<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 4, L.P.
(NAME OF THE ISSUER)
ConAm Realty Investors 4, 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)
44849P404
(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
================================================================================
$9,250,000 $1,850
Transaction Valuation(1) Amount of Filing Fee
================================================================================
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $1,870 Filing party: ConAm Realty Investors 4, L.P.
-------------- ------------------------------
Form or registration no.: Schedule 14A Date filed: August 20, 1998
------------ --------------------------------
</TABLE>
Instruction. Eight copies of this statement, including all exhibits, should be
filed with the Commission.
- --------
(1) For purposes of calculating the filing fee only. The filing fee was
calculated in accordance with Rule 0-11 under the Securities Exchange Act
of 1934, as amended, and equals 1/50 of one percent of the aggregate
amount of cash to be distributed to securityholders in connection with the
transaction.
<PAGE>
CONAM REALTY INVESTORS 4, L.P.
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110-1906
This Rule 13e-3 Transaction Statement (this "Statement") relates to the
proposed sale of the remaining two properties (the "Properties") of ConAm
Realty Investors 4, 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>
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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 $69.
- --------------------------------------------------------------------------------
(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 4, 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
A COMPLETE, SELF-CONTAINED APPRAISAL
OF
THE SHADOWOOD VILLAGE APARTMENTS
9820 CREEKFRONT ROAD
JACKSONVILLE, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS 4
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
DECEMBER 31, 1997
BY
BACH REALITY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BTM: 97-076
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter of Transmittal........................................ 1
Assumptions and Limiting Conditions.......................... 2
Certification................................................ 4
Salient Facts and Conclusions................................ 6
Nature of the Assignment..................................... 7
City/Neighborhood Analysis................................... 9
Apartment Market Analysis.................................... 18
Site Analysis................................................ 22
Improvements................................................. 25
Highest and Best Use......................................... 27
Appraisal Procedures......................................... 31
Sales Comparison Approach.................................... 33
Income Approach.............................................. 37
Reconciliation............................................... 47
</TABLE>
ADDENDA
Improved Sales Comparables
Rent Comparables
Legal Description
Professional Qualifications
<PAGE>
[LETTERHEAD OF B.A.C.H APPEARS HERE]
March 23, 1998
Hutton/Con Am Realty Investors 4
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal of the 110-Unit Multifamily Complex
Known as the Shadowood Village Apartments Located At 9820 Creekfront Road -
Jacksonville, Florida; BRA: 97-076
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of December 31, 1997. This complete, self-contained appraisal report is in
conformance with the guidelines of the Appraisal Institute. The scope of this
assignment includes the Sales Comparison and Income Approaches to value. The
property was inspected in December 1997, and for the purposes of this report it
is assumed that all physical and economic conditions are similar on the date of
value as they were on the date of inspection.
Our analysis of the property focused on the supply and demand factors
influencing the Jacksonville area apartment market, the sale of comparable
properties, market rent levels, appropriate operating expenses, and acceptable
investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of December 31, 1997 is in the sum of
FOUR MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($4,650,000)
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
stmctural soundness of the improvements that would
render the property more or less valuable.
8. That possession of this appraisal does not carry with
it the right of publication and that this report, or
any parts thereof, may not be reproduced in any form
without written permission of the appraiser.
9. That testimony or attendance in court or at a hearing
are not a part of this assignment; however, any such
appearance and/or preparation for testimony will
necessitate additional compensation than received for
this appraisal report.
10. That the valuation estimate herein is subject to an all
cash or all cash equivalent purchase and does not
reflect special or favorable financing in today's
market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of yield
anticipations and our judgement as to the risks and
uncertainties in the subject property and the
consequential rates of return required to attract an
investor under such risk conditions. There is no
guarantee that projected cash flows will actually be
achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraisers by Con
Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
-------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous materials
-------------------------------------------------------
at the subject property, analysis for EPA standards,
----------------------------------------------------
its removal, and/or its encapsulation. If the reader of
-------------------------------------------------------
this report and/or any entity or person relying on the
------------------------------------------------------
valuations in this report wishes to know the exact or
-----------------------------------------------------
detailed existence (if any) of asbestos or other toxic
------------------------------------------------------
or hazardous waste at the subject property, then we not
-------------------------------------------------------
only recommend, but state unequivocally that they
-------------------------------------------------
should obtain an independent study and analysis
-----------------------------------------------
(including costs to cure such environmental problems)
-----------------------------------------------------
of asbestos or other toxic and hazardous waste.
