<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 PENSION INVESTORS, L.P.
(NAME OF THE ISSUER)
ConAm Realty Pension Investors, L.P. Continental American Properties, Ltd.
ConAm Property Services III, Ltd. ConAm DOC Affiliates LLC
(NAME OF PERSONS FILING STATEMENT)
Units of Limited Partnership Interest
(TITLE OF CLASS OF SECURITIES)
44896K100
(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
================================================================================
$5,700,000 $1,140
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: $1,200 Filing party: ConAm Realty Pension Investors, L.P.
------------------- ------------------------------------
Form or registration no.: Schedule 14A Date filed: August 20, 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 PENSION INVESTORS, 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 property (the "Property") of ConAm Realty
Pension Investors, L.P., a New York 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 Property, 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 III, Ltd.
(the "General Partner"). Continental American Development, Inc., a California
corporation ("CADI"), is the general partner 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 Property 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 III, 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
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
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
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
(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.
- --------------------------------------------------------------------------------
3
<PAGE>
(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."
- --------------------------------------------------------------------------------
(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."
4
<PAGE>
- --------------------------------------------------------------------------------
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," "NOAPPRAISAL 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.
- --------------------------------------------------------------------------------
Item 13. Other Provisions
of the Transaction
- --------------------------------------------------------------------------------
(a) "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
(c) Not applicable.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
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 $127.
- --------------------------------------------------------------------------------
(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 PENSION INVESTORS, L.P.
By: CONAM PROPERTY SERVICES III, 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 III, 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 OAKTREE VILLAGE APARTMENTS
9803 CREEKFRONT ROAD
JACKSONVILLE, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1225 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-071
================================================================================
<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................................. 18
Site Analysis............................................. 22
Improvements.............................................. 25
Highest and Best Use...................................... 27
Appraisal Procedures...................................... 31
Sales Comparison Approach................................. 33
Income Approach........................................... 37
Reconciliation............................................ 47
</TABLE>
ADDENDA
Improved Sale Comparables
Rent Comparables
Legal Description
Professional Qualifications
<PAGE>
B.A.C.H
Realty Advisors Inc.
Appraisal, Consultation & Litigation
February 25, 1998
Hutton/Con Am Realty Investors
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal Of The 160-Unit Multifamily Complex
Known As The Oaktree Village Apartments Located At 9803 Creekfront Road In
Jacksonville, Florida; BRA: 97-071
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 November 30, 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 on
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 November 30, 1997 is in the sum of
SIX MILLION DOLLARS
($6,000,000)
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
SNB/kee
<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
appraisers.
6. That the information, estimates, and opinions
furnished the appraisers 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 appraisers.
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 appraisers 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 appraisers are 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 do hereby certify to the best of our
knowledge and belief that, except as otherwise noted in
this complete, self-contained appraisal report:
1. We 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 November 30, 1997 is $6,000,000.
/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 Oaktree Village Apartments
9803 Creekfront Road
Jacksonville, Florida
Location: North side of Creekfront Road at the
northwest corner of Southside Boulevard in
Jacksonville, Florida
BRA: 97-071
Legal Description: An 11.568-acre tract known as Parcels A and
B, Section 24, Township 3 South, Range 27
East, Duval County, Florida
Land Size: 11.568 acres or 503,902 square feet
Building Area: 156,688 square feet of net rentable space
plus a 1,500-square-foot clubhouse/leasing
office
Year Built: 1984
Unit Mix: 64 1BR/1BA at 796 square feet
48 2BR/2BA at 1,086 square feet
48 2BR/2BA at 1,117 square feet
No. of Units: 160
Average Unit Size: 979 square feet
Occupancy
Physical: 93.7 percent
Economic: 90-91 percent
Highest and Best Use
As Vacant: Apartment development
As Improved: Current use (as apartments)
Date of Value: November 30, 1997
"As Is" Market Value by
Sales Comparison Approach: $6,000,000
"As Is" Market Value by
Income Approach: $6,000,000
"As Is" Market Value
Conclusion: $6,000,000
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
Oaktree Village Apartments located at 9803
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 November 30, 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 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 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 (1-95) to the
west. Southbound traffic on Southside Boulevard is provided
access to southbound 1-95 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.
<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
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.
<TABLE>
<CAPTION>
3rd QTR 3rd 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>
3rd Qtr 3rd 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 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 the 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.
<TABLE>
<CAPTION>
Southside Southside
Category Blvd.
----------------------------------------------------------
<S> <C> <C>
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%
</TABLE>
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>
<TABLE>
<CAPTION>
Southside Total
Category Blvd. Southside City
---------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
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 93.8 percent and is considered to be
near 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 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 supported for a
strengthening apartment market.
21
<PAGE>
[PLAT MAP APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject site is located at the northwest corner of
Southside Boulevard and Creekfront Road in Jacksonville.
This location is on the southeast side of Jacksonville
about 8 aerial miles southeast of the Jacksonville Central
Business District (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 Oaktree Village
Apartments, which have a street address of 9803 Creekfront
Road, Jacksonville, Duval County, 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 11.568 acres and
is roughly pentagonal in shape. The site has over 1200 feet
of frontage along the north side of Creekfront Road and
more than 310 feet of frontage on the access road along the
west side of Southside Boulevard. The maximum width of the
site exceeds 1290 feet, and the maximum depth is more than
532 feet.
ACCESS AND The property is easily visible from both Creekfront Road
VISIBILITY and Southside Boulevard due to its adequate frontage on
both streets. Direct access into the site is provided north
from Creekfront Road just west of Southside Boulevard.
Creekfront Road is an asphalt-paved two-laned neighborhood
thoroughfare, which reaches a dead-end circle after running
about 1300 feet west from Southside Boulevard. Three
apartment complexes, including the subject, face onto this
street.
