<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
CONAM REALTY INVESTORS 81, L.P.
(NAME OF THE ISSUER)
ConAm Realty Investors 81, L.P. Continental American Properties, Ltd.
ConAm Property Services, Ltd. ConAm DOC Affiliates LLC
(NAME OF PERSONS FILING STATEMENT)
Units of Limited Partnership Interest
(TITLE OF CLASS OF SECURITIES)
44849P107
(CUSIP NUMBER OF CLASS OF SECURITIES)
Frederick B. McLane, Esq.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
(213) 430-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. The filing of a registration statement under the Securities Act of 1933.
c. A tender offer.
d. None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [X]
CALCULATION OF FILING FEE
===============================================================================
$12,334,670 $2,467
Transaction Valuation(1) Amount of Filing Fee
===============================================================================
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $2,467 Filing party: ConAm Realty Investors 81, L.P.
------------------- -------------------------------
Form or registration no.: Schedule 13E-3 Date filed: October 30, 1998
----------------- ---------------------------------
</TABLE>
Instruction. Eight copies of this statement, including all exhibits, should be
filed with the Commission.
- --------
(1) For purposes of calculating the filing fee only. The filing fee was
calculated in accordance with Rule 0-11 under the Securities Exchange Act
of 1934, as amended, and equals 1/50 of one percent of the aggregate
amount of cash to be distributed to securityholders in connection with the
transaction.
<PAGE>
CONAM REALTY INVESTORS 81, L.P.
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110-1906
This Rule 13e-3 Transaction Statement (this "Statement") relates to the
proposed sale of the remaining two properties (the "Properties") of ConAm
Realty Investors 81, L.P., a California limited partnership (the
"Partnership"), to a Delaware limited liability company (the "Purchaser") to
be formed if the proposed sale is approved by the Partnership's limited
partners. It is anticipated that, shortly after the sale of the Properties,
the net proceeds from the sale, together with certain cash reserves, would be
distributed to the limited partners and the Partnership would be liquidated. A
final distribution of cash from reserves would be distributed to limited
partners at the time of liquidation.
The general partner of the Partnership is ConAm Property Services, Ltd. (the
"General Partner"). Continental American Development, Inc., a California
corporation ("CADI"), and ConAm Development Corp. are the general partners of
the General Partner. The shareholders of CADI are substantially identical to
the partners of Continental American Properties, Ltd. ("CAPL"). CAPL is the
managing member of ConAm DOC Affiliates LLC, which will own a 9% interest in
the Purchaser. In addition, the shareholders of CADI are identical to the
shareholders of ConAm Management Corporation ("ConAm Management"), which will
act as the initial property manager for the Purchaser with respect to the
Properties if the proposed sale is approved.
A preliminary consent solicitation statement (the "Consent Solicitation
Statement") regarding the proposed sale was filed with the Securities and
Exchange Commission on October 30, 1998.
The following Cross-Reference Sheet is supplied pursuant to General
Instruction F of Schedule 13E-3 and cites the location in the Consent
Solicitation Statement of the information required to be included in response
to the items of this Statement, which Consent Solicitation Statement is hereby
incorporated by reference to the extent so cited. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Consent Solicitation Statement. The Consent Solicitation Statement
will be completed and, if appropriate, amended prior to the time it is first
sent or given to limited partners of the Partnership. This Statement will be
amended to reflect such completion or amendment of the Consent Solicitation
Statement.
<PAGE>
CROSS-REFERENCE SHEET
- --------------------------------------------------------------------------------
Item of Schedule 13E-3 Location in Consent Solicitation Statement
- --------------------------------------------------------------------------------
Item 1. Issuer and Class of
Security Subject to the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) Outside Front Cover Page, "SUMMARY--The
Partnership," "ACTION BY CONSENT--Record Date,"
"MARKET FOR THE UNITS," "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF."
- --------------------------------------------------------------------------------
(c) "MARKET FOR THE UNITS."
- --------------------------------------------------------------------------------
(d) "DISTRIBUTIONS."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) Not applicable.
- --------------------------------------------------------------------------------
Item 2. Identity and This Statement is being filed by the issuer and
Background certain affiliates of the issuer named in (b)
below.
- --------------------------------------------------------------------------------
(a)-(c) ConAm Property Services, Ltd.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
Continental American Properties, Ltd.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
ConAm DOC Affiliates LLC
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
ConAm Development Corp.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
Continental American Development, Inc.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
DJE Financial Corp.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Daniel J. Epstein
Chairman and Chief Executive Officer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
J. Bradley Forrester
President
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
E. Scott Dupree, Esq.
Senior Vice President and General Counsel
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
Robert J. Svatos
Senior Vice President and Chief Financial Officer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
Ralph W. Tilley
Senior Vice President and Treasurer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
- --------------------------------------------------------------------------------
(d) Daniel J. Epstein has been Chairman and Chief
Executive Officer of ConAm Management Corporation
since 1983.
J. Bradley Forrester has been President of ConAm
Management Corporation since 1994. Prior to
joining ConAm Management Corporation, Mr.
Forrester was Senior Vice President-Commercial
Real Estate for First Nationwide Bank from 1991
to 1994. First Nationwide Bank was a national
savings bank located at 700 Market Street, San
Francisco, California.
E. Scott Dupree has been Senior Vice President
and General Counsel of ConAm Management
Corporation since 1985.
Robert J. Svatos has been Senior Vice President
and Chief Financial Officer of ConAm Management
Corporation since 1988.
Ralph W. Tilley has been Senior Vice President
and Treasurer of ConAm Management Corporation
since 1980.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
(e) and (f) During the last five years, neither the
Partnership nor any of the persons named in the
response to Item 2(a) hereof has been
(i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction
and, as a result of such proceeding, was or is
subject to a judgment, decree or final order
enjoining further violations of, or prohibiting
activities subject to, federal or state
securities laws or finding any violation of such
laws.
- --------------------------------------------------------------------------------
(g) All natural persons named in the response to Item
2(a) are citizens of the United States of
America.
- --------------------------------------------------------------------------------
Item 3. Past Contacts,
Transactions or
Negotiations
- --------------------------------------------------------------------------------
(a)(1) Not applicable.
- --------------------------------------------------------------------------------
(a)(2) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
(b) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
Item 4. Terms of the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) Outside Front Cover Page, "SUMMARY," "SPECIAL
FACTORS--Effects of the Sale," "--Fairness of the
Sale," "THE PROPOSALS--The Purchaser," "--
Background of the Sale," "--Conflicts of Interest
of the General Partner," "--Terms of the Purchase
Agreements," "--The Amendment."
- --------------------------------------------------------------------------------
Item 5. Plans or Proposals
of the Issuer or Affiliate
- --------------------------------------------------------------------------------
(a)-(g) Outside Front Cover Page, "SUMMARY," "SPECIAL
FACTORS-- Effects of the Sale," "THE PROPOSALS--
The Purchaser," "--Conflicts of Interest of the
General Partner," "--Failure to Approve the
Sale."
- --------------------------------------------------------------------------------
Item 6. Source and Amounts
of Funds or Other
Consideration
- --------------------------------------------------------------------------------
(a) "THE PROPOSALS--Purchaser's Valuation," "--
Background of the Sale," "--Terms of the Purchase
Agreements."
- --------------------------------------------------------------------------------
(b) "ACTION BY CONSENT--Action by Consent."
- --------------------------------------------------------------------------------
(c) "THE PROPOSALS--Terms of the Purchase
Agreements."
- --------------------------------------------------------------------------------
(d) Not applicable.
- --------------------------------------------------------------------------------
Item 7. Purposes,
Alternatives, Reasons and
Effects
- --------------------------------------------------------------------------------
(a) "SPECIAL FACTORS--Reasons for the Sale," "THE
PROPOSALS-- Background of the Sale."
- --------------------------------------------------------------------------------
(b) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "--Fairness of the Sale."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
(c) "SPECIAL FACTORS--Reasons for the Sale," "--
Alternatives Considered to the Sale," "--Fairness
of the Sale."
- --------------------------------------------------------------------------------
(d) Outside Front Cover Page, "SUMMARY," "ACTION BY
CONSENT--Matters to be Considered," "SPECIAL
FACTORS-- Effects of the Sale," "THE PROPOSALS--
The Purchaser," "--Conflicts of Interest of the
General Partner," "CERTAIN FEDERAL AND STATE
INCOME TAX CONSEQUENCES OF THE SALE," "NO
APPRAISAL RIGHTS," "MARKET FOR THE UNITS."
- --------------------------------------------------------------------------------
Item 8. Fairness of the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) "SUMMARY--Fairness of the Sale and Certain
Conflicts of Interest," "SPECIAL FACTORS--
Fairness of the Sale." Each filing person
reasonably believes that the Sale is fair to the
Limited Partners and has adopted the analysis of
the General Partner with respect thereto.
- --------------------------------------------------------------------------------
(c) Outside Front Cover Page, "SUMMARY--Vote
Required," "ACTION BY CONSENT--Action by
Consent," "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(d) "SPECIAL FACTORS--Fairness of the Sale," "THE
PROPOSALS--Background of the Sale," "--Conflicts
of Interest of the General Partner."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
- --------------------------------------------------------------------------------
(a)-(c) "SUMMARY--Fairness of the Sale and Certain
Conflicts of Interest," "SPECIAL FACTORS--
Independent Appraisal."
- --------------------------------------------------------------------------------
Item 10. Interest in
Securities of the Issuer
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
Item 11. Contracts, Not applicable.
Arrangements or
Understandings with Respect
to the Issuer's Securities
- --------------------------------------------------------------------------------
Item 12. Present Intention
and Recommendation of
Certain Persons with Regard
to the Transaction
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
(b) No recommendation regarding the Sale has been
made to date by any person named in paragraph (a)
of this Item to any person owning Units in the
Partnership.
- --------------------------------------------------------------------------------
Item 13. Other Provisions
of the Transaction
- --------------------------------------------------------------------------------
(a) "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
(c) Not applicable.
- --------------------------------------------------------------------------------
Item 14. Financial
Information
- --------------------------------------------------------------------------------
(a) "AVAILABLE INFORMATION," Annex 1 and Annex 2 to
Consent Solicitation Statement. The book value
per Unit as of the 1997 fiscal year end was $28.
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
Item 15. Persons and
Assets Employed, Retained
or Utilized
- --------------------------------------------------------------------------------
(a) "THE PROPOSALS--The Purchaser."
- --------------------------------------------------------------------------------
(b) "SUMMARY--Solicitation Agent," "ACTION BY
CONSENT-- Action by Consent," "VOTING
PROCEDURES."
- --------------------------------------------------------------------------------
Item 16. Additional Not applicable.
Information
- --------------------------------------------------------------------------------
Item 17. Material to be
Filed as Exhibits
- --------------------------------------------------------------------------------
(a) Not applicable.
- --------------------------------------------------------------------------------
(b) Independent Appraisal.
- --------------------------------------------------------------------------------
(c) Not applicable.
- --------------------------------------------------------------------------------
(d) Previously filed.
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) Not applicable.
- --------------------------------------------------------------------------------
6
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
Dated: November 5, 1998
CONAM REALTY INVESTORS, 81 L.P.
By: CONAM PROPERTY SERVICES, LTD.,
its General Partner
By: CONTINENTAL AMERICAN DEVELOPMENT,
INC., its General Partner
By: /s/ Daniel J. Epstein
------------------------------
Name: Daniel J. Epstein
----------------------------
Title: President
---------------------------
CONAM PROPERTY SERVICES, LTD.
By: CONTINENTAL AMERICAN
DEVELOPMENT, INC., its General
Partner
By: /s/ Daniel J. Epstein
---------------------------------
Name: Daniel J. Epstein
-------------------------------
Title: President
------------------------------
CONTINENTAL AMERICAN PROPERTIES, LTD.
By: DJE FINANCIAL CORP., its General
Partner
By: /s/ Daniel J. Epstein
---------------------------------
Name: Daniel J. Epstein
-------------------------------
Title: President
-------------------------------
CONAM DOC AFFILIATES LLC
By: CONTINENTAL AMERICAN PROPERTIES,
LTD., its Administrative Member
By: DJE FINANCIAL CORP., its General
Partner
By: /s/ Daniel J. Epstein
------------------------------
Name: Daniel J. Epstein
----------------------------
Title: President
---------------------------
7
<PAGE>
EXHIBIT B
COMPLETE, SELF-CONTAINED
VALUATION
OF
TIERRA CATALINA
3201 EAST SKYLINE DRIVE
TUCSON, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 81
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
DECEMBER 31, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-077
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Letter of Transmittal...................................... 1
Assumptions and Limiting Conditions........................ 2
Certification.............................................. 4
Salient Facts and Conclusions.............................. 6
Nature of the Assignment................................... 7
City/Neighborhood Analysis................................. 9
Apartment Market Analysis.................................. 13
Site Analysis.............................................. 18
Improvements............................................... 21
Highest and Best Use....................................... 23
Appraisal Procedures....................................... 26
Sales Comparison Approach.................................. 28
Income Approach............................................ 32
Reconciliation............................................. 41
</TABLE>
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
B.A.C.H
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 18, 1998
Hutton/Con Am Realty Investors 81
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of Tierra Catalina Apartments, Tucson,
Arizona; BRA: 97-077
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of December 31, 1997. This appraisal report is in conformance with the
guidelines of the Appraisal Institute. The scope of this assignment includes the
Sales Comparison and Income Approaches to value. The property was inspected in
December 1997 and for purposes of this report it is assumed that all physical
and economic conditions are similar on the date of value as they were on the
date of inspection.
Our analysis of the property focused on the supply and demand factors
influencing the Tucson and subject area apartment market, the sale of comparable
properties; market rent levels, appropriate operating expenses, and acceptable
investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of December 31, 1997 is in the sum of
SIX MILLION FOUR HUNDRED THOUSAND DOLLARS
($6,400,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
BACH REALTY ADVISORS, INC.
/s/ Stevan N. Bach, MAI
Stevan N. Bach, MAI
President and Chief Executive Officer
Four Houston Center
1221 Lamar, Suite 1325
Houston TX 77010
(713) 739~0200
Fax (713) 739-0208
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this complete, self-contained appraisal
is subject to the following assumptions and limiting
conditions.
1. That responsibility is not taken for matters of a legal
nature affecting the property appraised or the title
thereto and that all legal descriptions furnished are
correct.
2. That the title to the property being appraised is good
and marketable and is appraised as though under
responsible ownership and/or management.
3. That the property is free and clear of all liens and
encumbrances, except as otherwise stated.
4. That the sketches in this report are included to assist
the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by the
appraiser.
6. That the information, estimates, and opinions furnished
the appraiser by others and contained in this report
are considered reliable and are believed to be true and
correct; however, responsibility is not taken for their
accuracy.
7. That responsibility is not taken for soil conditions or
structural soundness of the improvements that would
render the property more or less valuable.
8. That possession of this appraisal does not carry with
it the right of publication and that this report, or
any parts thereof, may not be reproduced in any form
without written permission of the appraiser.
9. That testimony or attendance in court or at a hearing
are not a part of this assignment; however, any such
appearance and/or preparation for testimony will
necessitate additional compensation than received for
this appraisal report.
10. That the valuation estimate herein is subject to an all
cash or cash equivalent purchase and does not reflect
special or favorable financing in today's market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of yield
anticipations and our judgement as to the risks and
uncertainties in the subject property and the
consequential rates of return required to attract an
investor under such risk conditions. There is no
guarantee that projected cash flows will actually be
achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by Con
Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
-------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous materials
-------------------------------------------------------
at the subject property, analysis for EPA standards,
----------------------------------------------------
its removal, and/or its encapsulation. If the reader of
-------------------------------------------------------
this report and/or any entity or person relying on the
------------------------------------------------------
valuations in this report wishes to know the exact or
-----------------------------------------------------
detailed existence (if any) of asbestos or other toxic
------------------------------------------------------
or hazardous waste at the subject property, then we not
-------------------------------------------------------
only recommend, but state unequivocally that they
-------------------------------------------------
should obtain an independent study and analysis
-----------------------------------------------
(including costs to cure such environmental problems)
-----------------------------------------------------
of asbestos or other toxic and hazardous waste.
----------------------------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned does hereby certify to the best of my
knowledge and belief that, except as otherwise noted in
this complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were developed,
and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics and
the Uniform Standards of Professional Appraisal
Practice of the Appraisal Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. 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.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment 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 action or
event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
4
<PAGE>
10. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as is,"
of the subject property on an all cash basis, as of
December 31, 1997, is $6,400,000.
/s/ Steven N. Bach, MAI
------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Tierra Catalina
3201 East Skyline Drive
Tucson, Arizona
Location: North side of East Skyline Drive just
east of Campbell Avenue
BRA: 97-077
Legal Description: The Foothills Professional Plaza, Lot 1,
Book 31, Page 53, Pima County, Arizona;
Lots 45, 46, and 47 of The Foothills,
per map recorded in Book 25, Page 100 of
Maps, in the Office of the Pima County
Records. Except that portion conveyed to
Pima County, Arizona, a body politic by
deed dated September 29, 1982 and recorded
in Docket 6899, Page 857
Land Size: 12.344 acres or 537,705 square feet
Building Area: 140,564 square feet of net rentable area
Year Built: 1983
Unit Mix: 23 1BR/1BA at 900 square feet
18 1BR/1BA at 916 square feet
19 2BR/2BA at 1,207 square feet
25 2BR/2BA at 1,233 square feet
17 2BR/2BA/TH at 1,304 square feet
18 3BR/2BA/TH at 1,525 square feet
No. of Units: 120
Average Unit Size: 1,171 square feet
Physical Occupancy: 99 percent
Economic Occupancy: 83 percent
Highest and Best Use
As Vacant: Multifamily
As Improved: Multifamily
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $6,300,000
"As Is" Market Value by
Income Approach: $6,400,000
"As Is" Market Value
Conclusion: $6,400,000
6
<PAGE>
NATURE OF THE ASSIGNMENT
- --------------------------------------------------------------------------------
PURPOSE OF THE
APPRAISAL The purpose of this complete, self-contained appraisal
is to give an estimate of the "as is" leased fee market
value of the subject property on an all cash basis.
IDENTIFICATION OF
THE PROPERTY The subject property contains 24 two-story apartment
buildings with 120 units and a total net rentable area
of 140,564 square feet. It was constructed in 1983 on
12.344 acres. It is identified as the Tierra Catalina
Apartments located at 3201 East Skyline Drive or along
the north side of East Skyline Drive, just east of
Campbell Avenue in Tucson, Arizona.
DATE OF THE APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as of
December 1997 which are assumed will remain unchanged
as of the valuation date of December 31, 1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition, 1996,
----------------------------
sponsored by the Appraisal Institute defines Market
Value as:
"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."
7
<PAGE>
It is our opinion that a reasonable time period to sell
the subject property is six months to one year and this
----------------------
is consistent with current market conditions. A sale
earlier than six months to one year may represent a
value other than market value and is reasonably
believed to be a value less than our market value
stated within our appraisal report.
Leased Fee Estate/1/ - 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.
FUNCTION OF THE
APPRAISAL It is the understanding of the appraisers that the
function of this appraisal is for annual partnership
and/or internal reporting purposes.
PROPERTY RIGHTS
APPRAISED The appraisers have appraised the "as is" leased fee
interest subject to short-term leases which are
typically 6 to 12 months in duration at the subject
property.
THREE-YEAR HISTORY According to the Pima County records, the current owner
of record is Hutton/Con Am Realty Investors 81. No sale
or listing of the subject property is believed to have
occurred over the past three years.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with
accepted techniques, standards, methods, and procedures
of the Appraisal Institute. The values set forth herein
were estimated after application and analysis by the
Sales Comparison and Income Approaches to value. These
approaches are more clearly defined in the valuation
section of this report. The Cost Approach was not
utilized in our analysis due to the age of the property
since depreciation is difficult to accurately measure
in older properties. Additionally, it is often the
perception of investors that cost does not necessarily
equate to value and the purchase price is not typically
based on construction costs.
The scope of our assignment included obtaining
pertinent property data from the client regarding
income and expense figures, tenant rent rolls, and
permission to inspect the subject. Additionally, the
appraisers conducted research either personally or
through associates to obtain current market rental
rates, construction trends, the sale of comparable
improved properties, anticipated investor returns, and
the supply and demand of competitive apartment projects
in the general and immediate area. After these
examinations were performed, an analysis was made in
order to estimate the leased fee market value of the
subject on an "as is" basis.
____________________________
/1/ The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
8
<PAGE>
[CITY MAP OF TUCSON ARTERIAL STREETS APPEARS HERE]
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
The Tucson Metropolitan Area (TMA) encompasses approximately
495 square miles and is located 63 miles north of Mexico and
115 miles southeast of Phoenix. Tucson is the county seat of
Pima County and includes four incorporated areas and two
Indian reservations. The county is generally separated into
the foothills and the flatlands topographical regions. The
foothills contain the resorts and more prestigious
residential areas, with higher housing prices and higher
household incomes. The flatlands contain a more diverse
residential population and most of the major employment
centers. The geographic boundaries of the TMA are defined by
five mountain ranges: the Santa Catalina, Rincon, Santa
Rita, Tucson, and Tortolita. The Santa Cruz, Rillito, and
Pantano are the three major rivers or washes that traverse
the Tucson area.
The major transportation arteries in the Tucson area are
Interstate Highway 10 and Interstate Highway 19. Interstate
Highway 10 is the major highway linking the southwestern
United States from El Paso to Los Angeles, and flows in a
northwest/southeast direction in the Tucson area. Interstate
Highway 19 branches south from Interstate Highway 10 near
the traditional downtown and serves the southwestern part of
the community. The Tucson International Airport services 13
domestic and international airlines and Amtrak provides
passenger rail transportation to the city.
LIVABILITY Tucson is in the Sonoran Desert region located in southern
Arizona and northern Mexico and is 2,389 feet above sea
level. This arid climate produces an average annual rainfall
of approximately 11 inches. The three main rivers or washes
in the area are dry for the majority of the year and in the
summer rainy season collects more than half of the annual
rainfall. The average daytime temperature is 82 degrees and
the average humidity level is 25 percent. The sunny, dry
climate of this area is largely responsible for the
population growth over the past twenty years and Tucson has
emerged as a popular vacation and tourist destination. Three
major resorts are located in the foothills of the mountains
around Tucson and there are a number of other smaller
resorts, guest ranches, and hotels, which offer year round
vacation and recreation facilities. There are more than 30
private and semi-private golf courses in the area as well as
more than 30 private and public tennis facilities.
The University of Arizona dominates the field of higher
education with a current enrollment of approximately 40,000
students. The University operates 7 colleges, 5 schools, 114
departments, and a medical school/center and is acknowledged
as a leader in studies of optical sciences, electronics,
scientific instrumentation, and astronomy. Other
institutions of higher education in the area are the Pima
Community College and the University of Phoenix (private).
POPULATION Tucson is the second largest city in Arizona, following
Phoenix. Tucson is located in Pima County or the Tucson
Metropolitan Area, which has shown strong population growth.
In 1980, the estimated population for Pima County was
527,289. This grew at an average annual rate of 2.7 percent
to 668,501 in 1990. Since 1990 the population has also grown
at an average of 2.7 percent to 794,933
9
<PAGE>
in 1997. The Pima Association of Governments projects the
population to grow to 846,000 by the year 2000 and to over 1
million by the year 2010. This would represent an average
annual growth rate of about 2.0 percent.
Economy The economic base of the TMA is heavily oriented toward
governmental and educational employment. The U.S. Army Fort
Huachuca and the University of Arizona are reported to be
the two largest employers with 11,193 and 10,311 employees,
respectively. Other substantial government employers include
the State of Arizona, Davis-Monthan Air Force Base, Tucson
Unified School District, Pima County, and the City of
Tucson. During the military cutbacks several years ago, the
Davis-Monthan Air Force Base was expecting to suffer huge
losses however, employment at the base has actually
increased. Manufacturing employment in metropolitan Tucson
has more than doubled in the past ten years. This growth is
due to the increase of high technology manufacturers
locating and expanding in Pima County. These manufacturers
include AlliedSignal, Weiser Lock, 3M, Burr-Brown,
Environmental Air Products, Inc., Krueger Industries, Inc.,
and Hughes Missile Company. Hughes Missile Systems and BHP
Copper Company are the largest private sector employers. In
January 1997 it was announced that Raytheon, one of the
largest defense contractors in the nation, had purchased
Hughes Corporation. It is expected that the Hughes operation
will increase their engineering employment in Tucson as a
result of the acquisition. Another positive impact on the
local economy has been Allied Signal's decision to not only
remain in Tucson, but to expand their operations. Another
area of growth for the local economy is the increase in
tourism. According to the Tucson Planning Department,
approximately one in four new jobs in the TMA are positively
affected by tourism. The following summarizes the Tucson
Metropolitan Area Employment as of September 1997.
<TABLE>
<S> <C>
Total Employment 365,000
Total Wage and Salary Employment 314,600
Manufacturing 29,800
Durable 23,900
Non-durable 5,900
Mining 2,300
Contract Construction 19,300
Transport., Communications and Public Utilities 13,500
Finance, Insurance and Real Estate 12,800
Trade 68,400
Wholesale 10,500
Retail 57,900
Services 100,200
Government 68,300
Total Civilian Labor Force 378,300
Unemployment Rate (Seasonally Adjusted) 3.2%
</TABLE>
10
<PAGE>
[NEIGHBORHOOD MAP OF TUCSON ARTERIAL STREETS APPEAR HERE]
<PAGE>
ECONOMIC OUTLOOK Over the past few years, Tucson's economy has been mixed.
Citywide, job growth fell off in the late 1980's and early
1990's and the unemployment rate began to creep up. However,
since 1995 this trend appears to have subsided. The
unemployment rate has decreased from 3.6 percent in March
1995 to 3.2 percent in September 1997. It is important to
note that the Davis-Monthan Air Force base was not included
on the Base Realignment and Closure Commission's list.
However, in recent years there has been a closing of
Lockheed Aeromod, which was reportedly, offset somewhat by
the expansions at Gates Learjet. Both the City of Tucson and
Pima County are actively seeking new employees to relocate
to the area. The Tucson Economic Development Corporation
reports that over 6,000 new jobs could be added to Tucson
due to the entrance of new companies.
Moderate and steady growth is projected for the Tucson
economy in the coming year. Population and job growth is
expected to increase. Single family home-building and sales
activity has improved over the last two years. The multi-
family home market experienced it's first growth since
recovery from the overbuilding of the 1980's. However,
caution is warranted in order not to recreate the same
scenario of over supply. Renewed consumer confidence, along
with the decline in mortgage interest rates is the primary
factors behind the strong sales performance. The commercial
sector continues to exhibit over supply in all sectors,
retail, industrial, and office. However, with little new,
construction taking place all markets are improving and
equilibrium is forecasted within the next two years.
Tucson's long-range outlook is optimistic due to its
diversified economic base featuring industry sectors
expected to prosper over time, a growing tourism industry,
and expanding service sector. This coupled with the relative
affordability of real estate compared with either coast is
expected to continue to lure employers/employees as well as
retirement in-migration.
NEIGHBORHOOD The subject property is located in the northern portion of
the Tucson metropolitan area (unincorporated Pima County)
near the foothills of the Santa Catalina mountains. The
boundaries of the neighborhood are Oracle Road to the west,
Ina Road, and residential areas north of Skyline Drive and
Sunrise Drive to the north, Sabino Canyon Road to the east,
and River Road to the south. Oracle Road, Campbell Avenue,
Swan Road, and Craycroft Road are the major north/south
traffic thoroughfares, which provide access to the
neighborhood from the employment centers of the central and
eastern areas of Tucson. Ina Road, Skyline Drive, and
Sunrise Drive accommodate east/west traffic flow in the
northern section near the subject. River Road, which runs
parallel to the Rillito River, defines the southern boundary
of the neighborhood and accommodates the east/west traffic
flow in the southern section.
Generally, the subject neighborhood is residential in nature
and is populated by middle- to upper-income households.
Commercial uses are located along the major traffic
thoroughfares and are mainly support uses for the area
residential base. The most recent commercial developments in
the area have been typically confined to major
intersections, due to the development plan and existing
zoning of Pima County. The closest major intersection to the
subject is at Sunrise Drive and Swan Road. Sunrise Village
and Plaza Bel Air are two community shopping centers at this
location with grocery store anchors as well as branch
banking
11
<PAGE>
facilities, fast-food restaurants, and a number of other
local tenants. One of the area's major commercial
developments is the new Muscular Dystrophy Association (MDA)
headquarters building on Sunrise Drive near the subject and
the new U.S. Postal facility near the intersection of River
Road and Campbell Road. Also, the new Catalina Foothills
High School has been completed on Sunrise Drive.
The subject is located just west of the La Paloma master-
planned community, an 800-acre development which was
approved in 1983 for a total of 2000 single-family and
multifamily units as well as a number of ancillary
commercial uses along Sunrise Drive. The centerpiece of the
La Paloma development is a Mobil Travel Guide four-star
resort and country club which includes a 27-hole golf
facility designed by Jack Nicklaus. Its most recent
construction was The Legends at La Paloma (1995), which is a
312 unit luxury apartment complex.
Water and sewer service is provided to a majority of the
neighborhood by the City of Tucson and the subject property
is located within the County Foothills School District 16.
Pima County provides fire protection and police service.
In order to better understand and analyze the population and
trends of the subject area, a study was prepared by Equifax
Decision Systems which provided demographics within a 1-, 3-
, and 5-mile radii of the subject area. The population
estimates for 1990 were estimated at 5,676 within a 1-mile
radius; 28,751 within a 3-mile radius; and 118,142 within a
5-mile radius. Population increased 198.48 percent between
1970 and 1980 and 67.58 percent between 1980 and 1990 within
a 1-mile radius of the subject. Within 3 miles, growth was
similar during 1970-1980 with a 208.21 percent increase and
73.05 percent from 1980 to 1990. Within a 5-mile radius, the
percentage population growth was substantially less with
increases of 49.58 and 32.37 percent from 1970 to 1980 and
1980 to 1990, respectively.
Residential units in the subject area within the 1- and 3-
mile radii are predominately owner-occupied as opposed to
renter-occupied (77.58 to 79.56 percent and 22.42 to 20.44
percent, respectively). These figures are consistent with
the impressions by visual inspection of the area that there
are a greater number of exclusive single-family residences
than apartment complexes.
Substantial levels of household income in the immediate area
of the subject suggest a relatively affluent population.
Estimated 1990 income levels for households within a 1-mile
and 3-mile radius of the subject property indicate a median
income of $51,397 and $53,264 per year, respectively. The
education level of the area population is high and most
probably contributes to the high-income levels.
Approximately 85 percent of the area residents are high
school graduates and 40 percent have completed college. The
population is predominately between 25 and 54 years old
within the 1- and 3-mile radii, with about 13 percent being
65 years and older.
NEIGHBORHOOD The subject property is perceived as being a positive
CONCLUSION attribute to the area by providing a quality multifamily
development which blends well with the upper income
residential communities nearby. Overall, the subject
neighborhood is projected to continue to prosper in future
years.
12
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
In our analysis of the Tucson Metropolitan (Metro) housing
market and more specifically the Northwest and Catalina
Foothills submarkets, we utilized data from the Metropolitan
Tucson Land Use Study with information from the
Statistics/Trends Summary published by RealData, Inc. It is
important to note that prior to 1995, a publication titled
"Market Strategies Apartment Survey Report" was utilized for
the data now reported by RealData, Inc. Therefore, there
could be some discrepancies in the presentation of data
between 1995 and 1996. Both the Northwest and Catalina
Foothills submarkets were included due to proximity and
similarities; however, the subject is actually situated in
the Catalina Foothills submarket. The study revealed an
ever-changing market and a summary of the data follows.
INVENTORY The rapid residential growth of the mid-1980s slowed during
the late 1980s as a result of the general slowdown in the
local economy and overbuilding. The multifamily sector
experienced declines in activity with a drastic decrease in
new building. Nevertheless, over the past two years there
have been a number of new projects completed and more are
under construction or are in the planning stage. As of the
Third Quarter 1997, the metro Tucson area had a total
inventory of 90,680 multi-family units with 6,928 units in
the Northwest submarket and 8,185 units in the Catalina
Foothills submarket. The submarkets represent about 17
percent of the total inventory.
As of the Third Quarter 1997, there were 811 multi-family
units under construction citywide and this does not include
a number of units, which are nearing completion and have
begun lease-up. There are 1,277 units permitted across the
city; however, all of these projects may not proceed.
VACANCY Vacancy levels for Metro Tucson and the submarkets showed
improvements from 1990 to 1994. However, in 1995, there was
a noticeable upswing. The following table summarizes the
vacancy rates from the Second Quarter 1990 through the Third
Quarter 1997. It is important to note that there is
typically a swing in vacancy during the year due to seasonal
demand. The summer months tend to report higher vacancies as
some residents temporarily move and the winter months are
much stronger due to the increase of extended stay visitors.