-----------------------------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned does hereby certify to the best of my
knowledge and belief that, except as otherwise noted in this
complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions and conclusions were developed,
and this report has been prepared, in conformity with
the requirements of the Code of Professional Ethics and
the Uniform Standards of Professional Appraisal
Practice of the Appraisal Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach, MAI, inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased professional
analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment is not contingent upon
the reporting of a predetermined value or direction in
value that favors the cause of the client, the amount
of the value estimate, the attainment of a stipulated
result, or the occurrence of a subsequent action or
event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
10. That all physical and economic conditions are the same
on the date of value as they were on the date of
inspection.
4
<PAGE>
11. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as is,"
of the subject property on an all cash basis, as of
December 31, 1997 is $4,650,000.
/s/ Stevan N. Bach
-------------------------------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: The Shadowood Apartments
9820 Creekfront Road
Jacksonville, Florida
Location: At the southwest corner of Southside Boulevard
and Creekfront Road in Jacksonville, Florida
BRA: 97-076
Legal Description: 8.14 acres out of Section 24, Township 3 South,
Range 27 East, Duval County, Florida
Land Size: 8.14 acres or 354,578 square feet
Building Area: 100,750 square feet of net rentable space plus a
1,500-square-foot leasing office/clubhouse
Year Built: 1986
Unit Mix: 28 1BR/1BA at 738 square feet
46 1BR/1BA/DEN at 895 square feet
36 2BR/2BA at 1,081 square feet
No. of Units: 110
Average Unit Size: 916 square feet
Occupancy
Physical: 94.5 percent
Economic: 92.1 percent
Highest and Best Use
As Vacant: Apartment development
As Improved: Current use (as apartments)
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $4,650,000
"As Is" Market Value by
Income Approach: $4,600,000
"As Is" Market Value
Conclusion: $4,650,000
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 Shadowood
Village Apartments located at 9820 Creekfront Road in
Jacksonville, Florida.
DATE OF THE
APPRAISAL ALL opinions of value expressed in this report reflect
physical and economic conditions prevailing as of December
31, 1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition, 1996,
sponsored by the Appraisal Institute defines Market Value
as:
"The most probable price which a property should bring
in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a
specified date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised,
and acting in what they consider their own best
interests;
(3) A reasonable time is allowed for exposure in the
open market;
(4) Payment is made in terms of cash in U.S. dollars
or in terms of financial arrangements comparable
thereto; and
(5) The price represents the normal consideration for
the property sold unaffected by special or
creative financing or sales concessions granted
by anyone associated with the sale."
Leased Fee Estate - An ownership interest held by a landlord
-----------------
with the rights of use and occupancy conveyed by lease to
others. The rights of the lessor (the leased fee owner) and
the leased fee are specified by contract terms contained
within the lease./l/
_____________________
/1/ The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
7
<PAGE>
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the function
of this appraisal is for annual partnership and/or internal
purposes.
PROPERTY RIGHTS
APPRAISED The appraisers have appraised the "as is" leased fee
interest subject to short-term leases which are typically 6
to 12 months in duration at the subject property.
THREE-YEAR HISTORY No transfers of ownership to the subject were discovered
during the past three years upon interviews with real estate
brokers in the area and research into the grantor/grantee
deed records of Duval County, Florida.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with accepted
techniques, standards, methods, and procedures of the
Appraisal Institute. The values set forth herein were
estimated after application and analysis by the Sales
Comparison and Income Approaches to value. These approaches
are more clearly defined in the valuation section of this
report.
The Cost Approach was not used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily reflect
value. Moreover, estimates of depreciation are difficult to
accurately measure in the marketplace, thereby compounding
the speculative nature of the opinions derived in the cost
method of valuation.
The scope of our assignment included obtaining pertinent
property data from the client regarding income and expense
figures, tenant rent rolls, and permission to inspect the
subject. Additionally, the 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.
8
<PAGE>
[SITE PLAN 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.
