<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 2, L.P.
(NAME OF THE ISSUER)
ConAm Realty Investors 2, L.P. Continental American Properties, Ltd.
ConAm Property Services II, Ltd. ConAm DOC Affiliates LLC
(NAME OF PERSONS FILING STATEMENT)
Units of Limited Partnership Interest
(TITLE OF CLASS OF SECURITIES)
44849P206
(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
================================================================================
$17,084,130 $3,417
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: $3,417 Filing party: ConAm Realty Investors 2, 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 2, 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 four properties (the "Properties") of ConAm
Realty Investors 2, 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 II, 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 II, 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."
- --------------------------------------------------------------------------------
(c) "SPECIAL FACTORS--Reasons for the Sale," "--
Alternatives Considered to the Sale," "--Fairness
of the Sale."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
(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."
- --------------------------------------------------------------------------------
(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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
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 $81.
- --------------------------------------------------------------------------------
(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 2, L.P.
By: CONAM PROPERTY SERVICES II, 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 II, 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
================================================================================
A COMPLETE, SELF-CONTAINED APPRAISAL
OF
THE CREEKSIDE OAKS APARTMENTS
9780 CREEKFRONT ROAD
JACKSONVILLE, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS 2
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: 97-075
================================================================================
<PAGE>
B.A.C.H
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 21, 1998
Hutton/Con Am Realty Investors 2
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of the 120-Unit Multifamily Complex
Known as the Creekside Oaks Apartments Located at 9780 Creekfront Road in
Jacksonville, Florida; BRA: 97-075
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 Jacksonville 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
FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000)
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
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 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 all 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 my 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, 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.
10. That all physical and economic conditions are the same
on the date of value as they were on the date of
inspection.
4
<PAGE>
11. 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 $5,500,000.
/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: The Creekside Oaks Apartments
9780 Creekfront Road
Jacksonville, Florida
Location: West end cul de sac of Creekfront Road west of
Southside Boulevard in Jacksonville, Florida
BRA: 97-075
Legal Description: A 17.71-acre tract known as Parcels 1 and 2,
Section 24, Township 3 South, Range 27 East, Duval
County, Florida
Land Size: 17.71 acres or 771,447 square feet
Building Area: 142,792 square feet of net rentable space plus
two, 1,200-square-foot leasing office/clubhouses
Year Built: 1984
Unit Mix: 32 1BR/1BA at 868 square feet
48 2BR/BA/FLAT at 1,196 square feet
32 2BR/2BA/TH at 1,430 square feet
8 3BR/2BA/TH at 1,481 square feet
No. of Units: 120
Average Unit Size: 1,190 square feet
Occupancy
Physical: 96.7 percent
Economic: 89.5 percent
Highest and Best Use
As Vacant: Apartment development
As Improved: Current use (as apartments)
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $5,600,000
"As Is" Market Value by
Income Approach: $5,500,000
"As Is" Market Value
Conclusion: $5,500,000
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 of this appraisal report is the Creekside Oaks
Apartments located at 9780 Creekfront Road in Jacksonville,
Florida.
DATE OF THE
APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as 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."
Leased Fee Estate - An ownership interest held by a
landlord with the rights of use and occupancy conveyed by
lease to others. The rights of the lessor (the leased fee
owner) and the leased fee are specified by contract terms
contained within the lease./1/
________________________________
/1/The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
7
<PAGE>
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the function
of this appraisal is for annual partnership and/or internal
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 No transfers of ownership to the subject were discovered
during the past three years upon interviews with real
estate brokers in the area and research into the
grantor/grantee deed records of Duval County, Florida.
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 used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily
reflect value. Moreover, estimates of depreciation are
difficult to accurately measure in the marketplace, thereby
compounding the speculative nature of the opinions derived
in the cost method of valuation.
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.
8
<PAGE>
AREA MAP APPEARS HERE
---------------------
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
Jacksonville is the seat of Duval County and is situated
near the northeastern corner of Florida on the St. Johns
River. This location is approximately 150 miles north of
Orlando, 165 miles east of Tallahassee, and 15 miles west
of the Atlantic Ocean.
The city of Jacksonville was consolidated with Duval County
in the 1960s and has since been recognized as one of the
largest incorporated municipalities in the nation in terms
of land area with 841 square miles. In population,
Jacksonville is one of the 20 largest cities in the United
States and the most populous incorporated city in Florida.
In 1990 the U.S. Bureau of the Census estimated the city's
population at 648,200 persons. In 1995 this estimate
increased to 676,718. The Jacksonville Metropolitan
Statistical Area (MSA) includes Duval, Clay, St. Johns, and
Nassau Counties. The 1990 MSA population was estimated at
906,727 according to the Census bureau, which indicates
that the MSA is the fifth largest MSA in Florida after
Tampa-St. Petersburg-Clearwater, Miami-Hialeah, Fort
Lauderdale-Hollywood-Pompano Beach, and Orlando. As of
January 1, 1997 the Jacksonville MSA stood at 1,025,600 or
13.1 percent higher than the 1990 population. The following
chart depicts the Jacksonville MSA population and
employment growth over the past two decades.
<TABLE>
<CAPTION>
1970 1980 1990 1994 1995 2005*
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Population 612,600 722,300 906,727 981,600 994,900 1,140,700
Employment 159,400 281,800 422,700 437,474 460,245 625,690
</TABLE>
Source: U.S. Bureau of the Census, Florida Department of
Labor and Employment Security *Projection
Historical population growth for the Jacksonville MSA from
1980 to 1990 averaged 2.3 percent per year. The growth has
decreased slightly to 1.7 percent annually from 1990 to
1995. Population increases are anticipated to continue as
job growth rises and as stated above the population
estimated as of January 1, 1997 was 1,025,600. The Bureau
of Business & Economic Research at the University of
Florida projects the Jacksonville MSA population to be
between 967,000 and 1,178,000 by the year 2000. The median
projection for this time period is a population of
1,063,700. The greatest population growth has recently
occurred to the south and east of the St. Johns River in
Duval County. Other notable growth has been observed in
northeastern Clay County near Orange Park, and in northern
St. Johns County particularly along the Atlantic Coast
beaches.
The median age of the population in the Jacksonville MSA is
lower than that found in the retirement havens of southern
Florida. The median age in this MSA is 34 years according
to the Census Bureau. This compares to about 36 years in
Miami, 39 years in Fort Lauderdale, and 40 years in Tampa.
The medium age in the city of Jacksonville is slightly less
(33.3 years) than for the MSA.
9
<PAGE>
Jacksonville was originally known as Florida's industrial
city due to its port, shipyards, paper mills, and food
processing plants. More recently, however, Jacksonville has
become known as a regional center for banking, insurance,
medicine and distribution. The Research Department of the
Jacksonville Chamber of Commerce reported that the six
largest private sector employers in the area were: Winn-
Dixie Grocery Company, AT&T, Publix Super Market, Blue
Cross/Blue Shield of Florida, Barnett Banks, and CSX
Transportation. Two of Florida's largest banks, Barnett
Bank and First Union, are officed in Jacksonville, along
with 30 insurance companies. Jacksonville is also
becoming a major back-office hub, as large corporations set
up customer service centers and data processing operations
in the area, including Merrill Lynch & Company, AT&T
Corporation, and America Online, Inc. in the past few
years. In addition, the world-renowned Mayo Clinic has one
of its two regional medical centers located in southeastern
Jacksonville. The recent additions in these medical and
service-related industries have contributed to a more
diverse economy in the area, and have helped civic leaders'
attempts to transform the city's image from that of an
industrial town to a regional distribution, service, and
financial center.
The largest contributor to the Jacksonville employment
market is its three naval installations which include:
Cecil Field Naval Air Station, located in the southwest
sector of Duval County; Jacksonville Naval Air Station,
located on the west bank of the St. Johns River a few miles
south of the Central Business District (CBD), and the
Mayport Naval Training Center, situated at the mouth of the
St. Johns River near the Atlantic Ocean. These military
establishments in Jacksonville employ approximately 31,200
civilian and military personnel. More recently, Cecil Field
has been placed on the government's list of possible
closures due to budget cutting measures. It is due to be
closed in August 1999, which should result in the loss of
approximately 7,500 military and civilian jobs.
Jacksonville created the Cecil Field Development Commission
with the task of developing a reuse plan for Cecil Field.
The commission was dissolved in May 1997 as it had
completed its task and transferred duties and functions to
the Jacksonville Economic Development Commission.
Infrastructure improvements are being discussed and to date
funding has been secured for three major projects: survey
of the land for city incorporation; three-phased conversion
of the water and sewer systems to the city systems; and a
transportation study (completed). The Naval Air Station is
increasing in size because of the consolidation of units to
the Jacksonville Naval Air Station. The net result in the
closure and consolidation is little change in the present
number of personnel.
Total civilian employment in the Jacksonville MSA as of
April 1996 was 480,100 persons according to the Florida
Department of Labor and Employment Security. The
unemployment rate as of that date was 3.3 percent down from
3.7 percent in February 1996, or lower than the U.S.
Department of Labor's 4.8 percent rate for the state of
Florida as of the same date. The above is the latest
information received from the Jacksonville Chamber of
Commerce.
10
<PAGE>
The breakdown of nonagricultural employment as of November
1995 in the Jacksonville area is presented below and
illustrates the growing diversity of the local employment
base.
<TABLE>
<CAPTION>
NONAGRICULTURAL EMPLOYMENT NUMBER PERCENT
------------------------------------------------------------
<S> <C> <C>
Manufacturing 35,500 7.4
Construction 24,200 5.0
Transportation, Communications, Utilities 32,000 6.7
Trade 117,600 24.5
Finance, Insurance, Real Estate 50,300 10.5
Services & Miscellaneous 152,900 31.8
Government 67,200 14.0
Other 400 0.1
------- -----
Total 480,100 100.0
</TABLE>
Source: Florida Department of Labor and Employment
Security, November 1995.
Note: The 480,100 estimates varies from the earlier
stated estimate of 460,245.
A surge of new jobs in Jacksonville earned the city a spot
as the ninth fastest-growing metro labor market in 1996,
according to the latest figures from the U.S. Bureau of
Labor Statistics between 1993 and 1995, non-farm employment
in Duval, St. Johns, Nassau and Clay Counties jumped 9.6
percent from 438,600 to 480,800. Despite its Florida
location, the tourist/convention industry has a smaller
impact on the Jacksonville MSA economy than in other parts
of the state. Most area beaches and recreation facilities
cater to local residents. The exception would be the Amelia
Island Resort located 20 miles northeast of the city on the
Atlantic Ocean. Amelia Island features world-class golf and
tennis and luxury resort accommodations and is designed to
attract vacationers from around the country. The most
recent addition to this resort was the 450-room Ritz
Carlton Hotel, which opened in June of 1991.
The increase in service-oriented industries in Jacksonville
has resulted in a substantial increase in income for the
area's residents. Per Capita income rose by an average of
approximately 1.4 percent per year from 1986 to 1995.
<TABLE>
<CAPTION>
JACKSONVILLE MSA
YEAR PER CAPITA INCOME
---------------------------
<S> <C>
1986 $14,629
1987 15,482
1988 16,490
1989 14,973
1990 15,695
1995 16,920
</TABLE>
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
According to a demographic profile of Duval County, the
medium household effective buying income was $15,712 as of
January 1, 1997. Additionally there were 278,800 households
with 48 percent owner-occupied. Total Duval County
population was 733,500 with projections of 787,000 by the
year 2005.
11
<PAGE>
Jacksonville is a major distribution center of durable
goods for Florida and Georgia. Transportation facilities
include an international airport, rail service from various
railroad companies, numerous private freight distribution
companies, and bus service. Jacksonville has rail
facilities with multi-modal transportation capabilities.
The Port of Jacksonville, which utilizes the St. Johns
River from the east end of the CBD to the Atlantic Ocean,
is a leading import center for foreign automobiles. This
facility consists of both the Blount Island Marine Terminal
(867 acres) and the Talleyrand Docks and Terminals (173
acres) and features a 38-foot-deep channel. The
Jacksonville Port Authority has acquired 589 acres of
property on Dames Point for its third terminal development,
which is the result of demand from new ship lines. A
$300,000,000 project to deepen the harbor from 38 to 42
feet has been proposed. The international airport, operated
by the Jacksonville Port Authority, has undergone $100
million of improvements, which added two new terminals,
twelve new gates, and extended a runway to accommodate
larger planes for transcontinental flights.
Two major Interstate Highways, Interstate 10 and Interstate
95, intersect near downtown Jacksonville. Interstate 10
travels west from the city to the Gulf Coast communities in
the Southeastern U.S., then continues west through the
Southwestern U.S. to Los Angeles. Interstate 95 runs
north/south along the Eastern Seaboard of the U.S.
Interstate 295 provides a bypass around the major urbanized
areas of the city to the northeast, northwest, west, and
south. Completion of the eastern section of Interstate 295,
which would create a beltway around the city, has been
proposed with limited access approach roads expected to be
in place by 2000. Many of the express roads and highways in
Jacksonville formerly were toll roads; however, the toll
charges were removed in the mid-1980s.
The unified city/county government in Jacksonville and
Duval County has been a unique feature of the area since
the 1960s. A singular taxing authority collects for
schools and municipal services for all residents. Excepted
from Jacksonville city authority are the communities of
Atlantic Beach, Neptune Beach, and Jacksonville Beach,
which are separate incorporated municipalities within Duval
County.
Twenty miles of beaches along the Atlantic Ocean provide a
wealth of recreational opportunities for area residents.
The wide St. Johns River south of the CBD is popular with
local pleasure craft. The average annual temperature in
Jacksonville is 71 degrees with annual rainfall averaging
55 inches. Residents' needs for higher education in the
area are served by several local colleges and universities
such as Jacksonville University, the University of North
Florida, and Florida Community College. Jacksonville is the
headquarters for both the Professional Golf Association and
Association of Tennis Professionals tours. It is also the
home of the newest member of the expanded National Football
League, the Jacksonville Jaguars. The team plays in the
City's Gator Bowl Stadium, which seats 82,000 after
renovation. The area boasts six museums, an active arts
association, and one major daily newspaper. In addition,
St. Augustine in neighboring St. Johns County to the south
is the oldest city in
12
<PAGE>
North America, and features numerous historic buildings and
landmarks including the Castillo de San Marcos National
Monument.
The diversification of the economy has affected development
in the Jacksonville area over the past several years.
According to Reynolds, Smith and Hills, Inc. (RS&H), a
local real estate research and development company, the
total inventory of office space in the area in 1990 was
12,436,000 square feet. There has been about 1,040,000
square feet of office construction since 1990. Over 5
million square feet of office space has been constructed
since 1987, with half in the suburban markets. Most
suburban development was intended for single-tenant usage
by companies such as Barnett Bank, American Express, CSX,
and Blue Cross/Blue Shield. Of these, Barnett Bank
developed an 820,000-square-foot nonbanking headquarters
facility in a campus-style environment near the
intersection of Southside Boulevard and U.S. 1 in
southeastern Jacksonville.
As of August 1997, the Central Business District (CBD)
consisted of 57 buildings with a total of 6,298,533 square
feet and a total for Jacksonville of more than 130
buildings with over 13,000,000 square feet, the majority of
which are in the Southside (Butler) area at 84 for
5,199,037 square feet. As of August 1997, office
announcements indicated eight projects to contain about
876,000 square feet and provide over 3,480 jobs.
Additionally seven other projects are to be announced that
total over 1.6 million square feet. Companies involved in
the announced projects are Atlantic Teleservices, Barnett
Banks, Purdential Health Care, Chase Manhatten Corporation,
Koger Equity, Gran Central Corporation, and Hallmark
Partners.
The office market in Jacksonville is active and reports by
submarket in the August 15, 1987 issue of Commercial Real
Estate indicate a tightening and strong market with new
construction justified. Vacancy is now in single digits
city-wide and all submarkets have lower vacancy than one
year ago except for one submarket. Rents city-wide have
increased $1.50 to $3.00 per square foot from 1996 levels
and proposed projects are expected to obtain rents in
excess of $20 per square foot.
The increasing household income in Jacksonville has
attracted a substantial amount of retail development in
recent years. Most of this development has occurred in
suburban markets on the south side and in the beach
communities. In September 1990, The Avenues Mall was
completed offering over 1.4 million square feet of retail
space at Southside Boulevard and U.S. Highway 1. Food Lion,
a North Carolina-based grocery chain, constructed 17 strip
centers throughout the Jacksonville area during 1988 and
1989. Beach area redevelopment featured the opening of two
regional centers known as Sandcastle Plaza and South Beach
Center, and several large "power" centers were constructed
near two of the regional malls in the area.
As of December 31, 1996 the Jacksonville MSA showed total
retail sales at $ 10.155 million, up 30.5 percent since
year end 1991. Duval County, which encompasses
Jacksonville, had retail sales of 7.644 million or an
increase of 26.3 percent since 1991. Based on information
from the ULI Market Profiles: 1996
-------------------------
13
<PAGE>
(NEIGHBORHOOD MAP APPEARS HERE]
------------------------------
<PAGE>
rents for retail space have stabilized since 1987 ranging
from $30.00 to $50.00 per square foot per year for enclosed
mall space. Typical rent levels for smaller centers
experienced a slight increase to a range between $9.00 and
$14.00 per square foot. Rental rates for older strip
centers range from $4.00 to $8.00 per square foot.
Retail development is projected to be stable until vacant
space within the market is reasonably absorbed. Residential
growth in the northern and middle St. Johns County areas,
southside-Intracoastal west, and the Avenue-U.S. Highway 1-
Southside Boulevard areas of the city is expected to
produce retail activity in these markets. Residential, both
single and multi-family remains active in development. The
October 31, 1997 edition of Homefront identifies over 320
single family developments that are active today.
The industrial real estate sector has not experienced the
significant vacancy problems incurred by the office and
retail markets. This sector is very strong in the
Jacksonville area and is experiencing heavy demand for
build-to-suit space from industry entering the market. New
construction during 1995 totaled over 1.5 million square
feet, a new record high. The major projects in the area
include Sara Lee's Coach subsidiary; NatureForm, Inc.;
Pilot Pen Corporation; Sally Industries; H.J. Heinz
Company's Portion Pac, Inc.; Viking Office Products and a
Georgia Pacific expansion. The majority of new construction
is taking place in the south and west sides of
Jacksonville. As established by the NAIOP report in August
1997, the south side submarket has favorably responded to
the one-year supply of space, however, there remains
300,000 square feet within six buildings that has not been
leased. Activity for this space has been slow. The west
side market continues to grow and is said to be a strong
market. The north side submarket is strong with minimal
vacancy and the Port Authority is expected to spend about
$100 million on airport and seaport capital improvements,
which were to begin October 1997. Industrial parks of
tradeport and Imeson will benefit most from the
expenditures.
The apartment market is discussed in the Apartment Market
Analysis section that follows.
NEIGHBORHOOD
ANALYSIS The subject is located on the southeast side of
Jacksonville approximately 8 aerial miles from downtown.
The neighborhood is generally described as a corridor which
runs north/south along Southside Boulevard between J.
Turner Butler Boulevard (Florida State Road 202) and
Phillips Highway (U.S. Highway 1). The east and west
boundaries of the neighborhood should be considered to be 1
mile on either side of and parallel to Southside Boulevard
to the north of U.S. Highway 1 and south of J. Turner
Butler Boulevard.
Southside Boulevard is a four-laned divided thoroughfare
crossing the city's south and east sides northward from
Phillips Highway at its southern end. Through the subject
neighborhood, this street has an access road parallel to
its west side providing entry to commercial and residential
properties on that side of
14
<PAGE>
the street. Major cross streets to Southside Boulevard in
this neighborhood include J. Turner Butler Boulevard at the
north, Baymeadows Road near the center of the neighborhood,
and Phillips Highway at the south end. Each of these three
streets is a four-laned roadway and each connects Southside
Boulevard traffic to Interstate Highway 95 (I-95) to the
west. Southbound traffic on Southside Boulevard is provided
access to southbound I-95 south of Belle Rive Boulevard,
while northbound traffic on this interstate is allowed
access onto northbound lanes of Southside Boulevard at this
same point.
The popularity of this neighborhood to residential and
commercial/retail users can be directly attributed to its
easy access to major employment centers. I-95 to the west
provides good access from the neighborhood to the CBD. In
addition, several major suburban office and industrial
parks are located either within the neighborhood boundaries
or within a short distance. Barnett Bank has its nonretail
banking headquarters in a campus-style facility within the
neighborhood on the west side of Southside Boulevard just
south of the I-95 exits. Merrill Lynch has built a regional
support facility at the opposite end of the neighborhood at
the southeast corner of Southside Boulevard and J. Turner
Butler Boulevard. The Southpoint Office Park, a major
suburban office location, is situated just 1 mile northwest
of this neighborhood at the intersection of I-95 and J.
Turner Butler, and the Deerwood Industrial Park is 1 mile
west at I-95 and Baymeadows Road.
In the retail sector, several neighborhood shopping centers
are noted along either side of Baymeadows Road between I-95
and Southside Boulevard, and also to the east of Southside
Boulevard at Baymeadows Road. The Grande Boulevard center,
mentioned in the city analysis above, is situated in this
neighborhood at the northwest corner of Baymeadows Road and
Southside Boulevard. The most significant new addition in
the retail sector of the neighborhood has been The Avenues
regional shopping mall, situated at the south end of this
neighborhood at the northwest corner of Southside Boulevard
and Phillips Highway and also bound by I-95. This regional
center has over 1.4 million square feet of enclosed retail
space and is anchored by several national retail chain
stores. The Avenues Mall has attracted the development of a
308,000 square foot community "power" center called
Southside Square across the street on Southside Boulevard;
this new shopping center features both Mervyn's and Target.
A Home Depot has been recently constructed to the north of
Southside Square, while a 10-acre development just south of
The Avenues along Phillips Highway has also been completed
anchored by two fast-food restaurants, a third full-service
restaurant, and a Toys `R' Us store.
All of this commercial development is supported by the
growth in the residential sector of Jacksonville's
southeast side over the past decade. The subject
neighborhood illustrates this trend with over fifteen
apartment and condominium developments developed in the
subject neighborhood since 1980. Surveys from over half of
the on-site leasing agents in the area typically report
physical occupancy rates at these properties at/or over 92
percent. Two golf course
15
<PAGE>
communities, Baymeadows and Deerwood, feature single-family
homes typically priced from $150,000 and catering to upper-
middle-income home buyers.
Despite the growth in the area, about one-third of the land
in the neighborhood lies vacant and ready for development.
To the south and east of this neighborhood are typically
vacant areas; to the north and west lie a mixture of
properties from office, retail and industrial properties
along Phillips Highway and I-95, to older single and
multifamily residential subdivisions. The Duval District
provides bus service to children in the neighborhood
attending public schools, and the University of North
Florida is located about 2 miles northeast of this
neighborhood at J. Turner Butler Boulevard and St. Johns
Bluff Road. St. Luke's Hospital is about 1 mile northwest
of the neighborhood in the Southpoint Office Park. Police
and fire protection is provided by the city of
Jacksonville.
The neighborhood's easy access to all of the supporting
facilities mentioned above has made the Southside Boulevard
corridor one of the most attractive areas in Jacksonville.
Physical occupancy rates in many multifamily developments
in this area are above 90 percent. Only one new apartment
project was permitted in the neighborhood in 1991, that
being two additional phases to the Park Avenues project.
There were no new apartment projects permitted in 1992 or
1993. This compares to 593 units permitted as of the end of
the Second Quarter 1995. No new retail centers are planned
as developers concentrate on leasing of new existing space
along Southside Boulevard. As the neighborhood becomes more
built out, it will likely experience a period of stability
as it matures in the long term compared to the period of
rapid development this neighborhood enjoyed throughout most
of the 1980s.
CONCLUSION Jacksonville, with a January 1997 U.S. Census Bureau
population of 1,025,600 in its MSA, was known in the past
as a military and industrial port city at the northeastern
end of Florida. However, the employment base has grown and
diversified over the past two decades as major banks,
insurance companies and medical service industries have
opened regional or headquarter offices in the area. This
activity has increased the income of area residents and
spurred significant job growth through much of the 1980s.
Although Jacksonville is not noted as a major tourist
center compared to southern areas of Florida, the area has
attractive beaches and a redeveloped downtown riverfront
area to serve the local population.
The diversification of the employment base ignited office
development both downtown and in the south side suburbs
during the past ten years. Numerous large retail centers
have been built in recent years to support the growing
Jacksonville area population and income. Major private
employers include Barnett Bank, Blue Cross/Blue Shield of
Florida, and CSX Transportation. Nonetheless, the city's
naval presence, with over 30,000 personnel, still dominates
employment in the area.
16
<PAGE>
While new industries and employers such as America Online
and AT&T have continued to enter the local employment
market with new back-office operation centers, the
appraisers anticipate less office development as the focus
in the marketplace switches to absorption and renovation of
existing vacant space. Bright spots in the Jacksonville
real estate market include improving occupancy rates in the
apartment market and a relatively low industrial space
vacancy rate compared to other industrial markets
nationwide.
The city of Jacksonville appears to be enjoying a favorable
economic climate. Construction permits and absorption of
space in some sectors such as single-family residential
have increased, while unemployment figures remain low.
Although the closing of the Cecil Field Naval Air Station
is not favorable, many of the lost jobs could potentially
be offset by additions to the area's other two Naval bases
and to the reuse plan of Cecil Field. The city's
diversifying economic base, good supporting facilities,
Florida sunbelt location, and good quality of life should
support growth and absorption in all sectors.
17
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
Information from two surveys was utilized in the analysis
of the Jacksonville apartment market analysis. The first is
the Apartment Market Survey for Greater Jacksonville,
Florida, Second Quarter, 1996 prepared by the Jacksonville
Planning and Development Department and the Northeast
Florida Apartment Council. The second is the Jacksonville
Apartment Market Survey, Third Quarter 1997, published by
Vestcor Realty Management, Inc. Most references are made to
the survey prepared by the Vestcor Realty Management, Inc.
as the FIRST SURVEY WAS NOT MADE IN 1997 BY THE PLANNING
DEPARTMENT AND NORTHEAST FLORIDA APARTMENT COUNCIL.
Construction of apartment projects in Jacksonville during
the late 1980s continued but at lower levels each year
from 1985 through 1989. The credit restrictions by lenders
and their regulators following the savings and loan
scandals in the mid-1980s contributed to make construction
funds scarce for apartment developers nationwide. The chart
below illustrates the units constructed per year in
Jacksonville since 1985.
YEAR TOTAL UNITS PERMITTED
-------------------------------
1985 5,079
1986 4,521
1987 2,656
1988 1,949
1989 1,407
1990 1,707
1991 1,170
1992 0
1993 278
1994 912
1995 1,073
1996 3,284
1997 978
Source: Jacksonville Planning and Development Department
In 1996 3,284 units were permitted for five or more
dwelling units. In 1997 there were 978 units permitted. The
outlook for future development of apartment projects in the
Jacksonville area appears to be good as occupancies are in
the 90 percent to 95 percent range and the economy remains
healthy. Construction was visible to the appraiser in the
south part of Jacksonville.
According to the Jacksonville Planning Department, the
current number of apartment units existing in the
metropolitan area is approximately 54,000. The Planning
Department conducts a survey of the city and area apartment
market. This survey is done by mail to the owners and/or
managers of apartment complexes in Duval County as well as
in northern Clay and St. Johns Counties, and the results of
the survey are published every quarter year in the
department's Apartment Market Survey. The Second Quarter of
-----------------------
this survey, which is stated to reflect the area apartment
market as of the end of June 1996, is the most recent
18
<PAGE>
available; this survey is compiled based on the responses
of owners and/or managers of 27 percent of the total
existing apartment units in the area. Of the 27 percent or
14,575 units, there was a physical occupancy rate of 95.58
percent with one bedroom apartments with the highest rate
at 96.23 percent and efficiencies with the lowest average
occupancy rate this quarter at 92.25 percent. The physical
occupancy rates and average monthly rents as of the Second
Quarter 1996 are generally higher among those properties,
which were built since 1990. The Third Quarter 1997 market
survey by Vestcor Realty Management, Inc. reflects the
following statistics for average occupancy.
3rd Qtr 3rd Qtr CHANGE
CATEGORY 1997 1996 IN 1 YEAR
---------------------------------------------------------
All units 92.8% 92.2% 0.6%
Built before 1979 92.1% 89.2% 2.9%
Built 1980--1989 94.0% 95.6% (1.6%)
Built 1990--1997 90.1% 92.2% (2.1%)
This survey indicates a slight increase in occupancy for
all units from one year ago with pre-1979 constructed units
receiving 2.9 percent positive occupancy while post 1980
and post 1990 construction showed 1.6 to 2.1 percent
decreases in occupancy. The major reason for the decrease
appears to be home-buying alternatives.
The Vestcor apartment market survey includes every
apartment community with more than 100 units. They compared
the information received from on-site personnel to their
electric meter analysis. Properties undergoing renovation
or in lease-up were removed from the database. If occupancy
data on properties was not consistent with the electric
meter analysis, these properties were also removed. The
result was a review of 186 apartment complexes containing
41,572 units or nearly 70 to 75 percent of the units in the
Jacksonville area by a 1996 count.
Average monthly rental rates per unit were obtained by
Vestcor and are delineated below by year of construction.
3rd QTR 3rd QTR CHANGE
CATEGORY 1997 1996 IN 1 YEAR
-----------------------------------------------------
All units $ 568 $ 565 +3--0.5%
Built before 1979 $ 509 $ 504 +5--1.0%
Built 1980--1989 $ 605 $ 596 +9--1.5%
Built 1990-- 1997t $ 809 $ 791 +18--2.3%
The Vestcor survey for the First Quarter 1996 reported an
average monthly rental rate per unit for the Jacksonville
area of $540. This compared to $565 per unit during the
Third Quarter 1996 indicates an increase in rental rates
during the 6 months from the Vestcor survey is 4.6 percent.
The survey indicates a slight monthly rental rate increase
for all apartment units surveyed, but increases of 1
percent to 2.3 percent for various construction dated
classified units. It is important to note that the
increases in categories by year built tend to counter the
findings of rental increases for all units and indicate
that
19
<PAGE>
the increase for all units should be between 1 percent to
2.3 percent or on average about 1.65 percent. Secondly, the
2nd Quarter 1997 average monthly rental for all units was
$574, which would indicate a $6.00 reduction to the 3rd
Quarter 1997 average monthly rent of $568..
Overall, the Jacksonville apartment market appears to be
healthy. Construction permits recorded for 1992 and 1993
were at their lowest levels in years, or from a high of
5,079 units in 1985 to 0 units permitted for 1992 and 278
in 1993. For 1994 and 1995, there were 912 and 1,073 units
permitted, respectively. In 1996, there were 3,284 units
permitted, while in 1997 there were 978 units permitted.
Physical occupancy as of the Third Quarter 1997 was at 92.8
percent, which is a drop from 1996, but reflects the new
construction. Absorption rates in new apartment projects
have remained healthy over the past two years. Vacancies of
the various apartment markets range from 3 to 7 percent.
The appraisers project that the citywide market should
reach a stabilized occupancy of 95 percent between one and
two years at this rate of growth.
SUBMARKET ANALYSIS The subject property is located in the Southside and
Southside Boulevard submarkets as defined in the Third
Quarter 1996 Apartment Market Survey by Vestcor. They are
identified on the map on a previous facing page. The
submarkets are generally within the Jacksonville City
Limits to the south and southeastern City Limit lines.
The average occupancy in the Southside Boulevard and
Southside submarkets for Third Quarter 1997 was 91.0
percent and 93.5 percent respectively. Third Quarter 1996
indicated an occupancy of 96.4 percent for the Southside
Boulevard submarket and thus indicates a decrease of 5.4
percentage points or 5.6 percent. The Southside submarket
had a Third Quarter 1996 occupancy rate of 89.1 percent and
indicates an increase (for one year) to Third Quarter 1997
of 4.4 percentage points or 4.9 percent.
An average occupancy by project age for each of the two
submarkets is shown below.
SOUTHSIDE SOUTHSIDE
CATEGORY BLVD.
-------------------------------------------------
Built before 1979 95.7% 93.3%
Built 1980--1989 91.5% 94.#5
Built 1990--1997 88.0% ---
All Properties 91.0% 93.5%
The lower occupancy in the 1990-1997 built projects
reflects the effect of new construction and in the
Southside submarket no 1990-1997 built units are shown.
Average monthly rent per square foot by project age was
identified in the City's various submarkets. Of the eight
submarkets, Southside Boulevard has the second highest
average monthly rent per square foot at $0.69/SF, second
only to the Beach submarket at $0.71 per square foot.
Southside submarket is sixth at $0.57 per square foot.
Shown below is the average monthly rent per square foot for
the two submarkets and the total city.
20
<PAGE>
SOUTHSIDE TOTAL
CATEGORY BLVD. SOUTHSIDE CITY
-------------------------------------------------
Built Pre-1979 $0.54 $0.53 $0.53
Built 1980-- 1989 $0.71 $0.70 $0.68
Built 1990-- 1997 $0.72 --- ----
All Properties $0.69 $0.57 $0.60
Southside Boulevard and Southside submarkets indicate
reasonably comparable monthly rental rates by period of
construction, however, since Southside does not have post-
1990 construction its overall average monthly rental rate
is greatly affected and is $0.12 per square foot per month
less than Southside Boulevard's average monthly rent.
Although both submarkets influence the subject (it is
within the 1980-1989 construction category), its location
is actually in the Southside Boulevard submarket.
Average apartment rents for the two submarkets in Third
Quarter 1996 were $651 per month for the Southside
Boulevard area and $523 per month for the Southside area.
In the Third Quarter 1997 the average monthly rents were
$660 and $528 respectively or increases of 1.4 percent and
1.0 percent over the year.
The higher physical occupancy and the strong average
monthly rental rates relate to the neighborhood's
increasing popularity and proximity to major Jacksonville
area shopping and employment centers (see preceding
City/Neighborhood Analysis section of this report). In
addition, the slowdown in construction permits in the area
and this submarket, combined with a continuing demand for
units in the area will help increase rental rates.
We have recognized that a significant portion of the
apartment units constructed in the area in recent years
were built in or near the subject's submarket. In the area
apartment market analysis, a chart was presented which
illustrates that the newer apartment properties in the area
tend to command the highest rental rates. New apartment
units are under construction east and northeast of the
subject and in the Ponte Vedra area. Although, these new
units bring competition, they also will reflect higher
rental rates and with prudent management and proper
maintenance, the subject property should compete well for
its share of the market.
The subject's submarket has exhibited a stabilized
occupancy at or above 91 percent, according to the local
apartment survey. The subject property has a current
physical occupancy of 96.7 percent and is considered to be
near or above the stabilized occupancy level. It is
forecasted that the subject will maintain a stabilized
occupancy of 95 percent throughout the 11-year cash flow
period.
According to the Vestcor Apartment Market Survey, only 3.60
percent of the apartment projects surveyed in this
submarket were currently offering rental discounts to
tenants. In the Second Quarter of 1997 apartment projects
offering concessions were 13.1 percent and a year ago in
the Third Quarter of 1996, 13 percent of the projects
surveyed gave concessions. This data is further support for
a strengthening apartment market.
21
<PAGE>
[PLAT MAP APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject site is located at the western end of the
Creekfront Road cul de sec in Jacksonville just west of its
intersection with Southside Boulevard. This location is on
the southeast side of Jacksonville about 8 aerial miles
southeast of the Jacksonville CBD, and is about 1/2 mile
south of the intersection of J. Turner Butler Boulevard and
Southside Boulevard. The site is improved with the
Creekside Oaks Apartments, which have a street address of
9780 Creekfront Road, Jacksonville, Florida.
SIZE AND SHAPE While a survey of the subject site was not available, a
copy of the plat map of the site from the Duval County Tax
Office is provided to the reader on the facing page.
Information provided by the Duval County Tax Assessor's
Office indicates that the site comprises 17.71 acres. The
site has over 474 feet of frontage along the south side and
west dead-end circle of Creekfront Road, and is irregular
in shape. The maximum width of the site exceeds 1,090 feet,
and the maximum depth is more than 1,000 feet.
ACCESS AND The property is easily visible from Creekfront Road due
VISIBILITY to its adequate frontage on this street. Direct access into
the site is provided both south and west from Creekfront
Road west of Southside Boulevard. Creekfront Road is an
asphalt-paved two-laned neighborhood thoroughfare, which
reaches a dead-end circle or cul de sac after running about
1,300 feet west from Southside Boulevard at the entrance to
the subject site. Three apartment complexes, including the
subject, face onto this street.
Indirect access to the property is provided via Southside
Boulevard along the east boundary of the subject. Southside
Boulevard is a four-laned divided roadway with a two-laned
access road along its west side, and is one of the main
north/south thoroughfares in southeastern Jacksonville.
LEGAL DESCRIPTION A full legal description is located in the Addenda of this
report. The subject site is generally described as being a
17.71-acre tract known as Parcels 1 and 2 out of Section
24, Township 3 South, Range 27 East, Duval County, Florida.
ZONING Prior to May 1, 1991, the site was zoned RG-C by the city
of Jacksonville. New zoning designations were put in place
by the city on that date, with the subject's new zoning
designation listed as RMD-E for Residential Medium Density,
E District. Both the current and prior designations provide
for similar development restrictions, namely to promote
multi-family residential uses with a maximum of 20 dwelling
units per acre. The subject improvements currently conform
to the zoning regulations.
UTILITIES All utilities are available to the site. Jacksonville
Suburban, a private utility supplier, provides water and
sewer service to the site; the Jacksonville Electric
Authority supplies electric service. Telephone hookups are
in place from Southern Bell, along with cable television
lines from Continental Cable.
22
<PAGE>
TERRAIN AND The subject site is generally level to curb grade. The
DRAINAGE site contains three retention lakes and drainage appears to
be adequate. A soil survey on the subject site was not
available. While the soil appears generally supportive of a
wide variety of improvements, the appraiser is not an
expert in soil content and was unable to certify this
assumption. According to the National Flood Insurance Map
120077-0236D dated August 15, 1989, the site is in Zone X,
or in "areas of minimal flooding." Numerous native trees
are located on the site; however, no significant obstacles
to development of the site (such as rock outcroppings,
etc.) were evident.
EASEMENTS AND
ENCUMBRANCES As stated above, a survey, which would indicate the
location of any easements or encroachments on the site, was
unavailable. A visual inspection of the property indicated
no significant easements or encumbrances, which would
adversely affect the marketability of this site.
REAL ESTATE TAXES The subject site and improvements have the following values
assessed by the Duval County Property Appraiser's Office:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Value $ 4,968,493 $ 4,964,407 $4,874,564 $4,891,049 $4,651,523
Total Taxes 107,710.97 110,049.98 107,459 106,639 99,649
Tax Rate per $1000
Valuation 21.6788 22.1678 22.0448 21.8028 21.4228
</TABLE>
The breakdown of the 1997 tax rate for the subject taxing
district is compared to the 1994 through 1996 tax rates:
<TABLE>
<CAPTION>
1994 1995 1996 1997
-----------------------------------------
<S> <C> <C> <C> <C>
County $11.2131 $1l.1196 $11.2158 $10.9883
School (State Law) 6.6540 6.6650 7.1154 6.3450
School (Local Board) 2.7600 2.7600 2.9516 2.7600
Inland Navigation 0.0490 0.4000 0.0380 0.0500
Water Management 0.4820 0.4820 0.4820 0.4820
Debt Payments (Voter Approved) 1.0097 0.9782 --- 0.7975
-------- -------- -------- --------
Tax Rate per $1000 Valuation $22.1678 $22.0448 $21.8028 $21.4228
</TABLE>
The assessor's parcel number for the subject site is
148522-1000. The subject is assessed at $32.58 per square
foot or $38,763 per unit. The real estate property taxes
for the subject are calculated at $99,649 based on the
mileage rate and assessed value and a payment date of March
1998. However, a discount from the tax expense is allowed
if paid in the four months prior to March. If paid in
November 1997, the taxes for the subject are discounted 4
percent. For purposes of this appraisal, we have assumed an
early payment of taxes. Therefore, the 1997 property taxes
will be paid in 1997. The real estate taxes in the Income
Approach section of this report reflect an approximate 4
percent increase (inflation factor) over the 1996 property
taxes. Real estate taxes for the subject in 1997/98 have
been estimated at $99,840.
23
<PAGE>
SITE CONCLUSION The subject property is in southeastern Jacksonville about
8 aerial miles southeast of downtown. The parcel contains
17.71 acres with level terrain. Drainage and soil
conditions appear to be adequate and supportive of a
variety of improvements. All utilities are available. The
site is in the Zone X area of minimal flooding. While a
survey of the site was not available, no adverse easements
or encroachments were noted during a physical inspection of
the site. Direct access and visibility is provided from
Creekfront Road, which runs from its dead-end at the
subject site eastward to Southside Boulevard. The property
is zoned by the city for multifamily residential uses
including apartment and/or condominium development, and
appears to be physically suitable for such improvements.
24
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 17.71-acre tract of land, is improved
with a one- and two-story apartment project known as the
Creekside Oaks Apartments. The improvements consist of 120
apartment units contained in 21 buildings constructed in
1984. Also situated on the site are two clubhouses with a
kitchen and laundry facilities, an exercise room and sauna,
exterior mail posts, two decks, two swimming pools and
jacuzzis surrounded by an iron fencing, a lighted and
fenced tennis court, two lakes, and a mechanical shed.
There are four basic floor plans for the 120 apartment
units. The basic features of these floor plans are as
follows:
<TABLE>
<CAPTION>
NO. OF
UNITS UNIT TYPE SIZE (SF) TOTAL NRA
--------------------------------------------
<S> <C> <C> <C>
32 1BR/1BA 868 27,776
48 2BR/2BA/FLAT 1,196 57,408
32 2BR/2BA/TH 1,430 45,760
8 3BR/2BA/TH 1,481 11,848
--- ----- -------
120 1,190 142,792
</TABLE>
TH = townhouse (two levels)
As seen in the figures above, the total net rentable area
of 142,792 in 120 apartment units results in an average of
1,190 square feet per unit. There are a total of 32 one-
bedroom units, 80 two-bedroom units, and 8 three-bedroom
units.
The land area is 17.71 acres equating to a density of 6.78
units per acre. The parking consists of 244 asphalt-paved
open spaces or 2.03 spaces per unit. The parking ratio is
within industry and local market standards.
The foundation of the buildings is of concrete slab with
wood-studded framing. The exterior walls are of cedar frame
with wood frame trim work, and the roof is pitched with a
composition shingle covering. Windows are of single-hung
aluminum thermal pane construction, with six panel exterior
doors. Porches by each exterior door have an exterior
light. Exterior stairwells have metal supports and
handrails with concrete risers and landings.