13
<PAGE>
<TABLE>
<CAPTION>
VACANCY RATES
----------------------------------------
METRO CATALINA
Q:YEAR TUCSON NORTHWEST FOOTHILLS
----------------------------------------
<S> <C> <C> <C>
III:97 8.66% 7.55% 7.02%
II:97 10.39% 8.82% 8.98%
I:97 8.3% 7.92% 8.6%
IV:96 9.2% 7.72% 10.71%
III:96 9.38% 7.5% 12.46%
II:96 11.1% 9.3% 15.5%
I:96 7.4% 7.9% 8.1%
IV:95 7.9% 7.6% 8.6%
III:95 7.9% 6.3% 11.0%
II:95 8.9% 9.7% 9.0%
I:95 3.6% 3.9% 3.8%
IV:94 4.0% 5.0% 3.4%
III:94 4.2% 4.2% 2.4%
II:94 5.9% 4.4% 4.1%
I:94 3.8% 3.4% 3.2%
IV:93 5.8% 4.1% 3.9%
III:93 7.9% 5.6% 6.2%
II:93 8.3% 3.9% 7.7%
I:93 6.6% 3.8% 5.6%
IV:92 7.7% 5.4% 5.5%
III:92 9.9% 8.2% 5.8%
II:92 10.8% 8.9% 7.7%
I:92 8.6% 7.7% 4.4%
IV:91 8.0% 7.7% 4.3%
III:91 10.4% 7.7% 5.9%
II:91 14.5% 8.9% 9.8%
I:91 11.4% 7.9% 8.0%
IV:90 12.3% 8.7% 8.5%
III:90 14.8% 10.6% 14.5%
II:90 18.7% 19.8% 18.9%
</TABLE>
Source: Marketing Strategies from II:90 to I:95
RealData, Inc. from II:95 to III:97
In summary, the overall vacancy citywide and in the
submarkets declined from the Second Quarter 1990 through the
First Quarter 1995. The vacancy in Metro Tucson dropped from
18.7 percent in the Second Quarter 1990 to 3.6 percent in
the First Quarter 1995. There were similar drops in both of
the submarkets with the Northwest submarket dropping from
19.8 percent in the Second Quarter 1990 to 3.9 percent in
the First Quarter 1995. The Catalina Foothills dropped from
18.9 percent in the Second Quarter 1990 to 3.8 percent in
the First Quarter 1995. However, in 1995, both the citywide
apartment market and the submarkets noticed an upswing in
vacancies. The Metro Tucson vacancy rate increased to 8.9
percent in the Second Quarter of 1995 and has fluctuated
from 7.9 percent to 11.1 percent since then. The overall
vacancy rate as of the Third Quarter 1997 was 8.66 percent,
which was down from the 9.38 percent rate for the same
period the previous year. The Northwest and Catalina markets
saw similar trends with vacancy increasing to 9.7 and 9.0
percent respectively in the Second Quarter 1995.
14
<PAGE>
In the Northwest submarket, the Third Quarter 1997 vacancy
rate was 7.55 percent virtually unchanged from 7.5 percent
the previous year. In the Catalina Foothills, the Third
Quarter 1997 vacancy rate was 7.02 percent down from 12.46
percent the previous year. The higher vacancy rates since
1995 are a direct result of the affordability of home
ownership and the over saturation of the market with new
apartments. Overall, Pima County is continuing to see
population increases, due primarily to an in-migration of
people seeking affordable housing and a higher than average
per capita income. With the slowdown in apartment
development, the Metro Tucson apartment market should
continue to stabilize from the effects of excessive
building.
However, due to the amount of new construction many projects
are feeling the impact and have sacrificed rents to maintain
their occupancy levels. The following summarizes the current
physical occupancy level at some of the competitive
properties.
<TABLE>
<CAPTION>
CURRENT PHYSICAL
APARTMENT COMPLEX YEAR BUILT NO. OF UNITS OCCUPANCY
---------------------------------------------------------------------
<S> <C> <C> <C>
Tierra Catalina 1983 120 92%
L'Auberge Canyon View 1987 264 96%
Greens at Ventana 1986 265 89%
The Arboretum 1986 352 99%
Pinnacle Canyon 1995 225 98%
</TABLE>
ABSORPTION According to Market Strategies, absorption of apartment
units in the Metro Tucson area has fluctuated significantly
each quarter over the past few years. In 1990, absorption
was estimated to be about 2,741 units. The Second Quarter
1990 showed a significant decline in absorption with
negative (2,765) units; however, this was followed by a
substantial increase in the Third and Fourth Quarters with
2,335 units, and 2,111 units, respectively. Similarly in
1991 there was a negative absorption in the Second Quarter
with a loss of (1,634) units followed by an increase in the
Third Quarter to a positive 2,315 units and in the Fourth
Quarter to 1,350 units. Overall, there was a slight decline
in the overall annual absorption with 2,679 units in 1991.
In 1992, the first two quarters reflected a negative
absorption of (1,444) units; however, this rebounded in the
second half of the year with 2,289 units. Overall, 1992
reflected a total absorption of 845 units. This was down
from 1990 and 1991. In 1993, the second quarter was again
one of the worst in terms of absorption. Overall absorption
for the year was 1,408 units. In 1994, the absorption
dropped somewhat to 1,084 units with the Second Quarter
reporting a negative absorption of (1,211) units. These
figures are according to Market Strategies. However,
according to RealData, Inc., the annual absorption in 1994
was a negative (424) units. In 1995, RealData, Inc. reported
another devastating year with a negative (447) units and the
second quarter reported the worst figures. The first half of
1996 appears to have improved slightly over 1995 when
comparing the first two quarters of the year; however, it
reported a negative absorption of (667) units. Beginning in
the Third Quarter 1996 the trend changed. Absorption was
1,561 in the Third Quarter 1996 and 755 in the Fourth
Quarter. First Quarter 1997 also showed significant
absorption of 755 units. However, Second Quarter again
showed a negative absorption of 866 units. The Third Quarter
rebounded with positive absorption of 1,135 units. Overall
the last four
15
<PAGE>
quarters showed positive absorption of 1,779 units, which is
the best performance since 1991.
RENTAL RATES The average rental rate of all projects in the Metro area
was $0.68 per square foot as of the Third Quarter of 1997.
The rents on the various unit types increased approximately
1.5 percent in the year ending Third Quarter 1997 from 1996.
The following summarizes the average rent per square foot by
unit type excluding utilities for the Third Quarter 1997.
<TABLE>
<CAPTION>
AVERAGE RENT/SF EXCLUDING UTILITIES
----------------------------------------------------
CATALINA
UNIT TYPE METRO TUCSON NORTHWEST FOOTHILLS
----------------------------------------------------
<S> <C> <C> <C>
Studio $0.82 $0.82 $0.93
1BR/1BA 0.72 0.74 0.78
1BR/1BA/DEN 0.62 ---- 0.62
2BR/1BA 0.65 0.67 0.74
2BR/2BA 0.65 0.62 0.69
3BR/2BA 0.64 0.67 0.71
</TABLE>
The average rents on all unit types is greater in the
Catalina Foothills submarket than the overall Metro area and
is the second highest of all submarkets (exception
University). Given the quality, desirable location, and
amenities, apartment rents in the Catalina Foothills
submarket have historically been the highest in the area.
The Northwest area has tracked relatively close to the
citywide average. However, due to the amount of new
construction, rents are not expected to increase over the
next year. A summary of the current average asking rent per
square foot for several of the subject's competitive
projects follows.
<TABLE>
<CAPTION>
AVERAGE UNIT AVERAGE ASKING
PROPERTY SIZE/SF RENT/SF
------------------------------------------------------------
<S> <C> <C>
Skyline Village 997 $0.68
L'Auberge Canyon View Ventana 1,019 $0.82
The Greens at Ventana Canyon 1,011 $0.80
The Arboretum 811 $0.73
Villa Sin Vacas 1,114 $0.87
Colonia Del Rio 1,010 $0.68
Boulders at La Reserve 999 $0.72
La Reserve Villas 900 $0.77
Legends at La Paloma 1,034 $0.79
Skyline Bel Aire 1,125 $0.64
Pinnacle Canyon 1,107 $0.76
</TABLE>
CONCLUSION In 1995, vacancies for the Tucson Metro area began to
increase after several years at low levels. As of the Third
Quarter 1995, the overall vacancy level was 7.9 percent up
from 4.0 percent at the same period in 1994. The vacancy
rate for Third Quarter 1996 was 9.38 percent. The Third
Quarter 1997 figures show a decrease to 8.66 percent,
reflecting a return to stabilization. Absorption levels
began to decline in 1994 with negative absorption in 1995
due to the significant amount of new construction primarily
in the Northwest and Catalina Foothills submarkets.
Absorption levels appear to be stabilizing in 1997 although
there remains a
16
<PAGE>
significant amount of new construction. The Northwest and
Catalina Foothills submarkets have traditionally been
healthier than the overall citywide market with a lower
vacancy and generally higher rents. However, there is a
considerable amount of vacant land zoned for multifamily
development in these submarkets and a number of new projects
have been developed with a few more planned. This could pose
a threat to the market if supply is not carefully monitored
in keeping pace with demand. Also, the single-family
residential market provides an alternative to the housing
rental market. Home loan interest rates have been reasonable
and many potential homebuyers appear to be electing home
ownership.
17
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject is located along the north side of East
Skyline Drive, just east of Campbell Avenue in Tucson,
Pima County, Arizona. It is more specifically situated at
3201 East Skyline Drive.
SIZE AND SHAPE The site is irregularly shaped with a total of 12.344
acres or 537,705 square feet. It has frontage on East
Skyline Road.
Access AND Visibility The subject property is located along the north side of
East Skyline Drive, just east of Campbell Avenue. The
site is situated about 10 miles northeast of the Tucson
Central Business District (CBD) and about 12 miles
northeast of the Tucson International Airport. Access to
the subject from these major activity centers is provided
by a number of north/south and east/west thoroughfares.
From both the CBD and the airport, one of the most direct
routes is by heading north on Campbell Avenue to East
Skyline Drive then east to the subject property. Other
major north/south thoroughfares, which lead to East
Skyline Drive or Sunrise Drive are 1st Avenue, Oracle
Road, and Swan Road.
Immediate access to the subject is provided by East
Skyline Drive. The main entry to the complex is off this
thoroughfare. There is one curb cut along the east/west
artery providing access.
East Skyline Drive is a four-laned, asphalt-paved,
east/west artery with concrete curbs, asphalt shoulders,
planted medians, and turn lanes.
ZONING The subject property is zoned "TR" Transitional under the
City of Tucson Zoning Ordinance. Permitted uses include
single-family dwelling, accessory buildings, church,
park, public or private school, agricultural use, duplex
dwelling, multiple dwelling, recreational facilities,
mobile housing, college, community service agency,
library or museum, hospital, clinic, club, private club,
community storage garage, child care center, professional
office, real estate office, motel/hotel, and research
facility.
UTILITIES The site is serviced by the following authorities.
Electricity.......................Tucson Electric Company
Telephone .....U.S. West Communications and Mountain Bell
Water......................................City of Tucson
Sanitary and Storm Sewers.....................Pima County
TERRAIN AND DRAINAGE THE site is hilly and above street grade. Upon site
inspection, the drainage appeared to be adequate.
According to the Federal Flood Insurance Rate Maps, the
subject lies within Zone C. Zone C is defined as "areas
of minimal flooding." A local wash bisects the property,
however, it does not threaten the complex.
18
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
SOIL AND SUBSOIL
CONDITIONS No soil engineer's report was available to the appraisers,
and no soil tests were performed. The soils are assumed to
have an adequate load-bearing capacity.
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal any
easements adversely affecting the subject property. For
purposes of this assignment, the appraisers assume that
the subject's value or marketability is not adversely
affected by the typical utility easements, which traverse
the property. The most obvious is a 15-foot-wide sewer
easement through the center of the property.
RELATIONSHIP OF SITE
TO SURROUNDINGS North: Upper-income residential
South: Vacant land
East: Vacant land
West: Vacant land, art gallery, and restaurant
REAL ESTATE TAXES Real estate taxes and assessments for the Tierra Catalina
Apartments are coordinated by the Pima County Assessor's
office. The property is subject to a number of different
taxing authorities and the taxes are calculated two ways.
A portion of the total tax liability is calculated based
on the "limited cash value" intended to create a ceiling
on the assessment. The limited cash value is multiplied by
a 10.0 percent assessment ratio then multiplied by the
rate per $100 of assessed value. This is considered the
primary tax rate and includes the school district,
community college, county, and state taxes. In 1997, the
primary tax rate was $9.7932 per $100 of assessed value.
The remainder of the tax liability is based on the "full
cash value" or current market value. This value is
multiplied by 10 percent and then multiplied by the tax
rate per $100 of assessed value. Full cash value
assessments are the secondary assessments and apply to
various taxing authorities including bonds, school
district, library, and special districts. In 1997, the
applicable tax rate was $4.7640 per $100 of assessed
value.
The following is a summary of the tax parcel number used
to identify the subject property, the 1997 primary and
secondary assessed values, and the total tax for 1997.
<TABLE>
<CAPTION>
PRIMARY ASSESSED SECONDARY ASSESSED
TAX PARCEL NO. VALUE (LIMITED) (FULL CASH) VALUE TOTAL TAX
----------------------------------------------------------------------
<S> <C> <C> <C>
108 01 71606 $582,000 $582,000 $84,772.90
</TABLE>
In addition to the above referenced property tax, the
property is subject to personal property taxes. The 1997
personal property tax assessment was $50,142 and the
personal property tax was $754.91. The total 1997 property
taxes for the subject property were $85,477.81. The total
real estate tax for the subject is projected in 1998 to be
$88,896 or $0.63 per square foot.
CONCLUSION The subject site is irregularly shaped with 12.344 acres
with hilly terrain. There are a few easements, which
traverse the property; however, none are believed to
adversely affect the site. The parcel is easily accessible
with frontage on East Skyline Drive. The subject is zoned
"TR" Transitional by the City of Tucson, and
19
<PAGE>
it is believed to be in compliance. The size and shape of
the site provide flexibility for a variety of development
and it blends well with the predominately residential areas
which surround it.
20
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 12.344-acre tract of land, is
improved with a two-story apartment project known as
Tierra Catalina. The improvements consist of 120
apartment units contained in 24 buildings constructed in
1983. Also situated on the site is a clubhouse, swimming
pool, tennis court, and covered parking.
There are six basic floor plans for the 120 apartment
units. The basic features of these floor plans are as
follows:
<TABLE>
<CAPTION>
NO. OF UNITS DESCRIPTION SIZE (SF) TOTAL SF
---------------------------------------------------
<S> <C> <C> <C>
23 1BR/1BA 900 20,700
18 1BR/1BA 916 16,488
19 2BR/2BA 1,207 22,933
25 2BR/2BA 1,233 30,825
17 2BR/2BA/TH 1,304 22,168
18 3BR/2BA/TH 1,525 27,450
--- ----- ------
120 1,171 140,564
</TABLE>
As seen in the figures above, the total net rentable area
of 140,564 square feet and a total of 120 apartment units
results in an average of 1,171 square feet per unit.
There are a total of 41 one-bedroom units, 61 two-bedroom
units, and 18 three-bedroom units. Please note the net
rentable area of the property has changed slightly from
previous reports (140,644 square feet previously) based
on the most recently received rent roll.
The land area is 12.344 acres, resulting in a density of
9.72 units per acre. The parking consists of
approximately 219 spaces, of asphalt construction, which
is 1.83 spaces per unit. The parking ratio is within
industry standards.
A more detailed description is as follows:
FOUNDATION Steel reinforced concrete slab with perimeter and
interior wire mesh. Second floors include wood frame,
plywood subfloor, and lightweight concrete.
FRAMING Wood.
ROOF Pitched red tile.
EXTERIOR Masonry with painted stucco finish.
SECOND-STORY ACCESS Ground level.
BALCONIES Concrete and concrete supports with metal handrails.
INTERIOR FINISHES
Living, Dining,
and Bedrooms: Painted and textured gypsum board walls and ceilings,
carpeting over pad, hollowcore wood doors, miniblinds,
incandescent lighting, and fireplaces.
21
<PAGE>
Bathrooms: Vinyl tile floor coverings, porcelain tub with ceramic
tile shower, textured and painted gypsum board walls and
ceilings, fiberboard vanities with laminate counters,
porcelain sink, and commode.
Kitchens: Vinyl tile floor coverings, formica countertops, laminated
fiberboard cabinets. Kitchen equipment includes a
range/oven, refrigerator, disposal, microwave ovens, and
dishwasher.
PLUMBING Adequate and meets city code.
HYAC Central air-conditioning and heating provided by
individual, compressor units.
ELECTRICAL Switch-type circuit breakers, 120/240-volt, and single-
phase service with each unit individually metered. Each
unit has adequate electrical outlets and ceiling-mounted
light fixtures. The copper wiring is in compliance with
city code.
INSULATION Batt-type in ceilings and walls.
SITE IMPROVEMENTS Asphalt-paved parking, covered metal carports, pole
lighting, concrete sidewalks, a swimming pool, clubhouse,
and tennis court.
LANDSCAPING Extensive mature landscaping.
AGE AND CONDITION The effective age of the subject is 14 years which
approximates the actual age and the remaining economic
life is estimated to be 26 years.
SITE AREA 12.344 acres or 537,705 square feet
DEFERRED MAINTENANCE Visual inspection of the property as well as estimates by
the management revealed the following deferred
maintenance. Some of these include appliance repair,
carpet replacement, window covering replacement, interior
repairs, furniture and fixture replacement, air-
conditioning and equipment repair, water heater
replacement, roof repair, landscaping, painting, paving,
etc. The deferred maintenance was estimated at $100,260,
which was rounded to $105,000. The costs are delineated
below:
<TABLE>
<CAPTION>
ITEM COST ITEM COST
--------------------------- -------------------------
<S> <C> <C> <C>
Appliances $ 3,600 Landscape $ 14,000
Carpet 28,800 Exterior Paint 18,000
Window Cover 960 Asphalt Paving 8,000
Furniture 1,000 Roof Repairs 3,000
Air Conditioning 8,500 Water Heaters 2,400
--------
General Interior 12,000 Total (Rounded) $105,000
</TABLE>
CONCLUSION Upon a detailed inspection of the property, the facility
is believed to be of good quality and workmanship. The
design and layout are felt to be functional and
aesthetically appealing. The project has been well
maintained and has an ongoing maintenance program;
however, there are a few items previously listed as
deferred maintenance. Overall, the apartments are in
reasonably good shape and we believe the effective age of
the improvements is about fourteen years with a remaining
economic life of 26 years.
22
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of Tierra Catalina entry and units
[PICTURE APPEARS HERE]
Interior view of clubhouse/leasing office
<PAGE>
[PICTURE APPEARS HERE]
View of swimming pool
[PICTURE APPEARS HERE]
View of tennis court and units
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of units
[PICTURE APPEARS HERE]
View of interior street and carports
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 109 living room (model)
[PICTURE APPEARS HERE]
Interior view of Unit 109 dining room (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 109 kitchen (model)
[PICTURE APPEARS HERE]
Interior view of Unit 109 bedroom (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 67 living room (vacant)
[PICTURE APPEARS HERE]
Interior view of Unit 67 dining room (vacant)
<PAGE>
HIGHEST AND BEST USE
- --------------------------------------------------------------------------------
The highest and best use of a property must be determined
because market value depends upon the property's most
profitable use. The Appraisal of Real Estate, Eleventh
Edition, defines highest and best use as:
"The reasonably probable and legal use of
vacant land or improved property, which is
physically possible, appropriately supported,
financially feasible, and that results in the
highest value."
There are two distinct types of highest and best use. The
first type is the highest and best use of the land as if
vacant. The second type is the highest and best use of a
parcel as improved. This pertains to the use that should be
made of the property as it currently exists.
In determining the highest and best use of a site, four
items must be considered: possible physical limitations of
the site, possible legal or permissible uses, and what uses
are financially feasible, and produce the maximum return on
the site. A careful neighborhood and site analysis is
essential in estimating the highest and best use of the site
as if vacant.
The following is our analysis of the highest and best use as
it pertains to the subject property and according to the
four essential tests.
SUBJECT PROPERTY
AS IF VACANT LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site is zoned "TR" Transitional under the City
of Tucson Zoning Ordinance. This district is intended to
provide for development of single-family dwellings,
accessory buildings, churches, parks, public or private
schools, agricultural uses, duplex dwellings, multiple
dwellings, recreational facilities, mobile housing,
colleges, community service agencies, libraries or museums,
hospitals, clinics, clubs, private clubs, community storage,
garages, child care centers, professional offices, real
estate offices, motel/hotels, and research facilities.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability, flood
plain, and surrounding patterns.
The subject site is irregularly shaped and encompasses
12.344 acres, allowing for reasonable flexibility in
developing the site. It has frontage along the north side of
East Skyline Drive. The topography of the site is sloping
and drainage appears to be good. Development in the
immediate area is primarily multifamily and single-family
residential. The area appears most conducive to multifamily
development given the surrounding projects and terrain. The
subject site has adequate utility capacity, enjoys a
functional size and shape, and is not affected by any
adverse easements or restrictions.
23
<PAGE>
After considering all of the physical characteristics of the
site noted above plus other data in the Site section of this
appraisal report, physically possible land uses are limited
to multifamily development. The primary deterrents to other
types of development were the subject's location, terrain,
zoning, and surrounding use patterns which helped to
eliminate other site improvements such as commercial,
single-family, and office development from our analysis.
FINANCIAL FEASIBILITY - In view of the present market
conditions, financial feasibility is directly proportional
to the amount of net income that could be derived from the
subject. After having eliminating all other development from
our analysis, the financial feasibility of multifamily
development must be tested.
The subject is located in the Catalina Foothills submarket,
which is experiencing an overall annual vacancy of about 7.0
percent. Physical vacancies are less at the subject, which
has a 1 percent physical vacancy. The vacancy level has
increased significantly from the 3.8 percent reported in the
first quarter of 1995 due to an abundance of new apartment
construction. In the early 1990's, rental rates had been
increasing at a strong pace; however, with the large number
of new units under construction or recently completed,
rental rates have stabilized and many complexes are offering
rent concessions. The average rents in the submarket range
from $0.62 to $0.93 per square foot depending on the size
and type of the unit. The average rent at the newer
complexes typically range from $0.75 to $1.00 per square
foot, which is within the feasible range at which to build.
However, as previously mentioned, the market has experienced
an abundance of new construction and the new projects are
offering rent concessions of up to one month free.
Therefore, given the number of units either recently
completed or under construction, additional apartment
construction does not appear to be feasible at this time
until the supply has been absorbed.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate, the subject's location, and financial
feasibility of certain land uses, more than likely a present
development of the land would not produce a positive cash
flow for multifamily development which would be sufficient
to satisfy the developer of the project. However, due to the
subject's location and the socio-economic status of the
neighborhood, we are of the opinion that multifamily
apartment units conducive to the subject site would produce
the highest net return over the longest period of time. The
site's location along the north side of East Skyline Drive
gives it good access and visibility, within an affluent
single family residential area, which is conducive to
apartment development. Therefore, after considering the
alternatives, we believe the highest and best use of the
site, as vacant, is to hold for future apartment
development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons. First
to identify the use of the property that is expected to
produce the highest overall return per invested dollar, and
the second reason is to help in identifying comparable
properties. The four tests or elements are also applied in
this analysis.
24
<PAGE>
LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site utilized for apartment use is reasonable
since it is a legal use.
PHYSICAL POSSIBILITY - Based on the subject's land size
(12.344 acres), rolling terrain, configuration, and the
improvement's positioning relative to the subject site, it
is felt that it would not be physically possible to increase
the size of the current improvements and remain competitive.
The density of the subject is approximately 9.72 units per
acre. Thus, based on the aforementioned factors, it is
judged that the improvements represent the largest amount of
space that could currently be developed under current site
conditions.
FINANCIALLY FEASIBLE - The discussion of the financial
feasibility of the subject, as if vacant, would also apply
to the test as improved. Based on the economic conditions
for alternative market segments, it was concluded that the
subject's present improvements are satisfactory to fulfill
this test.
In the Income Approach section of this report, the
appraisers estimated income and expenses for the subject.
The net operating income derived suggests that the property
is capable of generating income in excess of operating
expenses, exclusive of return on investment requirements and
debt service. The net operating income was capitalized into
a value indication that was supported by the Sales
Comparison Approach. Additionally, the value indication is
in excess of the estimated value of the land. This indicates
that the subject "as improved" is a feasible entity.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that under
competent and prudent management, the subject could produce
an adequate return to substantiate its existence.
Based on the subject's current use, we have determined that
as a multifamily apartment complex, it positively
contributes to the value of the site, and as a result is
presently developed according to its highest and best use.
However, the subject does not represent the "optimum" use
due to some deferred maintenance.
25
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of the
physical improvements. This value is derived by estimating
the replacement cost new of the improvements and, when
appropriate, deducting the reduction in value caused by
accrued depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that buyers
judge the value of an existing structure by comparing it to
the value of a newly constructed building with optimal
functional utility, assuming no undue cost due to delay.
Thus, the appraiser must estimate the difference in value
between the subject property and a newly constructed
building with optimal utility.
The Cost Approach was not used as this method of valuation
is typically the least reliable indicator of value in older
projects such as the subject since estimates of depreciation
are difficult to accurately measure in the marketplace.
Additionally, it is often the perception of investors that
cost does not necessarily equate to value and the purchase
price is not typically based on construction costs.
SALES COMPARISON
APPROACH this approach produces an estimate of value by comparing the
subject property to sales and/or listings of similar
properties in the immediate area or competing areas. The
principle of substitution is employed and basically states
when a property is replaceable in the market; its value can
be set by the cost of acquiring an equally desirable and
comparable property. This technique is viewed as the value
established by informed buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is capitalization of
the net income, which the subject property will produce
during the remaining economic life of the improvements. This
process consists of two techniques. The first technique
estimates the gross income, vacancy, expenses, and other
appropriate charges. The resulting net income or net cash
flow is then capitalized. The second technique projects the
gross income, vacancy, expenses, other appropriate charges,
nets income, and cash flow over a projected holding period.
The resulting cash flow and reversion (future value) are
discounted at an appropriate rate and added in order to
arrive at an indication of current value from the standpoint
of an investment. These methods provide an indication of the
present worth of anticipated future benefits (net income or
cash flow) to be derived from ownership of the property.
Both techniques were utilized in analyzing the subject
property.
SUMMARY The appraisers, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraisers' judgment
concerns the applicability of alternative tools of analysis
to the facts of the problem, the data and information needed
to apply these tools, and the selection of the analytical
approach and data most responsive to the problem in
question.
26
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or may point to a more reliable indication of the value of
the property being appraised than the other approach. In
some instances, because of the inadequacy or unavailability
of data, one of the approaches may be given little weight in
the final value estimate.
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TUCSON AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVERALL
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG/UNIT AT SALE /UNIT SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Pinnacle Canyon 11/97 $11,727,000 1995 225 228,931 98% N/A $51.23 $52,120 N/A 5.69
7050 E. Sunrise Drive 1,017
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
2 Pinnacle Heights 11/97 $16,364,000 1995 310 339,364 97% N/A $48.22 $52,787 N/A 5.60
7990 E. Snyder Road. 1,095
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
3 Foothills 11/97 $7,600,000 1984 270 167,910 97% N/A $45.26 $28,148 N/A 5.38
5441 N. Swan Road 622
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
4 Sandstone 06/97 $8,849,000 1986 330 181,167 100% $4.88 $48.84 $26,815 10.0% N/A
405 E. Prince Road 549 $2,682
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
5 Hilands I 06/97 $12,500,000 1985 426 234,324 95% $5.87 $53.34 $29,343 11.0% N/A
5755 E. River Road 550 $3,228
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
6 Windsail 03/97 $10,037,000 1985 300 243,952 94% $4.11 $41.14 $33,457 10.0% 5.74
7300 N. Mona Lisa Road 813 $3,346
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
7 Cobble Greek 01/97 $9,250,000 1980 301 217,382 91% N/A $42.55 $30,731 N/A 6.35
7700 E. Speedway Blvd. 722
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
8 Sundown Village 12/96 $11,350,000 1984 330 279,758 90% $3.97 $40.57 $34,394 10.09% 5.53
8215 Oracle Road 848 $3,367
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
9 Rio Cancion 12/96 $17,400,000 1983 379 343,370 90% $4.77 $50.67 $45,910 9.42% 6.31
2400 E. River Road 906 $4,324
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
10 Sonoran Terraces 08/96 $18,750,000 1985 374 416,256 95% $4.23 $45.04 $50,134 9.39% 6.59
7887 N. La Cholla Blvd. 1,113 $4,710
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 1983 120 140,564 99% $4.41
Tierra Catalina 1,171 $5,163
3201 East Sklyline Drive
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
The Sales Comparison Approach is considered a good valuation
method in the event that a sufficient number of similar and
recent transactions can be found and accurately verified.
The key to the Sales Comparison Approach is that a
sufficient number of comparable sales be present to reflect
an accurate indication of value. In such an event, market
value can be derived directly from the sales, since all
complexities involved are properly weighed according to
their significance to actual buyers and sellers.
This approach is based upon prices paid in actual market
transactions. It is a process of correlating and analyzing
recently sold properties, which are similar to the subject.
The reliability of this technique depends upon (a) the
degree of comparability of the property appraised with each
sale, (b) the length of time since the sale, (c) the
accuracy of the sales data, and (d) the absence of unusual
conditions affecting the sale.
The comparison process must be based on sales, which
constitute acceptable evidence of motivations inherent to
the market, occurring under similar market conditions, of
similar or reasonably similar apartment projects. These
projects were selected since they are reasonably comparable
to the subject property. A map and a summary of the
comparable sales can be found on the preceding pages. The
sales ranged in time from August 1996 to November 1997.
Reference is made to the individual sales data included in
the Addenda section of this report.
In our analysis of the sales data, important considerations
as to comparability were condition of the property, gross
income when combined with percent (%) occupied at sale date,
unit size, terms of sale, location, and motivation. The
sales provide units of comparison, which can be adjusted and
then applied, to the subject to derive an estimate of value.
Because these individual factors are difficult to quantify,
we compared the improved sales based on net operating income
(NOI) per square foot and per unit. Theoretically, the NOI
takes into consideration the various physical factors, which
influence value. An analysis of NOI likewise considers
economic differences in each improved property sale because
income is also a function of the current market. Thus, with
this analysis, all the factors affecting a sale can be
reduced to the common denominator of net operating income.
Also, we considered the effective gross income multiplier
method. There follows a discussion of our analysis and value
conclusion by the Sales Comparison Approach.
SALES ADJUSTMENT ANALYSIS
PROPERTY RIGHTS Property rights consists of ownership, legal estate,
economic benefits, and financial components. Our valuation
is of the leased fee estate on an all cash basis. Since all
the sales were reported to be of the leased fee estate, no
adjustment was necessary.
28
<PAGE>
CASH EQUIVALENCY Standard definitions of market value include payment in
"cash or its equivalent." The equivalent includes financing
terms generally available in the market. In many cases
comparable sales carry atypical financing terms that require
an adjustment to cash equivalency. There are basically two
areas, which may require adjustments for terms. One is the
amount of cash down payment and the other is favorable
financing or a low interest rate on the note/mortgage. Where
terms were considered to be more favorable than the market
at the time of sale, cash equivalency adjustments are made.
All of the sales used in this analysis were cash
transactions or were considered equivalent and therefore,
did not require a cash equivalent adjustment.
CONDITION OF SALE Adjustments for condition of sale usually reflect the
motivations of the buyer and the seller. Although conditions
of sale are perceived as applying only to sales that are not
arm's length transactions, some arm's length sales may
reflect atypical motivations or sale conditions due to
unusual tax considerations, sale at legal auction, lack of
exposure on the open market, etc. The sales utilized in our
analysis were not reported to be reflective of such
situations; therefore, no adjustment was necessary.
NET OPERATING
INCOME ANALYSIS In lieu of specific adjustments, we compared the improved
sales based on the net operating income (NOI) per square
foot and NOI per unit. This method presents a comparison
based on the income which a property is capable of
generating. Theoretically, the NOI takes into consideration
the various factors, which influence value such as quality,
size, amenities offered, location, age, condition etc. Thus,
these differing factors can be reduced to the common
denominator of net operating income.
The various sales reflected NOIs per square foot ranging
from $3.97 to $5.87 and NOIs per unit ranging from $2,682 to
$4,710. The subject NOI (with reserve expenses) has been
approximated at $4.41 per square foot or $5,163 per unit
from the Direct Capitalization analysis in the Income
Approach section of this report.
To estimate an adjustment for each sale, the subject's NOI
has been compared to the individual NOI of the comparable
sales. This adjustment should account for all the various
physical and economic differences in each improved property
sale as income is a function of the current market. Market
conditions should reflect perceived risk, or other factors,
which may affect value. The following chart presents the
adjustment process.