1970 1980 1990 1994 1995 2005*
-------------------------------------------------
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
Source: U.S. Bureau of the Census, Florida Department of
Labor and Employment Security
*Projection
Historical population growth for the Jacksonville MSA from
1980 to 1990 averaged 2.3 percent per year. The growth has
decreased slightly to 1.7 percent annually from 1990 to
1995. Population increases are anticipated to continue as
job growth rises and as stated above the population
estimated as of January 1, 1997 was 1,025,600. The Bureau of
Business & Economic Research at the University of Florida
projects the Jacksonville MSA population to be between
967,000 and 1,178,000 by the year 2000. The median
projection for this time period is a population of
1,063,700. The greatest population growth has recently
occurred to the south and east of the St. Johns River in
Duval County. Other notable growth has been observed in
northeastern Clay County near Orange Park, and in northern
St. Johns County particularly along the Atlantic Coast
beaches.
The median age of the population in the Jacksonville MSA is
lower than that found in the retirement havens of southern
Florida. The median age in this MSA is 34 years according to
the Census Bureau. This compares to about 36 years in Miami,
39 years in Fort Lauderdale, and 40 years in Tampa. The
medium age in the city of Jacksonville is slightly less
(33.3 years) than for the MSA.
9
<PAGE>
Jacksonville was originally known as Florida's industrial
city due to its port, shipyards, paper mills, and food
processing plants. More recently, however, Jacksonville has
become known as a regional center for banking, insurance,
medicine and distribution. The Research Department of the
Jacksonville Chamber of Commerce reported that the six
largest private sector employers in the area were: Winn-
Dixie Grocery Company, AT&T, Publix Super Market, Blue
Cross/Blue Shield of Florida, Barnett Banks, and CSX
Transportation. Two of Florida's largest banks, Barnett Bank
and First Union, are officed in Jacksonville, along with 30
insurance companies. Jacksonville is also becoming a major
back-office hub, as large corporations set up customer
service centers and data processing operations in the area,
including Merrill Lynch & Company, AT&T Corporation, and
America Online, Inc. in the past few years. In addition, the
world-renowned Mayo Clinic has one of its two regional
medical centers located in southeastern Jacksonville. The
recent additions in these medical and service-related
industries have contributed to a more diverse economy in the
area, and have helped civic leaders' attempts to transform
the city's image from that of an industrial town to a
regional distribution, service, and financial center.
The largest contributor to the Jacksonville employment
market is its three naval installations which include: Cecil
Field Naval Air Station, located in the southwest sector of
Duval County; Jacksonville Naval Air Station, located on the
west bank of the St. Johns River a few miles south of the
Central Business District (CBD), and the Mayport Naval
Training Center, situated at the mouth of the St. Johns
River near the Atlantic Ocean. These military establishments
in Jacksonville employ approximately 31,200 civilian and
military personnel. More recently, Cecil Field has been
placed on the government's list of possible closures due to
budget cutting measures. It is due to be closed in August
1999, which should result in the loss of approximately 7,500
military and civilian jobs. Jacksonville created the Cecil
Field Development Commission with the task of developing a
reuse plan for Cecil Field. The commission was dissolved in
May 1997 as it had completed its task and transferred duties
and functions to the Jacksonville Economic Development
Commission. Infrastructure improvements are being discussed
and to date funding has been secured for three major
projects: survey of the land for city incorporation; three-
phased conversion of the water and sewer systems to the city
systems; and a transportation study (completed). The Naval
Air Station is increasing in size because of the
consolidation of units to the Jacksonville Naval Air
Station. The net result in the closure and consolidation is
little change in the present number of personnel.
Total civilian employment in the Jacksonville MSA as of
April 1996 was 480,100 persons according to the Florida
Department of Labor and Employment Security. The
unemployment rate as of that date was 3.3 percent down from
3.7 percent in February 1996, or lower than the U.S.
Department of Labor's 4.8 percent rate for the state of
Florida as of the same date. The above is the latest
information received from the Jacksonville Chamber of
Commerce.
10
<PAGE>
The breakdown of nonagricultural employment as of November
1995 in the Jacksonville area is presented below and
illustrates the growing diversity of the local employment
base.
<TABLE>
<CAPTION>
NONAGRICULTURAL EMPLOYMENT NUMBER PERCENT
-------------------------------------------------------------------------
<S> <C> <C>
Manufacturing 35,500 7.4
Construction 24,200 5.0
Transportation, Communications, Utilities 32,000 6.7
Trade 117,600 24.5
Finance, Insurance, Real Estate 50,300 10.5
Services & Miscellaneous 152,900 31.8
Government 67,200 14.0
Other 400 0.1
------- -----
Total 480,100 100.0
</TABLE>
Source: Florida Department of Labor and Employment
Security, November 1995.