The property is also visible from 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 contained in the Addenda of
this report. The subject site is generally described as
being an 11.568-acre tract known as Parcels A and B 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,
B District. Both the current and prior designations provide
for similar development restrictions, namely to promote
multifamily 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 DRAINAGE The subject site is generally level to street grade with a
minor rise upward from the center of the site to its
eastern end at Southside Boulevard. The 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 Appraisers Office in
1993, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Value $4,640,841 $4,762,631 $4,655,837 $4,675,405 $5,078,473
Total Taxes 98,729 105,577 102,637 101,937 108,795
Tax Rate per
$1000 Valuation 21.2739 22.1678 22.0448 21.8028 21.4228
</TABLE>
The breakdown for the tax rate for the subject-taxing
district is compared to the 1994, 1995, and 1996 tax rate:
<TABLE>
<CAPTION>
1994 1995 1996 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
County $11.2131 11.1196 11.2158 10.9783
School (State Law) 6.6540 6.6650 7.1154 6.3450
School (Local Board) 2.7600 2.7600 2.9516 2.7800
Inland Navigation 0.0490 0.0400 0.0380 0.0500
Water Management 0.4820 0.4820 0.4820 0.4820
1.0097 0.9782 ----- 0.7875
-------- -------- -------- -------
Debt Payments (Voter
Approved) $22.1678 $22.0448 $21.8028 $21.4228
</TABLE>
The assessor's parcel number for the subject site is
148522-2000-9.
The real estate property taxes for the subject are
calculated at $108,795 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 1996, the
taxes for the subject are discounted 4 percent. For
purposes of this appraisal, we have assumed an early
payment of taxes. The real estate taxes in the Income
Approach section of this report reflect an approximate 2
percent increase over the 1997 property taxes. Real estate
taxes for the subject in 1998 have been estimated at
$110,760.
23
<PAGE>
SITE CONCLUSION The subject property is in southeastern Jacksonville about
8 aerial miles southeast of downtown. The parcel contains
11.568 acres with level and slightly sloping 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 with additional
visibility from Southside Boulevard abutting the site to
the east. 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 11.568-acre tract of land, is improved
with a two-story apartment project known as the Oaktree
Village Apartments. The improvements consist of 160
apartment units contained in ten buildings constructed in
1986. Also situated on the site is a leasing office, sauna,
exterior mail post, deck, swimming poo1 and hot tub
surrounded by an iron fence, lighted and fenced tennis
court, lake and mechanical shed.
There are three basic floor plans for the 160 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>
64 lBR/lBA 796 50,944
48 2BR/2BA 1,086 52,128
48 2BR/2BA 1,117 53,616
--- ----- -------
160 979 156,688
</TABLE>
As seen in the figures above, the total net rentable area
of 156,688 in 160 apartment units results in an average of
979 square feet per unit. There are a total of 64 one-
bedroom units and 96 two-bedroom units.
The land area is 11.568 acres equating to a density of
13.83 units per acre. The parking consists of 212 asphalt-
paved open spaces or 1.93 space per unit. There appears to
be adequate tenant parking.
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 metal exterior doors. Porches by each
exterior front door have an exterior light. Exterior
stairwells have metal stairs and supports with concrete
risers and landings.
The interior finish of each unit has painted gypsum board
walls and ceilings. Some walls are accented with decorative
wallpaper, and some ceilings feature boxed or other ceiling
treatments. Floors have carpeting over pad with tile floors
in the kitchen. 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 icemaker. Each
unit has an electric water heater with a 40-gallon
capacity. The kitchen equipment appears to be original but
is considered 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.
25
<PAGE>
Each of the units has miniblinds, an exterior screened-in
patio or deck, and washer and dryer closet equipped with
connections. 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, an entryway with brick
pavers, pole-mounted exterior light fixtures, and retaining
walls. 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. According to information supplied by
ConAm Management Corporation, the following capital
expenditures are scheduled for the subject in 1998:
<TABLE>
<S> <C>
Wood decking at pool and bridge.................. 3,000
Complete irrigation.............................. 20,000
Sidewalk repairs and some installation........... 10,000
Retaining wall repairs........................... 10,000
Shower pans and plumbing......................... 72,000
Exterior fence repairs and drainage.............. 8,000
Sight light...................................... 15,000
Total............................................ $138,000
</TABLE>
Considering the overall condition of the improvements, we
estimate the effective age of the subject property to be
equal to the actual age of eleven years.
26
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPPEARS HERE]
View of unit exterior and parking area
[PICTURE APPEARS HERE]
View of interior street and brick paved bridge
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 202 living room, dining area, and kitchen
[PICTURE APPEARS HERE]
Interior view of Unit 202 kitchen
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 202 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 generally pentagonal in shape and
encompasses a total of 11.568 acres, allowing for full
physical utilization of the site. The site has over 1,200
feet of frontage along the north side of Creekfront Road
and more than 310 feet of frontage on Southside Boulevard.
The topography of the site is generally level with a slight
slope upward from the center of the site to the east.
Drainage appears to be adequate. The site is located in
Flood Zone "X" which is defined in the previous Site
section of this report.
The subject's location is on the north side of Creekfront
Road at its northwest corner with the access road along the
west side of Southside Boulevard. Property uses along
Creekfront Road wholly consist of apartment complexes.
While the
27
<PAGE>
subject also has frontage on Southside Boulevard, a major
area thoroughfare, most of the site's street frontage is
along Creekfront Road. Creekfront Road is a two-laned
residential street with local traffic which travels
east/west from Southside Boulevard at its east end and a
dead end about 1,300 feet to the west. 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.
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 less than favorable, although there is
limited upscale condominium development occurring. Many of
the existing condominium and cooperative units have
exhibited depreciating market values over the past several
years.
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.
<TABLE>
<S> <C>
Cost to Construct............................... $50.00
Land Acquisitions............................... 4.00
------
Total Cost of Development.................... $54.00
</TABLE>
28
<PAGE>
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 ($75.12 S/F) are above the cost of development.
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 (11.568
acres), configuration (roughly pentagonal), 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 13.8 units per acre is in line with the market
sales, which reflect a range in density from 9.4 to 27.4
units per acre.
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.
29
<PAGE>
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 market project
amenities.
30
<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 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
31
<PAGE>
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.
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.
32
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
JACKSONVILLE 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 The Links @ Windsor Parke 08/87 $20,500,000 1995 280 296,616 95% $5.92 $69.11 $73,214 8.56% 7.80
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% 4.56
14401 Jose Vedra Blvd. 924
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
3 Hunter's Ridge (formerly 05/97 $15,200,000 1987 336 294,888 92% $4.00 $51.54 $45,238 7.76% 6.74
Oaks of Deerwood) 878
10100 Baymeadows Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 04/97 $16,700,000 1986 450 342,162 94% $4.69 $48.79 $37,111 9.60% 5.47
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% 7.31
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 $40.26 $32,254 9.56% 5.48
3333 Monument Road 801
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
7 The Antlers 05/96 $15,000,000 1985 400 327,728 97% $4.65 $45.77 $37,500 10.20% 5.63
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% 6.01
6710 Collins Road 995
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.
