<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
CONAM REALTY INVESTORS 3, L.P.
(NAME OF THE ISSUER)
ConAm Realty Investors 3, L.P. Continental American Properties, Ltd.
ConAm Property Services IV, Ltd. ConAm DOC Affiliates LLC
(NAME OF PERSONS FILING STATEMENT)
Units of Limited Partnership Interest
(TITLE OF CLASS OF SECURITIES)
44849P305
(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
===============================================================================
$16,486,647 $3,298
Transaction Valuation(1) Amount of Filing Fee
===============================================================================
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $3,298 Filing party: ConAm Realty Investors 3, L.P.
------------------- ---------------------------------
Form or registration no.: Schedule 13E-3 Date filed: October 30, 1998
---------------- ----------------------------------
</TABLE>
Instruction. Eight copies of this statement, including all exhibits, should be
filed with the Commission.
- --------
(1) For purposes of calculating the filing fee only. The filing fee was
calculated in accordance with Rule 0-11 under the Securities Exchange Act
of 1934, as amended, and equals 1/50 of one percent of the aggregate
amount of cash to be distributed to securityholders in connection with the
transaction.
<PAGE>
CONAM REALTY INVESTORS 3, 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 three properties (the "Properties") of ConAm
Realty Investors 3, L.P., a California limited partnership (the
"Partnership"), to a Delaware limited liability company (the "Purchaser") to
be formed if the proposed sale is approved by the Partnership's limited
partners. It is anticipated that, shortly after the sale of the Properties,
the net proceeds from the sale, together with certain cash reserves, would be
distributed to the limited partners and the Partnership would be liquidated. A
final distribution of cash from reserves would be distributed to limited
partners at the time of liquidation.
The general partner of the Partnership is ConAm Property Services IV, 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 Properties if the
proposed sale is approved.
A preliminary consent solicitation statement (the "Consent Solicitation
Statement") regarding the proposed sale was filed with the Securities and
Exchange Commission on October 30, 1998.
The following Cross-Reference Sheet is supplied pursuant to General
Instruction F of Schedule 13E-3 and cites the location in the Consent
Solicitation Statement of the information required to be included in response
to the items of this Statement, which Consent Solicitation Statement is hereby
incorporated by reference to the extent so cited. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Consent Solicitation Statement. The Consent Solicitation Statement
will be completed and, if appropriate, amended prior to the time it is first
sent or given to limited partners of the Partnership. This Statement will be
amended to reflect such completion or amendment of the Consent Solicitation
Statement.
<PAGE>
CROSS-REFERENCE SHEET
- --------------------------------------------------------------------------------
Item of Schedule 13E-3 Location in Consent Solicitation Statement
- --------------------------------------------------------------------------------
Item 1. Issuer and Class of
Security Subject to the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) Outside Front Cover Page, "SUMMARY--The
Partnership," "ACTION BY CONSENT--Record Date,"
"MARKET FOR THE UNITS," "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF."
- --------------------------------------------------------------------------------
(c) "MARKET FOR THE UNITS."
- --------------------------------------------------------------------------------
(d) "DISTRIBUTIONS."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) Not applicable.
- --------------------------------------------------------------------------------
Item 2. Identity and This Statement is being filed by the issuer and
Background certain affiliates of the issuer named in (b)
below.
- --------------------------------------------------------------------------------
(a)-(c) ConAm Property Services IV, 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," "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(d) "SPECIAL FACTORS--Fairness of the Sale," "THE
PROPOSALS--Background of the Sale," "--Conflicts
of Interest of the General Partner."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
- --------------------------------------------------------------------------------
(a)-(c) "SUMMARY--Fairness of the Sale and Certain
Conflicts of Interest," "SPECIAL FACTORS--
Independent Appraisal."
- --------------------------------------------------------------------------------
Item 10. Interest in
Securities of the Issuer
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
Item 11. Contracts, Not applicable.
Arrangements or
Understandings with Respect
to the Issuer's Securities
- --------------------------------------------------------------------------------
Item 12. Present Intention
and Recommendation of
Certain Persons with Regard
to the Transaction
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
(b) No recommendation regarding the Sale has been
made to date by any person named in paragraph (a)
of this Item to any person owning Units in the
Partnership.
- --------------------------------------------------------------------------------
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 $116.
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
Item 15. Persons and
Assets Employed, Retained
or Utilized
- --------------------------------------------------------------------------------
(a) "THE PROPOSALS--The Purchaser."
- --------------------------------------------------------------------------------
(b) "SUMMARY--Solicitation Agent," "ACTION BY
CONSENT-- Action by Consent," "VOTING
PROCEDURES."
- --------------------------------------------------------------------------------
Item 16. Additional Not applicable.
Information
- --------------------------------------------------------------------------------
Item 17. Material to be
Filed as Exhibits
- --------------------------------------------------------------------------------
(a) Not applicable.
- --------------------------------------------------------------------------------
(b) Independent Appraisal.
- --------------------------------------------------------------------------------
(c) Not applicable.
- --------------------------------------------------------------------------------
(d) Previously filed
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) Not applicable.
- --------------------------------------------------------------------------------
6
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
Dated: November 5, 1998
CONAM REALTY INVESTORS 3, L.P.
By: CONAM PROPERTY SERVICES IV, 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 IV, LTD.
By: CONTINENTAL AMERICAN DEVELOPMENT,
INC., its General Partner
By: /s/ Daniel J. Epstein
--------------------------------
Name: Daniel J. Epstein
------------------------------
Title: President
-----------------------------
CONTINENTAL AMERICAN PROPERTIES, LTD.
By: DJE FINANCIAL CORP., its General
Partner
By: /s/ Daniel J. Epstein
--------------------------------
Name: Daniel J. Epstein
------------------------------
Title: President
-----------------------------
CONAM DOC AFFILIATES LLC
By: CONTINENTAL AMERICAN PROPERTIES,
LTD., its Administrative Member
By: DJE FINANCIAL CORP., its General
Partner
By: /s/ Daniel J. Epstein
----------------------------
Name: Daniel J. Epstein
--------------------------
Title: President
-------------------------
7
<PAGE>
EXHIBIT B
================================================================================
COMPLETE, SELF-CONTAINED
VALUATION
OF
AUTUMN HEIGHTS APARTMENTS
4035 AUTUMN HEIGHTS DRIVE
COLORADO SPRINGS, EL PASO COUNTY, COLORADO
FOR
HUTTON/CON AM REALTY INVESTORS 5
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BTM: 97-072
================================================================================
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Letter of Transmittal........................................................... 1
Assumptions and Limiting Conditions............................................. 2
Certification................................................................... 4
Salient Facts and Conclusions................................................... 6
Nature of the Assignment........................................................ 7
City/Neighborhood Analysis...................................................... 9
Apartment Market Analysis....................................................... 14
Site Analysis................................................................... 18
Improvements.................................................................... 20
Highest and Best Use............................................................ 23
Appraisal Procedures............................................................ 26
Sales Comparison Approach....................................................... 28
Income Approach................................................................. 32
Reconciliation.................................................................. 43
</TABLE>
ADDENDA
Comparable Apartment Rentals
Comparable Apartment Sales
Professional Qualifications
<PAGE>
B A C H
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
February 23, 1998
Hutton/Con Am Realty Investors 5
1764 San Diego Avenue
San Diego, California 92110
Re: Complete, self-contained valuation of the Autumn Heights Apartments
located at 4035 Autumn Heights Drive, Colorado Springs, El Paso County,
Colorado; BRA: 97-072
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. The property was inspected on December 21, 1997, and for
purposes of this report it is assumed that all physical and economic conditions
are similar on the date of value as they were on the date of inspection. 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.
Our analysis of the property focused on the supply and demand factors
influencing the area apartment market, the sale of comparable properties; market
rent levels, appropriate operating expenses, and acceptable investor returns.
These analyses have been considered within the context of market conditions
within the subject area.
As a result of our inspections 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
ELEVEN MLLLION FIVE HUNDRED DOLLARS
($11,500,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
BACH REALTY ADVISORS, INC.
/s/ Stevan N. Bach
Stevan N. Bach, MAI
President and Chief Executive Officer
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this 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 any
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 letter of opinion, 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 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.
--------------------------
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned do hereby certify that to the best
of our knowledge and belief, except as otherwise
noted in this complete, self-contained appraisal:
1. We do not have any personal interest or bias
with respect to the subject matter of this
appraisal or the parties involved.
2. The statements of fact contained in this
appraisal, 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, conclusions, and
opinions concerning the subject property
that are set forth in this appraisal report.
Stevan N. Bach, MAI inspected the subject
property on December 21, 1997.
6. The use of this report is subject to the
requirements of the Appraisal Institute
relating to review by its duly authorized
representatives.
7. The reported analyses, opinions, and
conclusions are limited only by the reported
assumptions and limiting conditions, and are
our personal, unbiased professional
analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program
of continuing education for its members.
Members who meet the minimum standards of
this program are awarded periodic
educational certification. As of the date of
this report, Stevan N. Bach, MAI has
completed the requirements under the
continuing education program of the
Appraisal Institute.
9. Compensation for this assignment is not
contingent upon the reporting of a
predetermined value or direction in value
that favors the cause of the client, the
amount of the value estimate, the attainment
of a stipulated result, or the occurrence of
a subsequent action or event resulting from
the analyses, opinions, or conclusions in,
or the use of, this report.
4
<PAGE>
10. Based on the knowledge and experience of the
undersigned and the information gathered for
this report, the estimated "as is" leased
fee market value of the subject property on
an all cash basis, as of November 30, 1997,
is $11,500,000.
/s/ Stevan N. Bach
-----------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Autumn Heights Apartments
4035 Autumn Heights Drive
Colorado Springs, Colorado
Location: Southwest corner of Broadmoor Bluff Drive and
Star Ranch Road
BRA: 97-072
Legal Description: Lot 1, Block 1, Autumn Heights, File 1, City
of Colorado Springs, El Paso County, Colorado
Land Size: 13.265 acres or 577,823 square feet
Building Area: 164,753 square feet of net rentable space
Year Built: 1984
Unit Mix: 13 2BR/1BA at 938 square feet
20 1BR/1BA at 1,054 square feet
15 2BR/1.5BA at 1,241 square feet
28 2BR/2BA at 1,137 square feet *
38 2BR/2BA at 1,249 square feet
26 2BR/2BA at 1,291 square feet
Number of Units: 140
Average Unit Size: 1,177 square feet
Occupancy: Economic -- 88.3 percent
Physical -- 95.7 percent
Highest and Best Use
As Vacant: Multifamily residential
As Improved: Multifamily residential, as currently
improved
Date of Value: November 30, 1997
"As Is" Market Value by
Sales Comparison Approach: $11,400,000
"As Is" Market Value by
Income Approach: $11,600,000
"As Is" Market Value
Conclusion: $11,500,000
* According to the most recent information received from the subject
property, the actual square footage of this unit type is 1,139 square feet.
However, in order to maintain consistency with previous appraisals, the
1,137 square foot area has been maintained.
6
<PAGE>
NATURE OF THE ASSIGNMENT
- --------------------------------------------------------------------------------
PURPOSE OF THE
APPRAISAL The purpose of this complete, self-contained
appraisal is to estimate the "as is" leased fee
market value of the subject property on an all
cash basis.
IDENTIFICATION OF
THE PROPERTY The subject property is a two- to three-story
apartment project consisting of a total of 164,753
square feet of net rentable area in 140 units. It
was constructed in 1984 on 13.265 acres. The
subject is identified as Autumn Heights Apartments
and is located at 4035 Autumn Heights Drive,
Colorado Springs, El Paso County, Colorado.
DATE OF THE APPRAISAL All opinions of value expressed in this report
reflect conditions prevailing as of November 30,
1997. Our last inspection date was December 21,
1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Tenth Edition, 1992,
sponsored by the Appraisal Institute, defines
Market Value as:
"The most probable price which a property
should bring in a competitive and open
market under all conditions requisite to a
fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming
the price is not affected by undue stimulus.
Implicit in this definition is the
consummation of a sale as of a specified
date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically
motivated;
(2) Both parties are well informed or
well advised, and acting in what
they consider their own best
interests;
(3) A reasonable time is allowed for
exposure in the open market;
(4) Payment is made in terms of cash in
U.S. dollars or in terms of
financial arrangements comparable
thereto; and
(5) The price represents the normal
consideration for the property sold
unaffected by special or creative
financing or sales concessions
granted by anyone associated with
the sale."
It is our opinion that a reasonable time period to
sell the subject is six months to one year and
this is consistent with current marketing
conditions. A sale earlier than one year may
represent a value other than market value and is
reasonably believed to be a value less than our
market value stated herein.
7
<PAGE>
Leased Fee Estate: An ownership interest held by a
landlord with the right of use and occupancy
conveyed by lease to others; the rights of lessor
or the leased fee owner and leased fee are
specified by contract terms contained within the
lease.
FUNCTION OF THE
APPRAISAL It is the understanding of the appraisers that the
function of this appraisal is for annual
partnership reporting purposes.
PROPERTY RIGHTS
APPRAISED The appraisers have appraised the property's "as
is" leased fee interest, subject to existing
short-term leases which are typically 6 to 12
months in duration at the subject property.
PROPERTY HISTORY The subject property is currently owned by
Broadmoor Pines Joint Venture and has been since
the acquisition in 1985. No subsequent
transactions were noted for the subject property
since 1985.
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 this
method of valuation is typically the least
reliable indicator of value in projects which
exhibit a good deal of accrued depreciation.
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 to obtain
current market rental rates, construction trends,
the sale of comparable improved properties,
anticipated investor returns, and the supply and
demand of competitive apartments in the general
and immediate area. After these various items 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>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
Colorado Springs, Colorado's second largest city,
is a mid-sized metropolitan area located in south
central Colorado approximately 60 miles south of
Denver, the state capital. The urbanized area
covers approximately 180 square miles along
Interstate Highway 25. The Colorado Springs
Metropolitan Statistical Area (MSA), synonymous
with El Paso County within which Colorado Springs
is located, is the primary area of focus in our
analysis. Included is the city of Manitou on the
western edge of the metropolitan area and Pikes
Peak, which rises to over 14,000 feet. The
Colorado Springs Airport and Peterson Air Force
Base are located on the eastern edge of the area
with the Falcon Air Station being located
approximately 7 miles east of the airport. To the
north are the towns of Monument and Palmer Lake,
as well as the United States Air Force Academy,
and bordering Colorado Springs on the south are
the unincorporated areas of Security, Winfield,
the city of Fountain, and the Fort Carson Army
Base.
COLORADO SPRINGS
AREA DATA
GENERAL INFORMATION Colorado Springs and the Pikes Peak region have,
from the very beginning, been developed as a
community with quality of life in mind. From its
beginning in 1871, Colorado Springs has been known
for its beauty, mild climate, its regional resort
accommodations, and its outdoor recreation. In the
1890s, Colorado Springs found it was surrounded
by more than scenic wealth. Gold was discovered in
nearby Cripple Creek, and Colorado Springs found
itself a thriving financial center.
In 1942, Fort Carson was established on 147,000
acres south of Colorado Springs. The next three
decades saw the military play an increasingly
important role in the region's economy with the
addition of the U.S. Air Force Academy, Peterson
Air Force Base, the North American (now Aerospace)
Defense Command (NORAD), the Air Force Space
Command, the Strategic Defense Initiative National
Test Bed, the Consolidated Space Operations Center
(CSOC), and the Unified U.S. Space Command.
DEMOGRAPHICS Colorado Springs in the past has been classified
as a rapid-growth area. During brief periods in
the 1970s and again in the 1980s, it was
considered one of the fastest growing cities in
the United States. Population growth was
substantial in 1981, 1984, and 1986 while the
period of 1987 to 1991 witnessed nominal growth.
The population growth returned to significant
increases in 1992. The 1994 population estimate
for the Colorado Springs Metropolitan Statistical
Area was 454,220. The figure increased 2.6% to
465,885 in 1995. According to the U.S. Census, the
1996 population estimate for the Colorado Springs
Metropolitan Statistical Area was 474,455. This
annual average figure represents a 1.8 percent
increase over the 1995 population estimate.
Population estimates for the Colorado Springs MSA
in 1997 is 481,967, which represents a modest
growth of 1.6 percent from 1996.
9
<PAGE>
Compound growth rate during the 1980's averaged
2.5% per year and is expected to continue to
increase during the 1990's at an average rate of
2.2% per year. Population projections through the
year 2010 are relatively modest with an average
annual compound growth rate of about 1.6 percent.
The projections assume a decline of 2,500 military
positions and a moderate growth in civilian
employment. Population is expected to reach
583,100 persons by the year 2010.
AREA ECONOMICS The Colorado Springs economy is structured upon a
mix including manufacturing, service, and military
industries. Manufacturing areas include many
national computer, semiconductor, and
printing/publishing companies. Service industries
include a large number of national headquarters
for membership and athletic associations, several
religious organizations, and the United States
Olympic Committee headquarters and training
center. Military operations include the United
States Air Force Space Command headquarters, the
Consolidated Space Operations Center, the
Strategic Defense Initiative Test Bed, the North
American Aerospace Defense Command, the Fourth
Infantry Division, as well as the United States
Air Force Academy. Defense contractors include
firms active in military systems research and
development, aerospace, and software development.
In addition, there are a significant number of
area tourist facilities.
Employment in the Colorado Springs area remained
strong during 1997. Total employment increased 5.0
percent from 1996; this translated into 11,500 new
jobs added in 1997. This growth is compared to 4.6
percent growth in 1996, 6.1 percent in 1995 and
8.3% in 1994. The highest employment growth was in
the sectors of service, construction, and trade.
Service sector jobs have provided the bulk of
growth over the past 3 years and now comprise
nearly one third of all total wage and salary
employment. Currently, most of the employment
growth in the construction sector has been in the
commercial submarket. However, some of the large
commercial construction projects such as Rockwell
and Vitesse Semiconductor manufacturing plants and
various new hotel constructions were either
completed or nearly completed in 1997. Thus, a
drop in regional construction employment is
likely. Some significant employment gains have
been made in the high technology sector of the
manufacturing industry, particularly in the
defense industry. Less dramatic increases were
seen in all other sectors of employment. Despite
the fact that the percentage of military influence
in the total work force has been decreasing for
the past 15 years, the military is still the
single largest employer. MCI Telecommunications
Corporation is the largest civilian employer with
5,000 employees. As of the third quarter of 1997,
the jobless rate was 3.6 percent dropping from the
third quarter 1996 rate of 4.3 percent.
COMMERCIAL REAL
ESTATE The shopping center market consists of over 200
centers with a total space in excess of 12.8
million square feet. Colorado Springs has two
regional malls: Chapel Hills in the northern
sector and the Citadel in the eastern part of the
metro area. The major retail corridor is Academy
Boulevard, which runs the full length of the metro
area north to south. The vacancy rate in shopping
centers is reportedly about 8.1 percent as of the
fourth quarter 1997. Absorption totaled 891,430
square feet in 1997 and the average rents were
$8.98 NNN per square foot. New
10
<PAGE>
construction in 1997 totaled 412,000 square feet
and an added 250,000 square feet is currently
underway. Over 900,000 square feet is planned for
1998.
The Colorado Springs office market consists of
about 900 buildings with about 16.3 million square
feet of space. Approximately 40 percent of the
office space is owner-occupied; however, the
multi-tenant leased space reported a vacancy of
about 7.9 percent which is the lowest in 15 years.
Absorption of office space in 1997 was about
650,000 square feet and the average rental rate
for Class A space was about $10.00 to $15 NNN per
square foot. Several office facilities were
completed in 1997 totaling 346,000 square feet of
which 162,800 square feet is speculative office
space. Speculative new construction is presently
underway with the 115,000 square feet Pacifica
Pointe in Briargate and Tech II in The Tech
Center, which will contain 145,000 square feet.
The office market appears to be in a stabilized
position and is expected to continue in the near
future.
The industrial market consists of almost 1,000
buildings totaling 27.8 million square feet of
space, about, half of which is owner occupied. The
vacancy rate was reportedly about 6.3 percent and
rents increased from 1996 levels. Absorption
totaled 633,750 square feet in 1997, which is down
from 1996. Leasing activity and absorption are
down from last year mainly due to the lack of
available space. Thus, as a result owner/users
were responsible for most of the new construction.
CONCLUSION Colorado Springs has recovered from the late
1980s, when economic growth was only nominal at
best. The long-term prospects for the recovery and
the area's continued growth are considered very
good especially considering that Ft. Carson's
long-term stability appears to have improved.
Underlying factors for the area such as its
pleasant climate and natural amenities, its
skilled labor force, the availability of low-cost
real estate and development sites, and university
research programs give Colorado Springs an
advantage over other cities for its continued
resurging economy.
NEIGHBORHOOD
AREA DATA The Appraisal of Real Estate, Eleventh Edition
defines a neighborhood as: "a group of
complimentary land uses." A neighborhood may be
characterized by such uses as residential,
commercial, industrial, recreational,
agricultural, cultural, and civic activities, or a
mixture of these uses. Analysis of the
neighborhood in which a particular property is
located is important since the various economic,
social, physical, and potential forces which
affect the neighborhood also directly influence
the individual properties located within it. A
discussion of these various factors as they affect
the value of the subject property is presented as
follows.
DELINEATION The subject neighborhood is located approximately
4 miles south of the Central Business District
(CBD) of the city of Colorado Springs, Colorado.
The subject apartments are more specifically
located at the southwest corner of Broadmoor
Bluffs Drive and Star Ranch Road. For the purpose
of this report, the subject neighborhood area is
geographically described as the Broadmoor area of
southwest Colorado Springs, being bound by State
Highway 122 (Lake Avenue) on the north, Pike
National Forest on the west, Fort Carson and the
North American Defense
11
<PAGE>
Command (NORAD) military complexes on the south,
and State Highway 115 (Nevada Avenue) on the east.
ACCESS Access into downtown Colorado Springs is direct
and convenient via State Highway 115 (Nevada
Avenue) which carries traffic from downtown
Colorado Springs into the suburban areas of
southern Colorado Springs and the previously
mentioned military complexes to the south, as well
as being the major transportation artery from
Colorado Springs to Canon City, Colorado. Access
into the neighborhood area is also provided by
major east/west thoroughfares such as State
Highway 83 (Academy Boulevard) and State Highway
122 (Lake Avenue).
STAGE OF
DEVELOPMENT Land uses in the area vary, and the area is
currently in a stable growth stage. New single-
family construction is currently underway in the
subject neighborhood though primarily for higher-
end residential housing. State Highway 115 (Nevada
Avenue) gives access to a number of residential
subdivisions, both east and west, and is lined
with retail outlets, small strip shopping centers,
low-rise office buildings, fast-food restaurants,
and gas stations. In serving the everyday needs of
the typical resident, there is the Southgate
Shopping Center, a 1983 community-type shopping
center, which contains 131,603 square feet of
retail space and is located approximately 2.5
miles north of the subject on the northeast corner
of Nevada Avenue and Lake Avenue. Anchoring the
Southgate Center is a King Soopers Supermarket,
Sears, and Woolworths. The Citadel Mall, a major
regional mall, is located approximately 7.5 miles
northeast of the subject property and contains
1,035,000 square feet of which 656,000 square feet
are major tenants such as JC Penney, May Company,
and Dillards. The St. Frances Memorial Hospital is
located approximately 5 miles north of the subject
and east of the downtown area on Pikes Peak
Avenue.
POLITICAL
JURISDICTIONS The subject property is located within the city of
Colorado Springs, county of El Paso, and the
Cheyenne Mountain Independent School District
(District 12). Students residing at the subject
attend Cheyenne Mountain Elementary, Cheyenne
Mountain Middle School, and Cheyenne Mountain
Senior High School. The subject site is governed
by the city of Colorado Springs zoning ordinance.
UTILITIES/SERVICES The neighborhood is generally serviced by public
utilities inclusive of electric power from
Colorado Springs Utilities Company, natural gas
service from Colorado Interstate Gas Company,
telephone service from U.S. West Telephone
Company, and water and sewer utilities provided by
the city of Colorado Springs. Police and fire
protection is also provided by the city of
Colorado Springs.
NEIGHBORHOOD
CONCLUSIONS The subject neighborhood is considered to be
convenient to the working and shopping areas of
Colorado Springs primarily due to the proximity of
State Highway 115 (Nevada Avenue) which is the
main roadway from other areas of Colorado Springs
to the Fort Carson and the North American Defense
Command (NORAD) military complexes on the south.
Public transportation is also readily accessible
to the subject neighborhood. It appears that the
subject neighborhood is
12
<PAGE>
about 70 percent developed. A growth trend in
single-family residential housing is occurring
presently, while all other forms of construction
are moderate at best. Due to its location,
substantial residential base, and nearby retail
and military use, the subject neighborhood should
continue to be a viable residential market in the
future.
13
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
The Colorado Springs' apartment market has
experienced cyclical episodes over the past 20
years, which have generally followed the swings of
the economy. The 1980s saw an early upswing in the
economy around 1980 and 1981, and new apartment
construction occurred at a rapid rate in 1983 and
1984. New construction trickled to a stop in 1988
with considerable overbuilding having occurred,
and the economy slowed to a near standstill in
1989 and 1990. Recovery began in 1991 when the
apartment market again reversed its position from
a renter's market to a landlord's market. Within
the last few years, rents have increased at a
pace, which has spurred new construction.
In our analysis of the Colorado Springs apartment
market, we have referenced statistical data from
publications including the Pikes Peak Area Council
of Governments' (PPACG) Housing Market Analysis,
as well as the Palmer McAllister publication, The
Apartment Market Report. These publications divide
the Colorado Springs apartment market into two
categories, Pre-1980 construction and Post-1980
construction, as well as nine different submarkets
in the Colorado Springs vicinity.
The subject property is considered to be a Class A
apartment complex due to its design and
construction quality and it was built in 1984. It
is located in the "Southwest" submarket area of
Colorado Springs. This submarket area is generally
defined as being bound on the east by Interstate
Highway 25 and Academy Boulevard, on the south by
the military complexes of Fort Carson and NORAD,
on the north by a combination of Cimmaron Street,
Lower Gold Cup Road, Eighth Street, and Camp Road,
and on the west by Pike National Forest.
COLORADO SPRINGS
APARTMENT MARKET
SUPPLY/INVENTORY According to PPACG estimates, the Colorado Springs
market had an estimated inventory of 47,660 units
in 1996, however, this includes condominiums.
Palmer McAllister estimates 35,000 apartment units
at year-end 1997 were existing or under
construction and they surveyed 22,000 units or
about 60 to 65 percent of them. PPACG reports that
the total multi-family/condo estimates of 47,660
units is up from that reported in 1980 of 35,228
units. Over the ten-year period from 1980 to 1990,
the inventory increased to 47,159. However, from
1990 to 1995, the market realized little change.
Due to the high occupancy levels and increasing
rental rates which is a direct result of a growing
population, the market has seen a significant
amount of new construction. As of November 1997,
there were eleven complexes that had either been
recently completed or were near completion, five
more were in the early stages of construction, and
several others were proposed. Seven projects
totaling 1,259 units broke ground in 1995: The
Commons at Briargate with 194 units; The Arbors at
Mountain Shadows with 140 units; the Grand
Centennial with 344 units; Sunset Ridge with 240
units; El Dorado with 120 units; Green Valley; and
Sand Creek. Five more projects broke ground in
1996: Spring Canyon with 292 units; Camelback
Pointe with 258 units; The Oasis with
14
<PAGE>
252 units; The Ridge At Rockrimmon with 126 units;
and The Residence At Skyway with 118 units.
Additionally, five more projects broke ground in
1997 including Jefferson At Cheyenne Mountain with
276 units; Pine Bluffs with 296 units; Western
Terrace II with 208 units; The Meadows with 240
units; and Lynmar with 100 units. There are a few
other apartment complexes in various planning
stages including a 70 unit complex, Scenic View,
which is expected to begin construction within the
next 12 months. Therefore, there are over 17
apartment complexes with more than 3,500 units
that have either been completed recently, are
under construction, or are planned in the Colorado
Springs area.
DEMAND/ABSORPTION Absorption, the increase in physically occupied
units from one period to another, is a key measure
of apartment demand. Annual absorption in the
Colorado Springs apartment market has been
somewhat irregular over the past few years.
According to a study prepared by the PPACG, 1,060
units were absorbed in 1991, 2,169 units in 1992,
4,683 units in 1993, 783 units in 1994, and 558
units in 1995. Over the past few years, 1993
reported the highest amount of absorption. The
absorption dropped in 1994 and again in 1995;
however, this is believed to be a direct result of
a lack of available supply. Although an exact
absorption figure for 1997 is not available it was
learned that a reasonable range would be 750 to
1,250 units. The seven-year average annual
absorption for Colorado Springs from 1991 to 1997
was estimated near 1,500 units; however, the 1993
absorption is extreme and causes the average to be
high.
PHYSICAL VACANCY Since 1980, apartment vacancy within the Colorado
Springs area has ranged from a high in 1989 of
20.0 percent to a low in 1994 of 1.9 percent. As
previously discussed, significant absorption
occurred in 1993 which pushed vacancies down to an
all time low in 1994 of 1.9 percent. Vacancy
increased slightly in the next two years to 3.7%
in 1995, and 4.2% in 1996. The vacancy rate then
increased in 1997 to 5.5%. It is important to note
that as the new apartment complexes enter the
market, it is expected to have an impact on the
vacancy levels. As mentioned, over 3,500 units
have either recently entered the market, or are
under construction. This new product is not
expected to destabilize the market long term,
however, there may be a period of increased
vacancy in the short term as these new units are
absorbed. With a forecasted average annual
population growth rate of about 1.6 percent
through the year 2010, the average physical
vacancy in Colorado Springs is expected to remain
low over the long term. The following table
summarizes the annual vacancy since 1980.
15
<PAGE>
<TABLE>
<CAPTION>
COLORADO SPRINGS OVERALL
APARTMENT MARKET VACANCY
--------------------------------------
DATE VACANCY
--------------------------------------
<S> <C>
1980 12.8%
1981 11.8%
1982 10.2%
1983 18.9%
1984 17.7%
1985 19.7%
1986 18.2%
1987 17.6%
1988 18.2%
1989 20.0%
1990 19.6%
1991 17.0%
1992 12.8%
1993 3.0%
1994 1.9%
1995 3.7%
1996 4.2%
1997 5.5%
</TABLE>
Source:U.S. Census Bureau for 1990; PPACG
estimates; Palmer McAllister estimates
As was stated previously, the subject is located
within the Southwest submarket. In order to
examine the subject's submarket in relation to
other areas of the city, we analyzed figures
prepared by the Palmer McAllister Company as of
December 1997. The following table tracks the
vacancy within the various submarkets as compared
with the citywide estimates. As can be seen, the
subject's submarket commands some of the highest
rents and has a vacancy rate lower than the city
wide average. It is important to note that this
information considers only apartments constructed
after 1980.
<TABLE>
<CAPTION>
APARTMENT SUBMARKET VACANCIES AND AVERAGE RENTS
---------------------------------------------------------------------------------
SUBMARKET VACANCY RATE AVG.RENT/SF
---------------------------------------------------------------------------------
<S> <C> <C>
North Central 7.1% $0.80
South Central 3.9% 0.81
North 5.9% 0.85
Palmer Park 2.2% 0.72
Rustic Hills 8.6% 0.76
Airport 3.2% 0.76
Security, Widefield, Fountain 4.1% 0.65
Southwest 2.0% 0.75
West 16.5% 0.86
CITYWIDE 3.9% 0.78
</TABLE>
Source:Palmer McAllister Company
RENTAL RATES Rental rates are determined by supply and demand.
Therefore, it can be expected that the trend of
apartment rents would be a reflection of the
overall multifamily environment. Rents typically
increase as a result of an increase in demand, or
a decrease in supply. While little construction
occurred over the period from 1991 to
16
<PAGE>
1995, vacancy declined and demand began to exceed
supply. As of December 1997, the average rental
rate for Post 1980 constructed apartments citywide
was $0.78 per square foot compared to the
subject's Southwest submarket of $0.75 per square
foot. According to the Palmer McAllister survey
average rental rates in 1997 have increased about
3.5% from the 1996 average. Of note, the subject
is a Class A project capable of achieving rents in
excess of these averages. Over the next year, we
have projected an average rental rate of $0.81 per
square foot for the subject.
MARKET PROJECTIONS The Colorado Springs apartment market is presently
experiencing a surge of new apartment development
due to the increasing employment base of the area
and population growth. Rental rates appear to have
reached a level, which is feasible to justify new
construction. Also, there appears to be more
certainty with respect to the area defense
cutbacks and the outlook is optimistic. Therefore,
given the expanding economy and a low vacancy
level, new development was eminent. In order to
test the market's future multifamily requirement,
PPACG prepared a forecast through the year 2000.
The base scenario assumed a decline of 2,500
military positions and a moderate growth in
civilian employment. Population is expected to
grow 4.9% by the year 2000. Based on this
analysis, the model indicated an annual need of
861 units from 1997 to the year 2000. It is
important to note that the current amount of
construction is above that of the projection.
However, a portion of the new supply will satisfy
the "pent-up" demand. It is important to emphasize
that these projections are tied to a number of
assumptions regarding the local economy.
CONCLUSION Available market information indicates the
Colorado Springs apartment market has reached a
phase of new construction. The overall vacancy
rate decreased to a low of 1.9 percent as of the
end of 1994 and while it has increased slightly
since that time, remains at the low rate of 5.5
percent as of December 1997. Reportedly, there are
over 3,500 units either recently completed or
under construction and a number are in for
approval by the city. The low vacancy rate the
area has experienced over the past year has
applied upward pressure on rental rates which,
appear to have reached a point when new
development is feasible. Due to a growing
population and area job growth, the economy
appears to be thriving. The new apartment projects
are expected to relieve some of the "pent-up"
demand without creating an unhealthy situation.
However, if the amount of new construction is not
monitored, it could create a softness, which could
have a direct impact on the subject property.
Currently, the subject has a physical vacancy of
about 4.3 percent and an economic vacancy of 11.7
percent.
17
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject site is located at the southwest
corner of Broadmoor Bluff Drive and Star Ranch
Road. The physical address of the subject property
is 4035 Autumn Heights Drive, Colorado Springs, El
Paso County, Colorado.
SIZE AND SHAPE The subject site is irregular and contains a total
of 13.265 acres, or approximately 577,823 square
feet of land area. The tract has a total of 750.42
feet of frontage along the west line of Broadmoor
Bluff Drive and 1,441.34 feet of frontage along
the southeast line of Star Ranch Road.
ACCESS AND VISIBILITY Access to the subject site is provided by two curb
cuts along Broadmoor Bluff Drive leading to
interior roadways within the apartment complex.
Overall, visibility and accessibility to the site
are considered good.
LEGAL DESCRIPTION The subject may be legally described as a 13.265-
acre tract being Lot 1, Block 1, Autumn Heights,
File 1, an addition to the city of Colorado
Springs, El Paso County, Colorado.
ZONING The subject site is zoned "R-5" Multifamily
Residential District by the city of Colorado
Springs (note following zoning map). Land uses
permitted includes multifamily development under
the "R-5" usage. Additionally, portions of the
subject site are regulated as hillside overlay
areas and are restricted to conserve the natural
features and aesthetic qualities of these areas
while providing safe and convenient access to
hillside areas.
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal
any easements adversely affecting the subject
property. For the purpose of this appraisal, the
appraisers assume that the subject's value or
marketability is not adversely affected by any
existing easements.
UTILITIES AND DRAINAGE All utilities are available to the site, including
sanitary sewer, water, electricity, natural gas,
and telephone. According to the National Flood
Insurance Program, Flood Insurance Rate Map
(Community Panel 080060 0290 B, dated December 18,
1986), the site is located in Zone X, an area of
minimal flooding. Drainage of the site appears to
be adequate.
TOPOGRAPHY AND
SOIL CONDITIONS The subject site is rolling and appears to drain
toward the southwest corner of the site. No soil
engineer's report was available to the appraisers
and no soil tests were performed. The soils are
assumed to have an adequate load-bearing capacity.
According to the United States Department of
Agriculture Soil Conservation Service for El Paso
County, the subject soil is classified as Razor
stony clay loam, 5 to 15 percent slopes. This is
moderately deep, well-drained soil which is slowly
permeable with a moderate water capacity.
18
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
SURROUNDING
PROPERTY USES North: Star Ranch Road, with single-family
residential development beyond
South: Single-family residences
East: Broadmoor Bluffs Drive, with single-
family residences beyond
West: Star Ranch Road, with vacant land beyond
PRESENT USE The subject site is currently improved with a 140-
unit apartment project known as Autumn Heights
Apartments, which were constructed in 1984 and are
considered in above-average condition. Please
refer to the following section of this report for
further discussion of the subject improvements.
REAL ESTATE TAXES According to the El Paso County Appraisal
District, the subject property's tax assessor
parcel number is 65064-01-014. The subject is
located within El Paso County, City of Colorado
Springs, and the Cheyenne Mountain School District
12 taxing jurisdictions. The subject property 1996
assessment is $423,720, which is 10.7 percent of
the appraised value of $3,971,075. The taxes paid
in 1997 according to the subject property
operating statement were $32,767. Assuming a 4
percent increase in the tax rate from the previous
year, the total taxes due in 1998 are estimated at
$34,078 (including real and personal property).
SITE CONCLUSIONS The subject site is located at the southwest
corner of Broadmoor Bluff Drive and Star Ranch
Road near Fort Carson Military Reservation and the
North American Defense Command military complexes
in the southern portion of the city of Colorado
Springs, El Paso County, Colorado. The site is
irregular in shape and contains 13.265 acres, or
approximately 577,823 square feet. The subject has
good access and visibility and has all utilities
available. The size and shape of the subject site
lend well to a variety of development
possibilities; however, the zoning restrictions
limit development to residential usage.
19
<PAGE>
[PLAT MAP APPEARS HERE]
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site is improved with a two-story
apartment project known as the Autumn Heights
Apartments. The improvements consist of 140 units
contained in 26 two- to three-story buildings,
which were constructed in 1984. Also situated on
the site is a one-story leasing office/clubhouse,
a swimming pool and jacuzzi, and one laundry room.
There are six basic floor plans for the 140
apartment units. The reported square footages of
these floor plans and the total net rentable area
are as follows:
<TABLE>
<CAPTION>
UNIT TYPE NO. OF UNITS DESCRIPTION SIZE (SF) TOTAL SF GARAGE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Conquistador 13 2BR/1BA 938 12,194 1-car
Aspen 20 *lBR/1BA 1,054 21,080 2-car
Vail 15 2BR/1.5BA 1,241 18,615 2-car
Loveland 28 2BR/2BA 1,137** 31,836 1-car
Breckenridge 38 *2B1/2BA 1,249 47,462 2-car
Keystone 26 *2BR/2BA 1,291 33,566 2-car
-- ----- -------
140 1,177 164,753
</TABLE>
* With additional loft
** According the to the most recent information
received from the subject property, the actual
square footage of this unit type is 1,139
square feet. However, in order to maintain
consistency with previous appraisals, the 1,139
square foot figure has been retained.
As seen in the figures above, the total net
rentable area of 164,753 square feet and a total
of 140 units results in an average of 1,177 square
feet per unit. There are a total of 20 one-bedroom
units and 120 two-bedroom units.
The land area includes 13.265 acres, resulting in
a project density of 10.55 units per acre. The
parking consists of 40 open spaces of asphalt
construction for guest parking. All apartments
units have a separate garage (one- or two-car)
depending on the unit type. Including the garage
parking and the guest surface parking, there is a
total of 279 parking spaces or 1.99 spaces per
unit. The parking ratio is within industry
standards.
The subject property is considered atypical when
compared to other apartment rental properties in
the area. It was originally built as townhouses,
though it has never been marketed as such.
Numerous townhouse projects in the immediate
vicinity were constructed during the late-1970s
and early- to mid-1980s, which resemble the
subject's design; though each of these properties
had been sold-off over time to individual owners,
and presently operate as townhouse properties. As
a result of the townhouse design of the subject
units, it is regarded as one of the premium
multifamily properties in the Colorado Springs
area, as noted by the rental rate survey contained
in the Income Approach.
The following is a brief description of the
building components, which comprise the
improvements located on the subject property site.
20
<PAGE>
FOUNDATION Steel reinforced concrete slab with perimeter and
interior wire mesh. Second and third levels
include wood frame, plywood subfloor with
lightweight concrete over.
FRAMING Wood-framed.
ROOF Pitched with cedar-shake shingles over plywood
decking.
EXTERIOR Vertical wood siding and stucco.
INTERIOR FINISH
Ceiling Painted and textured gypsum board.
Walls Painted and textured gypsum board. Soundproof
double-insulated walls.
Floors Combination of carpeting over pad, ceramic tile,
and vinyl tile flooring.
PLUMBING All fixtures, drainage systems, equipment, and hot
water heaters assumed to comply with city of
Colorado Springs and national building codes.
HVAC All electric, individual system, which provides
heating and cooling with individually, controlled
thermostats.
ELECTRICAL Switch-type circuit breakers, 120/240-volt single-
phase service, with each apartment individually
metered. Each unit has adequate electrical outlets
and ceiling-mounted light fixtures and some with
ceiling fans.
UNIT FEATURES Frost-free refrigerators, dishwashers, garbage
disposals, smoke detectors, walk-in closets,
private patios, washer/dryer connections.
SITE IMPROVEMENTS Concrete sidewalks and unit driveways, asphalt
parking areas, leasing office/clubhouse with sauna
and laundry room, swimming pool and jacuzzi.
LANDSCAPING Mature trees and hedges, grass-covered common
areas, and well-maintained flower beds.
AGE AND CONDITION The subject property was built in 1984 reflecting
an actual age of 13 years. The property has been
well maintained and reflects an effective age
equal to that of its actual age of 13 years.
SITE AREA The subject site is irregular in shape and
contains a total of 13.265 acres, or approximately
577,823 square feet of land area.
DEFERRED MAINTENANCE Our inspection revealed that the property has
suffered no apparent settlement and/or structural
problems. However, Bach Realty Advisors,
Incorporated is not qualified to determine the
extent of, if any, structural problems, and we
highly recommend that a qualified engineer be
hired to assess the extent of the problems, if
any, and the cost to cure them.
Visual inspection of the property as well as
estimates by the management revealed several areas
of deferred maintenance. Some of these include
appliance repair and replacement, interior and
exterior repairs, redecoration of amenities and
entryways, carpet and tile replacement, window
covering replacement, equipment repair and
replacement, pool repair, water heater
replacement, structural repairs, garage
21
<PAGE>
repairs, landscaping, concrete asphalt repairs,
roof repairs, etc. The deferred maintenance was
estimated at about $487,200.
CONCLUSIONS The subject improvements were built in 1984. The
project consists of 140 units contained in 26
buildings and the net rentable area of the
property totals 164,753 square feet. The property
was originally designed as a townhouse project,
though has never been sold-off as other townhouse
properties in the immediate vicinity had been.