Note: The 480,100 estimates varies from the earlier
stated estimate of 460,245.
A surge of new jobs in Jacksonville earned the city a spot
as the ninth fastest-growing metro labor market in 1996,
according to the latest figures from the U.S. Bureau of
Labor Statistics between 1993 and 1995, non-farm employment
in Duval, St. Johns, Nassau and Clay Counties jumped 9.6
percent from 438,600 to 480,800. Despite its Florida
location, the tourist/convention industry has a smaller
impact on the Jacksonville MSA economy than in other parts
of the state. Most area beaches and recreation facilities
cater to local residents. The exception would be the Amelia
Island Resort located 20 miles northeast of the city on the
Atlantic Ocean. Amelia Island features world-class golf and
tennis and luxury resort accommodations and is designed to
attract vacationers from around the country. The most recent
addition to this resort was the 450-room Ritz Carlton Hotel,
which opened in June of 1991.
The increase in service-oriented industries in Jacksonville
has resulted in a substantial increase in income for the
area's residents. Per Capita income rose by an average of
approximately 1.4 percent per year from 1986 to 1995.
<TABLE>
<CAPTION>
JACKSONVILLE MSA
YEAR PER CAPITA INCOME
--------------------------------------
<S> <C>
1986 $14,629
1987 15,482
1988 16,490
1989 14,973
1990 15,695
1995 16,920
</TABLE>
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
According to a demographic profile of Duval County, the
medium household effective buying income was $15,712 as of
January 1, 1997. Additionally there were 278,800 households
with 48 percent owner-occupied. Total Duval County
population was 733,500 with projections of 787,000 by the
year 2005.
11
<PAGE>
Jacksonville is a major distribution center of durable goods
for Florida and Georgia. Transportation facilities include
an international airport, rail service from various railroad
companies, numerous private freight distribution companies,
and bus service. Jacksonville has rail facilities with
multi-modal transportation capabilities. The Port of
Jacksonville, which utilizes the St. Johns River from the
east end of the CBD to the Atlantic Ocean, is a leading
import center for foreign automobiles. This facility
consists of both the Blount Island Marine Terminal (867
acres) and the Talleyrand Docks and Terminals (173 acres)
and features a 38-foot-deep channel. The Jacksonville Port
Authority has acquired 589 acres of property on Dames Point
for its third terminal development, which is the result of
demand from new ship lines. A $300,000,000 project to
deepen the harbor from 38 to 42 feet has been proposed. The
international airport, operated by the Jacksonville Port
Authority, has undergone $100 million of improvements, which
added two new terminals, twelve new gates, and extended a
runway to accommodate larger planes for transcontinental
flights.
Two major Interstate Highways, Interstate 10 and Interstate
95, intersect near downtown Jacksonville. Interstate 10
travels west from the city to the Gulf Coast communities in
the Southeastern U.S., then continues west through the
Southwestern U.S. to Los Angeles. Interstate 95 runs
north/south along the Eastern Seaboard of the U.S.
Interstate 295 provides a bypass around the major urbanized
areas of the city to the northeast, northwest, west, and
south. Completion of the eastern section of Interstate 295,
which would create a beltway around the city, has been
proposed with limited access approach roads expected to be
in place by 2000. Many of the express roads and highways in
Jacksonville formerly were toll roads; however, the toll
charges were removed in the mid-1980s.
The unified city/county government in Jacksonville and Duval
County has been a unique feature of the area since the
1960s. A singular taxing authority collects for schools and
municipal services for all residents. Excepted from
Jacksonville city authority are the communities of Atlantic
Beach, Neptune Beach, and Jacksonville Beach, which are
separate incorporated municipalities within Duval County.
Twenty miles of beaches along the Atlantic Ocean provide a
wealth of recreational opportunities for area residents. The
wide St. Johns River south of the CBD is popular with local
pleasure craft. The average annual temperature in
Jacksonville is 71 degrees with annual rainfall averaging 55
inches. Residents' needs for higher education in the area
are served by several local colleges and universities such
as Jacksonville University, the University of North Florida,
and Florida Community College. Jacksonville is the
headquarters for both the Professional Golf Association and
Association of Tennis Professionals tours. It is also the
home of the newest member of the expanded National Football
League, the Jacksonville Jaguars. The team plays in the
City's Gator Bowl Stadium, which seats 82,000 after
renovation. The area boasts six museums, an active arts
association, and one major daily newspaper. In addition, St.
