PAGE>
Mssrs. Brian Summers and Thomas Burke
July 26,1997
Page 2
parking. Based on conversations with the Client, it is a special
assumption of this report that the value attributable to the office
density is not considered in the estimated market value of the
existing shopping center. This same assumption was made in the
Original Report.
2. The Fresh Choice restaurant has ceased operations and is seeking a
subtenant. We have been informed that Fresh Choice is capable of
maintaining the obligation and have explicitly assumed that only a
normal credit loss risk is associated with the space. Should that
not be the case, the value conclusion would be lower.
This report was prepared for Community Centers One L.L.C. and Lehman
Brothers, Inc. and is intended only for their use. The report may not be
distributed to or relied upon by other persons or entities without written
permission of Cushman & Wakefield of Washington, D.C., Inc.
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 6, 1997, was:
THIRTY SIX MILLION ONE HUNDRED THOUSAND DOLLARS
$36,100,000
This letter is invalid as an opinion of value if detached from the summary
appraisal report, its exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C., INC.
/s/Steven A. Studabaker
Steven A. Studabaker, MAI [SEAL]
Associate Director
Virginia Commercial General Real Property Appraiser No. 4001-001111
/s/Donald R. Morris
Donald R. Morris, MAI [SEAL]
Manager, Director
Valuation Advisory Services
Virginia Commercial General Real Property 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: Fairfax Towne Center
Location: The subject property is located in the
southwest quadrant of West Ox Road and
Route 50 (Lee Jackson Memorial Highway),
Fairfax, Fairfax County, Virginia
Assessor's Parcel Numbers: Map No. 046-3-01-0024-A
Interest Appraised: Leased Fee Estate
Date of Value: July 6, 1997
Date of Inspection: July 6, 1997
Ownership: Community Centers One L.L.C.
Land Area: 22.8 Acres
Current Property Assessment (1996) $44,522,085
Current Property Taxes: $547,621.65
Zoning: PDC - Planned Development - Commercial
Highest and Best Use
If Vacant: Shopping Center / Retail
As Improved: Continued use as multi-tenant shopping
center
Improvements
Type: One- and two-level power center with
attached three-level parking deck
Year Built: 1994
Type of Construction: Steel frame, masonry exterior walls
Gross Leasable Area: 253,941 Square Feet
Operating Data and Forecasts
Current Occupancy: 97%
Forecasted Stabilized Occupancy: +95%
Condition: Very Good
CUSHMAN &
WAKEFIELD(R)
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Summary Of Salient Facts And Conclusions
================================================================================
Value Indicators
Cost Approach Not Applied
Sales Comparison Approach: $35,600,000 to $38,100,000
or $140 to $150 per SF
Income Approach-Discounted Cash Flow Analysis
Rent Growth Rate: 3.5%
Expense Growth Rate: 3.5%
Forecasted Credit Loss: 3.0%
Reversion Year
Capitalization Rate 10.5%
Transaction Costs at
Reversion: 3.0%
Discount Rate: 11.50%
Indicated Values: $36,100,000
Per SF NRA $142.16
Implied Going-In Cap Rate: 10.3%
Income Approach-Direct Capitalization Analysis
Capitalization Rate: 10.0 to 10.5%
Indicated Values: $36,300,000
Per SF NRA $142.95
Implied Going-In Cap Rate: 10.25%
Value Conclusion: $36,100,000
Per SF NRA $142.16
Implied Going-In Cap Rate: 10.3%
Exposure Time Implicit
In Market Value Estimate: 12 months
Special Assumptions Affecting Valuation:
1. The subject site contains 22.8 acres of land that are part of an approved
mixed use development known as Gateway Center. The 22.8 acres includes an
unsubdivided parcel of about two acres that is intended for development
with two multi-story office buildings containing up to 480,000 gross
square feet of and structured parking. Based on conversations with the
Client, it is a special assumption of this report that the value
attributable to the office density is not considered in the estimated
market value of the existing shopping center.
2. The Fresh Choice restaurant has ceased operations and is seeking a
subtenant. We have been informed that Fresh Choice is capable of
maintaining the obligation and have explicitly assumed that only a normal
credit loss risk is associated with the space. Should that not be the
case, the value conclusion would be lower.
3. 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 SUBJECT PROPERTY ........................................... 1
INTRODUCTION .............................................................. 4
Identification of Property ........................................... 4
Property Ownership and Recent History ................................ 4
Purpose and Intended Use of the Appraisal ............................ 4
Extent of the Appraisal Process ...................................... 5
Date of Value and Property Inspection ................................ 5
Property Rights Appraised ............................................ 5
Definitions of Value, Interest Appraised, and Other Pertinent Terms .. 5
Legal Description .................................................... 7
REGIONAL ANALYSIS ......................................................... 8
NEIGHBORHOOD ANALYSIS ..................................................... 11
MARKET ANALYSIS ........................................................... 13
PROPERTY ANALYSIS ......................................................... 22
Site Description ..................................................... 22
Improvements Description ............................................. 22
Real Property Taxes and Assessments .................................. 23
Zoning ............................................................... 24
Highest and Best Use ................................................. 25
VALUATION PROCESS ......................................................... 26
SALES COMPARISON APPROACH ................................................. 27
INCOME CAPITALIZATION APPROACH ............................................ 33
RECONCILIATION AND FINAL VALUE ESTIMATE ................................... 58
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 59
CERTIFICATION OF APPRAISAL ................................................ 61
ADDENDA ................................................................... 62
Metropolitan Washington, D.C. Retail Overview ........................ 69
Recent Market Developments ........................................... 71
Legal Description and Selected Site/Floor Plans
Pro-Ject +Plus Output and Assumptions
Regional Market Analysis
National Investor Survey
Qualifications of Appraisers
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
View of the improvements at the northern end of the site as seen looking west
from a point near the West Ox Road / Route 50 interchange.
[GRAPHIC OMITTED]
View of improvements at the northern end of the site as seen looking northwest
from a point near the main entrance to the site from West Ox Road.
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Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
View of the storefronts and pedestrian arcade located between the northern
and southern wings, as seen looking west toward the rear of the site.
[GRAPHIC OMITTED]
View of the southern wing of the improvements as seen looking north
from the parking lot.
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Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
View of the parking deck located at the northwest corner of the property as seen
from the adjacent surface parking lot.
[GRAPHIC OMITTED]
View of the townhouses located at the western end of the PUD.
================================================================================
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property is known as Fairfax Towne Center, a 253,941 square
foot power center located at the southwest quadrant of West Ox Road and Route 50
(Lee Jackson Memorial Highway). There is one ground leased outparcel containing
13,269 square feet of land on the south end of the shopping center. It has been
developed with a 2,687 square foot bank building with drive-through lanes. As
the bank pays passthrough expenses, including taxes on the building area, the
size of the improvements are included in the gross leasable area of the center.
There are no other outparcels. Anchor tenants include United Artists, Safeway,
TJ Maxx, Bed Bath and Beyond, and Tower Records. The center opened in November
1994 and is currently 97 percent leased by 16 tenants, though the Fresh Choice
restaurant has ceased operations and is seeking a replacement tenant.
Fairfax County is one the three major municipalities in the Northern
Virginia suburbs of Washington, D.C. The property is located in the Fair Oaks /
Fair Lakes area, which is one of the current growth nodes in Northern Virginia.
The Fairfax Towne Center retail property is part of a larger planned development
that has a multi-family residential component under construction and plans for
two office buildings.
Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
One, L.L.C., a joint venture between Developers Diversified Realty Corporation
(DDR) and DRA Advisors, Inc. (DRA). The subject was acquired as part of the
former Homart Community Center Division for a total purchase price of
approximately $500 million from General Growth Properties, Inc. The date of
transfer was November 17, 1995. An allocation of the price to the subject
property has not been made, therefore no conclusions about the transfer price
can be made relative to the value estimate reached in this report.
Homart purchased the 22.79+/- acre site that includes the two office pad
sites from Gateway Center, Inc. in November 1993 for a reported $4,000,000, or
$4.03 per square foot ($1,775,517 per acre). Subsequent to the sale, Homart
developed the Fairfax Towne Center retail center. Hard costs for the center
totaled $19,463,000, or $76.30 per square foot of GLA. Soft costs added another
$17.23 per square foot ($4,396,000), bringing total project costs to $27,859,000
($109.21 per square foot). Including construction interest and sales/
reimbursements, net project costs totaled $29,452,000 ($115.45 per square foot).
To our knowledge, the property is not currently offered for sale.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the current market value of
the leased fee estate in the property in as-is condition as of July 6, 1997, the
most recent inspection date. The intended use of this appraisal is to assist the
client in an evaluation of assets that serve as collateral for a securitized
financing transaction.
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WAKEFIELD(R)
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<PAGE>
Introduction
================================================================================
Extent of the Appraisal Process
In the process of preparing the appraisal, we:
o Inspected the exterior of the improvements and a sample of interior
spaces and drove the site.
o Conducted research regarding the region, the neighborhood and
competitive market for the subject property.
o Conducted market investigations into recent sales of comparable
shopping centers to ascertain sales price per square foot and
capitalization rates.
o Pursued market data with regard to asking and recently signed rental
rates at comparable properties.
o Reviewed a detailed history of income and expenses for actual 1996,
and a budget forecast for 1997.
o Reviewed a current rent roll statements provided by the owner, and
discussed questions that arose from that information.
o Prepared a detailed discounted cash flow analysis for the purpose of
discounting a forecasted net income stream to a present value
estimate for the subject property.
o Prepared the Sales Comparison and Income Capitalization Approaches
to value.
o Reconciled the value indications to a single estimate of value for
the property.
Date of Value and Property Inspection
The date of value for the subject property is July 6, 1997, with the date
of inspection being the same.
Property Rights Appraised
We have valued the market value of the leased fee estate of the
improvements, as of the effective date of the appraisal.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value is in accordance with 12 C.F.R. 34,
Paragraph 34.42 of the OCC final rule issued by the Comptroller of the currency
(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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<PAGE>
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 on conversations with property owners, brokers and management
firms, we have estimated the appropriate exposure time would have been 12 months
or less for the property.
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 (leased
fee owner) and the leased fee owner 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 imposed by the governmental powers of taxation,
eminent domain, police power, and escheat.
Market Rent
The rental income that a property would most probably command in the open
market; indicated by 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.
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<PAGE>
Introduction
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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.
Definitions of other terms taken from various sources are as follows:
Market Value As Is on Appraisal Date
The market value of a property in the condition observed upon inspection
and as it physically and legally exists without hypothetical conditions,
assumptions, or qualifications as of the date the appraisal is prepared.
Legal Description
The property is legally described by metes and bounds in the Land Records
of Fairfax County, Virginia. A copy of the metes and bounds plat is included in
the Addenda. This parcel includes land for two proposed and approved office
buildings, however. The prior owners estimated the land area associated with the
office sites at approximately two acres. They are located at the rear,
northwestern edge of the property between Monument Court and the parking
structure and are currently used as parking for about 192 vehicles. The
residential units in Phase II of Gateway are located beyond this area. Please
see the special exception dealing with this issue.
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WAKEFIELD(R)
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<PAGE>
REGIONAL ANALYSIS
================================================================================
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 globe. Washington had been dubbed a "recession proof" city in that it was
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. The 1990s recession proved, of course, that
the District was and is indeed vulnerable to economic cycles as is the rest of
the country. Nonetheless, that mystic has been a factor in the area's economic
life cycle.
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, the Washington area is bisected by 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.
According to Market Statistics' 1996 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 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
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Regional Analysis
================================================================================
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.
During recent years, employment in Northern Virginia grew by rapidly,
above 3.0 percent but in the Maryland suburbs, the figure was only about 2.0
percent while for the District of Columbia it was less than 1.0 percent. Job
growth in the region fell below the national average 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 maintained a steady
portion of total employment, thus indicating that employment in these sectors
expands and contracts with the economy.
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 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, the recent downsizing
notwithstanding. 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.
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. 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.
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.
Overall, the region's performance has been described as being in a period
of recovery, as evidenced by the net increase in wage and salary jobs, with the
services and government sectors adding the most positions. Additional employment
gains have occurred within the region and a
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<PAGE>
Regional Analysis
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strengthening economy has emerged as the recovery broadened and deepened.
However, some area economists have raised caution flags for 1996 and beyond.
Finally, another important issue affecting the demand for real estate is
household income. 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.
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 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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Neighborhood Map
[GRAPHIC OMITTED]
<PAGE>
NEIGHBORHOOD ANALYSIS
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Area Definition
The subject property is situated in the southwest quadrant of West Ox Road
and Route 50 (Lee Jackson Memorial Parkway) in the middle of Fairfax County in
an area generally referred to as Fair Oaks / Fair Lakes, after the Fair Oaks
Regional Mall and the Fair Lakes planned community. The intersection of West Ox
Road and U.S. Route 50 is a clover-leaf with West Ox Road crossing over U.S.
Route 50. There is a traffic signal at the entrance to the property opposite
Legato Road, as well as at the south end of the property at Monument Drive.
There are turn lanes into the center. 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 located in central Fairfax County in a rapidly
growing area near Fair Oaks Regional Mall. Access to the area is most easily
achieved from Interstate 66 and U.S. Route 50 (east/west) and West Ox Road and
the Fairfax County Parkway (north/south). Regional access is also available via
Interstate 66, located approximately 0.1 miles to the south.
The primary traffic carriers include Lee Jackson Memorial Highway (Route
50), West Ox Road, Fairfax County Parkway (north/south), and Lee Highway (Route
29, east/west). West Ox Road is a four lane arterial linking the neighborhood
with Lee Highway to the south and the Reston/Herndon area to the north. U.S.
Route 50 is a four to six lane limited access road in the vicinity of the
subject, running east/west an interchange at West Ox Road and traffic signals
and turn-lanes at most other major intersections. It is one of the most heavily
trafficked arterials in the Northern Virginia area.
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 Tyson's 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.
Fair Lakes is a mixed-use development about two miles west of the Fair
Oaks development and is the largest along the 1-66 corridor with a total
potential office development of 4.5 million square feet of space. 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 and now
totals over one
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Neighborhood Analysis
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millions square feet. Several restaurants and stand-alone retail stores have
also been constructed on pad sites at the center.
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 Towne Center, Jermantown Square, K-Mart Plaza, Kamp Washington Shopping
Center, and Sully Place.
Special Hazards or Adverse Influences
As noted, the area contains many office and business parks, residential
and retail uses, producing 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 central Fairfax County. Based on the improvements in office
occupancy levels 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 retail 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 to improving.
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MARKET ANALYSIS
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Due to the summary nature of this report, we will focus on the key
competing centers in the subject's market area and a summary of the trade area
demographics. An overview of the metropolitan area retail markets and their
relationship to Northern Virginia area is included in the Addenda should the
reader find that information helpful.
Competitive Environment
By virtue of the market structure, the subject competes with certain
retail establishments throughout the general area. Provided on the following
chart is a summary of some key information on existing properties. As will be
seen, the subject's primary competition is seen in local community-oriented
retail centers with similar tenant mixes. The subject also competes to some
degree with existing regional and specialty shopping centers such as the Fair
Oaks Mall. It is noted, however, that the subject is not a unique property
within this market, in that it faces direct competition with several major
centers in the immediate area.
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<TABLE>
<CAPTION>
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COMPETING RETAIL CENTERS
Fairfax Towne Center (Fairfax, Virginia)
Cushman & Wakefield of Washington, D.C., Inc.
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Year Building Site Land - Bldg Vacant Vacancy
No. Name/Location Built Area (SF) Area (SF) Ratio SF Rate Anchors
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Subj Fairfax Towne Center 1994 253,841 958,320 3.774 7,195 2.8% Safeway
West Ox Road & U.S. Rte 50 United Artists
Fairfax County Bed Bath & Beyond
Fairfax, Virginia TJ Maxx
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1 Fairfax Court 1992 252,530 2,134,440 8.452 3,984 1.6% Montgomery Ward
U.S. Rte 50 & Jermantown Rd Circuit City
Fairfax County Today's Man
Fairfax, Virginia
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2 Price Club Plaza 1993 314,548 1,611,720 5.124 0 0.0% Price Club
West Ox Rd & Lee Hwy Home Depot
Fairfax County Computer City
Fairfax, Virginia Sports Authority
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3 Fair Lakes Center 1993 800,000 3,136,320 3.920 0 0.0% Food Lion
SS Fair Lakes Pkwy Wal-Mart
Fairfax County BJ's Wholesale Club
Fair Lakes, Virginia Hechingers
Best Buy
Toys-R-Us
Kids Warehouse
Uptons
PetsMart
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4 Greenbrier Towne Center 1972 350,000 N/A N/A 56,000 16.0% Giant Foods
U.S. Rte 50 & Majestic Lane (Renov 1992) Vacant
Fairfax County Marshalls
Chenilly, Virginia Ross Dress for Less
Linens & Things
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5 Fair Oaks Mall 1980 1,400,000 5,009,400 3.578 N/A N/A Sears
I-66 & U.S. Rte 50 (Renov 1987, 1993) Woodward & Lothrop
Fairfax County Hecht's
Fairfax, Virginia
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TOTAL 3,371,019 12,850,200 3.812 67,179 2.0%
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<CAPTION>
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Anchor [ILLEGIBLE] In-Line Center Distance
No. Name/Location SF Devel. Rents ($/SF) Orientation from Subject Competition
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Subj Fairfax Towne Center 61,322 Yes $20-$27/SF Power Center/ N/A N/A
West Ox Road & U.S. Rte 50 47,230 Community
Fairfax County 39,669
Fairfax, Virginia 37,246
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1 Fairfax Court 112,630 No $16.00-$20.00 Power Center 2.2 Mi - E Primary
U.S. Rte 50 & Jermantown Rd 34,700 (5-Min Drive)
Fairfax County 25,900
Fairfax, Virginia
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2 Price Club Plaza 120,000 No None Power Center 1.5 Mi - S Primary
West Ox Rd & Lee Hwy 122,180 (3-Min Drive)
Fairfax County 20,000
Fairfax, Virginia 42,002
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3 Fair Lakes Center 37,000 Yes $20.00-$22.00 Power Center 1.5 Mi - W Primary
SS Fair Lakes Pkwy 183,000 (4-Min Drive)
Fairfax County 124,000
Fair Lakes, Virginia 110,000
46,000
80,000
Incl Toys
62,000
25,000
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4 Greenbrier Towne Center 63,000 Yes $18.00-$26.00 Community 2 Mi - W Primary
U.S. Rte 50 & Majestic Lane 35,000 (6-Min Drive)
Fairfax County 32,000
Chenilly, Virginia 27,000
18,000
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5 Fair Oaks Mall No $28.00-$35.00 Regional Mall 1 Mi - E Secondary
I-66 & U.S. Rte 50 (3-Min Drive)
Fairfax County
Fairfax, Virginia
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<PAGE>
Market Analysis
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Other Competition
There exists various nodes of retail development throughout the immediate
area that also offer varying degrees of competition to the subject. There are a
number of strip centers that, because of their major tenants and merchandising,
do offer themselves as some competition, albeit limited, to the subject.
Additionally, there is the Fair Oaks Regional Mall located a short distance from
the subject.
o Fair Oaks Mall - Located in the triangle formed by U.S. Route 50 on
the north, I-66 on the south, and Legato Road to the west, Fair Oaks
Mall is one of Northern Virginia's leading shopping destinations
after Tyson's Corner. It contains 1.4 million square feet of space
and is anchored by Hecht's, Lord & Taylor, and Sears. The mall has a
typical mix of national and regional tenants and is well maintained.
Lease rates for shop tenants reportedly range from $28 to $35 per
square foot. Vacancy and sales data were not provided, though 1995
sales were indicated to have been up slightly from 1994 levels.
Management also indicated that Lord & Taylor was moving into the
larger department store space formerly occupied by Woodward &
Lothrop. The 50,000 square foot Woodward & Lothrop furniture store
is still available and the May Company's plans for the space now
occupied by Lord & Taylor were not available.
o Sully Place - This 515,000+/- square foot community/power center is
located 3.5+/- miles west of the subject along U.S. Route 50 near
Centreville Road. The center is anchored by Kmart, Service
Merchandise, Petstuff, Weis Markets, and Baby Superstore, and has a
vacant Lowe's store. It is secondary competition to the subject by
virtue of its tenancy and location. Occupancy is at the 70 percent
level, due primarily to the vacant Lowe's space, and rental rates
for shop space is in the $20 to $25 per square foot range. The
center was constructed in 1991. There is a Taco Bell outparcel.
Within a four mile radius of the property, there are estimated to be
another dozen neighborhood convenience centers. These are not compete a major
competitive factor for the subject, but help to meet their market niches.
Excluding vacant anchor stores like the one at Sully Place, the overall vacancy
rate in the area is in the five to seven percent range, with many centers being
at the low end of the range. Generally, lease rates for shop space support those
found at the subject.
With regards to store closings in the area, Bob's Stores is closing at
Fair Lakes Promenade, which delivered in 1995. The space contains 44,920 square
feet, and the asking rent was not available at the time of the report.
To our knowledge, no new centers are being developed in the neighborhood.
Property Profile
The subject property is a multi-tenant power center anchored by Safeway,
Bed, Bath & Beyond, United Artists Theaters, and T.J. Maxx. The following credit
ratings were provided by the owners.
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Market Analysis
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Major Tenant Credit Ratings
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Tenant SF GLA S&P Long Term Rating
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Safeway Stores 61,322 BBB
United Artists 47,230 BB-
Bed, Bath & Beyond 39,669 NR
TJ Maxx 37,246 BBB+
Tower Records 23,000 NR
Zany Brainy 15,344 NR
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Source: Standard & Poors, February 1997 (Provided by Owners)
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Trade Area Definition
Fairfax Towne Center is located in the growth section of Fairfax County,
Virginia, situated near the interchange of I-66 and U.S. Route 50, and at Route
50's intersection with West Ox Road. These routes good east-west/north-south
access to the property along with proximity to Interstate 66.
As discussed, the location and accessibility of competing centers has
direct bearing on the formation and make-up of the subject's trade area as well.
The subject competes most directly with Fair Lakes Center, Greenbriar Town
Center and Price Club Plaza although none have truly comparable configurations.
Each of these centers, along with Fair Oaks Regional Mall, helps provide an
additional draw to the subject's region. Secondary competition is seen in other
area community centers which are anchored by only one or two competing anchor
tenants, namely groceries and off-price or discount retailers.
Finally, it is important to note that other neighborhood centers,
freestanding "category killers", and outlet malls all represent a strong force
in the market's competitive environment. However, their primary stores (discount
department stores, drugs, home improvement centers and warehouse clubs) are
different from those which comprise the subject property. Certainly there is a
place for both in most retail environments, including the subject region.
Collectively, they balance out the retail infill and act as a traffic generator
that increases the area's status as a destination retail hub.
Given all of the above, a primary trade area for the subject property
would likely span an area encompassing about 5 miles around the center. The
subject's secondary trade area might span up to 10 miles from the site due to
the United Artists Theatre and restaurant draws. To add perspective to this
analysis, we have segregated our survey into 3, 5, and 10-mile concentric
circles with a comparison to the United States and State of Virginia. The report
on the following page presents this data.
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<TABLE>
<CAPTION>
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DEMOGRAPHIC STATISTICS
Fairfax Towne Center
Fairfax, Virginia
=================================================================================================
3 Mile 6 Mile 10 Mile State of
Radius Radius Radius Virginia
=================================================================================================
<S> <C> <C> <C> <C>
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POPULATION STATISTICS
- ------------------------
1980 25,296 91,955 418,608 5,346,819
1990 44,537 167,954 594,633 6,187,358
1997 Est. 53,742 200,111 671,936 6,713,619
2002 Proj. 61,586 227,286 730,111 7,016,791
Compound Annual Change
1980 - 1990 5.82% 6.21% 3.57% 1.47%
1980 - 1997 4.53% 4.68% 2.82% 1.35%
1997 - 2002 2.76% 2.58% 1.67% 0.89%
- -------------------------------------------------------------------------------------------------
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HOUSEHOLD STATISTICS
- ------------------------
1980 7,657 29,907 139,845 1,863,073
1990 16,027 58,450 208,652 2,291,830
1997 Est. 20,762 73,497 244,836 2,542,084
2002 Proj. 24,733 88,261 275,056 2,786,696
Compound Annual Change
1980 - 1990 7.67% 6.93% 4.06% 2.09%
1980 - 1997 6.04% 5.43% 3.35% 1.64%
1997 - 2002 3.56% 3.25% 2.36% 1.85%
- -------------------------------------------------------------------------------------------------
- ------------------------
PERSONS PER HOUSEHOLD
- ------------------------
1980 3.30 3.07 2.99 2.87
1990 2.78 2.87 2.85 2.70
1997 Est. 2.59 2.72 2.74 2.64
2002 Proj. 2.49 2.63 2.65 2.52
- ------------------------
AVERAGE HOUSEHOLD INCOME
- ------------------------
1997 Average Household Income $101,247 $98,734 $97,416 $56,128
1997 Median Household Income $ 80,671 $79,582 $76,901 $41,414
1997 Per Capita Income $ 39,427 $36,872 $35,855 $22,077
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* Source: Equifax National Decision Systems
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<PAGE>
Market Analysis
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Population
Once the market has been established, the focus of our analysis centers on
the statistical data of the trade area, including population. Equifax National
Decision Systems (ENDS) provides historical, current and forecasted population
estimates for the trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. A detailed profile of
the trade area is included in the Addenda of this report.
Between 1980 and 1997, ENDS reports that the population within the primary
trade area increased by 108,156 residents to 200,111, reflecting a 4.7 percent
annual growth. Through 2002, the trade area is expected to continue to increase
to 227,286 residents which is equal to a 2.6 percent growth per annum.
It is important to recognize that the population growth in the trade area
has greatly exceeded the average annual growth rate for the state, which was 1.3
percent between 1980 and 1997. Over the next five years, the subject's 2.6
percent average annual growth (primary market) will also outpace the 1.2 percent
rate for Virginia.
Because of the high level of competition in the area, and continued new
retail construction in the vicinity of new residential growth, the subject is
expected to achieve only a slightly above average capture rate of retail
expenditure potential, based primarily on the entertainment and restaurant draws
to the property.
Households
According to ENDS, the primary trade area added 43,590 households between
1980 and 1997, an annual average increase of 5.4 percent to 73,497 units.
Consistent with the national trend, the trade area is experiencing household
growth at a rate in excess of population changes. Between 1997 and 2002 the area
is expected to continue household formation, but at a slower pace of 3.25
percent per year. The household growth rate is expected to be somewhat faster
than the population growth, a pattern that is consistent with the data for
Fairfax County. We see this as a result of a greater incidence of single person
households.
Correspondingly, a greater number of smaller households with fewer
children generally indicates more disposable income. In 1980, there were 3.07
persons per household and by 1997, it is estimated to have decreased to 2.72.
Trade Area Income
Trade area income figures for the subject support the profile of a middle-
upper income market. According to ENDS, average household income within the
primary trade area in 1997 is approximately $98,734.
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Market Analysis
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A comparison of the trade area's relative ranking is shown on the
following chart.
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Average Household Income Comparison
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Area Income
================================================================================
3 Mile Radius $101,247
- --------------------------------------------------------------------------------
5 Mile Radius* $ 98,734
- --------------------------------------------------------------------------------
10 Mile Radius $ 97,417
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State of Virginia $ 56,128
================================================================================
Source: Equifax National Decision Systems
- --------------------------------------------------------------------------------
*Primary Trade Area
================================================================================
Income ranges in the immediate market area greatly exceed state and
national averages. The distribution of income within the primary trade area can
be summarized as follows:
================================================================================
Household by Income
================================================================================
% of
Category Households
================================================================================
Greater Than $150,000 8.74%
- --------------------------------------------------------------------------------
$100,000 - $149,999 20.89%
- --------------------------------------------------------------------------------
$ 75,000 - $ 99,999 24.94%
- --------------------------------------------------------------------------------
$ 50,000 - $ 74,999 26.08%
- --------------------------------------------------------------------------------
$ 35,000 - $ 49,999 9.30%
- --------------------------------------------------------------------------------
$ 25,000 - $ 34,999 4.43%
- --------------------------------------------------------------------------------
Less Than $ 25,000 5.62%
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Subject Sales
Since the subject property opened in late 1994, only limited sales data
has been reported to the owners. Of those tenants reporting full year 1995 sales
figures, Picture Place achieved sales of $128.75 per square foot, Fresh Choice
Restaurant $182.40 per square foot, and Bed, Bath & Beyond $137.86 per square
foot. None of the other tenants reported full year sales. In 1996 more sales
data was available, though only one tenant, Safeway Stores, has sales in excess
of its breakpoint. The available sales data and percentage rent breakpoints are
summarized in the following table.
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Tenant Sales History ($/SF)
================================================================================
Tenant 1995 1996 Breakpoint
================================================================================
United Artists N/A $ 72 $198.00
Safeway Stores N/A $ 396 $ 81.54
Bed Bath & Beyond $ 138 $ 135 $362.50
Zany Brainy $ 133 $ 132 N/A
TJ Maxx N/A $ 134 $407.00
Hair Cuttery N/A $ 188 $530.00
Picture Place $ 129 $ 134 $500.00
China King N/A $ 103 N/A
Fresh Choice Restaurant $ 182 $ 192 $560.00
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Market Analysis
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Industry Average Sales
Potential sales at the subject property can be analyzed in comparison to
industry averages. The following chart presents a comparison of average sales by
center category for power and super community shopping centers in the U.S. and
the Eastern Region.
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Average/Sales Performance
U.S. Power Centers and Super Community Centers
================================================================================
Power Centers Super Community Centers
United States Eastern Region United States Eastern Region
================================================================================
Overall Average $197.23 $188.96 $187.90 $174.20
- --------------------------------------------------------------------------------
Median $199.31 $199.31 $183.44 $175.67
- --------------------------------------------------------------------------------
Lower Decile $ 87.04 -- $107.24 $116.16
- --------------------------------------------------------------------------------
Upper Decile $292.49 -- $313.64 $233.52
================================================================================
Source: Urban Land Institute: Dollars and Cents of Power Centers - 1995
================================================================================
From the above we see that industry averages and medians range from
approximately $189 to $200 per square foot for power centers and $174 to $188
per square foot for super community centers. Upper and lower decile levels show
dramatic swings. As a major new competitor in central Fairfax County, we would
expect that sales at Fairfax Towne Center would fall at or above industry
averages.
Retail Sales by Category
ENDS tracks retail sales information for specific areas. The total retail
sales and a breakdown by category is shown in the following table.
================================================================================
Retail Sales By Category ($ Millions)
================================================================================
3 Miles 5 Miles 10 Miles
================================================================================
Grocery Store $ 124 $ 447 $1,335
- --------------------------------------------------------------------------------
General Merchandise $ 80 $ 288 $ 911
- --------------------------------------------------------------------------------
Department Store $ 58 $ 204 $ 657
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Apparel Store $ 55 $ 199 $ 567
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Drug Store $ 24 $ 88 $ 232
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Eating & Drinking Places $ 70 $ 253 $ 713
- --------------------------------------------------------------------------------
Furniture & Home Furnishings $ 22 $ 79 $ 268
- --------------------------------------------------------------------------------
Home Appliance, Radio, TV $ 33 $ 117 $ 372
- --------------------------------------------------------------------------------
Total Retail Sales $ 823 $3,022 $8,118
================================================================================
Categories not included above include automotive dealers, automotive supplies,
gasoline service stations and hardware/garden/lumber stores
================================================================================
Based on the foregoing, it is thus easy to conclude that the primary trade
area of the subject has good demographic trends for future retail sales. The
current population and household growth trends suggest that the area may be able
to support somewhat more retail space than currently exists. Additionally, the
average and median household income levels are well above average.
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<PAGE>
Market Analysis
On balance, based upon the demographic and competition profile in the
subject's market area, we expect that sales have a reasonable likelihood to
increase at rates equal to or greater than inflation throughout the foreseeable
future.
Conclusion
The following summarizes our key conclusions.
o The neighborhood has good vehicular access via U.S. Route 50, U.S.
Route 29, and West Ox Road. The subject enjoys a visible location
and is located in one of the key retail and residential growth
corridors in Fairfax County.
o The existing trade area structure is largely characterized by
traditional neighborhood centers and community centers anchored by
grocery or discount stores, but also includes two major retail
projects, most notably Fair Oaks Regional Mall and Fair Lakes
Center, an 800,000 square foot power center.
o The subject benefits from an affluent local population. Average
household income within a 5 mile radius of the property is currently
estimated at $98,734. Expanding out to a 10 mile trade area, the
income level declines slightly to $97,416. This figure is well above
state and regional norms and is higher than it was two years ago.
o The center is well positioned in an area that is forecasted to
continue to witness substantial population and household growth. The
population within a 10 mile radius is currently estimated at 671,936
and by 2002 it is expected to increase to over 730,000.
o Vacancy levels within the subject neighborhood are low. Fairfax
Towne Center is nearing 100 percent occupancy. Some big box retailer
turnover continues in the region, most recently Bob's Store,
creating space for new entrants to the market without needing to
develop new projects.
Our analysis concludes that the merchandising mix of the center, the
location along major arterials, and the popularity and uniqueness of the major
tenants, all combine to establish Fairfax Towne Center as a viable retail center
in its trade area. We believe that, with competent management, focused
marketing, and a responsive maintenance program, it should continue to maintain
a strong position in its marketplace.
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TENANT INDEX
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PROPERTY ANALYSIS
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Site Description
The site is located Southwest quadrant of West Ox Road and U.S. Route 50,
opposite Legato Road and bordered on the south be Monument Drive, Fairfax,
Fairfax County, Virginia. It is irregularly shaped with surface parking along
the West Ox Road frontage and a three level parking deck at the rear of the site
near the theatre. The topography is generally level after grading. Please see
the plat included in the Addenda.
The subject site contains 22.8 acres of land that are part of an approved
mixed use development known as Gateway Center. The 22.8 acres includes an
unsubdivided parcel of about two acres that is intended for development with two
multi-story office buildings containing up to 480,000 gross square feet of and
structured parking. Based on conversations with the Client, it is a special
assumption of this report that the value attributable to the office density is
not considered in the estimated market value of the existing shopping center.
This assumption was also made in the original report.
The site is served by all public utilities and it is not in a flood hazard
zone. Drainage appears to be adequate.
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.
We did not observe the presence of any toxic waste or other hazardous
materials during the course of our physical inspection; however, as appraisers
hazardous materials and toxic waste issues go beyond our area of expertise.
Therefore, we recommend that a professional survey be conducted to determine
whether any adverse conditions exist. It is beyond the scope of this assignment
to evaluate the effect of these potentially adverse conditions.
Improvements Description
The subject site has been improved with a one- and two-level power Center
with a total GLA of 253,941+/- square feet, including the bank pad site
building. The center was constructed in 1994. The parking is provided on the
surface parking areas along West Ox Road and in a three-level parking deck at
the northwest corner of the site by the United Artists Theatres. There are
approximately 1,744 spaces in total with 793 spaces provided on the parking
deck. The lot and parking structure are striped throughout and provide 33
handicapped accessible spaces. The resultant parking ratio is 6.83 spaces per
1,000 square feet of GLA.
The buildings are constructed with steel frame and masonry and glass
storefront exterior walls. They are 100 percent sprinklered. HVAC is provided
via individual roof-mounted heat pumps for which tenants are responsible for
maintenance and operational costs. A standard distribution system of ducts,
ceiling diffusers, grills, register, thermostats, etc. has been designed and
constructed by landlord, based on open space and interior partitions. The roof
areas were not inspected. Water and sanitary sewer connections for each tenant
suite (required for one lavatory and one water closet in restroom) are
installed. Water and sewer usage is metered
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Tax Map Location
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Property Analysis
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individually and billed to tenants by the local utility. Adequate commercial
electrical service is provided for each tenant space and billed directly by
Virginia Power for usage.
The Americans with Disabilities Act (ADA) became effective January 26,
1992. Notwithstanding any discussion of possible readily achievable barrier
removal construction items in this report, we have not been furnished a specific
compliance survey and analysis of this proposed 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 of the property at completion, together with a
detailed analysis of the requirements of the ADA could reveal 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
no current data relating to this issue, we did not consider possible non-
compliance with the requirements of ADA in estimating the value of the property.
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. For tax assessment
purposes, the subject property is identified as Tax Parcel 046-3-01-0024-A.
The 1997 tax rate for Fairfax County is currently $1.2300 per $100 of
assessed value. The rates over the last four years were mostly between $1.2310
and $1.1614 per $100, with the 1997 rate being down $0.001 from 1996, which was
up six percent from 1995.
The subject's current assessment is presented in the following table. The
1997 assessment is not available.
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Historical Assessed Value
================================================================================
1997 1996 1995
================================================================================
Land $17,794,740 $17,600,640 $17,599,215
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Improvement $26,727,345 $25,034,775 $21,668,085
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Total Assessment $44,522,085 $42,635,410 $39,267,300
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Tax Rate ($/$100) $ 1.2300 $ 1.2310 $ 1.1614
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Tax Liability $547,621.65 $524,841.90 $456,050.42
================================================================================
The current assessment is more than 20 percent higher than the value
conclusion reached in the report, and at $175 per square foot, is above the
selling prices of similar quality shopping centers in the market. With rental
rates and selling prices increasing at a rapid pace in Fairfax County, it is
very likely that the Assessor's Office will be seeking increases in assessments.
Their normal calculation methodology is to estimate the fee simple net operating
income, excluding real estate taxes, and capitalize the income at a market
derived overall rate which is grossed up for
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Property Analysis
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the tax rate. It is strongly recommended that an appeal of the real estate
assessment be undertaken.
We have grown taxes at 3.5 percent annually in the cash flow analysis.
Zoning
The subject property is zoned PDC, Planned Development - Commercial by
Fairfax County. This district was established to encourage the innovative and
creative design of commercial development. The district's regulations are
designed to accommodate preferred high density land uses which could produce
detrimental effects on neighboring properties if not strictly controlled as to
location and design. Rezoning to and development under this district will be
permitted only in accordance with a development plan prepared and approved in
accordance with provisions of Article 16.
Principal permitted uses in this zone include business service and supply,
restaurants, scientific research and development, exposition halls and
facilities, financial institutions, hotels/motels, office, personal service
establishments, public uses, repair services, retail sales, and theatres.
Additionally, as an approved planned development, the subject property is
governed by an approved Conceptual and Final Development Plan dated May 1, 1991,
and revised through December 19, 1991, as well as Proffered Development
Conditions dated August 12, 1991, and revised through February 19, 1992. The
plans were developed and submitted for approval by a prior owner, Gateway
Centers, Inc. Because the subject property is a part of a larger approved and
phased project, the subject is also governed by a Reciprocal Easement Agreement
(REA) dated November 13, 1993. These agreements govern the allocation of
development and operating costs for the property and, in our opinion, are
believed to be typical for such arrangements and do not appear to present any
conditions that would adversely impact the property's market value. The REA and
its exhibits, including the Conceptual and Final Development Plan and Proffers
were recorded in Fairfax County Deed Book 8859, Page 1090. The approved plan for
the Gateway project permits development with up to 480,000 square feet of
office, 205,000 square feet of retail, 130, square feet of multi-family
dwellings, and 55,000 square feet of cinema/theater uses.
As far as we can ascertain, the improvements are in compliance with
existing zoning restrictions, but a complete compliance study is beyond the
scope of this appraisal assignment. 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 other 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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Property Analysis
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Highest and Best Use
As Though Vacant
The overall site is zoned for a variety of commercial uses, including
office, hotel/motel and retail, but the portion that is subject to this
appraisal is restricted by the PDC approvals to retail uses. We have determined
that the highest and best use of the land, as vacant, would be for retail
development.
As Improved
The data in the Market Analysis section reveals that the competitive
market is strong, and that demand for retail space continues to absorb new
vacancies. Thus, we have concluded that the subject property, as improved, is
capable of providing an adequate return to the land on both a near and long-term
basis. This conclusion is further supported by the data and analyses presented
in the balance of this report.
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VALUATION PROCESS
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Appraisers have three approaches available for valuing a improved income
producing property: The Cost Approach, the Sales Comparison Approach and the
Income Approach. The real property interest being appraised, the type and age of
the property, and the quantity and quality of data may affect the applicability
of a particular approach in a specific appraisal situation. We have relied on
the Sales Comparison and Income Approaches in valuing the improvements. With
regards the excess land, we have applied both a Sales Comparison Analysis using
the available land sale data, and a sell-out analysis.
In our opinion, the Cost Approach is not relevant to this assignment.
Depreciated replacement cost is not that important to the typical investor,
except as a reasonableness test. Furthermore, we are valuing the leased fee
estate in the property, which is strongly influenced by the existing lease
commitments, whereas the Cost Approach, in its typical format, reflects a fee
simple estate in the property. Consequently, we have not developed this
approach.
The appraisal process is concluded by a review and re-examination of the
approaches to value. 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 will be estimated.
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SALES COMPARISON APPROACH
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Methodology
The Sales Comparison Approach provides an estimate of 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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 unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The chart of the following pages present an overview of the improved
property sales used in this analysis. The numbers correspond to a larger
collection of sales as shown in the Addenda.
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<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
GLA
Sale Sale Yr Built/ Site Area Site GLA
No. Name/Location Date Condition Sale Price (Sq. Ft) Coverage Sold
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. 1) Pending 1996 $24,000,000 784,000 23.3% 183,000
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
15 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500
I-85 @ W. T. Harris Blvd. Excellent
Charlotte, North Carolina
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17 Towneast Center & Plaza Jul-96 1992 $12,700,000 653,000 32.2% 210,000
Mesquite, Good
Dallas County, Texas
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18 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256
SWC/Preston & Park Blvd. Excellent
Colling County, Plano, Texas
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19 Casa Linda Jun-96 1950/86 $33,769,000 1,128,640 28.9% 326,116
Garland Rd. & Buckner Blvd. Good
Dallas County,
Dallas, Texas
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20 Greenbriar Towne Center May-96 1970 $58,500,000 1,290,683 26.8% 345,286
Lee Jackson Hwy & Majestic Ln. Good
Fairfax County
Chantilly, Virginia
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24 Town Fair Shopping Center Jan-96 1989 $15,950,000 9,439,450 2.5% 235,892
1915 Hurstbourne Parkway Good
Jefferson County
Louisville, Kentucky
====================================================================================================================================
Sample Mean: $34,024,333 2,329,801 22.6% 329,619
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Anchor Sale
Sale Anchor GLA as Price/ NOI/
No. Name/Location GLA % of Total Sq. Ft Sq. Ft OAR Anchor Tenants
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
4 Smoketown Station 211,226 45.0% $99.06 $10.23 10.33% Lowe's Home Center,
Prince William Pkwy & Worth Shoppers Food Whse.
Prince William County, Best Buy
Woodbridge, Virginia
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8 Aboretum Crossing (Phs. 1) 154,000 84.2% $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just For
Austin, Texas Feet, Mikasa
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12 Lawrenceville Market Center 459,209 92.0% $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
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15 The Village at University Place 140,200 41.9% $99.85 $9.84 9.85% Best Buy, Office Depot,
I-85 @ W. T. Harris Blvd. TJ Maxx, Rhodes
Charlotte, North Carolina Furniture
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17 Towneast Center & Plaza 149,760 71.3% $60.48 $6.65 11.00% Best Buy, Sears Home
Mesquite, Life, PetsMart, Home
Dallas County, Texas Depot*
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18 Preston Shepard Place 265,837 73.2% $128.83 $12.11 9.40% Marshalls, Steinmart,
SWC/Preston & Park Blvd. Office Depot, Baby
Colling County, Plano, Texas Superstore, MJ Des.,
Borders, HomePlace
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19 Casa Linda -- -- $103.55 $9.84 9.50% Albertsons, Blockbuster
Garland Rd. & Buckner Blvd. Music, Ambers Crafts
Dallas County,
Dallas, Texas
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20 Greenbriar Towne Center 104,244 30.2% $169.42 $14.94 8.82% CVS, Linens N Things,
Lee Jackson Hwy & Majestic Ln. Marshalls, Ross, Total
Fairfax County Beverage, Grant Food
Chantilly, Virginia
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24 Town Fair Shopping Center -- -- $67.62 $6.49 9.60% Wal-Mart
1915 Hurstbourne Parkway Staples
Jefferson County Michael's
Louisville, Kentucky Fashion Bug
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Sample Mean: $103.26 $10.03 9.82%
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<CAPTION>
====================================================================================================================================
Sale Occupancy
No. Name/Location At Sale Comments
====================================================================================================================================
<S> <C> <C> <C>
4 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in
Prince William Pkwy & Worth retail hub for county. Anchor rents
Prince William County, $8.40/sf; in-line $14-$19/sf. Other
Woodbridge, Virginia majors incl. Kids R Us, PetsMart,
SuperCrown.
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8 Aboretum Crossing (Phs. 1) 98.0% Presale of promotional center.
U.S. Highway 183 & Sale expected to close by Jan 31,
N. Mopac Blvd. 1997. REIT purchase based on
Austin, Texas direct cap.
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12 Lawrenceville Market Center 100.0% Cash Acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management.
Lawrenceville, Georgia *Ground Lease
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15 The Village at University Place 100.0% Other anchors at center are Wal-
I-85 @ W. T. Harris Blvd. Mart and Sam's Club. This is a pre
Charlotte, North Carolina sale of new center developed by
Hawn.
- ------------------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza 100.0% REIT buyer using direct cap only.
Mesquite, *Home Depot is tenant owned.
Dallas County, Texas
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18 Preston Shepard Place 100.0% New ctr. in affluent area. Traffic
SWC/Preston & Park Blvd. counts > 37,000 & 45,000/day.
Colling County, Plano, Texas Buyer used 10.5% IRR & 9.25%
terminal cap in analysis. Avg. rent
= $15.73/sf.
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19 Casa Linda 84.0% Older section of eastern Dallas.
Garland Rd. & Buckner Blvd. Good condition at sale. Sale
Dallas County, based on existing income.
Dallas, Texas
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20 Greenbriar Towne Center 84.0% Part of bulk property purchase
Lee Jackson Hwy & Majestic Ln. price allocated & adjusted for
Fairfax County assumption of existing debt at
Chantilly, Virginia above mkt. inter. rate. NOI proj. in
'97 results in 9.2% OAR.
- ------------------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center 100.0% Good quality center in prime retail
1915 Hurstbourne Parkway location. Rents $12-$16 per sq/ft.
Jefferson County Wal-Mart w/sales @ $400/sf.
Louisville, Kentucky Property in good condition at sale.
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, nine comparable
sales have been analyzed for this analysis. These represent large community and
power center sales in the south, southwest, southeast, and eastern regions of
the United States. The sales range between $60.48 and $169.42 per square foot of
GLA sold with overall capitalization rates ranging from a low of 8.82 percent to
a high of 11.0 percent. These transactions occurred between January 1996 and May
1997, or a period of about 18 months.
For the surveyed sales, the mean overall sale price is calculated to be
$34.0 million. The mean gross leasable area sold is 329,616 square feet, with
the mean overall price per square foot calculated at $103.25 per square foot.
Finally, the survey shows a mean NOI of $10.03 per square foot, with an overall
capitalization rate of 9.82 percent. The mean NOI is over $4 per square foot
less than at the subject.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
condition must be accounted, thereby creating a time adjusted normal unit of
comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. The comparables were all encumbered by
a number of leases with varying sized tenants and expiration dates. We believe,
then, that no adjustment to the market data is necessary for the property rights
conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis
were accomplished with cash and/or cash and market oriented financing.
Therefore, no adjustment for financial terms is required for the comparables.
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Sales Comparison Approach
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Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale may
significantly affect transaction prices. However, all sales used in this
analysis are considered to be "arms-length" market transactions between both
knowledgeable buyers and sellers on the open market. Therefore, no adjustment
for conditions of sale are required for the comparables.
Market Conditions
As discussed in the "Trade Area Analysis" section of this report, the
subject property is expected to continue capturing a fair share in its market
area. Many retail markets are now considered to be over-built. For instance,
many markets have experienced a flood of new big box users over the past several
years. This has been the direct result of the explosive retail market in the mid
to late 1980s and following the recession of the early 1990s. As such, fewer
transactions have transpired over the last few years as a result of the
inability of knowledgeable buyers and sellers to come to terms. High vacancy
rates, declining rental and growth rates, expected expense growth, and an
abundance of competition, combined with competition from alternative investments
and general lack of financing, have served to depress the market for retail
space. For this reason, negative adjustments might be considered appropriate for
older sales in this analysis.
Still, well performing retail projects have become an attractive
investment to such entities as foreign and domestic insurance companies, pension
funds and syndication's. Moreover, the majority of sales presented have all
taken place within the last 12 to 18 months. Adjustments for market conditions
are difficult at best in this kind of analysis. Thus, no market condition
adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed in the
"Regional" and "Retail Market" sections of this report, northern Virginia has
been the recipient of substantial growth and is poised for continued vitality
into the foreseeable future.
From a review of the sales, there appear to be no glaring locational
differences between comparables. It is noted, however, that several of the sales
are located in areas which are experiencing somewhat better population and
income growth, which would be considered superior to the subject location.
Likewise, some of the properties are in markets which are experiencing either
negative or slower growth and could be considered inferior to the subject.
Several of the properties are also situated in significantly larger trade
areas/regions which would be considered superior. The locational considerations
will be explicitly incorporated into the economic analysis of the properties, as
the market rent levels, rent growth potential, sales levels, etc., are an
integral part of the property's location.
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Sales Comparison Approach
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Physical Traits
Most sales presented were constructed during the mid-1980s to the early
1990s with the exception of Sale Nos. 19 and 20, which involved the
reconfiguration or renovation of older strip centers. All sales were considered
to be in good condition at sale and no measurable physical adjustments can be
readily quantified. Some upward adjustment would be considered appropriate for
Sale Nos. 19 and 20. As with the locational considerations, these matters will
be more explicitly recognized in the economic characteristics.
Economic Characteristics
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $10.29 per square foot) is presented in the "Income
Approach" section of this report and is based on first year NOI.
================================================================================
Comparing Properties Based on NOI Per SF
================================================================================
NOI Per SF GLA
Sale ----------------------- Adjustment Unadjusted Adjusted
No Subject / Comparable = Factor x Unit Price = Unit Price
================================================================================
1-4 $14.66 / $10.13 = 1.44687 x $99 = $143
1-8 $14.66 / $13.70 = 1.06984 x $131 = $140
1-12 $14.66 / $6.59 = 2.22410 x $69 = $154
1-15 $14.66 / $9.84 = 1.48951 x $100 = $149
1-17 $14.66 / $6.65 = 2.20403 x $60 = $133
1-18 $14.66 / $12.11 = 1.21031 x $129 = $156
1-19 $14.66 / $9.84 = 1.48951 x $104 = $154
1-20 $14.66 / $14.94 = 0.98105 x $169 = $166
1-24 $14.66 / $6.49 = 2.25837 x $68 = $153
- --------------------------------------------------------------------------------
Median $9.84 1.48951 $100 $153
Average $10.03 1.59707 $103 $150
================================================================================
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<PAGE>
Sales Comparison Approach
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $133 to $166 per square foot with a mean of
approximately $150 per square foot on a stabilized basis. The subject's
"stabilized" net operating income per square foot of $14.16 (FY 1997/98) is
considered to be most comparable to Sales Nos. 8, 18 and 20. These improved
property sales show adjusted unit rates of $140, $156 and $166 per square foot
of gross leasable area, respectively. However, the recent shift in the market to
a requirement for higher yields is best represented by the most recent sales.
Thus, the indications of 1-4, 1-8 and 1-12, the three most recent transactions
are somewhat better indications of the overall trend in the market. Their
indicated values were $143, $140 and $154 per square foot, respectively.
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, however, do not explicitly convey by
themselves 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.
The subject is viewed as being a new and well located power/community
center in an area with excellent demographics, and strong competition from other
equally well located power centers and other retail destinations. It is well
leased but has not yet performed at sales levels that would be expected in such
a location. Long term improvement is likely when the adjacent office towers are
constructed on the site.
Considering the characteristics of the subject relative to the
comparables, we believe that a unit rate at the low to middle of the range is
appropriate or say $140 to $150 per square foot. Applying this unit rate range
to 253,941 square feet results in a value of approximately $35,600,000 to
$38,100,000 for the subject property.
Conclusion
In light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the range of Thirty Five
Million Six Hundred Thousand Dollars ($35,600,000) to Thirty Eight Million One
Hundred Fifty Thousand Dollars ($38,100,000), as of July 6,1997.
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INCOME CAPITALIZATION 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
through direct capitalization and/or a discounted cash-flow analysis. In direct
capitalization, the 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).
Based on conversations with market participants, we feel that the majority
of investors for a property like the subject would use the Discounted Cash Flow
Method in an attempt to mirror expectations relative to those variables that are
commonly found in a changing marketplace. Current market conditions continue to
reflect a growth trend in property values and rental rates and the discounted
cash flow analysis affords the most realistic method of reflecting investor
expectations of the current period, as well as projections of the future.
Therefore, it is our opinion that the discounted cash flow method is the most
appropriate for the valuation of the subject property.
Analysis of Existing and Proposed Leases
The buildings are 97 percent leased, with the only vacancy being the space
formerly attributed to Slades (7,195 square feet). A lease is reportedly being
negotiated for a portion of the space with an initial rent of $22.00 per square
foot. This bay has never been occupied. It is located at the rear of the center
opposite the theatre.
The Fresh Choice restaurant adjacent to Bed Bath and Beyond has closed,
however. While it reported sales of $198 per square foot in 1996, the operators
have discontinued operations. The property management reports that the tenant is
paying a monthly rent premium of $5,000 to retain their rights to the store as
they try to find a sub-tenant. The current base rent is $30.00 per square foot,
which would be high for a non-restaurant tenant. The store operator feels that
the heavy investment in tenant improvements, fixtures and equipment may make it
possible to find a sub-tenant to take over the lease obligations. Because the
restaurant chain, to our knowledge, is not currently having financial problems
that would prevent payment of the rent, we have allowed the lease payments to
continue. The rent premium has not been included in our analysis. The additional
risk associated with this tenant's rent stream will be considered in our
selection of a discount rate.
A summary of our understanding of the rent roll is shown on the following
two pages. Additionally, the detailed lease terms and conditions are reflected
in the Pro-Ject +plus model. The tenant by tenant assumptions are also included
in the Addenda.
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<TABLE>
<CAPTION>
Fairfax Towne Center
Rent Roll As of July 1997
====================================================================================================================================
Lease Net Net Free
Suite Square Term Lease Lease Annual Rent/ Rent Rent
No. Tenant Feet (Years) Beg. Date End Date Rentals SF/Yr. Escalations (Mos.)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12110 United Artists 47,230 20 12/23/94 12/31/2005 $748,596 $15.85 $2.15/SF End of 0 Mos.
Yr 10; +$1/SF End Yr 15
12200 Safeway Stores 61,322 25 11/11/94 11/30/2004 $735,864 $12.00 $0.50/SF End 0 Mos.
of Every 5th Yr
12170 TJ Maxx 37,246 15 11/14/94 11/30/2004 $308,337 $8.28 +$0.50/SF 2004 0 Mos.
12100 Bed, Bath & Beyond 39,669 17 11/14/94 01/31/2004 $575,201 $14.50 $1/SF Yr 6 0 Mos.
$1.15/SF Yr 11
12214 Chesapeake Bagel 1,970 10 09/13/94 03/31/2005 $51,220 $26.00 3.0% / Yr 6 Mos.
12212 Festival Cleaners 1,750 5 12/19/94 12/31/99 $63,669 $36.38 5.0% / Yr 2 Mos.
12210 Parcel Plus 820 5 11/15/94 11/30/99 $23,488 $28.64 3.0% / Yr 0 Mos.
12208 Supercuts 1,244 5 12/20/94 12/31/99 $34,832 $28.00 $1.50/SF Yr 3 0 Mos.
12186 Picture Place 1,576 5 02/10/95 02/28/2000 $40,976 $26.00 4.0% Yr 3 0 Mos.
3.0% Yrs 4,5
12180 Zany Brainy 15,344 10 12/06/94 12/31/2005 $329,896 $21.50 +10% Yr 6 3 Mos.
12124 Tower Records/ 23,000 15 12/06/94 11/30/2009 $543,950 $23.65 $1.65/SF End of 0 Mos.
Yrs 2, 5; $3.80/SF
End of Yr 10
3A China King 3,975 10 06/15/95 06/30/2005 $87,450 $22.00 3.0% / Yr 0 Mos.
12150 VACANT 7,195 15 $0.00
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Expenses $ Reimb.
Suite Tls CAM Admin. Mgmt. Fee Percent
No. Tenant ($/SF) Fee in Cam Rent
====================================================================================================================================
<C> <C> <C> <C> <C> <C>
12110 United Artists $22.23 NNN+15% No 4.00%
Less Pkg Garage Over 8% Bkpt
12200 Safeway Stores $0 NNN+8% No 1.00%
CAM Cap=$1/SF Over $5.0M
12170 TJ Maxx $0 NNN No 2.00%
12100 Bed, Bath & Beyond $0 NNN+10% No 4.00%
CAM Cap=$1.25/SF
12214 Chesapeake Bagel $0 NNN=15% No 5.00%
Surcharge on Tax, Insur & CAM
12212 Festival Cleaners $0 NNN=15% Yes 5.00%
Surcharge on Tax, Insur & CAM
12210 Parcel Plus $0 NNN=15% Yes 0.00%
12208 Supercuts $4.00 NNN=15% Yes 5.00%
Surcharge on Tax, Insur & CAM
12186 Picture Place $0 NNN=15% Yes 5.00%
Surcharge on Tax, Insur & CAM
12180 Zany Brainy $4.39 NNN=15% Yes 0.00%
12124 Tower Records/ $13.65 NNN+15% No None
3A China King $15.00 NNN=15% Yes 0.00%
Surcharge on Tax, Insur & CAM
12150 VACANT
====================================================================================================================================
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<TABLE>
<CAPTION>
====================================================================================================================================
Lease Net Net Free
Suite Square Term Lease Lease Annual Rent/ Rent Rent
No. Tenant Feet (Years) Beg. Date End Date Rentals SF/Yr. Escalations (Mos.)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12120 Fresh Choice/ 5,613 15 03/24/95 02/29/2010 $168,390 $30.00 $2/SF Yr 3 0 Mos
Restaurant has ceased operations and is seeking a sub-tenant) 15% Yrs 6, 10
N/A Moto-Photo 1,700 5 08/21/95 08/30/2000 $42,024 $24.72 3.0% / Yr 0 Mos
N/A Nail Palace 1,600 5 08/21/95 08/30/2000 $38,400 $24.00 3.0% / Yr 4 Mos
12270 Fairfax Bank 2,687 20 06/28/94 12/31/2014 $80,004 $29.77 15% Yrs 6,11,16 7 Mos
====================================================================================================================================
$3,872,297 $15.69 /SF Occupied Area
<CAPTION>
====================================================================================================================================
Expenses & Reimb.
Suite Tls CAM Admin. Mgmt. Fee Percent
No. Tenant ($/SF) Fee in Cam Rent
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
12120 Fresh Choice/ $20.00 NNN+15% Yes 5.00%
N/A Moto-Photo N/A NNN=15% Yes None
Surcharge on Tax, Insur & CAM
N/A Nail Palace $5.00 NNN=15% Yes None
Surcharge on Tax, Insur & CAM
12270 Fairfax Bank $0 NNN=15% Yes 0.00%
Surcharge on Tax, Insur & CAM
====================================================================================================================================
</TABLE>
================================================================================
Total GLA 253,941 100.0%
Occupied SF 246,746 97.2%
Vacant SF 7,195 2.8%
Avg Tenant Size 14,108
Avg Rent ($/SF) $15.69
Avg Lease Term 11.9
================================================================================
================================================================================
Inventory of Second Story Space
================================================================================
47,230 $748,696 $15.85 United Artists
37,246 $308,337 $8.28 TJ Maxx
84,476 $1,056,933 $12.51 Total 2nd Story
33.3% 27.3% % Total Property
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Income Capitalization Approach
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The center's allocation of space and rents by size of tenant is summarized
in the following table.
================================================================================
Sq Ft GLA No. Total Rent $/SF
================================================================================
Anchors 185,467 4 $2,367,997 $ 12.77
Majors Over 10,000 SF 38,344 2 $ 873,846 $ 22.79
2,000 to 10,000 SF 16,783 3 $ 255,840 $ 15.24
1,000 to 2,000 SF 9,840 6 $ 271,121 $ 27.55
Under 1,000 SF 820 1 $ 23,488 $ 28.64
Outparcel Buildings 2,687 1 $ 80,004 $ 29.77
Total 253,941 17 $3,872,297 $ 15.25
================================================================================
Assumptions Regarding the Existing Leases
Information provided by management indicates that none of the tenants,
except Slades, are in default of their lease and the tenant base generally
appears to be stable. The only exception is the Fresh Choice restaurant, which
has ceased operations and is seeking a subtenant. We have been informed that
Fresh Choice is capable of maintaining the obligation and have explicitly
assumed that only a normal credit loss risk is associated with the space. Should
that not be the case, the value conclusion would be lower.
We have specifically assumed that all of the other remaining tenants will
continue paying rent under the terms of their leases. We addressed renewal
probability below in the subsection on Vacancy and Collection Loss.
With regards to renewal options, some of the tenants have options at below
market rents, notably Bed Bath and Beyond and TJ Maxx. We have assumed the
tenants will exercise these options. All other leases are assumed to be subject
to speculative renewal probabilities and terms.
Lease Expirations
Our analysis of lease expirations shows no lease expirations during the
first two fiscal years of the holding period. The first year with any material
turnover is 2005, when three leases totaling 21,829 square feet expire. Overall,
the property is considered to have very low turnover due to its many long term
leases. The turnover is summarized in the following table.
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Income Capitalization Approach
================================================================================
================================================================================
Lease Expiration Schedule
================================================================================
No. of Total % of
Period Fiscal Year Tenants SF GLA
================================================================================
1 1998 0 - 0.0%
2 1999 0 - 0.0%
3 2000 4 5,390 2.1%
4 2001 1 1,700 0.7%
5 2002 0 - 0.0%
6 2003 0 - 0.0%
7 2004 0 - 0.0%
8 2005 3 21,289 8.4%
9 2006 1 1,600 0.6%
10 2007 4 5,390 2.1%
11 2008 2 8,895 3.5%
12 2009 2 28,613 11.3%
13 2010 0 - 0.0%
Annual Average 1.3 5,606 2.2%
================================================================================
Estimate of The Subject's Current Market Rent
There has been no recent leasing at the property, in large part because
the center was substantially leased after delivery. The only vacancy is the bay
opposite the United Artists theatre that has been supposedly leased twice, only
to have the transactions default.
One current proposal for a portion of that space includes a base rent of
$22.00 per square foot on 3,195 square feet. The lease would have a ten year
term and steps of $1.50 per square foot in years three and five and $2.00 per
square foot in year eight. Details on tenant improvement allowances and free
rent concessions were not available.
Comparable Big Box / Anchor Leases
In the original report we showed a sample of anchor and big box leases
with a range between $13.00 and $28.39 per square foot for spaces of 18,446 to
62,000 square feet. The bulk of the indicators were between $12.00 and $18.00
per square foot and we concluded to a market rent of $15.00 per square foot for
the subject.
A review of the subject's anchor leasing and a new sample of comparable
anchor rentals shows rates between $8.50 to $14.75 per square foot. The grocery
anchor lease comparables had rents of $9.96, $11.69 and $14.75 per square foot,
with the high end rate being for a build-to-suit in a strong submarket. The
other grocery lease rates are typical for the market, though both are in
inferior locations to the subject. Thus, we would conclude to a rate at or above
$12.00 per square foot for this type use at the subject. The Safeway lease was
for $12.00 per square foot.
The other anchor leases are mostly for much larger space than is available
at the subject. Their rates are mostly $11.00 per square foot. However, they
only provide perspective on the larger bay sizes. The comparables shown in the
previous report show market rates for leasing of appropriately sized bays in
other power centers and represent a better indication of the market. Overall,
market conditions have not changed with regard rental rates and our conclusions
are unchanged.
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<TABLE>
<CAPTION>
Comparable Anchor Rental Summary
===============================================================================================================
Comp Shopping Center/ Square Start Term Rent
No. Location Tenant Feet Date (Years) Per SF
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Subject Fairfax Towne Center United Artists 47,230 Dec-94 20 $15.85
Fairfax County, Virginia
Safeway Stores 61,322 Nov-94 25 $12.00
TJ Maxx 37,246 Nov-94 15 $8.14
Bed Bath & Beyo 39,699 Nov-94 17 $14.50
A-1 McLearen Center Food Lion 33,000 1st Q 1997 20 $9.96
Fairfax County, Virginia
A-2 Fairfax Centre Caldor 123,000 May-95 20 $11.00
Fairfax County, Virginia
A-3 Rolling Valley Mall Shopper's Food 49,284 Oct-96 20 $11.69
Fairfax County, Virginia Warehouse
Total Crafts 29,359 Apr-97 10 $8.50
A-3 Confidential Fresh Fields 25,173 4th Q 1996 20 $14.75
Northern Virginia
A-4 Long Gate Center Kohl's 86,584 Feb-96 20 $10.96
Columbia, Maryland
A-5 Fair Lakes Parkway Hechingers 85,882 Nov-95 25 $11.00
Fairfax County, Virginia
===============================================================================================================
<CAPTION>
====================================================================================================================================
Comp Shopping Center/ Annual Expense Percentage Tenant
No. Location Tenant Escalation Structure Rent Improvements
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Subject Fairfax Towne Center United Artists +$2.15 Yr 11 NNN + 15% 4.00% $22.23
Fairfax County, Virginia +$1.00 Yr 15
Safeway Stores +$0.50 End Every 5t NNN + 8% 1.00% $0.00
TJ Maxx Bump Yr 11 NNN 2.00% $0.00
Bed Bath & Beyo +$1.00 Yr 6 NNN + 10% 4.00% $0.00
+$1.15 Yr 11
A-1 McLearen Center Food Lion None NNN Natural Not Available
Fairfax County, Virginia Breakpoint
A-2 Fairfax Centre Caldor None NNN Natural Not Available
Fairfax County, Virginia Breakpoint
A-3 Rolling Valley Mall Shopper's Food 06/01 - $12.19 NNN Natural None
Fairfax County, Virginia Warehouse Breakpoint
Total Crafts 15% in Yr. 6 NNN Not Available $5.96/SF
A-3 Confidential Fresh Fields Yr. 6 - $16.75 NNN Natural Not Available
Northern Virginia Yr. 11 - $19.00 Breakpoint
Yr. 16 - $21.50
A-4 Long Gate Center Kohl's None NNN 1.5% / $22,000,000 Not Available
Columbia, Maryland
A-5 Fair Lakes Parkway Hechingers None NNN Not Available Built-to-Suit
Fairfax County, Virginia
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</TABLE>
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Income Capitalization Approach
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Comparable In-Line / Shop Space Leases
In the original report we showed a sample of local in-line leases with a
range between $18.00 and $25.00 per square foot. The bulk of the comparable
indicators were in the low $20s per square foot. The subject's leasing at that
point showed a wider and higher range, with some of the smaller spaces leasing
at rates in the upper $20s per square foot. We concluded in the original report
to a range of shop space market rents between $20.00 and $27.00 per square foot
for the subject.
A review of the subject's shop leasing reveals no new leases since the
last report. However, it is our understanding that the asking rent for the
vacant space is around $20 per square foot.
An examination of recent shop space rent comparables, as shown in the
following table, shows a diverse collection of rental rates, most from
conventional neighborhood and community sized centers.
================================================================================
Recent Shop Space Rentals
================================================================================
Center Name/Type Lease Date Size Rate Term (Yrs) Concessions
================================================================================
Greenbriar Plaza 1996 2,400 $18.00 10 4 Mos Free; TI=N/A
1996 4,000 $16.80 5 4 Mos Free; TI=None
1997 6,500 $17.00 5 None
Neighborhood Center 1996 1,500 $20.00 5 None
Neighborhood Center 1996 2,400 $19.00 5 2 Mos Free, TI=None
1996 1,200 $21.88 5 None
1996 2,780 $21.90 5 None
Neighborhood Center 1996 2,400 $22.00 10 None
================================================================================
The comparable leases are in nearby centers with mostly inferior locations
or drawing power. As such, their rental rates are somewhat lower than what would
be expected for the subject. Nonetheless, they support the lower end of the
leasing for the subject. Overall, market conditions have not changed with regard
rental rates and our conclusions are unchanged.
Based on the foregoing review of the comparable rental data, coupled with
the most recent leasing activity for the property itself, it is our opinion that
the following parameters would be representative of a market lease for the
subject property, as of the effective date of appraisal:
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Income Capitalization Approach
================================================================================
================================================================================
Market Rent Projections
================================================================================
Suite Size Rental Rate Range Market Rate
================================================================================
Anchors $12.00 to $17.00 $15.00
- --------------------------------------------------------------------------------
Under 1,000 SF $25.00 to $30.00 $27.00
- --------------------------------------------------------------------------------
1,000 - 2,999 SF $23.00 to $27.00 $24.00
- --------------------------------------------------------------------------------
3,000 -10,000 SF $21.00 to $25.00 $23.00
- --------------------------------------------------------------------------------
Over 10,000 SF $20.00 to $22.00 $20.00
================================================================================
Lease Terms
The typical lease term for new retail leases in centers such as the
subject generally ranges from three to ten years for shop space and 15 to 20
years for anchor tenants. The smaller shop space has seen a pattern of longer
leases over the last year, with most leases being written at five to ten years.
To reflect this mix, we have used an average lease term for shop space of seven
years. Based on the sampling of anchor tenant leases, we concluded that a 15
year term was typical.
Rent Escalations
Market practice dictates that it is not uncommon to get rent bumps
throughout the lease term either in the form of fixed dollar amounts or a
percentage increase based upon changes in some index, usually the Consumer Price
Index (CPI). The more recent practice in this market area has been for periodic
increases based on either the change in the CPI index or based on fixed amounts.
Most leases at the subject property have set increases which escalate rent on
specified dates throughout the lease term. We have reflected the contractual
escalations for each existing lease and have reflected a 10 percent step in the
fifth year of an anchor tenant lease and a 15 percent step at the end of the
fourth year of shop space leases.
Concessions
Free Rent
Free rent is an inducement offered by developers to entice a tenant to
locate in their project over a competitor's. As a rule, most major retail
developers have been successful in negotiating leases without including free
rent. Our experience with large, retail centers 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.
A review of competing centers reveals that one to two months are being
offered to allow the tenant time to fixture and merchandise the space before
opening. Such was the case for some leasing at Fairfax Towne Center, where four
of the ten non-anchor tenants received an average of 2.1 months free rent on an
average lease of 10 years, or a concession of 1.7 percent. On a seven year
average lease term, this would equate to 1.5 months free rent. After applying
our 65 percent renewal probability factor, the concession equates to one month
of free rent for all speculative renewals in the center, and two months for all
vacant spaces over the term of the analysis.
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Income Capitalization Approach
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Tenant Workletter
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that a tenant workletter is not typically
offered but is often times given as part of tenant negotiations. Some tenants at
the subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. For this analysis, new tenants to the center are given an
allowance of $15.00 per square foot, with renewal tenants receiving $2.00 per
square foot. These estimates are supported by the new leases written at the
property and by the information collected in our analysis of the comparable
centers. Based on our renewal probability of 65/35, the tenant allowance at
rollover is equal to $6.55 per square foot. No allowance is provided for tenants
exercising options.
Absorption
The subject property is presently 98 percent leased, with one 7,195 square
foot vacant bay unoccupied. Because of the subject's strong, growth oriented
market, the remaining space is expected to lease in about a year.
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's Fall 1996 survey of
pension fund, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 6.0 percent. The low and high mean is shown to be 2.9 and 3.7
percent, respectively, for community centers, and is somewhat higher for power
centers (3.3 to 3.5 percent). (see Addenda for survey results).
The Peter F. Korpacz Investor Survey (Second Quarter 1996) shows slightly
more conservative results with average annual rent growth of 2.88 percent for
power centers.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and management's
desire to attract and keep certain tenants that increase the center's synergy
and appeal. We have applied the following rent growth rate to the property for
the future. It is consistent with the conclusions reached in the prior report.
================================================================================
Year Rate*
================================================================================
1997 +1.46%
- --------------------------------------------------------------------------------
1998-2005 +3.5%
- --------------------------------------------------------------------------------
*Reflects growth at the end of the calendar year. In
the PRO-JECT model, a 1.46% rate at year end 1997
effects growth in 1998 and is a prorata share of a
typical year's growth at 3.5%.
================================================================================
Commissions
Based upon our analysis of competing properties within the market as well
as historic leasing activity at the subject, we have made an allowance for
leasing commissions for this
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Income Capitalization Approach
================================================================================
assignment. For new leases, a commission of three percent of aggregate rents for
new leases while renewal leases will not have commission charges. With the 65/35
probability assumption, the blended commission rate is 1.05 percent of aggregate
rents. This conclusion is consistent with the assumptions used in the prior
report.
Releasing Assumption
Upon lease expiration, it is our best estimate that there is a 65 percent
probability that an existing tenant will renew their lease, while the remaining
35 percent will vacate their space at expiration. Lease terms are for seven
years. Our global market assumptions for non-anchor tenants may be summarized as
shown below.
================================================================================
Renewal Assumptions
Non-Anchor Tenants
================================================================================
Tenant Type Lease Term Rent Steps Free Rent Tenant Alterations &
Commissions
================================================================================
In-Line Shops 7 yrs. 15% Step at End of 1 month Yes
4th Year
================================================================================
As discussed, option renewals have been compared to projected market rents
in order to forecast the probability of tenant options being exercised. In this
analysis, all options are assumed to be exercised when the option rent is below
the market rent. These conclusions are consistent with the assumptions used in
the prior report.
Overage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most smaller leases have a natural breakpoint, with anchors
often having stipulated breakpoints. The average overage percentage for small
space retail tenants is in a range of 5 percent to 6 percent.
The following table details the sales performance of the center since
delivery in 1995. The sales levels have been only fair compared to expectations,
with the only store performing well is Safeway. As shown at the bottom of the
table, the average sales for non-grocery tenants is $117 per square foot. The
average is skewed downward by the large size and low per square foot sales rate
of the movie theatre.
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Income Capitalization Approach
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================================================================
Tenant Sales History ($/SF)
================================================================
Tenant 1995 1996 Breakpoint
================================================================
United Artists N/A $ 72 $198.00
Safeway Stores N/A $396 $81.54
Bed Bath & Beyond $138 $135 $362.50
Zany Brainy $133 $132 N/A
TJ Maxx N/A $134 $407.00
Hair Cuttery N/A $188 $530.00
Picture Place $129 $134 $500.00
China King N/A $103 N/A
Fresh choice Restaurant $182 $192 $560.00
Average For Reporting Tenants: $197
Average Excluding Safeway: $117
================================================================
We have not forecasted any percentage rent for tenants in the center. Based
on conversations with local owners and developers of new centers, few assumed
that new tenants would pay percentage rent within the first five to ten years of
occupancy. Accordingly, we have not explicitly assumed any percentage rent
payments in this analysis. These conclusions are consistent with the assumptions
used in the prior report.
Expense Reimbursement and 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, insurance, and common area maintenance (CAM). Common area maintenance and
insurance are recovered from tenants on a pro-rata share basis. Most tenants are
charged an administrative fee between 5 and 15 percent on CAM and Insurance. In
some instances, management fees are also passed through to tenants through CAM
billings. Real estate taxes and insurance are also recovered on a prorata basis.
Total recoveries in the first year of the holding period equate to $3.85 per
square foot, which equates to about 25 percent of minimum rents.
Allowance for Vacancy and Credit Loss
Our assumptions in this portion of the analysis are unchanged from that of
the prior report. We reflected a provision for permanent vacancy and credit loss
of 3.0 percent among the existing tenants. We have not taken a credit loss
against income from the major tenants.
Upon lease expiration, it is our best estimate that there is a 65 percent
probability that an existing tenant will renew their lease, while the remaining
35 percent will vacate their space at this time. Our analysis assumes there to
be a six to nine month downtime between tenants, which translates to 3.0 months
on a weighted average basis.
The reader is reminded that the Fresh Choice restaurant has ceased
operations and is seeking a subtenant. We have been informed that Fresh Choice
is capable of maintaining the obligation and have explicitly assumed that only a
normal credit loss risk is associated with the space. Should that not be the
case, the value conclusion would be lower.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Fairfax Towne Center
Fairfax County, Virginia
Operating Income and Expense Analysis
1996 1997 Cushman & Wakefield
Actual Budget FY 1997/98 Projections
<TABLE>
<CAPTION>
Annual Annual Annual
Amount Per SF Amount Per SF Amount Per SF
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $ 3,871,543 $ 15.25 $ 4,014,198 $ 15.81 $ 3,890,070 $ 15.32
Percentage Rent $ 0 $ 0.00 $ 0 $ 0.00 $ 0 $ 0.00
Recoveries $ 954,550 $ 3.76 $ 948,612 $ 3.74 $ 977,567 $ 3.85
Other Income $ 5,398 $ 0.02 $ 20,271 $ 0.08 $ 12,848 $ 0.05
Less: Credit Loss (1) $ (42,434) $ (0.17) $ (30,106) $ (0.12) $ (34,656) $ (0.14)
----------- -------- ----------- -------- ------- ---------
Effective Gross Income $ 4,789,057 $ 18.86 $ 4,952,975 $ 19.50 $ 4,845,829 $ 19.08
RECOVERABLE EXPENSES
FIXED EXPENSES
Real Estate Taxes $ 524,842 $ 2.07 $ 524,842 $ 2.07 $ 558,803 $ 2.20
Insurance $ 71,583 $ 0.28 $ 68,790 $ 0.27 $ 71.519 $ 0.28
----------- -------- ----------- -------- ------- ---------
Total Fixed Expenses $ 596,425 $ 2.35 $ 593,632 $ 2.34 $ 630,322 $ 2.48
VARIABLE EXPENSES
Repairs & Maintenance (CAM) $ 236,173 $ 0.93 $ 247,350 $ 0.97 $ 260,206 $ 1.02
Utilities (CAM) $ 72,812 $ 0.29 $ 62,500 $ 0.25 $ 64,796 $ 0.26
General & Administrative (CAM) $ 13,611 $ 0.05 $ 5,000 $ 0.02 $ 12,959 $ 0.05
Management Fees (CAM) $ 185,280 $ 0.73 $ 197,000 $ 0.78 116,702 $ 0.46
----------- -------- ----------- -------- ------- ---------
Total Variable Expenses $ 507,876 $ 2.00 $ 511,850 $ 2.02 $ 454,663 $ 1.79
Non Recoverable Expenses $ 13,400 $ 0.05 $ 0 $ 0.00 $ 38,878 $ 0.15
TOTAL EXPENSES $ 1,117,701 $ 4.40 $ 1,105,482 $ 4.35 $ 1,123,863 $ 4.43
NET OPERATING INCOME $ 3,671,356 $ 14.46 $ 3,847,493 $ 15.15 $ 3,721,966 $ 14.66
===========================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
The average physical occupancy of the subject over the first 12 fiscal
years equates to 97.6 percent. Thus, the center's occupancy can be expected to
be very high and relatively stable for the initial investment period.
Effective Gross Income
In the initial year of the investment, effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately $19.08 per
square foot of GLA. The current estimate is up about 1.5 percent from the last
appraisal, due primarily to increases in base rent due to scheduled rent steps.
=======================================================================
Effective Gross Revenue Summary
Initial Year of Investment - Fiscal Year 1997/98
=======================================================================
Aggregate Sum Unit Rate Income Ratio
=======================================================================
Potential Gross Income $4,880,485 $19.22 100.0%
Less: Vacancy and Credit Loss $34,656 $0.14 0.7%
Effective Gross Income $4,845,829 $19.08 99.3%
=======================================================================
Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories: reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. Many leases also include management fees along with
the administrative surcharge. The non-reimbursable expenses associated with the
subject property include all general and administrative expenses, and marketing
expenses. Other expenses include a reserve for the replacement of short-lived
capital components, leasing commissions and alteration costs associated with
leasing space. Generally, it is our assumption that expenses will increase by
3.5 percent per year unless otherwise stated.
The Operating Income and Expense Analysis table on the facing page presents
1996 actual and 1997 budgeted expense items along with Cushman & Wakefield's
adjusted figures for fiscal year 1997198. On the following facing page are
expenses reported by the Urban Land Institute (ULI) and the International
Council of Shopping Centers (ICSC). We have compared the owner's budgeted
expense items with published data in order to support our adjusted expense
figures.
In total, Cushman & Wakefield has projected operating expenses of $4.43 per
square foot. This is an increase of $0.03 per square foot over 1996 actual, and
$0.08 per square foot more than the owner's 1997 budget. Excluding management
fees, which we have included at a market oriented 3.0 percent of minimum rents
rather than the owner's 4.0 percent of effective gross income, total expenses
are 11.2 percent higher in our analysis than the 1997 budget. The primary causes
are real estate taxes and non-recoverable expenses. Taxes are higher than the
owner's budget because new assessment data is available, and the budge omitted
non-recoverable expenses. All other expense categories have been stable compared
to the actual property experience and the last appraisal.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Among other non-operating expenses, we observe the following:
Alterations - These assumptions are unchanged from the prior report, where
we concluded that at the expiration of a lease, we have forecasted a cost of
$15.00 per square foot for turnover space (initial cost growing at expense
inflation rate) weighted by our turnover probability of 35 percent. For rollover
space, the cost is $2.00 per square foot for redecorating or moving allowances.
Thus, the blended weighted rate is $6.55 per square foot.
Leasing Commissions - These assumptions are also unchanged from the prior
report, where we made an allowance for leasing commissions for this assignment.
For new leases, a commission of 3.0 percent of the aggregate lease value will be
charged, while renewal leases will not be charged. With the 65/35 probability
assumption, the blended commission rate for 1996 is 1.05 percent of the
aggregate lease value.
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. We have forecasted a replacement
reserve estimate of $0.10 per square foot through 1997 and then jumping to $0.15
per square foot and growing annually thereafter by the CPI. The lower rate in
the initial years was to reflect the property's new condition and the existence
of many warranties on equipment.
Remaining Construction Costs - Based on conversations with the owner, we
have determined that there are $60,000 of off-site proffer costs projected for
sometime in the next two years, or about 1998.
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
investor in each year of the holding period before debt service. The following
table summarizes the conclusions.
======================================================================
Operating Summary
Initial Year of Investment - Fiscal Year 1997198
======================================================================
Aggregate Sum Unit Rate* Operating Ratio
======================================================================
Effective Gross Income $4,845,829 $19.08 100.0%
----------------------------------------------------------------------
Operating Expenses $1,123,863 $ 4.43 23.2%
----------------------------------------------------------------------
Net Income $3,721,966 $14.66 76.8%
----------------------------------------------------------------------
Capital Expenditures $ 197,388 $ 0.78 4.1%
----------------------------------------------------------------------
Cash Flow $3,524,578 $13.88 72.7%
======================================================================
*Based on total appraised GLA of 253,941 SF
======================================================================
Our cash flow model has forecasted the following compound annual growth
rates over the holding period plus the reversion year.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Effective Gross Income 1.9%
Operating Expenses 3.0%
Net Operating Income 1.5%
Cash Flow 1.8%
Overall, these factors are considered reasonable for a property with many
long term leases with stipulated rent increases.
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software 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 following page is a summary of
the expected annual cash flows from the operation of Fairfax Towne Center over
the stated investment holding period. Following is a detailed discussion of the
components which form the basis of this analysis.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Fairfax Towne Center
Fairfax County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================================
Fiscal Year, Begin August 1: 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental income $ 3,902,237 $ 4,036,293 $ 4,074,550 $ 4,157,945 $ 4,182,122 $ 4,191,267 $ 4,204,811
Free Rent $ (12,167) $ 0 $ (11,939) $ (3,825) $ 0 $ 0 $ 0
Percentage Rent $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Recoveries
Operating Expenses $ 426,730 $ 450,612 $ 475,102 $ 500,318 $ 515,371 $ 530,235 $ 545,636
Real Estate Taxes $ 550,837 $ 583,733 $ 599,849 $ 621,917 $ 644,509 $ 667,066 $ 690,414
------------------------------------------------------------------------------------------------
Total Recoveries $ 977,567 $ 1,034,345 $ 1,074,951 $ 1,122,235 $ 1,159,880 $ 1,197,301 $ 1,236,050
Other Income $ 12,848 $ 13,105 $ 13,367 $ 13,635 $ 13,907 $ 14,185 $ 14,469
Less: Credit Loss $ (34,656) $ (39,977) $ (39,187) $ (41,424) $ (42,529) $ (43,032) $ (43,675)
------------------------------------------------------------------------------------------------
Effective Gross Income $ 4,845,829 $ 5,043,766 $ 5,111,742 $ 5,248,566 $ 5,313,380 $ 5,359,721 $ 5,411,655
RECOVERABLE EXPENSES
FIXED EXPENSES
Real Estate Taxes $ 558,803 $ 578,361 $ 598,603 $ 619,554 $ 641,239 $ 663,682 $ 686,911
Insurance $ 71,519 $ 74,022 $ 76,613 $ 79,294 $ 82,069 $ 84,942 $ 87,915
------------------------------------------------------------------------------------------------
Total Fixed Expenses $ 630,322 $ 652,383 $ 675,216 $ 698,848 $ 723,308 $ 748,624 $ 774,826
VARIABLE EXPENSES
Repairs & Maintenance (CAM) $ 260,206 $ 269,313 $ 278,739 $ 288,495 $ 298,593 $ 309,043 $ 319,860
Utilities (CAM) $ 64,796 $ 67,064 $ 69,412 $ 71,841 $ 74,355 $ 76,958 $ 79,651
General & Administrative (CAM) $ 12,959 $ 13,413 $ 13,882 $ 14,368 $ 14,871 $ 15,392 $ 15,930
Management Fees (CAM) $ 116,702 $ 121,089 $ 121,878 $ 124,623 $ 125,464 $ 125,738 $ 126,144
------------------------------------------------------------------------------------------------
Total Variable Expenses $ 454,663 $ 470,879 $ 483,911 $ 499,327 $ 513,283 $ 527,131 $ 541,585
Non-Recoverable Expenses $ 38,878 $ 40,239 $ 41,647 $ 43,105 $ 44,613 $ 46,175 $ 47,791
TOTAL EXPENSES $ 1,123,863 $ 1,163,501 $ 1,200,774 $ 1,241,280 $ 1,281,204 $ 1,321,930 $ 1,364,202
================================================================================================
NET OPERATING INCOME $ 3,721,966 $ 3,880,265 $ 3,910,968 $ 4,007,286 $ 4,032,176 $ 4,037,791 $ 4,047,453
================================================================================================
LESS:
Capital Items & Reserves $ 38,091 $ 99,424 $ 40,804 $ 42,232 $ 43,710 $ 45,240 $ 46,824
Tenant Improvements $ 111,702 $ 0 $ 39,143 $ 12,778 $ 0 $ 0 $ 0
Commissions $ 47,595 $ 0 $ 11,142 $ 3,550 $ 0 $ 0 $ 0
================================================================================================
CASH FLOWS $ 3,524,578 $ 3,780,841 $ 3,819,879 $ 3,948,726 $ 3,988,466 $ 3,992,551 $ 4,000,629
================================================================================================
=================================================================================================================================
<CAPTION>
=======================================================================================
Fiscal Year, Begin August 1: 2005 2006 2007 2008
=======================================================================================
<S> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental income $ 4,308,096 $ 4,581,156 $ 4,573,521 $ 4,584,553
Free Rent $ (38,097) $ (14,110) $ (10,831) $ (9,225)
Percentage Rent $ 0 $ 0 $ 0 $ 0
Recoveries
Operating Expenses $ 558,629 $ 589,358 $ 604,894 $ 620,927
Real Estate Taxes $ 699,843 $ 734,902 $ 759,101 $ 783,983
------------------------------------------------------
Total Recoveries $ 1,258,472 $ 1,324,260 $ 1,363,995 $ 1,404,910
Other Income $ 14,759 $ 15,054 $ 15,355 $ 15,662
Less: Credit Loss $ (39,557) $ (46,097) $ (46,132) $ (46,677)
------------------------------------------------------
Effective Gross Income $ 5,503,673 $ 5,860,263 $ 5,895,908 $ 5,949,223
RECOVERABLE EXPENSES
FIXED EXPENSES
Real Estate Taxes $ 710,953 $ 735,836 $ 761,590 $ 788,246
Insurance $ 90,992 $ 94,176 $ 97,473 $ 100,884
------------------------------------------------------
Total Fixed Expenses $ 801,945 $ 830,012 $ 859,063 $ 889,130
VARIABLE EXPENSES
Repairs & Maintenance (CAM) $ 331,055 $ 342,642 $ 354,634 $ 367,047
Utilities (CAM) $ 82,439 $ 85,325 $ 88,311 $ 91,402
General & Administrative (CAM) $ 16,488 $ 17,065 $ 17,662 $ 18,280
Management Fees (CAM) $ 128,100 $ 137,011 $ 136,881 $ 137,260
------------------------------------------------------
Total Variable Expenses $ 558,082 $ 582,043 $ 597,488 $ 613,989
Non-Recoverable Expenses $ 49,464 $ 51,195 $ 52,987 $ 54,841
TOTAL EXPENSES $ 1,409,491 $ 1,463,250 $ 1,509,538 $ 1,557,960
======================================================
NET OPERATING INCOME $ 4,094,182 $ 4,397,013 $ 4,386,370 $ 4,391,263
======================================================
LESS:
Capital Items & Reserves $ 48,463 $ 50,159 $ 51,914 $ 53,731
Tenant Improvements $ 149,335 $ 48,568 $ 35,239 $ 30,818
Commissions $ 48,048 $ 13,097 $ 10,130 $ 8,563
======================================================
CASH FLOWS $ 3,848,336 $ 4,285,189 $ 4,289,087 $ 4,298,151
======================================================
=======================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
=====================
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 an 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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has Caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A [Neighborhood and Community] centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively: a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
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WAKEFIELD(R)
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<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Power Centers and Big Box Neighborhood/Community
Investment ----------------------------------------------------------------
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50- 10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00 -15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
=========================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
=========================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
=========================================================================
Free & Clear Equity IRR
=========================================================================
RANGE 9.50-12.50% 9.00-12.50% N/A
AVERAGE 11.33% 11.25%
-------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
=========================================================================
Free & Clear Going-in. Cap Rate
=========================================================================
RANGE 8.75-10.50% 8.50- 10.50% N/A
AVERAGE 9.58% 9.58%
-------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
=========================================================================
Residual Cap Rate
=========================================================================
RANGE 9.00- 11.50% 8.50- 11.50% N/A
AVERAGE 9.96% 9.88%
-------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
=========================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey -
Second Qtr. 1997
=========================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time ago. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such,
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
cap rates tend to be higher in centers which have a higher percentage of big box
space (upwards to 100 percent) and lower in centers where a higher percentage
(20 to 25 percent) of the GLA is occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.10 percent to 10.00 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.42 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.50 and 10.00 percent.
Finally, we have considered the subject's position in the market and anchor
tenancy. Fairfax Towne Center is a well-located power center in an attractive
growth market. It has a merchandising mix that includes grocery, theatre, big
box home stores, restaurants, and soft goods. Several of the tenants are good
credit risk, though one of the restaurants has closed and sales performance
overall has been mediocre. By virtue of the lease structure with many of the
major tenants, rental growth will tend to lag general inflation. The upside will
be through the ultimate attainment of overage rent, something we have not
forecasted due to lack of adequate sales history. Nonetheless, an investor has
recognized this real short term potential in the selection of a capitalization
rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen recent retail interest. The tenant
sales performance, however, suggests that some incremental risk may be
associated with the property.
Based Upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 10.00 and 10.50
percent.
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CUSHMAN &
WAKEFIELD(R)
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<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. 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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to several offsetting factors. The
considerations include a relatively flat income growth forecast for the
property, one large restaurant tenant that has closed its doors and may be at
risk, sales performance over the first two years of operation has been soft,
offset in part by the potential for a substantially increased volume of traffic
at the center upon development of the adjacent office tower. Thus, we would
conclude to the upper end of a suggested range.
Therefore, a projected terminal capitalization rate of 10.50 percent is
indicated for the subject property. Thus, this rate 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.
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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.25 percent for national power center in their
Fourth Quarter 1996 survey, with a range between 9.00-12.50 percent.
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
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Income Capitalization Approach
================================================================================
number of different investment opportunities. The following is a list of rates
offered by other types of securities.
=====================================================
Market Rates and Bond Yields (%) July 10, 1997
=====================================================
Reserve Bank Discount Rate 5.00%
-----------------------------------------------------
Prime Rate (Monthly Average) 8.50%
-----------------------------------------------------
3-Month Treasury Bills 4.96%
-----------------------------------------------------
U.S. 10-Year Notes 6.24%
-----------------------------------------------------
U.S. 30-Year Bonds 6.56%
-----------------------------------------------------
Telephone Bonds 7.63%
-----------------------------------------------------
Municipal Bonds 5.56%
=====================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject was
included earlier in the report and reference is made thereto.
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Income Capitalization Approach
================================================================================
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 80.0 percent of base rental income
will, on average, come from anchor major/tenants whose creditworthiness adds
stability to the cash flow. Additional considerations regarding risk one large
restaurant tenant that has closed its doors and may be at risk, sales
performance over the first two years of operation has been soft, and a positive
future potential for a substantially increased volume of traffic at the center
Upon development of the adjacent office tower.
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 of 11.50 percent for the center.
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 10-year fiscal period commencing on August 1, 1997.
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.
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Income Capitalization Approach
================================================================================
=====================
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:
================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
================================================================================
SUBJECT PROPERTY FAIRFAX TOWNE CENTER
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL GROSS LEASABLE AREA 253,941 SF
- --------------------------------------------------------------------------------
ANCHOR/MAJOR TENANT GLA 223,811 SF
- --------------------------------------------------------------------------------
IN-LINE SHOP GLA 30,130 SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997)
- --------------------------------------------------------------------------------
TENANTS 0 - 1,000 SF $27.00/SF
- --------------------------------------------------------------------------------
TENANTS 1,001 - 2,999 SF $24.00/SF
- --------------------------------------------------------------------------------
TENANTS 3,000 - 10,000 SF $23.00/SF
- --------------------------------------------------------------------------------
TENANTS OVER 10,000 SF $20.00/SF
- --------------------------------------------------------------------------------
TENANTS OVER 20,000 SF/ANCHORS $15.00/SF
- --------------------------------------------------------------------------------
RENTAL BASIS NNN
- --------------------------------------------------------------------------------
MARKET RENTAL GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
CREDIT RISK LOSS 3.0%
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM 7 Years
- --------------------------------------------------------------------------------
RENEWAL PROBABILITY 65.0%
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE DOWNTIME 3 Months
- --------------------------------------------------------------------------------
STABILIZED OCCUPANCY 98.0%
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
- --------------------------------------------------------------------------------
NEW TENANTS 3.0% of Minimum Rent
- --------------------------------------------------------------------------------
RENEWAL TENANTS 0.0% of Minimum Rent
- --------------------------------------------------------------------------------
TENANT IMPROVEMENT ALLOWANCE
- --------------------------------------------------------------------------------
NEW TENANT $15.00/SF
- --------------------------------------------------------------------------------
RENEWAL TENANT $2.00/SF
- --------------------------------------------------------------------------------
EXPENSE GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
TAX GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
MANAGEMENT FEE 3.0%
- --------------------------------------------------------------------------------
CAPITAL RESERVES (PSF OF GLA) $0.15/SF
================================================================================
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Income Capitalization Approach
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===================================================================
RATES OF RETURN AS IS
===================================================================
CASH FLOW START DATE 8/1/97
- -------------------------------------------------------------------
DISCOUNT RATE 11.50%
- -------------------------------------------------------------------
GOING-IN CAPITALIZATION RATE N/A
- -------------------------------------------------------------------
TERMINAL CAPITALIZATION RATE 10.50%
- -------------------------------------------------------------------
REVERSIONARY SALES COSTS 3.00%
- -------------------------------------------------------------------
HOLDING PERIOD 10 Years
===================================================================
====================
Discounted Cash Flow
====================
For a property such as the subject, it is our opinion that an investor
would require an all cash discount rate of 11.50 percent on an "as is" operating
basis. A valuation matrix for the subject appears on the Following Page, and
indicates a Market Value for the subject property as of July 6, 1997 of
$36,100,000. This value estimate produces an implied going-in capitalization
rate of 10.3 percent, which is expected given the subject's high occupancy and
stable income potential.
Regarding the composition of the yield, as analyzed in the Discounted Cash
Flow Analysis chart, 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. 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 was 10.9 percent, which appears appropriate relative to the risks
involved.
The value indication via the income capitalization approach in the original
appraisal (February 1996) was $37,600,000. Thus, there has been a 4.0 percent
decline in value. We attributed the drop in value to the absence of leasing
transactions previously estimated by the owners (Slades Restaurants), and an
increase in yield requirements suggested by the market for similar power
centers, particularly when sales performance is not as it was expected to be.
Mindful of this, in our opinion the decline in value is reasonable and
well-supported.
In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates a Market Value for the subject property
as of July 6, 1997 of $36,100,000.
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.
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Fairfax Towne Center
Fairfax County, Virginia
Discounted Cash Flow Analysis
As of August 1, 1997
================================================================================
NET DISCOUNT PRESENT ANNUAL
FISCAL CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 11.50% CASH FLOWS OF YIELD RETURN
================================================================================
1998 $3,524,578 X 0.89686 = $3,161,057 8.76% 9.76%
1999 $3,780,841 X 0.80436 = $3,041,156 8.43% 10.47%
2000 $3,819,879 X 0.72140 = $2,755,656 7.63% 10.58%
2001 $3,948,728 X 0.64699 = $2,554,804 7.08% 10.94%
2002 $3,988,466 X 0.68026 = $2,314,363 6.41% 11.05%
2003 $3,992,551 X 0.52042 = $2,077,788 5.76% 11.06%
2004 $4,000,629 X 0.46674 = $1,867,257 5.17% 11.08%
2005 $3,848,336 X 0.41860 = $1,610,920 4.46% 10.66%
2006 $4,285,189 X 0.37543 = $1,608,778 4.46% 11.87%
2007 $4,289,087 X 0.33671 = $1,444.163 4.00% 11.88%
---------- ---- -----
Total Present Value of Cash Flows $22,435,942 62.16% 10.94%
Average
Reversion:
2008 $4,391,263 (1) / 10.50% = $41,821,552
Less: cost of Sale @ 3.00% $ 1,254.647
Net Reversion $40,566,906
X Discount Factor 0.33671
-------
Total Present Value of Reversion $13,659,135 37.84%
Total Present Value of Cash Flow $36,095,078 100.00%
ROUNDED: $36,100,000
-----------
--------------------------------------------------
Gross Leasable Area (S.F.): 253,941
Per Square Foot of Gross Leasable Area: $142.16
Implicit Going-In Capitalization Rate:
Year One NOI $3,721,966
Going-In Capitalization Rate: 10.3%
==================================================
Note: (1) Net Operating Income
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<PAGE>
Income Capitalization Approach
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=====================
Direct Capitalization
=====================
To further support our value conclusion derived via the discounted cash
flow, we have also applied 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 10.00 to 10.50 percent applied to first year income. Applying
these rates to first stabilized year net operating income before reserves,
alterations, and other expenses for the subject of $3,721,966 results in a value
of approximately $35.4 to $37.2 million. From this range, we would be inclined
to conclude at a Market Value of $36,300,000 via Direct Capitalization as of
July 6, 1997. This value is indicative of an overall rate of 10.25 percent.
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Value indications for the leased fee estate in Fairfax Towne Center by the
various approaches to value are indicated as follows:
====================================================================
Valuation Approach Value Indication
====================================================================
Cost Approach Not Applied
Sales Comparison Approach $35,600,000 to $38,100,000
Income Capitalization Approach
Discounted Cash Flow Analysis $36,100,000
Direct Capitalization Method $36,300,000
====================================================================
In the reconciliation of the principle approaches, 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.
Sales Comparison Approach
The Sales Comparison Approach is a reflection of what investors have been
paying for similar office / flex properties. The primary emphasis of this
approach is to focus on investment parameters as well as the indicated sales
prices per square foot. This technique is usually relied on as a secondary check
against the Income Capitalization Approach.
Income Capitalization Approach
The Income Capitalization Approach is considered to be the most reliable
and meaningful indicator of value in our analysis of the subject property. The
subject property is highly suited to analysis by both the discounted cash flow
and direct capitalization methods, 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 discounted cash flow analysis can
analyze existing leases, the probabilities of future turnovers, and reflect the
expectations of the changes in rental rates. Essentially, the discounted cash
flow analysis models many of the dynamics of a property such as the subject.
We relied most heavily Upon the results of the Income Capitalization
Approach analysis because it is the primary analytical and decision making tool
used by most purchasers/investors.
Giving primary weight to the indication of value via the Income
Capitalization Approach indications for the improvements, we have formed an
opinion that the prospective market value of the leased fee estate in the
property, subject to the assumptions, limiting conditions, certification and
definitions, as of July 6, 1997, is:
THIRTY SIX MILLION ONE HUNDRED THOUSAND DOLLARS
$36,100,000
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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 of Washington, D.C., Inc. or an affiliated
subsidiary which issued the Appraisal.
Appraiser(s) means the employees of C&W who prepared and signed the Appraisal.
The Appraisal has been 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 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 other factual
matters. The Appraisal and the opinion of value stated therein is as of the
date stated in the Appraisal. Changes since that date in external and
market factors can significantly affect property value.
3. 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 that 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&W's prior written consent. Reference to the Appraisal Institute
or to the MAI designation is prohibited.
4. The Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
5. 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
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<PAGE>
Assumptions and Limiting Conditions
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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.
6. The physical description of the improvements is based on plans and
specifications and other information provided by the owner or other persons
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.
7. The projected potential gross income referred to in the Appraisal is based
on copies of leases provided by the owner. The Appraiser assumes no
responsibility for the authenticity or completeness of lease information
provided by others or the bona fides of actual leases. C&W suggests that
legal advice be obtained regarding the interpretation of lease provisions
and the contractual rights of parties.
8. The projections 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 projections 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, envisions for the future in
terms of rental rates, expenses, supply and demand.
9. 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.
10. 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.
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 stated in the appraisal.
Failure to comply with the requirements of the ADA may negatively 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
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We certify that, to the best of our knowledge and belief:
1) Steven A. Studabaker, MAI, has inspected the property, and Donald R.
Morris, MAI, has reviewed the report, but has not 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, Donald R. Morris, MAI, and Steven A.
Studabaker, MAI, have completed the requirements of the continuing
education program of the Appraisal.
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 6, 1997, was $36,100,000.
/s/ Steven A. Studabaker
- ----------------------------------------------------
Steven A. Studabaker, MAI
Virginia Certified General Appraiser No. 4001-001111
/s/ Donald R. Morris
- ----------------------------------------------------
Donald R. Morris, MAI
Virginia Certified General Appraiser No. 4001-002465
SEAL
COMMONWEALTH OF VIRGINIA
STEVEN A. STUDABAKER
No. 4001-001111
Certified General
Real Estate
Appraiser
SEAL
COMMONWEALTH OF VIRGINIA
Donald R. Morris, MAI
No. 4001-002465
Certified General
Real Estate
Appraiser
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<PAGE>
ADDENDA
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<PAGE>
Addenda
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LEGAL DESCRIPTION
SITE PLAT
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<PAGE>
[GRAPHIC OMITTED]
Legal Description
<PAGE>
[GRAPHIC OMITTED]
Map FAIRFAX TOWNE CENTER
PHASE I
<PAGE>
[GRAPHIC OMITTED]
BUILDING DETAILS
<PAGE>
[GRAPHIC OMITTED]
FAIRFAX TOWNE CENTER PHASE II
<PAGE>
[GRAPHIC OMITTED]
LEGAL DESCRIPTION
<PAGE>
Addenda
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COMPARABLE IMPROVED SALES
================================================================================
<PAGE>
===============================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================
<TABLE>
<CAPTION>
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA % of Total
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. Pending 1981 $76,200,000 1,643,083 23.0% 377,965 153,355 40.6%
NEC/Sepulveda Blvd. & Marina Jul-97 Good
Los Angeles County,
Manhattan Beach, California
- ------------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7%
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center Jun-97 N/A $39,174,000 - - 213,603 87,813 41.1%
Metro Center Good
San Mateo County
Colma, California
- ------------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226 45.0%
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461 55.8%
Fremont Blvd. & Monry Ave. Good
Alameda County,
Fremont, California
- ------------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village Mar-97 1979/94 $73,500,000 - - 418,356 - -
LaJolla, California Good
- ------------------------------------------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. Mar-97 1990 $22,000,000 1,817,759 18.5% 336,670 102,220 30.4%
SEQ/ I-880 & Highway 37 Good
Solano County,
Vallejo, California
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000 84.2%
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
9 Carrollton Crossroads Jan-97 1987 $18,100,000 - - 303,805 234,453 77.2%
US Hwy. 27 & Hwy. 166 Good
Carrollton, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
10 Westminster Center Dec-96 1991 $51,750,000 1,829,520 20.0% 365,699 - -
Golden West Ave. & Westminster Good
Orange County
Westminster, California
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404 84.1%
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- ------------------------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center Nov-96 1995 $34,600,000 - - 499,129 459,209 92.0%
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
13 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000 85.0%
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
- ------------------------------------------------------------------------------------------------------------------------------------
14 Prestonwood Village Sep-96 1980 $14,660,000 701,752 27.1% 190,131 123,454 64.9%
5305 Arapaho Road Good
Dallas County,
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Sale
Sale Price/ NOI/
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants
=====================================================================================================
<C> <S> <C> <C> <C> <C>
1 Manhattan Village S.C. $201.61 $15.87 7.87% Ralph's Sav-On,
NEC/Sepulveda Blvd. & Marina Mann Theaters,
Los Angeles County, Macy's Mens
Manhattan Beach, California
- -----------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. $112.19 $11.21 9.99% Bed Bath & Beyond,
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million,
Orlando, Florida Shoe Carnival
- -----------------------------------------------------------------------------------------------------
3 280 Metro Center $183.40 $15.50 8.45% Marshalls, Nordstrom
Metro Center Rack, Kids R Us, Old
San Mateo County Navy, Barnes & Noble
Colma, California
- -----------------------------------------------------------------------------------------------------
4 Smoketown Station $99.06 $10.13 10.23% Lowe's Home Center
Prince William Pkwy & Worth Shoppers Food Whse,
Prince William County, Best Buy
Woodbridge, Virginia
- -----------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. $91.41 $8.00 8.75% Safeway, Ross, Longs
Fremont Blvd. & Monry Ave. Drug, Old Navy,
Alameda County, OfficeMax,
Fremont, California Tower Records
- -----------------------------------------------------------------------------------------------------
6 LaJolla Village $175.69 $15.81 9.00% Smith's Food King,
LaJolla, California AMC Theaters, Ross,
Marshalls, Super Crown
- -----------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. $65.35 $6.02 9.21% OfficeMax, Ross, PetCo,
SEQ/ I-880 & Highway 37 Vacant HomeBase,
Solano County, Service Mer'dise
Vallejo, California (gr.lease)
- -----------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just for
Austin, Texas Feet, Mikasa
- -----------------------------------------------------------------------------------------------------
9 Carrollton Crossroads $59.58 $6.43 10.80% Wal-Mart, Goody's,
US Hwy. 27 & Hwy. 166 JCPenney, Kroger
Carrollton, Georgia
- -----------------------------------------------------------------------------------------------------
10 Westminster Center $141.51 $11.76 8.31% Home Depot, Edwards
Golden West Ave. & Westminster Cinema, Lucky Super-
Orange County, market, Thrifty Drug
Westminster, California
- -----------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter $96.98 $8.87 9.15% Kmart, HomeDepot, Toys
N. Jantzen Dr & N. Center Ave RUs, REI, Ross, Comp.
Portland, Oregon City, Copelands, Linens,
OldNavy, Barnes&Noble
- -----------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- -----------------------------------------------------------------------------------------------------
13 Centennial Plaza $71.37 $7.49 10.50% Home Depot, Best Buy,
N.W. 59 & May Avenue Home Place
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------------------------------
14 Prestonwood Village $77.10 $9.27 12.02% Best Buy, ToysRUs,
5305 Arapaho Road KidsRUs, Drug
Dallas County, Emporium
Dallas, Texas
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Sale Occupancy
No. Name/Location At Sale Comments
================================================================================================
<C> <S> <C> <C>
1 Manhattan Village S.C. 93.3%
NEC/Sepulveda Blvd. & Marina
Los Angeles County,
Manhattan Beach, California
- -------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. 100.0% New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%
- -------------------------------------------------------------------------------------------------
3 280 Metro Center 99.0% 351,632sf ctr. known as the country's
Metro Center first "power" ctr. IRR appx. 10.76% w/
San Mateo County term.cap. of 9.5%. UACinema, vacant
Colma, California Home Depot, & NYFabric not incl.
- -------------------------------------------------------------------------------------------------
4 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth hub for county. Anchor rents $8.40/sf; in-
Prince William County, line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- -------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. - 661,140sf ctr. orginally constructed as
Fremont Blvd. & Monry Ave. regional ctr. Converted b/w '92-'94.
Alameda County, Anchors not incl. in GLA sold are Mont-
Fremont, California gomery Ward & Home Express
- --------------------------------------------------------------------------------------------------
6 LaJolla Village - Solus to Prudential.
LaJolla, California
- -------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. 90.1% Sale of ctr. w/ 3 future pad sites to
SEQ/ I-880 & Highway 37 accommodate 25,600sf addition. Anchors
Solano County, not incl. ToysRUs, Costco, SaveMart,
Vallejo, California Longs, Cinedome, HomeDepot
- -------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) 98.0% Presale of promotional center. Sale
U.S. Highway 183 & expected to close by Jan. 31, 1997.
N. Mopac Blvd. REIT purchase based on direct cap.
Austin, Texas
- -------------------------------------------------------------------------------------------------
9 Carrollton Crossroads 98.5% Location 32 miles west of downtown
US Hwy. 27 & Hwy. 166 Atlanta. Renovated in 1993. Within 10-
Carrollton, Georgia mile radius - 20,162 households,
$41,800 avg. household income.
- -------------------------------------------------------------------------------------------------
10 Westminster Center 93.0% Ctr. reportedly developed at cost of $45
Golden West Ave. & Westminster million by IDM Corp. Avg. lease rate for in
Orange County, line space $15-$27/sf.
Westminster, California
- -------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave gomery Ward & Kmart anchor enclosed
Portland, Oregon mall of 87,500 square feet. Montgomery
Ward on ground lease.
- -------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management
Lawrenceville, Georgia * Ground Lease
- -------------------------------------------------------------------------------------------------
13 Centennial Plaza 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue writing. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-9.25%
interest. REIT buyer.
- -------------------------------------------------------------------------------------------------
14 Prestonwood Village 97.0% Ctr. purchased at high cap due to some
5305 Arapaho Road rents being above mkt., flat income
Dallas County, stream, & 13,770sf of 2nd story space.
Dallas, Texas
- -------------------------------------------------------------------------------------------------
</TABLE>
Page 1
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
============================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
============================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
15 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200 41.9%
I-85 @ W. T. Harris Blvd. Excellent
Charlotte, North Carolina
- ----------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384 43.6%
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ----------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza Jul-96 1992 $12,700,000 653,000 32.2% 210,000 149,760 71.3%
Mesquite, Good
Dallas County, Texas
- ----------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837 73.2%
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- ----------------------------------------------------------------------------------------------------------------------------
19 Casa Linda Jun-96 1950/86 $33,769,000 1,128,640 28.9% 326,116 -- --
Garland Rd. & Buckner Blvd. Good
Dallas County,
Dallas, Texas
- ----------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center May-96 1970 $58,500,000 1,290,683 26.8% 345,286 104,244 30.2%
Lee Jackson Hwy. & Majestic Ln. Good
Fairfax County,
Chantilly, Virginia
- ----------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza Mar-96 1972/82/93 $14,375,000 737,906 20.0% 147,396 122,052 82.8%
NEC/Federal & Candlewood Lake Good
Fairfield County,
Brookfield, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
22 Kmart Center Feb-96 1994/95 $23,134,700 1,224,036 22.6% 276,500 140,221 50.7%
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
- ----------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace Jan-96 1976/91 $80,000,000 1,000,573 45.9% 459,703 218,929 47.6%
Mexella & Lincoln Blvd. Good
Marina Freeway
Marina Del Rey, California
- ----------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center Jan-96 1989 $15,950,000 9,439,450 2.5% 235,892 -- --
1915 Hurstbourne Parkway Good
Jefferson County
Louisville, Kentucky
- ----------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta Dec-95 1995/96 $46,000,000 -- -- 491,000 440,000 89.6%
S/E/C Shea Blvd. & Excellent
Pina Co. Road
Scottsdale, Arizona
- ----------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square Dec-95 1983 $24,835,000 1,104,246 28.7% 317,197 190,318 60.0%
ES/I-45 & at Bay Blvd. Good
Houston
Webster, Texas
- ----------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village Dec-95 1995 $50,000,000 1,393,920 24.9% 347,699 254,979 73.3%
WS/Ashford Dunwoody, Under Excellent
North of downtown Atlanta Contract
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner Nov-95 1970/89 $29,500,000 867,846 21.5% 186,734 96,833 51.9%
Route 71 & I-84 Good
Hartford County
West Hartford, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
15 The Village at University Place $ 99.85 $ 9.84 9.85% Best Buy, Office Depot, 100.0% Other anchors at center are
I-85 @ W. T. Harris Blvd. TJ Maxx, Rhodes Wal-Mart and Sam's Club. This
Charlotte, North Carolina Furniture is a pre-sale of new center
developed by Hawn.
- ------------------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza $ 78.13 $ 7.81 10.00% Publix 92.0% Community center; block &
13898 SW 56th Street Eckerd Drug stucco. Fair-avg exposure.
Dade County, Theater (gr. lease) Anchor rents appx. $7-$9/sf;
Kendall, Miami, Florida J. Byrons (not owned) in-line shops $12-$19/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza $ 60.48 $ 6.65 11.00% Best Buy, Sears Home 100.0% REIT buyer using direct cap
Mesquite, Life, PetsMart, Home only.
Dallas County, Texas Depot* * Home Depot is tenant owned.
- ------------------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place $128.83 $12.11 9.40% Marshalls, Steinmart, 100.0% New ctr. in affluenct area.
SWC/Preston & Park Blvd. Office Depot, Baby Traffic counts > 37,000 &
Colling County, Superstore, MJ Des., 45,000/day. Buyer used 10.5%
Plano, Texas Borders, HomePlace IRR & 9.25% terminal cap in
analysis. Avg. rent =
$15.73/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
19 Casa Linda $103.55 $ 9.84 9.50% Albertsons, Blockbuster 84.0% Older section of eastern
Garland Rd. & Buckner Blvd. Music, Ambers Crafts Dallas. Good condition at
Dallas County, sale. Sale based on existing
Dallas, Texas income.
- ------------------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center $169.42 $14.94 8.82% CVS, LinensNThings, 84.0% Part of bulk property
Lee Jackson Hwy. & Majestic Ln. Marshalls, Ross, Total purchase; price allocated &
Fairfax County, Beverage, Giant Food adjusted for assumption of
Chantilly, Virginia existing debt at above mkt.
inter. rate. NOI proj. in '97
results in 9.2% OAR.
- ------------------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza $ 97.53 $ 9.00 9.22% OfficeMax, The Wiz, 99.0% Property does not have anchor
NEC/Federal & Candlewood Lake Waldbaums, T.J.Maxx > 50,000 sf but has good
Fairfield County, juniors. In-line rents are
Brookfield, Connecticut $9-$18/sf; Wiz & OfficeMax
$13.50/sf; TJMaxx and Wald.
below market.
- ------------------------------------------------------------------------------------------------------------------------------------
22 Kmart Center $ 83.67 $ 7.93 9.48% Kmart 97.0% Community center; block &
10501 Pines Boulevard Food Lion tilt; good exposure. Rental
Broward County, rates range from $8-$20/sf.
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace $174.03 $18.43 10.59% Vons, Sav-On, 92.0% Project consists of 2
Mexella & Lincoln Blvd. UA Theatres, Sport properties; 2nd largest
Marina Freeway Chalet, Cineplex retail ctr. west of San Diego
Marina Del Rey, California Odeon, Gelson's Fwy b/w Ventura Fwy &
Manhattan.
Sales= $347/sf;
rents=$12-45/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center $ 67.62 $ 6.49 9.60% Wal-Mart 100.0% Good quality center in prime
1915 Hurstbourne Parkway Staples retail location. Rents
Jefferson County Michael's $12-$16 per sq/ft Wal-Mart
Louisville, Kentucky Fashion Bug w/sales @ $400/sf. Property in
good condition at sale.
- ------------------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta $ 93.69 $ 9.37 10.00% HomeBase, Kmart, 100.0% Separate take down of Home
S/E/C Shea Blvd. & OfficeMax, Smith's, Base as of 3/96. Total
Pina Co. Road Barnes&Noble, Comp transaction contracted 12/95.
Scottsdale, Arizona USA, Linens, PetSmart New center in developing
area.
- ------------------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square $ 78.30 $ 7.24 9.25% Target 100.0% Price adj. to incl. $1.0M in
ES/I-45 at Bay Blvd. Service Merchandise renovations done prior to
Houston Palais Royal sale. Buyer used IRR of
Webster, Texas 11.25-11.50%. Ctr. has good
visibility and access.
- ------------------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village $143.80 $16.54 11.50% Wal-Mart 93.0% Concrete block, brick facade
WS/Ashford Dunwoody, Borders Books shopping center under
North of downtown Atlanta Rhodes Furniture construction. Under contract
Atlanta, Georgia Reading China as of Dec-95. Shop leases run
from $18-30/sf; avg. $25/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner $157.98 $14.98 9.48% Filene's Basement 96.1% Specialty retail center
Route 71 & I-84 Toys R Us located across from Westfarms
Hartford County Kids R Us Mall at I-84. Strong trade
West Hartford, Connecticut Old Navy area. Renovated in 1989.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=========================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook Nov-95 1985/93 $25,675,000 1,742,535 24.5% 426,097 372,987 87.5%
NEC/Medical Ctr. Blvd. & I-45 Good
Houston
Webster, Texas
- -------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. Sep-95 1990 $14,000,000 923,472 20.3% 187,168 114,086 61.0%
SEC/Route 53 & Briarcliff Rd. Good
DuPage County
Bolingbrook, Illinois
- -------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II Jul-95 1995 $ 9,655,000 435,600 22.7% 98,954 75,454 76.3%
NWC/Mt. Zion Blvd. & Zion Under Excellent
Clayton County Contract
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. May-95 1980/89 $19,000,000 583,704 30.7% 179,000 70,566 39.4%
Route 112 & Bicycle Path Average
Suffolk County
Port Jefferson, New York
- -------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square May-95 1980/87 $ 9,200,000 435,600 22.7% 98,704 58,078 58.8%
1715 Howell Mill Road Very Good
Fulton County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
34 Cobb Place Apr-95 1987 $21,035,000 1,013,206 23.5% 237,791 133,161 56.0%
800 Ernest Barrett Pkwy. Good
Cobb County
Kennesaw, Georgia
- -------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. Apr-95 1991 $21,000,000 1,184,334 14.4% 170,406 88,807 52.1%
NEC/Route 22 & Buffalo Gr. Very Good
Lake County
Buffalo Grove, Illinois
- -------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134 81.1%
Santa Clara County Excellent
Milpitas, California
- -------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center Mar-95 1994 $12,300,000 875,164 18.4% 160,965 135,216 84.0%
Route 59 & Meridian Pkwy Good
DuPage County
Aurora, Illinois
- -------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center Feb-95 1990 $14,400,000 478,768 24.4% 117,025 97,735 83.5%
800-850 Playa Avenue Good
Monterey County
Sand City, California
- -------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III Feb-95 1995 $ 9,100,000 415,998 22.1% 92,000 92,000 100.0%
SS/Steve Reynolds Blvd. Excellent
Gwinnett County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. Jan-95 1982 $ 7,425,000 457,380 17.1% 78,390 41,345 52.7%
2090 Dunwoody Club Dr. Good
DeKalb County
Georgia
- -------------------------------------------------------------------------------------------------------------------------
41 Danbury Square Jan-95 1989 $19,250,000 840,708 22.9% 192,621 78,700 40.9%
Kenosia Ave. & I-84 Good
Fairfield County
Danbury, Connecticut
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook $ 60.26 $ 6.03 10.00% Builder's Sq., Bed 99.0% Former mall renovated/converted in
NEC/Medical Ctr. Blvd. & I-45 Bath Beyond, 1993. Good location, exposure.
Houston Oshmans, SteinMart Anchors generate over 90% of minimum
Webster, Texas Best Buy, Sears rent. Avg in-line rent = $12.03/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. $ 74.80 $ 7.75 10.36% Wal-Mart 96.0% Wal-Mart has option to expand
SEC/Route 53 & Briarcliff Rd. 30,000. Located in growing retail
DuPage County area. Other tenants incl. Aldi Food
Bolingbrook, Illinois Store, Bedding Experts, & fast food
restaurants.
- ------------------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II $ 97.57 $ 9.18 9.41% Michael's 100.0% New community center located next to
NWC/Mt. Zion Blvd. & Zion Old Navy freestanding Target, Home Depot, &
Clayton County Baby Superstore Southlake Ph. I Buyer used 5%
Atlanta, Georgia vacancy factor & $.10/sf reserve.
- ------------------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. $106.15 $10.72 10.10% FoodTown 99.0% Average quality community center.
Route 112 & Bicycle Path CVS Drugstore Other tenants include Kay Bee Toy,
Suffolk County Dress Barn, Sam Goody, NYNEX.
Port Jefferson, New York
- ------------------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square $ 93.21 $ 9.09 9.75% Kroger 100.0% Good quality brick & masonry ctr.
1715 Howell Mill Road located in densely populated trade
Fulton County area. Korger provides strong daily
Atlanta, Georgia draw; ctr. has poor visibility.
- ------------------------------------------------------------------------------------------------------------------------------------
34 Cobb Place $ 88.46 $ 9.56 10.81% Service M'dise 96.0% Good quality center with limited
800 Ernest Barrett Pkwy. Upton's exposure & narrow configuration.
Cobb County AMC Theatres Ctr. has high amount of in-line
Kennesaw, Georgia space & lacks drawing power of 4th
anchor store.
- ------------------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. $123.24 $11.53 9.36% Dominick's 98.0% Property includes three outlots, one
NEC/Route 22 & Buffalo Gr. Sears Hardware of which was zoned industrial (5.03
Lake County ac.). Also includes income from
Buffalo Grove, Illinois ground leases.
- ------------------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch $113.97 $10.60 9.30% Service M'dise 100.0% Pre-sale of power ctr with good
Santa Clara County SportsMart, Borders, access & freeway exposure. Wal-Mart
Milpitas, California OfficeMax, PetsMart, not included in sale. Buyer used
Computer City, Ross 11.2% IRR. Anchor rents
$9.70-18.70/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center $ 76.41 $ 7.63 9.99% Builders Square 100.0% Concrete block, decorative face
Route 59 & Meridian Pkwy PetsMart brick center; above average quality.
DuPage County Located on the fringe of Meridian
Aurora, Illinois Business Campus.
- ------------------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center $123.05 $12.06 9.80% Office Depot 96.7% Good quality power ctr along Hwy 1.
800-850 Playa Avenue Marshalls Costco owns their own land/bldg.
Monterey County Orchard Supply Anchor rents $8.00-10.77/sf; shop
Sand City, California Costco** rents avg $16.56/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III $ 98.91 $ 9.25 9.35% Circuit City 100.0% Two anchor tenants in power center.
SS/Steve Reynolds Blvd. Media Play Both tenants on long-term leases
Gwinnett County with appx. 20 yrs remaining. Located
Atlanta, Georgia near Gwinnett Mall in Northcross
area.
- ------------------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. $ 94.72 $ 9.06 9.56% Kroger 80.0% Average-good quality community
2090 Dunwoody Club Dr. center. Sale based on actual income
DeKalb County & expenses, excl. reserves. Seller
Georgia acquired through foreclosure.
- ------------------------------------------------------------------------------------------------------------------------------------
41 Danbury Square $ 99.94 $ 9.52 9.53% Loehmann's 90.0% Good quality community shopping
Kenosia Ave. & I-84 Toys R Us center located adjacent to Danbury
Fairfield County Kids R Us Fair regional mall.
Danbury, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Addenda
================================================================================
PRO-JECT ASSUMPTIONS
================================================================================
<PAGE>
FAIRFAX TOWNE CENTER 1997 UPD (7130)
PROJECT DESIGNATOR, 7130
REVISION: 7/27/97 @ 16:23
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------- ----------- ---------- --------
# 1 - SUITE 12200 SAFEWAY 61,322 11/1994 11/2019
# 2 SUITE 12100 BED BATH & BEYOND 39,669 11/1994 1/2010
# 3 SUITE 12170 TJ MAXX 37,246 12/1994 11/2009
# 4 - SUITE 12110 UNITED ARTISTS 47,230 1/1995 12/2014
# 5 - SUITE 12124 TOWER RECORDS 23,000 12/1994 11/2009
# 6 SUITE 12214 CHESAPEAKE BAGEL 1,970 3/1995 3/2005
# 7 - SUITE 12212 FESTIVAL CLEANERS 1,750 12/1994 11/1999
# 8 - SUITE 12210 PARCEL PLUS 820 11/1994 11/1999
# 9 - SUITE 12208 SUPERCUTS 1,244 1/1998 12/1999
# 10 - SUITE 12186 PICTURE PLACE 1,576 2/1995 2/2000
# 11 - SUITE 12180 ZANY BRAINY 15,344 12/1994 1/2005
# 12 - SUITE 3A CHINA KING 3,975 6/1995 5/2005
# 13 - SUITE 12120 FRESH CHOICE 5,613 3/1995 3/2010
# 14 - SUITE 12150 VACANT 7,195 6/1998 5/2008
# 15 - SUITE 12270 FAIRFAX BANK 2,687 1/1995 12/2014
# 16 - SUITE IC-B MOTO PHOTO 1,700 1/1996 12/2000
# 17 - SUITE IC-B NAIL PALACE 1,600 10/1995 11/2005
-----------
17 TENANTS 283,941
===========
<PAGE>
FAIRFAX TOWNE CENTER 1997 UPD (7130)
PROJECT DESIGNATOR: 7130
REVISION: 7/27/97 @ 16:23
MNEMONIC REFERENCE TABLE
AREA MEASURES
- -------------
GLA - GROSS LEASABLE AREA
RGLA - WEIGHTED AVERAGE GLA FOR PASSTHROUGHS OF TOTAL INSURANCE EXPENSE TO
TENANTS USING TOTAL GLA FOR LIABILITY AND NET GLA FOR PROPTY
TGLA - TOTAL GLA
OCCA - OCCUPIED AREA
BBB
SAFA - SAFEWAY BASIS FOR PASSTHROUGHS
NET - GLA NET OF SAFEWAY, FAIRFAX RANK AND TJ MAXX
GROWTH RATES
- ------------
CPIG - GENERAL CPI FACTOR
GRNT - MARKET RENT GROWTH
ECPI - EXPENSE GROWTH
SFWY - SAFEWAY GROWTH OF 25% IN YEARS 2000 AND 2005
CP15 - CPI AT 5%
CP13 - CPI AT 3%
CPFC - ESCALATIONS FOR FRESH CHOICE LEASE PAYMENTS
CP14 - CPI AT 4%
COMN - COMMISSIONS FOR NEW TENANTS
COMR - COMMISSIONS FOR RENEWAL TENANTS
COMB - BLENDED COMMISSIONS
CPI2
MARKET RATES
- ------------
TIB - TENANT IMPROVEMENT ALLOWANCE, BLENDED
CAMR
TAXR
INSR
RESV
SMLR - SHOP TENANT MARKET RENTS
UACM - COMMON AREA MAINTENANCE RATE FOR UNITED ARTISTS
LRGR - LARGE TENANT MARKET RENTS
ANCR - ANCHOR TENANT MARKET RENTS
MK27
MK23
MK26
MK25
BBBR - COMMON AREA MAINTENANCE FOR BED BATH & BEYOND
TIN - TENANT IMPROVEMENT ALLOWANCE FOR NEW TENANTS
TIR - TENANT IMPROVEMENT ALLOWANCE FOR RENEWAL TENANTS
SAFC
EXPENSES
- --------
CAME
TAXX
INSX
MGMT
CF15 - 115% CAM + SOME MANAGEMENT FEE
TX15 - TAXES + ADMIN 15%
IN15 - INSURANCE + ADMIN 15%
CA07 - CAM + ADMIN 7%
SR15 - STANDARD RECOVERY: CF15+ 115% TAX + 115% INSURANCE
CA15 - CAM + ADMIN 15%
<PAGE>
PAGE 2
CA08 - CAM + ADMIN 8%
CA10 - CAM + ADMIN 10%
CA00 - CAM + 50% MANAGEMENT FEE
IN08 - INSURANCE + ADMIN 8%
BBBE - BED BATH & BEYOND PASSTHROUGH OF CAM
LIAE - LIABILITY INSURANCE ONLY
UACE - UNITED ARTISTS CAM EXPENSE BASIS
NONE - NON-RECOVERABLE ADMINISTRATIVE COSTS
LI8% - MARKETING AND ADVERTISING
SAFC
CAME
UTLE
G&AE
GLOBAL RECOVERIES
- -----------------
CF15
TX15
IN15
RHCC
CA15
CA10
CAMX
TAXX
INSX
GA10
GA15
<PAGE>
FAIRFAX TOWNS CANTER 1997 UPD (7130)
PROJECT DESIGNATOR: 7130
REVISION: 7/25/97 @ 17:12
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 246,746 246,746 253,941 250,127 252,241 253,941 253,941 253,941 253,941
FEBRUARY 246,746 246,746 253,941 250,127 252,241 253,941 253,941 253,941 238,597
MARCH 246,745 246,746 253,941 251,121 252,241 253,941 253,941 253,941 238,597
APRIL 246,746 246,746 253,941 252,365 253,941 253,941 253,941 253,941 236,627
MAY 246,746 246,746 253,941 252,365 253,941 253,941 253,941 253,941 251,971
JUNE 246,746 253,941 253,941 253,941 253,941 253,941 253,941 253,941 247,996
JULY 246,746 253,941 253,941 253,941 253,941 253,941 253,941 253,941 249,966
AUGUST 246,746 253,941 253,941 253,941 253,941 253,941 253,941 253,941 249,966
SEPTEMBER 246,745 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941
OCTOBER 246,746 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941
NOVEMBER 246,746 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941
DECEMBER 246,746 253,941 251,371 253,941 253,941 283,941 253,941 253,941 252,341
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 246,746 250,943 253,727 252,808 253,516 253,941 253,941 253,941 248,485
TOTAL SF-GLA 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 97.17 98.52 99.92 99.55 99.83 100.00 100.00 100.00 97.85
======= ======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 252,341 253,941 253,941 253,941 230,941 253,941 253,941 253,941 253,941
FEBRUARY 252,341 253,941 253,941 253,941 230,941 253,941 253,941 253,941 253,941
MARCH 253,941 251,371 253,941 253,941 253,941 253,941 253,941 252,341 253,941
APRIL 253,941 250,127 252,241 253,941 248,328 253,941 253,941 252,341 253,941
MAY 253,941 250,127 252,241 253,941 248,328 253,941 253,941 252,341 253,941
JUNE 253,941 251,121 245,046 253,941 248,328 253,941 253,941 253,941 251,371
JULY 253,941 252,365 246,746 253,941 253,941 253,941 251,971 253,941 250,127
AUGUST 253,941 252,365 246,746 253,941 253,941 253,941 251,971 253,941 250,127
SEPTEMBER 253,941 253,941 253,941 253,941 253,941 253,941 247,996 253,941 251,121
OCTOBER 253,941 253,941 253,941 253,941 253,941 253,941 249,966 253,941 252,365
NOVEMBER 253,941 253,941 253,941 253,941 253,941 253,941 249,966 253,941 252,365
DECEMBER 253,941 253,941 253,941 230,941 253,941 253,941 253,941 253,941 216,695
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 253,674 252,594 251,717 252,024 248,704 253,941 252,455 253,541 249,490
TOTAL SF-GLA 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941 253,941
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 99.89 99.47 99.12 99.25 97.94 100.00 99.41 99.84 98.25
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
2015 2016
------- -------
JANUARY 166,778 127,109
FEBRUARY 127,109 127,109
MARCH 127,109 127,109
APRIL 127,109 127,109
MAY 111,765 127,109
JUNE 111,765 127,109
JULY 110,065 127,109
AUGUST 125,409 127,109
SEPTEMBER 118,214 127,109
OCTOBER 119,914 127,109
NOVEMBER 119,914 127,109
DECEMBER 127,109 127,109
------- -------
<PAGE>
PAGE 2
AVERAGE SF
OCCUPIED-OCCA 124,355 127,109
TOTAL SF-GLA 253,941 253,941
------- -------
OCCUPANCY % 48.97 50.05
======= =======
<PAGE>
FAIRFAX TOWNE CENTER 1997 UPD (7130)
PROJECT DESIGNATOR: 7130
REVISION: 7/27/97 @ 16:23
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF FAIRFAX TOWNE CENTER 1997 UPD (7130) BEGINNING 8/1997 FOR
20 YEARS ON A FISCAL YEAR BASIS
AREA MEASURE
- ------------
GLA
DESCRIBED AS GROSS LEASABLE AREA
1997 VALUE - 253,941
THEREAFTER - CONSTANT
1997: 253,941 1998: 253,941 1999: 253,941 2000: 253,941
2001: 253,941 2002: 253,941 2003: 253,941 2004: 253,941
2005: 253,941 2006: 253,941 2007: 253,941 2008: 253,941
2009: 253,941 2010: 253,941 2011: 253,941 2012: 253,941
2013: 253,941 2014: 253,941 2015: 253,941 2016: 253,941
RGLA
DESCRIBED AS WEIGHTED AVERAGE GLA FOR PASSTHROUGHS OF TOTAL INSURANCE EXPENSE
TO TENANTS USING TOTAL GLA FOR LIABILITY AND NET GLA FOR PROPTY
1997 VALUE - 220,526
THEREAFTER - CONSTANT
1997: 220,526 1998: 220,526 1999: 220,526 2000: 220,526
2001: 220,526 2002: 220,526 2003: 220,526 2004: 220,526
2005: 220,526 2006: 220,526 2007: 220,526 2005: 220,526
2009: 220,526 2010: 220,526 2011: 220,526 2012: 220,526
2013: 220,526 2014: 220,526 2015: 220,526 2016: 220,526
TGLA
DESCRIBED AS TOTAL GLA
+100.0% OF GLA
1997: 253,941 1998: 253,941 1999: 253,941 2000: 253,941
2001: 253,941 2002: 253,941 2003: 253,941 2004: 253,941
2005: 253,941 2006: 253,941 2007: 253,941 2008: 253,941
2009: 253,941 2010: 253,941 2011: 253,941 2012: 253,941
2013: 253,941 2014: 253,941 2015: 253,941 2016: 253,941
OCCA
DESCRIBED AS OCCUPIED AREA
1997 VALUE - 246,746
1998 VALUE - 250,943
1999 VALUE - 253,727
2000 VALUE - 252,808
2001 VALUE - 253,516
2002 VALUE - 253,941
2003 VALUE - 253,941
2004 VALUE - 253,941
2005 VALUE - 248,485
2006 VALUE - 253,674
2007 VALUE - 252,594
2008 VALUE - 251,717
2009 VALUE - 252,024
2010 VALUE - 245,704
2011 VALUE - 253,941
2012 VALUE - 252,455
<PAGE>
PAGE 2
2013 VALUE - 253,541
2014 VALUE - 249,490
2015 VALUE - 124,355
2016 VALUE - 127,109
THEREAFTER - CONSTANT
1997: 246,746 1998: 250,943 1999: 253,727 2000: 252,808
2001: 253,516 2002: 253,941 2003: 253,941 2004: 253,941
2005: 248,485 2006: 253,674 2007: 252,594 2008: 251,717
2009: 252,024 2010: 248,704 2011: 253,941 2012: 252,455
2013: 253,541 2014: 249,490 2015: 124,355 2016: 127,109
BBB
1997 VALUE - 39,669
THEREAFTER - CONSTANT
1997: 39,669 1998: 39,669 1999: 39,669 2000: 39,669
2001: 39,669 2002: 39,669 2003: 39,669 2004: 39,669
2005: 39,669 2006: 39,669 2007: 39,669 2008: 39,669
2009: 39,669 2010: 39,669 2011: 39,669 2012: 39,669
2013: 39,669 2014: 39,669 2015: 39,669 2016: 39,669
SAFA
DESCRIBED AS SAFEWAY BASIS FOR PASSTHROUGHS
1997 VALUE - 61,322
THEREAFTER - CONSTANT
1997: 61,322 1998: 61,322 1999: 61,322 2000: 61,322
2001: 61,322 2002: 61,322 2003: 61,322 2004: 61,322
2005: 61,322 2006: 61,322 2007: 61,322 2008: 61,322
2009: 61,322 2010: 61,322 2011: 61,322 2012: 61,322
2013: 61,322 2014: 61,322 2015: 61,322 2016: 61,322
NET
DESCRIBED AS GLA NET OF SAFEWAY, FAIRFAX BANK AND TJ MAXX
1997 VALUE - 152,686
THEREAFTER - CONSTANT
1997: 152,686 1998: 152,686 1999: 152,686 2000: 152,686
2001: 152,686 2002: 152,686 2003: 152,686 2004: 152,686
2005: 152,686 2006: 152,686 2007: 152,686 2008: 152,686
2009: 152,686 2010: 152,686 2011: 152,686 2012: 152,686
2013: 152,686 2014: 152,686 2015: 152,686 2016: 152,686
GROWTH RATES
- ------------
CPIG
DESCRIBED AS GENERAL CPI FACTOR
1997 VALUE - 3.50
1998 VALUE - 3.50
THEREAFTER - CONSTANT
1997: 3.5000 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 2012: 3.5000
2013: 3.5000 2014: 3.5000 2015: 3.5000 2016: 3.5000
GHNT
DESCRIBED AS MARKET RENT GROWTH
1997 VALUE - 1.46
<PAGE>
PAGE 3
1998 VALUE - 3.50
THEREAFTER - CONSTANT
1997: 1.4600 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 2012: 3.5000
2013: 3.5000 2014: 3.5000 2015: 3.5000 2016: 3.5000
ECPI
DESCRIBED AS EXPENSE GROWTH
1997 VALUE - 0.00
1998 VALUE - 4.00
THEREAFTER - CONSTANT
1997: 0.0000 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 2012: 4.0000
2013: 4.0000 2014: 4.0000 2015: 4.0000 2016: 4.0000
SFWY
DESCRIBED AS SAFEWAY GROWTH OF 25% IN YEARS 2000 AND 2005
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 25.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 25.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 25.00
2010 VALUE - 0.00
2011 VALUE - 0.00
2012 VALUE - 0.00
2013 VALUE - 0.00
2014 VALUE - 25.00
2015 VALUE - 0.00
2016 VALUE - 0.00
THEREAFTER - CONSTANT
1997: 0.0000 1998: 0.0000 1999: 25.0000 2000: 0.0000
2001: 0.0000 2002: 0.0000 2003: 0.0000 2004: 25.0000
2005: 0.0000 2006: 0.0000 2007: 0.0000 2008: 0.0000
2009: 25.0000 2010: 0.0000 2011: 0.0000 2012: 0.0000
2013: 0.0000 2014: 25.0000 2015: 0.0000 2016: 0.0000
CPI5
DESCRIBED AS CPI AT 5%
1997 VALUE - 5.00
1998 VALUE - 5.00
THEREAFTER - CONSTANT
1997: 5.0000 1998: 5.0000 1999: 5.0000 2000: 5.0000
2001: 5.0000 2002: 5.0000 2003: 5.0000 2004: 5.0000
2005: 5.0000 2006: 5.0000 2007: 5.0000 2008: 5.0000
2009: 5.0000 2010: 5.0000 2011: 5.0000 2012: 5.0000
2013: 5.0000 2014: 5.0000 2015: 5.0000 2016: 5.0000
CP13
<PAGE>
PAGE 4
DESCRIBED AS CPI AT 3%
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 2012: 3.0000
2013: 3.0000 2014: 3.0000 2015: 3.0000 2016: 3.0000
CPFC
DESCRIBED AS ESCALATIONS FOR FRESH CHOICE LEASE PAYMENTS
1997 VALUE - 0.00
1999 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 15.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 15.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2009 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 15.00
2011 VALUE - 0.00
2012 VALUE - 0.00
2013 VALUE - 0.00
2014 VALUE - 0.00
2019 VALUE - 15.00
2016 VALUE - 0.00
THEREAFTER - CONSTANT
1997: 0.0000 1999: 0.0000 1999: 0.0000 2000: 15.0000
2001: 0.0000 2002: 0.0000 2003: 0.0000 2004: 0.0000
2005: 15.0000 2006: 0.0000 2007: 0.0000 2008: 0.0000
2009: 0.0000 2010: 15.0000 2011: 0.0000 2012: 0.0000
2013: 0.0000 2014: 0.0000 2015: 15.0000 2016: 0.0000
CPI4
DESCRIBED AS CPI AT 4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
1997: 4.0000 1999: 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 2012: 4.0000
2013: 4.0000 2014: 4.0000 2015: 4.0000 2016: 4.0000
COMB
DESCRIBED AS COMMISSIONS FOR NEW TENANTS
1997 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 2012: 3.0000
2013: 3.0000 2014: 3.0000 2015: 3.0000 2016: 3.0000
COMR
<PAGE>
PAGE 5
DESCRIBED AS COMMISSIONS FOR RENEWAL TENANTS
1997 VALUE - 0.00
THEREAFTER - CONSTANT
1997: 0.0000 1998: 0.0000 1999: 0.0000 2000: 0.0000
2001: 0.0000 2002: 0.0000 2003: 0.0000 2004: 0.0000
2005: 0.0000 2006: 0.0000 2007: 0.0000 2008: 0.0000
2009: 0.0000 2010: 0.0000 2011: 0.0000 2012: 0.0000
2013: 0.0000 2014: 0.0000 2015: 0.0000 2016: 0.0000
COMB
DESCRIBED AS BLENDED COMMISSIONS
+35.0% OF COMN +65.0% OF COMR
1997: 1.0500 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 2012: 1.0500
2013: 1.0500 2014: 1.0500 2015: 1.0500 2016: 1:0500
CP12
1997 VALUE - 2.00
THEREAFTER - CONSTANT
1997: 2.0000 1998: 2.0000 1999: 2.0000 2000: 2.0000
2001: 2.0000 2002: 2.0000 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 2012: 2.0000
2013: 2.0000 2014: 2.0000 2018: 2.0000 2016: 2.0000
MARKET RATES
- ------------
TIB
DESCRIBED AS TENANT IMPROVEMENT ALLOWANCE, BLENDED
+35.0% OF TIN +65.0% OF TIR
1997: 6.5500 1998: 6.7793 1999: 7.0165 2000: 7.2621
2001: 7.5163 2002: 7.7793 2003: 8.0516 2004: 8.3334
2005: 8.6251 2006: 8.9270 2007: 9.2394 2008: 9.5628
2009: 9.8975 2010: 10.2439 2011: 10.6024 2012: 10.9735
2013: 11.3576 2014: 11.7551 2015 12.1665 2016: 12.5924
CAMR
1997 VALUE - 1.25
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 1.2500 1998: 1.2937 1999: 1.3390 2000: 1.3859
2001: 1.4344 2002: 1.4846 2003: 1.5366 2004: 1.5903
2005: 1.6450 2006: 1.7036 2007: 1.7632 2008: 1.8250
2009: 1.8888 2010: 1.9549 2011: 2.0234 2012: 2.0942
2013: 2.1675 2014: 2.2433 2015: 2.3219 2016: 2.4031
TAXR
1997 VALUE - 2.16
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 2.1565 1998: 2.2320 1999: 2.3101 2000: 2.3909
2001: 2.4746 2002: 2.5612 2003: 2.6509 2004: 2.7437
2005: 2.8397 2005: 2.9391 2007: 3.0420 2008: 3.1484
2009: 3.2586 2010: 3.3727 2011: 3.4907 2012: 3.6129
2013: 3.7393 2014: 3.8702 2015: 4.0057 2016: 4.1459
<PAGE>
PAGE 6
INSR
1997 VALUE - 0.28
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 0.2760 1998: 0.2857 1999: 0.2957 2000: 0.3060
2001: 0.3167 2002: 0.3278 2003: 0.3393 2004: 0.3511
2005: 0.3634 2006 0.3762 2007: 0.3893 2008: 0.4030
2009: 0.4171 2010: 0.4317 2011: 0.4468 2012: 0.4624
2013: 0.4786 2014: 0.4953 2015: 0.5127 2016: 0.5306
RESV
1997 VALUE - 0.15
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 0.1500 1998: 0.1552 1999: 0.1607 2000: 0.1663
2001: 0.1721 2002: 0.1782 2003: 0.1844 2004: 0.1908
2005: 0.1975 2006: 0.2044 2007: 0.2116 2008: 0.2190
2009: 0.2267 2010: 0.2346 2011: 0.2428 2012: 0.2513
2013: 0.2601 2014: 0.2692 2015: 0.2786 2016: 0.2884
SMLR
DESCRIBED AS SHOP TENANT MARKET RENTS
1997 VALUE - 24.00
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 24.0000 1998: 24.3504 1999: 25.2027 2000: 26.0848
2001: 26.9977 2002: 27.9426 2003: 28.9206 2004: 29.9329
2005: 30.9805 2006: 22.0648 2007: 33.1871 2008: 34.3486
2009: 38.5508 2010: 36.7951 2011: 38.0829 2012: 39.4158
2013: 40.7954 2014: 42.2232 2015: 43.7011 2016: 45.2306
UACM
DESCRIBED AS COMMON AREA MAINTENANCE RATE FOR UNITED ARTISTS
1997 VALUE - 1.61
1998 VALUE - 1.66
1999 VALUE - 1.72
2000 VALUE - 1.97
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 1.6100 1998: 1.6600 1999 1.7200 2000: 1.9700
2001: 2.0390 2002: 2.1103 2003: 2.1842 2004: 2.2606
2005: 2.3397 2006: 2.4216 2007: 2.5064 2008: 2.5941
2009: 2.6849 2010: 2.7789 2011: 2.8761 2012: 2.9768
2013: 3.0810 2014: 3.1888 2016: 3.3004 2016. 3.4160
LRGR
DESCRIBED AS LARGE TENANT MARKET RENTS
1997 VALUE - 20.00
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 20.0000 1998: 20.2920 1999: 21.0022 2000: 21.7373
2001: 22.4981 2002: 23.2855 2003: 24.1005 2004: 24.9440
2005: 25.8171 2006: 26.7207 2007: 27.6559 2008: 28.6239
2009: 29.6257 2010: 30.6626 2011: 31.7358 2012: 32.8465
2013: 33.9962 2014: 38.1860 2015: 36.4175 2016: 37.6922
ANCR
DESCRIBED AS ANCHOR TENANT MARKET RENTS
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE GRNT
<PAGE>
PAGE 7
1997: 15.0000 1998: 15.2190 1999: 15.7517 2000: 16.3030
2001: 16.8736 2002: 17.4642 2003: 18.0754 2004: 18.7080
2005: 19.3628 2006: 20.0405 2007: 20.7419 2008: 21.4679
2009: 22.2193 2010: 22.9969 2011: 23.8018 2012: 24.6349
2013: 25.4971 2014: 26.3895 2015: 27.3132 2016: 28.2691
MK27
1997 VALUE - 27.00
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 27.0000 1998: 27.3942 1999: 28.3530 2000: 29.3454
2001: 30.3724 2002: 31.4355 2003: 32.5357 2004: 33.6745
2005: 34.8531 2006: 36.0729 2007: 37.3355 2008: 38.6422
2009: 39.9947 2010: 41.3945 2011: 42.8433 2012: 44.3428
2013: 45.8948 2014: 47.5011 2015: 49.1637 2016: 50.8844
MK23
1997 VALUE - 23.00 -
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 23.0000 1998: 23.3358 1999: 24.1526 2000: 24.9979
2001: 25.8728 2002: 26.7784 2003: 27.7156 2004: 28.6857
2005: 29.6896 2006: 30.7288 2001: 31.8043 2008: 32.9174
2009: 34.0696 2010: 35.2620 2011: 36.4962 2012: 37.7735
2013: 39.0956 2014: 40.4639 2015: 41.8802 2016: 43.3460
MK26
1997 VALUE - 26.50
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 26.5000 1998: 26.8869 1999: 27.8279 2000: 28.8019
2001: 29.8100 2002: 30.8533 2003: 31.9332 2004: 33.0509
2005: 34.2076 2006: 35.4049 2007: 36.6441 2068: 37.9266
2009: 39.2541 2010: 40.6279 2011: 42.0499 2012: 43.5217
2013: 45.0449 2014: 46.6215 2015: 48.2532 2016: 49.9421
MK25
1997 VALUE - 25.00
THEREAFTER - GROWING AT GROWTH RATE GRNT
1997: 25.0000 1998: 25.3650 1999: 26.2528 2000: 27.1716
2001: 28.1226 2002: 29.1069 2003: 30.1257 2004: 31.1801
2005: 32.2714 2006: 33.4009 2007: 34.5699 2008: 35.7798
2009: 37.0321 2010: 38.3282 2011: 39.6697 2012: 41.0582
2013: 42.4952 2014: 43.9825 2015: 45.5219 2016: 47.1152
BBBB
DESCRIBED AS COMMON AREA MAINTENANCE FOR BED BATH & BEYOND
1997 VALUE - 1.25
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 1.2500 1998: 1.2937 1999: 1.3390 2000: 1.3859
2001: 1.4344 2002: 1.4846 2003: 1.5366 2004: 1.5903
2005: 1.6460 2006: 1.7036 2007: 1.7632 2008: 1.8250
2009: 1.8888 2010: 1.9549 2011: 2.0234 2012: 2.0942
2013: 2.1675 2014: 2.2433 2015: 2.3219 2016: 2.4031
TIN
DESCRIBED AS TENANT IMPROVEMENT ALLOWANCE FOR NEW TENANTS
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
<PAGE>
PAGE 8
1997: 15.0000 1998: 15.5250 1999: 16.0684 2000: 16.6308
2001: 17.2128 2002: 17.8153 2003: 18.4388 2004: 19.0842
2005: 19.7521 2006: 20.4435 2007: 21.1590 2008: 21.8995
2009: 22.6660 2010: 23.4593 2011: 24.2804 2012: 25.1302
2013: 26.0098 2014: 26.9201 2015: 27.8623 2016: 28.8375
TIR
DESCRIBED AS TENANT IMPROVEMENT ALLOWANCE FOR RENEWAL TENANTS
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 2.0000 1998: 2.0700 1999: 2.1424 2000: 2.2174
2001: 2.2950 2002: 2.3754 2003: 2.4585 2004: 2.5446
2005: 2.6336 2006: 2.7258 2007: 2.8212 2008: 2.9199
2009: 3.0221 2010: 3.1279 2011. 3.2374 2012. 3.3507
2013: 3.4680 2014: 3.5893 2015: 3.7150 2016: 3.8450
SAFC
1997 VALUE - 1.00
THEREAFTER - GROWING AT GROWTH RATE SFWY
1997: 1.0000 1998: 1.0000 1999: 1.0000 2000: 1.2500
2001: 1.2500 2002: 1.2500 2003: 1.2500 2004: 1.2500
2005: 1.5625 2006: 1.5625 2007: 1.5625 2008: 1.5625
2009: 1.5625 2010: 1.9531 2011: 1.9531 2012: 1.9531
2013: 1.9531 2014: 1.9531 2015: 2.4414 2016: 2.4414
MISCELLANEOUS INCOMES
- ---------------------
OTHER INCOME
1997 VALUE - 12,700
THEREAFTER - GROWING AT GROWTH RATE CP12
1997: 12,700 1998: 12,954 1999: 13,213 2000: 13,477
2001: 13,747 2002: 14,022 2003: 14,302 2004: 14,588
2005: 14,880 2006: 15,178 2007: 15,481 2008: 15,791
2009: 16,107 2010: 16,429 2011: 16,757 2012: 17,093
2013: 17,434 2014: 17,783 2015: 18,139 2016: 18,501
EXPENSES
- --------
COMMON AREA , REFERRED TO AS CAMX
AN INFORMATIONAL EXPENSE
+100.0% OF CAME+100.0% OF UTLE
+100.0% OF G&AE
1997: 331,200 1998: 342,792 1999: 354,790 2000: 367,207
2001: 380,060 2002: 393,362 2003: 407,129 2004: 421,379
2005: 436,127 2006: 451,392 2007: 467,190 2008: 483,542
2009: 800,466 2010: 517,982 2011: 536,112 2012: 554,875
2013: 574,296 2014: 594,396 2015: 615,200 2016: 636,732
REAL ESTATE TAXES , REFERRED TO AS TAXX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 547,622
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 547,622 1998: 566,789 1999: 586,626 2000: 607,158
2001: 628,409 2002: 650,403 2003: 673,167 2004: 696,728
<PAGE>
PAGE 9
2005: 721,113 2006: 746,352 2007: 772,475 2008: 799,511
2009: 827,494 2010: 896,456 2011: 886,432 2012: 917,457
2013: 949,568 2014: 982,803 2015: 1,017,201 2016: 1,052,803
INSURANCE , REFERRED TO AS INSX
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE INSR MULTIPLIED BY AREA MEASURE GLA
1997: 70,088 1998: 72,541 1999: 75,080 2000: 77,707
2001: 80,427 2002: 83,242 2003: 86,156 2004: 89,171
2005: 92,292 2006: 95,522 2007: 98,866 2008: 102,326
2009: 105,907 2010: 109,614 2011: 113,451 2012: 117,421
2013: 121,531 2014: 125,785 2015: 130,187 2016: 134,744
MANAGEMENT FEE , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1997 VALUE - 116,201
1998 VALUE - 118,674
1999 VALUE - 121,223
2000 VALUE - 123,437
2001 VALUE - 124,791
2002 VALUE - 125,577
2003 VALUE - 125,855
2004 VALUE - 126,903
2005 VALUE - 131,669
2006 VALUE - 137,798
2007 VALUE - 136,909
2008 VALUE - 137,013
2009 VALUE - 138,972
2010 VALUE - 139,881
2011 VALUE - 147,805
2012 VALUE - 146,531
2013 VALUE - 149,462
2014 VALUE - 147,865
2015 VALUE - 88,163
2016 VALUE - 97,922
THEREAFTER - CONSTANT
1997: 116,201 1998: 118,674 1999: 121,223 2000: 123,437
2001: 124,791 2002: 125,577 2003: 125,855 2004: 126,903
2005: 131,669 2006: 137,798 2007: 136,909 2008: 137,013
2009: 138,972 2010: 139,881 2011: 147,805 2012: 146,531
2013: 149,462 2014: 147,865 2015: 88,163 2016: 97,922
CAM & FEES + 15% , REFERRED TO AS CF15
DESCRIBED AS 115% CAM + SOME MANAGEMENT FEE
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX +57.5% OF MGMT
1997: 447,695 1996: 462,448 1999: 477,711 2000: 493,265
2001: 508,823 2002: 524,573 2003: 540,565 2004: 557,555
2005: 577,256 2006: 598,334 2007: 615,992 2008: 634,856
2009: 655,445 2010: 676,111 2011: 701,516 2012: 722,362
2013: 746,381 2014: 768,578 2015: 758,174 2016: 788,547
TAXES + 15% , REFERRED TO AS TX15
DESCRIBED AS TAXES + ADMIN 15%
AN INFORMATIONAL EXPENSE
+115.0% OF TAXX
1997: 629,765 1998: 651,807 1999: 674,620 2000: 698,232
2001: 722,670 2002: 747,963 2003: 774,142 2004: 801,237
2005: 829,280 2006: 855,305 2007: 888,346 2008: 919,438
2009: 951,618 2010: 984,925 2011: 1,019,397 2012: 1,059,076
<PAGE>
PAGE 10
2013: 1,092,004 2014: 1,130,224 2015: 1,169,782 2016: 1,210,724
INSURANCE + 15% , REFERRED TO AS IN15
DESCRIBED AS INSURANCE + ADMIN 15%
AN INFORMATIONAL EXPENSE
+115.0% OF IN5X
1997: 80,601 1998: 83,422 1999: 86,342 2000: 89,364
2001: 92,491 2002: 95,729 2003: 99,079 2004: 102,547
2005: 106,136 2006: 109,851 2007: 113,695 2008: 117,675
2009: 121,793 2010: 126,056 2011: 130,468 2012: 135,035
2013: 139,761 2014: 144,652 2015: 149,715 2016: 154,955
CAM + 7% , REFERRED TO AS CA07
DESCRIBED AS CAM + ADMIN 7%
AN INFORMATIONAL EXPENSE
+107.0% OF CAMX
1997: 354,384 1998: 366,787 1999: 379,625 2000: 392,912
2001: 406,664 2002: 420,897 2003: 435,628 2004: 450,875
2005: 466,656 2006: 482,989 2007: 499,894 2008: 517,390
2009: 535,498 2010: 554,241 2011: 573,639 2012: 593,717
2013: 614,497 2014: 636,004 2015: 658,264 2016: 681,303
STD RECOVERY @ 15%, REFERRED TO AS SR15
DESCRIBED AS STANDARD RECOVERY: CF15+ 115% TAX + 115% INSURANCE
AN INFORMATIONAL EXPENSE
+100.0% OF CF15+100.0% OF TX15
+100.0% OF IN15
1997: 1,158,062 1998: 1,197,677 1999: 1,238,673 2000: 1,280,861
2001: 1,323,985 2002: 1,368,265 2003: 1,413,786 2004: 1,461,339
2005: 1,512,672 2006: 1,566,490 2007: 1,618,033 2008: 1,671,968
2009: 1,728,856 2010: 1,787,092 2011: 1,851,381 2012: 1,912,472
2013: 1,978,146 2014: 2,043,454 2015: 2,077,671 2016: 2,154,226
CAM + 15% , REFERRED TO AS CA15
DESCRIBED AS CAM + ADMIN 15%
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX
1997: 380,880 1998: 394,211 1999: 408,008 2000: 422,288
2001: 437,069 2002: 452,366 2003: 468,199 2004: 484,586
2005: 501,546 2006: 519,100 2007: 537,269 2008: 556,073
2009: 575,536 2010: 595,679 2011: 616,528 2012: 638,107
2013: 660,440 2014: 683,556 2015: 707,480 2016: 732,242
CAM + 8% , REFERRED TO AS CA08
DESCRIBED AS CAM + ADMIN 8%
AN INFORMATIONAL EXPENSE
+108.0% OF CAMX
1997: 357,696 1998: 370,215 1999: 383,173 2000: 396,584
2001: 410,464 2002: 424,831 2003: 439,700 2004: 455,089
2005: 471,017 2006: 487,503 2007: 504,565 2008: 522,225
2009: 540,503 2010: 559,421 2011: 579,000 2012: 599,265
2013: 620,240 2014: 841,948 2015: 664,416 2016: 687,671
CAM + 10% , REFERRED TO AS CA10
DESCRIBED AS CAM + ADMIN 10%
AN INFORMATIONAL EXPENSE
+110.0% OF CAMX
<PAGE>
PAGE 11
1997: 364,320 1998: 377,071 1999: 390,269 2000: 403,928
2001: 418,066 2002: 432,698 2003: 447,842 2004: 463,517
2005: 479,740 2006: 496,531 2007: 513,909 2008: 531,896
2009: 550,512 2010: 569,780 2011: 589,723 2012: 610,363
2013: 631,726 2014: 653,836 2015: 676,720 2016: 700,405
CAM & FEES , REFEREED TO AS CA00
DESCRIBED AS CAN + 50% MANAGEMENT FEE
AN INFORMATIONAL EXPENSE
+100.0% OF CAMX +50.0% OF MGMT
1997: 389,300 1998: 402,129 1999: 415,401 2000: 428,926
2001: 442,455 2002: 456,150 2003: 470,057 2004: 484,830
2005: 501,961 2006: 520,291 2007: 535,645 2008: 552,048
2009: 569,952 2010: 557,923 2011: 610,014 2012: 628,141
2013: 649,027 2014: 668,329 2015: 659,282 2016: 685,693
INSURANCE + 8% , REFERRED TO AS IN08
DESCRIBED AS INSURANCE + ADMIN 8%
AN INFORMATIONAL EXPENSE
+108.0% OF INSX
1997: 75,695 1998: 78,344 1999: 81,086 2000: 83,924
2001: 86,861 2002: 89,902 2003: 93,048 2004: 96,305
2005: 99,675 2006: 103,164 2007: 106,775 2008: 110,512
2009: 114,380 2010: 118,383 2011: 122,527 2012: 126,815
2013: 131,254 2014: 135,847 2015: 140,602 2016: 145,523
BED BATH CAM , REFERRED TO AS BBBE
DESCRIBED AS BED BATH & BEYOND PASSTHROUGH OF CAM
AN INFORMATIONAL EXPENSE
MARKET RATE BBBR MULTIPLIED BY AREA MEASURE BBB
1997: 49,586 1998: 51,322 1999: 53,118 2000: 54,977
2001: 56,901 2002: 58,893 2003: 60,954 2004: 63,088
2005: 65,296 2006: 67,581 2001: 69,946 2008: 72,394
2009: 74,928 2010: 77,551 2011: 80,265 2012: 83,074
2013: 85,982 2014: 88,991 2015: 92,106 2016: 95,330
LIABILITY INSUR , REFERRED TO AS LIAE
DESCRIBED AS LIABILITY INSURANCE ONLY
AN INFORMATIONAL EXPENSE +67.0% OF INSX
1997: 46,959 1998: 48,602 1999: 50,303 2000: 52,064
2001: 53,886 2002: 55,772 2003: 57,724 2004: 59,745
2005: 61,836 2006: 64,000 2007: 86,240 2008: 68,558
2009: 70,958 2010: 73,441 2011: 76,012 2012: 78,672
2013: 81,426 2014: 84,276 2015: 87,225 2016: 90,278
UA CAM COSTS , REFERRED TO AS UACE
DESCRIBED AS UNITED ARTISTS CAM EXPENSE BASIS
AN INFORMATIONAL EXPENSE
MARKET RATE UACM MULTIPLIED BY AREA MEASURE GLA
1997: 408,845 1998: 421,542 1999: 436,779 2000: 500,264
2001: 517,773 2002: 535,895 2003: 554,651 2004: 674,064
2005: 594,156 2006: 614,952 2007: 636,475 2005: 658,752
2009: 881,808 2010: 705,671 2011: 730,370 2012: 755,933
2013: 782,390 2014: 809,774 2015: 838,116 2016: 867,450
<PAGE>
PAGE 12
NON-RECOVERABLE , REFERRED TO AS NONE
DESCRIBED AS NON-RECOVERABLE ADMINISTRATIVE COSTS
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 38,100
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 38,100 1998: 39,434 1999: 40,814 2000: 42,242
2001: 43,721 2002: 45,251 2003: 46,835 2004: 48,474
2005: 50,170 2006: 51,926 2007: 53,744 2008: 55,625
2009: 57,572 2010: 59,587 2011: 61,672 2012: 63,831
2013: 66,065 2014: 68,377 2015: 70,770 2016: 73,247
LIABILITY +8% , REFERRED TO AS LI8%
DESCRIBED AS MARKETING AND ADVERTISING
AN INFORMATIONAL EXPENSE
+108.0% OF LIAE
1997: 50,715 1998: 52,491 1999: 54,328 2000: 56,229
2001: 58,197 2002: 60,234 2003: 62,342 2004: 64,524
2005: 66,783 2006: 69,120 2007: 71,539 2008: 74,043
2009: 76,635 2010: 79,317 2011: 82,093 2012: 84,966
2013: 87,940 2514: 91,018 2015: 94,203 2016: 97,500
SAFEWAY CAM + MGMT, REFERRED TO AS SAFC
AN INFORMATIONAL EXPENSE
MARKET RATE SAFC MULTIPLIED BY AREA MEASURE SAFA
1997: 61,322 1998: 61,322 1999: 61,322 2000: 76,653
2001: 76,653 2002: 76,653 2003: 76,653 2004: 76,653
2005: 95,816 2006: 95,816 2007: 95,816 2008: 95,816
2009: 95,816 2010: 119,770 2011: 119,770 2012: 119,770
2013: 119,770 2014: 119,770 2015: 149,712 2016: 149,712
CAM EXPENSES , REFERRED TO AS CAME
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 255,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 255,000 1998: 263,925 1999: 273,162 2000: 252,723
2001: 292,618 2002: 302,860 2003: 313,460 2004: 324,431
2005: 335,786 2006: 347,539 2007: 359,703 2008: 372,292
2009: 395,322 2010: 398,809 2011: 412,767 2012: 427,214
2013: 442,166 2014: 457,642 2015: 473,660 2016: 490,238
UTILITIES , REFERRED TO AS UTLE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 63,500
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 63,500 1998: 65,723 1999: 68,023 2000: 70,404
2001: 72,868 2002: 75,418 2003: 78,058 2004: 80,790
2005: 83,617 2006: 86,544 2007: 89,573 2008: 92,708
2009: 95,953 2010: 99,311 2011: 102,787 2012: 106,385
2013: 110,108 2014: 113,962 2015: 117,951 2016: 122,079
GENERAL & ADMINIST, REFERRED TO AS G&AE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,700
THEREAFTER - GROWING AT GROWTH RATE CPIG
1997: 12,700 1998: 13,145 1999: 13,605 2000: 14,081
2001: 14,574 2002: 15,084 2003: 15,612 2004: 16,158
2005: 16,723 2006: 17,309 2007: 17,915 2008: 18,542
<PAGE>
PAGE 13
2009: 19,191 2010: 19,862 2011: 20,557 2012: 21,277
2013: 22,022 2014: 22,792 2018: 23,590 2016: 24,416
VACANCY ALLOWANCE
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 3.00
1998 VALUE - 3.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 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
NONE
ALTERATION PAYOUTS
STANDARD METHOD #1 - CASHED DUE
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
<PAGE>
PAGE 14
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
NONE
CAPITAL EXPENDITURES
CAPITAL RESERVE
MARKET RATE RESV MULTIPLIED BY AREA MEASURE GLA
1997: 38,091 1998: 39,424 1999: 40,804 2000: 42,232
2001: 43,710 2002: 45,240 2003: 46,824 2004: 48,463
2005: 50,159 2005: 51,914 2007: 53,731 2008: 55,612
2009: 57,558 2010: 59,573 2011: 61,658 2012: 63,816
2013: 66,049 2014: 68,361 2015: 70,754 2016: 73,230
OFFSITE PROFFERS
1997 VALUE - 0.00
1998 VALUE - 60,000
1999 VALUE - 0.00
THEREAFTER - CONSTANT
1997: 0 1998: 60,000 1999: 0 2000: 0
2001: 0 2002: 0 2003: 0 2004: 0
2005: 0 2006: 0 2007: 0 2008: 0
2009: 0 2010: 0 2011: 0 2012: 0
2013: 0 2014: 0 2015: 0 2016: 0
PRIMARY CLASSIFICATION CODES
1 - ANCHORS
2 - IN-LINE SHOPS
3 - OUTPARCELS
4 - OP GROUND LEASES
5 - SALES
SECONDARY CLASSIFICATION CODES
1 - VACANCY LOSS
COST CENTERS
1 - COMMON AREA
2 - TAXES
3 - INSURANCE
SALES VOLUME PROFILE
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
<PAGE>
PAGE 15
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
CAM & FEES + 15% , REFERRED TO AS CF15
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CF15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAXES + 15% , REFERRED TO AS TX15
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TX15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE + 15% , REFERRED TO AS IN15
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE IN15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RHCC
GLOBAL GROUPING
GLOBAL RECOVERY CF15
GLOBAL RECOVERY TX15
GLOBAL RECOVERY IN15
CAM + 15% , REFERRED TO AS CA15
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CA15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM + 10% , REFERRED TO AS CAlO
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAlO
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMON AREA , REFERRED TD AS CAMX
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAMX
<PAGE>
PAGE 16
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES , REFERRED TO AS TAXX
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE , REFERRED TO AS INSX
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE INSX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GA10
GLOBAL GROUPING
GLOBAL RECOVERY CAlO
GLOBAL RECOVERY TAXX
GLOBAL RECOVERY INSX
GAl5
GLOBAL GROUPING
GLOBAL RECOVERY CA15
GLOBAL RECOVERY TAXX
GLOBAL RECOVERY INSX
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/SQUARE FOOT/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>
FAIRFAX TOWNE CENTER 1997 UPD (7130)
PROJECT DESIGNATOR: 7130
REVISION: 7/27/97 @ 16:23
PROJECT ASSUMPTIONS REPORT
FOR TENANTS ONLY
INCLUDING ALL TENANTS
TENANTS
THERE ARE A TOTAL OF 17 LEASEHOLD TENANT (S)
# 1 - SUITE 12200 , SAFEWAY
BASE LEASE DATES: 11/1994 TO 11/2019
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 61,322
PRIMARY CODE, 1 - ANCHORS
MARKET RATE: ANCR
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
CHANGING TO - 12.50/SF/YR ON 12/2004
CHANGING TO - 13.00/SF/YR ON 12/2009
CHANGING TO - 13.50/SF/YR ON 12/2014
CHANGING TO - 14.00/SF/YR ON 12/2019
PERCENTAGE RENT:
INITIAL SALES - 340.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
1.00% OF OVERAGE TO A CEILING OF 81.54/SF/YR
0.00% OF OVERAGE TO A CEILING OF 0.00/SF/YR
0.00% OF OVERAGE TO A CEILING OF 0.00/SF/YR
0.75% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
SAFEWAY CAM + MGMT
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE SAFC
BASED ON AN ABSOLUTE PERCENTAGE OF 108.00%
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIABILITY +8%
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE L18%
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
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 2
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 2 - SUITE 12100 , BED BATH & BEYOND
BASE LEASE DATES: 11/1994 TO 1/2010
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 39,669
PRIMARY CODE: 1 - ANCHORS
MARKET RATE: ANCR
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.50/SF/YR
CHANGING TO - 15.50/SF/YR ON 12/1999
CHANGING TO - 16.65/SF/YR ON 12/2004
PERCENTAGE RENT:
INITIAL SALES - 135.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
4.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY TAXX
GLOBAL GROUPING
GLOBAL RECOVERY INSX
BED BATH CAM
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE BBBE
BASED ON AN ABSOLUTE PERCENTAGE OF 100.00%
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
OPTION 1 DATES: 2/2010 TO 1/2015
SQUARE FOOTAGE: 39,669
MINIMUM RENT:
INITIAL RENT - 17.65/SF/YR
PERCENTAGE RENT:
INITIAL SALES - CONTINUED FROM PRIOR TERM
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
4.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY TAXX
GLOBAL GROUPING
GLOBAL RECOVERY INSX
<PAGE>
PAGE 3
BED BATH CAM
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SNARE RECOVERY OF EXPENSE BBBE
BASED ON AM ABSOLUTE PERCENTAGE OF 100.00%
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: MARKET RATE /
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIB
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS: NONE
# 3 - SUITE 12170 , TJ MAXX
BASE LEASE DATES: 12/1994 TO 11/2009
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 37,246
PRIMARY CODE: 1 - ANCHORS
MARKET RATE: ANCR
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 8.28/SF/YR
CHANGING TO - 8.78/SF/YR ON 12/2004
CHANGING TO - 9.28/SF/YR ON 12/2009
PERCENTAGE RENT:
INITIAL SALES - 129.00/SF/YR
THEREAFTER - GROWING AT 2.00%
INITIAL BREAKPOINT - 222.00/SF/YR
CHANGING TO - 243.00/SF/YR ON 12/2004
CHANGING TO - 263.00/SF/YR ON 12/2009
2.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
COMMON AREA
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAMX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIABILITY INSUR
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LIAE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
<PAGE>
PAGE 4
ALTERATIONS: NONE
OPTION 1 DATES: 12/2009 TO 11/2014
SQUARE FOOTAGE: 37,246
MINIMUM RENT:
INITIAL RENT - 9.28/SF/YR
PERCENTAGE RENT:
INITIAL SALES - CONTINUED FROM PRIOR TERM
THEREAFTER - GROWING AT 2.00%
INITIAL BREAKPOINT - 222.00/SF/YR
CHANGING TO - 243.00/SF/YR ON 12/2004
CHANGING TO - 263.00/SF/YR ON 12/2009
2.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
COMMON AREA
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAMX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SNARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIABILITY INSUR
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LIAE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
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: NONE
# 4 - SUITE 12110 , UNITED ARTISTS
BASE LEASE DATES: 1/1995 TO 12/2014
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 47,230
PRIMARY CODE: 1 - ANCHORS
MARKET RATE: ANCR
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.85/SF/YR
CHANGING TO - 18.00/SF/YR ON 1/2005
CHANGING TO - 19.00/SF/YR ON 1/2010
PERCENTAGE RENT:
INITIAL SALES - 72.00/SF/YR
<PAGE>
PAGE 5
THEREAFTER - GROWING AT 2.00%
INITIAL BREAKPOINT - 198.00/SF/YR
CHANGING TO - 225.00/SF/YR ON 1/2005
CHANGING TO - 238.00/SF/YR ON 1/2010
4.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
UA CAM COSTS
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SNARE RECOVERY OF EXPENSE UACE
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
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SNARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE INSX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
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: 1,050,000
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS: NONE
# 5 - SUITE 12124 , TOWER RECORDS
BASE LEASE DATES: 12/Z994 TO 11/2009
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 23,000
PRIMARY CODE: 1 - ANCHORS
MARKET RATE: LRGR
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 22.00/SF/YR
CHANGING TO - 23.65/SF/YR ON 12/1996
CHANGING TO - 25.30/SF/YR ON 12/1999
CHANGING TO - 29.10/SF/YR ON 12/2004
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
<PAGE>
PAGE 6
COMMISSIONS: NONE
ALTERATIONS: 314,000
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 10.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE LRGR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
10.00 AFTER MONTH 60
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 6 SUITE 12214 , CHESAPEAKE BAGEL
BASE LEASE DATES: 3/1995 TO 3/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,970
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 26.00/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
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 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 7 - SUITE 12212 , FESTIVAL CLEANERS
BASE LEASE DATES: 12/1994 TO 11/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,750
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 36.38/SF/YR
THEREAFTER - GROWING AT 5.00%
WITH 2 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
3 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 8
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 15
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GAl5
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 8 - SUITE 12210 , PARCEL PLUS
BASE LEASE DATES: 11/1994 TO 11/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 820
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: MK27
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 28.64/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
0.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
3 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MK27 MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
<PAGE>
PAGE 9
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 9 - SUITE 12208 , SUPERCUTS
BASE LEASE DATES: 1/1995 TO 12/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,244
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 26.50/SF/YR
CHANGING TO - 28.00/SF/YR ON 1/1997
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
3 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 10
- --------------------------------------------------------------------------------
# 10 - SUITE 12186 , PICTURE PLACE
BASE LEASE DATES: 2/1995 TO 2/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,576
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 26.00/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
3 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 11 - SUITE 12180 , ZANY BRAINY
BASE LEASE DATES: 12/1994 TO 1/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 15,344
PRIMARY CODE: 1 - ANCHORS
<PAGE>
PAGE 11
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: LRGR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 21.50/SF/YR
CHANGING TO - 23.65/SF/YR ON 2/2000
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES:
CAM & FEES + 15%
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CF15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE + 15%
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARES RECOVERY OF EXPENSE IN15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
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: 4.62/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 10.00 3 NONE 1 YES YES
2 10.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE LRGR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
<PAGE>
PAGE 12
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 12 - SUITE 3A , CHINA KING
BASE LEASE DATES: 6/1995 TO 5/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,975
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: MK23
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 22.00/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 0.00/SF/YR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MK23 MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 13 - SUITE 12120 , FRESH CHOICE
BASE LEASE DATES: 3/1995 TO 3/2010
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 5,613
<PAGE>
PAGE 13
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: MK23
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 30.00/SF/YR
CHANGING TO - 33.35/SF/YR ON 4/2000
CHANGING TO - 38.35/SF/YR ON 4/2005
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
CAM & FEES + 15%
ASSIGNED TO COST CENTER 1 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CF15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 2 - TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OP ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE + 15%
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE IN15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE RGLA
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: 20.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MK23 MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
<PAGE>
PAGE 14
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT -
#14 - SUITE 12150 , VACANT
BASE LEASE DATES: 6/1998 TO 5/2008
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 7,195
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: LRGR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1999 VALUE - MARKET RATE LRGR
THEREAFTER - GROWING AT 2.00%
WITH 1 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1.00/SF/YR
THEREAFTER - GROWING AT 2.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
COMMISSIONS: GROWTH RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE LRGR
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT GROWTH RATE GRNT
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
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 GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 15
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 15 - SUITE 12270 , FAIRFAX BANK
BASE LEASE DATES: 1/1996 TO 12/2014
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,687
PRIMARY CODE: 4 - OP GROUND LEASES
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 29.77/SF/YR
CHANGING TO - 34.24/SF/YR ON 1/2000
CHANGING TO - 39.38/SF/YR ON 1/2005
CHANGING TO - 48.28/SF/YR ON 1/2010
WITH 7 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 0.00/SF/YR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CF15
GLOBAL GROUPING
GLOBAL RECOVERY TX15
INSURANCE + 15%
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE IN15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
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: NONE
- --------------------------------------------------------------------------------
# 16 - SUITE 1C-B , MOTO PHOTO
BASE LEASE DATES: 1/1996 TO 12/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,700
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 24.72/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 0.00/SF/YR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
<PAGE>
PAGE 16
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: GROWTH RATE COMB
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIB
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS. MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------- ------ -------- --------- ----------- -----------
1 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
3 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
# 17 - SUITE 1C-B , NAIL PALACE
BASE LEASE DATES: 10/1995 TO 11/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,600
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
MARKET RATE: SMLR
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 24.00/SF/YR
THEREAFTER - GROWING AT 3.00%
PERCENTAGE RENT:
INITIAL SALES - 0.00/SF/YR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CF15
GLOBAL GROUPING
<PAGE>
PAGE 17
GLOBAL RECOVERY TAXX
INSURANCE
ASSIGNED TO COST CENTER 3 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE INSX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: GROWTH RATE COMB
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 7.00 3 NONE 1 YES YES
2 7.00 3 NONE 1 YES YES
RENEWAL MINIMUM RENT:
MARKET RATE SMLR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
15.00 AFTER MONTH 48
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GA15
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
INVESTOR SURVEY
================================================================================
<PAGE>
OFFICES-URBAN, CLASS A
<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>
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>
OFFICES - SUBURBAN
<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>
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>
INDUSTRIAL
<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>
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>
RETAIL, COMMUNITY AND NEIGHBOHOOD CENTERS
<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>
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>
RETAIL, POWER CENTERS AND "BIG BOX"
<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>
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>
Going-In Terminal Blended Equity Income Expense
Cap Rate Cap Rate IRR IRR Growth Growth Projection Management
===================================================================================================== Period Fees Reserves
Low High Low High Low High Low High Low High Low High Years % Revenue % Revenue
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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% 4.00% 4.00% 7 2.50% 4.00%
5.00% 7.00% 10.50% 11.00% 12.50% 13.00% 4.00% 5.00% 3.00% 4.00% 10 3.50% 4.00%
11.00% 13.00% 11.00% 13.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00% 4.00% 4.00% 5 4.00% 5.00%
10.50% 10.50% 10.00% 10.00% 3.50% 5.00% 10 4.50% 5.00%
11.00% 11.00% 13.00% 13.00% 5.00% 6.00% 3.00% 4.00% 5 3.00% 4.00%
9.00% 9.00% 10.00% 10.00% 13.00% 13.00% 16.00% 16.00% 4.00% 4.50% 3.00% 3.00% 10 2.50% 3.00%
11.00% 12.00% 10.00% 11.00% 12.00% 16.00% 19.00% 23.00% 3.00% 4.00% 4.00% 4.00% 5 3.00% 3.50%
8.00% 8.00% 10.00% 10.00% 12.00% 14.00% 15.00% 20.00% 8.00% 8.00% 6.00% 6.00% 10 4.50% 5.50%
6.00% 8.00% 8.00% 9.00% 20.00% 25.00% 5.00% 5.00% 3.00% 4.00% 5 4.00% 4.00%
8.50% 8.50% 9.00% 9.00% 5.00% 5.00% 4.00% 4.00% 5 3.00% 3.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00% 4.00% 4.00% 5 3.50% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
No. of
Responses 10 10 11 11 7 7 7 7 9 9 11 11 11 11 11
Average 8.80% 9.60% 9.95% 10.55% 13.50% 15.57% 18.29% 22.29% 4.89% 5.72% 3.77% 4.18% 7 3.45% 4.09%
- ------------------------------------------------------------------------------------------------------------------------------------
First
Class
11.00% 11.00% 11.00% 11.00% 15.00% 20.00% 20.00% 20.00% 4.00% 4.00% 4.00% 4.00% 7 2.50% 3.00%
11.00% 11.00% 13.00% 13.00% 5.00% 6.00% 3.00% 4.00% 5 3.00% 4.00%
10.00% 10.00% 11.00% 11.00% 15.00% 15.00% 18.00% 18.00% 4.00% 4.50% 3.00% 3.00% 10 2.50% 3.00%
10.00% 10.00% 11.00% 11.00% 15.00% 18.00% 15.00% 20.00% 10.00% 10.00% 5.00% 5.00% 10 3.50% 4.50%
10.00% 10.00% 10.50% 10.50% 16.00% 16.00% 25.00% 25.00% 4.00% 4.00% 3.00% 3.00% 7 2.50% 4.00%
8.00% 9.00% 10.00% 10.00% 20.00% 25.00% 5.00% 5.00% 3.00% 4.00% 5 3.00% 4.00%
10.00% 10.00% 10.50% 10.50% 22.00% 22.00% 4.00% 4.00% 4.00% 4.00% 5 3.00% 4.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00% 4.00% 4.00% 5 3.50% 4.00%
5.00% 5.00% 10.00% 11.00% 15.00% 15.00% 4.00% 4.00% 3.00% 3.00% 5 3.00% 4.50%
8.00% 8.00% 10.00% 10.00% 14.50% 14.50% 20.00% 20.00% 3.50% 3.50% 3.50% 3.50% 10 2.00% 4.00%
10.50% 10.50% 11.00% 11.00% 13.00% 13.00% 20.00% 23.00% 4.50% 4.50% 3.50% 3.50% 10 3.50% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
No. of
Responses 10 10 11 11 8 8 9 9 10 10 11 11 11 11 11
Average 9.35% 9.45% 10.55% 10.82% 14.81% 16.19% 19.78% 21.67% 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>
Going-In Terminal Blended Equity Income Expense
Cap Rate Cap Rate IRR IRR Growth Growth Projection Management
===================================================================================================== Period Fees Reserves
Low High Low High Low High Low High Low High Low High Years % Revenue % Revenue
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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% 4.00% 4.00% 7 2.50% 3.00%
10.00% 12.00% 10.00% 12.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00% 4.00% 4.00% 5 4.00% 4.50%
11.00% 11.00% 10.00% 10.00% 3.50% 5.00% 10 4.00% 5.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00% 3.50% 3.50% 5 4.00% 4.50%
12.00% 12.00% 14.00% 14.00% 2.00% 3.00% 3.00% 4.00% 5 3.00% 6.00%
12.00% 12.00% 13.00% 13.00% 19.00% 19.00% 22.00% 22.00% 3.50% 4.00% 3.00% 3.00% 5 3.00% 3.00%
10.50% 10.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00% 4.00% 4.00% 10 2.50% 4.00%
10.00% 11.00% 22.00% 22.00% 6.00% 6.00% 4.00% 4.00% 5 5.00% 4.00%
- ----------------------------------------------------------------------------------------------------------------------------------
No. of
Responses 7 7 8 8 4 4 6 6 7 7 8 8 8 8 8
Average 10.79% 11.50% 11.63% 12.25% 14.75% 16.50% 19.00% 20.50% 4.07% 4.86% 3.63% 3.94% 7 3.50% 4.25%
- ----------------------------------------------------------------------------------------------------------------------------------
Economy
10.00% 12.00% 12.00% 12.00% 18.00% 25.00% 4.00% 4.00% 4.00% 4.00% 7 2.50% 3.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00% 3.50% 3.50% 5 4.00% 4.50%
12.50% 12.50% 14.00% 14.00% 2.00% 3.00% 3.00% 4.00% 5 3.00% 6.00%
13.00% 13.00% 14.00% 14.00% 21.00% 21.00% 24.00% 24.00% 2.50% 4.00% 3.00% 3.00% 5 4.00% 3.00%
11.50% 11.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00% 4.00% 4.00% 10 2.50% 4.00%
- ----------------------------------------------------------------------------------------------------------------------------------
No. of
Responses 5 5 5 5 3 3 4 4 5 5 5 5 5 5 5
Average 11.40% 12.40% 12.80% 13.20% 15.33% 17.67% 18.00% 20.75% 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% 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>
SURVEY OF RECENT CLOSED TRANSACTIONS
<TABLE>
<CAPTION>
Net Rentable Area Sales Price Per Sq. Ft. Going-in Cap Rate Internal Rate of Return
- ----------------- ----------------------------- -------------------------- ------------------------- ------------------------
Property No. Sales No. Sales No. Sales No. Sales
Type 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 13.20% 12.25%
Industrial 57 150,787 118,400 57 $ 37.75 $ 37.87 28 10.80% 10.61% (Sample Not Large Enough
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 Enough
to Report)
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%
</TABLE>
<PAGE>
Addenda
================================================================================
REGIONAL MARKET ANALYSIS
================================================================================
<PAGE>
REGIONAL MARKET ANALYSIS
================================================================================
Metropolitan Washington, D.C. Retail Overview
According to Smithy Braedon - Oncor International's Annual Retail Vacancy
Rates - Year End 1995 report, Metropolitan Washington, D.C. has an overall
retail inventory of over 108.4 million square feet in three distinct submarkets:
District of Columbia, Northern Virginia and Suburban Maryland. At year end there
was about 9.8 million square feet available which equates to an overall vacancy
rate of 9.0 percent. The vacancy rate is up from 7.9 percent at year end 1994
and 8.2 percent at year end 1993. The increase in vacancy is partially accounted
for by several store closings including Drug Emporium, F&M, Fashion Bug and
Evans Catalog Showroom. An overview of the Metropolitan Washington, D.C. retail
market is depicted in the table below:
<TABLE>
<CAPTION>
=============================================================================================
Retail Market Overview
Metropolitan Washington, D.C. Region
=============================================================================================
Jurisdiction Inventory Available Vacancy Under Planned (SF)
(SF) (8F) Rate Construction
=============================================================================================
<S> <C> <C> <C> <C> <C>
Washington, D.C. 6,784,143 1,099,031 16.2% 0 N/A
Northern Virginia 50,831,399 4,580,630 9.0% 120,000 7,954,586
Alexandria 2,511,702 164,181 6.5% 0 628,000
Arlington County 4,663,131 275,933 5.9% 0 52,335
Fairfax County 29,493,570 2,237,623 7.6% 0 410,421
Loudoun County 3,248,929 348,823 10.7% 120,000 3,795,000
Prince William County 10,914,067 1,554,070 14.2% 0 3,068,830
Suburban Maryland 50,829,396 4,132,351 8.1% 357,000 3,831,393
Anne Arundel County 7,317,739 798,358 10.9% 0 663,000
Frederick County 2,546,358 161,347 6.3% 0 636,000
Montgomery County 19,028,900 1,273,002 6.7% 0 323,063
Prince George's County 21,936,399 1,899,644 8.7% 357,000 2,209,330
- ---------------------------------------------------------------------------------------------
Total Washington, D.C. 108,444,938 9,812,012 9.0% 477,000 11,785,979
Region
=============================================================================================
</TABLE>
In terms of market size, Northern Virginia and Suburban Maryland have a
similar amount of supply with 50.8 million square feet or 46.9 percent of
inventory each. The Suburban Maryland submarket is performing better with a year
end 1995 vacancy rate of 8.1 percent whereas, Northern Virginia possesses a
vacancy factor of 9.0 percent. The Washington, D.C. submarket has the highest
vacancy at 16.2 percent. The best performing jurisdictions are Arlington County
(5.9 percent), Frederick County (6.3 percent) and Alexandria (6.5 percent). With
the exception of the outlying counties of Loudoun and Prince William in
Virginia, and Anne Arundel in Maryland, the suburban jurisdictions are
performing well with vacancy rates under ten percent.
The following table highlights the historical vacancy rates in the region
by submarket and jurisdiction.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
================================================================================
Historical Vacancy Rates
================================================================================
Year End 1990 1991 1992 1993 1994 1995
================================================================================
Washington. D.C 16.6% 19.8% 19.4% 16.6% 16.7% 16.2%
Capital Hill & East N/A N/A N/A N/A 6.7% 5.7%
CBD N/A 23.1% 23.2% 17.9% 15.3% 16.8%
East End N/A 24.9% 29.7% 25.8% 30.0% 25.0%
West End/Georgetown N/A 19.1% 16.5% 13.2% 14.4% 11.7%
Uptown N/A 21.7% 14.9% 12.3% 9.2% 13.7%
Virginia 6.4% 8.5% 9.1% 8.9% 9.0% 9.0%
Alexandria 12.7% 13.8% 7.8% 8.7% 7.2% 6.5%
Arlington 6.7% 8.0% 12.5% 12.4% 10.5% 5.9%
Fairfax 5.1% 6.1% 5.7% 5.3% 5.6% 7.6%
Loudoun 4.1% 8.1% 11.5% 11.9% 13.8% 10.7%
Prince William 9.3% 11.5% 14.4% 13.9% 13.9% 14.2%
Maryland 6.7% 7.5% 7.2% 7.0% 6.8% 8.1%
Anne Arundel N/A N/A N/A N/A 9.5% 10.9%
Frederick 8.0% 11.4% 9.3% 8.9% 8.7% 6.3%
Montgomery 5.6% 5.3% 6.1% 5.3% 5.1% 6.7%
Prince George's 9.1% 10.0% 7.5% 7.4% 6.6% 8.7%
================================================================================
The three largest suburban markets: Fairfax, Montgomery and Prince
George's counties, all had increases in vacancy at year end 1995. In Fairfax
County, over 1.1 million square feet was added to inventory. Several new centers
including Plaza America, Spectrum Center, and Fair Lakes Promenade were
delivered in 1995. During this time, 482,735 square feet was absorbed; however,
this was not enough to keep pace with deliveries and the vacancy rate increased
two basis points to 7.6 percent. There is currently no retail center under
construction. Thus, with continued growth in population, income and retail sales
coupled with no additions to supply, the existing vacant space should be
recycled and absorbed in the near term.
Similar to Fairfax County, both Montgomery and Prince George's counties
experienced increases in inventory; although, at a more moderate level.
Montgomery County added about 350,000 square feet of new space. Net absorption
was positive but nominal at 36,381 square feet and as such, vacancy rose from
5.1 to 6.7 percent. There are no retail projects currently under construction.
Prince George's County increased its retail base by over 500,000 square feet.
Leasing activity was dynamic with a net absorption of 479,043 square feet.
Nonetheless, the absorption level did not offset the increase in inventory and
the year end vacancy rate increased to 8.7 percent. There is an additional
357,000 square feet under construction in one project - Corridor Marketplace in
Laurel.
Retail sales also provide an indication of the strength of a given retail
market. The table on the following page provides total retail sales for the
Metropolitan Washington, D.C. region. Retail sales data is provided for 1990 and
1995 as well as a five year projection.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
Total Retail Sales
================================================================================
Metropolitan Washington, D.C.
================================================================================
Total Retail Sales ($000)
1990 $32,925,657
1995 $45,522,053
2000 Projection $60,514,983
Annual Percent Change
1990-1995 +6.7%
1995-2000 +5.9%
================================================================================
Between 1990 and 1995, retail sales in the region grew by an average
compound rate of 6.7 percent per year. For the next five years, the region's
retail sales are projected to grew at a lower rate of 5.9 percent annually.
The Buying Power Index (BPI) is a measure of a given market's ability to
buy, and is expressed as a percentage of the total U.S. population (100%). It is
a combination of the number of people who can purchase the product or service,
their ability to pay for it, and their access to outlets where the transaction
can be made. According to Market Statistics, a division of Bill Communications
(formerly Sales and Marketing Management), the BPI for Metropolitan Washington,
D.C. is 2.3001. Compared with other regions, the area is ranked fourth behind
Chicago, Los Angeles, and New York distinguishing Washington, D.C. as one of the
nations top retail markets.
Conclusion
Overall, Metropolitan Washington, D.C. has a strong retail market but
caution is warranted as projected demographic data indicates a slowing of the
area's population, income and retail sales growth in the latter half of the
decade. It is our believe that the retail market will remain viable but the
level of development experienced between 1993 and 1995 will dissipate which is
already occurring with only 550,000 square feet under construction. There is a
lot of space planned, however, we do not expect to see much speculative
development. As always, well located properties will continue to be redeveloped
and recycled and new projects will only be built with substantial preleasing.
Given this scenario, we do not expect over-building nor do we expect continuing
increases in vacancy.
Recent Market Developments
In an effort to bring these statistics into better perspective, we have
researched recent trends in tenancy and related retail events pertinent to the
market, with primary sources being: The Washington Post, The Washington Business
Journal, The Real Estate Journal's Corridor, and Value Retail News. Our findings
are summarized below, with many of the bullet points being abstracts of the
newspaper articles.
Investment Activity
o A group of domestic pension funds managed by L&B Real Estate Counsel of
Dallas has acquired a majority interest in the 1.954 million square foot
Tyson's Corner Center. Aldrich, Eastman & Waltch of Boston brokered the
partial interest at Tyson's
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
for almost a year. The price was only identified as less than $500
million, which was the asking price for the 52 percent interest. The
purchasers previously held a minority interest. L&B expects to be able to
add significant value over the next two to three years through development
opportunities and expansion. Future plans include completion of several
free-standing buildings on out-parcels surround the property's 82 acres.
o Muddy Branch Square, Gaithersburg, was purchased in early 1997 by Muddy
Branch Square LP, an affiliate of Lehrco Corp.
o Portsmouth Station SC, Manassas, was acquired by First Allied Corp from
Citistate Manassas, Inc. For $10.4M. It is located at corner of Sudley
Road and Portsmouth Road in Manassas and contains 150,000 square feet of
GLA. The anchors are Toys R Us, Linens n' Things, Pier One Imports, the
Party Co. and First Virginia Bank. First Allied Vice President of
acquisitions, Edward Glazer, said 1997 is targeted to be their biggest
year ever in the DC metropolitan area. Other recent acquisitions include
Boulevard Shops in Laurel, MD, Cipriano Square in Greenbelt, MD, and
K-Mart Town Center in Burke, VA.
o May Department Stores (Hecht's Co.) purchased the vacant site adjacent to
its downtown Washington, D.C. Metro Center store for $3.35 million as a
preventive measure against a downtown entry by Kohl's Department Store.
Hecht's is currently planning to add another 34,000 square foot floor to
its existing Ballston Commons Mall store.
o River Oaks Shopping Center in Woodbridge, VA, sold to Teachers Insurance
(TIAA Real Estate). The center is 90,885 square feet and sold for about
$13 million. It was built in 1995, is located on 10.42 acres, has 402
parking spaces, is 94 percent occupied, and includes a 64,885 square foot
Giant Foods. Rents average $14.15 per square foot, including a rent
guarantee from the seller on the 6 percent of vacant space.. Over the next
five years 17 percent of the leases turnover with an aggregate rent of
$288,088 at expiration. Giant's lease expires in 2021.
o Circuit City bought a 9.7 acre site in Frederick, MD for its first store
in that area. It is located at Route 85 and Hermitage Drive. The price was
$1.5 million; the seller was Prime Note Collections, Inc. The planned
store is 33,000 square feet.
o RF&P sold 100 percent of its stock in the subsidiary owning the 345 acre
Potomac Yards site in Alexandria, Virginia, to LF Strategic Investors LP,
an investment fund led by Lazard Freres. The sale occurred in late 1996.
Plans for the site are now on hold until they reconsider what direction to
take the land.
o First Washington REIT bought six centers for $53 million, with financing
provided through $37 million in secondary stock offerings. The total size
of the six centers is 626,000 square feet, bringing First Washington to 40
centers and four million square feet. The centers are: Kings Park Shopping
Center in Burke, VA, Four Mile Fork in
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
Fredericksburg, VA, and Northway Shopping Center in Millersville, VA. The
others are in Philadelphia and Wilmington, DE.
o Rivertowne Commons in Oxon Hill, MD sold for $34.7M to H/P Cos. in
December 1996. The 385,000 square foot center was built eight years ago
and is anchored by Safeway, Kmart and a movie theater complex.
o First Washington Realty Trust purchased Clopper Mill Village Shopping
Center, a 134,000 square foot community center in Germantown, Maryland.
The center is anchored by a 74,000 square foot Shoppers Club. It also
acquired Centre Ridge Marketplace in Centreville, Virginia. The center is
under construction and will contain 106,000 square feet anchored by Super
Fresh, Sears Paint & Hardware and Hollywood Video. The total purchase
price was approximately $31 million, or $129 per square foot.
o LaSalle Advisors purchased the 297,000 square foot Festival at Riva Road
in Annapolis, Maryland, for a pension fund client. The price was not
immediately available. The center opened in 1989 and is anchored by Giant
Foods, TJ Maxx and MJ Designs, along with 65 other retailers. It was 92
percent occupied.
New Construction Activity
o Good Hope Marketplace, a 98,000 square foot new center at Alabama Avenue,
Naylor Road and Good Hope Road, in the District of Columbia, opened in
February 1997. This is the first new center to open in D.C. east of the
Anacostia River since World War II. The center will be anchored by a
57,000 square foot Safeway, which will close its older building across the
street. Other signed tenants include Radio Shack, Pizza Hut, Chevy Chase
Bank and Rent-a-Center, Blockbuster Video, and police substation. Safeway
is developing the project with two local development corporations, but
will sign a sale leaseback on the store for a 25 year lease.
o Lerner Enterpnses is trying to develop Dulles Town Center Regional Mall in
Sterling/countryside, Loudoun County, Virginia. It is to be located at the
southeast corner of Routes 7 and 28 and will contain 1.2 million square
feet. Dulles Town Center will also include office, townhouses and
industrial uses. Site plans, set backs, parking requirements, etc. have
not yet been approved.
o Len Forkas, President of Milestone development for South Charles Realty of
Baltimore, indicates the proposed Milestone Center project in Germantown,
Maryland near 1-270 and Route 27, will include 2,000 residential units,
1.0 million square feet of office and a 980,000 square foot shopping
center.
o Chelsea GCA Realty is developing the Loudoun Corner Premium Outlets in
Leesburg at the northeast corner of Route 7 and the Route 15 Bypass on the
east side of Leesburg. The site is 71 acres and will be phased with
225,000 SF in first phase for delivery in 1998. Total size is 475,000
square feet with 100 to 150 tenants.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
o H/P Cos is also hoping to develop a factory outlet center in Leesburg
(rezoning request has been turned down by Loudoun County Planning Board).
The original target was for 200,000 to 400,000 square feet of retail.
o West*Group has finally received approval for development of a 450,000
square foot shopping center at Cherry Hill Road and Route 29 in Calverton,
Montgomery County. The center will be anchored by a 130,000 square foot
Target, with BJ's Wholesale Club, Kohl's Department Store, and SuperFresh
also reported to be negotiating deals. The property is part of West Farm's
250 acre site located between Silver Spring and Columbia. The mixed use
project will also include 1.7M square feet of office and flex space, of
which 1.0M square feet has already been developed.
o Seven Corners Shopping Center in Falls Church has signed leases with Home
Depot and Shoppers Food Warehouse as new anchors. They will be located in
the section of the site formerly improved by the Woodward & Lothrop
department store and furniture store.
o Potomac Mills in Woodbridge, VA, plans a 250,000 square foot expansion in
1997, including restaurants, trendy shops, interactive retailers and
entertainment offerings. The new size would be 1.9 million square feet. No
retailers have been signed yet, though Dave & Busters, American Wilderness
Experience and Rainforest Cafe are obvious prospects.
o Washingtonian Center, Gaithersburg, has signed letters of intent with
Galyan's, Kohl's Department Stores, Barnes & Noble and Rio Grande
restaurant for its proposed expansion by 350,000 to 450,000 SF to the
existing 200,000 SF center. The existing stores include a 14-screen
theater, Sport & Health Club, Washington Golf, three restaurants and a
small food court. The project is being developed by H/P Cos and Circle
Management (Ted Pedas). One 90,000 square foot anchor space and several
small shops are still available.
o Columbia Mall in Columbia, Maryland, will be expanded to include a new
170,000 square foot Nordstrom's store. It will be on two levels and will
be added as part of a $70M expansion and renovation of the mall, which is
25 years old. The center will also be expanded by 50,000 SF of shop space
and an extra parking deck. Opening is targeted for 2000. The center
currently has 938,000 square feet and is anchored by J.C. Penney, Sears
and Hechts.
o H/P Cos. is finalizing its plans to develop a 193,000 SF shopping center
on 16 acres in Sterling, VA. A letter of intent has been signed with
Kohl's for 93,000 square feet. The project will include a 2-story office
building (40,000 square feet) Opening is targeted for November 1997.
o H/P Cos. is also building a Target store in Burke, Virginia, at Roberts,
New Guinea and Old Guinea Roads. They sold the 10.55 acre site to Target
for $4.19M, or $9.12 per square foot.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
o Potomac Yard Center broke ground in November 1996 for a 580,000 square
foot retail project. Signed tenants include: Computer City, Sports
Authority, Old Navy Clothing, Hallmark, HomePlace, Staples, PetsMart,
Shoppers Food Warehouse and Target, as well as a Hoyts Theatre. Annual
sales are projected to be in excess of $150 million.
o Eastover Shopping Center in Oxon Hill, MD is being renovated and expanded
by the Jenco Foundation. Originally built 52 years ago, the center will be
expanded to include a 60,000 square foot Giant Foods and Pharmacy store.
The site is 25 acres and includes over 250,000 square feet at Indian Head
Hwy and Southern Avenue. The renovation is being financed by a $6M Section
108 loan from PGC and a $600,000 grant from HUD. Giant Food originally
signed the lease in August 1995. Construction has commenced after
demolition of 25 percent of the center. Delivery is for August 1997. Other
new tenants: Chevy Chase Bank, Burger king, Pizza Hut, Subway Sandwiches,
Rainbow Stores, Simply Fashion, New York Fashions, Ashley Steward
Fashions, Lot Stores, The Furniture Place and Shoe City Shoes and Sports.
Tenant Contractions
o Papa John's Pizza has canceled plans for seven new District of Columbia
stores. It explained the change by describing D.C. as business unfriendly
and unpredictable
o Fresh Fields has closed its Gaithersburg Square store in Gaithersburg,
Maryland, after only 13 months in operation. Sales were very low. At the
same time a new store opened November 8, 1996, in Vienna, VA, at 142 Maple
Avenue under the name of Whole Foods Market. Whole Foods Markets bought
Rockville based Fresh Fields in the summer of 1996. Whole Foods also owns
and operates the Bread & Circus chain, which has opened two stores in the
DC area this year. All 12 existing stores will be renamed in 1997 to Whole
Foods Markets.
o Best Buy has reported a financial loss for the third quarter of 1996, the
first time in a decade. The electronics retailer, with 272 stores in 32
states, reported a third quarter loss of $11 million, or $0.25 per share
on sales of $2 billion. Some scaling back is expected in the face of stiff
competition from Circuit City.
o Bob's Stores announces it will be withdrawing from the Washington, D.C.
market.
o Best Products has liquidated all assets and closed all of its stores.
Tenant Expansions
Electronics:
o CompUSA opened its new 27,000 square foot store at 500 Perry Parkway in
Gaithersburg next to the Fairgrounds.
Grocery:
o Sutton Place Gourmet opened two new stores in Virginia: 21,000 square feet
in McLean and 24,000 square feet in Reston, both in November 1996. The
stores
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
continue to emphasize their produce departments. Food competition
continues strong from Fresh Fields and Bread & Circus. After up to six
months of declining sales when Bread & Circus opened near the New Mexico
Avenue store in the District of Columbia, same store sales comparisons are
positive again.
Department and Discount Stores:
o Kohl's Department store plans to open a total of 21 stores in the Spring
of 1997, including some in the DC/Baltimore/Phil area. Local openings will
include Dale City, Fredericksburg, Kingstowne, and Winchester Valley, VA;
Laurel, Bowie, Waldorf, Germantown, and Ellicott City, MD. They bought the
8.7 acre site in Dale City, Prince William County, Virginia for $3.42
million. It is located in the Rollingwood Center next to Home Depot.
o Value City Department Stores had such good success with its opening at
Iverson Mall in Hillcrest Heights, Prince George's County, Maryland, that
it is considering five more stores in Prince George's County. Store sizes
in the chain include 45,000 square feet for furniture, department stores
between 85,000 and 125,000 square feet, and combination stores at 160,000
to 180,000 square feet. The one at Iverson is a 160,000 square foot
combination store.
o Kmart is now leasing outparcels to restaurants and service oriented
retailers at its centers in an effort to boost revenues. This will impact
stores in Greenbelt, Laurel, Suitland, and Silver Spring, Maryland, and
Fairfax and Springfield, Virginia. Kmart says its intent is to help it get
through bankruptcy.
o Syms paid $5.75 million for the former Holladay Tyler printing plant site
at the northeast corner of Twin Brook Parkway and Chapman Ave in
Rockville, Maryland. Syms will be closing its store at Mid-Pike Plaza, two
miles to the south. The new site is zoned for up to 82,000 square feet.
o Sears plans to open a 151,400 square foot department store at 6211
Leesburg Pike, Falls Church, Virginia, the current site for Caldors and
formerly Lord & Taylor. This would be the first regional Sears opening
since 1990. Two Sears stores have been closed since 1992 as part of its
restructuring. The contract for the store was originally structured to
allow for an October opening, but Sears has since retreated from that
date, in part because Caldor has not officially stated it would close.
There is no signed contract. Caldor has been operating under Chapter 11
bankruptcy protection since September 1995. By comparison, J.C. Penney has
opened seven new stores in former Woodward & Lothrop locations throughout
the D.C. area.
o City Place Mall in Silver Spring, Maryland, reports 1996 sales up four
percent over 1995, with Nordstrom Rack and Marshalls leading the way.
Burlington Coat Factory is scheduled for a March 1 opening of a new 65,000
square foot store on the 5th and 6th levels of the mall. This will be
their ninth store in the area.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
Hardware / Home Improvements
Home Depot leased another five stores which are expected to be open by
year end. Hechingers continues to be lagging in its expansion plans. The
new stores total more than 600,000 square feet. Locations include:
o Springfield Commons, a 241,000 square foot proposed center across
from Springfield Mall, Springfield, Virginia, on a 20 acre site
being developed by Fried Cos. The Home Depot would contain 116,000
square feet plus a 16,000 square foot outdoor display area. This
store will compete directly with two older and smaller Hechingers
stores in Hybla Valley and Backlick Road.
o Others: Milestone Center in Germantown, and College Park, Maryland;
and possible locations in Waldorf and Frederick, Maryland, Falls
Church, Virginia (Seven Corners)
o Home Depot has 12 stores in Washington area, including one in
Annapolis, and six stores in Baltimore. By comparison, Hechingers
has 27 stores in Washington and 12 in Baltimore
o Sears has announced plans to open 20,000 to 25,000 square foot hardware
stores in strip center and free-standing locations nationwide. Two
locations have been announced for DC metropolitan area, including Herndon
and Centreville.
o Home Depot plans a store for Owings Mills, MD, on a 13 acre parcel at 9818
Reisterstown Road. Demolition of an existing 200,000 square foot building
is necessary with construction to begin by mid-year 1997.
Home Furnishings:
o Linens-n-Things will add 10,000 square feet at Mid-Pike Plaza, according
to Federal Realty.
o HomePlace intends to open eleven of its 53,000 square foot home and
kitchen stores in the D.C. area and another four in Baltimore. Centers
close to deals include Bowie Renaissance Center in Bowie, Maryland,
Milestone in Germantown, Maryland, Potomac Yard in Alexandria, Virginia,
and a planned shopping center in Manassas, Virginia. Their first entries
to the market were in Annapolis and Ellicott City, Maryland, in September
1996. The company is projecting annual sales in excess of $10M for each
store, or about $189 per square foot. Their product mix includes cookware,
linens, picture frames, glassware, ready-to-assemble furniture and other
kitchen, bathroom and bedroom items. HomePlace further crowds the local
home-furnishings market, now dominated by Bed, Bath & Beyond, Linens n'
Things, Crate & Barrel, and Williams Sonoma. Kitchen Bazaar liquidated all
16 of its stores earlier in 1996.
o The Kitchen Store opened five stores in seven weeks in late 1996 and has
signed three more leases for stores slated to open in 1997. All the stores
are in malls except for one at 4401 Connecticut Avenue, Washington, D.C.
Four of the stores are in former Kitchen Bazaar sites. Another is planned
for Fair Oaks Mall, Fairfax,
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
Virginia. Average sales so far at $250 per square foot, compared with
industry average of $185 per square foot.
o Reading China and More!, a kitchen and dining room retailer, plans to open
five 25,000 square foot stores in the DC area. Potomac Run in Loudoun and
Columbia Crossing in Columbia are the first two to sign. Other locations
being sought are in Alexandria, Rockville Pike and Gaithersburg. The chain
sells 20,000 brand-name products for the kitchen and dining room at 20 to
25 percent off list. Reading China currently has 19 stores in 11 states.
Restaurants:
o Dave & Busters opened in November 1996 at White Flint Mall. The 60,000
square foot store cost $10,000,000 to build and has seating for 200, a 40
foot Midway Bar and a 21 foot Viewpoint Bar. Sales are projected to be
over $250 per square foot according to retailer: 44 percent of sales from
amusement, 34 percent from food, 21 percent from beverage sales and 1
percent from merchandise. The mall is owned by Lerner Corp. and has been
hard hit by competition from Montgomery Mall since its renovation and
expansion with Nordstroms and Macys. New tenants at White Flint include
Borders Books, Discovery Zone and Cheesecake Factory.
o Based on the success of their first location at 1652 K Street, McCormick &
Schmick's Seafood Restaurant is planning to add three more locations,
possibly in Reston, Montgomery County and Baltimore, and maybe another in
D.C.
o D.C. is targeted for several new restaurant expansions. Smith & Wollensky
and Manhattan Ocean Club are both close to signing deals at the new 600
13th Street office building near Metro Center. John Harvard's Brew House
(170 seat restaurant and brewpub) is preparing to open its first store
further down 13th Street at the site of the closed Dock Street Brewing Co.
in March. Dock Street closed after less than four months in operation
because it was unable to adequately finance the restaurant.
o The East End of the District of Columbia is now a destination with the
construction of the MCI Arena. The success of Red Sage, Old Ebbitt Grill
and Sequoia have boosted the District's image for restaurants nationally.
o Also considering D.C. locations are: Country Star Restaurants, Official
All Star Cafe, Fashion Cafe, Motown Cafe, Eerie Entertainment (haunted
house), BB King Blues Club, Harley-Davidson Cafe, Club Kodomo, Dive!
(Speilberg). Morton's of Chicago has opened a new restaurant in the former
Duke Ziebert's at 1050 Connecticut Avenue.
o BET Holdings is opening its first BET SoundStage restaurant in Prince
George's County in January 1997 at 9460 Lottsford Road in Largo, Maryland.
The focus will be on video and entertainment. The restaurant is 365 seats
in 12,000 square feet. Other clubs are in the discussion phases in Las
Vegas and Orlando (Disney World).
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
Theatres:
o Two national movie chains are scouting DC area for sites. Hoyts Cinemas
(Australia) has signed a lease to build a 14-screen cinema in Bowie,
Maryland at Faison's project at Routes 50 and 197. The total center would
be 79,000 square feet of restaurant and entertainment uses. They were also
negotiating on a site at Potomac Yard for a 16-screen theater.
o Regal Cinemas (Knoxsville, TN) is opening in Sterling, Virginia. It also
plans to build a 13-screen theater at Rockville Town Center, Maryland, and
16-screens at Parole Town Center in Annapolis, Maryland. Both are targeted
to break ground in early 1997.
o AMC is currently working on five new sites in the D.C. area, including a
24-screen, 5,000 seat cinema at Milestone center in Germantown, Maryland.
It will be the largest movie theater on the East Coast. The theater letter
of intent is for the site on the east side of 1-270 at Father Hurley
Boulevard. It must be rezoned from office to mixed use. The 36 acre
project will also include an extended stay hotel and four restaurants.
o Both Landmark Mall and Ballston Commons are negotiating to add theatres.
Other Retailers:
o Hudson Trails Outfitters announces plans to open two or three new stores
in 1997, with sizes ranging between 15,000 and 20,000 square feet. The
chain expects to reach 20 stores over the next several years, an increase
of 10 stores. Current locations include Gaithersburg, Annapolis, Columbia,
Hunt Valley and Kensington, Maryland, Springfield, Virginia, and Tenley
Circle, in D.C.
o Pier 1 Imports took over the former Circuit City 8,960 square foot store
at Bailey's Crossroads Shopping Center, in Fairfax County, Virginia. This
space was vacated when Circuit City moved across the street to join Border
Books and Filene's Basement. Office Depot has opened in the center as
well.
o Ross Dress for Less opened a 28,630 square foot store at Briggs Chaney
Plaza in Prince George's County, Maryland, on March 8, 1997. This is their
14th store in the D.C. area and one of six planned to open in the Spring
of 1997. Combined Properties manages the center.
o The Book Market has targeted the Washington DC-Baltimore metro area for a
15-20 store opening. The stores are typically 20,000 square feet in size
with short term leases (15 to 30 weeks) in existing space that is waiting
for a permanent tenant. The stores do heavy discounting.
o 7-Eleven stores are reportedly expanding, and are looking for additional
locations in Maryland and Virginia, though none in the District of
Columbia.
o Gold's Gym opened a stand-alone, 18,000 square foot facility at 255 Muddy
Branch Road in Gaithersburg, in February 1997.
================================================================================
<PAGE>
Regional Market Analysis
================================================================================
o Great Clips haircutteries, with 13 stores in the D.C. metropolitan area,
is looking to add another 150 stores in the D.C./Baltimore region. No
specific sites have been signed as yet. Store sizes are typically between
800 and 1,200 square feet.
o Sneaker Stadium signed ten year lease for 19,516 square feet at former
Staples building at 8461 Leesburg Pike in Tyson's Corner. The chain is
looking for another 10 to 14 locations in the Baltimore/Washington market.
Conclusion
The regional retail market remains highly competitive. Major retailers are
constantly testing this market to determine if their format will work with local
shoppers. The region's strong growth patterns, generally stable employment, and
high levels of household income are perceived as a gold mine by many. The list
of expansions summarized above strongly demonstrates this interest.
While updated 1996 regional statistics are not available from any source,
our general observation of the market is that occupancy levels and rental rates
remain high. There has been a concern about over building for several years, but
this concern has not been translated into material reductions in new
development. Power centers, the newest format in the retail market, have been
developed in strong locations and older centers have been reinvented as power
centers. No new regional malls have been developed, though plans for one in
Sterling, Loudoun County, Virginia, are being more actively pursued. Finally,
new neighborhood centers are still being developed to support subdivision
growth.
================================================================================
<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
(#GA0OOI0267)
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 A. STUDABAKER, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #10241)
Certified General Real Estate Appraiser District of Columbia -
(#GA00010046)
Certified General Real Estate Appraiser Commonwealth of Virginia -
(#4001 001111)
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
<PAGE>
================================================================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Perimeter Pointe Center
Southeast Corner of Mount Vernon Highway
and Perimeter Center West Parkway
Atlanta, Fulton County, Georgia
================================================================================
IN A SUMMARY REPORT
As of July 3 1997
Prepared for:
Master Realty, Inc.
Managing Member of Community Centers II L.L.C.
1180 Avenue of the Americas
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Prepared By:
Cushman & Wakefield of Georgia, Inc.
3300 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
<PAGE>
Cushman & Wakefield of Georgia, Inc.
3300 One Atlantic Center [LOGO] CUSHMAN &
1201 West Peachtree Street WAKEFIELD(R)
Atlanta, GA 30309
(404) 875-1000
July 10, 1997
Mr. Brian Summers
Vice President
Master Realty, Inc.
Managing Member of Community Centers II L.L.C.
1180 Avenue of the Americas
New York, NY 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Re: Complete Appraisal of Real Property
Perimeter Pointe Center
Southeast Corner of Mount Vernon Highway
and Perimeter Center West Parkway
Atlanta, Fulton County, Georgia
Dear Sirs:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our Complete Appraisal
estimating the Market Value of the Leased Fee Estate in the above
referenced real property. For this assignment, we are providing an
estimate of the Market Value of the subject property. The results of our
analysis are being presented in this Summary Report.
The subject of this appraisal is a one-story, non-enclosed,
power/super-community shopping center that was built in 1995/1996. It
contains a total gross leasable area of 351,532 square feet and is
anchored by Michaels, Stein Mart, Home Place, Babies R Us, Goody's, United
Artist Theaters, etc. At the time of inspection, it was effectively 92.1
percent occupied based on signed and highly likely leases.
As specified in the Letter of Engagement, the value opinion reported
herein 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 (USPAP). The results are being conveyed
in a Summary Report according to our agreement. 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
<PAGE>
Mr. Brian Summers Page 2 July 10, 1997
Master Realty, Inc.
Mr. Thomas Burke
Lehman Brothers, Inc.
client and for the intended use stated below. The appraiser is not responsible
for unauthorized use of this report.
This report has been prepared for Master Realty, Inc. and Lehman Brothers, Inc..
("Clients") and it is intended only for the specified use of the Clients. It may
not be distributed to or relied upon by other persons or entities without the
written permission of the appraiser.
The property was inspected by Luten L. Teate, MAI. The report has been prepared
by Luten L. Teate, MAI.
As a result of our analysis, we have formed an opinion that the Market Value of
the Leased Fee Estate in the referenced property, and subject to the
assumptions, limiting conditions, certifications, and definitions, as of July 3
1997, the date of inspection, was:
FORTY SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
$47,500,000
This letter is invalid as an opinion of value if detached from the report, which
contains the text, exhibits, and an Addenda. Other relevant data has been
retained in our files.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF GEORGIA, INC.
/s/ Luten L. Teate
Luten L. Teate, MAI
Associate Director
Certified Real Estate Appraiser Georgia No. CG001389
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Perimeter Pointe
Property Type: Power/Super-Community Shopping Center
Location: Corner of Mount Vernon and Perimeter
Center West Parkway
Atlanta, Fulton County, Georgia
Interest Appraised: Leased Fee Estate
Date of Value: July 3,1997
Date of Inspection: July 3,1997
Ownership: Community Centers II L.L.C.
Land Area: 31.186 acres
Zoning: C-1 Commercial
Highest and Best Use
As Though Vacant: Retail use
As Improved: Continued use as a power/super-community
shopping center.
Improvements
Description: One-story, non-enclosed,
power/super-community shopping center
building of masonry construction that has a
total gross leasable area of 351,532 square
feet.
Year Built/Expanded: 1995/1996
Gross Building Area: N/A
=================================================
GLA Breakdown
-------------------------------------------------
Tenant Type GLA (sf) %
Anchors
Michaels 18,122 5.2%
Stein Mart 35,000 10.0%
Baby Superstore 36,900 10.5%
Homeplace 54,448 15.5%
Vacant 56,607 16.1%
Goody's 30,560 8.7%
St. Joseph Hospital 22,580 6.4%
Consign & Design 15,650 4.5%
United Artists Theatre 35,390 10.1%
Outparcel Buildings 15,000 4.3%
Shops 31,275 8.9%
-------
Total 351,532 100.0%
=================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
=================================
Income Capitalization Approach
Assumptions-Discounted Cash Flow
=================================
Current Occupancy: 92.1% effective based on signed and highly
likely leases
Forecasted Stabilized Occupancy: 92-94% of shops
Holding Period: 10 years
Growth Rate Assumptions
Sales Growth: 1.5% in 1997, 3.0%/year thereafter
Rent Growth: 1.5% in 1997, 3.0%/year thereafter
Expense Growth: 3.0%/year
Tax Growth: 3.0%/year
Tenant Alterations
New Tenants: $10.00/SF
Renewal Tenants: $2.00/SF
Leasing Commissions
New Tenants: 4.0%
Renewal Tenants: 2.0%
Tenant Renewal Probability: 80%
Cost of Sale at Reversion: 3.0%
Investment Rates
Going-In Capitalization Rate: 10.0%
Terminal Capitalization Rate: 10.0%
Discount Rate: 11.25%
=================================
Market Value Indicators
=================================
Cost Approach: N/A
Sales Comparison Approach: $47,500,000 to $51,000,000
Income Capitalization Approach
Discounted Cash Flow: $46,600,000
Direct Capitalization: $48,600,000
Value Conclusion: $47,500,000
Resulting Indicators
Value Per Sq/Ft Owned GLA: $135.12
Net Operating Income (FY 1999): $4,856,030 (Year 2)
Implicit Capitalization Rate: 10.2%
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Exposure Time Implicit in
Market Value Conclusion: Not to Exceed 12 Months
Special Assumptions Affecting Valuation:
The following special assumptions have been considered within the
assignment at hand. These assumptions are in addition to the assumptions and
limiting conditions which follow at the end of the report.
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll, budgets, sales
reports and other property specific information. We were also
provided with a Pro-Ject diskette for the property which ownership
has portrayed as containing the actual lease terms. It is noted that
we audited actual lease documents for several of the major tenants
during the course of our initial Complete Appraisal in November,
1995. Based upon the current information provided, minor
discrepancies were noted which we have reconciled to our
satisfaction.
2. We have made a visual inspection of the subject property and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. Our cash flow analysis and valuation has recognized that all signed
leases and pending leases with a high probability of coming to
fruition are signed and implemented according to the terms provided.
Such leases are identified within the body of this report.
4. The forecasts of income, expenses, and absorption of vacant space
included herein 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.
5. We did not measure the improvements but relied on the GLA shown in
the rent roll provided by management. The tenant GLAs , shown in the
rent roll, were cross-checked against selected leases/lease briefs.
6. We inspected a representative sample of the retail spaces and we
believe that the spaces we inspected are representative of all of
the space as to overall quality and condition except where otherwise
noted.
7. We did not observe any hazardous materials during our inspection.
The appraiser has no knowledge of the existence of such materials on
or in the property. The appraiser, however, is not qualified to
detect such substances. The presence of substances such as asbestos,
urea-formaldehyde foam insulation, or other potentially hazardous
materials may have an affect on the value of the property. The value
estimate is predicated on the assumption that there is no such
materials on or in the property that would cause a loss in value. No
responsibility is assumed for any such conditions, or for any
expertise or engineering knowledge required to discover them. The
client is urged to retain an expert in this field to make this
determination.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
8. We did not inspect the roof of the building or make a detailed
inspection of the mechanical systems. The appraisers are not
qualified to warrant the adequacy or mechanical condition of these
components. The client is urged to retain an expert in this field.
9. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
Special Risk Factors
1. The highly likely leases will not be signed when or at the terms
reported to us by management.
Positive Factors
1. Well known anchor tenants
2. Excellent location at the intersection of two heavily traveled local
service roads
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
United Artists and Smaller Stores
[GRAPHIC OMITTED]
Goody's, Home Place and Larger Vacant Stores #600 and 800
================================================================================
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Free Standing Max & Erma's Restaurant on Outparcel
[GRAPHIC OMITTED]
Free Standing Bertucci's Restaurant on Outparcel
================================================================================
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Free Standing Chick-Fil-A on Outparcel
[GRAPHIC OMITTED]
Michaels and Stein Mart
================================================================================
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Stein Mart and Babies R Us
[GRAPHIC OMITTED]
Loading Area
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
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
DEMOGRAPHIC AND ECONOMIC ANALYSIS .......................................... 7
MARKET ANALYSIS ............................................................ 14
PROPERTY DESCRIPTION ....................................................... 22
Site Description ........................................................ 22
Improvement Description ................................................. 22
Property Taxes & Assessments ............................................ 22
Zoning .................................................................. 23
HIGHEST AND BEST USE ....................................................... 24
Highest and Best Use of Site As Though Vacant ........................... 24
Highest and Best Use of Property As Improved ............................ 24
VALUATION PROCESS .......................................................... 25
SALES COMPARISON APPROACH .................................................. 26
INCOME CAPITALIZATION APPROACH ............................................. 31
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 47
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 50
CERTIFICATION OF APPRAISAL ................................................. 52
ADDENDA .................................................................... 53
Legal Description
Rent Roll & Summary of Recent Leases
National Database of Sales
ULI Database of Operating Results for Power Centers
Lease Expiration Chart - Pro-Ject
Competitive Property Photographs
Local Sale Comparables
Appraiser Qualifications
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is a one-story, non-enclosed,
power/super-community shopping center that was built in 1995 and 1996. It
contains a total gross leasable area of 351,532 square feet and is anchored by
Michaels, Stein Mart, Home Place, Babies R Us, Goody's, United Artist Theaters,
etc. The property is identified by the Fulton County Tax Assessor's office as
Parcel Numbers 17-0019-LL-118, 119,120 and 121..
The subject site is 31.186 acres . The legal description is in the
Addenda. The site is improved with the shopping center structures and paved
parking/truck loading areas. It has good access and exposure.
Property Ownership and Recent History
The subject property is currently owned by Community Centers II L.L.C. It
was purchased in 1996 as part of a portfolio and we are told that individual
prices were not allocated.
The leases and operating agreements that are in place encumber the
operation of the property.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the Market Value of the
Leased Fee Estate in the subject property as it existed on the date of
inspection. The function of this appraisal is for a securitized financing
transaction being arranged by Lehman Brothers, Inc..
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the subject property, a sampling of the anchor stores and
smaller shops, and its surrounding environs;
o Interviewed representatives of current ownership, leasing personnel,
and representatives of the management company;
o Reviewed leasing policy, concessions, tenant build-out allowances,
and recently negotiated rental rates, as well as forecasted
operating statements;
o Conducted market research of occupancy rates, asking rents,
concessions, and operating expenses at competing properties;
o Conducted market inquiries into recent sales of similar retail
centers to ascertain sale prices per square foot, effective gross
income multipliers, and capitalization rates;
o Determined a trade area for the subject and analyzed specific data
for the property as prepared by Equifax National Decision Systems
(ENDS);
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WAKEFIELD(R)
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<PAGE>
Introduction
================================================================================
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based upon available market data and
current market thinking relative to growth in market rents and
market absorption:
o Developed a market value estimate of the center via the Sales
Comparison Approach;
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes;
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject PIus+ software for the purpose of discounting a forecasted
net income stream into a present value of the leased fee estate for
the center;
o Reconciled the value indications and concluded a final value
estimate; and
o Prepared a Complete Appraisal of the subject property with the
results conveyed in this summary narrative report in accordance with
Standards Rule 2-2(b) of USPAP. A summary appraisal format provides
a summary of the data, analyses, and conclusions rather than
presenting a self-contained narrative within the report. Other
pertinent data and information is retained in our files.
Date of Value and Property Inspection
Our Market Value date is July 3,1997. On that date, Luten L. Teate, MAI,
inspected the property and its environs.
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
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Introduction
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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 our findings, we conclude that an appropriate exposure time for
this property would by 12 months or less.
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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
We have been provided with a complete metes and bounds legal description
of the property. It is in the Addenda.
Competency Provision
We are aware of the competency provision of the Uniform Standards of
Professional Appraisal Practice (USPAP). The authors of this report meet these
standards. Luten L. Teate, MAI inspected the property, researched and analyzed
pertinent market information, wrote, and
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Introduction
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reviewed the appraisal report. Luten L. Teate, MAI have extensive appraisal
experience with retail properties nationally.
It is our opinion that we are fully competent to perform this appraisal,
due to the fact that:
1. We have full knowledge and experience in the nature of this
assignment;
2. All necessary and appropriate steps have been taken in order to
complete the assignment competently; and
3. We do not lack any knowledge or experience that would prohibit this
assignment to be completed in a professional, competent manner, or
where a biased or misleading opinion of value would be rendered.
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[GRAPHIC OMITTED]
Map of Metropolitan Atlanta Area
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ATLANTA REGION
DEMOGRAPHIC STATISTICS COMPARISON
- --------------------------------------------------------------------------------
Atlanta State of
MSA Georgia United States
- --------------------------------------------------------------------------------
Population
1980 2,233,325 5,463,106 226,545,792
1990 2,959,950 6,478,216 248,709,872
1996 (EST.) 3,503,622 7,350,305 265,037,504
2001 (PROJ.) 3,941,898 8,045,044 277,157,184
- --------------------------------------------------------------------------------
Compound Annual Change
1980-1990 2.86% 1.72% 0.94%
1980-1996 2.85% 1.87% 0.99%
1996-2001 2.39% 1.82% 0.90%
- --------------------------------------------------------------------------------
Households
1980 789,577 1,871,652 80,389,688
1990 1,102,578 2,366,615 91,947,408
1996 (EST.) 1,349,992 2,776,699 100,130,936
2001 (PROJ.) 1,538,245 3,080,155 105,243,728
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Compound Annual Change
1980-1990 3.40% 2.37% 1.35%
1980-1996 3.41% 2.50% 1.38%
1996-2000 2.65% 2.10% 1.00%
- --------------------------------------------------------------------------------
Average Household Size
1980 2.83 2.92 2.82
1990 2.68 2.74 2.70
1996 (EST.) 2.56 2.61 2.63
- --------------------------------------------------------------------------------
Average Household Income
1990 $44,400 $36,810 $38,453
1996 (EST.) $58,973 $47,776 $49,031
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Compound Annual Change 4.84% 4.44% 4.13%
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1996 Income Distribution Est.
less than $5,000 3.9% 6.1% 4.7%
$5,000-$15,000 9.6% 14.7% 15.1%
$15,000-$24,999 12.3% 15.3% 14.8%
$25,000-$34,999 12.5% 14.2% 13.8%
$35,000-$49,999 17.2% 16.7% 16.9%
$50,000-$74,999 22.0% 17.7% 18.5%
$75,000-$99,999 9.7% 6.6% 7.2%
$100,000-$149,999 6.8% 4.5% 5.0%
greater than $150,000 6.1% 4.1% 4.0%
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Other Indices
Professional/Managerial Occupation 28.8% 24.6% 26.4%
Education Above High School Level 51.8% 41.3% 45.2%
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SOURCE: Equifax National Decision Systems
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DEMOGRAPHIC AND ECONOMIC ANALYSIS
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REGIONAL ANALYSIS
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. The chart on the previous
page presents an overview of demographic and economic trends within the
subject's region as prepared by Equifax National Data Systems (ENDS).
Definition of the Region
o The Atlanta Region consists of 18 counties. The subject is in Fulton
County. Reference is made to the previous regional map.
o Atlanta is the largest incorporated area in the Atlanta Region. The city
limits of Atlanta is located mostly within Fulton County, but there is a
small section extending into neighboring DeKalb County.
o The subject is not in the Atlanta city limits.
Overview of the Atlanta Region
o Atlanta is a major financial and corporate center for the entire
southeastern United States. Its relatively low cost of living, mild
climate, excellent transportation facilities, and a variety of educational
and recreational facilities have contributed to its attractiveness as a
place to live.
o The metropolitan area has been successful at attracting corporate
relocations to the area. It also continues to be the city of choice for
many start-up companies in a variety of service and manufacturing
industries.
o Atlanta was the site of the 1994 Super Bowl and the 1996 Summer Olympic
Games.
Overview of Atlanta Real Estate Market
During the first half of the current decade, the primary objective of many
players in the Atlanta commercial real estate market was survival as the metro
area struggled through the effects of the national recession which also effected
most major markets throughout the United States. The survivors now appear to be
enjoying an Atlanta marketplace that has strongly recovered. The primary sectors
of the commercial real market: office, industrial, apartments, and retail all
experienced an oversupply during the 1980s. However, during the first part of
the decade, demand exceeded additions to supply and, as a result, both
occupancies and rents have increased. Now, available, quality space is difficult
to find.
A number of factors have contributed to the Atlanta commercial real estate
market's resurgence:
o The recovery of the nation's economy.
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Demographic and Economic Analysis
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o Activity generated by the 1996 Olympic Games.
o The mature and well-developed metropolitan transportation infrastructure
which includes:
o The strategic location at the junction of three interstate highways.
o Hartsfield International Airport which is one of the nation's busiest and
has recently completed a $305 million concourse to service international
air traffic.
o The Metropolitan Atlanta Rapid Transit Authority (MARTA) rail system which
was established in 1988 and now connects the downtown business area and
the airport to suburban office and residential locations. Reference is
made to the previous regional map which shows the MARTA lines.
o Diverse job base anchored by services, retail trade, government and
manufacturing employment.
The above factors are market fundamentals that do not completely insulate
the Atlanta area from periodic slumps in the national economy but generally
serve to mitigate their effects. Atlanta's employment diversification has also
proved to be attractive to many real estate investors. A number of recent
surveys have chosen Atlanta as one of the more popular business and residential
locations in the United States.
Population
o During the early to mid-1970s, the City of Atlanta experienced substantial
out-migration of population to the suburban areas, creating dramatic new
suburban residential and commercial retail development. The primary
directions of growth were northwest and northeast into the suburban
counties of Cobb, Gwinnett and DeKalb.
o While the population of the metropolitan area was increasing rapidly, the
City of Atlanta actually showed a 14.0 percent population decrease during
the decade of the 1970s.
o Since 1980, the city's population has stabilized and may have even
increased slightly. The suburban development trend has continued with many
outlying areas now offering their own infrastructures.
o The previous chart is based on demographic statistics and estimates
prepared by Equifax National Decision Systems (ENDS). It shows that the
population of the MSA has grown at a more rapid pace than either the state
or nation as a whole since 1980, and this trend is expected to continue
for the next 3-5 years.
Households
o Growth in households is important to both office and retail properties. It
has been found to be more important to a retail property than growth in
population because households have been found to be the primary demand
generators for retail goods. Growth in population may not always represent
growth in the number of people in the age bracket that typically purchases
retail goods. However, growth in households usually does.
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Demographic and Economic Analysis
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o The previous chart shows the MSA also experienced more rapid household
growth than either the state or nation as a whole since 1980 and this
trend is expected to continue for the near-term.
o The property being appraised is in one of the area of above average
forecasted household growth for the next 5-years.
Economic Base and General Conditions
The composition of Atlanta's labor force is diverse and not dominated by
manufacturing or any one industry group. The trade and services sectors of the
economy employ about 55% of the work force in the metropolitan area. A summary
of Atlanta's employment characteristics is below:
o The labor force has grown by about 16 percent, in aggregate, since 1990.
o The May, 1997 unemployment rate for the SMSA was about 3.4 percent which
is lower than the 4.1 percent for the state. These are the latest figures
as of this writing.
o The unemployment rate for the Atlanta area has consistently been lower
than experienced by the state as a whole since 1990.
o Job growth during the latter part of the 1980s exhibited a declining trend
and was negative in 1991. However, since 1991, this trend has reversed. In
1993 through 1995, job growth was estimated at 85,300, 96,800, and 77,900
respectively. The Georgia State University Economic Forecasting Center
(EFC) estimated that the Atlanta region's economy created slower but still
impressive levels of job growth in 1996 of about 76,000. The EFC warns
that future job growth at these high levels probably can not be sustained
and forecasts only about 35,000 new jobs for 1997.
Directions of Growth
The primary directions of growth for the Atlanta area are generally
considered to be in the I-75 and I-85 corridors both north and south of I-285.
Reference is made to the previous map.
The subject property is situated in one of the primary directions of
growth for the metropolitan area.
Conclusion
Atlanta has seen a resurgence in job growth, approaching the experience of
the mid-1980s. The economy is drive by job growth which is generated by the
airport, transportation infrastructure, and the desirable business climate.
This, along with other factors, has translated into a healthy demand for
industrial, retail and office space. The overall improvement of the Atlanta
economy, together with the 1996 Olympic Games, have led to improvements in all
segments of demand.
Some recent positive and negative factors impacting Atlanta's economy are:
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Demographic and Economic Analysis
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Positives
o The 1996 Summer Olympic Games were the largest in history, attracting
about 10,000 athletes and sold about 9 million tickets. The Olympics were
completed with a slight profit, a portion of which will be used to
construct a permanent museum at Centennial Olympic Park.
o A $213 million sports arena has been approved on the site of the Omni
Coliseum by the Fulton County Commission and the Atlanta City Commission
so the Atlanta Hawks professional basketball team will stay in the
downtown area.
o First Data Corporation (FDC), a Fortune 500 firm, is in the process of a
staged relocation of its corporate headquarters from New Jersey to
Atlanta. About 10% of FDC's 37,000 employees now work in the metro area.
o Lockheed Martin won a $700+/- million contract from the Australian Air
Force to build 12 C-130 transport planes.
o General Motors started producing vans at its Doraville assembly plant in
June 1996, after spending two years retooling the plant. Employment at the
plant has now grown to about 3,300 jobs.
o Local companies like SunTrust Bank , Delta Airlines, and Norfolk Southern
have recently announced significant hiring plans.
Negatives
o Metro Atlanta failed air quality standards set by the Clean Air Act which
has led to Federal restrictions and potential loss of road building funds.
o Lockheed Martin announced plans to lay off up to 1,500 workers in late
1996 due to delays in congressional funding for the F-22 Stealth fighter.
NEIGHBORHOOD ANALYSIS
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, or a mixture
of commercial and residential properties, is called a neighborhood.
Location
o The property being appraised is in unincorporated Fulton County and about
12.5 miles north of downtown Atlanta, Georgia. Reference is made to the
previous maps for the location of this property relative to the region.
o The boundaries of the neighborhood are not precise but are considered to
be about one mile radius of this property which is at the intersection of
two of the major traffic/commercial arteries in Fulton County:
1. Mount Vernon Highway
2. Perimeter Center West Parkway
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Demographic and Economic Analysis
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Access-Traffic Counts
o The property is located at the intersection of the above two referenced
streets. The Georgia Department of Transportation shows the following
1996, bi-directional traffic counts for the reporting stations that are
closest to the subject as:
================================================================================
Summary of 1996 Traffic Counts Near Perimeter Pointe
================================================================================
On Mt. Vernon Highway Between Glenridge Drive 10,938
and Fulton/DeKalb County Line
On Abernathy Road Between Ga. 400 48,826
and Mt. Vernon Highway
Source: Georgia Department of Transportation
================================================================================
o We checked the 1996 traffic counts at other reporting stations in the
general area. We found that the counts near this center are some of higher
ones in the area but not the highest. A higher count (63,000+/-) was found
at Ashford Dunwoody Road just north of I-285. However, this is expected
since this reporting station is very near Perimeter Mall which is the
commercial hub of the area.
Access-Other
o Our inspection of the area suggests that this neighborhood has excellent
access. Both frontage roads are heavily traveled traffic arteries.
Perimeter Center West Parkway changes names after crossing Mount Vernon
Highway and is known as Abernathy Road. It intersects Georgia Highway 400
about .5 mile northwest of this center. Georgia 400 is a major, limited
access commuter route for many of the residents living in the affluent
suburbs of the northern metro area.
o The MARTA Sandy Springs rail system is under construction near this
property and is scheduled to open in 1999-2000. While the construction in
the area is currently causing congestion, experience has shown that it
will improve access to the area.
o We are not aware of any planned road improvements such as widenings or
relocations that would impact access to the neighborhood.
Neighborhood Characteristics
o General Overview: The neighborhood can best be described as one of
Atlanta's largest and strongest office/hotel/retail submarkets. Over the
past 15 years, the rural portions of North Fulton and neighboring counties
have become popular bedroom community areas because of their proximity to
Interstate 285 and Georgia 400 which provide access to the employment
centers along both arteries. Retail and other types of commercial
development followed the in-migration of households to the area.
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Demographic and Economic Analysis
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o The neighborhood now has a mixture of commercial and residential land
uses. The more significant commercial uses are concentrated along the
area's major arteries in a dense pattern.
o The other streets in the neighborhood are predominantly residential in
nature. The homes appear to be occupied by middle to upper income
residents. The subdivisions in the area range in age from new to 20+/-
years old.
o In Relation to metro area Growth Pattern -- As mentioned in the Regional
Analysis, there are several recognized directions of growth for the metro
area. Most are northward especially along the I-75 Georgia 400 and I-85
corridors. The neighborhood being examined is in one of those corridors.
While residential sectors of this neighborhood are, for the most part,
already developed and stable, there are still pockets of developing single
and multi-family development scattered throughout the area. The area is
experiencing growth in both its retail and office sectors. The center
being appraised is well located, and easily accessible from most parts of
the surrounding area and positioned well to benefit from the growth.
o Age and History of the Area -- Most improvements in the neighborhood, both
commercial and retail, appear to be 0 to 10 years old. Residential areas
are generally older at 10 to 25 years.
o Percent Built-Up -- Land within the neighborhood appears to be about 70
percent built-up, overall.
o Major Area Influences -- Perimeter Mall and a number of multi-building,
mid-rise office complexes are the most prominent commercial improvements
in the neighborhood. The stores at the Mall and, the many other retail and
office developments in the area are the employment generators in the
neighborhood.
Nearby and Adjacent Uses
o North -- Mount Vernon Place, a 412 unit, new, multi-family, luxury
apartment complex on Mount Vernon Highway and the Northpark Town Center
office development on Abernathy Road. A fourth tower of the office park is
under construction.
o South -- There is an Embassy Suites Hotel and the two building Crown
Pointe office complex along Crown Pointe Parkway. Across Perimeter Center
West Parkway from the subject are two recently developed power centers
known as Perimeter Square East and West. They are at the southeast and
southwest comers of the intersection of Perimeter Center West Parkway and
Central Parkway.
The Sandy Springs MARTA station is under construction adjacent to the
subject, on the south. This MARTA station will be underground at this
point of the rail line.
o East -- Single-family residences on Mount Vernon Highway and the local
service streets that are developed off of it.
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Demographic and Economic Analysis
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o West -- A mid-rise office building known as 1100 Perimeter Center West is
across Perimeter Center West Parkway from the subject.
Population, Housing, Income and Employment
o This type of data is not available with any degree of accuracy in a
neighborhood level. However, in a later section of the report, we discuss
these and other items for the trade area that we selected for this
shopping center. Although the trade area is somewhat larger than the
neighborhood, they are similar in most respects. That discussion is,
therefore, pertinent for the neighborhood as well.
Special Hazards or Adverse Influences
o We are not aware of any existing or planned detrimental influences such as
land fills, noise pollution, air pollution, etc., that adversely impact
this property.
Planned Improvements/Demolition
o We are not aware of planned improvements or demolitions of commercial
properties within the neighborhood that might alter this property's
competitive position.
Conclusion
o The neighborhood appears stable and its commercial sectors are developing.
Proximity to Georgia 400 and I-285 give above average access to the
neighborhood which has encouraged development of the neighborhood's
commercial/retail sites. The outlook for the near-term appears good.
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MARKET ANALYSIS
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Market Trends
The following chart summarizes the historical trends of the Atlanta retail
market. It shows a total inventory of about 101,500,000 square feet, a current
vacancy rate that is considered low at about 7.6 percent, and a declining trend
in that rate.
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The Atlanta Retail Market Historical Trends
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Vacancy Occupancy
Year Existing ----------------------------------- Net
Ending Sq. Ft. SF % SF % Absorption
================================================================================
1991 74,502,769 9,770,984 13.1% 64,731,785 86.9% 321,623
1992 85,686,916 9,185,490 12.1% 66,501,426 87.9% 1,769,635
1993 83,637,634 8,891,522 10.6% 74,746,112 89.4% 4,534,837
1994 85,576,400 7,809,559 9.1% 77,766,841 91.9% 3,267,416
1995 95,740,964 7,604,760 7.9% 88,136,204 92.1% 7,187,068
1996 98,796,972 7,593,671 7.7% 91,203,301 92.3% 4,767,090
2nd Qtr. 1997 101,465,267 7,744,083 7.6% 93,721,184 92.4% 948,823
Source: Jamison Research, Inc.
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The following chart shows recent trends and the current status of the
portion of the retail market that includes non-mall properties with a regional
draw. The subject falls into this category. In this segment of the market,
vacancy is also quite low at about 6.4 percent.
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Atlanta's Regional Center Trends
(Non Malls)
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Period Vacancy
Ending Existing SF Vacant SF Rate Absorption
================================================================================
1993 6,939,550 616,763 8.9% 838,830
1994 7,828,429 674,228 8.6% 409,000
1995 10,984,841 999,688 9.1% 218,150
1996 12,016,738 740,915 6.2% 1,828,685
2nd Qtr. 1997 12,002,275 768,665 6.4% -27,750
Source: Jamison Research, Inc.
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Market Analysis
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The following chart focuses on the current status of the Central Perimeter
submarket and the regional (non-mall) portion of that submarket. They show
similar strength.
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Submarket Statistics as of Second Quarter, 1997
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Vacancy Absorption
Inventory Vacant SF Rate Sq. Ft.
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Central Perimeter Submarket
6,088,929 371,713 6.1% 163,648
Central Perimeter Regional Centers
1,019,837 72,200 7.1% 39,750
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Source: Jamison Research, Inc.
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Property Profile
The subject property is anchored by a number of national retail tenants,
all of which are unique to the trade area. Provided below is a summary of the
major tenants that are in place. Combined, they account for in excess of 70.7
percent of GLA..
=================================
Anchor Tenants % of GLA
=================================
Michael's 5.1%
---------------------------------
Stein Mart 9.9%
---------------------------------
Baby Superstore 10.5%
---------------------------------
Home Place 15.5%
---------------------------------
Goody's 8.7%
---------------------------------
St. Joseph Hospital 6.4%
---------------------------------
Consign & Design 4.6%
---------------------------------
United Artists Theaters 10.1%
---------------------------------
Retail Structure
Retail in the Perimeter Pointe area consists of:
o A regional mall
o A number of power or super-community centers
o Numerous free standing retail buildings.
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Market Analysis
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The subject is in an intensely developed retail area in the northern
suburbs of metropolitan Atlanta. The focus or hub of destination shopping for
this area is the Perimeter Mall. Developed in 1971 and expanded several times
since, Perimeter Mall is a regional center with a total GLA of about 1,300,000
square feet. Anchor tenants include Rich's Macy's and J.C. Penney. Nordstrom is
under construction and should be open by year end. There is substantial
peripheral development around the mall including free-standing restaurants,
hotels, strip center, and "big box" stores, all of whose occupants are well
known national franchise retailers. Some of these include:
o Home Depot
o Linens N' Things
o Best Buys
o Marshalls
The chart on the following page summarizes details about the area's most
significant retail properties. They include Perimeter Mall and four power
centers. All are within a one-mile radius of the subject. The chart shows that
most of these properties were constructed within the last five years and they,
in aggregate, contain a total GLA of about 2,105,000 square feet. Overall
occupancy in these centers is approximately 98 percent which shows that demand
and supply in this retail area are well matched.
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Market Analysis
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<TABLE>
<CAPTION>
============================================================================================================================
Competitive Shopping Centers
============================================================================================================================
Year Total Occupied Total Shop Shop
Property Location Built GLA (SF) SF Occupanc GLA (SF) Occupanc
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Perimeter Mall Ashford Dunwoody Rd 1971/91/97 1,445,150 1,416,247 98.0% 454,400 54.0%
at Hammond Dr.
2 Perimeter Expo Ashford Dunwoody Road 1993 288,037 282,037 97.9% 41,037 85.4%
at Hammond Dr.
3 Perimeter Square East Perimeter Center West Parkway 1994 190,616 190,616 100.0% 5,500 100.0%
at Central Parkway
4 Perimeter Square West Perimeter Center West Parkway 1995 98,000 98,000 100.0% 21,339 100.0%
at Central Parkway
5 Perimeter Station Perimeter Center Parkway 1996/97 83,000 83,000 100.0% 0
at Perimeter Center Parkway
====================== =======
TOTALS 2,104,803 2,069,900 522,276
Weighted Average 98.3% 93.6%
SUBJECT 1995/96 351,532 323,925 92.1% 31,275 96.8%
============================================================================================================================
SURVEY TOTALS 2,456,335 2,393,825 97.5% 553,551 93.8%
============================================================================================================================
</TABLE>
Distance
From
Property Subject Anchors
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1 Perimeter Mall 0.75 Miles Macy's
Rich's
J.C. Penney
Nordstrom
(Under Const.)
2 Perimeter Expo 0.75 Miles Home Depot
Best Buys
Marshalls
Linen N Things
Office Max
3 Perimeter Square East 0.1 Miles Computer City
Bed, Bath & Beyond
TJ Maxx
Petsmart
Haverty's (8/96)
4 Perimeter Square West 0.1 Miles REI
Circuit City
5 Perimeter Station 0.7 Miles Barnes & Noble
Container Store
Mikasa
Restoration Hardware
Canyon Cafe
TOTALS
Weighted Average
SUBJECT Michaels
Stein Mart
Baby Superstores
Homeplace
United Artist Theatre
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SURVEY TOTALS
====================================================================
We conclude that the subject is not the dominant retail center in its
trade area but one of a number of relatively new, well anchored, well occupied,
and well located properties.
New/Proposed Development
To the best of our knowledge, there are no other proposed properties in
the area which would compete directly with the subject.
Conclusions
The following summarizes our property specific conclusions based on our
market research and experience.
Rental Rates
We find that base rental rates in the areas shopping centers are
considered above average for Atlanta area community centers. Our
discussions with the leasing agents for the subject property and its
competitors told us that spaces are leased in
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Market Analysis
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the range of $15 to $30 per square foot depending on center space size,
location in the center, lease term and retrofit allowance.
o The subject property's rates generally are toward the upper end of the
range because it is a newer upscale center. Most tenants also pay
reimbursable charges, and often do have periodic steps in the rental rate.
o We considered recent rates at the subject, its competition, and our
database of recent leases at other southeastern power/community centers
and we concluded market rates for the shop spaces at subject of:
-------------------------------------
Shop Spaces 1,000 SF or < $29.00
-------------------------------------
Shop Spaces of 1,001-2,000 SF $28.00
-------------------------------------
Shop Spaces over 2,001-5,000 $27.00
-------------------------------------
Spaces >5,001 SF $18.00
-------------------------------------
o The above rates are averages over the lease term so we did not
include rent steps in future leases for our cash flow model.
o We did not estimate market rent for anchor spaces because most have
leases that expense beyond the analysis period.
Expense Rates
Operating expense rates at the subject in 1996 were about $1.78 per square
foot. and management expects these costs to increase to about $2.84/SF in
1997. We were unable to obtain expense rates for the most competitive
properties. We based our estimates of future expenses for the subject on
the limited history and ownership's budget that were provided. We also
considered the operating results database of power and super community
centers that is published in Dollars & Cents of Shopping Centers. This
database is summarized in the Addenda.
Concessions/Workletter
Our interviews of the leasing agents for the subject and its primary
competitors showed that retrofit allowances are sometimes but not always
given and that spaces are taken in "broom clean" condition. The agents
told us that from time to time, concessions are given in the form of free
rent. This is usually limited to new tenants and is minimal. We considered
this in our analysis. We realize that there are occasionally situations
where sought after tenants will be given some retrofit allowance as an
inducement. This cost is not reimbursable to other tenants as CAM. We have
allowed for this possibility in our cash flow analysis.
Trade Area Analysis
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
traffic arteries provides the basis for local but not regional access. Second,
competitive properties and geographic boundaries help
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Market Analysis
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to define the potential size of the trade area as a measure of distance from the
property. Third, the merchandising mix and anchor alignment provide the basic
draw of customers that are likely to patronize the property.
The location and accessibility of competing centers has direct bearing on
the formation and make-up of the subject's potential trade area. The subject
competes most directly with several power/super community centers that are
within a one mile radius.
To summarize, the foundation of our analysis in the delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers which compete with the
subject and the strength and composition of the retail in-fill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Given all of the above, we believe that a primary trade area for the
subject property would likely span an area encompassing about three miles around
the center. The subject's secondary trade area might span up to five miles from
the site. Based on these observations, we have analyzed a demographic profile
for the subject based upon a radius of approximately 5+/- miles from the
property. To add perspective to this analysis, we have segregated our survey
into three and five mile concentric circles for a comparison to the Atlanta MSA
and State. The following chart presents this data as prepared by Equifax
National Decision Systems.
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Market Analysis
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<TABLE>
<CAPTION>
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Perimeter Pointe Center Demograpic Statistics Comparison
====================================================================================================
Trade Area
=========================
3-Mile 5-Mile Atlanta State of
Radius Radius MSA Georgia
====================================================================================================
Population
<S> <C> <C> <C> <C>
1980 53,814 123,550 2,233,325 5,463,106
1990 62,398 153,400 2,959,950 6,478,216
1996 74,260 184,311 3,503,622 7,350,305
2001 85,089 209,053 3,941,898 8,045,044
Compound Annual Change
1980-1990 1.5% 2.2% 2.9% 1.7%
1980-1996 2.0% 2.5% 2.9% 1.9%
1996-2001 2.8% 2.6% 2.4% 1.8%
- ----------------------------------------------------------------------------------------------------
Households
1980 19,119 45,054 789,577 1,871,652
1990 27,260 64,245 1,102,578 2,366,615
1996 35,117 81,644 1,349,992 2,776,699
2001 41,676 95,814 1,538,245 3,080,155
Compound Annual Change
1980-1990 3.6% 3.6% 3.4% 2.4%
1980-1996 3.9% 3.8% 3.4% 2.5%
1996-2001 3.5% 3.3% 2.6% 2.1%
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Average Household Income
1990 $67,635 $70,104 $44,400 $36,810
1997 $98,585 $104,143 $58,973 $47,776
2001 $124,770 $131,638 $79,928 $63,576
Compound Annual Change
1990-1996 6.5% 6.8% 4.8% 4.4%
1996-2001 4.8% 4.8% 6.3% 5.9%
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1996 Income Distribution (Est)
less than $5,000 1.6% 2.0% 3.9% 6.1%
$5,000-$15,000 5.6% 6.1% 9.6% 14.7%
$15,000-$24,999 9.2% 8.5% 12.3% 15.3%
$25,000-$34,999 9.5% 9.6% 12.5% 14.2%
$35,000-$49,999 15.4% 14.8% 17.2% 16.7%
$50,000-$74,999 27.7% 27.4% 22.0% 17.7%
$75,000-$99,999 15.8% 15.6% 9.7% 6.6%
$100,000-$149,999 8.9% 10.2% 6.8% 4.5%
greater than $150,000 6.5% 5.8% 6.1% 4.1%
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Other Indices
Professional/Managerial Occupation 35.4% 34.2% 28.8% 24.6%
Education Above High School Level 60.8% 65.3% 51.8% 41.0%
Incomes Over $25,000/year 83.7% 83.4% 74.3% 63.9%
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SOURCE: Equifax National Decision Systems
(1) Estimates
(2) Primary trade area = 3-mile radius, total trade area = 5-mile radius.
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</TABLE>
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Market Analysis
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The previous chart shows that the demographics of the trade area are above
average relative to those of either the MSA or the state.
Summary/Observations/Conclusion
We have briefly analyzed the retail trade history and profile of the
subject region in order to make reasonable assumptions as to the forecasted
performance of the subject's trade area. A metropolitan area and locational
overview has been presented which has highlighted important points about the
study area, as well as demographic and economic data specific to the trade area.
We have also included a brief summary of the competitive retail centers in the
market area. The trade area profile discussed encompasses a five mile radius
from the subject. Marketing information relating to these sectors has been
presented and analyzed in order to determine patterns of change and growth. 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 bullet points summarize some of our key conclusions with
regard to the subject's trade area and market potential:
o The subject enjoys a generally accessible location within one of the
growth quadrants of Metro Atlanta.
o Household growth has been strong within the trade area when compared
the MSA and the state. This trend is expected to continue for the
near term.
o Income levels within the subject's trade area are generally higher
than the MSA or state as a whole and this trend is expected to
continue for the near term.
o The property is well positioned geographically to benefit from
future growth in both households and household income in the area.
o The subject is not the dominant retail center in the area but one of
a number of well anchored, well located, newer, power/super
community centers. There is also a strong regional mall within a
mile of this property.
o While we are not aware of near-term plans for new competition in the
area, there are vacant or underutilized, commercially zoned tracts
in the area. There is no reason to assume that one or more of these
may not be developed with retail. However, new development should
help create a more critical retail mass in the area that will
continue to attract additional customer traffic.
o On balance, it is our opinion that, with competent management,
proper maintenance and aggressive marketing, the subject will
continue to be a viable entity and maintain a strong share of market
expenditure potential. Our outlook for the area continues to be
positive with above average demographics. We judge this property to
have moderate prospects for appreciating real estate values.
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PROPERTY DESCRIPTION
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Site Description
o The site size is 31.186 acres. A copy of the legal description is in the
Addenda.
o The site generally slopes downward from north to south but is at grade
with both frontage streets, and is typical of the area.
o It is predominately covered with the shopping center buildings or site
improvements such as paved parking.
o Access is average with curb cuts along both frontage streets.
o Exposure to both streets is considered average.
o The site is not in the flood plain based on our inspection of the flood
plain maps with city planning personnel.
Improvement Description
The improvements were built in 1995/1996 and consist of a single level,
retail building and free standing outparcel buildings that contain about 351,532
square feet of GLA. Construction is steel frame, masonry exterior with a flat
roof. The structure appears to be in good condition for its age and we did not
notice significant deferred maintenance.
The following chart summarizes the owned GLA of this center.
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GLA Breakdown
-----------------------------------------------------------
Tenant Type GLA(sf) %
Anchors
Michaels 18,122 5.2%
Stein Mart 35,000 10.0%
Baby Superstore 36,900 10.5%
Homeplace 54,448 15.5%
Vacant 56,607 16.1%
Goody's 30,560 8.7%
St. Joseph Hospital 22,580 6.4%
Consign & Design 15,650 4.5%
United Artists Theatre 35,390 10.1%
Outparcel Buildings 15,000 4.3%
Shops 31,275 8.9%
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Total 351,532 100.0%
===========================================================
Property Taxes & Assessments
The subject property is currently assessed by Fulton County. The city and
county apply their tax rates to the 40 percent assessment to derive the tax
liability. Tax billings in this jurisdiction are based on a calendar basis. The
subject's current 100 percent tax appraisal of $40,339,200 equates to a 40
percent assessment of $16,135,680 which results in a CY 1997
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Property Description
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tax estimate of about $569,015, if we assume a three percent higher tax rate in
1997 than in 1996. Our tax comparable research support is the tax appraisal as
appropriate.
Zoning
The subject property is zoned C-1 (Commercial) by Fulton County. After a
review of subject improvements, the local zoning code ordinance, and discussions
with the planning and zoning department, we believe that the subject property,
as improved, is a conforming use. 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.
Highest and Best Use of Site As Though Vacant
The subject site is zoned for shopping center development. Access is
considered above average. It is a convenient shopping location for residents of
the Central Perimeter area. Surrounding land uses reflect a mix of retail and
other uses. There is also ample residential backup. 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. Given the zoning effect on the site, nearby land use
patterns, and accessibility, we are of the opinion that the highest and best use
of the subject site, as if vacant, is for retail development, such as a
community-oriented shopping center.
Highest and Best Use of Property As Improved
When a site contains improvements, the existing use will generally
continue in-use until such time the land value exceeds the sum of the land and
existing improvement value, and the cost to remove improvements for another use.
The subject property has been in continuous operation as a shopping center for
about two years. As such, the existing leases which are in-place dictate a
retail use of the property. The subject improvements are considered to be in
good condition and continue to provide a sufficient return to the land. The
site's value, as if vacant, clearly does not exceed the value of the property as
currently improved, so it is reasonable to conclude that the highest and best
use of the property, as improved, is for continued use as a shopping center.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Sales Comparison Approach, and the Income Capitalization
Approach. The type and age of the property and the quantity and quality of data
effect the applicability in a specific appraisal situation.
Cost Approach
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. 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 fully consider the value of anchor store commitments to
shopping centers and the difficulty of site assemblage for such properties. All
things considered, the 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.
Sales Comparison Approach
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 subject. This approach
has applicability in the subject analysis but is difficult to utilize in a
complex income-producing property because of the unique differences between
properties and the markets in which they operate. Consequently, it is rather
"broad brush". Furthermore, this approach has been used to help develop
investment indices and parameters from which to judge the reasonableness of our
principal approach, the Income Capitalization Approach
Income Capitalization 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 Capitalization Approach has been emphasized as our primary
methodology for this valuation.
Reconciliation
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 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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; and
6. Interpret the adjusted sales data and draw a logical value
conclusion.
The most widely-used, market-oriented unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased. We also considered the overall capitalization rates and the net
operating incomes/sf that were extracted from an analysis of the sales. We have
utilized these market comparisons in our analysis. The Addenda contains a chart
showing details of our national database of power/super-community center sales.
The chart on the following page presents an overview of the improved property
sales used in this analysis. Details of these transactions have been retained in
our files.
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Shopping Center Sales Summary
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Gross Site Cash Overall
Sale Sale Leasable Size Year Occupancy Equiv Cap
No. Name/Location Date Area(SF) (Acres) Built at Sale Sales Price Price/SF Rate NOI/SF EGIM
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Carrollton Crossroads 01/97 303,805 36.00 1987 98.5% $18,100,000 $59.58 10.08% $6.01 N/A
U.S. Highway 27 and U.S. Highway 166
Carrollton,GA
2 Hamilton Village 03/97 365,397 44.85 1991 96% $18,378,750 $50.30 10.52% $5.29 N/A
2020 Gunbarrel Road
Chattanooga, TN
3 Lawrenceville MarketCenter 11/96 499,829 NIA 1995 100% $34,600,000 $123.56 9.50% $11.74 N/A
Ga. 316 & Ga. 120
Lawrenceville, GA
4 Perimeter Village 07/96 366,600 32.00 1995 93% $50,000,000 $136.39 9.40% $12.82 N/A
West Side Of Ashford Dunwoody Road
Atlanta, GA
5 The Village At University Place 08/96 334,500 37.50 1995 100% $33,400,000 $99.85 9.85% $9.84 N/A
SWQ Of Interstate 85 and W.T. Harris
Charlotte, NC
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, five comparable
sales have been analyzed for this analysis. These represent
power/super-community center sales which have occurred throughout the southeast.
The sales exhibit a broad range in unit prices of between $50.30 to $136.39 per
square foot of GLA sold with overall capitalization rates ranging from a low of
9.40 percent to a high of 10.52 percent. These transactions occurred between
July, 1996 and March, 1997.
For the sales surveyed, the mean overall sale price is calculated to be
$30,895,750 mean gross leasable area sold is 374,026 square feet, with the mean
overall price per square foot calculated at $93.94. Finally, the survey shows a
mean NOI of $9.14 square foot, with a mean overall capitalization rate of 9.87
percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include market location, site coverage, anchor GLA as a
component of GLA sold, anchor credit, and, more importantly, the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property.
o The first adjustment made to the market data takes into account
differences between the subject property and the comparable property sales
with regard to the legal interest transferred. Leased fee interest was
transferred in all cases so no adjustment is necessary.
o Advantageous financing terms or peculiar conditions of sale are then
adjusted to reflect a normal market transaction. All sales were on an all
cash basis so no adjustment is necessary.
o Next, changes in market condition must be accounted, thereby creating a
time adjusted normal unit of comparison. We find that the market has
softened over the last year for power/super community centers and that
investors are now assigning a higher degree of risk in their rate
selection. This trend is evident in the overall capitalization rates of
the sales previously presented. This impacts the unit prices that are
paid.
o Lastly, adjustments for location, the physical traits, and the economic
characteristics of the market data are made in order to generate the final
adjusted unit rate which is appropriate for the subject property.
Generally, we find that the subject has a superior location and economic
characteristics to most of the comparables.
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. In our opinion, a buyer's criteria for the purchase of a
retail property is predicated primarily on the
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Sales Comparison Approach
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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. This is true for the five sales we analyzed.
Therefore, an adjustment for these economic differences incorporates factors
such as location, tenant mix, rental levels, operating characteristics, and
building quality.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's second year or stabilized
projected net operating income per square foot to the pro-forma income of the
individual sale properties. The table below adjusts each property's sale price
per square foot on this basis. As mentioned, this property has a large block of
space (56,600 square feet) that has not leased since the center opened. We have
assumed that it will lease within about a year, so the second year's net
operating income is more reflective of a stabilized level for this property. The
derivation of the subject's projected first stabilized year NOI (FY1999 - $13.81
per square foot) is presented in the Income Capitalization Approach section of
this report. The adjustment factor is calculated by dividing the subject's
project NOI per square foot by the comparable's NOI per square foot.
=================================================
Comparing Properties Based on NOI Per Square Foot
Based on Second Year NOI Estimate
=================================================
NOI/SF
Subject
---------- Unadjusted Adjusted
Sale No. Comparable X Price/SF Price/SF
1 $13.81 $59.58 $136.94
----------
$6.01
2 $13.81 $50.30 $131.35
----------
$5.29
3 $13.81 $123.56 $145.39
----------
$11.74
4 $13.81 $136.39 $146.96
----------
$12.82
5 $13.81 $99.85 $140.17
----------
$9.84
=================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $131 to $147 per square foot with a mean of
approximately $140 per square foot on a stabilized basis.
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Sales Comparison Approach
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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, however, do not explicitly convey by
themselves 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.
The subject is viewed as being a well located, well anchored center that
is one of the stronger but not the dominant power/super-community centers in an
trade area. It has above average demographics for the Atlanta area and a
moderate to strong growth potential. Anchor alignment and tenant merchandising
appear to be appropriate to the market. Overall, we would consider this property
to be a good investment opportunity.
Conclusion
Considering the characteristics of the subject relative to the above, we
believe that a unit rate toward the middle of the range of $135 to $145 per
square foot is appropriate for the subject property. Applying this unit rate
range to 351,523 square feet results in a value of approximately $47,500,000 to
$51,000,000 for the subject property, as of July 3 1997, the date of inspection.
Market Value - Sales Comparison Approach
Rounded to $47,500,000 to $51,000,000
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INCOME CAPITALIZATION APPROACH
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Introduction
The Income Capitalization 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 Capitalization 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.
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 Capitalization Approach to the valuation of the subject, we
have utilized a 10-year holding period for an investment in the subject
property, with the cash flow analysis commencing in August 1997. 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, but short enough to reasonably
estimate the expected income and expenses of the real estate. Although our cash
flow analysis is presented on a fiscal year basis, it is noted that we may
discuss income and expenses based upon a calendar year basis for comparison to
historical and budgeted data.
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Income Capitalization Approach
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The revenues and expenses which an informed investor may expect to incur
from the subject property will vary, over the holding period. Major investors
active in 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.
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 a following page is a summary of
the expected annual cash flows from the operation of the subject over the stated
investment holding period.
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.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
- --------------------
Discounted Cash Flow
- --------------------
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. Minimum base rent represents a
legal contract establishing a return to investors in the real estate, while the
passing-on of certain expenses to 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 a 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. At the subject it is minor and
usually includes termination fees, extra tenant charges and deposit forfeitures.
The rent roll and summary of recent leases is in the Addenda.
Operating 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 insurance. Management fee is reimbursable by some
but not all tenants. Reimbursement is usually based on pro rata share but there
are exceptions. The reimbursable costs are usually factored upward by a 5 to 15
percent administrative fee prior to reimbursement. There are also exceptions to
this rule of thumb. The structure at the subject property is typical of the
reimbursable expense recovery structure found at most other southeastern centers
that we have appraised.
The non-reimbursable expenses associated with the subject property include
certain general and administrative expenses, including non-recoverable
maintenance and reserves for replacements, and management fee for some tenants.
Non-operating expenses include alteration costs associated with bringing
space up to occupancy standards, and leasing commissions.
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 operating history and budget provided by ownership. This
information is provided in the Addenda. We have compared this information to
published data which are available, as well as comparable expense information.
The Addenda includes a summary of the operating results database for power
centers that is compiled by Urban Land Institute. Finally, this information has
been tempered by our experience with other comparable shopping centers in the
marketplace as well as on a national basis.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
- ---------------------------
Cash Flow Assumptions
- ---------------------------
Our cash flows forecasted for the property are presented on a following
page. The formulation of these cash flows incorporate the following general
assumptions in our computer model:
================================================================================
Summary of Critical Assumptions For Discounted Cash Flow
================================================================================
Subject Property Perimeter Pointe
================================================================================
Square Footage Reconciliation
================================================================================
Total Gross Leasable Area 351,532
- --------------------------------------------------------------------------------
Anchor/Major Tenant GLA 305,257
- --------------------------------------------------------------------------------
In-Line and Free-Standing Shop GLA 46,275
================================================================================
Market Rent/Sales Conclusions
================================================================================
Market Rent Estimates (1997) Average Rates Over Term
- --------------------------------------------------------------------------------
Tenants 1,000 SF or less $29.00/SF
- --------------------------------------------------------------------------------
Tenants 1,001-2,000 SF $28.00/SF
- --------------------------------------------------------------------------------
Tenants 2,001-5,000 SF $27.00/SF
- --------------------------------------------------------------------------------
Tenants 5,000 SF $18.00/SF
- --------------------------------------------------------------------------------
Rental Basis NNN
- --------------------------------------------------------------------------------
Stabilized Market Rental Growth Rate 1.5% in 1997, 3.0%/Year
thereafter
- --------------------------------------------------------------------------------
Credit Risk Loss (Non-Anchor Space) 1.5%
================================================================================
Vacancy and Typical Lease Term
================================================================================
Average Lease Term 3, 5 and 10 Years (shops)
- --------------------------------------------------------------------------------
Rent Steps None
- --------------------------------------------------------------------------------
Renewal Probability 80%
- --------------------------------------------------------------------------------
Weighted Average Downtime Between Leases 2 Months
- --------------------------------------------------------------------------------
Stabilized Occupancy (Shop Space) 92-94%
- --------------------------------------------------------------------------------
Forecasted Date Of Stabilization N/A
- --------------------------------------------------------------------------------
Absorption Period N/A
================================================================================
Operating Expense Data
================================================================================
Leasing Commissions
- --------------------------------------------------------------------------------
New Tenants 4.0%
- --------------------------------------------------------------------------------
Renewal Tenants 2.0%
- --------------------------------------------------------------------------------
Tenant Improvement Allowance
- --------------------------------------------------------------------------------
New Tenants $10.00/SF
- --------------------------------------------------------------------------------
Renewal Tenants $2.00/SF
- --------------------------------------------------------------------------------
Stabilized Tax and Expense Growth Rate 3.0%/Year
- --------------------------------------------------------------------------------
Management Fee (of EGI) 4.0%
- --------------------------------------------------------------------------------
Capital Reserves (PSF of Owned GLA) $.10/SF in 1997
================================================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
- ----------------------
Additional Assumptions
- ----------------------
1. Anchor stores (>15,000 SF) will renew their leases for at least one
10-year term at their current contract rate over the term. The re-leasing
cost will include no retrofit allowance but renewal tenant commissions.
2. Office Depot and the vacant store at 600B (26,607 SF) will have
reimbursement clauses like Michaels.
3. The vacant store 600B (26,607 SF) will lease in July 1998 for 10 years at
$9.00 per square foot flat with no finish allowance.
4. Tenants with insufficient sales histories are assumed to never reach
breakpoint. 1997 sales are assumed at 3 percent higher than 1996 actuals.
5. Future lease terms of shop tenants:
If current term is 34 years Assume 3 years
If current term is 5-9 years Assume 5 years
If current term is 10 or more years Assume 10 years
6. With an 80 percent renewal probability, this is equivalent to 2 months
downtime on all leases.
7. Market rent estimates are averages over the lease term so we did not use
periodic rent steps in our model.
8. Vacant shop space will be absorbed in January 1998 at market rates for 5
year term.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
PERIMETER POINTE CENTER
PROJECT DESIGNATOR: PP97
REVISION: 7/18/97 @ 9:32
ANNUAL CASH FLOW REPORT
BEGINNING 8/1/97 FOR 12 YEARS
7/18/97 @ 9:30
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2OOl FY2002 FY2OO3 FY2004 FY2005
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
ANCHORS 3,612,424 3,921,041 3,947,837 4,034,175 4,121,212 4,138,845 4,144,424 4,168,651
IN LINE SHOPS 724,556 759,181 763,428 748,926 804,516 828,995 863,375 869,414
FREE STANDING 358,213 371,227 377,420 382,595 398,661 408,963 414,192 414,192
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 4,695,193 5,051,449 5,088,685 5,165,696 5,324,389 5,376,803 5,421,991 5,452,257
RECOVERIES:
CAM/MGT. FEES 339,947 377,084 387,124 396,577 411,077 423,515 436,387 447,991
INSURANCE 49,708 55,877 57,449 58,965 60,863 62,738 64,772 66,719
REAL ESTATE TAXES 536,094 602,451 619,556 634,934 653,655 673,700 695,327 716,189
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 925,749 1,035,412 1,064,129 1,090,476 1,125,595 1,159,953 1,196,486 1,230,899
OVERAGE RENT 0 0 0 0 0 0 0 875
SALES VOLUME (000) 8,439 8,640 8,899 9,244 10,307 10,616 10,934 11,262
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 5,620,942 6,086,861 6,152,814 6,256,172 6,449,984 6,536,756 6,618,477 6,684,031
VACANCY ALLOWANCE (49,595) (51,767) (52,282) (51,897) (55,059) (56,690) (58,582) (59,048)
MISCELLANEOUS 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 5,591,347 6,055,094 6,120,532 6,224,275 6,414,925 6,500,066 6,579,895 6,644,983
EXPENSES
- --------
CAM 284,900 293,447 302,250 311,318 320,657 330,277 340,186 350,391
REAL ESTATE TAXES 578,958 596,326 614,216 632,643 651,622 671,171 691,306 712,045
GENERAL & ADMIN. 10,175 10,480 10,795 11,118 11,452 11,796 12,149 12,514
INSURANCE 53,724 55,336 56,996 58,706 60,467 62,281 64,149 66,074
MANAGEMENT FEE 224,838 243,475 246,113 250,247 258,000 261,471 264,739 267,361
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 1,152,595 1,199,064 1,230,370 1,264,032 1,302,198 1,336,996 1,372,529 1,408,385
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 4,438,752 4,856,030 4,890,162 4,960,243 5,112,727 5,163,070 5,207,366 5,236,598
ALTERATIONS 10,300 0 12,939 39,303 23,995 18,601 0 0
COMMISSIONS 212,672 0 6,983 36,186 21,761 45,551 0 0
STRUCTURAL RESERVE 35,213 36,270 37,358 38,478 39,633 40,822 42,046 43,308
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
FY1998 FY1999 FY2000 FY2OOl FY2002 FY2OO3 FY2004 FY2005
CASH FLOW 4,180,567 4,819,760 4,832,882 4,846,276 5,027,338 5,058,096 5,165,320 5,193,290
</TABLE>
FY2006 FY2OO7 FY2008 FY2009
INCOME
- ------
MINIMUM RENT:
ANCHORS 4,255,190 4,298,997 4,298,997 4,298,997
IN LINE SHOPS 815,548 922,601 1,007,127 1,000,332
FREE STANDING 420,177 441,817 454,479 460,558
---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 5,490,915 5,663,415 5,760,603 5,759,887
RECOVERIES:
CAM/MGT. FEES 455,290 466,608 482,495 493,229
INSURANCE 68,208 70,217 72,913 74,999
REAL ESTATE TAXES 732,753 751,656 779,484 801,958
---------- ---------- ---------- ----------
TOTAL RECOVERIES 1,256,251 1,288,481 1,334,892 1,370,186
OVERAGE RENT 1,880 0 0 0
SALES VOLUME (000) 11,198 11,948 12,307 12,676
---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 6,749,046 6,951,896 7,095,495 7,130,073
VACANCY ALLOWANCE (56,962) (62,145) (66,716) (66,813)
MISCELLANEOUS 20,000 20,000 20,000 20,000
---------- ---------- ---------- ----------
TOTAL INCOME 6,712,084 6,909,751 7,048,779 7,083,260
EXPENSES
- --------
CAM 360,903 371,730 382,882 394,368
REAL ESTATE TAXES 733,406 755,408 778,071 801,413
GENERAL & ADMIN. 12,889 13,276 13,674 14,085
INSURANCE 68,056 70,098 72,201 74,367
MANAGEMENT FEE 269,962 278,076 283,820 285,203
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,445,216 1,488,588 1,530,648 1,569,436
---------- ---------- ---------- ----------
NET OPERATING
INCOME 5,266,868 5,421,163 5,518,131 5,513,824
ALTERATIONS 63,430 79,134 4,983 17,390
COMMISSIONS 58,407 344,193 108,140 9,386
STRUCTURAL RESERVE 44,607 45,945 47,324 48,743
---------- ---------- ---------- ----------
FY2006 FY2OO7 FY2008 FY2009
CASH FLOW 5,100,424 4,951,891 5,357,684 5,438,305
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Net Income/Net Cash Flow
Operating expenses are deducted from the estimated revenue to result in an
annual net operating income. The total other expenses of the subject property,
including alterations, commissions, capital expenditures, and reserves, are
annually deducted from net operating income, thereby leaving a net cash flow to
the investors in each year of the holding period before debt service. Since
there is a large anchor space vacant and we estimate that it can be leased
within one year, our analysis will be based on second year estimated net income
as representative of a stabilized level. In the second year of investment, the
net operating income is forecasted to be equal to approximately $4,856,030 which
is equivalent to 80.2 percent of effective gross income. Deducting other
expenses including capital items results in a net cash flow before debt service
of approximately $4,819,760.
================================================================================
Second Year (Stabilized) Estimates for Perimeter Pointe
================================================================================
Income $ $/SF
Base Rent $5,051,449 $14.35
Percentage Rent $0 $0.00
Expense Recoveries $1,035,412 $2.94
Other Income $20,000 $0.06
----------
Potential Gross Income $6,106,861 $17.34
Allowance for Vacancy & credit Loss ($51,767) ($0.15)
==========
Effective Gross Income $6,055,094 $17.20
Less: Recoverable Expenses
Common Area Maintenance $293,447 $0.83
Real Estate Taxes $596,326 $1.69
Insurance $55,336 $0.16
==========
Total Recoverable $945,109 $2.68
Less: Non-Recoverable Expenses
General & Administrative $10,480 $0.03
Management $243,475 $0.69
==========
Total Non-Recoverable $253,955 $0.72
Total Operating Expenses $1,199,064 $3.41
NET OPERATING INCOME $4,856,030 $13.79
Operating Expense Ratio 19.8%
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Real Estate Investment Management Inc. reports in their Emerging Trends in Real
Estate - 1997 that, while power centers are considered one retail property type
currently in a growth mode, most respondents feel that the oversupply of this
type of retail will impact value gains for these property types to the extent
they may lag regional malls in appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A [Neighborhood and Community] centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Power Center and Big Box Neighborhood/Community
Investment ----------------------------------------------------------------
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50-10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00-15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
================================================================================
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CUSHMAN &
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<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50-12.50% 9.00-12.50% N/A
AVERAGE 11.33% 11.25%
CHANGE(Basis Points) -- +8 N/A
================================================================================
Free & Clear Going - In Cap Rate
================================================================================
RANGE 8.75-10.50% 8.50-10.50% N/A
AVERAGE 9.58% 9.58%
CHANGE(Basis Points) - 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00-11.50% 8.50-11.50% N/A
AVERAGE 9.96% 9.88%
CHANGE(Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey -
Second Qtr. 1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best.
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CUSHMAN &
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<PAGE>
Income Capitalization Approach
================================================================================
Nonetheless, the effect of these changes have been a rise in rates as investors
find it necessary to adjust their risk premiums in their underwriting.
In the Sales Comparison Approach, the chart of most comparable sales
showed overall capitalization rates ranging from 9.40 percent to 10.52 percent
for good quality power/super-community and power centers in the Southeast. The
overall mean for the sales presented is 9.87 percent. From the surveys and
comparable sales presented, we would be inclined to consider a going-in
capitalization rate for the between 9.75 and 10.25 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. The subject is a well-located power center in an attractive
growth market. It has a unique tenant alignment and well matched merchandising
mix with several good credit tenants. The upside will be through the ultimate
attainment of overage rent, something we have not forecasted due to lack of
adequate sales history. We believe that an investor would likely recognize this
real short term potential in the selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen strong retail interest.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.75 and 10.25
percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years. In addition, the long term nature of many of the leases
makes the income stream almost as secure in 10 years as it is today.
Therefore, a projected terminal capitalization rate of about 10 percent is
indicated for the subject property. 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.
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-41-
CUSHMAN &
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<PAGE>
Income Capitalization 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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.25 percent for national power center in their
Fourth Quarter 1996 survey, with a range between 9.00-12.50 percent.
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 (%) July 10, 1997
========================================================
Reserve Bank Discount Rate 5.00%
--------------------------------------------------------
Prime Rate (Monthly Average) 8.50%
--------------------------------------------------------
3-Month Treasury Bills 4.96%
--------------------------------------------------------
U.S. 10-Year Notes 6.24%
--------------------------------------------------------
U.S. 30-Year Bonds 6.56%
--------------------------------------------------------
Telephone Bonds 7.63%
--------------------------------------------------------
Municipal Bonds 5.56%
========================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 percent.
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CUSHMAN &
WAKEFIELD(R)
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Income Capitalization Approach
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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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that a majority of base rental income will, on
average, come from anchor major/tenants whose creditworthiness adds stability to
the cash flow.
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 11.50 percent for the
center.
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 10-year period commencing on August 1,1997.
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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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Income Capitalization Approach
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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.
=============================================================
Summary of Rates Selected
=============================================================
Cash Flow Start Date 8/1/97
Discount Rate 11.25-11.50%
Going-In Capitalization Rate 10.0%
Terminal Capitalization Rate 10.0%
Reversionary Sales Costs 3.0%
Holding Period 10 years
=============================================================
For a property such as the subject, it is our opinion that an investor
would require an all cash discount rate of about 11.25 percent. The following
chart summarizes the expected cash flows and value estimate via this method of
analysis.
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Income Capitalization Approach
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Town Center Prado
Barret Parkway @ Bells Ferry Road
Discounted Cash Flow Summary
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Discount Present
Cash Factor Value of Composition
Year Flow 11.25% Cash Flows of Yield
================================================================================
One $4,180,567 0.89888 $3,757,813 8.06%
Two $4,819,760 0.80798 $3,894,264 8.35%
Three $4,832,882 0.72627 $3,509,992 7.53%
Four $4,846,276 0.65283 $3,163,793 6.78%
Five $5,027,338 0.58681 $2,950,108 6.32%
Six $5,058,096 0.52747 $2,668,007 5.72%
Seven $5,165,320 0.47413 $2,449,047 5.25%
Eight $5,193,290 0.42619 $2,213,311 4.75%
Nine $5,100,424 0.38309 $1,953,917 4.19%
Ten $4,951,891 0.34435 $1,705,183 3.66%
Present Value of Cash Flows $28,265,435 60.66%
Reversion:
Year Eleven NOI Cap Rate Value
-------------------------- -----------
Gross Reversion: $5,515,131 10.00% = $55,181,310
Less: Reversion Year Capital Expend. ($160,447)
Subtotal $55,020,553
===========
Cost of Sale: 3% ($1,650,626)
Net Reversion: $53,370,237
x Discount Factor 0.34435
Present Value of Reversion $18,378,041 39.44%
Combined Present Value $46,643,476
Rounded $46,600,000 100.00%
Price per Square Foot $132.56
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In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates an Market Value of about $46,600,000 for
the subject property as of July 3,1997.