Consequently, the property is one of the highest
quality apartment complexes in the area at present
due to its superior design and construction
features. The project is presently in above-
average condition overall. The improvements have
been well maintained though, as noted above, did
exhibit some deferred maintenance typical for a
project of its age.
22
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of clubhouse/leasing office
[PICTURE APPEARS HERE]
Interior view of clubhouse/leasing office
<PAGE>
[PICTURE APPEARS HERE]
View of swimming poo1 and subject units
[PICTURE APPEARS HERE]
Exterior view of Unit 420
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 420 dining area and kitchen (model)
[PICTURE APPEARS HERE]
Interior view of Unit 420 living room (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 420 bedroom (model)
[PICTURE APPEARS HERE]
Interior view of Unit 420 bathroom (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 420 upstairs bedroom (model)
[PICTURE APPEARS HERE]
View of interior street and exterior of other subject units
<PAGE>
HIGHEST AND BEST USE
- --------------------------------------------------------------------------------
The highest and best use of a property must be
determined because market value depends upon the
property's most profitable use. The Appraisal of
----------------
Real Estate, Tenth 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 - As discussed in the
Description of the Site, the subject site is zoned
"R-5" by the city of Colorado Springs. Primary
allowable uses include single-family, duplex, and
multiple-family dwellings. A portion of the site is
within a Hillside Overlay area, which requires an
approved developmental plan to protect
environmental topography and features. Accordingly,
several forms of residential developments are
legally permissible on the site.
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 encompasses a total of 13.265
acres and allows for full physical utilization of
the site. The site has 750.42 lineal feet of
frontage along the west line of Broadmoor Bluff
Drive and 1,441.34 feet of frontage along the
southeast line of Star Ranch Road Drive. The
topography of the site is gently sloping to
generally level. Drainage appears to be adequate.
The site is located in Flood Zone "X" which is
defined in the previous Site section of this report
as areas of minimal flooding.
The subject site's location, good access and
visibility, and the fact that it is not affected by
any adverse easements or restrictions as noted upon
inspection, make it conducive to almost all
property types. However, its zoning code "R-5" and
surrounding uses dictate a residential use. The
subject site, in general, is too large
23
<PAGE>
for development of an individual, single-family use
and too small for a residential subdivision.
Accordingly, multifamily development is dictated by
the physical characteristics of the site.
After considering these physical characteristics of
the site and other data described in the Site
section of this appraisal report, physically
possible land uses would include a variety of
residential development such as apartments,
condominiums, or townhouses, but are directed to
multifamily development. The primary deterrents to
other types of development were surrounding land
use patterns, existing zoning, and the secondary
location of Broadmoor Bluff and Star Ranch Road
compared to other neighborhood four-lane
thoroughfares.
FINANCIAL FEASIBILITY - Financial feasibility is
directly proportional to the amount of net income
that could be derived from the subject. The
financial feasibility of a development can also be
viewed as a function of supply and demand. As of
December 1997, the apartment market in Colorado
Springs was reportedly at about 94.5 percent
occupancy and about 98.0 percent in the subjects'
Southwest quadrant. Due to this low vacancy level
and rising rental rates, new construction is
occurring in Colorado Springs. However, with the
number of new complexes recently completed, under
construction, and proposed, the market could once
again become overbuilt.
MAXIMUM PRODUCTIVITY - After considering the
current economic climate, the subject's location,
and the financial feasibility of certain land uses,
more than likely a present development of the land
would produce an adequate return on costs. Due to
the subject's location and the socioeconomic status
of the neighborhood, we are of the opinion that a
multifamily development is conducive to the subject
site and would produce the highest net return over
the longest period of time.
In summary, the multifamily apartment market
continues to have a low vacancy rate. The site's
southwest location near the Fort Carson Military
Reservation and the NORAD complex gives it a large
base of prospective rent-paying tenants from which
to draw; however, the rents for the majority may be
generally too high for military personnel. The
subject is in an area that has historically been
one of the strongest market areas of Colorado
Springs, commanding higher than average rents and
having consistently higher occupancies than the
overall apartment market in Colorado Springs.
Overall, we believe the site as vacant would be
economically feasible to develop for multifamily
residential use at this time; however, with the
amount of new construction this could change as the
new product is introduced to the market. 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:
24
<PAGE>
LEGALLY PERMISSIBLE - The subject site is zoned "R-
5," Multifamily Residential District. The subject
has a lot coverage, setbacks, and density, all of
which are estimated to be currently satisfying the
zoning requirements. The subject property is
considered a legally conforming use.
PHYSICAL POSSIBILITY - Based on the subject's size
(13.265 acres), configuration (irregular), 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 property contains comparable
project amenities when compared to competing
projects.
FINANCIAL FEASIBILITY - The discussion of the
financial feasibility of the subject, as if vacant,
would also apply to the test as improved. The
subject property was originally constructed as a
townhouse project in 1984, though it has been
operated as an apartment project since completed.
In our research of the marketplace, we noted
several other townhouse properties in the subject's
immediate neighborhood, which are more comparable
to the subject than are other surrounding apartment
projects. Generally speaking, the subject's
construction qualities are superior to that of
local apartment projects, and their floor plan
designs, most specifically their average unit sizes
and their garage features adhere to the design of
townhouse development in the area. However, these
features are expected to help the subject remain
competitive as an apartment complex with the new
projects and amenities. As an apartment complex or
townhouse development, the improvements are
expected to produce results greater than the land
value. At this time, the subject operating as an
apartment complex appears to be most feasible;
however, with rental rates rising and interest
rates falling, the subject property operating as a
townhouse project may be approaching a feasible
situation.
MAXIMUM PRODUCTIVITY - Analysis of the scenarios
presented earlier indicates that operation of the
subject property strictly, as a rental property
would produce the highest net return over the
longest period of time. Consequently, we believe
the maximally productive use of the subject
property, as improved, is a continuation of its
present use as a rental project.
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. Due to the
various items of deferred maintenance noted
previously, the present improvements are not
considered to be the optimum use.
25
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or
techniques are used in the appraisal of real
estate. These are the Cost Approach, Sales
Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an
estimate of value by adding to the land value the
estimated value of the physical improvements. This
value is derived by estimating the replacement cost
new of the improvements and, when appropriate,
deducting the reduction in value caused by accrued
depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that
buyers judge the value of an existing structure by
comparing it to the value of a newly constructed
building with optimal functional utility, assuming
no undue cost due to delay. Thus, the appraiser
must estimate the difference in value between the
subject property and a newly constructed building
with optimal utility.
The Cost Approach was not used as a method of
valuation in this appraisal. The Cost Approach is
typically the least reliable indicator because cost
does not necessarily reflect value. Additionally,
projects are not purchased within the market
presently at current replacement cost levels, and
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.
26
<PAGE>
SUMMARY The appraisers, in applying the tools of analysis
to the valuation problem, seek to simulate the
thought process of the most probable decision
maker. The appraisers' judgment concerns the
applicability of alternative tools of analysis to
the facts of the problem, the data and information
needed to apply these tools, and the selection of
the analytical approach and data most responsive to
the problem in question.
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.
27
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COLORADO AREA
IMPROVED SALES SUMMARY
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Sale Sale Cash Equiv. Year No. of NRA Occup. NOI/SF
No. Name/Location Date Sale Price Built Units Avg/Unit At Sale /Unit
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Spring Canyon 11/97 $19,917,000* 1997 292 268,396 93.5% $6.49
4510 Spring Canyon Heights Contract 919 $5,961
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
2 Western Hills 07/97 $7,350,000 1985 152 114,780 94% $6.92
810 Western Drive 755 $5,226
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
3 Grand Centennial 06/97 $22,360,000* 1996 344 313,780 92.5% $6.56
5157 N. Centennial Blvd. 912 $5,987
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
4 Templeton Park 02/97 $23,300,000 1984 496 446,672 93% $5.41
4675 Templeton Park Circle 901 $4,869
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
5 The Neighborhood 12/96 $10,750,000 1984 191 212,010 94% $4.87
3504A Van Teylingen Drive 1,110 $5,402
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
6 Ridgeview Place 11/96 $16,500,000 1984 336 300,952 94% $5.32
3310 Knoll Lane 896 $4,764
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
Subject 1984 140 164,753 97% $5.89
Autumn Heights 1,177 $6,926
4035 Autumn Heights Drive
Colorado Springs, CO
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
Cash Equivalent Price
- ------------------------------------------------------------------------------------
Sale Per Per Oveall Expense
No. Name/Location SF /Unit Rate EGIM Ratios
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Spring Canyon $74.21 $68,209 8.74% 7.67 30.8%
4510 Spring Canyon Heights
Colorado Springs, CO
- ------------------------------------------------------------------------------------
2 Western Hills $64.04 $48,355 10.81% 6.50 27.0%
810 Western Drive
Colorado Springs, CO
- ------------------------------------------------------------------------------------
3 Grand Centennial $71.26 $65,000 9.21% 7.43 29.2%
5157 N. Centennial Blvd.
Colorado Springs, CO
- ------------------------------------------------------------------------------------
4 Templeton Park $52.16 $46,976 10.37% 6.51 29.1%
4675 Templeton Park Circle
Colorado Springs, CO
- ------------------------------------------------------------------------------------
5 The Neighborhood $50.71 $56,283 9.60% 7.05 29.6%
3504A Van Teylingen Drive
Colorado Springs, CO
- ------------------------------------------------------------------------------------
6 Ridgeview Place $54.83 $49,107 9.76% 6.78 30.7%
3310 Knoll Lane
Colorado Springs, CO
- ------------------------------------------------------------------------------------
Subject 33.4%
Autumn Heights
4035 Autumn Heights Drive
Colorado Springs, CO
- ------------------------------------------------------------------------------------
</TABLE>
* - These two apartments were presales predicated upon agreed income.
<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. In such an event,
market value can be derived directly from the
sales, since all complexities involved are properly
weighted 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 or nearly 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. We have included the most
recent comparable sales from the Colorado Springs
MSA that were considered to be most comparable to
the subject property in terms of average unit size
and quality. Six sales occurring between November
1996 and November 1997 were identified. The six
sales ranged in total units from 152 to 496, in net
rentable area from 114,780 to 446,672 square feet,
in average unit size from 755 to 1,110 square feet,
and in years of construction from 1984 to 1997. A
summary of the sales is located on the previous
page with a location map facing.
IMPROVED SALES
ADJUSTMENT ANALYSIS We have analyzed the sales for such differentials
as property rights conveyed as well as a check of
cash equivalencies. The six sales and their
comparisons to the subject are presented in this
section.
PROPERTY RIGHTS Property rights consists of ownership, legal
estate, economic benefits, and financial
components. Our valuation is of the leased fee
estate on an all cash basis. Since all the sales
were reported to be of the leased fee estate, no
adjustment was necessary.
CASH EQUIVALENCY Standard definitions of market value include
payment in "cash or its equivalent." The equivalent
includes financing terms generally available in the
market. In many cases comparable sales carry
atypical financing terms that require an adjustment
to cash equivalency. There are basically two areas,
which may require adjustments for terms. One is the
amount of cash down payment and the other is
favorable financing or a low interest rate on the
note/mortgage. Where terms were considered to be
more favorable than the market at the time of sale,
cash equivalency adjustments are made. All of the
sales used in this analysis were cash transactions
or were considered equivalent and, therefore, did
not require a cash equivalent adjustment.
28
<PAGE>
NET OPERATING
INCOME ANALYSIS In lieu of specific adjustments, we compared the
improved sales based on the net operating income
(NOI) per square foot and NOI per unit. This method
presents a comparison based on the income which a
property is capable of generating. Theoretically,
the NOI takes into consideration the various
factors, which influence value such as quality,
size, amenities offered, location, age, condition,
etc. Thus, these differing factors can be reduced
to the common denominator of net operating income.
The various sales reflected NOI's per square foot
ranging from $4.87 to $6.92 and NOI's per unit
ranging from $4,764 to $5,987. The subject NOI
(with reserve expenses) has been approximated at
$6.87 per square foot or $8,090 per unit from the
Direct Capitalization of this report.
To estimate an adjustment for each sale, the
subject's NOI has been compared to the individual
NOI's of the comparable sales. This adjustment
should account for all the various physical and
economic differences in each improved property
sale, as income is a function of the current
market. Market conditions should reflect perceived
risk, or other factors, which may affect value. The
following chart presents the adjustment process.
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/SF NOI/SF NOI/SF FACTOR PRICE/SF
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $74.21 $6.49 $6.87 1.05855 $78.56
2 64.04 6.92 6.87 0.99277 63.58
3 71.26 6.56 6.87 1.04726 74.63
4 52.16 5.41 6.87 1.26987 66.24
5 50.71 4.87 6.87 1.41068 71.54
6 54.83 5.32 6.87 1.29135 70.80
</TABLE>
After adjustments, the sales reflected a range in
value for the subject from $63.58 to $78.56 per
square foot. Sales 1, 2 and 3 are the most recent
sales as well as the most similar in economics
Placing emphasis on these sales, tempered slightly
with the other sales, a value of $72.00 per square
foot is estimated for the subject. From this value
the $487,200 in deferred maintenance is deducted to
arrive at the "as is" value of the subject. The
calculation is shown below.
<TABLE>
<S> <C>
164,753 SF X $72.00/SF............. $11,862,216
Less Deferred Maintenance.......... (487,200)
------------
"As Is" Value via NOI/SF $11,375,016
Rounded $11,380,000
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/UNIT NOI/UNIT NOI/UNIT FACTOR PRICE/UNIT
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $68,209 $5,961 $8,090 1.35715 $92,570
2 48,355 5,226 8,090 1.54803 74,855
3 65,000 5,987 8,090 1.35126 87,832
4 46,976 4,869 8,090 1.66153 78,052
5 56,238 5,402 8,090 1.49759 84,221
6 49,107 4,764 8,090 1.69815 83,391
</TABLE>
After adjustments, the sales reflected a range in
value for the subject from $74,855 to $92,570 per
unit. Again, sales 1, 2 and 3 are the most recent
and are the most similar in terms of economics.
Based on this data, $85,000 per unit is estimated
for the subject. The following indication reflects
an "as is" value per unit for the subject
considering the subject's deferred maintenance.
<TABLE>
<S> <C>
140 units X $85,000/unit.............. $11,900,000
Less: Deferred maintenance............ (487,200)
------------
Value via NOI Price/Unit Method....... $11,412,800
Rounded $11,410,000
</TABLE>
EFFECTIVE GROSS INCOME
MULTIPLIER METHOD In addition to the NOI price per square foot and
price per unit analysis, we have employed an
effective gross income multiplier analysis. Unlike
the price per unit analysis, EGIMs cannot be
adjusted for dissimilar factors when compared to
the subject. Instead, certain factors must be
closely analyzed for determining comparability of
the multiplier to the subject property. These
include the timing of the sale and whether market
condition changes have occurred between the date of
valuation and the sale date, as well as occupancies
and expense ratio levels, and the comparability of
the sale in terms of its physical features and the
resulting income stream potential of the property.
Listed below are the details of the sales we felt
to be pertinent in our selection of a reasonable
EGIM for the subject. All factors were considered
in our interpretation of the data leading to the
EGIM of the sales.
<TABLE>
<CAPTION>
SALE DATE OF SALE EGIM OCCUPANCY EXPENSE RATIO
---------------------------------------------------------
<S> <C> <C> <C> <C>
1 11/97 7.67 93.5% 30.8%
2 07/97 6.50 94% 27.0%
3 06/97 7.43 92.5% 29.2%
4 02/97 6.51 93% 29.1%
5 12/96 7.05 94% 29.6%
6 11/96 6.78 94% 30.7%
Subject 96% 30.4%
</TABLE>
The sales indicated EGIMs ranging from 6.50 to
7.67, with all sales operating at stabilized
levels. We believe an EGIM of 7.2 is supported by
the sales. Applying the 7.2 EGIM to the subject's
stabilized effective gross income, and deducting
for deferred maintenance, results in the following
value indication.
<TABLE>
<S> <C>
7.2 X $1,627,326...................... $11,716,747
Less: Deferred maintenance............ (487,200)
-----------
Value via EGIM Method................. $11,229,547
Rounded $11,230,000
</TABLE>
30
<PAGE>
CONCLUSION The NOI per square foot and per unit methods
presented a value indication of $11,380,000 and
$11,410,000 respectively and the effective gross
income multiplier method indicated a value of
$11,230,000. Weight has been given to the net
operating income comparisons because this method
reflects both income and expense information. The
EGIM method only accounts for income and does not
take into consideration expenses, which can vary
from property to property. Therefore, it is our
opinion that the leased fee market value of the
subject property based on the indication provided
by the Sales Comparison Approach, all cash, on an
"as is" basis as of November 30, 1997, is
ELEVEN MILLION ONE HUNDRED THOUSAND DOLLARS
($11,400,000)
31
<PAGE>
[MAP OF COLORADO SPRINGS APPEARS HERE]
[COMPARABLE RENTALS]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF OCCUPANCY UNIT EFFECTIVE AMENITIES/COMMENTS
NO. NAME/LOCATION BUILT UNITS UNIT TYPE SIZE/SF
- ------------------------------------------------------------------------------------------------------------------------------------
RENT/MO. RENT/SF/MO.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1 L'Auberge Broadmoor 1987 108 94% 1BR/1BA 1,000 $ 875 $0.88 Swimming pool, fitness
5 Watch Hill Drive 2BR/1BA 1,100 995 0.90 center, sauna, whirlpool
2BR/2BA 1,300 1,195 0.92 clubhouse, miniblinds,
ceiling fans, alarm,
vaulted ceilings, a/c,
fireplaces and washer/
dryers in all units
individual attached
garages.
- ------------------------------------------------------------------------------------------------------------------------------------
2 L'Auberge Cheyenne 1987 108 N/A 1BR/1BA/Den 875 835-855 0.97 Swimming pool,
Creek 115 West 2BR/2BA 1,044 955-975 0.92 jacuzzi, clubhouse,
Cheyenne Road washer/dryer,
fireplaces, covered
parking., patio/
balcony.
- ------------------------------------------------------------------------------------------------------------------------------------
3 Cheyenne Crest 1985 208 96.7% 1BR/1BA 546 530-560 1.00 Swimming pool,
Apts. 4008 1BR/1BA 714 645-665 0.92 jacuzzi, clubhouse,
Westmeadow Drive 1BR/1BA/Den 938 735-760 0.80 sports courts, ceiling
2BR/2BA 990 740-775 0.77 fans, washer/dryer
connections, some with
fireplaces, balcony/
patio, icemaker, a/c,
playground area,
storage units. Some
carports which rent
for $25 per month.
Concessions: $300 off
1/st/ months rent for
2 BD/2BA units.
- ------------------------------------------------------------------------------------------------------------------------------------
4 Cheyenne Crossing 1986 220 97.7% STUDIO 460 480-500 1.07 Swimming pool, jacuzzi,
Apts. 640 Wycliffe 1BR/1BA 740 580-600 0.80 sauna, exercise room,
Drive 2BR/1BA 950 700-720 0.75 clubhouse, ceiling fans,
2BR/2BA 1,000 700-720 0.71 washer/dryer
connections,
some washer/dryer
in units, some with
fireplaces, balconies,
a/c, vaulted ceilings,
ceiling fans,
security,
playground area.
No concessions.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Mountain View Apts. 1984 252 98.8% 1BR/1BA 550 555-565 1.02 Indoor/outdoor
4085 Westmeadow 1BR/1BA 680 650-660 0.96 swimming pool, heated
Drive 2BR/1BA 800 695-705 0.88 jacuzzi, sauna,
2BR/2BA 1,000 765-775 0.77 clubhouse, exercise
room, ceiling fans,
washer/dryer,
fireplaces, balconies/
patios. Concessions:
$150 off on small
1BR with a 9 to 12
month lease.
- ------------------------------------------------------------------------------------------------------------------------------------
6 Cobblestone Ridge 1985 208 97.1% 1BR/1BA 720 550-560 0.77 Indoor and outdoor
Apts. 4125 Pebble 2BR/1BA 840 650-660 0.78 swimming pools, jacuzzi,
Ridge Circle 2BR/2BA 1,043 745-765 0.72 sauna, clubhouse, weight
3BR/2BA 1,235 860-870 0.70 room, tennis courts,
3BR/2BA 1,501 935-955 0.63 ceiling fans, a/c,
washer/dryer
connections, wet bars,
ceiling fans, some
with fireplaces,
playground area. No
concessions.
- ------------------------------------------------------------------------------------------------------------------------------------
7 L'Auberge Pine Cliff 1985 96 N/A 1BR/1BA/Den 921 900-950 1.00 Swimming pool, hot tub,
515 Autumn Crest 1BR/1BA 1,028 925-975 0.92 clubhouse, washer/
2BR/2BA 1,066 975-1,025 0.94 dryers in each storage,
2BR/2BA 1,154 1,160-1,210 1.03 deck, carports (included
2BR/2BA 1,204 1,195-1,245 1.01 in rent). No
concessions.
- ------------------------------------------------------------------------------------------------------------------------------------
8 TheOasis 1997 251 N/A 1BR/1BA 605-882 595- 0.96 Fireplace, icemaker,
1495 Farnham Point 840 microwave, vaulted
2BR/1-2BA 950-1238 925-1060 0.90 ceiling, washer/dryer
in unit, patio, garage,
pool, spa, exercise room
===================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF OCCUPANCY UNIT EFFECTIVE AMENITIES/COMMENTS
NO. NAME/LOCATION BUILT UNITS UNIT TYPE SIZE/SF
- ------------------------------------------------------------------------------------------------------------------------------------
RENT/MO. RENT/SF/MO.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
9 The Commons/Briar 1996 194 95% 1BR/1BA 701 790 1.13 Fireplace, microwave,
2845 Firewood Point 2BR/1BA 888 900 1.01 washer/dryer, clubhouse,
2BR/2BA 1052 1005 0.96 fitness center, garages,
2BR/2BA 1158 1020 0.88 pool, sauna, whirlpool.
3BR/2BA 1336 1125 0.84
- ------------------------------------------------------------------------------------------------------------------------------------
10 The Arbors 1996 140 96% 1BR 900- 790- 0.91 Ceiling fans, fireplace,
2192 Denton Grove icemaker, vaulted
ceilings,
1045 975 washer/dryer, carports,
fitness center, pool,
tennis courts.
2BR 208- 1090-1175 0.88
1318
- ---------------------------------------------------------------------------------------------------------------------------------
SUBJECT PROPERTY 1984 140 96% 2BR/1BA 938 840 0.90 Swimming pool, jacuzzi,
Autumn Heights 1BR/lBA 1,054 885 0.84 sauna, laundry room,
Apts. 2BR/1.5BA 1,241 990 0.80 clubhouse, fireplaces,
4035 Autumn 2BR/2BA 1,137 900 0.79 washer/dryer
Heights Drive 2BR/2BA 1,249 1,000 0.80 connections, ceiling
2BR/2BA 1,291 1,050-1,070 0.81-0.83 fans, attached garages,
security systems.
Concessions: None
=================================================================================================================================
</TABLE>
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of its
quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the neighborhood
based on past history and present conditions. Vacancies are
then deducted to arrive at effective gross income. Estimated
annual expenses are deducted from the effective gross
income, resulting in an indication of net operating income
before debt service. From the estimated net annual income,
annual debt service, and deferred maintenance (if
applicable), are subtracted to obtain annual cash flow to
equity. This cash flow can be capitalized into an indication
of equity value by direct capitalization utilizing an
overall equity rate, or if debt does not exist, an overall
capitalization rate. It may also be projected into the
future over a selected but appropriate holding period, and
discounted along with the anticipated equity reversion at
the market discount rate and added in order to arrive at the
net present equity value for the subject property. In either
method, the present mortgage balance (if applicable) would
be added to the equity value to obtain the total value of
the property. The appraisers have utilized both methods in
valuing the subject property on an all cash basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental income
from the various rental units, as well as laundry income,
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"
-------------------------------------------------------------------------------
Size Rent/ Rent/ Monthly
Unit Type Units (SF) Mo. SF Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Conquistador 2BR/1BA 13 938 $840 $0.90 $10,920
Aspen 1BR/1BA 20 1,054 885 0.84 17,700
Vail 2BR/1.5BA 15 1,241 990 0.80 14,850
Loveland 2BR/2BA 28 1,137* 900 0.79 25,200
Breckenridge 2BR/2BA 38 1,249 1,000 0.80 38,000
Keystone (A) 2BR/2BA 22 1,291 1,050 0.81 23,100
Keystone (B) 2BR/2BA 4 1,291 1,070 0.83 4,280
--- ----- ----- ----- --------
140 1,177 $958 $0.81 $134,050
</TABLE>
* According to the most recent information received from the
subject property, the actual square footage of this unit
type is 1,139 square feet. However, in order to maintain
consistency with the previous appraisals, the 1,137 square
foot area has been maintained.
32
<PAGE>
These rents have been compared to other apartment complexes
in the area which are regarded as the most competitive and
comparable to the subject property. For the purpose of this
analysis, we have considered ten apartment complexes that
were found to be the most comparable to the subject in the
Colorado Springs area. They range in total size from 96 to
252 units, in average unit size from 724 to 1,039 square
feet, and in occupancy from 94 to 99 percent. These
comparable rentals are summarized on a preceding page along
with an accompanying map.
Most of the comparables surveyed were located within the
subject's immediate vicinity. Rent Comparables 1, 2, and 7
are the most comparable to the subject overall; specifically
in terms of location, overall quality, physical condition,
unit size, rental rates, and in amenities offered. These
three comparables indicated an average quoted rental rate
range from $0.90 to $0.99 per square foot per month. These
properties each feature numerous units with mountain or
ridge views which, in the Colorado Springs area, attracts a
considerable premium in terms of rental rates. While the
subject also has above-average mountain views, the property
does not specifically have as good a view as these other
properties. Consequently, we have focused on the lowest
rental rates of the comparables' unit rent ranges which are
those for no or limited views, while the upper end of the
range is for units with spectacular views. Comparables 3, 4,
5 and 6 were considered to be slightly inferior to inferior
when compared to the subject; however, they were analyzed as
additional indications of market rents in the subject's
area. Comparables 8, 9, and 10 are new projects, which are
considered slightly superior to the subject, however they
have been included, as they are competitive with the subject
according to the on-site leasing agents.
INDIVIDUAL UNIT
RENT ANALYSES CONQUISTADOR UNITS - 2BR/1BA (938 SF)
The subject property features 13 two-bedroom/one-bathroom
unit floor plans, each comprised of a net rentable area of
938 square feet. A summary of the comparable properties'
two-bedroom/one-bathroom units considered to be in direct
competition with the subject's "Conquistador" unit is as
follows:
<TABLE>
<CAPTION>
PROPERTY NAME
(RENTAL NO.) SIZE (SF) RENT/MO. RENT/SF/MO. COMPARABILITY
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheyenne Crossing (4) 950 $ 700 $0.74 Inferior
Mountain View (5) 800 $ 695 $0.87 Inferior
Cobblestone Ridge (6) 840 $ 650 $0.77 Inferior
The Oasis (8) 950 $ 925 $0.97 Superior
The Commons/Briar(9) 1052 $1,005 $0.96 Superior
Subject Property 938 $ 840 $0.90 --------
(Conquistador Plan)
</TABLE>
The subject's two-bedroom/one-bathroom units are presently
quoted at a rental rate of $840 or $0.90 per square foot per
month. This floor plan currently has only one vacant unit.
Analysis of the contracted rental rates of the subject show
that the majority of the recent leases are at the current
asking rate. Therefore, we believe the market rent for this
unit type is $840 or $.90/sf.
33
<PAGE>
ASPEN UNITS - 1BR/1BA (1,054 SF)
The subject property features 20 one-bedroom/one-bathroom
unit floor plans with a net rentable area of 1,054 square
feet. The comparable properties with similar one-bedroom/
one-bathroom unit floor plans are as follows:
<TABLE>
<CAPTION>
PROPERTY NAME
(RENTAL NO.) SIZE SF) RENT/MO. RENT/SF/MO COMPARABILITY
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Broadmoor (1) 1,000 $875 $0.88 Comparable
Cheyenne Creek(2) 875 $835 $0.95 Comparable
Cheyenne Crest (3) 714 $645 $0.90 Inferior
Cheyenne Crossing (4) 740 $580 $0.78 Inferior
Mountain View (5) 680 $650 $0.96 Inferior
Pine Cliff (7) 921 $900 $0.97 Comparable
Pine Cliff (7) 1,028 $925 $0.90 Comparable
The Oasis (8) 882 $840 $0.95 Superior
The Commons/Briar(9) 888 $900 $1.01 Superior
The Arbors(10) 1,045 $975 $0.93 Superior
Subject Property 1,054 $885 $0.84 ---
(Aspen Plan)
</TABLE>
Management is currently quoting a rental rate of $885 or
$0.84 per square foot for the subject's one-bedroom/one-
bathroom units. This unit type is presently fully occupied.
Leases signed at the subject over the past six months have
been primarily at the current asking rate. Based on the
majority of recent leases, it is our opinion that market
rent for these units is reasonable at $885 or $0.84 per
square foot.
VAIL UNITS - 2BR/1.5BA (1,241 SF)
The subject contains 15 two-bedroom/one and one-half-
bathroom unit floor plans, which feature a net rentable area
of 1,241 square feet. No other two-bedroom/one and one-half-
bathroom floor plans were noted within the market; thus, we
compared this unit floor plan with those of comparably sized
two-bedroom/two-bathroom units. A summary of these
comparison units is as follows:
<TABLE>
<CAPTION>
PROPERTY NAME
(RENTAL NO.) SIZE (SF) RENT/MO RENT/SF/MO. COMPARABILITY
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Broadmoor (1) 1,100 $995 $0.90 Superior
Cheyenne Creek (2) 1,044 $955 $0.91 Comparable
Cheyenne Crest (3) 990 $740 $0.75 Inferior
Cheyenne Crossing (4) 1,000 $700 $0.70 Inferior
Mountain View (5) 1,000 $776 $0.78 Inferior
Cobblestone Ridge (6) 1,043 $745 $0.71 Inferior
Pine Cliff (7) 1,154 $1160 $1.00 Comparable
Pine Cliff (7) 1,204 $1195 $0.99 Comparable
The Oasis (8) 1,238 $1060 $0.86 Superior
The Commons/Briar (9) 1,158 $1020 $0.88 Superior
The Arbors(10) 1,208 $1090 $0.90 Superior
Subject Property 1,241 $990 $0.80 ---
(Vail Plan)
</TABLE>
34
<PAGE>
The quoted rental rate for the subject's two-bedroom/one and
one-half bathroom units is presently $990 or $0.80 per
square foot. In this unit type there are currently no
vacancies. The subject's recent contracted rents for these
units are typically around the asking rent of $990.
Therefore, in our opinion, market rent for the subject's
two-bedroom/one and one-half bathroom unit is reasonably
estimated at $990 or $0.80 per square foot.
2BR/2BA FLOOR PLANS (1,137-1,291 SF)
The subject has three separate two-bedroom/two-bathroom
floor plans, the smallest of which is the Loveland floor
plans at 1,137 square feet of net rentable area. This is
followed by the Breckenridge at 1,249 square feet and the
Keystone at 1,291 square feet. A summary of the two-
bedroom/two-bathroom and three-bedroom/two-bathroom units
within the local market which were considered competitive to
the subject is as follows:
<TABLE>
<CAPTION>
PROPERTY NAME
(RENTAL NO.) SIZE (SF) RENT/MO. RENT/SF/MO. COMPARABILITY
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Broadmoor (1) 1,300 $1,195 $0.92 Superior
Cheyenne Creek (2) 1,044 $ 955 $0.92 Comparable
Cheyenne Crest (3) 990 $ 740 $0.75 Inferior
Cheyenne Crossing (4) 1,000 $ 700 $0.70 Inferior
Mountain View (5) 1,000 $ 765 $0.77 Inferior
Cobblestone Ridge (6) 1,043 $ 745 $0.71 Inferior
Cobblestone Ridge (6) *1,235 $ 860 $0.70 Inferior
Pine Cliff (7) 1,154 $1,160 $1.00 Comparable
Pine Cliff (7) 1,204 $1,195 $0.99 Comparable
The Oasis (8) 1,238 $1,060 $0.86 Superior
The Commons/Briar(9) 1,158 $1,020 $0.88 Superior
The Arbors (10) 1208-1318 $1,090-1175 $0.90 Superior
Subject Property
(Loveland Plan) 1,137 $ 900 $0.79 ---
(Breckenridge Plan) 1,249 $1,000 $0.80 ---
(Keystone Plan) 1,291 $1,050-1,070 $0.81-0.83 ---
</TABLE>
* 3BR/2BA units
The only comparable properties having two-bedroom/two-
bathroom units with a size at or near the subject two-
bedroom/two-bathroom units are Rents 1, 7 and 10. Rent #6
has three-bedroom/two-bathroom units with similar size.
The subject's smaller two-bedroom/two-bathroom unit, the
Loveland floor plan, are quoted at $900 or $0.79 per square
foot and there is only one vacant unit. The most recent
contract rents are primarily at $900. We believe the quoted
rent is reasonable and have estimated a current market
rental rate of $900 or $0.79 per square foot for the
subject's 1,137-square-foot two-bedroom/two-bathroom unit.
The Breckenridge units are quoted at $1,000 per unit with a
net rentable area of 1,249 square feet. There is one vacant
unit and the majority of recent leases are at $1,000.
Attributing emphasis to the rents signed for these units, we
believe market
35
<PAGE>
rent for the subject's 1,249-square-foot two-bedroom/two-
bathroom unit is reasonably estimated at $1,000 or $0.80 per
square foot.
The subject's largest unit, the Keystone floor plan, is
quoted from $1,050 to $1,070 presently, with the difference
attributed to four of the units having a superior view
compared to the other 22 units. While this difference is
acknowledged, the contracted rental rates generally do not
differ. The majority of recent leases were contracted at
$1,050 with some as high as $1,075. In our opinion, based on
the leases signed at the subject in recent months, and
considering the market, we have accepted the subject quoted
units as $1,050 and $1,070.
Based on the preceding rental analysis of the subject units,
the current market rental rate estimates for the subject
units are summarized as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
-------------------------------------------------------------------------------------------
Total Size Total Rent/ Rent/ Mo.
Plan Unit Type Units (SF) (SF) Month SF/Mo. Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Conquistador 2BR/1BA 13 938 12,194 $840 $0.90 $10,920
Aspen 1BR/1BA 20 1,054 21,080 885 0.84 17,700
Vail 2BR/1.5BA 15 1,241 18,615 990 0.80 14,850
Loveland 2BR/2BA 28 1,137 31,836 900 0.79 25,200
Breckenridge 2BR/2BA 38 1,249 47,462 1,000 0.80 38,000
Keystone 2BR/2BA 26 1 291 33,566 1 060 0.82 27,560
--- ----- ------ ----- ----- --------
140 1,177 164,753 959 $0.82 $134,230
</TABLE>
Gross Annual Rental Income: $134,050 x 12 months =
$1,608,600.
During our projection period, estimated gross rental income
was increased at a rate of 2 percent in the first year to
reflect stabilized gross potential rent in the Direct
Capitalization Analysis and in the first fiscal year of the
Cash Flow Analysis to $1,642,975. This was grown at a rate
of 4 percent in each year thereafter.
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. Actual figures for 1992 through 1996 show
a total for Other Income of $19,336, $20,029, $33,560,
$57,108, and $55,970 in each respective year. These compute
to respective rentable square footage amounts of $0.12,
$0.12, $0.20, $0.35, and $0.33 for each year. The
substantial increase between 1994 and 1995 is believed to be
a result of added furniture income. The figure for 12 months
ending November 30, 1997 is $77,535 or $0.47 per square
foot. Based on our experience with similar type properties
and the actual performance of the subject property, it is
our opinion that other income in the amount of $0.42 per
square foot, before vacancy, is typical for a project such
as the subject. This equates to a total "Other Income" of
$70,000 in the first year of our cash flow as well as in the
direct capitalization method. During our projection period,
"Other Income" was increased at a rate of 4 percent, or our
estimate of long-term growth, throughout the holding period.
36
<PAGE>
<TABLE>
<CAPTION>
AUTUMN HEIGHTS APARTMENTS
HISTORICAL EXPENSES
- -------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1991 ACTUAL 1992 ACTUAL 1993 ACTUAL 1994
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.29 $341 $0.30 $353 $0.30 $356 $0.33 $386
Insurance 0.05 59 0.04 47 0.04 51 0.06 65
Personnel 0.40 471 0.38 447 0.41 484 0.47 556
Utilities 0.30 353 0.33 388 0.29 345 0.32 380
Repair & Maintenance 0.27 318 0.27 318 0.25 290 0.36 420
Contract Services 0.15 177 0.12 141 0.13 157 0.16 186
General & Administration 0.21 247 0.21 247 0.22 256 0.27 318
Management 0.33 388 0.35 412 0.38 448 0.42 490
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $2.00 $2,354 $2.00 $2,354 $2.03 $2,387 $2.38 $2,800
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
AUTUMN HEIGHTS APARTMENTS
HISTORICAL EXPENSES
- --------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1995 1996 1997
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.33 $386 $0.23 $270 $0.20 $234
Insurance 0.08 90 0.08 95 0.07 78
Personnel 0.50 590 0.50 590 0.54 635
Utilities 0.35 417 0.36 428 0.39 454
Repair & Maintenance 0.38 451 0.31 371 0.49 578
Contract Services 0.18 213 0.21 248 0.23 274
General & Administrative 0.44 516 0.41 487 0.47 554
Management 0.45 529 0.47 558 0.45 531
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES $2.71 $3,191 $2.57 $3,046 $2.84 $3,338
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
From this we have arrived at our first fiscal year estimate
of scheduled gross income as if 100 percent occupied:
Gross Rental Income $1,642,975
Other Income ($0.42/SF) 70,000
---------
Total Potential Gross Income $1,712,975
VACANCY AND
COLLECTION LOSS Normally, in a stable market, vacancy and collection loss
for an apartment complex will be in the 3 to 8 percent
range. Typically, from 1 to 2 percent of an apartment
project's units are non-revenue-generating employee and
model units. In addition to revenue losses attributable to
physical vacancy, rent-free employee units, and non-revenue-
generating model units, a deduction is made for a variance
in contract rents versus market rents. Further, losses
attributable to tenant turnover, unit "made-ready" time,
unit re-leasing and actual collections losses must be
factored into total vacancy and collection losses. As
previously indicated in our Apartment Market Overview
section, the Colorado Springs area overall vacancy was most
recently reported at 5.5 percent. The subject has a physical
occupancy of 95.7 percent. When the most current income and
expense statement is compared to our estimate of market rent
at the subject property, an economic occupancy of 88.3
percent is indicated for the subject property. Due to the
large number of units, which have either recently come on
the market or under construction, we estimate vacancy to
increase for the next couple years while these new units are
absorbed. Therefore, we have estimated a 15 percent economic
vacancy in the first fiscal year of the cash flow and 10
percent in the second year. Given the market and the
subject's history, we believe a stabilized economic
occupancy of 95 percent to be reasonable for the subject.
Therefore, this figure has been utilized for the remainder
of the projection period. Assuming that there are no
significant changes affecting the market after the first two
years of the cash flow, i.e., significant levels of
additional construction, increased permit activity, etc., we
project that the subject should be capable of maintaining a
stabilized economic occupancy level of 95 percent.
EXPENSE ANALYSIS The various expenses necessary in the operation of
the subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement. Reserves
for replacement are estimated based on age, condition, and
construction quality. It is emphasized that all income and
expenses are based on the assumption of competent and
prudent management. The facing table summarizes the actual
expenses for the subject property from 1991 to 1997.
REAL ESTATE TAXES - According to the El Paso County
Appraisal District, the subject property's tax assessor
parcel number is 65064-01-014. The subject is located within
El Paso County, City of Colorado Springs, and the Cheyenne
Mountain School District 12 taxing jurisdictions. The
subject property 1996 assessment is $423,720, which is 10.7
percent of the appraised value of $3,971,075. The 1997
property taxes according to the subject operating statement
were $32,767. Assuming a 4 percent increase in the tax rate
from the previous year, the total taxes due in the first
year of the cash flow are estimated at $34,078.
37
<PAGE>
INSURANCE - This category includes fire and extended
coverage. Insurance costs can vary from one property to
another depending upon the type and whether a blanket policy
is used. Often times a property owner will insure multiple
properties on one policy in an effort to reduce the cost of
insurance per project. Our expense estimate is based upon
typical costs for an individually insured apartment projects
in the area. The subject's actual insurance costs were $0.04
per square foot in 1992, $0.04 per square foot in 1993,
$0.06 per square foot in 1994, and $0.08 per square foot in
1995 and 1996. For the 12 months ending November 30, 1997
the insurance expense was $10,972 or $0.07 per square foot.
Insurance expenses on similar projects typically range from
$0.06 to $0.08 per square foot. We have estimated an expense
of $0.09 per square foot or $15,421. This was grown in each
year of the analysis at 4 percent.
PERSONNEL/SALARIES - This category consists of salaries paid
to on-site personnel such as manager, assistant manager,
leasing agents, and maintenance personnel. Group insurance
and payroll taxes are also incorporated in this figure. This
category is not to be confused with another discussed
category of Management. The subject expenses historically
have ranged from $0.38 to $0.54 per square foot. The 1997
expenses for this category are $88,911 or $0.54 per square
foot. Based on this data, we have estimated the personnel
expense at $0.53 per square foot or $87,385. This expense
was grown at 4 percent in each year of our cash flow
analysis.
UTILITIES - The subject is an "individually metered" complex
with the tenant paying for most of the utility usage. Thus
the owner's share includes electricity for common area
lighting, laundry equipment, heating and air conditioning
for the clubhouse and vacant models, water (including the
pool), sewer, and gas. The subject's utility expenses ranged
from $0.29 to $0.36 per square foot between 1991 and 1996.
The utility expense for the 12-month period ending November
1997 was $63,624 or $0.39 per square foot. Based on the
aforementioned factors, the subject's present utility
expense has been estimated at $0.38 per square foot or
$63,397. This expense was grown at 4 percent annually.
REPAIRS AND MAINTENANCE - This category consists of the
normal expenses to keep the property in good repair and
includes maintenance and repairs in the following general
categories: plumbing, HVAC, electrical, building,
appliances, drapery and carpet, painting and wallpaper,
janitorial, and decorating costs. The subject's repairs and
maintenance expense ranged from $0.25 to $0.38 per square
foot from 1991 to 1996. The 1997 repair and maintenance
expense was $80,969 or $0.49 per square foot. The subject's
repairs and maintenance expense has been estimated at $0.37
per square foot or $61,684 and it was increased at 4 percent
each year thereafter. It's believed that the 1997 repair and
maintenance expense included some capital expenditures and
some salary items.