Augustine in neighboring St. Johns County to the south is
the oldest city in
12
<PAGE>
North America, and features numerous historic buildings and
landmarks including the Castillo de San Marcos National
Monument.
The diversification of the economy has affected development
in the Jacksonville area over the past several years.
According to Reynolds, Smith and Hills, Inc. (RS&H), a local
real estate research and development company, the total
inventory of office space in the area in 1990 was 12,436,000
square feet. There has been about 1,040,000 square feet of
office construction since 1990. Over 5 million square feet
of office space has been constructed since 1987, with half
in the suburban markets. Most suburban development was
intended for single-tenant usage by companies such as
Barnett Bank, American Express, CSX, and Blue Cross/Blue
Shield. Of these, Barnett Bank developed an 820,000-square-
foot nonbanking headquarters facility in a campus-style
environment near the intersection of Southside Boulevard and
U.S. 1 in southeastern Jacksonville.
As of August 1997, the Central Business District (CBD)
consisted of 57 buildings with a total of 6,298,533 square
feet and a total for Jacksonville of more than 130 buildings
with over 13,000,000 square feet, the majority of which are
in the Southside (Butler) area at 84 for 5,199,037 square
feet. As of August 1997, office announcements indicated
eight projects to contain about 876,000 square feet and
provide over 3,480 jobs. Additionally seven other projects
are to be announced that total over 1.6 million square feet.
Companies involved in the announced projects are Atlantic
Teleservices, Barnett Banks, Purdential Health Care, Chase
Manhatten Corporation, Koger Equity, Gran Central
Corporation, and Hallmark Partners.
The office market in Jacksonville is active and reports by
submarket in the August 15, 1987 issue of Commercial Real
Estate indicate a tightening and strong market with new
construction justified. Vacancy is now in single digits
city-wide and all submarkets have lower vacancy than one
year ago except for one submarket. Rents city-wide have
increased $1.50 to $3.00 per square foot from 1996 levels
and proposed projects are expected to obtain rents in excess
of $20 per square foot.
The increasing household income in Jacksonville has
attracted a substantial amount of retail development in
recent years. Most of this development has occurred in
suburban markets on the south side and in the beach
communities. In September 1990, The Avenues Mall was
completed offering over 1.4 million square feet of retail
space at Southside Boulevard and U.S. Highway 1. Food Lion,
a North Carolina-based grocery chain, constructed 17 strip
centers throughout the Jacksonville area during 1988 and
1989. Beach area redevelopment featured the opening of two
regional centers known as Sandcastle Plaza and South Beach
Center, and several large "power" centers were constructed
near two of the regional malls in the area.
As of December 31, 1996 the Jacksonville MSA showed total
retail sales at $10.155 million, up 30.5 percent since year
end 1991. Duval County, which encompasses Jacksonville, had
retail sales of 7.644 million or an increase of 26.3 percent
since 1991. Based on information from the ULI Market
----------
Profiles: 1996
--------------
13
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
rents for retail space have stabilized since 1987 ranging
from $30.00 to $50.00 per square foot per year for enclosed
mall space. Typical rent levels for smaller centers
experienced a slight increase to a range between $9.00 and
$14.00 per square foot. Rental rates for older strip centers
range from $4.00 to $8.00 per square foot.
Retail development is projected to be stable until vacant
space within the market is reasonably absorbed. Residential
growth in the northern and middle St. Johns County areas,
southside-Intracoastal west, and the Avenue-U.S. Highway 1-
Southside Boulevard areas of the city is expected to produce
retail activity in these markets. Residential, both single
and multi-family remains active in development. The October
31, 1997 edition of Homefront identifies over 320 single
family developments that are active today.
The industrial real estate sector has not experienced the
significant vacancy problems incurred by the office and
retail markets. This sector is very strong in the
Jacksonville area and is experiencing heavy demand for
build-to-suit space from industry entering the market. New
construction during 1995 totaled over 1.5 million square
feet, a new record high. The major projects in the area
include Sara Lee's Coach subsidiary; NatureForm, Inc.; Pilot
Pen Corporation; Sally Industries; H.J. Heinz Company's
Portion Pac, Inc.; Viking Office Products and a Georgia
Pacific expansion. The majority of new construction is
taking place in the south and west sides of Jacksonville. As
established by the NAIOP report in August 1997, the south
side submarket has favorably responded to the one-year
supply of space, however, there remains 300,000 square feet
within six buildings that has not been leased. Activity for
this space has been slow. The west side market continues to
grow and is said to be a strong market. The north side
submarket is strong with minimal vacancy and the Port
Authority is expected to spend about $100 million on airport
and seaport capital improvements, which were to begin
October 1997. Industrial parks of tradeport and Imeson will
benefit most from the expenditures.