33
<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.
34
<PAGE>
<TABLE>
<CAPTION>
======================================================================
Sales Comparison - NOI Adjustments
----------------------------------
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/SE NOI/SF Factor Price/SF
--- -------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
1 $ 69.11 $ 5.92 $ 3.84 0.646465 $ 44.68
2 $ 28.96 $ 3.16 $ 3.84 1.215190 $ 35.19
3 $ 51.54 $ 4.00 $ 3.84 0.960000 $ 49.48
4 $ 48.99 $ 4.69 $ 3.84 0.818763 $ 40.11
5 $ 75.12 $ 6.26 $ 3.84 0.613419 $ 46.08
6 $ 40.26 $ 3.85 $ 3.84 0.997403 $ 40.16
7 $ 45.77 $ 4.65 $ 3.84 0.825806 $ 37.80
8 $ 42.06 $ 4.26 $ 3.84 0.901408 $ 37.91
Mean= 41.43
Value @ mean $6,491,584
Sale Sale Subject Adjust. Adjust.
No. Price/Unit NOI/Unit NOI/Unit Factor Price/Unit
--- ---------- -------- -------- ------ ----------
1 $73,214 $6,267 3,756 0.599330 43,879
2 $26,750 $2,916 3,756 1.288066 34,456
3 $45,238 $3,510 3,756 1.070085 48,409
4 $37,111 $3,562 3,756 1.054464 39,132
5 $75,099 $6,263 3,756 0.599713 45,038
6 $32,254 $3,083 3,756 1.218294 39,295
7 $37,500 $3,811 3,756 0.985568 36,959
8 $41,852 $4,240 3,756 0.885849 37,075
Mean = $ 40,530
Value @ mean $6,484,800
======================================================================
</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 $3.84 per square foot or $3,756 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 $35.19 to
$49.48 per square foot and $34,456 to $48,409 per unit. The
simple average adjusted prices (not weighted) per square
foot and per unit of the comparable sales was calculated at
$41.43 and $40,530, respectively. Applying an age
adjustment based on square foot area and number of units
indicates value at $37.66 per square foot and $37,058 per
unit
156,688 SF at $37.66/SF, Rounded.................$5,900,000
160 units at $37,058/unit....................... $5,930,000
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
DCF analysis in the Income Approach, the subject is
estimated to have a 47.32 percent operating expense ratio
(excluding reserves) in the first year of the holding
period. 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 5.60 resulting in a total value
indication as follows:
$1,151,639 x 5.60, Rounded......................$6,450,000
35
<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
value indication between $5,900,000 and $5,930,000 and the
effective gross income multiplier method indicated a value
of $6,450,000. 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 $6,200,000. From
this, a deduction for capital expenditures of $138,000 is
made as follows:
Indicated Value $6,200,000
Less: Capital Expenditures (138,000)
"As Is" Value $6,062,000
Rounded $6,050,000
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 November 30, 1997, is
SIX MILLION FIFTY THOUSAND DOLLARS
($6,050,000)
36
<PAGE>
[MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RENT COMPARABLE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
COMP. YEAR NO. NRA AVERAGE 1996 1997 SQUARE 1997 MONTHLY
NO. NAME OF PROJECT BUILT UNITS (SF) UNIT SIZE OCCUP. RATE OCCUP. RATE FLOOR PLANS FEET RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Lakeside Apartments 1984 416 344,192 827 96% 94% 1BR/1BA 625 $489
8700 Southside Blvd. 1BR/1BA 714 539
1BR/1BA/SR 814 559
2BR/2BA 951 639
2BR/2BA 1,003 679
2BR/2BA/SR 1,052 659
2BR/2BA/SR 1,162 699
- ------------------------------------------------------------------------------------------------------------------------------------
2 Cypress Lakes Apts. 1984 276 247,000 895 97% 96% lBR/1BA 750 $575
10200 Belle Rive Blvd. 2BR/2BA 950 665
2BR/2BA 1,150 715
- ------------------------------------------------------------------------------------------------------------------------------------
3 Sandpiper Apartments 1986 376 288,017 766 90-95% 90% lBR/1BA 501 $480
9536 Princeton Square lBR/1BA 602 540
Blvd. lBR/1BA 722 585
2BR/1BA 818 630
2BR/2BA 959 670
2BR/2BA 1,088 795
- ------------------------------------------------------------------------------------------------------------------------------------
4 Green Tree Place 1987 352 298,720 848 N/A 94% 1BR/1BA 550 $505-520
9480 Princeton Square 1BR/1BA 650 526-541
Blvd. 1BR/1BA 802 566-581
2BR/1BA 900 594-606
2BR/2BA 1,020 636-646
2BR/2BA 1,100 671-686
- ------------------------------------------------------------------------------------------------------------------------------------
Oaktree Village Apts. 1984 156,688 979 95.6% 93.7% 1BR/1BA 796 $530-540
9803 Creekfront Road 2BR/2BA 1,086 625-635
SUBJECT 2BR/2BA 1,117 675-685
====================================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------
RENT COMPARABLE ANALYSIS
- ----------------------------------------------------------------------------
1997
RENT/SF AMENITIES/COMMENTS
- ----------------------------------------------------------------------------
<S> <C>
$0.782 Washer/dryer in units, miniblinds, fireplaces,
0.755 outdoor utility closet, swimming pools, tennis
0.687 courts, jacuzzi, sauna, exercise/weight room,
0.672 club room, volleyball court, lake
0.677
0.626
0.602
- ----------------------------------------------------------------------------
$0.767 Washer/dryer connections, miniblinds,
0.700 fireplaces, ceiling fans, outdoor utility closet,
0.622 wet bars, pools, tennis courts, exercise/weight
room, jogging trail, racquetball court, club
room, laundry facility, lake
- ----------------------------------------------------------------------------
$0.958 Washer/dryer connections, wood burning
0.897 fireplaces, vertical blinds, screened-in patios,
0.810 tennis court, 2 pools & hot tub, car wash area &
0.770 vacuum, playground, controlled access gate, 1
0.669 month free rent on 12 month lease.