The interior finish of each unit has painted gypsum board
walls and ceilings. Some ceilings feature vaulted or boxed
ceiling treatments, while a few walls are accented with
decorative wallpaper. Floors have carpeting over pad, with
ceramic tile floors in the kitchen and bathrooms. Batt
insulation is located in the walls and ceilings.
The kitchen is equipped with wood and fiberboard cabinetry
covered with formica countertops and a double stainless
steel sink. Appliances are made by General Electric, and
include a range/oven, vent/hood, microwave oven,
dishwasher, disposal, and refrigerator with ice maker. Each
unit has an electric water heater with a 40-gallon
capacity. The kitchen is considered to be in good
condition.
25
<PAGE>
Carpet and tile floors are found in the bathrooms, with
additional tile around the tub enclosure. The toilet,
bathtub, and sink are porcelain, and a formica countertop
covers a small vanity. Each bathroom also has a wall mirror
and an exhaust fan.
Each apartment unit in this project typically has a
fireplace, wet bar, ceiling fans, wet bars, washer, and
dryer closet with connections, miniblinds, an exterior
screened-in patio or deck with utility closet, and some
first-level courtyards. Interior doors are hollow-core wood
with some folding closet doors. Each unit is equipped with
a fire extinguisher per local fire codes.
The mechanical components include standard PVC plumbing
pipes with stainless steel fixtures. The units are equipped
with electric central heating and air-conditioning which is
individually metered. The interior wiring is copper with
125 amps designated per unit and ample electrical outlets.
Each apartment is wired for telephone and cable television.
Other than the major site amenities stated above, the
grounds feature asphalt-paved parking pads and access
roadways with concrete sidewalks for pedestrian traffic.
Pole-mounted exterior light fixtures are situated
throughout the grounds. The landscaping features numerous
native trees as well as decorative planted shrubbery and
lawns.
The subject improvements appear to be in average to good
overall condition. The subject underwent renovation during
1994. However, with the advent of Hurricane Josephine in
early October 1996, five roof leaks were reported by on-
site management. In late 1996 and 1997 required repairs,
deferred maintenance, or capital expenditures were made
resulting from the hurricane. Upon inspection of the
property and information supplied by ConAm Management
Company, the following capital expenditures are planned for
1998:
Chimney Caps & Stacks......................... $ 40,000
Wood Replacement -- Patios/Balconies.......... 40,000
Irrigation Pump Line Repair, Time Clocks...... 30,000
Plumbing Leaks, Shower Pans................... 30,000
TOTAL......................................... $140,000
Considering the overall average to good condition of the
improvements, we estimate the effective age of the subject
property to be equal to the actual age of thirteen years.
26
<PAGE>
- --------------------------------------------------------------------------------
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of units and parking area.
[PICTURE APPEARS HERE]
Exterior view of units, parking area, and interior street.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 1105 living room.
[PICTURE APPEARS HERE]
Interior view of Unit 1105 dining room area.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 507 bedroom.
<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 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 would be adaptable to multifamily
residential uses as limited by its current zoning of RMD-E
by the city of Jacksonville. This zoning designation for
the site is intended to restrict and promote the
development of the subject to medium density residential
uses of up to 20 dwelling units per acre.
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 irregular in shape and encompasses a
total of 17.71 acres. The elongated length and width of the
site, despite its irregular configuration allows for
adequate physical utilization of the site. The site has
over 474 feet of frontage along the south and west sides of
Creekfront Road. The topography of the site is generally
level, and drainage appears to be adequate. The site is
located in Flood Zone "X" which is defined in the previous
Site description section of this report.
The subject's location is at the western culdesac of
Creekfront Road with access to Southside Boulevard to the
west. Property uses along Creekfront Road wholly consist of
three apartment complexes. Creekfront Road is a two-laned
residential street with local traffic which travels
east/west from Southside Boulevard at its east
27
<PAGE>
end and a dead end about 1,300 feet to the west at the
subject site. The subject has adequate utility capacity,
enjoys a relatively good functional size and shape, and is
not affected by any adverse easements or restrictions as
noted upon inspection.
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 would
include a variety of residential development such as
apartments, condominiums, cooperatives or townhouses, but
are directed to apartment development. The primary
deterrents to other types of development were zoning,
surrounding land use patterns, and the lack of significant
traffic along Creekfront Road. Condominiums are a
consideration, however, the area generally has apartments,
and condominiums today favor water or beach locations.
FINANCIAL FEASIBILITY - Financial feasibility is directly
proportional to the amount of net income that could be
derived from the subject. Rents have slightly increased
over the previous 12 months and the apartment market
overall appears to be favorable. Area realtors report that
near-term prospects for condominium and cooperative units
in Jacksonville is becoming favorable, although there is
limited upscale condominium development occurring. As
stated above, condominium usage generally seeks water or
beach related locations..
After having eliminated all other development from our
analysis, the financial feasibility of multifamily
development must be tested. The subject site is in the
"Southside Boulevard" apartment submarket area and adjacent
to the Southside submarket. According to the Vestcor
Jacksonville Apartment Market, which is prepared by Vestcor
Realty Management, Inc., occupancy for the submarket
decreased from 96.4 percent in the Third Quarter 1996 to
91.0 percent in the Third Quarter 1997. From those projects
responding to the survey, the average rent increased from
only $651 to $660 per unit over the one-year period.
Through the year 1997, there have been 978 multifamily
building permits in the city/area. This is down from the
3,284 units permitted in 1996.
From the preceding, apartment development appears to be
feasible, although the market has some units to absorb.
Occupancy rates have decreased during the past year and
have remained at 90 percent or greater. Rental rates have
risen according to the apartment survey and there has been
an increase in apartment building activity in the subject's
submarkets indicating that development is feasible. The
following reflects apartment development costs on a square
foot basis.
Cost to Construct.................................. $50.00
Land Acquisitions.................................. 4.00
------
Total Cost of Development..................... $54.00
The preceding discussion indicates that development is
feasible for multifamily residential development. As
indicated in the Sales Comparison Approach in this report,
apartments developed since 1985 reflect sale prices from
$28.96 to $75.12 per square foot. The sale prices of new
projects ($65-75 S/F) are above the cost of development.
28
<PAGE>
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, we are of the opinion
that the demand for multifamily apartment units conducive
to the subject site would produce the highest net return
over the longest period of time. This is due to the
subject's location and the popularity of the neighborhood.
In summary, the multifamily apartment market has shown
increasingly healthy signs during the early to mid-1990s.
The site's location near major south side employment
facilities, the University of North Florida, The Avenues
Mall, and Interstate 95 gives it a large base of
prospective rent-paying tenants from which to draw. During
1996 and 1997, apartment development is occurring in or
near the submarket for the first time since 1991.
Therefore, after considering the alternatives, we believe
the highest and best use of the site, as vacant, is for
multifamily residential development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons.
First, to identify the improvements that are expected to
produce the highest overall return per invested dollar, and
the second reason is to help identify comparable
properties. The four tests or elements are also applied in
this analysis to the subject as follows:
LEGALLY PERMISSIBLE - Within the scope of a legal analysis
the subject property would be adaptable to multifamily
residential uses as limited by the zoning of the site by
the city of Jacksonville.
PHYSICAL POSSIBILITY - Based on the subject's size (17.71
acres), general configuration, and the improvements'
positioning relative to the subject site, it is felt that
the subject's improvements employ the maximum use and
potential of the site as developed. The subject's density
of 6.78 units per acre is below the market sales, which
reflect a range in density from 9.4 to 27.4 units per acre.
Additional research should be made to see if more units
could be added.
FINANCIAL FEASIBILITY - 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.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that
under competent and prudent management, the subject
produces an adequate return on market value to substantiate
its existence.
In conclusion, 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. The present improvements are not considered to be
the optimum use due to the lack of current market project
amenities and the need for capital expenditures.
29
<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 a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily
reflect value. Moreover, estimates of depreciation are
difficult to accurately measure in the marketplace, thereby
compounding the speculative nature of the opinions derived
in the cost method of valuation.
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 appraiser, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraiser's 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.
33
<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 others. In
some instances, because of the inadequacy or unavailability
of data, one or two of the approaches may be given little
weight in the final value estimate.
34
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
JACKSONVILLE AREA
IMPROVED SALES SUMMARY
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG./SF AT SALE /UNIT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke 08/97 $20,500,000 1995 280 296,616 95% $5.92
13700 Sutton Park Dr. North 1,059
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
2 San Pablo 06/97 $5,350,000 1974 200 184,750 90% $3.16
14401 Jose Vedra Blvd. 924
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
3 Hunter's Ridge (formerly Oaks of 05/97 $15,200,000 1987 336 294,888 92% $4.00
Deerwood) 878
10100 Baymeadows Road
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 04/97 $16,700,000 1986 450 342,162 94% $4.69
1715 Hodges Blvd. 760
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra 01/97 $19,000,000 1996 253 252,162 95% $6.26
101 Vera Cruz Drive 1,000
Ponte Vedra, FL
- --------------------------------------------------------------------------------------------------------------------------
6 The Huntington @ Hidden Mills 08/96 $7,225,000 1986 224 179,476 98% $3.85
3333 Monument Road 801
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
7 The Antlers 05/96 $15,000,000 1985 400 327,728 97% $4.65
8433 Southside Blvd. 819
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
8 Westland Park 05/96 $16,950,000 1989 405 403,010 97% $4.26
6710 Collins Road 995
Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
JACKSONVILLE AREA
IMPROVED SALES SUMMARY
- -----------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- -----------------------------------------------------------------------------------------
SALE PER PER OVERALL
NO. NAME/LOCATION SF /UNIT RATE EGIM
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke $69.11 $73,214 8.56% 7.80
13700 Sutton Park Dr. North
Jacksonville, FL
- -----------------------------------------------------------------------------------------
2 San Pablo $28.96 $26,750 10.90% 4.56
14401 Jose Vedra Blvd.
Jacksonville, FL
- -----------------------------------------------------------------------------------------
3 Hunter's Ridge (formerly Oaks of $51.54 $45,238 7.76% 6.74
Deerwood)
10100 Baymeadows Road
Jacksonville, FL
- -----------------------------------------------------------------------------------------
4 Woodhollow $48.79 $37,111 9.60% 5.47
1715 Hodges Blvd.
Jacksonville, FL
- -----------------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra $75.12 $75,099 8.34% 7.31
101 Vera Cruz Drive
Ponte Vedra, FL
- -----------------------------------------------------------------------------------------
6 The Huntington @ Hidden Mills $40.26 $32,254 9.56% 5.48
3333 Monument Road
Jacksonville, FL
- -----------------------------------------------------------------------------------------
7 The Antlers $45.77 $37,500 10.20 5.63
8433 Southside Blvd.
Jacksonville, FL
- -----------------------------------------------------------------------------------------
8 Westland Park $42.06 $44,852 10.10% 6.01
6710 Collins Road
Jacksonville, FL
- -----------------------------------------------------------------------------------------
</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 similar to
the subject property. A map and a summary of the comparable
sales can be found on the preceding pages. The transaction
dates of the sales used ranged from May 1996 to August
1997. Reference is made to the individual sales data
included in the Addenda section of this report.
SALE 1, known as the Links at Windsor Park Apartments, sold
in August 1997 for $20,500,000. There are 280 units
totaling 296,616 square feet. The property sold at $69.11
per square foot or $73,214 per unit. It was built in 1995
and was in excellent condition. The Links was 90 percent
occupied at sale date. It sits on 23.36 acres of land and
reflects density at 11.98 units per acre. The property's
construction is described as wood frame with wood siding
and some stucco.
SALE 2, known as the San Pablo Apartments, sold in June
1997. It has 200 units and 184,750 square feet. The sales
price was $5,350,000 and the property was 90 percent
occupied at sale date. Unit prices indicated are $28.96 per
square foot and $26,750 per unit. The sale reflected a 10.8
percent capitalization rate and was in need of substantial
repair and renovation work. The rate is 14,24 acres and the
unit density indicated is 14.04 units per acre. The
property at sale date was inferior to the subject.
SALE 3, known as Hunter's Ridge, (formerly known as Oaks at
Deerwood) sold for $15,200,000 or $45,238 per unit in May
1987. It has 294,888 square feet and indicates a unit
price of $51.54 per square foot. Land area is 34.70 acres
and shows unit density at 9.68 units per acre. The
capitalization rate was 7.76 percent, however, the property
needed some attention and had good upside potential.
35
<PAGE>
SALE 4, known as the Woodhollow Apartments sold inn April
1997 for $16,700,000 or $48.99 square foot and $37,111 per
unit. The property contains 450 units and 342,162 square
feet. At date of sale, occupancy was 94 percent and the
terms were cash at a $10,350,000 mortgage at 7.5 percent
interest due in 7 years, amortized over 25 years. The
property has 38.65 acres and indicates a unit density of
11.6 units per acre. Construction is wood frame with stucco
and wood siding.
SALE 5, known as The Courts at Ponte Vedra, is located in
Ponte Vedra Beach. It sold in January 1997 for $19,000,000.
The property was built in 1996 and has 253 units with
252,916 total square feet.. Unit prices indicated by the
sale are $75.12 per square foot and $75,099 per unit.
Construction is wood frame with stucco and some masonry.
The site contains 9.23 acres and indicates a unit density
of 27.41 units per acre. Capitalization rate at time of
sale was 8.34 percent and the project had 95 percent
occupancy.
SALE 6, known as the Huntington at Hidden Mills, (formerly
known as Cozumel), sold for $40.26 per square foot net
rentable area or $32,254 per unit in August 1996. The sale
price was $7,225,000. The property contains 14.92 acres and
has a unit density of 15 units per acre. There are 179,476
square feet of rentable area within 224 units. The average
unit size is 801 square feet. Approximately 98 percent of
the units were occupied at the time of sale. The sales
price of $7,225,000 was adjusted upward by $350,000 for a
re-plumbing required and was a credit given by the seller.
SALE 7 is the Antlers containing 400 units and 527,728
square feet of rentable area. The average size of a unit is
819 square feet. Developed in 1985, the project is situated
42.51 acres of land and has a unit density of 9.4 units per
acre. The property sold in May 1996 for $45.77 per square
foot net rentable area or $37,500 per unit and totaled
$15,000,000. At the time of sale the units were 97 percent
physically occupied.
SALE 8 sold in May 1996 for $16,950,060 which is equivalent
to $42.06 per square foot net rentable area or $41,852 per
unit. The project, Westland Park, was built in 1989/90 and
contains 405 units and 403,010 square feet of rentable
space. The average unit size is 995 square feet. Unit
density for this property is 14.9 units per acre. Occupancy
at the time of sale was reported at 97 percent.
In lieu of specific adjustments, we compared the improved
sales based on the net operating income (NOI) per square
foot and 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, condition etc. Thus, these
differing factors can be reduced to the common denominator
of net operating income.
36
<PAGE>
==================================================================
Sales Comparison - NOI Adjustments
-----------------------------------
<TABLE>
<CAPTION>
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/SF NOI/SF Factor Price/SF
--- -------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
1 $ 69.11 $ 5.92 $ 3.82 0.64527 $ 44.59
2 $ 28.96 $ 3.16 $ 3.82 1.20886 $ 35.01
3 $ 51.54 $ 4.00 $ 3.82 0.95500 $ 49.22
4 $ 48.99 $ 4.69 $ 3.82 0.81450 $ 39.90
5 $ 75.12 $ 6.26 $ 3.82 0.61022 $ 45.84
6 $ 40.26 $ 3.85 $ 3.82 0.99221 $ 39.95
7 $ 45.77 $ 4.65 $ 3.82 0.82151 $ 37.60
8 $ 42.06 $ 4.26 $ 3.82 0.89671 $ 37.72
Mean= 41.23
Value @ mean $5,887,314
Sale Sale Subject Adjust. Adjust.
No. Price/Unit NOI/Unit NOI/Unit Factor Price/Unit
--- ---------- -------- -------- ------ ----------
1 $73,214 $6,267 $4,549 0.72587 $ 53,144
2 $26,750 $2,916 $4,549 1.56001 $ 41,730
3 $45,238 $3,510 $4,549 1.29601 $ 58,629
4 $37,111 $3,562 $4,549 1.27709 $ 47,394
5 $75,099 $6,263 $4,549 0.72633 $ 54,547
6 $32,254 $3,083 $4,549 1.47551 $ 47,591
7 $37,500 $3,811 $4,549 1.19365 $ 44,762
8 $41,852 $4,240 $4,549 1.07288 $ 44,902
Mean = $ 49,087
Value @ mean $5,890,485
==================================================================
</TABLE>
<PAGE>
The various sales reflected NOIs per square foot ranging
from $3.16 to $6.26 and NOIs per unit ranging from $2,916
to $6,267. The subject NOI (without reserve expenses) has
been approximated at $3.82 per square foot or $4,549 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. The adjustments 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. Time differences do not need
further adjustment as any drop in value would theoretically
be the function of a drop in income. There would need to be
an adjustment for age in order to recognize differences in
the length of the income streams. The chart on the facing
page presents the adjustment process for NOI per square
foot and NOI per unit.
After adjustment, the sales range in price from $35.01 to
$49.22 per square foot and $41,730 to $58,629 per unit. The
simple average adjusted prices (not weighted) per square
foot and per unit of the comparable sales was calculated at
$41.23 and $49,087, respectively. Applying an age
adjustment based on square foot area and number of units
indicates value at $40.00 per square foot and $47,500 per
unit
142,792 SF at $40.00/SF, Rounded................ $5,700,000
120 units at $47,500/unit....................... $5,700,000
A second method of comparison is by use of the effective
gross rental multiplier (EGRM). In this analysis, the
subject's effective gross income is multiplied by a factor
estimated from the sales to derive an indication of value.
The sales utilized in this analysis reflect EGRMs ranging
from 4.56 to 7.80 as shown on the following facing page.
Expense ratios range from 33.26 to 50.27 percent. From the
Direct Capitalization analysis in the Income Approach, the
subject is estimated to have a 47.4 percent operating
expense ratio (excluding reserves). This is most similar to
Sales 3, 4, and 6. These sales have EGRMs ranging from 5.47
to 6.74 with expense ratios from 47.45 to 47.70 percent.
Sales 4 and 6 were apartments built in 1986 and Sale 3 was
built in 1987. Most emphasis was placed on Sales 4 and 6.
Based on the preceding analysis, an EGRM for the subject
has been estimated at 5.75 resulting in a total value
indication as follows:
$1,038,496 x 5.75, Rounded...................... $6,000,000
37
<PAGE>
<TABLE>
<CAPTION>
====================================================================
SALES COMPARISON - EGRM ANALYSIS
--------------------------------------------------------------------
EFFECTIVE EFFECTIVE GROSS OPERATING
SALE NO. GROSS REVENUE/SF REVENUE MULTIPLIER EXPENSE RATIO
--------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 8.86 7.80 33.26%
2 6.35 4.56 50.27%
3 7.65 6.74 47.70%
4 8.92 5.47 47.45%
5 10.27 7.31 39.00%
6 7.35 5.48 47.63%
7 8.13 5.63 42.80%
8 7.00 6.01 39.14%
====================================================================
</TABLE>
<PAGE>
The NOI per square foot and per unit methods presented a
similar value indication of $5,700,000 and the effective
gross income multiplier method indicated a value of
$6,000,000. Weight has been given to all methods with
emphasis on the method using net operating income because
these methods reflect both income and expense information.
The EGRM method was used as support. From the proceeding, a
value for the subject is estimated at $5,800,000. From
this, a deduction for capital expenditures of $140,000 is
made as follows:
Indicated Value $5,800,000
Less: Capital Expenditures (140,000)
Rent Loss (19,735)
"As Is" Value $5,640,265
Rounded $5,600,000
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
FIVE MILLION SIX HUNDRED THOUSAND DOLLARS
($5,600,000)
38
<PAGE>
[MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
RENT COMPARABLE ANALYSIS
THE CREEKSIDE OAKS APARTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
COMP. YEAR NO. NRA AVERAGE 1997 SQUARE 1997 MONTHLY
NO. NAME OF PROJECT BUILT UNITS (SF) UNIT SIZE OCCUP. RATE FLOOR PLANS FEET RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Deerbrook 1987 144 175,064 1,216 93% 1BR/1.5BA 875 $645-660
8025 Bay Meadows Circle 2BR/2BA 1,206 745-770
East 2BR/2.5BA 1,356 775-790
3BR/3BA/TH 1,566 935-950
- -----------------------------------------------------------------------------------------------------------------------------------
2 Royal Oaks 1990 284 264,280 931 96% 1BR/1BA 675 $555-575
10023 Belle Rive Blvd. 1BR/1BA 780 595-615
1BR/1BA 970 675-695
2BR/2BA 1,100 715-735
- -----------------------------------------------------------------------------------------------------------------------------------
3 Southern Pines 1989 200 194,500 973 97% 1BR/1BA 750 670-710
10200 Belle Rive Blvd. East 2BR/2BA 1,040 805-835
3BR/2BA 1,235 940-960
- -----------------------------------------------------------------------------------------------------------------------------------
4 The Reserve 1984 226 242,876 1,075 93% 1BR/1BA 808 655
7632 Southside Blvd. 2BR/1BA 1,034 755
2BR/2BA 1,093 795
2BR/2BA/TH 1,143 815
3BR/2BA/TH 1,358 975
- -----------------------------------------------------------------------------------------------------------------------------------
Creekside Oaks Apts. 1984 120 142,792 1,190 92.5% 1BR/lBA 868 625
9780 Creekfront Road 2BR/2BA 1,196 745
SUBJECT 2BR/2BA/TH 1,430 775
3BR/2BA/TH 1,481 875
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================================================
RENT COMPARABLE ANALYSIS
THE CREEKSIDE OAKS APARTMENTS
- -------------------------------------------------------------------------------------------------------------
COMP. 1997
NO. NAME OF PROJECT RENT/SF AMENITIES/COMMENTS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Deerbrook $0.737-0.754 Fireplaces, microwave ovens, cove lighting in
8025 Bay Meadows Circle 0.618-0.638 kitchen, washer/dryer connections, some wet
East 0.572-0.583 bars, ceiling fans, vertical blinds, smoke
0.597-0.607 detectors, vaulted ceilings, screened porches.
Patios/balconies, golf course and lake views,
weight room, swimming pool, party pavilion,
24-hour maintenance, outside storage.
- -------------------------------------------------------------------------------------------------------------
2 Royal Oaks $O.822-0.852 Dishwashers, garbage disposals, washer/dryer
10023 Belle Rive Blvd. 0.763-0.788 in units, miniblinds, fireplaces, outdoor
0.696-0.716 utility closets, patio/balconies, burglar
0.650-0.668 alarms
Swimming pool, tennis court, racquetball court,
jacuzzi, exercise/weight room, club room, lake,
volleyball court.
- -------------------------------------------------------------------------------------------------------------
3 Southern Pines $0.893-0.947 Washer/dryer, fireplaces, ceiling fans, vaulted
10200 Belle Rive Blvd. East 0.774-0.803 ceilings, microwaves, and oversized screened
0.761-0.777 patios.
Clubhouse, fitness center, garages with
automatic openers, pool and spa, lighted tennis
court, and car wash.
- -------------------------------------------------------------------------------------------------------------
4 The Reserve 0.811 Flats and town homes, intrusion alarms, 9 ft.
7632 Southside Blvd. 0.730 vaulted ceilings, washer/dryer, fireplaces,
0.727 microwaves, self-cleaning ovens, ceiling fans,
0.713 vertical mini blinds, private patios.
0.718 Restricted gate access, clubhouse with exercise
room, interior racquet ball court, business
center, oversized pool with jacuzzi, lighted
tennis court, basketball court, sand volleyball
area, BBQ area, billiards room.
- -------------------------------------------------------------------------------------------------------------
Creekside Oaks Apts. 0.720 Vaulted ceilings, microwaves, wet bar.
9780 Creekfront Road 0.623 Swimming pools, hot tubs, tennis courts,
SUBJECT 0.542 saunas, billiards room, weight room.
0.591
=============================================================================================================
</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 (if applicable) is
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. Since our valuation is on a
cash basis, no mortgage was considered. In either method,
the present mortgage balance (if applicable) would be added
to the equity value to obtain the total value of the
property. 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 any
laundry income, pet deposits, 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>
A 1BR/1BA 32 868 $625 $0.720 $ 20,000
B 2BR/2BA/Flat 48 1,196 745 0.623 35,760
C 2BR/2BA/TH 32 1,430 775 0.542 24,800
D 3BR/2BA/TH 8 1,481 875 0.591 7,000
--- ---------
120 $ 87,560
</TABLE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
neighborhood area. For the purpose of this analysis, we
have considered four apartment complexes that were
identified by management and found by the appraiser to be
most comparable. They range in
39
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
SUBJECT - RENT ANALYSIS
CREEKSIDE OAKS
- ------------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY PROJECT/UNIT
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF AMENITIES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 868 $ 625 $0.720 Avg. Plus/Avg. Plus
Deerbrook 1BR/1.5BA 875 645-660 0.737-0.754 Avg. Plus/Good
Royal Oaks 1BR/1BA 780 595-615 0.763-0.788 Good/Good
Southern Pines 1BR/1BA 750 670-710 0.893-0.947 Very Good/Good
The Reserve 1BR/1BA 808 655 0.811 Good/Good
- ------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,196 $ 745 $0.623 Avg. Plus/Avg. Plus
Deerbrook 2BR/2BA 1,206 745-770 0.618-0.638 Avg. Plus/Good
Royal Oaks 2BR/2BA 1,100 715-735 0.650-0.668 Good/Good
The Reserve 2BR/2BA 1,093 795 0.727 Good/Good
- ------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/TH 1,430 $775 0.542 Avg. Plus/Avg. Plus
Deerbrook 2BR/2.5BA 1,356 775-790 0.572-0.583 Avg. Plus/Good
The Reserve 2BR/2BA/TH 1,143 815 0.713 Good/Good
- ------------------------------------------------------------------------------------------------
SUBJECT 3BR/2BA/TH 1,481 $875 0.591 Avg. Plus/Plus
Deerbrook 3BR/3BA/TH 1,566 935-950 0.597-0.607 Avg. Plus/Good
Southern Pines 3BR/2BA 1,235 940-960 0.761-0.777 Very Good/Good
The Reserve 3BR/2BA/TH 1,358 975 0.718 Good/Good
================================================================================================
</TABLE>
<PAGE>
total unit size from 144 to 284 units and in occupancy from
89 to 94 percent. These comparable rentals are summarized
on a previous page.
All of the comparables surveyed were located within the
subject's immediate vicinity. Each is comparable to the
subject overall, particularly in terms of overall physical
condition, unit size, rental rates, and the amenities
offered. These comparables indicate an average effective
rental rate range from $0.63 to $0.816 per square foot per
month.
On the table on the facing page, each of the subject's four
floor plans is compared to similar floor plans obtained
from the rent comparables. All of the comparable rentals
have at least average project amenities for an apartment in
this market which include a pool, tennis court, clubhouse,
hot tub/jacuzzi, and landscaped grounds. Apartments which
have project amenities, which are rated "good" on this
chart additionally have a car wash stand, indoor
racquetball courts, basketball court, and/or volleyball
area. Unit amenities for standard or average apartment
units include typical built-in kitchen appliances,
miniblinds, a fireplace, a patio or deck, and average
finish. Good unit amenities on a given apartment unit also
include a microwave oven, washer and dryer, vaulted
ceilings and ceiling fans, and/or burglar alarms.
According to the rent analysis summary, the subject's Plan
A is most comparable to the one bedroom plan at Deerbrook
that contains 875 square feet and rents monthly from $645
to $660 or $0.737 to $0.754 per square foot. This unit is
slightly superior to the subject Plan A because it has 1.5
baths rather than just 1 bathroom. The unit at the Reserve
contains 808 square feet and rents for $655 per month or
$0.811 per square foot monthly. It is superior to the
subject as to amenities and the entire project was recently
renovated or upgraded. The subject unit contains 868 square
feet and has a monthly rent of $625, which is considered to
be market.
Plan B from the subject has 1,196 square feet and rents for
$745 per month or $0.623 per square foot. This unit is a 2
bedroom. 2 bathroom flat. The comparable unit at Deerbrook
rents for $745 to $770 per month or $0.618 to $0.638 per
square foot and brackets the subject rent. It has 1,206
square feet. The 2 bedroom units at Royal Oaks and The
Reserve range in size from 1,093 square feet to 1,100
square feet and in monthly rental of $0.65 to $0.727 per
square feet. Both properties are considered superior to the
subject as to amenities. Additionally Royal Oaks is newer
and The Reserve has been renovated/upgraded.
The subject's Plan C with 1,430 square feet has an asking
rent of $775 per month or $0.542 per square foot. This
rental rate has not increased since last year. The subject
unit is a townhouse and is compared to the 2 bedroom/2.5
bathroom unit at Deerbrook and the 2 bedroom/2
bathroom/townhouse unit at The Reserve. The former rents
for $775 to $790 or $0.572 to $0.583 per square foot per
month and the latter rents for $815 or $0.713 square feet
per month. These units are superior in amenities to the
subject. The subject rent for Plan C is considered market.
40
<PAGE>
The subject's Plan D contains 1,481 square feet and is a 3
bedroom/2 bathroom/townhouse. It rents for $875 per month
or $0.591 per square feet per month. The 3 bedroom
townhouse units at Deerbrook and The Reserve are believed
comparable, however, the Deerbrook unit with 1,566 square
feet is larger and The Reserve unit with 1,358 square feet
is smaller than the subject unit. The comparables rent for
$0.597 to $0.718 per square feet monthly and are
considered superior to the subject unit. The subject unit's
rent at $875 is considered market.
There are currently four vacant units in the subject
complex. This equates to a current physical occupancy rate
of 96.7 percent. Physical occupancy one year ago was 92.5
percent. These numbers indicate a downward movement in
physical occupancy for the subject property.
Economic occupancy is estimated near 90 percent. The most
recent leases for Plans A, B, C, and D indicate that the
subject is obtaining the quoted rental rates. Therefore, we
estimate that the current quoted rental rates for the
subject are indicative of market rates.
After considering the subject's physical occupancy and
actual rates the projected market rental rates for the
subject are summarized below.
<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>
A 1BR/1BA 32 868 $625 $0.720 $20,000
B 2BR/2BA/Flat 48 1,196 745 0.623 35,760
C 2BR/2BA/TH 32 1,430 775 0.542 24,800
D 3BR/2BA/TH 8 1,481 875 0.591 7,000
--- -------
120 $87,560
</TABLE>
Gross Annual Rental Income: $87,560 x 12 months =
$1,050,720
Our cash flow analysis, as well as our direct
capitalization method, indicates a gross rental income of
$1,071,734. This figure is the result of a 2 percent
increase in rental rates during the first year of our
projection period.
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, pet deposits, late charges, and
application fees. Other Income in 1990 was reported at
$40,115 or $0.28 per square foot. This figure fell by over
35 percent during 1991 to $0.18 per square foot or a total
of $26,277. For 1992, other income totaled $29,487 or $0.21
per square foot. Figures for 1993 show a total of $26,040
or $0.18 per square foot. For 1994 and 1995, other income
was $15,304 and $22,101 or $0.11 and $0.15 per square foot,
respectively. Figures for annualized 1996 amount to $18,714
($0.12 per square foot) and actual other income for 1997
was $20,621 or $0.14 per square foot. Based on our
experience with similar type properties and the actual
performance of the subject 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. This
41
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
CREEKSIDE OAKS APARTMENTS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comparable No. 1 2 3 SUBJECT PROPERTY
Year Built 1986 1984 1985 1984
Net Rentable Square Feet 100,750 156,688 117,980 142,792
Number of Units 110 160 124 120
Average Unit Size 916 979 951 1,190
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1997 1997 1993 1994 1995 1996-YTD 1997-YTD BRA PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED ANNUALIZED CALENDAR YEAR
PSF PSF PSF PSF PSF PSF PSF PSF ENDING 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------------
/SF /UNIT
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses
Real Estate Taxes $0.80 $0.64 $0.71 $0.74 $0.74 $0.74 $0.77 $0.72 $0.70 $ 892
Insurance 0.18 0.13 0.16 0.10 0.15 0.17 0.17 0.16 0.19 214
Operating Expenses 0.68 0.69 0.65 0.56 0.59 0.60 0.63 0.55 0.67 762
Utilities 0.94 0.70 0.86 0.55 0.60 0.62 0.63 0.68 0.66 750
Repairs & Maintenance 0.58 0.53 0.43 0.43 0.31 0.42 0.53 0.52 0.50 595
Contract Services 0.21 0.18 0.30 0.20 0.20 0.22 0.22 0.21 0.23 262
Management 0.37 0.33 0.39 0.30 0.32 0.32 0.34 0.34 0.36 416
General Administrative 0.18 0.15 0.18 0.09 0.14 0.19 0.24 0.15 0.15 238
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Total Expenses $3.94 $3.39 $3.74 $2.97 $3.05 $3.28 $3.53 $3.33 *$3.46 *$4,129
=================================================================================================================================
</TABLE>
* There may be differences due to rounding
<PAGE>
equates to a total "Other Income" of $21,419 in the first
fiscal year of our projected cash flow as well as in the
direct capitalization method.
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied for the beginning
of the first fiscal year of our projection period:
Gross Rental Income $1,071,7349
Other Income 21,419
----------
Total Potential Gross Income $1,093,153
VACANCY AND
COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 10 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. The subject's
current 96.7 percent physical occupancy is above the
approximate 91.0 percent Third Quarter physical occupancy
rate enjoyed by the Southside Boulevard submarket. The
subject's occupancy is also higher than the Third Quarter
92.8 percent citywide rate in the Jacksonville area. The
subject property has a current economic occupancy rate of
nearly 90 percent, which is considered near stabilized
occupancy for the subject. A 95.0 percent stabilized
economic occupancy has been utilized for the subject during
the holding period and a deduction is taken for rent loss
until stabilized occupancy is believed achievable in year
1.
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 projected expenses on
comparable apartment projects located in the subject area,
as well as the actual historical performance of the subject
property. The following Expense Analysis Chart on the
facing page summarizes the actual and/or annualized 1997
expenses reported by three (3) "individually metered"
projects, as well as the subject property's actual 1993,
1994, 1995, and 1996 expense figures. The 1997 actual
figures were available to the appraiser at the time of the
report and are shown in the chart on the facing page. Bach
Realty Advisors' estimated expenses for the subject
property in Fiscal Year 1998 are also displayed.
42
<PAGE>
Based upon the analysis of the comparables, we have
developed the following expense estimates for the subject.
REAL ESTATE TAXES - The Creekside Oaks Apartments are
subject to the taxing authorities of Duval County. The
county distributes the tax receipts from property owners to
different authorities as specified in the Site section of
this report. The subject's 1997 assessed value is
$4,651,523 the total tax liability is $99,649 or $0.70 per
square foot; however, if paid by November 1997 they would
be $95,663 or $0.67 per square foot. After examining the
tax liabilities of the comparables used in our expense
analysis (which exhibited a range from $0.69 to $0.80 per
square foot), we have reflected the actual discounted 1997
real estate taxes plus an approximate 2 percent inflation
factor in our estimate of the 1998 taxes. Thus, real estate
taxes have been estimated at $0.70 per square foot or $832
per unit and totaling $99,840. This amount is increased at
a rate of 4 percent per year throughout our projection
period.
INSURANCE - For the first fiscal year, we have estimated
insurance at a market cost of $0.15 per square foot or
$26,733. All of the expense comparables utilized exhibit a
range of insurance costs from $0.15 to $0.18 per square
foot for 1997. The subject's actual insurance costs have
been fluctuating from $0.09 to $0.24 per square foot since
1993. The appraiser believes that the insurance expense for
the subject is appropriate and is generally supported by
the expense comparables. The expense per unit is $223.
Insurance expense is increased 4 percent annually for the
duration of the holding period.
OPERATING EXPENSES - This category includes salaries for
office managers and leasing agents, maid services, payroll
taxes and FICA, security, advertising, and promotional
items. The subject's actual figures for 1993 through 1996,
were $0.56 to $0.63 per square foot, respectively. The
annualized 1997 operating expense is $0.55 per square foot.
The expense comparables indicate a range of operating
expenses from $0.65 to $0.69 per square foot. Based on the
subject's historical expenses and a comparison of operating
expenses of comparable properties, the appraisers have
estimated a 1997/98 year operating expense of $95,040 which
is equivalent to $0.67 per square foot or $792 per unit.
This expense is expected to increase 4 percent annually
throughout our projection period.
UTILITIES - The expense comparables' 1997 utility expenses
have a range from $0.70 to $0.94 per square foot. The
subject's annualized 1996 year-to-date expense is $0.61 per
square foot. The 1997 expense is $0.68 per square foot.
This expense category includes electricity to the common
areas, water, sewer, and garbage collection. The subject's
1998 expense for utilities has been estimated by the
appraiser to be $0.66 per square foot or $780 per unit,
near the lower end of the comparables range as supported by
the costs for the property. This equates to a total utility
expense estimate of $93,558 for the subject property in the
first year. Utility expenses are increased 4 percent
annually throughout the projection period.
REPAIRS AND MAINTENANCE - The 1996 annualized actual year-
to-date repairs and maintenance costs are $0.53 per square
foot for the subject. Repairs and
43
<PAGE>
maintenance expenses are necessary in order to keep the
property in good repair and consist of repairs required on
plumbing, air-conditioners, electrical components,
miniblinds, carpeting, janitorial services, and decorative
costs. The expense comparables indicate a range from $0.43
to $0.58 per square foot and the subject's 1997 annualized
expense is $0.50 per square foot. Repairs and maintenance
costs of $0.50 per square foot or $595 per unit and
totaling $71,396 have been projected for the subject for
the first year of our cash flow analysis and increased 4
percent annually.
CONTRACT SERVICES - The contract services category includes
mainly landscaping services. Our surveyed expense
comparables reported 1997 contract services expenses
between $0.21 and $0.30 per square foot. Actual expenses
for the subject for the 1996 contract services expense were
$0.22 per square foot, while 1997 indicated $0.21 per
square foot. The appraiser has emphasized the historical
and budgeted expenses for the subject when estimating the
per square foot contract services expense for the property
of $0.23 per square foot or $272 per unit and totaling
$32,672 in the first year of the cash flow. These expenses
are expected to increase annually at a rate of 4 percent.
MANAGEMENT - This figure for apartment projects is
typically expressed as a percentage of the effective gross
income of the property. The industry standard for an
apartment complex of this size and quality is about 5
percent of effective gross income. This includes the fee to
outside management or ownership for managing the property.
According to the actual income and expense statements from
1993 forward provided by the client, management fees at the
subject have been approximately 5 percent. We have also
relied upon indicators from the market to determine typical
expenses for this category. A management fee of 5 percent
of the projected effective gross income for each year of
the cash flow is estimated.
GENERAL AND ADMINISTRATIVE - This expense category includes
legal expenses, dues, fees, printing, auto costs, postage,
accounting/audit, permits, travel, credit, reports, office
equipment, telephone, and all other miscellaneous and
administrative costs. Our surveyed expense comparables
indicated actual administrative expenses ranging from $0.15
to $0.18 per square foot. The subject's annualized year-to-
date 1996 costs were $0.24 per square foot. The 1997
expense was $0.15 per square foot. The appraiser utilized a
$0.15 per square foot figure or $178 per unit and totaling
$21,419, supported by the comparables' range. This expense
increases at a rate of 4 percent for each year in the cash
flow.
EXPENSE SUMMARY In conclusion, vacancy loss has been estimated at 5 percent
throughout the holding period. The total estimated 1997
calendar year expenses for the Creekside Oaks Apartments,
excluding reserves for replacement, equates to $3.46 per
net rentable square foot or $4,105 per unit. This is above
the range indicated by the expense comparables, but is
reasonable and well supported by actual historical figures
indicated by the subject property.
44
<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
may include roof covering, carpeting, appliances,
compressors, parking areas, drives, etc. The subject was
constructed in 1984 and appears to have had ongoing
maintenance since its construction. It is our opinion that
a reserve allowance of $0.25 per square foot or $300 per
unit is adequate to provide for the continued maintenance
of the project given the on-going termite problem and
weather related conditions as mentioned below. Reserves
for replacement total $48,000 and are grown at 4 percent
for the duration of the holding period. Reserves were
included in our expenses prior to concluding the net
operating income.
DEFERRED MAINTENANCE/
CAPITAL EXPENDITURES The subject has numerous items requiring capital
expenditures. Capital expenditures listed by management in
the 1997 budget total $140,000 as detailed in the
Improvements section of this report.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION A reasonable method for estimating value via the Income
Approach in a stabilized market 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.
Real Estate Investment Trusts (REITS) have been the major
players among new apartment acquisitions over the past,
few years which has resulted in upward pressure on selling
prices as capitalization rates have dropped. More
recently, REITs are strong in the market. Capitalization
rates are lower this year than last year due to many
buyers pursuing limited inventory.
Survey participants in RERC's Emerging Trends in Real
Estate: 1997 indicate that multifamily is still a viable
investment vehicle, but its desirability is ebbing as
short-term rental growth has already peaked in some
markets. Expectations for 1998 are an increased interest
in apartments as markets stabilize and new construction
comes on-line. Since 1994 returns for apartments have
averaged near 12 percent, above all other categories.
Solid returns in the 9 to 10 percent area are expected to
continue with 9 percent and below for new Class A product,
much of which may be pre-sold. Apartment investment fits
the portfolio profiles of pension funds and REITs who want
immediate high cash flows with predictable capital
45
<PAGE>
costs and national vacancy rates in relative equilibrium at
5 percent to 8 percent and a growing population, the risk
in the multifamily market is steady and we anticipate that
investors will continue to find their niche the market.
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. Real Estate is
considered riskier than bonds due to illiquidity,
competition, burden of management, and market conditions;
therefore approximately 150 basis points or more could be
added to the Corporate "Baa" bond rate in a normal market.
Based on the previous data and recognizing new
construction, we believe a 12 percent discount rate is
reasonable in the current market based on an all cash sale
and alternative investments.
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 for apartment
properties indicated a terminal capitalization rate range
from 8.0 to 10.25 percent or an average of 9.29 percent to
attract investment. Going-in capitalization rates of the
comparable sales in the Sales Comparison Approach could be
calculated based on the data provided. Most had a
relatively similar occupancy rate as the subject at their
respective times of sale. The range of going-in
capitalization rates from these sales was from 7.76 to 10.9
percent (without reserves). A going-in capitalization rate
in the middle of this range is considered appropriate. The
going-in rate is typically lower than the terminal
capitalization rate stated above due to the older age of
the property and the risk of the market ten years hence.
Based upon the aforementioned factors, the terminal
capitalization rate for the subject should be above the
average going-in capitalization rate exhibited by the
comparable sales in the Sales Comparison Approach.