29
<PAGE>
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/SF NOI/SF NOI/SF FACTOR PRICE/SF
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $51.23 NA $4.41 NA NA
2 48.22 NA $4.41 NA NA
3 45.26 NA $4.41 NA NA
4 48.84 $4.88 $4.41 0.90369 $44.14
5 53.34 5.87 $4.41 0.75128 40.07
6 41.14 4.11 $4.41 1.07299 44.14
7 42.55 NA $4.41 NA NA
8 40.57 3.97 $4.41 1.11083 45.07
9 50.67 4.77 $4.41 0.92453 46.85
10 45.04 4.23 $4.41 1.04255 46.96
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $40.07 to $46.90 per square foot. Sales 6
and 10 have the most similar net operating incomes per
square foot and they reflect values of $44.14 to $46.96 per
square foot. Placing emphasis on these sales, and tempered
with the other sales, a value of $45.50 per square foot is
estimated for the subject. From this value the $105,000 in
deferred maintenance is deducted to arrive at the "as is"
value of the subject. The calculation is shown below.
<TABLE>
<CAPTION>
<S> <C>
140,564 SF x $45.50/SF................................... $6,325,380
Less Deferred Maintenance................................ (105,000)
Rent Loss................................................ (61,922)
----------
"As Is" Value via NOI/SF................................. $6,228,740
Rounded $6,200,000
</TABLE>
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/UNIT NOI/UNIT NOI/UNIT FACTOR PRICE/UNIT
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $52,120 NA $5,163 NA NA
2 52,787 NA 5,163 NA NA
3 28,148 NA 5,163 NA NA
4 26,815 2,682 5,163 1.92506 $ 51,620
5 29,343 3,228 5,163 1.59944 46,932
6 33,457 3,346 5,163 1.54303 51,625
7 30,731 NA 5,163 NA NA
8 34,394 3,367 5,163 1.53341 52,740
9 45,910 4,324 5,163 1.19403 54,818
10 50,134 4,710 5,163 1.09618 54,956
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $46,932 to $54,956 per unit. Sales 9 and 10
reflected the most similar NOI per unit to the subject and
had adjusted values of $54,818 and $54,956 per unit. Based
on all the data, we estimated a value for the subject of
$54,500 per unit. The following indication reflects an "as
is" value per unit for the subject considering the subject's
deferred maintenance.
<TABLE>
<CAPTION>
<S> <C>
120 units x $54,500/unit...................... $6,540,000
Less: Deferred maintenance.................... (105,000)
Rent Loss..................................... (61,922)
----------
Value via NOI Price/Unit Method............... $6,373,078
Rounded $6,400,000
</TABLE>
30
<PAGE>
EFFECTIVE GROSS INCOME
MULTIPLIER METHOD In addition to the NOI price per square foot and price
per unit analysis, we have employed an effective gross
income multiplier analysis to the sales based on the
sales' actual effective gross income multipliers
(EGIM). Unlike the price per unit analysis, EGIMs
cannot be adjusted for dissimilar factors when compared
to the subject. Instead, certain factors must be
closely analyzed for determining comparability of the
multiplier to the subject property. These include the
timing of the sale and whether market condition changes
have occurred between the date of valuation and the
sale date, as well as occupancies and expense ratio
levels, and the comparability of the sale in terms of
its physical features and the resulting income stream
potential. Listed below are the details of the sales we
felt to be pertinent in our selection of a reasonable
EGIM for the subject. All factors were considered in
our interpretation of the data leading to the EGIM of
the sales.
<TABLE>
<CAPTION>
SALE DATE OF SALE EGIM OCCUPANCY EXPENSE RATIO
-------------------------------------------------
<S> <C> <C> <C> <C>
1 11/97 5.59 98% N/A
2 11/97 5.60 97% N/A
3 11/97 5.38 97% N/A
6 03/97 5.74 94% 42.58%
7 01/97 6.35 91% NA
8 12/96 5.53 90% 45.86%
9 12/96 6.31 90% 40.57%
10 8/96 6.59 90% 39.48%
Subject 99% 42.88%
</TABLE>
The sales indicated EGIMs ranging from 5.38 to 6.59, with
all sales operating at or near stabilized levels. Based on
this data, we believe an EGIM of 6.0 is reasonable for the
subject considering the subject's quality and expense ratio.
Applying the 6.0 EGIM to the subject's stabilized effective
gross income, and deducting for deferred maintenance,
results in the following value indication.
<TABLE>
<S> <C>
$1,084,703 x 6.00.......................... $6,508,218
Less: Deferred maintenance................. (105,000)
Rent Loss.................................. (61,922)
Value via EGIM Method...................... $6,341,296
Rounded $6,300,000
</TABLE>
CONCLUSION The NOI per square foot and per unit methods presented value
indications of $6,200,000 and $6,400,000. The effective
gross income multiplier method indicated a value of
$6,300,000. Weight has been given to the net operating
income comparisons because this method reflects both income
and expense information, however, these methods bracket the
EGIM conclusion. The EGIM method only accounts for income
and does not take into consideration expenses, which can
vary from property to property. Therefore, it is our opinion
that the leased fee market value of the subject property
based on the indication provided by the Sales Comparison
Approach, all cash, on an "as is" basis as of December 31,
1997, is
SIX MILLION THREE HUNDRED THOUSAND DOLLARS
($6,300,000)
31
<PAGE>
[MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT
YEAR NO. OF AVG.UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE (SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO. RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Skyline Village 1985 168 997 91% 1BR/1BA 800 $550 0.69 Amenities include a swimming
6651 North 1BR/1BA/DEN 1,000 650 0.65 pool, spa, tennis court,
Campbell Ave. 2BR/2BA 1,100 750-800 0.68-0.73 clubroom, covered parking,
2BR/2BA/TH 1,100 850 0.77 laundry facility.
3BR/2BA/TH 1,250 850 0.68 Concessions: $250 off the
first month's rent.
- ------------------------------------------------------------------------------------------------------------------------------------
2 L'Auberge Canyon 1987 264 1,019 96% 1BR/lBA 724 $725 1.00 Amenities include a swimming
View 6650-55 N 2BR/2BA 909 775 0.85 pool, tennis court,
Kolb Road 2BR/2BA 1,049 825 0.79 washer/dryer, microwave,
2BR/2BA 1,095 875 0.80 fireplace, jacuzzi, clubroom
3BR/2BA 1,223 1,010 0.82 and covered parking.
3BR/2BA 1,243 1,010 0.81 Concessions: None
3BR/2BA 1,291 1,010 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Greens at 1986 265 1,011 89% 1BR/1BA/DEN 818 $714 0.87 Amenities include 3 swimming
Ventana 5800 N 1BR/1BA/DEN 847 740 0.87 pools, spa, washer/dryer,
Kolb Road 2BR/2BA 945 775 0.82 microwave, fireplace, club
2BR/2BA 974 739 0.76 room, and covered parking.
2BR/2BA 1,018 787-837 0.77-0.82 Concessions: One-half month
2BR/2BA 1,050 800 0.76 free.
2BR/2BA/DEN 1,169 914-964 0.78-0.82
2BR/2BA/DEN 1,207 950 0.79
- ------------------------------------------------------------------------------------------------------------------------------------
4 The Arboretum 1986 496 811 99% 1BR/1BA 520 475 0.91 Amenities include 3 swimming
4700 N Kolb Rd. 1BR/1BA 616 500 0.81 pools, club-room, exercise
lBR/1BA 686 510 0.74 room, laundry facilities,
1BR/1BA 767 560 0.73 washer/dryer hook-ups,
2BR/1BA 984 650 0.66 fireplace, and covered
2BR/2BA 995 710 0.71 parking.
2BR/2BA 1,001 735 0.73 Concessions: One-half month
3BR/2BA 1,200 799 0.67 free rent. $175 off if
deposit on 1/st/ visit.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Villa Sin Vacas 1985 72 1,114 90's% 1BR/1BA/DEN 930 835 0.90 Amenities include washer
7601 N. Calle 2BR/2BA 1,195 1,050 0.88 dryer, fireplace, microwave,
Sin Envidia 3BR/2BA 1,458 1,200 0.82 covered parking, clubhouse,
pool.
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
6 Colonia Del Rio 1985 176 1,010 90's% 1BR/1BA 713 560 0.79 Amenities include
4601 N. Via 1BR/1BA 796 590 0.74 washer/dryer, microwave,
Entrada 1BR/1BA 1,022 655 0.64 pool, covered parking,
2BR/lBA 1,068 680 0.64 fireplace, exercise
2BR/2BA/TH 1,170 795 0.68 facility, playground, spa
3BR/2BA 1,345 795-810 0.59-0.60 Concessions: $200 off first
month's rent
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY (CONT'D)
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT
YEAR NO. OF AVG. UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE (SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO. RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 Boulders at La 1995 240 999 N/A 1BR/1BA 725 595 0.82 Amenities include pool, spa,
Reserve 1500 E. 1BR/1BA/DEN 929 655 0.71 washer/dryer, microwave,
Pusch Wilderness 2BR/2BA 1,057 740 0.70 some fireplaces, garages,
3BR/2BA 1,268 860 0.68 fitness center
Concession: 1/2 mo. free
rent on 1-2BR and 1 mo. free
rent on 3BR with 12
mo.lease.
- ------------------------------------------------------------------------------------------------------------------------------------
8 La Reserve Villas 1988 240 900 90's% 1BR/1BA 697 580 0.83 Amenities include 2 pools,
10700 N. La 2BR/2BA 943 690 0.73 spa, washer/dryer,
Reserve 2BR/2BA 957 750 0.78 microwave, some fireplaces,
3BR/2BA 1,111 875 0.79 fitness center, clubhouse
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
9 Legends at La 1995 312 1,034 90's% 1BR/1BA 745 675 0.91 Amenities include 2 pools,
Paloma 3750 2BR/2BA 1,036 795 0.77 spa, washer/dryer,
E. Via Palomita 3BR/2BA 1,258 975 0.78 microwave, fireplace,
fitness center, clubhouse.
Concessions: 1 mo. free
- ------------------------------------------------------------------------------------------------------------------------------------
10 Skyline Bel Aire 1979 137 1,125 90's% 1BR/1BA/DEN 968 615 0.64 Amenities include pool, spa,
6255 Camino 2BR/2BA 1,263 815 0.65 2 tennis courts,
Pimeria Alta washer/dryer, fireplace,
covered parking, clubhouse.
Concessions: 1BR $590/mo.;
$300 off first mo. on a 12
mo. lease and $150 off first
mo. on a 6 mo. lease.
- ------------------------------------------------------------------------------------------------------------------------------------
11 Pinnacle Canyon 1995 225 1,017 98% 1BR/1BA 795 650 0.82 Amenities include pool, spa
7050 E. Sunrise 1BR/1BA 840 675 0.80 washer/dryer microwave,
Road 2BR/2BA 1,124 775 0.69 built in TV, garages
2BR/2BA 1,152 800 0.69 available, clubhouse
3BR/2BA 1,351 935 0.69 exercise facility,
computer center
Concessions: 1 mo. free for
12 mo. lease
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT PROPERTY 1993 120 1,171 99% 1BR/1BA 900 640-730 0.71-0.81 Amenities include a swimming
Tierra Catalina 1BR/1BA 916 625-680 0.68-0.74 pool, tennis court, spa,
3201 East Skyline 2BR/2BA 1,207 790 0.66 clubroom, laundry facility
Drive 2BR/2BA 1,233 850-950 0.69-0.77 and covered parking.
2BR/2BR/TH 1,304 890-950 0.68-0.73
3BR/2BA/TH 1,525 950-1,070 0.62.0.70
====================================================================================================================================
</TABLE>
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of its
quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the neighborhood
based on past history and present conditions. Vacancies are
then deducted to arrive at effective gross income. Estimated
annual expenses are deducted from the effective gross
income, resulting in an indication of net operating income
before debt service. From the estimated net annual income,
annual debt service and deferred maintenance (if
applicable), are subtracted to obtain annual cash flow to
equity. This cash flow can be capitalized into an indication
of equity value by direct capitalization utilizing an
overall equity rate, or if debt does not exist, an overall
capitalization rate. It may also be projected into the
future over a selected but appropriate holding period, and
discounted along with the anticipated equity reversion at
the market discount rate and added in order to arrive at the
net present equity value for the subject property. In either
method, the present mortgage balance (if applicable) would
be added to the equity value to obtain the total value of
the property. Since our valuation is on a cash basis, no
mortgages were considered. The appraisers have utilized both
methods in valuing the subject property on an all cash
basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental income
from the various rental units, as well as laundry income,
forfeited security deposits, and miscellaneous income.
Information provided by the on-site leasing agents indicated
the following current rent schedule:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
------------------------------------------------------------------------
TYPE UNITS SIZE (SF) RENT/MO. RENT/SF AVG. MO. TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1BR/1BA 23 900 $640-730 $0.71-0.81 $14,900
1BR/1BA 18 916 625-680 0.68-0.74 12,185
2BR/2BA 19 1,207 790 0.66 15,010
2BR/2BA 25 1,233 850-950 0.69-0.77 21,450
2BR/2BA/TH 17 1,304 890-950 0.68-0.73 15,490
3BR/2BA/TH 18 1,525 950-1,070 0.62-0.70 17,460
--- ----- --------- ---------- -------
120 1,171 804 $ 0.69 $96,495
</TABLE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
general area. For the purpose of this analysis, we have
considered eleven apartment complexes that were found to be
most
32
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
SUBJECT RENT ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF COMPARABILITY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 900 $640-730 $0.71
Skyline Village 1BR/1BA 800 550 0.69 Comparable
The Greens at Ventana 1BA/1BA/DEN 847 740 0.87 Superior
The Arboretum 1BR/1BA 767 560 0.73 Comparable
Colonia Del Rio 1BR/1BA 796 590 0.74 Comparable
Pinnacle Canyon 1BR/1BA 840 675 0.80 Superior
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 1BR/1BA 916 625-680 0.68-0.74
Skyline Village 1BR/1BADEN 1,000 650 0.65 Comparable
The Arboretum 2BR/1BA 984 650 0.66 Comparable
Villa Sin Vacas 1BR/1BA/DEN 930 835 0.90 Superior
Colonia Del Rio 1BR/1BA 1,022 655 0.64 Comparable
Boulders at La Reserve 1BR/1BA/DEN 929 655 0.71 Comparable
Skyline Bel Aire 1BR/1BA/DEN 968 615 0.64 Comparable
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,207 790 0.66
Skyline Village 2BR/2BA 1,100 750-800 0.68-0.73 Comparable
L'Auberge Canyon View 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Comparable
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/1BA 1,068 680 0.64 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Comparable
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Comparable
Skyline Bel Aire 2BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 2BR/2BA 1,152 800 0.69 Comparable
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,233 850-950 0.69-0.77
Skyline Village 2BR/2BA 1,100 750-800 0.68-0.73 Comparable
L'Auberge Canyon 2BR/2BA 1,095 875 0.80 Comparable
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Comparable
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/2BA 1,068 680 0.64 Inferior
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Inferior
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Comparable
Skyline Bel Aire 2BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 2BR/2BA 1,152 800 0.69 Inferior
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/TH 1,304 890-950 0.68-0.73
Skyline Village 2BR/2BA/TH 1,100 850 0.77 Comparable
L'Auberge Canyon View 3BR/2BA 1,243 1,010 0.81 Superior
The Greens at Ventana 2BR/2BA/DEN 1,207 950 0.79 Superior
Arboretum 3BR/2BA 1,200 799 0.67 Comparable
Colonia Del Rio 2BR/2BA/TH 1,170 795 0.68 Comparable
Boulders at La Reserve 3BR/2BA 1,268 860 0.68 Comparable
La Reserve Villas 3BR/2BA 1,111 875 0.79 Superior
Legends at La Paloma 3BR/2BA 1,258 975 0.78 Superior
Skyline Bel Aire 2BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 3BR/2BA 1,351 935 0.69 Comparable
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 3BR/2BA/TH 1,525 950-1,070 0.62-0.70
Skyline Village 3BR/2BA/TH 1,250 850 0.68 Comparable
Villa Sin Vacas 3BR/2BA 1,458 1,200 0.82 Superior
L'Auberge Canyon View 3BR/2BA 1,291 1,010 0.78 Superior
Colonia Del Rio 3BR/2BA 1,345 795-810 0.59-0.60 Inferior
Arboretum 3BR/2BA 1,200 799 0.67 Comparable
Boulders at La Reserve 3BR/2BA 1,268 860 0.68 Comparable
La Reserve Villas 3BR/2BA 1,111 875 0.79 Superior
Legends at La Paloma 3BR/2BA 1,258 975 0.78 Superior
Pinnacle Canyon 3BR/2BA 1,351 935 0.69 Comparable
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
comparable. They range in total size from 80,178 to 402,272
square feet, in average unit size from 811 to 1,125 square
feet, and in physical occupancy from 89 to 99 percent. The
comparable rentals are summarized on the previous page.
All of the comparables surveyed were located within the
subject's general vicinity. The comparables average rent
range from $0.64 to $0.87 per square foot. Rent Comparables
1, 4, and 6 are believed to be most comparable to the
subject overall, specifically, in terms of overall physical
condition, location, rental rates, and the amenities
offered. These comparables indicate an average rental rates
of $0.68, $0.73 and $0.68 per square foot per month,
respectively.
It is important to note that these rents are reflective of
the current market. The Tucson area is somewhat seasonal and
rents do not tend to be increased during the summer months.
Also, a number of new units within the market have recently
been completed and more are under construction; therefore,
rents are not expected to increase over the short term. In
fact, rent concessions are reportedly being offered. The
current asking average monthly rent for the subject is $0.69
per square foot and the actual contract rents average about
$0.64 per square foot.
After considering each of the aforementioned factors,
including the subject's historical performance, we are of
the opinion that the subject's asking rentals are
reasonable. Given the subject's 99 percent physical
occupancy and actual rents, the projected market effective
rental rates for the subject are summarized as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------------
TOTAL SIZE TOTAL RENT/ MO. RENT/
UNIT TYPE UNITS (SF) (SF) MONTH TOTAL SF/MO.
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1BR/1BA 23 900 20,700 $648 $14,900 $0.72
1BR/1BA 18 916 16,488 677 12,185 0.74
2BR/2BA 19 1,207 22,933 790 15,010 0.65
2BR/2BA 25 1,233 30,825 858 21,450 0.70
2BR/2BA/TH 17 1,304 22,168 911 15,490 0.70
3BR/2BA/TH 18 1,525 27,450 970 17,460 0.64
--- ----- ------ ---- ------ -----
120 1,172 140,564 $804 $96,495 $0.69
</TABLE>
Gross Annual Rental Income: $96,495 x 12 months = $1,157,940
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, late charges, and miscellaneous. Other
income in 1991 was reported at $16,752 or $0.12 per square
foot. This figure dropped during 1992 to $14,139 or $0.10
per square foot; however, it increased in 1993 to $16,076 or
$0.11 per square foot, in 1994 to $16,958 or $0.12 per
square foot and in 1995 to $19,932 or $0.14 per square foot.
In 1996 other income dropped to $15,669 or $0.11 per square
foot. Annualized figures for 1997 reflect a total of $26,254
or $0.19 per square foot. Based on our experience with
similar type properties and the actual performance of the
property, it is our opinion that other income in the amount
of $0.15 per square foot is typical for a project such as
the subject
33
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
TIERRA CATALINA
HISTORICAL EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1991 ACTUAL 1992 ACTUAL 1993 ACTUAL 1994 ACTUAL 1995
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.59 $ 692 $0.64 $ 755 0.61 $ 719 $0.62 $ 722 $0.64 $ 746
Insurance $0.06 $ 66 $0.08 $ 97 0.06 $ 71 $0.07 $ 77 $0.07 $ 86
Personnel $0.48 $ 565 $0.46 $ 540 0.50 $ 583 $0.50 $ 582 $0.52 $ 609
Utilities $0.42 $ 489 $0.40 $ 472 0.39 $ 451 $0.43 $ 507 $0.40 $ 474
Repairs & Maintenance $0.28 $ 323 $0.27 $ 322 0.32 $ 373 $0.34 $ 394 $0.35 $ 409
Contract Services $0.12 $ 142 $0.11 $ 124 0.13 $ 147 $0.15 $ 173 $0.14 $ 166
General Administrative $0.20 $ 234 $0.17 $ 198 0.13 $ 154 $0.15 $ 178 $0.24 $ 281
Management $0.29 $ 339 $0.31 $ 365 0.32 $ 377 $0.34 $ 402 $0.35 $ 413
----- ------ ----- ------ ----- ------ ----- ------ ----- ------
TOTAL $2.44 $2,850 $2.44 $2,873 $2.46 $2,875 $2.60 $3,035 $2.71 $3,184
=====================================================================================================================
<CAPTION>
=============================================================
- --------------------------------------------------------------
EXPENSE ACTUAL 1996 ACTUAL 1997
CATEGORY PER SF PER UNIT PER SF PER UNIT
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Taxes $0.65 $ 762 $0.65 $ 759
Insurance $0.05 $ 62 $0.05 $ 57
Personnel $0.56 $ 656 $0.64 $ 753
Utilities $0.50 $ 582 $0.50 $ 588
Repairs & Maintenance $0.38 $ 442 $0.38 $ 451
Contract Services $0.16 $ 183 $0.19 $ 222
General Administrative $0.25 $ 288 $0.26 $ 308
Management $0.34 $ 400 $0.35 $ 407
----- ------ ----- ------
TOTAL $2.88 $3,375 $3.03 $3,544
==============================================================
<CAPTION>
===========================================================================================================
COMPARABLE
EXPENSE ANALYSIS
- -----------------------------------------------------------------------------------------------------------
COMPARABLE 1 2 3 BRA PROJECTIONS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Year 1997 1997 1997 1998
NRA 167,500 116,036 58,018 140,564
No. Units 168 120 60 120
Year Built 1985 1986 1986 1983
Average Unit Size (SF) 997 967 967 1,171
- -----------------------------------------------------------------------------------------------------------
EXPENSE CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- -----------------------------------------------------------------------------------------------------------
Real Estate Taxes $0.60 $ 595 $0.59 $ 570 $0.55 $ 534 $0.63 $ 741
Insurance $0.06 $ 61 $0.07 $ 69 $0.07 $ 70 $0.07 $ 85
Personnel $0.57 $ 567 $0.65 $ 625 $0.66 $ 638 $0.62 $ 726
Utilities $0.39 $ 387 $0.59 $ 575 $0.60 $ 577 $0.52 $ 609
Repairs & Maintenance $0.43 $ 431 $0.39 $ 376 $0.42 $ 407 $0.37 $ 439
Contract Services $0.09 $ 93 $0.18 $ 176 $0.21 $ 200 $0.17 $ 195
General Administrative $0.21 $ 212 $0.12 $ 113 $0.23 $ 222 $0.28 $ 329
Management $0.35 $ 350 $0.34 $ 326 $0.34 $ 325 $0.38 $ 442
----- ------ ----- ------ ----- ------ ----- ------
TOTAL EXPENSES $2.70 $2,696 $2.93 $2,830 $3.08 $2,973 $3.04 $3,566
===========================================================================================================
</TABLE>
<PAGE>
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied:
Gross Rental Income $1,157,940
Other Income ($0.15/SF) $21,085
---------
Total Potential Gross Income $1,179,025
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 7 percent range.
This covers the time lag during re-leasing and normal
refurbishing of apartment units, and the loss of income
resulting from bad debt or other vacancies. According
to our market analysis, the subject's Catalina
Foothills area had a physical vacancy of 7.0 percent in
the Third Quarter 1997 and the overall market was
reportedly at 8.66 percent. Quarterly vacancies tend to
fluctuate as a result of a seasonal decline in demand
during the summer months. The vacancy level for both
the overall market and the submarket have increased
significantly over the past year due to a number of new
projects, which have recently been completed. In
surveying the direct competition, the current physical
vacancies have increased slightly from that reported
last year and these rates may increase further as
additional units are introduced into the market.
Currently, the subject reportedly has a 1 percent
physical vacancy and the economic vacancy given current
market rents is about 17 percent. The primary
difference between the physical and economic vacancy is
due to the below-market contract rents. We have
projected a 10 percent economic vacancy in Fiscal Year
1998. We estimate that after the first year of the
projection period, some of the excess inventory will be
absorbed and the subject property should be capable of
maintaining a stabilized vacancy of 8 percent each year
thereafter.
EXPENSE ANALYSIS The various expenses necessary in the operation of the
subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement.
Proper appraisal technique demands that an appraiser
rely on typical expenses as opposed to actual expenses,
which may vary according to management or special
circumstances that may not persist. In addition, the
total expenses per square foot should be within a range
typical for similar projects. Reserves for replacement
are estimated based on age, condition, and construction
quality. It is re-emphasized that all income, as well
as expense estimates, are based on the assumption of
competent and prudent management.
We have based the following estimate of project
expenses on comparable apartment projects located in
the subject area, as well as the actual historical
performance of the subject property. The facing table
summarizes the annualized 1997 expenses reported by
three "individually metered" comparable projects, as
well as the subject property's actual expenses from
1991 to 1996, and annualized 1997 expenses (actual
figures for the period from January through October and
budgeted figures for November and December). Also
included are the 1998 projections for the subject
property expenses.
34
<PAGE>
REAL ESTATE TAXES - The Pima County Assessor's Office
coordinates the real estate taxes for Tierra Catalina.
The real property is subject to a number of different
taxing authorities and there are two assessments. In
1997, the limited cash value and the full cash value
assessments are reported to be $582,000. The property
is also subject to personal property taxes with a 1997
assessment of $50,142. The total taxes for 1997 were
$85,477.81. Considering a tax rate increase of about 4
percent from 1997 to 1998, the taxes are estimated to
be $0.63 per square foot or $88,896. This was increased
at 4 percent per year.
INSURANCE - This category includes fire and extended
coverage. Insurance costs can vary from one property to
another depending upon the type and whether a blanket
policy is used. Often times a property owner will
insure multiple properties on one policy in an effort
to reduce the cost of insurance per project. Our
expense estimate is based upon typical costs for an
individually insured apartment project in the Tucson
area. The subject's actual insurance costs were $0.06
per square foot in 1991, $0.08 per square foot in 1992,
$0.06 per square foot in 1993, $0.07 per square foot in
1994, $0.07 per square foot in 1995, and $0.05 per
square foot in 1996. The annualized insurance expense
for 1997 was $0.05 per square foot. The comparables
reflected this expense at $0.06 to $0.07 per square
foot. Based on this data, we estimated insurance at
$0.07 per square foot in the first year or $10,233.
This expense is expected to increase 4 percent annually
throughout our projection period.
PERSONNEL - This category includes salaries for office
managers, leasing agents, maid services, payroll taxes,
and FICA. This category is not to be confused with the
category of Management. The expense comparables
reflected a personnel expense ranging from $0.57 to
$0.66 per square foot. Annualized figures for the
subject in 1997 indicate this expense at $0.64 per
square foot. The subject's actual figures for 1993,
1994, 1995, and 1996 were $0.50, $0.50, $0.52, and
$0.56 per square foot, respectively. Based on
historical figures at the subject property and
tempering them with the market data, we have estimated
this expense at $81,150 or $0.62 per square foot. This
expense is expected to increase 4 percent annually
throughout our projection period.
UTILITIES - This expense category includes electric,
gas, water, and sewer for the apartment's common area.
The subject's actual figures for 1993, 1994, 1995, and
1996 were $0.39, $0.43, $0.40, and $0.50 per square
foot, respectively. Annualized figures for 1997
indicate this expense at $0.50 per square foot. The
comparables indicated a range from $0.39 to $0.60 per
square foot. Based on this data, we have estimated this
expense at $0.52 per square foot, or $73,093. This
expense is expected to increase 4 percent annually
throughout our projection period.
REPAIR AND MAINTENANCE - These expenses are necessary
in order to keep the property in good repair including
plumbing, air-conditioners, electrical, draperies,
carpets, janitorial supplies, and decorative costs. The
expense comparables indicated a range from $0.39 to
$0.43 per square foot. Annualized figures for 1997
indicate this expense at $0.38 per square foot, while
actual figures for 1993, 1994, 1995, and 1996 were
$0.32, $0.34, $0.35, and $0.38 per square foot,
respectively.
35
<PAGE>
Due to the age, overall condition, and the ongoing
maintenance at the subject property, an estimate of
$0.37 per square foot or $52,627 has been projected for
the subject. This expense is expected to increase 4
percent annually throughout our projection period.
CONTRACT SERVICES - This expense category includes
landscaping, security, etc. The comparables indicated a
range from $0.09 to $0.21 per square foot,
respectively. The subject's actual figures for 1993,
1994, 1995, and, 1996 were $0.13, $0.15, $0.14, and
$0.16 per square foot, respectively. Annualized figures
for 1997 indicate this expense at $0.19 per square
foot. We have estimated this expense for the subject at
$0.17 per square foot or $23,390 and this expense is
expected to increase 4 percent annually throughout our
projection period.
GENERAL ADMINISTRATIVE - This expense category includes
professional, legal, and accounting costs,
administration costs, promotional expenses, etc. The
expense comparables indicate a range of $0.12 to $0.23
per square foot. Actual figures for the subject in
1993, 1994, 1995, and 1996 were $0.13, $0.15, $0.24,
and $0.25 per square foot, respectively. The 1997
annualized expenses are $0.26 per square foot. We have
estimated this expense for the subject at $0.28 per
square foot or $39,470. This expense is expected to
increase 4 percent annually throughout our projection
period.
MANAGEMENT - This includes the fee to outside
management or ownership for managing the property. This
expense is typically a percentage of the effective
gross income of the property. The industry standard for
an apartment complex of this size and quality is
between 3 and 5 percent of effective gross income. The
management fee for the subject is reportedly 5 percent
of effective gross income. The comparables reflected
this expense between $0.34 and $0.35 per square foot.
The 1997 annualized expenses are $0.35 per square foot.
The subject's expense in 1993, 1994, 1995, and 1996
appear reasonable at $0.32, $0.34, $0.35, and $0.34 per
square foot, respectively. Based on this data we have
projected the management fee at 5 percent of effective
gross income in each year of our analysis which was
cross-checked on a per square foot basis.
EXPENSE SUMMARY The subject's total expenses were $2.46 per square foot
in 1993, $2.60 per square foot in 1994, $2.71 per
square foot in 1995 and $2.88 per square foot in 1996.
Annualized expenses for 1997 are $3.03 per square foot
or $3,544 per unit. The comparables ranged from $2.70
to $3.08 per square foot and from $2,696 to $2,973 per
unit. Considering the size and quality of the subject,
the overall expenses appear reasonable. Our estimate of
the total expenses for Fiscal Year 1998 at $3.04 per
square foot are slightly higher than the annualized
expenses for 1997.
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These
may include roof covering, carpeting, appliances,
compressors, parking areas, drives, etc. The subject
was constructed in 1983 and appears to have had ongoing
maintenance
36
<PAGE>
since its construction. It is our opinion that a
reserve allowance of $300 per unit or about $0.26 per
square foot is adequate to provide for the continued
maintenance of the project. This was included in our
expenses prior to concluding the net operating income.
DEFERRED MAINTENANCE The subject improvements are in good condition and
exhibited only minor deferred maintenance at the time
of our inspection. This has been estimated at $100,260,
which has been rounded to $105,000. This includes
appliance repair and replacement, carpet replacement,
window covering replacement, interior repairs, air
conditioning repairs, roof repairs, water heater
replacement, landscaping, painting, and paving.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION The most realistic method for estimating value via the
Income Approach is through the use of Discounted Cash
Flow Analysis. The Market Value of a real estate
investment under the Discounted Cash Flow Method is
defined as the discounted sum of all net cash inflows
plus the property's discounted reversionary value.
Primarily, any given property is only worth the value
of the income derived from it.
The general methodology of Discounted Cash Flow
involves the following steps: 1) increasing each year's
cash flows by an appropriate appreciation factor; 2)
discounting each year's net cash flow by an appropriate
discount rate; 3) deriving the property's reversionary
value in the final year and discounting it to the
present; and 4) the summation of all cash flows,
including final year reversion, into an estimate of
value.
According to the Third Quarter 1997 real estate
investor survey compiled by Peter F. Korpacz &
Associates, Inc. the apartment market is being flooded
with capital, primarily from REIT's, rendering it
almost impossible for large institutional investors to
land deals. In addition, brokers have fewer properties
to market either because long-term holders are buying
product before it is ever offered on the market place
or because owners are not willing to sell. The main
factor is investors are watching to determine if
investment locations are the pace of job growth. The
slower pace of job growth in many markets, coupled with
continued increases in multi-family and single family
permits as well as attractive interest rates could
combine to negatively effect the apartment market. As
such, some investors are increasing overall vacancy
allowance in their acquisition analyses and backing off
on revenue growth assumptions. However, apartment
investment continues to be attractive for pension funds
and REIT's and we anticipate investors will continue to
find the apartment market a desirable investment.