0.731
- ----------------------------------------------------------------------------
$0.918-0.945 Fitness center, tennis courts, swimming pools &
0.809-0.832 jacuzzi, volleyball court, playground, car wash,
0.706-0.723 controlled access gates, intrusion alarms,
0.660-0.673 washer/dryer, vaulted ceilings, fireplaces,
0.624-0.633 ceiling fans, bay windows.
0.610-0.624
- ----------------------------------------------------------------------------
$0.666-0.678 Washer/dryer connections, miniblinds, outdoor
0.576-0.585 utility closets, pool, tennis court, hot tub,
0.604-0.613 clubroom, lakes
============================================================================
</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 lBR/1BA 64 796 $535 $0.672 $34,240
B 2BR/2BA 48 1,086 630 0.580 30,240
C 2BR/2BA 48 1,117 680 0.609 32,640
--- -------
160 $97,120
</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
37
<PAGE>
total unit size from 276 to 416 units and in occupancy from
90 to 96 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 $0.602 to $0.81 per square foot per
month.
On the table on the facing page, each of the subject's
three 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 units offered at Lakeside. This
plan is also similar to the one-bedroom unit at Cypress
Lakes. These comparables range in monthly rental asking
prices from $539 to $575 or from $0.755 to $0.767 per
square foot. The subject's Plan A has average asking rents
of $535 per unit or $0.672 per square foot. The subject's
rent is on the low end of the range of those for Plan A of
the comparable properties. This is due to the superior
amenities of the comparable properties. Additionally, the
subject units' rent for $530 and $540 per month for
downstairs and upstairs units respectively
Plan B containing 1,086 square feet from the subject is
also most similar in size and amenities to similar two-
bedroom units displayed from Lakeside. This comparable unit
has a monthly rental rate of $679 or $0.677 per square
foot. Plan B has average asking rents of $630 per month or
$0.58 per square foot. Thus, the current asking rent is
below the per square foot range provided by the rent
comparables. This again is due to the superior amenities of
the comparables and again the subject rent differs from up
or down units.
The subject's largest plan, Plan C, with 1,117 square feet
has an average asking rent of $680 per month or $0.609 per
square foot. This plan is most similar in size and
amenities to the two-bedroom plans from Lakeside and
Cypress Lakes. These comparable units range in monthly
rental amounts from $699 to $715, which equates to $0.602
to $0.622 per square foot. Each has a higher rent per
square foot than the subject because of superior amenities.
38
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================
SUBJECT-RENT ANALYSIS
OAKTREE VILLAGE
- -----------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY PROJECT/UNIT
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF AMENITIES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 796 $535 $0.672 Average/Average
Lakeside 1BR/1BA 714 539 0.755 Good/Average
Cypress Lakes 1BR/1BA 750 575 0.767 Average/Average
Sandpiper 1BR/1BA 722 585 0.81 Good/Good
Green Tree Place 1BR/1BA 802 566-581 0.706-0.723 Good/Good
- -----------------------------------------------------------------------------------------------
SUBJECT 2BA/2BA 1,086 630 0.580 Average/Average
Lakeside 2BR/2BA 1,003 679 0.677 Good/Average
Cypress Lakes 2BR/2BA 1,052 659 0.626 Average/Good
Sandpiper 2BR/2BA 1,088 795 0.731 Good/Good
Green Tree Place 2BR/2BA 1,020 636-646 0.624-0.633 Good/Good
- ------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,117 680 0.609 Average/Average
Lakeside 2BR/2BA 1,162 699 0.602 Good/Average
Cypress Lakes 2BR/2BA 1,150 715 0.622 Average/Good
Green Tree Place 2BR/2BA 1,100 671-686 0.610-0.624 Good/Good
=================================================================================================
</TABLE>
<PAGE>
There are currently ten vacant units in the subject
complex. This equates to a current physical occupancy rate
of 93.7 percent. Physical occupancy one year ago was 95.6
percent. These numbers indicate a downward movement in
physical occupancy for the subject property.
Economic occupancy is estimated near 90 to 91 percent,
however, because actual fiscal year-end information was not
available and there were 2 months of budgeted projections,
a true economic occupancy cannot be ascertained. The most
recent leases for Plans A, B, and C 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 TOTAL RENT/ MO. RENT/
(SF) (S/F) MONTH TOTAL SF/MO.
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A 1BR/1BA 64 796 50,944 $535 $34,240 $0.672
B 2BR/2BA 48 1,086 52,128 630 30,240 0.580
C 2BR/2BA 48 1,117 53,616 680 32,640 0.609
--- ----- ------- ---- ------- ------
160 979 156,688 $607 $97,120 $ 0.62
</TABLE>
Gross Annual Rental Income: $97,120 x 12 months =
$1,165,440
Our cash flow analysis, as well as our direct
capitalization method, indicates a gross rental income of
$1,188,749. 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
$50,132 or $0.32 per square foot. This figure fell by over
30 percent during 1991 to $0.22 per square foot or a total
of $33,735. For 1992, other income totaled $38,020 or $0.24
per square foot. Figures for 1993 show a total of $29,681
or $0.19 per square foot. For 1994 and 1995, other income
was $28,598 and $23,882 or $0.18 and $0.15 per square foot,
respectively. Figures for annualized 1996 amount to $18,714
($0.12 per square foot) and actual and budgeted other
income for 1997 ranges between $19,061 to $21,833. 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 equates to
a total "Other Income" of $23,503 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:
39
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
OAKTREE VILLAGE APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable No. 1 2 3 SUBJECT PROPERTY
Year Built 1986 1984 1985 1984
Net Rentable Square Feet 100,750 142,792 117,980 156,688
Number of Units 110 120 124 160
Average Unit Size 916 1,190 951 979
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1996 1996 1993 1994 1995 1996-YTD 1997-YTD BTM PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED ANNUALIZED FIRST YEAR
PSF PSF PSF PSF PSF PSF PSF PSF ENDING 11/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
/SF /UNIT
====================================================================================================================================
EXPENSES
Real Estate Taxes $ 0.80 $ 0.72 $ 0.71 $ 0.63 $ 0.65 $ 0.64 $ 0.65 $ 0.69 $0.71 $ 692
Insurance 0.18 0.16 0.16 0.08 0.12 0.13 0.13 0.13 0.16 159
Operating Expenses 0.68 0.55 0.65 0.70 0.72 0.64 0.70 0.69 0.75 731
Utilities 0.94 0.68 0.86 0.57 0.58 0.61 0.63 0.70 0.65 631
Repairs & Maintenance 0.58 0.52 0.43 0.49 0.36 0.47 0.59 0.53 0.54 530
Contract Services 0.21 0.21 0.30 0.17 0.16 0.18 0.17 0.18 0.18 180
Management 0.37 0.34 0.39 0.29 0.30 0.31 0.32 0.32 0.37 360
General Administrative 0.18 0.15 0.18 0.09 0.12 0.14 0.17 0.15 0.16 159
-------- -------- -------- ------ ------ ------ -------- ------ ----- ------
Total Expenses $ 3.94 $ 3.33 $ 3.74 $ 3.03 $ 3.01 $ 3.12 $ 3.36 $ 3.39 *$3.52 *$3,442
====================================================================================================================================
</TABLE>
* There may be differences due to rounding
<PAGE>
Gross Rental Income $1,188,749
Other Income 23,503
----------
Total Potential Gross Income $1,212,252
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 93.7 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 nearly
comparable to the Third Quarter 92.8 percent citywide
rate in the Jacksonville area. The subject property has
a current economic occupancy rate of 90 to 91 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 no deduction is taken for rent loss as the
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 1996 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 not
available to the appraisers at the time of the report,
however, the 1997 expenses were annualized 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.