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow, 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 following chart summarizes
the
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Income Capitalization Approach
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capitalization rates indicated by the sales we selected as the most appropriate
for the subject analysis.
=============================================
Summary of Capitalization Rates
=============================================
Sale Capitalization
No. Rate
=============================================
1 10.08%
2 10.52%
3 9.50%
4 9.40%
5 9.85%
Stabilized Capitalization Rate Selected 10.0%
=============================================
In view of our total analysis, we would anticipate that the subject
property would trade at an overall rate of approximately 10.0 to 10.25 percent
applied to first year income. Applying these rates to second year net operating
income before alterations, and other expenses for the subject of $4,856,030
results in a value of approximately $47,500,000 to $48,600,000. From this range,
we would be inclined to conclude at an Market Value of $48,600,000 via Direct
Capitalization as of July 3,1997. This value is indicative of an overall rate of
10.0 percent.
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RECONCILIATION AND FINAL VALUE ESTIMATE
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Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below.
==============================================================
Value Summary
==============================================================
Cost Approach NIA
--------------------------------------------------------------
Sales Comparison Approach $47,500,000 to $51,000,000
--------------------------------------------------------------
Income Capitalization Approach
Discounted Cash Flow $46,600,000
Direct Capitalization $48,600,000
==============================================================
Two approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complimentary results, each technique
supporting the other. The value indicators range from $46,600,000 to
$51,000,000, resulting in a difference of only 9.4 percent. However, the value
indications by the Income Approach produce a tighter range of values and are
also considered the most reliable.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
The process of comparing historical sales data to assess what purchasers
have been paying for similar type properties can be 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, this methodology is best suited as support for the
conclusions of the Income Capitalization Approach. It provides useful market
extracted rates of return, such as overall rates, to simulate investor behavior
in the Income Capitalization Approach.
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Reconciliation and Final Value Estimate
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Income Capitalization Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method (DCF) 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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center. Particular emphasis is placed on the results of the discounted
cash flow analysis because of the applicability of this method in accounting for
the specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis of the
subject property upon stabilized operations.
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 Capitalization Approach methodologies.
The range in values exhibited by the Income Capitalization Approach is small. We
have placed more emphasis on the value estimate via the Income Approach because
it is less "broad brush" than the Sales Comparison Approach and is the method of
analysis used most often by the market participants.
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Reconciliation and Final Value Estimate
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Market 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, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
3, 1997, the date of inspection, was:
FORTY SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
$47,500,000
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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.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. This is a Complete Appraisal in a Summary 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.
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&Ws prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
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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. 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.
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 has 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.
10. 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.
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.
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CERTIFICATION OF APPRAISAL
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We certify that, to the best of our knowledge and belief:
1. Luten L. Teate, MAI, inspected the property and prepared 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, Luten L. Teate, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Luten L. Teate
Luten L. Teate, MAI
Associate Director
Georgia No. CG001389
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ADDENDA
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Legal Description
Rent Roll and Summary of Recent Leases
National Database of Sales
Operating History and Budget Chart
ULI Database of Operating Results for Power Centers
Lease Expiration Chart - Pro-Ject
Competitive Property Photographs
Local Sale Comparables
Appraiser Qualifications
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LEGAL DESCRIPTION
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LEGAL DESCRIPTION
PARCEL A
All that tract or parcel of land lying and being in Land Lot 19 of the 17th
District of Fulton County, Georgia, and being more particularly described as
follows:
Beginning at the intersection of the easterly line of said Land Lot 19 and the
northeasterly right-of-way line of Perimeter Center West, formerly known as
Meadow Lane (variable width right-of-way); proceeding thence along said
northeasterly right-of-way line, the following courses: North 66(degrees) 23'
19" West a distance of 310.61 feet to a point and northwesterly a distance of
6.82 feet along the arc of a curve to the right, said curve having a radius of
2,609.64 feet and being subtended by a chord having a bearing and distance of
North 66(degrees) 18' 48" West 6.82 feet to a point; leaving said northeasterly
right-of-way line and proceeding thence North 00(degrees) 35' 05" East a
distance of 4.26 feet to a point; proceeding thence northwesterly a distance of
364.76 feet along the arc of a curve to the right, said curve having a radius of
2,246.50 feet and being subtended by a chord having a bearing and distance of
North 61(degrees) 33' 07" West 364.36 feet to a point; proceeding thence North
48(degrees) 46' 19" West a distance of 15.27 feet to a point; proceeding thence
North 32(degrees)24' 31" East a distance of 84.58 feet to a point; proceeding
thence North 57(degrees) 35' 29" West a distance of 9.00 feet to a point;
proceeding thence North 32(degrees) 24' 31" East a distance of 26.25 feet to a
point; proceeding thence North 57(degrees) 35' 29" West a distance of 29.82 feet
to a point; proceeding thence North 32(degrees) 24' 31" East a distance of 15.00
feet to a point; proceeding thence North 57(degrees) 35' 29" West a distance of
18.63 feet to a point; proceeding thence North 48(degrees) 13' 23" East a
distance of 111.56 feet to a point; proceeding thence North 41(degrees) 46' 37"
West a distance of 615.25 feet to a point; proceeding thence South 48(degrees)
13' 23" West a distance of 100.25 feet to a point, said point being the True
Point of Beginning; continuing thence South 48(degrees) 13' 23" West a distance
of 10.50 feet to a point; proceeding thence North 43(degrees) 45' 36" West a
distance of 217.12 feet to a point on the southeasterly right-of-way line of
Mount Vernon Highway (variable width right-of-way); proceeding thence along said
southeasterly right-of-way line, the following courses: northeasterly a distance
of 10.56 feet along the arc of a curve to the left, said curve having a radius
of 1,302.31 feet and being subtended by a chord having a bearing and distance of
North 39(degrees) 30' 45" East 10.56 feet to a point, South 43(degrees) 45' 36"
East a distance of 14.27 feet to a point and North 34(degrees) 37' 11" East a
distance of 200.00 feet to a point; leaving said southeasterly right-of-way line
and proceeding thence South 55(degrees) 22' 49" East a distance of 105.88 feet
to a point; proceeding thence southeasterly a distance of 51.33 feet along the
arc of a curve to the left, said curve having a radius of 230.00 feet and being
subtended by a chord having a bearing and distance of South 61(degrees) 46' 25"
East 51.22 feet to a point; proceeding thence South 68(degrees) 10' 0l" East a
distance of 31.33 feet to a point; proceeding thence South 31(degrees) 42' 17"
West a distance of 254.15 feet to the true point of beginning.
Said tract or parcel of land contains 1.0414 acre as shown on the ALTA/ASCM
As-Built Survey for Developers Diversified Realty Corporation, et al., prepared
by Travis Pruitt & Associates, P.C., dated October 27, 1995, last revised
November 13, 1995.
CUSHMAN &
WAKEFIELD(R)
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LEGAL DESCRIPTION
PARCEL B
All that tract or parcel of land lying and being in Land Lot 19 of the 17th
District of Fulton County, Georgia, and being more particularly described as
follows:
Beginning at the intersection of the easterly line of said Land Lot 19 and the
northeasterly right-of-way line of Perimeter Center West, formerly known as
Meadow Lane (variable width right-of-way); proceeding thence along said
northeasterly right-of-way line, the following courses: North 66(degrees) 23'
19" West a distance of 310.61 feet to a point and northwesterly a distance of
6.82 feet along the arc of a curve to the right, said curve having a radius of
2,609.64 feet and being subtended by a chord having a bearing and distance of
North 66(degrees) 18' 48" West 6.82 feet to a point; leaving said northeasterly
right-of-way line and proceeding thence North 00(degrees) 35' 05" East a
distance of 4.26 feet to a point; proceeding thence northwesterly a distance of
364.76 feet along the arc of a curve to the right, said curve having a radius of
2,246.50 feet and being subtended by a chord having a bearing and distance of
North 61(degrees) 33' 07" West 364.36 feet to a point; proceeding thence North
48(degrees) 46' 19" West a distance of 15.27 feet to a point; proceeding thence
North 32(degrees) 24' 31" East a distance of 84.58 feet to a point; proceeding
thence North 57(degrees) 35' 29" West a distance of 9.00 feet to a point;
proceeding thence North 32(degrees) 24' 31" East a distance of 26.25 feet to a
point; proceeding thence North 57(degrees) 35' 29" West a distance of 29.82 feet
to a point; proceeding thence North 32(degrees) 24' 31" East a distance of 15.00
feet to a point; proceeding thence North 57(degrees)35' 29" West a distance of
18.63 feet to a point; proceeding thence North 48(degrees) 13' 23" East a
distance of 111.56 feet to a point; proceeding thence North 41(degrees) 46' 37"
West a distance of 615.25 feet to a point; proceeding thence South 48(degrees)
13' 23" West a distance of 110.75 feet to a point; proceeding thence North
43(degrees) 45' 36" West a distance of 217.12 feet to a point on the
southeasterly right-of-way line of Mount Vernon Highway (variable width
right-of-way); proceeding thence along said southeasterly right-of-way line, the
following courses: northeasterly a distance of 10.56 feet along the arc of a
curve to the left, said curve having a radius of 1,302.31 feet and being
subtended by a chord having a bearing and distance of North 39(degrees) 30' 45"
East 10.56 feet to a point, South 43(degrees) 45' 36" East a distance of 14.27
feet to a point and North 34(degrees) 37' 11" East a distance of 537.67 feet to
a point, said point being the True Point of Beginning; continuing thence along
said southeasterly right-of-way line, North 34(degrees) 37' 11" East a distance
of 160.00 feet to a point; leaving said southeasterly right-of-way line and
proceeding thence South 58(degrees) 17' 43" East a distance of 180.61 feet to a
point; proceeding thence South 31(degrees) 42' 17" West a distance of 159.79
feet to a point; proceeding thence North 58(degrees) 17' 43" West a distance of
188.75 feet to the true point of beginning.
Said tract or parcel of land contains 0.6775 acre as shown on the ALTA/ASCM
As-Built Survey for Developers Diversified Realty Corporation, et al., prepared
by Travis Pruitt & Associates, P.C., dated October 27, 1995, last revised
November 13, 1995.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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LEGAL DESCRIPTION
PARCEL C
All that tract or parcel of land lying and being in Land Lot 19 of the 17th
District of' Fulton County, Georgia, and being more particularly described as
follows:
Beginning at the intersection of the easterly line of said Land Lot 19 and the
northeasterly right-of-way line of Perimeter Center West, formerly known as
Meadow Lane (variable width right-of-way); proceeding thence along said
northeasterly right-of-way line, the following courses: North 66(degrees) 23'
19" West a distance of 310.61 feet to a point and northwesterly a distance of
6.82 feet along the arc of a curve to the right, said curve having a radius of
2,609.64 feet and being subtended by a chord having a bearing and distance of
North 66(degrees) 18' 48" West 6.82 feet to a point; leaving said northeasterly
right-of-way line and proceeding thence North 00(degrees) 35' 05" East a
distance of 4.26 feet to a point; proceeding thence northwesterly a distance of
364.76 feet along the arc of a curve to the right, said curve having a radius of
2,246.50 feet and being subtended by a chord having a bearing and distance of
North 61(degrees) 33' 07" West 364.36 feet to a point; proceeding thence North
48(degrees) 46' 19" West a distance of 15.27 feet to a point; proceeding thence
North 32(degrees) 24' 31" East a distance of 84.58 feet to a point; proceeding
thence North 57(degrees) 35' 29" West a distance of 9.00 feet to a point;
proceeding thence North 32(degrees) 24' 31" East a distance of 26.25 feet to a
point; proceeding thence North 57(degrees) 35' 29" West a distance of 29.82 feet
to a point; proceeding thence North 32(degrees) 24' 31" East a distance of 15.00
feet to a point; proceeding thence North 57(degrees) 35' 29" West a distance of
18.63 feet to a point; proceeding thence North 48(degrees) 13' 23" East a
distance of 111.56 feet to a point; proceeding thence North 41(degrees) 46' 37"
West a distance of 615.25 feet to a point; proceeding thence South 48(degrees)
13' 23" West a distance of 110.75 feet to a point; proceeding thence North
43(degrees) 45' 36" West a distance of 217.12 feet to a point on the
southeasterly right-of-way line of Mount Vernon Highway (variable width
right-of-way); proceeding thence along said southeasterly right-of-way line, the
following courses: northeasterly a distance of 10.56 feet along the arc of a
curve to the left, said curve having a radius of 1,302.31 feet and being
subtended by a chord having a bearing and distance of North 39(degrees) 30' 45"
East 10.56 feet to a point, South 43(degrees) 45' 36" East a distance of 14.27
feet to a point and North 34(degrees) 37' 11" East a distance of 697.67 feet to
a point, said point being the True Point of Beginning; continuing thence along
said southeasterly right-of-way line, North 34(degrees) 37' 11" East a distance
of 200.79 feet to a point; leaving said southeasterly right-of-way line and
proceeding thence easterly a distance of 123.61 feet along the arc of a curve to
the left, said curve having a radius of 287.17 feet and being subtended by a
chord having a bearing and distance of South 77(degrees) 48' 50" East 122.65
feet to a point; proceeding thence South 48(degrees) 07' 18" East a distance of
23.71 feet to a point; proceeding thence South 07(degrees) 17' 42" East a
distance of 16.35 feet to a point; proceeding thence southerly a distance of
64.66 feet along the arc of a curve to the right, said curve having a radius of
95.00 feet and being subtended by a chord having a bearing and distance of South
12(degrees) 12' 18" West 63.42 feet to a point; proceeding thence South
31(degrees) 42' 17" West a distance of 164.83 feet to a point; proceeding thence
North 58(degrees) 17' 43" West a distance of 180.61 feet to the true point of
beginning.
Said tract or parcel of land contains 0.8804 acre as shown on the ALTA/ASCM
As-Built Survey for Developers Diversified Realty Corporation, et al., prepared
by Travis Pruitt & Associates. P.C., dated October 27, 1995, last revised
November 13, 1995.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
LEGAL DESCRIPTION
PARCELS "D" AND "E"
All that tract or parcel of land lying and being in Land Lot 19 of the 17th
District of Fulton County, Georgia, and being more particularly described as
follows:
Beginning at the intersection of the easterly line of said Land Lot 19 and the
northeasterly right-of-way line of Perimeter Center West, formerly known as
Meadow Lane (variable width right-of-way); proceeding thence along said
northeasterly right-of-way line, the following courses: North 66(degrees) 23'
19" West a distance of 310.61 feet to a point and northwesterly a distance of
6.82 feet along the arc of a curve to the right, said curve having a radius of
2,609.64 feet and being subtended by a chord having a bearing and distance of
North 66(degrees) 18' 48" West 6.82 feet to a point: leaving said northeasterly
right-of-way line and proceeding thence North 00(degrees) 35' 05" East a
distance of 4.26 feet to a point; proceeding thence northwesterly a distance of
364.76 feet along the arc of a curve to the right, said curve having a radius of
2,246.50 feet and being subtended by a chord having a bearing and distance of
North 61(degrees) 33' 07" West 364.36 feet to a point; proceeding thence North
48(degrees) 46' 19" West a distance of 15.27 feet to a point; proceeding thence
North 32(degrees) 24' 31" East a distance of 84.58 feet to a point; proceeding
thence North 57(degrees) 35' 29" West a distance of 9.00 feet to a point;
proceeding thence North 32(degrees) 24' 31" East a distance of 26.25 feet to a
point; proceeding thence North 57(degrees) 35' 29" West a distance of 29.82 feet
to a point; proceeding thence North 32(degrees) 24' 31" East a distance of 15.00
feet to a point; proceeding thence North 57(degrees) 35' 29" West a distance of
18.63 feet to a point; proceeding thence North 48(degrees) 13' 23" East a
distance of 111.56 feet to a point; proceeding thence North 41(degrees) 46' 37"
West a distance of 615.25 feet to a point; proceeding thence South 48(degrees)
13' 23" West a distance of 100.25 feet to a point: proceeding thence North
31(degrees) 42' 17" East a distance of 254.15 feet to a point; proceeding thence
North 68(degrees) 10' 01" West a distance of 31.33 feet to a point: proceeding
thence northwesterly a distance of 51.33 feet along the arc of a curve to the
right, said curve having a radius of 230.00 feet and being subtended by a chord
having a bearing and distance of North 61(degrees) 46' 25" West 51.22 feet to a
point; proceeding thence North 55(degrees) 22' 49" West a distance of 105.88
feet to a point on the southeasterly right-of-way line of Mount Vernon Highway
(variable width right-of-way); proceeding thence along said southeasterly
right-of-way line, North 34(degrees) 37' 11" East a distance of 337.67 feet to a
point; leaving said southeasterly right-of-way line and proceeding thence South
58(degrees) 17' 43" East a distance of 188.75 feet to a point; proceeding thence
North 31(degrees) 42' 17" East a distance of 324.62 feet to a point; proceeding
thence northerly a distance of 64.66 feet along the arc of a curve to the left,
said curve having a radius of 95.00 feet and being subtended by a chord having a
bearing and distance of North 12(degrees) 12' 18" East 63.42 feet to a point;
proceeding thence North 07(degrees) 17' 42" West a distance of 16.35 feet to a
point; proceeding thence North 48(degrees) 07' 18" West a distance of 23.71 feet
to a point; proceeding thence westerly a distance of 123.61 feet along the arc
of a curve to the right, said curve having a radius of 287.17 feet and being
subtended by a chord having a bearing and distance of North 77(degrees) 48' 50"
West 122.65 feet to a point on said southeasterly right-of-way line of Mount
Vernon Highway; proceeding thence along said southeasterly right-of-way line,
the following courses: North 57(degrees) 47' 04" West a distance of 10.95 feet
to a point and North 34(degrees) 06' 46" East a distance of 36.26 feet to a
point; leaving said southeasterly right-of-way line and proceeding thence
easterly a distance of 177.60 feet along the arc of a curve to the left, said
curve having a radius of 250.00 feet and being subtended by a chord having a
bearing and distance of South 84(degrees) 43' 58" East 173.89 feet to a point;
proceeding thence North 74(degrees) 54' 56" East a distance of 92.74 feet to a
point; proceeding thence easterly a distance of 241.65 feet along the arc of a
curve to the right, said curve having a radius of 400.00 feet and being
subtended by a chord having a bearing and distance of South 87(degrees) 46' 39"
East 237.99 feet to a point; proceeding thence South 19(degrees) 31' 45" West a
distance of 38.88 feet to a point; proceeding thence South 68(degrees) 58' 10"
East a distance of 17.15 feet to a point; proceeding thence southeasterly,
easterly and northeasterly a distance of 95.19 feet along the arc of a curve to
the left, said curve having a radius of 66.42 feet and being subtended by a
chord having a bearing and distance of South 76(degrees) 52' 27" East 87.25 feet
to a point; proceeding thence South 68(degrees) 58' 10" East a distance of 60.25
feet to a point on said easterly line of Land Lot 19; proceeding thence along
said easterly land lot line, the following courses: South 00(degrees) 16' 43"
West a distance of 162.62 feet to a point, South 02(degrees) 12' 50" West a
distance of 6.23 feet to a point, South 00(degrees) 24' 29" West a distance of
63.70 feet to a point, South 01(degrees) 57' 55" West a distance of 6.59 feet to
a point, South 00(degrees) 33" 50" West a distance of 292.01 feet to a concrete
monument and South 00(degrees) 42' 17" West a distance of 1,083.17 feet to a
point; leaving said easterly land lot line and proceeding thence North
89(degrees) 21' 58" West a distance of 160.00 feet to a point; proceeding thence
South 32(degrees) 40' 15" West a distance of 48.21 feet to a point; proceeding
thence South 66(degrees) 04' 21" East a distance of 201.88 feet to a point on
said easterly line of Land Lot 19; proceeding thence along said easterly land
lot line, South 00(degrees) 42' 17" West a distance of 21.13 feet to the point
of beginning.
Said tract or parcel of land contains 28.0735 acres.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENT ROLL AND SUMMARY OF RECENT LEASES
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100 Discount Party Warehouse 8,265 Sep-96 Aug-97 10.00 12 @ $10,331.25 $123,975 $15.00 $17.19
Sep-97 Aug-98 12 @ $10,641.19 $127,694 $15.45
Sep-98 Aug-99 12 @ $10,958.01 $131,496 $15.91
Sep-99 Aug-00 12 @ $11,281.73 $135,381 $16.38
Sep-00 Aug-01 12 @ $11,619.21 $139,431 $16.87
Sep-01 Aug-02 12 @ $11,970.48 $143,646 $17.38
Sep-02 Aug-03 12 @ $12,328.63 $147,944 $17.90
Sep-03 Aug-04 12 @ $12,700.55 $152,407 $18.44
Sep-04 Aug-05 12 @ $13,079.36 $156,952 $18.99
Sep-05 Aug-06 12 @ $13,471.95 $161,663 $19.56
150 Michael's 18,122 May-96 May-99 13.83 37 @ $21,671.00 $260,052 $14.35 $15.76
Jun-99 May-04 60 @ $23,407.58 $280,891 $15.50
Jun-04 Feb-10 69 @ $25,280.00 $303,360 $16.74
200 Stein Mart, Inc. 35,000 Dec-95 Nov-00 15.00 60 @ $23,375.00 $280,500 $8.01 $8.50
Dec-00 Nov-05 60 @ $24,791.67 $297,500 $8.50
Dec-05 Nov-10 60 @ $26,208.33 $314,500 $8.99
300 Baby Superstores 36,900 Dec-96 Dec 01 10.17 61 @ $30,750.00 $369,000 $10.00 $10.50
Jan-02 Jan-07 61 @ $33,825.00 $405,900 $11.00
</TABLE>
7/18/97 1
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salon El Khouri 1,784 Sep-96 Aug-99 5.00 36 @ $2,973.33 $35,680 $20.00 $20.40
Sep-99 Aug-01 24 @ $3,122.00 $37,464 $21.00
420 Discount Travel 750 Jan-96 Jan-98 5.00 24 @ $1,673.75 $20,085 $26.78 $27.76
Feb-96 Jan-99 12 @ $1,723.75 $20,685 $27.58
Feb-99 Jan-00 12 @ $1,775.63 $21,308 $28.41
Feb-00 Jan-01 12 @ $1,828.75 $21,945 $29.26
430 Nail Talk 1,250 Jan-96 Jan-98 5.00 24 @ $2,896.88 $34,763 $27.81 $28.83
Feb-98 Jan-99 12 @ $2,983.33 $35,800 $28.64
Feb-99 Jan-00 12 @ $3,072.92 $36,875 $29.50
Feb-00 Jan-01 12 @ $3,165.63 $37,988 $30.39
440 Perimeter Cleaners 750 Dec-95 Dec-97 5.00 24 @ $1,802.50 $21,630 $28.84 $29.90
Jan-98 Dec-98 12 @ $1,856.83 $22,282 $29.71
Jan-99 Dec-99 12 @ $1,912.50 $22,950 $30.60
Jan-00 Dec-00 12 @ $1,969.38 $23,633 $31.51
450 Vacant 1,000 0.00 0 @ $0.00 $0.00
460 Hair Cuttery 1,084 Apr-96 Apr-98 5.08 25 @ $2,791.30 $33,496 $30.90 $32.02
May-98 Apr-99 12 @ $2,875.31 $34,504 $31.83
May-99 Apr-00 12 @ $2,961.13 $35,534 $32.78
</TABLE>
7/18/97 2
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
May-00 Apr-01 12 @ $3,049.65 $36,596 $33.76
470 Buckhead Fine Wine 2,084 Jul-96 Jul-99 3.08 37 @ $4,254.83 $51,058 $24.50 $24.50
490 Mattress Firm 3,388 Aug-96 Jul-97 5.00 12 @ $6,917.17 $83,006 $24.50 $26.30
Aug-97 Jul-98 12 @ $7,058.33 $84,700 $25.00
Aug-98 Jul-99 12 @ $7,481.83 $89,782 $26.50
Aug-99 Jul-00 12 @ $7,623.00 $91,476 $27.00
Aug-00 Jul-01 12 @ $8,046.60 $96,559 $28.50
500 Homeplace Stores 54,448 Nov-95 Oct-97 15.25 24 @ $72,597.33 $871,168 $16.00 $17.45
Nov-97 Oct-00 36 @ $74,866.00 $898,392 $16.50
Nov-00 Oct-05 60 @ $79,403.33 $952,840 $17.50
Nov-05 Jan-11 63 @ $83,940.67 $1,007,288 $18.50
600A Vacant (Office Depot) 30,000 Oct-97 Sep-07 10.00 120 @ $23,125.00 $277,500 $9.25 $9.25
600B Vacant 26,607 0.00 0 @ $0.00 $0.00
700 Goody's 30,560 May-97 Apr-00 10.00 36 @ $21,875.00 $262,500 $8.59 $8.84
May-00 Apr-04 48 @ $22,500.00 $270,000 $8.84
May-04 Apr-07 36 @ $23,125.00 $277,500 $9.08
800 Consign & Design 15,650 Jun-97 Dec-97 5.00 7 @ $5,416.67 $65,000 $4.15 $8.86
Jan-98 May-98 5 @ $10,833.33 $130,000 $8.31
</TABLE>
7/18/97 3
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Point As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jun-98 May-99 12 @ $11,510.42 $138,125 $8.83
Jun-99 May-00 12 @ $12,187.50 $146,250 $9.35
Jun-00 May-01 12 @ $12,864.58 $154,375 $9.86
Jun-01 May-02 12 @ $13,541.67 $162,500 $10.38
900 St. Joseph's Hospital 22,580 Sep-96 Aug-98 10.00 24 @ $48,001.31 $576,016 $25.51 $25.73
Sep-98 Aug-01 36 @ $47,098.12 $565,177 $25.03
Sep-01 Aug-06 60 @ $49,356.12 $592,273 $26.23
OPA Bertucci's 5,400 Feb-96 Feb-98 15.00 24 @ $10,833.33 $130,000 $24.07 $29.02
Mar-98 Feb-01 36 @ $11,483.33 $137,800 $25.52
Mar-01 Feb-03 24 @ $12,516.83 $150,202 $27.82
Mar-03 Feb-06 36 @ $13,267.83 $159,214 $29.48
Mar-06 Feb-08 24 @ $14,461.92 $173,543 $32.14
Feb-08 Feb-11 36 @ $15,329.67 $183,956 $34.07
OPB Chick-Fil-A 2,800 Oct-96 Oct-98 15.00 24 @ $7,500.00 $90,000 $32.14 $35.79
Nov-98 Oct-01 36 @ $7,875.00 $94,500 $33.75
Nov-01 Oct-06 60 @ $8,250.00 $99,000 $35.36
Nov-06 Oct-11 60 @ $9,075.00 $108,900 $38.89
OPC Max & Erma's 6,800 Feb-97 Jan-99 15.00 23 @ $11,250.00 $135,000 $19.85 $22.81
</TABLE>
7/18/97 4
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feb-99 Jan-02 36 @ $12,093.75 $145,125 $21.34
Feb-02 Jan-07 60 @ $13,000.75 $156,009 $22.94
Feb-07 Feb-12 61 @ $13,975.53 $167,710 $24.66
1010 BellSouth Mobilty, Inc. 2,000 Feb-96 Jan-98 5.00 24 @ $4,666.67 $56,000 $28.00 $29.26
Feb-98 Jan-01 36 @ $5,016.67 $60,200 $30.10
1020 Planet Smoothie 750 Sep-96 Sep-97 5.08 13 @ $1,812.50 $21,750 $29.00 $30.76
Oct-97 Sep-98 12 @ $1,866.88 $22,403 $29.87
Oct-98 Sep-99 12 @ $1,923.13 $23,078 $30.77
Oct-99 Sep-00 12 @ $1,980.63 $23,768 $31.69
Oct-00 Sep-01 12 @ $2,040.00 $24,480 $32.64
1030 Buckhead Fine Wine Bar 1,304 Aug-95 Aug-99 3.08 37 @ $3,042.67 $36,512 $28.00 $28.00
1040 Gorins Cafe & Grill 1,500 Aug-96 Jul-98 10.00 24 @ $3,125.00 $37,500 $25.00 $26.50
Aug-98 Jul-01 36 @ $3,250.00 $39,000 $26.00
Aug-01 Jul-04 36 @ $3,375.00 $40,500 $27.00
Aug-04 Jul-06 24 @ $3,500.00 $42,000 $28.00
1050 Starbucks Corporation 1,500 Mar-96 Mar-98 10.08 25 @ $3,125.00 $37,500 $25.00 $28.11
Apr-98 Mar-01 36 @ $3,360.00 $40,320 $26.88
Apr-01 Mar-03 24 @ $3,594.00 $43,128 $28.75
</TABLE>
7/18/97 5
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apr 03 Mar-06 36 @ $3,883.00 $46,596 $31.06
1100 United Artists Theatre 35,390 Dec 95 Dec-97 20.08 25 @ $50,430.75 $605,169 $17.10 $19.51
Jan 98 Dec-00 36 @ $51,610.42 $619,325 $17.50
Jan 01 Dec-05 60 @ $54,471.11 $653,653 $18.47
Jan-06 Dec-10 60 @ $59,366.73 $712,401 $20.13
Jan-11 Dec-15 60 @ $65,324.04 $783,888 $22.15
1020 Atlanta Bread Company 3,866 Dec-95 Jan-98 5.17 26 @ $8,376.33 $100,516 $26.00 $27.13
Feb-98 Jan-01 36 @ $9,004.56 $108,055 $27.95
====================================================================================================================================
Occupied Area 293,925
Vacant Area 57,607
=========
Total Area 351,532
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis Summary
================================================================================
Previous 0 to 12 Months
Total Area 134,365 SF
Number of Tenants 13
Average Tenant Size 10,336 SF
Total Minimum Rent $2,050,273
Average Minimum Rental Rate $15.26
Previous 13 to 24 Months
Total Area 159,560 SF
Number of Tenants 12
Average Tenant Size 13,297 SF
Total Minimum Rental Rate $2,699,645
Average Minimum Rental Rate $16.92
Previous 25 to 36 Months
Total Area 0 SF
Number of Tenants 0
Average Tenant Size 0 SF
Total Minimum Rental Rate $0
Average Minimum Rental Rate $0.00
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Rent Roll Analysis Summary
<TABLE>
<CAPTION>
==========================================================================================================
Total Percent
==========================================================================================================
Total Area
<S> <C> <C> <C>
Gross Leasable Area 351,532 SF 100.00% Number of Tenants 25
Occupied 293,925 SF 83.61% Average Tenant Size 11,757
------
Vacant 57,607 SF 16.39% Average Minimum Rental Rate $16.16
(Weighted)
Anchor Space
Gross Leasable Area 305,257 SF 100.00% Number of Tenants 8
Occupied 248.650 SF 81.46% Average Tenant Size 31,081
-------- ------
Vacant 56,607 SF 18.54% Average Minimum Rental Rate $14.48
(Weighted)
Small Shop Area
Gross Leasable Area 46,275 SF 100.00% Number of Tenants 17
Occupied 45,275 SF 97.84% Average Tenant Size 2,663
------
Vacant 1,000 SF 2.16% Average Minimum Rental Rate $25.38
(Weighted)
==========================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Previous 0 to 12 Months
800 Consign & Design 15,650 Jun-97 Dec-97 5.00 7 @ $5,416.67 $65,000 $4.15 $8.86
Jan-98 May-98 5 @ $10,833.33 $130,000 $8.31
Jun-98 May-99 12 @ $11,510.42 $138,125 $8.83
Jun-99 May-00 12 @ $12,187.50 $146,250 $9.35
Jun-00 May-01 12 @ $12,864.58 $154,375 $9.86
Jun-01 May-02 12 @ $13,541.67 $162,500 $10.38
700 Goody's 30,560 May-97 Apr-00 10.00 36 @ $21,875.00 $262,500 $8.59 $8.84
May-00 Apr-04 48 @ $22,500.00 $270,000 $8.84
May-04 Apr-07 36 @ $23,125.00 $277,500 $9.08
OPC Max & Erma's 6,800 Feb-97 Jan-99 15.00 23 @ $11,250.00 $135,000 $19.85 $22.81
Feb-99 Jan-02 36 @ $12,093.75 $145,125 $21.34
Feb-02 Jan-07 60 @ $13,000.75 $156,009 $22.94
Feb-07 Feb-12 61 @ $13,975.83 $167,710 $24.66
300 Baby Superstores 36,900 Dec-96 Dec-01 10.17 61 @ $30,750.00 $369,000 $10.00 $10.50
Jan-02 Jan-07 61 @ $33,825.00 $405,900 $11.00
OPB Chick-Fil-A 2,800 Oct-96 Oct-98 15.00 24 @ $7,500.00 $90,000 $32.14 $35.79
Nov-98 Oct-01 36 @ $7,875.00 $94,500 $33.75
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nov-01 Oct-06 60 @ $8,250.00 $99,000 $35.36
Nov-06 Oct-01 60 @ $9,075.00 $108,900 $38.89
Salon El Khouri 1,784 Sep-96 Aug-99 5.00 36 @ $2,973.33 $35,680 $20.00 $20.40
Sep-99 Aug-01 24 @ $3,122.00 $37,464 $21.00
100 Discount Party Warehouse 8,265 Sep-96 Aug-97 10.00 12 @ $10,331.25 $123,975 $15.00 $17.19
Sep-97 Aug-98 12 @ $10,641.19 $127,694 $15.45
Sep-98 Aug-99 12 @ $10,958.01 $131,496 $15.91
Sep-99 Aug-00 12 @ $11,281.73 $135,381 $16.38
Sep-00 Aug-01 12 @ $11,619.21 $139,431 $16.87
Sep-01 Aug-02 12 @ $11,970.48 $143,646 $17.38
Sep-02 Aug-03 12 @ $12,328.63 $147,944 $17.90
Sep-03 Aug-04 12 @ $12,700.55 $152,407 $18.44
Sep-04 Aug-05 12 @ $13,079.36 $156,952 $18.99
Sep-05 Aug-06 12 @ $13,471.95 $161,663 $19.56
900 St. Joseph's Hospital 22,580 Sep-96 Aug-98 10.00 24 @ $48,001.31 $576,016 $25.51 $25.73
Sep-98 Aug-01 36 @ $47,098.12 $565,177 $25.03
Sep-01 Aug-06 60 @ $49,356.12 $592,273 $26.23
1020 Planet Smoothie 750 Sep-96 Sep-97 5.08 13 @ $1,812.50 $21,750 $29.00 $30.76
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct-97 Sep-98 12 @ $1,866.88 $22,403 $29.87
Oct-98 Sep-99 12 @ $1,923.13 $23,078 $30.77
Oct-99 Sep-00 12 @ $1,980.63 $23,768 $31.69
Oct-00 Sep-01 12 @ $2,040.00 $24,480 $32.64
490 Mattress Firm 3,388 Aug-96 Jul-97 5.00 12 @ $6,917.17 $83,006 $24.50 $26.30
Aug-97 Jul-98 12 @ $7,058.33 $84,700 $25.00
Aug-98 Jul-99 12 @ $7,481.83 $89,782 $26.50
Aug-99 Jul-00 12 @ $7,623.00 $91,476 $27.00
Aug-00 Jul-01 12 @ $8,046.60 $96,559 $28.50
1030 Buckhead Fine Wine Bar 1,304 Aug-96 Aug-99 3.08 37 @ $3,042.67 $36,512 $28.00 $28.00
1040 Gorins Cafe & Grill 1,500 Aug-96 Jul-98 10.00 24 @ $3,125.00 $37,500 $25.00 $26.50
Aug-98 Jul-01 36 @ $3,250.00 $39,000 $26.00
Aug-01 Jul-04 36 @ $3,375.00 $40,500 $27.00
Aug-04 Jul-06 24 @ $3,500.00 $42,000 $28.00
470 Buckhead Fine Wine 2,084 Jul-96 Jul-99 3.08 37 @ $4,254.83 $51,058 $24.50 $24.50
Previous 13 to 24 Months
150 Michael's 18,122 May-98 May-99 13.83 37 @ $21,671.00 $280,052 $14.35 $15.76
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West@ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jun-99 May-04 60 @ $23,407.58 $280,891 $15.50
Jun-04 Feb-10 69 @ $25,280.00 $303,360 $16.74
460 Hair Cuttery 1,084 Apr-96 Apr-98 5.08 25 @ $2,791.30 $33,496 $30.90 $31.64
May-98 Apr-01 36 @ $2,875.31 $34,504 $31.83
May-01 Apr-00 -12 @ $2,961.13 $35,534 $32.78
May-00 Apr-01 12 @ $3,049.65 $36,596 $33.76
1050 Starbucks Corporation 1,500 Mar-96 Mar-98 10.08 25 @ $3,125.00 $37,500 $25.00 $28.11
Apr-98 Mar-01 36 @ $3,360.00 $40,320 $26.88
Apr-01 Mar-03 24 @ $3,594.00 $43,128 $28.75
Apr-03 Mar-06 36 @ $3,883.00 $46,596 $31.06
OPA Bertucci's 5,400 Feb-96 Feb-98 15.00 24 @ $10,833.33 $130,000 $24.07 $29.02
Mar-98 Feb-01 36 @ $11,483.33 $137,800 $25.52
Mar-01 Feb-03 24 @ $12,516.83 $150,202 $27.82
Mar-03 Feb-06 36 @ $13,267.83 $159,214 $29.48
Mar-06 Feb-08 24 @ $14,461.92 $173,543 $32.14
Feb-08 Feb-11 36 @ $15,329.67 $183,956 $34.07
420 Discount Travel 750 Jan-96 Jan-98 5.00 24 @ $1,673.75 $20,085 $26.78 $27.76
Feb-98 Jan-99 12 @ $1,723.75 $20,685 $27.58
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feb-99 Jan-00 12 @ $1,775.63 $21,308 $28.41
Feb-00 Jan-01 12 @ $1,828.75 $21,945 $29.26
430 Nail Talk 1,250 Jan-96 Jan-98 5.00 24 @ $2,896.88 $34,763 $27.81 $28.83
Feb-98 Jan-99 12 @ $2,983.33 $35,800 $28.64
Feb-99 Jan-00 12 @ $3,072.92 $36,875 $29.50
Feb-00 Jan-01 12 @ $3,165.63 $37,988 $30.39
1010 Bell South Mobility, Inc. 2,000 Feb-96 Jan-98 5.00 24 @ $4,666.67 $56,000 $28.00 $29.26
Feb-98 Jan-01 36 @ $5,016.67 $60,200 $30.10
440 Perimeter Cleaners 750 Dec-95 Dec-97 5.00 24 @ $1,802.50 $21,630 $28.84 $29.90
Jan-98 Dec-98 12 @ $1,856.83 $22,282 $29.71
Jan-99 Dec-99 12 @ $1,912.50 $22,950 $30.60
Jan-00 Dec-00 12 @ $1,969.38 $23,633 $31.51
200 Stein Mart, Inc. 35,000 Dec-95 Nov-00 15.00 60 @ $23,375.00 $280,500 $8.01 $8.50
Dec-00 Nov-05 60 @ $24,791.67 $297,500 $8.50
Dec-05 Nov-10 60 @ $26,208.33 $314,500 $8.99
1020 Atlanta Bread Company 3,866 Dec-95 Jan-98 5.17 26 @ $8,376.33 $100,516 $26.00 $27.13
Feb-98 Jan-01 36 @ $9,004.56 $108,055 $27.95
1100 United Artists Theatre 35,390 Dec-95 Dec-97 20.08 25 @ $50,430.75 $605,169 $17.10 $19.51
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Perimeter Pointe-As of July, 1997
Perimeter Center West @ Mount Vernon Highway
Atlanta, Fulton County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-98 Dec-00 36 @ $51,610.42 $619,325 $17.50
Jan-01 Dec-05 60 @ $54,471.11 $653,653 $18.47
Jan-06 Dec-10 60 @ $59,366.73 $712,401 $20.13
Jan-11 Dec-15 60 @ $65,324.04 $783,888 $22.15
500 Homeplace Stores 54,448 Nov-95 Oct-97 15.25 24 @ $72,597.33 $871,168 $16.00 $17.45
Nov-97 Oct-00 36 @ $74,866.00 $898,392 $16.50
Nov-00 Oct-05 60 @ $79,403.33 $952,840 $17.50
Nov-05 Jan-11 63 @ $83,940.67 $1,007,288 $18.50
====================================================================================================================================
Total Area 293,925
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
Summary of In-Line Leases Starting Within The Last Two Years
Perimeter Pointe
Arranged By Size
================================================================================
Average
Annual
Square Term Lease
Suite Tenant Feet (Yrs) Rate
================================================================================
Shops < 1,000 SF
1020 Planet Smoothie 750 5.1 $30.76
420 Discount Travel 750 5.0 $27.76
440 Perimeter Cleaners 750 5.0 $29.90
Shops with 1,001-2,000 SF
460 Hair Cuttery 1,084 5.1 $31.54
430 Nail Talk 1,250 5.0 $28.83
1030 Buckhead Fine Wine Bar 1,304 3.1 $28.00
1040 Gorins Cafe & Grill 1,500 10.0 $26.50
1050 Starbucks Corporation 1,500 10.1 $28.11
Salon El Khouri 1,784 5.0 $20.40
Shops with 2,001-5,000 SF
1010 BellSouth Mobility, Inc. 2,000 5.0 $29.26
470 Buckhead Fine Wine 2,084 3.1 $24.50
490 Mattress Finn 3,388 5.0 $26.30
1020 Atlanta Bread Company 3,866 5.2 $27.13
Shops >5,000 SF
100 Discount Party Warehouse 8,265 10.0 $17.19
Free Standing Stores on Outparcels
OPA Bertucci's 5,400 15.0 $29.02
OPC Max & Erma's 6,800 15.0 $22.81
OPB Chick-Fil-A 2,800 15.0 $35.79
============
Total 45,275
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Summary of Recovery Provisions & % Clause @ Town Center Prado Center
Perimeter Pointe
CAM Insurance Real Estate Taxes Denominator
-------------------------- ---------------------- --------------------- ------------- % Rent
GLA Share % Admin. Fee Share % Admin. Fee Share % Admin. Fee Clause
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100 Discount Party 8,265 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 5.0%
150 Michael's 18,122 Pro Rata (2),(3) 10.0% Pro Rata 0.0% Pro Rata 0.0% GIA of Center 0.0%
200 Stein Mart 35,000 Pro Rata (2),(3) 15.0% Pro Rata 0.0% Pro Rata 0.0% GLA of Center 2.0%
300 Baby Superstores 35,900 Pro Rata (2),(3) 8.0% Pro Rata 0.0% Pro Rata 0.0% GLA of Center 0.0%
410 Salon El-Khouri 1,784 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 0.0% GLA of Center 4.0%
420 Discount Travel 750 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 0.0%
430 Nail Talk 1,250 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 5.0%
440 Perimeter Cleaners 750 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 5.0%
460 Hair Cuttery 1,084 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 5.00%
470 Buckhead Fine Wine 2,084 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 0.0% GLA of Center 0.0%
490 Mattress Firm 3,388 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 0.0% GLA of Center 3.0%
500 Homeplace 54,448 Pro Rata (2),(3) 7.5% Pro Rata 0.0% Pro Rata 0.0% GLA of Center 0.0%
700 Goody's 30,560 Pro Rata (1) 10.0% Pro Rata 10.0% Pro Rata 0.0% GLA of Center 3.0%
800 Consign & Design 16,250 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 0.0% GLA of Center 0.0%
900 St. Joseph's Hospital 22,580 Pro Rata (1) 10.0% Pro Rata 10.0% Pro Rata 0.0% GLA of Center 0.0%
OPA Bertucci 5,400 Pro Rata (1),(3) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 0.0%
OPB Chick-Fil-A 2,800 (4) PRS None 0.0% GLA of Center 0.0%
OPC Max & Erma's 6,800 (4) PRS None 0.0% GLA of Center 0.0%
1010 Bell South Mobility 2,000 Pro Rata (2) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 0.0%
1020 Planet Smoothie 750 Pro Rata (2) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 0.0%
1030 Buckhead Wine Bar 1,304 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 0.0% GLA of Center 0.0%
1040 Gorins 1,500 Pro Rata (1) 15.0% Pro Rats 15.0% Pro Rata 0.0% GLA of Center 4.0%
1050 Starbucks 1,500 Pro Rata (2) 15.0% Pro Rata 0.0% Pro Rata 0.0% GLA of Center 0.0%
1100 Theatre 35,390 Pro Rata (2),(3) 15.0% Pro Rata 0.0% Pro Rata 0.0% GLA of Center 4.0%
1020 Atlanta Bread 3,866 Pro Rata (1) 15.0% Pro Rata 15.0% Pro Rata 15.0% GLA of Center 5.0%
-------
294,525
-------------------------------------------------------------------------------------------------------------------
1. CAM includes management fee, depreciation of equipment, and reserves for roof/parking lot repair.
2. CAM excludes management fee but includes depreciation and reserves.
3. Atypical CAM composition. CAM excludes one or more of the following: trash removal and fire protection services.
4. Fixed CAM @ $4,000/year growing by $0.05/sf every five years.
-------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NATIONAL DATABASE OF SALES
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
===============================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================
<TABLE>
<CAPTION>
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA % of Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. Pending 1981 $76,200,000 1,643,083 23.0% 377,965 153,355 40.6%
NEC/Sepulveda Blvd. & Marina Jul-97 Good
Los Angeles County,
Manhattan Beach, California
- ------------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7%
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center Jun-97 N/A $39,174,000 - - 213,603 87,813 41.1%
Metro Center Good
San Mateo County
Colma, California
- ------------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226 45.0%
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461 55.8%
Fremont Blvd. & Monty Ave. Good
Alameda County,
Fremont, California
- ------------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village Mar-97 1979/94 $73,500,000 - - 418,356 - -
LaJolla, California Good
- ------------------------------------------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. Mar-97 1990 $22,000,000 1,817,759 18.5% 336,670 102,220 30.4%
SEQ/ I-880 & Highway 37 Good
Solano County,
Vallejo, California
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000 84.2%
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
9 Carrollton Crossroads Jan-97 1987 $18,100,000 - - 303,805 234,453 77.2%
US Hwy. 27 & Hwy. 166 Good
Carrollton, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
10 Westminster Center Dec-96 1991 $51,750,000 1,829,520 20.0% 365,699 - -
Golden West Ave. & Westminster Good
Orange County
Westminster, California
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404 84.1%
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- ------------------------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center Nov-96 1995 $34,600,000 - - 499,129 459,209 92.0%
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
13 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000 85.0%
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
- ------------------------------------------------------------------------------------------------------------------------------------
14 Prestonwood Village Sep-96 1980 $14,660,000 701,752 27.1% 190,131 123,454 64.9%
5305 Arapaho Road Good
Dallas County,
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Sale
Sale Price/ NOI/
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants
=====================================================================================================
<S> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. $201.61 $15.87 7.87% Ralph's Sav-On,
NEC/Sepulveda Blvd. & Marina Mann Theaters,
Los Angeles County, Macy's Mens
Manhattan Beach, California
- -----------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. $112.19 $11.21 9.99% Bed Bath & Beyond,
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million,
Orlando, Florida Shoe Carnival
- -----------------------------------------------------------------------------------------------------
3 280 Metro Center $183.40 $15.50 8.45% Marshalls, Nordstrom
Metro Center Rack, Kids R Us, Old
San Mateo County Navy, Barnes & Noble
Colma, California
- -----------------------------------------------------------------------------------------------------
4 Smoketown Station $99.06 $10.13 10.23% Lowe's Home Center
Prince William Pkwy & Worth Shoppers Food Whse,
Prince William County, Best Buy
Woodbridge, Virginia
- -----------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. $91.41 $8.00 8.75% Safeway, Ross, Longs
Fremont Blvd. & Monty Ave. Drug, Old Navy,
Alameda County, OfficeMax,
Fremont, California Tower Records
- -----------------------------------------------------------------------------------------------------
6 LaJolla Village $175.69 $15.81 9.00% Smith's Food King,
LaJolla, California AMC Theaters, Ross,
Marshalls, Super Crown
- -----------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. $65.35 $6.02 9.21% OfficeMax, Ross, PetCo,
SEQ/ I-880 & Highway 37 Vacant HomeBase,
Solano County, Service Mer'dise
Vallejo, California (gr.lease)
- -----------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just for
Austin, Texas Feet, Mikasa
- -----------------------------------------------------------------------------------------------------
9 Carrollton Crossroads $59.58 $6.43 10.80% Wal-Mart, Goody's,
US Hwy. 27 & Hwy. 166 JCPenney, Kroger
Carrollton, Georgia
- -----------------------------------------------------------------------------------------------------
10 Westminster Center $141.51 $11.76 8.31% Home Deport, Edwards
Golden West Ave. & Westminster Cinema, Lucky Super-
Orange County market, Thrifty Drug
Westminster, California
- -----------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter $96.98 $8.87 9.15% Kmart, HomeDepot, Toys
N. Jantzen Dr & N. Center Ave RUs, REI, Ross, Comp.
Portland, Oregon City, Copelands, Linens,
OldNavy, Barnes&Noble
- -----------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- -----------------------------------------------------------------------------------------------------
13 Centennial Plaza $71.37 $7.49 10.50% Home Depot, Best Buy,
N.W. 59 & May Avenue Home Place
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------------------------------
14 Prestonwood Village $77.10 $9.27 12.02% Best Buy, ToysRUs,
5305 Arapaho Road KidsRUs, Drug
Dallas County, Emporium
Dallas, Texas
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Sale Occupancy
No. Name/Location At Sale Comments
================================================================================================
<S> <C> <C>
1 Manhattan Village S.C. 93.3%
NEC/Sepulveda Blvd. & Marina
Los Angeles County,
Manhattan Beach, California
- -------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. 100.0% New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%
- -------------------------------------------------------------------------------------------------
3 280 Metro Center 99.0% 351,632sf ctr. known as the country's
Metro Center first "power" ctr. IRR appx. 10.76% w/
San Mateo County term.cap. of 9.5%. UACinema, vacant
Colma, California Home Depot, & NYFabric not incl.
- -------------------------------------------------------------------------------------------------
4 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth hub for county. Anchor rents $8.40/sf; in-
Prince William County, line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- -------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. - 661,140sf ctr. orginally constructed as
Fremont Blvd. & Monty Ave. regional ctr. Converted b/w '92-'94.
Alameda County, Anchors not incl. in GLA sold are Mont-
Fremont, California gomery Ward & Home Express
- --------------------------------------------------------------------------------------------------
6 LaJolla Village - Solus to Prudential.
LaJolla, California
- -------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. 90.1% Sale of ctr. w/ 3 future pad sites to
SEQ/ I-880 & Highway 37 accommodate 25,600sf addition. Anchors
Solano County, not incl. ToysRUs, Costco, SaveMart,
Vallejo, California Longs, Cinedome, HomeDepot
- -------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) 98.0% Presale of promotional center. Sale
U.S. Highway 183 & expected to close by Jan. 31, 1997.
N. Mopac Blvd. REIT purchase based on direct cap.
Austin, Texas
- -------------------------------------------------------------------------------------------------
9 Carrollton Crossroads 98.5% Location 32 miles west of downtown
US Hwy. 27 & Hwy. 166 Atlanta. Renovated in 1993. Within 10-
Carrollton, Georgia mile radius - 20,162 households,
$41,800 avg. household income.
- -------------------------------------------------------------------------------------------------
10 Westminster Center 93.0% Ctr. reportedly developed at cost of $45
Golden West Ave. & Westminster million by IDM Corp. Avg. lease rate for in
Orange County line space $15-$27/sf.
Westminster, California
- -------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave gomery Ward & Kmart anchor enclosed
Portland, Oregon mall of 87,500 square feet. Montgomery
Ward on ground lease.
- -------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management
Lawrenceville, Georgia * Ground Lease
- -------------------------------------------------------------------------------------------------
13 Centennial Plaza 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue writing. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-9.25%
interest. REIT buyer.
- -------------------------------------------------------------------------------------------------
14 Prestonwood Village 97.0% Ctr. purchased at high cap due to some
5305 Arapaho Road rents being above mkt., flat income
Dallas County, stream, & 13,770sf of 2nd story space.
Dallas, Texas
- -------------------------------------------------------------------------------------------------
</TABLE>
Page 1
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
============================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200 41.9%
I-85 @ W. T. Harris Blvd. Excellent
Charlotte, North Carolina
- ----------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384 43.6%
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ----------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza Jul-96 1992 $12,700,000 653,000 32.2% 210,000 149,760 71.3%
Mesquite, Good
Dallas County, Texas
- ----------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837 73.2%
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- ----------------------------------------------------------------------------------------------------------------------------
19 Casa Linda Jun-96 1950/86 $33,769,000 1,128,640 28.9% 326,116 -- --
Garland Rd. & Buckner Blvd. Good
Dallas County,
Dallas, Texas
- ----------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center May-96 1970 $58,500,000 1,290,683 26.8% 345,286 104,244 30.2%
Lee Jackson Hwy. & Majestic Ln. Good
Fairfax County,
Chantilly, Virginia
- ----------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza Mar-96 1972/82/93 $14,375,000 737,906 20.0% 147,396 122,052 82.8%
NEC/Federal & Candlewood Lake Good
Fairfield County,
Brookfield, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
22 Kmart Center Feb-96 1994/95 $23,134,700 1,224,036 22.6% 276,500 140,221 50.7%
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
- ----------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace Jan-96 1976/91 $80,000,000 1,000,573 45.9% 459,703 218,929 47.6%
Mexella & Lincoln Blvd. Good
Marina Freeway
Marina Del Rey, California
- ----------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center Jan-96 1989 $15,950,000 9,439,450 2.5% 235,892 -- --
1915 Hurstbourne Parkway Good
Jefferson County
Louisville, Kentucky
- ----------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta Dec-95 1995/96 $46,000,000 -- -- 491,000 440,000 89.6%
S/E/C Shea Blvd. & Excellent
Pina Co. Road
Scottsdale, Arizona
- ----------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square Dec-95 1983 $24,835,000 1,104,246 28.7% 317,197 190,318 60.0%
ES/I-45 & at Bay Blvd. Good
Houston
Webster, Texas
- ----------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village Dec-95 1995 $50,000,000 1,393,920 24.9% 347,699 254,979 73.3%
WS/Ashford Dunwoody, Under Excellent
North of downtown Atlanta Contract
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner Nov-95 1970/89 $29,500,000 867,846 21.5% 186,734 96,833 51.9%
Route 71 & I-84 Good
Hartford County
West Hartford, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
15 The Village at University Place $ 99.85 $ 9.84 9.85% Best Buy, Office Depot, 100.0% Other anchors at center are
I-85 @ W. T. Harris Blvd. TJ Maxx, Rhodes Wal-Mart and Sam's Club. This
Charlotte, North Carolina Furniture is a pre-sale of new center
developed by Hawn.
- ------------------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza $ 78.13 $ 7.81 10.00% Publix 92.0% Community center; block &
13898 SW 56th Street Eckerd Drug stucco. Fair-avg exposure.
Dade County, Theater (gr. lease) Anchor rents appx. $7-$9/sf;
Kendall, Miami, Florida J. Byrons (not owned) in-line shops $12-$19/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza $ 60.48 $ 6.65 11.00% Best Buy, Sears Home 100.0% REIT buyer using direct cap
Mesquite, Life, PetsMart, Home only.
Dallas County, Texas Depot* * Home Depot is tenant owned.
- ------------------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place $128.83 $12.11 9.40% Marshalls, Steinmart, 100.0% New ctr. in affluenct area.
SWC/Preston & Park Blvd. Office Depot, Baby Traffic counts > 37,000 &
Colling County, Superstore, MJ Des., 45,000/day. Buyer used 10.5%
Plano, Texas Borders, HomePlace IRR & 9.25% terminal cap in
analysis. Avg. rent =
$15.73/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
19 Casa Linda $103.55 $ 9.84 9.50% Albertsons, Blockbuster 84.0% Older section of eastern
Garland Rd. & Buckner Blvd. Music, Ambers Crafts Dallas. Good condition at
Dallas County, sale. Sale based on existing
Dallas, Texas income.
- ------------------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center $169.42 $14.94 8.82% CVS, LinensNThings, 84.0% Part of bulk property
Lee Jackson Hwy. & Majestic Ln. Marshalls, Ross, Total purchase; price allocated &
Fairfax County, Beverage, Giant Food adjusted for assumption of
Chantilly, Virginia existing debt at above mkt.
inter. rate. NOI proj. in '97
results in 9.2% OAR.
- ------------------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza $ 97.53 $ 9.00 9.22% OfficeMax, The Wiz, 99.0% Property does not have anchor
NEC/Federal & Candlewood Lake Waldbaums, T.J.Maxx > 50,000 sf but has good
Fairfield County, juniors. In-line rents are
Brookfield, Connecticut $9-$18/sf; Wiz & OfficeMax
$13.50/sf; TJMaxx and Wald.
below market.
- ------------------------------------------------------------------------------------------------------------------------------------
22 Kmart Center $ 83.67 $ 7.93 9.48% Kmart 97.0% Community center; block &
10501 Pines Boulevard Food Lion tilt; good exposure. Rental
Broward County, rates range from $8-$20/sf.
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace $174.03 $18.43 10.59% Vons, Sav-On, 92.0% Project consists of 2
Mexella & Lincoln Blvd. UA Theatres, Sport properties; 2nd largest
Marina Freeway Chalet, Cineplex retail ctr. west of San Diego
Marina Del Rey, California Odeon, Gelson's Fwy b/w Ventura Fwy &
Manhattan.
Sales= $347/sf;
rents=$12-45/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center $ 67.62 $ 6.49 9.60% Wal-Mart 100.0% Good quality center in prime
1915 Hurstbourne Parkway Staples retail location. Rents
Jefferson County Michael's $12-$16/sf. Wal-Mart w/ sales
Louisville, Kentucky Fashion Bug @ $400/sf. Property in good
condition at sale.
- ------------------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta $ 93.69 $ 9.37 10.00% HomeBase, Kmart, 100.0% Separate take down of Home
S/E/C Shea Blvd. & OfficeMax, Smith's, Base as of 3/96. Total
Pina Co. Road Barnes&Noble, Comp transaction contracted 12/95.
Scottsdale, Arizona USA, Linens, PetSmart New center in developing
area.
- ------------------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square $ 78.30 $ 7.24 9.25% Target 100.0% Price adj. to incl. $1.0M in
ES/I-45 at Bay Blvd. Service Merchandise renovations done prior to
Houston Palais Royal sale. Buyer used IRR of
Webster, Texas 11.25-11.50%. Ctr. has good
visibility and access.
- ------------------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village $143.80 $16.54 11.50% Wal-Mart 93.0% Concrete block, brick facade
WS/Ashford Dunwoody, Borders Books shopping center under
North of downtown Atlanta Rhodes Furniture construction. Under contract
Atlanta, Georgia Reading China as of Dec-95. Shop leases run
from $18-30/sf; avg. $25/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner $157.98 $14.98 9.48% Filene's Basement 96.1% Specialty retail center
Route 71 & I-84 Toys R Us located across from Westfarms
Hartford County Kids R Us Mall at I-84. Strong trade
West Hartford, Connecticut Old Navy area. Renovated in 1989.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=========================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook Nov-95 1985/93 $25,675,000 1,742,535 24.5% 426,097 372,987 87.5%
NEC/Medical Ctr. Blvd. & I-45 Good
Houston
Webster, Texas
- -------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. Sep-95 1990 $14,000,000 923,472 20.3% 187,168 114,086 61.0%
SEC/Route 53 & Briarcliff Rd. Good
DuPage County
Bolingbrook, Illinois
- -------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II Jul-95 1995 $ 9,655,000 435,600 22.7% 98,954 75,454 76.3%
NWC/Mt. Zion Blvd. & Zion Under Excellent
Clayton County Contract
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. May-95 1980/89 $19,000,000 583,704 30.7% 179,000 70,566 39.4%
Route 112 & Bicycle Path Average
Suffolk County
Port Jefferson, New York
- -------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square May-95 1980/87 $ 9,200,000 435,600 22.7% 98,704 58,078 58.8%
1715 Howell Mill Road Very Good
Fulton County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
34 Cobb Place Apr-95 1987 $21,035,000 1,013,206 23.5% 237,791 133,161 56.0%
800 Ernest Barrett Pkwy. Good
Cobb County
Kennesaw, Georgia
- -------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. Apr-95 1991 $21,000,000 1,184,334 14.4% 170,406 88,807 52.1%
NEC/Route 22 & Buffalo Gr. Very Good
Lake County
Buffalo Grove, Illinois
- -------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134 81.1%
Santa Clara County Excellent
Milpitas, California
- -------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center Mar-95 1994 $12,300,000 875,164 18.4% 160,965 135,216 84.0%
Route 59 & Meridian Pkwy Good
DuPage County
Aurora, Illinois
- -------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center Feb-95 1990 $14,400,000 478,768 24.4% 117,025 97,735 83.5%
800-850 Playa Avenue Good
Monterey County
Sand City, California
- -------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III Feb-95 1995 $ 9,100,000 415,998 22.1% 92,000 92,000 100.0%
SS/Steve Reynolds Blvd. Excellent
Gwinnett County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. Jan-95 1982 $ 7,425,000 457,380 17.1% 78,390 41,345 52.7%
2090 Dunwoody Club Dr. Good
DeKalb County
Georgia
- -------------------------------------------------------------------------------------------------------------------------
41 Danbury Square Jan-95 1989 $19,250,000 840,708 22.9% 192,621 78,700 40.9%
Kenosia Ave. & I-84 Good
Fairfield County
Danbury, Connecticut
- -------------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing Dec-94 1994 $34,400,000 1,481,040 21.6% 319,499 202,229 63.3%
NWC/Georgia 400 & Mansell Excellent
Fulton County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook $ 60.26 $ 6.03 10.00% Builder's Sq., Bed 99.0% Former mall renovated/converted in
NEC/Medical Ctr. Blvd. & I-45 Bath Beyond, 1993. Good location, exposure.
Houston Oshmans, SteinMart Anchors generate over 90% of minimum
Webster, Texas Best Buy, Sears rent. Avg in-line rent = $12.03/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. $ 74.80 $ 7.75 10.36% Wal-Mart 96.0% Wal-Mart has option to expand
SEC/Route 53 & Briarcliff Rd. 30,000. Located in growing retail
DuPage County area. Other tenants incl. Aldi Food
Bolingbrook, Illinois Store, Bedding Experts, & fast food
restaurants.
- ------------------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II $ 97.57 $ 9.18 9.41% Michael's 100.0% New community center located next to
NWC/Mt. Zion Blvd. & Zion Old Navy freestanding Target, Home Depot, &
Clayton County Baby Superstore Southlake Ph. I Buyer used 5%
Atlanta, Georgia vac-ancy factor & $.10/sf reserve.
- ------------------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. $106.15 $10.72 10.10% FoodTown 99.0% Average quality community center.
Route 112 & Bicycle Path CVS Drugstore Other tenants include Kay Bee Toy,
Suffolk County Dress Barn, Sam Goody, NYNEX.
Port Jefferson, New York
- ------------------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square $ 93.21 $ 9.09 9.75% Kroger 100.0% Good quality brick & masonry ctr.
1715 Howell Mill Road located in densely populated trade
Fulton County area. Korger provides strong daily
Atlanta, Georgia draw; ctr. has poor visibility.
- ------------------------------------------------------------------------------------------------------------------------------------
34 Cobb Place $ 88.46 $ 9.56 10.81% Service M'dise 96.0% Good quality center with limited
800 Ernest Barrett Pkwy. Upton's exposure & narrow configuration.
Cobb County AMC Theatres Ctr. has high amount of in-line
Kennesaw, Georgia space & lacks drawing power of 4th
anchor store.
- ------------------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. $123.24 $11.53 9.36% Dominick's 98.0% Property includes three outlots, one
NEC/Route 22 & Buffalo Gr. Sears Hardware of which was zoned industrial (5.03
Lake County ac.). Also includes income from
Buffalo Grove, Illinois ground leases.
- ------------------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch $113.97 $10.60 9.30% Service M'dise 100.0% Pre-sale of power ctr with good
Santa Clara County SportsMart, Borders, access & freeway exposure. Wal-Mart
Milpitas, California OfficeMax, PetsMart, not included in sale. Buyer used
Computer City, Ross 11.2% IRR. Anchor rents
$9.70-18.70/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center $ 76.41 $ 7.63 9.99% Builders Square 100.0% Concrete block, decorative face
Route 59 & Meridian Pkwy PetsMart brick center; above average quality.
DuPage County Located on the fringe of Meridian
Aurora, Illinois Business Campus.
- ------------------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center $123.05 $12.06 9.80% Office Depot 96.7% Good quality power ctr along Hwy 1.
800-850 Playa Avenue Marshalls Costco owns their own land/bldg.
Monterey County Orchard Supply Anchor rents $8.00-10.77/sf; shop
Sand City, California Costco** rents avg $16.56/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III $ 98.91 $ 9.25 9.35% Circuit City 100.0% Two anchor tenants in power center.
SS/Steve Reynolds Blvd. Media Play Both tenants on long-term leases
Gwinnett County with appx. 20 yrs remaining. Located
Atlanta, Georgia near Gwinnett Mall in Northcross
area.
- ------------------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. $ 94.72 $ 9.06 9.56% Kroger 80.0% Average-good quality community
2090 Dunwoody Club Dr. center. Sale based on actual income
DeKalb County & expenses, excl. reserves. Seller
Georgia acquired through foreclosure.
- ------------------------------------------------------------------------------------------------------------------------------------
41 Danbury Square $ 99.94 $ 9.52 9.53% Loehmann's 90.0% Good quality community shopping
Kenosia Ave. & I-84 Toys R Us center located adjacent to Danbury
Fairfield County Kids R Us Fair regional mall.
Danbury, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing $107.67 $ 9.80 9.10% AMC Theatres, 99.0% One-story, concrete blk & brick
NWC/Georgia 400 & Mansell Uptons, TJMaxx, center located appx 0.8 miles south
Fulton County OfficeMax, of North Point Mall. Avg shop
Atlanta, Georgia Sports Authority rent=$15.23/sf. Ctr also has Toys R
Us, Michaels.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=====================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
43 Stewart Plaza Dec-94 1990 $22,000,000 561,924 39.6% 222,500 146,504 65.8%
650 Stewart Avenue Good
Nassau County
Garden City, New York
- ---------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South Nov-94 1989/93 $ 6,500,000 866,844 18.8% 162,778 134,659 82.7%
Highway 138 & I-675 Good
Clayton County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza Sep-94 1975/91 $57,350,000 2,178,000 21.8% 475,600 262,236 55.1%
NW 56th & Sheridan St. Good
Broward County
Hollywood, Florida
- ---------------------------------------------------------------------------------------------------------------------
46 Orland Town Center Sep-94 1994 $12,000,000 871,200 15.4% 134,000 55,873 41.7%
SEC/159th & 95th Ave. Excellent
Cook County
Orland Hills, Illinois
- ---------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center Sep-94 1994 $21,800,000 1,089,000 21.1% 230,000 127,267 55.3%
Lyman Ave. & 75th St. Excellent
DuPage County
Darien, Illinois
- ---------------------------------------------------------------------------------------------------------------------
48 Latham Farms Sep-94 1993 $64,600,000 3,920,400 15.4% 603,405 467,000 77.4%
I-87, U.S. 9, & Rte. 7 Excellent
Albany County, Colonie,
Albany, New York
- ---------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center Aug-94 1987 $20,500,000 632,491 33.6% 212,355 53,500 25.2%
SWC/ Ludlam Rd. & Bird Rd. Avg.-Good
Dada County,
Unicorp. Miami, Florida
- ---------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace Aug-94 1992 $14,850,000 1,785,960 9.7% 173,538 0 0.0%
SWC/Garland & Jupiter Good
Dallas, Texas
- ---------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair Aug-94 1992 $18,650,000 1,724,976 12.1% 209,362 0 0.0%
SWC/U.S. 190 & Brodie Good
Austin, Texas
- ---------------------------------------------------------------------------------------------------------------------
52 Southlake Pavillion Aug-94 1994 $12,500,000 539,273 24.8% 133,515 114,800 86.0%
NWC/Mt. Zion Blvd. & Zion Excellent
Clayton County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
53 Anaheim Hills Festival Jul-94 1991-94 $48,980,000 3,702,600 8.2% 303,661 146,755 48.3%
8000-8200 E. Santa Ana Very Good
Orange County
Anaheim Hills, California
- ---------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavillion Jul-94 1993 $18,400,000 248,292 40.3% 100,161 67,608 67.5%
Peachtree & Piedmont Very Good
Buckhead County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. Jul-94 1992-93 $51,000,000 2,090,880 27.6% 576,973 279,600 48.5%
U.S. 101 at Rowland Very Good
Marin County
Novato, California
- ---------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavillion Jun-94 1993-94 $31,750,000 153,767 112.8% 173,430 150,570 86.8%
Hale & Maple Avenues Good
Westchester County
White Plains, New York
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
43 Stewart Plaza $ 98.88 $ 9.89 10.00% Caldor 86.0% Good quality community shopping
650 Stewart Avenue Kiddie City center located adjacent to the
Nassau County Roosevelt Field Mall in Garden City.
Garden City, New York
- ------------------------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South $ 39.93 $ 4.06 10.16% Kmart 99.0% Average-good quality, concrete retail
Highway 138 & I-675 Bruno's ctr. on south side Atlanta.
Clayton County Visibility impaired by outpads &
Atlanta, Georgia setback. Price adjusted to reflect
repair costs.
- ------------------------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza $120.58 $10.97 9.10% Office Depot 95.0% Power center purchase based on a
NW 56th & Sheridan St. Publix 10.8% IRR, term. cap of 9.25-9.50%.
Broward County J. Byrons Sale included development of 15,000sf
Hollywood, Florida AMC Theatres Luria's. Sales b/w $200-300/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
46 Orland Town Center $ 89.55 $ 8.58 9.58% OfficeMax 100.0% Purchased on existing income.
SEC/159th & 95th Ave. Circuit City Wal-Mart not included in sale. Site
Cook County PetsMart had potential for additional bldg.
Orland Hills, Illinois Wal-Mart** Buyer quoted IRR of 10.8%.
- ------------------------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center $ 94.78 $ 9.16 9.66% Home Depot 100.0% Power center opened in Summer '94.
Lyman Ave. & 75th St. Circuit City Wal-Mart not included in sale.
DuPage County PetsMart Majority of tenants have set options.
Darien, Illinois Wal-Mart** Buyer suggested 10.7% IRR.
- ------------------------------------------------------------------------------------------------------------------------------------
48 Latham Farms $107.06 $10.01 9.35% Wal-Mart 95.0% Good quality power center with trade
I-87, U.S. 9, & Rte. 7 Sam's Club area population reported at 150,000.
Albany County, Colonie, Home Quarters Placed on mkt in March '94. Masonry &
Albany, New York Shop 'N Save steel constr.
- ------------------------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center $ 96.54 $ 8.80 9.12% Winn Dixie 95.0% Property in avg.-good condition at
SWC/ Ludlam Rd. & Bird Rd. Eckerd Drugs sale; minor exterior upgrade needed.
Dada County, Good accessible/visible location.
Unicorp. Miami, Florida Some 2nd story space.
- ------------------------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace $ 85.57 $ 7.70 9.00% Marshall's 94.0% Part of larger 325,548sf power
SWC/Garland & Jupiter Tom Thumb center. Good condition, relatively
Dallas, Texas Taylor Brooks new at sale. Purchased by Penn. State
Retirement Trust.
- ------------------------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair $ 89.08 $ 8.79 9.87% PetsMart 99.0% Part of larger 352,084sf ctr.
SWC/U.S. 190 & Brodie TJMaxx Other tenants incl.
Austin, Texas Home Depot** SportsTown, Bookstop, Famous
Circuit City** Footware. Home Depot, Circuit City &
Luby's not included.
- ------------------------------------------------------------------------------------------------------------------------------------
52 Southlake Pavillion $ 93.62 $ 8.72 9.31% Media Play 100.0% Center located adjacent to Home Depot
NWC/Mt. Zion Blvd. & Zion PetsMart store w/ 3rd highest sales level in
Clayton County Rhodes Furniture Atlanta MSA. Good access & exposure
Atlanta, Georgia via I-75.
- ------------------------------------------------------------------------------------------------------------------------------------
53 Anaheim Hills Festival $161.30 $15.32 9.50% Vons, Marshalls, 75.0% Good quality power center with
8000-8200 E. Santa Ana TJMaxx, Cinema, stabilization guarantee. Buyer
Orange County Target** purchased based on NOI guarantee.
Anaheim Hills, California Mervyn's** Target & Mervyn's not part of sale.
- ------------------------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavillion $183.70 $16.55 9.01% Sports Authority 75.0% Two-bldg center built in 1993. Income
Peachtree & Piedmont PetsMart projections using 5% vacancy for
Buckhead County in-line space. Acquired subject to
Atlanta, Georgia $12 million loan.
- ------------------------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. $ 88.39 $ 8.17 9.24% Macy's Homestore, 89.0% Sale involves Phs I & II of power ctr
U.S. 101 at Rowland Oshmans, Marchalls, in affluent North San Francisco Bay
Marin County Costco** area. Costco & Target on long-term
Novato, California Target** ground leases. Buyer used 11.1% IRR.
- ------------------------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavillion $183.07 $17.39 9.50% OfficeMax 92.0% Four-level, enclosed urban power ctr;
Hale & Maple Avenues Sports Authority reuse of former dept. store. Anchor
Westchester County Toys R Us rents $16.00-20.00/sf; in-line rents
White Plains, New York Borders Books $20.00-25.00/sf. Incl. devel.rights.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
======================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
57 Fairlane North S.C. Apr-94 1994 $59,200,000 2,983,860 19.8% 589,688 0 0.0%
Mercury Drive & Ford Drive Very Good
Michigan 153
Dearborn, Michigan
- ----------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza Feb-94 1988 $15,400,000 871,200 24.7% 215,275 94,976 44.1%
U.S. 30, E of Interstate 65 Good
Merrillville, Indiana
- ----------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. Feb-94 1993 $17,245,688 777,000 22.8% 177,308 138,958 78.4%
NWC/Golf & Basswood Good
Cook County
Schaumberg, Illinois
- ----------------------------------------------------------------------------------------------------------------------
60 Providence Square Jan-94 1990 $19,200,000 696,960 27.3% 190,378 108,747 57.1%
Upper Roswell & Good
Johnson Ferry
Marieta, Georgia
- ----------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace Dec-93 1987 $44,000,000 980,100 30.5% 299,206 0.0%
NEC/Birch & Randolph Average
Orange County
Brea, California
- ----------------------------------------------------------------------------------------------------------------------
62 The Quarry Dec-93 1992 $24,500,000 2,656,289 16.8% 447,000 325,000 72.7%
Joliet & LaGrange Roads Very Good
Cook County
Hodgkins, Illinois
- ----------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center Dec-93 1985 $26,380,000 1,611,720 16.2% 261,025 130,077 49.8%
Harbor & Orangethorpe Very Good
Orange County
Fullerton, California
- ----------------------------------------------------------------------------------------------------------------------
64 Townline Square Dec-93 1989 $25,000,000 1,397,405 21.6% 302,081 218,885 72.5%
S. Broad St. & Route 5 Good
New Haven County
Meriden, Connecticut
- ----------------------------------------------------------------------------------------------------------------------
65 First Colony Commons Dec-93 1992-94 $33,350,000 1,595,102 23.5% 374,472 152,505 40.7%
U.S. Hwy 59 & Williams Good
Harris County
Sugarland, Texas
- ----------------------------------------------------------------------------------------------------------------------
66 Athens Pointe Dec-93 1993 $ 4,700,000 442,134 13.8% 60,799 55,999 92.1%
Mitchell Bridge & Hwy. 78 Good
Athens
Georgia
- ----------------------------------------------------------------------------------------------------------------------
67 Clairemont Square Nov-93 1956-1989 $35,470,000 1,849,558 24.6% 454,650 0 0.0%
NEC/Clairemont Mesa & Good
Clairemont Drive
San Diego, California
- ----------------------------------------------------------------------------------------------------------------------
68 Green Orchard Nov-93 1990/93 $18,400,000 1,200,000 26.7% 320,395 217,826 68.0%
East of Center Drive & Good
Alpine Avenue
Walker, Michigan
- ----------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center Nov-93 1986/90 $ 9,670,500 784,080 18.6% 145,570 60,000 41.2%
12501 Shelbyville Road Good
Jefferson County
Louisville, Kentucky
- ----------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook Oct-93 1986 $19,000,000 816,750 26.9% 219,823 130,685 59.5%
U.S. Hwy 59 & FM Bypass Good
Harris County
Humble, Texas
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
57 Fairlane North S.C. $100.39 $ 9.54 9.50% Wal-Mart, Sam's, 100.0% New power center pre-sold in Dec-93.
Mercury Drive & Ford Drive Super Kmart, Sports Sale date is when center was
Michigan 153 Authority, Builders, completed. Also included Service
Dearborn, Michigan OfficeMax, Borders Merchandise as anchor.
- ------------------------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza $ 71.54 $ 6.68 9.34% OfficeMax 95.0% Good quality retail center located
U.S. 30, E of Interstate 65 TJMaxx across from the Southlake regional
Merrillville, Indiana F&M Distributers shopping mall.
Kids R Us
- ------------------------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. $ 97.26 $ 9.51 9.78% Kohl's 94.0% Good quality center one mile west of
NWC/Golf & Basswood Linens 'N Things Woodfield Mall. Barnes & Noble not
Cook County Barnes & Noble* included in sale. Located in high
Schaumberg, Illinois retail demand area.
- ------------------------------------------------------------------------------------------------------------------------------------
60 Providence Square $100.85 $ 9.07 8.99% Upton's 100.0% Well-located center contiguous to an
Upper Roswell & Home Depot 86,640sf Home Depot (not included).
Johnson Ferry Drugs For Less Home Depot leases former Phar-Mor
Marieta, Georgia space of 25,600sf. No vacancy.
- ------------------------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace $147.06 $13.69 9.31% Marshall's 96.0% Seller guaranteed retail rates on
NEC/Birch & Randolph Circuit City vacant suites. Buyer neg. opt. to
Orange County Toys R Us pur-chase fee inter. in land for
Brea, California United Artists $6.5m. OAR reflects impact of gr.
lease. (9.8% w/o).
- ------------------------------------------------------------------------------------------------------------------------------------
62 The Quarry $ 54.81 $ 5.54 10.10% Kohl's, OfficeMax, 98.0% Buyer based dale on '94 income; 9.8%
Joliet & LaGrange Roads Sam's Club, OAR on existing. Target not included
Cook County Wal-Mart, in sale. Trade area reported to have
Hodgkins, Illinois Target** popul. of 213,000; avg. hh. inc. of
$49,973.
- ------------------------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center $101.06 $10.86 10.75% Toys R Us 96.0% Sale included part of 367,00sf ctr.
Harbor & Orangethorpe Silo Other anchor (Price Club) not
Orange County AMC Theatre included. Leases range from
Fullerton, California Price Club** $12.00-22.00/sf. Occupancy 96% at
sale.
- ------------------------------------------------------------------------------------------------------------------------------------
64 Townline Square $ 82.76 $ 8.26 9.98% Bradlees 92.0% Class B type ctr. previously
S. Broad St. & Route 5 Marshall's foreclosed by Aetna Life. Portion of
New Haven County The Wiz ctr. has poor visibility. Steel
Meriden, Connecticut ShopRite frame, masonry. Price based on
buyer's pro forma.
- ------------------------------------------------------------------------------------------------------------------------------------
65 First Colony Commons $ 89.06 $ 8.25 9.26% Service M'dise 100.0% Sale based on actual pro forma. Steel
U.S. Hwy 59 & Williams Sportstown frame & stucco/brick. Home Depot not
Harris County Sears Homelife included in sale. Other majors incl.
Sugarland, Texas Home Depot** Bookstop, Sound Whse.
- ------------------------------------------------------------------------------------------------------------------------------------
66 Athens Points $ 77.30 $ 7.75 10.03% Publix 96.0% Good Quality, masonry neighborhood
Mitchell Bridge & Hwy. 78 shopping center sale. Actual price
Athens Points was $5.05m but included outparcel
Georgia valued at $350,000; price adjusted.
- ------------------------------------------------------------------------------------------------------------------------------------
67 Clairemont Square $ 78.02 $ 7.80 10.00% Vons 85.0% Avg-good quality center. Sav-On Drugs
NEC/Clairemont Mesa & Marshall's is another major tenants.
Clairemont Drive TJMaxx
San Diego, California Circuit City
- ------------------------------------------------------------------------------------------------------------------------------------
68 Green Orchard $ 57.43 $ 5.81 10.11% Builders Square 100.0% Average quality center with only fair
East of Center Drive & Kohl's visibility. Property includes 55,260
Alpine Avenue Witmark sq. ft. ground lease to Loek's Star
Walker, Michigan Theatre.
- ------------------------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center $ 66.43 $ 7.09 10.68% Kroger 92.1% Avg-good quality center. Rents
12501 Shelbyville Road $10-$12 per sq/ft at sale. Sale
Jefferson County included two outparcel lots w/
Louisville, Kentucky limited frontage. Property in good
condition at sale.
- ------------------------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook $ 86.43 $ 8.11 9.38% Randall's 98.0% Ctr. adj. to mall. Other majors make
U.S. Hwy 59 & FM Bypass TJMaxx up 15% of ctr. All tenants on
Harris County Amber Crafts long-term leases thru 2000. Anchor
Humble, Texas rents $5.75- 7.25/sf; in-line
$10.00-12.00/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
========================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
71 Plaza at Puente Hills Oct-93 1987-92 $58,000,000 3,049,200 16.9% 516,583 287,351 55.6%
Fullerton Rd./Pomona Fwy. Good
Los Angeles County
City of Industry, California
- ------------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center Oct-93 1993 $45,200,000 2,121,372 14.0% 297,059 138,922 46.8%
Route 35 & Laurel Ave. Very Good
Monmouth County
Holmdel, New Jersey
- ------------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing Oct-93 1989-92 $13,700,000 1,097,712 15.0% 164,997 111,478 67.6%
Newbury Street & Route 1 Good
Danvers, Massachusetts
- ------------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks Sep-93 1991 $11,100,000 1,448,806 12.6% 182,835 0 0.0%
U.S. Highway 78 Good
Gwinnett County
Snellville, Georgia
- ------------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza Aug-93 1993 $19,900,000 1,002,490 27.5% 275,927 240,631 87.2%
NEQ/Lantana & Jog Road Very Good
Palm Beach County
Lantana, Florida
- ------------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. Aug-93 1971/87-90 $19,500,000 805,860 26.3% 211,767 173,860 82.1%
Madison & Manzanita Average
Sacramento County
Carmichael, California
- ------------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing Aug-93 1987 $20,000,000 1,089,000 20.1% 219,300 104,915 47.8%
Colisuem & Cunningham Good
Hampton County
Hampton, Norfolk, Virginia
- ------------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza Aug-93 1989 $20,780,000 771,448 27.6% 212,711 129,075 60.7%
I-91 & Montowese Exit Good
New Haven County
North Haven, Connecticut
- ------------------------------------------------------------------------------------------------------------------------
79 Price Club Plaza Aug-93 1986/92 $25,016,000 1,053,280 23.7% 249,325 165,100 66.2%
SEC/Sunrise Hwy & Bayview Good
Copaigue, Town of Babylon,
New York
- ------------------------------------------------------------------------------------------------------------------------
80 Heritage Walk Jun-93 1991 $8,657,624 871,200 18.2% 158,282 141,742 89.6%
ES/Columbia Street Good
Baldwin County
Milledgeville, Georgia
- ------------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center Jun-93 1961/91 $32,500,000 2,862,763 17.8% 510,252 162,512 31.8%
Crawford Road Good
Indianapolis, Indiana
- ------------------------------------------------------------------------------------------------------------------------
82 Loehman's Plaza Mar-93 1986-89 $33,714,000 1,268,774 19.8% 251,529 151,286 60.1%
Middle Country Rd. & Good
Morices
Lake Grove, New York
- ------------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade Mar-93 1971-91 $27,000,000 827,640 29.0% 239,745 0 0.0%
I-190 & Hawthorne Blvd. Good
Los Angeles County
Torrance, California
- ------------------------------------------------------------------------------------------------------------------------
84 The Brickyard Feb-93 1989-90 $19,575,000 1,675,753 16.3% 273,417 212,758 77.8%
Wilbur Cross Highway Good
Hartford County
Berlin, Connecticut
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
71 Plaza at Puente Hills $112.28 $11.70 10.42% IKEA, Silo, 93.5% Sale of power-oriented ctr. Anchors
Fullerton Rd./Pomona Fwy. AMC Theatre, that were not included in sale were
Los Angeles County Circuit City, Home Depot, Price Savers, & Toys R
City of Industry, California Miller's Outpost Us.
- ----------------------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center $152.16 $14.41 9.47% A&P Food 80.0% Occupancy based on commitments.
Route 5 & Laurel Ave. Marshall's Other majors incl. Barnes & Noble,
Monmouth County The Wiz Lee Wards, Pet Food Giant. New ctr.
Holmdel, New Jersey OfficeMax at sale. Purchased during
construction.
- ----------------------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing $ 83.03 $ 8.79 10.59% OfficeMax 87.0% Completion of ctr. delayed due to
Newbury Street & Route 1 Home Quarters foreclosure proceedings. Under
Danvers, Massachusetts Bed, Bath & Beyond contract for one yr while buyer
Discovery Zone secured tenants for vacant space.
- ----------------------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks $ 60.71 $ 6.02 9.91% Wal-Mart 98.0% Average-good quality center; masonry
U.S. Highway 78 Food Lion construction in good condition.
Gwinnett County Anchors include Wal-Mart & Food
Snellville, Georgia Lion.
- ----------------------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza $ 72.12 $ 7.03 9.75% Kmart 99.5% New power ctr. purchased by REIT.
NEQ/Lantana & Jog Road Builders Square II In-line tenants pay avg. $16.00/sf
Palm Beach County Food Lion + $2.25 for NNN. Buyer cited
Lantana, Florida product quality, credit of Kmart,
high % of anchor GLA.
- ----------------------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. $ 92.08 $ 9.31 10.11% Home Depot 92.0% Buyer noted upside from leasing
Madison & Manzanita TJMaxx 17,00sf store. Sale price based on
Sacramento County Longs Drugs appraised value. Leases range from
Carmichael, California $18.00-24.00/sf.
- ----------------------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing $ 91.20 $ 8.44 9.25% Marshall's 95.0% Masonry & concrete retail center in
Colisuem & Cunningham Food Lion good condition at sale. Traditional
Hampton County Phar-Mor tenant mix.
Hampton, Norfolk, Virginia Linen Warehouse
- ----------------------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza $ 97.69 $ 8.96 9.17% Home Depot 100.0% Sale reportedly based upon
I-91 & Montowese Exit TJMaxx appraised value. 100% leased at
New Haven County XPect Discount sale. Other tenants include Dress
North Haven, Connecticut PriceCostco** Barn, LeeJay. PriceCostco not
included in sale.
- ----------------------------------------------------------------------------------------------------------------------------------
79 Price Club Plaza $100.33 $ 9.03 9.00% Filene's Basement 98.8% Sold from Price Company to Price
SEC/Sunrise Hwy & Bayview PriceCostco REIT based upon 9.0% cap rate on
Copaigue, Town of Babylon, projected year one income. Property
New York 98.9% leased at sale.
- ----------------------------------------------------------------------------------------------------------------------------------
80 Heritage Walk $ 54.70 $ 5.38 9.84% Kmart 100.0% Good location fronting 4-lane
ES/Columbia Street Bi-Lo primary artery; adjacent to
Baldwin County Goody's Wal-Mart super center. Sale
Milledgeville, Georgia included 2 outparcels.
- ----------------------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center $ 63.69 $ 5.92 9.30% Kohl's 90.0% Community center in central portion
Crawford Road Kroger of Indianapolis. Anchor
Indianapolis, Indiana Drug Emporium rents=$3-7.25/sf; in-line
rents=$12-14/sf. Sale did not
include option to purchase
outlots.
- ----------------------------------------------------------------------------------------------------------------------------------
82 Loehman's Plaza $134.04 $12.06 9.00% Loehman's 100.0% Expanded power center in excellent
Middle Country Rd. & Bed & Bath location. Good condition at sale.
Morices Filene's Basement
Lake Grove, New York Foodtown
- ----------------------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade $112.62 $12.05 10.70% Office Depot, 98.6% Promotional community ctr. Average
I-190 & Hawthorne Blvd. Marshall's, Silo, lease rate in ctr., reported to be
Los Angeles County Ross, Bookstar, $20/sf for in-line space. Center
Torrance, California Mann Theatres repositioned into new format.
- ----------------------------------------------------------------------------------------------------------------------------------
84 The Brickyard $ 71.59 $ 8.40 11.73% Home Depot 86.0% Seaman's formerly leased 30,000sf
Wilbur Cross Highway Pace but went into bankruptcy. Lease
Hartford County rates range from $12-15.00/sf for
Berlin, Connecticut in-line tenants. Pace also seen as
risk.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=======================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=======================================================================================================================
85 New Park Plaza Dec-92 1979-80 $ 8,700,000 561,924 33.2% 186,459 100,920 54.1%
Mowry & Cedar Average
Alameda County
Newark, California
- -----------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook Aug-92 1985-89 $31,250,000 1,630,015 22.8% 370,907 190,212 51.3%
Centerfield Blvd. & FM 1960 Good
Harris County
Houston, Texas
- -----------------------------------------------------------------------------------------------------------------------
87 Westward S.C. May-92 1960-88 $18,450,000 794,099 27.9% 221,564 165,508 74.7%
NEC/Spencer & Okeechobee Good
Palm Beach County
West Palm Beach, Florida
- -----------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza Apr-92 1989-91 $43,200,000 1,758,082 22.1% 389,000 221,892 57.0%
NWC/91 Fwy. & McKinley Good
Riverside County
Corona, California
- -----------------------------------------------------------------------------------------------------------------------
89 Broad River Commons Feb-92 1969-86 $ 7,615,000 761,864 17.8% 135,700 0 0.0%
Broad River & Marley Drive Good
Richland County
Columbia, South Carolina
- -----------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons Dec-91 1991 $30,725,000 1,372,140 22.7% 311,318 207,118 66.5%
Pines Blvd. & University Dr. Very Good
Broward County
Pembroke Pines, Florida
- -----------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. Dec-91 1989 $16,500,000 2,831,400 9.4% 265,600 0 0.0%
San Jose Blvd. & Claire Good
Jacksonville, Florida
- -----------------------------------------------------------------------------------------------------------------------
92 Commons at Greenpoint Oct-90 1989 $28,000,000 936,104 32.0% 299,709 0 0.0%
NWC/I-45 & Beltway 8 Very Good
Harris County
Houston, Texas
=======================================================================================================================
Survey High: $80,000,000 9,439,450 -- 788,826 663,404 --
Survey Low: $ 4,700,000 153,767 -- 60,799 0 --
=======================================================================================================================
Survey Average: $28,030,256 1,375,595 20.2% 278,180 153,131 55.0%
=======================================================================================================================
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
85 New Park Plaza $ 46.66 $ 5.33 11.42% TJMaxx 85.0% Community ctr. with avg. lease
Mowry & Cedar Toys R Us rates around $10.00/sf for in-line
Alameda County Herman's tenants. Good location with upside
Newark, California Hancock Fabrics potential from new leasing.
- ------------------------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook $ 84.25 $ 8.03 9.53% Marshall's 94.0% Good quality ctr. in suburban
Centerfield Blvd. & FM 1960 Sportstown Houston. Adj. to mall. Anchor rents
Harris County AMC Theatre $6.00-8.00/sf. Other majors include
Houston, Texas Phar-Mor Bed, Bath & Beyond, Bookstop, Sound
Whse.
- ------------------------------------------------------------------------------------------------------------------------------------
87 Westward S.C. $ 83.27 $ 8.36 10.04% Office Depot 96.0% Reconfigured power ctr. In-line
NEC/Spencer & Okeechobee Circuit City tenant rents from $11.00-15.00/sf;
Palm Beach County Sports Authority avg. $12/sf. Several outpads on
West Palm Beach, Florida Phar-Mor ground lease terms included in
sale.
- ------------------------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza $111.05 $10.75 9.68% Home Depot 94.0% Price Club & Albertson's also
NWC/91 Fwy. & McKinley Ross anchors; not included in sale.
Riverside County Levitz Furniture JCPenny Kids & Holiday Spa other
Corona, California Drug Emporium majors. Leases range from
$12.00-30.00/sf for in-line.
- ------------------------------------------------------------------------------------------------------------------------------------
89 Broad River Commons $ 56.12 $ 5.99 10.67% Home Quarters 100.0% Masonry & concrete center in
Broad River & Marley Drive Phar-Mor avg.-good condition; renovated in
Richland County Herman's 1986.
Columbia, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons $ 98.69 $ 9.44 9.57% Publix Superstore, 90.4% Seller provided lease-back
Pines Blvd. & University Dr. Office Depot, guarantee on vacant space;
Broward County Circuit City, TJMaxx, estimated value of $500k. Price
Pembroke Pines, Florida Marshall's adjusted to reflect. Anchor leases
$6.75-9.00/sf; in-line avg.
$15.11/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. $ 62.12 $ 6.21 10.00% SteinMart, TJMaxx, 82.0%
San Jose Blvd. & Claire Beall's,
Jacksonville, Florida Phar-Mor,
Michael's
- ------------------------------------------------------------------------------------------------------------------------------------
92 Commons at Greenpoint $ 93.42 $ 8.12 8.69% Office Depot 97.0%
NWC/I-45 & Beltway 8 Marshall's
Harris County Phar-Mor
Houston, Texas Sportstown
====================================================================================================================================
Survey High: $201.61 $18.43 12.02% -- 100.0%
Survey Low: $ 39.93 $ 4.06 7.87% -- 75.0%
====================================================================================================================================
Survey Average: $ 99.43 $ 9.58 9.74% -- 94.9%
====================================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
OPERATING HISTORY AND BUDGET CHART
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================
Operating Income and Expense Analysis-Perimeter Pointe (2)
===============================================================================================
1996 Owner's 1997 Budget C&W 1997 Estimate
=============================================================
Total Per SF Total Per SF Total Per SF
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Income
Base Rent $1,854,091 $5.27 $4,570,710 $12.98 $4,600,000 $13.06
Percentage Rent $83,256 $0.24 $0 $0.00 $0 $0.00
Expense Recoveries $490,034 $1.39 $756,907 $2.15 $850,000 $2.41
Other Income (3) $271,872 $0.77 $28,393 $0.08 $20,000 $0.06
-------------------------------------------------------------
Effective Gross Income $2,699,253 $7.67 $5,356,010 $15.21 $5,470,000 $15.53
Recoverable Expenses
Common Area Maintenance $164,582 $0.47 $270,025 $0.77 $280,000 $0.80
Insurance $48,611 $0.14 $105,972 $0.30 $52,800 $0.15
Real Estate Taxes $297,719 $0.85 $380,494 $1.08 $569,000 $1.62
-------------------------------------------------------------
Total $510,912 $1.45 $756,491 $2.15 $901,800 $2.56
Non-Recoverable Expenses
General & Administrative $4,730 $0.01 $5,000 $0.01 $10,000 $0.03
Management $109,692 $0.31 $240,000 $0.68 $218,800 $0.62
Reserves for Replacement $0 $0.00 $0 $0.00 $35,213 $0.10
-------------------------------------------------------------
Total $114,422 $0.32 $245,000 $0.70 $264,013 $0.75
Total Operating Expenses $625,334 $1.78 $1,001,491 $2.84 $1,165,813 $3.31
Net Operating Income $2,073,919 $5.89 $4,354,519 $12.37 $4,304,187 $12.22
Operating Expense Ratio 23.2% 18.7% 21.3%
---------------------------------------------------------------------------------------
1. $/SF is based on GLA owned and does not include anchor owned GLA, if any.
2. Source: Lehman Brothers presentation brochure.
3. In 1996, included $271,551 in non-recurring termination fee from Pets Stuff.
---------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ULI DATABASE OF OPERATING RESULTS FOR POWER CENTERS
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
==============================================================================================
Average Operating Results of U.S. Power Centers (4)
Source: Dollars & Cents of Shopping Centers-1995 Edition
==============================================================================================
All Centers Southern Centers
==========================--------------------------------------------------------------------
Property Profile Low High Avg. Low High Avg.
==========================
<S> <C> <C> <C> <C> <C> <C>
# of Centers in Sample: 25 7
Average GLA: 285,478 520,869 358,619 n/a n/a 360,467
Average Sales/SF: $87 $292 $197 n/a n/a $189
==========================
Revenue
==========================
Total Rent: $3.60 $14.36 $7.22 n/a n/a $6.24
Reimbursements:
CAM: $0.17 $2.12 $0.85 n/a n/a $0.51
Taxes: $0.23 $1.44 $0.65 n/a n/a $0.68
Insurance: $0.02 $0.13 $0.07 n/a n/a $0.08
Miscellaneous: $0.00 $0.00 $0.27 n/a n/a n/a
Miscellaneous Income: $0.01 $0.37 $0.08 n/a n/a $0.04
Total Revenue: (2) $4.40 $17.05 $9.36 n/a n/a $8.23
==========================
Expenses
==========================
Total Maintenance (3) $0.49 $3.55 $1.29 n/a n/a $0.46
Advertising & Promotion: $0.00 $0.44 $0.12 n/a n/a $0.06
Real Estate Taxes: $0.33 $1.99 $1.10 n/a n/a $0.86
Insurance: $0.07 $0.35 $0.15 n/a n/a $0.12
General & Administrative: (1) $0.02 $1.56 $0.42 n/a n/a $0.47
Management Fees: $0.17 $0.58 $0.35 n/a n/a n/a
Total Operating Expenses: (2) $1.02 $7.04 $3.24 n/a n/a $2.37
==========================
Operating Expense Ratio: 23.2% 41.3% 34.6% 28.8%
==========================
-----------------------------------------------------------------------------------------
1. Excluding management fees and leasing commissions.
2. Because data are averages, detailed dollar amounts may not add to totals.
3. Includes: Maintenance, security, and other expenses for common areas as well as some
cleanup/fixup/repair cost for spaces between tenants that is not a retrofit cost..
4. ULI defines a power center as containing at least one discount department store of
100,000 square feet or more and at least four category specific, off-price anchors
of 20,000 square feet or more.
-----------------------------------------------------------------------------------------
==============================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
LEASE EXPIRATION CHART - PRO-JECT
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PERIMETER POINTE CENTER
PROJECT DESIGNATOR: PP97
REVISION: 7/18/97 @ 9:51
EXPIRATION REPORT
YEARS 1998 TO 2007, ALL TENANTS,
INCLUDING OPTIONS, EXCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS EXCLUDING CPI ADJUSTMENTS,
EXCLUDING PERCENTAGE RENTS
7/24/97 @ 16:50
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- --------------------- --------- -------- ------- ------- ------- -------
# 17-SUITE 470 INITIAL
BUCKHEAD FINE WINE 2,084 7/1999 24.50 3.78 28.28 28.23
--------- ------- ------- ------- -------
1 FY 99 EXPIRATIONS 2,084 24.50 3.78 28.28 28.23
# 21-SUITE 1030 INITIAL
BUCKHEAD BAR 1,304 8/1999 28.00 3.77 31.78 29.27
--------- ------- ------- ------- -------
1 FY100 EXPIRATIONS 1,304 28.00 3.77 31.78 29.27
--------- ------- ------- ------- -------
2 CUMULATIVE EXPS 3,388 25.85 3.78 29.62 28.63
# 9-SUITE 440 INITIAL
PERIMETER CLEANER 750 12/2000 31.50 4.14 35.65 32.16
# 8-SUITE 430 INITIAL
NAIL TALK 1,250 1/2001 30.39 4.26 34.66 31.06
# 19-SUITE 1010 INITIAL
BELL SOUTH MOBILE 2,000 1/2001 30.10 3.44 33.54 31.06
# 7-SUITE 450 INITIAL
DISCOUNT TRAVEL 750 1/2001 29.26 4.26 33.52 32.16
# 25-SUITE 1200 INITIAL
ATLANTA BREAD CO 3,866 1/2001 27.95 4.26 32.21 29.95
# 11-SUITE 460 INITIAL
HAIR CUTTERY 1,084 4/2001 33.76 4.26 38.03 31.06
# 6-SUITE 490 INITIAL
MATTRESS FIRM 3,388 7/2001 28.50 3.98 32.49 29.95
--------- ------- ------- ------- -------
7 FY101 EXPIRATIONS 13,088 29.42 4.06 33.47 30.57
--------- ------- ------- ------- -------
9 CUMULATIVE EXPS 16,476 28.68 4.00 32.68 30.17
# 5-SUITE 410 INITIAL
SALON EL KHOURI 1,784 8/2001 21.00 3.98 24.98 31.06
# 20-SUITE 1020 INITIAL
PLANET SMMOTHIE 750 9/2001 32.64 3.44 36.08 32.16
--------- ------- ------- ------- -------
2 FY102 EXPIRATIONS 2,534 24.45 3.82 28.27 31.38
--------- ------- ------- ------- -------
11 CUMULATIVE EXPS 19,010 28.12 3.98 32.09 30.33
CUSHMAN &
WAKEFIELD(R)
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PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- --------------------- --------- -------- ------- ------- ------- -------
# 10-SUITE 450 INITIAL
VACANT 1,000 12/2002 29.44 4.10 33.54 34.12
--------- ------- ------- ------- -------
1 FY103 EXPIRATIONS 1,000 29.44 4.10 33.54 34.12
--------- ------- ------- ------- -------
12 CUMULATIVE EXPS 20,010 28.18 3.98 32.17 30.52
# 23-SUITE 1050 INITIAL
STARBUCKS 1,500 3/2006 31.06 3.64 34.70 36.00
# 22-SUITE 1040 INITIAL
GORIN'S CAFE 1,500 7/2006 28.00 4.56 32.56 36.00
--------- ------- ------- ------- -------
2 FY106 EXPIRATIONS 3,000 29.53 4.10 33.63 36.00
--------- ------- ------- ------- -------
14 CUMULATIVE EXPS 23,010 28.36 4.00 32.36 31.24
# 1-SUITE 100 INITIAL
PARTY WAREHOUSE 8,265 8/2006 19.56 4.87 24.43 23.14
--------- ------- ------- ------- -------
1 FY107 EXPIRATIONS 8,265 19.56 4.87 24.43 23.14
--------- ------- ------- ------- -------
15 CUMULATIVE EXPS 31,275 26.03 4.23 30.26 29.10
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
COMPETITIVE PROPERTY PHOTOGRAPHS
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
COMPETITIVE PROPERTIES
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[GRAPHIC OMITTED]
Perimeter Square West
[GRAPHIC OMITTED]
Perimeter Square West
<PAGE>
Competitive Properties
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[GRAPHIC OMITTED]
Perimeter Square East
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Perimeter Square East
<PAGE>
Competitive Properties
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[GRAPHIC OMITTED]
Perimeter Station
[GRAPHIC OMITTED]
Perimeter Station
<PAGE>
Competitive Properties
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[GRAPHIC OMITTED]
Perimeter Mall with Nordstrom Department Store Under Construction
[GRAPHIC OMITTED]
Perimeter Expo
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LOCAL SALE COMPARABLES
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<PAGE>
RETAIL SALE 1
================================================================================
Location Data
Property Name: Carrollton Crossroads
Location: U.S. Highway 27 and U.S. Highway 166
City: Carrollton
County:
State/Zip: Georgia 30117
Assessor's Parcel No(s): 10-64
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 36.00 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
Wal-Mart 123,779 SF
Goody's 28,888 SF
JC Penney 32,201 SF
Kroger 49,585 SF
Local Tenant GLA: 69,352 SF
Anchor Tenant GLA: 234,453 SF
Total GLA: 303,805 SF
GLA Purchased: 303,805 SF
Year Built: 1987
Parking: Adequate
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 01/97
Marketing Time: 6 months
Grantor: Equity Properties
Grantee: Halper Enterprises/Morningside Associates
Document No.: N/A
Sale Price: $18,100,000
Financing: Cash to Seller
Cash Equivalent Price: $18,100,000
Required Capital Cost: $0
Adjusted Sales Price: $18,100,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 98.5%
Existing or Pro Forma Income:Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $1,825,000 $6.01
CARROLLTON
CUSHMAN &
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<PAGE>
RETAIL SALE 1
================================================================================
Analysis
Value Indicators:
Overall Capitalization Rate (OAR): 10.08 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $59.58
Comments
One story, power/super community center in a rural location about 32 radial
miles west of downtown Atlanta. Shops include national and local retailers
that are typically found in other southeast power centers. The center was
renovated in 1993. The center is performing well and many tenants are
paying percentage rent. Within a 10-mile radius of the center are about
20,162 households with an average household income of about $41,800.
CUSHMAN &
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<PAGE>
RETAIL SALE 2
================================================================================
Location Data
Property Name: Hamilton Village
Location: 2020 Gunbarrel Road
City: Chattanooga
County:
State/Zip: Tennessee
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 44.85 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
See Comments 293,222 SF
Local Tenant GLA: 72,175 SF
Anchor Tenant GLA: 293,222 SF
Total GLA: 365,397 SF
GLA Purchased: 365,397 SF
Year Built: 1991
Parking: Adequate
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 03/97
Marketing Time: N/A
Grantor: Provident Life and Accident Insurance
Company
Grantee: CNM Hamilton, LP
Document No.: N/A
Sale Price: $18,378,750
Financing: Cash to Seller
Cash Equivalent Price: $18,378,750
Required Capital Cost: $0
Adjusted Sales Price: $18,378,750
Verification: Confidential
Financial Data
Assumptions & Forecast: Appraiser
Occupancy at Sale: 96%
Existing or Pro Forma Income:Existing
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: $625,169 $1.71
Net Operating Income: $1,934,031 $5.29
HAMILTON VILLAGE
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
RETAIL SALE 2
================================================================================
Analysis
Value Indicators:
Overall Capitalization Rate (OAR): 10.52 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $50.30
Comments
Major tenants are:
Walmart @ 114,557 sf
Office Max @ 24,200 sf
Books a Million @28,875 sf
Waccamaw @ 59,125 sf
Hamrick's @ 45,465 sf
Baby Superstore @ 21,000 sf
This center is located in the primary shopping area for Chattanooga across
from Hamilton Place Mall.
Shortly after the sale the Wal-Mart expanded to 184,757 SF displacing
21,425 SF of shops. Wal-Mart will pay for the expansion cost and has agreed
to pay higher rent on the leased portion of its store to supplement income
lost from the shop space it is displacing. The income figures above are as
is at time of sale and do not include revenue loss or gain from the
expansion.
Expenses include 5% vacancy for shops, 3% management fee, $.10 for
reserves.
HAMILTON VILLAGE
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<PAGE>
RETAIL SALE 3
================================================================================
Location Data
Property Name: Lawrenceville MarketCenter
Location: Ga. 316 & Ga. 120
City: Lawrenceville
County: Gwinnett
State/Zip: Georgia
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: N/A
Excess Land: N/A
Gross Leasable Area:
Anchors:
AMC Theatres 65,442 SF
Home Depot 103,550 SF
Target 116,245 SF
See Comments 173,972 SF
Local Tenant GLA: 40,620 SF
Anchor Tenant GLA: 459,209 SF
Total GLA: 499,829 SF
GLA Purchased: 280,034 SF
Year Built: 1995
Parking: 6.4 spaces per 1,000 sf of GL
Condition: Excellent
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 11/96
Marketing Time: N/A
Grantor: Cousins Properties
Grantee: The Equitable Real Estate Investment
Document No.: N/A
Sale Price: $34,600,000
Financing: Cash to Seller
Cash Equivalent Price: $34,600,000
Required Capital Cost: $0
Adjusted Sales Price: $34,600,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income:Pro Fonna
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,287,000 $11.74
LAWRENCEVILLE
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WAKEFIELD(R)
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<PAGE>
RETAIL SALE 3
================================================================================
Analysis
Value Indicators: Direct Cap and DCF
Overall Capitalization Rate (OAR): 9.50 %
Projected IRR: 11.00 %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $123.56
Comments
Single level, non-enclosed power center that is located about 25 radial
miles northeast of downtown Atlanta. Anchors not listed above include:
Goody's @ 32,400 sf; Linens N Things @ 35,000 sf; Marshalls @ 30,000 sf; MJ
Designs @ 36,966 Sf, Old Navy @ 14,000 sf; and PetsMart @ 25,606 Sf.
Smaller mini-anchor tenants Include a number of well known power center
type retailers.
Purchased in two transactions: the owned GLA (280,034 sf) and three ground
leases which have been Improved by the ground lessee with free standing
Target, Home Depot and Bertucci's buildings. Their GLA is not included in
the GLA purchased which is shown above. However, the net operating income
above does include the rental contribution from the ground leased parcels.
Within a 10-mile radius of the property there are about 122,348 households
with an average household income of about $70,300.
LAWRENCEVILLE
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<PAGE>
RETAIL SALE 4
================================================================================
Location Data
Property Name: Perimeter Village
Location: West Side Of Ashford Dunwoody Road
Approx. 1/4 Mile North Of
City: Atlanta
County:
State/Zip: Georgia
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 32.00 Acres
Excess Land: 0
Gross Leasable Area:
Anchors:
See Comments
Local Tenant GLA: 108,301 SF
Anchor Tenant GLA: 258,299 SF
Total GLA: 368,600 SF
GLA Purchased: 366,600 SF
Year Built: 1995
Parking: N/A
Condition: Excellent
Exterior Walls: Brick Veneer
Sale Data
Transaction Type: Sale
Date of Transaction: 07/96
Marketing Time: N/A
Grantor: Jacoby Development, Inc.
Grantee: Prudential
Document No.: N/A
Sale Price: $50,000,000
Financing: Cash to Seller
Cash Equivalent Price: $50,000,000
Required Capital Cost: $0
Adjusted Sales Price: $50,000,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 93%
Existing or Pro Forma Income:N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $4,700,000 $12.82
PERIMETER VILLAGE
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<PAGE>
RETAIL SALE 4
================================================================================
Analysis
Value Indicators: Direct Cap and DCF
Overall Capitalization Rate (OAR): 9.40 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $136.39
Comments
Primarily a one-story, concrete block center with brick facade.
There is one portion that is 2-story containing 25,000 SF.
Wal-Mart 149,429 SF
Borders Books 40,000 SF
Rhodes Furniture 40,000 SF
Reading China & Glass 25,550 SF
Designer Shoe W'House 19,920 SF
Just For Feet 15,000 SF
Ulta3 Cosmetics 8,400 SF
Shops lease between $18-$30 with an average rental rate of $25.00/SF.
Perimeter Village went under contract to sell in July 1995 on an "earn-out"
basis. The base purchase price was $44.0 million increasing to $50.0 once
pre-established occupancy goals were met. Underwriting includes a 5%
vacancy on noncredit tenants, a $.10/SF reserve for replacements and a 3%
management fee.
PERIMETER VILLAGE
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<PAGE>
RETAIL SALE 5
================================================================================
Location Data
Property Name: The Village At University Place
Location: SWQ Of Interstate 85 and W.T.
Harris Blvd.
City: Charlotte
County: Mecklenburg
State/Zip: North Carolina
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 37.50 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
Best Buy 44,400 SF
Office Depot 30,800 SF
TJ Maxx 30,000 SF
Rhodes Furniture 35,000 SF
Local Tenant GLA: 194,300 SF
Anchor Tenant GLA: 140,200 SF
Total GLA: 334,500 SF
GLA Purchased: 334,500 SF
Year Built: 1995
Parking: N/A
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 08/96
Marketing Time: N/A
Grantor: University Place Mall, Inc. (The
Hahn Co.)
Grantee: Village Place I and II, Inc.
Document No.: LIBER 8707, PAGES 434-443
Sale Price: $33,400,000
Financing: Cash to Seller
Cash Equivalent Price: $33,400,000
Required Capital Cost: $0
Adjusted Sales Price: $33,400,000
Verification: Representative Of The Seller
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,289,900 $9.84
THE VILLAGE AT
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
RETAIL SALE 5
================================================================================
Analysis
Value Indicators: Direct Cap
Overall Capitalization Rate (OAR): 9.85 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $99.85
Comments
New power center constructed on the northeast side of Charlotte by the Hahn
Company. The developer had intended to originally build a mall but opted
for a power center. The nearest regional mall is Eastland Mall. According
to the Directory of Major Malls, the center has a primary trade area of
200,000 with an average household income of $40,000. Tenants include Best
Buy, Hannaford Brothers, TJ Maxx, Office Depot, Rhodes Furniture, Michaels
Stores, and a supermarket. Wal-Mart and Sam's are also on the site but are
separately owned. In addition, there are nine pad sites capable of
accommodating 75,000 SF of retail area. Several of these were leased.
Exclusive of the outparcel GLA, the center contained 259,500 square feet.
The seller reports that the transactions were structured with an earnout.
The initial purchase price was $28.9 million which will increase to $33.4
million upon the completion and lease-up of the last phase which should
occur during 1997. We could not confirm the buyer's assumptions but a
representative of the seller said the buyer based the price on a 9.8% cap
rate on all income but the ground rent which was underwritten on a 10.0%
cap rate. The 9.85% cap rate is our interpolation of the net income.
The Parcel #s for the site are 047-201-42, 44, 45; 047-252-04; and
047-292-41.
THE VILLAGE AT
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WAKEFIELD(R)
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<PAGE>
APPRAISER QUALIFICATIONS
================================================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
QUALIFICATIONS
================================================================================
Luten L. Teate, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designation No.7843)
Georgia Certified General Real Estate Appraiser (No. CGOO1389)
Licensed Real Estate Salesman (Georgia)
Member of Cushman & Wakefield's Regional Mall Valuation Committee
Real Estate Experience:
Senior Appraiser, Cushman and Wakefield of Georgia Inc., Valuation Advisory
Services, Atlanta, Georgia, a full service real estate organization
specializing in appraisal and consultation. 1981 to present.
Three years previous experience as associate appraiser with Couch &
Associates (firm acquired by Cushman & Wakefield in April, 1981), Atlanta,
Georgia.
Previously, four years experience as real estate title examiner for several
local law firms, Atlanta, Georgia.
Experience in valuation of Class A, CBD, office towers and regional
shopping malls and consultation and valuation service involving both
improved and unimproved properties.
Market and feasibility studies for proposed development projects and other
property investments.
Valuation techniques include Discounted Cash Flow Analysis and other
computer-assisted applications.
Education:
Emory University -- B.A. (Economics)
Georgia State University -- various post graduate real estate courses:
Appraisal Institute Courses: Litigation Valuation Course, Case Studies in
Valuation, Standards of Professional Practice, Valuation Analysis, Courses
101 and 201.
Certified in Appraisal Institute's voluntary program of continuing
education for its designated members.
<PAGE>
======================================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Broadway Marketplace
S/W/C Alameda Avenue and
South Broadway Street
City and County of Denver
Colorado
======================================================
IN A SUMMARY REPORT
As of July 9,1997
Prepared For:
Master Realty, Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial
20th Floor
New York, New York 10285
Prepared By:
Cushman & Wakefield of Colorado, Inc.
Valuation Advisory Services
1670 Broadway, Suite 3400
Denver, Colorado 80202
File No. 97-9058
<PAGE>
Cushman & Wakefield of Colorado, Inc. Cushman &
1670 Broadway, Suite 3400 Wakefield(R)
Denver, CO 80202-4801
Tel: (303) 813-6400 Improving your place
Fax: (303) 813-6499 in the world.
July 23, 1997
Mr. Brian Summers
Vice President
Master Realty Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas
l8th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Re: Broadway Marketplace
S/W/C Alameda Avenue and
South Broadway Street
City and County of Denver
Colorado
Gentlemen:
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 above 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 is a complete appraisal
prepared in accordance with the Uniform Standards of Professional Appraisal
Practice. The results are being conveyed in a Summary Report according to our
agreement. The accompanying report summarizes the pertinent data, analysis and
conclusions secured in our investigation, rather than provide a self-contained
narrative within the report. It is noted that this report incorporates by
reference our previous Complete Appraisal prepared in a Self-Contained report
format with a date of value of February 9, 1996.
This report was prepared for Master Realty, Managing Member of Community
Centers I, LLC and Lehman Brothers, Inc. (Client) and it is intended only for
the specified use of the Client. The purpose is for a securitized financing
transaction being arranged by Lehman Brothers. The property was inspected by and
the report prepared by Dean R. Paauw, MAI.
<PAGE>
July 23, 1997
Page 2
As a result of our total analysis, we have formed an opinion that the
market value of the leased fee estate in the subject property, as of July 9,
1996, the date of inspection, was:
THIRTY FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
$34,500,000
The Market Value estimate includes +/- 22,000 square feet of excess
developable land which was valued at $1,100,000.
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 COLORADO, INC.
VALUATION ADVISORY SERVICES
/s/ Dean R. Paauw, MAI
Dean R. Paauw, MAI
Associate Director
Colorado Certified General Appraiser
No. CG01313501
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Broadway Marketplace
Location: The subject property is located at the
southwest corner of Alameda Avenue and
South Broadway Street, City and County
of Denver, Colorado.
Land Area (Per Survey): 38.59 acres (1,681,024+/- square feet)
Includes 22,100 sq. ft. footprint of
excess land
Zoning: B-4 (General Business)
Improvements
Type: Multi-building retail power center
Gross Leasable Area (Owned):
Albertsons 50,645 SF
Sam's Club 114,057 SF
K-Mart 107,806 SF
Pep Boys* 22,356 SF
OfficeMax 23,500 SF
In-Line Shops 51,022 SF
------
Total 369,386 SF
* On ground lease
Total Shopping Center GLA: 382,576 square feet (including 3
non-owned restaurant pads)
Year Built: 1993-95
Condition: Good
Land-to-Building Ratio: 4.54:1
Site Coverage: 22.0%
Parking Spaces Provided: 2,056+/- stalls are provided (5.57 cars
per 1,000 square feet of leasable area)
Date of Inspection: July 9, 1997
Date of Value: July 9, 1997
Highest and Best Use
If Vacant: Commercial/retail utilization built to
its maximum feasible FAR.
As Improved: Continued retail use as a "power"
center.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Operating Data and Forecasts
Current Occupancy: 100%
Forecasted Vacancy and Credit Loss
(In-Line Shops Only): 7.0%
Operating Expenses: Annual Amount PSF*
------------- ----
CY 1997 Budget (Owners): $1,011,332 $2.74
FY 1998 C&W Forecast: $1,094,498 $2.96
CY 1996 Budget:** $1,246,659 $3.37
* PSF of owned GLA
** Includes Sam's Club parcel; now excluded
Value Indicators
Excess Developable Site: $1,100,000 (included with other value
indications)
Sales Comparison Approach: $34,350,000 to $36,200,000
$90 to $95 PSF GLA (prior to
adjustments)
Income Approach:
Direct Capitalization: $34,850,000
Discounted Cash Flow: $33,850,000
Direct Capitalization Assumptions
Overall Rate: 9.9%
DCF Investment Assumptions
Holding Period: 10 years
Market Rent Growth Rate: +3.5%
Expense Growth Rate: +3.5%
Tenant Improvements-
New Tenants: $3.00/SF
Renewing Tenants: $0.50/SF
Leasing Commissions-
New Tenants: $3.00/SF
Renewing Tenants: $1.50/SF
Renewal Probability: 70%
Terminal Capitalization Rate: 10.0%
Cost of Sale at Reversion: 2.5%
Discount Rate: 10.75%
Value Conclusion: $34,500,000
Exposure Time Implicit
in Market Value Conclusion: Not to exceed 12 months
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Resulting Indicators
Unit Rate: $93.40/SF of owned GLA (369,386 SF)
Net Income (CY 1996): $3,353,795
Implicit Overall Capitalization Rate: 9.72% (reflects excess land)
Special Assumptions:
o Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll and lease
abstracts for most of the tenants. We also audited actual lease
documents. No significant discrepancies were noted.
o We have made a visual inspection of building improvements and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
o The forecasts of income and expenses contained herein are not
predictions of the future. Rather, these projections are our best
estimates of current market thinking on future income, expenses,
growth rates, and demand. No warranty or representation is made with
regard to materialization of these forecasts.
o During 1990, the Americans With Disabilities Act (ADA) was passed by
Congress. This is Civil Rights legislation which, among other
things, provides for equal access to public placed for disabled
persons. It applied to existing structures as of January 1992 and
new construction as of January 1993. Virtually all landlords of
commercial facilities and tenants engaged in business that serve the
public have compliance obligations under this law. While we are not
experts in this field, our understanding of the subject property is
that it is in full compliance because of its recent construction.
o Originally, we were provided with a Phase I Environmental Site
Assessment prepared by Professional Site Assessment, Inc. dated
April 28, 1995. In addition, a review of the report was conducted by
ALTA Consulting Group. Based on our review of these documents, there
are a number of environmental issues at the subject property,
including Underground Storage Tanks (UST). We are not experts in the
detection of environmental contaminants, or in the cost to cure them
if they do exist. Our analysis assumes that any existing
environmental hazards or conditions affecting the property are
minimal and do not materially affect value.
o There were 86 exceptions noted to title in a recent preliminary
title commitment. We have made an assumption that there are no
exceptions that materially impact the subject's value.
o Please refer to the complete list of Assumptions and Limiting
Conditions included at the end of this report.
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TABLE OF CONTENTS
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Page
INTRODUCTION...................................................................1
Identification of Property..................................................1
Purpose and Intended Use 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
REGIONAL ANALYSIS..............................................................5
NEIGHBORHOOD ANALYSIS..........................................................9
RETAIL MARKET ANALYSIS........................................................12
PROPERTY DESCRIPTION..........................................................21
REAL PROPERTY TAXES AND ASSESSMENTS...........................................25
ZONING........................................................................26
HIGHEST AND BEST USE..........................................................27
VALUATION PROCESS.............................................................28
SALES COMPARISON APPROACH.....................................................30
INCOME APPROACH...............................................................35
RECONCILIATION AND FINAL VALUE ESTIMATE.......................................49
ASSUMPTIONS AND LIMITING CONDITIONS...........................................50
CERTIFICATION OF APPRAISAL....................................................52
ADDENDA.......................................................................53
SUBJECT RENT ROLL
SUBJECT RETAIL SALES
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISER'S QUALIFICATIONS
CUSHMAN &
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PROPERTY SITE
<PAGE>
SUBJECT PHOTOGRAPHS
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[GRAPHIC OMITTED]
View looking south on South Broadway;
subject is off photograph to right.
[GRAPHIC OMITTED]
View looking east on Alameda Avenue;
subject is at right.
<PAGE>
Subject Photographs
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[GRAPHIC OMITTED]
Albertson's and Office Max.
[GRAPHIC OMITTED]
Kmart and Building A.
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Subject Photographs
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[GRAPHIC OMITTED]
Sam's Club.
[GRAPHIC OMITTED]
Building C.
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Subject Photographs
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[GRAPHIC OMITTED]
Pep Boys and Remco.
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Building D.
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Subject Photographs
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[GRAPHIC OMITTED]
Building B.
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INTRODUCTION
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Identification of Property
The subject of this appraisal is Broadway Marketplace, a
369,386-square-foot GLA power center on a 38.59-acre site located at the
southwest corner of Alameda Avenue and South Broadway Street in Denver,
Colorado. Additional non-owned outparcel development consists of three pad sites
totaling 13,190 square feet of building area. Anchor tenants at the Broadway
Marketplace include Albertsons, Kmart, Sam's Warehouse Club, OfficeMax, and Pep
Boys. Pep Boys is on a long-term ground lease. The center opened in 1994-95 and
is currently 100 percent leased. There is an excess developable site available
for another +/-22,100 square foot of retail space which is expected to be
developed with either one or two mini-anchors. There are 11 tax parcels
associated with the subject property.
Property Ownership and Recent History
The subject property is currently in title to Community Centers I, LLC, a
joint venture between Developer's Diversified Realty Corporation (DDR) and DRA
Advisors, Inc. (DRA). The subject was acquired as part of the former Homart
Community Center Division for a total purchase price of approximately $500.0
million from General Growth Properties, Inc. The date of transfer was November
17, 1995. According to the Denver Clerk and Recorder's office, there was a quit
claim deed from Homart Development Inc. to the current ownership recorded
November 24, 1995 at reception number 00146837 indicating a sales price of
$30,947,400. It was not immediately clear if this price was for the entire
subject property. At any rate, this would represent an allocated value from the
acquisition price for the entire portfolio.
A history of the project shows Homart and the Denver Urban Renewal
Authority (DURA) assembled the 40-acre site from numerous owners over a time
period extending from December 1992 to December 1994. A portion of the land area
includes city streets that have been vacated by the City of Denver. The site
acquisition was done in conjunction with DURA who had declared the site as
blighted to help with redevelopment. As part of the agreement with DURA,
approximately $12.5 million in tax-increment financing (TIF) bonds were
utilized, in which the retailer's sales taxes pay off part of the DURA subsidy.
According to Homart, the total assemblage sales price was $14,750,965, or
$8.77 per square foot. In addition to the land assemblage, there was a
significant amount of demolition and environmental abatement associated with the
redevelopment. Demolition included a gutted 8-story Montgomery Wards building,
20 to 30 businesses and approximately 40 homes. Subsequently, Homart developed
the Broadway Marketplace retail center. There remain approximately $80,000 in
on-site development costs (i.e. site improvements). These remaining costs will
be reflected in the value estimate.
Although actual construction costs were not provided, total budgeted
development costs equaled $44,415,000, including $12,350,000 allocated for land
acquisition. Demolition and environmental costs were estimated at $2,900,000.
The proceeds to the developer from the TIF reimbursement of $12,500,000 left a
net development cost of $31,915,000.
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Introduction
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Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the subject property. The function of this appraisal is to
provide an independent valuation and analysis of the property and to assist the
client in evaluating the asset for underwriting purposes in connection with a
proposed financing.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the buildings, site improvements, and a
representative sample of tenant spaces.
o Reviewed leasing policy, concessions, tenant build-out allowances
and history of recent rental rates and occupancy.
o Reviewed a detailed budget of income and expense forecasts for 1997.
o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Conducted market inquiries into recent sales of similar retail
centers 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.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems.
o For this assignment, we did not review actual lease documents. A
sample were audited for the original appraisal, as well as lease
abstracts, a current rent roll and other tenant specific data. The
tenancy has not changed since the original report.
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and the
current market thinking relative to growth in market rents and
market absorption.
o Developed a value estimate of the center through direct sales
comparison.
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject +plus software for the purpose of discounting the
forecasted net income stream to a present value of the leased fee
estate for the center.
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes.
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition.
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Introduction
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o For this assignment, a complete appraisal of the subject property
was performed with the results conveyed in this summary report. A
complete appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. This report also
incorporates our previous Complete Appraisal in a Self-Contained
report format with a date of value of February 9, 1996 by reference.
Date of Value and Property Inspection
The property has been valued as of July 9, 1997. On that date, Dean R.
Paauw, MAI inspected the property and its environs.
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.
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Introduction
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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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
A complete legal description of the property was included in the Addenda
of the original report.
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REGIONAL ANALYSIS
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Employment and the Economy
Employment
The non-agricultural wage & salary employment by sector in the
Denver-Boulder Metropolitan Statistical Area is summarized in the table.
=====================================================
Denver-Boulder MSA
Nonagricultural Wage & Salary Employment
January 1997
-----------------------------------------------------
Sector Employed
-----------------------------------------------------
Mining and Construction 72,300
Manufacturing 120,400
Transportation & Public Utilities 87,400
Trade 283,000
F.I.R.E. 83,400
Services 352,400
Government 169,200
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TOTAL 1,168,100
=====================================================
Source: Colorado Department of Labor and Employment
o The DMA economy has grown since 1988, following substantial over-building
in the early-1980s and economic deterioration in the mid-1980s.
o The compounded, average annual increase from 1990 through 1996 equaled
3.86 percent, based on annual averages.
o The 1996 annual, average, non-agricultural wage and salary employment in
the Denver-Boulder MSA was 1,158,100. This represents an increase of 2.6
percent from the 1995 annual average of 1,128,700.
o The strongest growth over the past year occurred in the trade and services
sectors. Growth in the construction sector has been strong, due to public
works projects, single-family construction and build-to-suit development.
Government has grown to service a larger population. Other sectors have
exhibited moderate growth.
Major Employers
o Several, major telecommunications companies are headquartered or have
major operations in the area, including TCI (largest cable-TV provider in
the country), US West (largest private employer in the DMA), MCI, Sprint
and AT&T.
o There are numerous, large high-tech manufacturing facilities in the DMA
and along the Rocky Mountain Front Range, including Lockheed Martin (3.2
million square feet in the Denver area), Eastman-Kodak (occupying 3.1
million square feet in Greeley), Hewlett Packard (occupying 3.0 million
square feet in Fort Collins, Loveland and Colorado Springs), IBM (2.5
million square feet in Boulder) and StorageTek (2.3 million square feet in
Louisville and Longmont).
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REGIONAL MAP
<PAGE>
Regional Analysis
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o Denver International Airport (DIA), which opened February 28, 1995,
employ's approximately 26,000; 21,000 were transferred from Stapleton
International Airport, which was closed. United Airlines employs
approximately 6,700 at the new airport.
o Rocky Flats, previously a producer of nuclear weapons trigger devices,
employs approximately 5,000. This facility is currently operated by EG&G,
a private employer. Production has been terminated and the facility will
be phased-out over a 10-year period, with labor reductions of
approximately 15 to 20 percent per year projected for the next three
years.
o Merrill Lynch (financial services) is in the process of constructing a one
million square-foot campus-type facility in the southeast quadrant of the
DMA that will employ 3,000 to 5,000. The 280,000 square-foot first phase
in the Meridian International Business Center is nearly complete.
o Sun Microsystems will construct a one million square-foot, high-tech/R&D
and manufacturing campus in the northwest quadrant of the DMA in the
Interlocken Business Park, and employ 3,500. The first 500,000 square-foot
phase recently broke ground and is planned to be completed in 1998.
Unemployment
o The unemployment rate for the Denver-Boulder Metropolitan Statistical Area
fluctuated between 3.0 and 7.0 percent from 1990 through 1996.
o The most recent employment figures indicate unemployment rate of 3.7
percent in the Denver-Boulder MSA.
Retail Sales
o The DMA's compounded, average annual retail sales increased 9.65 percent
from 1990 through 1994.
o In 1995, average retail sales increased by 5.2 percent. Through 1996,
retail sales have grown by 6.9 percent from one year prior.
Housing
There has been substantial single family residential development in recent
years. Information regarding building permits issued is summarized as follows.
o In 1993, 16,254 building permits were issued. In 1994, 19,917 permits were
issued, a 22.5 percent increase over 1993 levels. In 1995, 12,540 building
permits were issued.
o Through 1996, approximately 19,280 residential building permits issued,
exhibiting a strong increase from the 1995 level, and similar to 1994.
o New housing sales increased 11.9 percent, as 15,055 homes were sold
through 1995, compared to 13,456 in 1995.
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Regional Analysis
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o Through 1996, there were 14,992 housing starts (attached, detached and
custom), compared to 13,188 during 1995, a 13.7 percent increase.
o The average price of a new production-built home currently is
approximately $172,000, similar to year-end 1995.
o The average single-family residential resale price equaled $159,328 at the
end of 1996, up 6 percent from the 1995 average.
Economic Impact on Real Property Markets
Growth in population and employment has resulted in increased demand for
real property throughout the DMA. Residential real estate has experienced
sufficient demand to result in substantial, new speculative construction. There
are numerous multi-family residential projects planned or under construction
throughout the DMA. Single-family construction is at its highest levels since
the building boom of the early 1980s.
Office occupancy has reached stabilized levels in most markets, due to
improved economic conditions and population growth. Office rental rates have
increased substantially since 1993, and speculative construction is occurring in
prime market areas, including the Southeast Suburban submarket and Boulder.
Certain submarkets continue to lag in improvement, including Denver's central
business district. There are numerous build-to-suit projects, as several large
companies have established regional or national headquarters in the Denver area.
Industrial market conditions have improved substantially since 1993,
resulting in the achievement of stabilized occupancy levels. Proforma rental
rates have been reached in prime market areas. Numerous speculative industrial
projects are under way near the Denver International Airport, with over 3
million square feet recently completed or under way. The developers of a
majority of these speculative projects require lease-up prior to breaking
ground. Build-to-suit construction has been substantial.
Build-to-suit retail construction has been substantial throughout the DMA,
involving predominately national retailers such as "big box" operations and
national chain restaurants. Certain areas have experienced extensive
development, with large regional shopping malls generating the greatest level of
development. Extensive development has occurred in proximity to the Southwest
Plaza Mall, Westminster Mall and the Cherry creek Mall. The new Park Meadows
Town Center, a 1.5 million square-foot regional mall with four anchor stores and
120 other stores, located in the southeast suburban portion of the DMA, was
completed in September 1996. Development surrounding the mall has been
extensive, as numerous "power centers", "big box" stores, fast-food restaurants,
sit-down restaurants and retail shopping centers have been developed or are
under construction.
The Denver Metropolitan Area economy has exhibited one of the strongest
growth rates in the nation in the 1990s. The result has been an influx of
investors, national retailers, major corporations, and other investors and users
of real property. The growth is projected to continue, though at moderating
levels to recent years.
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Regional Analysis
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Summary and Projected Trends
Employment growth has been relatively high in the 1990s, and generally
exceeded 3 percent from 1990 through 1995. In 1996, employment growth slowed
slightly, as the increase in average, non-agricultural employment from 1995 to
1996 was approximately 2.6 percent. The strongest growth was in construction and
the services sectors.
Many public works projects have been completed, and construction job
growth has continued regardless. This is due primarily to continued residential
and retail construction and new office, industrial and hotel development. The
services sector has continued to gain, as the DMA economy becomes more diverse,
offering a wide variety of employment opportunities in the services sector. The
DMA has become a strong telecommunications, computer software, tourism and
financial services center. Many companies have established major operations in
the area, such as TCI and US West, and are planning major operations, such as
Merrill Lynch and Sun Microsystems. In addition, the DMA has become a major
center for distribution of goods throughout the nation, due to the centralized
location in the nation and Rocky Mountain Region, and the excellent
transportation characteristics.
The economic growth has resulted in strong population growth, high retail
sales levels, low unemployment rates, and high levels of residential and
commercial construction. There has been a major influx of national retailers
into the DMA and build-to-suit retail development is among the highest in the
nation. Demand for industrial space has been strong, and numerous distribution
warehouses and office/warehouse properties are being constructed. Demand for
office space has been strong as well, as numerous companies are expanding or
establishing operations in the Denver area. To provide adequate accommodations,
numerous hotels are being developed throughout the DMA.
The economic downturn in the late-1980s was primarily due to the
dependency on the oil and gas industry, and the lack of diversity in the local
economy. Overall, the DMA economy has become much more diverse, and a repeat of
the 1980s is very unlikely. We believe the DMA economy will continue to grow at
levels slightly lower than those experienced in the early-1990s. Based on
historical trends, discussions with market participants, anticipated new
development, and projections made by various sources, we have made the following
projections:
o Employment growth is projected to average approximately 2.0 percent
annually.
o Population growth is projected to average approximately 1.5 percent
annually.
o Unemployment is projected to be approximately 4.0 percent.
o Inflation is projected to average 3.5 percent.
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NEIGHBORHOOD ANALYSIS
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General
The subject is located in south-central Denver, two miles south of the
Central Business District. Boundaries of the neighborhood are concluded to be as
follows:
North: Speer Boulevard and Sixth Avenue
East: University Boulevard
South and West: Interstate 25
This urban neighborhood has a wide variety of uses, from upscale housing
and the Denver Country Club in the northeast quadrant to industrial and
low-income housing in the northwest section. Speer Boulevard runs along a
portion of Cherry Creek and provides access to downtown.
Access/Linkage
The subject property lies at the southwest corner of Alameda Avenue and
South Broadway, two of the busiest non-highway arteries in the neighborhood.
Broadway is one of the main commercial arteries in Denver and connects the CBD
and I-25 (2 1/2 mile stretch). Between I-25 and downtown, Broadway is a one-way
street (southbound), one block west of Lincoln Street, a one-way northbound
street. Broadway is the more commercialized of the two arteries, and has long
been a strong retail address. Alameda Avenue is a major east-west artery in
central Denver, and also provides nearby connection to I-25. Alameda Avenue is
one of the few east-west streets in the vicinity which have access across I-25.
This section of Interstate 25, less than one mile south and west, carries some
of the highest traffic levels in Colorado (between 136,000 and 174,000 cars
daily). Average daily traffic counts for Alameda Avenue and South Broadway are
as follows:
As of 1993
----------
Alameda Avenue 23,628 (west of South Broadway)
South Broadway (one-way south) 20,198 (south of Alameda Avenue)
South Lincoln (one-way north) 21,028 (south of Alameda Avenue)
Other major neighborhood arterials are as follows:
East-West: Sixth Avenue (U.S. 6)
North-South: University Boulevard
Surrounding Land Use Patterns
Primary Land Uses: Vary significantly by location. The
residential neighborhoods
surrounding the large Washington
Park are generally middle-to-upper
middle income. The Denver Country
Club and surrounding areas consist
of upper-income and wealthy
residential areas. The northwest
quadrant contains a mixture of
businesses, lower and lower-middle
income housing and industrial uses
served by a rail line.
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Neighborhood Map
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Neighborhood Analysis
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Secondary Land Uses: South Broadway is a well-known
retail/commercial corridor in
central Denver, and generally
consists of storefront retail as
well as fast -food restaurants,
auto-related uses and service
businesses.
Adjacent properties are noted as follows:
Pad sites: Wendy's, Imperial Palace (Chinese
restaurant), and Taco Bell. Other
existing buildings along South
Broadway include a Valas TV store,
a two-tenant retail building and a
mexican restaurant.
North: Lower-income single-family housing,
a 7-11 store, two service stations,
a car wash, and a service business.
One of the service stations
(Conoco) was recently razed and
re-built with a new C-store format.
East (across Broadway): A new McDonald's restaurant (opened
1997), storefront retail, a masonic
temple, a Girl Scouts headquarters,
parking lot and an auto-sound
business.
South: The Denver Interplaza is a
retail/office redevelopment started
in 1984. It includes the Denver
Design Center (office/showroom), a
former Printemps fashion store, and
the International Collection, a
collection of retail shops.
West: A few light industrial buildings,
an electrical utility substation,
and an RTD light-rail line and
station. The light rail provides
extremely convenient access to
downtown and various neighborhoods
east of downtown. The RTD station
has been a particularly good source
of business for the Pep Boys store.
Comments: The light-rail line is a relatively
new mass-transit concept to Denver,
and this portion of the line
connecting the CBD and a station
near I-25 is one of the first to be
completed. Thus far, light rail has
been a relative success, although
future expansion is uncertain.
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Neighborhood Analysis
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Neighborhood Trends
Percent Built-up: 95+ percent
Stage of Life Cycle: Redevelopment; the subject and the
adjoining Denver Design Center
represent the beginning of
redevelopment in the area.
Summary
Because of its central urban location, the subject is in the midst of a
relatively dense population center of the Denver metro area. The subject's
strong location is due to its proximity (2 miles) to downtown along a major
commuter route and its accessibility to Interstate 25. The subject is one of the
first redevelopments in this south-central Denver area, although future projects
are planned closer to downtown, primarily including residential uses.
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<TABLE>
<CAPTION>
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DEMOGRAPHIC STATISTICS
Broadway Marketplace (Denver, Colorado)
Cushman & Wakefield, Inc.
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1-Mile 3-Mile 5-Mile State of United
Radius Radius Radius Colorado States (000)
===================================================================================================
<S> <C> <C> <C> <C> <C>
-----------------------------
POPULATION STATISTICS
-----------------------------
1980 22,621 175,392 435,754 2,889,965 226,546
1990 20,656 160,159 409,557 3,294,394 248,710
1997 22,056 173,803 446,764 3,916,448 266,798
2002 23,355 185,821 476,956 4,325,698 278,179
Compound Annual Change
----------------------
1980 - 1990 -0.90% -0.90% -0.62% 1.32% 0.94%
1980 - 1997 -0.15% -0.05% 0.15% 1.80% 0.97%
1995 - 2002 0.82% 0.96% 0.94% 1.43% 0.60%
- ---------------------------------------------------------------------------------------------------
-----------------------------
HOUSEHOLD STATISTICS
-----------------------------
1980 11,994 85,125 190,757 1,061,249 80,390
1990 11,328 80,525 186,387 1,282,489 91,947
1997 10,970 80,662 208,531 1,561,828 101,517
2002 10,025 79,250 222,925 1,726,337 107,281
Compound Annual Change
----------------------
1980 - 1990 -0.57% -0.55% -0.23% 1.91% 1.35%
1980 - 1997 -0.52% -0.32% 0.53% 2.30% 1.38%
1995 - 2002 -1.28% -0.25% 0.96% 1.44% 0.79%
- ---------------------------------------------------------------------------------------------------
-----------------------------
PERSONS PER HOUSEHOLD
-----------------------------
1980 1.89 2.06 2.28 2.72 2.82
1990 1.82 1.99 2.20 2.57 2.70
1997 2.01 2.15 2.14 2.51 2.63
2002 2.33 2.34 2.14 2.51 2.59
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-----------------------------
AVERAGE HOUSEHOLD INCOME
-----------------------------
1997 Average Household Income $48,453 $49,642 $50,335 $52,813 $55,443
1997 Median Household Income $29,765 $29,274 $31,521 $38,358 $37,916
1997 Per Capita HH Income $22,961 $21,571 $22,001 $21,017 $21,272
- ---------------------------------------------------------------------------------------------------
* Source: Equifax National Decision Systems
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RETAIL MARKET ANALYSIS
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Property Profile
The subject is anchored by a number of national and regional retail
tenants. These major tenants are under long-term leases and include Sam's Club,
Kmart, Albertson's, Pep Boys, and Office Max. Provided below is a summary of the
credit profile of several of these major tenants. Combined, they account for in
excess of 79.3 percent of contract base rents.
================================================================================
Anchor Tenants Parent Company S&P Rating(1) % of Base Rent
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Sam's Club Wal-Mart AA 26.8%
- --------------------------------------------------------------------------------
Kmart Kmart BB 28.8%
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Albertson's Albertson's A+ 12.1%
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Office Max Office Max NR 7.0%
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Pep Boys Pep Boys BBB 4.6%
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As of February 1997
Trade Area Analysis
The primary trade area remains at three miles. The subject's secondary
trade area, particularly for Sam's Club, might span up to five miles from the
site. To add perspective to this analysis, we have segregated our survey into 1,
3 and 5-mile concentric circles. The report on the facing page presents this
data. The full updated demographics are presented in the Addenda.
Additional patronage from the strong traffic levels (which is largely
commuter traffic) along South Broadway and Lincoln Streets would account for
strong inflow of additional sales. From our analysis, it is our opinion that the
3-mile radius surrounding the subject property comprises the primary trade area
from which 70 to 80 percent of its sales originate.
Retail Structure
On the following pages, we have provided profiles of the subject's primary
competition. As will be seen, the subject's primary competition is seen not in
one or two specific centers, but in a competing commercial strip two miles east
which includes several big box tenants and a small grouping of big-box
discounters. Another competing retail strip is the 16th Street Mall in downtown.
The subject also competes to some degree with existing super-regional shopping
centers such as the Cherry Creek Mall and Villa Italia Mall. It is noted,
however, that the subject is a unique property within this market whereas no
existing centers truly present a similar competitive stance to Broadway
Marketplace. Although Denver is attracting a fair amount of big box and power
center development, these have been and continue to be developed in the suburban
locations 8-15 miles from the subject.
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Retail Market Analysis
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Competitive Retail Center No. 1 (Primary)
Name: South Colorado Boulevard, located between
Alameda Avenue and I-25 (2 miles long)
Distance from Subject: 2+/- miles east (8-10+/- min. drive time)
Total GLA: Estimated at over 1,000,000 SF
Major Retailers:
Builders Square 110,000+/- SF
Barnes and Noble 46,000+/- SF
Computer City 25,300+/- SF
Safeway 55,000+/- SF
King Soopers 40,000+/- SF
PetSmart 24,600+/- SF
Office Depot 38,000+/- SF
REI N/A
Toys 'R' Us N/A
Target 115,000+/- SF
Albertson's (new) 60,000+/- SF
Circuit City (new) N/A
Walgreen's 13,000+/- SF
Number of Retailers: Over 100 stores and restaurants
Comments:
South Colorado Boulevard has remained one of the busiest commercial
boulevards in southeast Denver for decades. In the early 1990s, there was
redevelopment at the interchange of Colorado Boulevard and I-25 with a small
grouping of big box retailers consisting of Toys 'R' Us, Computer City, REI and
two restaurants. An entertainment-related retail center (Colorado Center) is
under construction in this corridor at its southeast quadrant of I-25, and has a
planned Spring 1998 opening.
This retail strip is one of the main competitors to the subject. There are
several neighborhood and convenience shopping centers along Colorado Boulevard
as well as hotels, office buildings, fast food and sit-down restaurants,
auto-related users and other commercial development.
Rental rates for smaller in-line tenants in the shopping centers are
generally between $15 and $25 per square foot, net. Larger tenant rates are
typically between $10 and $17 per square foot, net. Land prices have generally
been from $15.00 to $25.00 per square foot for mid-sized (1-5 acre) parcels.
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<PAGE>
Retail Market Analysis
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Competitive Retail Center No. 2 (Primary)
Name: 16th Street Mall
Location: Downtown Denver
Distance from Subject: 2+/- miles north (5-7+/- min. drive time)
Total GLA: Over 1,000,000+/- SF
Major Retailers: Media Play
TJ Maxx
Walgreens
Office Depot
Comments:
This is a mile-long retail pedestrian corridor in the middle of the
central business district which is served by shuttle buses. All of the major
local department stores have left downtown, including May D&F and Joslins. There
has been redevelopment in this corridor, most notably by the Tabor Center, a
glass-enclosed 115,000-square-foot retail galleria that is part of a mixed-use
office/hotel development. Tabor Center has a new ownership and plans to change
its marketing orientation to more upscale tenants.
There has been a strong interest by potential residents and retailers
alike in lower Downtown (LoDo) with the recent completion of Coors Field
(Colorado Rockies), Elitch Gardens (amusement park) and a proposed new Denver
Nuggets arena. Downtown, though, has a reputation as a relatively weak retail
market, as all of the downtown department stores (i.e. Joslins, May, Denver Dry)
have left in the past decade. Offsetting this, the $100 million 350,000 square
foot Denver Entertainment and Fashion Pavilion is under construction for the
16th Street Mall which would include a 12-screen movie theater and other
national retail/entertainment tenants such as Nike Town, Barnes & Noble, Virgin
Records and Hard Rock Cafe. Rental rates are being quoted at $30 to $50 per
square foot, net. The developer is receiving a DURA (i.e. Denver Urban Renewal
Authority) grant as part of the financing package. It should open in the Fall of
1998. There is another proposed project for lower downtown that has construction
set for summer 1996. The 350,000-square-foot, $40 million mixed-use Stadium Walk
will be located in lower downtown near Coors Field and include 100 residential
units, movie theater, retail shops and restaurants.
The 16th Street Mall retail corridor serves over 110,000 downtown office
workers. Rental rates for storefront retail space are generally quoted from
$15.00 to $30.00 per square foot, net, depending upon location, building type
and condition. More typically, rental rates are in the $14 to $20 per square
foot range.
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[GRAPHIC OMITTED]
SHOPPING CENTER
COMPETITION MAP
<PAGE>
Retail Market Analysis
================================================================================
New/Proposed Competition
There exists various nodes of existing and future retail development
within a 5-mile radius that also offer varying degrees of competition to the
subject.
A - Cinderella City Mall - This is an aging 1.2 million-square-foot
mall located four miles south of the subject at South Broadway and
Hampden Avenue (U.S. 285) in the suburb of Englewood. The 1960s-era
mall has lost all of its anchor department stores and is expected to
be demolished and redeveloped in the near future as a $40 million,
450,000-square-foot major entertainment center with big box
retailers. A developer has been selected and planning is underway.
Preliminary plans include a 5,000-seat Sony movie theatre, several
restaurants, a large general merchandise store, and a light-rail
stop. The owner (Equitable) is getting ready to deed the property
over to the City of Englewood, who would then control its future
redevelopment. The 75-acre site has environmental problems, but has
good accessibility and little big-box competition. Potential
competition is years away.
B - University Hills Mall - This was an aging mall (1958) that was
recently razed, and a new power center is under construction on the
22-acre site, four miles southeast on South Colorado Boulevard. It
has a strong trade area and established retail location. The 250,000
square foot power center will include a King Soopers (already open),
Home Place, Office Max and Just for Feet. There will also be pad
restaurants and banks. Most tenants should be open by September
1997.
C - Former Gates Rubber Company - This complex of former manufacturing
buildings just south of I-25 along Broadway could become a retail
redevelopment, in the view of some retail specialists, according to
a 1995 Denver Post article. The speculation rests on the success of
the subject property as well as the strength of the retail market.
However, razing the Gates structures could be prohibitively
expensive. The possibility for future redevelopment of the Gates
property became closer to reality when Gates was sold to a foreign
company in late 1995.
D - Alameda Crossing - Located two miles west at the northwest corner
of Alameda Avenue and Sheridan Boulevard is an existing
131,000-square-foot neighborhood center anchored by Albertson's and
Walgreens. This center was built in 1980-85 and serves a
lower-middle income area. Occupancy ranges over 90 percent with
leases ranging over $8.00 to $10.00 per square foot for in-line
space. Because of its demographics, in-line tenants here do not
effectively compete with the subject.
As can be seen, competitive existing retail development in the immediate
area is very limited and consists of primarily two retail concentrations (16th
Street and South Colorado Boulevard), and not specifically with any community or
neighborhood shopping centers. These centers will limit the subject's trade area
in these directions.
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Retail Market Analysis
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The influx of big box development continues in the Denver Metro Area,
however, all of the current and proposed development is located in nearly all
directions in the suburban locations approximately 8-15 miles distant. Because
of the subject's trade area, these developments will not impact the subject
property.
Property Profile
The subject property's profile has not changed, and remains anchored by a
number of national retail tenants, including Kmart, OfficeMax and Sam's Club, a
subsidiary of Wal-Mart, Inc. Other national and/or regional tenants include Pep
Boys (automotive) and Albertson's (grocery).
Population
Between 1980 and 1997, ENDS reports that the population within the primary
trade area actually decreased by 1,589 residents to 173,803, reflecting a 0.9
percent decrease or negative 0.05 percent annual growth. However, population
actually has grown from 1990. Through 2002, the trade area is expected to
increase to 185,821 residents which is equal to a 6.9 percent increase or 1.35
percent growth per annum.
Further analysis shows that the fastest growing quadrant of the trade area
lies between the three and five-mile radius of the subject, as the core of
Denver has been fully developed.
Provided on the following page is a graphic representation of the
population change forecasted for the subject's trade area through 2002. Note
that the areas forecasted to have the most significant growth are found outside
of the primary trade area to the south and east. The proposed competition would
be in these areas, which should lessen their impact on the subject.
Households
According to ENDS, the primary trade area lost 4,463 households between
1980 and 1997, a decrease of 5.24 percent to 80,662 units. Contrary with the
national trend, the trade area is experiencing household growth at a rate slower
than population changes. Between 1997 and 2002 the area is expected to decline
by 1.75 percent in the number of households.
Trade Area Income
Trade area income figures for the subject support the profile of a mix of
income levels from lower to upper-income neighborhoods. According to ENDS,
average household income within the primary trade area in 1997 was approximately
$49,642, in comparison to the median household income of $29,274. This gives an
idea of the disparity in income levels in the trade area, with greater
prevalence of lower-income households and a moderate amount of high and
very-high incomes.
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[GRAPHIC OMITTED]
W. ALAMEDA AVE & BROADWAY
DENVER COUNTY, CO
1, 3 & 5 MILE RADII
POPULATION % GROWTH 1997 - 2002
<PAGE>
Retail Market Analysis
================================================================================
A comparison of the trade area's relative ranking is shown on the
following chart.
=========================================
Average Household Income Comparison
=========================================
Area Income
=========================================
1 Mile Radius $48,453
-----------------------------------------
3 Mile Radius* $49,642
-----------------------------------------
5 Mile Radius $50,335
-----------------------------------------
State of Colorado $52,813
-----------------------------------------
United States $55,443
=========================================
Source: Equifax National Decision Systems
=========================================
* Primary Trade Area
=========================================
Income ranges in the immediate market area rate below metro, state and
national averages. The distribution of income within the primary trade area can
be summarized as follows:
=========================================
Household by Income
=========================================
% of
Category Households
=========================================
Greater Than $150,000 4.69%
-----------------------------------------
$100,000 - $149,999 4.31%
-----------------------------------------
$ 75,000 - $ 99,999 5.82%
-----------------------------------------
$ 50,000 - $ 74,999 13.07%
-----------------------------------------
$ 35,000 - $ 49,999 14.11%
-----------------------------------------
$ 25,000 - $ 34,999 13.96%
-----------------------------------------
Less Than $ 25,000 44.03%
=========================================
Provided on the following page is a graphic presentation of the average
household income distribution throughout the trade area. As can be seen, the
subject is situated on the boundary between an upper-income neighborhood (Cherry
Creek) and the lower-income areas in west-central Denver.
Subject Sales
Limited sales numbers have been reported by the subject's tenants, and
these are provided in the Addenda. The Sam's Club reported sales of $335 per
square foot in fiscal year 1996, down two percent from FY 1995. Kmart reported
FY 1996 sales of $150 per square foot, up 10 percent from 136 in FY 1995.
Albertson's does not need to report sales. There is not enough subject sales
information with which to compare sales to industry averages.
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[GRAPHIC OMITTED]
W. ALAMEDA AVE & BROADWAY
DENVER COUNTY, CO
1, 3 & 5 MILE RADII
HH 97 BY INCOME: AVERAGE
<PAGE>
Retail Market Analysis
================================================================================
Industry Average Sales
Sales at the subject property can be analyzed in comparison to industry
averages. In our initial appraisal in early 1996 we felt the subject had the
potential to perform above regional and even national benchmarks. The following
chart presents a comparison of average sales by center category for both power
centers and community centers in the U.S.
<TABLE>
<CAPTION>
=======================================================================================================================
Comparison of Sales and Rent
Power Center and Community Center Tenants
=======================================================================================================================
U.S. Median* U.S. Median* U.S. Median**
Retail Power Center Super Community Centers Community Center
- -----------------------------------------------------------------------------------------------------------------------
Sales Rent % of Sales Rent % of Sales Rent % of
Tenant Classification PSF PSF Sales PSF PSF Sales PSF PSF Sales
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Department Store $180.00 $ 3.42 1.9% $165.00 $ 3.50 2.1% $142.00 $ 4.41 3.1%
- -----------------------------------------------------------------------------------------------------------------------
Superstore (Food) $285.00 $ 4.58 1.6% N/A N/A N/A $372.00 $ 5.79 1.6%
- -----------------------------------------------------------------------------------------------------------------------
Restaurant (w/liquor) $234.00 $ 15.90 6.8% $223.00 $ 13.99 6.3% $210.00 $ 12.58 6.0%
- -----------------------------------------------------------------------------------------------------------------------
Shoes $187.00 $ 12.00 6.4% $180.00 $ 12.00 6.7% $159.00 $ 13.00 8.2%
- -----------------------------------------------------------------------------------------------------------------------
Cards & Gift $105.00 $ 12.50 11.9% $136.00 $ 12.62 9.3% $127.00 $ 12.36 9.7%
- -----------------------------------------------------------------------------------------------------------------------
Women's Ready to Wear $122.00 $ 10.20 8.4% $167.00 $ 13.48 8.1% $146.00 $ 12.16 8.3%
- -----------------------------------------------------------------------------------------------------------------------
Overall Average $197.00 $ 7.22 3.7% $188.00 $ 6.85 3.6% $210.00 $ 7.19 3.4%
- -----------------------------------------------------------------------------------------------------------------------
Median $200.00 $ 6.33 3.2% $183.00 $ 6.80 3.7% $199.00 $ 6.90 3.5%
- -----------------------------------------------------------------------------------------------------------------------
Lower Decile $ 87.00 $ 3.60 4.1% $107.00 $ 3.21 3.0% $117.00 $ 3.36 2.9%
- -----------------------------------------------------------------------------------------------------------------------
Upper Decile $292.00 $ 14.36 4.9% $314.00 $ 12.33 3.9% $371.00 $ 12.71 3.4%
=======================================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
=======================================================================================================================
</TABLE>
Overall, average sales performance may be refined further as shown in the
following chart.
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Retail Market Analysis
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<TABLE>
<CAPTION>
=====================================================================================================
Sales Performance Indices
U.S. Power Centers and Community Centers
=====================================================================================================
Power Centers* Super Community Centers* Community Centers**
- -----------------------------------------------------------------------------------------------------
Southern Southern Southern
United States Region United States Region United States Region
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Overall Average $197 $189 $188 $174 $210 $192
- -----------------------------------------------------------------------------------------------------
Median $200 $200 $183 $176 $199 $189
- -----------------------------------------------------------------------------------------------------
Lower Decile $ 87 -- $107 $116 $117 $117
- -----------------------------------------------------------------------------------------------------
Upper Decile $292 -- $314 $234 $371 $312
=====================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
=====================================================================================================
</TABLE>
From the above we see that industry averages and medians range from
approximately $189 to $200 per square foot for power centers and $174 to $188
per square foot for super community centers. This is based on the 1995 ULI
publication. More recently, ULI has put forth its 1997 version of operating
results for standard community centers. Displayed above is a range of $189 to
$210 per square foot as average/median performance ranges. Upper and lower
decile levels show more dramatic swings as would be expected. Nonetheless, with
sales of $223 per square foot, the subject falls above average/median industry
benchmarks.
Conclusion
The following summarizes our key conclusions:
o The neighborhood has excellent access via South Broadway, Alameda
Avenue and I-25. South Broadway and Alameda Avenue are commuter
arteries with combined traffic count of nearly 44,000 cars daily.
The subject is centrally located with a densely populated trade
area.
o The existing competitive structure is limited because the Denver
Metro's power centers have primarily been built in the outlying
suburban areas far from central Denver. The primary competition
comes from two retail strips, one two miles east and the other in
the CBD. However, there is likely to be increased competition from
proposed power centers in Englewood and southeast Denver.
o Rental rates for in-line space in existing power centers are on an
upward trend, with most experiencing $1.00 to $2.00 per square foot
increases in the past 18 months. In-line space at a new power center
(U-Hills Shopping Center) four miles away is leasing up at $20 to
$25 per square foot, with annual steps in most leases.
o The subject has both a lower-income (north/west), middle-income
(south/east) and affluent (east) local population within its 3-mile
trade area. Average household income within a 3-mile radius of the
property is currently estimated at nearly $50,000.
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Retail Market Analysis
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o Spending power is influenced by the heavily-traveled commuter
arteries of South Broadway and Lincoln Streets. The income and
retail sales potential of this commuting traffic brings is not
measured in the demographic statistics, which are reflective of
residents only.
The merchandising mix of the center, the location along two major
arterials, and the popularity and uniqueness of the major tenants, all combine
to establish Broadway Marketplace as a viable retail center. We believe that,
with competent management, aggressive marketing, and a responsive maintenance
program, it should continue to develop a strong position in the market
throughout the foreseeable future.
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PROPERTY DESCRIPTION
================================================================================
Site Description
Location: S/W/C of South Broadway and Alameda
Avenue City and County of Denver
Shape: Irregular
Site Area: 38.59 acres (1,681,024 square feet)
Frontage: West side of South Broadway (1,095.10
feet) South side of Alameda Avenue
(1,246.49 feet) East side of Cherokee
Street (617.0 feet)
Topography/Terrain: Relatively level
Street Improvements: South Broadway is a one-way
(southbound), five-lane fully-improved
arterial with on-street parking. Alameda
Avenue is a two-way, four-lane (plus
center turn lane) fully-improved
arterial. The intersections of Alameda &
Broadway and Alameda & Bannock are both
signaled.
Soil Conditions: No study of soils was conducted as part
of this appraisal and no opinion is
rendered on sub-soil conditions.
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.
Utilities
Water: City of Denver
Sewer: City of Denver
Electricity: Public Service Company of Colorado
Gas: Public Service Company of Colorado
Telephone: U.S. West
Access: Primary access is gained via Broadway
(north/south) and Alameda Avenue
(east/west). Ingress/egress is gained
via curb-cut entrances along Broadway
(5) and Alameda Avenue (3). Secondary
ingress/egress is also provided by
Cherokee Street and Center Avenue.
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Property Description
================================================================================
Land Use Restrictions: A recent title report was reviewed by
the appraisers. There are 86 exceptions
noted in the title report. Please see
the special assumption.
Flood Hazard: The subject property lies in Flood Zone
X according to Community Number 080046,
Panel Number 0014B, and, therefore does
not need flood insurance.
Wetlands: No wetlands study has been provided for
this analysis. If a subsequent
engineering survey reveals the presence
of regulated wetlands, we reserve the
right to amend this valuation.
Site Improvements: The subject site has been graded, paved
and improved with all necessary
utilities.
Hazardous Substances: Please refer to our Special Assumption
with an explanation as to our disclaimer
regarding hazardous substances.
Comments: Overall, the size, topography and site
configuration appear functionally
adequate and conducive for retail
utilization. The site is serviced by all
public utilities and the curb appeal of
site improvements is good.
The property includes 22,100 square feet
of excess land which is planned for
either one or two mini-anchor tenants.
This parcel is adjacent to the in-line
shops attached to Kmart and contributes
additional value to the shopping center.
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Property Description
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Improvements Description
The subject site has been improved with a single-level, six-building power
center with a total GLA of 369,386 square feet (excluding non-owned outparcels).
A more complete description of these improvements follows. Please refer to the
site plan on the following page for the location of the improvements on the
subject tract.
General Description
Type: Power center comprised of five major
stores, four smaller multi-tenant retail
buildings, and three outparcels (not
owned).
Year Built: 1993-95
Size
Albertsons 50,645 SF
Sams Warehouse Club 114,057 SF
K-Mart 107,806 SF
Office Max 23,500 SF
Pep Boys 22,356 SF
In-Line Shops 50,944 SF
------------- ---------
Total 369,386 SF
GLA including three
pad restaurants: 382,576 SF
Developer: Homart Development
Layout: The center comprises six buildings, two
of which are smaller multi-tenant retail
shops. Sam's Club is the only
stand-alone store and anchors the
southern end of the center, while
Albertson's and OfficeMax anchor the
northern end. Kmart anchors the west end
and has an attached multi-tenant retail
building. Pep Boys and an attached
multi-tenant retail building are at the
southwest corner of the site. Outparcels
are situated on the eastern portion of
the site with zero lot line along South
Broadway to maintain the urban nature of
the development.
Site Improvements
On-Site Parking 2,004 regular spaces
52 handicap spaces
---------------------
2,056 total parking spaces
Parking Ratio: 5.57 spaces/1,000 SF of existing GLA or
one space per 180 square feet.
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[GRAPHIC OMITTED]
BROADWAY MARKETPLACE FLOOR PLAN
<PAGE>
Property Description
================================================================================
Artwork: At the corner of South Broadway and
Alameda Avenue, there is a pedestrian
plaza with a sculpture with moving
panels caused by wind breezes. Also,
there are concrete art panels along with
block walls at the Plaza and along
Alameda Avenue. The artwork was required
due to the involvement of DURA.
Other: Unique, artistic functional benches.
Comments: Overall, the site and building
improvements appear to be well designed
and configured for retail utilization.
Site configuration appears well suited
for vehicular movement and visibility.
The property's condition is good.
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REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject is currently assessed by Denver County. Real estate taxes in
Colorado are paid in arrears, by April 30th (in full) the following year.
Properties are re-assessed every two years, with the most recent re-assessment
in 1997. Assessed values are 29 percent of the Assessor's estimate of market
value. A mill levy is applied to the assessed value to determine the tax
liability. The mill levy for 1996 was 80.826 per $1,000 in assessed value. Taxes
for 1996 are summarized in the following chart.
-------------------------------------------------------
Assessor No. Actual Value 1996 Taxes
-------------------------------------------------------
5152-01-029 $ 4,386,700 $102,823
-------------------------------------------------------
5152-02-033 $ 6,480,900 $151,909
-------------------------------------------------------
5152-03-034 $ 1,449,400 $ 33,973
-------------------------------------------------------
5152-04-042 $ 321,600 $ 7,538
-------------------------------------------------------
5152-04-045 $ 370,700 $ 8,689
-------------------------------------------------------
5152-04-046 $ 402,500 $ 9,434
-------------------------------------------------------
5152-04-048 $ 36,100 $ 846
-------------------------------------------------------
5152-05-016 $ 9,667,000 $226,590
-------------------------------------------------------
5152-06-032 $ 140,600 $ 3,295
-------------------------------------------------------
Total $23,255,500 $545,097
-------------------------------------------------------
The 1996 tax amount totaled $545,097. This amount has been paid in full.
The 1997 assessment has increased 0.04 percent to $23,264,100.
There are also special assessments for the subject for the Broadway
Maintenance District. According to the Treasurer's office, these 1996 fees
totaled $35,957, and were paid in 1997. Therefore, the subject's total 1996 tax
liability was $581,054. We have projected the 1997 taxes to remain flat at
$581,054. Thereafter, taxes in future years are projected to increase at 3.5
percent annually.
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<PAGE>
ZONING
================================================================================
The subject property remains zoned B-4, General Business, by the City and
County of Denver. This district allows for a variety of commercial uses,
including retail. The property is part of the Broadway Marketplace, a planned
building group (PBG), approved by Denver.
We are not experts in the interpretation of complex zoning ordinances. The
subject has been constructed within the confines of the B-4 regulations. As
such, we assume that all general requirements have been met and that the
existing as well as the proposed improvements conform to code.
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
================================================================================
As Vacant
The site is large enough to accommodate a variety of uses, including
office and retail development. Its street frontage and good access further
support this view. All utilities are available and the site which is relatively
level. Overall, the site appears to have no physically limiting conditions.
The B-4 designation is designed primarily for commercial utilization.
Based on the site's size and layout, with consideration given to parking
constraints, a shopping center of similar size to the existing improvements may
be a permitted use. Due to the site's frontage and proximity to other commercial
uses, we believe that retail uses would be a legally conforming use for the
site.
The retail market is improving and is generally in equilibrium in many
markets. In addition, we see no significant changes in the local demographics
which might threaten the economic viability of the subject site.
The last test of highest and best use is that of maximum productivity. In
this case, the site is located in a central urbanized area of the city. Existing
neighborhood uses further compliment the site. The subject's size, location and
proximity to regional road networks and residential nodes, lead us to the
conclusion that the Highest and Best Use for the subject property, as if vacant,
would be for a new shopping center.
Highest and Best Use As Improved
An alternative use 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. Therefore, we have
concluded that the highest and best use of the site as improved is for retail
utilization as a shopping center.
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VALUATION PROCESS
================================================================================
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 Sales Comparison and Income
Approaches will be used in this appraisal. A Cost Approach was utilized in the
original report, but will not be repeated in this valuation. The estimation of
obsolescence for functional and economic conditions as well as depreciation on
improvements makes this approach sometime problematic. Furthermore, the Cost
Approach fails to fully consider the value of anchor store commitments and the
difficulty of site assemblages for such properties. As such, the 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.
By definition, the subject property is considered an income/investment
property. 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.
The subject property includes an excess developable site that could be
developed with a 22,100 square foot retail building (with one or two stores).
The incremental value of this site is estimated in the following section and
will be added to the value indications by the Sales Comparison and Income
Approaches.
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<PAGE>
EXCESS LAND VALUATION
================================================================================
The subject property includes a land parcel adjacent to one of the in-line
shop buildings. It is identified as 'future anchor' on the Site Plan in the
Description of Property section earlier in the report. The site is ready to
build and is expected to be developed by the owner with a +/-22,100-square-foot
retail building. We believe a prospective buyer would place additional value to
this developable site, as it could be leased or sold to a prospective
retailer(s).
We have updated our land valuation of the excess buildable site with two
recent land sales in the Denver Metro Area of sites that have been built with
big-box retailers. The sales are described in the following chart and indicate a
relatively tight range of sale prices based on each site's buildable area.
================================================================================
Big Box Site Sales Summary
================================================================================
Proposed Retailer/ Sale Land Area/ Price PSF
Location Date Sales Price Bldg Area Building Area
================================================================================
DSW Shoe Store/ 12/96 $1,361,300 2.39 Ac/ $54.45
NWC Chester/Yosemite 25,000 SF
Lone Tree
- --------------------------------------------------------------------------------
Circuit City 5/96 $1,700,000 3.88 Ac/ $51.52
SWC S. Wadsworth/Belleview 33,000 SF
Denver
================================================================================
The range supports our previous valuation of $50.00 per square foot of
buildable area. Applying this value to the 22,100 square foot buildable site
results in the following value range:
22,100 SF x $50.00/SF = $1,105,000
$1,100,000 (rounded)
The value of this excess site will be added to the value indications by
the other approaches.
Value of Excess Developable Site
$1,100,000
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SALES COMPARISON APPROACH
================================================================================
The most widely-used and market-oriented unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The chart of the Following Page presents an overview of the improved
property sales used in this analysis.
Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, ten comparable sales
have been analyzed for this analysis. These represent large community and power
center sales in the south, northwest, southeast, southwest, and eastern regions
of the United States. The sales range between $60.26 and $131.15 per square foot
of GLA sold with overall capitalization rates ranging from a low of 9.15 percent
to a high of 10.50 percent. These transactions occurred between November 1995
and June 1997 (pending), with the majority of sales taking place over the past
12 months.
For the ten sales surveyed, the mean overall sale price is calculated to
be $35,200,000 (rounded). The mean gross leasable area sold is 378,818 square
feet, with the mean overall price per square foot calculated at $96.04 per
square foot. Finally, the survey shows a mean NOI of $9.45 per square foot, with
an overall capitalization rate of 9.84 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
condition must be accounted, thereby creating a time adjusted normal unit of
comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
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POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA
===============================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- -------------------------------------------------------------------------------------------------------------------------------
2 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- -------------------------------------------------------------------------------------------------------------------------------
3 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- -------------------------------------------------------------------------------------------------------------------------------
4 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- -------------------------------------------------------------------------------------------------------------------------------
5 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129 459,209
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- -------------------------------------------------------------------------------------------------------------------------------
6 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
- -------------------------------------------------------------------------------------------------------------------------------
7 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- -------------------------------------------------------------------------------------------------------------------------------
8 White Turkey Plaza Mar-95 1972/82/93 $14,375,000 737,906 20.0% 147,396 122,052
NEC/Federal & Candlewood Lake Good
Fairfield County,
Brookfield, Connecticut
- -------------------------------------------------------------------------------------------------------------------------------
9 Scottsdale Fiesta Dec-95 1995/96 $46,000,000 -- -- 491,000 440,000
S/E/C Shea Blvd. & Excellent
Pina Co. Road
Scottsdale, Arizona
- -------------------------------------------------------------------------------------------------------------------------------
10 Center at Baybrook Nov-95 1985/93 $25,675,000 1,742,535 24.5% 426,097 372,987
NEC/Medical Ctr. Blvd. & I-45 Good
Houston
Webster, Texas
===============================================================================================================================
Survey High: $76,500,000 2,938,558 -- 788,826 663,404
Survey Low: $14,375,000 737,906 -- 147,396 122,052
===============================================================================================================================
Survey Average: $35,202,700 1,469,824 25.8% 378,818 303,599
===============================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Anchor Sale
Sale GLA as Price/ NOI/
No. Name/Location % of Total Sq.Ft. Sq.Ft OAR Anchor Tenants
========================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. 79.7% $112.19 $11.21 9.99% Bed Bath & Beyond,
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million,
Orlando, Florida Shoe Carnival
- ------------------------------------------------------------------------------------------------------------------------
2 Smoketown Station 45.0% $99.06 $10.13 10.23% Lowe's Home Center,
Prince William Pkwy & Worth Shoppers Food Whse,
Prince William County, Best Buy
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------
3 Aboretum Crossing (Phs. I) 84.2% $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just for
Austin, Texas Feet, Mikasa
- ------------------------------------------------------------------------------------------------------------------------
4 Jantzen Beach Supercenter 84.1% $96.98 $8.87 9.15% Kmart, HomeDepot, Toys
N. Jantzen Dr & N. Center Ave R Us, REI, Ross, Comp.
Portland, Oregon City, Copelands, Linens,
Old Navy, Barnes & Noble
- ------------------------------------------------------------------------------------------------------------------------
5 Lawrenceville Market Center 92.0% $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- ------------------------------------------------------------------------------------------------------------------------
6 Centennial Plaza 85.0% $71.37 $7.49 10.50% Home Depot, Best Buy,
N.W. 59 & May Avenue Home Place
Oklahoma City, Oklahoma
- ------------------------------------------------------------------------------------------------------------------------
7 Preston Shepard Place 73.2% $128.83 $12.11 9.40% Marshalls, Steinmart,
SWC/Preston & Park Blvd. Office Depot, Baby
Colling County, Superstore, MJ Des.,
Plano, Texas Borders, HomePlace
- ------------------------------------------------------------------------------------------------------------------------
8 White Turkey Plaza 82.8% $97.53 $9.00 9.22% OfficeMax, The Wiz,
NEC/Federal & Candlewood Lake Waldbaums, T.J. Maxx
Fairfield County,
Brookfield, Connecticut
- ------------------------------------------------------------------------------------------------------------------------
9 Scottsdale Fiesta 89.6% $93.69 $9.37 10.00% HomeBase, Kmart,
S/E/C Shea Blvd. & OfficeMax, Smith's,
Pina Co. Road Barnes & Noble, Comp
Scottsdale, Arizona USA, Linens, PetSmart
- ------------------------------------------------------------------------------------------------------------------------
10 Center at Baybrook 87.5% $60.26 $6.03 10.00% Builder's Sq., Bed
NEC/Medical Ctr. Blvd. & I-45 Bath Beyond, Osh-
Houston mans, SteinMart,
Webster, Texas Best Buy, Sears
========================================================================================================================
Survey High: -- $131.15 $13.70 10.50% --
Survey Low: -- $60.26 $6.03 9.15% --
========================================================================================================================
Survey Average: 80.1% $96.04 $9.45 9.84% --
========================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------
Sale Occupancy
No. Name/Location At Sale Comments
================================================================================================
<C> <S> <C> <C>
1 International Drive Value Ctr. 100.0% New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%.
- ------------------------------------------------------------------------------------------------
2 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth hub for county. Anchor rents $8.40/sf; in-
Prince William County, line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- ------------------------------------------------------------------------------------------------
3 Aboretum Crossing (Phs. I) 98.0% Presale or promotional center. Sale
U.S. Highway 183 & expected to close by Jan. 31, 1997.
N. Mopac Blvd. REIT purchase based on direct cap.
Austin, Texas
- ------------------------------------------------------------------------------------------------
4 Jantzen Beach Supercenter 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave gomery Ward & Kmart anchor enclosed
Portland, Oregon mall of 87,500 square feet. Montgomery
Ward on ground lease.
- ------------------------------------------------------------------------------------------------
5 Lawrenceville Market Center 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management.
Lawrenceville, Georgia * Ground Lease
- ------------------------------------------------------------------------------------------------
6 Centennial Plaza 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue writing. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-
9.25% interest. REIT buyer.
- ------------------------------------------------------------------------------------------------
7 Preston Shepard Place 100.0% New ctr. In affluenct area. Traffic counts
SWC/Preston & Park Blvd. > 37,000 & 45,000/day. Buyer used
Colling County, 10.5% IRR & 9.25% terminal cap in
Plano, Texas analysis. Avg. rent = $15.73/sf.
- ------------------------------------------------------------------------------------------------
8 White Turkey Plaza 99.0% Property does not have anchor > 50,000
NEC/Federal & Candlewood Lake sf but has good juniors. In-line rents are
Fairfield County, $9-$18/sf; Wiz & OfficeMax $13.50/sf;
Brookfield, Connecticut TJMaxx & Wald. Below market.
- ------------------------------------------------------------------------------------------------
9 Scottsdale Fiesta 100.0% Separate take down of Home Base as of
S/E/C Shea Blvd. & 3/96. Total transaction contracted 12/95.
Pina Co. Road New center in developing area.
Scottsdale, Arizona
- ------------------------------------------------------------------------------------------------
10 Center at Baybrook 99.0% Former mall renovated/converted in
NEC/Medical Ctr. Blvd. & I-45 1993. Good location, exposure. Anchors
Houston generate over 90% of minimum rent. Avg
Webster, Texas in-line rent=$12.03/sf.
================================================================================================
Survey High: 100.0%
Survey Low: 93.0%
================================================================================================
Survey Average: 98.1%
================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach
================================================================================
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. We believe, then, that no adjustment
to the market data is necessary for the property rights conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis
were accomplished with cash and/or cash and market oriented financing.
Therefore, no adjustment for financial terms is required for the comparables.
Conditions of Sale
All sales used in this analysis are considered to be "arms-length"
market transactions between both knowledgeable buyers and sellers on the open
market. Therefore, no adjustment for conditions of sale are required for the
comparables.
Market Conditions
High vacancy rates, declining rental and growth rates, expected expense
growth, and an abundance of competition, combined with competition from
alternative investments and general lack of financing, have served to depress
the market for retail space. For this reason, negative adjustments might be
considered appropriate for older sales in this analysis.
Still, well performing retail projects have become an attractive
investment to such entities as foreign and domestic insurance companies, pension
funds and syndication's. Moreover, the majority of sales presented have all
taken place within the last 12 months. Adjustments for market conditions are
difficult at best in this kind of analysis. Thus, no market condition
adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed in the
"Regional" and "Retail Market" sections of this report, Denver has been the
recipient of significant growth and is poised for continued vitality into the
foreseeable future. As the subject is an infill redevelopment, its trade area
has limited power center-type competition, however, it also has limited
potential in terms of increased population and household growth.
It is noted that several of the sales are located in areas which are
experiencing somewhat better population and income growth, which would be
considered superior to the subject location. Likewise, some of the properties
are in markets which are experiencing either negative or slower growth and could
be considered inferior to the subject. Several of the properties are also
situated in significantly smaller trade areas/regions which would be considered
inferior to Denver.
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Sales Comparison Approach
================================================================================
Physical Traits
Most sales presented were constructed during the mid-1980s to the early
1990s with the exception of a portion of Sale Nos. 4 and 8. All sales were
considered to be in good to excellent condition at sale and no measurable
physical adjustments can be readily quantified.
Economic Characteristics
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $9.08 per square foot) is presented in the "Income
Approach" section of this report and is based on first year NOI.
================================================================================
Price Per SQ/FT: Adjustment Chart
================================================================================
Comp.
Sale Subject Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
================================================================================
1 $ 11.21 $ 9.08 0.8100 $ 112.19 $ 90.87
- --------------------------------------------------------------------------------
2 $ 10.13 $ 9.08 0.8963 $ 99.06 $ 88.79
- --------------------------------------------------------------------------------
3 $ 13.70 $ 9.08 0.6628 $ 131.15 $ 86.93
- --------------------------------------------------------------------------------
4 $ 8.87 $ 9.08 1.0237 $ 96.98 $ 99.28
- --------------------------------------------------------------------------------
5 $ 6.59 $ 9.08 1.3778 $ 69.32 $ 95.51
- --------------------------------------------------------------------------------
6 $ 7.49 $ 9.08 1.2123 $ 71.37 $ 86.52
- --------------------------------------------------------------------------------
7 $ 12.11 $ 9.08 0.7498 $ 128.83 $ 96.60
- --------------------------------------------------------------------------------
8 $ 9.00 $ 9.08 1.0089 $ 97.53 $ 98.40
- --------------------------------------------------------------------------------
9 $ 9.37 $ 9.08 0.9691 $ 93.69 $ 90.79
- --------------------------------------------------------------------------------
10 $ 6.03 $ 9.08 1.5058 $ 60.26 $ 90.74
================================================================================
Survey
Mean: $ 9.45 $ 9.08 0.9608 $ 96.04 $ 92.28
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $87 to $99 per square foot with a mean of
approximately $92 per square foot.
The subject is viewed as being the dominant power/community center in an
area with good demographics and traffic counts, and limited competition. It is
100 percent leased. Some upside exists through the potential for overage rents
as the center matures. Considering the characteristics of the subject relative
to the above, we believe that a unit range of $90 to $95 per square foot is
appropriate. Applying this unit rate range to 369,368 owned square feet results
in a value of approximately $33,250,000 to $35,100,000 for the subject property.
Based upon a net income of $3,353,795, a range of overall capitalization
rates extending from 9.55 to 10.09 percent is generated by the indicated value.
This range is considered to be reasonable for a property of the subject's
caliber and rent growth potential.
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Sales Comparison Approach
================================================================================
Conclusion
To this range, the indicated value of the excess land must be added.
Therefore, in light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the range of Thirty-Four
Million Three Hundred Fifty Thousand Dollars ($34,350,000) to Thirty-Six Million
Two Hundred Thousand Dollars ($36,200,000).
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<PAGE>
================================================================================
ANNUAL CASH FLOW REPORT
Broadway Marketplace (Denver, Colorado)
Cushman & Wakefield, Inc.
================================================================================
<TABLE>
<CAPTION>
FY 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Minimum Rent
Anchors $2,884,465 $2,884,465 $2,900,858 $2,910,523 $2,910,523 $2,910,523 $2,910,523
In-Line Shops $678,303 $700,968 $732,060 $746,946 $760,632 $774,971 $792,578
-------- -------- -------- -------- -------- -------- --------
Total Minimum Rent $3,562,768 $3,585,433 $3,632,918 $3,657,469 $3,671,155 $3,685,494 $3,703,101
Recoveries
Common Area Maint. $295,539 $305,567 $315,993 $326,845 $338,144 $349,836 $361,771
Insurance $77,497 $80,209 $83,006 $86,476 $89,795 $92,939 $96,192
Real Estate Taxes $571,383 $583,047 $603,213 $624,086 $645,930 $968,539 $691,936
-------- -------- -------- -------- -------- -------- --------
Total Recoveries $944,419 $968,823 $1,002,212 $1,037,407 $1,073,869 $1,111,314 $1,149,899
Gross Rental Income $4,507,187 $4,554,256 $4,635,130 $4,694,876 $4,745,024 $4,796,808 $4,853,000
Vacancy/Credit Loss ($58,894) ($60,779) ($63,332) ($64,801) ($66,203) ($67,645) ($69,330)
-------- -------- -------- -------- -------- -------- --------
Total Income $4,448,293 $4,493,477 $4,571,798 $4,630,075 $4,678,821 $4,729,163 $4,783,670
EXPENSES
Common Area Maint. $285,717 $295,717 $306,067 $316,779 $327,866 $339,342 $351,219
Insurance $84,184 $87,131 $90,180 $93,337 $96,604 $99,985 $103,484
Real Estate Taxes $581,054 $592,917 $613,669 $635,148 $657,378 $680,386 $704,200
Owner's Expenses $18,846 $19,506 $20,189 $20,895 $21,627 $22,384 $23,167
Management Fee $124,697 $125,490 $127,152 $128,011 $128,490 $128,992 $129,609
-------- -------- -------- -------- -------- -------- --------
Total Expenses $1,094,498 $1,120,761 $1,157,257 $1,194,170 $1,231,965 $1,271,089 $1,311,679
Net Operating Income $3,353,795 $3,372,716 $3,414,541 $3,435,905 $3,446,856 $3,458,074 $3,471,991
Alterations $0 $0 $1,339 $6,116 $0 $0 $3,181
Commissions $0 $0 $2,089 $9,540 $0 $0 $4,962
Structural Reserve $36,939 $38,231 $39,570 $40,954 $42,388 $43,871 $45,407
------- ------- ------- ------- ------- ------- -------
Total $36,939 $38,231 $42,998 $56,610 $42,388 $43,871 $53,550
CASH FLOW $3,316,856 $3,334,485 $3,371,543 $3,379,295 $3,404,468 $3,414,203 $3,418,441
<CAPTION>
FY 2005 2006 2007 2008
<S> <C> <C> <C> <C>
INCOME
Minimum Rent
Anchors $2,927,959 $2,938,146 $2,938,146 $2,938,146
In-Line Shops $831,971 $854,459 $870,193 $886,564
------- ------- ------- -------
Total Minimum Rent $3,759,930 $3,792,605 $3,808,339 $3,824,710
Recoveries
Common Area Maint. $377,204 $390,828 $404,263 $418,165
Insurance $99,814 $103,364 $106,982 $110,725
Real Estate Taxes $716,153 $741,219 $767,162 $794,011
-------- -------- -------- --------
Total Recoveries $1,193,171 $1,235,411 $1,278,407 $1,322,901
Gross Rental Income $4,953,101 $5,028,016 $5,086,746 $5,147,611
Vacancy/Credit Loss ($72,787) ($74,898) ($76,505) ($78,174)
-------- -------- -------- --------
Total Income $4,880,314 $4,953,118 $5,010,241 $5,069,437
EXPENSES
Common Area Maint. $363,511 $376,234 $389,402 $403,031
Insurance $107,106 $110,855 $114,735 $118,750
Real Estate Taxes $728,847 $754,356 $780,759 $808,085
Owner's Expenses $23,978 $24,817 $25,686 $26,585
Management Fee $131,598 $132,741 $133,292 $133,865
-------- -------- -------- --------
Total Expenses $1,355,040 $1,399,003 $1,443,874 $1,490,316
Net Operating Income $3,525,274 $3,554,115 $3,566,367 $3,579,121
Alterations $15,277 $7,263 $0 $0
Commissions $23,833 $11,331 $0 $0
Structural Reserve $46,996 $48,641 $50,344 $52,106
------- ------- ------- -------
Total $86,106 $67,235 $50,344 $52,106
CASH FLOW $3,439,168 $3,486,880 $3,516,023 $3,527,015
</TABLE>
================================================================================
<PAGE>
INCOME APPROACH
================================================================================
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. In this
valuation of Broadway Marketplace, we have utilized a 10 year holding period for
the investment with the cash flow analysis commencing on August 1, 1997.
Following is a detailed discussion of the components which form the basis of
this analysis.
Potential Gross Revenues
In the initial year of the investment, fiscal year 1998, it is projected
that the subject property will generate approximately $4,448,293 in potential
gross revenues, equivalent to $12.04 square foot of total appraised GLA of
369,386 square feet. These forecasted revenues may be allocated to the following
components:
================================================================================
Broadway Marketplace
Revenue Summary
Initial year of Investment - FY 1998
================================================================================
Revenue Component Amount Unit Rate Income Ratio
================================================================================
Minimum Rent $3,562,768 $ 9.65 80.1%
- --------------------------------------------------------------------------------
Overage Rent $ 0 $ 0 0%
- --------------------------------------------------------------------------------
Expense Recoveries $ 944,419 $ 2.56 21.2%
- --------------------------------------------------------------------------------
Vacancy Allowance ($ 58,894) ($ 0.16) (1.3%)
================================================================================
Total $4,448,293 $12.04 100.0%
================================================================================
Minimum Rental Income
Rent from the tenants consists of contractual obligations of the space
leases. Aggregate rent in the initial year of the holding period is shown to be
$3,562,768 or $9.65 per square foot based upon a total appraisal GLA of 369,386
square feet.
Analysis of Market Leases
A survey of local retail properties is presented on Table A for
comparison with the subject property. These are several community/power retail
centers of various sizes and quality located throughout the Denver area. Most
are located along major arterials in areas of commercial-retail development. All
rates compiled are triple net whereas tenants pay a pro-rata share of common
area maintenance charges.
In-line Lease 1 is Towne Center at Brookhill in the northwest sector of
the DMA. This center is not too far from a super-regional mall and is located in
a very strong retail corridor in a growing suburban market. Occupancy has
increased from 7 to 18.4 percent, due to the vacancy of a furniture big box
store. Rental rates remaining at $12.00 to $14.00 per square foot, net,
depending upon location. The CAM charge is currently at $4.58 per square foot.
In-line Lease 2 is the Edgewater Marketplace in an urban setting three
miles west of downtown. This 265,000-square-foot power center has three anchors,
and is more of a community center. This center has significantly more
competition and has inferior income levels. A recent lease was at $12.00 per
square foot. Rates have increased in this center. The CAM charge is $3.40 per
square foot. The center is 100 percent occupied.
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<PAGE>
================================================================================
TABLE A
LOCAL RETAIL RENT COMPARABLES
Cushman & Wakefield, Inc.
================================================================================
<TABLE>
<CAPTION>
==================================================================================================================================
Year Building Site Area/ Vacant SF/ Anchor Anchor SF
No. Name/Location Built Area Land-Bldg Rate Anchors Sq.Ft. % of GLA
==================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C>
Subj Broadway Marketplace 1993-95 369,386 38.59 0 Sam's Club 114,057 86.19%
SWC Alameda Avenue and 4.55 0.0% KMart 107,806
Broadway Albertson's 50,645
Denver, Colorado PepBoys 22,356
OfficeMax 23,500
--------- ------
Total 318,364
- ----------------------------------------------------------------------------------------------------------------------------------
1 Towne Center at Brookhill 1986- 505,000 n/a 92,720 Former Levitz Furnitur 68,550 60.73%
88th Avenue and Wadsworth 1993 n/a 18.4% Burlington Coat Factor 79,750
Westminster, Colorado Service Merchandise 51,850
Gart Bros. Sporting 15,100
Phar-Mor 55,000
Office Depot 36,416
------------ ------
Total 306,666
- ----------------------------------------------------------------------------------------------------------------------------------
2 Edgewater Marketplace 1987 265,000 n/a 0 Builder's Square 80,000 65.66%
20th Avenue and Sheridan Blv n/a 0.0% Cub Foods 70,000
Saver's 24,000
------- ------
Total 174,000
- ----------------------------------------------------------------------------------------------------------------------------------
3 Southwest Commons 1987 300,000 32.0 0 Hobby Lobby 34,000 65.17%
S. Wadsworth Blvd and 4.65 0.0% KMart 86,500
Bowles Avenue Service Merchandise 50,000
Littleton, Colorado Fred Schmid 25,000
----------- ------
Total 195,500
- ----------------------------------------------------------------------------------------------------------------------------------
4 Arvada Marketplace 1986 456,000 58.0 15,000 HomeClub 100,000 64.65%
I-70 and N. Wadsworth Blvd. 5.54 3.3% Sam's Club 101,800
Arvada, Colorado Gart Sports 68,000
Office Depot 25,000
------------ ------
Total 294,800
==================================================================================================================================
Total 1,895,386 143 107,720 #REF! #REF!
5.55 5.7%
==================================================================================================================================
<CAPTION>
=======================================================================================================================
Outpad In-Line Vacant Square Asking NNN Free Rent/
No. Name/Location Devel. Rents/sf Suites Feet Rate Charges Term
=======================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C>
Subj Broadway Marketplace Yes $10-16/sf -- -- -- $3.50 --
SWC Alameda Avenue and Estimate
Broadway
Denver, Colorado
- -----------------------------------------------------------------------------------------------------------------------
1 Towne Center at Brookhill Yes $12-14/sf Available < 3,000 SF $12.00 $4.58 Not typical/
88th Avenue and Wadsworth $14.00 5 yrs.
Westminster, Colorado Rent difference depends on loation
- -----------------------------------------------------------------------------------------------------------------------
2 Edgewater Marketplace Yes $12/sf -- -- -- $3.40 None/
20th Avenue and Sheridan Blv Recent 3-5 yrs.
- -----------------------------------------------------------------------------------------------------------------------
3 Southwest Commons Yes $11-18/sf -- -- -- $4.12 Negot./
S. Wadsworth Blvd and 3-5 yrs.
Bowles Avenue
Littleton, Colorado
- -----------------------------------------------------------------------------------------------------------------------
4 Arvada Marketplace Yes $13.50 Available < 3,000 $13.50 $2.88 Negot./
I-70 and N. Wadsworth Blvd. 5 yrs.
Arvada, Colorado
=======================================================================================================================
Total $8.00 $8.00 $2.16 Negot./
$18.00 $14.00 $4.48 3-5 yrs.
=======================================================================================================================
</TABLE>
<PAGE>
================================================================================
TABLE B
COMPARABLE ANCHOR LEASES
Cushman & Wakefield, Inc.
================================================================================
<TABLE>
<CAPTION>
====================================================================================================================================
Year Building Anchor Anchor Opt- Annual Rent % Escal-
No. Name/Location Opened Area Tenant Sq.Ft. Term tions Rent Per SF Rent ations
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subj. Broadway Marketplace 1994 369,308 Sam's Club 114,057 25 yrs. Yes $1,084,701 $9.51 0.50% Flat
SWC Alameda Avene and KMart 107,806 25 yrs. Yes $1,010,000 $9.37 1.00% Flat
Broadway PepBoys (ground lease) 22,356 20 yrs. Yes $143,302 $6.41 n/a Yes
Denver, Colorado Albertson's 50,645 25 yrs. Yes $399,671 $7.89 n/a Flat
OfficeMax 23,500 15 yrs. Yes $246,750 $10.50 n/a Yes
--------- ------ ------- --- -------- ------ --- ---
Total 318,364 $2,884,424 $9.06
- ------------------------------------------------------------------------------------------------------------------------------------
1 Confidential Mid-1990's 350,000 CompUSA 25,600 15 yrs. Yes $307,200 $12.00 No Yes
Denver Metro Area Circuit City 42,721 15 yrs. Yes $446,862 $10.46 No Yes
HomePlace 53,000 15 yrs. Yes $564,450 $10.65 2.00% Yes
Office Depot 30,000 15 yrs. Yes $307,500 $10.25 No Yes
Baby Superstore 40,000 10 yrs. Yes $338,000 $8.45 2.00% Yes
Barnes & Noble 30,000 15 yrs. Yes $385,500 $12.85 No Yes
-------------- ------ ------- --- -------- ------ -- ---
Total 221,321 $2,349,512 $10.62
- ------------------------------------------------------------------------------------------------------------------------------------
2 Confidential Mid-1990's 140,000 Home Express 23,000 15 yrs. n/a $218,500 $9.50 n/a Yes
Denver Metro Area PetsMart 25,416 20 yrs. n/a $259,243 $10.20 n/a Yes
Computer City 40,000 15 yrs. n/a $370,000 $9.25 n/a Yes
Best Buy 51,000 15 yrs. n/a $515,100 $10.10 n/a Yes
-------- ------ ------- --- -------- ------ --- ---
Total 139,416 $1,362,843 $9.78
- ------------------------------------------------------------------------------------------------------------------------------------
3 Confidential 1997 250,000 OfficeMax 30,000 15 yrs. n/a $376,500 $12.55 n/a n/a
King Soopers 65,000 15 yrs. n/a $682,500 $10.50 n/a n/a
HomePlace 53,000 15 yrs. n/a $768,500 $14.50 n/a n/a
--------- ------ ------- --- -------- ------ --- ---
Total 148,000 $1,827,500 $12.35
- ------------------------------------------------------------------------------------------------------------------------------------
4 Confidential 1997 400,000 SoundTrack 40,647 15 yrs. n/a $414,599 $10.20 n/a n/a
Denver Metro Area Bed Bath & Beyond 35,758 15 yrs. n/a $348,641 $9.75 n/a n/a
OfficeMax 23,313 15 yrs. n/a $221,474 $9.50 n/a n/a
Barnes & Noble 26,348 15 yrs. n/a $289,828 $11.00 n/a n/a
-------------- ------ ------- --- -------- ------ --- ---
Total 126,066 $1,274,541 $10.11
- ------------------------------------------------------------------------------------------------------------------------------------
5 Confidential Planned 206,000 Home Improvement store 100,000 15 yrs. Yes $1,150,000 $11.50 No Yes
Denver Metro Area 1996 Home Furnishings 40,000 15 yrs. Yes $380,000 $9.50 3.00% Yes
---------------- ------ ------- --- -------- ----- ----- ---
Total 140,000 $1,530,000 $10.93
====================================================================================================================================
Total/Averages 285,885 1,093,167 $11,228,820 $10.27
====================================================================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
In-line Lease 3 is the Southwest Commons power center, also located in
the South Wadsworth Boulevard corridor. Anchors include Kmart, Service
Merchandise, Cost Plus and Fred Schmid (electronics). In-line rental rates range
from $12 to $16 per square foot, depending on location. This center has been 100
percent occupied for some time. The leasing agent was uncertain, but estimated
rent steps within leases would be from $0.50 to $1.00 per square foot per year.
CAM charges are currently $3.74 per square foot.
In-line Lease 4 is the Arvada Marketplace in the northwest quadrant of
the DMA. This sprawling 456,000-square-foot power center also has a Sam's Club
as well as an Office Depot, Garts Sports and HomeBase. Approximately 15,000
square feet is available for lease. Asking rental rates are $13.50 for smaller
spaces (under 3,000 SF), with three percent bumps. The CAM charge is $2.88 per
square foot. Although this center is located adjacent to I-70, its demographics
are generally inferior.
Thus, market area rental rates presented on Table A reflect a range
between $12.00 and $18.00 per square foot, net, for in-line tenants. Typical
leases run three to five years with $0.50 per square foot steps most common.
Tenant improvement allowances are negotiable, typically ranging from as-is to
$3.00 per square foot for new tenants and generally as-is for renewing tenants,
although no real allowances were quoted. Free rent is also a negotiable item.
Relative to the subject, these properties represent comparable power centers in
the Denver area, although they are outside of the subject's influence and do not
really compete with Broadway Marketplace. Although the properties vary by
location and configuration with respect to the subject, the reporting lease
rates generally support those at Broadway Marketplace.
Anchor Tenant Leases
Table B presents lease rates for anchor type tenants in community and
power-oriented retail centers in the Denver Metro Area. The survey has been
expanded to include a larger regional scope. As can be seen, the leases
typically range between $9.50 and $12.85 per square foot, with 15 to 20 year
terms being typical. The overall average for nearly 1.1 million square feet
surveyed is $10.27 per square foot.
Overall, the anchor tenant leases on Table B support the subject's major
tenant leases which are also arrayed on the chart.
Subject Leasing Activity
The subject is 100 percent occupied. There are no new tenants since our
last appraisal in February 1996. Table C on the following page represents
leasing activity at the subject property. This summary shows initial lease rates
which range from $10.00 to $16.48 per square foot for in-line tenants and $7.89
to $10.50 per square foot for anchor tenants.
Conclusion - Minimum Rent for In-Line Shops
Broadway Marketplace is 100 percent occupied with no absorption of
vacant space necessary for this analysis. As such, the subject property should
remain a viable shopping destination to a healthy trade area into the
foreseeable future. The majority of minimum rent is based on long-term leases by
credit tenants.
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36
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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TABLE C
Rent Roll Summary/Subject Leasing
Cushman & Wakefield, Inc.
================================================================================
<TABLE>
<CAPTION>
=============================================================================================================================
1996 Initial Rent CAM Reimb. Tax Insr.
Suite Lease Lease Annualized Rent Escal- Over- Admin. Mgmt. Admin. Admin. Op-
No. Tenant Area Begin End Rent Per Sq/Ft ation age Fee Fee Fee Fee tions
=============================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Sam's Club 114,057 12/93 11/18 $1,084,701 $9.51 No 0.50% 0.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
2 KMart 107,806 4/94 3/19 $1,010,000 $9.37 No 1.00% 0.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
3 Albertson's 50,645 7/94 5/19 $399,671 $7.89 No n/a 10.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
A100 Payless Shoesource 3,200 3/94 6/94 $48,000 $15.00 No 4.00% 10.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
A101 Beauty Smart 4,400 5/94 7/99 $58,916 $13.39 Yes 0.00% 15.0% Yes 15.0% 15.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
A104 Fashion Bug 12,000 6/94 1/05 $120,000 $10.00 No 4.00% 10.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
A105 Sally Beauty 2,000 4/94 4/99 $28,000 $14.00 No 3.00% 15.0% Yes 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
B100 Blockbuster Video 6,481 4/94 6/99 $97,215 $15.00 No 0.00% 10.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
B200 Colorel Blinds 3,737 4/95 3/00 $52,318 $14.00 Yes 0.00% 15.0% Yes 15.0% 15.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
B400 Party America 7,265 10/94 9/04 $101,710 $14.00 Yes 5.00% 15.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C OfficeMax 23,500 10/94 1/10 $246,750 $10.50 Yes 0.00% 7.5% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C100 PepBoys 22,356 12/94 1/14 $143,302 $6.41 Yes 0.00% 0.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C200 Remco 3,000 12/94 12/97 $36,000 $12.00 No 0.00% 15.0% No 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C400 Travel Network * 1,365 1/96 12/00 $16,380 $12.00 Yes 0.00% 15.0% Yes 0.0% 0.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C500 Radio Shack 2,400 6/95 6/05 $25,200 $10.50 Yes 3.00% 15.0% No 0.0% 15.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
C800 GNC 1,500 2/95 2/05 $21,000 $14.00 Yes 3.00% 15.0% Yes 0.0% 15.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
D100 Subway 1,296 1/95 12/99 $21,358 $16.48 Yes 0.00% 15.0% No 15.0% 15.0% Yes
- -----------------------------------------------------------------------------------------------------------------------------
D102 Mailboxes 1,300 12/94 12/99 $21,424 $16.48 Yes 0.00% 15.0% Yes 00% 150% Yes
- -----------------------------------------------------------------------------------------------------------------------------
D103 Costcutters 1,000 1/95 1/00 $16,000 $16.00 Yes 6.00% 15.0% Yes 00% 150% Yes
- -----------------------------------------------------------------------------------------------------------------------------
Pad Wendy's 4,275 n/a n/a owned n/a n/a n/a 15.0% No n/a 15.0% n/a
- -----------------------------------------------------------------------------------------------------------------------------
Pad Imperial Palace 7,015 n/a n/a owned n/a n/a n/a $2,000 No n/a n/a n/a
- -----------------------------------------------------------------------------------------------------------------------------
Pad Taco Bell 1,900 n/a n/a owned n/a n/a n/a 15.0% No n/a 15.0% n/a
=============================================================================================================================
* Includes 2 months free rent starting 1/1/96
22 Total/Average 369,308 $3,547,945 $9.61 1.00%- 0.0%- 0.0%- 0.0%-
(Excludes Pads) 6.00% 15.0% 15.0% 15.0%
=============================================================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
After considering all of the above, with slightly higher lease rates in
most of the comparables, we have utilized the following market rental rate
assumptions for in-line space at Broadway Marketplace.
================================================================================
Market Rent Projections
================================================================================
Subject Lease
Suite Size Rate Range Market Rate
================================================================================
Retail Building A
0-10,000 SF $13.39 to $15.00 $15.00
Over 10,000 SF $10.00 $11.00
- --------------------------------------------------------------------------------
Retail Building B $14.00 to $15.00 $15.00
- --------------------------------------------------------------------------------
Retail Building C $10.50 to $14.00 $13.00
- --------------------------------------------------------------------------------
Retail Building D $16.00 to $16.48 $17.00
================================================================================
Lease Terms
Market practice dictates that it is not uncommon to get rent bumps
throughout the lease term either in the form of fixed dollar amounts or a
percentage increase based upon changes in some index, usually the Consumer Price
Index (CPI). We have reflected an annual escalation method in our analysis for
new in-line leases based upon a CPI factor which in this case is 3.50 percent.
Concessions
Free Rent
No free rent is projected in this analysis.
Tenant Improvements
Based on competing projects and discussion with the leasing agent, new
tenants to the center are given an allowance of $3.00 per square foot, with
renewal tenants receiving $0.50 per square foot. Based on our renewal
probability of 70/30, the tenant allowance at rollover is equal to $1.25 per
square foot in 1997. No allowance is provided for tenants exercising options.
Commissions
Based upon our analysis of competing properties within the market as
well as historic leasing activity at the subject, we have made an allowance for
leasing commissions as follows:
For new leases, a commission of $3.00 per square foot will be charged while
renewal leases will have commissions of $1.50 per square foot. With the 70/30
probability assumption, the blended commission rate for 1996 is $1.95 per square
foot of leased area.
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37
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Rent Growth Rates
A review of investor's expectations regarding income growth shows that
projections generally range between 3.00 and 4.00 percent for retail centers. We
have utilized a rent growth rate of 3.5 percent per year over the holding
period, beginning in 1999.
Releasing Assumption
Upon lease expiration, it is our best estimate that there is a 70
percent probability that an existing tenant will renew their lease, while the
remaining 30 percent will vacate their space at expiration. Lease terms are for
5 years. Our global market assumptions for non-anchor tenants may be summarized
on the following chart.
================================================================================
Renewal Assumptions
Non-Anchor Tenants
================================================================================
Lease Tenant Alterations
Tenant Type Term Rent Steps Free Rent & Commissions
================================================================================
In-Line Shops 5 yrs. Increasing by CPI None Yes
================================================================================
Many tenants have set options to renew their leases. Option renewals
have been compared to projected market rents in order to forecast the
probability of tenant options being exercised. In this analysis, most options
are assumed to be exercised.
Overage Rent
We have not forecasted any percentage rent for tenants in the center due
to the nature of relatively new construction of the project.
Expense Reimbursement
In the first year of the investment, it is projected that the subject
property will generate approximately $944,419 in reimbursements for these
operating expenses. This estimate is equal to approximately $2.56 per square
foot of GLA and represents approximately 21.2 percent of potential gross
revenues.
Common Area Maintenance
The CAM recovery is based on CAM expenses less the set CAM payment by
one of the non-owned pad sites (Imperial Palace). This 'tenant' pays $2,000 per
year in CAM for its first five years, which then increases an additional $300
annually in 1999 and after every fifth year thereafter. Also, the trash removal
expense is only paid by most of the in-line tenants. The following formula
details the standard recovery method. Sam's Club, the largest tenant, is now
maintaining their own lot, therefore, both the CAM expense and area denominator
have declined substantially.
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38
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
================================================================================
Typical Common Area Maintenance Recovery
================================================================================
1997 Expense (excl. trash) $268,000
- --------------------------------------------------------------------------------
Less: Imperial Palace CAM payment ($ 2,000)
- --------------------------------------------------------------------------------
Equals: Remainder $266,000
- --------------------------------------------------------------------------------
Add: Administrative Fee (15%) $305,900
- --------------------------------------------------------------------------------
Divisor: Center GLA (SF) 261,504
- --------------------------------------------------------------------------------
Equals CAM Expense Recovery per SF $1.17
================================================================================
================================================================================
Typical Trash Removal Recovery
================================================================================
Year One Trash Removal $12,000
- --------------------------------------------------------------------------------
Add: Administrative Fee (15%) $13,800
- --------------------------------------------------------------------------------
Divisor: Appropriate Tenants (SF) 39,079
- --------------------------------------------------------------------------------
Equals Trash Expense Recovery per SF $0.35
================================================================================
Real Estate Taxes
Real estate taxes are recovered on a pro-rata share basis for tenants at
the center. Several tenants have administrative fees added to their tax
obligation. We have assumed only a straight pro-rata share for all new leases.
Insurance
Insurance expenses are split into two categories: liability insurance
and property/fire insurance. The total insurance expense (1997) is projected at
$82,500. Some tenants (mostly anchors) do not pay the property/fire insurance
portion.
Allowance for Vacancy and Credit Loss
We have reflected a provision for permanent vacancy and credit loss of
7.0 percent among the existing non-anchor tenants.
Effective Gross Income
In the initial year of the investment effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately $4,448,293,
equivalent to $12.04 per square foot of appraised GLA.
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39
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
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TABLE D 369,386
OPERATING BUDGET FOR 1996/1997 Sq.Ft.
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=================================================================================================
Broadway Marketplace 1996 Per 1997 Per Cushman & Per
Denver, Colorado Budget Sq. Ft. Budget Sq. Ft. Wakefield Sq. Ft.
FY 1998
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INCOME/REVENUE
Minimum Rent: $3,548,915 $9.61 N/A $0.00 $3,562,768 $9.65
Percentage Rent: $0 $0.00 N/A $0.00 $0 $0.00
Marketing: $0 $0.00 N/A $0.00 $0 $0.00
Other: ($8,463) $0.00 N/A $0.00 $0 $0.00
CAM Recovery: $408,505 $1.11 N/A $0.00 $295,539 $0.80
Tax Recovery: $532,321 $1.44 N/A $0.00 $571,383 $1.55
Insurance Recovery: $92,396 $0.25 N/A $0.00 $77.497 $0.21
------------------- ------- ----- ----- ------- -----
Subtotal: $4,573,674 $12.38 N/A $0.00 $4,507,187 $12.20
Vacancy/Credit Loss: $0 $0.00 N/A $0.00 ($58,894) ($0.16)
OPERATING EXPENSES
Common Area Maintenance: $375,634 $1.02 $262,219 $0.71 $285,717 $0.77
Real Estate Taxes: $539,597 $1.46 $543,196 $1.47 $581,054 $1.57
Insurance: $110,893 $0.30 $82,564 $0.22 $84,184 $0.23
Management Fee: $182,947 $0.50 $123,353 $0.33 $124,697 $0.34
Other Expenses*: $36,944 $0.10 $0 $0.00 $18,846 $0.05
--------------- ------- ----- -- ----- ------- -----
Subtotal: $1,246,015 $3.37 $1,011,332 $2.74 $1,094,498 $2.96
NET OPERATING INCOME $3,327,659 $9.01 N/A $0.00 $3,353,795 $9.08
=================================================================================================
</TABLE>
- ----------
* Includes contingency for nonrecoverable miscellaneous expenses.
================================================================================
<PAGE>
Income Approach
================================================================================
Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. The non-reimbursable expenses associated with the
subject property include the management fee and miscellaneous expenses. We do
note that under several of the existing lease contracts, management is deemed
recoverable. Generally, it is our assumption that expenses will increase by 3.5
percent per year unless otherwise stated.
Table D on the facing page presents management's 1996 and 1997 budgeted
expense items along with Cushman & Wakefield's adjusted figures. Table E on the
following facing page illustrates expenses reported by the Urban Land Institute
(ULI) and the International Council of Shopping Centers (ICSC). We have compared
the owner's budgeted expense items with published data in order to support our
adjusted expense figures.
In total, Cushman & Wakefield has projected operating expenses of $2.96
per square foot, reflecting the Sam's self-maintained parcel. The chart on the
facing page shows operating expenses for various retail centers that generally
ranges between $1.97 and $3.76 per square foot with most in the $2.25 to $3.25
per square foot. Our Year One forecast of $2.96 per square foot is consistent
with the data presented.
Expense Growth Rates
The Cushman & Wakefield survey of power centers found the low and high
mean from each respondent to be 3.4 percent and 3.7 percent, respectively.
Unless otherwise cited, expenses are forecasted to grow by 3.5 percent per annum
over the holding period.
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property.
Common Area Maintenance - As described, ownership can, in some
instances, recover the cost of the property management fee which is
estimated at 3.5 percent of minimum and percentage rent. In our
analysis, we have forecasted a 1997 CAM expense of $280,000 (excluding
management), equal to $1.07 per square foot of the CAM denominator. This
amount is approximate to management's budget. The trash portion of this
amount equals $12,000.
Insurance - Insurance projections have been calculated at $0.22 per
square foot annually, based upon property and liability insurance equal
to $82,500 per year.
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. Our Year One estimate is based upon the actual
1996 taxes and the 1997 assessment. In Year One, the 1997 total tax
expense is equal to $1.57 per square foot, or $581,054. Taxes are
expected to be flat in 1998, and increase thereafter at 3.5 percent.
================================================================================
40
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WAKEFIELD(R)
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================================================================================
OPERATING EXPENSE STATISTICS Power & Super-Community Centers
Cushman & Wakefield, Inc. West
================================================================================
<TABLE>
<CAPTION>
===============================================================================================================================
ULI ULI ULI ULI ULI ULI ULI ULI
Power Power Super- Super- Super- Super- Community Community
Centers/ Centers/ Community/ Community Community Community Centers/ Centers/
U.S. U.S. U.S. U.S. West West U.S. U.S.
Average Median Average Median Average Median Average Median
===============================================================================================================================
Property Profile
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total GLA: 358,619 346,315 316,310 303,896 331,457 304,871 179,931 167,959
Total Owned GLA: 295,562 290,533 291,411 285,423 282,284 286,405 167,215 156,543
Avg. Sales/sf*: $197.23 $199.81 $187.90 $183.44 $232.02 $230.59 $202.33 $197.73
Anchor Sales/sf: - - - - - - - -
Operating Income
Minimum Rent: $7.02 $5.81 $6.35 $5.84 $9.45 $8.09 $6.47 $6.36
Overage Rent: $0.50 $0.19 $0.41 $0.29 $0.86 $0.52 $0.38 $0.27
CAM Charges: $0.85 $0.68 $0.96 $0.80 $1.77 $1.66 $0.73 $0.61
Property Taxes: $0.65 $0.45 $0.63 $0.55 $0.57 $0.43 $0.67 $0.60
Insurance: $0.07 $0.07 $0.05 $0.05 $0.04 $0.04 $0.07 $0.06
Utilities: $0.27 $0.04 $0.36 $0.07 $0.12 $0.04 $0.19 $0.11
Other: $0.00 $0.00 $0.19 $0.12 $0.10 $0.05 $0.17 $0.10
------ ----- ----- ----- ----- ----- ----- ----- -----
Total income: $9.36 $9.01 $9.18 $8.55 $12.99 $12.73 $8.62 $8.27
Operating Expenses
Total Maintenance**: $1.29 $0.81 $1.22 $0.99 $1.62 $1.43 $0.87 $0.77
Real Estate Taxes: $1.10 $1.05 $0.91 $0.85 $0.85 $0.75 $0.91 $0.83
Insurance: $0.15 $0.13 $0.15 $0.13 $0.22 $0.21 $0.14 $0.13
Advertising: $0.12 $0.05 $0.19 $0.11 $0.18 $0.08 $0.10 $0.05
Administrative***: $0.36 $0.43 $0.50 $0.49 $0.63 $0.40 $0.28 $0.31
Management Fee: $0.35 $0.32 $0.33 $0.31 $0.39 $0.34 $0.34 $0.32
--------------- ----- ----- ----- ----- ----- ----- ----- -----
Total Expenses: $3.24 $3.21 $3.36 $3.07 $3.76 $3.48 $2.88 $2.72
OER: 34.6% 35.6% 36.6% 35.9% 28.9% 27.3% 33.4% 32.9%
Net Operating Income $6.13 $5.39 $5.44 $5.22 $8.92 $8.85 $5.67 $5.33
<CAPTION>
============================================================================================================
ICSC ICSC ICSC ICSC ICSC ICSC
Power Ctrs Power Ctrs Strip Centers Strip Centers Strip Centers Strip Centers
U.S. U.S. U.S. U.S. West West
Total Centers 100,000- 200,000- Centers Centers
Survey greater than less than greater than
200,000sf 199,999sf 399,999sf 100,000sf 100,000sf
============================================================================================================
Property Profile
<S> <C> <C> <C> <C> <C> <C>
Total GLA: - - 137,378 260,677 79,170 135,475
Total Owned GLA: - - 133,557 232,127 66,219 129,388
Avg. Sales/sf*: $127.78 $118.55 $115.64 $137.23 $120.34 $111.68
Anchor Sales/sf: $244.00 $254.09 $264.52 $208.79 $263.38 $272.52
Operating Income
Minimum Rent: $6.92 $7.09 $5.90 $6.50 $7.33 $6.93
Overage Rent: - - - - - -
CAM Charges: $0.71 $0.68 $0.67 $0.82 $0.89 $0.88
Property Taxes: $0.80 $0.80 $0.58 $0.84 $0.75 $0.65
Insurance: $0.11 $0.10 $0.07 $0.07 $0.09 $0.05
Utilities: $0.07 $0.12 $0.07 $0.08 $0.19 $0.08
Other: $0.08 $0.10 $0.06 $0.05 $0.09 $0.07
------ ----- ----- ----- ----- ----- -----
Total income: $8.92 $9.15 $7.35 $8.25 $9.01 $8.72
Operating Expenses
Total Maintenance**: $0.62 $0.61 $0.72 $0.68 $1.05 $0.89
Real Estate Taxes: $1.01 $0.89 $0.70 $0.85 $0.82 $0.80
Insurance: $0.10 $0.10 $0.11 $0.11 $0.11 $0.10
Advertising: $0.06 $0.05 $0.05 $0.04 $0.13 $0.08
Administrative***: $0.22 $0.19 $0.09 $0.12 $0.17 $0.08
Management Fee: $0.29 $0.33 $0.26 $0.29 $0.23 $0.28
--------------- ----- ----- ----- ----- ----- -----
Total Expenses: $2.35 $2.23 $1.97 $2.14 $2.22 $2.24
OER: 26.3% 24.4% 26.8% 25.9% 24.6% 25.7%
Net Operating Income $5.88 $6.30 $5.39 $5.96 $6.78 $6.29
</TABLE>
- ----------
* Average sales include all tenants except for ICSC figures which show
non-anchor tenants.
** CAM expenses include repairs & maintenance, utilities, and security.
*** Management fees & bad debt allowances have been deducted from administrative
costs. Management has been shown separately.
Source: Urban Land Institute "Dollars & Cents" (1995); International Council of
Shopping Centers "The Score" (1996).
(Because the data are means/medians, detailed amounts do not add to totals.
================================================================================
<PAGE>
Income Approach
================================================================================
Non-Reimbursable Expenses
Management - The annual cost of managing the subject property is
projected to be 3.5 percent of minimum rental and percentage income. In
the initial year of our analysis, this amount is shown to be $124,697,
equivalent to $0.34 per square foot of appraised GLA.
Owner's Expense - In the initial year, the owner's expenses are
forecasted to amount to $0.05 per square foot, or $18,846.
Alterations - We have forecasted a cost of $3.00 per square foot for
turnover space (initial cost growing at expense inflation rate) weighted
by our turnover probability of 30 percent. For rollover space, the cost
is $0.50 per square foot for redecorating or moving allowances. Thus,
the blended weighted rate is $1.25 per square foot.
Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject,
we have new lease commissions of $3.00 per square foot and renewal
leases of $1.50 per square foot. With the 70/30 probability assumption,
the blended commission rate for 1997 is $1.95 per square foot of leased
area.
Replacement Reserves - We have forecasted a replacement reserve estimate
of $36,939. On the basis of appraised GLA, this amount is equal to $0.10
per square foot, consistent with industry figures.
Net Income/Net Cash Flow
In the initial year of investment, the net operating income is
forecasted to be equal to $9.08 per square foot which is equivalent to 75.4
percent of effective gross income. Deducting reserves results in a net cash flow
of $8.98 per square foot, equivalent to 74.6 percent of effective gross income.
================================================================================
Operating Summary
Initial Year of Investment - FY 1998
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Effective Gross Income $ 4,448,293 $12.04 100.0%
- --------------------------------------------------------------------------------
Operating Expenses $ 1,094,498 $ 2.96 24.6%
- --------------------------------------------------------------------------------
Net Income $ 3,353,795 $ 9.08 75.4%
- --------------------------------------------------------------------------------
Other Expenses $ 36,939 $ .10 0.8%
- --------------------------------------------------------------------------------
Cash Flow $ 3,316,856 $ 8.98 74.6%
================================================================================
* Based on total appraised GLA of 369,386 SF
================================================================================
Our cash flow model has forecasted the following compound annual growth
rates over the ten-year holding period fiscal years 1998-2007.
Net Operating Income 0.69%
Cash Flow 0.65%
================================================================================
41
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Selection of Capitalization Rates
Overall Rate
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest
retail chains has not gone unnoticed by investors. Furthermore, quest for market
share has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap
rates for Class A [Neighborhood and Community] centers range between 8.50 and
10.50 percent, with a low average of 9.30 percent and high average of 9.80
percent, respectively; a spread of 50 basis points. Terminal, or going-out,
rates are now 10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Investment Power Center and Big Box Neighborhood/Community
Parameters Low High Low High
================================================================================
OAR/Going-ln 8.50 - 10.50% 9.00 - 10.50% 8.50 - 10.50% 9.00 - 10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50 - 10.50% 9.50 - 10.50% 9.50 - 10.50% 10.00 - 11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50 - 15.00% 10.50 - 15.00% 10.00 - 15.00% 10.00 - 15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
================================================================================
42
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter l997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50 - 12.50% 9.00 - 12.50% N/A
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) - +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75 - 10.50% 8.50 - 10.50% N/A
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) - 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00 - 11.50% 8.50 - 11.50% N/A
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) - +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second Qtr.
1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
Investors have recognized that the retail landscape has been
fundamentally altered by consumer lifestyles changes, industry consolidations
and bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
================================================================================
43
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.15 percent to 10.50 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.84 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.75 and 10.25 percent.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.75 and 10.25
percent.
Terminal Capitalization Rate
On average, the C&W rate survey shows a 30-60 basis point differential.
The Korpacz survey shows a spread of 38 basis points. For the subject, however,
we do not believe that it is necessary to add points to the terminal rate due to
the fact that forecasted income growth is relatively flat and that the subject
has the potential to be into percentage rent in future years.
Therefore, a projected terminal capitalization rate ranging from 9.75 to
10.25 percent is indicated for the subject property. 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 10.0 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 $35.7 million based on fiscal year 2008
net income of approximately $3.57 million.
Cost of Sales
From the projected reversionary value to an investor in the subject
property, we have made a deduction of 2.5 percent.
================================================================================
Net Proceeds at Reversion
================================================================================
Less Costs of Sale and
Net Income FY 2008 Gross Sale Price Miscellaneous Expense @ 2.5% Net Proceeds
================================================================================
$3,579,121 $35,791,210 $894,780 $34,898,430
================================================================================
Selection of Discount Rate
Yield rates on long term real estate investments range widely between
property types. As cited in Cushman & Wakefield's Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.25 percent for national power center in their
Fourth Quarter 1996 survey, with a range between 9.00-12.50 percent.
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
================================================================================
44
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
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 (%) July 10, 1997
================================================================================
Reserve Bank Discount Rate 5.00%
- --------------------------------------------------------------------------------
Prime Rate (Monthly Average) 8.50%
- --------------------------------------------------------------------------------
3-Month Treasury Bills 4.96%
- --------------------------------------------------------------------------------
U.S. 10-Year Notes 6.24%
- --------------------------------------------------------------------------------
U.S. 30-Year Bonds 6.56%
- --------------------------------------------------------------------------------
Telephone Bonds 7.63%
- --------------------------------------------------------------------------------
Municipal Bonds 5.56%
================================================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 percent.
Investors have suggested that the retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 80.0 percent of base rental income
will, on average, come from anchor major/tenants whose creditworthiness adds
stability to the cash flow.
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 10.50 and 11.00 percent for the
center.
================================================================================
45
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Present Value
In the instance of the subject, we have analyzed the cash flows
anticipated over a ten year period commencing on August 1,1997. A sale or
reversion is deemed to occur at the end of the 10th year (July 31, 2007), based
upon capitalization of the following year's net operating income.
Cash Flow Assumptions
The supporting data for our forecasted cash flows for the center have
been presented. To reiterate, the formulation of these cash flows incorporates
the following general assumptions in our computer model.
================================================================================
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
================================================================================
SUBJECT PROPERTY BROADWAY MARKETPLACE
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL GROSS LEASABLE AREA 369,386 SF
- --------------------------------------------------------------------------------
MAJOR/MAJOR TENANT GLA 318,364 SF
- --------------------------------------------------------------------------------
IN-LINE SHOP GLA 51,022 SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997/98)
- --------------------------------------------------------------------------------
BUILDING A $15.00/SF
- --------------------------------------------------------------------------------
BUILDING B $15.00/SF
- --------------------------------------------------------------------------------
BUILDING C $13.00/SF
- --------------------------------------------------------------------------------
BUILDING D $17.00/SF
- --------------------------------------------------------------------------------
RENTAL BASIS NNN
- --------------------------------------------------------------------------------
MARKET RENTAL GROWTH RATE 3.5%/YR
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM 5 Years
- --------------------------------------------------------------------------------
RENEWAL PROBABILITY 70.0 %
- --------------------------------------------------------------------------------
STABILIZED VACANCY/CREDIT LOSS 7.0%
(NON-ANCHOR)
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
- --------------------------------------------------------------------------------
NEW TENANTS $3.00 PSF
- --------------------------------------------------------------------------------
RENEWAL TENANTS $1.50 PSF
- --------------------------------------------------------------------------------
TENANT IMPROVEMENT ALLOWANCE
- --------------------------------------------------------------------------------
NEW TENANT $3.00/SF
- --------------------------------------------------------------------------------
RENEWAL TENANT $0.50/SF
- --------------------------------------------------------------------------------
EXPENSE GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
TAX GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
MANAGEMENT FEE 3.5%
- --------------------------------------------------------------------------------
CAPITAL RESERVES (PSF OF GLA) $0.10/SF
================================================================================
================================================================================
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<PAGE>
================================================================================
================================================================================
Reversion Calculation
Broadway Marketplace (Denver, Colorado)
- --------------------------------------------------------------------------------
Terminal Cap Rate
================================================================================
9.75% 10.00% 10.25%
---------------------------------------------------
Reversion Value $36,708,933 $35,791,210 $34,918,254
Less Cost of Sale @ 2.5% $917,723 $894,780 $872,956
-------- -------- --------
Net Proceeds $35,791,210 $34,895,430 $34,045,297
================================================================================
================================================================================
Sale Yield Matrix Analysis
Broadway Marketplace (Denver, Colorado)
- --------------------------------------------------------------------------------
Reversion Terminal Internal Rate of Return
Value Cap 10.50% 10.75% 11.00%
================================================================================
$35,791,210 9.75% $33,589,003 $33,077,556 $32,576,921
-------------------
$34,896,430 10.00% $33,259,322 $32,755,242 $32,261,794
-------------------
$34,045,297 10.25% $32,945,724 $32,448,651 $31,962,038
================================================================================
================================================================================
DCF Vaue $32,750,000
Plus: Excess Development Pad $1,100,000
Total Value by DCF Analysis $33,850,000
Rounded to $33,850,000
Value Per SF of GLA $92
Indicated OAR 9.91%
================================================================================
================================================================================
<PAGE>
Income Approach
================================================================================
================================================================================
RATES OF RETURN AS IS
================================================================================
CASH FLOW START DATE 8/1/97
- --------------------------------------------------------------------------------
DISCOUNT RATE 10.50-11.00%
- --------------------------------------------------------------------------------
GOING-IN CAPITALIZATION RATE N/A
- --------------------------------------------------------------------------------
TERMINAL CAPITALIZATION RATE 9.75-10.25%
- --------------------------------------------------------------------------------
REVERSIONARY SALES COSTS 2.50%
- --------------------------------------------------------------------------------
HOLDING PERIOD 10 Years
================================================================================
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 10.50 to 11.00 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. A valuation matrix
for Broadway Marketplace appears on the facing page.
Through a sensitivity analysis, it can be seen that the present value of
the subject property varies from approximately $32,000,000 to $33,600,000.
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 IRR 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 an IRR of approximately 10.75 percent
and a terminal rate of 10.0 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 (prior to adjustments for
excess land) of $32,750,000 for the subject property. The yield matrix indicates
a unit rate of $89 per square foot and an indicated overall rate of 10.24
percent. The model also shows an average cash-on-cash return of 10.4 percent. As
can be seen, 61.6 percent of the value can be attributable to cash flow and 38.4
percent is attributable to the reversion. This weighting is considered
reasonable from typical investor underwriting requirements.
Adjustment to this value indication is required for the subject's excess
land value of $1,100,000. Therefore, the final value indication by the DCF
Analysis equals $33,850,000.
================================================================================
47
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
Discounted Cash Flow Analysis
Broadway Marketplace (Denver, Colorado)
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------
ANNUAL
NET DISCOUNT PRESENT CASH
FISCAL CASH FACTOR @ VALUE OF COMPOSITION ON CASH
YEAR FLOW 10.75% CASH FLOWS OF YIELD RETURN
================================================================================
One $3,316,856 X 0.902935 = $2,994,904 9.14% 10.13%
Two $3,334,485 X 0.815291 = $2,718,575 8.30% 10.18%
Three $3,371,543 X 0.736154 = $2,481,976 7.58% 10.29%
Four $3,379,295 X 0.664699 = $2,246.214 6.86% 10.32%
Five $3,404,468 X 0.600180 = $2,043,293 6.24% 10.40%
Six $3,414,203 X 0.541923 = $1,850,235 5.65% 10.43%
Seven $3,418,441 X 0.489321 = $1,672,715 5.11% 10.44%
Eight $3,439,168 X 0.441825 = $1,519,510 4.64% 10.50%
Nine $3,486,880 X 0.398939 = $1,391,052 4.25% 10.65%
Ten $3,516,023 X 0.360216 = $1,266,527 3.87% 10.74%
--------------
Total Present Value of Cash Flows $20,185,000 61.62% 10.41% Average
--------------
Compound Annual Change of Cash Flows 0.65%
Reversion:
Eleven $3,579,121 (1) / 10.00% = $35,791,210
Less: Cost of Sale @2.50% $894,780
Net Reversion $34,896,430
X Discount Factor 0.360216
--------
Total Present Value of Reversion $12,570,242 38.38%
------
Total Present Value $32,755,242 100.00%
ROUNDED: 32,750,000
----------
================================================================================
Owned GLA (SF): 369,386
Per Square Foot of Owned GLA $89
Implicit Going-in Capitalization Rate:
Year One NOI $3,353,795
Going-in Cap Rate 10.24%
CAGR Concluded Value to Reversion 0.89%
================================================================================
Note: (1) Net Operating Income
================================================================================
<PAGE>
Income Approach
================================================================================
Direct Capitalization
In this valuation, we will again consider the indicated overall rates
from the comparable sales in the Sales Comparison Approach as well as those
rates established in each Investor Survey.
In view of our previous analysis, we would anticipate that at the
subject would trade at an overall rate of approximately 9.75 to 10.25 percent
applied to the first year income. Applying these rates to first year net
operating income before reserves, alterations and other expenses for the subject
of $3,353,795 results in a value of approximately $32,700,000 to $34,400,000.
From this range we would be inclined to conclude at a value of $33,750,000 by
direct capitalization. This is indicative of a capitalization rate of 9.9
percent which is toward the middle of the range applied.
Again, the adjustment for the excess land of $1,100,000 is added to this
preliminary value indication. Therefore, the value indication by direct
capitalization method equals $34,850,000.
================================================================================
48
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WAKEFIELD(R)
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
A summary of the value indications for the subject is set forth below.
================================================================================
Value Summary
================================================================================
Cost Approach N/A
- --------------------------------------------------------------------------------
Sales Comparison Approach $34,350,000 - $36,200,000
- --------------------------------------------------------------------------------
Income Approach
Discounted Cash Flow $33,850,000
Direct Capitalization $34,850,000
================================================================================
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold. This methodology is best suited as support for the conclusions of the
"Income Approach". It provides 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 (DCF) as it will be bought and sold in investment circles.
Essentially, the DCF can model many of the dynamics of a complex shopping
center. Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific characteristics of the property, as well as being the tool used by many
purchasers.
Capitalization
Real estate of the subject's caliber is commonly purchased on a direct
capitalization basis. Overall, this methodology has been given important
consideration in our total analysis, due to the subject's stabilized operations.
Conclusions
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 methodologies. We have
concluded a value indication slightly closer to the Direct Capitalization
method.
As a result of our analysis, 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
9, 1997, was:
THIRTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
$34,500,000.
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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.
================================================================================
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 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.
================================================================================
51
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
I certify that, to the best of our knowledge and belief:
1. Dean R. Paauw, MAI inspected the property and prepared 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. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
5. My 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 person
signing this report.
7. My 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, Dean R. Paauw has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Dean R. Paauw
Dean R. Paauw, MAI
Associate Director
Colorado Certified General Appraiser
No. CG01313501
================================================================================
52
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
SUBJECT RENT ROLL
SUBJECT RETAIL SALES
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISER'S QUALIFICATIONS
================================================================================
53
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Addenda
================================================================================
Subject Rent Roll
================================================================================
<PAGE>
4/29/97 Community Centers One LLC 3:58 pm
User: KRAUSE Commercial Rent Roll Page: 19
Property : BROADWAY MARKETPLACE Report Date From : 5/01/97 To : 5/31/97
Denver Colorado 80223
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT -------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albertson's #885 950-323 50645 6/15/94 5/31/19 33305.92 399671.04 7.89 7/01/94 33,305.92
OfficeMax, Inc. #199 950-343 23500 11/07/94 1/31/10 20562.50 246750.00 10.50 1/01/95 20,562,50
12/01/99 21,541.67
12/01/04 22,520.83
KMart #7303 950-363 107806 3/24/94 3/31/19 84166.67 1010000.04 9.37 5/01/94 84,166.67
Imperial Palace 950-427 7015 1/19/94 12/31/43 0.00 0.00 0.00 0.00
Taco Bell #16230 950-447 1900 12/29/93 12/31/43 0.00 0.00 0.00 0.00
Pep Boys 950-487 22356 11/29/94 11/30/14 11941.83 143301.96 6.41 1/01/95 11,941.83
12/01/99 13,136.01
12/01/04 14,449.61
12/01/09 15,894.57
Wal-Mart/Sam's #6632 950-505 114057 11/19/93 11/30/18 90391.75 1084701.00 9.51 6/01/94 90,391.75
Wendys #2096 950-515 4275 12/29/93 12/31/43 0.00 0.00 0.00 0.00
Subway #14930 950-303D1 1296 1/06/95 1/31/00 1832.76 21993.12 16.97 2/01/97 1,832.76
2/01/98 1,887.84
2/01/99 1,944.00
Mailboxes 950-303D2 1300 12/05/94 12/31/99 1838.42 22061.04 16.97 1/01/97 1,838.42
1/01/98 1,893.67
1/01/99 1,950.00
Cost Cutters 950-303D3 1000 12/05/94 1/31/00 1414.17 16970.04 16.97 1/01/97 1,414.17
1/01/98 1,456.67
1/01/99 1,500.83
Payless Shoesource #4633 950-407A1 3200 3/24/94 3/31/04 4000.00 48000.00 15.00 7/01/94 4,000.00
Sally Beauty #1641 950-407A2 2000 3/28/94 3/31/99 2333.33 27999.96 14.00 6/01/94 2,333.33
Fashion Bug #2682 950-407A3 12000 4/27/94 1/31/05 10000.00 120000.00 10.00 8/01/94 10,000.00
Beauty Smart 950-407A4 4400 7/23/94 7/31/99 5056.33 60675.96 13.79 8/01/96 5,056.33
8/00/97 5,210.33
8/01/98 5,364.33
Remco #3321 950-487C2 3000 12/05/94 12/31/97 3000.00 36000.00 12.00 1/01/95 3,000.00
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX---- --INS EXPENSE----- -----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albertson's #885 0.00 0.00 0.00 0.00 0.00 0.00 7.89 33,305.92
OfficeMax, Inc. #199 2,066.04 1.05 2,879.81 1.47 587.50 0.30 13.33 26,095.85
KMart #7303 7,762.13 0.86 0.00 0.00 1796.77 0.20 10.43 93,725.57
Imperial Palace 166.67 0.29 0.00 0.00 0.00 0.00 0.29 166.67
Taco Bell #16230 264.59 1.67 0.00 0.00 31.67 0.20 1.87 296.26
Pep Boys 1,828.34 0.98 0.00 0.00 372.60 0.20 7.59 14,142.77
Wal-Mart/Sam's #6632 0.00 0.00 0.00 0.00 0.00 0.00 9.51 90,391.75
Wendys #2096 595.32 1.67 0.00 0.00 71.25 0.20 1.87 666.57
Subway #14930 135.14 1.25 182.64 1.69 32.72 0.30 20.22 2,183.26
Mailboxes 194.32 1.79 183.21 1.69 32.82 0.30 20.76 2,248.77
Cost Cutters 149.48 1.79 140.93 1.69 25.25 0.30 20.76 1,729.83
Payless Shoesource #4633 319.17 1.20 0.00 0.00 0.00 0.00 16.20 4,319.17
Sally Beauty #1641 298.96 1.79 245.09 1.47 50.00 0.30 17.56 2,927.38
Fashion Bug #2682 1,196.89 1.20 1,470.54 1.47 300.00 0.30 12.97 12,967.43
Beauty Smart 657.71 1.79 620.08 1.69 111.09 0.30 17.58 6,445.21
Remco #3321 312.82 1.25 367.64 1.47 75.00 0.30 15.02 3,755.46
</TABLE>
<PAGE>
4/29/97 Community Centers One LLC 3:58 pm
User: KRAUSE Commercial Rent Roll Page: 20
Property : BROADWAY MARKETPLACE Report Date From : 5/01/97 To : 5/31/97
Denver Colorado 80223
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT -------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ---------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
General Nutrition Ctr #2631 950-487C5 1500 2/04/95 2/28/05 1750.00 21000.00 14.00 4/01/95 1,750.00
3/01/00 2,012.50
Travel Network 950-487C6 1365 12/16/95 12/31/00 1405.00 16860.00 12.35 1/01/97 1,405.00
1/01/98 1,446.83
1/01/99 1,490.12
1/01/00 1,534.49
Radio Shack #4003 950-487C7 2400 5/15/95 5/31/05 2100.00 25200.00 10.50 7/01/95 2,100.00
6/01/98 2,300.00
6/01/00 2,500.00
6/01/02 2,700.00
Blockbuster Video #8048 950-545B1 6481 4/04/94 7/31/99 8101.25 97215.00 15.00 7/01/94 8,101.25
Colorel Blinds 950-545B2 3815 3/05/95 3/31/00 4624.54 55494.48 14.55 4/01/97 4,624.54
4/01/98 4,764.68
4/01/99 4,907.93
Party America #35 950-545B4 7265 9/21/94 9/30/04 8475.83 101709.96 14.00 11/01/94 8,475.83
10/01/98 0.00
Misc. Income 950-99999 0 0.00 0.00 0.00 0.00
- ---------------------------- ----------- ------- --------- -------- ---------- ---------- --------- ---------- -----------
T 0 T A L S : 382576 296300.30 3555603.60 9.29
Total Occupied Square Feet : 382576
Total Vacant Square Feet : 0
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX---- --INS EXPENSE----- -----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ---------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General Nutrition Ctr #2631 224.22 1.79 211.39 1.69 37.87 0.30 17.79 2,223.48
Travel Network 204.04 1.79 192.37 1.69 34.46 0.30 16.14 1,835.87
Radio Shack #4003 358.75 1.79 338.22 1.69 60.60 0.30 14.29 2,857.57
Blockbuster Video #8048 646.42 1.20 0.00 0.00 162.03 0.30 16.50 8,909.70
Colorel Blinds 570.26 1.79 467.51 1.47 96.32 0.30 18.11 5,758.63
Party America #35 757.55 1.25 890.29 1.47 181.63 0.30 17.02 10,305.30
Misc. Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ---------------------------- --------- --------- --------- -------- ------- -------- -------- -----------
T 0 T A L S : 18,708.82 0.59 8,189.72 0.26 4059.58 0.13 10.26 327,258.42
</TABLE>
<PAGE>
Addenda
================================================================================
Subject Retail Sales
================================================================================
<PAGE>
/13/97 Community Centers One LLC 9:11 am
User: KUSHNER Retail Sales Detail Report Page: 1
Reported Sales : 1996 - 1997
Property : BROADWAY MARKETPLACE Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -363 KMart #7303
Sq Ft 107,806 1997 1,452,752 1,452,752 1,452,752
Rent 84,166.67 1996 1,344,782 1,344,782 1,344,782 1,452,752 1,452,752 1,452,752 1,452,752 1,452,752
Store Opened 3/24/94
Lease Exp 3/31/19
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -505 Wal-Mart/Sam's #6632
Sq Ft 114,057 1997 3,824,189
Rent 90,391.75 1996 3,180,247 3,824,189 3,824,189 3,824,189 3,824,189 3,824,189 3,824,189 3,824,189
Lease Eff 11/19/93
Lease Exp 11/30/18
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -303D1 Subway #14930
Sq Ft 1,296 1997 29,961
Rent 1,832.76 1996 28,964 28,362 30,141 30,399 33,165 34,678 32,727
Lease Eff 1/06/95
Lease Exp 1/31/00
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -303D2 Mailboxes
Sq Ft 1,300 1997 39,400 33,928 40,063 38,439
Rent 1,838.42 1996 28,264 33,740
Store Opened 12/10/94
Lease Exp 12/31/99
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -303D3 Cost Cutters
Sq Ft 1,000 | 1997 26,166 30,569 27,477 0
Rent 1,414.17 | 1996 21,697 21,493 27,851 27,225 26,594 26,851 25,837 25,655
Store Opened 2/17/95 |
Lease Exp 1/31/00 |
Departments No |
<CAPTION>
Tenant September October November December Yr. SPSF Yr. Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -363 KMart #7303
Sq Ft 107,806 40 4,358,257
Rent 84,166.67 1,452,752 1,452,752 1,452,752 1,452,752 159 17,109,116
Store Opened 3/24/94
Lease Exp 3/31/19
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -505 Wal-Mart/Sam's #6632
Sq Ft 114,057 34 3,824,189
Rent 90,391.75 3,824,189 3,824,189 3,824,189 3,824,189 397 45,246,326
Lease Eff 11/19/93
Lease Exp 11/30/18
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
- -303D1 Subway #14930
Sq Ft 1,296 23 29,961
Rent 1,832.76 169 218,437
Lease Eff 1/06/95
Lease Exp 1/31/00
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
- -303D2 Mailboxes
Sq Ft 1,300 117 151,830
Rent 1,838.42 48 62,004
Store Opened 12/10/94
Lease Exp 12/31/99
Departments No
- ------------------------------------------------------------------------------------------------------------------------------------
- -303D3 Cost Cutters
Sq Ft 1,000 84 84,212
Rent 1,414.17 23,910 24,570 24,851 277 276,534
Store Opened 2/17/95
Lease Exp 1/31/00
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:11 am
User: KUSHNER Retail Sales Detail Report Page: 2
Reported Sales : 1996 - 1997
Property : BROADWAY MARKETPLACE Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -407A1 Payless Shoesource #4633
Sq Ft 3,200 1997 26,743 29,595 52,017 40,693
Rent 4,000.00 1996 25,251 29,429 37,068 43,767 48,787 48,251 39,015 43,127
Store Opened 3/24/94
Lease Exp 3/31/04
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -407A2 Sally Beauty #1641
Sq Ft 2,000 1997 No Sales
Rent 2,333.33 1996 26,600 29,523 33,327 29,810 30,652 32,391 33,664 34,161
Store Opened 3/28/94
Lease Exp 3/31/99
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -407A3 Fashion Bug #2682
Sq Ft 12,000 1997 33,216 48,902 84,646 58,678
Rent 10,000.00 1996 43,284 44,086 58,337 55,735 67,044 77,787 51,417 60,386
Store Opened 4/27/94
Lease Exp 1/31/05
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -487C2 Remco #3321
Sq Ft 3,000 1997 No Sales
Rent 3,000.00 1996 34,257 33,994 38,209 37,615 37,303 33,412 34,944 34,902
Store Opened 12/05/94
Lease Exp 12/31/97
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -487C5 General Nutrition Ctr #2631
Sq Ft 1,500 1997 25,535 27,106 27,235 25,790
Rent 1,750.00 1996 22,633 25,656 29,561 28,976 27,036 27,395 24,014 25,677
Store Opened 2/04/95
Lease Exp 2/28/05
Departments No
<CAPTION>
Tenant September October November December Yr. SPSF Yr. Total
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- -407A1 Payless Shoesource #4633
Sq Ft 3,200 47 149,049
Rent 4,000.00 36,008 36,312 36,907 35,832 144 459,753
Store Opened 3/24/94
Lease Exp 3/31/04
Departments No
- -------------------------------------------------------------------------------------------------------------
- -407A2 Sally Beauty #1641
Sq Ft 2,000
Rent 2,333.33 29,587 29,368 27,496 34,886 186 371,465
Store Opened 3/28/94
Lease Exp 3/31/99
Departments No
- -------------------------------------------------------------------------------------------------------------
- -407A3 Fashion Bug #2682
Sq Ft 12,000 19 225,443
Rent 10,000.00 76,371 47,899 48,902 87,380 60 718,628
Store Opened 4/27/94
Lease Exp 1/31/05
Departments No
- -------------------------------------------------------------------------------------------------------------
- -487C2 Remco #3321
Sq Ft 3,000
Rent 3,000.00 28,843 28,862 31,658 32,928 136 406,925
Store Opened 12/05/94
Lease Exp 12/31/97
Departments No
- -------------------------------------------------------------------------------------------------------------
- -487C5 General Nutrition Ctr #2631
Sq Ft 1,500 70 105,666
Rent 1,750.00 23,891 26,244 26,003 22,678 207 309,764
Store Opened 2/04/95
Lease Exp 2/28/05
Departments No
</TABLE>
<PAGE>
/13/97 Community Centers One LLC 9:11 am
User: KUSHNER Retail Sales Detail Report Page: 3
Reported Sales : 1996 - 1997
Property : BROADWAY MARKETPLACE Select By : Unit Ref
Type of Occupant : Current
Include Non Reporters : No
<TABLE>
<CAPTION>
Tenant Year January February March April May June July August
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -487C6 Travel Network
Sq Ft 1,365 1997 55,532 61,508 58,175 55,786
Rent 1,405.00 1996 -- No Sales
Store Opened 12/16/95
Lease Exp 12/31/00
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -487C7 Radio Shack #4003
Sq Ft 2,400 1997 28,985 24,081 29,998 33,329
Rent 2,100.00 1996 17,099 18,556 23,701 22,363 22,602 19,447 22,407 28,363
Lease Eff 5/15/95
Lease Exp 5/31/05
Departments No
- -----------------------------------------------------------------------------------------------------------------------------------
- -545B4 Party America #35
Sq Ft 7,265 1997 47,002 43,631 40,466 49,385 52,423
Rent 8,475.83 1996 49,125 47,607 45,682 57,447 65,503 58,072 61,596 50,857
Store Opened 8/06/94
Lease Exp 9/30/04
Departments No
Property Totals 1997 5,589,482 1,721,504 1,815,921 329,577 52,423 0 0 0
1996 4,822,203 5,481,415 5,492,848 5,610,279 5,635,627 5,635,226 5,602,562 5,580,070
<CAPTION>
Tenant September October November December Yr. SPSF Yr. Total
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- -487C6 Travel Network
Sq Ft 1,365 169 231,001
Rent 1,405.00
Store Opened 12/16/95
Lease Exp 12/31/00
Departments No
- ---------------------------------------------------------------------------------------------------------
- -487C7 Radio Shack #4003
Sq Ft 2,400 48 116,394
Rent 2,100.00 26,440 31,706 32,409 47,185 130 312,278
Lease Eff 5/15/95
Lease Exp 5/31/05
Departments No
- ---------------------------------------------------------------------------------------------------------
- -545B4 Party America #35
Sq Ft 7,265 32 232,907
Rent 8,475.83 42,263 80,059 49,845 47,475 90 655,533
Store Opened 8/06/94
Lease Exp 9/30/04
Departments No
Property Totals 0 0 0 0 1,309 9,508,907
5,564,255 5,581,962 5,555,014 5,585,305 9,105 66,146,764
</TABLE>
<PAGE>
Addenda
================================================================================
Pro-Ject Lease Abstract Report
================================================================================
<PAGE>
BROADWAY MARKETPLACE
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-SUITE 1 1 114,057 12/93 11/18 - 9.51 1,084,682 0.50 UNLIMITED 50,000
SAM'S WAREHOUSE -
1-460 9.51 1,084,682 0.50 UNLIMITED 50,000
# 2-SUITE 2 1 107,806 4/94 3/19 - 9.37 1,010,142 1.00 UNLIMITED 23,130
K-MART
1-600 9.37 1,010,142 1.00 UNLIMITED 23,130
# 3-SUITE 3 1 50,645 7/94 5/19 - 7.89 399,589 NATURAL
ALBERTSON'S -
1-360 7.89 399,589 NATURAL
# 4-SUITE AlOO 2 3,200 4/94 3/04 - 15.00 48,000 4.00 UNLIMITED NATURAL
PAYLESS SHOESOURCE 1
1-60 17.25 55,200 4.00 UNLIMITED NATURAL
2-60 19.84 63,488 4.00 UNLIMITED NATURAL
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ---------- ------------------ ---------- -----------
# 1-SUITE 1 1 LIABILITY INS. ZERO
SAM'S WAREHOUSE - REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
REAL ESTATE TAXES ZERO
# 2-SUITE 2 1 COMMON AREA ZERO
K-MART LIABILITY INS. ZERO
REAL ESTATE TAXES ZERO
COMMON AREA ZERO
LIABILITY INS. ZERO
REAL ESTATE TAXES ZERO
# 3-SUITE 3 1 CAM + 10% ZERO
ALBERTSON'S - LIABILITY INS. ZERO
REAL ESTATE TAXES ZERO
CAM + 10% ZERO
LIABILITY INS. ZERO
REAL ESTATE TAXES ZERO
# 4-SUITE AlOO 2 CAM + 10% ZERO
PAYLESS SHOESOURCE 1 REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
<PAGE>
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>
# 5-SUITE A101 2 4,400 8/94 7/99 - 14.21 62,524 NATURAL
BEAUTY SMART 1 8/98 14.63 64,372
1-60 15.07 66,308 NATURAL
8/00 15.52 68,288
8/01 15.99 70,356
8/02 16.47 72,468
8/03 16.96 74,624
2-60 17.47 76,868 NATURAL
8/05 18.00 79,200
8/06 18.53 81,532
8/07 19.09 83,996
8/08 19.66 86,504
# 6-SUITE A104 2 12,000 5/94 1/05 - 10.00 120,000 4.00 UNLIMITED 2,400
FASHION BUG 1
1-60 11.00 132,000 4.00 UNLIMITED 2,640
2-60 12.00 144,000 4.00 UNLIMITED 2,880
3-60 13.00 156,000 4.00 UNLIMITED 3,120
4-60 14.00 168,000 4.00 UNLIMITED 3,360
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
# 5-SUITE A101 2 CAM & FEES + 15% ZERO
BEAUTY SMART 1 TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
# 6-SUITE A104 2 CAM + 10% ZERO
FASHION BUG 1 REAL ESTATE TAXES ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
<PAGE>
PAGE 3
<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>
# 7-SUITE AlO5 2 2,000 4/94 3/99 - 14.00 28,000 3.00 UNLIMITED 933
SALLY BEAUTY 1
1-60 16.10 32,200 3.00 UNLIMITED 933
# 8-SUITE B1OO 2 6,481 4/94 7/99 - 15.00 97,215 NATURAL
BLOCKBUSTER 1
1-60 17.25 111,797 NATURAL
2-60 19.84 128,583 NATURAL
3-60 22.81 147,832 NATURAL
# 9-SUITE B200 2 3,815 4/95 3/00 - 14.55 55,508 NATURAL
COLOREL BLINDS 1 4/98 14.99 57,187
4/99 15.44 58,904
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
# 7-SUITE AlO5 2 CAM & FEES + 15% ZERO
SALLY BEAUTY 1 REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM & FEES + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
# 8-SUITE B1OO 2 CAM + 10% ZERO
BLOCKBUSTER 1 REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
CAM + 10% ZERO
REAL ESTATE TAXES ZERO
TRASH + 10% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
# 9-SUITE B200 2 CAM & FEES + 15% ZERO
COLOREL BLINDS 1 TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
<PAGE>
PAGE 4
<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>
1-60 15.90 59,418 NATURAL
4/01 16.38 61,212
4/02 16.87 63,043
4/03 17.37 64,912
4/04 17.90 66,892
2-60 18.44 68,910 NATURAL
4/06 18.98 70,928
4/07 19.55 73,058
4/08 20.14 75,263
4/09 20.75 77,543
# 10-SUITE B400 2 7,265 10/94 9/04 - 14.00 101,710 5.00 UNLIMITED NATURAL
PARTY AMERICA 1 10/98 16.07 116,749
10/99 16.63 120,817
10/00 17.21 125,031
10/01 17.81 129,390
10/02 18.43 133,894
10/03 19.08 138,616
# 11-SUITE C 1 23,500 12/94 1/10 - 10.50 246,750 NATURAL
OFFICEMAX - 1/00 11.00 258,500
1/05 11.50 270,250
1-300 12.00 282,000
2/15 12.50 293,750
2/20 13.00 305,500
2/25 13.50 317,250
12/27 14.00 329,000
# 12-SUITE C1OO 1 22,356 12/94 11/14 - 6.41 143,302 NATURAL
PEP BOYS - 12/99 7.05 157,610
12/04 7.76 173,483
12/09 8.53 190,697
1-60 9.38 209,699
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
CAM & FEES + 15% ZERO
TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
# 10-SUITE B400 2 CAM + 15% ZERO
PARTY AMERICA 1 REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
# 11-SUITE C 1 CAM + 7.5% ZERO
OFFICEMAX PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
CAM + 7.5% ZERO
PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
# 12-SUITE C1OO COMMON AREA ZERO
PEP BOYS PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
COMMON AREA ZERO
PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
<PAGE>
PAGE 5
<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>
2-60 10.32 230,714 NATURAL
3-60 11.36 253,964 NATURAL
4-60 11.36 253,964 NATURAL
# 13-SUITE C200 2 3,000 12/94 11/97 - 12.00 36,000 NATURAL
RENCO 1
1-36 13.20 39,600 NATURAL
# 14-SUITE C400 2 1,365 1/96 12/00 - 12.35 16,858 3.00 UNLIMITED NATURAL
TRAVEL NETWORK 1 12/97 12.72 17,363
12/98 13.10 17,882
12/99 13.49 18,414
# 15-SUITE C5OO 2 2,400 4/95 3/05 - 10.50 25,200 3.00 UNLIMITED NATURAL
RADIO SHACK 1 4/98 11.50 27,600
4/00 12.50 30,000
4/02 13.50 32,400
1-60 14.00 33,600 3.00 UNLIMITED NATURAL
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
COMMON AREA ZERO
PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
COMMON AREA ZERO
PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
COMMON AREA ZERO
PROP. INSURANCE ZERO
REAL ESTATE TAXES ZERO
LIABILITY INS. ZERO
# 13-SUITE C200 2 CAM + 15% ZERO
RENCO 1 REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
CAM + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
# 14-SUITE C400 2 CAM & FEES + 15% ZERO
TRAVEL NETWORK 1 REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INSURANCE ZERO
LIABILITY INS. ZERO
# 15-SUITE C5OO CAM + 15% ZERO
RADIO SHACK REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
REAL ESTATE TAXES ZERO
CAM + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
<PAGE>
PAGE 6
<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-SUITE C800 2 1,500 3/95 2/05 - 14.00 21,000 3.00 UNLIMITED NATURAL
GNC 1 3/00 16.10 24,150
1-60 18.52 27,780 300 UNLIMITED NATURAL
2-60 21.29 31,935 3.00 UNLIMITED NATURAL
# 17-SUITE D100 2 1,296 1/95 12/99 - 16.97 21,993 NATURAL
SUBWAY 1 1/98 17.48 22,654
1/99 18.01 23,341
1-60 18.54 24,028 NATURAL
1/01 19.10 24,754
1/02 19.68 25,505
1/03 20.27 26,270
1/04 20.88 27,060
# 18-SUITE D102 2 1,300 12/94 11/99 - 16.97 22,061 NATURAL
MAILBOXES, ETC. 1 12/97 17.48 22,724
12/98 18.01 23,413
1-60 18.55 24,115 NATURAL
12/00 19.10 24,830
12/01 19.68 25,584
12/02 20.27 26,351
12/03 20.88 27,144
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
# 16-SUITE C800 2 CAM & FEES + 15% ZERO
GNC 1 REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB, INS. + 15% ZERO
# 17-SUITE D100 2 CAM + 15% ZERO
SUBWAY 1 TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
# 18-SUITE D102 CAM & FEES + 15% ZERO
MAILBOXES, ETC. REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
<PAGE>
PAGE 7
<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>
2-60 21.51 27,963 NATURAL
12/05 22.15 28,795
12/06 22.81 29,653
12/07 23.50 30,550
12/08 24.20 31,460
# 19-SUITE D103 2 1,000 12/94 11/99 - 16.97 16,970 6.00 UNLIMITED NATURAL
COSTCUTTERS 1 12/97 17.48 17,480
12/98 18.01 18,010
1-60 18.55 18,550 6.00 UNLIMITED NATURAL
12/00 19.11 19,110
12/01 19.68 19,680
12/02 20.27 20,270
12/03 20.88 20,880
# 20-SUITE PAD 1 4 4,275 1/94 12/13 - 0.00 0 NATURAL
WENDY'S -
# 21-SUITE PAD 2 4 7,015 1/94 12/13 - 0.00 0 NATURAL
IMPERIAL PALACE 2
# 22-SUITE PAD 3 4 1,900 1/94 12/13 - 0.00 0 NATURAL
TACO BELL -
---------
382,576
=========
</TABLE>
PRIMARY/
SECONDARY PRO RATA % OF RENT
TENANT CODES RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------- ----------- ------------------ ---------- -----------
CAM & FEES + 15% ZERO
REAL ESTATE TAXES ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
# 19-SUITE D103 2 CAM & FEES + 15% ZERO
COSTOUTTERS 1 TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
CAM & FEES + 15% ZERO
TAXES + 15% ZERO
TRASH + 15% ZERO
PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
# 20-SUITE PAD 1 4 CAM + 15% ZERO
WENDY' S PROP. INS. + 15% ZERO
LIAB, INS. + 15% ZERO
# 21-SUITE PAD 2 4 NONE
IMPERIAL PALACE 2
# 22-SUITE PAD 3 4 CAM + 15% ZERO
TACO BELL PROP. INS. + 15% ZERO
LIAB. INS. + 15% ZERO
<PAGE>
Addenda
================================================================================
Pro-Ject Assumption Report
================================================================================
<PAGE>
BROADWAY MARKETPLACE
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF BROADWAY MARKETPLACE BEGINNING 8/1997
FOR 16 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
GLA
DESCRIBED AS GROSS LEASEABLE AREA
1997 VALUE - 404,733
THEREAFTER - CONSTANT
GLOA
1997 VALUE - 404,733
THEREAFTER - CONSTANT
SALE
1997 VALUE - 13,190
THEREAFTER - CONSTANT
PINA
DESCRIBED AS GLA FOR PROP. INS. REIMBURSEMENT
1997 VALUE - 369,386
THEREAFTER - CONSTANT
CGLA
DESCRIBED AS GLA FOR CAM CHARGES
1997 VALUE - 261,504
THEREAFTER- CONSTANT
TGLA
1997 VALUE - 369,386
THEREAFTER - CONSTANT
KGLA
DESCRIBED AS GROSS LEASEABLE AREA FOR K-MART'S RECOVERIES
1997 VALUE - 397,899
THEREAFTER - CONSTANT
LGBA
1997 VALUE - 370,129
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
TRSH
DESCRIBED AS GLA FOR TRASH RECOVERIES
1997 VALUE - 39,079
THEREAFTER - CONSTANT
LINA
DESCRIBED AS GLA FOR LIABILITY INSURANCE RECOVERIES
1997 VALUE - 375,561
THEREAFTER - CONSTANT
GROWTH RATES
MCPI
DESCRIBED AS MARKET RENT GROWTH
1997 VALUE - 3.50
THEREAFTER - CONSTANT
ECPI
DESCRIBED AS EXPENSE GROWTH RATE
1997 VALUE - 3.50
THEREAFTER - CONSTANT
SCPI
DESCRIBED AS SALES GROWTH RATE
1997 VALUE - 3.50
THEREAFTER - CONSTANT
MARKET RATES
MK13
DESCRIBED AS MARKET RENT FOR BUILDING C
1997 VALUE - 13.00
1998 VALUE - 13.00
THEREAFTER - GROWING AT GROWTH RATE MCPI
MK15
DESCRIBED AS MARKET RENT FOR BUILDING B
1997 VALUE - 15.00
1998 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE MCPI
MK17
DESCRIBED AS MARKET RENT FOR BUILDING D
1997 VALUE - 17.00
<PAGE>
PAGE 3
1998 VALUE - 17.00
THEREAFTER - GROWING AT GROWTH RATE MCPI
OWNE
DESCRIBED AS OWNER'S EXPENSE
1997 VALUE - 0.05
THEREAFTER - GROWING AT GROWTH RATE ECPI
\\
CONSTANT
\\\
CONSTANT
REPL
DESCRIBED AS REPLACEMENT RESERVE RATE PSF
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE ECPI
COMM
DESCRIBED AS BLENDED COMMISSION RATE UPON LEASE EXPIRATION
1997 VALUE - 1.95
THEREAFTER - GROWING AT GROWTH RATE ECPI
ALTR
DESCRIBED AS BLENDED ALTERATION RATE PSF UPON LEASE EXPIRATION
1997 VALUE - 1.25
THEREAFTER - GROWING AT GROWTH RATE ECPI
MISCELLANEOUS INCOMES
NONE
EXPENSES
COMMON AREA MAINT., REFERRED TO AS CAMX
DESCRIBED AS RECOVERABLE CAM EXPENSE
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF IMCO
- -100.0% OF TRSH
INSURANCE , REFERRED TO AS INSX
DESCRIBED AS RECOVERABLE INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
<PAGE>
PAGE 4
+100.0% OF PIX +100.0% OF LIX
REAL ESTATE TAXES , REFERRED TO AS TAXX
DESCRIBED AS RECOVERABLE TAX EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 581,054
1998 VALUE - 581,054
THEREAFTER - GROWING AT GROWTH RATE ECPI
MANAGEMENT FEE , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEE
AN INFORMATIONAL EXPENSE
1997 VALUE - 124,550
1998 VALUE - 124,991
1999 VALUE - 125,982
2000 VALUE - 127,530
2001 VALUE - 127,880
2002 VALUE - 128,228
2003 VALUE - 128,541
2004 VALUE - 129,715
2005 VALUE - 132,652
2006 VALUE - 133,095
2007 VALUE - 133,484
2008 VALUE - 133,887
2009 VALUE - 134,994
2010 VALUE - 136,053
2011 VALUE - 136,209
2012 VALUE - 136,867
THEREAFTER - CONSTANT
CAM & FEES + 15% , REFERRED TO AS CF15
DESCRIBED AS CAM PLUS MANAGEMENT (FOR RECOVERIES
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX +97.0% OF MGMT
INSURANCE + 15% , REFERRED TO AS IN15
AN INFORMATIONAL EXPENSE
+115.0% OF INSX
TAXES + 15% , REFERRED TO AS TX15
DESCRIBED AS TAX EXPENSE TIMES 115%
AN INFORMATIONAL EXPENSE
+115.0% OF TAXX
CAM + 15% , REFERRED TO AS CA15
DESCRIBED AS CAM EXPENSE TIMES 115%
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX
<PAGE>
PAGE 5
CAM + 10% , REFERRED TO AS CA10
DESCRIBED AS CAM EXPENSE TIMES 110%
AN INFORMATIONAL EXPENSE
+110.0% OF CAMX
INSURANCE + 10% , REFERRED TO AS IN10
AN INFORMATIONAL EXPENSE
+110.0% OF INSX
CAM + 7.5% , REFERRED TO AS CA75
DESCRIBED AS CAM EXPENSE TIMES 107.5%
AN INFORMATIONAL EXPENSE
+ 107.5% OF CAMX
PROP. INSURANCE , REFERRED TO AS PIX
DESCRIBED AS RECOVERABLE PROP. INSURANCE EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 7,500
THEREAFTER - GROWING AT GROWTH RATE ECPI
LIABILITY INS. , REFERRED TO AS LIX
AN INFORMATIONAL EXPENSE
1997 VALUE - 75,000
THEREAFTER - GROWING AT GROWTH RATE ECPI
LIAB. INS. + 10% , REFERRED TO AS LI1O
DESCRIBED AS LIABILITY EXPENSE TIMES 110%
AN INFORMATIONAL EXPENSE
+110.0% OF LIX
TRASH REMOVAL , REFERRED TO AS TRSH
DESCRIBED AS RECOVERABLE TRASH EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 12,000
THEREAFTER - GROWING AT GROWTH RATE ECPI
TRASH + 10% , REFERRED TO AS TR10
DESCRIBED AS RECOVERABLE TRASH EXP. TIMES 110%
AN INFORMATIONAL EXPENSE
+110.0% OF TRSH
IMPERIAL CONTRIB. , REFERRED TO AS IMCO
DESCRIBED AS IMPERIAL RESTAURANT CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1997 VALUE - 2,000
1998 VALUE - 2,000
1999 VALUE - 2,300
2000 VALUE - 2,300
<PAGE>
PAGE 6
2001 VALUE - 2,300
2002 VALUE - 2,300
2003 VALUE - 2,300
2004 VALUE - 2,600
2005 VALUE - 2,600
2006 VALUE - 2,600
2007 VALUE - 2,600
2008 VALUE - 2,600
2009 VALUE - 2,900
2010 VALUE - 2,900
THEREAFTER - CONSTANT
COMMON AREA MAINT., REFERRED TO AS CAME
DESCRIBED AS COMMON AREA EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 280,000
THEREAFTER - GROWING AT GROWTH RATE ECPI
TRASH + 15% , REFERRED TO AS TR15
DESCRIBED AS TRASH EXPENSE TIMES 115%
AN INFORMATIONAL EXPENSE
+115.0% OF TRSH
OWNERS EXPENSE , REFERRED TO AS OWNE
DESCRIBED AS OWNER'S EXPENSE
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE OWNE MULTIPLIED BY AREA MEASURE TGLA
LIAB. INS. + 15% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY INSURANCE TIMES 115%
AN INFORMATIONAL EXPENSE
+115.0% OF LIX
PROP. INS. + 15% , REFERRED TO AS PI15
DESCRIBED AS PROP. INSURANCE EXPENSE TIMES 115%
AN INFORMATIONAL EXPENSE
+115.0% OF PIX
\ , REFERRED TO AS \
AN INFORMATIONAL EXPENSE
CONSTANT
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
<PAGE>
PAGE 7
1997 VALUE - 7.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 3.50
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
- ----------------------
NONE
<PAGE>
PAGE 8
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
- --------------------
REPLACEMENT RSRV
MARKET RATE REPL MULTIPLIED BY AREA MEASURE TGLA
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - ANCHORS
2 - IN-LINE SHOPS
3 - OUT-PARCEL SHOPS
4 - SALES
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - VACANCY LOSS
2 -
COST CENTERS
- ------------
10 - COMMON AREA
12 - INSURANCE
<PAGE>
PAGE 9
16 - REAL ESTATE TAXES
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.0O
MAR 8.33% 1.0O
APR 8.33% 1.0O
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
- -----------------
COMMON AREA , REFERRED TO AS CAMX
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAMX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE , REFERRED TO AS INSX
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE INSX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
REAL ESTATE TAXES , REFERRED TO AS TAXX
ASSIGNED TO COST CENTER 16 - REAL ESTATE TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
<PAGE>
PAGE 10
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RECA
GLOBAL GROUPING
GLOBAL RECOVERY CAMX
GLOBAL RECOVERY LIXX
GLOBAL RECOVERY TAXX
CAN & FEES + 15% , REFERRED TO AS CF15
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CF15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE + 15% , REFERRED TO AS IN15
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE IN15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAXES + 15% , REFERRED TO AS TX15
ASSIGNED TO COST CENTER 16 - REAL ESTATE TAXES
PRO RATA SHARE RECOVERY OF EXPENSE TX15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE TGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RHCC
GLOBAL GROUPING
GLOBAL RECOVERY CF15
GLOBAL RECOVERY LI15
GLOBAL RECOVERY TAXX
GLOBAL RECOVERY PI15
GLOBAL RECOVERY TR15
CAM + 10% , REFERRED TO AS CAl0
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAl0
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 11
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
INSURANCE + 10% , REFERRED TO AS IN10
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE IN10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAN + 7.5% , REFERRED TO AS CA75
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CA75
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM + l5% , REFERRED TO AS CA15
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE CAl5
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GGCC
GLOBAL GROUPING
GLOBAL RECOVERY CA15
GLOBAL RECOVERY INSX
GLOBAL RECOVERY TAXX
TRASH + 15% , REFERRED TO AS TR15
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE TR15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TRASH + 10% , REFERRED TO AS TR10
ASSIGNED TO COST CENTER 10 - COMMON AREA
PRO RATA SHARE RECOVERY OF EXPENSE TR10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE CGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
<PAGE>
PAGE 12
PROP. INSURANCE , REFERRED TO AS PIXX
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE PIX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE PINA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIABILITY INS. , REFERRED TO AS LIXX
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LIX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE LINA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
PROP. INS. + l5% , REFERRED TO AS PI15
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE PI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE PINA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
LIAB. INS. + 15% , REFERRED TO AS LI15
ASSIGNED TO COST CENTER 12 - INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE LI15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE LINA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASETHROUGH
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
<PAGE>
PAGE 13
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - SMALL SHOPS
BASE LEASE DATES: 2/1994 TO 1/1995
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,000
PRIMARY CODE: 2 - IN-LINE SHOPS
SECONDARY CODE: 1 - VACANCY LOSS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
3.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 NONE NONE NONE YES YES
2 5.00 NONE NONE NONE YES YES
3 5.00 NONE NONE NONE YES YES
4 5.00 NONE NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MK13 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MCPI PER YEAR DURING EACH RENEWAL TERM
<PAGE>
PAGE 14
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY RHCC
RENEWAL COMMISSIONS: MARKET RATE COMM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTR
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Pro-Ject Tenant Register Report
================================================================================
<PAGE>
BROADWAY MARKETPLACE
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
# 1 - SUITE 1 SAM'S WAREHOUSE 114,057 12/1993 11/2018
# 2 - SUITE 2 K-MART 107,806 4/1994 3/2019
# 3 - SUITE 3 ALBERTSON'S 50,645 7/1994 5/2019
# 4 - SUITE A100 PAYLESS SHOESOURCE 3,200 4/1994 3/2004
# 5 - SUITE Al01 BEAUTY SMART 4,400 8/1994 7/1999
# 6 - SUITE A104 FASHION BUG 12,000 5/1994 1/2005
# 7 - SUITE A105 SALLY BEAUTY 2,000 4/1994 3/1999
# 8 - SUITE B100 BLOCKBUSTER 6,481 4/1994 7/1999
# 9 - SUITE B200 COLOREL BLINDS 3,815 4/1995 3/2000
# 10 - SUITE B400 PARTY AMERICA 7,265 10/1994 9/2004
# 11 - SUITE C OFFICEMAX 23,500 12/1994 1/2010
# 12 - SUITE C100 PEP BOYS 22,356 12/1994 11/2014
# 13 - SUITE C200 REMCO 3,000 12/1994 11/1997
# 14 - SUITE C400 TRAVEL NETWORK 1,365 1/1996 12/2000
# 15 - SUITE C500 RADIO SHACK 2,400 4/1995 3/2005
# 16 - SUITE C800 GNC 1,500 3/1995 2/2005
# 17 - SUITE D100 SUBWAY 1,296 1/1995 12/1999
# 18 - SUITE D102 MAILBOXES, ETC. 1,300 12/1994 11/1999
# 19 - SUITE D103 COSTCUTTERS 1,000 12/1994 11/1999
# 20 - SUITE PAD 1 WENDY'S 4,275 1/1994 12/2013
# 21 - SUITE PAD 2 IMPERIAL PALACE 7,015 1/1994 12/2013
# 22 - SUITE PAD 3 TACO BELL 1,900 1/1994 12/2013
-----------
22 TENANTS 382,576
===========
<PAGE>
Addenda
================================================================================
Pro-Ject Lease Expiration Report
================================================================================
<PAGE>
BROADWAY MARKETPLACE
EXPIRATION REPORT
YEARS 1998 TO 2013, ALL TENANTS,
EXCLUDING OPTIONS, EXCLUDING RENEWALS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
EXCLUDING PERCENTAGE RENTS
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
# 13-SUITE C200 INITIAL
REMCO 3,000 11/1997 12.00 2.79 14.79 13.00
--------- ------ ------ ------ ------
1 FY 98 EXPIRATIONS 3,000 12.00 2.79 14.79 13.00
# 7-SUITE A105 INITIAL
SALLY BEAUTY 2,000 3/1999 14.00 3.64 17.64 13.45
# 8-SUITE B100 INITIAL
BLOCKBUSTER 6,481 7/1999 15.00 3.12 18.12 15.52
# 5-SUITE A101 INITIAL
BEAUTY SMART 4,400 7/1999 14.63 3.92 18.55 13.45
--------- ------ ------ ------ ------
3 FY 99 EXPIRATIONS 12,881 14.72 3.47 18.19 14.50
--------- ------ ------ ------ ------
4 CUMULATIVE EXPS 15,881 14.20 3.34 17.55 14.21
# 18-SUITE D102 INITIAL
MAILBOXES, ETC 1,300 11/1999 18.01 3.67 21.68 17.59
# 19-SUITE D103 INITIAL
COSTCUTTERS 1,000 11/1999 18.01 3.92 21.94 0.00
# 17-SUITE D100 INITIAL
SUBWAY 1,296 12/1999 18.01 3.45 21.46 0.00
# 9-SUITE B200 INITIAL
COLOREL BLINDS 3,815 3/2000 15.44 4.05 19.49 13.93
--------- ------ ------ ------ ------
4 FY100 EXPIRATIONS 7,411 16.69 3.86 20.55 10.26
--------- ------ ------ ------ ------
8 CUMULATIVE EXPS 23,292 14.99 3.51 18.50 12.95
<PAGE>
PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
# 14-SUITE C400 INITIAL
TRAVEL NETWORK 1,365 12/2000 13.49 3.76 17.25 14.41
--------- ------ ------- ------ ------
1 FY101 EXPIRATIONS 1,365 13.49 3.76 17.25 14.41
--------- ------ ------- ------ ------
9 CUMULATIVE EXPS 24,657 14.91 3.52 18.43 13.04
# 4-SUITE A100 INITIAL
PAYLESS SHOESOURCE 3,200 3/2004 15.00 3.70 18.70 0.00
--------- ------ ------- ------ ------
1 FY104 EXPIRATIONS 3,200 15.00 3.70 18.70 0.00
--------- ------ ------- ------ ------
10 CUMULATIVE EXPS 27,857 14.92 3.54 18.47 11.54
# 10-SUITE B400 INITIAL
PARTY AMERICA 7,265 9/2004 16.07 3.77 19.84 18.44
# 6-SUITE A104 INITIAL
FASHION BUG 12,000 1/2005 10.00 3.77 13.77 0.00
# 16-SUITE C800 INITIAL
GNC 1,500 2/2005 16.10 4.44 20.54 0.00
# 15-SUITE C500 INITIAL
RADIO SHACK 2,400 3/2005 13.50 3.94 17.44 19.08
--------- ------ ------- ------ ------
4 FY105 EXPIRATIONS 23,165 12.66 3.83 16.49 7.76
--------- ------ ------- ------ ------
14 CUMULATIVE EXPS 51,022 13.90 3.67 17.57 9.82
# 11-SUITE C INITIAL
OFFICEMAX 23,500 1/2010 11.50 4.43 15.93 0.00
--------- ------ ------- ------ ------
1 FY110 EXPIRATIONS 23,500 11.50 4.43 15.93 0.00
--------- ------ ------- ------ ------
15 CUMULATIVE EXPS 74,522 13.14 3.91 17.05 6.73
<PAGE>
Addenda
================================================================================
ENDS Full Data Report
================================================================================
<PAGE>
Tue Jul 8, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 23,355 185,821 476,956
1997 ESTIMATE 22,056 173,803 446,764
1990 CENSUS 20,656 160,159 409,557
1980 CENSUS 22,621 175,392 435,754
GROWTH 1980 - 1990 -8.69% -8.69% -6.01%
HOUSEHOLDS
2002 PROJECTION 10,025 79,250 222,925
1997 ESTIMATE 10,970 80,662 208,531
1990 CENSUS 11,328 80,525 186,387
1980 CENSUS 11,994 85,125 190,757
GROWTH 1980 - 1990 -5.56% -5.40% -2.29%
1997 ESTIMATED POPULATION BY RACE 22,056 173,803 446,764
WHITE 77.27% 74.33% 72.91%
BLACK 2.00% 4.91% 7.26%
ASIAN & PACIFIC ISLANDER 1.71% 3.37% 3.15%
OTHER RACES 19.02% 17.39% 16.69%
1997 ESTIMATED POPULATION 22,056 173,803 446,764
HISPANIC ORIGIN 28.12% 27.50% 26.40%
OCCUPIED UNITS 11,328 80,525 186,387
OWNER OCCUPIED 33.12% 37.19% 46.43%
RENTER OCCUPIED 66.88% 62.81% 53.57%
1990 AVERAGE PERSONS PER HH 1.82 1.94 2.15
1997 EST. HOUSEHOLDS BY INCOME 10,970 80,662 208,531
$150,000 OR MORE 3.97% 4.69% 4.37%
$100,000 TO $149,999 3.91% 4.31% 4.35%
$ 75,000 TO $ 99,999 6.37% 5.82% 6.04%
$ 50,000 TO $ 74,999 14.28% 13.07% 15.19%
$ 35,000 TO $ 49,999 14.38% 14.11% 15.15%
$ 25,000 TO $ 34,999 13.57% 13.96% 14.08%
$ 15,000 TO $ 24,999 19.73% 16.90% 16.21%
$ 5,000 TO $ 15,000 19.41% 20.02% 18.48%
UNDER $ 5,000 4.39% 7.11% 6.13%
1997 EST. AVERAGE HOUSEHOLD INCOME $48,453 $49,642 $50,335
1997 EST. MEDIAN HOUSEHOLD INCOME $29,765 $29,274 $31,521
1997 EST. PER CAPITA INCOME $22,961 $21,571 $22,001
<PAGE>
Tue Jul 8, 1997 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1997 ESTIMATED POPULATION BY SEX 22,056 173,803 446,764
MALE 50.78% 50.50% 48.80%
FEMALE 49.22% 49.50% 51.20%
MARITAL STATUS 17,792 133,735 332,362
SINGLE MALE 23.24% 21.87% 17.99%
SINGLE FEMALE 18.01% 16.29% 14.33%
MARRIED 32.40% 35.88% 42.43%
PREVIOUSLY MARRIED MALE 10.33% 9.81% 8.75%
PREVIOUSLY MARRIED FEMALE 16.02% 16.16% 16.50%
HOUSEHOLDS WITH CHILDREN 1,898 16,447 47,407
MARRIED COUPLE FAMILY 57.06% 56.97% 60.23%
OTHER FAMILY-MALE HEAD 8.36% 7.77% 7.11%
OTHER FAMILY-FEMALE HEAD 32.66% 33.74% 31.20%
NON FAMILY 1.93% 1.52% 1.46%
1997 ESTIMATED POPULATION BY AGE 22,056 173,803 446,764
UNDER 5 YEARS 5.58% 6.50% 7.17%
5 TO 9 YEARS 4.43% 5.32% 6.09%
10 TO 14 YEARS 3.83% 4.55% 5.28%
15 TO 17 YEARS 2.41% 2.86% 3.24%
18 TO 20 YEARS 2.53% 3.47% 3.12%
21 TO 24 YEARS 6.16% 6.46% 5.81%
25 TO 29 YEARS 10.00% 8.40% 7.56%
30 TO 34 YEARS 11.97% 9.69% 8.81%
35 TO 39 YEARS 14.34% 11.63% 10.35%
40 TO 49 YEARS 18.32% 17.19% 15.70%
50 TO 59 YEARS 7.00% 7.82% 8.56%
60 TO 64 YEARS 2.99% 3.48% 3.96%
65 TO 69 YEARS 2.88% 3.48% 4.16%
70 TO 74 YEARS 2.24% 2.72% 3.30%
75 + YEARS 5.31% 6.45% 6.89%
MEDIAN AGE 36.08 36.18 36.41
AVERAGE AGE 37.15 37.40 37.73
<PAGE>
Tue Jul 8, 1997 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1997 ESTIMATED FEMALE POP. BY AGE 10,856 86,030 228,739
UNDER 5 YEARS 5.70% 6.55% 6.98%
5 TO 9 YEARS 4.53% 5.52% 6.15%
10 TO 14 YEARS 3.91% 4.61% 5.20%
15 TO 17 YEARS 2.27% 2.72% 2.99%
18 TO 20 YEARS 2.65% 3.62% 3.09%
21 TO 24 YEARS 6.29% 6.41% 5.70%
25 TO 29 YEARS 9.93% 7.95% 7.14%
30 TO 34 YEARS 11.67% 9.23% 8.36%
35 TO 39 YEARS 12.81% 10.46% 9.45%
40 TO 49 YEARS 17.42% 16.07% 15.01%
50 TO 59 YEARS 6.67% 7.53% 8.61%
60 TO 64 YEARS 2.99% 3.58% 4.15%
65 TO 69 YEARS 3.26% 3.91% 4.55%
70 TO 74 YEARS 2.68% 3.05% 3.60%
75 + YEARS 7.23% 8.80% 9.03%
FEMALE MEDIAN AGE 36.19 36.62 37.32
FEMALE AVERAGE AGE 38.12 38.64 39.19
POPULATION BY HOUSEHOLD TYPE 20,656 160,159 409,557
FAMILY HOUSEHOLDS 56.24% 62.13% 70.85%
NON-FAMILY HOUSEHOLDS 43.46% 35.61% 26.90%
GROUP QUARTERS 0.30% 2.26% 2.25%
HOUSEHOLDS BY TYPE 11,328 80,525 186,387
SINGLE MALE 25.54% 24.01% 18.46%
SINGLE FEMALE 27.51% 25.07% 22.51%
MARRIED COUPLE 23.88% 27.92% 35.70%
OTHER FAMILY-MALE HEAD 2.95% 3.10% 3.43%
OTHER FAMILY-FEMALE HEAD 8.15% 9.97% 11.64%
NON FAMILY-MALE HEAD 7.29% 6.18% 5.02%
NON FAMILY-FEMALE HEAD 4.69% 3.75% 3.23%
POPULATION BY URBAN VS. RURAL 20,499 159,925 409,385
URBAN 100.00% 100.00% 100.00%
RURAL 0.00% 0.00% 0.00%
<PAGE>
Tue Jul 8, 1997 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BAS 8,866 66,517 170,851
WORKING WITH CHILD 0 - 5 4.44% 4.37% 4.77%
NOT WORKING WITH CHILD 0 - 5 0.20% 0.44% 0.37%
NOT IN LABOR FORCE WITH CHILD 0 - 2.16% 3.11% 3.21%
WORKING WITH CHILD 6 - 17 5.09% 6.96% 8.38%
NOT WORKING WITH CHILD 6 - 17 0.52% 0.51% 0.56%
NOT IN LAB. FORCE WITH CHILD 6 - 1.57% 2.30% 2.55%
WORKING WITH CHILD 0 - 5 & 6 - 18 1.95% 2.52% 3.04%
NOT WORKING WITH CHILD 0-5 & 6-18 0.06% 0.39% 0.39%
NOT IN LAB. FORCE W/CHILD 0-5 &6- 2.15% 2.45% 2.29%
WORKING WITH NO CHILDREN 52.97% 42.33% 39.25%
NOT WORKING WITH NO CHILDREN 3.29% 2.59% 2.22%
NOT IN LAB. FORCE WITH NO CHILD. 25.60% 32.05% 32.96%
HH BY AGE BY POVERTY STATUS 11,243 80,301 186,662
ABOVE POVERTY UNDER AGE 65 71.97% 64.39% 65.10%
ABOVE POVERTY AGE 65 + 13.17% 16.38% 18.41%
BELOW POVERTY UNDER AGE 65 11.96% 15.07% 12.95%
BELOW POVERTY AGE 65 + 2.90% 4.16% 3.54%
POPULATION 16+ BY EMPLOYMENT STATUS 17,576 131,952 328,396
EMPLOYED IN ARMED FORCES 0.25% 0.10% 0.26%
EMPLOYED CIVILIANS 69.41% 63.25% 62.06%
UNEMPLOYED CIVILIANS 4.58% 4.75% 4.60%
NOT IN LABOR FORCE 25.77% 31.90% 33.08%
POPULATION 16+ BY OCCUPATION 12,199 83,459 203,794
EXECUTIVE AND MANAGERIAL 15.41% 14.11% 13.39%
PROFESSIONAL SPECIALTY 21.17% 18.99% 17.42%
TECHNICAL SUPPORT 4.20% 3.91% 3.90%
SALES 10.76% 11.41% 11.17%
ADMINISTRATIVE SUPPORT 14.71% 16.32% 17.18%
SERVICE: PRIVATE HOUSEHOLD 0.16% 0.50% 0.49%
SERVICE: PROTECTIVE 1.09% 1.05% 1.23%
SERVICE: OTHER 14.46% 14.84% 14.23%
FARMING FORESTRY & FISHING 0.80% 1.08% 1.13%
PRECISION PRODUCTION & CRAFT 6.05% 6.64% 7.87%
MACHINE OPERATOR 4.74% 4.61% 4.79%
TRANS. AND MATERIAL MOVING 3.39% 3.21% 3.46%
LABORERS 3.05% 3.33% 3.74%
<PAGE>
Tue Jul 8, 1997 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 3,953 33,388 95,865
NO WORKERS 15.58% 16.84% 15.29%
ONE WORKER 26.82% 28.06% 29.15%
TWO WORKERS 50.71% 47.34% 45.94%
THREE + WORKERS 6.88% 7.76% 9.61%
HISPANIC POPULATION BY TYPE 20,656 160,159 409,557
NOT HISPANIC 76.02% 75.34% 76.05%
MEXICAN 16.84% 16.60% 16.66%
PUERTO RICAN 0.29% 0.23% 0.21%
CUBAN 0.23% 0.12% 0.10%
OTHER HISPANIC 6.62% 7.71% 6.99%
1997 HISPANICS BY RACE: BASE 6,202 47,795 117,946
WHITE 36.08% 38.90% 38.23%
BLACK 0.58% 1.02% 1.33%
ASIAN 0.48% 0.82% 0.76%
OTHER 62.86% 59.25% 59.68%
POPULATION BY TRANSPORTATION TO WORK 12,133 82,038 200,571
DRIVE ALONE 67.28% 62.94% 67.40%
CAR POOL 10.34% 11.56% 12.85%
PUBLIC TRANSPORTATION 11.67% 10.35% 8.31%
DRIVE MOTORCYCLE 0.07% 0.23% 0.17%
WALKED ONLY 4.25% 8.52% 5.98%
OTHER MEANS 2.44% 2.27% 1.67%
WORKED AT HOME 3.96% 4.12% 3.62%
POPULATION BY TRAVEL TIME TO WORK 12,133 82,038 200,571
UNDER 10 MINUTES / WORK AT HOME 14.67% 17.61% 16.17%
10 TO 29 MINUTES 66.19% 61.88% 61.34%
30 TO 59 MINUTES 16.11% 17.34% 19.28%
60 TO 89 MINUTES 2.04% 1.82% 1.87%
90+ MINUTES 0.98% 1.35% 1.33%
AVERAGE TRAVEL TIME IN MINUTES 18.77 19.07 19.71
HOUSEHOLDS BY NO. OF VEHICLES 11,352 80,582 186,436
NO VEHICLES 19.38% 23.47% 17.25%
1 VEHICLE 50.41% 43.44% 42.10%
2 VEHICLES 23.85% 24.48% 29.36%
3+ VEHICLES 6.36% 8.61% 11.29%
ESTIMATED TOTAL VEHICLES 13,449 96,667 255,340
<PAGE>
Tue Jul 8, 1997 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 15,485 113,424 282,221
ELEMENTARY (0-8) 6.39% 8.25% 8.25%
SOME HIGH SCHOOL (9-11) 12.14% 13.37% 13.94%
HIGH SCHOOL GRADUATE (12) 17.58% 21.60% 24.10%
SOME COLLEGE (13-15) 22.72% 19.66% 20.44%
ASSOCIATES DEGREE ONLY 4.35% 4.82% 4.97%
BACHELORS DEGREE ONLY 23.30% 20.31% 17.89%
GRADUATE DEGREE 13.52% 12.00% 10.41%
POPULATION ENROLLED IN SCHOOL 4,364 36,670 95,096
PUBLIC PRE- PRIMARY 2.64% 3.42% 4.20%
PRIVATE PRE- PRIMARY 3.31% 3.07% 3.09%
PUBLIC ELEM/HIGH 41.74% 46.22% 51.19%
PRIVATE ELEM/HIGH 6.03% 6.70% 7.86%
ENROLLED IN COLLEGE 46.28% 40.58% 33.67%
HOUSING UNITS BY OCCUPANCY STATUS 13,191 92,857 211,235
OCCUPIED 85.87% 86.72% 88.24%
VACANT 14.13% 13.28% 11.76%
VACANT UNITS 1,863 12,332 24,848
FOR RENT 68.17% 64.64% 60.70%
FOR SALE ONLY 8.73% 10.49% 13.77%
SEASONAL 2.16% 2.33% 1.99%
OTHER 20.94% 22.54% 23.54%
OWNER OCCUPIED PROPERTY VALUES 2,842 24,618 74,234
UNDER $25,000 1.11% 1.18% 1.08%
$25,000 TO $49,999 9.03% 11.06% 9.97%
$50,000 TO $74,999 31.26% 33.90% 35.14%
$75,000 TO $99,999 35.17% 24.54% 29.64%
$100,000 TO $149,999 18.32% 15.23% 14.01%
$150,000 TO $199,999 2.96% 5.77% 4.80%
$200,000 TO $299,999 0.82% 4.14% 3.05%
$300,000 TO $399,999 0.37% 2.00% 1.13%
$400,000 TO $499,999 0.20% 0.89% 0.46%
$500,000 + 0.75% 1.30% 0.71%
MEDIAN PROPERTY VALUE $82,812 $97,162 $89,405
TOTAL RENTAL UNITS 7,390 49,275 96,811
MEDIAN RENT $324 $322 $339
<PAGE>
Tue Jul 8, 1997 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 11,328 80,525 186,387
1 PERSON UNITS 53.05% 49.07% 40.97%
2 PERSON UNITS 28.29% 28.46% 30.65%
3 PERSON UNITS 9.62% 10.48% 12.68%
4 PERSON UNITS 5.02% 6.84% 8.93%
5 PERSON UNITS 2.34% 3.00% 3.96%
6 PERSON UNITS 0.95% 1.23% 1.61%
7 + UNITS 0.74% 0.94% 1.20%
YEAR ROUND UNITS IN STRUCTURE 13,191 92,857 211,235
SINGLE UNITS DETACHED 31.67% 37.43% 47.38%
SINGLE UNITS ATTACHED 6.89% 5.34% 6.01%
DOUBLE UNITS 7.55% 4.55% 4.18%
3 TO 9 UNITS 13.69% 10.90% 9.73%
10 TO 19 UNITS 12.51% 10.09% 8.52%
20 TO 49 UNITS 13.94% 14.42% 10.89%
50 + UNITS 12.68% 15.96% 11.75%
MOBILE HOME OR TRAILER 0.12% 0.31% 0.64%
ALL OTHER 0.94% 1.00% 0.90%
SINGLE/MULTIPLE UNIT RATIO 0.64 0.76 1.18
HOUSING UNITS BY YEAR BUILT 11,352 80,582 186,436
BUILT 1989 TO MARCH 1990 0.00% 0.14% 0.32%
BUILT 1985 TO 1988 2.99% 2.81% 3.20%
BUILT 1980 TO 1984 0.97% 5.00% 4.99%
BUILT 1970 TO 1979 6.77% 9.29% 11.60%
BUILT 1960 TO 1969 18.38% 14.54% 14.94%
BUILT 1950 TO 1959 10.90% 18.15% 24.90%
BUILT 1940 TO 1949 7.69% 11.83% 11.99%
BUILT 1939 OR EARLIER 52.31% 38.23% 28.06%
<PAGE>
Tue Jul 8, 1997 Page 1
CUSTOM SUMMARY REPORT
(RETAIL TRADE POTENTIAL REPORT - CURRENT YEAR SALES BY STORE TYPE)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
TOTAL RETAIL SALES $234 $1,722 $4,712
APPAREL & ACCESSORY STORES $15 $109 $269
AUTOMOTIVE DEALERS $34 $253 $846
AUTOMOTIVE & HOME SUPPLY STORES $3 $23 $63
DRUG & PROPRIETARY STORES $6 $41 $108
EATING & DRINKING PLACES $38 $272 $671
FOOD STORES $40 $296 $816
FURNITURE & HOME FURNISHINGS STORES $11 $78 $190
HOME APPLIANCE, RADIO, & T.V. STORES $11 $78 $206
GASOLINE SERVICE STATIONS $13 $96 $260
GENERAL MERCHANDISE $20 $152 $468
DEPARTMENT STORES $18 $134 $406
(INCLUDING LEASED DEPTS.)