The apartment market is discussed in the Apartment Market
Analysis section that follows.
NEIGHBORHOOD
ANALYSIS The subject is located on the southeast side of Jacksonville
approximately 8 aerial miles from downtown. The neighborhood
is generally described as a corridor which runs north/south
along Southside Boulevard between J. Turner Butler Boulevard
(Florida State Road 202) and Phillips Highway (U.S. Highway
1). The east and west boundaries of the neighborhood should
be considered to be 1 mile on either side of and parallel to
Southside Boulevard to the north of U.S. Highway 1 and south
of J. Turner Butler Boulevard.
Southside Boulevard is a four-laned divided thoroughfare
crossing the city's south and east sides northward from
Phillips Highway at its southern end. Through the subject
neighborhood, this street has an access road parallel to its
west side providing entry to commercial and residential
properties on that side of
14
<PAGE>
the street. Major cross streets to Southside Boulevard in
this neighborhood include J. Turner Butler Boulevard at the
north, Baymeadows Road near the center of the neighborhood,
and Phillips Highway at the south end. Each of these three
streets is a four-laned roadway and each connects Southside
Boulevard traffic to Interstate Highway 95 (I-95) to the
west. Southbound traffic on Southside Boulevard is provided
access to southbound I-95 south of Belle Rive Boulevard,
while northbound traffic on this interstate is allowed
access onto northbound lanes of Southside Boulevard at this
same point.
The popularity of this neighborhood to residential and
commercial/retail users can be directly attributed to its
easy access to major employment centers. I-95 to the west
provides good access from the neighborhood to the CBD. In
addition, several major suburban office and industrial parks
are located either within the neighborhood boundaries or
within a short distance. Barnett Bank has its nonretail
banking headquarters in a campus-style facility within the
neighborhood on the west side of Southside Boulevard just
south of the I-95 exits. Merrill Lynch has built a regional
support facility at the opposite end of the neighborhood at
the southeast corner of Southside Boulevard and J. Turner
Butler Boulevard. The Southpoint Office Park, a major
suburban office location, is situated just 1 mile northwest
of this neighborhood at the intersection of I-95 and J.
Turner Butler, and the Deerwood Industrial Park is 1 mile
west at I-95 and Baymeadows Road.
In the retail sector, several neighborhood shopping centers
are noted along either side of Baymeadows Road between I-95
and Southside Boulevard, and also to the east of Southside
Boulevard at Baymeadows Road. The Grande Boulevard center,
mentioned in the city analysis above, is situated in this
neighborhood at the northwest corner of Baymeadows Road and
Southside Boulevard. The most significant new addition in
the retail sector of the neighborhood has been The Avenues
regional shopping mall, situated at the south end of this
neighborhood at the northwest corner of Southside Boulevard
and Phillips Highway and also bound by I-95. This regional
center has over 1.4 million square feet of enclosed retail
space and is anchored by several national retail chain
stores. The Avenues Mall has attracted the development of a
308,000 square foot community "power" center called
Southside Square across the street on Southside Boulevard;
this new shopping center features both Mervyn's and Target.
A Home Depot has been recently constructed to the north of
Southside Square, while a 10-acre development just south of
The Avenues along Phillips Highway has also been completed
anchored by two fast-food restaurants, a third full-service
restaurant, and a Toys 'R' Us store.
All of this commercial development is supported by the
growth in the residential sector of Jacksonville's southeast
side over the past decade. The subject neighborhood
illustrates this trend with over fifteen apartment and
condominium developments developed in the subject
neighborhood since 1980. Surveys from over half of the on-
site leasing agents in the area typically report physical
occupancy rates at these properties at/or over 92 percent.
Two golf course
15
<PAGE>
communities, Baymeadows and Deerwood, feature single-family
homes typically priced from $150,000 and catering to upper-
middle-income home buyers.