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
REAL ESTATE TAXES - The Oaktree Village 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 $5,078,473,405 the total tax
liability is $108,795 or $0.69 per square foot. After
examining the tax liabilities of the comparables used
in our expense analysis (which exhibited a range from
$0.73 to $1.09 per
40
<PAGE>
square foot), we have reflected the actual 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 $0.71 per square
foot or $692 per unit and totaling $110,760. 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 $0.162 per
square foot or $25,418. All of the expense comparables
utilized exhibit a range of insurance costs from $0.16
to $0.18 per square foot for 1995. The subject's actual
insurance costs have been fluctuating from $0.08 to
$0.13 per square foot since 1993. The annualized 1996
insurance costs are projected at $0.13 per square foot.
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
$159. 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 $0.70, $0.72, $0.64,
and $0.70 per square foot, respectively. The annualized
1997 operating expense is $0.69 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 year operating expense
of $116,948 which is equivalent to $0.75 per square
foot or $731 per unit. This expense is expected to
increase 4 percent annually throughout our projection
period.
UTILITIES - The expense comparables' 1996 utility
expenses have a range from $0.68 to $0.94 per square
foot. The subject's annualized 1996 year-to-date
expense is $0.63 per square foot. The 1997 expense is
$0.70 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
$0.645 per square foot or $631 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 $101,031 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 $0.59
per square foot for the subject, which shows a increase
in expenses of $0.12 per square foot 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 $0.53 per square foot. Repairs and maintenance costs
of $0.541 per square foot or $530 per unit and totaling
$84,737
41
<PAGE>
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 1996 contract services
expenses between $0.21 and $0.30 per square foot.
Actual expenses for the subject in for the 1996
contract services expense are estimated at $0.17 per
square foot, while 1997 indicated $0.18 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 $0.184 per square foot or $180 per unit and
totaling $28,808 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 1992 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 are in this range at $0.17 per square foot. The
1997 expense was $0.15 per square foot. The appraiser
utilized an $0.162 per square foot figure or $159 per
unit and totaling $25,423, 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 Oaktree
Village Apartments, excluding reserves for replacement,
equates to $3.52 per net rentable square foot or $3,442
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.
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 $0.31 per square
42
<PAGE>
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 $138,000 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 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,
43
<PAGE>
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.
CASH FLOW ASSUMPTIONS . Rents were based on an average rental rate of
approximately $0.62 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.
44
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
OAKTREE VILLAGE
- ---------------------------------------------------------------------------------------------------------------------------
Period 1 2 3 4 5 6 7
1998 1999 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Apt Rents 1,188,749 1,236,299 1,285,751 1,337,181 1,390,668 1,446,295 1,504,146
Rent/SF/Mo. 0.632 0.658 0.684 0.711 0.740 0.769 0.800
Other Income/Yr. 23,503 24,443 25,421 26,438 27,495 28,595 29,739
--------- --------- --------- --------- --------- --------- ---------
Gross Income 1,212,252 1,260,742 1,311,172 1,363,618 1,418,163 1,474,890 1,533,885
% Vacancy 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 60,613 63,037 65,559 68,181 70,908 73,744 76,694
--------- --------- --------- --------- --------- --------- ---------
Eff. Gross Income 1,151,639 1,197,705 1,245,613 1,295,437 1,347,255 1,401,145 1,457,191
-------------------
EXPENSES: Per/Unit Per/SF
-------------------
Real Estate Taxes 692 0.707 110,760 115,190 119,798 124,590 129,574 134,756 140,147
Insurance 159 0.162 25,418 26,434 27,492 28,591 29,735 30,924 32,161
Operating Expenses 731 0.746 116,948 121,626 126,491 131,551 136,813 142,285 147,977
Utilities 631 0.645 101,031 105,072 109,275 113,646 118,192 122,919 127,836
Repair & Maintenance 530 0.541 84,737 88,127 91,652 95,318 99,130 103,096 107,219
Contract Services 180 0.184 28,808 29,960 31,159 32,405 33,701 35,049 36,451
Management Fee 5.00% 0.367 57,582 59,885 62,281 64,772 67,363 70,057 72,860
General & Administrative 159 0.162 25,423 26,440 27,497 28,597 29,741 30,931 32,168
Reserves 300 0.306 48,000 49,920 51,917 53,993 56,153 58,399 60,735
--- ----- --------- --------- --------- --------- --------- --------- ---------
Total Expenses $3,742 $ 3.82 598,706 622,655 647,561 673,463 700,402 728,418 757,554
-----------------
Per SF Per Yr. 3.82 3.97 4.13 4.30 4.47 4.65 4.83
Per Unit Per Yr. 3,742 3,892 4,047 4,209 4,378 4,553 4,735
--------- --------- --------- --------- --------- --------- ---------
NET OPERATING INCOME $552,933 $575,050 $598,052 $621,974 $646,853 $ 672,727 $699,637
========= ========= ========= ========= ========= ========= =========
Per SF $ 3.53 $ 3.67 $ 3.82 $ 3.97 $ 4.13 $ 4.29 $ 4.47
Per Unit $ 3,456 $ 3,594 $ 3,738 $ 3,887 $ 4,043 $ 4,205 $ 4,373
- -------------------------------------------------------------------------------------------------------------------------
Capital Items: 138,000
--------- --------- --------- --------- --------- --------- ---------
Cash Flow 414,933 575,050 598,052 621,974 646,853 672,727 699,637
--------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value of Cash Flow 370,476 458,427 425,682 395,276 367,042 340,825 316,480