Therefore, a terminal capitalization rate of 10.0 percent
appears appropriate for the subject property based on the
Korpacz survey.
46
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CREEKSIDE OAKS
- ------------------------------------------------------------------------------------------------------------------------------------
Period 1 2 3 4 5 6 7
1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Apt. Rents 1,071,734 1,114,604 1,159,188 1,205,555 1,253,778 1,303,929 1,356,086
Rent/SF/Mo. 0.625 0.650 0.677 0.704 0.732 0.761 0.791
Other Income/Yr. 21,419 22,276 23,167 24,093 25,057 26,059 27,102
--------- --------- --------- --------- --------- -------- ---------
Gross Income 1,093,153 1,136,880 1,182,355 1,229,649 1,278,835 1,329,988 1,383,188
% Vacancy 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 54,658 56,844 59,118 61,482 63,942 66,499 69,159
--------- --------- --------- --------- --------- --------- ---------
Eff. Gross Income 1,038,496 1,080,036 1,123,237 1,168,166 1,214,893 1,263,489 1,314,028
----------------
EXPENSES: Per/Unit Per/SF
----------------
Real Estate Taxes 832 0.70 99,840 103,834 107,987 112,306 116,799 121,471 126,329
Insurance 223 0.19 26,733 27,803 28,915 30,071 31,274 32,525 33,826
Operating Expenses 792 0.67 95,040 98,842 102,796 106,908 111,184 115,631 120,256
Utilities 780 0.66 93,558 97,301 101,193 105,240 109,450 113,828 118,381
Repairs & Maintenance 595 0.50 71,396 74,252 77,222 80,311 83,523 86,864 90,339
Contract Services 272 0.23 32,672 33,978 35,338 36,751 38,221 39,750 41,340
Management Fee 5.00% 0.36 51,925 54,002 56,162 58,408 60,745 63,174 65,701
General & Administrative 178 0.15 21,419 22,276 23,167 24,093 25,057 26,059 27,102
Reserves 300 0.25 36,000 37,440 38,938 40,495 42,115 43,800 45,551
--------- -------- --------- --------- -------- --------- ---------
Total Expenses $4,405 $ 3.70 528,583 549,727 571,716 594,584 618,368 643,102 668,826
Per SF --------------- 3.70 3.85 4.00 4.16 4.33 450 4.68
Per Unit 4,405 4,581 4,764 4,955 5,153 5,359 5,574
--------- -------- --------- --------- -------- --------- ---------
NET OPERATTNG INCOME $509,913 $530,309 $551,521 $573,582 $596,526 $620,387 $645,202
========= ======== ======== ======== ======== ======== ========
Per SF $ 3.57 $ 3.71 $ 386 $ 4.02 $ 4.18 $ 4.34 $ 4.52
Per Unit $ 4,249 $ 4,419 $ 4,596 $ 4,780 $ 4,971 $ 5,170 $ 5,377
=================================================================================================================================
Capital Items: 140,000
-------- -------- -------- -------- -------- -------- --------
Cash Flow 369,913 530,309 551,521 573,582 596,526 620,387 645,202
-------- -------- -------- -------- -------- -------- --------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value Of Cash Flow 330,279 422,759 392,562 364,522 338,485 314,307 291,857
NOI in 11th Year 754,795 Present Value of Income Stream 3,211,109
Ro at Reversion 10.00% Present Value of Reversion 2,333,029
--------
--------------------------------------------------
Indicated Reversion 7,547,951 Indicated Value of Subject 5,544,138
Less: Sales Costs 4.00% 301,918 Indicated Value/SF 38.83
--------- Indicated Value/Unit 46,201
Reversion In 10th Yr 7,246,033 GIM At Indicated Value 5.17
Ro At Indicated Value 9.20%
--------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Period 8 9 10 Reversion
2005 2006 2007 2008
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apt. Rents 1,410,329 1,466,743 1,525,412 1,586,429
Rent/SF/Mo. 0823 0.856 0.890 0.926
Other Income/Yr. 28,186 29,313 30,486 31,705
--------- --------- --------- ----------
GROSS INCOME 1,438,515 1,496,056 1,555,898 1,618,134
% VACANCY 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 71,926 74,803 77,795 80,907
-------- --------- --------- ---------
Eff. Gross Income 1,366,590 1,421,253 1,478,103 1,537,227
EXPENSES:
Real Estate Taxes 131,383 136,638 142,103 147,788
Insurance 35,179 36,586 38,050 39,572
Operating Expenses 125,067 130,069 135,272 140,683
Utilities 123,116 128,041 133,163 138,489
Repairs & Maintenance 93,952 97,710 101,619 105,684
Contract Services 42,994 44,713 46,502 48,362
Management Fee 68,329 71,063 73,905 76,861
General & Administrative 28,186 29,313 30,486 31,705
Reserves 47,374 49,268 51,239 53,289
--------- --------- --------- ---------
Total Expenses 695,579 723,403 752,339 782,432
Per SF 4.87 5.07 5.27 5.48
Per Unit 5,796 6,028 6,269 6,520
--------- --------- -------- ---------
NET OPERATTNG INCOME $671,010 $697,851 $725,765 $754,795
======== ========= ======== =========
Per Sf $ 4.70 $ 4.89 $ 5.08 $ 5.29
Per Unit $ 5,592 $ 5,815 $ 6,048 $ 6,290
==============================================================================================
Capital Items: -------- --------- -------- --------
671,010 697,851 725,765 754,795
Cash Flow -------- --------- -------- --------
0.403883 0.360610 0.321973 1.000000
Present Value Factor 12.00%
Present Value Of Cash Flow 271,010 251,652 233,677 754,795
</TABLE>
<PAGE>
==============================================================
CASH FLOW SUMMARY
CALENDAR YEAR ANNUAL 12.00% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------ --------- ---------- ---------
1998 $369,913 0.892857 $330,279
1999 530,309 0.797194 422,759
2000 551,521 0.711780 392,562
2001 573,582 0.635518 364,522
2002 596,526 0.567427 338,485
2003 620,387 0.506631 314,307
2004 645,202 0.452349 291,857
2005 671,010 0.403883 271,010
2006 697,851 0.360610 251,652
2007 725,765 0.321973 233,677
-------
TOTAL NPV OF CASH FLOWS $3,211,109
Projected NOI - 11th Year $754,795
Terminal Capitalization Rate 10.000%
------
Estimated Value of Property at End of 10th Year $7,547,951
Sales Cost 4.00% (301,918)
-------
Value of Reversion at End of 10th Year $7,246,033
Discount Factor 12.00% 0.321973
--------
Present Value of Reversion $2,333,029
Sum of Present Values of Cash Flow 3,211,109
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $5,544,138
(ROUNDED) $5,540,000
==========
==============================================================
<PAGE>
CASH FLOW ASSUMPTIONS . Rents were based on an average rental rate of
approximately $0.613 per square foot per month.
During the projection period rents are expected to
increase at 2 percent during 1997. Rents increase 4
percent in the second year of our analysis and each
year thereafter.
. The subject property's current physical occupancy
rate is 96.7 percent. The economic occupancy rate
of nearly 90 percent as of December 1997 is near
the estimated stabilized occupancy rate of 95.0
percent. It is our opinion that the subject should
be capable of averaging 95.0 percent economic
occupancy throughout the holding period of our cash
flow analysis.
. Other income is increased at 4 percent per year
after the first year of the cash flow.
. 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 ten-year projection
period. Management expenses are based on a
percentage of gross income and increase with
occupancy and rental increases. Reserves are
calculated at $0.25 per square foot or $300 per
unit in the first year and also increase at 4
percent per year thereafter.
. A discount rate of 12.0 percent was utilized.
. A terminal capitalization rate of 10.0 percent was
felt reasonable.
. A sales cost of 4 percent of the reversionary value
was estimated.
A cash flow analysis and summary for the subject
beginning January 1, 1998 may be found on the preceding
pages. The estimated leased fee market value for the
subject on an "as is" basis as of December 31, 1997 via
discounted cash flow method is
FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000)
47
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================
DIRECT CAPITALIZATION
==============================================================================================
TOTAL /UNIT /SF
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Potential Gross Rental Income $1,071,734 $ 8,931 $ 7.51
Other Income 21,419 178 0.15
---------- ------- ------
Potential Gross Income $1,093,153 $ 9,110 $ 7.66
Less: Vacancy & Credit Loss @ 5.00% 54,658 455 0.38
---------- ------- ------
Effective Gross Income $1,038,496 $ 8,654 $ 7.27
FIXED EXPENSES
- --------------
Real Estate Taxes $ 99,840 $ 832 $ 0.70
Insurance 26,733 223 0.19
---------- ------- ------
Total Fixed $ 126,573 $ 1,055 $ 0.89
VARIABLE EXPENSES
- -----------------
Operating Expenses $ 95,040 $ 792 $ 0.67
Utilities 93,558 780 0.66
Repairs & Maintenance 71,396 595 0.50
Contract Services 32,672 272 0.23
Management Fee 5.00% 51,925 433 0.36
General & Administrative 21,419 178 0.15
Reserves for Replacement 36,000 300 0.25
---------- ------------- ------
Total Variable $ 402,010 $ 3,350 $ 2.82
Total Expenses $ 528,583 $ 4,405 $ 3.70
---------- ------------- ------
Net Operating Income $ 509,913 $ 4,249 $ 3.57
Capitalization Rate 9.00%
Fee Simple Stabilized Market Value $5,665,695 $47,214 $39.68
Less: Rent Loss Due to Lease Up 19,735 164.4590615 0
Capital Expenditures 140,000 1,167 0.98
---------- ------------- ------
LEASED FEE "AS IS" MARKET VALUE $5,505,960 $45,883 $38.56
ROUNDED $5,510,000
==========
==============================================================================================
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1 Year 2
------ ------
Stabilized NOI $509,913 $509,913
Projected NOI 488,796 530,309
-------- --------
Rent Loss 21,117 0
7.00% PV Factor 0.934579 0.873439
-------- --------
PV Income Loss $ 19,735 $ 0
CUMULATIVE LOSS $ 19,735
==============================================================================================
</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 7.76
to 10.90 percent. The Korpacz investor survey
previously quoted indicated an average desired
going-in capitalization rate of 9.29 percent. Some
weight in this analysis is given to the comparable
market sales since these transactions best
illustrate the behavior of investor/purchasers in
this marketplace. Investors' greater aversion to
risk in the market caused by the recent national
recession and credit constriction indicates that
the range of capitalization rates from the
comparables, which sold prior to this phase in the
economy may be optimistic. Therefore, from these
findings an overall rate of 9.00 percent was
chosen for application to the subject. This rate
is 1.0 percentage point lower than the terminal
capitalization rate utilized for the subject in
the preceding discounted cash flow analysis. The
direct capitalization method indicates a value of
$5,500,000 and is shown on the facing page.
INCOME APPROACH
CONCLUSION DCF Method..............................$5,500,000
Direct Capitalization Method............$5,500,000
Consideration is given to both the discounted cash
flow method and the direct capitalization
approach. These have been rounded to the nearest
ten thousand dollars, however, for purposes of the
income approach conclusion, the value is rounded
to the nearest fifty thousand.
From the above analysis provided by the Income
Approach, we estimate the leased fee market value
of the subject property on an "as is" all cash
basis, as of December 31, 1997, to be
FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000)
48
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $5,600,000
Income Approach $5,500,000
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
the market activity based on the willing buyer/willing
seller concept.
Eight recent sales, dating from May 1996 through August
1997 were utilized in the Sales Comparison Approach. Each
is similar to the subject property in several
characteristics including occupancy, location, age,
construction quality, amenities, and/or condition. The data
on the comparable sales was considered to be reasonably
accurate and reliable. The methods of comparison utilized
in this analysis were the net operating income per square
foot and per unit and the effective gross rental multiplier
(EGRM) methods. These indicators rely on a comparison of
income rather than physical attributes. Thus, adjustments
for physical factors are not necessary as economics are the
common denominator. A final market value estimate for the
subject was made based on the analysis presented in the
Sales Comparison Approach.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rents 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 from nearby similar properties, were considered to be
adequate. Because the Income Approach deals directly with
income streams, we believe it is a very good indication of
current market conditions. It tends to reflect a value,
which an investor of a property would anticipate.
In the Income Approach, comparable properties from the
subject's Southside Boulevard area were utilized when
deriving the subject property's economic market rents and
projected expenses. The Sales Comparison Approach also
contains sales from similar areas on the city's south and
southeast sides. For this reasoning, both the Sales
Comparison and Income Approaches are emphasized in the
final analysis with greater emphasis on the Income
Approach.
Therefore, it is our opinion that the market value of the
leased fee estate of the subject property on an "as is" all
cash basis, as of December 31, 1997, is
FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000)
49
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PHOTOS APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name The Links at Windsor Park
Address 13700 Sutton Park Drive North
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 08/97
Grantor (Seller) Windsor Park Apartments, Ltd.
Grantee (Buyer) Rancho Bernardo Corporate Center
Recorded Document 8726-846
Sale Price $20,500,000
Occupancy 95%
Sale Price per Unit $73,214
Sale Price per SF $69.11
Capitalization Rate 8.56%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $ 2,767,693
Vacancy/Collection Loss ($138,385)
Effective Gross Income $ 2,629,308
Operating Expenses $ (874,508)
Net Operating Income $ 1,754,800
PROPERTY DESCRIPTION
Year Built 1995
Number of Stories 2 and 3
Number of Units 280
Number of Bedrooms NA
Net Rentable Area 296,616 SF
Average Unit Size 1,059 SF
Land Area 23.36 acres
Unit Density 11.98 Units per Acre
Property Condition Excellent
Parking (type) Open
Construction Type Wood frame/Wood Siding/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments: Was completed in early 1995 and was in excellent
condition at time of sale. Complex amenities include
security fencing with remote entry gate, swimming pool,
sun deck, tennis courts, clubhouse with fitness center,
playground, and amenity lake with partial frontage
along golf course fairways. Units have installation
alarms, washer/dryer, appliances ceiling fans, window
coverings, and built-in bookcases.
<PAGE>
SAN PABLO
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name San Pablo
Address 14401 Jose Vedra Blvd..
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) N/A
Grantee (Buyer) N/A
Recorded Document N/A
Sale Price $5,350,000
Occupancy 90%
Sale Price per Unit $26,750
Sale Price per SF $28.96
Capitalization Rate 10.8%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,302,800
Vacancy/Collection Loss ($130,280)
Effective Gross Income $1,172,520
Operating Expenses ($589,370)
Net Operating Income $583,150
PROPERTY DESCRIPTION
Year Built 1974
Number of Stories 2
Number of Units 200
Number of Bedrooms 350
Net Rentable Area 184,750
Average Unit Size 924 SF
Land Area 14.24 acres
Unit Density 14.04 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Concrete block with masonry and wood veneer
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments San Pablo Apartments needed new plumbing system, wood
replacement, some roof replacement and other repairs at
time of sale. The property has tennis courts,
basketball courts, full size pool, and playground.
Expenses do not include reserves.
<PAGE>
HUNTER'S RIDGE
- --------------------------------------------------------------------------------
[PICTURES APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Hunter's Ridge (previously Oaks at Deerwood)
Address 10100 Baymeadows Road
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Oaks at Baymeadows II Associates, Ltd.
Grantee (Buyer) Mid-America Apartments of Duval, L.P.
Recorded Document 8653-596
Sale Price $15,200,000
Occupancy 92%
Sale Price per Unit $45,238
Sale Price per SF $51.54
Capitalization Rate 7.76%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,451,409
Vacancy/Collection Loss ($196,113)
Effective Gross Income $2,255,296
Operating Expenses $1,075,776
Net Operating Income $1,179,520
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms NA
Net Rentable Area 294,888 SF
Average Unit Size 878 SF
Land Area 34.70 acres
Unit Density 9.68 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Wood frame/Wood Siding/Shingle roof
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Property had a name change after the sale and is now
known as Hunter's Ridge. Clubhouse has a tile roof
covering and entry is paved with brick pavers. Well
landscaped and treed. Amenities include a pool with hot
tub, tennis courts, fitness facility in clubhouse, car
care center, racquet ball/volleyball court, outdoor
storage for each unit, mini-blinds, and washer/dryer
connections.
<PAGE>
WOODHOLLOW
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Woodhollow Apartments
Address 1715 Hodges Blvd.
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Woodhollow, LP
Grantee (Buyer) Mid-America Apartments, LP
Recorded Document 8590-2406
Sale Price $16,700,000
Occupancy 94%
Sale Price per Unit $37,111
Sale Price per SF $48.99
Capitalization Rate 9.60%
TERMS OF SALE Cash to mortgage of $10,350,000 @ 7.5%
Due in 7 years, based on 25 amortization schedule
INCOME/EXPENSE DATA
Potential Gross Income $3,245,490
Vacancy/Collection Loss ($194,729)
Effective Gross Income $3,050,761
Operating Expenses ($1,447,561)
Net Operating Income $1,603,200
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Units 450
Number of Bedrooms 690
Net Rentable Area 342,162 SF
Average Unit Size 760 SF
Land Area 38.65 acres
Unit Density 11.6 Units per Acre
Property Condition Average Plus
Parking (type) Open parking
Construction Type Wood frame
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments The cap rate does not include a deduction for reserves.
Amenities are a 6-acre lake, olympic size pool with
large cool deck, jacuzzi, 2 tennis courts, 2 volleyball
courts, BBQ and picnic areas, large playground, and a
gated boat storage.
<PAGE>
THE COURTS AT PONTE VEDRA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name The Courts at Ponte Verdra
Address 101 Vera Cruz Drive
City/County/State Ponte Vedra Beach, FL
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Windsor Apartments, L.P.
Grantee (Buyer) Metropolitan Life Insurance Corporation
Recorded Document 01220-01824
Sale Price $19,000,000
Occupancy 95%
Sale Price per Unit $75,099
Sale Price per SF $75.12
Capitalization Rate 8.34%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,734,426
Vacancy/Collection Loss ($136,721)
Effective Gross Income $2,597,705
Operating Expenses ($1,013,105)
Net Operating Income $1,584,600
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Units 253
Number of Bedrooms N/A
Net Rentable Area 252,916 SF
Average Unit Size 1,000 SF
Land Area 9.23 acres
Unit Density 27.41 Units per Acre
Property Condition Excellent
Parking (type) Open parking
Construction Type Wood frame/Masonry/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Built in late 1996 and sold on 95% proforma. Leasing
was ahead of schedule at time of sale. Complex was in
excellent condition. Property had very attractive
architectural design features at windows and roof
lines. Amenities include security gate entry, fountain,
brick pavers, lap pool, heated spa, and clubhouse with
business center. Property had higher unit density than
most projects in Ponte Vedra.
<PAGE>
THE HUNTINGTON AT HIDDEN MILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Huntington at Hidden Mills (formerly Cozumel)
Address 3333 Monument Road
Location East side of Monument Road, north of SR 10 (Atlantic
Blvd.)
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Date of Sale 8/8/96
Grantor (Seller) Private Syndication
Grantee (Buyer) Walden Residential
Recorded Document NA
Sale Price $7,225,000
Occupancy 98%
Sale Price per Unit $32,254.46
Sale Price per SF $40.26
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,356,839
Vacancy/Collection Loss 2.8% $37,991
Effective Gross Income $1,318,848
Operating Expenses $628,166
Net Operating Income $690,682
PHYSICAL DATA
Year Built 1986
Number of Stories 2-3
Number of Units 224
Number of Bedrooms 376
Net Rentable Area 179,476 SF
Average Unit Size 801 SF
Land Area 14.92 acres
Unit Density 15
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments Price adjusted upward by $350,000 for required re-
plumbing and was a credit given by the seller.
The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE ANTLERS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Antlers
Address 8433 Southside Blvd.
Location East side of Southside Blvd., south of J. Turner Butler
Blvd.
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Balcor
Grantee (Buyer) United Dominion Real Estate
Date of Sale 5/29/96
Sale Price $15,000,000
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $37,500.00
Sale Price per SF $45.77
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,752,915
Vacancy/Collection Loss 3.2% $88,093
Effective Gross Income $2,664,822
Operating Expenses $1,140,493
Net Operating Income $1,524,329
PHYSICAL DATA
Year Built 1985
Number of Stories 2-3
Number of Units 400
Number of Bedrooms 504
Site Area 42.51 acre(s)
Net Rentable Area 327,728 SF
Average Unit Size 819 SF
Land Area 42.51 acres
Unit Density 9.4
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
WESTLAND PARK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name Westland Park
Address 6710 Collins Road
Location North side of Collins Road, north of I-295
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Vestcor
Grantee (Buyer) United Dominion Real Estate
Sale Date 5/9/96
Sale Price $16,950,060
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $41,852.00
Sale Price per SF $42.06
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,929,883
Vacancy/Collection Loss 3.7% $ 108,406
Effective Gross Income $2,821,477
Operating Expenses $1,104,247
Net Operating Income $1,717,230
PHYSICAL DATA
Year Built 1989
Number of Stories 2-3
Number of Units 405
Number of Bedrooms 723
Net Rentable Area 403,010 SF
Average Unit Size 995 SF
Land Area 27.17
Unit Density 14.9
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
DEERBROOK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Project No. 97-075
Name of Project: Deerbrook
Street Address: 8025 Baymeadows Circle East
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Buildings: NA
Number of Stories: 2
Number of Units: 144
Net Rentable Area (SF): 175,064
Average Unit Size (SF): 1,216
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame with stucco and horizontal wood siding
and composition shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
40 lBR/l.5BA 875 $645-660 $0.737-0.754
40 2BR/2BA 1,206 745-770 0.618-0.638
40 2BR/2.5BA/TH 1,356 775-790 0.572-0.583
24 3BR/3BA/TH 1,566 935-950 0.597-0.607
</TABLE>
Unit Amenities: Fireplaces, microwave ovens, cove lighting in
kitchen, washer/dryer connections, some wet bars,
ceiling fans, vertical blinds, smoke detectors,
vaulted ceilings, screened porches.
Project Amenities: Patios/balconies, golf course and lake views,
weight room, swimming pool, party pavilion, 24-
hour maintenance, outside storage
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.63 Ave.
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $250
Pets Allowed/Deposit: Yes; $300 nonrefundable
Confirmed With: On-site management and ConAm's comparable survey
Date Confirmed: December 1997 Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Washer/dryer rentals at $30/month, lake views are
an added $10/month, and golf course views are
$15/month.
<PAGE>
ROYAL OAKS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Project No. 97-075
Name of Project: Royal Oaks Apartments
Street Address: 10023 Belle Rive Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1990
Number of Buildings: 15
Number of Stories: 2-3
Number of Units: 284
Net Rentable Area (SF): 264,280
Average Unit Size (SF): 931
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Stucco walls with tile roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------------
<S> <C> <C> <C> <C>
48 1BR/1BA 675 $555-595 $0.822-0.852
72 1BR/1BA 780 595-615 0.763-0.788
36 1BR/1BA 970 675-695 0.696-0.716
128 2BR/2BA 1,100 715-735 0.650-0.668
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
in units, miniblinds, fireplaces, outdoor
utility closets, patio/balconies, burglar
alarms
Project Amenities: 1 swimming pool, 1 tennis court, 1
racquetball court, jacuzzi, exercise/weight
room, clubroom, lake, volleyball court
ECONOMIC DATA
Percent Occupied: 94%
Avg. Monthly Rent/SF of NRA: $0.714
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $250
Pets Allowed/Deposit: Yes; $300-$405 nonrefundable
Confirmed With: On-site management and ConAm's comparable
survey
Date Confirmed: December 1997 Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates for each
individual floor plan are due to an
additional $20 per month for a third floor
location. The project also offers furnished
corporate units.
<PAGE>
SOUTHERN PINES
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Project No. 97-075
Name of Project: Southern Pines
Street Address: 10010 Belle Rive Boulevard East
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1989
Number of Buildings: NA
Number of Stories: 2
Number of Units: 200
Net Rentable Area (SF): 194,500
Average Unit Size (SF): 973
Parking Surface: Asphalt
Parking Spaces: Open parking and garages
Type of Construction: Wood frame/stucco with tile roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
60 lBR/lBA 750 $670-710 $0.893-0.947
120 2BR/2BA 1,040 805-835 0.774-0.803
20 3BR/2BA 1,235 940-960 0.761-0.777
</TABLE>
Unit Amenities: Washer/dryer, fireplaces, ceiling fans,
vaulted ceilings, microwaves, and oversized
screened patios.
Project Amenities: Clubhouse, fitness center, garages with
automatic openers, pool and spa, lighted
tennis court, and car wash
ECONOMIC DATA
Percent Occupied: 92%
Avg. Monthly Rent/SF of NRA: $0.816
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $200
Pets Allowed/Deposit: Yes; $350 nonrefundable
Confirmed With: On-site management and ConAm's comparable
survey
Date Confirmed: December 1997 Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Extra monthly charges for lake views and
garages are $20 and $75 respectively.
<PAGE>
THE RESERVE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Project No. 97-075
Name of Project: The Reserve (at Deerwood)
Street Address: 7632 Southside Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984/1997
Number of Buildings: NA
Number of Stories: 1
Number of Units: 226
Net Rentable Area (SF): 242,876
Average Unit Size (SF): 1,075
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame with horizontal wood siding and gable
composition shingle roof.
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------------
<S> <C> <C> <C> <C>
54 1BR/1BA 808 $655 $0.811
28 2BR/1BA 1,034 755 0.730
58 2BR/2BA 1,093 795 0.727
46 2BR/2BA/TH 1,143 815 0.713
40 3BR/2BA/TH 1,358 975 0.718
</TABLE>
Unit Amenities: Flats and town homes, intrusion alarms, 9 ft.
vaulted ceilings, washer/dryer, fireplaces,
microwaves, self-cleaning ovens, ceiling fans,
vertical mini blinds, private patios.
Project Amenities: Restricted gate access, clubhouse with exercise
room, interior racquet ball court, business
center, oversized pool with jacuzzi, lighted
tennis court, basketball court, sand volleyball
area, BBQ area, billiards room.
ECONOMIC DATA
Percent Occupied: 92%
Avg. Monthly Rent/SF of NRA: $0.737
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $250 of which $200 is refundable
Pets Allowed/Deposit: Yes; $300 nonrefundable
Confirmed With: On-site management and ConAm's comparable survey
Date Confirmed: December 1997 Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Resident pays water/sewer and places a $30
refundable deposit. Business Center has library
with personal computer, fax machine, copier, and
typewriter.
<PAGE>
STREET PARCEL - Together with the following described easement for ingress,
- -------------
egress, drainage and utilities.
A tract of land, in Section 24, Township 3 South, Range 27 East,
Jacksonville, Duval County, Florida. Said tract being more particularly
described as follows:
For point of reference, commence at the point of intersection of the
Northerly right of way line of Baymeadows Road (a 100-foot right of way, as now
established) with the Westerly right of way line of Southside Boulevard (State
Road No. 115, a 300-foot right of way, as now established), and run N-0 degrees
01' 50"W., along said Westerly right of way line, a distance of 4,395.00 feet to
a point of curvature for point of beginning.
From the point of beginning thus described, run a distance of 39.27
feet, along the arc of a curve, concave Southwesterly, and having a radius of
25.00 feet, a chord distance of 35.36 feet to the point of tangency of said
curve, the bearing of the aforementioned chord being N-45 degrees 01' 50"W.; run
thence S-89 degrees 58' 10"W, a distance of 146.66 feet to a point of curvature;
run thence a distance of 60.35 feet, along the arc of a curve, concave
Southeasterly, and having a radius of 182.00 feet, a chord distance of 60.08
feet to the point of tangency of said curve, the bearing of the aforementioned
chord being S-80 degrees 28 '10"W.; run thence S-70 degrees 58' 10"W. a distance
of 540.57 feet to a point of curvature; run thence a distance of 203.35 feet,
along the arc of a curve, concave Northeasterly, and having a radius of 274.14
feet, a chord distance of 198.72 feet to a point of reverse curvature, the
bearing of the aforementioned chord being N-87 degrees 46' 50"W.; run thence a
distance of 50.41 feet, along the arc of a curve, concave Southeasterly, and
having a radius of 50.00 feet, a chord distance of 48.30 feet to a point of
reverse curvature, the bearing of the aforementioned chord being S-84 degrees
35' 06"W.; run thence a distance of 515.81 feet, along the arc of a curve,
concave Northwesterly, and having a radius of 100.00 feet, a chord distance of
106.67 feet to a point of
[STAMP APPEARS HERE]
Page 4 of 5 Pages
<PAGE>
reverse curvature, the bearing of the aforementioned chord being 11-23 degrees
28' 10"E.; run thence a distance of 50.41 feet, along the arc of a curve,
concave Northeasterly, and having a radius of 50.00 feet, a chord distance of
48.30 feet to a point of reverse curvature, the bearing of the aforementioned
chord being S-37 degrees 38'46"E.; run thence a distance of 158.84 feet, along
the arc of a curve, concave Northerly, and having a radius of 214.14 feet, a
chord distance of 155.23 feet to the point of tangency of said curve, the
bearing of the aforementioned chord being S-87 degrees 46' 50"E.; run thence N-
70 degrees 58' 10"E. a distance of 663.77 feet to a point of curvature; run
thence a distance of 79.59 feet, along the arc of a curve, concave
Southeasterly, and having a radius of 240.00 feet, a chord distance of 79.22
feet to a point of tangency, the bearing of the aforementioned chord being N-80
degrees 28' 10"E.; run thence N-89 degrees 58' 10"E. a distance of 30.83 feet to
a point of curvature; run thence a distance of 39.27 feet, along the arc of a
curve, concave Northwesterly and having a radius of 25.00 feet, a chord distance
of 35.36 feet to the point of tangency of said curve with the Westerly right of
way line of aforementioned Southside Boulevard, the bearing of the
aforementioned chord being N-44 degrees 58' 10"E.; run thence S-0 degrees 01'
50"E., along said Westerly right of way line, a distance of 150.00 feet to the
point of beginning. The land thus described contains 2.2422 acres, more or less.
[STAMPS APPEARS HERE]
Page 5 of 5 Pages
<PAGE>
================================================================================
COMPLETE, SELF-CONTAINED
VALUATION
OF
VILLAGE AT THE FOOTHILLS I APARTMENTS
7333 NORTH MONA LISA ROAD
TUCSON, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 2
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: 97-079
================================================================================
<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........................................ 13
Site Analysis.................................................... 18
Improvements..................................................... 21
Highest and Best Use............................................. 24
Appraisal Procedures............................................. 27
Sales Comparison Approach........................................ 29
Income Approach.................................................. 33
Reconciliation................................................... 42
</TABLE>
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
B.A.C.H
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 17, 1998
Hutton/Con Am Realty Investors 2
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of Village at the Foothills I
Apartments, Tucson, Arizona; BRA: 97-079
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
TWO MILLION FOUR HUNDRED THOUSAND DOLLARS
($2,400,000)
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
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
appraisers. 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, 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, Stevan N. Bach, MIA 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 $2,400,000.
/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: Village at the Foothills I Apartments
7333 North Mona Lisa Road
Tucson, Arizona
Location: West side of North Mona Lisa Road just north of
Ina Road
BRA: 97-079
Legal Description: Irregular parcel in northeasterly portion of the
southeast quarter of the southwest quarter of and
a portion of the west half of the southwest
quarter of the southeast quarter lying west of
Mona Lisa Road containing 4.8 acres in Section 33-
12-13, Pima County, Arizona
Land Size: 4.8 acres or 209,088 square feet
Building Area: 58,018 square feet of net rentable area
Year Built: 1986
Unit Mix: 16 1BR/1BA at 780 square feet
18 2BR/2BA at 1,081 square feet
6 2BR/2BA at 1,190 square feet
20 1BR/1BA at 947 square feet
No. of Units: 60
Average Unit Size: 967 square feet
Physical Occupancy: 88 percent
Economic Occupancy: 86 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: $2,300,000
"As Is" Market Value by
Income Approach: $2,400,000
"As Is" Market Value
Conclusion: $2,400,000
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 seven 2-story apartment
buildings with 60 units and a total net rentable area of
58,018 square feet. It was constructed in 1986 on 4.8 acres.
It is identified as the Village at the Foothills I
Apartments located at 7333 North Mona Lisa Road. The complex
is situated along the west side of North Mona Lisa Road,
just north of Ina Road in Tucson, 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 of 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."
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 2. 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>
[AREA MAP OF TUCSON ARTERIAL STREETS APPEAR 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 collect 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 semiprivate 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 compound rate of 2.4
percent to 668,501 in 1990. Since 1990 the population has
also grown at an average annual
9
<PAGE>
compound rate of 2.5 percent to 794,933 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 compound
growth rate of about 1.8 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 expected to suffer huge
losses however, employment at the base 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 Hughes Corporation had been purchased by
Raytheon, one of the largest defense contractors in the
nation. 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 is 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 APPEARS 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 to not recreate the same
scenario of oversupply. Renewed consumer confidence, along
with the decline in mortgage interest rates are the primary
factors behind the strong sales performance. The commercial
sector continues to exhibit oversupply in all sectors,
retail, industrial, and office. However, with little new,
construction taking place all markets are improving and
equilibrium is forecasted within approximately 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 east or
west coast is expected to continue to lure
employers/employees as well as retirement in-migration.
NEIGHBORHOOD The subject is situated in the northwest portion of Tucson.
It is about 10 miles north of the Central Business District
(CBD). More specifically, it is situated along the west side
of North Mona Lisa Road. The neighborhood boundaries may be
defined as Thornydale Road to the west, La Canada Drive to
the east, Magee Road to the north, and Orange Grove Road to
the south.
The general area is sporadically developed with significant
vacant land available. The majority of vacant parcels are
large tracts and are north of the subject. The major
thoroughfares south of the subject area tend to include a
variety of residential and commercial development. Ina Road
to the south of the subject has a number of development
types such as restaurants, retail, office, and some
residential projects. This thoroughfare provides the most
extensive variety of commercial development to the subject
area. One of the most significant retail projects is the
Foothills Mall at Ina Road and LaCholla Boulevard, which is
anchored by Foley's and Dillard's. Neighborhood and
community centers along Ina Road include Heritage Plaza,
Drug Emporium Plaza, North Pima Center, and Gold Canyon
Plaza. Some of the older apartment complexes in the area on
Ina Road include the Foothill Shadows and Tierra Ricon. Some
of the newer apartment complexes include Casa Madera
situated just northeast of the subject on Mona Lisa Road,
Centre Point located about a mile west of the subject on Ina
11
<PAGE>
Road, and Catalina Canyon which was remodeled about a year
ago just east of the subject. Additionally, a second phase
of the Casa Madera Apartments was construction just east of
the subject.
Ina Road is an east/west artery, which connects the subject
area to other major thoroughfares and business centers. The
other east/west thoroughfares in the area, Cortaro Farms
Road/Magee Road and Orange Grove Road are sporadically
developed with mainly single-family residential. As a result
of the residential development, there are some support
facilities and amenities in proximity to the subject. These
include the Tucson National Golf Course to the northwest and
the Arthur Pack Desert Golf Course along Thornydale at
Overton Road. Schools within or near the neighborhood are
Mountainview High School and Tortolita Junior High School.
The residential development in the area is mainly middle- to
upper-income housing. In order to better understand the
general make-up of the subject area, we analyzed
demographics within a 3- and 5-mile radii of the immediate
subject area. According to this study, the population in the
neighborhood has grown significantly over the past decade.
The population estimates for 1990 were estimated at 37,440
within a 3-mile radius and 70,798 within a 5-mile radius.
Within 3 miles, the population during 1970-1980 experienced
a 324.64 percent increase and 74.81 percent from 1980 to
1990. Within a 5-mile radius, the population growth from
1970-1980 increased 207.00 percent and 55.64 percent from
1980 to 1990.
Residential units in the subject area within a 1-mile radius
are predominately owner-occupied as opposed to renter-
occupied (84 and 16 percent, respectively). These figures
are consistent with the impressions by visual inspection of
the area that there are a greater number of single-family
residences than apartment complexes. Estimated 1990 income
levels for households within a 1- and 3-mile radius of the
subject property indicate a median income of $37,413 and
$37,380 per year, respectively.
The education level of the area population is high and most
probably contributes to the income levels. Approximately 34
percent of the area residents are high school graduates and
27 percent have completed college. The population is
predominately between 25 and 44 years old with about 15
percent being 65 years and older.
NEIGHBORHOOD
CONCLUSION Overall, the subject neighborhood is projected to continue
to prosper in future years and it is estimated to be about
50 to 60 percent developed. The immediate area is mainly
developed with residential subdivisions and commercial
projects, which are situated along major thoroughfares. The
residential development in the area is geared toward middle-
to upper-income. Zoning helps regulate future development
patterns, and the neighborhood is believed to have a healthy
future. For the most part, the Village at the Foothills I
Apartments are perceived as being a positive attribute to
the area providing a quality multifamily facility well
screened by its extensive landscaping.
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 Northwest 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 in order 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 a
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.
AVERAGE RENT/SF EXCLUDING UTILITIES
-----------------------------------------------------
<TABLE>
<CAPTION>
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/lBA/DEN 0.62 ---- 0.62
2BR/lBA 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 AVERAGE ASKING
PROPERTY UNIT RENT/SF
SIZE/SF
--------------------------------------------------------
<S> <C> <C>
Tierra Catalina 1,171 $0.69
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 movement towards occupancy 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
16
<PAGE>
there remains a 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 west side of North Mona
Lisa Road, just north of Ina Road in Tucson, Pima County,
Arizona. It is more specifically situated at 7333 North
Mona Lisa Road.
SIZE AND SHAPE The site is irregularly shaped with a total of 4.8 acres
or 209,088 square feet. It has frontage on North Mona
Lisa Road.
ACCESS AND VISIBILITY The subject property is located along the west side of
North Mona Lisa Road, just north of Ina Road. The site is
situated about 10 miles north of the Tucson CBD and about
12 miles north 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 Interstate
Highway 10 to Ina road then east to North Mona Lisa Road.
Other major north/south thoroughfares which lead to Ina
Road are La Cholla, La Canada, and Oracle Roads.
North Mona Lisa Road provides immediate access to the
subject. The main entry to the complex is off this
thoroughfare. There is one curb cut along the north/south
artery providing access. This access street (Crystal Cave
Drive) is shared by Phases I and II-III. Access is also
available through Phase II and III on Capital Cave Drive
from Ina Road.
North Mona Lisa Road is a four-laned, asphalt-paved,
north/south artery with gravel shoulder and turn lanes.
It narrows to a two-lane road north a short distance from
the subject.
Ina Road is a four-laned, asphalt-paved, east/west artery
with concrete curbs, paved shoulder, and planted median
ZONING The subject property is zoned "CB-l" Local Business 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, research facility, a variety of retail,
service station, supermarket, service outlets, theater,
etc.
UTILITIES The site is serviced by the following authorities.
<TABLE>
<S> <C>
Electricity.................................................................Tucson Electric
Telephone........................................U.S. West Communications and Mountain Bell
Sewer...........................................................................Pima County
</TABLE>
18
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
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 subject lies within Zone C. Zone C is defined as
"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
northwest property line
. various water and sewer easements throughout the
property
. various access easements throughout the
property
RELATIONSHIP OF SITE
TO SURROUNDINGS North: Floodway and Desert Shadows Apartments
South: Village at the Foothills II and III
East: Windsail Apartments
West: Floodway and Desert Shadows Apartments
REAL ESTATE TAXES Real estate taxes and assessments for the Village
at the Foothills I 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 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 is $ 10.3696 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 $5.9941
per $100 of assessed value.
These tax rates are applied to the appropriate assessed
values in order to derive the total real estate taxes.
The following is the tax parcel number used to identify
the subject parcel, the 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>
225 43 03302 $203,820 $210,450 $33,749.90
</TABLE>
19
<PAGE>
In addition to the above referenced property taxes, the
property is subject to personal property taxes. In 1997, the
personal property taxes were $2,165.14. The total taxes for
the subject property for 1997 were $35,915.04. The total
real estate tax for the subject is projected in 1998 is
based on a 4 percent increase in the total 1997 tax amount
or $37,352 which equates to $0.64 per square foot.
CONCLUSION The subject site is irregularly shaped with 4.8 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 Mona Lisa Road. The subject is zoned
"CB-1" Local Business by the City of Tucson, 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. It is interconnected by interior roadways
or drives with Village of the Foothills II and III.
20
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 4.8-acre tract of land, is improved with
a two-story apartment project known as the Village at the
Foothills I. The improvements consist of 60 apartment units
contained in seven buildings constructed in 1986. Also
situated on the site is a clubhouse, swimming pool, and
covered parking.
There are four basic floor plans for the 60 apartment units.
The basic features of these floor plans are as follows:
<TABLE>
<CAPTION>
UNIT TYPE NO. OF UNITS DESCRIPTION SIZE (SF) TOTAL SF
-----------------------------------------------------------
<S> <C> <C> <C> <C>
A 16 1BR/1BA 780 12,480
B 18 2BR/2BA 1,081 19,458
C 6 2BR/2BA/TH 1,190 7,140
D 20 1BR/1BA/DEN 947 18,940
-- ----- ------
60 967 58,018
</TABLE>
Please note the reported net rentable area (58,018 square
feet) of the subject property has changed slightly from
previous reports (previously 58,042 square feet) due to a
change in the reported size of Unit C from 1,194 to 1,190
square feet, based on the subject rent roll dated 11/7/97
provided by the property owner. As seen in the figures
above, the total net rentable area of 58,018 square feet and
a total of 60 apartment units result in an average of 967
square feet per unit. There are a total of 36 one-bedroom
units and 24 two-bedroom units.
The land area is 4.8 acres, resulting in a density of 12.50
units per acre. The parking consists of approximately 98
spaces, of asphalt construction, which is 1.6 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 composition built-up roofs 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 metal handrails.
21
<PAGE>
INTERIOR FINISHES
Living, Dining,
and Bedrooms: Painted and textured gypsum board walls and ceilings,
carpeting over pad, hollow-core wood doors, miniblinds,
incandescent lighting, and fireplaces.
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 oven, and
dishwasher.
PLUMBING Adequate and meets city code.
HVAC 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, and
clubhouse.
LANDSCAPING Extensive mature landscaping.
AGE AND CONDITION The effective age of the subject is eleven years which
approximates the actual age and the remaining economic life
is estimated to be 29 years.
SITE AREA 4.8 acres or 209,088 square feet.
DEFERRED
MAINTENANCE Visual inspection of the property as well as estimates by
the ConAm management revealed a few items of deferred
maintenance. Some of these include appliance repair,
replacement of flooring and drapes, furniture and fixture
repair, air-conditioning and equipment repair, painting,
interior repairs, parking lot repairs, roof repairs, and
replacement of water heaters. The deferred maintenance was
estimated at $50,000 and is delineated below.