DISCOUNT RATE Over the past several years, the internal rate of
return (IRR) has gained greater usefulness and market
acceptance as an investment measure. IRR is the yield
on an investment based on an initial cash investment,
annual cash flows to the property, as well as resale
proceeds. IRR allows for return on investment as well
as recapture of the original investment when factoring
in the reversion. To simulate this process, we have
relied upon several investor surveys, which detail
reasonable yields or IRR requirements of purchasers. We
have used this rate as a discount
37
<PAGE>
rate that, when applied to projected cash flows and net
resale proceeds (reversion), results in the present
value of the property.
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This IRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. Corporate "Baa" bonds are typically viewed as
an alternative investment. Real estate is considered
riskier due to illiquidity, competition, burden of
management, and market conditions; therefore,
approximately 150 basis points or more could be added
to this percentage rate in a normal market. Based on
the previous data and considering the amount of new
construction in the market and the lease-up time
required to regain stabilization, we believe a 12.50
percent discount rate is reasonable based on an all
cash sale and alternative investments. While this is
134 basis points higher than the indicated average by
the previously mentioned survey, we believe it reflects
the added risk in the market.
CAPITALIZATION RATE The subject property's reversionary value is derived by
capitalizing the eleventh year's net operating income.
As mortgage rates have fluctuated over the past several
years, it becomes difficult to apply a band of
investment method to establish a capitalization rate
because capitalization rates do not react dramatically
to ups and downs of mortgage interest rates.
Additionally, the mercurial nature of the recent market
creates a large variance of returns depending on
property potential. Again, according to the previously
cited investor survey, investors of apartment
properties indicated a terminal capitalization rate
range from 8.0 to 10.25 percent with an average of 9.29
percent. This range appears reasonable after analyzing
recent sales in the area, which follow.
SALE IDENTIFICATION SALE DATE CAPITALIZATION RATE
----------------------------------------------------
4 Sandstone 06/97 10%
5 Hilands I 06/97 11%
6 Windsail 03/97 10%
8 Sundown Village 12/96 10.09%
9 Rio Cancion 12/96 9.42%
10 Sonoran Terrace 08/96 9.39%
Based upon the aforementioned factors and the quality
of the subject, it is our opinion that a 9.5 percent
"going-in" capitalization rate was appropriate in this
market. Typically, the terminal capitalization rate
would be higher than the "going-in" capitalization rate
due to the greater risk and older age of the property
at the end of the projection period. Therefore, we
believe a terminal capitalization rate of 10.5 percent
is appropriate for the subject property. The resulting
value indicates a first year capitalization rate of
9.33 percent.
CASH FLOW ASSUMPTIONS . Rents were based on an average current rental rate
of approximately $0.69 per square foot. During the
projection period rents were increased at a rate of
0 percent in Year 1 and 4 percent per year
thereafter. As previously discussed in the
"Apartment Market Analysis" section of this report,
the subject area's average rental rates have
increased at a healthy pace in the
38
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
TERRACATLINA APARTMENTS
Fiscal Year Ending 12/31 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents 1,157,940 1,204,258 1,252,428 1,302,525 1,354,626 1,408,811 1,465,164
Rent/SF/Mo. 0.686 0.714 0.743 0.772 0.803 0.835 0.869
Other Income/Yr. 21,085 21,928 22,805 23,717 24,666 25,653 26,679
--------- --------- --------- --------- --------- --------- ---------
Gross Income 1,179,025 1,226,186 1,275,233 1,326,242 1,379,292 1,434,464 1,491,842
% Vacancy 10.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Vacancy Allowance 117,902 98,095 102,019 106,099 110,343 114,757 119,347
--------- --------- --------- --------- --------- --------- ---------
Effective Gross Income 1,061,122 1,128,091 1,173,214 1,220,143 1,268,949 1,319,707 1,372,495
-----------------
Expenses: $/UNIT $/SF
-----------------
Real Estate Taxes 741 0.63 88,896 92,452 96,150 99,996 103,996 108,156 112,482
_________________
Insurance 85 0.07 10,233 10,642 11,068 11,511 11,971 12,450 12,948
_________________
Personnel 726 0.62 87,150 90,636 94,261 98,032 101,953 106,031 110,272
_________________
Utilities 609 0.52 73,093 76,017 79,058 82,220 85,509 88,929 92,486
_________________
Repairs and Maintenance 439 0.37 52,627 54,732 56,922 59,198 61,566 64,029 66,590
_________________
Contract Services 195 0.17 23,390 24,325 25,298 26,310 27,363 28,457 29,596
_________________
General Administrative 329 0.28 39,470 41,049 42,691 44,399 46,175 48,022 49,943
_________________
Management Fee 5.00% 0.38 53,056 56,405 58,661 61,007 63,447 65,985 68,625
_________________
Reserves for Replacement 300 0.26 36,000 37,440 38,938 40,495 42,115 43,800 45,551
_________________ --------- --------- --------- --------- --------- --------- ---------
Total Expenses 463,916 483,698 503,046 523,168 544,095 565,859 588,493
Per SF 3.30 3.44 3.58 3.72 3.87 4.03 4.19
--------- --------- --------- --------- --------- --------- ---------
Net Operating Income 597,207 644,392 670,168 696,975 724,854 753,848 784,002
Per SF 4.25 4.58 4.77 4.96 5.16 5.36 5.58
Capital Items: 105,000 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Cash Flow 492,207 644,392 670,168 696,975 724,854 753,848 784,002
--------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270 0.438462
Present Value of Cash Flow 437,517 509,150 470,680 435,118 402,242 371,851 343,755
NOI in 10th Year 917,171 Present Value of Income Stream 3,853,445
Ro at Reversion 10.50% Present Value of Reversion 2,582,303
---------
Indicated Reversion 8,734,965 Indicated Value of Subject 6,435,748
Less: Sales Costs 4.00% 349,399 Indicated Value/SF 45.79
---------
Indicated Value/Unit 53,631
Reversion in 10th Yr 8,385,567 GIM at Indicated Value
(rent income only) 5.56
Ro at Indicated Value 9.28%
<CAPTION>
=================================================================================================
TERRACATLINA APARTMENTS
Fiscal Year Ending 12/31 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Apt. Rents 1,523,770 1,584,721 1,648,110 1,714,034
Rent/SF/Mo. 0.903 0.940 0.977 1,016
Other Income/Yr. 27,746 28,856 30,010 31,210
--------- --------- --------- ---------
Gross Income 1,551,516 1,613,577 1,678,120 1,745,244
% Vacancy 8.00% 8.00% 8.00% 8.00%
Vacancy Allowance 124,121 129,086 134,250 139,620
--------- --------- --------- ---------
Effective Gross Income 1,427,395 1,484,490 1,543,870 1,605,625
-----------------
Expenses: $/UNIT $/SF
-----------------
Real Estate Taxes 741 0.63 116,981 121,660 126,527 131,588
_________________
Insurance 85 0.07 13,466 14,005 14,565 15,147
_________________
Personnel 726 0.62 114,683 119,270 124,041 129,003
_________________
Utilities 609 0.52 96,186 100,033 104,035 108,196
_________________
Repairs and Maintenance 439 0.37 69,254 72,024 74,905 77,901
_________________
Contract Services 195 0.17 30,779 32,011 33,291 34,623
_________________
General Administrative 329 0.28 51,940 54,018 56,179 58,426
_________________
Management Fee 5.00% 0.38 71,370 74,225 77,194 80,281
_________________
Reserves for Replacement 300 0.26 47,374 49,268 51,239 53,289
_________________ --------- --------- --------- ---------
Total Expenses 612,033 636,514 661,975 688,454
Per SF 4.35 4.53 4.71 4.90
--------- --------- --------- ---------
Net Operating Income 815,362 847,976 881,896 917,171
Per SF 5.80 6.03 6.27 6.52
Capital Items: 0 0 0 0
--------- --------- --------- ---------
Cash Flow 815,362 847,976 881,896 917,171
--------- --------- --------- ---------
Present Value Factor 12.50% 0.389744 0.346439 0.307946 0.000000
Present Value of Cash Flow 317,783 293,772 271,576 0
NOI in 10th Year
Ro at Reversion
Indicated Reversion
Less: Sales Costs 4.00%
Reversion in 10th Yr
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
========================================================================
CASH FLOW SUMMARY
CALENDAR YEAR ANNUAL 12.50% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------ --------- ---------- ---------
<S> <C> <C> <C>
1998 $ 492,207 0.888888889 $ 437,517
1999 644,392 0.790123457 509,149
2000 670,168 0.702331962 470,680
2001 696,975 0.624295077 435,118
2002 724,854 0.554928957 402,242
2003 753,848 0.493270184 371,851
2004 784,002 0.438462386 343,755
2005 815,362 0.389744343 317,783
2006 847,976 0.346439416 293,772
2007 881,896 0.307946148 271,576
-------
Total NPV of Cash Flows $3,853,445
Projected NOI - 11th Year $ 917,171
Terminal Capitalization Rate 10.50%
---------
Estimated Value of Property at End of 10th Year $ 8,734,962
Less Sales Cost @ 4.00% (349,398)
---------
Value of Reversion at End of 10th Year $ 8,385,563
Discount Factor - 10th Year 12.50% 0.307946
---------
Present Value of the Reversion $ 2,582,302
Sum of Present Values of Cash Flow 3,853,445
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $ 6,435,747
(ROUNDED) $ 6,400,000
=========
========================================================================
</TABLE>
<PAGE>
early 1990's; however, with the significant amount
of new construction the growth has slowed.
. The subject's current physical vacancy is 1 percent
and the economic vacancy rate is about 17 percent.
The primary reason for the discrepancy between the
physical and economic rent is the difference between
market and contract rents as well as discounts given
for concessions. Due to the large supply of excess
inventory in the current market, we estimate 10
percent vacancy for the first year of the cash flow.
It is our opinion that the subject should be capable
of obtaining an 8 percent vacancy rate for the for
the remainder of the holding.
. The property has been appraised based on a "resident
pays utilities" status.
. Expenses (with the exception of management) have
been increased at an average growth rate of 4
percent annually over the 11-year projection period.
Management expenses are based on a percentage of
effective gross income and increase with occupancy
and rental increases.
. A discount rate of 12.50 percent was utilized.
. A terminal capitalization rate of 10.5 percent was
believed reasonable.
. A sales cost of 4 percent of the reversionary value
was estimated.
A cash flow analysis for the subject may be found on
the preceding pages. The estimated leased fee market
value for the subject on an "as is" basis via
discounted cash flow method is
SIX MILLION FOUR HUNDRED THOUSAND DOLLARS
($6,400,000)
39
<PAGE>
================================================================================
TIERRA CATALINA APARTMENTS
Fiscal Year Ending 12/31 ---> 1998
----
- --------------------------------------------------------------------------------
Income:
Apt. Rents $1,157,940
Rent/SF/Mo. 0.686
Other Income/Yr. 21,085
-------------
Gross Income $1,179,025
% Vacancy 8.00%
Vacancy Allowance 94,322
-------------
Effective Gross Income $1,084,703
------ ----
Expenses: $/UNIT $/SF
------ ----
Real Estate Taxes 741 0.63 $88,896
------ ----
Insurance 85 0.07 10,233
------ ----
Personnel 726 0.62 87,150
------ ----
Utilities 609 0.52 73,093
------ ----
Repairs and Maintenance 439 0.37 52,627
------ ----
Contract Services 195 0.17 23,390
------ ----
General Administrative 329 0.28 39,470
------ ----
Management Fee 5.00% 0.38 54,235
------ ----
Reserves for Replacement 300 0.26 36,000
------ ----
-------------
Total Expenses $465,095
Per SF 3.31
-------------
Net Operating Income 619,608
Per SF 4.41
Capitalization Rate 9.50%
-------------
Fee Simple Stabalized Market Value $6,522,191
Less: Rent Loss Due to Lease-up 61,922
Deferred Maintenance 105,000
-------------
Leased Fee "As Is" Market Value $6,355,268
Leased Fee "As Is" Market Value (Rounded) $6,360,000
- --------------------------------------------------------------------------------
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1
------
Stabilized NOI $619,608
Projected NOI 553,351
--------
Rent Loss $66,257
PV Factor @ 7.00% 0.934579
--------
PV Income Loss $61,922
CUMULATIVE LOSS $61,922
================================================================================
<PAGE>
DIRECT
CAPITALIZATION Direct capitalization is a method used to convert a single
year's income estimate into a value indication. In direct
capitalization a rate of return for the investor and
recapture of the capital invested is implicit in the overall
capitalization rate.
The overall capitalization rate was chosen after analyzing
the comparable apartment sales in our Sales Comparison
Approach. These sales indicated a range of "going-in"
capitalization rates from 9.39 to 11.00 percent.
A "going-in" capitalization rate of 9.5 percent was deemed
appropriate due to the quality of the subject, its location,
and the current market conditions. The net income is
capitalized into a value of $6,522,191 with deductions for
rent loss due to contract rent and deferred maintenance made
subsequently to reflect a value of $6,360,000 or $6,400,000
rounded.
INCOME APPROACH
CONCLUSION DCF Method........................................$6,400,000
Direct Capitalization Method......................$6,400,000
The two methods of comparison are supportive of each other
and we gave equal reliance to each. We are of the opinion
that the "as is" market value of the subject property, as of
December 31, 1997 is $6,400,000
40
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $6,300,000
Income Approach $6,400,000
The Sales Comparison Approach utilized relatively
recent comparable sales of similar properties in the
area. The weakness of the Sales Comparison Approach is
that no two properties are exactly alike and exact
conditions of a sale are often unknown. The strength of
this approach is that it indicates market activity
based on the willing buyer/willing seller concept. We
placed relatively equal weight on this approach to the
Income Approach.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rental rates
in the immediate area of the subject, actual expenses,
and investor returns derived from the market, we have
estimated value. Actual data on the property, as well
as comparable data was considered adequate. Because the
Income Approach deals directly with income streams, we
feel it is a very good indication of current market
conditions. It tends to reflect a value, which an
investor of a property would anticipate. We have placed
primary emphasis on the Income Approach.
Therefore, it is our opinion that the "as is" leased
fee market value of the subject property, on an all
cash basis, as of December 31, 1997 is
SIX MILLION FOUR HUNDRED THOUSAND DOLLARS
($6,400,000)
41
<PAGE>
PINNACLE CANYON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Pinnacle Canyon
Address 7050 E. Sunrise Drive
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Canyon Joint Venture
Grantee (Buyer) BRE Property Investors, Inc.
Recorded Document 10677-1104
Sale Price $11,727,000
Occupancy 98%
Sale Price per Unit $52,120
Sale Price per SF $51.23
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 20
Number of Units 225
Number of Bedrooms 428
Net Rentable Area 228,931
Average Unit Size 1,017 SF
Land Area 15.290 Acres
Unit Density 14.71 Units per Acre
Property Condition Excellent
Parking (type) Open, carport and detached garage (500 spaces)
Construction Type Wood frame, stucco exterior, concrete foundation,
tile roof
Unit Amenities Washer/dryer, built-in television, roman tub,
microwave
Project Amenities Swimming pool, spa, clubhouse, exercise room,
computer center
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and
Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N.Bach, Bach Realty
Advisors, Inc.
Comments Detailed income and expense information was not
available. The NOI/SF, expenses, and capitalization
could not be derived, however, the EGIM is estimated
at 5.69.
<PAGE>
PINNACLE HEIGHTS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Pinnacle Heights
Address 7990 East Snyder
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Heights Associates
Grantee (Buyer) BRE Property Investors, LLC
Recorded Document 10677-1112
Sale Price $16,364,000
Occupancy 97%
Sale Price per Unit $52,787
Sale Price per SF $48.22
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 25
Number of Units 310
Number of Bedrooms 562
Net Rentable Area 339,364
Average Unit Size 1,095 SF
Land Area 30 Acres
Unit Density 10.33 Units per Acre
Property Condition Excellent
Parking (type) Open, carport, and detached garage (590 spaces)
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer, microwave, ceiling fans
Project Amenities Swimming pool, two spas, exercise room, computer center,
and clubhouse
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and Bruce
Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty Advisors,
Inc.
Comments Detailed income and expense information was not
available, however, a 5.60 EGIM has been estimated.
<PAGE>
FOOTHILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Foothills
Address 5441 N. Swan Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Foothills APB, LP
Grantee (Buyer) AIMCO/Foothill LP
Recorded Document 10677-2151
Sale Price $7,600,000
Occupancy 97%
Sale Price per Unit $28,148
Sale Price per SF $45.26
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 2
Number of Buildings 11
Number of Units 270
Number of Bedrooms 300
Net Rentable Area 167,910
Average Unit Size 622 SF
Land Area 7.5 Acres
Unit Density 36 Units per Acre
Property Condition Good
Parking (type) Open and covered (380 spaces)
Construction Type Wood frame, stucco exterior, and tile roof
Unit Amenities Patio/balcony, storage
Project Amenities Swimming pool, clubhouse, weight room,
racquetball, tennis courts, laundry facility
Confirmed With Real Data, Inc., Newspaper article (11/30/97),
and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments No economic information was available, a 5.38
EGIM was estimated from knowledge of sales
price, rents, and occupancy.
<PAGE>
SANDSTONE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Sandstone Apartments
Address 405 E. Prince Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Tucson Park Ridge, Ltd.
Grantee (Buyer) Feigal Sandstone LP
Recorded Document 10569-1839
Sale Price $8,849,000
Occupancy 100%
Sale Price per Unit $26,815
Sale Price per SF $48.84
Capitalization Rate 10.0%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1986
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 330
Number of Bedrooms 363
Net Rentable Area 181,167
Average Unit Size 549 SF
Land Area 8.42 Acres
Unit Density 39.19 Units per Acre
Property Condition Good
Parking (type) Covered and open
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer available, covered parking,
balconies
Project Amenities Swimming pool, spa, tennis courts, volleyball,
laundry room, clubhouse, exercise room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
HILANDS I
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Highlands I
Address 5755 E. River Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Doubletree Finance, Inc.
Grantee (Buyer) Northland Hilands Portfolio, LP
Recorded Document 10565/255
Sale Price $12,500,000
Occupancy 95%
Sale Price per Unit $29,343
Sale Price per SF $53.34
Capitalization Rate 11%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 426
Number of Bedrooms 468
Net Rentable Area 234,324
Average Unit Size 550 SF
Land Area 14.71 Acres
Unit Density 28.95 Units per Acre
Property Condition Good
Parking (type) Open and carport (527 spaces)
Construction Type Wood frame, stucco exterior, concrete
foundation, tile roof
Unit Amenities Washer/dryer, patio or balcony w/storage,
covered parking
Project Amenities 2 Swimming pools, spa, lounge, exercise room,
racquetball court, tennis courts, laundry room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data available.
<PAGE>
WINDSAIL
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<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Windsail
Address 7300 North Mona Lisa Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 03/97
Grantor (Seller) PTR Holdings
Grantee (Buyer) Windsail Properties LLC
Recorded Document 10513/2196
Sale Price $10,037,000
Occupancy 94%
Sale Price per Unit $33,457
Sale Price per SF $41.14
Capitalization Rate 10%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 21
Number of Units 300
Number of Bedrooms 548
Net Rentable Area 243,952
Average Unit Size 813 SF
Land Area 11.65 Acres
Unit Density 25.8 Units per Acre
Property Condition Good
Parking (type) Open (150) and Covered (300)
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer connection, fireplace, microwave,
balcony/patio
Project Amenities Swimming pool, spa, sauna, exercise room,
tennis courts, playground
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data reveals estimated EGIM
of 5.74
<PAGE>
COBBLE CREEK
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Cobble Creek
Address 7700 E. Speedway Blvd.
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Cobble Creek Associates, LLC
Recorded Document 11463/642
Sale Price $9,250,000
Occupancy 91%
Sale Price per Unit $30,731
Sale Price per SF $42.55
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1980
Last Year Renovated NA
Number of Stories 3
Number of Buildings 13
Number of Units 301
Number of Bedrooms 367
Net Rentable Area 217,382
Average Unit Size 722 SF
Land Area 9.877 Acres
Unit Density 30.47 Units per Acre
Property Condition Fair
Parking (type) Open and carport (386 spaces)
Construction Type Concrete block with stucco exterior, flat
built-up roof
Unit Amenities Fireplace, balcony/patio
Project Amenities Swimming pool, clubhouse, spa, tennis court,
racquetball court, basketball court
Confirmed With Comps and Real Data, Inc., and Bruce Greenberg,
MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Economic information was confidential, however,
from knowledge of sales price, rental rates,
and occupancy, an EGIM of 6.35 was calculated.
<PAGE>
SUNDOWN VILLAGE
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Sundown Village
Address 8215 North Oracle Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Sundown Associates, LLC
Recorded Document 10438/1085
Sale Price $11,350,000
Occupancy 90%
Sale Price per Unit $34,394
Sale Price per SF $40.57
Capitalization Rate 10.09%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,187,240
Vacancy/Collection Loss 10% $(218,724)
Other Income $83,970
Effective Gross Income $2,052,486
Operating Expenses $(941,265)
Net Operating Income $1,111,221
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 1, 2 & 3
Number of Buildings 37
Number of Units 330
Number of Bedrooms 486
Net Rentable Area 279,758
Average Unit Size 848 SF
Land Area 14.99 Acres
Unit Density 22 Units per Acre
Property Condition Good
Parking (type) Open (82) Covered (250) and Detached Garage (17)
Construction Type Wood frame with stucco exterior, tile roof
Unit Amenities Fireplace, microwave, washer/dryer hook-up
Project Amenities Swimming pool, spa, sauna, clubhouse
Confirmed With Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
RIO CANCION
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Rio Cancion
Address 2400 East River Road
City/ State Tucson, Arizona
TRANSACTION DATA
SALE DATE 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Rio Cancion Associates, LC
Recorded Document 10438/1044
Sale Price $17,400,000
Occupancy 90%
Sale Price per Unit $45,910
Sale Price per SF $50.67
Capitalization Rate NA
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,956,200
Vacancy/Collection Loss 10% $(295,620)
Other Income $97,200
Effective Gross Income $2,757,780
Operating Expenses $(1,118,846)
Net Operating Income $1,638,934
PROPERTY DESCRIPTION
Year Built 1983
Last Year Renovated NA
Number of Stories 1 & 2
Number of Buildings 35
Number of Units 379
Number of Bedrooms 613
Net Rentable Area 343,370
Average Unit Size 906 SF
Land Area 16.323 Acres
Unit Density 23.21 Units per Acre
Property Condition Good
Parking (type) Open and carport (878 spaces)
Construction Type Wood frame with stucco exterior, concrete
foundation, Spanish tile roof
Unit Amenities Fireplace, vaulted ceilings, microwave,
balcony/patio, w/d hookup
Project Amenities 3 swimming pools, spa, fitness room, basketball
court, tennis court, carports, clubhouse
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
SONORAN TERRACES
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<PAGE>
COMPARABLE APARTMENT SALE 10
PROPERTY IDENTIFICATION
Job Number 97-073/97-077
Project Name Sonoran Terraces
Address 7887 N. La Cholla Boulevard
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 08/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) NA Sonoran Terraces 5-1
Recorded Document 10357/907
Sale Price $18,750,000
Occupancy 95%
Sale Price per Unit $50,134
Sale Price per SF $45.04
Capitalization Rate 9.39%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,995,238
Vacancy/Collection Loss 5% $(149,762)
Effective Gross Income $2,845,476
Operating Expenses $1,084,034
Net Operating Income $1,761,442
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 60
Number of Units 374
Number of Bedrooms 632
Net Rentable Area 416,256 SF
Average Unit Size 1,113 SF
Land Area 25.810 Acres
Unit Density 14.49 Units per Acre
Property Condition Good
Parking (type) Open and Covered (674 spaces)
Construction Type Brick veneer, concrete foundation, Spanish
tile roof
Unit Amenities Washer/dryer
Project Amenities Swimming pools, clubhouse, tennis courts,
weight room, covered parking
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments None
<PAGE>
SKYLINE VILLAGE
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<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Skyline Village
Street Address: 6651 North Campbell Avenue
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 168
Net Rentable Area (SF): 167,500
Average Unit Size (SF): 997
Parking Surface: Asphalt
Type of Construction: Painted stucco exterior with flat built-up
roofs and red tile pitched roof fr
Unit Mix:
<TABLE>
<CAPTION>
---------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------
<S> <C> <C> <C> <C>
48 1BR/1BA 800 $ 550 $ 0.69
44 1BR/1BA/DEN 1,000 650 0.65
66 2BR/2BA 1,100 750-850 0.68-0.77
10 2BR/2BA/TH 1,250 850 0.68
---------------------------------------------
</TABLE>
Concession: $250 off first month's rent
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, fireplaces, covered parking
Project Amenities: Swimming pool, tennis court, jacuzzi,
clubroom, laundry facility
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.68
Electricity Paid By: Tenant
Length of Lease: 6, 9, and 12 months
Security Deposit: Yes
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
L' AUBERGE CANYON VIEW
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY DESCRIPTION
Job Number: 97-073/97-077
Name of Project: L'Auberge Canyon View
Street Address: 6650-55 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Stories: 2
Number of Units: 264
Net Rentable Area (SF): 269,048
Average Unit Size (SF): 1,019
Parking Surface: Asphalt
Type of Construction: Masonry with flat built-up roofs
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 724 $ 725 $1.00
64 2BR/2BA 909 775 0.85
60 2BR/2BA 1,049 825 0.79
66 2BR/2BA 1,095 875 0.80
12 3BR/2BA 1,223 1,010 0.82
19 3BR/2BA 1,243 1,010 0.81
11 3BR/2BA 1,291 1,010 0.78
----------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer in units, fireplaces,
outdoor-utility closets, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi,
clubroom
ECONOMIC DATA
Percent Occupied: 96%
Avg. Effective Monthly
Rent/SF of NRA: $0.82
Electricity Paid By: Tenant
Length of Lease: 7 and 12 months
Security Deposit: $225; $200 refundable
Confirmed With: RealData Inc./On-Site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
THE GREENS AT VENTANA CANYON
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: The Greens at Ventana Canyon
Street Address: 5800 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 265
Net Rentable Area (SF): 267,935
Average Unit Size (SF): 1,011
Parking Surface: Asphalt
Type of Construction: Masonry exterior
Unit Mix:
<TABLE>
<CAPTION>
--------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
--------------------------------------------
<S> <C> <C> <C> <C>
22 1BR/1BA/DEN 818 $ 714 $ 0.87
26 1BR/1BA 847 740 0.87
29 2BR/2BA 945 775 0.82
27 2BR/2BA 974 739 0.76
48 2BR/2BA 1,018 787-837 0.77-0.82
65 2BR/2BA 1,050 800 0.76
22 2BR/2BA 1,169 914-964 0.78-0.82
26 2BR/2BA/DEN 1,207 950 0.79
--------------------------------------------
</TABLE>
Concessions: 1/2 off first month's rent
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer in units, fireplaces,
ceiling fans, outdoor utility closets,
patio/balconies, covered parking
Project Amenities: 1 swimming pool, jacuzzi, picnic area, club
room
ECONOMIC DATA
Percent Occupied: 89%
Avg. Monthly Rent/SF of NRA: $0.80
Electricity Paid By: Tenant
Length of Lease: 12 months
Security Deposit: None (special)
Confirmed With: RealData Inc./On-site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
THE ARBORETUM
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: The Arboretum
Street Address: 4700 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 496
Net Rentable Area (SF): 402,272
Average Unit Size (SF): 811
Parking Surface: Asphalt
Parking Spaces: 322 open; 352 covered
Type of Construction: Frame with stucco exterior and flat built-up
roofs and pitched tile and shingle roofs
Unit Mix:
<TABLE>
<CAPTION>
-----------------------------------------
Total Unit Size Monthly Monthly
Units Type W(SF) Rent Rent/SF
_________________________________________
<S> <C> <C> <C> <C>
32 1BR/1BA 520 $475 $0.91
128 1BR/1BA 616 500 0.81
96 1BR/1BA 686 510 0.74
32 1BR/1BA 767 560 0.73
64 2BR/1BA 984 650 0.66
48 2BR/2BA 995 710 0.71
48 2BR/2BA 1,001 735 0.73
48 3BR/2BA 1,200 799 0.67
-----------------------------------------
</TABLE>
Concessions: 1/2 month free rent. $175 off if deposit on
1/st/ visit
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, fireplaces, patio/balconies, ceiling
fans, covered parking
Project Amenities: 3 swimming pools, jacuzzi, picnic area,
clubroom, laundry facility, exercise/weight
room
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of NRA: 0.734
Electricity Paid By: Tenant
Length of Lease: 9 and 12 months
Security Deposit: $175 -- 1BR; $200-2BR; $225-3BR
Pets Allowed/Deposit: $200 plus $15 per month
Confirmed With: RealData Inc./On-Site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
VILLAS SIN VACAS
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<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Villas Sin Vacas
Street Address: 7601 North Calle Sin Envidia
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 72
Net Rentable Area (SF): 80,178
Average Unit Size (SF): 1,114
Parking Surface: Asphalt
Type of Construction: Open and 72 carports
Unit Mix:
<TABLE>
<CAPTION>
---------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------
<S> <C> <C> <C> <C>
38 1BR/1BA/DEN 930 $ 835 $0.90
18 2BR/2BA 1,195 1,050 0.88
16 3BR/2BA 1,458 1,200 0.82
--------------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Fireplace, washer and dryer, microwave,
covered parking
Project Amenities: Swimming pool, clubhouse
ECONOMIC DATA
Percent Occupied: Mid to high 90's%
Avg. Monthly Rent/SF of NRA: $0.871
Electricity Paid By: Tenant
Length of Lease: 9 and 12 months
Security Deposit: $200
Pets Allowed/Deposit $200
Confirmed With: On-Site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
COLONIA DEL RIO
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<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Colonia Del Rio
Street Address: 4601 N. Via Entrada
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 176
Net Rentable Area (SF): 177,760
Average Unit Size (SF): 1,010
Parking Surface: Asphalt
Parking Spaces: 261
Type of Construction: Masonry exterior with red tile roofs
Unit Mix:
<TABLE>
<CAPTION>
-----------------------------------------------------
Total Unit Size Eff.Mo. Eff. Mo.
Units Type (SF) Rent Rent/SF
-----------------------------------------------------
<S> <C> <C> <C> <C>
22 1BR/1BA 713 $560 $0.79
44 1BR/1BA 796 590 0.74
22 1BR/1BA 1,022 655 0.64
22 2BR/1BA 1,068 680 0.64
44 2BR/2BA/TH 1,170 795 0.68
22 3BR/2BA 1,345 795-810 0.59-0.60
-----------------------------------------------------
</TABLE>
Concessions: $200 off 1st month's rent
Unit Amenities: Fireplace, washer and dryer, microwave,
covered parking
Project Amenities: Swimming pool, spa, exercise room,
playground
ECONOMIC DATA
Percent Occupied: 90's%
Avg. Effective Monthly Rent/SF of NRA: $0.683
Electricity Paid By: Tenant
Length of Lease: NA
Security Deposit: $75
Pets Allowed/Deposit: Yes/$150
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
BOULDERS AT LA RESERVE
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<PAGE>
RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Boulders at La Reserve
Street Address: 1500 E. Pusch Wilderness Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 239,792
Average Unit Size (SF): 999
Parking Surface: Asphalt
Parking Spaces: 375, same garages
Type of Construction: Masonry exterior with flat built-up and
red tile pitched roofs
Unit Mix:
<TABLE>
<CAPTION>
---------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA 725 $595 $0.82
48 1BR/1BA/DEN 929 655 0.71
64 2BR/2BA 1,057 740 0.70
64 3BR/2BA 1,268 860 0.68
---------------------------------------------------
</TABLE>
Concessions: 1/2 month free rent on 1BR or 2 BR and 1
month free on 3BR w/12 month lease
Unit Amenities: Some fireplaces, washer and dryer,
microwave, garage
Project Amenities: Swimming pool, spa, exercise room,
clubhouse
ECONOMIC DATA
Percent Occupied: NA
Avg. Effective Monthly Rent/SF of NRA: $0.717
Electricity Paid By: Tenant
Length of Lease: 7-13 months
Security Deposit: $100
Pets Allowed/Deposit: $300 plus $10 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Comments: Garages bring a rental premium of $60
plus.