NOI in 11th Year 818,476 Present Value of Income Stream 3,494,356
Ro at Reversion 10.00% Present Value of Reversion 2,529,862
--------- --------------------------------------------------------
Indicated Reversion 8,184,758 Indicated Value of Subject 6,024,218
Less: Sales Costs 4.00% 327,390 Indicated Value/SF 38.45
---------
Reversion in 10th Yr 7,857,368 Indicated Value/Unit 37,651
GIM at Indicated Value 5.07
Ro at Indicated Value 9.18%
--------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Period 8 9 10 Reversion
2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME:
Apt Rents 1,564,312 1,626,885 1,691,960 1,759,639
Rent/SF/Mo. 0.832 0.865 0.900 0.936
Other Income/Yr. 30,928 32,165 33,452 34,790
--------- --------- --------- ---------
Gross Income 1,595,241 1,659,050 1,725,412 1,794,429
% Vacancy 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 79,762 82,953 86,271 89,721
--------- --------- --------- ---------
Eff Gross Income 1,515,479 1,576,098 1,639,142 1,704,707
------------------
EXPENSES: ??? ????
------------------
Real Estate Taxes 692 0.707 145,753 151,583 157,646 163,952
Insurance 159 0.162 33,448 34,786 36,177 37,624
Dperating Expenses 731 0.746 153,896 160,051 166,453 173,112
Utilities 631 0.645 132,950 138,268 143,798 149,550
Repair & Maintenance 530 0.541 111,508 115,969 120,607 125,432
Contract Services 180 0.184 37,909 39,426 41,003 42,643
Management Fee 5.00% 0.367 75,774 78,805 81,957 85,235
General & Administrative 159 0.162 33,455 34,793 36,185 37,632
Reserves 300 0.162 63,165 65,691 68,319 71,052
------ ------ --------- --------- --------- ---------
Total Expenses $3,742 $ 3.82 787,857 819,371 852,146 886,232
--------------
Per SF Per Yr. 5.03 5.23 5.44 5.66
Per Unit Per Yr. 4,924 5,121 5,326 5,539
--------- --------- --------- ---------
NET OPERATING INCOME $ 727,622 $ 756,727 $ 786,996 $ 818,476
========= ========= ========= =========
Per SF $ 4.64 $ 4.83 $ 5.02 $ 5.22
Per Unit $ 4,548 $ 4,730 $ 4,919 $ 5,115
- ------------------------------------------------------------------------------------------------------
Capital Items:
--------- --------- --------- ---------
Cash Flow 727,622 756,727 786,996 818,476
--------- --------- --------- ---------
Present Value Factor 12.00% 0.403883 0.360610 0.321973 1.000000
Present Value of Cash Flow 293,874 272,883 253,392 818,476
NOI in 11th Year
Ro at Reversion
Indicated Reversion
Less: Sales Costs 4.00%
Reversion in 10th Yr
</TABLE>
<PAGE>
================================================================================
CASH FLOW SUMMARY
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL 12.00% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------- --------- ---------- ---------
<S> <C> <C> <C>
1998 $414,933 0.892857 $ 370,476
1999 575,050 0.797194 458,427
2000 598,052 0.711780 425,682
2001 621,974 0.635518 395,276
2002 646,853 0.567427 367,042
2003 672,727 0.506631 340,825
2004 699,637 0.452349 316,480
2005 727,622 0.403883 293,874
2006 756,727 0.360610 272,883
2007 786,996 0.321973 253,392
-------
TOTAL NPV OF CASH FLOWS $3,494,356
Projected NOI - 11th Year $ 818,476
Terminal Capitalization Rate 10.00%
-----
Estimated Value of Property at End of 10th Year $8,184,758
Less Sales Cost 4.00% (327.390)
---------
Value of Reversion at End of 10th Year $7,857,368
Discount Factor - 10th Year 12.00% 0.321973
---------
Present Value of Reversion $2,529,862
Sum of Present Values of Cash Flow 3,494,356
---------
MARKET VALUE AS OF NOVEMBER 30, 1997 $6,024,218
(ROUNDED) $6,020,000
=========
================================================================================
</TABLE>
<PAGE>
. The subject property's current physical occupancy
rate is 93.7 percent. The economic occupancy rate
of 90 to 91 percent as of November 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 $0.306 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 December 1, 1997 may be found on the
preceding pages. The estimated leased fee market value
for the subject on an "as is" basis as of November 30,
1997 via discounted cash flow method is
SIX MILLION TWENTY THOUSAND DOLLARS
($6,020,000)
45
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
DIRECT CAPITALIZATION
======================================================================================================
TOTAL /UNIT /SF
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Potential Gross Rental Income $1,188,749 $ 7,430 $ 7.59
Other Income 23,503 147 0.15
------ --- ----
Potential Gross Income $1,212,252 $ 7,577 $ 7.74
Less: Vacancy & Credit Loss @ 5.00% 60,613 379 0.39
------ --- ----
Effective Gross Income $1,151,639 $ 7,198 $ 7.35
FIXED EXPENSES
--------------
Real Estate Taxes $ 110,760 $ 692 $ 0.71
Insurance 25,418 159 0.16
------ --- ----
Total Fixed $ 136,178 $ 851 $ 0.87
VARIABLE EXPENSES
-----------------
Operating Expenses $ 116,948 $ 731 $ 0.75
Utilities 101,031 631 0.64
Repairs & Maintenance 84,737 530 0.54
Contract Services 28,808 180 0.18
Management Fee 5.00% 57,582 360 0.37
General & Administrative 25,423 159 0.16
Reserves for Replacement 48,000 300 0.31
------ --- ----
Total Variable $ 462,529 $ 2,891 $ 2.95
Total Expenses $ 598,706 $ 3,742 $ 3.82
---------- ------- ------
Net Operating Income $ 552,933 $ 3,456 $ 3.53
Capitalization Rate 9.00%
----
Fee Simple Stabilized Market value $6,143,699 $38,398 $39.21
Less: Rent Loss Due to Lease Up 0 0 0
Capital Expenditures 138,000 863 0.88
------- --- ----
LEASED FEE "AS IS" MARKET VALUE $6,005,699 $37,536 $38.33
ROUNDED $6,010,000
==========
======================================================================================================
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1 Year 2 Year 3
------ ------ ------
Stabilized NOI $ 552,933 $552,933 $552,933
Projected NOI 567,101 575,050 598,052
------- ------- -------
Rent Loss 0 0 0
PV Factor 7.00% 0,934579 0,873439 0,816298
-------- -------- --------
PV Income Loss $ 0 $ 0 $ 0
CUMULATIVE LOSS $ 0
======================================================================================================
</TABLE>
<PAGE>
DIRECT CAPITALIZATION
Direct capitalization is a method used to convert a
single year's income estimate into a value indication.