HARDWARE, LUMBER & GARDEN STORES $10 $73 $207
($'S IN MILLIONS)
<PAGE>
Tue Jul 8, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-02, HH 80-02, INC 80-02)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
W ALAMEDA AVE & BROADWAY
DENVER CITY, CO COORD: 39:42.67 104:59.23
- --------------------------------------------------------------------------------
1.00 MILE 3.00 MILE 5.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POP_80: TOTAL 22,621 175,392 435,754
POP_90: TOTAL 20,656 160,159 409,557
POP_97: TOTAL (EST.) 22,056 173,803 446,764
POP_02: TOTAL (PROJ.) 23,355 185,821 476,956
HH_80: TOTAL 11,994 85,125 190,757
HH_90: TOTAL 11,328 80,525 186,387
HH_97: TOTAL (EST.) 10,970 80,662 208,531
HH_02: TOTAL (PROJ.) 10,025 79,250 222,925
INC_80: PER CAPITA (EST.) $8,484 $8,365 $8,390
INC_90: PER CAPITA $16,392 $16,177 $15,158
INC_97: PER CAPITA (EST. $22,961 $21,571 $22,001
INC_02: PER CAPITA (PROJ $28,969 $26,319 $29,413
HH_80_BY INCOME_79: MEDIAN $43,859 $0 $0
HH_90_BY INCOME_89: MEDIAN $21,965 $21,715 $23,890
HH_97_BY INCOME: MEDIAN $29,765 $29,274 $31,521
HH_02_BY INCOME: MEDIAN $39,874 $34,700 $38,769
HH_80_BY INCOME_79: AVERAGE $16,000 $17,236 $19,165
HH_90 BY INCOME_89: AVERAGE $29,725 $31,828 $32,844
HH_97_BY INCOME: AVERAGE $48,453 $49,642 $50,335
HH_02_BY INCOME: AVERAGE $67,917 $66,617 $67,260
<PAGE>
Addenda
================================================================================
Cushman and Wakefield Investor Survey
================================================================================
<PAGE>
3:08 PM on 7/11/97
INVESTOR SURVEY
Cushman & Wakefield Valuation Advisory Services
Summer 1996
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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
-------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.6% 10.3% 13.0% 13.6% 3.8% 4.1% 3.5% 3.8% 7.8 9.1
-------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 9.3% 9.8% 9.3% 9.8% 11.8% 12.2% 3.6% 3.9% 3.5% 3.8% 8.3 9.5
-----------------------------------------------------------------------------------------------------------------------------
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
Class B - Leased Asset 10.1% 10.6% 9.6% 10.4% 12.9% 13.3% 3.9% 4.2% 3.6% 3.9% 8.0 9.7
-----------------------------------------------------------------------------------------------------------------------------
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
Class A - Value Added 9.3% 10.0% 9.5% 10.3% 12.8% 13.6% 3.9% 4.1% 3.6% 3.8% 7.3 8.8
-----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 B - Value Added 10.5% 10.9% 10.1% 10.9% 14.5% 15.3% 3.9% 4.2% 3.4% 3.7% 7.6 8.6
-----------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------------
Suburban 9.2% 9.8% 9.6% 10.1% 12.9% 13.5% 3.6% 4.1% 3.4% 3.6% 7.7 8.7
-------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 8.8% 9.6% 9.4% 10.0% 11.2% 11.7% 3.8% 4.1% 3.6% 3.7% 8.8 9.6
-----------------------------------------------------------------------------------------------------------------------------
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
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
Class B - Leased Asset 9.6% 10.1% 9.7% 10.2% 12.1% 12.6% 3.7% 4.1% 3.5% 3.6% 8.5 9.5
-----------------------------------------------------------------------------------------------------------------------------
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% 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
</TABLE>
<PAGE>
3:08 PM on 7/ll/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 - Value Added 9.0% 9.7% 9.5% 10.1% 13.6% 14.6% 3.5% 4.1% 3.5% 3.7% 6.9 7.8
-----------------------------------------------------------------------------------------------------------------------------
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
Class B - Value Added 9.5% 9.8% 9.9% 10.4% 14.6% 15.3% 3.3% 3.9% 3.2% 3.4% 8.9 7.8
-----------------------------------------------------------------------------------------------------------------------------
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
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
INDUSTRIAL
-------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.2% 9.5% 9.9% 10.3% 11.3% 11.4% 3.2% 3.7% 3.3% 3.7% 9.5 10.2
-------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 8.9% 9.3% 9.5% 9.9% 10.9% 11.1% 3.3% 3.6% 3.3% 3.6% 9.8 10.1
-----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 B - Leased Asset 9.2% 9.4% 9.8% 10.0% 11.0% 11.0% 3.2% 3.6% 3.3% 3.7% 9.7 10.2
-----------------------------------------------------------------------------------------------------------------------------
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
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
Class A - Value Added 9.3% 9.6% 9.9% 10.4% 11.5% 11.5% 3.3% 3.8% 3.3% 3.8% 9.3 10.3
-----------------------------------------------------------------------------------------------------------------------------
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
Class B - Value Added 9.5% 9.8% 10.2% 10.7% 11.8% 11.8% 3.3% 3.8% 3.3% 3.8% 9.3 10.3
-----------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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>
-------------------------------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
RETAIL
-------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.5% 10.1% 10.0% 10.7% 13.2% 13.7% 3.2% 3.5% 3.5% 3.8% 8.5 9.1
-------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 9.4% 9.9% 10.0% 10.4% 12.1% 12.4% 3.2% 3.4% 3.6% 3.8% 8.8 9.4
-----------------------------------------------------------------------------------------------------------------------------
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
9.8% 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
Class B - Leased Asset 9.5% 10.1% 10.3% 11.1% 12.3% 12.3% 2.9% 3.3% 3.6% 4.0% 8.8 9.5
-----------------------------------------------------------------------------------------------------------------------------
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%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 - Value Added 9.5% 10.2% 9.6% 10.4% 14.0% 15.0% 3.3% 3.6% 3.3% 3.6% 8.2 8.8
-----------------------------------------------------------------------------------------------------------------------------
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
Class B - Value Added 9.7% 10.3% 10.0% 10.9% 14.3% 15.3% 3.3% 3.6% 3.3% 3.6% 8.2 8.8
-----------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
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
-----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 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
- ------------------------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------------------------
Regional Malls 9.1% 9.4% 9.3% 9.9% 13.4% 13.6% 3.2% 3.4% 3.6% 3.8% 8.5 8.7
----------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 8.0% 8.2% 8.3% 8.7% 11.5% 11.8% 3.3% 3.5% 3.6% 3.7% 9.0 9.6
--------------------------------------------------------------------------------------------------------------------------------
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
Class B - Leased Asset 9.4% 9.5% 9.5% 10.0% 13.8% 13.8% 3.1% 3.3% 3.9% 4.0% 8.3 8.3
--------------------------------------------------------------------------------------------------------------------------------
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
Class A - Value Added 8.9% 9.3% 9.3% 10.0% 13.5% 13.8% 3.3% 3.5% 3.5% 3.8% 9.0 9.0
--------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 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
Class B - Value Added 10.2% 10.6% 10.2% 10.7% 14.8% 15.0% 3.2% 3.4% 3.4% 3.6% 7.8 7.8
--------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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>
----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail 8.3% 9.3% 9.2% 10.6% 10.9% 11.0% 3.6% 4.0% 3.6% 4.0% 10.3 10.9
----------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 7.8% 8.8% 8.3% 9.5% 10.5% 11.0% 3.8% 4.0% 3.8% 4.0% 8.0 10.5
--------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
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
--------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
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
--------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
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
--------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
RESIDENTIAL
----------------------------------------------------------------------------------------------------------------------------------
Apartments 8.7% 9.2% 9.5% 10.2% 11.3% 11.8% 3.4% 4.3% 3.2% 3.7% 7.9 9.1
----------------------------------------------------------------------------------------------------------------------------------
Class A - Leased Asset 8.7% 9.2% 9.1% 9.7% 11.4% 11.8% 3.3% 3.8% 3.3% 3.7% 8.2 8.8
--------------------------------------------------------------------------------------------------------------------------------
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
Class B - Leased Asset 8.9% 9.6% 9.6% 10.4% 11.0% 11.6% 3.1% 4.0% 3.1% 3.8% 9.5 10.3
--------------------------------------------------------------------------------------------------------------------------------
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
Class A - Value Added 8.5% 8.8% 9.3% 10.0% 11.3% 11.7% 3.5% 4.7% 3.2% 3.7% 7.0 8.7
--------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
<PAGE>
3:08 PM on 7/11/97
<TABLE>
<CAPTION>
=================================================================================================================================
Capitalization Rates Internal Growth Rate 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 B - Value Added 8.7% 9.2% 9.8% 10.7% 11.7% 12.3% 3.5% 4.7% 3.2% 3.7% 7.0 8.7
-----------------------------------------------------------------------------------------------------------------------------
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
</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
<PAGE>
Addenda
================================================================================
Appraiser's Qualifications
================================================================================
<PAGE>
QUALIFICATIONS
================================================================================
Dean R. Paauw, MAI
Professional Affiliations
Member of the Appraisal Institute (MAI Designation)
State of Colorado Certified General Appraiser (ID # CG01313501)
State of Utah Certified General Appraiser (ID # CG00046420)
State of New Mexico Certified General Appraiser (ID# 001282-G)
Real Estate Experience
Associate Director, Cushman & Wakefield of Colorado, Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. Member of Cushman & Wakefield's Hospitality
Valuation Group and Retail Valuation Group. April 1988 to present.
Associate Appraiser, James Real Estate Services, Denver, Colorado. 1986 to
1988.
Researcher, Van Court and Company, Denver, Colorado. 1985 to 1986.
Internship, Markland Development, Inc., Grand Rapids, Michigan. 1984.
Experience includes appraisal of the following types of properties:
Office Buildings Subdivisions
Hotels/Motels Special Purpose
Athletic Clubs Shopping Centers/Regional Malls
Industrial Facilities Leasehold/Leased Fee Interest
Vacant Land Apartments
<PAGE>
Qualifications
================================================================================
Dean R. Paauw, MAI
Education
Masters of Business Administration in Real Estate and Construction
Management, 1986.
University of Denver
Denver, Colorado
Bachelor of Arts in Business Administration, 1984.
Calvin College
Grand Rapids, Michigan
Appraisal Institute Courses:
Course 110 - Real Estate Appraisal Principles
Course 210 - Case Studies in Real Estate Valuation
Course 310 - Basic Income Capitalization
Course 510 - Advanced Income Capitalization
Course 410 - Standards of Professional Practice
Course 540 - Report Writing and Valuation Analysis
Fair Lending and the Appraiser (Continuing Education)
Basic Valuation Procedures
Certified in the Appraisal Institute's voluntary program of continuing
education for its designated members.
<PAGE>
================================================================================
COMPLETE APPRAISAL OF REAL PROPERTY
Town Center Prado
Barrett Parkway at Bells Ferry Road
Atlanta, Cobb County, Georgia
================================================================================
IN A SUMMARY REPORT
As of July 3 1997
Prepared For:
Master Realty, Inc.
Managing Member of Community Centers I L.L.C.
1180 Avenue of the Americas
New York, NY 10036-8401
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Prepared By:
Cushman & Wakefield of Georgia, Inc.
3300 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
<PAGE>
Cushman & Wakefield of Georgia, Inc.
3300 One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309
(404) 875-1000
August 13,1997
Mr. Brian Summers
Vice President
Master Realty, Inc.
Managing Member of Community Centers I L.L.C.
1180 Avenue of the Americas
New York, NY 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Re: Complete Appraisal of Real Property
Town Center Prado
Barrett Parkway at Bells Ferry Road
Atlanta, Cobb County, Georgia
Dear Sirs:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our Complete Appraisal
estimating the Market Value of the Leased Fee Estate in the above referenced
real property. For this assignment, we are providing an estimate of the Market
Value of the subject property. The results of our analysis are being presented
in this Summary Report.
The subject of this appraisal is a one-story, non-enclosed,
power/super-community shopping center that was built in 1995 and 1997. It
contains a total gross leasable area of 317,978 square feet and is anchored by
Publix, Home Place, Stein Mart, Sportslife, etc. At the time of inspection, it
was effectively 97.3 percent occupied based on signed and highly likely leases.
The site, including the two vacant outparcels, contains about 43.97 acres. The
two vacant outparcels are not included in the value reported below.
<PAGE>
Mr. Brian Summers
Vice President
Master Realty, Inc.
Managing Member of Community Centers I L.L.C.
August 13,1997
Page 2
As specified in the Letter of Engagement, the value opinion reported
herein 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 (USPAP). The results are being conveyed in a Summary Report according
to our agreement. 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.
This report has been prepared for Master Realty, Inc. and Lehman Brothers,
Inc., ("Clients") and it is intended only for the specified use of the Clients.
It may not be distributed to or relied upon by other persons or entities without
the written permission of the appraiser.
The property was inspected by Luten L. Teate, MAI. The report has been
prepared by Luten L. Teate, MAI.
As a result of our analysis, we have formed an opinion that the Market
Value of the Leased Fee Estate in the referenced property, and subject to the
assumptions, limiting conditions, certifications, and definitions, as of July 3
1997, the date of inspection, was:
THIRTY THREE MILLION DOLLARS
$33,000,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda. Other relevant data has been
retained in our files.
Respecifully submitted,
CUSHMAN & WAKEFIELD OF GEORGIA, INC.
/s/ Luten L. Teate, MAI
Luten L. Teate, MAI
Associate Director
Certified Real Estate Appraiser Georgia No. CGOO1389
/krh
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Town Center Prado
Property Type: Power/Super-Community Shopping Center
Location: Barrett Parkway at Bells Ferry Road
Cobb County, Georgia
Interest Appraised: Leased Fee Estate
Date of Value: July 3, 1997
Date of Inspection: July 3, 1997
Ownership: Community Centers I, L.L.C.
Land Area: 39.8 acres (total center site excluding
two vacant outparcels)
Zoning: GD (General Commercial)
Highest and Best Use
As Though Vacant: Retail use
As Improved: Continued use as a
power/super-community shopping center.
Improvements
Description: One-story, non-enclosed,
power/super-community shopping center
building of masonry construction that
has a total gross leasable
area of 317,978 square feet.
Year Built/Expanded: 1995/1997
Gross Building Area: 317,978 SF
CUSHMAN &
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
================================================================================
GLA Breakdown - Town Center Prado
- --------------------------------------------------------------------------------
Tenant Type GLA (sf) %
Anchors
Homeplace 53,000 16.7%
Sport Shoe 15,000 4.7%
Coomer's Crafts 14,500 4.6%
Zainy Brainy 13,500 4.2%
Publix 56,146 17.7%
Stein Mart 36,538 11.5%
Barnes & Noble 19,978 6.3%
Outparcel Buildings
Sportslife 40,000 12.6%
Blockbuster/Atlanta Bread 11,000 3.5%
Shops 58,316 18.3%
-------
Total 317,978 100.0%
================================================================================
Income Capitalization Approach
Assumptions-Discounted Cash Flow
Current Occupancy: 97.3% (effective based on leased spaces)
Forecasted Stabilized Occupancy: 93-95% (of shop space)
Holding Period: 10 years
Growth Rate Assumptions
Sales Growth: 1.5% in 1997, 3% per year thereafter
Rent Growth: 1.5% in 1997, 3% per year thereafter
Expense Growth: 3.0%
Tax Growth: 3.0%
Tenant Alterations
New Tenants: $7.00
Renewal Tenants: $1.00
Leasing Commissions
New Tenants: 4.0%
Renewal Tenants: 2.0%
Tenant Renewal Probability: 80%
Cost of Sale at Reversion: 2.0%
CUSHMAN &
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Investment Rates
Going-In Capitalization Rate: 10.0%
Terminal Capitalization Rate: 10.0%
Discount Rate: 11.25% to 11.5%
Market Value Indicators
Cost Approach: N/A
Sales Comparison Approach: $31,800,000-$33,400,000
Income Capitalization Approach
Discounted Cash Flow: $32,800,000 to $33,300,000
Direct Capitalization: $33,000,000
Value Conclusion: $33,000,000
Resulting Indicators
Value Per Sq/Ft Owned GLA: $103.78
Net Operating Income (FY 1998): $3,297,485
Implicit Capitalization Rate: 10.0%
Exposure Time Implicit in
Market Value Conclusion: Not to Exceed 12 Months
Special Assumptions Affecting Valuation:
The following special assumptions have been considered within the
assignment at hand. These assumptions are in addition to the assumptions and
limiting conditions which follow at the end of the report.
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll, budgets, sales
reports and other property specific information. We were also
provided with a Pro-Ject diskette for the property which ownership
has portrayed as containing the actual lease terms. It is noted that
we audited actual lease documents for several of the major tenants
during the course of our initial Complete Appraisal in February
1996. Based upon the current information provided, minor
discrepancies were noted which we have reconciled to our
satisfaction.
2. We have made a visual inspection of the subject property and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. Our cash flow analysis and valuation has recognized that all signed
leases and pending leases with a high probability of coming to
fruition are signed and implemented according to the terms provided.
Such leases are identified within the body of this report.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
4. The forecasts of income, expenses, and absorption of vacant space
included herein 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.
5. We did not measure the improvements but relied on the GLA shown in
the rent roll provided by management. The tenant GLAs , shown in the
rent roll, were cross-checked against selected leases/lease briefs.
6. We inspected a representative sample of the retail spaces and we
believe that the spaces we inspected are representative of all of
the space as to overall quality and condition except where otherwise
noted.
7. We did not observe any hazardous materials during our inspection.
The appraiser has no knowledge of the existence of such materials on
or in the property. The appraiser, however, is not qualified to
detect such substances. The presence of substances such as asbestos,
urea-formaldehyde foam insulation, or other potentially hazardous
materials may have an affect on the value of the property. The value
estimate is predicated on the assumption that there is no such
materials on or in the property that would cause a loss in value. No
responsibility is assumed for any such conditions, or for any
expertise or engineering knowledge required to discover them. The
client is urged to retain an expert in this field to make this
determination.
8. We did not inspect the roof of the building or make a detailed
inspection of the mechanical systems. The appraisers are not
qualified to warrant the adequacy or mechanical condition of these
components. The client is urged to retain an expert in this field.
9. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
Special Risk Factors
1. The pending leases that were considered in this analysis may not
actually be signed or are signed with terms that are significantly
different than we were told.
Positive Factors
1. Well known anchor tenants
2. Excellent location at the intersection of two heavily traveled local
service roads
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPH OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
View From Barrett Parkway
<PAGE>
Photograph of Subject Property
================================================================================
[GRAPHIC OMITTED]
Building Anchored by Party City
Building Anchored by Barnes & Noble
<PAGE>
Photograph of Subject Property
================================================================================
[GRAPHIC OMITTED]
Free-Standing Blockbuster on Outparcel
Vacant Outparcels
<PAGE>
Photograph of Subject Property
================================================================================
[GRAPHIC OMITTED]
Stein Mart (Under Construction)
Free-Standing Sportslife
<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
DEMOGRAPHIC AND ECONOMIC ANALYSIS .......................................... 7
NEIGHBORHOOD ANALYSIS ...................................................... 12
MARKET ANALYSIS ............................................................ 16
PROPERTY DESCRIPTION ....................................................... 24
Site Description ......................................................... 24
Improvement Description .................................................. 24
Property Taxes & Assessments ............................................. 25
Zoning ................................................................... 25
HIGHEST AND BEST USE ....................................................... 26
Highest and Best Use of Site As Though Vacant ............................ 26
Highest and Best Use of Property As Improved ............................. 26
VALUATION PROCESS 27
SALES COMPARISON APPROACH .................................................. 28
INCOME CAPITALIZATION APPROACH ............................................. 33
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 49
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 52
CERTIFICATION OF APPRAISAL ................................................. 54
ADDENDA .................................................................... 55
Legal Description
Rent Roll and Summary of Recent Leases
National Database of Sales
Operating History and Budget Chart
ULI Database of Operating Results for Power Centers
Lease Expiration Chart - Pro-Ject
Competitive Property Photographs
Local Sale Comparables
Appraiser Qualifications
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is a one-story, non-enclosed,
power/super-community shopping center that was built in 1995 and 1997. The 1997
expansion included a Stein Mart and a free-standing Blockbuster anchored retail
building in 1997. The center contains a total gross leasable area of 317,978
square feet and is anchored by a Publix, Home Place, Stein Mart and Sportslife,
etc. The property is identified by the Cobb County Tax Assessor's office as
Parcel Number 16-0583-001 (improved portion).
The subject site is 39.8 acres (excluding the vacant outparcels). The
legal description is in the Addenda. The site is improved with the shopping
center structure and paved parking/truck loading areas. It has good access and
exposure.
Property Ownership and Recent History
The subject property is currently owned by Community Centers, I, L.L.C. It
was purchased in 1996 as part of a portfolio and we are told that individual
prices were not allocated.
Leases are currently in-place with a number of tenants at the property's
"as is" condition. The leases and operating agreements that are in place
encumber the operation of the property.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the Market Value of the
Leased Fee Estate in the subject property as it existed on the date of
inspection. The function of this appraisal is for a securitized financing
transaction being arranged by Lehman Brothers, Inc.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the subject property, a sampling of the anchor stores and
smaller shops, and its surrounding environs;
o Interviewed representatives of current ownership, leasing personnel,
and representatives of the management company;
o Reviewed leasing policy, concessions, tenant build-out allowances,
and recently negotiated rental rates, as well as forecasted
operating statements;
o Conducted market research of occupancy rates, asking rents,
concessions, and operating expenses at competing properties;
o Conducted market inquiries into recent sales of similar retail
centers to ascertain sale prices per square foot, effective gross
income multipliers, and capitalization rates;
o Determined a trade area for the subject and analyzed specific data
for the property as prepared by Equifax National Decision Systems
(ENDS);
================================================================================
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<PAGE>
Introduction
================================================================================
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based upon available market data and
current market thinking relative to growth in market rents and
market absorption;
o Developed a market value estimate of the center via the Sales
Comparison Approach;
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes;
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject Plus+ software for the purpose of discounting a forecasted
net income stream into a present value of the leased fee estate for
the center;
o Reconciled the value indications and concluded a final value
estimate; and
o Prepared a Complete Appraisal of the subject property with the
results conveyed in this summary narrative report in accordance with
Standards Rule 2-2(b) of USPAP. A summary appraisal format provides
a summary of the data, analyses, and conclusions rather than
presenting a self-contained narrative within the report.
Other pertinent data and information is retained in our files.
Date of Value and Property Inspection
Our Market Value date is July 3,1997. On that date, Luten L. Teate, MAI,
inspected the property and its environs.
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
================================================================================
-2-
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
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 our findings, we conclude that an appropriate exposure time for
this property would by 12 months or less.
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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
We have been provided with a complete metes and bounds legal description
of the property. It is in the Addenda.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Introduction
================================================================================
Competency Provision
We are aware of the competency provision of the Uniform Standards of
Professional Appraisal Practice (USPAP). The authors of this report meet these
standards. Luten L. Teate, MAI inspected the property, researched and analyzed
pertinent market information, wrote, and reviewed the appraisal report. Luten L.
Teate, MAI have extensive appraisal experience with retail properties
nationally.
It is our opinion that we are fully competent to perform this appraisal,
due to the fact that:
1. We have full knowledge and experience in the nature of this
assignment;
2. All necessary and appropriate steps have been taken in order to
complete the assignment competently; and
3. We do not lack any knowledge or experience that would prohibit this
assignment to be completed in a professional, competent manner, or
where a biased or misleading opinion of value would be rendered.
================================================================================
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<PAGE>
[GRAPHIC OMITTED]
Map of Metropolitan Atlanta Area
CUSHMAN &
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<PAGE>
================================================================================
ATLANTA REGION
DEMOGRAPHIC STATISTICS COMPARISON
================================================================================
Atlanta State of
MSA Georgia United States
================================================================================
Population
1980 2,233,325 5,463,106 226,545,792
1990 2,959,950 6,478,216 248,709,872
1996 (EST.) 3,503,622 7,350,305 265,037,504
2001 (PROJ.) 3,941,898 8,045,044 277,157,184
================================================================================
Compound Annual Change
1980-1990 2.86% 1.72% 0.94%
1980-1996 2.85% 1.87% 0.99%
1996-2001 2.39% 1.82% 0.90%
================================================================================
Households
1980 789,577 1,871,652 80,389,688
1990 1,102,578 2,366,615 91,947,408
1996 (EST.) 1,349,992 2,776,699 100,130,936
2001 (PROJ.) 1,538,245 3,080,155 105,243,728
================================================================================
Compound Annual Change
1980-1990 3.40% 2.37% 1.35%
1980-1996 3.41% 2.50% 1.38%
1996-2000 2.65% 2.10% 1.00%
================================================================================
Average Household Size
1980 2.83 2.92 2.82
1990 2.68 2.74 2.70
1996 (EST.) 2.56 2.61 2.63
================================================================================
Average Household Income
1990 $44,400 $36,810 $38,453
1996 (EST.) $58,973 $47,776 $49,031
================================================================================
Compound Annual Change 4.84% 4.44% 4.13%
================================================================================
1996 Income Distribution Est.
less than $5,000 3.9% 6.1% 4.7%
$5,000-$15,000 9.6% 14.7% 15.1%
$15,000-$24,999 12.3% 15.3% 14.8%
$25,000-$34,999 12.5% 14.2% 13.8%
$35,000-$49,999 17.2% 16.7% 16.9%
$50,000-$74,999 22.0% 17.7% 18.5%
$75,000-$99,999 9.7% 6.6% 7.2%
$100,000-$149,999 6.8% 4.5% 5.0%
>$150,000 6.1% 4.1% 4.0%
================================================================================
Other Indices
Professional/Managerial Occupation 28.8% 24.6% 26.4%
Education Above High School Level 51.8% 41.3% 45.2%
================================================================================
SOURCE: Equifax National Decision Systems
================================================================================
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<PAGE>
DEMOGRAPHIC AND ECONOMIC ANALYSIS
================================================================================
Regional Analysis
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. The chart on the previous
page presents an overview of demographic and economic trends within the
subject's region as prepared by Equifax National Data Systems (ENDS).
Definition of the Region
o The Atlanta Region consists of 18 counties. The subject is in Cobb County.
Reference is made to the previous regional map.
o Atlanta is the largest incorporated area in the Atlanta Region. The city
limits of Atlanta is located mostly within Fulton County, but there is a
small section extending into neighboring Dekalb County.
o The subject is not in the Atlanta city limits.
Overview of the Atlanta Region
o Atlanta is a major financial and corporate center for the entire
southeastern United States. Its relatively low cost of living, mild
climate, excellent transportation facilities, and a variety of educational
and recreational facilities have contributed to its attractiveness as a
place to live.
o The metropolitan area has been successful at attracting corporate
relocations to the area. It also continues to be the city of choice for
many start-up companies in a variety of service and manufacturing
industries.
o Atlanta was the site of the 1994 Super Bowl and the 1996 Summer Olympic
Games.
Overview of Atlanta Real Estate Market
During the first half of the current decade, the primary objective of many
players in the Atlanta commercial real estate market was survival as the metro
area struggled through the effects of the national recession which also effected
most major markets throughout the United States. The survivors now appear to be
enjoying an Atlanta marketplace that has strongly recovered. The primary sectors
of the commercial real market: office, industrial, apartments, and retail all
experienced an oversupply during the 1980s. However, during the first part of
the decade, demand exceeded additions to supply and, as a result, both
occupancies and rents have increased. Now, available, quality space is difficult
to find.
A number of factors have contributed to the Atlanta commercial real estate
market's resurgence:
o The recovery of the nation's economy.
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Demographic and Economic Analysis
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o Activity generated by the 1996 Olympic Games.
o The mature and well-developed metropolitan transportation infrastructure
which includes:
o The strategic location at the junction of three interstate highways.
o Hartsfield International Airport which is one of the nation's busiest and
has recently completed a $305 million concourse to service international
air traffic.
o The Metropolitan Atlanta Rapid Transit Authority (MARTA) rail system which
was established in 1988 and now connects the downtown business area and
the airport to suburban office and residential locations. Reference is
made to the previous regional map which shows the MARTA lines.
o Diverse job base anchored by services, retail trade, government and
manufacturing employment.
The above factors are market fundamentals that do not completely insulate
the Atlanta area from periodic slumps in the national economy but generally
serve to mitigate their effects. Atlanta's employment diversification has also
proved to be attractive to many real estate investors. A number of recent
surveys have chosen Atlanta as one of the more popular business and residential
locations in the United States.
Population
o During the early to mid-1970s, the City of Atlanta experienced substantial
out-migration of population to the suburban areas, creating dramatic new
suburban residential and commercial retail development. The primary
directions of growth were northwest and northeast into the suburban
counties of Cobb, Gwinnett and DeKalb.
o While the population of the metropolitan area was increasing rapidly, the
City of Atlanta actually showed a 14.0 percent population decrease during
the decade of the 1970s.
o Since 1980, the city's population has stabilized and may have even
increased slightly. The suburban development trend has continued with many
outlying areas now offering their own infrastructures.
o The previous chart is based on demographic statistics and estimates
prepared by Equifax National Decision Systems (ENDS). It shows that the
population of the MSA has grown at a more rapid pace than either the state
or nation as a whole since 1980, and this trend is expected to continue
for the next 3-5 years.
Households
o Growth in households is important to both office and retail properties. It
has been found to be more important to a retail property than growth in
population because households have been found to be the primary demand
generators for retail goods. Growth in population may not always represent
growth in the number of people in the age bracket that typically purchases
retail goods. However, growth in households usually does.
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Demographic and Economic Analysis
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o The previous chart shows the MSA also experienced more rapid household
growth than either the state or nation as a whole since 1980 and this
trend is expected to continue for the near-term.
o The property being appraised is in one of the area of above average
forecasted household growth for the next 5-years.
The previous chart shows that estimated 1996 median and average household
incomes for Metropolitan Atlanta are 30.1 to 23.4 percent higher than for the
state as a whole, respectively.
Economic Base and General Conditions
The composition of Atlanta's labor force is diverse and not dominated by
manufacturing or any one industry group. The trade and services sectors of the
economy employ about 55% of the work force in the metropolitan area. A summary
of Atlanta's employment characteristics is below:
o The labor force has grown by about 16 percent, in aggregate, since 1990.
o The May, 1997 unemployment rate for the SMSA was about 3.4 percent which
is lower than the 4.1 percent for the state. These are the latest figures
as of this writing.
o The unemployment rate for the Atlanta area, has consistently been lower
than experienced by the state as a whole since 1990.
o Job growth during the latter part of the 1980s exhibited a declining trend
and was negative in 1991. However, since 1991, this trend has reversed. In
1993 through 1995, job growth was estimated at 85,300, 96,800, and 77,900
respectively. The Georgia State University Economic Forecasting Center
(EFC) estimated that the Atlanta region's economy created slower but still
impressive levels of job growth in 1996 of about 76,000. The EFC warns
that future job growth at these high levels probably can not be sustained
and forecasts only about 35,000 new jobs for 1997.
Directions of Growth
The primary directions of growth for the Atlanta area are generally
considered to be in the I-75 and 1-85 corridors both north and south of I-285.
Reference is made to the previous map.
The subject property is situated in one of the primary directions of
growth for the metropolitan area.
Conclusion
Atlanta has seen a resurgence in job growth, approaching the experience of
the mid-1980s. The economy is drive by job growth which is generated by the
airport, transportation infrastructure, and the desirable business climate.
This, along with other factors, has translated into a healthy demand for
industrial, retail and office space. The overall improvement of the
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Demographic and Economic Analysis
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Atlanta economy, together with the 1996 Olympic Games, have led to improvements
in all segments of demand.
Some recent positive and negative factors impacting Atlanta's economy are:
Positives
o The 1996 Summer Olympic Games were the largest in history, attracting
about 10,000 athletes and sold about 9 million tickets. The Olympics were
completed with a slight profit, a portion of which will be used to
construct a permanent museum at Centennial Olympic Park.
o A $213 million sports arena has been approved on the site of the Omni
Coliseum by the Fulton County Commission and the Atlanta City Commission
so the Atlanta Hawks professional basketball team will stay in the
downtown area.
o First Data Corporation (FDC), a Fortune 500 firm, is in the process of a
staged relocation of its corporate headquarters from New Jersey to
Atlanta. About 10% of FDC's 37,000 employees now work in the metro area.
o Lockheed Martin won a $700+/- million contract from the Australian Air
Force to build 12 C-130 transport planes.
o General Motors started producing vans at its Doraville assembly plant in
June 1996, after spending two years retooling the plant. Employment at the
plant has now grown to about 3,300 jobs.
o Local companies like SunTrust Bank, Delta Airlines, and Norfolk Southern
have recently announced significant hiring plans.
Negatives
o Metro Atlanta failed air quality standards set by the Clean Air Act which
has led to Federal restrictions and potential loss of road building funds.
o Georgia Pacific is in the process of an early retirement program to
eliminate about 1,400 jobs including about 160 in Atlanta.
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[GRAPHIC OMITTED]
Map of Northwest Atlanta
<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
An investor in a shopping center may have strong interest in the immediate
area and its outlook for the future. Important factors include but are not
limited to demographic trends and projections, nearby land uses/projected
trends, employment centers, and access/traffic counts. We try to address these
and other items in this section of the report. The previous two maps should aid
the reader in the following overview.
Location
o The property being appraised is in unincorporated Cobb County and
about 20 miles northwest of downtown Atlanta, Georgia. Reference is
made to the previous maps for the location of this property relative
to the region.
o The boundaries of the neighborhood are not precise but are
considered to be about one mile radius of this property which is at
the intersection of two of the primary traffic arteries in Cobb
County.
1. Barrett Parkway/Piedmont Road
2. Bells Ferry Road
Access-Traffic Counts
o The property is located at the intersection of the above two
referenced streets. The Georgia Department of Transportation shows
the following recent, bi-directional traffic counts for the
reporting stations that are closest to the subject as:
Summary of 1996 Traffic Counts
Near Town Center Prado
================================================================================
On Barrett Parkway Between Bells 25,557
Ferry Road and I-575
On Bells Ferry Road Between Chastain 9,647
Road and Barrett Parkway
Source: Georgia Department of Transportation
================================================================================
The traffic count on Barrett Parkway is considered high for a
non-interstate artery in the general area.
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Neighborhood Analysis
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Access-Other
o Our inspection of the area suggests that this neighborhood has
excellent access. Barrett Parkway intersects US 575/GA 5 about 1/2
mile west of this center. It also intersects I-75 about one mile
west of the center. Bells Ferry Road and Barrett Parkway are primary
local service arteries for the area.
o We are not aware of any planned road improvements such as widenings
or relocations that would impact access to the neighborhood.
Neighborhood Characteristics
General Overview: The neighborhood can best be described as a rural
suburban area that is developing. Over the past 15 years, the rural portions of
Cobb and neighboring counties have become popular bedroom community areas
because of their proximity to Interstate 75 which provides access to the
employment centers along I-75 and the northern portion of I-285. Retail and
other types of commercial development followed the in-migration of households to
the area. The two most prominent commercial developments in the general area
are:
a). Town Center Mall: a 1,275,000+/- square foot regional mall that was
opened in 1976 and was expanded in 1992. It has four well known
anchors: Rich's, Macy's, Parisians, Sears as well as a shop tenant
mix that targets a broad income of customers. It is about one mile
west of the property being appraised and on Barrett Parkway. A fifth
anchor store formerly occupied by Mervyn's, is vacant and being
built out for J.C. Penney's. Mervyn's closed all its Atlanta stores.
b). Barrett: a multi-use PUD containing about 1,000 acres. Development
started in 1987 and, to-date, includes industrial, multi-family,
office and retail structures. There are still about 250 acres to be
developed in the master plan. This project is located about one mile
west of the property being appraised and essentially across Barrett
Parkway from Town Center Mall.
The neighborhood now has a mixture of commercial, light industrial and
residential land uses.
a). The retail development in the area is concentrated along Barrett
Parkway and especially near major intersections, such as with I-75
and I-575. It includes the aforementioned mall, power centers,
community, neighborhood shopping centers and free-standing retail
buildings occupied by banks, fast food restaurants, and service
commercial stores.
b). The other streets in the neighborhood are predominantly residential
in nature.
In Relation to metro area Growth Pattern: As mentioned in the
Regional Analysis, there are several recognized directions of growth
for the metro area. Most are northward especially along the I-75 and
1-85 corridors. The neighborhood being examined is in one of those
corridors.
Age and History of the Area: Most improvements in the neighborhood,
both commercial and residential, appear to be 0 to 10 years old.
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Neighborhood Analysis
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Percent Built-Up: Land within the neighborhood appears to be about
70 percent built-up, overall.
We found that commercial development is only scattered along the
portion of Barrett Parkway that is east of Bells Ferry Road. The
property being appraised is now on the eastern boundary of the
intense commercial activity but we expect that development to
gradually move eastward along Barrett Parkway/Piedmont Road as sites
closer to I-75 and I-575 become more scarce.
Major Area Influences: Town Center Mall and the Barrett PUD are the
most prominent commercial improvements in the neighborhood. The
stores at the Mall, the many other retail developments, and the
office and industrial buildings in Barrett area the employment
generators in the neighborhood.
Nearby and Adjacent Uses
o North: Single-family residences along Bells Ferry Road.
o South: There is a free-standing service station at the southwest pin
corner of Barrett Parkway and Bells Ferry Road, and an older, strip
type shopping center on a site that wraps around the service
station.
o East: The Bells Ferry Elementary School is on the site directly
across Bells Ferry Road from the center being appraised.
Single-family subdivisions surround the school.
o West: There are a number of free-standing retail buildings on
frontage parcels along Barrett Parkway. These buildings are occupied
by:
House of Denmark Furniture
Burger King
Pier 1 Imports, and
Tune Up Clinic
The last two of these appear to have been developed on out-parcels
of the Home Center Village Shopping Center. This is the closest
shopping center to the Town Center Prado.
Population, Housing, Income and Employment
This type of data is not available with any degree of accuracy in a
neighborhood level. However, in a later section of the report, we discuss these
and other items for the trade area that we selected for this shopping center.
Although the trade area is somewhat larger than the neighborhood, they are
similar in most respects. That discussion is, therefore, pertinent for the
neighborhood as well.
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Neighborhood Analysis
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Special Hazards or Adverse Influences
o We are not aware of any existing or planned detrimental influences
such as land fills, noise pollution, air pollution, etc., that
adversely impact this property.
Planned Improvements/Demolition
o We are not aware of planned improvements or demolitions of
commercial properties within the neighborhood that might alter this
property's competitive position.
Conclusion
o The neighborhood appears stable and developing. Proximity to both
I-75 and I-575 give above average access to the neighborhood which
has encouraged development of the neighborhood's commercial/retail
sites. The outlook for the near-term appears good.
o This property is located on the area's predominant traffic and
commercial arteries and we found no evidence to suggest that the
prominence of this location will change.
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MARKET ANALYSIS
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Market Trends
The following chart summarizes the historical trends of the Atlanta retail
market. It shows a total inventory of about 101,500,000 square feet, a current
vacancy rate that is considered low at about 7.6 percent, and a declining trend
in that rate.
<TABLE>
<CAPTION>
==========================================================================================
The Atlanta Retail Market Historical Trends
==========================================================================================
Year Existing Vacancy Occupancy Net
Ending Sq. Ft. SF % SF % Absorption
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
1991 74,502,769 9,770,984 13.1% 64,731,785 86.9% 321,623
1992 85,686,916 9,185,490 12.1% 66,501,426 87.9% 1,769,635
1993 83,637,634 8,891,522 10.6% 74,746,112 89.4% 4,534,837
1994 85,576,400 7,809,559 9.1% 77,766,841 91.9% 3,267,416
1995 95,740,964 7,604,760 7.9% 88,136,204 92.1% 7,187,068
1996 98,796,972 7,593,671 7.7% 91,203,301 92.3% 4,767,090
2nd Qtr. 1997 101,465,267 7,744,083 7.6% 93,721,184 92.4% 948,823
Source: Jamison Research, Inc.
==========================================================================================
</TABLE>
The following chart shows recent trends and the current status of the
portion of the retail market that includes non-mall properties with a regional
draw. The subject falls into this category. In this segment of the market,
vacancy is also quite low at about 6.4 percent.
================================================================================
Atlanta's Regional Center Trends
(Non Malls)
================================================================================
Period Vacancy
Ending Existing SF Vacant SF Rate Absorption
================================================================================
1993 6,939,550 616,763 8.9% 838,830
1994 7,828,429 674,228 8.6% 409,000
1995 10,984,841 999,688 9.1% 218,150
1996 12,016,738 740,915 6.2% 1,828,685
2nd Qtr. 1997 12,002,275 768,665 6.4% -27,750
Source: Jamison Reasearch, Inc.
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Market Analysis
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The following chart focuses on the current status of the North Cobb
submarket and the regional (non-mall) portion of that submarket. It shows
similar strength in the market and an especially low vacancy rate in the
regional centers.
================================================================================
Submarket Statistics as of Second Quarter, 1997
================================================================================
Vacancy Absorption
Inventory Vacant SF Rate Sq. Ft.
================================================================================
North Cobb Submarket
14,410,289 1,165,318 8.1% 61,919
North Cobb Regional Centers
1,610,716 70,890 4.4% -27,585
- --------------------------------------------------------------------------------
Source: Jamison Research, Inc.
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Property Profile
The subject property is anchored by a number of national retail tenants,
all of which are unique to the trade area. Provided below is a summary of the
major tenants. Combined, they account for in excess of 65.6 percent of GLA.
================================================================================
Anchor Tenants % of GLA
================================================================================
Homeplace 16.7%
- --------------------------------------------------------------------------------
Sport Shoe 4.7%
- --------------------------------------------------------------------------------
Coomer's Crafts 4.6%
- --------------------------------------------------------------------------------
Zainy Brainy 4.2%
- --------------------------------------------------------------------------------
Publix 17.2%
- --------------------------------------------------------------------------------
Stein Mart 11.5%
- --------------------------------------------------------------------------------
Barnes & Noble 6.3%
- --------------------------------------------------------------------------------
SportsLife 12.6%
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Market Overview
Retail in the Town Center area consists of:
o A regional mall
o A number of power or super community centers
o Numerous free-standing buildings
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Market Analysis
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Retail Structure
The subject is in an intensely developed retail area in the northern
suburbs of metropolitan Atlanta. The focus or hub of destination shopping for
this area is the Town Center Mall. Developed in 1986 and expanded in 1993, Town
Center Mall is a super regional center with a total GLA of about 1,275,000
square feet. Anchor tenants include Rich's, Macy's, Sears, and Parisians. There
is also a vacant anchor store that was formerly occupied by Mervyn's until all
of their Atlanta stores were closed. The store is now being built out for
occupancy by J.C. Penney. There is substantial peripheral development around the
mall including free-standing restaurants, motels, strip centers, and "big box"
stores all of whose occupants are well known national franchise retailers. Some
of these include:
o Midas Muffler o Red Lobster Restaurant
o Firestone Tire Store o Shoney's Restaurant
o Pike Nursery o Kuppenheimer Clothing
o Kids R Us o Applebee's Restaurant
o Just For Feet o Circuit City
The following chart summarizes details about the area's most significant
retail properties. They include Town Center Mall and eight other shopping
centers that are in different formats. All are in the Barrett Parkway corridor
and within a one-mile radius of the subject. Photographs of these properties are
in the Addenda. The chart shows that most of these properties were constructed
within the last ten years and they, in aggregate, contain a total GLA of about
2,600,000 square feet. Overall occupancy in these centers is well above 90
percent which shows that supply and demand in this retail corridor is currently
in equilibrium.
We conclude that the subject is not the dominant retail center in its
trade area but one of a number of relatively new, well anchored, well occupied,
and well located properties.
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Market Analysis
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<TABLE>
<CAPTION>
====================================================================================================================================
Competitive Shopping Centers
====================================================================================================================================
Distance
Year Total Occupied Total From
Property Location Built GLA (SF) SF Occupancy Subject Anchors
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Town Center Mall Barrett Parkway @ I-75 1986/92 1,275,000 1,236,750 97.0% 1 Mile Macy's
Rich's
Sears
Pariaian
Vacant
2 Home Center Village Barrett Parkway @ 1989 110,734 107,412 97.0% .25 Miles Drug Emporium
Towne Village Blvd. Decorating Center
Carmike Cinema
3 Town Center Plaza Barrett Parkway @ I-75 1988 225,000 222,750 99.0% 1 Mile TJ Maxx
Marshalls
Michaels
Linnen Loft
4 Barrett Place Barrett Parkway @ 1992 218,303 218,303 100.0% 1.25 Miles Sports Authority
Cobb Place Parkway Pets Mart
Office Max
Best Buy
Linens N Things
Rhodes Furniture
5 Barrett Pavilion Barrett Parkway @ 1994 210,000 210,000 100.0% 1.25 Miles Old Navy
Cobb Place Parkway Target
Shoe Carnival
Ulta III
Media Play
6 Barrett Commons Cobb Place Parkway 1996 110,000 110,000 100.0% 1.25 Miles Goody's
MJD Clothing
7 Cobb Place Barrett Parkway @ 1987 327,000 277,950 85.0% 1.3 Miles Service Merchandise
Barrett Lakes Blvd. Uptons
Bed,Bath & Beyond
AMC Theatre
8 Barrett Home Center Barrett Parkway @ 1993/94 90,000 90,000 100.0% 1.3 Miles Office Depot
Home Center Drive Lazy Boy Furniture
=====================
TOTALS 2,566,037 2,473,165
Weighted Average 96.4%
SUBJECT Barrett Parkway @ 1995/97 317,978 309,205 97.2% Publix
Bells Ferry Road Home Place
Stein Mart
Barnes & Noble
Sport Shoe
====================================================================================================================================
SURVEY TOTALS 2,884,015 2,782,370 96.5%
====================================================================================================================================
</TABLE>
New/Proposed Development
To the best of our knowledge, these are no other proposed properties in
the area which would compete directly with the subject.
Conclusions
The following summarizes our property specific conclusions based on our
market research and experience.
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Market Analysis
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Rental Rates
o We find that base rental rates in the area's shopping centers are
considered above average for Atlanta area community centers. Our
discussions with the leasing agents for the subject property and its
competitors told us that spaces are leased in the range of $13 to
$20 per square foot depending on center space size, location in the
center, lease term and retrofit allowance.
o The subject property's rates generally are toward the upper end of
the range because it is a newer upscale center. Most tenants also
pay reimbursable charges, and often have periodic steps in the
rental rate.
o We considered recent rates at the subject, its competition, and our
database of recent leases at other southeastern power/community
centers and we concluded market rates for the shop spaces at subject
of:
================================================================================
Shop Spaces 1,500 SF or < $18.50
- --------------------------------------------------------------------------------
Shop Spaces of 1,501-3,000 SF $17.50
- --------------------------------------------------------------------------------
Shop Spaces over 3,001-5,000 $16.50
- --------------------------------------------------------------------------------
Spaces 5,001-10,000 SF $15.50
- --------------------------------------------------------------------------------
Spaces in Free-Standing
Buildings with High Exposure $19.00
- --------------------------------------------------------------------------------
Spaces in Free-Standing
Building with Average Exposure $15.00
================================================================================
o The above rates are averages over the lease term so we did not
include rent steps in future leases for our cash flow model.
o We did not estimate market rent for anchor spaces because most have
leases that expense beyond the analysis period.
Expense Rates
Operating expense rates at the subject in 1996 were about $2.47 per square
foot. However, they included some non-recurring administrative costs. We were
unable to obtain expense rates for the most competitive properties. We based our
estimates of future expenses for the subject on the limited history and
ownership's budget that were provided. It is summarized in the Addenda. We also
considered the operating results database of power and super community centers
that is published in Dollars & Cents of Shopping Centers. This database is also
summarized in the Addenda.
Concessions/Workletter
Our interviews of the leasing agents for the subject and its primary
competitors showed that retrofit allowances are sometimes but not always given
and that spaces are taken in "broom clean" condition. The agents told us that
from time to time, concessions are given in the form of free rent. This is
usually limited to new tenants and is minimal. We considered this in our
analysis. We realize that there are occasionally situations where sought after
tenants will be given some retrofit allowance as an inducement. This cost is not
reimbursable to other tenants as CAM. We have allowed for this possibility in
our cash flow analysis.
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Market Analysis
Trade Area Analysis
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
traffic arteries provides the basis for local but not regional access. Second,
competitive properties and geographic boundaries help to define the potential
size of the trade area as a measure of distance from the property. Third, the
merchandising mix and anchor alignment provide the basic draw of customers that
are likely to patronize the property.
The location and accessibility of competing centers has direct bearing on
the formation and make-up of the subject's potential trade area. The subject
competes most directly with several power/super-community centers that are
within a one mile radius.
To summarize, the foundation of our analysis in the delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers which compete with the
subject and the strength and composition of the retail in-fill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Given all of the above, we believe that a primary trade area for the
subject property would likely span an area encompassing about three miles around
the center. The subject's secondary trade area might span up to five miles from
the site. Based on these observations, we have analyzed a demographic profile
for the subject based upon a radius of approximately 5+/- miles from the
property. To add perspective to this analysis, we have segregated our survey
into three and five mile concentric circles for a comparison to the Atlanta MSA
and State. The following chart presents this data as prepared by Equifax
National Decision Systems.
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Market Analysis
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<TABLE>
<CAPTION>
=====================================================================================
Town Center Prado Center Demographic Statistics Comparison
=====================================================================================
Trade Area
===================
3-Mile 5-Mile Atlanta State of
Radius Radius MSA Georgia
=====================================================================================
<S> <C> <C> <C> <C>
Population
1980 20,581 67,014 2,233,325 5,463,106
1990 30,547 109,072 2,959,950 6,478,216
1996 37,852 138,141 3,503,622 7,350,305
2001 42,404 156,038 3,941,898 8,045,044
Compound Annual Change
1980-1990 4.0% 5.0% 2.9% 1.7%
1980-1996 3.9% 4.6% 2.9% 1.9%
1996-2001 2.3% 2.5% 2.4% 1.8%
- -------------------------------------------------------------------------------------
Households
1980 6,484 22,548 789,577 1,871,652
1990 11,304 40,008 1,102,578 2,366,615
1996 15,137 53,434 1,349,992 2,776,699
2001 17,689 62,471 1,538,245 3,080,155
Compound Annual Change
1980-1990 5.7% 5.9% 3.4% 2.4%
1980-1996 5.4% 5.5% 3.4% 2.5%
1996-2001 3.2% 3.2% 2.6% 2.1%
- -------------------------------------------------------------------------------------
Average Household Income
1990 $44,371 $44,315 $44,400 $36,810
1997 $75,044 $73,955 $58,973 $47,776
2001 96247 93264 $79,928 $63,576
Compound Annual Change
1990-1996 9.2% 8.9% 4.8% 4.4%
1996-2001 5.1% 4.7% 6.3% 5.9%
- -------------------------------------------------------------------------------------
1996 Income Distribution (Est)
less than $5,000 1.6% 2.0% 3.9% 6.1%
$5,000-$15,000 5.6% 6.1% 9.6% 147%
$15,000-$24,999 9.2% 8.5% 12.3% 15.3%
$25,000-$34,999 9.5% 9.6% 12.5% 14.2%
$35,000-$49,999 15.4% 14.8% 17.2% 16.7%
$50,000-$74,999 27.7% 27.4% 22.0% 17.7%
$75,000-$99,999 15.8% 15.6% 9.7% 6.6%
$100,000-$149,999 8.9% 10.2% 6.8% 4.5%
greater than $150,000 6.5% 5.8% 6.1% 4.1%
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Other Indices
Professional/Managerial Occupation 35.4% 34.2% 28.8% 24.6%
Education Above High School Level 60.8% 62.2% 51.8% 41.0%
Incomes Over $25,000/year 83.7% 83.4% 74.3% 63.9%
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SOURCE: Equifax National Decision Systems
(1) Estimates
(2) Primary trade area = 3-mile radius, total trade area = 5 -mile radius.
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</TABLE>
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<PAGE>
Market Analysis
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The previous chart shows that the demographics of the trade area are above
average relative to those of either the MSA or the state.
Summary/Observations/Conclusion
We have briefly analyzed the retail trade history and profile of the
subject region in order to make reasonable assumptions as to the forecasted
performance of the subject's trade area. A metropolitan area and locational
overview has been presented which has highlighted important points about the
study area, as well as demographic and economic data specific to the trade area.
We have also included a brief summary of the competitive retail centers in the
market area. The trade area profile discussed encompasses a five mile radius
from the subject. Marketing information relating to these sectors has been
presented and analyzed in order to determine patterns of change and growth. 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 bullet points summarize some of our key conclusions with
regard to the subject's trade area and market potential:
o The subject enjoys a generally accessible location within one of the
growth quadrants of Metro Atlanta.
o Population growth has been strong within the trade area when
compared the MSA and the state. This trend is expected to continue
for the near term.
o Income levels within the subject's trade area are generally higher
than the MSA or state as a whole and this trend is expected to
continue for the near term.
o The property is well positioned geographically to benefit from
future growth in the area. The subject is not the dominant retail
center in the area but one of a number of well anchored, well
located, newer, power/super community centers. There is also a
strong regional mall within a mile of this property.
o While we are not aware of near-term plans for new competition in the
area, there are vacant, commercially zoned tracts in the area. There
is no reason to assume that one or more of these may not be
developed with retail. However, new development should help create a
more critical mass of stores along Barrett Parkway and merchandising
that continues to attract additional customer traffic.
o On balance, it is our opinion that, with competent management,
proper maintenance and aggressive marketing, the subject will
continue to be a viable entity and maintain a strong share of market
expenditure potential. Our outlook for the area continues to be
positive with above average demographics. We judge this property to
have moderate prospects for appreciating real estate values.
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PROPERTY DESCRIPTION
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Site Description
o The site size is about 39.8 acres (excluding the two vacant outparcels). A
copy of the legal description for the entire center is in the Addenda. We
were not provided with a legal description of the portion being appraised.
o The site slopes downward from east to west, is at grade with Barrett
Parkway but below the grade of Bells Ferry Road.
o It is predominately covered with the shopping center building or site
improvements such as paved parking.
o Access is average with one curb cut along Bells Ferry Road for southbound
traffic only but two curb cuts along the primary frontage, Barrett
Parkway.
o Exposure to both streets is considered average.
o The site is not in the flood plain based on our inspection of the flood
plain maps with city planning personnel.
Improvement Description
The improvements were built in 1995-1997 and consist of a single level,
retail building that contains about 317,978 square feet. Construction is steel
frame, masonry exterior with a flat roof. The structure appears to be in good
condition for its age and we did not notice significant deferred maintenance.
The following chart summarizes the owned GLA of this center.
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GLA Breakdown-Town Center Prado
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Tenant Type GLA(sf) %
Anchors
Homeplace 53,000 16.7%
Sport Shoe 15,000 4.7%
Coomer's Crafts 14,500 4.6%
Zainy Brainy 13,500 4.2%
Publix 56,146 17.7%
Stein Mart 36,538 11.5%
Barnes & Noble 19,978 6.3%
Outparcel Buildings
Sportslife 40,000 12.6%
Blockbuster/Atlanta Bread 11,000 3.5%
Shops 58,316 18.3%
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Total 317,975 100.0%
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Property Description
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Property Taxes & Assessments
The subject property is currently assessed by Cobb County. The county
applies its tax rate to the 40 percent assessment to derive the tax liability.
Tax billings in this jurisdiction are based on a calendar basis. The subject's
current tax appraisal of $19,635,617 equates to a 40 percent assessment of
$7,854,247 which results in a CY 1997 tax estimate of about $264,100, if we
assume a three percent higher tax rate in 1997 than in 1996. Our tax comparable
research support the tax appraisal as appropriate.
Zoning
The subject property is zoned GC (General Commercial) by Cobb County.
After a review of subject improvements, the local zoning code ordinance, and
discussions with the planning and zoning department, we believe that the
subject property, as improved, is a conforming use. 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.
Highest and Best Use of Site As Though Vacant
The subject site is zoned for shopping center development. Access is
considered above average. It is a convenient shopping location for residents of
the Town Center area. Surrounding land uses reflect a mix of retail and other
uses. There is also ample residential backup. 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. Given the zoning effect on the site, nearby land use
patterns, and accessibility, we are of the opinion that the highest and best use
of the subject site, as if vacant, is for retail development, such as a
community-oriented shopping center.
Highest and Best Use of Property As Improved
When a site contains improvements, the existing use will generally
continue in-use until such time the land value exceeds the sum of the land and
existing improvement value, and the cost to remove improvements for another use.
The subject property has been in continuous operation as a shopping center for
about two years. As such, the existing leases which are in-place dictate a
retail use of the property. The subject improvements are considered to be in
good condition and continue to provide a sufficient return to the land. The
site's value, as if vacant, clearly does not exceed the value of the property as
currently improved, so it is reasonable to conclude that the highest and best
use of the property, as improved, is for continued use as a shopping center.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Sales Comparison Approach, and the Income Capitalization
Approach. The type and age of the property and the quantity and quality of data
effect the applicability in a specific appraisal situation.
Cost Approach
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. 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 fully consider the value of anchor store commitments to
shopping centers and the difficulty of site assemblage for such properties. All
things considered, the 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.
Sales Comparison Approach
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 subject. This approach
has applicability in the subject analysis but is difficult to utilize in a
complex income-producing property because of the unique differences between
properties and the markets in which they operate. Consequently, it is rather
"broad brush". Furthermore, this approach has been used to help develop
investment indices and parameters from which to judge the reasonableness of our
principal approach, the Income Capitalization Approach.
Income Capitalization 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 Capitalization Approach has been emphasized as our primary
methodology for this valuation.
Reconciliation
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 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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; and
6. Interpret the adjusted sales data and draw a logical value
conclusion.
The most widely-used, market-oriented unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased. We also considered the overall capitalization rates and the net
operating incomes/sf that were extracted from an analysis of the sales. As such,
we have utilized these market comparisons in our analysis. The Addenda contains
a chart showing details of our national database of power/super-community center
sales. The chart on the following page presents an overview of the improved
property sales used in this analysis. Details of these transactions have been
retained in our files.
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<TABLE>
<CAPTION>
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Shopping Center Sales Summary
====================================================================================================================================
Gross Site Cash Overall
Sale Sale Leasable Size Year Occupancy Equiv Cap
No. Name / Location Date Area(SF) (Acres) Built at Sale Sale Price Price/SF Rate NOI/SF EGIM
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Carrollton Crossroads 01/97 303,805 36.00 1987 98.5% $18,100,000 $59.58 10.08% $6.01 N/A
U.S. Highway 27 and U.S. Highway 166
Carrollton, GA
2 Hamilton Village 03/97 365,397 44.85 1991 96% $18,378,750 $50.30 10.52% $5.29 N/A
2020 Gunbarrel Road
Chattanooga, TN
3 Lawrenceville MarketCenter 11/96 499,829 N/A 1995 100% $34,600,000 $123.56 9.50% $11.74 N/A
Ga. 316 & Ga. 120
Lawrenceville, GA
4 Perimeter Village 07/96 366,600 32.00 1995 93% $50,000,000 $136.39 9.40% $12.82 N/A
West Side Of Ashford Dunwoody Road
Atlanta, GA
5 The Village At University Place 08/96 334,500 37.50 1995 100% $33,400,000 $99.85 9.85% $9.84 N/A
SWQ Of Interstate 85 and W.T. Harris
Charlotte, NC
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, five comparable
sales have been analyzed for this analysis. These represent
power/super-community center sales which have occurred throughout the southeast.
The sales exhibit a broad range in unit prices of between $50.30 to $136.39 per
square foot of GLA sold with overall capitalization rates ranging from a low of
9.40 percent to a high of 10.52 percent. These transactions occurred between
July, 1996 and March, 1997.
For the sales surveyed, the mean overall sale price is calculated to be
$30,895,750. The mean gross leasable area sold is 374,026 square feet, with the
mean overall price per square foot calculated at $93.94. Finally, the survey
shows a mean NOI of $9.14 square foot, with a mean overall capitalization rate
of 9.87 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include market location, site coverage, anchor GLA as a
component of GLA sold, anchor credit, and, more importantly, the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property.
o The first adjustment made to the market data takes into account
differences between the subject property and the comparable property sales
with regard to the legal interest transferred. Leased fee interest was
transferred in all cases so no adjustment is necessary.
o Advantageous financing terms or peculiar conditions of sale are then
adjusted to reflect a normal market transaction. All sales were on an all
cash basis so no adjustment is necessary.
o Next, changes in market condition must be accounted, thereby creating a
time adjusted normal unit of comparison. We find that the market has
softened over the last year for power/super community centers and that
investors are now assigning a higher degree of risk in their rate
selection. This trend is evident in the overall capitalization rates of
the sales previously presented. This impacts the unit prices that are
paid.
o Lastly, adjustments for location, the physical traits, and the economic
characteristics of the market data are made in order to generate the final
adjusted unit rate which is appropriate for the subject property.
Generally, we find that the subject has a superior location and economic
characteristics to most of the comparables.
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. In our opinion, a buyer's criteria for the purchase of a
retail property is predicated primarily on the
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Sales Comparison Approach
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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. This is true for the five sales we analyzed.
Therefore, an adjustment for these economic differences incorporates factors
such as location, tenant mix, rental levels, operating characteristics, and
building quality.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first stabilized year
NOI (FY 1998 - $10.37 per square foot) is presented in the Income Capitalization
Approach section of this report. The adjustment factor is calculated by dividing
the subject's project NOI per square foot by the comparable's NOI per square
foot.
================================================================================
Comparing Properties Based on NOI Per Square Foot
================================================================================
NOI/SF
Subject
---------- Unadjusted Adjusted
Sale No. Comparable X Price/SF Price/SF
1 $10.37 $59.58 $102.80
----------
$6.01
2 $10.37 $50.30 $98.60
----------
$5.29
3 $10.37 $123.56 $109.14
----------
$11.74
4 $10.37 $136.69 $110.57
----------
$12.82
5 $10.37 $99.85 $105.23
----------
$9.84
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $99 to $111 per square foot with a mean of
approximately $105 per square foot on a stabilized basis.
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, however, do not explicitly convey by
themselves many of the details surrounding a specific
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Sales Comparison Approach
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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.
The subject is viewed as being a well located, well anchored center that
is one of the stronger but not the dominant power/super-community centers in an
trade area. It has above average demographics for the Atlanta area and a
moderate to strong growth potential. Anchor alignment and tenant merchandising
appear to be appropriate to the market. Overall, we would consider this property
to be a good investment opportunity.
Conclusion
Considering the characteristics of the subject relative to the above, we
believe that a unit rate toward the middle of the range of $100 to $105 per
square foot is appropriate for the subject property. Applying this unit rate
range to 317,978 square feet results in a value of approximately $31,800,000 to
$33,400,000 for the subject property, as of July 3 1997, the date of inspection.
Market Value - Sales Comparison Approach
Rounded to $31,800,000 to $33,400,000
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INCOME CAPITALIZATION APPROACH
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Introduction
The Income Capitalization 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 Capitalization 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.
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 Capitalization Approach to the valuation of the subject, we
have utilized a 10-year holding period for an investment in the subject
property, with the cash flow analysis commencing in August 1997. 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, but short enough to reasonably
estimate the expected income and expenses of the real estate. Although our cash
flow analysis is presented on a fiscal year basis, it is noted that we may
discuss income and expenses based upon a calendar year basis for comparison to
historical and budgeted data.
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Income Capitalization Approach
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The revenues and expenses which an informed investor may expect to incur
from the subject property will vary, over the holding period. Major investors
active in 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.
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 a following page is a summary of
the expected annual cash flows from the operation of the subject over the stated
investment holding period.
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.
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Income Capitalization Approach
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Discounted Cash Flow
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. Minimum base rent represents
a legal contract establishing a return to investors in the real estate, while
the passing-on of certain expenses to 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 a 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. At the subject it is minor and
usually includes termination fees, extra tenant charges and deposit forfeitures.
The rent roll and summary of recent leases is in the Addenda.
Operating 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 insurance. Management fee is reimbursable by some
but not all tenants. Reimbursement is usually based on pro rata share but there
are exceptions. The reimbursable costs are usually factored upward by a 5 to 15
percent administrative fee prior to reimbursement. There are also exceptions to
this rule of thumb. The structure at the subject property is typical of the
reimbursable expense recovery structure found at most other southeastern centers
that we have appraised.
The non-reimbursable expenses associated with the subject property include
certain general and administrative expenses, including non-recoverable
maintenance and reserves for replacements, and management fee for some tenants.
Non-operating expenses include alteration costs associated with bringing
space up to occupancy standards, and leasing commissions.
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 operating history and budget provided by ownership. This
information is provided in the Addenda. We have compared this information to
published data which are available, as well as comparable expense information.
The Addenda includes a summary of the operating results database for power
centers that is compiled by Urban Land Institute. Finally, this information has
been tempered by our experience with other comparable shopping centers in the
marketplace as well as on a national basis.
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Income Capitalization Approach
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Cash Flow Assumptions
Our cash flows forecasted for the property are presented on a following
page. The formulation of these cash flows incorporate the following general
assumptions in our computer model:
================================================================================
Summary of Critical Assumptions For Discounted Cash Flow
================================================================================
Subject Property Town Center Prado
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Square Footage Reconciliation
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Total Gross Leasable Area 317,978 SF
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Anchor/Major Tenant GLA 248,662 SF
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In-Line and Free-Standing Shop GLA 69,316 SF
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Market Rent/Sales Conclusions
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Market Rent Estimates (1997) Average Rates Over Term
- --------------------------------------------------------------------------------
Tenants 1,500 SF or less $18.50/SF
- --------------------------------------------------------------------------------
Tenants 1,501-3,000 SF $17.50/SF
- --------------------------------------------------------------------------------
Tenants 3,001-5,000 SF $16.50/SF
- --------------------------------------------------------------------------------
Tenants 5,001-10,000 SF $15.50/SF
- --------------------------------------------------------------------------------
Free-Standing - High Exposure $19.00/SF
- --------------------------------------------------------------------------------
Free-Standing - Average Exposure $15.00/SF
- --------------------------------------------------------------------------------
Rental Basis NNN
- --------------------------------------------------------------------------------
Stabilized Market Rental Growth Rate 1.5% in 1997, 3.0%//Year
thereafter
- --------------------------------------------------------------------------------
Credit Risk Loss (Non-Anchor Space) 1.5%
================================================================================
Vacancy and Typical Lease Term
================================================================================
Average Lease Term 3, 5 and 10 Years (shops)
- --------------------------------------------------------------------------------
Rent Steps None
- --------------------------------------------------------------------------------
Renewal Probability 80%
- --------------------------------------------------------------------------------
Weighted Average Downtime Between Leases 2 Months
- --------------------------------------------------------------------------------
Stabilized Occupancy (Shop Space) 92-94%
- --------------------------------------------------------------------------------
Forecasted Date Of Stabilization N/A
- --------------------------------------------------------------------------------
Absorption Period N/A
================================================================================
Operating Expense Data
================================================================================
Leasing Commissions
- --------------------------------------------------------------------------------
New Tenants 4.0%
- --------------------------------------------------------------------------------
Renewal Tenants 2.0%
- --------------------------------------------------------------------------------
Tenant Improvement Allowance
- --------------------------------------------------------------------------------
New Tenants $7.00/SF
- --------------------------------------------------------------------------------
Renewal Tenants $1.00/SF
- --------------------------------------------------------------------------------
Stabilized Tax and Expense Growth Rate 3.0%/Year
- --------------------------------------------------------------------------------
Management Fee (of EGI) 4.0%
- --------------------------------------------------------------------------------
Capital Reserves (PSF of Owned GLA) $.10/SF in 1997
================================================================================
================================================================================
-36-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Additional Assumptions
1. Anchor stores (greater than 15,000 SF) will renew their leases for
at least one, 10-year term at their then current contract rate over
the term. The releasing cost will include no retrofit allowance but
renewal tenant commissions.
2. Tenants with insufficient sales histories are assumed to never reach
breakpoint. 1997 sales are assumed at three percent higher than 1996
actual.
3. Future lease terms of shop tenants.
If current term is 3-4 years, assume 3 years
If current term is 5-9 years, assume 5 years
If current term is 10 or more years, assume 10 years
4. Downtime between leases-shop space- 9 month. With a 80% renewal
probability, this is equivalent to two months on all space.
5. Market rent estimates are average over term so do not have periodic
steps.
================================================================================
-37-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
TOWN CENTER PRADO
PROJECT DESIGNATOR: TC97
REVISION: 7/23/97 @ 13:38
ANNUAL CASH FLOW REPORT
BEGINNING 8/1/97 FOR 12 YEARS
7/23/97 @ 13:35
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005
INCOME
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MINIMUM RENT:
ANCHORS 2,455,209 2,509,206 2,517,362 2,590,623 2,624,990 2,629,990 2,632,490 2,632,490
IN LINE SHOPS 840,631 933,201 967,356 913,139 971,456 1,040,825 1,091,231 1,069,587
FREE STANDING 162,746 188,450 188,450 191,783 193,500 197,412 209,593 209,593
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 3,458,586 3,630,857 3,673,168 3,695,545 3,789,946 3,868,227 3,933,314 3,911,670
RECOVERIES:
CAM/MGT. FEES 300,721 321,804 334,598 342,387 360,661 374,298 389,916 397,829
INSURANCE 42,929 45,257 46,916 47,582 49,396 51,228 53,305 54,592
REAL ESTATE TAXES 269,241 282,818 292,915 297,951 309,196 320,431 332,930 341,267
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 612,891 649,879 674,429 687,920 719,253 745,957 776,151 793,688
OVERAGE RENT 0 0 0 0 0 0 0 526
SALES VOLUME (000) 24,001 25,164 26,687 27,695 28,524 29,837 30,732 31,169
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 4,071,477 4,280,736 4,347,597 4,383,465 4,509,199 4,614,184 4,709,465 4,705,884
VACANCY ALLOWANCE (55,634) (61,397) (63,214) (61,374) (64,533) (67,952) (71,065) (70,307) )
MISCELLANEOUS 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 4,035,843 4,239,339 4,304,383 4,342,091 4,464,666 4,566,232 4,658,400 4,655,577
EXPENSES
- --------
CAM EXPENSES 254,375 262,006 269,866 277,962 286,301 294,890 303,737 312,849
GENERAL & ADMIN 8,344 8,594 8,852 9,117 9,391 9,672 9,963 10,261
REAL ESTATE TAXES 270,859 278,984 287,354 295,974 304,854 313,999 323,419 333,122
INSURANCE 41,921 43,179 44,474 45,808 47,182 48,598 50,056 51,558
MANAGEMENT FEE 162,859 171,230 173,904 175,339 180,368 184,567 188,378 188,235
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 738,358 763,993 784,450 804,200 828,096 851,726 875,553 896,025
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 3,297,485 3,475,346 3,519,933 3,537,891 3,636,570 3,714,506 3,782,847 3,759,552
ALTERATIONS 63,253 18,905 0 64,979 40,297 45,020 7,355 22,574
COMMISSIONS 38,385 9,744 0 58,724 53,602 38,928 6,919 11,635
STRUCTURAL RESERVE 31,798 32,752 33,734 34,746 35,789 36,862 37,968 39,107
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 3,164,049 3,413,945 3,486,199 3,379,442 3,506,882 3,593,696 3,730,605 3,686,236
<CAPTION>
FY2006 FY2007 FY2008 FYZ009
INCOME
- ------
<S> <C> <C> <C> <C>
MINIMUM RENT:
ANCHORS 2,701,956 2,744,668 2,727,160 2,744,668
IN LINE SHOPS 1,037,588 1,161,005 1,159,555 1,257,676
FREE STANDING 209,593 197,839 225,230 257,983
---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 3,949,137 4,103,512 4,111,945 4,260,327
RECOVERIES:
CAM/MGT. FEES 402,699 419,755 423,385 449,740
INSURANCE 55,514 57,848 58,750 62,340
REAL ESTATE TAXES 347,706 361,481 366,254 386,424
---------- ---------- ---------- ----------
TOTAL RECOVERIES 805,919 839,084 848,389 898,504
OVERAGE RENT 628 0 0 0
SALES VOLUME (000) 32,344 33,582 34,109 35,578
GROSS RENTAL
INCOME 4,755,684 4,942,596 4,960,334 5,158,831
VACANCY ALLOWANCE (76,178) (84,972) (86,097) (92,353)
MISCELLANEOUS 20,000 20,000 20,000 20,000
---------- ---------- ---------- ----------
TOTAL INCOME 4,699,506 4,877,624 4,894,237 5,086,478
EXPENSES
- --------
CAM EXPENSES 322,235 331,902 341,859 352,115
GENERAL & ADMIN 10,569 10,886 11,213 11,549
REAL ESTATE TAXES 343,115 353,409 364,011 374,932
INSURANCE 53,104 54,697 56,338 58,028
MANAGEMENT FEE 190,227 197,704 198,413 206,353
---------- ---------- ---------- ----------
TOTAL EXPENSES 919,250 948,598 971,834 1,002,977
---------- ---------- ---------- ----------
NET OPERATING
INCOME 3,780,256 3,929,026 3,922,403 4,083,501
ALTERATIONS 75,331 19,218 97,674 12,486
COMMISSIONS 157,464 16,011 143,750 10,383
STRUCTURAL RESERVE 40,281 41,489 42,734 44,016
---------- ---------- ---------- ----------
CASH FLOW 3,507,180 3,852,308 3,638,245 4,016,616
</TABLE>
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-38-
<PAGE>
Income Capitalization Approach
================================================================================
Net Income/Net Cash Flow
Operating expenses are deducted from the estimated revenue to result in
an annual net operating income. The total other expenses of the subject
property, including alterations, commissions, capital expenditures, and
reserves, are annually deducted from net operating income, thereby leaving a 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 $3,297,485 which is equivalent to 81.7
percent of effective gross income. Deducting other expenses including capital
items results in a net cash flow before debt service of approximately
$3,164,049.
================================================================================
First Year Estimates for Town Center Prado
================================================================================
Income $ $/SF
Base Rent $ 3,458,586 $ 12.60
Percentage Rent $ 0 $ 0.00
Expense Recoveries $ 612,891 $ 2.23
Other Income $ 20,000 $ 0.07
-----------
Potential Gross Income $ 4,091,477 $ 14.91
Allowance for Vacancy & Credit Loss ($ 55,634) ($ 0.20)
Effective Gross Income $ 4,035,843 $ 14.71
===========
Less: Recoverable Expenses
Common Area Maintenance $ 254,375
Real Estate Taxes $ 270,859
Insurance $ 41,921
===========
Total Recoverable $ 567,155
Less: Non-Recoverable Expenses
General & Administrative $ 8,344
Management $ 162,859
===========
Total Non-Recoverable $ 171,203
Total Operating Expenses $ 738,358
NET OPERATING INCOME $ 3,297,485
Operating Expense Ratio 18.3%
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-39-
<PAGE>
Income Capitalization Approach
================================================================================
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-40-
<PAGE>
Income Capitalization Approach
================================================================================
Real Estate Investment Management Inc. reports in their Emerging Trends in Real
Estate - 1997 that, while power centers are considered one retail property type
currently in a growth mode, most respondents feel that the oversupply of this
type of retail will impact value gains for these property types to the extent
they may lag regional malls in appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A [Neighborhood and Community] centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Investment Power Centers and Big Box Neighborhood/Community
------------------------------------------------------------------
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50 - 10.50% 9.00 - 10.50% 8.50 - 10.50% 9.00 - 10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50 - 10.50% 9.50 - 10.50% 9.50 - 10.50% 10.00 - 11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50 - 15.00% 10.50 - 15.00% 10.00 - 15.00% 10.00 - 15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-41-
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50 - 12.50% 9.00 - 12.50% N/A
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75 - 10.50% 8.50 - 10.50% N/A
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00 - 11.50% 8.50 - 11.50% N/A
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second Qtr.
1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-42-
<PAGE>
Income Capitalization Approach
================================================================================
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, the chart of most comparable sales
showed overall capitalization rates ranging from 9.40 percent to 10.52 percent
for good quality power/super-community and power centers in the Southeast. The
overall mean for the sales presented is 9.87 percent. From the surveys and
comparable sales presented, we would be inclined to consider a going-in
capitalization rate for the between 9.75 and 10.25 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. The subject is a well-located power center in an attractive
growth market. It has a unique tenant alignment and well matched merchandising
mix with several good credit tenants. The upside will be through the ultimate
attainment of overage rent, something we have not forecasted due to lack of
adequate sales history. We believe that an investor would likely recognize this
real short term potential in the selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen strong retail interest.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.75 and 10.25
percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years. In addition, the long term nature of many of the leases
makes the income stream almost as secure in 10 years as it is today.
Therefore, a projected terminal capitalization rate of about 10 percent is
indicated for the subject property. 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.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-43-
<PAGE>
Income Capitalization 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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.25 percent for national power center in their
Fourth Quarter 1996 survey, with a range between 9.00-12.50 percent.
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 Yie1ds(%) July 1O, 1997
- --------------------------------------------------------------------------------
Reserve Bank Discount Rate 5.00%
- --------------------------------------------------------------------------------
Prime Rate (Monthly Average) 8.50%
- --------------------------------------------------------------------------------
3-Month Treasury Bills 4.96%
- --------------------------------------------------------------------------------
U.S. 10-Year Notes 6.24%
- --------------------------------------------------------------------------------
U.S. 30-Year Bonds 6.56%
- --------------------------------------------------------------------------------
Telephone Bonds 7.63%
- --------------------------------------------------------------------------------
Municipal Bonds 5.56%
================================================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-44-
<PAGE>
Income Capitalization Approach
================================================================================
percent, while the discount rate is 5.00 percent. Ten year treasury notes are
currently yielding around 6.24 percent, while 30-year bonds are at 6.56 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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that a majority of base rental income will, on
average, come from anchor major/tenants whose creditworthiness adds stability to
the cash flow.
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 11.50 percent for the
center.
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 10-year period commencing on August 1,1997.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-45-
<PAGE>
Income Capitalization Approach
================================================================================
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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.
================================================================================
Summary of Rates Selected
================================================================================
Cash Flow Start Date 8/1/97
Discount Rate 11.25-11.50%
Going-In Capitalization Rate 10.0%
Terminal Capitalization Rate 10.0%
Reversionary Sales Costs 3.0%
Holding Period 10 years
================================================================================
For a property such as the subject, it is our opinion that an investor
would require an all cash discount rate of about 11.25 percent. The following
chart summarizes the expected cash flows and value estimate via this method of
analysis.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
-46-
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Town Center Prado
Barrett Parkway @ Bells Ferry Road
Discounted Cash Flow Summary
================================================================================
Discount Present
Cash Factor Value of Composition
Year Flow 11.25% Cash Flows of Yield
================================================================================
One $ 3,164,049 0.89888 $2,844,089 8.54%
Two $ 3,413,945 0.80798 $2,758,395 8.28%
Three $ 3,486,199 0.72627 $2,531,932 7.60%
Four $ 3,379,442 0.65283 $2,206,200 6.62%
Five $ 3,506,882 0.58681 $2,057,885 6.18%
Six $ 3,593,696 0.52747 $1,895,576 5.69%
Seven $ 3,730,605 0.47413 $1,768,802 5.31%
Eight $ 3,686,236 0.42619 $1,571,025 4.72%
Nine $ 3,507,180 0.38309 $1,343,563 4.03%
Ten $ 3,852,308 0.34435 $1,326,541 3.98%
Present Value of Cash Flows $20,304,008 60.97%
Reversion:
Year Eleven NOI Cap Rate Value
------------------------------ -----------
Gross Reversion: $3,922,403 10.00% = $39,224,030
Less: Reversion Year capital Expend. ($284,158)
Subtotal $38,939,572
===========
Cost of Sale: 3% ($1,168,196)
Net Reversion: $37,771,676
x Discount Factor 0.34435
Present Value of Reversion $13,006,677 39.06%
Combined Present Value $33,310,684
Rounded $33,300,000 100.00%
Price per Square Foot $104.72
In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates an Market Value of about $33,300,000 for
the subject property as of July 3, 1997.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow, 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 following chart summarizes
the capitalization rates indicated by the sales we selected as the most
appropriate for the subject analysis.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization
No. Rate
================================================================================
1 10.08%
2 10.52%
3 9.50%
4 9.40%
5 9.85%
Stabilized Capitalization Rate Selected 10.0%
================================================================================
In view of our total analysis, we would anticipate that the subject
property would trade at an overall rate of approximately 10.0 to 10.25 percent
applied to first year income. Applying these rates to first year net operating
income before alterations, and other expenses for the subject of $3,297,485
results in a value of approximately $32,200,000 to $33,000,000. From this range,
we would be inclined to conclude at an Market Value of $33,000,000 via Direct
Capitalization as of July 3,1997. This value is indicative of an overall rate of
10.0 percent.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below.
================================================================================
Value Summary
================================================================================
Cost Approach N/A
- --------------------------------------------------------------------------------
Sales Comparison Approach $31,800,000 to $33,400,000
- --------------------------------------------------------------------------------
Income Capitalization Approach
Discounted Cash Flow $33,300,000
Direct Capitalization $33,000,000
================================================================================
Two approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complimentary results, each technique
supporting the other. The value indicators range from $31,800,000 to
$33,300,000, resulting in a difference of only 4.7 percent.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
The process of comparing historical sales data to assess what purchasers
have been paying for similar type properties can be 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, this methodology is best suited as support for the
conclusions of the Income Capitalization Approach. It provides useful market
extracted rates of return, such as overall rates, to simulate investor behavior
in the Income Capitalization Approach.
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WAKEFIELD(R)
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Income Capitalization Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method (DCF) 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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center. Particular emphasis is placed on the results of the discounted
cash flow analysis because of the applicability of this method in accounting for
the specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis of the
subject property upon stabilized operations.
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 Capitalization Approach methodologies.
The range in values exhibited by the Income Capitalization Approach is small. We
have placed more emphasis on the value estimate via the Income Approach because
it is less "broad brush" than the Sales Comparison Approach and is the method of
analysis used most often by the market participants.
================================================================================
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WAKEFIELD(R)
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Market 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, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
3,1997, the date of inspection, was:
THIRTY THREE MILLION DOLLARS
$33,000,000
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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 Complete Appraisal in a Summary 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.
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.
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WAKEFIELD(R)
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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. 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.
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 has 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.
10. 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.
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.
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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:
I. Luten L. Teate, MAI, inspected the property and prepared 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, Luten L. Teate, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Luten L. Teate
--------------------
Luten L. Teate, MAI
Associate Director
Georgia No. CG001389
================================================================================
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WAKEFIELD(R)
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<PAGE>
ADDENDA
================================================================================
Legal Description
Rent Roll and Summary of Recent Leases
National Database of Sales
Operating History and Budget Chart
ULI Database of Operating Results for Power Centers
Lease Expiration Chart - Pro-Ject
Competitive Property Photographs
Local Sale Comparables
Appraiser Qualifications
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WAKEFIELD(R)
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<PAGE>
LEGAL DESCRIPTION
================================================================================
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<PAGE>
L E G A L D E S C R I P T I O N
TRACT 2
All that tract or parcel of land lying and being in Land Lot 571, Land Lot 582
and Land Lot 583 of the 16th District, 2nd Section of Cobb County, Georgia and
being more particularly described as follows:
BEGINNING at a 1 inch diameter crimp top iron pipe at the northwest corner
of Land Lot 583, said pipe being the common corner to Land Lot 570, Land Lot
571, Land Lot 582 and Land Lot 583 and from the POINT OF BEGINNING thus
established, run North 89 degrees 34 minutes 53 seconds East for a distance of
748.40 feet to an iron pin on the westerly right-of-way of Bells Ferry Road (80
foot right-of-way_;
Thence, along the westerly right-of-way of Bells Ferry Road, run along a
curve to the right having a radius of 15847.59 feet and an arc length of 407.68
feet, being subtended by a chord of South 02 degrees 42 minutes 27 seconds East
for a distance of 407.67 feet to a point;
Thence, continuing along the westerly right-of-way of Bells Ferry Road,
run South 01 degrees 07 minutes 43 seconds East for a distance of 640.24 feet to
a point;
Thence, continuing along the westerly right-of-way of Bells Ferry Road,
run South 00 degrees 51 minutes 50 seconds East for a distance of 31.88 feet to
a point;
Thence, leaving the westerly right-of-way of Bells Ferry Road, run North
89 degrees 59 minutes 06 seconds West for a distance of 440.33 feet to a point;
Thence run South 03 degrees 15 minutes 27 seconds East for a distance of
184.27 feet to a point on the northerly right-of-way of Ernest Barrett Parkway
(right-of-way width varies);
Thence along the northerly right-of-way of Ernest Barrett Parkway, run
along a curve to the right having a radius of 1446.50 feet and an arc length of
133.13 feet, being subtended by a chord of North 86 degrees 07 minutes 42
seconds West for a distance of 133.09 feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run North 83 degrees 29 minutes 34 seconds West for a distance of
211.75 feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run along a curve to the left having a radius of 1553.50 feet and an
arc length of 359.65 feet, being subtended by a chord of South 89 degrees 52
minutes 27 seconds West for a distance of 358.85 feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run North 51 degrees 50 minutes 34 seconds West for a distance of 55.93
feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run South 80 degrees 31 minutes 37 seconds West for a distance of
100.16 feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run South 36 degrees 59 minutes 30 seconds West for a distance of 49.00
feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run North 09 degrees 27 minutes 49 seconds West for a distance of 27.22
feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run South 81 degrees 13 minutes 48 seconds West for a distance of
130.20 feet to a point;
Thence continuing along the northerly right-of-way of Ernest Barrett
Parkway, run South 81 degrees 38 minutes 06 seconds West for a distance of
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WAKEFIELD(R)
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<PAGE>
34.11 feet to a point;
Thence leaving the northerly right-of-way of Ernest Barrett Parkway, run
North 01 degrees 07 minutes 07 seconds West for a distance of 1232.27 feet to a
point on the line common to Land Lot 571 and Land Lot 582;
Thence run North 01 degrees 07 minutes 07 seconds West for a distance of
250.00 feet to a point;
Thence run North 89 degrees 00 minutes 27 seconds East for a distance of
711.89 feet to a point on the easterly line of Land Lot 571;
Thence, along the easterly line of Land Lot 571, run South 01 degrees 42
minutes 41 seconds East for a distance of 250.00 feet to the POINT OF BEGINNING.
Said tract or parcel contains 43.9793 acres.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RENT ROLL AND SUMMARY OF RECENT LEASES
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
102 New Homes America 3,300 Dec-95 Feb-98 5.25 27 @ $4,815.25 $57,783 $17.51 $18.12
Mar-98 Feb-99 12 @ $4,961.00 $59,532 $18.04
Mar-99 Feb-00 12 @ $5,109.50 $61,314 $18.58
Mar-00 Feb-01 12 @ $5,260.75 $63,129 $19.13
104 Homeplace 53,000 Feb-96 Oct-97 15.00 21 @ $43,283.33 $519,400 $9.80 $11.27
Nov-97 Oct-00 36 @ $45,491.67 $545,900 $10.30
Nov-00 Oct-05 60 @ $49,908.33 $598,900 $11.30
Nov-05 Jan-11 63 @ $54,325.00 $651,900 $12.30
105 The Sport Shoe 15,000 Jan-96 Nov-97 9.92 23 @ $17,650.00 $211,800 $14.12 $14.93
Dec-97 Nov-00 36 @ $18,275.00 $219,300 $14.62
Dec-00 Nov-02 24 @ $18,900.00 $226,800 $15.12
Dec-02 Nov-05 36 @ $19,525.00 $234,300 $15.62
108 Gateway Computers 6,500 Mar-97 Feb-02 5.00 60 @ $8,125.00 $97,500 $15.00 $15.00
110 Vacant 3,848 0.00 0 @ $0.00 $0.00
114 Coomer's Crafts 14,500 May-97 Apr-99 5.00 24 @ $9,968.75 $119,625 $8.25 $8.70
May-99 Apr-02 36 @ $10,875.00 $130,500 $9.00
115 Wendy's Bridal Shoppes 5,500 Apr-97 Mar-98 5.00 12 @ $4,812.50 $57,750 $10.50 $12.50
Apr-98 Mar-99 12 @ $5,270.83 $63,250 $11.50
</TABLE>
7/23/97 1
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WAKEFIELD(R)
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apr-99 Mar-00 12 @ $5,729.17 $68,750 $12.50
Apr-00 Mar-01 12 @ $6,187.50 $74,250 $13.50
Apr-01 Mar-02 12 @ $6,645.83 $79,750 $14.50
116 Zany Brainy 13,500 Oct-95 Oct-97 10.33 25 @ $16,593.75 $199,125 $14.75 $15.40
Nov-97 Oct-00 36 @ $17,156.25 $205,875 $15.25
Nov-00 Jan-06 63 @ $17,718.75 $212,625 $15.75
119 Hallmark Showcase 6,800 Oct-95 Oct-98 3.00 36 @ $9,066.67 $108,800 $16.00 $16.00
122 Jenny Craig, Inc. 2,125 Feb-96 Feb-98 5.00 24 @ $2,656.25 $31,875 $15.00 $15.60
Mar-98 Feb-01 36 @ $2,833.33 $34,000 $16.00
124 Publix 56,146 Nov-95 Dec-15 20.08 241 @ $37,430.67 $449,168 $8.00 $8.00
126 Barnes & Noble 19,978 Sep-95 Sep-00 15.33 60 @ $20,810.42 $249,725 $12.50 $13.52
Oct-00 Sep-05 60 @ $22,475.25 $269,703 $13.50
Oct-05 Jan-11 64 @ $24,140.08 $289,681 $14.50
128 Mail Boxes, Inc. 1,320 Oct-95 Nov-98 5.17 38 @ $1,980.00 $23,760 $18.00 $18.32
Dec-98 Nov-99 12 @ $2,039.42 $24,473 $18.54
Dec-99 Nov-00 12 @ $2,100.58 $25,207 $19.10
130 Great Clips 960 Nov-95 Nov-97 5.08 25 @ $1,440.00 $17,280 $18.00 $18.65
Dec-97 Nov-98 12 @ $1,483.20 $17,798 $18.54
</TABLE>
7/23/97 2
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-98 Nov-99 12 @ $1,528.00 $18,336 $19.10
Dec-99 Nov-00 12 @ $1,573.58 $18,883 $19.67
132 Olsten Staffing 1,200 Apr-97 Mar-98 5.00 12 @ $1,800.00 $21,600 $18.00 $19.11
Apr-98 Mar-99 12 @ $1,854.00 $22,248 $18.54
Apr-99 Mar-00 12 @ $1,909.00 $22,908 $19.09
Apr-00 Mar-01 12 @ $1,967.00 $23,604 $19.67
Apr-01 Mar-02 12 @ $2,025.00 $24,300 $20.25
134 Discount Travel 1,320 Jan-96 Jan-98 5.00 24 @ $1,870.00 $22,440 $17.00 $17.93
Feb-98 Jan-99 12 @ $1,980.00 $23,760 $18.00
Feb-99 Jan-00 12 @ $2,039.00 $24,468 $18.54
Feb-00 Jan-01 12 @ $2,101.00 $25,212 $19.10
136 Disc Go Round 1,300 Oct-95 Dec-97 3.17 26 @ $1,785.33 $21,424 $16.48 $16.63
Jan-98 Dec-98 12 @ $1,838.42 $22,061 $16.97
138 BellSouth Mobility 1,500 Sep-95 Nov-97 5.17 26 @ $2,250.00 $27,000 $18.00 $18.78
Dec-97 Nov-00 36 @ $2,418.75 $29,025 $19.35
140 AT&T 2,000 Oct-97 Sep-02 5.00 60 @ $3,333.33 $40,000 $20.00 $20.00
142 Party City 9,975 Oct-95 Jan-01 5.33 64 @ $13,092.19 $157,106 $15.75 $15.75
145 TSI Soccer 3,170 Dec-95 Feb-98 5.17 26 @ $3,963.00 $47,556 $15.00 $15.66
</TABLE>
7/23/97 3
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mar-98 Feb-01 36 @ $4,261.00 $51,132 $16.13
147 Vacant 2,125 0.00 0 @ $0.00 $0.00
150 Vacant 2,800 0.00 0 @ $0.00 $0.00
152 Hickory Hams 2,573 Oct-95 Nov-97 5.17 26 @ $3,645.08 $43,741 $17.00 $17.74
Dec-97 Nov-00 36 @ $3,919.54 $47,034 $18.28
215 SportsLife 40,000 Mar-96 Mar-98 15.08 25 @ $41,000.00 $492,000 $12.30 $13.28
Apr-98 Mar-01 36 @ $42,230.00 $506,760 $12.67
Apr-01 Mar-06 60 @ $43,919.17 $527,030 $13.18
Apr-06 Mar-11 60 @ $47,213.10 $566,557 $14.16
OPA Blockbuster 7,000 Jul-97 Aug-97 10.00 2 @ $0.00 $0 $0.00 $18.94
Sep-97 Jun-02 58 @ $10,704.17 $128,450 $18.35
Jul-02 Jun-07 60 @ $11,754.17 $141,050 $20.15
OPB Vacant (Atlanta Bread) 4,000 Oct-97 Dec-97 5.00 3 @ $3,333.33 $40,000 $10.00 $15.15
Jan-98 Sep-00 33 @ $5,000.00 $60,000 $15.00
Oct-00 Sep-02 24 @ $5,333.33 $64,000 $16.00
Stein Mart 36,538 Aug-97 Sep-97 9.92 1 @ $0.00 $0 $0.00 $5.70
Oct-97 Jul-07 118 @ $17,507.83 $210,094 $5.75
</TABLE>
7/23/97 4
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Occupied Area 305,205
Vacant Area 12,773
-------
Total Area 317,978
</TABLE>
7/23/97 5
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Rent Roll Analysis Summary
================================================================================
Total Percent
================================================================================
Total Area
Gross Leasable Area 317,978 SF 100.00% Number of Tenants 24
Occupied 305,205 SF 95.98% Average Tenant Size 12,717
------- ------
Vacant 12,773 SF 4.02% Average Minimum Rental Rate $11.62
(Weighted)
Anchor Space
Gross Leasable Area 248,662 SF 100.00% Number of Tenants 8
Occupied 248,662 SF 100.00% Average Tenant Size 31,083
------- ------
Vacant 0 SF 0.00% Average Minimum Rental Rate $10.51
(Weighted)
Small Shop Area
Gross Leasable Area 69,316 SF 100.00% Number of Tenants 16
Occupied 56,543 SF 81.57% Average Tenant Size 3,534
------- ------
Vacant 12,773 SF 18.43% Average Minimum Rental Rate $16.47
(Weighted)
================================================================================
7/16/97 1
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Recent Lease Analysis Summary
Previous 0 to 12 Months
Total Area 34,700 SF
Number of Tenants 5
Average Tenant Size 6,940 SF
Total Minimum Rent $447,941
Average Minimum Rental Rate $12.91
Previous 13 to 24 Months
Total Area 231,967 SF
Number of Tenants 17
Average Tenant Size 13,645 SF
Total Minimum Rental Rate $2,849,685
Average Minimum Rental Rate $12.28
Previous 25 to 36 Months
Total Area 0 SF
Number of Tenants 0
Average Tenant Size 0 SF
Total Minimum Rental Rate $0
Average Minimum Rental Rate $ 0.00
================================================================================
7/16/97 1
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Previous 0 to 12 Months
-----------------------
OPA Blockbuster 7,000 Jul-97 Aug-97 10.00 2 @ $0.00 $0 $0.00 $18.94
Sep-97 Jun-02 58 @ $10,704.17 $128,450 $18.35
Jul-02 Jun-07 60 @ $11,754.17 $141,050 $20.15
114 Coomer's Crafts 14,500 May-97 Apr-99 5.00 24 @ $ 9,968.75 $119,625 $8.25 $ 8.70
May-99 Apr-02 36 @ $10,875.00 $130,500 $9.00
115 Wendy's Bridal Shoppes 5,500 Apr-97 Mar-98 5.00 12 @ $4,812.50 $57,750 $10.50 $12.50
Apr-98 Mar-99 12 @ $5,270.83 $63,250 $11.50
Apr-99 Mar-00 12 @ $5,729.17 $68,750 $12.50
Apr-00 Mar-01 12 @ $6,187.50 $74,250 $13.50
Apr-01 Mar-02 12 @ $6,645.83 $79,750 $14.50
132 Olsten Staffing 1,200 Apr-97 Mar-98 5.00 12 @ $1,800.00 $21,600 $18.00 $19.11
Apr-98 Mar-99 12 @ $1,854.00 $22,248 $18.54
Apr-99 Mar-00 12 @ $1,909.00 $22,908 $19.09
Apr-00 Mar-01 12 @ $1,967.00 $23,604 $19.67
Apr-01 Mar-02 12 @ $2,025.00 $24,300 $20.25
108 Gateway Computers 6,500 Mar-97 Feb-02 5.00 60 @ $8,125.00 $97,500 $15.00 $15.00
</TABLE>
7/16/97 1
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Previous 13 to 24 Months
------------------------
122 Jenny Craig, Inc. 2,125 Feb-96 Feb-98 5.00 24 @ $2,656.25 $31,875 $15.00 $15.60
Mar-98 Feb-01 36 @ $2,833.33 $34,000 $16.00
215 SportsLife 40,000 Mar-96 Mar-98 15.08 25 @ $41,000.00 $492,000 $12.30 $13.28
Apr-98 Mar-01 36 @ $42,230.00 $506,760 $12.67
Apr-01 Mar-06 60 @ $43,919.17 $527,030 $13.18
Apr-06 Mar-11 60 @ $47,213.10 $566,557 $14.16
104 Homeplace 53,000 Feb-96 Oct-97 15.00 21 @ $43,283.33 $519,400 $9.80 $11.27
Nov-97 Oct-00 36 @ $45,491.67 $545,900 $10.30
Nov-00 Oct-05 60 @ $49,908.33 $598,900 $11.30
Nov-05 Jan-11 63 @ $54,325.00 $651,900 $12.30
134 Discount Travel 1,320 Jan-96 Jan-98 5.00 24 @ $1,870.00 $22,440 $17.00 $17.93
Feb-98 Jan-99 12 @ $1,980.00 $23,760 $18.00
Feb-99 Jan-00 12 @ $2,039.00 $24,468 $18.54
Feb-00 Jan-01 12 @ $2,101.00 $25,212 $19.10
105 The Sport Shoe 15,000 Jan-96 Nov-97 9.92 23 @ $17,650.00 $211,800 $14.12 $14.93
Dec-97 Nov-00 36 @ $18,275.00 $219,300 $14.62
Dec-00 Nov-02 24 @ $18,900.00 $226,800 $15.12
</TABLE>
7/16/97 2
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-02 Nov-05 36 @ $19,525.00 $234,300 $15.62
102 New Homes America 3,300 Dec-95 Feb-98 5.25 27 @ $4,815.25 $57,783 $17.51 $18.12
Mar-98 Feb-99 12 @ $4,961.00 $59,532 $18.04
Mar-99 Feb-00 12 @ $5,109.50 $61,314 $18.58
Mar-00 Feb-01 12 @ $5,260.75 $63,129 $19.13
145 TSI Soccer 3,170 Dec-95 Feb-98 5.17 26 @ $3,963.00 $47,556 $15.00 $15.66
Mar-98 Feb-01 36 @ $4,261.00 $51,132 $16.13
119 Hallmark Showcase 6,800 Oct-95 Oct-98 3.00 36 @ $9,066.67 $108,800 $16.00 $16.00
124 Publix 56,146 Nov-95 Dec-15 20.08 241 @ $37,430.67 $449,168 $8.00 $8.00
130 Great Clips 960 Nov-95 Nov-97 5.08 25 @ $1,440.00 $17,280 $18.00 $18.65
Dec-97 Nov-98 12 @ $1,483.20 $17,798 $18.54
Dec-98 Nov-99 12 @ $1,528.00 $18,336 $19.10
Dec-99 Nov-00 12 @ $1,573.58 $18,883 $19.67
136 Disc Go Round 1,300 Oct-95 Dec-97 3.17 26 @ $1,785.33 $21,424 $16.48 $16.63
Jan-98 Dec-98 12 @ $1,838.42 $22,061 $16.97
116 Zany Brainy 13,500 Oct-95 Oct-97 10.33 25 @ $16,593.75 $199,125 $14.75 $15.40
Nov-97 Oct-00 36 @ $17,156.25 $205,875 $15.25
Nov-00 Jan-06 63 @ $17,718.75 $212,625 $15.75
</TABLE>
7/16/97 3
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Town Center Prado-As of 7/97
Barrett Parkway @ Bells Ferry Road
Atlanta, Cobb County, Georgia
Recent Lease Analysis for 24 Months
<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
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
126 Barnes & Noble 19,978 Sep-95 Sep-00 15.33 60 @ $20,810.42 $249,725 $12.50 $13.52
Oct-00 Sep-05 60 @ $22,475.25 $269,703 $13.50
Oct-05 Jan-11 64 @ $24,140.08 $289,681 $14.50
128 Mail Boxes, Inc. 1,320 Oct-95 Nov-98 5.17 38 @ $1,980.00 $23,760 $18.00 $18.32
Dec-98 Nov-99 12 @ $2,039.42 $24,473 $18.54
Dec-99 Nov-00 12 @ $2,100.58 $25,207 $19.10
142 Party City 9,975 Oct-95 Jan-01 5.33 64 ~ $13,092.19 $157,106 $15.75 $15.75
152 Hickory Hams 2,573 Oct-95 Nov-97 5.17 26 @ $3,645.08 $43,741 $17.00 $17.74
Dec-97 Nov-00 36 @ $3,919.54 $47,034 $18.28
138 BellSouth Mobility 1,500 Sep-95 Nov-97 5.17 26 @ $2,250.00 $27,000 $18.00 $18.78
Dec-97 Nov-00 36 @ $2,418.75 $29,025 $19.35
Total Area 266,667
</TABLE>
7/16/97 4
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
rcntbysize
================================================================================
Summary of Leases Starting Within The Last Two Years
Town Center Prado
Arranged By Size
================================================================================
Average
Annual
Square Term Lease
Suite Tenant Feet (Yrs) Rate
================================================================================
Shops less than 1,500 SF
130 Great Clips 960 5.08 $18.65
132 Olsten Staffing 1,200 5.00 $19.11
136 Disc Go Round 1,300 3.17 $16.63
134 Discount Travel 1,320 5.00 $17.93
128 Mail Boxes, Inc. 1,320 5.17 $18.32
138 BellSouth Mobility 1,500 5.17 $18.78
Shops 1,501-3,000 SF
122 Jenny Craig, Inc. 2,125 5.00 $15.60
152 Hickory Hams 2,573 5.17 $17.74
140 AT&T 2,000 5.00 $20.00
Shops 3,001-5,000 SF
145 TSI Soccer 3,170 5.17 $15.66
102 New Homes America 3,300 5.25 $18.12
Shops 5,001-10,000 SF
115 Wendy's Bridal Shoppes 5,500 5.00 $12.50
108 Gateway Computers 6,500 5.00 $15.00
119 Hallmark Showcase 6,800 3.00 $16.00
142 Party City 9,975 5.33 $15.75
Free Standing Buildings on Outparcels
OPA Blockbuster 7,000 10.00 $18.94
OPB Atlanta Bread 4,000 5.00 $15.15
======
Total 60,543
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
Summary of Recovery Provisions & % Clause @ Town Center Prado Center
Town Center Prado
<TABLE>
<CAPTION>
CAM Insurance
------------------------------- -----------------------
GLA Share % Admin. Fee Share % Admin. Fee
===============================================================================================
<C> <C> <C> <C> <C> <C>
5 Sportslife 40,000 Pro Rata(2), (3) 10.0% None
400 Homeplace 53,000 Pro Rata(2), (3) 7.0% Pro Rata 0.0%
Stein Mart 36,538 Pro Rata(2) 15.0% Pro Rata 15.0%
500 The Sport Shoe 15,000 Pro Rata(2) 10.0% Pro Rata 0.0%
700 Coomer's Crafts 14,500 Pro Rata(2) 15.0% Pro Rata 15.0%
800 Zany Brainy 13,500 Pro Rata(2) 15.0% Pro Rata 15.0%
900 Hallmark Showcase 6,800 Pro Rata(2) 12.0% Pro Rata 0.0%
1000 Publix 56,146 Pro Rata(1), (3) 0.0% (4) 0.0%
1100 Barnes & Noble 19,968 Pro Rata(2) 10.0% Pro Rata 0.0%
1200 Disc Go Round 1,300 Pro Rata(1) 15.0% Pro Rata 15.0%
1201 Mail Boxes, Etc. 1,320 Pro Rata(1) 15.0% Pro Rata 15.0%
1250 Town Prado Cleaners 1,200 Pro Rata(1) 15.0% Pro Rata 0.0%
1202 Great Clips 960 Pro Rata(2) 15.0% Pro Rata 0.0%
1203 Bell South Mobility 1,500 Pro Rata(2) 15.0% Pro Rata 15.0%
1204 Brueggers Bagles 2,000 Pro Rata(2) 15.0% Pro Rate 0.0%
1300 Party City 9,975 Pro Reta(2) 15.0% Pro Rata 0.0%
1400 TSI Soccer 3,170 Pro Rata(2) 15.0% Pro Rata 15.0%
1501 Hickory Hams 2,573 Pro Rata(1) 15.0% Pro Rata 15.0%
1500 New Homes America 3,300 Pro Rata(1) 15.0% Pro Rata 15.0%
115 Wendy Bridal 5,500 Pro Rata(1) 15.0% Pro Rata 15.0%
1210 Discount Travel 1,320 Pro Rata(2) 15.0% Pro Rata 15.0%
108 Gateway Computes 6,500 Pro Rata(1) 0.0% Pro Rata 0.0%
OPA Blockbuster 7,000 Pro Rata(1) 0.0% (4) 0.0%
910 Jenny Craig 2,125 Pro Rata(2) 10.0% Pro Rata 15.0%
132 Olsten Staffing 1,200 Pro Rata(1) 15.0% Pro Rata 15.0%
-----
#####
</TABLE>
Real Estate Taxes Denominator
----------------------- -------------- % Rent
Share % Admin. Fee Clause
=============================================================================
5 Sportslife Pro Rata 0.0% GLA of Center 0.0%
400 Homeplace Pro Rata 0.0% GLA of Center 0.0%
Stein Mart Pro Rata 0.0% 2.0%
500 The Sport Shoe Pro Rata 0.0% GLA of Center 2.0%
700 Coomer's Crafts Pro Rata 0.0% GLA of Center 0.0%
800 Zany Brainy Pro Rata 0.0% GLA of Center 0.0%
900 Hallmark Showcase Pro Rata 0.0% GLA of Center 5.0%
1000 Publix Pro Rata 0.0% GLA of Center 1.25%
1100 Barnes & Noble Pro Rata 0.0% GLA of Center 3.0%
1200 Dlsc Go Round Pro Rata 15.0% Occupied GLA/80% 5.0%
1201 Mail Boxes, Etc. Pro Rata 15.0% Occupied GLA/90% 0.0%
1250 Town Prado Cleaners Pro Rata 0.0% GLA of Center 5.0%
1202 Great Clips Pro Rata 15.0% Occupied GLA/80% 4.0%
1203 Bell South Mobility Pro Rata 0.0% GLA of Center 0.0%
1204 Brueggers Bagles Pro Rata 0.0% Occupied GLA/90% 0.0%
1300 Party Clty Pro Rata 0.0% GLA of Center 0.0%
1400 TSI Soccer Pro Rata 15.0% Occupied GLA/90% 0.0%
1501 Hickory Hams Pro Rata 15.0% Occupied GLA/80% 5.0%
1500 New Homes America Pro Rata 15.0% Occupied GLA/80% 0.0%
115 Wendy Bridal Pro Rata 15.0% Occupied GLA/80% 3.0%
1210 Discount Travel Pro Rata 15.0% Occupied GLA/80% 0.0%
108 Gateway Computes Pro Rata 0.0% GLA of Center 0.0%
OPA Blockbuster Pro Rata 0.0% GLA of Center 0.0%
910 Jenny Craig Pro Rata 0.0% GLA of Center 0.0%
132 Olsten Staffing Pro Rata 0.0% GLA of Center 0.0%
- --------------------------------------------------------------------------------
1. CAM includes management fee, depreciation of equipment, and reserves for
roof/parking lot repair.
2. CAM excludes management fee but includes depreciation and reserves.
3. Atypical CAM composition. CAM excludes one or more of the following: trash
removal, fire protection services expenses, exterior electricity or
pressure washing of building exterior.
4. Liability insurance only.
- --------------------------------------------------------------------------------
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
NATIONAL DATABASE OF SALES
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
===============================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
===============================================================================
<TABLE>
<CAPTION>
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq. Ft.) Coverage Sold GLA % of Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. Pending 1981 $76,200,000 1,643,083 23.0% 377,965 153,355 40.6%
NEC/Sepulveda Blvd. & Marina Jul-97 Good
Los Angeles County,
Manhattan Beach, California
- ------------------------------------------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7%
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
3 280 Metro Center Jun-97 N/A $39,174,000 - - 213,603 87,813 41.1%
Metro Center Good
San Mateo County
Colma, California
- ------------------------------------------------------------------------------------------------------------------------------------
4 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226 45.0%
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461 55.8%
Fremont Blvd. & Monty Ave. Good
Alameda County,
Fremont, California
- ------------------------------------------------------------------------------------------------------------------------------------
6 LaJolla Village Mar-97 1979/94 $73,500,000 - - 418,356 - -
LaJolla, California Good
- ------------------------------------------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. Mar-97 1990 $22,000,000 1,817,759 18.5% 336,670 102,220 30.4%
SEQ/ I-880 & Highway 37 Good
Solano County,
Vallejo, California
- ------------------------------------------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000 84.2%
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
9 Carrollton Crossroads Jan-97 1987 $18,100,000 - - 303,805 234,453 77.2%
US Hwy. 27 & Hwy. 166 Good
Carrollton, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
10 Westminster Center Dec-96 1991 $51,750,000 1,829,520 20.0% 365,699 - -
Golden West Ave. & Westminster Good
Orange County
Westminster, California
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter Dec-96 1972/96 $76,500,000 2,938,558 26.8% 788,826 663,404 84.1%
N. Jantzen Dr & N. Center Ave Good
Portland, Oregon
- ------------------------------------------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center Nov-96 1995 $34,600,000 - - 499,129 459,209 92.0%
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
13 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000 85.0%
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
- ------------------------------------------------------------------------------------------------------------------------------------
14 Prestonwood Village Sep-96 1980 $14,660,000 701,752 27.1% 190,131 123,454 64.9%
5305 Arapaho Road Good
Dallas County,
Dallas, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Sale
Sale Price/ NOI/
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants
=====================================================================================================
<S> <C> <C> <C> <C> <C>
1 Manhattan Village S.C. $201.61 $15.87 7.87% Ralph's Sav-On,
NEC/Sepulveda Blvd. & Marina Mann Theaters,
Los Angeles County, Macy's Mens
Manhattan Beach, California
- -----------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. $112.19 $11.21 9.99% Bed Bath & Beyond,
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million,
Orlando, Florida Shoe Carnival
- -----------------------------------------------------------------------------------------------------
3 280 Metro Center $183.40 $15.50 8.45% Marshalls, Nordstrom
Metro Center Rack, Kids R Us, Old
San Mateo County Navy, Barnes & Noble
Colma, California
- -----------------------------------------------------------------------------------------------------
4 Smoketown Station $99.06 $10.13 10.23% Lowe's Home Center
Prince William Pkwy & Worth Shoppers Food Whse,
Prince William County, Best Buy
Woodbridge, Virginia
- -----------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. $91.41 $8.00 8.75% Safeway, Ross, Longs
Fremont Blvd. & Monty Ave. Drug, Old Navy,
Alameda County, OfficeMax,
Fremont, California Tower Records
- -----------------------------------------------------------------------------------------------------
6 LaJolla Village $175.69 $15.81 9.00% Smith's Food King,
LaJolla, California AMC Theaters, Ross,
Marshalls, Super Crown
- -----------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. $65.35 $6.02 9.21% OfficeMax, Ross, PetCo,
SEQ/ I-880 & Highway 37 Vacant HomeBase,
Solano County, Service Mer'dise
Vallejo, California (gr.lease)
- -----------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) $131.15 $13.70 10.45% Circuit City, Cost Plus,
U.S. Highway 183 & Baby Superstore, Design
N. Mopac Blvd. Shoe Whse, Just for
Austin, Texas Feet, Mikasa
- -----------------------------------------------------------------------------------------------------
9 Carrollton Crossroads $59.58 $6.43 10.80% Wal-Mart, Goody's,
US Hwy. 27 & Hwy. 166 JCPenney, Kroger
Carrollton, Georgia
- -----------------------------------------------------------------------------------------------------
10 Westminster Center $141.51 $11.76 8.31% Home Deport, Edwards
Golden West Ave. & Westminster Cinema, Lucky Super-
Orange County market, Thrifty Drug
Westminster, California
- -----------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter $96.98 $8.87 9.15% Kmart, HomeDepot, Toys
N. Jantzen Dr & N. Center Ave RUs, REI, Ross, Comp.
Portland, Oregon City, Copelands, Linens,
OldNavy, Barnes&Noble
- -----------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center $69.32 $6.59 9.50% Target*, Home Depot*,
Ga. 316 & GA. 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- -----------------------------------------------------------------------------------------------------
13 Centennial Plaza $71.37 $7.49 10.50% Home Depot, Best Buy,
N.W. 59 & May Avenue Home Place
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------------------------------
14 Prestonwood Village $77.10 $9.27 12.02% Best Buy, ToysRUs,
5305 Arapaho Road KidsRUs, Drug
Dallas County, Emporium
Dallas, Texas
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Sale Occupancy
No. Name/Location At Sale Comments
================================================================================================
<S> <C> <C>
1 Manhattan Village S.C. 93.3%
NEC/Sepulveda Blvd. & Marina
Los Angeles County,
Manhattan Beach, California
- -------------------------------------------------------------------------------------------------
2 International Drive Value Ctr. 100.0% New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%
- -------------------------------------------------------------------------------------------------
3 280 Metro Center 99.0% 351,632sf ctr. known as the country's
Metro Center first "power" ctr. IRR appx. 10.76% w/
San Mateo County term.cap. of 9.5%. UACinema, vacant
Colma, California Home Depot, & NYFabric not incl.
- -------------------------------------------------------------------------------------------------
4 Smoketown Station 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth hub for county. Anchor rents $8.40/sf; in-
Prince William County, line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
- -------------------------------------------------------------------------------------------------
5 Fremont Hub Shopping Ctr. - 661,140sf ctr. orginally constructed as
Fremont Blvd. & Monty Ave. regional ctr. Converted b/w '92-'94.
Alameda County, Anchors not incl. in GLA sold are Mont-
Fremont, California gomery Ward & Home Express
- --------------------------------------------------------------------------------------------------
6 LaJolla Village - Solus to Prudential.
LaJolla, California
- -------------------------------------------------------------------------------------------------
7 Gateway Plaza Shopping Ctr. 90.1% Sale of ctr. w/ 3 future pad sites to
SEQ/ I-880 & Highway 37 accommodate 25,600sf addition. Anchors
Solano County, not incl. ToysRUs, Costco, SaveMart,
Vallejo, California Longs, Cinedome, HomeDepot
- -------------------------------------------------------------------------------------------------
8 Aboretum Crossing (Phs. I) 98.0% Presale of promotional center. Sale
U.S. Highway 183 & expected to close by Jan. 31, 1997.
N. Mopac Blvd. REIT purchase based on direct cap.
Austin, Texas
- -------------------------------------------------------------------------------------------------
9 Carrollton Crossroads 98.5% Location 32 miles west of downtown
US Hwy. 27 & Hwy. 166 Atlanta. Renovated in 1993. Within 10-
Carrollton, Georgia mile radius - 20,162 households,
$41,800 avg. household income.
- -------------------------------------------------------------------------------------------------
10 Westminster Center 93.0% Ctr. reportedly developed at cost of $45
Golden West Ave. & Westminster million by IDM Corp. Avg. lease rate for in
Orange County line space $15-$27/sf.
Westminster, California
- -------------------------------------------------------------------------------------------------
11 Jantzen Beach Supercenter 97.0% Redevelopment of a failed mall. Mont-
N. Jantzen Dr & N. Center Ave gomery Ward & Kmart anchor enclosed
Portland, Oregon mall of 87,500 square feet. Montgomery
Ward on ground lease.
- -------------------------------------------------------------------------------------------------
12 Lawrenceville Market Center 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 Estate Investment Management
Lawrenceville, Georgia * Ground Lease
- -------------------------------------------------------------------------------------------------
13 Centennial Plaza 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue writing. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-9.25%
interest. REIT buyer.
- -------------------------------------------------------------------------------------------------
14 Prestonwood Village 97.0% Ctr. purchased at high cap due to some
5305 Arapaho Road rents being above mkt., flat income
Dallas County, stream, & 13,770sf of 2nd story space.
Dallas, Texas
- -------------------------------------------------------------------------------------------------
</TABLE>
Page 1
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
============================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200 41.9%
I-85 @ W. T. Harris Blvd. Excellent
Charlotte, North Carolina
- ----------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384 43.6%
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ----------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza Jul-96 1992 $12,700,000 653,000 32.2% 210,000 149,760 71.3%
Mesquite, Good
Dallas County, Texas
- ----------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837 73.2%
SWC/Preston & Park Blvd. Excellent
Colling County,
Plano, Texas
- ----------------------------------------------------------------------------------------------------------------------------
19 Casa Linda Jun-96 1950/86 $33,769,000 1,128,640 28.9% 326,116 -- --
Garland Rd. & Buckner Blvd. Good
Dallas County,
Dallas, Texas
- ----------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center May-96 1970 $58,500,000 1,290,683 26.8% 345,286 104,244 30.2%
Lee Jackson Hwy. & Majestic Ln. Good
Fairfax County,
Chantilly, Virginia
- ----------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza Mar-96 1972/82/93 $14,375,000 737,906 20.0% 147,396 122,052 82.8%
NEC/Federal & Candlewood Lake Good
Fairfield County,
Brookfield, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
22 Kmart Center Feb-96 1994/95 $23,134,700 1,224,036 22.6% 276,500 140,221 50.7%
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
- ----------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace Jan-96 1976/91 $80,000,000 1,000,573 45.9% 459,703 218,929 47.6%
Mexella & Lincoln Blvd. Good
Marina Freeway
Marina Del Rey, California
- ----------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center Jan-96 1989 $15,950,000 9,439,450 2.5% 235,892 -- --
1915 Hurstbourne Parkway Good
Jefferson County
Louisville, Kentucky
- ----------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta Dec-95 1995/96 $46,000,000 -- -- 491,000 440,000 89.6%
S/E/C Shea Blvd. & Excellent
Pina Co. Road
Scottsdale, Arizona
- ----------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square Dec-95 1983 $24,835,000 1,104,246 28.7% 317,197 190,318 60.0%
ES/I-45 & at Bay Blvd. Good
Houston
Webster, Texas
- ----------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village Dec-95 1995 $50,000,000 1,393,920 24.9% 347,699 254,979 73.3%
WS/Ashford Dunwoody, Under Excellent
North of downtown Atlanta Contract
Atlanta, Georgia
- ----------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner Nov-95 1970/89 $29,500,000 867,846 21.5% 186,734 96,833 51.9%
Route 71 & I-84 Good
Hartford County
West Hartford, Connecticut
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
15 The Village at University Place $ 99.85 $ 9.84 9.85% Best Buy, Office Depot, 100.0% Other anchors at center are
I-85 @ W. T. Harris Blvd. TJ Maxx, Rhodes Wal-Mart and Sam's Club. This
Charlotte, North Carolina Furniture is a pre-sale of new center
developed by Hawn.
- ------------------------------------------------------------------------------------------------------------------------------------
16 Miller Square Plaza $ 78.13 $ 7.81 10.00% Publix 92.0% Community center; block &
13898 SW 56th Street Eckerd Drug stucco. Fair-avg exposure.
Dade County, Theater (gr. lease) Anchor rents appx. $7-$9/sf;
Kendall, Miami, Florida J. Byrons (not owned) in-line shops $12-$19/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
17 Towneast Center & Plaza $ 60.48 $ 6.65 11.00% Best Buy, Sears Home 100.0% REIT buyer using direct cap
Mesquite, Life, PetsMart, Home only.
Dallas County, Texas Depot* * Home Depot is tenant owned.
- ------------------------------------------------------------------------------------------------------------------------------------
18 Preston Shepard Place $128.83 $12.11 9.40% Marshalls, Steinmart, 100.0% New ctr. in affluenct area.
SWC/Preston & Park Blvd. Office Depot, Baby Traffic counts > 37,000 &
Colling County, Superstore, MJ Des., 45,000/day. Buyer used 10.5%
Plano, Texas Borders, HomePlace IRR & 9.25% terminal cap in
analysis. Avg. rent =
$15.73/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
19 Casa Linda $103.55 $ 9.84 9.50% Albertsons, Blockbuster 84.0% Older section of eastern
Garland Rd. & Buckner Blvd. Music, Ambers Crafts Dallas. Good condition at
Dallas County, sale. Sale based on existing
Dallas, Texas income.
- ------------------------------------------------------------------------------------------------------------------------------------
20 Greenbriar Towne Center $169.42 $14.94 8.82% CVS, LinensNThings, 84.0% Part of bulk property
Lee Jackson Hwy. & Majestic Ln. Marshalls, Ross, Total purchase; price allocated &
Fairfax County, Beverage, Giant Food adjusted for assumption of
Chantilly, Virginia existing debt at above mkt.
inter. rate. NOI proj. in '97
results in 9.2% OAR.
- ------------------------------------------------------------------------------------------------------------------------------------
21 White Turkey Plaza $ 97.53 $ 9.00 9.22% OfficeMax, The Wiz, 99.0% Property does not have anchor
NEC/Federal & Candlewood Lake Waldbaums, T.J.Maxx > 50,000 sf but has good
Fairfield County, juniors. In-line rents are
Brookfield, Connecticut $9-$18/sf; Wiz & OfficeMax
$13.50/sf; TJMaxx and Wald.
below market.
- ------------------------------------------------------------------------------------------------------------------------------------
22 Kmart Center $ 83.67 $ 7.93 9.48% Kmart 97.0% Community center; block &
10501 Pines Boulevard Food Lion tilt; good exposure. Rental
Broward County, rates range from $8-$20/sf.
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
23 Villa Marina Marketplace $174.03 $18.43 10.59% Vons, Sav-On, 92.0% Project consists of 2
Mexella & Lincoln Blvd. UA Theatres, Sport properties; 2nd largest
Marina Freeway Chalet, Cineplex retail ctr. west of San Diego
Marina Del Rey, California Odeon, Gelson's Fwy b/w Ventura Fwy &
Manhattan.
Sales= $347/sf;
rents=$12-45/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
24 Town Fair Shopping Center $ 67.62 $ 6.49 9.60% Wal-Mart 100.0% Good quality center in prime
1915 Hurstbourne Parkway Staples retail location. Rents
Jefferson County Michael's $12-$16/sf. Wal-Mart w/ sales
Louisville, Kentucky Fashion Bug @ $400/sf. Property in good
condition at sale.
- ------------------------------------------------------------------------------------------------------------------------------------
25 Scottsdale Fiesta $ 93.69 $ 9.37 10.00% HomeBase, Kmart, 100.0% Separate take down of Home
S/E/C Shea Blvd. & OfficeMax, Smith's, Base as of 3/96. Total
Pina Co. Road Barnes&Noble, Comp transaction contracted 12/95.
Scottsdale, Arizona USA, Linens, PetSmart New center in developing
area.
- ------------------------------------------------------------------------------------------------------------------------------------
26 Baybrook Square $ 78.30 $ 7.24 9.25% Target 100.0% Price adj. to incl. $1.0M in
ES/I-45 at Bay Blvd. Service Merchandise renovations done prior to
Houston Palais Royal sale. Buyer used IRR of
Webster, Texas 11.25-11.50%. Ctr. has good
visibility and access.
- ------------------------------------------------------------------------------------------------------------------------------------
27 Perimeter Village $143.80 $16.54 11.50% Wal-Mart 93.0% Concrete block, brick facade
WS/Ashford Dunwoody, Borders Books shopping center under
North of downtown Atlanta Rhodes Furniture construction. Under contract
Atlanta, Georgia Reading China as of Dec-95. Shop leases run
from $18-30/sf; avg. $25/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
28 Corbins Corner $157.98 $14.98 9.48% Filene's Basement 96.1% Specialty retail center
Route 71 & I-84 Toys R Us located across from Westfarms
Hartford County Kids R Us Mall at I-84. Strong trade
West Hartford, Connecticut Old Navy area. Renovated in 1989.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=========================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook Nov-95 1985/93 $25,675,000 1,742,535 24.5% 426,097 372,987 87.5%
NEC/Medical Ctr. Blvd. & I-45 Good
Houston
Webster, Texas
- -------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. Sep-95 1990 $14,000,000 923,472 20.3% 187,168 114,086 61.0%
SEC/Route 53 & Briarcliff Rd. Good
DuPage County
Bolingbrook, Illinois
- -------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II Jul-95 1995 $ 9,655,000 435,600 22.7% 98,954 75,454 76.3%
NWC/Mt. Zion Blvd. & Zion Under Excellent
Clayton County Contract
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. May-95 1980/89 $19,000,000 583,704 30.7% 179,000 70,566 39.4%
Route 112 & Bicycle Path Average
Suffolk County
Port Jefferson, New York
- -------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square May-95 1980/87 $ 9,200,000 435,600 22.7% 98,704 58,078 58.8%
1715 Howell Mill Road Very Good
Fulton County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
34 Cobb Place Apr-95 1987 $21,035,000 1,013,206 23.5% 237,791 133,161 56.0%
800 Ernest Barrett Pkwy. Good
Cobb County
Kennesaw, Georgia
- -------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. Apr-95 1991 $21,000,000 1,184,334 14.4% 170,406 88,807 52.1%
NEC/Route 22 & Buffalo Gr. Very Good
Lake County
Buffalo Grove, Illinois
- -------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134 81.1%
Santa Clara County Excellent
Milpitas, California
- -------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center Mar-95 1994 $12,300,000 875,164 18.4% 160,965 135,216 84.0%
Route 59 & Meridian Pkwy Good
DuPage County
Aurora, Illinois
- -------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center Feb-95 1990 $14,400,000 478,768 24.4% 117,025 97,735 83.5%
800-850 Playa Avenue Good
Monterey County
Sand City, California
- -------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III Feb-95 1995 $ 9,100,000 415,998 22.1% 92,000 92,000 100.0%
SS/Steve Reynolds Blvd. Excellent
Gwinnett County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. Jan-95 1982 $ 7,425,000 457,380 17.1% 78,390 41,345 52.7%
2090 Dunwoody Club Dr. Good
DeKalb County
Georgia
- -------------------------------------------------------------------------------------------------------------------------
41 Danbury Square Jan-95 1989 $19,250,000 840,708 22.9% 192,621 78,700 40.9%
Kenosia Ave. & I-84 Good
Fairfield County
Danbury, Connecticut
- -------------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing Dec-94 1994 $34,400,000 1,481,040 21.6% 319,499 202,229 63.3%
NWC/Georgia 400 & Mansell Excellent
Fulton County
Atlanta, Georgia
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
29 Center at Baybrook $ 60.26 $ 6.03 10.00% Builder's Sq., Bed 99.0% Former mall renovated/converted in
NEC/Medical Ctr. Blvd. & I-45 Bath Beyond, 1993. Good location, exposure.
Houston Oshmans, SteinMart Anchors generate over 90% of minimum
Webster, Texas Best Buy, Sears rent. Avg in-line rent = $12.03/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
30 Market Square S.C. $ 74.80 $ 7.75 10.36% Wal-Mart 96.0% Wal-Mart has option to expand
SEC/Route 53 & Briarcliff Rd. 30,000. Located in growing retail
DuPage County area. Other tenants incl. Aldi Food
Bolingbrook, Illinois Store, Bedding Experts, & fast food
restaurants.
- ------------------------------------------------------------------------------------------------------------------------------------
31 Southlake Pavillion, Ph. II $ 97.57 $ 9.18 9.41% Michael's 100.0% New community center located next to
NWC/Mt. Zion Blvd. & Zion Old Navy freestanding Target, Home Depot, &
Clayton County Baby Superstore Southlake Ph. I Buyer used 5%
Atlanta, Georgia vac-ancy factor & $.10/sf reserve.
- ------------------------------------------------------------------------------------------------------------------------------------
32 Port Plaza S.C. $106.15 $10.72 10.10% FoodTown 99.0% Average quality community center.
Route 112 & Bicycle Path CVS Drugstore Other tenants include Kay Bee Toy,
Suffolk County Dress Barn, Sam Goody, NYNEX.
Port Jefferson, New York
- ------------------------------------------------------------------------------------------------------------------------------------
33 Howell Mill Square $ 93.21 $ 9.09 9.75% Kroger 100.0% Good quality brick & masonry ctr.
1715 Howell Mill Road located in densely populated trade
Fulton County area. Korger provides strong daily
Atlanta, Georgia draw; ctr. has poor visibility.
- ------------------------------------------------------------------------------------------------------------------------------------
34 Cobb Place $ 88.46 $ 9.56 10.81% Service M'dise 96.0% Good quality center with limited
800 Ernest Barrett Pkwy. Upton's exposure & narrow configuration.
Cobb County AMC Theatres Ctr. has high amount of in-line
Kennesaw, Georgia space & lacks drawing power of 4th
anchor store.
- ------------------------------------------------------------------------------------------------------------------------------------
35 Woodland Commons S.C. $123.24 $11.53 9.36% Dominick's 98.0% Property includes three outlots, one
NEC/Route 22 & Buffalo Gr. Sears Hardware of which was zoned industrial (5.03
Lake County ac.). Also includes income from
Buffalo Grove, Illinois ground leases.
- ------------------------------------------------------------------------------------------------------------------------------------
36 McCarthy Ranch $113.97 $10.60 9.30% Service M'dise 100.0% Pre-sale of power ctr with good
Santa Clara County SportsMart, Borders, access & freeway exposure. Wal-Mart
Milpitas, California OfficeMax, PetsMart, not included in sale. Buyer used
Computer City, Ross 11.2% IRR. Anchor rents
$9.70-18.70/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
37 Builders Square Center $ 76.41 $ 7.63 9.99% Builders Square 100.0% Concrete block, decorative face
Route 59 & Meridian Pkwy PetsMart brick center; above average quality.
DuPage County Located on the fringe of Meridian
Aurora, Illinois Business Campus.
- ------------------------------------------------------------------------------------------------------------------------------------
38 Sand Dollar Center $123.05 $12.06 9.80% Office Depot 96.7% Good quality power ctr along Hwy 1.
800-850 Playa Avenue Marshalls Costco owns their own land/bldg.
Monterey County Orchard Supply Anchor rents $8.00-10.77/sf; shop
Sand City, California Costco** rents avg $16.56/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
39 Venture Pointe, Ph. III $ 98.91 $ 9.25 9.35% Circuit City 100.0% Two anchor tenants in power center.
SS/Steve Reynolds Blvd. Media Play Both tenants on long-term leases
Gwinnett County with appx. 20 yrs remaining. Located
Atlanta, Georgia near Gwinnett Mall in Northcross
area.
- ------------------------------------------------------------------------------------------------------------------------------------
40 Orchard Park S.C. $ 94.72 $ 9.06 9.56% Kroger 80.0% Average-good quality community
2090 Dunwoody Club Dr. center. Sale based on actual income
DeKalb County & expenses, excl. reserves. Seller
Georgia acquired through foreclosure.
- ------------------------------------------------------------------------------------------------------------------------------------
41 Danbury Square $ 99.94 $ 9.52 9.53% Loehmann's 90.0% Good quality community shopping
Kenosia Ave. & I-84 Toys R Us center located adjacent to Danbury
Fairfield County Kids R Us Fair regional mall.
Danbury, Connecticut
- ------------------------------------------------------------------------------------------------------------------------------------
42 Mansell Crossing $107.67 $ 9.80 9.10% AMC Theatres, 99.0% One-story, concrete blk & brick
NWC/Georgia 400 & Mansell Uptons, TJMaxx, center located appx 0.8 miles south
Fulton County OfficeMax, of North Point Mall. Avg shop
Atlanta, Georgia Sports Authority rent=$15.23/sf. Ctr also has Toys R
Us, Michaels.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=====================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
43 Stewart Plaza Dec-94 1990 $22,000,000 561,924 39.6% 222,500 146,504 65.8%
650 Stewart Avenue Good
Nassau County
Garden City, New York
- ---------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South Nov-94 1989/93 $ 6,500,000 866,844 18.8% 162,778 134,659 82.7%
Highway 138 & I-675 Good
Clayton County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza Sep-94 1975/91 $57,350,000 2,178,000 21.8% 475,600 262,236 55.1%
NW 56th & Sheridan St. Good
Broward County
Hollywood, Florida
- ---------------------------------------------------------------------------------------------------------------------
46 Orland Town Center Sep-94 1994 $12,000,000 871,200 15.4% 134,000 55,873 41.7%
SEC/159th & 95th Ave. Excellent
Cook County
Orland Hills, Illinois
- ---------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center Sep-94 1994 $21,800,000 1,089,000 21.1% 230,000 127,267 55.3%
Lyman Ave. & 75th St. Excellent
DuPage County
Darien, Illinois
- ---------------------------------------------------------------------------------------------------------------------
48 Latham Farms Sep-94 1993 $64,600,000 3,920,400 15.4% 603,405 467,000 77.4%
I-87, U.S. 9, & Rte. 7 Excellent
Albany County, Colonie,
Albany, New York
- ---------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center Aug-94 1987 $20,500,000 632,491 33.6% 212,355 53,500 25.2%
SWC/ Ludlam Rd. & Bird Rd. Avg.-Good
Dada County,
Unicorp. Miami, Florida
- ---------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace Aug-94 1992 $14,850,000 1,785,960 9.7% 173,538 0 0.0%
SWC/Garland & Jupiter Good
Dallas, Texas
- ---------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair Aug-94 1992 $18,650,000 1,724,976 12.1% 209,362 0 0.0%
SWC/U.S. 190 & Brodie Good
Austin, Texas
- ---------------------------------------------------------------------------------------------------------------------
52 Southlake Pavillion Aug-94 1994 $12,500,000 539,273 24.8% 133,515 114,800 86.0%
NWC/Mt. Zion Blvd. & Zion Excellent
Clayton County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
53 Anaheim Hills Festival Jul-94 1991-94 $48,980,000 3,702,600 8.2% 303,661 146,755 48.3%
8000-8200 E. Santa Ana Very Good
Orange County
Anaheim Hills, California
- ---------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavillion Jul-94 1993 $18,400,000 248,292 40.3% 100,161 67,608 67.5%
Peachtree & Piedmont Very Good
Buckhead County
Atlanta, Georgia
- ---------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. Jul-94 1992-93 $51,000,000 2,090,880 27.6% 576,973 279,600 48.5%
U.S. 101 at Rowland Very Good
Marin County
Novato, California
- ---------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavillion Jun-94 1993-94 $31,750,000 153,767 112.8% 173,430 150,570 86.8%
Hale & Maple Avenues Good
Westchester County
White Plains, New York
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
43 Stewart Plaza $ 98.88 $ 9.89 10.00% Caldor 86.0% Good quality community shopping
650 Stewart Avenue Kiddie City center located adjacent to the
Nassau County Roosevelt Field Mall in Garden City.
Garden City, New York
- ------------------------------------------------------------------------------------------------------------------------------------
44 Freeway Junction South $ 39.93 $ 4.06 10.16% Kmart 99.0% Average-good quality, concrete retail
Highway 138 & I-675 Bruno's ctr. on south side Atlanta.
Clayton County Visibility impaired by outpads &
Atlanta, Georgia setback. Price adjusted to reflect
repair costs.
- ------------------------------------------------------------------------------------------------------------------------------------
45 Sheridan Plaza $120.58 $10.97 9.10% Office Depot 95.0% Power center purchase based on a
NW 56th & Sheridan St. Publix 10.8% IRR, term. cap of 9.25-9.50%.
Broward County J. Byrons Sale included development of 15,000sf
Hollywood, Florida AMC Theatres Luria's. Sales b/w $200-300/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
46 Orland Town Center $ 89.55 $ 8.58 9.58% OfficeMax 100.0% Purchased on existing income.
SEC/159th & 95th Ave. Circuit City Wal-Mart not included in sale. Site
Cook County PetsMart had potential for additional bldg.
Orland Hills, Illinois Wal-Mart** Buyer quoted IRR of 10.8%.
- ------------------------------------------------------------------------------------------------------------------------------------
47 Darien Towne Center $ 94.78 $ 9.16 9.66% Home Depot 100.0% Power center opened in Summer '94.
Lyman Ave. & 75th St. Circuit City Wal-Mart not included in sale.
DuPage County PetsMart Majority of tenants have set options.
Darien, Illinois Wal-Mart** Buyer suggested 10.7% IRR.
- ------------------------------------------------------------------------------------------------------------------------------------
48 Latham Farms $107.06 $10.01 9.35% Wal-Mart 95.0% Good quality power center with trade
I-87, U.S. 9, & Rte. 7 Sam's Club area population reported at 150,000.
Albany County, Colonie, Home Quarters Placed on mkt in March '94. Masonry &
Albany, New York Shop 'N Save steel constr.
- ------------------------------------------------------------------------------------------------------------------------------------
49 Bird Ludlam Shopping Center $ 96.54 $ 8.80 9.12% Winn Dixie 95.0% Property in avg.-good condition at
SWC/ Ludlam Rd. & Bird Rd. Eckerd Drugs sale; minor exterior upgrade needed.
Dada County, Good accessible/visible location.
Unicorp. Miami, Florida Some 2nd story space.
- ------------------------------------------------------------------------------------------------------------------------------------
50 White Rock Marketplace $ 85.57 $ 7.70 9.00% Marshall's 94.0% Part of larger 325,548sf power
SWC/Garland & Jupiter Tom Thumb center. Good condition, relatively
Dallas, Texas Taylor Brooks new at sale. Purchased by Penn. State
Retirement Trust.
- ------------------------------------------------------------------------------------------------------------------------------------
51 Sunset Valley Marketfair $ 89.08 $ 8.79 9.87% PetsMart 99.0% Part of larger 352,084sf ctr.
SWC/U.S. 190 & Brodie TJMaxx Other tenants incl.
Austin, Texas Home Depot** SportsTown, Bookstop, Famous
Circuit City** Footware. Home Depot, Circuit City &
Luby's not included.
- ------------------------------------------------------------------------------------------------------------------------------------
52 Southlake Pavillion $ 93.62 $ 8.72 9.31% Media Play 100.0% Center located adjacent to Home Depot
NWC/Mt. Zion Blvd. & Zion PetsMart store w/ 3rd highest sales level in
Clayton County Rhodes Furniture Atlanta MSA. Good access & exposure
Atlanta, Georgia via I-75.
- ------------------------------------------------------------------------------------------------------------------------------------
53 Anaheim Hills Festival $161.30 $15.32 9.50% Vons, Marshalls, 75.0% Good quality power center with
8000-8200 E. Santa Ana TJMaxx, Cinema, stabilization guarantee. Buyer
Orange County Target** purchased based on NOI guarantee.
Anaheim Hills, California Mervyn's** Target & Mervyn's not part of sale.
- ------------------------------------------------------------------------------------------------------------------------------------
54 Buckhead Pavillion $183.70 $16.55 9.01% Sports Authority 75.0% Two-bldg center built in 1993. Income
Peachtree & Piedmont PetsMart projections using 5% vacancy for
Buckhead County in-line space. Acquired subject to
Atlanta, Georgia $12 million loan.
- ------------------------------------------------------------------------------------------------------------------------------------
55 Vintage Oaks S.C. $ 88.39 $ 8.17 9.24% Macy's Homestore, 89.0% Sale involves Phs I & II of power ctr
U.S. 101 at Rowland Oshmans, Marchalls, in affluent North San Francisco Bay
Marin County Costco** area. Costco & Target on long-term
Novato, California Target** ground leases. Buyer used 11.1% IRR.
- ------------------------------------------------------------------------------------------------------------------------------------
56 The Westchester Pavillion $183.07 $17.39 9.50% OfficeMax 92.0% Four-level, enclosed urban power ctr;
Hale & Maple Avenues Sports Authority reuse of former dept. store. Anchor
Westchester County Toys R Us rents $16.00-20.00/sf; in-line rents
White Plains, New York Borders Books $20.00-25.00/sf. Incl. devel.rights.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
======================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
57 Fairlane North S.C. Apr-94 1994 $59,200,000 2,983,860 19.8% 589,688 0 0.0%
Mercury Drive & Ford Drive Very Good
Michigan 153
Dearborn, Michigan
- ----------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza Feb-94 1988 $15,400,000 871,200 24.7% 215,275 94,976 44.1%
U.S. 30, E of Interstate 65 Good
Merrillville, Indiana
- ----------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. Feb-94 1993 $17,245,688 777,000 22.8% 177,308 138,958 78.4%
NWC/Golf & Basswood Good
Cook County
Schaumberg, Illinois
- ----------------------------------------------------------------------------------------------------------------------
60 Providence Square Jan-94 1990 $19,200,000 696,960 27.3% 190,378 108,747 57.1%
Upper Roswell & Good
Johnson Ferry
Marieta, Georgia
- ----------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace Dec-93 1987 $44,000,000 980,100 30.5% 299,206 0.0%
NEC/Birch & Randolph Average
Orange County
Brea, California
- ----------------------------------------------------------------------------------------------------------------------
62 The Quarry Dec-93 1992 $24,500,000 2,656,289 16.8% 447,000 325,000 72.7%
Joliet & LaGrange Roads Very Good
Cook County
Hodgkins, Illinois
- ----------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center Dec-93 1985 $26,380,000 1,611,720 16.2% 261,025 130,077 49.8%
Harbor & Orangethorpe Very Good
Orange County
Fullerton, California
- ----------------------------------------------------------------------------------------------------------------------
64 Townline Square Dec-93 1989 $25,000,000 1,397,405 21.6% 302,081 218,885 72.5%
S. Broad St. & Route 5 Good
New Haven County
Meriden, Connecticut
- ----------------------------------------------------------------------------------------------------------------------
65 First Colony Commons Dec-93 1992-94 $33,350,000 1,595,102 23.5% 374,472 152,505 40.7%
U.S. Hwy 59 & Williams Good
Harris County
Sugarland, Texas
- ----------------------------------------------------------------------------------------------------------------------
66 Athens Pointe Dec-93 1993 $ 4,700,000 442,134 13.8% 60,799 55,999 92.1%
Mitchell Bridge & Hwy. 78 Good
Athens
Georgia
- ----------------------------------------------------------------------------------------------------------------------
67 Clairemont Square Nov-93 1956-1989 $35,470,000 1,849,558 24.6% 454,650 0 0.0%
NEC/Clairemont Mesa & Good
Clairemont Drive
San Diego, California
- ----------------------------------------------------------------------------------------------------------------------
68 Green Orchard Nov-93 1990/93 $18,400,000 1,200,000 26.7% 320,395 217,826 68.0%
East of Center Drive & Good
Alpine Avenue
Walker, Michigan
- ----------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center Nov-93 1986/90 $ 9,670,500 784,080 18.6% 145,570 60,000 41.2%
12501 Shelbyville Road Good
Jefferson County
Louisville, Kentucky
- ----------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook Oct-93 1986 $19,000,000 816,750 26.9% 219,823 130,685 59.5%
U.S. Hwy 59 & FM Bypass Good
Harris County
Humble, Texas
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
57 Fairlane North S.C. $100.39 $ 9.54 9.50% Wal-Mart, Sam's, 100.0% New power center pre-sold in Dec-93.
Mercury Drive & Ford Drive Super Kmart, Sports Sale date is when center was
Michigan 153 Authority, Builders, completed. Also included Service
Dearborn, Michigan OfficeMax, Borders Merchandise as anchor.
- ------------------------------------------------------------------------------------------------------------------------------------
58 Merrillville Plaza $ 71.54 $ 6.68 9.34% OfficeMax 95.0% Good quality retail center located
U.S. 30, E of Interstate 65 TJMaxx across from the Southlake regional
Merrillville, Indiana F&M Distributers shopping mall.
Kids R Us
- ------------------------------------------------------------------------------------------------------------------------------------
59 Woodfield Plaza S.C. $ 97.26 $ 9.51 9.78% Kohl's 94.0% Good quality center one mile west of
NWC/Golf & Basswood Linens 'N Things Woodfield Mall. Barnes & Noble not
Cook County Barnes & Noble* included in sale. Located in high
Schaumberg, Illinois retail demand area.
- ------------------------------------------------------------------------------------------------------------------------------------
60 Providence Square $100.85 $ 9.07 8.99% Upton's 100.0% Well-located center contiguous to an
Upper Roswell & Home Depot 86,640sf Home Depot (not included).
Johnson Ferry Drugs For Less Home Depot leases former Phar-Mor
Marieta, Georgia space of 25,600sf. No vacancy.
- ------------------------------------------------------------------------------------------------------------------------------------
61 Brea Marketplace $147.06 $13.69 9.31% Marshall's 96.0% Seller guaranteed retail rates on
NEC/Birch & Randolph Circuit City vacant suites. Buyer neg. opt. to
Orange County Toys R Us pur-chase fee inter. in land for
Brea, California United Artists $6.5m. OAR reflects impact of gr.
lease. (9.8% w/o).
- ------------------------------------------------------------------------------------------------------------------------------------
62 The Quarry $ 54.81 $ 5.54 10.10% Kohl's, OfficeMax, 98.0% Buyer based dale on '94 income; 9.8%
Joliet & LaGrange Roads Sam's Club, OAR on existing. Target not included
Cook County Wal-Mart, in sale. Trade area reported to have
Hodgkins, Illinois Target** popul. of 213,000; avg. hh. inc. of
$49,973.
- ------------------------------------------------------------------------------------------------------------------------------------
63 Fullerton Town Center $101.06 $10.86 10.75% Toys R Us 96.0% Sale included part of 367,00sf ctr.
Harbor & Orangethorpe Silo Other anchor (Price Club) not
Orange County AMC Theatre included. Leases range from
Fullerton, California Price Club** $12.00-22.00/sf. Occupancy 96% at
sale.
- ------------------------------------------------------------------------------------------------------------------------------------
64 Townline Square $ 82.76 $ 8.26 9.98% Bradlees 92.0% Class B type ctr. previously
S. Broad St. & Route 5 Marshall's foreclosed by Aetna Life. Portion of
New Haven County The Wiz ctr. has poor visibility. Steel
Meriden, Connecticut ShopRite frame, masonry. Price based on
buyer's pro forma.
- ------------------------------------------------------------------------------------------------------------------------------------
65 First Colony Commons $ 89.06 $ 8.25 9.26% Service M'dise 100.0% Sale based on actual pro forma. Steel
U.S. Hwy 59 & Williams Sportstown frame & stucco/brick. Home Depot not
Harris County Sears Homelife included in sale. Other majors incl.
Sugarland, Texas Home Depot** Bookstop, Sound Whse.
- ------------------------------------------------------------------------------------------------------------------------------------
66 Athens Points $ 77.30 $ 7.75 10.03% Publix 96.0% Good Quality, masonry neighborhood
Mitchell Bridge & Hwy. 78 shopping center sale. Actual price
Athens Points was $5.05m but included outparcel
Georgia valued at $350,000; price adjusted.
- ------------------------------------------------------------------------------------------------------------------------------------
67 Clairemont Square $ 78.02 $ 7.80 10.00% Vons 85.0% Avg-good quality center. Sav-On Drugs
NEC/Clairemont Mesa & Marshall's is another major tenants.
Clairemont Drive TJMaxx
San Diego, California Circuit City
- ------------------------------------------------------------------------------------------------------------------------------------
68 Green Orchard $ 57.43 $ 5.81 10.11% Builders Square 100.0% Average quality center with only fair
East of Center Drive & Kohl's visibility. Property includes 55,260
Alpine Avenue Witmark sq. ft. ground lease to Loek's Star
Walker, Michigan Theatre.
- ------------------------------------------------------------------------------------------------------------------------------------
69 Eastgate Shopping Center $ 66.43 $ 7.09 10.68% Kroger 92.1% Avg-good quality center. Rents
12501 Shelbyville Road $10-$12 per sq/ft at sale. Sale
Jefferson County included two outparcel lots w/
Louisville, Kentucky limited frontage. Property in good
condition at sale.
- ------------------------------------------------------------------------------------------------------------------------------------
70 Randall's Ctr/Deerbrook $ 86.43 $ 8.11 9.38% Randall's 98.0% Ctr. adj. to mall. Other majors make
U.S. Hwy 59 & FM Bypass TJMaxx up 15% of ctr. All tenants on
Harris County Amber Crafts long-term leases thru 2000. Anchor
Humble, Texas rents $5.75- 7.25/sf; in-line
$10.00-12.00/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
========================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
71 Plaza at Puente Hills Oct-93 1987-92 $58,000,000 3,049,200 16.9% 516,583 287,351 55.6%
Fullerton Rd./Pomona Fwy. Good
Los Angeles County
City of Industry, California
- ------------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center Oct-93 1993 $45,200,000 2,121,372 14.0% 297,059 138,922 46.8%
Route 35 & Laurel Ave. Very Good
Monmouth County
Holmdel, New Jersey
- ------------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing Oct-93 1989-92 $13,700,000 1,097,712 15.0% 164,997 111,478 67.6%
Newbury Street & Route 1 Good
Danvers, Massachusetts
- ------------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks Sep-93 1991 $11,100,000 1,448,806 12.6% 182,835 0 0.0%
U.S. Highway 78 Good
Gwinnett County
Snellville, Georgia
- ------------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza Aug-93 1993 $19,900,000 1,002,490 27.5% 275,927 240,631 87.2%
NEQ/Lantana & Jog Road Very Good
Palm Beach County
Lantana, Florida
- ------------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. Aug-93 1971/87-90 $19,500,000 805,860 26.3% 211,767 173,860 82.1%
Madison & Manzanita Average
Sacramento County
Carmichael, California
- ------------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing Aug-93 1987 $20,000,000 1,089,000 20.1% 219,300 104,915 47.8%
Colisuem & Cunningham Good
Hampton County
Hampton, Norfolk, Virginia
- ------------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza Aug-93 1989 $20,780,000 771,448 27.6% 212,711 129,075 60.7%
I-91 & Montowese Exit Good
New Haven County
North Haven, Connecticut
- ------------------------------------------------------------------------------------------------------------------------
79 Price Club Plaza Aug-93 1986/92 $25,016,000 1,053,280 23.7% 249,325 165,100 66.2%
SEC/Sunrise Hwy & Bayview Good
Copaigue, Town of Babylon,
New York
- ------------------------------------------------------------------------------------------------------------------------
80 Heritage Walk Jun-93 1991 $8,657,624 871,200 18.2% 158,282 141,742 89.6%
ES/Columbia Street Good
Baldwin County
Milledgeville, Georgia
- ------------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center Jun-93 1961/91 $32,500,000 2,862,763 17.8% 510,252 162,512 31.8%
Crawford Road Good
Indianapolis, Indiana
- ------------------------------------------------------------------------------------------------------------------------
82 Loehman's Plaza Mar-93 1986-89 $33,714,000 1,268,774 19.8% 251,529 151,286 60.1%
Middle Country Rd. & Good
Morices
Lake Grove, New York
- ------------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade Mar-93 1971-91 $27,000,000 827,640 29.0% 239,745 0 0.0%
I-190 & Hawthorne Blvd. Good
Los Angeles County
Torrance, California
- ------------------------------------------------------------------------------------------------------------------------
84 The Brickyard Feb-93 1989-90 $19,575,000 1,675,753 16.3% 273,417 212,758 77.8%
Wilbur Cross Highway Good
Hartford County
Berlin, Connecticut
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
71 Plaza at Puente Hills $112.28 $11.70 10.42% IKEA, Silo, 93.5% Sale of power-oriented ctr. Anchors
Fullerton Rd./Pomona Fwy. AMC Theatre, that were not included in sale were
Los Angeles County Circuit City, Home Depot, Price Savers, & Toys R
City of Industry, California Miller's Outpost Us.
- ----------------------------------------------------------------------------------------------------------------------------------
72 Holmdel Towne Center $152.16 $14.41 9.47% A&P Food 80.0% Occupancy based on commitments.
Route 5 & Laurel Ave. Marshall's Other majors incl. Barnes & Noble,
Monmouth County The Wiz Lee Wards, Pet Food Giant. New ctr.
Holmdel, New Jersey OfficeMax at sale. Purchased during
construction.
- ----------------------------------------------------------------------------------------------------------------------------------
73 Danvers Crossing $ 83.03 $ 8.79 10.59% OfficeMax 87.0% Completion of ctr. delayed due to
Newbury Street & Route 1 Home Quarters foreclosure proceedings. Under
Danvers, Massachusetts Bed, Bath & Beyond contract for one yr while buyer
Discovery Zone secured tenants for vacant space.
- ----------------------------------------------------------------------------------------------------------------------------------
74 Snellville Oaks $ 60.71 $ 6.02 9.91% Wal-Mart 98.0% Average-good quality center; masonry
U.S. Highway 78 Food Lion construction in good condition.
Gwinnett County Anchors include Wal-Mart & Food
Snellville, Georgia Lion.
- ----------------------------------------------------------------------------------------------------------------------------------
75 Lantana Square/Plaza $ 72.12 $ 7.03 9.75% Kmart 99.5% New power ctr. purchased by REIT.
NEQ/Lantana & Jog Road Builders Square II In-line tenants pay avg. $16.00/sf
Palm Beach County Food Lion + $2.25 for NNN. Buyer cited
Lantana, Florida product quality, credit of Kmart,
high % of anchor GLA.
- ----------------------------------------------------------------------------------------------------------------------------------
76 Madison Square S.C. $ 92.08 $ 9.31 10.11% Home Depot 92.0% Buyer noted upside from leasing
Madison & Manzanita TJMaxx 17,00sf store. Sale price based on
Sacramento County Longs Drugs appraised value. Leases range from
Carmichael, California $18.00-24.00/sf.
- ----------------------------------------------------------------------------------------------------------------------------------
77 Coliseum Crossing $ 91.20 $ 8.44 9.25% Marshall's 95.0% Masonry & concrete retail center in
Colisuem & Cunningham Food Lion good condition at sale. Traditional
Hampton County Phar-Mor tenant mix.
Hampton, Norfolk, Virginia Linen Warehouse
- ----------------------------------------------------------------------------------------------------------------------------------
78 Price Club Plaza $ 97.69 $ 8.96 9.17% Home Depot 100.0% Sale reportedly based upon
I-91 & Montowese Exit TJMaxx appraised value. 100% leased at
New Haven County XPect Discount sale. Other tenants include Dress
North Haven, Connecticut PriceCostco** Barn, LeeJay. PriceCostco not
included in sale.
- ----------------------------------------------------------------------------------------------------------------------------------
79 Price Club Plaza $100.33 $ 9.03 9.00% Filene's Basement 98.8% Sold from Price Company to Price
SEC/Sunrise Hwy & Bayview PriceCostco REIT based upon 9.0% cap rate on
Copaigue, Town of Babylon, projected year one income. Property
New York 98.9% leased at sale.
- ----------------------------------------------------------------------------------------------------------------------------------
80 Heritage Walk $ 54.70 $ 5.38 9.84% Kmart 100.0% Good location fronting 4-lane
ES/Columbia Street Bi-Lo primary artery; adjacent to
Baldwin County Goody's Wal-Mart super center. Sale
Milledgeville, Georgia included 2 outparcels.
- ----------------------------------------------------------------------------------------------------------------------------------
81 Speedway Super Center $ 63.69 $ 5.92 9.30% Kohl's 90.0% Community center in central portion
Crawford Road Kroger of Indianapolis. Anchor
Indianapolis, Indiana Drug Emporium rents=$3-7.25/sf; in-line
rents=$12-14/sf. Sale did not
include option to purchase
outlots.
- ----------------------------------------------------------------------------------------------------------------------------------
82 Loehman's Plaza $134.04 $12.06 9.00% Loehman's 100.0% Expanded power center in excellent
Middle Country Rd. & Bed & Bath location. Good condition at sale.
Morices Filene's Basement
Lake Grove, New York Foodtown
- ----------------------------------------------------------------------------------------------------------------------------------
83 Torrance Promenade $112.62 $12.05 10.70% Office Depot, 98.6% Promotional community ctr. Average
I-190 & Hawthorne Blvd. Marshall's, Silo, lease rate in ctr., reported to be
Los Angeles County Ross, Bookstar, $20/sf for in-line space. Center
Torrance, California Mann Theatres repositioned into new format.
- ----------------------------------------------------------------------------------------------------------------------------------
84 The Brickyard $ 71.59 $ 8.40 11.73% Home Depot 86.0% Seaman's formerly leased 30,000sf
Wilbur Cross Highway Pace but went into bankruptcy. Lease
Hartford County rates range from $12-15.00/sf for
Berlin, Connecticut in-line tenants. Pace also seen as
risk.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
=======================================================================================================================
Anchor
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total
=======================================================================================================================
85 New Park Plaza Dec-92 1979-80 $ 8,700,000 561,924 33.2% 186,459 100,920 54.1%
Mowry & Cedar Average
Alameda County
Newark, California
- -----------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook Aug-92 1985-89 $31,250,000 1,630,015 22.8% 370,907 190,212 51.3%
Centerfield Blvd. & FM 1960 Good
Harris County
Houston, Texas
- -----------------------------------------------------------------------------------------------------------------------
87 Westward S.C. May-92 1960-88 $18,450,000 794,099 27.9% 221,564 165,508 74.7%
NEC/Spencer & Okeechobee Good
Palm Beach County
West Palm Beach, Florida
- -----------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza Apr-92 1989-91 $43,200,000 1,758,082 22.1% 389,000 221,892 57.0%
NWC/91 Fwy. & McKinley Good
Riverside County
Corona, California
- -----------------------------------------------------------------------------------------------------------------------
89 Broad River Commons Feb-92 1969-86 $ 7,615,000 761,864 17.8% 135,700 0 0.0%
Broad River & Marley Drive Good
Richland County
Columbia, South Carolina
- -----------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons Dec-91 1991 $30,725,000 1,372,140 22.7% 311,318 207,118 66.5%
Pines Blvd. & University Dr. Very Good
Broward County
Pembroke Pines, Florida
- -----------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. Dec-91 1989 $16,500,000 2,831,400 9.4% 265,600 0 0.0%
San Jose Blvd. & Claire Good
Jacksonville, Florida
- -----------------------------------------------------------------------------------------------------------------------
92 Commons at Greenpoint Oct-90 1989 $28,000,000 936,104 32.0% 299,709 0 0.0%
NWC/I-45 & Beltway 8 Very Good
Harris County
Houston, Texas
=======================================================================================================================
Survey High: $80,000,000 9,439,450 -- 788,826 663,404 --
Survey Low: $ 4,700,000 153,767 -- 60,799 0 --
=======================================================================================================================
Survey Average: $28,030,256 1,375,595 20.2% 278,180 153,131 55.0%
=======================================================================================================================
<CAPTION>
====================================================================================================================================
Sale
Sale Price/ NOI/ Occupancy
No. Name/Location Sq.Ft. Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
85 New Park Plaza $ 46.66 $ 5.33 11.42% TJMaxx 85.0% Community ctr. with avg. lease
Mowry & Cedar Toys R Us rates around $10.00/sf for in-line
Alameda County Herman's tenants. Good location with upside
Newark, California Hancock Fabrics potential from new leasing.
- ------------------------------------------------------------------------------------------------------------------------------------
86 Commons at Willowbrook $ 84.25 $ 8.03 9.53% Marshall's 94.0% Good quality ctr. in suburban
Centerfield Blvd. & FM 1960 Sportstown Houston. Adj. to mall. Anchor rents
Harris County AMC Theatre $6.00-8.00/sf. Other majors include
Houston, Texas Phar-Mor Bed, Bath & Beyond, Bookstop, Sound
Whse.
- ------------------------------------------------------------------------------------------------------------------------------------
87 Westward S.C. $ 83.27 $ 8.36 10.04% Office Depot 96.0% Reconfigured power ctr. In-line
NEC/Spencer & Okeechobee Circuit City tenant rents from $11.00-15.00/sf;
Palm Beach County Sports Authority avg. $12/sf. Several outpads on
West Palm Beach, Florida Phar-Mor ground lease terms included in
sale.
- ------------------------------------------------------------------------------------------------------------------------------------
88 Corona Hills Plaza $111.05 $10.75 9.68% Home Depot 94.0% Price Club & Albertson's also
NWC/91 Fwy. & McKinley Ross anchors; not included in sale.
Riverside County Levitz Furniture JCPenny Kids & Holiday Spa other
Corona, California Drug Emporium majors. Leases range from
$12.00-30.00/sf for in-line.
- ------------------------------------------------------------------------------------------------------------------------------------
89 Broad River Commons $ 56.12 $ 5.99 10.67% Home Quarters 100.0% Masonry & concrete center in
Broad River & Marley Drive Phar-Mor avg.-good condition; renovated in
Richland County Herman's 1986.
Columbia, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
90 Pembroke Commons $ 98.69 $ 9.44 9.57% Publix Superstore, 90.4% Seller provided lease-back
Pines Blvd. & University Dr. Office Depot, guarantee on vacant space;
Broward County Circuit City, TJMaxx, estimated value of $500k. Price
Pembroke Pines, Florida Marshall's adjusted to reflect. Anchor leases
$6.75-9.00/sf; in-line avg.
$15.11/sf.
- ------------------------------------------------------------------------------------------------------------------------------------
91 Riverplace S.C. $ 62.12 $ 6.21 10.00% SteinMart, TJMaxx, 82.0%
San Jose Blvd. & Claire Beall's,
Jacksonville, Florida Phar-Mor,
Michael's
- ------------------------------------------------------------------------------------------------------------------------------------
92 Commons at Greenpoint $ 93.42 $ 8.12 8.69% Office Depot 97.0%
NWC/I-45 & Beltway 8 Marshall's
Harris County Phar-Mor
Houston, Texas Sportstown
====================================================================================================================================
Survey High: $201.61 $18.43 12.02% -- 100.0%
Survey Low: $ 39.93 $ 4.06 7.87% -- 75.0%
====================================================================================================================================
Survey Average: $ 99.43 $ 9.58 9.74% -- 94.9%
====================================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OPERATING HISTORY AND BUDGET CHART
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
Operating Income and Expense Analysis - Town Center Prado(2)
======================================================================
1996 Owner's 1997 Budget C&W 199 Estimate
======================================================================
Total Per SF Total Per SF Total Per SF
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Income
Base Rent $2,850,672 $10.39 $3,217,441 $11.72 $3,400,000 $12.39
Percentage Rent $ 581 $ 0.00 $ 0 $ 0.00 $ 0 $ 0.00
Expense Recoveries $ 548,368 $ 2.00 $ 601,639 $ 2.19 $ 600,000 $ 2.19
Other Income(3) $ 222,616 $ 0.81 $ 22,256 $ 0.08 $ 20,000 $ 0.07
Effective Gross Income $3,622,237 $13.20 $3,841,338 $14.00 $4,020,000 $14.65
Recoverable Expenses
Common Area Maintenance $ 223,236 $ 0.81 $ 234,380 $ 0.85 $ 250,000 $ 0.91
Insurance $ 79,512 $ 0.29 $ 94,032 $ 0.34 $ 41,200 $ 0.15
Real Estate Taxes $ 243,299 $ 0.89 $ 240,203 $ 0.88 $ 266,150 $ 0.97
Total $ 546,047 $ 1.99 $ 568,615 $ 2.07 $ 557,350 $ 2.03
Non-Recoverable Expenses
General & Administrative(4) $ 31,697 $ 0.12 $ 5,000 $ 0.02 $ 8,200 $ 0.03
Management $ 127,533 $ 0.46 $ 170,851 $ 0.62 $ 160,800 $ 0.59
Reserves for Replacement $ 0 $ 0.00 $ 0 $ 0.00 $ 27,444 $ 0.10
Total $ 159,230 $ 0.58 $ 175,851 $ 0.64 $ 196,444 $ 0.72
Total Operating Expenses $ 705,277 $ 2.57 $ 744,466 $ 2.71 $ 753,794 $ 2.75
Net Operating Income $2,916,960 $10.63 $3,096,870 $11.28 $3,266,206 $11.90
Operating Expense Ratio 19.5% 19.4% 18.8%
</TABLE>
- --------------------------------------------------------------------------------
1. $/SF is based on GLA owned and does not include anchor owned GLA, if any.
2. Source: Lehman Brothers Presentation Booklet
3. For 1996, includes about $212,394 in non-recurring, lease termination fees.
4. For 1996, includes some non-recurring collection fees.
- --------------------------------------------------------------------------------
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ULI DATABASE OF OPERATING RESULTS FOR POWER CENTERS
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
================================================================================
Average Operating Results of U.S. Power Centers(4)
Source: Dollars & Cents of Shopping Centers-1995 Edition
================================================================================
All Centers Southern Centers
=============================------------------------- -------------------
Property Profile Low High Avg. Low High Avg.
=============================
# of Centers in Sample: 25 7
Average GLA: 285,478 520,869 358,619 n/a n/a 360,467
Average Sales/SF: $ 87 $ 292 $ 197 n/a n/a $ 189
=============================
Revenue
=============================
Total Rent: $3.60 $14.36 $7.22 n/a n/a $6.24
Reimbursements:
CAM: $0.17 $ 2.12 $0.85 n/a n/a $0.51
Taxes: $0.23 $ 1.44 $0.65 n/a n/a $0.68
Insurance: $0.02 $ 0.13 $0.07 n/a n/a $0.08
Miscellaneous: $0.00 $ 0.00 $0.27 n/a n/a n/a
Miscellaneous Income: $0.01 $ 0.37 $0.08 n/a n/a $0.04
Total Revenue:(2) $4.40 $17.05 $9.36 n/a n/a $8.23
=============================
Expenses
=============================
Total Maintenance(3) $0.49 $ 3.55 $1.29 n/a n/a $0.46
Advertising & Promotion: $0.00 $ 0.44 $0.12 n/a n/a $0.06
Real Estate Taxes: $0.33 $ 1.99 $1.10 n/a n/a $0.86
Insurance: $0.07 $ 0.35 $0.15 n/a n/a $0.12
General & Administrative:(1) $0.02 $ 1.56 $0.42 n/a n/a $0.47
Management Fees: $0.17 $ 0.55 $0.35 n/a n/a n/a
Total Operating Expenses:(2) $1.02 $ 7.04 $3.24 n/a n/a $2.37
=============================
Operating Expenses Ratio: 23.2% 41.3% 34.6% 28.8%
=============================
- --------------------------------------------------------------------------------
1. Excluding management fees and leasing commissions.
2. Because data are averages, detailed dollar amounts may not add to totals.
3. Includes: Maintenance, security, and other expenses for common areas as
well as some clean up/fixup/repair cost for spaces between tenants that is
not a retrofit cost..
4. ULI defines a power center as containing at least one discount department
store of 100,000 square feet or more and at least four category specific,
off-price anchors of 20,000 square feet or more.
- --------------------------------------------------------------------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
LEASE EXPIRATION CHART - PRO-JECT
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TOWN CENTER PRADO
PROJECT DESIGNATOR: TC97
REVISION: 7/23/97 @ 14:39
EXPIRATION REPORT
YEARS 1998 TO 2007, ALL TENANTS,
INCLUDING OPTIONS, EXCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS EXCLUDING CPI ADJUSTMENTS,
EXCLUDING PERCENTAGE RENTS
7/24/97 @ 16:57
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 10-SUITE 119 INITIAL
HALLMARK SHOWCASE 6,800 10/1998 16.00 2.07 18.07 15.73
# 12-SUITE 136 INITIAL
DISC GO ROUND 1,300 12/1998 16.97 2.87 19.84 19.34
------ ----- ---- ----- -----
2 FY 99 EXPIRATIONS 8,100 16.16 2.20 18.35 16.31
# 13-SUITE 128 INITIAL
MAILBOXES ETC 1,320 11/2000 19.10 3.04 22.14 19.92
# 14-SUITE 138 INITIAL
BELLSOUTH MOBILITY 1,500 11/2000 19.35 2.26 21.62 19.92
# 17-SUITE 130 INITIAL
GREAT CLIPS 960 11/2000 19.67 2.39 22.06 19.92
# 20-SUITE 152 INITIAL
HICKORY HAMS 2,573 11/2000 18.28 3.04 21.32 18.84
# 18-SUITE 142 INITIAL
PARTY CITY 9,975 1/2001 15.75 2.31 18.06 17.19
# 23-SUITE 134 INITIAL
FIRST DISCT TRAVEL 1,320 1/2001 19.10 2.48 21.58 20.52
# 22-SUITE 122 INITIAL
JENNY CRAIG 2,125 2/2001 16.00 2.29 18.29 19.41
# 19-SUITE 145 INITIAL
TSI SOCCER INC 3,170 2/2001 16.13 2.48 18.61 18.30
# 25-SUITE 102 INITIAL
NEW HOMES AMERICA 3,300 2/2001 19.13 3.13 22.26 19.41
------ ----- ---- ----- -----
9 FY101 EXPIRATIONS 26,243 17.18 2.55 19.72 18.51
------ ----- ---- ----- -----
11 CUMULATIVE EXPS 34,343 16.94 2.47 19.40 17.99
# 5-SUITE 108 INITIAL
GATEWAY 2000 6,500 2/2002 15.00 2.79 17.79 17.71
# 16-SUITE 132 INITIAL
OLSTEN STAFFING 1,200 3/2002 20.25 3.06 23.31 21.13
# 8-SUITE 115 INITIAL
WENDY'S BRIDAL 5,500 5/2002 14.50 3.21 17.71 17.71
------ ----- ---- ----- -----
3 FY102 EXPIRATIONS 13,200 15.27 2.99 18.26 18.02
------ ----- ---- ----- -----
14 CUMULATIVE EXPS 47,543 16.47 2.61 19.08 18.00
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- -------------------- --------- -------- ------- ------- ------- -------
# 15-SUITE 138 INITIAL
AT&T 2,000 9/2002 20.00 3.21 23.21 19.99
# 28-SUITE OPB INITIAL
ATLANTA BREAD 4,000 9/2002 16.00 3.21 19.21 17.14
# 6-SUITE 110 INITIAL
VACANT 3,848 12/2002 16.75 3.21 19.96 19.41
# 21-SUITE 147 INITIAL
VACANT 2,125 2/2003 17.76 3.30 21.06 20.59
# 24-SUITE 150 INITIAL
VACANT 2,800 5/2003 17.76 3.30 21.07 20.59
----- ----- ---- ----- -----
5 FY103 EXPIRATIONS 14,773 17.32 3.24 20.56 19.27
----- ----- ---- ----- -----
19 CUMULATIVE EXPS 62,316 16.67 2.76 19.43 18.30
# 26-SUITE OPA INITIAL
BLOCKBUSTER 7,000 6/2007 20.15 3.13 23.28 25.16
----- ----- ---- ----- -----
1 FY107 EXPIRATIONS 7,000 20.15 3.13 23.28 25.16
----- ----- ---- ----- -----
20 CUMULATIVE EXPS 69,316 17.03 2.80 19.82 18.99
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
COMPETITIVE PROPERTY PHOTOGRAPHS
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
COMPETITIVE PROPERTY PHOTOGRAPHS
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Home Center Village
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Town Center Plaza
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WAKEFIELD(R)
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<PAGE>
COMPETITIVE PROPERTY PHOTOGRAPHS
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Barrett Place
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Barrett Pavilion
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WAKEFIELD(R)
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COMPETITIVE PROPERTY PHOTOGRAPHS
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Barrett Commons-MJ Designs
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Barrett Commons-Goody's
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
COMPETITIVE PROPERTY PHOTOGRAPHS
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Cobb Place
[GRAPHIC OMITTED]
Barrett Home Center
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CUSHMAN &
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<PAGE>
LOCAL SALE COMPARABLES
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 1
================================================================================
Location Data
Property Name: Carrollton Crossroads
Location: U.S. Highway 27 and U.S. Highway 166
City: Carrollton
County:
State/Zip: Georgia 30117
Assessor's Parcel No(s): 10-64
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 36.00 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
Wal-Mart 123,779 SF
Goody's 28,888 SF
JC Penney 32,201 SF
Kroger 49,585 SF
Local Tenant GLA: 69,352 SF
Anchor Tenant GLA: 234,453 SF
Total GLA: 303,805 SF
GLA Purchased: 303,805 SF
Year Built: 1987
Parking: Adequate
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 01/97
Marketing Time: 6 months
Grantor: Equity Properties
Grantee: Halper Enterprises/Morningside Associates
Document No.: N/A
Sale Price: $18,100,000
Financing: Cash to Seller
Cash Equivalent Price: $18,100,000
Required Capital Cost: $0
Adjusted Sales Price: $18,100,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 98.5%
Existing or Pro Forma
Income: Pro Forma
TOTAL P.S.F.
---------- -------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $1,825,000 $6.01
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 1
================================================================================
Analysis
Value Indicators:
Overall Capitalization Rate (OAR): 10.08%
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $59.58
Comments
One story, power/super community center in a rural location about 32
radial miles west of downtown Atlanta. Shops include national and local
retailers that are typically found in other southeast power centers. The
center was renovated in 1993. The center is performing well and many
tenants are paying percentage rent. Within a 10-mile radius of the center
are about 20,162 households with an average household income of about
$41,800.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 2
================================================================================
Location Data
Property Name: Hamilton Village
Location: 2020 Gunbarrel Road
City: Chattanooga
County:
State/Zip: Tennessee
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 44.85 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
See Comments 293,222 SF
Local Tenant GLA: 72,175 SF
Anchor Tenant GLA: 293,222 SF
Total GLA: 365,397 SF
GLA Purchased: 365,397 SF
Year Built: 1991
Parking: Adequate
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 03/97
Marketing Time: N/A
Grantor: Provident Life and Accident Insurance
Company
Grantee: CNM Hamilton, LP
Document No.: N/A
Sale Price: $18,378,750
Financing: Cash to Seller
Cash Equivalent Price: $18,378,750
Required Capital Cost: $0
Adjusted Sales Price: $18,378,750
Verification: Confidential
Financial Data
Assumptions & Forecast: Appraiser
Occupancy at Sale: 96%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
---------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: $625,169 $1.71
Net Operating Income: $1,934,031 $5.29
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 2
================================================================================
Analysis
Value Indicators:
Overall Capitalization Rate (OAR): 10.52%
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $50.30
Comments
Major tenants are:
Walmart @ 114,557 sf
Office Max @ 24,200 sf
Books a Million @ 28,875 sf
Waccamaw @ 59,125 sf
Hamrick's @ 45,465 sf
Baby Superstore @ 21,000 sf
This center is located in the primary shopping area for Chattanooga across
from Hamilton Place Mall.
Shortly after the sale the Wal-Mart expanded to 184,757 SF displacing
21,425 SF of shops. Wal-Mart will pay for the expansion cost and has
agreed to pay higher rent on the leased portion of its store to supplement
income lost from the shop space it is displacing. The income figures above
are as is at time of sale and do not include revenue loss or gain from the
expansion.
Expenses include 5% vacancy for shops, 3% management fee, $.10 for
reserves.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 3
================================================================================
Location Data
Property Name: Lawrenceville MarketCenter
Location: Ga. 316 & Ga. 120
City: Lawrenceville
County: Gwinnett
State/Zip: Georgia
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: N/A
Excess Land: N/A
Gross Leasable Area:
Anchors:
AMC Theatres 65,442 SF
Home Depot 103,550 SF
Target 116,245 SF
See Comments 173,972 SF
Local Tenant GLA: 40,620 SF
Anchor Tenant GLA: 459,209 SF
Total GLA: 499,829 SF
GLA Purchased: 280,034 SF
Year Built: 1995
Parking: 6.4 spaces per 1,000 sf of GL
Condition: Excellent
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 11/96
Marketing Time: N/A
Grantor: Cousins Properties
Grantee: The Equitable Real Estate Investment
Document No.: N/A
Sale Price: $34,600,000
Financing: Cash to Seller
Cash Equivalent Price: $34,600,000
Required Capital Cost: $0
Adjusted Sales Price: $34,600,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
---------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,287,000 $11.74
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 3
================================================================================
Analysis
Value Indicators: Direct Cap and DCF
Overall Capitalization Rate (OAR): 9.50 %
Projected IRR: 11.00 %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $123.56
Comments
Single level, non-enclosed power center that is located about 25 radial
miles northeast of downtown Atlanta. Anchors not listed above include:
Goody's @ 32,400 sf; Linens N Things @ 35,000 sf; Marshalls @ 30,000 sf;
MJ Designs @ 38,966 sf, Old Navy @ 14,000 sf; and PetsMart @ 25,606 sf.
Smaller mini-anchor tenants include a number of well known power center
type retailers.
Purchased in two transactions: the owned GLA (280,034 sf) and three ground
leases which have been improved by the ground lessee with free standing
Target, Home Depot and Bertucci's buildings. Their GLA is not included in
the GLA purchased which is shown above. However, the net operating income
above does include the rental contribution from the ground leased parcels.
Within a 10-mile radius of the property there are about 122,348 households
with an average household income of about $70,300.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 4
================================================================================
Location Data
Property Name: Perimeter Village
Location: West Side Of Ashford Dunwoody Road
Approx. 1/4 Mile North Of
City: Atlanta
County:
State/Zip: Georgia
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 32.00 Acres
Excess Land: 0
Gross Leasable Area:
Anchors:
See Comments
Local Tenant GLA: 108,301 SF
Anchor Tenant GLA: 258,299 SF
Total GLA: 366,600 SF
GLA Purchased: 366,600 SF
Year Built: 1995
Parking: N/A
Condition: Excellent
Exterior Walls: Brick Veneer
Sale Data
Transaction Type: Sale
Date of Transaction: 07/96
Marketing Time: N/A
Grantor: Jacoby Development, Inc.
Grantee: Prudential
Document No.: N/A
Sale Price: $50,000,000
Financing: Cash to Seller
Cash Equivalent Price: $50,000,000
Required Capital Cost: $0
Adjusted Sales Price: $50,000,000
Verification: Confidential
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 93%
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
---------- -------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $4,700,000 $12.82
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 4
================================================================================
Analysis
Value Indicators: Direct Cap and DCF
Overall Capitalization Rate (OAR): 9.40 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $136.39
Comments
Primarily a one-story, concrete block center with brick facade. There is
one portion that is 2-story containing 25,000 SF.
Wal-Mart 149,429 SF
Borders Books 40,000 SF
Rhodes Furniture 40,000 SF
Reading China & Glass 25,550 SF
Designer Shoe W'House 19,920 SF
Just For Feet 15,000 SF
Ulta3 Cosmetics 8,400 SF
Shops lease between $18-$30 with an average rental rate of $25.00/SF.
Perimeter Village went under contract to sell in July 1995 on an
"earn-out" basis. The base purchase price was $44.0 million increasing to
$50.0 once pre-established occupancy goals were met. Underwriting includes
a 5% vacancy on noncredit tenants, a $.10/SF reserve for replacements and
a 3% management fee.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 5
================================================================================
Location Data
Property Name: The Village At University Place
Location: SWQ Of Interstate 85 and W.T. Harris Blvd.
City: Charlotte
County: Mecklenburg
State/Zip: North Carolina
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Power Center
Land Area: 37.50 Acres
Excess Land: N/A
Gross Leasable Area:
Anchors:
Best Buy 44,400 SF
Office Depot 30,800 SF
TJ Maxx 30,000 SF
Rhodes Furniture 35,000 SF
Local Tenant GLA: 194,300 SF
Anchor Tenant GLA: 140,200 SF
Total GLA: 334,500 SF
GLA Purchased: 334,500 SF
Year Built: 1995
Parking: N/A
Condition: Good
Exterior Walls: Masonry
Sale Data
Transaction Type: Sale
Date of Transaction: 08/96
Marketing Time: N/A
Grantor: University Place Mall, Inc. (The Hahn Co.)
Grantee: Village Place I and II, Inc.
Document No.: LIBER 8707, PAGES 434-443
Sale Price: $33,400,000
Financing: Cash to Seller
Cash Equivalent Price: $33,400,000
Required Capital Cost: $0
Adjusted Sales Price: $33,400,000
Verification: Representative Of The Seller
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
---------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,289,900 $9.84
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RETAIL SALE 5
================================================================================
Analysis
Value Indicators: Direct Cap
Overall Capitalization Rate (OAR): 9.85 %
Projected IRR: N/A
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $99.85
Comments
New power center constructed on the northeast side of Charlotte by the
Hahn Company. The developer had intended to originally build a mall but
opted for a power center. The nearest regional mall is Eastland Mall.
According to the Directory of Major Malls, the center has a primary trade
area of 200,000 with an average household income of $40,000. Tenants
include Best Buy, Hannaford Brothers, TJ Maxx, Office Depot, Rhodes
Furniture, Michaels Stores, and a supermarket. Wal-Mart and Sam's are also
on the site but are separately owned. In addition, there are nine pad
sites capable of accommodating 75,000 SF of retail area. Several of these
were leased. Exclusive of the outparcel GLA, the center contained 259,500
square feet.
The seller reports that the transactions were structured with an earnout.
The initial purchase price was $28.9 million which will increase to $33.4
million upon the completion and lease-up of the last phase which should
occur during 1997. We could not confirm the buyer's assumptions but a
representative of the seller said the buyer based the price on a 9.8% cap
rate on all income but the ground rent which was underwritten on a 10.0%
cap rate. The 9.85% cap rate is our interpolation of the net income.
The Parcel #s for the site are 047-201-42, 44, 45; 047-252-04; and
047-292-41.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
APPRAISER QUALIFICATIONS
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
QUALIFICATIONS
================================================================================
Luten L. Teate, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designation No. 7843)
Georgia Certified General Real Estate Appraiser (No. CG001389)
Licensed Real Estate Salesman (Georgia)
Member of Cushman & Wakefield's Regional Mall Valuation Committee
Real Estate Experience:
Senior Appraiser, Cushman and Wakefield of Georgia, Inc., Valuation
Advisory Services, Atlanta, Georgia, a full service real estate
organization specializing in appraisal and consultation. 1981 to present.
Three years previous experience as associate appraiser with Couch &
Associates (firm acquired by Cushman & Wakefield in April, 1981), Atlanta,
Georgia.
Previously, four years experience as real estate title examiner for
several local law firms, Atlanta, Georgia.
Experience in valuation of Class A, CBD, office towers and regional
shopping malls and consultation and valuation service involving both
improved and unimproved properties.
Market and feasibility studies for proposed development projects and other
property investments.
Valuation techniques include Discounted Cash Flow Analysis and other
computer-assisted applications.
Education:
Emory University -- B.A. (Economics)
Georgia State University -- various post graduate real estate courses.
Appraisal Institute Courses: Litigation Valuation Course, Case Studies in
Valuation, Standards of Professional Practice, Valuation Analysis, Courses
101 and 201.
Certified in Appraisal Institute's voluntary program of continuing
education for its designated members.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
=======================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Independence Commons
N/E/C 39th Street and Arrowhead Drive
City of Independence
Jackson County, Missouri
=======================================
IN A SUMMARY REPORT
As of July 1997
Master Realty Inc.
Managing Member of Community Centers II, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial
20th Floor
New York, New York 10285
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, NY 10019
<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.
July 10, 1997
Mr. Brian Summers
Vice President
Master Realty inc.
Managing Member of Community Centers II, LLC
1180 Avenue of the Americas
18th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center
20th Floor
New York, New York 10285
Re: Independence Commons
N/E/C 39th Street and
Arrowhead Drive
City of Independence
Jackson County, Missouri
Gentlemen:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our report estimating the
market value of the leased fee estate in the above referenced real property.
As specified in the Letter of Engagement, the value opinion reported
herein 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. The results of the appraisal are being conveyed in a Summary Report
according to our agreement. The accompanying report summarizes the pertinent
data, analysis and conclusions secured in our investigation, rather than provide
a self-contained narrative within the report. It is noted that this report
incorporates by reference our previous Complete Appraisal prepared in a
Self-Contained report format with a date of value of August 30, 1995.
This report was prepared for Master Realty Inc., Managing Member of
Community Centers, II, LLC and Lehman Brothers, Inc. (Clients) and it is
intended only for the specified use of the Clients. The property was inspected
by and the report prepared by Martha A. Shelley, MAI.
<PAGE>
Cushman & Wakefield, Inc.
Master Realty, Inc.
Lehman Brothers, Inc. Page 2 July 10, 1997
As a result of our total analysis, we have formed an opinion that the
market value of the leased fee estate in the subject property, as of July 2,
1997, the date of inspection, was:
THIRTY EIGHT MILLION DOLLARS
$38,000,000
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, INC.
/s/ Martha A. Shelley
- ---------------------------
Martha A. Shelley, MAI
Director
Retail Valuation Group
MAS:mas
#97-9394
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Independence Commons
Location: The subject property is located at the northeast
corner of 39th Street and Arrowhead Drive, City of
Independence, Jackson County, Missouri.
Date of Inspection: July 2, 1997
Ownership: Community Centers II, LLC
Total Land Area:
Shopping Center: 42.21+/- acres (1,838,668+/- square feet)
Net Area (Owned): 39.58+/- acres (1,724,105+/- square feet
Zoning: C-P-2, Planned General Commercial
Improvements
Type: Single-level power center constructed of brick and
concrete walls and concrete slab foundation.
Gross Leasable Area (Owned):
===========================================================
Building Components Building Area % of Total
===========================================================
Anchor Tenants
Kohl's 80,684+/- SF
Bed Bath & Beyond 40,000+/- SF
Marshall's 30,439+/- SF
Rhodes Furniture 50,640+/- SF
Barnes & Noble 30,000+/- SF
AMC Theatres 63,800+/- SF
===========================================================
Subtotal Anchors: 295,563+/- SF 77.3%
===========================================================
Other Major Tenants:
Nill Bros. Sporting Goods 12,033+/- SF
Coomers Crafts 15,003+/- SF
===========================================================
Subtotal Other Majors: 27,036+/- SF 7.1%
===========================================================
Shop Tenants:
Building B 24,463+/- SF
Building K 18,000+/- SF
===========================================================
Subtotal Shop Area: 42,463+/- SF 11.1%
===========================================================
Total Owned Center Area: 365,062+/- SF 95.5%
===========================================================
Total Building Area: 382,162+/- square feet (including three non-owned
pad sites)
Year Built: 1996
Condition: New/Excellent
Land-to-Building Ratio: 4.72:1 (owned)
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Site Coverage: 21.2% (owned)
Parking Spaces Provided: 2,282 stalls are provided (5.97 cars per 1,000
square feet of total building area)
Highest and Best Use
If Vacant: Commercial/retail utilization built to its maximum
feasible FAR.
As Improved: Continued retail use as a power/community center.
Operating Data and Forecasts
Current Occupancy: 97.3%
Forecasted Stabilized
Occupancy: 97% (based on small shop GLA and net of downtime
provisions).
Operating Expenses Annual Amount Unit Rate *
------------- -----------
1997 Budget (Owners):(1) $ 876,933 $2.40
1997 C&W Forecast: $1,210,715 $3.31
* Per square foot of owned GLA
(1) Ownership's budgeted expenses do not include full tax bill.
Value Indicators
Cost Approach: N/A
Sales Comparison Approach: $37,600,000 to $38,300,000
Income Approach
Direct Capitalization: $38,160,000
Discounted Cash Flow: $38,000,000
Investment Assumptions
Holding Period: 10 years
Income Growth Rate: +3.0%
Expense Growth Rate: +3.0 %
Sales Growth Rate: +3.0%
Tenant Improvements-
New Tenants: $2.00/SF
Renewing Tenants: None
Commissions
New Tenants: $3.00/SF
Renewing Tenants: None
Vacancy Between Tenants: 3 months
Renewal Probability: 70%
Terminal Capitalization
Rate: 9.75% - 10.00%
Cost of Sale at Reversion: 2.50%
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Discount Rate: 10.75% - 11.00%
Value Conclusion: $38,000,000
Resulting Indicators
Unit Rate: $104.09/SF of owned GLA
Net Income (FY 1998): $3,625,231
Implicit Overall
Capitalization Rate: 9.54%
Exposure Time Implicit
in Market Value Conclusion: Not to exceed 12 months
Special Risk Factors: None
Special Assumptions:
1. Throughout the analysis we have relied on information provided by
ownership and management which we assume to be accurate. This
information was provided in the form of a rent roll, budgets, sales
reports and other property specific information. We were also
provided with a Pro-Ject diskette for the property which ownership
has portrayed as containing the actual lease terms. It is noted that
we have not audited actual lease documents but have relied on the
terms provided in the rent roll and Pro-Ject file.
2. We have made a visual inspection of building improvements and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. The forecasts of income and expenses contained herein are not
predictions of the future. Rather, these projections are our best
estimates of current market thinking on future income, expenses,
growth rates, and demand. No warranty or representation is made with
regard to materialization of these forecasts.
4. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report. We believe, based on
the assumptions employed in our cash flow analysis and based on our
selection of investment parameters for the subject, the value
conclusion represents a market price achievable within one year's
exposure time on the open market.
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TABLE OF CONTENTS
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Page
PHOTOGRAPHS OF SUBJECT PROPERTY ............................................ 1
INTRODUCTION ............................................................... 5
Property Ownership and Recent History .................................... 5
Purpose and Intended Use 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 ...... 7
Legal Description ........................................................ 8
REGIONAL ANALYSIS .......................................................... 10
NEIGHBORHOOD DESCRIPTION ................................................... 17
RETAIL MARKET ANALYSIS ..................................................... 20
PROPERTY DESCRIPTION ....................................................... 34
Site Description ..................................................... 34
Improvements Description ............................................. 34
REAL PROPERTY TAXES AND ASSESSMENTS ........................................ 38
ZONING ..................................................................... 39
HIGHEST AND BEST USE ....................................................... 40
Highest and Best Use of Site As Though Vacant ............................ 40
Highest and Best Use of Property as Improved ............................. 40
VALUATION PROCESS .......................................................... 42
SALES COMPARISON APPROACH .................................................. 43
INCOME APPROACH ............................................................ 50
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 75
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 78
CERTIFICATION OF APPRAISAL ................................................. 80
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Table Of Contents
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ADDENDA .................................................................... 81
NATIONAL RETAIL MARKET OVERVIEW
ENDS FULL DATA REPORTS
SPECIALTY RETAIL AND THEATER LEASE COMPARABLES
SUBJECT RENT ROLL
1997 OPERATING BUDGET
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT LEASE EXPIRATION REPORT
CUSHMAN & WAKEFIELD INVESTOR SURVEY
STATE OF MISSOURI OUT OF STATE AUTHORIZATION TO APPRAISE
PROFESSIONAL QUALIFICATIONS
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PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
The subject Kohl's discount department store, which anchors the west end of the
center.
[GRAPHIC OMITTED]
View showing the west end of the subject Independence Commons shopping center.
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Photographs Of Subject Property
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[GRAPHIC OMITTED]
View showing the east end of the subject center.
[GRAPHIC OMITTED]
AMC Theatre, which anchors the east end of the subject center.
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Photographs Of Subject Property
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[GRAPHIC OMITTED]
Building K, a multi-tenant out parcel building included in the subject
ownership.
[GRAPHIC OMITTED]
Looking south from the AMC Theatre parking lot at the 2.28-acre vacant pad.
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Photographs Of Subject Property
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[GRAPHIC OMITTED]
The Smokehouse BBQ and Fazoli's out parcels, which are not included in the
ownership.
[GRAPHIC OMITTED]
Looking east along 39th Street along the subject's frontage.
Independence Center regional mall is to the right
side of the photograph and the subject center is to
the left.
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INTRODUCTION
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Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
II, LLC, a joint venture between Developers Diversified Realty Corporation (DDR)
and DRA Advisors, Inc. (DRA). The subject was acquired as part of the former
Homart Community Center Division for a total purchase price of approximately
$500.0 million from General Growth Properties, Inc. The date of transfer was
November 17, 1995. Allocation of the total price to the subject Independence
Commons was not available.
A history of the project shows that the 42+/- acre site was originally
acquired by Homart Community Centers, Inc. for a recorded consideration of
$4,775,000. Subsequent to the sale, Homart developed the subject center to its
present configuration with the project opening in the summer of 1996. The
subject center is currently 98 percent leased and occupied. There are two vacant
retail suites in Building K with a combined area of 10,300 square feet; however,
there is a pending lease with The Associates for the 3,500 square foot store.
The terms of the pending lease are considered reflective of market and we have
incorporated the pending deal points in our analysis. The leasing representative
reported strong interest in the remaining end-cap space (6,800 sf) from a
bicycle retailer, although the terms of the lease have not yet been negotiated.
Prior to the sale to Community Centers II, LLC, Homart had sold an
1.0-acre pad site to Brinker International (Chili's Restaurant) for $486,000.
Two other pad sites were sold in early 1996. Fazoli's restaurant purchased a
0.63-acre pad for $340,000; Smokehouse BBQ purchased a 1.0-acre site for
$527,000. All three of these pad developments are now classified as a non-owned
buildings.
There is one vacant pad remaining at the subject center. AMC Theatres is
negotiating a letter of intent to lease this pad. The site will be developed
with additional parking to support an expansion of the existing theater. We were
not provided with documentation of the pending pad lease to AMC Theatre.
However, representative of DRA Advisors indicated that it will generate
approximately $80,000 annual rent revenue. We have included rent revenue from
the pending AMC Theatre pad ground lease in our analysis.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the "as is" market value of
the leased fee estate in the subject property. The intended use of the report is
to underwrite a securitized financing transaction being arranged by Lehman
Brothers, Inc.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the buildings, site improvements, and a
representative sample of tenant spaces.
o Interviewed representatives of ownership and the property management
company including Alan Bobman, the leasing representative.
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Introduction
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o Reviewed leasing policy, concessions, tenant build-out allowances
and history of recent rental rates and occupancy.
o Reviewed a 1997 budget of income and expense as well as actual 1996
operating data, which reflects a partial year's operation.
o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Conducted market inquiries into recent sales of similar retail
centers 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.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems.
o In the course of this assignment we did not review actual lease
documents. We were provided with a Pro-Ject model prepared as of
July 1997, a current rent roll and other tenant specific data.
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and the
current market thinking relative to growth in market rents and
market absorption.
o Developed a value estimate of the center through direct sales
comparison.
o Prepared a detailed discounted cash flow (DCF) analysis using
Pro-Ject +plus software for the purpose of discounting the
forecasted net income stream to a present value of the leased fee
estate for the center.
o Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes.
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition.
o For this assignment, a Complete Appraisal of the subject property
was performed with the results conveyed in this summary report. A
Complete Appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. A summary appraisal
report format provides a summary of the data, analyses, and
conclusions rather than presenting a self-contained narrative within
the report. Other pertinent data is retained in our files. This
report also incorporates our previous Complete Appraisal prepared in
a self-contained report format with a date of value of August 30,
1995 by reference.
Date of Value and Property Inspection
The property has been valued as of July 2,1997. On that date, Martha A.
Shelley, MAI inspected the property and its environs.
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Introduction
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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.
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.
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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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
Legal Description
We were not provided with a legal description for the subject property.
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REGIONAL MAP
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REGIONAL ANALYSIS
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General Overview
The subject property is located in the City of Independence, Jackson
County, which is part of the Kansas City MSA. The Kansas City MSA includes 11
counties, 4 in Kansas (Johnson, Leavenworth, Miami, and Wyandotte), and 7 in
Missouri (Cass, Clay, Clinton, Jackson, Lafayette, Platte, and Ray). Kansas City
is among the most centrally located urban markets in the country, providing for
superior marketing and distribution capabilities. Positioned in the heart of the
farm belt at the confluence of the Kansas and Missouri Rivers, the city and its
suburbs lie within 1,500+/- miles of nearly every point in the continental U.S.
The MSA is approximately 793 miles from Atlanta, GA., 501 miles from Chicago,
IL., 489 miles from Dallas, TX., 602 miles from Denver, CO., 435 miles from
Minneapolis, MN., and 975 miles from Toronto, Canada.
Kansas City is a bi-state community covering more than 5,400+/- square
miles and containing more than 120 municipalities. Ideally located as a regional
hub, the city is at the center of a 200-mile radius which includes St. Louis,
MO., Des Moines, IA., Omaha, NE., Tulsa, OK., and Wichita, KS. Kansas City is
one of the largest agricultural distribution centers in the country and has
become one of the Midwest's major centers for trade, communications, finance,
and industry. The region offers a high standard of living, combined with one of
the lowest costs of living of all major U.S. cities. In addition, the area
consistently ranks below the national average for costs of housing,
transportation, food, and utilities.
Population
Population in the Kansas City MSA has grown at a relatively
moderate-stable pace over the past decade, showing increases of 0.9 percent per
year from 1980 to 1990, and 0.9 percent per year from 1990 to 1996. By
comparison, the State of Missouri has experienced population growth of 0.7
percent per year over the last six years, while the U.S. reports population
growth of about 1.1 percent per year for the same period. Estimates for 1996
place population in the Kansas City MSA at 1,674,616+/-, an aggregate increase
of 5.8 percent over 1990 and 1.0 percent increase over the 1995 population
estimate.
The Kansas portion of the MSA has added more than twice as many residents
over the past decade as the more manufacturing-intensive Missouri side.
Through 2000, population growth in the MSA is forecasted to be 0.6 percent
per year according to Woods & Poole Economics, higher than the rate of growth
projected for the state as a whole. Equifax National Decision Systems (ENDS)
projects population growth of 0.9 percent per year through 2000, while WEFA
forecasts annual population growth of about 0.9 percent per year. Sales &
Marketing Management is also projecting population growth of 0.9 percent per
annum over the next five years. The consensus forecast is for 0.8 percent annual
population growth in the Kansas City MSA through 2000.
Households
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 an
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Regional Analysis
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earlier age, all resulting in increases of one- and two-person households. The
total number of households in the Kansas City MSA has increased from 534,568+/-
in 1980 to 657,896+/- in 1996, a compound annual increase of about 1.3 percent
per year. Accordingly, the number of persons per household within the MSA has
decreased from 2.71 in 1980 to 2.54 in 1996.
Projections through 2000 by Woods & Poole Economics show household growth
in Kansas City at 0.7 percent per year, slightly higher than population growth
forecasts. ENDS projects household growth at 0.85 percent per year, which is
basically equivalent to their projection population growth rate. Combined with
other projections, the consensus forecast shows annual household growth of 0.9
percent per year through 2000.
Cost of Living
Kansas City is generally considered to be a low-cost area for businesses
and residents. Housing, utility, and transportation costs are consistently among
the bottom 20 of Top 100 MSAs. Additionally, K.C. residents enjoy a relatively
low tax burden; both property taxes per capita and state and local taxes per
capita rank the city among the bottom 30 for Top 100 MSAs. The ACCRA Inter-City
Index ranks Kansas City at 96.9 percent when compared against the national
benchmark of 100.0, as of the First Quarter 1997.
Income
Income levels in the MSA have consistently tracked higher than state and
national figures. In addition, low costs of living help to boost resident buying
power. On a per capita basis, Kansas City has an average income of $22,732 for
1996, about 2.1 percent higher than the state level of $18,968 and 2.0 percent
above the national per capita income level of $18,905. Jackson County has a
significantly lower per capita income figure than the MSA of $18,639.
Income growth has generally kept pace with state and national trends,
experiencing annual growth of roughly 6.5 percent per year (1980-90); 7.1
percent per year from 1990 to 1996 (not adjusted for inflation). Income
projections by Woods & Poole Economics show per capita income growth of 4.6
percent per year for the Kansas City MSA.
Effective Buying Income
While income levels are above average for the state and nation, lower
taxes and housing costs tend to further improve the purchasing power of area
residents. As such, the effective disposable income of residents--adjusted for
tax payments, contributions to pension funds, and the cost of new housing--ranks
fairly comparable than other regions of the Plains States. Sales & Marketing
Management places median household effective buying income at $35,148 for Kansas
City as of 1995, higher than the state median of $30,297, the West North Central
median of $30,574, and the U.S. median of $32,238. Jackson County has a
substantially higher median household EBI of $47,433.
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According to Sales & Marketing Management's Survey of Buying Power, the
Kansas City MSA had a total effective buying income of $27,210,609,000 at the
beginning of 1996. Total EBI is forecasted to increase at a compound annual rate
of 4.37 percent over the next five years to $33.69 billion in 2000.
Economic Trends
The Kansas City MSA has a relatively diverse economic base. Several
factors contribute to the strength and stability of the local economy, including
a good quality of life, a skilled labor force, low taxes, financial incentives
by government, and a good transportation network. Over the past several years,
the region has seen stable investment from new companies, as well as expanding
industries. Statistics on labor, employment, investment, and construction show
evidence of the region's dynamic economic growth.
Kansas City's location gives it superior marketing and distribution
capabilities. Its centrality enables manufacturers to benefit from low business
costs associated with distribution services by reducing travel and shipping
times. The MSA's advanced and diverse transportation network provides companies
easy access to local, regional, and national markets. The wide range of
manufacturing operations provides additional stability to the economy when one
of its industries suffers a slowdown.
In many ways, agribusiness remains a key element of the region's economy.
Kansas City is one of the largest agricultural distribution centers in the
country, making trade one of its most important economic components. In fact,
part of the region's strength, as well as its weakness, is its large trade
sector. Wholesale trade, in particular, depends on the level of agricultural
activity in surrounding areas.
Hand-in-hand with the dominance of wholesale trade is a large
transportation and warehousing industry. Transportation services, communication,
and utilities are also over-represented when compared with other Top 100 MSAs.
Kansas City has become a major regional center for communications and business
services, providing support for much of the Plains States region. In recent
years, businesses selling goods and services outside the MSA have also been
expanding, including communications and tourism.
As a regional transportation and trade center, Kansas City is a logical
place for government to do business on both the federal and state level. This
sector of employment has seen stable growth over the years and represents
approximately 13.8 percent of nonfarm employment within the region.
Kansas City's manufacturing base has been declining over the years, both
in terms of level and as a share of total employment. Over the past 5 years,
however, declining trends appear to have stabilized. Dominating the city's
manufacturing sector are printing and publishing and transportation equipment.
Although witnessing a slowdown in the late-1980s/ early-1990s, the lagging
automobile market has improved in recent years and remains as one of Kansas
City's key industries. It is duly noted, however, that many of K.C.'s durable
manufacturing industries, particularly transportation equipment, are cyclical in
nature, leaving this relatively diverse economy still vulnerable to recession.
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Finance and insurance, as well as the services industry, have shown good
stability and relatively strong growth amidst the region's well educated labor
force. With a strong representation of Fortune 1000 companies, including AT&T's
1 0-state regional headquarters, Sprint Corporation's national headquarters, H&R
Block's national headquarters, and Yellow Corporation's headquarters, Kansas
City should remain a dynamic business center and provide for a stable consumer
market despite recent slowdowns in manufacturing and trade.
Unemployment Rates
Unemployment rates in the Kansas City MSA have historically been below
Missouri and national figures, but above State of Kansas levels. As of March
1997, the unadjusted unemployment rate for Kansas City MSA was 3.6 percent, 40
basis points below year-ago levels, and 90 basis points below the national
average at 5.5 percent.
Employment Distribution
The largest sectors of non-agricultural employment in Kansas City are
Services (28.6%), Wholesale and Retail Trade (24.7%), and Government (14.9%).
Although manufacturing declines appear to have stabilized, this sector of
non-farm employment now accounts for a lower percentage of employment than its
16.1 percent share in 1980. Services, on the other hand, has increased its share
from 22.8 percent in 1980 to 28.6 percent today. Finance, Insurance and Real
Estate sectors of employment have generally maintained their percentage of
nonfarm employment, while Government has slipped slightly. Both Construction and
Transportation, Communications and Public Utilities have also maintained their
distribution of non-farm employment over the past fifteen years.
Major Employers/Industries
The relative diversity of the Kansas City economy can also be seen in the
list of major MSA employers. The following is a list of top employers with over
5,000 employees. We have also presented a list of employers with 3,000 to 4,999
employees. As can be seen, the list is represented by such industries as
manufacturing, government, telecommunications, education, transportation, and
health care.
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Major Employers (Employing 5,000 and Over)
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Company No. Employers
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Allied Signal, Inc. Avionics & Weapons Components Mfg.
AT&T Corp. Telecommunications
DST Systems, Inc. (H) Data Processing
Federal Government Government
Ford Motor Co. Motor Vehicle Mfg.
Fort Leavenworth Military
Hallmark Cards, Inc. (H) Social Expression
Health Midwest (H) Health Services
Kansas City, MO., School District Public Education
Sprint Corp. (H) Telecommunications
State of Kansas Government
State of Missouri Government
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Source: Profile of Greater Kansas. America's Smart Cities
(H) Reflects company headquarters.
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Major Employers (Employing 3,000-4,999)
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Company No. Employers
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Black & Veatch (H) Engineering & Architecture
Burlington Northern Santa Fe Corp. Transportation
City of Kansas City, MO. Government
General Motors Corp. Motor Vehicle Mfg.
Kansas City Southern Industries (H) Transportation & Financial Services
Kansas City, KS., School District Public Education
St. Luke's-Shawnee Mission Health System Health Services
Shawnee Mission School District Public Education
Southwestern Bell Telephone Co. Telecommunications
Trans World Airlines, Inc. Transportation
United Parcel Service of America, Inc. Delivery Service
University of Kansas Higher Education
University of Kansas Medical Center Health Services & Higher Education
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Source: Profile of Greater Kansas. America's Smart Cities
(H) Reflects company headquarters.
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Sprint Corporation is Kansas City's largest private sector employer,
with some 9,300 local employees. Sprint is followed by Health Midwest, which
employs some 8,600, and has a 25.0 percent share of the hospital market within
the metro area (it opened its 13th hospital in 1995). Additional firms with over
5,000 local employees includes Hallmark Cards, Ford Motor Company, and AT&T.
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Another important corporate move has been the announcement by
Harley-Davidson that they plan to build a $100.0 million motorcycle
manufacturing plant that will employ 350 in 1998, when the facility opens, and
at least 500 within 5 years. The 300,000 square foot facility will be located in
an enterprise zone near the Kansas City International Airport.
Another company that is about to join the list of large employers is
Gateway 2000. Gateway, the nation's largest direct marketer of personal
computers, has recently vacated office space downtown, moving to the old Kansas
City stockyards area (known as West Bottoms), where it expects to eventually
employ about 3,000 people (tripling its current local workforce). Gateway's
plans call for 400,000-600,000 square feet of space, consisting of both new
construction and converted facilities. The company reportedly plans to invest
between $65.0-$100.0 million in the West Bottoms area; the city has provided
nearly $32.0 million in tax-increment financing to improve the area's
infrastructure.
Near the airport, back office space operations have experienced a recent
boom. Included among the numerous facilities are America West Airlines'
Reservation Center (with 300 employees); American Capital Company (250
employees); Citicorp Credit Services (1,300 employees); EDS Global Travel Center
(375); and Worldspan (700). Citicorp is already expanding from their space here,
recently breaking ground on a $20.0 million complex, with plans to add several
hundred workers by the end of the decade.
Employment Growth
Woods & Poole Economics projects only moderate non-farm employment growth
for the Kansas City MSA over the next five years, with an annual rate of
increase forecasted at 0.6 percent per year. The WEFA Group projects higher
annual employment growth of 2.1 percent per year through 2000. The consensus
forecast is 1.4 percent annual growth for non-agricultural employment.
Retail Sales
Retail sales growth has been relatively moderate in the Kansas City area
over the past 11 years. Since 1985, total retail sales have grown at a compound
annual rate of 5.1 percent per year, only slightly higher than statewide growth
of 5.0 percent per year, and slightly lower than national growth of 5.4 percent
per annum. From 1990-95, sales growth has tracked at a higher rate of 6.6
percent per annum for the MSA, comparable to statewide growth, and outpacing
national increases of 5.4 percent per year.
Sales & Marketing Management is forecasting lower annual sales growth of
4.5 percent per year for the MSA through 2000. Woods & Poole Economics forecasts
the MSA to see annual retail sales growth of 0.6 percent per year above
inflation through 2000 (adjusted to 1987 dollars).
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Regional Analysis
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The composite purchasing profile of Kansas City residents tends to reflect
the demographic characteristics of the city. The MSA not only serves residents
of the immediate region, but also those in rural or small metropolitan areas
throughout the surrounding area. Kansas City tends to be a market of
family-oriented consumers. When compared to the average midwestern MSA and the
average Top 100 MSA, the motor vehicles and accessories, apparel, and shoes
merchandise product lines both receive a disproportionate share of K.C. retail
sales dollars.
Conclusion
The short- and long-term outlook for the Kansas City region and its
surrounding area is for stability, with moderate-good growth in employment and
population. The economy is relatively well diversified, with a low cost of
living and good transportation system. On balance, we are relatively optimistic
about the short-term outlook of the subject region. Long-term, the region should
see stability and moderate growth, with increasing real estate values.
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NEIGHBORHOOD DESCRIPTION
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Independence, Missouri
The subject property is located in the northeast quadrant of the
intersection of I-70 and I470/Route 291 in the City of Independence, Jackson
County, Missouri. The City of Independence encompasses approximately 78 miles
and is located immediately east of Kansas City, Missouri in Jackson County. The
1990 population of Independence was 112,301 representing a 0.8 percent increase
over the 1980 population of 111,424. The estimated 1996 population is 113,043,
reflecting an 0.7 percent increase for the six year period. The population is
projected to grow modestly over time with a year 2001 population estimate of
115,379, representing a 2.1 percent increase over the decade of the 1990's. The
estimated 1996 median household income for the City of Independence was $33,879
as compared to $39,839 for the Kansas City MSA.
Employment in Independence closely mirrors that of the Kansas City MSA.
The largest employment group is Services (37.8 percent), followed by Retail
Trade (25.4 percent), Manufacturing (16.3 percent) and FIRE (5.8 percent). The
types of manufacturing in the Independence area are diversified, but major
categories are plastic, machinery, food products, paper and munitions. Major
employers in Independence include the following:
================================================================================
Major Employers (500 or more)
Independence, Missouri
================================================================================
Employer Product/Service
================================================================================
Agco, Inc. Combines, tractors
- --------------------------------------------------------------------------------
City of Independence City government
- --------------------------------------------------------------------------------
Government Employee Hospital Association Medical insurance
- --------------------------------------------------------------------------------
Independence Reg. Health Center Hospital
- --------------------------------------------------------------------------------
Independence School District Public School District
- --------------------------------------------------------------------------------
Medical Center of Independence Hospital
- --------------------------------------------------------------------------------
Olin Corporation Small arms ammunition
- --------------------------------------------------------------------------------
Southwestern Bell Communications
================================================================================
Access to the neighborhood is very good. Interstate 70 and U.S. Highway 40
are major east/west highways. Both are part of the interstate highway system
which provides access to metropolitan Kansas City as well as adjoining states.
Additionally, Missouri Route 291 (I-470) is a major north/south highway route
which passes through Independence providing access to communities to the north
and south. It is reported that a new interchange of I-70 will be constructed
east of the subject at Selsa Road which will provide additional access for this
neighborhood. Via these and connecting roadways, all major points of the Kansas
City MSA are within a 30 minute drive.
Residential uses in this neighborhood are primarily detached single family
residential as well as some multi-family apartment uses. Since 1980, the City
of Independence has added 4,398 housing units, according to ENDS. Approximately
67 percent of the residents own their own home. Homes in this area range from
the mid $50,000 category to around $80,000. This
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WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Neighborhood Description
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compares to the median home price of $93,800 (1996) for the greater Kansas City
MSA. Typical of these are three new or proposed residential sub-division located
west of the subject along 39th Street - Woodlake Village, Appletree Condominiums
and Bramblewood. Apartment rental rates vary from $300 to $475 per month for a
two bedroom unit. According to ENDS, the median residential property value
within the 5-mile radius of the subject is $70,920. The median rent is estimated
at $345 per month.
The largest retail development in this area is Independence Center, a
865,000+/- square foot mall which was constructed in 1974. Located northwest of
the intersection of 1-70 and Route 291 is the new Crossroads of Independence
shopping center, consisting of a Home Quarters and Wal-Mart, plus several
outparcels. There are also numerous older community and neighborhood shopping
centers located primarily along Noland Road and Route 291.
The area immediately surrounding and directly influencing the subject
contains a mixture of retail, office and residential land uses. The subject lies
immediately opposite Independence Center and within one mile of the new
Crossroads of Independence shopping center. Also located along 39th Street in
the vicinity of the subject are a freestanding Circuit City Store, a branch bank
of Commerce Bank, a bowling alley and American Waterbeds store. Located behind
the subject are the Independence Ridge Apartments. Located along Arrowhead Drive
are newly constructed single and multi-story offices as well as some light
industrial uses. Located east of the subject is vacant agricultural land.
In conclusion, the neighborhood of the subject has experienced modest
population growth but significant commercial growth over the last ten years.
With excellent highway access, readily available developable land and continuing
population growth in the Kansas MSA, the area offers opportunities for
significant additional growth in the future. One of the growth corridors for the
MSA is considered to the south of the subject along I-470 into Lee's Summit and
the subject neighborhood is in the path of this growth. Also, this area is
emerging as the new retail corridor for eastern Kansas City. The trend for this
neighborhood has been positive in the past and we would expect this trend to
continue into the foreseeable future.
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NEIGHBORHOOD MAP
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<PAGE>
RETAIL MARKET ANALYSIS
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Property Profile
The subject property is anchored by a number of national retail tenants.
These anchor tenants include Kohl's discount department store, Bed Bath and
Beyond, Marshalls, Rhodes Furniture, Barnes & Noble, and AMC - America
Multi-Cinema. Other major tenants include Coomers Craft, Nills Bros. Sports, and
Hallmark Showcase.
Provided below is a summary of the credit profile of several of these
major tenants. Combined, they account for in excess of 81 percent of contractual
base rents.
================================================================================
Anchor Tenants Parent Company S&P Rating(1) % of Base Rents
- --------------------------------------------------------------------------------
Kohl's Department Store Kohl's Department Store BBB 16.1%
- --------------------------------------------------------------------------------
American Multi-Cinema American Multi-Cinema BB- 24.1%
- --------------------------------------------------------------------------------
Rhodes Furniture, Inc. Rhodes Furniture, Inc. NR 12.3%
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Bed, Bath and Beyond Bed, Bath and Beyond NR 10.2%
- --------------------------------------------------------------------------------
Marshalls TJX Companies BBB+ 6.8%
- --------------------------------------------------------------------------------
Barnes & Noble Barnes & Noble BB 10.6%
- --------------------------------------------------------------------------------
Coomers Craft Coomers Craft NR 3.8%
- --------------------------------------------------------------------------------
Nills Bros. Sports Nills Bros. Sports NR 3.8%
- --------------------------------------------------------------------------------
81.3%
- --------------------------------------------------------------------------------
(1) Ratings current as of February 1997
================================================================================
Trade Area Analysis
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 major 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.
In order to define and analyze the subject's market potential, it is
important to first establish the boundaries of the trade area from which the
subject draws 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.
As such, a clear understanding of the property type is important in order
to place the subject in its proper competitive context. The subject meets the
definitions of both a community center and a power center to some degree. Each
can be defined as follows:
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WAKEFIELD (R)
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Retail Market Analysis
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o A community center provides a wider range of facilities for the sale
of soft lines (wearing apparel for men, women, and children) and
hard lines (hardware and appliances). The community center makes a
greater variety of merchandise available-in sizes, styles, colors,
and prices. It is built around a junior department store, variety
store, or discount department store as the major tenant, in addition
to a supermarket. It does not have a full-line department store,
though it may have a strong specialty store or stores. In theory,
its typical size is 150,000 square feet of gross leasable area, but
in practice, it may range in size from 100,000 to 450,000 square
feet.
o The power center is a loosely defined term that can generally be
characterized as a grouping of retail stores that:
o collectively totals at least 250,000 square feet;
o includes at least one major anchor containing 100,000 square
feet or more, that is either a discount department store or
warehouse club;
o includes at least four smaller, category specific anchor
tenants of 25,000 square feet or more. These anchor stores
will typically have a narrow focus but deep selection in
specific merchandise lines such as building supplies/home
improvement goods, consumer electronics, off-price apparel,
sporting goods, books, personal computer hardware and
software, office supplies, toys, pet supplies, deep discount
drugs, bulk foods, or tapes and records;
o should contain a minimum of smaller shop space (10 percent or
so of the center's total gross leasable area); and
o will typically be configured in an open-air strip, "L" or "U"
shaped layout.
We have not been provided with any customer survey reports or shopper zip
code lists that would help identify the boundaries of the primary and secondary
trade areas. Therefore, we have made certain reasonable assumptions of the
extent of this area based upon other physical, demographic, and geographic data
available.
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 to the subject's position.
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WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
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Retail Structure
In order to examine the subject property in its proper context, we must
examine the nature of the competition. By virtue of the market structure, the
subject competes with certain retail establishments throughout the general area.
Provided on the following page chart is a summary of some key information on
existing properties. The subject's primary competition is seen in local
community-oriented retail centers with similar tenant mixes. The subject also
competes to some degree with existing regional and specialty shopping centers in
the immediate market area. It is noted, however, that the subject is a unique
property within this market whereas no existing centers truly present a similar
competitive stance to Independence Commons.
The local retail market has been stable over the past 12 to 18 months, or
since our previous appraisal. Petsmart opened their store between Wal-mart and
Home Quarters at Crossroads of Independence. There is still one remaining anchor
pad at this center. Price Chopper relocated from their older store in
Independence Center to the former Wal-mart at the Hub Shopping Center. Parts
America also opened a store in a portion of the former Wal-mart space. The
overall occupancy rate for the centers surveyed is estimated at 95 percent,
which is considered a stabilized occupancy for the market.
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WAKEFIELD (R)
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SHOPPING CENTER MAP
================================================================================
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Competitive Shopping Centers
===================================================================================================================================
Map No. Property Location Year Anchor Tenants Total GLA Occupancy Rent Range Distance From
Built (SF) Subject
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subj. Independence NEC 39th Street and 1996 Kohl's, Bed Bath & Beyond, 382,162 97% - - -
Commons Arrowhead Drive Marshalls, Rhodes, Barnes
& Noble, AMC Theatre
- -----------------------------------------------------------------------------------------------------------------------------------
1 Independence NEQ Highway 70 and 1974/88 Dillards, Jones Store, 864,400 90% n/a Across 39th
Center Route 291, at 39th Sears Street.
Street
- -----------------------------------------------------------------------------------------------------------------------------------
2 Crossroads of NWQ Highway 70 and 1996 Wal-mart, Home Quarters 408,000 100% $8.00 - .25 mi. SW.
Independence Route 291 $12.00/sf
- -----------------------------------------------------------------------------------------------------------------------------------
3 The Hub Shopping SWC Highway 291 and 1985 Price Chopper, Parts 100,000 100% $8.00 - 2 mi. N.
Center 23rd St. America $10.00/sf
- -----------------------------------------------------------------------------------------------------------------------------------
4 Independence Route 291 and Route 24 1978 Kmart, Foodland 134,634 90% $6.00 - 3 mi. N.
Square $8.00/sf
- -----------------------------------------------------------------------------------------------------------------------------------
5 The Marketplace SEC Noland and Highway 1987 Service Merchandise, Price 243,000 98% $10.00 - 3 mi. W.
70. Chopper $18.00/sf
- -----------------------------------------------------------------------------------------------------------------------------------
6 Noland Fashion NWC Noland and Highway 1986 Cimema 6, TJ Maxx, Toys R 300,000 95% $9.00 - 3.5 mi. SW.
Square 40. Us, Kids R Us, 1/2 Price, $14.00/sf
Shoe Carnival
- -----------------------------------------------------------------------------------------------------------------------------------
7 Hawthorne Square SEC Noland and Highway 1987 Builders Square, Checkers 180,000 95% $9.00 - 3.5 mi. SW.
40. $11.00/sf
===================================================================================================================================
</TABLE>
Cushman and Wakefield, Inc. INDCOMM.XLS, Competitive Shopping Centers
Valuation Advisory Services 7/21/97 at 5:33 PM
CUSHMAN &
WAKEFIELD (R)
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<PAGE>
<TABLE>
<CAPTION>
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DEMOGRAPHIC STATISTICS
Independence Commons, Independence, Missouri
Cushman and Wakefield, Inc.
===================================================================================================================================
3-mile 5-mile 10-mile City of Jackson Kansas State of United States
Radius Radius Radius Independence County City MSA Missouri (000)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Population Statistics
1980 31,096 101,081 325,035 111,424 629,266 1,449,374 4,916,667 226,545,856
1990 36,033 113,238 349,999 112,301 633,232 1,582,875 5,117,073 248,709,872
1996 37,371 116,686 357,197 113,043 637,090 1,674.62 5,343,959 265,037,504
2001 38,535 119,786 366,364 115,379 649,773 1,749,501 5,510,365 277,157,184
Compound Annual Changes
1980 - 1990 1.48% 1.14% 0.74% 0.08% 0.06% 0.89% 0.40% 0.94%
1990 - 1996 0.61% 0.50% 0.34% 0.11% 0.10% 0.94% 0.73% 1.07%
1996 - 2001 0.62% 0.53% 0.51% 0.41% 0.40% 0.88% 0.62% 0.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Household Statistics
1980 10,618 36,909 119,911 42,293 242,085 534,568 1,793,399 80,389,688
1990 14,042 44,029 134,953 45,313 252,582 608,459 1,961,206 91,947,408
1998 14,964 46,194 140,245 46,691 259,027 657,896 2,089,320 100,130,936
2001 15,599 47,608 143,606 47,576 263,158 686,440 2,151,816 105,243,728
Compound Annual Changes
1980 - 1990 2.83% 1.78% 1.19% 0.69% 0.43% 1.30% 0.90% 1.35%
1990 - 1996 1.07% 0.80% 0.64% 0.50% 0.42% 1.31% 1.06% 1.43%
1996 - 2001 0.83% 0.60% 0.47% 0.38% 0.32% 0.85% 0.59% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Household Income
1980 $25,655 $ 23,201 $ 21,214 $ 21,049 $ 19,658 $ 21,633 $ 18,752 $ 20,307
1990 $39,038 $ 38,094 $ 34,258 $ 32,451 $ 34,129 $ 38,622 $ 33,441 $ 38,453
1996 $50,231 $ 52,991 $ 47,375 $ 44,719 $ 48,478 $ 57,155 $ 47,397 $ 49,031
2001 $61,732 $ 71,125 $ 62,821 $ 59,653 $ 65,513 $ 76,758 $ 62,133 $ 65,729
Compound Annual Changes
1980 - 1990 4.29% 5.08% 4.91% 4.42% 5.67% 5.97% 5.96% 6.59%
1990 - 1996 4.29% 5.66% 5.55% 5.49% 6.02% 6.75% 5.99% 4.13%
1996 - 2001 4.21% 6.06% 5.81% 5.93% 6.21% 6.08% 5.56% 6.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Per Capita Income Statistics
1980 $ 8,760 $ 8,472 $ 7,826 $ 7,990 $ 7,610 $ 8,039 $ 6,917 $ 7,298
1990 $15,219 $ 14,872 $ 13,256 $ 13,208 $ 13,712 $ 15,029 $ 12,989 $ 14,420
1996 $20,292 $ 21,092 $ 18,764 $ 18,639 $ 20,022 $ 22,732 $ 18,968 $ 18,905
2001 $25,232 $ 28,425 $ 24,867 $ 24,829 $ 27,021 $ 30,559 $ 24,842 $ 25,467
Compound Annual Changes
1980 - 1990 5.68% 5.79% 5.41% 5.15% 6.06% 6.46% 6.50% 7.05%
1990 - 1996 4.91% 6.00% 5.98% 5.91% 6.51% 7.14% 6.51% 4.62%
1996 - 2001 4.45% 6.15% 5.77% 5.90% 6.18% 6.10% 5.54% 5.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Source: Equifax National Decisions Systems
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</TABLE>
<PAGE>
Retail Market Analysis
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Trade Area Demographics
Population and income level demographics provide important insight into
the property's trade area. On the facing page is summary chart of population,
household and household income statistics for the 3-, 5-, and 10-mile radii
surrounding the subject. Also shown are statistics for the City of Independence,
Jackson County, the Kansas City MSA, and the State of Missouri, compared to the
United States.
Population
The trade area is growing at a slower rate than the Kansas City MSA.
Nonetheless, the total 10-mile radius is projected to add 9,167 residents over
the next five years (1996-2001). The immediate 3-mile radius is projected to
increase at a faster rate of 0.62 percent, compared to 0.51 percent for the
10-mile radius.
On the two following pages, we present two color graphics which illustrate
the current (1996) population density and future population growth projections.
The population density graphic shows relatively low density of residential
development to the south and east of the subject. This suggests potential for
future growth. The second graphic shows strong anticipated growth in several
sectors within the immediate 3-mile trade area, as well as significant growth
section to the south in Lees Summit.
Households
According to ENDS, the 10-mile trade area will add 3,361 households
between 1996 and 2001, a compound increase of 0.47 percent. The 3-and 5-mile
trade area radii are projected to add households at 0.83 percent and 0.60
percent per year, compounded, respectively. Therefore, the more immediate trade
area is projected to add households at rates in excess of population increases.
In fact, relative to the Kansas City MSA and the State of Missouri, the subject
trade area is one of the faster growing housing markets.
Faster household growth relative to population increases will result in
smaller household size. In 1990, the average household size within the 3-mile
radius was 2.57 persons. By 2001, the average household size is projected to be
2.47 persons. By comparison, the average household size within the MSA was 2.60
persons in 1990, and is projected at 2.55 persons by 2001. A greater number of
smaller households with fewer children generally indicates more disposable
income.
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[GRAPHIC OMITTED]
INDEPENDENCE COMMONS
POPULATION PER SQUARE MILE
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<PAGE>
================================================================================
[GRAPHIC OMITTED]
INDEPENDENCE COMMONS
POPULATION % GROWTH 1996-2001
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<PAGE>
Retail Market Analysis
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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.
Trade area income figures for the subject support the profile of a
broad-based middle income market. According to ENDS, average household income
within the 5-mile radius trade area in 1996 is estimated at $52,991.
A comparison of the trade area's relative ranking is shown on the
following chart.
==============================================
Average Household Income Comparison
==============================================
Area Income
==============================================
3 Mile Radius * $50,231
----------------------------------------------
5 Mile Radius * $52,991
----------------------------------------------
10 Mile Radius $47,375
----------------------------------------------
City of Independence $44,719
----------------------------------------------
Jackson County $48,478
----------------------------------------------
Kansas City MSA $57,155
----------------------------------------------
Missouri $47,397
----------------------------------------------
United States $49,031
==============================================
Source: Equifax National Decision Systems
==============================================
*Primary Trade Area
==============================================
The distribution of income within the primary trade area can be summarized
as follows:
==============================================
Household by Income
Estimated 1996
==============================================
Category % of Households
==============================================
Greater Than $150,000 3.55%
----------------------------------------------
$100,000 - $149,999 4.51%
----------------------------------------------
$ 75,000 - $ 99,999 7.05%
----------------------------------------------
$ 50,000 - $ 74,999 21.10%
----------------------------------------------
$ 35,000 - $ 49,999 19.27%
----------------------------------------------
$ 25,000 - $ 34,999 13.17%
----------------------------------------------
Less Than $ 25,000 31.34%
==============================================
Source: Equifax National Decision Systems
==============================================
The following page color map illustrates median household income by zip
code within the subject's trade area. The subject is well positioned to capture
retail expenditures from the higher income households located in the south and
southwest quadrants of the market area.
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INDEPENDENCE COMMONS
HH 96 BY INCOME: MEDIAN (EST.)
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<PAGE>
Retail Market Analysis
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Market Overview
The subject is a dominant community center within the City of
Independence. It has excellent regional access via Highways 291 and 70, and
benefits from its location across from Independence Center regional mall. The
subject's anchor tenant mix provides a strong draw from both the immediate
residential neighborhoods, as well as the larger geographical region. We have
estimated the primary trade area to include the 5-mile radius from the subject
center. The primary competitive retail district is located approximately 3.5
miles southwest, at the intersection of Noland Road and Highway 70. Additional
retail facilities are located two to three miles north of the subject, at
Highway 291 and 23rd Street and Route 24. The subject center is rated superior
to these community and neighborhood shopping districts in terms of total tenant
mix, quality of the improvements, cross shopping opportunities with an
established regional mall, freeway access, and overall shopper appeal.
Quoted in-line rents in the market range from $8.00 to $18.00 per square
foot. We would expect the subject to continue to realize in-line rents which are
at the upper end of the range. According to Mr. Bobman, leasing representative
for the subject center, the current rent for typical in-line stores at competing
centers is $12.00 per square foot, triple net. In-line rents for Building B at
the subject center range from $12.00 to $13.50 per square foot, while Building K
rents range from $12.25 to $16.50 per square foot. We conclude that the
subject's contract rents are reflective of the current market rent for these
stores.
Subject Sales Productivity
The subject opened in mid-1996. As such, there is limited sales history
available for most stores. The following summarizes the available 1996/97 sales
for those tenants reporting.
========================================================
Independence Commons
1996/97 Sales Performance
========================================================
Tenant GLA (SF) Sales Sales PSF
========================================================
America Multi-Cinema 63,800 $8,431,914 $132
--------------------------------------------------------
Rhodes Furniture (1) 50,640 $6,336,727 $125
--------------------------------------------------------
Coomers Crafts 15,003 $ 887,056 $ 59
--------------------------------------------------------
Nill Bros. Sports 12,033 $ 656,139 $ 55
--------------------------------------------------------
O.H. Gerry Optical Company 3,015 $ 174,385 $ 58
========================================================
There is insufficient tenant sales data to analyze the overall performance
of the center.
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CUSHMAN &
WAKEFIELD (R)
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Retail Market Analysis
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Industry Average Sales
The following chart presents a comparison of average sales by center
category for both power centers and community centers in the U.S.
<TABLE>
<CAPTION>
=======================================================================================================================
Comparison of Sales and Rent
Power Center and Community Center Tenants
=======================================================================================================================
U.S. Median * U.S. Median * U.S. Median **
Retail Power Center Super Community Centers Community Center
- -----------------------------------------------------------------------------------------------------------------------
Tenant Classification Sales Sales % of Sales Sales % of Sales Sales % of
PSF PSF Sales PSF PSF Sales PSF PSF Sales
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Department Store $ 180.00 $ 3.42 1.9% $ 165.00 $ 3.50 2.1% $ 142.00 $ 4.41 3.1%
- -----------------------------------------------------------------------------------------------------------------------
Superstore (Food) $ 285.00 $ 4.58 1.6% N/A N/A N/A $ 372.00 $ 5.79 1.6%
- -----------------------------------------------------------------------------------------------------------------------
Restaurant (w/liquor) $ 234.00 $ 15.90 6.8% $ 223.00 $ 13.99 6.3% $ 210.00 $ 12.58 6.0%
- -----------------------------------------------------------------------------------------------------------------------
Shoes $ 187.00 $ 12.00 6.4% $ 180.00 $ 12.00 6.7% $ 159.00 $ 13.00 8.2%
- -----------------------------------------------------------------------------------------------------------------------
Cards & Gift $ 105.00 $ 12.50 11.9% $ 136.00 $ 12.62 9.3% $ 127.00 $ 12.36 9.7%
- -----------------------------------------------------------------------------------------------------------------------
Women's Ready to Wear $ 122.00 $ 10.20 8.4% $ 167.00 $ 13.48 8.1% $ 146.00 $ 12.16 8.3%
- -----------------------------------------------------------------------------------------------------------------------
Overall Average $ 197.00 $ 7.22 3.7% $ 188.00 $ 6.85 3.6% $ 210.00 $ 7.19 3.4%
- -----------------------------------------------------------------------------------------------------------------------
Median $ 200.00 $ 6.33 3.2% $ 183.00 $ 6.80 3.7% $ 199.00 $ 6.90 3.5%
- -----------------------------------------------------------------------------------------------------------------------
Lower Decile $ 87.00 $ 3.60 4.1% $ 107.00 $ 3.21 3.0% $ 117.00 $ 3.36 2.9%
- -----------------------------------------------------------------------------------------------------------------------
Upper Decile $ 292.00 $ 14.36 4.9% $ 314.00 $ 12.33 3.9% $ 371.00 $ 12.71 3.4%
=======================================================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
=======================================================================================================================
</TABLE>
Overall, average sales performance may be refined further as shown in the
following chart.
================================================================================
Sales Performance Indices
US Power Centers and Community Centers
================================================================================
Power Centers * Super Community Community
Centers * Centers **
- --------------------------------------------------------------------------------
United Midwest United Midwest United Midwest
States Region States Region States Region
================================================================================
Overall Average $197 $184 $188 $167 $210 $213
Median $200 $186 $183 $175 $199 $188
Lower Decile $ 87 -- $107 $ 96 $117 $117
Upper Decile $292 -- $314 $240 $371 $401
================================================================================
* Urban Land Institute "Dollars & Cents of Power Center, 1995"
** Urban Land Institute "Dollars & Cents of Shopping Centers, 1997"
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CUSHMAN &
WAKEFIELD (R)
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Retail Market Analysis
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From the above we see that industry averages and medians range from
approximately $184 to $200 per square foot for power centers and $167 to $188
per square foot for super community centers. This is based on the 1995 ULI
publication. More recently, ULI has put forth its 1997 version of operating
results for standard community centers. Displayed above is a range of $188 to
$213 per square foot as average/median performance ranges. Upper and lower
decile levels show more dramatic swings as would be expected.
We would expect the subject tenants to realize sales near the averages as
reported for each tenant category.
Conclusion
We have analyzed the retail trade history and profile of the Kansas City
MSA 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 were presented. The trade area profile discussed encompassed a
radii based analysis that was established based upon a study of the competitive
retail structure. Marketing information relating to these sectors was presented
and analyzed in order to determine patterns of change and growth as it impacts
the subject. The given data is useful in establishing quantitative dimensions of
the total trade area, while our comments serve to provide qualitative insight
into this market. A compilation of this data provides the basis for our
projections and forecasts particular to the subject property. The following
summarizes our key conclusions.
o The neighborhood has good vehicular access via Highways 291 and 70.
The subject enjoys a visible location directly across 39th Street
from Independence Center, the only regional mall serving the City of
Independence.
o The existing trade area structure is largely characterized by
traditional neighborhood centers as well as community centers
anchored by grocery or discount stores.
o The trade area can be characterized by middle to upper-middle income
households relative to comparison with the Kansas City MSA.
Population and household growth rates within the trade area are
projected to exceed the rate of growth within the larger region.
o The subject will benefit from its tenant mix which is unique to the
City of Independence and the western portion of the greater Kansas
City metro area.
o The center is well positioned in an area that is forecasted to
continue to witness relatively strong population and household
growth. The population within a 5 mile radius is currently estimated
at 116,688. Within the 10 mile radius, the population is estimated
at in excess of 350,000.
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Retail Market Analysis
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Our analysis concludes that the merchandising mix of the center, the
location along two major arterials, and the popularity and uniqueness of the
major tenants, all combine to establish Independence Commons as a viable retail
center in its trade area. We believe that, with competent management, aggressive
marketing, and a responsive maintenance program, it should continue to maintain
a strong position in the market throughout the foreseeable future.
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TENANT INDEX
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<PAGE>
PROPERTY DESCRIPTION
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Site Description
The subject property is located on the northeast corner of 39th Street and
Arrowhead Drive, in the City of Independence, Jackson County, Missouri. The
subject center covers an entire block extending north to 37th Terrace and east
to Jackson Drive. The total center site contains 42.21+/- acres, of which the
subject ownership comprises 39.58+/- acres. Excluded from the subject ownership
are three out parcel pads which were sold during the development of the center.
There is one vacant pad containing 2.28+/- acres which remains in the
subject ownership. The owner's representative reports that there is a pending
lease with American Multi-Cinema, Inc. for this site. AMC Theatres plans to use
the site to provide necessary additional parking to support their proposed
expansion of their theater building. The planned expansion will add 5 additional
screens, although the size of building expansion was not available. We have
considered the pending AMC Theatre expansion lease of the vacant pad parcel in
our analysis.
The subject site is generally level to moderately sloping at the east end,
where the vacant pad and AMC theater site are somewhat above the grade of 39th
Street. The topography of the site affords the property excellent drive-by
visibility from 39th Street. All utilities are provided to the site. Access to
the property is good, with two main driveways entrances from 39th Street. The
more westerly entrance is improved with a four-way traffic signal. Additional
driveway entrances are provided from the bordering roadways. The 39th Street
intersections with both Arrowhead Drive and Jackson Drive are improved with
traffic signals.
The subject site is not located in a flood zone, according to National
Flood Insurance Rate Maps. We were not given a wetlands survey, or other
environmental survey for the property. We are not aware of any environmental
conditions that would impact the property's value or marketability. The reader
is referred to the Assumptions and Limiting Conditions for our position
regarding this issue.
We were not provided with a preliminary title report, survey, or other
documentation of the subject's legal description and exceptions to title. We are
not aware of any easements, encroachments, or restrictions that would adversely
affect the site's use. However, we recommend a current title search to determine
whether any adverse conditions exist.
Overall, the subject site is well suited for its existing use as a large
community power center. Externally, no deleterious influences were noted.
Improvements Description
The subject site is improved with a strip retail community power center
commonly known as Independence Commons. Please refer to the Site Plan on the
facing page which provides a graphic illustration of the subject center layout.
Independence Commons was completed in mid-1996, with most of the stores opening
in April to June of that year. Following is a summary of the gross leasable
building area for the subject center.
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Property Description
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==========================================================
Building Components Building Area % of Total
==========================================================
Anchor Tenants
Kohl's 80,684+/- SF
Bed Bath & Beyond 40,000+/- SF
Marshall's 30,439+/- SF
Rhodes Furniture 50,640+/- SF
Barnes & Noble 30,000+/- SF
AMC Theatres 63,800+/- SF
==========================================================
Subtotal Anchors 295,563+/- SF 77.3%
==========================================================
Other Major Tenants:
Nill Bros. Sporting Goods 12,033+/- SF
Coomers Crafts 15,003+/- SF
==========================================================
Subtotal Other Majors 27,036+/- SF 7.1%
==========================================================
Shop Tenants:
Building B 24,463+/- SF
Building K 18,000+/- SF
==========================================================
Subtotal Shop Area: 42,463+/- SF 11.1%
==========================================================
Total Owned Center Area 365,062+/- SF 95.5%
==========================================================
Out Parcel Tenants
Chili's Restaurant 6,600+/- SF
Fazoli's 3,500+/- SF
Smokehouse BBQ 7,000+/- SF
==========================================================
Subtotal Out Parcel Area: 17,100+/- SF 4.5%
==========================================================
TOTAL CENTER GLA: 382,162+/- SF 100.0%
==========================================================
As of the date of our inspection, there were two vacant retail suites in
Building K with a combined GLA or 10,300 square feet, or 2.7 percent of the
total center area. The leasing representative reports that there is a pending
lease for the interior space which contains 3,500 square feet. The lease is
projected to commence in October, 1997. This will increase the center occupancy
to 98.2 percent. The remaining vacant store was previously leased to
Kuppenheimer. The leasing representative reports strong interest in this space
from a bicycle retailer. A lease plan is presented at the end of this section.
The subject improvements are constructed of steel-frame structures with
face brick over concrete block exterior walls. Foundations and subfloors are
constructed of reinforced concrete footings and reinforced concrete slab floors
on grade. Heating and cooling is provided by roof-mounted combination HVAC units
that serve Individual tenant suites. Plumbing and electric service is deemed
adequate for the current retail use. All buildings are sprinklered for fire
protection.
Building finishes include drop acoustic tile ceiling, painted sheet rock
walls, plate glass store front windows and doors in aluminum frames. Each tenant
suite is equipped with at least one handicap accessible rest room.
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Property Description
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Parking for the subject center is provided by asphalt-paved surface lots.
There are 2,282 striped parking spaces, which equates to a parking ratio of 5.97
spaces per 1,000 square feet of total building area. The subject site is
landscaped along all roadway frontages, along the building perimeters, and
throughout the parking lot.
Overall, the site and building improvements appear to be well designed and
configured for retail utilization. Site configuration appears well suited for
vehicular movement and visibility. According to Marshall Valuation Services, the
typical life expectancy for community retail center buildings like the subject
is 45 to 50 years. The effective age of the subject improvements is estimated at
one year.
Analysis of the structural integrity of each building is beyond our
expertise and best made by a professional engineer.
Our review of the local environs reveals that there are no extraordinary
external influences which negatively impact the value of the subject property.
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INDEPENDENCE COMMONS - Independence, MO
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is currently assessed by Jackson County, and is
identified as Parcel 34-200-01-27 (main parcel) and 34-200-01-30 (vacant pad).
The 1997/98 tax rate and taxes for the property have not yet been established.
The following table shows the 1997 assessed values, with the taxes calculated
based on the 1996/97 tax rate.
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Jackson County Assessment
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I.D. No. 34-200-01-27 34-200-01-30 Combined
============================================================================
Land $1,646,259 $95,665 $1,741,924
----------------------------------------------------------------------------
Improvements $7,174,916 $0 $7,174,916
----------------------------------------------------------------------------
Total $8,821,175 $95,665 $8,916,840
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1996/97 Tax Rate $6.713 per $100 assessed value
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Estimated Taxes $592,165 $6,422 $598,587
============================================================================
The above assessed value reflects an equalization rate of 32 percent and
the Assessor's estimate of full value of approximately $27,865,123.
The Assessor's estimate of value is slightly below our current value
estimate for the property, suggesting that ownership is realizing all possible
benefits of the doubt regarding value and taxes.
We have used the above total taxes in our analysis, growing throughout the
investment holding period by our general expense inflation rate of 3.0 percent
per year.
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ZONING
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The subject property is zoned C-P-2, Planned General Commercial, by the
City of Independence. This zoning district allows for retail, sales, offices and
wholesale trade in a planned development. Based on our review of the public
information, the subject's existing subject shopping center development is a
legally conforming use.
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
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.
We have evaluated the site's highest and best use improved and as if
vacant. In both cases 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. Because the site is improved with
improvements that generate an important return, the focus of the highest and
best use is on the site as improved.
Highest and Best Use of Property as Improved
There are no obvious physical conditions that would limit the subject's
development potential. The existing shopping center improvements are compatible
with surrounding land uses, and the improvements have been designed as a viable
community shopping complex. Independence Commons is well positioned to service
the surrounding resident population. With all of this in mind, we are of the
opinion that the current use of the site is physically possible.
To the best of our knowledge, the property complies with all of the zoning
requirements under the Planned General Commercial zoning district. As noted,
there are no private restrictions which are known to adversely affect the
utilization of the site. Furthermore, we are not aware of any environmental
constraints which might impact the property. Finally, it is recognized that the
property has been in continuous operation as a retail use since mid-1996. As
such, the existing leases and REAs which are in place dictate a retail use for
the property.
As discussed in the "Retail Market Analysis" sections of this report, the
subject is an important shopping destination for a substantial trade area that
includes over 100,000 people in its primary market. In the "Income Approach" to
the valuation of the subject property, we have provided a detailed analysis of
the subject's revenue producing ability as a shopping center. Accordingly, we
find that the property, under the concept of continued use, will produce a
sufficient income stream to an investor. In our opinion, no other use of the
site would provide as great a return. Therefore, we have concluded that the
highest and best use of the site as improved is for continued retail utilization
as a shopping center.
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HIGHEST AND BEST USE
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As Vacant
The subject site is conducive to a variety of developments. Surrounding
land uses include retail, office and residential developments. The subject's
zoning classification allows for retail commercial and office development. Given
the subject's location across from Independence Center, the only regional mall
serving the City of Independence, as well as its good regional accessibility, we
conclude that retail development represents the most likely use of the site, as
if vacant. This is supported by the national anchor store demand and rent levels
which have been attained by the subject development. Therefore, it is our
opinion that the highest and best use of the subject site, as if vacant, would
be for destination retail development to its highest possible F.A.R.
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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 power and large
community centers. The estimation of obsolescence for functional and economic
conditions as well as depreciation on improvements makes this approach sometime
problematic. Furthermore, the Cost Approach fails to fully consider the value of
anchor store commitments and the difficulty of site assemblages for such
properties. As such, the 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 subject. 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 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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 unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
The chart of the Following Page presents an overview of the improved
property sales used in this analysis.
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<TABLE>
<CAPTION>
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POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Anchor Sale
Sale Sale Yr Built/ Site Area Site GLA Anchor GLA as Price/
No. Name/Location Date Condition Sale Price (Sq.Ft.) Coverage Sold GLA % of Total Sq.Ft.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274 79.7% $112.19
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
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2 Smoketown Station May-97 1994 $46,500,000 2,350,062 20.0% 469,392 211,226 45.0% $99.06
Prince William Pkwy & Worth Good
Prince William County,
Woodbridge, Virginia
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3 Fremont Hub Shopping Ctr. Apr-97 1962/94 $45,000,000 1,229,699 40.0% 492,263 274,461 55.8% $91.41
Fremont Blvd. & Monry Ave. Good
Alameda County,
Fremont, California
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4 Aboretum Crossing (Phs. I) Pending 1996 $24,000,000 784,000 23.3% 183,000 154,000 84.2% $131.15
U.S. Highway 183 & Jan-97 Excellent
N. Mopac Blvd.
Austin, Texas
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5 Westminster Center Dec-96 1991 $51,750,000 1,829,520 20.0% 365,699 -- -- $141.51
Golden West Ave. & Westminster Good
Orange County,
Westminster, California
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6 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129 459,209 92.0% $69.32
Ga. 316 & GA. 120 Excellent
Lawrenceville, Georgia
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7 Centennial Plaza Nov-96 1992 $16,700,000 862,000 27.1% 234,000 199,000 85.0% $71.37
N.W. 59 & May Avenue Good
Oklahoma City, Oklahoma
====================================================================================================================================
Survey High: $51,750,000 2,350,062 -- 499,129 459,209 -- $141.51
Survey Low: $16,700,000 784,000 -- 183,000 148,274 -- $69.32
====================================================================================================================================
Survey Average: $34,203,857 1,339,956 25.9% 347,081 241,028 69.4% $102.29
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
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Sale
No. Name/Location NOI/ Occupancy
Sq.Ft. OAR Anchor Tenants At Sale Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. $11.21 9.99% Bed Bath & Beyond, 100.0% New power-oriented center in tourist
International Drive & Touch One Ross, Old Navy, T.J. area. Incl. $650,000 outpad site. Anchor
Orange County Maxx, Books-A-Million, rents $10/sf; in-line $15/sf. IRR appx.
Orlando, Florida Shoe Carnival 11.0%; term. cap 10.0%.
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2 Smoketown Station $10.13 10.23% Lowe's Home Center, 95.0% Ctr. abuts Potomac Mills Mall in retail
Prince William Pkwy & Worth Shoppers Food Whse, hub for county. Anchor rents $8.40/sf; in-
Prince William County, Best Buy line $14-$19/sf. Other majors incl.
Woodbridge, Virginia KidsRUs, PetSmart, SuperCrown.
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3 Fremont Hub Shopping Ctr. $8.46 9.25% Safeway, Ross, Longs 89.0% 661,140sf ctr. originally constructed as
Fremont Blvd. & Monry Ave. Drug, Old Navy, regional ctr. Converted b/w '92-'94.
Alameda County, OfficeMax, Anchors not incl. in GLA sold are Mont-
Fremont, California Tower Records gomery Ward & Home Express.
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4 Aboretum Crossing (Phs. I) $13.70 10.45% Circuit City, Cost Plus, 98.0% Presale of promotional center. Sale
U.S. Highway 183 & Baby Superstore, Design expected to close by Jan. 31, 1997.
N. Mopac Blvd. Shoe Whse, Just For REIT purchase based on direct cap.
Austin, Texas Feet, Mikasa
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5 Westminster Center $11.76 8.31% Home Depot, Edwards 93.0% Ctr. reportedly developed at cost of $45
Golden West Ave. & Westminster Cinema, Lucky Super- million by IDM Corp. Avg. lease rate for in
Orange County, market, Thrifty Drug line space $15-$27/sf.
Westminster, California
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6 Lawrenceville Market Center $6.59 9.50% Target*, Home Depot*, 100.0% Cash acquisition by Equitable Real
Ga. 316 & GA. 120 AMC, Goody's, Linens N Estate Investment Management.
Lawrenceville, Georgia Things, Marshalls, MJ * Ground Lease
Design, PetsMart
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7 Centennial Plaza $7.49 10.50% Home Depot, Best Buy, 93.0% Buyer uses direct cap only for under-
N.W. 59 & May Avenue Home Place wirting. Terms included assumption of
Oklahoma City, Oklahoma $11.8 million existing loan at 9.0%-9.25%
interest. REIT buyer.
====================================================================================================================================
Survey High: $13.70 10.50% -- 100.0%
Survey Low: $6.59 8.31% -- 89.0%
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Survey Average: $9.91 9.75% -- 95.4%
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</TABLE>
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Sales Comparison Approach
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Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, seven comparable
sales have been analyzed for this analysis. These represent recent sales of
large community and power center sales in the south, southwest, southeast, and
western regions of the United States. The sales range between $69.32 and $141.51
per square foot of GLA sold, with overall capitalization rates ranging from a
low of 8.31 percent to a high of 10.50 percent. These transactions occurred
between November, 1996 and June, 1997. Most of the sale properties involve newer
developments which are the dominant community or power center within their
respective market.
For the seven sales surveyed, the mean overall sale price is calculated to
be $34.2 million (rounded). The mean gross leasable area sold is 347,081 square
feet, with the mean overall price per square foot calculated at $102.29 per
square foot. Finally, the survey shows a mean NOI of $9.91 per square foot, with
an overall capitalization rate of 9.75 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Sale No. 1, the most recent comparable transaction surveyed, is the
pending sale of International Drive Value Center in Orlando, Florida. This is a
relatively smaller center, but with a high ratio of anchor tenant GLA. Anchor
and in-line rents are similar to the subject. The property sold for $20,877,700,
which equates to $112.19 per square foot of GLA sold. The sale price results in
a going-in rate of 9.99 percent.
Smoketown Station (Sale No. 2) is also a very recent sale. Closing in May
1997, this transaction shows a sale price of $46.5 million for 469,392 square
feet. The resulting indicators suggest a price per square foot of $99.06 and an
overall cap rate of 10.23 percent. Smoketown Station abuts Potomac Mills Mall in
the primary retail district. The center was 95 percent leased at sale and
anchored by Lowe's Home Center, Shoppers Food Warehouse, Best Buy, Kids R Us,
PetSmart, and SuperCrown Books. The higher capitalization rate reflects the flat
leases for the three "big box" anchor stores.
The two sales which are most proximate to the subject include Sale No. 4
(Aboretum Crossing) and Sale No. 7 (Centennial Plaza). Arboretum Crossing (Sale
No. 4) is the pre-sale of a new promotional center located in Austin, Texas. It
sold in January 1997 for $24,000,000, or $131.15 per square foot. The OAR
achieved is 10.45 percent. Anchors at the property include Circuit City, Cost
Plus, Baby Superstore, Design Shoe Warehouse, Just for Feet and Mikasa. The
tenant mix, which includes relatively smaller anchor or major stores with higher
per unit rental rates, pushes the price per square foot upward. However, the
higher credit risk associated with this tenancy resulted in a higher going-in
capitalization rate.
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Sales Comparison Approach
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Sale No. 7 is the November, 1995 sale of Centennial Plaza in Oklahoma
City, Oklahoma. The sale price was $16,700,000 for 234,000 square feet. This
equates to $71.37 per square foot, with a going-in OAR of 10.50 percent. Terms
of the sale involved cash to existing loans totaling $11.8 million at fixed
interest rates of 9.0 percent and 9.25 percent. According to our sources, a
slight upward adjustment for cash equivalency is required. This center was built
in 1992 and was in overall good condition at the time of sale. Anchor tenants
include Home Depot, Best Buy, and Home Place and comprise 85 percent of the
total center GLA. The high ratio of "big box" anchor tenants drives the per unit
price of this comparable downward.
The balance of comparable shopping center sales are situated in varying
markets across the country. They have been included because of their
comparability to the subject by virtue of anchor alignment, merchandising mix,
size, etc. We believe that these sales provide a better indication of value for
the subject than the local/regional centers in Kansas and Missouri.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
condition must be accounted, thereby creating a time adjusted normal unit of
comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. The comparables were all encumbered by
a number of leases with varying sized tenants and expiration dates. We believe,
then, that no adjustment to the market data is necessary for the property rights
conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis,
with the exception of Sale No. 7, were accomplished with cash and/or cash and
market oriented financing. Therefore, no adjustment for financial terms is
required for these comparables. We have considered an upward adjustment to Sale
No. 7 for the above market loans assumed in the transaction.
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Sales Comparison Approach
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Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale may
significantly affect transaction prices. However, all sales used in this
analysis are considered to be "arms-length" market transactions between both
knowledgeable buyers and sellers on the open market. Therefore, no adjustment
for conditions of sale are required for the comparables.
Market Conditions
The sales presented have all taken place within the last 12 months. Thus,
no market condition adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed in the
"Regional" and "Retail Market" sections of this report, the subject's trade area
is forecasted to experience population and household growth at rates in excess
of the surrounding Kansas city MSA, but moderate in relation to other areas in
the west and south regions of the country.
From a review of the sales, there appear to be no glaring locational
differences between comparables. It is noted, however, that several of the sales
are located in areas which are experiencing somewhat better population and
income growth, which would be considered superior to the subject location.
Likewise, some of the properties are in markets which are experiencing either
negative or slower growth and could be considered inferior to the subject.
Several of the properties are also situated in significantly larger trade
areas/regions which would be considered superior to Kansas City.
Physical Traits
Most sales presented were newly constructed, with the exception of Sale
No. 3 (Fremont Hub) which involved a re-development of an older regional center.
All sales were considered to be in good to excellent condition at sale and no
measurable physical adjustments can be readily quantified. Some upward
adjustment would be considered appropriate for Sale No. 3.
Economic Characteristics
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $9.93 per square foot) is presented in the "Income
Approach" section of this report and is based on first year NOI.
================================================================================
Price Per SQ/FT Adjustment Chart
================================================================================
Comp.
Sale Subject Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
================================================================================
1 $ 11.21 $ 9.93 0.8858 $ 112.19 $ 99.38
- --------------------------------------------------------------------------------
2 $ 10.13 $ 9.93 0.9803 $ 99.06 $ 97.11
- --------------------------------------------------------------------------------
3 $ 8.46 $ 9.93 1.1738 $ 91.41 $ 107.30
- --------------------------------------------------------------------------------
4 $ 13.70 $ 9.93 0.7248 $ 131.15 $ 95.06
- --------------------------------------------------------------------------------
5 $ 11.76 $ 9.93 0.8444 $ 141.51 $ 119.49
- --------------------------------------------------------------------------------
6 $ 6.59 $ 9.93 1.5068 $ 69.32 $ 104.45
- --------------------------------------------------------------------------------
7 $ 7.49 $ 9.93 1.3258 $ 71.37 $ 94.62
================================================================================
Survey
Mean: $ 9.91 $ 9.93 1.0020 $ 102.29 $ 102.49
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $95 to $119 per square foot with a mean of
approximately $102.49 per square foot on a stabilized basis. The subject's
"stabilized" net operating income per square foot of $9.93 (FY 1998) is
considered to be most comparable to Sales Nos. 1, 2, 3, and 5. These improved
property sales show adjusted unit rates ranging between $97 and $119 per square
foot of gross leasable area.
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, however, do not explicitly convey by
themselves 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 .
The subject is viewed as being the dominant power/community center in an
area with good demographics, and limited competition. It is well leased with
several tenants that are unique to the market. Continued upside exists through
lease-up of the remaining two vacant stores and through the potential for
overage rents as the center matures.
Considering the characteristics of the subject relative to the above, we
believe that a unit rate at the middle of the range of $103 to $105 per square
foot is appropriate. Applying this unit rate range to 365,062 square feet
results in a value of approximately $37,600,000 to $38,330,000 for the subject
property.
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WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Based upon a net income of $3,625,231, a range of overall capitalization
rates extending from 9.46 to 9.64 percent is generated by the indicated value.
This range is considered to be reasonable for a property of the subject's
caliber.
Conclusion
In light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the range of $37,600,000 to
$38,300,000, as of July 2, 1997.
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WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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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, the discounted cash flow analysis is the
most applicable.
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 of 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 on the capitalization of the next year's projected
net income.
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 market value of the subject, operations are considered to be
at stabilization. Thus, the direct capitalization method will provide additional
support in the valuation process.
Discounted Cash Flow
The Discounted Cash Flow 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 indicative of the subject property's current value in the marketplace.
In this Income Approach to the valuation of Independence Commons, we have
utilized a 10-year holding period for the investment with the cash flow analysis
commencing on August 1, 1997. We have tested the sensitivity of the present
value over a 10 to 15 year time horizon and chosen a 10 year period as being a
realistic time to sell. Please note that our cash flows are provided on a fiscal
year basis.
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VALUATION ADVISORY SERVICES
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<PAGE>
INDEPENDENCE COMMONS
<TABLE>
<CAPTION>
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCOME
- ------
Minimum Rent $ 3,712,003 $ 3,849,686 $ 3,859,098 $ 3,901,671 $ 4,011,038 $ 4,107,377
Overage Rent $0 $1 $2 $3 $4 $5
-- -- -- -- -- --
Total Rent Revenue 3,712,003 3,849,687 3,859,100 3,901,674 4,011,042 4,107,382
Expense Recoveries 1,178,591 1,228,243 1,264,014 1,294,079 1,315,698 1,370,806
--------- --------- --------- --------- --------- ---------
Total Income 4,890,594 5,077,930 5,123,114 5,195,753 5,326,740 5,478,188
General Vacancy/Credit Loss (30,114) (30,114) (33,085) (33,581) (33,500) (32,844) (35,688)
Effective Income 4,860,480 5,044,845 5,089,533 5,162,253 5,293,896 5,442,500
EXPENSES
- --------
Common Area Maintenance 300,346 309,356 318,637 328,196 338,042 348,183
Real Estate Taxes 602,360 620,431 639,044 638,215 677,961 698,300
Insurance Expense 111,481 114,826 118,271 121,819 125,473 129,237
Miscellaneous Expense 25,438 26,201 26,987 27,796 28,630 29,489
Management Fee Expense 195,624 203,117 204,925 207,830 213,069 219,127
------- ------- ------- ------- ------- -------
Total Expenses 1,235,249 1,273,931 1,307,864 1,343,856 1,383,175 1,424,336
-------------------------------------------------------------------------------------
NET OPERATING INCOME 3,625,231 3,770,914 3,781,669 3,818,397 3,910,721 4,018,164
-------------------------------------------------------------------------------------
(Before Ground Rent)
CAPITAL COSTS
- -------------
Alterations 24,008 0 0 0 16,851 10,510
Commissions 30,900 0 0 0 22,458 13,320
Reserves 36,506 36,506 36,506 36,506 36,506 36,506
------ ------ ------ ------ ------ ------
Total Capital Costs 91,414 36,506 36,506 36,506 75,815 60,336
=====================================================================================
TOTAL PROPERTY CASH FLOW $3,533,817 $3,734,408 $3,745,163 $3,781,891 $3,834,906 $3,957,828
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCOME
- ------
Minimum Rent $ 4,164,763 $ 4,167,300 $ 4,289,452 $ 4,371,431 $4,474,255
Overage Rent $6 $7 $8 $9 $10
-- -- -- -- ---
Total Rent Revenue 4,164,769 4,167,307 4,289,460 4,371,440 4,474,265
Expense Recoveries 1,420,510 1,461,936 1,504,984 1,518,900 1,581,169
--------- --------- --------- --------- ---------
Total Income 5,585,279 5,629,243 5,794,444 5,890,340 6,055,434
General Vacancy/Credit Loss (37,936) (38,183) (38,934) (37,039) (40,823)
Effective Income 5,547,343 5,591,060 5,755,510 5,853,301 6,014,611
EXPENSES
- --------
Common Area Maintenance 358,628 369,387 380,469 391,883 403,639
Real Estate Taxes 719,249 740,827 763,052 785,943 809,521
Insurance Expense 133,115 137,108 141,221 145,458 149,822
Miscellaneous Expense 30,374 31,285 32,223 33,190 34,186
Management Fee Expense 223,411 225,169 231,778 235,613 242,217
------- ------- ------- ------- -------
Total Expenses 1,464,777 1,503,776 1,548,743 1,592,087 1,639,385
------------------------------------------------------------------
NET OPERATING INCOME 4,082,566 4,087,284 4,206,767 4,261,214 4,375,226
------------------------------------------------------------------
(Before Ground Rent)
CAPITAL COSTS
- -------------
Alterations 0 0 0 20,022 6,536
Commissions 0 0 0 22,458 7,200
Reserves 36,506 36,506 36,506 36,506 36,506
------ ------ ------ ------ ------
Total Capital Costs 36,506 36,506 36,506 78,986 50,242
==================================================================
TOTAL PROPERTY CASH FLOW $4,046,060 $4,050,778 $4,170,261 $4,182,228 $4,324,984
==================================================================
</TABLE>
<TABLE>
<CAPTION>
PRICING MATRIX
=========================================================================================
IRR / TERMINAL RATE 9.25% 9.50% 9.75% 10.00% 10.25%
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10.25% $40,779,596 $40,322,199 $39,888,258 $39,476,013 $39,083,879
10.50% $40,135,193 $39,688,040 $39,263,817 $38,860,805 $38,477,452
------------------------
10.75% $39,504,639 $39,067,477 $38,652,733 $38,258,727 $37,883,940
11.00% $38,887,586 $38,460,171 $38,054,674 $37,669,452 $37,303,022
------------------------
11.25% $38,283,700 $37,865,793 $37,469,317 $37,092,665 $36,734,386
</TABLE>
RETURN (IRR) MATRIX
================================================================================
Price/Term Cap 9.25% 9.50% 9.75% 10.00% 10.25%
- --------------------------------------------------------------------------------
$39,000,000 10.95% 10.78% 10.61% 10.44% 10.28%
$38,500,000 11.16% 10.98% 10.81% 10.65% 10.49%
$38,000,000 11.37% 11.19% 11.02% 10.86% 10.70%
$37,500,000 11.58% 11.41% 11.24% 11.07% 10.91%
$37,000,000 11.80% 11.62% 11.45% 11.29% 11.13%
Cushman & Wakefield, Inc. INDC-DCF.XLS, Cash Flow
Valuation Adivsory Services 7/21/97 at 4:07 PM
<PAGE>
Income Approach
================================================================================
An analytical real estate computer model that simulates the behavioral
aspects of the property and examines the results mathematically is employed for
the discounted cash flow analysis. In this instance, it is the PRO-JECT +plus
software model. 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. Following is a detailed discussion of the components which form the
basis of this analysis.
Potential Gross Revenues
The total potential gross revenues generated by the subject property is
primarily composed of minimum rent determined by lease agreement, and
reimbursement of certain expenses incurred in the ownership and operation of the
real estate.
In the initial year of the investment, fiscal year 1998, it is projected
that the subject property will generate approximately $4,890,594 in potential
gross revenues, equivalent to $13.40 square foot of total owned GLA of 365,062
square feet. These forecasted revenues may be allocated to the following
components:
================================================================================
Independence Commons
Revenue Summary
Initial Year of Investment FY 1998
================================================================================
Revenue Component Amount Unit Rate Income Ratio
================================================================================
Minimum Rent $3,712,003 $10.17 76%
- --------------------------------------------------------------------------------
Overage Rent $ 0 $ 0 0%
- --------------------------------------------------------------------------------
Expense Recoveries $1,178,591 $ 3.23 24%
- --------------------------------------------------------------------------------
Total $4,890,594 $13.40 100.0%
================================================================================
Minimum Rental Income
The 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
vacant space (if applicable), market rent growth, and renewal/ turnover
probability.
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 the
trade area. Consequently, the best measure of minimum rental income can
sometimes be its actual rent roll leasing schedule.
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<PAGE>
Income Approach
================================================================================
As such, our analysis of recently negotiated leases for tenants at the
subject provides important insight into perceived market rent levels for the
center. This is of particular importance since tenants are cognizant of the
centers position in the market and are factoring this knowledge into their lease
negotiations. Inasmuch as a tenant's ability to pay rent is based upon expected
sales achievement, the level of negotiated rents is directly related to the
tenant's perception of expected performance at the property. Since the subject
center was first opened in 1996, there is ample lease data from this property to
analyze typical rent structures for the various tenant categories.
On the following pages are tenant profile exhibits for existing tenants at
the subject center. We have considered three separate retail tenant categories:
large tenants (greater than 20,000 square feet), other major tenants (10,000 to
16,000 square feet), and small tenants (less than 10,000 square feet). Following
is a summary of the tenant leases which have most recently been negotiated at
the subject center.
Mattress Firm leased 4,500 square feet in Building K (Suite K001)
commencing in May, 1997. The base rent is $15.00 per square foot,
increasing to $16.50 per square foot in May, 2000. This is a five-year
lease. The tenant improvement allowance was $6,750 square feet, or $1.50
per square foot. There was no free rent concession. It is our
understanding that the tenant opened for business in mid-April. This is an
interior suite in Building K, which is a multi-tenant out parcel building.
The subject leasing representative reports a pending lease with The
Associates, a financial tenant, for 3,500 square feet in Building K (Suite
K002). Terms have been negotiated and the lease is being prepared. The
base rent is $12.25 per square foot for the first two years, increasing to
$13.25 in year 3, and to $14.50 per square foot for years four and five.
The tenant has a right to terminate the lease in year three. The tenant
improvement allowance is budgeted at $10,000 ($2.86 per square foot) but
is dependent on the tenant's actual build-out costs. There was no free
rent concession. The lease is expected to commence in mid-September, 1997.
There is also reported to be strong interest for vacant Suite K001 (6,800
square feet), which is the end-cap space in Building K. The prospective
tenant is a bicycle retailer. Although lease terms have not been
negotiated, the space has been offered at an initial base rent of $16.00
per square foot, with $60,000 TI allowance ($8.82 per square foot). One of
the reasons for the higher TI allowance is the inferior quality of the
previous tenant's build-out.
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<PAGE>
Income Approach
================================================================================
Another recent lease negotiation is the pending ground lease of the vacant
out parcel pad to American Multi-Cinema, Inc. According to Mr. Bobman,
AMC Theatres plans to expand their theater building with five additional
screens. Additional parking will reportedly be required to support the
increased building area. Therefore, AMC Theatres intends to lease the
vacant pad for the additional parking as required by the planning
authorities. We were not provided with a written copy of the lease deal
points. However, Mr. Bobman reports that the effective net rent will be
approximately $80,000, flat. The ground-lease will be coterminous with
AMC's existing lease, including the option terms.
It should be noted that we have not included the pending leases in the
following tenant profile exhibits. However, the pending leases for Suite K002
(The Associates) and the vacant pad site are considered reflective of market
lease terms and have been incorporated into our valuation analysis. We assume
that Suite K001 will be leased, or absorbed, at our concluded market rent for
the space.
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<PAGE>
TENANT PROFILE
Independence Commons
Large Retail Tenants (>20,000 sf)
==================================================================
Min Rent
Suite Tenant Occupied PSF/Mo
A000 Kohl's 80,684 $6.53
------------------------------------------------------------------
H000 Rhode's Furniture 50,640 $8.00
------------------------------------------------------------------
C000 Bed, Bath and Beyond 40,000 $9.00
------------------------------------------------------------------
D000 Marshall's 30,439 $7.75
------------------------------------------------------------------
I000 Barnes & Noble 30,000 $13.25
------------------------------------------------------------------
===================================
Tenant Summary
===================================
High rent (psf) $ 13.25
Low rent (psf) $ 6.53
-----------------------------------
Weighted average (psf) $ 8.31
-----------------------------------
Largest area (sf) 80,684
Smallest area (sf) 30,000
-----------------------------------
Average area (sf) 46,353
-----------------------------------
-----------------------------------
Total Occupied Area (sf) 231,763
===================================
[GRAPHIC OMITTED]
Tenant Overview Chart
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CUSHMAN &
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TENANT PROFILE
Independence Commons
Other Major Tenants (10,000 - 16,000 sf)
=================================================
Min Rent
Suite Tenant Occupied PSF/Mo
=================================================
F000 Croomers Crafts 15,003 $ 8.25
-------------------------------------------------
E000 Nill Brother Sport 12,033 $ 11.00
-------------------------------------------------
=================================================
===================================
Tenant Summary
===================================
High rent (psf) $11.00
Low rent (psf) $ 8.25
-----------------------------------
Weighted average (psf) $ 9.47
-----------------------------------
Largest area (sf) 15,003
Smallest area (sf) 12,033
-----------------------------------
Average area (sf) 13,518
-----------------------------------
-----------------------------------
Total Occupied Area (sf) 27,036
===================================
[GRAPHIC OMITTED]
Tenant Overview Chart
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
======================================================
TENANT PROFILE
Independence Commons
Small Retail Tenants
======================================================
------------------------------------------------------
Min Rent
Suite Tenant Occupied PSF/Mo
B001 Hallmark Showcase 7,500 $13.00
------------------------------------------------------
K001 Mattress Firm 4,500 $15.00
------------------------------------------------------
B002 Southwest Bell 4,000 $12.50
------------------------------------------------------
B004 Oh Gerry Optical 3,015 $13.00
------------------------------------------------------
B005 Shoe Cents 3,000 $12.00
------------------------------------------------------
B003 Perfume Pizazz 2,710 $13.00
------------------------------------------------------
B006 Jenny Craig 2,228 $13.50
------------------------------------------------------
B007 Sally Beauty 2,010 $12.00
------------------------------------------------------
K003 Computer Rennaisance 2,000 $16.50
------------------------------------------------------
K004 Great Clips 1,200 $16.00
------------------------------------------------------
======================================================
===================================
Tenant Summary
===================================
High rent (psf) $16.50
Low rent (psf) $12.00
-----------------------------------
Weighted average (psf) $13.43
-----------------------------------
Largest area (sf) 7,500
Smallest area (sf) 1,200
-----------------------------------
Average area (sf) 3,216
-----------------------------------
-----------------------------------
Total Occupied Area (sf) 32,163
===================================
[GRAPHIC OMITTED]
Tenant Overview Chart
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Analysis of Market Leases
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 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 the
trade area. Due to its location and overall uniqueness to the market area, it is
difficult to compare the subject to other local centers.
A survey of local retail properties was presented in the Market Analysis
section for comparison with the subject property. These are retail centers of
various sizes and quality located throughout the subject's immediate competitive
market. The centers detailed in the chart are all within the primary trade area
of the subject. As previously discussed, the two most competitive centers are
The Marketplace and Noland Fashion Square. The average in-line rents at these
centers currently range from $9.00 to $18.00 per square foot. Most of the recent
leasing activity is reported to be in the $10.00 to $15.00 per square foot
range.
The subject is considered the dominant community center within the City of
Independence. Thus, we would expect to see achievable rents at the subject
center which are at the upper end of the comparable data range. We conclude an
average market rent for the in-line stores in Building B at $13.50 per square
foot. For the Building K stores, the average market rent is concluded at $14.50
per square foot. The higher market rent reflects the superior exposure, tenant
identity and parking access for the stores in Building K, which is a
free-standing out parcel building. The subject's leasing representative
concurred with our market rent estimates.
To determine market standards for the leasing of anchor spaces, we
conducted a national survey of anchor tenants at large community, power, and
regional centers. This data is presented in the Addenda. The most pertinent
comparables on this chart involve several anchor store leases at a new
developing power center in northern Kansas City. These major tenant leases
indicate initial base rents ranging from $6.50 per square foot for Steinbach to
$13.00 per square foot for Barnes & Noble. The weighted average base rent is
calculated at $9.57 per square foot per year.
Based on the available data, it is our opinion that the subject's existing
anchor and major tenant leases are reasonably reflective of market rent for
these stores.
The subject AMC Theatre lease shows a base rent of $13.50 per square foot,
with fixed increases every four years. We have considered the contract rent for
the theater relative to recent theater leases with national cinema operators
throughout the country. This data is summarized in the Addenda. The comparable
theater leases range widely from $7.56 to $35.53, with a weighted average rent
of $16.77. The subject's contract rent is reasonably supported by the recent AMC
Theatre lease at a new power center current under construction in northern
Kansas City at $16.50 per square foot, as well as a confidential lease for a new
theater at an off-price mega mall in the Midwestern United States at $18.31 per
square foot.
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<PAGE>
Income Approach
================================================================================
All of the anchor tenants have renewal options at fixed rents which extend
beyond the analysis term. We have assumed in our analysis that the anchors will
exercise their options, or alternatively that a replacement tenant would
re-lease the space at similar terms. Nill Brother Sports also has two five-year
renewal options extending the lease term through 2016. Coomers Crafts expires in
April, 2011, which is also beyond the investment holding period.
Conclusion
The following table summarizes our market rent conclusions for the various
store categories at the subject center.
==============================================
Market Rent Conclusions*
Independence Commons
==============================================
Anchor Stores (>20,000 sf) $ 9.00
----------------------------------------------
Other Majors (10,000 - 16,000 sf) $ 11.00
----------------------------------------------
In-line Shops (Building B) $ 13.50
----------------------------------------------
In-line Shops (Building K) $ 14.50
----------------------------------------------
* Rents are per square foot, per annum, with
triple net expenses.
==============================================
Lease Terms
The typical lease term for new retail leases in centers such as the
subject generally ranges from three to ten years. Market practice dictates that
it is not uncommon to get rent bumps throughout the lease term 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 (4 percent) annual increase and be capped at a higher maximum (6 to 7
percent) amount. Most of the in-line leases at the subject center are either
flat over the typical 5-year term, or with fixed increases after three years of
$0.50 per square foot.