CONTRACT SERVICES - This category includes pest control,
landscaping services, pool maintenance, and other contract
labor. The subject's expense ranged from $0.12 to $0.21 per
square foot from 1991 to 1996. Expenses for the 12-month
period ending November 30, 1997 were $38,387 or $0.23 per
square foot.
38
<PAGE>
Considering the subject's historical trends, contract
service expense has been estimated at $0.22 per square foot,
or $35,982. This expense was inflated at 4 percent annually
throughout the cash flow analysis.
GENERAL AND ADMINISTRATIVE - This expense category includes
legal, advertising and promotion, dues, fees, printing,
auto, postage, accounting/audit, permits, travel, credit
reports, office equipment, telephone, answering service,
pagers, miscellaneous employee expenses, and other
administrative expenses. Historically, the subject
property's expenses have been within a range from $0.21 to
$0.44 per square foot. The 1997 expense for this category
was $77,563 or $0.47 percent square foot. Considering the
subject's history, we have estimated this category at $0.45
per square foot or $73,678. This expense was inflated at 4
percent annually.
MANAGEMENT FEE - This expense category covers compensation
to a management company for time and personnel to manage the
subject property. This expense typically ranges from 3 to 5
percent. The subject property's current management expense
is nearly 5 percent of effective gross income, which has
resulted in annual expenses from $0.33 to $0.47 per square
foot between 1991 and 1996. The 1997 management expense is
$74,439 or $0.47 per square foot. Based on the subject's
historical expenses, and as these are supported by market
indications, we are of the opinion that a management fee of
5.0 percent of effective gross income is reasonable for the
subject property.
RESERVES FOR REPLACEMENT - This expense is needed for
replacement of short-lived items such as kitchen appliances,
heating units, and air-conditioners as well a exterior
painting, etc. In estimating a reserve for the subject, we
have given consideration to the age of the subject and the
subject's construction components, which include a wood and
stucco exterior. To keep the subject in good repair and
maintain a strong position within its competitive area, we
have calculated reserves for replacement at $300 per unit,
which equates to $42,500 in the first year. This expense was
grown at 4 percent in each year of our analysis.
In this appraisal, which attempts to accurately reflect
current trends, methods, and criteria, reserves for
replacements have been deducted from effective gross income
as an operating expense to arrive at net operating income.
EXPENSE SUMMARY First year expenses (excluding reserves) have been estimated
at $486,425 or $2.95 per square foot. Over twenty (20)
apartment projects were analyzed as to expenses and they
ranged from $2.02 to $4.18 per square foot excluding
reserves. The mean average was $3.01 per square foot, while
the medium average was $2.84 per square foot. The first year
estimate for the subject is well within the range indicated
by the comparables and it is well supported by the subject's
historicals.
DISCOUNTED CASH
FLOW ANALYSIS The most realistic method for estimating value via the
Income Approach is through the use of Discounted Cash Flow
Analysis. The Market Value of a real estate investment under
the Discounted Cash Flow Method is defined as the discounted
sum of all net cash inflows plus the property's discounted
reversionary value. Primarily, any given property is only
worth the value of the income derived from it.
39
<PAGE>
The general methodology of Discounted Cash Flow involves the
following steps: 1)increasing each year's cash flows by an
appropriate appreciation factor; 2) discounting each year's
net cash flow by an appropriate discount rate; 3) deriving
the property's reversionary value in the final year and
discounting it to the present; and 4) the summation of all
cash flows, including final year reversion, into an estimate
of value.
According to the Third Quarter 1997 real estate investor
survey compiled by Peter F. Korpacz & Associates, Inc. the
apartment market is being flooded with capital, primarily
from REIT's, rendering it almost impossible for large
institutional investors to land deals. In addition, brokers
have fewer properties to market either because long-term
holders are buying product before it is ever offered on the
market place or because owners are not willing to sell. The
main factor is investors are watching to determine if
investment locations are the pace of job growth. The slower
pace of job growth in many markets, coupled with continued
increases in multi-family and single family permits as well
as attractive interest rates could combine to negatively
effect the apartment market. As such, some investors are
increasing overall vacancy allowance in their acquisition
analyses and backing off on revenue growth assumptions.
However, apartment investment continues to be attractive for
pension funds and REIT's and we anticipate investors will
continue to find the apartment market a desirable
investment.
DISCOUNT RATE Over the past several years, the internal rate of return
(IRR) has gained greater usefulness and market acceptance as
an investment measure. IRR is the yield on an investment
based on an initial cash investment, annual cash flows to
the property, as well as resale proceeds. IRR allows for
return on investment as well as recapture of the original
investment when factoring in the reversion. To simulate this
process, we have relied upon several investor surveys, which
detail reasonable yields or IRR requirements of purchasers.
We have used this rate as a discount rate that, when applied
to projected cash flows and net resale proceeds (reversion),
results in the present value of the property.
According to the Third Quarter 1997 investor survey compiled
by Peter F. Korpacz & Associates, Inc., investors for
apartment properties indicated a return requirement ranging
from 10.0 to 12.5 percent with an average of 11.16 percent.
This IRR depends on the conservative or aggressive nature of
rental and expense growth assumptions, as well as location
and other factors. Corporate "Baa" bonds are typically
viewed as an alternative investment. Real estate is
considered riskier due to illiquidity, competition, burden
of management, and market conditions; therefore,
approximately 150 basis points or more could be added to
this percentage rate in a normal market. Based on the
previous data and considering the amount of new construction
in the market and the lease-up time required we believe a 12
percent discount rate is reasonable based on an all cash
sale and alternative investments. While this is 84 basis
points higher than the indicated average by the previously
mentioned survey, we believe it reflects the added risk in
the market.
40
<PAGE>
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 has become 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 that
depends on property potential. According to the previously
referenced survey, apartment investors have a general
criteria of an 8.0 to 10.25 percent terminal capitalization
rate with an average of 9.29 percent. The comparables
utilized in the Sales Comparison Approach reflected a range
of "going-in" capitalization rates from 8.7 to 10.8 percent.
Due to the subject's superior qualities, a rate at the lower
end of the range appears reasonable for the subject.
Consequently, we have selected a going-in capitalization
rate of 9.5 percent for the subject. "Going-out" or terminal
capitalization rates are generally 50 to 100 basis points
higher than "going-in" rates. Based upon hypothetical resale
at the end of the holding period, it will be over 20 years
old and competing with newer projects with state-of-the-arts
efficiency and market amenities. With this in mind, we have
utilized a terminal capitalization rate of 10.5 percent. The
resulting value indicates a first year capitalization rate
of 8.29 percent for the subject and is a reflection of the
first year's 15 percent vacancy.
CASH FLOW
ASSUMPTIONS Rents were based on a current average rental rate of
approximately $0.81 per square foot per month. During the
projection period, rents were increased at a rate of 2
percent in the first year of our analysis and 4 percent
annually thereafter. As previously discussed in the
"Apartment Market Analysis" section of this report, the
subject area's average rental rates have been increasing at
a steady rate and rental rates for Class A properties have
shown the strongest increases. The subject's physical
occupancy is 95.7 percent and the economic vacancy is 88.3
percent. Due to the influx of new units in the subject's
market we expect vacancy to increase over the next two years
until the new product is absorbed. Therefore, the vacancy
for the first year of the cash flow is estimated at 15
percent. The vacancy for the second year is estimated at 10
percent. It is our opinion that the subject should be
capable of maintaining a 5 percent (stabilized) vacancy rate
throughout the remainder of our cash flow analysis.
The property has been appraised based on a "resident pays
utilities" status.
Expenses (with the exception of management) have been
increased at an average growth rate of 4 percent annually
over the 11-year projection period. Management expenses are
based on a percentage of effective gross income and increase
with occupancy and rental increases.
A discount rate of 12.0 percent was utilized.
A terminal capitalization rate of 10.5 percent was
considered reasonable.
A sales cost of 4 percent of the reversionary value was
estimated.
Deferred maintenance totaling $487,200 was estimated based
upon information for scheduled repairs provided by the
owner.
A cash flow analysis for the subject is presented on the
following page. The
41
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
SKYLINE VILLAGE APARTMENTS
Fiscal Year Ending 11/30-- 1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents $1,642,975 $1,708,694 $1,777,042 $1,848,124 $1,922,049 $1,998,931
Rent/SF/Mo. 0.831 0.864 0.899 0.935 0.972 1.011
Other Income/Yr. 70,000 72,800 75,712 78,740 81,890 85,166
----------------------------------------------------------------------------
Gross Income $1,712,975 $1,781,494 $1,852,754 $1,926,864 $2,003,939 $2,084,096
% Vacancy 15.00% 10.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 256,946 178,149 92,638 96,343 100,197 104,205
----------- ---------- ---------- ---------- ---------- ----------
Eff. Gross Income 1,456,029 1,603,345 1,760,116 1,830,521 1,903,742 1,979,891
----------------
Expenses: ???? ????
----------------
Real Estate Taxes 243 $0.21 34,078 35,441 36,859 38,333 39,866 41,461
Insurance 110 $0.09 15,421 16,038 16,679 17,346 18,040 18,762
Personnel/Salaries 624 $0.53 87,385 90,880 94,516 98,296 102,228 106,317
Utilities 453 $0.38 63,397 65,933 68,570 71,313 74,165 77,132
Repairs and Maintenance 441 $0.37 61,684 64,151 66,717 69,386 72,161 75,047
Contract Services 257 $0.22 35,982 37,421 38,918 40,475 42,094 43,778
General & Administrative 526 $0.45 73,678 76,625 79,690 82,877 86,192 89,640
Management 5.00% $0.44 72,801 80,167 88,006 91,526 95,187 98,995
Reserves 300 $0.25 42,000 43,680 45,427 47,244 49,134 51,099
---------------- ----------- ---------- ---------- ---------- ---------- ----------
Total Expenses 486,425 510,336 535,381 556,797 579,069 602,231
Per SF Per Yr. 2.95 3.10 3.25 3.38 3.51 3.66
----------- ---------- ---------- ---------- ---------- ----------
Net Operating Income 969,604 1,093,009 1,224,735 1,273,724 1,324,673 1,377,660
NOI/SF 5.89 6.63 7.43 7.73 8.04 8.36
===============================================================================================================================
Capital Items:
Deferred maintenance 487,200 0 0 0 0 0
----------- ---------- ---------- ---------- ---------- ----------
Cash Flow 482,404 1,093,009 1,224,735 1,273,724 1,324,673 1,377,660
Present Value Factor 12.00% 0.89286 0.79719 0.71178 0.63552 0.56743 0.50663
----------- ---------- ---------- ---------- ---------- ----------
Present Value of Cash Flow 430,717 871,340 871,742 809,475 751,655 697,965
NOI in 11th Year 1,676,134
Ro at Reversion 10.50%
-----------
Indicated Reversion 15,963,182
Less: Sales Costs 4.00% (638,527)
-----------
Reversion in 11th Yr 15,324,655
<CAPTION>
===================================================================================================================================
Fiscal Year Ending ????? 2004 2005 2006 2007 2008
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Apt. Rents 2,078,888 2,162,043 2,248,525 2,338,466 2,432,005
Rent/SF/Mo. 1.052 1.094 1.137 1.183 1.230
Other Income/Yr. 88,572 92,115 95,800 99,632 103,617
---------------------------------------------------------------
Gross Income 2,167,460 2,254,159 2,344,325 2,438,098 2,535,622
% Vacancy 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 108,373 112,708 117,216 121,905 126,781
----------- ---------- ---------- ---------- ----------
Effective Gross Income 2,059,087 2,141,451 2,227,109 2,316,193 2,408,841
Expenses:
Real Estate Taxes 43,120 44,844 46,638 48,504 50,444
Insurance 19,512 20,293 21,105 21,949 22,827
Personnel/Salaries 110,570 114,993 119,592 124,376 129,351
Utilities 80,217 83,426 86,763 90,234 93,843
Repairs and Maintenance 78,049 81,171 84,418 87,795 91,307
Contract Services 45,529 47,350 49,244 51,214 53,262
General Administrative 93,226 96,955 100,833 104,866 109,061
Management 102,954 107,073 111,355 115,810 120,442
Reserves 53,143 55,269 57,480 59,779 62,170
----------- ---------- ---------- ---------- ----------
Total Expenses 626,321 651,373 677,428 704,525 732,707
Per SF Per Yr. 3.80 3.95 4.11 4.28 4.45
----------- ---------- ---------- ---------- ----------
Net Operating Income 1,432,766 1,490,077 1,549,680 1,611,667 1,676,134
NOI/SF 8.70 9.04 9.41 9.78 10.17
===================================================================================================================================
Capital Items:
Deferred Maintenance 0 0 0 0 0
----------- ---------- ---------- ---------- ----------
Cash Flow 1,432,766 1,490,077 1,549,680 1,611,667 1,676,134
Present Value Factor 0.45235 0.40388 0.36061 0.32197
----------- ---------- ---------- ----------
Present Value of Cash Flow 648,111 601,817 558,830 518,914
NOI in 11th Year Present Value of Income Stream 6,760,567
Ro at Reversion Present Value of Reversion 4,934,129
-----------
-------------------------------------------------
Indicated Reversion Cumulative Present Value 11,694,695
Less: Sales Costs Indicated Value/SF 70.98
Indicated Value/Unit 83,534
Reversion in 11th Yr GIM at Indicated Value 7.12
Ro at Indicated Value 8.29%
-------------------------------------------------
==================================================================================================================
</TABLE>
<PAGE>
============================================================================
CASH FLOW SUMMARY
-------------------------------------------------------------------
Fiscal Year Annual 12.00% PV of
Ending 11/30 Cash Flows NPV Factor Cash Flows
-------------------------------------------------------------------
1998 $482,404 0.892857 $430,717
1999 $1,093,009 0.797194 871,340
2000 $1,224,735 0.711780 871,742
2001 $1,273,724 0.635518 809,475
2002 $1,324,673 0.567427 751,655
2003 $1,377,660 0.506631 697,965
2004 $1,432,766 0.452349 648,111
2005 $1,490,077 0.403883 601,817
2006 $1,549,680 0.360610 558,830
2007 $1,611,667 0.321973 518,914
-------
Total $6,760,567
Projected NOI in 11th Year $1,676,134
Going-out Capitalization Rate 10.50%
-----
Estimated Value of Property at
End of 10th Year $15,963,182
Less Sales Cost @ 4.00% (638,527)
--------
Value of Reversion at End of 10th Year $15,324,655
Discount Factor 12.00% 0.321973
--------
Present Value of the Reversion $4,934,129
Sum of Present Values of Cash Flow 6,760,567
---------
Market Value as of November 30, 1997 $11,694,695
Rounded $11,690,000
============================================================================
<PAGE>
==============================================================================
DIRECT CAPITALIZATION
Gross Potential Rent $1,642,975
Other Income 70,000
-----------
Gross Income $1,712,975
Stabilized Vacancy 5.00% (85,649)
-----------
Effective Gross Income $1,627,326
Expenses:
Real Estate Taxes $34,078
Insurance 15,421
Personnel/Salaries 87,385
Utilities 63,397
Repair & Maintenance 61,684
Contract Services 35,982
General & Administrative 73,678
Management 81,366
Reserves 42,000
Total Expenses ($494,990)
-----------
Net Operating Income $1,132,336
Capitalization Rate 9.50%
-----------
Stabilized Market Value $11,919,328
LESS:
Deferred Maintenance (487,200)
Rental Loss (232,316)
-----------
Fee Simple Market Value $11,199,812
Rounded $11,200,000
==============================================================================
<PAGE>
estimated leased fee market value for the subject on an
"as is" basis via discounted cash flow method is
$11,690,000.
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 chosen in the cash flow
discussion was considered reasonable of the behavior of
buyers and sellers in the local marketplace when
considering the subject's investment quality. If the
property being appraised has an economic vacancy less
than the projected stabilized vacancy, the difference
must be discounted to the present and deducted from the
stabilized value indication. Also, any deferred
maintenance must be deducted from this indication.
The subject has a projected first year economic vacancy
factor of 15 percent according to the Discounted Cash
Flow analysis. The stabilized vacancy factor is 5
percent. Therefore, a rent loss must be calculated. The
projected NOI at 15 percent vacancy is subtracted from
the stabilized NOI at the 5 percent vacancy factor.
Additionally the second year NOI at 10 percent vacancy
is subtracted from the stabilized NOI at 5 percent
vacancy. The differences are then discounted at 7
percent to Net present value and subtracted from the
stabilized market value. In addition, the estimated
deferred maintenance of $487,200 was deducted, and the
resulting direct capitalization value indication for
the subject on an "as is" basis is $11,200,000. The
direct capitalization calculations are shown on the
facing page.
INCOME APPROACH
CONCLUSION DCF Method..................................$11,690,000
Direct Capitalization Method................$11,200,000
The two methods of comparison are supportive of each
other; however, greatest weight in our value conclusion
was given to the discounted cash flow analysis. We are
of the opinion that the "as is" leased fee market value
of the subject property, as of November 30, 1997 is
$11,600,000.
42
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Indications of value provided through the appraisal
process are summarized as follows and are predicated on
an "as is," all cash, basis.
Sales Comparison Approach $11,400,000
Income Approach $11,600,000
The Sales Comparison Approach utilized the most recent
sales of comparable apartment properties in Colorado
Springs. The weakness of the Sales Comparison Approach
is that no two properties are exactly alike and exact
conditions of a sale are often unknown. The strength of
this approach is that it indicates that market activity
based on the willing buyer/willing seller concept.
Sales activity has been strong over the past twelve
months. We were able to identify six sales occurring
from 11/96 to 11/97. Therefore, we feel there is
sufficient data that the sales comparison approach
provides a reliable indication of market value.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rental rates
in the immediate area of the subject, actual expenses,
and investor returns within the market, we have
estimated value. Actual data on the property, as well
as comparable data was considered to lend adequate
support. Because the Income Approach deals directly
with income streams, we feel it is a very good
indication of current market conditions. It tends to
reflect a value, which an investor of a property would
anticipate. Accordingly, we feel the income approach
provides a reliable indication of the market value of
the subject.
Therefore, relying on the value of the subject
supported by both the Sales Comparison and Income
Approaches, the value it is our opinion that the "as
is" leased fee market value of the subject property, on
an all cash basis, as of November 30, 1997 is
ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($11,500,000)
In addition, we have contemplated the possible
conversion of the existing apartments units to
individual condominium interests. To date, the
condominium market in the Colorado Springs area has yet
to maximize returns on conversion. Likewise, the
maximum return on condominium sales is generally
realized on new units in contrast to the resale of
previously occupied condominium units. The subject
property is currently being operated as a rental
apartment project with an occupancy of 95.7 percent.
Although condominiums provide a lifestyle free from
exterior maintenance, the single-family detached
residence remains the residence of choice in El Paso
County.
At the present time there is an ample supply of single-
family residences in Colorado Springs at reasonably low
prices. The condominium market in the Colorado Springs
area is not presently providing an adequate return,
which would justify the risk of conversion. It is our
opinion that the subject property should be maintained
as an apartment rental complex at this time.
43
<PAGE>
L' AUBERGE BROADMOOR
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: L' Auberge Broadmoor
Street Address: 5 Watch Hill Drive
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Stories: 2
Number of Units: 108
Net Rentable Area (SF): 110,060
Average Unit Size (SF): 1,019
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Brick veneer and frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------------
<S> <C> <C> <C> <C>
25 lBR/2BA 1,000 $ 875 $ 0.88
55 2BR/2BA 1,100 995 0.90
28 2BR/2BA 1,300 1,195 0.92
</TABLE>
Unit Amenities: Dishwashers, garbage disposals,
washer/dryers, miniblinds, patio/balconies,
ceiling fans, fireplaces, alarm, A/C, vaulted
ceilings
Project Amenities: Swimming pool, fitness center, clubhouse, hot
tub, some with attached garages
Concessions: None indicated
ECONOMIC DATA
Percent Occupied: 94%
Avg. Monthly Rent/SF of NRA: $0.90
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $225 ($30 application fee, $400 pet deposit)
Confirmed With: Management on-site and Apartment Appraisers
and Consultants
Date Confirmed: 12/14/97
<PAGE>
L' AUBERGE CHEYENNE CREEK
- --------------------------------------------------------------------------------
[PHOTOS APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Job Number 97-072
Name of Project: L' Auberge Cheyenne Creek
Street Address: 115 West Cheyenne Road (north of Lake Avenue
off Nevada Avenue)
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Stories: 3-4
Number of Units: 107
Net Rentable Area (SF): 108,300
Average Unit Size (SF): 992
Parking Surface: Concrete-paved
Parking Spaces: Adequate
Type of Construction: Masonry veneer and wood frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------
<S> <C> <C> <C> <C>
33 1BR/1BA/Den 875 $835-$855 $0.97
74 2BR/2BA 1,044 $955-$975 $0.92
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
in each unit, mini-blinds, patio/balconies,
ceiling fans, fireplaces
Project Amenities: Swimming pool, jacuzzi, clubhouse, covered
parking.
Concessions: None
ECONOMIC DATA
Percent Occupied: N/A
Avg. Monthly Rent/SF of NRA: $0.94
Electricity Paid By: Tenant
Length of Lease: 6-12 month
Security Deposit: None
$20 more for top floor units
Confirmed With: Apartment Appraisers and Consultants
Date Confirmed: 12/14/97
<PAGE>
CHEYENNE CREST
- --------------------------------------------------------------------------------
[PHOTOS APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: Cheyenne Crest
Street Address: 4008 Westmeadow Drive
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 208
Net Rentable Area (SF): 165,524
Average Unit Size (SF): 796
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Brick veneer and frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------------------
<S> <C> <C> <C> <C>
63 lBR/1BA 546 $530-560 $1.00
42 lBR/1BA 714 $645-665 $0.92
16 1BR/1BA/DEN 938 $735-760 $0.80
87 2BR/2BA 990 $740-775 $0.77
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
connections, mini-blinds, patio/balconies,
ceiling fans, some with fireplaces, storage
units, balcony/patio, icemaker A/C
Project Amenities: Swimming pool, jacuzzi, clubhouse, sports
courts, laundry facility, playground area,
carports for rent $25 per month.
Concessions: $300 off first month's rent for 2BR/2BA units
ECONOMIC DATA
Percent Occupied: 97%
Avg. Monthly Rent/SF of NRA: $0.87
Electricity Paid By: Tenant
Length of Lease: 8-12 months
Security Deposit: $200 - $250
Confirmed With: Apartment Appraisers and Consultants through
on-site management.
Date Confirmed: 12/14/97
<PAGE>
CHEYENNE CROSSING
- --------------------------------------------------------------------------------
[PHOTOS APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: Cheyenne Crossing
Street Address: 640 Wycliffe Drive
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 220
Net Rentable Area (SF): 178,720
Average Unit Size (SF): 812
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Brick veneer and frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------------
<S> <C> <C> <C> <C>
40 STUDIO 460 $480-500 $1.07
68 1BR/1BA 740 $580-600 $0.80
40 2BR/1BA 950 $700-720 $0.75
72 2BR/2BA 1,000 $700-720 $0.71
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
connections, some with washer/dryers, mini-
blinds, patio/balconies, ceiling fans, some
with fireplaces
Project Amenities: Swimming pool, jacuzzi, clubhouse, sauna,
laundry facility, playground area, security
fencing, security systems, exercise room
Concessions: None
ECONOMIC DATA
Percent Occupied: 98%
Avg. Monthly Rent/SF of NRA: $0.78
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $300 - 1BR
Confirmed With: Apartment Appraisers and Consultants
Date Confirmed: 1/6/98
<PAGE>
MOUNTAIN VIEW
- --------------------------------------------------------------------------------
[PHOTOS APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: Mountain View
Street Address: 4085 Westmeadow Drive
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Stories: 2
Number of Units: 252
Net Rentable Area (SF): 182,400
Average Unit Size (SF): 724
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Brick veneer and frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------
<S> <C> <C> <C> <C>
80 1BR/1BA 555 $555-565 $1.02
80 1BR/1BA 680 $650-660 $0.96
40 2BR/1BA 800 $695-705 $0.88
52 2BR/2BA 1000 $765-775 $0.77
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
connections, mini-blinds, patio/balconies,
ceiling fans, some with fireplaces
Project Amenities: Swimming pool, jacuzzi, clubhouse, sauna,
exercise facility, laundry facility,
playground area, security fencing, security
systems
Concessions: $150 off on small 1 BR with a 9 to 12 month
lease
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of NRA: $.91
Electricity Paid By: Tenant
Length of Lease: 12 months
Security Deposit: $200 - 1BR; $250 - 2BR
Pets Allowed/Deposit: Yes/$300 ($100 nonrefundable)
Confirmed With: Apartment Appraisers and Consultants
Date Confirmed: 12/14/97
<PAGE>
COBBLESTONE RIDGE
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: Cobblestone Ridge
Street Address: 4125 Pebble Ridge Circle
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 208
Net Rentable Area (SF): 186,368
Average Unit Size (SF): 896
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Brick veneer and frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------
<S> <C> <C> <C> <C>
88 1BR/1BA 720 $550-560 $0.77
40 2BR/1BA 840 $650-660 $0.78
60 2BR/2BA 1,043 $745-765 $0.72
12 3BR/2BA 1,235 $860-870 $0.70
8 3BR/2BA 1,501 $935-955 $0.63
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
connections, mini-blinds, patio/balconies, ceiling
fans, wetbars, some with fireplaces
Project Amenities: Indoor and outdoor swimming pools, jacuzzi,
clubhouse, sauna, laundry facility, playground
area, security fencing, security systems, 2 tennis
courts
Concessions: None
ECONOMIC DATA
Percent Occupied: 97%
Avg. Monthly Rent/SF of NRA: $0.74
Electricity Paid By: Tenant
Length of Lease: 6 months
Security Deposit: $200 - 1BR; $250 - 2BR; $300 - 3BR
Confirmed With: Apartment Appraisers and Consultants
Date Confirmed: 12/14/97
<PAGE>
L' AUBERGE PINE CLIFF
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: L'Auberge Pine Cliff
Street Address: 515 Autumn Crest Circle
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 1/2
Number of Units: 96
Net Rentable Area (SF): 101,859
Average Unit Size (SF): 1,039
Parking Surface: Asphalt-paved
Parking Spaces: Adequate
Type of Construction: Stucco and wood frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------
<S> <C> <C> <C> <C>
39 1BR/1BA/Den 921 $900-950 $1.00
14 1BR/1BA 1,028 $925-975 $0.92
12 2BR/2BA 1,066 $975-1,025 $0.94
14 2BR/2BA 1,154 $1,160-1,210 $1.03
17 2BR/2BA 1,204 $1,195-1,245 $1.01
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, mini-blinds, fireplaces, ceiling fans,
vaulted ceilings, walk-in closets, outdoor
utility closets, patio/balconies, carports
(included in rent), no garages
Project Amenities: Swimming pool, hot tub, and clubhouse
Concessions: None
ECONOMIC DATA
Percent Occupied: NA
Avg. Monthly Rent/SF of NRA: $0.99
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $455
Confirmed With: Apartment Appraisers and Consultants
Date Confirmed: 12/14/97
Remarks: This project was built by the same developer and
has equivalent quality as the subject. Higher
rents are for units with a view. $50 view premium
for about 40% of the units. Carports included in
rent.
<PAGE>
THE OASIS
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
RENT COMPARABLE 8
Property Identification
Job Number: 97-072
Name of Project: The Oasis
Street Address: 1495 Farnham Point
City/State: Colorado Springs, Colorado
Property Description
Year Built/Renovated: 1997
Number of Stories: 2
Number of Units: 252
Net Rentable Area (SF): 223,860
Average Unit Size (SF): 892
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------
<S> <C> <C> <C> <C>
24 1BR/1BA 605 $ 595 $0.98
32 1BR/1BA 669 $ 645 $0.96
40 1BR/1BA 773 $ 725 $0.94
17 1BR/1BA 817 $ 820 $1.00
17 1BR/1BA 877 $ 830 $0.95
17 1BR/1BA 882 $ 840 $0.95
10 2BR 950 $ 925 $0.97
10 2BR 1,015 $ 945 $0.93
24 2BR 1,034 $ 900 $0.87
24 2BR 1,076 $ 975 $0.91
18 2BR 1,147 $1,050 $0.92
18 2BR 1,238 $1,060 $0.86
</TABLE>
Unit Amenities: Washer/dryer in units, vaulted ceilings,
fireplaces, icemaker, microwave, patios, and
garages
Project Amenities: Pool, spa, exercise room
Concessions: None
ECONOMIC DATA
Percent Occupied: 95%
Avg. Monthly Rent/SF of NRA: $0.93
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $250 - $275 plus $35 application fee and $300 pet
deposit
Confirmed With: On-site personnel
Date Confirmed: 12/14/97
<PAGE>
THE COMMONS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: The Commons/Briar
Street Address: 2845 Firewood Point
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1996
Number of Stories: 2
Number of Units: 194
Net Rentable Area (SF): 194,468
Average Unit Size (SF): 1,034
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 701 $ 790 $1.13
36 1BR/1BA 888 $ 900 $1.01
50 2BR/ 1,052 $1,005 $0.96
34 2BR/ 1,158 $1,020 $0.88
36 3BR/ 1,236 $1,125 $0.84
</TABLE>
Unit Amenities: Washer/dryer in units, fireplaces, ceiling fans,
microwaves, and garages
Project Amenities: Swimming pool, hot tub, clubhouse, fitness center
Concessions: None
ECONOMIC DATA
Percent Occupied: 95%
Avg. Monthly Rent/SF of NRA: $0.96
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $335-$370 plus $30 application fee and $400 pet
deposit
Confirmed With: On-site management
Date Confirmed: 12/14/97
<PAGE>
THE ARBORS
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
RENT COMPARABLE 10
PROPERTY IDENTIFICATION
Job Number: 97-072
Name of Project: The Arbors
Street Address: 2192 Denton Grove
City/State: Colorado Springs, Colorado
PROPERTY DESCRIPTION
Year Built/Renovated: 1996
Number of Stories: 2
Number of Units: 140
Net Rentable Area (SF): N/A
Average Unit Size (SF): N/A
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
----------------------------------------------
<S> <C> <C> <C> <C>
N/A 1BR/1BA 900 $ 790 $0.88
1BR/1BA 919 $ 835 0.91
1BR/1BA 955 $ 855 0.90
1BR/1BA 1,045 $ 975 0.93
2BR 1,208 $1,090 0.90
2BR 1,240 $1,080 0.87
2BR 1,277 $1,095 0.86
2BR 1,255 $1,100 0.88
2BR 1,279 $1,155 0.90
2BR 1,318 $1,175 0.89
</TABLE>
Unit Amenities: Washer/dryer in units, fireplaces, ceiling
fans, vaulted ceilings, ice makers, and
carports
Project Amenities: Swimming pool, laundry room, fitness center,
and tennis courts
Concessions: None
ECONOMIC DATA
Percent Occupied: 94%
Avg. Monthly Rent/SF of NRA: $.90
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $350 plus $30 application fee and $500 pet
deposit
Confirmed With: On-site management
Date Confirmed: 12/14/97
Comments: On-site management would not provide breakdown
on unit mix.
<PAGE>
SPRING CANYON
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name Spring Canyon
Address 4510 Spring Canyon Heights
City/County/State Colorado Springs, El Paso County, Colorado
TRANSACTION DATA
Date of Sale 11/97 (under contract)
Grantor (Seller) The Spanos Corporation
Grantee (Buyer) Sentinel Acquisition Corporation
Recorded Document N/A
Sale Price $19,917,000
Occupancy 93.5%
Sale Price per Unit $68,209
Sale Price per SF $74.21
Terms of Sale Cash Sale
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER UNITS OF COMPARISON
SF
<S> <C> <C> <C> <C>
Potential Gross Income $2,652,000 $9.88 Price/Net Rentable SF $74.21
Vacancy/Collection Loss 6.5% ($172,380) $0.64 Indicated G.I.M. $ 7.5lx
Other Income $118,734 $0.44 Indicated E.G.I.M. $ 7.67x
Effective Gross Income $2,598,354 $9.68 Going-In Capitalization Rate 8.74%
Operating Expenses ($799,209) $2.98
Reserves for Replacement ($58,400) $0.22
Net Operating Income $1,740,745 $6.49
</TABLE>
PHYSICAL DATA
Year Completed 1997
Construction Type Wood frame/stucco
Site Area 14.67 acre(s)
No. Stories 2-3
No. Buildings N/A
Total Units 292
Net Rentable Area 268,396 SF
Average Unit Size 919 SF
Unit Amenities Washer/Dryer, balcony with storage, fireplaces in
55% of units, alarm, central A/C, microwave,
vaulted 9 ft. ceiling, 78 detached garages, and 292
carports
Project Amenities Swimming pool, spa, sauna, clubhouse with exercise
room, business center, conference room, mini movie
theater, and lighted outdoor sports court
Confirmed With Apartment Appraisers and Consultants 11/28/97
Comments Closing scheduled upon reaching 80% occupancy. This
was a pre-sale. Leasing started 2/1/97. As of 6/97
36 units were completed, but 86 had been pre-
leased.
<PAGE>
WESTERN HILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name Western Hills
Address 810 Western Drive
City/County/State Colorado Springs, El Paso, Colorado
TRANSACTION DATA
Date of Sale 07/97
Grantor (Seller) Leroy Landhuis
Grantee (Buyer) Western Hills Association (Insignia)
Recorded Document 97075597
Sale Price $7,350,000
Occupancy 94%
Sale Price per Unit $48,355
Sale Price per SF $64.04
Terms of Sale Cash Sale
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER UNITS OF COMPARISON
SF
<S> <C> <C> <C> <C>
Potential Gross Income $1,120,800 $9.726 Price/Net Rentable SF $64.04
Vacancy/Collection Loss 5.00% ($67,248) $ 0.59 Indicated G.I.M. 6.56x
Other Income $76,688 $ .067 Indicated E.G.I.M. 6.50x
Effective Gross Income $1,130,240 $ 9.85 Going-In Capitalization Rate 10.81%
Operating Expenses $(305,513) $ 2.66
Reserves for Replacement ($30,400) $ 0.26
Net Operating Income Less $794,327 $ 6.92
Reserves
</TABLE>
PHYSICAL DATA
Year Completed 1985
Construction Type Wood frame/stucco
Site Area 7.626 acres
No. Stories 2-3
No. Buildings N/A
Total Units 152
Net Rentable Area 114,780 SF
Average Unit Size 755 SF
Unit Amenities Stacked washer/dryer, fireplaces, ceiling fans,
and patio/balcony
Project Amenities Swimming pool, exercise room, tennis courts,
sauna and spa
Confirmed With Apartment Appraisers and Consultants 11/28/97
Comments Buyer operates adjacent project.
<PAGE>
GRAND CENTENNIAL
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name Grand Centennial
Address 5157 N. Centennial Boulevard
City/County/State Colorado Springs, El Paso, Colorado
TRANSACTION DATA
Date of Sale 06/97
Grantor (Seller) Westwood Residential
Grantee (Buyer) Sentinel Real Estate Corporation
Recorded Document 97064903
Sale Price $22,360,000
Occupancy 92.5%
Sale Price per Unit $65,000
Sale Price per SF $71.26
Terms of Sale Cash Sale
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER SF UNITS OF COMPARISON
<S> <C> <C> <C> <C>
Potential Gross Income $3,097,080 $9.87 Price/Net Rentable SF $71.26
Vacancy/Collection Loss 7.5% ($232,281) $0.74 Indicated G.I.M. 7.22x
Other Income $143,600 $0.46 Indicated E.G.I.M. 7.43x
Effective Gross Income $3,008,399 $9.59 Going-In Capitalization Rate 9.21%
Operating Expenses ($879,916) $2.80
Reserves for Replacement ($68,800) $0.22
Net Operating Income Less $2,059,683 $6.56
Reserves
</TABLE>
PHYSICAL DATA
Year Completed 1996
Construction Type Wood frame and wood exterior
Site Area 23.14 acres
No. Stories 3
No. Buildings N/A
Total Units 344
Net Rentable Area 313,780
Average Unit Size 912 SF
Unit Amenities Washer/dryer hookups, patios, 9 ft. ceilings
with crown molding, ice makers, wood burning
fire places, microwaves and wired for alarm
Project Amenities Swimming pool, spa, clubhouse and exercise
facility, 7-acre park, laundry facility, 80
detached garages and 48 carports
Confirmed With Apartment Appraisers and Consultants 11/28/97
Comments Closing scheduled upon reaching 75% occupancy.
First occupancy 8/1/96. Started leasing 6/26/96.
By 1/15/97 206 units built and 191 units leased.
<PAGE>
TEMPLETON PARK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name Templeton Park
Address 4675 Templeton Park Circle
City/County/State Colorado Springs, El Paso, Colorado
TRANSACTION DATA
Date of Sale 02/97
Grantor (Seller) Templeton Investors
Grantee (Buyer) Griffis/Blessing
Recorded Document 97019202
Sale Price $23,300,000
Occupancy 93%
Sale Price per Unit $46,976
Sale Price per SF $52.16
Terms of Sale $17,475,000 loan at 7.5% with a 25-year
amortization, due in 6 years
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER SF UNITS OF COMPARISON
<S> <C> <C> <C> <C>
Potential Gross Income $3,758,208 $8.41 Price/Net Rentable SF $52.16
Vacancy/Collection Loss 7% ($263,075) $0.59 Indicated G.I.M. 6.20x
Other Income $86,300 $0.19 Indicated E.G.I.M. 6.5lx
Effective Gross Income $3,581,433 $8.01 Going-In Capitalization Rate 10.37%
Operating Expenses ($1,042,200) $2.33
Reserves for Replacement ($124,000) $0.28
Net Operating Income Less $2,415,233 $5.41
Reserves
</TABLE>
PHYSICAL DATA
Year Completed 1984
Construction Type Wood frame with vertical wood siding
Site Area 20.869 acres
No. Stories 2-3
No. Buildings N/A
Total Units 496
Net Rentable Area 446,672 SF
Average Unit Size 901 SF
Unit Amenities Central A/C, walk-in closets, dishwashers,
patios/balconies. 184 units have fireplaces and
washer/dryer hook-ups. Some units have trash
compactors, wet bars, or ceiling fans.
Project Amenities 3 pools (indoor & outdoor), spa, men's and
women's saunas, 2 tennis courts, basketball
court, 2 playgrounds, and a clubhouse with small
kitchen, billiards and a weight room.
Confirmed With Apartment Appraisers and Consultants 11/28/97
Comments Now known as Sterling Pointe Apartments
<PAGE>
THE NEIGHBORHOOD
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name The Neighborhood
Address 3504 A Van Teylingen Drive
City/County/State Colorado Springs, El Paso, Colorado
TRANSACTION DATA
Date of Sale 12/96
Grantor (Seller) Te-Two Real Estate LP
Grantee (Buyer) Investor Realty Trust
Recorded Document 96157453
Sale Price $10,750,000
Occupancy 94%
Sale Price per Unit $56,283
Sale Price per SF $50.71
Terms of Sale $7,525,000 loan at 7.92% with a 25 year
amortization due in 10 years
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER SF UNITS OF COMPARISON
<S> <C> <C> <C> <C>
Potential Gross Income $1,592,940 $7.51 Price/Net Rentable SF $50.71
Vacancy/Collection Loss 6% ($95,576) $0.45 Indicated G.I.M. 6.75x
Other Income $28,314 $0.13 Indicated E.G.I.M. 7.05x
Effective Gross Income $1,525,678 $7.20 Going-In Capitalization Rate 9.6%
Operating Expenses ($450,870) $2.13
Reserves for Replacement ($42,975) $0.20
Net Operating Income Less $1,031,833 $4.87
Reserves
</TABLE>
PHYSICAL DATA
Year Completed 1982
Construction Type Wood frame with wood siding
Site Area 14.84 acre(s)
No. Stories 2
No. Buildings Unknown
Total Units 191
Net Rentable Area 212,010 SF
Average Unit Size 1,110 SF
Unit Amenities Washer/Dryer hook-ups, balconies, fireplace,
storage, dishwasher, no A/C.
Project Amenities Volleyball court, no clubhouse or pool.
Confirmed With Apartment Appraisers and Consultants
Comments This property was under contract for $10.8
million, but fell through. There are 48 units in
Phase I that have electric heat and are billed
separately for hot water. One unit is the
office.
<PAGE>
RIDGEVIEW PLACE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-072
Project Name Ridgeview Place
Address 3310 Knoll Lane
City/County/State Colorado Springs, El Paso, Colorado
TRANSACTION DATA
Date of Sale 11/96
Grantor (Seller) Ridgeview Place Association
Grantee (Buyer) GB Investments, et. al.
Recorded Document 96147933
Sale Price $16,400,000
Cash Equivalent Sale Price $16,500,000
Occupancy 94%
Sale Price per Unit $49,107
Sale Price per SF $54.83
Terms of Sale $11,250,000 loan at 8.03% 26 year amortization,
due in 7 years
<TABLE>
<CAPTION>
INCOME/EXPENSE DATA TOTAL PER SF UNITS OF COMPARISON
<S> <C> <C> <C> <C>
Potential Gross Income $2,532,551 $8.42 Price/Net Rentable SF $54.83
Vacancy/Collection Loss 6% ($151,953) $0.50 Indicated G.I.M. 6.52x
Other Income $52,400 $0.17 Indicated E.G.I.M. 6.78x
Effective Gross Income $2,432,998 $8.08 Going-In Capitalization Rate 9.76%
Operating Expenses ($746,210) $2.48
Reserves for Replacement ($75,600) $0.25
Net Operating Income Less $1,611,188 $5.60
Reserves
</TABLE>
PHYSICAL DATA
Year Completed 1984
Construction Type Wood frame and wood siding
Site Area 25.17 acres
No. Stories 1-2
No. Buildings N/A
Total Units 336
Net Rentable Area 300,952 SF
Average Unit Size 896 SF
Unit Amenities Central A/C, balconies/patios, storage, 2B2 and
3B have fireplaces and washer/dryer hook-ups.
Project Amenities 2 swimming pools, 2 saunas, billiards,
playground, clubhouse, exercise facility,
tennis, basketball, and volleyball courts.
Confirmed With Apartment Appraisers and Consultants 11/28/97
Comments Sale price was reduced by $100,000 for termites.
Therefore $100,000 was added to the cash
equivalent sale price to reflect good condition.
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991-May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985-1991)
President
Bach & Associates, Inc. (1980-1984)
President
Landauer Associates, Inc. (1980-1984)
Senior Vice-President and General Manager-Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973-1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971-1973)
Appraiser. Real Estate research valuation on urban and
rural properties.
Ray R. Hastings, MAI (1964-1971)
Appraiser. Real Estate research valuation on urban and
rural properties.
Residential Real Estate Sales (1963-1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of the
Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987-1992)
Appraisal Institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who
meet the minimum standards of this program are awarded
periodic education certification).