<TABLE>
<CAPTION>
CATEGORY COST CATEGORY COST
============================== ============================
<S> <C> <C> <C>
Appliance $ 1,200 Landscape $ 4,000
Carpet 10,800 Exterior Paint 3,000
Major RDC 1,000 Asphalt Repair 4,000
Window Cover 360 Stairs Repair 1,500
Furniture 900 Roof 16,000
Air Conditioning 3,200 Water Heaters 1,200
-------
General Interior 1,200 Total Rounded $50,000
</TABLE>
22
<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 eleven years with
a remaining economic life of 29 years.
23
<PAGE>
================================================================================
[FLOOR PLAN APPEARS HERE]
================================================================================
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of entry drive, monument sign, and exterior of units
[PICTURE APPEARS HERE]
Exterior view of units.
<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 "CB-1" Local Business 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, research facility, a variety of retail,
service station, supermarket, service outlets, theater, etc.
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 4.8
acres, allowing for some flexibility in developing the site.
It has frontage along the west side of North Mona Lisa Road.
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.
24
<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 Northwest submarket, which is
experiencing an overall annual vacancy of about 7.6 percent.
Physical vacancy at the subject property is 12 percent. The
average vacancy level has increased in the submarket
significantly from 3.9 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 most complexes are offering rent concessions.
The average rents in the submarket range from $0.62 to $0.82
per square foot depending on the size and age of each unit.
The average rental rate at newer complexes typically ranges
from $0.75 to $1.00 per square foot, which is within the
feasible range in which to build. However, as previously
mentioned the market has experienced an abundance of new
construction and projects are offering rent concessions of
up to one month free. Therefore, given the amount of new
supply, 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 the 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 would produce the highest net return over
the longest period of time. The site's location along the
west side of North Mona Lisa Road gives it good access and
visibility within an affluent 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.
LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site utilized for apartment use is reasonable
since it is a legal use.
25
<PAGE>
PHYSICAL POSSIBILITY - Based on the subject's land size (4.8
acres), 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 12.50 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 some less than state of
the arts amenities, while new apartments have such
amenities..
26
<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 appraiser, in applying the tools of analysis to the
valuation problem, seeks to simulate the thought process of
the most probable decision-maker. The appraiser's 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.
27
<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.
28
<PAGE>
================================================================================
[IMPROVED SALES MAP]
================================================================================
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TUCSON AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE NAME/LOCATION SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVEALL
NO. 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 Creek 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 1986 60 58,018 88% $3.99
Village at the Foothills I 967 $3,860
7333 North Mona Lisa Road
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.
29
<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 reflects 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 $3.99 per square
foot or $3,860 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 $51.23 NA $3.99 NA NA
2 48.22 NA $3.99 NA NA
3 45.26 NA $3.99 NA NA
4 48.84 4.88 $3.99 .81762 39.93
5 53.34 5.87 $3.99 .67972 36.26
6 41.14 4.11 $3.99 .97080 39.94
7 42.55 NA $3.99 NA NA
8 40.57 3.97 $3.99 1.00504 40.77
9 50.67 4.77 $3.99 .83648 42.38
10 45.04 4.23 $3.99 .94326 42.48
</TABLE>
30
<PAGE>
After adjustments, the sales reflected a range in value for
the subject from $36.26 to $42.48 per square foot. Sales 6
and 8 have the most similar net operating incomes per square
foot and they reflect values of $39.94 and $40.77 per square
foot. Placing emphasis on these sales, tempered with the
other sales, a value of $40.50 per square foot is estimated
for the subject. From this value the $50,000 in deferred
maintenance is deducted to arrive at the "as is" value of
the subject. The calculation is shown below.
<TABLE>
<CAPTION>
<S> <C>
58,018 SF x $40.50/SF......................... $2,349,729
Less Deferred Maintenance..................... (50,000)
Rent Loss..................................... (21,446)
-------
"As Is" Value via NOI/SF...................... $2,278,283
Rounded $2,300,000
</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 $3,860 NA NA
2 52,787 NA 3,860 NA NA
3 28,148 NA 3,860 NA NA
4 26,815 2,682 3,860 1.43922 $38,593
5 29,343 3,228 3,860 1.19579 $35,088
6 33,457 3,346 3,860 1.15362 $38,597
7 30,731 NA 3,860 NA NA
8 34,394 3,367 3,860 1.14642 $39,430
9 45,910 4,324 3,860 .89269 $40,983
10 50,134 4,710 3,860 .81953 $41,086
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $35,088 to $41,086 per unit. Sales 8 and 9
reflected the most similar NOI per unit to the subject and
had adjusted values of $39,430 and $40,983 per unit. Based
on all the data, we estimated a value for the subject of
$39,000 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>
60 units x $40,000/unit......................... $2,400,000
Less: Deferred maintenance...................... (50,000)
Rent Loss....................................... (21,446)
------
Value via NOI Price/Unit Method................. $2,328,554
Rounded........ $2,300,000
</TABLE>
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
31
<PAGE>
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 88% 45.13%
</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 5.8 is reasonable for the
subject considering the subject's quality and expense ratio.
Applying the 5.8 EGIM to the subject's stabilized effective
gross income, and deducting for deferred maintenance,
results in the following value indication.
<TABLE>
<CAPTION>
<S> <C>
$422,099 x 5.80.................................$2,448,174
Less: Deferred maintenance...................... (50,000)
Rent Loss....................................... (21,446)
Value via EGIM Method...........................$2,376,728
----------
Rounded $2,400,000
</TABLE>
CONCLUSION The NOI per square foot and per unit methods each presented
a value indication of $2,300,000 and the effective gross
income multiplier method indicated a value of $2,400,000.
Weight has been given to the net operating income
comparisons because this method reflects both income and
expense information. 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
TWO MILLION THREE HUNDRED THOUSAND DOLLARS
($2,300,000)
32
<PAGE>
[MAP OF COMPARABLE RENTALS APPEAR 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.
- ------------------------------------------------------------------------------------------------------------------------------------
1 Tierra Catalina 1983 120 1,171 99% 1BR/1BA 900 $640-730 0.71-0.81
3201 E Skyline Drive 1BR/1BA 916 625-680 0.68-0.74
2BR/2BA 1,207 790 0.65
2BR/2BA 1,233 850-950 0.69-0.77
2BR/2BA/TH 1,304 890-950 0.68-0.73
3BR/2BA/TH 1,525 9501,070 0.62-0.70
- ------------------------------------------------------------------------------------------------------------------------------------
2 L'Auberge Canyon View 1987 264 1,019 96% 1BR/1BA 724 $725 1.00
6650-55 N Kolb Road 2BR/2BA 909 775 0.85
2BR/2BA 1,049 825 0.79
2BR/2BA 1,095 875 0.80
3BR/2BA 1,223 1,010 0.82
3BR/2BA 1,243 1,010 0.81
3BR/2BA 1,291 1,010 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Greens at Ventana 1986 265 1,011 89% 1BR/1BA/DEN 818 $714 0.87
5800 N Kolb Road 1BR/1BA/DEN 847 740 0.87
2BR/2BA 945 775 0.82
2BR/2BA 974 739 0.76
2BR/2BA 1,018 787-837 0.77-0.82
2BR/2BA 1,050 800 0.76
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
4700 N Kolb Rd. 1BR/1BA 616 500 0.81
1BR/1BA 686 510 0.74
1BR/1BA 767 560 0.73
2BR/1BA 984 650 0.66
2BR/2BA 995 710 0.71
2BR/2BA 1,001 735 0.73
3BR/2BA 1,200 799 0.67
- ------------------------------------------------------------------------------------------------------------------------------------
5 Villa Sin Vacas 1985 72 1,114 90's% 1BR/1BA/DEN 930 835 0.90
7601 N. Calle Sin Envidia 2BR/2BA 1,195 1,050 0.88
3BR/2BA 1,458 1,200 0.82
- ------------------------------------------------------------------------------------------------------------------------------------
6 Colonia Del Rio 1985 176 1,010 90's% 1BR/1BA 713 560 0.79
4601 N. Via Entrada 1BR/1BA 796 590 0.74
1BR/1BA 1,022 655 0.64
2BR/1BA 1,068 680 0.64
2BR/2BA/TH 1,170 795 0.68
3BR/2BA 1,345 795-810 0.59-0.60
====================================================================================================================================
<CAPTION>
- -------------------------------------------------------------------------------
NO. NAME/LOCATION AMENITIES/COMMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
1 Tierra Catalina Amenities include a swimming pool, spa,
3201 E Skyline Drive tennis court, clubroom, covered parking,
washer/dryer hooks-ups, microwave,
fireplace.
Concessions: None
- -------------------------------------------------------------------------------
2 L'Auberge Canyon View Amenities include a swimming pool, tennis
6650-55 N Kolb Road court, washer/dryer, microwave, fireplace,
jacuzzi, clubroom, and covered parking.
Concessions: None
- -------------------------------------------------------------------------------
3 The Greens at Ventana Amenities include 3 swimming pools, spa,
5800 N Kolb Road washer/dryer, microwave, fireplace, club-
room, and covered parking.
Concessions: One-half month free.
- -------------------------------------------------------------------------------
4 The Arboretum Amenities include 3 swimming pools, club-
4700 N Kolb Rd. room, exercise room, laundry facilities,
washer/dryer hook-ups, fireplace, and
covered parking.
Concessions: One-half month free rent.
$175 off if deposit on 1/st/ visit.
- -------------------------------------------------------------------------------
5 Villa Sin Vacas Amenities include washer dryer, fireplace,
7601 N. Calle Sin Envidia microwave, covered parking, clubhouse,
pool.
Concessions: None
- -------------------------------------------------------------------------------
6 Colonia Del Rio Amenities include washer/dryer,
4601 N. Via Entrada microwave, pool covered parking,
fireplace, exercise facility, playground, spa
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.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 Boulders at La Reserve 1995 240 999 N/A 1BR/1BA 725 595 0.82
1500 E. Pusch Wilderness 1BR/1BA/DEN 929 655 0.71
2BR/2BA 1,057 740 0.70
3BR/2BA 1,268 860 0.68
- ------------------------------------------------------------------------------------------------------------------------------------
8 La Reserve Villas 1988 240 900 90's% 1BR/1BA 697 580 0.83
10700 N. La Reserve 2BR/2BA 943 690 0.73
2BR/2BA 957 750 0.78
3BR/2BA 1,111 875 0.79
- ------------------------------------------------------------------------------------------------------------------------------------
9 Legends at La Paloma 1995 312 1,034 90's% 1BR/1BA 745 675 0.91
3750 E. Via Palomita 2BR/2BA 1,036 795 0.77
3BR/2BA 1,258 975 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
10 Skyline Bel Aire 1979 137 1,125 90's% 1BR/1BA/DEN 968 615 0.64
6255 Camino Pimeria Alta 2BR/2BA 1,263 815 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
11 Pinnacle Canyon 1995 225 1,017 98% 1BR/1BA 795 650 0.82
7050 E. Sunrise Road 1BR/1BA 840 675 0.80
2BR/2BA 1,124 775 0.69
2BR/2BA 1,152 800 0.69
3BR/2BA 1,351 935 0.69
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT PROPERTY 1986 60 967 88% 1BR/1BA 780 529 0.68
Village at Foothills I 1BR/1BA/DEN 947 629 0.66
7333 North Mona Lisa 2BR/2BA 1,081 659 0.61
Road 2BR/2BA/TH 1,190 759 0.64
====================================================================================================================================
<CAPTION>
NO. NAME/LOCATION AMENITIES/COMMENTS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
7 Boulders at La Reserve Amenities include pool, spa, washer/dryer,
1500 E. Pusch Wilderness microwave, some fireplaces, garages, fitness
center
Concessions: 1/2 mo. free rent on 1-2BR and
1 mo. free rent on 3BR with 12 mo. lease.
- ----------------------------------------------------------------------------------------
8 La Reserve Villas Amenities include 2 pools, spa,
10700 N. La Reserve washer/dryer, microwave, some fireplaces,
fitness center, clubhouse.
Concessions: None
- ----------------------------------------------------------------------------------------
9 Legends at La Paloma Amenities include 2 pools, spa,
3750 E. Via Palomita washer/dryer, microwave, fireplace, fitness
center, clubhouse.
Concessions: 1 mo. free
- ----------------------------------------------------------------------------------------
10 Skyline Bel Aire Amenities include pool, spa, 2 tennis courts,
6255 Camino Pimeria Alta washer/dryer, fireplace, covered parking,
clubhouse.
Concessions: 1 BR $590/mo.; $300 off first
mo. on a 12 mo. lease and $150 off first mo.
on a 6 mo. lease.
- ----------------------------------------------------------------------------------------
11 Pinnacle Canyon Amenities include pool, spa, washer/dryer,
7050 E. Sunrise Road microwave, built in TV, garages available,
clubhouse, exercise facility, computer
center
Concessions: 1 mo. free for 12 mo. lease.
- ----------------------------------------------------------------------------------------
SUBJECT PROPERTY Amenities include a swimming pool, tennis
Village at Foothills I court, spa, clubroom, and covered parking.
7333 North Mona Lisa
Road
========================================================================================
</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 MO. TOTAL
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1BR/lBA 16 780 $529 $0.68 $ 8,464
1BR/lBA/Den 20 947 629 0.67 12,580
2BR/2BA 18 1,081 659 0.51 11,862
2BRI2BA/TH 6 1190 759 0.64 4,554
-- ----- ---- ----- -------
60 967 $624 $0.65 $37,460
</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 comparable. They range in total size from 80,178 to
402,272 square feet, in
33
<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 780 $529 $0.68
L'Auberge Canyon View 1BR/1BA 724 725 1.00 Supenor
Greens at Ventana 1BR/1BA/DEN 818 714 0.87 Superior
Tierra Catalina 1BR/1BA 900 640 0.71 Comparable
The Arboretum 1BR/1BA 767 560 0.73 Comparable
Colonia Del Rio 1BR/1BA 796 590 0.74 Comparable
Boulders at La Reserve 1BR/1BA 725 595 0.82 Superior
La Reserve Villas 1BR/1BA 697 580 0.83 Superior
Legends at La Paloma 1BR/1BA 745 675 0.91 Superior
Pinnacle Canyon 1BR/1BA 795 650 0.82 Superior
- -----------------------------------------------------------------------------------------------------------------
SUBJECT 1BR/1BA/DEN 947 629 0.67
Tierra Catalina 1BR/1BA 916 680 0.74 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 Superior
Skyline Bel Aire 1BR/1BA/DEN 968 615 0.64 Comparable
- -----------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,081 659 0.61
L'Auberge Canyon View 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Superior
Tierra Catalina 2BR/2BA 1,207 790 0.65 Comparable
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Supenor
Colonia Del Rio 2BR/1BA 1,068 680 0.64 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Superior
La Reserve Villas 2BR/2BA 957 750 0.78 Superior
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Superior
Pinnacle Canyon 2BR/2BA 1,124 775 0.69 Superior
- -----------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/TH 1,190 759 0.64
L'Auberge Canyon 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Superior
Tierra Catalina 2BR/2BA/TH 1,304 890 0.68 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/2BA/TH 1,170 795 0.68 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Superior
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Superior
Skyline Bel Aire 2BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 2BR/2BA 1,124 775 0.69 Superior
=================================================================================================================
</TABLE>
<PAGE>
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 previous pages.
All of the comparables surveyed were located within the
subject's general vicinity. 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 average quoted rental rates from $0.68
to $0.73 per square foot per month. The other projects were
relatively comparable to the subject and were used as
additional indications of market rents in the subject's
area.
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 immediate area of the
subject have recently opened; therefore, rents are not
expected to increase over the short term. In fact, rent
concessions are being offered at most of the new projects.
The current asking average monthly rent for the subject is
$0.65 per square foot. The average contract rent for the
subject at $0.60 per square foot is slightly less than the
average quoted rent. This spread in rents is typical in a
competitive market with changing rental rates due to the
time lag in tenant turnover. However, as leases expire and
tenants re-lease at market rates, this spread should narrow.
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 88 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>
lBR/lBA 16 780 12,480 $529 $ 8,464 $0.68
lBR/lBA/Den 20 947 18,940 629 12,580 0.66
2BR/2BA 18 1,081 19,458 659 11,862 0.61
2BR/2BA/TH 6 1,190 7,140 759 4,554 0.64
---- ----- ------ ---- ------- -----
60 967 58,018 $624 $37,460 $0.65
</TABLE>
Gross Annual Rental Income: $37,460 x 12 months - $449,520
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 $6,813 or $0.12 per square
foot. This figure dropped during 1992 to $4,976 or $0.09 per
square foot. It increased to $6,174 or $0.11 per square foot
in 1993, to $7,766 or $0.13 per square foot in 1994, to
$9,374 or $0.16 per square foot in 1995 and 1996. The
annualized figures for 1997 (including actual figures for
January through October and budgeted figures for November
and December) reflect a total of $11,135 or $0.19 per square
foot for this category. Based on our experience with similar
type properties and the actual performance of the property,
it is our opinion that other income of $0.16 per square foot
before vacancy is reasonable. This is typical for a project
such as the subject.
34
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
VILLAGE AT THE FOOTHILLS I APARTMENTS
HISTORICAL EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1992 ACTUAL 1993 ACTUAL 1994 ACTUAL 1995 ACTUAL 1996 ANNUALIZED 1997
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 $0.49 $ 474 $0.48 $ 467 $0.48 $ 468 $0.53 $ 509 $0.54 $ 523 $0.55 $ 534
Insurance 0.06 57 0.06 61 0.06 62 $0.07 $ 69 $0.07 $ 70 $0.07 $ 70
Personnel 0.49 470 0.53 512 0.58 562 $0.65 $ 624 $0.64 $ 615 $0.66 $ 638
Utilities 0.41 401 0.43 420 0.47 459 $0.54 $ 520 $0.60 $ 576 $0.60 $ 577
Repairs & Maintenance 0.34 332 0.34 332 0.44 426 $0.47 $ 453 $0.42 $ 409 $0.42 $ 407
Contract Services 0.13 128 0.12 114 0.13 125 $0.20 $ 192 $0.19 $ 184 $0.21 $ 200
General Administrative 0.06 62 0.06 62 0.07 63 $0.08 $ 79 $0.18 $ 175 $0.23 $ 222
Management 0.29 282 0.31 297 0.33 317 $0.35 $ 335 $0.35 $ 338 $0.34 $ 325
----- ------- ----- ------ ----- ------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $2.28 $2 ,206 $2.34 $2,264 $2.57 $2,482 $2.88 $2,781 $2.99 $2,890 $3.08 $2,974
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================
COMPARABLE
EXPENSE ANALYSIS
- -----------------------------------------------------------------------------------------------
COMPARABLE 1 2 3 BRA PROJECTIONS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Year 1997 1997 1997 1998
NRA 116,036 140,564 167,500 58,018
No. Units 120 120 168 60
Year Built 1986 1983 1985 1986
Average Unit Size (SF) 967 1171 997 967
<CAPTION>
- -----------------------------------------------------------------------------------------------
EXPENSES CATEGORY 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>
Real Estate Taxes $0.59 $ 570 $0.65 $ 759 $0.60 $639 $0.64 $623
Insurance 0.07 69 0.05 57 0.06 61 0.07 $ 70
Personnel 0.65 625 0.64 753 0.57 567 0.62 $603
Utilities 0.59 575 0.50 588 0.39 387 0.52 $503
Repairs & Maintenance 0.39 376 0.38 451 0.43 431 0.48 $463
Contract Services 0.18 176 0.19 222 0.09 93 0.19 $181
General Administrative 0.12 113 0.26 308 0.21 212 0.08 $ 80
Management 0.34 326 0.36 407 0.35 350 0.36 $344
- -----------------------------------------------------------------------------------------------
TOTAL EXPENSES $2.93 $2,830 $3.03 $3,545 $2.70 $2,740 $2.96 $2,867
===============================================================================================
</TABLE>
<PAGE>
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied:
Gross Rental Income $449,520
Other Income ($0.16/SF) 9,283
--------
Total Potential Gross Income $458,803
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 Northwest area
had an annual physical vacancy of 7.6 percent in the
Third Quarter 1997 and the overall market was
reportedly at 8.7 percent. Quarterly vacancies tend to
fluctuate as a result of a seasonal decline in demand
during 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 established direct competition, the
current physical vacancies ranged from 1 to 11 percent.
Currently, the subject reportedly has a 12 percent
physical vacancy and the subject's economic vacancy
given current market rents was 14 percent. The primary
difference between the physical and economic vacancy is
due to the below market contract rents. Therefore,
given this data we have projected a 10 percent economic
vacancy in Fiscal Year 1998. In Fiscal Year 1999 and
each subsequent year the economic vacancy is projected
to be 8 percent. The economic vacancy is not expected
to improve beyond this level due to the number of new
projects, which have recently been completed or are
under construction.
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 1996 expenses reported by
three "individually metered" comparable projects, as
well as the subject property's actual expenses from
1992 to 1996, annualized 1997 expenses (including
actual monthly figures for the period from January
through October and budgeted numbers for November and
December), and Bach Realty Advisors' 1998 projections.
35
<PAGE>
REAL ESTATE TAXES - The Pima County Assessor's Office
coordinates the real estate taxes for the Village at the
Foothills I. The property is subject to a number of
different taxing authorities and there are two assessments.
In 1997, the limited cash value assessment was $203,820 and
the full cash value assessment was $210,450. Additionally,
the subject property personal property assessment was
$135,000. The total property tax in 1997 was $35,915.04 or
$0.62 per square foot. Based on this information and an
expected increase, we have projected the real estate taxes
for the first year of our projection at $37,352 or $0.64 per
square foot. 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 1993, $0.06 per square foot in
1994, $0.07 per square foot in 1995, and $0.7 per square
foot in 1996. The annualized expenses for 1997 reflect this
expense at $0.07 per square foot. The comparables reflected
this expense between $0.05 and $0.07 per square foot. Based
on this data, we estimated insurance at $0.07 per square
foot in the first year or $4,224. 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 $0.65 per square foot.
Annualized figures for the subject in 1997 indicate this
expense at $0.66 per square foot. The subject's actual
figures for 1993, 1994, 1995, and 1996 were $0.53, $0.58,
$0.65, and $0.64 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
$36,203 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
$0.43, $0.47, $0.54, and $0.60 per square foot,
respectively. Annualized figures for 1997 indicate this
expense at $0.60 per square foot. The comparables indicated
a range from $0.39 to $0.59 per square foot. Based on this
data, we have estimated this expense at $0.52 per square
foot, or $30,169. 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 $0.38 to $0.43 per square
foot. Annualized figures for 1997 indicate this expense at
$0.42 per square foot, while actual figures for 1993, 1994,
36
<PAGE>
1995, and 1996 were $0.34, $0.44, $0.47, and $0.42 per
square foot, respectively. Due to the age, overall
condition, and the ongoing maintenance at the subject
property, an estimate of $0.48 per square foot or $27,756
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 $0.18 per square foot, respectively. The
subject's actual figures for 1993, 1994, 1995, and 1996 were
$0.12, $0.13, $0.20, and $0.19 per square foot,
respectively. Annualized figures for 1997 indicate this
expense at $0.21 per square foot. We have estimated this
expense for the subject at $0.19 per square foot or $10,861
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 $0.26 per square foot. Actual
figures for the subject in 1993, 1994, 1995, and 1996 were
$0.06, $0.07, $0.08, and $0.18 per square foot,
respectively. Annualized expenses for 1997 were $0.23 per
square foot. We have estimated this expense for the subject
at $0.08 per square foot or $4,827. 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 $0.36
per square foot. The subject's expense in 1993, 1994, 1995,
and 1996 appear reasonable at $0.31, $0.33, $0.35, and $0.35
per square foot, respectively. Annualized expenses for 1997
were $0.34 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 $2.28 per square foot in
1992, $2.34 per square foot in 1993, $2.57 per square foot
in 1994, $2.88 per square foot in 1995, and $2.99 in 1996.
Annualized expenses for 1997 are $3.08 per square foot and
$2,973 per unit. The comparables ranged from $2.70 to $3.03
per square foot and from $2,740 to $3,549 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 is $2.96 per square foot or
$2,867 per unit.
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
1986 and appears to have had ongoing maintenance
37
<PAGE>
since its construction. It is our opinion that a
reserve allowance of $300 per unit or about $0.31 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 $50,000.
This includes appliance repair and replacement, carpet
replacement, window covering replacement, interior
repairs, roof repairs, air conditioning and equipment
repair, pool repair, 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
38
<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.
<TABLE>
<CAPTION>
Sale Identification Sale Date Capitalization Rate
----------------------------------------------------------------
<S> <C> <C> <C>
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%
</TABLE>
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 before capital items.
CASH FLOW ASSUMPTIONS . Rents were based on an average current rental rate
of approximately $0.65 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
39
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
VILLAGE AT THE FOOTHILL ST APARTMENTS
Fiscal Year Ending 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Apt. Rents 449,520 467,501 486,201 505,649 525,875 546,910 568,786 591,538 615,199
Rent/SF/Mo. 0.646 0.671 0.698 0.726 0.755 0.786 0.817 0.850 0.884
Other Income/Yr. 9,283 9,654 10,040 10,442 10,860 11,294 11,746 12,216 12,704
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross Income 458,803 477,155 496,241 516,091 536,734 558,204 580,532 603,753 627,903
% Vacancy 10.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Vacancy Allowance 45,880 38,172 39,699 41,287 42,939 44,656 46,443 48,300 50,232
------- ------- ------- ------- ------- ------- ------- ------- -------
Effective Gross Income 412,923 438,983 456,542 474,804 493,796 513,548 534,089 555,453 577,671
-------------
Expenses: $/UNIT $/SF
-------------
Real Estate Taxes 623 0.64 37,352 38,846 40,400 42,016 43,697 45,444 47,262 49,153 51,119
-------------
Insurance 70 0.07 4,224 4,393 4,568 4,751 4,941 5,139 5,344 5,558 5,780
-------------
Personnel 603 0.62 36,203 37,651 39,157 40,724 42,353 44,047 45,809 47,641 49,547
-------------
Utilities 503 0.52 30,169 31,376 32,631 33,936 35,294 36,706 38,174 39,701 41,289
-------------
Repairs and Maintenance 463 0.48 27,756 28,866 30,021 31,222 32,470 33,769 35,120 36,525 37,986
-------------
Contract Services 181 0.19 10,861 11,295 11,747 12,217 12,706 13,214 13,743 14,292 14,864
-------------
General Administrative 80 0.08 4,827 5,020 5,221 5,430 5,647 5,873 6,108 6,352 6,606
-------------
Management Fee 5.00% 0.36 20,646 21,949 22,827 23,740 24,690 25,677 26,704 27,773 28,884
-------------
Reserves for Replacement 300 0.31 18,000 18,720 19,469 20,248 21,057 21,900 22,776 23,687 24,634
------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Expenses 190,038 198,117 206,042 214,283 222,855 231,769 241,040 250,681 260,708
Per SF 3.28 3.41 3.55 3.69 3.84 3.99 4.15 4.32 4.49
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Operating Income 222,884 240,866 250,500 260,520 270,941 281,779 293,050 304,772 316,963
Per SF 3.84 4.15 4.32 4.49 4.67 4.86 5.05 5.25 5.46
Capital Items: 50,000 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Cash Flow 172,884 240,866 250,500 260,520 270,941 281,779 293,050 304,772 316,963
-------- -------- -------- -------- -------- -------- -------- -------- --------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270 0.438462 0.389744 0.346439
Present Value of Cash Flow 153,675 190,314 175,934 162,641 150,353 138,993 128,491 118,783 109,808
NOI in 10th Year 342,827 Present Value of Income Stream 1,430,505
Ro at Reversion 10.50% Present Value of Reversion 955,177
--------- -------------------------------------------------
Indicated Reversion 3,265,018 Indicated Value of Subject 2,385,682
Less: Sales Costs 5.00% 163,251 Indicated Value/SF 41.12
---------
Indicated Value/Unit 39,761
Reversion in 10th Yr 3,101,767 GIM at Indicated Value (rent income 5.31
only)
Ro at Indicated Value 9.34%
-------------------------------------------------
<CAPTION>
==========================================================================================
VILLAGE AT THE FOOTHILL ST APARTMENTS
Fiscal Year Ending 2007 2008
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME:
Apt. Rents 639,807 655,399
Rent/SF/Mo. 0.919 0.956
Other Income/Yr. 13,212 13,741
-------- --------
Gross Income 653,020 679,140
% Vacancy 8.00% 8.00%
Vacancy Allowance 52,242 54,331
-------- --------
Effective Gross Income 600,778 624,809
-------------
Expenses: $/UNIT $/SF
-------------
Real Estate Taxes 623 0.64 53,164 55,290
-------------
Insurance 70 0.07 6,012 6,252
-------------
Personnel 603 0.62 51,528 53,590
-------------
Utilities 503 0.52 42,940 44,658
-------------
Repairs and Maintenance 463 0.48 39,505 41,085
-------------
ContractServices 181 0.19 15,459 16,077
-------------
General Administrative 80 0.08 6,870 7,145
-------------
Management Fee 5.00% 0.36 30,039 31,240
-------------
Reserves for Replacement 300 0.31 25,620 26,644
------------- -------- --------
Total Expenses 271,137 281,982
Per SF 4.67 4.86
-------- --------
Net Operating Income 329,641 342,827
Per SF 5.68 5.91
Capital Items: 0 0
-------- --------
Cash Flow 329,641 342,827
-------- --------
Present Value Factor 12.50% 0.307946 0.000000
Present Value of Cash Flow 101,512 0
NOI in 10th Year
Ro at Reversion
Indicated Reversion
Less: Sales Costs 5.00%
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 $172,884 0.888888889 $ 153,675
1999 240,866 0.790123457 190,314
2000 250,500 0.702331962 175,934
2001 260,520 0.624295077 162,641
2002 270,941 0.554928957 150,353
2003 281,779 0.493270184 138,993
2004 293,050 0.438462386 128,491
2005 304,772 0.389744343 118,783
2006 316,963 0.346439416 109,808
2007 329,641 0.307946148 101,512
----------
TOTAL NPV OF CASH FLOWS $1,430,505
Projected NOI - 11th Year $ 342,827
Terminal Capitalization Rate 10.50%
----------
Estimated Value of Property at End of 10th Year $3,265,018
Less Sales Cost @ 5.00% (163,251)
----------
Value of Reversion at End of 10th Year $3,101,767
Discount Factor - 10th Year 12.50% 0.307946
----------
Present Value of the Reversion $ 955,177
Sum of Present Values of Cash Flow 1,430,505
----------
MARKET VALUE AS OF DECEMBER 31, 1997 $2,385,682
(ROUNDED) $2,390,000
==========
=========================================================================
</TABLE>
<PAGE>
early 1990's; however, with the significant amount of
new construction the growth has slowed.
. The subject's current physical vacancy is 12 percent
and the economic vacancy rate is about 14 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
following pages. The estimated leased fee market value for
the subject on an "as is" basis via discounted cash flow
method is
TWO MILLION FOUR HUNDRED THOUSAND DOLLARS
($2,400,000)
40
<PAGE>
<TABLE>
<CAPTION>
================================================================================
VILLAGE AT THE FOOTHILLS I APARTMENTS
Fiscal Year Ending 12/31 ---- 1998
----
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Apt. Rents $449,520
Rent/SF/Mo. 0.646
Other Income/Yr. 9,283
--------
Gross Income $458,803
% Vacancy 8.00%
Vacancy Allowance 36,704
--------
Effective Gross Income $422,099
-----------------
Expenses: $/Unit $/SF
-----------------
Real Estate Taxes 623 0.64 $ 37,352
Insurance 70 0.07 4,224
Personnel 603 0.62 36,203
Utilities 503 0.52 30,169
Repairs and Maintenance 463 0.48 27,756
Contract Services 181 0.19 10,861
General Administrative 80 0.08 4,827
Management Fee 5.00% 0.36 21,105
Reserves for Replacement 300 0.31 18,000
----------------- --------
Total Expenses $190,497
Per SF 3.28
--------
Net Operating Income $231,602
Per SF 3.99
Capitalization Rate 9.50%
--------
Fee Simple Stabilized Market Value $2,437,911
Less: Rent Loss Due to Lease-up $21,446
Deferred Maintenance $50,000
----------
Leased Fee "As Is" Market Value $2,366,465
Leased Fee "As Is" Market Value (Rounded) $2,400,000
----------------------------------------------------------------------------
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1
------
Stabilized NOI $231,602
Projected NOI 208,654
-------
Rent Loss $22,948
PV Factor @ 7.00% 0.934579
--------
PV Income Loss $21,446
CUMULATIVE LOSS $21,446
============================================================================
</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 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 $2,437,911
with deductions for rent loss due to lease-up and
deferred maintenance made subsequently to reflect a
value of $2,366,465 or $2,400,000 rounded.
INCOME APPROACH
CONCLUSION DCF METHOD.................................. $2,400,000
DIRECT CAPITALIZATION METHOD................ $2,400,000
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 $2,400,000
41
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $2,300,000
Income Approach $2,400,000
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 supportive 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 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
TWO MILLION FOUR HUNDRED THOUSAND DOLLARS
($2,400,000)
42
<PAGE>
PINNACLE CANYON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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 97-073/97-079
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 97-073/97-079
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 97-073/97-079
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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 $(1,1 18,846)
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 10
PROPERTY IDENTIFICATION
Job Number 97-073/97-079
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 25.8 10 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>
TIERRA CATALINA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
Name of Project: Tierra Catalina
Street Address: 3201 East Skyline Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Stories: 2
Number of Units: 120
Net Rentable Area (SF): 140,561
Average Unit Size (SF): 1,171
Parking Surface: Asphalt
Type of Construction: Painted stucco exterior with flat built-up
roofs and red tile pitched roof fronts
<TABLE>
<CAPTION>
--------------------------------------------------
Unit Mix: Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
--------------------------------------------------
<S> <C> <C> <C> <C>
23 1BR/1BA 900 $ 640 $0.71-0.81
18 1BR/lBA 916 625-680 0.74
19 2BR/2BA 1,207 790 0.65
25 2BR/2BA 1,233 850-950 0.69-0.77
17 2BR/2BA/TH 1,304 890-950 0.680.73
18 3BR/2BA/TH 1,525 950-1,070 0.620.70
--------------------------------------------------
</TABLE>
Concession: None
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer connections, fireplaces,
patio/balconies, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi,
picnic area, clubroom, laundry facility
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of NRA: $0.69
Electricity Paid By: Tenant
Length of Lease: 6,9, and 12 months
Security Deposit: $175-$275
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
L'AUBERGE CANYON VIEW
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY DESCRIPTION
Job Number: 97-073/97-79
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
- -------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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 SNE/Bach Realty Advisors, Inc.
<PAGE>
VILLAS SIN VACAS
- --------------------------------------------------------------------------------
PHOTO DID NOT DEVELOP
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
JOB NUMBER: 97-073/97-79
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>
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
- --------------------------------------------------------------------------------
PHOTO DID NOT DEVELOP
<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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 1/st/ 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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 8
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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 pools, 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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 10
PROPERTY IDENTIFICATION
Job Number: 97-073/97-79
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: 97-073/97-79
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>
================================================================================
A COMPLETE, SELF-CONTAINED APPRAISAL
OF
THE PONTE VEDRA BEACH VILLAGE I APARTMENTS
700 OCEAN PLACE
PONTE VEDRA BEACH, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS 2
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: 97-074
================================================================================
<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...............................19
Site Analysis...........................................24
Improvements............................................27
Highest and Best Use....................................29
Appraisal Procedures....................................33
Sales Comparison Approach...............................35
Income Approach.........................................39
Reconciliation..........................................49
</TABLE>
ADDENDA
Improved Sales Comparables
Rent Comparables
Legal Description
Professional Qualifications
<PAGE>
[LETTERHEAD OF BACH REALTY ADVISORS APPEARS HERE]
March 20, 1998
Hutton/Con Am Realty Investors 2
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal Of The 122-Unit Multifamily Complex
Known as the Ponte Vedra Beach Village I Apartments Located at 700 Ocean
Place in Ponte Vedra Beach, Florida; BRA: 97-074
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 Jacksonville 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
EIGHT MILLION DOLLARS
($8,000,000)
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 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 all 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 anticipation's 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, 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.
10. That all physical and economic conditions are the same
on the date of value as they were on the date of
inspection.
4
<PAGE>
11. 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 $8,000,000.
/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: The Ponte Vedra Beach Village I Apartments
700 Ocean Place
Ponte Vedra Beach, Florida
Location: East side of State Highway A1A at Ocean Place
about three miles south of the Duval/St Johns
County line in Ponte Vedra Beach, Florida
BRA: 97-074
Legal Description: 21.75-acre tract out of Sections 27 and 46,
Township 3 South, Range 29 East, St. Johns
County, Florida
Land Size: 21.75 acres or 947,430 square feet
Building Area: 143,508 square feet of net rentable space plus an
approximate 1,500-square-foot leasing
office/clubhouse
Year Built: 1984
Unit Mix: 38 1BR/1BA/VILLA at 858 square feet
42 2BR/2BA/VILLA at 1,196 square feet
30 2BR/2BA/TH at 1,430 square feet
12 3BR/2BA/TH at 1,481 square feet
No. of Units: 122
Average Unit Size: 1,176 square feet
Occupancy:
Physical: 94.3 percent
Economic: 85 percent
Highest and Best Use
As Vacant: Apartment development
As Improved: Current use (as apartments)
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $8,000,000
"As Is" Market Value by
Income Approach: $8,000,000
"As Is" Market Value
Conclusion: $8,000,000
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 of this appraisal report is the Ponte Vedra
Beach Village I Apartments located at 700 Ocean Place, Ponte
Vedra Beach, Florida.
DATE OF THE
APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as 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."
Leased Fee Estate - An ownership interest held by a landlord
-----------------
with the rights of use and occupancy conveyed by lease to
others. The rights of the lessor (the leased fee owner) and
the leased fee are specified by contract terms contained
within the lease.
- -----------------------------
/1/The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
7
<PAGE>
FUNCTION OF THE
APPRAISAL It is the understanding of the appraisers that the function
of this appraisal is for annual partnership and/or internal
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 No transfers of ownership to the subject were discovered
during the past three years upon interviews with real estate
brokers in the area and research into the grantor/grantee
deed records of St. Johns County, Florida.
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 used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily reflect
value. Moreover, estimates of depreciation are difficult to
accurately measure in the marketplace, thereby compounding
the speculative nature of the opinions derived in the cost
method of valuation.
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.
8
<PAGE>
[JACKSONVILLE BEACH AREA MAP APPEARS HERE]
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
Jacksonville is the seat of Duval County and is situated
near the northeastern corner of Florida on the St. Johns
River. This location is approximately 150 miles north of
Orlando, 165 miles east of Tallahassee, and 15 miles west of
the Atlantic Ocean.
The city of Jacksonville was consolidated with Duval County
in the 1960s and has since been recognized as one of the
largest incorporated municipalities in the nation in terms
of land area with 841 square miles. In population,
Jacksonville is one of the 20 largest cities in the United
States and the most populous incorporated city in Florida.
In 1990 the U.S. Bureau of the Census estimated the city's
population at 648,200 persons. In 1995 this estimate
increased to 676,718. The Jacksonville Metropolitan
Statistical Area (MSA) includes Duval, Clay, St. Johns, and
Nassau Counties. The 1990 MSA population was estimated at
906,727 according to the Census bureau, which indicates that
the MSA is the fifth largest MSA in Florida after Tampa-St.
Petersburg-Clearwater, Miami-Hialeah, Fort Lauderdale-
Hollywood-Pompano Beach, and Orlando. As of January 1, 1997
the Jacksonville MSA stood at 1,025,600 or 13.1 percent
higher than the 1990 population. The following chart depicts
the Jacksonville MSA population and employment growth over
the past two decades.
<TABLE>
<CAPTION>
1970 1980 1990 1994 1995 2005*
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Population 612,600 722,300 906,727 981,600 994,900 1,140,700
Employment 159,400 281,800 422,700 437,474 460,245 625,690
</TABLE>
Source: U.S. Bureau of the Census, Florida Department of
Labor and Employment Security
*Projection
Historical population growth for the Jacksonville MSA from
1980 to 1990 averaged 2.3 percent per year. The growth has
decreased slightly to 1.7 percent annually from 1990 to
1995. Population increases are anticipated to continue as
job growth rises and as stated above the population
estimated as of January 1, 1997 was 1,025,600. The Bureau of
Business & Economic Research at the University of Florida
projects the Jacksonville MSA population to be between
967,000 and 1,178,000 by the year 2000. The median
projection for this time period is a population of
1,063,700. The greatest population growth has recently
occurred to the south and east of the St. Johns River in
Duval County. Other notable growth has been observed in
northeastern Clay County near Orange Park, and in northern
St. Johns County particularly along the Atlantic Coast
beaches.
The median age of the population in the Jacksonville MSA is
lower than that found in the retirement havens of southern
Florida. The median age in this MSA is 34 years according to
the Census Bureau. This compares to about 36 years in Miami,
39 years in Fort Lauderdale, and 40 years in Tampa. The
medium age in the city of Jacksonville is slightly less
(33.3 years) than for the MSA.
9
<PAGE>
Jacksonville was originally known as Florida's industrial
city due to its port, shipyards, paper mills, and food
processing plants. More recently, however, Jacksonville has
become known as a regional center for banking, insurance,
medicine and distribution. The Research Department of the
Jacksonville Chamber of Commerce reported that the six
largest private sector employers in the area were: Winn-
Dixie Grocery Company, AT&T, Publix Super Market, Blue
Cross/Blue Shield of Florida, Barnett Banks, and CSX
Transportation. Two of Florida's largest banks, Barnett Bank
and First Union, are officed in Jacksonville, along with 30
insurance companies. Jacksonville is also becoming a major
back-office hub, as large corporations set up customer
service centers and data processing operations in the area,
including Merrill Lynch & Company, AT&T Corporation, and
America Online, Inc. in the past few years. In addition, the
world-renowned Mayo Clinic has one of its two regional
medical centers located in southeastern Jacksonville. The
recent additions in these medical and service-related
industries have contributed to a more diverse economy in the
area, and have helped civic leaders' attempts to transform
the city's image from that of an industrial town to a
regional distribution, service, and financial center.