Our market rent conclusions assume flat rent over the five-year lease
term.
Concessions
Free Rent
Management reports that free rent has been a relative non-issue for new
tenants at the subject center. The subject has achieved 97 percent occupancy and
is viewed as the premier retail community center in the area. As such, we do not
feel that it is necessary to offer any free rent.
Tenant Workletter
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that tenant workletter is not typically
offered but often times given as part of tenant negotiation. Some tenants at the
subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. The most recent executed lease shows a tenant improvement
allowance of $1.50 per square foot
================================================================================
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
(Mattress Firm). Ownership has budgeted $2.86 per square foot for Suite K002. We
have included the full budgeted allowance in our cash flow analysis. However,
the higher allowance is for first generation space. Typically, tenant
improvement costs are lower for second generation stores in a newer center. For
this analysis, new tenants to the center are given an allowance of $2.00 per
square foot. We have not included any tenant allowances for renewal tenants.
Based on our renewal probability of 70/30, the tenant allowance at rollover is
equal to $0.60 per square foot in 1997. No allowance is provided for tenants
exercising options.
Absorption
The subject property is presently 97 percent leased. There are two
remaining vacant suites. A pending lease has been negotiated for Suite K002
(3,500 square feet), with the anticipated rent commencement in mid September,
1997. We have projected absorption of this space in October, 1997. Although
there is strong interest in the remaining end-cap space (Suite K005) at 6,800
square feet, the deal has not yet been negotiated. We project absorption of this
space in March, 1998, or a downtime of 8 months from the date of our inspection.
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's Autumn 1996 survey of
pension fund, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 6.0 percent. The low and high mean is shown to be 2.9 and 3.7
percent, respectively. (see Addenda for survey results).
The Peter F. Korpacz Investor Survey (Second Quarter 1997) shows slightly
more conservative results with average annual rent growth of 2.88 percent.
After considering the above, we have utilized a rent growth rate of 3.0
percent per year over the holding period.
Commissions
For new leases, a commission of $3.00 per square foot will be charged,
which is reflective of the standard commission rate in the subject's market.
Renewal leases will not have commission charges. With the 70/30 probability
assumption, the blended commission rate for 1997 is $0.90 per square foot of
leased area.
Releasing Assumption
Upon lease expiration, it is our best estimate that there is a 70 percent
probability that an existing tenant will renew their lease, while the remaining
30 percent will vacate their space at expiration. Lease terms are for 5 years.
Our global market assumptions for non-anchor tenants may be summarized on the
following chart.
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Income Approach
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================================================================================
Renewal Assumptions
Non- Anchor Tenants
================================================================================
Lease Tenant Alterations
Tenant Type Term Rent Steps Free Rent & Commissions
================================================================================
In-Line Shops 5 yrs. Flat None Yes
================================================================================
Many tenants have set options to renew their leases. Option renewals have
been compared to projected market rents in order to forecast the probability of
tenant options being exercised. In this analysis, all anchor and major store
options are assumed to be exercised. For the smaller in-line stores, we have
assumed that the space will rollover to market at the expiration of the initial
lease term based on our global renewal/rollover probability. We have not
included the option terms for the in-line tenants.
Overage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most leases have a natural breakpoint. In a few instances, the
lease provides for a specified breakpoint sales level. The average overage
percentage for small space retail tenants is in a range of 4 percent to 6
percent. Anchor overage percentages range from 2 percent to 3 percent. The
theater lease specifies an overage percentage of 8 percent over a natural
breakpoint.
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 one measure for protecting the equity investor against
inflation.
We have not forecasted any percentage rent for tenants in the center.
Investors are typically very cautious in projecting overage rent revenue in the
underwriting of new, unseasoned retail centers. The limited tenant sales reports
for the subject center do not suggest that tenant sales will initially exceed
their respective overage breakpoints.
Expense Reimbursement
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, insurance, and common area maintenance (CAM). In the first year of the
investment, it is projected that the subject property will generate
approximately $1,178,591 in reimbursements for these operating expenses. This
estimate is equal to approximately $3.23 per square foot of owned GLA (365,062
square feet) and represents approximately 24 percent of potential gross
revenues. The tenant-owned out parcel buildings also contribute to common area
maintenance recoveries.
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VALUATION ADVISORY SERVICES
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Income Approach
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Common Area Maintenance
Common area maintenance is recovered from tenants on a pro-rata share
basis. Most tenants are charged an administrative fee between 10 and 15 percent.
In some instances, management fees are also passed through to tenants through
CAM billings. Some of the tenants pay no administrative fee, while others pay
their pro rata share of the expenses with an annual cap. The out parcel tenants
(un-owned) each pay fixed CAM charges as specified in their separate agreements.
The standard small shop recovery includes management and a 15 percent
administrative fee. Based on this recovery formula, and using the projected
fiscal 1998 CAM expense of $300,346, the typical small shop recovery rate is
calculated at $1.59 per square foot per year.
For all speculative renewal tenants, we have assumed continued CAM
recovery charges as per the initial lease terms.
Real Estate Taxes
Real estate taxes are recovered on a pro-rata share basis for tenants at
the center. Several tenants have administrative fees added to their tax
obligation. Utilizing a FY 1998 estimated tax expense of $602,360, and assuming
a 15 percent administrative fee, the indicated recovery from typical in-line
tenants is $1.90 per square foot. For speculative renewals, we have assumed
continued tax recovery charges as per the initial lease terms.
Insurance
Insurance expenses are recovered based upon a pro-rata share. Most of the
in-line tenants pay an administrative fee in addition to the actual expense. In
FY 1998, an expense of $111,481 and a 15 percent administrative fee results in a
recovery of $0.35 per square foot.
Total Expense Recoveries
As discussed above, total tenant recovery charges are calculated at $3.84
per square foot per year, based on the typical in-line tenant recovery formula.
This equates to a monthly charge of $0.32 per square foot.
Allowance for Vacancy and Credit Loss
Both the investor and the appraiser are 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 and all the tenants were actually 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 provision for permanent vacancy and
credit loss of 3.0 percent among the existing non-anchor tenants.
In this analysis we have forecasted that there is a 70 percent probability
that an existing tenant will renew their lease and a 30 percent probability that
the space will turnover. Upon turnover, we have forecasted rent loss equivalent
to three months to be incurred to account for the time and/or costs associated
with bringing the space back on line. Thus, minimum rent as
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<TABLE>
<CAPTION>
==================================================================================================================
Operating Income and Expense Analysis
==================================================================================================================
1996 1997 Budget C&W Estimtate
Total Per SF Total Per SF Total Per SF
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Income
Base Rent $2,840,741 $ 7.78 $3,663,930 $ 10.04 $3,712,003 $ 10.17
Percentage Rent $0 $ - $0 $ - $0 $ -
Other Income $12,789 $ 0.04 $3,738 $ 0.01 $0 $ -
Expense Recoveries $582,031 $ 1.59 $825,315 $ 2.26 $ 1,178,591 $ 3.23
------------------------------------------------------------------------------------
Gross Income $3,435,561 $ 9.41 $4,492,983 $ 12.31 $4,890,594 $ 13.40
Less Credit Loss Allowance ($30,114)
Effective Gross Income $4,860,480
Recoverable Expenses
Common Area Maintenance $119,005 $ 0.33 $295,180 $ 0.81 $300,346 $ 0.82
Insurance $88,470 $ 0.24 $109,564 $ 0.30 $111,481 $ 0.31
Real Estate Taxes $219,700 $ 0.60 $288,785 $ 0.79 $602,360 $ 1.65
------------------------------------------------------------------------------------
Total $427,175 $ 1.17 $693,529 $ 1.90 $1,014,187 $ 2.78
Non-Recoverable Expenses
General & Administrative $65,062 $ 0.18 $5,000 $ 0.01 $0 $ -
Management $142,434 $ 0.39 $178,404 $ 0.49 $195,624 $ 0.54
Advertising/Marketing $0 $ - $0 $ - $0 $ -
Other Non-recoverable $0 $ - $0 $ - $25,438 $ 0.07
Reserves for Replacement $2,045 $ 0.01 $37,156 $ 0.10 $36,506 $ 0.10
------------------------------------------------------------------------------------
Total $209,541 $ 0.57 $220,560 $ 0.60 $257,568 $ 0.71
Total Operating Expenses $636,716 $ 1.74 $914,089 $ 2.50 $1,271,755 $ 3.48
Net Operating Income $2,798,845 $ 7.67 $3,578,894 $ 9.80 $3,588,725 $ 9.83
(1) Taken from Pro-Ject Cash Flow and reflects fiscal year 1998 projections.
==================================================================================================================
</TABLE>
Cushman & Wakefield, Inc. INDCOMM.XLS, Oper Inc & Exp Analysis
Valuation Advisory Services 7/21/97 at 5:22 PM
<PAGE>
Income Approach
================================================================================
well as all reimbursable income has been reduced by this forecasted probability.
This equates to approximately 5.0 percent of total potential tenant revenue (3
months vacancy -:- 60 month lease term = .05).
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.
Effective Gross Income
In the initial year of the investment, effective gross revenues ("Total
Income" line on cash flow) are forecasted to amount to approximately $4,860,480,
equivalent to $13.31 per square foot of owned GLA (365,062 square feet)
================================================================================
Effective Gross Revenue Summary
Initial Year of Investment-FYH 1998
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $4,890,594 $13.40 100.00%
- --------------------------------------------------------------------------------
Less: Vacancy and Credit Loss ($ 30,114) $ 0.08 0.60%
- --------------------------------------------------------------------------------
Effective Gross Income $4,860,480 $13.31 99.40%
================================================================================
Expenses
The total expenses incurred in the production of income from the subject
property are divided into two categories; reimbursable and non-reimbursable
items. The expenses which are reimbursable include real estate taxes, insurance
and common area maintenance. The non-reimbursable expenses associated with the
subject property include the management fee and miscellaneous expenses. We do
note that under many of the existing lease contracts, management is deemed
recoverable. Other expenses include a reserve for the replacement of short-lived
capital components, leasing commissions and alteration costs associated with
leasing space. Generally, it is our assumption that expenses will increase by
3.0 percent per year unless otherwise stated.
The schedule on the facing page presents management's 1997 budgeted
expense items along with Cushman & Wakefield's adjusted figures. On the
following facing page is a table illustrating expenses reported by the Urban
Land Institute (ULI) and the International Council of Shopping Centers (ICSC).
We have compared the owner's budgeted expense items with published data in order
to support our adjusted expense figures.
In total, Cushman & Wakefield has projected operating expenses of $3.38
per square foot of owned GLA. It is noted that management's 1997 budgeted taxes
are understated. According to a Mr. Dan Bobman of DRA Advisors, the revised
budgeted taxes are $553,280. Considering the additional tax expense, ownership's
1997 budget shows a revised total of $1,141,428, or $3.12 per square foot.
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OPERATING EXPENSE STATISTICS Community Neighborhood, & Strip Centers
Cushman & Wakefield, Inc. Midwest
<TABLE>
<CAPTION>
===================================================================================================================================
ULI ULI ULI ULI ULI ULI ULI ULI
Community Community Community Community Neighborhood Neighborhood Neighborhood Neighborhood
Centers/ Centers/ Centers/ Centers/ Centers/ Centers/ Centers/ Centers/
U.S. U.S. Midwest Midwest U.S. U.S. Midwest Midwest
Average Median Average Median Average Median Average Median
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property Profile
Total GLA: 171,767 161,829 161,291 146,772 63,975 63,719 64,873 64,270
Total Owned GLA: 157,503 148,782 145,389 137,095 61,210 60,150 62,442 62,255
Avg. Sales/sf*: $210.23 $198.71 $212.81 $188.31 $232.72 $216.22 $229.09 $213.95
Anchor Sales/sf: -- -- -- -- -- -- -- --
Operating Income
Minimum Rent: $6.92 $6.76 $6.93 $7.06 $7.37 $7.23 $7.41 $6.42
Overage Rent: $0.30 $0.26 $0.28 $0.17 $0.37 $0.25 $0.32 $0.22
CAM Charges: $0.75 $0.61 $0.74 $0.59 $0.75 $0.67 $0.81 $0.78
Property Taxes: $0.72 $0.63 $0.92 $0.79 $0.72 $0.67 $0.99 $0.90
Insurance: $0.07 $0.07 $0.09 $0.08 $0.09 $0.09 $0.09 $0.09
Utilities: $0.31 $0.11 $0.55 $0.11 $0.12 $0.12 $0.13 $0.14
Other: $0.14 $0.07 $0.14 $0.06 $0.11 $0.08 $0.05 $0.03
------ -------- -------- -------- -------- -------- -------- -------- --------
Total Income: $9.06 $8.54 $9.44 $8.74 $9.31 $8.80 $9.62 $9.01
Operating Expenses
Total Maintenance **: $0.83 $0.75 $0.80 $0.67 $0.82 $0.74 $0.97 $0.88
Real Estate Taxes: $0.92 $0.83 $1.12 $1.03 $0.91 $0.83 $1.23 $1.15
Insurance: $0.14 $0.13 $0.12 $0.12 $0.15 $0.15 $0.15 $0.13
Advertising: $0.10 $0.06 $0.07 $0.04 $0.05 $0.03 $0.04 $0.03
Administrative ***: $0.16 $0.17 $0.17 $0.17 $0.11 $0.09 $0.09 $0.13
Management Fee: $0.35 $0.33 $0.36 $0.34 $0.38 $0.37 $0.39 $0.37
--------------- -------- -------- -------- -------- -------- -------- -------- --------
Total Expenses: $2.78 $2.56 $2.91 $2.68 $2.68 $2.53 $3.14 $2.97
OER: 30.7% 30.0% 30.8% 30.7% 28.8% 28.8% 32.6% 33.0%
Net Operating Income $6.13 $5.86 $6.18 $5.93 $6.55 $6.38 $6.39 $5.92
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
ICSC ICSC ICSC ICSC ICSC ICSC
Strip Strip Strip Strip Strip Strip
Centers Centers Centers Centers Centers Centers
U.S. U.S. U.S. U.S. Midwest Midwest
Total 40,000- 100,000- 200,000- Centers Centers
Survey less than greater than
99,999sf 199,999sf 399,999sf 100,000sf 100,000sf
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Property Profile
Total GLA: 103,740 72,563 137,378 260,677 68,771 192,770
Total Owned GLA: 97,523 70,482 133,557 232,127 61,993 175,088
Avg. Sales/sf: $125.94 $124.11 $115.64 $137.23 $145.14 $137.40
Anchor Sales/sf: $257.09 $269.25 $264.52 $208.79 $300.32 $255.90
Operating Income
Minimum Rent: $6.62 $6.79 $5.90 $6.50 $8.39 $5.72
Overage Rent: -- -- -- -- -- --
CAM Charges: $0.74 $0.72 $0.67 $0.82 $1.45 $0.66
Property Taxes: $0.68 $0.76 $0.58 $0.84 $0.72 $0.89
Insurance: $0.09 $0.09 $0.07 $0.07 $0.11 $0.06
Utilities: $0.09 $0.09 $0.07 $0.08 $0.19 $0.08
Other: $0.05 $0.04 $0.06 $0.05 $0.16 $0.06
------ -------- -------- -------- -------- -------- --------
Total Income: $8.16 $8.36 $7.35 $8.25 $ 10.58 $7.45
Operating Expenses
Total Maintenance **: $0.77 $0.76 $0.72 $0.68 $1.59 $0.71
Real Estate Taxes: $0.81 $0.81 $0.70 $0.85 $0.92 $1.15
Insurance: $0.13 $0.13 $0.11 $0.11 $0.17 $0.11
Advertising: $0.04 $0.03 $0.05 $0.04 $0.35 $0.05
Administrative ***: $0.12 $0.13 $0.09 $0.12 $0.58 $0.17
Management Fee: $0.29 $0.30 $0.26 $0.29 $0.34 $0.31
--------------- -------- -------- -------- -------- -------- --------
Total Expenses: $2.27 $2.27 $1.97 $2.14 $3.38 $2.43
OER: 27.8% 27.2% 26.8% 25.9% 31.9% 32.6%
Net Operating Income $5.88 $5.88 $5.39 $5.96 $7.17 $5.02
</TABLE>
- ----------
* Average sales include all tenants except for ICSC figures which show
non-anchor tenants.
** CAM expenses include repairs & maintenance, utilities, and security.
*** Management fees & bad debt allowances have been deducted from
administrative costs. Management has been shown separately.
Source: Urban Land Institute "Dollars & Cents" (1997); International Council of
Shopping Centers "The Score" (1995).
(Because the data are means/medians, detailed amounts to not add to totals).
================================================================================
<PAGE>
Income Approach
================================================================================
Our forecasted FY 1998 expenses of $1,235,817, which equates to $3.38 per
square foot, or an expense ratio of approximately 25 percent, is reasonably
consistent with the data presented.
Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than necessarily with competitive market forces. The Autumn
1996 Cushman & Wakefield survey of community centers found the low and high mean
from each respondent to be 3.4 percent and 3.9 percent, respectively. The Second
Quarter 1997 Korpacz survey reports that the range in expense growth rates was
from 3.0 percent to 5.0 percent with an average of 4.04 percent, down 13 basis
points from one year ago. Unless otherwise cited, expenses are forecasted to
grow by 3.0 percent per annum over the holding period, which is consistent with
our project income growth rate.
Reimbursable Operating Expenses
Provided below is a detailed discussion of the reimbursable expenses
forecasted for the subject property.
Common Area Maintenance - This expense is forecasted at $295,180 in CY
1997 based on ownership's 1997 budget.
Insurance - Insurance has been projected at $109,564 in CY 1997,
consistent with the owners 1997 budgeted expense. This equates to $0.30
per square foot of owned GLA.
Real Estate Taxes - A complete discussion of real estate taxes was
previously presented. Our 1997 estimate of $592,000 is based on the
current assessment and the 1996/97 tax rate. Taxes are forecasted to
increase by our general expense inflation rate of 3.0 percent throughout
the analysis period.
Non-Reimbursable Expenses
Total annual 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 an property similar to the subject would consider reasonable, based
upon projected operations, informed opinion and experience. The following is a
summary and discussion of non-reimbursable expenses incurred in the operation of
subject property for the initial year.
Management - The annual cost of managing the subject property is projected
to be 4.0 percent of minimum rental and percentage income. In the initial
year of our analysis, this amount is shown to be $195,624, equivalent to
$0.54 per square foot of appraised GLA. This is recoverable for some
tenants. Our estimate is reflective of a typical management agreement with
a firm in the business of providing
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Income Approach
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professional management services. This amount is also considered typical
for a retail complex of this size. Our investigation into the market for
this property type indicates an overall range of fee of 3 to 5 percent. We
have chosen the mid-point of the range as we have reflected leasing
commissions separately.
Miscellaneous - This catch-all category is provided for various
miscellaneous and sundry expenses that ownership will typically incur.
Such items are unrecovered repair and general and administrative costs,
non-recurring expenses, expenses associated with maintaining vacant space
and bad debts in excess of our credit loss provision would be included
here. In the initial year, these miscellaneous items are forecasted to
amount to approximately $25,438, which reflects a partial year increase
over the 1997 allowance of $25,000.
Alterations - 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 $2.00
per square foot for turnover space (initial cost growing at expense
inflation rate) weighted by our turnover probability of 30 percent. We
have not included alteration costs for renewal space. Thus, the blended
weighted rate is $0.60 per square foot. Alteration costs are forecasted to
increase by 3.0 percent per year, consistent with our general inflation
projection.
Leasing Commissions - Based upon our analysis of competing properties
within the market as well as historic leasing activity at the subject, we
have made an allowance for leasing commissions for this assignment. For
new leases, a commission of $3.00 per square foot will be charged, while
renewal leases will not be charged. With the 70/30 probability assumption,
the blended commission rate for 1997 is $0.90 per square foot of leased
area. Leasing commission rates are assumed to be flat throughout the
10-year holding period.
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. We have forecasted a
replacement reserve estimate of $36,506. On the basis of appraised GLA,
this amount is equal to $0.10 per square foot, consistent with industry
figures.
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
investor in each year of the holding period before debt service. The derivation
of net income and net cash flow are summarized in the following table for the
initial investment year.
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Income Approach
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Operating Summary
Initial Year of Investment - FY 1998
================================================================================
Aggregate Sum Unit Rate * Operating Ratio
================================================================================
Effective Gross Income $ 4,860,480 $ 13.31 100.0%
- --------------------------------------------------------------------------------
Operating Expenses $ 1,235,231 $ 3.38 25.5%
- --------------------------------------------------------------------------------
Net Income $ 3,625,231 $ 9.93 74.6%
- --------------------------------------------------------------------------------
Other Expenses $ 91,414 $ .25 1.9%
- --------------------------------------------------------------------------------
Cash Flow $ 3,533,817 $ 9.68 72.7%
================================================================================
*Based on total appraised GLA of 365,062+/- SF
================================================================================
Our cash flow model has forecasted the following compound annual growth
rates over the ten year holding period FY 1998-2007.
Net Operating Income 1.81%
Cash Flow 1.89%
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
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In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate - 1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A Neighborhood and Community centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
For Class A Power Centers, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
================================================================================
Investment Power Centers and Big Box Neighborhood/Community
------------------------------------------------------------
Parameters Low High Low High
================================================================================
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- --------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50-10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- --------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00-15.00%
11.50% 11.70% 11.90% 12.10%
================================================================================
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of
9.50 percent. However, the low end of the range increased by 25 basis points to
8.75 percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
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Income Approach
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================================================================================
NATIONAL POWER CENTER MARKET
Second Quarter 1997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50-12.50% 9.00-12.50% N/A
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75-10.50% 8.50-10.50% N/A
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00-11.50% 8.50-11.50% N/A
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey - Second Qtr.
1997
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help
differentiate them from the competition. As such, entertainment, a loosely
defined concept, is one of the most common directions new centers have taken
with multiplexes, restaurants and other specialty tenants entering the
merchandising mix.
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.10 percent to 10.00 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.42 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.50 and 10.00 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. New Hope Commons is a well-located specialty power center in an
attractive growth market. It has a unique tenant alignment and well matched
merchandising mix with several good credit tenants. By virtue of the lease
structure with many of the major tenants, rental growth will tend to lag general
inflation. The upside will be through the ultimate attainment of overage rent,
something we have not forecasted due to lack of adequate sales history.
Nonetheless, an investor has recognized this real short term potential in the
selection of a capitalization rate.
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality,
well-located center in an area which has seen recent retail interest.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate of 9.50 percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years.
Therefore, a projected terminal capitalization rate ranging from 9.75 to
10.00 percent is indicated for the subject property. 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.
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CUSHMAN &
WAKEFIELD (R)
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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 Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.25 percent for national power center in their
Fourth Quarter 1996 survey, with a range between 9.00-12.50 percent.
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 (%) July 10,1997
===================================================
Reserve Bank Discount Rate 5.00%
---------------------------------------------------
Prime Rate (Monthly Average) 8.50%
---------------------------------------------------
3-Month Treasury Bills 4.96%
---------------------------------------------------
U.S. 10-Year Notes 6.24%
---------------------------------------------------
U.S. 30-Year Bonds 6.56%
---------------------------------------------------
Telephone Bonds 7.63%
---------------------------------------------------
Municipal Bonds 5.56%
===================================================
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 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 retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that nearly 60 percent of base rental income
will, on average, come from anchor/major tenants whose creditworthiness adds
stability to the cash flow.
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 10.75 and 11.00 percent for
the center if it were operating on a stabilized basis.
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 1 0-year period commencing on August 1, 1997.
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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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CUSHMAN &
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.
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CUSHMAN &
WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
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:
================================================================================
SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS
INDEPENDENCE COMMONS SHOPPING CENTER
INDEPENDENCE CITY, JACKSON COUNTY, MISSOURI
================================================================================
Holding Period: 10 Years from the date of value
commencing August 1, 1997
Cash Flow Projections: Fiscal year basis
Market Rent::
Anchor Stores As per lease and option terms.
Building B (In-line) $13.50
Building K (multi-tenant outparcel) $14.50
Suite B1 (Hallmark) $12.50
Building F (Coomers Crafts) $11.00
Lease Term / Rent Steps 5 year terms. Market rates are flat
over the term
Compound Annual Growth Rates
Market Rent: 3.0% per year
Retail Sales: 3.0% per year
General Expenses: 3.0% per year
Real Estate Taxes: 3.0% per year
CPI: 3.0% per year
Management Expense: 4.0% of Effective Gross Income
Miscellaneous Non-recoverable Exp $25,000 per year
Vacancy & Credit Loss: 3.0%
Turnover/Renewal Probability 30% turnover/70% renewal
Downtime Between Leases 3 months (9 months weighted by 30%
turnover probability)
Leasing Commissions
New Leases: $3.00 psf
Renewal Leases: None.
Free Rent: None
Tenant Improvement Allowance
New Tenant in 1st Generation Space: Not Applicable
New Tenant In 2nd Generation Space: $2.00 psf
Renewal Tenant: None
Reversion Calculation: The net reversion has been
calculated by capitalizing the 11th
year's net operating income. A 2.5%
selling expense has been deducted.
We have not grossed up the NOI for
lag vacancy. Capital costs have not
been deducted.
================================================================================
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CUSHMAN &
WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INDEPENDENCE COMMONS
<TABLE>
<CAPTION>
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
Minimum Rent $3,712,003 $3,849,686 $3,859,098 $3,901,671 $4,011,038 $4,107,377 $4,164,763
Overage Rent $0 $1 $2 $3 $4 $5 $6
-- -- -- -- -- -- --
Total Rent Revenue 3,712,003 3,849,687 3,859,100 3,901,674 4,011,042 4,107,382 4,164,769
Expense Recoveries 1,178,591 1,228,243 1,264,014 1,294,079 1,315,698 1,370,806 1,420,510
--------- --------- --------- --------- --------- --------- ---------
Total Income 4,890,594 5,077,930 5,123,114 5,195,753 5,326,740 5,478,188 5,585,279
General Vacancy/Credit Loss (30,114) ( 33,085) (33,581) (33,500) (32,844) (31,688) (37,936)
Effective Income 4,860,480 5,044,845 5,089,533 5,162,253 5,293,896 5,442,500 5,547,343
EXPENSES
- --------
Common Area Maintenance 300,346 309,356 318,637 328,196 338,042 348,183 358,628
Real Estate Taxes 602,360 620,431 639,044 658,215 677,961 698,300 719,249
Insurance Expense 111,481 114,826 118,271 121,819 125,473 129,237 133,115
Miscellaneous Expense 25,438 26,201 26,987 27,796 28,630 29,489 30,374
Management Fee Expense 195,624 203,117 204,925 207,830 213,069 219,127 223,411
------- ------- ------- ------- ------- ------- -------
Total Expenses 1,235,249 1,273,931 1,307,864 1,343,856 1,383,175 1,424,336 1,464,777
--------------------------------------------------------------------------------------------------
NET OPERATING INCOME 3,625,231 3,770,914 3,781,669 3,818,397 3,910,721 4,018,164 4,082,566
(Before Ground Rent) --------------------------------------------------------------------------------------------------
CAPITAL COSTS
- -------------
Alterations 24,008 0 0 0 16,851 10,510 0
Commissions 30,900 0 0 0 22,458 13,320 0
Reserves 36,506 36,506 36,506 36,506 36,506 36,506 36,506
------ ------ ------ ------ ------ ------ ------
Total Capital Costs 91,414 36,506 36,506 36,506 75,815 60,336 36,506
==================================================================================================
TOTAL PROPERTY CASH FLOW $3,533,817 $3,734,408 $3,745,163 $3,781,891 $3,834,906 $3,957,828 $4,046,060
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FY 2005 FY 2006 FY 2007 FY 2008
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME
- ------
Minimum Rent $4,167,300 $4,289,452 $4,371,431 $4,474,255
Overage Rent $7 $8 $9 $10
-- -- -- ---
Total Rent Revenue 4,167,307 4,289,460 4,371,440 4,474,265
Expense Recoveries 1,461,936 1,504,984 1,518,900 1,581,169
--------- --------- --------- ---------
Total Income 5,629,243 5,794,444 5,890,340 6,055,434
General Vacancy/Credit Loss (38,183) (38,934) (37,039) (40,823)
Effective Income 5,591,060 5,755,510 5,853,301 6,014,611
EXPENSES
- --------
Common Area Maintenance 369,387 380,469 391,883 403,639
Real Estate Taxes 740,827 763,052 785,943 809,521
Insurance Expense 137,108 141,221 145,458 149,822
Miscellaneous Expense 31,285 32,223 33,190 34,186
Management Fee Expense 225,169 231,778 235,613 242,217
------- ------- ------- -------
Total Expenses 1,503,776 1,548,743 1,592,087 1,639,385
------------------------------------------------------
NET OPERATING INCOME 4,087,284 4,206,767 4,261,214 4,375,226
(Before Ground Rent) ------------------------------------------------------
CAPITAL COSTS
- -------------
Alterations 0 0 20,022 6,536
Commissions 0 0 22,458 7,200
Reserves 36,506 36,506 36.506 36.506
------ ------ ------ ------
Total Capital Costs 36,506 36,506 78,986 50,242
======================================================
TOTAL PROPERTY CASH FLOW $4,050,778 $4,170,261 $4,182,228 $4,324,984
======================================================
</TABLE>
<TABLE>
<CAPTION>
PRICING MATRIX
=========================================================================================
IRR / TERMINAL RATE 9.25% 9.50% 9.75% 10.00% 10.25%
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10.25% $40,779,596 $40,322,199 $39,888,258 $39,476,013 $39,083,879
10.50% $40,135,193 $39,688,040 $39,263,817 $38,860,805 $38,477,452
10.75% $39,504,639 $39,067,477 $38,652,733 $38,258,727 $37,883,940
11.00% $38,887,586 $38,460,171 $38,054,674 $37,669,452 $37,303,022
11.25% $38,283,700 $37,865,793 $37,469,317 $37,092,665 $36,734,386
</TABLE>
RETURN (IRR) MATRIX
================================================================================
Price/Term Cap 9.25% 9.50% 9.75% 10.00% 10.25%
- --------------------------------------------------------------------------------
$39,000,000 10.95% 10.78% 10.61% 10.44% 10.28%
$38,500,000 11.16% 10.98% 10.81% 10.65% 10.49%
$38,000,000 11.37% 11.19% 11.02% 10.86% 10.70%
$37,500,000 11.58% 11.41% 11.24% 11.07% 10.91%
$37,000,000 11.80% 11.62% 11.45% 11.29% 11.13%
Cushman & Wakefield, Inc. INDC-DCF.XLS, Cash Flow
Valuation Adivsory Services 7/21/97 at 4:07 PM
<PAGE>
Income Approach
================================================================================
================================================================================
Investment Parameters
================================================================================
Discount Rate: 10.75% - 11.0%
Going-In Capitalization Rate: 9.5%
Terminal Capitalization Rate: 9.75% - 10.0%
Reversionary Sales Costs: 2.5%
================================================================================
Discounted Cash Flow
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 10.75 to 11.00 percent
on an "as is" operating basis. 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 10.50 to 11.25 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. A valuation matrix for the subject appears on the Facing Page.
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $37.67 to $38.65 million "as
is". 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.
In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates a Market Value for the subject property
as of July 2, 1997 of $38,000,000.
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.
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CUSHMAN &
WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow, 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 9.50 percent applied to first year income. Applying these rates to
first stabilized year net operating income before reserves, alterations, and
other expenses for the subject of $3,625,231 results in a value of approximately
$38,160,000 via Direct Capitalization as of July 2, 1997.
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CUSHMAN &
WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below
========================================================
Value Summary
========================================================
Cost Approach n/a
--------------------------------------------------------
Sales Comparison Approach $37,600,000-$38,300,000
--------------------------------------------------------
Income Approach
Discounted Cash Flow $38,000,000
Direct Capitalization $38,160,000
========================================================
Two approaches to value have been utilized for this analysis. Because
leased shopping centers like the subject typically are not bought and sold based
on their replacement cost, we have not used the Cost Approach in this analysis.
In general terms, the approaches included provide complimentary results,
each approach or technique supporting the other. Between the high and low range
supported by each methodology, we see a variance of about 2 percent.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
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, this methodology is best suited as support for the
conclusions of the "Income Approach". It provides 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 (DCF) 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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's
caliber is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis, due to
the subject's stabilized operations.
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 methodologies. The ranges in
value exhibited by the Income Approach are consistent with the leasing profiles.
Each 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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CUSHMAN &
WAKEFIELD (R)
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VALUATION ADVISORY SERVICES
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<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, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July 2,
1997, is:
THIRTY EIGHT MILLION DOLLARS
$38,000,000
The value estimate rendered reflects an exposure period of 12 months to
realize a market sale of the property after the effective date of value. The
marketing time presumed by our value conclusion is also 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. This is a Summary Appraisal Report which is intended to comply with the
reporting requirements set forth under Standard Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice for a Summery Appraisal
Report. As such, it might not include full 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
information contained in this report is specific to the needs of the
client and for the intended use stated in this report. The appraiser is
not responsible for unauthorized use of this report.
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.
================================================================================
-78-
CUSHMAN &
WAKEFIELD (R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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 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 has 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.
10. 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.
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.
================================================================================
-79-
CUSHMAN &
WAKEFIELD (R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Martha A. Shelley, MAI 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, Richard W. Latella has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Martha A. Shelley
--------------------------
Martha A. Shelley, MAI
Director
Retail Valuation Group
================================================================================
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CUSHMAN &
WAKEFIELD (R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
NATIONAL RETAIL MARKET OVERVIEW
ENDS FULL DATA REPORTS
SPECIALTY RETAIL AND THEATER LEASE COMPARABLES
SUBJECT RENT ROLL
1997 OPERATING BUDGET
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT LEASE EXPIRATION REPORT
CUSHMAN & WAKEFIELD INVESTOR SURVEY
STATE OF MISSOURI LETTER
PROFESSIONAL QUALIFICATION
================================================================================
-81-
<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.
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. We shall first provide a brief overview of broad
economic measures that are important in terms of long range retail sales
forecasting and general investment underwriting. This is followed by a
discussion of retail sales trends along with selected statistics of the shopping
center industry. Also included is a discussion of contemporary industry trends,
valuation issues and a brief overview of the REIT market.
Personal Income and Consumer Spending
Americans' personal income advanced by eight-tenths of a percent in
December, which helped raise income for all of 1996 by 5.5 percent. This was
less than 1995 but it far outpaced the 2.5 percent in 1994.
==========================================================
Personal Income Consumer Spending
==========================================================
Year % Change Year % Change
==========================================================
1993 4.7 1993 5.8
1994 2.5 1994 5.5
1995 6.1 1995 4.8
1996 5.5 1996 4.6
==========================================================
Source: Commerce Dept.
==========================================================
American workers won wage gains in 1996 that were the largest since 1990.
Nationwide, average hourly wages rose by 3.8 percent to $11.98 in 1996, about
five-tenths of a percent above the inflation rate. This compares with 3.2
percent in 1995. Personal income grew one-tenth of a percent in April 1997.
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 4.6 percent
in 1996, slightly off of the 4.8 percent rise in 1995. These increases followed
a significant lowering on unemployment and bolstered consumer confidence.
Personal spending grew one-tenth of a percent in April 1997. This was the
smallest increase since September 1996 and was in line with analysts'
expectations.
================================================================================
-1-
<PAGE>
National Retail Market Overview
================================================================================
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
Year (1) (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 6.8
- --------------------------------------------------------------------------------
1994 131,056 2.4 123,060 3.1 6.1
- --------------------------------------------------------------------------------
1995 132,337 .98 124,926 1.5 5.6
- --------------------------------------------------------------------------------
1996 135,022 2.0 127,855 2.3 5.3
================================================================================
CAGR 1.32 1.37
1990-1996
================================================================================
(1) Year ending December 31
================================================================================
Source: Bureau of Labor Statistics U.S. Department of Labor
================================================================================
During 1996, the labor force increased by 2,685,000 or approximately 2.0
percent. Correspondingly, the level of employment increased by 2,929,000 or 2.3
percent. As such, the year end unemployment rate dropped by three-tenths of a
percent to 5.3 percent. For 1996, monthly job growth averaged 224,000. On
balance, over 10.0 million jobs have been created since the recovery began.
Preliminary data for February 1997 shows that the unemployment rate slipped to
5.3 percent, near a seven-year low.
Housing Trends
Housing trends are an important economic measure due to the substantial
economic activity generated when a home changes hands (i.e. spending on repairs
by sellers, redecorating by buyers, fees, commissions and taxes).
For all of 1996, new single family home sales totaled 756,000, up 13.3
percent from 667,000 in 1995. The yearly sales level was the highest since 1978.
The median new home price of new homes sold in 1995 was $133,900, up 3 percent
from the median of $130,000 for 1994. Through March 1997, it was tracking at
$138,000. Sales of new homes fell 2.5 percent in March 1997, after having risen
to their highest level in eleven years in February. Builders are currently
reporting a 4.5 month inventory of unsold homes.
Sales of existing single family homes fell in April by 2.4 percent to 4.06
million units. The median price jumped by 4.6 percent to $118,100.
================================================================================
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<PAGE>
National Retail Market Overview
================================================================================
New housing starts rose by 8.8 percent for all of 1996 to 1.47 million
units, the most since 1988. Housing starts fell by 4.8 percent in May to an
annual rate of 1.397 million units. This was the third consecutive monthly
decline.
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 64.7
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. Conversely, the fourth quarter
(1996) GDP grew at a surprisingly robust 3.8 percent. As a result, the GDP
posted a 2.4 percent annual gain for all of 1996, topping the 2.0 percent rise
in 1995. Revised first quarter 1996 data shows that the GDP grew at a stunning
5.8 percent annual pace, well above even the most optimistic forecasts.
Preliminary reports are for second quarter growth in the 2+/- percent range. The
Fed foresees a moderation of this trend and expects the U.S. economy will expand
at a 2.0 to 2.50 percent pace during 1997 which is in-line with White House
forecasts and a pace which is viewed as the economy's non-inflationary growth
limit.
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
----------------------------------------------
1996 2.4
==============================================
* Reflects new chain weighted system of
measurement. Comparable 1994 measure would
be 3.5%
==============================================
Source: Bureau of Economic Analysis
==============================================
Wholesale Prices
Soaring energy prices in December drove wholesale costs to a twelve month
high. For the year, the Producer Price Index (PPI) gained 2.8 percent. However,
excluding energy, the PPI rose just 1.4 percent in all of 1996. In 1995, the
index rose 2.3 percent. Projections for 1997 show that most economists expect a
2.5 percent rise and a core increase of 1.5 percent.
================================================================================
-3-
<PAGE>
National Retail Market Overview
================================================================================
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.
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
1996 158.6(2) 3.3
==================================================
(1) All Urban Workers
(2) Preliminary
==================================================
Source: Dept. of Labor, Bureau of Labor Statistics
==================================================
Preliminary data for the year shows the consumer prices rose in line with
investor expectations. The index was up three-tenths of a percent in December,
its third consecutive gain at this level. On an annualized basis, the inflation
rate was reported at 3.3 percent for year, the highest rate of increase since
1990. Since then, inflation has eased every year except for 1994 when it was
unchanged. Excluding food and energy, the 77 percent of the index known as the
core index, the underlying inflation rate was 2.6 for the previous twelve
months, the lowest core rate since 1965, with the exception of an increase of
the same size in 1994.
Data for May 1997 shows that the CPI rose only one-tenth of a percent,
while the core rate increased by two-tenths of a percent. The overall index has
risen by only one-tenth of a percentage point in four of the five months this
year, indicative of an annual rate of only 1.4 percent.
Recently, a special advisory panel of prominent economists have contended
that the current method of calculating the Consumer Price Index overstates
inflation by 1.1 percentage points annually. The government is currently
reviewing the far ranging implications a change in procedure may have.
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 to
nine months. The Conference Board, an independent business group, reported that
the index climbed three-tenths of a percent in May 1997.
================================================================================
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<PAGE>
National Retail Market Overview
================================================================================
The Conference Board also reported that Consumer Confidence rose in May
1997 to 127.1 from 118.5 in April, its highest level in twenty-eight years. This
was above the consensus opinion. Accordingly, consumers attitudes about the
economy remain upbeat. Measures of consumer confidence are watched closely for
indications of future consumer spending.
The Employment Cost Index is a measure of overall compensation including
wages, salaries and benefits. Despite a tight labor market, American workers
have not won pay and benefit increases large enough to push inflation higher, at
least for the near term. The Labor Department reported that the index rose by
2.9 percent in 1996, the same as in 1995. For the 12 months through March 1997
it was still tracking at 2.9 percent.
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. Through the first 70 years of this century, non-farm
productivity rose at an annual rate of 2.2 percent. Between 1973 and 1995, a
marked slowdown has been in evidence with only a 1 percent annual rate. The
Labor Department reports that the productivity of American workers grew by
seven-tenths of a percent in 1996, the largest gain since a 3.2 percent advance
in 1992. Productivity increased by three-tenths of a percent in 1995.
Consumer Credit The Federal Reserve said consumer credit expanded at a
seasonally adjusted $3.0 billion in May 1997 or at a 2.9 percent annual rate.
This was well below most analysts' expectations and is likely a result of
tougher lending standards being imposed by banks and consumers cutting back on
spending. Nonetheless, credit card delinquencies and personal bankruptcies
remain near record levels indicating that consumers may be reaching a point of
saturation with respect to new debt. However, a drop in write-offs was in
evidence in May from the record levels in 1996 which came about following
aggressive marketing campaigns by card issuers.
New Construction activity dropped 1.8 percent in May to an annual rate of
$586.2 billion, with declines in both public and private sector spending.
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 track at about 2.5 percent through 1998. Over the
longer term, inflation is expected to average 2.7 percent. This will have a
direct influence on consumption (consumer expenditures).
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 of 2.3 percent over the next decade, and slow to about 2.1 percent by 2019.
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
================================================================================
-5-
<PAGE>
National Retail Market Overview
================================================================================
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 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 1993 at 68.0 percent after
averaging about 63.0 percent over much of the post-war period. WEFA estimates
that real consumption expenditure growth will average 2.2 percent per year
through 2005 and slows to 2.1 percent thereafter.
Retail Sales
During the period 1980 through 1996, total retail sales in the United
States increased at a compound annual rate of 6.1 percent. Data for the period
1990 through 1996 shows that sales growth has slowed to an annual average of 5.0
percent. This information is summarized on the following chart.
==================================================================
Total U.S. Retail Sales(1)
==================================================================
Amount Annual
Year (Billions) 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 5.2%
-----------------------------------------------------------------
1993 $2,074,499 6.3%
-----------------------------------------------------------------
1994 $2,236,966 7.8%
-----------------------------------------------------------------
1995 $2,340,817 4.6%
-----------------------------------------------------------------
1996 $2,465,835 5.3%
-----------------------------------------------------------------
Compound Annual Growth Rate
1980-1996 +6.1%
-----------------------------------------------------------------
CAGR: 1990-1996 +5.0%
==================================================================
(1) 1985 - 1995 data reflects recent revisions by the U.S.
Department of Commerce: Combined Annual and Revised Monthly
Retail Trade.
(2) Preliminary advance estimates.
==================================================================
Source: Monthly Retail Trade Reports Business Division, Current
Business Reports, Bureau of the Census, U.S. Department
of Commerce.
==================================================================
The Census Bureau of the Department of Commerce reports that advance
estimates for U.S. retail sales for 1996 were $2.465 trillion, an increase of
$125.0 billion, or 5.3 percent from 1995. For the month of December 1996, sales
were up six-tenths of a percent.
Data for April 1997 shows that sales were down three-tenths of a percent
from March, after a strong first quarter showing. This was the first drop since
November 1996 and the largest since last June.
================================================================================
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<PAGE>
National Retail Market Overview
================================================================================
Provided on the chart below 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 June 1997
================================================================================
% Change From Previous Year
----------------------------
Name of Retailer Overall Same Store Basis
================================================================================
Wal-Mart +11.8% + 6.4%
- --------------------------------------------------------------------------------
Kmart + 3.5% + 5.3%
- --------------------------------------------------------------------------------
Sears, Roebuck & Company + 7.4% + 3.1%
- --------------------------------------------------------------------------------
J.C. Penney + 1.9% + 0.8%
- --------------------------------------------------------------------------------
Dayton Hudson Corporation + 7.9% + 2.9%
- --------------------------------------------------------------------------------
May Department Stores +10.4% + 4.6%
- --------------------------------------------------------------------------------
Federated Department Stores + 3.9% + 3.2%
- --------------------------------------------------------------------------------
The Limited Inc. +11.0% + 4.0%
- --------------------------------------------------------------------------------
Gap Inc. +21.0% + 5.0%
- --------------------------------------------------------------------------------
Ann Taylor - 3.8% - 5.8%
- --------------------------------------------------------------------------------
Woolworths - 3.8% - 3.1%
================================================================================
Source: New York Times/Wall Street Journal
================================================================================
o Data for June 1997 shows that sales rebounded strongly, particularly for
apparel retailers. There were some exceptions however, such as Talbot's
and Ann Taylor. The Goldman Sachs index rose 4.0 percent, compared to last
year's 3.8 percent increase. Traditional department stores such as
Federated and May Department Stores did fairly well. Luxury retailers such
as Neiman Marcus (+9.5%) also did well.
The outlook for retail sales growth is one of cautious optimism. It
appears as if the low price department stores and off price apparel segment is
poised to continue to do well, as they tend to be representative of those
industry segments which have gone through mergers and are benefiting from fewer
competitors. 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 continue to rise. 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. GAFO 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. The store types that
comprise shopping centers comprised approximately 53 percent of total retail
sales in 1995. The balance were generated by auto dealers, gas stations, food
service facilities and other miscellaneous establishments.
Total retail sales grew by 4.6 percent in the United States in 1995 to
$2.341 trillion, an increase of $104 billion over 1994. This followed an
increase of 7.8 percent or $162 billion over 1993. Automobile dealers captured
$34+/- billion of total retail sales growth last year, while Shopping Center
Inclined Sales accounted for nearly 50.0 percent of the increase ($50 billion).
GAFO sales increased by $32.5 billion. This group was led by department stores
which posted a $14.4 billion increase in sales. The following chart summarizes
the performance for this most recent comparison period.
================================================================================
-8-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Retail Sales by Major Store Type
1994-1995 ($Mil.)
================================================================================
Percent of 1994-1995
Store Type 1994 1995 Income(1) % Change
================================================================================
GAFO:
General Merchandise $ 282,541 $ 296,904 5.1%
Apparel & Accessories 109,603 109,962 .3%
Furniture & Furnishings 119,626 129,923 8.6%
Other GAFO 80,533 88,029 9.3%
- --------------------------------------------------------------------------------
GAFO Subtotal $ 592,303 $ 624,818 14.4% 5.5%
- --------------------------------------------------------------------------------
Convenience Stores:
Grocery $ 376,330 $ 389,134 3.4%
Other Food 21,470 21,378 (.4)%
- --------------------------------------------------------------------------------
Subtotal $ 397,800 $ 410,512 9.5% 3.2%
Drug 81,538 84,240 2.0% 3.3%
- --------------------------------------------------------------------------------
Convenience Subtotal $ 479,338 $ 494,752 3.2%
- --------------------------------------------------------------------------------
Other:
Home Improvement &
Building Supplies Stores $ 122,533 $ 124,626 2.9% 1.7%
Shopping Center-Inclined
Subtotal $1,194,174 $1,244,196 28.8% 4.2%
Automobile Dealers 526,319 560,624 6.5%
Gas Stations 142,193 148,192 4.2%
Eating and Drinking Places 228,351 233,606 2.3%
All Other 145,929* 154,199* 5.7%
- --------------------------------------------------------------------------------
Total Retail Sales $2,236,966 $2,340,817 4.6%
================================================================================
* Estimated Sales
- --------------------------------------------------------------------------------
(1) Current Population Report, Page 60, Estimated at 96.8 million households @
$44,100 = 4.3 trillion.
================================================================================
Source: U.S. Department of Commerce, Bureau of the Census and Dougal M. Casey:
Various ICSC White Papers.
================================================================================
GAFO sales grew by 5.5 percent in 1995 to $624.8 billion. From the above
it can be calculated that GAFO sales accounted for 26.7 percent of total retail
sales and nearly 50.0 percent of all shopping center-inclined sales. GAFO sales
have also risen relative to household income. In 1990 these sales represented
13.9 percent of average household income. By 1994/1995 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.
================================================================================
-9-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Determinants of Retail Sales Growth and U.S. Retail Sales by Key Store Type
================================================================================
1990 1994 2000(P)
================================================================================
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. $5.4 Tril.
- --------------------------------------------------------------------------------
% Allocations of Income to Sales
GAFO Stores 13.9% 14.4% 14.7%
Convenience Stores 12.9% 11.7% 10.7%
Home Improvement Stores 2.8% 3.0% 3.3%
Total Shopping Center-Inclined Stores 29.6% 29.1% 28.8%
Total Retail Stores 54.3% 54.6% 52.8%
- --------------------------------------------------------------------------------
Sales ($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 $2,850
================================================================================
Note: Sales and income figures are for the full year; population and household
figures are as of April 1 in each respective year. P = Projected.
================================================================================
Source: U.S. Census of Population, 1990; U.S. Bureau of the Census Current
Population Reports: Consumer Income P6-168, 174, 180, 184 and 188;
Berna Miller with Linda Jacobsen, "Household Futures", American
Demographics, March 1995; Retail Trade sources already cited; and
Dougal M. Casey: ICSC White Paper
================================================================================
GAFO sales have risen at a compound annual rate of approximately 6.8
percent since 1991 based on the following annual change in sales.
===============================
1990/91 2.9%
-------------------------------
1991/92 7.0%
-------------------------------
1992/93 6.6%
-------------------------------
1993/94 7.0%
-------------------------------
1994/95 5.5%
===============================
According to a recent study by the ICSC, GAFO sales are expected to grow
by 5.0 percent per annum through the year 2000, which is well above the 4.1
percent growth for all retail sales. This information is presented in the
following chart.
================================================================================
-10-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Retail Sales Forecasts in the United States, by Major Store Type
================================================================================
1994 2000(P) Percent Change
- --------------------------------------------------------------------------------
Compound
Store Type ($ 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 $1,194 $1,555 30.2% 4.5%
Subtotal
- --------------------------------------------------------------------------------
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.
================================================================================
According to the ICSC White Paper: Overstoring - A Look at Retail Space
and Sales Performance; Shopping Center Inclined Sales have grown from $257
billion in 1972 to $1.244 trillion in 1995, a 7.1 percent annual growth rate.
Historical data is shown below.
================================================================================
Shopping Center Inclined Store Sales
1972-1995 (Billions)
================================================================================
1972 1980 1990 1995
================================================================================
Sales $257 $532 $1,000 $1,244
- --------------------------------------------------------------------------------
Compound Annual Growth
- --------------------------------------------------------------------------------
1972-1995 7.1%
- --------------------------------------------------------------------------------
1972-1980 9.5%
- --------------------------------------------------------------------------------
1980-1990 6.6%
- --------------------------------------------------------------------------------
1990-1995 4.3%
================================================================================
Source: U.S. Bureau of The Census and ICSC White Paper: Overstoring - A Look at
Retail Space and Sales Performance.
================================================================================
From the above, we see that the most recent annual rate of growth
(1990-1995) in Shopping Center Inclined Sales of 4.3 percent has decreased to
less than half of what it was during the 1970s (9.5 percent). Projections
through December 2000 are for a compound growth rate of 4.5 percent.
================================================================================
-11-
<PAGE>
National Retail Market Overview
================================================================================
Shopping centers have stabilized their share of shopping center inclined
sales. In 1972 this share was estimated at 48 percent. Since the early 1980s,
this share has stabilized in the 72 to 73 percent range. For example, the
estimated sales total of $894 billion of shopping center sales in 1995 was equal
to 72 percent of total 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 total sales per square foot rose
by 2.9 percent to $278 per square foot in 1996. This compares to a .5 percent
increase for the period 1994-1995. The following chart identifies the most
recent year-end results. The winners were shown to be Apparel and Accessories
(+4.8%) led by Men's Apparel and Shoes, while Furniture and Furnishings suffered
(-2.8%). The Home Improvement category rose an outstanding 100.0 percent to $302
per square foot.
================================================================================
-12-
<PAGE>
National Retail Market Overview
================================================================================
================================================================
1996 Year End Performance
Non-Anchor Tenant Sales In U.S. Malls
================================================================
ICSC Index
% Change
Store Type 1996 (SF*) From YE 1995
================================================================
GAFO Categories:
Apparel and Accessories
Women's Accessories and Specialties $301 3.2%
Women's Ready-To-Wear 195 3.3%
Men's Apparel 270 7.0%
Children's Apparel 350 .5%
Family Apparel 314 4.2%
Women's Shoes 325 5.1%
Men's Shoes 383 5.6%
Family Shoes 279 5.3%
Shoes Miscellaneous 343 3.8%
Apparel and Accessories - Misc. $279 2.9%
----------------------------------------------------------------
SUBTOTAL $257 4.8%
----------------------------------------------------------------
Furniture and Furnishings:
Home Furniture & Furnishings $273 1.4%
Home Entertainment & Electronics 303 -4.3%
Home Furnishings - Misc. 300 -3.4%
----------------------------------------------------------------
SUBTOTAL $293 -2.8%
----------------------------------------------------------------
Other GAFO:
Jewelry $652 4.9%
Stationery/Cards/Gifts/Novelty 275 1.7%
Books 249 -2.1%
Sporting Goods/Bicycles 246 -1.1%
Other GAFO - Misc. 311 4.4%
----------------------------------------------------------------
SUBTOTAL $343 2.2%
----------------------------------------------------------------
TOTAL GAFO $284 3.2%
----------------------------------------------------------------
NON GAFO Categories:
Food Services
Fast Food $414 2.3%
Restaurants 280 1.0%
Food Services - Misc. 352 -.8%
----------------------------------------------------------------
SUBTOTAL $340 1.6%
----------------------------------------------------------------
OTHER NON-GAFO Categories:
Specialty Food Stores $355 .9%
Supermarkets 433 .8%
Drug/HBA 291 4.7%
Personal Services 283 7%
Automotive 140 1.2%
Home Improvement 302 100.1%
Mall Entertainment 76 -3.6%
Other Non-GAFO - Misc. 353 4.9%
----------------------------------------------------------------
SUBTOTAL $223 1.5%
----------------------------------------------------------------
TOTAL NON-GAFO $266 1.4%
----------------------------------------------------------------
OTHER CATEGORIES-MISCELLANEOUS $151 4.4%
----------------------------------------------------------------
Memo: GAFO & Food Service Total $290 3.1%
----------------------------------------------------------------
GRAND TOTAL $278 2.9%
================================================================
* Sales per square foot derived as total non-anchor mall sales
divided by total occupied square footage.
================================================================
Source: ICSC - Research Quarterly
================================================================
================================================================================
-13-
<PAGE>
National Retail Market Overview
================================================================================
Non-Store Retailing
In 1995, non-store retailing accounted for $69.7 billion, or 3.92
percent of total non-automotive retail sales. Of this total, $49.7 billion was
attributed to mail/telephone order catalog retailers. The balance is comprised
of coin-operated vending machines, house-to-house canvassing, party plan (i.e.
tupperware parties) telemarketing and other non-store venues such as home
shopping networks and electronic commerce.
================================================================================
Non-Store and Total Retail Sales
================================================================================
Year Total Mail Order Non-Store Total Non-Auto Sa1es % of Total
================================================================================
1985 $15,848 mil. $28,275 ml. $1,071,828 2.64%
1990 $26,577 mil. $45,632 ml. $1,457,006 3.13%
1995 $49,710 mil. $69,667 mil. $1,778,915 3.92%
================================================================================
Source: Department of Commerce
================================================================================
Mail order sales, currently at only 2.8 percent of total retail sales,
continue to grow. Estimates currently place on-line sales at $518.0 million or
1 percent of the mail order tally. Estimates place total on-line sales as high
as $6.6 billion by the year 2000. Since 1990, mail order sales have grown at an
annual rate of 9.9 percent which is double the average growth of non-automotive
retail sales and 1.7 times the average growth of GAFO store sales. One measure
of this growing trend is the November/December ratio of mail order to GAF store
sales. In 1990, the ratio was 5.4 percent. By 1992 it had grown to 6.9 percent
and by 1995 it was 7.6 percent.
Industry Trends
According to the National Research Bureau, there were a total of 42,130
shopping centers in the United States at the end of 1996. During this year, 895
new centers opened, a 3.2 percent increase over the 867 that opened in 1995.
This followed an 18.0 percent increase in 1995. The greatest growth came in the
small center category (less than 100,000 square feet) where 496 centers were
constructed. In terms of GLA added, new construction in 1996 was up 2.7 percent
resulting in an addition of 106.2 million square feet of GLA from approximately
4.97 billion to 5.1 billion square feet. In other important trends, the
development of regional and super-regional malls hit a five year high in 1996
with the opening of eight centers, twice as many as in 1995. This boosted the
nation's total of regionals to 301 and super-regionals to 380. The small center
category (less than 100,000 square feet) was the only one to experience a
decrease in new centers built with 496 centers versus 551 in 1995. The following
chart highlights trends over the period 1987 through 1995.
================================================================================
-14-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
==========================================================================================================================
Census Data: 10-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%
1996 42,130 5,100,605,534 $933,918,275 121,068 $183.10 1.75% 895 2.17%
==========================================================================================================================
Compound
Annual
Growth +3.60% +3.56% +4.99% N/A +1.39% 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 compound annual rate of approximately 3.6 percent since 1987. New
construction was up 2.7 percent in 1996, a slight increase over 1995 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 176 new centers opening,
followed by New Jersey (59), North Carolina (48) and Texas (47).
Among the 42,130 centers in 1996, the following breakdown by size can be
shown.
===================================================================
U.S. Shopping Center Inventory YE December 1996
===================================================================
Number of Centers Square Feet (Millions)
----------------------------------------------
Size Range (SF) Amount Percent Amount Percent
===================================================================
Under 100,000 26,497 62.9% 1,293.3 25.4%
-------------------------------------------------------------------
100,001- 200,000 10,186 24.2% 1,399.2 27.4%
-------------------------------------------------------------------
200,001- 400,000 3,477 8.3% 925.5 18.1%
-------------------------------------------------------------------
400,001- 800,000 1,276 3.0% 711.2 13.9%
-------------------------------------------------------------------
800,001-1,000,000 309 .7% 278.4 5.5%
-------------------------------------------------------------------
Over 1,000,000 385 .9% 492.9 9.7%
===================================================================
Total 42,130 100.0% 5,100.6 100.0%
===================================================================
Source: National Research Bureau (some numbers slightly rounded).
===================================================================
Empirical data shows that the average GLA per capita is increasing. In
1996, the average for the nation was 19.23. This was up 19.4 percent from 16.1
in 1988 and more recently, 18.7 square feet per capita in 1995. Among states,
Florida regained its lead and now has the highest GLA per capita with 28.05
square feet. South Dakota has the lowest at 9.07 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 5.6 in 1996. This information is presented
on the following chart.
================================================================================
-15-
<PAGE>
National Retail Market Overview
================================================================================
============================================
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
--------------------------------------------
1996 19.2 5.6
============================================
Source: International Council of Shopping
Center: The Scope of The Shopping
Center Industry and National
Research Bureau
============================================
While per capita GLA has continued to increase, a key issue is that the
rate of increase has slowed. Per capita space has increased by only one and a
half square feet during the period 1990 through 1996. This trend is manifested
in the pace of inventory increases from 165 million square feet per year between
1972 and 1980, to 143 million square feet per year (1980-1990), and 118 million
square feet per year (1990-1996).
Construction data also indicates that while the overall pace of shopping
center openings has eased, the pace of large store (50,000 to 200,000 square
feet) construction has more than doubled. During the more recent five year
period, big boxes have accounted for 41 percent of inventory additions.
================================================================================
Trends in Inventory Growth*
1972-1995
================================================================================
1972-198O 1980-1990 1990-1995
================================================================================
Shopping Center Space Added 164 143 115
- --------------------------------------------------------------------------------
Free-Standing Stores 36 34 79
(50,000-200,000 SF)
- --------------------------------------------------------------------------------
Total 200 177 194
- --------------------------------------------------------------------------------
Big Box Allocation of Inventory Growth 18% 19% 41%
================================================================================
* Average Annual Increase (Million Square Feet)
================================================================================
Source: NRB and F.W. Dodge
================================================================================
In their publication, NRB/Shopping Centers Today 1996 Shopping Center
Census, the National Research Bureau reports that overall retail conditions were
good in 1996. Total shopping center sales increased 4.5 percent to $933.92
billion in 1996, up from $893.81 billion in 1995.
================================================================================
-16-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
=============================================================================================================
Selected Shopping Center Statistics
1990-1996
=============================================================================================================
Compound
Annual
1990 1991 1992 1993 1994 1995 1996 Growth
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Sales in Shopping Centers * $706.40 $716.90 $768.20 $806.60 $851.30 $893.81 $933.92 4.8%
- -------------------------------------------------------------------------------------------------------------
Total Leasable Area ** 4.39 4.56 4.68 4.77 4.86 4.97 5.10 2.5%
- -------------------------------------------------------------------------------------------------------------
Unit Rate $160.89 $157.09 $164.20 $169.08 $175.13 $179.94 $183.10 2.2%
=============================================================================================================
* Billions of Dollars
** Billions of Square Feet
=============================================================================================================
Source: National Research Bureau
=============================================================================================================
</TABLE>
According to the National Research Bureau, total sales in shopping centers
have grown at a compound rate of 5.0 percent since 1987. As described, aggregate
sales were up 4.5 percent nationwide from $893.8 billion (1995) to $933.9
billion (1996). In 1996, average sales were $183.10 per square foot, up nearly
2.7 percent over 1995 and 2.2 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 $207.44 per square
foot. Nonetheless, with compound sales growth lagging the growth in GLA, there
is an indication of overbuilding by this broad measure.
The following chart tracks the change in average sales per square foot by
size category between 1993 and 1995.
=====================================================================
Sales Trends by Size Category
1993-1996
=====================================================================
Average Sales Per Square Foot % Change
============================================
Category 1993 1994 1995 1996 1993-96*
=====================================================================
Less than 100,000 SF $193.10 $199.70 $204.94 $209.74 +2.8%
---------------------------------------------------------------------
100,001 to 200,000 SF $156.18 $161.52 $166.00 $169.56 +2.8%
---------------------------------------------------------------------
200,001 to 400,000 SF $147.57 $151.27 $153.96 $154.07 +1.4%
---------------------------------------------------------------------
400,001 to 800,000 SF $157.04 $163.43 $168.21 $170.14 +2.7%
---------------------------------------------------------------------
800,001 to 1,000,000 SF $194.06 $203.20 $210.40 $213.93 +3.3%
---------------------------------------------------------------------
More than 1,000,000 SF $183.90 $193.13 $201.05 $207.44 +4.1%
---------------------------------------------------------------------
Total $169.08 $175.13 $179.94 $183.10 +2.7%
=====================================================================
* Compound Annual Change
=====================================================================
Source: National Research Bureau
=====================================================================
Consumers demand for value and selection have led to an unprecedented
growth of the category killer, superstore and warehouse club concepts. In its
annual industry report, Discount Store News has identified the nation's top 200
merchants. Overall, these merchants posted sales of $336.6 billion, up 7.5
percent over 1995. The chart below highlights the year-to-year performance along
with 1997 projections.
================================================================================
-17-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Sales by Segment (in billions $)
================================================================================
Market 1997
1995 1996 Share % Change (Proj.)
===============================================================================
Full-Line Discount Stores(1) $150.9 $162.3 48% 7.6% $178.5
- -------------------------------------------------------------------------------
Specialty Discounters(2) 67.5 76.3 23% 13.1% 87.5
- -------------------------------------------------------------------------------
Warehouse Clubs 41.1 43.5 13% 5.8% 45.9
- -------------------------------------------------------------------------------
Other Discount Mass Merchants(3) 30.8 31.8 9% 5.0% 33.4
- -------------------------------------------------------------------------------
Off-Price Apparel Chains 15.8 16.9 5% 6.2% 17.9
- -------------------------------------------------------------------------------
Jewelry/Hard Lines Retailers 6.9 5.9 2% (15.0%) 5.1
- -------------------------------------------------------------------------------
Total Market $313.0 $336.6 100% 7.5% $368.5
================================================================================
(1) Includes full-line discount department stores, supercenters, closeouters
and single-price retailers.
(2) Includes home, automotive, crafts, toys, office supplies, book, computer
superstores, baby superstores, pet supplies, consumer electronics and
sporting goods specialty stores.
(3) Includes Sears, Ward, QVC, HSN and variety stores.
================================================================================
Source: DSN Research
================================================================================
As can be seen, the largest segment is comprised of full line discount
stores which was up 7.6 percent to $162.3 billion, or 48 percent of all sales.
Excluding Wal-Mart, by far the industry leader, 75 retailers in the DSN top 200
posted double digit sales gains. The biggest winners were baby superstores
(+47.2%), book superstores (+35.9%), and home furnishing superstores (33.1%).
Among the supercenter categories, Wal-Mart Supercenter's $19.3 billion in sales,
up 67.7 percent over 1995, accounted for more than half of the segment's $36.2
billion in sales.
The Urban Land Institute, in the 1997 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.
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.
Market Shifts - Contemporary Trends In the Retail Industry
The mid 1990s have continued the trend of profound changes in the retail
industry. Department stores have emerged from the troubles of late 1980s and
early 1990s to be stronger than ever. Continued consolidations in this industry
segment should continue. Specialty retailers continue to experience a shakeout
of weaker, out of favor formats while discounters gain market share. Power
centers, the growth vehicle of the last several years have reached a point of
saturation that has undermined investor's interest in this product. Outlet
centers are still struggling, however, the super-regional mega-center appears
poised to be the hot concept for the next few years.
================================================================================
-18-
<PAGE>
National Retail Market Overview
================================================================================
Some of the important developments in the industry over the past year can
be summarized as follows:
o The 1996 Christmas selling season ended on a down note with sales
finishing below most analysts expectations. For most consumer
electronics and computer retailers, the season was horrible with
December sales down 4.8 percent on average. Best Buy, last year's
rising star, was off 13.0 percent. Apparel sales rose 3.3 percent
led in part by Ann Taylor up 8.8 percent following last year's 2.9
percent decline. According to the Department of Commerce, on an
overall basis, department stores registered an average increase of
4.6 percent while discounters had a 7.8 percent rise on average.
Conventional department stores rose 1.9 percent. A summary of some
year over year comparable store sales results is shown below.
=========================================================
Comparable Store Sales
(%) Change Over Last 12 Months
=========================================================
Discounters
Wal-Mart 4.5
Kmart 2.3
Dayton Hudson 2.4
---------------------------------------------------------
Department Stores
Sears 6.1
Federated 2.8
JC Penney 2.9
Dillards 2.0
---------------------------------------------------------
Apparel
Limited 2.0
The Gap 5.0
TJX 7.0
=========================================================
Miscellaneous
Best Buy -4.0
Tandy .4
Woolworth -2.0
Pier 1 12.0
=========================================================
Source: Wall Street Journal
=========================================================
o Consolidation in the department store industry segment continued,
albeit at a slower pace than seen over the last few years.
o Strawbridge & Clothier - 128 year old Philadelphia based
institution sold 13 unit department store division to May
Company. Its 27 unit discount Clover division went to Kimco
which is putting Kohl's in several of the units, their initial
foray into the East.
o Profitts - Acquired 38 unit Parisian chain for $221 million.
Company now controls 141 stores in 19 states. They have also
announced an agreement to acquire G.R. Herberger's, a 40-unit
department store chain based in St. Cloud, Minnesota for $153
million.
================================================================================
-19-
<PAGE>
National Retail Market Overview
================================================================================
o Rich's - 26 unit New England based regional chain closes.
o Federated - Continues its conversion of Broadway stores in
California to Macy's and Bloomingdales.
o Discounters are being attacked from two sides. Big Box
category killers have rapidly expanded on one side.
Alternatively, full service department stores have become more
promotional, closing the price advantage gap discounters have
traditionally enjoyed. For example, Bradlees and Caldor remain
in bankruptcy and Ames continues to struggle looking for the
right strategy to compete against Wal-Mart, Kmart, Target and
now Kohl's.
o Troubles continues for several specialty retailers as the
protracted shake-out continued with several Chapter 11
filings, downsizings, and some cases, outright liquidations.
Among the more notable:
o McCrory Corp. - Seeking court approval to close 307 of its 461
remaining stores and liquidate. At one time it ran 820 stores
in 1992 when it filed for protection.
o Limited - Will close 200 of its 4,500 units during 1997.
o Handy Andy - Regional home improvement chain closed remaining
54 stores.
o Herman's - Liquidated all of its sporting goods stores in the
northeast.
o Today's Man - 35 unit apparel super store chain filed Chapter
11.
o Barney's - High profile New York based upscale retailer filed
Chapter 11.
o Merry-Go-Round - Liquidated and closed its remaining 560 units
including Chess King, Dejaiz and Cignal units.
o Jamesway - Regional discount department store chain in the
northeast liquidated.
o Incredible Universe - After aggressive foray into this mega
store format (185,OOO+/- square feet), Tandy closes division
down. Tandy will also close the remaining 53 units of its
struggling McDuff Electronics chain and 19 of its 108 Computer
City units.
o Ernst Home Centers - Board approved liquidation of 53-unit
chain.
o Kids Mart - 144-unit childrens apparel chain rumored to be
close to filing Chapter 11.
o Sun Television and Appliance - Considering closing 9 of its 50
stores citing losses.
o Best - Closes 81 of its 169 catalog showrooms and agrees to
sell remaining units to Shottenstein Corp.
================================================================================
-20-
<PAGE>
National Retail Market Overview
================================================================================
o Rickel Home Centers - 86 unit home improvement chain filed
Chapter 11.
o House of Fabrics - Filed Chapter 11 and closes 86 of its 361
units.
o Discovery Zone - Fast expanding childrens' entertainment and
recreation oriented concept filed Chapter 11.
o Ben Franklin - Arts and crafts retailer filed Chapter 11.
o Kuppenheimer - Apparel retailer files Chapter 11 and plans to
close half of its 87 units.
o County Seat - 740-unit apparel retailer has filed Chapter 11
and will close 200 units. The Wet Seal has made a proposal to
acquire 508 of the stores.
o All For A Dollar - 111-unit close-out chain has filed
Chapter 11.
o Mergers and consolidations among specialty retailers, drug,
supermarket and apparel categories continue.
o Staples merging with Office Depot in a $3.4 billion deal
making it by far the largest in the office superstore
category.
o Toys R Us acquired Baby Superstore in $407 million deal.
o Melville sold Kay Bee Toys to Consolidated Stores adding to
its Toy Liquidators, Toys Unlimited and Amazing Toys close-out
units for $315 million. Melville has officially changed its
name to CVS Corp.
o Safeway to acquire Von's in a $1.65 billion deal, creating an
operation with 1,400 stores, 139,000 employees and $22.0
billion in revenues. They will still trail the industry
leader, Kroger, in size.
o JC Penney, parent of Thrift Drug, announced they will acquire
Fay's Inc., operator of 272 units, making Thrift the nation's
eight largest chain. Penney's acquisition of Eckerd Drug has
been cleared by the FTC.
o Sears & Roebuck acquired the 61 unit Orchard Supply Hardware
chain for $415 million.
o Waban, Inc. - to spin off BJ's Wholesale Club and change its
name to its other wholesale club division, HomeBase.
o Food Lion - announced its pending acquisition of Kash N Karry
in a $341.0 million deal.
o PetsMart - Announced plans to acquire Pet City Holdings, the
largest pet superstore chain in the UK.
o TJX Companies - announced intent to sell its Chadwick's of
Boston catalog to Brylane LP.
o Revco - completed its tender offer for Big B drug store chain.
================================================================================
-21-
<PAGE>
National Retail Market Overview
================================================================================
o Quality Food Centers - Bellevue, WA based supermarket chain to
acquire 56-unit Hughes Family Markets for $360 million.
o REITs ended the year with generally good gains over the thrashing
many of their stock prices took earlier in the year. Through
October, the average mall REIT was up 23.4 percent, while shopping
center REITs were up 16.2 percent. Outlet center REITs were the
notable laggards with a .2 percent loss. The most significant deal
in 1996 involved Simon Property Group's $1.5 billion acquisition of
The DeBartolo Realty Corp. The combined company has a market
capitalization of $7.5 billion and a portfolio of 111 regional
malls, 66 strip centers, and several specialty centers.
o Power center growth has arguably fueled the industry's expansion
over the past few years. With investors having become more
pessimistic due to overbuilding and cannibalization of sales, a new
growth vehicle is emerging, the supercenter. This concept combines
the elements of a neighborhood center, discounter, supermarket, and
drug store into one unit of 150,000 to 200,000 square feet. At the
end of 1995 there were 500+/- supercenters. A recent ICSC Survey
expects the market to reach buildout in 2003 with 1,800 stores.
Leading chains include Wal-Mart, Kmart, Target and Meyer.
o Despite trends towards consolidation and downsizing, retailers say
they will continue aggressive expansions over the next four years.
These results were tabulated from Shopping Center World's 16th
Annual Retailer's Expansion Plans Survey. Retailers say they will
open 28,000 stores between 1997 and the end of 2000. Among the 148
responding retailers, 83 percent planned their expansions in
shopping centers led by regional malls.
o Regional Malls 72%
o Power Centers 50%
o Neighborhood Centers 46%
o Community Centers 34%
o Outlet Centers 20%
o Off-Price Centers 17%
37 percent cited the southeastern part of the country as the hottest
growth area.
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. The five outlet center REITs operated
132 centers as of mid-year 1996. By the year 2000 they expect to
operate nearly 175 units. Overall occupancy in 1995 (1996 not
available at this writing) slipped to 93.3 percent from 95.5 percent
in 1994. 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 .2 percent to $212 per
square foot for the four quarters ended September 30, 1996.
================================================================================
-22-
<PAGE>
National Retail Market Overview
================================================================================
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 other
superstores categories such as in the office products segment where
Office Depot and Staples have announced a merger.
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. Many of the nation's
largest media and entertainment companies are getting into the
retail business in some fashion. AMC Entertainment has formed a
separate subsidiary, Centertainment, Inc., to work with developers
to create entertainment based retail projects.
o Super-regional value-oriented mega malls such as The Mills concept
are expected to be one area of growth over the next several years.
This hybrid concept incorporates the diverse mix of super-regional
malls with the value-oriented aspects of factory outlets, category
killers, off-price merchants and retailer clearance outlets under
one roof. In addition, they add an entertainment component that is
designed to extend the stay of the patron from approximately one to
one and one-half hours in a traditional mall format to three to five
hours. These malls are at least 1.0 million square feet although the
Mills design averages 1.5 million square feet. They can contain
between 7 and 20 anchors and have trade areas stretching upwards to
100 miles.
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
================================================================================
-23-
<PAGE>
National Retail Market Overview
================================================================================
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 - 1997 that their respondents give retail
investments generally poor performance forecasts in their latest survey due to
the protracted merchant shakeout which will continue into 1997 and the general
overbuilding which has had a fundamental change on the industry. While dominant,
Class A malls are still considered to be one of the best real estate investments
anywhere, only 20 percent of the respondents recommended buying malls.
Among the nine real estate categories tracked by Emerging Trends, each had
estimated 1996 and forecasted 1997 value gains except for regional malls and
power centers. Community centers showed a very modest (less than 1 percent)
increase. One of the most daunting tasks facing owners is the competition for
good tenants and the huge capital outlays needed to keep the properties
functional and up-to-date. Emerging Trends views REITs as being buyers but the
capital needs of many of these centers will likely hit FF0 hard over the next
twelve to eighteen months. New REIT IPOs will be limited but consolidations and
follow-up offerings will increase as REIT companies seek to grow capitalizations
for greater operating efficiencies.
Power centers were hit particularly hard in the latest survey. By some
estimates this industry niche now accounts for 25 percent of all retail sales
and not only have they hurt regional malls but their overbuilding has
cannibalized each other. Power centers are now shown to be one of the riskiest
investment classes with only 4 percent of the respondents saying its a good time
to buy. For 1997, the interviewees see community and strip centers as offering
the best investment opportunity in the retail sector.
The following chart summarizes the results of their current survey.
================================================================================
Retail Property Rankings and Forecasts
================================================================================
Property Type Investment Potential Predicted Value Gains
--------------------- 1996 ----------------------
Rating(1) Rating(2) Rent Change 1 Yr. 5 Yrs. 10 Yrs.
================================================================================
Regional Malls 4.9 8th -0.1% -1.7% 12.7% 26.6%
- --------------------------------------------------------------------------------
Power Centers 4.1 9th 0.1% -2.3% 9.1% 19.7%
- --------------------------------------------------------------------------------
Community Centers 5.3 6th (tie) 1.6% 0.3% 12.5% 26.1%
================================================================================
(1) Scale of 1 to 10
(2) Based on 9 property types
Source: Emerging Trends in Real Estate - 1997
================================================================================
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 the fourth quarter of 1996 shows that the retail
index posted a positive 5.08 percent increase in total return for the year.
Increased competition in the retail sector from new and
================================================================================
-24-
<PAGE>
National Retail Market Overview
================================================================================
expanding formats and changing locational references has caused the retail index
to trail all other property types. In fact, this was the fifth consecutive
quarter in which retail properties posted the lowest return among the five
NCREIF property types. Overall, it appears also that value write-downs have
continued. The -1.73 percent in negative appreciation for the retail subindex
marked the continuation of this trend. Continuing concerns about overbuilding
competition and capital requirements are cited as the primary factors for the
pessimistic performance.
================================================================================
Retail Property Returns
NCREIF Index
Fourth Quarter 1996 (%)
================================================================================
Period Income Appreciation Total Change in CPI *
4th Qtr.1996 2.09 -1.73 .36 .51
One Year 8.46 -3.18 5.08 3.32
Three Years 8.26 -2.82 5.27 2.85
Five Years 7.88 -3.94 3.71 2.84
Ten Years 7.26 -1.49 5.69 3.68
================================================================================
* Annualized year ending 12/31
================================================================================
Source: Real Estate Performance Report
National Council of Real Estate Investment Fiduciaries
================================================================================
Retail's total return of 5.08 percent for 1996 was substantially behind
the other investment categories including Apartment (11.10%), Office (12.74%),
R&D (17.64%), and Warehouse (12.69%). Among the different retail categories,
neighborhood centers posted the best total performance, while regional malls
were laggards.
================================================================================
Retail Segment Performance
================================================================================
Category Income Appreciation Total
================================================================================
Neighborhood 8.85% - .63% 8.17%
- --------------------------------------------------------------------------------
Community 9.03% -2.10% 6.79%
- --------------------------------------------------------------------------------
Regional Malls 7.74% -3.98% 3.53%
- --------------------------------------------------------------------------------
Super Regional Malls 8.04% -3.29% 4.55%
================================================================================
From the above, it is clear that value declines were still in evidence
during 1996.
Private investor underwriting has become more conservative with respect to
vacancy allowances, growth rates (rent, sales) and occupancy cost tolerance
levels. The reduced spread between cash returns and internal rate of returns is
evidence that buyers seek a higher proportion of their expected return from
income rather than from appreciation.
The Cushman & Wakefield Investor Survey also confirms trends that
capitalization rates for most retail categories have risen. Regional malls have
been the most affected. This is partly due to the fact that over 75 malls are
currently available for sale.
================================================================================
-25-
<PAGE>
National Retail Market Overview
================================================================================
Real Estate Investment Trust Market (REITs)
To date, the impact of REITs on the retail investrnent 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.
Currently, there are in excess of 300 REITs in the United States, more
than three-quarters of 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 December, equity REITs posted
nearly a 10 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 38.8 percent total return. This was followed by
self-storage (34.9%), hotels (30.8%), triple-net lease (31.6%), and
industrial/self-storage (27.9%). One equity REIT sector was in the red - outlet
centers (-2.80%).
Retail REITs
As of December 31, 1996, there were a total of 43 REITs specializing in
retail, making up sizable percentage of the securities in the REIT market.
Forty-two of these 43 REIT companies are Equity REITs. 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, displays a summary performance of
the three composite categories.
================================================================================
-26-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Table A - Retail REIT Performance
As of December 31, 1996
- --------------------------------------------------------------------------------
Y-T-D Total Dividend No. of REIT Market
Return Yield Securities Capitalization*
================================================================================
ALL REITs 39.96% 6.59% 43 $20,190.7
Strip Centers 32.88% 6.50% 26 $11,145.8
Regional Malls 44.63% 6.60% 10 $7,349.0
Outlet Centers 3.78% 9.22% 6 $1,300.2
- --------------------------------------------------------------------------------
* Number reported in thousands.
Source: Realty Stock Review
- --------------------------------------------------------------------------------
As can be seen, the 43 REIT securities have a market capitalization of
approximately $20.2 billion. Total returns of nearly 40.0 percent were well
ahead of the stock market as a whole and also exceeded the 35.8 percent return
for all REITs. Regional malls did exceptionally well with nearly a 45 percent
return followed by strip centers. Outlet centers, which were posting negative
returns through the third quarter, recovered to show a 3.8 percent return for
the year. Accordingly, dividend yields for this group are 9.22 percent, some 266
basis points above the composite average return.
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
nine 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.
The ten 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. Through October 31, 1996, the regional mall
segment has outperformed its shopping and outlet center counterparts with 23.43
percent total return.
================================================================================
-27-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Table B - REGIONAL MALL REIT ANALYSIS
Cushman & Wakefield, Inc.
====================================================================================================================================
REIT PORTFOLIO CBL CWN GGP JPR MAC MLS RSE SPG TCO UBR
CBL & Crown General JP The The Rouse Simon Taubman Urban
Assoc. American Growth Realty Macerich Mills Company Property Centers Shopping
Inc. Company Corp. Group Centers
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Company Overview
- ----------------
No. of Retail Centers l05 25 67 n/a 20 18 69 177 19 12
No. of Regional Malls 16 25 66 10 17 4 38 113 19 8
Mall as % of Portfolio 71% 99% 98% 71% 97% 82% 75% 77% 100% 95%
Avg. Total GLA/Center* 655 545 699 493 735 1,500 873 759 1,102 1,040
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------
Mall Operations
- ---------------
Reporting Year 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995
Avg. Sales PSF of Mall Shop GLA $232 $206 $235 $208 $290 $297 $289 $276 $352 $344
Avg. Rent on Recent Leases $17.41 $17.96 $21.80 $21.45 $23.00 $25.00 $24.90 $21.92 $41.27 $34.64
Minimum Rent/Sales Ratio 7.5% 8.7% 9.3% 10.3% 7.9% 8.4% 8.6% 7.9% 11.7% 10.1%
Total Occupancy Cost/Sales Ratio 12.3% 11.1% 12.1% 10.2% 11.3% 11.6% 12.2% 11.0% 15.1% 11.4%
Mall Shop Occupancy Level 88.2% 82.0% 86.2% 86.5% 92.2% 90.0% 95.2% 86.4% 88.0% 92.6%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------
Share Prices
- ------------
IPO Date 10/27/93 8/9/93 4/8/93 n/a 3/9/94 4/94 1966 12/26/93 11/18/92 10/6/93
IPO Price $19.50 $17.25 $22.00 n/a $19.00 $23.50 n/a $22.25 $11.00 $23.50
Current Price (11/29/96) $24.50 $7.63 $27.75 $19.50 $23.25 $20.75 $26.50 $27.38 $11.63 $26.50
52 Week High $25.00 $8.75 $28.38 $19.75 $24.00 $22.50 $27.38 $27.88 $12.50 $27.88
52-Week Low $19.50 $6.63 $18.50 $15.13 $19.00 $16.50 $18.25 $21.13 $9.25 $20.13
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------
Capitalization & Yields
- -----------------------
Market Capitalization** $1,266 $842 $2,744 $661 $1,328 $1,481 $3,936 $5,900 $3,127 $1,072
Annual Dividend $1.68 $0.80 $1.72 $1.92 $1.76 $1.89 $0.88 $1.97 $0.88 $1.98
Dividend Yield (11/29/96) 6.86% 10.48% 6.20% 9.85% 7.57% 9.11% 3.32% 7.20% 7.57% 7.47%
FF0 1996*** $2.03 $1.29 $1.95 $1.83 $1.96 $1.96 $2.42 $2.34 $0.98 $2.41
FFO Yield (11/29/96) 8.29% 16.91% 7.03% 9.38% 8.43% 9.45% 9.13% 8.55% 8.43% 9.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Salomon Bothers, Realty Stock Review; Annual Reports and Green Street Advisors, Inc.
* Numbers in thousands (000) includes malls 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>
================================================================================
-28-
<PAGE>
National Retail Market Overview
================================================================================
Shopping Center REITs
Shopping center REITs comprise the largest sector of the retail REIT
market accounting for 26 out of the total 43 securities. General characteristics
of seven of the largest shopping center REITs are summarized on Table C. The
public equity market capitalization of the seven companies totaled $6.1 billion
as of October 31, 1996. The two largest, Kimco Realty Corp. and New Plan Realty
Trust have a market capitalization equal to approximately 34.4 percent of the
group total.
Year-to-date returns have been 16.19 percent for all shopping center REITs
including a 7.36 percent dividend yield.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Table C-SHOPPING CENTER REIT ANALYSIS
Cushman & Wakefield Inc.
===================================================================================================================================
REIT PORTFOLIO DDR FRT GRT JPR KIM NPR VNO WRI
Devel. Federal Glimcher JP Kimco New Plan Vornado Weingarten
Diversified Realty Inv Realty Realty Inc Realty Corp. Realty Realty Realty
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Company Overview
- ----------------
Total Properties l11 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
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------
Mall Operations
- ---------------
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% 94.0% 92.0%
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------
Share Prices
- ------------
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 $25.75 $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
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------
Capitalization & Yield
- ----------------------
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 (12/15/95) 8.03% 7.01% 10.82% 8.14% 5.11% 6.43% 6.20% 6.64%
FF0 1995*** $2.65 $1.78 $2.25 $1.83 $3.15 $1.44 $2.67 $2.80
FF0 Yield (12/15/95) 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>
================================================================================
-29-
<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.
================================================================================
-30-
<PAGE>
ENDS DEMOGRAPHIC REPORTS
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-01, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-7O & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POP_80: TOTAL 31,096 101,081 325,035
POP_9O: TOTAL 36,033 113,238 349,999
POP_96: TOTAL (EST.) 37,371 116,688 357,197
POP_01: TOTAL (PROJ.) 38,535 119,788 366,364
HH_80: TOTAL 10,618 36,909 119,911
HH_90: TOTAL 14,042 44,029 134,953
HH_96: TOTAL (EST.) 14,964 46,194 140,245
HH_O1: TOTAL (PROJ.) 15,599 47,608 143,606
INC_80: PER CAPITA (EST.) $8,760 $8,472 $7,826
INC_90: PER CAPITA $15,219 $14,872 $13,256
INC_96: PER CAPITA (EST.) $20,292 $21,092 $18,784
INC_01: PER CAPITA (PROJ.) $25,232 $28,425 $24,867
HH_80_BY INCOME_79: MEDIAN $23,933 $21,052 $18,967
HH_90_BY INCOME_89: MEDIAN $36,248 $33,085 $29,813
HH_96_BY INCOME: MEDIAN (EST.) $42,091 $39,262 $35,124
HH_01_BY INCOME: MEDIAN $49,709 $47,696 $43,240
HH-80_BY INCOME_79: AVERAGE $25,655 $23,201 $21,214
HH_90_BY INCOME_89: AVERAGE $39,038 $38,094 $34,258
HH_96_BY INCOME: AVERAGE (EST.) $50,231 $52,991 $47,375
HH_01_BY INCOME: AVERAGE $61,732 $71,125 $62,821
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-70 & US RTE 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 38,535 119,788 366,364
1996 ESTIMATE 37,371 116,688 357,197
1990 CENSUS 36,033 113,238 349,999
1980 CENSUS 31,096 101,081 325,035
GROWTH 1980 - 1990 15.88% 12.03% 7.68%
HOUSEHOLDS
2001 PROJECTION 15,599 47,608 143,606
1996 ESTIMATE 14,964 46,194 140,245
1990 CENSUS 14,042 44,029 134,953
1980 CENSUS 10,618 36,909 119,911
GROWTH 1980 - 1990 32.24% 19.29% 12.54%
1996 ESTIMATED POPULATION BY RACE 37,371 116,688 357,197
WHITE 95.72% 94.41% 82.71%
BLACK 1.83% 2.86% 14.38%
ASIAN & PACIFIC ISLANDER 1.12% 1.22% 1.06%
OTHER RACES 1.32% 1.51% 1.84%
1996 ESTIMATED POPULATION 37,371 116,688 357,197
HISPANIC ORIGIN 2.61% 2.59% 2.94%
OCCUPIED UNITS 14,042 44,029 134,953
OWNER OCCUPIED 71.68% 69.71% 67.80%
RENTER OCCUPIED 28.32% 30.29% 32.20%
1990 AVERAGE PERSONS PER HH 2.55 2.56 2.57
1996 EST. HOUSEHOLDS BY INCOME 14,964 46,194 140,245
$150,000 OR MORE 1.50% 3.55% 2.54%
$100,000 TO $149,999 5.27% 4.51% 3.89%
$ 75,000 TO $ 99,999 7.73% 7.05% 6.10%
$ 50,000 TO $ 74,999 24.51% 21.10% 19.43%
$ 35,000 TO $ 49,999 20.84% 19.27% 18.18%
$ 25,000 TO $ 34,999 13.26% 13.17% 14.04%
$ 15,000 TO $ 24,999 13.37% 14.20% 15.63%
$ 5,000 TO $ 15,000 11.10% 14.11% 15.82%
UNDER $ 5,000 2.43% 3.03% 4.37%
1996 EST. AVERAGE HOUSEHOLD INCOME $50,231 $52,991 $47,375
1996 EST. MEDIAN HOUSEHOLD INCOME $42,091 $39,262 $35,124
1996 EST. PER CAPITA INCOME $20,292 $21,092 $18,784
<PAGE>
Wed Jun 25, 1997 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC: 1-70 & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 37,371 116,688 357,197
MALE 47.84% 47.72% 47.58%
FEMALE 52.16% 52.28% 52.42%
MARITAL STATUS 28,823 89,047 271,629
SINGLE MALE 10.72% 10.67% 11.52%
SINGLE FEMALE 9.55% 9.31% 10.33%
MARRIED 63.06% 61.80% 57.35%
PREVIOUSLY MARRIED MALE 5.08% 5.34% 6.37%
PREVIOUSLY MARRIED FEMALE 11.58% 12.88% 14.43%
HOUSEHOLDS WITH CHILDREN 4,942 16,080 50,526
MARRIED COUPLE FAMILY 80.61% 76.63% 70.74%
OTHER FAMILY-MALE HEAD 3.69% 4.20% 4.89%
OTHER FAMILY-FEMALE HEAD 14.70% 17.99% 23.12%
NON FAMILY 1.00% 1.19% 1.25%
1996 ESTIMATED POPULATION BY AGE 37,371 116,688 357,197
UNDER 5 YEARS 5.93% 6.66% 7.52%
5 TO 9 YEARS 6.18% 6.89% 7.32%
10 TO 14 YEARS 7.11% 7.43% 7.45%
15 TO 17 YEARS 4.38% 4.54% 4.46%
18 TO 20 YEARS 3.22% 3.18% 3.20%
21 TO 24 YEARS 5.44% 4.85% 4.86%
25 TO 29 YEARS 7.38% 7.21% 7.70%
30 TO 34 YEARS 7.04% 7.15% 7.64%
35 TO 39 YEARS 8.23% 8.30% 8.39%
40 TO 49 YEARS 17.28% 16.58% 14.89%
50 TO 59 YEARS 11.88% 10.09% 9.31%
60 TO 64 YEARS 4.31% 4.32% 4.13%
65 TO 69 YEARS 4.13% 4.43% 4.27%
70 TO 74 YEARS 2.90% 3.15% 3.04%
75 + YEARS 4.58% 5.22% 5.80%
MEDIAN AGE 37.01 36.26 34.90
AVERAGE AGE 37.16 36.76 36.15
<PAGE>
Wed Jun 25, 1997 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-70 & RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
1996 ESTIMATED FEMALE POP. BY AGE 19,492 61,005 187,232
UNDER 5 YEARS 5.41% 6.23% 6.96%
5 TO 9 YEARS 5.85% 6.41% 6.80%
10 TO 14 YEARS 6.94% 7.23% 7.15%
15 TO 17 YEARS 4.21% 4.37% 4.24%
18 TO 20 YEARS 3.11% 3.03% 3.04%
21 TO 24 YEARS 5.38% 4.76% 4.84%
25 TO 29 YEARS 7.38% 7.21% 7.72%
30 TO 34 YEARS 6.73% 6.95% 7.43%
35 TO 39 YEARS 8.23% 8.36% 8.31%
40 TO 49 YEARS 17.73% 16.70% 14.82%
50 TO 59 YEARS 11.63% 10.02% 9.42%
60 TO 64 YEARS 4.37% 4.45% 4.26%
65 TO 69 YEARS 4.08% 4.56% 4.39%
70 TO 74 YEARS 3.24% 3.45% 3.33%
75 + YEARS 5.71% 6.27% 7.29%
FEMALE MEDIAN AGE 38.03 37.28 36.10
FEMALE AVERAGE AGE 38.22 37.86 37.55
POPULATION BY HOUSEHOLD TYPE 36,033 113,238 349,999
FAMILY HOUSEHOLDS 87.09% 87.08% 85.98%
NON-FAMILY HOUSEHOLDS 12.11% 12.33% 13.02%
GROUP QUARTERS 0.80% 0.59% 1.00%
HOUSEHOLDS BY TYPE 14,042 44,029 134,953
SINGLE MALE 8.03% 8.05% 9.12%
SINGLE FEMALE 14.13% 14.86% 15.45%
MARRIED COUPLE 63.04% 60.78% 55.70%
OTHER FAMILY-MALE HEAD 2.39% 2.58% 3.16%
OTHER FAMILY-FEMALE HEAD 8.34% 9.80% 12.48%
NON FAMILY-MALE HEAD 2.52% 2.45% 2.51%
NON FAMILY-FEMALE HEAD 1.56% 1.48% 1.58%
POPULATION BY URBAN VS. RURAL 36,067 113,045 349,733
URBAN 99.36% 99.44% 97.05%
RURAL 0.64% 0.56% 2.95%
<PAGE>
Wed Jun 25, 1997 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC 1-70 & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BAS 14,889 46,315 142,959
WORKING WITH CHILD 0 - 5 5.60% 5.80% 5.59%
NOT WORKING WITH CHILD 0 - 5 0.25% 0.39% 0.51%
NOT IN LABOR FORCE WITH CHILD 0 - 1.78% 2.19% 2.60%
WORKING WITH CHILD 6 - 17 14.59% 13.80% 13.45%
NOT WORKING WITH CHILD 6 - 17 0.35% 0.40% 0.59%
NOT IN LAB. FORCE WITH CHILD 6 - 3.74% 3.71% 3.30%
WORKING WITH CHILD 0 - 5 & 6 - 18 3.86% 4.04% 4.21%
NOT WORKING WITH CHILD 0-5 & 6-18 0.15% 0.28% 0.37%
NOT IN LAB. FORCE W/CHILD 0-5 &6- 1.39% 2.26% 2.35%
WORKING WITH NO CHILDREN 39.50% 35.61% 34.17%
NOT WORKING WITH NO CHILDREN 1.47% 1.60% 1.78%
NOT IN LAB. FORCE WITH NO CHILD. 27.32% 29.93% 31.07%
HH BY AGE BY POVERTY STATUS 14,031 44,040 134,554
ABOVE POVERTY UNDER AGE 65 79.67% 74.12% 71.02%
ABOVE POVERTY AGE 65 + 15.47% 18.25% 18.60%
BELOW POVERTY UNDER AGE 65 3.23% 5.21% 7.36%
BELOW POVERTY AGE 65 + 1.63% 2.42% 3.02%
POPULATION 16+ BY EMPLOYMENT STATUS 28,325 87,324 266,351
EMPLOYED IN ARMED FORCES 0.20% 0.12% 0.13%
EMPLOYED CIVILIANS 69.55% 66.30% 63.89%
UNEMPLOYED CIVILIANS 2.99% 3.37% 4.12%
NOT IN LABOR FORCE 27.27% 30.22% 31.86%
POPULATION 16+ BY OCCUPATION 19,700 57,894 170,174
EXECUTIVE AND MANAGERIAL 13.64% 12.79% 11.32%
PROFESSIONAL SPECIALTY 13.36% 13.26% 11.75%
TECHNICAL SUPPORT 4.05% 3.39% 3.74%
SALES 13.00% 12.83% 11.84%
ADMINISTRATIVE SUPPORT 21.38% 20.90% 21.02%
SERVICE: PRIVATE HOUSEHOLD 0.15% 0.24% 0.30%
SERVICE: PROTECTIVE 1.52% 1.55% 1.81%
SERVICE: OTHER 6.89% 8.86% 10.61%
FARMING FORESTRY & FISHING 0.52% 0.67% 0.74%
PRECISION PRODUCTION & CRAFT 11.45% 11.10% 11.36%
MACHINE OPERATOR 5.98% 6.18% 6.50%
TRANS. AND MATERIAL MOVING 4.57% 4.57% 4.74%
LABORERS 3.48% 3.66% 4.27%
<PAGE>
Wed Jun 25, 1997 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-70 & US RTE. 29I COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 10,520 32,414 96,628
NO WORKERS 9.94% 11.27% 12.12%
ONE WORKER 23.79% 25.74% 27.11%
TWO WORKERS 51.44% 49.64% 47.85%
THREE + WORKERS 14.83% 13.36% 12.92%
HISPANIC POPULATION BY TYPE 36,033 113,238 349,999
NOT HISPANIC 98.03% 98.16% 97.78%
MEXICAN 1.51% 1.38% 1.77%
PUERTO RICAN 0.04% 0.04% 0.06%
CUBAN 0.02% 0.02% 0.03%
OTHER HISPANIC 0.40% 0.39% 0.36%
1996 HISPANICS BY RACE: BASE 976 3,027 10,496
WHITE 60.27% 55.24% 46.31%
BLACK 0.65% 1.23% 2.50%
ASIAN 1.36% 1.93% 1.78%
OTHER 37.72% 41.60% 49.41%
POPULATION BY TRANSPORTATION TO WORK 19,599 57,229 167,840
DRIVE ALONE 84.31% 82.37% 80.00%
CAR POOL 12.15% 12.85% 13.38%
PUBLIC TRANSPORTATION 0.49% 1.08% 2.41%
DRIVE MOTORCYCLE 0.05% 0.07% 0.10%
WALKED ONLY 0.56% 0.86% 1.19%
OTHER MEANS 0.34% 0.62% 0.68%
WORKED AT HOME 2.11% 2.15% 2.25%
POPULATION BY TRAVEL TIME TO WORK 19,599 57,229 167,840
UNDER 10 MINUTES =/ WORK AT HOME 12.63% 12.98% 13.11%
10 TO 29 MINUTES 53.84% 52.75% 53.06%
30 TO 59 MINUTES 31.27% 31.88% 31.08%
60 TO 89 MINUTES 1.15% 1.47% 1.72%
90+ MINUTES 1.12% 0.93% 1.02%
AVERAGE TRAVEL TIME IN MINUTES 22.31 22.43 22.49
HOUSEHOLDS BY NO. OF VEHICLES 14,038 43,947 134,809
NO VEHICLES 3.70% 5.40% 8.62%
1 VEHICLE 29.58% 31.85% 33.86%
2 VEHICLES 46.23% 43.95% 40.62%
3+ VEHICLES 20.49% 18.80% 16.89%
ESTIMATED TOTAL VEHICLES 26,335 79,064 228,056
<PAGE>
Wed Jun 25, 1997 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-7O & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 23,924 73,862 225,204
ELEMENTARY (0-8) 3.89% 5.22% 6.48%
SOME HIGH SCHOOL (9-11) 10.68% 11.88% 14.07%
HIGH SCHOOL GRADUATE (12) 36.79% 36.54% 36.47%
SOME COLLEGE (13-15) 22.90% 21.37% 21.29%
ASSOCIATES DEGREE ONLY 5.19% 5.34% 5.27%
BACHELORS DEGREE ONLY 13.90% 13.20% 11.34%
GRADUATE DEGREE 6.65% 6.45% 5.08%
POPULATION ENROLLED IN SCHOOL 8,825 27,662 85,986
PUBLIC PRE-PRIMARY 4.44% 5.67% 5.09%
PRIVATE PRE-PRIMARY 3.01% 3.84% 3.31%
PUBLIC ELEM/HIGH 61.99% 62.12% 62.52%
PRIVATE ELEM/HIGH 5.04% 5.44% 5.99%
ENROLLED IN COLLEGE 25.53% 22.93% 23.08%
HOUSING UNITS BY OCCUPANCY STATUS 14,689 46,496 145,249
OCCUPIED 95.60% 94.69% 92.91%
VACANT 4.40% 5.31% 7.09%
VACANT UNITS 647 2,467 10,296
FOR RENT 61.39% 53.00% 46.67%
FOR SALE ONLY 20.70% 20.16% 17.90%
SEASONAL 1.45% 2.35% 2.65%
OTHER 16.47% 24.49% 32.78%
OWNER OCCUPIED PROPERTY VALUES 8,748 27,588 82,192
UNDER $25,000 0.97% 2.20% 8.55%
$25,000 TO $49,999 9.34% 20.41% 27.32%
$50,000 TO $74,999 47.77% 41.16% 35.93%
$75,000 TO $99,999 26.79% 20.03% 17.12%
$100,000 TO $149,999 11.13% 10.45% 7.56%
$150,000 TO $199,999 2.59% 3.67% 2.36%
$200,000 TO $299,999 1.18% 1.67% 0.92%
$300,000 TO $399,999 0.14% 0.23% 0.14%
. $400,000 TO $499,999 0.05% 0.11% 0.05%
$500,000 + 0.03% 0.08% 0.05%
MEDIAN PROPERTY VALUE $73,690 $70,920 $61,608
TOTAL RENTAL UNITS 3,837 12,789 41,281
MEDIAN RENT $382 $345 $332
<PAGE>
Wed Jun 25, 1997 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-70 & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 14,042 44,029 134,953
1 PERSON UNITS 22.15% 22.92% 24.56%
2 PERSON UNITS 35.48% 34.64% 32.87%
3 PERSON UNITS 18.66% 18.15% 17.84%
4 PERSON UNITS 16.20% 15.99% 15.40%
5 PERSON UNITS 5.38% 5.87% 6.26%
6 PERSON UNITS 1.45% 1.65% 1.99%
7 + UNITS 0.68% 0.77% 1.06%
YEAR ROUND UNITS IN STRUCTURE 14,689 46,496 145,249
SINGLE UNITS DETACHED 68.44% 71.00% 72.47%
SINGLE UNITS ATTACHED 3.54% 4.60% 4.27%
DOUBLE UNITS 2.12% 3.89% 3.81%
3 TO 9 UNITS 7.28% 8.64% 8.19%
10 TO 19 UNITS 5.92% 4.49% 4.58%
20 TO 49 UNITS 4.30% 2.27% 2.26%
50 + UNITS 2.71% 2.40% 1.86%
MOBILE HOME OR TRAILER 4.89% 2.04% 1.82%
ALL OTHER 0.81% 0.66% 0.75%
SINGLE/MULTIPLE UNIT RATIO 3.23 3.48 3.71
HOUSING UNITS BY YEAR BUILT 14,038 43,947 134,809
BUILT 1989 TO MARCH 1990 0.79% 1.34% 1.46%
BUILT 1985 TO 1988 17.27% 11.76% 9.29%
BUILT 1980 TO 1984 9.99% 7.54% 6.76%
BUILT 1970 TO 1979 28.28% 24.14% 20.60%
BUILT 1960 TO 1969 29.55% 23.34% 21.39%
BUILT 1950 TO 1959 9.45% 17.56% 18.82%
BUILT 1940 TO 1949 2.24% 5.87% 7.96%
BUILT 1939 OR EARLIER 2.43% 8.45% 13.72%
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(RETAIL TRADE POTENTIAL REPORT - CURRENT YEAR SALES BY STORE TYPE)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
INDEPENDENCE COMMONS, INDEPENDENCE, MO
NEC I-70 & US RTE. 291 COORD: 39:02.77 94:21.73
- --------------------------------------------------------------------------------
3.00 MILE 5.00 MILE 10.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
TOTAL RETAIL SALES $363 $1,115 $3,361
APPAREL & ACCESSORY STORES $15 $48 $142
AUTOMOTIVE DEALERS $88 $270 $812
AUTOMOTIVE & HOME SUPPLY STORES $5 $15 $47
DRUG & PROPRIETARY STORES $12 $37 $113
EATING & DRINKING PLACES $44 $136 $412
FOOD STORES $57 $176 $532
FURNITURE & HOME FURNISHINGS STORES $7 $22 $65
HOME APPLIANCE, RADIO, & T.V. STORES $11 $33 $100
GASOLINE SERVICE STATIONS $23 $71 $216
GENERAL MERCHANDISE $57 $174 $525
DEPARTMENT STORES $39 $121 $365
(INCLUDING LEASED DEPTS.)
HARDWARE, LUMBER & GARDEN STORES $15 $46 $138
($'S IN MILLIONS)
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-01, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
CITY OF INDEPENDENCE, MO
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP 80: TOTAL 111,424
POP_90: TOTAL 112,301
POP_96: TOTAL (EST.) 113,043
POP_O1: TOTAL (PROJ.) 115,379
HH_80: TOTAL 42,293
HH_90: TOTAL 45,313
HH_96: TOTAL (EST.) 46,691
HH_01: TOTAL (PROJ.) 47,576
INC_80: PER CAPITA (EST.) $7,990
INC_90: PER CAPITA $13,208
INC_96: PER CAPITA (EST.) $18,639
INC_01: PER CAPITA (PROJ.) $24,829
HH_80_BY INCOME_79: MEDIAN $19,109
HH_90_BY INCOME_89: MEDIAN $28,690
HH_96_BY INCOME: MEDIAN (EST.) $33,879
HH_01_BY INCOME: MEDIAN $41,521
HH_80_BY INCOME_79: AVERAGE $21,049
HH_90_BY INCOME_89: AVERAGE $32,451
HH_96_BY INCOME: AVERAGE (EST.) $44,719
HH_01_BY INCOME: AVERAGE $59,653
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
CITY OF INDEPENDENCE, MO
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 115,379
1996 ESTIMATE 113,043
1990 CENSUS 112,301
1980 CENSUS 111,424
GROWTH 1980 - 1990 0.79%
HOUSEHOLDS
2001 PROJECTION 47,576
1996 ESTIMATE 46,691
1990 CENSUS 45,313
1980 CENSUS 42,293
GROWTH 1980 - 1990 7.14%
1996 ESTIMATED POPULATION BY RACE 113,043
WHITE 94.98%
BLACK 2.00%
ASIAN & PACIFIC ISLANDER 1.23%
OTHER RACES 1.79%
1996 ESTIMATED POPULATION 113,043
HISPANIC ORIGIN 2.83%
OCCUPIED UNITS 45,313
OWNER OCCUPIED 67.11%
RENTER OCCUPIED 32.89%
1990 AVERAGE PERSON PER HH 2.46
1996 ESTIMATED HH BY INCOME 46,691
$150,000 + 2.09%
$100,000 TO $149,999 3.52%
$ 75,000 TO $ 99,999 4.91%
$ 50,000 TO $ 74,999 18.47%
$ 35,000 TO $ 49,999 19.38%
$ 25,000 TO $ 34,999 14.56%
$ 15,000 TO $ 24,999 16.40%
$ 5,000 TO $ 14,999 17.21%
UNDER $ 5,000 3.46%
1996 EST. AVERAGE HH INCOME $44,719
1996 EST. MEDIAN HH INCOME $33,879
1996 EST. PER CAPITA INCOME $18,639
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-01, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
JACKSON COUNTY, MO
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 629,266
POP_90: TOTAL 633,232
POP_96: TOTAL (EST.) 637,090
POP_01: TOTAL (PROJ.) 649,773
HH_80: TOTAL 242,085
HH_90: TOTAL 252,582
HH_96: TOTAL (EST.) 259,027
HH_01: TOTAL (PROJ.) 263,158
INC_80: PER CAPITA (EST.) $7,610
INC_90: PER CAPITA $13,712
INC_96: PER CAPITA (EST.) $20,022
INC_01: PER CAPITA (PROJ.) $27,021
HH_80_BY INCOME_79: MEDIAN $17,114
HH_90 BY INCOME_89: MEDIAN $28,211
HH_96_BY INCOME: MEDIAN (EST.) $33,732
HH_01_BY INCOME: MEDIAN $42,399
HH_80_BY INCOME_79: AVERAGE $19,658
HH_90_BY INCOME_89: AVERAGE $34,129
HH_96_BY INCOME: AVERAGE (EST.) $48,478
HH_01_BY INCOME: AVERAGE $65,513
<PAGE>
Wed Jun 25, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6510
PREPARED FOR
CUSHMAN & WAKEFIELD, INC
JACKSON COUNTY, MO
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 649,773
1996 ESTIMATE 637,090
1990 CENSUS 633,232
1980 CENSUS 629,266
GROWTH 1980 - 1990 0.63%
HOUSEHOLDS
2001 PROJECTION 263,158
1996 ESTIMATE 259,027
1990 CENSUS 252,582
1980 CENSUS 242,085
GROWTH 1980 - 1990 4.34%
1996 ESTIMATED POPULATION BY RACE 637,090
WHITE 73.07%
BLACK 23.40%
ASIAN & PACIFIC ISLANDER 1.23%
OTHER RACES 2.31%
1996 ESTIMATED POPULATION 637,090
HISPANIC ORIGIN 3.57%
OCCUPIED UNITS 252,582
OWNER OCCUPIED 61.31%
RENTER OCCUPIED 38.69%
1990 AVERAGE PERSON PER HH 2.46
1996 ESTIMATED HH BY INCOME 259,027
$150,000 + 3.26%
$100,000 TO $149,999 4.11%
$ 75,000 TO $ 99,999 5.81%
$ 50,000 TO $ 74,999 18.20%
$ 35,000 TO $ 49,999 16.86%
$ 25,000 TO $ 34,999 13.88%
$ 15,000 TO $ 24,999 16.04%
$ 5,000 TO $ 14,999 16.18%
UNDER $ 5,000 5.66%
1996 EST. AVERAGE HH INCOME $48,478
1996 EST. MEDIAN HH INCOME $33,732
1996 EST. PER CAPITA INCOME $20,022
<PAGE>
SPECIALTY RETAIL AND THEATER LEASE COMPARABLES
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SPECIALTY RETAIL LEASES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased Annual Rent/
No. Name/Location Date Tenant Term Area Rent Sq/Ft Steps
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Barry Woods Crossing Fall '97 Office Max 15 yrs. 23,100 $248,325 $10.75 None
I-29 and Barry Road
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
2 Barry Woods Crossing Fall '97 Bed, Bath & Beyond 15 yrs. 35,000 $288,750 $8.25 $9.10/sf (11-15)
I-29 and Barry Road
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
3 Barry Woods Crossing Fall '97 Old Navy 10 yrs. 16,533 $196,412 $11.88 $12.82/sf (6-10)
I-29 and Barry Road
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
4 Barry Woods Crossing Fall '97 Barnes & Noble 15 yrs. 25,000 $325,000 $13.00 $13.91/sf (6-10)
I-29 and Barry Road $15.30/sf (11-15)
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
5 Barry Woods Crossing Fall '97 Stein Mart 15 yrs. 34,022 $220,122 $6.47 $6.80/sf (6-10)
I-29 and Barry Road $7.15/sf (11-15)
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
6 Off-Price Super-Regional Mall Nov-97 Saks-Off Fifth 15 yrs. 34,589 $242,123 $7.00 None
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
7 Off-Price Super-Regional Mall Nov-97 Linens 'N Things 10 yrs. 40,137 $441,507 $11.00 $12.00/sf (6-10)
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
8 Off-Price Super-Regional Mall Nov-97 Burlington Coat 15 yrs. 80,359 $401,795 $5.00 $5.25/sf (6-10)
Western United States + opt. $5.50/sf (11-15)
- ------------------------------------------------------------------------------------------------------------------------------------
9 Off-Price Super-Regional Mall Nov-97 Oshman's Sporting 15 yrs. 65,952 $352,843 $5.35 None
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
10 Off-Price Super-Regional Mall Nov-97 Ross 10 yrs. 29,734 $297,340 $10.00 $11.00/sf (6-10)
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
11 Off-Price Super-Regional Mall Nov-97 Group USA 10 yrs. 22,548 $253,665 $11.25 None
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
12 Off-Price Super-Regional Mall Nov-97 Old Navy 5 yrs. 14,015 $182,195 $13.00 None
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
13 Springhurst Towne Center Aug-97 Reading China 15 yrs. 24,500 $245,000 $10.00 $10.50/sf (6-10)
Westport & I-265 + opt $11.00/sf (11-15)
Louisville, Kentucky
====================================================================================
No. Name/Location Comments
====================================================================================
<S> <C> <C>
1 Barry Woods Crossing Newly developing power center with
I-29 and Barry Road good freeway exposure and access.
Kansas City, Missouri Lease signed.
- ------------------------------------------------------------------------------------
2 Barry Woods Crossing Newly developing power center with
I-29 and Barry Road good freeway exposure and access
Kansas City, Missouri Lease in negotiation. Overage 5%
against natural breakpoint.
- ------------------------------------------------------------------------------------
3 Barry Woods Crossing Newly developing power center with
I-29 and Barry Road good freeway exposure and access.
Kansas City, Missouri Lease in negotiation. Overage 2%
against natural breakpoint. Tenant has
5-year termination option tied to sales.
- ------------------------------------------------------------------------------------
4 Barry Woods Crossing Newly developing power center with
I-29 and Barry Road good freeway exposure and access.
Kansas City, Missouri Lease signed.
- ------------------------------------------------------------------------------------
5 Barry Woods Crossing Newly developing power center with
I-29 and Barry Road good freeway exposure and access.
Kansas City, Missouri Lease in negotiation. Overage 6%
against natural break point.
- ------------------------------------------------------------------------------------
6 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. CAM,tax contr.
plus 0.75% of sales > $17.6 m.
- ------------------------------------------------------------------------------------
7 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. CAM,tax contr.
plus 3.0% of sales > $3.3 m.
- ------------------------------------------------------------------------------------
8 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. CAM, tax contr.
plus 1.5% of sales > $15.1 m.
- ------------------------------------------------------------------------------------
9 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. CAM,tax contr.;
no % rent clause.
- ------------------------------------------------------------------------------------
10 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. CAM,tax contr.
plus 2.0% > natural break.
- ------------------------------------------------------------------------------------
11 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. P/R CAM, tax
plus 3.0% > natural break.
- ------------------------------------------------------------------------------------
12 Off-Price Super-Regional Mall New value retail center w/ excellent
Western United States location, demographics. P/R CAM, tax
plus 2.0% > natural break.
- ------------------------------------------------------------------------------------
13 Springhurst Towne Center Power ctr. under construction. P/R
Westport & I-265 CAM+8%, taxes, insur. 3% of sales over
Louisville, Kentucky natural breakpoint.
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SPECIALTY RETAIL LEASES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased Annual Rent/
No. Name/Location Date Tenant Term Area Rent Sq/Ft
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
14 Springhurst Towne Center Aug-97 Party Source 15 yrs. 42,000 $378,000 $9.00
Westport & I-265 + opt.
Louisville, Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
15 Off-Price Super-Regional Mall Nov-96 Marsalls 15 yrs. 50,895 $394,436 $7.75
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
16 Off-Price Super-Regional Mall Nov-96 American Wilderness 15 yrs. 30,639 $428,946 $14.00
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
17 Off-Price Super-Regional Mall Nov-96 Totally 4 Kids 15 yrs. 49,599 $247,955 $5.00
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
18 Off-Price Super-Regional Mall Nov-96 Sports Authority 15 yrs. 50,111 $507,624 $10.13
Western United States +2 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
19 Off-Price Super-Regional Mall Nov-96 TJMaxx 10 yrs. 35,669 $338,856 $9.50
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
20 Off-Price Super-Regional Mall Nov-96 Burlington Coat 15 yrs. 79,989 $439,940 $5.50
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
21 Off-Price Super-Regional Mall Nov-96 Dave & Busters 20 yrs. 59,275 $612,311 $10.33
Western United States +2 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
22 Off-Price Super-Regional Mall Nov-96 Bed Bath & Beyond 15 yrs. 44,208 $508,392 $11.50
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
23 Off-Price Super-Regional Mall Nov-96 Saks-Off Fifth 15 yrs. 28,600 $203,060 $7.10
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
24 Off-Price Super-Regional Mall Nov-96 Foozles 10 yrs. 20,726 $269,438 $13.00
Western United States +2 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
25 Off-Price Super-Regional Mall Nov-96 Group USA 10 yrs. 20,686 $268,918 $13.00
Western United States +2 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
26 Off-Price Super-Regional Mall Nov-96 Old Navy 10 yrs. 15,095 $195,235 $13.00
Western United States + opt.
- ------------------------------------------------------------------------------------------------------------------------------------
27 Stephanie Street Center Oct-96 Old Navy 10 yrs. 14,950 $206,931 $13.83
Stephanie Street +1 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
=====================================================================================================
No. Name/Location Steps Comments
=====================================================================================================
<S> <C> <C> <C>
14 Springhurst Towne Center $9.50/sf (6-10) Power ctr. under construction. P/R
Westport & I-265 $10.00/sf (11-15) CAM+8% taxes, insur. No % rent
Louisville, Kentucky clause.
- -----------------------------------------------------------------------------------------------------
15 Off-Price Super-Regional Mall $8.25/sf (6-10) New value retail ctr. w/ 1.5m sf in ex-
Western United States $8.75/sf (11-15) cellent location; 19 anchors. CAM & tax
contr. + 2.0% of sales > $15.0m
- -----------------------------------------------------------------------------------------------------
16 Off-Price Super-Regional Mall None New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 5.0% of sales > $8.6m.
- -----------------------------------------------------------------------------------------------------
17 Off-Price Super-Regional Mall $5.25/sf (6-10) New value retail ctr. w/ 1.5m sf in ex-
Western United States $5.50/sf (11-15) cellent location; 19 anchors. CAM & tax
contr. + 1.5% of sales > $9.3m.
- -----------------------------------------------------------------------------------------------------
18 Off-Price Super-Regional Mall $10.63/sf (6-10) New value retail ctr. w/ 1.5m sf in ex-
Western United States $12.48/sf (11-15) cellent location; 19 anchors. CAM & tax
contr. + 1.5% of sales > $17.0m.
- -----------------------------------------------------------------------------------------------------
19 Off-Price Super-Regional Mall $10.00/sf (6-10) New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 2.0% of sales > $15.Om.
- -----------------------------------------------------------------------------------------------------
20 Off-Price Super-Regional Mall None New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 1.5% of sales > $l5.0m.
- -----------------------------------------------------------------------------------------------------
21 Off-Price Super-Regional Mall None New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 3.5% of sales > $11.Om.
- -----------------------------------------------------------------------------------------------------
22 Off-Price Super-Regional Mall $12.00/sf (11-15) New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 3.0% of sales > $13.3m.
- -----------------------------------------------------------------------------------------------------
23 Off-Price Super-Regional Mall $7.60/sf (6-15) New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 0.75% of sales > $12.7m.
- -----------------------------------------------------------------------------------------------------
24 Off-Price Super-Regional Mall None New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM & tax
contr. + 3.0% of sales > $9.9m.
- -----------------------------------------------------------------------------------------------------
25 Off-Price Super-Regional Mall None New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent locaton; 19 anchors. Gross
lease + 3.0% of sales > $6.2m
- -----------------------------------------------------------------------------------------------------
26 Off-Price Super-Regional Mall $14.00/sf (6-10) New value retail ctr. w/ 1.5m sf in ex-
Western United States cellent location; 19 anchors. CAM, tax
contr. + 2.0% of sales > natural.
- -----------------------------------------------------------------------------------------------------
27 Stephanie Street Center $15.87/sf (6-10) New 251,OOOsf power ctr. near Sunset
Stephanie Street Galleria. NNN lease. Termination
Henderson, Nevada clause.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SPECIALTY RETAIL LEASES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased Annual Rent/
No. Name/Location Date Tenant Term Area Rent Sq/Ft
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
28 Stephanie Street Center Oct-96 CompUSA 15 yrs. 15,000 $180,000 $12.00
Stephanie Street 3 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
29 Stephanie Street Center Jul-96 PetSmart 15 yrs. 26,040 $299,460 $11.50
Stephanie Street 4 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
30 Stephanie Street Center Mar-96 Circuit City 20 yrs. 33,089 $416,391 $12.58
Stephanie Street 6 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
31 Stephanie Street Center Feb-96 Barnes & Noble 15 yrs. 27,000 $324,000 $12.00
Stephanie Street 3 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
32 Stephanie Street Center Jan-96 OfficeMax 15 yrs. 23,500 $247,338 $10.53
Stephanie Street 3 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
33 Stephanie Street Center Dec-95 HomePlace 15 yrs. 53,000 $623,810 $11.77
Stephanie Street 3 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
34 Stephanie Street Center Nov-95 Best 15 yrs. 50,432 $486,164 $9.64
Stephanie Street 6 5-yr. opt.
Henderson, Nevada
- ------------------------------------------------------------------------------------------------------------------------------------
35 International Drive Value Ctr. Jul-96 Books-A-Million 10 yrs. 20,000 $170,000 $8.50
International Dr. & Touch One 2 5-yr. opt.
Orlando, Florlda
- ------------------------------------------------------------------------------------------------------------------------------------
36 International Drive Value Ctr. Mar-96 Shoe Carnival lO yrs. 17,000 $195,500 $11.50
International Dr. & Touch One 2 5-yr. opt.
Orlando, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
37 International Drive Value Ctr. Dec-95 Ross 15 yrs. 28,220 $282,200 $10.00
International Dr. & Touch One 3 5-yr. opt.
Orlando, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
38 International Drive Value Ctr. Nov-95 Old Navy 10 yrs. 15,000 $225,000 $15.00
International Dr. & Touch One 1 5-yr. opt.
Orlando, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
39 International Drive Value Ctr. Oct-95 Bed Bath & Beyond 15 yrs. 40,000 $580,000 $14.50
International Dr. & Touch One 3 5-yr. opt.
Orlando, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
40 International Drive Value Ctr. Oct-95 T.J. Maxx 10 yrs. 28,054 $272,805 $9.72
International Dr. & Touch One 4 5-yr. opt.
Orlando, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
41 Independence Commons Apr-96 Marshalls 15 yrs. 30,000 $232,500 $7.75
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
==========================================================================================================
No. Name/Location Steps Comments
==========================================================================================================
<S> <C> <C> <C>
28 Stephanie Street Center $13.20/sf (6-10) New 251,000sf power ctr. near Sunset
Stephanie Street $14.52/sf (11-15) Galleria. NNN lease.
Henderson, Nevada
- ----------------------------------------------------------------------------------------------------------
29 Stephanie Street Center $12.65/sf (6-10) New 251,000sf power ctr. near Sunset
Stephanie Street $13.92/sf (11-15) Galleria. NNN lease. Allowance of
Henderson, Nevada $100,000 or 4 mos. free.
- ----------------------------------------------------------------------------------------------------------
30 Stephanie Street Center Lesser of 10% or CPI New 251,000sf power ctr. near Sunset
Stephanie Street every 5 yrs. Galleria. NNN lease. Termination
Henderson, Nevada clause.
- ----------------------------------------------------------------------------------------------------------
31 Stephanie Street Center $13.80/sf (6-10) New 251,000sf power ctr. near Sunset
Stephanie Street $15.87/sf (11-15) Galleria. NNN lease.
Henderson, Nevada
- ----------------------------------------------------------------------------------------------------------
32 Stephanie Street Center $11.03/sf (6-10) New 251,OOOsf power ctr. near Sunset
Stephanie Street $11.33/sf (11-15) Gallerla. NNN lease.
Henderson, Nevada
- ----------------------------------------------------------------------------------------------------------
33 Stephanie Street Center $12.77/sf (6-10) New 251,000sf power ctr. near Sunset
Stephanie Street $13.77/sf (11-15) Galleria. NNN lease.
Henderson, Nevada
- ----------------------------------------------------------------------------------------------------------
34 Stephanie Street Center $10.60/sf (6-10) New 251,000sf power ctr. near Sunset
Stephanie Street $11.66/sf (11-15) Galleria. NNN lease.
Henderson, Nevada
- ----------------------------------------------------------------------------------------------------------
35 International Drive Value Ctr. None New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One CAM, taxes. Other anchors incl.
Orlando, Florlda TJMaxx, Old Navy, Bed Bath.
- ----------------------------------------------------------------------------------------------------------
36 International Drive Value Ctr. $12.00/sf (6-10) New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One CAM+10%, taxes. Other anchors incl.
Orlando, Florida TJMaxx, Old Navy, Bed Bath.
- ----------------------------------------------------------------------------------------------------------
37 International Drive Value Ctr. $11.00/sf (6-10) New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One $11.75/sf (11-15) CAM+10%, taxes. Other anchors incl.
Orlando, Florida TJMaxx, Old Navy, Bed Bath.
- ----------------------------------------------------------------------------------------------------------
38 International Drive Value Ctr. None New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One CAM+5%, taxes. Other anchors incl.
Orlando, Florida Ross, TJMaxx, Bed Bath & Beyond.
- ----------------------------------------------------------------------------------------------------------
39 International Drive Value Ctr. $15.50/sf (6-10) New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One $16.50/sf (11-15) CAM+5%, taxes. Other anchors incl.
Orlando, Florida Ross, TJMaxx, Old Navy.
- ----------------------------------------------------------------------------------------------------------
40 International Drive Value Ctr. $10.22/sf (6-10) New 186,081sf ctr. in tourist area. P/R
International Dr. & Touch One CAM, taxes. Other anchors incl. Ross,
Orlando, Florida Old Navy, Bed Bath & Beyond.
- ----------------------------------------------------------------------------------------------------------
41 Independence Commons $0.25/sf after yr. New 363,853sf power center. Tenant
39th St. & Arrowhead Dr. 2, 6, 9, & 12 pays 2.0% of sales over natural break.
Independence, Missouri No concessions given.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SPECIALTY RETAIL LEASES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased Annual Rent/
No. Name/Location Date Tenant Term Area Rent Sq/Ft
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
42 Independence Commons Apr-96 Comers Craft 15 yrs. 15,000 $123,750 $8.25
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
43 Independence Commons Mar-96 Bed Bath & Beyond 15 yrs. 40,000 $360,000 $9.00
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
44 Independence Commons Mar-96 Rhodes Furniture 20 yrs. 50,000 $400,000 $8.00
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
45 Independence Commons Mar-96 Barnes & Noble 15 yrs. 30,000 $397,500 $13.25
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
46 Independence Commons Mar-96 Nill Bros. Sports 10 yrs. 12,000 $132,000 $11.00
39th St. & Arrowhead Dr.
Independence, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
47 Perimeter Center Nov-95 HomePlace 15 yrs. 54,000 $864,000 $16.00
Mt. Vernon Hwy./Perimeter
Fuiton County, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
48 Town Center Pardo Dec-95 Sportslife 15 yrs. 40,000 $492,000 $12.30
Barrett Pkwy. & Piedmont Rd.
Gwinnett Cty., Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
49 Town Center Pardo Dec-95 The Sport Shoe 10 yrs. 15,000 $183,750 $12.25
Barrett Pkwy. & Piedmont Rd.
Gwinnett Cty., Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
50 Town Center Pardo Oct-95 HomePlace 15 yrs. 53,000 $519,400 $9.80
Barrett Pkwy. & Piedmont Rd.
Gwinnett Cty., Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
51 Town Center Pardo Sep-95 Petstuff 15 yrs. 20,000 $190,000 $9.50
Barrett Pkwy. & Piedmont Rd.
Gwinnett Cty., Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
52 Town Center Pardo Aug-95 Barnes & Noble 15 yrs. 20,000 $250,000 $12.50
Barrett Pkwy. & Piedmont Rd.
Gwinnett Cty., Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
53 New Hope Commons Nov-95 Best Buy 15 yrs. 45,000 $562,500 $12.50
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
54 New Hope Commons Sep-95 Michael's 10 yrs. 19,064 $173,482 $9.10
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
55 New Hope Commons Sep-95 Marshalls 15 yrs. 30,090 $270,810 $9.00
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
========================================================================================================
No. Name/Location Steps Comments
========================================================================================================
<S> <C> <C> <C>
42 Independence Commons $9.00/sf (4-5) New 363,853sf power center. Tenant
39th St. & Arrowhead Dr. $9.90/sf (6-10) improvement allowance of $6.00/sf
Independence, Missouri $10.80/sf (11-15) given.
- --------------------------------------------------------------------------------------------------------
43 Independence Commons $9.90/sf (6-10) New 363,853sf power center. Tenant
39th St. & Arrowhead Dr. $10.98/sf (11-15) pays 3.0% of sales over natural
Independence, Missouri breakpoint.
- --------------------------------------------------------------------------------------------------------
44 Independence Commons $9.25/sf (6-10) New 363,853sf power center. Tenant
39th St. & Arrowhead Dr. $10.50/sf (11-15) improvement allowance of $10.00/sf
Independence, Missouri $11.75/sf (16-20) given.
- --------------------------------------------------------------------------------------------------------
45 Independence Commons $14.50/sf (6-10) New 363,853sf power center. Tenant
39th St. & Arrowhead Dr. $15.75/sf (11-15) improvement allowance of $25.00/sf
Independence, Missouri given.
- --------------------------------------------------------------------------------------------------------
46 Independence Commons $12.40/sf (6-10) New 363,853sf power center. Tenant
30th St. & Arrowhead Dr. improvement allowance of $7.00/sf
Independence, Missouri given; plus 1 month free rent.
- --------------------------------------------------------------------------------------------------------
47 Perimeter Center $16.50/sf (3-5) 367,000sf power ctr. north of down-
Mt. Vernon Hwy./Perimeter $17.50/sf (6-10) town Atlanta. 2 mos. free rent. NNN
Fulton County, Georgia $18.50/sf (11-15) lease.
- --------------------------------------------------------------------------------------------------------
48 Town Center Pardo $12.67/sf (3-5) New 305,314sf power ctr. Tenant
Barrett Pkwy. & Piedmont Rd. $13.18/sf (6-10) received $2.OM in allowances and 3
Gwinnett Cty., Georgia $14.16/sf (11-15) mos. free rent. Ctr. opened 9/95.
- --------------------------------------------------------------------------------------------------------
49 Town Center Pardo $12.75/sf (3-5) New 305,314sf power ctr. Tenant
Barrett Pkwy. & Piedmont Rd. $13.25/sf (6-7) received $180,000 in allowances; 2
Gwinnett Cty., Georgia $13.75/sf (8-10) mos. free rent. Ctr. opened 9/95.
- --------------------------------------------------------------------------------------------------------
50 Town Center Pardo $10.30/sf (3-6) New 305,314sf power ctr. Tenant
Barrett Pkwy. & Piedmont Rd. $11.30/sf (7-10) received 3 mos. free rent. Ctr. opened
Gwinnett Cty., Georgia $12.30/sf (11-15) 9/95.
- --------------------------------------------------------------------------------------------------------
51 Town Center Pardo $10.00/sf (6-10) New 305,314sf power ctr. Tenant did
Barrett Pkwy. & Piedmont Rd. $10.75/sf (11-15) not receive any allowances. Ctr. opened
Gwinnett Cty., Georgia 9/95.
- --------------------------------------------------------------------------------------------------------
52 Town Center Pardo $13.50/sf (6-10) New 305,314sf power ctr. Tenant
Barrett Pkwy. & Piedmont Rd. $14.50/sf (11-15) received $1,908,963 in allowances. Ctr.
Gwinnett Cty., Georgia opened 9/95.
- --------------------------------------------------------------------------------------------------------
53 New Hope Commons $12.90/sf (3-5) New 470,015sf power ctr. Best Buy
Hwy. 501-15 & Interstate 40 $13.35/sf (6-10) received $37.00/sf in Tls plus 1 month
Durham, North Carolina $14.35/sf (11-15) free rent.
- --------------------------------------------------------------------------------------------------------
54 New Hope Commons $9.25/sf (3-5) New 470,015sf power ctr. Tenant
Hwy. 501-15 & Interstate 40 $9.75/sf (6-10) received 2.5 months free rent.
Durham, North Carolina
- --------------------------------------------------------------------------------------------------------
55 New Hope Commons $9.15/sf (4-5) New 470,015sf power ctr. Tenant did
Hwy. 501-15 & Interstate 40 $9.50/sf (6-10) not receive any allowances.
Durham, North Carolina $10.50/sf (11-15)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SPECIALTY RETAIL LEASES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased Annual Rent/
No. Name/Location Date Tenant Term Area Rent Sq/Ft
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
56 New Hope Commons Sep-95 Linens 'N Things 15 yrs. 31,610 $324,003 $10.25
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
57 New Hope Commons Sep-95 Old Navy Clothing 5 yrs. 17,500 $210,000 $12.00
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
58 New Hope Commons Aug-95 Barnes & Noble 15 yrs. 25,000 $362,500 $14.50
Hwy. 501-15 & Interstate 40
Durham, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
Survey Low: 12,000 $123,750 $5.00
Survey High: 80,359 $864,000 $16.00
Survey Mean: 32,958 $328,396 $10.55
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================
No. Name/Location Steps Comments
====================================================================================================
<S> <C> <C> <C>
56 New Hope Commons $10.55/sf (4-5) New 470,015sf power ctr. Tenant
Hwy. 501-15 & Interstate 40 $10.85/sf (6-10) received $13.20/square foot in Tls.
Durham, North Carolina $11.45/sf (11-15)
- ----------------------------------------------------------------------------------------------------
57 New Hope Commons $13.00/sf (6-10) New 470,015sf power ctr. Tenant did
Hwy. 501-15 & Interstate 40 not receive any allowances.
Durham, North Carolina
- ----------------------------------------------------------------------------------------------------
58 New Hope Commons $15.50/sf (6-10) New 470,015sf power ctr. Tenant
Hwy. 501-15 & Interstate 40 $16.50/sf (11-15) leased 25,000sf outparcel bldg.
Durham, North Carolina
- ----------------------------------------------------------------------------------------------------
Survey Low:
Survey High:
Survey Mean:
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CINEMA LEASE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Lease Leased # Annual
No. Name/Location Start Tenant Term Area (SF) Screens Rent
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 Austin Power Center Jan-99 RKO Century Warner 25 yrs. 61,353 -- $1,441,182
Austin Avenue & NYS Thruway (Proposed)
Yonkers, New York
- ------------------------------------------------------------------------------------------------------------------------------------
2 Shoppes at Forest Hills Feb-98 Regal 20 yrs. 102,000 24 $2,888,800
Forest Hills, New York (Proposed) +4 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
3 Franklin Mills Dec-97 General Cinema 20 yrs. 61,000 14 $950,000
S/E/Q of Woodhaven Road at
Knights Road
Philadelphia, PA
- ------------------------------------------------------------------------------------------------------------------------------------
4 Off-Price Super-Regional Mall Nov-97 Harkins Theater 15 yrs. 95,000 22 $1,116,250
Western United States +3 5-yr. opt.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Off-Price Super-Regional Mall Aug-97 Dickinson Theater 20 yrs. 56,479 12 $1,034,089
Midwestern United States +2 5-yr opt.
- ------------------------------------------------------------------------------------------------------------------------------------
6 Barrywoods Crossing Fall-97 AMC Theatres 20 yrs. 89,290 n/a $1,473,285
I-29 and Barry Road + opt.
Kansas City, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
7 Springhurst Towne Center Aug-97 Cinemark 20 yrs. 77,000 20 $1,001,000
Westport & Interstate 265 + opt.
Louisville, Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
8 Richland Crossing Jun-97 Magic Cinema 25 yrs. 42,300 12 $320,211
Route 309
Richland Township, Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
9 Charlestowne Mall Jun-97 Regal 20 yrs. 90,000 13 $1,395,000
Kirk Road & North Avenue (Proposed)
St. Charles, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
10 Wolfchase Galleria Feb-97 Malco Theaters 20 yrs. 30,000 8 $360,000
1-64/Germantown Parkway +2 5-yr. opt.
Memphis, Tennessee
- ------------------------------------------------------------------------------------------------------------------------------------
11 Mall at the Source Jan-97 Confidential 20 yrs. 54,450 10 $1,524,600
Old Country Road &
Meadowbrook Parkway
Westbury, New York
- ------------------------------------------------------------------------------------------------------------------------------------
12 500 Corporate Plaza Jan-97 United Artists 20 yrs. 41,336 10 $868,056
10 Michael Dr. & Bi-County Blvd. +4 5-yr. opt.
East Farmingdale,
Nassau, New York
- ------------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================
Rent/ Rent/ Overage
No. Name/Location Sq/Ft Screen Steps Rent
===============================================================================================================
<S> <C> <C> <C> <C> <C>
1 Austin Power Center $23.49 -- $26.31/sf (6-10) 1% over natural
Austin Avenue & NYS Thruway $29.31/sf (11-15) breakpoint
Yonkers, New York $33.00/sf (16-20)
$36.96/sf (21-25)
- ---------------------------------------------------------------------------------------------------------------
2 Shoppes at Forest Hills $28.32 $120,367 $29.12/sf (6-10) 8.0% over
Forest Hills, New York $31.12/sf (11-15) $24,073,285
$35.281sf (16-20) (steps every 5 yrs.)
- ---------------------------------------------------------------------------------------------------------------
3 Franklin Mills $15.57 $67,841 $17.l3/sf (1l-20) N/A
S/E/Q of Woodhaven Road at
Knights Road
Philadelphia, PA
- ---------------------------------------------------------------------------------------------------------------
4 Off-Price Super-Regional Mall $11.75 $50,739 2.0% increase every 9.0% over
Western United States year of lease $24,800,000
(steps every year)
- ---------------------------------------------------------------------------------------------------------------
5 Off-Price Super-Regional Mall $18.31 $86,174 $19.64/sf (6-10) 4.0% over
Midwestern United States $21.10/sf (11-15) $4,500,000
$22.70/sf (16-20) (steps every 5 yrs.)
- ---------------------------------------------------------------------------------------------------------------
6 Barrywoods Crossing $16.50 #VALUE! $17.50/sf (11-20) 6% over natural
I-29 and Barry Road breakpoint
Kansas City, Missouri
- ---------------------------------------------------------------------------------------------------------------
7 Springhurst Towne Center $13.00 $50,050 $13.50/sf (6-10) 10% over natural
Westport & Interstate 265 $14.00/sf (11-15) breakpoint
Louisville, Kentucky $14.50/sf (16-20)
- ---------------------------------------------------------------------------------------------------------------
8 Richland Crossing $7.56 $26,684 $8.32/sf (6-10) N/A
Route 309 $9.15/sf (11-15)
Richland Township, Pennsylvania $10.00/sf (16-20)
$11.08/sf (21-25
- ---------------------------------------------------------------------------------------------------------------
9 Charlestowne Mall $15.50 $107,308 $16.50/sf (11-20) N/A
Kirk Road & North Avenue
St. Charles, Illinois
- ---------------------------------------------------------------------------------------------------------------
10 Wolfchase Galleria $12.00 $45,000 $13.00/sf (6-10) 10% over
1-64/Germantown Parkway $14.00/sf (11-15) $4,000,000
Memphis, Tennessee $15.00/sf (16-20)
- ---------------------------------------------------------------------------------------------------------------
11 Mall at the Source $28.00 $152,460 $2.00/sf after 10% over natural
Old Country Road & yrs. 5, 10, 15 breakpoint
Meadowbrook Parkway
Westbury, New York
- ---------------------------------------------------------------------------------------------------------------
12 500 Corporate Plaza $21.00 $86,806 7.5% 10% over natural
10 Michael Dr. & Bi-County Blvd. every 5 yrs. breakpoint
East Farmingdale,
Nassau, New York
- ---------------------------------------------------------------------------------------------------------------
=====================================================================================
No. Name/Location Comments
=====================================================================================
<S> <C> <C>
1 Austin Power Center Proposed theatre within 427,256 SF
Austin Avenue & NYS Thruway power center expected to be completed
Yonkers, New York by January 1999. Anchors will include
Home Depot and Costco.
- -------------------------------------------------------------------------------------
2 Shoppes at Forest Hills Free standing bldg to include 8,000sf of
Forest Hills, New York restaurant space. Expected to break
ground in Spring 1997.
- -------------------------------------------------------------------------------------
3 Franklin Mills Former Sears store demolished for
S/E/Q of Woodhaven Road at construction of new Cinema. Franklin
Knights Road Mills is a 1.4 mil. sf value oriented mega
Philadelphia, PA mall in Philadelphia PA. Construction
allowance of $9,250,000.
- -------------------------------------------------------------------------------------
4 Off-Price Super-Regional Mall New value retail center w/ 1.2 m sf in ex-
Western United States cellent location; 17 anchor stores. Pays
CAM ($0.75/sf) & tax ($1.75/sf)
contributions.
- -------------------------------------------------------------------------------------
5 Off-Price Super-Regional Mall New value retail center w/ 850,000sf in
Midwestern United States good location; 11 anchor stores. Pays
tax & insurance contributions.
- -------------------------------------------------------------------------------------
6 Barrywoods Crossing Signed lease for free-standing building
I-29 and Barry Road in new power center currently being
Kansas City, Missouri developed in northern Kansas City.
- -------------------------------------------------------------------------------------
7 Springhurst Towne Center Largest cinema in Kentucky Ohio,
Westport & Interstate 265 Indiana in new 800,000sf power ctr.
Louisville, Kentucky Anchors include Kohl's, Marshalls
Meijer. P/R CAM, tax, & insurance.
- -------------------------------------------------------------------------------------
8 Richland Crossing Suburban location outside of
Route 309 Philadelphia.
Richland Township, Pennsylvania
- -------------------------------------------------------------------------------------
9 Charlestowne Mall Regal-Funscape concept devoted to
Kirk Road & North Avenue 50% of space. 1.0 million square foot
St. Charles, Illinois mall planning expansion. Expected to
break ground and open in late 1997.
- -------------------------------------------------------------------------------------
10 Wolfchase Galleria Wolfchase Galleria is a new 4-anchor
1-64/Germantown Parkway mall in the Memphis MSA which opened
Memphis, Tennessee in February 1997 by Urban Shopping
Centers.
- -------------------------------------------------------------------------------------
11 Mall at the Source Proposed new construction, regional
Old Country Road & mall location; to be 8 to 10 screens.
Meadowbrook Parkway
Westbury, New York
- -------------------------------------------------------------------------------------
12 500 Corporate Plaza Net lease involving new construction
10 Michael Dr. & Bi-County Blvd. with 7.5% steps. 2,700 seats.
East Farmingdale,
Nassau, New York
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
CINEMA LEASE COMPARABLES
Cushman & Wakefield, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
Lease Leased # Annual Rent/ Rent/
No. Name/Location Start Tenant Term Area (SF) Screens Rent Sq/Ft Screen
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13 Confidential Location Jan-97 Plitt 20 yrs. 45,000 9 $998,100 $22.18 $110,900
Under Construction
Chicago, Illinois
- ----------------------------------------------------------------------------------------------------------------------------------
14 Independence Commons Dec-96 AMC 20 yrs. 63,800 14 $861,300 $13.50 $61,521
39th St. & Arrowhead Dr.
Independence, Missouri
- ----------------------------------------------------------------------------------------------------------------------------------
15 Off-Price Super Regional Mall Oct-96 Iwerks Theatre 15 yrs. 14,468 -- $514,048 $35.53 --
Western United States + 3 5-yr. opt.
- ----------------------------------------------------------------------------------------------------------------------------------
16 Courtland Center Oct-96 Startime Cinema 20 yrs. 25,000 10 $250,000 $10.00 $25,000
Burton, Michigan
- ----------------------------------------------------------------------------------------------------------------------------------
17 Bay Ridge Center Jul-96 United Artists 20 yrs. 35,000 8 $665,000 $19.00 $83,125
Bay Ridge Ave. & Narrows Ave. + 3 5-yr. opt.
Bayridge, Brooklyn, New York
- ----------------------------------------------------------------------------------------------------------------------------------
18 Perimeter Center Dec-95 United Artists 20 yrs. 35,366 10 $604,759 $17.10 $60,476
Mt Vernon Hwy & Perimeter
Fulton County, Georgia
- ----------------------------------------------------------------------------------------------------------------------------------
19 Keystone Plaza May-95 Cinemark 15 yrs. 73,294 17 $769,587 $10.50 $45,270
Route 19
Erie, Pennsylvania
- ----------------------------------------------------------------------------------------------------------------------------------
20 AMC Theatres Feb-95 AMC 25 yrs. 80,000 20 $1,540,000 $19.25 $77,000
Norwalk Blvd & Interstate 5
Norwalk, California
- ----------------------------------------------------------------------------------------------------------------------------------
21 Fairfax Towne Center Jan-95 United Artists 20 yrs. 48,103 10 $762,433 $15.85 $76,243
SWC/W. Ox Rd. & Route 50
Fairfax, Virginia
- ----------------------------------------------------------------------------------------------------------------------------------
22 Shopper's World Dec-94 General Cinema 20 yrs. 85,000 14 $1,700,000 $20.00 $121,429
Framingham, Massachusetts
- ----------------------------------------------------------------------------------------------------------------------------------
23 Bay Terrace Center Mar-94 Sony Theatres 20 yrs. 22,092 6 $385,000 $17.43 $64,167
Bell Boulevard & 26th Avenue
Bayside, Oueens, New York
- ----------------------------------------------------------------------------------------------------------------------------------
24 Carmel Mountain Plaza Jul-93 Pacific Theatres 20 yrs. 34,561 14 $524,982 $15.19 $37,499
Interstate 15 & Carmel Mtn.Rd.
San Diego, California
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
CINEMA LEASE COMPARABLES
Cushman & Wakefield, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Overage
No. Name/Location Steps Rent Comments
===================================================================================================================================
<S> <C> <C> <C> <C>
13 Confidential Location $26.51/sf (11-15) 10% over natural 270,000sf urban ctr. to be anchored by
Under Construction $30.41/sf (16-20) breakpoint Eddie Bauer, Marshalls, Blockbuster,
Chicago, Illinois P/R CAM & taxes.
- -----------------------------------------------------------------------------------------------------------------------------------
14 Independence Commons $1.00/sf after yr. 2, 6, 10% over natural New 363,853sf power ctr. anchored by
39th St. & Arrowhead Dr. 10, 14, 18 breakpoint Kohl's, Marshalls, Barnes & Noble, Bed
Independence, Missouri Bath & Beyond. AMC received an allow-
ance of $85.00/sf.
- -----------------------------------------------------------------------------------------------------------------------------------
15 Off-Price Super Regional Mall $39.09/sf (6-10) 7% over New value retail center w/ 1.5m sf in ex-
Western United States $42.99/sf (11-15) $7,344,000 cellent location; 19 anchor stores. Pays
CAM & tax contributions.
- -----------------------------------------------------------------------------------------------------------------------------------
16 Courtland Center $12.00/sf (11-20) 10% over natural Renovated/expanded cinema in 470,100
Burton, Michigan breakpoint sf ctr. P/R CAM, taxes $24,100 HVAC
TIs of $750,000 given to tenant
- -----------------------------------------------------------------------------------------------------------------------------------
17 Bay Ridge Center 10% every 5 yrs. 10% over natural Proposed new construction with 10%
Bay Ridge Ave. & Narrows Ave. breakpoint steps every 5 years. Net lease 2,132
Bayridge, Brooklyn, New York seats.
- -----------------------------------------------------------------------------------------------------------------------------------
18 Perimeter Center $17.00/sf (3-5) 4% over natural 367,800sf open-air community center
Mt Vernon Hwy & Perimeter $18.47/sf (6-10) breakpoint with HomePlace, SteinMart. P/R CAM
Fulton County. Georgia $20.13/sf (11-15) +15%, taxes. Lease includes $65.00/sf
$22.15/sf (16 20) in TIs.
- -----------------------------------------------------------------------------------------------------------------------------------
19 Keystone Plaza $11.50/sf (6-10) 9% over natural New 500,000sf power ctr. anchored by
Route 19 $12.00/sf (11-15) breakpoint Lowe's, Wal-Mart, Media Play, & Kohl's.
Erie, Pennsylvania Net lease, P/R CAM, taxes &
insurance.
- -----------------------------------------------------------------------------------------------------------------------------------
20 AMC Theatres $19.75/sf (6-10) 8% over natural New freestanding multiplex located in
Norwalk Blvd & Interstate 5 $20.25/sf (11-15) breakpoint suburban Los Angeles. Net lease.
Norwalk, California $20.75/sf (16-20) Breakpoint is $962,500 per screen.
$21.25/sf (21-25)
- -----------------------------------------------------------------------------------------------------------------------------------
21 Fairfax Towne Center $18.00/sf (11-15) 8% over natural New 265,000sf community ctr. in
SWC/W. Ox Rd. & Route 50 $19.80/sf (16-20) breakpoint suburban D.C. opened late 94. P/R
Fairfax, Virginia CAM, taxes. TIs reported to be $1.05M,
or $21.83/sf.
- -----------------------------------------------------------------------------------------------------------------------------------
22 Shopper's World $22.50/sf (13-20) 9% over natural Redeveloped 828,000sf power ctr.
Framingham, Massachusetts breakpoint anchored by Sears, Marshalls, TJ Maxx.
CAM+ 10% Fee, taxes, and & rent
clause.
- -----------------------------------------------------------------------------------------------------------------------------------
23 Bay Terrace Center Steps $45,000 N/A New construction adjacent a large
Bell Boulevard & 26th Avenue every 5 yrs. shopping center. Very good location.
Bayside, Oueens, New York P/R CAM & taxes.
- -----------------------------------------------------------------------------------------------------------------------------------
24 Carmel Mountain Plaza $15.91/sf (2-3) 10% over natural 530,000sf power ctr. in NE San Diego.
Interstate 15 & Carmel Mtn.Rd $16.64/sf (4-5) breakpoint Anchors include Kmart, Mervyn's,
San Diego, California CPI Incr. (6-20) Circuit City. P/R CAM+10%. Rent increases
by CPI in yrs. 6-20.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CINEMA.XLS 2
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
CINEMA LEASE COMPARABLES
Cushman & Wakefield, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Lease Leased # Annual Rent/ Rent/
No. Name/Location Start Tenant Term Area (SF) Screens Rent Sq/Ft Screen
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 Galleria at Crystal Run Feb-93 Sony Theatres 25 yrs. 37,928 10 $371,700 $9.80 $37,170
Route 17 & Interstate 84
Orange County, New York
- ---------------------------------------------------------------------------------------------------------------------------------
26 Freehold Raceway Mall Jan-93 Loew's Theaters 15 yrs. 43,303 14 $450,000 $10.39 $32,143
Route 9 & Route 33
Freehold, Monmouth Cty., NJ
- ---------------------------------------------------------------------------------------------------------------------------------
27 Wilton Mall at Saratoga Feb-91 Hoyt's Cinema 20 yrs. 26,689 -- $306,924 $11.50 --
SS/Route 50 E of Interstate 87 + opt
Wilton, Saratoga Cty., New York
- ---------------------------------------------------------------------------------------------------------------------------------
28 Bay Plaza Shopping Center Jul-89 General Cinema 20 yrs. 55,700 13 $1,531,750 $27.50 $117,827
Baychester Road
Bronx, New York
- ---------------------------------------------------------------------------------------------------------------------------------
29 Great Northern Mall Oct-88 Cinema National 15 yrs. 24,200 -- $266,200 $11.00 --
NEC/Interstate 481 & Route 31 + opt
Clay, Onondaga Cty, New York
- ---------------------------------------------------------------------------------------------------------------------------------
30 Berkshire Mall Sep-88 Hoyt's Cinema 25 yrs. 30,946 -- $485,952 $15.70 --
Pittsfield, Massachusetts
- ---------------------------------------------------------------------------------------------------------------------------------
31 Pittsford Plaza Jun-88 General Cinema 20 yrs. 27,452 6 $329,424 $12.00 $54,904
NWQ/Route 31 & French Rd.
Pittsford, Monroe Cty, New York
- ---------------------------------------------------------------------------------------------------------------------------------
32 Salmon Run Mall Sep-86 Watertown Cinema 25 yrs. 26,250 -- $323,400 $12.32 --
NWQ/Interstate 81 & Route 3
Watertown, Jefferson Cty., NY
=================================================================================================================================
Survey Low: 14,468 6 $250,000 $7.56 #VALUE!
Survey High: 102,000 24 $2,888,800 $35.53 #VALUE!
- ---------------------------------------------------------------------------------------------------------------------------------
Survey Mean: 51,074 13 $875,407 $16.77 #VALUE!
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
CINEMA LEASE COMPARABLES
Cushman & Wakefield, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Overage
No. Name/Location Steps Rent Comments
===============================================================================================================================
<S> <C> <C> <C> <C>
25 Galleria at Crystal Run $10.60/sf (6-25) 12% over 1.0M sf regional mall location. P/R
Route 17 & Interstate 84 $3,161,000 CAM, taxes, insur. Yrs. 1-5 50% of
Orange County, New York concession sales included in receipts.
Yrs. 6-25: 100% of concessions.
- -------------------------------------------------------------------------------------------------------------------------------
26 Freehold Raceway Mall None None 1.15M sf regional mall anchored by
Route 9 & Route 33 Nordstrom, L&T, JCPenney & Sears.
Freehold, Monmouth Cty., NJ Loew's pays a contribution for CAM &
its own tax billings.
- -------------------------------------------------------------------------------------------------------------------------------
27 Wilton Mall at Saratoga None 12% over 490,000sf regional mall anchored by
SS/Route 50 E of Interstate 87 $2,433,000 Bon-Ton, Sears, JCPenney, Steinbach,
Wilton, Saratoga Cty., New York & Montgomery Ward. Cinema respon-
sible for P/R CAM & tax.
- -------------------------------------------------------------------------------------------------------------------------------
28 Bay Plaza Shopping Center $30.25/sf (11-15) 8% over stipulated 380,000sf power ctr. in urban location
Baychester Road $33.28/sf (16-20) breakpoints Anchors include Pathmark & Rickel. Net
Bronx, New York lease; CAM, taxes, insurance & rent.
- -------------------------------------------------------------------------------------------------------------------------------
29 Great Northern Mall None 12% over natural 780,000sf regional mall anchored by
NEC/Interstate 481 & Route 31 breakpoint Bon-Ton, Sears, Kaufmanns, Dick's.
Clay, Onondaga Cty., New York Net lease; cinema pays P/R CAM &
taxes.
- -------------------------------------------------------------------------------------------------------------------------------
30 Berkshire Mall None 8% over natural 665,000sf regional mall anchored by
Pittsfield, Massachusetts breakpoint JCPenney, Sears, Filene's, Hills, &
Service Merchandise. Tenant pays
CAM & taxes; sales est. $1.41M.
- -------------------------------------------------------------------------------------------------------------------------------
31 Pittsford Plaza None 8% over natural Older 480,000sf regional mall anchored
NWO/Route 31 & French Rd breakpoint by TJMaxx, Bed Bath & Beyond, Barnes
Pittsford, Monroe Cty., New York & Noble, and MJ Design. Net lease; P/R
CAM & taxes, plus utilities.
- -------------------------------------------------------------------------------------------------------------------------------
32 Salmon Run Mall $14.32/sf (11-20) 15% over 640,000sf regional mall anchored by
NWC/Interstate 81 & Route 3 $16.32/sf (21-25) $1,100,000 JCPenney, Sears, Hills, Steinbach, Bon-
Watertown, Jefferson Cty., NY Ton, Montgomery Ward. P/R CAM &
taxes.
===============================================================================================================================
Survey Low: 14,468 6 $250,000 $7.56 #VALUE!
Survey High: 102,000 24 $2,888,800 $35.53 #VALUE!
- ---------------------------------------------------------------------------------------------------------------------------------
Survey Mean: 51,074 13 $875,407 $16.77 #VALUE!
=================================================================================================================================
</TABLE>
CINEMA.XLS 3
<PAGE>
SUBJECT RENT ROLL
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 8
Property : Independence Commons
Independence, MO.
Report Date From : 5/01/97 To : 5/31/97
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ.FOOT ----------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ----------------------------- ------------- ----------- --------- --------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kohl's Department Stores #23 810-A000 80684 9/15/95 1/31/16 43905.54 526866.48 6.53 10/01/95 43,905.54
10/01/97 48,074.22
10/01/05 49,755.13
10/01/10 51,436.05
Hallmark Showcase #826 810-B001 7500 8/19/96 8/31/01 8125.00 97500.00 13.00 9/01/96 8,125.00
Southwestern Bell- The Stor 810-B002 4000 6/26/96 5/30/01 4166.67 50000.04 12.50 7/01/96 4,166.67
7/01/98 4,333.33
7/01/00 4,500.00
Perfume Pizzazz 810-B003 2710 9/06/96 9/30/01 2935.83 35229.96 13.00 10/01/96 2,935.83
10/01/99 3,161.67
O.H. Gerry Optical Company 810-B004 3015 3/30/96 6/30/01 3266.25 39195.00 13.00 7/01/96 3,266.25
7/01/99 3,391.88
Shoe Cents 810-B005 3000 8/17/96 8/31/01 3000.00 36000.00 12.00 9/01/96 3,000.00
Jenny Craig, Inc. #715 810-B006 2228 4/15/96 4/30/01 2506.50 30078.00 13.50 7/01/96 2,506.50
Sally Beauty Supply #1905 810-B007 2010 4/08/96 4/30/01 2010.00 24120.00 12.00 7/01/96 2,010.00
Bed, Bath and Beyond #107 810-C000 40000 3/23/96 1/31/12 30000.00 360000.00 9.00 3/01/96 30,000.00
4/01/01 33,000.00
4/01/06 36,300.00
Marshalls #675 810-D000 30439 3/05/96 1/31/12 19658.52 235902.24 7.75 7/01/06 19,658.52
4/01/98 20,292.67
4/01/02 20,926.81
4/01/05 21,560.96
4/01/08 22,195.10
Nill Bros. Sporting Goods, I 810-E000 12033 4/30/96 1/31/06 11030.25 132363.00 11.00 6/01/96 11,030.25
5/01/01 12,434.10
Coomers, Inc. 810-F000 15003 4/27/96 4/30/11 10314.56 123774.72 8.25 5/01/96 10,314.56
5/01/98 11,252.25
5/01/01 12,377.48
5/01/06 13,502.70
Rhodes Furniture, Inc. 810-H000 50640 3/28/96 3/31/16 33760.00 405120.00 8.00 4/01/96 33,760.00
3/01/01 34,440.64
4/01/01 39,035.00
3/01/06 39,715.65
</TABLE>
<TABLE>
<CAPTION>
---------CAM EXPENSE------- ---REAL ESTATE TAX--- -----INS EXPENSE------- ----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------ --------------- ---------- ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kohl's Department Stores #23 5,620.73 0.84 0.00 0.00 2017.10 0.30 7.67 51,543.37
Hallmark Showcase #826 595.76 0.95 1,108.36 1.77 187.50 0.30 16.03 10,016.62
Southwestern Bell- The Stor 483.12 1.45 650.24 1.95 110.00 0.33 16.23 5,410.03
Perfume Pizzazz 342.19 1.52 383.55 1.70 77.91 0.34 16.56 3,739.48
O.H. Gerry Optical Company 380.71 1.52 512.40 2.04 86.68 0.34 16.90 4,246.04
Shoe Cents 378.81 1.52 509.85 2.04 86.25 0.35 15.90 3,974.91
Jenny Craig, Inc. #715 269.10 1.45 329.26 1.77 55.70 0.30 17.02 3,160.56
Sally Beauty Supply #1905 253.81 1.52 297.04 1.77 50.25 0.30 15.59 2,611.10
Bed, Bath and Beyond #107 2,789.52 0.84 0.00 0.00 1000.00 0.30 10.14 33,789.52
Marshalls #675 2,208.79 0.87 0.00 0.00 0.00 0.00 8.62 21,867.31
Nill Bros. Sporting Goods 1,515.63 1.51 2,046.43 2.04 345.09 0.34 14.90 14,937.40
Coomers, Inc. 1,845.03 1.48 2,483.23 1.99 420.08 0.34 12.05 15,062.90
Rhodes Furniture, Inc. 5,929.59 1.41 7,483.66 1.77 1266.00 0.30 11.48 48,439.25
</TABLE>
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 9
Property : Independence Commons
Independence, MO.
Report Date From : 5/01/97 To : 5/31/97
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ.FOOT ----------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ----------------------------- ------------- ----------- --------- --------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/01/96 44,310.00
3/01/11 44,990.64
4/01/11 49,585.00
Barnes & Noble #2732 810-I000 30000 3/16/96 3/31/11 33125.00 397500.00 13.25 4/01/96 33,125.00
4/01/01 36,250.00
4/01/06 39,375.00
American Multi-Cinema, Inc. 810-J000 63800 12/15/95 12/31/15 71775.00 861300.00 13.50 4/01/96 71,775.00
1/01/98 78,420.83
1/01/02 82,408.33
1/01/06 87,725.00
1/01/10 93,041.67
1/01/14 101,016.67
Mattress Firm 810-K001 4500 12/01/97 5625.00 67500.00 15.00 5/01/97 5,625.00
5/01/00 6,187.50
Vacant 810-K002 3500 12/01/96 0.00 0.00 0.00 0.00
Computer Renaissance 810-K003 2000 6/14/96 7/31/01 2666.67 32000.04 16.00 8/01/96 2,666.67
8/01/97 2,750.00
8/01/98 2,833.33
8/01/99 2,917.77
8/01/00 3,000.00
Great Clips/Cutting Loose, I 810-K004 1200 5/15/96 6/30/01 1600.00 19200.00 16.00 7/01/96 1,600.00
7/01/98 1,750.00
Vacant 810-K005 6800 0.00 0.00 0.00 0.00
Chili's Grill & Bar/Brinker 810-OL01 6600 4/13/95 12/31/44 0.00 0.00 0.00 0.00
Smokehouse BBQ 810-OL02 7000 6/13/96 12/31/45 0.00 0.00 0.00 0.00
Fazoli's Restaurants, Inc. 810-OL03 3500 2/15/96 12/31/45 0.00 0.00 0.00 0.00
Vacant 810-OL04 0 0.00 0.00 0.00 0.00
*** VACANT *** 810-99999 0 0.00 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
---------CAM EXPENSE------- ---REAL ESTATE TAX--- -----INS EXPENSE------- ----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------ --------------- ---------- ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barnes & Noble #2732 2,168.77 0.87 0.00 0.00 0.00 0.00 14.12 35,293.77
American Multi-Cinema, Inc. 9,444.48 1.78 0.00 0.00 1063.33 0.20 15.48 82,282.81
Mattress Firm 573.75 1.53 375.00 1.00 112.50 0.30 17.83 6,686.25
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Computer Renaissance 252.54 1.52 283.06 1.70 57.50 0.35 19.56 3,259.77
Great Clips/Cutting Loose, I 95.32 0.95 203.94 2.04 30.00 0.30 19.29 1,929.26
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Chili's Grill & Bar/Brinker 125.00 0.23 0.00 0.00 0.00 0.00 0.23 125.00
Smokehouse BBQ 125.00 0.21 0.00 0.00 0.00 0.00 0.21 125.00
Fazoli's Restaurants, Inc. 125.00 0.43 0.00 0.00 0.00 0.00 0.43 125.00
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
*** VACANT *** 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
<PAGE>
4/29/97 Community Centers One LLC 3:57 pm
User: KRAUSE Commercial Rent Roll Page: 10
Property : Independence Commons
Independence, MO.
Report Date From : 5/01/97 To : 5/31/97
<TABLE>
<CAPTION>
T E R M PRORATED BASE RENT BASE RENT
SQ.FOOT ----------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO. OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- ----------------------------- ------------- ----------- --------- --------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
T O T A L S : 382162 289470.79 3473649.48 9.09
Total Occupied Square Feet: 382162
Total Vacant Square Feet: 0
</TABLE>
<TABLE>
<CAPTION>
---------CAM EXPENSE------- ---REAL ESTATE TAX--- -----INS EXPENSE------- ----GROSS RENTS------
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- ----------------------------- ------------ --------------- ---------- ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T O T A L S : 35,522.65 1.12 16,666.02 0.52 6965.89 0.22 10.95 348,625.35
</TABLE>
<PAGE>
1997 OPERATING BUDGET
<PAGE>
IV. Financial Analysis
================================================================================
A. In-Place Cash Flow
<TABLE>
<CAPTION>
1996 Budget l997 IN-PLACE(3) (1997)
------------ -------------------------- -----------------------
Per Square Per Square
Actual Budget Foot Budget Foot
------------ -------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental Income $2,840,741 $3,663,930 $9.86 $3,486,155 $9.38
CAM Recoveries 582,031 825,315 2.22 819,854 2.21
Reserves (11,540) (27,479) (0.07) (27,479) (0.07)
Other Income 24,329 31,217 0.08 31,217 0.08
------------ -------------------------- -----------------------
Total Revenue $3,435,561 $4,492,983 $12.09 $4,309,747 $11.60
Expenses
Real Estate Taxes $219,700 $288,785 $0.78 288,785 $0.78
Repairs & Maintenance 79,695 257,740 0.69 257,740 0.69
Utilities 39,310 37,440 0.10 37,440 0.10
Insurance 88,470 109,564 0.29 109,564 0.29
Other Expenses 65,062 5,000 0.01 5,000 0.01
Management Fees 142,434 178,404 0.48 178,404 0.48
------------ -------------------------- -----------------------
Total Expenses $634,671 $876,933 $2.36 $876,933 $2.36
------------ -------------------------- -----------------------
Net Operating Income $2,800,890 $3,616,050 $9.73 $3,432,814 $9.24
Structural Reserve @ $.10/ft.(1) 2,045 37,156 0.10 37,156 0.10
Tenant Improvmt./Leasing Comm.(2) 0 0 0.00 27,663 0.07
------------ -------------------------- -----------------------
Cash Flow $2,798,845 $3,578,894 $9.63 $3,367,995 $9.06
============ ========================== =======================
</TABLE>
(1) Structural reserve of approximately $0.10/sf owned for space only.
Partially reimbursable up to 5% of CAM.
(2) Ongoing tenant improvements/leasing commissions expense based on actual
average annual turnover over a five year period @$5/sf.
(3) In Place 1997 budgeted cash flow using Full Year 1997 Budget adjusted for
In Place rents for the period Jan/97 through Dec/97.
<PAGE>
PRO-JECT LEASE ABSTRACT REPORT
<PAGE>
INDEPENDENCE COMMONS 8/97
PROJECT DESIGNATOR: INDC
REVISION: 7/11/97 @ 15:15
LEASE ABSTRACT REPORT
FOR ALL TENANTS 7/21/97 @ 17:49
<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) RECOVERIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE A000 1 80,684 10/95 1/16 - 6.53 526,866 NATURAL EXP-OUT-FIRE 6%
KOHL'S 1 10/97 7.15 576,890 REAL ESTATE TAXES
10/05 7.40 597,062 PROPERTY INS
10/10 7.65 617,233 LIABILITY INS
1-60 8.05 649,506 NATURAL EXP-OUT-FIRE 6%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
2-60 8.45 681,780 NATURAL EXP-OUT-FIRE 6%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
3-60 8.85 714,053 NATURAL EXP-OUT-FIRE 6%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
4-60 8.85 714,053 NATURAL EXP-OUT-FIRE 6%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 2-SUITE B001 2 7,500 9/96 8/01 - 13.00 97,500 5.00 UNLIMITED NATURAL EXP-OUT+GFIR 12%
HALLMARK SHOWCASE 5 REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 3-SUITE B002 2 4,000 7/96 6/01 - 12.50 50,000 NATURAL EXP-OUT+GFIR+MG 10
SOUTHWEST BELL 4 7/98 13.00 52,000 REAL ESTATE TAXES
7/00 13.50 54,000 LIABILITY INS
PROPERTY INS
# 4-SUITE B003 2 2,710 10/96 9/01 - 13.00 35,230 NATURAL EXP-OUT+GFIR+MG 15
PERFUME PIZAZZ 3 10/99 14.00 37,940 RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
# 5 SUITE B004 2 3,015 7/96 6/01 - 13.00 39,195 6.00 UNLIMITED NATURAL EXP-OUT+GFIR+MG 15
OH GERRY OPTICAL 4 7/99 13.50 40,703 RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
# 6-SUITE BOO5 2 3,000 9/96 8/01 - 12.00 36,000 4.00 UNLIMITED NATURAL EXP-OUT+GFIR+MG 15
SHOE CENTS 4 RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
# 7-SUITE B006 2 2,228 5/96 4/01 - 13.50 30,078 NATURAL EXP-OUT+GFIR+MG 10
JENNY CRAIG 3 REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
</TABLE>
<PAGE>
<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) RECOVERIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 8-SUITE B007 2 2,010 5/96 4/01 - 12.00 24,120 4.00 UNLIMITED 700 EXP-OUT+GFIR+MG 15
SALLY BEAUTY 3 REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 9-SUITE C000 1 40,000 4/96 1/12 - 9.00 360,000 3.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
BED BATH & BEYOND 1 4/01 9.90 396,000 REAL ESTATE TAXES
4/06 10.89 435,600 PROPERTY INS
LIABILITY INS
1-60 11.98 479,200 3.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
2-60 13.18 527,200 3.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
3-60 14.50 580,000 3.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 10-SUITE D000 1 30,439 4/96 1/12 - 7.75 235,902 2.00 UNLIMITED NATURAL EXP-OUT-FIRE
MARSHALL'S 1 4/98 8.00 243,512 CAM ADMIN
4/02 8.25 251,122 REAL ESTATE TAXES
4/05 8.50 258,732 LIABILITY INS
4/08 8.75 266,341
1-60 9.50 289,170 2.00 UNLIMITED NATURAL EXP-OUT-FIRE
CAM ADMIN
REAL ESTATE TAXES
LIABILITY INS
2-60 10.00 304,390 2.00 UNLIMITED NATURAL EXP-OUT-FIRE
CAM ADMIN
REAL ESTATE TAXES
LIABILITY INS
3-60 10.50 319,610 2.00 UNLIMITED NATURAL EXP-OUT-FIRE
CAM ADMIN
REAL ESTATE TAXES
LIABILITY INS
# 11-SUITE E000 2 12,033 5/96 1/06 - 11.00 132,363 3.00 UNLIMITED NATURAL EXP-OUT+GFIR+MG 15
NILL BROTHER SPORT 6 5/01 12.40 149,209 RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
1-60 14.54 174,960 3.00 UNLIMITED NATURAL EXP-OUT+GFlR+MG 15
RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
2-60 16.73 201,312 3.00 UNLIMITED NATURAL EXP-OUT+GFIR+MG 15
RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
</TABLE>
<PAGE>
<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) RECOVERIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 12-SUITE F000 2 15,003 5/96 4/11 - 8.25 123,775 NATURAL EXP-OUT+GFIR+MG 12
COOMERS CRAFTS 6 5/98 9.00 135,027 RE TAX W/12%
5/01 9.90 148,530 LIAB INS W/12%
5/06 10.80 162,032 PROP INS w/12%
# 13-SUITE H000 1 50,640 4/96 3/16 - 8.00 405,120 NATURAL EXP-OUT-FIRE+MG 10
RHODES FURNITURE 1 4/01 9.25 468,420 REAL ESTATE TAXES
4/06 10.50 531,720 PROPERTY INS
4/11 11.75 595,020 LIABILITY INS
1-60 13.99 708,400 NATURAL EXP-OUT-FIRE+MG 10
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
2-60 15.99 809,600 NATURAL EXP-OUT-FIRE+MG 10
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 14-SUITE I000 1 30,000 4/96 3/11 - 13.25 397,500 NATURAL EXP-OUT-FIRE 10%
BARNES NOBLE 1 4/01 14.50 435,000 REAL ESTATE TAXES
4/06 15.75 472,500 PROPERTY INS
LIABILITY INS
1-60 17.00 510,000 NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
2-60 18.25 547,500 NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
# 15-SUITE J000 1 63,800 1/96 12/15 - 13.50 861,300 8.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
AMC THEATRES 1 1/98 14.75 941,050 REAL ESTATE TAXES
1/02 15.50 988,900 LIABILITY INS
1/06 16.50 1,052,700
1/10 17.50 1,116,500
1/14 19.00 1,212,200
1-60 20.50 1,307,900 8.00 UNLIMITED NATURAL EXP-OUT-FIRE 10%
REAL ESTATE TAXES
LIABILITY INS
2-60 22.00 1,403,600 8.00 UNLIMITED NATURAL EXP-OUT-FIRE lO%
REAL ESTATE TAXES
LIABILITY INS
3-60 23.50 1,499,300 8.00 UNLIMITED NATURAL EXP-OUT-FIRE lO%
REAL ESTATE TAXES
LIABILITY INS
4-60 23.50 1,499,300 8.00 UNLIMITED NATURAL EXP-OUT-FIRE lO%
REAL ESTATE TAXES
LIABILITY INS
# 16-SUITE J000 1 1 10/97 12/15 - %80000.00 80,000 NATURAL NONE
AMC EXPANSION 1
1-60 %80000.00 80,000 NATURAL NONE
</TABLE>
<PAGE>
<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) RECOVERIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-60 %80000.00 80,000 NATURAL NONE
3-60 %80000.00 80,000 NATURAL NONE
4-60 %80000.00 80,000 NATURAL NONE
#17-SUITE K005 2 6,800 5/96 1/97 - 0.00 0 5.00 UNLIMITED NATURAL EXP-OUT+GFIR 15%
KUPPENHEIMER 5 REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
#18-SUITE K005 2 6,800 3/98 2/03 - 14.50 98,600 5.00 UNLIMITED NATURAL EXP-OUT+GFIR 15%
PROFORMA VACANT 5 REAL ESTATE TAXES
PROPERTY INS
LIABILITY INS
#19-SUITE K004 2 1,200 7/96 6/01 - 16.00 19,200 4.00 UNLIMITED 500 EXP-OUT+GFIR 15%
GREAT CLIPS 3 7/98 17.50 21,000 RE TAX W/15%
PROPERTY INS
LIABILITY INS
#20-SUITE K003 2 2,000 8/96 7/01 - 16.50 33,000 NATURAL EXP-OUT+GFIR+NG 15
COMPUTER RENNAISAN 3 8/98 17.00 34,000 RE TAX W/15%
8/99 17.50 35,000 LIAB INS W/15%
8/00 18.00 36,000 PROP INS W/15%
#21-SUITE KOOl 2 4,500 5/97 4/02 - 15.00 67,500 NATURAL EXP-OUT+GFIR+MG 15
MATTRESS FIRM 4 5/00 16.50 74,250 RE TAX W/15%
LIAB INS W/15%
PROP INS W/15%
#22-SUITE K002 2 3,500 10/97 9/02 - 12.25 42,875 NATURAL EXP-OUT+GFIR+MG 15
SPEC TENANT 4 10/99 13.25 46,375 REAL ESTATE TAXES
10/00 14.50 50,750 LIAB INS W/15%
` PROP INS w/15%
#23-SUITE OUT1 4 6,600 5/95 12/44 - 0.00 0 NATURAL FIXED CAM
CHILI'S 8
#24-SUITE OUT2 4 3,500 3/96 12/45 - 0.00 0 NATURAL FIXED CAM
FAZOLI'S 8
#25-SUITE OUT3 4 7,000 7/96 12/45 - 0.00 0 NATURAL FIXED CAM
SMOKEHOUSE BBQ 8
-------
388,963
=======
</TABLE>
<PAGE>
PRO-JECT ASSUMPTIONS REPORT
<PAGE>
INDEPENDENCE COMMONS 8/97
PROJECT DESIGNATOR: INDC
REVISION: 7/11/97 @ 15:15
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
7/25/97 @ 16:19
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF INDEPENDENCE COMMONS 8/97 BEGINNING 8/1997 FOR 20 YEARS ON
A FISCAL YEAR BASIS
AREA MEASURES
- -------------
TGLA
DESCRIBED AS TOTAL CENTER GLA (INCLUDES OUTPARCELS)
1997 VALUE - 382,162
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA (INCLUDES OUTPARCELS)
1997 VALUE - 371,804
1998 VALUE - 381,030
1999 VALUE - 382,163
2000 VALUE - 382,163
2001 VALUE - 375,247
2002 VALUE - 380,163
2003 VALUE - 380,463
2004 VALUE - 382,163
2005 VALUE - 382,163
2006 VALUE - 377,841
2007 VALUE - 378,444
2008 VALUE - 379,588
2009 VALUE - 382,163
2010 VALUE - 382,163
2011 VALUE - 377,706
2012 VALUE - 375,204
2013 VALUE - 379,213
2014 VALUE - 382,163
2015 VALUE - 382,163
2016 VALUE - 367,382
THEREAFTER - CONSTANT
OGLA
DESCRIBED AS OUTPARCEL GLA (CHILI'S, FAZZOLI'S, SMOKEHOUSE BBQ)
1997 VALUE - 17,100
THEREAFTER - CONSTANT
CGLA
DESCRIBED AS CENTER GLA (EXCLUDES OUTPARCELS)
+100.0% OF TGLA-100.0% OF OGLA
OCGL
DESCRIBED AS OCCUPIED CENTER GLA (EXCLUDES OUTPARCELS)
+100.0% OF OCCA-100.0% OF OGLA
PIEX
DESCRIBED AS GLA EXCLUDED FOR PROP INS ALLOCATION (EXCL MARSHALL'S, AMC AND
ALL OUTPARCELS)
1997 VALUE - 111,339
THEREAFTER - CONSTANT
PIGL
DESCRIBED AS GLA FOR PROP INS ALLOCATION
+100.0% OF TGLA-100.0% OF PIEX
<PAGE>
PAGE 2
GROWTH RATES
- ------------
GREN
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GEXP
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GCPI
1997 VALUE - 3.00
THEREAFTER - CONSTANT
GSAL
1997 VALUE - 3.00
THEREAFTER - CONSTANT
MARKET RATES
- ------------
STRU
1997 VALUE - 0.10
THEREAFTER - CONSTANT
MRBB
1997 VALUE - 13.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MRBK
1997 VALUE - 14.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MRB1
1997 VALUE - 12.50
THEREAFTER - GROWING AT GROWTH RATE GREN
MRBF
1997 VALUE - 11.00
THEREAFTER - GROWING AT GROWTH RATE GREN
NCOM
1997 VALUE - 3.00
THEREAFTER - CONSTANT
RCOM
1997 VALUE - 0.00
THEREAFTER - CONSTANT
BCOM
+30.0% OF NCOM +70.0% OF RCOM
NALT
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE GEXP
RALT
1997 VALUE - 0.00
THEREAFTER - GROWING AT GROWTH RATE GEXP
BALT
+30.0% OF NALT +70.0% OF RALT
RSTP
1997 VALUE - 0.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 3
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 188,971
1998 VALUE - 201,175
1999 VALUE - 203,806
2000 VALUE - 205,776
2001 VALUE - 207,947
2002 VALUE - 218,022
2003 VALUE - 220,920
2004 VALUE - 224,090
2005 VALUE - 226,197
2006 VALUE - 233,369
2007 VALUE - 240,086
2008 VALUE - 244,142
2009 VALUE - 248,945
2010 VALUE - 253,669
2011 VALUE - 258,630
2012 VALUE - 265,149
2013 VALUE - 273,014
2014 VALUE - 283,147
2015 VALUE - 285,388
2016 VALUE - 283,761
THEREAFTER - CONSTANT
OUTPARCEL CONTRIB , REFERRED TO AS OUTP
DESCRIBED AS OUTPARCEL CONTRIBUTION
AN INFORMATIONAL EXPENSE
1997 VALUE - 4,500
1998 VALUE - 4,500
1999 VALUE - 4,500
2000 VALUE - 4,500
2001 VALUE - 5,355
2002 VALUE - 5,355
2003 VALUE - 5,355
2004 VALUE - 5,355
2005 VALUE - 5,355
2006 VALUE - 6,210
2007 VALUE - 6,210
2008 VALUE - 6,210
2009 VALUE - 6,210
2010 VALUE - 6,210
2011 VALUE - 7,065
THEREAFTER - CONSTANT
FIRE PROTECTION , REFERRED TO AS FIRE
DESCRIBED AS NET FIRE PROTECTION EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 2,800
THEREAFTER - GROWING AT GROWTH RATE GEXP
GROSSED UP FIRE , REFERRED TO AS GFIR
DESCRIBED AS GROSSED UP FIRE PROTECTION (/.19065)
AN INFORMATIONAL EXPENSE
1997 VALUE - 14,687
THEREAFTER - GROWING AT GROWTH RATE GEXP
TOTAL CAM EXPENSE , REFERRED TO AS CAME
DESCRIBED AS TOTAL CAM EXPENSE
<PAGE>
PAGE 4
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 295,180
THEREAFTER - GROWING AT GROWTH RATE GEXP
EXP-OUT-FIRE , REFERRED TO AS 1CAM
DESCRIBED AS TOTAL CAM EXPENSE LESS OUTPARCEL CONT AND FIRE PROTECTION
AN INFORMATIONAL EXPENSE
+100.0% OF CAME-100.0% OF OUTP
- -100.0% OF FIRE
EXP-OUT-FIRE 6% , REFERRED TO AS 1C06
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT AND FIRE PROTECTION W/6% ADMIN
AN INFORMATIONAL EXPENSE
+106.0% OF 1CAM
EXP-OUT-FIRE 10% , REFERRED TO AS 1C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT AND FIRE PROTECTION W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 1CAM
EXP-OUT-FIRE+MG , REFERRED TO AS 2CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT AND FIRE PROTECTION PLUS MGMT FEES
AN INFORMATIONAL EXPENSE
+100.0% OF 1CAM+100.0% OF MGMT
EXP-OUT-FIRE+MG 10, REFERRED TO AS 2C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT AND FIRE PROTECTION PLUS MGMT FEES
AND 10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 2CAM
EXP-OUT+GFIR , REFERRED TO AS 3CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF 1CAM+100.0% OF GFIR
EXP-OUT+GFIR 10% , REFERRED TO AS 3C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND 10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 3CAM
EXP-OUT+GFIR 12% , REFERRED TO AS 3C12
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND 12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF 3CAM
EXP-OUT+GFIR 15% , REFERRED TO AS 3C15
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND 15% ADMlN
AN INFORMATIONAL EXPENSE
+115.0% OF 3CAM
EXP-OUT+GFIR+MG , REFERRED TO AS 4CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND MGMT FEES
AN INFORMATIONAL EXPENSE
+100.0% OF 3CAM+100.0% OF MGMT
EXP-OUT+GFIR+MG 10, REFERRED TO AS 4C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND MGMT FEES
W/10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 4CAM
EXP-OUT+GFIR+MG 12, REFERRED TO AS 4C12
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND MGMT FEES
W/12% ADMIN
AN INFORMATIONAL EXPENSE
+112.0% OF 4CAM
<PAGE>
PAGE 5
EXP-OUT+GFIR+MG 15, REFERRED TO AS 4C15
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSSED UP FIRE AND MGMT FEES
W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 4CAM
REAL ESTATE TAXES , REFERRED TO AS RETX
DESCRIBED AS REAL ESTATE TAXES
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 592,000
THEREAFTER - GROWING AT GROWTH RATE GEXP
RE TAX W/15% , REFERRED TO AS RE15
DESCRIBED AS REAL ESTATE TAXES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF RETX
PROPERTY INS , REFERRED TO AS PINS
DESCRIBED AS PROPERTY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 29,644
THEREAFTER - GROWING AT GROWTH RATE GEXP
LIABILITY INS , REFERRED TO AS LINS
DESCRIBED AS LIABILITY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 79,920
THEREAFTER - GROWING AT GROWTH RATE GEXP
TOTAL INS EXPENSE , REFERRED TO AS INSE
DESCRIBED AS TOTAL INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PINS+100.0% OF LINS
LIAB INS W/15% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF LINS
PROP INS W/15% , REFERRED TO AS PI15
DESCRIBED AS PROPERTY INS W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF PINS
RE TAX W/12% , REFERRED TO AS RE12
AN INFORMATIONAL EXPENSE
+112.0% OF RETX
LIAB INS W/12% , REFERRED TO AS LI12
AN INFORMATIONAL EXPENSE
+112.0% OF LINS
PROP INS W/12% , REFERRED TO AS PI12
AN INFORMATIONAL EXPENSE
+112.0% OF PINS
MISC. EXPENSE , REFERRED TO AS MSCE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 25,000
THEREAFTER - GROWING AT GROWTH RATE GEXP
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 3.00
<PAGE>
PAGE 6
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF GROSS RENTAL INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 4.00
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
- ----------------------
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
<PAGE>
PAGE 7
CAPITAL EXPENDITURES
- --------------------
STRUCTURAL RESERVE
MARKET RATE STRU MULTIPLIED BY AREA MEASURE CGLA
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - ANCHOR
2 - IN LINE SHOP
3 - OUTPARCEL (OWNED)
4 - OUTPARCEL (SOLD)
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - ANCHOR
2 - IN LINE < 1000
3 - IN LINE 1000-2999
4 - IN LINE 3000-4999
5 - IN LINE 5000-10000
6 - IN LINE > 10000
7 - OUTPARCEL (OWNED)
8 - OUTPARCEL (SOLD)
COST CENTERS
- ------------
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
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
- -----------------
NONE
<PAGE>
PAGE 8
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/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>
PRO-JECT LEASE EXPIRATION REPORT
<PAGE>
INDEPENDENCE COMMONS 8/97
PROJECT DESIGNATOR: INDC
REVISION: 7/11/97 @ 15:15
EXPIRATION REPORT
YEARS 1998 TO 2008, ALL TENANTS,
INCLUDING OPTIONS, EXCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
7/21/97 @ 17:57
<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>
# 7-SUITE B006 INITIAL
JENNY CRAIG 2,228 4/2001 13.50 3.85 17.35 15.19
# 8-SUITE B007 INITIAL
SALLY BEAUTY 2,010 4/2001 12.00 3.92 15.92 15.19
# 3-SUITE B002 INITIAL
SOUTHWEST BELL 4,000 6/2001 13.50 3.85 17.35 15.19
# 5-SUITE B004 INITIAL
OH GERRY OPTICAL 3,015 6/2001 13.50 4.25 17.75 15.19
# 19-SUITE K004 INITIAL
GREAT CLIPS 1,200 6/2001 17.50 3.54 21.04 16.32
# 20-SUITE K003 INITIAL
COMPUTER RENNAISAN 2,000 7/2001 18.00 4.25 22.25 16.32
----- ----- ---- ----- -----
6 FY101 EXPIRATIONS 14,453 14.25 3.97 18.22 15.44
# 2-SUITE B001 INITIAL
HALLMARK SHOWCASE 7,500 8/2001 13.00 3.24 16.24 14.07
# 6-SUITE B005 INITIAL
SHOE CENTS 3,000 8/2001 12.00 4.25 16.25 15.19
# 4-SUITE B003 INITIAL
PERFUME PIZAZZ 2,710 9/2001 14.00 4.25 18.25 15.19
# 21-SUITE K001 INITIAL
MATTRESS FIRM 4,500 4/2002 16.50 4.39 20.89 16.81
----- ----- ---- ----- -----
4 FY102 EXPIRATIONS 17,710 13.87 3.86 17.73 15.13
----- ----- ---- ----- -----
10 CUMULATIVE EXPS 32,163 14.04 3.91 17.95 15.27
# 22-SUITE K002 INITIAL
SPEC TENANT 3,500 9/2002 14.50 4.11 18.61 16.81
# 18-SUITE K005 INITIAL
PROFORMA VACANT 6,800 2/2003 14.50 3.47 17.97 17.31
----- ----- ---- ----- -----
2 FY103 EXPIRATIONS 10,300 14.50 3.68 18.18 17.14
----- ----- ---- ----- -----
12 CUMULATIVE EXPS 42,463 14.15 3.85 18.01 15.72
</TABLE>
<PAGE>
CUSHMAN & WAKEFIELD INVESTOR SURVEY
<PAGE>
Retail Market
Neighborhood and Community Centers
<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
- ------------------------------------------------------------------------------------------------------------------------
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
9.8% 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% 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 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% 3.6% 8.2 8.8
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Total Responses 24 24 18 18 18 18 22 22 22 22 22 22
Weighted Average (%) 9.5% 10.1% 10.0% 10.7% 13.2% 13.7% 3.2% 3.5% 3.5% 3.8% 8.5 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 - Autumn 1996
REAL ESTATE OUTLOOK
<PAGE>
Retail Market
Power Center & "Big Box"
<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
- ------------------------------------------------------------------------------------------------------------------------
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
involvement due to leasing issues and/or additional capital investment for
physical issues
----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Autumn 1996
REAL ESTATE OUTLOOK
<PAGE>
Retail Market
Regional Malls
<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
- ------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 5.0% 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% 10.0% 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% 1l.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% 1l.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 - Autumn 1996
REAL ESTATE OUTLOOK
<PAGE>
STATE OF MISSOURI LETTER
<PAGE>
[Letterhead of Cushman & Wakefield, Inc.]
Martha A Shelley, MAI
Director
Valuation Advisory Services
June 25, 1997 =====================
RECEIVED
Judy Kolb -----------
Executive Director JUN 26 1997
Missouri Real Estate Appraisers Commissions -----------
3605 Missouri Boulevard MISSOURI REAL ESTATE
Jefferson City, MO 65102-1335 APPRAISERS COMMISSION
=====================
Dear Ms. Kolb:
Cushman & Wakefield has been retained by Master Realty, Inc. to appraise a
portfolio of 10 retail shopping centers, one of which is located In Missouri.
I, Martha A. Shelley, MAI, will conduct the appraisal and inspect the property.
I am a Certified General Appraiser in the State of New York (No. 46000031698). A
copy of my certification and a current original stamped history letter are
enclosed with this letter.
I plan to inspect the property on July 2, 1997 and will be in Missouri for two
days at that time.
The subject property is commonly known as Independence Commons shopping center,
a 362,000 square-foot retail "power" center. It is located on the northeast
corner of 39th Street and Arrowhead Drive, City of Independence, Jackson County,
Missouri.
I understand that no temporary permit will not be sent. Please sign below if you
agree to the above and return to me via facsimile (212-841-7849).
Sincerely,
/s/ Martha A. Shelley
Martha A. Shelley, MAI
New York State Certified General Appraiser No. 46000031698
AGREED BY:
/s/ Judith A. Kolb
- ------------------
Judy Kolb
Executive Director
encl. Irrevocable Consent Form
original stamped history letter
copy of New York State Certification
<PAGE>
PROFESSIONAL QUALIFICATIONS
<PAGE>
Qualifications Of Martha A. Shelley
================================================================================
Appraisal Institute Courses:
Standards of Professional Practice, 1992/93
Report Writing, 1990
Case Studies, 1990
Capitalization Theory and Techniques - Parts A & B, 1989
Basic Valuation Procedures, 1988
Appraisal Principles, 1987
Continuing Education:
Understanding Limited Scope Appraisals, 1994
Mello Roos/Assessment Bond Seminar II, 1995
Eminent Domain Seminar, 1995
OREA Federal and State Laws and Regulations, 1995
Certified in the Appraisal Institute's voluntary program of continuing education
for its designated members
<PAGE>
==============================================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Carillon Place
SEC/Airport-Pulling Road & Pine Ridge Road
City of Naples
Collier County, Florida
==============================================================
IN A SUMMARY REPORT
As Is Market Value
As of July 14, 1997
Prepared For:
Master Realty, Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas, 18th Floor
New York, New York 10036-8401
Lehman Brothers, Inc.
3 World Financial, 20th Floor
New York, New York 10285
Prepared By:
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, NY 10019
<PAGE>
Cushman & Wakefield, Inc. CUSHMAN &
51 West 52nd Street WAKEFIELD(R)
New York, NY 10019-6178
(212) 841-7500 Improving your place
in the world
August 13, 1997
Mr. Brian Summers
Vice President
Master Realty, Inc.
Managing Member of Community Centers I, LLC
1180 Avenue of the Americas, 18th Floor
New York, New York 10036-8401
Mr. Thomas Burke
Vice President
Lehman Brothers, Inc.
3 World Financial Center, 20th Floor
New York, New York 10285
Re: Complete Appraisal of Real Property
Carillon Place
SEC/Airport-Pulling Road & Pine Ridge Road
City of Naples
Collier County, Florida
Gentlemen:
In fulfillment of our agreement as outlined in the Letter of Engagement, Cushman
& Wakefield, Inc. is pleased to transmit our report estimating the market value
of the leased fee estate in the above referenced real property. Specifically, we
are providing an As Is Market Value with the results conveyed in this summary
report.
As specified in the Letter of Engagement, the value opinion reported herein 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 (USPAP). The results are being conveyed in a Summary Report according
to our agreement. As such, it presents only summary discussions of the data,
reasoning, and analyses used in the appraisal process to develop the appraiser's
opinion of value. Supporting documentation concerning the data, reasoning, and
analyses are retained in the appraiser's file, as well as our Original Appraisal
report dated February 16, 1996 which is incorporated by reference. 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.
This report has been prepared for Master Realty, Inc. (Managing Member of
Community Centers I, LLC) and Lehman Brothers, Inc. (Client) and it is intended
only for the specified use of the Client.
<PAGE>
Cushman & Wakefield, Inc.
Master Realty, Inc.
Lehman Brothers, Inc.
August 13, 1997
Page 2
The property was inspected by Jay F. Booth, MAI. The report has been prepared by
Jay F. Booth, MAI. Richard W. Latella, MAI has reviewed and approved the report,
but did not inspect the property.
As a result of our analysis, we have formed an opinion that the As Is Market
Value of the Leased Fee Estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
14, 1997, the date of inspection, was:
TWENTY EIGHT MILLION DOLLARS
$28,000,000
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, INC.
/s/Jay F. Booth /s/Richard W. Latella
Jay F. Booth, MAI Richard W. Latella, MAI
Associate Director Senior Director
Retail Valuation Group Retail Valuation Group
State of Florida Temporary
Practice Permit No. 0001138
C&W File #: 97-9394
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Carillon Place
Property Type: Retail Power Center
Location: The subject property is located at the southeast
corner of Airport-Pulling Road and Pine Ridge
Road, City of Naples, Collier County, Florida.
Date of Inspection: July 14, 1997
Date of Value: July 14, 1997
Total Land Area
Gross Area: 31.98+/- acres
Net Area (Owned): 29.16+/- acres
Zoning: PUD, Planned Unit Development
Highest and Best Use
As If Vacant: Commercial/retail utilization built to its maximum
feasible FAR.
As Improved: Continued retail use as a power/community center.
Improvements
Type: Single-level power center constructed of concrete
block with pink brick exterior and red barrel-tile
roof. Built in 1994, the property is considered to
be in excellent condition.
Gross Leasable Area (Owned): ==================================================
Major Tenants Bldg. Area Allocation
==================================================
Winn-Dixie 50,540+/- SF
--------------------------------------------------
TJ Maxx 32,900+/- SF
--------------------------------------------------
Service Merchandise 50,061+/- SF
--------------------------------------------------
Ross Stores 25,500+/- SF
--------------------------------------------------
Circuit City 21 285+/- SF
--------------------------------------------------
OfficeMax 23,500+/- SF
==================================================
Total Majors 203,786+/- SF 76.5%
==================================================
In-Line Shops 47,654+/- SF 17.9%
==================================================
Owned Outparcels 14,998+/- SF 5.6%
==================================================
Total Owned GLA 266,438+/- SF 100.0%
==================================================
Total Building Area: 281,838+/- square feet (including non-owned
outparcels)
Land-Building Ratio/
Site Coverage: 4.77:1 / 21.0%
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Income and Expense Information:
- --------------------------------------------------------------------------------
Operating Summary
================================================================================
Component Actual 1996 Budget 1997 C&W FY98
- --------------------------------------------------------------------------------
Minimum Rent: $2,710,087 $2,771,379 $2,789,133
- --------------------------------------------------------------------------------
Overage Rent: $ 0 $ 0 $ 10,401
- --------------------------------------------------------------------------------
Recoveries/Other: $ 548,176 $ 599,181 $ 585,593
- --------------------------------------------------------------------------------
Expenses: $ 709,758 $ 702,563 $ 752,144
- --------------------------------------------------------------------------------
Net Operating Income: $2,548,506 $2,667,997 $2,632,983
- --------------------------------------------------------------------------------
- ---------------------------
Income Approach Assumptions
Discounted Cash Flow
- ---------------------------
Current Occupancy: 96.2% (Based Upon Total Owned GLA)
Forecasted Stabilized Occupancy*: 99.0% (Based Upon Total Owned GLA)*
* Exclusive of downtime between leases.
Forecasted Date of Stabilization: October 1997
Holding Period: 10 years (fiscal basis)
Growth Rate Assumptions
Sales Growth: 3.5% - 1997-2007
Rent Growth: 3.5% - 1997-2007
Expense Growth: 3.5% - 1997-2007
Tax Growth: 3.5% - 1997-2007
Tenant Alterations
New Tenants: $6.00/SF
Renewal Tenants: $2.00/SF
Leasing Commissions
New Tenants: $3.50/SF
Renewal Tenants: $1.75/SF
Tenant Renewal Probability: 70.0%
Cost of Sale at Reversion: 2.5%
- ---------------------------
Investment Rate Parameters
"As Is Valuation"
- ---------------------------
As Is Investment Rates
Going-In Capitalization Rate: 9.25% - 9.75%
Terminal Capitalization Rate: 9.25% - 9.75%
Discount Rate: 10.50% - 11.00%
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
- ---------------------------
Market Value Indicators
"As Is Valuation"
- ---------------------------
Cost Approach: N/A
Sales Comparison Approach: $27,500,000 - $28,500,000
Income Capitalization Approach
Discounted Cash Flow: $28,000,000
Direct Capitalization: $28,000,000
Value Conclusion: $28,000,000
Resulting Indicators
Value Per Sq/Ft Owned GLA: $105.09
Net Operating Income (FY 1998): $2,633,011
Implicit Capitalization Rate: 9.40%
Exposure Time Implicit in
Market Value Conclusion: Not to Exceed 12 Months
Special Assumptions Affecting Valuation:
The following special assumptions have been considered within the
assignment at hand. These assumptions are in addition to the assumptions and
limiting conditions which follow at the end of the report.
1. Throughout this analysis we have relied on information provided by
ownership and management which we assume to be accurate. Such
information includes but is not limited to leases, lease abstracts,
rent roll, and budgeted operating data. Should any information
received be subsequently shown to be erroneous or incorrect, we
reserve the right to amend the value conclusion herein.
2. We have made a visual inspection of the subject property and local
environs in the process of this analysis. Our comments are limited
to those items which were readily observable and apparent to such an
inspection. Comments regarding the structural integrity of
improvements are beyond the scope of our engagement and are best
made by a professional engineer.
3. Our cash flow analysis and valuation has recognized that all signed
leases and pending leases with a high probability of coming to
fruition are signed and implemented according to the terms provided.
Such leases are identified within the body of this report.
4. The forecasts of income, expenses, and absorption of vacant space
included herein 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.
5. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Special Risk Factors:
The following special risk factors for the subject property have been
considered during the appraisal assignment at hand:
o T.J. Maxx and Dollar Tree have recently executed signed leases to
occupy the former Linen Barn space. These leases are forecasted to
begin in October 1997. Our analysis has reflected these
transactions.
o Domino's Pizza currently has a lease out-for-signature for the
current Papa John's space. Although not yet signed as of this
writing, we are advised that this deal has a very high probability
of coming to fruition. As such, we have included the Domino's lease
in our analysis.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTOGRAPH]
View of northern end of center off of Pine Ridge Road at OfficeMax.
[PHOTOGRAPH]
OfficeMax and Pier 1 Imports at northern end of property.
<PAGE>
Photographs of Subject Property
================================================================================
[PHOTOGRAPH]
Circuit City and Ross Dress For Less
[PHOTOGRAPH]
T.J. Maxx and Winn Dixie Marketplace at southern end of center.
<PAGE>
Photographs of Subject Property
================================================================================
[PHOTOGRAPH]
Central portion of property (Coconuts and Clothestime).
[PHOTOGRAPH]
Former Linen Barn store, current vacancy adjacent to T J. Maxx.
<PAGE>
Photographs of Subject Property
================================================================================
[PHOTOGRAPH]
Eckerd Drug and Payless Shoesource outpad.
[PHOTOGRAPH]
Looking north along Airport-Pulling Road, subject at right.
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION .............................................................. 1
Identification of Property ........................................... 1
Property Ownership and Recent History ................................ 1
Purpose and Intended Use 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 .................................................... 5
DEMOGRAPHIC AND ECONOMIC ANALYSIS ......................................... 6
MARKET ANALYSIS ........................................................... 11
PROPERTY DESCRIPTION ...................................................... 21
Site Description ..................................................... 21
Improvements Description ............................................. 23
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 27
ZONING .................................................................... 29
HIGHEST AND BEST USE ...................................................... 30
Highest and Best Use of Site As Though Vacant ........................ 30
Highest and Best Use of Property As Improved ......................... 30
VALUATION PROCESS ......................................................... 31
SALES COMPARISON APPROACH ................................................. 32
INCOME APPROACH ........................................................... 37
RECONCILIATION AND FINAL VALUE ESTIMATE ................................... 57
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 59
CERTIFICATION OF APPRAISAL ................................................ 61
ADDENDA ................................................................... 62
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is Carillon Place, a 266,438+/- square foot
community/power center located at the southeast corner of Airport-Pulling Road
(Route 31) and Pine Ridge Road (Route 896), City of Naples, Collier County,
Florida. Additional non-owned outparcel development consists of four pad sites
totaling 15,400+/- square feet of building area. All outparcels have been sold
except for Boston Chicken, which is subject to a ground lease, and Eckerd
Drugs/Payless ShoeSource, which is subject to building lease agreements. Anchor
tenants include Winn-Dixie, T.J. Maxx, Service Merchandise, Ross, Circuit City,
and OfficeMax. Other major tenants include Pier I Imports, Eckerd Drugs, and
Floral Supply Mart. The center opened in March 1994 and is currently 96.2
percent leased based on total owned GLA.
Naples is located on the Gulf of Mexico in southwest Florida, 30.0+/-
miles south of Ft. Myers and within 150.0+/- miles of Miami, Ft. Lauderdale, and
Tampa. Its location on the Gulf has enabled Naples to develop a strong base of
resident, seasonal, and tourist population. Upscale shopping districts,
prestigious residential neighborhoods, planned communities, and a semi-tropical
climate have fostered a unique resort and retirement community in this market.
Naples is considered to be one of Florida's most affluent markets.
Property Ownership and Recent History
Title to the subject property is currently vested with Community Centers
I, LLC, a joint venture between Developers Diversified Realty Corporation (DDR)
and DRA Advisors, Inc. (DRA). The subject was acquired as part of the former
Homart Community Center Division for a total purchase price of approximately
$500.0 million from General Growth Properties, Inc. The date of transfer was
November 17, 1995. According to Collier County records deed book 2123, page 724,
dated November 28, 1995, the allocated sale price for Carillon Place was
$25,024,500.
A history of the project shows that the 31.98+/- acre site was originally
acquired by Homart Community Centers, Inc. for a recorded consideration of
$6,300,000. Subsequent to the sale, Homart developed the subject center to its
present configuration with the project opening in the Spring of 1994. Subsequent
to its opening, Homart sold four outparcels which are summarized in the
following chart:
- --------------------------------------------------------------------------------
Carillon Place
Outparcel Sales
- --------------------------------------------------------------------------------
Entity Pad No. Site Size SF Date of Sale Price Price/SF
- --------------------------------------------------------------------------------
First Regal A-1 32,489 11/28/94 $ 625,666 $19.26
- --------------------------------------------------------------------------------
First Union Bank A-2 37,110 9/09/94 $ 908,190 $24.47
- --------------------------------------------------------------------------------
Applebee's C 26,469 1/95 $ 636,300 $24.04
- --------------------------------------------------------------------------------
Fifth & Third Bank D 26,819 12/23/94 $ 729,558 $27.20
- --------------------------------------------------------------------------------
Total 122,887 $2,899,714 $23.60
- --------------------------------------------------------------------------------
Source: Homart Community Center Division
- --------------------------------------------------------------------------------
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
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Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee estate in the subject property. The function of this appraisal is to
provide an independent valuation and analysis of the property and to assist the
client in evaluating the asset for underwriting purposes in connection with a
proposed financing.
Extent of the 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;
o Interviewed representatives of ownership, the property management
company, and leasing personnel;
o Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy;
o Conducted market research of occupancy rates, asking rents,
concessions and operating expenses at competing properties.
o Reviewed trade area specific data for the property as prepared by
Equifax National Decision Systems;
o Conducted market inquiries into recent sales of similar retail
centers 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 Reviewed lease documents and a representative sample of actual
tenant leases. We were also provided with lease abstracts, a current
rent roll, and other tenant specific data;
o Reviewed a detailed budget of income and expense forecasts
o Estimated market rental rates, absorption, and stabilized income and
expenses for the subject based on available market data and current
market thinking relative to growth in market rents and market
absorption;
o Developed a value estimate via the Sales Comparison Approach;
o Prepared 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 Prepared a forecast of income and expenses in connection with
preparing an estimate of stabilized net income for direct
capitalization purposes;
o Reconciled the value indications and concluded a final value
estimate for the subject in its "as is" condition; and
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
o Prepared a complete appraisal with the results conveyed in this
summary report in accordance with Standards Rule 2-2(b) of USPAP. A
complete appraisal involves an estimate of market value without any
departure from the Uniform Standards of Professional Appraisal
Practice maintained by the Appraisal Foundation. A summary appraisal
format provides a summary presentation of the data, analyses, and
conclusions rather than presenting a self-contained narrative
report. Other pertinent data and information is retained in our
files and/or included in our Original Appraisal dated February
16, 1996 which is incorporated here by reference.
Date of Value and Property Inspection
The property has been valued as of July 14, 1997. On that date, Jay F.
Booth, MAI 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.
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VALUATION ADVISORY SERVICES
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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.
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. 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.
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
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.
These definitions have been taken into account when arriving at the
estimate of market value reported in this appraisal assignment.
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
Legal Description
A complete legal description of the property is provided within the body
of the A.L.T.A. Title Policy dated October 13, 1995 which is provided in the
Addenda. The property can generally be described as all of Tracts B, D, and G of
Carillon, Plat Book 21, Pages 59-61, and part of Tract E of Carillon, Plat Book
21, Pages 59-61, recorded in official record book 1999, Pages 2095-2099,
Township 49 South, Range 25 East, Section 13, Collier County, Florida.
Competency Provision
We are aware of the competency provision of the Uniform Standards of
Professional Appraisal Practice (USPAP). The authors of this report meet these
standards. Jay F. Booth, MAI inspected the property, researched and analyzed
pertinent market information, wrote, and reviewed the appraisal report under the
supervision of Richard W. Latella, MAI. Jay F. Booth, MAI and Richard W.
Latella, MAI have extensive appraisal experience with retail properties
nationally.
It is our opinion that we are fully competent to perform this appraisal,
due to the fact that:
1. We have full knowledge and experience in the nature of this
assignment;
2. All necessary and appropriate steps have been taken in order to
complete the assignment competently; and
3. We do not lack any knowledge or experience that would prohibit this
assignment to be completed in a professional, competent manner, or
where a biased or misleading opinion of value would be rendered.
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<PAGE>
- --------------------------------------------------------------------------------
REGIONAL TRENDS - Naples/Collier County MSA, Florida
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==============================================================================================================================
Population Estimate Projected CAGR CAGR CAGR
Statistics 1980 1990 1996 2000 1980-90 1990-96 1996-00
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Naples MSA/Collier County 87,550 154,200 186,880 209,400 5.8% 3.3% 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
Lee County 208,130 338,310 385,820 426,630 5.0% 2.2% 2.5%
- ------------------------------------------------------------------------------------------------------------------------------
State of Florida 9,841,130 13,019,100 14,448,940 15,578,770 2.8% 1.8% 1.9%
- ------------------------------------------------------------------------------------------------------------------------------
Southeast U.S. 52,874,780 59,467,560 64,358,640 67,359,030 1.2% 1.3% 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
United States (000) 227,226 249,403 265,225 274,581 0.9% 1.0% 0.9%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Woods & Poole Economics, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Household Estimate Projected CAGR CAGR CAGR
Statistics 1980 1990 1996 2000 1980-90 1990-96 1996-00
==============================================================================================================================
Naples MSA/Collier County 34,430 62,010 74,120 82,900 6.1% 3.0% 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
Lee County 83,630 140,830 158,090 175,230 5.3% 1.9% 2.6%
- ------------------------------------------------------------------------------------------------------------------------------
State of Florida 3,795,270 5,160,610 5,643,080 6,103,020 3.1% 1.5% 2.0%
- ------------------------------------------------------------------------------------------------------------------------------
Southeast U.S. 18,658,840 22,398,560 24,301,610 25,653,510 1.8% 1.4% 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
United States (000) 80,825 92,255 98,161 102,399 1.3% 1.0% 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Woods & Poole Economics, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Per Capita Estimate Projected CAGR CAGR CAGR
Income 1980 1990 1996 2000 1980-90 1990-96 1996-00
==============================================================================================================================
Naples MSA/Collier County $12,300 $27,295 $34,398 $41,409 8.3% 3.9% 4.7%
- ------------------------------------------------------------------------------------------------------------------------------
Lee County $10,146 $19,398 $24,957 $29,973 6.7% 4.3% 4.7%
- ------------------------------------------------------------------------------------------------------------------------------
State of Florida $9,834 $18,788 $24,061 $28,784 6.7% 4.2% 4.6%
- ------------------------------------------------------------------------------------------------------------------------------
Southeast U.S. $8,494 $16,501 $21,570 $25,831 6.9% 4.6% 4.6%
- ------------------------------------------------------------------------------------------------------------------------------
United States (000) $9,942 $18,666 $23,760 $28,271 6.5% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Woods & Poole Economics, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Employment Statistics Estimate Projected CAGR CAGR CAGR
Naples Florida 1980 1990 1996 2000 1980-90 1990-96 1996-00
==============================================================================================================================
Total Employment 46,450 94,130 110,020 121,200 7.3% 2.6% 2.4%
- ------------------------------------------------------------------------------------------------------------------------------
Farm/Agr. Services 4,580 11,790 13,980 15,130 9.9% 2.9% 2.0%
- ------------------------------------------------------------------------------------------------------------------------------
Total Non-Farm Emp. 41,880 82,340 96,040 106,070 7.0% 2.6% 2.5%
- ------------------------------------------------------------------------------------------------------------------------------
Mining 230 420 810 910 6.2% 11.6% 3.0%
- ------------------------------------------------------------------------------------------------------------------------------
Construction 5,280 10,180 10,240 11,070 6.8% 0.1% 2.0%
- ------------------------------------------------------------------------------------------------------------------------------
Manufacturing 1,220 2,610 2,710 3,040 7.9% 0.6% 2.9%
- ------------------------------------------------------------------------------------------------------------------------------
T.C.P.U. 1,460 2,470 2,690 2,900 5.4% 1.4% 1.9%
- ------------------------------------------------------------------------------------------------------------------------------
Whlse/Retail Trade 10,780 19,630 25,100 28,170 6.2% 4.2% 2.9%
- ------------------------------------------------------------------------------------------------------------------------------
F.I.R.E. 7,830 10,690 10,280 11,130 3.2% -0.6% 2.0%
- ------------------------------------------------------------------------------------------------------------------------------
Services 10,980 28,900 35,760 39,750 10.2% 3.6% 2.7%
- ------------------------------------------------------------------------------------------------------------------------------
Government 4,100 7,440 8,450 9,100 6.1% 2.1% 1.9%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Woods & Poole Economics, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Retail Sales Projected CAGR CAGR CAGR
Trends 1985 1990 1995 2000 1985-95 1990-95 1995-00
==============================================================================================================================
City of Naples ($000) $601,203 $723,430 $1,001,441 - 5.2% 6.7% -
- ------------------------------------------------------------------------------------------------------------------------------
Collier County ($000) $1,001,954 $1,398,866 $2,438,922 $3,309,063 9.3% 11.7% 6.3%
- ------------------------------------------------------------------------------------------------------------------------------
Ft. Meyers ($000) $875,140 $1,583,352 $1,829,333 - 7.7% 2.9% -
- ------------------------------------------------------------------------------------------------------------------------------
Lee County($000) $1,753,982 $3,103,309 $4,257,611 $5,223,500 9.3% 6.5% 4.2%
- ------------------------------------------------------------------------------------------------------------------------------
State of Florida ($Mil) $73,756 $105,304 $145,665 $176,703 7.0% 6.7% 3.9%
- ------------------------------------------------------------------------------------------------------------------------------
South Atlantic U.S. ($Mil) $238,701 $325,787 $445,368 $550,391 6.4% 6.5% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------
United States $Mil $1,395,243 $1,807,183 $2,355,242 $2,871,025 5.4% 5.4% 4.0%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Sales & Marketing Management "Survey of Buying Power"
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEMOGRAPHIC AND ECONOMIC ANALYSIS
================================================================================
REGIONAL ANALYSIS
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. The chart on the Facing Page
presents an overview of demographic and economic trends within the subject's
region as prepared by Woods & Poole Economics, Inc. of Washington D.C.
Location/Area Definition
The subject property is located at the southeast quadrant of Airport-
Pulling Road (Route 31) and Pine Ridge Road (Route 896) in the City of Naples,
Collier County, Florida. Collier County is the southernmost county of the four
counties which comprise Southwest Florida including Sarasota, Charlotte, and
Lee. Naples is located approximately 150.0 miles south of Tampa and 100.0 miles
west of the Ft. Lauderdale/Miami area. Smaller communities within Collier County
include North Naples, East Naples, Golden Gate, Marco Island, and the rural
community of Immokalee. With tourism as a primary economic base, Naples/Collier
County is becoming increasingly diversified with major employers in banking,
education, manufacturing, and services. Continued strengthening of the region
will rely on this diversification and continued tourism, population, and
employment growth.
Access/Transportation
Collier County is well served by state and local highways as well as
Interstate 75. Interstate 75 is the major north/south arterial linking Naples
with Ft. Myers, Sarasota, Tampa, and other points north. Interstate 75 runs east
from Naples (Alligator Alley Toll) into Ft. Lauderdale and Miami. U.S. Highway
41 runs parallel to Interstate 75 and is the major commercial arterial through
Naples. The Naples Airport provides commuter service to Miami, Tampa, and
Orlando for connections with major airlines. The Southwest Florida International
Airport (30.0+/- miles north in Ft. Myers) provides more regional service to
southeastern and eastern seaboard states. Airlines servicing the region include
US Airways, American Eagle, Delta, ComAir, Continental, and United. Bus service
to the region is provided by Greyhound.
Demographic Trends
The continued strengthening of Collier County's tourism industry, coupled
with the establishment of a more diversified economic base, has had a positive
impact on area demographic trends. In fact, Collier County is one of the fastest
growing regions in Florida. Population in the MSA is forecasted to grow at an
annual rate of 2.8 percent per annum through 2000, while household formation is
projected to increase by 2.8 percent per year. Income levels within the region
are well above statewide levels and are forecasted to grow by 4.7 percent per
year through 2000. Even with higher income levels, lower taxes and housing costs
tend to improve the purchasing power of area residents. As such, the effective
disposable income of residents--adjusted for tax payments, contributions to
pension funds, and the cost of new housing--ranks better than the state as a
whole. Sales & Marketing Management places median household effective buying
income at $37,624 for Collier County, higher than the state median of $29,664,
and U.S. median household EBI of $32,238.
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Demographic and Economic Analysis
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Seasonal Population
The Naples/Collier County region's semi-tropical climate, distinctive
shopping districts, prestigious residential neighborhoods, planned development
communities, and clean, accessible beaches have fostered a unique resort and
retirement market which attracts a seasonal population base. Many winter and
part-time residents own homes in the region, but maintain legal residences
elsewhere. These residents are not reflected in census data, but provide an
additional population base for the region.
Economic Trends
Collier County has been one of the primary focal points of economic
activity in Southwestern Florida. Historically an agricultural center; the
Naples region is now best known as a winter retreat and tourist destination. As
such, Naples has become a service-oriented economy for retail, finance, health,
government, and tourist-related business. Collier County's dependence on tourism
yields an employment base dominated by the service and trade sectors, although
still relying to some extent on a large agricultural base.
Clearly, the economic strength of Naples/Collier County is fueled largely
by the tourism industry. In many resort markets, unemployment rates tend to
increase substantially during recessionary periods; times when construction
activity slows and tourism declines. It is clear that effects of the last
national recession have had a negative impact on unemployment in both Collier
County and the State of Florida as a whole. This trend has improved over the
past 2-3 years as employment growth has stabilized.
====================================================================
Historic Unemployment Rates
====================================================================
Year Collier County Florida United States
- --------------------------------------------------------------------
1996 6.0% 5.1% 5.4%
- --------------------------------------------------------------------
1995 6.9% 5.5% 5.6%
- --------------------------------------------------------------------
1994 8.0% 6.6% 6.1%
- --------------------------------------------------------------------
1993 8.3% 7.0% 6.9%
- --------------------------------------------------------------------
1992 9.4% 8.2% 7.5%
- --------------------------------------------------------------------
1991 7.9% 7.3% 6.8%
- --------------------------------------------------------------------
1990 5.6% 5.9% 5.6%
- --------------------------------------------------------------------
Source: Bureau of Labor Statistics; Florida Dept. of Labor and
Employment
- --------------------------------------------------------------------
Mirroring national trends, unemployment peaked in 1992, followed by a
declining trend through 1996. Looking forward, nonfarm employment growth is
forecasted to be 2.5 percent per year by Woods & Poole Economics.
The primary impetus for economic growth in Collier County continues to be
tourism and population growth. Although Southwest Florida is attempting to
attract a larger base of manufacturing to the four-county area, tourism and
services remain the primary industries. Services currently accounts for about
37.2 percent of nonfarm employment in the region. The Trade sector accounts for
approximately 26.1 percent of non-agricultural employment, followed by F.I.R.E.
(10.7 percent), Construction (10.7 percent), and Government (8.8 percent). Farm
and agricultural services comprise about 12.7 percent of total employment within
the region.
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-7-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Demographic and Economic Analysis
================================================================================
The hotel industry in Collier County provides one of the most significant
reflections of Naples' tourist industry. The county has a mix of high-end world
renown resorts and locally owned hotels, which accounted for nearly $500 million
in gross taxable sales in 1990. In 1990, there were over 90 lodging
establishments in Collier County providing over 4,400 living units. This
industry was bolstered in 1985 and 1986 when two world-class resorts were opened
at opposite ends of the Pelican Bay planned community. The Ritz-Carlton Naples,
which anchors the north end of Pelican Bay, opened late in 1985 with 463 guest
rooms, and 19 separate meeting rooms, totaling 24,000 square feet. As a result
of this hotel's accommodations and facilities, more than half of the Fortune 500
Companies have held conventions or seminars at the Ritz since 1987. The Registry
Resort opened on the southern end of Pelican Bay in 1986, with 474 rooms, 21,000
square feet of meeting space, and six restaurants. Prior to the Ritz and
Registry openings, major meetings were conducted in Marco Island, with nominal
retail dollars being spent on the mainland. The opening of these hotels has had
a major effect on the hotel and resort industry in Naples, bringing the north
Collier County area into a stronger position to cater to business meetings and
seminars, with the addition of 45,000 square feet of meeting space.
In conclusion, the near-term outlook for Collier County remains positive
based upon past performance and projections for future growth. Population growth
in the region has outpaced most areas of the United States, a trend which is
expected to continue over the next five to ten years. Naples' permanent and
seasonal residents are affluent and well educated. This, combined with the
area's role as a dominant resort area, provides a sizable market for goods and
services and increases the market's appeal to retailers.
Although Florida has been negatively impacted by the last national/global
recession and highly publicized crime problems, the Naples/Collier County region
has, to some extent, skirted the economic downturn and indirectly benefited from
negative publicity along Florida's east coast (Miami). Over the long-term, we
anticipate continued growth in the Naples MSA for the foreseeable future. As is
the case with many areas of the state, tourism, the services sector,
construction, and agriculture will continue to be the region's leading
industries.
NEIGHBORHOOD ANALYSIS
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, or a mixture
of commercial and residential properties, is called a neighborhood.
Neighborhood Characteristics
The subject property is situated at the southeast corner of
Airport-Pulling Road and Pine Ridge Road in the northeast quadrant of the Naples
MSA. The intersection of Airport-Pulling Road and Pine Ridge Road is signalized
with left- hand turn lanes in each direction. The subject's neighborhood can be
defined as an east/west corridor along Pine Ridge Road, extending from
Goodlette-Frank Road (Route 851) and Tamiami Trail (Highway 41) to the west, to
Interstate 75 on the east. The neighborhood also runs north/south along
Airport-Pulling Road. The area contains some of the region's more affluent
communities and has been the recipient of significant retail development over
the past five years.
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-8-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Demographic and Economic Analysis
================================================================================
Accessibility/Linkage
The subject neighborhood is located in the northeastern sector of Naples,
in a fast developing area near North Naples. Access to the area is most easily
achieved by Airport-Pulling Road (north/south) and Pine Ridge Road (east/west).
Regional access is available via Interstate 75, located approximately 2.0 miles
to the east, and Highway 41 North, approximately 4.0 miles to the west. The
primary traffic carriers include Pine Ridge Road and Airport-Pulling Road. Pine
Ridge Road (Route 896) is a four to six lane arterial linking the neighborhood
with Interstate 75 and Highway 41, the Tamiami Trail. Airport-Pulling Road
(Route 31) is a four lane thoroughfare running north/south with turn-lanes at
intersections. Airport-Pulling Road is six lanes near the subject. U.S. Highway
41 is a six lane arterial improved with curbs, gutters and turn-lanes. It is the
most heavily trafficked arterial in Naples.
Surrounding Land Use Patterns
Predominant land uses in the subject neighborhood consist of a mixture of
commercial developments, including retail centers, fast food restaurants,
automotive service stations, and various other service-related facilities.
Directly to the north, across Pine Ridge Road, is the Baron-Collier High School
and a new Sports Authority store at the northeast corner of the intersection.
East of the subject are several apartment complexes and residential areas.
Directly to the south and southeast is land in farm use. Across Airport-Pulling
Road, to the west, is Pine Ridge Crossing, a 280,000+/- square foot community
shopping center which opened shortly after the subject. At the northwest corner
of the intersection is Bed Bath & Beyond Plaza (formerly Ridgeport Plaza), a
recently renovated community center anchored by Bed Bath & Beyond (formerly
Winn- Dixie, which vacated to open at Carillon Place) and Toys R Us. Just west
of the subject intersection is an operating Home Depot store and former Pace
Club Warehouse which is no longer in retail use. A large new 20-plex cinema
(Cobb) opened in January north of the subject along the west side of Airport
Road.
Several miles west is the Pelican Bay resort area anchored by The
Waterside Shops at Pelican Bay, a 250 000+ square foot specialty center, with
Saks Fifth Avenue and Jacobson's. -The Westinghouse Pelican Bay project has been
an on- going planned unit development community. The project includes about
2,l00+/- acres, featuring three miles of frontage property along the Gulf of
Mexico. Major land uses include a variety of residential developments,
single-family homes, villas and high-rise apartments and condominiums,
approximately 313,000+/- square feet of office space, and two first class luxury
hotels; The Ritz-Carlton and -The Registry Resort and Golf Course. Other
resort-oriented properties in the area include the Seagate Beach Club, Gulf
Shore Beach, Shore Club, Highpoint Golf and Tennis Club, the World Tennis
Center, Moorings Country Club and Golf Course, and the Beach Club Golf Course.
Grey Oaks is situated to the south of Carillon Place, featuring $1.0 million
homes.
Neighborhood Summary
The subject property benefits from its location at an easily accessible
intersection in the northeastern quadrant of Naples. From its proximity to high-
end developments and world-class hotel/resorts, to its accessibility from all
parts of the region, the subject is clearly capable of capturing a substantial
amount of expenditure potential. Further, the subject is situated in the growth
path for Collier County, centering around North Naples. 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 into the
foreseeable future.
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-9-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Demographic and Economic Analysis
================================================================================
CRITICAL OBSERVATIONS
The following bullet points summarize some of our general observations
relating to demographic and economic trends in the subject's region and
neighborhood:
o Economy - Naples/Collier County has an economy which is based
primarily on the tourism industry. While vulnerable during
recessionary times, the MSA has been fairly successful in
diversifying its economic base in recent years with the addition of
new companies and industries.
o Demographics - Demographic trends clearly show strong signs of
growth and stability and are forecasted to continue this growth into
the foreseeable future. This bodes well for the area's real estate
market and consumer needs.
o Location - The subject property has a good location which is well-
suited to serve the local communities of North Naples, as well as
all areas of Collier County due to the unique tenancy and excellent
accessibility of the center.
Conclusion
On balance, the subject benefits from its location at an easily accessible
intersection in the North Naples area of Collier County. From its proximity to
residential developments, to its accessibility from other parts of the region,
the subject is clearly capable of capturing a substantial amount of GAFO
expenditure potential. The neighborhood has good local drawing power by virtue
of the roadway network serving it, as well as the center's anchor tenancy. Over
the long term, we believe the prospect for net appreciation in real estate
remains good.
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-10-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
COMPETITIVE PROPERTIES
Naples/Collier County MSA
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
====================================================================================================================================
Center Yr. Blt/ Total No. Parking Anchor Anchor
No. Name Location Orientation Rent/Exp. GLA Parking Ratio Tenants GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S Carillon Place Pine Ridge & Power Ctr. 1994 266,270 1,451 5.45 Winn-Dixie, 198,980
Airport-Pulling TJMaxx, Service,
Ross, Circuit,
OfficeMax
- ------------------------------------------------------------------------------------------------------------------------------------
1 Pine Ridge Pine Ridge & Community 1994 280,000 0.00 Publix, Beall's, 209,359
Crossing Airport-Pulling Target
- ------------------------------------------------------------------------------------------------------------------------------------
2 Bed Bath & Beyond Pine Ridge & Community 1987 95,000 0.00 Bed Bath & Beyond, 45,025
Plaza Airport-Pulling Toys R Us
- ------------------------------------------------------------------------------------------------------------------------------------
3 Naples Shopping U.S. 41 & Golden Community 1962/89 201,227 960 4.77 Publix, Marshalls, 122,139
Center Gate Pkwy. Linens, Walgreens,
Office Depot
- ------------------------------------------------------------------------------------------------------------------------------------
4 Park Shore U.S. 41 & Old Community 1973 231,930 1,377 5.94 Kmart, Eckerd 187,493
Shopping Center Road Drug, J. Byrons,
Vacant
- ------------------------------------------------------------------------------------------------------------------------------------
5 Pavilion Shopping U.S. 41 & Community 1983 153,467 0.00 Publix, Walgreens, 83,177
Center Vanderbilt Beach Theater
- ------------------------------------------------------------------------------------------------------------------------------------
6 Neapolitan Way U.S. 41 & Community 1986 137,000 700 5.11 Publix, Walgreens 47,950
Neapolitan Way
- ------------------------------------------------------------------------------------------------------------------------------------
7 Riverchase U.S. 41 & Community 1992 114,000 0.00 Publix 47,489
Shopping Center Immokalee
- ------------------------------------------------------------------------------------------------------------------------------------
8 Greentree Center Airport-Pulling & Community 1987 108,000 -- Winn-Dixie, Eckerd
Immokalee Drug
- ------------------------------------------------------------------------------------------------------------------------------------
9 Gulf Gate Plaza U.S. 41 & Community 1970/86 173,259 664 3.83 Publix, Beall's 61,758
Bayshore Drive Outlet, Jo-Ann
Fabrics
- ------------------------------------------------------------------------------------------------------------------------------------
10 Naples Towne U.S. 41 & Palm Community 1983 138,319 -- Kmart, Wooley's, 115,977
Centre Drive Luria's (Vacating)
- ------------------------------------------------------------------------------------------------------------------------------------
11 Towne Centre U.S. 41 & Palm Community 1986 109,000 0.00 Beall's, Cobb 54,495
South Drive Theater
- ------------------------------------------------------------------------------------------------------------------------------------
12 Freedom Square U.S. 41 & Route Community 1994 213,839 0.00 Publix, Kmart 173,239
951
====================================================================================================================================
Survey Low: 95,000 0.00
====================================================================================================================================
Survey High: 280,000 5.94
====================================================================================================================================
Survey Mean: 170,870 2.28
====================================================================================================================================
Survey Total: 2,221,311
====================================================================================================================================
- ---------------------------------------------------------------------------------------------------------------
Overall Shop Distance Competi-
Anchor In-Line Shop NNN Charges Occu- Occu- From tive
No. Name Ratio Rent/SF per SF pancy pancy Subject Stance
- ---------------------------------------------------------------------------------------------------------------
S Carillon Place 74.0% $14.00 - $18.00 $2.80 - $3.00 96.1% 84.8% -- --
- ---------------------------------------------------------------------------------------------------------------
1 Pine Ridge 74.8% $14.00 - $18.00 $2.65 - $2.95 99.1% 54.5 -- Primary
Crossing
- ---------------------------------------------------------------------------------------------------------------
2 Bed Bath & Beyond 47.4% $10.00 - $14.00 $2.65 - $2.85 92.0% 84.8% -- Secondary
Plaza
- ---------------------------------------------------------------------------------------------------------------
3 Naples Shopping 60.7% $8.00 - $10.00 $2.75 - $3.00 92.0% 79.8% 4.0 Miles SW Primary
Center
- ---------------------------------------------------------------------------------------------------------------
4 Park Shore 80.8% $5.00 - $14.00 $2.75 - $3.00 82.7% 84.2% 2.5 Miles W Secondary
Shopping Center
- ---------------------------------------------------------------------------------------------------------------
5 Pavilion Shopping 54.2% $16.00 - $25.00 -- 97.0% 93.4% 4.0 Miles NW Secondary
Center
- ---------------------------------------------------------------------------------------------------------------
6 Neapolitan Way 35.0% -- -- 96.0% 93.8% 2.5 Miles W Secondary
- ---------------------------------------------------------------------------------------------------------------
7 Riverchase 41.7% $15.00 -$19.00 -- 100.0% 100.0% 5.0 Miles NW Secondary
Shopping Center
- ---------------------------------------------------------------------------------------------------------------
8 Greentree Center 0.0% -- -- 100.0% 100.0% 4.0 Miles N Secondary
- ---------------------------------------------------------------------------------------------------------------
9 Gulf Gate Plaza 35.6% $7.00 - $11.00 -- 88.0% 81.4% 5.5 Miles S Secondary
- ---------------------------------------------------------------------------------------------------------------
10 Naples Towne 83.8% $10.00 - $12.00 $2.80 - $3.20 94.2% 64.1% 6.0 Miles S Secondary
Centre
- ---------------------------------------------------------------------------------------------------------------
11 Towne Centre 50.0% $13.00 - $13.00 $2.80 - $3.20 97.0% 94.0% 6.0 Miles S Secondary
South
- ---------------------------------------------------------------------------------------------------------------
12 Freedom Square 81.0% $13.00 - $16.00 $3.00 - $3.00 84.7% 19.4% 10.5 Miles S Secondary
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
Survey Low: 0.00% $5.00 - $10.00 $2.65 - $2.85 82.7% 19.4%
===============================================================================================================
Survey High: 83.8% $16.00 - $25.00 $3.00 - $3.20 100.0% 100.0%
===============================================================================================================
Survey Mean: 55.3% $11.18 - $15.45 $2.80 - $3.03 93.8% 82.8%
===============================================================================================================
Survey Total:
===============================================================================================================
</TABLE>
<PAGE>
MARKET ANALYSIS
================================================================================
Trade Area Analysis
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 major 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.
In order to define and analyze the subject's market potential, it is
important to first establish the boundaries of the trade area from which the
subject draws 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 serves a dual purpose in the community. That is to say that it
acts as both a convenience center for the residents living in the immediate
neighborhood, as well as a community/power center by virtue of the larger
destination tenants such as Ross, Service Merchandise, Circuit City, OfficeMax,
and T.J. Maxx. As such, a clear understanding of the property type is important
in order to place the subject in its proper competitive context.
We have not been provided with any customer survey or shopper zip code
reports that would help identify the boundaries of the primary and secondary
trade areas. Therefore, we have made certain reasonable assumptions of the
extent of this area based upon other physical, demographic, and geographic data
available. Before the trade area can be defined it is necessary that we review
the retail market and the competitive structure of the general marketplace, with
consideration given to the subject's position.
Retail Structure/Competition
In order to examine the subject property in its proper context, we must
examine the nature of the competition. By virtue of the market structure, the
subject competes with certain retail establishments throughout the general
Naples/Collier County area.
The table on the Facing Page presents an overview of retail competition
for the subject property, with an identification of which properties are
considered to be most competitive with the subject in terms of merchandising and
location. While not all of the comparables are directly competitive with
Carillon Place, the properties provide a better understanding of the competitive
alignment within the subject's region. The centers also help to define the
potential trade area from which the subject draws its likely customers.
As shown, the subject competes most directly with Pine Ridge Crossings, a
280,000+/- square foot community center located across Airport-Pulling Road. The
property is anchored by Publix, Beall's, and Target. In-line shop rents range
from $14.00 to $18.00 per square foot, with an overall in-line occupancy of 96.5
percent. Triple net charges at this property are reported between $2.85-$2.95
per square foot.
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-11-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Both Target and Beall's are competitors for customers with Ross and T.J.
Maxx at the subject property, while Publix is another regional grocery operator
which competes with Winn-Dixie. The subject, however, provides a much broader
mix of merchandise and national retail tenants. The two centers together are
considered to be more complementary than competitive, providing a larger draw of
customers to the area.
Another primary competitor with the subject is the Naples Shopping Center
which is located on the west side of the intersection of U.S. Highway 41 and
Golden Gate Parkway, across from the Coastland Center regional mall. Naples
Shopping Center is anchored by Publix, Marshalls, Linens 'N Things, Walgreens,
and Office Depot. There are a good number of local tenants at this center which
reports an overall vacancy of 8.0 percent vacancy, although only one or two
spaces appeared vacant upon inspection. Rents in this center are quoted from
$5.00 to $15.00 per square foot, with a more narrow range of $6.00 to $10.00
reported.
Clearly, tenants which compete most directly with the subject include
Publix (Winn-Dixie), Marshalls (T.J. Maxx and Ross), Office Depot (OfficeMax),
Walgreens (Eckerd Drugs), and Linens 'N Things (Linen Barn). The subject,
however, offers a deeper merchandising mix and more convenient access in a less
congested area of Naples.
The subject also competes to some degree with existing regional and
specialty shopping centers such as the Coastland Mall and Waterside Shops. It is
noted, however, that the subject is a unique property within this market whereas
no existing centers truly present a similar competitive stance to Carillon
Place.
Other Competition
There exists various nodes of retail development throughout the immediate
area that also offer varying degrees of competition to the subject. There are a
number of strip centers that, because of their major tenants and merchandising,
do offer themselves as some competition, albeit limited, to the subject.
Competition Summary
Primary competition to Carillon Place is seen in Pine Ridge Crossings and
the Naples Shopping Center. Both offer competitive merchandising, with Naples
Shopping Center offering the most comparable mix of tenants to Carillon Place.
Secondary competition derives from smaller area centers with only one or two
competing anchors to the subject (i.e. grocery, drug, and/or discount department
store). These centers compete to some degree with Carillon Place but more or
less help to balance the mix of retail infill for Naples. Finally, both
Waterside Shops and Coastland Center offer a competitive stance to the subject,
albeit limited. The existence of these centers is considered a benefit, rather
than a hindrance, reinforcing the commercial draw of the Naples' market.
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-12-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
New/Proposed Development
There are two proposed projects in the works for Naples, both involving
large theater complexes. The first is a 250,000+/- square foot (Phase 1)
"entertainment" center at Grey Oaks. This project will be anchored by a 24-
screen movie complex. Site work began in late 1995, however, further
construction was put on hold in January 1996. Grey Oaks Town Center could
ultimately total 1.4+/- million square feet with a mix of uses from retail,
theater, and entertainment, to office buildings and restaurants. This first
phase will include the theater complex, shops, restaurants, and offices and will
be comparable in size and perception to the Waterside Shops. Some discussion of
a neighborhood center anchored by fast food restaurants and a national drug
store chain has also been in the works. Zoning for the town center is already in
place for the 1,600+/- acre Grey Oaks community which allows for 2,400+/-
residences, 700,000+/- square feet of retail space, 650,000+/- square feet of
office, and a 250-room hotel. Completion of the first phase is now scheduled for
late-1998, although this is still considered speculative as of this writing.
Full development of the community is not expected for 10 to 20 years.
This center is to be located at the northeast corner of Golden Gate
Parkway and Airport-Pulling Road, approximately 4.0+/- miles south of the
subject. Its potential tenancy is not likely to compete directly with the
subject. Grey Oaks Town Center is being marketed as an upscale type development
which would compete more directly with the Waterside Shops and upscale shopping
districts of Naples.
The other new development is the Pine Air Lakes retail project just north
of the subject on the west side of Airport-Pulling Road. Although no complete
plans have been announced, a 20-screen theater has already been completed. The
tenant is Cobb Theatres, with potential for complimentary retail uses. Similar
to the Grey Oaks project, this center is not likely to compete directly with the
subject. Its close proximity should provide a larger potential draw of customers
to the area.
Finally, some talk has been made of an additional factory outlet center
along Pine Ridge Road. The center, being considered by The Lutgert Companies,
would contain approximately 150,000+/- square feet and some 40+/- stores and
will most likely be located just east of Interstate 75.
Subject Property Profile
The subject property is anchored by a number of national retail tenants
who are unique to the Naples/Collier County market. These include Service
Merchandise, T.J. Maxx, Ross, OfficeMax, and Circuit City. Winn-Dixie is a
familiar name to Florida residents, as is Eckerd Drugs. The subject Winn-Dixie,
however, incorporates the chain's new "superstore" concept. Eckerd Drugs is one
of only two drugstores in the area with a drive-up window. Pier I Imports -is
another unique tenant to the local market.
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-13-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Trade Area Definition
In defining boundaries for the subject's primary trade area, several
factors have been considered. First, the property's location with respect to
transportation provides the basis for regional access to the area. Second,
regional competition and geographic boundaries help to define the potential size
of the trade area as a measure of distance from the property. Third, the
merchandising mix and anchor alignment provide the basic draw of customers that
are likely to patronize the property.
Carillon Place is located in a developing area of the Naples metropolitan
area, situated at the intersection of Airport-Pulling Road and Pine Ridge Road.
These routes provide good east-west/north-south access to the property along
with proximity to Interstate 75 and U.S. Highway 41.
As discussed, the location and accessibility of competing centers has
direct bearing on the formation and make-up of the subject's trade area as well.
The subject competes most directly with Pine Ridge Crossings and the Naples
Shopping Center, although neither have truly comparable configurations. Pine
Ridge Crossings actually helps provide an addition draw to the subject's region.
The expanded Coastland Center will be more competitive with the subject.
Secondary competition is seen in other area community centers which are anchored
by only one or two competing anchor tenants, namely groceries and off-price or
discount retailers.
Finally, it is important to note that other neighborhood centers,
freestanding "category killers", and outlet malls all represent a strong force
in the market's competitive environment. However, their primary stores (discount
department stores, drugs, home improvement centers and warehouse clubs) are
different from those which comprise the subject property. Certainly there is a
place for both in most retail environments, including the subject region.
Collectively, they 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 in the delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility, including area traffic patterns, geographical
constraints, and nodes of residential development;
2. The position and nature of the area's retail structure, including
the location of destination retail centers and the strength and
composition of the retail infill; and
3. The size, anchor tenancy, and merchandising composition of the
subject property's tenants.
Given all of the above, a primary trade area for the subject property
would likely span an area encompassing about 5.0 to 10.0 miles around the
center. The subject's secondary trade area might span up to 20.0 or 30.0 miles
from the site due to its unique merchandising which cannot be found in many
areas of Southwest Florida.
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-14-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
DEMOGRAPHIC STATISTICS
Carillon Place (Naples, Florida)
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
5-Mile 10-Mile 20-Mile City of Collier State of
Radius Radius Radius Naples County Florida
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POPULATION STATISTICS
- ---------------------
1980 35,030 66,468 89,957 18,395 85,971 9,746,326
1990 67,772 127,875 172,897 19,505 152,099 12,937,926
1997 84,416 159,904 215,836 20,291 185,176 14,450,334
2002 90,437 171,923 235,483 18,696 196,975 15,363,003
Compound Annual Change
- ----------------------
1980 - 1990 6.82% 6.76% 6.75% 0.59% 5.87% 2.87%
1990 - 1997 3.19% 3.24% 3.22% 0.57% 2.85% 1.59%
1997 - 2002 1.39% 1.46% 1.76% -1.62% 1.24% 1.23%
- --------------------------------------------------------------------------------------------------------------------
HOUSEHOLD STATISTICS
- --------------------
1980 14,037 27,321 36,675 8,516 33,966 3,744,255
1990 28,313 54,365 73,144 9,776 61,703 5,134,869
1997 35,982 69,452 94,687 9,797 77,170 5,864,493
2002 38,641 74,814 103,232 9,502 82,330 6,315,395
Compound Annual Change
- ----------------------
1980 - 1990 7.27% 7.12% 7.15% 1.39% 6.15% 3.21%
1990 - 1997 3.48% 3.56% 3.76% 0.03% 3.25% 1.92%
1997 - 2002 1.44% 1.50% 1.74% -0.61% 1.30% 1.49%
- --------------------------------------------------------------------------------------------------------------------
AVERAGE HOUSEHOLD INCOME
- ------------------------
1980 $26,163 $23,913 $22,895 $32,398 $23,658 $18,695
1990 $56,710 $51,110 $50,217 $82,434 $51,978 $36,517
1997 $84,951 $74,973 $72,460 $113,217 $77,184 $52,110
2002 $110,294 $97,158 $93,149 $149,057 $101,113 $67,157
Compound Annual Change
- ----------------------
1980 - 1990 8.04% 7.89% 8.17% 9.79% 8.19% 6.92%
1990 - 1997 5.94% 5.63% 5.38% 4.64% 5.81% 5.21%
1997 - 2002 5.36% 5.32% 5.15% 5.65% 5.55% 5.20%
- --------------------------------------------------------------------------------------------------------------------
PER CAPITA INCOME STATISTICS
- ----------------------------
1980 $10,484 $9,829 $9,334 $14,999 $9,424 $7,270
1990 $23,951 $22,031 $21,455 $41,704 $21,386 $14,698
1997 $36,538 $33,018 $32,237 $55,062 $32,696 $21,441
2002 $47,547 $42,855 $41,399 $76,061 $42,953 $28,009
Compound Annual Change
- ----------------------
1980 - 1990 8.61% 8.41% 8.68% 10.77% 8.54% 7.29%
1990 - 1997 6.22% 5.95% 5.99% 4.05% 6.25% 5.54%
1997 - 2002 5.41% 5.35% 5.13% 6.67% 5.61% 5.49%
- --------------------------------------------------------------------------------------------------------------------
SOURCE: Equifax National Decision Systems
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Market Analysis
================================================================================
Based on these observations, together with our discussions with ownership,
we believe that the primary trade area for the subject would extend outward to a
radius of approximately 10.0+/- miles from the property. To add perspective to
this analysis, we have segregated our survey into 5.0, 10.0 and 20.0-mile
concentric circles with a comparison to the United States and State of Florida.
The report on the Facing Page presents this data.
According to a recent ICSC study, community and power centers tend to have
trade areas which extend roughly six miles in any direction and contain
approximately 150,000 to 200,000 residents with 60,000 to 70,000 households and
income levels in excess of $35,000 per household. As such, it is our opinion
that the 10.0 mile radius surrounding the subject property comprises the primary
trade area from which 70.0 to 80.0 percent of its sales originate.
Vacancy Rates
Based upon our survey of competitive properties in the subject's region,
an overall vacancy rate of approximately 6.2 percent is estimated. For in-line
shop space only, the overall vacancy rate is calculated to be about 17.2
percent. Obviously vacancy rates vary depending upon location, accessibility,
property configuration, and competition. In general terms, we believe the survey
bodes well for the subject, with generally strong occupancy levels at the more
competitive projects, including Pine Ridge Crossing.
Rental Rates
Rental rates at competing properties reflect a range of $5.00-$25.00 per
square foot for in-line shops. The low mean rental rate for in-line shops is
calculated to be $11.18 per square foot, while the high mean is $15.45 per foot.
From the data, it is clear that the subject's rents are near the high-end of the
market for competing properties. Rents at Pine Ridge Crossing generally support
those found at the subject, suggesting a range of $14.00 to $18.00 per square
foot.
Expense Rates
From discussions with local brokers and property managers, expense rates
generally range from $2.50 to $3.50 per square foot for community centers in the
region, with CAM ranging between $1.50 to $2.00 per square foot, including
insurance, and taxes from $1.00 to $1.50 per foot. The low mean of our survey
reflects triple net charges of $2.80 per square foot, while the high mean is
$3.03 per foot.
Concessions/Workletter
Concessions given to tenants in the Naples market include free rent, cash
allowances, and build-out. Generally, free rent is limited to those projects
with inferior locations and inferior anchor tenants. Tenant improvement
allowances typically range from $3.00 to $6.00 per square foot for new tenants,
with renewal tenants receiving no TIs or half the rate of new tenants.
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WAKEFIELD(R)
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<PAGE>
Market Analysis
================================================================================
Summary/Observations/Conclusion
We have analyzed the retail trade history and profile of the Naples MSA
and 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 were presented. The trade area profile
discussed encompassed a radii based analysis that was established based upon a
study of the competitive retail structure. Marketing information relating to
these sectors was presented and analyzed in order to determine patterns of
change and growth as it impacts the subject. Next we discussed the subject's
retail sales performance potential over the near term. The given data is useful
in establishing quantitative dimensions of the total trade area, while our
comments serve to provide qualitative insight into this market. A compilation of
this data provides the basis for our projections and forecasts particular to the
subject property.
The following bullet points summarize some of our key conclusions and
observations with regard to the subject's trade area and market potential:
o The subject neighborhood has good vehicular access via Pine Ridge
Road and Airport-Pulling Road. The subject enjoys a visible location
and is centered in the principal commercial hub for this quadrant of
the city.
o The existing trade area structure is largely characterized by
traditional neighborhood and community centers anchored by grocery
or discount stores. Regional mall shopping is currently only found
in areas to the south at Coastland Center and, to some extent, west
at Waterside Shops.
o The subject benefits from an affluent local population. Average
household income within a 5.0-mile radius of the property is
currently estimated at $84,951. Expanding into the full 10.0-mile
primary trade area, the income level declines slightly to $74,973.
These figures are well above statewide and national levels.
o Spending power is acutely influenced by the high degree of tourists
which come into the Naples community each year. The income and
retail sales potential that these visitors bring is not measured in
the demographic statistics which are reflective of permanent
residents only.
o The center is well positioned in an area that is forecasted to
continue to witness substantial population and household growth.
Population within a 10.0-mile radius is currently estimated at
159,904 and by 2002 it is expected to increase by to nearly 171,923
(compound annual growth of 1.5 percent). Household formation is
projected to increase at an annual rate of 1.5 percent per year.
o Vacancy levels within the subject neighborhood are low. Carillon
Place is currently 96.2 percent occupied after being 100.0 percent
occupied since its opening in 1994; leases are currently signed to
fill the 10,500 square feet of current vacancy.
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<PAGE>
Market Analysis
================================================================================
o The property is well positioned geographically to benefit from
future growth in the area. Additional retail development in the
neighborhood has helped create a critical mass of stores and
merchandising that continues to attract additional customer traffic.
Our analysis concludes that the merchandising mix of the center, the
location along two major arterials, and the popularity and uniqueness of the
major tenants, all combine to establish Carillon Place as a viable retail center
in its trade area. We believe that, with competent management, focused
marketing, and a responsive maintenance program, it should continue to maintain
a strong position in its marketplace. Our outlook for the area continues to be
positive, with moderate-good prospects for appreciating real estate values.
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<PAGE>
[MAP]
PINE RIDGE RD & AIRPORT PULLING ROAD
NAPLES, FL
5, 10, & 20 MILE RINGS
POP 97: TOTAL (EST)
<PAGE>
[MAP]
PINE RIDGE RD & AIRPORT PULLING ROAD
NAPLES, FL
5, 10, & 20 MILE RINGS
POPULATION % TOTAL GROWTH 1997-2002
<PAGE>
[MAP]
PINE RIDGE RD & AIRPORT PULLING ROAD
NAPLES, FL
5, 10, & 20 MILE RINGS
HH 97 BY INCOME: AVERAGE
<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: SEC/ of Pine Ridge Road and
Airport-Pulling Road
City of Naples, Collier County, Florida
Shape: Irregular-Rectangular
Site Area (owned): 29.16+/- acres (1,270,162+/- square feet)
Frontage: South side of Pine Ridge Road (1,l00+/- feet)
East side of Airport-Pulling Road (1,675+/- feet)
Topography/Terrain: Relatively level
Street Improvements: Pine Ridge Road and Airport-Pulling Road are two-
way, four-lane arterials with left-hand turn lanes
adjacent to the subject. They are macadam paved
with concrete curbing, sidewalks, street lighting
and overhead utilities.
Soil Conditions: No study of soils was conducted as part of this
appraisal and no opinion is rendered on sub-soil
conditions. 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.
Utilities
Water: City of Naples
Sewer: City of Naples
Electricity: Florida Power and Light
Gas: N/A
Telephone: United Telephone
Access: Primary access is gained via Pine Ridge Road
(east/west) and Airport-Pulling Road
(north/south). Ingress/ egress is gained via curb-
cut entrances along Pine Ridge Road (2) and
Airport-Pulling Road (3). Ingress/egress along
Airport-Pulling Road is by easement agreement over
a city-owned drainage-way.
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<PAGE>
[SITE PLAN OMITTED]
<PAGE>
Property Description
================================================================================
Land Use Restrictions: We were provided with an A.L.T.A. title
commitment from the Chicago Title Insurance Co.
dated October 13, 1995. The report cites various
utility and reciprocal easement agreements which
seem to be typical for such a land use. We do not
know of any other easements, encroachments or
restrictions that would adversely affect the
site's use.
Flood Hazard: The subject property lies in Flood Zone X accord-
ing to Community Number 120067, Panel Number
0385D. According to Collier County, the subject
has been constructed at a flood elevation of 18
inches above the crown of the road as required by
planning.
Wetlands: No wetlands study has been provided for this
analysis. If a subsequent engineering survey
reveals the presence of regulated wetlands, we
reserve the right to amend this valuation.
Site Improvements: The subject site has been graded, paved and
improved with all necessary underground and
overhead utilities
Hazardous Substances: Please refer to our Assumptions and Limiting
Conditions with an explanation as to our
disclaimer regarding hazardous substances.
Comments: Overall, the size, topography and site
configuration appear functionally adequate and
conducive for retail utilization. The site is
serviced by all public utilities and the curb
appeal of site improvements is good.
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<PAGE>
[FLOOR PLAN OMITTED]
<PAGE>
Property Description
================================================================================
Improvements Description
The subject site has been improved with a single-level retail center with
a total GLA of 266,438+/- square feet (excluding non-owned outparcels). A more
complete description of these improvements follows. Please refer to the site
plan on the Facing Page for the location of the improvements on the subject
tract.
General Description
Type: Power/community center comprised of six major
stores, several in-line retail tenants, and six
outparcels.
Year Built: 1994
Gross Leasable
Area (Owned): ==================================================
Major Tenants Bldg. Area Allocation
==================================================
Winn-Dixie 50,540+/- SF
--------------------------------------------------
TJ Maxx 32,900+/- SF
--------------------------------------------------
Service Merchandise 50,061+/- SF
--------------------------------------------------
Ross Stores 25,500+/- SF
--------------------------------------------------
Circuit City 21 285+/- SF
--------------------------------------------------
OfficeMax 23,500+/- SF
==================================================
Total Majors 203,786+/- SF 76.5%
==================================================
In-Line Shops 47,654+/- SF 17.9%
==================================================
Owned Outparcels 14,998+/- SF 5.6%
==================================================
Total Owned GLA 266,438+/- SF 100.0%
==================================================
3
Total Building Area: 281,838+/- square feet (including non-owned
outparcels)
Original Developer: Homart Development Company
Construction Detail
Foundations: Poured reinforced concrete.
Framing: Structural steel frame, column and beam
construction.
Floors: Poured concrete slab on porous fill and vapor
barrier.
Exterior Walls: Pink brick on concrete block.
Roof Structure: Steel deck.
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Property Description
================================================================================
Storefronts: Safety glass with aluminum framing. Most store-
fronts are uniform in appearance.
Pedestrian Doors: Safety glass in aluminum frame; mixture of manual
and electrically operated tempered glass doors.
Loading/Rear
Service Doors: In-line shops have flush type single metal doors
at grade. Anchors have depressed drive-way loading
docks with hollow metal overhead doors. Circuit
City has a customer service area to accommodate
installation services.
Mechanical Detail
Heating and Cooling: HVAC is provided via individual roof-mounted heat
pumps for which tenants are responsible for main-
tenance and operational costs. A standard distri-
bution system of ducts, ceiling diffusers, grills,
register, thermostats, etc. has been designed and
constructed by landlord, based on open space and
interior partitions.
Plumbing: Water and sanitary sewer connections for each
tenant suite (required for one lavatory and one
water closet in restroom) are installed. Water and
sewer usage is metered individually and billed to
tenants by the local utility.
Electrical Service: Adequate commercial service is provided for each
tenant space and billed directly by Florida Power
and Light for usage.
Fire Protection: The buildings are completely sprinklered in
accordance with local regulations. Fire hydrants
are provided throughout the property.
Interior Detail
Layout and Design: The center has been constructed in an elongated
shape designed to conform to the site. Winn-Dixie
anchors the southern end of the center, while
OfficeMax anchors the northern end. Outparcels
are situated on the western portion of the site
along Airport-Pulling Road.
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Property Description
================================================================================
Interior finish for most tenants has been
completed per specification of the tenant. Anchor
stores typically are built-out with vinyl
composite tile over concrete, painted drywall,
recessed fluorescent light fixtures, and exposed
ceiling deck with beams and joist exposed.
Other tenants have suspended acoustical tile
ceilings, painted drywall, recessed fluorescent
lighting, 12 to 14 foot ceiling height, and
various floor coverings, including carpet and
ceramic tile.
Outparcels: The site plan provides for a total of six pads
summarized as follows.
==================================================
Building
Pad # Tenant Size (SF)
==================================================
A-1 First Regal/Carillon Fuel 2,450+/- SF
--------------------------------------------------
A-2 First Union Bank 4,500+/- SF
--------------------------------------------------
B Boston Chicken* 3,279+/- SF
--------------------------------------------------
C Applebee's 5,050+/- SF
--------------------------------------------------
D Fifth & Third Bank 3,400+/- SF
--------------------------------------------------
E Eckerd/Payless* 11,719+/- SF
==================================================
Total 30,398+/- SF
==================================================
* Boston Chicken is on ground lease terms.
Eckerd Drug Store and Payless Shoesource are
on standard lease terms. The remaining
parcels have been sold.
==================================================
Hazardous Substance: Please refer to the Assumptions and Limiting
Conditions (No. 10) for a more complete discussion
of our disclaimer concerning hazardous substances.
Site Improvements
On-Site Parking Standard 1,425 Stalls
Handicap 26 Stalls
-------- ------------
Total 1,451 Stalls
Parking areas are graded and surfaced with
bituminous concrete paving suitable to local
conditions. The lot is striped throughout.
Parking Ratio: 5.4 spaces/1,000 SF of GLA
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Property Description
================================================================================
Landscaping: Landscaping is primarily comprised of native plant
species, including sable palm and other shrubbery
and grass.
Other: Parking lot lighting is provided with anodized
aluminum high intensity lighting.
Comments: Overall, the site and building improvements appear
to be well designed and configured for retail
utilization. Site configuration appears well
suited for vehicular movement and visibility.
Analysis of the structural integrity of each
building is beyond our expertise and best made by
a professional engineer.
Our review of the local environs reveals that
there are no extraordinary external influences
which negatively impact the value of the subject
property.
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
Overview
The subject property is currently assessed by Collier County, whose tax
year runs from January 1 to December 31. The tax rate and/or revised assessments
for 1997 are not complete as of this writing, and therefore, taxes are
unavailable. Taxes for 1996 are summarized in the following chart:
================================================================================
1996 Assessments & Taxes
================================================================================
Parcel Land Improved Total 1996
Carillon Tract Value Value Value Taxes
- --------------------------------------------------------------------------------
B $4,099,370 $8,640,944 $12,740,314 $192,139.22
- --------------------------------------------------------------------------------
D $148,105 $24,010 $172,115 $2,595.70
- --------------------------------------------------------------------------------
E $100 $0 $100 $1.51
- --------------------------------------------------------------------------------
G $163,350 $392,159 $555,509 $8,377.73
- --------------------------------------------------------------------------------
Total $4,410,925 $9,057,113 $13,468,038 $203,114.16
- --------------------------------------------------------------------------------
As shown, the subject has a total assessment of about $13.5 million which
results in a tax billing of $203,114.16 based on the 1996 millage rate of
$15.0812 per $100 of assessed value. This compares with reported taxes of
$193,808.90 in 1995 ($14.6118 per $100 mill rate).
Preliminary 1997 Valuation
Based on information provided by Collier County, the subject's preliminary
1997 valuation will result in a slightly lower total assessment. This is shown
on the following chart.
================================================================================
Preliminary - 1997 Assessments
================================================================================
Parcel Land Improved Total 1997
Carillon Tract Value Value Value Taxes
- --------------------------------------------------------------------------------
B $4,099,370 $8,552,900 $12,652,270 N/A
- --------------------------------------------------------------------------------
D $148,105 $23,765 $171,870 N/A
- --------------------------------------------------------------------------------
E $100 $0 $100 N/A
- --------------------------------------------------------------------------------
G $163,350 $388,157 $551,507 N/A
- --------------------------------------------------------------------------------
Total $4,410,925 $8,964,822 $13,375,747 N/A
- --------------------------------------------------------------------------------
If we were to increase the 1996 millage rate by, say, 3.5 percent and
apply it to the preliminary valuation of $13.37 million, the 1997 tax billing
would be roughly $210,000.
Ownership's Budget
The current budget estimates taxes for 1997 at $195,374, essentially flat
over the 1995 tax burden.
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Real Property Taxes and Assessments
================================================================================
Conclusion
We believe it is prudent to forecast some increase in taxes for the 1997
tax year. We base this on conversations with the Collier County Tax Assessor's
office, as well as the subject's recent tax history. We have projected that
taxes of $210,000 will be incurred for the 1997 calendar year. We have assumed
taxes will increase at an annual rate of 3.5 percent per annum for this
analysis.
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ZONING
================================================================================
The subject property is zoned PUD, a Planned Unit Development designation
by the City of Naples. This district allows for a variety of commercial uses,
including retail shopping centers. Site development is governed by plan review.
We are not experts in the interpretation of complex zoning ordinances. The
subject has been constructed within the confines of the PUD regulations. As
such, we assume that all general requirements have been met and that the
existing as well as the proposed improvements conform to code.
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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<PAGE>
HIGHEST AND BEST USE
================================================================================
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.
Highest and Best Use of Site As Though Vacant
The subject site is zoned for shopping center development. Access is
considered good. It is a convenient shopping mode for residents of North Naples,
as well as residents throughout the Collier County region. Surrounding land uses
reflect a mix of retail and commercial development, further improving the draw
of the neighborhood. There is also ample residential backup. 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 locally. Given the zoning effect on the
site, nearby land use patterns, and accessibility, we are of the opinion that
the highest and best use of the subject site, as if vacant, is for retail
development, such as a power-oriented shopping center, built to its maximum
feasible F.A.R.
Highest and Best Use of Property As Improved
When a site contains improvements, the existing use will generally
continue in-use until such time the land value exceeds the sum of the land and
existing improvement value, and the cost to remove improvements for another use.
The subject property has been in continuous operation as a shopping center for
about 3 years. As such, the existing leases which are in-place dictate a retail
use of the property. Subject improvements are considered to be in excellent
condition and continue to provide a sufficient return to the land. The site's
value, as if vacant, clearly does not exceed the value of the property as
currently improved, so it is reasonable to conclude that the highest and best
use of the property, as improved, is for continued use as a shopping center
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VALUATION PROCESS
================================================================================
Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Sales Comparison Approach, and the Income Capitalization
Approach. The type and age of the property and the quantity and quality of data
effect the applicability in a specific appraisal situation.
Cost Approach
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. 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 fully consider the value of anchor store commitments to
shopping centers and the difficulty of site assemblage for such properties. All
things considered, the Cost Approach will not be employed in this analysis due
to the fact that the marketplace does no rigidly trade leased shopping centers
on a cost/value basis.
Sales Comparison Approach
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 subject. This approach
has a direct application to the subject property. Furthermore, this approach has
been used to help develop investment indices and parameters from which to judge
the reasonableness of our principal approach, the Income Capitalization
Approach.
Income Capitalization 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 Capitalization Approach has been emphasized as our primary
methodology for this valuation.
Reconciliation
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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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
POWER CENTER/COMMUNITY CENTER SALE COMPARABLES
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Yr Built/ Site Area Site GLA Anchor
No. Name/Location Date Condition Sale Price (Sq. Ft) Coverage Sold GLA
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. Pending 1995 $20,877,000 984,456 18.9% 186,081 148,274
International Drive & Touch One Jun-97 Excellent
Orange County Agreement
Orlando, Florida Mar-97
- ------------------------------------------------------------------------------------------------------------------------------------
2 Lawrenceville Market Center Nov-96 1995 $34,600,000 -- -- 499,129 459,209
Ga. 316 & GA, 120 Excellent
Lawrenceville, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Village at University Place Aug-96 1995-97 $33,400,000 1,633,500 20.5% 334,500 140,200
I-85 at W.T. Harris Blvd. Excellent
Charlotte, North Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
4 Miller Square Plaza Aug-96 1980/83/90 $12,240,000 1,040,648 15.1% 156,670 68,384
13898 SW 56th Street Fair-Good
Dade County,
Kendall, Miami, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
5 Preston Shepard Place Jul-96 1995 $46,800,000 1,359,072 26.7% 363,256 265,837
SWC/Preston & Park Blvd. Excellent
Coiling County,
Plano, Texas
- ------------------------------------------------------------------------------------------------------------------------------------
6 Kmart Center Feb-96 1994/95 $23,134,700 1,224,036 22.6% 276,500 140,221
10501 Pines Boulevard Good-Excl.
Broward County,
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
7 McCarthy Ranch Mar-95 1994/95 $30,100,000 1,176,120 22.5% 264,112 214,134
Santa Clara County Excellent
Milpitas, California
- ------------------------------------------------------------------------------------------------------------------------------------
8 Mansell Crossing Dec-94 1994 $34,400,000 1,481,040 21.6% 319,499 202,229
NWC/Georgia 400 & Mansell Excellent
Fulton County
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
9 Sheridan Plaza Sep-94 1975/91 $57,350,000 2,178,000 21.8% 475,600 262,236
NW 56th & Sheridan St. Good
Broward County
Hollywood, Florida
====================================================================================================================================
Survey High: $57,350,000 2,178,000 -- 499,129 459,209
Survey Low: $12,240,000 984,456 -- 156,670 68,384
====================================================================================================================================
Survey Average: $32,544,633 1,364,609 23.1% 319,483 211,192
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Anchor Sale
Sale GLA as Price/ NOI/ Occupancy
No. Name/Location % of Total Sq. Ft Sq. Ft OAR Anchor Tenants At Sale
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 International Drive Value Ctr. 79.7% $112.19 $11.21 9.99% Bed Bath & Beyond, 100.0%
International Drive & Touch One Ross, Old Navy, T.J.
Orange County Maxx, Books-A-Million
Orlando, Florida Shoe Carnival
- ------------------------------------------------------------------------------------------------------------------------------------
2 Lawrenceville Market Center 92.0% $69.32 $6.59 9.50% Target*, Home Depot*, 100.0%
Ga. 316 & GA 120 AMC, Goody's, Linens N
Lawrenceville, Georgia Things, Marshalls, MJ
Design, PetsMart
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Village at University Place 41.9% $99.85 $9.84 9.85% Best Buy, Office Depot, 100.0%
I-85 at W.T. Harris Blvd. TJ Maxx, Rhodes
Charlotte, North Carolina Furniture
- ------------------------------------------------------------------------------------------------------------------------------------
4 Miller Square Plaza 43.6% $78.13 $7.81 10.00% Publix 92.0%
13898 SW 56th Street Eckerd Drug
Dade County, Theater (gr. lease)
Kendall, Miami, Florida J. Byrons (not owned)
- ------------------------------------------------------------------------------------------------------------------------------------
5 Preston Shepard Place 73.2% $128.83 $12.11 9.40% Marshalls, Steinmart, 100.0%
SWC/Preston & Park Blvd. Office Depot, Baby
Coiling County, Superstore, MJ Des.,
Plano, Texas Borders, HomePlace
- ------------------------------------------------------------------------------------------------------------------------------------
6 Kmart Center 50.7% $83.67 $7.93 9.48% Kmart 97.0%
10501 Pines Boulevard Food Lion
Broward County,
Pembroake Pines, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
7 McCarthy Ranch 81.1% $113.97 $10.60 9.30% Service M'dise, 100.0%
Santa Clara County SportsMart, Borders,
Milpitas, California OfficeMax, PetsMart,
Computer City, Ross
- ------------------------------------------------------------------------------------------------------------------------------------
8 Mansell Crossing 63.3% $107.67 $9.80 9.10% AMC Theatres, 99.0%
NWC/Georgia 400 & Mansell Uptons, TJ Maxx,
Fulton County OfficeMax,
Atlanta, Georgia Sports Authority
- ------------------------------------------------------------------------------------------------------------------------------------
9 Sheridan Plaza 55.1% $120.58 $10.97 9.10% Office Depot 95.0%
NW 56th & Sheridan St. Publix
Broward County J. Byrons
Hollywood, Florida AMC Theatres
====================================================================================================================================
Survey High: -- $128.83 $12.11 10.00% -- 100.0%
Survey Low: -- $69.32 $6.59 9.10% -- 92.0%
====================================================================================================================================
Survey Average: 86.1% $101.58 $9.65 9.52% -- 98.1%
====================================================================================================================================
<CAPTION>
=====================================================================================
Sale
No. Name/Location Comments
=====================================================================================
<S> <C> <C>
1 International Drive Value Ctr. New power-oriented center in tourist
International Drive & Touch One area. Incl. $650,000 outpad site. Anchor
Orange County rents $10/sf; In-line $15/sf. IRR appx.
Orlando, Florida 11.0%; term. cap 10.0%.
- -------------------------------------------------------------------------------------
2 Lawrenceville Market Center Cash acquisition by Equitable Real
Ga. 316 & GA 120 Estate Investment Management.
Lawrenceville, Georgia * Ground Lease
- -------------------------------------------------------------------------------------
3 The Village at University Place Other anchors at center are Wal-Mart
I-85 at W.T. Harris Blvd. and Sam's Club. This is a pre-sale of
Charlotte, North Carolina new center developed by Hawn.
- -------------------------------------------------------------------------------------
4 Miller Square Plaza Community center; block & stucco. Fair-
13898 SW 56th Street avg exposure. Anchor rents appx. $7-
Dade County, $9/sf; in-line shops $12-$19/sf.
Kendall, Miami, Florida
- -------------------------------------------------------------------------------------
5 Preston Shepard Place New ctr. in affluent area. Traffic counts
SWC/Preston & Park Blvd. >37,000 & 45,000/day. Buyer used
Coiling County, 10.5% IRR & 9.25% terminal cap in
Plano, Texas analysis. Avg. rent = $15.73/sf.
- -------------------------------------------------------------------------------------
6 Kmart Center Community center; block & tilt; good
10501 Pines Boulevard exposure. Rental rates range from $8-
Broward County, $20/sf.
Pembroake Pines, Florida
- -------------------------------------------------------------------------------------
7 McCarthy Ranch Pre-sale of power ctr with good access &
Santa Clara County freeway exposure. Wal-Mart not included
Milpitas, California in sale. Buyer used 11.2% IRR. Anchor
rents $9.70-18.70/sf.
- -------------------------------------------------------------------------------------
8 Mansell Crossing One-story, concrete blk & brick center
NWC/Georgia 400 & Mansell located appx. 0.8 miles south of North
Fulton County Point Mall. Avg shop rent=$15.23/sf. Ctr
Atlanta, Georgia also has Toys R Us, Michaels.
- -------------------------------------------------------------------------------------
9 Sheridan Plaza Power center purchase based on a
NW 56th & Sheridan St. 10.8% IRR, term. cap of 9.25-9.50%.
Broward County Sale included development of 15,000 sf
Hollywood, Florida Luria's. Sales b/w $200-300/sf.
=====================================================================================
Survey High:
Survey Low:
=====================================================================================
Survey Average:
=====================================================================================
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
The Sales Comparison Approach provides an estimate of 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, knowledgeable buyers and sellers, we can identify market value and
price trends. Comparability in physical, locational and economic characteristics
is an important criterion when comparing the 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, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional, or locational factors;
3. Reduce the sales price to a common unit of comparison, such as price
per square foot of gross leasable area that is to be sold;
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; and
6. Interpret the adjusted sales data and draw a logical value
conclusion.
The most widely-used and market-oriented unit of comparison for properties
such as the subject is the sale price per square foot of gross leasable area
(GLA) purchased and the overall capitalization rate extracted from an analysis
of the sale.
Overview of Sales
The negotiated sale price of comparable properties tends to set a range in
which the value of the subject will usually fall. In total, nine (9) comparable
sales have been analyzed for this analysis. These represent large community and
power center sales in the south, southwest, southeast, and eastern regions of
the United States (see chart on Facing Page).
As shown, the sales range between $69.32 and $128.83 per square foot of
GLA sold, with overall capitalization rates ranging from a low of 9.10 percent
to a high of 10.00 percent. These transactions occurred between September 1994
and July 1997, with the majority of sales taking place over the past year
(1996).
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
For the sales surveyed, the mean overall sale price is calculated to be
$32,500,000 (rounded). The mean gross leasable area sold is 319,483 square feet,
with the mean overall price per square foot calculated at $101.58 per square
foot. Finally, the survey shows a mean NOI of $9.65 per square foot, with a mean
capitalization rate of 9.52 percent.
As can be seen, the sales vary from property to property, based on various
characteristics of each property. Some of the most notable differences between
the comparable sales include site coverage, anchor GLA as a component of GLA
sold, occupancy, tenant merchandising and anchor credit, and the net operating
income achieved per square foot.
Analysis of Sales
The major elements of comparison for an analysis of this type include the
property rights conveyed, the financial terms incorporated into a particular
transaction, the conditions or motivations surrounding the sale, changes in
market conditions since the sale, the location of the real estate, its physical
traits and the economic characteristics of the property. The first adjustment
made to the market data takes into account differences between the subject
property and the comparable property sales with regard to the legal interest
transferred. Advantageous financing terms or peculiar conditions of sale are
then adjusted to reflect a normal market transaction. Next, changes in market
condition must be accounted, thereby creating a time adjusted normal unit of
comparison. Lastly, adjustments for location, the physical traits, and the
economic characteristics of the market data are made in order to generate the
final adjusted unit rate which is appropriate for the subject property.
Property Rights Conveyed
All of the sales utilized in this analysis involved the transfer of the
leased fee interest in the real property. The comparables were all encumbered by
a number of leases with varying sized tenants and expiration dates. We believe,
then, that no adjustment to the market data is necessary for the property rights
conveyed.
Financial Terms
To the best of our knowledge, all of the sales utilized in this analysis
were accomplished with cash and/or cash and market oriented financing.
Therefore, no adjustment for financial terms is required for the comparables.
Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale may
significantly affect transaction prices. However; all sales used in this
analysis are considered to be "arms-length" market transactions between both
knowledgeable buyers and sellers on the open market. Therefore, no adjustment
for conditions of sale are required for the comparables.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
Market Conditions
As discussed in the Market Analysis section of this report, the subject
property is expected to continue capturing a substantial share in its market
area. Some retail markets are now considered to be over-built. For instance,
many markets have experienced a flood of new big box users over the past several
years. This has been the direct result of the explosive retail market in the
mid- to late-1980s and following the recession of the early-1990s. High vacancy
rates, declining rental and growth rates, expected expense growth, and an
abundance of competition, combined with competition from alternative investments
and general lack of financing, have served to depress the market for retail
space. For this reason, negative adjustments might be considered appropriate for
older sales in this analysis.
Still, well performing retail projects have become an attractive
investment to such entities as foreign and domestic insurance companies, REITs,
pension funds, and syndication's. More-over, the majority of sales presented
have all taken place within the last 12 to 18 months. Adjustments for market
conditions are difficult at best in this kind of analysis. Thus, no market
condition adjustments would be considered necessary in this instance.
Location
An adjustment for location may be required when the locational
characteristics of a comparable property are different from those of the subject
property. Adjustments of this sort are difficult as well. Without a better
analysis of comparable trade areas and sales averages at the sale properties,
adjustments of this sort are virtually impossible. As discussed, Naples/Collier
County has been the recipient of substantial growth and is poised for continued
vitality into the foreseeable future.
From a review of the sales, there appear to be no glaring locational
differences between comparables. It is noted, however, that several of the sales
are located in areas which are experiencing somewhat better population and
income growth, which would be considered superior to the subject location.
Likewise, some of the properties are in markets which are experiencing either
negative or slower growth and could be considered inferior to the subject.
Several of the properties are also situated in significantly larger trade
areas/regions which would be considered superior to Naples/Collier County.
Physical Traits
Most sales presented were constructed during the mid-1980s to the early-
1990s, with the exception of Sale No. 9, which involved the reconfiguration of
an older strip center into a power center format. All sales were considered to
be in good condition at sale and no measurable physical adjustments can be
readily quantified.
Economic Characteristics
Most income producing properties are purchased on gross expected income,
rather than leasable area, making unit prices a somewhat subjective reflection
of investment behavior. 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 operating
income and the sales price of the property.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
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, rental levels, operating characteristics,
and building quality, making adjustments more objective rather than subjective.
In order to quantify the appropriate adjustments to the indicated per
square foot unit values, we compare the subject's first year projected net
operating income per square foot to the pro-forma income of the individual sale
properties. The table below adjusts each property's sale price per square foot
on this basis. The derivation of the subject's projected first year net
operating income (FY 1998 $9.88 per square foot) is presented in the Income
Approach section of this report and is based on first year NOI.
================================================================================
Price Per SQ/FT Adjustment Chart
================================================================================
Comp.
Sale Subject Adjust. Unadjust. Adjust.
Sale No. NOI/SF NOI/SF Factor Unit Price Unit Price
- --------------------------------------------------------------------------------
1 $ 11.21 $ 9.88 0.88136 $112.19 $ 98.88
- --------------------------------------------------------------------------------
2 $ 6.59 $ 9.88 1.49924 $ 69.32 $103.93
- --------------------------------------------------------------------------------
3 $ 9.84 $ 9.88 1.00107 $ 99.85 $100.26
- --------------------------------------------------------------------------------
4 $ 7.81 $ 9.88 1.26504 $ 78.13 $ 98.84
- --------------------------------------------------------------------------------
5 $ 12.11 $ 9.88 0.81585 $128.83 $105.11
- --------------------------------------------------------------------------------
6 $ 7.93 $ 9.88 1.24590 $ 83.67 $104.24
- --------------------------------------------------------------------------------
7 $ 10.60 $ 9.88 0.93208 $113.97 $106.23
- --------------------------------------------------------------------------------
8 $ 9.80 $ 9.88 1.00816 $107.67 $108.55
- --------------------------------------------------------------------------------
9 $ 10.97 $ 9.88 0.90064 $120.58 $108.60
================================================================================
Survey
Mean $ 9.65 $ 9.88 1.02383 $101.58 $104.00
================================================================================
After adjustments for these economic differences, the sales presented
reflect a range from approximately $99.00 to $109.00 per square foot with a mean
of approximately $104.00 per square foot. The subject's net operating income per
square foot of $9.88 (FY 1998) is considered to be most comparable to Sales Nos.
3, 7, 8, and 9. These improved property sales show adjusted unit rates ranging
between $100.00 and $109.00 per square foot of gross leasable area.
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, however, do not explicitly convey by
themselves 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.
The subject is viewed as being the dominant power/community center in an
area with good demographics, strong tourist revenues, and reasonable
competition. It is well leased, with a number of tenants that are unique to the
market. Continued upside exists through the potential for overage rents as the
center matures.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Considering the characteristics of the subject relative to the above, we
believe that a unit rate at the middle- to upper-end of the range of $104.00 to
$108.00 per square foot is appropriate. Applying this unit rate range to
266,438+/- square feet of owned GLA results in a value of approximately
$27,700,000 to $28,800,000 for the subject property.
Based upon a net operating income of $2,633,011 in FY 1998, a range of
overall capitalization rates extending from 9.14 to 9.51 percent is generated by
the indicated value. This range is generally considered to be reasonable for a
property of the subject's caliber. We would note that the subject's income is
slightly depressed in the first year of our analysis due to the former Linen
Barn suite which is not forecasted to be leased until October.
Conclusion
In light of the above, it is our opinion that the Sales Comparison
Approach indicates a market value for the subject in the range of $27,500,000 to
$28,500,000 on an "As Is" basis as of July 14, 1997, the date of inspection.
As Is Market Value - Sales Comparison Approach
Rounded to $27,500,000 to $28,500,000
================================================================================
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<PAGE>
INCOME APPROACH
================================================================================
Introduction
The Income Capitalization 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.
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 Capitalization Approach to the valuation of the subject, we
have utilized a 10-year holding period for the "As Is" investment in the subject
property, with the cash flow analysis commencing on August 1, 1997. 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, but short enough to reasonably
estimate the expected income and expenses of the real estate. Although our cash
flow analysis is presented on a fiscal year basis, it is noted that we may
discuss income and expenses based upon a calendar year basis for comparison to
historical and budgeted data.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
ANNUAL CASH FLOW REPORT
Carillon Place
Cushman & Wakefield, Inc.
================================================================================
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME
MINIMUM RENT
Anchor Store Tenants $ 1,831,275 $ 1,853,222 $ 1,883,235 $ 1,897,450 $ 1,897,450
In-Line Store Tenants $ 730,908 $ 750,071 $ 787,551 $ 809,074 $ 819,439
Owned Outparcel $ 226,950 $ 230,129 $ 248,663 $ 248.653 $ 248.653
----------- ----------- ----------- ----------- -----------
Subtotal: $ 2,789,133 $ 2,833,422 $ 2,919,449 $ 2,955,187 $ 2,965,552
RECOVERIES
CAM Recovery Income $ 341,360 $ 353,323 $ 363,333 $ 375,931 $ 388,603
TAX Recovery Income $ 215,279 $ 224,168 $ 232,013 $ 240,137 $ 248,538
INS Recovery Income $ 68,978 $ 71,909 $ 74,426 $ 77,029 $ 79,726
----------- ----------- ----------- ----------- -----------
Subtotal: $ 625,617 $ 649,400 $ 669,772 $ 693,097 $ 716,867
Overage Rent $ 10,401 $ 14,900 $ 19,557 $ 24,376 $ 29,364
Recaptures $ 0 $ 0 $ 0 $ 0 $ 0
Sales Volume (000) $ 42,236 $ 43,715 $ 45,187 $ 46,670 $ 48,204
Gross Rental Income: $ 3,425,151 $ 3,497,722 $ 3,608,778 $ 3,672,660 $ 3,711,783
----------- ----------- ----------- ----------- -----------
Miscellaneous Income $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy/Credit Loss ($ 45,098) ($ 46,288) ($ 48,769) ($ 49,870) ($ 50,525)
----------- ----------- ----------- ----------- -----------
Total Income: $ 3,380,053 $ 3,451,434 $ 3,580,009 $ 3,622,790 $ 3,681,258
OPERATING EXPENSES
EXPENSES
Common Area Maint. $ 304,247 $ 314,896 $ 325,917 $ 337,325 $ 349,131
Real Estate Taxes $ 214,288 $ 221,788 $ 229,550 $ 237,584 $ 245,900
Insurance $ 68,122 $ 70,506 $ 72,974 $ 75,528 $ 78,172
Miscellaneous Expenses $ 20,408 $ 21,123 $ 21,862 $ 22,627 $ 23,419
Management Fee $ 139,977 $142,416 $ 146,950 $ 148,978 $ 149,745
----------- ----------- ----------- ----------- -----------
Total Expenses: $ 747,042 $ 770,729 $ 797,253 $ 822,042 $ 846,388
Operating Expense Ratio: 22.1% 22.3% 22.4% 22.7% 23.1%
NET OPERATING INCOME $ 2,633,011 $ 2,680,705 $ 2,762,756 $ 2,800,748 $ 2,814,890
Alterations $ 0 $ 0 $ 0 $ 0 $ 0
Commissions $ 0 $ 0 $ 0 $ 0 $ 0
Replacement Reserve $ 39,966 $ 41,365 $ 42,812 $ 44,311 $ 45,862
----------- ----------- ----------- ----------- -----------
Subtotal: $ 39,966 $ 41,365 $ 42,812 $ 44,311 $ 45,862
----------- ----------- ----------- ----------- -----------
NET CASH FLOW $ 2,593,045 $ 2,639,340 $ 2,719,944 $ 2,756,437 $ 2,769,028
2003 2004 2005 2006 2007
----------- ----------- ----------- ----------- -----------
OPERATING INCOME
MINIMUM RENT
Anchor Store Tenants $ 1,897,450 $ 1,903,326 $ 1,941,312 $ 1,969,875 $ 1,969,875
In-Line Store Tenants $ 836,021 $ 832,062 $ 876,431 $ 906,547 $ 915,927
Owned Outparcel $ 248,663 $ 251,465 $ 270,220 $ 270,220 $ 270,220
----------- ----------- ----------- ----------- -----------
Subtotal: $ 2,982,134 $ 2,986,863 $ 3,087,963 $ 3,146,642 $ 3,156,022
RECOVERIES
CAM Recovery Income $ 402,125 $ 413,943 $ 430,002 $ 445,212 $ 460,780
TAX Recovery Income $ 257,165 $ 265,259 $ 274,891 $ 284,685 $ 294,907
INS Recovery Income $ 82,488 $ 85,031 $ 88,141 $ 91,290 $ 94,583
----------- ----------- ----------- ----------- -----------
Subtotal: $ 741,778 $ 764,233 $ 793,034 $ 821,187 $ 850,270
Overage Rent $ 34,527 $ 39,870 $ 45,401 $ 51,292 $ 57,857
Recaptures $ 0 $ 0 $ 0 $ 0 $ 0
Sales Volume (000) $ 49,793 $ 51,437 $ 52,613 $ 54,846 $ 56,722
Gross Rental Income: $ 3,768,439 $ 3,790,956 $ 3,926,398 $ 4,019,121 $ 4,064,149
Miscellaneous Income $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy/Credit Loss ($ 51,449) ($ 51,540) ($ 54,397) ($ 55,912) ($ 56,633)
----------- ----------- ----------- ----------- -----------
Total Income: $ 3,706,990 $ 3,739,416 $ 3,872,001 $ 3,963,209 $ 4,007,516
OPERATING EXPENSES
EXPENSES
Common Area Maint $ 361,351 $ 373,998 $ 387,088 $ 400,636 $ 414,658
Real Estate Taxes $ 254,506 $ 263,414 $ 272,634 $ 282,176 $ 292,052
Insurance $ 80,908 $ 83,739 $ 86,670 $ 89,704 $ 92,843
Miscellaneous Expenses $ 24,239 $ 25,087 $ 25,965 $ 26,874 $ 27,814
Management Fee $ 150,833 $ 151,336 $ 156,668 $ 159,897 $ 160,694
----------- ----------- ----------- ----------- -----------
Total Expenses: $ 871,837 $ 897,674 $ 929,025 $ 959,287 $ 988,061
Operating Expense Ratio: 23.5% 24.0% 24.0% 24.2% 24.7%
NET OPERATING INCOME $ 2,835,153 $ 2,841,842 $ 2,942,976 $ 3,003,922 $ 3,019,455
Alterations $ 0 $ 23,500 $ 14,107 $ 12,684 $ 6,771
Commissions $ 0 $ 15,205 $ 9,009 $ 7,826 $ 4,388
Replacement Reserve $ 47,467 $ 49,128 $ 50,848 $ 52,627 $ 54,469
----------- ----------- ----------- ----------- -----------
Subtotal: $ 47,467 $ 87,833 $ 73,964 $ 73,137 $ 65,628
NET CASH FLOW $ 2,787,686 $ 2,754,009 $ 2,869,012 $ 2,930,785 $ 2,953,827
CAGR CAGR
2008 1998/07 2000/07
----------- ------- -------
OPERATING INCOME
MINIMUM RENT
Anchor Store Tenants $ 1,969,875 0.8% 0.6%
In-Line Store Tenants $ 934,936 2.5% 2.2%
Owned Outparcel $ 270,220 2.0% 1.2%
----------- --- ---
Subtotal: $ 3,175,031 1.4% 1.1%
RECOVERIES
CAM Recovery Income $ 476,197 3.4% 3.5%
TAX Recovery Income $ 304,871 3.6% 3.5%
INS Recovery Income $ 97,758 3.6% 3.5%
----------- --- ---
Subtotal: $ 878,826 3.5% 3.6%
Overage Rent $ 64,902 21.0% 16.8%
Recaptures $ 0 -- --
Sales Volume (000) $ 58,608 3.3% 3.5%
Gross Rental Income: $ 4,118,759 1.9% 1.7%
----------- --- ---
Miscellaneous Income $ 0 -- --
Vacancy/Credit Loss ($ 57,698) 2.6% 2.2%
----------- --- ---
Total Income: $ 4,061,061 1.9% 1.7%
OPERATING EXPENSES
EXPENSES
Common Area Maint $ 429,171 3.5% 3.5%
Real Estate Taxes $ 302,274 3.5% 3.5%
Insurance $ 96,093 3.5% 3.5%
Miscellaneous Expenses $ 28,788 3.5% 3.5%
Management Fee $ 161,996 1.5% 1.3%
Total Expenses: $ 1,018,322 3.2% 3.1%
Operating Expense Ratio: 25.1%
NET OPERATING INCOME $ 3,042,739 1.5% 1.3%
Alterations $ 15,799 -- --
Commissions $ 10,238 -- --
Replacement Reserve $ 56,376 3.5% 3.5%
----------- --- ---
Subtotal: $ 82,413 5.7% 6.3%
NET CASH FLOW 1.5% 1.2%
</TABLE>
<PAGE>
Income Approach
================================================================================
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 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.