Certified General Real Estate Property appraiser in the
State of Texas, Certification No. TX-1323079-G
Certified General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
<PAGE>
- --------------------------------------------------------------------------------
COMPLETE, SELF-CONTAINED
VALUATION
OF
SKYLINE VILLAGE
6651 NORTH CAMPBELL AVENUE
TUCSON, PIMA COUNTY, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 3
1764 SAN DIEGO AVENUE
29TH FLOOR
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-073
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Letter of Transmittal............................................................ 1
Assumptions and Limiting Conditions.............................................. 2
Certification.................................................................... 4
Salient Facts and Conclusions.................................................... 6
Nature of the Assignment......................................................... 7
City/Neighborhood Analysis....................................................... 9
Apartment Market Analysis........................................................ 13
Site Analysis.................................................................... 18
Improvements..................................................................... 20
Highest and Best Use............................................................. 22
Appraisal Procedures............................................................. 25
Sales Comparison Approach........................................................ 27
Income Approach.................................................................. 31
Reconciliation................................................................... 40
</TABLE>
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
BACH
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 8, 1998
Hutton/Con Am Realty Investors 3
1764 San Diego Avenue
San Diego, California 9210
Re: A Complete, Self-Contained Appraisal of the Skyline Village Apartments,
Tucson, Arizona; BRA: 97-073
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 in
December 1997.
Our analysis of the property focused on the supply and demand factors
influencing the Tucson and subject area apartment market, the sale of comparable
properties, market rent levels, appropriate operating expenses, and acceptable
investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of November 30, 1997 is in the sum of
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
/s/ Stevan N. Bach
Stevan N. Bach, MAI
President and Chief Executive Officer
Four Houston Center
1221 Lamar, Suite 1325
Houston, TX 77010
(713) 739-0200
Fax (713) 739-0208
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this complete, self-contained
appraisal is subject to the following assumptions and
limiting conditions.
1. That responsibility is not taken for matters of a
legal nature affecting the property appraised or
the title thereto and that all legal descriptions
furnished are correct.
2. That the title to the property being appraised is
good and marketable and is appraised as though
under responsible ownership and/or management.
3. That the property is free and clear of all liens
and encumbrances, except as otherwise stated.
4. That the sketches in this report are included to
assist the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by
the appraiser.
6. That the information, estimates, and opinions
furnished the appraiser by others and contained in
this report are considered reliable and are
believed to be true and correct; however,
responsibility is not taken for their accuracy.
7. That responsibility is not taken for soil
conditions or structural soundness of the
improvements that would render the property more
or less valuable.
8. That possession of this appraisal does not carry
with it the right of publication and that this
report, or any parts thereof, may not be
reproduced in any form without written permission
of the appraiser.
9. That testimony or attendance in court or at a
hearing are not a part of this assignment;
however, any such appearance and/or preparation
for testimony will necessitate additional
compensation than received for this appraisal
report.
10. That the valuation estimate herein is subject to
an all cash or cash equivalent purchase and does
not reflect special or favorable financing in
today's market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of
yield anticipations and our judgement as to the
risks and uncertainties in the subject property
and the consequential rates of return required to
attract an investor under such risk conditions.
There is no guarantee that projected cash flows
will actually be achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by
Con Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
--------------------------------------------------
asbestos and will not take any responsibility for
--------------------------------------------------
its existence or the existence of other hazardous
--------------------------------------------------
materials at the subject property, analysis for
--------------------------------------------------
EPA standards, its removal, and/or its
--------------------------------------------------
encapsulation. If the reader of this report and/or
--------------------------------------------------
any entity or person relying on the valuations in
--------------------------------------------------
this report wishes to know the exact or detailed
--------------------------------------------------
existence (if any) of asbestos or other toxic or
--------------------------------------------------
hazardous waste at the subject property, then we
--------------------------------------------------
not only recommend, but state unequivocally that
--------------------------------------------------
they should obtain an independent study and
--------------------------------------------------
analysis (including costs to cure such
--------------------------------------------------
environmental problems) of asbestos or other toxic
--------------------------------------------------
and hazardous waste.
-------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser 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 does hereby certify to the best of our
knowledge and belief that, except as otherwise noted in this
complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were developed,
and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics and
the Uniform Standards of Professional Appraisal
Practice of the Appraisal Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased professional
analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment is not contingent upon
the reporting of a predetermined value or direction in
value that favors the cause of the client, the amount
of the value estimate, the attainment of a stipulated
result, or the occurrence of a subsequent action or
event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
4
<PAGE>
10. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as is,"
of the subject property on an all cash basis, as of
November 30, 1997, is $7,500,000.
/s/ Stevan N. Bach
-----------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Skyline Village
6651 North Campbell Avenue
Tucson, Arizona
Location: West side of North Campbell Avenue just
north of East Skyline Drive
BRA: 97-073
Legal Description: All of that portion of Block 1 of Casa Conejo
Estates, Block 1, Lots 1 and 2, being a
subdivision of record in the office of the
Pima County, Arizona Recorder in Book 18 of
Maps and Plats at Page 76
Land Size: 10.2356 acres or 445,863 square feet
Building Area: 167,500 square feet of net rentable area
Year Built: 1985
Unit Mix: 48 1BR/1BA at 800 square feet
44 1BR/lBA Den at 1,000 square feet
66 2BR/2BA at 1,100 square feet (including
6 TH)
10 2BR/2BA/TH at 1,200 square feet
No. of Units: 168
Average Unit Size 997 square feet
Physical Occupancy 93 percent
Economic Occupancy: 85 percent
Highest and Best Use
As Vacant: Multifamily
As Improved: Multifamily
Date of Value: November 30, 1997
"As Is" Market Value by
Sales Comparison Approach: $7,400,000
"As Is" Market Value by
Income Approach: $7,500,000
"As Is" Market Value
Conclusion: $7,500,000
6
<PAGE>
NATURE OF THE ASSIGNMENT
- --------------------------------------------------------------------------------
PURPOSE OF THE
APPRAISAL The purpose of this complete, self-contained appraisal is to
give an estimate of the "as is" leased fee market value of
the subject property on an all cash basis.
IDENTIFICATION OF
THE PROPERTY The subject property contains 18 two-story apartment
buildings with 168 units and a total net rentable area of
163,072 square feet. It was constructed in 1985 on 10.2356
acres. It is identified as the Skyline Village Apartments
located at 6651 North Campbell Avenue. The complex is
situated along the west side of North Campbell Avenue, just
north of East Skyline Drive in Tucson, Arizona.
DATE OF THE
APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as of November
30, 1997. The property was inspected in December 1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition, 1996,
---------------------------
sponsored by the Appraisal Institute defines Market Value
as:
"The most probable price which a property should bring
in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a
specified date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised,
and acting in what they consider their own best
interests;
(3) A reasonable time is allowed for exposure in the
open market;
(4) Payment is made in terms of cash in U.S. dollars
or in terms of financial arrangements comparable
thereto; and
(5) The price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted by
anyone associated with the sale."
7
<PAGE>
It is our opinion that a reasonable time period to sell the
subject property is six months to one year and this is
consistent with current market conditions. A sale earlier
than six months to one year may represent a value other than
market value and is reasonably believed to be a value less
than our market value stated within our appraisal report.
Leased Fee Estate/1/ - An ownership interest held by a
--------------------
landlord with the rights of use and occupancy conveyed by
lease to others. The rights of the lessor (the leased fee
owner) and the leased fee are specified by contract terms
contained within the lease.
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the function
of this appraisal is for annual partnership and/or internal
reporting purposes.
PROPERTY RIGHTS
APPRAISED The appraiser have appraised the "as is" leased fee interest
subject to short-term leases which are typically 6 to 12
months in duration at the subject property.
THREE-YEAR HISTORY According to the Pima County records, the current owner of
record is Hutton/Con Am Realty Investors 3. No sale or
listing of the subject property is believed to have occurred
over the past three years.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with accepted
techniques, standards, methods, and procedures of the
Appraisal Institute. The values set forth herein were
estimated after application and analysis by the Sales
Comparison and Income Approaches to value. These approaches
are more clearly defined in the valuation section of this
report. The Cost Approach was not utilized in our analysis
due to the age of the property since depreciation is
difficult to accurately measure in older properties.
Additionally, it is often the perception of investors that
cost does not necessarily equate to value and the purchase
price is not typically based on construction costs.
The scope of our assignment included obtaining pertinent
property data from the client regarding income and expense
figures, tenant rent rolls, and permission to inspect the
subject. Additionally, the appraiser conducted research
either personally or through associates to obtain current
market rental rates, construction trends, the sale of
comparable improved properties, anticipated investor
returns, and the supply and demand of competitive apartment
projects in the general and immediate area. After these
examinations were performed, an analysis was made in order
to estimate the leased fee market value of the subject on an
"as is" basis.
______________________
/1/The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
[AREA MAP APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
The Tucson Metropolitan Area (TMA) encompasses approximately
495 square miles and is located 63 miles north of Mexico and
115 miles southeast of Phoenix. Tucson is the county seat of
Pima County and includes four incorporated areas and two
Indian reservations. The county is generally separated into
the foothills and the flatlands topographical regions. The
foothills contain the resorts and more prestigious
residential areas, with higher housing prices and higher
household incomes. The flatlands contain a more diverse
residential population and most of the major employment
centers. The geographic boundaries of the TMA are defined by
five mountain ranges: the Santa Catalina, Rincon, Santa
Rita, Tucson, and Tortolita. The Santa Cruz, Rillito, and
Pantano are the three major rivers or washes that traverse
the Tucson area.
The major transportation arteries in the Tucson area are
Interstate Highway 10 and Interstate Highway 19. Interstate
Highway 10 is the major highway linking the southwestern
United States from El Paso to Los Angeles, and flows in a
northwest/southeast direction in the Tucson area. Interstate
Highway 19 branches south from Interstate Highway 10 near
the traditional downtown and serves the southwestern part of
the community. The Tucson International Airport services 13
domestic and international airlines and Amtrak provides
passenger rail transportation to the city.
LIVABILITY Tucson is in the Sonoran Desert region located in southern
Arizona and northern Mexico and is 2,389 feet above sea
level. This arid climate produces an average annual rainfall
of approximately 11 inches. The three main rivers or washes
in the area are dry for the majority of the year and in the
summer rainy season collect more than half of the annual
rainfall. The average daytime temperature is 82 degrees and
the average humidity level is 25 percent. The sunny, dry
climate of this area is largely responsible for the
population growth over the past twenty years and Tucson has
emerged as a popular vacation and tourist destination. Three
major resorts are located in the foothills of the mountains
around Tucson and there are a number of other smaller
resorts, guest ranches, and hotels, which offer year round
vacation and recreation facilities. There are more than 30
private and semiprivate golf courses in the area as well as
more than 30 private and public tennis facilities.
The University of Arizona dominates the field of higher
education with a current enrollment of approximately 40,000
students. The University operates 7 colleges, 5 schools, 114
departments, and a medical school/center and is acknowledged
as a leader in studies of optical sciences, electronics,
scientific instrumentation, and astronomy. Other
institutions of higher education in the area are the Pima
Community College and the University of Phoenix (private).
POPULATION Tucson is the second largest city in Arizona, following
Phoenix. Tucson is located in Pima County or the Tucson
Metropolitan Area, which has shown strong population growth.
In 1980, the estimated population for Pima County was
527,289. This grew at an average annual rate of 2.7 percent
to 668,501 in 1990. Since 1990 the population has also grown
at an average of 2.7 percent to 794,933
9
<PAGE>
in 1997. The Pima Association of Governments projects the
population to grow to 846,000 by the year 2000 and to over 1
million by the year 2010. This would represent an average
annual growth rate of about 2.0 percent.
ECONOMY The economic base of the TMA is heavily oriented toward
governmental and educational employment. The U.S. Army Fort
Huachuca and the University of Arizona are reported to be
the two largest employers with 11,193 and 10,311 employees,
respectively. Other substantial government employers include
the State of Arizona, Davis-Monthan Air Force Base, Tucson
Unified School District, Pima County, and the City of
Tucson. During the military cutbacks several years ago, the
Davis-Monthan Air Force Base was expecting to suffer huge
losses however, employment at the base has actually
increased. Manufacturing employment in metropolitan Tucson
has more than doubled in the past ten years. This growth is
due to the increase of high technology manufacturers
locating and expanding in Pima County. These manufacturers
include AlliedSignal, Weiser Lock, 3M, Burr-Brown,
Environmental Air Products, Inc., Krueger Industries, Inc.,
and Hughes Missile Company. Hughes Missile Systems and BHP
Copper Company are the largest private sector employers. In
January 1997 it was announced that Hughes Corporation had
been purchased by Raytheon, one of the largest defense
contractors in the nation. It is expected that the Hughes
operation will increase their engineering employment in
Tucson as a result of the acquisition. Another positive
impact on the local economy has been Allied Signal's
decision to not only remain in Tucson, but to expand their
operations. Another area of growth for the local economy is
the increase in tourism. According to the Tucson Planning
Department, approximately one in four new jobs in the TMA is
positively affected by tourism. The following summarizes the
Tucson Metropolitan Area Employment as of September 1997.
<TABLE>
<CAPTION>
<S> <C>
Total Employment 365,000
Total Wage and Salary Employment 314,600
Manufacturing 29,800
Durable 23,900
Non-durable 5,900
Mining 2,300
Contract Construction 19,300
Transport., Communications and Public Utilities 13,500
Finance, Insurance and Real Estate 12,800
Trade 68,400
Wholesale 10,500
Retail 57,900
Services 100,200
Government 68,300
Total Civilian Labor Force 378,300
Unemployment Rate (Seasonally Adjusted) 3.2%
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
[NEIGHBORHOOD MAP APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
ECONOMIC OUTLOOK Over the past few years, Tucson's economy has been mixed.
Citywide, job growth fell off in the late 1980's and early
1990's and the unemployment rate began to creep up. However,
since 1995 this trend appears to have subsided. The
unemployment rate has decreased from 3.6 percent in March
1995 to 3.2 percent in September 1997. It is important to
note that the Davis-Monthan Air Force base was not included
on the Base Realignment and Closure Commission's list.
However, in recent years there has been a closing of
Lockheed Aeromod, which was reportedly, offset somewhat by
the expansions at Gates Learjet. Both the City of Tucson and
Pima County are actively seeking new employees to relocate
to the area. The Tucson Economic Development Corporation
reports that over 6,000 new jobs could be added to Tucson
due to the entrance of new companies.
Moderate and steady growth is projected for the Tucson
economy in the coming year. Population and job growth is
expected to increase. Single family home-building and sales
activity has improved over the last two years. The multi-
family home market experienced it's first growth since
recovery from the overbuilding of the 1980's. However,
caution is warranted in order to not recreate the same
scenario of over supply. Renewed consumer confidence, along
with the decline in mortgage interest rates are the primary
factors behind the strong sales performance. The commercial
sector continues to exhibit over supply in all sectors,
retail, industrial, and office. However, with little new,
construction taking place all markets are improving and
equilibrium is forecasted within the next two years.
Tucson's long-range outlook is optimistic due to its
diversified economic base featuring industry sectors
expected to prosper over time, a growing tourism industry,
and expanding service sector. This coupled with the relative
affordability of real estate compared with either coast is
expected to continue to lure employers/employees as well as
retirement in-migration.
NEIGHBORHOOD The subject property is located in the northern portion of
the Tucson metropolitan area (unincorporated Pima County)
near the foothills of the Santa Catalina mountains. The
boundaries of the neighborhood are Oracle Road to the west,
Ina Road, and residential areas north of Skyline Drive and
Sunrise Drive to the north, Sabino Canyon Road to the east,
and River Road to the south. Oracle Road, Campbell Avenue,
Swan Road, and Craycroft Road are the major north/south
traffic thoroughfares, which provide access to the
neighborhood from the employment centers of the central and
eastern areas of Tucson. Ina Road, Skyline Drive, and
Sunrise Drive accommodate east/west traffic flow in the
northern section near the subject. River Road, which runs
parallel to the Rillito River, defines the southern boundary
of the neighborhood and accommodates the east/west traffic
flow in the southern section.
Generally, the subject neighborhood is residential in nature
and is populated by middle- to upper-income households.
Commercial uses are located along the major traffic
thoroughfares and are mainly support uses for the area
residential base. The most recent commercial developments in
the area have been typically confined to major
intersections, due to the development plan and existing
zoning of Pima County. The closest major intersection to the
subject is at Sunrise Drive and Swan Road. Sunrise Village
and Plaza Bel Air are two community shopping centers at this
location with grocery store anchors as well as branch
banking
11
<PAGE>
facilities, fast-food restaurants, and a number of
other local tenants. The area's most recent major
commercial construction is the new Muscular Dystrophy
Association (MDA) headquarters building on Sunrise
Drive near the subject and the new U.S. Postal facility
near the intersection of River Road and Campbell Road.
Also, the new Catalina Foothills High School has been
completed on Sunrise Drive.
The subject is located just west of the La Paloma
master-planned community, an 800-acre development which
was approved in 1983 for a total of 2000 single-family
and multifamily units as well as a number of ancillary
commercial uses along Sunrise Drive. The centerpiece of
the La Paloma development is a Mobil Travel Guide four-
star resort and country club which includes a 27-hole
golf facility designed by Jack Nicklaus. The most
recent construction was The Legends at La Paloma which
is a new 312 unit luxury apartment complex.
Water and sewer service is provided to a majority of
the neighborhood by the City of Tucson and the subject
property is located within the County Foothills School
District 16. Fire protection and police service is
provided by Pima County.
In order to better understand and analyze the
population and trends of the subject area, a study was
prepared by Equifax Decision Systems which provided
demographics within a 1-, 3-, and 5-mile radii of the
subject area. The population estimates for 1990 were
estimated at 5,676 within a 1-mile radius; 28,751
within a 3-mile radius; and 118,142 within a 5-mile
radius. Population increased 198.48 percent between
1970 and 1980 and 67.58 percent between 1980 and 1990
within a 1-mile radius of the subject. Within 3 miles,
growth was similar during 1970-1980 with a 208.21
percent increase and 73.05 percent from 1980 to 1990.
Within a 5-mile radius, the percentage population
growth was substantially less with increases of 49.58
and 32.37 percent from 1970 to 1980 and 1980 to 1990,
respectively.
Residential units in the subject area within the 1- and
3-mile radii are predominately owner-occupied as
opposed to renter-occupied (77.58 to 79.56 percent and
22.42 to 20.44 percent, respectively). These figures
are consistent with the impressions by visual
inspection of the area that there are a greater number
of exclusive single-family residences than apartment
complexes.
Substantial levels of household income in the immediate
area of the subject suggest a relatively affluent
population. Estimated 1990 income levels for households
within a 1-mile and 3-mile radius of the subject
property indicate a median income of $51,397 and
$53,264 per year, respectively. The education level of
the area population is high and most probably
contributes to the high income levels. Approximately 85
percent of the area residents are high school graduates
and 40 percent have completed college. The population
is predominately between 25 and 54 years old within the
1- and 3-mile radii, with about 13 percent being 65
years and older.
NEIGHBORHOOD CONCLUSION The subject property is perceived as being a positive
attribute to the area by providing a quality
multifamily development which blends well with the
upper income residential communities nearby. Overall,
the subject neighborhood is projected to continue to
prosper in future years.
12
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
In our analysis of the Tucson Metropolitan (Metro) housing
market and more specifically the Northwest and Catalina
Foothills submarkets, we utilized data from the Metropolitan
Tucson Land Use Study with information from the
Statistics/Trends Summary published by RealData, Inc. It is
important to note that prior to 1995, a publication titled
"Market Strategies Apartment Survey Report" was utilized for
the data now reported by RealData, Inc. Therefore, there
could be some discrepancies in the presentation of data
between 1995 and 1996. Both the Northwest and Catalina
Foothills submarkets were included due to proximity and
similarities; however, the subject is actually situated in
the Catalina Foothills submarket. The study revealed an
ever-changing market and a summary of the data follows.
INVENTORY The rapid residential growth of the mid-1980s slowed during
the late 1980s as a result of the general slowdown in the
local economy and overbuilding. The multifamily sector
experienced declines in activity with a drastic decrease in
new building. Nevertheless, over the past two years there
have been a number of new projects completed and more are
under construction or are in the planning stage. As of the
Third Quarter 1997, the metro Tucson area had a total
inventory of 90,680 multi-family units with 6,928 units in
the Northwest submarket and 8,185 units in the Catalina
Foothills submarket. The submarkets represent about 17
percent of the total inventory.
As of the Third Quarter 1997, there were 811 multi-family
units under construction citywide and this does not include
a number of units which are nearing completion and have
begun lease-up. There are 1,277 units permitted across the
city; however, all of these projects may not proceed.
VACANCY Vacancy levels for Metro Tucson and the submarkets showed
improvements from 1990 to 1994. However, in 1995, there was
a noticeable upswing. The following table summarizes the
vacancy rates from the Second Quarter 1990 through the Third
Quarter 1997. It is important to note that there is
typically a swing in vacancy during the year due to seasonal
demand. The summer months tend to report higher vacancies as
some residents temporarily move and the winter months are
much stronger due to the increase of extended stay visitors.
13
<PAGE>
<TABLE>
<CAPTION>
VACANCY RATES
---------------------------------------------------------------------------
METRO CATALINA
Q:YEAR TUCSON NORTHWEST FOOTHILLS
---------------------------------------------------------------------------
<S> <C> <C> <C>
III:97 8.66% 7.55% 7.02%
II:97 10.39% 8.82% 8.98%
I:97 8.3% 7.92% 8.6%
IV:96 9.2% 7.72% 10.71%
III:96 9.38% 7.5% 12.46%
II:96 11.1% 9.3% 15.5%
I:96 7.4% 7.9% 8.1%
IV:95 7.9% 7.6% 8.6%
III:95 7.9% 6.3% 11.0%
II:95 8.9% 9.7% 9.0%
I:95 3.6% 3.9% 3.8%
IV:94 4.0% 5.0% 3.4%
III:94 4.2% 4.2% 2.4%
II:94 5.9% 4.4% 4.1%
I:94 3.8% 3.4% 3.2%
IV:93 5.8% 4.1% 3.9%
III:93 7.9% 5.6% 6.2%
II:93 8.3% 3.9% 7.7%
I:93 6.6% 3.8% 5.6%
IV:92 7.7% 5.4% 5.5%
III:92 9.9% 8.2% 5.8%
II:92 10.8% 8.9% 7.7%
I:92 8.6% 7.7% 4.4%
IV:91 8.0% 7.7% 4.3%
III:91 10.4% 7.7% 5.9%
II:91 14.5% 8.9% 9.8%
I:91 11.4% 7.9% 8.0%
IV:90 12.3% 8.7% 8.5%
III:90 14.8% 10.6% 14.5%
II:90 18.7% 19.8% 18.9%
</TABLE>
Source: Marketing Strategies from II:90 to I:95
RealData, Inc. from II:95 to III:97
In summary, the overall vacancy citywide and in the
submarkets declined from the Second Quarter 1990 through the
First Quarter, 1995. The vacancy in Metro Tucson dropped
from 18.7 percent in the Second Quarter 1990 to 3.6 percent
in the First Quarter 1995. There were similar drops in both
of the submarkets with the Northwest submarket dropping from
19.8 percent in the Second Quarter 1990 to 3.9 percent in
the First Quarter 1995. The Catalina Foothills dropped from
18.9 percent in the Second Quarter 1990 to 3.8 percent in
the First Quarter 1995. However, in 1995, both the citywide
apartment market and the submarkets noticed an upswing in
vacancies. The Metro Tucson vacancy rate increased to 8.9
percent in the Second Quarter of 1995 and has fluctuated
from 7.9 percent to 11.1 percent since then. The overall
vacancy rate as of the Third Quarter 1997 was 8.66 percent,
which was down from the 9.38 percent rate for the same
period the previous year. The Northwest and Catalina markets
saw similar trends with vacancy increasing to 9.7 and 9.0
percent respectively in the Second Quarter 1995.
14
<PAGE>
In the Northwest submarket, the Third Quarter 1997 vacancy
rate was 7.55 percent virtually unchanged from from 7.5
percent the previous year. In the Catalina Foothills, the
Third Quarter 1997 vacancy rate was 7.02 percent down from
12.46 percent the previous year. The higher vacancy rates
since 1995 are a direct result of the affordability of home
ownership and the over saturation of the market with new
apartments. Overall, Pima County is continuing to see
population increases, due primarily to an in-migration of
people seeking affordable housing and a higher than average
per capita income. With the slowdown in apartment
development, the Metro Tucson apartment market should
continue to stabilize from the effects of excessive
building.
However, due to the amount of new construction many projects
are feeling the impact and have sacrificed rents to to
maintain their occupancy levels. The following summarizes
the current physical occupancy level at some of the
competitive properties.
<TABLE>
<CAPTION>
CURRENT PHYSICAL
APARTMENT COMPLEX YEAR BUILT NO. OF UNITS OCCUPANCY
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tierra Catalina 1983 120 92%
L'Auberge Canyon View 1987 264 96%
Greens at Ventana 1986 265 89%
The Arboretum 1986 352 99%
Pinnacle Canyon 1995 225 98%
</TABLE>
ABSORPTION According to Market Strategies, absorption of apartment
units in the Metro Tucson area has fluctuated significantly
each quarter over the past few years. In 1990, absorption
was estimated to be about 2,741 units. The Second Quarter
1990 showed a significant decline in absorption with a
negative (2,765) units; however, this was followed by a
substantial increase in the Third and Fourth Quarters with
2,335 units, and 2,111 units, respectively. Similarly in
1991 there was a negative absorption in the Second Quarter
with a loss of (1,634) units followed by an increase in the
Third Quarter to a positive 2,315 units and in the Fourth
Quarter to 1,350 units. Overall, there was a slight decline
in the overall annual absorption with 2,679 units in 1991.
In 1992, the first two quarters reflected a negative
absorption of (1,444) units; however, this rebounded in the
second half of the year with 2,289 units. Overall, 1992
reflected a total absorption of 845 units. This was down
from 1990 and 1991. In 1993, the second quarter was again
one of the worst in terms of absorption. Overall absorption
for the year was 1,408 units. In 1994, the absorption
dropped somewhat to 1,084 units with the Second Quarter
reporting a negative absorption of (1,211) units. These
figures are according to Market Strategies. However,
according to RealData, Inc., the annual absorption in 1994
was a negative (424) units. In 1995, RealData, Inc. reported
another devastating year with a negative (447) units and the
second quarter reported the worst figures. The first half of
1996 appears to have improved slightly over 1995 when
comparing the first two quarters of the year; however, it
reported a negative absorption of (667) units. Beginning in
the Third Quarter 1996 the trend changed. Absorption was
1,561 in the Third Quarter 1996 and 755 in the Fourth
Quarter. First Quarter 1997 also showed significant
absorption of 755 units. However, Second Quarter again
showed a negative absorption of 866 units. The Third Quarter
rebounded with positive absorption of 1,135 units. Overall
the last four
15
<PAGE>
quarters showed positive absorption of 1,779 units, which is
the best performance since 1991.
RENTAL RATES The average rental rate of all projects in the Metro area
was $0.68 per square foot as of the Third Quarter of 1997.
The rents on the various unit types increased approximately
1.5 percent in the year ending Third Quarter 1997 from 1996.
The following summarizes the average rent per square foot by
unit type excluding utilities for the Third Quarter 1997.
<TABLE>
<CAPTION>
AVERAGE RENT/SF EXCLUDING UTILITIES
------------------------------------------------------------------------------------------------------
CATALINA
UNIT TYPE METRO TUCSON NORTHWEST FOOTHILLS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Studio $0.82 $0.82 $0.93
1BR/1BA 0.72 0.74 0.78
1BR/1BA/DEN 0.62 ---- 0.62
2BR/1BA 0.65 0.67 0.74
2BR/2BA 0.65 0.62 0.69
3BR/2BA 0.64 0.67 0.71
</TABLE>
The average rents on all unit types is greater in the
Catalina Foothills submarket than the overall Metro area and
is the second highest of all submarkets (exception
University). Given the quality, desirable location, and
amenities, apartment rents in the Catalina Foothills
submarket have historically been the highest in the area.
The Northwest area has tracked relatively close to the
citywide average. However, due to the amount of new
construction, rents are not expected to increase over the
next year. A summary of the current average asking rent per
square foot for several of the subject's competitive
projects follows.
<TABLE>
<CAPTION>
AVERAGE UNIT AVERAGE ASKING
PROPERTY SIZE/SF RENT/SF
------------------------------------------------------------------------------------------
<S> <C> <C>
Tierra Catalina 1,172 $0.61
L'Auberge Canyon View Ventana 1,019 $0.82
The Greens at Ventana Canyon 1,011 $0.80
The Arboretum 846 NA
Villa Sin Vacas 1,028 NA
Colonia Del Rio 1,010 NA
Boulders at La Reserve 999 NA
La Reserve Villas 927 NA
Legends at La Paloma 1,013 NA
Skyline Bel Aire 1,116 NA
San Ventana 1,067 NA
Pinnacle Canyon 1,107 $0.72
</TABLE>
CONCLUSION In 1995, vacancies for the Tucson Metro area began to
increase after several years at low levels. As of the Third
Quarter 1995, the overall vacancy level was 7.9 percent up
from 4.0 percent at the same period in 1994. The vacancy
rate for Third Quarter 1996 was 9.38 percent. The Third
Quarter 1997 figures show a decrease to 8.66 percent,
reflecting a return to stabilization. Absorption levels
began to decline in 1994 with negative absorption in 1995
due to the significant amount of new construction primarily
in the Northwest and Catalina Foothills submarkets.
16
<PAGE>
Absorption levels appear to be stabilizing in 1997 although
there remains a significant amount of new construction. The
Northwest and Catalina Foothills submarkets have
traditionally been healthier than the overall citywide
market with a lower vacancy and generally higher rents.
However, there is a considerable amount of vacant land zoned
for multifamily development in these submarkets and a number
of new projects have been developed with a few more planned.
This could pose a threat to the market if supply is not
carefully monitored in keeping pace with demand. Also, the
single-family residential market provides an alternative to
the housing rental market. Home loan interest rates have
been reasonable and many potential home buyers appear to be
electing home ownership.
17
<PAGE>
[SKYLINE VILLAGE SITE PLAN APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject is located along the west side of North
Campbell Avenue, just north of East Skyline Drive in
Tucson, Pima County, Arizona. It is more specifically
situated at 6651 North Campbell Avenue.
SIZE AND SHAPE The site is irregularly shaped with a total of 10.2356
acres or 445,863 square feet. It has frontage on North
Campbell Avenue.
ACCESS AND VISIBILITY The subject property is located along the west side of
North Campbell Avenue, just north of East Skyline
Drive. The site is situated about ten miles northeast
of the Tucson Central Business District (CBD) and about
12 miles northeast of the Tucson International Airport.
Access to the subject from these major activity centers
is provided by a number of north/south and east/west
thoroughfares. From both the CBD and the airport, one
of the most direct routes is by heading north on
Campbell Avenue just past East Skyline Drive to the
subject property. Other major north/south
thoroughfares, which lead to East Skyline Drive or
Sunrise Drive, are 1st Avenue, Oracle Road, and Swan
Road.
Immediate access to the subject is provided by North
Campbell Avenue. The main entry to the complex is off
this thoroughfare. There are two entrances along the
north/south artery providing access.
North Campbell Avenue - a two-laned, asphalt-paved,
north/south artery with asphalt-paved shoulders.
ZONING The subject property is zoned "TR" Transitional under
the City of Tucson Zoning Ordinance. Permitted uses
include single-family dwellings, accessory buildings,
churches, parks, public or private schools,
agricultural uses, duplex dwellings, multiple
dwellings, recreational facilities, mobile housing,
colleges, community service agencies, libraries or
museums, hospitals, clinics, clubs, private clubs,
community storage garages, child care centers,
professional offices, real estate offices,
motel/hotels, and research facilities.
UTILITIES The site is serviced by the following authorities.
Electricity.....................Tucson Electric Company
Telephone....U.S. West Communications and Mountain Bell
Water....................................City of Tucson
Sanitary and Storm Sewers...................Pima County
TERRAIN AND DRAINAGE The site is sloping and at street grade. Upon site
inspection, the drainage appeared to be adequate.
According to the Federal Flood Insurance Rate Maps the
subject lies within Zone C. Zone C is defined as "areas
of minimal flooding."
SOIL AND SUBSOIL
CONDITIONS No soil engineer's report was available to the
appraisers, and no soil tests were performed. The soils
are assumed to have an adequate load-bearing capacity.
18
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal any
easements adversely affecting the subject property. For
purposes of this assignment, the appraisers assume that
the subject's value or marketability is not adversely
affected by the typical utility easements, which
traverse the property.
RELATIONSHIP OF SITE
TO SURROUNDINGS North: Manzanita School
South: Vacant land
East: The Foothills subdivision (residential)
West: Residential
REAL ESTATE TAXES Real estate taxes and assessments for the Skyline
Village Apartments are coordinated by the Pima County
Assessor's office. The property is subject to a number
of different taxing authorities and the taxes are
calculated two ways. A portion of the total tax
liability is calculated based on the "limited cash
value" intended to create a ceiling on the assessment.
The limited cash value is multiplied by a 10 percent
assessment ratio then multiplied by the rate per $100
of assessed value. This is considered the primary tax
rate and includes the school district, community
college, county, and state taxes. In 1997, the total
tax rate is 9.7932 per $100 of assessed value. The
remainder of the tax liability is based on the "full
cash value" or current market value. This value is
multiplied by 10 percent and then multiplied by the tax
rate of 5.0276 per $100 of assessed value. Full cash
value assessments are the secondary assessments and
apply to various taxing authorities including bonds,
school district, library, and special districts.
The following is a summary of the tax parcel number
used to identify the subject property, the 1997 primary
and secondary assessed values, and the total tax for
1997.
<TABLE>
<CAPTION>
PRIMARY ASSESSED SECONDARY ASSESSED
TAX PARCEL NO. VALUE (LIMITED) (FULL CASH) VALUE TOTAL TAX
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
1080205503 $730,800 $730,800 $106,384.02
</TABLE>
The 1997 real estate taxes were $106,384 based on the
above assessment. Additionally there is a personal
property tax of $1,763.85 and the total taxes equate to
$108,148. This amount is grown at 4 percent to reflect
the 1998 estimated taxes at $112,474 or $0.67 per
square foot of livable area.
CONCLUSION The subject site is irregularly shaped containing
10.2356 acres with sloping terrain. There are a few
easements, which traverse the property; however, none
are believed to adversely affect the site. The parcel
is easily accessible with frontage on North Campbell
Avenue. The subject is zoned "TR" Transitional, by the
City of Tucson, and it is believed to be in compliance.
The size and shape of the site provide flexibility for
a variety of development.
19
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 10.2356-acre tract of land, is
improved with a two-story apartment project known as
Skyline Village. The improvements consist of 168
apartment units contained in 18 buildings constructed
in 1985. Also situated on the site is a clubhouse,
swimming pool, tennis court, and covered parking.
There are five basic floor plans for the 168 apartment
units. The basic features of these floor plans are as
follows:
<TABLE>
<CAPTION>
NO. OF
UNITS DESCRIPTION SIZE (SF) TOTAL SF
--------------------------------------------------------------
<S> <C> <C> <C>
48 1BR/1BA 800 38,400
44 1BR/1BA Den 1,000 44,000
60 2BR/2BA 1,100 66,000
6 2BR/2BA TH 1,100 6,600
10 2BR/2BA TH 1,250 12,500
--- ----- --------
168 997 167,500
</TABLE>
The total net rentable area of 167,500 square feet
within 168 apartment units results in an average of 997
square feet per unit. There are a total of 92 one-
bedroom units and 76 two-bedroom units. Please note the
total net rentable area and individual unit sizes have
changed slightly from previous reports based on the
most recent subject rent rolls received from the
property owner.
The land area is 10.2356 acres, resulting in a density
of 16.41 units per acre. The parking consists of
approximately 270 spaces with 160 covered, which is
1.61 spaces per unit. The parking ratio is within
industry standards.
A more detailed description is as follows:
FOUNDATION Steel reinforced concrete slab with perimeter and
interior wire mesh. Second floors include wood frame,
plywood subfloor, and lightweight concrete.
FRAMING Wood.
ROOF Pitched red tile and flat built-up.
EXTERIOR Masonry with painted stucco finish.
SECOND-STORY ACCESS Metal stair rails with concrete risers and landings.
BALCONIES Concrete and concrete supports with metal handrails.
INTERIOR FINISHES
Living, Dining,
and Bedrooms: Painted and textured gypsum board walls and ceilings,
carpeting over pad, hollow-core wood doors, miniblinds,
incandescent lighting, and fireplaces.
20
<PAGE>
Bathrooms: Vinyl tile floor coverings, porcelain tub with ceramic
tile shower, textured and painted gypsum board walls
and ceilings, fiberboard vanities with laminate
counters, porcelain sink, and commode.
Kitchens: Vinyl tile floor coverings, formica countertops,
laminated fiberboard cabinets. Kitchen equipment
includes a range/oven, refrigerator, disposal,
microwave oven, and dishwasher.
PLUMBING Adequate and meets city code.
HVAC Central air-conditioning and heating provided by
individual, compressor units.
ELECTRICAL Switch-type circuit breakers, 120/240-volt, single-
phase service with each unit individually metered. Each
unit has adequate electrical outlets and ceiling-
mounted light fixtures. The copper wiring is in
compliance with city code.
INSULATION Batt-type in ceilings and walls.
SITE IMPROVEMENTS Asphalt-paved parking, covered metal carports, pole
lighting, concrete sidewalks, a swimming pool,
clubhouse, and tennis court.
LANDSCAPING Extensive mature landscaping.
AGE AND CONDITION The effective age of the subject is 12 years which
approximates the actual age and the remaining economic
life is estimated to be 28 years.
SITE AREA 10.2356 acres or 445,863 square feet.
DEFERRED MAINTENANCE Visual inspection of the property as well as estimates
by the management revealed several areas of deferred
maintenance. Some of these include general interior and
exterior repairs, HVAC repairs, pool repairs, parking
lot repairs, roof replacement, etc. The deferred
maintenance was estimated at about $120,100 and rounded
to $125,000.
CONCLUSION Upon a detailed inspection of the property, the
facility is believed to be of good quality and
workmanship. The design and layout are felt to be
functional and aesthetically appealing. The project has
been well maintained and has an ongoing maintenance
program; however, there are a few items previously
listed as deferred maintenance. Overall, the apartments
are in reasonably good shape and we believe the
effective age of the improvements is about 12 years
with a remaining economic life of 28 years.
21
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of clubhouse/leasing office
[PICTURE APPEARS HERE]
Interior view of clubhouse/leasing office
<PAGE>
[PICTURE APPEARS HERE]
View of swimming pool
[PICTURE APPEARS HERE]
View of tennis courts
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 111 living room (model)
[PICTURE APPEARS HERE]
Interior view of Unit 111 kitchen (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 111 bedroom (model)
[PICTURE APPEARS HERE]
Exterior view of units
<PAGE>
[PICTURE APPEARS HERE]
View of interior street
<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, Tenth Edition,
----------------------------
defines highest and best use as:
"The reasonably probable and legal use of vacant land
or improved property, which is physically possible,
appropriately supported, financially feasible, and that
results in the highest value."
There are two distinct types of highest and best use. The
first type is the highest and best use of the land as if
vacant. The second type is the highest and best use of a
parcel as improved. This pertains to the use that should be
made of the property as it currently exists.
In determining the highest and best use of a site, four
items must be considered: possible physical limitations of
the site, possible legal or permissible uses, and what uses
are financially feasible, and produce the maximum return on
the site. A careful neighborhood and site analysis is
essential in estimating the highest and best use of the site
as if vacant.
The following is our analysis of the highest and best use as
it pertains to the subject property and according to the
four essential tests.
SUBJECT PROPERTY
AS IF VACANT LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site is zoned "TR" Transitional under the City
of Tucson Zoning Ordinance. This district is intended to
provide for development of single-family dwellings,
accessory buildings, churches, parks, public or private
schools, agricultural uses, duplex dwellings, multiple
dwellings, recreational facilities, mobile housing,
colleges, community service agencies, libraries or museums,
hospitals, clinics, clubs, private clubs, community storage,
garages, child care centers, professional offices, real
estate offices, motel/hotels, and research facilities.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability, flood
plain, and surrounding patterns.
The subject site is irregularly shaped and encompasses
10.2356 acres, allowing for reasonable flexibility in
developing the site. It has frontage along the west side of
North Campbell Avenue. The topography of the site is sloping
and drainage appears to be good. Development in the
immediate area is primarily multifamily and single-family
residential. The area appears most conducive to multifamily
development given the surrounding projects and terrain. The
subject site has adequate utility capacity, enjoys a
functional size and shape, and is not affected by any
adverse easements or restrictions.
22
<PAGE>
After considering all of the physical characteristics of the
site noted above plus other data in the Site section of this
appraisal report, physically possible land uses are limited
to multifamily development. The primary deterrents to other
types of development were the subject's location, terrain,
zoning, and surrounding use patterns which helped to
eliminate other site improvements such as commercial,
single-family, and office development from our analysis.
FINANCIAL FEASIBILITY - In view of the present market
conditions, financial feasibility is directly proportional
to the amount of net income that could be derived from the
subject. After having eliminating all other development from
our analysis, the financial feasibility of multifamily
development must be tested.
The subject is located in the Catalina Foothills submarket,
which is experiencing an overall vacancy as of Third Quarter
1997 of 7.02 percent. Physical vacancy at the subject
property is 7 percent. The Catalina Foothills submarket
vacancy level has increased significantly from the 2.4
percent reported in the Third Quarter of 1994 due to an
abundance of new apartment construction. In the early
1990's, rental rates had been increasing at a strong pace;
however, with the large number of new units under
construction or recently completed, rental rates have
stabilized. The average rents in the submarket range from
$0.62 to $0.93 per square foot depending on the size of the
unit. The average rent at the newer complexes typically
ranged from $0.75 to $1.00 per square foot, which is within
the feasible range at which to build. However, as previously
mentioned, the market has experienced an abundance of new
construction and the new projects are offering rent
concessions of up to one month free. Therefore, given the
number of units either recently completed or under
construction, additional apartment construction does not
appear to be feasible at this time until the supply has been
absorbed.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate, the subject's location, and financial
feasibility of certain land uses, more than likely a present
development of the land would not produce a positive cash
flow for multifamily development which would be sufficient
to satisfy the developer of the project. However, due to the
subject's location and the socio-economic status of the
neighborhood, we are of the opinion that multifamily
apartment units conducive to the subject site would produce
the highest net return over the longest period of time. The
site's location along the west side of North Campbell Avenue
gives it good access and visibility, within an affluent
single-family residential area, which is conducive to
apartment development. Therefore, after considering the
alternatives, we believe the highest and best use of the
site, as vacant, is to hold for future apartment
development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons. First
to identify the use of the property that is expected to
produce the highest overall return per invested dollar, and
the second reason is to help in identifying comparable
properties. The four tests or elements are also applied in
this analysis.
LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site utilized for apartment use is reasonable
since it is a legal use.
23
<PAGE>
PHYSICAL POSSIBILITY - Based on the subject's land size
(10.2356 acres), terrain, configuration, and the
improvement's positioning relative to the subject site, it
is felt that it would not be physically possible to increase
the size of the current improvements and remain competitive.
The density of the subject is approximately 16.41 units per
acre. Thus, based on the aforementioned factors, it is
judged that the improvements represent the largest amount of
space that could currently be developed under current site
conditions.
FINANCIALLY FEASIBLE - The discussion of the financial
feasibility of the subject, as if vacant, would also apply
to the test as improved. Based on the economic conditions
for alternative market segments, it was concluded that the
subject's present improvements are satisfactory to fulfill
this test.
In the Income Approach section of this report, the
appraisers estimated income and expenses for the subject.
The net operating income derived suggests that the property
is capable of generating income in excess of operating
expenses, exclusive of return on investment requirements and
debt service. The net operating income was capitalized into
a value indication that was supported by the Sales
Comparison Approach. Additionally, the value indication is
in excess of the estimated value of the land. This indicates
that the subject "as improved" is a feasible entity.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that under
competent and prudent management, the subject could produce
an adequate return to substantiate its existence.
Based on the subject's current use, we have determined that
as a multifamily apartment complex, it positively
contributes to the value of the site, and as a result is
presently developed according to its highest and best use.
However, the subject does not represent the "optimum" use
due to some deferred maintenance.
24
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of the
physical improvements. This value is derived by estimating
the replacement cost new of the improvements and, when
appropriate, deducting the reduction in value caused by
accrued depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that buyers
judge the value of an existing structure by comparing it to
the value of a newly constructed building with optimal
functional utility, assuming no undue cost due to delay.
Thus, the appraiser must estimate the difference in value
between the subject property and a newly constructed
building with optimal utility.
The Cost Approach was not used as this method of valuation
is typically the least reliable indicator of value in older
projects such as the subject since estimates of depreciation
are difficult to accurately measure in the marketplace.
Additionally, it is often the perception of investors that
cost does not necessarily equate to value and the purchase
price is not typically based on construction costs.
SALES COMPARISON
APPROACH This approach produces an estimate of value by comparing the
subject property to sales and/or listings of similar
properties in the immediate area or competing areas. The
principle of substitution is employed and basically states
when a property is replaceable in the market, its value can
be set by the cost of acquiring an equally desirable and
comparable property. This technique is viewed as the value
established by informed buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is capitalization of
the net income, which the subject property will produce
during the remaining economic life of the improvements. This
process consists of two techniques. The first technique
estimates the gross income, vacancy, expenses, and other
appropriate charges. The resulting net income or net cash
flow is then capitalized. The second technique projects the
gross income, vacancy, expenses, other appropriate charges,
net income, and cash flow over a projected holding period.
The resulting cash flow and reversion (future value) are
discounted at an appropriate rate and added in order to
arrive at an indication of current value from the standpoint
of an investment. These methods provide an indication of the
present worth of anticipated future benefits (net income or
cash flow) to be derived from ownership of the property.
Both techniques were utilized in analyzing the subject
property.
SUMMARY The appraisers, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraisers' judgment
concerns the applicability of alternative tools of analysis
to the facts of the problem, the data and information needed
to apply these tools, and the selection of the analytical
approach and data most responsive to the problem in
question.
25
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or may point to a more reliable indication of the value of
the property being appraised than the other approach. In
some instances, because of the inadequacy or unavailability
of data, one of the approaches may be given little weight in
the final value estimate.
26
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TUCSON AREA
IMPROVED SALES SUMMARY
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG/UNIT AT SALE /UNIT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Pinnacle Canyon 11/97 $11,727,000 1995 225 228,931 98% N/A
7050 E. Sunrise Drive 1,017
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
2 Pinnacle Heights 11/97 $16,364,000 1995 310 339,364 97% N/A
7990 E. Snyder Road. 1,095
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
3 Foothills 11/97 $ 7,600,000 1984 270 167,910 97% N/A
5441 N. Swan Road 622
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
4 Sandstone 06/97 $ 8,849,000 1986 330 181,167 100% $ 4.88
405 E. Prince Road 549 $2,682
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
5 Hilands I 06/97 $12,500,000 1985 426 234,324 95% $ 5.87
5755 E. River Road 550 $3,228
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
6 Windsail 03/97 $10,037,000 1985 300 243,952 94% $ 4.11
7300 N. Mona Lisa Road 813 $3,346
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
7 Cobble Creek 01/97 $ 9,250,000 1980 301 217,382 91% N/A
7700 E. Speedway Blvd. 722
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
8 Sundown Village 12/96 $11,350,000 1984 330 279,758 90% $ 3.97
8215 Oracle Road 848 $3,367
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
9 Rio Cancion 12/96 $17,400,000 1983 379 343,370 90% $ 4.77
2400 E. River Road 906 $4,324
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
10 Sonoran Terraces 08/96 $18,750,000 1985 374 416,256 90% $ 4.23
7887 N. La Cholla Blvd. 1,113 $4,710
Tucson, AZ
- ----------------------------------------------------------------------------------------------------------------------
SUBJECT 1985 168 165,700 93% $ 4.33
Skyline Village 977 $4,313
6651 N. Campbell Avenue
Tucson, Az
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------
SALE PER PER OVEALL
NO. NAME/LOCATION SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Pinnacle Canyon $51.23 $52,120 N/A 5.69
7050 E. Sunrise Drive
Tucson, AZ
- ------------------------------------------------------------------------------
2 Pinnacle Heights $48.22 $52,787 N/A 5.60
7990 E. Snyder Road.
Tucson, AZ
- -------------------------------------------------------------------------------
3 Foothills $45.26 $28,148 N/A 5.38
5441 N. Swan Road
Tucson, AZ
- -------------------------------------------------------------------------------
4 Sandstone $48.84 $26,815 10.0% N/A
405 E. Prince Road
Tucson, AZ
- -------------------------------------------------------------------------------
5 Hilands I $53.34 $29,343 11.0% N/A
5755 E. River Road
Tucson, AZ
- -------------------------------------------------------------------------------
6 Windsail $41.14 $33,457 10.0% 5.74
7300 N. Mona Lisa Road
Tucson, AZ
- -------------------------------------------------------------------------------
7 Cobble Creek $42.55 $30,731 N/A 6.35
7700 E. Speedway Blvd.
Tucson, AZ
- -------------------------------------------------------------------------------
8 Sundown Village $40.57 $34,394 10.09% 5.53
8215 Oracle Road
Tucson, AZ
- -------------------------------------------------------------------------------
9 Rio Cancion $50.67 $45,910 9.42% 6.31
2400 E. River Road
Tucson, AZ
- -------------------------------------------------------------------------------
10 Sonoran Terraces $45.04 $50,134 9.39% 6.59
7887 N. La Cholla Blvd.
Tucson, AZ
- -------------------------------------------------------------------------------
SUBJECT
Skyline Village
6651 N. Campbell Avenue
Tucson, Az
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
The Sales Comparison Approach is considered a good valuation
method in the event that a sufficient number of similar and
recent transactions can be found and accurately verified.
The key to the Sales Comparison Approach is that a
sufficient number of comparable sales be present to reflect
an accurate indication of value. In such an event, market
value can be derived directly from the sales, since all
complexities involved are properly weighed according to
their significance to actual buyers and sellers.
This approach is based upon prices paid in actual market
transactions. It is a process of correlating and analyzing
recently sold properties, which are similar to the subject.
The reliability of this technique depends upon (a) the
degree of comparability of the property appraised with each
sale, (b) the length of time since the sale, (c) the
accuracy of the sales data, and (d) the absence of unusual
conditions affecting the sale.
The comparison process must be based on sales, which
constitute acceptable evidence of motivations inherent to
the market, occurring under similar market conditions, of
similar or reasonably similar apartment projects. These
projects were selected since they are reasonably comparable
to the subject property. A map and a summary of the
comparable sales can be found on the preceding pages. The
sales ranged in time from August 1996 to November 1997.
Reference is made to the individual sales data included in
the Addenda section of this report.
In our analysis of the sales data, important considerations
as to comparability were condition of the property, gross
income when combined with percent (%) occupied at sale date,
unit size, terms of sale, location, and motivation. The
sales provide units of comparison, which can be adjusted and
then applied, to the subject to derive an estimate of value.
Because these individual factors are difficult to quantify,
we compared the improved sales based on net operating income
(NOI) per square foot and per unit. Theoretically, the NOI
takes into consideration the various physical factors, which
influence value. An analysis of NOI likewise considers
economic differences in each improved property sale because
income is also a function of the current market. Thus, with
this analysis, all the factors affecting a sale can be
reduced to the common denominator of net operating income.
Also, we considered the effective gross income multiplier
method. There follows a discussion of our analysis and value
conclusion by the Sales Comparison Approach.
SALES ADJUSTMENT
ANALYSIS
PROPERTY RIGHTS Property rights consists of ownership, legal estate,
economic benefits, and financial components. Our valuation
is of the leased fee estate on an all cash basis. Since all
the sales were reported to be of the leased fee estate, no
adjustment was necessary.
27
<PAGE>
CASH EQUIVALENCY Standard definitions of market value include payment in
"cash or its equivalent." The equivalent includes financing
terms generally available in the market. In many cases
comparable sales carry atypical financing terms that require
an adjustment to cash equivalency. There are basically two
areas, which may require adjustments for terms. One is the
amount of cash down payment and the other is favorable
financing or a low interest rate on the note/mortgage. Where
terms were considered to be more favorable than the market
at the time of sale, cash equivalency adjustments are made.
All of the sales used in this analysis were cash
transactions or were considered equivalent and therefore,
did not require a cash equivalent adjustment.
CONDITION OF SALE Adjustments for condition of sale usually reflect the
motivations of the buyer and the seller. Although conditions
of sale are perceived as applying only to sales that are not
arm's length transactions, some arm's length sales may
reflect atypical motivations or sale conditions due to
unusual tax considerations, sale at legal auction, lack of
exposure on the open market, etc. The sales utilized in our
analysis were not reported to be reflective of such
situations; therefore, no adjustment was necessary.
NET OPERATING
INCOME ANALYSIS In lieu of specific adjustments, we compared the improved
sales based on the net operating income (NOI) per square
foot and NOI per unit. This method presents a comparison
based on the income which a property is capable of
generating. Theoretically, the NOI takes into consideration
the various factors, which influence value such as quality,
size, amenities offered, location, age, condition etc. Thus,
these differing factors can be reduced to the common
denominator of net operating income.
The various sales reflected NOIs per square foot ranging
from $3.97 to $5.87 and NOIs per unit ranging from $2,682 to
$4,710. The subject NOI (with reserve expenses) has been
approximated at $4.33 per square foot or $4,313 per unit
from the Direct Capitalization analysis in the Income
Approach section of this report.
To estimate an adjustment for each sale, the subject's NOI
has been compared to the individual NOI of the comparable
sales. This adjustment should account for all the various
physical and economic differences in each improved property
sale as income is a function of the current market. Market
conditions should reflect perceived risk, or other factors,
which may affect value. The following chart presents the
adjustment process.
28
<PAGE>
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/SF NOI/SF NOI/SF FACTOR PRICE/SF
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $51.23 NA $4.33 NA NA
2 48.22 NA 4.33 NA NA
3 45.26 NA 4.33 NA NA
4 48.84 4.88 4.33 0.88730 43.34
5 53.34 5.87 4.33 0.73765 39.35
6 41.14 4.11 4.33 1.05353 43.34
7 42.55 NA 4.33 NA NA
8 40.57 3.97 4.33 1.09068 44.25
9 50.67 4.77 4.33 0.90776 46.00
10 45.04 4.23 4.33 1.02364 46.10
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $39.35 to $46.10 per square foot. Sales 6
and 10 have the most similar net operating incomes per
square foot and they reflect values of $43.34 and $46.10 per
square foot. Placing emphasis on these sales, tempered with
the other sales, a value of $45.00 per square foot is
estimated for the subject. From this value the $125,000 in
deferred maintenance is deducted to arrive at the "as is"
value of the subject. The calculation is shown below.
165,700 SF x $45.00/SF.......................... $7,456,500
Less Deferred Maintenance....................... (125,000)
---------
"As Is" Value via NOI/SF........................ $7,331,500
Rounded $7,300,000
<TABLE>
<CAPTION>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/UNIT NOI/UNIT NOI/UNIT FACTOR PRICE/UNIT
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $52,120 NA $4,313 NA NA
2 52,787 NA 4,313 NA NA
3 28,148 NA 4,313 NA NA
4 26,815 2,682 4,313 1.60813 43,122
5 29,343 3,228 4,313 1.33612 39,206
6 33,457 3,346 4,313 1.28900 43,126
7 30,730 NA 4,313 NA NA
8 34,394 3,367 4,313 1.28096 44,057
9 45,910 4,324 4,313 0.99746 45,793
10 50,134 4,710 4,313 0.91571 45,908
</TABLE>
After adjustments, the sales reflected a range in value for
the subject from $39,206 to $45,908 per unit. Sales 9 and 10
reflected the most similar NOI per unit to the subject and
had adjusted values of $45,793 and $45,908 per unit. Based
on all the data, we estimated a value for the subject of
$45,000 per unit. The following indication reflects an "as
is" value per unit for the subject considering the subject's
deferred maintenance.
168 units x $45,000/unit........................ $7,560,000
Less: Deferred maintenance...................... (125,000)
----------
Value via NOI Price/Unit Method................. $7,435,000
Rounded $7,400,000
29
<PAGE>
EFFECTIVE GROSS
INCOME
MULTIPLIER METHOD In addition to the NOI price per square foot and price per
unit analysis, we have employed an effective gross income
multiplier analysis to the sales based on the sales' actual
effective gross income multipliers (EGIM). Unlike the price
per unit analysis, EGIMs cannot be adjusted for dissimilar
factors when compared to the subject. Instead, certain
factors must be closely analyzed for determining
comparability of the multiplier to the subject property.
These include the timing of the sale and whether market
condition changes have occurred between the date of
valuation and the sale date, as well as occupancies and
expense ratio levels, and the comparability of the sale in
terms of its physical features and the resulting income
stream potential. Listed below are the details of the sales
we felt to be pertinent in our selection of a reasonable
EGIM for the subject. All factors were considered in our
interpretation of the data leading to the EGIM of the sales.
<TABLE>
<CAPTION>
SALE DATE OF SALE EGIM OCCUPANCY EXPENSE RATIO
--------------------------------------------------------
<S> <C> <C> <C> <C>
1 11/97 5.59 98% N/A
2 11/97 5.60 97% N/A
3 11/97 5.38 97% N/A
6 03/97 5.74 94% 42.58%
8 12/96 5.53 90% 45.86%
9 12/96 6.31 90% 40.57%
10 8/96 6.59 90% 39.48%
Subject 93% 44.08%
</TABLE>
The sales indicated EGIMs ranging from 5.38 to 6.59, with
all sales operating at or near stabilized levels. Based on
this data, we believe an EGIM of 5.8 is reasonable for the
subject considering the subject's quality and expense ratio.
Applying the 5.8 EGIM to the subject's stabilized effective
gross income, and deducting for deferred maintenance,
results in the following value indication.
5.80 x $1,276,270............................... $7,402,366
Less: Deferred maintenance...................... (125,000)
-----------
Value via EGIM Method........................... $7,277,366
Rounded $7,300,000
CONCLUSION The NOI per square foot and per unit methods presented a
value indication between $7,300,000 and $7,400,000 and the
effective gross income multiplier method indicated a value
of $7,300,000. Weight has been given to the net operating
income comparisons because this method reflects both income
and expense information. The EGIM method only accounts for
income and does not take into consideration expenses, which
can vary from property to property. Therefore, it is our
opinion that the leased fee market value of the subject
property based on the indication provided by the Sales
Comparison Approach, all cash, on an "as is" basis as of
November 30, 1997, is
SEVEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($7,400,000)
30
<PAGE>
[MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT
YEAR NO. OF AVG. UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE(SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Tiena Catalina 1983 120 1,172 92% 1BR/1BA 900 $640 0.71 Amenities include a swiming
3201 E Skyline Drive 1BR/1BA 916 680 0.74 pool, spa, tennis court,
2BR/2BA 1,207 790 0.65 clubroom, covered parking,
2BR/2BA 1,233 850 0.69 washer/dryer hook-ups,
2BR/2BA/TH 1,304 890 0.68 mocrowave, fireplace
3BR/2BA/TH 1,525 950 0.62 Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
2 L'Auberge Canyon view 1987 264 1,019 96% 1BR/1BA 724 $ 725 1.00 Amenities include a swimming
6650-55 N Kolb Road 2BR/2BA 909 775 0,85 pool, tennis court, washer/
2BR/2BA 1,049 825 0.79 dryer, microwave, fireplace,
2BR/2BA 1,095 875 0.80 jacuzzi, clubroom, and
3BR/2BA 1,223 1,010 0.82 covered parking.
3BR/2BA 1,243 1,010 0.81 Concessions: None
3BR/2BA 1,291 1,010 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Greens at Ventana 1986 265 1,011 89% 1BR/1BA/DEN 818 $ 714 0.87 Amenities include 3 swimming
5800 N Kolb Road 1BR/1BA/DEN 847 740 0.87 pools,spa, washer/dryer,
2BR/2BA 945 775 0.82 microwave,fireplace, club
2BR/2BA 974 739 0.76 room, and covered parking.
2BR/2BA 1,018 787-737 0.77-0.82 Concessions: One-half month
2BR/2BA 1,050 800 0.76 free.
2BR/2BA/DEN 1,169 914-964 0.78-0.82
2BR/2BA/DEN 1,207 950 0.79
- ------------------------------------------------------------------------------------------------------------------------------------
4 The Arboretum 1986 496 811 99% 1BR/1BA 520 475 0.91 Amenities include 3 swimming
4700 N Kolb Rd. 1BR/1BA 616 500 0.81 pools, club-room, exercise
1BR/1BA 686 510 0.74 room, laundry facilities,
1BR/1BA 767 560 0.73 washer/dryer hook-ups,
2BR/1BA 984 650 0.66 fireplace, and covered
2BRI2BA 995 710 0.71 parking. Concessions:
2BR/2BA 1,001 735 0.73 One-half month free rent.
3BR/2BA 1,200 799 0.67 $175 off if deposit on
l/st/ visit.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Villa Sin Vacas 1985 72 1,114 90's 1BR/1BA/DEN 930 835 0.90 Amenities include washer
7601 N. Calle Sin 2BR/2BA 1,195 1,050 0.88 dryer, fireplace, microwave,
Envidia 3BR/2BA 1,458 1,200 0.82 covered parking, clubhouse,
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
6 Colonia Del Rio 4601 1985 176 1,010 90's 1BR/1BA 713 560 0.79 Amenities include washer/
N. Via Entrada 1BR/1BA 796 590 0.74 dryer, microwave, pool,
lBR/1BA 1,022 655 0.64 covered parking, fireplace,
2BR/1BA 1,068 680 0.64 exercise facility,
2BR/2BA/TH 1,170 795 0.68 playground, spa Concessions:
3BR/2BA 1,345 795-810 0.59-0.60 $200 off first month's
rent
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY (Cont'd)
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT
YEAR NO. OF AVG. UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE(SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 Boulders at La 1995 240 999 N/A 1BR/1BA 725 595 0.82 Amenities include pool, spa,
Reserve 1500 E. Pusch 1BR/1BA/DEN 929 655 0.71 microwave, some fireplaces,
Wilderness 2BR/2BA 1,057 740 0.70 garages, fitness center
3BR/2BA 1,268 860 0.68 Concessions: 1/2 mo. free
rent on 1-2BR and 1 mo. free
rent on 3 BR with 12 mo.
lease.
- ------------------------------------------------------------------------------------------------------------------------------------
8 La Reserve Villas 1988 240 900 90's 1BR/1BA 697 580 0.83 Amenities include 2 pools,
10700 N. La Reserve 2BR/2BA 943 690 0.73 spa, washer/dryer,
2BR/2BA 957 750 0.78 microwave, some fireplaces,
3BR/2BA 1,111 875 0.79 fitness center, clubhouse
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
9 Legends at La Paloma 1995 312 1,034 90's 1BR/1BA 745 675 0.91 Amenities include 2 pools,
3750 E. Via Palomita 2BR/2BA 1,036 795 0.77 spa, washer/dryer,
3BR/2BA 1,258 975 0.78 microwave, fireplace,
fitness center, clubhouse.
Concessions: 1 mo. free
- ------------------------------------------------------------------------------------------------------------------------------------
10 Skyline Bel Aire 1979 136 1,125 90's 1BR/1BA/DEN 968 615 0.64 Amenities include pool, spa,
6255 Camino 2BR/2BA 1,263 815 0.65 2 tennis courts, washer/
Pimeria Alta dryer, fireplace, covered
parking, clubhouse.
Concessions: 1 BR $590/mo.;
$300 off first mo. on a
12 mo. lease and $150 off
first mo. on a 6 mo. lease.
- ------------------------------------------------------------------------------------------------------------------------------------
11 Pinnacle Canyon 1995 225 1,017 98% 1BR/1BA 795 650 0.82 Amenities include pool, spa,
7050 E. Sunrise 1BR/1BA 840 675 0.80 washer/dryer, microwave,
Road 2BR/2BA 1,124 775 0.69 built in TV, garages
2BR/2BA 1,152 800 0.69 available, clubhouse,
3BR/2BA 1,351 935 0.69 exercise facility,
computer center
Concessions: 1 mo. free for
12 mo. lease.
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT PROPERTY 1985 168 997 91% 1BR/1BA 800 550 0.69 Amenities include a
Skyline Village 1BR/1BA/DEN 1,000 650 0.65 swimming pool, tennis court,
6651 N Campbell 2BR/2BA 1,100 750-800 0.68--0.73 clubroom, laundry facility,
Avenue 2BR/2BA/TH 1,100 850 0.77 and covered parking.
2BR/2BA/TH 1,250 850 0.68 Concessions: $250 off the
first month's rent.
====================================================================================================================================
</TABLE>
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of its
quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the neighborhood
based on past history and present conditions. Vacancies are
then deducted to arrive at effective gross income. Estimated
annual expenses are deducted from the effective gross
income, resulting in an indication of net operating income
before debt service. From the estimated net annual income,
annual debt service and deferred maintenance (if
applicable), are subtracted to obtain annual cash flow to
equity. This cash flow can be capitalized into an indication
of equity value by direct capitalization utilizing an
overall equity rate, or if debt does not exist, an overall
capitalization rate. It may also be projected into the
future over a selected but appropriate holding period, and
discounted along with the anticipated equity reversion at
the market discount rate and added in order to arrive at the
net present equity value for the subject property. In either
method, the present mortgage balance (if applicable) would
be added to the equity value to obtain the total value of
the property. Since our valuation is on a cash basis, no
mortgages were considered. The appraisers have utilized both
methods in valuing the subject property on an all cash
basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental income
from the various rental units, as well as laundry income,
forfeited security deposits, and miscellaneous income.
Information provided by the on-site leasing agents indicated
the following current rent schedule:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------
TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO. TOTAL
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1BR/1BA 48 800 $550 $0.69 $ 26,400
lBR/1BA/Den 44 1,000 650 0.65 28,600
2BR/2BA 59 1,100 750 0.68 44,250
2BR/2BA 1 1,100 800 0.73 800
2BR/2BA/TH 6 1,100 850 0.77 8,500
2BR/2BA/TH 10 1 250 850 0.68 5,100
--- ----- ---- ----- --------
168 997 $676 $0.68 $113,650
</TABLE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
general area. For the purpose of this analysis, we have
considered twelve apartment complexes that were found to be
most comparable. They range in total size from 140,644 to
269,048 square feet, in
31
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUBJECT - RENT ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT AVG. AVG.
UNIT TYPE SIZE (SF) RENT/MONTHLY RENT/MONTHLY COMPARABILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT lBR/lBA 800 $550 $0.69
L'Auberge Canyon View The lBR/lBA 724 725 1.00 Superior
Greens at Ventana lBR/lBA/DEN 818 714 0.87 Superior
Tierra Catalina lBR/lBA 900 640 0.71 Comparable
The Arboretum 1BR/lBA 767 560 0.73 Comparable
Colonia Del Rio 1BR/lBA 796 590 0.74 Comparable
Boulders at La Reserve lBR/lBA 725 595 0.82 Superior
La Reserve Villas 1BR/lBA 697 580 0.83 Superior
Legends at La Paloma lBR/1BA 745 675 0.91 Superior
Pinnacle Canyon 1BR/1BA 795 650 0.82 Superior
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT lBR/lBA/DEN 1,000 650 0.65
Tierra Catalina lBR/lBA 916 680 0.74 Comparable
The Arboretum 2BR/lBA 984 650 0.66 Comparable
Villa Sin Vacas lBR/lBA/DEN 930 835 0.90 Superior
Colonia Del Rio lBR/1BA 1,022 655 0.74 Comparable
Boulders at La Reserve lBR/lBA/DEN 929 655 0.71 Comparable
Skyline Bel Aire lBR/lBA/DEN 968 615 0.64 Comparable
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,100 750-800 0.68-.73
L'Auberge Canyon View 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Comparable
Tierra Catalina 2BR/2BA 1,207 790 0.65 Comparable
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/2BA 1,068 680 0.64 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Comparable
La Reserve Villas 2BR/2BA 957 750 0.78 Comparable
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Comparable
Pinnacle Canyon 2BR/2BR/2BA 1,124 775 0.69 Comparable
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,100 850 0.77
L'Auberge Canyon 2BR/2BA 1,095 875 0.80 Comparable
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Comparable
Tierra Catalina 2BR/2BA 1,207 790 0.65 Inferior
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/2BA 1,068 680 0.64 Inferior
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Inferior
La Reserve Villas 2BR/2BA 957 750 0.78 Comparable
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Comparable
Pinnacle Canyon 2BR/2BA/TH 1,024 775 0.69 Inferior
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA/TH 1,250 850 0.68
L'Auberge Canyon View 2BR/2BA/TH 1,243 1,010 0.81 Superior
The Greens at Ventana 2BR/2BA/TH 1,207 950 0.79 Superior
Tierra Catalina 3BR/2BA 1,304 890 0.68 Comparable
Arboretum 2BR/2BA/TH 1,200 799 0.67 Comparable
Colonia Del Rio 3BR/2BA 1,170 795 0.64 Comparable
Boulders at La Reserve 3BR/2BA 1,268 860 0.68 Comparable
La Reserve Villas 3BR/2BA 1,111 875 0.79 Comparable
Legends at La Paloma 2BR/2BA 1,258 975 0.78 Superior
Skyline Bel Aire 3BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 3BR/2BA 1,351 935 0.69 Comparable
====================================================================================================================================
</TABLE>
<PAGE>
average unit size from 846 to 1,172 square feet, and in
physical occupancy from 89 to 99 percent. The comparable
rentals are summarized on the previous page.
All of the comparables surveyed were located within the
subject's general vicinity. The comparables average rent
ranged from $0.61 to $0.82 per square foot. Rent Comparables
1, 4, and 6 are believed to be most comparable to the
subject overall, specifically, in terms of overall physical
condition, location, rental rates, and the amenities
offered.
It is important to note that these rents are reflective of
the current market. The Tucson area is somewhat seasonal and
rents do not tend to be increased during the summer months.
Also, a number of new units within the market have recently
been completed and more are under construction; therefore,
rents are not expected to increase over the short term. In
fact, rent concessions are reportedly being offered. The
current asking average monthly rent for the subject is $0.68
per square foot and the actual contract rents average about
$0.63 per square foot.
After considering each of the aforementioned factors,
including the subject's historical performance, we are of
the opinion that the subject's asking rentals are
reasonable. Given the subject's 93 percent physical
occupancy and actual rents, the projected market effective
rental rates for the subject are summarized as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
--------------------------------------------------------------------
TOTAL SIZE TOTAL RENT/ MO. RENT/
UNIT TYPE UNITS (SF) (SF) MONTH TOTAL SF/MO.
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1BR/1BA 48 800 38,400 $550 $ 26,400 $0.69
1BR/1BA/Den 44 1,000 44,000 650 28,600 0.65
2BR/2BA 59 1,100 64,900 750 45,000 0.68
2BR/2BA 1 1,100 1,100 800 800 0.73
2BR/2BA/TH 6 1,100 6,600 850 5,100 0.77
2BR/2BA/TH 10 1,250 12,500 850 8,500 0.68
--- ----- ------- ---- -------- -----
168 997 167,500 $676 $113,650 $0.68
</TABLE>
Gross Annual Rental Income: $113,650 x 12 months =
$1,363,800
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, late charges, and miscellaneous items.
Other income in 1991 was reported at $34,062 or $0.21 per
square foot. In 1992, other income dropped to $25,501 or
$0.16 per square foot, in 1993 it was $26,394 or $0.16 per
square foot, in 1994 it was $28,391 or $0.17 per square
foot, 1995 it was $25,233 or $0.15 per square foot, in 1996
it was $0.16 per square foot. The 1997 figure is $22,348 or
$0.13 per square foot. Based on our experience with similar
type properties and the actual performance of the subject,
we have estimated other income at $23,450 or $0.14 per
square foot.
From this we have arrived at our estimate of scheduled gross
income as if 100 percent occupied:
<TABLE>
<S> <C>
Gross Rental Income $1,363,800
Other Income ($0.14/SF) 23,450
----------
Total Potential Gross Income $1,387,250
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
SKYLINE VILLAGE
HISTORICAL EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1991 ACTUAL 1992 ACTUAL 1993 ACTUAL 1994 ACTUAL 1995
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.59 $570 $0.65 $759 $0.55 $534 $0.58 $567 $0.60 $580
Insurance 0.07 69 0.05 57 0.07 70 0.06 63 0.07 69
Personnel 0.65 625 0.64 753 0.66 638 0.48 467 0.50 482
Utilities 0.59 575 0.50 588 0.60 577 0.41 396 0.42 404
Repairs & Maintenance 0.39 376 0.38 451 0.42 407 0.35 342 0.46 444
Contract Services 0.18 176 0.19 222 0.21 200 0.11 108 0.10 102
General Administrative 0.12 113 0.26 308 0.23 222 0.19 187 0.16 158
Management 0.34 326 0.36 407 0.34 325 0.36 352 0.38 364
----- ------ ----- ------ ----- ------ ----- ------ ----- ------
TOTAL $2.93 $2,830 $3.03 $3,545 $3.08 $2,973 $2.56 $2,482 $2.68 $2,602
================================================================================================================================
<CAPTION>
- --------------------------------------------------------------------
EXPENSE ACTUAL 1996 ACTUAL 1997
CATEGORY PER SF PER UNIT PER SF PER UNIT
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Taxes $0.66 $639 $0.60 $595
Insurance 0.07 72 0.06 61
Personnel 0.52 517 0.57 567
Utilities 0.42 420 0.39 387
Repairs & Maintenance 0.45 450 0.43 431
Contract Services 0.10 95 0.09 93
General Administrative 0.16 164 0.21 212
Management 0.36 356 0.35 350
----- ------ ----- ---
TOTAL $2.74 $2,713 $2.70 26%
====================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================
COMPARABLE
EXPENSE ANALYSIS
- ------------------------------------------------------------------------------------------------------------
COMPARABLE 1 2 3 BRA PROJECTIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Year 1997 1997 1997 1998
NRA 116,084 140,564 58,018 167,500
No. units 120 120 60 168
Year Built 1986 1983 1986 1985
Average Unit Size(SF) 967 1171 967 977
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
EXPENSE CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.59 $570 $0.65 $759 $0.55 $534 $0.67 $669
Insurance 0.07 69 0.05 57 0.07 70 0.07 73
Personnel 0.65 625 0.64 753 0.66 638 0.58 581
Utilities 0.59 575 0.50 588 0.60 577 0.49 489
Repairs & Maintenance 0.39 376 0.38 451 0.42 407 0.48 477
Contract Services 0.18 176 0.19 222 0.21 200 0.14 140
General Administrative 0.12 113 0.26 308 0.23 222 0.18 176
Management 0.34 036 0.36 407 0.34 325 0.37 5.00%
----- ------ ----- ------ ----- ------ ----- ------
TOTAL EXPENSES $2.93 $2,830 $3.03 $3,515 $3.08 $2,973 $2.98 $2,976
============================================================================================================
</TABLE>
<PAGE>
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for
an apartment complex will be in the 3 to 7 percent
range. This covers the time lag during re-leasing and
normal refurbishing of apartment units, and the loss
of income resulting from bad debt or other vacancies.
According to our market analysis, the subject's
Catalina Foothills area had a physical vacancy of
7.02 percent in the Third Quarter 1997 and the
overall market was reportedly at 8.66 percent.
Quarterly vacancies tend to fluctuate as a result of
a seasonal decline in demand during the summer
months. The vacancy level for both the overall market
and the submarket increased significantly in 1995 due
to a number of new projects, which have recently been
completed. The current vacancy rates have showed some
improvements, signaling a return to stabilization. In
surveying the direct competition, the current
physical vacancies have decreased slightly from those
reported last year however, they remain at levels
which tend to indicate an over-built market.
Currently, the subject reportedly has a 7 percent
physical vacancy and the subject's economic vacancy
given current market rents is 15 percent. The primary
difference between the physical and economic vacancy
is due to the difference between market and contract
rents and discounts given for concessions. Given this
data we have projected a 10 percent economic vacancy
in Fiscal Year 1998. We estimate after the first year
of the cash flow some of the excess inventory will be
absorbed and the subject property should be capable
of maintaining a stabilized vacancy of 8 percent.
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. In addition, the
total expenses per square foot should be within a
range typical for similar projects. Reserves for
replacement are estimated based on age, condition,
and construction quality. It is re-emphasized that
all income, as well as expense estimates, are based
on the assumption of competent and prudent
management.
We have based the following estimate of project
expenses on comparable apartment projects located in
the subject area, as well as the actual historical
performance of the subject property. The facing table
summarizes annualized 1997 expenses reported by three
"individually metered" comparable projects, as well
as the subject property's actual expenses from 1991
through 1997.
REAL ESTATE TAXES - The Pima County Assessor's Office
coordinates the real estate taxes for Skyline
Village. The property is subject to a number of
different taxing authorities and there are two
assessments. In 1997, both the limited cash value and
full cash value assessments will be $730,800. The
1997 taxes were $100,035 or $0.60 per square foot
based on the subject property operating statement.
The taxes for Fiscal Year 1998 have been estimated at
$112,474 or $0.67 per square foot.
INSURANCE - This category includes fire and extended
coverage. Insurance costs can vary from one property
to another depending upon the type and whether a
blanket policy is used. Often times a property owner
will insure multiple properties
33
<PAGE>
on one policy in an effort to reduce the cost of insurance
per project. Our expense estimate is based upon typical
costs for an individually insured apartment project in the
Tucson area. The subject's actual insurance costs were $0.06
per square foot in 1991, $0.05 per square foot in 1992,
$0.06 per square foot in 1993, $0.06 per square foot in
1994, $0.07 per square foot in 1995, and $0.7 per square
foot in 1996. The 1997 expense was $0.06 per square foot.
The comparables reflected this expense between $0.05 and
$0.07 per square foot. Based on this data, we estimated
insurance at $0.07 per square foot in the first year or
$12,194. This expense is expected to increase 4 percent
annually throughout our projection period.
PERSONNEL - This category includes salaries for office
managers, leasing agents, maid services, payroll taxes, and
FICA. This category is not to be confused with the category
of Management. The expense comparables reflected a personnel
expense ranging from $0.64 to $0.66 per square foot. Figures
for the subject in 1997 indicate this expense at $0.57 per
square foot. The subject's actual figures for 1993, 1994,
1995, and 1996 were $0.47, $0.48, $0.50, and $0.52 per
square foot, respectively. Based on historical figures at
the subject property and tempering them with the market
data, we have estimated this expense at $97,552 or $0.58 per
square foot. This expense is expected to increase 4 percent
annually throughout our projection period.
UTILITIES - This expense category includes electric, gas,
water, and sewer for the apartment's common area. The
subject's actual figures for 1993, 1994, 1995, and 1996 were
$0.39, $0.41, $0.42, and $0.42 per square foot,
respectively. Figures for 1997 indicate this expense at
$0.39 per square foot. The comparables indicated a range
from $0.50 to $0.60 per square foot. Based on this data, we
have estimated this expense at $0.49 per square foot, or
$82,075. This expense is expected to increase 4 percent
annually throughout our projection period.
REPAIR AND MAINTENANCE - These expenses are necessary in
order to keep the property in good repair including
plumbing, air-conditioners, electrical, draperies, carpets,
janitorial supplies, and decorative costs. The expense
comparables indicated a range from $0.38 to $0.42 per square
foot. Figures for 1997 indicate this expense at $0.43 per
square foot, while actual figures for 1993, 1994, 1995, and
1996 were $0.28, $0.35, $0.46, and $0.45 per square foot,
respectively. Due to the age, overall condition, and the
ongoing maintenance at the subject property, an estimate of
$0.48 per square foot or $80,132 has been projected for the
subject. This expense is expected to increase 4 percent
annually throughout our projection period.
CONTRACT SERVICES - This expense category includes
landscaping, security, etc. The comparables range between
$0.18 and $0.21 per square foot. The subject's actual
figures for 1993, 1994, 1995, and 1996 were $0.10, $0.11,
$0.10, and $0.10 per square foot, respectively. Figures for
1997 indicate this expense at $0.09 per square foot. We have
estimated this expense for the subject at $0.14 per square
foot or $23,450 and this expense is expected to increase 4
percent annually throughout our projection period.
34
<PAGE>
GENERAL ADMINISTRATIVE - This expense category includes
professional, legal, and accounting costs,
administration costs, promotional expenses, etc. The
expense comparables indicate a range of $0.12 to $0.26
per square foot. Actual figures for the subject in
1993, 1994, 1995, and 1996 were $0.20, $0.19, $0.16,
and $0.16 per square foot, respectively. The figures
for the subject in 1997 are $0.21 per square foot. We
have estimated this expense for the subject at $0.18
per square foot or $29,614. This expense is expected to
increase 4 percent annually throughout our projection
period.
MANAGEMENT - This includes the fee to outside
management or ownership for managing the property. This
expense is typically a percentage of the effective
gross income of the property. The industry standard for
an apartment complex of this size and quality is
between 3 and 5 percent of effective gross income. The
management fee for the subject is reportedly 5 percent
of effective gross income. The comparables reflected
this expense between $0.34 and $0.36 per square foot.
The subject's expense in 1993, 1994, 1995, and 1996
appear reasonable at $0.34, $0.36, $0.38, and $0.36 per
square foot, respectively. The expenses for 1997 are at
$0.35 per square foot. Based on this data we have
projected the management fee at 5 percent of effective
gross income in each year of our analysis, which was
cross-checked on a per-square-foot basis.
EXPENSE SUMMARY The subject's total expenses were $2.40 per square foot
in 1993, $2.56 per square foot in 1994, $2.68 per
square foot in 1995, and $2.74 per square foot in 1996.
Expenses for 1997 are $2.70 per square foot. The
expense comparables ranged from $2.93 to $3.08 per
square foot and from $2,830 to $3,515 per unit.
Considering the size and quality of the subject, the
overall expenses appear reasonable. Our estimate of the
total expenses for Fiscal Year 1998 at $2.98 per square
foot or $2,976 per unit.
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These
may include roof covering, carpeting, appliances,
compressors, parking areas, drives, etc. The subject
was constructed in 1985 and appears to have had ongoing
maintenance since its construction. It is our opinion
that a reserve allowance of $300 per unit or about
$0.30 per square foot is adequate to provide for the
continued maintenance of the project. This was included
in our expenses prior to concluding the net operating
income.
DEFERRED MAINTENANCE The subject improvements are in good condition;
however, there is some deferred maintenance. This has
been estimated at about $125,000. This includes
appliance repair and replacement, carpet replacement,
window covering replacement, interior and exterior
repairs, roof repairs, air-conditioning and equipment
repair, pool repair, water heater replacement,
landscaping, painting, and paving.
35
<PAGE>
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION The most realistic method for estimating value via the
Income Approach is through the use of Discounted Cash
Flow Analysis. The Market Value of a real estate
investment under the Discounted Cash Flow Method is
defined as the discounted sum of all net cash inflows
plus the property's discounted reversionary value.
Primarily, any given property is only worth the value
of the income derived from it.
The general methodology of Discounted Cash Flow
involves the following steps: 1) increasing each year's
cash flows by an appropriate appreciation factor; 2)
discounting each year's net cash flow by an appropriate
discount rate; 3) deriving the property's reversionary
value in the final year and discounting it to the
present; and 4) the summation of all cash flows,
including final year reversion, into an estimate of
value.
According to the Third Quarter 1997 real estate
investor survey compiled by Peter F. Korpacz &
Associates, Inc. the apartment market is being flooded
with capital, primarily from REIT's, rendering it
almost impossible for large institutional investors to
land deals. In addition, brokers have fewer properties
to market either because long-term holders are buying
product before it is ever offered on the market place
or because owners are not willing to sell. The main
factor is investors are watching to determine if
investment locations are the pace of job growth. The
slower pace of job growth in many markets, coupled with
continued increases in multi-family and single family
permits as well as attractive interest rates could
combine to negatively effect the apartment market. As
such, some investors are increasing overall vacancy
allowance in their acquisition analyses and backing off
on revenue growth assumptions. However, apartment
investment continues to be attractive for pension funds
and REIT's and we anticipate investors will continue
to find the apartment market a desirable investment.
DISCOUNT RATE Over the past several years, the internal rate of
return (IRR) has gained greater usefulness and market
acceptance as an investment measure. IRR is the yield
on an investment based on an initial cash investment,
annual cash flows to the property, as well as resale
proceeds. IRR allows for return on investment as well
as recapture of the original investment when factoring
in the reversion. To simulate this process, we have
relied upon several investor surveys, which detail
reasonable yields or IRR requirements of purchasers. We
have used this rate as a discount rate that, when
applied to projected cash flows and net resale proceeds
(reversion), results in the present value of the
property.
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This TRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. Corporate "Baa" bonds are typically viewed as
an alternative investment. As of October 11, 1996, the
yield was 8.07 percent up from 7.71 percent one year
earlier. Real estate is considered riskier due to
illiquidity, competition, burden of management, and
market conditions; therefore, approximately 150 basis
points or more could be
36
<PAGE>
added to this percentage rate in a normal market. Based
on the previous data and considering the amount of new
construction in the market and the lease-up time
required to regain stabilization, we believe a 12.50
percent discount rate is reasonable based on an all
cash sale and alternative investments. While this is
134 basis points higher than the indicated average by
the previously mentioned survey, we believe it reflects
the added risk in the market.
CAPITALIZATION RATE The subject property's reversionary value is derived by
capitalizing the eleventh year's net operating income.
As mortgage rates have fluctuated over the past several
years, it becomes difficult to apply a band of
investment method to establish a capitalization rate
because capitalization rates do not react dramatically
to ups and downs of mortgage interest rates.