In direct capitalization a rate of return for the
investor and recapture of the capital invested is
implicit in the overall capitalization rate.
The overall capitalization rate was chosen after
analyzing the comparable apartment sales in our Sales
Comparison Approach. These sales indicated a range of
"going-in" capitalization rates from 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 $6,010,000 and is shown on the
facing page.
INCOME APPROACH
CONCLUSION DCF Method................................. $6,020,000
Direct Capitalization Method............... $6,010,000
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 November 30, 1997, to be
SIX MILLION DOLLARS
($6,000,000)
46
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $6,050,000
Income Approach $6,000,000
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 back to May 1996, 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, and each
property is similarly located on the city's south and
southeast sides. The methods of comparison utilized in this
analysis were the net operating income per square foot 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 November 30, 1997, is
SIX MILLION DOLLARS
($6,000,000)
47
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PICTURES 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]
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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
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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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]
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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
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[PICTURE APPEARS HERE]
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COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-075
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
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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
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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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
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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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>
LAKESIDE
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Name of Project: Lakeside Apartments
Street Address: 8700 Southside Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Buildings: 22
Number of Stories: 2-3
Number of Units: 416
Net Rentable Area (SF): 344,192
Average Unit Size (SF): 827
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame and stucco composition roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
----------------------------------------------------
<S> <C> <C> <C> <C>
120 lBR/lBA 625 $489 $0.782
68 lBR/lBA 716 539 0.755
84 lBR/lBA/SR 814 559 0.687
28 2BR/2BA 951 639 0.672
44 2BR/2BA/SR 1,052 679 0.677
28 2BR/2BA 1,003 659 0.626
44 2BR/2BA/SR 1,162 699 0.602
</TABLE>
SR = sun room
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, miniblinds, fireplaces, outdoor utility
closets, patio/balconies
Project Amenities: 2 swimming pools, 2 tennis courts, jacuzzi, sauna,
exercise/weight room, club room, lake, volleyball
court
ECONOMIC DATA
Percent Occupied: 94%
Avg. Monthly Rent/SF
of NRA: $0.695
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $150
Pets Allowed/Deposit: Yes; 25 pounds maximum; $150 nonrefundable with $300
deposit
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Remarks: Differences in rental rates between individual floor
plans are due to screened-in porches and fireplaces.
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CYPRESS LAKES
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Name of Project: Cypress Lakes Apartments
Street Address: 10200 Belle Rive Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Buildings: 35
Number of Stories: 2
Number of Units: 276
Net Rentable Area (SF): 247,000
Average Unit Size (SF): 895
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame and stucco with composition roofs
Unit Mix:
<TABLE>
<CAPTION>
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
<S> <C> <C> <C> <C>
136 lBR/lBA 750 $575 $0.767
80 2BR/2BA 950 665 0.700
60 2BR/2BA 1,150 715 0.622
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplaces,
ceiling fans, outdoor utility closets,
patio/balconies, wet bars
Project Amenities: 1 swimming pool, 2 tennis courts, jacuzzi, sauna,
exercise/weight room, jogging trail, 1 racquetball
court, club room, laundry facility, lake
ECONOMIC DATA
Percent Occupied: 96%
Avg. Monthly Rent/SF
of NRA: $0.706
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $150
Pets Allowed/Deposit: Yes, under 25 pounds ($195 nonrefundable)
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Remarks: Differences in rental rates for individual floor
plans are due to location and lake views.
<PAGE>
SANDPIPER
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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RENT COMPARABLE 3
PROPERTY DESCRIPTION
Name of Project: Sandpiper Apartments
Street Address: 9536 Princeton Square Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Buildings: N/A
Number of Stories: 2
Number of Units: 376
Net Rentable Area (SF): 288,017
Average Unit Size (SF): 766
Parking Surface: Asphalt open
Parking Spaces: N/A
Type of Construction: Stucco/Wood siding with composition roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------------
<S> <C> <C> <C> <C>
N/A lBR/lBA 501 $480 $0.958
N/A lBR/lBA 602 540 0.897
N/A lBR/lBA 722 585 0.810
N/A 2BR/lBA 818 630 0.770
N/A 2BR/2BA 959 670 0.699
N/A 2BR/2BA 1,088 795 0.731
</TABLE>
Unit Amenities: Washer/dryer connections, wood burning fireplaces,
vertical blinds
Project Amenities: Screened-in patios, tennis courts,
pools and hot tubs, car wash area and vacuum,
controlled access gates, playground.
ECONOMIC DATA
Percent Occupied: 90%
Avg. Monthly Rent/SF
of NRA: N/A
Electricity Paid By: Tenant
Length of Lease: 6 or 12 months
Security Deposit: Yes
Pets Allowed/Deposit: Yes
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Remarks: Desirable location and project.