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.
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.
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<PAGE>
Income Approach
================================================================================
- --------------------
Discounted Cash Flow
"As Is Valuation"
- --------------------
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. Minimum base rent represents a
legal contract establishing a return to investors in the real estate, while the
passing-on of certain expenses to 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 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.
Minimum Rental Income
The 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
vacant space (if applicable) market rent growth, and renewal/turnover
probability.
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. The 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.
The minimum rents forecasted at the subject property are essentially
derived from various tenant categories: anchor tenant revenues consisting of
base rent obligations, tenant revenues consisting of all in-line shops and
ground rent paid by outparcel tenants.
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 the
trade area. Consequently, the best measure of minimum rental income can
sometimes be its actual rent roll leasing schedule.
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Income Approach
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Analysis of Market Leases
A survey of local retail properties is presented in the Market Analysis
section of this report. These are retail centers of various sizes and quality
located throughout the Naples area. Most are located along major arterials in
areas of commercial-retail development. The smallest center contains
approximately 95,000+/- square feet and is considered to be a neighborhood-
oriented facility. The largest center is the Pine Ridge Crossings, a 280,000+/-
square foot center anchored by Target, Publix, and Beall's. Larger, community
and power-oriented centers will have anchors such as discount department stores,
category killers, big box users, and grocery outlets, while neighborhood centers
will typically only have one grocery type anchor. Most rates compiled are triple
net whereas tenants pay a pro-rata share of common area maintenance charges.
Pine Ridge Crossings, located adjacent to the subject at the southwest
corner of Pine Ridge and Airport-Pulling roads. This center opened in July 1994
and currently only has one vacant suite remaining. An asking rent of $18.50 per
square foot is being quoted, with triple net charges running $2.85-$2.95 per
square foot. Two months free rent would be given for a three to five year lease
term with build-out negotiable. Other leases in the center reportedly range
between $14.00 and $18.00 per square feet.
Naples Shopping Center at U.S. 41 and Golden Gate Parkway, across from
Coastland Center mall. Rents reportedly range between $6.00 and $10.00 per
square foot in this center, while triple net charges are estimated between $2.75
and $3.00 per square foot.
Bed Bath & Beyond Plaza (formerly Ridgeport Plaza), is situated at the
northwest corner of Pine Ridge and Airport-Pulling roads. Leases here range from
$10.00 to $14.00 per square foot, with current asking rates between $10.00 and
$14.00 per square foot. Triple net charges are running about $2.65-$2.85 per
square foot. One to two months free rent are offered for a three to five year
lease.
Finally, Park Shore Shopping Center is located along U.S. Highway 41. This
231,930+/- square foot center is anchored by Kmart, Hyde Park Market, J.
Byron's, and Eckerd Drugs. Leases in the center range between $5.00 and $14.00
per square foot (including anchors). Asking rents range from $8.00 per square
foot to $14.00 per square foot, with triple net charges reportedly ranging
between $2.75 and $3.00 per square foot. No property specific -information was
released by the owner.
Thus, the market area rental rates presented reflect a range between
$10.00 and $18.00 per square foot triple net for in-line tenants. Typical leases
run three to ten years with annual CPI escalations or set increases every two to
three years. Tenant improvement allowances are negotiable, typically ranging
from $4.00 to $6.00 per square foot for new tenants and $1.00 to $1.50 per
square foot for renewing tenants, although no real allowances were quoted.
Relative to the subject, these properties represent comparable retail projects
in the Naples area that compete to some degree with Carillon Place. Although the
properties vary by location and configuration with respect to the subject, the
reporting lease rates generally support those at Carillon Place. In general
terms, the subject is considered superior to other competing centers within the
Collier County market.
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COMPARABLE ANCHOR LEASES
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
===============================================================================================================================
Year Building Anchor Anchor
No. Name/Location Opened Area Tenant Sq.Ft. Term Options
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Carillon Place 1994 266,270 Winn-Dixie 50,384 20 yrs. Yes
SEC/Airport-Pulling & Pine T.J. Maxx 26,250 15 yrs. Yes
Ridge Road Service Merchandise 50,061 20 yrs. Yes
Naples, Florida Ross 25,500 10 yrs. Yes
Circuit City 21,285 20 yrs. Yes
Office Max 23,500 15 yrs. Yes
---------- ------ ------- ---
Total 196,980
- -------------------------------------------------------------------------------------------------------------------------------
2 Confidential 1994 725,000 Kmart 114,764 25 yrs. n/a
Broward County Builder's Square 107,653 25 yrs. n/a
Hollywood, Florida Marshall's 30,406 10 yrs. Yes
Service Merchandise 51,250 10 yrs. n/a
OfficeMax 23,500 15 yrs. n/a
AMC Theaters 54,017 20 yrs. n/a
Ross 27,708 10 yrs. n/a
MacFrugal's 20,000 15 yrs. n/a
Linen Supermarket 15,000 10 yrs. n/a
Rag Shop 10,000 10 yrs. n/a
-------- ------ ------- ---
Total 454,298
- -------------------------------------------------------------------------------------------------------------------------------
3 Pembroke Commons 1991 311,318 Marshall's 40,000 15 yrs. Yes
University Dr. & Pine Blvd. Office Depot 25,108 25 yrs. Yes
Broward County Publix Superstore 65,537 25 yrs. Yes
Pembroke Pines, Florida Circuit City 31,473 20 yrs. Yes
T.J. Maxx 25,000 15 yrs. Yes
Linen 'N Things 20,000 20 yrs. Yes
--------------- ------ ------- ---
Total 207,118
- -------------------------------------------------------------------------------------------------------------------------------
4 Promenade Shoppes 1988 293,729 Marshall's 48,385 20 yrs. n/a
Biscayne Blvd. & 203rd
Miami, Florida
- -------------------------------------------------------------------------------------------------------------------------------
5 Las Americas 1987 455,000 Marshall's (7/93) 24,300 20 yrs. Yes
Coral Way & 122nd Ave. OfficeMax (7/93) 24,295 15 yrs. n/a
Dade County AMC Theaters (Proposed) 40,585 20 yrs. Yes
Miami, Florida ----------------------- ------ ------- ---
Total 89,180
- -------------------------------------------------------------------------------------------------------------------------------
6 Freedom Square 1994 213,839 Kmart (12/94) 117,162 25 yrs. Yes
Naples, Florida Publix (3/95) 56,077 20 yrs. Yes
------------- ------- ------- ---
Total 173,239
- -------------------------------------------------------------------------------------------------------------------------------
7 International Value Ctr. 1995 186,081 Books-A-Million (8/96) 20,000 10 yrs. Yes
Intl. Dr. & Touch One Shoe Carnival (3/96) 17,000 10 yrs. Yes
Orange County Ross (12/95) 28,220 15 yrs. Yes
Orlando, Florida Old Navy (11/95) 15,000 10 yrs. Yes
T.J. Maxx (10/95) 28,054 10 yrs. Yes
Bed Bath & Beyond (10/95) 40,000 15 yrs. Yes
------------------------- ------- ------- ---
Total 148,274
- -------------------------------------------------------------------------------------------------------------------------------
8 Plaza at Brandon T.C. 1994 242,635 Ross (2/94) 25,106 10 yrs. Yes
Tampa, Florida
- -------------------------------------------------------------------------------------------------------------------------------
9 Kendale Lakes Mall 1977 308,000 Marshall's ('93) 28,000 10 yrs. Yes
Kendall Dr. & 137th Ave. OfficeMax ('93) 23,500 15 yrs. Yes
Miami, Florida --------------- ------ ------- ---
Total 51,500
- -------------------------------------------------------------------------------------------------------------------------------
10 Flagler Park Plaza 1990 452,681 Service Merchandise 50,000 20 yrs. n/a
W. Flagler & 82nd-84th Joann Fabrics 12,016 10 yrs. n/a
Miami, Florida ------------- ------ ------- ---
Total 62,016
- -------------------------------------------------------------------------------------------------------------------------------
11 Tower Shops 1989 650,000 Home Depot (Purchased) 81,000 n/a n/a
SEC/University & I-595 Luria's 29,592 15 yrs. n/a
Broward County ------- ------- ------- ---
Davie, Florida Total 110,592
- -------------------------------------------------------------------------------------------------------------------------------
12 Confidential n/a n/a CompUSA (11/93) 26,287 15 yrs. Yes
Power Center Rooms To Go (3/94) 16,000 25 yrs. None
Palm Beach, Florida United Artists (11/93) 30,600 20 yrs. Yes
---------------------- ------ ------- ---
Total 72,887
===============================================================================================================================
Total/Average: 373,141 1,639,575
===============================================================================================================================
- ---------------------------------------------------------------------------------------------
Annual Rent % Escal-
No. Name/Location Rent Per SF Rent ations
- ---------------------------------------------------------------------------------------------
1 Carillon Place $403,960 $8.02 1 00% Flat
SEC/Airport-Pulling & Pine $229,688 $8.75 2.00% Yes
Ridge Road $437,500 $8.74 n/a Flat
Naples, Florida $248,625 $9.75 2.00% Yes
$222,138 $10.44 n/a Yes
$240,875 $10.25 1.00% Yes
---------- ------
$1,782,786 $9.05
- ---------------------------------------------------------------------------------------------
2 Confidential $858,435 $7.48 1.00% Flat
Broward County $832,158 $7.73 1.00% Flat
Hollywood, Florida $243,200 $8.00 1.00% Yes
$425,000 $8.29 n/a Flat
$282,000 $12.00 1.00% Yes
$594,187 $11.00 2.00% Flat
$249,372 $9.00 2.00% Flat
$180,000 $9.00 2.00% Yes
$135,000 $9.00 5.00% Yes
$85,417 $8.54 3.00% Yes
---------- ------
$3,884,768 $8.55
- ---------------------------------------------------------------------------------------------
3 Pembroke Commons $310,000 $7.75 2.50% Yes
University Dr. & Pine Blvd. $200,864 $8.00 1.00% Yes
Broward County $517,742 $7.90 1 00% Yes
Pembroke Pines, Florida $259,338 $8.24 n/a Yes
$168,750 $6.75 2.00% Yes
$180,000 $9.00 3.00% Yes
---------- ------
$1,636,694 $7.90
- ---------------------------------------------------------------------------------------------
4 Promenade Shoppes $338,696 $7.00 2.00% Flat
Biscayne Blvd. & 203rd
Miami, Florida
- ---------------------------------------------------------------------------------------------
5 Las Americas $182,250 $7.50 1.00% Yes
Coral Way & 122nd Ave. $194,380 $8.00 n/a Yes
Dade County $344,973 $8.50 6.00% Yes
Miami, Florida -------- ----- ----- ---
$721,603 $8.09
- ---------------------------------------------------------------------------------------------
6 Freedom Square $805,216 $6.87 n/a Flat
Naples, Florida $448,616 $8.00 1.25% Flat
---------- ------
$1,253,832 $7.24
- ---------------------------------------------------------------------------------------------
7 International Value Ctr. $170,000 $8.50 n/a Flat
Intl. Dr. & Touch One $195,500 $11.50 n/a Yes
Orange County $282,200 $10.00 n/a Yes
Orlando, Florida $225,000 $15.00 n/a Flat
$272,805 $9.72 n/a Yes
$580,000 $14.50 n/a Yes
---------- ------
$1,725,505 $11.64
- ---------------------------------------------------------------------------------------------
8 Plaza at Brandon T.C. $213,401 $8.50 2.00% Yes
Tampa, Florida
- ---------------------------------------------------------------------------------------------
9 Kendale Lakes Mall $261,800 $9.35 1.50% Yes
Kendall Dr. & 137th Ave. $282,000 $12.00 n/a Yes
Miami, Florida -------- ------ --- ---
$543,800 $10.56
- ---------------------------------------------------------------------------------------------
10 Flagler Park Plaza $375,000 $7.50 n/a Yes
W. Flagler & 82nd-84th $90,120 $7.50 4.50% Flat
Miami, Florida ------- ----- ----- ----
$465,120 $7.50
- ---------------------------------------------------------------------------------------------
11 Tower Shops $506,250 $6.25 1.00% Flat
SEC/University & I-595 $196,000 $6.62 n/a Yes
Broward County -------- ----- --- ---
Davie, Florida $702,250 $6.35
- ---------------------------------------------------------------------------------------------
12 Confidential $236,583 $9.00 n/a Yes
Power Center $110,000 $6.88 n/a Yes
Palm Beach, Florida $459,000 $15.00 6.00% Yes
-------- ------ ----- ---
$805,563 $11.05
=============================================================================================
Total/Average: $14,074,038 $8.58
=============================================================================================
</TABLE>
<PAGE>
Income Approach
================================================================================
Anchor Tenant Leases
The survey on the Facing Page presents lease rates for anchor type tenants
in community and power-oriented retail centers within the Florida market. The
survey has been expanded to include a larger regional scope. As can be seen, the
leases typically range between $7.00 and $15.00 per square foot, with 10 to 20
year terms being typical. The overall average for the 1,639,575 square feet
surveyed is $8.58 per square foot. Overall, the anchor tenant leases shown
support the subject's major tenant leases which are also arrayed on the chart.
Outparcel Leases
The subject property has one outparcel site which we have reflected as
being under ground lease terms for this analysis. Boston Chicken is on a ten
year ground lease, paying $18.30 per square foot of building area (3,279 square
feet). This rate escalates to $21.04 after five years. Boston Chicken also pays
a contribution for CAM and a pro-rata share of taxes with a 15.0 percent
administrative fee. Tenant has three five-year options to renew.
Eckerd Drugs leases an 8,719 square foot building on an outpad as well.
This is a standard building lease at $13.68 per square foot, which escalates
every five years throughout the 20-year lease. Eckerd has four option renewals
and pays a pro-rata share of expenses at the center. Payless Shoesource occupies
the other portion of this building on a 10-year lease at $15.90 per square foot,
increasing to $17.89 in 1999.
The remaining outpads are separately owned. However, these tenants are
responsible for CAM contributions to the center.
Subject Leasing Activity
Leasing at the subject property has been significant, being 100.0 percent
leased since opening until Linen Barn recently closed. OfficeMax and Eckerd
Drugs reportedly opened in February 1994, with a grand opening for the center
taking place on April 20, 1994. A survey of subject leases shows lease rates
which range from $14.00 to $20.00 per square foot for in-line tenants and $8.00
to $10.00 per square foot for anchor tenants.
The following is a discussion of anchor leases at the subject property.
o Winn-Dixie, a regional grocery operator, signed a lease in April
1993 for 50,540+/- square feet. Per agreement, Winn-Dixie pays an
annual rent of $403,960 for the 20 year term plus 1.0 percent of
gross sales in excess of annual rent (natural breakpoint). Tenant is
responsible for all utility charges, including electricity, water,
telephone, and other services used. Winn-Dixie is entitled to five
successive options of five years each. Winn-Dixie is responsible for
its pro-rata share of common area maintenance expenses, ad valorem
real estate taxes, and the cost of fire and extended coverage
insurance. Tenant also has an option to expand its store on the
northerly side of the existing building up to 38 feet in width and
the store's 222 foot building depth.
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Income Approach
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o T.J. Maxx signed a lease for 26,250+/- square feet in March 1992.
This lease is for 15 years with three successive options of five
years each. T.J. Maxx pays a minimum rent of $229,688. Each option
incurs an escalation in rent. In addition to minimum rent, tenant is
required to pay 2.0 percent of gross sales over stipulated
breakpoint. T.J. Maxx is also obligated to pay a pro-rata share of
CAM, tax, and insurance expenses. We would note that TJX has
recently signed a deal to expand their store by 6,650+/- square feet
into a portion of the former Linen Barn space. This expansion will
be completed by October 1997, with TJX paying $8.75 per square foot
for the additional space.
o Service Merchandise occupies 50,061+/- square feet from a lease
commenced in July 1994. Tenant's term is for 20 years with four
successive five year option periods. Service Merchandise pays an
annual rent of $437,500, which is fixed in each option period.
Tenant is not required to pay additional rent in the form of
percentage rent, but does pay a pro-rata share of CAM, tax, and
insurance.
o Ross Stores agreed to lease 25,500+ square feet in a lease which
commenced in May 1994. The lease term is for 10 years with four
additional five year option periods. Ross pays an annual rent based
upon $9.75 per square foot, increasing to $10.25 per square foot in
year six. In addition to minimum rent, tenant is obligated to pay
2.0 percent of gross sales over set breakpoints and a pro-rata share
of CAM, tax, and insurance.
o Circuit City has leased 21,285+ square feet under lease which
commenced in May 1994. The lease runs for 20 years, with four
consecutive five year option periods. Circuit City pays an annual
rent of $222,138 ($10.44 per square foot) for the first five years,
increasing every five years based upon a calculation of CPI-U
increases or 12.0 percent (the lesser of). Tenant does not pay a
percentage of sales but is obligated to pay a pro-rata share of
common area expenses, real estate taxes, and insurance.
o OfficeMax signed a lease for 23,500+/- square feet for a 15 year
term with three successive option periods of five years each. Tenant
pays a minimum rent of $10.25 per square foot which increases to
$10.75 per square foot in year six and $11.25 per square foot in
year eleven. OfficeMax is also required to pay 1.0 percent of gross
sales over stipulated breakpoints throughout the term of the lease.
Tenant recoveries are based on a pro-rata share of CAM, tax, and
insurance expenses.
Conclusion - Minimum Rent for In-Line Shops
From our analysis, it is clear that current market rents at Carillon Place
are well supported by other competing properties as well as recent leasing
activity in the center itself. The property enjoys an accessible location within
a growing trade area which should only be strengthened by future commercial
development along Pine Ridge and Airport-Pulling roads. Carillon has a strong
occupancy with no absorption of vacant space necessary for this analysis. As
such, the subject property should remain a viable shopping destination to a
healthy trade area into the foreseeable future.
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Income Approach
================================================================================
After considering all of the above, relative to the subject's position in
the market, we have utilized the following market rental rate assumptions for
in-line space at Carillon Place.
================================================================================
Market Rent Projections
================================================================================
Suite Size Rental Rate Range Market Rate
================================================================================
Anchors $ 8.00 to $10.00 $ 9.00
- --------------------------------------------------------------------------------
Under 1,000 SF $17.00 to $20.00 $ 18.50
- --------------------------------------------------------------------------------
1,000 - 2,999 SF $16.00 to $18.00 $ 17.50
- --------------------------------------------------------------------------------
3,000 - 4,999 SF $12.50 to $17.50 $ 15.00
- --------------------------------------------------------------------------------
5,000 - 10,000 SF $12.00 to $16.00 $ 14.00
- --------------------------------------------------------------------------------
Over 10,000 SF $11.00 to $12.00 $ 11.50
- --------------------------------------------------------------------------------
Outparcels $12.00 to $15.00 $ 14.00
- --------------------------------------------------------------------------------
Lease Terms
The typical lease term for new retail leases in centers such as the
subject generally ranges from three to ten years. Market practice dictates that
it is not uncommon to get rent bumps throughout the lease term 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 (4 percent) annual increase and be capped at a higher maximum (6 to 7
percent) amount. Many leases at the subject property have set increases which
escalate rent either annually or on specified dates throughout the lease term.
Concessions
Developers and owners have a number of methods to induce tenants to locate
at their properties. Included among these concession packages are free rent,
tenant build-out costs, and cash allowances. Concessions are typically dependent
upon local market practice and/or the strength of the particular property or
mall owner/developer.
Free Rent
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 large, retail centers 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.
A review of competing centers reveals that one to two months are typically
being offered for three to five year deals. Such was evidenced at Carillon
Place, where eight of the seventeen non-anchor tenants received and average of
1.78 months free rent on an average lease of 6 years. We view this leasing
structure as having been necessary to expedite lease-up. The subject achieved
100 percent occupancy during its first year and is viewed as the premier retail
center in the area. As such, we do not feel that it is necessary to continue to
offer free rent.
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Income Approach
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Tenant Workletter
Tenant build-out allowances are another form of inducement to tenants. A
review of local environs suggests that tenant workletter is not typically
offered but often times given as part of tenant negotiation. Some tenants at the
subject were provided with build-out allowances in conjunction with the new
construction of the center. This is typical of new construction during which
tenants are given allowances covered in the construction budget. Generally,
allowances vary lease by lease, depending upon build-out requirements and rental
rates achieved. For this analysis, new tenants to the center are given an
allowance of $6.00 per square foot, with renewal tenants receiving $2.00 per
square foot. No allowance is provided for tenants exercising options.
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 3.00 and
4.00 percent for retail centers. Cushman & Wakefield's Autumn 1996 survey of
pension fund, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between 2.0 and 4.0 percent for Class A Power Centers. The low mean of the
survey is calculated to be 3.3, while the high mean is 3.5 percent. The Peter F.
Korpacz Investor Survey (Second Quarter 1997) shows slightly more conservative
results with average annual rent growth of 2.9 percent.
The tenants' ability to pay rent is closely tied to its increases in
sales. However, rent growth can also be impacted by competition and
management's desire to attract and keep certain tenants that increase the
center's synergy and appeal. With literally no lease-up to contend with, as well
as having the newest, most dominant center in the market, management is a
formidable position to command higher rents. After considering the above, we
have utilized a rent growth rate of 3.5 percent per year over the holding
period.
Releasing Assumption
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 expiration. Lease terms are
for 5 years, with both tenant improvement allowances and commissions paid. We
would note that many tenants have set options to renew their leases. Option
renewals have been compared to projected market rents in order to forecast the
probability of tenant options being exercised. In this analysis, all options are
assumed to be exercised.
Overage Rent
In addition to the minimum base rent, tenants will typically contract to
pay a percentage of their gross annual sales over a pre-established base amount
as overage rent. Most leases have a natural breakpoint. In a few instances, the
lease provides for a specified breakpoint sales level. The average overage
percentage for small space retail tenants is in a range of 5.0 percent to 6.0
percent.
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Income Approach
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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 one measure for protecting the equity investor against
inflation.
For this analysis, we have utilized actual reported sales for tenants at
the subject center. These sales levels are forecasted to grow by our sales
growth rate into the future. If a tenant does not currently report sales, we
have assumed that no sales/overage will be achieved from that tenant space.
Sales Growth Rates
According to both the Cushman & Wakefield and Korpacz surveys, major
investors are looking at a range of growth rates of 0.0 percent initially, to a
high of 5.0 percent in their computational parameters. Most typically, growth of
3.0-4.0 percent are seen in these surveys. After considering our analysis,
combined with the potential for population and income growth in the subject
market, we have forecasted sales growth of 3.5 percent per annum.
Expense Reimbursement
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, insurance, and common area maintenance (CAM).
Common Area Maintenance
Common area maintenance is recovered from tenants on a pro-rata share
basis. Most tenants are charged an administrative fee between 5.0 and 15.0
percent. In some instances, management fees are also passed through to
tenants through CAM billings. This is viewed as a slightly aggressive, but
fairly typical leasing structure for power center formats. The following
formula details the standard recovery method we have forecasted for new
leases.
================================================================================
Common Area Maintenance Recovery Calculation
================================================================================
CAM Expense: Actual hard cost for year plus interest and depreciation
- --------------------------------------------------------------------------------
Add: 15.0% Administrative Fee
- --------------------------------------------------------------------------------
Add: Management Fees
- --------------------------------------------------------------------------------
Equals: Net pro-ratable CAM billable to tenants on the basis of
gross leasable area GLA
- --------------------------------------------------------------------------------
Real Estate Taxes
Real estate taxes are also recovered on a pro-rata share basis for tenants
at the center. Utilizing a FY 1998 tax expense of $214,288, the indicated
recovery from typical in-line tenants is $0.80 per square foot. Several
tenants have administrative fees added to their tax obligation.
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<TABLE>
<CAPTION>
====================================================================================================================================
OPERATING EXPENSE STATISTICS Power & Super Community Centers
Cushman & Wakefield, Inc. South
====================================================================================================================================
ULI ULI ULI ULI ULI ULI ULI
Power Power Super- Super- Super- Super- Community
Centers/ Centers/ Community Community Community Community Centers/
U.S. U.S. U.S. U.S. South South U.S.
Average Median Average Median Average Median Average
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Property Profile
- ----------------
Total GLA: 358,619 346,315 316,310 303,896 327,941 321,850 179,931
Total Owned GLA: 295,562 290,533 291,411 285,423 314,091 295,416 167,215
Avg. Sales/sf*: $ 197.23 $ 199.81 $ 187.90 $ 183.44 $ 174.20 $ 175.67 $ 202.33
Anchor Sales/sf: -- -- -- -- -- -- --
Operating Income
- ----------------
Minimum Rent: $ 7.02 $ 5.81 $ 6.35 $ 5.84 $ 6.20 $ 6.32 $ 6.47
Overage Rent: $ 0.50 $ 0.19 $ 0.41 $ 0.29 $ 0.34 $ 0.28 $ 0.38
CAM Charges:: $ 0.85 $ 0.68 $ 0.96 $ 0.80 $ 0.84 $ 0.62 $ 0.73
Property Taxes: $ 0.65 $ 0.45 $ 0.63 $ 0.55 $ 0.66 $ 0.74 $ 0.67
Insurance: $ 0.07 $ 0.07 $ 0.05 $ 0.05 $ 0.07 $ 0.08 $ 0.07
Utilities: $ 0.27 $ 0.04 $ 0.36 $ 0.07 $ 0.28 $ 0.08 $ 0.19
Other: $ 0.00 $ 0.00 $ 0.19 $ 0.12 $ 0.17 $ 0.16 $ 0.17
-------- -------- -------- -------- -------- -------- --------
Total Income: $ 9.36 $ 9.01 $ 9.18 $ 8.55 $ 8.86 $ 8.86 $ 8.62
Operating Expenses
- ------------------
Total Maintenance**: $ 1.29 $ 0.81 $ 1.22 $ 0.99 $ 1.02 $ 0.80 $ 0.87
Real Estate Taxes: $ 1.10 $ 1.05 $ 0.91 $ 0.85 $ 0.83 $ 0.83 $ 0.91
Insurance: $ 0.15 $ 0.13 $ 0.15 $ 0.13 $ 0.14 $ 0.13 $ 0.14
Advertising: $ 0.12 $ 0.05 $ 0.19 $ 0.11 $ 0.27 $ 0.13 $ 0.10
Administrative***: $ 0.36 $ 0.43 $ 0.50 $ 0.49 $ 0.55 $ 0.49 $ 0.28
Management Fee: $ 0.35 $ 0.32 $ 0.33 $ 0.31 $ 0.35 $ 0.31 $ 0.34
-------- -------- -------- -------- -------- -------- --------
Total Expenses: $ 3.24 $ 3.21 $ 3.36 $ 3.07 $ 3.34 $ 3.10 $ 2.88
OER 34.6% 35.6% 36.6% 35.9% 37.7% 35.0% 33.4%
Net Operating Income $ 6.13 $ 5.39 $ 5.44 $ 5.22 $ 5.41 $ 5.41 $ 5.67
- --------------------
====================================================================================================================================
ULI ICSC ICSC ICSC ICSC ICSC ICSC
Community Power Ctrs Power Ctrs Strip Centers Strip Centers Strip Centers Strip Centers
Centers/ U.S. U.S. U.S. U.S. South South
U.S. Total Centers 100,000- 200,000- Centers Centers
Median Survey greater than less than greater than
200,000sf 199,999sf 399,999sf 100,000sf 100,000sf
====================================================================================================================================
Property Profile
- ----------------
Total GLA: 167,959 -- -- 137,378 260,677 61,108 161,405
Total Owned GLA: 156,543 -- -- 133,557 232,127 59,286 150,918
Avg. Sales/sf*: $ 197.73 $ 127.78 $ 118.55 $ 115.64 $ 137.23 $ 105.52 $ 118.55
Anchor Sales/sf: -- $ 244.00 $ 254.09 $ 264.52 $ 208.79 $ 266.75 $ 199.08
Operating Income
- ----------------
Minimum Rent: $ 6.36 $ 6.92 $ 7.09 $ 5.90 $ 6.50 $ 6.80 $ 5.38
Overage Rent: $ 0.27 -- -- -- -- -- --
CAM Charges:: $ 0.61 $ 0.71 $ 0.68 $ 0.67 $ 0.82 $ 0.67 $ 0.57
Property Taxes: $ 0.60 $ 0.80 $ 0.80 $ 0.58 $ 0.64 $ 0.84 $ 0.43
Insurance: $ 0.06 $ 0.11 $ 0.10 $ 0.07 $ 0.07 $ 0.10 $ 0.08
Utilities: $ 0.11 $ 0.07 $ 0.12 $ 0.07 $ 0.08 $ 0.10 $ 0.06
Other: $ 0.10 $ 0.08 $ 0.10 $ 0.06 $ 0.05 $ 0.04 $ 0.02
Total Income: $ 8.27 $ 8.92 $ 9.15 $ 7.35 $ 8.25 $ 8.38 $ 6.57
Operating Expenses
- ------------------
Total Maintenance**: $ 0.77 $ 0.62 $ 0.61 $ 0.72 $ 0.68 $ 0.79 $ 0.60
Real Estate Taxes: $ 0.83 $ 1.01 $ 0.89 $ 0.70 $ 0.85 $ 0.72 $ 0.59
Insurance: $ 0.13 $ 0.10 $ 0.10 $ 0.11 $ 0.11 $ 0.14 $ 0.11
Advertising: $ 0.05 $ 0.06 $ 0.05 $ 0.05 $ 0.04 $ 0.02 $ 0.02
Administrative***: $ 0.31 $ 0.22 $ 0.19 $ 0.09 $ 0.12 $ 0.11 $ 0.09
Management Fee: $ 0.32 $ 0.29 $ 0.33 $ 0.26 $ 0.29 $ 0.33 $ 0.25
-------- -------- -------- -------- -------- -------- --------
Total Expenses: $ 2.72 $ 2.35 $ 2.23 $ 1.97 $ 2.14 $ 2.27 $ 1.74
OER 32.9% 26.3% 24.4% 26.8% 25.9% 27.1% 26.5%
Net Operating Income $ 5.33 $ 5.88 $ 6.30 $ 5.39 $ 5.96 $ 5.99 $ 4.90
- --------------------
- --------------------
* Average sales include all tenants except for ICSC figures which show non-anchor tenants.
** CAM expenses include repairs & maintenance, utilities, and security.
*** Management fees & bad debt allowances have been deducted from administrative costs. Management has been shown separately.
Source: Urban Land Institute "Dollars & Cents" (1995); International Council of Shopping Centers "The Score" (1996).
(Because the date are means/medians, detailed amounts do not add to totals).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Approach
================================================================================
Insurance
Insurance expenses are recovered based upon a pro-rata share. In FY 1998,
an expense of 68,122 results in a recovery of 0.26 per square foot of
total owned gross leasable area.
Allowance for Vacancy and Credit Loss
Both the investor and the appraiser are 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
100.0 percent occupied and all the tenants were actually 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 provision for permanent vacancy and
credit loss of 4.0 percent among the existing non-anchor tenants.
In this analysis we have forecasted that there is a 70.0 percent
probability that an existing tenant will renew their lease and a 30.0 percent
probability that the space will turnover. Upon turnover, we have forecasted rent
loss equivalent to four months to be incurred to account for the time and/or
costs associated with bringing the space back on line. Thus, minimum rent as
well as all reimbursable income has been reduced by this forecasted probability.
For tenants exercising options, we have tested the option rent against projected
market rent as a means of forecasting the option probability. Where an option
rent exceeds the forecasted market rent, it would be assumed that the tenant
will not exercise its option. In this analysis, all tenant options are assumed
to be exercised.
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.
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 insurance. The non-reimbursable expenses associated
with the subject property include management fees and certain miscellaneous
expenses, including non-recoverable maintenance. We do note that under many of
the existing lease contracts, management is deemed recoverable. Other expenses
include a reserve for the replacement of short-lived capital components,
alteration costs associated with bringing space up to occupancy standards, and
leasing commissions.
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 history and budget projection
provided by ownership for 1997. This information is provided in the Addenda. We
have compared this information to published data which are available, as well as
comparable expense information (see Facing Page). Finally, this information has
been tempered by our experience with other regional shopping centers.
================================================================================
-46-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than with competitive market forces. The Autumn 1996 Cushman
& Wakefield survey of Class A Power Centers found the low and high mean from
each respondent to be 3.4 and 3.7 percent, respectively. The rates ranged from
3.0 to 4.0 percent. The Second Quarter 1997 Korpacz survey reports that the
average expense growth rate for power centers is 4.0 percent, down 13 basis
points from one year ago. For this analysis, unless otherwise stated, expenses
are forecasted to grow by 3.5 percent per annum over 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 $2,633,011 which is equivalent to 77.9 percent of effective
gross income. Deducting other expenses including capital items results in a net
cash flow before debt service of approximately $2,593,045.
================================================================================
Operating Summary
Initial Year of Investment - Fiscal Year 1998
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Minimum Rent $ 2,789,133 $10.47 --
- --------------------------------------------------------------------------------
Recovery Income $ 625,617 $ 2.35 --
- --------------------------------------------------------------------------------
Percentage Rent $ 10,401 $ 0.04 --
- --------------------------------------------------------------------------------
Vacancy/Collection Loss ($ 45,098) ($ 0.17) --
- --------------------------------------------------------------------------------
Effective Gross Income $ 3,380,053 $12.69 100.0%
- --------------------------------------------------------------------------------
Operating Expenses $ 747,042 $ 2.80 22.1%
- --------------------------------------------------------------------------------
Net Operating Income $ 2,633,011 $ 9.88 77.9%
- --------------------------------------------------------------------------------
Other Expenses $ 39,966 $ 0.15 1.2%
- --------------------------------------------------------------------------------
Cash Flow $ 2,593,045 $ 9.73 76.7%
================================================================================
* Based on total owned GLA of 266,438+/- square feet.
================================================================================
The rate of change to both net income and cash flow is important from an
investor's perspective. Our cash flow model has forecasted the following
compound annual growth rates over the holding period FY 1998 through FY 2007 on
a calendar year basis.
==================================
Income Growth ("As Is")
==================================
Net Operating Income: 1.5%
----------------------------------
Net Cash Flow: 1.5%
----------------------------------
================================================================================
-47-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
As calculated, growth rates in net operating income and net cash flow are
forecasted to approximate to 1.5 and 1.5 percent per annum, respectively, which
represents moderate-stable growth potential to an investor in the property.
These lower growth rates are typical of a center such as the subject where its
income from anchor tenants is a principal revenue source, with lease structures
that contain only modest rent bumps. Such income growth has a measured impact on
our selection of investment parameters as discussed below.
- ---------------------
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 an
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 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.
Recent surveys of prominent investors point towards a trend of rising
capitalization and discount rates for retail as a general industry segment.
Aggressive expansion in certain markets coupled with locational deficiencies and
absence of tenant quality have posed problems for some investors in their
underwriting.
In addition, the recent turmoil among many of the nation's largest retail
chains has not gone unnoticed by investors. Furthermore, quest for market share
has caused many retails to pursue aggressive expansion plans that may have
negative long term implications. Equitable Real Estate Investment Management
Inc. reports in their Emerging Trends in Real Estate -1997 that, while power
centers are considered one retail property type currently in a growth mode, most
respondents feel that the oversupply of this type of retail will impact value
gains for these property types to the extent they may lag regional malls in
appreciation over a five and ten year time frame.
The Cushman & Wakefield Autumn 1996 survey reveals that going-in cap rates
for Class A Neighborhood and Community centers range between 8.50 and 10.50
percent, with a low average of 9.30 percent and high average of 9.80 percent,
respectively; a spread of 50 basis points. Terminal, or going-out, rates are now
10.00 and 10.40 percent on average.
================================================================================
-48-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
For Class A Power Center, going-in capitalization rates now range from
8.50 to 10.50 percent, with a low average of 9.40 percent and a high average of
9.50 percent. Terminal rates average 9.70 and 10.10 percent for the power center
format, while discount rates run 10.50 to 12.00. The low IRR mean is 11.50
percent, with a high mean of 11.70 percent.
<TABLE>
<CAPTION>
==========================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Power Retail Centers - Autumn 1996
==========================================================================================
Investment Power Center and Big Box Neighborhood/Community
Parameters -------------------------------------------------------------------------
Low High Low High
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OAR/Going-In 8.50-10.50% 9.00-10.50% 8.50-10.50% 9.00-10.50%
9.40% 9.50% 9.30% 9.80%
- ------------------------------------------------------------------------------------------
OAR/Terminal 9.50-10.50% 9.50-10.50% 9.50-10.50% 10.00-11.00%
9.70% 10.10% 10.00% 10.40%
- ------------------------------------------------------------------------------------------
IRR 10.50-15.00% 10.50-15.00% 10.00-15.00% 10.00-15.00%
11.50% 11.70% 11.90% 12.10%
- ------------------------------------------------------------------------------------------
</TABLE>
The Second Quarter 1997 Peter F. Korpacz survey of the National Power
Center Market finds that overall capitalization rates remained stable while
terminal and discount rates rose 8 basis points over the last quarter. Current
going-in rates present a range of 8.75 to 10.50 percent, with an average of 9.50
percent. However, the low end of the range increased by 25 basis points to 8.75
percent. Terminal rates suggest a slight spread over going-in rates, with a
range of 9.00-11.50 percent and an average of 9.96 percent. The average IRR is
shown to be 11.33 percent, with a range between 9.50-12.50 percent. Again the
low end of the range increased but this time the spread is by 50 basis points.
- --------------------------------------------------------------------------------
NATIONAL POWER CENTER MARKET
Second Quarter 1997
================================================================================
CURRENT LAST
KEY INDICATORS QUARTER QUARTER YEAR AGO
================================================================================
Free & Clear Equity IRR
================================================================================
RANGE 9.50-12.50% 9.00-12.50% N/A
- --------------------------------------------------------------------------------
AVERAGE 11.33% 11.25%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Free & Clear Going-In Cap Rate
================================================================================
RANGE 8.75-10.50% 8.50-10.50% N/A
- --------------------------------------------------------------------------------
AVERAGE 9.58% 9.58%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- 0 N/A
================================================================================
Residual Cap Rate
================================================================================
RANGE 9.00-11.50% 8.50-11.50% N/A
- --------------------------------------------------------------------------------
AVERAGE 9.96% 9.88%
- --------------------------------------------------------------------------------
CHANGE (Basis Points) -- +8 N/A
================================================================================
Source: Peter Korpacz Associates, Inc. Real Estate Investor Survey -
Second Qtr. 1997
================================================================================
================================================================================
-49-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
The survey goes on to note that because of overbuilding in many markets,
power centers are less enticing to institutional buyers than they were a short
time age. Buyer criteria includes a tenant alignment of the dominant category
retailers, good demographics with income and population growth projected at or
above regional norms, and the "A+" location in that particular market. The most
desirable center in a particular market is the dominant property which has
created a true barrier to entry.
Overall rates are a function of income growth in a particular income
stream. Typically, long term leases which are written for anchor tenants tend to
be flat with little or no upside. As such, cap rates tend to be higher in
centers which have a higher percentage of big box space (upwards to 100 percent)
and lower in centers where a higher percentage (20 to 25 percent) of the GLA is
occupied by shorter term in-line stores.
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.
Investors have recognized that the retail landscape has been fundamentally
altered by consumer lifestyles changes, industry consolidations and
bankruptcies. 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 center that help differentiate
them from the competition. As such, entertainment, a loosely defined concept, is
one of the most common directions new centers have taken with multiplexes,
restaurants and other specialty tenants entering the merchandising mix.
A trend toward bringing in larger specialty and category tenants to the
center is also in evidence. The risk from an owners standpoint is finding that
mix which works the best. Nonetheless, the effect of these changes have been a
rise in rates as investors find it necessary to adjust their risk premiums in
their underwriting.
In the Sales Comparison Approach, our survey of comparable sales showed
overall capitalization rates ranging from 9.10 percent to 10.00 percent for good
quality community and power centers nationwide. The overall mean for the sales
presented is 9.52 percent. From the surveys and comparable sales presented, we
would be inclined to consider a going-in capitalization rate for the between
9.25 and 9.75 percent.
Finally, we have considered the subject's position in the market and
anchor tenancy. Carillon Place is a well-located specialty power center in an
attractive growth market. It has a unique tenant alignment and well matched
merchandising mix with several good credit tenants. By virtue of the lease
structure with many of the major tenants, rental growth will tend to lag general
inflation. The upside will be through the ultimate attainment of overage rent,
something we have not forecasted due to lack of adequate sales history.
Nonetheless, an investor has recognized this real short term potential in the
selection of a capitalization rate.
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
In our selection of cap rates for the subject property, we have placed
specific emphasis on the quality and durability of the forecasted income stream.
On balance, we find that the subject can be classified as a good quality, well-
located center in an area which has seen recent retail interest.
Based upon the rate information derived from the comparable sales and
investor surveys, we believe that a property with the characteristics of the
subject would potentially trade at an overall rate between 9.25 and 9.75
percent.
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.
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, the C&W rate survey shows a 30-60 basis point
differential. The Korpacz survey shows a spread of 38 basis points.
For the subject, however, we do not believe that it is necessary to add
points to the terminal rate due to the fact that forecasted income growth is
relatively flat and that the subject has the potential to be into percentage
rent in future years.
Therefore, a projected terminal capitalization rate ranging from 9.25 to
9.75 percent is indicated for the subject property. 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.
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.
================================================================================
-51-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
Yield rates on long term real estate investments range widely between
property types. As cited in Cushman & Wakefield's Autumn 1996 survey, investors
in power retail centers are currently looking at broad rates of return between
10.50 and 15.00 percent. The indicated low and high means are 11.50 and 11.70
percent, respectively, for power centers. Peter F. Korpacz reports an average
internal rate of return of 11.33 percent for national power centers in their
Second Quarter 1997 survey, with a range between 9.50-12.50 percent.
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 (%) July 10, 1997
=====================================================
Reserve Bank Discount Rate 5.00%
-----------------------------------------------------
Prime Rate (Monthly Average) 8.50%
-----------------------------------------------------
3-Month Treasury Bills 4.96%
-----------------------------------------------------
U.S. 10-Year Notes 6.24%
-----------------------------------------------------
U.S. 30-Year Bonds 6.56%
-----------------------------------------------------
Telephone Bonds 7.63%
-----------------------------------------------------
Municipal Bonds 5.56%
-----------------------------------------------------
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 4.96 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 7.63 percent. The prime rate is currently 8.50 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.24 percent, while 30-year bonds are at 6.56 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.
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Investors have suggested that the retail investment market has become
increasingly "tiered" over the past two years. The country's premier properties
are considered to have the strongest trade areas, excellent anchor alignments,
and significant barriers of entry to future competitive supply. It is our
opinion that the subject would attract strong interest from institutional
investors if offered for sale in the current marketplace.
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 forecasted lease expiration schedule for the subject is
included in the Addenda and reference is made thereto.
We would 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 for replacement, and vacancy provisions.
Finally, we also recognize that over 65.0 percent of base rental income,
on average, comes from anchor major/tenants whose creditworthiness adds
stability to the cash flow.
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 10.50 and 11.00 percent for the
center operating on a stabilized basis.
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 10-year period commencing on August 1, 1997.
A sale or reversion is deemed to occur at the end of the 10th year (July
31, 2007), 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.
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
- ---------------------
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:
- --------------------------------------------------------------------------------
SUMMARY OF CRITICAL ASSUMPTIONS FOR DISCOUNTED CASH FLOW
- --------------------------------------------------------------------------------
SUBJECT PROPERTY CARILLON PLACE
================================================================================
SQUARE FOOTAGE RECONCILIATION
================================================================================
TOTAL OWNED GROSS LEASABLE AREA 266,438+/- SF
- --------------------------------------------------------------------------------
MAJOR/MAJOR TENANT GLA 203,786+/- SF
- --------------------------------------------------------------------------------
IN-LINE SHOP GLA 62,652+/- SF
================================================================================
MARKET RENT/SALES CONCLUSIONS
================================================================================
MARKET RENT ESTIMATES (1997/98)
- --------------------------------------------------------------------------------
ANCHOR TENANTS $ 9.00/SF
- --------------------------------------------------------------------------------
TENANTS 0 - 999 SF $ 18.50/SF
- --------------------------------------------------------------------------------
TENANTS 1,000 - 2,999 SF $ 17.50/SF
- --------------------------------------------------------------------------------
TENANTS 3,000 - 4,999 SF $ 15.00/SF
- --------------------------------------------------------------------------------
TENANTS 5,000 - 10,000 SF $ 14.00/SF
- --------------------------------------------------------------------------------
TENANTS OVER 10,000 SF $ 11.50/SF
- --------------------------------------------------------------------------------
OWNED OUTPARCELS $ 14.00/SF
- --------------------------------------------------------------------------------
RENTAL BASIS NNN
- --------------------------------------------------------------------------------
MARKET RENTAL GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
CREDIT RISK LOSS (NON-ANCHOR SPACE) 4.0%
================================================================================
VACANCY & TYPICAL LEASE TERM
================================================================================
AVERAGE LEASE TERM (NON-ANCHORS) 5 Years
- --------------------------------------------------------------------------------
RENEWAL PROBABILITY 70.0 %
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE DOWNTIME 3 Months
- --------------------------------------------------------------------------------
STABILIZED OCCUPANCY (NON-ANCHORS) 96.0 %
================================================================================
OPERATING EXPENSE DATA
================================================================================
LEASING COMMISSIONS
- --------------------------------------------------------------------------------
NEW TENANTS $3.50/SF
- --------------------------------------------------------------------------------
RENEWAL TENANTS $1.75/SF
- --------------------------------------------------------------------------------
TENANT IMPROVEMENT ALLOWANCE
- --------------------------------------------------------------------------------
NEW TENANT $6.00/SF
- --------------------------------------------------------------------------------
RENEWAL TENANT $2.00/SF
- --------------------------------------------------------------------------------
EXPENSE GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
TAX GROWTH RATE 3.5%/YR
- --------------------------------------------------------------------------------
MANAGEMENT FEE 5.0% of Minimum & % Rent
- --------------------------------------------------------------------------------
CAPITAL RESERVES (PSF OF GLA) $0.15/SF
- --------------------------------------------------------------------------------
================================================================================
-54-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SENSITIVITY ANALYSIS
Carillon Place 1 2 3 4 5 6 7
Cushman & Wakefield, Inc. 1998 1999 2000 2001 2002 2003 2004
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Effective Gross Income: $3,380,053 $3,451,434 $3,560,009 $3,622,790 $3,661,258 $3,706,990 $3,739,416
Operating Expenses: $747,042 $770,729 $797,253 $822,042 $846,368 $871,837 $897,574
Net Operating Income: $2,633,011 $2,680,705 $2,762,756 $2,800,748 $2,814,890 $2,835,153 $2,841,842
Net Cash Flow: $2,593,045 $2,639,340 $2,719,944 $2,756,437 $2,769,028 $2,787,686 $2,754,009
Property Value: $28,000,000
Net Sales Price: $27,512,499 $28,354,601 $28,744,519 $28,889,661 $29,097,623 $29,166,273 $30,204,227
Net Cash Flow: $2,593,045 $2,639,340 $2,719,944 $2,756,437 $2,769,028 $2,787,686 $2,754,009
- - NOI Return: 9.40% 9.57% 9.87% 10.00% 10.05% 10.13% 10.15%
- - Cash-On-Cash Return: 9.26% 9.43% 9.71% 9.84% 9.89% 9.96% 9.84%
Discounted Income Stream:
Discounted Sales Price: $24,841,985 $23,117,245 $21,160,398 $19,202,930 $17,463,804 $15,805,875 $14,779,563
Discounted Cash Flow: $2,341,350 $2,151,830 $2,002,298 $1,832,201 $1,661,914 $1,510,711 $1,347,594
Net Present Value: $27,183,335 $27,610,424 $27,655,876 $27,530,609 $27,453,397 $27,306,179 $27,627,462
Carillon Place: 8 9 10 11 CAGR CAGR
Cushman & Wakefield, Inc. 2005 2006 2007 2008 1996-07 2000-07
Effective Gross Income: $3,872,001 $3,963,209 $4,007,516 $4,061,061 1.9% 1.7%
Operating Expenses: $929,025 $959,287 $988,061 $1,018,322 3.2% 3.1%
Net Operating Income: $2,942,976 $3,003,922 $3,019,455 $3,042,739 1 5% 1.3%
Net Cash Flow: $2,869,012 $2,930,785 $2,953,827 1.5% 1.2%
Property Value: $31,228,111 1.2%
Net Sales Price: $30,829,726 $30,989,143 $31,228,111 Average Returns
Net Cash Flow: $2,869,012 $2,930,785 $2,953,827 Over Holding Period
- - NOI Return: 10.51% 10.73% 10.78% -------------------
- - Cash-On-Cash Return: 10.25% 10.47% 10.55% NOI 10.1%
Cash 9.9%
Discounted Income Stream: Yield Composition
Discounted Sales Price: $13,621,338 $12,362,775 $11,248,856 -----------------
Discounted Cash Flow: $1,267,601 $1,169,204 $1,064,015 Reversion 40.8%
Net Present Value: $27,736,838 $27,647,479 $27,597,575 Cash Flow 59.2%
-------------------
Total Value 100.0%
- --------------------------------------------------------------------------------
ASSUMPTIONS & CONCLUSIONS
- --------------------------------------------------------------------------------
Value Range: Low High Conclusion
Discount Rate: 11.25% 10.50% 10.75%
Terminal Cap Rate: 10.00% 9.25% 9.50%
================================================================================
Value Range/Conclusion: $26,217,719 $28,343,421 $28,000,000
- --------------------------------------------------------------------------------
- - Going-In Cap Rate: 10.04% 9.29% 9.40%
- --------------------------------------------------------------------------------
- - Price/sf Owned GLA: $98.40 $106.38 $105.09
- --------------------------------------------------------------------------------
- - Price/sf Mall Shop GLA: $98.40 $106.38 $105.09
- --------------------------------------------------------------------------------
=============================================================================================
SALE-YIELD MATRIX
- ---------------------------------------------------------------------------------------------
Net Reversion Terminal
Cost of Sale: Capitalization Discount Rate IRR
2.50% Rate 10.50% 10.75% 11.00% 11.25%
=============================================================================================
$32,072,114 9.25% $28,343,421 $27,901,598 $27,469,209 $27,046,021
- ---------------------------------------------------------------------------------------------
$31,228,111 9.50% $28,032,449 $27,597,575 $27,171,965 $26,755,389
- ---------------------------------------------------------------------------------------------
$30,427,390 9.75% $27,737,424 $27,309,143 $26,889,963 $26,479,661
- ---------------------------------------------------------------------------------------------
$29,666,705 10.00% $27,457,151 $27,035,132 $26,622,062 $26,217,719
- ---------------------------------------------------------------------------------------------
NOI vs. Cash Flow NPV vs. Sales Price By Year
[BAR CHART OMITTED] [BAR CHART OMITTED]
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Approach
================================================================================
RATES OF RETURN AS IS VALUATION
- --------------------------------------------------------------------------------
CASH FLOW START DATE 8/1/97
- --------------------------------------------------------------------------------
DISCOUNT RATE 10.50% - 11.00%
- --------------------------------------------------------------------------------
GOING-IN CAPITALIZATION RATE 9.25% - 9.75%
- --------------------------------------------------------------------------------
TERMINAL CAPITALIZATION RATE 9.25% - 9.75%
- --------------------------------------------------------------------------------
REVERSIONARY SALES COSTS 2.50%
- --------------------------------------------------------------------------------
HOLDING PERIOD 10 Years
- --------------------------------------------------------------------------------
- --------------------
Discounted Cash Flow
- --------------------
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 10.50 to 11.00 percent
on an "as is" operating basis. 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 10.50 to 11.00 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. A valuation matrix for the subject appears on the Facing Page.
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $26.9 to $28.3 million "as
is". 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 10.75 percent
and a terminal rate around 9.50 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 an As Is Market Value for the subject
property as of July 14, 1997 of $28,000,000.
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.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
- ---------------------
Direct Capitalization
- ---------------------
To further support our value conclusion derived via the discounted cash
flow, 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. In view of our total analysis,
we would anticipate that the subject property would trade at an overall rate of
approximately 9.25 to 9.75 percent applied to first year income. Applying these
rates to first stabilized year net operating income before reserves,
alterations, and other expenses for the subject of $2,633,011 results in a value
of approximately $27.0 to $28.5 million. From this range, we would be inclined
to conclude at an As Is Market Value of $28,000,000 via Direct Capitalization as
of July 14, 1997. This value is indicative of an overall rate of 9.40 percent.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Reconciliation is the process of deriving a single point value estimate
for the subject property from the indications provided by the approaches at
hand. This process requires the weighing of each approach as they relate to the
appraisal assignment and resolving the differences among the valuation
procedures. In the end, a single estimate of market value is concluded based
upon the appropriateness of each value indication. A summary of the value
indications for the subject is set forth below.
- --------------------------------------------------------------------------------
Value Summary
- --------------------------------------------------------------------------------
Cost Approach N/A
- --------------------------------------------------------------------------------
Sales Comparison Approach $27,500,000 - $28,500,000
- --------------------------------------------------------------------------------
Income Capitalization Approach
Discounted Cash Flow $28,000,000
Direct Capitalization $28,000,000
- --------------------------------------------------------------------------------
Two approaches to value have been utilized for this analysis. In general
terms, the approaches included provide complimentary results, each approach or
technique supporting the other. Between the high and low range supported by each
methodology, we see a variance of about 3.6 percent.
Sales Comparison Approach
The Sales Comparison Approach has arrived at a value for the subject
property by analyzing historical arms-length transactions, 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
area sold.
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, this methodology is best suited as support for the
conclusions of the "Income Approach". It provides useful market extracted rates
of return, such as overall rates, to simulate investor behavior in the "Income
Approach".
Income Capitalization Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method (DCF) 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.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
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 DCF can analyze existing leases,
probabilities of future rollovers and turnovers, and reflect the expectations of
overage rents. Essentially, the DCF can model many of the dynamics of a complex
shopping center.
Particular emphasis is placed on the results of the discounted cash flow
analysis because of the applicability of this method in accounting for the
specific 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 steam that is over or understated, this error is compounded
by the capitalization process. Nonetheless, real estate of the subject's caliber
is commonly purchased on a direct capitalization basis. Overall, this
methodology has been given important consideration in our total analysis, due to
the subject's stabilized operations.
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 Capitalization Approach methodologies.
The ranges in value exhibited by the Income Capitalization Approach are
consistent with the leasing profiles. Each 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 As Is
Market Value of the Leased Fee Estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
14, 1997, the date of inspection, was:
TWENTY EIGHT MILLION DOLLARS
$28,000,000
================================================================================
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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. This is a Summary Appraisal Report which is intended to comply with the
reporting requirements set forth under Standard Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice for a Summery Appraisal
Report. As such, it might not include full 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
information contained in this report is specific to the needs of the
client and for the intended use stated in this report. The appraiser is
not responsible for unauthorized use of this report.
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.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<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 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 has 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.
10. 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.
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.
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Jay F. Booth, MAI inspected the property and prepared the report. Richard
W. Latella, MAI, 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, Jay F. Booth and Richard W. Latella have
completed the requirements of the continuing education program of the
Appraisal Institute.
/s/Jay F. Booth /s/Richard W. Latella
-------------------------- --------------------------
Jay F. Booth, MAI Richard W. Latella, MAI
Associate Director Senior Director
Retail Valuation Group Retail Valuation Group
State of Florida Temporary
Practice Permit No. 0001138
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
NATIONAL RETAIL MARKET OVERVIEW
SUBJECT RENT ROLL & OPERATING BUDGET
SUBJECT TENANT SALES REPORTS
PROPERTY SURVEY (JANUARY 1995)
A.L.T.A. TITLE POLICY
ALTA CONSULTING CORP. REVIEW LETTER OF ENVIRONMENTAL REPORTS
PRO-JECT LEASE ABSTRACT REPORT
PRO-JECT ASSUMPTION REPORT
PRO-JECT TENANT REGISTER REPORT
PRO-JECT LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
STATE OF FLORIDA TEMPORARY APPRAISAL LICENSE
APPRAISERS QUALIFICATIONS
================================================================================
-62-
<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.
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. We shall first provide a brief overview of
broad economic measures that are important in terms of long range retail sales
forecasting and general investment underwriting. This is followed by a
discussion of retail sales trends along with selected statistics of the shopping
center industry. Also included is a discussion of contemporary industry trends,
valuation issues and a brief overview of the REIT market.
Personal Income and Consumer Spending
Americans' personal income advanced by eight-tenths of a percent in
December, which helped raise income for all of 1996 by 5.5 percent. This was
less than 1995 but it far outpaced the 2.5 percent in 1994.
---------------------------------------------------
Personal Income Consumer Spending
Year % Change Year % Change
---------------------------------------------------
1993 4.7 1993 5.8
---------------------------------------------------
1994 2.5 1994 5.5
---------------------------------------------------
1995 6.1 1995 4.8
---------------------------------------------------
1996 5.5 1996 4.6
---------------------------------------------------
Source: Commerce Dept.
---------------------------------------------------
American workers won wage gains in 1996 that were the largest since 1990.
Nationwide, average hourly wages rose by 3.8 percent to $11.98 in 1996, about
five-tenths of a percent above the inflation rate. This compares with 3.2
percent in 1995. Personal income grew one-tenth of a percent in April 1997.
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 4.6 percent
in 1996, slightly off of the 4.8 percent rise in 1995. These increases followed
a significant lowering on unemployment and bolstered consumer confidence.
Personal spending grew one-tenth of a percent in April 1997. This was the
smallest increase since September 1996 and was in line with analysts'
expectations.
================================================================================
-1-
<PAGE>
National Retail Market Overview
================================================================================
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
Year(1) (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 6.8
- --------------------------------------------------------------------------------
1994 131,056 2.4 123,060 3.1 6.1
- --------------------------------------------------------------------------------
1995 132,337 .98 124,926 1.5 5.6
- --------------------------------------------------------------------------------
1996 135,022 2.0 127,855 2.3 5.3
- --------------------------------------------------------------------------------
CAGR 1.32 1.37
1990-1996
- --------------------------------------------------------------------------------
(1) Year ending December 31
- --------------------------------------------------------------------------------
Source: Bureau of Labor Statistics U.S. Department of Labor
- --------------------------------------------------------------------------------
During 1996, the labor force increased by 2,685,000 or approximately 2.0
percent. Correspondingly, the level of employment increased by 2,929,000 or 2.3
percent. As such, the year end unemployment rate dropped by three-tenths of a
percent to 5.3 percent. For 1996, monthly job growth averaged 224,000. On
balance, over 10.0 million jobs have been created since the recovery began.
Preliminary data for April 1997 shows that the unemployment rate slipped to 4.8
percent, near a twenty-year low.
Housing Trends
Housing trends are an important economic measure due to the substantial
economic activity generated when a home changes hands (i.e. spending on repairs
by sellers, redecorating by buyers, fees, commissions and taxes).
For all of 1996, new single family home sales totaled 756,000, up 13.3
percent from 667,000 in 1995. The yearly sales level was the highest since 1978.
The median new home price of new homes sold in 1996 was $140,000, up 4.6 percent
from 1995. Through May 1997, it was tracking at $143,000. Sales of new homes
fell 7.7 percent in April 1997. Builders are currently reporting a 4.5 month
inventory of unsold homes.
Sales of existing single family homes fell in April by 2.4 percent to 4.06
million units. The median price jumped by 4.6 percent to $118,100.
================================================================================
-2-
<PAGE>
National Retail Market Overview
================================================================================
New housing starts rose by 8.8 percent for all of 1996 to 1.47 million
units, the most since 1988. Housing starts fell by 4.8 percent in May to an
annual rate of 1.397 million units. This was the third consecutive monthly
decline.
The home ownership rate seems to be rising, after remaining stagnant over
the last decade. For 1996, the share of households that own their homes was 65.4
percent, compared to 64.7 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. Conversely, the fourth quarter
(1996) GDP grew at a surprisingly robust 3.8 percent. As a result, the GDP
posted a 2.4 percent annual gain for all of 1996, topping the 2.0 percent rise
in 1995. Revised first quarter 1996 data shows that the GDP grew at a stunning
5.8 percent annual pace, well above even the most optimistic forecasts.
Preliminary reports are for second quarter growth in the 2+/- percent range. The
Fed foresees a moderation of this trend and expects the U.S. economy will expand
at a 2.0 to 2.50 percent pace during 1997 which is in-line with White House
forecasts and a pace which is viewed as the economy's non-inflationary growth
limit.
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
----------------------------------------
1996 2.4
----------------------------------------
* Reflects new chain weighted system
of measurement. Comparable 1994
measure would be 3.5%
========================================
Source: Bureau of Economic Analysis
========================================
Wholesale Prices
Soaring energy prices in December drove wholesale costs to a twelve month
high. For the year, the Producer Price Index (PPI) gained 2.8 percent. However,
excluding energy, the PPI rose just 1.4 percent in all of 1996. In 1995, the
index rose 2.3 percent. Projections for 1997 show that most economists expect a
2.5 percent rise and a core increase of 1.5 percent.
================================================================================
-3-
<PAGE>
National Retail Market Overview
================================================================================
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.
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
------------------------------------
1996 158.6(2) 3.3
------------------------------------
(1) All Urban Workers
(2) Preliminary
====================================
Source: Dept. of Labor, Bureau of
Labor Statistics
====================================
Preliminary data for the year shows the consumer prices rose in line with
investor expectations. The index was up three-tenths of a percent in December,
its third consecutive gain at this level. On an annualized basis, the inflation
rate was reported at 3.3 percent for year, the highest rate of increase since
1990. Since then, inflation has eased every year except for 1994 when it was
unchanged. Excluding food and energy, the 77 percent of the index known as the
core index, the underlying inflation rate was 2.6 for the previous twelve
months, the lowest core rate since 1965, with the exception of an increase of
the same size in 1994.
Data for May 1997 shows that the CPI rose only one-tenth of a percent,
while the core rate increased by two-tenths of a percent. The overall index has
risen by only one-tenth of a percentage point in four of the five months this
year, indicative of an annual rate of only 1.4 percent.
Recently, a special advisory panel of prominent economists have contended
that the current method of calculating the Consumer Price Index overstates
inflation by 1.1 percentage points annually. The government is currently
reviewing the far ranging implications a change in procedure may have.
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 to
nine months. The Conference Board, an independent business group, reported that
the index held steady in June after rising three-tenths of a percent in May.
================================================================================
-4-
<PAGE>
National Retail Market Overview
================================================================================
The Conference Board also reported that Consumer Confidence rose in May
1997 to 127.1 from 118.5 in April, its highest level in twenty-eight years. This
was above the consensus opinion. Accordingly, consumers attitudes about the
economy remain upbeat. Measures of consumer confidence are watched closely for
indications of future consumer spending.
The Employment Cost index is a measure of overall compensation including
wages, salaries and benefits. Despite a tight labor market, American workers
have not won pay and benefit increases large enough to push inflation higher, at
least for the near term. The Labor Department reported that the index rose by
2.9 percent in 1996, the same as in 1995. For the Second Quarter 1997, the index
rose eight-tenths of a percent. For the 12 months through June 1997 it was
tracking at 2.8 percent.
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. Through the first 70 years of this century, non-farm
productivity rose at an annual rate of 2.2 percent. Between 1973 and 1995, a
marked slowdown has been in evidence with only a 1 percent annual rate. The
Labor Department reports that the productivity of American workers grew by
seven-tenths of a percent in 1996, the largest gain since a 3.2 percent advance
in 1992. Productivity increased by three-tenths of a percent in 1995. Data
through the second quarter of 1997 shows that productivity rose six-tenths of a
percent on an annual basis. For the 12 months through the second quarter,
productivity rose at an annual rate of seven-tenths of a percent. Most
economists and analysts greeted the latest report with criticism that insists
the official data greatly understates a flourishing economy seen in today's
workplace.
Consumer Credit The Federal Reserve said consumer credit stalled in June
after rising at a revised rate of $2.5 billion in May 1997 or at a 2.9 percent
annual rate. This was well below most analysts' expectations and is likely a
result of tougher lending standards being imposed by banks and consumers cutting
back on spending. Nonetheless, credit card delinquencies and personal
bankruptcies remain near record levels indicating that consumers may be reaching
a point of saturation with respect to new debt. However, a drop in write-offs
was in evidence from the record levels in 1996 which came about following
aggressive marketing campaigns by card issuers.
New Construction activity dropped 1.1 percent in June to an annual rate of
$591.5 billion. The report showed that spending on residential construction,
which makes up nearly half the total, fell 1.2 percent. Commercial spending also
fell 2.8 percent, while public spending rose seven tenths of a percent.
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 track at about 2.5 percent through 1998. Over the
longer term, inflation is expected to average 2.7 percent. This will have a
direct influence on consumption (consumer expenditures).
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
================================================================================
-5-
<PAGE>
National Retail Market Overview
================================================================================
U.S. GDP will grow at an average annual rate of 2.3 percent over the next
decade, and slow to about 2.1 percent by 2019.
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 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 1993 at 68.0 percent after averaging about
63.0 percent over much of the post-war period. WEFA estimates that real
consumption expenditure growth will average 2.2 percent per year through 2005
and slows to 2.1 percent thereafter.
Retail Sales
During the period 1980 through 1996, total retail sales in the United
States increased at a compound annual rate of 6.1 percent. Data for the period
1990 through 1996 shows that sales growth has slowed to an annual average of 5.0
percent. This information is summarized on the following chart.
===============================================
Total U.S. Retail Sales (1)
===============================================
Amount Annual
Year (Billions) 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 5.2%
-----------------------------------------------
1993 $2,074,499 6.3%
-----------------------------------------------
1994 $2,236,966 7.8%
-----------------------------------------------
1995 $2,340,817 4.6%
-----------------------------------------------
1996 (2) $2,465,835 5.3%
-----------------------------------------------
Compound Annual Growth Rate
1980-1996 +6.1%
-----------------------------------------------
CAGR: 1990-1996 +5.0%
===============================================
(1) 1985-1995 data reflects recent revisions
by the U.S. Department of Commerce:
Combined Annual and Revised Monthly
Retail Trade.
(2) Preliminary advance estimates.
===============================================
Source: Monthly Retail Trade Reports Business
Division, Current Business Report,
Bureau of the Census, U.S. Department
of Commerce.
===============================================
================================================================================
-6-
<PAGE>
National Retail Market Overview
================================================================================
The Census Bureau of the Department of Commerce reports that advance
estimates for U.S. retail sales for 1996 were $2.465 trillion, an increase of
$125.0 billion, or 5.3 percent from 1995. For the month of December 1996, sales
were up six-tenths of a percent.
Census Bureau data for June 1997 shows that sales were up five-tenths of a
percent from May, led by a surprising pick up in new car sales (up 1.1 percent).
Provided on the chart below 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 July 1997
================================================================================
% Change From Previous Year
Name of Retailer Overall Same Store Basis
- --------------------------------------------------------------------------------
Wal-Mart +11.3% + 6.0%
- --------------------------------------------------------------------------------
Kmart + 5.9% + 9.2%
- --------------------------------------------------------------------------------
Sears, Roebuck & Company + 5.9% + 2.4%
- --------------------------------------------------------------------------------
J.C. Penney + 3.0% + 2.0%
- --------------------------------------------------------------------------------
Dayton Hudson Corporation + 9.9% + 5.6%
- --------------------------------------------------------------------------------
May Department Stores +10.6% + 5.7%
- --------------------------------------------------------------------------------
Federated Department Stores + 9.3% + 8.6%
- --------------------------------------------------------------------------------
The Limited Inc. +9.0% + 1.0%
- --------------------------------------------------------------------------------
Gap Inc. +24.0% + 6.0%
- --------------------------------------------------------------------------------
Ann Taylor - 7.9% - 5.8%
- --------------------------------------------------------------------------------
Woolworths - 7.0% - 9.2%
================================================================================
Source: New York Times/Wall Street Journal
================================================================================
Data for July 1997 shows that sales rebounded strongly, particularly for
apparel retailers. There were some exceptions however, such as Ann Taylor.
Nonetheless American retailers enjoyed one of the strongest months in two
years. The Goldman Sachs index rose 5.7 percent, compared to last year's
1.7 percent increase. Discounters such as Wal-Mart (+6.0%) and Kmart
(+9.2%) as well as traditional department stores such as Federated (+8.6%)
and May Department Stores (+5.6%) did well. Luxury retailers such as
Neiman Marcus (+7.5%) also did well.
The outlook for retail sales growth is one of cautious optimism. It
appears as if the low price department stores and off price apparel segment is
poised to continue to do well, as they tend to be representative of those
industry segments which have gone through mergers and are benefiting from fewer
competitors. 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 continue to rise. 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. GAFO goods
================================================================================
-7-
<PAGE>
National Retail Market Overview
================================================================================
comprise the overwhelming bulk of goods and products carried in shopping centers
and department stores and consist of the following categories:
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. The store types that
comprise shopping centers comprised approximately 53 percent of total retail
sales in 1995. The balance were generated by auto dealers, gas stations, food
service facilities and other miscellaneous establishments.
Total retail sales grew by 4.6 percent in the United States in 1995 to
$2.341 trillion, an increase of $104 billion over 1994. This followed an
increase of 7.8 percent or $162 billion over 1993. Automobile dealers captured
$34+/- billion of total retail sales growth last year, while Shopping Center
Inclined Sales accounted for nearly 50.0 percent of the increase ($50 billion).
GAFO sales increased by $32.5 billion. This group was led by department stores
which posted a $14.4 billion increase in sales. The following chart summarizes
the performance for this most recent comparison period.
================================================================================
Retail Sales by Major Store Type
1994-1995 ($Mil.)
================================================================================
Percent of 1994-1995
Store Type 1994 1995 Income(1) % Change
================================================================================
GAFO:
General Merchandise $ 282,541 $ 296,904 5.1%
Apparel & Accessories 109,603 109,962 .3%
Furniture & Furnishings 119,626 129,923 8.6%
Other GAFO 80,533 88,029 9.3%
- --------------------------------------------------------------------------------
GAFO Subtotal $ 592,303 $ 624,818 14.4% 5.5%
- --------------------------------------------------------------------------------
Convenience Stores:
Grocery $ 376,330 $ 389,134 3.4%
Other Food 21,470 21,378 (.4)%
- --------------------------------------------------------------------------------
Subtotal $ 397,800 $ 410,512 9.5% 3.2%
Drug 81,538 84,240 2.0% 3.3%
- --------------------------------------------------------------------------------
Convenience Subtotal $ 479,338 $ 494,752 3.2%
- --------------------------------------------------------------------------------
Other:
Home Improvement &
Building Supplies Stores $ 122,533 $ 124,626 2.9% 1.7%
Shopping Center-Inclined
Subtotal $1,194,174 $1,244,196 28.8% 4.2%
Automobile Dealers 526,319 560,624 6.5%
Gas Stations 142,193 148,192 4.2%
Eating and Drinking Places 228,351 233,606 2.3%
All Other 145,929* 154,199* 5.7%
- --------------------------------------------------------------------------------
Total Retail Sales $2,236,966 $2,340,817 4.6%
================================================================================
* Estimated Sales
- --------------------------------------------------------------------------------
(1) Current Population Report, Page 60. Estimated at 96.8 million households @
$44,100 = 4.3 trillion.
================================================================================
-8-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Source: U.S. Department of Commerce, Bureau of the Census and Dougal M. Casey:
Various ICSC White Papers.
================================================================================
GAFO sales grew by 5.5 percent in 1995 to $624.8 billion. From the above
it can be calculated that GAFO sales accounted for 26.7 percent of total retail
sales and nearly 50.0 percent of all shopping center-inclined sales. GAFO sales
have also risen relative to household income. In 1990 these sales represented
13.9 percent of average household income. By 1994/1995 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.
================================================================================
Determinants of Retail Sales Growth and U.S. Retail Sales by Key Store Type
================================================================================
1990 1994 2000(P)
================================================================================
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. $5.4 Tril.
- --------------------------------------------------------------------------------
% Allocations of Income to Sales
GAFO Stores 13.9% 14.4% 14.7%
Convenience Stores 12.9% 11.7% 10.7%
Home Improvement Stores 2.8% 3.0% 3.3%
Total Shopping Center-Inclined Stores 29.6% 29.1% 28.8%
Total Retail Stores 54.3% 54.6% 52.8%
- --------------------------------------------------------------------------------
Sales ($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 $2,850
================================================================================
Note: Sales and income figures are for the full year; population and household
figures are as of April 1 in each respective year. P = Projected.
================================================================================
Source: U.S. Census of Population, 1990; U.S. Bureau of the Census Current
Population Reports: Consumer Income P6-168, 174, 180, 184 and 188; Berna
Miller with Linda Jacobsen, "Household Futures", American Demographics,
March 1995; Retail Trade sources already cited; and Dougal M. Casey:
ICSC White Paper
================================================================================
GAFO sales have risen at a compound annual rate of approximately 6.8
percent since 1991 based on the following annual change in sales.
=====================================
1990/91 2.9%
-------------------------------------
1991/92 7.0%
-------------------------------------
1992/93 6.6%
-------------------------------------
1993/94 7.0%
-------------------------------------
1994/95 5.5%
=====================================
================================================================================
-9-
<PAGE>
National Retail Market Overview
================================================================================
According to a recent study by the ICSC, GAFO sales are expected to grow
by 5.0 percent per annum through the year 2000, which is well above the 4.1
percent growth for all retail sales. This information is presented in the
following chart.
================================================================================
Retail Sales Forecasts in the United States, by Major Store Type
================================================================================
1994 2000(P) Percent Change
- --------------------------------------------------------------------------------
Compound
Store Type ($ 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 $1,194 $1,555 30.2% 4.5%
Subtotal
- --------------------------------------------------------------------------------
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.
================================================================================
According to the ICSC White Paper: Overstoring - A Look at Retail Space
and Sales Performance; Shopping Center Inclined Sales have grown from $257
billion in 1972 to $1.244 trillion in 1995, a 7.1 percent annual growth rate.
Historical data is shown below.
======================================================================
Shopping Center Inclined Store Sales
1972-1995 (Billions)
======================================================================
1972 1980 1990 1995
======================================================================
Sales $257 $532 $1,000 $1,244
----------------------------------------------------------------------
Compound Annual Growth
----------------------------------------------------------------------
1972-1995 7.1%
----------------------------------------------------------------------
1972-1980 9.5%
----------------------------------------------------------------------
1980-1990 6.6%
----------------------------------------------------------------------
1990-1995 4.3%
======================================================================
Source: U.S. Bureau of The Census and ICSC White Paper: Overstoring -
A Look at Retail Space and Sales Performance.
======================================================================
From the above, we see that the most recent annual rate of growth
(1990-1995) in Shopping Center Inclined Sales of 4.3 percent has decreased to
less than half of what it was
================================================================================
-10-
<PAGE>
National Retail Market Overview
================================================================================
during the 1970s (9.5 percent). Projections through December 2000 are for a
compound growth rate of 4.5 percent.
Shopping centers have stabilized their share of shopping center inclined
sales. In 1972 this share was estimated at 48 percent. Since the early 1980s,
this share has stabilized in the 72 to 73 percent range. For example, the
estimated sales total of $894 billion of shopping center sales in 1995 was equal
to 72 percent of total 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 total sales per square foot rose
by 2.9 percent to $278 per square foot in 1996. This compares to a .5 percent
increase for the period 1994-1995. The following chart identifies the most
recent year-end results. The winners were shown to be Apparel and Accessories
(+4.8%) led by Men's Apparel and Shoes, while Furniture and Furnishings suffered
(-2.8%). The Home Improvement category rose an outstanding 100.0 percent to $302
per square foot.
================================================================================
-11-
<PAGE>
National Retail Market Overview
================================================================================
========================================================================
1996 Year End Performance
Non-Anchor Tenant Sales in U.S. Malls
========================================================================
ICSC Index
% Change
Store Type 1996 (SF*) From YE 1995
------------------------------------------------------------------------
GAFO Categories:
Apparel and Accessories
Women's Accessories and Specialties $301 3.2%
Women's Ready-To-Wear 195 3.3%
Men's Apparel 270 7.0%
Children's Apparel 350 .5%
Family Apparel 314 4.2%
Women's Shoes 325 5.1%
Men's Shoes 383 5.6%
Family Shoes 279 5.3%
Shoes Miscellaneous 343 3.8%
Apparel and Accessories - Misc. $279 2.9%
------------------------------------------------------------------------
SUBTOTAL $257 4.8%
------------------------------------------------------------------------
Furniture and Furnishings:
Home Furniture & Furnishings $273 1.4%
Home Entertainment & Electronics 303 -4.3%
Home Furnishings - Misc 300 -3.4%
------------------------------------------------------------------------
SUBTOTAL $293 -2.8%
------------------------------------------------------------------------
Other GAFO:
Jewelery $652 4.9%
Stationery/Cards/Gifts/Novelty 275 1.7%
Books 249 -2.1%
Sporting Goods/Bicycles 246 -1.1%
Other GAFO - Misc. 311 4.4%
------------------------------------------------------------------------
SUBTOTAL $343 2.2%
------------------------------------------------------------------------
TOTAL GAFO $284 3.2%
------------------------------------------------------------------------
NON GAFO Categories:
Food Services
Fast Food $414 2.3%
Restaurants 280 1.0%
Food Services - Misc. 352 -.8%
------------------------------------------------------------------------
SUBTOTAL $340 1.6%
------------------------------------------------------------------------
OTHER NON-GAFO Categories:
Specialty Food Stores $355 .9%
Supermarkets 433 .8%
Drug/HBA 291 4.7%
Personal Services 283 .7%
Automotive 140 1.2%
Home Improvement 302 100.1%
Mall Entertainment 76 -3.6%
Other Non-GAFO - Misc. 353 4.9%
------------------------------------------------------------------------
SUBTOTAL $223 1.5%
------------------------------------------------------------------------
TOTAL NON-GAFO $266 1.4%
------------------------------------------------------------------------
OTHER CATEGORIES-MISCELLANEOUS $151 4.4%
------------------------------------------------------------------------
Memo: GAFO & Food Service Total $290 3.1%
------------------------------------------------------------------------
GRAND TOTAL $278 2.9%
========================================================================
* Sales per square foot derived as total non-anchor mall sales divided
by total occupied square footage.
========================================================================
Source: ICSC - Research Quarterly
========================================================================
================================================================================
-12-
<PAGE>
National Retail Market Overview
================================================================================
Non-Store Retailing
In 1995, non-store retailing accounted for $69.7 billion, or 3.92 percent
of total non-automotive retail sales. Of this total, $49.7 billion was
attributed to mail/telephone order catalog retailers. The balance is comprised
of coin-operated vending machines, house-to-house canvassing, party plan (i.e.
tupperware parties) telemarketing and other non-store venues such as home
shopping networks and electronic commerce.
================================================================================
Non-Store and Total Retail Sales
================================================================================
Year Total Mail Order Non-Store Total Non-Auto Sales % of Total
================================================================================
1985 $15,848 mil. $28,275 mil. $1,071,828 2.64%
- --------------------------------------------------------------------------------
1990 $26,577 mil. $45,632 mil. $1,457,006 3.13%
- --------------------------------------------------------------------------------
1995 $49,710 mil. $69,667 mil. $1,778,915 3.92%
================================================================================
Source: Department of Commerce
================================================================================
Mail order sales, currently at only 2.8 percent of total retail sales,
continue to grow. Estimates currently place on-line sales at $518.0 million or 1
percent of the mail order tally. Estimates place total on-line sales as high as
$6.6 billion by the year 2000. Since 1990, mail order sales have grown at an
annual rate of 9.9 percent which is double the average growth of non-automotive
retail sales and 1.7 times the average growth of GAFO store sales. One measure
of this growing trend is the November/December ratio of mail order to GAF store
sales. In 1990, the ratio was 5.4 percent. By 1992 it had grown to 6.9 percent
and by 1995 it was 7.6 percent.
Industry Trends
According to the National Research Bureau, there were a total of 42,130
shopping centers in the United States at the end of 1996. During this year, 895
new centers opened, a 3.2 percent increase over the 867 that opened in 1995.
This followed an 18.0 percent increase in 1995. The greatest growth came in the
small center category (less than 100,000 square feet) where 496 centers were
constructed. In terms of GLA added, new construction in 1996 was up 2.7 percent
resulting in an addition of 106.2 million square feet of GLA from approximately
4.97 billion to 5.1 billion square feet. In other important trends, the
development of regional and super-regional malls hit a five year high in 1996
with the opening of eight centers, twice as many as in 1995. This boosted the
nation's total of regionals to 301 and super-regionals to 380. The small center
category (less than 100,000 square feet) was the only one to experience a
decrease in new centers built with 496 centers versus 551 in 1995. The following
chart highlights trends over the period 1987 through 1995.
================================================================================
-13-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
=======================================================================================================
Census Data: 10-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%
- -------------------------------------------------------------------------------------------------------
1996 42,130 5,100,605,534 $933,918,275 121,068 $183.10 1.75% 895 2.17%
- -------------------------------------------------------------------------------------------------------
Compound
Annual
Growth +3.60% +3.56% +4.99% N/A +1.39% 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 3.6 percent since 1987. New
construction was up 2.7 percent in 1996, a slight increase over 1995 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 176 new centers opening,
followed by New Jersey (59), North Carolina (48) and Texas (47).
Among the 42,130 centers in 1996, the following breakdown by size can be
shown.
==================================================================
U.S. Shopping Center Inventory, YE December 1996
==================================================================
Number of Centers Square Feet(Millions)
------------------- --------------------
Size Range (SF) Amount Percent Amount Percent
==================================================================
Under 100,000 26,497 62.9% 1,293.3 25.4%
------------------------------------------------------------------
100,001- 200,000 10,186 24.2% 1,399.2 27.4%
------------------------------------------------------------------
200,001- 400,000 3,477 8.3% 925.5 18.1%
------------------------------------------------------------------
400,001- 800,000 1,276 3.0% 711.2 13.9%
------------------------------------------------------------------
800,001-1,000,000 309 .7% 278.4 5.5%
------------------------------------------------------------------
Over 1,000,000 385 .9% 492.9 9.7%
------------------------------------------------------------------
Total 42,130 100.0% 5,100.6 100.0%
==================================================================
Source: National Research Bureau (some numbers slightly rounded).
==================================================================
Empirical data shows that the average GLA per capita is increasing. In
1996, the average for the nation was 19.23. This was up 19.4 percent from 16.1
in 1988 and more recently, 18.7 square feet per capita in 1995. Among states,
Florida regained its lead and now has the highest GLA per capita with 28.05
square feet. South Dakota has the lowest at 9.07 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 5.6 in 1996. This information is presented
on the following chart.
================================================================================
-14-
<PAGE>
National Retail Market Overview
================================================================================
==================================================
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
--------------------------------------------------
1996 19.2 5.6
==================================================
Source: International Council of Shopping Center:
The Scope of The Shopping Center Industry
and National Research Bureau
==================================================
While per capita GLA has continued to increase, a key issue is that the
rate of increase has slowed. Per capita space has increased by only one and a
half square feet during the period 1990 through 1996. This trend is manifested
in the pace of inventory increases from 165 million square feet per year between
1972 and 1980, to 143 million square feet per year (1980-1990), and 118 million
square feet per year (1990-1996).
Construction data also indicates that while the overall pace of shopping
center openings has eased, the pace of large store (50,000 to 200,000 square
feet) construction has more than doubled. During the more recent five year
period, big boxes have accounted for 41 percent of inventory additions.
=========================================================================
Trends in Inventory Growth *
1972-1995
=========================================================================
1972-1980 1980-1990 1990-1995
=========================================================================
Shopping Center Space Added 164 143 115
-------------------------------------------------------------------------
Free-Standing Stores 36 34 79
(50,000 - 200,000 SF)
-------------------------------------------------------------------------
Total 200 177 194
-------------------------------------------------------------------------
Big Box Allocation of Inventory Growth 18% 19% 41%
-------------------------------------------------------------------------
* Average Annual Increase (Million Square Feet)
=========================================================================
Source: NRB and F.W. Dodge
=========================================================================
In their publication, NRB/Shopping Centers Today 1996 Shopping Center
Census, the National Research Bureau reports that overall retail conditions were
good in 1996. Total shopping center sales increased 4.5 percent to $933.92
billion in 1996, up from $893.81 billion in 1995.
================================================================================
-15-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
==========================================================================================================
Selected Shopping Center Statistics
1990-1996
==========================================================================================================
Compound
Annual
1990 1991 1992 1993 1994 1995 1996 Growth
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail Sales in Shopping Centers* $706.40 $716.90 $768.20 $806.60 $851.30 $893.81 $933.92 4.8%
- ----------------------------------------------------------------------------------------------------------
Total Leasable Area** 4.39 4.56 4.68 4.77 4.86 4.97 5.10 2.5%
- ----------------------------------------------------------------------------------------------------------
Unit Rate $160.89 $157.09 $164.20 169.08 $175.13 $179.94 $183.10 2.2%
==========================================================================================================
* Billions of Dollars
** Billions of Square Feet
==========================================================================================================
Source: National Research Bureau.
==========================================================================================================
</TABLE>
According to the National Research Bureau, total sales in shopping centers
have grown at a compound rate of 5.0 percent since 1987. As described, aggregate
sales were up 4.5 percent nationwide from $893.8 billion (1995) to $933.9
billion (1996). In 1996, average sales were $183.10 per square foot, up nearly
2.7 percent over 1995 and 2.2 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 $207.44 per square
foot. Nonetheless, with compound sales growth lagging the growth in GLA, there
is an indication of overbuilding by this broad measure.
The following chart tracks the change in average sales per square foot by
size category between 1993 and 1995.
================================================================================
Sales Trends by Size Category
1993-1996
================================================================================
Average Sales Per Square Foot % Change
====================================================
Category 1993 1994 1995 1996 1993-96*
================================================================================
Less than 100,000 SF $193.10 $199.70 $204.94 $209.74 +2.8%
- --------------------------------------------------------------------------------
100,001 to 200,000 SF $156.18 $161.52 $166.00 $169.56 +2.8%
- --------------------------------------------------------------------------------
200,001 to 400,000 SF $147.57 $151.27 $153.96 $154.07 +1.4%
- --------------------------------------------------------------------------------
400,001 to 800,000 SF $157.04 $163.43 $168.21 $170.14 +2.7%
- --------------------------------------------------------------------------------
800,001 to 1,000,000 SF $194.06 $203.20 $210.40 $213.93 +3.3%
- --------------------------------------------------------------------------------
More than 1,000,000 SF $183.90 $193.13 $201.05 $207.44 +4.1%
- --------------------------------------------------------------------------------
Total $169.08 $175.13 $179.94 $183.10 +2.7%
================================================================================
* Compound Annual Change
================================================================================
Source: National Research Bureau
================================================================================
Consumers demand for value and selection have led to an unprecedented
growth of the category killer, superstore and warehouse club concepts. In its
annual industry report, Discount Store News has identified the nation's top 200
merchants. Overall, these merchants posted sales of $336.6 billion, up 7.5
percent over 1995. The chart below highlights the year-to-year performance along
with 1997 projections.
================================================================================
-16-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
===========================================================================================
Sales by Segment (in billions $)
===========================================================================================
1995 1996 Market Share % Change 1997 (Proj.)
===========================================================================================
<S> <C> <C> <C> <C> <C>
Full-Line Discount Stores(1) $150.9 $162.3 48% 7.6% $178.5
- -------------------------------------------------------------------------------------------
Specialty Discounters(2) 67.5 76.3 23% 13.1% 87.5
- -------------------------------------------------------------------------------------------
Warehouse Clubs 41.1 43.5 13% 5.8% 45.9
- -------------------------------------------------------------------------------------------
Other Discount Mass Merchants(3) 30.8 31.8 9% 5.0% 33.4
- -------------------------------------------------------------------------------------------
Off-Price Apparel Chains 15.8 16.9 5% 6.2% 17.9
- -------------------------------------------------------------------------------------------
Jewelry/Hard Lines Retailers 6.9 5.9 2% (15.0%) 5.1
- -------------------------------------------------------------------------------------------
Total Market $313.0 $336.6 100% 7.5% $368.5
===========================================================================================
(1) Includes full-line discount department stores, supercenters, closeouters and
single-price retailers
(2) Includes home, automotive, crafts, toys, office supplies, book, computer superstores,
baby superstores, pet supplies, consumer electronics and sporting goods specialty
stores.
(3) Includes Sears, Ward, QVC, HSN and variety stores.
===========================================================================================
Source: DSN Research
===========================================================================================
</TABLE>
As can be seen, the largest segment is comprised of full line discount
stores which was up 7.6 percent to $162.3 billion, or 48 percent of all sales.
Excluding Wal-Mart, by far the industry leader, 75 retailers in the DSN top 200
posted double digit sales gains. The biggest winners were baby superstores
(+47.2%), book superstores (+35.9%), and home furnishing superstores (33.1%).
Among the supercenter categories, Wal-Mart Supercenter's $19.3 billion in sales,
up 67.7 percent over 1995, accounted for more than half of the segment's $36.2
billion in sales.
The Urban Land Institute, in the 1997 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.
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.
Market Shifts - Contemporary Trends In the Retail Industry
The mid 1990s have continued the trend of profound changes in the retail
industry. Department stores have emerged from the troubles of late 1980s and
early 1990s to be stronger than ever. Continued consolidations in this industry
segment should continue. Specialty retailers continue to experience a shakeout
of weaker, out of favor formats while discounters gain market share. Power
centers, the growth vehicle of the last several years have reached a point of
saturation that has undermined investor's interest in this product. Outlet
Centers are still struggling, however, the super-regional mega-center appears
poised to be the hot concept for the next few years.
================================================================================
-17-
<PAGE>
National Retail Market Overview
================================================================================
Some of the important developments in the industry over the past year can
be summarized as follows:
o The 1996 Christmas selling season ended on a down note with sales
finishing below most analysts expectations. For most consumer
electronics and computer retailers, the season was horrible with
December sales down 4.8 percent on average. Best Buy, last year's
rising star, was off 13.0 percent. Apparel sales rose 3.3 percent
led in part by Ann Taylor up 8.8 percent following last year's 2.9
percent decline. According to the Department of Commerce, on an
overall basis, department stores registered an average increase of
4.6 percent while discounters had a 7.8 percent rise on average.
Conventional department stores rose 1.9 percent. A summary of some
year over year comparable store sales results is shown below.
==========================================================
Comparable Store Sales
(%) Change Over Last 12 Months
==========================================================
Discounters
Wal-Mart 4.5
Kmart 2.3
Daylon Hudson 2.4
----------------------------------------------------------
Department Stores
Sears 6.1
Federated 2.8
JC Penney 2.9
Dillards 2.0
----------------------------------------------------------
Apparel
Limited 2.0
The Gap 5.0
TJX 7.0
----------------------------------------------------------
Miscellaneous
Best Buy -4.0
Tandy .4
Woolworth -2.0
Pier 1 12.0
==========================================================
Source: Wall Street Journal
==========================================================
o Consolidation in the department store industry segment continued,
albeit at a slower pace than seen over the last few years.
o Strawbridge & Clothier - 128 year old Philadelphia based
institution sold 13 unit department store division to May
Company. Its 27 unit discount Clover division went to Kimco
which is putting Kohl's in several of the units, their initial
foray into the East.
o Profitts - Acquired 38 unit Parisian chain for $221 million.
Company now controls 141 stores in 19 states. They have also
announced an agreement to acquire G.R. Herberger's, a 40-unit
department store chain based in St. Cloud, Minnesota for $153
million.
================================================================================
-18-
<PAGE>
National Retail Market Overview
================================================================================
o Rich's - 26 unit New England based regional chain closes.
o Federated - Continues its conversion of Broadway stores in
California to Macy's and Bloomingdales.
o Discounters are being attacked from two sides. Big Box
category killers have rapidly expanded on one side.
Alternatively, full service department stores have become more
promotional, closing the price advantage gap discounters have
traditionally enjoyed. For example, Bradlees and Caldor remain
in bankruptcy and Ames continues to struggle looking for the
right strategy to compete against Wal-Mart, Kmart, Target and
now Kohl's.
o Troubles continues for several specialty retailers as the protracted
shake-out continued with several Chapter 11 filings, downsizings,
and some cases, outright liquidations. Among the more notable:
o McCrory Corp. - Seeking court approval to close 307 of its 461
remaining stores and liquidate. At one time it ran 820 stores
in 1992 when it filed for protection.
o Limited - Will close 200 of its 4,500 units during 1997.
o Handy Andy - Regional home improvement chain closed remaining
54 stores.
o Herman's - Liquidated all of its sporting goods stores in the
northeast.
o Today's Man - 35 unit apparel super store chain filed Chapter
11.
o Barney's - High profile New York based upscale retailer filed
Chapter 11.
o Merry-Go-Round - Liquidated and closed its remaining 560 units
including Chess King, Dejaiz and Cignal units.
o Jamesway - Regional discount department store chain in the
northeast liquidated.
o Incredible Universe - After aggressive foray into this mega
store format (185,000+- square feet), Tandy closes division
down. Tandy will also close the remaining 53 units of its
struggling McDuff Electronics chain and 19 of its 108 Computer
City units.
o Ernst Home Centers - Board approved liquidation of 53-unit
chain.
o Kids Mart - 144-unit childrens apparel chain rumored to be
close to filing Chapter 11.
o Sun Television and Appliance - Considering closing 9 of its 50
stores citing losses.
o Best - Closes 81 of its 169 catalog showrooms and agrees to
sell remaining units to Shottenstein Corp.
================================================================================
-19-
<PAGE>
National Retail Market Overview
================================================================================
o Rikel Home Centers - 86 unit home improvement chain filed
Chapter 11.
o House of Fabrics - Filed Chapter 11 and closes 86 of its 361
units.
o Discovery Zone - Fast expanding childrens' entertainment and
recreation oriented concept filed Chapter 11.
o Ben Franklin - Arts and crafts retailer filed Chapter 11 .
o Kuppenheimer - Apparel retailer files Chapter 11 and plans to
close half of its 87 units.
o County Seat - 740-unit apparel retailer has filed Chapter 11
and will close 200 units. The Wet Seal has made a proposal to
acquire 508 of the stores.
o All For A Dollar - 111 -unit close-out chain has filed Chapter
11.
o Mergers and consolidations among specialty retailers, drug,
supermarket and apparel categories continue.
o Staples merging with Office Depot in a $3.4 billion deal
making it by far the largest in the office superstore
category.
o Toys R Us acquired Baby Superstore in $407 million deal.
o Melville sold Kay Bee Toys to Consolidated Stores adding to
its Toy Liquidators, Toys Unlimited and Amazing Toys close-out
units for $315 million. Melville has officially changed its
name to CVS Corp.
o Safeway to acquire Von's in a $1.65 billion deal, creating an
operation with 1,400 stores, 139,000 employees and $22.0
billion in revenues. They will still trail the industry
leader, Kroger, in size.
o JC Penney, parent of Thrift Drug, announced they will acquire
Fay's Inc., operator of 272 units, making Thrift the nation's
eight largest chain. Penney's acquisition of Eckerd Drug has
been cleared by the FTC.
o Sears & Roebuck acquired the 61 unit Orchard Supply Hardware
chain for $415 million.
o Waban, Inc. - to spin off BJ's Wholesale Club and change its
name to its other wholesale club division, HomeBase.
o Food Lion - announced its pending acquisition of Kash N Karry
in a $341.0 million deal.
o PetsMart - Announced plans to acquire Pet City Holdings, the
largest pet superstore chain in the UK.
o TJX Companies - announced intent to sell its Chadwick's of
Boston catalog to Brylane LP.
o Revco - completed its tender offer for Big B drug store chain.
================================================================================
-20-
<PAGE>
National Retail Market Overview
================================================================================
o Quality Food Centers - Bellevue, WA based supermarket chain to
acquire 56-unit Hughes Family Markets for $360 million.
o REITs ended the year with generally good gains over the thrashing
many of their stock prices took earlier in the year. Through
October, the average mall REIT was up 23.4 percent, while shopping
center REITs were up 16.2 percent. Outlet center REITs were the
notable laggards with a .2 percent loss. The most significant deal
in 1996 involved Simon Property Group's $1.5 billion acquisition of
The DeBartolo Realty Corp. The combined company has a market
capitalization of $7.5 billion and a portfolio of 111 regional
malls, 66 strip centers, and several specialty centers.
o Power center growth has arguably fueled the industry's expansion
over the past few years. With investors having become more
pessimistic due to overbuilding and cannibalization of sales, a new
growth vehicle is emerging, the supercenter. This concept combines
the elements of a neighborhood center, discounter, supermarket, and
drug store into one unit of 150,000 to 200,000 square feet. At the
end of 1995 there were 500+- supercenters. A recent ICSC Survey
expects the market to reach buildout in 2003 with 1,800 stores.
Leading chains include Wal-Mart, Kmart, Target and Meyer.
o Despite trends towards consolidation and downsizing, retailers say
they will continue aggressive expansions over the next four years.
These results were tabulated from Shopping Center World's 16th
Annual Retailer's Expansion Plans Survey. Retailers say they will
open 28,000 stores between 1997 and the end of 2000. Among the 148
responding retailers, 83 percent planned their expansions in
shopping centers led by regional malls.
o Regional Malls 72%
o Power Centers 50%
o Neighborhood Centers 46%
o Community Centers 34%
o Outlet Centers 20%
o Off-Price Centers 17%
37 percent cited the southeastern part of the country as the hottest
growth area.
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. The five outlet center REITs
operated 132 centers as of mid-year 1996. By the year 2000 they
expect to operate nearly 175 units. Overall occupancy in 1995 (1996
not available at this writing) slipped to 93.3 percent from 95.5
percent in 1994. 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 .2 percent to $212 per
square foot for the four quarters ended September 30, 1996.
================================================================================
-21-
<PAGE>
National Retail Market Overview
================================================================================
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 other
superstores categories such as in the office products segment where
Office Depot and Staples have announced a merger.
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. Many of the nation's
largest media and entertainment companies are getting into the
retail business in some fashion. AMC Entertainment has formed a
separate subsidiary, Centertainment, Inc., to work with developers
to create entertainment based retail projects.
o Super-regional value-oriented mega malls such as The Mills concept
are expected to be one area of growth over the next several years.
This hybrid concept incorporates the diverse mix of super-regional
malls with the value-oriented aspects of factory outlets, category
killers, off-price merchants and retailer clearance outlets under
one roof. In addition, they add an entertainment component that is
designed to extend the stay of the patron from approximately one to
one and one-half hours in a traditional mall format to three to five
hours. These malls are at least 1.0 million square feet although the
Mills design averages 1.5 million square feet. They can contain
between 7 and 20 anchors and have trade areas stretching upwards to
100 miles.
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
================================================================================
-22-
<PAGE>
National Retail Market Overview
================================================================================
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 - 1997 that their respondents give retail
investments generally poor performance forecasts in their latest survey due to
the protracted merchant shakeout which will continue into 1997 and the general
overbuilding which has had a fundamental change on the industry. While dominant,
Class A malls are still considered to be one of the best real estate investments
anywhere, only 20 percent of the respondents recommended buying malls.
Among the nine real estate categories tracked by Emerging Trends, each had
estimated 1996 and forecasted 1997 value gains except for regional malls and
power centers. Community centers showed a very modest (less than 1 percent)
increase. One of the most daunting tasks facing owners is the competition for
good tenants and the huge capital outlays needed to keep the properties
functional and up-to-date. Emerging Trends views REITs as being buyers but the
capital needs of many of these centers will likely hit FF0 hard over the next
twelve to eighteen months. New REIT IPOs will be limited but consolidations and
follow-up offerings will increase as REIT companies seek to grow capitalizations
for greater operating efficiencies.
Power centers were hit particularly hard in the latest survey. By some
estimates this industry niche now accounts for 25 percent of all retail sales
and not only have they hurt regional malls but their overbuilding has
cannibalized each other. Power centers are now shown to be one of the riskiest
investment classes with only 4 percent of the respondents saying its a good time
to buy. For 1997, the interviewees see community and strip centers as offering
the best investment opportunity in the retail sector.
The following chart summarizes the results of their current survey.
================================================================================
Retail Property Rankings and Forecasts
================================================================================
Investment Potential Predicted Value Gains
Property Type -------------------- 1996 ---------------------
Rating(1) Ranking(2) Rent Change 1 Yr. 5 Yrs. 10 Yrs.
================================================================================
Regional Malls 4.9 8th -0.1% -1.7% 12.7% 26.6%
- --------------------------------------------------------------------------------
Power Centers 4.1 9th 0.1% -2.3% 9.1% 19.7%
- --------------------------------------------------------------------------------
Community Centers 5.3 6th (tie) 1.6% 0.3% 12.5% 26.1%
================================================================================
(1) Scale of 1 to 10
(2) Based on 9 property types
Source: Emerging Trends in Real Estate - 1997
================================================================================
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 fourth quarter of 1996 shows that the
retail index posted a positive 5.08 percent increase in total return for the
year. Increased competition in the retail sector from new and
================================================================================
-23-
<PAGE>
National Retail Market Overview
================================================================================
expanding formats and changing locational references has caused the retail index
to trail all other property types. In fact, this was the fifth consecutive
quarter in which retail properties posted the lowest return among the five
NCREIF property types. Overall, It appears also that value write-downs have
continued. The -1.73 percent in negative appreciation for the retail subindex
marked the continuation of this trend. Continuing concerns about overbuilding
competition and capital requirements are cited as the primary factors for the
pessimistic performance.
================================================================================
Retail Property Returns
NCREIF Index
Fourth Quarter 1996 (%)
================================================================================
Period Income Appreciation Total Change in CPI *
================================================================================
4th Qtr. 1996 2.09 -1.73 .36 .51
- --------------------------------------------------------------------------------
One Year 8.46 -3.18 5.08 3.32
- --------------------------------------------------------------------------------
Three Years 8.26 -2.82 5.27 2.85
- --------------------------------------------------------------------------------
Five Years 7.88 -3.94 3.71 2.84
- --------------------------------------------------------------------------------
Ten Years 7.26 -1.49 5.69 3.68
================================================================================
* Annualized year ending 12/31
================================================================================
Source: Real Estate Performance Report
National Council of Real Estate Investment Fiduciaries
================================================================================
Retail's total return of 5.08 percent for 1996 was substantially behind
the other investment categories including Apartment (11.10%), Office (12.74%),
R&D (17.64%), and Warehouse (12.69%). Among the different retail categories,
neighborhood centers posted the best total performance, while regional malls
were laggards.
=============================================================
Retail Segment Performance
=============================================================
Category Income Appreciation Total
=============================================================
Neighborhood 8.85% - .63% 8.17%
-------------------------------------------------------------
Community 9.03% -2.10% 6.79%
-------------------------------------------------------------
Regional Malls 7.74% -3.98% 3.53%
-------------------------------------------------------------
Super Regional Malls 8.04% -3.29% 4.55%
=============================================================
From the above, it is clear that value declines were still in evidence
during 1996.
Private investor underwriting has become more conservative with respect to
vacancy allowances, growth rates (rent, sales) and occupancy cost tolerance
levels. The reduced spread between cash returns and internal rate of returns is
evidence that buyers seek a higher proportion of their expected return from
income rather than from appreciation.
The Cushman & Wakefield Investor Survey also confirms trends that
capitalization rates for most retail categories have risen. Regional malls have
been the most affected. This is partly due to the fact that over 75 malls are
currently available for sale.
================================================================================
-24-
<PAGE>
National Retail Market Overview
================================================================================
The Urban Land Institute, in their 1997 Real Estate Forecast - Mid Year
Outlook, projects very small increases in effective rents through mid-1998 for
both regional malls and strip shopping centers. Even though rent increases will
likely be higher than 1996, they will likely not keep pace with inflation. In
fact, retail garnered the bottom two spots in ULI's ranking of 10 property types
in measuring their expected performance change. The downward pressure on rents
has been attributed to the expansion of big-box retailers, which has resulted in
a changing tenant base that requires a different type of space then exists in
much of the older retail stock.
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.
Currently, there are in excess of 300 REITs in the United States, more
than three-quarters of 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 December, equity REITs posted
nearly a 10 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 38.8 percent total return. This
================================================================================
-25-
<PAGE>
National Retail Market Overview
================================================================================
was followed by self-storage (34.9%), hotels (30.8%), triple-net lease (31.6%),
and industrial/self-storage (27.9%). One equity REIT sector was in the red -
outlet centers (-2.80%).
Retail REITs
As of June 30, 1997, there were a total of 45 REITs specializing in
retail, making up sizable percentage of the securities in the REIT market.
Forty-four of these REIT companies are Equity REITs. 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, displays a summary performance of the three
composite categories. Table B identifies the number of companies and market
capitalization for year end 1996 as well as through the second quarter 1997.
- --------------------------------------------------------------------------------
Table A - Retail REIT Performance
- --------------------------------------------------------------------------------
12/31/96 6/30/97
-------------------------------------------------
Y-T-D Total Dividend Y-T-D Dividend
Return Yield Total Return Yield
================================================================================
ALL REITs 39.96% 6.59% 6.35% 6.52%
Strip Centers 32.88% 6.50% 7.51% 6.32%
Regional Malls 44.63% 6.60% 7.59% 6.69%
Outlet Centers 3.78% 9.22% (4.01%) 8.53%
- --------------------------------------------------------------------------------
Source: Realty Stock Review
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table B - Market Capitalization
- --------------------------------------------------------------------------------
12/31/96 6/30/97
------------------------------------------------------
No. of Market No. of Market
Securities Capitalization* Securities Capitalization
================================================================================
ALL REITs 43 $20,190.7 45 $22,904.3
Strip Centers 26 $11,145.8 25 $12,055.3
Regional Malls 10 $7,349.0 12 $8,765.3
Outlet Centers 6 $1,300.2 6 $1,373.5
- --------------------------------------------------------------------------------
* Number reported in thousands.
Source: Realty Stock Review
- --------------------------------------------------------------------------------
As can be seen, the 43 REIT securities at year end 1996 had a market
capitalization of approximately $20.2 billion. Total returns of nearly 40.0
percent were well ahead of the stock market as a whole and also exceeded the
35.8 percent return for all REITs. Regional malls did
- --------------------------------------------------------------------------------
-26-
<PAGE>
National Retail Market Overview
================================================================================
exceptionally well with nearly a 45 percent return followed by strip centers at
approximately 33%. Outlet centers, which were posting negative returns through
the third quarter, recovered to show a 3.8 percent return for the year.
Accordingly, dividend yields for this group were 9.22 percent, some 266 basis
points above the composite average return.
Data through the second quarter of 1997 shows that the new forty-five REIT
securities have a market cap of $22.9 billion. Year to date returns for strip
centers and regional malls are around 7.50% respectively. Alternatively, outlet
center REITs continue to perform poorly with a negative 4% return.
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
nine 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.
The ten 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.
- --------------------------------------------------------------------------------
-27-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Table B - REGIONAL MALL REIT ANALYSIS
Cushman & Wakfield, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
REIT PORTFOLIO CBL CWN GGP JPR MAC MLS RSE SPG TCO URB
CBL & Crown General JP Realty The Macerich The Mills Rouse Simon Taubman Urban
Assoc. American Growth Inc. Company Corp Company Property Centers Shopping
Group Centers
=================================================================================================================================
----------------
Company Overview
----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Retail Centers 105 25 67 n/a 20 18 69 177 19 12
No. of Regional Malls 16 25 66 10 17 4 38 113 19 8
Mall as % of Portfolio 71% 99% 98% 71% 97% 82% 75% 77% 100% 95%
Avg. Total GLA/Center* 655 545 699 493 735 1,500 873 759 1,102 1,040
- ---------------------------------------------------------------------------------------------------------------------------------
-----------------
Mall Operations
-----------------
Reporting Year 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995
Avg. Sales PSF of Mall
Shop GLA $232 $206 $235 $208 $290 $297 $289 $276 $352 $344
Avg. Rent on Recent
Leases $17.41 $17.96 $21.80 $21.45 $23.00 $25.00 $24.90 $21.92 $41.27 $34.64
Minimum Rent/Sales Ratio 7.5% 8.7% 9.3% 10.3% 7.9% 8.4% 8.6% 7.9% 11.7% 10.1%
Total Occupancy Cost/Sales
Ratio 12.3% 11.1% 12.1% 10.2% 11.3% 11.6% 12.2% 11.0% 15.1% 11.4%
Mall Shop Occupancy Level 88.2% 82.0% 86.2% 86.5% 92.2% 90.0% 95.2% 86.4% 88.0% 92.6%
- ---------------------------------------------------------------------------------------------------------------------------------
------------
Share Prices
------------
IPO Date 10/27/93 8/9/93 4/8/93 n/a 3/9/94 4/94 1966 12/26/93 11/18/92 10/6/93
IPO Price $19.50 $17.25 $22.00 n/a $19.00 $23.50 n/a $22.25 $11.00 $23.50
Current Price (11/29/96) $24.50 $7.63 $27.75 $19.50 $23.25 $20.75 $26.50 $27.38 $11.63 $26.50
52 - Week High $25.00 $8.75 $28.38 $19.75 $24.00 $22.50 $27.38 $27.88 $12.50 $27.88
52 - Week Low $19.50 $6.63 $18.50 $15.13 $19.00 $16.50 $18.25 $21.13 $9.25 $20.13
- ---------------------------------------------------------------------------------------------------------------------------------
-----------------------
Capitalization & Yields
-----------------------
Market Capitalization** $1,266 $842 $2,744 $661 $1,328 $1,481 $3,936 $5,900 $3,127 $1,072
Annual Dividend $1.68 $0.80 $1.72 $1.92 $1.76 $1.89 $0.88 $1.97 $0.88 $1.98
Dividend Yield (11/29/96) 6.86% 10.48% 6.20% 9.85% 7.57% 9.11% 3.32% 7.20% 7.57% 7.47%
FF0 1996*** $2.03 $1.29 $1.95 $1.83 $1.96 $1.96 $2.42 $2.34 $0.98 $2.41
FF0 Yield (11/29/96) 8.29% 16.91% 7.03% 9.38% 8.43% 9.45% 9.13% 8.55% 8.43% 9.09%
- ---------------------------------------------------------------------------------------------------------------------------------
Source: Salomon Bothers, Realty Stock Review; Annual Reports and Green Street Advisors, Inc.
* Numbers in thousands (000) includes malls 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>
================================================================================
-28-
<PAGE>
National Retail Market Overview
================================================================================
Shopping Center REITs
Shopping center REITs comprise the largest sector of the retail REIT
market accounting for 26 out of the total 43 securities. General characteristics
of seven of the largest shopping center REITs are summarized on Table C. The
public equity market capitalization of the seven companies totaled $6.1 billion
as of October 31, 1996. The two largest, Kimco Realty Corp. and New Plan Realty
Trust have a market capitalization equal to approximately 34.4 percent of the
group total.
Year-to-date returns have been 16.19 percent for all shopping center REITs
including a 7.36 percent dividend yield.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Table C - SHOPPING CENTER REIT ANALYSIS
Cushman & Wakefield, Inc.
===============================================================================================================================
REIT PORTFOLIO DDR FRT GRT JPR KIM NPR VNO WRI
Devel. Federal Glimcher JP Kimco New Plan Vornado Weingarten
Diversified Realty Inv. Realty Realty Inc Realty Corp. Realty Realty Realty
===============================================================================================================================
----------------
Company Overview
----------------
<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
- ------------------------------------------------------------------------------------------------------------------------------
---------------
Mall Operations
---------------
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% 94.0% 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
------------
Share Prices
------------
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
- ------------------------------------------------------------------------------------------------------------------------------
-----------------------
Capitalization & Yields
-----------------------
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 (12/15/95) 8.03% 7.01% 10.82% 8.14% 5.11% 6.43% 6.20% 6.64%
FF0 1995*** $2.65 $1.78 $2.25 $1.83 $3.15 $1.44 $2.67 $2.80
FF0 Yield (12/15/95) 8.87% 7.61% 12.68% 8.87% 7.46% 6.66% 7.39% 7.75%
- ------------------------------------------------------------------------------------------------------------------------------
Source: Salomon Brothers 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>
================================================================================
-29-
<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.
================================================================================
-30-
<PAGE>
IV. Financial Analysis
================================================================================
A. In Place Cash Flow
<TABLE>
<CAPTION>
1996 Operating Results Budget 1997 IN-PLACE(3)(1996) IN-PLACE (4) (1997)
--------------------------------- ------------------- ------------------ -------------------
Per Square Per Square Per Square
Actual Budget $ Variance Budget Foot Budget Foot Budget Foot
---------- --------------------- ------------------- ------------------ -------------------
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental Income $2,710,087 $2,801,105 ($91,018) $2,771,379 $10.15 $2,746,323 $10.06 $2,746,323 $l0.06
CAM Recoveries 587,802 557,418 30,384 597,357 2.19 587,802 2.15 592,033 2.17
Reserves (43,262) (8,396) (34,866) (20,785) (0.08) (43,262) (0.16) (20,785) (0.08)
Other Income 3,636 0 3,636 22,609 0.08 3,636 0.01 22,609 0.08
---------- --------------------- ------------------ ------------------ -------------------
Total Revenue $3,258,263 $3,350,127 ($91,864) $3,370,560 $12.34 $3,294,499 $12.06 $3,340,181 $12.23
Expenses
Real Estate Taxes $ 195,734 $ 186,776 $8,958 $ 195,374 0.72 $ 195,734 0.72 $ 195,374 0.72
Repair & Maintenance 187,543 156,419 31,124 264,660 0.97 187,543 0.69 264,660 0.97
Utilities 53,331 24,934 28,397 33,500 0.12 53,331 0.20 33,500 0.12
Insurance 91,706 89,881 1,825 69,806 0.26 91,706 0.34 69,806 0.26
Other Expenses 50,900 81,520 (30,620) 5,000 0.02 50,900 0.19 5,000 0.02
Management Fees 130,544 134,005 (3,461) 134,223 0.49 130,544 0.48 134,223 0.49
---------- --------------------- ------------------ ------------------ -------------------
Total Expenses $ 709,758 $ 673,535 $36,223 $ 702,563 $2.57 $ 709,758 $2.60 $702,563 $2.57
---------- --------------------- ------------------ ------------------ -------------------
Net Operating Income $2,548,506 $2,676,592 ($128,086) $2,667,997 $9.77 $2,584,742 $9.46 $2,637,618 $9.66
Structural Reserve @ $.13/ft.(1) 2,917 35,501 (32,584) 35,501 0.13 35,501 0.13 35,501 0.13
Tenant Improvement/Leasing Comm.(2) 0 0 0 0 0.00 30,104 0.11 30,104 0.11
---------- --------------------- ------------------ ------------------ -------------------
Cash Flow $2,545,588 $2,641,091 ($95,502) $2,632,496 $9.64 $2,519,136 $9.22 $2,572,012 $9.42
========== ===================== ================== ================== ===================
</TABLE>
(1) Structural reserve of approximately $0.13/sf for owned space only. Partially
reimbursable up to 5% of CAM.
(2) Ongoing tenant improvements/leasing commissions expense based on actual
average annual turnover over a five year period @ $5/sf.
(3) In Place 1997 budgeted cash flow using 1996 actual expenses/recoveries and
current in-place areas.
(4) In Place 1997 budgeted cash flow using 1997 budgeted expenses/recoveries and
current in-place rents.
<PAGE>
In-Place Rent Roll
================================================================================
<TABLE>
<CAPTION>
Anchor/ Leased Base Additional Total
Property Tenant Small Shop GLA GLA Rent Rent Rent
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Naples Winn-Dixie Anchor 50,540 50,540 403,960 102,438 506,398
Service Merchandise Anchor 50,061 50,061 437,500 104,139 541,639
TJMaxx Anchor 26,250 26,250 229,688 56,575 286,263
TJMaxx Expansion Anchor 6,650 6,650 72,219 14,332 86,551
Ross Anchor 25,500 25,500 248,625 56,319 304,944
Office Max Anchor 23,500 23,500 240,875 50,648 291,523
Circuit City Anchor 21,285 21,285 222,138 42,190 264,328
--------------------------------------------------
Anchor Total 203,786 203,786 1,855,005 426,642 2,281,647
Floral Supply Mart Small Shop 12,000 12,000 144,000 36,714 180,714
Vacant Small Shop 10,150 0 0 0 0
Pier 1 Imports Small Shop 9,112 9,112 153,082 21,529 174,611
Eckerd Drug Small Shop 8,719 8,719 119,250 18,326 137,576
Clothestime Small Shop 4,020 4,020 56,280 9,093 65,373
Coconuts Music Small Shop 3,869 3,869 54,166 10,922 65,088
Video Way Small Shop 3,600 3,600 63,036 11,014 74,050
Bow Regards Cards Small Shop 3,010 3,010 54,255 8,008 62,263
Payless ShoeSource Small Shop 3,000 3,000 47,700 6,626 54,326
Supercuts Small Shop 1,541 1,541 29,427 4,715 34,142
Sally Beauty Small Shop 1,500 1,500 24,000 4,356 28,356
GNC Small Shop 1,330 1,330 25,403 3,923 29,326
Papa Johns Small Shop 1,330 1,330 25,403 4,069 29,472
TCBY Small Shop 1,024 1,024 19,558 3,133 22,691
Vacant Small Shop 918 0 0 0 0
A-Z Travel Small Shop 900 900 15,759 2,754 18,513
--------------------------------------------------
Small Shop Total 66,023 54,955 831,319 145,181 976,500
Applebees Outparcel 5,050 5,050 0 5,000 5,000
First Union Bank Outparcel 4,500 4,500 0 2,400 2,400
Fifth Third Bank Outparcel 3,400 3,400 0 2,400 2,400
Boston Chicken Outparcel 3,279 3,279 60,000 5,410 65,410
First Regal Properties Outparcel 2,450 2,450 0 5,000 5,000
--------------------------------------------------
Outparcel Total 18,679 18,679 60,000 20,210 80,210
Grand Total 288,488 277,420 2,746,323 592,033 3,338,357
</TABLE>
<PAGE>
1/21/97 2:41 pm
Community Centers One LLC
User: KUSHNER Page: 15
Commercial Rent Roll
Property : CARILLON PLACE
Naples, Florida 33942
Report Date From : 1/01/97 To : 1/31/97
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO.OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- -------- --------- -------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Winn Dixie #739 940-50l0 50540 4/07/94 4/06/14 33663.33 403959.96 7.99 6/01/94 33,663.33
General Nutrition Center #24 940-5014 1330 4/23/94 4/30/99 2116.92 25403.04 19.10 5/01/96 2,116.92
5/01/97 2,180.09
5/01/98 2,245.48
Papa John's Pizza, Inc. #355 940-5016 1330 5/16/94 5/31/99 2116.92 25403.04 19.10 6/01/96 2,116.92
6/01/97 2,180.09
6/01/98 2,245.48
T. J. Maxx #084 940-5018 26250 3/13/94 3/31/09 19140.63 229687.56 8.75 4/01/94 19,140.63
Vacant 940-5022 10150 0.00 0.00 0.00 0.00
Bow Regards 940-5026 3010 8/18/95 8/31/00 4520.02 54255.24 18.02 9/01/96 4,521.27
9/01/97 4,656.91
9/01/98 4,796.61
9/01/99 4,940.51
Sally Beauty #1640 940-5030 1500 3/14/94 3/31/97 2000.00 24000.00 16.00 6/01/94 2,000.00
Movie Gallery/Video Way 940-5032 3600 4/15/94 4/30/99 5253.00 63036.00 17.51 5/01/96 5,253.00
5/01/97 5,412.00
5/01/98 5,574.00
A to Z Travel, Inc. 940-5034 900 7/23/94 7/31/99 1313.25 15759.00 17.51 8/01/96 1,313.25
8/01/97 1,352.65
8/01/98 1,393.23
TCBY Treats 940-5036 1024 8/29/94 8/31/99 1629.83 19557.96 19.10 9/01/96 1,629.83
9/01/97 1,678.51
9/01/98 1,754.45
Vacant 940-5038 918 0.00 0.00 0.00 0.00
Clothestime #755 940-5042 4020 3/03/94 3/31/04 4690.00 56280.00 14.00 6/01/94 4,690.00
4/01/99 5,393.50
Supercuts, Inc. (FL1215) 940-5046 1541 9/23/94 9/30/99 2452.27 29427.24 19.10 10/01/96 2,452.27
10/01/97 2,525.84
10/01/98 2,601.61
Coconuts #761 940-5048 3869 9/11/94 1/31/98 4513.83 54165.96 14.00 10/01/94 4,513.83
Service Merchandise #331 940-5052 50061 3/10/94 2/28/15 36458.33 437499.96 8.74 8/01/94 36,458.33
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX- --INS EXPENSE----- -----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- --------- --------- -------- -------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winn Dixie #739 0.00 0.00 0.00 0.00 0 00 0 00 7 99 33,663.33
General Nutrition Center #24 207.22 1.87 110.83 1.00 38.24 0.35 22.31 2,473.21
Papa John's Pizza, Inc. #355 207.22 1.87 127.46 1.15 38.24 0.35 22.46 2,489.84
T. J. Maxx #084 2,451.33 1.12 0.00 0.00 656.25 0.30 10.17 22,248.21
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Bow Regards 407.80 1.63 250.83 1.00 75.25 0.30 20.95 5,255.15
Sally Beauty #1640 233.70 1.87 125.00 1.00 37.50 0.30 19.17 2,396.20
Movie Gallery/Video Way 560.89 1.87 345.00 1.15 103.50 0.35 20.87 6,262.39
A to Z Travel, Inc. 140.22 1.87 86.25 1.15 25.88 0.35 20.87 1,565.60
TCBY Treats 159.54 1.87 98.13 1.15 29.44 0.35 22.46 l.916.94
Vacant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Clothestime #755 411.14 1.23 0.00 0.00 100.50 0.30 15.53 5,201.64
Supercuts, Inc. (FL1215) 240.09 1.87 147.68 1.15 44.30 0.34 22.46 2,884.34
Coconuts #761 576.59 1.79 322.42 1.00 96.73 0.30 17.09 5,509.57
Service Merchandise #331 4,674.90 1.12 0.00 0.00 0.00 0.00 9.86 41,133.23
</TABLE>
<PAGE>
1/21/97 2:41 pm
Community Centers One LLC
User: KUSHNER Page: 16
Commercial Rent Roll
Property : CARILLON PLACE
Naples, Florida 33942
Report Date From : 1/01/97 To : 1/31/97
<TABLE>
<CAPTION>
TERM PRORATED BASE RENT BASE RENT
SQ. FOOT ------------------- UNIT INFO BASE RENT RENT PER INCREASE INCREASE
TENANT UNIT REF NO.OCCUPIED FROM TO BASE RENT ANNUAL SQ FT/YR (DATE) (AMOUNT)
- -------------------------- ----------- -------- --------- -------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ross Dress #305 940-5054 25500 4/26/94 1/31/05 20718.75 248625.00 9.75 6/01/94 20.718.75
2/01/99 20.500,00
Circuit City #3205 940-5056 21285 5/12/94 1/31/15 18511.50 222138.00 10.44 7/01/94 18,511.50
2/01/00 0.00
2/01/05 0.00
2/01/10 0.00
Floral Supply Mart, Inc. 940-5060 12000 12/17/94 12/31/99 12000.00 144000.00 12.00 1/01/95 12,000.00
Pier 1 Imports #797 940-5062 9112 11/06/94 2/28/05 12756.80 153081.60 16.80 11/01/96 12,756.80
11/01/99 14,032.48
OfficeMax, Inc. #159 940-5066 23500 2/24/94 1/31/10 20072.92 240875.04 10.25 6/01/94 20,072.92
2/01/99 21,052.08
2/01/04 22,031.25
Eckerd Drug #3069 940-5070 8719 2/28/94 2/28/14 9937.50 119250.00 13.68 7/01/94 9,937.50
5/01/99 10,500.00
5/01/04 10,875.00
5/01/09 11,250.00
Payless Shoe Source #4884 940-5072 3000 4/23/94 4/30/04 3975.00 47700.00 15.90 7/01/94 3,975.00
5/01/99 4,471.88
Fifth Third Trust Company-FS 940-5076 3400 12/21/93 0.00 0.00 0.00 0.00
Boston Chicken #569 94O-5088 3279 7/23/94 7/31/04 5000.00 60000.00 18.30 12/01/94 5,000.00
8/01/99 5,750.00
First Union National Bank 940-5094 4500 9/14/94 0.00 0.00 0.00 0.00
Applebees #138 940-5095 5050 2/06/95 0.00 0.00 0.00 0.00
First Regal/Amoco 940-5096 2450 7/20/94 0.00 0.00 0.00 0.00
Misc. Income 940-99999 0 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
T 0 T A L S : 281838 222840.80 2674104.60 9.49
Total Occupied Square Feet : 281838
Total Vacant Square Feet : 0
<CAPTION>
---CAM EXPENSE------ --REAL ESTATE TAX- --INS EXPENSE----- -----GROSS RENTS----
TENANT MONTH SQ FT/YR MONTH SQ FT/YR MONTH SQ FT/YR SQ FT/YR TOTAL
- -------------------------- - --------- --------- -------- -------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ross Dress #1305 2,494.69 1.17 0.00 0.00 0.00 0.00 10.92 23,213.44
Circuit City #3205 1,813.67 1.02 0.00 0.00 354.75 0.20 11.66 20,679.92
Floral Supply Mart, Inc. 1,869.63 1.87 1,150.00 1.15 345.00 0.35 18.36 15,364.63
Pier 1 Imports #797 974.29 1.28 0.00 0.00 261.97 0.35 18.43 13,993.06
OfficeMax, Inc. #159 2,194.53 1.12 1,958.33 1.00 587.50 0.30 12.67 24,813.28
Eckerd Drug #3069 775.44 1.07 0.00 0.00 0.00 0.00 14.74 10,712.94
Payless Shoe Source #4884 293.49 1.17 0.00 0.00 0.00 0.00 17.07 4,268.49
Fifth Third Trust Company-FS 250.00 0.88 0.00 0.00 0.00 0.00 0.88 250.00
Boston Chicken #569 255.53 0.94 1,054.00 3.86 0.00 0.00 23.09 6,309.53
First Union National Bank 200.00 0.53 0.00 0.00 0.00 0.00 0.53 200.00
Applebees #138 416.67 0.99 0.00 0.00 0.00 0.00 0.99 416.67
First Regal/Amoco 416.67 2.04 0.00 0.00 0.00 0.00 2.04 416.67
Misc. Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------------
T 0 T A L S : 22,225.25 0.95 5,775.93 0.25 2795.05 0.12 10.80 253,638.28
</TABLE>
<PAGE>
1997 COMPARATIVE RENT ROLL BUDGET
Carillon Place SC, Naples, FL Site Code #940000
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT UNIT # SQ. FT. JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Winn-Dixie 5010 50,540 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33
- -----------------------------------------------------------------------------------------------------------------------------------
GNC 5014 1,330 2,116.92 2,116.92 2,116.92 2,116.92 2,180.09 2,180.09 2,180.09
- -----------------------------------------------------------------------------------------------------------------------------------
Papa Johns 5016 1,330 2,116.92 2,116.92 2,116.92 2,116.92 2,116.92 2,180.09 2,180.09
- -----------------------------------------------------------------------------------------------------------------------------------
TJMaxx 5018 26,250 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63
- -----------------------------------------------------------------------------------------------------------------------------------
Vacant 5022 10,150 9,304.17 9,304.17 9,304.17
- -----------------------------------------------------------------------------------------------------------------------------------
Bow Regards Cards 5026 3,010 4,520.02 4,520.02 4,520.02 4,520.02 4,520.02 4,520.02 4,520.02
- -----------------------------------------------------------------------------------------------------------------------------------
Sally Beauty 5030 1,500 2,000.00 2,000.00 2,000.00 2,062.50 2,062.50 2,062.50 2,062.50
- -----------------------------------------------------------------------------------------------------------------------------------
Video Way 5032 3,600 5,253.00 5,253.00 5,253.00 5,253.00 5,412.00 5,412.00 5,412.00
- -----------------------------------------------------------------------------------------------------------------------------------
A-Z Travel 5034 900 1,313.25 1,313.25 1,313.25 1,313.25 1,313.25 1,313.25 1,313.25
- -----------------------------------------------------------------------------------------------------------------------------------
TCBY 5036 1,024 1,629.83 1,629.83 1,629.83 1,629.83 1,629.83 1,629.83 1,629.83
- -----------------------------------------------------------------------------------------------------------------------------------
Carillon Cleaners 5038 918 1,542.24 1,542.24 1,542.24 1,588.14 1,588.14 1,588.14 1,588.14
- -----------------------------------------------------------------------------------------------------------------------------------
Clothestime 5042 4,020 4,690.00 4,690.00 4,690.00 4,690.00 4,690.00 4,690.00 4,690.00
- -----------------------------------------------------------------------------------------------------------------------------------
Supercuts 5046 1,541 2,452.27 2,452.27 2,452.27 2,452.27 2,452.27 2,452.27 2,452.27
- -----------------------------------------------------------------------------------------------------------------------------------
Coconuts Music 5048 3,869 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83
- -----------------------------------------------------------------------------------------------------------------------------------
Service Merchandise 5052 50,061 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33
- -----------------------------------------------------------------------------------------------------------------------------------
Ross 5054 25,500 20,718.75 20,718.75 20,718.75 20,718.75 20,718.75 20,718.75 20,718.75
- -----------------------------------------------------------------------------------------------------------------------------------
Circuit City 5056 21,285 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50
- -----------------------------------------------------------------------------------------------------------------------------------
Floral Supply Mart 5060 12,000 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
Pier 1 Imports 5062 9,112 12,756.80 12,756.80 12,756.80 12,756.80 12,756.80 12,756.80 12,756.80
- -----------------------------------------------------------------------------------------------------------------------------------
Office Max 5066 23,500 20,072.92 20,072.92 20,072.92 20,072.92 20,072.92 20,072.92 20,072.92
- -----------------------------------------------------------------------------------------------------------------------------------
Eckerd Drug 5070 8,719 9,937.50 9,937.50 9,937.50 9,937.50 9,937.50 9,937.50 9,937.50
- -----------------------------------------------------------------------------------------------------------------------------------
Payless ShoeSource 5072 3,000 3,975.00 3,975.00 3,975.00 3,975.00 3,975.00 3,975.00 3,975.00
- -----------------------------------------------------------------------------------------------------------------------------------
Boston Chicken 5088 3,279 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
Applebees 5095 5,050 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
Fifth Third Bank OP-D 3,400 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
First Union Bank OPA-2 4,500 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
First Regal Properties OPA-1 2,450 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
Total 281,838 224,383.04 224,383.04 224,383.04 224,491.44 234,017.78 234,080.95 234,080.95
- ------------------------------------------------------------------------------------------------------------------------------------
Original Budget 232,748.72 232,748.72 232,748.72 233,081.35 233,346.44 233,458.51 233,346.42
===================================================================================================================================
DIFFERENCE (8,365.68) (8,365.68) (8,365.68) (8,589.91) 671.34 622.44 734.53
===================================================================================================================================
===================================================================================================================================
Vacant Square Feet 0 0 0 10,150 10,150 10,150 10,150
===================================================================================================================================
Total Occupied Sq. Ft. 281,838 281,838 281,838 271,688 271,688 271,688 271,688
- ------------------------------------------------------------------------------------------------------------------------------------
Occupancy Rate 100.00% 100.00% 100.00% 96.40% 96.40% 96.40% 96.40%
- ------------------------------------------------------------------------------------------------------------------------------------
Vacancy Rate 0.00% 0.00% 0.00% 3.60% 3.60% 3.60% 3.60%
===================================================================================================================================
<CAPTION>
=========================================================================================================================
TENANT UNIT # SQ. FT. AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER TOTAL
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Winn-Dixie 5010 50,540 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 401,959.96
- -------------------------------------------------------------------------------------------------------------------------
GNC 5014 1,330 2,180.09 2,180.09 2,180.09 2,180.09 2,180.09 25,908.40
- -------------------------------------------------------------------------------------------------------------------------
Papa Johns 5016 1,330 2,180.09 2,180.09 2,180.09 2,180.09 2,180.09 25,845.23
- -------------------------------------------------------------------------------------------------------------------------
TJMaxx 5018 26,250 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 229,687.56
- -------------------------------------------------------------------------------------------------------------------------
Vacant 5022 10,150 9,304.17 9,304.17 9,304.17 9,304.17 9,304.17 74,433.36
- -------------------------------------------------------------------------------------------------------------------------
Bow Regards Cards 5026 3,010 4,520.02 4,655.47 4,655.47 4,655.47 4,655.47 54,782.04
- -------------------------------------------------------------------------------------------------------------------------
Sally Beauty 5030 1,500 2,062.50 2,062.50 2,062.50 2,062.50 2,062.50 24,562.50
- -------------------------------------------------------------------------------------------------------------------------
Video Way 5032 3,600 5,412.00 5,412.00 5,412.00 5,412.00 5,412.00 64,308.00
- -------------------------------------------------------------------------------------------------------------------------
A-Z Travel 5034 900 1,352.65 1,352.65 1,352.65 1,352.65 1,352.65 15,956.00
- -------------------------------------------------------------------------------------------------------------------------
TCBY 5036 1,024 1,629.83 1,678.51 1,678.51 1,678.51 1,678.51 19,752.68
- -------------------------------------------------------------------------------------------------------------------------
Carillon Cleaners 5038 918 1,588.14 1,588.14 1,588.14 1,588.14 1,588.14 18,919.98
- -------------------------------------------------------------------------------------------------------------------------
Clothestime 5042 4,020 4,690.00 4,690.00 4,690.00 4,690.00 4,690.00 56,280.00
- -------------------------------------------------------------------------------------------------------------------------
Supercuts 5046 1,541 2,452.27 2,452.27 2,525.84 2,525.84 2,525.84 29,647.95
- -------------------------------------------------------------------------------------------------------------------------
Coconuts Music 5048 3,869 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 54,165.96
- -------------------------------------------------------------------------------------------------------------------------
Service Merchandise 5052 50,061 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 437,499.96
- -------------------------------------------------------------------------------------------------------------------------
Ross 5054 25,500 20,718.75 20,718.75 20,718.75 20,718.75 20,718.75 248,625.00
- -------------------------------------------------------------------------------------------------------------------------
Circuit City 5056 21,285 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 222,138.00
- -------------------------------------------------------------------------------------------------------------------------
Floral Supply Mart 5060 12,000 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 144,000.00
- -------------------------------------------------------------------------------------------------------------------------
Pier 1 Imports 5062 9,112 12,756.80 12,756.80 12,756.80 12,756.80 12,756.80 153,081.60
- -------------------------------------------------------------------------------------------------------------------------
Office Max 5066 23,500 20,072.92 20,072.92 20,072.92 20,072.92 20,072.92 240,875.04
- -------------------------------------------------------------------------------------------------------------------------
Eckerd Drug 5070 8,719 9,937.50 9,937.50 9,937.50 9,937.50 9,937.50 119,250.00
- -------------------------------------------------------------------------------------------------------------------------
Payless ShoeSource 5072 3,000 3,975.00 3,975.00 3,975.00 3,975.00 3,975.00 47,700.00
- -------------------------------------------------------------------------------------------------------------------------
Boston Chicken 5088 3,279 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 60,000.00
- -------------------------------------------------------------------------------------------------------------------------
Applebees 5095 5,050 0.00
- -------------------------------------------------------------------------------------------------------------------------
Fifth Third Bank OP-D 3,400 0.00
- -------------------------------------------------------------------------------------------------------------------------
First Union Bank OPA-2 4,500 0.00
- -------------------------------------------------------------------------------------------------------------------------
First Regal Properties OPA-1 2,450 0.00
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
Total 281,838 234,120.35 234,304.48 234,378.05 234,378.05 234,378.05 2,771,379.22
- -------------------------------------------------------------------------------------------------------------------------
Original Budget 233,496.76 233,674.95 233,746.37 234,353.84 234,353.84 2,801,104.64
=========================================================================================================================
DIFFERENCE 623.59 629.53 631.68 24.21 24.21 (29,725.42)
=========================================================================================================================
=========================================================================================================================
Vacant Square Feet 0 0 0 0 0
=========================================================================================================================
Total Occupied Sq. Ft. 281,838 281,838 281,838 281,838 281,838
- -------------------------------------------------------------------------------------------------------------------------
Occupancy Rate 100.00% 100.00% 100.00% 100.00% 100.00%
- -------------------------------------------------------------------------------------------------------------------------
Vacancy Rate 0.00% 0.00% 0.00% 0.00% 0.00%
=========================================================================================================================
</TABLE>
<PAGE>
EXTRAS RECONCILIATION
AS OF 12/31/97
NAPLES, FL
<TABLE>
<CAPTION>
====================================================================
WINN-DIXIE T.J. MAXX PRO FORMA SERVICE ROSS CIRCUIT
VACANT MERCHANDISE CITY
Actual Adjusted ====================================================================
CAM EXPENSES 12/31/97 12/31/97 245/365
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00 134,223.00 N/A N/A N/A N/A N/A N/A
Office Supplies 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 33,500.00 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 N/A
Repairs to P/L 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp. 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 2,600.00 12,756.98 N/A N/A 12,756.98 N/A N/A N/A
Salaries 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) (17,440.00) (17,440.00)(17,440.00) (17,440.00) (17,440.00)(17,440.00) (17,440.00)
----------- ---------------------------------------------------------------------------------
TOTAL EXPENSES 414,942.00 427,835.78 280,855.80 280,855.80 293,612.78 280,855.80 280,855.80 244,620.00
=========== ==========
SQUARE FEET 263,459 50,540 26,250 10,150 50,061 25,500 21,285
-----------------------------------------------------------------------------------------------
TERMS PRS PRS-5% PRORATE-15 PRS-5% PRS-10% PRS-10%
-----------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 53,938.69 28,015.25 7,601.44 53,427.48 27,214.81 19,785.52
PLUS ADMINISTRATIVE FEE 0.00 1,400.76 1,140.22 2,671.37 2,721.48 1,978.55
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 53,938.69 29,416.01 8,741.66 56,098.85 29,936.29 21,764.07
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 53,938.69 29,416.01 8,741.66 56,098.85 29,936.29 21,764.07
====================================================================
---------
INSURANCE 86,759.10
---------
PROPERTY INS 14,127.30 14,127.30 14,127.30 14,127.30
---------
LIABILITY INS 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80
---------
SQUARE FEET PROP 141,273
SQUARE FEET LIAB 263,159 50,540 26,250 10,150 50,061 25,500 21,285
-----------------------------------------------------------------------------------------------
LIAB ONLY PRS PRORATE - 15 LIAB ONLY PRS LIAB ONLY
-----------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 10,108.00 7,875.00 2,043.90 10,012.20 7,650.00 4,257.00
PLUS ADMINISTRATIVE FEE 0.00 0.00 306.59 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 10,108.00 7,875.00 2,350.49 10,012.20 7,650.00 4,257.00
====================================================================
----------
CENTER TAXES 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00
----------
SQUARE FEET 266,438 50,540 26,250 10,150 50,061 25,500 21,285
-----------------------------------------------------------------------------------------------
PRS PRS PRORATE - 15 PRS PRS PRS
-----------------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 50,540.00 26,250.00 6,813.01 50,061.00 25,500.00 21,285.00
PLUS ADMINISTRATIVE FEE 0.00 0.00 1,021.95 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
---------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 50,540.00 26,250.00 7,834.97 50,061.00 25,500.00 21,285.00
=====================================================================
TOTAL DUE FROM (TO) TENANT 114,586.69 63,541.91 18,927.11 116,172.05 63,686.29 47,306.97
=====================================================================
<CAPTION>
========================================================================================================
PIER 1 OFFICE MAX ECKERD PAYLESS GNC PAPA JOHNS
IMPORTS DRUG SHOESOURCE
========================================================================================================
CAM EXPENSES
<S> <C> <C> <C> <C> <C> <C>
Management Fees N/A N/A N/A N/A 134,223.00 134,223.00
Office Supplies 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 12,756.98 N/A N/A N/A 12,756.98 12,756.98
Salaries 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00)
--------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 293,612.78 280,855.80 280,855.80 280,855.80 427,835.78 427,835.78
SQUARE FEET 9,112 23,500 8,719 3,000 1,330 1,330
--------------------------------------------------------------------------------------------------------
TERMS PRS-15% PRS-5% PRS-0% PRS-10% PRS-15% PRS-15%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 10,166.48 25,080.32 9,305.33 3,201.74 2,162.27 2,162.27
PLUS ADMINISTRATIVE FEE 1,524.97 1,254.02 0.00 320.17 324.34 324.34
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 11,691.45 26,334.33 9,305.33 3,521.92 2,486.61 2,486.61
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 11,691.45 26,334.34 9,305.33 3,521.92 2,496.61 2,496.61
========================================================================================================
INSURANCE
PROPERTY INS 14,127.30 14,127.30 14,127.30 14,127.30 14,127.30 14,127.30
LIABILITY INS 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80
SQUARE FEET PROP
SQUARE FEET LIAB 9,112 23,500 8,719 3,000 1,330 1,330
--------------------------------------------------------------------------------------------------------
PRS-15% PRS PRS PRS PRS-15% PRS-15%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 2,733.60 7,050.00 2,615.70 900.00 399.00 399.00
PLUS ADMINISTRATIVE FEE 410.04 0.00 0.00 0.00 59.85 59.85
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 3,143.64 7,050.00 2,615.70 900.00 458.85 458.85
========================================================================================================
CENTER TAXES 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00
SQUARE FEET 9,112 23,500 8,719 3,000 1,330 1,330
--------------------------------------------------------------------------------------------------------
PRS PRS PRS PRS PRS PRS-15%
--------------------------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 9,112.00 23,500.00 8,719.00 3,000.00 1,330.00 1,330.00
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 199.50
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 9,112.00 23,500.00 8,719.00 3,000.00 1,330.00 1,529.50
========================================================================================================
TOTAL DUE FROM (TO) TENANT 23,947.09 56,884.33 20,640.03 7,421.92 4,275.46 4,474.96
========================================================================================================
<CAPTION>
====================================================
SALLY VIDEO WAY CARILLON
BEAUTY CLEANERS
====================================================
CAM EXPENSES
<S> <C> <C> <C>
Management Fees 134,223.00 134,223.00 134,223.00
Office Supplies 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00
Electricity - Ext. /.9245 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00
Fire Protection Insp. 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 12,756.98 12,756.98 12,756.98
Salaries 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) (17,440.00) (17,440.00)
----------------------------------------------------
TOTAL EXPENSES 427,835.78 427,835.78 427,835.78
====================================================
SQUARE FEET 1,500 3,600 918
----------------------------------------------------
TERMS PRS-15% PRS-15% PRS-15%
----------------------------------------------------
TENANT'S PRO-RATA SHARE 2,438.65 5,852.77 1,492.46
PLUS ADMINISTRATIVE FEE 365.80 877.92 223.87
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 2,804.45 6,730.69 1,716.32
LESS PRIOR BILLINGS
LESS ACCURALS
----------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,804.45 6,730.69 1,716.32
====================================================
INSURANCE
PROPERTY INS 14,127.30 14,127.30 14,127.30
LIABILITY INS 52,631.80 52,631.80 52,631.80
SQUARE FEET PROP
SQUARE FEET LIAB 1,500 3,600 918
----------------------------------------------------
PRS PRS-15% PRS-15%
----------------------------------------------------
TENANT'S PRO-RATA SHARE 450.00 1,080.00 275.40
PLUS ADMINISTRATIVE FEE 0.00 162.00 41.31
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
----------------------------------------------------
TOTAL DUE FROM (TO) TENANT 450.00 1,242.00 316.71
====================================================
CENTER TAXES 266,438.00 266,438.00 266,438.00
SQUARE FEET 1,500.00 3,600.00 918.00
----------------------------------------------------
PRS PRS-15% PRS-15%
----------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 1,500.00 3,600.00 918.00
PLUS ADMINISTRATIVE FEE 0.00 540.00 137.70
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
----------------------------------------------------
TOTAL DUE FROM (TO) TENANT 1,500.00 4,140.00 1,055.70
====================================================
TOTAL DUE FROM (TO) TENANT 4,754.45 12,112.68 3,088.73
====================================================
</TABLE>
Winn-Dixie - pays CAM monthly based on actual CAM costs.
Boston Chicken - Tenant pays a fixed $200 per month for CAM and $25 per month
for electric expense.
<PAGE>
EXTRAS RECONCILIATION
AS OF 12/31/97
NAPLES, FL
<TABLE>
<CAPTION>
===============================================================================
CLOTHESTIME SUPERCUTS COCONUTS A - Z TCBY FLORAL
MUSIC TRAVEL SUPPLY MART
Actual Adjusted
CAM EXPENSES 12/31/97 12/31/97 ===============================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00 134,223.00 N/A 134,223.00 134,223.00 134,223.00 134,223.00 134,223.00
Office Supplies 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 33,500.00 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 2,600.00 12,756.98 12,756.98 12,756.98 12,756.98 12,756.98 12,756.98 12,756.98
Salaries 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00)(17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00)
----------- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 414,943.00 427,835.78 293,612.78 427,835.78 427,835.78 427,835.78 427,835.78 427,835.78
=========== ==========
SQUARE FEET 263,159 4,020 1,541 3,869 900 1,024 12,000
--------------------------------------------------------------------------------------------------------
TERMS PRS-10% PRS-15% PRS-10% PRS-15% PRS-15% PRS-15%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 4,485.21 2,505.31 6,290.10 1,463.19 1,664.79 19,509.23
PLUS ADMINISTRATIVE FEE 448.52 375.80 629.01 219.48 249.72 2,926.38
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 4,933.73 2,881.11 6,919.11 1,682.67 1,914.51 22,435.61
LESS PRIOR BILLINGS
LESS ACCRUALS
---------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 4,933.73 2,881.11 6,919.11 1,682.67 1,914.51 22,435.61
---------- =================================================================================
INSURANCE 86,759.10
---------
PROPERTY INS 14,127.30 14,127.30 14,127.30 14,127.30 14,127.30 14,127.30 14,127.30
---------
LIABILITY INS 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80 52,631.80
---------
SQUARE FEET PROP 141,273
SQUARE FEET LIAB 263,159 4,020 1,541 3,869 900 1,024 12,000
---------------------------------------------------------------------------------
PRS PRS-15% PRS PRS-15% PRS-15% PRS-15%
---------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 1,206.00 462.30 1,160.70 270.00 307.20 3,600.00
PLUS ADMINISTRATIVE FEE 0.00 69.35 0.00 40.50 46.08 540.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
---------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 1,206.00 531.65 1,160.70 310.50 353.28 4,140.00
----------- =================================================================================
CENTER TAXES 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00 266,438.00
-----------
SQUARE FEET 266,438 4,020 1,541 3,869 900 1,024 12,000
---------------------------------------------------------------------------------
PRS PRS-15% PRS PRS-15% PRS-15% PRS-15%
---------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 4,020.00 1,541.00 3,869.00 900.00 1,024.00 12,000.00
PLUS ADMINISTRATIVE FEE 0.00 231.15 0.00 135.00 153.60 1,800.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
---------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 4,020.00 1,772.15 3,869.00 1,035.00 1,177.60 13,800.00
=================================================================================
TOTAL DUE FROM (TO) TENANT 18,159.73 5,184.90 11,948.81 3,028.17 3,445.39 40,375.61
=================================================================================
<CAPTION>
====================================================================================
BOSTON APPLEBY'S FIFTH THIRD FIRST UNION FIRST REGAL BOW
CHICKEN BANK BANK PROPERTIES REGARDS
OUTLOT OUTLOT OUTLOT OUTLOT OUTLOT CARDS
CAM EXPENSES ====================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00
Office Supplies 200.00
Pressure Washing 13,600.00
Pest Extermination 2,100.00
Light Bulbs - Ext. 1,000.00
Sweeping - Ext. 27,000.00
Trash Removal 3,700.00
Landscaping-Exterior 81,160.00
Parking Lot Striping 6,000.00
Retention Maintenance 1,520.00
Security 12,780.00
Electricity - Ext./.9245 36,235.80
Repairs to P/L 2,000.00
Signage 2,500.00
Repairs Elec/Gas 9,500.00
Painting - Ext. 3,500.00
Repairs to Plumbing 7,500.00
Repair Com. Area Roof 3,000.00
Miscellaneous - Ext. 4,000.00
Fire Protection Insp 2,000.00
Fire Protection Sys/.20381 12,756.98
Salaries 54,000.00
Maint-Outside Serv-Ext. 25,000.00
Outlot Contribution (17,440.00)
--------------------------------------------------------------------------------------
TOTAL EXPENSES 0.00 0.00 0.00 0.00 0.00 427,835.78
SQUARE FEET 3,010
--------------------------------------------------------------------------------------
TERMS Fixed at $220 Fixed at $1,250 Fixed at $600 Fixed at $600 Fixed at $1,250 PRS-15%
--------------------------------------------------------------------------------------
per month per quarter per quarter per quarter per quarter
------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57
------------------------------------------------------------------------
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 0.00
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57 330,073.60
====================================================================================== 110.70%
INSURANCE
PROPERTY INS N/A N/A N/A N/A N/A 14,127.30
LIABILITY INS N/A N/A N/A N/A N/A 52,631.90
SQUARE FEET PROP
SQUARE FEET LIAB 0 0 0 0 0 3,010
N/A N/A N/A N/A N/A PRS
TENANT'S PRO-RATA SHARE 0.00 0.00 0.00 0.00 0.00 903.00
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 0.00 0.00 0.00 0.00 0.00 903.00 87,493.56
====================================================================================== 101.10%
CENTER TAXES 266,438.00 N/A N/A N/A N/A 266,438.00
SQUARE FEET 3,279 0 0 0 0 3,010
--------------------------------------------------------------------------------------
PRS-15% N/A N/A N/A N/A PRS
--------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT pay own pay own pay own pay own
TENANT'S PRO-RATA SHARE 3,279 0 0 0 0 3,010
PLUS ADMINISTRATIVE FEE 491.85 0.00 0.00 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 3,770.85 0.00 0.00 0.00 0.00 3,010.00 267,811.77
====================================================================================== 100.52%
TOTAL DUE FROM (TO) TENANT 6,410.85 5,000.00 2,400.00 2,400.00 5,000.00 8,806.57
======================================================================================
</TABLE>
<PAGE>
1997 STRAIGHT-LINE RENTS ADJUSTMENT BUDGET
Carillon Place SC, Naples, FL Site Code #940000
<TABLE>
<CAPTION>
====================================================================================================================================
TENANT UNIT # SQ. FT. JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY
====================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Winn-Dixie 5010 50,540 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33
- -----------------------------------------------------------------------------------------------------------------------------------
GNC 5014 1,330 2,165.47 2,165.47 2,165.47 2,165.47 2,165.47 2,165.47 2,165.47
- -----------------------------------------------------------------------------------------------------------------------------------
Papa Johns 5016 1,330 2,162.83 2,162.83 2,162.83 2,162.83 2,162.83 2,162.83 2,162.83
- -----------------------------------------------------------------------------------------------------------------------------------
TJMaxx 5018 26,250 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63
- -----------------------------------------------------------------------------------------------------------------------------------
Vacant 5022 10,150 9,304.17 9,304.17 9,304.17
- -----------------------------------------------------------------------------------------------------------------------------------
Bow Regards Cards 5026 3,010 4,664.57 4,664.57 4,664.57 4,664.57 4,664.57 4,664.57 4,664.57
- -----------------------------------------------------------------------------------------------------------------------------------
Sally Beauty 5030 1,500 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
Video Way 5032 3,600 5,374.83 5,374.83 5,374.83 5,374.83 5,374.83 5,374.83 5,374.83
- -----------------------------------------------------------------------------------------------------------------------------------
A-Z Travel 5034 900 1,338.85 1,338.85 1,338.85 1,338.85 1,338.85 1,338.85 1,338.85
- -----------------------------------------------------------------------------------------------------------------------------------
TCBY 5036 1,024 1,666.49 1,666.49 1,666.49 1,666.49 1,666.49 1,666.49 1,666.49
- -----------------------------------------------------------------------------------------------------------------------------------
Carillon Cleaners 5038 918 1,579.73 1,579.73 1,579.73 1,579.73 1,579.73 1,579.73 1,579.73
- -----------------------------------------------------------------------------------------------------------------------------------
Clothestime 5042 4,020 5,073.73 5,073.73 5,073.73 5,073.73 5,073.73 5,073.73 5,073.73
- -----------------------------------------------------------------------------------------------------------------------------------
Supercuts 5046 1,541 2,494.89 2,494.89 2,494.89 2,494.89 2,494.89 2,494.89 2,494.89
- -----------------------------------------------------------------------------------------------------------------------------------
Coconuts Music 5048 3,869 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83
- -----------------------------------------------------------------------------------------------------------------------------------
Service Merchandise 5052 50,061 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33
- -----------------------------------------------------------------------------------------------------------------------------------
Ross 5054 25,500 20,596.66 20,596.66 20,596.66 20,596.66 20,596.66 20,596.66 20,596.66
- -----------------------------------------------------------------------------------------------------------------------------------
Circuit City 5056 21,285 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50
- -----------------------------------------------------------------------------------------------------------------------------------
Floral Supply Mart 5060 12,000 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
Pier 1 Imports 5062 9,112 13,613.61 13,613.61 13,613.61 13,613.61 13,613.61 13,613.61 13,613.61
- -----------------------------------------------------------------------------------------------------------------------------------
Office Max 5066 23,500 21,247.92 21,247.92 21,247.92 21,247.92 21,247.92 21,247.92 21,247.92
- -----------------------------------------------------------------------------------------------------------------------------------
Eckerd Drug 5070 8,719 10,696.06 10,696.06 10,696.06 10,696.06 10,696.06 10,696.06 10,696.06
- -----------------------------------------------------------------------------------------------------------------------------------
Payless ShoeSource 5072 3,000 4,270.18 4,270.18 4,270.18 4,270.18 4,270.18 4,270.18 4,270.18
- -----------------------------------------------------------------------------------------------------------------------------------
Boston Chicken 5088 3,279 5,432.69 5,432.69 5,432.69 5,432.69 5,432.69 5,432.69 5,432.69
- -----------------------------------------------------------------------------------------------------------------------------------
Applebees 5095 5,050 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
Fifth Third Bank OP-D 3,400 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
First Union Bank OPA-2 4,500 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
First Regal Properties OPA-1 2,450 Cam Only
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
Total 281,838 228,666.13 228,666.13 228,666.13 228,666.13 237,970.30 237,970.30 237,970.30
- ------------------------------------------------------------------------------------------------------------------------------------
Original Budget 224,383.04 224,383.04 224,383.04 224,491.44 234,017.78 234,080.95 234,080.95
===================================================================================================================================
DIFFERENCE 4,283.09 4,283.09 4,283.09 4,174.69 3,952.52 3,889.35 3,889.35
===================================================================================================================================
===================================================================================================================================
Vacant Square Feet 10,150 10,150 10,150 10,150 0 0 0
===================================================================================================================================
Total Occupied Sq. Ft. 271,688 271,688 271,688 271,688 281,838 281,838 281,838
- ------------------------------------------------------------------------------------------------------------------------------------
Occupancy Rate 96.40% 96.40% 96.40% 96.40% 100.00% 100.00% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Vacancy Rate 3.60% 3.60% 3.60% 3.60% 0.00% 0.00% 0.00%
===================================================================================================================================
<CAPTION>
======================================================================================================================
TENANT UNIT # SQ. FT. AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER TOTAL
======================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winn-Dixie 5010 50,540 33,663.33 33,663.33 33,663.33 33,663.33 33,663.33 403,959.96
- ----------------------------------------------------------------------------------------------------------------------
GNC 5014 1,330 2,165.47 2,165.47 2,165.47 2,165.47 2,165.47 25,985.64
- ----------------------------------------------------------------------------------------------------------------------
Papa Johns 5016 1,330 2,162.83 2,162.83 2,162.83 2,162.83 2,162.83 25,953.96
- ----------------------------------------------------------------------------------------------------------------------
TJMaxx 5018 26,250 19,140.63 19,140.63 19,140.63 19,140.63 19,140.63 229,687.56
- ----------------------------------------------------------------------------------------------------------------------
Vacant 5022 10,150 9,304.17 9,304.17 9,304.17 9,304.17 9,304.17 74,433.36
- ----------------------------------------------------------------------------------------------------------------------
Bow Regards Cards 5026 3,010 4,664.57 4,664.57 4,664.57 4,664.57 4,664.57 55,974.84
- ----------------------------------------------------------------------------------------------------------------------
Sally Beauty 5030 1,500 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 24,000.00
- ----------------------------------------------------------------------------------------------------------------------
Video Way 5032 3,600 5,374.83 5,374.83 5,374.83 5,374.83 5,374.83 64,497.96
- ----------------------------------------------------------------------------------------------------------------------
A-Z Travel 5034 900 1,338.85 1,338.85 1,338.85 1,338.85 1,338.85 16,066.20
- ----------------------------------------------------------------------------------------------------------------------
TCBY 5036 1,024 1,666.49 1,666.49 1,666.49 1,666.49 1,666.49 19,997.88
- ----------------------------------------------------------------------------------------------------------------------
Carillon Cleaners 5038 918 1,579.73 1,579.73 1,579.73 1,579.73 1,579.73 18,916.76
- ----------------------------------------------------------------------------------------------------------------------
Clothestime 5042 4,020 5,073.73 5,073.73 5,073.73 5,073.73 5,073.73 60,884.76
- ----------------------------------------------------------------------------------------------------------------------
Supercuts 5046 1,541 2,494.89 2,494.89 2,494.89 2,494.89 2,494.89 29,938.68
- ----------------------------------------------------------------------------------------------------------------------
Coconuts Music 5048 3,869 4,513.83 4,513.83 4,513.83 4,513.83 4,513.83 54,165.96
- ----------------------------------------------------------------------------------------------------------------------
Service Merchandise 5052 50,061 36,458.33 36,458.33 36,458.33 36,458.33 36,458.33 437,499.96
- ----------------------------------------------------------------------------------------------------------------------
Ross 5054 25,500 20,596.66 20,596.66 20,596.66 20,596.66 20,596.66 247,159.92
- ----------------------------------------------------------------------------------------------------------------------
Circuit City 5056 21,285 18,511.50 18,511.50 18,511.50 18,511.50 18,511.50 222,138.00
- ----------------------------------------------------------------------------------------------------------------------
Floral Supply Mart 5060 12,000 12,000.00 12,000.00 12,000.00 12,000.00 12,000.00 144,000.00
- ----------------------------------------------------------------------------------------------------------------------
Pier 1 Imports 5062 9,112 13,613.61 13,613.61 13,613.61 13,613.61 13,613.61 163,363.32
- ----------------------------------------------------------------------------------------------------------------------
Office Max 5066 23,500 21,247.92 21,247.92 21,247.92 21,247.92 21,247.92 254,975.04
- ----------------------------------------------------------------------------------------------------------------------
Eckerd Drug 5070 8,719 10,696.06 10,696.06 10,696.06 10,696.06 10,696.06 128,352.72
- ----------------------------------------------------------------------------------------------------------------------
Payless ShoeSource 5072 3,000 4,270.18 4,270.18 4,270.18 4,270.18 4,270.18 51,242.16
- ----------------------------------------------------------------------------------------------------------------------
Boston Chicken 5088 3,279 5,432.69 5,432.69 5,432.69 5,432.69 5,432.69 65,192.28
- ----------------------------------------------------------------------------------------------------------------------
Applebees 5095 5,050 0.00
- ----------------------------------------------------------------------------------------------------------------------
Fifth Third Bank OP-D 3,400 0.00
- ----------------------------------------------------------------------------------------------------------------------
First Union Bank OPA-2 4,500 0.00
- ----------------------------------------------------------------------------------------------------------------------
First Regal Properties OPA-1 2,450 0.00
- ----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
Total 281,838 237,970.30 237,970.30 237,970.30 237,970.30 237,970.30 2,818,426.92
- ----------------------------------------------------------------------------------------------------------------------
Original Budget 234,120.35 234,304.48 234,378.05 234,378.05 234,378.05 2,771,379.22
======================================================================================================================
DIFFERENCE 3,849.95 3,665.82 3,592.25 3,592.25 3,592.25 47,047.70
======================================================================================================================
======================================================================================================================
Vacant Square Feet 0 0 0 0 0
======================================================================================================================
Total Occupied Sq. Ft. 281,838 281,838 281,838 281,838 281,838
- ------------------------------------------------------------------------------------------------------------------p----
Occupancy Rate 100.00% 100.00% 100.00% 100.00% 100.00%
- ----------------------------------------------------------------------------------------------------------------------
Vacancy Rate 0.00% 0.00% 0.00% 0.00% 0.00%
======================================================================================================================
</TABLE>
<PAGE>
EXTRAS RECONCILIATION
AS OF 12/31/97
NAPLES, FL
<TABLE>
<CAPTION>
====================================================================
WINN-DIXIE T.J. MAXX PRO FORMA SERVICE ROSS CIRCUIT
VACANT MERCHANDISE CITY
Actual Adjusted ====================================================================
CAM EXPENSES 12/31/97 Factor 12/31/97 245/365
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00 1.00 134,223.00 N/A N/A N/A N/A N/A N/A
Office Supplies 200.00 1.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 1.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 1.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 1.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 1.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 1.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 1.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 1.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 33,500.00 0.9245 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 N/A
Repairs to P/L 2,000.00 1.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 1.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 1.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 1.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 1.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 1.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 1.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 1.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 2,600.00 0.20381 12,756.98 N/A N/A 12,756.98 N/A N/A N/A
Salaries 54,000.00 1.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 1.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) 1.00 (17,440.00) (17,440.00)(17,440.00) (17,440.00) (17,440.00)(17,440.00) (17,440.00)
----------- ---------------------------------------------------------------------------------
TOTAL EXPENSES 414,943.00 427,835.78 280,855.80 280,855.80 293,612.78 280,855.80 280,855.80 244,620.00
=========== ==========
SQUARE FEET 263,159.00 263,159.00 50,540.00 26,250.00 10,150.00 50,061.00 25,500.00 21,285.00
--------------------------------------------------------------------------------------------------------
TERMS PRS PRS-5% PRORATE-15 PRS-5% PRS-10% PRS-10%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 53,938.69 28,016.25 7,601.44 53,427.48 27,214.81 19,785.52
PLUS ADMINISTRATIVE FEE 0.00 1,400.76 1,140.22 2,671.37 2,721.48 1,978.55
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 53,938.69 29,416.01 8,741.66 56,098.85 29,936.29 21,764.07
LESS PRIOR BILLINGS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 53,938.69 29,416.01 8,741.66 56,098.85 29,936.29 21,764.07
PSF Charge 1.07 1.12 0.86 1.12 1.17 1.02
====================================================================
--------------------------------
INSURANCE 89,806.25 89,806.25
PROPERTY INS 10,595.48 1.8628 19737.25 19,737.25 19,737.25 19,737.25
LIABILITY INS 59,210.78 1.00 59210.78 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78
--------------------------------
SQUARE FEET PROP 141,273 141,273
SQUARE FEET LIAB 263,159 263,159 50,540 26,250 10,150 50,061 25,500 21,285
--------------------------------------------------------------------------------------------------------
LIAB ONLY PRS PRORATE-15 LIAB ONLY PRS LIAB ONLY
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 11,371.50 7,875.03 2,043.91 11,263.73 7,650.03 4,789.13
PLUS ADMINISTRATIVE FEE 0.00 0.00 306.59 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 11,371.50 7,875.03 2,350.50 11,263.73 7,650.03 4,789.13
PSF Charge 0.23 0.30 0.23 0.23 0.30 0.23
====================================================================
----------
CENTER TAXES 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78
----------
SQUARE FEET 266,438 50,540 26,250 10,150 50,061 25,500 21,285
--------------------------------------------------------------------------------------------------------
PRS PRS PRORATE - 15 PRS PRS PRS
--------------------------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 37,128.28 19,284.08 5,005.06 36,776.39 18,733.11 15,636.63
PLUS ADMINISTRATIVE FEE 0.00 0.00 750.76 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 37,128.28 19,284.08 5,755.81 36,776.39 18,733.11 15,636.63
0.73 0.73 0.57 0.73 0.73 0.73
====================================================================
TOTAL DUE FROM (TO) TENANT 102,438.47 56,575.12 18,548.97 104,138.97 56,319.43 42,189.83
2.03 2.16 1.66 2.08 2.21 1.98
====================================================================
Monthly Cam 4,494.89 2,451.33 971.30 4,674.90 2,494.69 1,813.67
Monthly Ins 947.63 656.25 261.17 938.64 637.50 399.09
Monthly Tax 3,094.02 1,607.01 639.53 3,064.70 1,561.09 1,303.05
<CAPTION>
=======================================================================================================
PIER 1 OFFICE MAX ECKERD PAYLESS GNC PAPA JOHNS
IMPORTS DRUG SHOESOURCE
=======================================================================================================
CAM EXPENSES
<S> <C> <C> <C> <C> <C> <C>
Management Fees N/A N/A N/A N/A 134,223.00 134,223.00
Office Supplies 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/20381 12,756.98 N/A N/A N/A 12,756.98 12,756.98
Salaries 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00)
--------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 293,612.78 280,855.80 280,855.80 280,855.80 427,835.78 427,835.78
SQUARE FEET 9,112 23,500 8,719 3,000 1,330 1,330
--------------------------------------------------------------------------------------------------------
TERMS PRS-15% PRS-5% PRS-0% PRS-10% PRS-15% PRS-15%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 10,166.48 25,080.32 9,305.33 3,201.74 2,162.27 2,162.27
PLUS ADMINISTRATIVE FEE 1,524.97 1,254.02 0.00 320.17 324.34 324.34
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 11,691.45 26,334.33 9,305.33 3,521.92 2,486.61 2,486.61
LESS PRIOR BILLINGS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 11,691.45 26,334.33 9,305.33 3,521.92 2,486.61 2,486.61
PSF Charge 1.28 1.12 1.07 1.17 1.87 1.87
========================================================================================================
INSURANCE
PROPERTY INS 19,737.25 19,737.25 19,737.25 19,737.25 19,737.25 19,737.25
LIABILITY INS 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78
SQUARE FEET PROP
SQUARE FEET LIAB 9,112 23,500 8,719 3,000 1,330 1,330
PRS-15% PRS PRS PRS PRS-15% PRS-15%
TENANT'S PRO-RATA SHARE 2,733.61 7,050.03 2,615.71 900.00 399.00 399.00
PLUS ADMINISTRATIVE FEE 410.04 0.00 0.00 0.00 59.85 59.85
PRO-RATED OR CAPPED AMTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 3,143.65 7,050.03 2,615.71 900.00 458.85 458.85
PSF Charge 0.35 0.30 0.30 0.30 0.35 0.35
========================================================================================================
CENTER TAXES 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78
SQUARE FEET 9,112 23,500 8,719 3,000 1,330 1,330
--------------------------------------------------------------------------------------------------------
PRS PRS PRS PRS PRS PRS-15%
--------------------------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 6,693.96 17,263.84 6,405.25 2,203.89 977.06 977.06
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 146.58
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 6,693.96 17,263.84 6,405.25 2,203.89 977.06 977.06
0.73 0.73 0.73 0.73 0.73 0.84
========================================================================================================
TOTAL DUE FROM (TO) TENANT 21,529.06 50,648.21 18,326.30 6,625.82 3,922.53 4,069.08
2.36 2.16 2.10 2.21 2.95 3.06
========================================================================================================
Monthly Cam 974.29 2,194.53 775.44 293.49 207.22 207.22
Monthly Ins 261.97 587.50 217.98 75.00 38.15 38.15
Monthly Tax 557.83 1,438.65 533.77 183.66 81.42 81.42
<CAPTION>
==================================================================
SALLY VIDEO WAY CARILLON CLOTHESTIME
BEAUTY CLEANERS
==================================================================
CAM EXPENSES
<S> <C> <C> <C> <C>
Management Fees 134,223.00 134,223.00 134,223.00 N/A
Office Supplies 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 36,235.80 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/.20381 12,756.98 12,756.98 12,756.98 12,756.98
Salaries 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) (17,440.00) (17,440.00) (17,440.00)
------------------------------------------------------------------
TOTAL EXPENSES 427,835.78 427,835.78 427,835.78 293,612.78
==================================================================
SQUARE FEET 1,500 3,600 918 4,020
------------------------------------------------------------------
TERMS PRS-15% PRS-15% PRS-15% PRS-10%
------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 2,438.65 5,852.77 1,492.46 4,485.21
PLUS ADMINISTRATIVE FEE 365.80 877.92 223.87 448.52
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 2,804.45 6,730.68 1,716.32 4,933.73
LESS PRIOR BILLINGS
------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,804.45 6,730.68 1,716.32 4,933.73
PSF Charge 1.87 1.87 1.87 1.23
==================================================================
INSURANCE
PROPERTY INS 19,737.25 19,737.25 19,737.25 19,737.25
LIABILITY INS 59,210.78 59,210.78 59,210.78 59,210.78
SQUARE FEET PROP
SQUARE FEET LIAB 1,500 3,600 918 4,020
------------------------------------------------------------------
PRS PRS-15% PRS-15% PRS
------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 450.00 1,080.00 275.40 1,206.00
PLUS ADMINISTRATIVE FEE 0.00 162.00 41.31 0.00
PRO-RATED OR CAPPED AMOUNTS
LESS PRIOR PAYMENTS
------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 450.00 1,242.01 316.71 1,206.00
PSF Charge 0.30 0.35 0.35 0.30
==================================================================
CENTER TAXES 195,733.78 195,733.78 195,733.78 195,733.78
SQUARE FEET 1,500 3,600 918 4,020
------------------------------------------------------------------
PRS PRS-15% PRS-15% PRS
------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 1,101.95 3,041.37 775.55 2,953.22
PLUS ADMINISTRATIVE FEE 0.00 396.70 101.16 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 1,101.95 2,041.37 775.55 2,953.22
0.73 0.84 0.84 0.73
==================================================================
TOTAL DUE FROM (TO) TENANT 4,356.40 11,014.06 2,808.59 9,092.96
2.90 3.06 3.06 2.26
==================================================================
Monthly Cam 233.70 560.89 143.03 411.14
Monthly Ins 37.50 103.50 26.39 100.50
Monthly Tax 91.83 253.45 64.63 246.10
</TABLE>
Winn-Dixie - pays CAM monthly based on actual CAM costs.
Boston Chicken - Tenant pays a fixed $200 per month for CAM and $25 per month
for electric expense.
<PAGE>
EXTRAS RECONCILIATION
AS OF 12/31/97
NAPLES, FL
<TABLE>
<CAPTION>
==================================================================
SUPERCUTS COCONUTS A - Z TCBY FLORAL
MUSIC TRAVEL SUPPLY MART
Actual Adjusted
CAM EXPENSES 12/31/97 Factor 12/31/97 ==================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00 1.00 134,223.00 134,223.00 134,223.00 134,223.00 134,223.00 134,223.00
Office Supplies 200.00 1.00 200.00 200.00 200.00 200.00 200.00 200.00
Pressure Washing 13,600.00 1.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00 13,600.00
Pest Extermination 2,100.00 1.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Light Bulbs - Ext. 1,000.00 1.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
Sweeping - Ext. 27,000.00 1.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00 27,000.00
Trash Removal 3,700.00 1.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00 3,700.00
Landscaping-Exterior 81,160.00 1.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00 81,160.00
Parking Lot Striping 6,000.00 1.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Retention Maintenance 1,520.00 1.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00 1,520.00
Security 12,780.00 1.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00 12,780.00
Electricity - Ext./.9245 33,500.00 0.9245 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80 36,235.80
Repairs to P/L 2,000.00 1.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Signage 2,500.00 1.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00
Repairs Elec/Gas 9,500.00 1.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00 9,500.00
Painting - Ext. 3,500.00 1.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00 3,500.00
Repairs to Plumbing 7,500.00 1.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00 7,500.00
Repair Com. Area Roof 3,000.00 1.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Miscellaneous - Ext. 4,000.00 1.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Fire Protection Insp 2,000.00 1.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Fire Protection Sys/20381 2,600.00 0.20381 12,756.98 12,756.98 12,756.98 12,756.98 12,756.98 12,756.98
Salaries 54,000.00 1.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00 54,000.00
Maint-Outside Serv-Ext. 25,000.00 1.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Outlot Contribution (17,440.00) 1.00 (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00) (17,440.00)
----------- ---------------------------------------------------------------------------------
TOTAL EXPENSES 414,943.00 427,835.78 427,835.78 427,835.78 427,835.78 427,835.78 427,835.78
=========== ==========
SQUARE FEET 263,159 263,159 1,541 3,869 900 1,024 12,000
--------------------------------------------------------------------------------------------------------
TERMS PRS-15% PRS-10% PRS-15% PRS-15% PRS-15%
--------------------------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 2,505.31 6,290.10 1,463.19 1,664.79 19,509.23
PLUS ADMINISTRATIVE FEE 375.80 629.01 219.48 249.72 2,926.38
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 2,881.11 6,919.11 1,682.67 1,914.51 22,435.61
LESS PRIOR BILLINGS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,881.11 6,919.11 1,682.67 1,914.51 22,435.61
PSF Charge 1.87 1.79 1.87 1.87 1.87
------------------------------- ====================================================================
INSURANCE 69,806.25 89,806.25
PROPERTY INS 10,595.48 1.8628 19,737.25 19,737.25 19,737.25 19,737.25 19,737.25 19,737.25
LIABILITY INS 59,210.78 1.00 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78 59,210.78
-------------------------------
SQUARE FEET PROP 141,273.00 141,273
SQUARE FEET LIAB 263,159.00 263,159 1,541.00 3,869.00 900.00 1,024.00 12,000.00
--------------------------------------------------------------------
PRS-15% PRS PRS-15% PRS-15% PRS-15%
--------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 462.30 1,160.70 270.00 307.20 3,600.01
PLUS ADMINISTRATIVE FEE 69.35 0.00 40.50 46.08 540.00
PRO-RATED OR CAPPED AMOUNTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 531.65 1,160.70 310.50 353.28 4,140.02
PSF Charge 0.35 0.30 0.35 0.35 0.35
----------- ====================================================================
CENTER TAXES 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78 195,733.78
-----------
SQUARE FEET 266,438 1,541 3,869 900 1,024 12,000
--------------------------------------------------------------------
PRS-15% PRS PRS-15% PRS-15% PRS-15%
--------------------------------------------------------------------
BASE YEAR TAX AMOUNT
TENANT'S PRO-RATA SHARE 1,132.07 2,842.29 661.17 752.26 8,815.58
PLUS ADMINISTRATIVE FEE 169.81 0.00 99.18 112.84 1,322.34
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 1,301.88 2,842.29 760.34 865.10 10,137.92
0.84 0.73 0.84 0.84 0.84
====================================================================
TOTAL DUE FROM (TO) TENANT 4,714.63 10,922.10 2,753.52 3,132.89 36,713.55
3.06 2.82 3.06 3.06 3.06
====================================================================
Monthly Cam 240.09 576.59 140.22 159.54 1,869.63
Monthly Ins 44.30 96.73 25.88 29.44 345.00
Monthly Tax 108.49 236.86 63.36 72.09 844.83
<CAPTION>
=====================================================================================
BOSTON APPLEBY'S FIFTH THIRD FIRST UNION FIRST REGAL BOW
CHICKEN BANK BANK PROPERTIES REGARDS
OUTLOT OUTLOT OUTLOT OUTLOT OUTLOT CARDS
CAM EXPENSES =====================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees 134,223.00
Office Supplies 200.00
Pressure Washing 13,600.00
Pest Extermination 2,100.00
Light Bulbs - Ext. 1,000.00
Sweeping - Ext. 27,000.00
Trash Removal 3,700.00
Landscaping-Exterior 81,160.00
Parking Lot Striping 6,000.00
Retention Maintenance 1,520.00
Security 12,780.00
Electricity - Ext./.9245 36,235.80
Repairs to P/L 2,000.00
Signage 2,500.00
Repairs Elec/Gas 9,500.00
Painting - Ext. 3,500.00
Repairs to Plumbing 7,500.00
Repair Com. Area Roof 3,000.00
Miscellaneous - Ext. 4,000.00
Fire Protection Insp 2,000.00
Fire Protection Sys/20381 12,756.98
Salaries 54,000.00
Maint-Outside Serv-Ext. 25,000.00
Outlot Contribution (17,440.00)
--------------------------------------------------------------------------------------
TOTAL EXPENSES 0.00 0.00 0.00 0.00 0.00 427,835.78
SQUARE FEET 3,010.00
--------------------------------------------------------------------------------------
TERMS Fixed at $220 Fixed at $1,250 Fixed at $600 Fixed at $600 Fixed at $1,250 PRS-15%
--------------------------------------------------------------------------------------
per month. per quarter. per quarter. per quarter. per quarter.
TENANT'S PRO-RATA SHARE 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 0.00
1997 CAM CHARGE (CAPS)
YEAR-TO-DATE CAP
TOTAL DUE THROUGH 12/31/97 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57
LESS PRIOR BILLINGS
---------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,640.00 5,000.00 2,400.00 2,400.00 5,000.00 4,893.57 330,073.60
PSF Charge 0.81 0.99 0.71 0.53 2.04 1.63
====================================================================================== 110.70%
INSURANCE
PROPERTY INS N/A N/A N/A N/A N/A 19,737.25
LIABILITY INS N/A N/A N/A N/A N/A 59,210.78
SQUARE FEET PROP
SQUARE FEET LIAB 0 0 0 0 0 3,010
--------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A PRS
--------------------------------------------------------------------------------------
TENANT'S PRO-RATA SHARE 0.00 0.00 0.00 0.00 0.00 903.00
PLUS ADMINISTRATIVE FEE 0.00 0.00 0.00 0.00 0.00 0.00
PRO-RATED OR CAPPED AMOUNTS
LESS PRIOR PAYMENTS
--------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 0.00 0.00 0.00 0.00 0.00 903.00 70,540.89
PSF Charge 0.00 0.00 0.00 0.00 0.00 0.30
====================================================================================== 101.05%
CENTER TAXES 195,733.78 N/A N/A N/A N/A 195,733.78
SQUARE FEET 3,279 0 0 0 0 3,010
--------------------------------------------------------------------------------------
PRS-15% N/A N/A N/A N/A PRS
--------------------------------------------------------------------------------------
BASE YEAR TAX AMOUNT pay own pay own pay own pay own
TENANT'S PRO-RATA SHARE 2,406.86 0.00 0.00 0.00 0.00 2,211.24
PLUS ADMINISTRATIVE FEE 361.33 0.00 0.00 0.00 0.00 0.00
PRO-RATED OR CAPPED AMTS
LESS PRIOR BILLINGS
LESS ACCRUALS
--------------------------------------------------------------------------------------
TOTAL DUE FROM (TO) TENANT 2,770.19 0.00 0.00 0.00 0.00 2,211.24 196,742.99
0.84 0.00 0.00 0.00 0.00 0.73
====================================================================================== 100.52%
TOTAL DUE FROM (TO) TENANT 5,410.19 5,000.00 2,400.00 2,400.00 5,000.00 8,007.81
1.65 0.99 0.71 0.53 2.04 2.68 597,357.49
======================================================================================
Monthly Cam 220.00 416.67 200.00 200.00 416.67 407.80
Monthly Ins 0.00 0.00 0.00 0.00 0.00 75.25
Monthly Tax 230.85 0.00 0.00 0.00 0.00 184.27
</TABLE>
<PAGE>
CARILLON PLACE
LEASING OVERVIEW
<TABLE>
<CAPTION>
Tenant Sq. Ft. Rent/Sq. Ft. Term Comments
------ ------- ------------ ---- --------
<S> <C> <C> <C> <C>
First Quarter New Leasing Activity
T.J. Maxx (expansion) 6,650 $10.86 12 years 7.5% step every 5 years
Dollar Tree 3,500 $15.00 5 years
Current Prospects
Dominos Pizza 1,330 $20.0O 5 years
Tropical Storm (tourist shop). 918 $15.00 3 years
</TABLE>
<PAGE>
COMMUNITY CENTER PORTFOLIO
SALES ANALYSIS
<TABLE>
<CAPTION>
FY 1996 FY 1995 %
Location Anchor Sales / Sq.Ft. Sales / Sq.Ft. Change
-------- ------ -------------- -------------- ------
<S> <C> <C> <C> <C>
Carillon Place: OfficeMax $296 N/A -
Naples, FL Winn-Dixie $249 $234 6%
T.J Maxx $189 $181 4%
Ross Dress for Less $189 $182 4%
Carmel Mountain Plaza: Circuit City $410 N/A -
San Diego, CA Barnes & Noble $267 $250 7%
Michaels $143 $140 2%
Kmart $110 $97 13%
Fairfax Towne Center: Safeway Stores $340 N/A -
Fairfax, VA Bed Bath & Beyond $135 $138 -3%
Zany Brainy $132 $133 -1%
T.J.Maxx $129 N/A -
Broadway Marketplace: Sam's Club $335 $341 -2%
Denver, CO Kmart $150 $136 10%
Woodfield Village Green: Nordstrom Rack $488 $458 5%
Schaumburg, IL Old Navy $441 N/A -
Container Store $245 N/A -
Marshalls $213 $195 9%
OfficeMax $210 N/A -
Sports Authority $205 $195 7%
Builder's Square $110 N/A -
New Hope Commons:
Durham, NC Old Navy $410 N/A -
Barnes & Noble $237 N/A -
Linen N' Things $184 * N/A -
Michaels $169 N/A -
Town Center Prado:
Marietta, GA Publix $277 N/A -
Barnes & Noble $184 N/A -
The Shoe Sport $149 N/A -
Zany Brainy $138 N/A -
Independence Commons:
Independence, MO American Multi-Cinema $132 N/A -
Rhodes Furniture $125 * N/A -
Perimeter Pointe:
Atlanta,GA SteinMart $121 N/A -
HomePlace $119 N/A -
Shoppers World:
Framingham, MA Toys R' Us $391 $367 * 6%
Barnes & Noble $237 N/A -
Macy's Furniture $185 $166 * 11%
Linen N' Things $178 * N/A -
The Sports Authority $174 N/A -
General Cinema Theatres $121 N/A -
*Twelve Months Annualized
</TABLE>
<PAGE>
[GRAPHIC OMITTED]
Map
<PAGE>
**********-CONFIDENTIAL-************ DATE NOV-14-1995 ****** TIME 17:54 *** F.01
MODE = TRANSMISSION START-NOV-14 17:46 END-NOV-14 17:54
NO. COM ABBR/NTWK STATION NAME/ PAGES PRG.NO. PROGRAM NAME
TELEPHONE NO.
001 OK 13129939767 017
-DENBY & GAMMERMAN P.C. -
*********(FAX-950 V1.35)** - -**** - 516 261 4133-****************
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE A
Office File Number Effective Date Commitment Number
PC100925 REVISED October 13, 1995 FL-Q15-10-100928 4th REVISED
at 8:00 a.m.
1. Policy or Policies to be issued:
ALTA OWNER'S POLICY, Form B
(amended 10/17/92): $25,000,000
Proposed Insured:
COMMUNITY CENTERS ONE L.L.C., a Delaware Limited Liability Company
ALTA LOAN POLICY
(amended 10/17/92): $
Proposed Insured:
Lehman Brother Holdings Inc., d/b/a Lehman Capital, a division of Lehman
Brothers Holdings Inc., its successors and/or assigns.
2. The estate or interest in the land described or referred to in this
Commitment and covered herein is a fee simple, and title thereto is at the
effective date hereof vested in:
3. The Land is described as follows:
PARCEL 1:
TRACTS B, D, and G of the plat of CARILLON, according to the plat recorded
in Plat Book 21, pages 59-61, Public Records of Collier County, Florida.
PARCEL 2:
Part of Tract B of the plat of Carillon, according to the plat recorded in
Plat Book 21, Pages 59-61, Public Records of Collier County, Florida,
described as follows:
Beginning at the Northwest corner of said Tract "E"; thence along the
Northerly boundary of said Tract "E"; North 88 degrees 50'18" East 6.50
feet; thence leaving said boundary, South 43 degrees 50'18" West 9.19 feet
to the Westerly boundary of said Tract "E"; thence along said boundary,
North 01 degrees 09'42" West 6.50 feet to the Point of Beginning of the
parcel herein described.
Bearings are assumed and based on the West line of said Tract "E", being
North 01 degrees 09'42" West.
Note: This Commitment consists of insert pages labeled in Schedule A,
Schedule B-Section 1, and Schedule B-Section 2. This Commitment is of no
force and effect unless all schedules are included, along with any Rider
pages incorporated by reference in the insert pages.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE A, continued
Commitment Number FL-Q15-10-100928
PARCEL 3:
Non-exclusive easement to use the Stormwater Management System for the
benefit of Parcel 1 created by the Reciprocal Easement Agreement recorded
in Official Records Book 1849, page 2231, Public Records of Collier
County, Florida, over, across and under that portion of Tract A of the
Plat of Carillon, according to the plat thereof recorded in Plat Book 21,
page 59, Public Records of Collier County, Florida, designated as a
drainage easement.
PARCEL 4:
Non-exclusive easement for ingress and egress and utilities for the
benefit of Parcel 1 created by the Reciprocal Easement Agreement recorded
in O.R. Book 1898, Page 1390, Public Records of Collier County, Florida,
over, across and within that portion of Tract F of the plat of Carillon,
according to the plat thereof recorded in Plat Book 21, page 59, Public
Records of Collier County, Florida, described therein.
PARCEL 5:
Non-exclusive easement for ingress and egress and utilities for the
benefit of Parcel 1 created by the Reciprocal Easement Agreement recorded
in O.R. Book 1985, Page 535, Public Records of Collier County, Florida,
over, across and within that portion of Tract C-1 of Carillon Tract "C"
Replat, according to the plat thereof recorded in Plat Book 23, page 69,
Public Records of Collier County, Florida, described therein.
PARCEL 6:
Non-exclusive easement for ingress and egress and utilities for the
benefit of Parcel 1 created by the Reciprocal Easement Agreement recorded
in O.R. Book 2006, Page 1256, Public Records of Collier County, Florida,
over, across and within that portion of Tract C-2 of Carillon Tract "C"
Replat, according to the plat thereof recorded in Plat Book 23, page 69,
Public Records of Collier County, Florida, described therein.
Note: This Commitment consists of insert pages labeled in Schedule A,
Schedule B-Section 1, and Schedule B-Section 2. This Commitment is of no
force and effect unless all schedules are included, along with any Rider
pages incorporated by reference in the insert pages.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE A, continued
Commitment Number FL-Q15-10-100928
PARCEL 7:
Non-exclusive easement for ingress and egress and utilities for the
benefit of Parcel 1 created by the Reciprocal Easement Agreement recorded
in O.R. Book 2028, Page 2022, Public Records of Collier County, Florida,
over, across and within the portion of Tract E of the plat of Carillon,
according to the plat thereof recorded in Plat Book 21, page 59, Public
Records of Collier County, Florida, described therein.
Note: This Commitment consists of insert pages labeled in Schedule A,
Schedule B-Section 1, and Schedule B-Section 2. This Commitment is of no
force and effect unless all schedules are included, along with any Rider
pages incorporated by reference in the insert pages.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - SECTION 1
Commitment Number FL-Q15-10-100928 4th Revised
I #1-7 deleted R. Carlucci CTI
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - SECTION 2
Commitment Number FL-Q15-10-100928 4th REVISED
II. Schedule E of the policy or policies to be issued will contain exceptions
to the following matters unless the same are disposed of to the
satisfaction of the Company.
1. [DELETED]
2. Standard Exceptions:
a. [DELETED]
b. [DELETED]
c. [DELETED]
d. [DELETED]
e. [DELETED]
f. [DELETED]
g. Taxes for the year 1996 and subsequent years which are not yet
due and payable (loan only)
Folio #25500000750 for Tract B;
Folio #25500000909 for Tract D;
Folio #25500001050 for Tract G;
Folio #25500000967 for that portion of Tract E described in
Schedule A.
3. [DELETED]
Note: On loan policies, junior and subordinate matters, if any, will not
be reflected in Schedule B.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - SECTION 2
4. Standard exceptions (a) and (d) may be removed upon receipt of a
satisfactory affidavit-indemnity from the party shown in title and
in possession stating who is in possession of the lands and whether
there are improvements being made at date of commitment or
contemplated to commence prior to the date of closing which will not
have been paid for in full prior to the closing.
5. Agreement between Wallace L. Lewis, Jr., Homart Community Centers,
Inc., and Marian H. Gerace, Trustee, recorded in Official Records
Book 1841, page 2315, Public Records of Collier County, Florida.
6. Reciprocal Easement Agreement between Homart Community Centers,
Inc., and Wallace L. Lewis, Jr., recorded in Official Records Book
1849, page 2231, Public Records of Collier County, Florida.
7. Reciprocal Easement Agreement between Homart Development Co., and
Fifth Third Trust Co., and Savings Bank, FSB, recorded in Official
Records Book 1898, page 1390, Public Records of Collier County,
Florida.
8. Memorandum of Lease Agreement between Homart Development Co., and
Circuit City Stores, Inc., recorded in Official Records Book 1883,
page 2265, Public Records of Collier County, Florida.
9. Short Form Lease between Homart Community Centers, Inc., and Jack
Eckard Corporation, recorded in Official Records Book 1860, page
534, Public Records of Collier County, Florida.
10. Short Form Lease between Homart Community Centers, Inc., and Winn-
Dixie Stores, Inc., recorded in Official Records Book 1871, page
117, Public Records of Collier County, Florida.
11. Memorandum of Lease between Homart Development Co., as successor by
merger to Homart Community Centers, Inc., and Ross Stores, Inc.,
recorded in Official Records Book 1896, page 285, Public Records of
Collier County, Florida.
12. Conveyance of Utility Facilities to Board of County Commissioners of
Collier County, recorded in Official Records Book 1920, page 751,
Public Records of Collier County, Florida.
13. Oil, gas and mineral rights reserved to previous owner of the fee
simple title to lands insured herein, as evidenced by that certain
instrument, as recorded in Official Records Book 1841, page 2313,
Public Records of Collier County, Florida.
14. Landscape Buffer Easement as shown on the plat of Carillon recorded
in Plat Book 21, page 59, Public Records of Collier County, Florida.
15. Water easement as shown on the Plat of Carillon recorded in Plat
Book 21, page 59, Public Records of Collier County, Florida.
Note: On loan policies, junior and subordinate matters, if any, will not
be reflected in Schedule B.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - SECTION 2, continued
Commitment Number FL-Q15-10-100928 4th REVISED
16. DELETED
17. Easement granted to Florida Power and Light by instrument recorded
in Official Records Book 1966, page 1642, Public Records of Collier
County, Florida.
18. Easement granted to United Telephone Company by instrument recorded
in Official Records Book 1971, page 376, Public Records of Collier
County, Florida.
19. Perpetual access road easement granted to South Florida Water
management District by instrument recorded in Official Records Book
1975, page 1580, Public Records of Collier County, Florida.
20. DELETED
21. Lease between Homart Development Co., and Payless Shoesource, Inc.,
recorded in Official Records Book 1944, page 1620, Public Records of
Collier County, Florida.
22. Reciprocal Easement Agreement by and between Homart Development Co.,
and First Union National Bank of Florida, a national banking
association, dated September 14, 1994, recorded September 14, 1994
in Official Records Book 1985, page 535, Public Records of Collier
County, Florida.
23. Reciprocal Easement Agreement by and between Homart Development Co.,
and Carillon Fuels, Inc., recorded in Official Records Book 2006,
page 1256, Public Records of Collier County, Florida.
24. Rights of tenants, as tenants only, under unrecorded leases set
forth on attached rent roll.
25. Reciprocal Easement Agreement, recorded in O.R. Book 2028, page
2022, Public Records of Collier County, Florida.
26. Claim of Lien in favor of Grahams's Plastering, Inc., recorded in
O.R. Book 1923, page 1573, and Amended Claim of Lien recorded in
O.R. Book 1968, page 1555, Public Records of Collier County,
Florida.
NOTE: An action to foreclose said lien was filed in Case No. 94-4210
Circuit Court of Collier County. A Notice of Lis Pendens recorded in
O.R. Book 1999, page 2343 and amended Lis Pendens was recorded in
O.R. Book 2057, page 1919, Public Records of Collier County,
Florida.
Note: On loan policies, junior and subordinate matters, if any, will not
be reflected in Schedule B.
<PAGE>
A.L.T.A. COMMITMENT
CHICAGO TITLE INSURANCE COMPANY
SCHEDULE B - SECTION 2, continued
Commitment Number FL-Q15-10-100928 4th REVISED
26A. Claim of Lien in favor of CCS of Sarasota, Inc., recorded in O.R.
Book 1920, page 920, Public Records of Collier County, Florida.
NOTE: A cross claim to foreclose said lien was filed in Case No. 94-
4210 Circuit Court of Collier County. A Notice of Lis Pendens
recorded in O.R. Book 2034, page 271, Public Records of Collier
County, Florida.
27. Claim of Lien in favor of Pete's Electric Service, Inc., recorded in
O.R. Book 1960, page 2038, Public Records of Collier County,
Florida.
NOTE: An action to foreclose said Lien was filed in Case No.
94-1516CA Circuit Court for Collier County. A Notice of Lis Pendens
recorded in O.R. Book 2050, page 72, Public Records of Collier
County, Florida.
28. Survey prepared by Wilson, Miller, Barton & Peek, Inc., dated
October 18, 1995 under File No. 4G-1095 discloses the following:
a. Six foot high by 0.60 wide block wall encroachment along the
easterly boundary line to the south of the drainage easement.
b. Unrecorded easements as disclosed by storm drains, water
valves, manhole covers, electric boxes, FPL box, etc., that
are located on the lands and not located within the easements
on the survey.
NOTE:
THE COMPANY HEREBY INSURES THE INSURED AGAINST ANY LOSS SUSTAINED OR
INCURRED BY THE INSURED BY REASON OF THE ENFORCEMENT OF THE LIEN
EXCEPTED AT NUMBER(S) 26, 26A, 27 OF SCHEDULE "B" SO AS TO SECURE
FULL OR PARTIAL SATISFACTION THEREOF OUT OF THE LAND DESCRIBED IN
SCHEDULE "A" AS A LIEN ENCUMBERING OR HAVING PRIORITY OVER THE
ESTATE OR MORTGAGE INSURED BY THIS POLICY, TOGETHER WITH THE
ENFORCEMENT OF ANY SUBSEQUENTLY FILED LIEN WHICH MIGHT RELATE BACK
TO THE AFORENOTED EXCEPTION NUMBER(S) AS A LIEN ENCUMBERING OR
HAVING PRIORITY OVER THE ESTATE OR MORTGAGE INSURED BY THIS POLICY,
AS WELL AS SUCH COSTS, ATTORNEYS' FEES AND EXPENSES IN DEFENSE
AGAINST SUCH ENCUMBRANCE AS PROVIDED IN THE CONDITIONS AND
STIPULATIONS OF THIS POLICY.
29. Taxes for the year 1995 which are due and payable, but not yet
delinquent (owner only).
30. Taxes for the year 1996 and subsequent years which are not yet due
and payable (owner only).
<PAGE>
[DELETED]
<PAGE>
ADDITIONAL SCHEDULE B EXCEPTIONS
(Lehman Loan Policy)
[DELETE]
ASSIGNMENT OF LEASES AND RENTS DATED _________________, 1995 GIVEN
BY COMMUNITY CENTERS ONE L.L.C., A DELAWARE LIMITED LIABILITY
COMPANY TO LEHMAN BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDINGS INC., RECORDED
_________________, 1995, AS/IN _________________.
UCC FIXTURE FILING LISTING COMMUNITY CENTERS ONE L.L.C., A DELAWARE
LIMITED LIABILITY COMPANY, AS DEBTOR AND LEHMAN BROTHERS HOLDINGS
INC., D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS
INC., AS SECURED PARTY, RECORDED _________________, 1995, AS/IN
_________________.
<PAGE>
ENDORSEMENT
Attached to Policy No.
FL-015-10-100928
Issued by
CHICAGO TITLE INSURANCE COMPANY
The Company insures the owner of the indebtedness secured by the insured
mortgage against loss or damage sustained by reason of:
1. Any incorrectness in the assurance that, at Date of Policy:
(a) There are no covenants, conditions or restrictions under which
the lien of the mortgage referred to in Schedule A can be
divested, subordinated or extinguished, or its validity,
priority or enforceability impaired.
(b) Unless expressly excepted in Schedule B:
(1) There are no present violations on the land of any
enforceable covenants, conditions or restrictions, nor
do any existing improvements on the land violate any
building setback lines shown on a plat of subdivision
recorded or filed in the public records.
(2) Any instrument referred to in Schedule B as containing
covenants, conditions or restrictions on the land does
not, in addition, (i) establish an easement on the land;
(ii) provide a lien for liquidated damages; (iii)
provide for a private charge or assessment; (iv) provide
for an option to purchase, a right of first refusal or
the prior approval of a future purchaser or occupant.
(3) There is no encroachment of existing improvements
located on the land onto adjoining land, nor any
encroachment onto the land of existing improvements
located on adjoining land.
(4) There is no encroachment of existing improvements
located on the land onto that portion of the land
subject to any easement excepted in Schedule B.
(5) There are no notices of violation of covenants,
conditions and restrictions relating to environmental
protection recorded or filed in the public records.
2. Any future violation on the land of any existing covenants,
conditions or restrictions occurring prior to the acquisition of
title to the estate or interest in the land by the insured, provided
the violation results in:
(a) invalidity, loss of priority, or unenforceability of the lien
of the insured mortgage; or
(b) loss of title to the estate or interest in the land if the
insured shall acquire title in satisfaction of the
indebtedness secured by the insured mortgage.
3. Damage to existing improvements, including lawns, shrubbery or
trees:
(a) which are located on or encroach upon that portion of the land
subject to any easement excepted in Schedule B, which damage
results from the exercise of the right to maintain the
easement for the purpose for which it was granted or reserved;
(b) resulting from the future exercise of any right to use the
surface of the land for the extraction or development of
minerals excepted from the description of the land or excepted
in Schedule B.
4. Any final court order or judgment requiring the removal from any
land adjoining the land of any encroachment excepted in Schedule B.
5. Any final court order or judgment denying the right to maintain any
existing improvements on the land because of any violation of
covenants, conditions or restrictions or building setback lines
shown on a plat or subdivision recorded or filed in the public
records.
Wherever in this endorsement the words "covenants, conditions or restrictions"
appear, they shall not be deemed to refer to or include the terms, covenants,
conditions or limitations contained in an instrument creating a lease.
As used in paragraphs 1(b)(1) and 5, the words "covenants, conditions or
restrictions" shall not be deemed to refer to or include any covenants,
conditions or restrictions relating to environmental protection.
This endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and any prior endorsements thereto. Except to the extent
expressly stated, it neither modifies any of the terms and provisions of the
policy and any prior endorsements, nor does it extend the effective date of the
policy and any prior endorsements, nor does it increase the face amount thereof.
In Witness Whereof, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be
signed and sealed as of the date of policy shown in Schedule A, the policy to
become valid when countersigned by an authorized signatory.
CHICAGO TITLE INSURANCE COMPANY
By: /s/Richard L. Polla
President
______________________________ [SEAL]
Authorized Signatory
By: /s/Thomas J. Adams
Secretary
Note: This endorsement shall not be
binding until countersigned by an
authorized signatory.
ALTA ENDORSEMENT-FORM 9 (3/27/92)
(Restrictions, Encroachments, Minerals)
<PAGE>
ENDORSEMENT
Attached to and forming a part of the Title Insurance
Policy No. FL-015-10-100928
Issued by
CHICAGO TITLE INSURANCE COMPANY
SURVEY ENDORSEMENT
Company hereby acknowledges the lands described in Schedule A are the same lands
described in the survey prepared by Wilson, Miller, Barton & Peek, Inc. dated
January 1995, last revised November _____, 1995 as File No. 5G-331 however, the
Company does not insure the accuracy or completeness of said survey.
This endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and any prior endorsements thereto. Except to the extent
expressly stated, it neither modifies any of the terms and provision of the
policy and any prior endorsements, nor does it extend the effective date of the
policy and any prior endorsements, nor does it increase the face amount thereof.
CHICAGO TITLE INSURANCE COMPANY
By: ________________________________
Authorized Signatory
<PAGE>
ENDORSEMENT
Attached to Policy No.
FL-015-10-100928
Issued by
CHICAGO TITLE INSURANCE COMPANY
The Company insures the owner of the indebtedness secured by the insured
mortgage against loss or damage sustained by reason of:
1. The invalidity or unenforceability of the lien of the insured
mortgage resulting from the provisions therein which provide for
changes in the rate of interest.
2. Loss of priority of the lien of the insured mortgage as security for
the unpaid principal balance of the loan, together with interest as
changed in accordance with the provisions of the insured mortgage,
which loss of priority is caused by the changes in the rate of
interest.
"Changes in the rate of interest", as used in this endorsement, shall mean only
those changes in the rate of interest calculated pursuant to the formula
provided in the insured mortgage at Date of Policy.
This endorsement does not insure against loss or damage based on (a) usury, or
(b) any consumer credit protection or truth in lending law.
This endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and any prior endorsements thereto except that the
insurance afforded by this endorsement is not subject to Section 3(d) of the
Exclusions From Coverage. Except to the extent expressly stated, it neither
modifies any of the terms and provisions of the policy and any prior
endorsements, nor does it extend the effective date of the policy and any prior
endorsements, nor does it increase the face amount thereof.
CHICAGO TITLE INSURANCE COMPANY
By: /s/Richard L. Polla
President
______________________________ [SEAL]
Authorized Signatory
By: /s/Thomas J. Adams
Secretary
Note: This endorsement shall not be
binding until countersigned by an
authorized signatory.
ALTA ENDORSEMENT-FORM 6
CLTA Form 111.5 (Rev. 3/13/87)
(Variable Rate Mortgage (7/1/97)
<PAGE>
Carillon Place
ENDORSEMENT
ATTACHED TO AND FORMING A PART OF
LOAN POLICY NO.
ISSUED BY
CHICAGO TITLE INSURANCE COMPANY
SPECIAL ENDORSEMENT
THE COMPANY INSURES THE INSURED AGAINST LOSS OR DAMAGE SUSTAINED BY REASON OF
THE PRIORITY OF ANY LIEN FOR CHARGES AND ASSESSMENTS AT DATE OF POLICY IN FAVOR
OF PARTIES WHICH ARE PROVIDED FOR IN ANY DOCUMENTS REFERRED TO IN SCHEDULE "B"
OVER THE LIEN OF THE INSURED MORTGAGE IDENTIFIED IN SCHEDULE "A".
THIS ENDORSEMENT IS MADE A PART OF THE POLICY. IT IS SUBJECT TO ALL THE TERMS OF
THE POLICY AND PRIOR ENDORSEMENTS. EXCEPT AS EXPRESSLY STATED ON THIS
ENDORSEMENT, THE TERMS, DATES AND AMOUNT OF THE POLICY AND PRIOR ENDORSEMENTS
ARE NOT CHANGED.
DATED
CHICAGO TITLE INSURANCE COMPANY
- -----------------------
AUTHORIZED SIGNATORY
<PAGE>
Carillon Place
ENDORSEMENT
Attached to and forming a part of
Title Insurance Policy No.
FL-015-10-100928
Issued by
CHICAGO TITLE INSURANCE COMPANY
LOCATION ENDORSEMENT 6
The Company hereby insures the insured against loss or damage which the insured
shall sustain by reason of any inaccuracy in the following assurance:
Said land is contiguous to a physically open street known as Airport Road
North and Pine Ridge Road
This endorsement is made a part of the policy or commitment and is subject to
all the terms and provisions thereof and of any prior endorsements thereto.
Except to the extent expressly stated, it neither modifies any of the terms and
provisions of the policy or commitment and prior endorsements, if any, nor does
it extend the effect date of the policy or commitment and prior endorsements or
increase the face amount thereof.
CHICAGO TITLE INSURANCE COMPANY
/s/ Alvin W. Long
President
CHICAGO TITLE INSURANCE COMPANY
SEAL
- -------------------------- ATTEST
Authorized Signatory /s/ Chester C. [ILLEGIBLE]
Secretary
Note: This endorsement shall not be valid or binding until countersigned by an
authorized signatory.
C.T.I. Co. Location Endorsement 6
(Owner's or Loan Policy - Contiguity of Land and Open Street)
LOC 6
<PAGE>
ENDORSEMENT
Attached to and forming a part of the Title Insurance
Policy No. FL-015-10-100928
Issued by
CHICAGO TITLE INSURANCE COMPANY
LOCATION ENDORSEMENT 4
The Company hereby insures the Insured against loss or damage which the Insured
shall sustain by reason of any inaccuracy in the following assurance:
Parcel 1 and Parcel 2, described in Schedule A, are contiguous to each other
and, taken as a tract, constitute one parcel of land.
The endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and of any prior endorsements thereto. Except to the
extent expressly stated, it neither modifies any of the terms and provision of
the policy and any prior endorsements, nor does it extend the effective date of
the policy and any prior endorsements, nor does it increase the face amount
thereof.
CHICAGO TITLE INSURANCE COMPANY
BY:
--------------------------
Authorized Signatory
<PAGE>
[ALTA LOGO]
CONSULTING CORP.
August 25, 1995
Joan U. Allgood
Vice President/General Counsel
DEVELOPERS DIVERSIFIED
REALTY CORPORATION
34555 Chagrin Blvd.
Moreland Hills, OH 44022
RE: REVIEW OF ENVIRONMENTAL REPORTS FOR CARILLON PLACE, NAPLES, FLORIDA - ALTA
PROJECT NO. 95063
Dear Joan:
As requested, Alta Consulting Corp. (Alta) reviewed the following environmental
reports for the Carillon Place Naples, Florida (the previous environmental
reports were attachments to the current report):
1. Phase I Environmental Site Assessment, Carillon Place Naples, Florida, PSI
Project No. 878-5F330, prepared by Professional Service Industries, Inc.,
for Sears, Roebuck & Co. and Homart Development Co., dated April 28, 1995;
and
Phase I, Level II Environmental Audit of the 32 Acre Site at the
Intersection of Pine Ridge/Airport Roads, Collier County, Florida, M&A
Report No. CE1-756, prepared by Messimer & Associates, Inc., for Wilma
Southeast, Inc., dated August, 1991.
The subject property is a 32 acre tract of land. The site which includes a large
single story building and a smaller building (Boston Chicken) was developed in
1993. Historical aerial photographs show that the area was used for agricultural
purposes between 1973 and 1993. The northwest corner of the property was used
for trailer storage in 1981.
Two environmental assessments were prepared by Professional Service Industries,
Inc., (PSI) and Messimer & Associates, Inc. in 1995 and 1991, respectively. The
PSI report indicated that a construction company located to the southwest stored
construction equipment, drums and ASTs on the ground surface. In addition, a
significant stain was observed on the pavement around a pad mounted transformer.
The transformer is owned by Florida Power & Light Company and was determined to
be non-PCB containing. The M&A report identified two areas that were potential
sources of contamination: 1) empty fuel and chemical containers found near an
electric pump; and 2) the former retail sales area at the northwest comer of the
subject property where
4 CORPORATION CENTER DRIVE o BROADVIEW HTS., OHIO 44147 o
(216) 838-0550 FAX (216) 838-0528
<PAGE>
Joan U. Allgood
DEVELOPERS DIVERSIFIED
REALTY CORPORATION
August 25, 1995
Page 2
stressed vegetation and an empty drum were found. A Phase II was performed to
investigate these concerns and no contamination was found.
Based on our review of the environmental reports listed above, Alta makes the
following recommendations:
1. The Phase I ESA, dated April 10, 1995, was prepared in accordance with the
Standard Practice for Environmental Site Assessments: Phase I
Environmental Site Assessment Process (ASTM E1527-94). Developers
Diversified Realty Corporation should request a Reliance Letter from
Homart Development Co. and PSI that names Developers Diversified Realty
Corporation and its lenders.
Thank you for the opportunity to be of service to Developers Diversified Realty
Corporation. Contact me at (216) 838-0550 if you have any questions about this
site.
Sincerely,
ALTA CONSULTING CORP.
/s/ John T. Blackman
John T. Blackman
President
ALTA
CONSULTING CORP.
<PAGE>
CARILLON PLACE (NAPLES) -- C&W 7/97
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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 5010 1 50,540 5/94 4/14 - 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
WINN DIXIE 1 REAL ESTATE TAXES
LIAB INSURANCE
1-60 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
REAL ESTATE TAXES
LIAB INSURANCE
2-60 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
REAL ESTATE TAXES
LIAB INSURANCE
3-60 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
REAL ESTATE TAXES
LIAB INSURANCE
4-60 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
REAL ESTATE TAXES
LIAB INSURANCE
5-60 7.99 403,960 1.00 UNLIMITED 11,814 CAM-OUT-FIR+GEL
REAL ESTATE TAXES
LIAB INSURANCE
# 2-SUITE 5018 1 26,250 4/94 3/09 - 8.75 229,688 2.00 UNLIMITED 8,773 CAM-OUT-FIR+GEL 5
TJ MAXX 1 4/04 10,653 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 11.15 292,687 2.00 UNLIMITED 11,593 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
2-60 11.95 313,687 2.00 UNLIMITED 12,533 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
3-60 12.75 334,687 2.00 UNLIMITED 13,473 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
4-60 13.55 355,687 2.00 UNLIMITED 14,413 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 3-SUITE 5022A 1 6,650 10/97 3/09 - 8.75 58,187 NATURAL CAM-OUT-FIR+GEL 5
TJ MAXX EXPANSION 1 10/99 9.55 63,508 REAL ESTATE TAXES
10/04 10.35 68,827 PROPERTY INSURANCE
LIAB INSURANCE
1-60 11.15 74,148 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-60 11.95 79,468 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
3-60 12.75 84,788 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
4-60 13.55 90,108 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 4-SUITE 5022B 2 3,500 10/97 9/02 - 15.00 52,500 4.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL+MG 15
DOLLAR TREE 4 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 15.00 52,500 4.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL+MG 15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 5-SUITE 5052 1 50,061 4/94 2/15 - 8.74 437,500 NATURAL CAM-OUT-FIR+GEL 5
SERVICE MER'DISE 1 REAL ESTATE TAXES
LIAB INSURANCE
1-60 8.74 437,500 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
LIAB INSURANCE
2-60 8.74 437,500 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
LIAB INSURANCE
3-60 8.74 437,500 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
LIAB INSURANCE
4-60 8.74 437,500 NATURAL CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
LIAB INSURANCE
# 6-SUITE 5054 1 25,500 5/94 1/05 - 9.75 248,625 2.00 UNLIMITED 8,000 CAM-OUT-FIR+GEL 10
ROSS DRESS 1 2/99 10.25 261,375 2/99 9,200 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 11.25 286,875 2.00 UNLIMITED 10,125 CAM-OUT-FIR+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
2-60 12.25 312,375 2.00 UNLIMITED 11,025 CAM-OUT-FIR+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3-60 13.25 337,875 2.00 UNLIMITED 11,925 CAM-OUT-FIR+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
4-60 14.25 363,375 2.00 UNLIMITED 12,825 CAM-OUT-FIR+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 7-SUITE 5056 1 21,285 6/94 1/15 - 10.44 222,138 NATURAL CAM-OUT-ELE-FIR 10
CIRCUIT CITY 1 2/00 11.69 248,795 REAL ESTATE TAXES
2/05 13.09 278,650 LIAB INSURANCE
2/10 14.66 312,088
1-60 14.66 312,088 NATURAL CAM-OUT-ELE-FIR 10
REAL ESTATE TAXES
LIAB INSURANCE
2-60 14.66 312,088 NATURAL CAM-OUT-ELE-FIR 10
REAL ESTATE TAXES
LIAB INSURANCE
3-60 14.66 312,088 NATURAL CAM-OUT-ELE-FIR 10
REAL ESTATE TAXES
LIAB INSURANCE
4-60 14.66 312,088 NATURAL CAM-OUT-ELE-FIR 10
REAL ESTATE TAXES
LIAB INSURANCE
# 8-SUITE 5062 2 9,112 12/94 2/05 - 16.80 153,082 NATURAL CAM-OUT-GFI+GEL 15
PIER 1 IMPORTS 5 11/99 18.48 168,390 REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
1-60 21.25 193,630 NATURAL CAM-OUT-GFI+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
2-60 24.44 222,697 NATURAL CAM-OUT-GFI+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
3-60 28.11 256,138 NATURAL CAM-OUT-GFI+GEL 15
REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
# 9-SUITE 5066 1 23,500 3/94 1/10 - 10.25 240,875 1.00 UNLIMITED 15,000 CAM-OUT-FIR+GEL 5
OFFICEMAX 1 2/99 10.75 252,624 2/99 15,732 REAL ESTATE TAXES
2/04 11.25 264,375 2/04 16,463 PROPERTY INSURANCE
LIAB INSURANCE
1-60 11.75 276,125 1.00 UNLIMITED 17,195 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-60 12.25 287,875 1.00 UNLIMITED 17,927 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
3-60 12.75 299,625 1.00 UNLIMITED 18,659 CAM-OUT-FIR+GEL 5
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 10-SUITE 5070 3 8,719 3/94 2/14 - 13.68 119,250 2.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL
ECKERD DRUGS 5 5/99 14.45 126,000 REAL ESTATE TAXES
5/04 14.97 130,500 PROPERTY INSURANCE
5/09 15.48 135,000 LIAB INSURANCE
1-60 16.26 141,750 2.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
2-60 17.03 148,500 2.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
3-60 17.81 155,250 2.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
4-60 17.81 155,250 2.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 11-SUITE 5072 3 3,000 5/94 4/04 - 15.90 47,700 5.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL 10
PAYLESS SHOESOURCE 4 5/99 17.89 53,663 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 20.12 60,370 5.00 UNLIMITED NATURAL CAM-OUT-FIR+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 12-SUITE 5014 2 1,330 5/94 4/99 - 19.67 26,161 4.00 UNLIMITED 632 CAM-OUT+GEXP+MG 15
GENERAL NUTRITION 3 5/98 20.26 26,945 REAL ESTATE TAXES
PROP INS W/15%
LIAB INS W/15%
1-60 20.87 27,757 4.00 UNLIMITED 632 CAM-OUT+GEXP+MG 15
5/00 21.49 28,581 REAL ESTATE TAXES
5/01 22.14 29,446 PROP INS W/15%
5/02 22.80 30,324 LIAB INS W/15%
5/03 23.49 31,242
2-60 24.20 32,186 4.00 UNLIMITED 632 CAM-OUT+GEXP+MG 15
5/05 24.92 33,144 REAL ESTATE TAXES
5/06 25.67 34,141 PROP INS W/15%
5/07 26.44 35,165 LIAB INS W/15%
5/08 27.23 36,216
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 13-SUITE 5016 - 1,330 6/94 9/97 - 19.67 26,161 NATURAL CAM-OUT+GEXP+MG 15
PAPA JOHN'S (V)* - RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
# 14-SUITE 5016 2 1,330 10/97 9/00 - 18.00 23,940 NATURAL CAM-OUT+GEXP+MG 15
DOMINOS PIZZA (N)* 3 10/98 18.50 24,605 REAL ESTATE TAXES
10/99 19.00 25,270 PROPERTY INSURANCE
LIAB INSURANCE
1-36 19.50 25,935 NATURAL CAM-OUT+GEXP+MG 15
10/01 20.00 26,600 REAL ESTATE TAXES
10/02 20.50 27,265 PROPERTY INSURANCE
LIAB INSURANCE
# 15-SUITE 5030 2 1,500 4/94 3/97 - 0.00 0 3.00 UNLIMITED 815 CAM-OUT+GEXP+MG 15
SALLY BEAUTY 3 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 16.50 24,750 3.00 UNLIMITED 815 CAM-OUT+GEXP+MG 15
4/99 17.00 25,500 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
2-60 17.50 26,250 3.00 UNLIMITED 815 CAM-OUT+GEXP+MG 15
4/04 18.50 27,750 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 16-SUITE 5032 2 3,600 5/94 4/99 - 18.04 64,944 6.00 UNLIMITED 1,020 CAM-OUT+GEXP+MG 15
VIDEO WAY 4 5/98 18.58 66,888 RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
1-60 19.14 68,904 6.00 UNLIMITED 1,020 CAM-OUT+GEXP+MG 15
5/00 19.71 70,956 RE TAXES W/15%
5/01 20.31 73,116 PROP INS W/15%
5/02 20.91 75,276 LIAB INS W/15%
5/03 21.54 77,544
# 17-SUITE 5038 2 918 7/97 6/00 - 18.00 16,524 NATURAL CAM-OUT+GEXP+MG 15
TROPICAL STORM 2 7/98 18.50 16,983 REAL ESTATE TAXES
7/99 19.00 17,442 PROPERTY INSURANCE
LIAB INSURANCE
1-36 19.50 17,901 NATURAL CAM-OUT+GEXP+MG 15
7/01 20.00 18,360 REAL ESTATE TAXES
7/02 20.50 18,819 PROPERTY INSURANCE
LIAB INSURANCE
# 18-SUITE 5042 2 4,020 4/94 3/04 - 14.00 56,280 3.00 UNLIMITED 1,251 CAM-OUT+GFI+GEL 10
CLOTHESTIME 4 4/99 16.10 64,722 4/99 1,438 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-60 18.51 74,430 3.00 UNLIMITED 1,654 CAM-OUT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-60 21.29 85,585 3.00 UNLIMITED 1,902 CAM-OUT+GFI+GEL 10
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 19-SUITE 5046 2 1,541 10/94 9/99 - 19.10 29,427 6.00 UNLIMITED NATURAL CAM-OUT+GEXP+MG 15
SUPERCUTS 3 10/97 19.67 30,311 RE TAXES W/15%
10/98 20.26 31,220 PROP INS W/15%
LIAB INS W/15%
1-60 20.87 32,156 6.00 UNLIMITED NATURAL CAM-OUT+GEXP+MG 15
10/00 21.49 33,121 RE TAXES W/15%
10/01 22.14 34,114 PROP INS W/15%
10/02 22.80 35,138 LIAB INS W/15%
10/03 23.49 36,192
# 20-SUITE 5048 2 3,869 10/94 1/98 - 14.00 54,165 4.00 UNLIMITED NATURAL CAM-OUT+GEXP+MG 15
COCONUTS MUSIC 4 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
1-84 14.00 54,165 4.00 UNLIMITED NATURAL CAM-OUT+GEXP+MG 15
2/00 16.00 61,904 REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
2-60 18.00 69,642 4.00 UNLIMITED NATURAL CAM-OUT+GEXP+MG 15
REAL ESTATE TAXES
PROPERTY INSURANCE
LIAB INSURANCE
# 21-SUITE 5034 2 900 8/94 7/99 - 18.04 16,232 NATURAL CAM-OUT+GEXP+MG 15
A TO Z TRAVEL 2 8/98 18.58 16,719 RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
1-60 19.13 17,220 NATURAL CAM-OUT+GEXP+MG 15
8/00 19.71 17,736 RE TAXES W/15%
8/01 20.30 18,269 PROP INS W/15%
8/02 20.91 18,817 LIAB INS W/15%
8/03 21.53 19,381
# 22-SUITE 5036 2 1,024 9/94 8/99 - 19.10 19,558 NATURAL CAM-OUT+GEXP+MG 15
TCBY YOGURT 3 9/97 19.67 20,143 RE TAXES W/15%
9/98 20.56 21,053 PROP INS W/15%
LIAB INS W/15%
1-60 21.18 21,688 NATURAL CAM-OUT+GEXP+MG 15
9/00 21.81 22,333 RE TAXES W/15%
9/01 22.53 23,069 PROP INS W/15%
9/02 23.14 23,695 LIAB INS W/15%
9/03 23.83 24,402
# 23-SUITE 5060 2 12,000 1/95 12/99 - 12.00 144,000 5.00 UNLIMITED 3,600 CAM-OUT+GEXP+MG 15
FLORAL SUPPLY 6 RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
1-60 13.18 158,112 5.00 UNLIMITED 3,960 CAM-OUT+GEXP+MG 15
6/02 14.12 169,401 6/02 4,030 RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
</TABLE>
<PAGE>
<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) RECOVERIES
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-60 15.76 189,120 5.00 UNLIMITED 4,540 CAM-OUT+GEXP+MG 15
RE TAXES W/15%
PROP INS W/15%
LIAB INS W/15%
# 24-SUITE 5026 2 3,010 9/95 8/00 - 18.02 54,240 6.00 UNLIMITED 878 CAM-OUT+GEXP+MG 15
BOW REGARDS 4 9/97 18.56 55,866 REAL ESTATE TAXES
9/98 19.12 57,551 PROPERTY INSURANCE
9/99 19.69 59,267 LIAB INSURANCE
1-60 20.29 61,064 6.00 UNLIMITED 878 CAM-OUT+GEXP+MG 15
9/01 20.90 62,897 REAL ESTATE TAXES
9/02 21.52 64,783 PROPERTY INSURANCE
9/03 22.17 66,727 LIAB INSURANCE
9/04 22.83 68,729
# 25-SUITE 5076 4 3,400 10/94 9/40 - 0.00 0 NATURAL CAM-FIFTH THIRD
FIFTH THIRD BANK 8
# 26-SUITE 5094 4 4,500 10/94 9/40 - 0.00 0 NATURAL CAM-FIFTH UNION
FIRST UNION BANK 8
# 27-SUITE 5096 4 2,450 11/94 10/40 - 0.00 0 NATURAL CAM-CARILLON FUEL
CARILLON FUELS 8
# 28-SUITE 5095 4 5,050 3/95 2/40 - 0.00 0 NATURAL CAM-APPLEBEE'S
APPLEBEE'S 8
# 29-SUITE 5088 3 3,279 8/94 7/04 - 18.30 60,000 NATURAL CAM-BOSTON CHICKEN
BOSTON CHICKEN 7 8/99 21.04 69,000 REAL ESTATE TAXES
1-60 24.20 79,350 NATURAL CAM-BOSTON CHICKEN
REAL ESTATE TAXES
2-60 27.83 91,250 NATURAL CAM-BOSTON CHICKEN
REAL ESTATE TAXES
3-60 32.02 105,000 NATURAL CAM-BOSTON CHICKEN
REAL ESTATE TAXES
-------
283,168
=======
</TABLE>
<PAGE>
CARILLON PLACE (NAPLES) -- C&W 7/97
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF CARILLON PLACE (NAPLES) -- C&W 7/97 BEGINNING 8/1997
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
TGLA
DESCRIBED AS TOTAL CENTER GLA
1997 VALUE - 281,838
1998 VALUE - 281,838
THEREAFTER - CONSTANT
OCCA
DESCRIBED AS TOTAL CENTER OCCUPIED AREA
1997 VALUE - 273,767
1998 VALUE - 281,838
1999 VALUE - 281,838
2000 VALUE - 281,838
2001 VALUE - 281,838
2002 VALUE - 281,838
2003 VALUE - 281,463
2004 VALUE - 280,661
2005 VALUE - 281,336
2006 VALUE - 281,838
2007 VALUE - 281,005
2008 VALUE - 281,574
2009 VALUE - 279,291
2010 VALUE - 264,331
2011 VALUE - 264,639
THEREAFTER - CONSTANT
OUTG
DESCRIBED AS OUTPARCEL GLA
1997 VALUE - 18,679
1998 VALUE - 18,679
THEREAFTER - CONSTANT
CMGL
DESCRIBED AS GLA LESS OUTPARCELS (CAM AND LIAB GLA ALLOCATION)
+100.0% OF TGLA-100% OF OUTG
BMGL
DESCRIBED AS BOSTON MARKET GLA
1997 VALUE - 3,279
1998 VALUE - 3,279
THEREAFTER - CONSTANT
TXGL
DESCRIBED AS TAX GLA ALLOCATION (EXCLUDES OUTPARCELS EXCEPT BOSTON MARKET)
+100.0% OF TGLA-100.0% OF OUTG
+100.0% OF BMGL
PIEX
DESCRIBED AS GLA EXCLUDED FOR PROP INS ALLOCATION (OUTPARCELS, WINN DIXIE,
SERVICE MERCH, CIRCUITY CITY)
1997 VALUE - 140,565
1998 VALUE - 140,565
THEREAFTER - CONSTANT
PIGL
DESCRIBED AS GLA FOR PROP INS ALLOCATION
+100.0% OF TGLA-100.0 OF PIEX
<PAGE>
PAGE 2
GROWTH RATES
- ------------
RENG
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXPG
1997 VALUE - 3.50
THEREAFTER - CONSTANT
SALG
1997 VALUE - 3.50
THEREAFTER - CONSTANT
CPIG
1997 VALUE - 3.50
THEREAFTER - CONSTANT
TAXG
1997 VALUE - 3.50
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKT1
1997 VALUE - 9.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT2
1997 VALUE - 18.50
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT3
1997 VALUE - 17.50
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT4
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT5
1997 VALUE - 14.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT6
1997 VALUE - 11.50
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT7
1997 VALUE - 12.00
THEREAFTER - GROWING AT GROWTH RATE RENG
ALTN
1997 VALUE - 6.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALTR
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALTB
+70.0% OF ALTR +3O.0% OF ALTN
COMN
1997 VALUE - 3.50
<PAGE>
PAGE 3
1998 VALUE - 3.50
1999 VALUE - 3.50
2000 VALUE - 3.50
2001 VALUE - 3.50
2002 VALUE - 4.00
2003 VALUE - 4.00
2004 VALUE - 4.00
2005 VALUE - 4.00
2006 VALUE - 4.00
2007 VALUE - 4.50
THEREAFTER - CONSTANT
COMR
1997 VALUE - 1.75
1998 VALUE - 1.75
1999 VALUE - 1.75
2000 VALUE - 1.75
2001 VALUE - 1.75
2002 VALUE - 2.00
2003 VALUE - 2.00
2004 VALUE - 2.00
2005 VALUE - 2.00
2006 VALUE - 2.00
2007 VALUE - 2.25
THEREAFTER - CONSTANT
COMB
+70.0% OF COMR +30.0% OF COMN
RESX
1997 VALUE - 0.15
THEREAFTER - GROWING AT GROWTH RATE EXPG
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
MANAGEMENT FEES , REFERRED TO AS MGMT
DESCRIBED AS MANAGEMENT FEES
AN INFORMATIONAL EXPENSE
1997 VALUE - 138,523
1998 VALUE - 141,128
1999 VALUE - 144,022
2000 VALUE - 148,459
2001 VALUE - 149,251
2002 VALUE - 150,274
2003 VALUE - 150,836
2004 VALUE - 152,208
2005 VALUE - 159,217
2006 VALUE - 160,617
2007 VALUE - 160,705
2008 VALUE - 162,704
2009 VALUE - 164,393
2010 VALUE - 159,356
2011 VALUE - 160,914
THEREAFTER - CONSTANT
CAMX-COMMON AREAS , REFERRED TO AS CAMX
DESCRIBED AS TOTAL CENTER CAM EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 298,160
THEREAFTER - GROWING AT GROWTH RATE EXEG
<PAGE>
PAGE 4
EXT ELECTRIC , REFERRED TO AS ELEC
DESCRIBED AS EXTERIOR ELECTRIC EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 33,500
THEREAFTER - GROWING AT GROWTH RATE EXPG
FIRE PROTECTION , REFERRED TO AS FIRE
DESCRIBED AS FIRE PROTECTION EXPENSE
AN INFORMATIONAL EXPENSE
1997 VALUE - 2,600
THEREAFTER - GROWING AT GROWTH RATE EXPG
GROSS ELECTRIC , REFERRED TO AS GELE
DESCRIBED AS GROSSED UP EXT ELECTRIC EXPENSE (/.9245)
AN INFORMATIONAL EXPENSE
1997 VALUE - 36,236
THEREAFTER - GROWING AT GROWTH RATE EXPG
GROSS FIRE , REFERRED TO AS GFIR
DESCRIBED AS GROSSED UP FIRE PROTECTION (/.20381)
AN INFORMATIONAL EXPENSE
1997 VALUE - 12,757
THEREAFTER - GROWING AT GROWTH RATE EXPG
OUTPARCEL CONT , REFERRED TO AS OUTC
DESCRIBED AS OUTPARCEL CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1997 VALUE - 17,440
THEREAFTER - CONSTANT
CAM-OUT-ELE-FIR , REFERRED TO AS 1CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT LESS ELECTRIC AND FIRE
AN INFORMATIONAL EXPENSE
+100.0% OF CAMX-100.0% OF ELEC
- -100.0% OF FIRE-100.0% OF OUTC
CAM*OUT-ELE-FIR 10, REFERRED TO AS 1C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT LESS ELECTRIC AND FIRE W/l0% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 1CAM
CAM-OUT-FIR+GEL , REFERRED TO AS 2CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT LESS FIRE PLUS GROSS ELECTRIC
AN INFORMATIONAL EXPENSE
+100.0% OF CAMX-100.0% OF ELEC
- -100.0% OF FIRE+l00.0% OF GELE
- -100.0% OF OUTC
CAM-OUT-FIR+GEL 5 , REFERRED TO AS 2C05
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT LESS FIRE PLUS GROSS ELECTRIC W/
5% ADMIN
AN INFORMATIONAL EXPENSE
+105.0% OF 2CAM
CAM-OUT-FIR+GEL 10, REFERRED TO AS 2C10
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT LESS FIRE PLUS GROSS ELECTRIC W/
10% ADMIN
AN INFORMATIONAL EXPENSE
+110.0% OF 2CAM
CAM-OUT+GFI+GEL , REFERRED TO AS 3CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSS FIRE AND GROSS ELECTRIC
AN INFORMATIONAL EXPENSE
+100.0% OF CAMX-100.0% OF ELEC
- -110.0% OF FIRE+100.0% OF GELE
+100.0% OF GFIR-100.0% OF OUTC
CAM-OUT+GFI+GEL 10, REFERRED TO AS 3C10
<PAGE>
PAGE 5
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSS FIRE AND GROSS ELECTRIC
W/10% ADMIN
AND INFORMATIONAL EXPENSE
+110% OF 3CAM
CAM-OUT+GFI+GEL 15, REFERRED TO AS 3C15
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSS FIRE AND GROSS ELECTRIC
W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115% OF 3CAM
CAM-OUT+GEXP+MG , REFERRED TO AS 4CAM
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSS FIRE AND ELECTRIC PLUS
MGMT FEE
AN INFORMATIONAL EXPENSE
+100.0% OF CAMX-100.0% OF ELEC
- -100.0% OF FIRE+100.0% OF GELE
+100.0% OF GFIR-100.0 OF OUTC
+100.0% OF MGMT
CAM-OUT+GEXP+MG 15, REFERRED TO AS 4C15
DESCRIBED AS TOTAL CAM LESS OUTPARCEL CONT PLUS GROSS FIRE AND ELECTRIC PLUS
MGMT FEES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF 4CAM
TAXX-R.E. TAXES , REFERRED TO AS TAXX
DESCRIBED AS REAL ESTATE TAX EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 210,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
RE TAXES W/15%, REFERRED TO AS RE15
DESCRIBED AS REAL ESTATE TAXES W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF TAXX
PROPERTY INSURANCE, REFERRED TO AS PROP
DESCRIBED AS PROPERTY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 14,127
THEREAFTER - GROWING AT GROWTH RATE EXPG
LIAB INSURANCE , REFERRED TO AS LIAB
DESCRIBED AS LIABILITY INSURANCE
AN INFORMATIONAL EXPENSE
1997 VALUE - 52,632
THEREAFTER - GROWING AT GROWTH RATE EXPG
INSX-INSURANCE , REFERRED TO AS INSX
DESCRIBED AS TOTAL CENTER INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF PROP+100.0% OF LIAB
PROP INS W/15% , REFERRED TO AS pI15
DESCRIBED AS PROPERTY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF PROP
LIAB INS W/15% , REFERRED TO AS LI15
DESCRIBED AS LIABILITY INSURANCE W/15% ADMIN
AN INFORMATIONAL EXPENSE
+115.0% OF LIAB
MISX-MISCELLANEOUS, REFERRED TO AS MISX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 20,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
<PAGE>
PAGE 6
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 4.00
1998 VALUE - 4.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 5.00
1998 VALUE - 5.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.O00% 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 7
COMMON AREA MAINTENANCE POOL
- ----------------------------
N0NE
CAPITAL EXPENDITURES
- --------------------
STURCTURAL RESERVE
MARKET RATE RESX MULTIPLIED BY AREA MEASURE TXGL
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - ANCHORS
2 - IN LINE SHOPS
3 - OUTPARCEL (OWNED)
4 - OUTPARCEL (SOLD)
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - ANCHORS
2 - IN LINE < 1000
3 - IN LINE 1000-2999
4 - IN LINE 3000-4999
5 - IN LINE 5000-10000
6 - IN LINE > 10000
7 - OUTPARCEL (OWNED)
8 - OUTPARCEL (SOLD)
COST CENTERS
- ------------
1 - CAM
2 - REAL ESTATE TAXES
3 - INSURANCE
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
<PAGE>
PAGE 8
GLOBAL RECOVERIES
- -----------------
NONE
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/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>
CARILLON PLACE (NAPLES) -- C&W 7/97
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- -------------------------------------- ------------- ------------- -------------
1 - ANCHORS
# 1 - SUITE 5010 WINN DIXIE 50,540 5/1994 4/2014
# 2 - SUITE 5018 TJ MAXX 26,250 4/1994 3/2009
# 3 - SUITE 5022A TJ MAXX EXPANSION 6,650 10/1997 3/2009
# 5 - SUITE 5052 SERVICE MER'DISE 50,061 4/1994 2/2015
# 6 - SUITE 5054 ROSS DRESS 25,500 5/1994 1/2005
# 7 - SUITE 5056 CIRCUIT CITY 21,285 6/1994 1/2015
# 9 - SUITE 5066 OFFICEMAX 23,500 3/1994 1/2010
-------
7 TENANTS 203,786
2 - IN LINE SHOPS
# 4 - SUITE 5022B DOLLAR TREE 3,500 10/1997 9/2002
# 8 - SUITE 5062 PIER 1 IMPORTS 9,112 12/1994 2/2005
# 12 - SUITE 5014 GENERAL NUTRITION 1,330 5/1994 4/1999
# 14 - SUITE 5016 DOMINOS PIZZA (N)* 1,330 10/1997 9/2000
# 15 - SUITE 5030 SALLY BEAUTY 1,500 4/1994 3/1997
# 16 - SUITE 5032 VIDEO WAY 3,600 5/1994 4/1999
# 17 - SUITE 5038 TROPICAL STORM 918 7/1997 6/2000
# 18 - SUITE 5042 CLOTHESTIME 4,020 4/1994 3/2004
# 19 - SUITE 5046 SUPERCUTS 1,541 10/1994 9/1999
# 20 - SUITE 5048 COCONUTS MUSIC 3,869 10/1994 1/1998
# 21 - SUITE 5034 A TO Z TRAVEL 900 8/1994 7/1999
# 22 - SUITE 5036 TCBY YOGURT 1,024 9/1994 8/1999
# 23 - SUITE 5060 FLORAL SUPPLY 12,000 1/1995 12/1999
# 24 - SUITE 5026 BOW REGARDS 3,010 9/1995 8/2000
-------
14 TENANTS 47,654
3 - OUTPARCEL (OWNED)
# 10 - SUITE 5070 ECKERD DRUGS 8,719 3/1994 2/2014
# 11 - SUITE 5072 PAYLESS SHOESOURCE 3,000 5/1994 4/2004
# 29 - SUITE 5088 BOSTON CHICKEN 3,279 8/1994 7/2004
-------
3 TENANTS 14,998
4 - OUTPARCEL (SOLD)
# 25 - SUITE 5076 FIFTH THIRD BANK 3,400 10/1994 9/2040
# 26 - SUITE 5094 FIRST UNION BANK 4,500 10/1994 9/2040
# 27 - SUITE 5096 CARILLON FUELS 2,450 11/1994 10/2040
# 28 - SUITE 5095 APPLEBEE'S 5,050 3/1995 2/2040
-------
4 TENANTS 15,400
0 - UNASSIGNED
# 13 - SUITE 5016 PAPA JOHN'S (V)* 1,330 6/1994 9/1997
-------
1 TENANTS 1,130
-------
29 TENANTS 283,168
=======
<PAGE>
CARILLON PLACE (NAPLES) -- C&W 7/97
EXPIRATION REPORT
YEARS 1998 TO 2008, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- --------------------------------------------------------------------------------
# 13-SUITE 5016 INITIAL
PAPA JOHN'S (V)* 1,330 9/1997 19.67 3.13 22.80 0.00
------ ----- ---- ----- -----
1 FY 98 EXPIRATIONS 1,330 19.67 3.13 22.80 0.00
# 17-SUITE 5038 OPTION 1
TROPICAL STORM 918 6/2003 20.50 3.58 24.08 22.74
------ ----- ---- ----- -----
1 FYlO3 EXPIRATIONS 918 20.50 3.58 24.08 22.74
------ ----- ---- ----- -----
2 CUMULATIVE EXPS 2,248 20.01 3.31 23.32 9.29
# 14-SUITE 5016 OPTION 1
DOMINO'S PIZZA 1,330 9/2003 20.50 3.59 24.09 21.51
# 16-SUITE 5032 OPTION 1
VIDEO WAY 3,600 4/2004 21.54 3.91 25.45 19.08
# 21-SUITE 5034 OPTION 1
A TO Z TRAVEL 900 7/2004 21.53 3.91 25.44 23.54
------ ----- ---- ----- -----
3 FYlO4 EXPIRATIONS 5,830 21.30 3.84 25.14 20.33
------ ----- ---- ----- -----
5 CUMULATIVE EXPS 8,078 20.94 3.69 24.63 17.25
# 22-SUITE 5036 OPTION 1
TCBY YOGURT 1,024 8/2004 23.84 3.90 27.74 22.26
# 19-SUITE 5046 OPTION 1
SUPERCUTS 1,541 9/2004 23.49 3.92 27.40 22.26
------ ----- ---- ----- -----
2 FY105 EXPIRATIONS 2,565 23.63 3.91 27.54 22.26
------ ----- ---- ----- -----
7 CUMULATIVE EXPS 10,643 21.59 3.75 25.33 18.46
# 24-SUITE 5026 OPTION 1
BOW REGARDS 3,010 8/2005 22.83 3.84 26.67 19.75
------ ----- ---- ----- -----
1 FY1O6 EXPIRATIONS 3,010 22.83 3.84 26.67 19.75
------ ----- ---- ----- -----
8 CUMULATIVE EXPS 13,653 21.86 3.77 25.63 18.75
# 15-SUITE 5030 OPTION 2
SALLY BEAUTY 1,500 3/2007 18.50 4.08 22.58 24.69
------ ----- ---- ----- -----
1 FY107 EXPIRATIONS 1,500 18.50 4.08 22.58 24.69
------ ----- ---- ----- -----
9 CUMULATIVE EXPS 15,153 21.53 3.80 25.33 19.33
<PAGE>
PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- --------------------------------------------------------------------------------
# 4 SUITE 5022B OPTION
DOLLAR TREE 3,500 9/2007 15.00 3.85 18.85 21.16
------ ----- ---- ----- -----
1 FY1O8 EXPIRATIONS 3,500 15.00 3.85 18.85 21.16
------ ----- ---- ----- -----
10 CUMULATIVE EXPS 18,653 20.30 3.81 24.11 19.68
<PAGE>
Wed Jul 9, 1997 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
PINE RIDGE RD & AIRPORT PULLING RD
NAPLES, FL COORD: 26:12.66 81:46.08
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 20.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POP_80: TOTAL 35,030 66,468 89,957
POP_90: TOTAL 67,772 127,875 172,897
POP_97: TOTAL (EST.) 84,416 159,904 215,836
POP_02: TOTAL (PROJ.) 90,437 171,923 235,483
HH_80: TOTAL 14,037 27,321 36,675
HH_90: TOTAL 28,313 54,365 73,144
HH_97: TOTAL (EST.) 35,982 69,452 94,687
HM_02: TOTAL (PROJ.) 38,641 74,814 103,232
INC_80: PER CAPITA (EST.) $10,484 $9,829 $9,334
INC_90: PER CAPITA $23,951 $22,031 $21,455
INC_97: PER CAPITA EST $36,538 $33,018 $32,237
INC_02: PER CAPITA PROJ $47,547 $42,855 $41,399
HH_80_BY INCOME_79: MEDIAN $43,712 $43,747 $0
HH_90_BY INCOME_89: MEDIAN $38,857 $34,748 $34,400
HH_97_BY INCOME: MEDIAN $48,966 $44,272 $43,192
HH_02_BY INCOME: MEDIAN $62,198 $55,162 $52,567
HH_80_BY INCOME_79: AVERAGE $26,163 $23,913 $22,895
HH_90_BY INCOME_89: AVERAGE $56,710 $51,110 $50,217
HH_97_BY INCOME: AVERAG $84,951 $74,973 $72,460
HH_02_BY INCOME: AVERAG $110,294 $97,158 $93,149
<PAGE>
Wed Ju1 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
PINE RIDGE RD & AIRPORT PULLING RD
NAPLES, FL COORD: 26:12.66 81:46.08
- --------------------------------------------------------------------------------
5.00 MILE 10.00 MILE 20.00 MILE
DESCRIPTION RADIUS RADIUS RADIUS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 90,437 171,923 235,483
1997 ESTIMATE 84,416 159,904 215,836
1990 CENSUS 67,772 127,875 172,897
1980 CENSUS 35,030 66,468 89,957
GROWTH 1980 - 1990 93.47% 92.38% 92.20%
HOUSEHOLDS
2002 PROJECTION 38,641 74,814 103,232
1997 ESTIMATE 35,982 69,452 94,687
1990 CENSUS 28,313 54,365 73,144
1980 CENSUS 14,037 27,321 36,675
GROWTH 1980 - 1990 101.71% 98.99% 99.44%
1997 ESTIMATED POPULATION BY RACE 84,416 159,904 215,836
WHITE 95.54% 95.26% 95.67%
BLACK 2.96% 2.86% 2.29%
ASIAN & PACIFIC ISLANDER 0.54% 0.49% 0.49%
OTHER RACES 0.96% 1.39% 1.55%
1997 ESTIMATED POPULATION 84,416 159,904 215,836
HISPANIC ORIGIN 12.99% 13.56% 12.49%
OCCUPIED UNITS 28,313 54,365 73,144
OWNER OCCUPIED 70.42% 71.18% 73.26%
RENTER OCCUPIED 29.58% 28.82% 26.74%
1990 AVERAGE PERSON PER HH 2.37 2.31 2.32
1997 ESTIMATED HH BY INCOME 35,982 69,452 94,687
$150,000 + 12.66% 9.87% 9.23%
$100,000 TO $149,999 7.50% 7.25% 6.77%
$ 75,000 TO $ 99,999 8.95% 7.88% 7.63%
$ 50,000 TO $ 74,999 19.73% 18.39% 18.30%
$ 35,000 TO $ 49,999 16.83% 17.31% 17.76%
$ 25,000 TO $ 34,999 13.69% 15.29% 15.64%
$ 15,000 TO $ 24,999 11.17% 12.94% 13.35%
$ 5,000 TO $ 14,999 7.04% 8.59% 8.97%
UNDER $ 5,000 2.43% 2.48% 2.34%
1997 EST. AVERAGE HH INCOME $84,951 $74,973 $72,460
1997 EST. MEDIAN HH INCOME $48,966 $44,272 $43,192
1997 EST. PER CAPITA INCOME $36,538 $33,018 $32,237
<PAGE>
Wed Jul 9, 1997 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
NAPLES, FL
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 18,395
POP_90: TOTAL 19,505
POP_97: TOTAL (EST.) 20,291
POP_02: TOTAL (PROJ.) 18,696
HH_80: TOTAL 8,516
HH_90: TOTAL 9,776
HH_97: TOTAL (EST.) 9,797
HH_02: TOTAL (PROJ.) 9,502
INC_80: PER CAPITA (EST.) $14,999
INC_90: PER CAPITA $41,704
INC_97: PER CAPITA EST. $55,062
INC_02: PER CAPITA PROJ $76,061
HH_80_BY INCOME_79: MEDIAN $43,825
HH_90_BY INCOME_89: MEDIAN $45,073
HH_97_BY INCOME: MEDIAN $61,459
HH_02_BY INCOME: MEDIAN $83,411
HH_80_BY INCOME_79: AVERAGE $32,398
HH_90_BY INCOME_89: AVERAGE $82,434
HH_97_BY INCOME: AVERAG $113,217
HH_02_BY INCOME: AVERAG $149,057
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NAPLES, FL
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 18,696
1997 ESTIMATE 20,291
1990 CENSUS 19,505
1980 CENSUS 18,395
GROWTH 1980 - 1990 6.04%
HOUSEHOLDS
2002 PROJECTION 9,502
1997 ESTIMATE 9,797
1990 CENSUS 9,776
1980 CENSUS 8,516
GROWTH 1980 - 1990 14.79%
1997 ESTIMATED POPULATION BY RACE 20,291
WHITE 94.04%
BLACK 5.38%
ASIAN & PACIFIC ISLANDER 0.26%
OTHER RACES 0.31%
1997 ESTIMATED POPULATION 20,291
HISPANIC ORIGIN 9.53%
OCCUPIED UNITS 9,776
OWNER OCCUPIED 78.81%
RENTER OCCUPIED 21.19%
1990 AVERAGE PERSON PER HH 1.97
1997 ESTIMATED HH BY INCOME 9,797
$150,000 + 22.14%
$100,000 TO $149,999 8.43%
$ 75,000 TO $ 99,999 10.28%
$ 50,000 TO $ 74,999 16.91%
$ 35,000 TO $ 49,999 12.65%
$ 25,000 TO $ 34,999 11.10%
$ 15,000 TO $ 24,999 8.17%
$ 5,000 TO $ 14,999 7.53%
UNDER $ 5,000 2.79%
1997 EST. AVERAGE HH INCOME $113,217
1997 EST. MEDIAN HH INCOME $61,459
1997 EST. PER CAPITA INCOME $55,062
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-O1,INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
COLLIER COUNTY
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 85,971
POP_90: TOTAL 152,099
POP_97: TOTAL (EST.) 185,176
POP_02: TOTAL (PROJ.) 196,975
HH_80: TOTAL 33,966
HH_90: TOTAL 61,703
HH_97: TOTAL (EST.) 77,170
HH_02: TOTAL (PROJ.) 82,330
IN_80: PER CAPITA (EST.) $9,424
INC_90: PER CAPITA $21,386
INC_97: PER CAPITA EST $32,696
INC_02: PER CAPITA PROJ $42,953
HH_80_BY INCOME_79: MEDIAN $0
HH_90_BY INCOME_89: MEDIAN $34,214
HH_97_BY INCOME: MEDIAN $44,762
HH_02_BY INCOME: MEDIAN $57,083
HH_80_BY INCOME_79: AVERAGE $23,658
HH_90_BY INCOME_89: AVERAGE $51,978
HH_97_BY INCOME: AVERAG $77,184
HH_02_BY INCOME: AVERAG $101,113
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
COLLIER COUNTY
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 196,975
1997 ESTIMATE 185,176
1990 CENSUS 152,099
1980 CENSUS 85,971
GROWTH 1980 - 1990 76.92%
HOUSEHOLDS
2002 PROJECTION 82,330
1997 ESTIMATE 77,170
1990 CENSUS 61,703
1980 CENSUS 33,966
GROWTH 1980 - 1990 81.66%
1997 ESTIMATED POPULATION BY RACE 185,176
WHITE 91.95%
BLACK 4.64%
ASIAN & PACIFIC ISLANDER 0.48%
OTHER RACES 2.92%
1997 ESTIMATED POPULATION 185,176
HISPANIC ORIGIN 18.84%
OCCUPIED UNITS 61,703
OWNER OCCUPIED 70.21%
RENTER OCCUPIED 29.79%
1990 AVERAGE PERSON PER HH 2.41
1997 ESTIMATED HH BY INCOME 77,170
$150,000 + 10.66%
$100,000 TO $149,999 7.19%
$ 75,000 TO $ 99,999 8.24%
$ 50,000 TO $ 74,999 18.09%
$ 35,000 TO $ 49,999 16.65%
$ 25,000 TO $ 34,999 14.86%
$ 15,000 TO $ 24,999 12.72%
$ 5,000 TO $ 14,999 8.73%
UNDER $ 5,000 2.86%
1997 EST. AVERAGE HH INCOME $77,184
1997 EST. MEDIAN HH INCOME $44,762
1997 EST. PER CAPITA INCOME $32,696
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
POP 80-01, HH 80-O1, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
FLORIDA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 9,746,326
POP_90: TOTAL 12,937,926
POP_97: TOTAL (EST.) 14,450,334
POP_02: TOTAL (PROJ.) 15,363,003
HH_80: TOTAL 3,744,255
HH_9O: TOTAL 5,134,869
HH_97: TOTAL (EST.) 5,864,493
HH_O2: TOTAL (PROJ.) 6,315,395
INC_80: PER CAPITA (EST.) $7,270
INC_90: PER CAPITA $14,698
INC_97: PER CAPITA EST. $21,441
INC_02: PER CAPITA PROJ $28,009
HH_80_BY INCOME_79: MEDIAN $0
HH_90_BY INCOME_89: MEDIAN $27,890
HH_97_BY INCOME: MEDIAN $33,828
HH_02_BY INCOME: MEDIAN $41,040
HH_80_BY INCOME_79: AVERAGE $18,695
HH_90_BY INCOME_89: AVERAGE $36,517
HH_97_BY INCOME: AVERAG $52,110
HH_02_BY INCOME: AVERAG $67,157
<PAGE>
Wed Jul 9, 1997 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: SUMMARY REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
FLORIDA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2002 PROJECTION 15,363,003
1997 ESTIMATE 14,450,334
1990 CENSUS 12,937,926
1980 CENSUS 9,746,326
GROWTH 1980 - 1990 32.75%
HOUSEHOLDS
2002 PROJECTION 6,315,395
1997 ESTIMATE 5,864,493
1990 CENSUS 5,134,869
1980 CENSUS 3,744,255
GROWTH 1980 - 1990 37.14%
1997 ESTIMATED POPULATION BY RACE 14,450,334
WHITE 81.23%
BLACK 14.37%
ASIAN & PACIFIC ISLANDER 1.62%
OTHER RACES 2.78%
1997 ESTIMATED POPULATION 14,450,334
HISPANIC ORIGIN 16.00%
OCCUPIED UNITS 5,134,869
OWNER OCCUPIED 67.23%
RENTER OCCUPIED 32.77%
1990 AVERAGE PERSON PER HH 2.46
1997 ESTIMATED HH BY INCOME 5,864,493
$150,000 + 4.35%
$100,000 TO $149,999 4.54%
$ 75,000 TO $ 99,999 6.30%
$ 50,000 TO $ 74,999 16.86%
$ 35,000 TO $ 49,999 16.26%
$ 25,000 TO $ 34,999 14.49%
$ 15,000 TO $ 24,999 16.65%
$ 5,000 TO $ 14,999 15.51%
UNDER $ 5,000 5.04%
1997 EST. AVERAGE HH INCOME $52,110
1997 EST. MEDIAN HH INCOME $33,828
1997 EST. PER CAPITA INCOME $21,441
<PAGE>
DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION
DIVISION OF REAL ESTATE
FLORIDA REAL ESTATE APPRAISAL BOARD
TEMPORARY PRACTICE PERMIT
NUMBER
0001138
Jay F. Booth
121 E. 90th Street #10
New York, NY 10128
who possesses a current and valid license or certification in
New York
has complied with the requirements of Chapter 475, Part II and applicable rules
to qualify to receive a temporary practice permit to operate in the State of
Florida in the capacity of a
REAL ESTATE APPRAISER
To perform the following appraisal assignment: Certified General
By: /s/ [ILLEGIBLE]
---------------------------------------------
Chairman, Florida Real Estate Appraisal Board
Federally related transaction for client regulated by OCC: Airport-Pulling &
Pine Ridge Carillon Place, Shopping Center, Naples, Florida this 31st day of
July, 1997.
<PAGE>
QUALIFICATIONS
================================================================================
Jay F. Booth, MAI
Professional Affiliations:
Member, Appraisal Institute (MAI No.11142)
Candidate, Commercial Investment Real Estate Institute
Certified General Appraiser, State of New York No. 46000026796
Member, Young Advisory Council, Appraisal Institute
General Experience:
Associate Director, Cushman & Wakefield, Inc., Valuation Advisory
Services, Retail Valuation Group, a full-service real estate
organization specializing in appraisal, consulting, and advisory
services. With experience in appraisal and consulting for a full array
of property types, Mr Booth's primary focus is major national retail
properties, including regional malls, department stores, specialty
centers, and other formats. August 1993 - Present.
Associate, Appraisal Group, Inc., Portland, Oregon, a real estate
appraisal and consulting firm specializing in all property types,
including industrials, office buildings, retail centers, and special use
properties. At AGI, Mr. Booth also performed extensive work on market
analyses and supply and demand studies. May 1990 - July 1993.
Academic Education:
Master of Science in Real Estate (MSRE), 1995
Major: Real Estate Valuation & Analysis
New York University, New York, New York
Bachelor of Science (BS), 1991
Majors: Business-Economics, Art
Willamette University, Salem, Oregon
Overseas Study, 1988
Xiamen University, Xiamen, China;
Kookmin University, Seoul, South Korea;
Tokyo International, Tokyo, Japan
Appraisal Education:
As of the date of this report, Jay F. Booth has successfully completed
all of the continuing education requirements of the Appraisal Institute.
================================================================================
<PAGE>
QUALIFICATIONS
================================================================================
Richard W. Latella, MAI
Professional Affiliations:
Member, Appraisal Institute (MAI Designation #8346)
Affiliate Member, International Council of Shopping Centers, ICSC
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 #10796
Minnesota Certified General Real Estate Appraiser #20026517
Commonwealth of Virginia Certified General 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
Commonwealth of Massachusetts Certified General Real Estate Appraiser
#4287
General Experience:
Senior Director, Retail Valuation Group, Cushman & Wakefield Valuation
Advisory Services, a national full-service real estate organization. While
Mr. Latella's experience has been in appraising a full array of property
types, his principal focus involves appraisal and counseling clients for
major retail properties and specialty centers on a national basis. As
Senior Director, his responsibilities include coordination of the firm's
national Retail Valuation Group consisting of appraisers who specialize in
regional malls, department stores and other major retail property types.
He has personally appraised and consulted on in excess of 500 malls and
specialty centers 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 (July 1980-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 (June 1977-July
1980).
Associate, Warren W. Orpen & Associates, Trenton, New Jersey, assisting in
the preparation of residential property appraisals and condemnation
analyses (July 1975-April 1977).
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 all
of the requirements under the continuing education program of the
Appraisal Institute.
================================================================================
<PAGE>
[KTR LOGO] Koeppel Tener Real Estate Services, Inc.
575 Lexington Avenue, New York, NY 10022-6102
212 906-9400 Fax 212 935-5935
KTR Job #1-1-97156
NEW YORK, NY
LOS ANGELES, CA
CHICAGO, IL
SEATTLE, WA
DALLAS, TX
PISCATAWAY, NJ
APPRAISAL OF
WORLDWIDE PLAZA
825 EIGHTH AVENUE
BOROUGH OF MANHATTAN
NEW YORK COUNTY, NEW YORK
<PAGE>
[Letterhead of Koeppel Tener Real Estate Services, Inc.]
Mr. Spencer Kagan August 12, 1997
Vice President
Lehman Brothers, Inc.
3 World Financial Center - 12th Floor
New York, New York 10285-1100
Re: Worldwide Plaza
825 Eighth Avenue
New York, New York
Dear Mr. Kagan:
Pursuant to your request, Koeppel Tener Real Estate Services, Inc. has completed
its appraisal of the Leased Fee Interest in the above referenced property for
the purpose of estimating its As Is Market Value, free and clear of financing,
subject to existing leases and contractual obligations as of July 25, 1997, the
date of inspection.
The subject property, Worldwide Plaza, a mixed-use office complex constructed in
1989, is comprised of an Office and Amenity Components. The Amenity Component is
comprised of a theater and 3 individual retail, health club and garage
condominium units, which are collectively known as the "Amenity Component". The
subject property contains a total of 1,837,397 square feet of rentable building
area. Situated on a rectangular 160,700 square foot site, it occupies the entire
block bounded by Ninth Avenue and Eighth Avenue, between West 49th and West 50th
Streets, in the West Side office sub-market within Midtown Manhattan.
The Office Component (Block 1040 Lot 29) consists of a 47-story Class "A" office
building with two levels of retail space, containing a total of 1,595,462 square
feet of net rentable area (which includes 27,028 square feet of retail space).
The Amenity Component, comprised of the Theater and the Garage, Retail, and
Health Club Condominiums, is located at the base of the residential structure of
Worldwide Plaza. The Theater Component (Block 1040 Lot 50) consists of a
six-screen movie complex, approximately 56,934 square feet situated in the
sub-basement levels. The theater is leased by RKO Century Warner Theaters, Inc.
under a lease expiring in 2019.
(Continued. . .)
<PAGE>
Mr. Spencer Kagan. August 12, 1997
Lehman Brothers, Inc. Page 2
The Garage Condominium (Block 1040 Lot 1001) consists of a 131,971 square foot,
473 car parking garage. The Retail Condominium (Block 1040 lot 1002) consists of
18,030 square feet of miscellaneous retail space and is comprised of eleven
units. The Health Club Condominium (Block 1040 Lot 1003) consists of
approximately 35,000 square feet of space leased under a long term lease which
expires in 2009.
The Office Component is currently 97%+ occupied under multi-year retail and
office leases. The subject property's office space is currently occupied by 3
primary tenants; Ogilvy & Mather Worldwide (585,460 square feet, 37.3%) under
net leases expiring in 2009,Cravath Swaine & Moore (400,333 square feet, 25.5%)
under a net lease expiring in 2009, and Polygram Records (307,121 square feet,
19.6%) under a lease expiring in 2012. Overall, the subject property (the office
and amenity component) is 99% occupied under office, retail, theater, health
club and garage leases.
The purpose of our assignment is to determine the Market Value of the Leased Fee
combined interest in the Office Component and Amenity Component, as of July 25,
1997. Our valuation of the subject property has employed the 3 approaches to
value: the Income Capitalization Approach, the Sales Comparison Approach and the
Cost Approach. The Cost Approach is also employed at the client's request in
estimating insurable value (reference addenda).
Our value estimate is subject to the Basic Assumptions and Limiting Conditions
and Certification Statement contained herein. This valuation has been made in
conformity with and is subject to the requirements of the Uniform Standards of
Professional Appraisal Practice of The Appraisal Foundation. It is also subject
to the Code of Professional Ethics of the Appraisal Institute. Lastly, this
appraisal conforms to the appraisal guidelines of Teachers Insurance and Annuity
Association.
The market value developed in this appraisal represents a marketing time of 1
year or less.
(Continued. . .)
<PAGE>
Mr. Spencer Kagan. August 12, 1997
Lehman Brothers, Inc. Page 3
Attached is our appraisal report which describes our investigation and analyses,
together with Certification, Basic Assumptions and Limiting Conditions, upon
which we have based our opinion that the As Is Market Value of the Leased Fee
Interest in the subject property as of July 25, 1997 are:
THE OFFICE COMPONENT (Leased Fee Interest)
THREE HUNDRED EIGHTY SEVEN MILLION DOLLARS
($387,000,000)
THE AMENITY COMPONENT (Leased Fee Interest)
TWENTY NINE MILLION DOLLARS
($29,000,000)
THE OFFICE AND AMENITY COMPONENT COMBINED (Leased Fee Interest)
FOUR HUNDRED SIXTEEN MILLION DOLLARS
($416,000,000)
It has been a pleasure to be of service to you. Please do not hesitate to call
with any questions you may have regarding our assumptions, observations or
conclusion.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Wayne A. Nygard /s/ Shinbi Morimoto
By: Wayne A. Nygard, MAI By: Shinbi Morimoto
Senior Vice President Associate
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Frontispiece
TABLE OF CONTENTS (Continued)
TABLE OF CONTENTS
INTRODUCTION
Title Page
Letter of Transmittal
Table of Contents
Certificate of Appraisal
Photographs of the Subject Property
Summary of Important Conclusions...............................................1
Basic Assumptions and Limiting Conditions......................................3
PREMISES OF THE APPRAISAL
Purpose of the Appraisal.......................................................5
Identification of the Property.................................................5
Date of Valuation..............................................................5
Scope of the Appraisal.........................................................5
Intended Use of the Appraisal..................................................6
Property Rights Appraised......................................................6
Definition of Market Value.....................................................7
History of the Subject Property................................................8
Marketing Period...............................................................8
Area Analysis (Regional and City).............................................10
PROPERTY DATA
Site Data.....................................................................38
Zoning........................................................................43
Real Estate Assessments and Taxes.............................................46
Description of Improvements...................................................54
Summary of Existing Leases....................................................64
MARKET ANALYSIS
Office Market Overview........................................................68
Market Rent Analysis (Office , Retail, Theater, Garage and Health Club).......85
VALUATION
Highest and Best Use.........................................................114
Valuation Procedure..........................................................116
Income Capitalization Approach...............................................119
Amenity Component Valuation..................................................140
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Frontispiece
Sales Comparison Approach....................................................152
Reconciliation and Final Value Conclusion....................................161
ADDENDA
Exhibit 1 - Letter of Engagement
Exhibit 2 - Floor Plans
Exhibit 3 - Tenant Lease Abstracts
Exhibit 4 - Management Provided Financials
Exhibit 5 - Comparable Improved Sales
Qualifications of the Appraisers
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Frontispiece
CERTIFICATE OF APPRAISAL
We, Wayne A. Nygard, MAI and Shinbi Morimoto certify that to the best of our
knowledge and belief:
The statements of fact contained in this report are true and correct.
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.
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.
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 value
estimate, the attainment of a stipulated result, or the occurrence of a
subsequent event
Our analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Uniform Standards of Professional Appraisal
Practice.
Shinbi Morimoto and Wayne A. Nygard, MAI have made a personal inspection of the
property that is the subject of this report.
No one provided significant professional assistance to the persons signing this
report.
This appraisal was not prepared in conjunction with a request for a specific
value or a value within a given range or predicated upon loan approval.
Wayne A. Nygard, MAI has been duly certified to transact business as a Real
Estate General Appraiser (New York State Certification #46000004241.
The Appraisal Institute conducts a program of voluntary continuing professional
education for its designated members. MAI and SRA members who meet minimum
standards of this program are awarded periodic education certification. Wayne A.
Nygard, MAI, has completed the requirements under this program.
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Wayne A. Nygard /s/ Shinbi Morimoto
By: Wayne A. Nygard, MAI By: Shinbi Morimoto
Senior Vice President Associate
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Frontispiece
PHOTOGRAPH OF 825 EIGHTH AVENUE
WORLDWIDE PLAZA
[GRAPHIC OMITTED]
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 1
SUMMARY OF IMPORTANT CONCLUSIONS
Date of Value: July 25, 1997
Inspection Date: July 25, 1997
Property Address: Worldwide Plaza
825 Eighth Avenue
Borough of Manhattan
New York County, New York
Property Location: Entire City block, located between
Eighth and Ninth Avenues and
between West 49th and West 50th
Streets.
Purpose of the Appraisal: To estimate the As Is Market Value
of the Leased Fee Interests in the
subject property, free and clear
of financing, subject to
contractual obligations and
existing leases as of July 25,
1997.
Site Size: 160,700 square feet (rectangular)
Zoning: C6-7, General Central Commercial
District within a Special Midtown
District (MiD).
Improvements: A 47-story Class "A" commercial
office building and amenity
component, constructed in 1989
containing 1,837,397 square feet
of rentable area.
Highest and Best Use
As Vacant: Speculative holding until such
time that development of an office
building is economically feasible.
As Improved: Commercial office with retail on
grade.
Primary Approach: Discounted Cash Flow Analysis
Projection Period: 11 fiscal years beginning 8/1/97.
Holding Period: 10 fiscal years beginning 8/1/97.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 2
SUMMARY OF IMPORTANT CONCLUSIONS (Continued)
Office Market Rent (Per Sq.Ft.) - Average
Under 100,000 rentable square feet: $36.00 per square foot
Over 100,0000 rentable square feet: $34.00 per square foot
Retail Market Rent (Per Sq.Ft.)
Weighted Average Rent: $34.00 per square foot
Future Office Lease Terms (Years) and Rent Step-ups
All Office: 15 years, with $2.50 per square
foot step-ups every 5 years.
Future Retail Lease Terms (Years) and Rent Step-ups:
All retail: 10 years with 3.0% per year
step-ups.
Renewal Probability
Retail Component: 50%
Office Component: 50%
Months Vacancy Between Leases
All space: 6 months
Market Rent Growth Rate: 0.0% for calendar year 1997 and
4.0% per calendar year thereafter.
Expense Growth Rate: 3.5% per year from 1/1/97
Real Estate Tax Growth Rate: Variable due to BID and ICIP.
Credit Loss: Overall 3.0% per year.
AS IS VALUATION - LEASED FEE INTEREST
Income Capitalization Approach: $416,000,000
Sales Comparison Approach: $413,000,000
Cost Approach: NA
APPRAISED VALUE $416,000,000 ($226 per square
foot)
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 3
BASIC ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report is subject to the following assumptions and limiting
conditions:
No responsibility is assumed for the legal description or for matters including
legal or title considerations. Title to the property is assumed to be good and
marketable unless otherwise stated.
The property is appraised free and clear of any or all liens or encumbrances
unless otherwise stated.
Responsible ownership and competent property management are assumed.
The information furnished by others is believed to be reliable. However, no
warranty is given for its accuracy.
All engineering is assumed to be correct. The plot plans and illustrative
material in this report are included only to assist the reader in visualizing
the property.
It is assumed that there are no hidden or unapparent conditions of the property,
subsoil, or structures that render it more or less valuable. No responsibility
is assumed for such conditions or for arranging for engineering studies that may
be required to discover them.
It is assumed that there is full compliance with all applicable federal, state,
and local environmental regulations and laws unless noncompliance is stated,
defined, and considered in the appraisal report.
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with, unless a nonconformity has been stated, defined, and
considered in the appraisal report.
It is assumed that all required licenses, certificates of occupancy, consents,
or other legislative or administrative authority from any local, state, or
national government or private entity or organization have been or can be
obtained or renewed for any use on which the value estimate contained in this
report is based.
It is assumed that the utilization of the land and improvements is within the
boundaries or property lines of the property described and that there is no
encroachment or trespass unless noted in the report.
The distribution, if any, of the total valuation in this report between land and
improvements applies only under the stated program of utilization. The separate
allocations for land and buildings must not be used in conjunction with any
other appraisal and are invalid if so used.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 4
BASIC ASSUMPTIONS AND LIMITING CONDITIONS (Continued)
Possession of this report, or a copy thereof, does not carry with it the right
of publication.
The appraiser, by reason of this appraisal, is not required to give further
consultation, testimony, or be in attendance in court with reference to the
property in question unless arrangements have been previously made.
Neither all nor any part of the contents of this report (especially any
conclusions as to value, the identity of the appraiser, or the firm with which
the appraiser is connected) shall be disseminated to the public through
advertising, public relations, news, sales, or other media without prior written
consent and approval of the appraisers.
The appraisers have inspected the subject property with the due diligence
expected of a professional real estate appraiser. The appraisers are not
qualified to detect hazardous waste and/or toxic materials. Any comment by the
appraisers that might suggest the possibility of the presence of such substances
should not be taken as confirmation of the presence of hazardous waste and/or
toxic materials. Such determination would require investigation by a qualified
expert in the field of environmental assessment.
The presence of substances such as asbestos, urea-formaldehyde foam insulation
or other potentially hazardous materials may affect the value of the property.
The appraiser's value estimate is predicated on the assumption that there is no
such material on or in the property that would cause a loss in value.
No responsibility is assumed for any environmental conditions, or for any
expertise or engineering knowledge required to discover them. The appraiser's
descriptions and resulting comments are the result of the routine observations
made during the appraisal process.
The American with Disabilities Act (ADA) became effective January 26, 1992. The
appraisers have not made a specific compliance survey and analysis of the
subject 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 of the subject property, together with 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 could have a
negative effect upon the value of the property. Since the appraisers have no
direct evidence relating to this issue, they did not consider possible
non-compliance with the requirements of ADA in estimating the market rent of the
subject property.
All values rendered within this report assume marketing times of 12 months or
less unless otherwise indicated.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 5
PREMISES OF THE APPRAISAL
PURPOSE OF THE APPRAISAL
The purpose and intended use of this appraisal is to assist the client, Lehman
Brothers, in estimating the "as is" Market Value of the Leased Fee Interest in
the subject property, free and clear of financing, as of July 25, 1997, the date
the property was inspected by the staff of Koeppel Tener Real Estate Services,
Inc. Demographic, rental, and sales data, verified with local sources wherever
possible, is analyzed for the subject market. The Income Capitalization and
Sales Comparison Approaches to value are employed in estimating the Market Value
for the subject property.
IDENTIFICATION OF THE SUBJECT PROPERTY
The subject property consist of the Leased Fee interests in an office component
and amenity component that contains a total of 1,837,397 square feet of above
and below grade rentable area. The subject property improvements were
constructed in 1989, and contains office and retail areas, a 6-screen movie
theater, a 2-level underground parking garage and a health club component.
Overall, the subject property is 99% occupied under office, retail, theater,
garage and health club leases. 825 Eighth Avenue is the block bounded by Eighth
and Ninth Avenues and West 49th and West 50th Streets, in the Borough of
Manhattan and the City, County, and State of New York. The subject property is
identified on the Manhattan Tax Map as Block:1040, Lot:29 (Office component),
the amenity component consists of Block 1040 Lot 50 (Theater), Lot 1001
(Garage), Lot 1002 (Retail) and Lot 1003 (Health Club).
DATE OF VALUATION
This appraisal is dated as of July 25, 1997, the date the subject property was
inspected by the staff of Koeppel Tener Real Estate Services, Inc.
SCOPE OF THE APPRAISAL
Demographic data and data used in the valuation of the subject property has been
researched from the Manhattan office market and verified with local sources
wherever possible. A physical
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PREMISES OF THE APPRAISAL (Continued)
inspection of the subject property, a review of the existing lease abstracts,
which was provided by the management, and an analysis of the influencing market
has been performed.
Our valuation of the subject property has employed the 2 of the 3 approaches to
value: the Income Capitalization Approach, the Sales Comparison Approach. The
Cost Approach was not included in our analysis. The appraisal is in the full
narrative form, employing all applicable appraisal techniques. The data included
in this report has been researched from the subject property's influencing
community.
INTENDED USE OF REPORT
The function of this appraisal is for use by Lehman Brothers or its
subsidiaries, for loan underwriting. The report may be relied upon by (i) Lehman
Brothers and its successors and assigns in determining whether to make a loan
evidenced by a note (the "Property Note") secured by the property; (ii) the
Report may be relied upon by any purchaser or assignee of the Property Note in
determining to purchase the Property Note in determining to purchase the
Property Note from Lehman Brothers and its successors and assigns and by rating
agency rating securities secured by, or representing an interest in, the
property note; (iii) the report may be referred to and quoted in and included
with materials offering for sale upon by persons who acquire the Property Note
or an interest in the Property Note, and (v) the Report speaks only as of its
date.
PROPERTY RIGHTS APPRAISED
The purpose of our assignment is to determine the aggregate Market Value of the
Leased Fee interests in the subject property's Office and Amenity Components.
The subject property was most recently inspected by the staff of Koeppel Tener
Real Estate Services, Inc. on July 25, 1997.
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PREMISES OF THE APPRAISAL (Continued)
A Leased Fee Interest is defined by the Appraisal Institute in The Dictionary of
Real Estate Appraisal, Third Edition, (Appraisal Institute: Chicago, Illinois,
1993), as:
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.
DEFINITION OF MARKET VALUE
Market Value is defined by the federal financial institutions regulatory
agencies 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 specific 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.
Source: Office of the Comptroller of the Currency under 12 CFR, Part 34,
Subpart Appraisals, 34.42 Definitions [f]
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PREMISES OF THE APPRAISAL (Continued)
HISTORY OF THE SUBJECT PROPERTY
Worldwide Plaza, developed by Zeckendorf Company, Inc. and designed by Skidmore
Owings & Merill, is an integrated office, residential condominium, retail,
theater, health club and garage complex, which was completed in 1989. The 3.7
acre development site (the former Madison Square Garden site) was acquired in
1986 for a reported $87 million dollars. On November 20, 1996, the subject
property was under a Chapter 11 voluntary bankruptcy and debt restructuring
plan.
MARKETING PERIOD
According to the previously stated definition of Market Value, the property must
be allowed a reasonable time to be exposed in the open market to achieve the
appraised value. Historically, buyers and sellers of commercial real estate have
assumed a maximum 12 month period between offering the property for sale and
closing. Consequently, appraisers, have valued properties assuming their sale
within 12 months. This marketing period is appropriately longer for a property
that is to be sold piecemeal, such as condominium units or subdivision lots.
However, were such properties to be valued in bulk, assuming their sale to a
single investor, they too would be priced to reflect a sale consummated within
12 months.
In our market research, we have identified several relevant buildings that do
not appear to have involved a seller under duress. Review of sales activity
suggests there is adequate activity to confirm the presence of an active
investor network for most forms of commercial real estate.
The subject property is a multi-tenanted modern Class "A" commercial office
complex which is conveniently located in the West Side office sub-market within
Manhattan's Midtown Office Market in the Borough of Manhattan, New York, New
York. Market activity indicates that there is a demand for properties such as
the subject property and that conventional financing is available.
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PREMISES OF THE APPRAISAL (Continued)
Our appraisal of the subject property reveals no factors that would reasonably
suggest that the subject property is not marketable. Accordingly we believe,
that if priced appropriately (that is to say, the appraised value), the subject
property should sell within a reasonable period of time, which we consider to be
within 12 months. We acknowledge that in appraising the property to sell within
12 months, we must place most emphasis on the buyer's expectations and yield
requirements. Further, this estimate is consistent with real estate investor
surveys.
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REGIONAL ANALYSIS
INTRODUCTION
The subject property is situated in Manhattan, which is one of the 5 boroughs of
New York City. The city is the focal point of the region known as the New
York-Northern New Jersey-Long Island, NY Consolidated Metropolitan Statistical
Area, as defined by the U.S. Department of Labor, Bureau of Labor Statistics.
The Port Authority of New York and New Jersey, which tracks economic data in the
region defines the core area of the New York metropolitan region as the
17-county area of New York and New Jersey surrounding New York harbor. This core
encompasses the New York City sector of five counties (New York, Kings, Queens,
Bronx and Richmond), the New York State suburban sector of four counties
(Nassau, Suffolk, Westchester and Rockland) and the northeastern New Jersey
sector of eight counties (Bergen, Essex, Hudson, Middlesex, Morris, Passaic,
Somerset and Union).
In response to recent census data, which depict the metropolitan area as an
increasingly complex and interwoven network of employment and residential
locations over a wide geographic area, the Port Authority has begun to track
economic trends in a surrounding "outer ring" of ten counties which form a
crescent arching around the core from the New Jersey shore on the southeast,
through the mid-Hudson area of New York state and into southwestern Connecticut
at the northeast. These outer ring counties include Hunterdon, Mercer, Monmouth,
Ocean, Sussex and Warren in New Jersey, Dutchess, Orange and Putnam in New York
and Fairfield County in Connecticut.
ECONOMIC OVERVIEW
The region ranks as one of the largest in the U.S. regions as measured by
population, jobs, income and retail activity. Its economic base is shaped by a
wide range of businesses in services, finance, communications/media,
entertainment, hi-tech, trade and manufacturing that serve national and
international markets. It has an elaborate infrastructure that positions it well
to move goods and people around the region and to and from national and
international markets.
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REGIONAL ANALYSIS (Continued)
The region is the number one U.S. gateway with the value of its international
air cargo trade, totaling more than $84.4 billion, or nearly 24% of the U.S.
total. Total trade increased by about 10% in 1995, led by gains in import
activity. Its seaport activity represents nearly one-third of total trade value
of all U.S. East Coast activity.
While the region is a "high cost" location, businesses are attracted and
retained because of the skills and knowledge of the work force. Firms in the
metropolitan area are world leaders in finance, services and manufacturing, and
the region's employers require a highly productive workforce. While the high
wage levels of the region might suggest a lack of competitiveness, the business
community appears to value the character of the workforce. An example can be
found in the securities industry. With only 30% of the industry's total U.S.
workforce, the region accounts for 50% of U.S. output in this sector.
The regional economy slowed in 1995 and the first half of 1996 in conjunction
with sluggish growth in the U.S. and persistent weakness in key international
markets, such as Japan and Mexico, which are significant partners for trade and
investment in the region. Private sector employment grew for the fourth year in
a row and improvement is anticipated in 1997.
POPULATION
During recent decades the New York region has witnessed sharp rates of
population growth in outlying suburban and previously rural areas. In the same
period the area's cities and inner ring suburbs have either lost population,
remained level or experienced minimal growth in percentage terms. The contrast
is chiefly due to the availability of abundant, relatively cheaper land and to
improving accessibility in the outlying areas. In addition, the relocation of
businesses out of central cities has made it feasible to commute from previously
remote areas.
The table below indicates a decline of 6.7% in the population in the 17-county
inner ring of the metropolitan area in the period from 1970 to 1990, a period
during which the outer ring of New York
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REGIONAL ANALYSIS (Continued)
and New Jersey counties were experiencing growth of 30.4% and 38.0%,
respectively. Fairfield County, CT experienced 4.4% growth during this period.
Population declines in the 17-county inner core region appear to have been
reversed in the first five years of the 1990s, with growth experienced in all of
the regional sectors.
POPULATION TRENDS
NY-NJ-CT METROPOLITAN AREA
1970 - 1995
(000s)
- --------------------------------------------------------------------------------
% Change
Area of Region 1970 1990 1995 70-90 90-95
- --------------------------------------------------------------------------------
17-County NY-NJ Region 16178.6 15100.3 15661.4 -6.7% 3.7%
Outer NY Counties 500.6 653 675.3 30.4% 3.4%
Outer NJ Counties 1192.9 1646.3 1733.7 38.0% 5.3%
Fairfield County, CT 793 827.9 830.7 4.4% 0.3%
- --------------------------------------------------------------------------------
Source: Port Authority of NY/NJ; Compiled by KTR
EMPLOYMENT
In the early and mid years of the 1980s the region's core areas experienced
significant job growth. As illustrated in the following table, between 1980 and
1988 the total number of wage and salary employees increased by approximately
899,200. As overall job growth was increasing during this period at a compound
rate of 1.6% per year, employment in the manufacturing sector was declining
at an annual rate of 2.4%. The F.I.R.E. and Services sectors were gaining jobs
at the rate of 3.4% and 3.7% per annum, respectively. The 1989-92 recession in
the region resulted in losses of approximately 622,200 jobs, nearly 70% of the
total gained in the prior eight years. Only the Services sector was spared from
job losses, and the growth in that sector declined sharply. Since 1992, total
employment in the region's core has increased by 165,800 jobs, approximately 27%
of the jobs lost during the recession.