Additionally, the mercurial nature of the recent market
creates a large variance of returns depending on
property potential. Again, according to the previously
cited investor survey, investors of apartment
properties indicated a terminal capitalization rate
range from 8.0 to 10.25 percent with an average of 9.29
percent. This range appears reasonable after analyzing
recent sales in the area, which follow.
<TABLE>
<CAPTION>
SALE IDENTIFICATION SALE DATE CAPITALIZATION RATE
------------------------------------------------------------------
<S> <C> <C> <C>
4 Sandstone 06/97 10%
5 Hilands I 06/97 11%
6 Windsail 03/97 10%
8 Sundown Village 12/96 10.09%
9 Rio Cancion 12/96 9.42%
10 Sonoran Terrace 08/96 9.39%
</TABLE>
Based upon the aforementioned factors and the quality
of the subject, it is our opinion that a 9.5 percent
"going-in" capitalization rate was appropriate in this
market. Typically, the terminal capitalization rate
would be higher than the "going-in" capitalization rate
due to the greater risk and older age of the property
at the end of the projection period. Therefore, we
believe a terminal capitalization rate of 10.5 percent
is appropriate for the subject property. The resulting
value indicates a first year capitalization rate of
9.28 percent.
CASH FLOW ASSUMPTIONS . Rents were based on an average current rental rate
of approximately $0.68 per square foot. During the
projection period rents were increased at a rate
of 0 percent in Year 1 and 4 percent per year
thereafter. As previously discussed in the
"Apartment Market Analysis" section of this
report, the subject area's average rental rates
have increased at a healthy pace in the early
1990's; however, with the significant amount of
new construction the growth has slowed.
. The subject's current physical vacancy is 7
percent and the economic vacancy rate is about 15
percent. The primary reason for the discrepancy
between the physical and economic rent is the
difference between market and contract rents as
well as discounts given for concessions. Due to
the large supply of excess inventory in the
current market, we estimate 10 percent vacancy for
the first year of the cash flow. It is our opinion
that the subject should be capable of obtaining an
8 percent vacancy rate for the for the remainder
of the holding.
37
<PAGE>
. The property has been appraised based on a
"resident pays utilities" status.
. Expenses (with the exception of management) have
been increased at an average growth rate of 4
percent annually over the 11-year projection
period. Management expenses are based on a
percentage of effective gross income and increase
with occupancy and rental increases.
. A discount rate of 12.50 percent was utilized.
. A terminal capitalization rate of 10.5 percent was
believed reasonable.
. A sales cost of 4 percent of the reversionary
value was estimated.
A cash flow analysis for the subject may be found on
the following pages. The estimated leased fee market
value for the subject on an "as is" basis via
discounted cash flow method is
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000)
38
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
SKYLINE VILLAGE APARTMENTS
Fiscal Year Ending 11/30 1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents $1,363,800 $1,418,352 $1,475,086 $1,534,090 $1,595,453 $1,659,271
Rent/SF/Mo. 0.679 0.706 0.734 0.763 0.794 0.826
Other Income/Yr. 23,450 24,388 25,364 26,378 27,433 28,531
----------- ---------- ---------- ---------- ---------- ----------
Gross Income $1,387,250 $1,442,740 $1,500,450 $1,560,468 $1,622,886 $1,687,802
% Vacancy 10.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Vacancy Allowance 138,725 115,419 120,036 124,837 129,831 135,024
----------- ---------- ---------- ---------- ---------- ----------
Effective Gross Income $1,248,525 $1,327,321 $1,380,414 $1,435,630 $1,493,055 $1,552,778
----------------
Expenses: $/UNIT $/SF
----------------
Real Estate Taxes 669 0.67 $ 112,474 $ 116,973 $ 121,652 $ 126,518 $ 131,579 $ 136,842
----------------
Insurance 73 0.07 12,194 12,682 13,189 13,717 14,265 14,836
----------------
Personnel 581 0.58 97,552 101,454 105,512 109,733 114,122 118,687
----------------
Utilities 489 0.49 82,075 85,358 88,772 92,323 96,016 99,857
----------------
Repairs and Maintenance 477 0.48 80,132 83,337 86,671 90,138 93,743 97,493
----------------
Contract Services 140 0.14 23,450 24,388 25,364 26,378 27,433 28,531
----------------
General Administrative 176 0.18 29,614 30,799 32,031 33,312 34,644 36,030
----------------
Management Fee 5.00% 0.37 62,426 66,366 69,021 71,782 74,653 77,639
----------------
Reserves for Replacement 300 0.30 50,400 52,416 54,513 56,693 58,961 61,319
---------------- ----------- ---------- ---------- ---------- ---------- ----------
Total Expenses $ 550,317 $ 573,773 $ 596,724 $ 620,593 $ 645,416 $ 671,233
Per SF 3.29 3.43 3.56 3.71 3.85 4.01
----------- ---------- ---------- ---------- ---------- ----------
Net Operating Income $ 698,208 $ 753,548 $ 783,690 $ 815,038 $ 847,639 $ 881,545
Per SF 4.17 4.50 4.68 4.87 5.06 5.26
Capital Items: 125,000 0 0 0 0 0
----------- ---------- ---------- ---------- ---------- ----------
Cash Flow $ 573,208 $ 753,548 $ 783,690 $ 815,038 $ 847,639 $ 881,545
----------- ---------- ---------- ---------- ---------- ----------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270
Present Value of Cash Flow $ 509,518 $ 595,396 $ 550,411 $ 508,824 $ 470,380 $ 434,840
NOI in 10th Year $1,072,534 Present Value of Income Stream
Ro at Reversion 10.50% Present Value of Reversion
-----------
--------------------------------------------------------------
Indicated Reversion $10,214,609 Indicated Value of Subject
Less: Sales Costs 4.00% 408,584 Indicated Value/SF
-----------
Indicated Value/Unit
Reversion in 10th Yr $9,806,025 GIM at Indicated Value
Ro at Indicated Value
<CAPTION>
==================================================================================================================
Fiscal Year Ending 11/30 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents $1,725,642 $1,794,668 $1,866,454 $1,941,113 $2,018,757
Rent/SF/Mo. 0.859 0.893 0.929 0.966 1.004
Other Income/Yr. 29,672 30,859 32,093 33,377 34,712
----------- ---------- ---------- ---------- ----------
Gross Income $1,755,314 $1,825,526 $1,898,547 $1,974,489 $2,053,469
% Vacancy 8.00% 8.00% 8.00% 8.00% 8.00%
Vacancy Allowance 140,425 146,042 151,884 157,959 164,278
----------- ---------- ---------- ---------- ----------
Effective Gross Income $1,614,889 $1,679,484 $1,746,664 $1,816,530 $1,889,191
Expenses:
Real Estate Taxes $ 142,315 $ 148,008 $ 153,928 $ 160,086 $ 166,489
Insurance 15,429 16,046 16,688 17,356 18,050
Personnel 123,434 128,372 133,507 138,847 144,401
Utilities 103,851 108,005 112,325 116,818 121,491
Repairs and Maintenance 101,393 105,448 109,666 114,053 118,615
Contract Services 29,672 30,859 32,093 33,377 34,712
General Administrative 37,471 38,970 40,529 42,150 43,836
Management Fee 80,744 83,974 87,333 90,827 94,460
Reserves for Replacement 63,772 66,323 68,976 71,735 74,604
----------- ---------- ---------- ---------- ----------
Total Expenses $ 698,082 $ 726,005 $ 755,046 $ 785,248 $ 816,657
Per SF 4.17 4.33 4.51 4.69 4.88
----------- ---------- ---------- ---------- ----------
Net Operating Income $ 916,807 $ 953,479 $ 991,618 $1,031,283 $1,072,534
Per SF 5.47 5.69 5.92 6.16 6.40
Capital Items: 0 0 0 0 0
----------- ---------- ---------- ---------- ----------
Cash Flow $ 916,807 $ 953,479 $ 991,618 $1,031,283 $1,072,534
----------- ---------- ---------- ---------- ----------
Present Value Factor 0.438462 0.389744 0.346439 0.307946 0.000000
Present Value of Cash Flow $ 401,985 $ 371,613 $ 343,536 $ 317,580 $ 0
NOI in 10th Year Present Value of Income Stream $4,504,081
Ro at Reversion Present Value of Reversion 3,019,727
------------
Indicated Reversion Indicated Value of Subject $7,523,809
Less: Sales Costs Indicated Value/SF $ 44.92
Indicated Value/Unit $ 44,785
Reversion in 10th Yr GIM at Indicated Value 5.52
Ro at Indicated Value 9.28%
===============================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================
CASH FLOW SUMMARY
--------------------------------------------------------------
Fiscal Year Annual 12.50% PV of
Ending 11/30 Cash Flows NPV Factor Cash Flows
--------------------------------------------------------------
<S> <C> <C> <C>
1998 $ 573,208 0.888889 $ 509,518
1999 $ 753,548 0.790123 595,396
2000 $ 783,690 0.702332 550,411
2001 $ 815,038 0.624295 508,824
2002 $ 847,639 0.554929 470,380
2003 $ 881,545 0.493270 434,840
2004 $ 916,807 0.438462 401,985
2005 $ 953,479 0.389744 371,613
2006 $ 991,618 0.346439 343,536
2007 $1,031,283 0.307946 317,580
-------
Total $ 4,504,081
Projected NOI in 11th Year $ 1,072,534
Going-out Capitalization Rate 10.50%
-----------
Estimated Value of Property at
End of 10th Year $10,214,609
Less Sales Cost @ 4.00% (408.584)
-----------
Value of Reversion at End of
10th Year $ 9,806,025
Discount Factor 12.50% 0.307946
-----------
Present Value of the Reversion $ 3,019,727
Sum of Present Values of Cash Flow 4,504.081
-----------
Market Value as of November 30, 1997 $ 7,523,809
Rounded $ 7,520,000
================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==============================================================================
SKYLINE VILLAGE APARTMENTS
Fiscal Year Ending 11/30-- 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Apt. Rents $1,363,800
Rent/SF/Mo. 0.679
Other Income/Yr. 23,450
----------
Gross Income $1,387,250
% Vacancy 8.00%
Vacancy Allowance 110,980
----------
Effective Gross Income $1,276,270
-------------------
Expenses: $/Unit $/SE
-------------------
Real Estate Taxes 669 0.67 $ 112,474
-------------------
Insurance 73 0.07 12,194
-------------------
Personnel 581 0.58 97,552
-------------------
Utilities 489 0.49 82,075
-------------------
Repairs and Maintenance 477 0.48 80,132
-------------------
Contract Services 140 0.14 23,450
-------------------
General Administrative 176 0.18 29,614
-------------------
Management Fee 5.00% 0.37 63,814
-------------------
Reserves for Replacement 300 0.30 50,400
-------------------
----------
Total Expenses $ 551,705
Per SF 3.29
----------
Net Operating Income $ 724,566
Per SF 4.33
Capitalization Rate 9.50%
----------
Fee Simple Stabilized Market Value $7,627,005
Less: Rent Loss Due to Lease-up $ 16,803
Deferred Maintenance $ 125,000
----------
Leased Fee "As Is" Market Value $7,485,202
Leased Fee "As Is" Market Value (Rounded) $7,490,000
===============================================================================
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1
------
Stabilized NOI $ 724,566
Projected NOI $ 706,586
----------
Rent Loss $ 17,980
PV Factor @ 7.00% 0.934579
----------
PV Income Loss $ 16,803
CUMULATIVE LOSS $ 16,803
===============================================================================
</TABLE>
<PAGE>
DIRECT CAPITALIZATION
Direct capitalization is a method used to convert a single
year's income estimate into a value indication. In direct
capitalization a rate of return for the investor and
recapture of the capital invested is implicit in the overall
capitalization rate.
The overall capitalization rate was chosen after analyzing
the comparable apartment sales in our Sales Comparison
Approach. These sales indicated a range of "going-in"
capitalization rates from 9.39 to 11.00 percent.
A "going-in" capitalization rate of 9.5 percent was deemed
appropriate due to the quality of the subject, its location,
and the current market conditions. The net income is
capitalized into a value of $7,627,005 with deductions for
rent loss due to lease-up and deferred maintenance made
subsequently to reflect a value of $7,490,000 or $7,500,000
rounded.
INCOME APPROACH
CONCLUSION DCF METHOD..................................$7,500,000
DIRECT CAPITALIZATION METHOD................$7,500,000
The two methods of comparison are supportive of each other
and we gave equal reliance to each. We are of the opinion
that the "as is" market value of the subject property, as of
November 30, 1997 is $7,500,000.
39
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $7,400,000
Income Approach $7,500,000
The Sales Comparison Approach utilized relatively recent
comparable sales of similar properties in the area. The
weakness of the Sales Comparison Approach is that no two
properties are exactly alike and exact conditions of a sale
are often unknown. The strength of this approach is that it
indicates market activity based on the willing buyer/willing
seller concept. We placed weight on this approach in our
conclusions.
The Income Approach attempts to measure investment qualities
of the property. Based on actual rental rates in the
immediate area of the subject, actual expenses, and investor
returns derived from the market, we have estimated value.
Actual data on the property, as well as comparable data was
considered adequate. Because the Income Approach deals
directly with income streams, we feel it is a very good
indication of current market conditions. It tends to reflect
a value, which an investor of a property would anticipate.
We have placed considerable emphasis on the Income Approach.
Therefore, it is our opinion that the "as is" leased fee
market value of the subject property, on an all cash basis,
as of November 30, 1997 is
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000)
In addition, the appraisers have contemplated the possible
conversion of the existing apartment units to individual
condominium interests. To date, the condominium market in
the Tucson area has yet to maximize returns on conversion.
Likewise, the maximum return on condominium sales is
generally realized on new units in contrast to the resale of
previously occupied condominium units. The subject property
is currently being operated as a rental apartment project
with an economic occupancy of 85 percent and a physical
occupancy of 93 percent. Despite a relatively strong
condominium market in the past, the condominium market in
the Tucson area is not presently providing an adequate
return, which would justify the risk of conversion. Given
the age of the complex, it is our opinion that the subject
property should be maintained as an apartment rental
complex.
40
<PAGE>
PINNACLE CANYON
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Pinnacle Canyon
Address 7050 E. Sunrise Drive
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Canyon Joint Venture
Grantee (Buyer) BRE Property Investors, Inc.
Recorded Document 10677-1104
Sale Price $11,727,000
Occupancy 98%
Sale Price per Unit $52,120
Sale Price per SF $51.23
Capitalization Rate NA
TERMS OF SALE CASH
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 20
Number of Units 225
Number of Bedrooms 428
Net Rentable Area 228,931
Average Unit Size 1,017 SF
Land Area 15.290 Acres
Unit Density 14.71 Units per Acre
Property Condition Excellent
Parking (type) Open, carport and detached garage (500 spaces)
Construction Type Wood frame, stucco exterior, concrete foundation,
tile roof
Unit Amenities Washer/dryer, built-in television, roman tub,
microwave
Project Amenities Swimming pool, spa, clubhouse, exercise room,
computer center
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and
Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Detailed income and expense information was not
available. The NOT/SF, expenses, and capitalization
could not be derived, however, the EGIM is estimated
at 5.69.
<PAGE>
PINNACLE HEIGHTS
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Pinnacle Heights
Address 7990 East Snyder
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Heights Associates
Grantee (Buyer) BRE Property Investors, LLC
Recorded Document 10677-1112
Sale Price $16,364,000
Occupancy 97%
Sale Price per Unit $52,787
Sale Price per SF $48.22
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 25
Number of Units 310
Number of Bedrooms 562
Net Rentable Area 339,364
Average Unit Size 1,095 SF
Land Area 30 Acres
Unit Density 10.33 Units per Acre
Property Condition Excellent
Parking (type) Open, carport, and detached garage (590 spaces)
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer, microwave, ceiling fans
Project Amenities Swimming pool, two spas, exercise room, computer
center, and clubhouse
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and
Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Detailed income and expense information was not
available, however, a 5.60 EGIM has been estimated.
<PAGE>
FOOTHILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Foothills
Address 5441 N. Swan Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Foothills APB, LP
Grantee (Buyer) AIMCO/Foothill LP
Recorded Document 10677-2151
Sale Price $7,600,000
Occupancy 97%
Sale Price per Unit $28,148
Sale Price per SF $45.26
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 2
Number of Buildings 11
Number of Units 270
Number of Bedrooms 300
Net Rentable Area 167,910
Average Unit Size 622 SF
Land Area 7.5 Acres
Unit Density 36 Units per Acre
Property Condition Good
Parking (type) Open and covered (380 spaces)
Construction Type Wood frame, stucco exterior, and tile roof
Unit Amenities Patio/balcony, storage
Project Amenities Swimming pool, clubhouse, weight room, racquetball,
tennis courts, laundry facility
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and
Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments No economic information was available, a 5.38 EGIM
was estimated from knowledge of sales prices,
rents, and occupancy.
<PAGE>
STANDSTONE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Sandstone Apartments
Address 405 E. Prince Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Tucson Park Ridge, Ltd.
Grantee (Buyer) Feigal Sandstone LP
Recorded Document 10569-1839
Sale Price $8,849,000
Occupancy 100%
Sale Price per Unit $26,815
Sale Price per SF $48.84
Capitalization Rate 10.0%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1986
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 330
Number of Bedrooms 363
Net Rentable Area 181,167
Average Unit Size 549 SF
Land Area 8.42 Acres
Unit Density 39.19 Units per Acre
Property Condition Good
Parking (type) Covered and open
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer available, covered parking,
balconies
Project Amenities Swimming pool, spa, tennis courts, volleyball,
laundry room, clubhouse, exercise room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments
<PAGE>
HILANDS I
- --------------------------------------------------------------------------------
[PICUTRE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Highlands I
Address 5755 E. River Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Doubletree Finance, Inc.
Grantee (Buyer) Northland Hilands Portfolio, LP
Recorded Document 10565/255
Sale Price $12,500,000
Occupancy 95%
Sale Price per Unit $29,343
Sale Price per SF $53.34
Capitalization Rate 11%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 426
Number of Bedrooms 468
Net Rentable Area 234,324
Average Unit Size 550 SF
Land Area 14.71 Acres
Unit Density 28.95 Units per Acre
Property Condition Good
Parking (type) Open and carport (527 spaces)
Construction Type Wood frame, stucco exterior, concrete foundation,
tile roof
Unit Amenities Washer/dryer, patio or balcony w/storage, covered
parking
Project Amenities 2 Swimming pools, spa, lounge, exercise room,
racquetball court, tennis courts, laundry room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data available.
<PAGE>
WINDSAIL
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Windsail
Address 7300 North Mona Lisa Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 03/97
Grantor (Seller) PTR Holdings
Grantee (Buyer) Windsail Properties LLC
Recorded Document 10513/2196
Sale Price $10,037,000
Occupancy 94%
Sale Price per Unit $33,457
Sale Price per SF $41.14
Capitalization Rate 10%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 21
Number of Units 300
Number of Bedrooms 548
Net Rentable Area 243,952
Average Unit Size 813 SF
Land Area 11.65 Acres
Unit Density 25.8 Units per Acre
Property Condition Good
Parking (type) Open (150) and Covered (300)
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer connection, fireplace, microwave,
balcony/patio
Project Amenities Swimming pool, spa, sauna, exercise room,
tennis courts, playground
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data reveals estimated EGIM of
5.74
<PAGE>
COBBLE CREEK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Cobble Creek
Address 7700 E. Speedway Blvd.
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Cobble Creek Associates, LLC
Recorded Document 11463/642
Sale Price $9,250,000
Occupancy 91%
Sale Price per Unit $30,731
Sale Price per SF $42.55
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1980
Last Year Renovated NA
Number of Stories 3
Number of Buildings 13
Number of Units 301
Number of Bedrooms 367
Net Rentable Area 217,382
Average Unit Size 722 SF
Land Area 9.877 Acres
Unit Density 30.47 Units per Acre
Property Condition Fair
Parking (type) Open and carport (386 spaces)
Construction Type Concrete block with stucco exterior, flat
built-up roof
Unit Amenities Fireplace, balcony/patio
Project Amenities Swimming pool, clubhouse, spa, tennis court,
racquetball court, basketball court
Confirmed With Comps and Real Data, Inc., and Bruce
Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Economic information was confidential, however,
from knowledge of sales price, rental rates,
and occupancy, an EGIM of 6.35 was calculated.
<PAGE>
SUNDOWN VILLAGE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Sundown Village
Address 8215 North Oracle Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Sundown Associates, LLC
Recorded Document 10438/1085
Sale Price $11,350,000
Occupancy 90%
Sale Price per Unit $34,394
Sale Price per SF $40.57
Capitalization Rate 10.09%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,187,240
Vacancy/Collection Loss 10% $ (218,724)
Other Income $ 83,970
Effective Gross Income $2,052,486
Operating Expenses $ (941,265)
Net Operating Income $1,111,221
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 1, 2 & 3
Number of Buildings 37
Number of Units 330
Number of Bedrooms 486
Net Rentable Area 279,758
Average Unit Size 848 SF
Land Area 14.99 Acres
Unit Density 22 Units per Acre
Property Condition Good
Parking (type) Open (82) Covered (250) and Detached Garage
(17)
Construction Type Wood frame with stucco exterior, tile roof
Unit Amenities Fireplace, microwave, washer/dryer hook-up
Project Amenities Swimming pool, spa, sauna, clubhouse
Confirmed With Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments
<PAGE>
RIO CANCION
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Rio Cancion
Address 2400 East River Road
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Rio Cancion Associates, LC
Recorded Document 10438/1044
Sale Price $17,400,000
Occupancy 90%
Sale Price per Unit $45,910
Sale Price per SF $50.67
Capitalization Rate NA
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $ 2,956,200
Vacancy/Collection Loss 10% $ (295,620)
Other Income $ 97,200
Effective Gross Income $ 2,757,780
Operating Expenses $(1,118,846)
Net Operating Income $ 1,638,934
PROPERTY DESCRIPTION
Year Built 1983
Last Year Renovated NA
Number of Stories 1 & 2
Number of Buildings 35
Number of Units 379
Number of Bedrooms 613
Net Rentable Area 343,370
Average Unit Size 906 SF
Land Area 16.323 Acres
Unit Density 23.21 Units per Acre
Property Condition Good
Parking (type) Open and carport (878 spaces)
Construction Type Wood frame with stucco exterior, concrete
foundation, Spanish tile roof
Unit Amenities Fireplace, vaulted ceilings, microwave,
balcony/patio, w/d hookup
Project Amenities 3 swimming pools, spa, fitness room, basketball
court, tennis court, carports, clubhouse
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments
<PAGE>
SONORAN TERRACES
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 10
PROPERTY IDENTIFICATION
Job Number 97-073
Project Name Sonoran Terraces
Address 7887 N. La Cholla Boulevard
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 08/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) NA Sonoran Terraces 5-1
Recorded Document 10357/907
Sale Price $18,750,000
Occupancy 95%
Sale Price per Unit $50,134
Sale Price per SF $45.04
Capitalization Rate 93%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,995,238
Vacancy/Collection Loss 5% $ (149,762)
Effective Gross Income $2,845,476
Operating Expenses $1,084,034
Net Operating Income $1,761,442
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 60
Number of Units 374
Number of Bedrooms 632
Net Rentable Area 416,256 SF
Average Unit Size 1,113 SF
Land Area 25.810 Acres
Unit Density 14.49 Units per Acre
Property Condition Good
Parking (type) Open and Covered (674 spaces)
Construction Type Brick veneer, concrete foundation, Spanish tile
roof
Unit Amenities Washer/dryer
Project Amenities Swimming pools, clubhouse, tennis courts,
weight room, covered parking
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments None
<PAGE>
TIERRA CATALINA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Tierra Catalina
Street Address: 3201 East Skyline Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year built/Renovated: 1983
Number of Stories: 2
Number of Units: 120
Net Rentable Area (SF): 140,644
Average Unit Size (SF): 1,172
Parking Surface: Asphalt
Type of Construction: Painted stucco exterior with flat built-up
roofs and red tile pitched roof fronts
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
<S> <C> <C> <C> <C>
18 1BR/1BA 900 $640 $0.71
23 1BR/1BA 916 680 0.74
19 2BR/2BA 1,207 790 0.65
25 2BR/2BA 1,233 850 0.69
17 2BR/2BATH 1,304 890 0.68
18 3BR/2BATH 1,525 950 0.62
----------------------------------------------
</TABLE>
Concession: None
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, fireplaces,
patio/balconies, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi, picnic
area, clubroom, laundry facility
ECONOMIC DATA
Percent Occupied: 92%
Avg. Monthly Rent/SF of NRA: $0.61
Electricity Paid By: Tenant
Length of Lease: 6,9, and 12 months
Security Deposit: $175-$275
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
L' AUBERGE CANYON VIEW
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY DESCRIPTION
Job Number: 97-073
Name of Project: L'Auberge Canyon View
Street Address: 6650-55 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year built/Renovated: 1987
Number of Stories: 2
Number of Units: 264
Net Rentable Area (SF): 269,048
Average Unit Size (SF): 1,019
Parking Surface: Asphalt
Type of Construction: Masonry with flat built-up roofs
Unit Mix:
<TABLE>
<CAPTION>
---------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------
<C> <S> <C> <C> <C>
32 1BR/1BA 724 $ 725 $1.00
64 2BR/2BA 909 775 0.85
60 2BR/2BA 1,049 825 0.79
66 2BR/2BA 1,095 875 0.80
12 3BR/2BA 1,223 1,010 0.82
19 3BR/2BA 1,243 1,010 0.81
11 3BR/2BA 1,291 1,010 0.78
---------------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, fireplaces, outdoor-
utility closets, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi,
clubroom
ECONOMIC DATA
Percent Occupied: 96%
Avg. Effective Monthly
Rent/SF of NRA: $0.82
Electricity Paid By: Tenant
Length of Lease: 7 and 12 months
Security Deposit: $225; $200 refundable
Confirmed With: RealData Inc./On-Site Agent
Date Confined: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
THE GREENS AT VENTANA CANYON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: The Greens at Ventana Canyon
Street Address: 5800 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 265
Net Rentable Area (SF): 267,935
Average Unit Size (SF): 1,011
Parking Surface: Asphalt
Type of Construction: Masonry exterior
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------------
<S> <C> <C> <C> <C>
22 1BR/1BA/DEN 818 $ 714 $ 0.87
26 1BR/1BA 847 740 0.87
29 2BR/2BA 945 775 0.82
27 2BR/2BA 974 739 0.76
48 2BR/2BA 1,018 787-837 0.77-0.82
65 2BR/2BA 1,050 800 0.76
22 2BR/2BA 1,169 914-964 0.78-0.82
26 2BR/2BA/DEN 1,207 950 0.79
----------------------------------------------------
</TABLE>
Concessions: 1/2 off first month's rent
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, fireplaces, ceiling fans,
outdoor utility closets, patio/balconies,
covered parking
Project Amenities: 1 swimming pool, jacuzzi, picnic area, club room
ECONOMIC DATA
Percent Occupied: 89%
Avg. Monthly Rent/SF of NRA: $0.80
Electricity Paid By: Tenant
Length of Lease: 12 months
Security Deposit: None (special)
Confirmed With: RealData Inc./On-site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
THE ARBORETUM
- -------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: The Arboretum
Street Address: 4700 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 496
Net Rentable Area (SF): 402,272
Average Unit Size (SF): 811
Parking Surface: Asphalt
Parking Spaces: 322 open; 352 covered
Type of Construction: Frame with stucco exterior and flat built-up
roofs and pitched tile and shingle roofs
Unit Mix:
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type W(SF) Rent Rent/SF
----------------------------------------------
32 1BR/1BA 520 $475 $0.91
128 1BR/1BA 616 500 0.81
96 1BR/1BA 686 510 0.74
32 1BR/1BA 767 560 0.73
64 2BR/1BA 984 650 0.66
48 2BR/2BA 995 710 0.71
48 2BR/2BA 1,001 735 0.73
48 3BR/2BA 1,200 799 0.67
----------------------------------------------
Concessions: 1/2 month free rent. $175 off if deposit on
1/st/ visit
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
fireplaces, patio/balconies, ceiling fans,
covered parking
Project Amenities: 3 swimming pools, jacuzzi, picnic area,
clubroom, laundry facility, exercise/weight room
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of NRA: 0.734
Electricity Paid By: Tenant
Length of Lease: 9 and 12 months
Security Deposit: $175-1BR; $200-2BR; $225-3BR
Pets Allowed/Deposit: $200 plus $15 per month
Confirmed With: RealData Inc./On-Site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
VILLAS SIN VACAS
- --------------------------------------------------------------------------------
PHOTO DID NOT DEVELOP
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Villas Sin Vacas
Street Address: 7601 North Calle Sin Envidia
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 72
Net Rentable Area (SF): 80,178
Average Unit Size (SF): 1,114
Parking Surface: Asphalt
Type of Construction: Open and 72 carports
Unit Mix:
---------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------------
38 1BR/1BA/DEN 930 $835 $0.90
18 2BR/2BA 1,195 1,050 0.88
16 3BR/2BA 1,458 1,200 0.82
---------------------------------------------------
Concessions: None
Unit Amenities: Fireplace, washer and dryer, microwave,
covered parking
Project Amenities: Swimming pool, clubhouse
ECONOMIC DATA
Percent Occupied: Mid to high 90's %
Avg. Monthly Rent/SF of NRA: $0.871
Electricity Paid By: Tenant
Length of Lease: 9 and 12 months
Security Deposit: $200
Pets Allowed/Deposit $200
Confirmed With: On-Site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
COLONIA DEL RIO
- --------------------------------------------------------------------------------
PHOTO DID NOT DEVELOP
<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Colonia Del Rio
Street Address: 4601 N. Via Entrada
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 176
Net Rentable Area (SF): 177,760
Average Unit Size (SF): 1,010
Parking Surface: Asphalt
Parking Spaces: 261
Type of Construction: Masonry exterior with red tile roofs
Unit Mix:
----------------------------------------------
Total Unit Size Eff.Mo. Eff. Mo.
Units Type (SF) Rent Rent/SF
----------------------------------------------
22 1BR/1BA 713 $560 $0.79
44 1BR/1BA 796 590 0.74
22 1BR/1BA 1,022 655 0.74
22 2BR/1BA 1,068 680 0.64
44 2BR/2BA/TH 1,170 795 0.68
22 3BR/2BA 1,345 795-810 0.59-0.60
----------------------------------------------
Concessions: $200 off 1st month's rent
Unit Amenities: Fireplace, washer and dryer, microwave,
covered parking
Project Amenities: Swimming pool, spa, exercise room,
playground
ECONOMIC DATA
Percent Occupied: 90's
Avg. Effective Monthly
Rent/SF of NRA: $0.683
Electricity Paid By: Tenant
Length of Lease: NA
Security Deposit: $75
Pets Allowed/Deposit: Yes/$150
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
BOULDERS AT LA RESERVE
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Boulders at La Reserve
Street Address: 1500 E. Pusch Wilderness Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 239,792
Average Unit Size (SF): 999
Parking Surface: Asphalt
Parking Spaces: 375, same garages
Type of Construction: Masonry exterior with flat built-up and red
tile pitched roofs
Unit Mix:
-------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
-------------------------------------------
64 lBR/1BA 725 $595 $0.82
48 lBR/1BA/DEN 929 655 0.71
64 2BR/2BA 1,057 740 0.70
64 3BR/2BA 1,268 860 0.68
-------------------------------------------
Concessions: 1/2 A month free rent on lBR or 2BR and 1
month free on 3BR w/12 month lease
Unit Amenities: Some fireplaces, washer and dryer,
microwave, garage
Project Amenities: Swimming pool, spa, exercise room,
clubhouse
ECONOMIC DATA
Percent Occupied: NA
Avg. Effective Monthly
Rent/SF of NRA: $0.717
Electricity Paid By: Tenant
Length of Lease: 7-13 months
Security Deposit: $100
Pets Allowed/Deposit: $300 plus $10 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Comments: Garages bring a rental premium of $60 plus.
<PAGE>
LA RESERVE VILLAS
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
RENT COMPARABLE 8
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: La Reserve Villas
Street Address: 10700 N. LaReserve Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 216,008
Average Unit Size (SF): 900
Parking Surface: Asphalt
Parking Spaces: Yes, but 240 carports
Type of Construction: Masonry exterior with flat built-up and red
tile pitched roofs
Unit Mix:
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
64 1BR/1BA 697 $580 $0.83
96 2BR/2BA 943 690 0.73
52 2BR/2BA 957 750 0.78
28 3BR/2BA 1,111 875 0.79
----------------------------------------------
Concessions: None
Unit Amenities: Fireplace, washer/dryer, microwave
Project Amenities: (2) swimming pools, spa, exercise room,
clubhouse
ECONOMIC DATA
Percent Occupied: 90's%
Avg. Effective Monthly
Rent/SF of NRA: $0.772
Electricity Paid By: Tenant
Length of Lease: 6 mos., 9 mos., 1 year
Security Deposit: $140 1BR, $160 2BR, $180 3BR
Pets Allowed/Deposit: $300 plus $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
LEGENDS AT LA PALOMA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Legends at La Paloma
Street Address: 3750 E. Via Palomita
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 312
Net Rentable Area (SF): 322,696
Average Unit Size (SF): 1,034
Parking Surface: Asphalt
Parking Spaces: 312 carports and open parking
Type of Construction: Frame stucco with masonry exterior and sloped
tile roof
Unit Mix:
---------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
72 lBR/lBA 745 $675 $0.91
152 2BR/2BA 1,036 795 0.77
88 3BR/2BA 1,258 975 0.78
----------------------------------------------
Concessions: 1 month free rent
Unit Amenities: Fireplace, washer and dryer, microwave, ceiling
fan
Project Amenities: (2) swimming pools, spa, exercise room,
clubhouse, storage off patio/balcony
ECONOMIC DATA
Percent Occupied: mid to high 90's
Avg. Effective Monthly
Rent/SF of NRA: $0.791
Electricity Paid By: Tenant
Length of Lease: 6 mos. to 1 year
Security Deposit: $150 1BR, $175 2BR, $200 3BR
Pets Allowed/Deposit: $300 plus $10 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
SKYLINE BEL AIRE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 10
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Skyline Bel Aire
Street Address: 6255 Camino Pimeria Alta
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1979
Number of Stories: 1-2
Number of Units: 137
Net Rentable Area (SF): 154,151
Average Unit Size (SF): 1,125
Parking Surface: Asphalt
Parking Spaces: 136 carports and open parking
Type of Construction: Frame stucco with masonry exterior and flat roof
Unit Mix:
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
64 1BR/1BA 968 $615 $0.64
73 2BR/2BA 1,263 815 0.65
----------------------------------------------
Concessions: $25 off rent 1BR $300 off 1st month rent w/12
month lease $150 off 1st month rent w/6 month
lease
Unit Amenities: Fireplaces, washer and dryer, covered parking
Project Amenities: Swimming pool, spa, tennis court, billard room,
skylight in several bedrooms
ECONOMIC DATA
Percent Occupied: Mid 90s
Avg. Effective Monthly
Rent/SF of NRA: $0.641
Electricity Paid By: Tenant
Length of Lease: 6 mos., 9 mos., 1 year
Security Deposit: $125 1BR and $150 2BR
Pets Allowed/Deposit: $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
Comments: One of the large units is the manager's unit.
<PAGE>
PINNACLE CANYON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 11
PROPERTY IDENTIFICATION
Job Number: 97-073
Name of Project: Pinnacle Canyon
Street Address: 7050 E. Sunrise Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 225
Net Rentable Area (SF): 228,931
Average Unit Size (SF): 1,017
Parking Surface: Asphalt
Parking Spaces: NA
Type of Construction: Masonry exterior with red tile roof
Unit Mix:
----------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------
24 1BR/1BA 795 $650 $0.82
37 1BR/1BA 840 675 0.80
48 2BR/2BA 1,124 775 0.69
74 2BR/2BA 1,152 800 0.69
40 3BR/2BA 1,351 935 0.69
----------------------------------------------
Concessions: 1 month free rent w/12 month lease
Unit Amenities: Some fireplaces, washer and dryer, microwave,
built-in television, covered parking
Project Amenities: Swimming pool, spa, exercise room, clubhouse,
computer center
ECONOMIC DATA
Percent Occupied: 98%
Avg. Effective Monthly
Rent/SF of NRA: $0.762
Electricity Paid By: Tenant
Length of Lease: NA
Security Deposit: $100
Pets Allowed/Deposit: $200 plus $15 per month
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991 -- May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985 -- 1991)
President
Bach & Associates, Inc. (1980 -- 1984)
President
Landauer Associates, Inc. (1980 -- 1984)
Senior Vice-President and General Manager -- Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973 -- 1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971 -- 1973)
Appraiser. Real Estate research valuation on urban and rural
properties.
Ray R. Hastings, MAI (1964 -- 1971)
Appraiser. Real Estate research valuation on urban and rural
properties.
Residential Real Estate Sales (1963 -- 1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of the
Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987 -- 1992)
Appraisal Institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who meet
the minimum standards of this program are awarded periodic
education certification).
Certified General Real Estate Property appraiser in the State of
Texas, Certification No. TX-1323079-G
Certified General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
<PAGE>
A COMPLETE, SELF-CONTAINED APPRAISAL
OF
THE PONTE VEDRA BEACH VILLAGE II APARTMENTS
949 SHORELINE CIRCLE
PONTE VEDRA BEACH, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS 3
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-069
<PAGE>
<TABLE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<S> <C>
Letter of Transmittal........................................ 1
Assumptions and Limiting Conditions.......................... 2
Certification................................................ 4
Salient Facts and Conclusions................................ 6
Nature of the Assignment..................................... 7
City/Neighborhood Analysis................................... 9
Apartment Market Analysis....................................19
Site Analysis................................................24
Improvements.................................................27
Highest and Best Use.........................................29
Appraisal Procedures.........................................32
Sales Comparison Approach....................................34
Income Approach..............................................38
Reconciliation...............................................48
</TABLE>
ADDENDA
Improved Sales Comparables
Rent Comparables
Legal Description
Professional Qualifications
<PAGE>
[LETTERHEAD OF BACH REALTY ADVISORS APPEARS HERE]
March 17, 1998
Hutton/Con Am Realty Investors 3
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of the 124-unit Multifamily Complex
Known As the Ponte Vedra Beach Village II Apartments Located at 949
Shoreline Circle in Ponte Vedra Beach, Florida; BRA: 97-069
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 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
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this appraisal is subject to the
following assumptions and limiting conditions.
1. That responsibility is not taken for matters of a
legal nature affecting the property appraised or the
title thereto and that all legal descriptions
furnished are correct.
2. That the title to the property being appraised is good
and marketable and is appraised as though under
responsible ownership and/or management.
3. That the property is free and clear of all liens and
encumbrances, except as otherwise stated.
4. That the sketches in this report are included to
assist the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by the
appraiser.
6. That the information, estimates, and opinions
furnished the appraiser by others and contained in
this report are considered reliable and are believed
to be true and correct; however, responsibility is not
taken for their accuracy.
7. That responsibility is not taken for soil conditions
or structural soundness of the improvements that would
render the property more or less valuable.
8. That possession of this appraisal does not carry with
it the right of publication and that this report, or
any parts thereof, may not be reproduced in any form
without written permission of the appraiser.
9. That testimony or attendance in court or at a hearing
are not a part of this assignment; however, any such
appearance and/or preparation for testimony will
necessitate additional compensation than received for
this appraisal report.
10. That the valuation estimate herein is subject to an
all-cash or all cash equivalent purchase and does not
reflect special or favorable financing in today's
market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of yield
anticipation's and our judgement as to the risks and
uncertainties in the subject property and the
consequential rates of return required to attract an
investor under such risk conditions. There is no
guarantee that projected cash flows will actually be
achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by Con
Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
--------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous materials
-------------------------------------------------------
at the subject property, analysis for EPA standards,
----------------------------------------------------
its removal, and/or its encapsulation. If the reader of
-------------------------------------------------------
this report and/or any entity or person relying on the
--------------------------------------- --------------
valuations in this report wishes to know the exact or
-----------------------------------------------------
detailed existence (if any) of asbestos or other toxic
---------------------- ------- -----------------------
or hazardous waste at the subject property, then we not
--------------------------------- ----------------- ---
only recommend, but state unequivocally that they
---- ---------------------------------------- ----
should obtain an independent study and analysis
-----------------------------------------------
(including costs to cure such environmental problems)
-----------------------------------------------------
of asbestos or other toxic and hazardous waste.
----------------------------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned does hereby certify to the best of his
knowledge and belief that, except as otherwise noted in this
complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were
developed, and this report has been prepared, in
conformity with the requirements of the Code of
Professional Ethics and the Uniform Standards of
Professional Appraisal Practice of the Appraisal
Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach, MAI inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment is not contingent
upon the reporting of a predetermined value or
direction in value that favors the cause of the
client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence
of a subsequent action or event resulting from the
analyses, opinions, or conclusions in, or the use of,
this report.
10. That all, physical and economic conditions are the
same on the date of value as they were on the date of
inspection.
4
<PAGE>
11. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as
is," of the subject property on an all cash basis, as
of November 30, 1997 is $6,000,000.
/s/ Stevan N. Bach
-------------------------------------
Stevan N. Bach, MAI
President
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: The Ponte Vedra Beach Village II Apartments
949 Shoreline Circle
Ponte Vedra Beach, Florida
Location: East side of State Highway A1A at Ocean Place
about 3 miles south of the Duval/St. Johns County
line, Ponte Vedra Beach, Florida
BRA: 97-069
Legal Description: A 13.29-acre tract out of Sections 27 and 46,
Township 3 South, Range 29 East, St. Johns County,
Florida
Land Size: 13.29 acres or 578,912 square feet
Building Area: 117,980 square feet of net rentable area plus a
1,500-square-foot clubhouse
Year Built: 1985
Unit Mix: 32 1BR/1BA at 780 square feet
48 1BR/1BA/DEN at 947 square feet
44 2BR/2BA at 1,081 square feet
No. of Units: 124
Average Unit Size: 951 square feet
Occupancy
Physical: 94.4 percent
Economic: 92.7 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 Ponte Vedra
Beach Village II Apartments located at 949 Shoreline Circle,
Ponte Vedra Beach, 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 St. Johns County, Florida.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with accepted
techniques, standards, methods, and procedures of the
Appraisal Institute. The values set forth herein were
estimated after application and analysis by the Sales
Comparison and Income Approaches to value. These approaches
are more clearly defined in the valuation section of this
report.
The Cost Approach was not used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily reflect
value. Moreover, estimates of depreciation are difficult to
accurately measure in the marketplace, thereby compounding
the speculative nature of the opinions derived in the cost
method of valuation.