<PAGE>
GREEN TREE PLACE
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
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RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Name of Project: Green Tree Place
Street Address: 9480 Princeton Square Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Buildings: N/A
Number of Stories: 2
Number of Units: 352
Net Rentable Area (SF): 298,720
Average Unit Size (SF): 849
Parking Surface: Asphalt paved
Parking Spaces: N/A
Type of Construction: Wood frame with horizontal siding and composition
roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------
<S> <C> <C> <C> <C>
16 1BR/1BA 550 $505-520 $0.918-0.945
40 1BR/1BA 650 526-541 0.809-0.832
144 1BR/1BA 802 566-581 0.706-0.723
56 2BR/1BA 900 594-606 0.660-0.673
56 2BR/2BA 1,020 636-646 0.621-0.633
40 2BR/2BA 1,100 671-686 0.610-0.624
</TABLE>
Unit Amenities: Interior alarms, washer/dryers, vaulted ceilings,
fireplaces, ceiling fans, and bay windows
Project Amenities: Fitness center, tennis courts, swimming pool1 &
jacuzzi, volleyball court, car wash area, playground,
and controlled access gates.
ECONOMIC DATA
Percent Occupied: 94%
Avg. Monthly Rent/SF
of NRA: $0.699
Electricity Paid By: Tenant
Length of Lease: 6 or 12 months
Security Deposit: Yes
Pets Allowed/Deposit: Yes
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Remarks: Well maintained, above average complex.
<PAGE>
EXHIBIT "A"
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LEGAL DESCRIPTION
-----------------
PARCEL A:
- --------
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 00 degrees
01'50" W, along said Westerly right of way line, a distance of 4,855.00 feet to
the Southeasterly corner of that property described in the Public Records of
said County in Official Records Volume 5141, Page 122; run thence S 89 degrees
58'l0" W, along said Southerly boundary, a distance of 670.00 feet to a point
for point of beginning.
From the point of beginning thus described, run S 0 degrees 01'50" E a
distance of 532.65 feet to a point on the Northerly boundary of an easement for
ingress, egress, drainage and utilities, as described in the Public Records of
said County in Official Records Volume 5578, Pages 670 through 677; run thence
along said Northerly boundary, as follows: first course, S 70 degrees 58'10" W a
distance of 96.85 feet to a point of curvature; second course, a distance of
158.84 feet, along the arc of a curve, concave Northeasterly and having a
radius of 214.14 feet, a chord distance of 155.23 feet to a point of compound
curvature, the bearing of the aforementioned chord being N 87 degrees 46'50" W;
third course, 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 N
37 degrees 38'46" W; fourth course, a distance of 204.24 feet, along the arc of
a curve, concave Southwesterly and having a radius of 100.00 feet, a chord
distance of 170.55 feet to a point on the Easterly boundary of that property
described in the Public Records of said County in Official Records Volume 5578,
Pages 670 through 677, the bearing of the aforementioned chord being N 67
degrees l6'l6" W; run thence along said Easterly boundary, as follows: first
course, N 56 degrees 27'20" W a distance of 223.94 feet to a point; second
course, N 0 degrees 0l'50" W a distance of 330.00 feet to a point on the
Southerly boundary of said property described in Official Records Volume 5141,
Page 122; run thence N 89 degrees 58'l0" E, along said Southerly boundary, a
distance of 620.00 feet to the point of beginning.
PARCEL B:
- --------
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 00 degrees
01'50" W, along said Westerly right of way line, a distance of 4,855.00 feet to
the Southeasterly corner of that property described in the Public Records of
said County in Official Records Volume 5141, Page 122 for point of beginning.
Page One of Two Pages
<PAGE>
From that point of beginning thus described, run S 0 degrees 01'50"
E, along said Westerly right of way line of Southside Boulevard, a
distance of 310.00 feet to a point of curvature, said point lying on the
Nortnerly boundary of an easement for ingress, egress, drainage and
utilities described in the Public Records of said County in Official
Records Volume 5578, Pages 670 through 677; run thence along said
Northerly boundary as follows: first course, 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 a point of
tangency, the bearing of the aforementioned chord being S 44 degrees
58'10" W; second course, S 89 degrees 58'10" W a distance of 30.83 feet
to a point of curvature; third course, 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 S 80 degrees 28'10" W; fourth
course, S 70 degrees 58'10" W a distance of 566.92 feet to a point; run
thence N 0 degrees 01'50" W a distance of 532.65 feet to a point on the
Southerly boundary of said property described in Official Records Volume
5141, Page 122; run, thence N 89 degrees 58'10" E, along said Southerly
boundary, a distance of 679.00 feet to the point of beginning.
[STATE OF FLORIDA STAMPS APPEAR HERE]
Page Two of Two Pages
<PAGE>
EXHIBIT "B"
-----------
LEGAL DESCRIPTION
-----------------
Together with a perpetual non-exclusive easement over, through, across, under
and above the property hereinafter described for the purpose of ingress, egress
and utilities, to-wit:
STREET PARCEL
- -------------
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
1'50" 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'l0" 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 reverse curvature, the bearing of the aforementioned
chord being N 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'l0" 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.
<PAGE>
EXHIBIT "C"
----------
1. Easement over the East 20 feet of the subject property for
utility purposes as reserved by Warranty Deed from Deerwood Lands
Company to Epoch Properties, Inc. dated and recorded August 2,
1983, in Official Records Volume 5680, Page 2386, Public Records
of Duval County, Florida.
2. That certain reservation for non-exclusive easement for ingress,
egress and utilities and utility purposes reserved by Deerwood
Lands Company, in Deed dated and recorded August 2, 1983, in
Official Records Volume 5680, Page 2386, Public Records of Duval
County, Florida, over Parcel C of the subject property.
3. Easement granted by Epoch Properties, Inc. to Jacksonville
Suburban Utilities Corp. recorded in Official Records Volume
[5818], Page 1878, Public Records of Duval County, Florida.
4. That certain Bill of Sale granted by Epoch Properties, Inc. to
Jacksonville Suburban Utilities Corp. recorded in Official
Records Volume 5808, Page 1881, Public Records of Duval County,
Florida
5. Those certain Covenants and Restrictions attached as Exhibit "B"
to Deed from Deerwood Lands Company to Epoch Properties, Inc.
dated August 2, 1983, and recorded in Official Records Volume
5680, Page 2386, Public Records of Duval County, Florida.
<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)