Despite the growth in the area, about one-third of the land
in the neighborhood lies vacant and ready for development.
To the south and east of this neighborhood are typically
vacant areas; to the north and west lie a mixture of
properties from office, retail and industrial properties
along Phillips Highway and I-95, to older single and
multifamily residential subdivisions. The Duval District
provides bus service to children in the neighborhood
attending public schools, and the University of North
Florida is located about 2 miles northeast of this
neighborhood at J. Turner Butler Boulevard and St. Johns
Bluff Road. St. Luke's Hospital is about 1 mile northwest of
the neighborhood in the Southpoint Office Park. Police and
fire protection is provided by the city of Jacksonville.
The neighborhood's easy access to all of the supporting
facilities mentioned above has made the Southside Boulevard
corridor one of the most attractive areas in Jacksonville.
Physical occupancy rates in many multifamily developments in
this area are above 90 percent. Only one new apartment
project was permitted in the neighborhood in 1991, that
being two additional phases to the Park Avenues project.
There were no new apartment projects permitted in 1992 or
1993. This compares to 593 units permitted as of the end of
the Second Quarter 1995. No new retail centers are planned
as developers concentrate on leasing of new existing space
along Southside Boulevard. As the neighborhood becomes more
built out, it will likely experience a period of stability
as it matures in the long term compared to the period of
rapid development this neighborhood enjoyed throughout most
of the 1980s.
CONCLUSION Jacksonville, with a January 1997 U.S. Census Bureau
population of 1,025,600 in its MSA, was known in the past as
a military and industrial port city at the northeastern end
of Florida. However, the employment base has grown and
diversified over the past two decades as major banks,
insurance companies and medical service industries have
opened regional or headquarter offices in the area. This
activity has increased the income of area residents and
spurred significant job growth through much of the 1980s.
Although Jacksonville is not noted as a major tourist center
compared to southern areas of Florida, the area has
attractive beaches and a redeveloped downtown riverfront
area to serve the local population.
The diversification of the employment base ignited office
development both downtown and in the south side suburbs
during the past ten years. Numerous large retail centers
have been built in recent years to support the growing
Jacksonville area population and income. Major private
employers include Barnett Bank, Blue Cross/Blue Shield of
Florida, and CSX Transportation. Nonetheless, the city's
naval presence, with over 30,000 personnel, still dominates
employment in the area.
16
<PAGE>
While new industries and employers such as America Online
and AT&T have continued to enter the local employment market
with new back-office operation centers, the appraisers
anticipate less office development as the focus in the
marketplace switches to absorption and renovation of
existing vacant space. Bright spots in the Jacksonville real
estate market include improving occupancy rates in the
apartment market and a relatively low industrial space
vacancy rate compared to other industrial markets
nationwide.
The city of Jacksonville appears to be enjoying a favorable
economic climate. Construction permits and absorption of
space in some sectors such as single-family residential have
increased, while unemployment figures remain low. Although
the closing of the Cecil Field Naval Air Station is not
favorable, many of the lost jobs could potentially be offset
by additions to the area's other two Naval bases and to the
reuse plan of Cecil Field. The city's diversifying economic
base, good supporting facilities, Florida sunbelt location,
and good quality of life should support growth and
absorption in all sectors.
17
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
Information from two surveys was utilized in the analysis of
the Jacksonville apartment market analysis. The first is the
Apartment Market Survey for Greater Jacksonville, Florida,
Second Quarter, 1996 prepared by the Jacksonville Planning
and Development Department and the Northeast Florida
Apartment Council. The second is the Jacksonville Apartment
Market Survey, Third Quarter 1997, published by Vestcor
Realty Management, Inc. Most references are made to the
survey prepared by the Vestcor Realty Management, Inc. AS
THE FIRST SURVEY WAS NOT MADE IN 1997 BY THE PLANNING
DEPARTMENT AND NORTHEAST FLORIDA APARTMENT COUNCIL.
Construction of apartment projects in Jacksonville during
the late 1980s continued but at lower levels each year from
1985 through 1989. The credit restrictions by lenders and
their regulators following the savings and loan scandals in
the mid-1980s contributed to make construction funds scarce
for apartment developers nationwide. The chart below
illustrates the units constructed per year in Jacksonville
since 1985.