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NEW YORK - NEW JERSEY METROPOLITAN REGION
NON-AGRICULTURAL EMPLOYMENT 1980 - 1995
(in thousands of wage and salary employees)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Annual Rate of Increase (Decrease)
1980 1988 1991 1992 1993 1994 1995 1980-88 1988-91 1991-92 1992-95
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Employment 6,691.9 7,591.1 7,135.3 6,968.9 6,994.0 7,072.6 7,134.7 1.6% -2.0% -2.3% 0.8%
Manufacturing 1,338.3 1,098.6 911.2 862.5 836.8 816.4 796.7 -2.4% -6.0% -5.3% -2.6%
Non-Manufacturing 5,353.6 6,492.5 6,224.1 6,106.4 6,157.2 6,256.2 6,338.0 2.4% -1.4% -1.9% 1.2%
Const. and Mining 199.0 331.4 240.9 209.8 212.1 220.8 223.4 6.6% -10.1% -12.9% 2.1%
Trans. and Pub. Util. 468.9 470.9 466.5 449.3 453.4 458.4 462.4 0.1% -0.3% 3.7% 1.0%
Trade 1,399.2 1,621.1 1,468.7 1,427.2 1,419.2 1,440.8 1,473.1 1.9% -3.2% -2.8% 1.1%
F.I.R.E. 630.4 820.8 766.5 746.3 746.1 756.7 746.6 3.4% -2.3% -2.6% 0.0%
Services and Misc. 1,578.4 2,105.8 2,121.0 2,128.7 2,183.1 2,244.2 2,319.8 3.7% 0.2% 0.4% 2.9%
Government 1,077.7 1,159.5 1,158.4 1,143.2 1,141.3 1,133.2 1,110.8 0.9% 0.0% -1.3% -1.0%
- -------------------------------------------------------------------------------------------------------------------------------
Source: Port Authority of NY & NJ; compiled by KTR
</TABLE>
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REGIONAL ANALYSIS (Continued)
In 1995 total employment increased by 62,100 jobs. This represented an increase
of 0.9% over the 1994 level but a slowing in the growth rate from the 1.1%
increase in 1994 over 1993. This slow down in the rate of job growth in 1995 is
consistent with the slowdown in the regional economy discussed previously. While
employment in the government sector declined in 1995, all other
non-manufacturing employment sectors experienced gains. Manufacturing employment
represented 20.0% of the region's total wage and salary jobs as of 1980, by 1995
it represented only 11.2%. The table below illustrates the structural changes in
the region's economy that have been taking place over the recent past.
32.5%.EMPLOYMENT BY SECTOR
NY/NJ METROPOLITAN REGION 1980 - 1995
(in thousands of wage and salary jobs)
--------------------------------------------------------------
1980 1988 1992 1995
Total Employment 6,691.9 7,591.1 6,968.9 7,134.7
--------------------------------------------------------------
% by Sector
Construction 3.0% 4.4% 3.0% 3.1%
Manufacturing 20.0% 14.5% 12.4% 11.2%
TCPU 7.0% 6.2% 6.4% 6.5%
Trade 20.9% 21.4% 20.5% 20.6%
F.I.R.E. 9.4% 10.8% 10.7% 10.5%
Services 23.6% 27.7% 30.5% 32.5%
Government 16.1% 15.3% 16.4% 15.6%
--------------------------------------------------------------
Source: Port Authority of NY/NJ; Compiled by KTR
The following table illustrates that the outer-ring counties of the metropolitan
region have experienced greater percentage increases in employment since 1970
than have the counties in the 17-county inner core of the metropolitan region.
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REGIONAL ANALYSIS (Continued)
PRIVATE EMPLOYMENT
NY-NJ-CT METROPOLITAN REGION
1970 -1995
(000s)
- --------------------------------------------------------------------------------
Annual Rate of Change
Area of Region 1970 1994 1995 70-94 94-95
- --------------------------------------------------------------------------------
17 County NY/NJ Region 5,679.6 5,803.0 5,876.9 0.1% 1.3%
Outer NY Counties 116.5 172.6 176.8 1.7% 2.4%
Outer NJ Counties 268.5 489.5 498.4 2.5% 1.8%
Fairfield County, CT 272.9 350.8 356.0 1.1% 1.5%
- --------------------------------------------------------------------------------
Source: Port Authority of NY-NJ; Compiled by KTR
UNEMPLOYMENT
Unemployment in the region reached a cyclical low in 1988 when it fell to 4.2%.
In the following four year period unemployment increased in each year reaching
its recent peak at 9.1% in 1992 before beginning to decline again. In 1995 the
regional unemployment rate fell to 6.9% from the 1994 level of 7.3%. This
compares to a national unemployment rate in 1995 of 5.6%, indicating that the
region's recovery is lagging that of the nation as a whole. While data for the
entire region is not yet available, preliminary indications are that
unemployment in the region continued to decline in 1996.
INCOME
Based on data collected by the Port Authority, wage gains in the region's
private sector increased through the first half of 1995 at a faster rate than
employment gains, resulting in growth in wages per private sector job. This
followed an increase in 1994, which amounted to a 2.5% increase over 1993 wages.
The average wage in 1994 was $37,078. The following table outlines average wages
by employment sector in the 17-county inner core of the region.
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REGIONAL ANALYSIS (Continued)
1994 PRIVATE SECTOR WAGES
NY-NJ-CT METROPOLITAN AREA
(By Employment Sector)
----------------------------------------------
F.I.R.E. $61,251
Transportation, Comm. & Pub. Util. $41,422
Manufacturing $40,578
Construction $38,300
Services $32,952
Trade $27,493
Wholesale Trade $44,539
Retail Trade $19,037
----------------------------------------------
Source: Port Authority of NY & NJ; compiled by KTR
INFLATION
In 1996 consumer prices in the metropolitan area increased at an annual average
rate of 2.9%, the fourth year in a row in which prices grew at a rate of 3.0% or
less. In addition, this marked the third year in a row that regional inflation
was lower than that of the nation's, after exceeding it for twelve consecutive
years. The 1995 rate of price increase in the region was lower than the national
rate in housing, food, transportation, medical care and apparel. In only energy
costs did the regional rate exceed the national.
After 4 consecutive years of decline in the year to year inflation rate, the
region's inflation rate increased from 2.4% in 1994 to 2.5% in 1995 and to 2.9%
in 1996. According to data prepared by the U.S. Department of Labor Bureau of
Labor Statistics, during the period from 1986 to 1996 prices for all items in
the region grew at an annual rate of 4.0%. When viewed from 1990 forward, the
annual rate of increase has been only 3.2%. Projections made by Data Resources,
Inc. ("DRI") indicate a probable range in average annual inflation between 1994
and 2015 of 3.0% to 3.8%. Based on recent surveys of investor expectations for
both the Manhattan and the national suburban office markets, an inflation rate
of 4.0% has been utilized in this analysis, i.e., above the level projected by
DRI.
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REGIONAL ANALYSIS (Continued)
CONSTRUCTION ACTIVITY
The value of overall planned construction spending in the region in 1995
increased by 2.7% over that of 1994, which was a decline in the increase from
1993 to 1994 of 11.6%. This is believed to be the result of increasing interest
rates during 1994 and the lack of confidence in the economy engendered by
corporate downsizing. Residential construction increased in 1995 by 18.6%, while
infrastructure construction increased by 7.3%. Commercial/industrial
construction declined from the 1994 level by 7.3%. The New York City sector led
the region in 1995 with a 10.7% increase in overall construction spending, while
both the New Jersey and NY suburban sectors experienced marginal declines.
The table on the following page illustrates the history of recent changes in the
level of construction spending in the region since 1989.
CONSTRUCTION ACTIVITY
METROPOLITAN REGION
1989 - 1995
(in billions of 1992 dollars)
- --------------------------------------------------------------------------------
Total Residential Comm./Ind. Infrastructure
Year Construction Construction Construction Construction
- --------------------------------------------------------------------------------
1989 $16.105 $4.382 $7.713 $4.010
1990 $11.444 $2.908 $5.822 $2.713
1991 $9.915 $2.889 $4.270 $2.755
1992 $10.140 $2.357 $4.860 $2.923
1993 $9.728 $2.436 $4.592 $2.700
1994 $10.856 $2.579 $5.442 $2.835
1995 $11.145 $3.058 $5.046 $3.041
- --------------------------------------------------------------------------------
Source: Port Authority of NY & NJ; compiled by KTR
While commercial construction spending declined in 1995 in all three sectors of
the region, the New York City sector experienced dramatic gains in residential
and infrastructure construction levels increasing by 36.1% and 29.7%,
respectively. Despite the slowdown in the rate of increase
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REGIONAL ANALYSIS (Continued)
in construction activity in 1995, construction activity in the region has
increased in three of the four years since 1991 after declining sharply during
the recent recession from its pre-recession peak in 1989. Commercial
construction has been dominated by the retail sector, as the office market has
not recovered from its overbuilt status of the late 1980s and speculative new
construction is not yet feasible in most areas of the metropolitan region.
TRANSPORTATION
The metropolitan region benefits from a vast transportation infrastructure that
has historically provided its framework for growth.
The Port of New York/New Jersey is the nation's largest in terms of both total
tonnage and the dollar value of freight hauled, and the section of the port
known as Port Newark/Elizabeth accounts for more than 75% of the total tonnage
that moves through New York Harbor and occupies an area in excess of 2,200
acres, providing docking services for over 2,500 ships annually. It is directly
accessible to Newark International Airport, the New Jersey Turnpike (Interstate
95) and connecting highways.
The Port's prominence is directly related to its sophistication and capacity of
its services. These include 700 berths, 23 container cranes, a square mile of
transit and storage areas and specialized buildings for cold storage, automated
handling facilities, cargo distribution, wine storage and frozen meat
inspection.
The leading airports in the area are Newark International Airport in northern
New Jersey and Kennedy International and LaGuardia Airports in New York City's
Borough of Queens. Public mass transit needs are served by extensive commuter
rail and bus networks, which are primarily designed to provide commuter service
between the suburbs and Manhattan. The New Jersey suburbs are serviced by the NJ
Transit and the PATH railway systems, while the northern New York suburbs and
Fairfield County, CT are serviced by the Metro North Railroad and the Long
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REGIONAL ANALYSIS (Continued)
Island suburbs by the Long Island Railroad. Intra-city mass transportation in
New York City itself is provided by an extensive subway system, which services
four of the five counties, excepting Richmond, which has its own system. Ferries
provide trans-Hudson river service from New Jersey and Richmond County, NY.
Significant interstate highways serving the region include Interstate 95, which
connects the area with other cities along the eastern seaboard, Interstate 80,
which extends west to Pennsylvania from a junction in northern New Jersey with
Interstate 95, Interstate 78, which provides access to New York City via Staten
Island and to Pennsylvania to the west; Interstate 287 (completed in late 1993)
which provides a western circumferential route around New York City for long
distance auto and truck traffic and Interstate 87, which provides access to New
York City from upstate New York and Canada.
The Port Authority, which operates tunnels and bridges that span the Hudson
River between New Jersey and New York in addition to Kennedy and Newark airports
reports that regional traffic trends are consistent with an improving economy.
In 1994 international passenger traffic at the authority's airports increased to
20.8 million passengers, exceeding for the first time the pre-recession 1990
level of 20.7 million passengers. In 1995 there was a further increase to 22.1
million international passengers. In addition, eastbound (toward New York)
traffic on its bridges and tunnels reached 112.5 million vehicles in 1995,
surpassing the prior peak in 1990 of 112.4 million. Bus and PATH railroad
traffic increased in 1995, as well. Bus and subway traffic in New York City
increased to 1.551 billion passengers in 1995, an increase of 1.2% over the 1994
level, and commuter rail ridership increased in 1995 on the NJ Transit, Long
Island and Metro North Railroad systems by 0.2%, 0.5% and 0.3%, respectively.
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REGIONAL ANALYSIS (Continued)
REGIONAL MAP
[GRAPHIC OMITTED]
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REGIONAL ANALYSIS (Continued)
LONG TERM PROSPECTS
In its 1996 report "A Region at Risk," The Regional Plan Association (RPA)
predicted that it will take until 2005 for employment in the 31-County region it
monitors to exceed the level of employment reached in 1989 before the recession.
The region's job growth is projected to grow at 0.75% per annum, or
approximately 50% of the 1.4% rate projected for the nation as a whole. As a
result, its share of the nation's jobs will continue to decline. Jobs in the
services, F.I.R.E. and retail trade sectors are expected to experience more
robust growth, which is anticipated to be offset by continued decline in the
goods producing sectors, slow growth in contract construction and essentially no
growth in public sector employment.
An earlier (1990) report by the RPA entitled "The New Century: Forecasts for the
Tri-State Region", which was prepared based on 1986 data provided by the U.S.
Department of Commerce's Bureau of Economic Analysis (BEA), economic conditions
in 1988 and Wharton Econometric's projections, did not consider the effects of
the dramatic economic slowdown in the 1989 to 1992 period. Nevertheless, the
report did consider the long term effects of the projected limited growth in the
size of the labor force and did not anticipate any substantive changes in
immigration policy which would serve to change the trend. Because of its
reliance on long term demographics rather than current employment conditions,
the report's conclusions, although they are dated, are deemed worthy of
consideration.
The report anticipated that growth will be concentrated in the service
industries that grew fastest in both the regional and national economies during
the period 1977 to 1987, namely, business services and finance, insurance and
real estate. Manufacturing, on the other hand, was anticipated to continue to
decline.
The strongest geographic sector over the 1988-2015 period was expected to be the
14 county area of northern and central New Jersey which was anticipated to
capture almost 40% of the region's job growth with 978,000 jobs, an average of
36,222 jobs per annum. The table below illustrates the
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REGIONAL ANALYSIS (Continued)
anticipated job growth by subregion, as projected by the RPA. The statistics are
utilized here as an indication of trends rather than for the accuracy of the
finite job projections.
LOCATION OF NEW JOBS
BY SUBREGION, COMPARING RPA'S
PROJECTIONS WITH RECENT PERFORMANCE
-----------------------------------------------------------------
1977 - 1987 1988-2015
New Jobs % of New Jobs % of
(000s) Growth (000s) Growth
-----------------------------------------------------------------
Manhattan 334 15.9% 360 14.3%
Rest of NYC 149 7.1% 228 9.1%
New Jersey 727 34.5% 978 38.9%
Mid-Hudson 246 11.7% 362 14.4%
Long Island 413 19.6% 309 12.3%
Connecticut 236 11.2% 275 10.9%
--- ---- --- ----
Total New Jobs 2,105 100.0% 2,512 100.0%
-----------------------------------------------------------------
Source: Regional Plan Association; compiled by KTR
The recent moderate growth, which has been and is anticipated to continue to be
led by employment in the services sector, bodes well for continued improvement
in commercial real estate occupancies and values.
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CITY ANALYSIS
INTRODUCTION
The subject property is in Manhattan, one of the 5 boroughs or counties which
comprise New York City. The commercial hub of New York City, Manhattan is a
center of U.S. and international finance. It contains the headquarters of more
leading corporations than any other U.S. municipality and has more first-class
office space than any other city or urban area in the country. Home to the
headquarters of the United Nations and various consulates and legations, New
York City is also an international political center. In addition, it is a
leading media, cultural and artistic center, housing a number of the world's
leading communications companies, prized art museums and entertainment
facilities. As a result of its various attractions, Manhattan is perhaps the
leading domestic and international tourist center in the United States.
Manhattan has been intensively developed; it consists of a wide variety of
residential, commercial and industrial neighborhoods. Except for Central Park
and various smaller parks, virtually no space remains undeveloped. Public
transportation is readily available throughout the borough connecting it with
the other New York City boroughs and suburban areas. Its central business areas,
including Midtown and Lower Manhattan, tend to suffer from traffic congestion
during weekday business hours.
POPULATION
New York City has long been the most populous city in the United States with
nearly three times the number of people of the next three largest cities. In the
decade which ended in 1990, all of New York City's boroughs gained population,
reversing a long-term trend of declining population. Demographers have
attributed the rise to a surge in immigration from foreign countries,
particularly from Asia, Central America and the Caribbean.
As the following table shows, the highest increase in percentage terms occurred
in Staten Island, though the previous sharp growth rate of this borough had
abated. According to U.S. Census
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CITY ANALYSIS (Continued)
figures (which have been challenged for under-counting of urban areas), the
highest absolute increase among New York's boroughs occurred in Brooklyn.
Manhattan ranked second in percentage increase with a 4.1% gain and third in
absolute increase with a gain of approximately 59,000 people.
NEW YORK CITY POPULATION TRENDS
1960 TO 1990
(000s)
- --------------------------------------------------------------------------------
%Change
1960 1970 1980 1990 60-80 80-90
- --------------------------------------------------------------------------------
Manhattan 1,698.3 1,539.2 1,428.3 1,487.5 -15.9% 4.1%
The Bronx 1,424.8 1,471.7 1,169.0 1,203.8 -18.0% 3.0%
Brooklyn 2,627.3 2,602.0 2,230.9 2,300.7 -15.1% 3.1%
Staten Island 222.0 295.1 352.1 379.0 58.6% 7.6%
Queens 1,809.6 1,987.2 1,891.3 1,951.6 4.5% 3.2%
------- ------- ------- ------- --- ---
New York City 7,782.0 7,895.6 7,071.6 7,322.6 -9.1% 3.5%
Manhattan as % of NYC 21.8% 19.5% 20.2% 20.3%
- --------------------------------------------------------------------------------
INCOME
As the following table indicates, Manhattan ranked first among New York City's
boroughs in per capita income in both 1979 and 1989, as well as in the 1999
projections of NPA Data Services, Inc. Over the 1979 to 1989 period, Manhattan's
per capita income grew at a higher rate than in any other borough, but the rate
of increase is expected to fall behind that of the Bronx and Brooklyn over the
1989 to 1999 period. It is notable that, as of 1989, Manhattan's median level of
household income was lower than that of Staten Island. This appears to reflect
the fact that Manhattan has a higher percentage of low-income individuals and a
lower percentage of middle income earners than Staten Island.
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CITY ANALYSIS (Continued)
NEW YORK CITY
PER CAPITA INCOME
1979 TO 1999
- --------------------------------------------------------------------------------
Projected Annual Rate of Change
1979 1989 1999 79-89 89-99
- --------------------------------------------------------------------------------
Manhattan $26,742 $37,203 $43,667 3.4% 1.6%
The Bronx $10,994 $12,603 $15,082 1.4% 1.8%
Brooklyn $12,071 $14,652 $17,841 2.0% 2.0%
Staten Island $14,448 $18,870 $21,776 2.7% 1.4%
Queens $15,159 $18,859 $21,074 2.1% 1.3%
- --------------------------------------------------------------------------------
Source: NPA Data Services, Inc.; compiled by KTR
EMPLOYMENT
Spurred by New York City's ascendance as a world financial capital, the City's
economy exhibited strong growth in the 1980s. Between 1979 and 1989 total
non-agricultural employment expanded at an average rate of nearly 1.0% per
annum. By 1987, statistics provided by the U.S. Department of Labor indicate
that New York City's economic growth began to subside. By 1989 the growth surge
had begun to deteriorate and by the end of 1992 all of the job growth of the
1980s had been erased. Overall growth resumed at a moderate rate in 1993 and
continued through 1996, suggesting an economy in recovery.
As depicted in the following table, total employment in New York City grew
between 1979 and 1989 by almost 329,400 jobs. This growth was even more
pronounced if the calculation excludes the manufacturing sector, which persisted
in a decline that began in 1960. Total non-agricultural employment grew by over
488,000 jobs between 1979 and 1989; the strongest sectors of the economy were
construction, services, F.I.R.E. (finance, insurance and real estate) and
government. By 1989 the rate of growth had abated and in 1990 non-agricultural
employment registered the first overall loss in eight years, falling by 42,000
jobs with most of the major employment categories suffering declines. Gains were
noted in only the services, transportation and government sectors.
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CITY ANALYSIS (Continued)
The rate of decline accelerated in 1991. Total non-agricultural employment fell
by over 190,000 jobs, or 5.4% of the 1990 average. Every major employment
category exhibited losses from 1990 levels, including manufacturing (down 8.8%);
transportation (down 4.7%); wholesale and retail trade (down 7.1%); F.I.R.E.
(down 5.0%); services (down 4.5%) and government (down 2.5%).
In 1992, average non-agricultural employment declined by an additional 93,400
jobs or 2.8% from the 1991 average. While every major employment sector
continued to experience job losses, the rate of loss declined. Only two sectors
experienced increases in the rate of decline during the year, i.e. construction
and transportation. The rate of decline in the ever-more-important services
sector slowed to only 0.3%.
The year 1993 saw the fourth decrease in total employment in four years, though
losses were moderate, with a decline of only 6,300 jobs. Data from the New York
State Department of Labor indicate that average 1994 non-agricultural employment
grew by 29,500 jobs, the first overall increase in five years. This was followed
by a more modest increase of 13,600 jobs in 1995, indicating an economy that was
recovering but still struggling. The rate of increase in the creation of new
jobs accelerated in 1996, with the city producing 39,400 new jobs, an increase
of 1.2% over the 1995 level.
While employment figures prior to September 1993 were consistently lower than
those of the prior year, the rate of job loss was gradually ebbing. Between
September 1993 and December 1996, New York City experienced 40 consecutive
months of job growth on a year-to-year comparative basis.
UNEMPLOYMENT
While residents of Manhattan have historically enjoyed higher rates of
employment than the overall population of New York City, they were nevertheless
severely impacted by the region's economic weakness in the late 1980s and early
1990s. Unemployment in Manhattan, as well as New York
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NYC NON-AGRICULTURAL EMPLOYMENT
ANNUAL AVERAGE EMPLOYMENT 1979 - 1996
(in thousands of wage and salary employees)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual % Rate of Change
1979 1989 1990 1991 1992 1993 1994 1995 1996 1979-89 1989-92 1992-96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Employment 3,278.8 3,608.2 3,566.2 3,374.8 3,281.3 3,275.0 3,304.5 3,318.1 3,357.5 1.0% -3.1% 0.6%
Manufacturing 518.5 359.5 337.5 307.8 292.8 288.8 280.6 273.0 264.5 -3.6% -6.6% 2.5%
Non-Manufacturing 2,760.3 3,248.7 3,228.7 3,067.0 2,988.5 2,994.6 3,023.9 3,045.1 3,093.0 1.6% -2.7% 0.9%
Construction 70.9 120.8 114.9 99.8 87.1 85.8 88.8 89.3 91.2 5.5% -10.3% 1.1%
Trans. & Pub. Util. 258.7 218.1 229.1 218.4 204.8 203.4 201.5 203.6 204.6 -1.7% -2.1% 0.0%
Trade 621.1 630.2 608.3 565.3 545.6 537.9 541.1 556.2 561.9 0.1% -4.7% 0.7%
F.I.R.E. 429.6 530.6 519.6 493.6 473.5 471.6 480.2 474.1 472.3 2.1% -3.7% -0.1%
Services 858.7 1,147.2 1,149.0 1,096.9 1,093.1 1,115.8 1,146.6 1,180.1 1,229.0 2.9% -1.6% 3.0%
Government 520.1 601.5 607.6 592.7 584.1 579.7 565.4 541.5 533.8 1.5% -1.0% -2.2%
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Source: NY State Department of Labor; compiled by KTR
</TABLE>
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CITY ANALYSIS (Continued)
City and New York State overall, reached cyclical lows in 1988, i.e., 4.2% in
Manhattan and New York State and 4.7% in New York City. Between 1988 and 1992
the jobless rate increased sharply in all of these geographic units .
In 1993 the unemployment rate declined in Manhattan and in New York State while
it continued to increase in New York City, reaching a cyclical peak in 1993 of
11.0%. Through 1995, unemployment rates in the areas surveyed continued to
decline, reaching 7.0% in Manhattan, 8.2% in New York City and 6.3% in New York
State.
In 1996, New York State's unemployment rate continued to decline, while it
appears to have increased in both the city and in Manhattan. This reversal in
the New York City has been attributed by some analysts to increased optimism on
the part of the populace in response to 4 straight years of an improving
economy, encouraging the chronically unemployed to begin to re-enter the job
force. Recent federal welfare reforms may also be contributing to an increase in
job seekers.
PROJECTED EMPLOYMENT GROWTH
According to projections made by NPA Data Services, Inc., total employment in
Manhattan is expected to decline by 17,010 jobs between 1995 and 2005. Job
losses are anticipated in the Manufacturing, Transportation and Trade sectors,
while modest growth rates are projected in the Construction, F.I.R.E., Services
and Government sectors. In the following table we have outlined NPA's
projections by employment sector.
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CITY ANALYSIS (Continued)
MANHATTAN EMPLOYMENT PROJECTION
1995 to 2005
(in thousands of employees)
- --------------------------------------------------------------------------------
Estimated Projected Annual Rate
Sector 1995 2005 Change of Change
- --------------------------------------------------------------------------------
Total Employment 2,436.6 2,419.6 -17.0 -0.1%
Manufacturing 166.1 129.8 -36.3 -2.7%
Const. & Mining 30.4 32.4 2.0 0.6%
T. & P.U. 103.4 89.8 -13.6 -1.4%
Trade 316.7 289.9 -26.8 -0.9%
F.I.R.E. 467.8 478.6 10.8 0.2%
Services 896.2 922.8 26.6 0.3%
Government 448.5 474.8 26.2 0.6%
- --------------------------------------------------------------------------------
Source: NPA Data Services, 1995 Regional Economic Projection Series Database;
compiled by KTR
NEW YORK CITY GOVERNMENT
The structure of the New York City government consists of a Mayor, who functions
as the City's chief executive officer, a 51-member elected City Council, which
serves as the City's legislative body, a City Comptroller, who acts as the chief
fiscal officer, and a President of the Council, who presides over the City
Council. The Mayor is responsible for preparing and administering the City's
annual expense and capital budgets, which must be approved by the City Council.
While the Council is responsible for establishing annually the amount of the
real estate tax, it does not have the authority to impose other taxes unless
they have been authorized by State legislation. Among the Comptroller's various
responsibilities is that of evaluating the Mayor's budget, including the
underlying assumptions and methodology.
During the City's fiscal crisis in the mid-1970s, New York State took various
steps to assist the City to maintain fiscal stability, including enactment of
the Financial Emergency Act. Under the Act, the Municipal Assistance Corporation
("MAC") was created to provide financing assistance
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CITY ANALYSIS (Continued)
to the City and the New York State Financial Control Board was established to
monitor the City's financial affairs. The City must maintain a balanced expense
budget under GAAP guidelines and must prepare a four year financial plan prior
to the beginning of each fiscal year. In 1986, the Control Board's right of
approval over the City's financial plan was suspended as a result of the City's
improved financial condition. The Control Board continues to monitor the City's
four year financial plan and its operations. In the event that the City fails to
meet debt service obligations and under certain other circumstances, the Control
Board is required to reassert a significant degree of authority over the City's
finances and operations.
The recently revised New York City charter required the creation of an
Independent Budget Office ("IBO") which is to publish a report each February
discussing the amount of revenues and expenditures anticipated for the city in
the coming fiscal year, assuming current policies. In addition, it is to recast
its projections in light of the subsequently announced Mayor's preliminary
budget. The IBO is modeled on, and serves much the same purpose as, the
Congressional Budget Office of the U.S. Congress. In its first ever report,
issued on February 14, 1997, the IBO analyzed the current and anticipated state
of both the U.S. and City economies and the anticipated effects on City revenues
and expenditures in the fiscal years 1998 through 2001.
Highlights of the IBO's projections for the city economy include:
Labor Markets: Employment growth in New York City is expected to slow over
the next several years, partly in response to slower growth at the
national level. IBO projects that City employment will increase only 0.3%
in 1997. Slower employment growth, coupled with increased pressure on
low-skill employment due to welfare reform, is expected to gradually
increase the city's relatively high unemployment rate to 9.2% by 2001.
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CITY ANALYSIS (Continued)
Employment by Sector: Industries that are projected to add significant
numbers of jobs to the City's economy through 2001 include business
services, education, social services, multimedia, hotels, retail sales and
entertainment. Growth in healthcare employment, a longtime source of
strength in the New York City economy, is expected to slow as the health
industry restructures. Similarly, securities industry employment growth
will weaken but remain positive, as the industry's profits retreat from
their record levels. Sectors that are expected to contract over the next
several years include government, manufacturing, banking and insurance.
The IBO projects that downsizing in the government sector will moderate
through 1999, with government employment forecast to stabilize in 2000.
The long-term structural decline in New York City's manufacturing sector
is expected to continue. Finally, large bank mergers and insurance
industry restructuring are projected to decrease employment in these
important components of the City's financial services sector.
Personal Income: The forecast of slower securities industry revenue growth
is expected to have a greater citywide impact on income than employment.
IBO projects that personal income growth will decrease from a 4.5% annual
rate in 1996 to 3.6% in 1997. For the remainder of the forecast period,
personal income growth is expected to strengthen gradually, rising from a
rate of 3.8% in 1998 to 4.9% in 2001.
Real Estate and Construction: The firming of New York City's real estate
market is forecast to continue over the next several years. Gains in
employment coupled with a lack of new construction will cause the vacancy
rate in primary Manhattan office buildings to decline from 12.0% in 1996
to just under 10.0% in 2001, while inflation-adjusted asking rents are
expected to rise at an average annual rate of nearly 1.0%. Tightness in
housing markets is projected to spur multi-family residential construction
as well as increase the price of housing.
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CITY ANALYSIS (Continued)
The table below illustrates the IBO economic projections for New York City for
the calendar years 1998 through 2001.
NEW YORK CITY
ECONOMIC OUTLOOK BY CALENDAR YEAR
1998 THROUGH 2001
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Actual Forecast
1996 1997 1998 1999 2000 2001
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Personal Income
Percent Change, year over year 4.5% 3.6% 3.8% 4.4% 4.7% 4.9%
Total Payroll Employment
Thousands of Jobs 3,341.5 3,351.6 3,362.8 3,376.5 3,393.9 3,408.3
Percent Change, year over year 0.7% 0.3% 0.3% 0.4% 0.5% 0.4%
Government Sector Employment
Thousands of Jobs 522.0 515.0 510.8 508.3 508.4 510.9
Percent Change, year over year -2.6% -1.9% -1.0% -0.6% 0.0% 0.5%
Retail Sales
Percent Change, year over year 3.3% 1.7% 2.2% 2.2% 2.2% 2.2%
Civilian Unemployment Rate
Percent 8.7% 8.9% 9.0% 9.1% 9.1% 9.2%
Consumer Price Index 2.9% 2.5% 2.9% 3.0% 3.1% 3.1%
- -------------------------------------------------------------------------------------------
</TABLE>
Source: New York City Independent Budget Office (IBO); compiled by KTR
The largest single source of City revenues has been real estate taxes, which are
the primary source of revenues for the City's General Debt Service Fund. The
Mayor's proposed budget for the 1998 fiscal year indicated that General Property
Taxes were expected to provide approximately 38.3% of total tax revenues and
21.4% of total revenues. Revenues from real estate taxes as a percentage of
total tax receipts have been slowly declining over time. In 1983, when the
current tax system was put into place, real estate taxes brought in 44.0% of
total tax collections.
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CITY ANALYSIS (Continued)
CONCLUSIONS
Over the long term, New York City is expected to maintain its position as a
world financial, political and cultural capital. The long-term population
decline has been reversed, and growth in population and employment is expected
to occur into the next century. After substantial employment growth during the
1980s, New York City's economy contracted sharply during the recent recession.
The 1980s national expansion and the recent recession were both much more
heavily concentrated in the service sector of the economy than previous
expansions and contractions. With New York City's heavy concentration of
economic activity in the F.I.R.E. and Services sectors of the economy, the 1980s
growth was enhanced in the City, but the losses in the recent recession were
similarly affected.
Employment in New York City has grown for over 40 consecutive months, and, while
forecasters expect future growth to be more moderate than in the recent past,
continued growth is expected. With New York City's leading position in
international business, the arts and multi-media and with employment growth
expected to be concentrated in the services sectors of the economy, commercial
real estate values, especially in Manhattan, are expected to increase.
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CITY ANALYSIS (Continued)
NEIGHBORHOOD ANALYSIS
The subject property is centrally situated in Midtown Manhattan within the West
Side office sub-market and on the northern boundary of the Times Square/Theater
District retail trade area. It is conveniently located within a diverse area of
Midtown Manhattan containing office, retail, hotel, performance and movie
theaters and cultural attractions. The West Side office sub-market is the sixth
largest (17.7 million square feet) of the 8 recognized sub-markets within the
Midtown office market. It is bounded by West 65th Street to the north, the
midblock between Sixth and Seventh Avenues to the east, West 42nd Street to the
south and 11th Avenue to the west. This sub-market is currently experiencing the
third lowest vacancy rate (11.7%) within the Midtown office market.
The West Side sub-market experienced record new development of 7.2+ million
square feet of commercial office space during the 1980s. New office development
included the following Class "A" buildings: a 44-story building containing
900,000 square feet at 1540 Broadway which is now the U.S. corporate
headquarters of the Bertelsmann Publishing Company; a 42-story building
containing 1,200,000 square feet at 1585 Broadway and a 36-story building
containing 600,000 square feet at 750 Seventh Avenue, both recently acquired for
owner occupancy by Morgan Stanley; a 35-story building containing 1,563,000
square feet at 1675 Broadway, a 43-story mixed use building containing 750,000
square feet at 1755 Broadway; the subject property, a 47-story building
containing 1,595,462 square feet at 825 Eighth Avenue known as One Worldwide
Plaza and a 54-story building containing 1,455,000 at 787 Seventh Avenue and
known as the Equitable Tower.
A retail trade area serving tourists and area office workers is evident between
West 42nd and West 57th Streets with a wide variety of restaurants (200+), movie
theaters and general retail stores. The side streets are also point of
destination locations with electronics stores on West 45th Street, a Brazilian
commercial area on West 46th Street, the Diamond District on West 47th
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CITY ANALYSIS (Continued)
Street and musical instruments on West 48th Street. Rockefeller Center begins on
West 48th Street between Fifth and Sixth Avenues.
The subject property also increasingly benefits from the resurgence of Times
Square and environs as a retail and entertainment destination for people from
throughout the region, the United States, and the world. Worldwide Plaza's
proximity to Broadway theaters, restaurants along "Restaurant Row", and
destination retail and entertainment outlets enhance the attractiveness of the
subject property. Hotels located along Eighth Avenue bring tourists to the area.
Although the subject property is considered to be on the outskirts of the
Midtown office district, as its location between Eighth and Ninth Avenues is
west of where the new activity in Times Square is focused, it continues to
strengthen its market position from the influencing neighborhood improvements.
National retailers and entertainment corporations such as Disney, Warner Bros.,
and Virgin Records are establishing significant presence in the area. Tishman
Urban Development Corp. will be developing a multiplex and theme restaurant at
the corner of 42nd Street and Eighth Avenue, and Forest City Ratner is
developing a $200 million entertainment and retail complex on West 42nd Street.
Other new developments include the 75,000 square feet Virgin Records Megastore
on Broadway between West 45th and West 46th Streets. New theme restaurants in
the area include the All-Star Cafe, David Copperfield's, Dine-O-Mat, and
Ferrara's.
The Durst Organization has recently begun development on a 48-story office
building (4 Times Square) which will contain 1,600,000 square feet of rentable
area along with a 3-level retail component at Broadway and West 42nd Street.
Conde Nast Publications will be the premier tenant in this new building which is
projected to be completed in 1998-1999. Theater renovations along with
development of a state-of-the-art entertainment and retail complex has recently
begun by the Walt Disney Company, Tussaud's Group and AMC Entertainment in a
$150 million project. Construction is projected to begin in 1996 with completion
planned for 1998. This development is expected to have a favorable long term
effect on the immediate
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CITY ANALYSIS (Continued)
neighborhood.
The subject property is surrounded to the west primarily by low-rise turn of the
century tenements and small-scale retail operations. The new residential
construction planned in the area should help to bring a "critical mass" of
luxury high-rise development to western Midtown, which will help Worldwide Plaza
shed its negatively positioned image. The site on the southeast corner of Eighth
Avenue and West 50th Street is currently being developed and is scheduled to be
improved with a high-rise luxury residential facility with an estimated 550
market rate apartment units; and a 270 unit market rate apartment development is
planned for the west side of Eighth Avenue between West 50th and West 51st
Streets.
The area is serviced via MTA bus lines, which are available along the major
arteries and cross streets. Subway service is available on Broadway, Sixth,
Seventh and Eighth Avenues. The IND "C" and "E" subway trains have stations
located at Eighth Avenue at West 50th Street, below the subject property's
office component and West 42nd Streets. The IND "A" subway stop is also located
on West 42nd Street and Eighth Avenue. The BMT "B", "D","E" and "F" trains run
on Broadway and Sixth Avenue, with stops at Sixth Avenue and West 50th Street
and Times Square (West 42nd Street and Seventh Avenue). In addition, the
cross-town shuttle, which connects the IND and BMT subway lines to IRT No. 4, 5
and 6 subways on the East Side of Manhattan is situated at West 42nd Street and
Seventh Avenue.
CONCLUSIONS
The subject property is a highly visible site on the periphery of the Midtown
West business district. Stability is provided by the revitalization of the Times
Square area and the amount of significant commercial development delivered to
the community during the past 10 years. The availability of retail services, an
established residential base and excellent linkages will all promote the use of
the subject property as an office and retail location going forward.
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CITY ANALYSIS (Continued)
NEIGHBORHOOD MAP
[GRAPHIC OMITTED]
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SITE DATA
IDENTIFICATION: The subject property, identified as 825 Eighth Avenue, is
located on the west side of Eighth Avenue, between West 49th and West 50th
Streets in the West Side sub-market within the Midtown office market in the
Borough of Manhattan, New York County, New York.
LEGAL DESCRIPTION: The subject property is identified on the tax maps of the
City of New York as Block:1040, Lots 29 (office component), 50 (theater), 1001
(garage), 1002 (retail), and 1003 (health club).
DIMENSIONS: The subject property is situated on a rectangular site containing
approximately 160,700 square feet. The subject property's office component has
dimensions with frontage of 200+ feet on Eighth and Ninth Avenues, and
approximately 260 feet on West 49th Street and 260 feet on West 50th Street. The
remaining components have various frontages and are incorporated within other
buildings.
AREA: The surrounding land uses include a mix of residential buildings and
hotels, with office buildings located north and east of the subject property
along Broadway and Seventh Avenue. Most of the housing stock in the immediate
neighborhood is situated west of Eighth Avenue, consisting of
turn-of-the-century tenement houses. Local retail goods and services can be
found along Eighth Avenue, with theaters and restaurants situated along the
cross streets. Commercial office space is primarily located along Sixth and
Seventh Avenues and Broadway, with residential development situated west of
Eight Avenue.
TOPOGRAPHY: The subject property's site, which is at grade, is generally level.
PUBLIC AND MUNICIPAL UTILITIES: The subject property is accessible to all
municipal and utility hookups. Electric and gas service is provided by
Consolidated Edison and water and sewer service and police and fire protection
from the City of New York.
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SITE DATA (Continued)
SOIL INFORMATION: No major adverse subsoil or drainage conditions were observed
at the time of inspection, but an engineer's report was not submitted.
FLOOD PLAIN INFORMATION: The subject property is located within Zone C, which is
not considered to be within a flood zone (Panel #360497-0031B) according to the
Federal Emergency Management Bureau.
ON-SITE PARKING: There is a 2-level underground parking garage, containing 473
legal spaces, which is accessible via curb cuts on West 49th and West 50th
Streets.
AIR AND LIGHT: The subject property is afforded excellent air and light on all
elevations. Air and light is influenced by the size of the subject property
relative to the lower density buildings of the immediately surrounding area and
street widths of the avenues and side streets
VISIBILITY/ACCESSIBILITY: The subject property enjoys excellent visibility and
accessibility by mass transit. The IND Eighth Avenue subway line is accessed
from the 50th Street Station at the subject property. Local subway service (IRT
1) is also conveniently available at Broadway and West 50th Street. A connecting
tunnel was constructed during the late 1980s between this station and the
station at Eighth Avenue and West 51st Street. Uptown, downtown and crosstown
local and express bus service are conveniently available along the avenues, 42nd
Street, Rockefeller Center and 57th Streets.
Eighth Avenue is a 5-lane, 1-way heavily trafficked corridor running north to
south between upper and lower Manhattan, becoming Central Park West at 59th
Street. West 49th and West 50th Streets are both local, one-way side streets
running between the East River and Hudson River. All of the bounding streets are
asphalt paved and improved with sidewalks, curbs and street lights.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 40
SITE DATA (Continued)
CONCLUSIONS
The subject property occupies a functional rectangular site with excellent air
and light and excellent visibility and convenient accessibility to mass
transportation.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 41
SITE DATA (Continued)
SITE PLAN
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 42
SITE DATA (Continued)
FLOOD ZONE MAP
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 44
ZONING OVERVIEW
The subject property is situated within a C6-4, General Central Commercial
District within a Special Midtown District (MID) as designated by the City
Planning Commission of the City of New York. The rules and regulations of the
MID district supersede all underlying zoning criteria.
The C6 district is designed to serve the office workers of the Central Business
District with a wide range of retail/commercial goods and services. The C6
district is primarily comprised of 12 sub-districts which vary as to permitted
bulk building density for residential, commercial and community service
buildings. The subject property is located in sub-district no. 7.
PERMITTED USES: Permitted Use Groups, "as of right", within the C6 district
include residential (use groups 1 and 2), community facilities (use groups 3 and
4), transient hotel lodging (use group 5), retail and commercial (use groups 6
through 11) and recreation (use group 12). The existing uses within the subject
property fall within the parameters of Use Groups No. 6 and 8 (retail, general
office and theater). Further, the existing uses are considered legal and in
conformity with existing use regulations.
BULK REQUIREMENTS: The bulk density in the C6-4 district permits an F.A.R.
(Floor Area Ratio) of 10.00 for commercial and residential buildings without
bonus. The subject property, as if vacant and unencumbered and before any bonus
F.A.R., reflects an allowable buildable of 1,607,000 square feet (160,700 square
feet site times an F.A.R. of 10.0). The subject property as improved (including
the residential portion) reflects a total above grade building area of
approximately 2,400,000 plus square feet.
The actual area versus the allowable area suggests that the subject property is
overbuilt within the legal constraints of the allowable buildable area of a new
"as of right" building. This difference is attributed to the result of bonus
F.A.R. for an open plaza, subway station
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 44
ZONING OVERVIEW (Continued)
improvements, theater renovations and a through block pedestrian walkway which
were granted at the time of development. The subject property is considered to
be in compliance with the existing bulk requirements of the zoning district
based on its modern construction.
PARKING REQUIREMENTS: No on-site parking is required for any real estate within
Midtown Manhattan according to the city zoning code.
TIMES SQUARE BUSINESS IMPROVEMENT DISTRICT (BID): Various Business Improvement
Districts were designated throughout New York City to strengthen the business
core of various areas, to stabilize development while providing direction and
incentives for further growth, and to preserve, protect and enhance the various
shopping districts. Refer to real estate tax analysis section of this report for
further details.
CONCLUSIONS
The subject property is considered to be legal and conforming in terms of use,
legal and complying as to the bulk regulations, legal and complying as to
on-site parking regulations and legal and complying with the requirements of the
special district.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 45
ZONING OVERVIEW (Continued)
ZONING MAP
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 46
REAL ESTATE ASSESSMENTS AND TAXES
The subject property is assessed by the City of New York as follows. The fiscal
tax year in New York City runs from July 1 to June 30. Real estate taxes during
the calendar year 1997 consist of the second half taxes of 1996/97 and the first
half taxes of 1997/98.
825 EIGHTH AVENUE
ACTUAL 1996/1997 AND 1997/1998 REAL ESTATE TAXES
OFFICE COMPONENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Transitional Transitional Target/Actual Target/Actual
Block / Lot Tax Year Land Total Land Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1040/29 96/97 $19,530,000 $123,150,000 $19,350,000 $126,000,000
Office Tower 97/98 $19,350,000 $121,350,000 $19,350,000 $123,750,000
- -------------------------------------------------------------------------------------
</TABLE>
AMENITY COMPONENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Transitional Transitional Target/Actual Target/Actual
Block / Lot* Tax Year Land Total Land Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1040/50 96/97 $2,520,000 $3,937,930 $2,250,000 $3,825,000
Theater 97/98 $2,250,000 $3,815,000 $2,250,000 $3,825,000
- ------------------------------------------------------------------------------------------
1040/1001 96/97 $952,200 $3,308,220 $945,000 $3,645,000
Garage Condo 97/98 $944,550 $3,426,480 $945,000 $3,813,300
- ------------------------------------------------------------------------------------------
1040/1002 96/97 $1,260,000 $1,740,600 $1,260,000 $1,764,000
Retail Condo 97/98 $1,260,000 $1,721,700 $1,260,000 $1,840,500
- -----------------------------------------------------------------------------------------
1040/1003 96/97 $1,140,750 $2,491,000 $1,140,750 $2,362,500
Health Club Condo 97/98 $1,140,750 $2,357,740 $1,140,750 $2,333,700
- -----------------------------------------------------------------------------------------
</TABLE>
Source: NYC Tax Assessor's Office; Compiled by KTR.
TAX RATE HISTORY: The subject property is taxed by the City of New York as a
Class IV-commercial property. Tax rates (per each $100.00 of Assessed Value)
for the last 12 fiscal years are as follows:
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 47
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
NEW YORK CITY
12-YEAR COMMERCIAL TAX RATE HISTORY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1984-1985
1997/ 1996/ 1995/ 1994/ 1993/ 1992/ 1991/ 1990/ 1989/ 1988/ to
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1987-1988
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.072 $10.252 $10.402 $10.608 $10.724 $10.698 $10.631 $9.924 $9.539 $9.582 $9.460
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Source: City Assessor; Compiled by KTR
Historically, New York City has raised tax revenues by increasing a property's
transitional and target assessment rather than by increasing the tax rate. The
city was forced however, to begin increasing the tax rate in light of declining
real estate values between 1987 and 1993. Over the last several years, the city
has been encouraged to balance its budget through cost cutting, rather than
increasing property taxes, due to pressure by the Municipal Assistance
Corporation, New York State and the public. As such, the tax rate for the past 4
fiscal tax years has been nominally declining.
Assessed valuations for income producing commercial real estate are annually
adjusted by the City of New York at percentages typically ranging from 25% to
45% of market value. Assessed values are declared on January 5th and finalized
on April 14th of the calendar year. Assessed values for income producing real
estate are established by employing the Direct Capitalization Method of the
Income Capitalization Approach and the Sales Comparison Approach. The Income
Capitalization Approach is reported to be the primary means of establishing
value.
Under the city's system of assessing real estate, the Transitional Assessed
Value is used in developing a property's annual real estate tax bill. If the
Target/Actual Assessed Value is greater than the Transitional Assessed Value,
the difference is phased-in over the next 5 years in equal installments.
However, if the Target/Actual Assessed Value is lower than the Transitional
Assessed Value, New York City's tax policy stipulates that the tax burden is
based on the lower of the 2 assessed values.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 48
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
The 1996/1997 real estate taxes of the subject property have been based upon the
Transitional Assessed Values with the exception of block 1040 lots 50 and 1003.
The 1997/1998 real estate taxes are based upon the Transitional Assessed Value
except for Block 1040 Lot 1003 which is based on its Target/Actual Total..
TAX COMPARABLES: The 1997/1998 taxable Assessed Value of the subject property is
compared with the assessed values of major office buildings located in proximity
of the subject property and on Broadway between West 42nd and 57th Streets. The
reported rentable area is used as the unit basis for analysis purposes.
The compilation of 27 office buildings ranging in size from 41,000 to 2,000,000
square, averaging 450,000 (rounded). On a square foot basis, the assessed values
range from $25.00 to $91.00 per square foot. The upper end reflects a Class "A"
office building containing 869,000 square feet at 1540 Broadway. The low end of
the range reflects a Class "B" office building containing 100,000 square feet at
1780 Broadway. The assessed value of the subject property ($76.00 per square
foot, rounded) is in the upper half of the range which averages $60.00 per
square foot. Further analysis reveals, however, that the taxable assessment of
the subject property is consistent with modern Class "A" commercial office
buildings.
The current assessment of the subject property is processed accordingly since it
is generally consistent with the influencing market and as most building owners
will utilize tax appeal and tax certiorari proceedings to establish real estate
tax liabilities which are consistent with its income producing capacity.
RE-ASSESSMENT POLICY: The unofficial policy of the city assessor over the last
decade has been to re-assess all real property upon sale at 30-45% of the sale
price, assuming an arm's-length transfer. The 45% rate represents the tax
equalization rate computed by the State
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 49
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
of New York. Any increases in the tax liability of a property are subsequently
required to be phased in over a 5-year period. Significant increases in tax
assessments were evident during the 1980s due to upwardly trending values.
Conversely, tax assessments have been trending downward during the 1990s due to
declining cash flows and lower real estate values.
We have examined the sales of Class "A" office buildings in the Midtown office
markets to see if this methodology is still applicable in light of the decline
in real estate values and the evidence of lower assessed values over the last
several years. Fourteen recent sales indicate that the city assessor is applying
ratios typically ranging from 24% to 50% (rounded) for Class A office buildings
with a weighted average of 40% (rounded).
The comparisons illustrates that the subject property is taxed as at levels
consistent for buildings with which it competes. Based on this analysis, overall
changes in the subject property's assessed value would not be anticipated. The
cash flow model in the Income Capitalization Approach to this appraisal will
project future real estate taxes assuming 3.0% annual increases.
I.C.I.P. TAX DEFERRAL PROGRAM: The Industrial - Commercial Incentive Program
(I.C.I.P.) is a tax deferral program initiated and administered by the City of
New York for the purpose of upgrading the city's inventory of vacant commercial
real estate and under-utilized commercial and/or industrial buildings.
The I.C.I.P. Program is a 20-year tax deferral plan (interest free) in which the
assessment to the new improvements are 100% exempted during years no. 1 through
3, declining to 80% in year 4, 60% in year 5, 40% in year 6 and 20% in year 7.
The assessment to the new improvements are then taxed at 100% during years no. 8
through 10. Subsequently, the cumulative deferred real
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 50
REAL ESTATE TAXES AND ASSESSMENTS (continued)
estate taxes of the first 10 years must be repaid in equal annual installments
(10% per year) over the remaining 10 years.
The subject property was granted a 20-year I.C.I.P. tax abatement beginning with
the 1988/1989 fiscal tax year. The 1997/1998 fiscal tax year represents year no.
10 with the assessment to the new improvements taxed at 100% (0% exempted). The
subject property's office component, Block 1040 Lot 29, has deferred aggregate
real estates taxes of $48,412,800 for the first ten years and must begin
repaying the aggregate deferred real estate taxes in 10 annual installments of
$4,841,200 beginning with the 1998/1999 fiscal tax year.
825 EIGHTH AVENUE
ICIP EXEMPTION BENEFITS (OFFICE COMPONENT)
- --------------------------------------------------------------------------------
Fiscal % Assessment Total Tax Tax
Tax Year Year Exempt Exemption Assessment Rate Savings
- --------------------------------------------------------------------------------
1988/89 1 100% $112,500,000 $ 26,250,000 9.582% $ 2,515,275
1989/90 2 100% $112,500,000 $125,500,000 9.539% $ 10,731,375
1990/91 3 100% $112,500,000 $133,750,000 9.924% $ 11,164,500
1991/92 4 80% $ 90,000,000 $127,000,000 10.631% $ 9,567,900
1992/93 5 60% $ 67,500,000 $122,000,000 10.698% $ 7,221,150
1993/94 6 40% $ 45,000,000 $117,000,000 10.724% $ 4,825,800
1994/95 7 20% $ 22,500,000 $118,000,000 10.608% $ 2,386,800
1995/96 8 0% $ -- $126,000,000 10.402% $ --
1996/97 9 0% $ -- $122,000,000 10.252% $ --
1997/98 10 0% $ -- $123,750,000 10.072% $ --
------------
TOTAL $ 48,412,800
- --------------------------------------------------------------------------------
Source: NYC Dept. of Finance, Compiled by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 51
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
REAL ESTATE TAXES: The calendar year 1997 real estate taxes for the subject
property's office and amenity component are estimated as follows.
- --------------------------------------------------------------------------------
OFFICE COMPONENT
Block/Lot NYC F.Y. Taxable Assmnt. Tax Rate Tax Liability Calendar 1997
- --------------------------------------------------------------------------------
1040/29 1996/97 $123,150,000 0.10252 $12,625,338 $12,423,855
Office Tower 1997/98 $121,350,000 0.10072 $12,222,372
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENITY COMPONENT
Block/Lot NYC F.Y. Taxable Assmnt. Tax Rate Tax Liability Calendar 1997
- --------------------------------------------------------------------------------
1040/50 1996/97 $3,825,000 0.10252 $392,139 $ 388,193
Theater 1997/98 $3,815,000 0.10072 $384,247
1040/1001 1996/97 $3,308,220 0.10252 $339,159 $ 342,137
Garage Condo 1997/98 $3,426,480 0.10072 $345,115
1040/1002 1996/97 $1,740,600 0.10252 $178,446 $ 175,928
Retail Condo 1997/98 $1,721,700 0.10072 $173,410
1040/1003 1996/97 $2,362,500 0.10252 $242,204 $ 238,627
Healthclub 1997/98 $2,333,700 0.10072 $235,050
----------
TOTAL $1,144,885
- --------------------------------------------------------------------------------
Source: NYC Dept of Finance, Tax Assessor, Calculated by KTR.
The real estate taxes processed within the discounted cash flow analysis for the
office component inclusive of the repayment of the ICIP deferred exemptions are
summarized on the following page.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 52
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
825 EIGHTH AVENUE
OFFICE COMPONENT
PROJECTED TAX LIABILITIES
- --------------------------------------------------------------------------------
Calendar Projected Exemption Office Amenity Total
Tax Year Office Taxes* Repayment Tax Liability Tax Liability Tax Liability
- --------------------------------------------------------------------------------
1997 $12,423,855 - $12,423,855 $1,144,885 $13,568,740
1998 12,796,571 $2,420,640 15,217,211 1,179,232 16,396,442
1999 13,180,468 4,841,280 18,021,748 1,214,608 19,236,356
2000 13,575,882 4,841,280 18,417,162 1,251,047 19,668,209
2001 13,983,158 4,841,280 18,824,438 1,288,578 20,113,016
2002 14,402,653 4,841,280 19,243,933 1,327,235 20,571,169
2003 14,834,733 4,841,280 19,676,013 1,367,053 21,043,065
2004 15,279,775 4,841,280 20,121,055 1,408,064 21,529,119
2005 15,738,168 4,841,280 20,579,448 1,450,306 22,029,754
2006 16,210,313 4,841,280 21,051,593 1,493,815 22,545,408
2007 16,696,622 4,841,280 21,537,902 1,538,630 23,076,532
2008 17,197,521 2,420,640 19,618,161 1,584,789 21,202,949
2009 17,713,447 - 17,713,447 1,632,332 19,345,779
- --------------------------------------------------------------------------------
Source: Calculated by KTR.
BID TAXES
The subject property is located within Times Square business improvement
district (BID) for Midtown New York. This organization of local businesses
self-imposed taxes to pay for local services conducive to its needs. These funds
currently support the various needs and the creation of services for the
community. Programs specifically aimed at bolstering employment and providing
support services to both owners and tenants are anticipated to further spur
commercial occupancy levels within the garment district core. The historical BID
taxes for the subject property were not provided. BID taxes are typically 0.3%
of the assessed values for commercial buildings. As such, we have projected BID
Taxes of $364,000 for the office component and $34,000 for the amenities
component (based on the respective assessed values). The BID taxes are projected
to grow at 2.0% per year.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 53
REAL ESTATE TAXES AND ASSESSMENTS (Continued)
PROJECTED REAL ESTATE TAXES: Real estate taxes are projected for use in
the discounted cash flow analysis are as follows.
1. The 1996/1997 and 1997/1998 Assessed Values are adopted and processed
accordingly. The 1997 BID taxes will also be adopted and processed
accordingly.
2. Calendar year real estate taxes are assumed to increase by 3.0% per year
and BID Taxes by 2.0% per year.
3. The 1997 Calendar Year Real estate taxes are converted to coincide with
the fiscal year within the discounted cash flow analysis.
4. The repayment of the deferred ICIP exemption for the Office component will
be processed as previously discussed.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 54
DESCRIPTION OF THE IMPROVEMENTS
The following descriptions of the subject property are based upon an inspection
of the improvements by the staff of Koeppel Tener Real Estate Services, Inc. on
July 25, 1997 and from information provided by the ownership.
The subject property is comprised of a 47-story office building with two levels
of basement office space, and an amenity component consisting of a mutli-plex
movie theater, a health club, a garage and retail stores. The total rentable
area of the subject property equates to approximately 1,837,397 square feet of
which 1,595,462 square feet is comprised of the retail and office components
(not including 241,935 square feet comprised of garage, movie theater, and
health club). There are 45 leasable office floors (floors 3 and 13 are not used
for rental purposes) in the office building component, with approximately
1,568,434 square feet of rentable office space, including the two basement
office levels.
The office building component is a multi-tenanted 47-story Class "A" commercial
office building, designed by Skidmore, Owings & Merrill and completed in 1989,
The movie theater occupies three levels, primarily two below the mid-block plaza
and street-level entrances at West 49th Street and West 50th Street (only the
West 50th Street entrance is operational). The health club is located in the
base of the Worldwide Plaza residential tower, located mid-block between Eighth
and Ninth Avenues across the plaza from the office tower. The 473-car garage
component is located on two basement levels below the residential component.
In addition to the 27,028 square feet retail space located in the office
building (18,030 square feet) of retail space is located on West 49th and West
50th Street and the easterly blockfront of Ninth Avenue. There are also two
retail kiosks, one 800 square feet and one 900 square feet, located in the
mid-block open plaza.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 55
DESCRIPTION OF IMPROVEMENTS (Continued)
The following description addresses site improvements, general building layout,
building area, construction features, entrances/exits, building component
descriptions, interior finish, elements of depreciation and conclusions.
SITE IMPROVEMENTS
The subject property contains a mid-block park area that is accessible to the
public between the office tower and the residential portion of the site. Within
the open plaza, there are two retail kiosks, 800 and 900 square feet. Public
seating is available in the park, which is a brick-paved area.
OFFICE COMPONENT
BASEMENT NO. 2: This floor contains the management office (13,694 sq. ft.), and
office space.
BASEMENT NO. 1: This floor contains office space.
PARK LEVEL: Contains the public plaza, retail frontage, retail kiosks, and the
health club entrance.
OFFICE RENTABLE AREA: The subject property's office space is comprised of
multi-tenanted floors and single tenanted office floors constructed around a
central core area containing a total rentable area of 1,568,434 square feet.
Individual floor areas range from 17,925 (Floor No. 49) to 45,380 square feet
(Floor No. 4), with an average of approximately 32,000 square feet.
MANAGEMENT OFFICE: There is a management office located in the on the second
basement level containing 13,694 square feet.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 56
DESCRIPTION OF IMPROVEMENTS (Continued)
WORLDWIDE PLAZA STACKED GRAPHIC
[GRAPHIC OMITTED]
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 57
DESCRIPTION OF IMPROVEMENTS (Continued)
GRADE (1): Three office lobbies are provided at grade level. Cravath, Swaine &
Moore has a lobby entrance to its own offices mid-block along Eight Avenue.
Ogilvy & Mather also has a private lobby, located on the West 49th Street
frontage. A lobby for the remainder of the office tenants is located behind the
Cravath entrance along Eighth Avenue toward the mid-block park.
An open, covered walkway provides access to base-building retail spaces, which
are not accessible from inside the building. The movie theater's main entrance
is mid-block on the south side of West 50th Street.
FLOOR NOS. 2 - 47 (architectural floors): There is retail space located on the
second floor. The 4th - 47th floor consists of 44 single tenanted office floors
and 2 multi-tenanted office floors with mechanical rooms, men's and women's
toilet rooms and public hallways. For leasing purposes floor nos. 3 and 13 have
been omitted, therefore although there are 47 architectural floors. A table
summarizing the occupied areas is located on the following page.
AMENITIES COMPONENT
There are 4 parts to the subject property's amenity component which are
summarized as follows.
GARAGE RENTABLE AREA: The subject property contains a 2-level unit containing
131,971square feet of rentable area allocated with 473 legal parking spaces
located on the two basement levels (divided into eight ramps) below the
residential tower at Worldwide Plaza. The garage is fully spinklered.
RETAIL RENTABLE AREA: There is 27,028 square feet of retail space located on
floors one and two of the office component and an additional 18,030 square feet
demised into retail units located in the base of the residential tower at
Worldwide Plaza and in freestanding kiosks located in the open plaza.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 58
DESCRIPTION OF IMPROVEMENTS (Continued)
825 EIGHTH AVENUE
OFFICE COMPONENET
SUMMARY OF OCCUPIED FLOORS
<TABLE>
<CAPTION>
Leased --------------------------------------------------------------------------------- Architectural
Floor No. O&M CSM PG DARCY Microsoft RH VACANT MGMT Lifetime Floor No.
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C2 45,734 17,599 6,870 7,571 13,694 C2
----------
C1 37,708 37,708 C1
----------
G Retail 1
----------
2 11,000 6,000 5,000 2
----------
4 59,915 59,915 3
----------
5 45,683 45,683 4
----------
6 45,818 45,818 5
----------
7 39,328 39,328 6
----------
8 39,328 39,328 7
----------
9 39,328 39,328 8
----------
10 39,328 39,328 9
----------
11 39,328 39,328 10
----------
12 39,328 39,328 11
----------
14 39,454 39,454 12
----------
15 34,419 34,419 13
----------
16 34,678 34,678 14
----------
17 34,218 34,218 15
----------
18 36,256 36,256 16
----------
19 36,043 36,043 17
----------
20 28,731 28,731 18
----------
21 29,501 29,501 19
----------
22 29,501 29,501 20
----------
23 29,501 29,501 21
----------
24 29,501 29,501 22
----------
25 29,501 29,501 23
----------
26 29,501 29,501 24
----------
27 29,501 29,501 25
----------
28 29,501 29,501 26
----------
29 29,501 29,501 27
----------
30 28,970 28,970 28
----------
31 30,596 30,596 29
----------
32 30,596 30,596 30
----------
33 30,596 30,596 31
----------
34 30,596 30,596 32
----------
35 30,596 30,596 33
----------
36 30,518 30,518 34
----------
37 30,518 30,518 35
----------
38 30,518 30,518 36
----------
39 30,518 30,518 37
----------
40 30,676 30,676 38
----------
41 29,994 29,994 39
----------
42 28,761 28,761 40
----------
43 28,761 28,761 41
----------
44 28,761 28,761 42
----------
45 28,761 28,761 43
----------
46 29,128 29,128 44
----------
47 29,128 29,128 45
----------
48 21,383 21,383 46
----------
49 17,925 17,925 47
----------
----------
OFFICE RBA 1,568,434 585,460 400,333 307,121 104,359 65,757 30,518 30,596 13,694 30,596
----------
RETAIL SPACE 27,028
----------
TOTAL OFFICE COMP 1,595,462 0.86%
---------------------------------------------------------------------------
THEATER GARAGE HEALTH CLUB RETAIL
---------------------------------------------------------------------------
TOTAL AMENITY 241,935 56,934 131,971 35,000 18,030
- ----------------------------------------------------------------------------------------------------
TOTAL OFFICE AND AMENITY 1,837,397
- -----------------------------------
</TABLE>
Source: Management provided schedule; Compiled by KTR.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 59
DESCRIPTION OF IMPROVEMENTS (Continued)
MOVIE THEATER RENTABLE AREA: There is a 6-screen 2,102 seat capacity multi-plex
movie theater containing 56,934 square feet of space. The theater is located on
a total of three levels, with two-levels below the mid-block park containing the
lobby and theaters, and an at grade entrance with stairs leading down to the
theater. Access down to the theaters is by two sets of escalators or handicapped
accessible elevators. The theater is in good condition with attractive finishes
and space.
HEALTH CLUB RENTABLE AREA: The health club contains approximately 35,000
rentable square feet. The club has a park level entrance, and is located on two
basement levels below the residential tower at Worldwide Plaza. The health club,
operated by the Vertical Club, is accessed by two elevators. Facilities include
a 85 foot long lap pool, a hot tub, indoor track, aerobics room, sauna, and
exercise machines, and free weights.
CONSTRUCTION FEATURES
STRUCTURE: The existing improvement is comprised of a concrete foundation,
reinforced steel footings, a structural steel frame and concrete over steel
decking.
EXTERIOR WALL: The exterior walls are brick masonry cladding with cast stone
concrete trim backed with rigid insulation.
ROOF: The set-back flat roof is an Inverted Roof Membrane Assembly finished with
insulation and concrete pavers.
WINDOWS: Thermopane glass fixed lights set in anodized aluminum sashes. The
windows provide excellent light.
STAIRWELLS: There are two sets of painted steel scissors stairs with steel
handrails and
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825 Eighth Avenue August 12, 1997
New York, New York Page 60
DESCRIPTION OF IMPROVEMENTS (Continued)
painted concrete treads and landings. Stairways are enclosed in painted concrete
block walls. Firestairs are heated. Private interconnecting stairs have been
installed for multiple office floors occupied by a single tenants.
ELEVATORS: The subject property has a total of 23 automatically operated
passenger elevators (4000 lb. capacity) running between the lobby and the upper
floors. The passenger elevator cabs are finished with carpeted or marble floors,
wood panel walls, and polished bronze ceilings. The elevators are reported to be
in compliance with the Americans with Disabilities Act. Additionally, there are
3 freight elevators (4,000 to 4,500 lb. capacity per cab) and a truck elevator
(60,000 lb.
capacity per cab).
ESCALATORS: Escalators are located in the Cravath lobby and the Ogilvy lobby,
servicing the lobby and the concourse.
INTERIOR
MAIN ENTRANCES/LOBBIES: The building contains three lobbies: one for Cravath,
Swaine, and Moore, one for Ogilvy and Mather, and one for the remainder of the
office tenants. Individual sets of metal revolving and swing doors open to the
lobbies. Each lobby is finished with a marble floor and walls. Ceilings are
vaulted double height finished with veneer plaster.
SERVICE ENTRANCE: The loading dock with 7 bays are located on the second
basement level. Six of the seven are available for deliveries, and the other is
used for a compactor. The loading dock is accessed by two 60,000 pound capacity
truck elevators.
PUBLIC HALLWAYS: Public halls are finished with carpeted or tile floors, painted
and vinyl or fabric-covered wall finishes over gypsum wallboards on metal studs,
acoustic drop ceilings and ceiling-hung fluorescent lighting with parabolic
reflectors. Ceiling height is 13 feet on most office floors.
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825 Eighth Avenue August 12, 1997
New York, New York Page 61
DESCRIPTION OF IMPROVEMENTS (Continued)
OFFICE SPACE: Interior finishes generally reflect an average to above average
building installation typically found throughout the Class "A" office market of
Manhattan. All office units are finished according to tenant specifications as
follows: commercial carpeting, marble, vinyl tile and wood floors, sheetrock and
wood panel walls, acoustic drop ceilings, and ceiling hung fluorescent and high
hat lighting. All occupied office space has been fitted to individual tenant
requirements.
TOILET FACILITIES: Each floor contains adequate men's and women's toilet rooms.
The men's rooms contains 3 flushometer toilets, 3 urinals and sinks. The women's
rooms contains 4 flushometer toilets and sinks. Toilet rooms are finished with
ceramic tile floors and walls, acoustical tile ceiling and ceiling hung
fluorescent lighting. According to the building manager, the toilet facilities
are ADA compliant.
MECHANICAL SYSTEMS
HVAC/HEAT/HOT WATER: The office HVAC system is installed on individual floors to
provide tenants with a Variable Air Volume (VAV) system. All floors receive
cooling and electric heat through Blazer package 2-speed units. The system is
supplied from condenser water supply. The system uses an Evapco 4-cell roof
mounted cooling tower, with a maximum capacity of 6,000 tons. Cooled air is
provided to all space through central ductwork. Heat to the perimeter is
provided by two-zone hot water fin coil radiation.
ELECTRIC: Incoming electric service totals 36,000 amps, which is reduced to
277/480 volts by a bank of building-owned dry transformers. This amount appears
to be adequate. Electricity is directly metered by Con Edison.
WATER AND FIRE PROTECTION: Water, for domestic use, sprinkler and standpipe
system is stored in (2) tanks with a 28,000 gallon capacity (with 6,034 gallon
fire reserve) on the
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DESCRIPTION OF IMPROVEMENTS (Continued)
52nd floor. The subject property is fully sprinklered. Further, it is reportedly
in compliance with all laws pertaining to fire safety: emergency (strobe)
lighting throughout, smoke detectors, fire control panel in the lobby and
passenger elevators with automatic recall. Cravath has installed roll down (or
drop) doors at their convenience stairs, and Ogilvy has alternated their
convenience stairs from one side of the building to the other from floor to
floor.
SECURITY: Entrance and accessibility is controlled through the installation of a
security card system on individual floors. A closed-circuit television security
system is provided in the building, and monitors are located at the lobby
console and in the security room.
CONDITION OF BUILDING: The subject property is a modern Class "A" commercial
office building which has been constructed with quality materials, systems,
finish and workmanship, and which has been well maintained to date. The building
appears to be in very good condition and well maintained based on our inspection
of the subject property and discussions with the ownership.
ELEMENTS OF DEPRECIATION
PHYSICAL DETERIORATION: No physical deterioration has been found, other than
minor repairs and maintenance typical of most office buildings Overall, there
appeared to be limited amount physical deterioration due to a comprehensive
level of maintenance to date.
FUNCTIONAL OBSOLESCENCE: The building has been built to modern standards,
however, the retail layout of office components has limited street visibility, a
form of functional obsolescence as the rents in place are lower than typical
retail rents.
EXTERNAL OBSOLESCENCE: External obsolescence is evidenced within the subject
property since the current unsubsidized costs of development are in excess of
the unit values
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DESCRIPTION OF IMPROVEMENTS (Continued)
illustrated by Income Capitalization Approach. The difference in values is
primarily attributed to external obsolescence.
CONCLUSIONS
The subject property is a modern Class "A" commercial office building with an
amenities component which has been designed and constructed with quality
materials and workmanship and which has been well maintained to date. Its office
component reflects quality modern office space for both full and multi-tenanted
floor tenants, and is considered attractive to large space users based on its
large floor plates offering excellent light and air.
The Marshall Valuation Service suggests that Class "A" office buildings
typically have a life expectancy of approximately 60 years. The ratio of the
effective age (8 years) of the subject property to its estimated physical life
suggests accrued depreciation of 13.3% in its short and long lived components.
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825 Eighth Avenue August 12, 1997
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SUMMARY OF EXISTING LEASES
Current income has been compiled based on a review of a billing and collections
statement dated July 25, 1997 as supplied by Zeckendorf Management and
supporting information supplied by Blackstone. Reference the addenda for an
itemized tenant roster.
OCCUPANCY: The subject property is comprised of office and amenities components
which are occupied as follows.
825 EIGHTH AVENUE
OCCUPANCY SUMMARY
- -------------------------------------------------------------------------------
As a Occupancy
Occupied Vacant Total % of as a % of
Category (Sq.Ft.) (Sq.Ft.) (Sq.Ft.) Total Total
- -------------------------------------------------------------------------------
Office Tower
Retail/Commercial
15,250 11,778 27,028 1.7% 56.4%
Management
13,694 0 13,694 0.9% 100%
Office
1,524,144 30,596 1,554,740 97.4% 98%
--------- ------ --------- ----- ---
Sub-Total
1,553,088 42,374 1,595,462 100.0% 97.3%
As of Total
(86.8%)
Amenities
Theater 56,934 0 56,934 23.5% 100%
Garage 131,971 0 131,971 54.5% 100%
Health Club 35,000 0 35,000 14.5% 100%
Retail/Commercial 11,694 6,336 18,030 7.5% 64.9%
------ ----- ------ ---- -----
Sub-Total 235,999 6,336 241,935 100.0% 99%
As of Total (13.2%)
Total 1,819,254 49,510 1,837,397 (100.0%)
- -------------------------------------------------------------------------------
Source: Compiled by KTR
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825 Eighth Avenue August 12, 1997
New York, New York Page 65
SUMMARY OF EXISTING LEASES (Continued)
OFFICE SPACE
The primary office tenants are Ogilvy & Mather (585,460 square feet) under
leases expiring in 2009; Cravath Swaine & Moore (400,333 square feet) under a
lease expiring 2009; Polygram Records (307,121 square feet) under leases
expiring in 2012. The three major tenants occupy 82.4% of the subject property's
rentable office area.
825 EIGHTH AVENUE
LEASE EXPIRATION AND AVAILABILITY SCHEDULE
OFFICE COMPONENT
- --------------------------------------------------------------------------------
Category Rentable Area As a %of Total Cumulative As a %
(Sq.Ft.)
- --------------------------------------------------------------------------------
Management (A) 13,694 0.87% 0.87%
Vacant Office 30,596 1.95% 1.95%
1 - 1997 0 0 2.82%
2 - 1998 0 0 2.82%
3 - 1999 0 0 2.82%
4 2000 0 0 2.82%
5 2001 0 0 2.82%
6 - 2002 0 0 2.82%
7 - 2003 70,757 4.51% 7.34%
8 - 2004 0 0 7.34%
9 2005 0 0 7.34%
10 - 2006 0 0 7.34%
11 - 2007 30,518 1.95% 9.28%
12 - 2008 0 0 9.28%
13 - 2009 1,016,389 64.8% 74.08%
14 - 2010 99,359 6.33% 80.42%
15 - 2011 0 0 80.42%
16 - 2012 307,121 19.58% 100.00%
------- ------
Sub-Total 1,568,434 100.0%
- --------------------------------------------------------------------------------
(A) Includes concourse office and sub-basement storage. Source: Paramount
Group; compiled by KTR
MAJOR OFFICE TENANT PROFILES
OGILVY & MATHER: Ogilvy & Mather Worldwide, Inc. is an international advertising
agency with offices worldwide. The existing lease is guaranteed by Ogilvy, which
was acquired by WPP Group, PLC and is a publicly traded company. They are
considered a credit tenant with a 20.59% limited partnership interest in the
office component (granted as part of a leasing incentive). The space occupied by
Olgilvy & Mather is reportedly available for sublet; however confirmation was
not available from tenant representatives.
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825 Eighth Avenue August 12, 1997
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SUMMARY OF EXISTING LEASES (Continued)
CRAVATH SWAINE & MOORE: Cravath Swaine & Moore is considered to be one of the
most prestigious law firms in the United States, representing many high profile
clients. They are considered a credit tenant with a 8.91% limited partnership
interest in the office component (granted as part of a leasing incentive).
POLYGRAM RECORDS INC.: Polygram Records Inc. (partially owned by Philips
Electronic N.V.) involved in the entertainment and music industry is a
publicly-traded corporation. The existing lease, guaranteed by its parent
company Polygram N.V. is considered a credit lease.
RETAIL SPACE
The subject property contains a total of 45,058 square feet of retail space;
27,028 is located in the office component and 18,030 is included in the amenity
component. The retail units are primarily leased to local non-credit tenants
under various leases. The retail space consists of units with avenue frontage,
units with side street frontage, second floor space, arcade space and kiosk
space located in the outdoor plaza. As information regarding the retail leases
was limited, we have applied market oriented assumptions where information was
not available.
AMENITIES
The theater component is leased to the RKO Century Warner Theaters, Inc. (RKO)
under a lease that expires in 2019. The original lease was renegotiated
providing the tenant with a rent deferral and a percentage rent over a
breakpoint of gross sales. The theater is reportedly improving in sales and
should benefit directly from the new residential development projects that are
underway in the neighborhood.
The parking garage is operated under a recently negotiated management agreement
with Central Parking Systems. The agreement is for ten years whereby the
operator is responsible for all operating expenses, a base rent payment plus a
percentage rent. The health club component,
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825 Eighth Avenue August 12, 1997
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SUMMARY OF EXISTING LEASES (Continued)
consisting of approximately 35,000 square feet, is leased by Manhattan Sports
Club, Inc, a subsidiary of Bally's. The lease is guaranteed by Bally's and
expires in 2009. All amenity tenants are projected to continue occupying their
respective spaces within the subject property until expiration of their leases.
AMENITIES COMPONENT: The existing contract rents for the individual components
are detailed in the Market Rent Analysis sections of this report.
TENANT CONTRIBUTIONS: All office space tenants are required to pay real estate
tax and operating expense contributions. Real estate tax contributions are based
on the tenant's pro-rata share of occupied area or pro-rata share of increases
over a base year. Additional operating expense recoveries from miscellaneous
income offsets include HVAC charges, elevator maintenance and service charges.
RENEWAL OPTIONS: Renewal options are reported in a few of the leases. The
renewal options equate to a percentage of Fair Market Rental Value.
BAD DEBTS/ACCOUNTS RECEIVABLE: The historical bad debt of the subject property
was unavailable. A review of a current billing and collections report (dated
July, 1997) indicates that collections appear to be good. There are some
accounts that are past due, however, ownership indicates that most tenants
reasonably settle.
CONCLUSION
The portfolio of existing leases encumbering the subject property are consistent
with current market criteria. As these leases represent contractual obligations,
they are processed accordingly within the Income Capitalization Approach.
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825 Eighth Avenue August 12, 1997
New York, New York Page 68
OFFICE MARKET OVERVIEW
The Manhattan office market is divided into 3 major markets: Midtown, Downtown
and Midtown South. The subject property is centrally situated within Manhattan's
Midtown office market in the sub-market referred to as West Side sub-market.
The following office market analysis is based on our knowledge of the Midtown
office market and review of various real estate publications including. The Real
Estate Board of New York's "Manhattan Market Profile".
The following analysis delineates the 3 major office market areas of Manhattan
with emphasis on the Midtown office market. We will address supply and demand
factors within the Midtown office market and the influencing sub-markets. The
supply section addressees the total inventory of conventionally modernized
office buildings, planned new construction and competitive projects in the
surrounding area. The demand section will address current absorption and its
impact on the current and near term market conditions (vacancy lease, lease
rates). The 3 major sub-markets of Manhattan are generally defined as follows.
MIDTOWN OFFICE MARKET: The Midtown office market is generally defined as the
area between West 30th/East 32nd Street and 65th Streets from river to river. It
is further divided into 8 major sub-markets: (1) West Side, (2) Sixth
Avenue/Rockefeller Center, (3) Fifth/Madison Avenues, (4) Park Avenue, (5) East
Side, (6) Grand Central, (7) Murray Hill, and (8) the Penn Station/Garment
Center. The West Side sub-market is bounded by West 65th Street to the north,
the mid-block between Sixth and Seventh Avenues to the east, West 42nd Street to
the south and 11th Avenue to the west.
DOWNTOWN OFFICE MARKET: The Downtown office market, defined as the area below
Canal Street, is comprised of 5 distinct sub-markets: City Hall, Insurance,
Financial East, Financial West and World Trade.
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New York, New York Page 69
OFFICE MARKET OVERVIEW (Continued)
MIDTOWN SOUTH OFFICE MARKET: The Midtown South office market, defined as being
the area between East 32nd/West 30th Street and Canal Streets from river to
river, is divided into 5 distinct sub-markets: Park Avenue South, Flatiron,
Chelsea, Noho-Soho, and Hudson Square.
OFFICE BUILDING SUPPLY
MIDTOWN INVENTORY: There are 362 office buildings with approximately 194.7
million square feet of space within the Midtown office market. This survey
reflects office buildings exceeding 150,000 square feet and which are
conventionally modernized with air conditioning but not owned and occupied by a
government. Inventory by sub-market is delineated as follows.
MIDTOWN INVENTORY BY SUB-MARKET
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Rentable Area
In Million As a Percentage
No. Sub-market No. of Buildings Sq.Ft. of Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 West Side 31 17.7 9.1%
2 Sixth Avenue/Rockefeller Center 45 38.4 19.7%
3 Fifth/Madison Avenue 50 20.9 10.7%
4 Park Avenue 35 25.7 13.2%
5 East Side 33 15.8 8.1%
6 Grand Central 79 34.2 17.6%
7 Murray Hill 16 6.2 3.2%
8 Penn Station/Garment Center 73 35.8 18.4%
-- ---- -----
Total 362 194.7 100.0%
- --------------------------------------------------------------------------------------------
</TABLE>
Source: Gordon Report; compiled by KTR
he Midtown office market realized a net increase in inventory of approximately
22% (34 million square feet) between 1980 and 1993 due to expanding regional and
world economies and an expanding "white collar" work force. The Sixth
Avenue/Rockefeller Center sub-market contains the largest inventory of office
space followed by the Penn Station/Garment Center and Garment Center
sub-markets. The smallest sub-markets are the Murray Hill, East Side and West
Side sub-markets.
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825 Eighth Avenue August 12, 1997
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OFFICE MARKET OVERVIEW (Continued)
MIDTOWN CONSTRUCTION TRENDS: Between 1960 and 1992, 203 office buildings were
constructed in Midtown containing 112 million square feet with the last 2
buildings, containing 1.8 million square feet, completed in 1992. The average
construction rate over this period equates to 3.5 million square feet per year
which also holds true for the latter half of the 1980s. The majority of office
development during the early 1980s occurred in the East Side sub-markets,
subsequently moving to the West Side sub-market in the late 1980s, primarily
along Broadway in the Theater District, as a result of the availability of land
for development further enhanced by a 20% bulk zoning bonus. East Side
development occurred primarily along Third, Lexington, Madison (above East 50th
Street) and Fifth Avenues.
The majority of construction in the post-war period occurred in 3 cycles;
1960-65, 1969-72 and 1981-90. These cycles generally paralleled the city's
strong economic periods. The lowest point of construction is generally
considered to be the 1975 to 1978 period when the City of New York was on the
verge of bankruptcy, however, the current period is similar with that period as
speculative construction has ceased. New construction began diminishing after
the 1987 stock market crash, subsequently ending with the 1990 recession, a
declining employment base and lack of institutional financing.
The cyclical nature of real estate is still clearly evident as speculative new
construction has ceased with future office development projected to be
restricted as compared with the preceding decade. This is reflected by the fact
that 178,000 square feet was completed in 1991, 1.8 million square feet was
completed in 1992, 260,000 square feet was completed in 1993 of which 210,000
square feet was owner occupied and no new construction was completed in 1994,
1995 and 1996.
There has been no new speculative construction within the Midtown office market
between 1995-1996, however, 4.6 million square feet was extensively renovated in
several existing
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825 Eighth Avenue August 12, 1997
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OFFICE MARKET OVERVIEW (Continued)
buildings during this period. This activity was concentrated in 1 Penn Plaza
(2.4 million square feet), 100 Park Avenue (825,000 square feet), 320 Park
Avenue (656,000 square feet), 365 Fifth Avenue (582,000 square feet) and 110
East 60th Street (170,000 square feet).
The Durst Organization is constructing a 48-story office building (4 Times
Square) which will contain 1,600,000 square feet of rentable area (along with a
3-level retail component as part of the Times Square Redevelopment Project) at
Broadway and West 42nd Street. Conde Nast Publications and Skadden Arps Meagher
and Flom, Esqs. will be the anchor tenants (80% of total) in this new building
which is projected to be completed in 1998-1999. Low land costs due to its
assemblage over a long term period has enabled development under current market
conditions.
Market demand is increasing, however, near term development will be influenced
by the extensive pre-leasing requirements required to obtain institutional
development financing. Some of the more notable proposed projects are the
remaining 2.6 million square feet (3 additional buildings) of the Times Square
Redevelopment project, the 1.5 million square feet at Seventh Avenue and West
49th Street in Rockefeller Center, the 1.3 million square feet proposed for
Columbus Circle and 950,000 square feet proposed for 383 Madison Avenue at East
46th Street.
Although there is little new office construction on the immediate horizon the
current lack of available large blocks of contiguous space with the
infrastructure to support high tech office occupancy will lead to a demand for
new construction.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
MAP OF TIMES SQUARE AREA CONSTRUCTION
[GRAPHIC OMITTED]
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825 Eighth Avenue August 12, 1997
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OFFICE MARKET OVERVIEW (Continued)
OFFICE DEMAND ANALYSIS
MIDTOWN MARKET AVAILABILITY: Overall Midtown Manhattan availability rates, for
vacant and sub-let space, ranged between 2.0% and 9.8% between 1978 and 1988.
However, the combination of new 1980s construction coupled with the 1987 stock
market crash and ensuing regional recession raised the availability level from
13.2% in January 1989 to its maximum level of 18.0% as of December 1991.
Improving economic conditions and 8.2 million square feet of positive net
absorption between January, 1992 and December, 1994 (3.9 million square feet for
1993, 2.4 million square feet for 1992 and 1.8 million square feet for 1992)
lead to a downward trend in the overall vacancy rate through 1994 (16.5% as of
December, 1992, 15.5% as of December, 1993 and 13.5% as of December, 1994).
The overall vacancy rate increased to 14.2% at the end of December, 1995, as
sublet space continued to become available and the market waited for sustained
economic growth in order to justify further expansion. The overall vacancy rate
has subsequently declined to 13.5% at the end of December, 1996 and 12.8% at the
end of February, 1997 as improving economic conditions are evident and the
amount of sublet space has declined. Sublet space has historically ranged up to
20% of the existing vacant space.
The lowest percentage vacancies are evident in the West Side (8.0%), Sixth
Avenue/Rockefeller Center (8.5%), Park Avenue (10.2%) and East Side (11.2%)
sub-markets. The highest percentage vacancies are evident in the Murray Hill
sub-market (22.2%) followed by the Fifth/Madison Avenue (18.4%), Penn
Station/Garment Center sub-market (15.5%) and the Grand Central sub-market
(15.0%). The lowest square foot vacancies are evident in the Murray Hill, East
Side and sub-markets at 1.4, 1.4 and 1.8 million square feet, respectively. The
highest square foot vacancies are evident in the Penn Station/Garment Center
sub-market (5.5 million square feet) followed by the Grand Central sub-market
(5.1 million square feet), the
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OFFICE MARKET OVERVIEW (Continued)
Fifth/Madison Avenue sub-market (3.8 million square feet) and the Sixth
Avenue/Rockefeller Center sub-market (3.3 million square feet).
Current availabilities by sub-market are summarized as follows.
MIDTOWN AVAILABILITIES BY SUB-MARKET (SQUARE FEET)
AS OF 2/28/97
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Total Total Total Total Total Total Total
Availability Availability Availability Availability Availability Availability Availability
As of As of As of As of As of As of As of
2/28/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
In Millions In Millions In Millions In Millions In Millions In Millions In Millions
No. Sub-Market Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft.
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1. West Side 1.4 1.6 2.2 2.1 2.8 4.1 5.0
2. Sixth Avenue/Rock Ctr. 3.3 3.4 4.2 4.2 5.1 5.0 6.9
3. Fifth/Madison Ave. 3.8 4.0 3.0 3.7 3.0 3.6 3.8
4. Park Avenue 2.6 2.9 3.2 2.1 3.5 3.7 4.2
5. East Side 1.8 1.9 1.5 1.4 2.2 2.7 2.2
6. Grand Central 5.1 5.2 6.4 7.0 7.3 7.2 6.5
7. Murray Hill 1.4 1.6 1.2 0.8 0.9 0.8 0.7
8. Penn Station/Gar. Ctr. 5.5 5.4 6.0 4.5 4.9 4.9 4.7
--- --- --- --- --- --- ---
Total 24.9 26.1 27.7 25.8 29.7 32.2 34.0
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Gordon Report; compiled by KTR
MIDTOWN AVAILABILITIES BY SUB-MARKET (AS A %)
AS OF 2/28/97
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Total Total Total Total Total Total Total
Availability Availability Availability Availability Availability Availability Availability
As of As of As of As of As of As of As of
2/28/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
In Millions In Millions In Millions In Millions In Millions In Millions In Millions
No. Sub-Market Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft.
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1. West Side 8.0% 9.2% 12.6% 11.7% 15.7% 22.5% 27.3%
2. Sixth Avenue/Rock Ctr. 8.5% 8.9% 10.8% 10.9% 13.3% 13.2% 19.3%
3. Fifth/Madison Ave. 18.4% 19.3% 14.5% 18.0% 14.5% 17.6% 18.6%
4. Park Avenue 10.2% 11.4% 12.5% 8.2% 13.9% 14.6% 16.6%
5. East Side 11.2% 11.8% 9.8% 8.8% 14.3% 17.4% 14.1%
6. Grand Central 15.0% 15.3% 18.7% 20.6% 21.3% 21.0% 19.2%
7. Murray Hill 22.0% 25.6% 18.9% 14.1% 16.0% 14.7% 12.9%
8. Penn Station/Gar. Ctr. 15.5% 15.2% 16.7% 13.4% 14.5% 14.8% 13.9%
Total 12.8% 13.4% 14.2% 13.5% 15.5% 16.8% 18.0%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Gordon Report; compiled by KTR
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825 Eighth Avenue August 12, 1997
New York, New York Page 75
OFFICE MARKET OVERVIEW (Continued)
Declining availability rates during 1996 and 1997 have been most evident in the
West Side, Grand Central, Sixth Avenue/Rockefeller Center and Park Avenue
sub-markets. The Grand Central sub-market has been the most active sub-market
during 1996 and 1997. Availabilities within the West Side sub-market represents
only 8.0% (1.4 million square feet) of total availabilities, which represents
the lowest concentration of available space in a sub-market. The highest
concentration of available space (as a percentage of total availabilities) is
centered in the Grand Central, Penn Station/Garment Center and Fifth/Madison
Avenue sub-markets which account for 58.2% (14.5 million square feet) of total
availabilities.
Although an increase in availability rates have been evident in the
Fifth/Madison Avenue, East Side and Murray Hill sub-markets which have
experienced the loss of several large space users (Avon, J. P. Morgan, Blue
Cross/Blue Shield, Chemical Bank, Bank of America, Credit Suisse and First
Boston). These large space users have consolidated and relocated to other
locations within the Midtown, Midtown South and Downtown office markets.
The decline in the overall vacancy rate has been attributed to strong leasing
activity by both large (over 50,000 square feet) and small space users (under
50,000 square feet) within the Grand Central, Sixth Avenue/Rockefeller Center,
West Side, Penn Station/Garment Center and Park Avenue sub-markets. Between 1991
and 1996, there was a 25% to 35% decline in the supply of large contiguous floor
plates (over 50,000 square feet). This type of space has been in demand by large
corporate users attempting to secure space for future expansion at very
attractive rents. Recent reports indicate, however, that the supply of large
blocks of space has stabilized while the availability of small blocks of space
between 10,000 and 25,000 square feet has begun trending downward.
Notable transactions during 1996 include: 660,000+ square feet to Viacom in 1500
and 1633 Broadway; 300,000 square feet to Morgan Guaranty at 345 Park Avenue;
300,000 square feet to B.M.W. Motor Car at 555 West 57th Street; 150,000 square
feet to Pfizer; and 82,000 square
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 76
OFFICE MARKET OVERVIEW (Continued)
feet to Heller Financial at 150 East 42nd Street; 58,000 square feet to R.H
Donnelley at 220 East 42nd Street; 202,000 square feet to the N.F.L. at 280 Park
Avenue; 226,000 square feet to Deutsche Bank at 1251; and 1301 Sixth Avenue and
90,000 square feet to Sony at 555 Madison Avenue. As of the first half of the
1997 year, the leasing activity within the Midtown Office Market remains strong.
The top leasing transactions have been compiled and presented in the below:
MIDTOWN OFFICE MARKET'S TOP TRANSACTIONS
FOR THE FIRST HALF OF 1997
- --------------------------------------------------------------------------------
Building Address Sq. Ft. Leased Tenant
- --------------------------------------------------------------------------------
20 Rockerfeller Plaza 305,000 Christie's
330 West 34th Street* 302,400 NYC Human Resourcces Admin
220 East 42nd Street 302,000 Omnicom Group, Inc.
55 East 52nd Street 278,226 ING Barings Corp.
280 Park Avenue 205,329 Furman Salz
150 East 42nd Street 187,369 Pfizer
2 Penn Plaza 178,899 Information Builders
277 Park Avenue 161,150 Donaldson Luftkin & Jenrette
245 Park Avenue 120,402 Xerox Corp.
463 Seventh Avenue* 120,000 Brylane Inc.
335 Madison Avenue* 120,000 Itochu International
150 East 42nd Street 113,523 Bayerishce Veriensbank
888 Seventh Avenue 112,290 Golden Books
12 East 49th Street* 106,750 Credit Suisse First Boston
245 Park Avenue 100,066 Bear Stearns
757 Third Avenue 99,216 KPMG Peat Marwick
335 Madison Avenue* 93,693 ABN Amro Bank
1221 Sixth Avenue 87,820 Sonnenschein Nath & Rosenthal
260 Madison Avenue 77,733 Reader's Digest
1185 Sixth Avenue 75,000 Fleet Bank
1657 Broadway 75,000 Times Square Church
530 Fifth Avenue* 71,788 Mass Mutual
530 Fifth Avenue 71,170 J.P. Morgan
1 Penn Plaza* 66,000 Milberg Weiss & Bershad
1185 Sixth Avenue 63,000 Fleet Bank
417 Fifth Avenue 60,000 GT Interactive
1251 Sixth Avenue 57,500 Tha Bank of Tokyo trust
320 West 57th Street* 55,555 BMI-Broadcast Music
640 Fifth Avenue 54,821 Bozell Jacobs Kenyon & Eckhardt
- --------------------------------------------------------------------------------
* Renewal transaction
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 77
OFFICE MARKET OVERVIEW (Continued)
A recently published article (New York Times) quoted several leading brokers
stating that the current availability rate is 3% within the top 65 buildings in
the Midtown office market. Further, there are several large space users with a
potential demand for 9 million square feet which are looking at only 4 million
square feet of eligible office space. These companies (Bear Stearns, Reuters,
Standard & Poors, Citibank, Ziff-Davis Publishing, Grey Advertising and Paul,
Weiss, Rifkind, Wharton & Garrison) are looking for large open floors with
state-of-the-art features for power and communications.
Vacancy rates should continue a downward trend from an expanding economy and a
relatively small amount of space projected to enter the market over the next few
years. Current office market surveys suggest that the overall vacancy rate would
be further reduced by an estimated 1.0 to 1.5 million square feet, however,
sub-lease space has continued to influence overall availability. The majority of
space additions (vacancy and sub-lease) are reflected in the decisions by Avon
to vacate 700,000 square feet in 9 West 57th Street, Credit Suisse First Boston
to vacate 200,000+ feet in Tower 49, First Chicago to vacate 98,000 square feet
in 787 Seventh Avenue and Arthur Anderson to vacate 77,000 square feet in 1345
Sixth Avenue.
Another influencing factor in Midtown availability is marked by the exodus to
the Midtown South and suburban office markets where current occupancy costs are
50% lower than Midtown Manhattan or relocation to out-of state build to suit
Class "A" buildings. Overall, the long term future outlook remains positive for
the Midtown Office Market as existing large space users continue to remain due
to various financial incentive packages or landlord negotiations.
SUBJECT PROPERTY COMPETITIVE SET: A survey of Class "A" office buildings was
performed by KTR in the West Side sub-office market. This survey was utilized to
verify the current vacancy trends within the competitive set of office buildings
as of July 30, 1997. The
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 78
OFFICE MARKET OVERVIEW (Continued)
survey specifically identified 34 Class "A" office buildings within the blocks
from West 46th to West 56th Streets, bounded by Ninth and Sixth Avenues. The
subject property is considered to be in very good physical condition and is
considered to be superior in terms of average floorplates, available amenities,
and overall condition.
Considerate of the surveyed overall average occupancy for the influencing
competitive set of buildings, which was 95.5% with approximately 1.4 million
square feet of vacant space, and the subject property's existing tenant roster
as well as its overall superior characteristics, the subject property should be
able to maintain a stabilized occupancy of 97% +.
The subject property's office component is consistent with the overall office
based on its strong leasing activity during the past year at market oriented
lease rates. The subject property represents a desirable modern commercial
office building within the West Side sub-market. It should remain competitive in
the future considering its location, physical layout and condition (reference
Market Rent Analysis).
MIDTOWN ABSORPTION TRENDS: Absorption of office space in Midtown Manhattan
between 1980 and the 1994 (15 years) totaled approximately 15.5 million square
feet or an average of 1.0 million square feet per year (rounded). The 1.0
million square feet per year of average historical absorption reflects the
lateral moves within Midtown buildings, relocation to a less expensive Midtown
South and the mergers and consolidations made by existing companies within
Midtown versus new companies entering the market. During the 1990 to 1992
recession, modern class "A" buildings, constructed between 1987 and 1992, and
older class "B" buildings realized the highest vacancy as compared to many of
the newer facilities built prior to 1987-1988.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 79
OFFICE MARKET OVERVIEW (Continued)
The negative absorption within the Midtown office market peaked in 1991 as the
worst of the recession passed and a new real estate cycle had begun. This
transition period was evidenced in 3 years of declining availability and 8.2
million square feet in net absorption between 1992 and 1994. The following table
illustrates the improvement in the market in 1993 and 1994. In 1995 the market
recovery appeared to stall, likely a response to the more subdued employment
growth in New York City, previously discussed. However, 1996 saw a return to
positive absorption in all of the Manhattan markets, including Lower Manhattan.
MANHATTAN OFFICE SPACE ABSORPTION
1993 THROUGH 1996
(IN SQUARE FEET)
-------------------------------------------------------------
Year Midtown Downtown Midtown South
-------------------------------------------------------------
1993 2,600,000 (718,000) 322,000
1994 3,200,000 80,000 1,600,000
1995 (1,200,000) (2,000,000) 1,400,000
1996 1,600,000 749,000 634,000
-------------------------------------------------------------
The Gordon Office Market Report; compiled by KTR
Negative absorption was evident for 1995, subsequently improving to 1.6 and 1.2
million square feet of positive net absorption for 1996 and 1997, respectively,
as the city and national economies continued to expand.
Overall, positive net absorption has totaled 9.1 million square feet between
January 1, 1992 and February 28, 1997. Cumulative and annual net absorption per
sub-market is summarized as follows based on the previously summarized
historical availabilities.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 80
OFFICE MARKET OVERVIEW (Continued)
CUMULATIVE NET ABSORPTION
AS OF 2/28/97 BY SUB-MARKET
(IN SQUARE FEET)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Cum Net Cum Net Cum. Net Cum. Net Cum. Net Cum. Net
Absorption Absorption Absorption Absorption Absorption Absorption
Through Through Through Through Through Through
2/97 12/96 12/95 12/94 12/93 12/92
No. Sub-Market In Millions In Millions In Millions In Millions In Millions In Millions
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1. West Side 3,552,600 3,340,200 2,738,400 2,839,200 2,111,200 873,600
2. Sixth Ave./Rock Ctr. 3,645,400 3,491,800 2,762,200 2,756,500 1,842,100 1,880,200
3. Fifth/Madison Ave. (51,200) (239,300) 763,900 68,400 792,900 151,200
4. Park Avenue 1,595,000 1,298,000 1,016,400 2,133,600 685,800 508,000
5. East Side 430,000 335,200 651,200 818,000 (45,500) (532,200)
6. Grand Central 1,417,200 1,314,600 151,800 (477,400) (716,100) (613,800)
7. Murray Hill (615,800) (839,000) (423,600) (69,600) (179,800) (104,400)
8. Penn Station/Garment (892,500) (785,100) (1,322,100) 167,500 (201,000) (301,500)
---------- ---------- ---------- ---------- ---------- ----------
Total 9,080,700 7,916,400 6,338,200 8,236,200 4,289,600 1,861,100
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Negative number indicates negative net absorption
Source: Gordon Report; compiled by KTR
ANNUAL NET ABSORPTION AS OF 2/28/97 BY SUB-MARKET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Net Net Net Net Net Net
Absorption Absorption Absorption Absorption Absorption Absorption
1/1 -2/97 1/1 -12/96 1/1 -12/95 1/1 -12/94 1/1 -12/93 1/1 -12/92
No. Sub-Market Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft.
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1. West Side 212,400 601,800 (100,800) 728,000 1,237,600 873,600
2. Sixth Ave./Rock Ctr. 153,600 729,600 5,700 914,400 (38,100) 1,880,200
3. Fifth/Madison Ave 188,100 (1,003,200) 695,500 (724,500) 641,700 151,200
4. Park Avenue 297,000 281,600 (1,117,200) 1,447,800 177,800 508,000
5. East Side 94,800 (316,000) (166,800) 863,500 486,700 (532,200)
6. Grand Central 102,600 1,162,800 629,200 238,700 (102,300) (613,800)
7. Murray Hill 223,200 (415,400) (354,000) 110,200 (75,400) (104,400)
8. Penn Station/Garment (107,400) 537,000 (1,489,600) 368,500 100,500 (301,500)
Total 1,164,300 1,578,200 (1,898,000) 3,946,600 2,428,500 1,861,100
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Negative number indicates negative net absorption
Source: Gordon Report; compiled by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 81
OFFICE MARKET OVERVIEW (Continued)
WEIGHTED AVG. ANNUAL NET ABSORPTION
AS OF 2/28/97 BY SUB-MARKET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Annual Annual Annual Annual Annual Annual
Net Net Net Net Net Net
Absorption Absorption Absorption Absorption Absorption Absorption
Through Through Through Through Through Through
2/97 12/96 12/95 12/94 12/93 12/92
Sub-Market Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft.
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
West Side 687,596 668,040 684,600 946,400 1,055,600 873,600
6th/Rock 705,557 698,360 690,550 918,833 921,050 1,880,200
5th/Mad (9,910) (47,860) 190,975 22,800 396,450 151,200
Park Ave 308,708 259,600 254,100 711,200 342,900 508,000
East Side 83,225 67,040 162,800 272,667 (22,750) (532,200)
Grand Central 274,295 269,920 37,950 (159,133) (358,050) (613,800)
Murray Hill (119,186) (167,800) (105,900) (23,200) (89,900) (104,400)
P.S./Gar. Ctr (172,741) (157,020) (330,525) 55,833 (100,500) (301,500)
Total 1,757,543 1,583,280 1,584,550 2,745,400 2,144,800 1,861,100
- ------------------------------------------------------------------------------------------
</TABLE>
Negative number indicates negative net absorption
Source: Gordon Report; compiled by KTR
Recent surveys suggest that the market demand has shifted to the West Side,
Sixth Avenue/Rockefeller Center and Park Avenue sub-markets at the expense of
the other sub-markets. The preceding compilation reveals that the West Side,
Sixth Avenue/Rockefeller Center, Park Avenue and Grand Central sub-markets have
experienced the most extensive reductions in available space due to a strong
demand for space within modern buildings. This shift has occurred due the
growing need for large contiguous floor plates within modern buildings which are
capable of offering "state-of-the art" power and communications capabilities.
The Midtown office market has about 24.9 million square feet of space available.
However, a large percentage of this space is contained in obsolete office
buildings which are at the end of their economic life as commercial office
space. A typical vacancy rate ranging from 5.0% to 10.0% generally reflects
stable market conditions within an established office market. The
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 82
OFFICE MARKET OVERVIEW (Continued)
current Midtown vacancy of 12.8% suggests a stable market with the potential for
additions to supply.
MIDTOWN ASKING RENTS: Midtown asking rents range from the $24.00 per square foot
in the Penn Station/Garment Center to $45.00 per square foot along Park Avenue,
averaging $32.99 per square foot. The average asking rent in the West Side
sub-market has increased by an average annual rate of growth of 2.3% per year
since January 1, 1994. The overall average asking rent reflects improving market
conditions as evidenced by a 2.4% average annual increase since 1993.
Current average asking rents by sub-market are summarized as follows.
MIDTOWN AVERAGE ASKING RENTS BY SUB-MARKET
AS OF 2/28/97
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
2/28/97 12/31/96 12/3/195 12/31/94 12/31/93 12/31/92 12/31/91
No. Sub-Market $ Per $ Per $ per $ per $ per $ Per $ Per
Sq.Ft. Sq.Ft. Sq.Ft.. Sq.Ft. Sq.Ft. Sq.Ft. Sq.Ft.
- --------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1. West Side $28.60 $28.70 $27.50 $25.20 $26.90 $33.10 $36.10
2. Sixth Ave./Rock Ctr. 39.30 39.10 39.30 37.90 35.00 37.40 39.18
3. Fifth/Mad. Ave. 42.10 42.00 39.40 41.70 37.50 38.50 41.27
4. Park Avenue 43.90 44.40 44.10 43.00 41.10 39.80 41.74
5. East Side 34.80 34.80 35.30 32.20 30.50 31.30 34.87
6. Grand Central 31.40 31.30 30.40 29.80. 28.86 29.40 31.74
7. Murray Hill 24.30 24.20 25.20 23.70 25.00 25.20 25.47
8. Penn 24.60 24.00 23.50 22.80 23.00 23.30 26.38
Station/Garment
Overall $33.57 $33.51 $32.47 $32.23 $31.10 $32.45 $35.51
- --------------------------------------------------------------------------------------------------------
</TABLE>
Source: Gordon Report; compiled by KTR
Midtown's historical change in average asking rents between 1978 and 1994
reflects a 5.2% average annual compound increase. While this is useful for cash
flow projection purposes, it does not reflect Midtown real estate's wide
cyclical swing over the last 16 years. This movement is evidenced by large
percentage increases in the 1979 to 1981 period, followed by a sustained period
of marginally static rents between 1982 and 1989, declining rents between 1990
and 1993 and now evidenced by an equivalent 2.4% annual increase since January
1, 1994.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 83
OFFICE MARKET OVERVIEW (Continued)
PROJECTION OF MARKET RENT APPRECIATION: The evidence of an expanding regional
economy and the emerging equilibrium within the influencing market has been
considered relative to future increases in market rates. Also considered is the
fact that as the market approaches equilibrium property owners will be
attempting to improve their net operating profit margin which has been seriously
restricted due to declining effective contract rents but increasing operating
expenses.
Considerate of the aforementioned, we have projected the following growth rates
for use in the discounted cash flow analysis: 0% for the remainder of calendar
year 1997, 4.0% for 1998, and averaging 4.0% per calendar year thereafter. The
preceding estimate equates to an average rate of growth of 4.0% for the fiscal
year projection period. The preceding annual appreciation factor is consistent
with investor expectations as reported by various surveys and identified in the
Sales Comparison Approach.
CONCLUSIONS
The Midtown market has emerged from a state of over-supply. Vacancy rates in
excess of 15% are now nearing 10% and when older space is eliminated from the
group, the vacancy rate for modern space is less than 10%. Although rental rates
declined between 1991 and 1994, they have again begun to increase. With the
relatively small amount of new construction, rental rates for Class A space will
likely increase throughout the remainder of the decade. This is a result of and
concurrent with lower vacancy rates.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 84
OFFICE MARKET OVERVIEW (Continued)
MAP OF MIDTOWN OFFICE MARKET
[GRAPHIC OMITTED}
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 85
MARKET RENT ANALYSIS
INTRODUCTION
Current market rents for office, retail, theater, garage and health clubs are
compiled and analyzed for the purpose of establishing current economic rents for
any vacant space and for the forecasting of economic rent levels for the
existing occupied space upon lease expiration. The following market rent
analysis first addresses the office component of the subject property followed
by its retail and storage components. The preceding analysis is then correlated
into achievable current market rents. The individual market rents are summarized
at the end of each section.
The following analysis will utilize an effective contract rent model which
examines the impact of tenant workletters and free rent on the contract rent.
The analysis is based on the opportunity costs of capital employing a partial
payment factor. Tenant workletters and free rent are amortized over the term of
the lease. The contract rent (inclusive of the surplus electric income) less the
amortized workletter and free rent is then converted to its present value. A
partial payment factor is then applied to the sum of the discounted net contract
rents which equates to its Effective Contract Rent
OFFICE RENT
The decline in effective rental rates for primary and secondary office space
throughout Manhattan between 1988 and 1993 is well documented as the market
adjusted to declining office space demand and increasing supply and availability
of Class "A" and "B" space. The signs of a new economic/real estate cycle are
evident as the city economy slowly expands and vacancy rates trend slowly
downward. Currently, all categories of space users are upgrading their space in
higher quality buildings as well as absorbing blocks of space for future
expansion.
The most recent lease activity within the subject property is first examined
followed by our analysis of office rental activity.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 86
MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
RECENT LEASING ACTIVITY WITHIN THE SUBJECT PROPERTY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Area Level/Lease Date Contract Rent Step-up
Tenant (Sq. Ft.) Floorcase Expiry ($ Per Sq.Ft.) (Year) Tenant Contributions
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cravath 30,518 34 Jan-97 $27.00 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Swaine & Moore Aug-09 29.50 Jan-01 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
32.00 Jan-06 Electric: Direct
Polygram 241,249 17,18, Jan-97 $31.50 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
21-25,28 Jan-12 $34.00 Jan-02 Opr. Exp. Pro-rata share of incr. 1997 BY.
$36.50 Jan-07 Electric: Direct
Concessions: $22.50 TI for some space, 6 mos. free r
Polygram 59,002 27,26 Jan-97 $19.88 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Jan-12 $31.50 Jan-00 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
$34.00 Jan-02 Electric: Direct
$36.50 Jan-07 Concessions: $22.50 TI for some space, 6 mos. free r
Polygram 6,870 Bsmt. Jan-97 $20.47 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Jan-12 $22.10 Jan-02 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
$23.72 Jan-07 Electric: Direct
D'arcy Masius 91,788 31-33 Jan-97 $29.75 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Benton & Bowles Feb-10 $33.00 Mar-00 Opr. Exp. Pro-rata share of incr. 1997 BY.
$35.00 Jul-03 Electric: Direct
$37.00 Nov-06
D'arcy Masius 7,571 Bsmt. Jan-97 $19.34 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Benton & Bowles Feb-10 $21.45 Feb-00 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
$23.54 Apr-03 Electric: Direct
$24.05 Oct-06
D'arcy Masius 5,000 2 Jan-97 $15.00 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Benton & Bowles Jan-03 $18.00 Feb-00 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
Electric: Direct
Concessions: As Is
Free rent from 9/17/95 - 4/22/98
Microsoft 65,757 16,19 Jan-97 $34.50 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Aug-03 $38.25 Jan-00 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
(1)5-yr option Electric: Sub-metered & 5.0% add-on
95%FMV Concessions: $290,000
Free rent from 2/16/95 - 9/22/97
Lifetime Television 30,596 30 Apr-97 $36.00 R.E. Tax: Pro-rata share of incr. 1996/97 B.Y.
Jun-09 40.50 May-01 Opr. Exp. Pro-rata share of incr. 1997 B.Y.
45.00 Jun-05 Electric: Direct
Concessions: $40 per sq. ft.
12 mos free rent
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Management provided; compiled by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 87
MARKET RENT ANALYSIS (Continued)
RECENT LEASES WITHIN THE SUBJECT PROPERTY
The current management reports that the current asking rent is $38.00 per square
foot for the existing vacant space. Tenant workletters have ranged from $25 to
$50 for new leases, with 15-year lease terms with real estate tax contributions
payable over a base year. There have been various leases signed with new and
existing tenants during 1997. A good indicator for market-oriented contract
rents for the subject property's small and large spaces is exhibited by the
recent leases signed with Lifetime and Polygram. In April, 1997, Lifetime leased
30,596 square feet on the 30th floor for $36.50 per square foot. In January,
1997, Polygram signed a lease for 241,249 square feet (multiple floors) for
$31.50 per square foot. The Polygram lease represents a re-structured lease with
an existing primary tenant for additional space. Overall, lease terms are
typically 15 years with the majority of the larger leases containing rent
step-ups of $2.00 to $2.50 per square foot adjusted annually or every 5 years.
Real estate tax and operating expense recoveries based on a pro-rata share of
increases over a base year are evident in all of the new leases. Tenant
electricity is directly metered. According to the management, free rent has
typically ranged from 6 to 12 months. The most recent leasing activity for
office space within the subject property equates to effective rents ranging from
$28.66 to $31.50 per square foot employing our effective rent model. The recent
leasing activity is summarized in a table on the following page.
COMPARABLE LEASE DATA
Our survey, summarized at the end of this section, identified 11 actual leases
within 6 buildings which were signed between November, 1995 and February, 1997.
Contract rents range from $19.75 to $45.25 per square foot. The leased areas,
which represent full and multi-floor users, range in size from 27,000 to 659,320
square feet on floors from no. 2 through 48. Lease terms range from 10 to 20
years, averaging 15 years (rounded). Most of the leases contain rent step-ups
ranging from $2.00 to $5.00 per square foot, adjusted every 3 to 5 years.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 88
MARKET RENT ANALYSIS (Continued)
SUMMARY OF COMPARABLE OFFICE MARKET RENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Office Market Rents (General Office)
Worldwide Plaza
825 Eighth Avenue R.A. (Sq.Ft.)/
New York, New York Floors/ Lease Date Contract Rent Step-up
No. Address/Location Tenant Term (years) ($ Per Sq.Ft.) (year)
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1a. 1285 Sixth Avenue 27,000 Feb-97 $39.50 1-3
W/S, bet. West 51 & 52nd St. Mid-level Floors 11 42.50 4-6
Constructed: 1960 Star Diamonds 44.00 7-11
R.A. 1,475,000 sq.ft.
2a. 4 Times Square 602,259 Aug-96 $21.00 1-5
Broadway at Times Square 4-19 20 25.00 6-10
Under Construction Conde Nast 29.00 11-15
R.A. 1,600,000 sq.ft. 34.00 16-20
2b. " " 659,320 Aug-96 $28.00 1-5
27-48 20 32.00 6-10
Skadden Arps 36.00 11-15
40.00 16-20
3a. Paramount Plaza 56,092 Dec-96 $40.00 1-5
1631-1649 Broadway 46,47 15 44.00 6-10
Constructed: 1968 Law Firm 48.00 11-15
R.A. 2,285,639 sq.ft.
3b. " " 439,672 Jun-95 $24.51 1-5
5,6,7,8,11,15,16,17,31,32 15 % of CPI incr. 6-10
Viacom not to exceed 11-15
$5 p.s.f.
- ------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Office Market Rents (General Office)
Worldwide Plaza (A)
825 Eighth Avenue Effective
New York, New York Contract Rent
No. Address/Location ($ per Sq. Ft.) Tenant Contributions
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1a. 1285 Sixth Avenue $29.80 Real Estate Taxes: Pro-rata incr. over B.Y.
W/S, bet. West 51 & 52nd St. Operating Expenses: Pro-rata incr. over B.Y.
Constructed: 1960 Electricity: Sub-metered
R.A. 1,475,000 sq.ft. Concession: $45 TI, 12 months free rent
2a. 4 Times Square $33.15 Real Estate Taxes: Approximately $5 p.s.f
Broadway at Times Square Operating Expenses: Approximately $7 p.s.f
Under Construction Electricity: Direct
R.A. 1,600,000 sq.ft. Concession: $0 work, 6 months free rent
2b. " " $37.87 Real Estate Taxes: Approximately $5 p.s.f
Operating Expenses: Approximately $7 p.s.f
Electricity: Direct
Concession: $0 work, 14 months free rent
3a. Paramount Plaza $30.94 Real Estate Taxes: Pro-rata incr. over B.Y.
1631-1649 Broadway Operating Expenses: Pro-rata incr. over B.Y.
Constructed: 1968 Electricity: Sub-metered
R.A. 2,285,639 sq.ft. Concession: $52 TI, 14 months free rent
3b. " " $21.05 Real Estate Taxes: Pro-rata incr. over B.Y.
Operating Expenses: Pro-rata incr. over B.Y.
Electricity: Sub-metered
Concession: $0.42, 29 months free rent
- -------------------------------------------------------------------------------------------------------
</TABLE>
(A) Effective rent model based on 8.5% cost of capital employing a partial
payment factor amortizing TI, free rent and rent steps.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 89
MARKET RENT ANALYSIS (Continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Office Market Rents (General Office)
Worldwide Plaza
825 Eighth Avenue R.A. (Sq.Ft.)/
New York, New York Floors/ Lease Date Contract Rent Step-up
No. Address/Location Tenant Term (years) ($ Per Sq.Ft.) (year)
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
4a. Exxon Building 58,000 Apr-96 $38.00 1-5
1251 Sixth Avenue 27-28 15 42.00 6-10
W/S, bet. West 49 & 50th St. Deutsche Bank 46.00 11-15
Constructed: 1971
R.A. 1,900,000 sq.ft.
4b. 58,000 Feb-96 $44.00 1-5
28-29 10 46.00 6-10
Piper & Marbury 52.00 11-15
5a. 888 Seventh Avenue 45,749 Aug-96 $19.75 1-3
N/W/C of West 56th St. 21-23 10.5 22.75 4-6
Constructed: 1970 Stanley Kaplan 24.00 7-10.5
R.A. 730,000 sq.ft.
5b. 30,000 Apr-96 $23.00 1-5
7,8 15 27.00 6-10
R.D.R. Assocs. 32.00 11-15
6a. Equitable Center 48,500 Nov-95 $35.25 1-5
787 Seventh Avenue 2 20 39.25 6-10
E/S/ bet West 51 & 52nd Wilkie, Farr 43.25 11-15
Constucted: 1985 & Gallagher 47.25 16-20
R.A. 1,523,000 sq.ft.
6b. 240,000 Nov-95 $45.25 1-5
39-47 20 49.25 6-10
Wilkie, Farr 53.25 11-15
& Gallagher 57.25 16-20
- ------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Office Market Rents (General Office)
Worldwide Plaza (A)
825 Eighth Avenue Effective
New York, New York Contract Rent
No. Address/Location ($ per Sq. Ft.) Tenant Contributions
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
4a. Exxon Building $30.95 Real Estate Taxes: Pro-rata incr. over B.Y.
1251 Sixth Avenue Operating Expenses: Pro-rata incr. over B.Y.
W/S, bet. West 49 & 50th St. Electricity: Sub-metered
Constructed: 1971 Concession: $45 TI, 12 months free rent
R.A. 1,900,000 sq.ft.
4b. $34.99 Real Estate Taxes: Pro-rata incr. over B.Y.
Operating Expenses: Pro-rata incr. over B.Y.
Electricity: Sub-metered
Concession: $50 TI, 12 months free rent
5a. 888 Seventh Avenue $21.14 Real Estate Taxes: Pro-rata incr. over BY.
N/W/C of West 56th St. Operating Expenses: Pro-rata incr. over B.Y.
Constructed: 1970 Electricity: Sub-metered
R.A. 730,000 sq.ft. Concession: As Is, 4 months free rent
5b. $20.51 Real Estate Taxes: Pro-rata incr. over B.Y.
Operating Expenses: Pro-rata incr. over B.Y.
Electricity: Sub-metered
Concession: $20 TI, 14 months free rent
6a. Equitable Center $30.29 Real Estate Taxes: Pro-rata incr. over B.Y.
787 Seventh Avenue Operating Expenses: Pro-rata incr. over B.Y.
E/S/ bet West 51 & 52nd Electricity: Sub-metered
Constucted: 1985 Concession: As Is, 4 months free rent
R.A. 1,523,000 sq.ft.
6b. $39.24 Real Estate Taxes: Pro-rata incr. over B.Y.
Operating Expenses: Pro-rata incr. over B.Y.
Electricity: Sub-metered
Concession: $50 TI, 12 months free rent
- -------------------------------------------------------------------------------------------------------
</TABLE>
Source: KTR Market Research
(A) Effective rent model based on 8.5% cost of capital employing a partial
payment factor amortizing TI, free rent and rent steps.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 90
MARKET RENT ANALYSIS (Continued)
The majority of the leases provide for a pro-rata share contribution in both
real estate tax and operating expense increases above the base year of the
lease. The Porters Wage Index is not evident in any of the comparable leases.
Tenant workletters are evident in most of the leases at costs ranging from as is
to $52.00 per square foot (rounded). On a unit cost basis (tenant workletter per
square foot divided by lease years), tenant workletters range from none to $6.00
per square foot per lease year (rounded). Free rent is evident in all of the
leases ranging from 4 to 29 months. On a unit cost basis (number of months of
free rent divided by lease years), free rent ranges from 0.3 to 1.9 months of
free rent per lease year.
Employing our effective rent model, the comparable data reflects effective rents
ranging from $21.05 to $39.24 per square foot. The comparable office leases
presented in the tables on the previous pages were analyzed and then correlated
into market rental estimates for the subject property. We have estimated an
overall average market rent for the subject property's space under and over
100,000 square feet in size without correlating floor level, as the spaces under
100,000 square feet in size that are currently vacant or expiring during the
projection period are located on the mid-level floors and the spaces over
100,000 square feet do not expire during the projection period.
CORRELATION
The most recent leasing activity within the subject property (effective rents
ranging from $28.62 to $31.50 per square foot) is consistent with current market
parameters within the influencing market (effective rents ranging from $21.05 to
$39.24 per square foot).
OFFICE SPACE (100,000 SQ. FT. AND LESS): The compilation of comparable market
rents on the office spaces less than 100,000 square feet reflect effective rents
ranging from $20.51 to $34.99 per square. More specifically, comparable no.1a
(1285 Sixth Avenue), a Class "A" building with large floor plates with an
effective rents of $29.80 is considered to be most relevant to the rental value
of the subject property. The lease was for space in a mid-level floor in
comparable building, although located to the east of the subject property in a
superior location, which is considered similar to the subject property.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 91
MARKET RENT ANALYSIS (Continued)
After our adjustments, an average effective rent rounded to $29.00 per square
foot is concluded for the subject property's space less than 100,000 square
feet. Our estimated effective rent is achieved assuming a 15 year average lease
term, a contract rent of $36.00 per square foot $2.50 per square foot rent steps
every 5-years no rent steps, a tenant workletter of $40 per square foot , which
equates to $2.66 per lease year), and 12 months free rent equivalent to 0.8
months per lease .
OFFICE SPACE (100,000 SQ. FT. AND GREATER): The compilation of comparable market
rents on the office spaces greater than 100,000 square feet reflect effective
rents ranging from $21.05 to $39.24 per square foot. There was 1 recent lease in
the subject property for this size grouping equating to an effective rent of
$28.88 per square foot. This lease was with Polygram, an existing tenant, which
included expansion space. In consideration of the comparable leases and the
recent lease transaction in the subject property, an average effective rent
rounded to $28.00 per square foot is concluded for the larger office space. Our
estimated effective rent is achieved assuming a 15 year average lease term, a
contract rent of $34.00 per square foot, rent step-ups of $2.50 per square foot
every 5 years, a $40.00 per square foot tenant workletter (which equates to
$2.66 per square foot per lease year) and 12 months free rent (equivalent to 0.8
months per lease year).
OFFICE SPACE (BASEMENT & FLOOR 2): The contract rents for recently signed leases
in the subject property for basement space ranges from $15.00 to $20.47 per
square foot for 3 leases signed in 1997. The low end of the range reflects a
lease negotiated with a primary tenant within the subject property at reduced
rents warranting an upward adjustment. As the recent leasing activity within the
subject property is considered the best indicator current market rent levels, we
have estimated a contract rent of $20.00 per square foot, with 15 year lease
terms, rent step-ups of $2.50 every 5 years, no workletters and 6 months free
rent.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 92
MARKET RENT ANALYSIS (Continued)
RAW SPACE: According to the current management, some existing vacant units and
spaces that will be considered vacant upon rollover are considered raw or
require a gut renovation in order to be leased. A $40 per square foot tenant
workletter has been processed in our cash flow projection for the 31st floor
(architectural).
FUTURE LEASES: All future office leases for all categories of space are assumed
to contain a real estate tax and operating expense contribution based on a
pro-rata share of increases over a base year based on occupied square footage.
We have processed 12 months of free rent on new leases. The preceding estimates
are supported by the comparable data and the overall assumptions as previously
discussed in the office market analysis section for the midtown office market.
OFFICE LEASE RENEWALS: A renewal tenant workletter equating to 50% of the cost
of a new lease is assumed with no free rent.
CONCLUSIONS
The subject property is a conveniently located primary office building in very
good condition. The exposure to good light, large windows and functional floor
layouts make this a desirable building for large, full floor space users. The
future leasing activity of the subject property should be consistent with
overall market levels since it is certainly competitive within the Midtown
office market and the influencing sub-markets.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 93
MARKET RENT ANALYSIS (Continued)
MAP OF OFFICE RENT COMPARABLES
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 94
MARKET RENT ANALYSIS (Continued)
RETAIL MARKET OVERVIEW
The NYC retail market has experienced a resurgence in the retail market activity
due to the influx of novelty stores, the improved tourist and convention
markets, and the entry by mass-market retailers in the midtown area. Positive
retail sales and rapid expansion of the New York City retail markets ranging
from big-box tenants to high end fashion retailers have reshaped the retail
outlook. The retail market appears to be correcting itself after a few years
with signs of increased demand characterized by aggressive rent levels and the
addition of new retail space to the supply via mixed-use projects. Another
positive sign for the retail market is the narrowing of the gap between average
asking prices and average contracted rents for recent deals.
The Midtown Manhattan retail market varies greatly in terms of use, size and
orientation. Strong demand for retail space in various shopping sectors in
Midtown Manhattan continues along with the continued redevelopment efforts in
the Times Square district. Times Square is an internationally recognized tourist
destination with over 20 million visitors annually due to a concentration of
hotels (12,500 rooms), performance theaters (39, combined nightly capacity for
25,000 people) and movie theaters (23 screens). The redevelopment of Times
Square has attracted an influx of retailers that has transformed the
ground-level frontage to spaces commanding rents of $150 plus per square foot
and back building space for $75 plus per square foot. Theme restaurants have
opened in the vicinity of the Times Square 42nd Street area and have been
successful to date. The area has also created a multi-level retail market
attracting a wide range of retailers as it affords a wide array of rents
accommodating tenants with various frontage needs. Underutilized ground floor
spaces and first floor spaces in office buildings are being converted to retail
spaces.
A tour of the area reveals that the retail goods and services are oriented
towards tourists between West 42nd and West 50th Streets, subsequently becoming
more balanced between tourists, area office workers and residents between West
50th and West 57th Street. The number of vacant
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 95
MARKET RENT ANALYSIS (Continued)
stores within this trade area is currently negligible. Retail rents currently
are highest in the immediate Times Square area, subsequently declining by
proceeding north toward West 57th Street. Leasing activity in the influencing
area has primarily been by larger national and multi-chain stores as the
traditional retailers have been contending for smaller spaces and multi-level
stores due to the high competition and costs. The limited new construction is
expected to push rents to climb further. As the established retail corridors are
experiencing higher rents as the demand for space exceed the supply of retail
space, retailers are turning to spaces in less established corridors as an
affordable alternative.
The subject property is located within the retail trade area of the West Side
office Sub-Market, which is comprised of avenue and side street locations. The
subject property's retail trade area caters to pedestrian traffic primarily from
office workers, commuting pedestrians and some tourists. The subject property's
retail space is located in the base of office tower and in the amenity component
(base of the residential condominium).
The inventory of retail space in the subject property's area, excluding the
arcade space, primarily occupies the grade level stores on the avenues and side
street stores just off the avenue. Retail rents typically begin increasing by
proceeding east of Ninth Avenue. A wide variety of goods and services (banks,
restaurants, delicatessens, nail salons, photo shops, etc.) serve area office
workers and tourists. There is limited availability of vacant space along Ninth
and Eighth Avenues, and the vacant spaces are often limited to smaller street
units or side street locations.
In conclusion, the subject property is located in a secondary retail trade area
which is experiencing a long term upward trend.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 96
MARKET RENT ANALYSIS (Continued)
RETAIL COMPONENT
The subject property's retail space is summarized as follows.
825 EIGHTH AVENUE
OFFICE COMPONENT RETAIL SPACE SUMMARY
- --------------------------------------------------------------------------------
Street 2nd Floor Total
No. Tenant Location (Sq. Ft.) (Sq.Ft.) (Sq.Ft.)
- --------------------------------------------------------------------------------
1. Sunny Electronics W8, W13, W20 1,910 4,565 6,475
2. Chemical Bank W9, W11 5,066 5,066
3. Garden Bakery Cafe W12 1,206 1,206
4. ABC Nails W10 493 493
5. Carlson Wagonlit W15 1,177 1,177
6. Rajson Newstand W16 833 833
VACANT SPACE 5,567 6,211 11,778
----- ----- ------
Total 11,954 10,776 27,028
- --------------------------------------------------------------------------------
Source: Management provided information; compiled by KTR
825 EIGHTH AVENUE
AMENITY COMPONENT RETAIL SPACE SUMMARY
- --------------------------------------------------------------------------------
Grade Plaza Total
No. Tenant Location (Sq. Ft.) (Sq.Ft.) (Sq.Ft.)
- --------------------------------------------------------------------------------
9TH AVE. FRONTAGE
-----------------
1. WWP Cleaners W2 950 950
2. Supernatural W3 1,849 1,849
3. Petland W6 2,389 2,389
4. Bulbtronics W1 1,387 1,387
Vacant Various Mid-block 3,584 3,584
SIDE STREET
-----------
5. New World Grill K1 (Plaza) 900 900
6. Mexican Restaurant K2 (Plaza) 800 800
7. West Side Restaurant E4, E6 (50th & Plaza) 2,519 900 3,419
VACANT E1 (49th St.) 2,752 2,752
----- ----- -----
Total 15,430 2,600 18,030
- --------------------------------------------------------------------------------
Source: Management provided information; compiled by KTR
Retail space within the subject property consists of a total of 45,058 square
feet of retail space (2.45% of the subject property); 27,028 square feet of
space located in the office component (1.7% of the office component) and 18,030
square feet located in the amenity component (7.45% of the amenity component).
Most of the retail space with the exception of the units
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 97
MARKET RENT ANALYSIS (Continued)
located along Ninth Avenue, has limited frontage, limited exposure to grade
level traffic and varying depths. The retail space in the arcade is limited to
day to day traffic of the office component employees. None of the retail units
have basement or storage space and there is second floor retail space in the
office component. The retail tenancy within the subject property is classified
as neighborhood service retail of which most of the tenants are local non-credit
tenants.
Overall vacancy in the subject property's neighborhood, particularly along
mid-block side street locations, varies greatly from street to street. Although
the vacancy rates for the subject property's immediate vicinity, along the
avenues and side streets, are not reported within published surveys, we have
undertaken a visual survey. There appeared to be a few vacancies along the
mid-block locations of residential streets with very few vacancies along the
avenues. As the existing retail leases in the area roll-over, it has been
reported that the quality of tenants have generally improved. The caliber of the
subject property's retail tenancy should follow the general neighborhood trend
of improvement.
We have conducted a market rent survey of recent retail leases negotiated within
the subject property's influencing area. Our search revealed limited information
regarding recent leases along Eighth and Ninth avenues, therefore we expanded
our survey to include lease transactions along avenues further to the east. Our
survey of recent comparables has been categorized into retail space with avenue
frontage and those with side street frontage. We have also included the recent
leasing activity within the subject property, as it is considered to be the best
indicator of market-oriented rents for the subject property.
The existing retail leases within the subject property were negotiated between
1989 and 1997 with current contract rents ranging from $20.24 per square foot
for 1,849 square feet of space along Ninth Avenue to $40.00 per square foot for
800 feet of kiosk space in the plaza.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 98
MARKET RENT ANALYSIS (Continued)
AVENUE FRONTAGE RETAIL: Our survey, summarized at the end of this section,
identified 6 retail leases with avenue frontage exhibiting contract rents
ranging from $56.00 to $104.00 per square foot. The low end of the range
reflects a lease with frontage along Eighth Avenue. The upper end reflects a
lease with frontage along Seventh Avenue The comparables exhibited lease terms
ranging from 5 to 17 years with rent steps ranging from percentage annual
increases to 10% every 3 years and free rent ranging from none to 15 months.
According to brokers and real estate professionals in the area, the Ninth Avenue
corridor, which is primarily occupied by small restaurants, grocers, video and
local neighborhood service shops command rents generally ranging from $30 to $35
per square foot. The spaces along Eighth Avenue, generally have greater exposure
to pedestrian traffic and commands rents ranging from $40 to $45 per square
foot. Accordingly in estimating a market rent for the subject property's space
occupied, we have estimated retail market rent levels of $35 for the retail
stores with Ninth Avenue frontage and $45 per square foots for the retail with
Eighth Avenue exposure.
SIDE STREET FRONTAGE RETAIL: Our survey identified 5 comparable retail leases,
with side street frontage, signed between August, 1994 and May, 1997 at contract
rents ranging from $31.48 to $60.00 per square. The low end reflects an August,
1994 lease of a 4,383 square foot unit to a restaurant operator at 120 West 45th
Street, between Sixth and Seventh Avenues. The upper end reflects 1996 and 1997
leases of spaces ranging from 2,200 to 4,353 square feet units with side street
locations.
The subject property's retail stores with frontage along West 49th and 50th
Street are located between avenues further west than the comparables. In
consideration of the subject property's
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 99
MARKET RENT ANALYSIS (Continued)
location, downward adjustments were made to the exhibited market rents.
Comparable No. 10, 235 West 48th Street, a 2,932 square foot retail unit which
leased for $40 a square foot, is considered most relevant. This comparable,
within proximity of the subject property, is located in a similar secondary
retail trade area catering to the day- to-day workers in the area. A downward
adjustment for the subject property location further to the west was considered.
As such, an overall weighted average rent of $30.00 per square foot is estimated
for the subject property's retail units with side street frontage.
SECOND FLOOR RETAIL: The subject property's second floor retail space has
unusual floor configurations with limited exposure and access. Considering the
utility of the second floor space which could be utilized as office space, we
have processed a market rent similar to office rents. Therefore a $30.00 per
square foot market rent has been estimated for the second floor retail space.
PLAZA KIOSK & ARCADE RETAIL SPACE: The proposed pricing of the plaza kiosk and
arcade level space are based on the current rents and pending leases. A market
rent of $40.00 per square foot is estimated for the plaza kiosk space and $25.00
per square foot rents for the arcade space. Further, the lease will contain base
year real estate tax contributions and direct metering for electricity.
RETAIL MARKET RENTS
Based upon the above discussion and in light of the varying location of the
subject property retail spaces, we have assigned a weighted average rent of
$34.00 per square foot for the retail space. The weighted average calculations
have been summarized in a table on the following page
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 100
MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
RETAIL MARKET RENT ANALYSIS
- --------------------------------------------------------------------------------
OFFICE COMPONENT Square Feet Percent Market Rent
- --------------------------------------------------------------------------------
Street level & Eighth Avenue) 8,675 32.1% $ 45.00
Arcade level 7,577 28.0% $ 25.00
Second Floor 10,776 39.9% $ 30.00
------ ------ ------------
Total 27,028 100.00%
Weighted Avg. Mkt Rent For Office Component $ 33.41
Rounded to: $ 34.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENITY COMPONENT Square Feet Percent Market Rent
- --------------------------------------------------------------------------------
Ninth Avenue Frontgae 10,169 56.4% $ 35.00
Side Street Frontgae 6,161 34.2% $ 30.00
Kiosk Plaza Space 1,700 9.4% $ 40.00
------ ------- ------------
Total 18,030 100.00%
Weighted Avg. Mkt Rent For Amenity Component $ 33.76
Rounded to: $ 34.00
- --------------------------------------------------------------------------------
Source: Calculated by KTR.
FUTURE LEASES AND VACANT SPACE: Future retail leases are assumed to be for 10
years, include a real estate tax contribution based on a pro-rata share of
increases over a base year, 3% annual rent step-ups and 6 months free rent. All
tenant spaces are directly metered for electric. The currently vacant retail
space is projected to be leased on an as is basis.
RENEWALS: A 50% renewal probability is estimated with a four month downtime.
Future renewal leases are assumed to be leased as is with no free rent for the
entire projection period.
VACANCY AND CREDIT LOSS: A 3.0% credit loss factor is processed for subject
properties amenity component. Additionally a 15% combined vacancy and credit
loss factor was processed for the retail space in consideration of historical
occupancies.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 101
MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
RETAIL RENT COMPARABLES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Term Sq. Ft.
No. Tenant / Location Lease Date (Years) Area Year Contract Rent
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Avenue Frontage Retail Space
- ----------------------------
1. Confidential Nov-96 17 5,742 grnd. Yr. 1 $701,814
750 Seventh Avenue 1,000 bsmt. % steps n/a
(Between 48th & 49th St.) -----------
6,742
2. Le Bernadin Mar-96 10 5,960 Yr. 1 $408,260
787 Seventh Avenue (plus overage rent)
3. Bolton's Sep-96 12 2,973 Yr. 1 $267,570
1700 Broadway Yr 2-5 10% step every 3 yrs.
Between 53rd & 5th St.
4. Clothing Store Aug-95 5 2,000 Yr. 1 $185,000
692 Eighth Avenue (1) 5yr 3% annual steps
(Between 43rd & 44th) option
5. Coquette Sep-95 10 2,400 grnd. Yr. 1 $268,800
692 Eighth Avenue 2,400 bsmt. 10% step every 5 yrs.
(Between 43rd & 44th St.) -----------
4,800
6. American Gifts Apr-94 11 2,250 grnd. Yr. 1 $275,985
727 Seventh Avenue 2,250 bsmt. 4% annual steps
(Between 48th & 49th St.) -----------
4,500
ASKING RENTS
- ------------
832 Eighth Avenue Current 20 6,000 Yr. 1 $154,980
Annual Steps
(negotiable)
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
No. Tenant / Location ($ per sq. ft.) Comments
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Avenue Frontage Retail Space
- ----------------------------
1. Confidential $104.10 Real Estate Taxes: Pro-rata inc B.Y.
750 Seventh Avenue Operating Expenses: None
(Between 48th & 49th St.) Electric: Direct
Tenant Workletter: N.A.
Rent Concession: 15 mos. free rent
2. Le Bernadin $68.50 Real Estate Taxes: Plus Pro-rata Pilot
787 Seventh Avenue Operating Expenses: None
Electric: Direct
Tenant Workletter: As Is
Rent Concession: None
3. Bolton's $90.00 Real Estate Taxes: Pro-rata inc B.Y.
1700 Broadway Operating Expenses: N.A.
Between 53rd & 5th St. Electric: Direct
Tenant Workletter: As Is
Rent Concession: 6 mos. free rent
4. Clothing Store $92.50 Real Estate Taxes: Pro-rata inc B.Y.
692 Eighth Avenue Operating Expenses: None
(Between 43rd & 44th) Electric: Direct
Tenant Workletter: As Is
Rent Concession: 6 mos. free rent
5. Coquette $56.00 Real Estate Taxes: Pro-rata inc B.Y.
692 Eighth Avenue Avg. Rent Operating Expenses: None
(Between 43rd & 44th St.) Electric: Direct
Tenant Workletter: As Is
Rent Concession: None
6. American Gifts $61.33 Real Estate Taxes: Pro-rata inc B.Y.
727 Seventh Avenue Avg. Rent Operating Expenses: None
(Between 48th & 49th St.) Electric: Direct
Tenant Workletter: As Is
Rent Concession: 4 mos. free rent
ASKING RENTS
- ------------
832 Eighth Avenue $25.83 Real Estate Taxes: Net
Net Operating Expenses: Net
Electric: Direct
Tenant Workletter: As Is
Rent Concession: Negotiable
- -----------------------------------------------------------------------------------------
</TABLE>
Source: Field survey; compiled by KTR.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 102
MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
RETAIL RENT COMPARABLES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Term Sq. Ft.
No. Tenant / Location Lease Date (Years) Area Year Contract Rent
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Side Street Frontage Retail Space
- ---------------------------------
7. Deli May-97 5 2,200 Yr. 1 $132,000
1372 Broadway plus option % steps n/a
Side Street West 37th St.
8. Confidential Feb-97 10 4,000 (Grade) Yr. 1 $240,000
24 West 40th Street 2,000 (Bsmt) N/A (Basement included)
-------------
6,000
Yr 9
9. Au Corissant Sep-96 15.5 4,353 Yr 1-3 $260,005
(1290 Sixth Ave) 4-15 N/A
South Side of West 51st St.
10. Casa Dimeglio Oct-95 20 2,932 Yr 1 $118,180
235 West 48th Street 4.0% avg steps
Between 7th and 8th Ave
11. Antiques Sep-95 10 2,500 Yr 1 $132,500
125 West 55th 1.8% avg steps
Between 6th and 7th Ave
12. My Favorite Restaurant Aug-94 15.5 4,383 Yr 1 $137,977
120 West 45th Street 3.5% avg steps
Between 6th and 7th Ave
ASKING RENTS
- ------------
250 West 49th Street Current 10 2,000 Yr. 1 $80,000
10% step every 3 yrs.
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
No. Tenant / Location ($ per sq. ft.) Comments
- -----------------------------------------------------------------------------------------
Avenue Frontage Retail Space
- ----------------------------
<C> <S> <C> <C> <C>
7. Deli $60.00 Real Estate Taxes: Pro-rata inc B.Y.
1372 Broadway Operating Expenses: None
Side Street West 37th St. Electric: Direct
Tenant Workletter: As Is
Rent Concession: Some Free rent
8. Confidential $60.00 Real Estate Taxes: Pro-rata inc B.Y.
24 West 40th Street Operating Expenses: NA
Electric: Direct
Tenant Workletter: Some Work
Rent Concession: 3 mos. free rent
9. Au Corissant $59.73 Real Estate Taxes: Pro-rata inc in B.Y.
(1290 Sixth Ave) Operating Expenses: None
South Side of West 51st St. Electric: Direct
Tenant Workletter: As Is
Rent Concession: 6 mos. free rent
10. Casa Dimeglio $40.31 Real Estate Taxes: Pro-rata inc in B.Y.
235 West 48th Street Operating Expenses: None
Between 7th and 8th Ave Electric: Direct
Tenant Workletter: N.A.
Rent Concession: N.A.
11. Antiques $53.00 Real Estate Taxes: Pro-rata inc in B.Y.
125 West 55th Operating Expenses: None
Between 6th and 7th Ave Electric: Direct
Tenant Workletter: "As Is"
Rent Concession: None
12. My Favorite Restaurant $31.48 Real Estate Taxes: Pro-rata inc in B.Y.
120 West 45th Street Operating Expenses: None
Between 6th and 7th Ave Electric: Direct
Tenant Workletter: "As Is"
ASKING RENTS
- ------------
250 West 49th Stret $40.00 Real Estate Taxes: Pro-rata in B.Y.
Operating Expenses: None
Electric: Direct
Tenant Workletter: As Is
Rent Concession: Negotiable
- -----------------------------------------------------------------------------------------
</TABLE>
Source: Field survey; compiled by KTR.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 103
MARKET RENT ANALYSIS (Continued)
MAP OF RETAIL LEASE COMPARABLES
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 104
MARKET RENT ANALYSIS (Continued)
THEATER MARKET RENT ANALYSIS
In order to determine the reasonableness of the existing theater lease, a survey
of theaters was conducted. As a movie theater represents a specialized use with
a limited number available, our survey includes theaters situated throughout
Manhattan. The subject property is located in a mixed-use residential/commercial
area that is influenced by the retail Times Square and Plaza Districts, both of
which are considered to be major commercial corridors in Midtown. Development
activity within the vicinities has increased over the past several years
incorporating entertainment and theater complexes as well as the growth of theme
restaurants. Coupled with the strong profits realized by the movie industry, the
dearth of theater space within New York City, and the interest among theater
operators and developers to add movie complex/entertainment centers to the New
York City market, the subject property should be able to maintain it's
functional utility and produce sufficient gross sales.
The subject property's theater component consists of a six screen theater with
2,170 seats, comprised of 56,934 square feet of rentable area accessed mid-block
along West 50th Street. In the theater market rent survey summarized in the
table on the following page, comparable rents range from $311 to $1,278 per seat
per year, or $12.00 to $41.67 per square foot. The low end of the lease is
representative of a 1994 lease of a 10-screen theater. The high end of the range
is indicative of a recent theater lease with 15 screens, in a desirable
residential location
CONCLUSION: Considering the location of the subject property's theater space,
which would cater specifically to the area residents and nearby office workers,
it would most likely command a rent near the lower end of the range indicated by
the recent comparable theater leases. Theater leases typically include a
percentage rent provision based upon gross ticket sales, however, the majority
of the more recent leases do not include percentage rent clauses.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 105
MARKET RENT ANALYSIS (Continued)
The subject property's existing lease calls for rent payments of $636 per seat
or $27 per square foot plus 10% of gross revenues over $6,750,000. Although the
current lease provides for an additional percentage rent, it will not be
processed within our cash flow projections as information regarding historical
revenues was not available. The subject property's theater lease is net and
expires June 2019. It is reasonable to assume that the lease will remain in
place and will be processed accordingly to the existing contract terms in our
cash flow projections.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
THEATER MARKET RENT ANALYSIS (Continued)
THE WORLDWIDE PLAZA
MOVIE THEATER RENTAL SURVEY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
No. Address Tenant Date Size
- ----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 Kipps Bay Sony/Loews May-97 96,000
542-580 Second Avenue 3,131 Seats
New York, New York 15 Screens
2 Union Square United Artisits 1996 120,000
East 14th Street 3,500 Seats
New York, New York 14 Screens
3 TriBeCa Tribeca Cinema Mar-96 23,900
25 N. Moore Street Associates 780 Seats
New York, New York
4 Broadway & West 65th St. Confidential 1994 81,130
3,000 seats
10 screens
- ----------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Term
No. Address Rent Per (Years) Comments
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 Kipps Bay $41.67 per sq. ft. 20 Triple net lease. No percentage rent.
542-580 Second Avenue $1,278 per seat years 10% rent steps every 5 years.
New York, New York $266,667 per screen Commences upon substantial completion
2 Union Square $33.33 per sq. ft. 25 Triple net lease. Terms of the percentage
East 14th Street $1,143 per seat years rent were not disclosed.
New York, New York $285,715 per screen
3 TriBeCa $25 per sq. ft. 25 No percentage rent. Expenses are net.
25 N. Moore Street $765 per seat years
New York, New York $100,000 per screen
4 Broadway & West 65th St. $12 per sq. ft. 20 Percentage rent equals 10% of gross sales.
$311 per seat Tenant pays pro-rata share of R.E. taxes
$100,000 per screen over base year.
Survey Range Low $12 per sq. ft. 20 years
- ------------ $311 per seat
$100,000 per screen
High $41.67 per sq. ft. 25 years
$1,278 per seat
$285,715 per screen
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Source: Field survey; compiled by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 107
MARKET RENT ANALYSIS (Continued)
GARAGE MARKET ANALYIS
The New York City Garage market on the whole had been directly impacted by the
past economic downturn. As a result, the overall demand for parking services was
reduced for both commercial garages and residential garages. Discussions with
garage operators and owners of buildings with garage facilities suggested that
garage leases were being negotiated at reduced rents. However, as the local
economic conditions have strengthened significantly, the garage market is
anticipated to follow route.
Parking garage facilities in the subject property's influencing area, are often
constructed as part of a commercial or residential developments and are
generally built with parking ratios of 1 space per 1,000 square foot of building
area. The inventory of parking space primarily occupies free standing
facilities, open surface lots and the below-grade levels within buildings, along
side streets just off the avenues. Parking rates typically begin increasing by
block increments beginning from the west side as one proceeds east towards Fifth
Avenue. The demand for parking is often influenced by the overall
commercial/residential occupancy levels and the nearby retail influences.
The subject property is located in the northwest periphery of the retail trade
area of the Times/Square and West Side Sub-Market. The subject property's
parking demand is primarily generated by the area residents, office workers,
commuting pedestrians and pedestrian traffic from the movie theater and health
club users. A positive influence for the area has been surrounding development
activity of both residential and grade-level commercial facilities, which are
anticipated to rejuvenate and strengthen the demand for parking. As the subject
property is located in an area which currently has insufficient off-street
parking facilities, the projected increase in local residents, pedestrian
traffic and economic activity should further strengthen the demand for parking.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 108
MARKET RENT ANALYSIS (Continued)
The subject property's garage component, accessed via curb cuts along West 49th
and West 50th Streets, consists of 131,971 square feet of rentable area located
in 2 sub-levels of the residential portion of the complex. According to the
management, the subject property's garage has a legal working capacity of 473
cars. The garage is currently leased to Central Parking Corporation, a garage
operator, on a net lease basis. The terms of the lease are summarized below:
SUMMARY OF GARAGE LEASE
Lease Date: 12/97 - 11/2007
Term: 10 years 5 months
Base Rent:
Years 1-5: $850,000 per year
Plus 50% of all revenues above $2,100,000
Years 6-10: $900,000 per year
Plus 50% of all revenues above $2,400,000
Expenses: Net Lease
Free rent: 5 months
Alterations: Tenant is required to expend $200,000 on various
improvements.
Renewal options: None
To ascertain market-oriented garage income for the subject property, a rental
survey of parking facilities within the influencing area and surrounding markets
was conducted. The leases were analyzed upon a rent per space basis, a common
unit of comparison utilized for parking facilities. Excluding the subject
property, the noted comparable properties indicate a range of rents on, a gross
basis, between $2,691 and $4,500 per space with a tighter range averaging $3,350
per space with an average capacity of approximately 200 cars. The low end of the
range is defined by an older lease in an office building with additional
percentage rent, the higher end of the range is representative of a 1996 garage
within a luxury residential building.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 109
MARKET RENT ANALYSIS (Continued)
The majority of the recent leases reflect the overall stabilization in rents per
car from the previously discussed economic impacts on garage rents. The current
market is in the process of correcting itself, as exhibited by the more recent
leases, No.1 and No.2 , supporting $3,000 per space rents. The subject
property's contract rent for the garage equates to $1,797 per space. Including
the budgeted real estate and common area maintenance, which are net expenses,
the contracted rent equates to $2,941 per space. In consideration of the subject
property's commercial location within a stabilized commercial complex, a gross
rent of $3,000 per parking space is considered to be market-oriented. The
subject property's parking component should be able to support the current rent
levels and operate at full capacity.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
GARAGE MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
PARKING GARAGE RENTAL SURVEY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Term
No. Address Date Spaces Base Rent per Space (Years) Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
SUBJECT
-------
825 Eighth Avenue Dec-97 473 $1,797 10 Triple net lease. 50% of gross
New York, New York years revenues over $2,100,000 percentage
rent.
1 Carnegie Park Nov-96 150 $3,000 12 R.E. Tax: Pro-rata incr. over
200 East 94th Street years Oper Exp: None
New York, New York
2 101 West 56th Street Mar-96 196 $3,061 10 R.E. Tax: Pro-rata incr. over
N/W/C of 6th Avenue years Oper Exp: None
New York, New York
3 80 Park Avenue Early 1996 100 $4,500 15 R.E. Tax: Pro-rata incr. over
S/W/C of East 39th Street years Oper Exp: None
New York, New York
4 13-17 East 54th Street Oct-95 350 $3,500 20 R.E. Tax: Pro-rata incr. over
N/S, bet Fifth and Madison years Oper Exp: None
New York, New York
5 Paramount Plaza 1992 225 $2,691 Month Management agreement with Kinney
1631-1649 Broadway to Systems
New York, New York Month Owner to receive net proceeds after
deducting operating expenses and 3%
managemnt fee.
Survey Range Low $1,797 Mo. to Mo.
------------
High $4,500 20 years
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Field survey; compiled by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 111
MARKET RENT ANALYSIS (Continued)
HEALTH CLUB RENT ANALYSIS
The subject property's health club component consists of 35,000 square feet of
below-grade level space located in 2 sub-levels of the residential and plaza
portion of the complex. The health club features an indoor pool, running track,
aerobics rooms and various nautilus machines. The health club is currently
leased to a health club operator under a 20 year lease term that was signed in
1989. To ascertain market-oriented rents for the subject property's health club,
a rental survey of health club facilities within the influencing markets was
conducted. The leases were analyzed upon a rent per square foot basis, a common
unit of comparison.
The noted comparable properties indicate a range of rents between $11.78 and
$30.00 per square foot. The low end of the range is defined by a lease in a
property located within a residential building, the higher end of the range is
representative of health club facility with good exposure to pedestrian traffic.
Escalations ranged from none to the net real estate taxes and operating
expenses.
The health club lease expires past the projection period. Based on the range of
rents exhibited by the comparables, the current rent is considered to be within
market parameters. In consideration of the subject property's location within a
stabilized residential/commercial complex with new residential development
projects underway, the subject property should be able to support the current
rent of $24.10 per square foot plus net taxes and pro-rata share increases in
operating expenses.
<PAGE>
HEALTH CLUB MARKET RENT ANALYSIS (Continued)
825 EIGHTH AVENUE
HEALTH CLUB RENTAL SURVEY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
No. Address Tenant Date Size Rent Per Sq. Ft.
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 Le Triomphe 59th St. Gym Apr-96 1,413 (grade)
New York, New York 42,850 (concourse)
------ $11.78
44,263
2 575 Lexington Ave. N.Y. Sports Club 1996 18,290 (2nd floor)
New York, New York $21.00
3 25 Broadway Vertical Club II 1996* 3,124 (grade)
New York, New York 6,647 (mezzanine)
12,214 (basement)
12,975 (sub-basement)
*had been under negotiation since 1992 ------ $26.45
34,960
4 160 Columbus Avenue Rebok Sports Club 1995 125,000 (3rd-8th floor)
New York, New York 15,000 (deck and pool area)
------ $16.00
** renegotiated existing lease 140,000
5 207 West 76th Street Equinox Fitness 1994 7,663 (2nd & 3rd Fl.)
New York, New York $30.00
Survey Range Low $11.78 per sq. ft.
------------ High $30.00 per sq. ft.
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Term
No. Address Rent Sreps (Years) Comments
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 Le Triomphe Average 15 R.E. Taxes: Pro-rata incr B.Y.
New York, New York rent steps of years Oper. Exp: None
3% per year
2 575 Lexington Ave. Average 16 R.E. Taxes: Pro-rata incr B.Y.
New York, New York rent steps of years Oper. Exp: Pro-rata incr B.Y.
5% per year T.I.: None
Free Rent: 10.5 months
3 25 Broadway Average 10 R.E. Taxes: Information N.A.
New York, New York rent steps of years Oper. Exp: Share of C.A.M.
3% per year
*had been under negotiation since 1992
4 160 Columbus Avenue 20 R.E. Taxes: Net
New York, New York years Oper. Exp: Net
** renegotiated existing lease
5 207 West 76th Street Average 12 R.E. Taxes: Pro-rata incr B.Y.
New York, New York rent steps of years Oper. Exp: Pro-rata incr B.Y.
3% per year
Survey Range Low 10 years
------------ High 20 years
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 113
MARKET RENT ANALYSIS (Continued)
SUMMARY OF OFFICE RENT ASSUMPTIONS
Market Rent (Average)
Space Under 100,000 S. Ft.: $36.00 per square foot
Space Greater than 100,000 S. Ft: $34.00 per square foot
Lease Term (All space): 15 years
Rent Step-ups: $2.50 per square foot every 5 years.
Real Estate Tax and Operating
Expense Contributions: Pro-rata share of increases over a
base year.
Tenant Workletter- New Leases:
Space Under 100,000 S. Ft.: $40.00 per square foot
Space Greater than 100,000 S. Ft: $40.00 per square foot
Basement & Floor 1 None
Tenant Workletter-Renewal Leases: 50% of a new lease
Free Rent-New Leases: All space 12 months
Free Rent-Renewal Leases: None
SUMMARY OF RETAIL RENT ASSUMPTIONS
Market Rent $34.00 per square foot (weighted
average)
Lease Term: 10 years
Rent Step-ups: 3% steps per year
Real Estate Tax Expense Contributions: Pro-rata share of increases over a
base year.
Tenant Workletter- New & Renewal Leases: None
Free Rent-New Leases: All space 6 months
Free Rent-Renewal Leases: None
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 114
HIGHEST AND BEST USE ANALYSIS
Highest and Best Use is defined by the Appraisal Institute in The Dictionary of
Real Estate Appraisal, Third Edition, Chicago, Illinois, 1993, 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.
There are typically two Highest and Best Use scenarios: The Highest and Best Use
of the property as improved and the Highest and Best Use of the site as if
vacant. In each case, the use must pass four "tests"; it must be physically
possible, legally permissible, financially feasible and maximally productive.
HIGHEST AND BEST USE AS VACANT
The site can physically accommodate most uses: residential, commercial and
industrial. The subject property's components are found in various portions of
the site bounded by West 49th and 50th Street between Eighth and Ninth Avenues.
This entire site has a plot area of approximately 160,700 square feet. The
subject property is located in a C6-4 zoning district that permits a wide range
of commercial uses, including mixed-use residential and commercial buildings.
The maximum developable building area is limited to a commercial floor area
ratio of 10.0 or 1,607,000 square feet of rentable area before any available
bonuses.
The subject site represents a large rectangular building site located on West
49th and West 50th Streets between Eighth and Ninth Avenues. Its size and
configuration suggests that a number of alternative developments could be
physically accommodated on the site. Further, the subject property is
conveniently situated within a desirable West Side office sub-market and within
the northwestern periphery of the Times Square retail trade area of the Midtown
Office Market.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 115
HIGHEST AND BEST USE ANALYSIS (Continued)
Based upon the surrounding uniformity of commercial office uses, the Highest and
Best Use of the subject site as if vacant would be for its eventual development
into a Class "A" office building. The development of the site would occur, and
financing for such development would be available, only after significant
pre-leasing.
HIGHEST AND BEST USE AS IMPROVED
The subject property is improved with a 47-story Class "A" office building and
amenities component containing a total of 1,837,397 square feet of rentable
area. The existing total above grade area exceeds that as allowed by current
zoning before bonuses.
The improvements are in very good condition and the subject property is well
suited to meet the demands of the Class "A" office market. As improved, the
development of the subject property is consistent with the Highest and Best Use
of the property as though vacant. Since the improvement makes a contribution to
value, the continuation of the existing use is justified and there is no
alternative that would economically justify the demolition of the existing
improvements. Therefore, the Highest and Best Use of the subject property, as
improved, is for its continued use as a multi-tenanted commercial office
building complex.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 116
THE VALUATION PROCEDURE
There are 3 traditional approaches which can be employed in establishing the
market value of the Leased Fee Interest in the subject property. These
approaches and their applicability to our valuation are summarized as follows:
THE INCOME CAPITALIZATION APPROACH
The theory of the Income Capitalization Approach is based on the premise that
present value is the value of the net income and reversionary value the property
will produce for the remainder of its productive life or over a reasonable
holding (ownership) period. We have utilized the Discounted Cash Flow Analysis
technique to process this income stream.
In our Discounted Cash Flow Analysis, we will convert equity cash flows
(including cash flows and equity reversion) into value utilizing a discount rate
(or internal rate of return). The discount rate will be derived from a
comparative analysis of rates used by recent buyers of major office buildings.
We have appraised the subject property, free and clear of financing, subject to
existing ground leases, short term leases and contractual obligations.
The results of the Discounted Cash Flow Analysis are usually the primary value
indicator for properties such as the subject property. "Investor-purchasers"
expect a reasonable rate of return on their equity investment based on the
ownership risks involved; this approach closely parallels the investment
decision process.
The direct capitalization method is a secondary method in which the net
operating income is divided a market derived capitalization rate into value. The
direct capitalization method is not employed considering the complexity of the
underlying lease terms encumbering the subject property.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 117
THE VALUATION PROCEDURE (Continued)
THE SALES COMPARISON APPROACH
The Sales Comparison Approach is an estimate of value based upon a process of
comparing recent sales of similar properties in the surrounding or competing
areas to the subject property. Inherent in this approach is the principle of
substitution which is central to this approach.
The application of this approach consists of comparing the subject property with
similar properties of the same general type which have been sold recently or
currently are available for sale in competing areas. This comparative process
involves judgment as to the similarity of the subject property and the
comparable sale with respect to many value factors such as location, contract
rent levels, quality of construction, reputation and prestige, age and
condition, among others. A search of recent sales within the Midtown office
market has identified 6 current Leased Fee sales. The estimated value through
this approach represents the probable price at which the subject property would
be sold by a willing seller to a willing and knowledgeable buyer as of the date
of value.
THE COST APPROACH
The application of the Cost Approach is based on the principle of substitution.
This principle may be stated as follows: no one is justified in paying more for
a property than that amount by which he or she can obtain, by purchase of a site
and construction of a building, without undue delay, a property of equal
desirability and utility. In the case of a new building, no deficiencies in the
building should exist.
In the case of income-producing real estate, the cost of construction plays a
minor and relatively insignificant role in determining market value. The Cost
Approach is typically only a reliable indicator of value for: (a) new
properties; (b) special use properties; and (c) where the cost of reproducing
the improvements is easily and accurately quantifiable and there is no economic
obsolescence. In all instances, the issue of an appropriate entrepreneurial
profit - the reward for
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 118
THE VALUATION PROCEDURE (Continued)
undertaking the risk of construction, remains a highly subjective factor.
The subject property is a modern Class "A" office building with accrued
depreciation evident from all 3 sources of depreciation. The Cost Approach is
employed in this appraisal.
RECONCILIATION
The valuation procedure is concluded via a review of the approaches to value
employed. The reliability of the market data utilized and the overall
applicability of each approach are re-examined. Based upon this analysis, the
value indications are reconciled and a final estimate is concluded.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 119
INCOME CAPITALIZATION ANALYSIS
OFFICE COMPONENT
METHODOLOGY
Investors in income producing real estate typically make a forecast of net
operating income and cash flow over a period of time typically ranging from 10
to 15 years and then determine a purchase price which will provide a return on
and of the asset and justify the degree of risk inherent in the proposed
investment.
The aforementioned is developed through 2 methods: the Discounted Cash Flow
Analysis and the Direct Capitalization Method.
DISCOUNTED CASH FLOW ANALYSIS: The major tasks involved in such an approach to
valuing the subject property are enumerated as follows:
1. Analysis of the projected contract rental income stream, based upon the
current rent roll; establishing the market rent levels for the types of
space; projection of future annual revenues for a period coinciding with
major lease roll-overs, probable lease renewals at market rates, and
probable vacancy and credit losses.
2. Analysis of projected other income including operating expense and real
estate tax contributions.
3. A projection of future operating expenses, real estate taxes, and
management fees; based upon the analysis of the subject property's actual
operating history and the experience at other comparable buildings.
4. A derivation of the most probable annual net operating income to be
generated by the property over the projection period by subtracting all
property expenses from the effective gross income.
5. Projection of costs for tenant workletters, leasing commissions and
capital improvements considered necessary throughout the projection
period.
6. Conversion of the projected net operating income to annual cash flow by
deducting, if applicable, tenant workletters, leasing commissions and
capital improvements.
Koeppel Tener Real Estate Services, Inc., Valuation Division
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
7. Estimation of a re-sale price at the end of the investment period by
applying an appropriate overall capitalization rate to the forecasted next
year net operating income and deducting the appropriate selling costs
which include recording taxes and brokerage fees.
8. Determination of a discount rate (yield rate or internal rate of return)
which would attract a prudent investor to invest in a similar situation
with comparable degrees of risk, non-liquidity, and management burden.
9. Conversion of the pre-tax cash flows into a present value by discounting
at the proper yield rate.
The results of this analysis provide an estimate of the value of the property,
free and clear of financing. The resultant pre-tax cash flows are contained in
the accompanying cash flow pro forma.
ASSUMPTIONS UTILIZED IN DISCOUNTED CASH FLOW PROJECTIONS
The following assumptions and definitions are employed in our analysis of the
subject property.
PROJECTION PERIOD: The subject property's estimated value by a discounted cash
flow analysis is based on a cash flow projection over a specified number of
years. Since a typical investor is concerned not only with the return on capital
but also with the return of capital, our analysis takes into account the re-sale
of the property at the termination of the investment holding period.
The cash flow commences on the appraisal date, subsequently proceeding through
the lease-up of any vacant space, the expiration and re-lease of currently
occupied space at the then market levels, and finally extends to a period
stabilized occupancy.
The projected fiscal year cash flow of the subject property represents a 10 year
holding period,
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
beginning July 25, 1997, with the 11th fiscal year (F.Y.E. 8/30/08) net
operating income used in developing the subject property's future reversionary
value.
RENTABLE AREA: The individual rentable areas reported in the subject property
are accepted and processed accordingly. The total rentable area of the subject
property's office component equals 1,595,462 square feet of which 1,568,434
square feet encompasses the office and 27,028 square feet encompasses the retail
space.
PRO-RATA SHARES: The pro-rata shares indicated in the leases are processed
accordingly. The equivalent denominator equates to 1,595,462 square feet
(rounded) for real estate taxes and operating expense contributions.
EXPENSE RECOVERIES: The escalations, which vary from pro-rata shares to pro-rata
share increases over base year expense stops, are processed according to the
existing leases.
CONTRACT RENT: As previously discussed in the Summary of Existing Leases, the
subject property's existing leases represent contractual obligations which are
consistent with current market parameters. The existing contract rents are
processed in accordance with existing lease terms.
RENEWAL OPTIONS: As mentioned in the Summary of Existing Leases, renewal options
are reported in some leases for renewal at a Fair Market Rental Value or a
percentage thereof.
LEASE-UP OF VACANT SPACE: It is our opinion that the 30,596 square feet of
available office space within the subject property can be leased over the next
12 months.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
MARKET RENTAL RATES: The following is a summary of the market rental rates
assumed in our analysis. The following rents are expressed in present value
dollars.
Office Component
Smaller Tenants (Less than 100,000 square feet): $36.00 per square foot
Larger Tenants (Greater than 100,000 square feet): $34.00 per square foot
Retail Component
Weighted Average Retail Market Rent: $34.00 per square foot
FUTURE LEASE TERMS AND RENT STEP-UPS: The following future lease terms and rent
step-ups are assumed within this analysis.
Office Component: 15 years with $2.50 per square foot step-ups
every 5 years.
Retail Component 10 years with 3.0% per year step-ups
APPRECIATION FACTORS: The following appreciation factors are projected based on
the maturing of the West Side office sub-market, the upwardly trending Times
Square retail trade area and improving overall economic conditions.
Market Rents: 0.0% for the remaining months of calendar
year 1997, and 4.0% per calendar year
thereafter.
Other Income: 3.5% per year
Operating Expenses: 3.5% per year
Real Estate Taxes: Variable based on taxes projected in the
Real Estate Tax analysis section of the
appraisal.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
REAL ESTATE TAX CONTRIBUTIONS: The subject property's existing leases, contain
provisions which calls for additional charges based on each tenant's pro-rata
share of real estate taxes (the more recent lease are calculated by increases in
real estate taxes over a base year). Escalation income is computed in accordance
with existing lease terms. All future office and retail leases are projected to
include a pro-rata share of increases in real estate taxes over the base year of
the leases.
OPERATING EXPENSE CONTRIBUTION: Ogilvy & Mather and Cravath Swaine & Moore are
net leases which cover their full pro-rata shares of operating expenses of the
building. The remainder of the tenants contribute pro-rata increases over a base
year of operating expenses. Escalation income is computed in accordance with
existing lease terms. Further, operating expense contributions are processed on
a pro-rata share increase over base year of occupancy on all future office
leases. This technique is an accepted method within the New York City office
market and is used as an alternative to the Porter's Wage Contribution.
TENANT ELECTRIC CONTRIBUTION: Electricity is distributed throughout office
buildings in either of 3 ways: (1) by a direct meter between Con Edison and the
tenant for electric consumption; (2) by a sub-meter between the landlord and the
tenant for electric consumption with a percentage add-on for administration; (3)
and last, by rent inclusion. All existing office and retail space which is
currently direct metered is assumed to remain direct metered on all future
leases. All non-direct metered space is assumed to be sub-metered on all future
leases.
MISCELLANEOUS AND CONDENSER REIMBURSEMENT INCOME: The miscellaneous income
includes the reimbursements related to plaza maintenance, additional landlord
services and other sources. The income attributable to the plaza reimbursements
and additional landlord services has historically averaged $450,000 per year.
Other miscellaneous
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
income sources have been estimated at $15,000. The subject property additionally
offsets income from condenser reimbursements. According to management supplied
information, the condenser water income was reported to be $629,149 in 1995 and
$623,084 in 1996, of which approximately 80% is allocated out into other expense
categories. We have estimated a combined miscellaneous and condenser
reimbursements income, which has been rounded to $600,000 for the first year of
the cash flow analysis growing by 3.5% per year to account for the previously
mentioned sources of additional income.
TENANT WORKLETTER ALLOWANCE: Future new office leases are assumed to contain
tenant workletters equivalent to $2.66 per square foot per lease year which
equates to individual tenant workletters of $40.00 per square foot for new 15
year leases. Renewal office leases are processed with a tenant workletter
equivalent to 50% of the cost of a new lease which equates to $20.00 per square
foot. The cost of tenant workletters are assumed to increase by 3.5% per year.
All retail spaces are leased on an as is basis with 6 months free rent.
RENT CONCESSIONS: All new future office leases are assumed to contain 0.80
months of free rent per lease year (12.0 months total) are assumed for the
remainder of the projection period as the supply and demand for commercial
office space within the Midtown office market will be/at near equilibrium.
Office renewals are not afforded any free rent.
All new future retail leases are assumed to contain 6 months of free rent, but
none on renewal.
LEASE RENEWAL PROBABILITY: We have estimated a 50% renewal probability for all
tenants whose leases expire during the term of our analysis. A 50% renewal
probability is also assigned to the individual retail stores.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
MONTHS VACANCY BETWEEN LEASES: This lost income is identified in the cash flow
as Lag Vacancy. A 6 months vacancy between leases is assigned to all space
within the office components.
VACANCY AND CREDIT LOSS: Considerate of the credit tenants occupying the office
space a 3.0% credit loss is assumed throughout the cash flow projection. A 15%
vacancy and credit is processed for the retail space in consideration of its
historical vacancies and collections. These estimates are consistent with
investor surveys and considerate of the historical performance for the subject
property.
LEASING COMMISSIONS: The standard Manhattan leasing commissions for office and
retail space are as follows: 5.0% for year 1, 4.0% for year 2, 3.5% for years 3
to 5, 2.5% for years 6 to 10 and 2.0% for years 11 to 20. The standard leasing
commission equates to 32.0% for new 10-year leases, 42.0% for new 15-year leases
and 52.0% for new 20-year leases. Further, renewal commissions are calculated at
50% of the new lease rate, and commissions are assumed paid in the first year of
all new and renewal leases.
Conversations with local brokers and building managers reveals that brokers
require an additional 50% of the standard leasing commission when an office
tenant has retained its own broker. As such, an additional 25% commission (a/k/a
over-ride) is included due to the negotiability of leasing. Our estimate also
considers the fact that office tenants in today's market will typically retain
the use of an independent broker.
The following leasing commissions are assumed to be paid on all future retail
and office leases. Future leases for storage space is assumed to be exclusive of
any leasing commissions.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
Retail Lease (10 years): 32.0% (Standard 32.0% x 0.0% override).
Office Lease (15 years): 52.5% (Standard 42.0% x 25% override).
OPERATING EXPENSES
Operating expenses are projected based upon an analysis of the reported
operating history of the subject property and a comparison with other similar
office buildings. The actual operating expenses of the subject property for the
calendar years 1993 through 1996 and the budget for 1997 are summarized,
discussed and analyzed with operating expenses of similar properties. The data
is then correlated into a stabilized expense. The compilation of the historical
expenses for the subject property and the comparables are summarized at the end
of this section.
The level of operating expenses are in generally direct relationship to the
occupancy rate of an income-producing property. It is our opinion that the
actual costs of the other expenses of the subject property will not decline
unless a significantly higher percentage of the building is to be vacated. The
historical operating expenses of the subject property's office component is
analyzed on the basis of its reported rentable area of 1,595,462.
The projected operating expenses for the 1997 calendar year are subsequently
converted to a fiscal year basis by the Argus software program. Stabilized
operating expenses are estimated as follows based upon our review of the subject
property's actual operating history with that of similar Manhattan office
buildings. The estimated expenses reflect stabilized occupancy.
INSURANCE: This category covers the cost of annual premiums for fire and
liability insurance for the real estate. The historical expense of the subject
property has been relatively stable and has ranged from a low of $0.20 per
square foot to a high of $0.24 per square foot. According to the management, the
ownership has obtained a blanket policy which provides
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
insurance coverage at a discounted rate for multiple buildings under single
ownership. As such the actual premium of $230,000 per year or $0.14 per square
foot will be adopted for the cash flow projection.
UTILITIES: This category addresses the combined costs of water and sewer, fuel
for heating, and common area electricity. The historical expense of the subject
property is given most weight in estimating individual calendar year stabilized
expenses as the costs of comparable expenses may vary depending on consumption
according to occupancy and whether the tenants are direct metered for
electricity.
The unit cost of the subject property's common area utility expenses has
fluctuated over the years. ranging from $0.60 per square foot to $0.92 per
square foot. The subject property's 1997 budgeted expense of $1.01 per square
foot, which is also consistent with the year to date annualized expenses of
$0.92 per square foot, is given most weight in estimating a stabilized expense
of $1.00 per square foot which equates to $1,595,000 per year (rounded).
SECURITY: This represents the costs of security, plaza security and routine
patrolling. The historical expense of the subject property has been stable in
the past three years with expenses ranging from $0.52 per square foot in 1994 to
$0.53 per square foot in 1996. The subject property's budgeted cost for 1997, is
considered to be consistent with the historical expenses. Thus we have given
most weight to the 1997 budget expense of $0.56 per square foot which equates to
a rounded $890,000 per year.
CONTRACT CLEANING: The office component and the common area are cleaned by
various cleaning contracts. The historical cost of the subject property, which
has been relatively stable since 1995, is reported at $1.18 per square foot for
1995 and $1.17 per square foot for 1996. The comparable data ranges from $1.77
to $2.63 per square foot. It is difficult to
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
reconcile this account with the comparable expenses since the scope of services
often fluctuate between the various labor categories. The subject property's
1997 budgeted expense equates to $1.11 per square foot. However, as the subject
property's historical expenses are considered to be most representative of its
stabilized operation, we have given the 1995 and 1996 historical expenses the
most weight in estimating a stabilized expense rounded to $1,900,000, which
equates to $1.19 per square foot of total rentable area for the office
component.
REPAIRS AND MAINTENANCE: This represents the costs of repairing and maintaining
the building's common areas, elevator maintenance contract, fire alarm and
security system, and the normal on-going items of repair including roof,
periodic painting of the public areas, plumbing and electrical repairs. The
subject property's repair and maintenance expense category also includes payroll
and related taxes and benefits. As a detailed historical breakout of the payroll
expenses was not available, we have processed the repairs and maintenance
expense as categorized.
The historical expense of the subject property has been relatively stable since
1994 ranging from $2.79 per square foot to $2.89 per square foot. The
comparables exhibit expenses ranging from $0.74 o $1.58 per square foot. The
subject property's unit cost is above the range exhibited by the comparables,
which range from $0.74 to $1.58 per square foot, however, this is expected given
the subject property's grouping of expense items. According to the management
supplied June 1997 year to date expenses, approximately 30% of the expenses are
attributable to payroll and related expenses. We have given most weight to the
1995 and 1996 historical expenses in estimating a stabilized repair and
maintenance expense rounded to $4,600,000 per year or $2,88 per square foot.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
ADMINISTRATIVE: This category includes the cost of legal, accounting and
consulting services for the building. In addition, this account represents those
general expenses, outside the primary categories, used in managing the asset
(telephone, advertising etc.). This account typically fluctuates from year to
year since accountants and lawyers base their fees on the time they are required
to spend working with the building.
The historical expense of the subject property reflects a range from $0.07 per
square foot to $0.21 per square. The historical expense of the subject property
is consistent with lower end of the comparable data which reflects a wide range
from $0.08 to $0.99 per square foot. A market oriented expense of $0.10 per
square foot is processed and is considered to be consistent with the historical
expense range exhibited by the subject property, equating to an administrative
expense rounded to $160,000 for the 1997 projection year.
MANAGEMENT: Management fees of Manhattan office buildings are typically
negotiated at either a flat fee or a percentage of effective gross income. The
historical management expense of the subject property ranges from $0.22 per
square foot for 1993 to $0.33 per square foot for 1996. Typically, a management
company will enter into a flat fee contract which also provides exclusive
leasing rights to the building. The subject property is managed and leased by a
related entity (Zeckendorf Group) at 1.0% of gross building revenues.
Conversations with local brokers and owners reveals that the current cost of a
fixed management agreement ranges from $0.20 to $0.30 per square foot, assuming
that the management company retains the exclusive rights to the leasing
activity. A 1.0% fixed percentage of the effective gross income (which equates
to $0.38 per square foot in year 1 of the cash flow) and an exclusive leasing
arrangement is assumed.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
REAL ESTATE AND BID TAXES: The subject property's real estate and BID taxes are
estimated as discussed in the prior Real Estate Assessments and Taxes section of
this report. Calendar year taxes have been converted to an equivalent fiscal
year basis which are processed within the discounted cash flow analysis.
RESERVE FOR REPLACEMENTS: This allocation is comprised of a reserve for the
future replacement of the building's components, i.e. roof, H.V.A.C. system.
This non-cash charge is considered a supplement to the Repairs and Maintenance
budget and is non-recoverable. For the calendar year 1997, a budget of $0.20 per
square foot is estimated, which equates to a rounded expense of $320,000 per
year.
TOTAL OPERATING EXPENSES AND REAL ESTATE TAXES: Total operating expenses
(excluding management and real estate taxes) for the 1997 calendar year have
been projected at $9,375,000 ($5.87 per square foot).
FINANCING: None; the subject property is being valued free and clear of
financing.
The preceding expenses are summarized on the following pages.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
825 EIGHTH AVENUE
HISTORICAL, BUDGETED AND Y.T.D. OPERATING EXPENSES
(PER SQ. FT. BASIS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Budget YTD 6/30/97
Year Ending 1993 1994 1995 1996 1997 Annualized
- -----------------------------------------------------------------------------------------------------------------------------------
PSF PSF PSF PSF PSF PSF
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Insurance $317,677 $0.20 $379,435 $0.24 $323,347 $0.20 $331,500 $0.21 $350,000 $0.22 $372,000 $0.23
Utilities 1,294,523 0.81 1,472,744 0.92 961,331 0.60 1,004,696 0.63 1,609,500 1.01 1,460,062 0.92
Security 922,969 0.58 827,104 0.52 844,934 0.53 846,396 0.53 888,796 0.56 919,440 0.58
Contract Cleaning 2,095,006 1.31 1,729,636 1.08 1,875,878 1.18 1,862,142 1.17 1,774,042 1.11 1,773,548 1.11
Repairs and Maint. 3,214,690 2.01 4,445,117 2.79 4,615,440 2.89 4,566,873 2.86 4,659,360 2.92 4,754,566 2.98
Administration 106,575 0.07 166,661 0.10 91,933 0.06 336,135 0.21 191,512 0.12 67,974 0.04
------- ---- ------- ---- ------ ---- ------- ---- ------- ---- ------ ----
Total $7,951,440 $4.98 $9,020,697 $5.65 $8,712,863 $5.46 $8,947,742 $5.61 $9,473,210 $5.94 $9,347,590 $5.86
Management Fees $350,000 $0.22 $450,000 $0.28 $500,000 $0.31 $530,000 $0.33 $605,346 $0.38 $750,000 $0.47
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Management provided financials; compiled by KTR.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
825 EIGHTH AVENUE
OFFICE BUILDING EXPENSE COMPARABLES
(PER SQUARE FOOT BASIS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comparable No.: 1 2 3 4
Name: Equitable Tower Paramount Plaza 1675 Broadway 380 Madison
Address: 787 Seventh Ave. 1633 Broadway
Stories: 54 48 35 25
Constructed: 1985 1968 1989 1952/1990
Rentable Area (Sq. Ft.) 1,523,000 1,970,000 760,036 798,668
Period 1995 1996 1994 Budget 1996
(A) Trended Forward To: 1997 1997 1997 1997
- ----------------------------------------------------------------------------------------
Insurance $0.23 $0.36 $0.24 $0.24
Utilities 4.03 3.38 1.11 0.59
Labor 1.06 1.35 1.53 1.25
Contract Cleaning 1.89 1.99 1.94 1.77
Repairs and Maintenance 1.03 0.74 1.06 1.05
Administration 0.60 0.20 0.47 0.15
---- ---- ---- ----
Total $8.84 $8.02 $6.35 $5.05
- ----------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Comparable No.: 6 7 7
Name: 1155 Sixth Ave. 1325 Sixth Ave. The Grace Bldg.
Address: 1114 Sixth Ave.
Stories: 40 34 50
Constructed: 1984 1988 1970
Rentable Area (Sq. Ft.) 639,867 719,000 1,425,000
Period Actual 1995 1995 Budget 1996
(A) Trended Forward To: 1997 1997 1997
- -------------------------------------------------------------------------
Insurance $0.24 $0.28 $0.20
Utilities 2.93 1.54 3.18
Labor 1.49 1.16 0.85
Contract Cleaning 2.23 2.63 2.31
Repairs and Maintenance 1.58 1.27 1.58
Administration 0.08 0.38 0.99
---- ---- ----
Total $8.55 $7.26 $9.11
- -------------------------------------------------------------------------
</TABLE>
(A) Trended forward by 4.0% per year.
Source: Compiled by KTR
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
825 EIGHTH AVENUE
PROFORMA OPERATING EXPENSES
- --------------------------------------------------------------------------------
Projected
Expenses Calendar 1997 $ per Sq.Ft.
- --------------------------------------------------------------------------------
Insurance $230,000 $0.14
Utilities 1,595,000 1.00
Security 890,000 0.56
Contract Cleaning 1,900,000 1.19
Repairs and Maintenance 4,600,000 2.88
Administration 160,000 0.10
------- ----
Sub-Total $9,375,000 $5.87
Management 1.0% of E.G.I.
Reserves $320,000 $0.25
- --------------------------------------------------------------------------------
Source: Calculations by KTR
INVESTMENT CRITERIA
The following data is a compilation of a number of investor surveys, and is
based upon interviews conducted among many of the nation's leading life
insurance companies, commercial banks, investment banking firms, thrift
institutions, and syndicators. These surveys provide guidelines currently being
utilized in the market.
The table on the following page summarized the highlights of these reports for
the category of office buildings.
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
KORPACZ FIRST QUARTER 1997
MANHATTAN OFFICE MARKET
SUMMARY OF CURRENT INVESTMENT RATES
------------------------------------------------------
10.0% to 14.0% Internal Rate of Return
7.5% to 12.0% Overall Capitalization Rate
7.0% to 11.5% Terminal Capitalization Rate
0.0% to 10.0% Annual Revenue Growth Rate
3.0% to 5.0% Annual Expense Growth Rate
------------------------------------------------------
SELECTION OF A DISCOUNT RATE
Value is calculated by discounting the projected net operating income plus the
net proceeds from the reversionary sale of the property at an appropriate
discount rate. The discount rate is defined by the Appraisal Institute, The
Appraisal of Real Estate Appraisal, Tenth Edition, Chicago, Illinois, 1992 as "a
yield rate used to convert future payments or receipts into present value". The
yield rate is further defined by as "a rate or return on capital; it is usually
expressed as a compound annual percentage rate". The use of this rate results in
a net present value of a particular property when it is applied to a given
income stream and reversion.
This rate is determined by investors based upon the relative risk of a
particular investment in relation to other investment vehicles. Recent published
surveys of major investors' criteria have indicated desired IRRs generally range
from 10% to 14% for investment grade office buildings.
The consensus of those actively engaged in the marketplace for major office
buildings is that
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
internal rates of return (based upon forecasting techniques and assumptions
similar to those utilized herein) fall within a broad range, depending upon
numerous risk factors including, among others:
(a) LOCATION: the better the location the lower the IRR;
(b) PHYSICAL CHARACTERISTICS OF THE PROPERTY: the newer the property, the
higher the quality of materials and finishes, and the better the design
and layout of the physical plant, the lower the IRR;
(c) DEGREE OF FORECASTED CASH FLOW GROWTH: the greater the growth forecasted,
the higher the IRR;
(d) AMOUNT OF EQUITY INVESTMENT REQUIRED: the greater the required equity
investment (that portion of the total acquisition cost not typically
funded by conventional financing), the higher the IRR; and
(e) LENGTH OF PROJECTION PERIOD: the longer the projection period, the higher
the IRR.
The previously mentioned compilation of surveys of major investors indicates
internal rates are generally ranging from 10.0% to 14.0% for commercial office
properties. A review of current sales activity reveals a range in internal rates
from 11.0% to 12.5% of the sales identified in the Sales Comparison Approach.
DISCOUNT RATE CORRELATION: A discount rate of 11.0% is selected based on our
research of the local markets and considering the quality, quantity and
durability of the existing cash flow of the subject property. Our rate selection
is considered to be consistent with recent sales activity and current investment
criteria.
TERMINAL CAPITALIZATION RATE: Terminal, a/k/a residual capitalization rates
typically range from 7.5% to 11.5% depending on the type of real estate, its
condition,
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INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
geographic location, income growth potential, and overall level of interest
rates.
The terminal capitalization rates indicated in the preceding institutional rates
(7.0% to 11.5%) and the market sales (9.0% to 10.5%) are given most weight in
estimating a terminal capitalization rate since the institutional rates reflect
current investor criteria and the sales reflect market derived investment
criteria.
A terminal rate of 10.0% appears to be a reasonable estimate based on the recent
sales activity within the Midtown office market and the competitive position of
the subject property with consideration given to the leases expiring subsequent
to our holding period. Consequently, a terminal capitalization rate of 10.0% is
applied to the net operating income for the final year of our projection (F.Y.E.
2008) which represents the 11th year for our "as is" value. A buyer at that time
might reasonably expect inflation driven increases in net operating income, as
well as appreciation in property value over the holding period.
SELLING AND TRANSFER COSTS: Selling commission of 2.0% of the sale price and a.
New York State and New York City transfer taxes totaling 3.025% of the gross
future re-sale price are deducted.
DISCOUNTED CASH FLOW ANALYSIS
The preceding analysis has been developed from computer software known as
"Argus" written by Argus Financial Software, Houston , Texas. The accuracy and
reliability of this software has been tested and accepted by various segments of
the real estate industry.
An Income Capitalization Approach to value utilizing the discounted cash flow
technique is now processed based upon the investment considerations and
methodology discussed and our projections for income and expenses.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 137
INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
CASH FLOW - AS IS: The indicated Market Value of the Leased Fee Interest in the
subject property as of August 1, 1997 by application of the discounted cash flow
analysis technique is $387,434,449 which rounds to $387,000,000.
The $387,000,000 value is comprised of 2 components: the present value of the
sum of its future cash flows and present value of the future reversion. The
$233,466,129 present value of the future cash flows equates to approximately 60%
of the total value, the present value of the $153,968,320 net future reversion
represents the remaining 40% of the estimated value. The preceding relationship
clearly indicates that the market value is given most weight by the by the
current market value of the subject property's projected income.
INCOME CAPITALIZATION APPROACH CONCLUSION
Based upon the investment considerations and methodology already discussed and
our income and expense projections, we have processed an income capitalization
approach to value utilizing the discounted cash flow technique. We have
appraised the property to yield a 11.0% internal rate of return and a 10.0%
reversionary capitalization rate.
The indicated Market Value of the Leased Fee Interest of 825 Eighth Avenue's
Office Component, as derived by the discounted cash flow technique, as of July
25, 1997, is rounded to:
THREE HUNDREDEIGHTY SEVEN MILLION DOLLARS
$387,000,000
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 138
INCOME CAPITALIZATION APPROACH (Continued)
825 EIGHTH AVENUE ( OFFICE COMPONENT )
SUMMARY OF FUTURE CASH FLOWS
In Inflated Dollars for the Fiscal Year beginning 8/1/1997
(Scaled to the Nearest Thousand)
<TABLE>
<CAPTION>
For the Years Ending Jul-1998 Jul-1999 Jul-2000 Jul-2001 Jul-2002 Jul-2003 Jul-2004
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
POTENTIAL GROSS REVENUE
Base Rental Revenue $48,322 $50,344 $51,768 $53,124 $54,535 $55,767 $57,523
Absorption & Turnover Vacancy (36) (93) (58) (1,562)
Base Rent Abatements (229) (1,016) (43) (16) (1,367)
------- ------- ------- ------- ------- ------- -------
Scheduled Base Rental Revenue 48,093 49,293 51,632 53,109 54,535 55,709 54,595
Expense Reimbursement Revenue
Real Estate Taxes 7,439 7,807 8,185 8,575 8,978 9,391 9,721
Management 361 381 408 422 435 447 444
Insurance 138 143 149 155 162 169 175
Utilities 955 1,009 1,066 1,124 1,184 1,246 1,296
Contract Cleaning 1,138 1,202 1,269 1,339 1,411 1,485 1,544
Security 401 432 463 495 529 564 592
Repairs & Maint. 2,646 2,768 2,930 3,098 3,272 3,452 3,599
Administration 96 101 107 113 119 125 130
BID Taxes 218 225 232 240 248 255 261
ICIP 1,449 2,899 2,899 2,899 2,899 2,899
------- ------- ------- ------- ------- ------- -------
Total Reimbursement Revenue 13,391 15,518 17,708 18,460 19,236 20,032 20,662
Misc. and Condenser Reimb. 600 621 643 665 689 713 738
------- ------- ------- ------- ------- ------- -------
TOTAL P0TENTIAL GROSS REVENUE 62,084 65,432 69,983 72,234 74,459 76,454 75,994
Collection Loss (1,845) (1,944) (2,080) (2,147) (2,213) (2,272) (2,258)
------- ------- ------- ------- ------- ------- -------
EFFECTIVE GROSS REVENUE 60,239 63,488 67,903 70,087 72,246 74,181 73,736
------- ------- ------- ------- ------- ------- -------
OPERATING EXPENSES
Real Estate Taxes 12,424 12,797 13,180 13,576 13,983 14,403 14,835
Management 602 635 679 701 722 742 737
Insurance 230 239 249 259 269 280 291
Utilities 1,594 1,651 1,709 1,768 1,830 1,894 1,959
Contract Cleaning 1,899 1,966 2,035 2,107 2,180 2,257 2,334
Security 890 921 953 987 1,021 1,057 1,094
Repairs & Maint. 4,597 4,761 4,927 5,100 5,279 5,463 5,651
Administration 160 166 171 177 184 190 197
BID Taxes 364 371 379 386 394 402 410
ICIP 2,421 4,841 4,841 4,841 4,841 4,841
------- ------- ------- ------- ------- ------- -------
TOTAL OPERATING EXPENSES 22,760 25,927 29,124 29,902 30,704 31,529 32,349
------- ------- ------- ------- ------- ------- -------
NET OPERATING INCOME 37,479 37,560 38,779 40,185 41,542 42,653 41,387
------- ------- ------- ------- ------- ------- -------
LEASING & CAPITAL COSTS
Tenant improvements 1,224 1,740
Leasing Commissions 679 17 44 68
Reserves 320 331 343 355 367 380 393
------- ------- ------- ------- ------- ------- -------
TOTAL LEASING & CAPITAL COSTS 2,223 348 386 355 367 380 2,201
------- ------- ------- ------- ------- ------- -------
CASH FLOW BEFORE DEBT SERVICE $35,256 $37,213 $38,392 $39,830 $41,175 $42,273 $39,186
& INCOME TAX ======= ======= ======= ======= ======= ======= =======
</TABLE>
For the Years Ending Jul-2005 Jul-2006 Jul-2007 Jul-2008
-------- -------- -------- --------
POTENTIAL GROSS REVENUE
Base Rental Revenue $58,576 $59,831 $61,376 $63,311
Absorption & Turnover Vacancy (638) (1,080) (1,532) (1,382)
Base Rent Abatements (250) (1,743) (64) (2,120)
------- ------- ------- -------
Scheduled Base Rental Revenue 57,689 57,008 59,780 59,809
Expense Reimbursement Revenue
Real Estate Taxes 10,149 10,566 11,023 11,402
Management 469 469 492 496
Insurance 183 190 198 206
Utilities 1,361 1,425 1,495 1,556
Contract Cleaning 1,622 1,697 1,781 1,854
Security 628 663 703 737
Repairs & Maint. 3,787 3,971 4,173 4,350
Administration 137 143 150 156
BID Taxes 269 277 285 292
ICIP 2,899 2,899 2,899 2,899
------- ------- ------- -------
Total Reimbursement Revenue 21,504 22,300 23,199 23,946
Misc. and Condenser Reimb. 763 790 818 846
------- ------- ------- -------
TOTAL P0TENTIAL GROSS REVENUE 79,956 80,098 83,797 84,601
Collection Loss (2,376) (2,379) (2,489) (2,513)
------- ------- ------- -------
EFFECTIVE GROSS REVENUE 77,581 77,719 81,308 82,088
------- ------- ------- -------
OPERATING EXPENSES
Real Estate Taxes 15,280 15,738 16,210 16,697
Management 776 777 813 821
Insurance 303 315 327 340
Utilities 2,029 2,099 2,173 2,249
Contract Cleaning 2,417 2,501 2,588 2,679
Security 1,132 1,172 1,213 1,255
Repairs & Maint. 5,851 6,055 6,266 6,486
Administration 204 211 218 226
BID Taxes 418 426 435 444
ICIP 4,841 4,841 4,841 4,841
------- ------- ------- -------
TOTAL OPERATING EXPENSES 33,250 34,136 35,085 36,037
------- ------- ------- -------
NET OPERATING INCOME 44,331 43,583 46,223 46,051
------- ------- ------- -------
LEASING & CAPITAL COSTS
Tenant improvements 1,863 136 2,716
Leasing Commissions 69 5 193
Reserves 407 421 436 451
------- ------- ------- -------
TOTAL LEASING & CAPITAL COSTS 407 2,353 577 3,360
------- ------- ------- -------
CASH FLOW BEFORE DEBT SERVICE $43,923 $41,229 $45,646 $42,691
& INCOME TAX ======= ======= ======= =======
Totals may not add because of scaling to thousands.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 139
INCOME CAPITALIZATION ANALYSIS (Continued)
OFFICE COMPONENT
825 EIGHTH AVENUE
DISCOUNTED CASH FLOW SUMMARY
AS IS MARKET VALUE
- --------------------------------------------
11.00% Present
Discount Worth of ------------------------------
Year Cash Flow Factor Cash Flow Year Cash Flow Yield
- -------------------------------------------- ------------------------------
1 $35,256,000 0.901 $31,765,656 1 $35,256,000 9.10%
2 $37,213,000 0.812 $30,216,956 2 37,213,000 9.60%
3 $38,392,000 0.731 $28,064,552 3 38,392,000 9.91%
4 $39,830,000 0.659 $26,247,970 4 39,830,000 10.28%
5 $41,175,000 0.593 $24,416,775 5 41,175,000 10.63%
6 $42,273,000 0.535 $22,616,055 6 42,273,000 10.91%
7 $39,186,000 0.482 $18,887,652 7 39,186,000 10.11%
8 $43,923,000 0.434 $19,062,582 8 43,923,000 11.34%
9 $41,229,000 0.391 $16,120,539 9 41,229,000 10.64%
10 $45,646,000 0.352 $16,067,392 10 45,646,000 11.78%
----------- ------------------------------
Present Worth of Cash Flow $233,466,129
- --------------------------------------------
Reversion
- -----------------------------------------------------
11th Year N.O.I.: $46,051,000
Capital 10.0% 460,510,000
Less 2.0% Selling Expense: (9,200,000)
Less 3.025% Transfer Tax: (13,900,000)
-----------
Reversionary Value: $437,410,000
10th Year Discount Factor: 0.352000
Present Worth of Reversion: 39.7% $153,968,320
Present Worth of Cash Flows: 60.3% $233,466,129
------------
Value Indication $387,434,449
- -----------------------------------------------------
Source: Projection by KTR
- ------------------------------------
Net
Operating Capitalization
Year Income Rate
- ------------------------------------
1 $37,479,000 9.67%
2 $37,560,000 9.69%
3 $38,779,000 10.01%
4 $40,185,000 10.37%
5 $41,542,000 10.72%
6 $42,653,000 11.01%
7 $41,387,000 10.68%
8 $44,331,000 11.44%
9 $43,583,000 11.25%
10 $46,223,000 11.93%
11 $46,051,000 11.89%
- ------------------------------------
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 140
THE AMENITY COMPONENT VALUATION
THE AMENITY COMPONENT VALUATION
In our analysis of the subject property's amenity component comprised of the
theater component and 3 individual condominiums; garage, retail, and health
club, the Income Capitalization Approach is considered the most relevant method
in deriving its current Market Value. The Sales Comparison Approach has been
omitted, due to the lack of relevant theater and retail condominium sales, as
well as the Cost Approach due to the subjective nature of estimates of economic
and physical depreciation present in the subject property.
ASSUMPTIONS UTILIZED IN DISCOUNTED CASH FLOW PROJECTIONS
The following assumptions and definitions are employed in our analysis of the
subject property.
PROJECTION PERIOD: The subject property's estimated value by a discounted cash
flow analysis is based on a cash flow projection over a specified number of
years. Since a typical investor is concerned not only with the return on capital
but also with the return of capital, our analysis takes into account the re-sale
of the property at the termination of the investment holding period.
The cash flow commences from the appraisal date, subsequently proceeding through
the lease-up of any vacant space, the expiration and re-lease of currently
occupied space at the then market levels, and finally extends to a period
stabilized occupancy.
The projected fiscal year cash flow of the subject property represents a 10 year
holding period, beginning July 25, 1997, with the 11th fiscal year (F.Y.E.
8/30/08) net operating income used in developing the subject property's future
reversionary value.
RENTABLE AREA: The individual rentable areas reported in the subject property
are accepted and processed accordingly. The total rentable area of the subject
property's amenity component equates to 241,935.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 141
THE AMENITY COMPONENT VALUATION (Continued)
PRO-RATA SHARES: The respective pro-rata shares are processed accordingly. The
equivalent denominator equates to 241,935 square feet (rounded) for real estate
taxes and operating expense contributions.
EXPENSE RECOVERIES: The recoveries vary from pro-rata share to pro-rata share
increases with base year stops. The retail tenants are not responsible for
operating expense recoveries.
CONTRACT RENT: As the subject property's existing leases represent contractual
obligations which are consistent with current market parameters. The existing
contract rents are processed in accordance with existing lease terms.
RENEWAL OPTIONS: As renewal options are reported in some leases for renewal at a
Fair Market Rental Value or a percentage thereof.
LEASE-UP OF VACANT SPACE: The following lease-up scenario is projected for the
subject property based upon our analysis of market conditions within the West
Side office sub-market and the Times Square retail trade area within Midtown
Manhattan. It is our opinion that the 6,336 square feet of available retail
space within the subject property's amenity component is assumed to be leased
over the next 6 months.
MARKET RENTAL RATES: The summary of the market rental rates as discussed in the
Market Rent Analysis section of this appraisal has been processed in our cash
flow projections.
REAL ESTATE TAX CONTRIBUTIONS: The subject property's existing leases, contain
provisions which call for an additional charges based on each tenant's pro-rata
share of real
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 142
THE AMENITY COMPONENT VALUATION (Continued)
estate taxes (the retail lease are calculated by increases in real estate taxes
over a base year). Escalation income is computed in accordance with existing
lease terms. All future retail leases are projected to include a pro-rata share
of increases in real estate taxes over the base year of the leases.
OPERATING EXPENSE CONTRIBUTION: The theater, health club and garage are net
leases. The recently contracted retail tenants contribute pro-rata increases
over a base year of real estate taxes. Escalation income is computed in
accordance with existing lease terms.
TENANT ELECTRIC CONTRIBUTION: All existing space for the amenity component and
retail space are currently direct metered and are assumed to remain direct
metered on all future leases.
PERCENTAGE RENT: The theater is required to pay a percentage rent equivalent to
10.0% of gross sales above $6,750,000. As the historical gross revenues for the
theater were not available and in consideration of the theater's past
difficulties in paying rent due to low box office sales, we will not project
additional income attributable to percentage rent.
MISCELLANEOUS INCOME: Historical miscellaneous income has reportedly averaged
$10,000 per year (rounded) for the last 3 years (1994-1996). Miscellaneous
income includes the various additional landlord services. A base year
miscellaneous income of $10,000 is processed accordingly.
TENANT WORKLETTER ALLOWANCE: All retail spaces are leased on an as is basis with
no tenant improvement contributions.
RENT CONCESSIONS: All new future retail leases are assumed to contain 6 months
of free
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 143
THE AMENITY COMPONENT VALUATION (Continued)
rent, but none on renewal.
LEASE RENEWAL PROBABILITY: We have estimated a 50% renewal probability for all
tenants whose leases expire during the term of our analysis.
VACANCY AND CREDIT LOSS: Considerate of the credit tenants and the respective
contract rents, a 3.0% credit loss is processed for the theater, health club and
garage space throughout the cash flow projection. A 15% vacancy and credit is
processed for the retail space in consideration of its historical vacancies and
collections.
LEASING COMMISSIONS: As discussed previously, the following leasing commissions
are assumed to be paid on all future retail leases.
Retail Lease (10 years): 32.0% (Standard 32.0% x 0.0% override).
OPERATING EXPENSES
Operating expenses are projected based upon an analysis of the reported
operating history of the subject property. The actual operating expenses of the
subject property for the calendar years 1993 through 1996 and the budget for
1997 are summarized and the date is then correlated into a stabilized expense.
Due to the lack of properties considered comparable as a method of comparing
operating expenses, we have relied on the historical expenses in forming a base
year proforma for the cash flow projections.
The projected operating expenses for the 1997 calendar year are subsequently
converted to a fiscal year basis by the Argus software program. Stabilized
operating expenses are estimated as follows based upon our review of the subject
property's actual operating history.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 144
THE AMENITY COMPONENT VALUATION (Continued)
825 EIGHTH AVENUE
HISTORICAL, BUDGETED AND Y.T.D. OPERATING EXPENSES
(PER SQ. FT. BASIS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Budget
Year Ending 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------------
PSF PSF PSF PSF PSF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Insurance $66,696 $0.28 $46,694 $0.19 $9,003 $0.04 $11,365 $0.05 $10,000 $0.04
Utilities 10,528 0.04 -- -- -- -- -- -- -- --
Common Area Maintenance 294,754 1.22 321,662 1.33 275,067 1.14 316,307 1.31 388,727 1.61
Plaza Maint. and Security 136,537 0.56 163,193 0.67 180,586 0.75 183,798 0.76 180,635 0.75
Administration (1) -- -- -- -- -- -- -- -- -- --
Miscellaneous 16,607 0.07 25,344 0.10 34,347 0.14 13,591 0.06 24,000 0.10
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Total $525,122 $2.17 $556,893 $2.30 $499,003 $2.06 $525,061 $2.17 $603,362 $2.49
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Management Fees and Administrative expenses for the amenities are included
in the office operating statement.
Source: Management provided financials; compiled by KTR.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 145
THE AMENITY COMPONENT VALUATION (Continued)
INSURANCE: This category covers the cost of annual premiums for fire and
liability insurance for the real estate. The historical expense of the subject
property has been relatively stable the past two years equating to $0.04 per
square foot in 1995 and $0.05 per square foot in 1996. The 1996 historical
expense of $0.05 per square foot is processed in estimating a calendar year 1997
stabilized expense which equates to $12,000 per year.
UTILITIES: This category addresses the combined the common area utilities and
the cooling tower. The unit cost of the subject property's common area utility
expenses has fluctuated over the years. ranging from $1.14 per square foot to
$1.33 per square foot. The subject property's 1997 budgeted expense of $1.61 per
square foot is given most weight in estimating a stabilized expense of which
equates to $390,000 per year (rounded).
PLAZA MAINTENACE AND SECURITY: This represents the costs of repairing and
maintaining the plaza's common areas, building systems, security as well as the
normal on-going items of repair. The theater is responsible for the net expense.
The historical expense of the subject property has been trending upwards stable
since 1993 ranging from $0.56 per square foot in 1993 to $0.76 per square foot
in 1996. The subject property's budgeted cost for 1997, is slightly lower than
the 1996 historical expenses. Thus we have given most weight to the 1996
expenses rounded to $184,000 per year.
ADMINISTRATIVE: These expenses items are included in the office component
expenses and are not included in the amenity component expenses.
MISCELLANEOUS: The historical expenses for this category have fluctuated from
$0.06 to $0.14 per square foot, averaging $0.09 per square foot. The 1997
budgeted expense of $0.10 appears reasonable and has been processed equating to
a rounded expense of $24,200 for the proforma year.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 146
THE AMENITY COMPONENT VALUATION (Continued)
MANAGEMENT: A 1.0% fixed percentage of the effective gross and an exclusive
leasing arrangement is assumed.
REAL ESTATE AND BID TAXES: The subject property's real estate and BID taxes are
estimated as discussed in the prior Real Estate Assessments and Taxes section of
this report. Calendar year taxes have been converted to an equivalent fiscal
year basis which are processed within the discounted cash flow analysis.
RESERVE FOR REPLACEMENTS: This allocation is comprised of a reserve for the
future replacement of the building's components. This non-cash charge is
considered a supplement to the Repairs and Maintenance budget and is
non-recoverable. For the calendar year 1997, a budget of $0.15 per square foot
is estimated, which equates to a rounded expense of $36,000 per year.
825 EIGHTH AVENUE
AMENITY COMPONENT
PROFORMA OPERATING EXPENSES
- --------------------------------------------------------------------------------
Projected
Expenses Calendar 1997 $ per Sq.Ft.
- --------------------------------------------------------------------------------
Insurance $12,000 $0.05
Utilities 390,000 1.61
Plaza Maintenance and Security 184,000 0.76
Miscellaneous 24,200 0.10
-------- -----
Sub-Total $610,200 $2.52
Management 1.0% of E.G.I.
Reserves $36,000 $0.15
- --------------------------------------------------------------------------------
Source: Calculations by KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 147
THE AMENITY COMPONENT VALUATION (Continued)
TOTAL OPERATING EXPENSES AND REAL ESTATE TAXES: Total operating expenses (not
including management and real estate taxes) for the 1997 calendar year have been
projected at $610,200 ($2.52 per square foot)
SELECTION OF AN INTERNAL RATE OF RETURN
The consensus of those actively engaged in the marketplace for major retail
buildings is that internal rates of return (based upon forecasting techniques
and assumptions similar to those utilized herein) fall within a broad range,
depending upon numerous risk factors including, among others:
(a) LOCATION: the better the location the lower the IRR;
(b) PHYSICAL CHARACTERISTICS OF THE PROPERTY: the newer the property, the
higher the quality of materials and finishes, and the better the design
and layout of the physical plant, the lower the IRR;
(c) DEGREE OF FORECASTED CASH FLOW GROWTH: the greater the growth forecasted,
the higher the IRR;
(d) AMOUNT OF EQUITY INVESTMENT REQUIRED: the greater the required equity
investment (that portion of the total acquisition cost not typically
funded by conventional financing), the higher the IRR; and
(e) LENGTH OF PROJECTION PERIOD: the longer the projection period, the higher
the IRR.
In our opinion, due to the subject property's (a) secondary location in a
steadily growing residential neighborhood (b) the fact that the cash flow is at
market; and (c) the fluctuation of the movie industry as detailed various
industry articles, we believe an internal rate of return towards the higher end
of the range is appropriate for the subject property. The lower IRRs are
reflective of prime properties, typically situated within prime retail
locations, whereas the higher end of the range reflects retail buildings which
are considered secondary in terms of their location, tenancy and/or physical
quality and condition.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 148
THE AMENITY COMPONENT VALUATION (Continued)
DISCOUNT RATE CORRELATION: A discount rate of 12.0% is selected based on our
research of the local markets and considering the quality, quantity and
durability of the existing cash flow of the subject property. Our rate selection
is considered to be consistent with recent sales activity and current investment
criteria.
TERMINAL CAPITALIZATION RATE: The terminal capitalization rates indicated in the
preceding institutional rates (7.0% to 11.5%) and the market sales (9.0% to
10.5%) are given most weight in estimating a terminal capitalization rate since
the institutional rates reflect current investor criteria and the sales reflect
market derived investment criteria.
A terminal rate of 10.0% appears to be a reasonable estimate based on the recent
development of residential buildings proximate to the subject property.
Consequently, a terminal capitalization rate of 10.0% is applied to the net
operating income for the final year of our projection (F.Y.E. 2008) which
represents the 11th year for our "as is" value. A buyer at that time might
reasonably expect inflation driven increases in net operating income, as well as
appreciation in property value over the holding period.
SELLING AND TRANSFER COSTS: Selling commission of 2.0% of the sale price and a.
New York State and New York City transfer taxes totaling 3.025% of the gross
future re-sale price are deducted.
DISCOUNTED CASH FLOW ANALYSIS
The preceding analysis has been developed from computer software known as
"Argus" written by Argus Financial Software, Houston, Texas. The accuracy and
reliability of this software has been tested and accepted by various segments of
the real estate industry.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 149
THE AMENITY COMPONENT VALUATION (Continued)
An Income Capitalization Approach to value utilizing the discounted cash flow
technique is now processed based upon the investment considerations and
methodology discussed and our projections for income and expenses.
INCOME CAPITALIZATION APPROACH CONCLUSION
Based upon the investment considerations and methodology already discussed and
our income and expense projections, we have processed an income capitalization
approach to value utilizing the discounted cash flow technique. We have
appraised the property to yield a 12.0% internal rate of return and a 10.0%
reversionary capitalization rate.
The indicated Market Value of the Leased Fee Interest of the subject property's
amenity component, as derived by the discounted cash flow technique, as of July
25, 1997, is rounded to :
TWENTY NINE MILLION DOLLARS
$29,000,000
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 150
THE AMENITY COMPONENT VALUATION (Continued)
825 EIGHTH AVENUE
SUMMARY OF FUTURE CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ending Jul-1998 Jul-1999 Jul-2000 Jul-2001 Jul-2002 Jul-2003
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL GROSS REVENUE
Base Rental Revenue $2,859,950 $3,557,780 $3,605,315 $3,620,157 $3,689,914 $3,765,912
Absorption & Turnover Vacancy (8,734)
Base Rent Abatements (61,744)
---------- ---------- ---------- ---------- ---------- ----------
Scheduled Base Rental Revenue 2,798,206 3,557,780 3,596,581 3,620,157 3,689,914 3,765,912
Expense Reimbursement Revenue
Insurance 7,150 7,436 7,733 8,043 8,364 8,699
CAM 287,103 298,643 310,580 323,013 335,933 349,371
Plaza Maint & Security 178,962 186,155 193,596 201,345 209,399 217,775
Misc. 23,502 24,446 25,423 26,441 27,498 28,597
Garage Tax 342,137 352,401 362,973 373,862 385,078 396,631
Theater Tax 377,634 388,963 400,632 412,651 425,031 437,781
Retail Tax 4,207 8,543 13,302 18,205 23,256
Health Club Tax 238,627 245,786 253,159 260,754 268,577 276,634
BID Taxes 25,235 26,281 27,351 28,475 29,625 30,798
---------- ---------- ---------- ---------- ---------- ----------
Total Reimbursement Revenue 1,480,350 1,534,318 1,589,990 1,647,886 1,707,710 1,769,542
Misc. Income 10,000 10,350 10,712 11,087 11,475 11,877
---------- ---------- ---------- ---------- ---------- ----------
TOTAL POTENTIAL GROSS REVENUE 4,288,556 5,102,448 5,197,283 5,279,130 5,409,099 5,547,331
Collection Loss (128,357) (152,763) (155,597) (158,041) (161,929) (166,064)
---------- ---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS REVENUE 4,160,199 4,949,685 5,041,686 5,121,089 5,247,170 5,381,267
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Insurance 12,000 12,480 12,979 13,498 14,038 14,600
CAM 389,927 405,600 421,812 438,697 456,245 474,495
Plaza Maint & Security 183,965 191,360 199,009 206,975 215,254 223,864
Misc. 24,195 25,168 26,174 27,222 28,311 29,443
Garage Tax 342,137 352,401 362,973 373,862 385,078 396,631
Theater Tax 388,193 399,839 411,834 424,189 436,915 450,022
Retail Tax 175,928 181,206 186,642 192,241 198,009 203,949
Health Club Tax 238,627 245,786 253,159 260,754 268,577 276,634
BID Taxes 34,000 34,680 35,374 36,081 36,803 37,539
Management 41,602 49,497 50,417 51,211 52,472 53,813
---------- ---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 1,830,574 1,898,017 1,960,373 2,024,730 2,091,702 2,160,990
---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME 2,329,625 3,051,668 3,081,313 3,096,359 3,155,468 3,220,277
---------- ---------- ---------- ---------- ---------- ----------
LEASING & CAPITAL COSTS
Leasing Commissions 8,385
Reserves 36,000 37,440 38,938 40,495 42,115 43,800
---------- ---------- ---------- ---------- ---------- ----------
TOTAL LEASING & CAPITAL COSTS 36,000 37,440 47,323 40,495 42,115 43,800
---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW BEFORE DEBT SERVICE $2,293,625 $3,014,228 $3,033,990 $3,055,864 $3,113,353 $3,176,477
& INCOME TAX ========== ========== ========== ========== ========== ==========
<CAPTION>
For the Years Ending Jul-2004 Jul-2005 Jul-2006 Jul-2007 Jul-2008
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
POTENTIAL GROSS REVENUE
Base Rental Revenue $3,806,015 $3,885,804 $3,941,673 $3,956,418 $4,544,195
Absorption & Turnover Vacancy (9,680) (10,343) (5,378) (45,698)
Base Rent Abatements
---------- ---------- ---------- ---------- ----------
Scheduled Base Rental Revenue 3,796,335 3,875,461 3,936,295 3,956,418 4,498,497
Expense Reimbursement Revenue
Insurance 9,046 9,408 9,784 10,176 10,583
CAM 363,335 377,868 392,988 408,714 425,014
Plaza Maint & Security 226,480 235,539 244,964 254,766 264,927
Misc. 29,742 30,930 32,169 33,455 34,790
Garage Tax 408,529 420,785 433,409 446,411 459,804
Theater Tax 450,915 464,442 478,376 492,727 507,509
Retail Tax 27,176 31,590 34,015 39,698 38,441
Health Club Tax 284,933 293,481 302,286 311,354 320,695
BID Taxes 31,832 32,932 33,793 35,060 35,481
---------- ---------- ---------- ---------- ----------
Total Reimbursement Revenue 1,831,988 1,896,975 1,961,784 2,032,361 2,097,244
Misc. Income 12,293 12,723 13,168 13,629 14,106
---------- ---------- ---------- ---------- ----------
TOTAL POTENTIAL GROSS REVENUE 5,640,616 5,785,159 5,911,247 6,002,408 6,609,847
Collection Loss (168,850) (173,173) (176,942) (179,663) (197,872)
---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS REVENUE 5,471,766 5,611,986 5,734,305 5,822,745 6,411,975
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Insurance 15,184 15,791 16,423 17,080 17,763
CAM 493,461 513,199 533,734 555,092 577,230
Plaza Maint & Security 232,812 242,125 251,813 261,889 272,334
Misc. 30,620 31,845 33,119 34,444 35,818
Garage Tax 408,529 420,785 433,409 446,411 459,804
Theater Tax 463,523 477,428 491,751 506,504 521,699
Retail Tax 210,067 216,369 222,860 229,546 236,433
Health Club Tax 284,933 293,481 302,286 311,354 320,695
BID Taxes 38,290 39,055 39,836 40,633 41,446
Management 54,718 56,120 57,343 58,227 64,120
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 2,232,137 2,306,198 2,382,574 2,461,180 2,547,342
---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME 3,239,629 3,305,788 3,351,731 3,361,565 3,864,633
---------- ---------- ---------- ---------- ----------
LEASING & CAPITAL COSTS
Leasing Commissions 9,293 15,489 442,383
Reserves 45,551 47,374 49,268 51,239 53,289
---------- ---------- ---------- ---------- ----------
TOTAL LEASING & CAPITAL COSTS 54,844 47,374 64,757 51,239 495,672
---------- ---------- ---------- ---------- ----------
CASH FLOW BEFORE DEBT SERVICE $3,184,785 $3,258,414 $3,286,974 $3,310,326 $3,368,961
& INCOME TAX ========== ========== ========== ========== ==========
</TABLE>
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 151
THE AMENITY COMPONENT VALUATION (Continued)
825 EIGHTH AVENUE
DISCOUNTED CASH FLOW SUMMARY
AS IS MARKET VALUE
- --------------------------------------------
12.00% Present
Discount Worth of -------------------------------
Year Cash Flow Factor Cash Flow Year Cash Flow Yield
- -------------------------------------------- -------------------------------
1 $2,293,625 0.893 $2,048,207 1 $2,293,625 7.98%
2 $3,014,228 0.797 $2,402,340 2 3,014,228 10.49%
3 $3,033,990 0.712 $2,160,201 3 3,033,990 10.56%
4 $3,055,864 0.636 $1,943,530 4 3,055,864 10.63%
5 $3,113,353 0.567 $1,765,271 5 3,113,353 10.83%
6 $3,176,477 0.507 $1,610,474 6 3,176,477 11.05%
7 $3,184,785 0.452 $1,439,523 7 3,184,785 11.08%
8 $3,258,414 0.404 $1,316,399 8 3,258,414 11.34%
9 $3,286,974 0.361 $1,186,598 9 3,286,974 11.44%
10 $3,310,326 0.322 $1,065,925 10 3,310,326 11.52%
---------- -------------------------------
Present Worth of Cash Flow $16,938,468
- --------------------------------------------
Reversion
- ----------------------------------------------------
11th Year N.O.I.: $3,864,633
Capital 10.0% 38,646,330
Less 2.0% Selling Expense: (800,000)
Less 3.025% Transfer T (1,200,000)
-----------
Reversionary Value: $36,646,330
10th Year Discount Factor: 0.322000
Present Worth of Rever 41.1% $11,800,118
Present Worth of Cash 58.9% $16,938,468
-----------
Value Indication $28,738,586
- ----------------------------------------------------
Source: Projection by KTR
- ------------------------------------
Net
Operating Capitalization
Year Income Rate
- ------------------------------------
1 $2,329,625 8.11%
2 $3,051,668 10.62%
3 $3,081,313 10.72%
4 $3,096,359 10.77%
5 $3,155,468 10.98%
6 $3,220,277 11.21%
7 $3,239,629 11.27%
8 $3,305,788 11.50%
9 $3,351,731 11.66%
10 $3,361,565 11.70%
11 $3,864,633 13.45%
- ------------------------------------
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 152
SALES COMPARISON APPROACH
The Sales Comparison Approach is the process of comparing recent sales of
competitive properties. The estimated value derived through this approach
represents the probable price at which the subject property would be sold by a
willing seller to a willing buyer as of the date of value. Six sales of Leased
Fee Interests and 1 sale of a Leasehold Interest in Class "A" and "B" office
buildings in the Midtown office markets have been identified and selected for
analysis in the valuation of the subject property. The sale price per square
foot of rentable area is relied upon as the primary unit of comparison within
this approach in estimating the Market Value of the Leased Fee Interest in the
subject property, subject to the existing leases and contractual obligations.
The comparative process involves judgment as to the similarity between the
subject property and the comparable sale property with regard to a variety of
factors affecting value, such as location, age and condition of the structure,
rent levels, gross income multipliers, operational efficiencies and other
factors. Among the specific adjustment factors, the following have been
considered:
OWNERSHIP INTEREST: The indicated unit sale prices are adjusted to reflect a
100% ownership interest if a partial interest has been conveyed. One sale
representing a partial interest that was conveyed was adjusted to reflect the
sales of a 100% interest.
FINANCING: The comparable sales were either all cash transactions or were
financed at market oriented terms. No adjustments for any unusual or atypical
financing are required.
TIME: Normally, upward adjustments to the sale price indicators would be made to
reflect increasing values over time. However, in light of the well documented
decline in all types of real estate, these time adjustments are adjusted
downward to reflect a collapse of the regional economy and real estate market
between 1990 and 1993. The city economy is currently at the beginning of a new
economic/real estate cycle. Adjustments are not required since all of the sales
have occurred since December, 1995.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 153
SALES COMPARISON APPROACH (Continued)
LOCATION: Locational adjustments are based on our knowledge and observations of
the market areas of the individual sales as compared to the subject property.
The subject property is located in the northwestern boundary of the West Side
office sub-market and a secondary retail trade area within Midtown Manhattan.
PHYSICAL: Adjustments are made to reflect variations in the conditions and floor
sizes of the comparable sales relative to the subject property. The subject
property is a modern Class "A" office building which is in very good condition
and which has been well maintained to date. Further, it contains an average
floor size of 30,000+ square feet.
OCCUPANCY: The reported occupancy rate at the time of each sale is compared with
the subject property has an overall occupancy of 99.0% under multi-year leases .
ECONOMIC: The quality, quantity and durability of the underlying lease
portfolios of the individual sales are unique from the subject property.
Adjustments, relative to the subject property, are made accordingly.
THEATER, GARAGE, RETAIL AND HEALTHCLUB COMPONENTS: Commercial office buildings
containing additional components are typically more valuable than an office
buildings without, as value is added by the service provided by the amenities
available as well as the additional income offset from those components.
Adjustments are made to reflect variations in value due to the presence of
additional sources of income producing areas within a Midtown office building.
The subject property is comprised of an amenity component consisting of a movie
theater complex, three-level garage parking, retail and health club.
The following is a brief description of the relevant building sales considered
pertinent in our valuation of the subject property. A summary of the comparable
sales follows with full details
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 154
SALES COMPARISON APPROACH (Continued)
of the individual sales presented in the Addenda.
SALE NO 1: (505 Park Avenue, Leased Fee Interest, $236.55 per square foot) Sale
No. 1 is July 1997 cash sale of a 100% Leased fee Interest in a 26-story Class
"A" multi-tenanted commercial office building. Located at the northeast corner
of East 59th Street in a Park Avenue office sub-market, the building was
constructed in 1948 and extensively renovated in 1987. It contains 198,690
square feet of rentable area. The property was acquired by an international
buyer with a current occupancy of 97%. The building is operated by boutique
tenants in the range of $35.00 per square foot.
Sale No. 1 is located in a superior sub-market within the Midtown Office market
warranting a downward adjustment. The building represents modern construction,
however, its average floor plates of 9,000 square feet and building systems are
inferior to the subject property; an upward adjustment is warranted. This sale
contains a retail component but no additional amenity components, warranting an
upward adjustment. No adjustment for occupancy was made; however, an upward
adjustment was warranted as the building is primarily tenanted by smaller
non-credit tenants which are considered to be inferior to the subject property's
credit tenancy.
SALE No. 2 (1412 Broadway, Leased Fee Interest, $155.16 per square foot): Sale
No. 2 is a June, 1997 sale of a 100% Leased Fee Interest in a 25-story Class "B"
multi-tenanted commercial office building. Located at the northeast corner of
West 39th Street, within the Penn/Garment District sub-market, the building was
renovated and modernized in the 1980s and contains 381,535 square feet of
rentable area. The property was acquired with an occupancy of 84%. Escada is a
major tenant within this building.
Sale No. 2 is located in a inferior sub-market within the Midtown office market;
an upward adjustment is warranted. The building represents that of older
construction with average floor
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 155
SALES COMPARISON APPROACH (Continued)
plates of 15,000 square feet which are inferior to the subject property; an
upward adjustment is warranted. Lastly, this comparable sale was acquired with
an inferior occupancy and lower income potential (average rents of $23 per
square foot rentable area), as compared to the subject property; thus warranting
an upward adjustment. Overall, a significant upward adjustment is required.
SALE NO. 3 (527 Madison Avenue, Leased Fee Interest, $311.63 per square foot):
Sale No. 3 is a February, 1997 cash sale of a 100% Leased Fee Interest in a
26-story Class "A" multi-tenanted commercial office building . Located at the
southeast corner of East 54th Street in a Fifth/Madison Avenue office
sub-market, the building was constructed in 1986 and contains 215,000 square
feet of rentable area. It was constructed in 1986 and building services include
a garage with valet services and concierge services. The property was acquired
by Cornerstone Properties with a current occupancy of 98%. Sumitomo Bank is a
major tenant within this building.
Sale No. 3 is located in a superior sub-market within the Midtown office market;
a downward adjustment is warranted. A small upward adjustment for inferior
amenities was also warranted. Lastly, it was acquired with a high occupancy; no
adjustment is warranted. Overall, a sizable downward adjustment is required.
SALE NO. 4 (540 Madison Avenue, Leasehold Interest, $144.68 per square foot):
Sale No. 4 is a September, 1996 conventionally financed sale of a 100% Leasehold
Interest in a 38-story Class "A" multi-tenanted commercial office building.
Located at the southwest corner of East 55th Street in a Fifth/Madison Avenue
office sub-market and contains 259,190 square feet of rentable office and retail
area. The property was acquired by the Macklowe Organization with an occupancy
of 88.7%, however, the occupancy was expected to decline to 58% by year end due
to the loss of its 2 major tenants (Ladenburg Thalman and Sterling National
Bank).
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 156
SALES COMPARISON APPROACH (Continued)
Sale No. 4 requires an upward adjustment ($53.00 per square foot) since it
represents the conveyance of a Leasehold Interest. This adjustment is based on
the value of the Leased Hold Interest in the subject property divided by its
total rentable area. This sale is also located in a superior sub-market within
the Midtown office market; a downward adjustment is warranted. The building with
small floor plates (9,000 square feet) is inferior to the subject property; thus
warranting an upward adjustment. Lastly, it was acquired with a near term
occupancy of 58%; an upward adjustment is warranted. The sale price reflects the
leasing risk associated with current and anticipated vacancies and the capital
costs associated with re-positioning the product to Class "A" status. Overall, a
moderate upward adjustment is required subsequent to the adjustment for the
Leasehold Interest.
SALE NO. 5 (Multiple floors within 30 Rockefeller Center, Leased Fee Interest,
$275.00 per square foot): Sale No. 5 is a July, 1996 cash sale of a 100% Fee
Simple Interest to the National Broadcasting Company (N.B.C.) in 27 full floors
(Floors no. 2-18, 22-23, 25-26, 46-49 and 51-52) containing 1,600,000 square
feet of rentable area within a 52-story Class "A/B" commercial office building.
The Fee Simple Interest in the condominium was acquired by the Leasehold
Interest which exercised a purchase option in lieu of leasing the space at a
contract rent in the range of $50.00 per square foot.
Located in the heart of Rockefeller Center, the building was constructed in 1932
and converted to condominium ownership in the mid-1980s. It contains 2,900,000
square feet of rentable area and is 100% occupied under multi-year leases. The
floor plates are in the range of 30,000 square feet.
Sale No. 5 is located in a superior office and retail sub-market within the
Midtown office market; a downward adjustment is warranted. The physical
characteristics of the sale are considered to be similar to the subject property
with an occupancy of 100%, whereby no
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 157
SALES COMPARISON APPROACH (Continued)
adjustment is considered warranted. Overall, a small downward adjustment is
required.
SALE NO. 6 (1412 Sixth Avenue, Leased Fee Interest, $132.97 per square foot):
Sale No. 6 is a September, 1996 conventionally financed sale of a 100% Leased
Fee Interest in a 17-story Class "B" multi-tenanted commercial office building.
Located at the southwest corner of West 58th Street in a Sixth
Avenue/Rockefeller Center office sub-market, the building was originally
constructed in 1924 as a hotel and subsequently renovated during the 1970s into
a Class "B" office building. It contains 110,266 square feet of rentable office
and retail area. The property was acquired by a S. L. Green, a local investor,
with a current occupancy of 94%.
Sale No. 6 is not comparable to the subject property, however, its current
investment rates are considered to be informative as to current market criteria.
The sale is included for information only.
SALE NO. 7 (Heron Tower, 66-72 East 55th Street, Leased Fee Interest, $232.10
per square foot as adjusted): Sale No. 7 is a December, 1995 cash sale of a 50%
Leased Fee Interest in a 25-story class "A" multi-tenanted office building
constructed in 1989 containing 143,700 square feet of rentable office area. The
property was 96% occupied at the time of sale by boutique type tenants at rents
in the range of $40.00 per square foot.
Located on the south side of East 55th Street, between Park and Madison Avenues,
in a Fifth/Madison Avenue office sub-market, East 55th Street L.P. consolidated
its ownership by acquiring the 50% interest of its partner, Heron J.V.
Acquisition, Inc. Published information indicated that the grantee had a
purchase option on the interest of its partner.
Sale No. 7 is located in a superior sub-market within the Midtown office market,
however a downward adjustment is tempered due to its mid-block location. The
physical characteristics of
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 158
SALES COMPARISON APPROACH (Continued)
the sale are equal to the subject property considering its recent construction;
however, an upward adjustment is required due to its small floor plates (under
9,000 square feet). Lastly, it was acquired with a similar high occupancy and no
adjustment is necessary. Overall, no adjustment is required.
CORRELATION
Seven sales of commercial office buildings in the Midtown office market were
selected and then adjusted for location, size, physical condition, additional
components and occupancy. Sale No. 1 (505 Park Avenue ), Sale No. 3 (527 Madison
Avenue) and Sale No. 7 (66-72 East 55th Street) are considered most relevant.
After our adjustments, a value of $225 per square foot is estimated.
Leased Fee Interest ($ Per Square Foot Value) $225.00
Times:
Rentable Area 1,837,397
Equals:
Estimated Leased Fee Interest Value (Rounded) $413,000,000
SALES COMPARISON APPROACH CONCLUSION: $413,000,000
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 159
SUMMARY OF COMPARABLE OFFICE BUILDING SALES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Sale Price
Sale Date/ Class/Constructed/ Per Sq. Ft.
Sale Price/ Stories/Rentable Area/ Rentable
No. Address/Location Interest Occupancy Area
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1. 505 Park Avenue 7/97 A/1948,renov.'87
N/E/C of E 59th St $47,000,000 22/198,690 $236.5
Park Avenue Sub-market Leased Fee 97.0%
Midtown Office Market
2. 1412 Broadway 6/97 B/1927,renov.'80s
N/E/C of W 39th St $51,750,000 25/381,535 $155.16
Penn/Garment Center Sub-market (A)7,450,000 83.9%
------------
Midtown Office Market $59,200,000
Leased Fee
3. 527 Madison Avenue 2/97 A/1986
S/E/C of E 54th St $67,000,000 26/215,000 $311.63
Fifth/Madison Avenue Sub-market Leased Fee 98%
Midtown Office Market
4. 540 Madison Avenue 9/96 A/1970/ $150.47
S/W/C of East 55th Street $37,500,000 38/
Fifth/Madison Avenue. Sub-Market (A)2,500,000 259,190/ Adjusted
------------ 58% Upward For
$39,000,000 L.H. Interest
5. Condominium Interest In 7/96 A/B/1932
30 Rockefeller Center $440,000,000 50/1.6 million within $275.00
Sixth Ave/Rock Ctr. Sub-market Leased Fee 2.9 million
Midtown Office Market 100%
6. 1412-14l6 Sixth Avenue 6/96 B/1924/1970s/ $132.97
S/E/C of West 58th Street $14,662,500 17/
Sixth Ave./Rock Ctr. Sub-Market Leased Fee 110,266
94%
7. 66-72 East 55th Street 12/95 A/1989
S/S, bet Fifth & Madison Aves. $33,353,000 25/143,700 $232.10
Fifth/Madison Avenue Sub-market 50% 96%
Midtown Office Market $16,676,500
Leased Fee
- -----------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
No. Address/Location Location Physical Component Occupancy Composite
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1. 505 Park Avenue - + + None +
N/E/C of E 59th St
Park Avenue Sub-market
Midtown Office Market
2. 1412 Broadway + + + + +
N/E/C of W 39th St
Penn/Garment Center Sub-market
Midtown Office Market
3. 527 Madison Avenue - None + None -
S/E/C of E 54th St
Fifth/Madison Avenue Sub-market
Midtown Office Market
4. 540 Madison Avenue - + + + +
S/W/C of East 55th Street
Fifth/Madison Avenue. Sub-Market
5. Condominium Interest In
30 Rockefeller Center - None + None -
Sixth Ave/Rock Ctr. Sub-market
Midtown Office Market
6. 1412-14l6 Sixth Avenue N.A. N.A. N.A. N.A. NA.
S/E/C of West 58th Street
Sixth Ave./Rock Ctr. Sub-Market
7. 66-72 East 55th Street
S/S, bet Fifth & Madison Aves. - None + None None
Fifth/Madison Avenue Sub-market
Midtown Office Market
- -----------------------------------------------------------------------------------------------
</TABLE>
(A) Immediate capital expenditures subsequent to purchase; Source: Compiled by
KTR
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 160
SALES COMPARISON APPROACH (Continued)
LOCATION MAP OF COMPARABLE IMPROVED SALES
[GRAPHIC OMITTED]
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 161
RECONCILIATION AND FINAL ESTIMATE OF VALUE
The purpose of this appraisal is to provide an estimate of the Market Value of
the Leased Fee Interest in the subject property as of July 25, 1997.
Income Capitalization Approach: $416,000,000
Sales Comparison Approach: $413,000,000
Cost Approach: N/A
The Cost Approach relies on available current unit cost data (adjusted for time
and type of building) required to produce a like structure. The value indicated
is , in essence, a summation of land value and the depreciated value of the
improvements.
While the cost to replace a property is considered an indication of value, there
are variables inherent in estimating construction costs, depreciation and
remaining physical/economic life. Certain steps in the appraisal process require
the use of judgment (opinion factors); however, none more than the Cost
Approach. This approach has specific application and relevance in the valuation
of specific properties. Although the Cost Approach has been included, it is
given least emphasis in our estimated final value. Investors in income producing
real estate will look to cash flow projections and yield rates which are
analyzed in the Income Capitalization Approach.
The Sales Comparison Approach provides an estimate of value based upon the
recent activities of buyers and sellers in the marketplace. This approach is
generally considered to be reliable in active markets where the motivations of
buyers and sellers are known and the underlying economics of the properties
being transferred are available for scrutiny.
The Sales Comparison Approach is considered to be a good indication of value
when sufficient sales activity has occurred. The results of the Sales Comparison
Approach were expressed as a range, correctly reflecting the wide range in sales
prices as expressed in the price per square foot of rentable building area.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Page 162
RECONCILIATION AND FINAL ESTIMATE OF VALUE (Continued)
The Income Capitalization Approach seeks to view the value of the subject
property from the perspective of the typical investor. Employing a discounted
cash flow analysis as our primary means of value, this approach reflects the
relationship between the income a property is capable of generating and its
value in the marketplace. Sophisticated investors judge the value of a property
based upon the quality and quantity of the income generated, as well as the
likely impact of market conditions on future income generating capacity. By
considering these factors, the Income Capitalization Approach typically provides
the greatest measure of credibility in estimating value for income producing
real estate.
The investment qualities of the subject property have influenced our selection
of a 11.0% discount rate and a 10.0% terminal rate for the office component and
a 12.0% discount rate and a 10.0% terminal rate for the amenities component in
the discounted cash flow. The selected rates and concomitant cash yields are
reasonable and reflective of basic criteria developed from our market analysis.
The discounted cash flow analysis is given most weight in concluding a final
value. This approach is given most weight since it reflects current investment
criteria and the related risks in acquiring a high occupancy multi-tenanted
Class "A" commercial office building which is conveniently situated within a
desirable office sub-market. It applies market derived assumptions and investor
criteria in order to project future cash flows and desired yields.
The estimated Market Value of the Leased Fee Interest reflects the realty's
utility, conformity, current and future income generating capacity and risk
factor as a Class "A" commercial office building within the West Side office
sub-market and the Times Square retail trade area within Midtown Manhattan as of
July, 25, 1997 is rounded to: .
FOUR HUNDRED SIXTEEN MILLION DOLLARS
($416,000,000)
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
EXHIBIT 1 - LETTER OF ENGAGEMENT
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[Letterhead of Koeppel Tener Real Estate Services, Inc.]
Mr. Spencer Kagan July 16, 1997
Vice President
Lehman Brothers, Inc.
3 World Financial Center - 12th Floor
New York, N.Y. 10285-1100
Re: Appraisal of Worldwide Plaza, NYC
Dear Mr. Kagan:
As requested, we intend to prepare a Complete Self-Contained Appraisal of the
above referenced property. Situated entirely on Block 1040 (as per NYC tax
maps), the subject property consists of the following:
Lot 29: a 49-story Class A office building with a net rentable area of
1,600,OOO +/- square feet, including +/- 35,000 square feet of retail
space;
Lot 50: a 6-screen movie complex with a total of 2,102 seats;
Lot 1001: a 473-car garage;
Lot 1002: +/- 18,000 square feet of miscellaneous retail space; and
Lot 1003: a +/- 34,000 square foot health club.
All components are leased, with some of the retail and office space available
for rent. The movie complex, garage, miscellaneous retail and health club are
collectively known as the "amenity component".
The purpose of the appraisal is to estimate the current market value of the
leased fee interest in the property. The leased fee analysis, considers the
leases in place and the right to receive contractual rental income. The
appraisal report will be prepared in conformity with, and subject to the Code of
Professional Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute, and the Uniform Standards of Professional Appraisal
Practice (USPAP) as promulgated by the Appraisal Standards Board of the
Appraisal Foundation (as required by FIRREA, the Financial Institutions Reform,
Recovery and Enforcement Act of 1989). The report will contain all the
recognized appraisal methods and techniques that materially contribute to a
proper valuation of the real estate problem under consideration. Furthermore,
the report will be prepared subject to the attached Basic Assumptions and
Limiting Conditions. In order to initiate the assignment, the following
information is required:
o name and telephone number of contact for inspection and property
data
o current rent rolls
o copies of major office leases (tenants with 15% or more of the NRA)
<PAGE>
Mr. Spencer Kagan July 16, 1997
Lehman Brothers, Inc. Page Two
o copies of parking, theater, and health club leases
o retail lease abstracts
o copies of most current tax bills
o past three year income and expense history
o historic and projected capital expenses
o stacking plan
o 1996 tenant-by-tenant statement of actual collections
o any other descriptive data available (eng. report, marketing
brochure)
As agreed, the total fee inclusive of all disbursements is ($250 for 5
additional reports). It is understood that payment of the fee is not contingent
upon the appraised value nor any other prearranged condition. Within the
contractual relationship, it is understood that we will not be required to
prepare reports in anticipation of litigation, give testimony or appear in court
unless agreed upon in advance. We expect to finalize the report and deliver a
draft copy to your office by the end of business (5:00 pm) on Monday, August
11th. Subject to timely review, KTR is prepared to deliver 9 final reports by
Friday, August 15th. This time frame is contingent upon prompt delivery of all
required data and receipt of your signed authorization to commence. Such
commencement authorization must be received no later than Friday, July 18th.
We appreciate the opportunity to present this proposal. If it correctly states
your understanding of the work to be performed, please sign one copy and return
it to this office as your authorization to proceed.
Very truly yours,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Wayne A. Nygard
By: Wayne A. Nygard, MAI
Senior Vice President
Accepted By: ____________________________________
Title: ____________________________________
Date: ___________________________________
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
EXHIBIT 2 - FLOOR PLANS
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[GRAPHIC OMITTED]
825 Eighth Ave - 15th floor, typical floor plan
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
EXHIBIT 3 - TENANT LEASE ABSTRACTS
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
ABSTRACT OF LEASE
CRAVATH, SWAINE & MOORE
=======================
DATE OF LEASE: July 28, 1988
LANDLORD: New York Communications Center Associates
TENANT: Cravath, Swaine & Moore
PREMISES:
RENTABLE
SQUARE FEET
-----------
Office Premises: 20th, 36th to 47th floors 363,815
Below grade space: Floor 2 6,000
-------
Total Premises: 369,815
Note: Floor designations are structural floors.
TERM: 20 years
Commencement - September 1, 1989
Expiration - August 31, 2009
BASE RENT: (A) Annual fixed rents for the office premises are:
YEAR NET RENT PSF ANNUAL RENT
6 (9/1/94) $32.57 $12,044,875
7 $33.22 $12,285,254
8 $33.89 $12,533,030
9 $34.56 $12,780,806
10 $35.26 $13,039,677
11 $35.96 $13,298,547
12 $36.68 $13,564,814
13 $37.41 $13,834,779
14 $38.16 $14,112,140
15 $38.93 $14,396,898
16 $39.70 $14,681,656
17 $40.50 $14,977,508
18 $41.31 $15,277,058
19 $42.13 $15,580,306
20 $42.98 $15,894,649
<PAGE>
ESCALATIONS: (A) REAL ESTATE TAXES - Tenant's pro-rata share: 23.6465%
This is a net lease. The base year amount is zero.
(B) OPERATING EXPENSES - Tenant's pro-rata share: 23.6465%
This is a net lease. The base year amount is zero.
WORKLETTER: $34,083,350. Fully disbursed.
ELECTRICITY: Each tenant is directly sub-metered.
EXPANSION
OPTIONS: Landlord shall offer, at its discretion, during a period
beginning eight years after the Commencement Date and ending
on the tenth anniversary of the Commencement Date, either
the 19th and/or the 21st floors to the Tenant for renting
purposes. The fixed rent shall be set at $2.25 per square
foot above the rent level being paid for the initial space
at the time of the offering. Landlord will pay for tenant
alterations up to $5.00 per rentable square foot. During the
period beginning 13 years after the Commencement Date, and
terminating 15 years after the Commencement Date, Landlord
shall offer the 18th floor to the Tenant Rent will be $3.75
above the level at the time of the offering. Landlord will
pay for tenant alterations up to $2.50 per square foot.
Tenant must respond to any of these offers with 3 months
of the date options are made available.
RENEWAL
OPTIONS: Tenant has the option to extend the term of the Lease for
three additional periods of five (5) years each. Fixed
annual rent for each of the first, second and third renewal
terms shall be 90%, 95% and 100% of the market rent (as
defined in Section 41.03 of the lease).
TERMINATION
OPTIONS: None
DOCUMENTS: Agreement of Lease dated 7/28/88.
<PAGE>
ABSTRACT OF LEASE
POLYGRAM RECORDS / PHILIPS INTERACTIVE
======================================
DATE OF LEASE: November 9, 1988 and April 26, 1994, respectively
LANDLORD: New York Communications Center Associates
TENANTS: Polygram Records, Inc. and Philips Interactive Media of
America
PREMISES:
RENTABLE
SQUARE FEET
-----------
Office Premises: 21st to 24th floors 118,004
Office Premises: 18th floor 28,731
Office Premises: 17th floor 36,043
Office Premises: 25th floor 29,501
Office Premises: 26th floor 29.501
-------
Total Premises: 241,780
Note: Floor designations are structural floors. Polygram
occupies 15,501 sqft. and Philips occupies 14,000 sqft.
of the 26th floor.
TERM: l0 years (to 9/30/99)
BASE RENT: (A) Annual fixed rents for the office premises are:
AVERAGE
YEAR RENT PSF ANNUAL RENT
6 (9/27/94) 26.30 6,358,612
7 26.30 6,358,612
8 27.64 6,682,482
9 27.64 6,682,482
10 27.64 6,682,482
Note: Average rent does not include escalations.
Flrs. Flr. Flr.
21-24,18,17 25 26
----------- -- --
ESCALATIONS: (A) REAL ESTATE TAXES -
Tenant's pro-rata share: 11.6054% 1.8732% 1.8452%
BASE YEAR - Calendar Year: No Base 1993 Year 1995 Year
(B) OPERATING EXPENSES -
Tenant's pro-rata share: 11.6054% 1.8732% 1.8452%
BASE YEAR - Calendar Year: No Base 1993 Year 1995 Year
WORKLETTER: 21-24 - $4,720,160 (fully disbursed)
18 & 17 - None
25 - $502,253 (fully disbursed)
26 - None
ELECTRICITY: Each floor is directly sub-metered.
<PAGE>
EXPANSION
OPTIONS: Right of first offer on space available on floors 16-18 and
21-24, subject to prior rights of Ogilvy and Cravath.
RENEWAL
OPTIONS: (A) 25th Floor - one option of 10 years. Notice between
10/1/97 and 9/30/98. Rent: 5 years at $28/sq. ft;
5 years at $32/sq. ft..
(B) One option of 10 years on 24th floor, 23 and 24 or 22,
23 and 24. Notice by 10/1/97. Negotiated rent and
then first refusal.
(C) 26th floor (Polygram) - one option of 10 years. Notice
by 10/1/97. Negotiated rent and then first refusal.
(D) 26th floor (Philips) - Tenant has three renewal options
to be exercised no later than 12 months prior to the
end of the then term of the lease. The first option
is to August 13, 2009 and there are two succeeding
five year options. Rent shall be at market level,
agreed upon by lessor and lessee.
TERMINATION
OPTIONS: (A) 18th floor - option to terminate as of 8/31/96 by notice
8/31/95.
(B) 17th floor - option to terminate as of any day after
7/31/97 by 120 days' notice and payment of 96.7123%
of the sum of $2,253,687.50 plus tax and operating
expense multiplied by the fraction of the term
remaining as of the early termination date.
GUARANTY: Polygram, N.V. and Philips Electronics North America
Corporation, respectively
DOCUMENTS: Agreement of Lease dated 11/1/88 and 4/26/94, respectively
Supplement to Lease dated 10/1/90
Second Supplement to Lease dated 2/15/91
Third Supplement to Lease dated 4/16/93
Fourth Supplement to Lease dated 2/22/95
<PAGE>
POLYGRAM HOLDING, INC.
9/27/96 Draft of Amended and Restated Agreement of Lease, to commence 1/1/97
(the "New Lease").
As of January 1, 1997 the existing lease dated November 9, 1988 with PolyGram
Records, Inc. ("Records"), as amended ("Old Lease"), is terminated and all
liabilities are released as to Records and are assumed by PolyGram Holding, Inc.
("Holding," or "Tenant"), and the New Lease commences (and supersedes and
replaces the Old Lease) effective January 1, 1997.
- - The New Lease covers architectural floors 17, 18, 21-25, 27, 28 and a
portion of architectural floor 26 for a total of 286,251 square feet of
office space. The Old Lease covered architectural floors 17, 18, 21-25, 27
and a portion of architectural floor 26. On October 1, 1999 the remaining
portion of architectural floor 26 (14,000 square feet) currently sublet by
Records from N.W. Ayer & Son, Inc. will become part of the New Lease
premises, with proportionate increases in fixed rent and Tenant's share
for taxes and operating expenses. In addition, pursuant to a Seventh
Supplement to the Old Lease which is still being negotiated, Records was
given the option, assumed by Holding under the New Lease, to lease the
29th architectural floor (30,596 square feet) on or before December 31,
1996. (If the 29th floor is not available, Landlord has 9 months to
deliver vacant possession. If Landlord is unable to do so, Tenant may
terminate its option exercise with respect to the 29th floor.) The New
Lease provides that the Landlord make a $688,410 ($22.50 per square foot)
Improvements Allowance available to the Tenant in connection with its
occupancy of the 29th floor and a $651,825 ($22.50 per square foot)
Improvements Allowance in connection with the 28th floor. The New Lease
also provides that fixed rent and additional rent for the 29th floor will
be abated for the first eight months of the term thereof.
- - The term of the New Lease expires on December 31, 2011 with two, five-year
options to renew.
- - Fixed rent commences in the amount of $8,497,882.50 per annum ($29.69 per
square foot) until September 30, 1999; $9,016,875 per annum ($31.50 per
square foot) from October 1, 1999 to December 31, 2001; $9,732,584 per
annum ($34 per square foot) from January 1, 2002 to December 31, 2006 and
$10,448,161.50 per annum ($36.50 per square foot) from January 1, 2007 to
the expiration date. The addition of the remaining portion of the 26th
floor adds $441,000 per annum ($31.50 per square foot) to the fixed rent
from October 1,
1
<PAGE>
1999 to December 31, 2001; $476,000 per annum ($34 per square foot) from
January 1, 2002 to December 31, 2006 and $511,000 per annum ($36.50 per
square foot) from January 1, 2007 to the expiration date. The 29th floor
option space fixed rent shall be $963,774 per annum ($31.50 per square
foot) until December 31, 2001; $1,040,264 per annum ($34 per square foot)
from January 1, 2002 to December 31, 2006 and $1,116,754 per annum ($36.50
per square foot) from January 1, 2007 to the expiration date.
- - The New Lease contemplates the Tenant receiving a rent credit (the amount
of which is left blank in Article 1.6) to be applied against fixed rent
for the first six months of the lease term.
- - With the exception of the Tenant's build-out for the 28th and 29th floors
(for which the Improvements Allowance is made available by the Landlord to
Tenant) the Tenant takes the space as-is without obligation on the
Landlord's part to pay any additional alterations cost. (References to
Sections 22.6 and Article 45 of the New Lease in Section 3.1 are
incorrectly cited.) The Improvements Allowances for the 28th and 29th
floors will be advanced by the Landlord once each month based on
certifications by the Tenant's architect, engineer or design professional
that the designated portion of the work for which payment is requested has
been completed.
- - The Tenant will pay its proportionate share of taxes and operating costs
over a 1996/97 base tax year and an annual operating base year determined
by averaging the 1996 and 1997 actual operating expenses. Plaza taxes will
not be included in the Tenant's taxes but the Landlord's share of Plaza
operating expenses will be included in the computation of total operating
expenses. The Old Lease required contribution by the Tenant for Plaza
taxes, and a bulk of the space taken under the Old Lease had a direct
contribution by the Tenant for taxes and operating expenses, not merely an
increase over base. Upon the addition of the 29th and remaining portions
of the 26th floors to the premises, the base years remain the same. The
Tenant is also required to pay .9695% of the difference between the Base
Tax Year (1996/97) taxes and calendar year 1995 taxes and 1.452% of the
difference between the Base Tax Year taxes and 1995/96 taxes from January
1, 1997 to September 30, 1999. In addition, for the same period, Tenant
agrees to pay the same percentage of increases from Base Operating Year
expense for calendar years 1995 and 1996, respectively. These additional
payments, presumably, compensate the Landlord for a portion of the tax and
operating payments
2
<PAGE>
which would have been made by the Tenant pursuant to the terms of the Old
Lease.
- - The Tenant may, on 30 days prior notice to Landlord, offset fixed annual
rent in the event the Landlord fails to (i) fund the Improvement
Allowance, (ii) pay taxes on a timely basis, (iii) apply insurance
proceeds pursuant to the Lease or superior mortgage, (iv) pay an
arbitration award due Tenant, or (v) satisfy a judgment (or post a bond
regarding same) in favor of Tenant against Landlord (Section 10.10).
Notwithstanding the subordination of this Lease to present and future
mortgages pursuant to Article 24, it appears the Mortgagee would still be
subject to these rent offsets in the event of foreclosure.
- - In the event of a casualty partially affecting the building or the
premises, rent abates if Tenant, in the exercise of its reasonable
business judgment, determines it is unable to conduct business and vacates
or substantially suspends customary business operations. This standard
should be determined by whether the issuer of rent loss insurance will pay
such a claim. The Tenant may terminate the Lease if a contractor
determines the repair time will exceed one year. Tenant may terminate if
there is a total loss of the premises or a major part thereof during the
last 3 years of the Lease term. The Landlord's obligation to repair, under
all circumstances, should, ideally, be limited to (i) the sufficiency of
insurance proceeds, and (ii) the Mortgagee's making such funds available
for such repairs.
- - No assignment or subletting is permitted without the Landlord's prior
written consent, not to be unreasonably withheld; no consent required for
intra-company or interrelated entities occupying space. Tenant remains
liable notwithstanding any assignment or transfer. For subleases of at
least 2 contiguous floors entered into between the 11th and 14th lease
years, the Tenant may, upon the subtenant evidencing financial ability or
posting a letter of credit in favor of the Landlord, sublease beyond the
initial expiration of the lease term (into the renewal term), and
subtenant may, at Tenant's direction, become a direct tenant of Landlord
upon the commencement of the renewal term, at fair market rent. In such
event, the Tenant is relieved from liability as to the space directly
leased by the (former) subtenant. As a condition to Tenant's exercising
the renewal option, Tenant and its subtenants must together have lease at
least 3 full contiguous floors. Assignment consideration and sublease rent
overages are split between Landlord and Tenant on a 50/50 basis after
payment of reasonable related expenses.
3
<PAGE>
- - In the event of a condemnation of less than the whole of the building or
of only a part of the premises, the Landlord is obligated to restore the
premises and/or building, regardless of the amount of the award, if any.
In the event of a temporary condemnation, Tenant continues to pay rent but
is entitled to receive that portion of the award for reimbursement for
cost of restoration of the premises, use and occupancy and taking of
Tenant's property.
- - The Tenant is given 7 business days notice of monetary default.
- - A foreclosing mortgagee or transferee, provided notice is given to
Tenant, will not be liable for damages resulting from any default of any
prior Landlord, bound by rent paid by Tenant more than one month in
advance or bound by modifications to the Lease that (i) reduce rent, (ii)
shorten the term, (iii) cancel or surrender the Lease, or (iv) increase
the Landlord's liability (except inconsequentially) unless any such
modifications are made with such mortgagee's prior approval. The Lease is
automatically subordinate to the mortgage and the Tenant agrees to attorn
to such mortgagee provided the mortgagee agrees to be bound by the terms
of the Lease. The insert of the word "damages" is of some concern as it
could be interpreted that the foreclosing mortgagee could be liable for
the defaults of the prior Landlord but not liable for damages resulting
from such defaults.
- - The Tenant's obligation to issue a "certificate" is limited in content to
(i) whether the Lease has been modified, (ii) the dates to which rent has
been paid, (iii) stating whether, to the best knowledge of the party
signing, the Landlord is in default, and (iv) verifying which space is
subject to the Lease and options granted thereunder. The Tenant agrees not
to withhold rent or terminate the Lease until notice is given to the
mortgagee, with the mortgagee having 10 days to cure the matter which
gives rise to Tenant's right to terminate or withhold rent.
- - The Lease was brokered by Edward S. Gordon Company, Inc. and the Landlord
is responsible for payment of all compensation due Gordon on account of
the Lease. If Landlord fails to so pay, the Tenant may, upon 5 days notice
to Landlord, pay the broker and offset rent. The brokerage agreement is
not exhibited as part of the Lease and, presumably, the broker has not
agreed to subordinate its commission arrangement to the mortgage.
4
<PAGE>
ABSTRACT OF LEASE
MICROSOFT CORPORATION
=====================
DATE OF LEASE: August 28,1990
LANDLORD: New York Communications Center Associates
TENANT: Microsoft Corporation
PREMISES:
RENTABLE
SQUARE FEET
-----------
Office Premises: 19th floor 29,501
Office Premises: 16th floor 36,256
------
Total Premises: 65,757
Note: Floor designations are structural floors.
TERM: 9 years
Commencement - 8/28/90
Expiration - 8/31/98
BASE RENT: (A) Annual fixed rents for the office premises are:
YEAR NET RENT PSF ANNUAL RENT
6 (1/1/94) $25.00 $1,643,925
7 $25.00 $1,643,925
8 $30.00 $1,972,710
9 $30.00 $1,972,710
ESCALATIONS: (A) REAL ESTATE TAXES - Tenant's pro-rata share: 4.2046%
(B) OPERATING EXPENSES - Tenant's pro-rata share: 4.2046%
WORKLETTER: $3,287,850 ($900,000 has not been disbursed).
ELECTRICITY: Each tenant is directly sub-metered.
EXPANSION
OPTIONS: None
<PAGE>
RENEWAL
OPTIONS: One option for a period of two (2) years to be exercised not
earlier than 1/7/97 and not later than 5/31/97. (Renewal Rent
$30.00 psf). At the expiration of the aforesaid renewal term
the original premises is subject to rights of first offer by
Cravath, Swaine & Moore and Ogilvy & Mather Worldwide Inc. In
the event neither party exercises their rights, the Landlord
will give Tenant the option to extend the Lease for the entire
premises for an additional five year renewal period. The rent
for said five year period shall be the greater of (i) the
fixed annual net rent payable under the Lease by Tenant prior
to Lease expiration and (ii) 90% of the market rent.
TERMINATION
OPTIONS: None
DOCUMENTS: Agreement of Lease dated August 28, 1990
Supplement and Amendment to Lease dated July 2, 1991
<PAGE>
SECOND SUPPLEMENT AND AMENDMENT TO LEASE (this "Second Supplement")
made as of this 4th day of December, 1996, between NEW YORK COMMUNICATIONS
CENTER ASSOCIATES L.P., a Delaware limited partnership, having an office at c/o
Blackstone Real Estate Advisors L.P., 345 Park Avenue, New York, New York
(hereinafter referred to as "Landlord"), and MICROSOFT CORPORATION, a Washington
corporation having an office at One Microsoft Way, Redmond, Washington
98052-6399 (hereinafter referred to as "Tenant").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, Landlord and Tenant have heretofore entered into that
certain Agreement of Lease dated as of August 28, 1990, as supplemented and
amended by that certain Supplement and Amendment to Lease dated as of July 2,
1991 (as supplemented and amended, the "Lease") with respect to the 16th and
19th architectural floors in the building known as One Worldwide Plaza, 825
Eighth Avenue, New York, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend and supplement the
terms of the Lease in accordance with the terms of this Second Supplement as
hereinafter set forth;
NOW, THEREFORE in consideration of the demised premises, and the
mutual obligations herein contained, Landlord and Tenant do hereby agree as
follows:
1. Definitions. Unless otherwise defined herein, capitalized terms
shall have the meanings ascribed to such terms in the Lease.
2. Demised Premises/Term. Landlord and Tenant hereby agree that
notwithstanding anything to the contrary contained in the Lease, (i) the
"demised premises" under the Lease shall be comprised of 65,757 rentable square
feet (as defined in Section 3.1(b) of the Lease) constituting the entire
sixteenth and nineteenth above grade floors located in the Building and (ii) the
term of the Lease (which commenced on the Commencement Date) shall end at
midnight on August 31, 2003 (such date on which the term of the Lease expires is
hereinafter referred to as the "Expiration Date"), unless the term of the Lease
shall be extended pursuant to Article 39 of the Lease, or until such term shall
sooner cease and terminate as provided in the Lease.
3. Amendments. Landlord and Tenant agree to amend the terms of the
Lease as follows:
<PAGE>
2
A. The first paragraph of Section 1.1 of Article 1 of the Lease is hereby
amended by deleting it in its entirety and substituting the following in lieu
thereof:
"1.1 Tenant shall pay to Landlord from and after February 1, 1992 (the
"Rent Commencement Date") fixed annual net rent in an amount equal to the
product of the annual net rent per rentable square foot and the number of
rentable square feet in the demised premises (hereinafter referred to as
"fixed annual net rent") . The annual net rent per rentable square foot
shall be (i) Twenty-Five Dollars ($25.00) from February 1, 1992 through
August 31, 1996, (ii) Thirty Dollars ($30.00) from September 1, 1996
through December 31, 1996, (iii) Thirty-Four Dollars and fifty cents
($34.50) from January 1, 1997 through December 31, 1999 and (iv)
Thirty-Eight Dollars and twenty five cents ($38.25) from January 1, 2000
through August 31, 2003."
B. Article 2 of the Lease is hereby amended by deleting Section 2.7
thereof in its entirety.
C. Article 2 of the Lease is hereby amended by deleting the last sentence
of Section 2.9 thereof and substituting the following in lieu thereof:
"Tenant shall pay Landlord a sum equal to Landlord's direct personnel
expense incurred in connection therewith as compensation for Landlord's
direct and indirect costs, field supervision and coordination in
connection with such work."
D. Article 2 of the Lease is hereby amended by adding the following
Section 2.13 immediately following Section 2.12 thereof:
"2.13 Tenant acknowledges that it has examined the demised premises and
has accepted the same in its current condition and state of repair and
understands and agrees that, except with respect to the funding by
Landlord of the Alteration Fund (the proceeds of which Alteration Fund are
to be used to fund certain tenant improvements in accordance with the
terms of this Lease), Landlord has no further obligation to alter, improve
or otherwise prepare the demised premises for Tenant's occupancy thereof.
Landlord and Tenant hereby acknowledge and agree that the aggregate amount
of all sums remaining payable by Landlord to the Alteration Fund as of
December 4, 1996 is $290,150.47 (the "Remaining Alteration Sums").
Landlord and Tenant hereby agree that Landlord shall fund the Alteration
Fund with the Remaining Alteration Sums and disburse such sums from the
Alteration Fund in accordance with the terms of the Lease for Occupancy
Alterations to the demised premises (including, without limitation,
Occupancy Alterations performed in connection with the occupancy of the
Second Floor Option Space (as hereinafter defined), provided however, that
the sum of
<PAGE>
3
$85,000 (the "Remaining 19th Floor Work Allowance"), constituting a
portion of the Remaining Alteration Sums, need only be released from the
Alteration Fund by Landlord if such Remaining 19th Floor Work Allowance
shall be used by Tenant to fund Occupancy Alterations in the 1700 square
feet of space located on the 19th Floor which space is unfinished as of
December 4, 1996".
E. Article 3 of the Lease is hereby amended by deleting the last sentence
of subsection 3.1(a) thereof and substituting the following in lieu thereof:
"Tenant's Proportionate Share is 4.2046%."
F. Article 3 of the Lease is hereby amended by adding the following
subsections to Section 3.1 thereof:
"(f) The term "Base Tax Year" as hereinafter set forth for the
determination of the escalation of Taxes (from and after January 1, 1997)
shall mean the New York City real estate tax year commencing July 1, 1996
and ending June 30, 1997."
"(g) The term "Base Operating Year Expenses" shall mean the Operating
Expenses attributable to the 12 month period beginning January 1, 1997 and
ending December 31, 1997."
G. Article 3 of the Lease is hereby amended by deleting the first sentence
of subsection 3.5(a) thereof and substituting the following in lieu thereof:
"(A) Following the earlier to occur of (i) the Rent Commencement Date and
(ii) the date Tenant shall first occupy any portion of the demised
premises for the conduct of its business (such earlier date being the
"Additional Rent Payment Date") and continuing through December 31, 1996,
Tenant shall pay as additional rent for each Tax Year or part thereof
occurring after the Additional Rent Payment Date, a sum equal to Tenant's
Proportionate Share of the amount of the Taxes for such Tax Year, or part
thereof and (B) from and after January 1, 1997, if the Taxes paid for any
Tax Year exceed the Taxes paid during the Base Tax Year, Tenant shall pay
as additional rent for such Tax Year, a sum equal to Tenant's
Proportionate Share of the excess. The payments required to be made by
Tenant pursuant to clause (A) and (B) above, as the case may be, are
hereinafter referred to as "Tenant's Tax Payment".
H. Article 3 of the Lease is hereby amended by deleting the first sentence
of subsection 3.5(h) thereof and substituting the following in lieu thereof:
<PAGE>
ABSTRACT OF LEASE
ROBERTS & HOLLAND
=================
DATE OF LEASE: April 20, 1994
LANDLORD: New York Communications Center Associates, L.P.
TENANT: Roberts & Holland
PREMISES:
RENTABLE
SQUARE FEET
------------
Office Premises: 35th floor 30,518
Note: Floor designations are structural floors.
TERM: 13 years (April 20, 1994 - November 30, 2007)
BASE RENT: (A) Annual fixed rents for the office premises are:
LEASE MONTHS GROSS RENT PSF ANNUAL RENT
7/1/95 - 1/31/1999 $26.00 $793,468
2/1/99 - 5/31/2003 $29.00 $885,022
6/1/03 - 11/30/2007 $33.00 $1,007,094
ESCALATIONS: (A) REAL ESTATE TAXES - Tenant's pro-rata share: 1.9514%
(B) OPERATING EXPENSES - Tenant's pro-rata share: 1.9514%
ELECTRICITY: Tenant's responsibility
EXPANSION
OPTION: None
RENEWAL
OPTIONS: Tenant has the option to extend the lease with notice to
Landlord not later than 12 months prior to the Expiration date
and the fifth anniversary of the Expiration date to extend the
term of the lease for two renewal terms of five years each
(provided the lease has not expired or been terminated and
Tenant is not in default beyond any applicable notice and
grace period in the performance of any of its obligations
under the lease.
TERMINATION
OPTION: None
DOCUMENTS: Agreement of Lease dated 4/20/94
<PAGE>
5
"Transfer Rent" shall have the meaning ascribed in subsection 19.2.
SECTION 2
DEMISE AND TERM
2.1 Demise. (a) Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord 30,596 rentable square feet of space in the Building
constituting all of the 30th architectural Floor of the Building, which space is
known for marketing purposes as the 32nd floor.
(b) The "Premises" shall consist of the interior space horizontally
bounded by the finished surfaces of walls, windows and doors thereof and
vertically bounded by the exposed surfaces of (i) the slab constituting the
floor of the Premises and (ii) bottom of the slab of the floor above the
Premises; expressly and specifically excluding, however, all floor and ceiling
slabs, beams, sensors, smoke detectors and fire alarm speakers and all electric
and telephone closets, shafts, stacks, pipes, conduits, public passageways and
stairwells (including fire stairs) of the Building, all of which are hereby
expressly reserved to Landlord and further expressly reserving to Landlord the
right to use, in common with Tenant, such portions of the plenum above the hung
ceiling of each Floor of the Premises as Landlord may require for wiring,
conduits, cabling, ductwork and other installations, whether or not serving
Tenant's space (provided Landlord shall perform such work in a manner so as not
to materially interfere with Tenant's operation of its business).
(c) Landlord and Tenant agree that the "rentable square feet" of the
Building and the Premises is set forth on Schedule B attached hereto. Upon
request of either party from time to time in connection with a change in the
size of the Premises as a result of expansion, recapture or partial surrender
rights hereunder, the parties shall acknowledge in writing (i) the number of
rentable square feet comprising the Premises after giving effect to such change
in the size of the Premises and (ii) Tenant's Proportionate Share (as
hereinafter defined) after giving effect to such change in the size of the
Premises.
(d) Landlord's lease of the Premises to Tenant and Tenant's lease of
the Premises from Landlord shall be subject to all of the terms, covenants and
conditions set forth in this Lease.
2.2 Term. The Premises shall be leased for a term (the "Term")
commencing on the date hereof (the "Effective Date") and expiring at midnight on
June 30, 2009 (the "Expiration Date"), unless terminated earlier as otherwise
provided in this Lease.
<PAGE>
6
2.3 Delivery of the Premises to Tenant. (a) Landlord shall deliver
the Premises to Tenant on the Effective Date.
SECTION 3
BASE RENT/PAYMENT OF RENT
3.1 Base Rent. Tenant shall pay to Landlord a fixed annual rent
(hereinafter referred to as "Base Rent") for the Premises, subject to adjustment
as specifically provided in this Lease, as follows:
(1) $1,101,456 per annum commencing on the Rent Commencement Date
and ending on April 30, 2001, payable in equal monthly installments of
$91,788;
(2) $1,239,138 per annum commencing on May 1, 2001 and ending on May
31, 2005, payable in equal monthly installments of $103,261.50; and
(3) $1,376,820 per annum commencing on June 1, 2005 and ending on
the Expiration Date, payable in equal monthly installments of $114,735.
3.2 Commencement of Tenant's Obligation to Pay Rent. Tenant's
obligation to pay Base Rent and Adjustment Rent hereunder shall commence on the
Rent Commencement Date.
3.3 Payment of Rent. (a) Tenant shall pay the Base Rent in lawful
money of the United States of America, in equal monthly installments in advance
on the first day of each calendar month during said term, at the offices of
Landlord or such other place in the United States of America as Landlord may
designate, without notice or demand or any setoff or deduction whatsoever,
except as otherwise provided herein. Should the obligation to pay Base Rent
commence or end on any day other than on the first day of a month, then the Base
Rent for such month shall be adjusted and prorated on a per diem basis.
(b) Tenant shall pay Rent as above and as hereinafter provided, by
good and sufficient check (subject to collection) drawn on a New York City bank
which is a member of the New York Clearing House Association or a successor
thereto, such other reputable commercial bank doing business in New York City or
Citibank, Delaware. All sums other than Base Rent and Adjustment Rent payable by
Tenant hereunder shall be deemed Rent solely for the purpose of providing to
Landlord the same remedies as are available to Landlord in the event of a
default in the payment of Base Rent.
(c) If Tenant shall fail to pay when due (i) any installment of Base
Rent or Adjustment Rent for a period of five (5) days after such installment
shall have become due, or (ii) any payment of other Rent (other than Base Rent
or Adjustment
<PAGE>
7
Rent) within ten (10) days after such amount shall have become due, Tenant shall
pay interest thereon from the date due, at the annual rate (the "Interest
Rate") of two percentage points (2%) above the rate then most recently
announced by The Chase Manhattan Bank as its corporate base lending rate (the
"Prime Rate"), from time to time in effect.
(d) If any of the Rent payable under the terms and provisions of
this Lease shall be or become uncollectible, reduced or required to be refunded
because of any Legal Requirement constituting commercial rent control, Tenant
shall cooperate reasonably with Landlord and enter into such reasonable
agreements and take such other steps, at Landlord's sole cost and expense as
Landlord may reasonably request and as may be legally permissible to permit
Landlord to collect the maximum rents which from time to time during the
continuance of such Legal Requirement may be legally permissible (and not in
excess of the amounts which may, from time to time, be due under this Lease
absent such Legal Requirement) . Upon the termination of such Legal Requirement,
(a) the rents shall become and thereafter be payable in accordance with the
amounts reserved herein for the periods following such termination and (b)
Tenant shall pay to Landlord, to the maximum extent legally permissible, without
interest, an amount equal to the rents which would have been paid pursuant to
this Lease but for such Legal Requirement less the rents paid by Tenant during
the period that such Legal Requirement was in effect.
SECTION 4
ADJUSTMENT RENT
4.1 Certain Definitions. For the purposes of this Section 4 and
unless otherwise indicated throughout this Lease, the following definitions
shall apply:
(i) "Tenant's Proportionate Share" means the percentage resulting
from dividing the number of rentable square feet from time to time
comprising the Premises by the number of rentable square feet in the
Building (1,595,476 s.f.), all as set forth on Exhibit B. Tenant's
Proportionate Share shall be recalculated as of the effective date of any
change in the Premises pursuant to the provisions of this Lease in
accordance with Exhibit B. As of the date of this Lease, Tenant's
Proportionate Share shall be deemed to be 1.9177%. Appropriate adjustments
based on actual days elapsed shall be made in connection with the
computation of Tenant's Tax Payments and Tenant's Operating Payments for
any changes in Tenant's Proportionate Share during any Tax Year or
Comparative Year, respectively, or in connection with the computation
thereof for the Tax Year and Comparative Year in which this Lease shall
expire or terminate.
<PAGE>
ABSTRACT OF LEASE
MANHATTAN SPORTS CLUB, INC.
===========================
DATE OF LEASE: December 1, 1989
LANDLORD: ZCWK Associates
TENANT: Manhattan Sports Club, Inc.
PREMISES: RENTABLE
SQUARE FEET
-----------
Total Health Club Premises 35,000
TERM: 20 years (11/30/2009)
BASE RENT: (A) Annualized rents for the premises are:
YEAR ANNUAL RENT
6 (12/1/94) $773,900
7 $843,551
8 $843,551
9 $843,551
10 $919,471
11 $919,471
12 $919,471
13 $1,002,223
14 $1,002,223
15 $1,002,223
16 $1,092,423
17 $1,092,423
18 $1,092,423
19 $1,190,741
20 $1,190,741
ESCALATIONS: (A) REAL ESTATE TAXES - Tenant's pro-rata share:
100% of Health Club
Condominium Unit
(B) OPERATING EXPENSES - Tenant's pro-rata share:
5.0832% of Common charges of
The Residences at WWP
ELECTRICITY: Each tenant is directly sub-metered.
EXPANSION
OPTION: None
RENEWAL
OPTION: None
TERMINATION
OPTION: None
DOCUMENTS: Agreement of Lease dated 12/1/89
<PAGE>
ABSTRACT OF LEASE
CINEPLEX ODEON CORP.
====================
DATE OF LEASE: August 11, 1987
LANDLORD: ZCWK Associates, L.P. (directly and as beneficiary of ZCWK
Plaza Associates, nominee)
TENANT: RKO Century Warner Theaters by assignment from
Cineplex Odeon Corporation
PREMISES:
RENTABLE
SQUARE FEET
------------
Theater Premises: Two Floors Below Grade 53,573
1st Floor Above Grade space 3,361
-----
Total Premises: 56,934
TERM: 30 years (6/30/2019)
BASE RENT: (A) Annual fixed rents for the premises are:
YEAR ANNUAL RENT
6-10 (7/1/94) $1,775,104
11-15 $1,772,752
16-20 $1,938,456
21-30 $2,104,161
Note: The Second Amendment to Lease provided that between
February 1, 1991 and January 31, 1994, $400,000 in
annual rent is deferred and paid from net profits as
defined under the amendment. Landlord and Tenant have
agreed to continue deferring $400,000 per year in rent.
PERCENTAGE
RENT: Tenant shall pay 10% of the amount by which the annual gross
revenue of the premises exceeds $6,750,000.
ESCALATIONS: (A) REAL ESTATE TAXES - Tenant's pro-rata share:
97.280% of building and real estate taxes for Theater
condominium unit. This figure applies to 58,528 square
feet below grade.
(B) OPERATING EXPENSES - Tenant's pro-rata share: 97.280% of
Building expenses for Theater condominium unit. This
figure applies to 58,528 square feet below grade.
<PAGE>
WORKLETTER: $25O,OOO Fully disbursed.
ELECTRICITY: Each tenant is directly sub-metered.
EXPANSION
OPTIONS: None
RENEWAL
OPTIONS: None
TERMINATION
OPTIONS: None
DOCUMENTS: Agreement to Lease dated August 11, 1987
First Amendment to Lease June 15, 1989
Second Amendment to Lease February 1, 1991
Assignment dated as of August 11, 1987
<PAGE>
2. Deferred Portion; Repayment from Profits.
(a) For the period commencing as of June 1, 1995 and ending on the
Expiration Date, a portion (the "Deferred Portion") of fixed annual rent payable
pursuant to Section 1.01 of the Original Agreement due during each year (a
"Deferred Rent Year") commencing on June 1, 1995 and ending on the next
occurring May 31st shall be deferred as follows:
================================================================================
Fixed Annual Fixed Annual
Deferred Rent reserved Rent Payable Deferred
Rent Year under the Lease prior to Default Portion
- --------- --------------- ---------------- -------
- --------------------------------------------------------------------------------
1 $1,775,104 $1,062,500 $712,604
- --------------------------------------------------------------------------------
2 1,775,104 1,112,500 662,604
- --------------------------------------------------------------------------------
3 1,775,104 1,162,500 612,604
- --------------------------------------------------------------------------------
4 1,775,104 1,212,500 562,604
- --------------------------------------------------------------------------------
5 1,775,104 1,262,500 512,604
- --------------------------------------------------------------------------------
6 1,772,752 1,312,500 460,252
- --------------------------------------------------------------------------------
7 1,772,752 1,362,500 410,252
- --------------------------------------------------------------------------------
8 - 10 1,772,752 1,375,000 377,752
- --------------------------------------------------------------------------------
11 - 15 1,938,456 1,375,000 563,456
- --------------------------------------------------------------------------------
Thereafter 2,104,161 1,375,000 729,161
================================================================================
The Deferred Portion for each Deferred Rent Year and the accrued and unpaid
Deferred Portion for any previous Deferred Rent Year shall be payable, without
interest, from Profits (defined below); provided, however, upon the occurrence
of a default under the Lease beyond the expiration of any applicable notice,
grace and cure periods, (i) the entire Deferred Portion for each previous
Deferred Rent Year (less any amounts paid to, and retained by, Landlord by
Tenant from Profits) shall become immediately due and payable. Commencing upon
the occurrence of a default under the Lease beyond the expiration of applicable
grace cure and notice periods, fixed annual rent shall be calculated and due
and payable as set forth in Section 1.01 of the Original Agreement, without
regard to the Second Amendment or this Amendment (other than amounts payable
pursuant to the provisions of Section 6 of this Amendment) and (ii) this Section
2(a) shall be deemed deleted from the Lease. Tenant shall nevertheless be liable
for any amounts due pursuant to the provisions of Section 6 below.
-3-
<PAGE>
DIGEST OF LEASE DATED JULY 3, 1997,
BETWEEN
NEW YORK COMMUNICATIONS CENTER ASSOCIATES, L.P., AS LANDLORD,
AND CENTRAL PARKING
SYSTEM OF NEW YORK, INC., AS TENANT,
FOR GARAGE PREMISES AT 380 WEST 5Oth STREET, NEW YORK, NEW YORK
PREMISES: Entire Garage space at Worldwide Plaza.
TERM: The Term is approximately 10 years and 5 months. After
the Commencement Date, Landlord and Tenant will execute
and deliver an agreement setting forth the Commencement
and Expiration Dates.
COMMENCEMENT DATE: The date Landlord delivers possession of the Garage to
Tenant.
EXPIRATION DATE: The tentative Expiration Date of November 30, 2007, will
be extended by the number of calendar months equal to
the number of whole and partial calendar months elapsed
between July 2, 1997, and the Commencement Date, to
achieve a Term of a full 10 years and 5 months. The
Expiration Date will be the last day of the last
calendar month added.
RENT COMMENCEMENT DATE: December 1, 1997. If Landlord does not deliver
possession of the Premises by December 1, 1997, then
the Rent Commencement Date will be postponed until the
day that the Premises are delivered to Tenant.
DELIVERY OF PREMISES: Landlord will have no liability to Tenant if the
Premises are not delivered by a particular date. The
Premises are currently subject to a management agreement
that may be canceled upon 60 days notice. Landlord is
obligated to give this notice to cancel within three
business days after execution of the Lease.
BASE RENT: First Rental Period (12/1/l997 - 11/30/2002):
$850,000.00 per annum
$70,833.33 per month
Second Rental Period (12/1/2002 - Expiration Date):
$900,000.00 per annum
$75,000.00 per month
PERCENTAGE RENT: For each Lease Year of the First Rental Period:
0% of the first $2,100,000 of Gross Revenues;
50% of all Gross Revenues in excess of $2,100,000.
For each Lease Year of Second Rental Period 0% of
the first $2,400,000 of Gross Revenues; 50% of all Gross
Revenues in excess of $2,400,000.
Percentage Rent is due monthly, by the 20th day of the
following month, to be accompanied by a Monthly Report,
which must include the calculation of the Percentage
Rent, Gross Revenues received, Parking Taxes paid, and
customer deposits being he1d. At the end of each Lease
Year, Tenant must furnish Landlord with a certified
public
1
<PAGE>
accountant's statement setting forth the same items, to
accompany any Percentage Rent then due. A Lease Year is
each period of twelve months commencing on December 1,
1997 (or the Rent Commencement Date).
INTERIM PAYMENTS: For the interim period between the Commencement Date
and the Rent Commencement Date, Tenant will be required
to pay to Landlord, in lieu of Base Rent and Percentage
Rent, an amount equal to the Gross Revenues received by
Tenant during the interim period, less Tenant's
Expenses (all employee, utility and overhead costs) and
a Management Fee ($3,000 per month).
ADDITIONAL CHARGES: Tenant is responsible for the prompt payment of all
Parking Taxes, Commercial Rent, Occupancy Taxes and
Sales and Use Taxes. Tenant will pay all Real Estate
Taxes including water, sewer, vault, county, as well as
any other charge(s) assessed or imposed upon the Garage,
and the sidewalks and streets adjacent to the Garage,
that may be levied by any taxing authority. For the
first eight years following the execution of the Lease,
Tenant may institute tax certiorari proceedings with
respect to the Garage Tax Lot, provided that Tenant's
counsel is acceptable to, and communicates with,
Landlord. From the eighth anniversary of the execution
of the Lease forward, only Landlord may institute tax
certiorari proceedings.
Tenant will pay all other taxes and other costs in
connection with the Operating Expenses incurred in
connection with use of the Premises as a Garage (e.g.,
employee taxes and benefits, telephone, permits,
licenses, garbage collection and other related charges).
Tenant is also obligated to pay all General Common
Expenses and General Common Charges imposed by the
Condominium on the Garage. At Tenant's request, Landlord
will try to have the Condominium Board reduce the amount
of General Common Expenses and General Common Charges
imposed. If the Board does reduce the charges, then the
annual Base Rent will be increased for the remainder
of the Term by an amount equal to 85% of such savings.
BOOKS AND RECORDS: Tenant is obligated to maintain accurate books and
records at its offices at 2401 21st Avenue South,
Nashville, TN 37212. Landlord may review Tenant's books
with two business days notice in order to verify the
Gross Revenues.
SECURITY DEPOSIT: None.
GUARANTOR: Central Parking Corporation.
LATE PAYMENTS: Rent not paid within 5 days after the due date will bear
interest at an annual rate equal to the Citibank base
rate plus 2%.
UTILITIES: Tenant is obligated to reimburse Landlord, within 10
days after being billed, for heat, water, sewerage, gas
and any other utility services to the Garage at the rate
which Landlord is then charging other tenants in the
Building. Tenant will pay Landlord for all electrical
consumption, which is measured by a submeter.
2
<PAGE>
PERMITTED USE: Garage may be used only for the parking and storage of
passenger motor vehicles. Tenant may, with consent of
Landlord, operate valet parking, automobile washing and
detailing services. Tenant must keep Garage open 24
hours a day, 7 days a week.
PRIMARY AND SIDEWALK
APPROVALS: Tenant is required to procure and maintain all licenses,
permits and approvals, at Tenant's expense.
INSURANCE: Landlord is required to be included as an additional
insured on all liability insurance policies. Tenant is
obligated to maintain the following types of insurance:
o Worker's compensation insurance with limits of
not less than $500,000 for any one occurrence
o Employer's liability insurance of not less than
$l00,000
o Commercial general liability insurance of not less
than $l,000,000 for each occurrence, with a
$2,000,000 aggregate
o Garage keeper's legal liability insurance of not
less than $1,000,000
o Employee dishonesty and depositor's forgery
insurance with a limit of not less than $250,000
o Umbrella liability insurance for $15,000,000 in
excess of commercial general liability and garage
keeper's legal liability insurance
ASSIGNMENT AND
SUBLETTING: Tenant is required to first obtain Landlord's written
consent to any assignment of the Lease or subletting of
the Premises, which consent may be granted or withheld
in Landlord's sole discretion. The transfer of a
majority of stock of Tenant will be considered an
assignment of the Lease. Tenant may assign its interest
in the Lease to a person that "Controls" Tenant,
provided that prior notice is delivered to Landlord, and
that the Guaranty remains in full force and effect.
ALTERATlONS: Tenant must obtain Landlord's prior written consent, not
to be unreasonably withheld, for all alterations other
than minor cosmetic changes. All alterations will be
performed at Tenant's expense. Tenant must submit to
Landlord, for Landlord's approval, a schedule of Initial
Alterations to be performed by Tenant (with cost
estimates) within 30 days after the Commencement Date
for Landlord's approval. The Initial Alterations will
cost, in conjunction with the Capital Account Payment,
at least $200,000. If Tenant does not spend the full
$200,000, then Tenant must pay the difference to
Landlord. Tenant is required to complete all required
signage and graphics within 60 days after the
Commencement Date.
BROKER: None.
RENEWAL OPTION: None.
PREPAID RENT: None.
3
<PAGE>
NOTICES: All notices to Tenant are to be delivered to:
Tenant: Central Parking System of New York, Inc.
921 Bergen Avenue
Jersey City, NJ 07306
Attention: Brett Harwood
Copy to: Central Parking System of New York, Inc.
2401 21st Avenue South
Nashville, TN 37212
Attention: Monroe Carell, Jr., Chairman
4
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
EXHIBIT - COMPARABLE IMPROVED BUILDING SALES
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 1
Address 505 Park Avenue
Northeast corner of East 59th Street
Park Avenue Sub-Market/Midtown Office Market
New York, New York
Date of Sale June, 1997
Grantor First Park Associates
Grantee Glorious Sun
Block/Lot 1394/1
Liber/Page N.A.
Description A 22-story Class "A" office building,
constructed in 1948 and renovated in the
1987, containing 198,690 square feet of
rentable area including a retail/commercial
component.
Consideration* $47,000,000 for Leased Fee Interest
Financing Conventional Financing
Adjusted Sale Price $236.55 per square foot
Sales Analysis
Effective Gross Income $40.53 per square foot
Operating Expenses $19.09 per square foot
Net Operating Income $19.09 per square foot
Yield Rate 11.00%
Going OAR 9.1%
Comments:
The building was acquired with a current occupancy of 97% under leases to
"boutique" type tenants (small law and consulting firms). The quality and
durability of the leases, which expire over the next decade is reported to be
good based on a mix of non-credit, but successful privately owned companies.
Source: Confidential, KTR research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
505 Park Ave
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 2
Address 1412 Broadway
Northeast corner of West 39th Street
Penn/Garment Center Sub-Market
New York, New York
Date of Sale June, 1997
Grantor New York Life Insurance
Grantee Bruce S. Brickman and Associates
Block/Lot 815/14
Liber/Page N.A.
Description A 25-story Class "B" office building,
constructed in 1927s and renovated in the
1980s, containing 381,535 square feet of
rentable area including a retail/commercial
component.