The largest contributor to the Jacksonville employment
market is its three naval installations which include: Cecil
Field Naval Air Station, located in the southwest sector of
Duval County; Jacksonville Naval Air Station, located on the
west bank of the St. Johns River a few miles south of the
Central Business District (CBD), and the Mayport Naval
Training Center, situated at the mouth of the St. Johns
River near the Atlantic Ocean. These military establishments
in Jacksonville employ approximately 31,200 civilian and
military personnel. More recently, Cecil Field has been
placed on the government's list of possible closures due to
budget cutting measures. It is due to be closed in August
1999, which should result in the loss of approximately 7,500
military and civilian jobs. Jacksonville created the Cecil
Field Development Commission with the task of developing a
reuse plan for Cecil Field. The commission was dissolved in
May 1997 as it had completed its task and transferred duties
and functions to the Jacksonville Economic Development
Commission. Infrastructure improvements are being discussed
and to date funding has been secured for three major
projects: survey of the land for city incorporation; three-
phased conversion of the water and sewer systems to the city
systems; and a transportation study (completed). The Naval
Air Station is increasing in size because of the
consolidation of units to the Jacksonville Naval Air
Station. The net result in the closure and consolidation is
little change in the present number of personnel.
Total civilian employment in the Jacksonville MSA as of
April 1996 was 480,100 persons according to the Florida
Department of Labor and Employment Security. The
unemployment rate as of that date was 3.3 percent down from
3.7 percent in February 1996, or lower than the U.S.
Department of Labor's 4.8 percent rate for the state of
Florida as of the same date. The above is the latest
information received from the Jacksonville Chamber of
Commerce.
10
<PAGE>
The breakdown of nonagricultural employment as of November
1995 in the Jacksonville area is presented below and
illustrates the growing diversity of the local employment
base.
<TABLE>
<CAPTION>
NONAGRICULTURAL EMPLOYMENT NUMBER PERCENT
----------------------------------------------------------------
<S> <C> <C>
Manufacturing 35,500 7.4
Construction 24,200 5.0
Transportation, Communications, Utilities 32,000 6.7
Trade 117,600 24.5
Finance, Insurance, Real Estate 50,300 10.5
Services & Miscellaneous 152,900 31.8
Government 67,200 14.0
Other 400 0.1
------- -----
Total 480,100 100.0
</TABLE>
Source: Florida Department of Labor and Employment
Security, November 1995.
Note: The 480,100 estimates varies from the earlier
stated estimate of 460,245.
A surge of new jobs in Jacksonville earned the city a spot
as the ninth fastest-growing metro labor market in 1996,
according to the latest figures from the U.S. Bureau of
Labor Statistics between 1993 and 1995, non-farm employment
in Duval, St. Johns, Nassau and Clay Counties jumped 9.6
percent from 438,600 to 480, 800. Despite its Florida
location, the tourist/convention industry has a smaller
impact on the Jacksonville MSA economy than in other parts
of the state. Most area beaches and recreation facilities
cater to local residents. The exception would be the Amelia
Island Resort located 20 miles northeast of the city on the
Atlantic Ocean. Amelia Island features world-class golf and
tennis and luxury resort accommodations and is designed to
attract vacationers from around the country. The most recent
addition to this resort was the 450-room Ritz Carlton Hotel,
which opened in June of 1991.
The increase in service-oriented industries in Jacksonville
has resulted in a substantial increase in income for the
area's residents. Per Capita income rose by an average of
approximately 1.4 percent per year from 1986 to 1995.
<TABLE>
<CAPTION>
JACKSONVILLE MSA
YEAR PER CAPITA INCOME
---------------------------
<S> <C>
1986 $14,629
1987 15,482
1988 16,490
1989 14,973
1990 15,695
1995 16,920
</TABLE>
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
According to a demographic profile of Duval County, the
medium household effective buying income was $15,712 as of
January 1, 1997. Additionally there were 278,800 households
with 48 percent owner-occupied. Total Duval County
population was 733,500 with projections of 787,000 by the
year 2005.
11
<PAGE>
Jacksonville is a major distribution center of durable goods
for Florida and Georgia. Transportation facilities include
an international airport, rail service from various railroad
companies, numerous private freight distribution companies,
and bus service. Jacksonville has rail facilities with
multi-modal transportation capabilities. The Port of
Jacksonville, which utilizes the St. Johns River from the
east end of the CBD to the Atlantic Ocean, is a leading
import center for foreign automobiles. This facility
consists of both the Blount Island Marine Terminal (867
acres) and the Talleyrand Docks and Terminals (173 acres)
and features a 38-foot-deep channel. The Jacksonville Port
Authority has acquired 589 acres of property on Dames Point
for its third terminal development, which is the result of
demand from new ship lines. A $300,000,000 project to deepen
the harbor from 38 to 42 feet has been proposed. The
international airport, operated by the Jacksonville Port
Authority, has undergone $100 million of improvements, which
added two new terminals, twelve new gates, and extended a
runway to accommodate larger planes for transcontinental
flights.
Two major Interstate Highways, Interstate 10 and Interstate
95, intersect near downtown Jacksonville. Interstate 10
travels west from the city to the Gulf Coast communities in
the Southeastern U.S., then continues west through the
Southwestern U.S. to Los Angeles. Interstate 95 runs
north/south along the Eastern Seaboard of the U.S.
Interstate 295 provides a bypass around the major urbanized
areas of the city to the northeast, northwest, west, and
south. Completion of the eastern section of Interstate 295,
which would create a beltway around the city, has been
proposed with limited access approach roads expected to be
in place by 2000. Many of the express roads and highways in
Jacksonville formerly were toll roads; however, the toll
charges were removed in the mid-1980s.
The unified city/county government in Jacksonville and Duval
County has been a unique feature of the area since the
1960s. A singular taxing authority collects for schools and
municipal services for all residents. Excepted from
Jacksonville city authority are the communities of Atlantic
Beach, Neptune Beach, and Jacksonville Beach, which are
separate incorporated municipalities within Duval County.
Twenty miles of beaches along the Atlantic Ocean provide a
wealth of recreational opportunities for area residents. The
wide St. Johns River south of the CBD is popular with local
pleasure craft. The average annual temperature in
Jacksonville is 71 degrees with annual rainfall averaging 55
inches. Residents' needs for higher education in the area
are served by several local colleges and universities such
as Jacksonville University, the University of North Florida,
and Florida Community College. Jacksonville is the
headquarters for both the Professional Golf Association and
Association of Tennis Professionals tours. It is also the
home of the newest member of the expanded National Football
League, the Jacksonville Jaguars. The team plays in the
City's Gator Bowl Stadium, which seats 82,000 after
renovation. The area boasts six museums, an active arts
association, and one major daily newspaper. In addition, St.
Augustine in neighboring St. Johns County to the south is
the oldest city in
12
<PAGE>
North America, and features numerous historic buildings and
landmarks including the Castillo de San Marcos National
Monument.
The diversification of the economy has affected development
in the Jacksonville area over the past several years.
According to Reynolds, Smith and Hills, Inc. (RS&H), a local
real estate research and development company, the total
inventory of office space in the area in 1990 was 12,436,000
square feet. There has been about 1,040,000 square feet of
office construction since 1990. Over 5 million square feet
of office space has been constructed since 1987, with half
in the suburban markets. Most suburban development was
intended for single-tenant usage by companies such as
Barnett Bank, American Express, CSX, and Blue Cross/Blue
Shield. Of these, Barnett Bank developed an 820,000-square-
foot nonbanking headquarters facility in a campus-style
environment near the intersection of Southside Boulevard and
U.S. 1 in southeastern Jacksonville.
As of August 1997, the Central Business District (CBD)
consisted of 57 buildings with a total of 6,298,533 square
feet and a total for Jacksonville of more than 130 buildings
with over 13,000,000 square feet, the majority of which are
in the Southside (Butler) area at 84 for 5,199,037 square
feet. As of August 1997, office announcements indicated
eight projects to contain about 876,000 square feet and
provide over 3,480 jobs. Additionally seven other projects
are to be announced that total over 1.6 million square feet.
Companies involved in the announced projects are Atlantic
Teleservices, Barnett Banks, Purdential Health Care, Chase
Manhatten Corporation, Koger Equity, Gran Central
Corporation, and Hallmark Partners.
The office market in Jacksonville is active and reports by
submarket in the August 15, 1987 issue of Commercial Real
Estate indicate a tightening and strong market with new
construction justified. Vacancy is now in single digits
city-wide and all submarkets have lower vacancy than one
year ago except for one submarket. Rents city-wide have
increased $1.50 to $3.00 per square foot from 1996 levels
and proposed projects are expected to obtain rents in excess
of $20 per square foot.
The increasing household income in Jacksonville has
attracted a substantial amount of retail development in
recent years. Most of this development has occurred in
suburban markets on the south side and in the beach
communities. In September 1990, The Avenues Mall was
completed offering over 1.4 million square feet of retail
space at Southside Boulevard and U.S. Highway 1. Food Lion,
a North Carolina-based grocery chain, constructed 17 strip
centers throughout the Jacksonville area during 1988 and
1989. Beach area redevelopment featured the opening of two
regional centers known as Sandcastle Plaza and South Beach
Center, and several large "power" centers were constructed
near two of the regional malls in the area.
As of December 31, 1996 the Jacksonville MSA showed total
retail sales at $10.155 million, up 30.5 percent since year
end 1991. Duval County, which encompasses Jacksonville, had
retail sales of 7.644 million or an increase of 26.3 percent
since 1991. Based on information from the ULI Market
----------
Profiles: 1996
--------------
13
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
rents for retail space have stabilized since 1987 ranging
from $30.00 to $50.00 per square foot per year for enclosed
mall space. Typical rent levels for smaller centers
experienced a slight increase to a range between $9.00 and
$14.00 per square foot. Rental rates for older strip centers
range from $4.00 to $8.00 per square foot.
Retail development is projected to be stable until vacant
space within the market is reasonably absorbed. Residential
growth in the northern and middle St. Johns County areas,
southside-Intracoastal west, and the Avenue-U.S. Highway 1-
Southside Boulevard areas of the city is expected to produce
retail activity in these markets. Residential, both single
and multi-family remains active in development. The October
31, 1997 edition of Homefront identifies over 320 single
family developments that are active today.
The industrial real estate sector has not experienced the
significant vacancy problems incurred by the office and
retail markets. This sector is very strong in the
Jacksonville area and is experiencing heavy demand for
build-to-suit space from industry entering the market. New
construction during 1995 totaled over 1.5 million square
feet, a new record high. The major projects in the area
include Sara Lee's Coach subsidiary; NatureForm, Inc.; Pilot
Pen Corporation; Sally Industries; H.J. Heinz Company's
Portion Pac, Inc.; Viking Office Products and a Georgia
Pacific expansion. The majority of new construction is
taking place in the south and west sides of Jacksonville. As
established by the NAIOP report in August 1997, the south
side submarket has favorably responded to the one-year
supply of space, however, there remains 300,000 square feet
within six buildings that has not been leased. Activity for
this space has been slow. The west side market continues to
grow and is said to be a strong market. The north side
submarket is strong with minimal vacancy and the Port
Authority is expected to spend about $100 million on airport
and seaport capital improvements, which were to begin
October 1997. Industrial parks of tradeport and Imeson will
benefit most from the expenditures.
The apartment market is discussed in the Apartment Market
Analysis section that follows.
NEIGHBORHOOD
ANALYSIS The subject is located in the northeast area of St. Johns
County approximately 18 aerial miles from the Jacksonville
CBD. The neighborhood is generally described as the
northernmost portion of St. Johns County, or that area lying
west of the Atlantic Ocean and south and east of the St.
Johns/Duval County Line immediately south of the city of
Jacksonville Beach. Although unincorporated, this
neighborhood is better known as the community of Ponte Vedra
Beach.
Florida State Highway AlA (Highway AlA) is a major
thoroughfare, which runs the length of Florida's Atlantic
Coast areas from Fernandina Beach at the north end to Miami
Beach in the south. Through the subject neighborhood, this
divided fourlaned road cuts through the neighborhood in a
similar north/south fashion. Just north of the subject
neighborhood boundary in Jacksonville Beach, Highway AlA
intersects with J. Turner Butler Boulevard, a major roadway
connecting
14
<PAGE>
Jacksonville with its suburban beach communities. Highway
AlA runs generally about 5 blocks west of the Atlantic coast
in this neighborhood except at its southern end, where it
merges with State Road 203/Ponte Vedra Boulevard. Ponte
Vedra Boulevard continues northward from this point
immediately along the oceanfront. Major crossroads between
these two neighborhood roadways include Corona Road, about 1
mile south of the Duval County Line, and Solana Road,
several blocks north of Corona Road. Solana Road is a two-
laned street, which continues west from Highway AlA, then
turning southwest, and south along the Intracoastal Waterway
where its name changes to Roscoe Boulevard. Finally, Palm
Valley Road, a two-laned street, branches off to the
southwest from Highway AlA about 2 miles south of the county
line; Palm Valley Road, also known as State Road 210,
continues southwestward providing access to the neighborhood
from U.S. Highway 1 and Interstate 95 at the north end of
St. Johns County. Approximately half of the land within the
neighborhood boundaries is east of the Intracoastal
Waterway; this half is approximately 60 percent developed.
The area west of this canal lies largely undeveloped and is
predominantly marshland.
Ponte Vedra Beach enjoys a reputation as a popular resort
community and affluent suburban enclave in the Jacksonville
MSA. While no official population count exists, area real
estate professionals estimate the population of Ponte Vedra
Beach to be over 15,000 persons. The area is popular with
retirees for its proximity to beaches and for its numerous
resort-style subdivisions which often include country clubs,
golf courses, and tennis facilities. However, this location
within approximately 30 minutes of downtown Jacksonville and
even closer to large suburban office parks on the city's
south side has attracted local suburban residents as well.
The Mayo Clinic's regional facility at San Pablo Road and J.
Turner Butler Boulevard is just 4 miles northwest of this
neighborhood. The Southpoint and Southside Boulevard office
centers to the west are a reasonable 15-minute commute from
the neighborhood along Highway AlA and J. Turner Butler
Boulevard, which eventually intersects with Interstate 95 to
the west.
In the retail sector, several neighborhood shopping centers
are noted along either side of Highway AlA. Ponte Vedra
Square is situated in this neighborhood at the southwest
corner of Highway AlA and Solana Road, which Ponte Vedra
Point shopping center is at the southwest corner of this
highway and Palm Valley Road. Between these two neighborhood
centers is a third, known as Sawgrass Village along the west
side of the street. Regional shopping can be found at South
Beach Regional Center, located just to the north of the
neighborhood boundary at the northwest corner of Highway AlA
and J. Turner Butler Boulevard in Jacksonville Beach. A
planned 250,000-square-foot center was announced in late
1993 and was completed at the southwest corner of Highway
AlA and J. Turner Butler Boulevard. Anchor tenants include
Target, Publix, and Ace Hardware. Currently there is a
zoning change requested for land adjacent to the subject
Lakeview Village Apartments for a new shopping center.
All of these retail developments are supported by the growth
and affluence of the residential sector in Ponte Vedra
Beach. The affluence of the neighborhood is illustrated by
the location of six country club developments in the area
over the past twelve years which feature custom homes
generally priced from $150,000 to
15
<PAGE>
over $400,000, well above the median home price in the
Jacksonville MSA. The residential neighborhoods tend to
become more prestigious at the southern end of Ponte Vedra
Beach. This southern part of the community is the location
of both the Sawgrass and Tournament Players Club (TPC)
country club/golf course developments. The Professional Golf
Association and the Association of Tennis Professionals both
have headquarter offices in Ponte Vedra Beach at the
Tournament Players Club development, and each has sponsored
major professional tournaments within the community in the
last several years.
Office development in the Beaches area, which includes Ponte
Vedra, is primarily smaller sized buildings less than 30,000
square feet in size. The August 1997 Commercial Real Estate
publication surveyed 19 office buildings totaling
approximately 600,000 square feet and only 2 buildings were
in excess of 30,000 square feet. The current supply of
immediately available office space is low. The Ponte Vedra
market has more supply, but also has more demand
particularly in the law, medical professionals, financial
planners, and insurance professionals. Rental rates are in
the $19.00 to $21.00 per square foot full service category.
Demand is strong in Ponte Vedra and over 150,000 square feet
is proposed along the `hot' AlA corridor south of State 202.
Several multifamily condominium and apartment projects are
located in Ponte Vedra Beach. Condos are typically found
immediately along the ocean or with the Sawgrass or TPC
developments, while apartments are located at the north end
of the neighborhood and along Highway AlA. According to the
Jacksonville Planning Department, which publishes a
quarterly apartment survey for the region, the Beach area
submarket in which Ponte Vedra Beach is located has among
the highest monthly average apartment rental rate of the six
submarkets in the Jacksonville MSA. Physical occupancy rates
in each of the existing apartment communities surveyed were
over 90 percent. At subject valuation date, there were
several apartment projects being constructed in or near
Ponte Vedra. Apartment development was occurring west of AlA
and south of J. Turner Butler Boulevard (State 202) and
along Hodges Road north of J. Turner Butler Boulevard. The
apartment construction in or near Ponte Vedra is more
specifically identified as west of the subject apartment
complex near the Landing Parkway/Ponte Vedra Lakes Boulevard
intersection.
Despite the growth in the area, which has generally occurred
over the past twelve years, about one-third of the land in
the neighborhood lies vacant and ready for development. To
the south and west of this neighborhood are typically vacant
areas, which contain marshes or land within the Guana River
State Park; to the north is the older city of Jacksonville
Beach, and to the east is the Atlantic Ocean. The St. Johns
District provides bus service to children in the
neighborhood attending public schools; Ponte Vedra Beach has
its own elementary school at Highway AlA and Corona Road.
The University of North Florida is located about 6 miles
northwest of this neighborhood at J. Turner Butler Boulevard
and St. Johns Bluff Road. Police and fire protection is
provided by the county.
16
<PAGE>
The neighborhood's access to supporting facilities, Atlantic
beaches, along with the location of prestigious golf club
communities within Ponte Vedra Beach have made the
neighborhood one of the most attractive areas in
Jacksonville. Physical occupancy rates in many multifamily
developments in this area are above 90 percent. As the
result of an improving local economy, there has been new
development in retail and multifamily housing. As the
economy continues to recover, the appraiser anticipates that
the demand for residential units and retail space will
become greater, and that space in the subject neighborhood
will actively participate in this increased absorption due
to all of the neighborhood's positive features stated above.
However, as the neighborhood becomes more built-out, it will
likely experience a period of stability as it matures in the
long-term compared to the period of rapid development this
neighborhood enjoyed throughout most of the 1980s.
CONCLUSION Jacksonville, with a January 1997 U.S. Census Bureau
population of 1,025,600 in its MSA, was known in the past as
a military and industrial port city at the northeastern end
of Florida. However, the employment base has grown and
diversified over the past two decades as major banks,
insurance companies and medical service industries have
opened regional or headquarter offices in the area. This
activity has increased the income of area residents and
spurred significant job growth through much of the 1980s.
Although Jacksonville is not noted as a major tourist center
compared to southern areas of Florida, the area has
attractive beaches and a redeveloped downtown riverfront
area to serve the local population.
The diversification of the employment base ignited office
development both downtown and in the south side suburbs
during the past ten years. Numerous large retail centers
have been built in recent years to support the growing
Jacksonville area population and income. Major private
employers include Barnett Bank, Blue Cross/Blue Shield of
Florida, and CSX Transportation. Nonetheless, the city's
naval presence, with over 30,000 personnel, still dominates
employment in the area.
While new industries and employers such as America Online
and AT&T have continued to enter the local employment market
with new back-office operation centers, the appraisers
anticipate less office development as the focus in the
marketplace switches to absorption and renovation of
existing vacant space. Bright spots in the Jacksonville real
estate market include improving occupancy rates in the
apartment market and a relatively low industrial space
vacancy rate compared to other industrial markets
nationwide.
The city of Jacksonville appears to be enjoying a favorable
economic climate. Construction permits and absorption of
space in some sectors such as single-family residential have
increased, while unemployment figures remain low. Although
the closing of the Cecil Field Naval Air Station is not
favorable, many of the lost jobs could potentially be offset
by additions to the area's other two Naval bases and to the
reuse plan of Cecil Field. The city's diversifying economic
base, good supporting facilities, Florida sunbelt location,
and good quality of life should support growth and
absorption in all sectors.
17
<PAGE>
The Ponte Vedra area is in demand and development activity
is present in the apartment, retail, and office areas. This
is in the Beaches area and reflects tourism, a retirement
population, etc. with a growing need/demand for medical,
financial, insurance, and law professionals. It is expected
that demand for apartments will continue into the near
future.
18
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
Information from two surveys was utilized in the analysis of
the Jacksonville apartment market analysis. The first is the
Apartment Market Survey for Greater Jacksonville, Florida,
Second Quarter, 1996 prepared by the Jacksonville Planning
and Development Department and the Northeast Florida
Apartment Council. The second is the Jacksonville Apartment
Market Survey, Third Quarter 1997, published by Vestcor
Realty Management, Inc. Most references are made to the
survey prepared by the Vestcor Realty Management, Inc. AS
THE FIRST SURVEY WAS NOT MADE IN 1997 BY THE PLANNING
DEPARTMENT AND NORTHEAST FLORIDA APARTMENT COUNCIL.
Construction of apartment projects in Jacksonville during
the late 1980s continued but at lower levels each year from
1985 through 1989. The credit restrictions by lenders and
their regulators following the savings and loan scandals in
the mid- 1980s contributed to make construction funds scarce
for apartment developers nationwide. The chart below
illustrates the units constructed per year in Jacksonville
since 1985.
<TABLE>
<CAPTION>
YEAR TOTAL UNITS PERMITTED
-----------------------------
<S> <C>
1985 5,079
1986 4,521
1987 2,656
1988 1,949
1989 1,407
1990 1,707
1991 1,170
1992 0
1993 278
1994 912
1995 1,073
1996 3,284
1997 978
</TABLE>
Source: Jacksonville Planning and Development Department
and Vestcor Realty Management, Inc.
In 1996 3,284 units were permitted for five or more dwelling
units. In 1997 there were 978 units permitted. The outlook
for future development of apartment projects in the
Jacksonville area appears to be good as occupancies are in
the 90 percent to 95 percent range and the economy remains
healthy. Construction was visible to the appraiser in the
south part of Jacksonville.
According to the Jacksonville Planning Department, the
current number of apartment units existing in the
metropolitan area is approximately 54,000. The Planning
Department conducts a survey of the city and area apartment
market. This survey is done by mail to the owners and/or
managers of apartment complexes in Duval County as well as
in northern Clay and St. Johns Counties, and the results of
the survey are published every quarter year in the
department's Apartment Market Survey. The Second Quarter of
-----------------------
this survey, which is stated to
19
<PAGE>
reflect the area apartment market as of the end of June
1996, is the most recent available; this survey is compiled
based on the responses of owners and/or managers of 27
percent of the total existing apartment units in the area.
Of the 27 percent or 14,575 units, there was a physical
occupancy rate of 95.58 percent with one bedroom apartments
with the highest rate at 96.23 percent and efficiencies with
the lowest average occupancy rate this quarter at 92.25
percent. The physical occupancy rates and average monthly
rents as of the Second Quarter 1996 are generally higher
among those properties, which were built since 1990. The
Third Quarter 1997 market survey by Vestcor Realty
Management, Inc. reflects the following statistics for
average occupancy.
<TABLE>
<CAPTION>
3/RD/ QTR 3/RD/ QTR CHANGE
CATEGORY 1997 1996 IN 1 YEAR
------------------------------------------------------
<S> <C> <C> <C>
All units 92.8% 92.2% 0.6%
Built before 1979 92.1% 89.2% 2.9%
Built 1980--1989 94.0% 95.6% (1.6%)
Built 1990--1997 90.1% 92.2% (2.1%)
</TABLE>
The survey indicates a slight increase in occupancy for all
units from one year ago with pre-1979 constructed units
receiving the positive occupancy while post 1980 and post
1990 construction showed 1.6 to 2.1 percent decreases in
occupancy. The major reason for the decrease appears to be
home-buying alternatives.
The Vestcor apartment market survey includes every apartment
community with more than 100 units. They compared the
information received from on-site personnel to their
electric meter analysis. Properties undergoing renovation or
in lease-up were removed from the database. If occupancy
data on properties was not consistent with the electric
meter analysis, these properties were also removed. The
result was a review of 186 apartment complexes containing
41,572 units or nearly 70 to 75 percent of the units in the
Jacksonville area by a 1996 count.
Average monthly rental rates per unit were obtained by
Vestcor and are delineated below by year of construction.
<TABLE>
<CAPTION>
3/RD/ QTR 3/RD/ QTR CHANGE
CATEGORY 1997 1996 IN 1 YEAR
---------------------------------------------------------
<S> <C> <C> <C>
All units $ 568 $ 565 +3--0.5%
Built before 1979 $ 509 $ 504 +5--1.0%
Built 1980--1989 $ 605 $ 596 +9--1.5%
Built 1990-- 1997t $ 809 $ 791 +18--2.3%
</TABLE>
The Vestcor survey for the First Quarter 1996 reported an
average monthly rental rate per unit for the Jacksonville
area of $540. This compared to $565 per unit during the
Third Quarter 1996 indicates an increase in rental rates
during the 6 months from the Vestcor survey is 4.6 percent.
The survey indicates a slight monthly rental rate increase
for all apartment units surveyed, but increases of 1 percent
to 2.3 percent for various construction dated classified
units. It is important to note that the increases in
categories by year
20
<PAGE>
built tend to counter the findings of rental increases for
all units and indicate that the increase for all units
should be between 1 percent to 2.3 percent or on average
about 1.65 percent. Secondly, the 2nd Quarter 1997 average
monthly rental for all units was $574, which would indicate
a $6.00 reduction to the 3rd Quarter 1997 average monthly
rent of $568.
Overall, the Jacksonville apartment market appears to be
healthy. Construction permits recorded for 1992 and 1993
were at their lowest levels in years, or from a high of
5,079 units in 1985 to 0 units permitted for 1992 and 278 in
1993. For 1994 and 1995, there were 912 and 1,073 units
permitted, respectively. In 1996, there were 3,284 units
permitted, while in 1997 there were 978 units permitted.
Physical occupancy as of the Third Quarter 1997 was at 92.8
percent, which is a drop from 1996, but reflects the new
construction. Absorption rates in new apartment projects
have remained healthy over the past two years. Vacancies of
the various apartment markets range from 3 to 7 percent. The
appraisers project that the citywide market should reach a
stabilized occupancy of 95 percent between one and two years
at this rate of growth.
SUBMARKET ANALYSIS The subject property is located in the Beaches submarket.
This submarket is generally described as the northeastern
area of St. Johns County along the Atlantic Ocean at Ponte
Vedra Beach and including the Duval County beachfront
municipalities of Atlantic Beach, Neptune Beach, and
Jacksonville Beach.
Vestcor Realty Management, Inc.'s Third Quarter 1997 survey
features data on the apartment market within the city of
Jacksonville as well as the area within the subject
submarket and other immediate suburbs. This Third Quarter
1997 report, which is the most recent published to date,
states that the Beaches submarket had a 94.0 percent
physical occupancy rate, slightly higher than the average
occupancy rate of 92.8 percent of the eight submarkets
surveyed. This is a large increase from the 81.4 percent
physical occupancy rate experienced in this submarket during
the previous quarter and an increase from 93.6 percent in
the Third Quarter 1996. Reference is made to the following
table:
21
<PAGE>
<TABLE>
<CAPTION>
PHYSICAL OCCUPANCY
QUARTER/YEAR RATE BEACHES SUBMARKET
---------------------------------------
<S> <C>
01/92 93.63%
02/92 86.74%
03/92 88.13%
04/92 92.82%
01/93 94.43%
02/93 96.88%
03/93 91.95%
04/93 91.43%
01/94 92.57%
02/94 94.16%
03/94 95.34%
04/94 91.70%
01/95 98.46%
02/95 91.81%
03/95 95.38%
04/95 95.73%
01/96 94.89%
02/96 93.19%
03/96 93.60%
02/97 81.40%
03/97 94.30%
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
The Beaches area apartments tend to attract more transient
tenants than the city of Jacksonville as a whole. This can
be noted in the wide occupancy rate changes from the above
table. Beaches area tenants are usually most attracted to
the area during the summer months. In addition, the pool of
prospective tenants in this submarket fluctuates with the
personnel movements at the nearby Mayport Naval Air Station
and with the attraction of the retirement populace.
The average monthly rental rate in the Beaches submarket, at
$606 as of the Second Quarter 1996, was among the highest of
all the submarkets in the area. In the Second Quarter of
1997 the average monthly rental increased about 13 percent
to $687 and then decreased 1 percent to $680 in Third
Quarter 1997. It is believed that some of the changes in
rental rates and occupancy is affected by new construction
of multi-family, condo, and single family development in the
Beaches and adjacent areas. The following table illustrates
the trend in rental rates for the subject market according
to the surveys by the Jacksonville Planning and Development
Department and Vestcor.
22
<PAGE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY RENTAL
QUARTER/YEAR RATE BEACHES SUBMARKET
--------------------------------------------
<S> <C>
01/92 $470
02/92 563
03/92 577
04/92 510
01/93 500
02/93 582
03/93 496
04/93 570
01/94 598
02/94 571
03/94 551
04/94 560
01/95 546
02/95 523
03/95 662
04/95 644
01/96 689
02/96 606
03/96 674
02/97 687
03/97 680
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
Information regarding the number of new apartment projects,
proposed or under construction, was not made available in
the Third Quarter survey because the Beaches submarket is
located in St. Johns County and construction permits are
recorded in that county, not Duval County. There are
projects located near US Highway A1A being built in the
Ponte Vedra area and Beaches submarket. There are additional
projects being built along Hodges Road north of J. Turner
Butler Boulevard (State 202) which will contribute
competition to the Ponte Vedra apartment communities.
The subject's submarket has exhibited a stabilized occupancy
of between 90 and 95 percent (with one exception) according
to one local apartment survey. The subject property has a
current economic occupancy of 84 percent and is considered
to be able to reach occupancy stabilization within three
years.. Although the Beaches submarket has been an active
market in the past, the future expected development of
additional apartment units may cause problems for absorption
of the existing vacant units unless demand can remain
commensurate with construction. Additionally, there is some
concern from the effect of the proposed shopping center
adjacent to Lakeview Village on rental rates and/or
occupancy.
23
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject site is located along the east side of Highway
A1A at a private street known as Ocean Place about 3 miles
south of the Duval/St. Johns county line. This location is
in the northeastern area of St. Johns County in the
community of Ponte Vedra Beach about 18 aerial miles
southeast of the Jacksonville CBD. The site is improved with
the Ponte Vedra Beach Village I Apartments that have a
street address of 700 Ocean Place, Ponte Vedra Beach,
Florida.
SIZE AND SHAPE A survey of the subject site was provided to the appraisers
by the on-site property manager of the apartments. This
survey indicates that the site comprises 21.75 acres and has
an irregular, L-shaped configuration. The property has about
660 feet of frontage along the east line of Highway A1A and
includes the area designated for Ocean Place, a private road
running east/west through the site along its southern
boundary to an abutting parcel to the south (Ponte Vedra
II).
ACCESS AND
VISIBILITY The property is easily visible from Highway A1A due to its
significant frontage on this roadway. Access into the site
is provided by Ocean Place, a private roadway 60 feet wide
running east across the site from Highway A1A at the west
end of the site to the abutting parcel to the east. Highway
A1A is a four-laned divided roadway and is the main
thoroughfare in Ponte Vedra Beach. Most of the major
shopping centers in the area are located on this highway,
which is the main arterial providing access to other parts
of the Jacksonville area.
LEGAL DESCRIPTION A full legal description is contained in the Addenda of this
report. The subject site is generally described as being a
21.75-acre tract out of Sections 27 and 46, Township 3
South, Range 29 East, St. Johns County, Florida.
ZONING The site is zoned RG1 by St. Johns County which allows for
higher density residential uses such as apartments or
condominiums. Front and back setbacks are a minimum of 20
feet, with side setbacks at 10 feet. The maximum building
height allowed by this zoning designation is 35 feet, with
the minimum lot width at 100 feet. The minimum area coverage
allowed is 6,000 square feet with an additional 4,350 square
feet for each unit over two on the property. The coverage
area is credited only to developable land; 40 percent of the
undevelopable land on a parcel can also be made available
for credit under the zoning regulations. The subject site
and improvements appear to conform to these regulations.
UTILITIES All utilities are available to the site. Jacksonville
Suburban Utilities provides water and sewer service to the
site; the Jacksonville Electric Authority supplies electric
service. Telephone hookups are in place from Southern Bell,
along with cable television lines from Continental Cable.
TERRAIN AND
DRAINAGE The subject site is generally level to street grade with
minor landscaped beams within the site. The site contains
four retention lakes and drainage appears to be adequate. A
soil survey was not available on the subject site. While the
soil appears generally supportive of a wide variety of
improvements, the appraiser is not an expert in soil content
and was unable to certify this assumption. According
24
<PAGE>
to the National Flood Insurance Map 125147-0183D dated
September 18, 1985, the site is in Zone C, or "areas of
minimal flooding." Numerous native trees are located on the
site; however, no significant obstacles to development of
the site (such as rock outcroppings, etc.) were evident.
Numerous native trees are located on the site; however, no
significant obstacles to development of the site (such as
rock outcroppings, etc.) were evident.
EASEMENTS AND
ENCUMBRANCES The survey indicates the location of several utility and
right-of-way easements on the site, particularly on the
periphery. Most of these easements appear to be minor and of
no value consequence to the subject site. However, a 60-foot
ingress and egress and utility right-of-way easement runs
through the property along Ocean Place. This street is a
private paved road on the subject site. The easement allows
for ingress and egress to Highway A1A from the subject site
and to streets in a single-family subdivision, which abuts
the subject site to the east. The easement is stated to be
recorded in the St. Johns County Recording Office in ORV
406, page 14 and ORV 568, page 250. The presence of this
easement does not appear to have any significant adverse
effect on the subject site or its marketability.
REAL ESTATE TAXES The subject site and improvements have the following values
assessed by the St. Johns County Property Appraiser's
Office:
<TABLE>
<S> <C>
Improvements Value.............................. $4,325,060
Land Value...................................... $1,087,500
Total Value..................................... $5,412,560
Total Taxes..................................... $ 99,196
Tax Rate per $1000 Valuation.................... $ 18.3270
</TABLE>
The breakdown for the tax rate for the subject taxing
district for 1996 is compared to the 1994 and 1995 tax rate:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------------
<S> <C> <C> <C>
General County $ 6.3120 $ 6.0930 $ 6.0930
School-State Law 10.4060 10.0760 10.0760
St. Johns River Water Mgmt. Dist. 0.4820 0.4820 0.4820
Fire District 0.5000 0.7500 0.7500
Mosquito Control 0.3210 0.3140 0.2960
Airport 0.1380 0.1380 0.2800
Florida Island Navigation Dist. 0.0400 0.0380 0.0500
Jail 0.3500 0.2750 0.3000
-------- -------- --------
$18.5490 $18.1660 $18.3270
</TABLE>
The assessor's parcel number for the subject site is 061510-
0010. The subject, assessed for $37.72 per square foot or
$44,365 per unit, has a higher assessed value than the
comparables. The subject's assessed value is lower than the
value estimated for the subject in this report.
25
<PAGE>
The real estate property taxes for the subject are
calculated at $99,196 based on the mileage rate and assessed
value and a payment date of March 1997. However, a discount
from the tax expense is allowed if paid in the four months
prior to March. If paid in November 1997, the taxes for the
subject are discounted 4 percent. For purposes of this
appraisal, we have assumed an on-time payment of taxes.
Therefore, the 1997 property taxes will be paid in 1998. The
real estate taxes in the Income Approach section of this
report reflect an approximate 4 percent increase (inflation
factor) over the 1997 property taxes. Real estate taxes for
the subject in 1998 have been estimated at $103,163.
SITE CONCLUSION The subject property is located along the east line of
Highway A1A in the northeastern area of St. Johns County,
Florida, about 3 miles south of the Duval county line. This
location is about 18 aerial miles southeast of downtown
Jacksonville. The parcel contains 21.75 acres with level
terrain. Drainage and soil conditions appear to be adequate
and supportive of a variety of improvements. All utilities
are available. The site is in the Zone C area of minimal
flooding. A survey of the site indicates a 60-foot-wide
ingress and egress easement along Ocean Place, a private
road known as Ocean Place running east/west through the
subject site from Highway A1A and along its southern
boundary with the abutting parcel to the immediate south and
southwest. While this easement provides access for the
abutting east and southwest property owners onto Ocean Place
to reach Highway A1A, the influence of this traffic was not
considered significantly detrimental to the value or
marketability of the subject site. No other adverse
easements or encroachments were noted. Direct access and
visibility is provided from Highway A1A, a major
thoroughfare running along 710.48 feet of the west boundary
of the subject site. The property is zoned by the county for
high-density residential uses including condominium and/or
apartment development, and appears to be physically suitable
for such improvements. The apartment market in Ponte Vedra
Beach is considered strong and the subject site's location
along the east side of A1A is considered excellent for
multi-family development.
26
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 21.75-acre tract of land, is improved
with a one- and two-story apartment project known as the
Ponte Vedra Beach Village I Apartments. The improvements
consist of 122 apartment units contained in 22 buildings
constructed in 1984. Also situated on the site is a leasing
office/clubhouse with a kitchen and laundry facility, sauna,
exterior mail post, deck, swimming pool and jacuzzi
surrounded by an iron fence, lighted and fenced tennis
court, gazebo, four lakes and a mechanical shed.
There are four basic floor plans for the 122 apartment
units. The basic features of these floor plans are as
follows:
<TABLE>
<CAPTION>
NO. OF
UNITS UNIT TYPE SIZE (SF) TOTAL NRA
---------------------------------------------
<S> <C> <C> <C>
38 1BR/1BA/VILLA 858 32,604
42 2BR/2BA/VILLA 1,196 50,232
30 2BR/2BA/TH 1,430 42,900
12 3BR/2BA/TH 1,481 17,772
--- ----- -------
122 1,176 143,508
</TABLE>
TH = townhouse (two levels)
As seen in the figures above, the total net rentable area of
143,508 in 122 apartment units results in an average of
1,176 square feet per unit. There are a total of 38 one-
bedroom units, 72 two-bedroom units, and 12 three-bedroom
units.
The land area is 21.75 acres equating to a density of 5.61
units per acre. The parking consists of 278 asphalt-paved
open spaces, or 2.28 spaces per unit. The parking ratio is
within industry and local market standards.
The foundation of the buildings is of concrete slab with
wood-studded framing. The exterior walls are of stucco with
wood frame trim work, and the roof is pitched with a tile
covering. Windows are of single-hung aluminum thermal pane
construction, with six panel exterior doors. Porches by each
exterior door have an exterior light.
The interior finish of each unit has painted gypsum board
walls and ceilings. Some ceilings feature vaulted or boxed
ceiling treatments, while a few walls are accented with
decorative wallpaper. Floors have carpeting over pad, with
tile floors in the kitchen and bathrooms. Batt insulation is
located in the walls and ceilings.
The kitchen is equipped with wood and fiberboard cabinetry
covered with formica countertops and a double stainless
steel sink. Appliances are made by General Electric, and
include a range/oven, vent/hood, microwave oven, dishwasher,
disposal, and refrigerator with ice maker. Each unit has an
electric water heater with a 40-gallon capacity. The kitchen
equipment appears to be in good condition.
Carpet and tile floors are found in the bathrooms, with
additional tile around the tub enclosure. The toilet,
bathtub and sink are porcelain, and a formica countertop
covers a small vanity. Each bathroom also has a wall mirror
and an exhaust fan.
27
<PAGE>
Each apartment unit in this project typically has a
fireplace, wet bar, ceiling fans, wet bars, washer and dryer
closet with connections, miniblinds, an exterior screened-in
patio and courtyard. Interior doors are hollow-core wood
with some folding closet doors. Each unit is equipped with a
fire extinguisher per local fire codes.
The mechanical components include standard PVC plumbing
pipes with stainless steel fixtures. The units are equipped
with electric central heating and air-conditioning which is
individually metered. The interior wiring is copper, with
125 amps designated per unit and ample electrical outlets.
Each apartment is wired for telephone and cable television.
Other than the major site amenities stated above, the
grounds feature asphalt-paved parking pads and access
roadways, concrete sidewalks, a bridge with brick pavers,
and pole-mounted exterior light fixtures. The landscaping
features numerous native trees as well as decorative planted
shrubbery and lawns.
The subject improvements, upon inspection, appear to be in
average to good overall condition. The subject property
underwent renovation in 1994, which included repairing the
porch areas by replacing wood with aluminum. Also, there
were many capital expenditures made in 1997. According to
the management of the subject, ConAm Management Corporation,
the following capital expenditures have been included in the
1998 budget:
<TABLE>
<S> <C>
Asphalt/Seal/Repair....................... $ 20,000
Electrical Breaker Boxes.................. 48,400
Chimney Caps.............................. 25,000
Traffic Control Front Gating.............. 25,000
TOTAL..................................... $118,400
</TABLE>
Considering the overall average to good condition of the
improvements, we estimate the effective age of the subject
property to be equal to the actual age of twelve years.
28
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of clubhouse/leasing office used mutually for Ponte Vedra I and II
[PICTURE APPEARS HERE]
Interior view of living room in clubhouse.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of exercise room in clubhouse.
[PICTURE APPEARS HERE]
View of swimming pool at clubhouse.
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of Ponte Vedra I units.
[PICTURE APPEARS HERE]
Exterior view of Ponte Vedra I property.
<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 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 would be adaptable to multifamily
residential uses as limited by its current zoning of RG-1 by
St. Johns County. This zoning designation for the site is
intended to restrict and promote the development of the
subject to multifamily residential uses.
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 generally trapezoidal in shape and
encompasses a total of 21.75 acres, allowing for full
physical utilization of the site. The site has over 710 feet
of frontage along the east side of State Highway AlA. The
topography of the site is generally level and drainage
appears to be adequate. The site is located in Flood Zone
"C" which is defined in the previous Site section of this
report.
The subject's location is on the east side of State Highway
AlA at its intersection with a private road known as Ocean
Place about 3 miles south of the Duval/St. Johns county
line. State Highway AlA is a four-laned divided roadway and
is the major thoroughfare in Ponte Vedra Beach. Property
uses along this highway in Ponte Vedra Beach predominantly
consists of single and multi-family residential
29
<PAGE>
uses with supporting retail. The subject has adequate
utility capacity, enjoys a relatively good functional size
and shape, and is not affected by any adverse easements or
restrictions as noted upon inspection.
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 would
include a variety of residential development such as
apartments, condominiums, cooperatives or townhouses, but
are directed to apartment development. The site is 21.75
acres, has 600 feet of AlA frontage, a depth of almost 900
feet, and is flag or L-shaped extending behind or east of
the Ponte Vedra Beach Village II site. The site could not
reasonably accommodate retail usage only and is too large
for the current office development in demand (smaller-sized,
in the 15,000 to 30,000 square feet category).