The scope of our assignment included obtaining pertinent
property data from the client regarding income and expense
figures, tenant rent rolls, and permission to inspect the
subject. Additionally, the appraisers conducted research
either personally or through associates to obtain current
market rental rates, construction trends, the sale of
comparable improved properties, anticipated investor
returns, and the supply and demand of competitive apartment
projects in the general and immediate area. After these
examinations were performed, an analysis was made in order
to estimate the leased fee market value of the subject on an
"as is" basis.
8
<PAGE>
[AREA MAP OF JACKSONVILLE BEACH 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>
[JACKSONVILLE BEACH NEIGHBORHOOD MAP APPEAR HERE]
<PAGE>
rents for retail space have stabilized since 1987 ranging
from $30.00 to $50.00 per square foot per year for enclosed
mall space. Typical rent levels for smaller centers
experienced a slight increase to a range between $9.00 and
$14.00 per square foot. Rental rates for older strip centers
range from $4.00 to $8.00 per square foot.
Retail development is projected to be stable until vacant
space within the market is reasonably absorbed. Residential
growth in the northern and middle St. Johns County areas,
southside-Intracoastal west, and the Avenue-U.S. Highway 1-
Southside Boulevard areas of the city is expected to produce
retail activity in these markets. Residential, both single
and multi-family remains active in development. The October
31, 1997 edition of Homefront identifies over 320 single
family developments that are active today.
The industrial real estate sector has not experienced the
significant vacancy problems incurred by the office and
retail markets. This sector is very strong in the
Jacksonville area and is experiencing heavy demand for
build-to-suit space from industry entering the market. New
construction during 1995 totaled over 1.5 million square
feet, a new record high. The major projects in the area
include Sara Lee's Coach subsidiary; NatureForm, Inc.; Pilot
Pen Corporation; Sally Industries; H.J. Heinz Company's
Portion Pac, Inc.; Viking Office Products and a Georgia
Pacific expansion. The majority of new construction is
taking place in the south and west sides of Jacksonville. As
established by the NAIOP report in August 1997, the south
side submarket has favorably responded to the one-year
supply of space, however, there remains 300,000 square feet
within six buildings that has not been leased. Activity for
this space has been slow. The west side market continues to
grow and is said to be a strong market. The north side
submarket is strong with minimal vacancy and the Port
Authority is expected to spend about $100 million on airport
and seaport capital improvements, which were to begin
October 1997. Industrial parks of tradeport and Imeson will
benefit most from the expenditures.
The apartment market is discussed in the Apartment Market
Analysis section that follows.
NEIGHBORHOOD
ANALYSIS The subject is located in the northeast area of St. Johns
County approximately 18 aerial miles from the Jacksonville
CBD. The neighborhood is generally described as the
northernmost portion of St. Johns County, or that area lying
west of the Atlantic Ocean and south and east of the St.
Johns/Duval County Line immediately south of the city of
Jacksonville Beach. Although unincorporated, this
neighborhood is better known as the community of Ponte Vedra
Beach.
Florida State Highway AlA (Highway AlA) is a major
thoroughfare, which runs the length of Florida's Atlantic
Coast areas from Fernandina Beach at the north end to Miami
Beach in the south. Through the subject neighborhood, this
divided four-laned road cuts through the neighborhood in a
similar north/south fashion. Just north of the subject
neighborhood boundary in Jacksonville Beach, Highway AlA
intersects with J. Turner Butler Boulevard, a major roadway
connecting
14
<PAGE>
Jacksonville with its suburban beach communities. Highway
AlA runs generally about 5 blocks west of the Atlantic coast
in this neighborhood except at its southern end, where it
merges with State Road 203/Ponte Vedra Boulevard. Ponte
Vedra Boulevard continues northward from this point
immediately along the oceanfront. Major crossroads between
these two neighborhood roadways include Corona Road, about 1
mile south of the Duval County Line, and Solana Road,
several blocks north of Corona Road. Solana Road is a two-
laned street, which continues west from Highway AlA, then
turning southwest, and south along the Intracoastal Waterway
where its name changes to Roscoe Boulevard. Finally, Palm
Valley Road, a two-laned street, branches off to the
southwest from Highway AlA about 2 miles south of the county
line; Palm Valley Road, also known as State Road 210,
continues southwestward providing access to the neighborhood
from U.S. Highway 1 and Interstate 95 at the north end of
St. Johns County. Approximately half of the land within the
neighborhood boundaries is east of the Intracoastal
Waterway; this half is approximately 60 percent developed.
The area west of this canal lies largely undeveloped and is
predominantly marshland.
Ponte Vedra Beach enjoys a reputation as a popular resort
community and affluent suburban enclave in the Jacksonville
MSA. While no official population count exists, area real
estate professionals estimate the population of Ponte Vedra
Beach to be over 15,000 persons. The area is popular with
retirees for its proximity to beaches and for its numerous
resort-style subdivisions which often include country clubs,
golf courses, and tennis facilities. However, this location
within approximately 30 minutes of downtown Jacksonville and
even closer to large suburban office parks on the city's
south side has attracted local suburban residents as well.
The Mayo Clinic's regional facility at San Pablo Road and J.
Turner Butler Boulevard is just 4 miles northwest of this
neighborhood. The Southpoint and Southside Boulevard office
centers to the west are a reasonable 15-minute commute from
the neighborhood along Highway AlA and J. Turner Butler
Boulevard, which eventually intersects with Interstate 95 to
the west.
In the retail sector, several neighborhood shopping centers
are noted along either side of Highway AlA. Ponte Vedra
Square is situated in this neighborhood at the southwest
corner of Highway AlA and Solana Road, which Ponte Vedra
Point shopping center is at the southwest corner of this
highway and Palm Valley Road. Between these two neighborhood
centers is a third, known as Sawgrass Village along the west
side of the street. Regional shopping can be found at South
Beach Regional Center, located just to the north of the
neighborhood boundary at the northwest corner of Highway AlA
and J. Turner Butler Boulevard in Jacksonville Beach. A
planned 250,000-square-foot center was announced in late
1993 and was completed at the southwest corner of Highway
AlA and J. Turner Butler Boulevard. Anchor tenants include
Target, Publix, and Ace Hardware. Currently there is a
zoning change requested for land adjacent to the subject
Lakeview Village Apartments for a new shopping center.
All of these retail developments are supported by the
growth and affluence of the residential sector in Ponte
Vedra Beach. The affluence of the neighborhood is
illustrated by the location of six country club
developments in the area over the past twelve years which
feature custom homes generally priced from $150,000 to
15
<PAGE>
over $400,000, well above the median home price in the
Jacksonville MSA. The residential neighborhoods tend to
become more prestigious at the southern end of Ponte Vedra
Beach. This southern part of the community is the location
of both the Sawgrass and Tournament Players Club (TPC)
country club/golf course developments. The Professional Golf
Association and the Association of Tennis Professionals both
have headquarter offices in Ponte Vedra Beach at the
Tournament Players Club development, and each has sponsored
major professional tournaments within the community in the
last several years.
Office development in the Beaches area, which includes Ponte
Vedra, is primarily smaller sized buildings less than 30,000
square feet in size. The August 1997 Commercial Real Estate
publication surveyed 19 office buildings totaling
approximately 600,000 square feet and only 2 buildings were
in excess of 30,000 square feet. The current supply of
immediately available office space is low. The Ponte Vedra
market has more supply, but also has more demand
particularly in the law, medical professionals, financial
planners, and insurance professionals. Rental rates are in
the $19.00 to $21.00 per square foot full service category.
Demand is strong in Ponte Vedra and over 150,000 square feet
is proposed along the `hot' AlA corridor south of State 202.
Several multifamily condominium and apartment projects are
located in Ponte Vedra Beach. Condos are typically found
immediately along the ocean or with the Sawgrass or TPC
developments, while apartments are located at the north end
of the neighborhood and along Highway AlA. According to the
Jacksonville Planning Department, which publishes a
quarterly apartment survey for the region, the Beach area
submarket in which Ponte Vedra Beach is located has among
the highest monthly average apartment rental rate of the six
submarkets in the Jacksonville MSA. Physical occupancy rates
in each of the existing apartment communities surveyed were
over 90 percent. At subject valuation date, there were
several apartment projects being constructed in or near
Ponte Vedra. Apartment development was occurring west of AlA
and south of J. Turner Butler Boulevard (State 202) and
along Hodges Road north of J. Turner Butler Boulevard. The
apartment construction in or near Ponte Vedra is more
specifically identified as west of the subject apartment
complex near the Landing Parkway/Ponte Vedra Lakes Boulevard
intersection.
Despite the growth in the area, which has generally occurred
over the past twelve years, about one-third of the land in
the neighborhood lies vacant and ready for development. To
the south and west of this neighborhood are typically vacant
areas, which contain marshes or land within the Guana River
State Park; to the north is the older city of Jacksonville
Beach, and to the east is the Atlantic Ocean. The St. Johns
District provides bus service to children in the
neighborhood attending public schools; Ponte Vedra Beach has
its own elementary school at Highway AlA and Corona Road.
The University of North Florida is located about 6 miles
northwest of this neighborhood at J. Turner Butler Boulevard
and St. Johns Bluff Road. Police and fire protection is
provided by the county.
16
<PAGE>
The neighborhood's access to supporting facilities, Atlantic
beaches, along with the location of prestigious golf club
communities within Ponte Vedra Beach have made the
neighborhood one of the most attractive areas in
Jacksonville. Physical occupancy rates in many multifamily
developments in this area are above 90 percent. As the
result of an improving local economy, there has been new
development in retail and multifamily housing. As the
economy continues to recover, the appraiser anticipates that
the demand for residential units and retail space will
become greater, and that space in the subject neighborhood
will actively participate in this increased absorption due
to all of the neighborhood's positive features stated above.
However, as the neighborhood becomes more built-out, it will
likely experience a period of stability as it matures in the
long-term compared to the period of rapid development this
neighborhood enjoyed throughout most of the 1980s.
CONCLUSION Jacksonville, with a January 1997 U.S. Census Bureau
population of 1,025,600 in its MSA, was known in the past as
a military and industrial port city at the northeastern end
of Florida. However, the employment base has grown and
diversified over the past two decades as major banks,
insurance companies and medical service industries have
opened regional or headquarter offices in the area. This
activity has increased the income of area residents and
spurred significant job growth through much of the 1980s.
Although Jacksonville is not noted as a major tourist center
compared to southern areas of Florida, the area has
attractive beaches and a redeveloped downtown riverfront
area to serve the local population.
The diversification of the employment base ignited office
development both downtown and in the south side suburbs
during the past ten years. Numerous large retail centers
have been built in recent years to support the growing
Jacksonville area population and income. Major private
employers include Barnett Bank, Blue Cross/Blue Shield of
Florida, and CSX Transportation. Nonetheless, the city's
naval presence, with over 30,000 personnel, still dominates
employment in the area.
While new industries and employers such as America Online
and AT&T have continued to enter the local employment market
with new back-office operation centers, the appraisers
anticipate less office development as the focus in the
marketplace switches to absorption and renovation of
existing vacant space. Bright spots in the Jacksonville real
estate market include improving occupancy rates in the
apartment market and a relatively low industrial space
vacancy rate compared to other industrial markets
nationwide.
The city of Jacksonville appears to be enjoying a favorable
economic climate. Construction permits and absorption of
space in some sectors such as single-family residential have
increased, while unemployment figures remain low. Although
the closing of the Cecil Field Naval Air Station is not
favorable, many of the lost jobs could potentially be offset
by additions to the area's other two Naval bases and to the
reuse plan of Cecil Field. The city's diversifying economic
base, good supporting facilities, Florida sunbelt location,
and good quality of life should support growth and
absorption in all sectors.
17
<PAGE>
The Ponte Vedra area is in demand and development activity
is present in the apartment, retail, and office areas. This
is in the Beaches area and reflects tourism, a retirement
population, etc. with a growing need/demand for medical,
financial, insurance, and law professionals. It is expected
that demand for apartments will continue into the near
future.
18
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
Information from two surveys was utilized in the
analysis of the Jacksonville apartment market
analysis. The first is the Apartment Market Survey
for Greater Jacksonville, Florida, Second Quarter,
1996 prepared by the Jacksonville Planning and
Development Department and the Northeast Florida
Apartment Council. The second is the Jacksonville
Apartment Market Survey, Third Quarter 1997,
published by Vestcor Realty Management, Inc. Most
references are made to the survey prepared by the
Vestcor Realty Management, Inc. AS THE FIRST SURVEY
WAS NOT MADE IN 1997 BY THE PLANNING DEPARTMENT AND
NORTHEAST FLORIDA APARTMENT COUNCIL.
Construction of apartment projects in Jacksonville
during the late 1980s continued but at lower levels
each year from 1985 through 1989. The credit
restrictions by lenders and their regulators
following the savings and loan scandals in the mid-
1980s contributed to make construction funds scarce
for apartment developers nationwide. The chart below
illustrates the units constructed per year in
Jacksonville since 1985.
<TABLE>
<CAPTION>
YEAR Total Units Permitted
-------------------------------------
<S> <C>
1985 5,079
1986 4,521
1987 2,656
1988 1,949
1989 1,407
1990 1,707
1991 1,170
1992 0
1993 278
1994 912
1995 1,073
1996 3,284
1997 978
</TABLE>
Source: Jacksonville Planning and Development
Department and Vestcor Realty Management,
Inc.
In 1996 3,284 units were permitted for five or more
dwelling units. In 1997 there were 978 units
permitted. The outlook for future development of
apartment projects in the Jacksonville area appears
to be good as occupancies are in the 90 percent to 95
percent range and the economy remains healthy.
Construction was visible to the appraiser in the
south part of Jacksonville.
According to the Jacksonville Planning Department,
the current number of apartment units existing in the
metropolitan area is approximately 54,000. The
Planning Department conducts a survey of the city and
area apartment market. This survey is done by mail to
the owners and/or managers of apartment complexes in
Duval County as well as in northern Clay and St.
Johns Counties, and the results of the survey are
published every quarter year in the department's
Apartment Market Survey. The Second Quarter of
-----------------------
this survey, which is stated to
19
<PAGE>
reflect the area apartment market as of the end of
June 1996, is the most recent available; this survey
is compiled based on the responses of owners and/or
managers of 27 percent of the total existing
apartment units in the area. Of the 27 percent or
14,575 units, there was a physical occupancy rate
of 95.58 percent with one bedroom apartments with the
highest rate at 96.23 percent and efficiencies with
the lowest average occupancy rate this quarter at
92.25 percent. The physical occupancy rates and
average monthly rents as of the Second Quarter 1996
are generally higher among those properties, which
were built since 1990. The Third Quarter 1997 market
survey by Vestcor Realty Management, Inc. reflects
the following statistics for average occupancy.
<TABLE>
<CAPTION>
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
20
<PAGE>
built tend to counter the findings of rental
increases for all units and indicate that the
increase for all units should be between 1 percent to
2.3 percent or on average about 1.65 percent.
Secondly, the 2nd Quarter 1997 average monthly rental
for all units was $574, which would indicate a $6.00
reduction to the 3rd Quarter 1997 average monthly
rent of $568.
Overall, the Jacksonville apartment market appears to
be healthy. Construction permits recorded for 1992
and 1993 were at their lowest levels in years, or
from a high of 5,079 units in 1985 to 0 units
permitted for 1992 and 278 in 1993. For 1994 and
1995, there were 912 and 1,073 units permitted,
respectively. In 1996, there were 3,284 units
permitted, while in 1997 there were 978 units
permitted. Physical occupancy as of the Third Quarter
1997 was at 92.8 percent, which is a drop from 1996,
but reflects the new construction. Absorption rates
in new apartment projects have remained healthy over
the past two years. Vacancies of the various
apartment markets range from 3 to 7 percent. The
appraisers project that the citywide market should
reach a stabilized occupancy of 95 percent between
one and two years at this rate of growth.
SUBMARKET ANALYSIS The subject property is located in the Beaches
submarket. This submarket is generally described as
the northeastern area of St. Johns County along the
Atlantic Ocean at Ponte Vedra Beach and including the
Duval County beachfront municipalities of Atlantic
Beach, Neptune Beach, and Jacksonville Beach.
Vestcor Realty Management, Inc.'s Third Quarter 1997
survey features data on the apartment market within
the city of Jacksonville as well as the area within
the subject submarket and other immediate suburbs.
This Third Quarter 1997 report, which is the most
recent published to date, states that the Beaches
submarket had a 94.0 percent physical occupancy rate,
slightly higher than the average occupancy rate of
92.8 percent of the eight submarkets surveyed. This
is a large increase from the 81.4 percent physical
occupancy rate experienced in this submarket during
the previous quarter and an increase from 93.6
percent in the Third Quarter 1996. Reference is made
to the following table:
21
<PAGE>
<TABLE>
<CAPTION>
PHYSICAL OCCUPANCY
QUARTER/YEAR RATE BEACHES SUBMARKET
----------------------------------------
<S> <C>
01/92 93.63%
02/92 86.74%
03/92 88.13%
04/92 92.82%
01/93 94.43%
02/93 96.88%
03/93 91.95%
04/93 91.43%
01/94 92.57%
02/94 94.16%
03/94 95.34%
04/94 91.70%
01/95 98.46%
02/95 91.81%
03/95 95.38%
04/95 95.73%
01/96 94.89%
02/96 93.19%
03/96 93.60%
02/97 81.40%
03/97 94.30%
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
The Beaches area apartments tend to attract more
transient tenants than the city of Jacksonville as a
whole. This can be noted in the wide occupancy rate
changes from the above table. Beaches area tenants
are usually most attracted to the area during the
summer months. In addition, the pool of prospective
tenants in this submarket fluctuates with the
personnel movements at the nearby Mayport Naval Air
Station and with the attraction of the retirement
populace.
The average monthly rental rate in the Beaches
submarket, at $606 as of the Second Quarter 1996, was
among the highest of all the submarkets in the area.
In the Second Quarter of 1997 the average monthly
rental increased about 13 percent to $687 and then
decreased 1 percent to $680 in Third Quarter 1997. It
is believed that some of the changes in rental rates
and occupancy is affected by new construction of
multi-family, condo, and single family development in
the Beaches and adjacent areas. The following table
illustrates the trend in rental rates for the subject
market according to the surveys by the Jacksonville
Planning and Development Department and Vestcor.
22
<PAGE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY RENTAL
QUARTER/YEAR RATE BEACHES SUBMARKET
-------------------------------------------
<S> <C>
01/92 $470
02/92 563
03/92 577
04/92 510
01/93 500
02/93 582
03/93 496
04/93 570
01/94 598
02/94 571
03/94 551
04/94 560
01/95 546
02/95 523
03/95 662
04/95 644
01/96 689
02/96 606
03/96 674
02/97 687
03/97 680
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
Information regarding the number of new apartment
projects, proposed or under construction, was not
made available in the Third Quarter survey because
the Beaches submarket is located in St. Johns County
and construction permits are recorded in that county,
not Duval County. There are projects located near US
Highway A1A being built in the Ponte Vedra area and
Beaches submarket. There are additional projects
being built along Hodges Road north of J. Turner
Butler Boulevard (State 202) which will contribute
competition to the Ponte Vedra apartment communities.
The subject's submarket has exhibited a stabilized
occupancy of between 90 and 95 percent (with one
exception) according to one local apartment survey.
The subject property has a current economic occupancy
of 84 percent and is considered to be able to reach
occupancy stabilization within three years.. Although
the Beaches submarket has been an active market in
the past, the future expected development of
additional apartment units may cause problems for
absorption of the existing vacant units unless demand
can remain commensurate with construction.
Additionally, there is some concern from the effect
of the proposed shopping center adjacent to Lakeview
Village on rental rates and/or occupancy.
23
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE DESCRIPTION
- --------------------------------------------------------------------------------
LOCATION The subject site is located along the east side of
Highway A1A at a private street known as Ocean Place
about 3 miles south of the Duval/St. Johns County
Line. This location is in the northeastern area of
St. Johns County in the community of Ponte Vedra
Beach about 18 aerial miles southeast of the
Jacksonville CBD. The site is improved with the Ponte
Vedra Beach Village II Apartments which have a street
address of 949 Shoreline Circle, Ponte Vedra Beach,
Florida.
SIZE AND SHAPE A survey of the subject site was provided to the
appraiser by the on-site property manager of the
apartments. This survey indicates that the site
comprises 13.29 acres and has a generally trapezoidal
configuration. The property has a significant 903.41
feet of frontage along the east line of Highway A1A
and 810.92 feet of frontage along the south line of
Ocean Place, a private roadway.
ACCESS AND VISIBILITY The property is easily visible from Highway A1A due
to its significant frontage on this roadway. Direct
access into the site is provided by Ocean Place, a
private roadway 60 feet wide running east and
dividing the subject site from the site to the north.
A recorded ingress and egress easement given to the
subject site owners along this Ocean Place allows for
direct access onto Ocean Place. This access easement
is recorded at the St. Johns County Recording Office
in O.R.V. 406, page 14 and O.R.V. 568, page 250.
Highway A1A is a four-lane divided roadway and is the
main thoroughfare in Ponte Vedra Beach. Most of the
major shopping centers in the area are located on
this highway, which is the main arterial providing
access to other parts of the Jacksonville area.
LEGAL DESCRIPTION A legal description of the subject is contained in
the Addenda of this report. The subject site is
generally described as being a 13.29-acre tract out
of Sections 27 and 46, Township 3 South, Range 29
East, St. Johns County, Florida.
ZONING The site is zoned RG1 by St. Johns County which
allows for higher density residential uses such as
apartments or condominiums. Front and back setbacks
are a minimum of 20 feet with side setbacks at 10
feet. The maximum building height allowed by this
zoning designation is 35 feet with the minimum lot
width at 100 feet. The minimum area coverage allowed
is 6,000 square feet with an additional 4,350 square
feet for each unit over two on the property. The
coverage area is credited only to developable land;
40 percent of the undevelopable land on a parcel can
also be made available for credit under the zoning
regulations. The subject site and improvements appear
to conform to these regulations.
UTILITIES All utilities are available to the site. Jacksonville
Suburban Utilities provides water and sewer service
to the site; the Jacksonville Electric Authority
supplies electrical service. Telephone hookups are in
place from Southern Bell, along with cable television
lines from Continental Cable.
TERRAIN AND DRAINAGE The subject site is generally level to street grade,
with minor landscaped berms within the site. The site
contains three retention lakes and drainage appears
to be adequate. A soil survey was not available on
the subject site. While the soil appears generally
supportive of a wide variety of improvements, the
appraiser is
24
<PAGE>
not an expert in soil content and was unable to
certify this assumption. According to the National
Flood Insurance Map 125147-0183D dated September 18,
1985, the site is in Zone C, or "areas of minimal
flooding." Numerous native trees were noted on the
site; however, no significant obstacles to
development of the site (such as rock outcroppings,
etc.) were evident.
EASEMENTS AND
ENCUMBRANCES The survey indicates the location of several utility
and right-of-way easements on the site, particularly
on the periphery. Most of these easements appear to
be minor and of no value consequence to the subject
site. However, a 60-foot ingress and egress and
utility right-of-way easement runs through the
abutting property to the north along Ocean Place.
This street is a private paved road from which access
can be gained onto the subject property from
Shoreline Circle, another private road on the subject
site. The ingress and egress easement allows for
access to the subject site from Highway A1A.
REAL ESTATE TAXES The subject site and improvements have the following
values assessed by the St. Johns County Property
Appraiser's Office.
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Improvements Value $3,661,330
Land Value 652,500
----------
Total Value $4,313,830
Total Taxes $79,060
Tax Rate per $1,000 Valuation 18.3270
</TABLE>
The breakdown for the tax rate for the subject-taxing
district for 1997 is compared to the 1994 through
1996 tax rates:
<TABLE>
<CAPTION>
1995 1996 1997
-----------------------------
<S> <C> <C> <C>
General County $ 6.312 $ 6.0930 $ 6.0930
School-State Law 10.4060 10.0760 10.0760
St. Johns River Water Mgmt. Dist. 0.4820 0.4820 0.4820
Fire District 0.5000 0.7500 0.7500
Mosquito Control 0.3210 0.3140 0.2960
Airport 0.1380 0.1380 0.2800
Florida Inland Navigation Dist. 0.0400 0.0380 0.0500
Jail 0.3500 0.2750 0.3000
-------- -------- --------
$18.5490 $18.1660 $18.3270
</TABLE>
The assessor's parcel number for the subject site is
061510-0000. The subject, assessed for $36.56 per
square foot or $34,789 per unit is assessed lower
than the value estimated in this report.
The real estate property taxes for the subject are
calculated at $79,060 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. For
purposes of this appraisal, we have assumed an on-
time payment of taxes. The real estate taxes in the
Income Approach section of this report reflect an
approximate 3 percent increase (inflation factor)
over the 1997 property taxes.
25
<PAGE>
Real estate taxes for the subject in 1998 have been
estimated at $81,561. This estimate also provides for
personal property taxes.
SITE CONCLUSION The subject property is located along the east line
of Highway A1A in the northeastern area of St. Johns
County, Florida, about 3 miles south of the Duval
county line. This location is about 18 aerial miles
southeast of downtown Jacksonville. The parcel
contains 13.29 acres with level terrain. Drainage and
soil conditions appear to be adequate and supportive
of a variety of improvements. All utilities are
available. The site is in the Zone C area of minimal
flooding. A survey of the site indicates a 60-foot-
wide ingress and egress easement along Ocean Place, a
private road running east/west and dividing the
subject site from the site to the north. No other
adverse easements or encroachments were noted.
Visibility for the property is provided from Highway
A1A, a major thoroughfare running along 903.41 feet
of the west boundary of the subject site. The
property is zoned by the county for high-density
residential uses including condominium and/or
apartment development, and appears to be physically
suitable for such improvements. The apartment market
in Ponte Vedra Beach is considered strong and the
subject site's location along the east side A1A is
considered excellent for multi-family development.
26
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 13.29-acre tract of land, is
improved with a one- and two-story apartment project
known as the Ponte Vedra Beach Village II Apartments.
The improvements consist of 124 apartment units
contained in 14 buildings constructed in 1985. Also
situated on the site is a clubhouse with a kitchen
and laundry facility, exercise room and sauna,
exterior mail post, deck, swimming pool and jacuzzi
surrounded by an iron fence, lighted and fenced
tennis court, three lakes, and a mechanical shed.
There are three basic floor plans for the 124
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>
12 lBR/lBA/DN 780 9,360
12 lBR/lBA/UP 780 9,360
8 1BR/1BA/VILLA 780 6,240
20 1BR/1BA/DEN/DN 947 18,940
20 lBR/lBA/DEN/UP 947 18,940
8 1BR/1BA/DEN/VILLA 947 7,576
18 2BR/2BA/DN 1,081 19,458
18 2BR/2BA/UP 1,081 19,458
8 2BR/2BA/V 1,081 8,648
--- ----- -------
124 951 117,980
</TABLE>
DN = downstairs; UP = upstairs
As seen in the figures above, the total net rentable
area of 117,980 in 124 apartment units results for an
average of 951 square feet per unit. There are a
total of 80 one-bedroom units and 44 two-bedroom
units.
The land area is 13.29 acres equating to a density of
9.33 units per acre. The parking consists of 239
asphalt-paved open spaces, or 1.93 spaces per unit.
The parking ratio is within industry and local market
standards.
The foundation of the buildings is of concrete slab
with wood-studded framing. The exterior walls are of
stucco with wood frame trim work, and the roof is
pitched with a tile covering. Windows are of single-
hung aluminum thermal pane construction, with six
panel exterior doors. Porches by each exterior door
have an exterior light. 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. Floors have carpeting over
pad, with sheet vinyl floors in the kitchen. Batt
insulation is located in the walls and ceilings.
27
<PAGE>
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, dishwasher, disposal, and refrigerator.
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.
Each floor plan in this project has a fireplace, and
all of the units have a washer and dryer closet with
connections, miniblinds, and an exterior screened-in
patio or deck with utility closet. Interior doors are
hollow core wood with some folding closet doors. Each
unit is equipped with a fire extinguisher per local
fire codes.
The mechanical components include standard PVC
plumbing pipes with stainless steel fixtures. The
units are equipped with electric central heating and
air-conditioning which is individually metered. The
interior wiring is copper with 125 amps designated
per unit and ample electrical outlets. Each apartment
is wired for telephone and cable television.
Other than the major site amenities stated above, the
grounds feature asphalt-paved parking pads and access
roadways, concrete sidewalks, a bridge with brick
pavers, and pole-mounted exterior light fixtures. The
landscaping features numerous native trees as well as
decorative planted shrubbery and lawns.
The subject improvements appear to be in good overall
condition. The subject property underwent renovation
in 1994, which included general exterior repair,
exterior painting, asphalt/concrete repair,
stairs/balconies repair, and roof repairs and in 1997
there was a significant amount of capital
expenditures. Capital items due to be expensed in
1998, according to ConAm Management Corporation,
include the following:
<TABLE>
<S> <C>
Asphalt/Seal/Repair................... $ 20,000
Electrical Breaker Repairs............ 30,800
Chimney Caps.......................... 25,000
Traffic Control Gating @ Entry Way.... 25,000
------
TOTAL................................. $100,800
</TABLE>
Considering the overall good condition after
renovation of the improvements, we estimate the
effective age of the subject property to be equal to
the actual age of twelve years.
28
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of Ponte Vedra II units.
[PICTURE APPEARS HERE]
Interior view of living room in Unit 827.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of bedroom in Unit 827.
[PICTURE APPEARS HERE]
Interior view of kitchen in Unit 703.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of dining area in Unit 703.
[PICTURE APPEARS HERE]
Interior view of bedroom in Unit 703.
<PAGE>
[PICTURE APPEARS HERE]
View of screened porch in Unit 703.
[PICTURE APPEARS HERE]
View of Unit 703's exterior.
<PAGE>
[PICTURE APPEARS HERE]
View of Unit 727's (townhouse) exterior.
[PICTURE APPEARS HERE]
View of living room in Unit 727.
<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 trapezoidal in shape and
encompasses a total of 13.29 acres, allowing for full
physical utilization of the site. The site has over 900 feet
of frontage along the east side of State Highway AlA. The
topography of the site is generally level, and drainage
appears to be adequate. The site is located in Flood Zone
"C" which is defined in the previous Site Description
section of this report.
The subject's location is on the east side of State Highway
AlA at its intersection with a private road known as Ocean
Place about 3 miles south of the Duval/St. Johns county
line. State Highway AlA is a four-laned divided roadway and
is the major thoroughfare in Ponte Vedra Beach. Property
uses along this highway in Ponte Vedra Beach predominantly
consist of single and multifamily residential
29
<PAGE>
uses with supporting retail. The subject has adequate
utility capacity, enjoys a relatively good functional size
and shape, and is not affected by any adverse easements or
restrictions as noted upon inspection.
After considering all of the physical characteristics of the
site noted above plus other data in the Site section of this
appraisal report, physically possible land uses would
include a variety of residential development such as
apartments, condominiums, cooperatives or townhouses, but
are directed to apartment development. The shape and size of
the subject site would present a deterrent to retail or
office development. The site is 13.29 acres, however, its
depth to frontage is approximately 2 to 1, and retail usage
generally does not extend beyond 300-400 feet in depth,
while the subject has over 735 feet in depth. Office usage
is limited by size and shape as the subject acreage is much
larger than the typical smaller office developments in Ponte
Vedra.
FINANCIAL FEASIBILITY - Financial feasibility is directly
proportional to the amount of net income that could be
derived from the subject. Rents have increased over the
previous 12 months and the apartment market overall appears
to be favorable. Area realtors report that near-term
prospects for condominium and cooperative units in
Jacksonville are becoming favorable particularly if they are
beach oriented.
After having eliminated all other development from our
analysis, the financial feasibility of multifamily
development must be tested. The subject site is in the
"Beaches" apartment submarket area. In the survey conducted
by Vestcor Realty Management, Inc., the occupancy level for
the apartment projects in the Beaches submarket was 94.3
percent during the third quarter of 1997. This reflects a
2.7 percent decrease from one year earlier During the same
one-year period between the Third Quarters 1996 and 1997,
rental rates have increased 1.0 percent from $674 to $680
per month. Apartment development has been taking place in
the Beaches submarket.
From the preceding, apartment development may be feasible.
Although occupancy rates have increased slightly during the
past year, occupancies have remained at high levels. Rental
rates have risen moderately according to the most recent of
the two apartment surveys. The following reflects apartment
development costs on a square foot basis.
<TABLE>
<CAPTION>
<S> <C>
Cost to Construct (Class C Average to Good)... $50.00
Land Acquisitions............................. 4.00
------
Total Cost of Development..................... $54.00
</TABLE>
The preceding indicates that development is feasible for
multifamily residential development. As indicated in the
Sales Comparison Approach in this report, apartments
developed since 1995 reflect sale prices from $60.00 to
$75.00 per square foot. Most of the sale prices are at or
above the cost of development.
30
<PAGE>
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, we are of the opinion that
the demand for multifamily apartment units conducive to the
subject site would produce the highest net return over the
longest period of time. This is due to the subject's
location and the popularity of the neighborhood.
In summary, the multifamily apartment market has shown signs
of increasing health. The site's location near Jacksonville
area beaches in the exclusive Ponte Vedra residential and
resort communities, and within easy commuting distance to
major south side employment facilities, gives it a large
base of prospective rent-paying tenants from which to draw.
The subject is in an area that is relatively stable after a
decade of growth and is now experiencing a renewed demand.
Therefore, after considering the alternatives, we believe
the highest and best use of the site, as vacant, is for
multifamily residential development.
SUBJECT PROPERTY
As IMPROVED The property, as improved, is tested for two reasons. First,
to identify the improvements that are expected to produce
the highest overall return per invested dollar, and the
second reason is to help identify comparable properties. The
four tests or elements are also applied in this analysis to
the subject as follows:
LEGALLY PERMISSIBLE - Within the scope of a legal analysis
the subject property would be adaptable to multifamily
residential uses as limited by the zoning of the site by St.
Johns County.
PHYSICAL POSSIBILITY - Based on the subject's size (13.29
acres), configuration, and the improvements' positioning
relative to the subject site, it is felt that the subject's
improvements employ the maximum use and potential of the
site as developed. The subject's density of 9.33 units per
acre is approximately in line with the market sales, which
reflect a range in density from 10 to 20.5, 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.
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 subject's unit amenities are considered
average compared to newer projects in the area. Some of the
comparables have better unit amenities. Therefore, the
subject's improvements are not considered to be the optimum
use. Additionally, there is need for $100,800 of deferred
maintenance or capital expenditures.
31
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of the
physical improvements. This value is derived by estimating
the replacement cost new of the improvements and, when
appropriate, deducting the reduction in value caused by
accrued depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that buyers
judge the value of an existing structure by comparing it to
the value of a newly constructed building with optimal
functional utility, assuming no undue cost due to delay.
Thus, the appraiser must estimate the difference in value
between the subject property and a newly constructed
building with optimal utility.
The Cost Approach was not used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily reflect
value. Moreover, estimates of depreciation are difficult to
accurately measure in the marketplace, thereby compounding
the speculative nature of the opinions derived in the cost
method of valuation.
SALES COMPARISON
APPROACH This approach produces an estimate of value by comparing the
subject property to sales and/or listings of similar
properties in the immediate area or competing areas. The
principle of substitution is employed and basically states
when a property is replaceable in the market, its value can
be set by the cost of acquiring an equally desirable and
comparable property. This technique is viewed as the value
established by informed buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is capitalization of
the net income, which the subject property will produce
during the remaining economic life of the improvements. This
process consists of two techniques. The first technique
estimates the gross income, vacancy, expenses, and other
appropriate charges. The resulting net income or net cash
flow is then capitalized. The second technique projects the
gross income, vacancy, expenses, other appropriate charges,
net income, and cash flow over a projected holding period.
The resulting cash flow and reversion (future value) are
discounted at an appropriate rate and added in order to
arrive at an indication of current value from the standpoint
of an investment. These methods provide an indication of the
present worth of anticipated future benefits (net income or
cash flow) to be derived from ownership of the property.
Both techniques were utilized in analyzing the subject
property.
SUMMARY The appraiser, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraiser's judgment
concerns the applicability of alternative tools of analysis
to the facts of the problem, the data and information needed
to apply these tools, and the selection of the analytical
approach and data most responsive to the problem in
question.
32
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or may point to a more reliable indication of the value of
the property being appraised than the others. In some
instances, because of the inadequacy or unavailability of
data, one or two of the approaches may be given little
weight in the final value estimate.
33
<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 OVERALL
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 08/97 $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 1996 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.
34
<PAGE>
SALE 4, known as the Woodhollow Apartments sold inn April
1997 for $16,700,000 or $48.99 square foot and $37,111 per
unit. The property contains 450 units and 342,162 square
feet. At date of sale, occupancy was 94 percent and the
terms were cash at a $10,350,000 mortgage at 7.5 percent
interest due in 7 years, amortized over 25 years. The
property has 38.65 acres and indicates a unit density of
11.6 units per acre. Construction is wood frame with stucco
and wood siding.
SALE 5, known as The Courts at Ponte Vedra, is located in
Ponte Vedra Beach. It sold in January 1997 for $19,000,000.
The property was built in 1996 and has 253 units with
252,916 total square feet.. Unit prices indicated by the
sale are $75.12 per square foot and $75,099 per unit.
Construction is wood frame with stucco and some masonry. The
site contains 9.23 acres and indicates a unit density of
27.41 units per acre. Capitalization rate at 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.
35
<PAGE>
================================================================
Sales Comparison - NOI Adjustments
----------------------------------
<TABLE>
<CAPTION>
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/SF NOI/SF Factor Price/SF
-- -------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
1 $ 69.11 $ 5.92 $ 4.67 0.78885 $ 54.52
2 $ 28.96 $ 3.16 $ 4.67 1.47785 $ 42.80
3 $ 51.54 $ 4.00 $ 4.67 1.16750 $ 60.17
4 $ 48.99 $ 4.69 $ 4.67 0.99574 $ 48.78
5 $ 75.12 $ 6.26 $ 4.67 0.74601 $ 56.04
6 $ 40.26 $ 3.85 $ 4.67 1.21299 $ 48.83
7 $ 45.77 $ 4.65 $ 4.67 1.00430 $ 45.97
8 $ 42.06 $ 4.26 $ 4.67 1.09624 $ 46.11
Mean= $ 50.40
Value @ mean $5,946,192
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/Unit NOI/Unit Factor Price/Unit
-- -------- -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
1 $73,214 $6,267 4,450 0.71007 51,987
2 $26,750 $2,916 4,450 1.52606 40,822
3 $45,238 $3,510 4,450 1.26781 57,353
4 $37,111 $3,562 4,450 1.24930 46,363
S $75,099 $6,263 4,450 0.71052 53,360
6 $32,254 $3,083 4,450 1.44340 46,555
7 $37,500 $3,811 4,450 1.16767 43,788
8 $41,852 $4,240 4,450 1.049S3 43,925
Mean= $ 48,019
Value @ mean $5,954,356
================================================================
</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
36
<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)
37
<PAGE>
[MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
RENT COMPARABLE ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------
COMP. YEAR NO. NRA AVERAGE 1997 1996 SQUARE
NO. NAME OF PROJECT BUILT UNITS (SF) UNIT SIZE OCCUP. RATE OCCUP. RATE FLOOR PLANS FEET
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Remington Apts. 1985 344 302,904 881 95.0% 92.6% 1BR/1BA 683
611 Ponte Vedra Blvd. 1BR/1BA 755
2BR/1BA 886
2BR/2BA 977
2BR/2BA 1,043
2BR/2BA 1,155
- --------------------------------------------------------------------------------------------------------------------------
2 The Fairways Apts. 1984 216 186,600 864 88.0% 93% 1BR/1BA 550
100 Fairway Park Blvd. 1BR/1BA 600
2BR/2BA/FL 950
1BR/1BA/TH 1,100
2BR/1.5BA/TH 1,050
- --------------------------------------------------------------------------------------------------------------------------
3 Colonial Grand 1987 240 211,640 882 97.0% 99.5% 1BR/1BA 672
125 Great Harbour Way 1BR/1BA 760
1BR/1BA/DEN 937
2BR/2BA 974
- --------------------------------------------------------------------------------------------------------------------------
4 Arbor Club Apts. 1992 251 288,924 1,151 100% 95% 1BR/1BA 881
1 Arbor Club Drive 1BR/1BA/LOFT 1,102
2BR/2BA 1,181
2BR/2BA 1,254
3BR/2BA 1,426
3BR/2BA 1,493
- --------------------------------------------------------------------------------------------------------------------------
Ponte Vedra Beach 1985 124 117,980 951 94.4% 94% 1BR/1BA 780
Village II 1BR/1BA/DEN 947
949 Shoreline Circle 2BR/2BA 1,081
SUBJECT
==========================================================================================================================
<CAPTION>
==========================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------
COMP. 1997 MONTHLY 1997
NO. NAME OF PROJECT RATE RENT/SF AMENITIES/COMMENTS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 The Remington Apts. 605-615 0.886-0.900 Microwave ovens, miniblinds, vaulted ceilings,
611 Ponte Vedra Blvd. 635-670 0.841-0.887 ceiling fans, outdoor utility closets, pools, tennis
670-680 0.756-0.767 court, racquetball court, hot tub, sauna,
735-745 0.752-0.763 exercise/weight room, clubroom, lake
765-775 0.733-0.743
825-835 0.714-0.723
- -------------------------------------------------------------------------------------------------------------------------
2 The Fairways Apts. 555 1.01 Washer/dryer connections, miniblinds, fireplaces,
100 Fairway Park Blvd. 615 1.03 pool, tennis courts, hot tub, exercise/weight room,
700 0.737 clubroom, laundry facility, lake
650 0.867
740 0.673
705 0.671
- -------------------------------------------------------------------------------------------------------------------------
3 Colonial Grand 575-615 0.856-0.915 Microwave ovens, washer/dryer connections,
125 Great Harbour Way 620-660 0.816-0.868 miniblinds, fireplaces, ceiling fans, vaulted
670-710 0.715-0.758 ceilings, outdoor utility closets, pool, tennis court,
705-745 0.724-0.765 racquetball courts, basketball court, hot tub, sauna,
exercise/weight room, clubroom, volleyball court
- -------------------------------------------------------------------------------------------------------------------------
4 Arbor Club Apts. 655-685 0.743-0.778 Microwave ovens, washer/dryer connections,
1 Arbor Club Drive 740-760 0.672-0.690 miniblinds, fireplaces, vaulted ceilings, burglar
790-820 0.669-0.694 alarms, pool, tennis courts, jacuzzi,
825-855 0.658-0.682 exercise/weight room, clubroom, laundry facility,
980-1,000 0.687-0.701 garages
1,025-1,050 0.687-0.703
- -------------------------------------------------------------------------------------------------------------------------
Ponte Vedra Beach 615-665 0.788-0.840 Washer/dryer connections, miniblinds, fireplaces,
Village II 655-705 0.702-0.744 outdoor utility closets, wet bars, pool, tennis courts,
949 Shoreline Circle 725-765 0.671-0.708 hot tub, sauna, exercise/weight room, clubroom,
SUBJECT laundry facility, lake
=========================================================================================================================
</TABLE>
DN = downstairs; UP = upstairs; TH = townhouse
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of its
quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the neighborhood
based on past history and present conditions. Vacancies are
then deducted to arrive at effective gross income. Estimated
annual expenses are deducted from the effective gross
income, resulting in an indication of net operating income
before debt service. From the estimated net annual income,
annual debt service (if applicable) is subtracted to obtain
annual cash flow to equity. This cash flow can be
capitalized into an indication of equity value by direct
capitalization utilizing an overall equity rate, or if debt
does not exist, an overall capitalization rate. It may also
be projected into the future over a selected but appropriate
holding period, and discounted along with the anticipated
equity reversion at the market discount rate and added in
order to arrive at the net present equity value for the
subject property. Since our valuation is on a cash basis, no
mortgage was considered. In either method, the present
mortgage balance (if applicable) would be added to the
equity value to obtain the total value of the property. The
appraisers have utilized both methods in valuing the subject
property on an all cash basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental income
from the various rental units, as well as any laundry
income, pet deposits, forfeited security deposits, and
miscellaneous income. Information provided by the on-site
leasing agents indicated the subject's current rent schedule
to be as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
------------------------------------------------------------------------
UNIT TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO.TOTAL
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 1BR/1BA/DN 12 780 $615 $0.788 $ 7380
A 1BR/1BA/UP 12 780 625 0.801 7,500
A 1BR/1BA/V 8 780 655 0.840 5,240
B 1BR/1BA/Den 20 947 665 0.702 13,300
B 1BR/1BA/Den 20 947 675 0.713 13,500
B 1BR/1BA/Den 8 947 705 0.744 5,640
C 2BR/2BA/DN 18 1,081 725 0.671 13,050
C 2BR/2BA/UP 18 1,081 735 0.680 13,230
C 2BR/2BA/V 8 1,081 765 0.708 6,120
--- -------
124 $84,960
</TABLE>
38
<PAGE>
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 total unit size from 216 to 344 units and in
occupancy from 88 to 100 percent. These comparable rentals
are summarized on a previous page. (Note: Other Comparables:
The Tides At Marsh Landing, Ocean Links, The Greens At Marsh
Landings, Bay Club, The Courts At Ponte Vedra, The
Boardwalk, and Marsh Cove were surveyed; however, the four
comparables used were believed adequate for the appraiser to
estimate market rents for the subject.