Consideration* $59,200,000 for Leased Fee Interest
Financing $11.2 million in cash, remainder financed
Adjusted Sale Price $155.16 per square foot
Sales Analysis
Effective Gross Income $23.25 per square foot
Operating Expenses $12.80 per square foot
Net Operating Income $10.45 per square foot
Comments:
The property was acquired with an occupancy of 83.9% from New York Life
Insurance Company, which had acquired the property through foreclosure.
*The new investor purchased the property for $51,750,000 and will expend an
additional $7,450,000 for tenant improvements, leasing commissions and various
capital costs. The property was purchased with the intention of leasing the
existing vacant office space at $30 per square foot rents.
Source: Confidential, KTR research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
1412 Broadway
Fashion Gallery Bldg
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 3
Address 527 Madison Avenue
Southeast corner of East 54th Street
Fifth/Madison Avenue Sub-Market
Midtown Office Market
New York, New York
Date of Sale February, 1997
Grantor Louis Dreyfus Property Group
Grantee Cornerstone Properties
Block/Lot 1289/52
Liber/Page N.A.
Description A 26-story Class "A" office building,
constructed in 1986, containing 215,000
square feet of rentable area including a
retail component and an underground parking
garage.
Consideration $67,000,000 for Leased Fee Interest.
Financing Cash
Sale Price $311.63 per square foot
Comments:
The building was acquired with a current occupancy of 98%. Major tenants include
Sumitomo Bank & Trust Company and a number of overseas trading and investment
companies.
Source: KTR market research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
527 Madison Ave
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 4
Address Finland House
540 Madison Avenue
Southwest corner of East 55th Street
Midtown Office Market
New York, New York
Date of Sale September, 1996
Grantor Finlandia Center, Inc.
Grantee Macklowe Organization
Block/Lot 1290/56
Liber/Page N.A.
Description A 38-story Class "A" office building,
constructed in 1970, containing 259,190
square feet of rentable area including a
retail/commercial component.
Consideration $37,500,000, which includes $2,500,000 in
immediate capital expenditures, for
Leasehold Interest.
Financing Conventional Financing
Sale Price $144.68 per square foot
Sales Analysis
Effective Gross Income $27.12 per square foot
Operating Expenses $11.74 per square foot
Net Operating Income $15.34 per square foot
Yield Rate 11.00% to 11.50%
Terminal O.A.R. 9.0% to 9.5%
"Going-In" O.A.R. 10.6%
Comments: The building was acquired with a current occupancy of 88.7% and the
immediate need of $2.5 million in capital improvements. Occupancy is expected to
decline to 58% by year end due to the loss of 2 major tenants (Sterling National
Bank and Ladenburg Thalman). The quality, quantity and durability of the
remaining leases, which expire within 8 years, is reported to be good based on a
mix of credit and non-credit tenants. Further, the Leasehold Interest benefits
from a favorable ground rent, which is not subject to re-negotiation until 2004,
with 2 long term renewal options. Market rents and expenses have been assumed to
increase at 4.0% per year.
Source: Confidential sources, City Register, KTR market research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
540 Madison Ave
Finland House
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 5
Address 27 floors within 30 Rockefeller Center
West side of Sixth Avenue between West 49th
and 50th Streets
Sixth Avenue/Rockefeller Center Sub-Market
New York, New York
Date of Sale July, 1996
Grantor RCP Associates
Grantee N.B.C. Trust No. 1996A
Block/Lot 1265/1001, 1006-1011, 1013-1018, 1020-1022,
1025, 1029, 1030, 1051, 1052, 1055,
1056-1057, 1071-1072, 1078-1079, 1082-1086
Liber/Page 2347/678
Description A 52-story Class "A/B" office building,
constructed in 1932, containing 2,900,000
square feet of rentable area.
The property conveyed is a condominium
interest in 27 floors containing 1,600,000
square feet of rentable area.
Consideration $440,000,000 for Leased Fee Interest
Financing Cash
Sale Price $275.00 per square foot
Comments:
The Leased Fee Interest in the condominium was acquired by the Leasehold
Interest which exercised a purchase option in lieu of leasing the space at a
contract rent in the range of $50.00 per square foot. Located in the heart of
Rockefeller Center, the building was constructed in 1932 and converted to
condominium ownership in the mid-1980s when N.B.C. negotiated special incentives
from the City of New York.
Source: City Register, KTR market research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
30 Rockefeller Plaza
GE Bldg
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 6
Address 1412-1416 Sixth Avenue
Southeast corner of West 58th Street
Sixth Ave./Rockefeller Center Sub-Market
New York, New York
Date of Sale June, 1996
Grantor Benjamin Duhl
Grantee 1414 Mgt. Associates L.P.
Block/Lot 1273/71
Liber/Page 2339/357
Description A 17-story and basement, Class "B" office
building, constructed in 1924 as a hotel and
converted to office use in the 1970s,
containing 110,266 square feet of above
grade rentable area which includes a retail
component.
Consideration $14,662,500 for Leased Fee Interest
Financing Cash with 50% financing
Sale Price $132.97 per square foot
Sales Analysis
Effective Gross Income $29.01 per square foot
Operating Expenses $16.10 per square foot
Net Operating Income $12.91 per square foot
Yield Rate 11.5% to 12.0%
Terminal O.A.R. 9.5% to 10.0%
"Going-In" O.A.R. 9.7%
Comments:
The property was acquired with a current occupancy of 94% by non-credit tenants
under leases expiring over the next 10 years. Market rents and expenses have
been assumed to increase at 3.0% per year.
Source: Grantor, KTR market research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
1414 Avenue of the Americas
Fashion Footwear Bldg
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
COMPARABLE BUILDING SALE
Improved Sale 7
Address Heron Tower
66-72 East 55th Street
South side, between Park and Madison Avenues
Fifth/Madison Avenue office sub-marketj
New York, New York
Date of Sale December, 1995
Grantor Heron J.V. Acquisition
Grantee East 55th Street L.P.
Block/Lot 1290/44
Liber/Page N.A.
Description A 25-story Class "A" office building,
constructed in 1985, containing 4143,700
square feet of rentable area
Consideration $16,676,500 for 50% of Leased Fee Interest
$33,353,000 for 100% interest as adjusted
Financing Cash
Sale Price $232.10 per square foot as adjusted
Comments:
The property was 96% occupied at the time of sale by boutique type tenants at
rents in the range of $40.00 per square foot. The grantee consolidated its
ownership by acquiring the 50% interest of its partner (grantor). Published
information indicated that the grantee had a purchase option on the interest of
its partner.
Source: City Register, KTR market research.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
[PHOTO OMITTED]
70 E 55th St
Heron Tower
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
QUALIFICATIONS OF THE APPRAISERS
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
BIOGRAPHICAL INFORMATION
WAYNE A. NYGARD, MAI
SENIOR VICE PRESIDENT
WAYNE A. NYGARD is a member of the Appraisal Institute, holding the MAI
designation. He serves on the Metropolitan New York Chapter #4 Admissions and
Education Committees and served nationally on the Institutionally Employed
Appraiser Committee.
Mr. Nygard received his Bachelors of Business Administration, Cum Laude from
Baruch College of the City of New York with emphasis on Public Administration
and Law. He has attended numerous real estate education classes and seminars
including those offered by The Appraisal Institute, the former Society of Real
Estate Appraisers and New York University.
Mr. Nygard is a manager of the Koeppel Tener Real Estate Services, Inc. New York
Appraisal Division. His responsibilities include client development, appraisal
management and maintaining product quality. Prior to joining the firm, Mr.
Nygard was Vice President and Chief Appraiser for The Bank of New York. As the
first chief appraiser appointed by the bank, he founded the appraisal procedures
and policy for that institution. He was previously employed at The Chase
Manhattan Bank, N.A. as a Team Leader responsible for all Manhattan appraisal
assignments. He has performed appraisals on a wide variety of property types
throughout the United States. Mr. Nygard also has experience with tax certiorari
appraisals and in real estate brokerage.
Mr. Nygard is an Assistant Adjunct Professor of Real Estate at New York
University. He is a member of the NYU Real Estate Appraisal Advisory Council and
the Real Estate Board of New York. He is currently a Certified General Appraiser
in New York State.
Koeppel Tener Real Estate Services, Inc., Valuation Division
<PAGE>
825 Eighth Avenue August 12, 1997
New York, New York Addenda
BIOGRAPHICAL INFORMATION
SHINBI MORIMOTO
ASSOCIATE
SHINBI MORIMOTO is an associate in the New York City Valuation Division of
Koeppel Tener Real Estate Services, Inc.
Ms. Morimoto majored in Economics with a minor in Sociology at Columbia
University, Barnard College in New York, New York. She has completed the Real
Estate Appraisal Principles (R1), Basic Valuation Procedures (R2), Introduction
to Income Property Valuation (G1), Principals of Income Property Appraisal (G2)
and Applied Income Property Valuation (G3) courses offered by the Real Estate
Institute at New York University.
Prior to joining the firm, Ms. Morimoto was employed by a New York real estate
investment company where she managed various commercial and residential
properties. Her experience in real estate is broad based and she has been a
licensed real estate broker in the State of New York since 1992.
<PAGE>
[LOGO] CB
COMMERCIAL
TORRANCE MARKET ANALYSIS
PRENTISS INDUSTRIAL PORTFOLIO
Torrance, California
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
CB COMMERCIAL [LOGO] CB
REAL ESTATE GROUP, INC. COMMERCIAL
APPRAISAL SERVICES Delivering Solutions Through
Local Knowledge Worldwide
FOUNDED 1906
(713) 340-6620
(713) 340-6649
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Torrance Market Analysis
Prentiss Industrial Portfolio
Torrance, California
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Industrial Portfolio located in the
Torrance, California area.
The subject consists of 18, institutional quality, industrial developments
having a combined total of 1,252,708 SF of net rentable area. The Torrance
market has an average occupancy of 93% with an average asking rental rate of
$6.13 PSF/YR. Overall this market area is stabilized and showing improving
rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
2500 WEST LOOP SOUTH, SUITE 100, HOUSTON, TEXAS 77027-4502
<PAGE>
================================================================================
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: Pacific Gateway Center, Torrance, CA
Property Description: Pacific Gateway Center is an
industrial complex composed of 18
buildings containing 1,252,708 net
rentable square feet. The properties
are located in Torrance, California,
approximately 14 miles south of
downtown Los Angeles.
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 18
Number of Stories: 1
Gross Building Area: 1,252,708 SF
Net Rentable Area: 1,252,708 SF
Avg. Year Built: N/A
Condition: Good
Effective Age: N/A
Market Financial Indicators
Current Occupancy: 93.0%
Stabilized Occupancy: 93.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $7.00 - $8.00 PSF
Tenant Improvements (New Leases): $5.00 Per SF
Tenant Improvements (Renewal Leases): $2.50 Per SF
Leasing Commissions (New Leases): 5.0%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS................................................... ii
TABLE OF CONTENTS.......................................................... iii
TRADE AREA ANALYSIS........................................................ 1
COMPETITIVE MARKET TREND ANALYSIS.......................................... 3
MARKETABILITY CONCLUSIONS.................................................. 7
ADDENDA
A Improved Comparable Sales
B Demographics
C Torto Wheaton Research Data
- --------------------------------------------------------------------------------
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
Once fueled by the enormous growth of aerospace and defense industries, the
South Bay was flattened by large layoffs and downsizings of epic proportion.
Although the economic upheaval of the early 90s created severe white collar job
loss, the South Bay is in a solid recovery mode. The 1996/1997 economic forecast
and industry outlook developed by Jack Kyser, Chief Economist, says, "Aerospace
will no longer be a foot on the brake of the Los Angeles area's economy."
International trade, the recommercialization of the aerospace/defense
industries, the automotive industry, and the Alameda Corridor are just a few of
the major dynamics that are fueling this region's recovery.
Location
The trade area is located in Torrance within the South Bay submarket. The South
Bay region is defined by the Los Angeles International Airport (LAX) to the
north; and south through El Segundo, the beach communities of Manhattan Beach,
Hermosa Beach and Redondo Beach, the Palos Verdes Peninsula to the ports of Long
Beach and Los Angeles. Large industrial parks are included inland in the cities
of Carson, Compton and Rancho Dominguez.
Demographics
Population growth and new household formations have been on an upward trend
within the overall subject trade area, while remaining stable in the local
submarket.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
- --------------------------------------------------------------------------------
Torrance, CA
- --------------------------------------------------------------------------------
Population
2001 Estimate 145,815
1996 Estimate 138,669
1990 Census 133,107
1996 - 2001 % Change 5.2%
Households
2001 Estimate 56,712
1996 Estimate 54,187
1990 Census 52,617
1996 - 2001 % Change 4.7%
2001 Median Household Income $ 64,363
1996 Median Household Income $ 55,328
1996 Average Household Income $ 66,385
1990 Average Home Value $355,989
1990 % College Graduates 31.2%
- --------------------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
================================================================================
Trends and Conclusions
The outlook is for relatively stable performance with moderate improvement over
the next several years. As a result, the demand for existing developments is
expected to be good. Generally, the trade area is expected to maintain a
relatively stable growth pattern in the foreseeable future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
<TABLE>
<CAPTION>
========================================================================================================
MARKET STATISTICS
- --------------------------------------------------------------------------------------------------------
Category Source Los Angeles South Bay Torrance
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Existing Supply (SF X 1,000) (1) 803,534 187,277 26,606
(3) 718,867 195,740 26,603
Under Construction (SF X 1,000) (1) 2,228 320 0
Construction - 2 YR Annual Forecast (SF X 1,000) (1) 4,500 750 82
Absorption - 3 YR Avg. (SF X 1,000) (1) 11,014 2,998 371
Absorption - 2 YR Annual Forecast (SF X 1,000) (1) 9,072 2,670 245
1996 Occupancy (1) 91.8% 91.9% 92.5%
2nd Qtr. 1997 Occupancy (3) 92.9% 94.5%
Occupancy - 2 YR Forecast (1) 93.0% 96.8% 93.8%
Average Rent PSF - 1996 (1) $ 5.17 $ 5.25 $ 6.13
Average Rent PSF - 1st Qtr. 1997 (2) $ 5.54
Average Rent PSF - 2 YR Forecast (1) $ 6.03 $ 6.13 $ 7.15
Annual Rent Inflation - 2 YR Forecast (1) 8.0% 8.0% 8.1%
- --------------------------------------------------------------------------------------------------------
Source Codes:
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
========================================================================================================
</TABLE>
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Torrance area and local submarket over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================
MARKET TRENDS
1992 - 1996
- -------------------------------------------------------------------------------------------------------------------
Los Angeles South Bay Torrance
------------------------------ ------------------------------ --------------------------
Date Rent PSF Occupancy Rent PSF Occupancy Rent PSF Occupancy
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1992 $5.08 88.2% N/A 87.1% N/A 86.6%
1993 $4.47 88.0% N/A 87.3% N/A 89.1%
1994 $4.65 90.1% N/A 89.3% N/A 91.7%
1995 $4.83 90.0% N/A 89.8% N/A 89.3%
1996 $5.17 91.8% $5.25 91.9% $6.13 92.0%
1997 Forecast $5.63 92.8% $6.13 96.8% $7.15 93.8%
===================================================================================================================
Source: Torto Wheaton Research
===================================================================================================================
</TABLE>
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
<TABLE>
<CAPTION>
===================================================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
Comp. No. Location Size (GBA) Base Rent Exp. Reimb. TI's Pct. Occ.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 2271-2341 W. 250th
Street, Torrance, CA 115,000 SF $0.69 - $0.75 5% Negotiable 96%
2 370 Amapola Avenue,
Torrance, CA 99,000 SF $0.68 - $0.85 5% Negotiable 75%
3 SWC Earl Street &
Spencer Street,
Torrance, CA 80,000 SF $0.79 7% Negotiable 74%
4 373-385 Van Ness
Avenue, Torrance, CA 327,000 SF $0.85 - $1.15 5% Negotiable 93%
5 3547-3555 Voyager Street,
Torrance, CA 65,000 SF $0.85 - $1.00 Modified Gross Negotiable 96%
- -------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
===================================================================================================================
</TABLE>
The asking rental rates of the comparables range from $8.16 to $13.80 per square
foot on a modified gross basis. Quoted occupancy rates range from 74% to 96%.
Rental rates appear to be increasing, and there is a considerable amount of new
and planned construction in market at this time. Please refer to the Addenda for
details on recent construction trends.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET EXPENSE RATES
The following expense data is reported for the local market area:
================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
- --------------------------------------------------------------------------------
COMP 1
---------------------------------------
Location: Torrance, CA
NRA (SF): 152,142
Expense Year: 1995 1996
Effective Gross Income PSF: $10.19 $9.99
Unit of Comparison PSF PSF
--------------- ---------------
Expenses
Real Estate Taxes $0.66 $0.78
Insurance $0.49 $0.48
General Operating* $0.74 $0.65
Allowance for Replacements $0.00 $0.00
Management Fees $0.25 $0.27
--------------- ---------------
Total Expenses $2.14 $2.18
* Includes CAM, maintenance and repairs, administrative, and other.
- --------------------------------------------------------------------------------
Source: Actual operating statements and NAIOP 1996
Compiled By: CB Commercial
================================================================================
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
CAPITAL EXPENSES
- --------------------------------------------------------------------------------
Capital Expense Category Range Reported
- --------------------------------------------------------------------------------
Renewal Probability 50% to 75%
Tenant Improvements (New Leases)* $4.00 PSF to $10.00 PSF
Tenant Improvements (Renewal Leases) $2.50 PSF to $4.50 PSF
Weighted Average Tenant Improvements $3.25 PSF to $5.88 PSF
Leasing Commissions (New Leases) 4.0% to 6.0%
Leasing Commissions (Renewal Leases) 2.0% to 3.0%
Weighted Average Leasing Commissions 3.0% to 3.8%
- --------------------------------------------------------------------------------
* Tenant improvement data applies to built out office space only.
Compiled By: CB Commercial
================================================================================
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
<TABLE>
<CAPTION>
=========================================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
Sale No. Location Date of Sale Size (GBA) Price PSF OCC NOI PSF OAR
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 17230-17258 S. Main
Street, Carson, CA Dec-96 108,043 $41.49 100% $0.00 0.00%
2 See Comments,
Compton, CA Jul-96 1,699,162 $38.78 100% $3.63 9.37%
3 2103 E. University
Drive, Compton, CA Jul-96 103,000 $56.12 0% $0.00 0.00%
4 3500 Challenger
Street, Torrance, CA May-96 54,000 $77.78 0% $0.00 0.00%
5 370-390 Amapola
Avenue, Torrance, CA Dec-95 95,146 $42.04 86% $5.50 13.08%
6 1050-1070
Dominguez St.,
Carson, CA Sep-95 54,000 $35.19 100% $4.14 11.77%
- ---------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
================================================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
- --------------------------------------------------------------------------------
Category Amount
- --------------------------------------------------------------------------------
Current Occupancy: 93.0%
Stabilized Occupancy: 93.0%
Estimated Absorption: Market is stabilized.
Expenses (Range of Comparable Data): $2.14 - $2.18 PSF
Market Expenses: $2.18/SF
Market Rental Rate: $7.00 - $8.00 PSF
Type of Lease: Industrial Gross
Tenant Impr. Range (New Leases)*: $4.00 - $10.00 PSF
Tenant Improvements (New Leases)*: $5.00/SF
Tenant Impr. Range (Renewal Leases)*: $2.50 - $4.50 PSF
Tenant Improvements (Renewal Leases)*: $2.50/SF
Leasing Commis. Range (New Leases): 4.0% - 6.0%
Leasing Commissions (New Leases): 5.0%
Leasing Commis. Range (Renewal Leases): 2.0% - 3.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
- --------------------------------------------------------------------------------
* Applied to built out office area only.
Compiled By: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY OF COMPARABLE INDUSTRIAL SALES
====================================================================================================================================
Sales Price
Sale Sale Year Building Site Size Percent Sales Per SF of
No. Name / Location Date Built Size (SF) Type (Acre) Office Price Bldg Area OAR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 17230-17258 S. MAIN STREET 12/96 1987 108,043 Business Park 4.69 12 $ 4,483,000 $41.49 N/A
17230-17258 S. Main Street
Carson, CA
2 Boston Properties Portfolio 7/96 1967 1,699,162 Distribution 78.81 7% $65,900,000 $38.78 9.37%
See Comments
Compton, CA
3 Bowne Industries 07/96 1991 103,000 Research/Develop 5.20 24.3% $ 5,780,000 $56.12 N/A
2103 E. University Drive
Compton, CA
4 Aurora 05/96 1995 54,000 Research/Develop 2.48 44.4% $ 4,200,000 $77.78 N/A
3500 Challenger Street
Torrance, CA
5 Torrance Tech Park 12/95 1986 95,146 Business Park 4.44 70 $ 4,000,000 $42.04 13.08%
370-390 Amapola Avenue
Torrance, CA
6 1050-1070 Dominguez St. 09/95 1975 54,000 Business Park N/A N/A $ 1,900,000 $35.19 11.77%
Carson, CA
- ------------------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Location Data
Property Name: 17230-17258 S. MAIN STREET
Location: 17230-17258 S. Main Street
City: Carson
County: Los Angeles
State/Zip: California 90746
Assessor's Parcel No(s): 6126-009-021
Atlas Reference: 734-C7
Physical Data
Type: Business Park
Land Area: 4.690 Acres
Gross Building Area: 108,043 SF
Number of Buildings: N/A
Percent Office Area: 12
Percent Air Conditioned: 12
Clear Ceiling Height: 24
Year Built 1987
Land/Building Ratio: 1.89:1
Sprinklered: Yes
Rail Access: No
Condition: Average
Exterior Walls: Concrete Tilt-Up
Column Spacing: N/A
Loading: DH(10) RAMP(6)
Parking: 1:1000
Sale Data
Transaction Type: Escrow
Date of Transaction: 12/96
Marketing Time: N/A
Grantor: TRAMMELL CROW
Grantee: N/A
Document No.: N/A
Sale Price: $4,483,000
Financing: Not Available
Cash Equivalent Price: $0
Required Capital Cost: $4,483,000
Adjusted Sales Price: $4,483,000
Verification: LISTING BROKER
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 100
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria: Other
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $41.49
Comments
This sale represents the current escrow of a multitenant industrial park
located at 17230-17258 South Main Street in the city of Carson. This
building is a portion of the Centre-Pointe development constructed by
Trammell Crow. Access to this facility is good as Main Street is a major
arterial that provides direct access to the Artesia Freeway less than one-
block to the south. Improvements consist of a single, concrete tilt-up,
industrial building that was constructed in 1987 and contains
approximately 108,043 square feet of rentable area. The office buildout
totals approximately 12 percent Building amenities include a 24 foot
clear height, a calculated sprinkler system, six ramp loading doors, ten
dock high loading doors, and 1.0 parking spaces per 1,000 square feet of
building area. The minimum unit size is 5,727 square feet. The property is
currently in escrow for $4,483,785, or $41.50 per square foot. The
property was reported to be on the market for three months prior to the
agreed upon sale. Net operating income was not available. The property is
scheduled to close escrow in December 1996.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Location Data
Property Name: Boston Properties Portfolio
Location: See Comments
City: Compton
County: Los Angeles
State/Zip: California 90220
Assessor's Parcel No(s): N/A
Atlas Reference: 734-735, F-J7
Physical Data
Type: Distribution
Land Area: 78.810 Acres
Gross Building Area: 1,699,162 SF
Number of Buildings: 11
Percent Office Area: 7%
Percent Air Conditioned: 7%
Clear Ceiling Height: 20'-24'
Year Built: 1967
Land/Building Ratio: 2.02:1
Sprinklered: Yes
Rail Access: Yes
Condition: Good
Exterior Walls: Tilt-Up Pre-Cast
Column Spacing: N/A
Loading: Dock High & Ground level
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 7/96
Marketing Time: 4 months
Grantor: Boston Properties Portfolio
Grantee: South Bay Industrials Company L.L.C.
Document No.: 1135695
Sale Price: $65,900,000
Financing: Cash to Seller
Cash Equivalent Price: $65,900,000
Required Capital Cost: $0
Adjusted Sales Price: $65,900,000
Verification: Confidential
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $7,814,603 $4.60
Vacancy and Credit Loss: $ 117,219 $0.07
Effective Gross Income: $7,697,384 $4.53
Expenses: $1,524,220 $0.90
Net Operating Income: $6,173,164 $3.63
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 9.37%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): 8.56
Operating Expense Ratio (OER): 19.80%
Price Per Square Foot: $38.78
Comments
This represents the July 1996 purchase of eleven warehouse/distribution
buildings totaling 1,699,162 square feet located in Compton. The
improvements were constructed between 1967 and 1984 and were in good
condition. The buildings have clear heights ranging from 20 to 24 feet. On
an aggregate basis, the project has a seven percent office build-out.
Loading is predominantly provided by dock-high doors. At the time of sale,
this project was leased to 12 tenants with sizes ranging between 21,344 and
380,582 square feet. This property was purchased for $65,900,000. This
equates to $38.18 per square foot. The original purchase price was
$66,000,000; however, the sales price was adjusted $100,000 for deferred
maintenance. Based on pro-forma income, the indicated overall
capitalization rate is 9.37 percent. The individual buildings are listed on
the next page.
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Location Data
Property Name: Bowne Industries
Location: 2103 E. University Drive
City: Compton
County: Los Angeles
State/Zip: California 90220
Assessor's Parcel No(s): 7318-009-028,071
Atlas Reference: 764-J2
Physical Data
Type: Research/Develop
Land Area: 5.200 Acres
Gross Building Area: 103,000 SF
Number of Buildings: 1
Percent Office Area: 24.3%
Percent Air Conditioned: 24.3%
Clear Ceiling Height: 22'
Year Built: 1991
Land/Building Ratio: 2.20:1
Sprinklered: Yes
Rail Access: No
Condition: Good
Exterior Walls: Concrete Tilt-Up
Column Spacing: N/A
Loading: GL(1)
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 07/96
Marketing Time: N/A
Grantor: Heidelberg USA, Inc.
Grantee: Bowne of Los Angeles
Document No.: 1230915
Sale Price: $5,780,000
Financing: Cash to Seller
Cash Equivalent Price: $5,780,000
Required Capital Cost: $0
Adjusted Sales Price: $5,780,000
Verification: Buyer
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $56.12
Comments
This is the July 1996 sale of a 103,000 square foot research and
development building, located in the city of Compton. The buyer is an
owner/user who purchased the building for $5,780,000 or $56.12 per square
foot. The building has a 24.3-percent office buildout, 22-foot clear
height, and one ground level door. The building also included 16,000 square
feet of office mezzanine area.
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Location Data
Property Name: Aurora
Location: 3500 Challenger Street
City: Torrance
County: Los Angeles
State/Zip: California 90503
Assessor's Parcel No(s): 7352-019-026,027
Atlas Reference: 763-D2
Physical Data
Type: Research/Develop
Land Area: 2.480 Acres
Gross Building Area: 54,000 SF
Number of Buildings: 1
Percent Office Area: 44.4%
Percent Air Conditioned: 44.4%
Clear Ceiling Height:
Year Built: 1995
Land/Building Ratio: 2.00:1
Sprinklered: Yes
Rail Access: No
Condition: Good
Exterior Walls: Concrete Tilt-Up
Column Spacing: N/A
Loading: DH(2) GL(1)
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 05/96
Marketing Time: N/A
Grantor: Halo Pacific Limited Partnership
Grantee: Aurora Corporation of America
Document No.: 0681837
Sale Price: $4,200,000
Financing: Cash to Seller
Cash Equivalent Price: $4,200,000
Required Capital Cost: $0
Adjusted Sales Price: $4,200,000
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $77.78
Comments
This is the May 1996 sale of a 54,000 square foot research and development
building, located in the city of Torrance. The building had a 44-percent
office buildout, two dock high door, one ground level doors and 12,000
square feet of finished mezzanine. The buyer purchased the building for
$4,200,000 or $77.78 per square foot. The seller received all cash.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Location Data
Property Name: Torrance Tech Park
Location: 370-390 Amapola Avenue
City: Torrance
County: Los Angeles
State/Zip: California
Assessor's Parcel No(s): 7352-018-048
Atlas Reference: 763, G/4
Physical Data
Type: Business Park
Land Area: 4.440 Acres
Gross Building Area: 95,146 SF
Number of Buildings: 2
Percent Office Area: 70
Percent Air Conditioned: 70
Clear Ceiling Height: 24'
Year Built: 1986
Land/Building Ratio: 2.03:1
Sprinklered: N/A
Rail Access: No
Condition: Good
Exterior Walls: Tilt-Up Pre-Cast
Column Spacing: N/A
Loading: Grade level (21)
Parking: 281, 3.0/1000
Sale Data
Transaction Type: Sale
Date of Transaction: 12/95
Marketing Time: 3 months
Grantor: Sanwa Bank California
Grantee: Torrance Amapola Business Pk
Prtnrs (et al)
Document No.: 1995341
Sale Price: $4,000,000
Financing: Cash to Seller
Cash Equivalent Price: $4,000,000
Required Capital Cost $0
Adjusted Sales Price: $4,000,000
Verification: Selling Broker
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 86
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $915,864 $9.63
Vacancy and Credit Loss: $128,221 $1.35
Effective Gross Income: $787,643 $8.28
Expenses: $264,347 $2.78
Net Operating Income: $523,296 $5.50
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 13.08%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): 5.08
Operating Expense Ratio (OER): 33.56%
Price Per Square Foot: $42.04
Comments
This comparable represents the December 1995 sale of a 95,146-square-foot
multitenant industrial building. The property is located at the northeast
corner of Amapola Street and 205th Street. This location is in the northern
portion of the city of Torrance. The property is approximately one and one-
quarter miles south of the San Diego Freeway (Interstate 405) and
approximately two miles west of the Harbor Freeway (Interstate 110). Direct
access to both freeways is easily accessible (although distant). This
building is located in a small industrial park. Surrounding land uses
consist of newer warehouse/distribution buildings that are oriented to
smaller tenants. In the immediate area, there is evidence of new
construction. This building was constructed in 1986. It has 56,602 square
feet of ground floor office space, 10,000 square feet of office mezzanine
space (included in the building area), a 24-foot clear height, and ground-
level loading. This property was sold by a financial institution who
acquired it through foreclosure. It marketed for less than three months
before being purchased by an investor for $4,000,000, or $42.04 per square
foot. At the time of sale, the building was 86 percent leased. Actual net
operating income was reported to be $421,464, or $5.48 per square foot.
This indicates an overall capitalization rate equal to 13.0 percent based
on pro forma income. This sale involved a $700,000 (18 percent) cash
downpayment and a $3,300,000 (82 percent) first trust deed held by Fremont
Investment and Loan. Terms of this financing were unavailable.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 6
================================================================================
Location Data
Property Name:
Location: 1050-1070 Dominguez St.
City: Carson
County: Los Angeles
State/Zip: California
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Business Park
Land Area: N/A
Gross Building Area: 54,000 SF
Number of Buildings: 2
Percent Office Area: N/A
Percent Air Conditioned: N/A
Clear Ceiling Height:
Year Built: 1975
Land/Building Ratio: N/A
Sprinklered: N/A
Rail Access: N/A
Condition:
Exterior Walls:
Column Spacing: N/A
Loading: N/A
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 09/95
Marketing Time: N/A
Grantor: N/A
Grantee: N/A
Document No.: N/A
Sale Price: $1,900,000
Financing:
Cash Equivalent Price: $1,900,000
Required Capital Cost: $0
Adjusted Sales Price: $1,900,000
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 100%
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $223,560 $4.14
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CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 6
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 11.77%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $35.19
Comments
This Improved Sale represents the September 1995 purchase of a two-building
business park totaling 54,000 square feet. The property is located in the
city of Carson, in the South Bay area of Los Angeles County. This property
is one-half mile northeast of the San Diego Freeway (Interstate 405). It is
in an industrial area just east of the South Bay Pavilion at Carson, a
small regional mall. The buildings were constructed in approximately 1975.
The average unit size is roughly 2,000 square feet. At the time of sale,
the project was 100 percent leased. It was purchased for $1,900,000. This
equates to $35.19 per square foot. Based on income in-place, and after
deducting a 10.0 percent vacancy and collection loss, an overall
capitalization rate of 11.8 percent is indicated. The buyer made a 25
percent downpayment, with the remaining balance carried by a third party
financial institution.
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CB COMMERCIAL
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description USA Totals Area 1
- --------------------------------------------------------------------------------
1990 Population 248,709,873 133,107
1996 Population 265,411,137 138,669
% White 79.0 66.8
% Black 12.2 1.9
% American Indian 0.9 0.4
% Asian 3.6 28.1
% Other 4.3 2.9
% Hispanic 10.3 11.3
1996 Population by Age:
% 0-5 8.6 6.7
% 6-13 11.3 9.2
% 14-17 5.4 4.0
% 18-20 4.7 3.5
% 21-24 5.8 4.5
% 25-34 14.5 15.2
% 35-44 15.7 18.2
% 45-54 12.3 14.3
% 55-64 8.5 10.4
% 65-74 7.3 8.4
% 75-84 4.5 4.4
% 85 + 1.4 1.3
Median Age Total Population 34.9 38.6
1990 Households 91,947,410 52,615
1996 Households 98,045,317 54,187
1996 Average Household Size 2.64 2.54
1996 Household Income:
% $0-9,999 12.3 5.8
% $10,000-$14,999 7.8 4.1
% $15,000-$24,999 14.7 8.0
% $25,000-$34,999 14.1 10.4
% $35,000 -$49,999 18.2 16.7
% $50,000-$74,999 17.7 21.8
% $75,000 - $ 99,999 7.6 14.9
% $100,000 - $149,999 5.3 13.7
% $150,000+ 2.4 4.7
1996 Median Household Income ($) 35,822 55,328
1996 Median Family Income ($) 42,040 66,342
1990 Median Home Value ($) 79,098 339,972
1990 Median Contract Rent ($) 374 740
1990 % White Collar Workers 58.1 74.3
1990 % Blue Collar Workers 26.2 17.0
1990 % HS Graduate/Some College 54.9 56.4
1990 % Bachelor/Graduate Degree 20.3 31.2
Area defined by Place
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 79
1996 Employment: 94,303
Population:
2001 Projection 145,815
1996 Estimate 138,669
1990 Census 133,107
1990 - 1996 % Change (Growth) 4.2%
1990 Group Quarters Population 1,083
1996 % Population by Race:
White 66.8%
Black 1.9%
American Indian, Eskimo & Aleut 0.4%
Asian or Pacific Islander 28.1%
Other 2.9%
Hispanic 11.3%
1990 % Population by Race:
White 73.0%
Black 1.5%
American Indian, Eskimo & Aleut 0.4%
Asian or Pacific Islander 21.9%
Other 3.3%
Hispanic 10.1%
1996 % Population by Sex:
Male 49.0%
Female 51.0%
1990 % Population by Sex:
Male 49.1%
Female 50.9%
2001 Pop per Square Mile (Pop Density) 7,105.6
1996 Pop per Square Mile (Pop Density) 6,757.3
1990 Pop per Square Mile (Pop Density) 6,486.3
Area (Square Miles) 20.5
Area (Square Kilometers) 53.2
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
Households:
2001 Projection 56,712
1996 Estimate 54,187
1990 Census 52,615
1990-1996% Change (Growth) 3.0%
2001 Average Household Size 2.55
1996 Average Household Size 2.54
1990 Average Household Size 2.51
2001 Per Capita Income $30,371
1996 Per Capita Income $26,145
1990 Per Capita Income $22,193
2001 Median Family Income $77,176
1996 Median Family Income $66,342
1990 Median Family Income $56,601
2001 Median Household Income $64,363
1996 Median Household Income $55,328
1990 Median Household Income $47,204
2001 Average Household Income $77,509
1996 Average Household Income $66,385
1990 Average Household Income $55,459
1996 % Household Income:
$0-$9,999 5.8%
$10,000-$ 14,999 4.1%
$15,000-$ 24,999 8.0%
$25,000-$ 34,999 10.4%
$35,000-$ 49,999 16.7%
$50,000-$ 74,999 21.8%
$75,000-$ 99,999 14.9%
$100,000-$ 149,999 13.7%
$150,000+ 4.7%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 % Household Income:
$0-$9,999 7.1%
$10,000-$14,999 4.9%
$15,000-$ 24,999 9.8%
$25,000-$34,999 13.1%
$35,000-$49,999 17.8%
$50,000-$74,999 23.9%
$75,000-$99,999 12.8%
$100,000-$149,999 7.9%
$150,000+ 2.8%
1996 % Population by Age:
0-5 6.7%
6-13 9.2%
14-17 4.0%
18-20 3.5%
21-24 4.5%
25-34 15.2%
35-44 18.2%
45-54 14.3%
55-64 10.4%
65-74 8.4%
75-84 4.4%
85+ 1.3%
Median Age Total Population 38.6
Median Age Adult Population 44.2
1990 % Population by Age:
0-5 7.2%
6-13 8.7%
14-17 4.5%
18-20 3.7%
21-24 5.5%
25-34 19.3%
35-44 16.6%
45-54 12.1%
55-64 10.4%
65-74 7.5%
75-84 3.3%
85+ 1.2%
Median Age Total Population 35.6
Median Age Adult Population 41.6
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0-5 6.4%
6-13 8.9%
14-17 3.8%
18-20 3.3%
21-24 4.3%
25-34 14.7%
35-44 17.6%
45-54 14.3%
55-64 10.5%
65-74 8.9%
75-84 5.3%
85+ 2.0%
Female Median Age Total Population 39.7
Female Median Age Adult Population 45.4
1990 % Female Population by Age:
0-5 6.9%
6-13 8.4%
14-17 4.3%
18-20 3.6%
21-24 5.3%
25-34 18.4%
35-44 16.6%
45-54 12.0%
55-64 10.4%
65-74 8.1%
75-84 4.2%
85+ 1.7%
Female Median Age Total Population 36.8
Female Median Age Adult Population 42.7
1990 % Hispanic Population by Type:
Not of Hispanic Origin 89.9%
Mexican 6.1%
Puerto Rican 0.4%
Cuban 0.5%
Other Hispanic 3.1%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School (Age 3 & Over):
Preprimary School 7.5%
Elementary and High School 55.9%
College 36.6%
Total School Enrollment 33,102
1990 % Educational Attainment (Age 25 & Over):
Less than Grade 9 3.8%
Grade 9-12 (No Diploma) 8.5%
High School Graduate or Equivalency 23.7%
Some College (No Degree) 23.8%
Associate Degree 8.9%
Bachelor Degree 21.1%
Graduate or Professional Degree 10.1%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.3%
Civilian:
Employed 66.8%
Unemployed 2.8%
Not In Labor Force 30.2%
Female Labor Force:
Armed Forces 0.1%
Civilian:
Employed 57.9%
Unemployed 2.5%
Not In Labor Force 39.6%
1990 % Working Mothers:
Child less than 6 Only 17.3%
Child 6-17 Only 39.1%
Child less than 6 & 6-17 9.6%
Nonworking Mothers 33.9%
Total Mothers 14,876
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.8%
Mining 0.1%
Construction 4.8%
Manufacturing:
Nondurable Goods 4.1%
Durable Goods 21.4%
Transportation 5.6%
Communications & Public Utilities 2.2%
Wholesale Trade 5.5%
Retail Trade 15.5%
Finance/Insurance/Real Estate 7.6%
Services:
Business & Repair 5.8%
Personal 3.0%
Entertainment & Recreation 1.7%
Health 6.2%
Educational 6.4%
Other Professional & Related 6.3%
Public Administration 3.0%
Total 72,981
1990 % Occupation:
Executive & Managerial 19.4%
Professional Specialty 18.2%
Technical Support 4.6%
Sales 13.3%
Administrative Support 18.7%
Service: Private Household 0.3%
Service: Protective 1.6%
Service: Other 6.2%
Farming, Forestry & Fishing 0.7%
Precision Production, Craft & Repair 10.2%
Machine Operator, Assemblers & 2.9%
Inspectors
Transportation & Material Moving 2.0%
Laborers 1.7%
White Collar Total 74.3%
Blue Collar Total 17.0%
Total Employed 72,981
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 53,852
Never Married 32.3%
Married 55.8%
Separated 1.7%
Widowed 2.1%
Divorced 8.1%
Total Female: 56,708
Never Married 23.3%
Married 52.7%
Separated 2.0%
Widowed 10.6%
Divorced 11.4%
1990 Households by Type:
One Person Households 13,286
Two or more Person Households:
Family Households:
Married Couple 28,455
Male Householder 2,004
Female Householder 4,881
Nonfamily Households 3,989
1990 Family Households With Children
Married Couple Family 12,442
Male Householder 783
Female Householder 2,473
1990 Population by Household Type:
Family Households 109,705
Nonfamily Households 22,319
1990 Households With:
Children Under 18 15,862
Persons Over 65 11,322
Householder Over 65 9,722
1990 Average Family Size 3.04
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 Median Home Value $339,972
1990 Average Home Value $355,989
1990 Median Contract Rent $740
1990 Average Contract Rent $785
1990 Persons In Unit:
1 Person Units 13,286
2 Person Units 18,076
3 Person Units 9,119
4+ Person Units 20,715
1990 Housing Unit Counts:
Total Units 54,927
% Occupied 95.8%
% Vacant 4.2%
% Year Round 4.0%
% Seasonal 0.2%
Occupied Units 52,615
% Owner Occupied 56.3%
% Renter Occupied 43.7%
Vacant Units 2,312
% Year Round of Vacant Units 95.6%
% Seasonal of Vacant Units 4.4%
1990 Total Housing Units in Structure 54,927
1, Detached 53.7%
1, Attached 5.7%
2, 0.9%
3-9 9.5%
10-49 15.8%
50+ 11.5%
Mobile Home or Trailer 2.0%
Other 0.9%
1990 Owner Occupied Housing Units by 29,616
Year Built
Built 1985 to March, 1990 7.2%
Built 1980 to 1984 3.2%
Built 1970 to 1979 10.4%
Built 1960 to 1969 20.6%
Built 1950 to 1959 47.7%
Built 1949 or Earlier 10.8%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Torrance, CA 8/7/97
- --------------------------------------------------------------------------------
Description Area 1
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 82.4%
Carpooled 10.5%
Public Transportation 1.5%
Other Means 3.4%
Worked at Home 2.3%
1990 % Travel Time to Work:
0-14 Minutes 27.8%
15-29 Minutes 37.7%
30-59 Minutes 28.3%
60-89 Minutes 5.2%
90+ Minutes 1.0%
1990 Households by Number of Vehicles:
1 Vehicle 16,575
2 Vehicles 22,185
3 Vehicles 8,079
4 Vehicles 2,388
5 or More Vehicles 869
Area defined by Place
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
================================================================================
ADDENDUM C TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum C
TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
LOS ANGELES
- --------------------------------------------------------------------------------
Overview The population of the Los Angeles metropolitan
statistical area was 9.17 million making it the largest
in the country and the largest market that we follow as
of the end of first quarter 1996.
The Los Angeles, CA MSA consists of Los Angeles County.
The central cities are Los Angeles, Long Beach, Pasadena
and Lancaster.
The median per capita personal income in 1995 for the
MSA was $23,028 which is 1% below the national level.
The cost of doing business is 14% higher than the
national average.
Industries concentrated in Los Angeles include motion
picture production, personnel supply services and
business services. By comparing the percentage of total
employment each industry commands to the national
percentage we can determine some of the highly
concentrated industries.
The top major employers of the area include Hughes
Aircraft, McDonnell Douglas Corporation, Northrop
Grumman, Kaiser Permanente, and Bank of America. Other
employers include Pacific Bell, Walt Disney and TRW
Space and & Electronics Group.
The following table gives a basic overview of the Los
Angeles Industrial Market statistics, by building type.
Manufacturing facilities comprise the largest part
(48.0%) of the market, with warehouses next at 42.2%.
Availability ranges from 6.8% in manufacturing space to
13.8% in R & D properties. Los Angeles's total
industrial availability ranks 24th in the nation, while
it ranks 18th in rent level.
--------------------------------------------------------
Total
Industrial Warehouse R & D Manufacturing Other
- --------------------------------------------------------------------------------
Base (SFxl000) 803,534 339,036 28,057 385,852 50,589
Availability 8.2% 10.2% 13.8% 6.8% 2.5%
Current TW Rent Index $5.17 $5.17 $7.33 n/a n/a
Availability Rank* 24 27 41 31 17
Rent Rank* 18 18 22 n/a n/a
--------------------------------------------------------
* Rank out of 53 MSAs
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
VI. 451
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
THE ECONOMY Of the markets we follow, Los Angeles ranks 2nd in terms
of number of jobs, employing an estimated 3.9 million
[GRAPHIC OMITTED] total workers. Over the last 10 years employment has on
average remained unchanged, while in the last year it
grew by 2.2%. The average figures for our 53 MSAs are
1.5% and 2.0%, respectively.
While all sectors of an economy are important, it is the
manufacturing and distribution sectors that are most
relevant to the industrial market. Because these sectors
utilize space very differently, we do not combine them
into one 'industrial employment' category, but treat
them separately in our analysis.
Table 1 below presents the current employment levels and
location quotients for the major industry categories as
well as historic growth rates over the last 10 years,
last four quarters, and forecasted rates for the next 10
years.
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Average Annual Growth Rates: Los Angeles & 52 MSA
Employment Location Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Los Angeles 52 MSAs Los Angeles 52 MSAs Los Angeles 52 MSAs
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 223.80 0.83 -1.6 0.6 -0.2 1.1 -0.2 1.0
Government (Civilian) 530.08 0.94 0.8 1.2 -0.6 0.2 0.1 0.6
Manufacturing 634.13 1.26 -3.2 -1.1 0.2 0.4 -0.4 -0.1
Retail Trade 594.18 0.89 -0.3 1.4 1.8 2.3 1.5 1.8
Services 1260.19 1.04 2.2 3.7 4.5 3.4 2.5 2.8
Transportation & Public Utilities 205.90 0.95 0.2 1.6 0.4 1.3 0.4 1.2
Wholesale Trade 274.93 1.15 -0.5 1.0 3.9 2.3 0.6 1.3
--------------------------------------------------------------------------------------------------
Total Employment 3852.22 0.0 1.5 2.2 2.0 1.1 1.6
--------------------------------------------------------------------------------------------------
Distribution Employment 327.80 1.16 -0.2 1.4 3.7 2.4 0.7 1.4
--------------------------------------------------------------------------------------------------
Source: Regional Financial Associates, CBC/Torto Wheaton Research
Data as of 1st Quarter, 1995
</TABLE>
- -------------------------------------
Economic Performance
Rank out of 52]
- -------------------------------------
Total Employment:
current level 2
- -------------------------------------
Total Employment:
% growth over last 10 years 49
- -------------------------------------
Total Employment:
% growth over last year 24
- -------------------------------------
Total Employment:
% growth next 10 years 46
- -------------------------------------
Manufacturing employment in Los Angeles currently stands
at 634,130 workers. Over the last 10 years it has
declined 3.2% annually, while in the last year it has
grown 0.2%. Distribution employment is currently at a
level of 327,800 workers. It has averaged an annual
decrease of 0.2% over the last 10 years, with a increase
of 3.7% in the last year.
Although historic employment information provides an
important context in which to understand an economy, the
direction and magnitude of future employment growth is
of vital importance. The forecast from Regional
Financial Associates for total employment in Los Angeles
calls for an annual growth of 1.1% over the next 10
years. Note especially the contrast of the future rate
with the 0.0% average growth rate for the last 10 years.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
MARKET TRENDS With changes in distribution systems in the last 15
years, there has been much interest in the increasing
consolidation of distribution into large warehouses
('big boxes') in central locations. With this
consolidation there will be 'winning' markets providing
warehousing to 'losing' markets. By following trends in
localization and specialization, the effects of the new
distribution systems can be more fully understood.
Warehouse Localization occurs when distribution employment grows
more quickly in the MSA than in the nation.
Specialization is a measure of the percentage of total
employment devoted to distribution. Areas with high
specialization in distribution and those with increasing
localization in distribution are likely providing
warehousing for a larger region.
The following graph shows the level of specialization in
Los Angeles and the Nation. Because the slope of Los
Angeles's graph is not falling as fast as that of the
Nation, we see that warehousing is becoming localized in
Los Angeles.
Distribution
Employment [GRAPHIC OMITTED]
Specialization
Manufacturing Much discussion has been generated by the decline of
manufacturing in the United States. The question arises
as to how the manufacturing sector of real estate can
survive while manufacturing employment has been
shrinking so steadily. The answer lies in productivity.
While there are fewer workers manufacturing goods, each
worker is producing more each year. It is the goods
produced that require space for manufacturing and
storage.
The following graph shows a times series of the level of
manufacturing employment, along with our productivity
index for Los Angeles: both are indexed to 100 in 1980.
The Productivity Index is a measure of output per
manufacturing worker.
Relative
Productivity vs. [GRAPHIC OMITTED]
Mfg Employment
1980=100
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
THE Our Outlook for the Los Angeles MSA is presented here on
INDUSTRIAL an annual frequency, and in the next table on a
OUTLOOK semiannual frequency.
Table 2: Annual History and Forecast
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Employment Net Avail. TW Rent Index
Productivity Mfg Distribution Stock Completions Absorption Rate Level Inflation
Index (x1000) (x1000) (SFx1000) (SFx1000) (SFx1000) (%) ($) (%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1977 42.2 824.9 278.6 579,275 17,765
1978 40.7 889.5 300.9 604,132 24,857 1.95
1979 40.9 925.2 312.1 634,089 29,957 3.4 2.54 30.3
1980 40.5 898.6 308.8 655,567 21,478 17,470 3.9 3.13 23.2
1981 42.0 921.6 309.6 668,561 12,994 16,499 3.3 3.26 4.2
1982 45.9 855.4 299.4 679,122 10,561 -654 4.9 3.43 5.2
1983 46.5 846.8 304.2 686,357 7,235 7,567 4.8 3.62 5.5
1984 48.8 859.0 323.3 695,135 8,778 9,052 4.7 3.84 6.1
1985 49.5 867.7 330.4 709,567 14,432 5,238 5.9 4.23 10.2
1986 48.9 879.6 335.6 727,358 17,791 20,378 5.4 4.45 5.2
1987 54.5 887.4 341.3 747,530 20,172 15,345 5.9 4.89 9.9
1988 56.5 871.1 355.1 765,391 17,861 11,450 6.6 5.13 4.9
1989 55.4 857.9 361.9 780,328 14,937 15,511 6.4 5.32 3.7
1990 55.3 829.9 349.9 791,168 10,840 -12,007 9.2 5.60 5.3
1991 54.3 767.0 330.0 796,351 5,183 -8,832 10.9 5.34 -4.6
1992 53.2 709.4 309.8 799,327 2,976 -4,542 11.8 5.08 -4.9
1993 54.3 652.9 297.6 800,352 1,025 -697 12.0 4.47 -12.0
1994 55.6 643.5 304.4 801,095 743 17,477 9.9 4.65 4.0
1995 55.6 633.0 316.2 801,808 713 7,859 9.0 4.83 3.9
1996 56.6 634.1 327.8 803,534 1,726 7,999 8.2 5.17 7.0
Forecast 1997 57.7 638.7 331.3 806,573 3,039 11,127 7.2 5.63 8.9
1998 58.2 632.9 333.7 812,532 5,960 7,017 7.0 6.03 7.1
1999 58.0 626.7 335.7 820,056 7,523 1,723 7.6 6.34 5.1
2000 57.9 625.0 337.7 827,749 7,694 1,018 8.4 6.57 3.6
2001 58.2 623.6 339.5 835,425 7,676 2,046 9.0 6.76 2.9
2002 58.1 620.4 341.2 842,993 7,569 1,766 9.6 6.91 2.2
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Historic and
Forecasted [GRAPHIC OMITTED]
Rent
Inflation
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 3: Semiannual History and Forecast
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Mfg Distribution Net
Employment Employment Stock Completions Absorption Availability TW Rent Index
(x1000) (x1000) (SFx1000) (SFx1000) (SFx1000) Rate (%) Nominal Real*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1991.1 793.8 335.1 794,497 3,329 -5,717 10.3 5.47 6.39
1991.2 767.0 330.0 796,351 1,854 -3,115 10.9 5.34 6.14
1992.1 732.5 317.0 798,337 1,986 -6,214 11.9 5.21 5.91
1992.2 709.4 309.8 799,327 990 1,672 11.8 5.08 5.67
1993.1 681.7 300.9 799,993 666 -1,813 12.1 4.77 5.25
1993.2 652.9 297.6 800,352 359 1,116 12.0 4.47 4.86
1994.1 640.8 299.1 800,757 405 5,161 11.4 4.56 4.90
1994.2 643.5 304.4 801,095 338 12,316 9.9 4.65 4.93
1995.1 638.5 310.3 801,381 286 5,066 9.3 4.74 4.94
1995.2 633.0 316.2 801,808 427 2,793 9.0 4.83 4.99
1996.1 636.2 323.9 802,449 641 2,188 8.8 4.99 5.06
1996.2 634.1 327.8 803,534 1,085 5,811 8.2 5.17 5.17
Forecast 1997.1 637.5 329.5 804,645 1,111 5,705 7.6 5.40 5.31
1997.2 638.7 331.3 806,573 1,928 5,422 7.2 5.63 5.45
1998.1 636.8 332.7 809,210 2,637 4,349 6.9 5.84 5.56
1998.2 632.9 333.7 812,532 3,323 2,668 7.0 6.03 5.65
1999.1 629.5 334.5 816,231 3,698 1,162 7.3 6.20 5.71
1999.2 626.7 335.7 820,056 3,825 561 7.6 6.34 5.75
2000.1 624.8 336.8 823,902 3,847 479 8.0 6.46 5.76
2000.2 625.0 337.7 827,749 3,847 539 8.4 6.57 5.76
2001.1 624.7 338.6 831,580 3,831 945 8.7 6.67 5.76
2001.2 623.6 339.5 835,425 3,845 1,101 9.0 6.76 5.74
2002.1 621.9 340.4 839,262 3,838 1,009 9.3 6.84 5.71
2002.2 620.4 341.2 842,993 3,731 757 9.6 6.91 5.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Real rents shown in 1996 dollars.
- -------------------------------------
Economic Performance
[ILLEGIBLE]
- -------------------------------------
Distribution Employment:
Avg. Forecast Growth Rate 49
- -------------------------------------
Manufacturing Employment:
Avg. Forecast Growth Rate 39
- -------------------------------------
Availability: Current 24
- -------------------------------------
Availability: End-of-Forecast 40
- -------------------------------------
Los Angeles is the 2nd largest industrial market we
follow in terms of size, and has grown 7.2 million
square feet since 1991. Net absorption has averaged 2.8
million square feet per six-month period for the last
five years, and is forecasted to average 2.1 million
square feet per six-month period over the forecast
horizon. Real rents, i.e., rents adjusted for inflation
as of the second half of 1996, average $5.17 currently;
they are expected to rise to $5.68 by the end of our
forecast period.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Relative
Distribution Employment [GRAPHIC OMITTED]
Performance
1986=100
Relative
Net Absorption [GRAPHIC OMITTED]
Performance
(Demand/Occupied Stock)
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Relative
Completions [GRAPHIC OMITTED]
Performance
Availability Rates
vs [GRAPHIC OMITTED]
Real Rents
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
THE Tables 4 through 7 present our forecast for the
SUBMARKET submarkets of Los Angeles over the next 24 months. We
OUTLOOK employ a 'shared-down' approach in our submarket
forecasts, based on both current and historical market
factors. From these market factors we determine the
probability that tenants will lease space or investors
will build new space, within each submarket. The
probabilities are then applied to our overall metro
forecast to derive the share of net absorption or
completions.
Table 4: Submarket Forecast of Demand
[NOTE: THE LAST TWO COLUMNS OF THE NEXT 6 TABLES WERE SET NEW]
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------- ---------------------
Current Long-Term Avg.* 3-Year Avg. Estimated Avg.
Occupied Percent Annual Net Percent Annual Net Percent Annual Net Percent
Stock of Absorption of Absorption of Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Lancaster 742 0.1 32 0.5 35 0.3 42 0.5
Palmdale 373 0.1 20 0.3 18 0.2 58 0.7
----------------------------------------------------------------------- ---------------------
Subtotal for Antelope Valley 1,115 0.2 53 0.8 53 0.5 110 1.2
----------------------------------------------------------------------- ---------------------
DOWNTOWN LA
- ------------------------------------------------------------------------------------------------------------------------------------
Bell 2,688 0.4 17 0.2 -75 -0.7 201 2.2
Bell Gardens 2,520 0.3 11 0.2 56 0.5 65 0.7
Commerce 46,441 6.3 308 4.4 1,530 13.9 205 2.3
Cudahy 1,360 0.2 4 0.1 -27 -0.2 99 1.1
East Los Angeles 1,853 0.3 -0 0.0 -3 0.0 5 0.1
Huntington Park 4,580 0.6 -5 -0.1 -156 -1.4 161 1.8
Los Angeles/Downtown 105,806 14.3 -53 -0.8 -110 -1.0 141 1.6
Maywood 853 0.1 7 0.1 -16 -0.1 53 0.6
Montebello 10,872 1.5 134 1.9 216 2.0 181 2.0
Pico Rivera 6,015 0.8 10 0.1 271 2.5 111 1.2
South Gate 9,048 1.2 68 1.0 264 2.4 96 1.1
Vernon 47,326 6.4 129 1.9 301 2.7 263 3.1
----------------------------------------------------------------------- ---------------------
Subtotal for Downtown LA 239,362 32.4 633 9.0 2,251 20.6 1,601 17.8
----------------------------------------------------------------------- ---------------------
MID-COUNTIES
- ------------------------------------------------------------------------------------------------------------------------------------
Artesia 301 0.0 -0 0.0 -2 0.0 37 0.4
Bellflower 429 0.1 12 0.2 38 0.3 59 0.6
Cerritos 13,360 1.8 164 2.3 257 2.3 187 2.1
Downey 8,046 1.1 65 0.9 14 0.1 79 0.9
La Mirada 10,159 1.4 89 1.3 304 2.8 229 2.5
Lakewood 617 0.1 5 0.1 12 0.1 36 0.4
Norwalk 2,554 0.3 10 0.2 34 0.3 46 0.5
Paramount 7,082 1.0 108 1.5 18 0.2 146 1.6
Santa Fe Springs 37,658 5.1 843 12.0 623 5.7 299 3.3
Whittier 5,124 0.7 17 0.2 9 0.1 107 1.2
----------------------------------------------------------------------- ---------------------
Subtotal for Mid-Counties 85,330 11.6 1,315 18.7 1,307 11.9 1,225 13.5
----------------------------------------------------------------------- ---------------------
SAN FERNANDO VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Burbank 12,790 1.7 54 0.8 240 2.2 114 1.3
Central Valley 29,482 4.0 120 1.7 1,020 9.3 216 2.4
Glendale 7,981 1.1 26 0.4 131 1.2 90 1.0
Northeast Valley 24,755 3.4 377 5.4 740 6.7 214 2.4
Pasadena 4,865 0.7 20 0.3 199 1.8 29 0.3
West Valley 32,440 4.4 397 5.7 143 1.3 321 3.5
----------------------------------------------------------------------- ---------------------
Subtotal for San Fernando 112,313 15.3 995 14.3 2,473 22.5 984 10.9
----------------------------------------------------------------------- ---------------------
SANTA CLARITA VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Canyon Country 389 0.1 25 0.4 7 0.1 n/a n/a
Newhall 56 0.0 1 0.0 0 0.0 n/a n/a
Saugus 1,035 0.1 -2 0.0 -39 -0.4 106 1.2
Valencia 8,500 1.2 428 6.1 301 2.7 269 3.0
----------------------------------------------------------------------- ---------------------
Subtotal for Santa Clarita Valley 9,980 1.4 452 6.5 269 2.4 405 4.5
----------------------------------------------------------------------- ---------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 4: Submarket Forecast of Demand, (cont)
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------- ---------------------
Current Long-Term Avg.* 3-Year Avg. Estimated Avg.
Occupied Percent Annual Net Percent Annual Net Percent Annual Net Percent
Stock of Absorption of Absorption of Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Alhambra 3,089 0.4 19 0.3 -18 -0.2 59 0.6
Arcadia 773 0.1 17 0.2 -31 -0.3 78 0.9
Azusa 5,971 0.8 101 1.5 -13 -0.1 178 2.0
Baldwin Park 2,950 0.4 121 1.7 51 0.5 60 0.7
City of Industry 52,418 7.1 1,064 15.2 1,108 10.1 393 4.3
Claremont 599 0.1 19 0.3 9 0.1 n/a n/a
Covina 1,897 0.3 18 0.3 101 0.9 54 0.6
Diamond Bar 99 0.0 3 0.1 -10 -0.1 n/a n/a
Duarte/Monrovia 4,746 0.6 59 0.9 20 0.2 144 1.6
El Monte 8,618 1.2 65 0.9 15 0.1 76 0.8
Glendora/San Dimas/La Verne 3,674 0.5 111 1.6 -63 -0.6 284 3.1
Irwindale 6,314 0.9 190 2.7 28 0.3 150 1.7
Monterey Park 1,591 0.2 8 0.1 -29 -0.3 86 0.9
Pomona 15,304 2.1 345 4.9 299 2.7 214 2.4
Rosemead 893 0.1 -0 0.0 -3 0.0 13 0.1
San Gabriel 661 0.1 -4 -0.1 34 0.3 58 0.6
South El Monte 5,237 0.7 30 0.4 133 1.2 71 0.8
Temple City 157 0.0 -3 -0.1 7 0.1 84 0.9
Walnut 2,207 0.3 77 1.1 25 0.2 19 0.2
----------------------------------------------------------------------- ---------------------
Subtotal for San Gabriel Valley 117,198 15.9 2,247 32.0 1,663 15.1 2,095 23.0
----------------------------------------------------------------------- ---------------------
SOUTH BAY
- ------------------------------------------------------------------------------------------------------------------------------------
Carson 26,238 3.6 280 4.0 508 4.6 284 3.1
Compton 18,214 2.5 88 1.3 374 3.4 265 2.9
El Segundo 11,200 1.5 16 0.2 124 1.1 75 0.8
Gardena 21,275 2.9 182 2.6 330 3.0 231 2.5
Harbor City 1,356 0.2 -5 -0.1 7 0.1 66 0.7
Hawthorne 9,644 1.3 -12 -0.2 158 1.4 71 0.8
Inglewood 3,293 0.4 40 0.6 105 1.0 198 2.2
LA Unincorporated 1,506 0.2 15 0.2 195 1.8 123 1.4
Lawndale 275 0.0 0 0.0 9 0.1 15 0.2
Long Beach 14,951 2.0 108 1.6 59 0.5 181 2.0
Los Angeles/South Bay 10,859 1.5 31 0.5 183 1.7 179 2.0
Lynwood 3,696 0.5 47 0.7 150 1.4 110 1.2
Rancho Dominguez 16,490 2.2 222 3.2 381 3.5 306 3.4
Redondo Beach 2,175 0.3 -2 0.0 91 0.8 30 0.3
San Pedro 1,344 0.2 1 0.0 4 0.0 0 0.0
Signal Hill 1,562 0.2 23 0.3 -66 -0.6 168 1.8
Torrance 24,611 3.3 253 3.6 371 3.4 245 2.7
Wilmington 3,454 0.5 27 0.4 15 0.1 123 1.4
----------------------------------------------------------------------- ---------------------
Subtotal for South Bay 172,143 23.3 1,319 18.9 2,998 27.3 2,670 29.4
----------------------------------------------------------------------- ---------------------
----------------------------------------------------------------------- ---------------------
LOS ANGELES TOTALS 737,441 100.0 7,018 100.0 11,014 100.0 9,072 100.0
----------------------------------------------------------------------- ---------------------
</TABLE>
* Long term net absorption is an estimate of net absorption over the last 15
years. See the Appendix for a complete methodology.
- --------------------------------------------------------------------------------
We provide forecasts only in those submarkets where we have determined that
there is sufficient stock of space or where there is currently space under
construction.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 5: Submarket Forecast of Supply
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------- ---------------------
Historic Avg. Estimated Avg.
Annual Percent SF Under Percent Projects Percent Annual Percent
Completions of Construction of Planned of Completions of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Lancaster 35 0.3 0 0.0 56 0.7 12 0.3
Palmdale 23 0.2 0 0.0 456 5.8 35 0.6
----------------------------------------------------------------------- ---------------------
Subtotal for Antelope Valley 58 0.6 0 0.0 512 6.5 47 1.1
----------------------------------------------------------------------- ---------------------
DOWNTOWN LA
- ------------------------------------------------------------------------------------------------------------------------------------
Bell 38 0.3 0 0.0 0 0.0 9 0.2
Bell Gardens 17 0.1 0 0.0 0 0.0 4 0.1
Commerce 415 4.2 0 0.0 739 9.4 149 3.3
Cudahy 12 0.1 0 0.0 0 0.0 3 0.1
East Los Angeles 0 0.0 0 0.0 0 0.0 0 0.0
Huntington Park 31 0.3 0 0.0 0 0.0 8 0.2
Los Angeles/Downtown 542 5.5 10 0.4 250 3.1 156 3.5
Maywood 11 0.1 0 0.0 0 0.0 3 0.1
Montebello 167 1.7 0 0.0 500 6.3 73 1.6
Pico Rivera 27 0.2 0 0.0 96 1.2 13 0.3
South Gate 82 0.8 0 0.0 1,010 12.8 86 1.9
Vernon 328 3.3 116 5.2 376 4.8 189 4.2
----------------------------------------------------------------------- ---------------------
Subtotal for Downtown LA 1,670 17.2 126 5.6 2,971 37.9 693 15.5
----------------------------------------------------------------------- ---------------------
MID-COUNTIES
- ------------------------------------------------------------------------------------------------------------------------------------
Artesia 2 0.0 0 0.0 0 0.0 0 0.0
Bellflower 16 0.1 0 0.0 0 0.0 4 0.1
Cerritos 203 2.0 0 0.0 119 1.5 57 1.3
Downey 75 0.7 0 0.0 480 6.1 50 1.1
La Mirada 123 1.2 338 15.1 0 0.0 276 6.1
Lakewood 8 0.0 0 0.0 0 0.0 2 0.0
Norwalk 14 0.1 0 0.0 0 0.0 4 0.1
Paramount 128 1.3 0 0.0 0 0.0 31 0.7
Santa Fe Springs 958 9.8 512 22.9 1,176 15.0 683 15.2
Whittier 30 0.3 0 0.0 92 1.1 13 0.3
----------------------------------------------------------------------- ---------------------
Subtotal for Mid-Counties 1,557 16.0 850 38.1 1,867 23.8 1,120 24.9
----------------------------------------------------------------------- ---------------------
SAN FERNANDO VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Burbank 78 0.8 0 0.0 68 0.8 24 0.6
Central Valley 213 2.1 0 0.0 20 0.2 53 1.2
Glendale 40 0.4 0 0.0 0 0.0 9 0.2
Northeast Valley 443 4.5 0 0.0 468 5.9 138 3.1
Pasadena 23 0.2 0 0.0 0 0.0 5 0.1
West Valley 536 5.5 46 2.0 72 0.9 169 3.8
----------------------------------------------------------------------- ---------------------
Subtotal for San Fernando 1,333 13.7 46 2.0 628 8.0 398 8.9
----------------------------------------------------------------------- ---------------------
SANTA CLARITA VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Canyon Country 27 0.2 0 0.0 0 0.0 n/a n/a
Newhall 2 0.0 0 0.0 0 0.0 n/a n/a
Saugus 6 0.0 0 0.0 0 0.0 1 0.0
Valencia 456 4.6 458 20.5 434 5.5 473 10.5
----------------------------------------------------------------------- ---------------------
Subtotal for Santa Clarita Valley 491 5.0 458 20.5 434 5.5 481 10.7
----------------------------------------------------------------------- ---------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 5: Submarket Forecast of Supply, (cont)
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------- ---------------------
Historic Avg. Estimated Avg.
Annual Percent SF Under Percent Projects Percent Annual Percent
Completions of Construction of Planned of Completions of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Alhambra 24 0.2 0 0.0 0 0.0 6 0.1
Arcadia 24 0.2 0 0.0 0 0.0 6 0.1
Azusa 125 1.2 0 0.0 0 0.0 30 0.7
Baldwin Park 126 1.2 22 0.9 0 0.0 47 1.0
City of Industry 1,294 13.3 342 15.3 333 4.2 586 13.0
Claremont 19 0.2 0 0.0 0 0.0 n/a n/a
Covina 23 0.2 0 0.0 0 0.0 5 0.1
Diamond Bar 6 0.0 0 0.0 0 0.0 n/a n/a
Duarte/Monrovia 76 0.7 0 0.0 0 0.0 18 0.4
El Monte 76 0.7 0 0.0 0 0.0 18 0.4
Glendora/San Dimas/La Verne 144 1.4 64 2.8 168 2.1 93 2.1
Irwindale 210 2.1 0 0.0 210 2.6 65 1.4
Monterey Park 15 0.1 0 0.0 0 0.0 4 0.1
Pomona 394 4.0 0 0.0 12 0.1 97 2.2
Rosemead 0 0.0 0 0.0 0 0.0 0 0.0
San Gabriel 0 0.0 0 0.0 0 0.0 0 0.0
South El Monte 39 0.4 0 0.0 0 0.0 9 0.2
Temple City 1 0.0 0 0.0 0 0.0 0 0.0
Walnut 78 0.8 0 0.0 0 0.0 19 0.4
----------------------------------------------------------------------- ---------------------
Subtotal for San Gabriel Valley 2,674 27.5 428 19.2 723 9.2 1,009 22.3
----------------------------------------------------------------------- ---------------------
SOUTH BAY
- ------------------------------------------------------------------------------------------------------------------------------------
Carson 385 3.9 0 0.0 239 3.0 109 2.4
Compton 174 1.7 0 0.0 0 0.0 42 0.9
El Segundo 32 0.3 0 0.0 0 0.0 8 0.2
Gardena 254 2.6 0 0.0 0 0.0 62 1.4
Harbor City 0 0.0 0 0.0 0 0.0 0 0.0
Hawthorne 10 0.1 0 0.0 284 3.6 21 0.5
Inglewood 61 0.6 0 0.0 0 0.0 15 0.3
LA Unincorporated 26 0.2 0 0.0 0 0.0 6 0.1
Lawndale 1 0.0 0 0.0 0 0.0 0 0.0
Long Beach 151 1.5 0 0.0 0 0.0 37 0.8
Los Angeles/South Bay 63 0.6 320 14.3 0 0.0 248 6.5
Lynwood 58 0.5 0 0.0 0 0.0 14 0.3
Rancho Dominguez 306 3.1 0 0.0 181 2.3 87 1.9
Redondo Beach 0 0.0 0 0.0 0 0.0 0 0.0
San Pedro 1 0.0 0 0.0 0 0.0 0 0.0
Signal Hill 39 0.4 0 0.0 0 0.0 9 0.2
Torrance 336 3.4 0 0.0 0 0.0 82 1.8
Wilmington 40 0.4 0 0.0 0 0.0 10 0.2
----------------------------------------------------------------------- ---------------------
Subtotal for South Bay 1,937 19.9 320 14.3 704 8.9 750 16.5
----------------------------------------------------------------------- ---------------------
LOS ANGELES TOTALS 9,720 100.0 2,228 100.0 7,839 100.0 4,500 100.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Noteworthy Submarkets
in Los Angeles
Largest Share of
Forecasted Demand City of Industry
Largest Share of Fore-
casted Completions Santa Fe
The 3-year average annual net absorption is calculated from the current period
going back 3 years. Likewise the forecast of average annual net absorption is
calculated from the current period going forward 2 years. When the Outlook is
produced mid-year, the time periods referenced are also mid-year time periods.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 6: Submarket Rent and Availability Outlook
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
--------------------------------------- -----------------------------------------
1993 1995 1996 TW Rent Index
Availability Availability TW Rent Availability Avg. Annual
(%) (%) Index (%) Level Rent Inflation
--------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
- -----------------------------------------------------------------------------------------------------------------------
Lancaster 19.6 6.1 $4.96 1.1 $5.82 8.4
Palmdale 23.3 9.9 n/a 5.4 n/a n/a
--------------------------------------- -----------------------------------------
Subtotal for Antelope Valley 20.9 7.4 $4.96 3.2 $5.83 8.4
--------------------------------------- -----------------------------------------
DOWNTOWN LA
- -----------------------------------------------------------------------------------------------------------------------
Bell 8.7 16.0 $4.82 4.0 $5.58 7.6
Bell Gardens 11.5 5.2 $5.11 0.7 $6.01 8.4
Commerce 14.4 5.5 $4.64 5.2 $5.44 8.2
Cudahy 7.2 12.9 n/a 0.7 n/a n/a
East Los Angeles 0.0 0.5 n/a 0.0 n/a n/a
Huntington Park 8.8 17.5 n/a 12.0 n/a n/a
Los Angeles/Downtown 12.6 13.0 $5.16 13.0 $5.97 7.5
Maywood 4.8 10.0 n/a 0.2 n/a n/a
Montebello 11.9 6.6 $4.75 4.7 $5.56 8.2
Pico Rivera 19.3 6.9 $5.14 3.9 $6.01 8.2
South Gate 10.5 3.5 $4.37 3.2 $5.14 8.4
Vernon 11.0 9.8 $4.39 9.4 $5.10 7.8
--------------------------------------- -----------------------------------------
Subtotal for Downtown LA 12.4 10.2 $4.86 4.5 $5.64 7.8
--------------------------------------- -----------------------------------------
MID-COUNTIES
- -----------------------------------------------------------------------------------------------------------------------
Artesia 9.9 15.0 n/a 0.0 n/a n/a
Bellflower 0.0 14.7 $5.82 0.7 $6.80 8.0
Cerritos 11.8 6.4 $4.98 4.6 $5.83 8.2
Downey 3.4 3.0 $4.83 2.3 $5.68 8.5
La Mirada 15.8 7.6 $4.91 8.1 $5.72 8.0
Lakewood 15.4 9.5 n/a 0.1 n/a n/a
Norwalk 7.4 3.6 $4.69 0.4 $5.52 8.5
Paramount 6.7 6.0 $4.93 2.9 $5.78 8.3
Santa Fe Springs 9.6 6.1 $5.20 7.8 $6.07 8.1
Whittier 6.9 6.3 $4.47 2.9 $5.23 8.2
--------------------------------------- -----------------------------------------
Subtotal for Mid-Counties 9.7 6.1 $5.02 3.8 $5.87 8.2
--------------------------------------- -----------------------------------------
SAN FERNANDO VALLEY
- -----------------------------------------------------------------------------------------------------------------------
Burbank 9.4 4.5 $6.28 3.1 $7.38 8.3
Central Valley 17.0 7.5 $6.32 6.5 $7.38 8.0
Glendale 8.9 4.3 $7.26 2.4 $8.52 8.4
Northeast Valley 14.3 5.8 $5.87 5.2 $6.87 8.2
Pasadena 13.6 1.4 $7.05 0.5 $8.31 8.6
West Valley 10.3 9.1 $6.81 8.2 $7.92 7.9
--------------------------------------- -----------------------------------------
Subtotal for San Fernando 12.9 6.8 $6.46 3.9 $7.55 8.1
--------------------------------------- -----------------------------------------
SANTA CLARITA VALLEY
- -----------------------------------------------------------------------------------------------------------------------
Canyon Country 9.2 3.7 $5.28 n/a n/a n/a
Newhall 0.0 0.0 n/a n/a n/a n/a
Saugus 8.5 17.9 n/a 1.4 n/a n/a
Valencia 11.0 5.2 $5.62 8.8 $6.57 8.1
--------------------------------------- -----------------------------------------
Subtotal for Santa Clarita Valley 10.6 6.6 $5.61 3.8 $6.56 8.1
--------------------------------------- -----------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 6: Submarket Rent and Availability Outlook, (cont)
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
--------------------------------------- -----------------------------------------
1993 1996 1996 TW Rent Index
Availability Availability TW Rent Availability Avg. Annual
(%) (%) Index (%) Level Rent Inflation
--------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
- -----------------------------------------------------------------------------------------------------------------------
Alhambra 2.0 4.0 $5.42 0.7 $6.37 8.4
Arcadia 4.2 15.1 n/a 0.4 n/a n/a
Azusa 7.1 8.0 $4.68 3.4 $5.48 8.1
Baldwin Park 6.7 2.5 $4.79 1.6 $5.64 8.5
City of Industry 14.0 8.7 $4.75 9.2 $5.53 7.9
Claremont 4.7 0.0 $4.60 n/a n/a n/a
Covina 20.6 5.2 $4.47 0.3 $5.26 8.4
Diamond Bar 0.0 23.3 n/a n/a n/a n/a
Duarte/Monrovia 8.5 7.5 $5.11 2.6 $5.98 8.2
El Monte 3.0 2.9 $5.29 1.6 $6.23 8.5
Glendora/San Dimas/La Verne 8.5 14.7 $4.98 5.6 $5.77 7.7
Irwindale 6.6 5.7 $5.18 3.1 $6.07 8.3
Monterey Park 5.1 9.8 $5.16 0.5 $6.03 8.2
Pomona 11.8 6.3 $4.24 4.8 $4.97 8.2
Rosemead 1.3 2.7 n/a 0.0 n/a n/a
San Gabriel 28.0 14.7 $5.65 0.0 $6.59 8.0
South El Monte 10.7 3.6 $5.07 1.3 $5.96 8.4
Temple City 58.7 42.3 n/a 0.0 n/a n/a
Walnut 4.2 0.9 $5.48 1.0 $6.47 8.6
--------------------------------------- -----------------------------------------
Subtotal for San Gabriel Valley 10.9 7.4 $4.82 3.1 $5.63 8.1
--------------------------------------- -----------------------------------------
SOUTH BAY
- -----------------------------------------------------------------------------------------------------------------------
Carson 13.9 8.7 $5.08 7.4 $5.92 7.9
Compton 16.2 10.7 $4.86 8.5 $5.64 7.8
El Segundo 6.9 3.6 $5.89 2.4 $6.92 8.4
Gardena 11.4 7.6 $4.77 6.1 $5.57 8.0
Harbor City 11.0 9.7 $4.65 0.9 $5.44 8.1
Hawthorne 10.7 6.1 $4.43 5.1 $5.18 8.2
Inglewood 19.6 13.0 $6.65 3.3 $7.73 7.8
LA Unincorporated 48.1 13.9 $4.75 0.6 $5.54 8.0
Lawndale 14.3 4.8 n/a 0.0 $n/a n/a
Long Beach 7.6 6.6 $5.97 4.8 $6.98 8.2
Los Angeles/South Bay 11.7 7.0 $6.09 7.9 $7.10 8.0
Lynwood 18.4 6.4 $2.90 1.5 $3.40 8.3
Rancho Dominguez 16.7 10.5 $4.54 8.0 $5.28 7.8
Redondo Beach 15.6 3.2 $6.83 0.5 $8.04 8.5
San Pedro 1.0 0.0 n/a 0.0 n/a n/a
Signal Hill 6.8 17.6 $4.27 0.9 $4.95 7.7
Torrance 10.9 7.5 $6.13 6.2 $7.15 8.1
Wilmington 9.2 8.0 $4.56 2.0 $5.34 8.2
--------------------------------------- -----------------------------------------
Subtotal for South Bay 12.7 8.1 $5.25 3.2 $6.13 8.0
--------------------------------------- -----------------------------------------
--------------------------------------- -----------------------------------------
LOS ANGELES TOTALS 12.0 8.2 $5.17 7.0 $6.03 8.0
--------------------------------------- -----------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------
Noteworthy Submarkets
- -----------------------------------------
Largest Forecasted
Decrease in Avail. SF Temple City
- -----------------------------------------
Largest Forecasted Pasadena
A forecast of availability rates is derived from a forecast of demand and
supply. A new base is determined by adding the estimated new supply to the
existing base, and then adding the forecast of net absorption to the occupied
base to calculate a new occupied base. From this, a new availability rate may be
derived. Rental rates, in turn, are dependent upon availability rates and are
calculated last.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 7: Properties Under Construction
The following lists properties due in 1997; the list may be incomplete.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Size Year Property Asking
Name/Address/Owner (sf) Due Type Rent Sale Price
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DOWNTOWN LA
- -----------------------------------------------------------------------------------------------------------------------------
Los Angeles/Downtown 722 E 9th P1 10,000 1997 Other $890,000
Los Angeles
------------------------------------------------------------------------------------------
Vernon Ids Park 42,110 1997 Warehouse $2.5 million
4601 District Blvd
Vernon
------------------------------------------------------------------------------------------
Bldg A Tpi 45,212 1997 Other $2.6 million
4533 Pacific Blvd
Vernon
------------------------------------------------------------------------------------------
Ids 29,159 1997 Warehouse $1.8 million
4641 District Blvd
Vernon
------------------------------------------------------------------------------------------
Subtotal for Downtown LA 126,481
------------------------------------------------------------------------------------------
MID-COUNTIES
- -----------------------------------------------------------------------------------------------------------------------------
La Mirada 13993 Rosecrans 108,000 1997 Warehouse $4.68 net
La Mirada
------------------------------------------------------------------------------------------
13939 Rosecrans 229,125 1997 Manufacturing $4.68 net
La Mirada
------------------------------------------------------------------------------------------
Santa Fe Springs Mid-Counties Bus. 345,750 1997 Warehouse $4.68 net
15700 Shoemaker
Santa Fe Springs
------------------------------------------------------------------------------------------
Mid-Counties Bus. 164,981 1997 Warehouse
15700 Shoemaker
Santa Fe Springs
------------------------------------------------------------------------------------------
Subtotal for Mid-Counties 847,856
------------------------------------------------------------------------------------------
SAN FERNANDO VALLEY
------------------------------------------------------------------------------------------
West Valley 9320 Lurline Ave 30,500 1997 Manufacturing $7.80 gross
Chatsworth
------------------------------------------------------------------------------------------
9349 Oso Ave 15,440 1997 Manufacturing $8.28 gross
Chatsworth
------------------------------------------------------------------------------------------
Subtotal for San Fernando 45,940
------------------------------------------------------------------------------------------
SAN GABRIEL VALLEY
- -----------------------------------------------------------------------------------------------------------------------------
Baldwin Park Bldg B 20,677 1997 Warehouse $6.00 gross $1.3 million
13460 Brooks
Baldwin Park
------------------------------------------------------------------------------------------
City of Industry 518 Brea Canyon 135,000 1997 Warehouse $4.32 net $6.8 million
City Of Industry
------------------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 7: Properties Under Construction, (cont)
The following lists properties due in 1997; the list may be incomplete.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Size Year Property Asking
Name/Address/Owner (sf) Due Type Rent Sale Price
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fullerton Ind Park 40,000 1997 Warehouse $2.5 million
18560 San Jose
City Of Industry
------------------------------------------------------------------------------------------
Catellus Com. Ctr. 45,776 1997 Warehouse $2.9 million
508 Cheryl Lane
City Of Industry
------------------------------------------------------------------------------------------
SE Fairway Drive 120,000 1997 Warehouse
City Of Industry
------------------------------------------------------------------------------------------
Glendora/San Dimas/La Verne 468 S San Dimas 32,000 1997 Warehouse $1.6 million
La Verne
------------------------------------------------------------------------------------------
798 Palomares 16,000 1997 Warehouse $864,000
La Verne
------------------------------------------------------------------------------------------
768 Palomares 15,000 1997 Warehouse $825,000
La Verne
------------------------------------------------------------------------------------------
Subtotal for San Gabriel Valley 424,453
------------------------------------------------------------------------------------------
SANTA CLARITA VALLEY
- -----------------------------------------------------------------------------------------------------------------------------
Valencia Gateway I - Bldg 9 71,750 1997 Manufacturing
28410 W Industry
Valencia
------------------------------------------------------------------------------------------
Gateway I - Bldg 5 54,060 1997 Manufacturing $5.64 net $3.2 million
28308 W Industry
Valencia
------------------------------------------------------------------------------------------
28220 Industry Dr 93,000 1997 Manufacturing $5.1 million
Valencia
------------------------------------------------------------------------------------------
Gateway II - Bldg 48,140 1997 Manufacturing $5.88 net $3.0 million
28130 Harrison
Valencia
------------------------------------------------------------------------------------------
Gateway II - Bldg 19,155 1997 Manufacturing $6.60 net $1.3 million
28615 Braxton
Valencia
------------------------------------------------------------------------------------------
Gateway II - Bldg 34,170 1997 Manufacturing $6.24 net $2.3 million
28110 Harrison
Valencia
------------------------------------------------------------------------------------------
Gateway II - Bldg 115,220 1997 Warehouse
27911 W Franklin
Valencia
------------------------------------------------------------------------------------------
Gateway I - Bldg 22,130 1997 Manufacturing $6.60 net $1.5 million
28435 W Industry
Valencia
------------------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 7: Properties Under Construction, (cont)
The following lists properties due in 1997; the list may be incomplete.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Size Year Property Asking
Name/Address/Owner (sf) Due Type Rent Sale Price
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Subtotal for Santa Clarita Valley 457,625
------------------------------------------------------------------------------------------
SOUTH BAY
- -----------------------------------------------------------------------------------------------------------------------------
Los Angeles/South Bay 5353 W Imperial 320,000 1997 Warehouse $9.60 net
Los Angeles
------------------------------------------------------------------------------------------
Subtotal for South Bay 320,000
------------------------------------------------------------------------------------------
</TABLE>
Under Construction Standings
(Rank out of 52)
SF Under Construction 15
Completions Rate 39
There is currently about 2.2 million square feet of space under construction in
the Los Angeles MSA. The largest portion of the new construction (69.7%) is
warehouse space, with the rest consisting of both manufacturing and other
(unclassified) space.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
CURRENT The Los Angeles MSA includes the seven major market
INDUSTRIAL areas of Antelope Valley, Downtown LA, Mid-Counties, San
MARKET Fernando Valley, San Gabriel Valley, Santa Clarita
Valley, and South Bay. In our reports these are further
divided into a total of seventy-one smaller submarkets
defined by the local CB Commercial office. The following
pages include tables and graphs displaying information
for the total industrial market of Los Angeles, along
with separate sections devoted to the warehouse and
rental warehouse markets. Similar information is also
available upon request for the manufacturing and R & D
markets; our full clients receive this information as
part of the Electronic Outlook.
[GRAPHIC OMITTED] The size of the current industrial market in Los Angeles
is 803.5 million square feet, consisting of about 17,502
Distribution of properties which include both single buildings and
Industrial Space complexes. Industrial properties are often single tenant
by Tenant Type and occupied by the owner, but there are also a
significant number of rental properties.
We classify properties as rental structures if they have
more than one tenant or the single tenant is not the
owner. Generally speaking, the availability rate in
rental properties is higher than that in the total of
industrial properties. The first graph on this page
illustrates the division of total industrial space in
Los Angeles into renter vs. owner/user properties.
The two pie charts show the distribution of all
industrial space in Los Angeles by property type and by
size. In today's market it is common for warehouse
properties to occupy the majority of industrial space.
Note how Los Angeles compares to the typical market, in
which the smallest properties (below 50,000 square feet)
make up the largest portion of industrial space, while
the largest properties (over 400,000 square feet) form
the smallest segment of the market.
[GRAPHIC OMITTED] Finally, the bar graph at the bottom of this page
illustrates the pattern of construction in Los Angeles's
Distribution of industrial market, by showing the distribution of space
Industrial Space by age, or year built.
by Property Type
[GRAPHIC OMITTED]
Distribution of
Industrial Space
by Size (SFx1000)
[GRAPHIC OMITTED]
Distribution of Industrial Space by Age (Year Built)
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 8: Total Industrial Space by Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (x1000) (%) Net Rent Gross Rent
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
---------------------------------------------------------------------
Lancaster 35 790 6.1 n/a n/a
Palmdale 15 414 9.9 n/a n/a
---------------------------------------------------------------------
Subtotal for Antelope Valley 50 1,204 7.4 n/a n/a
---------------------------------------------------------------------
DOWNTOWN LA
---------------------------------------------------------------------
Bell 70 3,200 16.0 n/a $4.83
Bell Gardens 68 2,658 5.2 n/a n/a
Commerce 849 49,144 5.5 $4.13 $4.55
Cudahy 41 1,561 12.9 n/a $3.10
East Los Angeles 33 1,862 0.5 n/a n/a
Huntington Park 125 5,551 17.5 n/a $3.04
Los Angeles/Downtown 2,795 121,616 13.0 $5.38 $4.40
Maywood 30 948 10.0 n/a n/a
Montebello 202 11,640 6.6 n/a $4.38
Pico Rivera 165 6,461 6.9 n/a $4.08
South Gate 189 9,376 3.5 n/a $4.27
Vernon 907 52,468 9.8 $4.02 $3.89
---------------------------------------------------------------------
Subtotal for Downtown LA 5,474 266,485 10.2 $4.78 $4.29
---------------------------------------------------------------------
MID-COUNTIES
---------------------------------------------------------------------
Artesia 16 354 15.0 n/a n/a
Bellflower 20 503 14.7 n/a n/a
Cerritos 272 14,273 6.4 $4.69 $4.91
Downey 92 8,295 3.0 n/a $4.28
La Mirada 167 10,995 7.6 $5.25 $4.36
Lakewood 13 682 9.5 n/a $6.26
Norwalk 50 2,649 3.6 n/a n/a
Paramount 245 7,534 6.0 n/a $4.87
Santa Fe Springs 968 40,104 6.1 $4.85 $4.94
Whittier 110 5,469 6.3 n/a $5.05
---------------------------------------------------------------------
Subtotal for Mid-Counties 1,953 90,858 6.1 $4.83 $4.78
---------------------------------------------------------------------
SAN FERNANDO VALLEY
---------------------------------------------------------------------
Burbank 330 13,393 4.5 $5.62 $7.94
Central Valley 970 31,872 7.5 $5.65 $6.57
Glendale 283 8,340 4.3 n/a $6.77
Northeast Valley 689 26,279 5.8 $5.79 $5.76
Pasadena 107 4,934 1.4 n/a n/a
West Valley 1,008 35,668 9.1 $6.46 $7.68
---------------------------------------------------------------------
Subtotal for San Fernando 3,387 120,506 6.8 $6.11 $6.85
---------------------------------------------------------------------
SANTA CLARITA VALLEY
---------------------------------------------------------------------
Canyon Country 14 404 3.7 n/a n/a
Newhall 3 56 0.0 n/a n/a
Saugus 6 1,261 17.9 n/a n/a
Valencia 232 8,966 5.2 $6.14 $7.61
---------------------------------------------------------------------
Subtotal for Santa Clarita Valley 255 10,687 6.6 $6.14 $7.61
---------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 8: Total Industrial Space by Submarket, (cont)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (x1000) (%) Net Rent Gross Rent
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
---------------------------------------------------------------------
Alhambra 58 3,218 4.0 n/a n/a
Arcadia 35 910 15.1 n/a $5.88
Azusa 131 6,490 8.0 n/a $5.36
Baldwin Park 111 3,026 2.5 n/a n/a
City of Industry 820 57,413 8.7 $3.86 $4.33
Claremont 16 599 0.0 n/a n/a
Covina 67 2,001 5.2 n/a n/a
Diamond Bar 6 129 23.3 n/a n/a
Duarte/Monrovia 157 5,131 7.5 $4.89 $4.54
El Monte 163 8,875 2.9 n/a $4.94
Glendora/San Dimas/La Verne 138 4,307 14.7 $6.00 $7.43
Irwindale 124 6,696 5.7 $6.26 $4.38
Monterey Park 79 1,764 9.8 n/a $5.05
Pomona 288 16,333 6.3 $3.69 $3.82
Rosemead 26 918 2.7 n/a n/a
San Gabriel 24 775 14.7 n/a $4.34
South El Monte 224 5,433 3.6 n/a $5.04
Temple City 9 272 42.3 n/a n/a
Walnut 83 2,227 0.9 n/a n/a
---------------------------------------------------------------------
Subtotal for San Gabriel Valley 2,559 126,517 7.4 $4.14 $4.72
---------------------------------------------------------------------
SOUTH BAY
---------------------------------------------------------------------
Carson 449 28,738 8.7 $4.23 $4.50
Compton 346 20,396 10.7 $4.20 $3.96
El Segundo 159 11,618 3.6 $5.81 n/a
Gardena 699 23,025 7.6 $4.63 $4.19
Harbor City 56 1,502 9.7 n/a n/a
Hawthorne 141 10,270 6.1 $5.60 $4.97
Inglewood 134 3,785 13.0 $6.69 $8.08
LA Unincorporated 47 1,749 13.9 n/a $6.00
Lawndale 17 289 4.8 n/a n/a
Long Beach 452 16,008 6.6 $4.25 $5.91
Los Angeles/South Bay 281 11,676 7.0 $7.65 $4.52
Lynwood 55 3,949 6.4 n/a n/a
Rancho Dominguez 267 18,425 10.5 $4.50 $5.09
Redondo Beach 33 2,247 3.2 n/a n/a
San Pedro 18 1,344 0.0 n/a n/a
Signal Hill 77 1,896 17.6 n/a $5.64
Torrance 510 26,606 7.5 $4.64 $8.34
Wilmington 83 3,754 8.0 n/a $5.54
---------------------------------------------------------------------
Subtotal for South Bay 3,824 187,277 8.1 $4.81 $5.20
---------------------------------------------------------------------
---------------------------------------------------------------------
LOS ANGELES TOTALS 17,502 803,534 8.2 $4.86 $4.87
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Please note that rents are quoted as either net or gross. In many areas rents in
better quality space tends to be quoted as net, while rents in lower quality
space tend to be quoted as gross; therefore it is not unusual for average net
rents to be higher than average gross rents.
For some submarkets we have too few rents quoted to allow a meaningful average,
and we show an 'n/a' for these areas. However, ALL rents are included in the
total metro average rents.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
HISTORIC No market study is complete without the historical
INDUSTRIAL perspective. This table contains annual completions and
MARKET availability rates for all industrial space, for the
last five years.
Table 9: Historic Industrial Completions and Availability
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail %
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Lancaster 0 27.2 0 19.6 0 12.4 0 5.3 0 6.1
Palmdale 25 29.1 0 23.3 0 13.5 0 9.9 0 9.9
-------------------------------------------------------------------------------------------------
Subtotal for Antelope Valley 25 27.9 0 20.9 0 12.8 0 6.9 0 7.4
-------------------------------------------------------------------------------------------------
DOWNTOWN LA
- ------------------------------------------------------------------------------------------------------------------------------------
Bell 0 6.0 0 8.7 0 13.1 0 12.3 0 16.0
Bell Gardens 0 8.3 0 11.5 0 5.4 0 3.9 0 5.2
Commerce 172 13.4 0 14.4 20 9.0 41 4.2 190 5.5
Cudahy 0 11.1 0 7.2 0 4.3 0 5.6 0 12.9
East Los Angeles 0 0.0 0 0.0 0 0.0 0 0.0 0 0.5
Huntington Park 0 5.3 11 8.8 0 7.4 0 17.1 11 17.5
Los Angeles/Downtown 142 12.3 141 12.6 50 11.1 153 12.1 114 13.0
Maywood 0 7.3 0 4.8 0 4.8 0 9.8 0 10.0
Montebello 0 12.1 0 11.9 0 4.6 0 7.9 34 6.6
Pico Rivera 0 14.1 0 19.3 0 15.1 0 9.6 0 6.9
South Gate 28 7.6 0 10.5 0 13.0 0 13.2 153 3.5
Vernon 0 9.5 144 11.0 11 8.9 28 7.6 211 9.8
-------------------------------------------------------------------------------------------------
Subtotal for Downtown LA 342 11.4 296 12.4 81 9.9 222 9.4 713 10.2
-------------------------------------------------------------------------------------------------
MID-COUNTIES
- ------------------------------------------------------------------------------------------------------------------------------------
Artesia 0 24.3 0 9.9 0 9.4 0 16.1 11 15.0
Bellflower 0 23.4 0 0.0 0 18.4 173 45.9 0 14.7
Cerritos 0 11.0 0 11.8 0 8.3 0 5.0 0 6.4
Downey 28 4.7 0 3.4 0 4.0 0 3.3 0 3.0
La Mirada 0 18.9 0 15.8 0 10.4 0 9.5 0 7.6
Lakewood 0 0.0 0 15.4 0 19.0 0 6.9 0 9.5
Norwalk 0 21.7 0 7.4 0 3.5 0 6.2 0 3.6
Paramount 53 8.3 0 6.7 0 5.8 0 5.8 0 6.0
Santa Fe Springs 931 10.7 0 9.6 0 5.0 155 6.4 360 6.1
Whittier 0 5.7 0 6.9 0 3.4 0 1.9 0 6.3
-------------------------------------------------------------------------------------------------
Subtotal for Mid-Counties 1,012 11.1 0 9.7 0 6.2 328 6.2 371 6.1
-------------------------------------------------------------------------------------------------
SAN FERNANDO VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Burbank 192 11.4 0 9.4 15 9.9 15 10.5 11 4.5
Central Valley 16 13.1 60 17.0 0 15.0 0 13.9 0 7.5
Glendale 0 15.1 0 8.9 0 10.4 0 7.6 0 4.3
Northeast Valley 13 11.4 15 14.3 0 12.6 0 8.3 46 5.8
Pasadena 0 13.7 0 13.6 0 12.2 0 2.3 0 1.4
West Valley 0 11.1 0 10.3 0 10.9 0 8.8 0 9.1
-------------------------------------------------------------------------------------------------
Subtotal for San Fernando 221 12.1 75 12.9 15 12.3 15 9.9 57 6.8
-------------------------------------------------------------------------------------------------
SANTA CLARITA VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Canyon Country 0 9.2 0 9.2 0 3.2 0 3.2 0 3.7
Newhall 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Saugus 0 19.7 0 8.5 0 8.5 0 12.4 0 17.9
Valencia 150 17.0 0 11.0 412 7.6 0 9.3 18 5.2
-------------------------------------------------------------------------------------------------
Subtotal for Santa Clarita Valley 150 16.9 0 10.6 412 7.5 0 9.4 18 6.6
-------------------------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 9: Historic Industrial Completions and Availability, (cont)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail %
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Alhambra 0 1.9 0 2.0 0 1.3 0 1.9 0 4.0
Arcadia 0 3.1 0 4.2 0 7.4 0 7.1 0 15.1
Azusa 0 6.0 0 7.1 0 10.5 0 8.5 0 8.0
Baldwin Park 0 7.6 0 6.7 0 6.6 0 3.4 39 2.5
City of Industry 716 13.0 419 14.0 0 9.1 0 8.1 326 8.7
Claremont 0 1.2 0 4.7 0 4.8 0 0.0 0 0.0
Covina 0 3.9 0 20.6 0 20.2 0 10.7 0 5.2
Diamond Bar 0 20.5 0 0.0 0 0.0 0 18.6 0 23.3
Duarte/Monrovia 12 12.5 0 8.5 0 12.5 11 7.7 0 7.5
El Monte 61 3.5 0 3.0 0 3.0 27 4.3 0 2.9
Glendora/San Dimas/La Verne 0 6.3 0 8.5 0 9.4 55 11.5 12 14.7
Irwindale 14 12.8 0 6.6 0 7.7 0 1.8 10 5.7
Monterey Park 0 3.4 0 5.1 0 4.4 0 5.4 0 9.8
Pomona 12 12.5 0 11.8 0 11.3 0 8.6 0 6.3
Rosemead 0 4.7 0 1.3 0 1.3 0 5.3 0 2.7
San Gabriel 0 30.7 0 28.0 0 33.6 0 35.5 0 14.7
South El Monte 14 8.0 0 10.7 10 10.1 0 8.1 0 3.6
Temple City 0 49.0 0 58.7 0 27.6 0 7.7 0 42.3
Walnut 0 6.4 0 4.2 0 6.0 0 5.4 0 0.9
-------------------------------------------------------------------------------------------------
Subtotal for San Gabriel Valley 829 10.6 419 10.9 10 9.0 93 7.5 387 7.4
-------------------------------------------------------------------------------------------------
SOUTH BAY
- ------------------------------------------------------------------------------------------------------------------------------------
Carson 0 16.5 58 13.9 0 14.4 0 13.4 0 8.7
Compton 0 15.1 0 16.2 0 12.8 0 11.5 0 10.7
El Segundo 0 8.1 0 6.9 0 5.8 0 5.2 0 3.6
Gardena 0 8.6 143 11.4 129 7.5 0 9.1 0 7.6
Harbor City 0 16.2 0 11.0 0 9.7 0 2.5 0 9.7
Hawthorne 0 7.5 0 10.7 0 10.6 0 9.2 0 6.1
Inglewood 0 20.3 34 19.6 96 14.5 0 13.5 0 13.0
LA Unincorporated 0 59.3 0 48.1 0 39.7 0 15.6 0 13.9
Lawndale 0 6.0 0 14.3 0 4.7 0 5.1 0 4.8
Long Beach 0 10.2 0 7.6 0 7.4 0 6.9 0 6.6
Los Angeles/South Bay 250 10.6 0 11.7 0 13.9 0 12.4 0 7.0
Lynwood 0 19.7 0 18.4 0 14.0 0 8.2 0 6.4
Rancho Dominguez 90 13.7 0 16.7 0 11.5 0 11.8 0 10.5
Redondo Beach 0 21.0 0 15.6 0 7.8 0 2.9 0 3.2
San Pedro 0 1.0 0 1.0 0 0.0 0 0.0 0 0.0
Signal Hill 14 5.6 0 6.8 0 9.5 0 12.0 0 17.6
Torrance 0 13.4 0 10.9 0 8.3 55 9.9 180 7.5
Wilmington 43 7.7 0 9.2 0 8.3 0 10.7 0 8.0
-------------------------------------------------------------------------------------------------
Subtotal for South Bay 397 12.9 235 12.7 225 10.7 55 10.2 180 8.1
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
LOS ANGELES TOTALS 2,976 11.8 1,025 12.0 743 9.9 713 9.0 1,726 8.2
-------------------------------------------------------------------------------------------------
</TABLE>
Availability Rates [GRAPHIC OMITTED]
1992-1996
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
CURRENT
WAREHOUSE
MARKET
The warehouse segment currently comprises about 42.2% of the total Los Angeles
industrial market, and approximately 63.9% of all space built in the last five
years. The table below gives a snapshot of the warehouse market as of the end of
the fourth quarter, and the following table displays its distribution by age and
size of building.
Table 10: Warehouse Space by Submarket
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking TW Rent
# Bldgs (x1000) (%) Net Rent Gross Rent Index
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
----------------------------------------------------------------------------------
Lancaster 14 325 12.6 n/a n/a $4.96
Palmdale 8 200 20.5 n/a n/a n/a
----------------------------------------------------------------------------------
Subtotal for Antelope Valley 22 525 15.6 n/a n/a $4.96
----------------------------------------------------------------------------------
DOWNTOWN LA
----------------------------------------------------------------------------------
Bell 24 926 18.3 n/a $5.10 $4.82
Bell Gardens 10 751 7.9 n/a n/a $5.12
Commerce 188 16,824 10.3 $4.04 $4.51 $4.65
Cudahy 7 151 57.0 n/a n/a n/a
Huntington Park 26 795 25.0 n/a $3.65 n/a
Los Angeles/Downtown 488 23,679 21.3 $6.50 $4.15 $5.17
Maywood 2 63 100.0 n/a n/a n/a
Montebello 48 4,967 9.0 n/a $4.67 $4.76
Pico Rivera 24 1,590 14.0 n/a $4.02 $5.14
South Gate 18 522 15.7 n/a n/a $4.38
Vernon 219 20,235 12.7 $4.03 $4.07 $4.39
----------------------------------------------------------------------------------
Subtotal for Downtown LA 1,054 70,503 15.2 $5.20 $4.22 $4.77
----------------------------------------------------------------------------------
MID-COUNTIES
----------------------------------------------------------------------------------
Artesia 10 234 16.7 n/a n/a n/a
Bellflower 17 390 16.9 n/a n/a $5.83
Cerritos 153 8,828 7.7 $4.83 $4.69 $4.99
Downey 36 2,117 11.8 n/a $4.28 $4.83
La Mirada 82 6,383 12.7 n/a $4.35 $4.92
Lakewood 6 296 14.2 n/a n/a n/a
Norwalk 28 1,457 6.5 n/a n/a $4.70
Paramount 102 2,749 12.0 n/a $5.00 $4.94
Santa Fe Springs 474 21,780 8.5 $4.78 $4.94 $5.20
Whittier 40 1,597 13.5 n/a $5.73 $4.47
----------------------------------------------------------------------------------
Subtotal for Mid-Counties 948 45,831 9.6 $4.80 $4.70 $5.05
----------------------------------------------------------------------------------
SAN FERNANDO VALLEY
----------------------------------------------------------------------------------
Burbank 220 9,558 0.8 n/a $6.97 $6.29
Central Valley 398 13,217 3.0 $4.64 $6.16 $6.32
Glendale 211 6,519 2.1 n/a $6.37 $7.26
Northeast Valley 474 17,852 3.8 $5.54 $5.85 $5.87
Pasadena 84 4,133 0.8 n/a n/a $7.05
West Valley 126 4,883 18.2 $6.13 $6.96 $6.81
----------------------------------------------------------------------------------
Subtotal for San Fernando 1,513 56,162 3.9 $5.76 $6.11 $6.38
----------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking TW Rent
# Bldgs (x1000) (%) Net Rent Gross Rent Index
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SANTA CLARITA VALLEY
----------------------------------------------------------------------------------
Canyon Country 5 148 0.0 n/a n/a $5.29
Saugus 1 987 8.3 n/a n/a n/a
Valencia 43 1,763 0.0 n/a n/a $5.63
----------------------------------------------------------------------------------
Subtotal for Santa Clarita Valley 49 2,898 2.8 n/a n/a $5.60
----------------------------------------------------------------------------------
SAN GABRIEL VALLEY
----------------------------------------------------------------------------------
Alhambra 50 1,223 6.6 n/a n/a $5.42
Arcadia 32 856 10.9 n/a $5.88 n/a
Azusa 102 3,446 10.2 n/a $5.36 $4.69
Baldwin Park 99 2,308 1.3 n/a n/a $4.79
City of Industry 595 33,837 11.1 $3.79 $4.65 $4.76
Claremont 15 494 0.0 n/a n/a $4.61
Covina 57 1,413 7.4 n/a n/a $4.48
Diamond Bar 6 129 23.3 n/a n/a n/a
Duarte/Monrovia 126 3,613 6.6 n/a $4.52 $5.11
El Monte 134 4,424 3.6 n/a n/a $5.29
Glendora/San Dimas/La Verne 118 3,419 11.8 $4.64 $5.00 $4.99
Irwindale 94 3,242 3.3 n/a n/a $5.18
Monterey Park 72 1,572 8.9 n/a $4.95 $5.16
Pomona 238 12,299 6.1 n/a $3.80 $4.25
Rosemead 23 563 0.0 n/a n/a n/a
San Gabriel 20 671 5.2 n/a n/a $5.65
South El Monte 192 4,091 1.9 n/a n/a $5.07
Temple City 9 272 42.3 n/a n/a n/a
Walnut 77 1,653 1.1 n/a n/a $5.49
----------------------------------------------------------------------------------
Subtotal for San Gabriel Valley 2,059 79,525 8.2 $3.86 $4.59 $4.80
----------------------------------------------------------------------------------
SOUTH BAY
----------------------------------------------------------------------------------
Carson 257 18,138 10.0 $4.14 $4.74 $5.09
Compton 167 11,685 16.1 $4.17 $4.24 $4.86
El Segundo 41 1,477 7.7 n/a n/a $5.90
Gardena 265 8,618 11.9 $5.16 $4.33 $4.78
Harbor City 16 366 15.0 n/a n/a $4.66
Hawthorne 59 2,190 20.1 $6.04 $5.00 $4.43
Inglewood 72 2,363 18.0 $6.79 $8.08 $6.65
LA Unincorporated 18 753 12.9 n/a n/a $4.76
Lawndale 7 148 0.0 n/a n/a n/a
Long Beach 172 6,353 12.6 $4.41 $4.60 $5.97
Los Angeles/South Bay 136 5,390 10.5 $7.80 $4.42 $6.09
Lynwood 15 1,223 1.0 n/a n/a $2.90
Rancho Dominguez 129 10,184 12.8 $3.99 $4.61 $4.55
Redondo Beach 18 1,316 0.8 n/a n/a $6.84
San Pedro 9 673 0.0 n/a n/a n/a
Signal Hill 36 721 34.3 n/a $5.49 $4.27
Torrance 191 9,965 15.7 $4.18 $7.27 $6.13
Wilmington 33 2,029 13.2 n/a $5.54 $4.57
----------------------------------------------------------------------------------
Subtotal for South Bay 1,641 83,592 12.7 $4.62 $4.91 $5.23
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
METRO TOTALS 7,286 339,036 10.2 $4.65 $4.63 $5.17
----------------------------------------------------------------------------------
</TABLE>
For some submarkets we have too few rents quoted to allow a meaningful average,
and we show an 'n/a' for these areas. However, ALL rents are included in the
total metro average rents.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 11: Distribution of All Warehouse Space by Age and Size
<TABLE>
<CAPTION>
----------------------------------------------- --------------
Building Size (in thousands)
10-49 50-99 100-199 200-399 400+ Totals by Age
----------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Built 1990 - 1996
----------------------------------------------- --------------
Stock 6,199 2,326 1,310 3,197 1,237 14,269
Availability 18.0% 6.9% 10.0% 20.6% 0.0% 14.5%
Net Rent $6.25 n/a n/a $5.22 n/a $5.45
Gross Rent $5.97 $5.13 n/a n/a n/a $5.36
----------------------------------------------- --------------
Built 1985 - 1989
----------------------------------------------- --------------
Stock 15,779 11,856 10,166 8,562 401 46,764
Availability 7.5% 4.3% 6.0% 12.5% 0.0% 7.2%
Net Rent $5.72 $5.15 $4.07 $3.93 n/a $4.44
Gross Rent $5.66 $4.73 $6.23 n/a n/a $5.63
----------------------------------------------- --------------
Built 1980 - 1984
----------------------------------------------- --------------
Stock 14,598 7,412 7,621 5,014 1,041 35,686
Availability 10.1% 10.1% 11.1% 21.2% 0.0% 11.6%
Net Rent $5.21 $6.11 $4.88 n/a n/a $4.94
Gross Rent $5.18 $4.93 n/a n/a n/a $4.74
----------------------------------------------- --------------
Built 1970 - 1979
----------------------------------------------- --------------
Stock 34,027 23,382 24,800 17,910 3,759 103,878
Availability 9.4% 8.4% 10.9% 14.9% 8.4% 10.4%
Net Rent $5.80 $4.22 $4.38 $4.13 n/a $4.39
Gross Rent $5.12 $4.84 $4.57 $4.33 n/a $4.90
----------------------------------------------- --------------
Built Before 1970
----------------------------------------------- --------------
Stock 48,351 27,091 25,795 17,710 19,492 138,439
Availability 13.6% 11.3% 8.7% 7.6% 4.8% 10.2%
Net Rent $5.04 $5.96 $4.56 $4.53 n/a $4.82
Gross Rent $4.39 $3.68 $3.92 $3.13 n/a $4.14
----------------------------------------------- --------------
Totals by Size
----------------------------------------------- --------------
Stock 118,954 72,067 69,692 52,393 25,930 339,036
Availability 11.4% 8.9% 9.4% 13.0% 4.8% 10.2%
Net Rent $5.43 $5.19 $4.47 $4.24 n/a $4.65
Gross Rent $4.87 $4.32 $4.35 $4.23 n/a $4.63
----------------------------------------------- --------------
</TABLE>
[GRAPHIC OMITTED]
Distribution of
Warehouse Space
In Los Angeles
[GRAPHIC OMITTED]
Distribution of
Warehouse Properties
200,000 sf and Larger
By Age
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial
- --------------------------------------------------------------------------------
Table 12: Warehouse Rental Space by Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (x1000) (%) Net Rent Gross Rent
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
---------------------------------------------------------------------
Lancaster 10 187 0.0 n/a n/a
Palmdale 5 118 9.3 n/a n/a
---------------------------------------------------------------------
Subtotal for Antelope Valley 15 305 3.6 n/a n/a
---------------------------------------------------------------------
DOWNTOWN LA
---------------------------------------------------------------------
Bell 13 642 10.0 n/a n/a
Bell Gardens 3 127 0.0 n/a n/a
Commerce 98 8,848 10.0 n/a $4.44
Cudahy 3 48 79.2 n/a n/a
Huntington Park 13 414 26.6 n/a $4.05
Los Angeles/Downtown 245 13,053 21.3 $5.69 $4.34
Montebello 17 2,176 7.8 n/a n/a
Pico Rivera 6 363 23.7 n/a n/a
South Gate 10 403 7.2 n/a n/a
Vernon 141 13,051 13.5 $4.08 $4.31
---------------------------------------------------------------------
Subtotal for Downtown LA 549 39,125 15.1 $4.95 $4.34
---------------------------------------------------------------------
MID-COUNTIES
---------------------------------------------------------------------
Artesia 9 223 17.5 n/a n/a
Bellflower 5 97 0.0 n/a n/a
Cerritos 138 8,283 8.1 $4.83 $4.69
Downey 26 1,593 12.9 n/a $4.27
La Mirada 64 5,022 14.2 n/a $4.35
Lakewood 6 296 14.2 n/a n/a
Norwalk 22 1,238 7.7 n/a n/a
Paramount 81 2,198 11.4 n/a $5.07
Santa Fe Springs 385 16,258 8.7 $5.09 $4.92
Whittier 31 915 15.4 n/a $5.73
---------------------------------------------------------------------
Subtotal for Mid-Counties 767 36,123 9.9 $4.97 $4.70
---------------------------------------------------------------------
SAN FERNANDO VALLEY
---------------------------------------------------------------------
Burbank 62 2,687 1.2 n/a $7.13
Central Valley 203 7,550 4.2 n/a $6.08
Glendale 65 1,768 3.7 n/a $6.37
Northeast Valley 201 8,495 5.7 $5.27 $5.86
Pasadena 16 808 0.0 n/a n/a
West Valley 110 4,212 20.6 $6.13 $6.96
---------------------------------------------------------------------
Subtotal for San Fernando 657 25,520 6.9 $5.93 $6.08
---------------------------------------------------------------------
SANTA CLARITA VALLEY
---------------------------------------------------------------------
Canyon Country 5 148 0.0 n/a n/a
Saugus 1 987 8.3 n/a n/a
Valencia 28 1,141 0.0 n/a n/a
---------------------------------------------------------------------
Subtotal for Santa Clarita Valley 34 2,276 3.6 n/a n/a
---------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 12: Warehouse Rental Space by Submarket, (cont)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (x1000) (%) Net Rent Gross Rent
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
---------------------------------------------------------------------
Alhambra 21 497 4.8 n/a n/a
Arcadia 21 671 10.1 n/a n/a
Azusa 52 1,675 10.0 n/a n/a
Baldwin Park 73 1,711 1.8 n/a n/a
City of Industry 427 24,027 10.1 $3.84 $4.72
Claremont 9 240 0.0 n/a n/a
Covina 27 583 9.8 n/a n/a
Diamond Bar 4 101 7.9 n/a n/a
Duarte/Monrovia 79 2,507 5.3 n/a $4.82
El Monte 78 2,608 4.5 n/a n/a
Glendora/San Dimas/La Verne 81 2,208 9.1 n/a $5.00
Irwindale 63 2,108 2.8 n/a n/a
Monterey Park 48 1,114 8.3 n/a $4.55
Pomona 165 5,506 4.4 n/a $4.34
Rosemead 9 222 0.0 n/a n/a
San Gabriel 7 202 12.9 n/a n/a
South El Monte 122 2,424 1.7 n/a n/a
Temple City 6 171 48.5 n/a n/a
Walnut 53 1,144 1.7 n/a n/a
---------------------------------------------------------------------
Subtotal for San Gabriel Valley 1,345 49,719 7.6 $3.84 $4.69
---------------------------------------------------------------------
SOUTH BAY
---------------------------------------------------------------------
Carson 249 17,766 10.0 $4.14 $4.74
Compton 160 11,210 15.3 $4.17 $4.24
El Segundo 40 1,417 8.0 n/a n/a
Gardena 253 8,216 11.4 $5.38 $4.33
Harbor City 16 366 15.0 n/a n/a
Hawthorne 59 2,190 20.1 $6.04 $5.00
Inglewood 72 2,363 18.0 $6.79 $8.08
LA Unincorporated 17 740 13.1 n/a n/a
Lawndale 7 148 0.0 n/a n/a
Long Beach 164 6,006 11.8 n/a $4.60
Los Angeles/South Bay 132 5,305 9.7 $8.58 $4.42
Lynwood 15 1,223 1.0 n/a n/a
Rancho Dominguez 121 9,764 12.7 $3.99 $4.71
Redondo Beach 18 1,316 0.8 n/a n/a
San Pedro 9 673 0.0 n/a n/a
Signal Hill 34 682 30.5 n/a $5.72
Torrance 170 8,748 13.1 $4.28 $7.46
Wilmington 33 2,029 13.2 n/a $5.54
---------------------------------------------------------------------
Subtotal for South Bay 1,569 80,162 12.1 $4.69 $4.93
---------------------------------------------------------------------
---------------------------------------------------------------------
METRO TOTALS 4,936 233,230 10.6 $4.68 $4.76
---------------------------------------------------------------------
</TABLE>
Rental space (that is, space occupied by more than one tenant, or occupied by a
tenant that is not the owner) in Los Angeles's warehouse market accounts for
about 233.2 million square feet, comprising 68.8% of all warehouse space. In
comparison, about 61.8% of the total industrial market of Los Angeles is rental
space.
For some submarkets we have too few rents quoted to allow a meaningful average,
and we show an 'n/a' for these areas. However, ALL rents are included in the
total metro average.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 13: Distribution of All Warehouse Rental Space by Age and Size
<TABLE>
<CAPTION>
--------------------------------------------------------------
Building Size (in thousands)
10-49 50-99 100-199 200-399 400+ Totals by Age
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Built 1990 - 1996
--------------------------------------------------------------
Stock 4,804 2,100 947 2,797 837 11,485
Availability 13.1% 6.6% 4.5% 23.5% 0.0% 12.8%
Net Rent $6.25 n/a n/a $5.22 n/a $5.46
Gross Rent $5.95 n/a n/a n/a n/a $5.25
--------------------------------------------------------------
Built 1985 - 1989
--------------------------------------------------------------
Stock 12,991 10,199 8,862 7,632 401 40,085
Availability 6.8% 4.0% 6.8% 14.0% 0.0% 7.4%
Net Rent $5.47 $4.76 $4.07 $3.93 n/a $4.29
Gross Rent $5.59 $4.73 $6.23 n/a n/a $5.59
--------------------------------------------------------------
Built 1980 - 1984
--------------------------------------------------------------
Stock 10,428 6,101 5,715 3,524 577 26,345
Availability 9.0% 9.9% 8.2% 23.5% 0.0% 10.8%
Net Rent $4.87 $5.06 $5.20 n/a n/a $4.79
Gross Rent $5.02 $5.25 n/a n/a n/a $4.91
--------------------------------------------------------------
Built 1970 - 1979
--------------------------------------------------------------
Stock 25,032 18,952 21,528 13,113 981 79,606
Availability 9.3% 8.2% 12.3% 13.6% 0.0% 10.4%
Net Rent $5.41 $4.24 $4.35 $4.43 n/a $4.47
Gross Rent $5.26 $5.04 $4.61 $4.33 n/a $4.99
--------------------------------------------------------------
Built Before 1970
--------------------------------------------------------------
Stock 26,490 14,630 15,941 10,166 8,482 75,709
Availability 15.4% 13.1% 10.1% 11.2% 5.7% 12.2%
Net Rent $5.24 $5.79 $4.81 $4.53 n/a $5.06
Gross Rent $4.44 $3.77 $4.34 $3.13 n/a $4.24
--------------------------------------------------------------
Totals by Size
--------------------------------------------------------------
Stock 79,745 51,982 52,993 37,232 11,278 233,230
Availability 11.1% 8.9% 10.1% 14.7% 4.3% 10.6%
Net Rent $5.33 $4.88 $4.52 $4.37 n/a $4.68
Gross Rent $4.94 $4.51 $4.81 $4.23 n/a $4.76
--------------------------------------------------------------
</TABLE>
[GRAPHIC OMITTED]
Distribution of
Warehouse
Rental Space
in Los Angeles
By Age
[GRAPHIC OMITTED]
Distribution of
Warehouse
Rental Space
By Size
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
CURRENT Table 14 gives the historical perspective on the Los
WAREHOUSE Angeles warehouse market. During the last five years
MARKET 61.5% of all new construction has been in warehouse
space. In that period warehouse availability rates have
been higher on average than availability rates in all
industrial space in the MSA.
Table 14: Historic Warehouse Completions and Availability
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail %
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANTELOPE VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Lancaster 0 26.1 0 26.7 0 23.4 0 11.8 0 12.6
Palmdale 25 61.3 0 33.1 0 12.4 0 6.5 0 20.5
-------------------------------------------------------------------------------------------------
Subtotal for Antelope Valley 25 37.6 0 28.8 0 19.8 0 10.1 0 15.6
-------------------------------------------------------------------------------------------------
DOWNTOWN LA
- ------------------------------------------------------------------------------------------------------------------------------------
Bell 0 9.9 0 21.1 0 22.8 0 22.6 0 18.3
Bell Gardens 0 0.0 0 10.1 0 2.7 0 4.3 0 7.9
Commerce 40 21.0 0 27.2 20 13.4 41 4.9 164 10.3
Cudahy 0 38.5 0 32.5 0 32.5 0 32.5 0 57.0
Huntington Park 0 4.4 11 25.8 0 19.1 0 19.4 11 25.0
Los Angeles/Downtown 73 17.4 30 18.5 50 16.2 123 12.2 52 21.3
Maywood 0 0.0 0 0.0 0 0.0 0 0.0 0 100.0
Montebello 0 3.2 0 16.4 0 7.2 0 7.5 34 9.0
Pico Rivera 0 36.0 0 58.9 0 41.2 0 21.6 0 14.0
South Gate 17 8.8 0 17.5 0 18.8 0 17.7 82 15.7
Vernon 0 7.8 38 12.7 0 8.1 0 9.0 114 12.7
-------------------------------------------------------------------------------------------------
Subtotal for Downtown LA 130 14.9 79 19.9 70 13.6 164 9.8 457 15.2
-------------------------------------------------------------------------------------------------
MID-COUNTIES
- ------------------------------------------------------------------------------------------------------------------------------------
Artesia 0 25.6 0 7.3 0 6.5 0 18.6 11 16.7
Bellflower 0 46.5 0 0.0 0 31.3 173 58.0 0 16.9
Cerritos 0 13.9 0 14.0 0 10.5 0 5.2 0 7.7
Downey 0 15.6 0 9.5 0 11.4 0 5.0 0 11.8
La Mirada 0 28.3 0 23.4 0 13.1 0 10.3 0 12.7
Lakewood 0 0.0 0 30.0 0 41.7 0 8.3 0 14.2
Norwalk 0 31.5 0 10.5 0 6.9 0 4.8 0 6.5
Paramount 31 11.4 0 10.9 0 7.6 0 11.4 0 12.0
Santa Fe Springs 516 13.3 0 12.9 0 6.8 155 8.0 360 8.5
Whittier 0 3.5 0 5.8 0 7.4 0 1.3 0 13.5
-------------------------------------------------------------------------------------------------
Subtotal for Mid-Counties 547 15.8 0 14.1 0 9.0 328 8.0 371 9.6
-------------------------------------------------------------------------------------------------
SAN FERNANDO VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Burbank 0 2.5 0 2.3 15 2.0 15 1.1 11 0.8
Central Valley 0 10.9 60 9.0 0 6.3 0 5.0 0 3.0
Glendale 0 9.3 0 4.9 0 5.0 0 3.2 0 2.1
Northeast Valley 0 8.9 15 12.6 0 10.8 0 6.2 29 3.8
Pasadena 0 5.3 0 4.9 0 3.0 0 0.0 0 0.8
West Valley 0 15.3 0 12.4 0 9.7 0 8.5 0 18.2
-------------------------------------------------------------------------------------------------
Subtotal for San Fernando 0 8.8 75 8.6 15 6.9 15 4.5 40 3.9
-------------------------------------------------------------------------------------------------
SANTA CLARITA VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Canyon Country 0 16.1 0 12.7 0 4.4 0 6.3 0 0.0
Saugus 0 22.2 0 9.5 0 9.5 0 13.9 0 8.3
Valencia 131 27.3 0 14.9 0 7.0 0 9.6 0 0.0
-------------------------------------------------------------------------------------------------
Subtotal for Santa Clarita Valley 131 25.2 0 13.2 0 7.6 0 10.8 0 2.8
-------------------------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Los Angeles
- --------------------------------------------------------------------------------
Table 14: Historic Warehouse Completions and Availability, (cont)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail % Cmpltns Avail %
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAN GABRIEL VALLEY
- ------------------------------------------------------------------------------------------------------------------------------------
Alhambra 0 5.1 0 5.3 0 3.4 0 2.9 0 6.6
Arcadia 0 3.3 0 3.0 0 7.6 0 5.0 0 10.9
Azusa 0 6.7 0 7.1 0 10.0 0 8.0 0 10.2
Baldwin Park 0 8.1 0 5.3 0 5.5 0 2.6 39 1.3
City of Industry 216 16.9 419 14.2 0 7.6 0 6.8 326 11.1
Claremont 0 0.0 0 5.9 0 6.2 0 0.0 0 0.0
Covina 0 4.4 0 0.0 0 1.6 0 0.9 0 7.4
Diamond Bar 0 20.5 0 0.0 0 0.0 0 18.6 0 23.3
Duarte/Monrovia 12 15.1 0 6.2 0 6.4 11 2.9 0 6.6
El Monte 61 6.0 0 2.2 0 2.7 27 5.6 0 3.6
Glendora/San Dimas/La Verne 0 8.5 0 7.2 0 8.2 55 6.5 12 11.8
Irwindale 14 9.9 0 10.6 0 8.8 0 3.2 10 3.3
Monterey Park 0 4.0 0 4.3 0 3.4 0 6.1 0 8.9
Pomona 12 7.3 0 7.6 0 8.7 0 5.1 0 6.1
Rosemead 0 1.8 0 1.8 0 1.8 0 7.4 0 0.0
San Gabriel 0 31.7 0 30.3 0 27.8 0 27.6 0 5.2
South El Monte 14 8.8 0 8.2 10 9.2 0 7.0 0 1.9
Temple City 0 26.4 0 34.3 0 20.4 0 0.0 0 42.3
Walnut 0 7.5 0 5.4 0 6.5 0 7.2 0 1.1
-------------------------------------------------------------------------------------------------
Subtotal for San Gabriel Valley 329 12.1 419 10.1 10 7.5 93 6.1 387 8.2
-------------------------------------------------------------------------------------------------
SOUTH BAY
- ------------------------------------------------------------------------------------------------------------------------------------
Carson 0 20.1 58 15.6 0 15.9 0 14.1 0 10.0
Compton 0 21.6 0 22.8 0 15.3 0 16.5 0 16.1
El Segundo 0 11.5 0 12.4 0 12.1 0 6.8 0 7.7
Gardena 0 12.0 0 17.5 129 9.7 0 11.3 0 11.9
Harbor City 0 9.2 0 15.6 0 20.4 0 7.1 0 15.0
Hawthorne 0 21.6 0 34.5 0 23.4 0 22.7 0 20.1
Inglewood 0 23.5 34 25.9 96 19.1 0 13.3 0 18.0
LA Unincorporated 0 51.8 0 32.2 0 33.3 0 7.7 0 12.9
Lawndale 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Long Beach 0 15.3 0 11.0 0 10.9 0 12.7 0 12.6
Los Angeles/South Bay 250 13.8 0 16.2 0 18.4 0 16.1 0 10.5
Lynwood 0 4.2 0 5.6 0 15.9 0 7.0 0 1.0
Rancho Dominguez 90 19.0 0 25.2 0 15.1 0 14.7 0 12.8
Redondo Beach 0 21.9 0 25.4 0 4.7 0 0.0 0 0.8
San Pedro 0 1.9 0 1.9 0 0.0 0 0.0 0 0.0
Signal Hill 0 8.7 0 11.7 0 8.9 0 11.1 0 34.3
Torrance 0 24.7 0 18.0 0 13.0 25 18.6 180 15.7
Wilmington 43 13.3 0 15.0 0 15.1 0 17.8 0 13.2
-------------------------------------------------------------------------------------------------
Subtotal for South Bay 383 18.8 92 18.7 225 14.6 25 14.4 180 12.7
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
LOS ANGELES TOTALS 1,545 14.6 665 15.0 320 10.9 625 9.0 1,435 10.2
-------------------------------------------------------------------------------------------------
</TABLE>
Availability Rates [GRAPHIC OMITTED]
1992-1996
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
[GRAPHIC OMITTED]
MILWAUKEE MARKET ANALYSIS
PRENTISS INDUSTRIAL PORTFOLIO
Milwaukee, Wisconsin
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Milwaukee Market Analysis
Prentiss Industrial Portfolio
Milwaukee, Wisconsin
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Industrial Portfolio located in the
Milwaukee, Wisconsin area.
The subject consists of 17, institutional quality, industrial developments
having a combined total of 1,218,324 SF of net rentable area. The Milwaukee
market has an average occupancy of 96% with an average asking net lease rental
rate of $3.25 PSF/YR. Overall this market area is stabilized and showing
improving rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
================================================================================
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: Airport, Oak Creek, and Northwest
Properties, Milwaukee, WI
Property Description: The Airport Properties include 12
facilities containing a total of
572,953 SF. The Oak Creek Properties
include two warehouse/distribution
centers containing approximately
232,0000 SF. The Northwest
Properties include 3 facilities
containing 413,371 SF.
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 14
Number of Stories: 1
Gross Building Area: 804,953 SF
Net Rentable Area: 804,953 SF
Avg. Year Built: N/A
Condition: Good
Effective Age: N/A
Market Financial Indicators
Current Occupancy: 96.5%
Stabilized Occupancy: 96.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $3.00 - $3.50/SF/YR
Tenant Improvements (New Leases): As-Is
Tenant Improvements (Renewal Leases): As-Is
Leasing Commissions (New Leases): 4.5%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS......................................................ii
TABLE OF CONTENTS............................................................iii
TRADE AREA ANALYSIS............................................................1
COMPETITIVE MARKET TREND ANALYSIS..............................................3
MARKETABILITY CONCLUSIONS......................................................7
ADDENDA
A Improved Comparable Sales
B Demographics
C The Polacheck Company Industrial Market Data
- --------------------------------------------------------------------------------
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
Milwaukee has a fairly well diversified economy with concentrations in the
industries of healthcare, finance and insurance, and various manufacturing
industries. Milwaukee's growth in recent years have been in financial services,
healthcare, and automobile and farm equipment manufacturing.
Annual job growth from 1993 to 1996 was 1.6%, lagging behind the national
average of 2.3% per year. During 1996, 13,200 jobs were added to the Milwaukee
economy, indicating a 1.6% growth rate. From December 1995 to December 1996,
Milwaukee's unemployment rate increased from 3.2% to 3.6%. However, this area
remains one of the nation's tightest job markets.
Location
The trade area is located in Milwaukee within the Brown Deer, Cudahy, and Oak
Creek submarkets. Brown Deer is located in northwest Milwaukee County, while
Cudahy and Oak Creek are in southeast Milwaukee County.
Demographics
Population growth and new household formations have been on a slight upward
trend within the overall subject trade area, while declining slightly in the
local submarkets.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
- --------------------------------------------------------------------------------
Milwaukee Milwaukee-
County Waukesha PMSA
- --------------------------------------------------------------------------------
Population
2001 Estimate 898,572 1,484,901
1996 Estimate 925,398 1,462,453
1990 Census 959,275 1,432,149
1996 - 2001 % Change -2.9% 1.5%
Households
2001 Estimate 346,308 553,637
1996 Estimate 358,001 546,671
1990 Census 373,048 537,722
1996 - 2001 % Change -3.3% 1.3%
2001 Median Household Income $ 39,156 $ 46,555
1996 Median Household Income $ 33,393 $ 39,330
1996 Average Household Income $ 41,692 $ 32,316
1990 Average Home Value $ 74,776 $ 89,654
1990 % College Graduates 19.3% 21.3%
- --------------------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
================================================================================
Trends and Conclusions
The outlook is for relatively stable performance with moderate improvement over
the next several years. As a result, the demand for existing developments is
expected to be good. Generally, the trade area is expected to maintain a
relatively stable growth pattern in the foreseeable future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by The
Polacheck Company, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
<TABLE>
<CAPTION>
=======================================================================================
MARKET STATISTICS
- ---------------------------------------------------------------------------------------
Category Source Brown Deer Cudahy Oak Creek
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Existing Supply (SF X 1,000) (1) 1,906 4,291 8,018
1996 Construction (SF X 1,000) (1) 31 20 259
1995 Construction (SF X 1,000) (1) 0 125 366
1996 Absorption (SF X 1,000) (1) -215 -26 374
1995 Absorption (SF X 1,000) (1) 52 124 281
1996 Occupancy (1) 97.6% 97.7% 97.8%
1997 Occupancy (1) 84.8% 96.6% 99.3%
Average Rent PSF - 1997 (1) $3.25 $3.25 $3.25
Average Rent PSF - 1st Qtr. 1997 (2) $4.82 $4.82 $4.82
- ---------------------------------------------------------------------------------------
Source Codes:
(1) The Polacheck Company
(2) KOLL National Real Estate Index
=======================================================================================
</TABLE>
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Milwaukee area and local submarket over the past five years:
================================================================================
MARKET TRENDS
1995 - 1997
- --------------------------------------------------------------------------------
Brown Deer Cudahy Oak Creek
------------------- -------------- ---------------
Date Occupancy Occupancy Occupancy
- --------------------------------------------------------------------------------
1995 94.8% 97.7% 98.8%
1996 97.6% 97.7% 97.8%
1997 Forecast 84.8% 96.6% 99.3%
- --------------------------------------------------------------------------------
Source: The Polacheck Company
================================================================================
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET RENT TRENDS
In addition to the Polacheck and KOLL surveys, a number of rent comparables have
been surveyed in order to identify the performance trends within the subject's
trade area. CB Commercial surveyed competitive properties and lease transactions
for comparison to the subject. The selected comparable rentals are summarized in
the following summary chart.
<TABLE>
<CAPTION>
================================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- ------------------------------------------------------------------------------------------------
Comp. Pct.
No. Location Size (GBA) Office Base Rent TI's Pct. Occ.
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 4810 North 124th Street, Butler,
WI N/A 10% $2.75, net $0.00 100%
2 7475 South 6th Street, Oak
Creel, WI N/A 100% $2.95 PSF $0.00 100%
3 Highway W Between Highways
32 and 33, Grafton, WI N/A 2% $2.75 PSF $0.00 0%
4 5050 Sylvania, Yorkville, WI 437,000 SF 1%-5% $2.81, net $0.00 65%
5 E/O I-94, Pleasant Prairie, WI N/A 2% $2.80 PSF $0.00 100%
- ------------------------------------------------------------------------------------------------
Compliled by: CB Commercial
================================================================================================
</TABLE>
The asking rental rates of the comparables range from $2.75 to $2.95 per square
foot on a net lease basis. Quoted occupancy rates range from 0% to 100%.
According to Roger Siegel, Vice President and industrial market specialist with
The Polacheck Company, Rental rates for the subject properties should be
somewhat higher than the range exhibited by the rent comparables and a net rate
of $3.25 would be more appropriate based on their quality and location. Rental
rates appear to be stable, and there has been a considerable amount of new
construction in market in recent years. Mr. Siegel warned that there is
currently more space available in the market than has been present in recent
years. He feels the demand which was present in 1995 has now been satisfied and
the market is now in danger of being over-supplied in certain submarkets.
MARKET EXPENSE RATES
The following expense data is reported for the local market area:
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
- --------------------------------------------------------------------------------
NAIOP
COMP 1 MEDIAN
------------- --------------
Location: Milwaukee, WI Midwest Region
Source: (1) (2)
Expense Year: 1997 1996
Effective Gross Income PSF: $4.50 $4.25
Unit of Comparison PSF PSF
------------- --------------
Expenses
Real Estate Taxes $0.75 $0.51
Insurance $0.10 $0.05
General Operating* $0.40 $0.42
Allowance for Replacements $0.00 $0.00
Management Fees $0.13 $0.13
------------- --------------
Total Expenses $1.38 $1.11
* Includes CAM, maintenance and repairs, administrative, and other.
- --------------------------------------------------------------------------------
Source: (1) Discussion with Roger B. Siegel, Vice President and industrial
properties specialist with the Polacheck Company, Milwaukee, WI.
(2) NAIOP 1996
Compiled By: CB Commercial
================================================================================
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
================================================================================
CAPITAL EXPENSES
- --------------------------------------------------------------------------------
Capital Expense Category Range Reported
- --------------------------------------------------------------------------------
Renewal Probability 65% to 80%
Tenant Improvements (New Leases)* As-Is to As-Is
Tenant Improvements (Renewal Leases) As-Is to As-Is
Weighted Average Tenant Improvements As-Is to As-Is
Leasing Commissions (New Leases) 4.0% to 5.0%
Leasing Commissions (Renewal Leases) 0.0% to 2.0%
Weighted Average Leasing Commissions 1.4% to 2.6%
- --------------------------------------------------------------------------------
* Tenant improvement data applies to built out office space only.
Compiled By: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- --------------------------------------------------------------------------------
Sale Date of Size
No. Location Sale (GBA) Price PSF OCC NOI PSF OAR
- --------------------------------------------------------------------------------
1. 11000 West May-94 567,680 $0.00 0% $0.00 $0.00
Theodore Trecker
Way, West Alliss, WI
2. 1 Freeman Lane, Jan-00 412,000 $0.00 0% $0.00 $0.00
Beloit, WI
3. 477 South Douglas Apr-95 198,093 $0.00 0% $0.00 $0.00
Street, Ripon, WI
4. 940 West Grand Dec-94 856,350 $0.00 0% $0.00 $0.00
Avenue, Franklin
Park, IL
5. 505 Northwest Sep-94 490,752 $0.00 0% $0.00 $0.00
Avenue, Northlake,
IL
- --------------------------------------------------------------------------------
Complied by: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
================================================================================
PRENTISS PROPERTIES PORTFOLIO
MARKET RENT CONCLUSIONS
- -------------------------------------------------------------------------------
Category Amount
- -------------------------------------------------------------------------------
Current Occupancy: 96.5%
Stabilized Occupancy: 96.0%
Estimated Absorption: Market is stabilized.
Market Expenses: $1.35/SF/YR
Market Rental Rate: $3.00 - $3.50/SF/YR
Type of Lease: Net Lease
Tenant Impr. Range (New Leases): All As-Is
Tenant Improvements (New Leases)*: As-Is
Tenant Impr. Range (Renewal Leases): All As-Is
Tenant Improvements (Renewal Leases)*: As-Is
Leasing Commis. Range (New Leases): 4.0% - 5.0%
Leasing Commissions (New Leases): 4.5%
Leasing Commis. Range (Renewal Leases): 0.0% - 2.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
- -------------------------------------------------------------------------------
* Applied to built out office area only.
Compiled By: CB Commercial
===============================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
SUMMARY OF COMPARABLE INDUSTRIAL SALES
=============================================================================================================================
Sales Price
Sale Sale Year Building Site Size Percent Sales Per SF of
No. Name/Location Date Built Size (SF) Type (Acre) Office Price Bldg Area OAR
=============================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 05/94 1954 567,680 39.70 19 N/A N/A N/A
11000 West Theodore Trecker Way
West Alliss, WI
2 1974 412,000 24.76 12 N/A N/A N/A
1 Freeman Lane
Beloit, WI
3 04/95 1960 198,093 25.98 1 N/A N/A N/A
477 South Douglas Street
Ripon, WI
4 12/94 1960 856,350 19.51 36 N/A N/A N/A
9401 West Grand Avenue
Franklin Park, IL
5 09/94 1969 490,752 18.20 12 N/A N/A N/A
505 North Northwest Avenue
Northlake, IL
- -----------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Location Data
Property Name:
Location: 11000 West Theodore Trecker Way
City: West Alliss
County:
State/Zip: Wisconsin
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type:
Land Area: 39.700 Acres
Gross Building Area: 567,680 SF
Number of Buildings: N/A
Percent Office Area: 19
Percent Air Conditioned: 19
Clear Ceiling Height: 27'
Year Built: 1954
Land/Building Ratio: 3.05:1
Sprinklered: N/A
Rail Access: N/A
Condition:
Exterior Walls:
Column Spacing: N/A
Loading: dock high
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 05/94
Marketing Time: N/A
Grantor: City of West Alliss
Grantee: Quad Graphics
Document No.: N/A
Sale Price: $4,000,000
Financing:
Cash Equivalent Price: $0
Required Capital Cost: $0
Adjusted Sales Price: $0
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: N/A
Comments
This property was sold by the City of West Alliss to Quad Graphics for
use as a printing facility. Property had environmental problems.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Location Data Property Name:
Location: 1 Freeman Lane
City: Beloit
County:
State/Zip: Wisconsin
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type:
Land Area: 24.760 Acres
Gross Building Area: 412,000 SF
Number of Buildings: N/A
Percent Office Area: 12
Percent Air Conditioned: 12
Clear Ceiling Height: 19' to 30'
Year Built: 1974
Land/Building Ratio: 2.62:1
Sprinklered: N/A
Rail Access: N/A
Condition: Good
Exterior Walls:
Column Spacing: N/A
Loading: dock high
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction:
Marketing Time: N/A
Grantor: U.S. Shoe Corporation
Grantee: Reynolds Aluminum Deutschland
Corporation
Document No.: N/A
Sale Price: $6,000,000
Financing:
Cash Equivalent Price: $0
Required Capital Cost: $0
Adjusted Sales Price: $0
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: N/A
Comments
The seller received $6,450,000 loan of the buyer that is forgivable if
the buyer hires a certain number of employess from Wisconsin. In essence,
the buyer paid only $6,000,000. Thus, adjusted price is $6,000,000.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Location Data
Property Name:
Location: 477 South Douglas Street
City: Ripon
County:
State/Zip: Wisconsin
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type:
Land Area: 25.980 Acres
Gross Building Area: 198,093 SF
Number of Buildings: N/A
Percent Office Area: 1
Percent Air Conditioned: 1
Clear Ceiling Height: 21'
Year Built: 1960
Land/Building Ratio: 5.71:1
Sprinklered: N/A
Rail Access: N/A
Condition: Average
Exterior Walls:
Column Spacing: N/A
Loading: no dock loading
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 04/95
Marketing Time: N/A
Grantor: Pillsbury Company
Grantee: Friday Canning Corporation
Document No.: N/A
Sale Price: $2,400,000
Financing:
Cash Equivalent Price: $0
Required Capital Cost: $0
Adjusted Sales Price: $0
Verification:
Financial Data
Assumptions & Forecast N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: N/A
Comments
This property was bought for use as a canning facility.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Location Data
Property Name:
Location: 9401 West Grand Avenue
City: Franklin Park
County:
State/Zip: Illinois
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type:
Land Area: 19.510 Acres
Gross Building Area: 856,350 SF
Number of Buildings: N/A
Percent Office Area: 36
Percent Air Conditioned: 36
Clear Ceiling Height: 16' to 22'
Year Built: 1960
Land/Building Ratio: 0.99:1
Sprinklered: N/A
Rail Access: N/A
Condition: Fair
Exterior Walls:
Column Spacing: N/A
Loading: dock high
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 12/94
Marketing Time: N/A
Grantor: Franklin Partners
Grantee: Matsushita Electronics Company of
America
Document No.: N/A
Sale Price: $10,000,000
Financing:
Cash Equivalent Price: $0
Required Capital Cost: $0
Adjusted Sales Price: $0
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: N/A
Comments
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Location Data
Property Name:
Location: 505 North Northwest Avenue
City: Northlake
County:
State/Zip: Illinois
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type:
Land Area: 18.200 Acres
Gross Building Area: 490,752 SF
Number of Buildings: N/A
Percent Office Area: 12
Percent Air Conditioned: 12
Clear Ceiling Height: 25'
Year Built: 1969
Land/Building Ratio: 1.62:1
Sprinklered: N/A
Rail Access: N/A
Condition: Average
Exterior Walls:
Column Spacing: N/A
Loading: dock high
Parking: N/A
Sale Data
Transaction Type: Sale
Date of Transaction: 09/94
Marketing Time: N/A
Grantor: American National Bank & Trust Co.
TN #118749-06
Grantee: Zenith Electronics Corporation
Document No.: N/A
Sale Price: $7,400,000
Financing:
Cash Equivalent Price: $0
Required Capital Cost: $0
Adjusted Sales Price: $0
Verification:
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: N/A
Comments
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2 Area 3
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1990 Population 248,709,873 959,275 1,432,149 628,088
1996 Population 265,411,137 925,398 1,462,453 608,599
% White 79.0 72.2 81.6 59.7
% Black 12.2 22.3 14.3 33.1
% American Indian 0.9 0.8 0.6 1.1
% Asian 3.6 1.8 1.5 2.1
% Other 4.3 2.8 2.0 4.0
% Hispanic 10.3 5.8 4.2 7.8
1996 Population by Age:
% 0 - 5 8.6 9.1 8.8 10.1
% 6 - 13 11.3 11.6 11.6 12.5
% 14 - 17 5.4 5.3 5.4 5.6
% 18 - 20 4.7 4.5 4.6 4.8
% 21 - 24 5.8 5.5 5.5 6.0
% 25 - 34 14.5 15.3 14.2 16.1
% 35 - 44 15.7 15.9 16.0 15.5
% 45 - 54 12.3 10.8 12.1 9.8
% 55 - 64 8.5 7.8 8.4 6.9
% 65 - 74 7.3 7.5 7.2 6.8
% 75 - 84 4.5 5.0 4.5 4.4
% 85 + 1.4 1.8 1.6 1.6
Median Age Total Population 34.9 34.3 34.9 32.1
1990 Households 91,947,410 373,048 537,722 240,540
1996 Households 98,045,317 358,001 546,671 232,079
1996 Average Household Size 2.64 2.51 2.62 2.54
1996 Household Income:
%$ 0 - $9,999 12.3 13.2 10.1 17.1
%$ 10,000 - $ 14,999 7.8 8.9 7.2 10.8
%$ 15,000 - $ 24,999 14.7 15.6 13.5 17.5
%$ 25,000 - $ 34,999 14.1 14.5 13.4 15.1
%$ 35,000 - $ 49,999 18.2 18.6 19.3 18.1
%$ 50,000 - $ 74,999 17.7 18.1 21.1 14.9
%$ 75,000 - $ 99,999 7.6 6.3 8.3 4.3
%$l00,000 - $149,999 5.3 3.4 4.9 1.8
%$l50,000 + 2.4 1.5 2.2 0.5
1996 Median Household Income($) 35,822 33,393 39,330 27,862
1996 Median Family Income($) 42,040 40,822 47,686 33,586
1990 Median Home Value($) 79,098 65,423 76,905 54,265
1990 Median Contract Rent($) 374 362 375 341
1990 % White Collar Workers 58.1 58.8 59.7 53.9
1990 % Blue Collar Workers 26.2 26.6 26.9 29.1
1990 % HS Graduate/Some College 54.9 56.9 58.4 56.7
1990 % Bachelor/Graduate Degree 20.3 19.3 21.3 14.8
</TABLE>
Area defined by County
Area defined by MSA
Area defined by Place
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 46 56 35
1996 Employment: 497,016 737,848 306,457
Population:
2001 Projection 898,572 1,484,901 594,316
1996 Estimate 925,398 1,462,453 608,599
1990 Census 959,275 1,432,149 628,088
1990 - 1996 % Change (Growth) -3.5% 2.1% -3.1%
1990 Group Quarters Population 25,849 32,576 18,333
1996 % Population by Race:
White 72.2% 81.6% 59.7%
Black 22.3% 14.3% 33.1%
American Indian, Eskimo & Aleut 0.8% 0.6% 1.1%
Asian or Pacific Islander 1.8% 1.5% 2.1%
Other 2.8% 2.0% 4.0%
Hispanic 5.8% 4.2% 7.8%
1990 % Population by Race:
White 74.9% 82.6% 63.4%
Black 20.4% 13.8% 30.5%
American Indian, Eskimo & Aleut 0.7% 0.6% 0.9%
Asian or Pacific Islander 1.6% 1.3% 1.9%
Other 2.4% 1.7% 3.4%
Hispanic 4.7% 3.6% 6.3%
1996 % Population by Sex:
Male 47.6% 48.3% 47.5%
Female 52.4% 51.7% 52.5%
1990 % Population by Sex:
Male 47.4% 48.1% 47.3%
Female 52.6% 51.9% 52.7%
2001 Pop per Square Mile (Pop Density) 3,719.8 1,017.1 6,185.8
1996 Pop per Square Mile (Pop Density) 3,830.9 1,001.7 6,334.5
1990 Pop per Square Mile (Pop Density) 3,971.1 980.9 6,537.3
Area (Square Miles) 241.6 1,460.0 96.1
Area (Square Kilometers) 625.7 3,781.4 248.8
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
Households:
2001 Projection 346,308 553,637 225,891
1996 Estimate 358,001 546,671 232,079
1990 Census 373,048 537,722 240,540
1990 - 1996 % Change (Growth) -4.0% 1.7% -3.5%
2001 Average Household Size 2.52 2.62 2.55
1996 Average Household Size 2.51 2.62 2.54
1990 Average Household Size 2.50 2.60 2.53
2001 Per Capita Income $ 19,716 21,977 15,944
1996 Per Capita Income $ 16,593 18,428 13,549
1990 Per Capita Income $ 13,572 14,980 11,229
2001 Median Family Income $ 47,868 56,446 38,924
1996 Median Family Income $ 40,822 47,686 33,586
1990 Median Family Income $ 34,067 39,182 28,481
2001 Median Household Income $ 39,156 46,555 32,290
1996 Median Household Income $ 33,393 39,330 27,862
1990 Median Household Income $ 27,867 32,316 23,627
2001 Average Household Income $ 49,686 57,651 40,654
1996 Average Household Income $ 41,692 48,201 34,459
1990 Average Household Income $ 33,914 38,958 28,415
1996 % Household Income:
$ 0 - $9,999 13.2% 10.1% 17.1%
$ 10,000 - $ 14,999 8.9% 7.2% 10.8%
$ 15,000 - $ 24,999 15.6% 13.5% 17.5%
$ 25,000 - $ 34,999 14.5% 13.4% 15.1%
$ 35,000 - $ 49,999 18.6% 19.3% 18.1%
$ 50,000 - $ 74,999 18.1% 21.1% 14.9%
$ 75,000 - $ 99,999 6.3% 8.3% 4.3%
$ 100,000 - $ 149,999 3.4% 4.9% 1.8%
$ 150,000 + 1.5% 2.2% 0.5%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Household Income:
$ 0 - $9,999 16.7% 13.3% 21.2%
$ 10,000 - $ 14,999 9.6% 8.2% 11.2%
$ 15,000 - $ 24,999 18.4% 16.5% 20.0%
$ 25,000 - $ 34,999 16.6% 15.9% 16.6%
$ 35,000 - $ 49,999 19.1% 20.7% 17.5%
$ 50,000 - $ 74,999 13.8% 17.1% 10.6%
$ 75,000 - $ 99,999 3.3% 4.8% 2.1%
$ 100,000 - $ 149,999 1.5% 2.2% 0.6%
$ 150,000 + 0.9% 1.4% 0.4%
1996 % Population by Age:
0 - 5 9.1% 8.8% 10.1%
6 - 13 11.6% 11.6% 12.5%
14 - 17 5.3% 5.4% 5.6%
18 - 20 4.5% 4.6% 4.8%
21 - 24 5.5% 5.5% 6.0%
25 - 34 15.3% 14.2% 16.1%
35 - 44 15.9% 16.0% 15.5%
45 - 54 10.8% 12.1% 9.8%
55 - 64 7.8% 8.4% 6.9%
65 - 74 7.5% 7.2% 6.8%
75 - 84 5.0% 4.5% 4.4%
85 + 1.8% 1.6% 1.6%
Median Age Total Population 34.3 34.9 32.1
Median Age Adult Population 42.2 42.9 40.5
1990 % Population by Age:
0 - 5 9.4% 9.2% 10.3%
6 - 13 11.3% 11.7% 12.0%
14 - 17 5.0% 5.3% 5.1%
18 - 20 4.4% 4.2% 5.1%
21 - 24 6.4% 5.9% 7.1%
25 - 34 18.5% 17.7% 19.0%
35 - 44 14.2% 15.1% 13.4%
45 - 54 8.8% 9.8% 7.9%
55 - 64 8.5% 8.6% 7.7%
65 - 74 7.5% 7.0% 6.8%
75 - 84 4.6% 4.1% 4.2%
85 + 1.5% 1.4% 1.4%
Median Age Total Population 32.3 32.8 30.3
Median Age Adult Population 40.1 40.7 38.4
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 8.5% 8.3% 9.4%
6 - 13 10.8% 10.9% 11.6%
14 - 17 4.9% 5.1% 5.2%
18 - 20 4.2% 4.4% 4.5%
21 - 24 5.2% 5.3% 5.7%
25 - 34 15.0% 14.0% 15.9%
35 - 44 15.6% 15.8% 15.3%
45 - 54 10.8% 12.1% 9.8%
55 - 64 8.0% 8.6% 7.3%
65 - 74 8.1% 7.7% 7.4%
75 - 84 6.1% 5.5% 5.5%
85 + 2.6% 2.3% 2.3%
Female Median Age Total Population 35.8 36.3 33.6
Female Median Age Adult Population 43.5 43.9 41.7
1990 % Female Population by Age:
0 - 5 8.7% 8.7% 9.6%
6 - 13 10.6% 11.1% 11.2%
14 - 17 4.6% 5.0% 4.8%
18 - 20 4.3% 4.1% 5.0%
21 - 24 6.3% 5.8% 7.1%
25 - 34 18.1% 17.4% 18.7%
35 - 44 13.8% 14.9% 13.1%
45 - 54 8.8% 9.8% 8.0%
55 - 64 8.6% 8.6% 7.9%
65 - 74 8.2% 7.6% 7.5%
75 - 84 5.7% 5.1% 5.2%
85 + 2.2% 2.0% 2.0%
Female Median Age Total Population 33.5 33.9 31.5
Female Median Age Adult Population 41.4 41.7 39.4
1990 % Hispanic Population by Type:
Not of Hispanic Origin 95.3% 96.4% 93.7%
Mexican 2.5% 2.0% 3.3%
Puerto Rican 1.5% 1.1% 2.2%
Cuban 0.1% 0.1% 0.1%
Other Hispanic 0.5% 0.4% 0.6%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1990 % Population Enrolled in School (Age 3 & Over):
Preprimary School 6.3% 7.3% 5.6%
Elementary and High School 64.2% 65.6% 64.9 %
College 29.5% 27.1% 29.4%
Total School Enrollment 255,180 382,149 176,633
1990 % Educational Attainment (Age 25 & Over):
Less than Grade 9 8.3% 7.3% 9.8%
Grade 9-12 (No Diploma) 15.4% 13.0% 18.7%
High School Graduate or Equivalency 31.5% 32.1% 31.9%
Some College (No Degree) 19.4% 19.6% 19.0%
Associate Degree 6.0% 6.7% 5.8%
Bachelor Degree 13.1% 14.8% 10.3%
Graduate or Professional Degree 6.2% 6.5% 4.5%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.2% 0.1% 0.2%
Civilian:
Employed 60.7% 64.1% 58.2%
Unemployed 4.4% 3.7% 5.7%
Not In Labor Force 34.7% 32.1% 36.0%
Female Labor Force:
Armed Forces 0.0% 0.0% 0.0%
Civilian:
Employed 54.6% 57.1% 53.0%
Unemployed 3.8% 3.2% 4.9%
Not In Labor Force 41.5% 39.7% 42.1%
1990 % Working Mothers:
Child less than 6 Only 17.6% 17.3% 16.9%
Child 6-17 Only 38.0% 40.2% 35.4%
Child less than 6 & 6-17 13.3% 13.0% 13.5%
Nonworking Mothers 31.2% 29.5% 34.2%
Total Mothers 118,878 184,087 79,960
</TABLE>
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.5% 0.9% 0.5%
Mining 0.1% 0.1% 0.0%
Construction 3.8% 4.5% 3.7%
Manufacturing:
Nondurable Goods 6.8% 7.4% 7.1%
Durable Goods 15.3% 16.7% 15.2%
Transportation 4.4% 4.0% 4.5%
Communications & Public Utilities 2.3% 2.3% 2.3%
Wholesale Trade 4.5% 4.9% 4.0%
Retail Trade 16.9% 16.5% 17.6%
Finance/Insurance/Real Estate 7.9% 7.6% 7.2%
Services:
Business & Repair 5.1% 4.9% 5.3%
Personal 2.4% 2.3% 2.5%
Entertainment & Recreation 1.4% 1.3% 1.4%
Health 10.7% 9.8% 10.4%
Educational 8.1% 7.8% 8.3%
Other Professional & Related 6.6% 6.2% 6.1%
Public Administration 3.4% 2.9% 3.8%
Total 446,630 700,737 274,237
1990 % Occupation:
Executive & Managerial 11.1% 12.3% 9.2%
Professional Specialty 14.3% 14.3% 12.1%
Technical Support 3.6% 3.6% 3.5%
Sales 11.4% 12.0% 10.3%
Administrative Support 18.5% 17.5% 18.8%
Service: Private Household 0.2% 0.2% 0.2%
Service: Protective 1.8% 1.4% 2.1%
Service: Other 12.1% 10.9% 14.1%
Farming, Forestry & Fishing 0.5% 0.8% 0.6%
Precision Production, Craft & Repair 10.2% 11.2% 10.2%
Machine Operator, Assemblers & Inspectors 8.8% 8.6% 10.2%
Transportation & Material Moving 3.8% 3.6% 4.3%
Laborers 3.8% 3.5% 4.4%
White Collar Total 58.8% 59.7% 53.9%
Blue Collar Total 26.6% 26.9% 29.1%
Total Employed 446,630 700,737 274,237
</TABLE>
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 347,347 526,030 221,384
Never Married 36.4% 32.9% 41.2%
Married 50.5% 55.8% 44.3%
Separated 1.8% 1.5% 2.3%
Widowed 3.0% 2.6% 3.0%
Divorced 8.3% 7.3% 9.2%
Total Female: 401,231 586,963 258,631
Never Married 30.4% 27.1% 34.9%
Married 43.6% 49.9% 37.8%
Separated 2.6% 2.1% 3.4%
Widowed 12.9% 11.7% 12.5%
Divorced 10.4% 9.2% 11.3%
1990 Households by Type:
One Person Households 109,528 137,178 73,265
Two or more Person Households:
Family Households:
Married Couple 167,999 283,426 92,773
Male Householder 12,512 16,578 9,117
Female Householder 58,778 69,795 47,649
Nonfamily Households 24,231 30,745 17,736
1990 Family Households With Children
Married Couple Family 75,900 134,557 43,086
Male Householder 5,707 7,668 4,309
Female Householder 41,101 47,726 35,019
1990 Population by Household Type:
Family Households 768,286 1,192,148 495,050
Nonfamily Households 165,140 207,425 114,705
1990 Households With:
Children Under 18 124,037 191,813 83,391
Persons Over 65 91,901 124,207 56,144
Householder Over 65 84,496 113,466 51,404
1990 Average Family Size 3.14 3.16 3.21
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
1990 Median Home Value $ 65,423 76,905 54,265
1990 Average Home Value $ 74,776 89,654 55,806
1990 Median Contract Rent $ 362 375 341
1990 Average Contract Rent $ 375 389 351
1990 Persons In Unit:
1 Person Units 109,528 137,178 73,265
2 Person Units 116,694 170,086 71,320
3 Person Units 60,421 91,419 38,965
4+ Person Units 86,405 139,039 90,557
1990 Housing Unit Counts:
Total Units 390,715 562,031 254,204
% Occupied 95.5% 95.7% 94.6%
% Vacant 4.5% 4.3% 5.4%
% Year Round 4.4% 3.8% 5.2%
% Seasonal 0.2% 0.5% 0.1%
Occupied Units 373,048 537,722 240,540
% Owner Occupied 52.1% 59.4% 44.8%
% Renter Occupied 47.9% 40.6% 55.2%
Vacant Units 17,667 24,309 13,664
% Year Round of Vacant Units 96.5% 88.6% 97.5%
% Seasonal of Vacant Units 3.5% 11.4% 2.5%
1990 Total Housing Units in Structure 390,715 562,031 254,204
1, Detached 44.3% 53.0% 37.0%
1, Attached 4.3% 4.2% 4.8%
2, 20.4% 15.8% 25.3%
3 - 9 12.6% 11.0% 14.0%
10 - 49 11.1% 9.9% 11.1%
50 + 5.2% 4.1% 5.6%
Mobile Home or Trailer 0.4% 0.6% 0.2%
Other 1.7% 1.5% 1.9%
1990 Owner Occupied Housing Units by Year Built 194,221 319,660 107,682
Built 1985 to March, 1990 1.9% 5.3% 0.5%
Built 1980 to 1984 2.1% 3.5% 1.4%
Built 1970 to 1979 8.6% 15.4% 5.8%
Built 1960 to 1969 12.5% 15.2% 10.1%
Built 1950 to 1959 28.2% 24.4% 28.9%
Built 1949 or Earlier 46.6% 36.0% 53.2%
</TABLE>
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Milwaukee County, WI 8/7/97
Area 2 = Milwaukee-Waukesha PMSA
Area 3 = Milwaukee, WI
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 72.6% 76.7% 67.2%
Carpooled 12.0% 11.0% 13.2%
Public Transportation 7.9% 5.2% 11.0%
Other Means 5.7% 4.8% 6.9%
Worked at Home 1.9% 2.2% 1.6%
1990 % Travel Time to Work:
0 - 14 Minutes 31.1% 31.7% 30.2%
15 - 29 Minutes 48.3% 45.2% 47.9%
30 - 59 Minutes 17.8% 20.4% 18.6%
60 - 89 Minutes 1.9% 1.8% 2.3%
90 + Minutes 1.0% 1.0% 1.0%
1990 Households by Number of Vehicles:
1 Vehicle 144,831 182,926 96,207
2 Vehicles 121,218 200,868 65,959
3 Vehicles 28,632 57,103 14,871
4 Vehicles 7,031 15,952 3,515
5 or More Vehicles 2,238 5,906 1,021
Area defined by County
Area defined by MSA
Area defined by Place
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
================================================================================
ADDENDUM C THE POLACHECK COMPANY INDUSTRIAL MARKET DATA
- --------------------------------------------------------------------------------
Addendum C
THE POLACHECK COMPANY INDUSTRIAL MARKET DATA
- --------------------------------------------------------------------------------
<PAGE>
[GRAPHIC OMITTED]
INDUSTRIAL
The Polacheck Company, Inc. is pleased to present the 1997 edition of our
Industrial Market Survey. This year we are labeling the survey as the Southeast
Wisconsin Industrial Market Survey because we have included Racine and Kenosha
Counties in our numbers. The inclusion of these new counties obviously widens
our scope and provides you, our client, with a more accurate picture of our
trading area.
Demand remains strong in all geographic sectors of southeast Wisconsin.
Our large industrial transactions continue to be user-driven. As examples,
we cite the Harley-Davidson purchase of a Briggs and Stratton facility in
Menomonee Falls and the sale by Goodyear Tire and Rubber of a distribution
center in New Berlin to Chr. Hansen Inc.
<PAGE>
Institutional investor influence has gained strength, but availability of
product for these buyers is scarce.
Highlights and Messages
o Occupancy for the six county area is very high at 96.27 percent.
This is an increase from last year's four county rate of 94.36
percent.
o Milwaukee County continues to lose industrial base while all the
other counties have gained.
o The market response to demand has been the creation of product - the
number of available buildings has increased by 26 percent to 215
properties.
o Expansion will continue in all areas with the west and southwest
corridors the most active.
<PAGE>
DISTRIBUTION OF INDUSTRIAL BASE
Milwaukee County remains the entity with the largest industrial base; however,
the decline relative to other counties continues:
o In the four county area, Milwaukee County's share of the industrial
base is 66.8 percent, a decline of two percent from 1966.
o When all six counties are considered, Milwaukee County's share of
the industrial base is 55.98 percent.
[The following table was represented as a bar graph in the printed material]
DISTRIBUTION OF TOTAL INDUSTRIAL SPACE
1995 1996 1996
---- ---- ----
MILWAUKEE COUNTY 69.0% 68.2% 56.0%
WAUKESHA COUNTY 22.0% 22.5% 19.6%
OZAUKEE COUNTY 4.3% 4.5% 3.9%
WASHINGTON COUNTY 4.7% 4.9% 4.4%
KENOSHA COUNTY 0% 0% 4.2%
RACINE COUNTY 0% 0% 12.0%
<PAGE>
SOUTHEASTERN WISCONSIN AREA
VACANCY RATE
Vacancy rates have increased over the past year except for Ozaukee County.
Even with such increases, the occupancy rate exceeds 95 percent.
METROPOLITAN MILWAUKEE INDUSTRIAL SPACE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Total Square Feet Vacancy
County Square Feet Vacant Rate
- ----------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILWAUKEE 129,410,475 130,389,459 131,029,146 6,884,139 4,505,804 4,541,815 5.32 3.46 3.47
WAUKESHA 41,180,063 42,935,372 45,763,433 1,625,987 1,218,626 1,547,237 3.95 2.84 3.38
OZAUKEE 8,330,709 8,583,006 9,176,003 622,262 608,062 531,807 7.47 7.08 5.80
WASHINGTON 8,995,087 9,336,663 10,190,196 559,692 146,636 306,790 6.22 1.57 3.01
KENOSHA 0 0 9,810,920 0 0 498,905 0.00 0.00 5.09
RACINE 0 0 28,085,208 0 0 1,304,532 0.00 0.00 4.64
- ----------------------------------------------------------------------------------------------------------
TOTALS 187,916,334 191,244,500 234,054,906 9,692,080 6,479,128 8,731,086 5.16% 3.39% 3.73%
</TABLE>
[The following table was represented as a bar graph in the printed material]
DISTRIBUTION OF SPACE FOR SALE OR LEASE
1995 1996 1996
---- ---- ----
MILWAUKEE COUNTY 71.0% 69.5% 52.0%
WAUKESHA COUNTY 16.8% 18.8% 17.7%
OZAUKEE COUNTY 6.4% 9.4% 6.0%
WASHINGTON COUNTY 15.8% 2.3% 3.5%
KENOSHA COUNTY 0% 0% 5.7%
RACINE COUNTY 0% 0% 14.9%
BUILDING AVAILABILITY - The number of available buildings has increased to 215,
a jump of 26 percent over last year. It should be noted that this is a large
increase in buildings ranging in size from 10,000-50,000 square feet. This is a
direct response to the industrial shortage, which was indicated in last year's
report.
<PAGE>
INDUSTRIAL SPACE FOR SALE OR LEASE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Building Size No. of % of Sq. Ft. % of
(Square Feet) Buildings Buildings Available Space
1995 1996 1997 1995 1996 1997 1995 1996 1997 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10,000 - 19,999 75 70 84 35.5 40.9 39.1 1,043,842 969,985 1,187,368 10.1 15.0 13.6
20,000 - 49,999 81 64 86 38.4 37.4 40.0 2,381,563 1,890,060 2,500,770 23.0 29.2 29.7
50,000 - 99,999 27 26 30 12.8 15.2 14.0 1,797,379 1,801,605 2,048,730 17.4 27.8 23.4
100,000 - 240,999 24 10 10 11.4 05.8 04.7 3,611,470 1,517,478 1,201,981 34.9 23.4 13.8
250,000 + 4 1 5 01.9 00.6 02.3 1,503,475 300,000 1,702,228 14.5 04.6 19.5
- -----------------------------------------------------------------------------------------------------------------------------
TOTALS 211 171 215 100% 100% 100% 10,337,729 6,479,128 8,731,086 100% 100% 100%
</TABLE>
[The following table was represented as a bar graph in the printed material]
1995 1996 1996
---- ---- ----
10,000-19,999 10.1% 15.0% 13.6%
20,000-49,999 23.0% 29.2% 29.7%
50,000-99,999 17.4% 27.8% 23.4%
100,000-249,999 34.9% 23.4% 13.8%
250,000+ 14.5% 4.6% 19.5%
MARKET OUTLOOK
o The strong demand for product will continue from both users and
investors.
o Business park inventory is being absorbed quickly with a shortage of
sites anticipated by mid-1997.
o If there is a soft spot in the southeast Wisconsin industrial
market, it will be in the Racine/Kenosha corridor, where there are a
number of sites in formal business parks recently made available.
o Milwaukee County continues to talk about industrial development in
the Mitchell International Airport area.
<PAGE>
MILWAUKEE COUNTY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Total Square Feet Vacancy
Square Feet Vacant Rate
- --------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILWAUKEE 129,410,475 130,389,459 131,029,146 6,884,139 4,505,804 4,541,815 5.32% 3.46% 3.47%
BROWN DEER 1,875,818 1,875,818 1,905,818 97,450 45,000 290,674 5.20 2.40 15.25
CUDAHY 4,146,276 4,271,276 4,291,276 96,800 98,232 143,784 2.33 2.30 3.35
FRANKLIN 889,704 889,704 1,347,391 68,960 58,000 34,000 7.75 6.52 2.52
GLENDALE 5,016,254 5,016,254 4,366,254 1,506,981 201,006 314,168 30.04 4.01 7.20
GREENDALE 574,198 574,198 574,198 0 0 15,565 0.00 0.00 2.71
GREENFIELD 129,775 129,775 129,775 0 0 0 0.00 0.00 0.00
HALES CORNERS 17,303 17,303 17,303 0 0 0 0.00 0.00 0.00
MILWAUKEE 87,709,532 88,113,596 88,551,596 4,291,880 3,679,226 3,291,086 4.89 4.18 3.72
OAK CREEK 7,393,404 7,759,324 8,018,324 87,682 172,596 58,145 1.19 2.22 0.73
SHOREWOOD 0 0 0 0 0 0 0.00 0.00 0.00
SOUTH MILW. 2,887,639 2,887,639 2,887,639 100,000 83,000 80,600 3.46 2.87 2.79
ST. FRANCIS 686,952 770,952 820,952 0 0 0 0.00 0.00 0.00
WAUWATOSA 5,424,063 5,424,063 5,424,063 160,768 42,220 180,854 2.96 0.78 3.33
WEST ALLIS 8,509,447 8,509,447 8,544,447 473,618 126,524 122,759 5.57 1.49 1.44
WEST MILW. 4,150,110 4,150,110 4,150,110 0 0 10,780 0.00 0.00 0.26
</TABLE>
o Milwaukee County contains 56 percent of all industrial property in
southeast Wisconsin and 66.8 percent in the previously reported four
county area.
o Milwaukee County continues to lose industrial base to the
surrounding counties.
o Vacancy rate for the county is virtually unchanged from the 1996
rate of 3.46 at a healthy 3.47 percent.
o Of the 15 communities measured, six had an increase in vacancy
rates, five had a decrease and four remained the same.
o The city of Milwaukee has remained a very strong market with an
occupancy rate of 96.3 percent.
o The city of Glendale is sponsoring a major industrial redevelopment
at the site of the former Crown Cork and Seal plant.
[The following table was represented as a bar graph in the printed material]
VACANCY RATES
1995 1996 1997
---- ---- ----
BROWN DEER 5.20% 2.40% 15.26%
CUDAHY 2.33% 2.30% 3.35%
FRANKLIN 7.75% 6.52% 2.52%
GLENDALE 30.04% 4.01% 7.20%
GREENDALE 0% 0% 0%
GREENFIELD 0% 0% 0%
HALES CORNERS 0% 0% 0%
MILWAUKEE 4.89% 4.18% 3.72%
OAK CREEK 1.19% 2.22% 0.73%
SHOREWOOD 0% 0% 0%
SOUTH MILWAUKEE 3.46% 2.87% 2.79%
ST. FRANCIS 0% 0% 0%
WAUWATOSA 2.96% .78% 3.33%
WEST ALLIS 5.7% 1.49% 1.44%
WEST MILWAUKEE 0% 0% .26%
<PAGE>
SUBMARKET
ANALYSIS
[GRAPHIC OMITTED]
<PAGE>
MILWAUKEE COUNTY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Total Square Feet Vacancy
Square Feet Vacant Rate
- --------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILWAUKEE 129,410,475 130,389,459 131,029,146 6,884,139 4,505,804 4,541,815 5.32% 3.46% 3.47%
BROWN DEER 1,875,818 1,875,818 1,905,818 97,450 45,000 290,674 5.20 2.40 15.25
CUDAHY 4,146,276 4,271,276 4,291,276 96,800 98,232 143,784 2.33 2.30 3.35
FRANKLIN 889,704 889,704 1,347,391 68,960 58,000 34,000 7.75 6.52 2.52
GLENDALE 5,016,254 5,016,254 4,366,254 1,506,981 201,006 314,168 30.04 4.01 7.20
GREENDALE 574,198 574,198 574,198 0 0 15,565 0.00 0.00 2.71
GREENFIELD 129,775 129,775 129,775 0 0 0 0.00 0.00 0.00
HALES CORNERS 17,303 17,303 17,303 0 0 0 0.00 0.00 0.00
MILWAUKEE 87,709,532 88,113,596 88,551,596 4,291,880 3,679,226 3,291,086 4.89 4.18 3.72
OAK CREEK 7,393,404 7,759,324 8,018,324 87,682 172,596 58,145 1.19 2.22 0.73
SHOREWOOD 0 0 0 0 0 0 0.00 0.00 0.00
SOUTH MILW. 2,887,639 2,887,639 2,887,639 100,000 83,000 80,600 3.46 2.87 2.79
ST. FRANCIS 686,952 770,952 820,952 0 0 0 0.00 0.00 0.00
WAUWATOSA 5,424,063 5,424,063 5,424,063 160,768 42,220 180,854 2.96 0.78 3.33
WEST ALLIS 8,509,447 8,509,447 8,544,447 473,618 126,524 122,759 5.57 1.49 1.44
WEST MILW. 4,150,110 4,150,110 4,150,110 0 0 10,780 0.00 0.00 0.26
</TABLE>
o Milwaukee County contains 56 percent of all industrial property in
southeast Wisconsin and 66.8 percent in the previously reported four
county area.
o Milwaukee County continues to lose industrial base to the
surrounding counties.
o Vacancy rate for the county is virtually unchanged from the 1996
rate of 3.46 at a healthy 3.47 percent.
o Of the 15 communities measured, six had an increase in vacancy
rates, five had a decrease and four remained the same.
o The city of Milwaukee has remained a very strong market with an
occupancy rate of 96.3 percent.
o The city of Glendale is sponsoring a major industrial redevelopment
at the site of the former Crown Cork and Seal plant.
[The following table was represented as a bar graph in the printed material]
VACANCY RATES
1995 1996 1997
---- ---- ----
BROWN DEER 5.20% 2.40% 15.26%
CUDAHY 2.33% 2.30% 3.35%
FRANKLIN 7.75% 6.52% 2.52%
GLENDALE 30.04% 4.01% 7.20%
GREENDALE 0% 0% 0%
GREENFIELD 0% 0% 0%
HALES CORNERS 0% 0% 0%
MILWAUKEE 4.89% 4.18% 3.72%
OAK CREEK 1.19% 2.22% 0.73%
SHOREWOOD 0% 0% 0%
SOUTH MILWAUKEE 3.46% 2.87% 2.79%
ST. FRANCIS 0% 0% 0%
WAUWATOSA 2.96% .78% 3.33%
WEST ALLIS 5.7% 1.49% 1.44%
WEST MILWAUKEE 0% 0% .26%
<PAGE>
[LOGO] CB
COMMERCIAL
KANSAS CITY MARKET ANALYSIS
PRENTISS INDUSTRIAL PORTFOLIO
Kansas City, Missouri
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Kansas City Market Analysis
Prentiss Industrial Portfolio
Kansas City, Missouri
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Industrial Portfolio located in
Kansas City , Missouri.
The subject consists of three, institutional quality, industrial developments
having a combined total of 1,221,707 SF of net rentable area. The Kansas City
market has an average occupancy of 94% with a weighted average rental rate of
$4.41 PSF/YR. Overall this market area is stabilized and showing improving
rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: Various locations, Kansas City, MO
Property Description: Airworld Drive contains 200,000 ne
rentable square feet. 107th Terrace
contains 96,700 net rentable square
feet. Northland Park is composed of fou
warehouse/distribution facilities
containing 925,007 net rentable square
feet.
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 6
Number of Stories: 1
Gross Building Area: 1,221,707 SF
Net Rentable Area: 1,221,707 SF
Avg. Year Built 1972-1978
Condition: Good
Effective Age: 20 Years
Market Financial Indicators
Current Occupancy: 95.0%
Stabilized Occupancy: 95.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $0.84 - $1.19 PSF
Tenant Improvements (New Leases): $0.25 Per SF
Tenant Improvements (Renewal Leases): $0.00 Per SF
Leasing Commissions (New Leases): 6.0%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS.....................................................ii
TABLE OF CONTENTS...........................................................iii
TRADE AREA ANALYSIS...........................................................1
COMPETITIVE MARKET TREND ANALYSIS.............................................3
MARKETABILITY CONCLUSIONS.....................................................7
ADDENDA
A Improved Comparable Sales
B Demographics
C CB Commercial Industrial Market Statistics
D Torto Wheaton Research Data
================================================================================
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
The population of the Kansas City metropolitan statistical area was 1.66 million
people making it the 27th largest in the country as of the end of first quarter
1996. The Kansas City, MO-KS MSA consist of counties and cities in both Kansas
and Missouri. The four counties in Kansas are Johnson, Leavenworth, Miami, and
Wyandotte and the central cities are Kansas, Olathe, and Leavenworth. The seven
counties in Missouri are Cass, Clay, Clinton, Jackson, Lafayette, Platte, and
Ray.
The median per capita personal income in 1995 for the MSA was $24,469 which is
5% above the national level. The cost of doing business is the same as the
national average. Industries concentrated in Kansas City include local &
interurban passenger transit, railroad transportation, printing/publishing and
communication.
The top major employers of the area are Sprint, Health Midwest, Hallmark Cards,
University of Kansas & Medical Center and Ford Motor. Other employers include
Trans World Airlines, Allied-Signal and Black & Veatch.
Location
The trade area is located in the city of Kansas City . The city of Kansas City
is located on the border between northern Kansas and Missouri. The submarket is
located in North Kansas City Missouri.
Demographics
Population growth and new household formations have been on an upward trend
within the overall subject trade area, while declining somewhat in the local
submarket.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
==============================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
==============================================================
North Kansas Kansas City
City, MO MSA
--------------------------------------------------------------
Population
2001 Estimate 3,457 1,746,758
1996 Estimate 3,770 1,680,964
1990 Census 4,130 1,582,875
1996 - 2001 % Change -8.3% 3.9%
Households
2001 Estimate 2,017 667,815
1996 Estimate 2,193 644,060
1990 census 2,396 608,459
1996 - 2001 % Change -8.0% 3.7%
2001 Median Household Income $24,543 $43,984
1996 Median Household Income $22,289 $37,621
1996 Average Household Income $27,438 $47,283
1990 Average Home Value $56,091 $77,455
1990% College Graduates 11.0% 23.2%
--------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
==============================================================
Trends and Conclusions
The outlook is for relatively stable performance with moderate improvement over
the next several years. As a result, the demand for existing developments is
expected to be good. Generally, the trade area is expected to maintain a
relatively stable growth pattern in the foreseeable future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
=========================================================================
MARKET STATISTICS
-------------------------------------------------------------------------
Category Source Kansas City Submarket
-------------------------------------------------------------------------
Existing Supply (SF X 1,000) (1) 191,108 34,382
(3) 196,848 34,855
Under Construction (SF X 1,000) (1) 0 0
(3) 119 0
Construction - 2 YR Annual Forecast
(SF X 1,000) (1) 2,576 134
Absorption - 3 YR Avg. (SF X 1,000) (1) 4,471 567
Absorption - 2 YR Annual Forecast
(SF X 1,000) (1) 1,968 258
Current Occupancy (1) 95.6% 95.4%
(3) 94.2% 90.2%
Occupancy - 2 YR Forecast (1) 95.1% 96.1%
Average Rent PSF - Current (1) $4.00 $3.21
(2) $4.41
(3) $4.41 $3.16
Average Rent PSF - 2 YR Forecast (1) $4.59 $3.66
Annual Rent Inflation 2 YR Forecast (1) 7.1% 6.8%
Source Codes:
-------------------------------------------------------------------------
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
=========================================================================
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Kansas City area and local submarket over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
=======================================================================
MARKET TRENDS
1992 - 1996
=======================================================================
Kansas City Clay Co. Submarket
------------------ ---------------------
Date Rent PSF Occupancy Rent PSF Occupancy
-----------------------------------------------------------------------
1992 $2.94 90.6% N/A 92.4%
1993 $3.27 89.2% N/A 90.9%
1994 $3.43 91.2% N/A 92.5%
1995 $3.40 94.6% N/A 93.1%
1996 $4.00 95.6% $3.21 95.4%
1997 Forecast $4.29 96.2% $3.66 96.1%
-----------------------------------------------------------------------
Source: Torto Wheaton Research
=======================================================================
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
<TABLE>
<CAPTION>
==============================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERITES PORTFOLIO
- ----------------------------------------------------------------------------------------------
Comp.
No. Location Size GRA) Base Rent Ex. Reimb. TI's Pct. Occ.
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 825 Armourdale, 47,277 SF $3.35 Industrial Not 80%
Kansas City, KS Gross Applicable
2 8800 Sunshine Road, 99,800 SF $2.25 Industrial N/A 100%
Kansas City, KS Gross
3 2935 - 2929 Chrysler 52,000 SF $2.50 Industrial N/A 46%
Road, Kansas City, KS Gross
4 5300 Kansas Avenue, 400,000 SF $1.35 Net $0.00 100%
Kansas City, KS
5 3111 Fiberglass, 141,000 SF $2.25 Industrial As is 100%
Kansas City, KS Gross
- -----------------------------------------------------------------------------------------------
Compiled by: CB Commercial
===============================================================================================
</TABLE>
The asking rental rates of the comparables range from $1.35 to $3.35 per square
foot. Quoted occupancy rates range from 46% to 100%. Rental rates appear to be
relatively stable at this time and there is no new construction in the local
submarket. However, there is new construction in Johnson County, a southwest
submarket.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
MARKET EXPENSE RATES
================================================================================
The following industry survey expense data is reported for the local market
area:
================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
================================================================================
NAIOP
COMP I COMP 2 MEDIAN
------------ ------------- -------
Tulsa, OK (4 Oklahoma City Midwest
Location: props.) (20 props.) Region
NRA (SF): 373,721 1,344,634
Expense Year: 1996 1996 1996
Effective Gross Income PSF: $4.59 $3.28 $4.25
Unit of Comparison PSF PSF PSF
------------ ------------- --------
Expenses
Real Estate Taxes $0.39 $0.20 $0.51
Insurance $0.05 $0.04 $0.05
General Operating* $0.58 $0.49 $0.42
Allowance for Replacements $0.00 $0.00 $0.00
Management Fees $0.17 $0.11 $0.13
----- ----- -----
Total Expenses $1.19 $0.84 $1.11
* Includes CAM, maintenance and repairs, administrative, and other.
- --------------------------------------------------------------------------------
Source: Actual operating statements, BOMA Experience Exchange Report 1996,
and IREM Income/Expense Analysis Report 1998
Compiled By: CB Commercial
================================================================================
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
---------------------------------------------------------------------
CAPITAL EXPENSES
=====================================================================
Capital Expense CatEgory Range Reported
---------------------------------------------------------------------
Renewal Probability 50% to 75%
Tenant Improvements (New Leases) $0.00 PSF to $2.50 PSF
Tenant improvements (Renewal Leases) $0.00 PSF to $1.00 PSF
Weighted Average Tenant Improvements $0.00 PSF to $1.38 PSF
Leasing Commissions (New Leases) 4.5% to 6.0%
Leasing Commissions (Renewal Leases) 2.0% to 3.0%
Weighted Average Leasing Commissions 3.3% to 3.8%
----------------------------------------------------------------------
Compiled By: CB Commercial
======================================================================
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
Sale Date of Size
No. Location Sale (GBA) Price PSF OCC NOI PSF OAR
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2925 Fairfax Jun-96 282,000 $7.23 100% $0.92 12.76%
Trafficway, Kansas
City, KS
2 2850 Fairfax Trfwy, Jun-96 92,000 $8.48 0% $0.00 0.00%
Kansas City, KS
3 450 Funston, Kansas Mar-96 52,220 $17.23 100% $1.77 10.27%
City, KS
4 1001 W. Old Mar-96 89,320 $16.96 100% $1.55 9.11%
Highway 56, Olathe,
KS
5 14th & Osage, Apr-95 276,891 $7.61 0% $0.00 0.00%
Kansas City, MO
- -------------------------------------------------------------------------------------------
Compiled by: CB Commercial
===========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
=========================================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
=========================================================================
Category Amount
-------------------------------------------------------------------------
Current Occupancy: 95.0%
Stabilized Occupancy: 95.0%
Estimated Absorption: Market is stabilized.
Expenses (Range of Comparable Data): $0.84 -$1.19 PSF
Market Expenses: $1 .10/SF/YR
Market Rental Rate: $2.50 - $3.00 PSF
Type of Lease: Industrial Gross
Tenant Impr. Range (New Leases): $0.00 - $2.50 PSF
Tenant Improvements (New Leases): $0.25/SF
Tenant Impr. Range (Renewal Leases): $0.00 -$1.00 PSF
Tenant Improvements (Renewal Leases): $0.00/SF
Leasing Commis. Range (New Leases): 4.5% - 6.0%
Leasing Commissions (New Leases): 6.0%
Leasing Commis. Range (Renewal Leases): 2.0% - 3.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
-------------------------------------------------------------------------
Compiled By: CB Commercial
=========================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
SUMMARY OF COMPARABLE INDUSTRIAL SALES
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Price
Sale Sale Year Building Site Size Percent Sales Per SF of
No. Name / Location Date Built Size (SF) Type (Acre) Office Price Bldg Area OAR
====================================================================================================================================
1 06/96 1955 282,000 Bulk Warehouse 20.00 9 $2,040,000 $7.23 12.76%
2925 Fairfax Trafficway
Kansas City,KS
2 Massy Ferguson 06/96 1950 92,000 Distribution 4.10 8 $780,000 $8.48 N/A
2850 Fairfax Trfwy
Kansas City,KS
3 Browning Ferris Industries 03/96 1960 52,220 Distribution 3.44 10 $900,000 $17.23 10.27%
450 Funston
Kansas City,KS
4 Twin City Tool 03/96 1968 89,320 Manufacturing 10.00 8 $1,514,500 $16.96 9.11%
1001 W. Old Highway 56
Olathe,KS
5 04/95 1970 276,891 Distribution 21.83 6 $2,106,000 $7.61 N/A
14th & Osage
Kansas City,MO
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Compiled by: CB Commercial
- --------------------------------------------------------------------------------
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Location Data
Property Name:
Location: 2925 Fairfax Trafficway
City: Kansas City
County: Wyandotte
State/Zip: Kansas
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Bulk Warehouse
Land Area: 20.000 Acres
Gross Building Area: 282,000 SF
Number of Buildings: 2
Percent Office Area: 9
Percent Air Conditioned: 9
Clear Ceiling Height: 16'
Year Built: 1955
Land/Building Ratio: 3.09:1
Sprinklered: Yes
Rail Access: Rail loading
Condition: Average
Exterior Walls: Brick Veneer
Column Spacing: 20' X 49', 33'
Loading: Dock and grade
Parking: Open adequate
Sale Data
Transaction Type: Listing
Date of Transaction: 06/96
Marketing Time: N/A
Grantor: N/A
Grantee: N/A
Document No.: N/A
Sale Price: $2,000,000
Financing:
Cash Equivalent Price: $2,000,000
Required Capital Cost: $40,000
Adjusted Sales Price: $2,040,000
Verification: Fred Boardman
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 100%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
--------- ---------
Potential Gross Income: $451,200 $1.60
Vacancy and Credit Loss: $22,560 $0.08
Effective Gross Income: $428,640 $1.52
Expenses: $168,400 $0.60
Net Operating Income: $260,240 $0.92
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap
Overall Capitalization Rate (OAR): 12.76 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 4.76
Operating Expense Ratio (OER): 39.29 %
Price Per Square Foot: $7.23
Comments
This two building facility was constructed in stages between 1922 and
1960. The owner is replacing a portion of the roof which will cost
approximately $40,000. According to the broker, the property has no
signficant environmental problems, with the exception of some subsoil
water contamination which is in the process of being cured. The property
is currently leased for a one year period.
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Location Data
Property Name: Massy Ferguson
Location: 2850 Fairfax Trfwy
City: Kansas City
County: Johnson County
State/Zip: Kansas
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Distribution
Land Area: 4.100 Acres
Gross Building Area: 92,000 SF
Number of Buildings: N/A
Percent Office Area: 8
Percent Air Conditioned: 8
Clear Ceiling Height: 13
Year Built: 1950
Land/Building Ratio: 1.94:1
Sprinklered: No
Rail Access: Yes
Condition: Average
Exterior Walls: Masonry
Column Spacing: N/A
Loading: Grade and Dock
Parking: Open, adequate
Sale Data
Transaction Type: Listing
Date of Transaction: 06/96
Marketing Time: 36 months
Grantor: N/A
Grantee: N/A
Document No.: N/A
Sale Price: $780,000
Financing: Cash to Seller
Cash Equivalent Price: $780,000
Required Capital Cost: $0
Adjusted Sales Price: $780,000
Verification: Pat McGannan
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: N/A N/A
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $8.48
Comments
This property has been on the market for two years. The listing price was
reduced from $900,000 ($9.78 per square foot). The improvements were
constructed in the late 1940's and expanded in the late 1950's. The
listing broker indicated the property is in average to above average
condition considering its age. There is currently a contract on the
property at an undisclosed price.
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Location Data
Property Name: Browning Ferris Industries
Location: 450 Funston
City: Kansas City
County: Wyandotte
State/Zip: Kansas
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Distribution
Land Area: 3.440 Acres
Gross Building Area: 52,220 SF
Number of Buildings: N/A
Percent Office Area: 10
Percent Air Conditioned: 10
Clear Ceiling Height: 18
Year Built: 1960
Land/Building Ratio: 2.87:1
Sprinklered: Wet
Rail Access: Yes
Condition: Good
Exterior Walls: Masonry
Column Spacing: 30' X 25', 40'
Loading: Dock and grade
Parking: Open, adequate
Sale Data
Transaction Type: Sale
Date of Transaction: 03/96
Marketing Time: 12 months
Grantor: Bromberg & Henri L. Bromberg Jr.
Grantee: Browning Ferris Industries
Document No.: VOLUME 3804/0631
Sale Price: $900,000
Financing: Cash to Seller
Cash Equivalent Price: $900,000
Required Capital Cost: $0
Adjusted Sales Price: $900,000
Verification: Richard Peach/CB Commerical
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 100 %
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
-------- ------
Potential Gross Income: $135,772 $2.60
Vacancy and Credit Loss: $6,789 $0.13
Effective Gross Income: $128,983 $2.47
Expenses: $36,554 $0.70
Net Operating Income: $92,429 $1.77
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap
Overall Capitalization Rate (OAR): 10.27%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): 6.98
Operating Expense Ratio (OER): 28.34%
Price Per Square Foot: $17.23
Comments
Approximately one half the building was constructed 1953 and expanded in
1967. The property is in good condition.
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Location Data
Property Name: Twin City Tool
Location: 1001 W. Old Highway 56
City: Olathe
County: Johnson
State/Zip: Kansas
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Manufacturing
Land Area: 10.000 Acres
Gross Building Area: 89,320 SF
Number of Buildings: N/A
Percent Office Area: 8
Percent Air Conditioned: 8
Clear Ceiling Height: 18' - 29'; Effec. 21
Year Built: 1968
Land/Building Ratio: 4.88:1
Sprinklered: 100%, wet system
Rail Access: N/A
Condition: Average
Exterior Walls: Masonry
Column Spacing: 40'X40', 20"X60
Loading: Docks with levelers
Parking: Open, adequate
Sale Data
Transaction Type: Sale
Date of Transaction: 03/96
Marketing Time: 12 months
Grantor: Cresticon Inc.
Grantee: Reliable Cap and Closure
Document No.: N/A
Sale Price: $1,482,500
Financing: Cash to Seller
Cash Equivalent Price: $1,482,500
Required Capital Cost: $32,000
Adjusted Sales Price: $1,514,500
Verification: Rule and Co. Appraisal Files
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 100%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
--------- ------
Potential Gross Income: $148,250 $1.66
Vacancy and Credit Loss: $7,413 $0.08
Effective Gross Income: $140,838 $1.58
Expenses: $2,817 $0.03
Net Operating Income: $138,021 $1.55
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap
Overall Capitalization Rate (OAR): 9.11 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 10.75
Operating Expense Ratio (OER): 2.00 %
Price Per Square Foot: $16.96
Comments
The property was constructed in two stages. The first section
contains 63,320 square feet of manufacturing/warehouse and has an 18
foot ceiling height. The second section was constructed in 1980. This
area has a 29 foot ceiling height. The overall construction is a
combination of masonry block with brick veneer, and metal panels. The
weighted average of the improvements is 24.5 years.
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Location Data
Property Name:
Location: 14th & Osage
City: Kansas City
County: Wyandotte
State/Zip: Missouri
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Distribution
Land Area: 21.830 Acres
Gross Building Area: 276,891 SF
Number of Buildings: 2
Percent Office Area: 6
Percent Air Conditioned: 6
Clear Ceiling Height: 27
Year Built: 1970
Land/Building Ratio: 3.43:1
Sprinklered: Yes
Rail Access: No
Condition: Average
Exterior Walls: Steel
Column Spacing: N/A
Loading: Dock and Grade
Parking: Open, adequate
Sale Data
Transaction Type: Sale
Date of Transaction: 04/95
Marketing Time: N/A
Grantor: Colgate-Palmolive Development Corp.
Grantee: EXLTUBE
Document No.: N/A
Sale Price: $2,106,000
Financing: Cash to Seller
Cash Equivalent Price: $2,106,000
Required Capital Cost: $0
Adjusted Sales Price: $2,106,000
Verification: CB Commercial - Richard Peach
Financial Data
Assumptions & Forecast: Owner/User
================================================================================
CB COMMERCIAL
<PAGE>
INDUSTRIAL BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): N/A %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $7.61
Comments
Colgate-Palmolive previously converted the building from a steel
manufacturing plant to a product distribution center, however, the buyer
planned to convert the property back to a manufacturing facility for steel
tubing.
================================================================================
CB COMMERCIAL
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Population 248,709,873 4,130 1,582,875
1996 Population 265,411,137 3,770 1,680,964
% White 79.0 93.7 83.6
% Black 12.2 2.9 13.1
% American Indian 0.9 0.6 0.6
% Asian 3.6 1.7 1.4
% Other 4.3 1.1 1.3
% Hispanic 10.3 4.4 3.3
1996 Population by Age:
% 0 - 5 8.6 5.6 8.8
% 6 - 13 11.3 6.3 11.8
% 14 - 17 5.4 2.5 5.3
% 18 - 20 4.7 2.5 4.4
% 21 - 24 5.8 4.1 5.3
% 25 - 34 14.5 19.1 14.3
% 35 - 44 15.7 15.3 16.5
% 45 - 54 12.3 11.6 12.8
% 55 - 64 8.5 9.2 8.4
% 65 - 74 7.3 11.6 6.8
% 75 - 84 4.5 9.0 4.1
% 85 + 1.4 3.2 1.4
Median Age Total Population 34.9 41.0 35.0
1990 Households 91,947,410 2,396 608,459
1996 Households 98,045,317 2,193 644,060
1996 Average Household Size 2.64 1.71 2.56
1996 Household Income:
% $ 0 - $9,999 12.3 15.5 10.3
% $ 10,000 - $ 14,999 7.8 13.6 6.8
% $ 15,000 - $ 24,999 14.7 29.2 14.3
% $ 25,000 - $ 34,999 14.1 19.1 14.6
% $ 35,000 - $ 49,999 18.2 13.9 19.8
% $ 50,000 - $ 74,999 17.7 5.1 19.3
% $ 75,000 - $ 99,999 7.6 2.1 7.9
% $100,000 - $149,999 5.3 1.1 4.9
% $150,000+ 2.4 0.4 2.2
1996 Median Household Income ($) 35,822 22,289 37,621
1996 Med an Family Income ($) 42,040 27,696 45,454
1990 Median Home Value ($) 79,098 53,950 66,347
1990 Median Contract Rent ($) 374 296 343
1990 % White Collar Workers 58.1 64.0 62.8
1990 % Blue Collar Workers 26.2 23.1 23.5
1990 % HS Graduate/Some College 54.9 62.5 59.0
1990 % Bachelor/Graduate Degree 20.3 11.0 23.2
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 35 58
1996 Employment: 10,213 738,036
Population:
2001 Projection 3,457 1,746,758
1996 Estimate 3,770 1,680,964
1990 Census 4,130 1,582,875
1990 - 1996 % Change (Growth) -8.7% 6.2%
1990 Group Quarters Population 16 32,316
1996 % Population by Race:
White 93.7% 83.6%
Black 2.9% 13.1%
American Indian, Eskimo & Aleut 0.6% 0.6%
Asian or Pacific Islander 1.7% 1.4%
Other 1.1% 1.3%
Hispanic 4.4% 3.3%
1990 % Population by Race:
White 95.3% 84.4%
Black 1.8% 12.7%
American Indian, Eskimo & Aleut 0.5% 0.5%
Asian or Pacific Islander 1.4% 1.1%
Other 1.0% 1.3%
Hispanic 2.7% 2.9%
1996 % Population by Sex:
Male 44.5% 48.5%
Female 55.5% 51.5%
1990 % Population by Sex:
Male 44.0% 48.3%
Female 56.0% 51.7%
2001 Pop per Square Mile (Pop Density) 793.8 323.1
1996 Pop per Square Mile (Pop Density) 865.6 310.9
1990 Pop per Square Mile (Pop Density) 948.3 292.8
Area (Square Miles) 4.4 5,406.7
Area (Square Kilometers) 11.3 14,003.3
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas Market Quest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2= Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
Households:
2001 Projection 2,017 667,815
1996 Estimate 2,193 644,060
1990 Census 2,396 608,459
1990 - 1996 % Change (Growth) -8.5% 5.9%
2001 Average Household Size 1.71 2.57
1996 Average Household Size 1.71 2.56
1990 Average Household Size 1.72 2.55
2001 Per Capita Income $17,748 21,810
1996 Per Capita Income $16,029 18,472
1990 Per Capita Income $14,113 15,160
2001 Median Family Income $30,497 53,142
1996 Median Family Income $27,696 45,454
1990 Median Family Income $24,673 38,131
2001 Median Household Income $24,543 43,984
1996 Median Household Income $22,289 37,621
1990 Median Household Income $19,856 31,560
2001 Average Household Income $30,278 55,991
1996 Average Household Income $27,438 47,283
1990 Average Household Income $24,061 38,622
1996 % Household Income:
$ 0 - $ 9,999 15.5% 10.3%
$ 10,000 - $ 14,999 13.6% 6.8%
$ 15,000 - $ 24,999 29.2% 14.3%
$ 25,000 - $ 34,999 19.1% 14.6%
$ 35,000 - $ 49,999 13.9% 19.8%
$ 50,000 - $ 74,999 5.1% 19.3%
$ 75,000 - $ 99,999 2.1% 7.9%
$ 100,000 - $ 149,999 1.1% 4.9%
$ 150,000+ 0.4% 2.2%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2= Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Household Income:
$ 0 - $ 9,999 18.4% 12.9%
$ 10,000 - $ 14,999 15.2% 8.1%
$ 15,000 - $ 24,999 28.7% 17.5%
$ 25,000 - $ 34,999 19.4% 16.9%
$ 35,000 - $ 49,999 11.4% 19.5%
$ 50,000 - $ 74,999 5.0% 16.4%
$ 75,000 - $ 99,999 0.8% 4.9%
$ 100,000 - $ 149,999 0.7% 2.4%
$ 150,000 + 0.4% 1.4%
1996 % Population by Age:
0 - 5 5.6% 8.8%
6 - 13 6.3% 11.8%
14 - 17 2.5% 5.3%
18 - 20 2.5% 4.4%
21 - 24 4.1% 5.3%
25 - 34 19.1% 14.3%
35 - 44 15.3% 16.5%
45 - 54 11.6% 12.8%
55 - 64 9.2% 8.4%
65 - 74 11.6% 6.8%
75 - 84 9.0% 4.1%
85 + 3.2% 1.4%
Median Age Total Population 41.0 35.0
Median Age Adult Population 46.5 42.8
1990 % Population by Age:
0 - 5 5.6% 9.2%
6 - 13 5.3% 11.9%
14 - 17 2.5% 5.3%
18 - 20 3.1% 3.9%
21 - 24 6.7% 5.3%
25 - 34 19.8% 18.2%
35 - 44 13.2% 15.8%
45 - 54 10.0% 10.4%
55 - 64 10.2% 8.3%
65 - 74 12.1% 6.7%
75 - 84 8.5% 3.7%
85+ 2.9% 1.3%
Median Age Total Population 40.1 32.9
Median Age Adult Population 45.4 40.6
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 4.8% 8.3%
6 - 13 4.8% 11.1%
14 - 17 2.5% 5.0%
18 - 20 2.6% 4.2%
21 - 24 3.9% 5.1%
25 - 34 18.0% 14.0%
35 - 44 13.6% 16.4%
45 - 54 11.1% 12.8%
55 - 64 9.5% 8.6%
65 - 74 13.0% 7.4%
75 - 84 11.8% 5.0%
85+ 4.4% 2.1%
Female Median Age Total Population 44.8 36.3
Female Median Age Adult Population 49.6 43.8
1990 % Female Population by Age:
0 - 5 4.5% 8.7%
6 - 13 4.4% 11.2%
14 - 17 2.2% 5.0%
18 - 20 3.2% 3.8%
21 - 24 6.4% 5.3%
25 - 34 17.9% 17.9%
35 - 44 12.7% 15.5%
45 - 54 9.1% 10.3%
55 - 64 10.7% 8.5%
65 - 74 14.0% 7.3%
75 - 84 10.9% 4.6%
85 + 3.9% 1.8%
Female Median Age Total Population 43.9 33.9
Female Median Age Adult Population 49.2 41.6
1990 % Hispanic Population by Type:
Not of Hispanic Origin 97.3% 97.1%
Mexican 2.1% 2.2%
Puerto Rican 0.0% 0.1%
Cuban 0.2% 0.1%
Other Hispanic 0.4% 0.5%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria ` Page 5 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School
(Age 3 & Over):
Preprimary School 12.9% 8.3%
Elementary and High School 45.2% 66.6%
College 41.9% 25.1%
Total School Enrollment 681 402,457
1990 % Educational Attainment
(Age 25 & Over):
Less than Grade 9 11.6% 6.1%
Grade 9-12 (No Diploma) 14.9% 11.6%
High School Graduate or Equivalency 33.0% 31.7%
Some College (No Degree) 23.8% 21.8%
Associate Degree 5.7% 5.5%
Bachelor Degree 9.4% 15.7%
Graduate or Professional Degree 1.6% 7.5%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.3% 0.6%
Civilian:
Employed 62.2% 65.0%
Unemployed 3.5% 3.8%
Not In Labor Force 34.0% 30.6%
Female Labor Force:
Armed Forces 0.0% 0.1%
Civilian:
Employed 56.8% 58.7%
Unemployed 2.2% 3.0%
Not In Labor Force 41.0% 38.2%
1990 % Working Mothers:
Child less than 6 Only 27.4% 18.0%
Child 6-17 Only 34.0% 42.3%
Child less than 6 & 6-17 21.1% 13.0%
Nonworking Mothers 17.5% 26.6%
Total Mothers 365 212,637
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.6% 1.5%
Mining 0.0% 0.1%
Construction 4.1% 5.4%
Manufacturing:
Nondurable Goods 12.2% 7.2%
Durable Goods 9.5% 7.9%
Transportation 7.5% 6.2%
Communications & Public Utilities 1.5% 3.7%
Wholesale Trade 8.7% 5.6%
Retail Trade 19.4% 16.4%
Finance/Insurance/Real Estate 8.1% 8.5%
Services:
Business & Repair 4.7% 4.9%
Personal 3.7% 2.9%
Entertainment & Recreation 0.6% 1.3%
Health 7.3% 8.9%
Educational 2.4% 7.0%
Other Professional & Related 5.3% 7.3%
Public Administration 4.2% 5.2%
Total 2,246 784,951
1990 % Occupation:
Executive & Managerial 15.1% 13.2%
Professional Specialty 6.1% 14.0%
Technical Support 4.1% 3.9%
Sales 13.8% 12.8%
Administrative Support 25.0% 18.9%
Service: Private Household 0.7% 0.3%
Service: Protective 1.8% 1.7%
Service: Other 10.5% 10.4%
Farming, Forestry & Fishing 0.0% 1.3%
Precision Production, Craft & Repair 7.7% 10.0%
Machine Operator, Assemblers & Inspectors 8.9% 5.6%
Transportation & Material Moving 4.6% 3.9%
Laborers 1.9% 3.9%
White Collar Total 64.0% 62.8%
Blue Collar Total 23.1% 23.5%
Total Employed 2,246 784,951
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2 = Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 1,562 583,740
Never Married 30.5% 26.8%
Married 44.9% 60.2%
Separated 2.2% 1.7%
Widowed 3.5% 2.3%
Divorced 18.9% 9.0%
Total Female: 2,101 644,668
Never Married 24.8% 21.3%
Married 33.2% 53.9%
Separated 2.7% 2.1%
Widowed 20.8% 11.2%
Divorced 18.5% 11.5%
1990 Households by Type:
One Person Households 1,281 158,006
Two or more Person Households:
Family Households:
Married Couple 671 335,885
Male Householder 46 17,674
Female Householder 237 68,334
Nonfamily Households 161 28,560
1990 Family Households With Children
Married Couple Family 203 164,845
Male Householder 20 9,798
Female Householder 135 47,124
1990 Population by Household Type:
Family Households 2,487 1,328,347
Nonfamily Households 1,627 222,212
1990 Households With:
Children Under 18 370 224,168
Persons Over 65 781 130,584
Householder Over 65 747 119,826
1990 Average Family Size 2.55 3.10
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2= Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Median Home Value $53,950 66,347
1990 Average Home Value $56,091 77,455
1990 Median Contract Rent $296 343
1990 Average Contract Rent $326 356
1990 Persons In Unit:
1 Person Units 1,281 158,006
2 Person Units 722 195,957
3 Person Units 235 104,691
4+ Person Units 390 149,805
1990 Housing Unit Counts:
Total Units 2,616 663,910
% Occupied 91.6% 91.6%
% Vacant 8.4% 8.4%
% Year Round 8.1% 8.1%
% Seasonal 0.3% 0.2%
Occupied Units 2,396 608,459
% Owner Occupied 25.7% 65.6%
% Renter Occupied 74.3% 34.4%
Vacant Units 220 55,451
% Year Round of Vacant Units 95.9% 97.2%
% Seasonal of Vacant Units 4.1% 2.8%
1990 Total Housing Units in Structure 2,616 663,910
1, Detached 31.7% 66.9%
1, Attached 5.4% 4.9%
2, 8.2% 3.2%
3-9 35.9% 10.4%
10-49 17.7% 8.7%
50+ 0.0% 2.8%
Mobile Home or Trailer 0.0% 2.6%
Other 1.1% 0.6%
1990 Owner Occupied Housing Units by Year Built 615 398,982
Built 1985 to March, 1990 1.3% 10.7%
Built 1980 to 1984 1.3% 7.0%
Built 1970 to 1979 2.4% 19.5%
Built 1960 to 1969 6.0% 18.8%
Built 1950 to 1959 16.3% 19.7%
Built 1949 or Earlier 72.7% 24.3%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = North Kansas City, MO 8/7/97
Area 2= Kansas City MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 77.6% 79.8%
Carpooled 10.9% 12.6%
Public Transportation 5.6% 2.1%
Other Means 4.9% 2.7%
Worked at Home 1.0% 2.8%
1990 % Travel Time to Work:
0 - 14 Minutes 41.9% 28.7%
15 - 29 Minutes 41.6% 42.6%
30 - 59 Minutes 14.8% 25.6%
60 - 89 Minutes 0.3% 2.1%
90+ Minutes 1.4% 1.0%
1990 Households by Number of Vehicles:
1 Vehicle 1,228 200,952
2 Vehicles 639 247,916
3 Vehicles 60 79,663
4 Vehicles 7 21,495
5 or More Vehicles 11 6,218
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM C CB COMMERCIAL INDUSTRIAL MARKET STATISTICS
- --------------------------------------------------------------------------------
Addendum C
CB COMMERCIAL INDUSTRIAL MARKET STATISTICS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
KANSAS CITY INDUSTRIAL MARKET
Metropolitan Overview by County
Second Quarter 199?
<TABLE>
<CAPTION>
======================================================================================================================
County Jackson Johnson Clay Wyandotte Platte Total
======================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------
BASE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base SF 91,585,554 33,665,015 34,855,219 31,661,628 3,621,092 196,846,133
% of Base 46.53% 17.10% 17.71% 16.08% 1.84% 100.00%
- ----------------------------------------------------------------------------------------------------------------------
AVAILABLE
- ----------------------------------------------------------------------------------------------------------------------
Available SF 4,903,700 1,462,549 3,425,576 1,324,352 95,234 11,367,159
% Available 5.35% 4.34% 9.83% 4.18% 2.63% 5.77%
- ----------------------------------------------------------------------------------------------------------------------
ABSORPTION
- ----------------------------------------------------------------------------------------------------------------------
Sold 287,893 150,866 0 82,740 0 534,999
Lease 94,981 169,210 9,000 5,592 28,106 367,341
Absorption-YJD 382,874 320,076 9,000 88,332 28,106 902,340
% of Total Absorption 46.29% 38.70% 1.09% 10.68% 3.40% 100.00%
*Activity Index 1.00% 2.26% 0.06% 0.66% 1.85% 100.00%
- ----------------------------------------------------------------------------------------------------------------------
ABSORPTION BY BLDG TYPE
- ----------------------------------------------------------------------------------------------------------------------
Manufacturing 149,250 22,159 0 0 0 171,409
R&D 0 23,644 0 0 0 23,644
Warehouse 148,640 254,873 9,000 88,332 7,942 508,787
Special Purpose 84,984 19,400 0 0 20,164 124,548
- ----------------------------------------------------------------------------------------------------------------------
CONSTRUCTION
- ----------------------------------------------------------------------------------------------------------------------
Total BTS 0 0 0 0 0 0
Total SPEC 0 119,223 0 0 0 119,223
Total Construction 0 119 223 0 0 0 119,223
- ----------------------------------------------------------------------------------------------------------------------
SALE & LEASE RATE
- ----------------------------------------------------------------------------------------------------------------------
Asking Lease Rate $3.50 $5.92 $3.16 $3.79 $5.22 $4.41
Asking Sale Price $22.68 $41.62 $19.92 $22.73 N/A $25.59
======================================================================================================================
* Activity Index=Zone Absorption YTD / % of Zone Base
Compiled By: CB Commercial
=======================================================================================================================
</TABLE>
<PAGE>
===============================================================================
ADDENDUM D TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum D
TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
KANSAS CITY
- --------------------------------------------------------------------------------
Overview The population of the Kansas City metropolitan statistical area was
1.66 million people making it the 27th largest in the country and
the 26th largest of the markets we follow as of the end of first
quarter 1996.
The Kansas City, MO-KS MSA consist of counties and cities in both
Kansas and Missouri. The four counties in Kansas are Johnson,
Leavenworth, Miami, and Wyandotte and the central cities are Kansas,
Olathe, and Leavenworth. The seven counties in Missouri are Cass,
Clay, Clinton, Jackson, Lafayelle, Plafte, and Ray.
The median per capita personal income in 1995 for the MSA was
$24,469 which is 5% above the national level. The cost of doing
business the same as the national average.
Industries concentrated in Kansas City include local & interurban
passenger transit, railroad transportation, printing/publishing and
communication. By comparing the percentage of total employment each
industry commands to the national percentage we can determine some
of the highly concentrated industries.
The top major employers of the area are Sprint, Health Midwest,
Hallmark Cards, University of Kansas & Medical Center and Ford
Motor. Other employers include Trans World Airlines, Allied-Signal
and Black & Veatch.
The following table gives a basic overview of the Kansas City
Industrial Market statistics, by building type. Warehouses comprise
the largest part (54.5%) of the market, with manufacturing
facilities next at 30.3%. Availability ranges from 2.4% in
manufacturing space to 6.4% in warehouse properties. Kansas City's
total industrial availability ranks 4th in the nation, while it
ranks 36th in rent level.
--------------------------------------------------------------
Total
Industrial Warehouse R & D Manufacturing Other
- --------------------------------------------------------------------------------
Base (SFxlOOO) 191,106 104,108 3,766 57,973 25,259
Availability 4.4% 6.4% 5.5% 2.4% 0.4%
Current TW Rent
Index $4.00 $4.00 $5.99 n/a n/a
Availability Rank* 4 9 13 9 5
Rent Rank* 36 36 44 n/a n/a
- --------------------------------------------------------------------------------
* Rank out of 53 MSAs
Data as of 4th Quarter, 1996 VI. 397 (c) Copyright 1997, CBC/
Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
THE ECONOMY Of the markets we follow, Kansas City ranks 25th in terms of
number of jobs, employing an estimated 889,030 total workers.
Over the last 10 years employment has grown by 2.0%, while
in the last year it grew by 2.8%. The average figures
for our 53 MSAs are 1.5% and 2.0% respectively.
[The following table was depicted as a Pie Graph in the printed material]
Services 29% Govt. 15% Other 5% Mfg. 12% TCU 8%
Wholesale 7% Retail 18% FIRE 7%
While all sectors of an economy are important, it is the
manufacturing and distribution sectors that are most
relevant to the industrial market Because these sectors
utilize space very differently, we do not combine them into
one 'industrial employment' category, but treat them separately
in our analysis.
Table I below presents the current employment levels and location
quotients for the major industry categories as well as
historic growth rates over the last 10 years, last four quarters,
and forecasted rates for the next 10 years.
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Average Annual Growth Rates: Kansas City & 52 MSA Average
Employment Locaton Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Kansas City 52 MSAs Kansas City 52 MSAs Kansas City 52 MSAS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 63.07 1.01 1.0 0.6 1.2 1.1 1.0 1.0
Government(Civilian) 131.52 1.01 2.0 1.2 1.3 0.2 0.7 0.6
Manufacturing 109.21 0.94 -0.8 -1.1 1.9 0.4 -0.1 -0.1
Retail Trade 155.90 1.01 1.9 1.4 2.0 2.3 1.7 1.8
Services 254.85 0.91 4.5 3.7 4.4 3.4 3.1 2.8
Transportation & Public Utilities 69.82 1.39 2.4 1.6 3.3 1.3 1.2 1.2
Wholesale Trade 60.80 1.10 0.5 1.0 1.4 2.3 0.6 1.3
------------------------------------------------------------------------------------------------
Total Employment 889.03 2.0 1.5 2.8 2.0 1.6 1.6
------------------------------------------------------------------------------------------------
Distribution Employment 82.40 1.27 0.7 1.4 2.1 2.4 0.5 1.4
-------------------------------------------------------------------------------------------------
Source: Regional Financial Associates, CBC/Torto Wheaton Research
Data as of 1st Quarter, 1995
</TABLE>
- -------------------------------- Manufacturing employment in Kansas City
Economic Performance currently stands at 109,210 workers. Over
(Rank out of 52) the last 10 years it has declined 0.8%
- -------------------------------- annually, while in the last year it has
Total Employment: 25 grown 1.9%. Distribution employment is
current level currently at a level of 82,400 workers. It
- -------------------------------- has averaged an annual increase of 0.7% over
Total Employment: 30 the last 10 years, with an increase of 2.1%
% growth over last 10 years in the last year.
- --------------------------------
Total Employment: 18 Although historic employment information
% growth over last year provides an important context in which to
- -------------------------------- understand an economy, the direction and
Total Employment: 27 magnitude of future employment growth is of
% growth next 10 years vital importance. The forecast from Regional
- -------------------------------- Financial Associates for total employment in
Kansas City calls for an annual growth of
1.6% over the next 10 years. Note especially
the contrast of the future rate with the
2.0% average growth rate for the last 10
years.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
MARKET With changes in distribution systems in the last 15 years,
TRENDS there has been much interest in the increasing consolidation
of distribution into large warehouses ('big boxes') in
central locations. With this consolidation there will be
'winning' markets providing warehousing to 'losing' markets.
By following trends in localization and specialization, the
effects of the new distribution systems can be more fully
understood.
Warehouse Localization occurs when distribution employment grows more
quickly in the MSA than in the nation. Specialization is a
measure of the percentage of total employment devoted to
distribution. Areas with high specialization in distribution
and those with increasing localization in distribution are
likely providing warehousing for a larger region.
The following graph shows the level of specialization in
Kansas City and the Nation. Because the slope of Kansas City's
graph is falling faster than that of the Nation, we see that
warehousing is not becoming localized in Kansas City.
[The following table was depicted as a Line Graph in the printed material]
Distribution
Employment
Specialization
Kansas City
53 MSAs
Manufacturing Much discussion has been generated by the decline of
manufacturing in the United States. The question arises as to
how the manufacturing sector of real estate can survive while
manufacturing employment has been shrinking so steadily. The
answer lies in productivity. While there are fewer workers
manufacturing goods, each worker is producing more each year.
It is the goods produced that require space for manufacturing
and storage.
The following graph shows a times series of the level of
manufacturing employment, along with our productivity index
for Kansas City: both are indexed to 100 in 1980. The
Productivity Index is a measure of output per manufacturing
worker.
[The following table was depicted as a Line Graph in the printed material]
Relative
Productivity vs.
Mfg Employment
1980 = 100
Productivity
Mfg Employment
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
THE Our Outlook for the Kansas City MSA is presented here on
INDUSTRIAL an annual frequency, and in the next table on a
OUTLOOK semiannual frequency.
Table 2: Annual History and Forecast
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Employment Net Avail. TRW Rent Index
Productivity Mfg Distribution Stock Completions Absorption Rate Level Inflatlon
Index {x1OOO) (x1OOO) (SFx1OOO) (SFx1OOO) (SFx1OOO) (%) ($) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
History 1977 45.9 117.2 66.5 146,406 2,707
1978 44.1 122.2 70.9 151,949 5,543
1979 46.0 124.9 72.7 156,772 4,823 1.6 1.85
1980 43.7 116.8 70.2 160,017 3,245 952 3.0 2.23 20.5
1981 45.7 119.0 70.0 161,679 1,682 -328 4.2 2.07 -7.2
1982 46.6 112.9 67.6 169,886 8,207 7,013 4.7 1.88 -9.2
1983 52.6 112.9 67.2 170,972 1,086 -3,581 7.4 1.98 5.3
1984 54.1 120.1 71.4 172,598 1,626 1,678 7.3 2.36 19.2
1985 55.3 121.4 73.0 174,103 1,505 2,266 6.8 2.61 10.6
1986 55.6 117.8 76.5 176,365 2,262 -538 8.3 2.78 6.5
1987 60.1 108.9 78.9 182,435 6,070 5,566 8.3 3.14 13.0
1988 59.8 111.7 79.8 185,644 3,209 3,871 7.8 2.98 -5.7
1989 59.6 110.9 81.3 187,388 1,744 109 8.6 2.86 -3.4
1990 59.1 108.6 79.0 188,465 1,077 2,492 7.8 2.97 3.9
1991 58.8 105.5 76.5 188,835 370 -2,491 9.3 3.27 10.1
1992 61.2 104.8 76.0 189,148 313 95 9.4 2.94 -10.0
1993 61.4 105.4 75.5 189,591 443 -2,253 10.8 3.27 11.2
1994 62.3 105.5 78.2 189,892 301 4,066 8.8 3.43 4.9
1995 62.6 107.2 80.7 190,885 993 7,396 5.4 3.40 -0.9
1996 62.5 109.2 82.4 191,106 221 2,120 4.4 4.00 17.7
Forecast 1997 64.2 109.7 82.8 192,028 922 2,070 3.8 4.29 7.3
1998 65.4 109.4 83.1 196,256 4,229 1,865 4.9 4.59 7.0
1999 66.4 109.4 83.5 201,694 5,438 2,000 6.5 4.75 3.5
2000 67.4 109.3 83.9 207,005 5,311 2,168 7.8 4.79 0.8
2001 68.3 109.1 84.4 211,346 4,341 2,182 8.7 4.77 -O.4
2002 69.3 108.9 84.9 214,394 3,048 2,153 9.0 4.74 -O.6
=================================================================================================================================
</TABLE>
[The following table was depicted as a Line Graph in the printed material]
Historic and
Forecasted
Rent
Inflation
Kansas City
53 MSAs
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
Table 3: Semiannual History and Forecast
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Mfg Distribution Net
Employment Employment Stock Completions Absorption Availability TW Rent Index
(x1OOO) (x1OOO) (SFx1OOO) (SFx1OOO) (SFx1OOO) Rate (%) Nominal Real*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1991.1 102.9 77.8 188,701 236 -1,103 8.5 3.12 3.65
1991.2 105.5 76.5 188,835 134 -1,388 9.3 3.27 3.76
1992.1 105.1 76.6 188,984 149 324 9.2 3.10 3.51
1992.2 104.8 76.0 189,148 164 -229 9.4 2.94 3.28
1993.1 105.8 74.4 189,372 224 -1,501 10.3 3.10 3.42
1993.2 105.4 75.5 189,591 219 -752 10.8 3.27 3.56
1994.1 106.1 76.7 189,713 122 3,144 9.2 3.35 3.60
1994.2 105.5 78.2 189,892 179 922 8.8 3.43 3.63
1995.1 107.2 80.2 190,427 535 5,058 6.4 3.41 3.56
1995.2 107.2 80.7 190,885 458 2,338 5.4 3.40 3.51
1996.1 107.9 81.8 191,051 166 -989 6.0 3.69 3.74
1996.2 109.2 82.4 191,106 55 3,109 4.4 4.00 4.00
Forecast 1997.1 109.6 82.7 191,106 0 1,168 3.8 4.12 4.05
1997.2 109.7 82.8 192,028 922 902 3.8 4.29 4.15
1998.1 109.5 83.0 193,892 1,865 918 4.2 4.46 4.25
1998.2 109.4 83.1 196,256 2,364 947 4.9 4.59 4.30
1999.1 109.4 83.3 198,919 2,664 973 5.7 4.69 4.32
1999.2 109.4 83.5 201,694 2,774 1,027 6.5 4.75 4.31
2000.1 109.3 83.7 204,427 2,734 1,078 7.2 4.78 4.26
2000.2 109.3 83.9 207,005 2,577 1,090 7.8 4.79 4.20
2001.1 109.2 84.2 209,329 2,324 1,094 8.3 4.78 4.13
2001.2 109.1 84.4 211,346 2,017 1,088 8.7 4.77 4.05
2002.1 109.0 84.6 213,032 1,686 1,080 8.9 4.75 3.97
2002.2 108.9 84.9 214,394 1,362 1,073 9.0 4.74 3.89
==========================================================================================================
</TABLE>
* Real rents shown in 1996 dollars.
================================== Kansas City is the 17th largest
Economic Performance industrial market we follow in terms
(Rank out of 52) of size, and has grown 2.3 million
================================== square feet since 1991. Net absorption
Distribution Employment: 48 has averaged 1.1 million square feet
Avg. Forecast Growth Rate per six-month period for the last five
- ---------------------------------- years, and is forecasted to average
Manufacturing Employment: 44 1.0 million square feet per six-month
Avg. Forecast Growth Rate period over the forecast horizon. Real
- ---------------------------------- rents, i.e., rents adjusted for
Availability: Current 4 inflation as of the second half of
- ---------------------------------- 1996, average $4.00 currently; they
Availability: End-of-Forecast 36 are expected to fall to $3.89 by the
- ---------------------------------- end of our forecast period.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
[The following table was depicted as a Line Graph in the printed material]
Relative
Distribution Employment
Performance
1986 = 100
Kansas City
53 MSAs
[The following table was depicted as a Line Graph in the printed material]
Relative
Net Absorption
Performance
(Demand / Occupied Stock)
Kansas City
53 MSAs
[The following table was depicted as a Line Graph in the printed material]
Relative
Completions
Performance
Kansas City
53 MSAs
Data as of the 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
THE Tables 4 through 7 present our forecast for the submarkets of
SUBMARKET Kansas City over the next 24 months. We employ a 'shared-down'
OUTLOOK approach in our submarket forecasts, based on both current and
historical market factors. From these market factors we determine
the probability that tenants will lease space or investors will
build new space, within each submarket. The probabilities are then
applied to our overall metro forecast to derive the share of net
absorption or completions.
Table 4: Submarket Forecast of Demand
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------------- ---------------------------
Current Long-Term Avg.* 3-Year Avg. Estimated Avg.
Occupied Percent Annual Net Percent Annual Net Percent Annual Net Percent
Stock of Absorption of Absorption of Absorption of
(x1OOO) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clay 32,800 18.0 85 5.0 567 12.7 258 13.1
Jackson 86,139 47.1 550 32.3 2,109 47.2 739 37.6
Johnson 31,207 17.1 731 42.9 611 13.7 585 29.7
Platte 3,182 1.7 102 6.0 128 2.9 158 8.0
Wyandotte 29,416 16.1 234 13.7 1,056 23.6 228 11.6
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
KANSAS CITY TOTALS 182,724 100.0 1,701 100.0 4,471 100.0 1,968 100.0
----------------------------------------------------------------------------------------------------------------
* Long term net absorption is an estimate of net absorption over the last 15 years. See the Appendix for a
complete methodology.
</TABLE>
- --------------------------------------------------------------------------------
We provide forecasts only in those submarkets where we have
determined that there is sufficient stock of space or where
there is currently space under construction.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 5: Submarket Forecast of Supply
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
----------------------------------------------------------------------------- ---------------------------
Historic Avg. Estimated Avg.
Annual Percent SF Under Percent Projects Percent Annual Percent
Completions of Construction of Planned of Completions of
(x1OOO) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clay 123 6.3 0 0.0 0 0.0 134 5.2
Jackson 652 33.6 0 0.0 0 0.0 713 27.7
Johnson 777 40.0 0 0.0 50 10.00 1,304 50.6
Platte 117 6.0 0 0.0 0 0.0 128 5.0
Wyandotte 271 13.9 0 0.0 0 0.0 296 11.5
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
KANSAS CITY TOTALS 1,940 100.0 0 0.0 50 100.00 2,576 100.0
----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------- The 3-year average annual net absorption is
Noteworthy Submarkets calculated from the current period going
in Kansas City back 3 years. Likewise, the forecast of
================================= average annual net absorption is calculated
Largest in Size Jackson from the current period going forward 2
- --------------------------------- years. When the Outlook is produced
Largest Share of mid-year, the time periods referenced are
Long-Term Demand Johnson also mid-year time periods.
- ---------------------------------
Largest Share of For the first year of our supply forecast
Forecasted Demand Jackson (see Table 5) we use the actual square feet
- --------------------------------- under construction as reported by the local
Largest Share of Fore- CB Commercial office. After the first year,
casted Completions Johnson our econometric model predicts the new
- --------------------------------- supply based on market factors.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
Table 6: Submarket Rent and Availability Outlook
<TABLE>
<CAPTION>
Current and Historic Factors 2-Yr Forecast
-------------------------------------------- ----------------------------------------
TW Rent Index
1993 1996 1996 -----------------
Availability Availability TW Rent Availability Avg. Annual
(%) (%) Index (%) Level Rent Inflation
- ------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Clay 9.1 4.6 $3.21 3.9 $3.66 6.8
Jackson 10.6 4.3 $3.80 4.2 $4.37 7.3
Johnson 7.8 3.8 $4.78 7.6 $5.53 7.5
Platte 21.0 9.8 $4.12 7.6 $4.50 4.4
Wyandotte 14.7 4.4 $4.87 4.8 $5.58 7.0
-------------------------------------------- ----------------------------------------
-------------------------------------------- ----------------------------------------
KANSAS CITY TOTALS 10.8 4.4 $4.00 4.9 $4.59 7.1
-------------------------------------------- ----------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
=================================== A forecast of availability rates is
Noteworthy Submarkets derived from a forecast of demand and
in Kansas City supply. A new base is determined by
=================================== adding the estimated new supply to the
Highest Current Rent Wyandotte existing base, and then adding the
- ----------------------------------- forecast of net absorption to the
Largest Forecasted occupied base to calculate a new
Decrease in Avail. SF Platte occupied base. From this, a new
- ----------------------------------- availability rate may be derived.
Largest Forecasted Johnson Rental rates, in turn, are dependent
Increase in Rents upon availability rates and are
- ----------------------------------- calculated last.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 7: Properties Under Construction
The following lists properties due in 1997; the list may be
incomplete.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Name/Adresses/Owner Size (sf) Year Due Property Type Asking Rent Sale Price
-------------------------------------------------------------------------------------
</TABLE>
There are no industrial properties currently under
construction in Kansas City.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
CURRENT The Kansas City MSA has been divided, for
INDUSTRIAL reporting purposes, into a total of five smaller
MARKET submarkets defined by the local CB Commercial
office. The following pages include tables and
graphs displaying information for the total
industrial market of Kansas City, along with
separate sections devoted to the warehouse and
rental warehouse markets. Similar information is
also available upon request for the manufacturing
and R & D markets; our full clients receive this
information as part of the Electronic Outlook.
[The following table was depicted as a Bar Graph in the printed material]
Owner Renter
Distribution of
Industrial Space
by Tenant Type
The size of the current industrial market in Kansas City is
191.1 million square feet, consisting of about 2,947
properties which include both single buildings and
complexes. Industrial properties are often single tenant and
occupied by the owner, but there are also a significant
number of rental properties.
We classify properties as rental structures if they have
more than one tenant or the single tenant is not the owner.
Generally speaking, the availability rate in rental
properties is higher than that in the total of industrial
properties. The first graph on this page illustrates the
division of total industrial space in Kansas City into
renter vs. owner/user properties.
[The following table was depicted as a Pie Graph in the printed material]
R & D 2% Whse 55% Mfg 30% Other 13%
Distribution of
Industrial Space
by Tenant Type
The two pie charts show the distribution of all industrial,
space in Kansas City by property type and by size. In todays
market it is common for warehouse properties to occupy the
majority of industrial space. Note how Kansas City compares
to the typical market, in which the smallest properties
(below 50,000 square feet) make up the largest portion
of industrial space, while the largest properties
(over 400,000 square feet) form the smallest segment of the
market.
Finally, the bar graph at the bottom of this page
illustrates the pattern of construction in Kansas City's
industrial market, by showing the distribution of space
by age, or year built.
[The following table was depicted as a Bar Graph in the printed material]
Distribution of Industrial Space by Property Type (Year Built)
Pre 1970 1975 1980 1985 1990
1970 to to to to to
1974 1979 1984 1989 1996
[The following table was depicted as a Pie Graph in the printed material]
400+ 29% 10-49 25% 50-99 15% 100-199 17% 200-399 14%
Distribution of
Industrial Space
by Size (SFxlOOO)
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
Table 8: Total Industrial Space by Submarket
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (x1OOO) (%) Net Rent Gross Rent
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Clay 404 34,382 4.6 n/a $2.54
Jackson 1,336 90,009 4.3 $2.71 $3.33
Johnson 701 32,440 3.8 $5.05 $5.07
Platte 83 3,505 9.8 n/a $4.69
Wyandotte 423 30,770 4.4 n/a $2.82
------------------------------------------------------------------------
------------------------------------------------------------------------
KANSAS CITY TOTALS 2,947 191,106 4.4 $3.07 $3.35
------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Please note that rents are quoted as either net or gross. In
many areas rents in better quality space tends to be quoted
as net, while rents in lower quality space tend to be quoted
as gross; therefore it is not unusual for average net rents
to be higher than average gross rents.
For some submarkets we have too few rents quoted to allow a
meaningful average, and we show an 'n/a' for these areas.
However, ALL rents are included in the total metro average
rents.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
HISTORIC No market study is complete without the historical
INDUSTRIAL perspective. This table contains annual completions and
MARKET availability rates for all industrial space, for the last
five years.
Table 9: Historic Industrial Completions and Availability
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail% Cmpltns Avail% Cmpltns Avail% Cmpltns Avail% Cmpltns Avail%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Clay 0 7.6 0 9.1 0 7.5 133 6.9 0 4.6
Jackson 111 9.7 396 10.6 126 9.2 607 4.7 0 4.3
Johnson 80 8.9 27 7.8 175 5.8 253 4.5 221 3.8
Platte 122 23.8 0 21.0 0 17.7 0 11.8 0 9.8
Wyandotte 0 9.3 20 14.7 0 10.9 0 6.0 0 4.4
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
KANSAS CITY TOTALS 313 9.4 443 10.8 301 8.8 993 5.4 221 4.4
---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
[The following table was depicted as a Bar Graph in the printed material]
Availability Rates
1992 - 1996
Kansas City
53 MSAs
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
CURRENT The warehouse segment currently comprises about 54.5% of the
WAREHOUSE total Kansas City industrial market, and approximately 65.1%
MARKET of all space built in the last five years. The table below
gives a snapshot of the warehouse market as of the end of
the fourth quarter, and the following table displays its
distribution by age and size of building.
Table 10: Warehouse Space by Submarket
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking TW Rent
# Bldgs (x1OOO) (%) Net Rent Gross Rent Index
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Clay 218 15,452 9.3 n/a $2.50 $3.22
Jackson 787 49,707 6.1 $2.19 $3.90 $3.80
Johnson 527 22,370 4.7 $5.20 $5.20 $4.79
Platte 44 1,801 16.2 n/a $4.69 $4.13
Wyandotte 238 14,778 5.7 n/a $2.91 $4.88
=========================================================================================
-----------------------------------------------------------------------------------------
KANSAS CITY TOTALS 1,814 104,108 6.4 $2.70 $3.59 $4.00
-----------------------------------------------------------------------------------------
</TABLE>
For some submarkets we have too few rents quoted to allow a
meaningful average, and we show an 'n/a' for these areas.
However, ALL rents are included in the total metro average
rents.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
- --------------------------------------------------------------------------------
Table 11: Distribution of All Warehouse Space by Age and Size
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------- ----------------
Building Size (in thousands)
10 - 49 50 - 99 100 - 199 200 - 399 400+ Totals by Age\
- ------------------------------------------------------------------------------------------------ ----------------
Built 1990 - 1996
---------------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Stock 365 350 1,013 631 0 2,359
Availability 6.8% 10.3% 23.0% 3.5% n/a 13.4%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $5.08 n/a n/a n/a n/a $3.12
---------------------------------------------------------------------------- ----------------
Built 1985 - 1989
---------------------------------------------------------------------------- ----------------
Stock 3,508 1,510 1,189 515 1,750 8,472
Availability 5.9% 4.6% 1.0% 0.0% 0.0% 3.4%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $7.04 $4.69 n/a n/a n/a $6.53
---------------------------------------------------------------------------- ----------------
Built 1980 - 1984
---------------------------------------------------------------------------- ----------------
Stock 3,684 1,915 2,042 1,397 2,270 11,308
Availability 5.6% 9.4% 0.5% 0.0% 42.9% 12.1%
Net Rent n/a n/a n/a n/a n/a $2.54
Gross Rent $5.52 n/a n/a n/a n/a $4.02
---------------------------------------------------------------------------- ----------------
Built 1970-1979
---------------------------------------------------------------------------- ----------------
Stock 6,665 3,492 3,931 4,552 2,550 21,190
Availability 10.2% 12.8% 0.3% 6.0% 0.0% 6.7%
NetRent n/a n/a n/a n/a n/a n/a
Gross Rent $3.70 $3.21 n/a n/a n/a $3.23
---------------------------------------------------------------------------- ----------------
Built Before 1970
---------------------------------------------------------------------------- ----------------
Stock 15,802 8,527 10,718 9,456 16,276 60,779
Availability 9.1% 6.3% 8.9% 3.4% 0.0% 5.3%
Net Rent $2.37 n/a n/a n/a n/a $2.19
Gross Rent $3.57 $4.17 n/a n/a n/a $3.35
---------------------------------------------------------------------------- ----------------
Totals by Size
---------------------------------------------------------------------------- ----------------
Stock 30,024 15,794 18,893 16,551 22,846 l04,108
Availability 8.5% 8.1% 6.5% 3.7% 4.3% 6.4%
Net Rent $2.85 $2.84 n/a n/a n/a $2.70
Gross Rent $4.25 $3.85 $2.90 $2.42 n/a $3.59
---------------------------------------------------------------------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
[The following table was depicted as a Pie Graph in the printed material]
Distribution of
Warehouse Space
In Kansas City
Pre 1970 59% 1970s 20% 1980s 19% 1990s 2%
[The following table was depicted as a Pie Graph in the printed material]
Distribution of
Warehouse Properties
200,000 sf and Larger
By Age
Pre 1970 65% 1970s 18% 1980s 15% 1990s 2%
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 (Industrial Outlook)
- --------------------------------------------------------------------------------
Table 12: Warehouse Rental Space by Submarket
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Total SF Availability Avg. Asking Avg. Asking
# Bldgs (xlOOO) (%) Net Rent Gross Rent
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Clay 191 14,498 9.1 n/a $2.56
Jackson 421 24,263 5.2 $2.31 $4.80
Johnson 463 19,079 5.1 $5.20 $5.21
Platte 41 1,550 18.8 n/a $4.69
Wyandotte 145 9,152 7.5 n/a $2.82
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
KANSAS CITY, TOTALS 1,261 68,542 6.6 $3.37 $3.81
--------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Rental space (that is, space occupied by more than one
tenant, or occupied by a tenant that is not the owner) in
Kansas City's warehouse market accounts for about 68.5
million square feet, comprising 65.8% of all warehouse
space. In comparison, about 56.4% of the total industrial
market of Kansas City is rental space.
For some submarkets we have too few rents quoted to allow a
meaningful average, and we show an 'n/a' for these areas.
However, ALL rents are included in the total metro average
rents.
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Kansas City
Table 13: Distribution of All Warehouse Rental Space by Age and Size
Building Size (in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------- ------------------
Building Size (in thousands)
10 - 49 50 - 99 100 - 199 200 - 399 400+ Totals by Age
- ---------------------------------------------------------------------------------------------------- ---------------
Built 1990 - 1996
-------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stock 326 281 1,013 631 0 2,251
Availability 7.7% 12.8% 23.0% 3.5% n/a 14.0%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $5.08 n/a n/a n/a n/a $3.12
-------------------------------------------------------------------------------- ---------------
Built 1985 - 1989
-------------------------------------------------------------------------------- ---------------
Stock 2,746 1,321 844 515 430 5,856
Availability 7.1% 5.3% 1.4% 0.0% n/a 4.7%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $7.08 $4.69 n/a n/a n/a $6.55
-------------------------------------------------------------------------------- ---------------
Built 1980 - 1984
-------------------------------------------------------------------------------- ---------------
Stock 2,859 1,578 1,610 846 1,445 8,338
Availability 6.2% 11.4% 0.6% 0.0% 10.3% 6.2%
Net Rent n/a n/a n/a n/a n/a $2.54
Gross Rent $5.59 n/a n/a n/a n/a $4.03
-------------------------------------------------------------------------------- ---------------
Built 1970-1979
-------------------------------------------------------------------------------- ---------------
Stock 4,853 2,831 3,085 4,152 1,350 16,271
Availability 10.3% 15.6% 0.4% 6.6% 0.0% 7.6%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $3.73 $3.21 n/a n/a n/a $3.20
-------------------------------------------------------------------------------- ---------------
Built Before 1970
-------------------------------------------------------------------------------- ---------------
Stock 10,165 4,948 6,714 6,703 7,296 35,826
Availability 9.8% 7.7% 10.8% 1.2% 0.0% 6.1%
Net Rent n/a n/a n/a n/a n/a n/a
Gross Rent $3.75 $5.59 n/a n/a n/a $3.83
-------------------------------------------------------------------------------- ---------------
Totals by Size
-------------------------------------------------------------------------------- ---------------
Stock 20,949 10,959 13,266 12,847 10,521 68,542
Availability 9.1% 10.1% 7.5% 2.9% 1.4% 6.6%
Net Rent $3.77 $2.84 n/a n/a n/a $3.37
Gross Rent $4.45 $4.27 $2.90 $2.64 n/a $3.81
-------------------------------------------------------------------------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
[The following table was depicted as a Pie Graph in the printed material]
Distribution of
Warehouse
Rental Space
in Kansas City,
By Age
Pre 1970 52% 1970s 24% 1980s 21% 1990s 3%
[The following table was depicted as a Pie Graph in the printed material]
Distribution of
Warehouse
Rental Space
By Size
10-49 31% 50-99 16% 100-199 19% 200-399 19% 400+ 15%
Data as of 4th Quarter, 1996 (c) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Industrial Outlook
- --------------------------------------------------------------------------------
HISTORIC Table 14 gives the historical perspective on the Kansas City
WAREHOUSE warehouse market. During the last five years 62.4% of all
MARKET new construction has been in warehouse space. In that period
warehouse availability rates have been higher on average
than availability rates in all industrial space in the MSA.
Table 14: Historic Warehouse Completions and Availability
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Avail% Cmpltns Avail% Cmpltns Avail% Cmpltns Avail% Cmpltns Avail
----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Clay 0 15.3 0 17.1 0 14.0 133 10.7 0 9.3
Jackson 0 13.3 0 15.5 0 13.1 607 6.8 0 6.1
Johnson 68 10.7 12 9.2 175 7.2 243 5.6 221 4.7
Platte 0 28.1 0 22.7 0 21.6 0 18.9 0 16.2
Wyandotte 0 15.5 20 24.7 0 20.3 0 10.8 0 5.7
----------------------------------------------------------------------------------------------------------------
KANSAS CITY TOTALS 66 13.6 32 15.8 175 13.1 983 7.9 221 6.4
----------------------------------------------------------------------------------------------------------------
</TABLE>
[The following table was depicted as a Bar Graph in the printed material]
Availability Rates
1992 - 1996
Kansas City
53 MSAs
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
[LOGO]
SOUTHFIELD/DETROIT MARKET ANALYSIS
PRENTISS OFFICE PORTFOLIO
Southfield, Michigan
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[Letterhead of CB Commercial Real Estate Group, Inc.]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Southfield/Detroit Market Analysis
Prentiss Office Portfolio
Southfield, Michigan
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Office Portfolio located in
Southfield, Michigan.
The subject consists of a multi-tenant, institutional quality, office building
having a total of 241,751 SF of net rentable area. The Southfield market has an
average occupancy of 89% with a weighted average net rental rate of $15.08 -
$18.16 PSF/YR, depending on the data source. Overall this market area is
stabilized and showing improving rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
================================================================================
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: One Northwestern Plaza, Southfield,
Michigan
Property Description: One Northwestern Plaza is a 13- story
Class A suburban office building. The
building was developed in 1989 and
contains 241,751 net rentable square fee
with heated underground parking
facilities.
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 1
Number of Stories: 13
Gross Building Area: 241,751 SF
Net Rentable Area: 241,751 SF
Avg. Year Built: 1989
Condition: Good
Effective Age: 8 Years
Market Financial Indicators
Current Occupancy: 89.3%
Stabilized Occupancy: 90.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $18.00 - $22.00 PSF
Tenant Improvements (New Leases): $5.00 - $15.00 PSF
Tenant Improvements (Renewal Leases): $3.50 Per SF
Leasing Commissions (New Leases): 5.0%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS .....................................................ii
TABLE OF CONTENTS ...........................................................iii
TRADE AREA ANALYSIS ...........................................................1
COMPETITIVE MARKET TREND ANALYSIS .............................................3
MARKETABILITY CONCLUSIONS .....................................................7
ADDENDA
A Improved Comparable Sales
B Demographics
C Torto Wheaton Research Data
D CB Commercial Office Market Statistics
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
The Metropolitan Detroit Office Market is the 13th largest of 54 markets
followed nationally by CB Commercial. The office market is comprised of just
over 60 million square feet, and finished the year with an overall vacancy rate
of 11.1%, which is a drop of 2.8% from 1995. The Detroit market followed the
national trend of limited construction of new product, a declining vacancy rate
and a leveling off of net absorption which peaked at over 2.7 million square
feet in 1994. 1996 had a net absorption of 2 million square feet.
The suburban market in Metropolitan Detroit has over 46 million square feet, and
in 1996 had a vacancy rate of 9.4% and net absorption of 1.7 million square
feet. Southfield is the largest office market with over 15 million square feet
and had the most net absorption, 660,413 square feet. Our estimate of current
office employment for the Detroit Metropolitan area is 375,300 workers. Over the
last 10 years, office employment has grown by 3.6%. Last year office employment
grew by 7.4%
The CB Commercial forecast calls for an average annual growth in office
employment of 2.8% over the next six years, as a take off from its current
level. Office employment growth is a key element in our forecast model. Thus, we
expect this growth will effect net absorption in a positive manner. We are
forecasting vacancy rates to drop to a Metro Detroit wide average of 8.5% over
the next six years, and rent rising by an average annual rate of 6.3% through
the first half of 2001.
Location
The trade area is located in the city of Southfield. The city of Southfield is
located in the northwest quadrant of the Detroit MSA.
Demographics
Population growth and new household formations have been on an upward trend
within the subject trade area.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
================================================================================
Southfield Detroit MSA
- --------------------------------------------------------------------------------
Population
2001 Estimate 83,861 4,329,402
1996 Estimate 81,300 4,327,117
1990 Census 75,728 4,266,654
1996 - 2001 % Change 3.2% 0.1%
Households
2001 Estimate 36,028 1,611,544
1996 Estimate 34,734 1,607,134
1990 Census 32,112 1,580,063
1996 - 2001 % Change 3.7% 0.3%
2001 Median Household Income $53,084 $46,046
1996 Median Household Income $46,685 $40,167
1996 Average Household Income $58,138 $50,486
1990 Average Home Value $89,912 $83,128
1990 % College Graduates 34.7% 17.6%
- --------------------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
================================================================================
Trends and Conclusions
The trade area currently has a strong income demographic profile as compared to
the overall Detroit MSA. The outlook is for relatively stable performance with
moderate improvement over the next several years. As a result, the demand for
existing developments is expected to be good. Generally, the trade area is
expected to maintain a relatively stable growth pattern in the foreseeable
future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
================================================================================
MARKET STATISTICS
================================================================================
Category Source Detroit Southfield
- --------------------------------------------------------------------------------
Existing Supply (SF X 1,000) (1) 60,348 14,981
(3) 14,976
Under Construction (SF X 1,000) (1) 39 0
Construction - 2 YR Annual Forecast (SF X 1,000) (1) 1,306 210
Absorption - 3 YR Avg. (SF X 1,000) (1) 1,657 656
YTD 2nd Qtr 1997 Absorption (SF X 1,000) (3) 540 226
Absorption - 2 YR Annual Forecast (SF X 1,000) (1) 1,015 303
1996 Occupancy (1) 88.9% 87.8%
2nd Qtr 1997 Occupancy (3) 89.2% 89.3%
Occupancy - 2 YR Forecast (1) 88.4% 89.4%
Average Rent PSF - 1996 (1) $18.86 $18.16
Average Rent PSF - 1st Qtr 1997 (CBD vs. Suburban) (2) $18.28 $20.14
Average Rent PSF - 2nd Qtr 1997 (3) $15.12 $15.08
Average Rent PSF - 2 YR Forecast (1) $21.44 $20.62
Annual Rent Inflation - 2 YR Forecast (1) 6.6% 6.6%
- --------------------------------------------------------------------------------
Source Codes:
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
================================================================================
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Detroit area and local submarket over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
MARKET TRENDS
1992 - 1996
================================================================================
Detroit Southfield
--------------------------- ------------------------------
Date Rent PSF Occupancy Rent PSF Occupancy
- --------------------------------------------------------------------------------
1992 $13.20 80.8% N/A 74.6%
1993 $13.90 80.8% N/A 74.8%
1994 $15.46 83.8% N/A 79.4%
1995 $16.64 85.5% N/A 82.8%
1996 $18.86 88.8% $18.16 87.8%
1997 Forecast $20.93 90.7% $20.62 89.4%
- --------------------------------------------------------------------------------
Source: Torto Wheaton Research
================================================================================
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
<TABLE>
<CAPTION>
============================================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
============================================================================================================
Avg. Base Rent Ann. Exp. Pct.
Name Location Size (NRA) 1996 1997 Inc. Reimb. Occ.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Vanguard Center 23800 West 114,694 SF $13.39 $13.74 2.6% $1.09 89%
Ten Mile
Road,
Southfield, MI
- ------------------------------------------------------------------------------------------------------------
Size (NRA) Asking Lease Rates Exp. Avail.(SF Pct.
Market Area Location (SF X 1,000) Avg. Low High Reimb. X 1,000) Occ.
- ------------------------------------------------------------------------------------------------------------
Southfield 1997 Southfield, MI 14,976 SF $15.08 $10.00 $22.00 Base Yr. 1,602 SF 89%
Southfield 1996 Southfield, MI 14,999 SF $14.83 $10.00 $21.00 Base Yr. 3,150 SF 79%
- ------------------------------------------------------------------------------------------------------------
Percent Change for Submarket: -0.2% 1.7% 0.0% 4.8% Absorption: 1,547 SF 10.3%
- ------------------------------------------------------------------------------------------------------------
Detroit Metro 1997 Detroit, MI 60,741 SF $15.12 $6.50 $24.00 Base Yr. 6,560 SF 89%
Detroit Metro 1996 Detroit, MI 60,744 SF $14.95 $6.50 $23.50 Base Yr. 8,018 SF 87%
- ------------------------------------------------------------------------------------------------------------
Percent Change for Detroit Metro 0.0% 1.1% 0.0% 2.1% Absorption: 1,458 SF 2.4%
- ------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
============================================================================================================
</TABLE>
The asking rental rates of the comparables range from $13.75 to $22.00 per
square foot. Quoted occupancy rates range from 89% to 100%. Rental rates are
increasing at a rate of approximately 5% per year in the Southfield market area
and 2% per year in the overall Detroit area. As a result, new construction is
beginning to take place in select market areas. Refer to the Addenda for
construction data reported by Torto Wheaton.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET EXPENSE RATES
The following industry survey expense data is reported for the local market
area:
================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
================================================================================
IREM
COMP 1 MEDIAN
----------------------- -----------
Location: Southfield MI Detroit
NRA (SF): 114,694 Suburban
Expense Year: 1996 1997 Budget 1996
Effective Gross Income PSF: $14.44 $14.48 $13.91
Unit of Comparison PSF PSF PSF
---------- ---------- ----------
Expenses
Real Estate Taxes $ 1.13 $ 1.14 $ 1.13
Insurance $ 0.19 $ 0.20 $ 0.16
Janitorial $ 0.90 $ 0.90 $ 0.84
General Operating* $ 2.90 $ 2.93 $ 2.04
Utilities $ 2.02 $ 2.05 $ 2.46
Allowance for Replacements $ 0.00 $ 0.00 $ 0.00
Management Fees $ 0.70 $ 0.78 $ 0.55
Total Expenses $ 7.84 $ 8.00 $ 7.18
* Includes maintenance and repairs, administrative, and contract services.
- --------------------------------------------------------------------------------
Source: Actual operating statements and IREM Income/Expense Analysis Report 1996
Compiled By: CB Commercial
================================================================================
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
======================================================================
CAPITAL EXPENSES
======================================================================
Capital Expense Category Range Reported
----------------------------------------------------------------------
Renewal Probability 60% to 75%
Tenant Improvements (New Leases) $4.00 PSF to $20.00 PSF
Tenant Improvements (Renewal Leases) $2.00 PSF to $ 3.00 PSF
Weighted Average Tenant Improvements $2.80 PSF to $ 7.25 PSF
Leasing Commissions (New Leases) 4.5% to 6.0%
Leasing Commissions (Renewal Leases) 2.0% to 3.0%
Weighted Average Leasing Commissions 3.0% to 3.8%
----------------------------------------------------------------------
Compiled By: CB Commercial
======================================================================
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
<TABLE>
<CAPTION>
====================================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
====================================================================================================
Sale Date of Size
No. Name Location Sale (NRA) Price PSF OCC NOI PSF OAR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Franklin Bank 24725 Twelve Mile Mar-96 94,830 $64.33 89% $7.96 12.38%
Business Center Road, Southeast Corner
Of, Southfield, MI
2 10 Oak Hollow 25025 Denso Drive, Aug-95 164,282 $78.52 0% $8.56 10.90%
Gateway West Of Telegraph
Road, Southfield, MI
3 Westfield Office 30201 Orchard Lake Aug-95 50,436 $49.57 100% $5.90 11.90%
Building Road, WS Of Orchard,
Farmington Hills, MI
4 The Solomon 28588 Northwestern Jul-95 82,275 $66.85 98% $9.53 14.26%
Building Highway South Of 12
Mile Rd, Southfield, MI
5 Farmington Hills 22260 Haggerty Road, Jun-95 73,731 $58.32 83% $7.41 12.70%
Corporate II South Of 9 Mile Road.,
Farmington Hills, MI
- ----------------------------------------------------------------------------------------------------
Compiled By: CB Commercial
====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
================================================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
================================================================================
Category Amount
- --------------------------------------------------------------------------------
Current Occupancy: 89.3%
Stabilized Occupancy: 90.0%
Estimated Absorption: Market is stabilized.
Expenses (Range of Comparable Data): $7.18 - $8.00 PSF
Market Expenses: $7.50/SF
Market Rental Rate: $18.00 - $22.00 PSF
Type of Lease: Full service with base
year expense stop.
Tenant Impr. Range (New Leases): $4.00 - $20.00 PSF
Tenant Improvements (New Leases): $5.00 - $15.00 PSF
Tenant Impr. Range (Renewal Leases): $2.00 - $3.00 PSF
Tenant Improvements (Renewal Leases): $3.50/SF
Leasing Commis. Range (New Leases): 4.5% - 6.0%
Leasing Commissions (New Leases): 5.0%
Leasing Commis. Range (Renewal Leases): 2.0% - 3.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
- --------------------------------------------------------------------------------
Compiled By: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY OF COMPARABLE OFFICE BUILDING SALES
====================================================================================================================================
Number
Sale Sale Year of Building Size Occupancy Price Per
No. Name / Location Date Built Stories (NRA) at Sale Sale Price SF OER OAR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Franklin Bank Business Center 03/96 1984 2 to 3 94,830 89.27% $ 6,100,000 $64.33 46.28% 12.38%
24725 Twelve Mile Road, Southeast
Southfield, MI
2 10 Oak Hollow Gateway 08/95 1986 3 164,282 N/A $12,900,000 $78.52 N/A 10.90%
25025 Denso Drive, West Of Telegraph
Southfield, MI
3 Westfield Office Building 08/95 1990 2 50,436 100% $ 2,500,000 $49.57 N/A 11.90%
30201 Orchard Lake Road, WS Of
Farmington Hills, MI
4 The Solomon Building 07/95 1986 4 82,275 97.58% $ 5,500,000 $66.85 43.12% 14.26%
28588 Northwestern Highway South Of 12
Southfield, MI
5 Farmington Hills Corporate II 06/95 1987 3 73,731 83.04% $ 4,300,000 $58.32 43.31% 12.70%
22260 Haggerty Road, South Of 9 Mile
Farmington Hills, MI
- ------------------------------------------------------------------------------------------------------------------------------------
Compiled By: CB Commercial
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Location Data
Property Name: Franklin Bank Business Center
Location: 24725 Twelve Mile Road, Southeast Corner Of
12 Mile Rd and Lockdale Ave.
City: Southfield
County: Oakland
State/Zip: Michigan
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: N/A
Gross Building Area: 103,125 SF
Net Rentable Area: 94,830 SF
Usable Building Area: 86,209 SF
Year Built: 1984
# of Stories: 2 to 3
Parking: N/A
Condition: Good
Exterior Walls: Masonry
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 03/96
Marketing Time: N/A
Grantor: VRB Corporation
Grantee: JFK Investment Company (Joseph Kosik)
Document No.: N/A
Sale Price: $6,100,000
Financing: Cash to Seller
Cash Equivalent Price: $6,100,000
Required Capital Cost: $0
Adjusted Sale Price: $6,100,000
Verification: Appraiser and Broker
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 89.27%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: $1,405,986 $14.83
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $1,405,986 $14.83
Expenses: $650,634 $6.86
Net Operating Income: $755,352 $7.97
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 12.38%
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 4.34
Operating Expense Ratio (OER): 46.28%
Price Per Square Foot: $64.33
Comments
At the time of sale, the building was 89.27% occupied. The indicated OAR,
as stabilized, is 11.69%. The cost of stabilization was estimated to be
approximately $131,456. The adjusted OAR, reflecting a stabilized operating
level, but considering the cost to reach this operating level, is 12.12%
($755,347/($6,100,000 +$131,456)).
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Location Data
Property Name: 10 Oak Hollow Gateway
Location: 25025 Denso Drive, West Of Telegraph Road
City: Southfield
County: Oakland
State/Zip: Michigan
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 10.4900 Acres
Gross Building Area: 169,368 SF
Net Rentable Area: 164,282 SF
Usable Building Area: N/A
Year Built: 1986
# of Stories: 3
Parking: N/A
Condition: Average
Exterior Walls: Masonry
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 08/95
Marketing Time: N/A
Grantor: Metropolitan Life Insurance Co.
Grantee: Great Lakes REIT
Document No.: N/A
Sale Price: $12,900,000
Financing: Cash to Seller
Cash Equivalent Price: $12,900,000
Required Capital Cost: $0
Adjusted Sale Price: $12,900,000
Verification: Broker
Financial Data
Assumptions & Forecast N/A
Occupancy at Sale: N/A
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $1,406,100 $8.56
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 10.90%
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot $78.52
Comments
The buildings were approximately eighty percent occupied at the time of
sale. The property's location is particularly desirable as they are located
in the Oak Hollow Office Park.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Location Data
Property Name: Westfield Office Building
Location: 30201 Orchard Lake Road, WS Of Orchard Lake
Rd., 0.5 Mile S. Of 14 Mile
City: Farmington Hills
County: Oakland
State/Zip: Michigan
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: N/A
Gross Building Area: N/A
Net Rentable Area: 50,436 SF
Usable Building Area: N/A
Year Built: 1990
# of Stories: 2
Parking: N/A
Condition: Good
Exterior Walls: Masonry
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 08/95
Marketing Time: N/A
Grantor: Thomas A. Duke Company
Grantee: MBL Life
Document No.: N/A
Sale Price: $2,500,000
Financing: Not Available
Cash Equivalent Price: $2,500,000
Required Capital Cost: $0
Adjusted Sale Price: $2,500,000
Verification: Broker
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $297,500 $5.90
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 11.90%
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot $49.57
Comments
The property was 100 percent occupied at the time of sale. The space was
leased on USF rather than NRSF basis. The broker indicated this allowed
upside potential.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Location Data
Property Name: The Solomon Building
Location: 28588 Northwestern Highway South Of 12
Mile Rd
City: Southfield
County: Oakland
State/Zip: Michigan
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 4.1100 Acres
Gross Building Area: 94,453 SF
Net Rentable Area: 82,275 SF
Usable Building Area: N/A
Year Built: 1986
# of Stories: 4
Parking: N/A
Condition: Good
Exterior Walls: Glass Panels
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 07/95
Marketing Time: N/A
Grantor: MBL Life Assurance Co.
Grantee: Solomon Office Assocates, LLC
Document No.: N/A
Sale Price: $5,500,000
Financing: Cash to Seller
Cash Equivalent Price: $5,500,000
Required Capital Cost: $0
Adjusted Sale Price: $5,500,000
Verification: Broker
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 97.58%
Existing or Pro Forma Income: N/A
TOTAL P.S.F.
--------- ------
Potential Gross Income: $1,378,585 $16.76
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $1,378,585 $16.76
Expenses: $594,507 $7.23
Net Operating Income: $784,078 $9.53
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 14.26%
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 3.99
Operating Expense Ratio (OER): 43.12%
Price Per Square Foot $66.85
Comments
At the time of sale, the building was 97.58% occupied. The property was
renovated in early 1994. Upon review of the current leases, it was
determined that there were several leases with contract rent above market.
It was estimated the excess rent (NOI) totaled $143,514, as of the sale
date. The leases encumbered with the excess rents will be expiring within
two years; therefore, theses leases will rollover to market-level rents. To
extract a meaningful OAR the excess rent was subtracted from the 1st year
NOI, which indicated an OAR of 11.65%. The building's largest tenant is
P.P.O.M which leases over 20,000 SF, with rent at $21.88 per square feet.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Location Data
Property Name: Farmington Hills Corporate II
Location: 22260 Haggerty Road, South Of 9 Mile Road.
City: Farmington Hills
County: Oakland
State/Zip: Michigan
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: N/A
Gross Building Area: 77,212 SF
Net Rentable Area: 73,731 SF
Usable Building Area: N/A
Year Built: 1987
# of Stories: 3
Parking: N/A
Condition: Good
Exterior Walls: Masonry
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 06/95
Marketing Time: N/A
Grantor: MBL Life Assurance Co.
Grantee: Partnership-David B. Friedman, et al
Document No.: N/A
Sale Price: $4,300,000
Financing: Cash to Seller
Cash Equivalent Price: $4,300,000
Required Capital Cost: $0
Adjusted Sale Price: $4,300,000
Verification: Broker
Financial Data
Assumptions & Forecast: N/A
Occupancy at Sale: 83.04%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
Potential Gross Income: $963,331 $13.07
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $963,331 $13.07
Expenses: $417,224 $5.66
Net Operating Income: $546,107 $7.41
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 12.70%
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 4.46
Operating Expense Ratio (OER): 43.31%
Price Per Square Foot: $58.32
Comments
At the time of sale, the building was 83.04% occupied. The indicated OAR,
as stabilized, is 12.70%. The cost of stabilization was estimated to be
approximately $164,782. Therefore, the adjusted OAR, reflecting a
stabilized operating level, but considering the cost to reach this
operating level, is 12.23%.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Population 248,709,873 75,728 4,266,654
1996 Population 265,411,137 81,300 4,327,117
% White 79.0 61.1 75.1
% Black 12.2 35.4 22.0
% American Indian 0.9 0.3 0.4
% Asian 3.6 2.9 1.7
% Other 4.3 0.3 0.7
% Hispanic 10.3 1.9 2.2
1996 Population by Age:
% 0 - 5 8.6 6.6 8.6
% 6 - 13 11.3 8.9 11.4
% 14 - 17 5.4 4.1 5.1
% 18 - 20 4.7 3.6 4.4
% 21 - 24 5.8 4.8 5.5
% 25 - 34 14.5 15.3 14.6
% 35 - 44 15.7 16.0 16.1
% 45 - 54 12.3 13.3 12.7
% 55 - 64 8.5 9.3 8.6
% 65 - 74 7.3 9.1 7.5
% 75 - 84 4.5 6.6 4.3
% 85 + 1.4 2.3 1.3
Median Age Total Population 34.9 39.1 35.3
1990 Households 91,947,410 32,112 1,580,063
1996 Households 98,045,317 34,734 1,607,134
1996 Average Household Size 2.64 2.32 2.66
1996 Household Income:
% $ 0 - $ 9,999 12.3 7.5 12.6
% $ 10,000 - $ 14,999 7.8 5.3 6.7
% $ l5,000 - $24,999 14.7 10.0 12.2
% $ 25,000 - $34,999 14.1 12.3 12.1
% $ 35,000 - $49,999 18.2 18.8 17.7
% $ 50,000 - $74,999 17.7 21.5 19.8
% $ 75,000 - $ 99,999 7.6 12.0 9.6
% $100,000 - $149,999 5.3 9.2 6.7
% $150,000+ 2.4 3.3 2.6
1996 Median Household Income ($) 35,822 46,685 40,167
1996 Med an Family Income ($) 42,040 57,257 47,993
1990 Median Home Value ($) 79,098 85,130 67,280
1990 Median Contract Rent ($) 374 615 363
1990 % White Collar Workers 58.1 77.3 58.8
1990 % Blue Collar Workers 26.2 14.0 27.5
1990 % HS Graduate/Some College 54.9 50.1 57.7
1990 % Bachelor/Graduate Degree 20.3 34.7 17.7
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 74 53
1996 Employment: 99,663 1,897,041
Population:
2001 Projection 83,861 4,329,402
1996 Estimate 81,300 4,327,117
1990 Census 75,728 4,266,654
1990 - 1996 % Change (Growth) 7.4% 1.4%
1990 Group Quarters Population 736 47,711
1996 % Population by Race:
White 61.1% 75.1%
Black 35.4% 22.0%
American Indian, Eskimo & Aleut 0.3% 0.4%
Asian or Pacific Islander 2.9% 1.7%
Other 0.3% 0.7%
Hispanic 1.9% 2.2%
1990 % Population by Race:
White 67.9% 75.4%
Black 29.1% 22.1%
American Indian, Eskimo & Aleut 0.3% 0.4%
Asian or Pacific Islander 2.4% 1.3%
Other 0.4% 0.7%
Hispanic 1.7% 2.0%
1996 % Population by Sex:
Male 46.8% 48.2%
Female 53.2% 51.8%
1990 % Population by Sex:
Male 46.8% 48.1%
Female 53.2% 51.9%
2001 Pop per Square Mile (Pop Density) 3,196.9 1,110.9
1996 Pop per Square Mile (Pop Density) 3,099.3 1,110.3
1990 Pop per Square Mile (Pop Density) 2,886.9 1,094.8
Area (Square Miles) 26.2 3,897.2
Area (Square Kilometers) 67.9 10,093.7
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
Households:
2001 Projection 36,028 1,611,544
1996 Estimate 34,734 1,607,134
1990 Census 32,112 1,580,063
1990 - 1996 % Change (Growth) 8.2% 1.7%
2001 Average Household Size 2.31 2.66
1996 Average Household Size 2.32 2.66
1990 Average Household Size 2.34 2.67
2001 Per Capita Income $28,935 22,112
1996 Per Capita Income $25,065 18,960
1990 Per Capita Income $21,155 15,734
2001 Median Family Income $65,105 55,017
1996 Median Family Income $ 57,257 47,993
1990 Median Family Income $ 49,768 40,984
2001 Median Household Income $ 53,084 46,046
1996 Median Household Income $46,685 40,167
1990 Median Household Income $40,579 34,301
2001 Average Household Income $ 66,759 58,749
1996 Average Household Income $58,138 50,486
1990 Average Household Income $49,360 41,994
1996 % Household Income:
$ 0 - $ 9,999 7.5% 12.6%
$ 10,000 - $ 14,999 5.3% 6.7%
$ 15,000 - $ 24,999 10.0% 12.2%
$ 25,000 - $ 34,999 12.3% 12.1%
$ 35,000 - $ 49,999 18.8% 17.7%
$ 50,000 - $ 74,999 21.5% 19.8%
$ 75,000 - $ 99,999 12.0% 9.6%
$100,000 - $149,999 9.2% 6.7%
$150,000 + 3.3% 2.6%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Household Income:
$0 - $ 9,999 8.9% 15.2%
$ 10,000 - $ 14,999 6.1% 7.3%
$ 15,000 - $ 24,999 12.4% 14.3%
$ 25,000 - $ 34,999 14.4% 14.1%
$ 35,000 - $ 49,999 19.7% 18.6%
$ 50,000 - $ 74,999 21.2% 18.5%
$ 75,000 - $ 99,999 10.3% 7.0%
$100,000 - $149,999 4.7% 3.4%
$150,000+ 2.2% 1.6%
1996 % Population by Age:
0 - 5 6.6% 8.6%
6 - 13 8.9% 11.4%
14 - 17 4.1% 5.1%
18 - 20 3.6% 4.4%
21 - 24 4.8% 5.5%
25 - 34 15.3% 14.6%
35 - 44 16.0% 16.1%
45 - 54 13.3% 12.7%
55 - 64 9.3% 8.6%
65 - 74 9.1% 7.5%
75 - 84 6.6% 4.3%
85+ 2.3% 1.3%
Median Age Total Population 39.1 35.3
Median Age Adult Population 45.3 43.0
1990 % Population by Age:
0 - 5 7.0% 9.1%
6 - 13 8.7% 11.3%
14 - 17 4.5% 5.6%
18 - 20 3.5% 4.3%
21 - 24 5.5% 5.7%
25 - 34 17.7% 17.5%
35 - 44 15.9% 15.4%
45 - 54 10.8% 10.4%
55 - 64 9.5% 8.8%
65 - 74 8.8% 7.2%
75 - 84 6.1% 3.6%
85+ 2.2% 1.1%
Median Age Total Population 37.0 33.0
Median Age Adult Population 43.3 40.9
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 6.1% 8.1%
6 - 13 8.2% 10.7%
14 - 17 3.8% 4.8%
18 - 20 3.4% 4.1%
21 - 24 4.5% 5.2%
25 - 34 14.5% 14.4%
35 - 44 16.0% 16.1%
45 - 54 13.3% 12.7%
55 - 64 9.4% 8.8%
65 - 74 9.7% 8.1%
75 - 84 8.0% 5.2%
85+ 3.2% 1.8%
Female Median Age Total Population 40.9 36.6
Female Median Age Adult Population 46.8 44.0
1990 % Female Population by Age:
0 - 5 6.4% 8.6%
6 - 13 8.1% 10.6%
14 - 17 4.2% 5.3%
18 - 20 3.2% 4.1%
21 - 24 5.1% 5.7%
25 - 34 17.1% 17.3%
35 - 44 15.9% 15.3%
45 - 54 10.7% 10.3%
55 - 64 9.6% 8.9%
65 - 74 9.4% 7.9%
75 - 84 7.3% 4.4%
85+ 3.0% 1.5%
Female Median Age Total Population 38.6 34.1
Female Median Age Adult Population 44.6 41.8
1990 % Hispanic Population by Type:
Not of Hispanic Origin 98.3% 98.0%
Mexican 0.5% 1.2%
Puerto Rican 0.1% 0.3%
Cuban 0.1% 0.1%
Other Hispanic 1.0% 0.5%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School (Age 3 & Over):
Preprimary School 7.3% 7.9%
Elementary and High School 56.4% 65.9%
College 36.4% 26.2%
Total School Enrollment 18,545 1,138,104
1990 % Educational Attainment (Age 25 & Over):
Less than Grade 9 5.2% 7.7%
Grade 9-12 (No Diploma) 10.0% 16.9%
High School Graduate or Equivalency 22.4% 30.3%
Some College (No Degree) 20.9% 21.1%
Associate Degree 6.8% 6.4%
Bachelor Degree 20.0% 11.2%
Graduate or Professional Degree 14.7% 6.4%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.0% 0.1%
Civilian:
Employed 63.7% 58.4%
Unemployed 3.9% 5.7%
Not In Labor Force 32.3% 35.8%
Female Labor Force:
Armed Forces 0.0% 0.0%
Civilian:
Employed 56.0% 50.4%
Unemployed 3.3% 4.6%
Not In Labor Force 40.6% 45.0%
1990 % Working Mothers:
Child less than 6 Only 15.3% 14.7%
Child 6 - 17 Only 41.7% 37.0%
Child less than 6 & 6-17 12.6% 10.6%
Nonworking Mothers 30.5% 37.7%
Total Mothers 8,077 556,053
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990% Industry Employment:
Agriculture/Forestry/Fishing 0.6% 0.9%
Mining 0.0% 0.1%
Construction 3.3% 4.6%
Manufacturing:
Nondurable Goods 2.7% 4.2%
Durable Goods 14.7% 20.6%
Transportation 2.8% 3.8%
Communications & Public Utilities 2.9% 2.4%
Wholesale Trade 4.9% 4.4%
Retail Trade 16.8% 17.5%
Finance/Insurance/Real Estate 9.8% 6.3%
Services:
Business & Repair 6.4% 5.7%
Personal 2.7% 2.6%
Entertainment & Recreation 1.6% 1.2%
Health 10.1% 9.2%
Educational 8.8% 6.9%
Other Professional & Related 9.0% 6.1%
Public Administration 2.9% 3.6%
Total 39,725 1,914,501
1990 % Occupation:
Executive & Managerial 16.0% 12.0%
Professional Specialty 24.2% 14.1%
Technical Support 3.9% 3.9%
Sales 16.1% 11.8%
Administrative Support 17.1% 17.0%
Service: Private Household 0.2% 0.3%
Service: Protective 0.8% 1.8%
Service: Other 7.3% 10.9%
Farming, Forestry & Fishing 0.5% 0.7%
Precision Production, Craft & Repair 6.6% 11.8%
Machine Operator, Assemblers & Inspectors 4.0% 8.5%
Transportation & Material Moving 1.7% 3.6%
Laborers 1.7% 3.5%
White Collar Total 77.3% 58.8%
Blue Collar Total 14.0% 27.5%
Total Employed 39,725 1,914,501
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 29,056 1,576,465
Never Married 31.6% 32.6%
Married 56.4% 54.3%
Separated 1.3% 2.0%
Widowed 2.8% 2.8%
Divorced 7.9% 8.3%
Total Female: 34,025 1,762,618
Never Married 24.9% 26.1%
Married 48.0% 48.4%
Separated 1.5% 2.6%
Widowed 14.7% 12.2%
Divorced 10.9% 10.7%
1990 Households by Type:
One Person Households 10,373 387,947
Two or more Person Households:
Family Households:
Married Couple 15,680 819,466
Male Householder 934 59,520
Female Householder 3,130 241,613
Nonfamily Households 1,995 71,517
1990 Family Households With Children
Married Couple Family 6,460 395,551
Male Householder 350 26,968
Female Householder 1,644 157,794
1990 Population by Household Type:
Family Households 60,223 3,669,062
Nonfamily Households 14,769 549,881
1990 Households With:
Children Under 18 8,531 585,761
Persons Over 65 9,130 371,360
Householder Over 65 8,392 332,188
1990 Average Family Size 3.01 3.21
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Median Home Value $85,130 67,280
1990 Average Home Value $89,912 83,128
1990 Median Contract Rent $615 363
1990 Average Contract Rent $644 382
1990 Persons In Unit:
1 Person Units 10,373 387,947
2 Person Units 10,809 476,368
3 Person Units 4,880 283,624
4+ Person Units 10,538 432,124
1990 Housing Unit Counts:
Total Units 35,054 1,672,488
% Occupied 91.6% 94.5%
% Vacant 8.4% 5.5%
% Year Round 8.1% 5.1%
% Seasonal 0.3% 0.4%
Occupied Units 32,112 1,580,063
% Owner Occupied 53.9% 69.5%
% Renter Occupied 46.1% 30.5%
Vacant Units 2,942 92,425
% Year Round of Vacant Units 96.4% 92.3%
% Seasonal of Vacant Units 3.6% 7.7%
1990 Total Housing Units in Structure 35,054 1,672,488
1, Detached 46.8% 67.6%
1, Attached 5.8% 4.9%
2, 0.2% 4.7%
3-9 14.3% 7.8%
10-49 12.5% 7.5%
50+ 17.7% 3.4%
Mobile Home or Trailer 2.0% 3.1%
Other 0.7% 1.0%
1990 Owner Occupied Housing Units by Year Built 17,316 1,097,672
Built 1985 to March, 1990 1.3% 6.5%
Built 1980 to 1984 2.5% 3.3%
Built 1970 to 1979 16.0% 16.0%
Built 1960 to 1969 43.3% 16.4%
Built 1950 to 1959 24.5% 26.9%
Built 1949 or Earlier 12.4% 30.8%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Southfield, MI 8/7/97
Area 2 = Detroit MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 87.0% 83.3%
Carpooled 8.4% 10.1%
Public Transportation 0.8% 2.5%
Other Means 2.0% 2.5%
Worked at Home 1.8% 1.6%
1990 % Travel Time to Work:
0 - 14 Minutes 24.6% 25.4%
15 - 29 Minutes 43.7% 40.5%
30 - 59 Minutes 29.4% 29.6%
60 - 89 Minutes 1.6% 3.2%
90+ Minutes 0.7% 1.3%
1990 Households by Number of Vehicles:
1 Vehicle 11,905 519,803
2 Vehicles 12,911 588,280
3 Vehicles 3,726 192,084
4 Vehicles 1,018 58,088
5 or More Vehicles 283 20,739
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
================================================================================
ADDENDUM C TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum C
TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
<PAGE>
Detroit
- --------------------------------------------------------------------------------
DETROIT
- --------------------------------------------------------------------------------
Overview As of 19945 the population of the Detroit metropolitan
statistical area was 4.32 million making it the 8th
largest in the country and 8th largest of the markets we
follow.
The Detroit, MI MSA is comprised of the counties Lapeer,
Macomb, Monroe, Oakland, St. Clair, and Wayne. The
central cities are Detroit, Dearborn, Pontiac, and Port
Huron. The office properties that we report on are the
competitive multi-tenant properties that are 10,000
square feet and over.
From the most recent information, the median per capita
personal income in 1995 for the MSA was $26,031 which is
12% above the national level. The cost of doing business
is 7% above the national average.
Industries concentrated in Detroit include
transportation equipment, fabricated metal products,
museums & gardens, and industrial machinery & equipment.
By comparing the percentage of total employment each
industry commands to the national percentage, we can
determine some of the highly concentrated industries.
The top major employers of the area are Ford, General
Motors, Chrysler, Mercy Health Systems, and Henry Ford
Health Systems. Other employers include Americtech -
Michigan, Electronic Data Systems Corp. and NBD Bancorp.
Data as of 4th Quarter, 1996 VI. 237 (C) Copyright 1997, CBC/Torto
Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Economy Detroit has the 8th largest employment level of the MSAs
we follow at approximately 2,067,950 workers. Over the
last 10 years, employment has grown at an average annual
rate of 1.4%. In the last year it grew by 3.3%. The
measures for our 54 MSAs are 1.5% and 2.0%.
respectively.
[GRAPHIC OMITTED]
Table 1 presents the current employment levels and
location quotients for each industry as well as historic
growth rates over the last 10 years, last four quarters,
and forecasted rates for the next 10 years.
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Average Annual Growth Rates: Detroit & 54 MSAs
Employment Location Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Detroit 54 MSAs Detroit 54 MSAs Detroit 54 MSAs
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 111.7 0.77 1.2 0.6 3.8 1.1 0.6 1.0
Government (Civilian) 224.0 0.74 -0.5 1.2 -0.9 0.2 0.1 0.6
Manufacturing 449.8 1.66 -0.6 -1.1 1.6 0.4 -0.2 -0.1
Retail Trade 376.5 1.05 2.0 1.4 5.9 2.3 1.6 1.8
Services 623.6 0.96 3.6 3.7 5.0 3.4 2.3 2.8
Transportation & Public Utilities 91.9 0.79 1.0 1.6 1.4 1.3 1.1 1.2
Wholesale Trade 118.6 0.93 1.1 1.0 1.0 2.3 1.3 1.3
---------------------------------------------------------------------------------------
Total Employment 2067.9 1.4 1.5 3.3 2.0 1.1 1.6
---------------------------------------------------------------------------------------
Office Employment 387.6 0.93 3.6 2.7 8.3 3.5 1.9 2.0
---------------------------------------------------------------------------------------
Source: Regional Financial Associates, Torto Wheaton Research
Data as of 3rd Quarter, 1996
</TABLE>
An initial indication of the relative importance of a
particular employment sector is its share of total
employment, and for greater perspective, a comparison of
its share to the national share. Location quotients
above 1.0 indicate that the local economy has a greater
share of a particular industry than the national average
and the opposite is true when they are below 1.0.
For Detroit, the location quotient for FIRE employment
is 0.77 while the location quotient for Service
employment is 0.96. This means that in Detroit the share
of FIRE employment is 23% less than the national
average. The share of Service employment in this MSA is
4% less than the national average.
- ---------------------------------
Economic Performance
(Rank out of 54)
- ---------------------------------
Total Employment:
current level 8
- ---------------------------------
Total Employment:
% growth over last 10 years 37
- ---------------------------------
Total Employment:
% growth over last year 14
- ---------------------------------
Total Employment:
% growth over next 10 years 43
- ---------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Office We identify and measure employment within the FIRE and
Employment Service sectors in industries such as legal services,
accounting, and insurance to create our office
employment index. The index covers 80-90% of all
office-related employment within each MSA. More specific
details are available in the Data and Methodology
Appendix.
Our estimate of office employment for Detroit currently
stands at 387,600 workers. Over the last 10 years,
office employment has grown by 3.6%. Over the last year
Detroit has seen its office employment grow by 8.3%.
Table 2 below provides historic growth rates for some of
the significant office related industries in Detroit.
Table 2: Levels and Historic Growth Rates for
Subcategories of Office Employment
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Level Average Annual Growth Rates
Employment Category (x1000) Last 10 Years Last 5 Years Last Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance, Insurance, and Real Estate Banks 35.4 -0.2 -1.1 4.9
Credit Agencies & Mortgage Companies 9.6 3.8 4.6 5.9
Insurance Agents 12.1 3.6 3.8 5.2
Insurance Companies 25.3 -0.5 -1.7 0.4
Misc Investing & Trusts 2.9 5.7 3.8 -3.6
Real Estate Companies 22.0 3.7 3.1 5.6
Securities Firms 4.4 -0.4 0.6 2.3
Service Employment Accounting Firms 11.9 0.5 3.3 4.6
Advertising 10.0 2.7 2.6 7.5
Computer & Data Processing 32.9 4.0 4.3 11.9
Consumer Credit Reporting 1.0 2.2 3.4 5.4
Engineering & Architectural Services 32.7 3.9 6.7 10.4
Legal Services 14.9 0.8 -0.9 -4.0
Mailing & Reproduction 7.2 3.3 3.9 10.1
Management & Public Relations 12.3 3.7 6.3 9.4
Misc. Business Services 28.0 1.5 6.4 4.8
Misc. Equipment Rental & Leasing 3.0 -0.1 -1.5 1.0
Motion Picture Distribution Services 1.2 24.5 19.8 18.4
Other Services 36.7 4.1 4.1 12.4
Personnel Services 76.8 12.2 19.5 16.0
Research & Testing Services 7.1 2.4 1.2 8.8
- ----------------------------------------------------------------------------------------------------------------------------------
Source: Regional Financial Associates, Torto Wheaton Research
Data as of 3rd Quarter, 1996
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
For our 54 MSAs, the average annual growth rate of
office employment over the last 10 years was 2.7% while
over the last year it was 3.5%. The forecast calls for
office employment to grow by 2.0% over the next six
years.
The amount of office employees is the primary
determinant of the demand side of the office market
equation; but it is not the only factor. Also important
is the efficiency of space use, measured by square foot
per employee, as well as the rental cost of space. Some
market observers have been arguing that office hoteling,
virtual offices, or 'reengineering' will lead to less
space per employee in the future. By implication, there
would be less demand for office space.
The graph below provides a comparison of office
employment growth for Detroit compared to all 54 MSAs
since 1980 indexed to a 1980 starting point of 100.