FINANCIAL FEASIBILITY - Financial feasibility is directly
proportional to the amount of net income that could be
derived from the subject. Rents have increased over the
previous 12 months and the apartment market overall appears
to be favorable. Area realtors report that near-term
prospects for condominium and cooperative units in
Jacksonville are becoming favorable particularly if they are
beach oriented.
After having eliminated all other development from our
analysis, the financial feasibility of multifamily
development must be tested. The subject site is in the
"Beaches" apartment submarket area. In the survey conducted
by Vestcor Realty Management, Inc., the occupancy level for
the apartment projects in the Beaches submarket was 94.3
percent during the third quarter of 1997. This reflects a
2.7 percent decrease from one year earlier During the same
one-year period between the Third Quarters 1996 and 1997,
rental rates have increased 1.0 percent from $674 to $680
per month. Apartment development has been taking place in
the Beaches submarket.
From the preceding, apartment development may be feasible.
Although occupancy rates have increased slightly during the
past year, occupancies have remained at high levels. Rental
rates have risen moderately according to the most recent of
the two apartment surveys. The following reflects apartment
development costs on a square foot basis.
Cost to Construct (Class C Average to Good)......... $50.00
Land Acquisitions................................... 4.00
----
Total Cost of Development........................... $54.00
The preceding indicates that development is feasible for
multifamily residential development. As indicated in the
Sales Comparison Approach in this report, apartments
developed since 1995 reflect sale prices from $60.00 to
$75.00 per square foot. Most of the sale prices are at or
above the cost of development.
30
<PAGE>
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, we are of the opinion that
the demand for multifamily apartment units conducive to the
subject site would produce the highest net return over the
longest period of time. This is due to the subject's
location and the popularity of the neighborhood.
In summary, the multifamily apartment market has shown signs
of increasing health. The site's location near Jacksonville
area beaches in the exclusive Ponte Vedra residential and
resort communities, and within easy commuting distance to
major south side employment facilities, gives it a large
base of prospective rent-paying tenants from which to draw.
The subject is in an area that is relatively stable after a
decade of growth and is now experiencing a renewed demand.
Therefore, after considering the alternatives, we believe
the highest and best use of the site, as vacant, is for
multifamily residential development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons. First,
to identify the improvements that are expected to produce
the highest overall return per invested dollar, and the
second reason is to help identify comparable properties. The
four tests or elements are also applied in this analysis to
the subject as follows:
LEGALLY PERMISSIBLE - Within the scope of a legal analysis
the subject property would be adaptable to multifamily
residential uses as limited by the zoning of the site by St.
Johns County.
PHYSICAL POSSIBILITY - Based on the subject's size (21.75
acres), configuration, and the improvements' positioning
relative to the subject site, it is felt that the subject's
improvements employ the maximum use and potential of the
site as developed. The subject's density of 5.61 units per
acre is generally below the market sales, which typically
reflect a range in density from 10 to 15, units per acre.
Thus, the subject by current standards is under-improved.
Zoning regulations should be checked to see if the site can
increase its unit density in the future or if it is
restricted to its current density status.
FINANCIAL FEASIBILITY - 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.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that under
competent and prudent management, the subject produces an
adequate return on market value to substantiate its
existence.
In conclusion, 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. There may exist a possibility (after check of
zoning regulations) that the property could develop more
units. The subject's unit amenities are considered average
compared
31
<PAGE>
to newer projects in the area. Some of the comparables have
better unit amenities. Therefore, the subject's improvements
are not considered to be the optimum use. Additionally,
there is need for $118,400 of deferred maintenance or
capital expenditures.
32
<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 a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily reflect
value. Moreover, estimates of depreciation are difficult to
accurately measure in the marketplace, thereby compounding
the speculative nature of the opinions derived in the cost
method of valuation.
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 appraiser, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraiser's 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.
33
<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 others. In some
instances, because of the inadequacy or unavailability of
data, one or two of the approaches may be given little
weight in the final value estimate.
34
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Jacksonville Area
Improved Sales Summary
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE
NO. NAME/LOCATION SALE CASH/EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVEALL
DATE SALE PRICE BUILT UNITS AVG./SF AT SALE /UNIT SF /UNIT RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke 08/97 $20,500,000 1995 280 296,616 95% $5.92 $69.11 $73,214 8.56%
13700 Sutton Park Dr. North 1,059
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
2 San Pablo 06/97 $ 5,350,000 1974 200 184,750 90% $3.16 $28.96 $26,750 10.90%
14401 Jose Vedra Blvd. 924
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
3 Oaks of Deerwood 05/97 $15,200,000 1987 336 294,888 92% $4.00 $51.54 $45,238 7.76%
10100 Baymeadows Road 878
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 04/97 $16,700,000 1986 450 342,162 94% $4.69 $48.79 $37,111 9.60%
1715 Hodges Blvd. 760
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra 01/97 $19,000,000 1996 253 252,162 95% $6.26 $75.12 $75,099 8.34%
101 Vera Cruz Drive 1,000
Ponte Vedra, FL
- ------------------------------------------------------------------------------------------------------------------------------------
6 The Huntington @ Hidden 08/96 $ 7,225,000 1986 224 179,476 98% $3.85 $40.26 $32,254 9.56%
Mills 801
3333 Monument Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
7 The Antlers 05/96 $15,000,000 1985 400 327,728 97% $4.65 $45.77 $37,500 10.20%
8433 Southside Blvd. 819
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
8 Westland Park 05/96 $16,950,000 1989 405 403,010 97% $4.26 $42.06 $44,852 10.10%
6710 Collins Road 995
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Jacksonville Area
Improved Sales Summary
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE
NO. NAME/LOCATION EGIM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 The Links @ Windsor Parke 7.80
13700 Sutton Park Dr. North
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
2 San Pablo 4.56
14401 Jose Vedra Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
3 Oaks of Deerwood 6.74
10100 Baymeadows Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 5.47
1715 Hodges Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra 7.31
101 Vera Cruz Drive
Ponte Vedra, FL
- ------------------------------------------------------------------------------------------------------------------------------------
6 The Huntington @ Hidden 5.48
Mills
3333 Monument Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
7 The Antlers 5.63
8433 Southside Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
8 Westland Park 6.01
6710 Collins Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
</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 similar to
the subject property. A map and a summary of the comparable
sales can be found on the preceding pages. The transaction
dates of the sales used ranged from October 1994 to August
1996. Reference is made to the individual sales data
included in the Addenda section of this report.
SALE 1, known as the Links at Windsor Park Apartments, sold
in August 1997 for $20,500,000. There are 280 units totaling
296,616 square feet. The property sold at $69.11 per square
foot or $73,214 per unit. It was built in 1995 and was in
excellent condition. The Links was 90 percent occupied at
sale date. It sits on 23.36 acres of land and reflects
density at 11.98 units per acre. The property's construction
is described as wood frame with wood siding and some stucco.
SALE 2, known as the San Pablo Apartments, sold in June
1997. It has 200 units and 184,750 square feet. The sales
price was $5,350,000 and the property was 90 percent
occupied at sale date. Unit prices indicated are $28.96 per
square foot and $26,750 per unit. The sale reflected a 10.8
percent capitalization rate and was in need of substantial
repair and renovation work. The rate is 14,24 acres and the
unit density indicated is 14.04 units per acre. The property
at sale date was inferior to the subject.
SALE 3, known as Hunter's Ridge, (formerly known as Oaks at
Deerwood) sold for $15,200,000 or $45,238 per unit in May
1987. It has 294,,888 square feet and indicates a unit price
of $51.54 per square foot. Land area is 34.70 acres and
shows unit density at 9.68 units per acre. The
capitalization rate was 7.76 percent, however, the property
needed some attention and had good upside potential.
35
<PAGE>
SALE 4, known as the Woodhollow Apartments sold in April
1997 for $16,700,000 or $48.99 square foot and $37,111 per
unit. The property contains 450 units and 342,162 square
feet. At date of sale, occupancy was 94 percent and the
terms were cash at a $10,350,000 mortgage at 7.5 percent
interest due in 7 years, amortized over 25 years. The
property has 38.65 acres and indicates a unit density of
11.6 units per acre. Construction is wood frame with stucco
and wood siding.
SALE 5, known as The Courts at Ponte Vedra, is located in
Ponte Vedra Beach. It sold in January 1997 for $19,000,000.
The property was built in 1996 and has 253 units with
252,916 total square feet.. Unit prices indicated by the
sale are $75.12 per square foot and $75,099 per unit.
Construction is wood frame with stucco and some masonry. The
site contains 9.23 acres and indicates a unit density of
27.41 units per acre. Capitalization rate at times of sale
was 8.34 percent and the project had 95 percent occupancy.
SALE 6, known as the Huntington at Hidden Mills, (formerly
known as Cozumel), sold for $40.26 per square foot net
rentable area or $32,254 per unit in August 1996. The sale
price was $7,225,000. The property contains 14.92 acres and
has a unit density of 15 units per acre. There are 179,476
square feet of rentable area within 224 units. The average
unit size is 801 square feet. Approximately 98 percent of
the units were occupied at the time of sale. The sales price
of $7,225,000 was adjusted upward by $350,000 for a re-
plumbing required and was a credit given by the seller.
SALE 7 is the Antlers containing 400 units and 527,728
square feet of rentable area. The average size of a unit is
819 square feet. Developed in 1985, the project is situated
42.51 acres of land and has a unit density of 9.4 units per
acre. The property sold in May 1996 for $45.77 per square
foot net rentable area or $37,500 per unit and totaled
$15,000,000. At the time of sale the units were 97 percent
physically occupied.
SALE 8 sold in May 1996 for $16,950,060 which is equivalent
to $42.06 per square foot net rentable area or $41,852 per
unit. The project, Westland Park, was built in 1989/90 and
contains 405 units and 403,010 square feet of rentable
space. The average unit size is 995 square feet. Unit
density for this property is 14.9 units per acre. Occupancy
at the time of sale was reported at 97 percent.
In lieu of specific adjustments, we compared the improved
sales based on the net operating income (NOI) per square
foot and 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, condition etc. Thus, these
differing factors can be reduced to the common denominator
of net operating income.
36
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Sales Comparison - NOI Adjustments
----------------------------------
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/SF NOI/SF Factor Price/SF
- --- ------- ------ ----- ------ ---------
<S> <C> <C> <C> <C> <C>
1 $69.11 $5.92 $5.40 0.91216 $ 63.04
2 $28.96 $3.16 $5.40 1.70886 $ 49.49
3 $51.54 $4.00 $5.40 1.35000 $ 69.58
4 $48.99 $4.69 $5.40 1.15139 $ 56.41
5 $75.12 $6.26 $5.40 0.86262 $ 64.80
6 $40.26 $3.85 $5.40 1.40260 $ 56.47
7 $45.77 $4.65 $5.40 1.16129 $ 53.15
8 $42.06 $4.26 $5.40 1.26761 $ 53.32
Mean = 58.28
Value @ mean $8,364,005
<CAPTION>
Sale Sale Subject Adjust. Adjust.
No. Price/Unit NOI/Unit NOI/Unit Factor Price/Unit
--- --------- -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
1 $73,214 $6,267 $6,348 1.01292 $ 74,160
2 $26,750 $2,916 $6,348 2.17695 $ 58,234
3 $45,238 $3,510 $6,348 1.80855 $ 81,815
4 $37,111 $3,562 $6,348 1.78214 $ 66,137
5 $75,099 $6,263 $6,348 1.01357 $ 76,118
6 $32,254 $3,083 $6,348 2.05903 $ 66,412
7 $37,500 $3,811 $6,348 1.66570 $ 62,464
8 $41,852 $4,240 $6,348 1.49717 $ 62,660
Mean = $ 68,500
Value @ mean $8,357,000
===============================================================================
</TABLE>
<PAGE>
The various sales reflected NOIs per square foot ranging
from $3.16 to $6.26 and NOIs per unit ranging from $2,916 to
$6,267. The subject NOI (without reserve expenses) has been
approximated at $5.40 per square foot or $6,348 per unit
from the first year of the Discounted Cash Flow 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. The adjustments 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. Time differences do not need further
adjustment as any drop in value would theoretically be the
function of a drop in income. There would need to be an
adjustment for age in order to recognize differences in the
length of the income streams. The chart on the facing page
presents the adjustment process for NOI per square foot and
NOI per unit.
After adjustment, the sales range in price from $49.49 to
$69.58 per square foot and $58,234 to $81,815 per unit. The
simple average adjusted prices (not weighted) per square
foot and per unit of the comparable sales was calculated at
$58.28 and $68,500, respectively. Applying an age adjustment
based on square foot area and number of units indicates
value at $55.50 per square foot and $65,300 per unit
143,508 SF at $55.50/SF, Rounded........... $8,000,000
122 units at $65,300/unit.................. $8,000,000
A second method of comparison is by use of the effective
gross rental multiplier (EGRM). In this analysis, the
subject's effective gross income is multiplied by a factor
estimated from the sales to derive an indication of value.
The sales utilized in this analysis reflect EGRMs ranging
from 4.56 to 7.80 as shown on the following facing page.
Expense ratios range from 33.26 to 50.27 percent. From the
Direct Capitalization analysis in the Income Approach, the
subject is estimated to have a 36.74 percent operating
expense ratio (excluding reserves). This is most similar to
Sales 1, 5, and 8. These sales have EGRMs ranging from 6.01
to 7.80 with expense ratios from 33.26 to 39.14 percent.
Based on the preceding analysis, an EGRM for the subject has
been estimated at 6.90 resulting in a total value indication
as follows:
$1,224,277 X 6.90, Rounded.................. $8,400,000
The NOI per square foot and per unit methods presented a
value indication of $8,000,000 each and the effective gross
income multiplier method indicated a value of $8,400,000.
Weight has been given to all methods. From the proceeding, a
value for the subject is estimated at $8,200,000. From this,
a
37
<PAGE>
<TABLE>
<CAPTION>
================================================================================
SALES COMPARISON - EGRM ANALYSIS
- -------------------------------------------------------------------------------
EFFECTIVE EFFECTIVE GROSS OPERATING
SALE NO. GROSS REVENUE/SF REVENUE MULTIPLIER EXPENSE RATIO
<S> <C> <C> <C>
1 $8.86 7.80 33.26%
2 6.35 4.56 50.27%
3 7.65 6.74 47.70%
4 8.92 5.47 47.45%
5 10.27 7.31 39.00%
6 7.35 5.48 47.63%
7 8.13 5.63 42.80%
8 7.00 6.01 39.14%
===============================================================================
</TABLE>
<PAGE>
deduction for capital expenditures of $118,400 and a rent
loss due to lease-up to stabilized occupancy of $69,593 is
made as follows:
Indicated Value $8,200,000
Less: Capital Expenditures (118,400)
Rent Loss (69,593)
"As Is" Value $8,012,007
Rounded $8,000,000
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
EIGHT MILLION DOLLARS
($8,000,000)
38
<PAGE>
[AREA MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
RENT COMPARABLE ANALYSIS
PONTE VEDRA BEACH VILLAGE I
- ------------------------------------------------------------------------------------------------------------------------------------
COMP. YEAR NO. NRA AVERAGE 1995 1996
NO. NAME OF PROJECT BUILT UNITS (SF) UNIT SIZE OCCUP. RATE OCCUP. RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 The Greens at Marsh 1989 192 201,848 1,051 88.5% NA
Landings
1800 The Greens way
- ------------------------------------------------------------------------------------------------------------------------------------
2 Marsh Cove Apts. 1983 86 96,176 1,118 95% 99%
1220 Marsh Cove Lane
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Fairways Apts. 1984 216 186,600 864 88% 93%
100 Fairway Park Blvd.
-----------------------------------------------------------------------------------------------------------------------------------
4 Arbor Club Apts. 1992 251 288,924 1,151 100% 95%
1 Arbor Club Drive
- ------------------------------------------------------------------------------------------------------------------------------------
5 Ocean Links 1993 192 251,000 1,308 93% NA%
310 Soland Road
- ------------------------------------------------------------------------------------------------------------------------------------
Ponte Vedra Beach 1984 122 103,880 851 94.2% 95%
Village I
700 Ocean Place
SUBJECT
====================================================================================================================================
<CAPTION>
====================================================================================================================================
COMP. SQUARE 1996 MONTHLY 1997
NO. NAME OF PROJECT FLOOR PLANS FEET RATE RENT/SF AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 The Greens at Marsh 1BR/1BA 770 $ 756 $ 0.982 Microwave ovens, screened
Landings 2BR/1BA 1,065 865 0.812 patios, fireplaces, alarms,
1800 The Green Way 3BR/2BA 1,256 1,050 0.836 garages, pool and spa,
fitness center, car care
center.
- ------------------------------------------------------------------------------------------------------------------------------------
2 Marsh Cove Apts. 2BR/2BA/FL 980 $ 740 $ 0.755 Microwave ovens, washer/
1220 Marsh Cove Lane 2BR/2BA/FL 1,100 780 0.709 dryer connections,
2BR/2BA/LOFT 1,242 850 0.684 fireplaces, outdoor
2BR/2.5BA/TH 1,050 760 0.724 utility closets, pool,
2BR/2.5BA/TH 1,220 810 0.664 tennis court, hot tub
3BR/3BA 1,430 1,010 0.706
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Fairways Apts. 1BR/1BA 550 $ 555 $ 1.01 Washer/dryer connections,
100 Fairway Park Blvd. 1BR/1BA 600 615 1.03 miniblinds, fireplaces,
2BR/2BA/FL 950 700 0.737 pool, tennis courts,
1BR/1BA/TH 750 650 0.867 hot tub, exercise/weight
2BR/2BA/TH 1,100 740 0.673 room, clubroom, laundry
2BR/1.5BA/TH 1,050 705 0.671 facility, lake
- ------------------------------------------------------------------------------------------------------------------------------------
4 Arbor Club Apts. 1BR/1BA 881 $ 655-685 $0.743-0.778 Microwave ovens, washer/dryer
1 Arbor Club Drive 1BR/1BA/LOFT 1,102 740-760 0.672-0.690 connections, miniblinds,
2BR/2BA 1,181 790-820 0.669-0.694 fireplaces, vaulted ceilings,
2BR/2BA 1,254 825-855 0.658-0.682 burglar alarms, pool, tennis
3BR/2BA 1,426 980-1,000 0.687-0.701 courts, jacuzzi, exercise/
3BR/2BA 1,493 1,025-1,050 0.687-0.703 weight room, clubroom,
laundry facility, garages
- ------------------------------------------------------------------------------------------------------------------------------------
5 Ocean Links 1BR/1BA 943 $ 690-790 $0.732-0.838 Microwave ovens, washer/dryer
310 Soland Road 2BR/2BA 1,294 860-980 0.665-0.757 connections, panic buttons,
2BR/2BA 1,304 970-990 0.744-0.759 fireplaces, ceiling fans, vaulted
3BR/2BA 1,605 990-1,100 0.617-0.692 ceilings, skylights, alarms,
pool, tennis court, fitness
center, spa, ceiling fans,
clubroom.
- ------------------------------------------------------------------------------------------------------------------------------------
Ponte Vedra Beach 1BR/1BA/VILLA 858 $ 700 0.816 Microwave ovens, washer/dryer
Village I 2BR/2BA/VILLA 1,196 890 0.744 connections, miniblinds,
700 Ocean Place 2BR/2BA/TH 1,430 930 0.650 fireplaces, ceiling fans, vaulted
SUBJECT 3BR/2BA/TH 1,481 1,000 0.675 ceilings, outdoor utility closets,
wet bars, pool, tennis court, hot tub
sauna, clubroom, laundry facility
====================================================================================================================================
</TABLE>
DN = downstairs; UP = upstairs; TH = townhouse
<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 (if applicable) is 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. Since our valuation
is on a cash basis, no mortgage was considered. In
either method, the present mortgage balance (if
applicable) would be added to the equity value to
obtain the total value of the property. 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 any
laundry income, pet deposits, 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 RENT/MO RENT/SF MO. TOTAL
(SF)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 1BR/lBA/Villa 38 858 $ 600 $0.816 $ 26,600
B 2BR/2BA/Villa 42 1,196 890 0.744 37,380
C 2BR/2BR/TH 30 1,430 930 0.650 27,900
D 3BR/2BA/TH 12 1,481 1,000 0.675 12,000
--- --------
122 $103,880
</TABLE>
These rents have been compared to closely located and
similarly designed apartment complexes in the
subject's neighborhood area. For the purpose of this
analysis, we have considered five apartment complexes
that were identified by
39
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
SUBJECT - RENT ANALYSIS
PONTE VEDRA BEACH VILLAGE I
- ------------------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY PROJECT/UNIT
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF AMENITIES
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT lBR/lBA/VILLA 858 $700 $0.816 Good/Good
Greens at Marsh Landings 1BR/1BA 770 756 0.982 Good/Good
The Fairways 1BR/1BA/TH 750 650 0.867 Good/Good
Arbor Club 1BR/1BA 881 655-685 0.743-0.778 Good/Good
- ------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/VILLA 1,196 890 0.744 Good/Good
Greens at Marsh Landings 2BR/2BA 1,065 865 0.812 Good/Good
Marsh Cove 2BR/2BA 1,100 780 0.709 Good/Good
Arbor Club 2BR/2BA 1,181 790-820 0.669-0.694 Good/Good
Ocean Links 2BR/2BA 1,294 860-980 0.665-0.757 Good/Good
- ------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/TH 1,430 930 0.650 Good/Good
Marsh Cove 2BR/2BA/TH 1,220 810 0.664 Good/Good
Arbor Club 2BR/2BA 1,254 825-855 0.658-0.682 Good/Good
Ocean Links 2BR/2BA 1,294 860-980 0.665-0.757 Good/Good
Ocean Links 2BR/2BA 1,304 970-990 0.744-0.759 Good/Good
- ------------------------------------------------------------------------------------------------------
SUBJECT 3BR/2BA/TH 1,481 1,000 0.675 Good/Good
Marsh Cove 3BR/2BA 1,430 1,110 0.706 Good/Good
Arbor Club 3BR/2BA 1,426 980-1,000 0.687-0.701 Good/Good
Arbor Club 3BR/2BA 1,493 1,025-1,050 0.687-0.703 Good/Good
Ocean Links 3BR/2BA 1,605 990-1,110 0.617-0.692 Good/Good
======================================================================================================
</TABLE>
TH = townhouse
<PAGE>
management and found by the appraiser to be
reasonably comparable. They range in total unit size
from 86 to 251 units and in occupancy from 88 to 100
percent. These comparable rentals are summarized on a
previous page.
All of the comparables surveyed were located within
the subject's immediate vicinity. Each is comparable
to the subject overall, particularly in terms of
overall physical condition, unit size, rental rates,
and the amenities offered. These comparables indicate
an average effective rental rate range from $0.693 to
$0.845 per square foot per month.
On the table on the facing page, each of the
subject's four floor plans is compared to similar
floor plans obtained from the rent comparables. All
of the comparable rentals have competitive project
amenities for an apartment in this market which
include a pool, tennis court, clubhouse, hot
tub/jacuzzi, and landscaped grounds. Apartments which
have project amenities, which are rated "good" on
this chart additionally have a car wash stand, indoor
racquetball courts, basketball court, and/or
volleyball area. Unit amenities for standard or
average apartment units include typical built-in
kitchen appliances, miniblinds, a fireplace, a patio
or deck, and average finish. Good unit amenities on a
given apartment unit also include a microwave oven,
washer and dryer, vaulted ceilings and ceiling fans,
and/or burglar alarms.
According to the Rent Analysis summary, the subject's
Plan A is most comparable to the units offered at
Arbor Club; however, the subject is considered a
villa. The 1 bedroom units at the Fairways and Greens
at Marsh Landings are smaller with both renting at a
higher rate per square foot than the subject's unit.
The subject's Plan A has average asking rents of $700
per unit or $0.816 per square foot. The subject's
rent is in the mid-range of those for Plan A of the
comparable properties. This is due to the superior
amenities of the comparable properties. The subject
rent for Plan A is believed to be market.
Plan B (a villa) containing 1,196 square feet from
the subject is also most similar in size and
amenities to two-bedroom units displayed at Arbor
Club and Ocean Links. These competitive units have an
average monthly rental rate of $805 and $920
respectively or $0.681 to $0.711 per square foot
respectively. The Arbor Club unit is a flat and
considered inferior overall, while the Ocean Links
unit is reasonably comparable even though a flat and
newer in age. Plan B has average asking rents of $890
per month or $0.744 per square foot. Thus, the
current asking rent is comparable to the per square
foot range provided by the rent comparables.
The subject's Plan C with 1,430 square feet has an
average asking rent of $930 per month or $0.65 per
square foot. It is a townhouse unit. This plan is
most similar to the two-bedroom townhouse plan from
Marsh Cove, but the subject is larger. This
comparable unit has a monthly rental $810 which
equates to $0.664 per square foot, but is slightly
inferior to the subject. The remaining three
comparable units at Arbor Club and Ocean Links are
smaller in size than the subject unit and are not
townhouse units. Their monthly rent is $0.658 to
$0.759 per square foot and
40
<PAGE>
reflects the above issues as well as Ocean Links is a
newer project. The subject unit has a market rental
rate at its quoted current rental.
The subject's Plan D is a 3 bedroom/2 bath townhouse
containing 1,481 square feet and renting for $1,000
per month or $0.65 per square foot. It garners a
higher rent per square foot than the Plan C because
it is more attractive to families and/or sharing by
several people (tenants). No 3 bedroom townhouse
units were uncovered that were considered comparable,
therefore units at Marsh Cove, Arbor Club, and Ocean
Links, that are 3 bedroom flats were used for
comparison purposes. The units at Marsh Cove and
Arbor Club were comparable as to size with 1,426 to
1,493 square feet and rents from $0.687 to $0.706 per
square foot. The Ocean Links 3 bedroom unit has 1,605
square feet and rents for an average of $1,050 per
month or $0.654 per square foot. The subject unit
rents below the Marsh Cove and Arbor Club units, but
above the Ocean Links unit, which is a much larger
unit. After consideration of the age, amenities, and
size of the comparable units, it is believed that the
current subject rental is at market.
There are currently seven vacant units in the subject
complex. This equates to a current physical occupancy
rate of 94.3 percent. Physical occupancy one year ago
was 95.1 percent. These numbers indicate a slight
downward movement in physical occupancy for the
subject property, however, this could easily be
explained as a result of competition or current
turnover at date of value.
Economic occupancy is estimated near 85 percent. The
most recent leases for Plans A, B, C, and D indicate
that the subject is obtaining the quoted rental
rates. Therefore, we estimate that the current quoted
rental rates for the subject are indicative of market
rates.
After considering the subject's physical occupancy
and actual rates the projected market rental rates
for the subject are summarized below.
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------------------
UNIT TYPE UNITS SIZE RENT/MO RENT/SF MO. TOTAL
(SF)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A lBR/lBA/Villa 38 858 $ 600 $0.816 $ 26,600
B 2BR/2BA/Villa 42 1,196 890 0.744 37,380
C 2BR/2BA/TH 30 1,430 930 0.650 27,900
D 3BR/2BA/TH 12 1,481 1,000 0.675 12,000
--- --------
122 $103,880
</TABLE>
Gross Annual Rental Income: $103,880 x 12 months
= $1,246,560
Our cash flow analysis, as well as our direct
capitalization method, indicates a gross rental
income of $1,271,491. This figure is the result of a
2 percent increase in rental rates during the first
year of our projection period.
41
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
PONTE VEDRE BEACH VILLAGE I
- -----------------------------------------------------------------------------------------------------------------------------------
Comparable No. 1 2 3 SUBJECT PROPERTY
Year Built 1984 1986 1985 1984
Net Rentable Square Feet 142,792 100,750 117,980 143,508
Number of Units 120 110 124 122
Average Unit Size 1,190 916 951 1,176
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1997 1993 1994 1995 1996-YTD 1997 BRA PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED ACTUAL CALENDAR YEAR
PSF PSF PSF PSF PSF PSF PSF PSF ENDING 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
/SF /UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES
Real Estate Taxes $0.72 $0.80 $0.71 $0.67 $0.73 $0.73 $0.79 $0.67 $0.72 $ 846
Insurance 0.16 0.18 0.16 0.10 0.17 0.21 0.21 0.21 0.22 257
Operating Expenses 0.55 0.68 0.65 0.61 0.57 0.57 0.58 0.64 0.62 734
Utilities 0.68 0.94 0.86 0.31 0.30 0.30 0.33 0.36 0.45 529
Repairs & Maintenance 0.52 0.58 0.43 0.27 0.27 0.33 0.35 0.35 0.36 428
Contract Services 0.21 0.21 0.30 0.20 0.22 0.20 0.22 0.25 0.23 269
Management 0.34 0.37 0.39 0.35 0.37 0.37 0.38 0.38 0.40 475
General Administrative 0.15 0.18 0.18 0.07 0.09 0.10 0.13 0.15 0.10 122
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Total Expenses $3.33 $3.94 $3.68 $2.58 $2.72 $2.80 $2.99 $3.01 *$3.10 *$3,660
====================================================================================================================================
</TABLE>
* There may be differences due to rounding
<PAGE>
OTHER INCOME In addition to rental income from apartments, other
income is generated by laundry and vending machines,
forfeited security deposits, pet deposits, late
charges, and application fees. Figures for 1993, 1994,
and 1995 show other income ranging from $0.12 to $0.17
per square foot. Figures for annualized 1996 amount to
$$0.12 per square foot and actual and budgeted other
income for 1997 ranges between $18,420 to $20,292 or
$0.13 to $0.14 per square foot. Based on our experience
with similar type properties and the actual performance
of the subject property it is our opinion that other
income in the amount of $0.12 per square foot is
typical for a project such as the subject. This equates
to a total "Other Income" of $17,221 in the first
fiscal year of our projected cash flow as well as in
the direct capitalization method.
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied for the
beginning of the first fiscal year of our projection
period:
Gross Rental Income $ 1,271,491
Other Income 17,221
----------
Total Potential Gross Income $ 1,288,712
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 10 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. The
subject's current 94.3 percent physical occupancy is at
the 94.3 percent Third Quarter physical occupancy rate
enjoyed by the Beaches submarket. The subject property
has a current economic occupancy rate of 85 percent,
which is considered below stabilized occupancy for the
subject. A 95.0 percent stabilized economic occupancy
has been utilized for the subject during the holding
period and a deduction is taken for rent loss as the
stabilized occupancy is believed achievable in year 2.
Also the economic vacancy is s comparison of actual
rents obtained at year and versus market rents
estimated.
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 projected expenses on
comparable apartment projects located in the subject
area, as well as the actual historical performance of
the subject property. The Expense Analysis Chart on the
facing page summarizes the actual and/or annualized
1997 expenses reported by three (3) "individually
metered" projects, as well as the subject property's
actual 1993, 1994, 1995, and 1996 expense figures. The
1997 actual and budget figures were available to the
42
<PAGE>
appraiser also at the time of the report. They are
shown in the chart on the facing page. Bach Realty
Advisors' estimated expenses for the subject property
in Fiscal Year 1998 are also displayed.
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
REAL ESTATE TAXES - The Ponte Vedra Beach Village I
Apartments are subject to the taxing authorities of St.
Johns County. The county distributes the tax receipts
from property owners to different authorities as
specified in the Site section of this report. The
subject's 1997 assessed value is $5,412,560 the total
tax liability is $99,196 or $0.69 per square foot.
After examining the tax liabilities of the comparables
used in our expense analysis (which exhibited a range
from $0.71 to $0.80 per square foot), we have reflected
the actual 1997 real estate taxes plus an approximate 4
percent inflation factor in our estimate of the 1998
taxes. Thus, real estate taxes have been estimated at
$0.72 per square foot or $846 per unit and totaling
$103,163. The estimate has also considered personal
property taxes. This amount is increased at a rate of 4
percent per year throughout our projection period.
INSURANCE - For the first fiscal year, we have
estimated insurance at a market cost of $0.22 per
square foot or $31,340. All of the expense comparables
utilized exhibit a range of insurance costs from $0.16
to $0.18 per square foot for 1997. The subject's actual
insurance costs have been fluctuated from $0.10 to
$0.21 per square foot since 1993 with $0.21 per square
foot holding for the past three years. The appraisers
believe that the insurance expense for the subject is
appropriate and is generally supported by the expense
comparables. The expense per unit is $257. Insurance
expense is increased 4 percent annually for the
duration of the holding period.
OPERATING EXPENSES - This category includes salaries
for office managers and leasing agents, maid services,
payroll taxes and FICA, security, advertising, and
promotional items. The subject's actual figures for
1993, 1994, 1995, and 1996, were $0.57 to $0.64 per
square foot. The annualized 1997 operating expense is
$0.64 per square foot. The expense comparables indicate
a range of operating expenses from $0.55 to $0.68 per
square foot. Based on the subject's historical expenses
and a comparison of operating expenses of comparable
properties, the appraisers have estimated a 1997/98
year operating expense of $89,549 which is equivalent
to $0.62 per square foot or $734 per unit. This expense
is expected to increase 4 percent annually throughout
our projection period.
UTILITIES - The expense comparables' 1997 utility
expenses have a range from $0.68 to $0.94 per square
foot. The subject's annualized 1997 year-to-date
expense is $0.36 per square foot. This expense category
includes electricity to the common areas, water, sewer,
and garbage collection. The subject's 1998 expense for
utilities has been estimated by the appraiser to be
$0.45 per square foot or $529 per unit, below the lower
end of the comparables range but 25 percent higher than
1997. This equates to a total utility expense estimate
of $64,579 for the subject property
43
<PAGE>
in the first year. Utility expenses are increased 4
percent annually throughout the projection period.
REPAIRS AND MAINTENANCE - The 1996 annualized actual
year-to-date repairs and maintenance costs are $0.35
per square foot for the subject, which shows a slight
increase in expenses of from the previous year. Repairs
and maintenance expenses are necessary in order to keep
the property in good repair and consist of repairs
required on plumbing, air-conditioners, electrical
components, miniblinds, carpeting, janitorial services,
and decorative costs. The expense comparables indicate
a range from $0.43 to $0.58 per square foot and the
subject's 1997 annualized expense is $0.36 per square
foot. Repairs and maintenance costs of $0.36 per square
foot or $428 per unit and totaling $52,237 have been
projected for the subject for the first year of our
cash flow analysis and increased 4 percent annually.
Reliance was placed on the subject's historical
experience.
CONTRACT SERVICES - The contract services category
includes mainly landscaping services. Our surveyed
expense comparables reported 1997 contract services
expenses between $0.21 and $0.30 per square foot.
Actual expenses for the subject in for the 1997
contract services expense are estimated at $0.25 per
square foot. The appraiser has emphasized the
historical and budgeted expenses for the subject when
estimating the per square foot contract services
expense for the property of $0.23 per square foot or
$269 per unit and totaling $32,835 in the first year of
the cash flow. These expenses are expected to increase
annually at a rate of 4 percent.
MANAGEMENT - This figure for apartment projects is
typically expressed as a percentage of the effective
gross income of the property. The industry standard for
an apartment complex of this size and quality is about
5 percent of effective gross income. This includes the
fee to outside management or ownership for managing the
property. According to the actual income and expense
statements from 1993 forward provided by the client,
management fees at the subject have been approximately
5 percent. We have also relied upon indicators from the
market to determine typical expenses for this category.
A management fee of 5 percent of the projected
effective gross income for each year of the cash flow
is estimated.
GENERAL AND ADMINISTRATIVE - This expense category
includes legal expenses, dues, fees, printing, auto
costs, postage, accounting/audit, permits, travel,
credit, reports, office equipment, telephone, and all
other miscellaneous and administrative costs. Our
surveyed expense comparables indicated actual
administrative expenses ranging from $0.15 to $0.18 per
square foot. The subject's historical experience
indicated a range of $0.07 to $0.15 per square foot.
The 1997 expense was $0.15 per square foot. The
appraiser utilized a $0.10 per square foot figure or
$122 per unit and totaling $14,924, supported by the
comparables' range. This expense increases at a rate of
4 percent for each year in the cash flow.
EXPENSE SUMMARY In conclusion, vacancy loss has been estimated at 5
percent throughout the holding period. The total
estimated 1997 calendar year expenses for the Ponte
Vedra Beach Village Apartments, excluding reserves for
replacement,
44
<PAGE>
equates to $3.10 per net rentable square foot or $3,660
per unit. This is within the range indicated by the
expense comparables and is reasonable and well
supported by actual historical figures indicated by the
subject property. Five comparables were reviewed for
1997 and indicated a range for expenses of $3,300 to
$3,900 per unit.
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 1984 and appears to have had ongoing
maintenance since its construction. It is our opinion
that a reserve allowance of $0.26 per square foot or
$300 per unit is adequate to provide for the continued
maintenance of the project given the on-going termite
problem and weather related conditions as mentioned
below. Reserves for replacement total $36,600 and are
grown at 4 percent for the duration of the holding
period. Reserves were included in our expenses prior to
concluding the net operating income.
DEFERRED MAINTENANCE/
CAPITAL EXPENDITURES The subject has numerous items requiring capital
expenditures. Capital expenditures listed by management
in the 1998 budget total $118,400 as detailed in the
Improvements section of this report.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION a reasonable method for estimating value via the Income
Approach in a stabilized market 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.
Real Estate Investment Trusts (REITS) have been the
major players among new apartment acquisitions over the
past, few years which has resulted in upward pressure
on selling prices as capitalization rates have dropped.
More recently, REITs are strong in the market.
Capitalization rates are lower this year than last year
due to many buyers pursuing limited inventory.
Survey participants in RERC's Emerging Trends in Real
Estate: 1997 indicate that multifamily is still a
viable investment vehicle, but its desirability is
ebbing as short-term rental growth has already peaked
in some markets. Expectations for
45
<PAGE>
1998 are an increased interest in apartments as markets
stabilize and new construction comes on-line. Since
1994 returns for apartments have averaged near 12
percent, above all other categories. Solid returns in
the 9 to 10 percent area are expected to continue with
9 percent and below for new Class A product, much of
which may be pre-sold. Apartment investment fits the
portfolio profiles of pension funds and REITs who want
immediate high cash flows with predictable capital
costs and national vacancy rates in relative
equilibrium at 5 percent to 8 percent and a growing
population, the risk in the multifamily market is
steady and we anticipate that investors will continue
to find their niche the market.
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. Real Estate is considered riskier than bonds
due to illiquidity, competition, burden of management,
and market conditions; therefore approximately 150
basis points or more could be added to the Corporate
"Baa" bond rate in a normal market. Based on the
previous data and recognizing new construction, we
believe a 12 percent discount rate is reasonable in the
current market based on an all cash sale and
alternative investments.
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 for apartment
properties indicated a terminal capitalization rate
range from 8.0 to 10.25 percent or an average of 9.29
percent to attract investment. Going-in capitalization
rates of the comparable sales in the Sales Comparison
Approach could be calculated based on the data
provided. Most had a relatively similar occupancy rate
as the subject at their respective times of sale. The
range of going-in capitalization rates from these sales
was from 7.76 to 10.9 percent (without reserves). A
going-in capitalization rate in the middle of this
range is considered appropriate. The going-in rate is
typically lower than the terminal capitalization rate
stated above due to the older age of the property and
the risk of the market ten
46
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PONTE VEDRA VILLAGE 1
- -----------------------------------------------------------------------------------------------------------------------------------
Period 1 2 3 4 5 6 7
1998 1999 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Apt. Rents 1,271,491 1,322,351 1,375,245 1,430,255 1,487,465 1,546,963 1,608,842
Rent/SF/Mo. 0.738 0.768 0.799 0.831 0.864 0.898 0.934
Other Income/Yr. 17,221 17,910 18,626 19,371 20,146 20,952 21,790
---------- ---------- ---------- ---------- ---------- ---------- ---------
Gross Income 1,288,712 1,340,261 1,393,871 1,449,626 1,507,611 1,567,915 1,630,632
% Vacancy 10.00% 5.00% 5.00% 5.00% 5.000% 5.00% 5.00%
Vacancy Allowance 128,871 67,013 69,694 72,481 75,381 78,396 81,532
---------- ---------- ---------- ---------- ---------- ---------- ---------
Eff. Gross Income 1,159,841 1,273,248 1,324,178 1,377,145 1,432,230 1,489,520 1,549,100
-------------------
EXPENSES: Per/Unit Per/SF
-------------------
Real Estate Taxes 846 0.72 103,163 107,290 111,581 116,044 120,686 125,514 130,534
Insurance 257 0.22 31,340 32,594 33,898 35,254 36,664 38,130 39,656
Operating Expenses 734 0.62 89,549 93,131 96,856 100,731 104,760 108,950 113,308
Utilities 529 0.45 64,579 67,162 69,848 72,642 75,548 78,570 81,713
Repairs & Maintenance 428 0.36 52,237 54,327 56,500 58,760 61,110 63,554 66,097
Contract Services 269 0.23 32,835 34,148 35,514 36,935 38,412 39,949 41,547
Management Fee 5.00% 0.40 57,992 63,662 66,209 68,857 71,612 74,476 77,455
General & Administrative 122 0.10 14,924 15,521 16,142 16,787 17,459 18,157 18,884
Reserves 300 0.26 36,600 38,064 39,587 41,170 42,817 44,529 46,311
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total Expenses $3,961 $ 3.37 483,219 505,899 526,135 547,180 569,067 591,830 615,503
------ ------
Per SF 3.37 3.53 3.67 3.81 3.97 4.12 4.29
Per Unit 3,961 4,147 4,313 4,485 4,664 4,851 5,045
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net Operating Income $ 676,622 $ 767,349 $ 798,043 $ 829,965 $ 863,163 $ 897,690 $ 933,597
========== ========== ========== ========== ========== ========== =========
Per SF $ 4.71 $ 5.35 $ 5.56 $ 5.78 $ 6.01 $ 6.26 $ 6.51
Per Unit $ 5,546 $ 6,290 $ 6,541 $ 6,803 $ 7,075 $ 7,358 $ 7,652
===================================================================================================================================
Capital Items: 118,400
---------- ---------- ---------- ---------- ---------- ---------- ---------
Cash Flow 558,222 767,349 798,043 829,965 863,163 897,690 933,597
---------- ---------- ---------- ---------- ---------- ---------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value of Cash Flow 498,412 611,726 568,031 527,458 489,782 454,798 422,312
NOI in 11th Year 1,092,177 Present Value of Income Stream 4,666,928
Ro at Reversion 10.00% Present Value of Reversion 3,375,857
----------
------------------------------------------------------------
Indicated Reversion 10,921,769 Indicated Value of Subject 8,042,785
Less: Sales Costs 4.00% 436,871 Indicated Value/SF 56.04
----------
Indicated Value/Unit 65,924
Reversion in 10th Yr 10,484,898 GIM at Indicated Value 6.33
Ro at Indicated Value 8.41%
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Period 8 9 10 Reversion
2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME:
Apt. Rents 1,673,196 1,740,124 1,809,728 1,882,118
Rent/SF/Mo. 0.972 1.010 1.051 1.093
Other Income/Yr. 22,662 23,568 24,511 25,491
---------- ---------- ---------- ----------
Gross Income 1,695,857 1,763,692 1,834,239 1,907,609
% Vacancy 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 84,793 88,185 91,712 95,380
---------- ---------- ---------- ----------
Eff. Gross Income 1,611,064 1,675,507 1,742,527 1,812,228
EXPENSES:
Real Estate Taxes 135,755 141,186 146,833 152,706
Insurance 41,242 42,892 44,607 46,391
Operating Expenses 117,841 122,554 127,456 132,555
Utilities 84,981 88,380 91,915 95,592
Repairs & Maintenance 68,740 71,490 74,350 77,324
Contract Services 43,208 44,937 46,734 48,604
Management Fee 80,553 83,775 87,126 90611
General & Administrative 19,639 20,425 21,242 22,091
Reserves 48,163 50,090 52,093 54,177
---------- ---------- ---------- ----------
Total Expenses 640,123 665,728 692,357 720,052
Per SF 4.46 4.64 4.82 5.02
Per Unit 5,247 5,457 5,675 5,902
---------- ---------- ---------- ----------
Net Operating Income $ 970,941 $1,009,779 $1,050,170 $1,092,177
========== ========== ========== ==========
Per SF $ 6.77 $ 7.04 $7.32 $7.61
Per Unit $ 7,959 $ 8,277 $ 8,608 $ 8,952
================================================================================================
Capital Items:
---------- ---------- ---------- ----------
Cash Flow 970,941 1,009,779 1,050,170 1,092,177
========== ========== ========== ==========
Present Value Factor 0.403883 0.360610 0.321973 1.000000
Present Value of Cash Flow 392,147 364,136 338,127 1,092,177
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
======================================================================
CASH FLOW SUMMARY
<S> <C> <C> <C>
CALENDAR YEAR ANNUAL 12.00% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------ --------- ---------- ---------
1998 $ 558,222 0.892857 $ 498,412
1999 767,349 0.797194 611,726
2000 798,043 0.711780 568,031
2001 829,965 0.635518 527,458
2002 863,163 0.567427 489,782
2003 897,690 0.506631 454,798
2004 933,597 0.452349 422,312
2005 970,941 0.403883 392,147
2006 1,009,779 0.360610 364,136
2007 1,050,170 0.321973 338,127
-------
TOTAL NPV OF CASH FLOWS $ 4,666,928
Projected NOI - 11th Year $ 1,092,177
Terminal Capitalization Rate 10.00%
------
Estimated Value of Property at End of 10th Year $10,921,769
Sales Cost 4.00% (436,871)
---------
Value of Reversion at End of 10th Year $10,484,898
Discount Factor 12.00% 0.321973
--------
Present Value of Reversion $ 3,375,857
Sum of Present Values of Cash Flow 4,666,928
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $ 8,042,785
(ROUNDED) $ 8,000,000
===========
======================================================================
</TABLE>
<PAGE>
years hence. Based upon the aforementioned factors, the
terminal capitalization rate for the subject should be
above the average going-in capitalization rate
exhibited by the comparable sales in the Sales
Comparison Approach. Therefore, a terminal
capitalization rate of 10.0 percent appears appropriate
for the subject property based on the Korpacz survey.