All of the comparables surveyed were located within the
subject's immediate vicinity. Each is comparable to the
subject overall, particularly in terms of overall physical
condition, unit size, rental rates, and the amenities
offered. These comparables indicate an average effective
rental rate range from $0.693 to $0.79 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 in size to the units offered at The
Remington, the Colonial Grand, and the Arbor Club. These
comparables range in monthly rental asking prices from $635
to $685 or from $0.743 to $0.887 per square foot. Although
the subject's rates, $0.79 to $0.84 per square foot, are
within the range of the comparable rentals, the comparables
generally have superior unit amenities. Recent leases
indicate that the subject property is attaining quoted
rental rates. Therefore, the Plan A subject floor plans
appear to have asking rents which are typical of the market
rate.
Plan B from the subject is most similar in size and
amenities to similar one-bedroom/den units displayed from
the Colonial Grand. These comparable units have a monthly
rental range from $670 to $710 or from $0.715 to $0.758 per
square foot. Plan B has asking rents from $665 to $705 per
month or $0.702 and $0.744 per square foot. Plan B's asking
rates are in the middle part of the range. Again, recent
leases indicate that the quoted rental rates are being
attained. Thus, this subject floor plan's asking rent is
believed to be appropriate as the effective economic rent.
39
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================
SUBJECT - RENT ANALYSIS
THE PONTE VEDRA BEACH VILLAGE II APARTMENTS
- ------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY PROJECT/UNIT
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF AMENITIES
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 780 $615-655 $0.788-0.846 Good/Average
The Remmington 1BR/1BA 755 635-670 0.841-0.887 Good/Good
Colonial Grand 1BR/1BA 760 640-660 0.816-0.868 Good/Good
Arbor Club 1BR/1BA 881 655-685 0.743-0.777 Good/Good
- ------------------------------------------------------------------------------------------
SUBJECT 1BR/1BA/DEN 947 $665-705 $0.702-0.744 Good/Average
Colonial Grand 1BR/1BA/DEN 937 670-710 0.715-0.758 Good/Good
Arbor Club 1BR/1BA/LOFT 1,102 740-760 0.672-0.690 Good/Good
- ------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,081 $725-765 $0.671-0.708 Good/Average
The Remmington 2BR/2BA 1,155 825-835 0.714-0.723 Good/Good
Colonial Grand 2BR/2BA 974 705-745 0.724-0.765 Good/Good
Arbor Club 2BR/2BA 1,254 825-855 0.658-0.682 Good/Good
==========================================================================================
</TABLE>
<PAGE>
The subject's largest plan with 1,081 square feet has asking
rents from $725 to $765 per month. This plan is most similar
in size and amenities to the 1,155 square-foot plan from The
Remington Apartments, the 974-square-foot plan from Colonial
Grand, and the 1,254-square-foot floor plan of the Arbor
Club. These comparable units range in monthly rental amounts
from $705 to $855, which equates to a range from $0.66 to
$0.765 per square foot per month. The subject Plan C has per
square foot rents in the middle portion of this range, from
$0.67 1 and $0.708 per square foot per month. Considering
the preceding, the subject's Plan C asking rates are
considered to be at market.
There are currently seven (7) vacant units in the subject
complex. This equates to a current physical occupancy rate
of 94.4 percent. Physical occupancy one year ago was 91.90
percent. These numbers indicate an upward movement in
physical occupancy for the subject property, and it can be
considered reflective of its highway frontage and beach
proximity.
Economic occupancy is estimated near 92.7 percent. 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 (SF) RENT/MO. RENT/SF MO. TOTAL
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 1BR/1BA/DN 12 780 $615 $0.788 $ 7380
A 1BR/1BA/UP 12 780 625 0.801 7,500
A 1BR/1BA/V 8 780 655 0.840 5,240
B 1BR/1BA/Den 20 947 665 0.702 13,300
B 1BR/1BA/Den 20 947 675 0.713 13,500
B 1BR/1BA/Den 8 947 705 0.744 5,640
C 2BR/2BA/DN 18 1,081 725 0.671 13,050
C 2BR/2BA/UP 18 1,081 735 0.680 13,230
C 2BR/2BA/V 8 1,081 765 0.708 6,120
--- -------
124 $84,960
</TABLE>
Gross Annual Rental Income: $84,960 x 12 months = $1,019,520
Our cash flow analysis, as well as our direct capitalization
method, indicates a gross rental income of $1,039,910. 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.
The 1997 figures for other income showed $17,414 or about
$0.15 per square foot for this category. In comparison with
other similar type apartment projects in the subject area
other income was approximately $0.15 to $0.25 per square
foot. Based
40
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
PONTE VEDRA BEACH VILLAGE II APARTMENTS
(FISCAL YEAR ENDING 11/30)
====================================================================================================================================
Comparable No. 1 2 3 SUBJECT PROPERTY
Year Built 1984 1984 1986 1985
Net Rentable Square Feet 142,792 156,6884 100,750 117,980
Number of Units 120 160 110 124
Average Unit Size 1,190 979 916 951
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1997 1993 1994 1995 1996-YTD BTM PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED 1997 FISCAL YEAR
PSF PSF PSF PSF PSF PSF PSF ACTIVE PSF ENDING 11/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
(10 MONTHS) /SF /UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES
Real Estate Taxes $0.72 $0.69 $0.80 $0.69 $0.72 $0.71 $0.77 $0.65 $0.69 $658
Insurance 0.16 0.13 0.18 0.10 0.15 0.16 0.16 0.16 0.18 168
Operating Expenses 0.55 0.69 0.68 0.72 0.71 0.64 0.71 0.77 0.72 683
Utilities 0.68 0.70 0.94 0.61 0.71 0.68 0.75 0.86 0.75 712
Repairs & Maintenance 0.52 0.53 0.58 0.32 0.32 0.40 0.39 0.43 0.42 396
Contract Services 0.21 0.18 0.21 0.22 0.21 0.23 0.24 0.30 0.24 228
Management 0.34 0.32 0.37 0.35 0.36 0.36 0.38 0.39 0.40 385
General Administrative 0.15 0.15 0.18 0.07 0.10 0.12 0.13 0.18 0.12 119
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Expenses $3.33 $3.39 $3.94 $3.09 $3.28 $3.30 $3.53 $3.74 *$3.52 *$3,349
====================================================================================================================================
</TABLE>
* Numbers may vary due to rounding.
<PAGE>
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 $0.17 per
square foot is typical for a project such as the
subject. This equates to a total "Other Income" of
$20,000 in the first fiscal year of our projected cash
flow as well as in our direct capitalization method.
This figure is grown at the same rate as the rental
rates after the first year of the holding period.
Gross Rental Income $1,039,910
Other Income 20,000
----------
Total Potential Gross Income $1,059,910
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 10 percent range.
This covers the time lag during re-leasing and normal
refurbishing of apartment units and the loss of income
resulting from bad debt or other vacancies. The
subject's current 94.4 percent physical occupancy is at
the approximate 94.3 percent Third Quarter physical
occupancy rate enjoyed by the Beaches submarket. The
subject property has a current economic occupancy rate
of 92.7 percent, which is below stabilized occupancy
for the subject. A 95.0 percent stabilized economic
occupancy has been utilized for the subject during the
holding period beginning in year two and deduction is
taken for rent loss in year 1 of the cash flow. (Note:
When the subject's actual collected rent is compared to
Bach Realty Advisors' estimated March rent, an 87.3
percent economic occupancy exists.)
EXPENSE ANALYSIS The various expenses necessary in the operation of the
subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement.
Proper appraisal technique demands that an appraiser
rely on typical expenses as opposed to actual expenses,
which may vary according to management or special
circumstances that may not persist. In addition, the
total expenses per square foot should be within a range
typical for similar projects. Reserves for replacement
are estimated based on age, condition, and construction
quality. It is re-emphasized that all income, as well
as expense estimates, are based on the assumption of
competent and prudent management.
We have based our estimate of projected expenses on
comparable apartment projects located in the subject
area, as well as the actual historical performance of
the subject property. The following Expense Analysis
Chart on the facing page summarizes the actual and/or
annualized 1997 expenses reported by three (3)
"individually metered" projects, as well as the subject
property's actual 1993, 1994, 1995, and 1996 expense
figures. The 1997 actual figures were available to the
appraisers at the time of the report and are shown in
the chart on the facing page. Bach Realty Advisors'
estimated expenses for the subject property in Fiscal
Year 1998 are also displayed.
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
41
<PAGE>
REAL ESTATE TAXES - The Lakeview Village Apartments are
subject to the taxing authorities of St. Johns County. The
county distributes the tax receipts from property owners to
different authorities as specified in the Site section of
this report. The subject's 1997 assessed value is $4,313,830
the total tax liability is $79,060 or $0.67 per square foot.
After examining the tax liabilities of the comparables used
in our expense analysis (which exhibited a range from $0.69
to $0.80 per square foot), we have reflected the actual 1997
real estate taxes plus an approximate 3 percent inflation
factor in our estimate of the 1998 taxes. Thus, real estate
taxes have been estimated at $0.69 per square foot or $658
per unit and total $81,561. 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 $0.18 per square foot or
$20,892. All of the expense comparables utilized exhibit a
range of insurance costs from $0.13 to $0.18 per square foot
for 1997. The subject's actual insurance costs have been
fluctuating from $0.10 to $0.16 per square foot since 1993.
The annualized 1996 insurance costs were projected at $0.16
per square foot. The appraisers believe that the insurance
expense for the subject is appropriate, but is generally
higher than the expense comparables. The expense per unit is
$168. 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, ranged between $0.64 to $0.71. The annualized 1997
operating expense is $0.77 per square foot, which appears
high. The expense comparables indicate a range of operating
expenses from $0.55 to $0.69 per square foot. Based on the
subject's historical expenses and a comparison of operating
expenses of comparable properties, the appraisers have
estimated a 1998 year operating expense of $84,727 which is
equivalent to $0.72 per square foot or $673 per unit. This
expense is expected to increase 4 percent annually
throughout our projection period.
UTILITIES - The expense comparables' 1997 utility expenses
have a range from $0.68 to $0.94 per square foot. The
subject's annualized 1996 year-to-date expense was $0.75 per
square foot. The 1997 expense is $0.86 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 $0.75 per square foot or $712 per unit, near the lower
end of the comparables range. The appraiser relied on
subject historical utility expenses.
REPAIRS AND MAINTENANCE - The 1996 annualized actual year-
to-date repairs and maintenance costs are $0.39 per square
foot for the subject. 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 $0.52 to $0.58 per square foot and the
subject's 1997 annualized expense is $0.43 per square foot.
The subject's historical repair and maintenance is in a
range from $0.32 to $0.40 per square foot. The 1998
42
<PAGE>
expense estimate was $0.42 per square foot or $49,134. This
expense is increased 4 percent annually.
CONTRACT SERVICES - The contract services category includes
mainly landscaping services. Our surveyed expense
comparables reported 1997 contract services expenses between
$0.18 and $0.21 per square foot. Actual expenses for the
subject in for the 1996 contract services expense are
estimated at $0.24 per square foot, while 1997 indicated
$0.30 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 $0.24 per square foot or $228 per unit and
totaling $28,242 in the first year of the cash flow. These
expenses are expected to increase annually at a rate of 4
percent.
MANAGEMENT - This figure for apartment projects is typically
expressed as a percentage of the effective gross income of
the property. The industry standard for an apartment complex
of this size and quality is about 5 percent of effective
gross income. This includes the fee to outside management or
ownership for managing the property. According to the actual
income and expense statements from 1993 forward provided by
the client, management fees at the subject have been
approximately 5 percent including both on-site and
headquarter charges. 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 $0.13 per square foot.
The subject's historical G&A expense has ranged from $0.07
to $0.13 per square foot and has slowly climbed over the
years. The 1997 expense was $0.18 per square foot. The
appraiser utilized an $0.12 per square foot figure or $126
per unit and totaling $14,701, supported by the subject's
history. This expense increases at a rate of 4 percent for
each year in the cash flow.
EXPENSE SUMMARY In conclusion, stabilized vacancy loss has been estimated at
5 percent beginning in year two and continuing throughout
the holding period. The total estimated 1997 calendar year
expenses for the Ponte Vedra Beach Village II Apartments,
excluding reserves for replacement, equates to $3.52 per net
rentable square foot or $3,349 per unit. This is below the
range indicated by the expense comparables but is reasonable
and is 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
43
<PAGE>
subject was constructed in 1985 and appears to have had
ongoing maintenance since its construction. It is our
opinion that a reserve allowance of $0.32 per square
foot or $300 per unit is adequate to provide for the
continued maintenance of the project given the on-going
termite problem and weather related conditions as
mentioned below. Reserves for replacement total $37,200
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 $108,800 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
44
<PAGE>
investment based on an initial cash investment, annual
cash flows to the property, as well as resale proceeds.
IRR allows for return on investment as well as
recapture of the original investment when factoring in
the reversion. To simulate this process, we have relied
upon several investor surveys, which detail reasonable
yields or IRR requirements of purchasers. We have used
this rate as a discount rate that, when applied to
projected cash flows and net resale proceeds
(reversion), results in the present value of the
property.
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This IRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. Real Estate is considered riskier than bonds
due to illiquidity, competition, burden of management,
and market conditions; therefore approximately 150
basis points or more could be added to the Corporate
"Baa" bond rate in a normal market. Based on the
previous data and recognizing new construction, we
believe a 12 percent discount rate is reasonable in the
current market based on an all cash sale and
alternative investments.
CAPITALIZATION RATE The subject property's reversionary value is derived by
capitalizing the eleventh year's net operating income.
As mortgage rates have fluctuated over the past several
years, it becomes difficult to apply a band of
investment method to establish a capitalization rate
because capitalization rates do not react dramatically
to ups and downs of mortgage interest rates.
Additionally, the mercurial nature of the recent market
creates a large variance of returns depending on
property potential. Again, according to the previously
cited investor survey, investors for apartment
properties indicated a terminal capitalization rate
range from 8.0 to 10.25 percent or an average of 9.29
percent to attract investment. Going-in capitalization
rates of the comparable sales in the Sales Comparison
Approach could be calculated based on the data
provided. Most had a relatively similar occupancy rate
as the subject at their respective times of sale. The
range of going-in capitalization rates from these sales
was from 7.76 to 10.9 percent (without reserves). A
going-in capitalization rate in the middle of this
range is considered appropriate. The going-in rate is
typically lower than the terminal capitalization rate
stated above due to the older age of the property and
the risk of the market ten years hence. Based upon the
aforementioned factors, the terminal capitalization
rate for the subject should be above the average going-
in capitalization rate exhibited by the comparable
sales in the Sales Comparison Approach. Therefore, a
terminal capitalization rate of 10.0 percent appears
appropriate for the subject property based on the
Korpacz survey.
CASH FLOW ASSUMPTIONS . Rents were based on an average rental rate of
approximately $0.72 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.
45
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PONTE VEDRA VILLAGE
- -------------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6
Period 1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Apt. Rents 1,039,910 1,081,507 1,124,767 1,169,758 1,216,548 1,265,210
Rent/SF/Mo. 0.735 0.764 0.794 0.826 0.859 0.894
Other Income/Yr. 20,000 20,800 21,632 22,497 23,397 24,333
--------- --------- --------- --------- --------- ---------
Gross Income 1,059,910 1,102,307 1,146,399 1,192,255 1,239,945 1,289,543
% Vacancy 10.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 105,991 55,115 57,320 59,613 61,997 64,477
--------- --------- --------- --------- --------- ---------
Eff. Gross Income 953,919 1,047,191 1,089,079 1,132,642 1,177,948 1,225,066
-----------------
EXPENSES: Per Unit Per SF
-----------------
Real Estate Taxes 658 0.69 81,561 84,823 88,216 91,745 95,415 99,231
Insurance 168 0.18 20,892 21,727 22,596 23,500 24,440 25,418
Operating Expense 683 0.72 84,727 88,116 91,640 95,306 99,118 103,083
Utilities 712 0.75 88,338 91,871 95,546 99,368 103,342 107,476
Repair & Maintenance 396 0.42 49,134 51,099 53,143 55,269 57,480 59,779
Contract Services 228 0.24 28,242 29,372 30,547 31,769 33,039 34,361
Management Fee 5.00% 0.40 47,696 52,360 54,454 56,632 58,897 61,253
General & Administrative 119 0.12 14,701 15,289 15,901 16,537 17,199 17,887
Reserves 300 0.32 37,200 38,688 40,236 41,845 43,519 45,259
--------- --------- --------- --------- --------- ---------
Total Expenses $3,649 $ 3.84 452,490 473,346 492,279 511,971 532,449 553,747
----------------
Per SF Per Yr. 3.84 4.01 4.17 4.34 4.51 4.69
Per Unit Per Yr. 3,649 3,817 3,970 4,129 4,294 4,466
NET OPERATING INCOME $ 501,429 $573,846 $596,800 $620,672 $645,499 $671,319
========= ======== ======== ======== ======== =========
Per SF $ 4.25 $ 4.86 $ 5.06 $ 5.26 $ 5.47 $ 5.69
Per Unit $ 4,044 $ 4,628 $ 4,813 $ 5,005 $ 5,206 $ 5,414
==========================================================================================================================
Capital Items: 100,800
--------- --------- --------- --------- --------- ---------
Cash Flow 400,629 573,846 596,800 620,672 645,499 671,319
--------- --------- --------- --------- --------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631
Present Value of Cash Flow 357,705 457,466 424,790 394,448 366,273 340,111
NOI in 11th Year 816,762 Present Value of Income Stream
Ro at Reversion 10.00% Present Value of Reversion
--------- ------------------------------------------------
Indicated Reversion 8,167,616 Indicated Value of Subject
Less: Sales Costs 4.00% 326,705 Indicated Value/SF
---------
Reversion in 10th Yr 7,840,912 Indicated Value/Unit
GIM at Indicated Value
Ro at Indicated Value
------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
7 8 9 10 Reversion
2004 2005 2006 2007 2008
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME:
Apt. Rents 1,315,818 1,368,415 1,423,189 1,480,117 1,539,321
Rent/SF/Mo. 0.929 0.967 1.005 1.045 1.087
Other Income/Yr. 25,306 26,319 27,371 24,466 29,605
--------- --------- --------- --------- ---------
Gross Income 1,341,125 1,394,770 1,450,561 1,508,583 1,568,926
% Vacancy 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 67,056 69,738 72,528 75,429 78,446
--------- --------- --------- --------- ---------
Eff. Gross Income 1,274,069 1,325,031 1,378,033 1,433,154 1,490,480
EXPENSES:
Real Estate Taxes 103,201 107,329 111,622 116,087 120,730
Insurance 26,434 27,492 28,591 29,735 30,925
Operating Expense 107,206 111,495 115,954 120,593 125,416
Utilities 111,775 116,246 120,896 125,732 130,761
Repair & Maintenance 62,170 64,657 67,243 69,933 72,730
Contract Services 35,735 37,165 38,651 40,198 41,805
Management Fee 63,703 66,252 68,902 71,658 74,524
General & Administrative 18,602 19,346 20,120 20,925 21,762
Reserves 47,070 48,953 50,911 52,947 55,065
--------- --------- --------- --------- ---------
Total Expenses 575,897 598,933 622,890 647,806 673,718
Per SF Per Yr. 4.88 5.08 5.28 5.49 5.71
Per Unit Per Yr. 4,644 4,830 5,023 5,224 5,433
--------- --------- --------- --------- ---------
NET OPERATING INCOME $698,171 $726,098 $755,142 $785,348 $816,762
========= ========= ========= ========= =========
Per SF $5.92 $6.15 $6.40 $6.66 $6.92
Per Unit $5,630 $5,856 $6,090 $6,333 $6,587
==================================================================================================
Capital Items:
--------- --------- --------- --------- ---------
Cash Flow 698,171 726,098 755,142 785,348 816,762
--------- --------- --------- --------- ---------
Present Value Factor 0.452349 0.403883 0.360610 0.321973 1.000000
Present Value of Cash Flow 315,817 293,259 272,312 252,861 816,762
NOI in 11th Year 3,475,042
Ro at Reversion 2,524,564
- ---------------------------------------
Indicated Reversion 5,999,606
Lens: Sales Costs 50.85
48,384
Reversion in 10th Yr 5.77
8.36%
- ---------------------------------------
</TABLE>
<PAGE>
================================================================================
CASH FLOW SUMMARY
FISCAL YEAR ANNUAL 12.00% PV OF
ENDING 11/30 CASH FLOW NPV FACTOR CASH FLOWS
------------ --------- ---------- ----------
1998 $400,629 0.892857 $357,705
1999 573,846 0.797194 457,466
2000 596,800 0.711780 424,790
2001 620,672 0.635518 394,448
2002 645,499 0.567427 366,273
2003 671,319 0.506631 340,111
2004 698,171 0.452349 315,817
2005 726,098 0.403883 293,259
2006 755,142 0.360610 272,312
2007 785,348 0.321973 252,861
-------
TOTAL NPV OF CASH FLOWS $3,475,042
Projected NOI - 11TH YEAR $ 816,762
Terminal Capitalization Rate 10.00%
------
Estimated Value of Property at End of 10th Year $8,167,616
Sales Cost 4.00% (326,705)
---------
Value of Reversion at End of 10th Year $7,840,912
Discount Factor 12.00% 0.32193
-------
Present Value of the Reversion $2,524,564
Sum of Present Values of Cash Flow 3,475,042
---------
MARKET VALUE AS OF NOVEMBER 30, 1997 $5,999,606
(ROUNDED) $6,000,000
==========
================================================================================
<PAGE>
. The subject property's current physical occupancy rate
is 94.4 percent. The economic occupancy rate of 92.7
percent as of November 1997 is below 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 beginning in year two
and 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 $0.273 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 DOLLARS
($6,000,000)
46
<PAGE>
================================================================================
DIRECT CAPITALIZATION
<TABLE>
<CAPTION>
================================================================================
Total /Unit /SF
<S> <C> <C> <C>
Potential Gross Rental Income $1,039,910 $ 8,386 $ 8.81
Other Income 20,000 161 0.17
------- ------ -----
Potential Gross Income $1,059,910 $ 8,548 $ 8.98
Less: Vacancy & Credit Loss @ 5.00% 52,996 427 0.45
------- ------ -----
Effective Gross Income $1,006,915 $ 8,120 $ 8.53
FIXED EXPENSES
- --------------
Real Estate Taxes $ 81,561 $ 658 $ 0.69
Insurance 20,892 168 0.18
------- ------ -----
Total Fixed $ 102,452 $ 826 $ 0.87
Operating Expenses $ 84,727 $ 683 $ 0.72
Utilities 88,338 712 0.75
Repairs & Maintenance 49,134 396 0.42
Contract Services 28,242 228 0.24
Management Fee 5.00% 50,346 406 0.43
General Administrative 14,701 119 0.12
Reserves for Replacement 37,200 300 0.32
------- ------ -----
Total Variable $ 352,688 $ 2,844 $ 2.99
Total Expenses $ 455,140 $ 3,670 $ 3.86
------- ------ -----
Net Operating Income $ 551,775 $ 4,450 $ 4.68
Capitalization Rate 9.00%
----
Fee Simple Stabilized Market Value $6,130,832 $49,442 $51.97
Less: Rent Loss Due to Lease Up 69,194 558 0.59
Capital Expenditures 100,800 813 0.85
------- ------ -----
LEASED FEE "AS IS" MARKET VALUE $5,960,838 $48,071 $50.52
ROUNDED $6,000,000
==========
================================================================================
</TABLE>
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
<TABLE>
<CAPTION>
Year 1 Year 2
------ ------
<S> <C> <C>
Stabilized NOI $551,775 $551,775
Projected NOI 477,737 573,846
------- -------
Rent Loss $74,038 $0
7.00% PV Factor 0.934579439 0.873438728
----------- -----------
PV Income Loss $ 69,194 $0
CUMULATIVE TOTAL $ 69,194
================================================================================
</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 $6,000,000 and is
shown on the facing page.
INCOME APPROACH
CONCLUSION DCF Method...................................... $6,000,000
Direct Capitalization Method.................... $6,000,000
Consideration is given to both the discounted cash flow
method and the direct capitalization approach. These have
been rounded to the nearest ten thousand dollars, however,
for purposes of the income approach conclusion, the value is
rounded to the nearest fifty thousand.
From the above analysis provided by the Income Approach, we
estimate the leased fee market value of the subject property
on an "as is" all cash basis, as of November 30, 1997, to be
SIX MILLION DOLLARS
($6,000,000)
47
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $6,000,000
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 from May 1986 through August 1997
were utilized in the Sales Comparison Approach. Each is
similar to the subject property in one or more
characteristics including occupancy, location, age,
construction quality, amenities, and/or condition. The data
on the comparable sales was considered to be reasonably
accurate and reliable. The methods of comparison utilized in
this analysis were the net operating income per square foot
and per unit and the effective gross rental multiplier
(EGRM) methods. These indicators rely on a comparison of
income rather than physical attributes. Thus, adjustments
for physical factors are not necessary as economics are the
common denominator. A final market value estimate for the
subject was made based on the analysis presented in the
Sales Comparison Approach.
The Income Approach attempts to measure investment qualities
of the property. Based on actual rents in the immediate area
of the subject, actual expenses, and investor returns
derived from the market, we have estimated value. Actual
data on the property, as well as comparable data from nearby
similar properties, were considered to be adequate. Because
the Income Approach deals directly with income streams, we
believe it is a very good indication of current market
conditions. It tends to reflect a value which an investor of
a property would anticipate.
In the Income Approach, comparable properties from the
subject Ponte Vedra Beach area were utilized when deriving
the subject property's economic market rents and projected
expenses. For this reasoning, the Income Approach is given
greatest weight in the final analysis. The Sales Comparison
Approach totally supported the Income Approach conclusion.
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)
48
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE 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
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name San Pablo
Address 14401 Jose Vedra Blvd..
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) N/A
Grantee (Buyer) N/A
Recorded Document N/A
Sale Price $5,350,000
Occupancy 90%
Sale Price per Unit $26,750
Sale Price per SF $28.96
Capitalization Rate 10.8%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,302,800
Vacancy/Collection Loss ($130,280)
Effective Gross Income $1,172,520
Operating Expenses ($589,370)
Net Operating Income $583,150
PROPERTY DESCRIPTION
Year Built 1974
Number of Stories 2
Number of Units 200
Number of Bedrooms 350
Net Rentable Area 184,750
Average Unit Size 924 SF
Land Area 14.24 acres
Unit Density 14.04 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Concrete block with masonry and wood veneer
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments San Pablo Apartments needed new plumbing system, wood
replacement, some roof replacement and other repairs at
time of sale. The property has tennis courts,
basketball courts, full size pool, and playground.
Expenses do not include reserves.
<PAGE>
HUNTER'S RIDGE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Hunter's Ridge (previously Oaks at Deerwood)
Address 10100 Baymeadows Road
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Oaks at Baymeadows II Associates, Ltd.
Grantee (Buyer) Mid-America Apartments of Duval, L.P.
Recorded Document 8653-596
Sale Price $15,200,000
Occupancy 92%
Sale Price per Unit $45,238
Sale Price per SF $51.54
Capitalization Rate 7.76%
TERMS OF SALE SAID TO BE CASH
INCOME/EXPENSE DATA
Potential Gross Income $2,451,409
Vacancy/Collection Loss ($196,113)
Effective Gross Income $2,255,296
Operating Expenses $1,075,776
Net Operating Income $1,179,520
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms NA
Net Rentable Area 294,888 SF
Average Unit Size 878 SF
Land Area 34.70 acres
Unit Density 9.68 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Wood frame/Wood Siding/Shingle roof
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Property had a name change after the sale and is now
known as Hunter's Ridge. Clubhouse has a tile roof
covering and entry is paved with brick payers. Well
landscaped and treed. Amenities include a pool with hot
tub, tennis courts, fitness facility in clubhouse, car
care center, racquet ball/volleyball court, outdoor
storage for each unit, mini-blinds, and washer/dryer
connections.
<PAGE>
WOODHOLIOW
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Woodhollow Apartments
Address 1715 Hodges Blvd.
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Woodhollow, LP
Grantee (Buyer) Mid-America Apartments, LP
Recorded Document 8590-2406
Sale Price $16,700,000
Occupancy 94%
Sale Price per Unit $37,111
Sale Price per SF $48.99
Capitalization Rate 9.60%
TERMS OF SALE Cash to mortgage of $10,350,000 @ 7.5%
Due in 7 years, based on 25 amortization schedule
INCOME/EXPENSE DATA
Potential Gross Income $3,245,490
Vacancy/Collection Loss ($194,729)
Effective Gross Income $3,050,761
Operating Expenses ($1,447,561)
Net Operating Income $1,603,200
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Units 450
Number of Bedrooms 690
Net Rentable Area 342,162 SF
Average Unit Size 760 SF
Land Area 38.65 acres
Unit Density 11.6 Units per Acre
Property Condition Average Plus
Parking (type) Open parking
Construction Type Wood frame
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments The cap rate does not include a deduction for reserves.
Amenities are a 6-acre lake, olympic size pool with
large cool deck, jacuzzi, 2 tennis courts, 2 volleyball
courts, BBQ and picnic areas, large playground, and a
gated boat storage.
<PAGE>
THE COURTS AT PONTE VEDRA
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name The Courts at Ponte Vedra
Address 101 Vera Cruz Drive
City/County/State Ponte Vedra Beach, FL
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Windsor Apartments, L.P.
Grantee (Buyer) Metropolitan Life Insurance Corporation
Recorded Document 01220-01824
Sale Price $19,000,000
Occupancy 95%
Sale Price per Unit $75,099
Sale Price per SF $75.12
Capitalization Rate 8.34%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,734,426
Vacancy/Collection Loss ($136,721)
Effective Gross Income $2,597,705
Operating Expenses ($1,013,105)
Net Operating Income $1,584,600
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Units 253
Number of Bedrooms N/A
Net Rentable Area 252,916 SF
Average Unit Size 1,000 SF
Land Area 9.23 acres
Unit Density 27.41 Units per Acre
Property Condition Excellent
Parking (type) Open parking
Construction Type Wood frame/Masonry/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Built in late 1996 and sold on 95% proforma. Leasing
was ahead of schedule at time of sale. Complex was in
excellent condition. Property had very attractive
architectural design features at windows and roof
lines. Amenities include security gate entry, fountain,
brick pavers, lap pool, heated spa, and clubhouse with
business center. Property had higher unit density than
most projects in Ponte Vedra.
<PAGE>
THE HUNTINGTON AT HIDDEN MILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Huntington at Hidden Mills (formerly Cozumel)
Address 3333 Monument Road
Location East side of Monument Road, north of SR 10 (Atlantic
Blvd.)
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Date of Sale 8/8/96
Grantor (Seller) Private Syndication
Grantee (Buyer) Walden Residential
Recorded Document NA
Sale Price $7,225,000
Occupancy 98%
Sale Price per Unit $32,254.46
Sale Price per SF $40.26
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,356,839
Vacancy/Collection Loss 2.8% $37,991
Effective Gross Income $1,318,848
Operating Expenses $628,166
Net Operating Income $690,682
PHYSICAL DATA
Year Built 1986
Number of Stories 2-3
Number of Units 224
Number of Bedrooms 376
Net Rentable Area 179,476 SF
Average Unit Size 801 SF
Land Area 14.92 acres
Unit Density 15
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments Price adjusted upward by $350,000 for required re-
plumbing and was a credit given by the seller.
The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE ANTLERS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Antlers
Address 8433 Southside Blvd.
Location East side of Southside Blvd., south of J. Turner
Butler Blvd.
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Balcor
Grantee (Buyer) United Dominion Real Estate
Date of Sale 5/29/96
Sale Price $15,000,000
Occupancy 97%
Terms of sale Cash
Sale Price per Unit $37,500.00
Sale Price per SF $45.77
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,752,915
Vacancy/Collection Loss 3.2% $88,093
Effective Gross Income $2,664,822
Operating Expenses $1,140,493
Net Operating Income $1,524,329
PHYSICAL DATA
Year Built 1985
Number of Stories 2-3
Number of Units 400
Number of Bedrooms 504
Site Area 42.51 acre(s)
Net Rentable Area 327,728 SF
Average Unit Size 819 SF
Land Area 42.51 acres
Unit Density 9.4
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
WESTLAND PARK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name Westland Park
Address 6710 Collins Road
Location North side of Collins Road, north of I-295
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Vestcor
Grantee (Buyer) United Dominion Real Estate
Sale Date 5/9/96
Sale Price $16,950,060
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $41,852.00
Sale Price per SF $42.06
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,929,883
Vacancy/Collection Loss 3.7% $108,406
Effective Gross Income $2,821,477
Operating Expenses $1,104,247
Net Operating Income $1,717,230
PHYSICAL DATA
Year Built 1989
Number of Stories 2-3
Number of Units 405
Number of Bedrooms 723
Net Rentable Area 403,010 SF
Average Unit Size 995 SF
Land Area 27.17
Unit Density 14.9
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE REMINGTON
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Project No. 97-068/97-069
Name of Project: The Remington
Street Address: 611 Ponte Vedra Lakes
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: 43
Number of Stories: 2
Number of Units: 344
Net Rentable Area (SF): 302,904
Average Unit Size (SF): 881
Parking Surface: Asphalt
Parking Spaces: Open Parking
Type of Construction: Stucco walls with tile roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA 638 $605-615 $0.886-0.900
72 1BR/1BA 755 635-670 0.841-0.887
64 2BR/1BA 886 670-680 0.756-0.767
72 2BR/2BA 977 735-745 0.752-0.763
48 2BR/2BA 1,043 765-775 0.733-0.743
24 2BR/2BA 1,155 825-835 0.714-0.723
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
miniblinds, fireplaces, ceiling fans, vaulted
ceilings, outdoor utility closets, patio/balconies
Project Amenities: 2 swimming pool, 1 tennis court, 2 racquetball
court, hot tub, sauna, exercise/weight room,
clubroom, and lake
ECONOMIC DATA
Percent Occupied: 95%
Avg. Monthly Rent/SF of NRA: $0.79
Electricity Paid By: Tenant
Length of lease: 7 or 12 months
Security Deposit: $220 for 1BR; $270 for 2BR
Pets Allowed/Deposit: Yes, $200-300, 1/2 refundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Upper units lease at a premium; some upper units
have ceiling treatments and fireplaces.
<PAGE>
THE FAIRWAYS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Project No. 97-068/97-069
Name of Project: The Fairways Apartments
Street Address: 100 Fairway Park Boulevard
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Buildings: 21
Number of Stories: 2-3
Number of Units: 216
Net Rentable Area (SF): 186,600
Average Unit Size (SF): 864
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Frame and stucco walls with composition roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
8 1BR/1BA 550 $555 $ 1.01
18 1BR/1BA 600 615 1.03
86 2BR/2BA/FL 950 700 0.737
68 2BR/1BA/TH 750 650 0.867
18 2BR/2BA/TH 1,100 740 0.673
18 2BR/1.5BA/TH 1,050 705 0.671
</TABLE>
FL = flat; TH = townhouse
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, miniblinds, fireplaces, outdoor utility
closets, patio/balconies
Project Amenities: 1 swimming pool, 2 tennis courts, hot tub,
exercise/weight room, clubroom, laundry facility,
lake
ECONOMIC DATA
Percent Occupied: 88%
Avg. Monthly Rent/SF of NRA: $0.782
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $275
Pets Allowed/Deposit: Yes; 20 pounds maximum, $300-500 nonrefundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates between individual
floor plans are due to screened-in porches and
fireplaces.
<PAGE>
COLONIAL GRAND
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Project No. 97-068/97-069
Name of Project: Colonial Grand
Street Address: 125 Great Harbour Way
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Buildings: 31
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 211,640
Average Unit Size (SF): 822
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Stucco walls with tile roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------
<S> <C> <C> <C> <C>
40 1BR/1BA 672 $575-615 $0.856-0.915
40 1BR/1BA 760 620-660 0.816-0.868
40 1BR/1BA/DEN 937 670-710 0.715-0.758
120 2BR/2BA 974 705-745 0.724-0.765
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplaces,
ceiling fans, vaulted ceilings, walk-in closets,
outdoor utility closets, patio/balconies
Project Amenities: 1 swimming pool 1 tennis court, 2 racquetball
courts, 1 basketball court, hot tub, sauna,
exercise/weight room, clubroom, lakes, volleyball
court
ECONOMIC DATA
Percent Occupied: 97.0%
Avg. Monthly Rent/SF of NRA: $0.755
Electricity Paid By: Tenant
Length of lease: 7 or 12 months
Security Deposit: $175
Pets Allowed/Deposit: Yes, 25-pound weight limit; $300 nonrefundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates of individual floor
plans are due to location and fireplaces. Upstairs
units cost an additional $10 per month. There is
an additional charge of $10 per month for seven-
month leases.
<PAGE>
THE ARBOR CLUB
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Project No. 97-068/97-069/97-074
Name of Project: Arbor Club Apartments
Street Address: 1 Arbor Club Drive
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1992
Number of Buildings: 13 plus 12 garage buildings
Number of Stories: 2-3
Number of Units: 251
Net Rentable Area (SF): 288,924
Average Unit Size (SF): 1,151
Parking Surface: Asphalt
Parking Spaces: Open and garage space ($55/month)
Type of Construction: Wood/stucco siding
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
---------------------------------------------------------
<S> <C> <C> <C> <C>
52 1BR/1BA 881 $ 655-685 $0.743-0.778
52 1BR/1BA/LOFT 1,102 740-760 0.672-0.690
60 2BR/2BA 1,181 790-82- 0.669-0.694
60 2BR/2BA 1,254 825-855 0.658-0.682
9 3BR/2BA 1,426 980-1,000 0.687-0.701
18 2BR/2BA 1,493 1,025-1,050 0.687-0.703
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplaces,
vaulted ceilings, walk-in closets, burglar alarms
Project Amenities: 1 swimming pool, 2 tennis court, jacuzzi,
exercise/weight room, clubroom, laundry facility,
on-site security, garages
ECONOMIC DATA
Percent Occupied: 100%
Avg. Monthly Rent/SF of NRA: $0.693
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $175
Pets Allowed/Deposit: 25-pound limit; $300 pet fee (nonrefundable)
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: This project opened in April 1992. Differences in
rental rates for individual units are due to
fireplaces, lake view, and upstairs/downstairs.
There is also a $70 per month garage fee.
<PAGE>
ORDINANCE NUMBER: 84-3 P. U. D. OFF. REC. -
INTRODUCED BY: Commissioner Waldron BOOK B PAGE 1
- -
AN ORDINANCE OF THE COUNTY OF ST. JOHNS, STATE OF
FLORIDA, REZONING LANDS DESCRIBED REFERENCED
HEREIN AS (GOVERNMENT LOT 2, SECTION 16, TOWNSHIP
3 SOUTH, RANGE 29 EAST, ST. JOHNS COUNTY, FLORIDA,
CONTAINING 40 ACRES MORE OR LESS) FROM PRESENT
ZONING CLASSIFICATION OF OPEN RURAL TO PLANNED
UNIT DEVELOPMENT.
BE IT ORDAINED BY THE BOARD OF COUNTY COMMISSIONERS OF ST. JOHNS COUNTY,
FLORIDA:
SECTION 1. As requested by Epoch Properties, Inc., in its app1ication for
- ---------
zoning change filed November 17, 1983, (hereinafter called the "Lakeview Village
PUD Application"), the zoning classification of the real property described in
said application is hereby changed from Open Rural to Planned Unit Development
(Hereinafter called the "Lakeview Village PUD").
SECTION 2. All materials, stipulations, exhibits, surveys, site plans, traffic
- ---------
studies and other maps included in and attached to the Lakeview Village PUD
Application No. R-PUD-83-59 which are described as, but are not limited to, the
following: The Planned Unit Development Application for Zoning Change,
Compliance with Article 8 (Planned Unit Development-PUD), Exhibits attached to
the Compliance with Article 8 (Warranty Deeds (2), Authorizations of Agency (3),
List of Adjacent Property Owners, Survey of the subject Real Property,
TopographiCal Survey of the Subject Real Property, Schedule of Development,
Lakeview Village Project Data, Lakeview Village Land Usage Data, Lakeview
Village Building Data, Lakeview Village Apartment Community Planned Unit
Development Plan (and other information thereto), revised Schedule of
Development, revised Lakeview Village Apartment Community Planned Unit
Development Plan and other such renderings necessary of the Lakeview Village
Planned Unit Development - all of which are hereby incorporated in and made a
part of this Ordinance.
ORDINANCE BOOK 5 PAGE 492
<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)