Relative
Office Employment [GRAPHIC OMITTED]
Performance
1980 = 100
Office employment growth in Detroit was negative in the
early eighties and did not start to grow positively
until 1983. Office employment growth in Detroit did not
catch up to the nation until the middle of 1985. After
1985, office employment started growing at a faster pace
than the nation until the recession. For the nation as a
whole, the peak year in employment prior to the
recession was 1990 and the decline in office employment
was not as steep as in Detroit. Since the end of the
recession, Detroit office employment has grown faster
than the nation.
- ---------------------------------
Economic Performance
(Rank out of 54)
- ---------------------------------
Office Employment:
current level 10
- ---------------------------------
Office Employment:
% growth over last 10 year 28
- ---------------------------------
Office Employment:
% growth over last years 2
- ---------------------------------
Office Employment:
% growth next 6 years 36
- ---------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
The Current Detroit is the 13th largest of the 54 markets we follow
Office Market with 60.3 million square feet. As of the fourth quarter,
1996, the vacancy rate was 11.2%, placing Detroit 24th
out of 54 markets. The national vacancy rate was 12.2%.
Detroit contains 18.6 million square feet of Class 'A'
office space with a year-end vacancy rate of 4.4%, while
the average Class 'A' vacancy rate for the 54 markets
stood at 9.9% year-end. The 1980's saw a tremendous
building of office space. Nationally, 56.4% or 1.5
billion square feet of the total stock of all office
space has been built since 1980. In Detroit, 57.6% has
been built since 1980.
Out of our 54 markets, 48 quote rents primarily on a
gross basis. The Detroit average gross asking rent is
$14.65 per square foot, while nationally this figure is
$18.35. Over the last year, the Detroit quote declined
2.1%, while the national quote rose 2.8%.
Vacancy Rates
1992 - 1996 [GRAPHIC OMITTED]
Gross Asking Rents
1992 - 1996 [GRAPHIC OMITTED]
- ------------------------------
Office Market Standings
(Rank out of 54)
- ------------------------------
Building Count 15
- ------------------------------
Market Size 13
- ------------------------------
Vacancy Rate 24
- ------------------------------
Gross Asking Rents 38
- ------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 3: Detroit Office Space by Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Sublet as a %
Number of NRA Vacancy of Total Weighted Average TWR
Buildings (x1000) Rate Available Gross Asking Rents Rent Index*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Detroit 45 12,539 17.9 0.1 $12.77 $20.47
---------------------------------------------------------------------------------
Subtotal for Downtown 45 12,539 17.9 0.1 $12.77 $20.47
=================================================================================
---------------------------------------------------------------------------------
Ann Arbor 56 3,392 8.9 0.6 $16.39 $18.82
Birmingham/Bloomfield Hills 76 3,590 5.1 1.6 $19.90 $23.40
Dearborn 24 3,044 8.5 1.6 $17.75 na
Farmington Hills/W. Bloomfield 76 4,485 6.8 0.0 $17.11 $17.40
I-275 corridor 46 3,441 3.5 0.0 $17.39 $17.11
Macomb County 16 725 11.3 0.0 $16.50 na
Rochester/Rochester Hills 14 430 4.4 10.5 $18.88 na
Southfield/Bingham Farms 126 14,981 12.2 0.0 $14.86 $18.16
Troy/Auburn Hills 124 11,697 7.0 3.6 $17.08 $18.05
Unclassified 31 2,024 27.5 0.2 $12.47 na
---------------------------------------------------------------------------------
Subtotal for Suburban 599 47,809 9.4 0.9 $15.71 $18.46
=================================================================================
---------------------------------------------------------------------------------
Total for Detroit 634 60,348 11.2 0.7 $14.65 $18.86
=================================================================================
</TABLE>
[GRAPHIC OMITTED]
Detroit Office Space
The submarket descriptions for the Detroit MSA are
provided by the local CB Commercial office as of second
quarter 1996. This MSA consists of two major markets of
Downtown and Suburban. The Downtown market contains one
submarket, and the Suburban market contains ten.
However, one Suburban submarket is labeled as
Unclassified since there are no specified categories or
boundaries for these buildings. The Detroit MSA lies
north of the Detroit River which is on the United
States-Canadian border. The Suburban market extends to
Ann Arbor on the west which is bordered by the Huron
River.
Vacancy rates are calculated from the vacant available
square feet divided by the net rentable area. Space may
be classified as available but not vacant; space that is
available for sublease may or may not be classified as
vacant. All space classified as vacant is considered to
be available.
* The Torto Wheaton Rent Index represents the contract
gross rent for a 5 year - 10,000 square foot lease in a
building of average age, size, and class in an average
location. The average building in Detroit is a class B,
95,180 square foot building built between 1980 and 1995.
- ---------------------------
Downtown/suburban
Market Standings
DT SUB
- ---------------------------
Building Count 33 13
- ---------------------------
NRA 19 10
- ---------------------------
Vacancy Rate 34 25
- ---------------------------
TW Rent Index 14 19
- ---------------------------
Downtown ranked out of 46
Suburban ranked out of 53
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Table 4: Detroit Office Space by Class
<TABLE>
<CAPTION>
---------------------------------------------------------------
Class 'A' Gross Class 'B' & 'C' Gross
NRA Vacancy Asking NRA Vacancy Asking
(x1000) Rate Rent (x1000) Rate Rent
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Detroit 4,103 1.2 $20.84 8,436 26.1 $12.65
---------------------------------------------------------------
Subtotal for Downtown 4,103 1.2 $20.84 8,436 26.1 $12.65
===============================================================
---------------------------------------------------------------
Ann Arbor 2,008 5.0 $17.86 1,384 14.6 $15.42
Birmingham/Bloomfield Hills 1,517 4.0 $21.57 2,073 5.8 $19.03
Dearborn 995 3.2 na 2,049 11.0 $17.75
Farmington Hill/W. Bloomfield 387 1.3 $18.20 4,098 7.4 $17.10
I-275 Corridor 741 3.0 $20.41 2,700 3.7 $16.56
Macomb County 428 10.3 $16.09 297 12.8 $16.96
Rochester/Rochester Hills 151 7.9 $19.50 279 2.5 $16.58
Southfield/Bingham Farms 5,300 7.4 $19.00 9,681 14.9 $14.34
Troy/Auburn Hills 2,802 3.7 $19.23 8,895 8.1 $16.71
Unclassified 130 5.4 $15.00 1,894 29.0 $12.43
---------------------------------------------------------------
Subtotal for Suburban 14,459 5.4 $18.98 33,350 11.1 $15.21
===============================================================
---------------------------------------------------------------
Total for Detroit 18,562 4.4 $19.09 41,786 14.1 $14.21
===============================================================
</TABLE>
The personnel in the local CB Commercial office in the
Detroit area have classified most of the office
properties in Detroit as A, B, or C class space. The
local CB offices determine their own criteria for
building classification.
- --------------------------------------------------------------------------------
While 110 - or 17.4% - buildings out of a total Detroit
building count of 634 are currently classified as class
'A' properties, 30.8% of the net rentable area is
considered to be class 'A' space. At the end of the
fourth quarter of last year, the class 'A' vacancy rate
stood at 4.4%, compared to a rate of 11.2% for all
space.
At the national level, approximately 22.4% of office
properties are currently classified as class 'A', while
approximately 46.3% of the net rentable area is
classified as class 'A' space. At the end of the fourth
quarter of last year, the national class 'A' vacancy
rate stood at 9.9%.
- -----------------------------------
Detroit
Class "A" Standings Rank
Level Out of 54
- -----------------------------------
NRA (x1000) 18,562 19
- -----------------------------------
Vacancy Rate 4.4% 8
- -----------------------------------
Gross
Asking Rent $19.09 27
- -----------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Year-by-Year To put the Detroit market into perspective, the next two
Office History tables contain annual net absorption and vacancy rates
by submarket for the last five years.
Table 5: Historic Net Absorption By Submarket
-------------------------------------------------
(Square Feet x1000)
1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------
Detroit 440 -625 96 -8 304
-------------------------------------------------
Subtotal for Downtown 440 -625 96 -8 304
=================================================
-------------------------------------------------
Ann Arbor 192 -5 -88 81 104
Birmingham/Bloomfield Hills 125 206 84 246 57
Dearborn 58 36 -34 -3 11
Farmington Hills/W. Bloomfield -38 138 228 71 109
I-275 Corridor 1 72 199 43 142
Macomb County 11 22 -17 38 -3
Rochester/Rochester Hills 16 1 61 1 11
Southfield/Bingham Farms 44 32 700 518 750
Troy/Auburn Hills 219 295 617 108 478
Unclassified 10 -53 -15 16 67
-------------------------------------------------
Subtotal for Suburban 633 744 1,735 1,119 1,726
=================================================
-------------------------------------------------
Total for Detroit 1,078 119 1,831 1,111 2,030
=================================================
- --------------------------------------------------------------------------------
Detroit ranks 11th among our 54 MSAs in performance as
measured by calculating an absorption rate for 1996 -
that is, taking the year's total net absorption divided
by end-of-year 1995 occupied stock. Over the last five
years, the average annual absorption rate for Detroit is
2.49%, 30th out of our 54 MSAs.
- --------------------------------------------
Absorption Performance
Level/ Rank
Rate Out of 54
- --------------------------------------------
Avg ann'l absorption
over the last five years 1236 12
- --------------------------------------------
Ann'l Absorption Rate
over the last five years 2.5% 30
- --------------------------------------------
Absorption Rate
over the last 4 quarters 4.0% 11
- --------------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Table 6: Historic Vacancy Rates and Completions by Submarket
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy
SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Detroit 950 16.2 0 21.1 0 20.3 0 20.3 0 17.9
----------------------------------------------------------------------------------------------------
Subtotal for Downtown 950 16.2 0 21.1 0 20.3 0 20.3 0 17.9
====================================================================================================
----------------------------------------------------------------------------------------------------
Ann Arbor 0 11.0 0 11.2 26 13.0 0 10.3 67 8.9
Birmingham/Bloomfield Hills 10 18.3 140 15.8 0 13.5 0 6.6 0 5.1
Dearborn 44 8.4 0 7.3 0 8.6 0 8.8 0 8.5
Farmington Hills/W. Bloomfield 0 19.0 0 16.0 0 11.0 0 9.4 0 6.8
I-275 Corridor 0 16.2 0 14.0 0 8.3 0 7.1 18 3.5
Macomb County 0 17.3 0 13.3 0 16.1 0 10.9 0 11.3
Rochester/Rochester Hills 0 22.5 0 22.0 0 7.2 0 7.0 0 4.4
Southfield/Bingham Farms 486 25.4 0 25.2 0 20.6 0 17.2 0 12.2
Troy/Auburn Hills 0 19.8 0 17.3 0 12.1 0 11.1 0 7.0
Unclassified 0 26.0 0 28.7 0 28.1 79 30.1 0 27.5
----------------------------------------------------------------------------------------------------
Subtotal for Suburban 540 20.0 140 18.7 26 15.0 79 12.8 85 9.4
====================================================================================================
----------------------------------------------------------------------------------------------------
Total for Detroit 1,490 19.2 140 19.2 26 16.2 79 14.5 85 11.2
====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The metropolitan vacancy rate for Detroit stood at 11.2%
at the end of fourth quarter of 1996, 24th out of our 54
MSAs. In 1992, the vacancy rate stood at 19.2%, 30th out
of the 54 MSAs. Most markets around the country are
showing a good improvement in vacancy levels due to a
combination of moderate demand growth and little in the
way of new supply.
- ----------------------------------------
Vacancy History Standings
Rank
Rate Out of 54
- ----------------------------------------
Current Vacancy Rate 11.2% 24
- ----------------------------------------
1992 Vacancy Rate 19.2% 30
- ----------------------------------------
1995 Vacancy Rate 14.5% 35
- ----------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Office Our Outlook for Detroit is presented here on an annual
Outlook frequency and in the next table on a semiannual
frequency.
Table 7: Annual History and Forecast
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate Level Inflation
(%) (x1000) (x1000) (x1000) (x1000) (%) ($) (%)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1977 4.7 181.4 24,790 2,374 2,412 13.5
1978 5.2 191.4 25,196 406 402 13.3
1979 1.0 197.6 25,596 400 1,294 9.6
1980 -6.0 198.6 26,478 882 1,671 6.3
-------------------------------------------------------------------------------------------------
1981 -3.7 199.2 28,270 1,792 1,340 7.5
1982 -4.9 196.4 29,987 1,717 1,288 8.5
1983 -0.9 203.4 31,975 1,988 1,467 9.6
1984 5.7 221.7 33,967 1,992 2,174 8.5
-------------------------------------------------------------------------------------------------
1985 6.4 255.9 37,352 3,385 2,761 9.4
1986 3.0 272.9 43,605 6,253 4,226 12.7 $15.05
1987 1.4 291.1 47,671 4,066 3,740 12.3 $14.26 -5.2
1988 2.2 301.1 50,548 2,877 1,764 13.8 $14.55 2.0
-------------------------------------------------------------------------------------------------
1989 1.7 307.2 55,286 4,738 2,536 16.6 $14.16 -2.7
1990 0.6 309.7 58,076 2,790 1,165 18.6 $13.38 -5.5
1991 -3.2 301.7 58,528 452 134 19.0 $14.23 6.4
1992 0.0 310.5 60,018 1,490 1,087 19.2 $13.20 -7.2
-------------------------------------------------------------------------------------------------
1993 1.8 324.5 60,158 140 113 19.2 $13.90 5.3
1994 3.3 343.5 60,184 26 1,827 16.2 $15.46 11.2
1995 2.6 357.9 60,263 79 1,091 14.5 $16.64 7.6
1996 3.2 387.6 60,348 85 2,064 11.2 $18.86 13.3
==================================================================================
- ----------------------------------------------------------------------------------------------------------
Forecast 1997 1.5 396.2 60,387 40 1,186 9.3 $20.93 11.0
1998 0.8 402.1 62,954 2,567 834 11.7 $21.44 2.4
1999 1.2 409.8 67,416 4,462 1,313 15.6 $20.40 -4.9
2000 1.1 417.1 71,508 4,092 1,585 18.2 $19.22 -5.8
-------------------------------------------------------------------------------------------------
2001 1.2 425.1 73,558 2,051 1,273 18.7 $18.85 -1.9
2002 1.0 433.4 73,720 163 814 17.8 $19.49 3.4
==================================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Table 8: Semiannual History and Forecast
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate (S)
(%) (x1000) (x1000) (x1000) (x1000) (%) Real* Nominal
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1992.1 -0.2 305.2 59,469 941 346 19.7 $15.54 $13.71
1992.2 0.2 310.5 60,018 549 741 19.2 $14.75 $13.20
-------------------------------------------------------------------------------------------------
1993.1 0.9 315.5 60,122 104 24 19.3 $14.93 $13.55
1993.2 0.9 324.5 60,158 36 89 19.2 $15.12 $13.90
1994.1 1.5 333.0 60,173 15 313 18.7 $15.75 $14.66
1994.2 1.8 343.5 60,184 11 1,514 16.2 $16.38 $15.46
-------------------------------------------------------------------------------------------------
1995.1 1.5 348.5 60,213 29 386 15.6 $16.72 $16.04
1995.2 1.1 357.9 60,263 50 705 14.5 $17.18 $16.64
1996.1 1.5 376.2 60,313 50 827 13.2 $17.98 $17.72
1996.2 1.7 387.6 60,348 35 1,237 11.2 $18.86 $18.86
=====================================================================================
- -------------------------------------------------------------------------------------------------------------
Forecast 1997.1 0.9 392.3 60,368 20 758 10.0 $19.64 $19.96
1997.2 0.6 396.2 60,387 20 428 9.3 $20.26 $20.93
1998.1 0.3 398.9 61,329 942 391 10.1 $20.42 $21.45
1998.2 0.5 402.1 62,954 1,625 443 11.7 $20.08 $21.44
-------------------------------------------------------------------------------------------------
1999.1 0.6 405.9 65,085 2,131 585 13.7 $19.37 $21.02
1999.2 0.6 409.8 67,416 2,331 728 15.6 $18.49 $20.40
2000.1 0.5 413.4 69,644 2,228 800 17.1 $17.61 $19.75
2000.2 0.6 417.1 71,508 1,864 785 18.2 $16.86 $19.22
-------------------------------------------------------------------------------------------------
2001.1 0.6 421.0 72,834 1,327 700 18.7 $16.32 $18.91
2001.2 0.6 425.1 73,558 724 573 18.7 $16.00 $18.85
2002.1 0.5 429.3 73,720 163 439 18.3 $15.94 $19.08
2002.2 0.5 433.4 73,720 0 375 17.8 $16.01 $19.49
=====================================================================================
* Real rents shown in 1996 dollars
</TABLE>
- --------------------------------------------------------------------------------
The forecast calls for an average annual growth in
office employment of 1.9% over the next six years from
its current level. In that office employment growth is a
key element in our forecast model, we expect that this
growth will affect our forecast of net absorption in a
positive manner. We are forecasting vacancy rates to
rise to 17.8% over the next six years. Rents as measured
by the TW Rent Index are expected to decline by an
average annual rate of 0.0% through 2001.
- ----------------------------
Rent and Vacancy Performance
(Rank Out of 54)
- ----------------------------
1996.2 Vacancy Rate 24
- ----------------------------
2002.2 Vacancy Rate 37
- ----------------------------
1996.2 TW Rent Index 19
- ----------------------------
2002.2 TW Rent Index 42
- ----------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Outlook The following four graphs compare growth in office
Comparisons employment, new supply, absorption, and rent between
Detroit and a weighted average of our 54 markets.
- --------------------------------------------------------------------------------
Office Employment
Growth Rates [GRAPHIC OMITTED]
Completion Rates [GRAPHIC OMITTED]
Absorption Rates [GRAPHIC OMITTED]
TW Rent Inflation [GRAPHIC OMITTED]
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Submarket Outlook The following tables provide a short-term forecast by
submarket for net absorption, new supply, rent growth,
and vacancy rates.
Table 9: Forecast of Demand by Submarket
<TABLE>
<CAPTION>
Demand Forecast Factors 2 Year Forecast
------------------------------------------------------------------ ---------------------
---------------------------------------------------------------------- -------------------------
Long-term* 3-Year Estimated
Occupied Percent Avg. Annual Percent Avg. Annual Percent Avg. Annual Percent
Stock of Net Absorption of Net Absorption of Net Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- -------------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Detroit 10,289 19.2 64 3.5 131 7.9 235 23.2
---------------------------------------------------------------------- -------------------------
Subtotal for Downtown 10,289 19.2 64 3.5 131 7.9 235 23.2
====================================================================== =========================
---------------------------------------------------------------------- -------------------------
Ann Arbor 3,090 5.8 123 6.7 32 2.0 60 5.9
Birmingham/Bloomfleld Hills 3,408 6.4 149 8.2 129 7.8 48 4.7
Dearborn 2,786 5.2 100 5.4 -9 -0.5 49 4.8
Farmington Hills/W. Bloomfield 4,178 7.8 249 13.6 136 8.2 59 5.8
I-275 Corridor 3,320 6.2 182 9.9 128 7.7 27 2.7
Macomb County 643 1.2 27 1.5 6 0.4 10 0.9
Rochester/Rochester Hills 411 0.8 18 1.0 24 1.5 na na
Southfield/Bingham Farms 13,146 24.5 396 21.6 656 39.6 303 29.9
Troy/Auburn Hills 10,873 20.3 520 28.4 401 24.2 188 18.6
Unclassified 1,468 2.7 5 0.3 23 1.4 33 3.2
---------------------------------------------------------------------- -------------------------
Subtotal for Suburban 43,325 80.9 1,769 96.8 1,526 92.3 780 76.7
====================================================================== =========================
---------------------------------------------------------------------- -------------------------
Total for Detroit 53,614 100.0 1,833 100.0 1,657 100.0 1,015 100.0
====================================================================== =========================
* Long term net absorption is an estimate of
net absorption over the last 15 years. See the
Appendix for a complete methodology.
</TABLE>
- --------------------------------------------------------------------------------
The three-year average annual net absorption is
calculated from the current period going back three
years. Likewise, the two-year average annual forecast of
net absorption is calculated from the current period
going forward two years. When the Outlook is produced
mid-year, the time periods referenced are also mid-year
time periods.
- ---------------------------------------
Detroit
Submarket Standings
- ---------------------------------------
Largest share of long-term absorption:
------------------------------------
Troy/Auburn Hills
------------------------------------
- ---------------------------------------
Largest share of short-term absorption:
------------------------------------
Southfield/Bingham Farms
------------------------------------
- ---------------------------------------
Largest share of forecasted absorption:
------------------------------------
Southfield/Bingham Farms
------------------------------------
- ---------------------------------------
Data as of 4th Ouarter, 1996 (C) Copyrlght 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 10: Forecast of Supply by Submarket
<TABLE>
<CAPTION>
Supply Forecast Factors 2 Year Forecast
-------------------------------------------------------------- ----------------------
------------------------------------------------------------------- --------------------------
Average Annual Square Feet Estimated Annual
Completions Percent Under Percent Planned Percent Completions Percent
Last 15 Years of Construction of Projects of Next 2 Years of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- --------------------------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Detroit 145 6.8 0 0.0 0 0.0 71 5.4
------------------------------------------------------------------- --------------------------
Subtotal for Downtown 146 6.8 0 0.0 0 0.0 71 5.4
=================================================================== ==========================
------------------------------------------------------------------- --------------------------
Ann Arbor 139 6.5 39 100.0 80 42.8 388 29.7
Birmingham/Bloomfield Hills 159 7.5 0 0.0 0 0.0 66 5.1
Dearborn 113 5.3 0 0.0 0 0.0 45 3.5
Farmington Hills/W. Bloomfield 268 12.5 0 0.0 0 0.0 108 8.3
I-275 Corridor 189 8.8 0 0.0 107 57.2 155 11.8
Macomb County 31 1.5 0 0.0 0 0.0 13 1.0
Rochester/Rochester Hills 19 0.9 0 0.0 0 0.0 na na
Southfield/Bingham Farms 483 22.6 0 0.0 0 0.0 210 16.1
Troy/Auburn Hills 566 26.5 0 0.0 0 0.0 232 17.8
Unclassified 25 1.2 0 0.0 0 0.0 10 0.8
------------------------------------------------------------------- --------------------------
Subtotal for Suburban 1,992 93.3 39 100.0 187 100.0 1,235 94.7
=================================================================== ==========================
------------------------------------------------------------------- --------------------------
Total for Detroit 2,137 100.0 39 100.0 187 100.0 1,306 100.0
=================================================================== ==========================
</TABLE>
- --------------------------------------------------------------------------------
Our forecast of submarket supply utilizes historical
shares of new supply as well as acknowledged
under-construction and planned projects to distribute
our metropolitan forecast of new supply to each
submarket for the next two years.
The most likely influence on the Detroit market over the
next several years will be the amount of new
construction. Over the next two years we estimate 1.3
million square feet will be completed annually,
metro-wide. On the other hand, Table 9 shows us that 1.0
million square feet annually is the forecasted net
absorption during the same period.
Data as of 4th Ouarter, 1996 (C) Copyrlght 1997, CBC/Torto Wheaton Research
<PAGE>
Detroit
- --------------------------------------------------------------------------------
Table 11: Forecast of Vacancy Rates and Rents by Submarket
<TABLE>
<CAPTION>
Historic and Year-end 1996 Vacancy Rates and 2 Year Forecast
-------------------------------------------- ----------------------------------
------------------------------------------------ --------------------------------------
TW Rent Index
1993 1996 1996 Avg. Annual
Vacancy Rate Vacancy Rate TW Rent Index Vacancy Rate Level Rent Inflation
- -------------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Detroit 21.1 17.9 $ 20.47 15.1 $ 23.05 6.1
------------------------------------------------ --------------------------------------
Subtotal for Downtown 21.1 17.9 $ 20.47 15.1 $ 23.05 6.1
================================================ ======================================
------------------------------------------------ --------------------------------------
Ann Arbor 11.2 8.9 $ 18.82 23.0 $ 21.44 6.7
Birmingham/Bloomfield Hills 15.8 5.1 $ 23.40 5.9 $ 26.82 7.1
Dearborn 7.3 8.5 na 8.1 na na
Farmington Hills/W. Bloomfield 16.0 6.8 $ 17.40 8.6 $ 19.90 6.9
I-275 Corridor 14.0 3.5 $ 17.11 10.0 $ 19.65 7.2
Macomb County 13.3 11.3 na 11.7 na na
Rochester/Rochester Hills 22.0 4.4 na na na na
Southfield/Bingham Farms 25.2 12.2 $ 18.16 10.6 $ 20.62 6.6
Troy/Auburn Hills 17.3 7.0 $ 18.05 7.4 $ 20.64 6.9
Unclassified 28.7 27.5 na 25.1 na na
------------------------------------------------ --------------------------------------
Subtotal for Suburban 18.7 9.4 $ 18.47 10.7 $ 21.07 6.8
================================================ ======================================
------------------------------------------------ --------------------------------------
Total for Detroit 19.2 11.1 $ 18.86 11.6 $ 21.44 6.6
================================================ ======================================
</TABLE>
- --------------------------------------------------------------------------------
Combining the supply and demand forecasts of the
previous tables, we can project the rent and vacancy
levels by submarket for Detroit. We provide forecasts
only in those submarkets where we have determined that
there is sufficient stock of space or where there is
currently space under construction.
The local office in the Detroit area was reporting
39,000 square feet of multi-tenant space under
construction as of the 4th quarter of 1996. Our forecast
calls for an average of 2.2 million square feet to be
built each year over the next six years. The following
table provides information on current projects under
construction.
- --------------------------------------
Detroit
Submarket Standings
- --------------------------------------
Highest current vacancy rate
-----------------------------------
Unclassified
-----------------------------------
- --------------------------------------
Largest forecasted decrease in vacancy
-----------------------------------
Detroit
-----------------------------------
- --------------------------------------
Largest forecasted increase in rents
-----------------------------------
Birmingham/Bloomfield Hills
-----------------------------------
- --------------------------------------
Data as of 4th Ouarter, 1996 (C) Copyrlght 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 12: Multi-tenant Properties Under Construction
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Suburban Building Name and Address NRA Available Rent
<S> <C> <C> <C> <C> <C> <C>
Ann Arbor WILLIAMSBURG VII 15,000 100.0 21.00
1601 BRIARWOOD CIRCLE (NNN)
ANN ARBOR
Due: 1997
---------------------------------------------------------------------------
ATRIUM III 24,000 100.0 19.00
950 VICTORS WAY (NNN)
ANN ARBOR
Due: 1997
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
Subtotal for Ann Arbor 2 39,000 100.0 $19.77 na
===========================================================================
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
Total for Detroit 2 39,000 100.0 $19.77 na
===========================================================================
</TABLE>
- --------------------------------------------------------------------------------
This table reports only multi-tenant buildings that were
under construction as of 4th quarter, 1996. We do track
single tenant or build-to-suit construction for the
purposes of estimating absorption and making forecasts.
<PAGE>
================================================================================
ADDENDUM D CB COMMERCIAL OFFICE MARKET STATISTICS
- --------------------------------------------------------------------------------
Addendum D
CB COMMERCIAL OFFICE MARKET STATISTICS
- --------------------------------------------------------------------------------
<PAGE>
METROPOLITAN DETROIT OFFICE MARKET SUMMARY
2d Qtr 1997
<TABLE>
<CAPTION>
ASKING LEASE RTS
- --------------------------------------------------------------------------------------------------------
SUBMARKET MARKET SIZE VACANCY RATE NET ABSORPTION YTD NET ABSORP AVE LOW HIGH
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANN ARBOR 3,429,772 4.48 121,001 132,583 16.68 12.00 20.00
- --------------------------------------------------------------------------------------------------------
AUBURN HILLS 242,750 5.85 0 -5,596 17.50 17.50 17.50
- --------------------------------------------------------------------------------------------------------
BIRMINGHAM/BLOOM 3,725,446 7.19 -79,519 -47,768 20.89 12.50 25.00
- --------------------------------------------------------------------------------------------------------
DEARBORN 3,190,019 11.7 0 13,495 18.00 12.75 24.60
- --------------------------------------------------------------------------------------------------------
FARMINGTON 4,311,282 5.84 28,279 47,668 17.70 10.00 20.00
- --------------------------------------------------------------------------------------------------------
I-275 3,698,198 10.16 -51,237 -50,721 17.82 9.00 21.00
- --------------------------------------------------------------------------------------------------------
ROCHESTER 429,617 5.55 -10,692 -4,767 17.74 12.00 19.50
- --------------------------------------------------------------------------------------------------------
SOUTHFIELD 14,976,108 10.72 164,354 225,898 15.08 10.00 22.00
- --------------------------------------------------------------------------------------------------------
TROY 11,458,138 5.75 -14,470 170,955 17.71 13.75 22.50
- --------------------------------------------------------------------------------------------------------
MACOMB 795,116 13.36 -10,692 34,094 14.80 6.50 19.00
- --------------------------------------------------------------------------------------------------------
OTHER 1,943,876 31.94 0 -96,361 12.52 8.00 18.50
- --------------------------------------------------------------------------------------------------------
TOTAL SUBURBAN 48,200,347 9.12 147,024 419,480 16.17 6.50 25.00
- --------------------------------------------------------------------------------------------------------
DETROIT 12,540,223 16.99 22,428 120,102 12.95 7.00 27.00
OVERALL METRO 60,740,570 10.75 169,452 539,582 15.12 6.50 27.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
This information is prepared by:
CB Commercial Real Estate Group, Inc.
1000 Town Center
Suite 2300
Southfield, MI 48075
(810) 353-5400
<PAGE>
2ND QTR 1996
OFFICE
<TABLE>
<CAPTION>
ASKING LEASE RTS
- --------------------------------------------------------------------------------------------------------
SUBMARKET MARKET SIZE VACANCY RATE NET ABSORPTION YTD NET ABSORP AVE LOW HIGH
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANN ARBOR 3,332,272 10.14 -15,642 45,495 16.30 9.00 22.00
- --------------------------------------------------------------------------------------------------------
AUBURN HILLS 242,750 3.54 3,096 2,796 17.50 17.50 17.50
- --------------------------------------------------------------------------------------------------------
BIRMINGHAM/BLOOM 3,573,211 7.16 -11,668 -16,831 19.96 14.50 23.50
- --------------------------------------------------------------------------------------------------------
DEARBORN 3,122,819 11.73 -50,551 -85,763 16.74 12.75 21.00
- --------------------------------------------------------------------------------------------------------
FARMINGTON 4,331,282 9.18 7,195 8,055 16.81 10.00 20.00
- --------------------------------------------------------------------------------------------------------
1-275 3,595,121 6.35 62,268 31,789 17.07 9.00 20.00
- --------------------------------------------------------------------------------------------------------
ROCHESTER 429,617 3.81 10,227 13,674 17.04 12.00 19.50
- --------------------------------------------------------------------------------------------------------
SOUTHFIELD 14,998,788 12.66 566,787 615,768 14.83 10.00 21.00
- --------------------------------------------------------------------------------------------------------
TROY 11,426,449 9.38 -73,246 215,858 16.33 9.25 22.50
- --------------------------------------------------------------------------------------------------------
MACOMB 725,116 11.18 -10,958 -2,251 14.69 6.50 19.00
- --------------------------------------------------------------------------------------------------------
OTHER 1,943,876 28.47 0 12.55 8.00 18.50
- --------------------------------------------------------------------------------------------------------
TOTAL SUBURBAN 47,721,301 10.93 507,508 828,590 15.65 6.50 23.50
- --------------------------------------------------------------------------------------------------------
DETROIT 13,022,723 21.41 -29,122 -149,903 13.66 7.00 23.00
- --------------------------------------------------------------------------------------------------------
OVERALL METRO 60,744,024 13.18 478,386 678,687 14.95 6.50 23.50
- --------------------------------------------------------------------------------------------------------
</TABLE>
This information is prepared by:
CB Commercial Real Estate Group, Inc.
1000 Town Center
Suite 2300
Southfield, MI 48075
(810) 353-5400
<PAGE>
[LOGO]
NORTHERN VIRGINIA MARKET ANALYSIS
PRENTISS OFFICE PORTFOLIO
Fairfax County, Virginia
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[LETTERHEAD OF CB COMMERCIAL]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Northern Virginia Market Analysis
Prentiss Office Portfolio
Fairfax County, Virginia
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Office Portfolio located in Fairfax
County, Virginia.
The subject consists of 3 multi-tenant, institutional quality, office buildings
having a combined total of 427,251 SF of net rentable area. The Northern
Virginia market has an average occupancy of 96% with an average net rental rate
of $22.14 PSF/YR. Overall this market area is stabilized and showing improving
rental rates, and significant new construction.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: Various Locations, Fairfax County,
Virginia
Property Description: The northern Virginia portfolio consists
of three office buildings containing a
total of 427,245 net rentable square
feet, which are located in suburban
Fairfax County and Herndon, Virginia
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 3
Number of Stories: 4 - 8
Gross Building Area: 427,245 SF
Net Rentable Area: 427,245 SF
Avg. Year Built: 1988 - 1990
Condition: Good
Effective Age: 8 Years
Market Financial Indicators
Current Occupancy: 95.6%
Stabilized Occupancy: 95.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $20.00 - $23.00 PSF
Tenant Improvements (New Leases): $18.00 Per SF
Tenant Improvements (Renewal Leases): $5.00 Per SF
Leasing Commissions (New Leases): 4.0%
Leasing Commissions (Renewal Leases): 1.0%
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS......................................................ii
TABLE OF CONTENTS............................................................iii
TRADE AREA ANALYSIS............................................................1
COMPETITIVE MARKET TREND ANALYSIS..............................................3
MARKETABILITY CONCLUSIONS......................................................6
ADDENDA
A Improved Comparable Sales
B Expense Comparables
C Northern Virginia Office Market Statistics
D Demographics
E Torto Wheaton Research Data
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
The Washington, DC MSA is comprised of the five counties in Maryland of Calvert,
Charles, Frederick, Montgomery and Prince George's. The 11 counties in Virginia
of Arlington, Clarke, Culpeper, Fairfax, Fauquier, King George, Loudoun, Prince
William, Spotsylvania, Stafford, and Warren and the two counties in West
Virginia of Berkeley and Jefferson. The cities included in the MSA are
Washington, DC, Arlington, VA, Frederick, MD Fredericksburg, VA along with the
following six cities in Virginia of Alexandria Fairfax, Falls Church,
Fredericksburg, Manassas and Manassas Park.
As of 1994, the population of the Washington, DC metropolitan statistical area
was 4.47 million people making it the 6th largest in the country. The mean per
capita personal income in 1994 for the MSA was $27,762 which is 33.4% above the
national level. The cost of doing business is 36% higher than the national
average. Industries concentrated in Washington include federal civilian
government, engineering & management services, and business services.
The top major employers of the area are Giant Food, Marriott, Inova Health
System, Mediantic Healthcare and Woodward & Lothrop. Other employers include MCI
Communications , Potomac Electric Power and Dyncorp.
Washington, D.C. contains 80.4 million square feet of Class 'A' office space
with a year-end vacancy rate of 8.9%. The 1980's saw a tremendous building of
office space. Nationally, 56.4% or 1.5 billion square feet of the total stock of
all office space has been built since 1980. In Washington, D.C., 63.0% has been
built since 1980. The Washington, D.C. average gross asking rent is $22.59 per
square foot, while nationally this figure is $18.35. Over the last year, the
Washington, D.C. quote rose 7.1%, while the national quote rose 2.8%.
On an aggregate basis values for both vacant land and improved properties
generally increased in 1996 and are generally expected to increase again in the
short term future. The growth that has taken place in recent years is expected
to continue in the immediate future. Therefore, the overall trend for the
subject appears to be favorable.
Location
The trade area is located in northern Virginia in the suburban Washington D.C.
area.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
Demographics
Population growth and new household formations have been on an upward trend
within the subject trade area.
Selected trade area demographics are shown in the following table:
==================================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
- ------------------------------------------------------------------
Fairfax Washington
County DC MSA
- ------------------------------------------------------------------
Population
2001 Estimate 948,527 4,804,463
1996 Estimate 897,558 4,564,246
1990 Census 818,584 4,223,485
1996 - 2001 % Change 5.7% 5.3%
Households
2001 Estimate 337,626 1,767,697
1996 Estimate 319,948 1,684,493
1990 Census 292,345 1,566,134
1996 - 2001 % Change 5.5% 4.9%
2001 Median Household Income $82,293 $62,247
1996 Median Household Income $70,107 $53,817
1996 Average Household Income $82,486 $66,608
1990 Average Home Value $245,854 $194,291
1990 % College Graduates 49.0% 37.0%
- ------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
==================================================================
Trends and Conclusions
The trade area currently has a strong income demographic profile as compared to
the overall Washington D.C. MSA. The outlook is for continued strong performance
with moderate improvement over the next several years. As a result, the demand
for existing developments is expected to be good. Generally, the trade area is
expected to maintain a relatively stable growth pattern in the foreseeable
future.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
================================================================================
MARKET STATISTICS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Category Source Washington D.C. Northern VA
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Existing Supply (SF X 1,000) (1) 208,990 84,644
(3) 83,162
Under Construction (SF X 1,000) (1) 1,996 360
Construction - 2 YR Annual Forecast (SF X (1) 2,054 729
1,000)
Absorption - 3 YR Avg. (SF X 1,000) (1) 2,708 2,287
Absorption - 2 YR Annual Forecast (SF X 1,000) (1) 2,772 632
Current Occupancy (1) 91.7% 95.2%
(3) 95.6%
Occupancy - 2 YR Forecast (1) 92.5% 95.0%
Average Rent PSF - Current (1) $23.32 $20.97
(2) $33.23 $24.89
(3) $22.14
Average Rent PSF - 2 YR Forecast (1) $26.93 $24.57
Annual Rent Inflation - 2 YR Forecast (1) 8.2% 7.5%
- -----------------------------------------------------------------------------------------
</TABLE>
Source Codes:
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
================================================================================
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
MSA and local submarket over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
==================================================================
MARKET TRENDS
1992 - 1996
- ------------------------------------------------------------------
Washington D.C. MSA Northern Virginia
----------------------- ----------------------
Date Rent PSF Occupancy Rent PSF Occupancy
- ------------------------------------------------------------------
1992 $17.01 86.5% N/A 84.4%
1993 $17.38 88.6% N/A 87.1%
1994 $18.41 89.6% N/A 89.9%
1995 $20.63 90.4% N/A 93.0%
1996 $23.32 91.7% $20.97 95.2%
1997 Forecast $24.96 92.6% $24.57 95.0%
==================================================================
Source: Torto Wheaton Research
==================================================================
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
<TABLE>
<CAPTION>
========================================================================================================
Comp. Location Size (GBA) Base Rent Exp. Reimb. TI's Pct.
No. Occ.
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 501-513 Capitol Court, 27,100 SF $18.10 All $5.50 95%
NE, Washington, DC
2 2041 Martin Luther 79,012 SF $20.00 All $8.00 100%
King, Jr. Hwy, SE,
Washington, DC
3 1925 K Street, NW, 160,000 SF $22.70, Full Service 0% $25.00/SF 91%
Washington, DC
4 1015 18th Street, NW, 155,041 SF $22.75, Full Service 0% $8.00/SF 83%
Washington, DC
5 1133 15th Street, NW, 293,861 SF $23.00, Full Service 0% $18.00/SF 70%
Washington, DC
6 1627 K Street, NW, 76,603 SF $23.00, Full Service 0% $17.00/SF 81%
Washington, DC
- --------------------------------------------------------------------------------------------------------
</TABLE>
Compiled by: CB Commercial
================================================================================
Rental rates are increasing at a strong rate due to strong demand and a lack of
available supply. As a result, there are a number of buildings planned or under
construction at this time, including seven new speculative buildings in the
Herndon/Dulles submarket.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET EXPENSE RATES
A table presenting seven area expense comparables is located in the Addenda.
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
================================================================================
CAPITAL EXPENSES
- --------------------------------------------------------------------------------
Capital Expense Category Range Reported
- --------------------------------------------------------------------------------
Renewal Probability 75% to 85%
Tenant Improvements (New Leases) $5.50 PSF to $25.00 PSF
Tenant Improvements (Renewal Leases) $2.00 PSF to $5.00 PSF
Weighted Average Tenant Improvements $2.88 PSF to $8.00 PSF
Leasing Commissions (New Leases) 4.0% to 4.0%
Leasing Commissions (Renewal Leases) 1.0% to 2.0%
Weighted Average Leasing Commissions 1.8% to 2.3%
- --------------------------------------------------------------------------------
Compiled By: CB Commercial
================================================================================
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Sale Name Location Date of Size
No. Sale (NRA) Price PSF OCC NOI PSF OAR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Ballston Commons 4200 Wilson Boulevard, Mar-97 170,954 $167.30 98% $15.04 8.99%
Office Building Arlington, VA
2 Fairgate @ Ballston 1005 N. Glebe Road, Mar-97 143,564 $185.42 100% $21.05 11.35%
Phase I Arlington, VA
3 Potomac Tower 1001 North 19th Street, Feb-97 236,396 $263.12 100% $25.55 9.71%
Arlington, VA
4 1300 North 17th 1300 North 17th Street, Oct-96 372,865 $160.92 99% $17.51 10.88%
Street Arlington, VA
5 1616 North Fort 1616 North Fort Meyer Oct-96 292,826 $133.01 99% $15.16 11.40%
Meyer Drive Drive, Arlington, VA
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Compiled by: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
==============================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
==============================================================
Category Amount
- --------------------------------------------------------------
Current Occupancy: 95.6%
Stabilized Occupancy: 95.0%
Estimated Absorption: Market is
stabilized.
Expenses (Range of Comparable Data): $4.73 - $6.29 PSF
Market Expenses: $6.25/SF
Market Rental Rate: $20.00 - $23.00 PSF
Type of Lease: Full service with
base year expense
stop.
Tenant Impr. Range (New Leases): $5.50 - $25.00 PSF
Tenant Improvements (New Leases): $18.00/SF
Tenant Impr. Range (Renewal Leases): $2.00 - $5.00 PSF
Tenant Improvements (Renewal Leases): $5.00/SF
Leasing Commis. Range (New Leases): 4.0%
Leasing Commissions (New Leases): 4.0%
Leasing Commis. Range (Renewal Leases): 1.0% - 2.0%
Leasing Commissions (Renewal Leases): 1.0%
Average Lease Term 5 Years
- --------------------------------------------------------------
Compiled By: CB Commercial
==============================================================
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
SUMMARY OF COMPARABLE OFFICE BUILDING SALES
<TABLE>
<CAPTION>
====================================================================================================================================
Number Building
Sale Sale Year of Size Occupancy Price Per
No. Name / Location Date Built Stories (NRA) at Sale Sale Price SF OER OAR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Ballston Commons Office Building 3/97 1987 8 170,954 98% $28,600,000 $167.30 34.75% 8.99%
4200 Wilson Boulevard
Arlington,VA
2 Fairgate @ Ballston Phase I 3/97 1987 8 143,564 100% $26,620,000 $185.42 29.26% 11.35%
1005 N. Glebe Road
Arlington,VA
3 Potomac Tower 02/97 1989 19 236,396 100% $62,200,000 $263.12 30.55% 9.71%
1001 North 19th Street
Arlington,VA
4 l300 North 17th Street 10/96 1980 19 372,865 99.1% $60,000,000 $160.92 33.33% 10.88%
1300 North 17th Street
Arlington,VA
5 1616 North Fort Meyer Drive 10/96 1974 19 292,826 98.7% $38,950,000 $133.01 38.28% 11.40%
1616 North Fort Meyer Drive
Arlington,VA
6 Ballston Station 10/96 1989 8 273,920 100% $53,000,000 $193.49 N/A 9.15%
4301 N. Fairfax Drive
Arlington,VA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Compiled by: CB Commercial
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Location Data
Property Name: Ballston Commons Office Building
Location: 4200 Wilson Boulevard
City: Arlington
County: Arlington
State/Zip: Virginia 22203
Assessor's Parcel No(s): 14-059-034
Atlas Reference: 16-J4
Physical Data
Type: Suburban
Land Area: 0.5200 Acres
Gross Building Area: N/A
Net Rentable Area: 170,954 SF
Usable Building Area: N/A
Year Built: 1987
# of Stories: 8
Parking: Covered and adequate
Condition: Good
Exterior Walls: Glass Panels
Amenities: Integrated with Ballston Commons Shopping
Center, Metro Access
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 3 /97
Marketing Time: 4 months
Grantor: Wilson Office Building Associates, LP
Grantee: TA Associates Fund IV, LP
Document No.: 2819-1725 Rec. Date:03/06/97
Sale Price: $28,600,000
Financing: Cash to Seller
Cash Equivalent Price: $28,600,000
Required Capital Cost: $0
Adjusted Sale Price: $28,600,000
Verification: Buyer and Seller
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 98%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $4,150,000 $24.28
Vacancy and Credit Loss: $207,500 $1.21
Effective Gross Income: $3,942,500 $23.06
Expenses: $1,370,000 $8.01
Net Operating Income: $2,572,500 $15.05
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap,DCF and P.S.F
Overall Capitalization Rate (OAR): 8.99 %
Projected IRR: 11.50%
Effective Gross Multiplier (EGIM): 7.25
Operating Expense Ratio (OER): 34.75 %
Price Per Square Foot: $167.30
Comments
Class A Building near the Ballston Metro Station. The property has limited
lease roll over exposure for the subsequent three years, upon when over 60%
of the leases expire through the year 2001. Major tenants include EDS, US
Coast Guard, AGFA Corpiration, USAIR, and the Council of Better Business
Bureau. The average rent was about $21.50 PSF. The buyer used a 4% rental
growth rate and a 9.5% terminal capitalization rate in their cash flow
projections.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Location Data
Property Name: Fairgate @ Ballston Phase I
Location: 1005 N. Glebe Road
City: Arlington
County: Arlington
State/Zip: Virginia 22201
Assessor's Parcel No(s): 14-1/19
Atlas Reference: 17-D2
Physical Data
Type: Suburban
Land Area: 1.3180 Acres
Gross Building Area: N/A
Net Rentable Area: 143,564 SF
Usable Building Area: N/A
Year Built: 1987
# of Stories: 8
Parking: 364 Spaces Below Grade
Condition: Good
Exterior Walls: Brick Veneer
Amenities: Below Grade Parking, VAV system,
Food Service
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 3/97
Marketing Time: 7 months
Grantor: USF&G
Grantee: Teachers Insurance Partership
Document No.: N/A
Sale Price: $26,620,000
Financing: Cash to Seller
Cash Equivalent Price: $26,620,000
Required Capital Cost: $0
Adjusted Sale Price: $26,620,000
Verification: Seller
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $4,450,000 $31.00
Vacancy and Credit Loss: $178,000 $1.24
Effective Gross Income: $4,272,000 $29.76
Expenses: $1,250,000 $8.71
Net Operating Income: $3,022,000 $21.05
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria: DCF
Overall Capitalization Rate (OAR): 11.35 %
Projected IRR: 11.20 %
Effective Gross Multiplier (EGIM): 6.23
Operating Expense Ratio (OER): 29.26 %
Price Per Square Foot $185.42
Comments
This was part of a $164.5 million portfolio sale to Teachers Insurance.
USF&G retained a 10% interest in the acquiring partnership along with the
asset management contract. The capitalization rate and discount rate on the
portfolio were projected to be 10.7% and 11.7%, respectively.
The Fairgate Building is a multi-tenanted building leased at over $28 psf,
or about $4 above market. Space is currently being marketed at $25 psf.
While there is limited lease roll over exposure during the next 24 months,
over 20% of the leases expire in the year 2000 and 50% of the leases expire
in the year 2003. Nearly 60% of the property is leased to SATO Travel, a
goverment contractor of average to marginal credit. About 70,000 SF of the
building is leased to SATO at close to $32 psf scheduled to expire in 2003.
Additional investor assumptions used for this property were 3.5% rent and
expense growth and a 10.5% reversionary capitalization rate.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Location Data
Property Name: Potomac Tower
Location: 1001 North 19th Street
City: Arlington
County: Arlington
State/Zip: Virginia
Assessor's Parcel No(s): 16-018-007
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 0.5689 Acres
Gross Building Area: 252,193 SF
Net Rentable Area: 236,396 SF
Usable Building Area: N/A
Year Built: 1989
# of Stories: 19
Parking: 422 covered parking spaces
Condition: Excellent
Exterior Walls: Glass Panels
Amenities: Concierge, exercise facility, shuttle
to metro
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 02/97
Marketing Time: 5 months
Grantor: Potomac Tower LP
Grantee: Deutsche Immobielien Fonds AG
Document No.: N/A
Sale Price: $62,200,000
Financing: Cash to Seller
Cash Equivalent Price: $62,200,000
Required Capital Cost: $0
Adjusted Sale Price: $62,200,000
Verification: Broker
Financial Data
Assumptions & Forecast Broker
Occupancy at Sale: 100%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
----- ------
Potential Gross Income: $8,696,000 $36.79
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $8,696,000 $36.79
Expenses: $2,657,000 $11.24
Net Operating Income: $6,039,000 $25.55
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap
Overall Capitalization Rate (OAR): 9.71 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 7.15
Operating Expense Ratio (OER): 30.55 %
Price Per Square Foot $263.12
Comments
This building is located on the Virginia side of the Potomac River,
directly across from the Watergate Complex. The building is one of a few
skyscrapers in Rosslyn, an area of Arlington County, and has very good
access to Interstate 66, the George Washington Parkway, and Route 1. The
Rosslyn metro station is located 2 and one-half blocks away from the
building. Major tenants include TRW, AES, Friedman Billings Ramsey &
Company, Sverdrup Corp., and Towers Perrin, all of which occupy two floors.
The AES lease expires in 1999.
Market rent is $30 - $32 PSF, and the income is expected to decline as
leases expire. The buyer looks for class A office properties which can
maintain a cash on cash return above 9% over the holding period.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Location Data
Property Name: 1300 North 17th Street
Location: 1300 North 17th Street
City: Arlington
County: Arlington
State/Zip: Virginia 22209
Assessor's Parcel No(s): 17-3-31,32 & 17-2-2,15
Atlas Reference: 17-D2
Physical Data
Type: Suburban
Land Area: 1.8617 Acres
Gross Building Area: 408,466 SF
Net Rentable Area: 372,865 SF
Usable Building Area: N/A
Year Built: 1980
# of Stories: 19
Parking: 667 Below Grade
Condition: Good
Exterior Walls: Glass Panels
Amenities: Five level parking facility, Metro rail
access, restaurant, views
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 10/96
Marketing Time: 3 months
Grantor: LaSalle Fund II
Grantee: Beacon Properties LP
Document No.: 2801-0358 Rec. Date:10/18/96
Sale Price: $60,000,000
Financing: Cash to Seller
Cash Equivalent Price: $60,000,000
Required Capital Cost: $0
Adjusted Sale Price: $60,000,000
Verification: Buyer and Seller
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 99.1%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $9,790,000 $26.26
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $9,790,000 $26.26
Expenses: $3,263,000 $8.75
Net Operating Income: $6,527,000 $17.51
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap,DCF and P.S.F
Overall Capitalization Rate (OAR): 10.88 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 6.13
Operating Expense Ratio (OER): 33.33 %
Price Per Square Foot: $160.92
Comments
This is class A office building renovated in 1990. The property is well
located in a high density neighborhood of Rosslyn with good access to
highways and the metro rail. The improvements were in good condition at the
time of sale.
Five tenants occupy over 40% of the building at rents ranging from $18.00
to $27.00 PSF. Over 50% of the leases expire by the year 2000, indicating
above average leasing risk.
This property was acquired along with 1300 N. 17th Street for a total
consideration of $98.95 million. The listing price for the package was $125
million. The listing price allocated to 1300 N Fort Meyer was $75 million.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Location Data
Property Name: 1616 North Fort Meyer Drive
Location: 1616 North Fort Meyer Drive
City: Arlington
County: Arlington
State/Zip: Virginia 22209
Assessor's Parcel No(s): 17-3-31,32,33
Atlas Reference: 17-D2
Physical Data
Type: Suburban
Land Area: 1.4848 Acres
Gross Building Area: 339,010 SF
Net Rentable Area: 292,826 SF
Usable Building Area: N/A
Year Built: 1974
# of Stories: 19
Parking: 627 Structured
Condition: Good
Exterior Walls: Brick Veneer
Amenities: Five level parking facility, Metro
rail access, fitness center, plaza,
views
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 10/96
Marketing Time: 3 months
Grantor: LaSalle Fund II
Grantee: Beacon Properties LP
Document No.: 2801-0337 Rec. Date:10/18/96
Sale Price: $38,950,000
Financing: Cash to Seller
Cash Equivalent Price: $38,950,000
Required Capital Cost: $0
Adjusted Sale Price: $38,950,000
Verification: Buyer and Seller
Financial Data
Assumptions & Forecast: Broker
Occupancy at Sale: 98.7%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: $7,195,487 $24.57
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $7,195,487 $24.57
Expenses: $2,754,374 $9.41
Net Operating Income: $4,441,113 $15.17
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap,DCF and P.S.F
Overall Capitalization Rate (OAR): 11.40 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 5.41
Operating Expense Ratio (OER): 38.28 %
Price Per Square Foot: $133.01
Comments
This is class B office building renovated in 1990. The property is well
located in a high density neighborhood of Rosslyn with good access to
highways and the metro rail. The improvements were in good condition at the
time of sale, as the seller invested over $2.6 million in capital to
upgrade the HVAC and to repair water damage in the garage. An additional
$750,000 will be required for additional garage and mechanical system
repairs.
Three tenants, Amercan Red Cross, Price Waterhouse and TRW occupy over 60%
of the building at rents ranging from $22.50 to $25.50 PSF. Only 20% of the
leases expire by the year 2000, indicating modest leasing risk.
This property was acquired along with 1300 N. 17th Street for a total
consideration of $98.95 million. The listing price for the package was $125
million. The listing price for 1300 N. 17th Street was $50 million.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 6
================================================================================
Location Data
Property Name: Ballston Station
Location: 4301 N. Fairfax Drive
City: Arlington
County: Arlington
State/Zip: Virginia 22203
Assessor's Parcel No(s): 14-020-019
Atlas Reference: 16-H4
Physical Data
Type: Suburban
Land Area: 1.6422 Acres
Gross Building Area: N/A
Net Rentable Area: 273,920 SF
Usable Building Area: N/A
Year Built: 1989
# of Stories: 8
Parking: Below Grade Adequate
Condition: Excellent
Exterior Walls: Glass Panels
Amenities: On-Site Parking, Two Restaurants,
Metro Station Access
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 10/96
Marketing Time: 6 months
Grantor: London & Leeds / Ballston Station
Grantee: The State Teachers Retirement Board
of Ohio (OTR)
Document No.: 2803-0471 Rec. Date:10/31/96
Sale Price: $56,200,000
Financing: See Comments
Cash Equivalent Price: $53,000,000
Required Capital Cost: $0
Adjusted Sale Price: $53,000,000
Verification: Buyer
Financial Data
Assumptions & Forecast Buyer
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
----- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $4,850,000 $17.71
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 6
================================================================================
Analysis
Buyers Underwriting Criteria: Other
Overall Capitalization Rate (OAR): 9.15 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A %
Price Per Square Foot: $193.49
Comments
This transaction involved terms which allowed the seller to record a higher
price in exchange for receiving income over a specified time period. The
sale closed six months earlier at $53 million but was recorded at $56.2
million with the net income accruing to the buyer from six months prior.
The buyer indicated the actual price as of October 1996 was $53 million.
The property was leased during recession of the early 1990s well below
current market levels. About 75% of the leasew expire over the next two
years, and the buyer was anticipating large increases in net income due to
the improvement in the market.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM B EXPENSE COMPARABLES
- --------------------------------------------------------------------------------
Addendum B
EXPENSE COMPARABLES
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
COMPARABLE OFFICE BUILDING EXPENSES
FAIRFAX, COUNTY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 Average
Year Built 1986 1985 1979/89 1990 1990 1990 1970/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Area Reston, VA Reston, VA Reston, VA Fairlakes, VA Reston, VA Reston, VA Reston, VA
Occupancy 100% 95% 100% 95% 95% 95% 89%
Size 120,512 56,663 61,997 219,000 60,938 56,663 87,090
- -----------------------------------------------------------------------------------------------------------------------------------
Expense Categories $/SF $/SF $/SF $/SF $/SF $/SF $/SF $/SF
- -----------------------------------------------------------------------------------------------------------------------------------
Payroll $0.42 N/A $0.62 N/A N/A N/A $0.44 $0.49
Cleaning $0.95 $0.80 $0.70 $0.81 N/A * N/A * $0.66 $0.78
Security $0.06 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.06
Maintenance $1.75 $1.20 $0.79 $1.48 $2.15 * $2.55 * $0.73 $1.52
Administrative $0.33 $0.25 $0.16 $0.34 $0.37 $0.15 $0.05 $0.24
Utilities $1.75 $2.04 $1.53 $1.79 $2.00 $2.06 $1.93 $1.87
Management $0.40 $0.54 $0.26 $0.41 $0.42 $0.56 $0.56 $0.45
Real estate taxes $0.55 $0.93 $0.61 $0.78 $0.95 $0.85 $0.70 $0.77
Insurance $0.08 $0.11 $0.06 $0.13 $0.09 $0.09 $0.07 $0.09
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $6.29 $5.87 $4.73 $5.74 $5.98 $6.26 $5.14 $6.27
- -----------------------------------------------------------------------------------------------------------------------------------
* Cleaning is included in the maintenance expense
</TABLE>
Source: CB Commercial Real Estate Group, Inc - Appraisal Services
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM C NORTHERN VIRGINIA OFFICE MARKET STATISTICS
- --------------------------------------------------------------------------------
Addendum C
NORTHERN VIRGINIA OFFICE MARKET STATISTICS
- --------------------------------------------------------------------------------
<PAGE>
NORTHERN VIRGINIA OFFICE MARKET OVERVIEW - 2nd QTR 1996
<TABLE>
<CAPTION>
2nd QTR 1996 1996 YTD
Sq. Ft. Vacancy Net Leasing Net Leasing Average
Submarket # Bldgs N.R.A. Vacant* Rate Absorption Activity Absorption Activity Rent
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alexandria/Old Town 53 3,680,015 310,572 8.44% 1,000 40,000 -13,000 106,000 $19.36
Annandale 18 977,164 176,260 18.04% -12,000 18,000 15,000 49,000 $15.29
Chantilly 36 4,100,597 144,888 3.53% 31,000 40,000 52,000 84,000 $18.63
Crystal City 40 10,765,844 27,420 0.25% -17,000 0 394,714 433,000 $26.24
Eisenhower/Beltway 15 1,948,412 49,076 2.52% 19,000 19,000 25,000 26,000 $15.19
Fairfax Center 41 4,602,836 363,537 7.90% 65,000 66,000 126,000 148,000 $15.72
Fairfax City 35 2,122,904 237,263 11.18% 26,000 43,000 -16,000 66,000 $13.60
Falls Church 25 3,312,344 181,855 5.49% 16,000 23,000 21,000 36,000 $16.46
Herndon/Dulles 28 2,139,958 221,702 10.36% 11,000 30,000 57,000 107,000 $16.69
I-395 Corridor 31 3,449,965 207,900 6.03% -15,000 30,000 -58,000 47,000 $17.67
Manassas 12 586,689 167,876 28.61% 5,000 5,000 6,000 8,000 $15.04
McLean 9 531,225 35,871 6.75% -9,000 0 2,000 18,000 $16.81
Merrifield 42 4,138,921 257,930 6.23% -5,000 24,000 -27,000 70,000 $19.35
Reston 79 7,782,479 229,787 2.95% 52,000 75,000 107,000 178,000 $17.72
Rosslyn/Ballston 83 13,343,246 796,694 5.97% -50,000 102,000 17,000 393,000 $23.71
Springfield 29 2,156,257 250,224 11.60% 12,000 43,000 10,000 60,000 $13.54
Sterling 27 1,959,550 381,532 19.47% 78,000 87,000 91,000 104,000 $14.58
Tysons Corner 123 16,805,989 809,970 4.82% 406,000 460,000 689,000 793,000 $19.85
Vienna 15 1,463,144 73,016 4.99% 0 0 36,000 36,000 $17.74
Totals: 741 85,867,539 4,923,373 5.73% 614,000 1,105,000 1,140,000 2,354,000 $18.78
====================================================================================================================================
</TABLE>
NOTE: INCLUDES SVI (Competitive Office Bldgs) ONLY
* Includes vacant space currently available for direct lease.
Source: CB COMMERCIAL Real Estate Group, Inc 6/96
<PAGE>
NORTHERN VIRGINIA OFFICE MARKET OVERVIEW -2nd QTR 1997
<TABLE>
<CAPTION>
2nd QTR 1997 1997 YTD
Sq. Ft. Vacancy Net Leasing Net Leasing Average
Submarket # Bldgs N.R.A. Vacant* Rate Absorption Activity Absorption Activity Rent
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alexandria/Old Town 73 4,567,342 291,755 6.39% -76,000 135,000 -81,000 244,000 $21.40
Annandale 13 714,120 132,109 18.50% -5,000 11,000 2,000 36,000 $16.12
Chantilly 41 3,169,505 33,130 1.05% 284,000 55,000 515,000 311,000 $20.30
Crystal City 41 10,858,867 15,441 0.14% 43,000 57,000 52,000 90,000 $28.13
Eisenhower/Beltway 8 585,076 10,176 1.74% 2,000 2,000 85,000 88,000 $20.12
Fairfax Center 57 5,363,070 118,122 2.20% 100,000 128,000 342,000 410,000 $18.30
Fairfax City 30 1,750,805 122,677 7.01% 23,000 53,000 105,000 149,000 $17.32
Falls Church 28 3,514,962 221,268 6.30% 0 46,000 -6,000 61,000 $16.73
Herndon/Dulles 38 2,645,833 220,088 8.32% 134,000 141,000 298,000 321,000 $20.45
I-395 Corridor 27 2,674,893 88,742 3.32% 14,000 43,000 83,000 119,000 $19.32
Manassas 11 373,530 30,737 8.23% 5,000 6,000 7,000 17,000 $14.68
McLean 23 872,622 24,296 2.78% -1,000 13,000 3,000 28,000 $19.58
Merrifield 34 3,619,942 91,582 2.53% 72,000 73,000 117,000 225,000 $18.96
Reston 84 7,343,668 213,316 2.90% 52,000 89,000 -9,000 186,000 $21.91
Rosslyn/Ballston 86 14,194,476 1,234,052 8.69% 40,530 153,000 -163,668 317,000 $24.46
Springfield 26 1,796,528 103,597 5.77% 27,000 46,000 58,000 85,000 $17.46
Sterling 12 1,157,835 33,130 2.86% 49,000 50,000 127,000 139,000 $18.35
Tysons Corner 129 17,405,947 628,185 3.61% -72,000 212,000 86,000 508,000 $22.60
Vienna 8 553,409 3,035 0.55% 46,000 47,000 85,000 95,000 $19.33
Totals: 769 83,162,430 3,615,438 4.35% 737,530 1,360,000 1,705,332 3,429,000 $22.14
====================================================================================================================================
</TABLE>
NOTE: INCLUDES SVI (Competitive Office Bldgs) ONLY
* Includes vacant space currently available for direct lease.
Source: CB COMMERCIAL Real Estate Group, Inc 6/97
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM D DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum D
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Population 248,709,873 818,584 4,223,485
1996 Population 265,411,137 897,558 4,564,246
% White 79.0 77.3 66.2
% Black 12.2 8.5 24.9
% American Indian 0.9 0.3 0.3
% Asian 3.6 11.2 6.2
% Other 4.3 2.6 2.5
% Hispanic 10.3 8.0 6.6
1996 Population by Age:
% 0 - 5 8.6 7.7 8.1
% 6 - 13 11.3 10.7 10.8
% 14 - 17 5.4 4.9 4.9
% 18 - 20 4.7 4.2 4.2
% 21 - 24 5.8 5.2 5.3
% 25 - 34 14.5 15.4 16.3
% 35 - 44 15.7 17.9 17.7
% 45 - 54 12.3 16.6 14.3
% 55 - 64 8.5 9.4 8.6
% 65 - 74 7.3 5.2 5.8
% 75 - 84 4.5 2.3 3.1
% 85 + 1.4 0.6 0.9
Median Age Total Population 34.9 36.1 35.2
1990 Households 91,947,410 292,345 1,566,134
1996 Households 98,045,317 319,948 1,684,493
1996 Average Household Size 2.64 2.76 2.65
1996 Household Income:
% $ 0 - $ 9,999 12.3 2.5 5.6
% $ 10,000 - $ 14,999 7.8 1.6 3.4
% $ 15,000 - $ 24,999 14.7 4.8 8.4
% $ 25,000 - $ 34,999 14.1 7.0 10.8
% $ 35,000 - $ 49,999 18.2 14.3 17.6
% $ 50,000 - $ 74,999 17.7 24.5 23.4
% $ 75,000 - $ 99,999 7.6 18.6 13.8
% $ 100,000 - $ 149,999 5.3 19.2 12.0
% $ 150,000 + 2.4 7.5 4.9
1996 Median Household Income ($) 35,822 70,107 53,817
1996 Med an Family Income ($) 42,040 78,427 62,620
1990 Median Home Value ($) 79,098 216,620 162,286
1990 Median Contract Rent($) 374 748 615
1990 % White Collar Workers 58.1 79.0 71.9
1990 % Blue Collar Workers 26.2 11.0 15.5
1990 % HS Graduate/Some College 54.9 42.4 47.3
1990 % Bachelor/Graduate Degree 20.3 49.0 37.0
Area defined by County
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 89 76
1996 Employment: 402,540 2,279,465
Population:
2001 Projection 948,527 4,804,463
1996 Estimate 897,558 4,564,246
1990 Census 818,584 4,223,485
1990-1996% Change (Growth) 9.6% 8.1%
1990 Group Quarters Population 14,006 107,240
1996 % Population by Race:
White 77.3% 66.2%
Black 8.5% 24.9%
American Indian, Eskimo & Aleut 0.3% 0.3%
Asian or Pacific Islander 11.2% 6.2%
Other 2.6% 2.5%
Hispanic 8.0% 6.6%
1990 % Population by Race:
White 81.3% 67.3%
Black 7.7% 25.4%
American Indian, Eskimo & Aleut 0.2% 0.3%
Asian or Pacific Islander 8.5% 4.8%
Other 2.3% 2.2%
Hispanic 6.3% 5.4%
1996 % Population by Sex:
Male 49.6% 48.8%
Female 50.4% 51.2%
1990 % Population by Sex:
Male 49.7% 48.8%
Female 50.3% 51.2%
2001 Pop per Square Mile (Pop Density) 2,397.8 737.9
1996 Pop per Square Mile (Pop Density) 2,269.0 701.0
1990 Pop per Square Mile (Pop Density) 2,069.4 648.7
Area (Square Miles) 395.6 6,510.7
Area (Square Kilometers) 1,024.5 16,862.7
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
Households:
2001 Projection 337,626 1,767,697
1996 Estimate 319,948 1,684,493
1990 Census 292,345 1,566,134
1990 - 1996% Change (Growth) 9.4% 7.6%
2001 Average Household Size 2.77 2.66
1996 Average Household Size 2.76 2.65
1990 Average Household Size 2.75 2.63
2001 Per Capita Income $34,816 29,106
1996 Per Capita Income $29,869 25,174
1990 Per Capita Income $25,107 21,208
2001 Median Family Income $ 92,059 72,429
1996 Median Family Income $ 78,427 62,620
1990 Median Family Income $ 66,383 53,409
2001 Median Household Income $ 82,293 62,247
1996 Median Household Income $70,107 53,817
1990 Median Household Income $59,341 45,901
2001 Average Household Income $ 96,369 77,343
1996 Average Household Income $ 82,486 66,608
1990 Average Household Income $ 68,958 55,693
1996 % Household Income:
$ 0 - $9,999 2.5% 5.6%
$ 10,000 - $ 14,999 1.6% 3.4%
$ 15,000 - $ 24,999 4.8% 8.4%
$ 25,000 - $ 34,999 7.0% 10.8%
$ 35,000 - $ 49,999 14.3% 17.6%
$ 50,000 - $ 74,999 24.5% 23.4%
$ 75,000 - $ 99,999 18.6% 13.8%
$ l00,000 -$ 149,999 19.2% 12.0%
$ 150,000+ 7.5% 4.9%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Household Income:
$ 0 - $ 9,999 3.0% 6.9%
$ 10,000 - $ 14,999 2.0% 4.0%
$ 15,000 - $ 24,999 6.7% 11.2%
$ 25,000 - $ 34,999 9.7% 13.3%
$ 35,000 - $ 49,999 17.4% 19.4%
$ 50,000 - $ 74,999 27.4% 23.3%
$ 75,000 - $ 99,999 17.4% 11.6%
$ 100,000 - $ 149,999 11.9% 7.1%
$ 150,000+ 4.5% 3.1%
1996 % Population by Age:
0 - 5 7.7% 8.1%
6 - 13 10.7% 10.8%
14 - 17 4.9% 4.9%
18 - 20 4.2% 4.2%
21 - 24 5.2% 5.3%
25 - 34 15.4% 16.3%
35 - 44 17.9% 17.7%
45 - 54 16.6% 14.3%
55 - 64 9.4% 8.6%
65 - 74 5.2% 5.8%
75 - 84 2.3% 3.1%
85+ 0.6% 0.9%
Median Age Total Population 36.1 35.2
Median Age Adult Population 42.6 41.8
1990 % Population by Age:
0 - 5 8.5% 8.7%
6 - 13 10.6% 10.2%
14 - 17 5.3% 4.8%
18 - 20 3.8% 4.4%
21 - 24 6.0% 6.7%
25 - 34 19.4% 20.2%
35 - 44 19.3% 17.5%
45 - 54 13.2% 11.4%
55 - 64 7.4% 7.5%
65 - 74 4.4% 5.3%
75 - 84 1.7% 2.6%
85+ 0.5% 0.8%
Median Age Total Population 33.1 32.5
Median Age Adult Population 39.5 38.8
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 7.4% 7.8%
6 - 13 10.4% 10.3%
14 - 17 4.7% 4.6%
18 - 20 4.0% 4.0%
21 - 24 4.9% 5.0%
25 - 34 15.0% 16.1%
35 - 44 18.3% 17.8%
45 - 54 16.9% 14.4%
55 - 64 9.2% 8.5%
65 - 74 5.6% 6.2%
75 - 84 2.7% 3.8%
85 + 0.8% 1.3%
Female Median Age Total Population 37.0 36.1
Female Median Age Adult Population 43.1 42.5
1990 % Female Population by Age:
0 - 5 8.2% 8.3%
6 - 13 10.3% 9.7%
14 - 17 5.2% 4.6%
18 - 20 3.6% 4.2%
21 - 24 5.9% 6.6%
25 - 34 19.2% 20.0%
35 - 44 19.9% 17.5%
45 - 54 12.9% 11.2%
55 - 64 7.2% 7.5%
65 - 74 4.8% 5.9%
75 - 84 2.1% 3.3%
85+ 0.7% 1.1%
Female Median Age Total Population 33.8 33.3
Female Median Age Adult Population 39.8 39.3
1990 % Hispanic Population by Type:
Not of Hispanic Origin 93.7% 94.6%
Mexican 0.9% 0.7%
Puerto Rican 0.5% 0.5%
Cuban 0.3% 0.2%
Other Hispanic 4.7% 4.0%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School (Age 3 & Over):
Preprimary School 9.2% 8.0%
Elementary and High School 61.2% 59.9%
College 29.5% 32.1%
Total School Enrollment 217,447 1,084,505
1990 % Educational Attainment (Age 25 & Over):
Less than Grade 9 3.3% 5.8%
Grade 9-12 (No Diploma) 5.3% 9.9%
High School Graduate or Equivalency 17.0% 22.8%
Some College (No Degree) 19.1% 19.2%
Associate Degree 6.3% 5.4%
Bachelor Degree 28.7% 21.2%
Graduate or Professional Degree 20.3% 15.8%
1990 % Employment Status:
Total Labor Force:
Armed Forces 2.8% 2.0%
Civilian:
Employed 73.1% 70.1%
Unemployed 1.9% 2.7%
Not In Labor Force 22.2% 25.1%
Female Labor Force:
Armed Forces 0.7% 0.6%
Civilian:
Employed 68.2% 65.0%
Unemployed 1.8% 2.5%
Not In Labor Force 29.3% 31.8%
1990 % Working Mothers:
Child < 6 Only 18.7% 20.6%
Child 6-17 Only 43.5% 41.7%
Child < 6 & 6-17 11.2% 12.6%
Nonworking Mothers 26.6% 25.0%
Total Mothers 108,900 533,094
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.8% 1.2%
Mining 0.0% 0.1%
Construction 6.4% 7.3%
Manufacturing:
Nondurable Goods 2.3% 2.9%
Durable Goods 3.5% 3.3%
Transportation 3.8% 4.0%
Communications & Public Utilities 3.4% 3.1%
Wholesale Trade 3.1% 2.8%
Retail Trade 13.9% 13.7%
Finance/Insurance/Real Estate 8.7% 7.6%
Services:
Business & Repair 7.7% 6.7%
Personal 3.1% 3.3%
Entertainment & Recreation 1.3% 1.2%
Health 5.5% 6.7%
Educational 6.6% 7.6%
Other Professional & Related 13.9% 12.8%
Public Administration 15.9% 15.5%
Total 468,776 2,333,553
1990 % Occupation:
Executive & Managerial 25.3% 19.5%
Professional Specialty 21.8% 19.6%
Technical Support 4.7% 5.1%
Sales 11.3% 9.8%
Administrative Support 15.7% 17.9%
Service: Private Household 0.6% 0.7%
Service: Protective 1.6% 2.0%
Service: Other 7.3% 8.8%
Farming, Forestry & Fishing 0.6% 1.0%
Precision Production, Craft & Repair 6.3% 8.2%
Machine Operator, Assemblers & Inspectors 1.3% 2.1%
Transportation & Material Moving 1.7% 2.8%
Laborers 1.7% 2.5%
White Collar Total 79.0% 71.9%
Blue Collar Total 11.0% 15.5%
Total Employed 468,776 2,333,553
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 321,683 1,626,136
Never Married 31.6% 35.0%
Married 59.5% 53.5%
Separated 2.1% 3.1%
Widowed 1.2% 1.9%
Divorced 5.6% 6.4%
Total Female: 330,199 1,749,495
Never Married 25.5% 29.6%
Married 57.1% 49.0%
Separated 2.5% 3.7%
Widowed 6.3% 8.8%
Divorced 8.5% 8.9%
1990 Households by Type:
One Person Households 54,804 389,733
Two or more Person Households:
Family Households:
Married Couple 180,239 809,505
Male Householder 8,831 57,333
Female Householder 24,477 184,274
Nonfamily Households 23,994 125,289
1990 Family Households With Children
Married Couple Family 93,198 412,039
Male Householder 3,918 27,539
Female Householder 14,854 115,897
1990 Population by Household Type:
Family Households 691,129 3,423,014
Nonfamily Households 113,449 693,231
1990 Households With:
Children Under 18 112,868 561,489
Persons Over 65 38,494 266,690
Householder Over 65 30,952 228,459
1990 Average Family Size 3.16 3.17
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Median Home Value $216,620 162,286
1990 Average Home Value $245,854 194,291
1990 Median Contract Rent $748 615
1990 Average Contract Rent $785 623
1990 Persons In Unit:
1 Person Units 54,804 389,733
2 Person Units 95,778 482,033
3 Person Units 58,564 289,125
4+ Person Units 83,199 405,243
1990 Housing Unit Counts:
Total Units 307,966 1,674,507
% Occupied 94.9% 93.5%
% Vacant 5.1% 6.5%
% Year Round 4.8% 5.8%
% Seasonal 0.3% 0.7%
Occupied Units 292,345 1,566,134
% Owner Occupied 70.7% 61.3%
% Renter Occupied 29.3% 38.7%
Vacant Units 15,621 108,373
% Year Round of Vacant Units 94.4% 89.8%
% Seasonal of Vacant Units 5.6% 10.2%
1990 Total Housing Units in Structure 307,966 1,674,507
1, Detached 52.5% 46.1%
1, Attached 21.4% 17.5%
2, 0.3% 1.1%
3 - 9 5.4% 8.6%
10 - 49 13.7% 14.7%
50 + 5.6% 10.0%
Mobile Home or Trailer 0.7% 1.4%
Other 0.5% 0.7%
1990 Owner Occupied Housing Units
by Year Built 206,882 959,871
Built 1985 to March, 1990 19.4% 16.9%
Built 1980 to 1984 14.9% 10.8%
Built 1970 to 1979 27.1% 20.8%
Built 1960 to 1969 19.1% 17.7%
Built 1950 to 1959 14.5% 14.5%
Built 1949 or Earlier 5.0% 19.3%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Fairfax County, VA 8/7/97
Area 2 = Washington, DC MSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 71.2% 63.5%
Carpooled 15.6% 16.1%
Public Transportation 7.6% 12.9%
Other Means 2.6% 4.7%
Worked at Home 3.0% 2.9%
1990 % Travel Time to Work:
0 - 14 Minutes 16.7% 18.7%
15 - 29 Minutes 31.0% 31.7%
30 - 59 Minutes 42.9% 38.3%
60 - 89 Minutes 8.4% 9.5%
90 + Minutes 1.0% 1.8%
1990 Households by Number of Vehicles:
1 Vehicle 77,903 513,193
2 Vehicles 134,043 580,347
3 Vehicles 51,249 207,993
4 Vehicles 14,388 61,911
5 or More Vehicles 4,689 22,095
Area defined by County
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM E TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum E
TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
WASHINGTON, D.C.
- --------------------------------------------------------------------------------
Overview
The Washington, DC MSA is comprised of the five counties in Maryland of Calvert,
Charles, Frederick, Montgomery and Prince George's. The 11 counties in Virginia
of Arlington, Clarke, Culpeper, Fairfax, Fauquier, King George, Loudoun, Prince
William, Spotsylvania, Stafford, and Warren and the two counties in West
Virginia of Berkeley and Jefferson. The cities included in the MSA are
Washington, DC, Arlington, VA, Frederick, MD Fredericksburg, VA along with the
following six cities in Virginia of Alexandria Fairfax, Falls Church,
Fredericksburg, Manassas and Manassas Park. The office properties that we report
on are competitive multi-tenant properties that are 10,000 square feet and over.
As of 1994, the population of the Washington, DC metropolitan statistical area
was 4.47 million people making it the 6th largest in the country and and 7th
largest of the markets that we follow.
The mean per capita personal income in 1994 for the MSA was $27,762 which is
33.4% above the national level. The cost of doing business is 36% higher than
the national average.
Industries concentrated in Washington include ferderal civilian government,
engineering & management services, and business services. By comparing the
percentage of total employment each industry commands to the national percentage
we can identify some of the highly concentrated industries.
The top major employers of the area are Giant Food, Marriott, Inova Health
System, Mediantic Healthcare and Woodward & Lothrop. Other employers include MCI
Communications, Potomac Electric Power and Dyncorp.
Data as of 4th Quarter, 1996 VI. 903
(C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Economy
Washington, D.C. has the 6th largest employment level of the MSAs we follow at
approximately 2,418,950 workers. Over the last 10 years, employment has grown at
an average annual rate of 1.6%. In the last year it grew by 0.4%. The measures
for our 54 MSAs are 1.5% and 2.0%, respectively.
Table 1 presents the current employment levels and location quotients for each
industry as well as historic growth rates over the last 10 years, last four
quarters, and forecasted rates for the next 10 years.
[Graphic Omitted: Pie Chart]
Govt 24%
Services 38%
Other 5%
Mfg. 4%
TCU 5%
Wholesale 3%
Retail 16%
FIRE 5%
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Average Annual Growth Rates: Washington, D.C. & 54 MSAs
Employment Location Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Washington, D.C. 54 MSAs Washington, D.C. 54 MSAs Washington, D.C. 54 MSAs
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 132.9 0.78 1.0 0.6 -0.9 1.1 1.3 1.0
Government (Civilian) 589.5 1.67 0.4 1.2 -2.9 0.2 0.5 0.6
Manufacturing 93.6 0.30 -0.9 -1.1 0.5 0.4 -0.3 -0.1
Retail Trade 391.0 0.93 1.2 1.4 1.3 2.3 1.8 1.8
Services 898.2 1.18 3.7 3.7 2.3 3.4 2.9 2.8
Transportation & Public Utilities 117.0 0.86 1.5 1.6 3.1 1.3 1.5 1.2
Wholesale Trade 82.0 0.55 0.8 1.0 -0.5 2.3 1.1 1.3
--------------------------------------------------------------------------------------------------
Total Employment 2419.0 1.6 1.5 0.4 2.0 1.8 1.6
--------------------------------------------------------------------------------------------------
Office Employment 613.6 1.26 3.1 2.7 2.3 3.5 2.2 2.0
--------------------------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton Research
Data as of 3rd Quarter, 1996
An initial indication of the relative importance of a particular employment
sector is its share of total employment, and for greater perspective, a
comparison of its share to the national share. Location quotients above 1.0
indicate that the local economy has a greater share of a particular industry
than the national average and the opposite is true when they are below 1.0.
For Washington, D.C., the location quotient for FIRE employment is 0.78 while
the location quotient for Service employment is 1.18. This means that in
Washington, D.C. the share of FIRE employment is 22% less than the national
average. The share of Service employment in this MSA is 18% greater than the
national average.
- ---------------------------
Economic Performance
(Rank out of 54)
- ---------------------------
Total Employment: 6
current level
- ---------------------------
Total Employment: 35
% growth over last 10 years
- ---------------------------
Total Employment: 49
% growth over last year
- ---------------------------
Total Employment: 20
% growth next 10 years
- ---------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington, D.C.
- --------------------------------------------------------------------------------
Office Employment
We identify and measure employment within the FIRE and Service sectors in
industries such as legal services, accounting, and insurance to create our
office employment index. The index covers 80-90% of all office-related
employment within each MSA. More specific details are available in the Data and
Methodology Appendix.
Our estimate of office employment for Washington, D.C. currently stands at
613,600 workers. Over the last 10 years, office employment has grown by 3.1%.
Over the last year Washington, D.C. has seen its office employment grow by 2.3%.
Table 2 below provides historic growth rates for some of the significant office
related industries in Washington, D.C..
Table 2: Levels and Historic Growth Rates for
Subcategories of Office Employment
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Level Average Annual Growth Rates
Employment category (x1000) Last 10 Years Last 5 Years Last Year
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance, Insurance, and Real Estate
Banks 32.6 -1.8 -4.2 0.3
Credit Agencies & Mortgage Companies 14.2 3.9 8.6 0.8
Insurance Agents 9.9 3.1 -0.5 -4.1
Insurance Companies 23.3 3.4 1.3 2.5
Misc Investing & Trusts 4.4 7.4 1.8 3.3
Real Estate Companies 41.1 0.0 -0.9 -3.9
Securities Firms 7.3 4.8 9.4 -0.1
Service Employment
Accounting Firms 13.7 2.6 3.5 1.3
Advertising 2.0 -2.9 -6.1 4.8
Computer & Data Processing 102.8 7.2 6.7 8.1
Consumer Credit Reporting 1.2 -4.8 -9.3 -1.7
Engineering & Architectural Services 36.6 -0.7 0.2 -1.9
Legal Services 40.2 2.7 0.2 0.9
Mailing & Reproduction 11.1 6.6 8.2 11.2
Management & Public Relations 65.3 5.7 6.3 4.0
Misc. Business Services 38.7 5.4 5.8 3.1
Misc. Equipment Rental & Leasing 4.5 8.8 6.9 14.4
Motion Picture Distribution Services 0.1 -5.4 -18.8 -20.0
Other Services 83.5 2.9 1.2 1.2
Personnel Services 34.9 4.3 9.0 2.9
Research & Testing Services 46.1 1.4 0.8 -0.2
-----------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton Research
Data as of 3rd Quarter, 1996
Data as of 3rd Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
For our 54 MSAs, the average annual growth rate of office employment over the
last 10 years was 2.7% while over the last year it was 3.5%. The forecast calls
for office employment to grow by 2.0% over the next six years.
The amount of office employees is the primary determinant of the demand side of
the office market equation; but it is not the only factor. Also important is the
efficiency of space use, measured by square foot per employee, as well as the
rental cost of space. Some market observers have been arguing that office
hoteling, virtual offices, or 'reengineering' will lead to less space per
employee in the future. By implication, there would be less demand for office
space.
The graph below provides a comparison of office employment growth for
Washington, D.C. compared to all 54 MSAs since 1980 indexed to a 1980 starting
point of 100.
[GRAPHIC OMITTED]
[Line Graph: Relative Office Employment, from 1980 to 1996, comparing
Washington, D.C. to the Nation]
Since the early eighties, office employment in Washington, D.C. has grown at a
faster pace than the nation. For both Washington, D.C. and the nation as a
whole, office employment peaked in 1990 and then declined until approximately
1992 when growth began and has continued since then. Although the decline in
office employment in 1990 was slightly steeper for Washington, D.C., Washington,
D.C. is following the national pattern closely. Since the end of the recession,
Washington, D.C. office employment has continued to grow at much the same pace
as the nation.
- ---------------------------------
Economic Performance
(Rank out of 54)
- ---------------------------------
Office Employment:
current level 4
- ---------------------------------
Office Employment:
% growth over last 10 years 33
- ---------------------------------
Office Employment:
% growth over last year 40
- ---------------------------------
Office Employment:
% growth next 6 years 28
- ---------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
The Current Office Market
Washington, D.C. is the 2nd largest of the 54 markets we follow with 209.0
million square feet. As of the fourth quarter, 1996, the vacancy rate was 8.3%,
placing Washington, D.C. 9th out of 54 markets. The national vacancy rate was
12.2%.
Washington, D.C. contains 80.4 million square feet of Class 'A' office space
with a year-end vacancy rate of 8.9%, while the average Class 'A' vacancy rate
for the 54 markets stood at 9.9% year-end. The 1980's saw a tremendous building
of office space. Nationally, 56.4% or 1.5 billion square feet of the total stock
of all office space has been built since 1980. In Washington, D.C., 63.0% has
been built since 1980.
Out of our 54 markets, 48 quote rents primarily on a gross basis. The
Washington, D.C. average gross asking rent is $22.59 per square foot, while
nationally this figure is $18.35. Over the last year, the Washington, D.C. quote
rose 7.1%, while the national quote rose 2.8%.
[GRAPHIC OMITTED]
[Line Graph: Vacancy Rates 1992-1996, Washington, D.C. and the Nation]
[GRAPHIC OMITTED]
[Line Graph: Gross Asking Rents 1992-1996, Washington, D.C. and the Nation]
- ------------------------
Office Market Standings
(Rank out of 54)
- ------------------------
Building Count 1
- ------------------------
Market Size 2
- ------------------------
Vacancy Rate 9
- ------------------------
Gross Asking Rents 4
- ------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 3: Washington, D.C. Office Space by Submarket
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Sublet as a % Weighted
Number of NRA Vacancy of Total Average Gross TWR
Buildings (x1000) Rate Available Asking Rents Rent Index*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBD 188 31,067 10.8 15.1 $27.24 $31.04
Capitol Hill 29 5,061 17.7 8.9 $26.84 $22.37
East End 122 23,900 10.3 18.8 $26.98 $27.59
Northeast 1 48 45.8 0.0 na $16.94
Southeast 3 150 20.0 0.0 na na
Southwest 23 6,854 4.8 9.2 $29.79 $28.66
Upper Northwest 47 4,109 10.6 13.8 $22.61 $25.56
West End/Georgetown 35 4,834 7.9 21.9 $25.62 $28.54
-----------------------------------------------------------------
Subtotal for District of Columbia 448 76,023 10.4 15.4 $27.11 $28.70
=================================================================
-----------------------------------------------------------------
Alexandria/Oldtown 72 4,609 5.1 4.2 $22.27 $22.20
Annandale 22 1,250 12.1 12.6 $15.97 $20.64
Chantilly 36 2,584 14.9 0.8 $20.40 $16.58
Crystal City 41 10,696 0.1 19.0 $26.49 $25.66
Eisenhower Beltway 10 720 11.0 0.0 $16.14 $17.65
Fairax/Center 48 4,962 3.4 9.7 $19.38 $18.42
Fairfax/City 27 1,665 5.6 0.9 $14.91 $17.57
Falls Church 19 1,582 13.2 2.1 $16.14 $20.18
Herndon/Dulles 48 4,286 8.4 13.0 $17.94 $17.06
I-395 43 5,593 3.6 13.2 $18.53 $21.23
Manassas 17 584 11.5 0.0 $15.18 $20.50
McLean 25 948 1.9 11.9 $19.31 $22.77
Merrifield 32 3,821 3.3 20.7 $19.63 $20.60
Reston 79 6,688 5.9 18.1 $19.79 $18.87
Rosslyn/Ballston 80 14,304 6.1 10.9 $23.73 $22.94
Springfield 18 1,285 6.8 24.0 $13.79 $18.08
Sterling 9 687 28.2 0.0 $15.99 $16.91
Tyson's Corner 122 16,655 2.6 24.7 $20.11 $20.21
Vienna 21 1,725 0.6 12.5 $17.03 $19.80
-----------------------------------------------------------------
Subtotal for Northern Virginia 769 84,644 4.8 12.8 $20.48 $20.97
=================================================================
</TABLE>
[GRAPHIC OMITTED: Pie Chart]
Suburban Maryland 23%
Northern Virginia 41%
District of Columbia 36%
Washington, D.C. Office Space
The submarket descriptions for the Washington, DC MSA are provided by the local
CB Commercial office as of the second quarter 1995. This MSA consists of 3 major
market areas: the District of Columbia, Suburban Maryland and Northern
Virginia. All of the office space classified as 'downtown' is located in the 8
submarkets that form the District of Columbia. Northern Virginia lies to the
west of the District and contains 19 submarkets, while Suburban Maryland is
south of the District and has 13 submarkets.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Sublet as a % Weighted
Number of NRA Vacancy of Total Average Gross TWR
Buildings (x1000) Rate Available Asking Rents Rent Index*
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
301 Corridor 3 171 2.9 0.0 $13.50 na
Bethesda 66 7,681 6.6 5.2 $20.98 $22.82
Central PG County 25 1,383 16.5 0.0 $14.83 na
Gaithersburg 55 3,553 10.7 12.3 $16.70 $18.70
Inside Beltway 65 4,644 24.3 5.0 $15.28 $17.31
Kensington/Wheaton 18 937 7.7 2.6 $18.00 na
North Bethesda 25 4,111 4.1 17.9 $21.77 $21.54
North PG County 73 5,388 12.9 10.9 $17.02 $21.99
Route 29 Corridor 21 828 13.9 14.9 $17.12 $19.57
Shady Grove 88 7,227 3.8 45.3 $18.49 $19.61
Silver Spring 47 4,477 26.4 16.4 $15.11 $20.40
South PG County 16 1,077 7.2 2.9 $17.92 na
The Pike 62 6,846 8.6 12.2 $18.14 $20.69
-----------------------------------------------------------------
Subtotal for Suburban Maryland 564 48,323 11.2 14.8 $17.01 $20.56
=================================================================
-----------------------------------------------------------------
Total for Washington, D.C. 1781 208,990 8.3 14.5 $22.39 $23.32
=================================================================
</TABLE>
Vacancy rates are calculated from the vacant available square feet divided by
the net rentable area. Space may be classified as available but not vacant;
space that is available for sublease may or may not be classified as vacant. All
space classified as vacant is considered to be available.
* The Torto Wheaton Rent Index (TW Rent Index) represents the actual gross rent
for a 5 year - 10,000 square foot lease in a building of average age, size, and
class in an average location. The average building in Washington, D.C. is a
class B, 117,327 square foot building built between 1980 and 1995.
- ---------------------------
Downtown/Suburban
Market Standings
DT Sub
- ---------------------------
Building Count 2 1
- ---------------------------
NRA 3 1
- ---------------------------
Vacancy Rate 14 13
- ---------------------------
TW Rent Index 2 8
- ---------------------------
Downtown ranked out of 46
Suburban ranked out of 53
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 4: Washington, D.C. Office Space by Class
<TABLE>
<CAPTION>
---------------------------------------------------------
Class 'A' Class 'B' & 'C'
Gross Gross
NRA Vacancy Asking NRA Vacancy Asking
(x1000) Rate Rent (x1000) Rate Rent
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBD 11,840 12.8 $29.89 19,227 9.5 $24.10
Capitol Hill 1,923 8.6 $28.63 3,138 23.2 $23.11
East End 15,433 8.3 $29.94 8,467 14.0 $22.24
Northeast 0 na na 48 45.8 na
Southeast 0 na na 150 20.0 na
Southwest 3,058 10.1 $29.98 3,796 0.6 $28.59
Upper Northwest 813 3.8 $28.02 3,296 12.3 $20.02
West End/Georgetown 1,695 9.3 $30.29 3,139 7.1 $23.45
---------------------------------------------------------
Subtotal for District of Columbia 34,762 10.0 $29.83 41,261 10.8 $23.45
=========================================================
---------------------------------------------------------
Alexandria/Oldtown 1,158 8.6 $23.84 3,451 3.9 $20.76
Annandale 0 na na 1,250 12.1 $15.97
Chantilly 862 20.4 $22.58 1,722 12.1 $18.20
Crystal City 3,290 0.3 $26.49 7,406 0.0 na
Eisenhower Beltway 150 8.0 $19.00 570 11.8 $15.64
Fairfax/Center 1,911 0.7 $21.81 3,051 5.0 $16.79
Fairfax/City 250 8.4 $18.25 1,415 5.1 $14.07
Falls Church 460 3.0 $18.35 1,122 17.4 $15.75
Herndon/Dulles 1,568 17.0 $18.32 2,718 3.5 $16.70
I-395 1,899 2.8 $19.62 3,694 3.9 $18.14
Manassas 0 na na 584 11.5 $15.18
McLean 0 na na 948 1.9 $19.16
Merrifield 1,753 0.7 $19.76 2,068 5.5 $19.55
Reston 2,135 3.6 $23.05 4,553 6.9 $17.51
Rosslyn/Ballston 9,609 7.6 $24.24 4,695 3.0 $19.53
Springfield 0 na na 1,285 6.8 $13.79
Sterling 225 73.8 $17.75 462 6.1 $15.54
Tyson's Corner 6,172 3.0 $21.16 10,483 2.3 $19.12
Vienna 342 0.6 $18.00 1,383 0.6 $16.71
---------------------------------------------------------
Subtotal for Northern Virginia 31,784 5.8 $22.64 52,860 4.2 $17.77
=========================================================
</TABLE>
- --------------------------------------------------------------------------------
The personnel in the local CB Commercial offices in the Washington, D.C. area
have not yet completed a classification of the office properties in Washington,
D.C. as A, B, or C class space. Nevertheless, over two-thirds of our MSAs have
classified at the local level. TWR has used these MSAs as a model to build
algorithms to classify the properties in Washington, D.C. into 'A' and 'B/C'
categories. Please see the Data and Methodology Appendix for complete details.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------
Class 'A' Class 'B' & 'C'
Gross Gross
NRA Vacancy Asking NRA Vacancy Asking
(x1000) Rate Rent (x1000) Rate Rent
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
301 Corridor 0 na na 171 2.9 $13.50
Bethesda 3,942 7.5 $21.83 3,739 5.7 $19.71
Central PG County 0 na na 1,383 16.5 $14.83
Gaithersburg 484 17.8 $18.18 3,069 9.6 $16.34
Inside Beltway 529 60.1 $17.73 4,115 19.7 $14.21
Kensington/Wheaton 0 na na 937 7.7 $18.00
North Bethesda 2,005 3.1 $23.28 2,106 5.0 $20.84
North PG County 1,456 17.5 $18.47 3,932 11.2 $16.35
Route 29 Corridor 247 32.0 $19.00 581 6.2 $16.38
Shady Grove 1,506 10.6 $19.48 5,721 2.0 $17.63
Silver Spring 1,088 36.1 $18.02 3,389 23.3 $13.47
South PG County 303 2.0 $21.00 774 9.3 $14.93
The Pike 2,288 9.4 $20.82 4,558 8.2 $15.33
---------------------------------------------------------
Subtotal for Suburban Maryland 13,848 13.5 $19.53 34,475 10.3 $15.60
=========================================================
---------------------------------------------------------
Total for Washington, D.C. 80,394 8.9 $25.71 128,596 8.0 $19.02
=========================================================
</TABLE>
- --------------------------------------------------------------------------------
While 379 - or 21.3% - buildings out of a total Washington, D.C. building count
of 1,781 are currently classified as class 'A' properties, 38.5% of the net
rentable area is considered to be class 'A' space. At the end of the fourth
quarter of last year, the class 'A' vacancy rate stood at 8.9%, compared to a
rate of 8.3% for all space.
At the national level, approximately 22.4% of office properties are currently
classified as class 'A', while approximately 46.3% of the net rentable area is
classified as class 'A' space. At the end of the fourth quarter of last year,
the national class 'A' vacancy rate stood at 9.9%.
- -----------------------------------
Washington, D.C.
Class "A" Standings
Rank
Level out of 54
- -----------------------------------
NRA (x1000) 80,394 3
- -----------------------------------
Vacancy Rate 8.9% 28
- -----------------------------------
Gross $25.71 4
Asking Rent
- -----------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Year-by-Year Office History
To put the Washington, D.C. market into perspective, the next two tables contain
annual net absorption and vacancy rates by submarket for the last five years.
Table 5: Historic Net Absorption By Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------
(Square Feet
x1000)
1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CBD -214 -69 339 -676 310
Capitol Hill 317 30 -109 -210 0
East End 1,595 1,189 432 249 -680
Northeast -2 -2 -53 -10 28
Southeast -6 -3 -5 31 69
Southwest 250 106 4 -68 234
Upper Northwest 198 -48 -1 97 -142
West End/Georgetown -22 -133 111 171 -13
---------------------------------------------------------
Subtotal for District of Columbia 2,116 1,070 718 -416 -194
=========================================================
---------------------------------------------------------
Alexandria/Oldtown 92 78 -75 163 27
Annandale -14 163 -16 2 54
Chantilly 222 -9 46 324 -205
Crystal City -306 324 14 401 8
Eisenhower Beltway 93 -9 53 23 16
Fairfax/Center 277 548 48 129 449
Fairfax/City -38 50 93 165 50
Falls Church -31 -10 -58 58 44
Herndon/Dulles -10 493 170 129 -29
I-395 275 119 160 93 0
Manassas 39 69 -7 -5 11
McLean -14 38 95 32 44
Merrifield 232 260 163 -109 277
Reston 0 503 242 223 41
Rosslyn/Ballston 761 345 323 547 -140
Springfield 50 69 113 13 62
Sterling 196 15 -5 -91 47
Tyson's Corner 487 -112 753 624 939
Vienna 4 -137 -5 125 209
---------------------------------------------------------
Subtotal for Northern Virginia 2,315 2,797 2,107 2,846 1,904
=========================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------
(Square Feet
x1000)
1992 1993 1994 1995 1996
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
301 Corridor 46 8 -4 -1 5
Bethesda -14 290 -126 202 397
Central PG County -37 -47 -77 89 60
Gaithensburg 239 -98 -41 221 149
Inside Beltway -172 5 -83 -268 201
Kensington/Wheaton 7 -15 29 3 5
North Bethesda -109 602 -49 243 151
North PG County -3 125 -22 185 43
Route 29 Corridor -16 49 12 -10 -25
Shady Grove 186 314 -50 97 198
Silver Spring 77 214 -166 -310 38
South PG County 280 19 7 14 1
The Pike 12 221 -74 153 -46
---------------------------------------------------------
Subtotal for Suburban Maryland 496 1,687 -644 618 1,177
=========================================================
---------------------------------------------------------
Total for Washington, D.C. 4,927 5,554 2,181 3,048 2,887
=========================================================
</TABLE>
- --------------------------------------------------------------------------------
Washington, D.C. ranks 42nd among our 54 MSAs in performance as measured by
calculating an absorption rate for 1996 - that is, taking the year's total net
absorption divided by end-of-year 1995 occupied stock. Over the last five years,
the average annual absorption rate for Washington, D.C. is 2.07%, 37th out of
our 54 MSAs.
- ---------------------------------------------
Absorption Performance
Level/ Rank
Rate out of 54
- ---------------------------------------------
Avg ann'l absorption 3,722 1
over the last five years
- ---------------------------------------------
Ann'l Absorption Rate 2.1% 37
over the last five years
- ---------------------------------------------
Absorption Rate 1.7% 42
over the last 4 quarters
- ---------------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 6: Historic Vacancy Rates and Completions by Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy
SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBD 144 9.4 0 9.8 0 8.8 0 10.8 337 10.8
Capitol Hill 351 3.2 0 2.5 0 4.8 500 17.5 0 17.7
East End 905 13.0 154 9.0 0 7.4 509 7.6 0 10.3
Northeast 0 5.0 0 5.0 0 26.0 0 31.6 0 45.8
Southeast 0 30.6 0 30.6 0 31.3 35 29.3 0 20.0
Southwest 486 7.8 0 6.1 0 6.3 0 7.0 0 4.8
Upper Northwest 0 8.8 0 9.8 0 9.9 0 6.8 0 10.6
West End/Georgetown 0 11.0 0 13.6 0 11.5 0 7.8 0 7.9
---------------------------------------------------------------------------------------------
Subtotal for District of Columbia 1,886 10.1 154 9.0 0 8.2 1,044 9.5 337 10.4
=============================================================================================
---------------------------------------------------------------------------------------------
Alexandria/Oldtown 0 9.4 0 7.9 0 9.4 0 5.8 0 5.1
Annandale 0 28.9 0 15.1 0 16.2 0 16.1 0 12.1
Chantilly 0 22.0 0 21.9 0 20.0 0 7.1 0 14.9
Crystal City 0 5.8 0 4.5 0 4.3 0 0.2 0 0.1
Eisenhower Beltway 72 21.8 0 24.7 0 15.8 0 12.7 0 11.0
Fairfax/Center 0 28.5 0 16.3 0 15.4 0 12.2 0 3.4
Fairfax/City 0 30.0 0 27.4 0 20.3 0 8.7 0 5.6
Falls Church 0 16.3 0 16.4 0 20.9 0 16.1 0 13.2
Herndon/Dulles 0 26.4 0 12.8 0 8.0 0 5.7 100 8.4
I-395 0 10.0 0 7.9 0 5.3 0 3.5 0 3.6
Manassas 0 22.5 0 11.5 0 12.4 0 13.1 0 11.5
McLean 0 25.5 0 21.1 0 9.6 0 6.7 0 1.9
Merrifield 0 20.2 0 11.8 0 6.8 0 10.6 0 3.3
Reston 0 21.9 0 13.4 0 9.7 0 6.5 0 5.9
Rosslyn/Ballston 0 8.0 550 9.2 0 6.8 332 5.3 0 6.1
Springfield 0 20.8 92 21.9 0 12.6 0 11.6 0 6.8
Sterling 0 22.8 0 20.5 0 21.2 0 28.5 0 28.2
Tyson's Corner 0 16.5 0 17.6 0 12.2 0 8.4 0 2.6
Vienna 0 11.3 0 20.9 0 21.3 0 12.2 0 0.6
---------------------------------------------------------------------------------------------
Subtotal for Northern Virginia 72 15.6 642 12.9 0 10.1 332 7.0 100 4.8
=============================================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy
SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
301 Corridor 0 7.1 0 1.4 0 4.3 0 5.8 0 2.9
Bethesda 0 16.9 0 12.8 0 14.8 0 11.6 0 6.6
Central PG County 0 18.3 0 21.8 0 27.6 0 19.7 0 16.5
Gaithersburg 0 14.7 0 18.3 0 19.8 107 14.9 0 10.7
Inside Beltway 0 20.8 0 20.5 0 22.0 0 27.2 0 24.3
Kensington/Wheaton 0 8.6 0 11.0 0 7.2 0 8.2 0 7.7
North Bethesda 0 14.7 600 13.1 0 14.8 0 7.9 0 4.1
North PG County 28 17.8 0 15.2 120 18.2 0 13.2 0 12.9
Route 29 Corridor 0 18.3 0 11.4 0 9.6 0 10.7 0 13.9
Shady Grove 0 11.4 0 6.9 0 7.7 0 6.5 0 3.8
Silver Spring 0 22.8 0 18.0 0 22.8 0 26.7 0 26.4
South PG County 0 11.0 0 9.3 0 8.7 0 7.5 0 7.2
The Pike 0 11.9 0 8.1 0 9.7 0 8.0 0 8.6
---------------------------------------------------------------------------------------------
Subtotal for Suburban Maryland 28 15.8 600 13.2 120 15.1 107 13.4 0 11.2
=============================================================================================
---------------------------------------------------------------------------------------------
Total for Washington, D.C. 1,986 13.5 1,396 11.4 120 10.4 1,483 9.6 437 8.3
=============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The metropolitan vacancy rate for Washington, D.C. stood at 8.3% at the end of
fourth quarter of 1996, 9th out of our 54 MSAs. In 1992, the vacancy rate stood
at 13.5%, 7th out of the 54 MSAs. Most markets around the country are showing a
good improvement in vacancy levels due to a combination of moderate demand
growth and little in the way of new supply.
- -------------------------------------
Vacancy History Standings
Rank
Rate out of 54
- -------------------------------------
Current Vacancy Rate 8.3% 9
- -------------------------------------
1992 Vacancy Rate 13.5% 7
- -------------------------------------
1995 Vacancy Rate 9.6% 12
- -------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Office Outlook
Our Outlook for Washington, D.C. is presented here on an annual frequency and in
the next table on a semiannual frequency.
Table 7: Annual History and Forecast
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate Level Inflation
(%) (x1000) (x1000) (x1000) (x1000) (%) ($) (%)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1977 2.4 254.3 68,912 2,443 3,963 3.1
1978 4.8 274.9 72,331 3,419 4,037 2.1
1979 4.4 296.8 77,279 4,948 5,154 1.7
1980 3.1 315.0 84,972 7,693 8,157 1.0 $12.76
-----------------------------------------------------------------------------------------
1981 0.9 326.2 92,731 7,759 5,920 2.9 $13.44 5.3
1982 -1.0 333.3 101,018 8,287 2,491 8.4 $14.97 11.4
1983 2.7 356.9 108,407 7,389 4,383 10.6 $15.15 1.2
1984 6.4 386.9 119,192 10,785 8,330 11.7 $16.26 7.3
-----------------------------------------------------------------------------------------
1985 5.9 421.1 131,215 12,023 7,074 14.4 $17.32 6.5
1986 4.9 451.9 144,646 13,431 9,906 15.5 $17.88 3.2
1987 4.9 489.3 161,825 17,179 14,031 15.8 $18.25 2.1
1988 5.1 518.5 174,283 12,458 15,718 12.8 $18.62 2.0
-----------------------------------------------------------------------------------------
1989 3.0 539.4 187,252 12,969 9,249 13.9 $18.87 1.3
1990 1.2 548.9 198,697 11,445 4,092 16.8 $18.57 -1.6
1991 -2.2 533.9 203,568 4,871 7,717 15.0 $17.69 -4.7
1992 -0.5 546.7 205,554 1,986 4,771 13.5 $17.01 -3.8
-----------------------------------------------------------------------------------------
1993 1.8 563.6 206,950 1,396 5,553 11.4 $17.38 2.2
1994 1.8 587.8 207,070 120 2,177 10.4 $18.41 5.9
1995 1.6 600.0 208,553 1,483 2,997 9.6 $20.63 12.1
1996 0.5 613.6 208,990 437 3,111 8.3 $23.32 13.0
==================================================================================
- ---------------------------------------------------------------------------------------------------------------
Forecast 1997 1.1 624.2 210,397 1,408 3,126 7.4 $24.96 7.0
1998 0.9 634.0 213,081 2,683 2,403 7.5 $26.93 7.9
1999 1.5 648.0 217,391 4,311 2,546 8.1 $28.95 7.5
2000 1.9 663.7 223,169 5,778 3,397 9.0 $30.67 5.9
-----------------------------------------------------------------------------------------
2001 2.0 681.2 230,923 7,753 4,267 10.2 $31.97 4.2
2002 2.0 699.6 240,487 9,564 5,197 11.6 $32.82 2.7
==================================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
Table 8: Semiannual History and Forecast
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate (S)
(%) (x1000) (x1000) (x1000) (x1000) (%) Real* Nominal
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1992.1 -0.5 541.5 204,838 1,268 2,102 14.5 $19.67 $17.35
1992.2 0.0 546.7 205,554 718 2,669 13.5 $19.00 $17.01
1993.1 0.8 558.3 206,561 1,007 2,730 12.6 $18.95 $17.20
1993.2 1.0 563.6 206,950 389 2,823 11.4 $18.90 $17.38
--------------------------------------------------------------------------------------------
1994.1 0.7 575.2 207,009 59 1,294 10.8 $19.22 $17.89
1994.2 1.1 587.8 207,070 61 883 10.4 $19.50 $18.41
1995.1 1.1 593.9 207,600 530 2,966 9.2 $20.32 $19.49
1995.2 0.5 600.0 208,553 953 31 9.6 $21.30 $20.63
--------------------------------------------------------------------------------------------
1996.1 0.3 607.6 208,774 221 1,452 9.0 $22.25 $21.93
1996.2 0.2 613.6 208,990 216 1,659 8.3 $23.32 $23.32
====================================================================================
- ------------------------------------------------------------------------------------------------------------------
Forecast 1997.1 0.5 618.6 209,694 704 1,650 7.8 $23.70 $24.09
1997.2 0.6 624.2 210,397 704 1,476 7.4 $24.16 $24.96
--------------------------------------------------------------------------------------------
1998.1 0.4 628.7 211,557 1,160 1,265 7.3 $24.68 $25.92
1998.2 0.5 634.0 213,081 1,523 1,138 7.5 $25.22 $26.93
1999.1 0.7 640.8 215,078 1,997 1,186 7.8 $25.76 $27.96
1999.2 0.8 648.0 217,391 2,314 1,360 8.1 $26.24 $28.95
--------------------------------------------------------------------------------------------
2000.1 0.9 655.6 220,050 2,659 1,585 8.5 $26.63 $29.86
2000.2 1.0 663.7 223,169 3,119 1,812 9.0 $26.91 $30.67
2001.1 1.0 672.2 226,795 3,626 2,023 9.6 $27.07 $31.37
2001.2 1.0 681.2 230,923 4,127 2,244 10.2 $27.14 $31.97
--------------------------------------------------------------------------------------------
2002.1 1.0 690.5 235,509 4,586 2,483 10.9 $27.10 $32.45
2002.2 1.0 699.6 240,487 4,978 2,714 11.6 $26.97 $32.82
====================================================================================
</TABLE>
* Real rents shown in 1996 dollars
- --------------------------------------------------------------------------------
The forecast calls for an average annual growth in office employment of 2.2%
over the next six years from its current level. In that office employment growth
is a key element in our forecast model, we expect that this growth will affect
our forecast of net absorption in a positive manner. We are forecasting vacancy
rates to rise to 11.6% over the next six years. Rents as measured by the TW Rent
Index are expected to rise by an average annual rate of 6.5% through 2001.
- -----------------------------
Rent and Vacancy Performance
(Rank out of 54)
- -----------------------------
1996.2 Vacancy Rate 9
- -----------------------------
2002.2 Vacancy Rate 5
- -----------------------------
1996.2 TW Rent Index 7
- -----------------------------
2002.2 TW Rent Index 2
- -----------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Outlook Comparisons
The following four graphs compare growth in office employment, new supply,
absorption, and rent between Washington, D.C. and a weighted average of our 54
markets.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[Line chart: Office Employment Growth Rates, between 1978 and 2002, comparing
Washington, D.C. and 54 Markets]
[GRAPHIC OMITTED]
[Line chart: Completion Rates, between 1980 and 2002, comparing Washington, D.C.
and 54 Markets]
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[Line chart: Absorption Rates, between 1990 and 2002, comparing Washington, D.C.
and 54 Markets]
[GRAPHIC OMITTED]
[Line chart: TW Rent Inflation, between 1990 and 2002, comparing Washington,
D.C. and 54 Markets]
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Submarket Outlook
The following tables provide a short-term forecast by submarket for net
absoprtion, new supply, rent growth, and vacancy rates.
Table 9: Forecast of Demand by Submarket
<TABLE>
<CAPTION>
Demand Forecast Factors 2 Year Forecast
------------------------------------------------------------- ----------------------
Long-term* 3-Year Estimated
Occupied Percent Avg. Annual Percent Avg. Annual Percent Avg. Annual Percent
Stock of Net Absorption of Net Absorption of Net Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- ------------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBD 27,714 14.5 372 5.5 -9 -0.3 440 15.9
Capitol Hill 4,167 2.2 125 1.8 -106 -3.9 321 11.6
East End 21,430 11.2 855 12.6 0 0.0 648 23.4
Northeast 26 0.0 -1 0.0 -12 -0.4 na na
Southeast 120 0.1 5 0.1 32 1.2 na na
Southwest 6,523 3.4 171 2.5 57 2.1 113 4.1
Upper Northwest 3,674 1.9 58 0.9 -15 -0.6 72 2.6
West End/Georgetown 4,454 2.3 159 2.3 90 3.3 104 3.7
------------------------------------------------------------- ----------------------
Subtotal for District of Columbia 68,108 35.6 1,744 25.7 37 1.4 1,721 62.2
============================================================= ======================
------------------------------------------------------------- ----------------------
Alexandria/Oldtown 4,373 2.3 218 3.2 38 1.4 49 1.8
Annandale 1,099 0.6 24 0.4 13 0.5 12 0.4
Chantilly 2,200 1.1 147 2.2 55 2.0 106 3.8
Crystal City 10,687 5.6 319 4.7 141 5.2 4 0.1
Eisenhower Beltway 641 0.3 40 0.6 31 1.1 12 0.4
Fairfax/Center 4,795 2.5 313 4.6 209 7.7 26 0.9
Fairfax/City 1,572 0.8 76 1.1 103 3.8 7 0.3
Falls Church 1,373 0.7 28 0.4 15 0.5 16 0.6
Herndon/Dulles 3,924 2.0 237 3.5 90 3.3 45 1.6
I-395 5,394 2.8 251 3.7 84 3.1 22 0.8
Manassas 517 0.3 27 0.4 0 0.0 8 0.3
McLean 930 0.5 22 0.3 57 2.1 3 0.1
Merrifield 3,695 1.9 180 2.7 110 4.1 19 0.7
Reston 6,296 3.3 368 5.4 169 6.2 57 2.1
Rosslyn/Ballston 13,426 7.0 491 7.3 243 9.0 168 6.1
Springfield 1,198 0.6 36 0.5 63 2.3 5 0.2
Sterling 493 0.3 33 0.5 -16 -0.6 29 1.0
Tyson's Corner 16,229 8.5 682 10.1 772 28.5 43 1.5
Vienna 1,715 0.9 94 1.4 110 4.1 1 0.0
------------------------------------------------------------- ----------------------
Subtotal for Northern Virginia 80,557 42.0 3,586 53.0 2,287 84.3 632 22.7
============================================================= ======================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Demand Forecast Factors 2 Year Forecast
------------------------------------------------------------- ----------------------
Long-term* 3-Year Estimated
Occupied Percent Avg. Annual Percent Avg. Annual Percent Avg Annual Percent
Stock of Net Absorption of Net Absorption of Net Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
301 Corridor 166 0.1 7 0.1 0 0.0 na na
Bethesda 7,173 3.7 168 2.5 158 5.8 25 2.7
Central PG County 1,155 0.6 64 0.9 24 0.9 21 0.8
Gaithersburg 3,173 1.7 164 2.4 110 4.1 37 1.3
Inside Beltway 3,516 1.8 42 0.6 -50 -1.8 37 1.3
Kensington/Wheaton 865 0.5 0 0.0 12 0.5 2 0.1
North Bethesda 3,943 2.1 167 2.5 115 4.3 34 1.2
North PG County 4,691 2.4 202 3.0 69 2.5 58 2.1
Route 29 Corridor 713 0.4 39 0.6 -8 -0.3 20 0.7
Shady Grove 6,953 3.6 314 4.6 82 3.0 27 1.0
Silver Spring 3,294 1.7 83 1.2 -146 -5.4 53 1.9
South PG County 999 0.5 39 0.6 7 0.3 12 0.4
The Pike 6,258 3.3 150 2.2 11 0.4 43 1.5
------------------------------------------------------------- ----------------------
Subtotal for Suburban Maryland 42,899 22.4 1,439 21.2 384 14.3 419 15.0
============================================================= ======================
------------------------------------------------------------- ----------------------
Total for Washington, D.C. 191,564 100.0 6,769 100.0 2,708 100.0 2,772 100.0
============================================================= ======================
</TABLE>
*Long term net absorption is an estimate of net absorption over the last 15
years. See the Appendix for a complete methodology.
- --------------------------------------------------------------------------------
The three-year average annual net absorption is calculated from the current
period going back three years. Likewise, the two-year average annual forecast of
net absorption is calculated from the current period going forward two years.
When the Outlook is produced mid-year, the time periods referenced are also
mid-year time periods.
- ---------------------------------------
Washington, D.C.
Submarket Standings
- ---------------------------------------
Largest share of long-term absorption:
East End
- ---------------------------------------
Largest share of short-term absorption:
Tyson's Corner
- ---------------------------------------
Largest share of forecasted absorption:
East End
- ---------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 10: Forecast of Supply by Submarket
<TABLE>
<CAPTION>
Supply Forecast Factors 2 Year Forecast
----------------------------------------------------------------- ----------------------
Average Annual Square Feet Estimated Annual
Completions Percent Under Percent Planned Percent Completions Percent
Last 15 Years of Construction of Projects of Next 2 Years of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- ---------------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBD 542 7.0 0 0.0 0 0.0 65 3.2
Capitol Hill 175 2.3 340 17.0 0 0.0 244 11.9
East End 999 12.9 364 18.2 851 67.8 366 17.9
Northeast 0 0.0 0 0.0 0 0.0 na na
Southeast 7 0.1 0 0.0 0 0.0 na na
Southwest 189 2.4 589 29.5 0 0.0 105 5.1
Upper Northwest 80 1.0 96 4.8 0 0.0 74 3.6
West End/Georgetown 180 2.3 0 0.0 0 0.0 22 1.1
----------------------------------------------------------------- ----------------------
Subtotal for District of Columbia 2,172 28.0 1,389 69.5 851 67.8 877 42.8
================================================================= ======================
----------------------------------------------------------------- ----------------------
Alexandria/Oldtown 233 3.0 0 0.0 0 0.0 27 1.3
Annandale 32 0.4 0 0.0 0 0.0 4 0.2
Chantilly 172 2.2 144 7.2 0 0.0 111 5.4
Crystal City 319 4.1 0 0.0 0 0.0 39 1.9
Eisenhower Beltway 45 0.6 0 0.0 0 0.0 8 0.4
Fairfax/Center 324 4.2 0 0.0 0 0.0 42 2.0
Fairfax/City 82 1.1 0 0.0 0 0.0 10 0.5
Falls Church 39 0.5 0 0.0 0 0.0 6 0.3
Herndon/Dulles 260 3.4 0 0.0 0 0.0 30 1.5
I-395 264 3.4 0 0.0 0 0.0 33 1.6
Manassas 31 0.4 0 0.0 0 0.0 4 0.2
McLean 23 0.3 0 0.0 0 0.0 3 0.1
Merrifield 188 2.4 0 0.0 0 0.0 27 1.3
Reston 393 5.1 0 0.0 0 0.0 48 2.3
Rosslyn/Ballston 541 7.0 216 10.8 0 0.0 204 10.0
Springfield 41 0.5 0 0.0 0 0.0 6 0.3
Sterling 46 0.6 0 0.0 0 0.0 5 0.2
Tyson's Corner 708 9.1 0 0.0 405 32.2 106 5.2
Vienna 95 1.2 0 0.0 0 0.0 16 0.8
----------------------------------------------------------------- ----------------------
Subtotal for Northern Virginia 3,836 49.5 360 18.0 405 32.2 729 35.5
================================================================= ======================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Supply Forecast Factors 2 Year Forecast
----------------------------------------------------------------- ----------------------
Average Annual Square Feet Estimated Annual
Completions Percent Under Percent Planned Percent Completions Percent
Last 15 Years of Construction of Projects of Next 2 Years of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
----------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
301 Corridor 7 0.1 0 0.0 0 0.0 na na
Bethesda 195 2.5 247 12.4 0 0.0 181 8.8
Central PG County 78 1.0 0 0.0 0 0.0 10 0.5
Gaithersburg 187 2.4 0 0.0 0 0.0 23 1.1
Inside Beltway 101 1.3 0 0.0 0 0.0 14 0.7
Kensington/Wheaton 4 0.0 0 0.0 0 0.0 2 0.1
North Bethesda 177 2.3 0 0.0 0 0.0 22 1.1
North PG County 243 3.1 0 0.0 0 0.0 40 1.9
Route 29 Corridor 46 0.6 0 0.0 0 0.0 29 1.4
Shady Grove 330 4.3 0 0.0 0 0.0 46 2.3
Silver Spring 149 1.9 0 0.0 0 0.0 17 0.8
South PG County 44 0.6 0 0.0 0 0.0 5 0.2
The Pike 181 2.3 0 0.0 0 0.0 58 2.8
----------------------------------------------------------------- ----------------------
Subtotal for Suburban Maryland 1,742 22.4 247 12.4 0 0.0 448 21.7
================================================================= ======================
----------------------------------------------------------------- ----------------------
Total for Washington, D.C. 7,750 100.0 1996 100.0 1,256 100.0 2,054 100.0
================================================================= ======================
</TABLE>
- --------------------------------------------------------------------------------
Our forecast of submarket supply utilizes historical shares of new supply as
well as acknowledged under-construction and planned projects to distribute our
metropolitan forecast of new supply to each submarket for the next two years.
The most likely influence on the Washington, D.C. market over the next several
years will be the amount of new construction. Over the next two years we
estimate 2.0 million square feet will be completed annually, metro-wide. On the
other hand, Table 9 shows us that 2.8 million square feet annually is the
forecasted net absorption during the same period.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 11: Forecast of Vacancy Rates and Rents by Submarket
<TABLE>
<CAPTION>
Historic and Year-end 1996 Vacancy Rates and 2 Year Forecast
-------------------------------------------- -----------------------------------
TW Rent Index
1993 1996 1996 Avg. Annual
Vacancy Rate Vacancy Rate TW Rent Index Vacancy Rate Level Rent Inflation
- ------------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBD 9.8 10.8 $31.04 8.3 $35.55 7.0
Capitol Hill 2.5 17.7 $22.37 13.3 $24.83 6.4
East End 9.0 10.3 $27.59 7.7 $31.86 7.5
Northeast 5.0 45.8 $16.94 na na na
Southeast 30.6 20.0 na na na na
Southwest 6.1 4.8 $28.66 4.4 $33.56 8.2
Upper Northwest 9.8 10.6 $25.56 10.3 $29.55 7.5
West End/Georgetown 13.6 7.9 $28.54 4.5 $33.12 7.7
-------------------------------------------- -----------------------------------
Subtotal for District of Columbia 9.1 10.4 $28.69 9.6 $32.94 7.1
============================================ ===================================
Alexandria/Oldtown 7.9 5.1 $22.20 4.0 $26.04 8.3
Annandale 15.1 12.1 $20.64 10.6 $23.28 6.2
Chantilly 21.9 14.9 $16.58 14.1 $18.96 6.9
Crystal City 4.5 0.1 $25.66 0.8 $30.82 9.6
Eisenhower Beltway 24.7 11.0 $17.65 9.6 $20.12 6.8
Fairfax/Center 16.3 3.4 $18.42 4.0 $21.37 7.7
Fairfax/City 27.4 5.6 $17.57 5.9 $20.45 7.9
Falls Church 16.4 13.2 $20.18 11.8 $22.71 6.1
Herndon/Dulles 12.8 8.4 $17.06 7.6 $19.87 7.9
I-395 7.9 3.6 $21.23 4.0 $25.11 8.8
Manassas 11.5 11.5 $20.50 9.8 $23.31 6.6
McLean 21.1 1.9 $22.77 1.9 $26.84 8.6
Merrifield 11.8 3.3 $20.60 3.6 $24.01 8.0
Reston 13.4 5.9 $18.87 5.6 $22.06 8.1
Rosslyn/Ballston 9.2 6.1 $22.94 6.5 $26.88 8.2
Springfield 21.9 6.8 $18.08 6.9 $20.85 7.4
Sterling 20.5 28.2 $16.91 21.0 $17.86 2.8
Tyson's Corner 17.6 2.6 $20.21 3.4 $23.70 8.3
Vienna 20.9 0.6 $19.80 2.3 $23.12 5.1
-------------------------------------------- -----------------------------------
Subtotal for Northern Virginia 12.6 4.8 $20.97 5.0 $24.57 8.2
============================================ ===================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historic and Year-end 1996 Vacancy Rates and 2 Year Forecast
-------------------------------------------- -----------------------------------
TW Rent Index
1993 1996 1996 Avg. Annual
Vacancy Rate Vacancy Rate TW Rent Index Vacancy Rate Level Rent Inflation
-------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
301 Corridor 1.4 2.9 na na na na
Bethesda 12.8 6.6 $22.82 9.0 $26.33 7.4
Central PG County 21.8 16.5 na 14.6 na na
Gaithersburg 18.3 10.7 $18.70 9.7 $21.22 6.5
Inside Beltway 20.5 24.3 $17.31 23.2 $18.51 3.4
Kensington/Wheaton 11.0 7.7 na 7.7 na na
North Bethesda 13.1 4.1 $21.54 3.5 $25.20 8.2
North PG County 15.2 12.9 $21.99 12.1 $24.92 6.5
Route 29 Corridor 11.4 13.9 $19.57 15.0 $22.26 6.7
Shady Grove 6.9 3.8 $19.61 4.3 $23.03 8.4
Silver Spring 18.0 26.4 $20.40 24.7 $21.73 3.2
South PG County 9.3 7.2 na 6.0 na na
The Pike 8.1 8.6 $20.69 8.9 $23.96 7.6
-------------------------------------------- -----------------------------------
Subtotal for Suburban Maryland 13.3 11.2 $20.56 11.2 $23.43 6.8
============================================ ===================================
-------------------------------------------- -----------------------------------
Total for Washington, D.C. 11.4 8.3 $23.32 7.6 $26.93 7.5
============================================ ===================================
</TABLE>
- --------------------------------------------------------------------------------
Combining the supply and demand forecasts of the previous tables, we can project
the rent and vacancy levels by submarket for Washington, D.C.. We provide
forecasts only in those submarkets where we have determined that there is
sufficient stock of space or where there is currently space under construction.
The local offices in the Washington, D.C. area were reporting 2.0 million square
feet of multi-tenant space under construction as of the 4th quarter of 1996. Our
forecast calls for an average of 5.3 million square feet to be built each year
over the next six years. The following table provides information on current
projects
- ---------------------------------------
Washington D.C.
Submarket Standings
- ---------------------------------------
Highest current vacancy rate
-----------------------------------
Northeast
-----------------------------------
- ---------------------------------------
Largest forecasted decrease in vacancy
-----------------------------------
Sterling
-----------------------------------
- ---------------------------------------
Largest forecasted increase in rents
-----------------------------------
Crystal City
-----------------------------------
- ---------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 12: Multi-tenant Properties Under Construction
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
District of Columbia Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capitol Hill 00801 N CAPITOL ST NE 81,900 100.0 na
801 CAPITOL ST NE
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
00010 G ST NE 258,000 76.9 na
10 G ST NE
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Capitol Hill 2 339,900 82.5 na na
===========================================================================
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East End 00600 13TH ST NW 237,630 46.5 25.00/32.00
600 13TH ST NW (NNN)
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
TOWER BUILDING 125,700 87.7 28.00/33.00
1401 K ST NW (G)
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for East End 2 363,330 60.8 $28.50 $30.50
===========================================================================
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Southwest PORTALS PH 2 588,500 23.4 na
445 12TH ST SW
WASHINGTON
Due: 1998
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Southwest 1 588,500 23.4 na na
===========================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Washington. D.C.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
District of Columbia Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Upper Northwest 4001 BRANDYWINE ST 50,000 136.6 22.00
4001 BRANDYWINE ST NW (G)
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
MACARTHUR PROF. CTR 45,839 71.1 18.00/23.00
5185 MACARTHUR BLVD NW (NNN)
WASHINGTON
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Upper Northwest 2 95,839 105.3 $20.50 $22.00
===========================================================================
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Northern Virginia Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chantilly AEROSPACE CORP BLDG 144,375 37.7 22.75
15049 CONFERENCE CENTER DR (G)
CHANTILLY
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subotal for Chantilly 1 144,375 37.7 na $22.75
===========================================================================
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rosslyn/Ballston 1200 WILSON BLVD 138,542 100.0 26.00
1200 WILSON BLVD (G)
ROSSLYN
Due: 1997
---------------------------------------------------------------------------
AUSA BUILDING 77,000 60.9 25.00/26.00
2425 WILSON BLVD (G)
ARLINGTON
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Rosslyn/Ballston 2 215,542 86.0 na $25.87
===========================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent Asking
Suburban Maryland Building Name and Address NRA Available Rent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bethesda PHILLIPS BLDG 125,000 74.7 20.00
7900 NORFOLK AVE (G)
BETHESDA
Due: 1997
---------------------------------------------------------------------------
FAIRMONT BUILDING 122,390 89.9 23.50
7735 OLD GEORGETOWN RD (G)
BETHESDA
Due: 1997
---------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Bethesda 2 247,390 82.2 na $21.89
===========================================================================
<CAPTION>
---------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total for Washington, D.C. 12 1,994,876 59.3 $26.68 $24.69
===========================================================================
</TABLE>
- --------------------------------------------------------------------------------
This table reports only multi-tenant buildings that were under construction as
of 4th quarter, 1996. We do track single tenant or build-to-suit construction
for the purposes of estimating absorption and making forecasts.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
[GRAPHIC OMITTED]
SUBURBAN CHICAGO MARKET ANALYSIS
PRENTISS OFFICE PORTFOLIO
Suburban Chicago, Illinois
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[LETTERHEAD OF CB COMMERCIAL REAL ESTATE GROUP, INC.]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Suburban Chicago Market Analysis
Prentiss Office Portfolio
Suburban Chicago, Illinois
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Office Portfolio located in the
Chicago, Illinois area.
The subject consists of two, institutional quality, office developments having a
combined total of 226,076 SF of net rentable area. The Chicago market has an
average occupancy of 90%. Overall this market area is stabilized and showing
relatively stable rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
================================================================================
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: O'Hare and Deerfield Submarkets,
Suburban Chicago, Illinois
Property Description: O'Hare Plaza II is an eleven-story,
Class A suburban office building.
The Property was developed in 1986.
1717 Deerfield is a three-story,
Class A suburban office building.
The property was constructed in 1985
and contains 137,904 square feet.
Date of Analysis: August 1,1997
Improvements
Number of Buildings: 2
Number of Stories: 3 - 11
Gross Building Area: 371,554 SF
Net Rentable Area: 371,554 SF
Avg. Year Built: 1985 - 1986
Condition: Good
Effective Age: 11 Years
Market Financial indicators
Current Occupancy: 90.1%
Stabilized Occupancy: 90.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $15.00 - $16.00 PSF
Tenant Improvements (New Leases): $15.00 Per SF
Tenant Improvements (Renewal Leases): $5.00 Per SF
Leasmg Commissions (New Leases): 5.0%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS..................................................... ii
TABLE OF CONTENTS........................................................... iii
TRADE AREA ANALYSIS........................................................... 1
COMPETITIVE MARKET TREND ANALYSIS............................................. 3
MARKETABILITY CONCLUSIONS..................................................... 7
ADDENDA
A Improved Comparable Sales
B Demographics
C CB Commercial OfficeMarket Statistics
D Torto Wheaton Research Data
================================================================================
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
The population of the Chicago metropolitan statistical area was 7.73 million
making it the 3rd largest in the country as of the end of first quarter 1996.
The Chicago, IL MSA consists of the nine counties Cook, DeKalb, DuPage, Grundy,
Kane, Kendall, Lake, McHenry, and Will. The central cities within the MSA are
Chicago, Aurora, Elgin, Joliet, Evanston, North Chicago, and DeKalb. The median
per capita personal income in 1995 for the MSA was $27,309 which is 18% above
the national level. The cost of doing business is 10% above the national
average.
Industries concentrated in Chicago include security & commodity brokers, air
transportation, electronic equipment, insurance carriers, and
printing/publishing. The top major employers of the area include Sears Roebuck,
Jewel Food Stores, Motorola, Ameritech, and Dominick's Finer Foods. Other
employers include UAL, First Chicago and AT&T.
Location
The trade area is located in suburban Chicago within the submarkets designated
as Lake County and O'Hare. From a geographic perspective the areas analyzed are
defined Deerfield, Illinois, and the Chicago PMSA.
Demographics
Population growth and new household formations have been on an upward trend
within the overall subject trade area, while remaining stable in the local
submarket.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
================================================================================
Chicago
Deerfield, IL PMSA
- --------------------------------------------------------------------------------
Population
2001 Estimate 18,434 7,984,063
1996 Estimate 18,202 7,774,982
1990 Census 17,327 7,410,858
1996 - 2001 % Change 0.0% 2.7%
Households
2001 Estimate 6,264 2,854,099
1996 Estimate 6,186 2,789,197
1990 Census 5,892 2,671,540
1996 - 2001 % Change -0.6% 2.3%
2001 Median Household Income $106,533 $51,463
1996 Median Household Income $88,847 $43,673
1996 Average Household Income $113,473 $56,329
1990 Average Home Value $255,647 $135,409
1990 % College Graduates 59.7% 24.4%
- --------------------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
================================================================================
Trends and Conclusions
The outlook is for relatively stable performance with moderate improvement over
the next several years. As a result, the demand for existing developments is
expected to be good. Generally, the trade area is expected to maintain a
relatively stable growth pattern in the foreseeable future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
<TABLE>
<CAPTION>
=================================================================================================
MARKET STATISTICS
- -------------------------------------------------------------------------------------------------
Category Source Chicago Total Lake County O'Hare
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Existing Supply (SF X 1,000) (1) 188,619 6,077 12,847
(3) 6,071 12,850
Under Construction (SF X 1,000) (1) 693 125 0
Construction - 2 YR Annual Forecast (SF X 1,000) (1) 1,788 182 90
Absorption - 3YR Avg. (SF X 1,000) (1) 3,145 41 215
Absorption - 2 YR Annual Forecast (SF X 1,000) (1) 1,860 251 131
1996 Occupancy (1) 86.0% 87.2% 86.1%
2nd Qtr 1997 Occupancy (3) 89.5% 87.0%
Occupancy - 2 YR Forecast (1) 86.3% 90.0% 86.9%
Average Rent PSF - 1996 (1) $21.69 $20.82 $19.29
Average Rent PSF - 1st Qtr 1997 (3) $29.27 $23.43
Average Rent PSF - 2 YR Forecast (1) $24.17 $23.47 $21.53
Annual Rent Inflation - 2 YR Forecast (1) 5.6% 6.2% 5.6%
- -------------------------------------------------------------------------------------------------
Source codes:
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
=================================================================================================
</TABLE>
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Chicago area and local submarkets over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==============================================================================================
MARKET TRENDS
1992 - 1996
- ----------------------------------------------------------------------------------------------
Chicago MSA Lake County 0'Hare Submarket
----------------------- ---------------------- ----------------------
Date Rent PSF Occupancy Rent PSF Occupancy Rent PSF Occupancy
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1992 $16.42 80.7% N/A 86.5% N/A 80.6%
1993 $16.23 81.2% N/A 88.0% N/A 81.2%
1994 $17.55 83.1% N/A 87.7% N/A 79.5%
1995 $18.74 84.8% N/A 90.4% N/A 84.8%
1996 $21.69 86.0% $20.82 87.2% $19.29 86.1%
1997 Forecast $23.01 86.4% $23.47 90.0% $21.53 86.9%
- ----------------------------------------------------------------------------------------------
Source: Torto Wheaton Research
==============================================================================================
</TABLE>
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
<TABLE>
<CAPTION>
=======================================================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
Comp. Avg. Rent PSF Pct. Exp. Ten. Imp. Leas. Comm. Pct.
No. Location Size (NRA) 1996 1997 Inc. Reimb. New Renew New Renew Occ.
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 777 Big Timber Road 118,000 SF $10.00 Net Net $30.00 100%
Elgin, IL
2 Executive Tower 223,120 SF $14.50 $7.07 N/A
West I, Downers
Grove, IL
3 3075 Highland 244,000 SF $15.25 $7.30 0%
Parkway, Downers
Grove, IL
4 9525 West Bryn Mawr 238,941 SF $24.05 $25.62 7% Full Service $15.00 $5.00 5.0% 2.0% 99%
Ave, Rosemont, IL
5 8750 & 8770 West 625,960 SF $11.10 $11.87 7% $12.99 $15.00 $5.00 5.0% 2.0% 97%
Bryn Mawr Ave,
Rosemont, IL
- -----------------------------------------------------------------------------------------------------------------------
Average: 290,004 SF $17.57 $16.81 $20.00 $5.00 5.0% 2.0% 74%
- -----------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
=======================================================================================================================
</TABLE>
The rental rates of the comparables range from $10.00 to $15.25 per square foot
on a net lease basis. Quoted occupancy rates range from 0% to 100%. Rental rates
appear to be relatively stable at this time. However, there is a considerable
amount of new and planned construction in market at this time. Please refer to
the Addenda for details on recent construction trends.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET EXPENSE RATES
The following industry survey expense data is reported for the local market
area:
<TABLE>
<CAPTION>
============================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
- --------------------------------------------------------------------------------------------
BOMA
COMP 1 COMP 2 COMP 3 MEDIAN
------------ ----------- ---------- ---------
<S> <C> <C> <C> <C>
Location Rosemont, IL Chicago, IL Itasca, IL Chicago
NRA(SF) 238,941 625,960 525,139 Suburban
Expense Year 1996 1996 1996 1996
Effective Gross Income PSF: $25.36 $19.33 $20.31
Unit of Comparison PSF PSF PSF PSF
------------ ----------- ---------- ---------
Expenses
Real Estate Taxes $4.68 $3.56 $1.66 $3.56
Insurance $0.06 $0.19 $0.06 $0.15
Janitorial $0.00 $1.03 $0.71 $0.00
General Operating* $2.92 $2.79 $2.77 $2.78
Utilities $1.16 $1.29 $1.07 $1.37
Allowance for Replacements $0.00 $0.00 $0.00 $0.00
Management Fees $1.11 $0.40 $0.48 $0.53
------------ ----------- ---------- ---------
Total Expenses $9.93 $9.26 $6.74 $8.39
- --------------------------------------------------------------------------------------------
* Includes maintenance and repairs, administrative, and contract services.
Source: Actual operating statements, BOMA Experience Exchange Report 1996, and
IREM Income/Expense Analysis Report 1998
Compiled By: CB Commercial
============================================================================================
</TABLE>
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
CAPITAL EXPENSES
- --------------------------------------------------------------------------------
Capital Expense Category Range Reported
- --------------------------------------------------------------------------------
Renewal Probability 60% to 85%
Tenant Improvements (New Leases) $15.00 PSF to $30.00 PSF
Tenant Improvements (Renewal Leases) $3.00 PSF to $5.00 PSF
Weighted Average Tenant Improvements $7.80 PSF to $8.75 PSF
Leasing Commissions (New Leases) 4.0% to 6.0%
Leasing Commissions (Renewal Leases) 2.0% to 3.0%
Weighted Average Leasing Commissions 2.8% to 3.5%
- --------------------------------------------------------------------------------
Compiled by: CB Commercial
- --------------------------------------------------------------------------------
COMPARABLE SALES DATA AND TRENDS
================================================================================
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
<TABLE>
<CAPTION>
============================================================================================================
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
Sale Name Location Date of Size Price PSF OCC NOI PSF OAR
No. Sale (NRA)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 300 Park Plaza 300 Park Plaza, Jan-97 152,500 $196.07 100% $25.61 13.06%
Lisle, IL
2 Centennial Center 1900 E. Golf Road, Dec-96 265,430 $90.42 96% $8.17 9.04%
Schaumburg, IL
3 Oakbrook Terrace 1815 South Meyers Dec-96 247,235 $120.84 100% $15.23 12.60%
Corporate Center Road, Oakbrook
III Terrace, IL
4 1717 Deerfield Road 1717 Deerfield Road, Dec-96 137,904 $156.27 100% $16.67 10.67%
Deerfield, IL
5 One Lincoln Centre 184W400 Butterfield Nov-96 293,959 $170.60 91% $16.65 9.76%
Road, Oakbrook
Terrace, IL
- ------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
================================================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
================================================================================
Category Amount
- --------------------------------------------------------------------------------
Current Occupancy: 90.1%
Stabilized Occupancy: 90.0%
Estimated Absorption: Market is stabilized.
Expenses (Range of Comparable Data): $6.74 - $9.93 PSF
Market Expenses: $9.50/SF/YR
Market Rental Rate: $15.00 - $16.00 PSF
Type of Lease: Triple Net
Tenant Impr. Range (New Leases): $15.00 - $30.00 PSF
Tenant Improvements (New Leases): $15.00/SF
Tenant Impr. Range (Renewal Leases): $3.00 - $5.00 PSF
Tenant Improvements (Renewal Leases): $5.00/SF
Leasing Commis. Range (New Leases): 4.0% - 6.0%
Leasing Commissions (New Leases): 5.0%
Leasing Commis. Range (Renewal Leases): 2.0% - 3.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
- --------------------------------------------------------------------------------
Compiled By: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY OF COMPARABLE OFFICE BUILDING SALES
====================================================================================================================================
Number
Sale Sale Year of Building Size Occupancy Price Per
No. Name / Location Date Built Stories (NRA) at Sale Sale Price SF OER OAR
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1717 Deerfield Road 12/96 1985 3 137,904 100% $21,550,000 $156.27 N/A 10.67%
1717 Deerfield Road
Deerfield, IL
1 Centennial Center 12/96 1980 14 265,430 96% $24,000,000 $ 90.42 N/A 9.04%
1900 E. Golf Road
Schaumburg, IL
3 300 Park Plaza 01/97 1988 4 152,500 100% $29,900,000 $196.07 N/A 13.06%
300 Park Plaza
Lisle, IL
4 Oakbrook Terrace Corporate
Center III 12/96 1991 10 247,235 100% $29,875,000 $120.84 N/A 12.60%
1815 South Meyers Road
Oakbrook Terrace, IL
5 One Lincoln Centre 11/96 1986 16 293,959 91% $50,150,000 $170.60 36.14% 9.76%
184W400 Butterfield Road
Oakbrook Terrace, IL
- ------------------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Location Data
Property Name: 1717 Deerfield Road
Location: 1717 Deerfield Road
City: Deerfield
County: Lake
State/Zip: Illinois
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 7.0900 Acres
Gross Building Area: 137,904 SF
Net Rentable Area: 137,904 SF
Usable Building Area: 137,904 SF
Year Built: 1985
# of Stories: 3
Parking: 477 spaces
Condition: Good
Exterior Walls: Glass Panels
Amenities: N/A
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 12/96
Marketing Time: N/A
Grantor: European American Realty
Grantee: Prentiss Properties
Document No.: 3910398
Sale Price: $21,550,000
Financing: Cash to Seller
Cash Equivalent Price: $21,550,000
Required Capital Cost: $0
Adjusted Sale Price: $21,550,000
Verification: Cushman & Wakefield & Prentiss
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $2,298,643 $16.67
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap and DCF
Overall Capitalization Rate (OAR): 10.67%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $156.27
Comments
This is the sale of a three-story Class A office building constructed in
1985. The building was developed by LaaSalle Partners in 1985 and was
fully occupied by Premark during 1987. Premark subsequently subleased
the first and second floors to Dade International, who will become the
direct tenant on the second floor as of May 1997. The new Dade
International lease will be coterminus with the Premark sublease, which
expires on April 30, 2003. The building sold for $21,550,000 or $156.27
per square foot.
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Location Data
Property Name: Centennial Center
Location: 1900 E. Golf Road
City: Schaumburg
County: Cook
State/Zip: Illinois
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 12.9600 Acres
Gross Building Area: 296,575 SF
Net Rentable Area: 265,430 SF
Usable Building Area: N/A
Year Built: 1980
# of Stories: 14
Parking: 37 spaces/1,000 square feet
Condition: Good
Exterior Walls: Glass Panels
Amenities: On-site food service, 24 hr. security
Class: A
Sale Data
Transaction Type: Contract
Date of Transaction: 12/96
Marketing Time: N/A
Grantor: Metropolitan Life Insurance Company
Grantee: Great Lakes REIT
Document No.: N/A
Sale Price: $24,000,000
Financing: Market Terms
Cash Equivalent Price: $24,000,000
Required Capital Cost: $0
Adjusted Sale Price: $24,000,000
Verification: Confidential Source
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 96%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $2,169,752 $8.17
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 9.04%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $90.42
Comments
This Class A building is located just north of Woddfield Mall, with good
visibility from I-90 & Rte. 53. The transaction was scheduled to close
by year-end 1996.
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Location Data
Property Name: 300 Park Plaza
Location: 300 Park Plaza
City: Lisle
County: DuPage
State/Zip: Illinois
Assessor's Parcel No(s): N/A
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 13.3900 Acres
Gross Building Area: N/A
Net Rentable Area: 152,500 SF
Usable Building Area: N/A
Year Built: 1988
# of Stories: 4
Parking: N/A
Condition: Good
Exterior Walls: Glass Panels
Amenities: N/A
Class: A
Sale Data
Transaction Type: Contract
Date of Transaction: 01/97
Marketing Time: N/A
Grantor: N/A
Grantee: TMW Real Estate Group
Document No.: N/A
Sale Price: $29,900,000
Financing: Cash to Seller
Cash Equivalent Price: $29,900,000
Required Capital Cost: $0
Adjusted Sale Price: $29,900,000
Verification: C&W
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 100%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
-------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,905,525 $25.61
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap and DCF
Overall Capitalization Rate (OAR): 13.06%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot: $196.07
Comments
This building is fully occupied by Allied Van Lines, a privately held
company. The current lease expires in November 2003. At the time of
sale, the net operating income was $25.61 per square foot. The overall
rate was reportedly high due to the above market rent associated with
the existing lease to Allied Van Lines. The property was in good
condition at the time of sale.
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Location Data
Property Name: Oakbrook Terrace Corporate Center III
Location: 1815 South Meyers Road
City: Oakbrook Terrace
County: DuPage
State/Zip: Illinois 60148
Assessor's Parcel No(s): 06-21-308-002 ET AL
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 6.6000 Acres
Gross Building Area: N/A
Net Rentable Area: 247,235 SF
Usable Building Area: N/A
Year Built: 1991
# of Stories: 10
Parking: Surface and covered parking
Condition: Good
Exterior Walls: Concrete
Amenities: Health club, food service, conference
room and vending area
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 12/96
Marketing Time: 8 months
Grantor: Oak Brook Terrace Corp Ctr III LLC
Grantee: OTB Partners North
Document No.: R96-208273
Sale Price: $29,875,000
Financing: Cash to Seller
Cash Equivalent Price: $29,875,000
Required Capital Cost: $0
Adjusted Sale Price: $29,875,000
Verification: Mike Caprille, CB Commercial
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 100%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: N/A N/A
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: N/A N/A
Expenses: N/A N/A
Net Operating Income: $3,764,250 $15.23
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 12.60%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): N/A
Operating Expense Ratio (OER): N/A%
Price Per Square Foot $120.84
Comments
The property was reportedly purchased based on an approximate 12.6
percent OAR with a cash-on-cash return in the high 9 percent range. The
comparatively high OAR reflects an above market lease to Platinum
Technology, a software development company which occupies approximately
68 percent of the building on a triple net lease which expires in
December, 2002. The property was originally being marketed along with
Oakbrook Corporate Center I, which was subsequently foreclosed upon and
withdrawn from the market. The extended marketing time of 8 months
reflects the extenuating circumstances associated with the original
marketing efforts and is not reflective of current marketing times for
quality office buildings in the Oak Brook area. Additional parcels
numbers are 06-21-308-017 and -018.
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Location Data
Property Name: One Lincoln Centre
Location: 184W400 Butterfield Road
City: Oakbrook Terrace
County: DuPage
State/Zip: Illinois
Assessor's Parcel No(s): 06-21-402-028,032,03
Atlas Reference: N/A
Physical Data
Type: Suburban
Land Area: 5.3200 Acres
Gross Building Area: 309,907 SF
Net Rentable Area: 293,959 SF
Usable Building Area: N/A
Year Built: 1986
# of Stories: 16
Parking: 5-level parking garage
Condition: Good
Exterior Walls: Glass Panels
Amenities: Cafeteria and sundry shop
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 11/96
Marketing Time: 5 months
Grantor: Teachers Insurance & Annuity Assoc. of
America
Grantee: Cornerstone Oak Brook, Inc.
Document No.: R96-183471
Sale Price: $50,150,000
Financing: Market Terms
Cash Equivalent Price: $50,150,000
Required Capital Cost: $0
Adjusted Sale Price: $50,150,000
Verification: Seller
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 91%
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
--------- ------
Potential Gross Income: $7,666,560 $26.08
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $7,666,560 $26.08
Expenses: $2,771,061 $9.43
Net Operating Income: $4,895,499 $16.65
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 9.76%
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): 6.54
Operating Expense Ratio (OER): 36.14%
Price Per Square Foot: $170.60
Comments
This property is located near the northwest corner of the intersection
of 22nd Street and Butterfield Road, in Oak Brook Terrace.
CB COMMERCIAL
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 Population 248,709,873 12,425 17,327 7,410,858
1996 Population 265,411,137 12,766 18,202 7,774,982
% White 79.0 94.9 96.4 70.4
% Black 12.2 0.3 0.7 18.8
% American Indian 0.9 0.2 0.0 0.2
% Asian 3.6 2.7 2.7 4.0
% Other 4.3 2.0 0.1 6.6
% Hispanic 10.3 11.6 1.2 13.0
1996 Population by Age:
% 0 - 5 8.6 7.5 9.0 8.9
% 6 - 13 11.3 9.9 12.2 11.6
% 14 - 17 5.4 4.3 5.3 5.2
% 18 - 20 4.7 3.8 4.3 4.5
% 21 - 24 5.8 5.0 5.0 5.5
% 25 - 34 14.5 15.5 9.4 15.2
% 35 - 44 15.7 15.8 15.9 16.3
% 45 - 54 12.3 13.5 16.9 12.3
% 55 - 64 8.5 11.5 10.4 8.4
% 65 - 74 7.3 8.3 7.4 6.8
% 75 - 84 4.5 3.9 3.0 4.0
% 85+ 1.4 0.9 1.2 1.3
Median Age Total Population 34.9 37.4 38.3 34.4
1990 Households 91,947,410 4,549 5,892 2,671,540
1996 Households 98,045,317 4,583 6,186 2,789,197
1996 Average Household Size 2.64 2.79 2.92 2.74
1996 Household Income:
% $ 0 - $ 9,999 12.3 4.0 2.8 10.0
% $ 10,000 - $ 14,999 7.8 4.0 1.8 5.5
% $ 15,000 - $ 24,999 14.7 9.8 3.4 11.5
% $ 25,000 - $ 34,999 14.1 10.1 4.4 12.2
% $ 35,000 - $ 49,999 18.2 22.5 11.1 18.3
% $ 50,000 - $ 74,999 17.7 25.3 17.7 21.0
% $ 75,000 - $ 99,999 7.6 12.3 15.9 10.2
% $100,000 - $149,999 5.3 8.2 22.2 7.5
% $150,000+ 2.4 3.7 20.7 3.8
1996 Median Household Income ($) 35,822 49,676 88,847 43,673
1996 Median Family Income ($) 42,040 55,828 98,208 52,047
1990 Median Home Value ($) 79,098 123,377 236,766 110,927
1990 Median Contract Rent ($) 374 557 658 427
1990 % White Collar Workers 58.1 64.2 86.5 63.4
1990 % Blue Collar Workers 26.2 26.0 8.4 24.3
1990 % HS Graduate/Some College 54.9 60.3 34.8 52.3
1990 % Bachelor/Graduate Degree 20.3 18.9 59.6 24.5
Area defined by Place
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 72 97 59
1996 Employment: 12,636 15,563 3,599,122
Population:
2001 Projection 12,760 18,434 7,984,063
1996 Estimate 12,766 18,202 7,774,982
1990 Census 12,425 17,327 7,410,858
1990 - 1996 % Change (Growth) 2.7% 5.0% 4.9%
1990 Group Quarters Population 0 150 142,229
1996 % Population by Race:
White 94.9% 96.4% 70.4%
Black 0.3% 0.7% 18.8%
American Indian, Eskimo & Aleut 0.2% 0.0% 0.2%
Asian or Pacific Islander 2.7% 2.7% 4.0%
Other 2.0% 0.1% 6.6%
Hispanic 11.6% 1.2% 13.0%
1990 % Population by Race:
White 94.9% 97.0% 71.0%
Black 0.2% 0.5% 19.3%
American Indian, Eskimo & Aleut 0.1% 0.1% 0.2%
Asian or Pacific Islander 3.1% 2.2% 3.4%
Other 1.7% 0.2% 6.1%
Hispanic 7.0% 1.4% 11.4%
1996 % Population by Sex:
Male 48.7% 48.7% 48.7%
Female 51.3% 51.3% 51.3%
1990 % Population by Sex:
Male 48.5% 48.6% 48.6%
Female 51.5% 51.4% 51.4%
2001 Pop per Square Mile (Pop Density) 2,996.2 3,371.8 1,576.3
1996 Pop per Square Mile (Pop Density) 2,997.6 3,329.3 1,535.0
1990 Pop per Square Mile (Pop Density) 2,917.6 3,169.3 1,463.2
Area (Square Miles) 4.3 5.5 5,065.0
Area (Square Kilometers) 11.0 14.2 13,118.3
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
Households:
2001 Projection 4,557 6,264 2,854,099
1996 Estimate 4,583 6,186 2,789,197
1990 Census 4,549 5,892 2,671,540
1990 - 1996 % Change (Growth) 0.7% 5.0% 4.4%
2001 Average Household Size 2.80 2.92 2.75
1996 Average Household Size 2.79 2.92 2.74
1990 Average Household Size 2.73 2.92 2.72
2001 Per Capita Income $ 24,468 46,456 24,363
1996 Per Capita Income $ 21,490 38,884 20,584
1990 Per Capita Income $ 18,525 31,158 16,824
2001 Median Family Income $ 63,002 117,758 61,331
1996 Median Family Income $ 55,828 98,208 52,047
1990 Median Family Income $ 48,379 80,120 43,263
2001 Median Household Income $ 56,060 106,533 51,463
1996 Median Household Income $ 49,676 88,847 43,673
1990 Median Household Income $ 43,048 72,483 36,302
2001 Average Household Income $ 68,514 135,602 66,939
1996 Average Household Income $ 59,860 113,473 56,329
1990 Average Household Income $ 50,310 90,821 45,848
1996 % Household Income:
$ 0 - $ 9,999 4.0% 2.8% 10.0%
$ 10,000 - $ 14,999 4.0% 1.8% 5.5%
$ 15,000 - $ 24,999 9.8% 3.4% 11.5%
$ 25,000 - $ 34,999 10.1% 4.4% 12.2%
$ 35,000 - $ 49,999 22.5% 11.1% 18.3%
$ 50,000 - $ 74,999 25.3% 17.7% 21.0%
$ 75,000 - $ 99,999 12.3% 15.9% 10.2%
$ 100,000 - $ 149,999 8.2% 22.2% 7.5%
$ 150,000 + 3.7% 20.7% 3.8%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Household Income:
$ 0 - $ 9,999 5.0% 3.6% 12.4%
$ 10,000 - $ 14,999 4.7% 2.1% 6.4%
$ 15,000 - $ 24,999 12.4% 3.9% 14.4%
$ 25,000 - $ 34,999 13.1% 7.8% 14.8%
$ 35,000 - $ 49,999 25.9% 13.7% 19.4%
$ 50,000 - $ 74,999 22.9% 21.0% 19.0%
$ 75,000 - $ 99,999 8.7% 16.6% 7.1%
$ 100,000 - $ 149,999 5.0% 17.4% 4.1%
$ 150,000 + 2.3% 13.8% 2.4%
1996 % Population by Age:
0 - 5 7.5% 9.0% 8.9%
6 - 13 9.9% 12.2% 11.6%
14 - 17 4.3% 5.3% 5.2%
18 - 20 3.8% 4.3% 4.5%
21 - 24 5.0% 5.0% 5.5%
25 - 34 15.5% 9.4% 15.2%
35 - 44 15.8% 15.9% 16.3%
45 - 54 13.5% 16.9% 12.3%
55 - 64 11.5% 10.4% 8.4%
65 - 74 8.3% 7.4% 6.8%
75 - 84 3.9% 3.0% 4.0%
85 + 0.9% 1.2% 1.3%
Median Age Total Population 37.4 38.3 34.4
Median Age Adult Population 44.4 46.2 42.2
1990 % Population by Age:
0 - 5 7.7% 10.5% 9.2%
6 - 13 9.6% 11.4% 11.4%
14 - 17 4.6% 5.9% 5.3%
18 - 20 4.2% 2.9% 4.5%
21 - 24 6.1% 3.5% 6.1%
25 - 34 18.1% 13.9% 18.4%
35 - 44 14.6% 19.1% 15.2%
45 - 54 13.4% 13.9% 10.3%
55 - 64 10.5% 9.9% 8.2%
65 - 74 7.5% 5.6% 6.7%
75 - 84 3.0% 2.2% 3.6%
85 + 0.7% 1.1% 1.1%
Median Age Total Population 34.8 35.9 32.3
Median Age Adult Population 42.2 43.2 39.9
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 7.1% 8.6% 8.5%
6 - 13 9.3% 11.8% 11.0%
14 - 17 4.2% 5.0% 4.9%
18 - 20 3.7% 4.0% 4.2%
21 - 24 4.9% 4.7% 5.2%
25 - 34 15.3% 9.0% 14.8%
35 - 44 15.6% 16.4% 16.2%
45 - 54 13.8% 17.2% 12.4%
55 - 64 11.7% 10.5% 8.5%
65 - 74 8.5% 7.4% 7.4%
75 - 84 4.6% 3.5% 5.0%
85 + 1.2% 1.9% 1.8%
Female Median Age Total Population 38.4 39.5 35.8
Female Median Age Adult Population 45.1 46.8 43.3
1990 % Female Population by Age:
0 - 5 7.2% 10.2% 8.8%
6 - 13 9.1% 10.7% 10.8%
14 - 17 4.7% 5.6% 5.0%
18 - 20 4.1% 2.7% 4.1%
21 - 24 6.2% 3.3% 5.9%
25 - 34 17.7% 14.3% 18.0%
35 - 44 14.3% 19.2% 15.1%
45 - 54 14.1% 14.1% 10.3%
55 - 64 10.4% 9.6% 8.4%
65 - 74 8.0% 5.6% 7.4%
75 - 84 3.5% 2.9% 4.5%
85 + 0.7% 1.8% 1.5%
Female Median Age Total Population 35.7 36.7 33.5
Female Median Age Adult Population 43.0 43.6 41.1
1990 % Hispanic Population by Type:
Not of Hispanic Origin 93.0% 98.6% 88.6%
Mexican 5.2% 0.7% 7.8%
Puerto Rican 0.5% 0.1% 1.9%
Cuban 0.3% 0.1% 0.2%
Other Hispanic 1.1% 0.6% 1.4%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School
(Age 3 & Over):
Preprimary School 9.5% 14.2% 7.9%
Elementary and High School 60.2% 65.4% 64.2%
College 30.3% 20.4% 27.9%
Total School Enrollment 2,860 4,415 1,962,005
1990 % Educational Attainment
(Age 25 & Over):
Less than Grade 9 7.8% 2.9% 9.8%
Grade 9-12 (No Diploma) 12.9% 2.6% 13.5%
High School Graduate or Equivalency 33.4% 11.3% 26.6%
Some College (No Degree) 20.9% 19.3% 20.0%
Associate Degree 6.0% 4.2% 5.6%
Bachelor Degree 12.9% 34.6% 15.7%
Graduate or Professional Degree 6.0% 25.1% 8.7%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.0% 0.0% 0.4%
Civilian:
Employed 72.0% 72.0% 63.4%
Unemployed 2.5% 1.4% 4.6%
Not In Labor Force 25.5% 26.6% 31.6%
Female Labor Force:
Armed Forces 0.0% 0.1% 0.1%
Civilian:
Employed 63.3% 59.2% 55.7%
Unemployed 2.1% 1.5% 3.8%
Not In Labor Force 34.6% 39.2% 40.4%
1990 % Working Mothers:
Child less than 6 Only 15.6% 15.9% 16.1%
Child 6-17 Only 40.4% 34.8% 37.7%
Child less than 6 & 6-17 12.4% 9.0% 12.2%
Nonworking Mothers 31.6% 40.3% 34.0%
Total Mothers 1,477 2,623 939,886
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.3% 0.6% 0.8%
Mining 0.0% 0.0% 0.1%
Construction 5.6% 4.6% 5.2%
Manufacturing:
Nondurable Goods 11.0% 6.6% 8.0%
Durable Goods 12.6% 5.4% 11.4%
Transportation 7.7% 2.7% 5.6%
Communications & Public Utilities 2.8% 1.6% 2.6%
Wholesale Trade 8.4% 6.6% 5.6%
Retail Trade 17.4% 16.3% 16.0%
Finance/Insurance/Real Estate 9.3% 12.2% 9.0%
Services:
Business & Repair 5.4% 5.7% 5.5%
Personal 3.3% 2.0% 2.7%
Entertainment & Recreation 2.0% 2.5% 1.4%
Health 5.1% 7.2% 7.9%
Educational 3.4% 8.9% 7.2%
Other Professional & Related 4.5% 16.2% 7.5%
Public Administration 1.2% 1.1% 3.5%
Total 7,224 9,352 3,611,434
1990 % Occupation:
Executive & Managerial 14.7% 23.9% 14.2%
Professional Specialty 10.9% 27.3% 14.5%
Technical Support 2.5% 2.2% 3.5%
Sales 15.1% 19.7% 12.6%
Administrative Support 21.1% 13.3% 18.7%
Service: Private Household 0.3% 0.1% 0.3%
Service: Protective 0.7% 0.5% 1.9%
Service: Other 8.6% 4.2% 9.4%
Farming, Forestry & Fishing 0.2% 0.3% 0.7%
Precision Production, Craft & Repair 12.6% 5.2% 10.1%
Machine Operator, Assemblers & Inspectors 6.7% 1.1% 6.6%
Transportation & Material Moving 2.9% 1.2% 3.6%
Laborers 3.8% 1.0% 4.0%
White Collar Total 64.2% 86.5% 63.4%
Blue Collar Total 26.0% 8.4% 24.3%
Total Employed 7,224 9,352 3,611,434
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 4,862 6,353 2,774,217
Never Married 27.2% 22.7% 35.1%
Married 63.0% 72.4% 53.7%
Separated 0.8% 0.4% 2.0%
Widowed 2.3% 1.7% 2.6%
Divorced 6.6% 2.8% 6.6%
Total Female: 5,278 6,927 3,014,688
Never Married 22.1% 17.9% 27.9%
Married 57.6% 66.5% 48.7%
Separated 1.2% 0.9% 2.7%
Widowed 10.6% 8.6% 11.7%
Divorced 8.5% 6.1% 9.0%
1990 Households by Type:
One Person Households 844 770 683,728
Two or more Person Households:
Family Households:
Married Couple 2,940 4,519 1,392,423
Male Householder 137 101 104,487
Female Householder 407 383 355,218
Nonfamily Households 221 119 135,684
1990 Family Households With Children
Married Couple Family 1,287 2,379 702,396
Male Householder 50 48 46,643
Female Householder 164 204 221,359
1990 Population by Household Type:
Family Households 11,098 16,147 6,273,868
Nonfamily Households 1,327 1,030 994,761
1990 Households With:
Children Under 18 1,506 2,635 978,014
Persons Over 65 1,022 1,025 605,461
Householder Over 65 855 917 530,293
1990 Average Family Size 3.15 3.20 3.32
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 Median Home Value $123,377 236,766 110,927
1990 Average Home Value $132,715 255,647 135,409
1990 Median Contract Rent $557 658 427
1990 Average Contract Rent $559 670 447
1990 Persons In Unit:
1 Person Units 844 770 683,728
2 Person Units 1,596 1,857 772,247
3 Person Units 829 1,215 451,001
4+ Person Units 2,052 3,225 764,564
1990 Housing Unit Counts:
Total Units 4,697 6,052 2,851,754
% Occupied 96.8% 97.4% 93.7%
% Vacant 3.2% 2.6% 6.3%
% Year Round 2.9% 2.5% 6.0%
% Seasonal 0.2% 0.2% 0.3%
Occupied Units 4,549 5,892 2,671,540
% Owner Occupied 83.1% 89.4% 61.0%
% Renter Occupied 16.9% 10.6% 39.0%
Vacant Units 148 160 180,214
% Year Round of Vacant Units 92.6% 93.8% 95.6%
% Seasonal of Vacant Units 7.4% 6.3% 4.4%
1990 Total Housing Units in Structure 4,697 6,052 2,851,754
1, Detached 58.6% 87.5% 47.4%
1, Attached 12.8% 3.8% 4.7%
2, 1.0% 1.0% 9.8%
3 - 9 9.7% 3.2% 16.3%
10 - 49 10.6% 2.6% 12.0%
50 + 4.7% 1.6% 8.1%
Mobile Home or Trailer 1.8% 0.0% 0.9%
Other 0.7% 0.3% 0.9%
1990 Owner Occupied Housing Units by Year Built 3,778 5,266 1,628,992
Built 1985 to March, 1990 14.5% 6.8% 8.0%
Built 1980 to 1984 3.4% 3.3% 4.4%
Built 1970 to 1979 25.4% 9.2% 17.6%
Built 1960 to 1969 33.9% 31.1% 17.7%
Built 1950 to 1959 12.7% 37.5% 21.2%
Built 1949 or Earlier 10.2% 12.1% 31.0%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Wood Dale, IL 8/7/97
Area 2 = Deerfield, IL
Area 3 = Chicago PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2 Area 3
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 83.1% 75.6% 66.4%
Carpooled 8.1% 6.3% 11.9%
Public Transportation 5.0% 11.7% 14.5%
Other Means 2.1% 2.8% 5.0%
Worked at Home 1.7% 3.7% 2.2%
1990 % Travel Time to Work:
0 - 14 Minutes 25.7% 28.6% 22.8%
15 - 29 Minutes 35.7% 30.0% 31.0%
30 - 59 Minutes 31.2% 26.2% 35.0%
60 - 89 Minutes 6.1% 12.9% 8.8%
90 + Minutes 1.2% 2.3% 2.4%
1990 Households by Number of Vehicles:
1 Vehicle 1,134 1,187 949,876
2 Vehicles 2,333 3,328 918,803
3 Vehicles 530 982 254,178
4 Vehicles 238 205 69,754
5 or More Vehicles 73 34 22,617
Area defined by Place
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
================================================================================
ADDENDUM C CB COMMERCIAL INDUSTRIAL MARKET STATISTICS
================================================================================
Addendum C
CB COMMERCIAL OFFICE MARKET STATISTICS
<PAGE>
[LOGO] CB COMMERCIAL
Chicago Office Vacancy Index
2nd Quarter 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DOWNTOWN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1997
1997 1997 1996 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 48 26,577,288 3,252,032 12.24% 12.37% 12.22% 35,161
2 Central Loop 97 44,510,873 6,913,902 15.53% 16.24% 16.75% 316,325
3 East Loop 61 21,827,434 3,802,303 17.42% 18.60% 19.05% 258,505
4 North Michigan Ave. 45 13,307,009 2,034,297 15.29% 14.89% 15.66% (52,894)
13 River North 40 2,744,419 206,681 7.53% 7.65% 14.30% 3,267
- ----------------------------------------------------------------------------------------------------------------------
Combined 291 108,967,023 16,209,215 14.88% 15.39% 15.91% 560,364
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
DOWNTOWN OFFICE VACANCY 1997 1996
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
1 West Loop (3,800) 1,147,562
2 Central Loop 542,898 62,186
3 East Loop 274,336 145,851
4 North Michigan Ave. 49,667 213,884
13 River North 71,948 162,533
- -----------------------------------------------------------
Combined 935,049 1,732,016
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUBURBAN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1997
1997 1997 1996 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 52 4,210,145 561,992 13.35% 13.43% 13.03% 3,493
6 North Suburbs 74 5,088,456 320,868 6.31% 6.15% 6.74% (7,983)
7 Northwest Suburbs 218 21,595,252 2,314,662 10.72% 10.90% 12.55% 137,641
8 O'Hare 100 12,847,991 1,670,472 13.00% 13.13% 13.86% 17,022
9 East-West To11way 326 26,276,766 2,653,546 10.10% 10.27% 9.41% 45,578
10 West Cook 15 1,276,779 183,115 14.34% 13.70% 12.90% (8,177)
11 South Suburbs 59 2,395,264 308,911 12.90% 12.83% 13.32% (1,565)
12 Lake County 70 6,070,883 637,029 10.49% 12.51% 12.80% 122,363
- ----------------------------------------------------------------------------------------------------------------------
Combined 914 79,761,536 8,650,595 10.85% 11.11% 11.43% 308,372
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
SUBURBAN OFFICE VACANCY 1997 1996
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
5 Lake Shore (13,233) (32,698)
6 North Suburbs 22,108 106,394
7 Northwest Suburbs 512,758 583,499
8 O'Hare 112,911 164,173
9 East-West To11way 23,647 718,530
10 West Cook (18,444) 30,363
11 South Suburbs 10,229 2,742
12 Lake County 140,295 5,972
- -----------------------------------------------------------
Combined 790,271 1,578,975
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NORTH SUBURBAN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1997
1997 1997 1996 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 196 15,369,484 1,519,889 9.89% 10.66% 10.86% 117,873
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
NORTH SUBURBAN OFFICE VACANCY 1997 1996
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
5+6+12 North 149,170 79,668
- -----------------------------------------------------------
Please contact Duncan Heitman if you have additional questions 847-706-4910.
8/14/97
<PAGE>
[LOGO] CB COMMERCIAL
Chicago Office Vacancy by Class
2nd Quarter 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DOWNTOWN Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 13 14,484,844 1,141,772 7.88% 11 7,730,845 1,030,013 13.32%
2 Central Loop 25 18,998,941 1,733,145 9.12% 28 15,645,039 1,813,135 11.59%
3 East Loop 5 5,788,361 475,871 8.22% 18 9,355,915 1,498,340 16.01%
4 N. Michigan Ave. 10 4,642,488 719,031 15.49% 21 6,981,344 1,064,456 15.25%
13 River North 0 0 0 0.00% 12 1,055,900 66,713 6.32%
- ----------------------------------------------------------------------------------------------------
COMBINED 53 43,914,634 4,069,819 9.27% 90 40,769,043 5,472,657 13.42%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DOWNTOWN Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 24 4,361,599 1,080,247 24.77% 48 26,577,288 3,252,032 12.24%
2 Central Loop 44 9,866,893 3,367,622 34.13% 97 44,510,873 6,913,902 15.53%
3 East Loop 38 6,683,158 1,828,092 27.35% 61 21,827,434 3,802,303 17.42%
4 N. Michigan Ave. 14 1,683,177 250,810 14.90% 45 13,307,009 2,034,297 15.29%
13 River North 28 1,688,519 139,968 8.29% 40 2,744,419 206,681 7.53%
- -------------------------------------------------------------------------------------------------------
COMBINED 148 24,283,346 6,666,739 27.45% 291 108,967,023 16,209,215 14.88%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SUBURBAN Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 3 473,500 19,202 4.06% 15 1,512,322 126,387 8.36%
6 North Suburbs 1 215,000 20,002 9.30% 30 2,786,071 115,367 4.14%
7 Northwest Suburbs 55 10,284,463 561,105 5.46% 111 8,623,728 1,388,073 16.10%
8 O'Hare 25 6,055,489 408,272 6.74% 32 4,085,303 768,705 18.82%
9 East-West Tollway 51 10,158,841 823,400 8.11% 167 10,902,282 1,187,716 10.89%
10 West Cook 0 0 0 0.00% 2 223,800 5,662 2.53%
11 South Suburbs 4 273,193 46,414 16.99% 21 861,992 131,717 15.28%
12 Lake County 19 2,819,569 325,133 11.53% 35 2,627,738 243,968 9.28%
- --------------------------------------------------------------------------------------------------------
COMBINED 158 30,280,055 2,203,528 7.28% 413 31,623,236 3,967,595 12.55%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SUBURBAN Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 34 2,224,323 416,403 18.72% 52 4,210,145 561,992 13.35%
6 North Suburbs 43 2,087,385 185,499 8.89% 74 5,088,456 320,868 6.31%
7 Northwest Suburbs 49 2,687,061 365,484 13.60% 215 21,595,252 2,314,662 10.72%
8 O'Hare 43 2,707,199 493,495 18.23% 100 12,847,991 1,670,472 13.00%
9 East-West Tollway 108 5,215,643 642,430 12.32% 326 26,276,766 2,653,546 10.10%
10 West Cook 13 1,052,979 177,453 16.85% 15 1,276,779 183,115 14.34%
11 South Suburbs 34 1,260,079 130,780 10.38% 59 2,395,264 308,911 12.90%
12 Lake County 16 623,576 67,928 10.89% 70 6,070,883 637,029 10.49%
- -------------------------------------------------------------------------------------------------------
COMBINED 340 17,858,245 2,479,472 13.88% 911 79,761,536 8,650,595 10.85%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NORTH SUBURBS Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 23 3,508,069 364,337 10.39% 80 6,926,131 485,722 7.01%
- -----------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
NORTH SUBURBS Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 93 4,935,284 669,830 13.57% 196 15,369,484 1,519,889 9.89%
- -----------------------------------------------------------------------------------------------
</TABLE>
Please contact Duncan Heitman if you have additional questions 847-706-4910.
8/14/97
<PAGE>
[LOGO] CB COMMERCIAL
Chicago Office Vacancy by Class
2nd Quarter 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DOWNTOWN Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 13 14,484,844 1,313,550 9.07% 11 7,730,845 1,537,173 19.88%
2 Central Loop 25 18,998,941 2,139,758 11.26% 28 15,645,039 2,131,564 13.62%
3 East Loop 5 5,788,361 888,134 15.34% 18 9,355,915 1,456,517 15.57%
4 N. Michigan Ave. 10 4,642,488 919,983 19.82% 21 6,981,344 1,100,786 15.77%
13 River North 0 0 0 0.00% 12 1,055,900 115,440 10.93%
- ------------------------------------------------------------------------------------------------------
COMBINED 53 43,914,634 5,261,425 11.98% 90 40,769,043 6,341,480 15.55%
- ------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DOWNTOWN Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 24 4,361,599 1,002,055 22.97% 48 26,577,288 3,852,778 14.50%
2 Central Loop 44 9,866,893 2,731,226 27.68% 97 44,510,873 7,002,548 15.73%
3 East Loop 39 6,785,158 1,903,348 28.05% 62 21,929,434 4,247,999 19.37%
4 N. Michigan Ave. 14 1,683,177 288,499 17.14% 45 13,307,009 2,309,268 17.35%
13 River North 30 2,108,919 536,670 25.45% 42 3,164,819 652,110 20.60%
- --------------------------------------------------------------------------------------------------------
COMBINED 151 24,805,746 6,461,798 26.05% 294 109,489,423 18,064,703 16.50%
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SUBURBAN Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 3 473,500 5,952 1.26% 15 1,512,322 107,966 7.14%
6 North Suburbs 1 215,000 0 0.00% 30 2,786,071 210,180 7.54%
7 Northwest Suburbs 54 10,189,438 827,338 8.12% 109 8,459,206 1,772,969 20.96%
8 O'Hare 25 6,055,489 464,226 7.67% 32 4,085,303 915,930 22.42%
9 East-West Tollway 50 9,914,841 768,223 7.75% 163 10,778,494 1,199,929 11.13%
10 West Cook 0 0 0 0.00% 2 223,800 4,200 1.88%
11 South Suburbs 4 273,193 55,080 20.16% 19 837,542 115,429 13.78%
12 Lake County 20 2,792,854 199,341 7.14% 34 2,595,488 292,434 11.27%
- --------------------------------------------------------------------------------------------------------
COMBINED 157 29,914,315 2,320,160 7.76% 404 31,278,226 4,619,037 14.77%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SUBURBAN Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 31 1,992,941 211,627 10.62% 49 3,978,763 325,545 8.18%
6 North Suburbs 43 2,087,385 199,585 9.56% 74 5,088,456 409,765 8.05%
7 Northwest Suburbs 50 2,717,738 487,663 17.94% 213 21,366,382 3,087,970 14.45%
8 O'Hare 43 2,682,829 564,298 21.03% 100 12,823,621 1,944,454 15.16%
9 East-West Tollway 106 5,090,643 642,837 12.63% 319 25,783,978 2,610,989 10.13%
10 West Cook 13 1,052,979 160,041 15.20% 15 1,276,779 164,241 12.86%
11 South Suburbs 33 1,258,131 141,743 11.27% 56 2,368,866 312,252 13.18%
12 Lake County 16 623,576 79,377 12.73% 70 6,011,918 571,152 9.50%
- --------------------------------------------------------------------------------------------------------
COMBINED 335 17,506,222 2,487,171 14.21% 896 78,698,763 9,426,368 11.98%
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NORTH SUBURBS Class A Class B
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 24 3,481,354 205,293 5.90% 79 6,893,881 610,580 8.86%
- -----------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
NORTH SUBURBS Class C COMBINED
Area Submarket # N.R.A. Vacant S.F. Vacant % # N.R.A. Vacant S.F. Vacant %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 90 4,703,902 490,589 10.43% 193 15,079,137 1,306,462 8.66%
- -----------------------------------------------------------------------------------------------
</TABLE>
Please contact John Morris if you have additional questions 847-706-4943.
8/14/97
<PAGE>
[LOGO] CB COMMERCIAL
Chicago Office Vacancy Index
2nd Quarter 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DOWNTOWN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1996
1996 1996 1995 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 West Loop 48 26,577,288 3,852,778 14.50% 15.22% 16.54% 193,384
2 Central Loop 97 44,510,873 7,002,548 15.73% 16.48% 16.89% 334,200
3 East Loop 62 21,929,434 4,247,999 19.37% 19.60% 19.72% 50,648
4 North Michigan Ave. 45 13,307,009 2,309,268 17.35% 17.18% 17.27% (23,606)
13 River North 42 3,164,819 652,110 20.60% 23.18% 24.97% 81,600
- ----------------------------------------------------------------------------------------------------------------------
Combined 294 109,489,423 18,064,703 16.50% 17.08% 17.65% 636,226
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
DOWNTOWN OFFICE VACANCY 1996 1995
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
1 West Loop 543,016 832,324
2 Central Loop 516,438 93,615
3 East Loop 76,491 (92,881)
4 North Michigan Ave. (11,420) (2,996)
13 River North 138,252 54,474
- -----------------------------------------------------------
Combined 1,262,777 884,536
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SUBURBAN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1996
1996 1996 1995 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 Lake Shore 49 3,978,763 325,545 8.18% 7.93% 7.15% (10,198)
6 North Suburbs 74 5,088,456 409,765 8.05% 8.62% 8.83% 28,734
7 Northwest Suburbs 213 21,366,382 3,087,970 14.45% 14.36% 13.02% 49,128
8 O'Hare 100 12,823,621 1,944,454 15.16% 14.43% 15.16% (94,629)
9 East-West Tollway 319 25,783,978 2,610,989 10.13% 9.92% 10.61% (45,061)
10 West Cook 15 1,276,779 164,241 12.86% 14.11% 15.28% 15,896
11 South Suburbs 56 2,368,866 312,252 13.18% 11.72% 12.43% (34,520)
12 Lake County 70 6,011,918 571,152 9.50% 7.92% 9.61% (94,910)
- ----------------------------------------------------------------------------------------------------------------------
Combined 896 17,692,763 9,426,368 11.98% 11.64% 11.76% (185,560)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
SUBURBAN OFFICE VACANCY 1996 1995
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
5 Lake Shore (40,866) 127,388
6 North Suburbs 39,605 159,614
7 Northwest Suburbs 187,344 1,082,834
8 O'Hare (268) 631,394
9 East-West To11way 322,809 420,917
10 West Cook 30,793 36,505
11 South Suburbs (12,318) 141,676
12 Lake County 6,654 162,779
- -----------------------------------------------------------
Combined 533,753 2,763,107
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NORTH SUBURBAN OFFICE VACANCY 2nd Quarter 1st Quarter 4th Quarter 1996
1996 1996 1995 2nd Quarter
Area # Submarket # Bldgs. N.R.A. Vacant S.F. % Vacant % Vacant % Vacant Net Absorption
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5+6+12 North 193 15,079,137 1,306,462 8.66% 8.16% 8.70% (76,374)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
NORTH SUBURBAN OFFICE VACANCY 1996 1995
Year-to-date Year End
Area # Submarket Net Absorption Net Absorption
- -----------------------------------------------------------
5+6+12 North 5,393 449,781
- -----------------------------------------------------------
Please contact John Morris if you have additional questions 847-706-4943.
8/14/97
<PAGE>
CHICAGO METROPOLITAN OFFICE SPACE
Absorption Statistics
1997
ZONE SUBMARKET NAME 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
---- -------------- ------- ------- ------- ------- -----
1 WESTLOOP (38,961) 35,161 0 0 (3,800)
2 CENTRAL LOOP 226,573 316,325 0 0 542,898
3 EASTLOOP 15,831 258,505 0 0 274,336
4 N. MICHIGAN AVE 102,561 (52,894) 0 0 49,667
13 RIVER NORTH 68,681 3,267 0 0 71,948
------------------------------------------------------------------
TOTAL DOWNTOWN 374,685 560,364 0 0 935,049
------------------------------------------------------------------
5 LAKESHORE (16,726) 3,493 0 0 (13,233)
6 NORTH SUBURBS 30,091 (7,983) 0 0 22,108
7 NORTHWEST SUBURB 375,117 137,641 0 0 512,758
8 O'HARE 95,889 17,022 0 0 112,911
9 EAST-WEST TOLLWAY (21,931) 45,578 0 0 23,647
10 W. COOK COUNTY (10,267) (8,177) 0 0 (18,444)
11 SOUTH SUBURBS 11,794 (1,565) 0 0 10,229
12 LAKE COUNTY 17,932 122,363 0 0 140,295
------------------------------------------------------------------
TOTAL SUBURBS 481,899 308,372 0 0 790,271
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL DOWNTOWN &
SUBURBS 856,584 868,736 0 0 1,725,320
------------------------------------------------------------------
<PAGE>
CHICAGO METROPOLITAN OFFICE SPACE
Absorption by Class Statistics
2nd Quarter 1997
ZONE SUBMARKET NAME Class A Class B Class C TOTAL
- ---- -------------- ------- ------- ------- -----
1 WEST LOOP (4,401) 50,473 (10,911) 35,161
2 CENTRAL LOOP 27,431 248,897 39,997 316,325
3 EAST LOOP 181,688 107,661 (30,844) 258,505
4 N. MICHIGAN AVE 42,533 (111,173) 15,746 (52,894)
13 RIVER NORTH 0 1,585 1,682 3,267
----------------------------------------------------------------
TOTAL DOWNTOWN 247,251 297,443 15,670 560,364
----------------------------------------------------------------
5 LAKE SHORE (2,365) (15,372) 21,230 3,493
6 NORTH SUBURBS 0 1,854 (9,837) (7,983)
7 NORTHWEST SUBURBS (22,853) 100,420 60,074 137,641
8 O'HARE 29,683 (11,707) (954) 17,022
9 EAST-WEST TOLLWAY (504) 36,970 9,112 45,578
10 W. COOK COUNTY 0 305 (8,482) (8,177)
11 SOUTH SUBURBS (1,600) (12,590) 12,625 (1,565)
12 LAKE COUNTY 89,602 39,983 (7,222) 122,363
----------------------------------------------------------------
TOTAL SUBURBS 91,963 139,863 76,546 308,372
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL DOWNTOWN &
SUBURBS 339,214 437,306 92,216 868,736
----------------------------------------------------------------
<PAGE>
CHICAGO METROPOLITAN OFFICE SPACE
Absorption Statistics
1996
ZONE SUBMARKET NAME 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
- ---- -------------- ------- ------- ------- ------- -----
1 WEST LOOP 349,632 193,384 543,016
2 CENTRAL LOOP 182,238 334,200 516,438
3 EAST LOOP 25,843 50,648 76,491
4 N MICHIGAN AVE 12,186 (23,606) (11,420)
13 RIVERNORTH 56,652 81,600 138,252
------------------------------------------------------------------------
TOTAL DOWNTOWN 626,551 636,226 0 0 1,262,777
------------------------------------------------------------------------
5 LAKESHORE (30,668) (10,198) (40,866)
6 NORTH SUBURBS 10,871 28,734 39,605
7 NORTHWEST SUBURB 138,216 49,128 187,344
3 O'HARE 94,361 (94,629) (268)
9 EAST-WEST TOLLWAY 367,870 (45,061) 322,809
10 W. COOK COUNTY 14,897 15,896 30,793
11 SOUTH SUBURBS 22,202 (34,520) (12,318)
12 LAKE COUNTY 101,564 (94,910) 6,654
------------------------------------------------------------------------
TOTAL SUBURBS 719,313 (185,560) 0 0 533,753
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL DOWNTOWN &
SUBURBS 1,345,864 450,666 0 0 1,796,530
------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM D TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum D
TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
<PAGE>
CHICAGO
- --------------------------------------------------------------------------------
CHICAGO
Overview As of 1995, the population of the Chicago metropolitan
statistical area was 773 million making it the 3rd largest
in the country and the 3rd largest of the markets that we
follow.
The Chicago, IL MSA consists of the nine counties Cook,
Dekalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and
Will. The central cities within the MSA are Chicago, Aurora,
Elgin, Joliet, Evanston, North Chicago, and DeKalb. The
office properties that we report on are the competitive
multi-tenant properties that are 10,000 square feet and over.
From the most recent information, the median per capita
personal income in 1995 for the MSA was $27,309 which is 18%
above the national level. The cost of doing business is 10%
above the national average.
Industries concentrated in Chicago include security &
commodity brokers, air transportation, electronic equipment,
insurance carriers, and printing/publishing. By comparing the
percentage of total employment each industry commands to the
national percentage we can determine some of the highly
concentrated industries.
The top major employers of the area include Sears Roebuck,
Jewel Food Stores, Motorola, Ameritech, and Dominick's Finer
Foods. Other employers include UAL, First Chicago and AT&T.
Data as of 4th Quarter, 1996 VI. 129 (C) Copyright 1997, CBC/Torto
Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Economy Chicago has the largest employment level of the MSAs we
follow at approximately 3,973,670 workers. Over the last 10
years, employment has grown at an average annual rate of
1.6%. In the last year it grew by 1.7%. The measures for our
54 MSAs are 1.5% and 2.0%, respectively.
Table I presents the current employment levels and location
quotients for each industry as well as historic growth rates
over the last 10 years, last four quarters, and forecasted
rates for the next 10 years.
[GRAPHIC OMITTED]
[The following table information was depicted as a pie graph
in the printed material]
Govt. 12%
Other 4%
Mfg. 17%
TCU 6%
Wholesale 7%
Retail 17%
FIRE 8%
Services 29%
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Average Annual Growth Rates: Chicago & 54 MSAs
Employment Location Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Chicago 54 MSAs Chicago 54 MSAs Chicago 54 MSAs
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 304.5 1.09 1.2 0.6 1.1 1.1 0.9 1.0
Government (Civilian) 485.2 0.83 1.3 1.2 0.4 0.2 0.4 0.6
Manufacturing 657.9 1.26 0.1 -1.1 0.5 0.4 -0.1 -0.1
Retail Trade 669.5 0.97 1.5 1.4 3.6 2.3 1.5 1.8
Services 1196.8 0.95 3.5 3.7 2.6 3.4 2.6 2.8
Transportation & Public
Utilities 238.4 1.06 1.4 1.6 0.5 1.3 0.9 1.2
Wholesale Trade 272.1 1.11 -0.1 1.0 0.7 2.3 1.4 1.3
------------------------------------------------------------------------------
Total Employment 3973.7 1.6 1.5 1.7 2.0 1.3 1.6
------------------------------------------------------------------------------
Office Employment 817.5 1.03 2.4 2.7 1.9 3.5 2.0 2.0
------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton Research Data as of 3rd
Quarter, 1996
An initial indication of the relative importance of a
particular employment sector is its share of total
employment, and for greater perspective, a comparison of its
share to the national share. Location quotients above 1.0
indicate that the local economy has a greater share of a
particular industry than the national average and the
opposite is true when they are below 1.0.
For Chicago, the location quotient for FIRE employment is
1.09 while the location quotient for Service employment is
0.95. This means that in Chicago the share of FIRE employment
is 9% greater than the national average. The share of Service
employment in this MSA is 5% less than the national average.
- --------------------------------
Economic Performance
(Rank out of 54)
- --------------------------------
Total Employment: 1
current level
- --------------------------------
Total Employment: 36
% growth over last 10 years
- --------------------------------
Total Employment: 29
% growth over last year
- --------------------------------
Total Employment: 39
% growth next 10 years
- --------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Office Employment We identify and measure employment within the FIRE and
Service sectors in industries such as legal services,
accounting, and insurance to create our office employment
index. The index covers 80-90% of all office-related
employment within each MSA. More specific details are
available in the Data and Methodology Appendix.
Our estimate of office employment for Chicago currently
stands at 817,500 workers. Over the last 10 years, office
employment has grown by 2.4%. Over the last year Chicago has
seen its office employment grow by 1.9%. Table 2 below
provides historic growth rates for some of the significant
office related industries in Chicago.
Table 2: Levels and Historic Growth Rates for Subcategories of Office
Employment
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Level Average Annual Growth Rates
Employment Category (x1000) Last 10 Years Last 5 Years Last Year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance, Insurance, and Real Estate Banks 81.9 0.0 0.0 0.9
Credit Agencies & Mortgage Companies 25.4 7.0 5.0 4.1
Insurance Agents 27.0 -1.9 -1.3 1.2
Insurance Companies 76.0 2.1 0.1 1.3
Misc Investing & Trusts 11.2 -0.6 -2.9 -2.8
Real Estate Companies 45.2 1.4 0.5 -0.4
Securities Firms 37.7 2.2 3.7 2.3
Service Employment Accounting Firms 27.1 0.9 1.1 -0.4
Advertising 17.4 0.8 0.1 0.3
Computer & Data Processing 40.2 4.4 6.3 6.6
Consumer Credit Reporting 4.6 2.5 1.8 1.6
Engineering & Architectural Services 27.6 -0.2 5.5 1.7
Legal Services 38.9 0.6 0.6 -1.8
Mailing & Reproduction 18.2 0.5 2.5 4.4
Management & Public Relations 49.7 6.1 7.4 5.2
Misc. Business Services 67.6 5.0 4.8 2.6
Misc. Equipment Rental & Leasing 9.3 11.4 9.9 7.6
Motion Picture Distribution Services 1.0 -1.7 -1.0 -12.3
Other Services 76.8 1.3 -0.1 -2.7
Personnel Services 102.3 7.8 10.9 5.7
Research & Testing Services 32.2 -0.9 2.9 2.6
-------------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton Research
Data as of 3rd Quarter, 1996
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
For our 54 MSAs, the average annual growth rate of office
employment over the last 10 years was 2.7% while over the
last year it was 3.5%. The forecast calls for office
employment to grow by 2.0% over the next six years.
The amount of office employees is the primary determinant of
the demand side of the office market equation; but it is not
the only factor. Also important is the efficiency of space
use, measured by square foot per employee, as well as the
rental cost of space. Some market observers have been arguing
that office hoteling, virtual offices, or 'reengineering'
will lead to less space per employee in the future. By
implication, there would be less demand for office space.
The graph below provides a comparison of office employment
growth for Chicago compared to all 54 MSAS since 1980 indexed
to a 1980 starting point of 100.
[GRAPHIC OMITTED]
Since 1984, the level of office employment in Chicago has
consistently grown at the same pace as the nation. Office
employment for Chicago grew positively until the middle of
1986, then declined until 1987. Since 1987, growth has been
strong except during the recession of the early nineties when
office employment growth fell sharply. For the nation as a
whole, the peak year in office employment prior to the
recession was 1990. The national the decline in office
employment was on par with the decline in Chicago. Since the
end of the recession, Chicago has grown at approximately the
same pace as the nation.
- ----------------------------------
Economic Performance
(Rank out of 54)
- ----------------------------------
Office Employment: 2
current level
- ----------------------------------
Office Employment: 42
% growth over last 10 years
- ----------------------------------
Office Employment: 44
% growth over last year
- ----------------------------------
Office Employment:
% growth next 6 years 32
- ----------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
The Current Chicago is the 3rd largest of the 54 markets we follow with
Office Market 188.6 million square feet. As of the fourth quarter, 1996,
the vacancy rate was 14.0%, placing Chicago 40th out of 54
markets. The national vacancy rate was 12.2%.
Chicago contains 74.2 million square feet of Class 'A' office
space with a year-end vacancy rate of 9.3%, while the average
Class 'A' vacancy rate for the 54 markets stood at 9.9%
year-end. The 1980's saw a tremendous building of office
space. Nationally, 56.4% or 1.5 billion square feet of the
total stock of all office space has been built since 1980. In
Chicago, 50.2% has been built since 1980.
Out of our 54 markets, 48 quote rents primarily on a gross
basis. The Chicago average gross asking rent is $16.64 per
square foot, while nationally this figure is $18.35. Over the
last year, the Chicago quote rose 3.7%, while the national
quote rose 2.8%.
[GRAPHIC OMITTED]
Vacancy Rates 1992-1996
[GRAPHIC OMITTED]
Gross Asking Rents 1992-1996
- ----------------------------
Office Market Standings
(Rank out of 54)
- ----------------------------
Building Count 3
- ----------------------------
Market Size 3
- ----------------------------
Vacancy Rate 40
- ----------------------------
Gross Asking Rate 20
- ----------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 3: Chicago Office Space by Submarket
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Sublet as a %
Number of NRA Vacancy of Total Weighted Average TWR
Buildings (x1000) Rate Available Gross Asking Rents Rent Index*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Central Loop 97 44,512 16.8 7.3 $17.01 $23.01
East Loop 62 21,931 19.1 5.8 $14.84 $23.13
North Michigan Avenue 45 13,308 15.6 6.9 $17.90 $27.27
River North 40 2,875 14.3 8.8 $14.84 $18.82
West Loop 48 28,578 12.2 12.0 $16.68 $23.11
------------------------------------------------------------------------------
Subtotal for Downtown 292 109,204 15.9 7.9 $16.36 $23.47
==============================================================================
------------------------------------------------------------------------------
Lake County 70 6,077 12.8 13.4 $22.18 $20.82
Lake Shore 52 4,211 13.0 2.1 $17.20 $22.02
North Suburbs 74 5,091 6.7 35.8 $16.60 $19.87
O'Hare 100 12,847 13.9 6.4 $15.59 $19.29
Oak Brook 322 26,052 9.4 16.3 $18.92 $20.20
Schaumburg 214 21,462 12.5 11.5 $16.67 $17.76
South Suburbs 59 2,396 13.4 0.0 $16.17 $20.42
West Cook 15 1,279 12.8 0.0 $13.97 $22.82
------------------------------------------------------------------------------
Subtotal for Suburban 906 79,415 11.4 12.3 $17.25 $19.57
==============================================================================
------------------------------------------------------------------------------
Total for Chicago 1198 188,619 14.0 9.4 $16.64 $21.69
==============================================================================
</TABLE>
[GRAPHIC OMITTED]
Chicago Office Space
The submarket descriptions for the Chicago MSA are provided
by the local CB Commercial office as of second quarter 1995.
This MSA consists of two major markets of Downtown and
Suburban. The Downtown market contains five submarkets, and
the Suburban market includes eight submarkets. The Chicago
MSA lies on the western shore of Lake Michigan where the
Chicago River runs through the center of the Downtown
submarkets. The Suburban market area extends slightly to the
west of Fox River.
Vacancy rates are calculated from the vacant available square
feet divided by the net rentable area. Space may be
classified as available but not vacant; space that is
available for sublease may or may not be classified as
vacant. All space classified as vacant is considered to be
available.
* The Torto Wheaton Rent Index represents the contract gross
rent for a 5 year - 10,000 square foot lease in a building of
average age, size, and class in an average location. The
average building in Chicago is a class B, 157,424 square foot
building built between 1980 and 1995.
- ----------------------------
Downtown/Suburban
Market Standings
- ----------------------------
DT Sub
- ----------------------------
Building Count 3 4
- ----------------------------
NRA 2 6
- ----------------------------
Vacancy Rate 25 38
- ----------------------------
TW Rent Index 6 14
- ----------------------------
Downtown ranked out of 46
Suburban ranted out of 53
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Table 4: Chicago Office Space by Class
<TABLE>
<CAPTION>
------------------------------------------------------------
Class 'A' Gross Class 'B' & 'C' Gross
NRA Vacancy Asking NRA Vacancy Asking
(x1000) Rate Rent (x1000) Rate Rent
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Central Loop 18,999 10.0 $19.00 25,513 21.8 $16.97
East Loop 5,788 11.5 na 16,143 21.8 $14.84
North Michigan Avenue 4,642 17.2 $20.60 8,666 14.8 $16.88
River North 0 na na 2,875 14.3 $14.84
West Loop 14,485 8.0 $18.25 12,093 17.3 $16.34
------------------------------------------------------------
Subtotal for Downtown 43,914 10.3 $19.05 65,290 19.7 $16.18
============================================================
------------------------------------------------------------
Lake County 2,822 14.1 $24.25 3,255 11.7 $18.83
Lake Shore 474 1.3 $23.83 3,737 14.5 $17.06
North Suburbs 215 9.3 na 4,876 6.6 $16.60
O'Hare 6,056 7.0 $24.00 6,791 20.0 $15.39
Oak Brook 10,158 7.5 $24.53 15,894 10.7 $17.79
Schaumburg 10,283 6.8 $23.39 11,179 17.8 $15.59
South Suburbs 273 18.7 $19.39 2,123 12.7 $15.37
West Cook 0 na na 1,279 12.8 $13.97
------------------------------------------------------------
Subtotal for Suburban 30,281 7.8 $23.77 49,134 13.7 $16.25
============================================================
------------------------------------------------------------
Total for Chicago 74,195 9.3 $21.34 114,424 17.1 $16.20
============================================================
</TABLE>
The personnel in the local CB Commercial offices in the
Chicago area have classified most of the office properties in
Chicago as A, B, or C class space. The local CB offices
determine their own criteria for building classification.
While 211 - or 17.6% - buildings out of a total Chicago
building count of 1,198 are currently classified as class 'A'
properties, 39.3% of the net rentable area is considered to
be class 'A' space. At the end of the fourth quarter of last
year, the class 'A' vacancy rate stood at 9.3%, compared to a
rate of 14.0% for all space.
At the national level, approximately 22.4% of office
properties are currently classified as class 'A', while
approximately 46.3% of the net rentable area is classified as
class 'A' space. At the end of the fourth quarter of last
year, the national class 'A' vacancy rate stood at 9.9%.
- -------------------------------------
Chicago
Class "A" Standings
Rank
Level out of 54
- -------------------------------------
NRA (x1000) 74,195 4
- -------------------------------------
Vacancy Rate 9.3% 31
- -------------------------------------
Gross Asking Rent $21.34 13
- -------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Year-by-Year To put the Chicago market into perspective, the next two
Office History tables contain annual net absorption and vacancy rates by
submarket for the last five years.
Table 5: Historic Net Absorption By Submarket
<TABLE>
<CAPTION>
----------------------------------------------------------
(Square Feet xl000)
1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Central Loop 1,049 -473 676 -94 62
East Loop -377 502 -721 -158 143
North Michigan Avenue -28 83 291 -35 216
River North 20 -147 37 34 328
West Loop -821 -355 1,331 853 1,145
----------------------------------------------------------
Subtotal for Downtown -157 -390 1,614 600 1,894
==========================================================
----------------------------------------------------------
Lake County 143 100 129 171 -178
Lake Shore -4 57 187 84 -225
North Suburbs 10 205 147 107 107
O'Hare -3 55 -209 687 168
Oak Brook 85 661 976 316 534
Schaumburg -94 591 908 905 192
South Suburbs 35 -46 13 146 2
West Cook 16 11 90 36 32
----------------------------------------------------------
Subtotal for Suburban 188 1,634 2,241 2,452 632
==========================================================
----------------------------------------------------------
Total for Chicago 31 1,244 3,855 3,052 2,526
==========================================================
</TABLE>
Chicago ranks 43rd among our 54 MSAs in performance as
measured by calculating an absorption rate for 1996 - that
is, taking the year's total net absorption divided by
end-of-year 1995 occupied stock. Over the last five years,
the average annual absorption rate for Chicago is 1.39%, 46th
out of our 54 MSAs.
- -----------------------------------------------
Absorption Performance
Level/ Rank
Rate out of 54
- -----------------------------------------------
Avg ann'l absorption 2160 6
over the last five years
- -----------------------------------------------
Annual Absorption Rate 1.4% 46
over the last five years
- -----------------------------------------------
Absorption Rate 1.6% 43
over the last 4 quarters
- -----------------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Table 6: Historic Vacancy Rates and Completions by Submarket
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy
SF X 1000 Rate SF X 1000 Rate SF x 1000 Rate SF X 1000 Rate SF X 1000 Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Central Loop 2,841 17.2 0 18.2 0 16.7 0 16.9 0 16.8
East Loop 0 18.0 0 15.8 0 19.0 0 19.7 0 19.1
North Michigan Avenue 0 19.8 0 19.2 0 17.0 0 17.3 0 15.6
River North 0 22.6 0 27.2 0 26.0 0 25.0 0 14.3
West Loop 1,052 23.3 0 24.6 0 19.7 0 16.5 0 12.2
----------------------------------------------------------------------------------------------------
Subtotal for Downtown 3,893 19.3 0 19.6 0 18.2 0 17.6 0 15.9
====================================================================================================
----------------------------------------------------------------------------------------------------
Lake County 40 13.5 0 12.0 175 12.3 0 9.6 32 12.8
Lake Shore 0 15.7 0 14.4 0 9.7 0 7.1 0 13.0
North Suburbs 0 17.8 0 13.9 0 10.9 0 8.8 0 6.7
O'Hare 0 19.4 0 18.8 0 20.5 0 15.2 0 13.9
Oak Brook 30 17.6 193 15.6 0 12.0 0 10.6 244 9.4
Schaumburg 0 23.9 105 21.5 55 17.5 0 13.1 40 12.5
South Suburbs 0 16.4 0 18.2 28 18.5 0 12.5 28 13.4
West Cook 0 26.0 0 25.2 0 18.1 0 15.3 0 12.8
----------------------------------------------------------------------------------------------------
Subtotal for Suburban 70 19.3 298 17.5 258 15.0 0 11.8 344 11.4
====================================================================================================
----------------------------------------------------------------------------------------------------
Total for Chicago 3,963 19.3 298 18.8 258 16.9 0 15.2 344 14.0
====================================================================================================
</TABLE>
The metropolitan vacancy rate for Chicago stood at 14.0% at
the end of fourth quarter of 1996, 40th out of our 54 MSAs.
In 1992, the vacancy rate stood at 19.3%, 32nd out of the 54
MSAs. Most markets around the country are showing a good
improvement in vacancy levels due to a combination of
moderate demand growth and little in the way of new supply.
- --------------------------------------------------------------------------------
Vacancy History Standings
- ----------------------------------------
Rank
Rate out of 54
- ----------------------------------------
Current Vacancy Rate 14.0% 40
- ----------------------------------------
1992 Vacancy Rate 19.3% 32
- ----------------------------------------
1995 Vacancy Rate 15.2% 42
- ----------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Office Our Outlook for Chicago is presented here on an annual
Outlook frequency and in the next table on a semiannual frequency.
Table 7: Annual History and Forecast
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate Level Inflation
(%) (x1000) (x1000) (x1000) (x1000) (%) ($) (%)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1977 1.0 421.7 86,059 2,058 4,931 11.4
1978 3.3 438.6 88,338 2,279 5,641 7.3
1979 2.3 458.8 93,850 5,512 8,113 4.1 $11.60
1980 0.8 476.7 103,454 9,604 8,383 4.9 $12.44 7.2
------------------------------------------------------------------------------------------
1981 -1.3 503.6 108,209 4,755 2,683 6.6 $13.00 4.5
1982 -2.7 511.8 114,065 5,856 3,188 8.6 $13.43 3.3
1983 -1.6 514.3 121,439 7,374 668 13.6 $14.99 11.6
1984 5.1 557.0 128,315 6,876 8,123 11.9 $15.66 4.5
------------------------------------------------------------------------------------------
1985 5.0 582.7 137,092 8,777 5,265 13.7 $16.15 3.1
1986 0.6 648.3 150,032 12,940 5,916 17.2 $16.09 -0.4
1987 2.3 643.4 159,848 9,816 10,526 15.7 $15.78 -1.9
1988 3.1 677.4 163,424 3,576 6,774 13.4 $16.55 4.9
------------------------------------------------------------------------------------------
1989 2.4 705.5 171,103 7,679 4,426 14.7 $17.02 2.8
1990 1.5 724.1 180,783 9,680 3,195 17.5 $16.83 -1.1
1991 -1.5 707.8 183,756 2,973 2,269 17.6 $16.76 -0.4
1992 -0.4 732.5 187,719 3,963 75 19.3 $16.42 -2.0
------------------------------------------------------------------------------------------
1993 1.8 754.7 188,017 298 1,181 18.8 $16.23 -1.2
1994 2.4 782.1 188,275 258 3,787 16.9 $17.55 8.1
1995 2.6 802.1 188,275 0 3,201 15.2 $18.74 6.8
1996 1.9 817.5 188,619 344 2,555 14.0 $21.69 15.7
==================================================================================
- -----------------------------------------------------------------------------------------------------
Forecast 1997 1.5 835.9 189,312 694 1,428 13.6 $23.01 6.1
1998 1.1 849.3 192,184 2,872 2,288 13.7 $24.17 5.0
1999 1.4 866.0 196,633 4,449 2,736 14.2 $24.96 3.3
2000 1.4 883.3 201,764 5,130 3,087 14.9 $25.45 2.0
------------------------------------------------------------------------------------------
2001 1.4 902.0 206,930 5,167 3,299 15.4 $25.79 1.3
2002 1.4 921.8 211,838 4,908 3,403 15.8 $26.12 1.3
==================================================================================
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Table 8: Semiannual History and Forecast
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Total
Employment Office Net Vacancy TW Rent Index
Growth Empl. Stock Completions Absorption Rate (S)
(%) (x1000) (x1000) (x1000) (x1000) (%) Real* Nominal
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
History 1992.1 -0.6 723.3 186,548 2,792 995 18.3 $18.81 $16.59
1992.2 0.2 732.5 187,719 1,171 -920 19.3 $18.34 $16.42
1993.1 0.7 734.4 187,933 214 173 19.3 $17.99 $16.33
1993.2 1.1 754.7 188,017 84 1,008 18.8 $17.65 $16.23
-----------------------------------------------------------------------------------------------------
1994.1 1.1 762.7 188,210 193 2,039 17.8 $18.13 $16.88
1994.2 1.3 782.1 188,275 65 1,748 16.9 $18.59 $17.55
1995.1 1.7 796.6 188,275 0 2,071 15.8 $18.91 $18.14
1995.2 0.9 802.1 188,275 0 1,130 15.2 $19.34 $18.74
-----------------------------------------------------------------------------------------------------
1996.1 1.0 817.2 188,361 86 1,203 14.6 $20.45 $20.16
1996.2 0.9 817.5 188,619 258 1,352 14.0 $21.69 $21.69
=============================================================================================
- ------------------------------------------------------------------------------------------------------------------
Forecast 1997.1 0.7 826.5 188,966 347 802 13.7 $22.00 $22.36
1997.2 0.8 835.9 189,312 347 626 13.6 $22.27 $23.01
-----------------------------------------------------------------------------------------------------
1998.1 0.5 842.1 190,468 1,156 1,084 13.5 $22.50 $23.63
1998.2 0.6 849.3 192,184 1,716 1,204 13.7 $22.64 $24.17
1999.1 0.7 857.4 194,274 2,090 1,312 13.9 $22.68 $24.61
1999.2 0.7 866.0 196,633 2,359 1,424 14.2 $22.63 $24.96
-----------------------------------------------------------------------------------------------------
2000.1 0.7 874.3 199,161 2,528 1,509 14.6 $22.51 $25.24
2000.2 0.7 883.3 201,764 2,602 1,578 14.9 $22.33 $25.45
2001.1 0.7 892.4 204,368 2,604 1,630 15.2 $22.12 $25.63
2001.2 0.7 902.0 206,930 2,563 1,669 15.4 $21.90 $25.79
-----------------------------------------------------------------------------------------------------
2002.1 0.7 912.0 209,424 2,494 1,700 15.6 $21.67 $25.95
2002.2 0.7 921.8 211,838 2,414 1,703 15.8 $21.46 $26.12
=============================================================================================
</TABLE>
* Real rents shown in 1996 dollars
- --------------------------------------------------------------------------------
The forecast calls for an average annual growth in office
employment of 2.0% over the next six years from its current
level. In that office employment growth is a key element in
our forecast model, we expect that this growth will affect
our forecast of net absorption in a positive manner. We are
forecasting vacancy rates to rise to 15.8% over the next six
years. Rents as measured by the TW Rent Index are expected to
rise by an average annual rate of 3.5% through 2001.
- -----------------------------------
Rent and Vacancy Performance
(Rank out of 54)
- -----------------------------------
1996.2 Vacancy Rate 40
- -----------------------------------
2002.2 Vacancy Rate 24
- -----------------------------------
1996.2 TW Rent Index 9
- -----------------------------------
2002.2 TW Rent Index 14
- -----------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Tonto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Outlook The following four graphs compare growth in office
Comparisons employment, new supply, absorption, and rent between Chicago
and a weighted average of our 54 markets.
[GRAPHIC OMITTED]
Office Employment Growth Rates
[GRAPHIC OMITTED]
Completion Rates
[GRAPHIC OMITTED]
Absorption Rates
[GRAPHIC OMITTED]
TW Rent Inflation
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Submarket Outlook The following tables provide a short term forecast by
submarket for net absorption, new supply, rent growth, and
vacancy rates.
Table 9: Forecast of Demand by Submarket
<TABLE>
<CAPTION>
Demand Forecast Factors 2 Year Forecast
------------------------------------------------------------------- ------------------------
------------------------------------------------------------------- ------------------------
Long-term* 3-Year Estimated
Occupied Percent Avg. Annual Percent Avg. Annual Percent Avg Annual Percent
Stock of Net Absorption of Net Absorption of Net Absorption of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- ------------------------------------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Central Loop 37,054 22.9 698 17.1 215 6.8 394 21.2
East Loop 17,751 10.9 47 1.2 -245 -7.8 56 3.0
North Michigan Avenue 11,226 6.9 196 4.8 157 5.0 165 8.9
River North 2,463 1.5 -3 -0.1 133 4.2 3 0.2
West Loop 23,330 14.4 584 14.3 1,110 35.3 197 10.6
------------------------------------------------------------------- ------------------------
Subtotal for Downtown 91,924 56.6 1,522 37.3 1,370 43.5 815 43.9
=================================================================== ========================
------------------------------------------------------------------- ------------------------
Lake County 5,298 3.3 286 7.0 41 1.3 251 13.5
Lake Shore 3,662 2.3 35 0.9 15 0.5 35 1.9
North Suburbs 4,749 2.9 162 4.0 120 3.8 31 1.6
O'Hare 11,065 6.8 315 7.7 215 6.8 131 7.1
Oak Brook 23,591 14.5 986 24.2 609 19.4 317 17.0
Schaumburg 18,770 11.6 724 17.8 668 21.3 244 13.1
South Suburbs 2,075 1.3 40 1.0 54 1.7 33 1.8
West Cook 1,115 0.7 2 0.1 53 1.7 3 0.2
------------------------------------------------------------------- ------------------------
Subtotal for Suburban 70,325 43.4 2,550 62.7 1,775 56.5 1,045 56.2
=================================================================== ========================
------------------------------------------------------------------- ------------------------
Total for Chicago 162,149 100.0 4,072 100.0 3,145 100.0 1,860 100.0
=================================================================== ========================
</TABLE>
* Long term net absorption is an estimate of net absorption
over the last 15 years. See the Appendix for a complete
methodology.
The three-year average annual net absorption is calculated
from the current period going back three years. Likewise, the
two-year average annual forecast of net absorption is
calculated from the current period going forward two years.
when the Outlook is produced mid-year, the time periods
referenced are also mid-year time periods.
- -----------------------------------------
Chicago
Submarket Standings
- -----------------------------------------
Largest share of long-term absorption:
---------------------------------------
Oak Brook
---------------------------------------
- -----------------------------------------
Largest share of short-term absorption:
---------------------------------------
West Loop
---------------------------------------
- -----------------------------------------
Largest share of forecasted absorption:
---------------------------------------
Central Loop
---------------------------------------
- -----------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 10: Forecast of Supply by Submarket
<TABLE>
<CAPTION>
Supply Forecast Factors 2 Year Forecast
----------------------------------------------------------------- -------------------------
----------------------------------------------------------------- -------------------------
Average Annual Square Feet Estimated Annual
Completions Percent Under Percent Planned Percent Completions Percent
Last 15 Years of Construction of Projects of Next 2 Years of
(x1000) Metro (x1000) Metro (x1000) Metro (x1000) Metro
- ----------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Central Loop 1,052 19.6 0 0.0 0 0.0 203 11.4
East Loop 221 4.1 0 0.0 0 0.0 39 2.2
North Michigan Avenue 293 5.5 0 0.0 0 0.0 53 2.9
River North 13 0.2 0 0.0 0 0.0 3 0.1
West Loop 744 13.9 0 0.0 0 0.0 132 7.4
----------------------------------------------------------------- -------------------------
Subtotal for Downtown 2,323 43.3 0 0.0 0 0.0 430 24.0
================================================================= =========================
----------------------------------------------------------------- -------------------------
Lake County 333 6.2 125 18.0 0 0.0 182 10.2
Lake Shore 55 1.1 0 0.0 0 0.0 11 0.6
North Suburbs 180 3.4 0 0.0 0 0.0 38 2.1
O'Hare 406 7.6 0 0.0 0 0.0 90 5.0
Oak Brook 1,124 21.0 457 65.9 98 15.4 711 39.9
Schaumburg 871 16.3 111 16.0 538 84.6 312 17.5
South Suburbs 56 1.0 0 0.0 0 0.0 12 0.6
West Cook 9 0.2 0 0.0 0 0.0 2 0.1
----------------------------------------------------------------- -------------------------
Subtotal for Suburban 3,037 56.8 693 99.9 636 100.0 1,358 76.0
================================================================= =========================
----------------------------------------------------------------- -------------------------
Total for Chicago 5,360 100.0 693 100.0 636 100.0 1,788 100.0
================================================================= =========================
</TABLE>
Our forecast of submarket supply utilizes historical shares
of new supply as well as acknowledged under-construction and
planned projects to distribute our metropolitan forecast of
new supply to each submarket for the next two years.
The most likely influence on the Chicago market over the next
several years will be the amount of new construction. Over
the next two years we estimate 1.8 million square feet will
be completed annually, metro-wide. On the other hand, Table 9
shows us that 1.9 million square feet annually is the
forecasted net absorption during the same period.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
Table 11: Forecast of Vacancy Rates and Rents by Submarket
<TABLE>
<CAPTION>
Historic and Year-end 1996 Vacancy Rates and 2 Year Forecast
-------------------------------------------- ------------------------------------
-------------------------------------------- ------------------------------------
TW Rent Index
1993 1996 1996 Avg Annual
Vacancy Rate Vacancy Rate TW Rent Index Vacancy Rate Level Rent Inflation
- ------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Central Loop 18.2 16.8 $23.01 15.8 $25.21 4.7
East Loop 15.8 19.1 $23.13 18.9 $24.94 3.6
North Michigan Avenue 19.2 15.6 $27.27 13.7 $30.14 5.1
River North 27.2 14.3 $18.82 14.3 $20.90 5.4
West Loop 24.6 12.2 $23.11 11.5 $26.06 6.2
-------------------------------------------- ------------------------------------
Subtotal for Downtown 19.7 15.9 $23.47 15.1 $25.85 5.0
============================================ ====================================
-------------------------------------------- ------------------------------------
Lake County 12.0 12.8 $20.82 10.0 $23.47 6.2
Lake Shore 14.4 13.0 $22.02 11.8 $24.71 5.9
North Suburbs 13.9 6.7 $19.87 6.8 $23.17 8.0
O'Hare 18.8 13.9 $19.29 13.1 $21.53 5.6
Oak Brook 15.6 9.4 $20.20 11.8 $23.08 6.9
Schaumburg 21.5 12.5 $17.76 12.8 $19.98 6.1
South Suburbs 18.2 13.4 $20.42 11.5 $22.89 5.9
West Cook 25.2 12.5 $22.82 12.5 $25.60 5.9
-------------------------------------------- ------------------------------------
Subtotal for Suburban 17.5 11.4 $19.57 11.8 $22.15 6.4
============================================ ====================================
-------------------------------------------- ------------------------------------
Total for Chicago 18.8 14.0 $21.69 13.7 $24.17 5.6
============================================ ====================================
</TABLE>
Combining the supply and demand forecasts of the previous
tables, we can project the rent and vacancy levels by
submarket for Chicago. We provide forecasts only in those
submarkets where we have determined that there is sufficient
stock of space or where there is currently space under
construction.
The local offices in the Chicago area were reporting 693,000
square feet of multi-tenant space under construction as of
the 4th quarter of 1998. Our forecast calls for an average of
3.9 million square feet to be built each year over the next
six years. The following table provides information on
current projects under construction.
- ----------------------------------------
Chicago
Submarket Standings
- ----------------------------------------
Highest current vacancy rate
--------------------------------------
East Loop
--------------------------------------
- ----------------------------------------
Largest forecasted decrease in vacancy
--------------------------------------
Lake County
--------------------------------------
- ----------------------------------------
Largest forecasted increase in rents
--------------------------------------
North Suburbs
--------------------------------------
- ----------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 12: Multi-tenant Properties Under Construction
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Percent Asking
Suburban Building Name and Address NRA Available Rent
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lake County 1650 LAKE COOK 125,000 100.0 16.50
1650 LAKE COOK RD (N)
DEERFIELD
Due: 1997
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
--------------------------------------------------------------------------------------------
Subtotal for Lake County 1 125,000 100.0 $16.50 na
============================================================================================
--------------------------------------------------------------------------------------------
Percent Asking
Building Name and Address NRA Available Rent
- ----------------------------------------------------------------------------------------------------------------------
Oak Brook HIGHLAND LANDMARK I 244,000 100.0 17.00
31ST ST (N)
DOWNERS GROVE
Due: 1997
--------------------------------------------------------------------------------------------
CENTRE POINT IV 30,000 0.0 12.50
CENTER POINT DR (N)
NAPERVILLE
Due: 1997
--------------------------------------------------------------------------------------------
CENTRE POINT V 33,713 100.0 12.50
CENTER POINT DR (N)
NAPERVILLE
Due: 1997
--------------------------------------------------------------------------------------------
WESTWOOD OF LISLE 2 148,664 100.0 17.25
WARRENVILLE RD (N)
LISLE
Due: 1997
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
--------------------------------------------------------------------------------------------
Subtotal for Oak Brook 4 456,377 93.4 $16.73 na
============================================================================================
--------------------------------------------------------------------------------------------
Percent Asking
Building Name and Address NRA Available Rent
- ----------------------------------------------------------------------------------------------------------------------
Schaumburg SPRING LAKE EXC CAMP 50,845 100.0 14.25
250 SPRINGLAKE DR (N)
ITASCA
Due: 1997
--------------------------------------------------------------------------------------------
LESLIE OAKS BUS PK8 40,000 100.0 8.00/13.00
580 TOLLGATE RD (N)
ELGIN
Due: 1997
--------------------------------------------------------------------------------------------
LELIE OAKS BUS PK7 20,000 100.0 8.00/13.00
600 TOLLGATE RD (N)
ELGIN
Due: 1997
--------------------------------------------------------------------------------------------
</TABLE>
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Chicago
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Subtotal for Schaumburg 3 110,345 100.0 $12.22 na
============================================================================================
--------------------------------------------------------------------------------------------
Weighted Average Asking Rent
# of Buildings NRA Percent Available Net Gross
--------------------------------------------------------------------------------------------
Total for Chicago 8 892,222 95.7 $15.93 na
============================================================================================
</TABLE>
This table reports only multi-tenant buildings that were
under construction as of 4th quarter, 1996. We do track
single tenant or build-to-suit construction for the purposes
of estimating absorption and making forecasts.
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
[LOGO]
FARMERS BRANCH/DALLAS MARKET ANALYSIS
PRENTISS OFFICE PORTFOLIO
Farmers Branch, Texas
DATE OF ANALYSIS
August 1997
PREPARED FOR
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
PREPARED BY
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
<PAGE>
[Letterhead of CB Commercial]
August 15, 1997
Mr. Mark H. Mauldin
LEHMAN BROTHERS, INC.
3 World Financial Center
New York, New York 10285
RE: Farmers Branch/Dallas Market Analysis
Prentiss Office Portfolio
Farmers Branch, Texas
CBC File No. 97-301
Dear Mr. Mauldin:
At your request and authorization, CB Commercial Real Estate Group, Inc. has
prepared a Market Analysis for the Prentiss Office Portfolio located in Farmers
Branch, Texas. The subject consists of 3 multi-tenant, institutional quality,
office buildings having a combined total of 727,545 SF of net rentable area. The
Farmers Branch market has an average occupancy of 94% with a weighted average
net rental rate of $16.15 - $23.50 PSF/YR, depending on the data source. Overall
this market area is stabilized and showing improving rental rates.
This report may be relied upon by Lehman Brothers and its successors and assigns
in determining whether to make a loan evidenced by a note (the "Property Note")
secured by the property. This report may be relied upon by any purchaser or
assignee of the Property Note in determining whether to purchase the Property
Note from Lehman Brothers and its successors and assigns and by any rating
agency rating securities secured by, or representing an interest in the Property
Note. This report may be referred to, quoted in and included with materials
offering for sale the Property Note or an interest therein for sale. This report
may be relied upon by persons acquiring the Property Note or an interest in the
Property Note. This report speaks as of the date prepared.
It has been a pleasure to assist you in this assignment. If you have any
questions concerning the analysis, or if CB Commercial Real Estate Group, Inc.
can be of further service, please do not hesitate to contact us.
Respectfully submitted,
CB COMMERCIAL REAL ESTATE GROUP, INC.
CAPITAL MARKETS SUPPORT SERVICES
by:
/s/ Jason T. Hutchins
- -------------------------------
Jason T. Hutchins
Project Manager
JTH
<PAGE>
================================================================================
SUMMARY OF SALIENT FACTS
- --------------------------------------------------------------------------------
SUMMARY OF SALIENT FACTS
Property Name: PRENTISS PROPERTIES PORTFOLIO
Location: Park West Office Park, Farmers
Branch, Texas
Property Description:
Date of Analysis: August 1, 1997
Improvements
Number of Buildings: 3
Number of Stories: 4 - 8
Gross Building Area: 727,545 SF
Net Rentable Area: 727,545 SF
Avg. Year Built: 1989
Condition: Good
Effective Age: 8 Years
Market Financial Indicators
Current Occupancy: 94% (Submarket)
Stabilized Occupancy: 94.0%
Estimated Absorption: Market is stabilized.
Market Rental Rate: $18.00 - $22.00 PSF
Tenant Improvements (New Leases): $5.00 Per SF
Tenant Improvements (Renewal Leases): $2.50 Per SF
Leasing Commissions (New Leases): 4.5%
Leasing Commissions (Renewal Leases): 2.0%
<PAGE>
================================================================================
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS.....................................................ii
TABLE OF CONTENTS...........................................................iii
TRADE AREA ANALYSIS...........................................................1
COMPETITIVE MARKET TREND ANALYSIS.............................................3
MARKETABILITY CONCLUSIONS.....................................................7
ADDENDA
A Improved Comparable Sales
B Demographics
C Torto Wheaton Research Data
D New Construction Statistics
- --------------------------------------------------------------------------------
iii
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
TRADE AREA ANALYSIS
Regional Influences
The region is displaying signs of recovery, with major companies relocating to
the area and major expansions of companies already located in the area. Dallas
has seen more job gains than the state's other three major metro areas combined.
Since 1990 the number of employed persons in the combined Dallas PMSA and Fort
Worth Arlington PMSA have increased from 2,189,600 to 2,493,200, an increase of
303,600 new jobs, reflecting a 13.9% increase. During this period, unemployment
has decreased to 4.0% in the Dallas area and 3.9% in the Fort Worth-Arlington
area.
On an aggregate basis values for both vacant land and improved properties
generally increased in 1996 and are generally expected to increase again in the
short term future. The industrial and commercial growth that has taken place in
recent years is expected to continue in the immediate future. Therefore, the
overall trend for the subject appears to be favorable.
Location
The trade area is located in the city of Farmers Branch. The city of Farmers
Branch is located in north Texas, in the northwest quadrant of the Dallas MSA.
Demographics
Population growth and new household formations have been on an upward trend
within the subject trade area.
Selected trade area demographics are shown in the following table:
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
TRADE AREA ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
SELECTED METRO AREA DEMOGRAPHICS
SUBJECT'S LOCAL AREA
- --------------------------------------------------------------------------------
Farmers BranchDallas PMSA
- --------------------------------------------------------------------------------
Population
2001 Estimate 24,299 3,239,483
1996 Estimate 24,645 3,003,257
1990 Census 24,250 2,676,248
1996 - 2001 % Change -1.4% 7.9%
Households
2001 Estimate 8,708 1,203,854
1996 Estimate 8,876 1,118,500
1990 Census 8,771 1,001,750
1996 - 2001 % Change -1.9% 7.6%
2001 Median Household Income $53,918 $46,081
1996 Median Household Income $45,712 $39,367
1996 Average Household Income $57,386 $52,272
1990 Average Home Value $101,024 $103,333
1990 % College Graduates 25.1% 26.9%
- --------------------------------------------------------------------------------
Source: Strategic Mapping, Inc.
Compiled by: CB Commercial
================================================================================
Trends and Conclusions
The trade area currently has a strong income demographic profile as compared to
the overall Dallas PMSA. The outlook is for relatively stable performance with
moderate improvement over the next several years. As a result, the demand for
existing developments is expected to be good. Generally, the trade area is
expected to maintain a relatively stable growth pattern in the foreseeable
future.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
COMPETITIVE MARKET TREND ANALYSIS
COMPETITIVE OVERALL AND SUBMARKET SUPPLY
In order to research the market, we have relied upon data published by Torto
Wheaton Research, KOLL, and CB Commercial Real Estate Appraisal Services Group.
MARKET SUMMARY
Selected market statistics for the subject trade area are shown in the following
table:
================================================================================
MARKET STATISTICS
- --------------------------------------------------------------------------------
Category Source Dallas Submarket
- --------------------------------------------------------------------------------
Existing Supply (SF X 1,000) (1) 111,337 1,578
(3) 1,542
Under Construction (SF X 1,000) (1) 329 0
Construction - 2 YR Annual Forecast (SF X 1,000) (1) 1,251 18
Absorption - 3 YR Avg. (SF X 1,000) (1) 2,935 16
Absorption - 2 YR Annual Forecast (SF X 1,000) (1) 1,660 22
Current Occupancy (1) 84.7% 94.1%
(3) 99.0%
Occupancy - 2 YR Forecast (1) 84.1% 94.8%
Average Rent PSF - Current (1) $15.49 $16.17
(2) $17.50 $23.51
(3) $17.80
Average Rent PSF - 2 YR Forecast (1) $18.20 $20.54
Annual Rent Inflation - 2 YR Forecast (1) 8.4% 12.7%
- --------------------------------------------------------------------------------
Source Codes:
(1) Torto Wheaton Research
(2) KOLL National Real Estate Index
(3) CB Commercial
================================================================================
MARKET RENT/DEMAND TRENDS
The following table presents the trends in rental rates and occupancy for the
Dallas area and local submarket over the past five years:
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
================================================================================
MARKET TRENDS
1992 - 1996
- --------------------------------------------------------------------------------
Dallas Area Local Submarket
--------------------------- ----------------------------
Date Rent PSF Occupancy Rent PSF Occupancy
- --------------------------------------------------------------------------------
1992 $10.83 73.5% N/A 93.4%
1993 $11.50 75.0% N/A 92.8%
1994 $11.27 78.3% N/A 88.7%
1995 $12.40 80.6% N/A 95.4%
1996 $15.49 83.0% $16.17 94.1%
1997 Forecast $16.86 83.8% $20.54 94.8%
================================================================================
Source: Torto Wheaton Research
================================================================================
MARKET RENT TRENDS
In addition to the Torto Wheaton Research and KOLL surveys, a number of rent
comparables have been surveyed in order to identify the performance trends
within the subject's immediate submarket. CB Commercial surveyed competitive
properties and lease transactions for comparison to the subject. The selected
comparable rentals are summarized in the following summary chart.
<TABLE>
<CAPTION>
====================================================================================================================
COMPARABLE RENTALS SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
Comp. Avg. Base Rent Ann.
No. Name Location Size (GBA) Dec-96 Aug-97 Inc.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Northpointe Centre 12005 Ford Road, Farmers Branch, TX 168,814 SF $16.00 $16.50 4.7%
2 Triwest Plaza 3030 LBJ Freeway, Dallas, TX
2 Graystone Centre 3010 LBJ Freeway, Dallas, TX 294,672 SF $18.00 $19.00 8.5%
3 Park West E-1 1601 LBJ Freeway, Farmers Branch, TX 185,000 SF $19.50 $22.00 19.9%
4 Park West E-2 1603 LBJ Freeway, Farmers Branch, TX 187,237 SF $19.50 $22.00 19.9%
5 Park West E-3 1605 LBJ Freeway, Farmers Branch, TX 200,590 SF $19.50 $22.00 19.9%
6 Park West C-2 1505 LBJ Freeway, Farmers Branch, TX 343,602 SF $19.50 $22.00 19.9%
7 Park West C-3 1501 LBJ Freeway, Farmers Branch, TX 343,602 SF $19.50 $22.00 19.9%
- --------------------------------------------------------------------------------------------------------------------
Average: 246,217 SF $18.79 $20.79 16.1%
- --------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
====================================================================================================================
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Comp. Exp. Ten. Imp. Leas. Comm. Pct.
No. Name Reimb. New Renew New Renew Occ.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Northpointe Centre Base Yr. $4.00 - 15.00 4.5% 2.0% 76%
PSF
2 Triwest Plaza
2 Graystone Centre Base Yr. $4.00 4.5% 2.0% 95%
3 Park West E-1 Base Yr. (Elect. Net) $5.00 $3.50 4.5% 2.0% 100%
4 Park West E-2 Base Yr. (Elect. Net) $5.00 $3.50 4.5% 2.0% 100%
5 Park West E-3 Base Yr. (Elect. Net) $5.00 $3.50 4.5% 2.0% 100%
6 Park West C-2 Base Yr. (Elect. Net) $5.00 $3.50 4.5% 2.0% 100%
7 Park West C-3 Base Yr. (Elect. Net) $5.00 $3.50 4.5% 2.0% 99%
- ----------------------------------------------------------------------------------------------------------
Average: $4.83 $3.50 4.5% 2.0% 96%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The asking rental rates of the comparables range from $16.50 to $22.00 per
square foot. Quoted occupancy rates range from 76% to 100%. Rental rates are
increasing at a strong rate due to strong demand and a lack of available supply.
As a result, there are a number of buildings planned for construction at this
time, including one building on LBJ Freeway and four buildings in Las Colinas.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
MARKET EXPENSE RATES
The following industry survey expense data is reported for the local market
area:
<TABLE>
<CAPTION>
==============================================================================================================
PRENTISS PROPERTIES PORTFOLIO
COMPARABLE EXPENSE DATA
- --------------------------------------------------------------------------------------------------------------
COMP 1 COMP 2 COMP 3 IREM MEDIAN
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Location: Hurst East Fort East Fort
Worth Worth Dallas
NRA (SF): 79,738 85,030 87,172 Suburban
Expense Year: 1996 1996 1996 1996
Effective Gross Income PSF: $13.77 $7.47 $12.66
Unit of Comparison PSF PSF PSF PSF
------------- -------------- ------------- --------------
Expenses
Real Estate Taxes $1.32 $1.11 $1.48 $1.22
Insurance $0.15 $0.02 $0.19 $0.13
Janitorial $0.65 $0.00 $0.64 $0.72
General Operating* $1.66 $2.96 $1.65 $1.75
Utilities $1.96 $1.70 $1.70 $2.00
Allowance for Replacements $0.00 $0.00 $0.00 $0.00
Management Fees $0.00 $0.00 $0.02 $0.41
------------- -------------- ------------- --------------
Total Expenses $5.74 $5.79 $5.68 $6.23
* Includes maintenance and repairs, administrative, and contract services.
- --------------------------------------------------------------------------------------------------------------
Source: Actual operating statements, BOMA Experience Exchange Report 1996, and IREM
Income/Expense Analysis Report 1998
Compiled By: CB Commercial
==============================================================================================================
</TABLE>
MARKET CAPITAL EXPENDITURES
The rent comparables surveyed reported the following capital expenditures for
new and renewal leases:
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
COMPETITIVE MARKET TREND ANALYSIS
- --------------------------------------------------------------------------------
=============================================================================
CAPITAL EXPENSES
- -----------------------------------------------------------------------------
Capital Expense Category Range Reported
- -----------------------------------------------------------------------------
Renewal Probability 75% to 85%
Tenant Improvements (New Leases) $3.00 PSF to $15.00 PSF
Tenant Improvements (Renewal Leases) $2.00 PSF to $3.00 PSF
Weighted Average Tenant Improvements $2.25 PSF to $4.80 PSF
Leasing Commissions (New Leases) 4.5% to 6.0%
Leasing Commissions (Renewal Leases) 2.0% to 3.0%
Weighted Average Leasing Commissions 2.6% to 3.5%
- -----------------------------------------------------------------------------
Compiled By: CB Commercial
=============================================================================
COMPARABLE SALES DATA AND TRENDS
The following table provides a summary of the comparable sales. A more detailed
description of each transaction is included in the Addenda.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
IMPROVED SALE SUMMARY - PRENTISS PROPERTIES PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
Sale No. Name Location Date of Sale Size (GBA)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Quorum Place Office Building 14901 Quorum Drive, Dallas, TX Nov-95 185,000
2 122 John W. Carpenter Freeway 122 John W. Carpenter Freeway, Irving, TX Dec-95 236,400
3 Nissan Motor Acceptance Corporation 2901 Kinwest Parkway, Irving, TX Dec-95 174,410
4 Oaks Plaza I, II, and III 6700 LBJ Freeway, Dallas, TX Jan-96 22,858
5 One Signature Place 14755 Preston Road, Dallas, TX Jun-96 194,113
- ----------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
============================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------
Sale No. Name Price PSF OCC NOI PSF OAR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Quorum Place Office Building $67.65 85% $4.93 7.29%
2 122 John W. Carpenter Freeway $62.00 92% $6.08 9.81%
3 Nissan Motor Acceptance Corporation $64.08 100% $7.28 11.36%
4 Oaks Plaza I, II, and III $72.22 92% $7.64 10.58%
5 One Signature Place $92.96 94% $7.60 8.18%
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
================================================================================
MARKETABILITY CONCLUSIONS
- --------------------------------------------------------------------------------
MARKETABILITY CONCLUSIONS
================================================================================
PRENTISS PROPERTIES PORTFOLIO
CONCLUSIONS
- --------------------------------------------------------------------------------
Category Amount
- --------------------------------------------------------------------------------
Current Occupancy: 94% (Submarket)
Stabilized Occupancy: 94.0%
Estimated Absorption: Market is stabilized.
Expenses (Range of Comparable Data): $5.68 - $6.23 PSF
Market Expenses: $5.75/SF/YR
Market Rental Rate: $18.00 - $22.00 PSF
Type of Lease: Full service with base year
expense stop.
Tenant Impr. Range (New Leases): $3.00 - $15.00 PSF
Tenant Improvements (New Leases): $5.00/SF
Tenant Impr. Range (Renewal Leases): $2.00 - $3.00 PSF
Tenant Improvements (Renewal Leases): $2.50/SF
Leasing Commis. Range (New Leases): 4.5% - 6.0%
Leasing Commissions (New Leases): 4.5%
Leasing Commis. Range (Renewal Leases): 2.0% - 3.0%
Leasing Commissions (Renewal Leases): 2.0%
Average Lease Term 5 Years
- --------------------------------------------------------------------------------
Compiled By: CB Commercial
================================================================================
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
ADDENDA
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDENDUM A IMPROVED COMPARABLE SALES
- --------------------------------------------------------------------------------
Addendum A
IMPROVED COMPARABLE SALES
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY OF COMPARABLE OFFICE BUILDING SALES
====================================================================================================================================
Number
Sale Sale Year of Building Size Occupancy Price Per
No. Name / Location Date Built Stories (NRA) at Sale Sale Price SF OER OAR
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Quorum Place Office Building 11/95 1981 9 175,911 85% $11,900,000 $67.65 52.75% 7.29%
14901 Quorum Drive
Dallas, Tx
2 l22 John W. Carpenter Freeway 12/95 1982 6 214,700 92% $13,311,044 $62.00 49.65% 9.81%
122 John W. carpenter Freeway
lrving, Tx
3 Nissan Motor Acceptance Corporation 12/95 1984 3 174,410 100% $11,176,000 $64.08 2.90% 11.36%
2901 Kinwest Parkway
lrving, Tx
4 Oaks Plaza 1,11, and III 01/96 1979 2 198,000 92.0 $14,300,000 $72.22 42.73% 10.58%
6700 LBJ Freeway
Dallas, Tx
5 One Signature Place 06/98 1983 8 184,480 94.0 $17,150,000 $92.96 45.96% 8.18%
14755 Preston Road
Dallas, TX
- ------------------------------------------------------------------------------------------------------------------------------------
Compiled by: CB Commercial
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Location Data
Property Name: Quorum Place Office Building
Location: 14901 Quorum Drive
City: Dallas
County: Dallas
State/Zip: Texas
Assessor's Parcel No(s): N/A
Atlas Reference: 14D MAPSCO
Physical Data
Type: Suburban
Land Area: 5.4100 Acres
Gross Building Area: 185,000 SF
Net Rentable Area: 175,911 SF
Usable Building Area: N/A
Year Built: 1981
# of Stories: 9
Parking: Two-level garage w/3.6 cars/10
Condition: Good
Exterior Walls: Brick Veneer
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 11/95
Marketing Time: 18 months
Grantor: MLH Income Realty Partners III
Grantee: 14901 Quorum Partners
Document No.: VOL. 95223 PG. 1085
Sale Price: $11,900,000
Financing: Cash to Seller
Cash Equivalent Price: $11,900,000
Required Capital Cost: $0
Adjusted Sale Price: $11,900,000
Verification: Steve Young/MLH
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 85%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
---------- ------
Potential Gross Income: $2,133,900 $12.13
Vacancy and Credit Loss: $298,746 $1.70
Effective Gross Income: $1,835,154 $10.43
Expenses: $968,020 $5.50
Net Operating Income: $867,134 $4.93
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 1
================================================================================
Analysis
Buyers Underwriting Criteria: Direct Cap
Overall Capitalization Rate (OAR): 7.29 %
Projected IRR: N/A%
Effective Gross Multiplier (EGIM): 6.48
Operating Expense Ratio (OER): 52.75 %
Price Per Square Foot: $67.65
Comments
This building is located off the Dallas North Tollway, north of the
LBJ Freeway. It is located within the Quorum Office Market. According
to a representative for the seller, the building was on the market for
approximately 18 months. Rental rates were increasing within this
market at the time this property sold. Therefore, the buyer was
confident of leasing up the vacant space and re-leasing currently
occupied space at higher rental rates when existing leases come up for
renewal. When sold, the average rental rate at this property was
$10.15 per square foot.
- --------------------------------------------------------------------------------
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Location Data
Property Name: 122 John W. Carpenter Freeway
Location: 122 John W. Carpenter Freeway
City: Irving
County: Dallas
State/Zip: Texas
Assessor's Parcel No(s): N/A
Atlas Reference: DALLAS 21 B-T
Physical Data
Type: Suburban
Land Area: 6.1900 Acres
Gross Building Area: 236,400 SF
Net Rentable Area: 214,700 SF
Usable Building Area: N/A
Year Built: 1982
# of Stories: 8
Parking: 5 story parking garage
Condition: Good
Exterior Walls: Pre-Cast Aggregate
Amenities: On site leasing and management and a
deli
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 12/95
Marketing Time: 2 months
Grantor: Equitable Life Assurance Society of
U.S.
Grantee: 122 W. Carpenter Limited Partnership
Document No.: 95250/1123
Sale Price: $13,311,044
Financing: Cash to Seller
Cash Equivalent Price: $13,311,044
Required Capital Cost: $0
Adjusted Sale Price: $13,311,044
Verification: 23
Financial Data
Assumptions & Forecast: Buyer
Occupancy at Sale: 92%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
---------- ------
Potential Gross Income: $2,760,262 $12.86
Vacancy and Credit Loss: $165,616 $0.77
Effective Gross Income: $2,594,646 $12.08
Expenses: $1,288,200 $6.00
Net Operating Income: $1,306,446 $6.08
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 2
================================================================================
Analysis
Buyers Underwriting Criteria: DCF
Overall Capitalization Rate (OAR): 9.81 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 5.13
Operating Expense Ratio (OER): 49.65 %
Price Per Square Foot: $62.00
Comments
This office building is located on John W. Carpenter Freeway west of
O'Connor Road.
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Location Data
Property Name: Nissan Motor Acceptance Corporation
Location: 2901 Kinwest Parkway
City: Irving
County: Dallas
State/Zip: Texas
Assessor's Parcel No(s): N/A
Atlas Reference: DALLAS 11A-Y
Physical Data
Type: Suburban
Land Area: 10.5800 Acres
Gross Building Area: 174,410 SF
Net Rentable Area: 174,410 SF
Usable Building Area: N/A
Year Built: 1984
# of Stories: 3
Parking: Open
Condition: Good
Exterior Walls: Masonry
Amenities: One loading dock
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 12/95
Marketing Time: 6 months
Grantor: Tetra Pak, Inc.
Grantee: Trinet Corporate Partners II, L.P.
Document No.: 95249/4744
Sale Price: $11,175,000
Financing: Cash to Seller
Cash Equivalent Price: $11,175,000
Required Capital Cost: $1,000
Adjusted Sale Price: $11,176,000
Verification: Eric Langford, Broker
Financial Data
Assumptions & Forecast: Seller
Occupancy at Sale: 100%
Existing or Pro Forma Income: Existing
TOTAL P.S.F.
---------- ------
Potential Gross Income: $1,308,075 $7.50
Vacancy and Credit Loss: N/A N/A
Effective Gross Income: $1,308,075 $7.50
Expenses: $37,934 $0.22
Net Operating Income: $1,270,141 $7.28
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 3
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 11.36 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 8.54
Operating Expense Ratio (OER): 2.90 %
Price Per Square Foot: $64.08
Comments
This is a triple net leased facility, with a rental rate, effective
October 1996 of $7.50 psf, net. There was approximately 7 years
remaining on the lease at the time of the sale.
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Location Data
Property Name: Oaks Plaza I, II, and III
Location: 6700 LBJ Freeway
City: Dallas
County: Dallas
State/Zip: Texas
Assessor's Parcel No(s): 000007332755000000
Atlas Reference: DALLAS 15-U
Physical Data
Type: Suburban
Land Area: 7.7900 Acres
Gross Building Area: 22,858 SF
Net Rentable Area: 198,000 SF
Usable Building Area: N/A
Year Built: 1979
# of Stories: 2
Parking: Open, 3.4 per 1,000 sf
Condition: Average
Exterior Walls: Glass Panels
Amenities: N/A
Class: B
Sale Data
Transaction Type: Sale
Date of Transaction: 01/96
Marketing Time: N/A
Grantor: Hillcrest Ventures, Ltd.
Grantee: Brinker International Payroll
Corporation
Document No.: 96008-1090
Sale Price: $14,300,000
Financing: Cash to Seller
Cash Equivalent Price: $14,300,000
Required Capital Cost: $0
Adjusted Sale Price: $14,300,000
Verification: John Burgin W/Grantee
Financial Data
Assumptions & Forecast: Appraiser
Occupancy at Sale: 92.0
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
---------- ------
Potential Gross Income: $2,871,000 $14.50
Vacancy and Credit Loss: $229,680 $1.16
Effective Gross Income: $2,641,320 $13.34
Expenses: $1,128,600 $5.70
Net Operating Income: $1,512,720 $7.64
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 4
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 10.58 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 5.41
Operating Expense Ratio (OER): 42.73 %
Price Per Square Foot: $72.22
Comments
This is a three building office complex located on the south line of
the LBJ Freeway between Hillcrest Plaza and Hillcrest Road.
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Location Data
Property Name: One Signature Place
Location: 14755 Preston Road
City: Dallas
County: Dallas
State/Zip: Texas
Assessor's Parcel No(s): 0081740A0003B0100
Atlas Reference: DALLAS 15-F
Physical Data
Type: Suburban
Land Area: 4.7500 Acres
Gross Building Area: 194,113 SF
Net Rentable Area: 184,480 SF
Usable Building Area: N/A
Year Built: 1983
# of Stories: 8
Parking: 2.2 spaces per 1,000 sf
Condition: Good
Exterior Walls: Glass Panels
Amenities: Parking garage
Class: A
Sale Data
Transaction Type: Sale
Date of Transaction: 06/96
Marketing Time: 12 months
Grantor: The Mutual Life Insurance Company of
New York
Grantee: THML-S Real Estate Ltd Prtnrshp
Document No.: 96120-0540
Sale Price: $17,150,000
Financing: Cash to Seller
Cash Equivalent Price: $17,150,000
Required Capital Cost: $0
Adjusted Sale Price: $17,150,000
Verification: Jeff Laures - ARES, Inc.
Financial Data
Assumptions & Forecast: Appraiser
Occupancy at Sale: 94.0
Existing or Pro Forma Income: Pro Forma
TOTAL P.S.F.
---------- ------
Potential Gross Income: $2,760,164 $14.96
Vacancy and Credit Loss: $165,610 $0.90
Effective Gross Income: $2,594,554 $14.06
Expenses: $1,192,506 $6.46
Net Operating Income: $1,402,048 $7.60
================================================================================
CB COMMERCIAL
<PAGE>
OFFICE BUILDING SALE 5
================================================================================
Analysis
Buyers Underwriting Criteria:
Overall Capitalization Rate (OAR): 8.18 %
Projected IRR: N/A %
Effective Gross Multiplier (EGIM): 6.61
Operating Expense Ratio (OER): 45.96 %
Price Per Square Foot: $92.96
Comments
This is a well located office building just north of Preston Park
Mall.
================================================================================
CB COMMERCIAL
<PAGE>
================================================================================
ADDENDUM B DEMOGRAPHICS
- --------------------------------------------------------------------------------
Addendum B
DEMOGRAPHICS
- --------------------------------------------------------------------------------
<PAGE>
Atlas MarketQuest
Summary Report
CBC 7547.2501 Houston Galleria Page 1 of 1
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description USA Totals Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Population 248,709,873 24,250 2,676,248
1996 Population 265,411,137 24,645 3,003,257
% White 79.0 80.4 71.3
% Black 12.2 3.8 16.2
% American Indian 0.9 0.7 0.6
% Asian 3.6 2.5 3.1
% Other 4.3 12.6 8.8
% Hispanic 10.3 27.7 17.1
1996 Population by Age:
% 0- 5 8.6 8.6 9.5
% 6- 13 11.3 11.1 12.0
% 14- 17 5.4 4.7 5.3
% 18 - 20 4.7 3.9 4.7
% 21- 24 5.8 4.7 6.2
% 25- 34 14.5 14.1 16.8
% 35- 44 15.7 16.5 17.0
% 45- 54 12.3 12.3 12.4
% 55- 64 8.5 11.4 7.4
% 65- 74 7.3 8.6 5.0
% 75- 84 4.5 3.5 2.7
% 85 + 1.4 0.7 0.9
Median Age Total Population 34.9 36.7 32.4
1990 Households 91,947,410 8,771 1,001,750
1996 Households 98,045,317 8,876 1,118,500
1996 Average Household Size 2.64 2.76 2.65
1996 Household Income:
% $ 0 - $ 9,999 12.3 4.2 9.7
% $ 10,000 - $ 14,999 7.8 4.2 6.2
% $ 15,000 - $ 24,999 14.7 12.0 13.8
% $ 25,000 - $34,999 14.1 14.1 14.2
% $ 35,000 - $49,999 18.2 21.0 18.6
% $ 50,000 - $ 74,999 17.7 22.6 19.0
% $ 75,000 - $ 99,999 7.6 10.1 8.7
% $100,000 - $149,999 5.3 7.8 6.4
% $150,000 + 2.4 4.0 3.4
1996 Median Household Income ($) 35,822 45,712 39,367
1996 Median Family Income ($) 42,040 50,981 47,212
1990 Median Home Value ($) 79,098 86,816 81,512
1990 Median Contract Rent ($) 374 476 390
1990 % White Collar Workers 58.1 67.0 64.8
1990 % Blue Collar Workers 26.2 21.4 22.2
1990 % HS Graduate/Some College 54.9 54.4 51.6
1990 % Bachelor/Graduate Degree 20.3 25.1 26.9
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
BC 7547.2501 Houston Galleria Page 1 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 Socio-Economic Measure: 71 59
1996 Employment: 16,031 1,550,295
Population:
2001 Projection 24,299 3,239,483
1996 Estimate 24,645 3,003,257
1990 Census 24,250 2,676,248
1990 1996 % Change (Growth) 1.6% 12.2%
1990 Group Quarters Population 129 40,597
1996 % Population by Race:
White 80.4% 71.3%
Black 3.8% 16.2%
American Indian, Eskimo & Aleut 0.7% 0.6%
Asian or Pacific Islander 2.5% 3.1%
Other 12.6% 8.8%
Hispanic 27.7% 17.1%
1990 % Population by Race:
White 84.9% 73.3%
Black 2.8% 15.8%
American Indian, Eskimo & Aleut 0.7% 0.5%
Asian or Pacific Islander 2.3% 2.5%
Other 9.3% 7.9%
Hispanic 20.2% 14.0%
1996 % Population by Sex:
Male 49.6% 49.3%
Female 50.4% 50.7%
1990 % Population by Sex:
Male 49.7% 49.3%
Female 50.3% 50.7%
2001 Pop per Square Mile (Pop Density) 2,024.3 523.6
1996 Pop per Square Mile (Pop Density) 2,053.1 485.4
1990 Pop per Square Mile (Pop Density) 2,020.2 432.6
Area (Square Miles) 12.0 6,186.6
Area (Square Kilometers) 31.1 16,023.3
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 2 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
Households:
2001 Projection 8,708 1,203,854
1996 Estimate 8,876 1,118,500
1990 Census 8,771 1,001,750
1990- 1996% Change (Growth) 1.2% 11.7%
2001 Average Household Size 2.78 2.66
1996 Average Household Size 2.76 2.65
1990 Average Household Size 2.75 2.63
2001 Per Capita Income $24,522 23,097
1996 Per Capita Income $20,774 19,734
1990 Per Capita Income $17,213 16,343
2001 Median Family Income $60,132 55,264
1996 Median Family Income $50,981 47,212
1990 Median Family Income $42,421 39,178
2001 Median Household Income $53,918 46,081
1996 Median Household Income $45,712 39,367
1990 Median Household Income $38,037 32,668
2001 Average Household Income $68,072 61,375
1996 Average Household Income $57,386 52,272
1990 Average Household Income $46,868 42,916
1996 % Household Income:
$ 0 - $9,999 4.2% 9.7%
$ 10,000 - $ 14,999 4.2% 6.2%
$ 15,000 - $24,999 12.0% 13.8%
$ 25,000 - $ 34,999 14.1% 14.2%
$ 35,000 - $49,999 21.0% 18.6%
$ 50,000 - $ 74,999 22.6% 19.0%
$ 75,000 - $99,999 10.1% 8.7%
$ 100,000 - $ 149,999 7.8% 6.4%
$ 150,000 + 4.0% 3.4%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 3 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Household Income:
$ 0 - $9,999 5.8% 12.1%
$ 10,000 - $14,999 5.9% 7.6%
$ 15,000 -$24,999 16.1% 17.3%
$ 25,000 - $ 34,999 16.1% 16.2%
$ 35,000 - $ 49,999 22.2% 18.4%
$ 50,000 - $ 74,999 20.0% 16.6%
$ 75,000 - $ 99,999 7.0% 6.2%
$ 100,000 - $ 149,999 4.5% 3.4%
$ 150,000 + 2.3% 2.3%
1996 % Population by Age:
0 - 5 8.6% 9.5%
6 - 13 11.1% 12.0%
14 - 17 4.7% 5.3%
18 - 20 3.9% 4.7%
21 - 24 4.7% 6.2%
25 - 34 14.1% 16.8%
35 - 44 16.5% 17.0%
45 - 54 12.3% 12.4%
55 - 64 11.4% 7.4%
65 - 74 8.6% 5.0%
75 - 84 3.5% 2.7%
85 + 0.7% 0.9%
Median Age Total Population 36.7 32.4
Median Age Adult Population 44.1 39.9
1990 % Population by Age:
0 - 5 8.9% 10.0%
6 - 13 10.4% 11.8%
14 - 17 5.1% 5.4%
18 - 20 3.8% 4.5%
21 - 24 5.5% 6.5%
25 - 34 18.4% 21.0%
35 - 44 14.3% 16.1%
45 - 54 12.5% 10.0%
55 - 64 11.5% 6.8%
65 - 74 6.9% 4.8%
75 - 84 2.2% 2.5%
85 + 0.5% 0.8%
Median Age Total Population 33.9 30.7
Median Age Adult Population 41.9 37.6
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 4 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1996 % Female Population by Age:
0 - 5 8.2% 9.2%
6 - 13 10.6% 11.6%
14 - 17 4.5% 5.2%
18 - 20 3.7% 4.6%
21 - 24 4.4% 6.0%
25 - 34 12.9% 16.3%
35 - 44 16.2% 16.9%
45 - 54 12.8% 12.5%
55 - 64 12.3% 7.5%
65 - 74 9.4% 5.5%
75 - 84 4.0% 3.4%
85 + 0.9% 1.3%
Female Median Age Total Population 38.3 33.3
Female Median Age Adult Population 45.8 40.8
1990 % Female Population by Age:
0 - 5 8.4% 9.6%
6 - 13 10.0% 11.3%
14 - 17 4.8% 5.2%
18 - 20 3.4% 4.4%
21 - 24 4.8% 6.4%
25 - 34 17.9% 20.4%
35 - 44 14.6% 16.0%
45 - 54 13.3% 10.0%
55 - 64 12.0% 7.0%
65 - 74 7.4% 5.4%
75 - 84 2.6% 3.3%
85 + 0.8% 1.2%
Female Median Age Total Population 35.5 31.4
Female Median Age Adult Population 43.4 38.4
1990 % Hispanic Population by Type:
Not of Hispanic Origin 79.8% 86.0%
Mexican 16.5% 12.0%
Puerto Rican 0.2% 0.2%
Cuban 0.4% 0.1%
Other Hispanic 3.1% 1.7%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 5 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Population Enrolled in School (Age 3 & Over):
Preprimary School 8.7% 7.2%
Elementary and High School 65.8% 65.9%
College 25.4% 26.9%
Total School Enrollment 5,865 711,757
1990 % Educational Attainment (Age 25 & Over):
Less than Grade 9 8.7% 9.0%
Grade 9-12 (No Diploma) 11.8% 12.6%
High School Graduate or Equivalency 25.1% 23.8%
Some College (No Degree) 23.7% 22.3%
Associate Degree 5.6% 5.5%
Bachelor Degree 18.6% 18.7%
Graduate or Professional Degree 6.5% 8.2%
1990 % Employment Status:
Total Labor Force:
Armed Forces 0.2% 0.2%
Civilian:
Employed 69.8% 68.6%
Unemployed 4.0% 4.2%
Not In Labor Force 25.9% 27.0%
Female Labor Force:
Armed Forces 0.1% 0.0%
Civilian:
Employed 63.3% 60.7%
Unemployed 2.7% 3.7%
Not In Labor Force 33.9% 35.6%
1990 % Working Mothers:
Child < 6 Only 23.0% 19.1%
Child 6-17 Only 39.9% 38.1%
Child < 6 & 6-17 13.9% 13.1%
Nonworking Mothers 23.2% 29.7%
Total Mothers 2,839 368,004
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 6 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Industry Employment:
Agriculture/Forestry/Fishing 0.9% 1.4%
Mining 1.3% 1.0%
Construction 4.3% 5.4%
Manufacturing:
Nondurable Goods 7.2% 5.6%
Durable Goods 11.6% 11.2%
Transportation 5.1% 4.9%
Communications & Public Utilities 2.4% 3.4%
Wholesale Trade 8.5% 6.0%
Retail Trade 18.2% 16.9%
Finance/Insurance/Real Estate 9.6% 9.6%
Services:
Business & Repair 8.0% 7.2%
Personal 4.0% 3.5%
Entertainment & Recreation 1.5% 1.3%
Health 3.8% 6.0%
Educational 5.2% 6.6%
Other Professional & Related 6.1% 6.9%
Public Administration 2.4% 3.0%
Total 13,277 1,388,158
1990 % Occupation:
Executive & Managerial 16.6% 15.1%
Professional Specialty 11.7% 13.8%
Technical Support 3.9% 4.1%
Sales 15.5% 13.5%
Administrative Support 19.3% 18.2%
Service: Private Household 0.8% 0.6%
Service: Protective 0.6% 1.4%
Service: Other 9.3% 9.9%
Farming, Forestry & Fishing 0.9% 1.2%
Precision Production, Craft & Repair 10.0% 9.9%
Machine Operator, Assemblers & Inspectors 6.1% 5.4%
Transportation & Material Moving 2.3% 3.4%
Laborers 3.0% 3.5%
White Collar Total 67.0% 64.8%
Blue Collar Total 21.4% 22.2%
Total Employed 13,277 1,388,158
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 7 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Marital Status:
Total Male: 9,468 1,002,479
Never Married 27.1% 30.2%
Married 62.6% 57.2%
Separated 1.5% 2.4%
Widowed 1.6% 1.7%
Divorced 7.2% 8.4%
Total Female: 9,800 1,056,315
Never Married 17.5% 22.8%
Married 59.4% 53.2%
Separated 2.3% 3.1%
Widowed 8.8% 9.1%
Divorced 12.0% 11.8%
1990 Households by Type:
One Person Households 1,600 259,941
Two or more Person Households:
Family Households:
Married Couple 5,525 535,233
Male Householder 323 34,968
Female Householder 865 113,411
Nonfamily Households 458 58,197
1990 Family Households With Children
Married Couple Family 2,450 287,453
Male Householder 161 18,898
Female Householder 501 78,686
1990 Population by Household Type:
Family Households 21,459 2,243,632
Nonfamily Households 2,662 392,019
1990 Households With:
Children Under 18 3,146 389,122
Persons Over 65 1,715 156,938
Householder Over 65 1,463 138,558
1990 Average Family Size 3.12 3.21
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 8 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 Median Home Value $ 86,816 81,512
1990 Average Home Value $ 101,024 103,333
1990 Median Contract Rent $ 476 390
1990 Average Contract Rent $ 505 421
1990 Persons In Unit:
1 Person Units 1,600 259,941
2 Person Units 3,247 303,723
3 Person Units 1,597 175,477
4+ Person Units 3,710 262,609
1990 Housing Unit Counts:
Total Units 9,213 1,133,568
% Occupied 95.2% 88.4%
% Vacant 4.8% 11.6%
% Year Round 4.7% 10.8%
% Seasonal 0.1% 0.8%
Occupied Units 8,771 1,001,750
% Owner Occupied 69.6% 56.0%
% Renter Occupied 30.4% 44.0%
Vacant Units 442 131,818
% Year Round of Vacant Units 98.9% 93.2%
% Seasonal of Vacant Units 1.1% 6.8%
1990 Total Housing Units in Structure 9,213 1,133,568
1, Detached 77.5% 56.4%
1, Attached 3.2% 3.3%
2, 0.4% 1.6%
3 - 9 7.3% 11.8%
10 - 49 9.8% 14.9%
50 + 1.2% 6.4%
Mobile Home or Trailer 0.0% 4.4%
Other 0.6% 1.1%
1990 Owner Occupied Housing Units by Year Built 6,107 561,477
Built 1985 to March, 1990 0.7% 14.5%
Built 1980 to 1984 4.8% 15.9%
Built 1970 to 1979 10.4% 23.5%
Built 1960 to 1969 45.5% 18.4%
Built 1950 to 1959 35.8% 15.7%
Built 1949 or Earlier 2.7% 11.9%
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
Atlas MarketQuest
Market Stats Report
CBC 7547.2501 Houston Galleria Page 9 of 9
Area 1 = Farmers Branch, TX 8/7/97
Area 2 = Dallas PMSA
- --------------------------------------------------------------------------------
Description Area 1 Area 2
- --------------------------------------------------------------------------------
1990 % Means of Transportation to Work:
Car, Truck or Van:
Drove Alone 80.5% 77.5%
Carpooled 11.7% 14.1%
Public Transportation 1.8% 3.1%
Other Means 3.0% 2.9%
Worked at Home 3.0% 2.3%
1990 % Travel Time to Work:
0 - 14 Minutes 31.0% 24.1%
15 - 29 Minutes 45.3% 37.8%
30 - 59 Minutes 20.2% 32.5%
60 - 89 Minutes 1.6% 4.1%
90 + Minutes 1.9% 1.6%
1990 Households by Number of Vehicles:
1 Vehicle 2,353 356,704
2 Vehicles 4,370 410,024
3 Vehicles 1,311 124,291
4 Vehicles 377 32,226
5 or More Vehicles 97 9,075
Area defined by Place
Area defined by MSA
Copyright 1996 Strategic Mapping, Inc. All rights reserved.
<PAGE>
================================================================================
ADDENDUM C TORTO WHEATON RESEARCH DATA
- --------------------------------------------------------------------------------
Addendum C
TORTO WHEATON RESEARCH DATA
<PAGE>
Dallas
- --------------------------------------------------------------------------------
DALLAS
- --------------------------------------------------------------------------------
Overview As of 1995, the population of the Dallas metropolitan
statistical area was 2.96 million making it the 11th
largest in the country and the 11th largest of the
markets we follow.
The Dallas, TX MSA is comprised of the eight counties
Collin, Dallas, Denton, Ellis, Henderson, Hunt, Kaufman,
and Rockwell. The central cities consist of Dallas,
Irving, and Denton. The office properties that we report
on are the competitive multi-tenant properties that are
10,000 square feet and over.
From the most recent information, the median per capita
personal income in 1995 for the MSA was $25,604 which is
10% above the national level. The cost of doing business
is 2% above the national average.
Industries concentrated in Dallas include oil & gas
extraction, pipe lines except natural gas, electric &
electronic products. By comparing the percentage of
total employment each industry commands to the national
percentage, we can determine some of the highly
concentrated industries.
The top major employers of the Dallas area are AMR Corp,
Texas Instruments, Kroger, Baylor Health Care System,
and Lockheed Martin Tactical Aircraft Systems. Other
employers include SBC Communications, EDS Corp,
NationsBank of Texas, and Minyard Food Stores.
Data as of 4th Quarter 1996 VI. 201 (C) Copyright 1997, CBC/Torto
Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
The Economy Dallas has the 11th largest employment level of the MSAs
we follow at approximately 1,667,230 workers. Over the
last 10 years, employment has grown at an average annual
rate of 2.2%. In the last year it grew by 3.8%. The
measures for our 54 MSAs are 1.5% and 2.0%,
respectively.
[The following table was represented as a pie chart in the original]
Gov't 12%
Other 5%
Mfg. 14%
TCU 7%
Wholesale 8%
Retail 17%
FIRE 8%
Services 29%
Table 1 presents the current employment levels and
location quotients for each industry as well as historic
growth rates over the last 10 years, last four quarters,
and forecasted rates for the next 10 years.
Table 1: Employment Levels and Growth Rates by Industry
<TABLE>
<CAPTION>
Average Annual Growth Rates: Dallas & 54 MSAs
-----------------------------------------------------------------------------------------------
Employment Location Last 10 Years Last 4 Quarters Next 10 Years
Levels (x1000) Quotient Dallas 54 MSAs Dallas 54 MSAs Dallas 54 MSAs
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRE 131.2 1.12 -0.1 0.6 0.5 1.1 1.6 1.0
Government (civilian) 195.0 0.80 2.8 1.2 1.5 0.2 1.0 0.6
Manufacturing 235.2 1.08 0.2 -1.1 2.6 0.4 0.2 -0.1
Retail Trade 288.3 1.00 1.7 1.4 4.1 2.3 1.9 1.8
Services 488.2 0.93 4.9 3.7 4.9 3.4 3.1 2.8
Transportation & Public Utilities 110.5 1.17 4.8 1.6 6.3 1.3 1.2 1.2
Wholesale Trade 134.4 1.30 1.2 1.0 4.1 2.3 1.6 1.3
-----------------------------------------------------------------------------------------------
Total Employment 1667.2 2.2 1.5 3.8 2.0 1.8 1.6
-----------------------------------------------------------------------------------------------
Office Employment 394.9 1.18 2.9 2.7 3.3 3.5 2.3 2.0
-----------------------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton
Research Data as of 3rd Quarter, 1996
An initial indication of the relative importance of a
particular employment sector is its share of total
employment, and for greater perspective, a comparison of
its share to the national share. Location quotients
above 1.0 indicate that the local economy has a greater
share of a particular industry than the national average
and the opposite is true when they are below 1.0.
For Dallas, the location quotient for FIRE employment is
1.12 while the location quotient for Service employment
is 0.93. This means that in Dallas the share of FIRE
employment is 12% greater than the national average. The
share of Service employment in this MSA is 7% less than
the national average.
- ---------------------------------
Economic Performance
(Rank out of 54)
- ---------------------------------
Total Employment:
current level 11
- ---------------------------------
Total Employment:
% growth over last 10 years 27
- ---------------------------------
Total Employment:
% growth over last year 10
- ---------------------------------
Total Employment:
% growth next 10 years 19
- ---------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997. CBC/Torto Wheaton Research
<PAGE>
Dallas
- --------------------------------------------------------------------------------
Office We identify and measure employment within the FIRE and
Employment Service sectors in industries such as legal services,
accounting, and insurance to create our office
employment index. The index covers 80-90% of all
office-related employment within each MSA. More specific
details are available in the Data and Methodology
Appendix.
Our estimate of office employment for Dallas currently
stands at 394,900 workers. Over the last 10 years,
office employment has grown by 2.9%. Over the last year
Dallas has seen its office employment grow by 3.3%.
Table 2 below provides historic growth rates for some of
the significant office related industries in Dallas.
Table 2: Levels and Historic Growth Rates for Subcategories of
Office Employment
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Level Average Annual Growth Rates
Employment Category (x1000) Last 10 Years Last 5 Years Last Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance, Insurance, and Real Estate Banks 23.8 -2.6 -3.2 -1.1
Credit Agencies & Mortgage Companies 17.2 6.0 6.3 2.6
Insurance Agents 14.7 3.0 2.0 2.3
Insurance Companies 32.3 -0.8 0.0 -0.1
Misc Investing & Trusts 4.7 3.2 5.2 2.6
Real Estate Companies 30.4 -2.0 -1.1 0.1
Securities Firms 8.0 3.5 6.5 0.5
Service Employment Accounting Finns 9.5 2.8 5.4 2.5
Advertising 7.2 5.3 10.2 11.3
Computer & Data Processing 41.1 5.2 6.6 8.0
Consumer Credit Reporting 4.3 7.9 8.7 7.5
Engineering & Architectural Services 7.0 -3.3 -2.1 -4.6
Legal Services 15.8 3.3 0.4 1.5
Mailing & Reproduction 6.8 5.8 9.7 7.9
Management & Public Relations 19.7 11.3 11.8 8.4
Misc. Business Services 26.6 2.0 2.2 -2.1
Misc. Equipment Rental & Leasing 6.8 8.1 15.8 38.1
Motion Picture Distribution Services 2.1 21.2 21.8 21.1
Other Services 29.4 5.9 2.6 2.3
Personnel Services 51.4 11.3 9.7 5.9
Research & Testing Services 6.6 -0.1 -1.9 4.1
-----------------------------------------------------------------------------------------------
</TABLE>
Source: Regional Financial Associates, Torto Wheaton
Research Data as of 3rd Quarter, 1996
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
For our 54 MSAs, the average annual growth rate of
office employment over the last 10 years was 2.7% while
over the last year it was 3.5%. The forecast calls for
office employment to grow by 2.0% over the next six
years.
The amount of office employees is the primary
determinant of the demand side of the office market
equation; but it is not the only factor. Also important
is the efficiency of space use, measured by square foot
per employee, as well as the rental cost of space. Some
market observers have been arguing that office hoteling,
virtual offices, or 'reengineering' will lead to less
space per employee in the future. By implication, there
would be less demand for office space.
The graph below provides a comparison of office
employment growth for Dallas compared to all 54 MSAs
since 1980 indexed to a 1980 starting point of 100.
Relative
Office Employment [GRAPHIC OMITTED]
Performance
Since the early eighties, the level of office employment
in Dallas has consistently grown at a faster pace than
the nation. Growth in office employment has been
consistently positive except for a brief period between
the years of 1990 and 1993 where growth declined and
leveled. In both Dallas and the nation as a whole, the
peak year for employment prior to the recession was
1990. Since the end of the recession, Dallas office
employment has grown slightly faster than the nation.
- ---------------------------------
Economic Performance
(Rank out of 54)
- ---------------------------------
Office Employment:
current level 9
- ---------------------------------
Office Employment:
% growth over last 10 years 37
- ---------------------------------
Office Employment:
% growth over last year 27
- ---------------------------------
Office Employment:
% growth next 6 years 24
- ---------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Dallas
- --------------------------------------------------------------------------------
The Current Dallas is the 7th largest of the 54 markets we follow
Office Market with 111.3 million square feet. As of the fourth
quarter, 1996, the vacancy rate was 17.0%, placing
Dallas 49th out of 54 markets. The national vacancy
rate was 12.2%.
Dallas contains 71.1 million square feet of Class 'A'
office space with a year-end vacancy rate of 11.9%,
while the average Class 'A' vacancy rate for the 54
markets stood at 9.9% year-end. The 1980's saw a
tremendous building of office space. Nationally, 56.4%
or 1.5 billion square feet of the total stock of all
office space has been built since 1980. In Dallas, 73.6%
has been built since 1980.
Out of our 54 markets, 48 quote rents primarily on a
gross basis. The Dallas average gross asking rent is
$14.07 per square foot, while nationally this figure is
$18.35. Over the last year, the Dallas quote rose 10.3%,
while the national quote rose 2.8%.
Vacancy Rates [GRAPHIC OMITTED]
1992-1996
Gross Asking Rents [GRAPHIC OMITTED]
1992-1996
- ---------------------------
Office Market Standings
(Rank out of 54)
- ---------------------------
Building Count 14
- ---------------------------
Market Size 7
- ---------------------------
Vacancy Rate 49
- ---------------------------
Gross Asking Rents 42
- ---------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Table 3: Dallas Office Space by Submarket
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Sublet as a %
Number of NRA Vacancy of Total Weighted Average TWR
Buildings (x1000) Rate Available Gross Asking Rents Rent Index*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBD 55 27,524 34.8 1.4 $10.33 $14.38
---------------------------------------------------------------------------
Subtotal for Downtown 55 27,524 34.8 1.4 $10.33 $14.38
---------------------------------------------------------------------------
---------------------------------------------------------------------------
183 Corridor 10 947 8.3 0.0 $10.31 $14.60
Carrollton 14 1,329 10.8 5.3 $14.03 $15.05
Central 24 6,047 13.4 2.3 $13.63 $16.23
Dallas Parkway/Bent Tree 30 2,502 6.2 25.0 $17.09 $15.52
Far North Dallas 26 2,911 3.4 14.0 $18.26 $16.31
Garland 8 519 18.3 0.0 $9.08 na
LBJ East 37 3,380 7.2 11.6 $13.30 $15.73
LBJ West 10 1,578 5.9 6.1 $13.90 $16.17
LBJ/Quorum 143 22,764 6.7 12.2 $17.26 $16.22
Las Comas 71 11,792 5.6 8.3 $16.73 $15.54
Love Field 12 1,526 22.2 0.0 $11.24 na
Mid Stemmons 4 314 13.7 0.0 $9.37 $14.13
N. Central Expressway 33 4,436 13.5 1.8 $14.61 $16.36
North Stemmons 7 328 19.8 8.5 $13.98 na
Oaklawn/Turtle Creek 45 6,455 14.9 4.9 $17.52 $16.91
Preston Center 18 2,485 8.7 16.3 $18.63 $20.21
Richardson/Plano 80 6,170 9.8 0.8 $16.16 $15.36
South Dallas 8 602 9.3 0.0 $11.97 na
Stemmons 50 7,464 32.0 6.8 $13.45 $13.62
White Rock 4 264 54.9 0.0 $12.10 $17.92
---------------------------------------------------------------------------
Subtotal for Suburban 634 83,813 11.1 6.9 $14.96 $15.92
===========================================================================
---------------------------------------------------------------------------
Total for Dallas 689 111,337 17.0 4.2 $14.07 $15.49
===========================================================================
</TABLE>
* The Torto Wheaton Rent Index represents the contract
gross rent for a 5 year - 10,000 square foot lease in a
building of average age, size, and class in an average
location. The average building in Dallas is a class A,
161,566 square foot building built between 1980 and
1995.
- --------------------------------------------------------------------------------
The submarket descriptions for the Dallas MSA are
provided by the local CB Commercial office as of second
quarter 1995. This MSA consists of two major markets of
Downtown and Suburban. The Downtown market contains only
one submarket, while the Suburban market includes twenty
submarkets. The CBD submarket is bordered by the Woodall
Rodgers Freeway on the north and Highway 67 to the
south. The Suburban market lies east of Highway 360 and
west of Lake Ray Hubbard.
- -----------------------------------
Downtown/Suburban
Market Standings
DT Sub
- -----------------------------------
Building Count 27 12
- -----------------------------------
NRA 9 5
- -----------------------------------
Vacancy Rate 46 35
- -----------------------------------
Tw Rent Index 41 41
- -----------------------------------
Downtown ranked out of 46
Suburban ranked out of 53
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Dallas
- --------------------------------------------------------------------------------
Table 4: Dallas Office Space by Class
<TABLE>
<CAPTION>
----------------------------------------------------------------
Class 'A' Gross Class 'B'& 'C' Gross
NRA Vacancy Asking NRA Vacancy Asking
(x1000) Rate Rent (x1000) Rate Rent
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBD 17,176 22.6 na 10,348 55.0 $10.33
Subtotal for Downtown 17,176 22.6 na 10,348 55.0 $10.33
================================================================
----------------------------------------------------------------
183 Corridor 524 2.5 $14.00 423 15.6 $9.97
Carrollton 1,035 10.8 $15.17 294 10.9 $10.40
Central 2,597 5.9 $17.99 3,450 19.0 $12.55
Dallas Parkway/Bent Tree 1,991 5.4 $17.15 511 9.4 $16.97
Far North Dallas 2,823 3.3 $18.37 88 8.0 $16.00
Garland 268 8.6 $12.24 251 28.7 $8.03
LBJ East 1,737 6.7 $14.32 1,643 7.8 $12.59
LBJ West 1,441 3.5 $13.80 137 30.7 $13.92
LBJ/Quorum 14,101 6.3 $19.16 8,663 7.4 $14.68
Las Colinas 9,427 3.6 $16.29 2,365 13.2 $17.27
Love Field 257 16.0 $15.80 1,269 23.5 $8.60
Mid Stemmons 179 18.4 $9.41 135 7.4 $9.25
N. Central Expressway 2,908 11.3 $16.31 1,528 17.7 $12.45
North Stemmons 259 25.1 $13.98 69 0.0 na
Oaklawn/Turtle Creek 5,439 14.4 $17.89 1,016 17.3 $15.37
Preston Center 1,612 8.9 $20.95 873 8.1 $17.52
Richardson/Plano 4,786 9.1 $17.11 1,384 12.1 $13.66
South Dallas 181 12.2 $12.23 421 8.1 $11.80
Stemmons 2,245 33.6 $15.58 5,219 31.3 $12.44
White Rock 149 34.2 $12.02 115 81.7 $12.15
----------------------------------------------------------------
Subtotal for Suburban 53,959 8.4 $17.04 29,854 16.0 $13.03
================================================================
----------------------------------------------------------------
Total for Dallas 71,135 11.9 $17.04 40,202 26.0 $12.18
================================================================
</TABLE>
- --------------------------------------------------------------------------------
The personnel in the local CB Commercial office in the
Dallas area have classified most of the office
properties in Dallas as A, B, or C class space. The
local CB offices determine their own criteria for
building classification.
- ------------------------------------
Dallas
Class "A" Standings
- ------------------------------------
Rank
Level out of 54
- ------------------------------------
NRA (x1000) 71,135 5
- ------------------------------------
Vacancy Rate 11.9% 43
- ------------------------------------
Gross
Asking Rent $17.04 47
- ------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Spring, 1997 Office Outlook
- --------------------------------------------------------------------------------
Year-by-Year To put the Dallas market into perspective, the next two
Office History tables contain annual net absorption and vacancy rates
by submarket for the last five years.
Table 5: Historic Net Absorption By Submarket
-----------------------------------------------------
(Square Feet
x 1000)
1992 1993 1994 1995 1996
CBD -1,860 401 -802 -356 350
- -----------------------------------------------------------------------------
Subtotal for Downtown -1,860 401 -802 -356 350
-----------------------------------------------------
183 Corridor 27 46 4 28 44
Carrollton 80 61 60 49 34
Central 402 -402 785 259 235
Dallas Parkway/Bent Tree 222 420 605 28 6
Far North Dallas 262 -6 23 169 59
Garland -70 -34 14 2 37
LBJ East 38 -196 331 -39 617
LBJ West 130 -36 -38 107 -21
LBJ/Quorum -247 401 993 1,494 567
Las Colinas -164 957 466 281 222
Love Field -90 4 300 10 -67
Mid Stemmons 16 -39 81 40 47
N. Central Expressway 228 55 165 187 453
North Stemmons -9 11 12 5 20
Oaklawn/Turtle Creek 10 180 117 -9 -41
Preston Center 41 96 32 -108 18
Richardson/Plano -203 598 269 584 -65
South Dallas 7 29 2 23 6
Stemmons 273 68 262 -368 299
White Rock -2 -39 1 7 -88
-----------------------------------------------------
Subtotal for Suburban 951 2,174 4,484 2,749 2,382
=====================================================
-----------------------------------------------------
Total far Dallas -909 1,773 3,682 2,393 2,732
=====================================================
- --------------------------------------------------------------------------------
Dallas ranks 20th among our 54 MSAs in performance as
measured by calculating an absorption rate for 1996 -
that is, taking the year's total net absorption divided
by end-of-year 1995 occupied stock. Over the last five
years, the average annual absorption rate for Dallas is
2.26%, 36th out of our 54 MSAs.
- ----------------------------------------------
Absorption Performance
Level/ Rank
Rate out of 54
- ----------------------------------------------
Avg ann'l absorption
over the last five years 1937 7
- ----------------------------------------------
Ann'l Absorption Rate
over the last five years 2.3% 36
- ----------------------------------------------
Absorption Rate
over the last 4 quarters 3.0% 20
- ----------------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE>
Dallas
- --------------------------------------------------------------------------------
Table 6: Historic Vacancy Rates and Completions by Submarket
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy Cmpltns Vacancy
SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate SF X 1000 Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBD 0 30.3 0 31.8 0 34.6 0 36.1 0 34.8
-------------------------------------------------------------------------------------------------------
Subtotal for Downtown 0 30.3 0 31.8 0 34.6 0 36.1 0 34.8
=======================================================================================================
-------------------------------------------------------------------------------------------------------
183 Corridor 0 21.2 0 16.4 0 15.9 0 13.0 0 8.3
Carrollton 0 26.0 0 21.2 0 16.7 0 13.0 0 10.8
Central 0 27.9 0 34.5 0 21.5 0 17.2 0 13.4
Dallas Parkway/Bent Tree 0 44.9 0 29.9 0 7.8 0 6.9 0 6.2
Far North Dallas 0 12.4 0 12.1 0 11.3 0 5.5 0 3.4
Garland 0 18.4 0 28.5 0 25.8 0 25.4 0 18.3
LBJ East 0 28.3 0 35.1 0 24.5 0 25.5 0 7.2
LBJ West 0 6.6 0 7.2 0 11.3 0 4.6 0 5.9
LBJ/Quorum 0 22.0 0 20.2 0 15.9 0 9.3 0 6.7
Las Colinas 0 21.7 0 13.5 0 9.6 0 7.5 0 5.6
Love Field 0 38.2 0 38.2 0 18.5 0 17.8 0 22.2
Mid Stemmons 0 44.8 0 54.3 0 37.9 0 28.7 0 13.7
N. Central Expressway 0 32.6 0 31.7 0 27.9 0 23.7 0 13.5
North Stemmons 0 35.7 0 32.3 0 28.6 0 27.3 0 19.8
Oaklawn/Turtle Creek 0 18.8 0 15.9 0 14.2 0 14.2 0 14.9
Preston Center 0 10.3 0 6.2 0 4.9 0 9.3 0 8.7
Richardson/Piano 0 32.6 0 22.8 0 18.4 0 8.8 0 9.8
South Dallas 0 19.4 0 14.4 0 14.1 0 10.3 0 9.3
Stemmons 0 37.6 0 37.2 0 33.4 0 36.1 0 32.0
White Rock 0 6.5 0 23.3 0 22.8 0 20.3 0 54.9
-------------------------------------------------------------------------------------------------------
Subtotal for Suburban 0 25.2 0 22.7 0 17.5 0 14.0 0 11.1
=======================================================================================================
-------------------------------------------------------------------------------------------------------
Total for Dallas 0 26.5 0 25.0 0 21.7 0 19.4 0 17.0
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The metropolitan vacancy rate for Dallas stood at 17.0%
at the end of fourth quarter of 1996, 49th out of our 54
MSAs. In 1992, the vacancy rate stood at 26.5%, 52nd out
of the 54 MSAs. Most markets around the country are
showing a good improvement in vacancy levels due to a
combination of moderate demand growth and little in the
way of new supply.
- --------------------------------------
Vacancy History Standings
Rank
Rate out of 54
- --------------------------------------
Current Vacancy Rate 17.0% 49
- --------------------------------------
1992 Vacancy Rate 26.5% 52
- --------------------------------------
1995 Vacancy Rate 19.4% 50
- --------------------------------------
Data as of 4th Quarter, 1996 (C) Copyright 1997, CBC/Torto Wheaton Research
<PAGE> 