CASH FLOW ASSUMPTIONS . Rents were based on an average rental rate of
approximately $0.724 per square foot per month.
During the projection period rents are expected to
increase at 2 percent during 1997. Rents increase
4 percent in the second year of our analysis and
each year thereafter.
. The subject property's current physical occupancy
rate is 94.3 percent. The economic occupancy rate
of 85 percent as of December 1997 is below the
estimated stabilized occupancy rate of 95.0
percent. It is our opinion that the subject, after
the first year (10% vacancy), should be capable of
averaging 95.0 percent economic occupancy
throughout the holding period of our cash flow
analysis.
. Other income is increased at 4 percent per year
after the first year of the cash flow.
. 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 ten-year projection
period. Management expenses are based on a
percentage of gross income and increase with
occupancy and rental increases. Reserves are
calculated at $0.306 per square foot or $300 per
unit in the first year and also increase at 4
percent per year thereafter.
. A discount rate of 12.0 percent was utilized.
. A terminal capitalization rate of 10.0 percent was
felt reasonable.
. A sales cost of 4 percent of the reversionary
value was estimated.
A cash flow analysis and summary for the subject
beginning January 1, 1998 may be found on the preceding
pages. The estimated leased fee market value for the
subject on an "as is" basis as of December 31, 1997 via
discounted cash flow method is
EIGHT MILLION DOLLARS
($8,000,000)
47
<PAGE>
================================================================================
DIRECT CAPITALIZATION
<TABLE>
<CAPTION>
=========================================================================================
TOTAL UNIT /SF
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Potential Gross Rental Income $1,271,491 $10,422 $ 8.86
Ancillary Income 17,221 141 0.12
------ --- ---
Potential Gross Income $1,288,712 $10,563 $ 8.98
Less: Vacancy & Credit Loss @ 5.00% 64,436 528 0.45
------ --- ----
Effective Gross Income $1,224,277 $10,035 $ 8.53
FIXED EXPENSES
- --------------
Real Estate Taxes $ 103,163 $ 846 $ 0.72
Insurance 31,340 257 0.22
------ ---- ----
Total Fixed $ 134,503 $ 1,102 $ 0.94
VARIABLE EXPENSES
- -----------------
Operating Expenses $ 89,549 $ 734 $ 0.62
Utilities 64,579 529 0.45
Repairs & Maintenance 52,237 428 0.36
Contract Services 32,835 269 0.23
Management Fee 5.00% 61,214 502 0.43
General & Administrative 14,924 122 0.10
Reserves for Replacement 36,600 300 0.26
------ --- ----
Total Variable $ 351,938 $ 2,885 $ 2.45
Total Expenses $ 486,441 $ 3,987 $ 3.39
---------- ------- ------
Net Operating Income $ 737,836 $ 6,048 $ 5.14
Capitalization Rate 9.00%
----
Leased Fee Stabilized Market Value $8,198,173 $67,198 $57.13
Less: Rent Loss Due to Lease Up 69,593 570 0.48
Capital Expenditures 118,400 970 0.83
------- --- ----
LEASED FEE "AS IS" MARKET VALUE $8,010,180 $65,657 $55.82
ROUNDED $8,000,000
==========
</TABLE>
================================================================================
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1 Year 2
------ ------
Stabilized NOI $737,836 $737,836
Projected NOI 663,371 767,349
------- -------
Rent Loss $74,465 $0
7.00% PV Factor 0.934579 0.873439
-------- --------
PV Income Loss $69,593 $0
CUMULATIVE LOSS $69,593
================================================================================
<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 7.76 to 10.90 percent. The Korpacz
investor survey previously quoted indicated an average
desired going-in capitalization rate of 9.29 percent. Some
weight in this analysis is given to the comparable market
sales since these transactions best illustrate the behavior
of investor/purchasers in this marketplace. Investors'
greater aversion to risk in the market caused by the recent
national recession and credit constriction indicates that
the range of capitalization rates from the comparables,
which sold prior to this phase in the economy may be
optimistic. Therefore, from these findings an overall rate
of 9.00 percent was chosen for application to the subject.
This rate is 1.0 percentage point lower than the terminal
capitalization rate utilized for the subject in the
preceding discounted cash flow analysis. The direct
capitalization method indicates a value of $8,000,000 and is
shown on the facing page.
INCOME APPROACH
CONCLUSION DCF Method........................................$8,000,000
Direct Capitalization Method......................$8,000,000
Consideration is given to both the discounted cash flow
method and the direct capitalization approach. These have
been rounded to the nearest ten thousand dollars, however,
for purposes of the income approach conclusion, the value is
rounded to the nearest fifty thousand.
From the above analysis provided by the Income Approach, we
estimate the leased fee market value of the subject property
on an "as is" all cash basis, as of December 31, 1997, to be
EIGHT MILLION DOLLARS
($8,000,000)
48
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $8,000,000
Income Approach $8,000,000
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
the market activity based on the willing buyer/willing
seller concept.
Eight recent sales, dating from May 1996 through August 1997
were utilized in the Sales Comparison Approach. Each is
similar to the subject property in several characteristics
including occupancy, location, age, construction quality,
amenities, and/or condition. The data on the comparable
sales was considered to be reasonably accurate and reliable.
The methods of comparison utilized in this analysis were the
net operating income per square foot and per unit and the
effective gross rental multiplier (EGRM) methods. These
indicators rely on a comparison of income rather than
physical attributes. Thus, adjustments for physical factors
are not necessary as economics are the common denominator. A
final market value estimate for the subject was made based
on the analysis presented in the Sales Comparison Approach.
The Income Approach attempts to measure investment qualities
of the property. Based on actual rents 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 from nearby
similar properties, were considered to be adequate. Because
the Income Approach deals directly with income streams, we
believe it is a very good indication of current market
conditions. It tends to reflect a value, which an investor
of a property would anticipate.
In the Income Approach, comparable properties from the
subject Ponte Vedra Beach area were utilized when deriving
the subject property's economic market rents and projected
expenses. For this reasoning, the Income Approach is given
greatest weight in the final analysis.
Therefore, it is our opinion that the market value of the
leased fee estate of the subject property on an "as is" all
cash basis, as of December 31, 1997, is
EIGHT MILLION DOLLARS
($8,000,000)
49
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name The Links at Windsor Park
Address 13700 Sutton Park Drive North
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 08/97
Grantor (Seller) Windsor Park Apartments, Ltd.
Grantee (Buyer) Rancho Bernardo Corporate Center
Recorded Document 8726-846
Sale Price $20,500,000
Occupancy 95%
Sale Price per Unit $73,214
Sale Price per SF $69.11
Capitalization Rate 8.56%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,767,693
Vacancy/Collection Loss ($138,385)
Effective Gross Income $2,629,308
Operating Expenses $(874,508)
Net Operating Income $1,754,800
PROPERTY DESCRIPTION
Year Built 1995
Number of Stories 2 and 3
Number of Units 280
Number of Bedrooms NA
Net Rentable Area 296,616 SF
Average Unit Size 1,059 SF
Land Area 23.36 acres
Unit Density 11.98 Units per Acre
Property Condition Excellent
Parking (type) Open
Construction Type Wood frame/Wood Siding/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments: Was completed in early 1995 and was in excellent
condition at time of sale. Complex amenities include
security fencing with remote entry gate, swimming pool,
sun deck, tennis courts, clubhouse with fitness center,
playground, and amenity lake with partial frontage
along golf course fairways. Units have installation
alarms, washer/dryer, appliances ceiling fans, window
coverings, and built-in bookcases.
<PAGE>
SAN PABLO
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name San Pablo
Address 14401 Jose Vedra Blvd..
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) N/A
Grantee (Buyer) N/A
Recorded Document N/A
Sale Price $5,350,000
Occupancy 90%
Sale Price per Unit $26,750
Sale Price per SF $28.96
Capitalization Rate 10.8%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,302,800
Vacancy/Collection Loss ($130,280)
Effective Gross Income $1,172,520
Operating Expenses ($589,370)
Net Operating Income $583,150
PROPERTY DESCRIPTION
Year Built 1974
Number of Stories 2
Number of Units 200
Number of Bedrooms 350
Net Rentable Area 184,750
Average Unit Size 924 SF
Land Area 14.24 acres
Unit Density 14.04 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Concrete block with masonry and wood veneer
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments San Pablo Apartments needed new plumbing system, wood
replacement, some roof replacement and other repairs at
time of sale. The property has tennis courts,
basketball courts, full size pool, and playground.
Expenses do not include reserves.
<PAGE>
HUNTER'S RIDGE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name Hunter's Ridge (previously Oaks at Deerwood)
Address 10100 Baymeadows Road
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Oaks at Baymeadows II Associates, Ltd.
Grantee (Buyer) Mid-America Apartments of Duval, L.P.
Recorded Document 8653-596
Sale Price $15,200,000
Occupancy 92%
Sale Price per Unit $45,238
Sale Price per SF $51.54
Capitalization Rate 7.76%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,451,409
Vacancy/Collection Loss ($196,113)
Effective Gross Income $2,255,296
Operating Expenses $1,075,776
Net Operating Income $1,179,520
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms NA
Net Rentable Area 294,888 SF
Average Unit Size 878 SF
Land Area 34.70 acres
Unit Density 9.68 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Wood frame/Wood Siding/Shingle roof
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Property had a name change after the sale and is now
known as Hunter's Ridge. Clubhouse has a tile roof
covering and entry is paved with brick payers. Well
landscaped and treed. Amenities include a pool with hot
tub, tennis courts, fitness facility in clubhouse, car
care center, racquet ball/volleyball court, outdoor
storage for each unit, mini-blinds, and washer/dryer
connections.
<PAGE>
WOODHOLLOW
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name Woodhollow Apartments
Address 1715 Hodges Blvd.
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Woodhollow Apartments, LP
Grantee (Buyer) Mid-America Apartments, LP
Recorded Document 8590-2406
Sale Price $16,700,000
Occupancy 94%
Sale Price per Unit $37,111
Sale Price per SF $48.99
Capitalization Rate 9.60%
TERMS OF SALE Cash to mortgage of $10,350,000 @ 7.5%
Due in 7 years, based on 25 amortization schedule
INCOME/EXPENSE DATA
Potential Gross Income $3,245,490
Vacancy/Collection Loss ($194,729)
Effective Gross Income $3,050,761
Operating Expenses ($1,447,561)
Net Operating Income $1,603,200
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Units 450
Number of Bedrooms 690
Net Rentable Area 342,162 SF
Average Unit Size 760 SF
Land Area 38.65 acres
Unit Density 11.6 Units per Acre
Property Condition Average Plus
Parking (type) Open parking
Construction Type Wood frame
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments The cap rate does not include a deduction for reserves.
Amenities are a 6-acre lake, olympic size pool with
large cool deck, jacuzzi, 2 tennis courts, 2 volleyball
courts, BBQ and picnic areas, large playground, and a
gated boat storage.
<PAGE>
THE COURTS AT PONTE VEDRA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name The Courts at Ponte Vedra
Address 101 Vera Cruz Drive
City/County/State Ponte Vedra Beach, FL
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Windsor Apartments, L.P.
Grantee (Buyer) Metropolitan Life Insurance Corporation
Recorded Document 01220-01824
Sale Price $19,000,000
Occupancy 95%
Sale Price per Unit $75,099
Sale Price per SF $75.12
Capitalization Rate 8.34%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,734,426
Vacancy/Collection Loss ($136,721)
Effective Gross Income $2,597,705
Operating Expenses ($1,013,105)
Net Operating Income $1,584,600
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Units 253
Number of Bedrooms N/A
Net Rentable Area 252,916 SF
Average Unit Size 1,000 SF
Land Area 9.23 acres
Unit Density 27.41 Units per Acre
Property Condition Excellent
Parking (type) Open parking
Construction Type Wood frame/Masonry/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Built in late 1996 and sold on 95% proforma. Leasing
was ahead of schedule at time of sale. Complex was in
excellent condition. Property had very attractive
architectural design features at windows and roof
lines. Amenities include security gate entry, fountain,
brick pavers, lap pool, heated spa, and clubhouse with
business center. Property had higher unit density than
most projects in Ponte Vedra.
<PAGE>
THE HUNTINGTON AT HIDDEN MILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name The Huntington at Hidden Mills (formerly Cozumel)
Address 3333 Monument Road
Location East side of Monument Road, north of SR 10 (Atlantic
Blvd.)
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Date of Sale 8/8/96
Grantor (Seller) Private Syndication
Grantee (Buyer) Walden Residential
Recorded Document NA
Sale Price $7,225,000
Occupancy 98%
Sale Price per Unit $32,254.46
Sale Price per SF $40.26
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,356,839
Vacancy/Collection Loss 2.8% $ 37,991
Effective Gross Income $1,318,848
Operating Expenses $628,166
Net Operating Income $690,682
PHYSICAL DATA
Year Built 1986
Number of Stories 2-3
Number of Units 224
Number of Bedrooms 376
Net Rentable Area 179,476 SF
Average Unit Size 801 SF
Land Area 14.92 acres
Unit Density 15
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments Price adjusted upward by $350,000 for required re-
plumbing and was a credit given by the seller.
The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE ANTLERS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name The Antlers
Address 8433 Southside Blvd.
Location East side of Southside Blvd., south of J. Turner
Butler Blvd.
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Balcor
Grantee (Buyer) United Dominion Real Estate
Date of Sale 5/29/96
Sale Price $15,000,000
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $37,500.00
Sale Price per SF $45.77
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,752,915
Vacancy/Collection Loss 3.2% $ 88,093
Effective Gross Income $2,664,822
Operating Expenses $1,140,493
Net Operating Income $1,524,329
PHYSICAL DATA
Year Built 1985
Number of Stories 2-3
Number of Units 400
Number of Bedrooms 504
Site Area 42.51 acre(s)
Net Rentable Area 327,728 SF
Average Unit Size 819 SF
Land Area 42.51 acres
Unit Density 9.4
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
WESTLAND PARK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-074
Project Name Westland Park
Address 6710 Collins Road
Location North side of Collins Road, north of I-295
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Vestcor
Grantee (Buyer) United Dominion Real Estate
Sale Date 5/9/96
Sale Price $16,950,060
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $41,852.00
Sale Price per SF $42.06
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,929,883
Vacancy/Collection Loss 3.7% $108,406
Effective Gross Income $2,821,477
Operating Expenses $1,104,247
Net Operating Income $1,717,230
PHYSICAL DATA
Year Built 1989
Number of Stories 2-3
Number of Units 405
Number of Bedrooms 723
Net Rentable Area 403,010 SF
Average Unit Size 995 SF
Land Area 27.17
Unit Density 14.9
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include
an allowance for reserve for replacement
expenses.
<PAGE>
THE GREENS AT MARSH LANDING
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Project No.: 97-074
Name of Project: The Greens at Marsh Landings
Street Address: 1800 The Greens Way
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1989
Number of Buildings: NA
Number of Stories: 2
Number of Units: 192
Net Rentable Area (SF): 201,848
Average Unit Size (SF): 1,051
Parking Surface: Asphalt
Parking Spaces: Unknown, has garages
Type of Construction: Wood frame with stucco exterior and composition
roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------
<S> <C> <C> <C> <C>
40 1BR/1BA 770 $ 756 $ 0.982
104 2BR/2BA 1,065 865 0.812
48 3BR/2BA 1,256 1,050 0.836
</TABLE>
Unit Amenities: Microwaves, screened-in patios, washer/dryer,
glass enclosed fireplace, ceiling fans, walk-in
closets, and alarms.
Project Amenities: Garages with remote control, swimming pool and
spa, fitness center, and car care center.
ECONOMIC DATA
Percent Occupied: 88.5%
Avg. Monthly Rent/SF of NRA: $0.845
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $275
Pets Allowed/Deposit: Yes; $300 - $500 deposit
Confirmed With: On-site agent and ConAm Agent's survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: One month free on 3 bedroom -- one year lease, 1/2
month free rent on 7 month lease.
<PAGE>
MARSH COVE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Project No. 97-068/97-074
Name of Project: Marsh Apartments
Street Address: 1220 Marsh Cove Lane
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Buildings: 15
Number of Stories: 1-2
Number of Units: 86
Net Rentable Area (SF): 96,176
Average Unit Size (SF): 1,118
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Frame and stucco walls with composition roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------
<S> <C> <C> <C> <C>
18 2BR/2BA/FL 980 $ 740 $0.755
12 2BR/2BA/FL 1,100 780 0.709
8 2BR/2BA/LOFT 1,242 850 0.684
26 2BR/2.5BA/TH 1,050 760 0.724
16 2BR/2.5BA/TH 1,220 810 0.664
6 3BR/3BA 1,430 1,010 0.706
</TABLE>
FL = flat; TH = townhouse
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplaces,
outdoor utility closets, patio/balconies
Project Amenities: 1 swimming pool, 1 tennis court, hot tub
ECONOMIC DATA
Percent Occupied: 95.0%
Avg. Monthly Rent/SF of NRA: $0.71
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $200
Pets Allowed/Deposit: Yes, 25 pounds maximum $200 nonrefundable
Confirmed With: Leasing agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: There is an extra $10/month rent surcharge for
seven-month leases. There is also a premium of $10
per month for lake view units. No concessions are
give.
<PAGE>
THE FAIRWAYS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Project No. 97-068/97-069/97-074
Name of Project: The Fairways Apartments
Street Address: 100 Fairway Park Boulevard
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Buildings: 21
Number of Stories: 2-3
Number of Units: 216
Net Rentable Area (SF): 186,600
Average Unit Size (SF): 864
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Frame and stucco walls with composition roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------
<S> <C> <C> <C> <C>
8 1BR/1BA 500 $555 $ 1.01
18 1BR/1BA 600 615 1.03
86 2BR/2BA/FL 950 700 0.737
68 2BR/1BA/TH 750 650 0.867
18 2BR/2BA/TH 1,100 740 0.673
18 2BR/1.5BA/TH 1,050 705 0.671
</TABLE>
FL = flat; TH = townhouse
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, miniblinds, fireplaces, outdoor utility
closets, patio/balconies
Project Amenities: 1 swimming pool, 2 tennis courts, hot tub,
exercise/weight room, clubroom, laundry facility,
lake
ECONOMIC DATA
Percent Occupied: 88%
Avg. Monthly Rent/SF of NRA: $0.782
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $275
Pets Allowed/Deposit: Yes; 20 pounds maximum, $300-500 nonrefundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates between individual
floor plans are due to screened-in porches and
fireplaces.
<PAGE>
THE ARBOR CLUB
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Project No. 97-068/97-069/97-074
Name of Project: Arbor Club Apartments
Street Address: 1 Arbor Club Drive
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1992
Number of Buildings: 13 plus 12 garage buildings
Number of Stories: 2-3
Number of Units: 251
Net Rentable Area (SF): 288,924
Average Unit Size (SF): 1,151
Parking Surface: Asphalt
Parking Spaces: Open and garage space ($55/month)
Type of Construction: Wood/stucco siding
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------------
<S> <C> <C> <C> <C>
52 1BR/1BA 881 $ 655-685 $0.743-0.778
52 1BR/1BA/LOFT 1,102 740-760 0.672-0.690
60 2BR/2BA 1,181 790-82- 0.669-0.694
60 2BR/2BA 1,254 825-855 0.658-0.682
9 3BR/2BA 1,426 980-1,000 0.687-0.701
18 2BR/2BA 1,493 1,025-1,050 0.687-0.703
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplaces,
vaulted ceilings, walk-in closets, burglar alarms
Project Amenities: 1 swimming pool, 2 tennis court, jacuzzi,
exercise/weight room, clubroom, laundry facility,
on-site security, garages
ECONOMIC DATA
Percent Occupied: 100%
Avg. Monthly Rent/SF of NRA: $0.693
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $175
Pets Allowed/Deposit: 25-pound limit; $300 pet fee (nonrefundable)
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: This project opened in April 1992. Differences in
rental rates for individual units are due to
fireplaces, lake view, and upstairs/downstairs.
There is also a $70 per month garage fee. One
month free rent with a 12-month lease.
<PAGE>
OCEAN LINKS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Project No. 97-074
Name of Project: Ocean Links
Street Address: 310 Solano Road
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1993
Number of Buildings: NA
Number of Stories: 2
Number of Units: 192
Net Rentable Area (SF): 251,100
Average Unit Size (SF): 1,308
Parking Surface: Asphalt
Parking Spaces: Open and private garages
Type of Construction: Wood frame with stucco exterior and composition
shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------
<S> <C> <C> <C> <C>
36 1BR/1BA 943 $690-790 $0.732-0.838
72 2BR/2BA 1,294 860-980 0.665-0.757
36 2BR/2BA 1,304 970-990 0.744-0.759
48 3BR/2BA 1,605 990-1,110 0.617-0.692
</TABLE>
Unit Amenities: Ceiling fans, fireplaces, intrusion alarm, panic
buttons, microwaves, sky lights, vaulted ceilings,
and washer/dryer
Project Amenities: Swimming pool, tennis court, sauna, spa, garages,
clubhouse, and fitness center.
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.711
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $200
Pets Allowed/Deposit: Yes $250 deposit
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: One month free is given on a 12-month lease.
<PAGE>
LEGAL DESCRIPTION
Phase I:
- --------
A part of Section 27 and 46, Township 3 South, Range 29 East, St. Johns County,
Florida, and being more particularly described as follows: Commence at the
southeast corner of said Section 27 and run S. 74 degrees 22'30" west a distance
of 12.00 feet to the point of beginning; thence S. 15 degrees 37'30" east a
distance of 340.31 feet, thence S. 83 degrees 30'30" west a distance of 440.00
feet; thence north 2 degrees 39'15" west a distance of 584.99 feet; thence north
71 degrees 33'30" west a distance of 70.00 feet, to the point of curvature of a
curve to the right, said curve being concave northeasterly and having a radius
of 367.96 feet; thence northwesterly along the arc of said curve through a
central angle of 13 degrees 30'00", an arc distance of 86.70 feet, said arc
being subtended by a chord bearing and distance of north 64 degrees 48'30" west,
86.50 feet to the point of tangency of said curve; thence north 58 degrees
03'30" west a distance of 200.00 feet to the point of curvature of a curve to
the left, said curve being concave southwesterly and having a radius of 400.00
feet; thence northwesterly along the arc of said curve, through a central angle
of 35 degrees 43'44", an arc distance of 249.43 feet, said arc being subtended
by a chord bearing and distance of north 75 degrees 55'22" west 245.41 feet to a
point of reverse curvature of a curve to the right, said curve being concave
northeasterly and having a radius of 460.00 feet; thence northwesterly along the
arc of said curve through a central angle of 12 degrees 50'04", an arc distance
of 103.04 feet, said arc being subtended by a chord bearing and distance of
north 87 feet 22'12" west 102.83 feet to a point of reverse curvature of a curve
to the left, said curve being concave southwesterly and having a radius of
470.00 feet; thence northwesterly along the arc of said curve, through a central
angle of 12 degrees 58'20", an arc distance of 106.41 feet, said arc being
subtended by a chord bearing and distance of north 87 degrees 26'20" west 106.18
feet to the point of tangency of said curve said point lying in the easterly
right-of-way line of State Road A-I-A as now established; thence north 03
degrees 55'30" east a distance of 338.66 feet; thence south 15 degrees 37'30"
east a distance of 432.31 feet; thence north 76 degrees 50'30" east a distance
of 18.02 feet; thence south 15 degrees 37'30" east a distance of 374.79 feet to
the point of beginning. Containing 21.75 acres more of less being the same land
as described as Exhibit "A" of official records Volume 568, Pages 263 through
266, of the Public Records of said county.
<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
RANCHO ANTIGUA
8787 EAST MOUNTAIN VIEW ROAD
SCOTTSDALE, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 2
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: 97-081
<PAGE>
Rancho Antigua
Bach Realty Advisors, Inc. Table of Contents
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<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........................................... 25
Appraisal Procedures........................................... 28
Sales Comparison Approach...................................... 34
Income Approach................................................ 34
Reconciliation................................................. 43
</TABLE>
ADDENDUM
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
B.A.C.H
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 26, 1998
Hutton/Con Am Realty Investors 2
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of Rancho Antigua Apartments,
Scottsdale, Arizona; BRA 97-081
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
TWELVE MILLION SIX HUNDRED THOUSAND DOLLARS
($12,600,000)
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
Four Houston Center
1221 Lamar, Suite 1325
Houston, TX 77010
(713) 739-0200
Fax (713) 739-0208
<PAGE>
Rancho Antigua
Bach Realty Advisors, Inc. Assumptions and Limiting Conditions
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 my 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>
Rancho Antigua
Bach Realty Advisors, Inc. Certification
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 $12,600,000.
/S/ Stevan N. Bach
------------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Office
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Rancho Antigua
Location: 8787 East Mountain View Road
BRA: 97-081
Legal Description: A parcel of land situated in Section 25 T3N,
R4E Section 30 T3N, R5E, G&SRB&M, Maricopa
County, Arizona
Land Size: 13.795 acres or 600,910 square feet
Building Area: 217,758 square feet
Year Built: 1982
Unit Mix: 60 1BR/lBA at 809 square feet
30 2BR/2BA at 961 square feet
28 lBR/1.5BA/DEN at 961 square feet
62 2BR/2BA at 1,020 square feet
20 2BP/2BA/TH at 1,202 square feet
20 3BR/2BA at 1,310 square feet
No. of Units: 220
Average Unit Size: 990 square feet
Physical Occupancy: 95 percent
Economic Occupancy: 89 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: $12,700,000
"As Is" Market Value by
Income Approach: $12,600,000
"As Is" Market Value
Conclusion: $12,600,000
6
<PAGE>
Rancho Antigua
Bach Realty Advisors, Inc. Nature of the Assignment
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 21 two-story buildings with
220 units and a total net rentable area of 217,758 square
feet. It was constructed in 1982 on 13.795 acres. It is
identified as Rancho Antigua Apartments located at 8787 East
Mountain View Road at the southwest corner of Hayden Road 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."
7
<PAGE>
Rancho Antigua
Bach Realty Advisors, Inc. Nature of the Assignment
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 appraiser that the function
of this appraisal is for annual partnership reporting
and/or internal purposes.
PROPERTY RIGHTS
APPRAISED The appraiser 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 Maricopa County records, the current owner
is Hutton/Con Am Realty Investors 2. No sale or listing 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%
</TABLE>
<TABLE>
<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 northern portion of the
Scottsdale area. It is about 17 miles northeast of the
Phoenix Central Business District (CBD). More specifically,
it is situated at the southwest corner of East Mountain
View Road and Pima Road. The neighborhood boundaries may be
defined as Scottsdale Road to the west, 96th Street to the
east, Indian Bend to the south, and Cactus Road 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 including McCormick Ranch, Gainey Ranch, and
Scottsdale Ranch. Also, this area has a number of upper-end
townhomes, condominiums, and apartments. 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, Comanche, and
Mountain View. Area public schools include Saguaro High
School and Cochise Elementary School. Also, a number of
country clubs and golf courses are in the area such as
McCormick Ranch, Gainey Ranch, Scottsdale Country Club, and
Pima Golf Resort. 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, Pima, and Hayden Roads are main
north/south arteries, which connect the subject to other
major thoroughfares and business centers. Scottsdale Road
has a number of development types such as hotels/motels,
restaurants, retail, office, and some residential projects.
Hayden and Pima Roads tend to have townhome and condominium
development with retail and recreational support. Within
the subject's more immediate area there are a few community
and neighborhood centers. Mountain View Center is located
just to the west of the subject on Hayden Road and it
provides a variety of service tenants. Just southeast of
the subject is the McCormick Ranch Center on Pima Road. It
provides a Smitty's Supermarket, car repair, fast-food,
etc. Also, just northeast of the subject is a new retail
project, the Scottsdale Fiesta with a Smiths supermarket, a
K-Mart, Comp USA, AMC Theater, Office Max, among others.
Also, a new shopping center has opened at the northwest
corner of Pima Road and Shea Boulevard. Tenants include a
Basha's supermarket, a Blockbuster Video, Popular, Perkins
Family Restaurant, Sherwin Williams, and Stein Mart. The
nearest shopping mall/complex is located near Camelback
Road. This includes 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 important part of the area is the Scottsdale
Memorial Hospital and professional buildings just northeast
of the subject. This provides a service to the area and
provides additional employment opportunities. Also, in this
area is the
14
<PAGE>
Meridian Point Rehabilitation Center and the
Paradise Memorial Gardens Cemetery.
In the more immediate area, development is
primarily residential. Within the McCormick Ranch
Development, the subject is surrounded by various
multifamily projects including Sun Canyon
townhomes and Country Horizons townhomes.
Additionally, north of the subject on Arabian are
the Casabella Apartments and the Tierra Santa
townhomes. Also, 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 70 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 Rancho Antigua 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>
<TABLE>
<CAPTION>
==================================================================================================
APARTMENT MARKET STATISTICS
METROPOLITAN PHOENIX
- --------------------------------------------------------------------------------------------------
YEAR INVENTORY NEW CONSTRUCTION PERMIT ACTIVITY ABSORPTION VACANCY RATE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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%
- --------------------------------------------------------------------------------------------------
</TABLE>
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>
<TABLE>
<CAPTION>
===============================================================================================
APARTMENT MARKET STATISTICS
SCOTTSDALE/PARADISE VALLEY SUBMARKET
- -----------------------------------------------------------------------------------------------
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%
- -----------------------------------------------------------------------------------------------
1995 29,321 1,804 1,938 784 5.1%
- -----------------------------------------------------------------------------------------------
1996 30,832 1,511 989 1,461 4.0%
- -----------------------------------------------------------------------------------------------
1997 32,715 1,883 1,957 1,858 3.8%
- -----------------------------------------------------------------------------------------------
</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.
<TABLE>
<CAPTION>
HISTORICAL ABSORPTION (UNITS)
-----------------------------------------------------------
YEAR GREATER PHOENIX SUBMARKET
-----------------------------------------------------------
<S> <C> <C>
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
</TABLE>
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>
[PLAT MAP APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject is located at the southwest corner of East
Mountain View Road and Pima Road in Scottsdale,
Maricopa County, Arizona. It is more specifically
situated at 8787 East Mountain View Road.
SIZE AND SHAPE The site is irregularly shaped with a total of 13.795
acres or 600,910 square feet. It has frontage on East
Mountain View Road and Pima Road.
ACCESS AND VISIBILITY THE subject property is located along the south side of
East Mountain View Road and the west side of Pima Road.
The site is situated about 17 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 Pima
Road then north to East Mountain View Road. Similar
access is available from the CBD. Other major
north/south thoroughfares, which lead to Camelback Road
and connect to Pima Road are 7th Avenue, Central
Avenue, and 7th Street.
Immediate access to the subject is provided by East
Mountain View Road. The main entry to the complex is
off this thoroughfare. There are two curb cuts along
the east/west artery which provide direct access. Pima
Road provides visibility to the site; however, access
to the subject is not available from this thoroughfare.
East Mountain View Road - a lighted four-lane, asphalt-
paved, east/west artery with concrete curbs and
sidewalks, planted median, and turn lane at
intersections.
Pima Road is a four-land, asphalt-paved, north/south
thoroughfare with planted median, turn lane, concrete
curbs and sidewalks, and greenbelt along the west side.
ZONING The subject property is zoned "R-5" Multiple-Family
Residential under the City of Scottsdale Zoning
Ordinance and subject to the restrictions of the
McCormick Ranch Development. 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.
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
20
<PAGE>
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:
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
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 subject lies within Zone B. Zone B is defined as
areas between limits of the 100-year flood and 500-year
flood.
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.
. various water and sewer easements throughout the
property
. various access easements throughout the property
RELATIONSHIP OF SITE
TO SURROUNDINGS North: Sun Canyon (townhomes)
South: Linear Park
East: Vacant land
West: Country Horizons (townhomes)
21
<PAGE>
REAL ESTATE TAXES Real estate taxes and assessments for the Rancho
Antigua 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 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, library, volunteer
fire department, etc. In 1996, the applicable tax rate
was 3.2192 per $100 of assessed value.
In 1997, from information received from Con Am
Management, the taxes were $102,480 for the real
estate. The following is the tax parcel number used to
identify the subject parcel and the 1997 primary and
secondary assessed values.
PRIMARY ASSESSED SECONDARY ASSESSED
TAX PARCEL No. VALUE (LIMITED) VALUE (FULL CASH)
-----------------------------------------------------
217 36075 $933,488 $933,488
Reportedly, the personal property was included in the
real property assessment and not taxed separately. We
have estimated the 1998 taxes at $0.51 per square foot
or $110,969, which would include personal property at
the subject apartment.
CONCLUSION The subject site is irregularly shaped with 13.795
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 East Mountain
View Road and visibility from Pima Road. The subject is
zoned "R-5" Multiple-Family Residential by the City of
Scottsdale and it is within the McCormick Ranch planned
development. 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>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 13.795-acre tract of land, is
improved with a two-story apartment project known as
the Rancho Antigua Apartments. The improvements consist
of 220 apartment units contained in 21 buildings
constructed in 1982. Also situated on the site is a
leasing office/clubhouse, three swimming pools, three
spas, a tennis court, and covered parking. There are
six basic floor plans for the 220 apartment units. The
basic features of these floor plans are as follows:
<TABLE>
<CAPTION>
UNIT TYPE NO. OF UNITS DESCRIPTION SIZE (SF) TOTAL SF
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
A 60 lBR/lBA 809 48,540
B 30 2BR/2BA 961 28,830
B 28 lBR/1.5BA/DEN 961 26,908
C 62 2BR/2BA 1,020 63,240
D 20 2BR/2BA/TH 1,202 24,040
E 20 3BR/2BA 1,310 26,200
</TABLE>
As seen in the figures above, the total net rentable
area of 217,758 square feet and a total of 220
apartment units results in an average of 990 square
feet per unit. There are a total of 88 one-bedroom
units, 112 two-bedroom units, and 20 three-bedroom
units.
The land area is 13.795 acres, resulting in a density
of 15.95 units per acre. The parking consists of
approximately 392 spaces (220 covered) with asphalt
construction or 1.8 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 sub-floor, and lightweight concrete.
FRAMING Wood
ROOF A combination of flat built-up and pitched red tile.
EXTERIOR Masonry with painted stucco finish.
SECOND-STORY ACCESS Wrought iron supports and handrails with cement stair
risers and landings.
BALCONIES Concrete 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, miniblinds,
incandescent lighting, and fireplaces. Vinyl tile floor
coverings, porcelain tub with ceramic tile shower,
Bathrooms: textured and painted gypsum board walls and ceilings,
fiberboard vanities with laminate counters, porcelain
sink, and commode.
23
<PAGE>
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, 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, three swimming pools, three
spas, a tennis court, and picnic areas.
LANDSCAPING Extensive mature landscaping.
AGE AND CONDITION The effective age of the subject is fifteen years which
approximates the actual age and the remaining economic
life is estimated to be 25 years.
SITE AREA 13.795 acres or 600,910 square feet
DEFERRED MAINTENANCE Visual inspection of the property as well as estimates by
the management revealed a few items of deferred
maintenance including appliance repair and replacement,
floor and drapery replacement, furniture and fixtures
repair, air-conditioning and equipment repair, interior
repairs, landscaping, exterior paint, roof repairs, and
water heater repair and replacement. The deferred
maintenance was estimated at $181,900, which has been
rounded to $185,000. It is itemized below.
<TABLE>
<CAPTION>
CATEGORY COST CATEGORY COST
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Appliances $24,000 General Interior $ 18,000
Carpet 42,000 Landscape 20,000
Window Cover 9,600 Exterior Paint 15,000
Equipment 2,000 Stairs Repair 3,000
Furniture 1,900 Roof Repair/Replacement 36,000
Air Conditioning 8,000 Water Heaters 2,400
--------
Total (Rounded) $185,000
</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 fifteen years with a remaining
economic life of 25 years.
24
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- ------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of leasing office/clubhouse.
[PICTURE APPEARS HERE]
View of swimming pool and spa.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of clubhouse.
[PICTURE APPEARS HERE]
Interior view of fitness center in clubhouse.
<PAGE>
[PICTURE APPEARS HERE]
View of tennis court.
[PICTURE APPEARS HERE]
View of Building 3 and carport area.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of bedroom in model unit.
[PICTURE APPEARS HERE]
Interior view of dining area model unit.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of kitchen in model unit.
[PICTURE APPEARS HERE]
Interior view of den or second 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
13.795 acres, allowing for reasonable flexibility in
developing the site. It has frontage along the south side of
East Mountain View Road and the west side of Pima Road. 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.
25
<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. 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
East Mountain View Road and the west side of Pima Road
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 for 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.
26
<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
(13.795 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 15.95 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 need for state of
the art amenities possessed by new apartment projects.
27
<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.
28
<PAGE>
Rancho Antigua
Bach Realty Advisors, Inc. Appraisal Procedures
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.
29
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
PHOENIX/SCOTTSDALE AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ 7,660,000 1985 174 143,058 97% N/A $53.54 $44,023 N/A 5.68
4502 E. Paradise 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
- ------------------------------------------------------------------------------------------------------------------------------------
9 The Palisades 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
30
<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 $5.57 0.90276 $61.94
2 65.11 5.53 5.57 1.00723 65.58
3 53.54 NA 5.57 NA NA
4 59.03 NA 5.57 NA NA
5 61.62 5.28 5.57 1.05492 65.00
6 62.28 5.45 5.57 1.02202 63.65
7 61.61 5.36 5.57 1.03918 64.02
8 67.47 5.82 5.57 0.95704 64.57
9 67.67 5.68 5.57 0.98063 66.36
</TABLE>
31
<PAGE>
After adjustments, the sales reflected a range in value for
the subject from $61.94 to $66.36 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 $61.94 per square foot. Sales 2 and 6 have the most
similar net operating income per square foot and reflect
values of $65.58 and $63.65 per square foot. Based on all
the data, a value of $65.00 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 $60 per square
foot. From this value the $185,000 in deferred maintenance
and the $34,121 rent loss is deducted to arrive at the "as
is" value of the subject. The calculation is shown as
follows:
<TABLE>
<S> <C>
217,758 SF x $60.00/SF................ $13,065,480
Less Deferred Maintenance............. (185,000)
Less Rent Loss........................ (34,121)
"As Is" Value via NOI/SF.............. $12,846,359
Rounded $12,800,000
</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 $71,000 $6,390 $5,514 0.86291 $ 61,267
2 51,515 4,379 5,514 1.25919 64,867
3 40,023 NA 5,514 NA NA
4 49,838 NA 5,514 NA NA
5 52,083 4,464 5,514 1.23522 64,334
6 50,202 4,396 5,514 1.25432 62,969
7 61,895 5,387 5,514 1.02358 63,354
8 63,504 5,480 5,514 1.00620 63,898
9 62,687 5,266 5,514 1.05511 66,142
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $61,267 to $66,142 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 $61,267 per unit. Sales 7
and 8 are most similar in NOI per unit and these sales
reflected values of $63,354 and $63,898 per unit.
Additionally, an age adjustment was made. Based on all the
data, we estimated a value for the subject of $58,000 per
unit. The following indication reflects an "as is" value
per unit for the subject considering the subject's deferred
maintenance and rent loss.