<PAGE>
LA RESERVE VILLAS
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<PAGE>
RENT COMPARABLE 8
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name Of Project: La Reserve Villas
Street Address: 10700 N. LA Reserve Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 216,008
Average Unit Size (SF): 900
Parking Surface: Asphalt
Parking Spaces: Yes, but 240 carports
Type of Construction: Masonry exterior with flat built-up and red tile
pitched roofs
Unit Mix:
<TABLE>
<CAPTION>
--------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
--------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA 697 $580 $0.83
96 2BR/2BA 943 690 0.73
52 2BR/2BA 957 750 0.78
28 3BR/2BA 1,111 875 0.79
--------------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Fireplace, washer/dryer, microwave
Project Amenities: (2) swimming pools, spa, exercise room, clubhouse
ECONOMIC DATA
Percent Occupied: 90's%
Avg. Effective Monthly
Rent/SF of NRA: $0.772
Electricity Paid By: Tenant
Length of Lease: 6 mos., 9 mos., 1 year
Security Deposit: $140 1BR, $160 2BR, $180 3BR
Pets Allowed/Deposit: $300 plus $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
LEGENDS AT LA PALOMA
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<PAGE>
RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Legends at La Paloma
Street Address: 3750 E. Via Palomita
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 312
Net Rentable Area (SF): 322,696
Average Unit Size (SF): 1,034
Parking Surface: Asphalt
Parking Spaces: 312 carports and open parking
Type of Construction: Frame stucco with masonry exterior and sloped tile
roof
Unit Mix:
<TABLE>
<CAPTION>
--------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
--------------------------------------------
<S> <C> <C> <C> <C>
72 1BR/1BA 745 $675 $0.91
152 2BR/2BA 1,036 795 0.77
88 3BR/2BA 1,258 975 0.78
--------------------------------------------
</TABLE>
Concessions: 1 month free rent
Unit Amenities: Fireplace, washer and dryer, microwave, ceiling
fan
Project Amenities: (2) swimming pool, spa, exercise room, clubhouse,
storage off patio/balcony
ECONOMIC DATA
Percent Occupied: mid to high 90's%
Avg. Effective Monthly
Rent/SF of NRA: $0.791
Electricity Paid By: Tenant
Length of Lease: 6 mos. to 1 year
Security Deposit: $150 1BR, $175 2BR, $200 3BR
Pets Allowed/Deposit: $300 plus $10 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
SKYLINE BEL AIRE
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<PAGE>
RENT COMPARABLE 10
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Skyline Bel Aire
Street Address: 6255 Camino Pimeria Alta
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built!Renovated: 1979
Number of Stories: 1-2
Number of Units: 137
Net Rentable Area (SF): 154,151
Average Unit Size (SF): 1,125
Parking Surface: Asphalt
Parking Spaces: 136 carports and open parking
Type of Construction: Frame stucco with masonry exterior and flat roof
Unit Mix:
<TABLE>
<CAPTION>
-----------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
-----------------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA/DEN 968 $615 $0.64
73 2BR/2BA 1,263 815 0.65
-----------------------------------------------------
</TABLE>
Concessions: $25 off rent 1BR $300 off 1st month rent w/12
month lease $150 off 1st month rent w/6 month
lease
Unit Amenities: Fireplaces, washer and dryer, covered parking
Project Amenities: Swimming pool, spa, tennis court, billard room,
skylight in several bedrooms
ECONOMIC DATA
Percent Occupied: Mid 90's%
Avg. Effective Monthly
Rent/SF of NRA: $0.641
Electricity Paid By: Tenant
Length of Lease: 6 mos., 9 mos., 1 year
Security Deposit: $125 1BR and $150 2BR
Pets Allowed/Deposit: $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Comments: One of the large units is the manager's unit.
<PAGE>
PINNACLE CANYON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 11
PROPERTY IDENTIFICATION
Job Number: 97-073/97-077
Name of Project: Pinnacle Canyon
Street Address: 7050 E. Sunrise Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 225
Net Rentable Area (SF): 228,931
Average Unit Size (SF): 1,017
Parking Surface: Asphalt
Parking Spaces: NA
Type of Construction: Masonry exterior with red tile roof
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
<S> <C> <C> <C> <C>
24 1BR/1BA 795 $650 $0.82
37 1BR/1BA 840 675 0.80
48 2BR/2BA 1,124 775 0.69
74 2BR/2BA 1,152 800 0.69
40 3BR/2BA 1,351 935 0.69
----------------------------------------------
</TABLE>
Concessions: 1 month free rent w/12 month lease
Unit Amenities: Some fireplaces, washer and dryer, microwave,
built-in television, covered parking
Project Amenities: Swimming pool, spa, exercise room, clubhouse,
computer center
ECONOMIC DATA
Percent Occupied: 98%
Avg. Effective Monthly
Rent/SF of NRA: $0.762
Electricity Paid By: Tenant
Length of Lease: NA
Security Deposit: $100
Pets Allowed/Deposit: $200 plus $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991 -- May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985 -- 1991)
President
Bach & Associates, Inc. (1980 -- 1984)
President
Landauer Associates, Inc. (1980 -- 1984)
Senior Vice-President and General Manager -- Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973 -- 1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971 -- 1973)
Appraiser. Real Estate research valuation on urban and rural
properties.
Ray R. Hastings, MAI (1964 -- 1971)
Appraiser. Real Estate research valuation on urban and rural
properties.
Residential Real Estate Sales (1963 -- 1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of the
Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987 -- 1992)
Appraisal Institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who meet
the minimum standards of this program are awarded periodic
education certification).
Certified General Real Estate Property appraiser in the State of
Texas, Certification No. TX-1323079-G
Certified General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
<PAGE>
================================================================================
COMPLETE, SELF-CONTAINED
VALUATION
OF
LAS COLINAS APARTMENTS
5995 NORTH 78TH STREET
SCOTTSDALE, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 81
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
DECEMBER 31, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-080
================================================================================
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter of Transmittal................................................. 1
Assumptions and Limiting Conditions................................... 2
Certification......................................................... 4
Salient Facts and Conclusions......................................... 6
Nature of the Assignment.............................................. 7
City/Neighborhood Analysis............................................ 9
Apartment Market Analysis.............................................16
Site Analysis.........................................................20
Improvements..........................................................23
Highest and Best Use..................................................26
Appraisal Procedures..................................................29
Sales Comparison Approach.............................................31
Income Approach.......................................................35
Reconciliation........................................................44
</TABLE>
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
[LETTERHEAD OF BACH REALTY ADVISORS APPEARS HERE]
March 26, 1997
Hutton/Con Am Realty Investors 81
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of Las Colinas Apartments, Scottsdale,
Arizona; BRA: 97-080
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of December 31, 1997. This complete, self-contained appraisal report is in
conformance with the guidelines of the Appraisal Institute. The scope of this
assignment includes the Sales Comparison and Income Approaches to value. The
property was inspected in December 1997, and for the purposes of this report it
is assumed that all physical and economic conditions are similar on the date of
value as they were on the date of inspection.
Our analysis of the property focused on the supply and demand factors
influencing the Phoenix and subject area apartment market, the sale of
comparable properties, market rent levels, appropriate operating expenses, and
acceptable investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of December 31, 1997 is in the sum of
FOURTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($14,500,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
BACH REALTY ADVISORS, INC.
/s/ Stevan N. Bach
Stevan N. Bach, MAI
President and Chief Executive Officer
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this complete, self-contained appraisal
is subject to the following assumptions and limiting
conditions.
1. That responsibility is not taken for matters of a legal
nature affecting the property appraised or the title
thereto and that all legal descriptions furnished are
correct.
2. That the title to the property being appraised is good
and marketable and is appraised as though under
responsible ownership and/or management.
3. That the property is free and clear of all liens and
encumbrances, except as otherwise stated.
4. That the sketches in this report are included to assist
the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by the
appraiser.
6. That the information, estimates, and opinions furnished
the appraiser by others and contained in this report
are considered reliable and are believed to be true and
correct; however, responsibility is not taken for their
accuracy.
7. That responsibility is not taken for soil conditions or
structural soundness of the improvements that would
render the property more or less valuable.
8. That possession of this appraisal does not carry with
it the right of publication and that this report, or
any parts thereof, may not be reproduced in any form
without written permission of the appraiser.
9. That testimony or attendance in court or at a hearing
are not a part of this assignment; however, any such
appearance and/or preparation for testimony will
necessitate additional compensation than received for
this appraisal report.
10. That the valuation estimate herein is subject to an all
cash or cash equivalent purchase and does not reflect
special or favorable financing in today's market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of yield
anticipations and our judgement as to the risks and
uncertainties in the subject property and the
consequential rates of return required to attract an
investor under such risk conditions. There is no
guarantee that projected cash flows will actually
be achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by Con
Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
-------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous materials
-------------------------------------------------------
at the subject property, analysis for EPA standards,
----------------------------------------------------
its removal, and/or its encapsulation. If the reader of
-------------------------------------------------------
this report and/or any entity or person relying on the
--------------------------------------- --------------
valuations in this report wishes to know the exact or
-----------------------------------------------------
detailed existence (if any) of asbestos or other toxic
------------------------------------------------------
or hazardous waste at the subject property, then we not
-------------------------------------------------------
only recommend, but state unequivocally that they
--------------------------------------------------
should obtain an independent study and analysis
-----------------------------------------------
(including costs to cure such environmental problems)
-----------------------------------------------------
of asbestos or other toxic and hazardous waste.
----------------------------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned does hereby certify to the best of his
knowledge and belief that, except as otherwise noted in this
complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were developed,
and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics and
the Uniform Standards of Professional Appraisal
Practice of the Appraisal Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach, MAI inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. 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.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, I, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment 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 action or
event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
4
<PAGE>
10. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as is,"
of the subject property on an all cash basis, as of
December 31, 1997, is $14,500,000.
/s/ Stevan N. Bach
-------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Las Colinas Apartments
5995 North 78th Street
Scottsdale, Arizona
Location: Southeast corner of North 78th Street and McDonald
Drive
BRA: 97-080
Legal Description: Section 14, Block 2 North, Township 4 East, Las
Colinas Subdivision, Maricopa County, Arizona
Land Size: 15.7 acres or 683,892 square feet
Building Area: 252,700 square feet of net rentable area
Year Built: 1981
Unit Mix: 20 1BR/1BA at 560 square feet
72 1BR/1BA at 680 square feet
120 2BR/2BA at 900 square feet
74 2BR/2BA at 950 square feet
6 2BR/2BA at 1,000 square feet
8 3BR/2BA at 1,030 square feet
No. of Units: 300
Average Unit Size: 842 square feet
Physical Occupancy: 97%
Economic Occupancy: 90 percent
Highest and Best Use
As Vacant: Multifamily
As Improved: Multifamily
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $14,500,000
"As Is" Market Value by
Income Approach: $14,500,000
"As Is" Market Value
Conclusion: $14,500,000
<PAGE>
NATURE OF THE ASSIGNMENT
- --------------------------------------------------------------------------------
PURPOSE OF THE
APPRAISAL The purpose of this complete, self-contained appraisal
is to give an estimate of the "as is" leased fee market
value of the subject property on an all cash basis.
IDENTIFICATION OF
THE PROPERTY The subject property contains 19 two-story apartment
buildings with 300 units and a total net rentable area
of 252,700 square feet. It was constructed in 1981 on
15.7 acres. It is identified as the Las Colinas
Apartments located at 5995 North 78th Street or at the
southeast corner of North 78th Street and McDonald
Drive in Scottsdale, Arizona.
DATE OF THE
APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as of
December 31, 1997 which are assumed to be the same as
our most recent inspection date of December 1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition, 1996,
sponsored by the Appraisal Institute defines Market
Value as:
"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."
It is our opinion that a reasonable time period to sell
the subject property is six months to one year and this
----------------------
is consistent with current market conditions. A sale
earlier than six months to one year may represent a
value other than market value and is reasonably
believed to be a value less than our market value
stated within our appraisal report.
7
<PAGE>
Leased Fee Estate/1/- 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.
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the
function of this appraisal is for annual partnership
reporting and/or internal purposes.
PROPERTY RIGHTS
APPRAISED The appraiser has appraised the "as is" leased fee
interest subject to short-term leases which are
typically 6 to 12 months in duration at the subject
property.
THREE-YEAR HISTORY According to the Maricopa County records, the current
owner of record is Hutton/Con Am Realty Investors 81.
No sale or listing of the subject property is believed
to have occurred over the past three years.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with
accepted techniques, standards, methods, and procedures
of the Appraisal Institute. The values set forth herein
were estimated after application and analysis by the
Sales Comparison and Income Approaches to value. These
approaches are more clearly defined in the valuation
section of this report. The Cost Approach was not
utilized in our analysis due to the age of the property
since depreciation is difficult to accurately measure
in older properties. Additionally, it is often the
perception of investors that cost does not necessarily
equate to value and the purchase price is not typically
based on construction costs.
The scope of our assignment included obtaining
pertinent property data from the client regarding
income and expense figures, tenant rent rolls, and
permission to inspect the subject. Additionally, the
appraiser conducted research either personally or
through associates to obtain current market rental
rates, construction trends, the sale of comparable
improved properties, anticipated investor returns, and
the supply and demand of competitive apartment projects
in the general and immediate area. After these
examinations were performed, an analysis was made in
order to estimate the leased fee market value of the
subject on an "as is" basis.
_______________________________
/1/ The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
8
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
INTRODUCTION Metropolitan Phoenix covers 9,127 square miles and it is the
nucleus of Maricopa County along with 23 additional
surrounding communities. Metropolitan Phoenix is part of a
geographic area in South Central Arizona known as "the
golden corridor," an area of world-class resorts and spas,
and a governmental and commercial center for the state. The
city of Phoenix is already well developed within the city
limits, and the city serves as the core of the metropolitan
area's office and commercial development. The expansion of
the freeway system has opened up new markets in the western
and southern regions.
POPULATION The state's capital and the largest city in Arizona, Phoenix
is the seventh largest city in the nation. Phoenix is one of
the fastest growing major metropolitan areas in the country
and was fourth in the nation in absolute growth from 1980 to
1990. In 1996, the Phoenix metropolitan area was second to
Las Vegas as the fastest growing metropolitan area in the
nation. The population of Phoenix in 1995 was estimated at
about 1.1 million and it is projected to be about 1.2
million in 1997. In addition, the population in the
Metropolitan Area was estimated at 2.4 million and it is
projected to reach approximately 2.7 million in the year
2000. Population figures obtained for Maricopa County
indicate the dynamic growth experienced by the Phoenix area.
The increase in population is composed largely of net
migration into the area due to new employment opportunities,
a relatively reasonable cost of living, and a favorable
climate. The following summarizes the population growth of
the metropolitan area since 1977.
<TABLE>
<CAPTION>
YEAR NO. PERSONS ANNUAL CHANGE
-------------------------------------------------
<S> <C> <C>
1977 estimate 1,329,800 --
1980 census 1,509,052 4.31%
1990 census 2,122,101 3.47%
1991 estimate 2,173,135 2.40%
1992 estimate 2,238,000 2.98%
1993 estimate 2,291,200 2.38%
1994 estimate 2,355,900 2.82%
1995 estimate 2,551,765 8.31%
1996 estimate 2,634,625 3.25%
2000 estimate 2,715,097 1.01%
2005 estimate 3,031,348 2.23%
</TABLE>
EMPLOYMENT AND
LABOR FORCE The tremendous growth of Metropolitan Phoenix and its
location has led to a diverse economy and strong business
climate. Over the past few years, more than 50 new companies
have opened offices in the Phoenix area, which is home to
over 80 national and regional headquarters, ranging from
major hotel and restaurant chains to high-tech manufacturers
and airlines. There has recently been an influx of cost
conscious firms relocating from California seeking a
location with a lower cost of doing business. Also, Phoenix
has become a popular regional hub location for companies
with several regional offices. Service industries and trade
account for just over half of the employment base in the
Phoenix area and are projected to continue to be the largest
source of employment growth for the next few years. The
economic stability of the region, and the abundant labor
force make Phoenix a
9
<PAGE>
viable location for information-based industries such as
data processing, telecommunications and customer service
operations. Many financial services and banking institutions
have established data processing, credit card, and customer
service operations in the area during the past five years.
These include processing and/or regional headquarters
operations for American Express, Chase Bank, Bank of
America, Discover Card Services, and Well Fargo Bank.
Additionally, the electronics and high technology industries
have a tremendous presence in Phoenix. High technology/basic
manufacturing comprises 10.8 percent of non-agricultural
employment with an emphasis on the high technology sector.
Motorola is the region's largest private employer, with
about 20,000 workers. Additional major electronic and
technology-based employers include Honeywell, Intel,
Continental Circuits, Medtronic Micro. Rel., Microchip
Technology, EF Data Corp., Varian Tempe Electronics Center,
ADFlex Solutions, and Litton Electro Optical Systems. Also,
since Phoenix is the capital city of Arizona and the county
seat for Maricopa County, there is a significant amount of
government employment. About 13 percent of the employment
distribution in Phoenix is in the government and public
sector. The following table indicates the fifteen largest
employers in the Phoenix/Scottsdale Metropolitan (Metro)
area.
<TABLE>
<CAPTION>
FIFTEEN LARGEST EMPLOYERS -- METRO AREA
-----------------------------------------------------------------
FIRM FULL-TIME EMPLOYEES
-----------------------------------------------------------------
<S> <C>
State of Arizona 60,592
Motorola Inc. 19,350
Maricopa County 12,025
City of Phoenix 11,393
U.S. Postal Service 10,833
Samaritan Health System 10,800
Allied-Signal Aerospace Co. 8,755
Arizona State University 7,672
Pinnacle West Capital Corporation 7,335
US West Inc. 7,300
American Express Travel Related Services 7,200
Bank America Corp. 7,100
Intel Corp. 6,600
Banc One Corporation 6,500
Mesa Public Schools 6,378
</TABLE>
EMPLOYMENT Metropolitan Phoenix, with more than half of the states
labor force, has a well-developed and diversified economic
base. In part, due to this diversified economy, the
unemployment rate in the Phoenix area has fallen over the
past few years. The economic recovery began in 1993 with
increases in labor force and number of employed persons in
every subsequent year. Since a high of 6.4 percent in 1992,
the unemployment rate has been below 5 percent in each year
since and witnessed a low of 3.3 percent in 1997. The
following summarizes this trend.
10
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
MARICOPA COUNTY LABOR FORCE DATA
--------------------------------------------------------------------
1980 1990 1991 1992
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Civilian Labor Force 752,908 1,074,500 1,067,900 1,057,200
Employed 708,291 1,028,100 1,016,400 989,800
Unemployed 44,617 46,400 51,500 67,400
Unemployment Rate 5.9% 4.3% 4.8% 6.4%
<CAPTION>
----------------------------------------------------------------------------------
MARICOPA COUNTY LABOR FORCE DATA (CONT'D)
----------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Civilian Labor Force 1,074,600 1,217,900 1,293,300 1,335,100 1,481,400
Employed 1,025,600 1,158,000 1,244,000 1,289,700 1,433,100
Unemployed 49,000 59,900 49,300 45,500 48,300
Unemployment Rate 4.6% 4.9% 3.8% 3.4% 3.3%
</TABLE>
Source: Arizona Department of Economic Security
The Greater Phoenix area has a labor force of
approximately 1.5 million people, with a mix of
managers, professionals, and production workers.
Projected employment by occupation shows continued
strengthening of the area's professional and technical
work force, with service employment increasing as well.
TOURISM The Phoenix area enjoys 300 days of sunny skies and
warm temperatures each year and it is situated amidst
scenic countryside. It is not surprising that Phoenix
has become one of the most popular resort areas in
America. The metropolitan area has nearly 200 major
golf courses, 1,000 tennis courts, and more five-star
resorts than any other part of the country. The city
understands the impact tourism has on its economy and
takes great care to cultivate and promote this aspect
of its economy. The outlook for the metropolitan
Phoenix lodging market over the next few years is very
positive. The market as a whole continues to
demonstrate solid growth and has since 1992. According
to Lodging Outlook published by Smith Travel Research,
---------------
the Phoenix area hotel occupancies have been improving.
The 1996 year-end occupancy reached 72.2 percent, a
solid growth over the 71.9 percent level in 1995. Also,
the average daily room rate showed substantial
improvements between 1995 and 1996. In 1995, the
average daily room rate was $88.36 and it increased to
$94.72 in 1996, which is an increase of 7.2 percent.
Obviously, the increases in tourism have created
greater business for the Phoenix Sky Harbor
International Airport, which is currently, the eleventh
busiest airport in the nation. The number of passengers
passing through the airport in 1995 was 27.8 million.
In 1997, an estimated 31.5 million passengers are
expected and by the year 2007 this is anticipated to
increase to approximately 44.7 million passengers.
Currently, twenty-three airlines offer about 1,100
daily flights. A fourth terminal with 48 gates at a
cost of $170 million was opened in late 1990.
Additionally, a third runway is planned by the end of
the decade.
REAL ESTATE The metropolitan Phoenix single family home market has
witnessed an unprecedented seven years of increasing or
strong housing markets with record setting absorption
and price increases. As of the Fourth Quarter 1997, the
number of single-family building permits anticipated
for 1997 was about 27,719. This was
11
<PAGE>
down slightly from the record setting level in 1996 when
28,157 units were permitted. The number of permits is
expected to drop to 24,750 in 1998 and 22,594 in 1999. The
number of multifamily permits (including apartments and
condominiums) are estimated at 6,900 units in 1997. This
is expected to drop to 6,400 in 1998 and rise to 6,500 in
1999. The Apartment market is discussed in further detail
in the Apartment Market Analysis section of this report.
Over the next few years, commercial construction is
expected to remain strong and vacancy rates in most
sectors are expected to remain relatively stable. The
metropolitan Phoenix office market contained approximately
38.1 million square feet in 1996 to which 1.4 million
square feet was added in 1997. In 1997 a total of 1.3
million square feet was absorbed. Further gains are
expected in 1998 and 1999 of 1.8 million square feet each
year with absorption estimated at 1.5 million square feet
in each year. The office vacancy rate in 1997 8.9 percent
and office vacancy rates are anticipated to stabilize at
approximately 9 percent in 1998 and 1999. In 1997, 2.7
million square feet of retail space was added to the 79.5
million square feet already existing. The amount of new
construction is expected to decline to 2.1 million in 1998
and 2.0 million in 1999. Absorption in 1997 was a healthy
2.4 million square feet, which is expected to decrease
slightly to 2.1 million square feet in 1998, and 2.0
square feet in 1999. The retail vacancy rate in 1997 is
8.8 percent. Vacancy rates in retail space are expected to
remain stable at 8.5 percent through 1999. In 1997, 9.1
million square feet of industrial space was added. It is
expected that this will decrease to 7.8 million in 1998
and 7.7 million in 1999. The 1997 vacancy for industrial
space is 6.9 percent. The forecast for industrial activity
includes an estimated vacancy in 1998 and 1999 of 7.1
percent. In 1997 7.9 million square feet were absorbed and
it is predicted this will decrease to 7.3 million square
feet in 1998 and 7.0 million square feet in 1999.
LIVABILITY Recreation and culture are important resources of Phoenix,
enhancing its appeal and livability. The city has its own
symphony, Phoenix Museum of Fine Arts, Heard Museum, and
countless recreational facilities including Phoenix South
Mountain Preserve, the largest municipal park in the
world. Professional sports, yearly professional golf and
tennis events, horse, dog, and auto racing also contribute
to the diverse recreational pursuits available in Phoenix.
The Phoenix Metropolitan area is served by more than 50
school districts with slightly more than 350 elementary
and greater than 55 high schools. In addition, there are
approximately 40 parochial and 40 private schools in the
area, as well as 10 institutions of higher learning
(including Arizona State University-West), and about 80
private technical and business colleges. There are 42
hospitals with over 8,100 beds serving the metropolitan
area and 6 emergency medical facilities. All community
services are well represented throughout the Phoenix area.
Phoenix is also an economically viable area in which to
locate. The Metro Phoenix median household income as of
January 1997 was $36,078.
SUMMARY AND OUTLOOK The outlook for Phoenix continues to be promising;
however, it is expected to see a slowdown from the growth
experienced over the past few years. Overall, commercial
real estate markets should stay strong. Vacancy rates will
remain low, and the environment for commercial real estate
markets should remain healthy.
12
<PAGE>
Single-family activity, on the other hand, is expected to
moderate from the very high levels of the last three years.
The consensus forecast calls for a moderate reduction in
population growth which will impact the remaining
indicators. Total personal income is on the rise mainly due
to population inflows. Retail sales growth depends on that
influx of personal income and on retail spending generated
by single-family homebuyers. In the long-term, the outlook
is positive based on the areas continued success as a resort
capital, growth in tourism, favorable climate, growth in the
corporate group sector and rising household incomes. Barring
any unforeseen national economic downturn, the Metro Phoenix
area is expected to continue a general upward trend over the
next decade but at a slower pace than that experienced over
the past few years.
CITY OF SCOTTSDALE Scottsdale is located 8 miles northeast of the center of
Phoenix. The city was incorporated over 30 years ago and it
has experienced significant growth over the past 20 years.
The estimated Scottsdale population in 1996 was estimated at
about 178,525 which places it as the fifth largest city in
the state. The population of Scottsdale has increased 6.2
percent from the 1995 figure of 168,176 and 37 percent from
1990 (130,069) which equates to an annual average growth
rate of approximately 5 percent from that time. Strong
population growth is also projected to continue into the
future with 186,091 in the year 2000 and 212,154 in 2005.
The median household income in 1996 was reportedly $57,490,
which was significantly greater than that reported for
Maricopa County at $40,233. The unemployment rate in 1996 in
Scottsdale was 2.6 percent, which was lower than either
Maricopa County or the State of Arizona.
In its formative years, Scottsdale was primarily a bedroom
community. However, it has experienced an increase in
corporate office headquarters and clean industry. Also,
Scottsdale has become a destination location for tourism
with a number of luxury resort hotels.
A major element in the city's growth has been the
development of the 4,236-acre McCormick Ranch, the largest
of several planned communities in the county. It
incorporates a variety of developments in a well-designed
environment. One of the most prestigious multiplanned
developments in the area is the 640-acre Gainey Ranch, which
is between Scottsdale Road and Hayden Road, just south of
Shea Boulevard. This project has a resort hotel and 3 nine-
hole golf courses, upper-income single and multifamily
residential, office, and retail projects. Another master-
planned community is the 1,119-acre Scottsdale Ranch located
east of McCormick Ranch and north of the Salt River Indian
Reservation. The development provides for over 4,000
residential units and 15 acres of office and commercial use.
Major retail developments have recently been expanded to
serve the affluent residents of Scottsdale and the tourism
industry. Significant development has occurred near
Scottsdale Road and Camelback Road with the expansion of the
Scottsdale Fashion Square and Camelview Plaza. Also, the
Scottsdale Galleria near the Scottsdale downtown area
contains approximately 1.35 million square feet of high-end
retail/mixed-use space. It is important to note that
Scottsdale has rigid
13
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
zoning and building ordinances, which have helped
development conform and blend well with the area given
landscaping requirements. Scottsdale is expected to continue
to grow northerly in an orderly manner and remain one of the
area's most prestigious locations.
NEIGHBORHOOD The subject is situated in the central portion of the
Scottsdale area. It is about 15 miles northeast of the
Phoenix Central Business District (CBD). More specifically,
it is situated at the southeast corner of North 78th Street
and McDonald Drive. The neighborhood boundaries may be
defined as Scottsdale Road to the west, Pima Road to the
east, Camelback Road to the south, and the McCormick Ranch
Development to the north. The neighborhood appears to be
well established with the majority of the residential
development having occurred over the past 20 years. However,
the area does not show signs of decline. In fact, the
subject is in the middle of some of the most exclusive
residential communities in the area. As a result of the
residential development, there are sufficient support
facilities and amenities in proximity to the subject such as
parks, which include Nature Trail, Chaparral, Comanche, and
Mountain View. The area's main public school is Saguaro High
School. Also, a number of country clubs and golf courses are
in the area such as McCormick Ranch, Gainey Ranch,
Scottsdale Country Club, Pima Golf Resort, Lakeside Golf
Club, and Villa Monterey Country Club. Access to the area is
reasonably good and public transportation is provided along
major thoroughfares.
The general area is relatively well developed with some
vacant land available. The major thoroughfares tend to
include a variety of residential and commercial development.
Scottsdale Road has a number of development types such as
hotels/motels, restaurants, retail, office, and some
residential projects. Scottsdale Road is a main north/south
artery, which connects the subject to other major
thoroughfares and business centers. Near the subject on or
near Scottsdale Road are a few hotels including the previous
Registry Resort, the Scottsdale Plaza Resort, the Inn at
McCormick Ranch, and the Cottonwoods Resort. Also further
south are additional hotels including the Sunburst Resort
Hotel, Embassy Suites Holiday Inn, and Wyndham Paradise
Valley Resort. In addition to hotels, there are a number of
retail centers. Just north of McDonald Drive is a high-end
retail center, The Borgata, which is easily accessible from
the subject. Also, in this area is the Hilton Village with a
variety of tenants. Other retail centers in the area are
concentrated near Camelback Road. These include Scottsdale
Fashion Square, Camelview Plaza, and Camelback Mall.
Scottsdale Fashion Square and Camelview Plaza offer over 55
retail outlets in over 1 million square feet and are only a
few miles south of the subject.
Another major north/south artery in the area is Hayden Road.
While this thoroughfare is not as highly developed as
Scottsdale Road, it provides a variety of development
primarily Chaparral Park, Villa Monterrey Country Club,
Saguaro High School, and residential areas. South of the
subject on Hayden Road at Chaparral Road is a retail center,
Chaparral Plaza, which includes a variety of tenants. North
on Hayden Road is Saguaro High School, Miramonte Apartments,
and residential development.
14
<PAGE>
In the more immediate area, development is primarily
residential. The subject is surrounded by various
multifamily projects including Villas Estados condominiums,
Villa Antano patio homes, Villas Scottsdale town homes, and
Villa Antigua Apartments. In addition, there are numerous
upper-middle-income single-family residential developments
in the area.
Overall, the subject neighborhood is projected to continue
to prosper in future years and it is estimated to be about
80 percent developed. Population and number of households
are expected to increase moderately. The immediate area is
well developed along major thoroughfares with predominately
residential development along secondary streets. City zoning
helps regulate future development patterns; therefore, the
neighborhood is believed to have a healthy future. For the
most part, the Las Colinas Apartments are perceived as being
a positive attribute to the area providing a quality
facility well screened by the extensive landscaping. The
apartments benefit from its close in location and the
abundance of retail outlets and office development in the
area.
15
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
================================================================================
APARTMENT MARKET STATISTICS
METROPOLITAN PHOENIX
- --------------------------------------------------------------------------------
YEAR INVENTORY NEW CONSTRUCTION PERMIT ACTIVITY ABSORPTION VACANCY RATE
- --------------------------------------------------------------------------------
1980 127,853 -- 8,343 6,773 6.4%
- --------------------------------------------------------------------------------
1981 135,812 7,959 7,894 9,609 5.8%
- --------------------------------------------------------------------------------
1982 143,934 8,122 11,410 5,284 6.3%
- --------------------------------------------------------------------------------
1983 158,718 14,784 21,229 9,064 7.7%
- --------------------------------------------------------------------------------
1984 182,102 23,384 32,547 20,305 8.1%
- --------------------------------------------------------------------------------
1985 208,679 26,577 24,113 19,661 9.9%
- --------------------------------------------------------------------------------
1986 230,478 21,799 16,327 18,340 10.5%
- --------------------------------------------------------------------------------
1987 243,271 12,793 8,427 5,621 13.1%
- --------------------------------------------------------------------------------
1988 251,326 8,055 5,457 4,186 14.5%
- --------------------------------------------------------------------------------
1989 257,110 5,784 1,689 6,809 14.1%
- --------------------------------------------------------------------------------
1990 258,992 1,882 1,891 10,482 11.5%
- --------------------------------------------------------------------------------
1991 260,501 1,509 710 2,734 10.5%
- --------------------------------------------------------------------------------
1992 261,095 594 1,234 4,394 9.6%
- --------------------------------------------------------------------------------
1993 262,930 1,835 1,791 12,135 6.3%
- --------------------------------------------------------------------------------
1994 264,663 1,733 6,015 5,484 4.5%
- --------------------------------------------------------------------------------
1995 266,849 2,186 7,864 211 4.5%
- --------------------------------------------------------------------------------
1996 274,919 8,070 8,545 7,820 4.5%
- --------------------------------------------------------------------------------
1997 284,220 9,301 7,936 8,001 4.8%
================================================================================
Source: Phoenix Metropolitan Housing Study
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
In order to understand the current apartment market and make
future projections, we analyzed information found in
Apartment Trends, Third Quarter 1997, published by RealData,
----------------
Inc. and the Phoenix Metropolitan Housing Study, Fourth
----------------------------------
Quarter 1997 published by the Phoenix Metropolitan Housing
Study Committee. These semiannual publications compile
information obtained from surveys of "garden-style"
apartment projects in the Metro Phoenix area. Each survey
divides the Greater Phoenix area into submarkets and
provides information on inventory, permit activity,
absorption, and vacancy rates. According to the Phoenix
-------
Metropolitan Housing Study, the subject is located in the
--------------------------
Scottsdale submarket (District 1N and 1S) and also
influenced by the Paradise Valley submarket (District 2N and
2S).
CONSTRUCTION According to the Phoenix Metropolitan Housing Study, the
Greater Phoenix apartment market had a total of 284,220
units as of the Fourth Quarter 1997. Geographically, the
majority of apartment units are in Mesa, Tempe, Glendale,
Central Phoenix, and Scottsdale. These include Mesa with
36,799 units, Tempe with 25,770 units, Scottsdale with
24,007 units, Glendale with 16,140 units, and Sunnyslope
with 16,283 units.