<TABLE>
<S> <C>
220 units x $58,000/unit.............. $12,760,000
Less: Deferred maintenance............ (185,000)
Less Rent Loss........................ (34,121)
Value via NOI Price/Unit Method....... $12,540,879
Rounded $12,500,000
</TABLE>
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
32
<PAGE>
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 6.90 is reasonable for the
subject considering the subject's quality and expense
ratio. Applying the 6.90 EGIM to the subject's stabilized
effective gross income, and deducting for deferred
maintenance and rent loss, results in the following value
indication.
<TABLE>
<S> <C>
6.90 X $1,933,958.......................... $13,334,310
Less: Deferred maintenance................. (185,000)
Less Rent Loss............................. (34,121)
--------
Value via EGIM Method...................... $13,125,189
Rounded $13,100,000
</TABLE>
CONCLUSION The NOI per square foot and per unit methods presented a
value indication between $12,800,000 and $12,500,000 and
the effective gross income multiplier method indicated a
value of $13,100,000. 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
TWELVE MILLION SEVEN HUNDRED THOUSAND DOLLARS
($12,700,000)
33
<PAGE>
[COMPARABLE RENTALS MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
COMPARABLE RENT SUMMARY
- ---------------------------------------------------------------------------------------------------------------
YEAR NO. OF AVG. UNIT OCCUP. UNIT TYPE UNIT RENT/MO. RENT/SF/MO.
NO. NAME/LOCATION BUILT UNITS SIZE (SF) SIZE/SF
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Joshua Tree 1988 330 791 97% 1BR/1BA 650 $595-625 $0.92-0.96
11545 Frank Lloyd 1BR/1BA 710 625-655 0.88-0.92
Wright 2BR/2BA 868 690-720 0.79-0.83
2BR/2BA 942 740-770 0.79-0.82
- ---------------------------------------------------------------------------------------------------------------
2 The Equestrian 1986 202 746 98% 1BR/1BA 668 540 $ 0.81
11100 N 115th Street 1BR/2BA/DEN 835 640 0.77
2BR/2BA 888 650 0.75
- ---------------------------------------------------------------------------------------------------------------
3 Villa Montana 1986 208 779 95% 1BR/1BA 530 520 $ 0.98
11350 E Sahuaro 1BR/1BA 615 545-585 0.89-0.95
Drive 1BR/1BA 745 610-620 0.82-0.83
2BR/1BA 912 665-675 0.73-0.74
1BR/1BA/DEN 900 695-705 0.77-0.78
2BR/2BA 970 745-755 0.77-0.78
2BR/2BA 1,050 805 0.77
- ---------------------------------------------------------------------------------------------------------------
4 La Privada 1985 350 1,195 96% 1BR/1BA 857 722-742 $0.84-0.87
10255 Via Linda 2BR/2BA 1,213 847-867 0.70-0.71
2BR/2BA 1,360 967-997 0.71-0.73
2BR/2BA/TH 1,600 1,277 0.80
- ---------------------------------------------------------------------------------------------------------------
5 Dos Caminos 1983 264 1,007 97% 1BR/1BA 711 715 $ 1.01
10115 E Mountain 1BR/1BA 728 730-745 1.00-1.02
View Road 2BR/2BA 911 780 0.86
2BR/2BA 1,102 880 0.80
2BR/2.5BA/TH 1,263 980 0.78
- ---------------------------------------------------------------------------------------------------------------
6 Presidio at McCormick 1989 164 1,001 95% 1BR/1BA 750 675-695 $0.90-0.93
Ranch 2BR/1BA 964 765-785 0.79-0.81
9600 N 96th Street 2BR/2BA 1,091 790-810 0.72-0.74
2BR/2BA 1,105 825-845 0.75-0.76
3BR/2BA 1,265 960-980 0.76-0.77
- ---------------------------------------------------------------------------------------------------------------
7 Anacosta at 1988 160 865 98% 1BR/1BA 650 630 $ 0.97
McCormick Ranch 1BR/1BA 750 660 0.88
9750 N 96th Street 1BR/1BA/DEN 912 710 0.78
2BR/2BA 968 760 0.79
2BR/2BA 1,045 830 0.79
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------
NO. NAME/LOCATION AMENITIES/COMMENTS
- -------------------------------------------------------------------------
<S> <C> <C>
1 Joshua Tree Amenities include 2 swimming pools, a
11545 Frank Lloyd tennis court, hot tub, exercise room, and
Wright clubroom. No concessions. Rent ranges based
on fireplace or view.
- -------------------------------------------------------------------------
2 The Equestrian Amenities include 2 swimming pools, a hot
11100 N 115th Street tub, clubhouse, and laundry facility. No
concessions. Rents increase $30 with
washer/dryer and $20 with 6-month lease.
- -------------------------------------------------------------------------
3 Villa Montana Amenities include a swimming pool, hot tub,
11350 E Sahuaro exercise room, clubhouse, and laundry
Drive facility. No concessions. Rent ranges
based on fireplace or washer/dryer. Rents
increase $10 for covered parking.
- -------------------------------------------------------------------------
4 La Privada Amenities include a swimming pool, 2 tennis
10255 Via Linda courts, an exercise room, racquetball
court, and clubhouse. No concessions. Rents
vary due to location. Rents increase $50
with attached carport.
- -------------------------------------------------------------------------
5 Dos Caminos Amenities include 2 swimming pools, hot
10115 E Mountain tub, clubhouse, and garages. Concessions:
View Road $450 off move-in.
- -------------------------------------------------------------------------
6 Presidio at McCormick Amenities include a swimming pool, hot tub,
Ranch exercise room, clubhouse, and laundry
9600 N 96th Street facilities. No concessions. Rental rates
vary due to fireplace, views, and upstairs
or downstairs units.
- -------------------------------------------------------------------------
7 Anacosta at Amenities include 3 swimming pools, hot
McCormick Ranch tub, exercise room, clubhouse, and laundry
9750 N 96th Street room. No concessions. Rents vary due to
location.
- -------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
COMPARABLE RENT SUMMARY (cont'd)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF AVG. UNIT UNIT TYPE UNIT RENT/MO.
NO. NAME/LOCATION BUILT UNITS SIZE(SF) OCCUP. SIZE/SF
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phase 1
-------
8 Scottsdale Cove 1991 316 927 96% 1BR/1BA 673 $ 645-$660
9450 E Becker Lane and 1BR/1BA 738 680
1994 2BR/2BA 973 770-780
2BR/2BA 984 775-785
3BR/2BA 1,220 955-1,005
Phase II
--------
1BR/1BA 718 645-660
2BR/2BA 1,012 835-905
2BR/2BA 1,021 775-785
3BR/2BA 1,220 955-1,060
- --------------------------------------------------------------------------------------------------------------------------
9 The Tower at 1979 158 1,005 96% 1BR/1BA 755 $ 670
McCormick Ranch 1BR/1BA 874 730
8250 E Arabian Trail 1BR/1BA/DEN 987 760
2BR/2BA 1,157 860
2BR/2BA 1,315 1,035
- --------------------------------------------------------------------------------------------------------------------------
SUBJECT 1982 220 990 95% 1BR/1BA 809 $ 660
PROPERTY 2BR/2BA 961 750
Rancho Antigua 1BR/1.5BA/DEN 961 730
8787 E Mountain 2BR/2BA 1,020 790
View Road 2BR/2BA/TH 1,202 890
3BR/2BA 1,310 990
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NO. NAME/LOCATION RENT/SF/MO AMENITIES/COMMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8 Scottsdale Cove $0.96-$0.98 Amenities include 2 swimming pools, a hot tub,
9450 E Becker Lane 0.92 exercise room, and clubhouse. No concessions. Rent
0.79-0.80 varies with location and view.
0.79-0.80
0.82
0.90-0.92
0.83-0.89
0.76-0.78
0.78-0.87
- --------------------------------------------------------------------------------------------------------------
9 The Tower at 0.89 Amenities include 2 swimming pools, a hot tub,
McCormick Ranch 0.84 exercise room, and clubhouse. Concessions: Waive
8250 E Arabian Trail 0.77 deposit and redecorating fee.
0.74
0.79
- --------------------------------------------------------------------------------------------------------------
SUBJECT $ 0.82 Amenities include a clubhouse, 3 swimming pools, 3 spas,
PROPERTY 0.78 a tennis court, and covered parking.
Rancho Antigua 0.76
8787 E Mountain 0.78
View Road 0.74
0.76
- --------------------------------------------------------------------------------------------------------------
</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>
A 1BR/1BA 60 809 $660 $0.82 $48,540
B 2BR/2BA 30 961 750 0.78 28,830
B 1BR/1.5BA DEN 28 961 730 0.76 26,908
C 2BR/2BA 62 1,020 790 0.78 63,240
D 2BR/2BA/TH 20 1,202 890 0.74 24,040
E 3BR/2BA 20 1,310 990 0.76 26,200
--- ----- ---- ----- --------
220 990 $755 $0.78 $169,120
</TABLE>
The rent range presented in the previous table is due to
location variances. The monthly averages and total are based
on the average rent.
34
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
SUBJECT - RENT ANALYSIS
RANCHO ANTIGUA
- ---------------------------------------------------------------------------------------------------------------------------
UNIT AVG. AVG. MO.
UNIT TYPE SIZE (SF) RENT/MO. RENT/SF COMPARABILITY
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT (A PLAN) 1BR/1BA 809 $ 660 $ 0.82
Joshua Tree 1BR/1BA 710 625-655 0.88-0.92 Superior
Villa Montana 1BR/1BA 745 610-620 0.82-0.83 Comparable
La Privada 1BR/1BA 857 722-742 0.84-0.87 Comparable
Dos Caminos 1BR/1BA 728 730-745 1.00-1.02 Superior
Presidio at McCormick Ranch 1BR/1BA 750 675-695 0.90-0.93 Superior
Anacosta at McCormick Ranch 1BR/1BA 750 660 0.88 Superior
Scottsdale Cove 1BR/1BA 738 680 0.92 Superior
The Tower at McCormick Ranch lBR/1BA 755 670 0.89 Superior
- ---------------------------------------------------------------------------------------------------------------------------
SUBJECT (B PLAN) 2BR/2BA 961 750 $ 0.78
Joshua Tree 2BR/2BA 942 740-770 0.79-0.82 Comparable
The Equestrian 2BR/2BA 888 650 0.75 Slightly Inferior
Villa Montana 2BR/2BA 970 745-755 0.77-0.78 Slightly Inferior
Dos Caminos 2BR/2BA 911 780 0.86 Superior
Anacosta at McCormick Ranch 2BR/2BA 968 760 0.79 Comparable
Scottsdale Cove 2BR/2BA 973 770-780 0.79-0.80 Superior
- ---------------------------------------------------------------------------------------------------------------------------
SUBJECT (B PLAN) 1BR/1.5BA/DEN 961 730 0.76
Joshua Tree 2BR/2BA 942 740-770 0.79-0.82 Comparable
The Equestrian 1BR/1BA/DEN 835 640 0.77 Comparable
Villa Montana lBR/1BA/DEN 900 695-705 0.73-0.74 Slightly Inferior
Dos Caminos 2BR/2BA 911 780 0.86 Superior
Anacosta at McCormick Ranch 1BR/1BA/DEN 912 710 0.78 Superior
Scottsdale Cove 2BR/2BA 973 770-780 0.79-0.80 Superior
- ---------------------------------------------------------------------------------------------------------------------------
SUBJECT (C PLAN) 2BR/2BA 1,020 790 0.78
Joshua Tree 2BR/2BA 942 740-770 0.79-0.82 Comparable
Villa Montana 2BR/2BA 1,050 805 0.77 Comparable
Dos Caminos 2BR/2BA 1,102 880 0.80 Comparable
Presidio at McCormick Ranch 2BR/2BA 1,091 790-810 0.72-0.74 Inferior
Anacosta at McCormick Ranch 2BR/2BA 1,045 830 0.79 Comparable
Scottsdale Cove 2BR/2BA 1,021 775-785 0.76-0.78 Comparable
- ---------------------------------------------------------------------------------------------------------------------------
SUBJECT (D PLAN) 2BR/2BA/TH 1,202 890 0.74
Villa Montana 2BR/2BA 1,050 805 0.77 Comparable
La Privada 2BR/2BA 1,213 847-867 0.70-0.71 Inferior
Dos Caminos 2BR/2.5BA/TH 1,263 980 0.78 Comparable
Presidio at McCormick Ranch 2BR/2BA 1,105 825-845 0.75-0.76 Comparable
The Tower at McCormick Ranch 2BR/2BA 1,157 860 0.74 Slightly Inferior
- ---------------------------------------------------------------------------------------------------------------------------
SUBJECT (E PLAN) 3BR/2BA 1,310 990 0.76
LaPrivada 2BR/2BA 1,360 967-997 0.71-0.73 Inferior
Dos Caminos 2BR/2.5BA/TH 1,263 980 0.78 Comparable
Scottsdale Cove 3BR/2BA 1,220 955-1,060 0.78-0.87 Superior
Presidio at McCormick Ranch 3BR/2BA 1,265 960-980 0.76-0.77 Comparable
The Tower at McCormick Ranch 2BR/2BA 1,315 1,035 0.79 Superior
===========================================================================================================================
</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
nine apartment complexes that were found to be most
comparable. They range in total size from 150,738 to
418,297 units, in average unit size from 746 to 1,195
square feet, and in occupancy from 95 to 98 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 $0.75 to $0.87 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 reasonable. Given the
subject's 95 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"
----------------------------------------------------------------------------
MO. MO.
UNIT TYPE UNITS SIZE (SF) TOTAL (SF) RENT/MO. TOTAL RENT/SF
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A lBR/lBA 60 809 48,540 $660 $ 39,600 $0.82
B 2BR/2BA 30 961 28,830 750 22,500 0.78
B lBR/l.5BA DEN 28 961 26,908 730 20,440 0.76
C 2BR/2BA 62 1,020 63,240 790 48,980 0.78
D 2BR/2BA/TH 20 1,202 24,040 890 17,800 0.74
E 3BR/2BA 20 1,310 26,200 990 19,800 0.76
--- ----- ------- ---- -------- -----
220 990 217,758 $769 $169,120 $0.78
</TABLE>
Gross Annual Rental Income: $169,120 x 12 months =
$2,029,440
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 1990 was reported at $41,540 or $0.19 per
square foot. This figure rose in 1991 to $44,187 or $0.20
per square foot. In 1992, other income dropped to $40,411
or $0.19 per square foot and in 1993 it dropped to $39,071
or $0.18 per square foot. In 1994 other income was
reportedly $46,828 or $0.22 per square foot, in 1995 it was
$39,233 or $0.18 per square foot, and in 1996 it was
$45,889 or $0.21 per square foot. The 1997 other income
reflected $0.20 per square foot or about $44,500. 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 $0.23 per square foot is typical
for a project such as the subject. In the first year of our
analysis, this equates to $0.21 per square foot after
vacancy.
From this we have arrived at our estimate of scheduled
gross income as if 100 percent occupied:
35
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
RANCHO ANTIGUA
HISTORICAL EXPENSES
- ------------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1993 ACTUAL 1994 ACTUAL 1995 ACTUAL 1996 ANNUALIZED 1997
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 $0.42 $418 $0.42 $418 $0.45 $441 $0.47 $466 $0.47 $466
Insurance 0.06 59 0.06 63 0.07 69 0.07 70 $0.07 $ 64
Personnel 0.56 558 0.58 579 0.63 622 0.65 641 $0.71 $702
Utilities 0.36 360 0.42 419 0.45 442 0.50 496 $0.53 $528
Repairs & Maintenance 0.30 292 0.40 393 0.43 421 0.49 481 $0.49 $480
Contract Services 0.15 144 0.14 143 0.15 147 0.16 162 $0.20 $200
General Administrative 0.15 152 0.14 135 0.21 208 0.12 123 $0.15 $152
Management 0.35 349 0.37 370 0.38 380 0.41 409 $0.42 $420
---- --- ---- --- ---- --- ---- --- ----- ------
TOTAL $2.36 $2,332 $2.54 $2,519 $2.76 $2,730 $2.88 $2,848 $3.04 $3,012
=======================================================================================================================
- --------------------------------------------
<CAPTION>
EXPENSE
CATEGORY
- --------------------------------------------
BRA PROJECTIONS 1998
PER SF PER UNIT
- --------------------------------------------
<S> <C> <C>
Real Estate Taxes $0.51 $ 504
Insurance 0.08 $ 82
Personnel 0.65 $ 643
Utilities 0.50 $ 494
Repairs & Maintenance 0.45 $ 443
Contract Services 0.17 $ 165
General Administrative 0.21 $ 206
Mananagement 0.43 $ 430
---- ------
TOTAL $3.00 $2,968
===============
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================================
COMPARABLE
EXPENSE ANALYSIS
=======================================================================================================================
COMPARABLE 1
Expense Year 1997
NRA 252,700
No. Units 300
Year Built 1981
Average Unit Size 842
- --------------------------------------------- --------------------------------------------------------------------
EXPENSE CATEGORY PER SF PER UNIT COMPARABLE AVG UNIT SF, EXPENSES/SF EXPENSES/UNIT
- --------------------------------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.50 $ 421 Joshua Tree 781 $3.69 $2,918
Insurance 0.06 48 Salado Springs 845 $3.56 $3,011
Personnel 0.67 564 Elliot's Crossing 806 $3.36 $2,711
Utilities 0.51 429 The Pinnacle 1,004 $3.19 $3,200
Repairs & Maintenance 0.41 346 Sonterra 941 $3.40 $3,200
Contract Services 0.22 185 The Palisades 924 $4.09 $3,793
General Administrative 0.08 67
Management 0.42 351
----- -----
TOTAL $2.87 $2411
========================================================================================================================
</TABLE>
<PAGE>
Gross Rental Income $2,029,440
Other Income ($0.23SF) 50,084
---------
Total Potential Gross Income $2,079,524
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 in the
Scottsdale/Paradise Valley area has dropped from a high
of 13.7 percent in 1989 to a low of 3.8 percent as of
the Fourth Quarter of 1997. Due to the amount of new
construction, the market is expected to take a couple of
years to reach stabilization. In surveying the direct
competition, the current physical vacancies are
typically below 10 percent. The subject's economic
vacancy is currently about 11 percent and the physical
vacancy is about 5 percent. The primary difference
between the physical and economic vacancies is due to
the lower-than-market contract rents. Considering the
amount of new construction, we have projected a 9
percent economic vacancy in 1998. After the first year
of the cash flow, we have estimated the vacancy rate
will stabilize at 7 percent and remain at that level for
the remainder of the holding period. This recognizes the
supply/demand dynamics of the Scottsdale apartment
market.
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 a
comparable apartment project located in the subject
area, expenses at the comparable sales properties, as
well as the actual historical performance of the subject
property. The facing chart summarizes the actual
expenses reported by an "individually metered" project,
as well as the subject property's actual 1991 through
1996 and annualized 1997 expense figures (actual figures
for January through December).
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
REAL ESTATE TAXES - The Maricopa County Assessor's
Office coordinates the real estate taxes for the Las
Colinas Apartments. The property is subject to a number
of different taxing authorities and there are two
assessments. Reportedly, the personal property was
included in the real property assessment and not taxed
separately. The 1997 real estate taxes were $102,070
based on the subject property operating statement. We
estimated the 1998 taxes at $0.51 per square foot or
$110,969.
36
<PAGE>
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 from 1991 to
1996 were between $0.06 and $0.07 square foot. Annualized
figures for 1997 reflect insurance at $0.07 per square foot.
The one comparable indicated $0.06 per square foot. Given
this information, we estimated insurance at $0.08 per square
foot or $18,117 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 $0.67 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 $0.56, $0.58, $0.63, and $0.65 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 $141,543 or $0.65 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
$0.36, $0.42, $0.45, and $0.50 per square foot,
respectively. Annualized figures for 1997 indicate this
expense at $0.53 per square foot. The comparable indicated
$0.51 per square foot. Based on this data, we have estimated
this expense at $0.50 per square foot or $108,705. 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
comparable indicated $0.41 per square foot. Annualized
figures for the subject in 1997 indicate this expense at
$0.49 per square foot, while actual figures for 1993, 1994,
1995, and 1996 were $0.30, $0.40, $0.43, and $0.49 per
square foot, respectively. Due to the age, overall
condition, and the ongoing maintenance at the subject
property, an estimate of $0.45 per square foot or $97,381
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 $0.22 per
square foot. The subject's annual figures for 1993, 1994,
1995, and 1996 were $0.15, $0.14, $0.15, and $0.16 per
square foot. Annualized figures for 1997 indicate this
expense at $0.20 per square foot. We have estimated this
expense for
37
<PAGE>
the subject at $0.17 per square foot or $36,235 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 indicated $0.08 per square
foot, which is believed low. Annualized figures for
the subject in 1997 indicate $0.20 per square foot,
while actual figures for 1993, 1994, 1995, and 1996
were $0.15, $0.14, $0.21, and $0.12 per square
foot, respectively. We have estimated this expense
for the subject at $0.21 per square foot or
$45,294. 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 annualized 1997 expense is $0.42
per square foot. The subject's expenses in 1993,
1994, 1995, and 1996 appear reasonable at $0.35,
$0.37, $0.38, and $0.41 per square foot,
respectively. Based on this data we have projected
the management fee at 5 percent ($0.43 per square
foot for 1998) of effective gross income in each
year of our analysis which was crosschecked on a
per square foot basis.
EXPENSE SUMMARY The subject's total expenses in 1995 were $2.76 per
square foot, in 1996 total expenses were $2.88 per
square foot and annualized 1997 expenses are $3.04
per square foot. The comparable indicated $2.87 per
square foot. Six of the sale properties indicated a
range of $3.19 to $4.09 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 $3.00 per
square foot or $2,968 per unit, without reserves.
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 1982
and appears to have had ongoing maintenance since
its construction. It is our opinion that a reserve
allowance of $300 per unit or $0.30 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
$181,900, which has been rounded to $185,000. This
includes appliance replacement, floor and drapery
replacement, exterior repairs, furniture and
fixtures repair, air-conditioning and equipment
repairs, interior repairs, landscaping, painting,
roof repairs, and water heater replacement.
38
<PAGE>
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 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 bond
39
<PAGE>
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 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 Sonterra 12/96 8.63%
9 The Palisades 12/96 8.40%
</TABLE>
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
considering the subject's attributes and on-going
apartment construction. 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 9.24 percent.
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.
40
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
RANCHO ANTIGUA APARTMENTS
Fiscal Year Ending 12/31 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents 2,029,440 2,110,618 2,195,042 2,282,844 2,374,158 2,469,124 2,567,889 2,670,605 2,777,429
Rent/SF/Mo. 0.777 0.808 0.840 0.874 0.909 0.945 0.983 1.022 1.063
Other Income/Yr. 50,084 52,088 54,171 56,338 58,592 60,935 63,373 65,908 68,544
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross Income 2,079,524 2,162,705 2,249,214 2,339,182 2,432,749 2,530,059 2,631,262 2,736,512 2,845,973
% Vacancy 9.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Vacancy Allowance 187,157 151,389 157,445 163,743 170,292 177,104 184,188 191,556 199,218
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Effective Gross Income 1,892,367 2,011,316 2,091,769 2,175,439 2,262,457 2,352,955 2,447,073 2,544,956 2,646,755
Expenses:
Real Estate Taxes 110,969 115,408 120,025 124,826 129,819 135,011 140,412 146,028 151,869
Insurance 18,117 18,842 19,596 20,380 21,195 22,043 22,924 23,841 24,795
Personnel 141,543 147,204 153,093 159,216 165,585 172,208 179,097 186,261 193,711
Utilities 108,705 113,053 117,575 122,278 127,169 132,256 137,546 143,048 148,770
Repairs and Maintenance 97,381 101,277 105,328 109,541 113,922 118,479 123,219 128,147 133,273
Contract Services 36,235 37,684 39,192 40,759 42,390 44,085 45,849 47,683 49,590
General Administrative 45,294 47,105 48,990 50,949 52,987 55,107 57,311 59,603 61,988
Management Fee 94,618 100,566 104,588 108,772 113,123 117,648 122,354 127,248 132,338
Reserves for Replacement 66,000 68,640 71,386 74,241 77,211 80,299 83,511 86,851 90,326
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Expenses 718,863 749,780 779,771 810,962 843,401 877,137 912,222 948,711 986,659
Per SF 3.30 3.44 3.58 3.72 3.87 4.03 4.19 4.36 4.53
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Operating Income 1,173,504 1,261,536 1,311,997 1,364,477 1,419,056 1,475,819 1,534,851 1,596,245 1,660,095
Per SF 5.39 5.79 6.03 6.27 6.52 6.78 7.05 7.33 7.62
Capital Items: 185,000 0 0 0 0 0 0 0 0
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Cash Flow 988,504 1,261,536 1,311,997 1,364,477 1,419,056 1,475,819 1,534,851 1,596,245 1,660,095
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270 0.438462 0.389744 0.346439
Present Value of Cash Flow 878,671 996,769 921,458 851,836 787,475 727,977 672,975 622,128 575,122
NOI in 10th Year 1,795,559
Ro at Reversion 10.50%
----------
Indicated Reversion 17,100,562
Less: Sales Costs 3.00% 513,017
----------
Reversion in 10th Yr 16,587,545
<CAPTION>
=================================================================
2007 2008
- -----------------------------------------------------------------
<S> <C> <C>
Income:
Apt. Rents 2,888,526 3,004,067
Rent/SF/Mo. 1.105 1.150
Other Income/Yr. 71,286 74,137
---------- ----------
Gross Income 2,959,812 3,078,204
% Vacancy 7.00% 7.00%
Vacancy Allowance 207,187 215,474
---------- ----------
Effective Gross Income 2,752,625 2,862,730
Expenses:
Real Estate Taxes 157,944 164,262
Insurance 25,787 26,818
Personnel 201,459 209,518
Utilities 154,721 160,910
Repairs and Maintenance 138,604 144,148
Contract Services 51,574 53,637
General Administrative 64,467 67,046
Management Fee 137,631 143,136
Reserves for Replacement 93,939 97,696
---------- ---------
Total Expenses 1,026,126 1,067,171
Per SF 4.71 4.90
---------- ---------
Net Operating Income 1,726,499 1,795,559
Per SF 7.93 8.25
Capital Items: 0 0
---------- ---------
Cash Flow 1,726,499 1,795,559
---------- ---------
Present Value Factor 0.307946 0.0000000
Present Value of Cash Flow 531,669 0
NOI in 10th Year Present Value of Income Stream 7,566,080
Ro at Reversion Present Value of Reversion 5,108,071
-------------------------------------------------------
Indicated Reversion Indicated Value of 12,674,151
Less: Sales Costs Subject
Indicated Value/SF 58.20
Reversion in 10th Yr Indicated Value/Unit 57,610
GIM at Indicated Value (rent income only) 6.25
Ro at Indicated Value 9.26%
--------------------------------------------------------
====================================================================================================================================
</TABLE>
---------------------------------------
Expenses: $/Unit $/SF
---------------------------------------
Real Estate Taxes 504 0.51
---------------------------------------
Insurance 82 0.08
---------------------------------------
Personnel 643 0.65
---------------------------------------
Utilities 494 0.50
---------------------------------------
Repairs and Maintenance 443 0.45
---------------------------------------
Contract Services 165 0.17
---------------------------------------
General Administrative 206 0.21
---------------------------------------
Management Fee 5.00% 0.43
---------------------------------------
Reserves for Replacement 300 0.30
---------------------------------------
<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 $ 988,504 0.888888889 $ 878,671
1999 1,261,536 0.790123457 996,769
2000 1,311,997 0.702331962 921,458
2001 1,364,477 0.624295077 851,836
2002 1,419,056 0.554928957 787,475
2003 1,475,819 0.493270184 727,977
2004 1,534,851 0.438462386 672,975
2005 1,596,245 0.389744343 622,128
2006 1,660,095 0.346439416 575,122
2007 1,726,499 0.307946148 531,669
--------
TOTAL NPV OF CASH FLOWS $ 7,566,080
Projected NOI - 11th Year $ 1,795,559
Terminal Capitalization Rate 10.50%
------
Estimated Value of Property at End of 10th Year $17,100,562
Less Sales Cost @ 3.00% (513,017)
-------
Value of Reversion at End of 10th Year $16,587,545
Discount Factor - 10th Year 12.50% 0.307946
--------
Present Value of the Reversion $ 5,108,071
Sum of Present Values of Cash Flow 7,566,080
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $12,674,151
(ROUNDED) $12,700,000
===========
</TABLE>
===============================================================================
<PAGE>
. The subject's current economic vacancy rate is
about 11 percent. It is our opinion that the
subject should be capable of obtaining a 9 percent
vacancy rate for the entry point year (1998). After
that, a 7 percent stabilized vacancy rate can be
achieved.
. 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
following pages. The estimated leased fee market value for the
subject on an "as is" basis via discounted cash flow method is
TWELVE MILLION SEVEN HUNDRED DOLLARS
($12,700,000)
41
<PAGE>
================================================================================
RANCHO ANTIGUA APARTMENTS
<TABLE>
<CAPTION>
Fiscal Year Ending 12/31 1998
----
<S> <C>
Income:
Apt. Rents $ 2,029,440
Rent/SF/Mo. 0.777
Other Income/Yr. 50,084
-----------
Gross Income $ 2,079,524
% Vacancy 7.00%
Vacancy Allowance 145,567
-----------
Effective Gross Income $ 1,933,958
-------------------------------
Expenses: $/Unit $/SF
-------------------------------
Real Estate Taxes 504 0.51 $ 110,969
-------------------------------
Insurance 82 0.08 18,117
-------------------------------
Personnel 643 0.65 141,543
-------------------------------
Utilities 494 0.50 108,705
-------------------------------
Repairs and Maintenance 443 0.45 97,381
-------------------------------
Contract Services 165 0.17 36,235
-------------------------------
General Administrative 206 0.21 45,294
-------------------------------
Management Fee 5.00% 0.43 96,698
-------------------------------
Reserves for Replacement 300 0.30 66,000
------------------------------- -----------
Total Expenses $ 720,942
Per SF 3.31
-----------
Net Operating Income $ 1,213,015
Per SF 5.57
Capitalization Rate 9.50%
-----------
Fee Simple Stabilized Market Value $12,768,583
Less: Rent Loss Due to Lease-up $ 34,121
Deferred Maintenance $ 185,000
-----------
Leased Fee "As Is" Market Value $12,549,462
Leased Fee "As Is" Market Value (Rounded) $12,550,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
<TABLE>
<CAPTION>
Year 1
------
<S> <C> <C>
Stabilized NOI $1,213,015
Projected NOI 1,176,506
---------
Rent Loss $ 36,509
PV Factor@ 7.00% 0.934579
--------
PV Income Loss $ 34,121
CUMULATIVE LOSS $ 34,121
</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 8.4 to 9.00 percent. Additionally
the appraiser considered the subject's attributes and its
age as well as the on-going apartment construction in
Scottsdale/Phoenix.
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. Deductions are made for
rent loss and deferred maintenance. After these adjustments
this valuation method indicates a $12,550,000 subject value.
INCOME APPROACH
CONCLUSION DCF Method ..................................... $12,700,000
Direct Capitalization Method ................... $12,550,000
The two methods of comparison are supportive of each other
and we gave most reliance to the discounted cash flow
analysis. We are of the opinion that the "as is" market
value of the subject property, as of December 31, 1997 is
$12,600,000.
42
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $12,700,000
Income Approach $12,600,000
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. This approach is supportive of 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
TWELVE MILLION SIX HUNDRED THOUSAND DOLLARS
($12,600,000)
43
<PAGE>
VILLA ANTIGUA
- ----------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 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>
Bach Realty Advisors, Inc. Rancho Antigua Apartments
Sales Comparable Photographs
JOSHUA TREE
- ----------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 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 97-081
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
<TABLE>
<CAPTION>
PROPERTY IDENTIFICATION
<S> <C>
Job Number 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.
</TABLE>
<PAGE>
SALADO SPRINGS
- ----------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 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 97-081
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 97-081
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
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
$3,000/unit result in expense ratio of 37.26%.
<PAGE>
SONTERRA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 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
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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-081
Project Name The Palisades
Address 13440 North 44th 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.
<PAGE>
JOSHUA TREE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: Joshua Tree
Street Address: 11545 Frank Lloyd Wright
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Stories: 2
Number of Units: 330
Net Rentable Area (SF): 261,092
Average Unit Size (SF): 791
Parking Surface: Asphalt
Type of Construction: Masonry exterior 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>
84 1BR/1BA 650 $595-625 $0.92-0.96
82 1BR/1BA 710 625-655 0.88-0.92
84 2BR/2BA 868 690-720 0.79-0.83
80 2BR/2BA 942 740-770 0.79-0.82
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, fireplaces in some units,
ceiling fans, walk-in closets, outdoor utility
closets, patio/balconies
Project Amenities: 2 swimming pools, 1 tennis court, sauna,
exercise/weight room, clubroom, covered parking
ECONOMIC DATA
Percent Occupied: 97%
Avg. Monthly Rent/SF of NRA: $0.86
Electricity Paid By: Tenant
Length of Lease: 6 and 12 months
Security Deposit: $150 plus $125 redecorating fee = $375 total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rent ranges based on view or
fireplace.
<PAGE>
THE EQUESTRIAN
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: The Equestrian
Street Address: 11100 North 115th Street
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2 & 3
Number of Units: 202
Net Rentable Area (SF): 150,738
Average Unit Size (SF): 746
Parking Surface: Asphalt
Type of Construction: Stucco exterior 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>
120 1BR/1BA 668 $540 $0.81
20 1BR/2BA/DEN 835 640 0.77
62 2BR/2BA 888 650 0.75
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, fireplaces, ceiling fans,
outdoor utility closets, patio/balconies
Project Amenities: 2 swimming pools, jacuzzi, clubroom, laundry
facility
<TABLE>
<S> <C>
ECONOMIC DATA
Percent Occupied: 98%
Avg. Monthly Rent/SF of NRA: $0.79
Electricity Paid By: Tenant
Length of Lease: 6, 9, 12-months
Security Deposit: $100 deposit plus $100 redecorating fee = $200 total
</TABLE>
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rents increase $30 with
washer/dryer and $20 with 6-month lease.
<PAGE>
VILLA MONTANA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: Villa Montana
Street Address: 11350 East Sahuaro Drive
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 208
Net Rentable Area (SF): 162,032
Average Unit Size (SF): 779
Parking Surface: Asphalt
Type of Construction: Stucco exteriors with pitched red tile roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------------
<S> <C> <C> <C> <C>
24 1BR/1BA 530 $ 520 $ 0.98
48 1BR/1BA 615 545-585 0.89-0.95
48 1BR/1BA 745 610-620 0.82-0.83
16 2BR/1BA 912 665-675 0.73-0.74
24 1BR/1BA/DEN 900 695-705 0.77-0.78
32 2BR/2BA 970 745-755 0.77-0.78
16 2BR/2BA 1,050 805 0.77
</TABLE>
Unit Amenities: Dishwashers, washer/dryer connections in some
units, fireplaces, ceiling fans, walk-in closets,
patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, exercise/weight room,
clubroom, laundry facility, covered parking
ECONOMIC DATA
Percent Occupied: 95%
Avg. Monthly Rent/SF of NRA: $0.84
Electricity Paid By: Tenant
Length of Lease: 10-12 months
Security Deposit: $200 deposit plus $125 redecorating fee = $325
total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rent ranges based on fireplace or
washer/dryer. Rents increase $10 for covered
parking.
<PAGE>
LA PRIVADA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: La Privada
Street Address: 10255 Via Linda
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 350
Net Rentable Area (SF): 418,297
Average Unit Size (SF): 1,195
Parking Surface: Asphalt
Type of Construction: Stucco exteriors with pitched red tile roof fronts
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
----------------------------------------------------------------
<S> <C> <C> <C> <C>
72 1BR/1BA 857 $722-742 $0.84-0.87
209 2BR/2BA 1,217 847-867 0.70-0.71
34 2BR/2BA 1,360 967-997 0.71-0.73
35 3BR/2BA/TH 1,600 1,277 0.80
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, fireplaces, outdoor-utility closets,
patio/balconies
Project Amenities: 1 swimming pool, 2 tennis courts, exercise/weight
room, 1 racquetball court, clubroom
ECONOMIC DATA
Percent Occupied: 96%
Avg. Monthly Rent/SF of NRA: $0.75
Electricity Paid By: Tenant
Length of Lease: 12 months
Security Deposit: $300 deposit on 1-bedroom unit, $325 on 2-bedroom
unit, $400 on 3BR with 50% redecorating fee
retained on move-out
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rent ranges based on 2nd floor
locations. Rent increases $50 with attached
carport.
<PAGE>
DOS CAMINOS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: Dos Caminos
Street Address: 10115 East Mountain View Road
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Stories: 2
Number of Units: 264
Net Rentable Area (SF): 265,884
Average Unit Size (SF): 1,007
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>
48 1BR/1BA 711 $ 715 $ 1.01
36 1BR/1BA 728 730-745 1.00-1.02
18 2BR/2BA 911 780 0.86
96 2BR/2BA 1,102 880 0.80
66 2BR/2.5BA/TH 1,263 980 0.78
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, fireplaces, vaulted ceilings, walk-in
closets, outdoor utility closets,
patio/balconies, garages, and skylights
Project Amenities: 2 swimming pools, jacuzzi, clubroom
ECONOMIC DATA
Percent Occupied: 97%
Avg. Monthly Rent/SF of NRA: $0.87
Electricity and Water Paid By: Tenant
Length of Lease: 6 and 12 months
Security Deposit: $150 security deposit plus $150 redecorating
fee = $300 total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: Concessions: $450 off move-in. Rent ranges
based on location or view.
<PAGE>
PRESIDIO AT MCCORMICK RANCH
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job No. 97-081
Name of Project: Presidio at McCormick Ranch
Street Address: 9600 North 96th Street
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1989
Number of Stories: 2
Number of Units: 164
Net Rentable Area (SF): 164,132
Average Unit Size (SF): 1,001
Parking Surface: Asphalt
Type of Construction: Painted stucco exteriors with pitched red tile
roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------------
<S> <C> <C> <C> <C>
48 1BR/1BA 750 $675-695 $ 0.90-0.93
24 2BR/1BA 964 765-785 0.79-0.81
36 2BR/2BA 1,091 790-810 0.72-0.74
32 2BR/2BA 1,105 825-845 0.75-0.76
24 3BR/2BA 1,265 960-980 0.76-0.77
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, washer/dryer connections,
fireplaces, ceiling fans, vaulted ceilings, walk-in
closets, outdoor utility closets, patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, exercise/weight room,
clubroom, laundry facility, covered parking
ECONOMIC DATA
Percent Occupied: 95%
Avg. Monthly Rent/SF of NRA: $0.80
Electricity Paid By: Tenant
Length of Lease: 9, and 12 months
Security Deposit: $150 deposit plus $125 redecorating fee = $275
total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rental rates vary due to fireplace,
views, and upstairs or downstairs location.
<PAGE>
ANACOSTA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: Anacosta
Street Address: 9750 North 96th Street
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Stories: 2
Number of Units: 160
Net Rentable Area (SF): 138,400
Average Unit Size (SF): 865
Parking Surface: Asphalt
Type of Construction: Painted stucco exteriors with pitched red tile
roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 650 $630 $0.97
32 1BR/1BA 750 660 0.88
32 1BR/1BA 912 710 0.78
32 2BR/2BA 968 760 0.79
32 2BR/2BA 1,045 830 0.79
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, washer/dryer, fireplaces, ceiling fans
available, walk-in closets, outdoor utility
closets, patio/balconies
Project Amenities: 1 swimming pool, jacuzzi, exercise/weight room,
clubroom, laundry facility, covered parking
ECONOMIC DATA
Percent Occupied: 98%
Avg. Monthly Rent/SF of NRA: $0.84
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $150 deposit plus $150 redecorating fee $300 total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rents vary due to upstairs or
downstairs location.
<PAGE>
SCOTTSDALE COVE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 8
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: Scottsdale Cove I & II
Street Address: 9450 East Becker Lane
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1991 & 1994
Number of Stories: 1 and 2
Number of Units: 316
Net Rentable Area (SF): 292,940
Average Unit Size (SF): 927
Parking Surface: Asphalt
Type of Construction: Painted stucco exteriors with red tile roof fronts
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 673 $ 645-660 $0.96-0.98
14 1BR/1BA 738 680 0.92
72 2BR/2BA 973 770-780 0.79-0.80
60 2BR/2BA 984 775-785 0.79-0.80
14 3BR/2BA 1,220 995-1,005 0.82
8 3BR/2BA 1,220 $ 1,080 0.89
Phase II
48 1BR/1BA 718 $ 645-660 0.92
3 2BR/2BA 1,012 905 0.89
34 2BR/2BA 1,012 835 0.83
8 2BR/2BA 1,021 775-785 0.76-0.77
1 3BR/2BA 1,220 1,040-1,060 0.85-0.87
22 3BR/2BA 1,220 955 0.78
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, fireplaces, ceiling fans,
walk-in closets, outdoor utility closets,
patio/balconies
Project Amenities: 3 swimming pools, jacuzzi, exercise/weight room,
clubroom, covered parking
ECONOMIC DATA
Percent Occupied: 96%
Avg. Monthly Rent/SF of NRA: $0.81
Electricity Paid By: Tenant
Length of Lease: 9-12 months
Security Deposit: 1-bedroom - $150 deposit plus $150 redecorating fee
= $300 total
2-bedroom - $175 deposit plus $175 redecorating fee
= $350 total
3-bedroom - $200 deposit plus $200 redecorating fee
= $400 total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: No concessions. Rent ranges based on location and
view. Rents increase $15 with covered parking.
<PAGE>
THE TOWER
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-081
Name of Project: The Tower at McCormick Ranch
Street Address: 8250 East Arabian Tr.
City/State: Scottsdale, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1979
Number of Stories: 2
Number of Units: 158
Net Rentable Area (SF): 158,826
Average Unit Size (SF): 1,005
Parking Surface: Asphalt
Type of Construction: Painted stucco exterior
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------------
<S> <C> <C> <C> <C>
22 1BR/1BA 755 $ 670 $0.89
48 1BR/1BA 874 730 0.84
24 1BR/1BA/DEN 987 760 0.77
48 2BR/2BA 1,157 860 0.74
16 2BR/2BA 1,315 1,035 0.79
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, walk-in closets, outdoor
utility-closets, patio/balconies
Project Amenities: 2 swimming pools, jacuzzi, exercise/weight room,
clubroom
ECONOMIC DATA
Percent Occupied: 96%
Avg. Monthly Rent/SF of NRA: $0.80
Electricity Paid By: Tenant
Length of Lease: 6-14 months to a year
Security Deposit: $150 deposit plus $150 cleaning fee $300 total
Confirmed With: Real Data, Inc.
Date Confirmed: December 1997, Stevan N. Bach, MAI
Remarks: Concessions: Waive deposit and redecorating fee.
<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)