The majority of construction since 1980 occurred between
1983 and 1987 with 99,337 units or about 35 percent of the
current inventory. Since 1980, the highest annual
construction occurred in 1985 with 26,577 units. In 1988,
new construction dropped significantly and hit a low of 594
units in 1992. Construction activity began to increase in
1993 when 1,835 units were constructed. Activity continued
at this pace in 1995 and 1996 with 1,733 units and 2,186
units added. Construction really took off again in 1996 when
8,070 units were added to the market. The number of units
constructed continued to increase in 1997 to 9,301 units
The largest amount of permits issued was in 1984 with 32,547
units. However, in the late 1980s and early 1990s, the
amount of new permits issued slowed. In 1991, new permits
were issued for 710 units, citywide. This represented the
smallest number of new apartment unit permits issued in one
year over the past fifteen years. However, this increased to
1,234 in 1992 and to 1,791 in 1993. In 1994, permit activity
increased significantly to 6,015 units. In 1995 the number
of permits issued was reportedly 7,864 units and this rose
to 8,545 permits in 1996. A slight decline was witnessed in
1997 when 7,963 permits were issued. Reference is made to
the table on the facing page for a summary of the total
inventory, new construction, and permit activity since 1980.
Since the late 1980s, a significant amount of the new
construction has occurred in the subject's submarket. The
largest amount of new units entered the submarket in 1988
with 2,621 followed by 1,853 units in 1989. In 1992, there
were only 80 new units introduced into the market; however,
there were: 1,058 new units during 1993; 1,533 units in
1994; 1,084 units in 1995; and 1,511 units in 1996. In 1997
a total of 1,883 units entered the market and there were
1,957 units permitted.
16
<PAGE>
VACANCY The following vacancy statistics are available in the
Metropolitan Housing study. Over the past decade, annual
vacancy citywide has responded to the amount of new
construction. In 1980, apartment vacancy was 6.4 percent,
which was followed by a drop in 1981 to 5.8 percent.
However, in 1982 vacancy levels began a slow increase as new
inventory was added to the market. The vacancy level climbed
from 6.3 percent in 1982 to a high of 14.5 percent in 1988.
However, since the decline of new construction in 1988,
vacancies in the Greater Phoenix area have shown relatively
steady decline through 1996. In 1989, the overall vacancy
was estimated at 14.1 percent and this declined to 4.4
percent in 1996. The largest drop occurred between 1992 and
1993 when the vacancy level dropped from 9.6 percent to 6.3
percent. The vacancy level experienced a further decline in
1994 dropping to 4.5 percent. This was the lowest vacancy
level since 1980. The vacancy level remained relatively flat
through 1996 and then edged up slightly in 1997 to 4.8%.
However, it is important to note that according to the Real
Data publication, the overall vacancy is somewhat higher.
Real Data reported fourth quarter 1996 vacancy at 6.4
percent which is 1.9 percent higher than the vacancy rate
reported by the Phoenix Metropolitan Housing Study for the
same period. The most current available vacancy rate
reported by Real Data is for third quarter 1997 was 6.4%
which is also higher than the Phoenix Metropolitan Housing
Study figure for the same period at 5.2%. This discrepancy
is believed to be due to a different sampling set. Also, the
apartment market is affected by seasonality. Vacancies
increase during the summer months due to the extreme
temperatures; however, the market tightens up considerably
during the remainder of the year due to the university and
winter visitors.
Vacancies in the Scottsdale/Paradise Valley submarket have
followed a similar pattern as the metro area. Over the past
decade, the average vacancy dropped from a high of 13.7
percent in 1989 to a low of 3.8 percent in fourth quarter
1997 according to the Phoenix Metropolitan Housing Study.
RealData reports the same submarket at about 6.5 percent
vacancy for the third quarter of 1997 which is 2.2 percent
higher than the Phoenix Metropolitan Housing study figure
for the same period at 4.3 percent. The increase in
population had a direct impact on vacancy in the early
1990s. Considering a number of new projects are under
construction in the subject's submarket and a number have
been completed, vacancies are expected to experience an
increase. However, if the amount of new construction would
slow, the overall population is expected to increase, which
would have a direct impact on the apartment market and the
subject. A survey of the projects, which are considered to
be direct competition to the subject, reported vacancies
typically from 2 to 5 percent. The higher quality projects
with a full range of amenities in good locations are
expected to outperform the market. A summary of the annual
overall vacancy for the Greater Phoenix area and the
Scottsdale/Phoenix submarket as published in the
Metropolitan Housing study follows. Reference is made to the
Income Approach section for a summary of the occupancy
status of the projects considered to be direct competitors.
17
<PAGE>
================================================================================
APARTMENT MARKET STATISTICS
SCOTTSDALE/PARADISE VALLEY SUBMARKET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
YEAR INVENTORY SF IN INVENTORY PERMIT ACTIVITY ABSORPTION VACANCY RATE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1982 12,003 -- 1,159 35 5.4%
- -----------------------------------------------------------------------------------------
1983 13,431 1,428 1,491 380 5.6%
- -----------------------------------------------------------------------------------------
1984 15,215 1,784 2,544 346 5.9%
- -----------------------------------------------------------------------------------------
1985 16,961 1,746 1,465 541 8.5%
- -----------------------------------------------------------------------------------------
1986 18,636 1,675 1,419 664 8.7%
- -----------------------------------------------------------------------------------------
1987 19,481 845 2,209 584 9.2%
- -----------------------------------------------------------------------------------------
1988 22,102 2,621 1,178 1,682 12.0%
- -----------------------------------------------------------------------------------------
1989 23,955 1,853 799 1,262 13.7%
- -----------------------------------------------------------------------------------------
1990 24,382 427 1,328 674 8.2%
- -----------------------------------------------------------------------------------------
1991 25,566 1,184 84 474 8.2%
- -----------------------------------------------------------------------------------------
1992 25,646 80 664 630 7.1%
- -----------------------------------------------------------------------------------------
1993 26,704 1,058 1,330 1,433 4.6%
- -----------------------------------------------------------------------------------------
1994 28,237 1,533 2,306 1,383 4.2%
- -----------------------------------------------------------------------------------------
1995 (2ndQtr.) 28,353 116 1,290 (1,284) 5.6%
=========================================================================================
</TABLE>
Source: Phoenix Metropolitan Housing Study
<PAGE>
HISTORICAL VACANCIES
--------------------------------------
YEAR GREATER PHOENIX SUBMARKET
--------------------------------------
1982 6.3% 5.4%
1983 7.7% 5.6%
1984 8.1% 5.9%
1985 9.9% 8.5%
1986 10.5% 8.7%
1987 13.1% 9.2%
1988 14.5% 12.0%
1989 14.1% 13.7%
1990 11.5% 8.2%
1991 10.5% 8.2%
1992 9.6% 7.1%
1993 6.3% 4.6%
1994 4.5% N/A
1995 4.5% 5.1%
1996 4.4% 4.0%
1997 4.8% 3.8%
After considering the historical vacancy and the location of
the new complexes under construction, we believe the subject
and its competitors should be able to maintain a relatively
stabilized occupancy level. Citywide, the additional units
may negatively impact occupancy if the absorption levels do
not continue to keep pace.
ABSORPTION The improving occupancies in the early 1990s was the result
of positive absorption levels. Absorption from 1984 to 1986
was the highest with annual figures of 18,340 units to
20,305 units, citywide. However, new construction was at a
peak during these years and occupancy levels did not begin
to improve until 1989. In 1990, the market experienced an
absorption of 10,482 units, which dropped the vacancy by 2.6
percent. Absorption in 1991 was down from the 1990 figure to
2,734 units; nevertheless, the vacancy dropped by 1 percent.
In 1992, absorption increased to 4,394 units and the vacancy
dropped 0.90 percent. In 1993, the absorption level
increased dramatically with a total of 12,135 units and the
vacancy dropped by 3.3 percent. Again in 1994, the overall
market experienced a strong positive absorption level and
the vacancy dropped again to 4.5 percent. In 1995, the
absorption level fell to 211 units and the vacancy remained
level at 4.5 percent. In 1996, the absorption rebounded to
7,820 units and the vacancy level remained unchanged at 4.5
percent. Absorption continued to be strong in 1997 with
8,001 units however, due to the large amount of new
construction, the vacancy rate increased slightly to 4.8%.
The newer projects appear to be faring much better than the
older projects. Some of the older units are expected to be
lost to attrition over the next few years. Considering the
amount of new supply entering the market, occupancy is not
expected to improve drastically and the newer projects are
expected to capture a greater share of the market. The
average annual absorption since 1990 has been approximately
5,800 units. Assuming the projects under construction,
scheduled for construction, and in the final
development/design process are completed, there could be
approximately 13,000 new units entering the market over the
next few years which is expected to cause the vacancy level
to increase. Despite the expected population growth, we
believe
18
<PAGE>
the overall Phoenix apartment market could take a couple
years to regain a stabilized vacancy level upon completion
of the new units.
Absorption in the subject's submarket over the past few
years has been relatively similar to the overall market. In
1989, about 1,262 units were absorbed which accounts for the
decrease in vacancy from 13.7 percent in 1989 to 8.2 percent
in 1990. Since 1990, the annual absorption level averaged
about 900 units with 1997 reflecting a fifteen year high
absorption of 1,858 units. The result of the positive
absorption during 1990-1997 resulted in a decrease in
vacancy. Overall, from 1990 to 1997, the resultant change in
vacancy was from 8.2 to 3.8 percent. Based on the average
annual absorption in the submarket since 1990 of 900 units
and the completion of new units within the overall
submarket, which are either under construction or permitted,
we believe it could take almost two years to regain a
stabilized vacancy.
A summary of the average annual absorption for the Greater
Phoenix area and the subject's submarket follow.
HISTORICAL ABSORPTION UNITS
------------------------------------------
YEAR GREATER PHOENIX SUBMARKET
------------------------------------------
1982 5,284 35
1983 9,064 380
1984 20,305 346
1985 19,661 541
1986 18,340 664
1987 5,621 584
1988 4,186 1,682
1989 6,809 1,262
1990 10,482 674
1991 2,734 474
1992 4,394 630
1993 12,135 1,433
1994 5,484 1,383
1995 211 784
1996 7,820 1,461
1997 8,001 1,858
CONCLUSIONS In the early 1990s, the Greater Phoenix apartment market
improved from the overbuilding which occurred in the mid-
1980s. Since 1989, the vacancy rate has improved each year
except for a slight upswing reported in 1997. Given the
number of new units entering the market, the vacancy level
may increase over the next few years until demand can catch
up with the new supply. The submarket revealed a relatively
similar pattern as the overall market. The vacancy rate
reflected improvements during the early 1990s and it was not
until 1995 that the rate began to increase only to drop
again to a fifteen year low in 1997. Once again, the
submarket has experienced a significant amount of new
construction over the past few years and the demand does not
appear to be keeping the same pace. However, the subject
submarket is one of the more desirable areas, commanding the
highest average rents in the metropolitan Phoenix area.
Overall, the subject is expected to remain reasonably well-
leased and command competitive rents; however, if the market
becomes saturated with new products, it may become harder to
retain tenants.
19
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject is located at the southeast corner of North
78th Street and McDonald Drive in Scottsdale, Maricopa
County, Arizona. It is more specifically situated at
5995 North 78th Street.
SIZE AND SHAPE The site is irregularly shaped with a total of 15.7
acres or 683,892 square feet. It has frontage on North
78th Street, McDonald Drive, Hayden Road, and Starlight
Way.
ACCESS AND VISIBILITY The subject property is located along the south side of
McDonald Drive, the east side of North 78th Street, the
west side of Hayden Road, and the north side of
Starlight Way. It is situated about 15 miles northeast
of the Phoenix Central Business District (CBD). Access
to the subject from the CBD and the Sky Harbor
International Airport is provided by a number of
north/south and east/west thoroughfares. From the Sky
Harbor International Airport one of the most direct
routes is by heading north on either 24th Street, 32nd
Street, or 40th Street to Camelback Road then heading
east to Scottsdale Road then north to McDonald Drive
and east to North 78th Street. Similar access is
available from the CBD. Other major north/south
thoroughfares, which lead to Camelback Road and connect
to Scottsdale Road are 7th Avenue, Central Avenue, and
7th Street.
Immediate access to the subject is provided by North
78th Street. The main entry to the complex is off this
thoroughfare. There are two curb cuts along the
north/south artery providing access to both Phase I and
Phase II. Access is also provided along the north side
of Starlight Way to Phase II. Both McDonald Drive and
Hayden Road provide visibility to the site; however,
access to the subject is not available from these
thoroughfares.
North 78th Street is a lighted two-laned, asphalt-
paved, north/south artery with concrete curbs and
sidewalks. McDonald Drive is a four-laned, asphalt-
paved, east/west thoroughfare with planted median, turn
lane, and concrete curbs and sidewalks. Starlight Way
is a lighted two-laned, asphalt-paved, east/west artery
with concrete curbs and sidewalks. Hayden Road is a
lighted six-laned, asphalt-paved north/south artery
with concrete curbs and sidewalks, and a turn lane at
the major intersections.
ZONING The subject property is zoned "R-5" Multiple-Family
Residential under the City of Scottsdale Zoning
Ordinance. This district is intended to provide for
development of multiple-family residential and allows a
high density of population with a proportional increase
in amenities as the density rises. Permitted uses
include multiple-family dwellings, single-family
dwellings, boardinghouse or lodging house, accessory
buildings or other accessory uses, municipal uses,
school, and temporary sales office or construction
office. Uses permitted by conditional use permit
include a church, commercial radio and television
antennas, recreational uses, community buildings or
recreational fields, convent, day nursery or preschool,
golf course, guest ranch, hotel, motel, and time share
project with ten units or more, orphanage, plant
nursery, private club, private lake, private school,
public buildings, and residential health care facility.
20
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
Open Space Requirements:
Minimum of one-half of open space requirement shall
be incorporated as frontage open space and shall not
be required to exceed 50 square feet per 1 foot of
street frontage and not less than 20 square feet per
1 foot of frontage.
Building Height:
. No building shall exceed 36 feet in height.
. Shall not exceed one story within 50 feet of
adjacent property zoned to lower density.
Setbacks:
If abutting adjacent property zoned to lower
density, a yard of not less than 15 feet. If
adjacent property is zoned to higher density, a
building may be constructed on building line.
Distance Between Buildings;
Not less than 10 feet between an accessory building
and a main building or between two main buildings.
UTILITIES The site is serviced by the following authorities.
<TABLE>
<S> <C>
Electricity............................Salt River Project
Water..................................City of Scottsdale
Sewer..................................City of Scottsdale
Gas.....................................Southwest Gas Co.
Telephone....AT&T, U.S. West Communications, Mountain Bell
</TABLE>
TERRAIN AND DRAINAGE The site is basically level and slightly above street
grade. Upon site inspection, the drainage appeared to be
adequate. According to the Federal Flood Insurance Rate
Maps, the majority of the subject lies within Zone B with
the east line within Zone A and the southwest corner in
Zone C. Zone B is defined as areas between limits of the
100-year flood and 500-year flood, Zone A is within areas
of the 100-year flood, and Zone C is areas of minimal
flooding.
SOIL AND SUBSOIL
CONDITIONS No soil engineer's report was available to the
appraisers, and no soil tests were performed. The soils
are assumed to have an adequate load-bearing capacity.
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal any
easements adversely affecting the subject property. For
purposes of this assignment, the appraisers assume that
the subject's value or marketability is not adversely
affected by the typical utility easements, which traverse
the property. The following lists some of the more
significant easements at various areas of the subject
site.
. drainage and flood control easement along the east
property line
. various water and sewer easements throughout the
property
. various access easements throughout the property
21
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
RELATIONSHIP OF SITE
TO SURROUNDINGS North: Villas Scottsdale (town homes)
South: Villa Antano (patio homes)
East: Flood control easement and family golf center
West: Villa Estados (condominiums) and Villa Antigua
Apartments
REAL ESTATE TAXES Real estate taxes and assessments for the Las Colinas
Apartments are coordinated by the Maricopa County
Assessor's Office. The property is subject to a number
of different taxing authorities and the taxes are
calculated two ways. A portion of the total tax
liability is calculated based on the "limited cash
value" intended to create a ceiling on the assessment.
The limited cash value is multiplied by a 10 percent
assessment ratio then multiplied by the rate per $100
of assessed value. This is considered the primary tax
rate and includes the school district, junior college,
city, county, and state taxes. In 1996, the total tax
rate was 7.5996 per $100 of assessed value. The
remainder of the tax liability is based on the "full
cash value" or current market value. This value is
multiplied by the 10 percent assessment ratio and then
multiplied by the tax rate per $100 of assessed value.
Full cash value assessments are the secondary
assessments and apply to various taxing authorities
including bonds, budget overrides, and special
districts. In 1996, the applicable tax rate was 3.2192
per $100 of assessed value. In 1996, the real estate
taxes were $125,724.42. According to Con Am
information, taxes for 1997 were $115,930 or $0.46 per
square foot. This is expected to increase in 1998 to
$136,660 or $0.54 per square foot and include personal
property taxes.
CONCLUSION The subject site is irregularly shaped with 15.7 acres
and relatively level terrain. There are a few
easements, which traverse the property; however, none
are believed to adversely affect the site. The parcel
is easily accessible with frontage on North 78th Street
and McDonald Drive. The subject is zoned "R-5"
Multiple-Family Residential by the City of Scottsdale,
and it is believed to be in compliance. The size and
shape of the site provide flexibility for a variety of
development and it blends well with the predominately
multifamily projects which surround it.
22
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 15.7-acre tract of land, is
improved with a two-story apartment project known as
the Las Colinas Apartments. The improvements consist of
300 apartment units contained in 19 buildings
constructed in 1981. Also situated on the site is a
leasing office/clubhouse, three swimming pools, a spa,
a tennis court, covered parking, and three laundry
facilities.
There are six basic floor plans for the 300 apartment
units. The basic features of these floor plans are as
follows:
UNIT TYPE NO. OF UNITS DESCRIPTION SIZE(SF) TOTAL SF
--------------------------------------------------------
E 20 lBR/lBA 560 11,200
C 72 lBR/lBA 680 48,960
B 120 2BR/2BA 900 108,000
A 74 2BR/2BA 950 70,300
D 6 2BR/2BA 1,000 6,000
F 8 3BR/2BA 1,030 8,240
As seen in the figures above, the total net rentable
area of 252,700 square feet and a total of 300
apartment units results in an average of 842 square
feet per unit. There are a total of 92 one-bedroom
units, 200 two-bedroom units, and 8 three-bedroom
units.
The land area is 15.7 acres, resulting in a density of
19.11 units per acre. The parking consists of
approximately 450 spaces, of asphalt construction,
which is 1.5 spaces per unit. The parking ratio is
within industry standards.
A more detailed description is as follows:
FOUNDATION Steel reinforced concrete slab with perimeter and
interior wire mesh. Second floors include wood frame,
plywood subfloor, and lightweight concrete.
FRAMING Wood.
ROOF A combination of tar rolls over decking with pitched
red tile fronts.
EXTERIOR Masonry with painted stucco finish.
SECOND-STORY ACCESS Wrought iron supports and handrails with cement stair
risers and landings.
BALCONIES Concrete and wood supports with wood handrails and
cement flooring.
INTERIOR FINISHES
Living, Dining, and
Bedrooms: Painted and textured gypsum board walls and ceilings,
carpeting over pad, hollow-core wood doors, mini
blinds, incandescent lighting, and fireplaces in some
units.
23
<PAGE>
Bathrooms: Vinyl tile floor coverings, porcelain tub with ceramic
tile shower, textured and painted gypsum board walls
and ceilings, fiberboard vanities with laminate
counters, porcelain sink, and commode.
Kitchens: Vinyl tile floor coverings, Formica countertops,
laminated fiberboard cabinets. Kitchen equipment
includes a range/oven, refrigerator, disposal, and
dishwasher.
PLUMBING Adequate and meets city code.
HVAC Central air-conditioning and heating provided by
individual, roof-mounted compressor units.
ELECTRICAL Switch-type circuit breakers, l20/240-volt, and single-
phase service with each unit individually metered. Each
unit has adequate electrical outlets and ceiling-
mounted light fixtures. The copper wiring is in
compliance with city code.
INSULATION Batt-type in ceilings and walls.
SITE IMPROVEMENTS Asphalt-paved parking, covered metal carports, pole
lighting, concrete sidewalks, three swimming pools, two
spas, a tennis court, and a picnic area.
LANDSCAPING Extensive mature landscaping.
AGE AND CONDITION The effective age of the subject is 16 years which
approximates the actual age and the remaining economic
life is estimated to be 24 years.
SITE AREA 15.7 acres or 683,892 square feet.
DEFERRED MAINTENANCE Visual inspection of the property as well as estimates
by the management revealed a few items of deferred
maintenance. Some of these items include appliance
replacement, floor and drapery replacement, exterior
repairs, furniture and fixtures repair, air-
conditioning and equipment repairs, interior repairs,
landscaping, exterior paint, plumbing and electrical
repairs, pool repairs, roof repairs, paving, and water
heater replacement. The deferred maintenance was
estimated at about $196,900, which has been rounded to
$200,000. These items are listed below.
<TABLE>
<CAPTION>
CATEGORY COST CATEGORY COST
------------------------------------------------------------------
<S> <C> <C> <C>
Appliance $24,000 Landscape $ 16,000
Carpet 43,200 Exterior Paint 12,000
Major RDC 2,100 Plumbing/Electrical 6,000
Window Cover 8,400 Pool 1,200
Exterior 3,600 Asphalt Paving 1,000
Furniture 2,400 Stairs Repair 3,600
Air Conditioning 11,400 Roof Repair 44,000
General Interior 9,600 Water Heaters 8,400
--------
Total (Rounded) $200,000
</TABLE>
24
<PAGE>
CONCLUSION Upon a detailed inspection of the property, the facility is
believed to be of good quality and workmanship. The design
and layout are felt to be functional and aesthetically
appealing. The project has been well maintained and has an
ongoing maintenance program; however, there are a few items
previously listed as deferred maintenance. Overall, the
apartments are in reasonably good shape and we believe the
effective age of the improvements is about 16 years with a
remaining economic life of 24 years.
25
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of leasing office/clubhouse.
[PICTURE APPEARS HERE]
View of swimming pool area and unit exteriors.
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of apartment building.
[PICTURE APPEARS HERE]
Interior view of living room in model unit.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of kitchen and part of dining area in model unit.
[PICTURE APPEARS HERE]
Interior view of den/second bedroom in model unit.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of bedroom in model unit.
<PAGE>
HIGHEST AND BEST USE
- --------------------------------------------------------------------------------
The highest and best use of a property must be determined
because market value depends upon the property's most
profitable use. The Appraisal of Real Estate, Eleventh
----------------------------
Edition, defines highest and best use as:
"The reasonably probable and legal use of
vacant land or improved property, which is
physically possible, appropriately supported,
financially feasible, and that results in the
highest value."
There are two distinct types of highest and best use. The
first type is the highest and best use of the land as if
vacant. The second type is the highest and best use of a
parcel as improved. This pertains to the use that should be
made of the property as it currently exists.
In determining the highest and best use of a site, four
items must be considered: possible physical limitations of
the site, possible legal or permissible uses, and what uses
are financially feasible, and produce the maximum return on
the site. A careful neighborhood and site analysis is
essential in estimating the highest and best use of the site
as if vacant.
The following is our analysis of the highest and best use as
it pertains to the subject property and according to the
four essential tests.
SUBJECT PROPERTY
AS IF VACANT LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site is zoned "R-5" Multiple-Family Residential
under the City of Scottsdale Zoning Ordinance. This district
is intended to provide for development of multiple-family
residential with other allowable uses including single-
family dwellings, municipal buildings, and boardinghouses.
Some conditional uses include recreational uses, pre-school,
golf course, hotel/motel, private club, and health care
facilities. Therefore, a variety of uses are permissible.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability, flood
plain, and surrounding patterns.
The subject site is irregularly shaped and encompasses 15.7
acres, allowing for reasonable flexibility in developing the
site. It has frontage along the south side of McDonald
Drive, the east side of North 78th Street, and the north
side of Starlight Way. The topography of the site is
basically level, and drainage appears to be good.
Development in the immediate area is primarily multifamily
or single-family residential with commercial projects to the
east. The area appears most conducive to multifamily
development given the surrounding projects. The subject site
has adequate utility capacity, enjoys a functional size and
shape, and is not affected by any adverse easements or
restrictions.
26
<PAGE>
After considering all of the physical characteristics of the
site noted above plus other data in the Site section of this
appraisal report, physically possible land uses are limited
to multifamily development. The primary deterrents to other
types of development were the subject's location, and
surrounding use patterns, which helped to eliminate other
site improvements such as retail/commercial, light
industrial, single family, and office development from our
analysis. In addition, prudent land management suggests that
multifamily utilization of the subject site provides a
buffer between the surrounding single-family residential and
commercial developments.
FINANCIAL FEASIBILITY - In view of the present market
conditions, financial feasibility is directly proportional
to the amount of net income that could be derived from the
subject. After having eliminating all other development from
our analysis, the financial feasibility of multifamily
development must be tested.
The subject is located in the affluent Scottsdale/Paradise
Valley area, which is experiencing an overall annual
physical vacancy of about 3.8 percent. However, a number of
new apartment complexes have been built in the general area
and the average vacancy is expected to rise until the new
supply is absorbed. The average rents in the
Scottsdale/Paradise Valley submarket average about $0.79 to
$0.84 per square foot. The new projects, however, are
achieving a higher average rent. As discussed in the
preceding Apartment Market Analysis section of this report,
it is concluded that new construction appears reasonable;
however, it may take a couple of years to absorb the
existing and proposed supply.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, more than likely a present
development of the land would produce a positive cash flow
for multifamily development; however, it would not be
sufficient to satisfy the developer of the project. Due to
the subject's location and the socio-economic status of the
neighborhood, we are of the opinion that the demand for
apartment units conducive to the subject site would produce
the highest net return over the longest period of time.
In summary, the site's location along the south side of
McDonald Drive and the east side of North 78th Street gives
it good access and visibility, a characteristic conducive to
apartment development. In addition, the amenity package
offered and general appeal of the property in comparison to
its competition is good. Therefore, after considering the
alternative, we believe the highest and best use of the
site, as vacant, is to hold for future apartment
development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons. First
to identify the use of the property that is expected to
produce the highest overall return per invested dollar, and
the second reason is to help in identifying comparable
properties. The four tests or elements are also applied in
this analysis.
27
<PAGE>
LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site utilized for apartment use is most
reasonable since it is a legal use.
PHYSICAL POSSIBILITY - Based on the subject's land size
(15.7 acres) and configuration, and the improvement's
positioning relative to the subject site, it is felt that it
would not be physically possible to increase the size of the
current improvements and remain competitive. The density of
the subject is approximately 19.11 units per acre. Thus,
based on the aforementioned factors, it is judged that the
improvements represent the largest amount of space that
could currently be developed under current site conditions.
FINANCIALLY FEASIBLE - The discussion of the financial
feasibility of the subject, as if vacant, would also apply
to the test as improved. Based on the economic conditions
for alternative market segments, it was concluded that the
subject's present improvements are satisfactory to fulfill
this test.
In the Income Approach section of this report, the
appraisers estimated income and expenses for the subject.
The net operating income derived suggests that the property
is capable of generating income in excess of operating
expenses, exclusive of return on investment requirements and
debt service. The net operating income was capitalized into
a value indication that was supported by the Sales
Comparison Approach. Additionally, the value indication is
in excess of the estimated value of the land. This indicates
that the subject "as improved" is a feasible entity.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that under
competent and prudent management, the subject could produce
an adequate return to substantiate its existence.
Based on the subject's current use, we have determined that
as a multifamily apartment complex, it positively
contributes to the value of the site, and as a result is
presently developed according to its highest and best use.
However, the subject does not represent the "optimum use"
due to some deferred maintenance and the lack of state of
the art amenities, which new projects do have.
28
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of the
physical improvements. This value is derived by estimating
the replacement cost new of the improvements and, when
appropriate, deducting the reduction in value caused by
accrued depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that buyers
judge the value of an existing structure by comparing it to
the value of a newly constructed building with optimal
functional utility, assuming no undue cost due to delay.
Thus, the appraiser must estimate the difference in value
between the subject property and a newly constructed
building with optimal utility.
The Cost Approach was not used as this method of valuation
is typically the least reliable indicator of value in older
projects such as the subject since estimates of depreciation
are difficult to accurately measure in the marketplace.
Additionally, it is often the perception of investors that
cost does not necessarily equate to value and the purchase
price is not typically based on construction costs.
SALES COMPARISON
APPROACH This approach produces an estimate of value by comparing the
subject property to sales and/or listings of similar
properties in the immediate area or competing areas. The
principle of substitution is employed and basically states
when a property is replaceable in the market, its value can
be set by the cost of acquiring an equally desirable and
comparable property. This technique is viewed as the value
established by informed buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is capitalization of
the net income which the subject property will produce
during the remaining economic life of the improvements. This
process consists of two techniques. The first technique
estimates the gross income, vacancy, expenses, and other
appropriate charges. The resulting net income or net cash
flow is then capitalized. The second technique projects the
gross income, vacancy, expenses, other appropriate charges,
net income, and cash flow over a projected holding period.
The resulting cash flow and reversion (future value) are
discounted at an appropriate rate and added in order to
arrive at an indication of current value from the standpoint
of an investment. These methods provide an indication of the
present worth of anticipated future benefits (net income or
cash flow) to be derived from ownership of the property.
Both techniques were utilized in analyzing the subject
property.
SUMMARY The appraisers, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision maker. The appraisers' judgment
concerns the applicability of alternative tools of analysis
to the facts of the problem, the data and information needed
to apply these tools, and the selection of the analytical
approach and data most responsive to the problem in
question.
29
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or may point to a more reliable indication of the value of
the property being appraised than the other approach. In
some instances, because of the inadequacy or unavailability
of data, one of the approaches may be given little weight in
the final value estimate.
30
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
PHOENIX/SCOTTSDALE AREA
IMPROVED SALES SUMMARY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVEALL
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG./SF AT SALE /UNIT SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Villa Antigua 10/97 $9,230,000 1986 130 134,530 95% $6.17 $68.61 $71,000 9.00% N/A
5950 N. 78th Street 1,035 $6,390
Scottsdale, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
2 Joshua Tree 09/97 $17,000,000 1988 330 261,092 95% $5.53 $65.11 $51,515 8.50% 7.05
11545 N. Frank Lloyd Wright 791 $4,379
Scottsdale, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
3 Paradise Trails 06/97 $7,600,000 1985 174 143,058 97% N/A $53.34 $44,023 N/A 5.68
4502 E. Paradsie Village 822
Phoenix, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
4 The Overlook 04/97 $11,163,720 1987 224 189,120 N/A N/A $59.03 $49,838 N/A N/A
11620 E. Sahuaro Drive 844
Scottsdale, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
5 Salado Springs 04/97 $7,500,000 1986 144 121,712 91% $5.28 $61.62 $52,083 8.57% 6.97
242 S. Beck Avenue 845 $4,464
Tempe, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
6 Elliot's Crossing 03/97 $12,400,000 1987 247 199,096 96% $5.45 $62.28 $50,202 8.76% 7.22
7250 S. Kyrene Road 806 $4,396
Tempe, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
7 The Pinnacle 01/97 $15,350,000 1992 248 249,150 97% $5.36 $61.61 $61,895 8.70% 7.21
3033 E. Thunderbird Road 1,005 $5,387
Phoenix, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
8 Sonterra 12/96 $17,400,000 1996 274 257,890 90% $5.82 $67.47 $63,504 8.63% 7.32
17440 N. Tatum Blvd 941 $5,480
Phoenix, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
8 The Palasades 12/96 $33,600,000 1990 536 496,550 95% $5.68 $67.67 $62,687 8.40% 6.92
13440 N. 44th St. 926 $5,266
Phoenix, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
Subject 1982 220 217,758 95% 5.57
8787 East Mountain View Road 990 $5,514
Scottsdale, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
The Sales Comparison Approach is considered a good
valuation method in the event that a sufficient
number of similar and recent transactions can be
found and accurately verified. The key to the Sales
Comparison Approach is that a sufficient number of
comparable sales be present to reflect an accurate
indication of value. In such an event, market value
can be derived directly from the sales, since all
complexities involved are properly weighed according
to their significance to actual buyers and sellers.
This approach is based upon prices paid in actual
market transactions. It is a process of correlating
and analyzing recently-sold properties, which are
similar to the subject. The reliability of this
technique depends upon (a) the degree of
comparability of the property appraised with each
sale, (b) the length of time since the sale, (c) the
accuracy of the sales data, and (d) the absence of
unusual conditions affecting the sale.
The comparison process must be based on sales, which
constitute acceptable evidence of motivations
inherent to the market, occurring under similar
market conditions, of similar or reasonably similar
apartment projects. These projects were selected
since they are reasonably comparable to the subject
property. A map and a summary of the nine comparable
sales can be found on the preceding pages. The sales
ranged in time from December 1996 to October 1997.
Reference is made to the individual sales data
included in the Addenda section of this report.
In our analysis of the sales data, important
considerations as to comparability were condition of
the property, gross income when combined with percent
(%) occupied at sale date, unit size, terms of sale,
location, and motivation. The sales provide units of
comparison, which can be adjusted and then applied,
to the subject to derive an estimate of value.
Because these individual factors are difficult to
quantify, we compared the improved sales based on net
operating income (NOI) per square foot and per unit.
Theoretically, the NOI takes into consideration the
various physical factors, which influence value. An
analysis of NOI likewise considers economic
differences in each improved property sale because
income is also a function of the current market.
Thus, with this analysis, all the factors affecting a
sale can be reduced to the common denominator of net
operating income. Also, we considered the effective
gross income multiplier method. There follows a
discussion of our analysis and value conclusion by
the Sales Comparison Approach.
SALES ADJUSTMENT ANALYSIS
PROPERTY RIGHTS Property rights consists of ownership, legal estate,
economic benefits, and financial components. Our
valuation is of the leased fee estate on an all cash
basis. Since all the sales were reported to be of the
leased fee estate, no adjustment was necessary.
CASH EQUIVALENCY Standard definitions of market value include payment
in "cash or its equivalent." The equivalent includes
financing terms generally available in the market. In
many cases comparable sales carry atypical financing
terms that require an adjustment to
31
<PAGE>
cash equivalency. There are basically two areas,
which may require adjustments for terms. One is the
amount of cash down payment and the other is
favorable financing or a low interest rate on the
note/mortgage. Where terms were considered to be more
favorable than the market at the time of sale, cash
equivalency adjustments are made. All of the sales
used in this analysis were cash transactions or were
considered equivalent and therefore, did not require
a cash equivalent adjustment.
CONDITION OF SALE Adjustments for condition of sale usually reflect the
motivations of the buyer and the seller. Although
conditions of sale are perceived as applying only to
sales that are not arm's length transactions, some
arm's length sales may reflect atypical motivations
or sale conditions due to unusual tax considerations,
sale at legal auction, lack of exposure on the open
market, etc. The sales utilized in our analysis were
not reported to be reflective of such situations;
therefore, no adjustment was necessary.
NET OPERATING
INCOME ANALYSIS In lieu of specific adjustments, we compared the
improved sales based on the net operating income
(NOI) per square foot and NOI per unit. This method
presents a comparison based on the income which a
property is capable of generating. Theoretically, the
NOI takes into consideration the various factors,
which influence value such as quality, size,
amenities offered, location, age, condition etc.
Thus, these differing factors can be reduced to the
common denominator of net operating income.
The various sales reflected NOIs per square foot
ranging from $5.28 to $6.17 and NOIs per unit ranging
from $4,379 to $6,390. The subject NOI (with reserves
considered) has been approximated at $5.57 per square
foot or $5,514 per unit from the Direct
Capitalization analysis in the Income Approach
section of this report.
To estimate an adjustment for each sale, the
subject's NOI has been compared to the individual NOI
of the comparable sales. This adjustment should
account for all the various physical and economic
differences in each improved property sale, as income
is a function of the current market. Market
conditions should reflect perceived risk, or other
factors, which may affect value. The following chart
presents the adjustment process.
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/SF NOI/SF NOI/SF FACTOR PRICE/SF
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $68.61 $6.17 $5.51 0.89303 $61.27
2 65.11 5.53 5.51 0.99638 64.87
3 53.54 NA 5.51 NA NA
4 59.03 NA 5.51 NA NA
5 61.62 5.28 5.51 1.04356 64.30
6 62.28 5.45 5.51 1.01101 62.97
7 61.61 5.36 5.51 1.02799 63.33
8 67.47 5.82 5.51 0.94674 63.88
9 67.67 5.68 5.51 0.97007 65.64
</TABLE>
32
<PAGE>
After adjustments, the sales reflected a range in
value for the subject from $61.27 to $65.64 per
square foot. Please note that no NOI information was
available for Sales 3 and 4 and therefore no
adjustments were able to be made. Sale 1 is the most
recent, but reflected a significantly higher NOI per
square foot than the subject. The adjusted price of
the sale is $61.27 per square foot. Sales 2 and 6
have the most similar net operating income per square
foot and reflect values of $64.87 and $62.97 per
square foot. An age adjustment is needed since the
subject (on average) is about 6 to 7 years older than
the mean average age of the sales comparables. Based
on all the data, a mean average value of $63.75 per
square foot is estimated for the subject. The subject
apartment project is about 6 years older than the
mean average age of the comparables, therefore an
adjustment downward was made for age as it effects
the duration of the income stream. After adjusting
for age, the subject has a market value of $58 per
square foot. From this value the $200,000 in deferred
maintenance is deducted to arrive at the "as is"
value of the subject. The calculation is shown as
follows:
252,700 SF x $58.00/SF.................. $14,656,600
Less Deferred Maintenance............... (200,000)
"As Is" Value via NOI/SF................ $14,456,600
Rounded $14,500,000
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/UNIT NOT/UNIT NOT/UNIT FACTOR PRICE/UNIT
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $71,000 $6,390 $4,643 0.72660 $51,589
2 51,515 4,379 4,643 1.06029 54,621
3 44,023 NA 5,514 -- NA
4 49,838 NA 4,643 -- NA
5 52,083 4,464 4,643 1.04010 54,172
6 50,202 4,396 4,643 1.05619 53,023
7 61,895 5,387 4,643 0.86189 53,347
8 63,504 5,480 4,643 0.84726 53,804
9 62,687 5,266 4,643 0.88169 55,271
</TABLE>
After adjustments, the sales reflected a range in
value for the subject from $51,589 to $55,271 per
unit. Again, please note no NOI information was
available for Sales 3 and 4. Sale 1 is the most
recent sale, but it reflected a significantly higher
NOI per unit than the subject. The adjusted value by
this sale was $51,589 per unit. Sales 5 and 6 are
most similar in NOI per unit and these sales
reflected values of $53,023 and $54,172 per unit. The
mean average value from the data is $53,690 per unit.
Again an age adjustment is needed. Based on all the
data, we estimated a value for the subject of $48,000
per unit. The following indication reflects an "as
is" value per unit for the subject considering the
subject's deferred maintenance.
300 units x $48,000/unit................ $14,400,000
Less: Deferred maintenance.............. (200,000)
Value via NOI Price/Unit Method......... $14,200,000
Rounded $14,200,000
33
<PAGE>
EFFECTIVE GROSS INCOME
MULTIPLIER METHOD In addition to the NOI price per square foot and
price per unit analysis, we have employed an
effective gross income multiplier (EGIM) analysis to
the sales. Unlike the price per unit analysis, EGIMs
cannot be adjusted for dissimilar factors when
compared to the subject. Instead, certain factors
must be closely analyzed for determining
comparability of the multiplier to the subject
property. These include the timing of the sale and
whether market condition changes have occurred
between the date of valuation and the sale date, as
well as occupancies and expense ratio levels, and the
comparability of the sale in terms of its physical
features and the resulting income stream potential.
Listed below are the details of the sales we felt to
be pertinent in our selection of a reasonable EGIM
for the subject. All factors were considered in our
interpretation of the data leading to the EGIM of the
sales.
<TABLE>
<CAPTION>
SALE DATE OF SALE EGIM OCCUPANCY EXPENSE RATIO
-----------------------------------------------------
<S> <C> <C> <C> <C>
2 09/97 7.05 95% NA
3 06/97 5.68 97% NA
5 04/97 6.97 91% 40.28%
6 03/97 7.22 96% 36.76%
7 01/97 7.21 97% 37.26%
8 12/96 7.32 90% 36.84%
9 12/96 6.92 95% 41.87%
Subject 95% 37.28%
</TABLE>
The sales indicated EGIMs ranging from 5.68 to 7.32,
with all sales operating at or near stabilized
levels. Based on this data, we believe an EGIM of
6.50 is reasonable for the subject considering the
subject's quality and expense ratio. Applying the
6.50 EGIM to the subject's stabilized effective gross
income, and deducting for deferred maintenance,
results in the following value indication.
$2,274,649x6.50......................... $14,785,219
Less: Deferred maintenance.............. (200,000)
Value via EGIM Method................... $14,585,219
Rounded $14,600,000
CONCLUSION The NOI per square foot and per unit methods
presented a value indication between $14,500,000 and
$14,200,000 and the effective gross income multiplier
method indicated a value of $14,600,000. Weight has
been given to the net operating income comparisons
because this method reflects both income and expense
information. The EGIM method accounts for income and
does not take into consideration expenses, which can
vary from property to property. Furthermore, the EGIM
when used for valuation cannot be adjusted, yet as
seen in the NOI methods there is a need for an age
adjustment. Thus, the EGIM appears on the high side.
Therefore, it is our opinion that the leased fee
market value of the subject property based on the
indication provided by the Sales Comparison Approach,
all cash, on an "as is" basis as of December 31,
1997, is
FOURTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($14,500,000)
34
<PAGE>
[COMPARABLE RENTALS MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
COMPARABLE RENT SUMMARY
LAS COLINAS APARTMENTS
- ----------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF AVG. UNIT UNIT
NO. NAME/LOCATION BUILT UNITS SIZE (SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Sunscape 1978 442 894 93% 1BR/1BA 700 $600-650
3500 N. Hayden Road 1BR/1BA/LOFT 880 715-765
2BR/1BA 960 720-745
2BR/2BA 980 715-765
- ----------------------------------------------------------------------------------------------------------------------------
2 McDonald East 1978 144 880 99% 1BR/1BA 747 $545-565
8310 E. McDonald 2BR/2BA 1,013 645-665
- ----------------------------------------------------------------------------------------------------------------------------
3 Miramonte 1983 151 785 93% 1BR/1BA 550 $575
8025 E. Lincoln 1BR/1BA 560 620
1BR/1BA 679 635-645
2BR/2BA 924 740-755
2BR2BA 971 760-780
- ----------------------------------------------------------------------------------------------------------------------------
4 McCormick Place 1975 230 819 97% 1BR/1BA 500 $550-575
8520 Via Paseo 1BR/1BA 720 620-700
1BR/1BA 850 750
1BR/1BA 875 775-800
2BR/2BA 955 795-800
2BR/2BA 1,055 795-925
- ---------------------------------------------------------------------------------------------------------------------------
5 Scottsdale Serrento 1978 188 795 98% 1BR/1BA 479 $555
8145 E. Camelback Rd. 1BR/1BA 727 620
2BR/2BA 919 699
2BR/2BA 1,094 825
- ----------------------------------------------------------------------------------------------------------------------------
6 Camellero 1979 344 906 96% 1BR/1BA 501 $615-620
7979 E. Camelback Rd. 1BR/1BA 772 725
1BR/1BA 871 750
2BR/2BA 1,217 840-880
============================================================================================================================
SUBJECT 1981 300 842 97% 1BR/1BA 560 $550
PROPERTY 1BR/1BA 680 595
Las Colinas 2BR/2BA 900 660
5995 N. 78th Street 2BR/2BA 950 695
2BR/2BA 1,000 760
3BR/2BA 1,030 875
============================================================================================================================
<CAPTION>
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
NO NAME/LOCATION RENT/SF/MO. AMENITIES/COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Sunscape $0.86-0.93 Amenities include 2 swimming pools, a hot tub,
3500 N. Hayden Road 0.81-0.87 exercise room, clubhouse, Rents vary by location
0.75-0.78 and view. Concessions: 1BR/1BA/Loft-$60 off each
0.72-0.77 month and 100% off one month porated over term
with 12 month lease; 2BR/2BA-$30 off each month
with 12 month lease and 100% off one month prorated
over term with 12 month lease. Rents vary by location.
- ----------------------------------------------------------------------------------------------------------------------------
2 McDonald East $0.73-0.76 Amenities include a swimming pool, hot tub, sauna,
8310 E. McDonald 0.64-0.66 exercise room, clubroom, and laundry facility,
outdoor utility closets, and covered parking. No
concessions.
- ----------------------------------------------------------------------------------------------------------------------------
3 Miramonte $1.05 Amenities include a swimming pool, hot tub,
8025 E. Lincoln 1.11 clubroom, laundry facilities, microwave ovens,
0.94-0.95 washer/dryers, and fireplaces. No concessions. Rent
0.80-0.82 ranges based location or fireplace.
0.78-0.80
- ----------------------------------------------------------------------------------------------------------------------------
4 McCormick Place $1.10-1.15 Amenities include a clubhouse, exercise room, pool, spa,
8520 Via Paseo 0.86-0.97 sauna, jogging trail, putting green, microwave
0.88 ovens, storage, patios, and balconies. Concessions:
0.89-0.91 First month free. Rent varies based on patio.
0.83-0.84
0.75-0.88
- ----------------------------------------------------------------------------------------------------------------------------
5 Scottsdale Serrento $1.16 Amenities include a clubhouse, pool, spa, dishwashers,
8145 E. Camelback Rd. 0.85 patios, and balconies. No concessions.
0.76
0.75
- ----------------------------------------------------------------------------------------------------------------------------
6 Camellero $1.23-1.24 Amenities include a clubhouse, pool, spa, dishwashers,
7979 E. Camelback Rd. 0.94 patios, and balconies
0.86 Concessions: waive security deposit.
0.75-0.78
============================================================================================================================
SUBJECT $0.98 Amenities include a clubhouse, 3 swimming pools,
PROPERTY 0.88 a tennis court, laundry facilities, and a spa.
Las Colinas 0.73
5995 N. 78th Street 0.73
0.76
0.85
============================================================================================================================
</TABLE>
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of its
quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the neighborhood
based on past history and present conditions. Vacancies are
then deducted to arrive at effective gross income. Estimated
annual expenses are deducted from the effective gross
income, resulting in an indication of net operating income
before debt service. From the estimated net annual income,
annual debt service and deferred maintenance (if
applicable), are subtracted to obtain annual cash flow to
equity. This cash flow can be capitalized into an indication
of equity value by direct capitalization utilizing an
overall equity rate, or if debt does not exist, an overall
capitalization rate. It may also be projected into the
future over a selected but appropriate holding period, and
discounted along with the anticipated equity reversion at
the market discount rate and added in order to arrive at the
net present equity value for the subject property. In either
method, the present mortgage balance (if applicable) would
be added to the equity value to obtain the total value of
the property. Since our valuation is on a cash basis, no
mortgages were considered. The appraisers have utilized both
methods in valuing the subject property on an all cash
basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental income
from the various rental units, as well as laundry income,
forfeited security deposits, and miscellaneous income.
Information provided by the on-site leasing agents indicated
the subject's current rent schedule to be as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------------------------
UNIT TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO. TOTAL
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E lBR/lBA 20 560 $550 $0.98 $ 11,000
C lBR/lBA 54 680 595 0.88 32,130
C lBR/lBA/FP 18 680 595 0.88 10,170
B 2BR/2BA 98 900 660 0.73 64,680
B 2BR/2BA/FP 22 900 660 0.73 14,520
A 2BR/2BA 38 950 695 0.73 26,410
A 2BR/2BA/FP 36 950 695 0.73 25,020
D 2BR/2BA/FP 6 1,000 760 0.76 4,560
F 3BR/2BA/FP 8 1,030 875 0.85 7,000
--- ----- ---- ----- -------
300 842 $653 $0.78 $196,030
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================
SUBJECT - RENT ANALYSIS
- --------------------------------------------------------------------------------------
Average
Unit Average Monthly
Unit Type Size (SF) Rent/Month Rent/SF Comparability
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT (E PLAN) 1BR/1BR 560 $550 $0.98
Sunscape 1BR/1BA 700 600-650 0.86-0.93 Inferior
Miramonte 1BR/lBA 560 620 1.11 Superior
McCormick Place 1BR/1BA 500 550-575 1.10-1.15 Superior
Scottsdale Serrento 1BR/1BA 479 555 1.16 Superior
Camellero 1BR/1BA 501 615-620 1.23-1.24 Superior
- ---------------------------------------------------------------------------------------
SUBJECT (C PLAN) 1BR/1BA 680 595 0.88
Sunscape 1BR/1BA 700 600-650 0.86-0.93 Comparable
McDonald East 1BR/1BA 747 545-565 0.73-0.76 Inferior
Miramonte 1BR/LBA 679 635-645 0.94-0.95 Superior
McCormick Place 1BR/LBA 720 620-700 0.86-097 Comparable
Scottsdale Serrento 1BR/1BA 727 620 0.85 Comparable
Camellero 1BR/1BA 772 725 0.94 Superior
- ---------------------------------------------------------------------------------------
SUBJECT (B PLAN) 2BR/2BA 900 660 0.73
Sunscape 2BR/1BA 960 720-745 0.75-0.78 Comparable
Miramonte 2BR/2BA 924 740-755 0.80-0.82 Superior
McCormick Place 2BR/2BA 875 775-800 0.89-0.91 Superior
Scottsdale Serrento 2BR/2BA 919 699 0.76 Comparable
- ---------------------------------------------------------------------------------------
SUBJECT (A PLAN) 2BR/2BA 950 695 0.73
Sunscape 2BR/2BA 980 715-765 0.72-0.77 Comparable
Miramonte 2BR/2BA 971 760-780 0.78-0.80 Comparable
McCormick Place 2BR/2BA 955 795-800 0.83-0.84 Superior
Scottsdale Serrento 2BR/2BA 1,094 825 0.75 Superior
- ---------------------------------------------------------------------------------------
SUBJECT (D PLAN) 2BR/2BA 1,000 760 0.76
McDonald East 2BR/2BA 1,013 645-665 0.64-0.66 Inferior
Miramonte 2BR/2BA 971 760-780 0.78-0.80 Comparable
McCormick Place 2BR/2BA 1,055 795-925 0.75-0.88 Superior
Scottsdale Serrento 2BR/2BA 1,094 825 0.75 Comparable
- ---------------------------------------------------------------------------------------
SUBJECT (F PLAN) 3BR/2BA 1,030 875 0.85
McCormick Place 2BR/2BA 1,055 795-925 0.75-0.88 Comparable
Scottsdale Sorrento 2BR/2BA 1,094 825 0.75 Inferior
Camellero 2BR/2BA 1,217 840-880 0.75-0.78 Inferior
=======================================================================================
</TABLE>
<PAGE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
area. For the purpose of this analysis, we have considered
six apartment complexes that were found to be most
comparable. They range in total size from 118,568 to 395,200
square feet, in average unit size from 785 to 906 square
feet, and in occupancy from 93 to 99 percent. These
comparable rentals are summarized on the preceding page.
All of the comparables surveyed were located within the
subject's immediate vicinity. These projects are comparable
to the subject overall; specifically, in terms of overall
physical condition, unit size, rental rates, and the
amenities offered. These comparables indicate/an average
quoted rental rate range from $0.69 to $0.88 per square foot
per month.
After considering each of the aforementioned factors and the
subject's historical performance, we are of the opinion that
the subject's asking rentals are at market. Given the
subject's occupancy and actual rents, the projected market
effective rental rates for the subject are summarized as
follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------------------------------------
TOTAL SIZE TOTAL EFF. RENT/ EFF. MO. EFF. RENT/
PLAN UNIT TYPE UNITS (SF) (SF) MONTH TOTAL SF/MO.
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
E 1BR/1BA 20 560 11,200 $550 $ 11,000 $0.98
C 1BR/1BA 54 680 36,720 595 32,130 0.88
C lBR/lBA/FP 18 680 12,240 595 10,710 0.88
B 2BR/2BA 98 900 88,200 660 64,680 0.73
B 2BR/2BA/FP 22 900 19,800 660 14,520 0.73
A 2BR/2BA 38 950 36,100 695 26,410 0.73
A 2BR/2BA/FP 36 950 34,200 695 25,020 0.73
D 2BR/2BA 6 1,000 6,000 760 4,560 0.76
F 3BR/2BA/FP 8 1 030 8,240 875 7,000 0.85
---- ----- ------- ----- ------ -----
300 842 252,700 $653 $196,030 $0.78
</TABLE>
Gross Annual Rental Income: $196,030 x 12 mos. = $2,352,360
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, late charges, and furniture.
Other Income in 1989 was reported at $84,447 or $0.33 per
square foot. This figure rose in 1990 to $87,692 or $0.35
per square foot. In 1992, other income increased
significantly to $115,987 or $0.46 per square foot; however,
it dropped in 1993 to $78,575 or $0.31 per square foot. In
1994, other income was reportedly $85,431 or $0.34 per
square foot, in 1995 it was $80,542 or $0.32 per square
foot, and for 1996 it was $81,069 or $0.32 per square foot.
In 1997 other income for the subject was $87,476 or $0.35
per square foot. Based on our experience with similar type
properties and the actual performance of the property it is
our opinion that other income in the amount of $0.37 per
square foot is typical for a project such as the subject. In
the first year of our analysis, this equates to $0.34 per
square foot, after vacancy.
36
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
LOS COLINAS APARTMENTS
HISTORICAL EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1993 ACTUAL 1994 ACTUAL 1995 ACTUAL 1996 ANNUALIZED 1997 BRA PROJECTIONS
1998
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.39 $ 329 $0.42 $ 356 $0.47 $ 398 $0.50 $ 420 $0.50 $ 421 $ 0.54 $ 456
Insurance 0.07 55 0.07 60 0.08 67 0.06 48 0.06 48 0.08 $ 70
Personnel 0.58 493 0.59 498 0.63 531 0.61 515 0.67 564 0.68 $ 569
Utilities 0.39 325 0.42 355 0.45 380 0.51 426 0.51 429 0.52 $ 438
Repairs & Maintenance 0.35 298 0.36 302 0.45 375 0.41 348 0.41 346 0.47 $ 394
Contract Services 0.20 166 0.20 170 0.20 172 0.22 182 0.22 185 0.23 $ 193
General Administrative 0.08 71 0.10 87 0.15 123 0.13 112 0.08 67 0.17 $ 140
Management 0.35 296 0.37 316 0.40 334 0.42 353 0.42 351 0.44 $ 371
----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ------ ------
TOTAL $2.41 $2,033 $2.53 $2,144 $2.83 $2,380 $2.85 $2,405 $2.87 $2,412 $ 3.12 $2,631
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================
COMPARABLE
EXPENSE ANALYSIS
====================================================================================================================
COMPARABLE 1
--------------------
Expense Year 1997
NRA 217758
No. Units 220
Year Built 1982
Average Unit Size 990
- --------------------------------------------- -------------------------------------------------------------
EXPENSE CATEGORY PER SF PER UNIT COMPARABLE AVG UNIT SF EXPENSES/SF EXPENSES/UNIT
- --------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $ 0.47 $ 466 Joshua Tree 781 $3.69 $2,918
Insurance 0.07 64 Salado Springs 845 $3.56 $3,011
Personnel 0.71 702 Elliot's Crossing 806 $3.36 $2,711
Utilities 0.53 528 The Pinnacle 1,004 $3.19 $3,200
Repairs & Maintenance 0.49 480 Sonterra 941 $3.40 $3,200
Contract Services 0.20 200 The Palisades 924 $4.09 $3,793
General Administrative 0.15 152
Management 0.42 420
----- -----
TOTAL $ 3.04 $3,012
====================================================================================================================
</TABLE>
<PAGE>
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied:
Gross Rental Income $2,352,360
Other Income ($0.37/SF) 93,499
----------
Total Potential Gross Income $2,445,859
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 7 percent range.
This covers the time lag during re-leasing and normal
refurbishing of apartment units, and the loss of income
resulting from bad debt or other vacancies. Over the
past decade, the average vacancy for the
Scottsdale/Paradise Valley submarket has dropped from a
high of 13.7 percent in 1989 to a low of 3.8 percent in
the fourth quarter of 1997. However, due to the amount
of new construction, the market is expected to take
several years to absorb the new supply. In surveying
the direct competition, the current physical vacancies
are typically below 10 percent. The subject's economic
vacancy is currently about 10 percent and the physical
vacancy is about 3 percent. The primary difference
between the physical and economic vacancies is due to
the lower-than-market contract rents. Therefore, given
this data we have projected a 9 percent economic
vacancy in 1998. After the first year of the projection
period, we expect some of the excess supply will be
absorbed and therefore an economic vacancy of 7 percent
will be attained. This vacancy is expected to remain
stable through the remainder of the cash flow
EXPENSE ANALYSIS The various expenses necessary in the operation of the
subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement.
Proper appraisal technique demands that an appraiser
rely on typical expenses as opposed to actual expenses,
which may vary according to management or special
circumstances that may not persist. In addition, the
total expenses per square foot should be within a range
typical for similar projects. Reserves for replacement
are estimated based on age, condition, and construction
quality. It is re-emphasized that all income, as well
as expense estimates, are based on the assumption of
competent and prudent management.
We have based our estimate of project expenses on
comparable apartment projects located in the subject
area, as well as the actual historical performance of
the subject property. The facing chart summarizes the
actual expenses reported by one "individually metered"
project, as well as the subject property's actual
expenses from 1993 through 1996, and annualized 1997
expense figures (1997 figures reflect actual expenses
for the period from January 1, 1997 through December
1997.
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
REAL ESTATE TAXES - Real estate taxes and assessments
for the Las Colinas Apartments are coordinated by the
Maricopa County Assessor's Office. The property is
subject to a number of different taxing authorities and
the taxes are
37
<PAGE>
calculated two ways. A portion of the total tax
liability is calculated based on the "limited cash
value" intended to create a ceiling on the assessment.
The limited cash value is multiplied by a 10 percent
assessment ratio then multiplied by the rate per $100
of assessed value. This is considered the primary tax
rate and includes the school district, junior college,
city, county, and state taxes. In 1996, the total tax
rate was 7.5996 per $100 of assessed value. The
remainder of the tax liability is based on the "full
cash value" or current market value. This value is
multiplied by the 10 percent assessment ratio and then
multiplied by the tax rate per $100 of assessed value.
Full cash value assessments are the secondary
assessments and apply to various taxing authorities
including bonds, budget overrides, and special
districts. In 1996, the applicable tax rate was 3.2192
per $100 of assessed value. In 1996, the real estate
taxes were $125,724.42. In 1997 the real estate taxes
were $125,876 according to the subject property
operating statement. This is expected to increase in
1998 to $136,660 or $0.54 per square foot and includes
personal property tax. This was increased at 4 percent
per year, thereafter.
INSURANCE - This category includes fire and extended
coverage. Insurance costs can vary from one property to
another depending upon the type and whether a blanket
policy is used. Often times a property owner will
insure multiple properties on one policy in an effort
to reduce the cost of insurance per project. Our
expense estimate is based upon typical costs for
individually insured apartment projects in the Phoenix
area. The subject's actual figures for 1993, 1994,
1995, and 1996 were $0.07, $0.06, $0.08, and $0.06 per
square foot. The annualized insurance expense for 1997
is $0.06 per square foot. This falls within the
insurance indicated by the comparable at $0.07 per
square foot. Therefore, we estimated insurance at $0.08
per square foot or $21,025 in the first year. This
expense is expected to increase 4 percent annually
throughout our projection period.
PERSONNEL - This category includes salaries for office
managers, leasing agents, maid services, payroll taxes,
and FICA. This category is not to be confused with the
category of Management. The expense comparable showed a
personnel expense of $0.71 per square foot. Annualized
figures for the subject in 1997 indicate this expense
at $0.67 per square foot. The subject's actual figures
for 1993, 1994, 1995, and 1996 were $0.58, $0.59,
$0.63, and $0.61 per square foot, respectively. Based
on historical figures at the subject property and
tempering them with the market data, we have estimated
this expense at $170,825 or $0.68 per square foot. This
expense is expected to increase 4 percent annually
throughout our projection period.
UTILITIES - This expense category includes electric,
gas, water, and sewer for the apartment's common area.
The subject's actual figures for 1993, 1994, 1995, and
1996 were $0.39, $0.42, $0.45, and $0.51 per square
foot, respectively. Annualized figures in 1997 indicate
this expense at $0.51 per square foot. The comparable
indicated $0.53 per square foot. Based on this data, we
have estimated this expense at $0.52 per square foot or
$131,404. This expense is expected to increase 4
percent annually throughout our projection period.
38
<PAGE>
REPAIR AND MAINTENANCE - These expenses are necessary
in order to keep the property in good repair including
plumbing, air-conditioners, electrical, draperies,
carpets, janitorial supplies, and decorative costs. The
expense comparable indicated $0.49 per square foot.
Annualized figures for the subject in 1997 indicate
this expense at $0.41 per square foot, while actual
figures for 1993, 1994, 1995, and 1996 were $0.35,
$0.36, $0.45, and $0.41 per square foot, respectively.
Due to the age, overall condition, and the ongoing
maintenance at the subject property, an estimate of
$0.47 per square foot or $118,264 has been projected
for the subject. This expense is expected to increase 4
percent annually throughout our projection period.
CONTRACT SERVICES - This expense category includes
landscaping, security, etc. The expense comparables
varied with some combining these items with the
maintenance and repair category above. The comparable
indicated $0.20 per square foot. The subject's annual
figures for 1993, 1994, and 1995 were $0.20 per square
foot each year. In 1996, this expense was $0.22 per
square foot. Annualized 1997 figures indicate this
expense at $0.22 per square foot, also, we have
estimated this expense for the subject at $0.23 per
square foot or $57,818 and this expense is expected to
increase 4 percent annually throughout our projection
period.
GENERAL ADMINISTRATIVE - This expense category includes
professional, legal, and accounting costs,
administration costs, promotional expenses, etc. The
expense comparable indicates $0.15 per square foot.
Annualized figures in 1997 for the subject indicate
$0.08 per square foot, while actual figures for 1993,
1994, 1995, and 1996 were $0.08, $0.10, $0.15, and
$0.13 per square foot, respectively. We have estimated
this expense for the subject at $0.17 per square foot
or $42,049. We believe the low 1997 general
administrative expense was low and unusual for the
subject. This expense is expected to increase 4 percent
annually throughout our projection period.
MANAGEMENT - This includes the fee to outside
management or ownership for managing the property. This
expense is typically a percentage of the effective
gross income of the property. The industry standard for
an apartment complex of this size and quality is
between 3 and 5 percent of effective gross income. The
subject is reportedly at 5 percent of effective gross
income. The comparable reflected this expense at $0.42
per square foot. The subject's expenses in 1993, 1994,
1995, and 1996 appear reasonable at $0.35, $0.37,
$0.40, and $0.42 per square foot, respectively. In 1997
this subject expense was $0.42 per square foot. Based
on this data we have projected the management fee at 5
percent of effective gross income in each year of our
analysis which was cross-checked on a per square foot
basis.
EXPENSE SUMMARY The subject's total expenses were $2.83 per square foot
in 1995 and were $2.85 in 1996. Annualized figures for
1997 are $2.87 per square foot. The comparable showed
$3.04 per square foot. Considering the subject's size
and age, the expenses appear reasonable. Based on the
data previously discussed, we have projected total
expenses for the subject in 1998 at $3.12 per square
foot.
39
<PAGE>
RESERVES FOR REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These
include roof covering, carpeting, appliances,
compressors, parking areas, drives, etc. The subject
was constructed in 1981 and appears to have had ongoing
maintenance since its construction. It is our opinion
that a reserve allowance of $300 per unit or $0.36 per
square foot is adequate to provide for the continued
maintenance of the project. This was included in our
expenses prior to concluding the net operating income.
DEFERRED MAINTENANCE The subject improvements are in good condition and
exhibited only minor deferred maintenance at the time
of our inspection. This has been estimated at $196,900,
which has been rounded to $200,000. This includes
appliance replacement, floor and drapery replacement,
exterior repairs, furniture and fixtures repair, air-
conditioning and equipment repairs, interior repairs,
landscaping, painting, plumbing and electrical repairs,
pool repairs, parking lot repairs, roof repairs, and
water heater replacement.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION The most realistic method for estimating value via the
Income Approach is through the use of Discounted Cash
Flow Analysis. The Market Value of a real estate
investment under the Discounted Cash Flow Method is
defined as the discounted sum of all net cash inflows
plus the property's discounted reversionary value.
Primarily, any given property is only worth the value
of the income derived from it.
The general methodology of Discounted Cash Flow
involves the following steps: 1) increasing each year's
cash flows by an appropriate appreciation factor; 2)
discounting each year's net cash flow by an appropriate
discount rate; 3) deriving the property's reversionary
value in the final year and discounting it to the
present; and 4) the summation of all cash flows,
including final year reversion, into an estimate of
value.
According to the Third Quarter 1997 real estate
investor survey compiled by Peter F. Korpacz &
Associates, Inc. the apartment market is being flooded
with capital, primarily from REIT's, rendering it
almost impossible for large institutional investors to
land deals. In addition, brokers have fewer properties
to market either because long-term holders are buying
product before it is ever offered on the market place
or because owners are not willing to sell. The main
factor is investors are watching to determine if
investment locations are the pace of job growth. The
slower pace of job growth in many markets, coupled with
continued increases in multi-family and single family
permits as well as attractive interest rates could
combine to negatively effect the apartment market. As
such, some investors are increasing overall vacancy
allowance in their acquisition analyses and backing off
on revenue growth assumptions. However, apartment
investment continues to be attractive for pension funds
and REIT's and we anticipate investors will continue to
find the apartment market a desirable investment.
40
<PAGE>
DISCOUNT RATE Over the past several years, the internal rate of
return (IRR) has gained greater usefulness and market
acceptance as an investment measure. IRR is the yield
on an investment based on an initial cash investment,
annual cash flows to the property, as well as resale
proceeds. IRR allows for return on investment as well
as recapture of the original investment when factoring
in the reversion. To simulate this process, we have
relied upon several investor surveys, which detail
reasonable yields or IRR requirements of purchasers. We
have used this rate as a discount rate that, when
applied to projected cash flows and net resale proceeds
(reversion), results in the present value of the
property.
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This IRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. Corporate "Baa" bonds are typically viewed as
an alternative investment. Real estate is considered
riskier due to illiquidity, competition, burden of
management, and market conditions; therefore,
approximately 150 basis points or more could be added
to this percentage rate in a normal market. Based on
the previous data and considering the amount of new
construction in the market and the lease-up time
required to regain stabilization, we believe a 12.50
percent discount rate is reasonable based on an all
cash sale and alternative investments. While this is
134 basis points higher than the indicated average by
the previously mentioned survey, we believe it reflects
the added risk in the market.
CAPITALIZATION RATE The subject property's reversionary value is derived by
capitalizing the eleventh year's net operating income.
As mortgage rates have fluctuated over the past several
years, it becomes difficult to apply a band of
investment method to establish a capitalization rate
because capitalization rates do not react dramatically
to ups and downs of mortgage interest rates.
Additionally, the mercurial nature of the recent market
creates a large variance of returns depending on
property potential. Again, according to the previously
cited investor survey, investors of apartment
properties indicated a terminal capitalization rate
range from 8.0 to 10.25 percent with an average of 9.29
percent. This range appears reasonable after analyzing
the most recent sales in the area, which follow.
<TABLE>
<CAPTION>
SALE IDENTIFICATION SALE DATE CAPITALIZATION RATE
------------------------------------------------------------------------
<S> <C> <C> <C>
1 Villa Antigua 10/97 9.00%
2 Joshua Tree 09/97 8.50%
3 Paradise Trails 06/97 NA
4 The Overlook 04/97 NA
5 Salado Springs 04/97 8.57%
6 Elliot's Crossing 03/97 8.76%
7 The Pinacle 01/97 8.70%
8 Santerra 12/96 8.63%
9 Sunset Shadows 12/96 8.40%
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
LAS COLINAS APARTMENTS
Fiscal Year Ending 12/31 1998 1999 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents 2,352,360 2,446,454 2,544,313 2,646,085 2,751,928 2,862,006 2,976,486
Rent/SF/Mo. 0.776 0.807 0.839 0.873 0.908 0.944 0.982
OtherIncome/Yr. 93,499 97,239 101,129 105,174 109,381 113,756 118,306
---------- --------- --------- --------- --------- --------- ---------
Gross Income 2,445,859 2,543,693 2,645,441 2,751,259 2,861,309 2,975,761 3,094,792
% Vacancy 9.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Vacancy Allowance 220,127 178,059 185,181 192,588 200,292 208,303 216,635
---------- --------- --------- --------- --------- --------- ---------
Effective Gross Income 2,225,732 2,365,635 2,460,260 2,558,671 2,661,017 2,767,458 2,878,156
Expenses: $/Unit S/SF
Real Estate Taxes 456 0.54 136,660 142,127 147,812 153,724 159,873 166,268 172,919
----
Insurance 70 0.08 21,025 21,866 22,740 23,650 24,596 25,580 26,603
---- -----
Personnel 569 0.68 170,825 177,658 184,765 192,155 199,841 207,835 216,148
---- -----
Utilities 438 0.52 131,404 136,660 142,127 147,812 153,724 159,873 166,268
---- -----
Repairs and Maintenance 394 0.47 118,264 122,994 127,914 133,030 138,352 143,886 149,641
---- -----
Contract Services 193 0.23 57,818 60,130 62,536 65,037 67,639 70,344 73,158
---- -----
General Administrative 140 0.17 42,049 43,731 45,481 47,300 49,192 51,159 53,206
---- -----
Management Fee 5.00% 0.44 111,287 118,282 123,013 127,934 133,051 138,373 143,908
---- -----
Reserves for Replacement 300 0.36 90,000 93,600 97,344 101,238 105,287 109,499 113,879
---- ----- ---------- --------- --------- --------- --------- --------- ---------
Total Expenses 879,331 917,048 953,730 991,879 1,031,554 1,072,817 1,115,729
Per SF 3.48 3.63 3.77 3.93 4.08 4.25 4.42
---------- --------- --------- --------- --------- --------- ---------
Net Operating Income 1,346,400 1,448,587 1,506,530 1,566,791 1,629,463 1,694,642 1,762,427
Per SF 5.33 5.73 5.96 6.20 6.45 6.71 6.97
Capital Items: 200,000 0 0 0 0 0 0
---------- --------- --------- --------- --------- --------- ---------
Cash Flow 1,146,400 1,448,587 1,506,530 1,566,791 1,629,463 1,694,642 1,762,427
---------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270 0.438462
Present Value of Cash Flow 1,019,023 1,144,562 1,058,084 978,140 904,236 835,916 772,758
NOI in 10th Year 2,061,791 Present Value of Income Stream 8,697,989
Ro at Reversion 10.50% Present Value of Reversion 5,865,456
----------
------------------------------------------------------------
Indicated Reversion 19,636,100 Indicated Value of Subject 14,563,445
Less: Sales Costs 3.00% 589,083 Indicated Value/SF 57.63
---------- Indicated Value/Unit 48,545
Reversion in 10th Yr 19,047,017 GIM at Indicated Value (rent income only) 6.19
Ro at Indicated Value 9.25%
===============================================================================================================================
<CAPTION>
=====================================================================================
Fiscal Year Ending 12/31 2005 2006 2007 2008
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Apt. Rents 3,095,545 3,219,367 3,348,142 3,482,067
Rent/SF/Mo. 1.021 1.062 1.104 1.148
OtherIncome/Yr. 123,038 127,960 133,078 138,401
--------- --------- --------- ---------
Gross Income 3,218,584 3,347,327 3,481,220 3,620,469
% Vacancy 7.00% 7.00% 7.00% 7.00%
Vacancy Allowance 225,301 234,313 243,685 253,433
--------- --------- --------- ---------
Effective Gross Income 2,993,283 3,113,014 3,237,535 3,367,036
Expenses:
Real Estate Taxes 179,835 187,029 194,510 202,290
Insurance 27,667 28,774 29,925 31,122
Personnel 224,794 233,786 243,138 252,863
Utilities 172,919 179,835 187,029 194,510
Repairs and Maintenance 155,627 161,852 168,326 175,059
Contract Services 76,084 79,128 82,293 85,584
General Administrative 55,334 57,547 59,849 62,243
Management Fee 149,664 155,651 161,877 168,352
Reserves for Replacement 118,434 123,171 128,098 133,222
--------- --------- --------- ---------
Total Expenses 1,160,358 1,206,773 1,255,044 1,305,245
Per SF 4.59 4.78 4.97 5.17
--------- --------- --------- ---------
Net Operating Income 1,832,924 1,906,241 1,982,491 2,061,791
Per SF 7.25 7.54 7.85 8.16
Capital Items: 0 0 0 0
--------- --------- --------- ---------
Cash Flow 1,832,924 1,906,241 1,982,491 2,061,791
--------- --------- --------- ---------
Present Value Factor 0.389744 0.346439 0.307946 0.000000
Present Value of Cash Flow 714,372 660,397 610,500 0
=====================================================================================
</TABLE>
<PAGE>
================================================================================
CASH FLOW SUMMARY
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL 12.50% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------- --------- ---------- ---------
<S> <C> <C> <C>
1998 $1,146,400 0.888888889 $1,019,023
1999 1,448,587 0.790123457 1,144,562
2000 1,506,530 0.702331962 1,058,084
2001 1,566,791 0.624295077 978,140
2002 1,629,463 0.554928957 904,236
2003 1,694,642 0.493270184 835,916
2004 1,762,427 0.438462386 772,758
2005 1,832,924 0.389744343 714,372
2006 1,906,241 0.346439416 660,397
2007 1,982,491 0.307946148 610,500
-------
TOTAL NPV OF CASH FLOWS $8,697,989
Projected NOI - 11th Year $2,061,791
Terminal Capitalization Rate 10.50%
-----
Estimated Value of Property at End of 10th Year $19,636,100
Less Sales Cost @ 3.00% (589,083)
--------
Value of Reversion at End of 10th Year $19,047,017
Discount Factor - 10th Year 12.50% 0.307946
--------
Present Value of the Reversion $5,865,456
Sum of Present Values of Cash Flow 8,697,989
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $14,563,445
(ROUNDED) $14,600,000
===========
</TABLE>
================================================================================
<PAGE>
Based upon the aforementioned factors and the quality
of the subject, it is our opinion that a 9.5 percent
"going-in" capitalization rate was appropriate in this
market. Typically, the terminal capitalization rate
would be higher than the "going-in" capitalization rate
due to the greater risk and older age of the property
at the end of the projection period. Therefore, we
believe a terminal capitalization rate of 10.5 percent
is appropriate for the subject property. The resulting
value indicates a first year capitalization rate of
9.29 percent and reflects the need for first year
lease-up to stabilize occupancy.
CASH FLOW ASSUMPTIONS . Rents were based on an average current rental rate
of approximately $0.78 per square foot. During the
projection period rents were increased at a rate
of 0 percent in Year 1 and 4 percent per year
thereafter. As previously discussed in the
"Apartment Market Analysis" section of this
report, the subject area's average rental rates
have increased at a healthy pace in the early
1990's; however, with the significant amount of
new construction the growth has slowed.
. The subject's current economic vacancy rate is
about 10 percent. It is our opinion that the
subject should be capable of obtaining a 9 percent
vacancy rate for the entry point year (1998).
Beginning in 1999 and beyond it is our opinion
that a stabilized vacancy of 7 percent can be
obtained.
. The property has been appraised based on a
"resident pays utilities" status.
. Expenses (with the exception of management) have
been increased at an average growth rate of 4
percent annually over the 11-year projection
period. Management expenses are based on a
percentage of effective gross income and increase
with occupancy and rental increases.
. A discount rate of 12.50 percent was utilized.
. A terminal capitalization rate of 10.50 percent
was believed reasonable.
. A sales cost of 3 percent of the reversionary
value was estimated.
A cash flow analysis for the subject may be found on
the preceding pages. The estimated leased fee market
value for the subject on an "as is" basis via
discounted cash flow method is
FOURTEEN MILLION SIX HUNDRED DOLLARS
($14,600,000)
42
<PAGE>
<TABLE>
<CAPTION>
================================================================================
LAS COLINAS APARTMENTS
Fiscal Year Ending 12/31 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Income:
Apt. Rents $2,352,360
Rent/SF/Mo. 0.776
Other Income/Yr. 93,499
------------
Gross Income $2,445,859
% Vacancy 7.00%
Vacancy Allowance 171,210
------------
Effective Gross Income $2,274,649
------------------
Expenses: $/Unit $/SF
------------------
Real Estate Taxes 456 0.54 $136,660
------------------
Insurance 70 0.08 21,025
------------------
Personnel 569 0.68 170,825
------------------
Utilities 438 0.52 131,404
------------------
Repairs and Maintenance 394 0.47 118,264
------------------
Contract Services 193 0.23 57,818
------------------
General Administrative 140 0.17 42,049
------------------
Management Fee 5.00% 0.44 113,732
------------------
Reserves for Replacement 300 0.36 90,000
------------------ ------------
Total Expenses $881,777
Per SF 3.49
------------
Net Operating Income $1,392,872
Per SF 5.51
9.50%
Capitalization Rate ------------
Fee Simple Stabilized Market Value $14,661,808
Less: Rent Loss Due to Lease-up $0
Deferred Maintenance $200,000
------------
Leased Fee "As Is" Market Value $14,461,808
Leased Fee "As Is" Market Value (Rounded) $14,500,000
- --------------------------------------------------------------------------------
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1
------
Stabilized NOI $1,392,872
Projected NOI 1,446,655
---------
Rent Loss $0
PV Factor @ 7.00% 0.934579
PV Income Loss $0
CUMULATIVE LOSS $0
================================================================================
</TABLE>
<PAGE>
DIRECT CAPITALIZATION Direct capitalization is a method used to convert a
single year's income estimate into a value indication.
In direct capitalization a rate of return for the
investor and recapture of the capital invested is
implicit in the overall capitalization rate.
The overall capitalization rate was chosen after
analyzing the comparable apartment sales in our Sales
Comparison Approach. These sales indicated a range of
"going-in" capitalization rates from 8.40 to 9.00
percent.
A "going-in" capitalization rate of 9.5 percent was
deemed appropriate due to the quality of the subject,
its location, and the current market conditions. The
net income is capitalized into a value of $14,661,808
with deductions for deferred maintenance made
subsequently to reflect a value of $14,461,808 or
$14,500,000 rounded.
INCOME APPROACH
CONCLUSION DCF Method................................ $14,600,000
Direct Capitalization Method.............. $14,500,000
The two methods of comparison are supportive of each
other and we gave equal reliance to each. We are of the
opinion that the "as is" market value of the subject
property, as of December 31, 1997 is $14,500,000.
43
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $14,500,000
Income Approach $14,500,000
The Sales Comparison Approach utilized recent
comparable sales of similar properties in the area. The
weakness of the Sales Comparison Approach is that no
two properties are exactly alike and exact conditions
of a sale are often unknown. The strength of this
approach is that it indicates that market activity
based on the willing buyer/willing seller concept.
Because the market data provided sufficient recent
sales which are considered comparable and in the
subject's general area, we placed equal weight on this
approach.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rental rates
in the immediate area of the subject, actual expenses,
and investor returns derived from the market, we have
estimated value. Actual data on the property, as well
as comparable data was considered adequate. Because the
Income Approach deals directly with income streams, we
feel it is a very good indication of current market
conditions. It tends to reflect a value, which an
investor of a property would anticipate. We have placed
equal emphasis on the Income Approach as well as the
Sales Comparison Approach.
Therefore, it is our opinion that the "as is" leased
fee market value of the subject property, on an all
cash basis, as of December 31, 1997 is
FOURTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($14,500,000)
44
<PAGE>
VILLA ANTIGUA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Villa Antigua
Address 5950 N. 78th
City/ State Scottsdale, Arizona
TRANSACTION DATA
Sale Date 10/97
Grantor (Seller) Cluster Housing Properties (et al)
Grantee (Buyer) Villa Antigua Condominium Ventures
Recorded Document 711812
Sale Price $1,070,000
Occupancy 95%
Sale Price per Unit $71,000
Sale Price per SF $68.61
Capitalization Rate 9%
TERMS OF SALE CASH
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 1&2
Number of Buildings 16
Number of Units 130
Number of Bedrooms 250
Net Rentable Area 134,530 SF
Average Unit Size 1,035 SF
Land Area 7.35 Acres
Unit Density 17.69 Units per Acre
Property Condition Good
Parking (type) Open (95) Covered (130 spaces) Total Spaces (225)
Construction Type Concrete foundation, wood framing, stucco exterior
and Spanish tile roof
Unit Amenities Fireplace, washer/dryer, microwave, balcony/patio,
storage locker
Project Amenities 2 swimming pools, spa, recreation room, tennis
court, fitness center, and business center
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Buyer planned to convert to condominium complex.
Limited financial information available due to
condominium conversion.
<PAGE>
JOSHUA TREE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Joshua Tree
Address 11545 N. Frank Lloyd Wright
City/ State Scottsdale, Arizona
TRANSACTION DATA
Sale Date 09/97
Grantor (Seller) Joshua Tree, L.P.
Grantee (Buyer) Joshua Tree Holdings, LLC
Recorded Document 682094
Sale Price $17,000,000
Occupancy 95%
Sale Price per Unit $51,515
Sale Price per SF $65.11
Capitalization Rate 8.5%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1988
Number of Stories 1&2
Number of Buildings 22
Number of Units 330
Number of Bedrooms 494
Net Rentable Area 261,092 SF
Average Unit Size 791 SF
Land Area 13.87 Acres
Unit Density 23.79 Units per Acre
Property Condition Average
Parking (type) Open (155) Covered (330) Total (485)
Construction Type Concrete foundation, wood framing, stucco exterior
Unit Amenities Patio/balcony, dishwasher, some fireplaces,
microwave
Project Amenities 2 swimming pools, 2 spas, gym, recreation room,
tennis court, and sauna
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments An EGIM of 7.05 was calculated based on income at
time of sale.
<PAGE>
PARADISE TRAILS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Paradise Trails
Address 4502 E. Paradise Village
City/State Phoenix, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Paradise Trails Associates
Grantee (Buyer) Paradise Trails Apartments, L.P.
Recorded Document 435389
Sale Price $7,660,000
Occupancy 97%
Sale Price per Unit $44,022
Sale Price per SF $53.54
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Number of Stories 1&3
Number of Buildings 9
Number of Units 174
Number of Bedrooms 228
Net Rentable Area 143,058 SF
Average Unit Size 822 SF
Land Area 4.73 Acres
Unit Density 36.78 Units per Acre
Property Condition Average
Parking (type) Open (83) and Carport (170) Total (253 spaces)
Construction Type Concrete slab, wood frame, stucco exterior, and
flat built up roof
Unit Amenities Fireplace, balcony/patio, and washer/dryer, and
dishwasher
Project Amenities Swimming pool, spa, recreation room, gym, and
racquetball
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments An EGIM of 5.68 was calculated based on income
information. Further details, including expense
data was undisclosed.
<PAGE>
THE OVERLOOK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name The Overlook
Address 11620 E. Sahuaro Drive
City/ State Scottsdale, Arizona
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Cigna Income Realty-I, LP
Grantee (Buyer) Glenborough Properties, LP
Recorded Document 283548
Sale Price $11,163,720
Occupancy NA
Sale Price per Unit $49,838
Sale Price per SF $59.03
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 1&2
Number of Buildings 16
Number of Units 224
Number of Bedrooms 320
Net Rentable Area 189,120 SF
Average Unit Size 844 SF
Land Area 9.3 Acres
Unit Density 24.09 Units per Acre
Property Condition Average
Parking (type) Open (205) Carport (112) Total (317)
Construction Type Concrete foundation, wood framing, stucco exterior,
Spanish tile roof
Unit Amenities Fireplace, balcony/patio, dishwasher, washer/dryer
hook-up
Project Amenities Swimming pool, spa, gym, tennis court, laundry, and
recreation room
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments This transaction was part of a 6-priority
nationwide portfolio sale by Cigna Properties. No
income information available.
<PAGE>
SALADO SPRINGS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Salado Springs
Address 242 S. Beck
City/ State Tempe, Arizona
TRANSACTION DATA
Sale Date 02/97
Grantor (Seller) Salado Springs Associates, LP
Grantee (Buyer) Salado Springs Apartment, LLC
Recorded Document 234918
Sale Price $7,500,000
Occupancy 95%
Sale Price per Unit $52,083
Sale Price per SF $61.62
Capitalization Rate 8.57%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Buildings 19
Number of Units 144
Number of Bedrooms 256
Net Rentable Area 121,712 SF
Average Unit Size 845 SF
Land Area 10.09 Acres
Unit Density 14.27 Units per Acre
Property Condition Average
Parking (type) Open (154) Carport (187) Total (341)
Construction Type Concrete foundation, wood frame, stucco
exterior, Spanish tile roof
Unit Amenities Fireplace, washer/dryer, patio/balcony, storage
locker
Project Amenities Swimming pool, spa
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments An EGIM of 6.97 was calculated based on income
information at time of sale. Expense ratio
reportedly 40.28%.
<PAGE>
ELLIOT'S CROSSING
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Elliot's Crossing
Address 7520 S. Kyrene
City/ State Tempe, Arizona
TRANSACTION DATA
Sale Date 03/97
Grantor (Seller) Elliot's Crossing Partners, Ltd.
Grantee (Buyer) LBK 2, LP
Recorded Document 149826
Sale Price $12,400,000
Occupancy 96%
Sale Price per Unit $50,202
Sale Price per SF $62.28
Capitalization Rate 8.76%
TERMS OF SALE CASH
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2
Number of Buildings 26
Number of Units 247
Number of Bedrooms 327
Net Rentable Area 199,096 SF
Average Unit Size 806 SF
Land Area 10.08 Acres
Unit Density 24.51 Units per Acre
Property Condition Average
Parking (type) Open (260) and Carport (122) Total (382)
Construction Type Concrete foundation, wood frame, stucco exterior,
Spanish tile roof
Unit Amenities Washer/dryer hook-ups, fireplace, balcony/patio
Project Amenities Swimming pool, spa, laundry, recreation room, gym
Confirmed With COMPS
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Additional charges of $10/month for wood burning
stove, washer/dryer hook-ups, vaulted ceiling, and
covered parking. $40/month charge for
washer/dryer. An EGIM of 7.22 was calculated based
on income at time of sale. Expense ratio reported
at 36.76%.
<PAGE>
THE PINNACLE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name The Pinnacle
Address 3033 East Thunderbird Road
City/ State Phoenix, Arizona
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Unicume-Scottsdale Partnership
Grantee (Buyer) TMT Pinnacle Apartments, Inc.
Recorded Document 025879
Sale Price $15,350,000
Occupancy 97%
Sale Price per Unit $61,895
Sale Price per SF $61.61
Capitalization Rate 8.70%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,134,200
Vacancy/Collection Loss 3% $ (64,026)
Other Income: $ (59,520)
Effective Gross Income $2,129,694
Expenses $ (793,600)
Net Operating Income $1,336,094
PROPERTY DESCRIPTION
Year Built 1992
Number of Stories 2
Number of Buildings 16
Number of Units 248
Number of Bedrooms 420
Net Rentable Area 249,150 SF
Average Unit Size 1,004 SF
Land Area 14.83 Acres
Unit Density 16.7 Units per Acre
Property Condition Excellent
Parking (type) Open (153) Covered (248) including RV Parking (31
covered and 24 open) Total (401)
Construction Type Wood frame, stucco exterior, concrete slab
foundation, composition shingle roof
Unit Amenities 2 swimming pools, 2 spas, laundry, clubhouse,
racquetball, tennis, volleyball
Project Amenities Swimming pool, clubhouse, spa, tennis court,
racquetball court, basketball court
Confirmed With COMPS and Ralph J. Brekan & Company, Inc.
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments An EGIM of 7.21 was calculated based on reported
income at time of sale. Expenses reported at
$3,200/unit result in expense ratio of 37.26%.
<PAGE>
SONTERRA
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name Sonterra
Address 17440 North Tatum Boulevard
City/ State Phoenix, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Specified Properties VII-PX, LB
Grantee (Buyer) Knickerbocker Properties, Inc. XIX
Recorded Document NA
Sale Price $17,400,000
Occupancy 90%
Sale Price per Unit $63,504
Sale Price per SF $67.47
Capitalization Rate 8.63%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,568,984
Vacancy/Collection Loss 3% $ (256,898)
Other Income: $ (65,760)
Effective Gross Income $2,377,846
Expenses $ (876,800)
Net Operating Income $1,501,046
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Buildings 12
Number of Units 274
Number of Bedrooms 486
Net Rentable Area 257,890 SF
Average Unit Size 941 SF
Land Area 10.44 Acres
Unit Density 26.2 Units per Acre
Property Condition Good
Parking (type) Open, attached and detached garages
Construction Type Stucco exterior with Spanish tile roof
Unit Amenities Fireplace, washer/dryer hook-up, microwave
Project Amenities Fitness center, clubhouse, business center, and
pool
Confirmed With Ralph J. Brekan & Company, Inc.
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments: Information concerning income and expenses were
said to be confidential and was not disclosed.
However, the confirming party stated that the
project was operating at income and expense
levels typical of the market. Gross scheduled
income was derived from rents at the time of
sale. Ancillary income of $240 per unit annually
was estimated by the appraiser. Market expenses
were estimated at $3,200 per unit (including
reserves).
<PAGE>
THE PALISADES
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-080/97-081
Project Name The Palisades
Address 13440 North 44/th/ Street
City/State Phoenix, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) State of California Public Employee's Retirement
System (CALPERS)
Grantee (Buyer) Palisades Acquisition
Recorded Document NA
Sale Price $33,600,000
Occupancy 95%
Sale Price per Unit $62,686
Sale Price per SF $67.67
Capitalization Rate 8.4%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $4,975,363
Vacancy/Collection Loss 5% $(248,768)
Other Income $ 128,640
Effective Gross Income $4,855,240
Operating Expenses $2,032,840
Net Operating Income $2,822,400
PROPERTY DESCRIPTION
Year Built 1990
Number of Stories 2
Number of Buildings 35
Number of Units 536
Number of Bedrooms 924
Net Rentable Area 496,550 SF
Average Unit Size 926 SF
Land Area 21.95 Acres
Unit Density 24.4 Units per Acre
Property Condition Good
Parking (type) Open and covered
Construction Type Stucco with Spanish tile roof
Unit Amenities Washer/dryer, fireplace, microwave, patio/balcony
Project Amenities 3 swimming pools, fitness center, tennis courts,
volleyball court, and 2 spas
Confirmed With Ralph J. Brekan & Company, Inc.
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty Advisors,
Inc.
Comments Gross scheduled income was derived from rents at time
of sale. Ancillary income of $240 per unit annually was
estimated by the appraiser. Expenses were $3,793 per
unit.
<PAGE>
SUNSCAPE
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number 97-080
Name of Project: Sunscape
Street Address: 3500 North Hayden Road
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1978
Number of Stories: 2
Number of Units: 442
Net Rentable Area (SF): 395,200
Average Unit Size (SF): 894
Parking Surface: Asphalt
Type of Construction: Painted masonry exterior with flat built-up roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTH
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------------------
<S> <C> <C> <C> <C>
108 1BR/1BA 700 $600-650 $0.86-0.93
108 1BR/1BA/LOFT 880 715-765 0.81-0.87
36 2BR/1BA 960 720-745 0.75-0.78
190 2BR/2BA 1,000 715-765 0.72-0.77
</TABLE>
Consessions: 1BR/1Baa/
Unit Amenities: Dishwashers, garbage disposals, fireplaces in
some units, patio/balconies
Project Amenities: 2 swimming pools, jacuzzi, exercise/weight room,
club room, laundry facility
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.80
Electricity Paid By: Tenant
Length of Lease: 6, 9 and 12 months
Security Deposit: $160 security plus $125 redecorating equals a
total of $285
Confirmed With: On-site agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: No current concessions. Some concessions during
the spring and summer depending on the
competition. Rental rate vary depending on
location.
<PAGE>
MCDONALD EAST
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Job Number: 97-080
Name of Project: McDonald East
Street Address: 8310 East McDonald Drive
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1978
Number of Stories: 2
Number of Units: 144
Net Rentable Area (SF): 126,720
Average Unit Size (SF): 880
Parking Surface: Asphalt
Type of Construction: Painted masonry with flat built-up roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------
<S> <C> <C> <C> <C>
72 lBR/1BA 747 $545-565 $0.73-0.76
72 2BR/2BA 1,013 $645-665 $0.64-0.66
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, walk-in
closets, outdoor utility closets,
patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, sauna,
exercise/weight room, club room, laundry
facility, covered parking
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of NRA: $0.69
Electricity Paid By: Tenant
Length of Lease: 12 months
Security Deposit: $100 security plus $150 redecorating fee =
$250 total
Confirmed With: On-site Agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Rent ranges based on location.
<PAGE>
MIRAMONTE
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-080
Name of Project: Miramonte
Street Address: 8025 East Lincoln Drive
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Stories: 2
Number of Units: 151
Net Rentable Area (SF): 118,568
Average Unit Size (SF): 785
Parking Surface: Asphalt
Type of Construction: Stucco with Spanish tile roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------------------
<S> <C> <C> <C> <C>
1 1BR/1BA 550 $575 $1.05
6 lBR/1BA 560 620 1.11
82 1BR/1BA 679 635-645 0.94-0.95
26 2BR/2BA 924 740-755 0.80-0.82
36 2BR/2BA 971 760-780 0.78-0.80
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals, microwave
oven, washer/dryers, fireplaces in some
units, ceiling fans, patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, club room, laundry
facility, covered parking, exercise room
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.88
Electricity Paid By: Tenant
Length of Lease: 6, 9, or 12 months
Security Deposit: 1-bedroom - $175 security deposit and $175
redecorating fee = $350 total
2-bedroom - $200 security deposit and $200
redecorating fee = $400 total
Confirmed With: On-site agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Rent differences for some floor plans-based
on location or fireplace
<PAGE>
MCCORMICK PLACE
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[PICTURES APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
JOB NUMBER: 97-080
Name of Project: McCormick Place
Street Address: 8250 East Via Paseo Del Norte
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1975
Number of Stories: 2
Number of Units: 230
Net Rentable Area (SF): 188,305
Average Unit Size (SF): 819
Parking Surface: Asphalt
Type of Construction: Stucco with Spanish tile and built up roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------------------
<S> <C> <C> <C> <C>
43 1BR/1BA 500 $550-$575 $l.l0-$l.15
74 lBR/1BA 720 620-700 0.86-0.97
18 1BR/1BA 850 750 0.88
10 lBR/lBA 875 775-800 0.89-0.91
2 2BR/2BA 955 795-800 0.83-0.84
83 2BR/2BA 1,055 795-925 0.75-0.88
</TABLE>
Concessions: First month free
Unit Amenities: Dishwashers, garbage disposals, storage,
microwave oven, patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, club room, exercise
room, sauna, jogging trail, putting green
ECONOMIC DATA
Percent Occupied: 97%
Avg. Monthly Rent/SF of NRA: $0.88
Electricity Paid By: Tenant
Length of Lease: 9 months plus
Security Deposit: NA
Confirmed With: On-site agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Rent differences for some floor plans based
on patio.
<PAGE>
SCOTTSDALE SERRENTO
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
JOB NUMBER: 97-080
Name of Project: Scottsdale Serrento
Street Address: 8145 East Camelback
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1978
Number of Stories: 2
Number of Units: 188
Net Rentable Area (SF): 148,374
Average Unit Size (SF): 795
Parking Surface: Asphalt
Type of Construction: Stucco exterior with shingle and built
up roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------------
<S> <C> <C> <C> <C>
35 1BR/1BA 479 $555 $1.16
69 1BR/1BA 727 620 0.85
54 2BR/1BA 919 699 0.76
30 2BR/2BA 1,094 825 0.75
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals,
patio/balconies
Project Amenities: 1 swimming pool, spa, clubhouse
ECONOMIC DATA
Percent Occupied: 98%
Avg. Monthly Rent/SF of NRA: $0.84
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: 1BR - $150 security plus $150
redecorating fee for $300 total
2BR - $175 security plus $175
redecorating fee for $350 total
Confirmed With: On-site agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach
Realty Advisors, Inc.
<PAGE>
THE CAMELLERO
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-080
Name of Project: The Camellero
Street Address: 7979 E. Camelback Road
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1979
Number of Stories: 2
Number of Units: 344
Net Rentable Area (SF): 311,526
Average Unit Size (SF): 906
Parking Surface: Asphalt
Type of Construction: Stucco exterior with flat built up roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
----------------------------------------------------------
<S> <C> <C> <C> <C>
88 lBR/1BA 501 $615-620 $1.23-1.24
6 1BR/1BA 772 725 0.94
74 1BR/1BA 871 750 0.86
176 2BR/2BA 1,127 840-880 0.75-0.78
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals,
patio/balconies, storage, some
washer/dryer
Project Amenities: 1 swimming pool, spa, clubhouse
ECONOMIC DATA
Percent Occupied: 96%
Avg. Monthly Rent/SF of NRA: $0.85
Electricity Paid By: Tenant
Length of Lease: 1O to 12 months
Security Deposit: $150 security plus $150 redecorating fee
for $300 total
Confirmed With: On-site agent/Real Data, Inc.
Date Confirmed: December, 1997, Stevan N. Bach, Bach
Realty Advisors, Inc.
Remarks: Rent ranges based on location.
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991-May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985-1991)
President
Bach & Associates, Inc. (1980-1984)
President
Landauer Associates, Inc. (1980-1984)
Senior Vice-President and General Manager-Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973-1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971-1973)
Appraiser. Real Estate research valuation on urban and
rural properties.
Ray R. Hastings, MAI (1964-1971)
Appraiser. Real Estate research valuation on urban and
rural properties.
Residential Real Estate Sales (1963-1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
MEMBER: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of the
Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987-1992)
Appraisal Institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
LICENSES: Real Estate Broker, State of Texas
CERTIFICATION: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who
meet the minimum standards of this program are awarded
periodic education certification).
Certified General Real Estate Property appraiser in the
State of Texas, Certification No. TX-1323079-G Certified
General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