YEAR TOTAL UNITS PERMITTED
------------------------------
1985 5,079
1986 4,521
1987 2,656
1988 1,949
1989 1,407
1990 1,707
1991 1,170
1992 0
1993 278
1994 912
1995 1,073
1996 3,284
1997 978
Source: Jacksonville Planning and Development Department
In 1996 3,284 units were permitted for five or more dwelling
units. In 1997 there were 978 units permitted. The outlook
for future development of apartment projects in the
Jacksonville area appears to be good as occupancies are in
the 90 percent to 95 percent range and the economy remains
healthy. Construction was visible to the appraiser in the
south part of Jacksonville.
According to the Jacksonville Planning Department, the
current number of apartment units existing in the
metropolitan area is approximately 54,000. The Planning
Department conducts a survey of the city and area apartment
market. This survey is done by mail to the owners and/or
managers of apartment complexes in Duval County as well as
in northern Clay and St. Johns Counties, and the results of
the survey are published every quarter year in the
department's Apartment Market Survey. The Second Quarter of
-----------------------
this survey, which is stated to reflect the area apartment
market as of the end of June 1996, is the most recent
18
<PAGE>
available; this survey is compiled based on the responses of
owners and/or managers of 27 percent of the total existing
apartment units in the area. Of the 27 percent or 14,575
units, there was a physical occupancy rate of 95.58 percent
with one bedroom apartments with the highest rate at 96.23
percent and efficiencies with the lowest average occupancy
rate this quarter at 92.25 percent. The physical occupancy
rates and average monthly rents as of the Second Quarter
1996 are generally higher among those properties, which were
built since 1990. The Third Quarter 1997 market survey by
Vestcor Realty Management, Inc. reflects the following
statistics for average occupancy.
<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>
This survey indicates a slight increase in occupancy for all
units from one year ago with pre-1979 constructed units
receiving 2.9 percent positive occupancy while post 1980 and
post 1990 construction showed 1.6 to 2.1 percent decreases
in occupancy. The major reason for the decrease appears to
be home-buying alternatives.
The Vestcor apartment market survey includes every apartment
community with more than 100 units. They compared the
information received from on-site personnel to their
electric meter analysis. Properties undergoing renovation or
in lease-up were removed from the database. If occupancy
data on properties was not consistent with the electric
meter analysis, these properties were also removed. The
result was a review of 186 apartment complexes containing
41,572 units or nearly 70 to 75 percent of the units in the
Jacksonville area by a 1996 count.
Average monthly rental rates per unit were obtained by
Vestcor and are delineated below by year of construction.
<TABLE>
<CAPTION>
3rd Qtr 3rd Qtr Change
Category 1997 1996 In 1 Year
------------------------------------------------------
<S> <C> <C> <C>
All units $ 568 $ 565 +3--0.5%
Built before 1979 $ 509 $ 504 +5--1.0%
Built 1980 -- 1989 $ 605 $ 596 +9--1.5%
Built 1990 -- 1997t $ 809 $ 791 +18--2.3%
</TABLE>
The Vestcor survey for the First Quarter 1996 reported an
average monthly rental rate per unit for the Jacksonville
area of $540. This compared to $565 per unit during the
Third Quarter 1996 indicates an increase in rental rates
during the 6 months from the Vestcor survey is 4.6 percent.
The survey indicates a slight monthly rental rate increase
for all apartment units surveyed, but increases of 1 percent
to 2.3 percent for various construction dated classified
units. It is important to note that the increases in
categories by year built tend to counter the findings of
rental increases for all units and indicate that
19
<PAGE>
the increase for all units should be between 1 percent to
2.3 percent or on average about 1.65 percent. Secondly, the
2/nd/ Quarter 1997 average monthly rental for all units was
$574, which would indicate a $6.00 reduction to the 3/rd/
Quarter 1997 average monthly rent of $568.
Overall, the Jacksonville apartment market appears to be
healthy. Construction permits recorded for 1992 and 1993
were at their lowest levels in years, or from a high of
5,079 units in 1985 to 0 units permitted for 1992 and 278 in
1993. For 1994 and 1995, there were 912 and 1,073 units
permitted, respectively. In 1996, there were 3,284 units
permitted, while in 1997 there were 978 units permitted.
Physical occupancy as of the Third Quarter 1997 was at 92.8
percent, which is a drop from 1996, but reflects the new
construction. Absorption rates in new apartment projects
have remained healthy over the past two years. Vacancies of
the various apartment markets range from 3 to 7 percent. The
appraisers project that the citywide market should reach a
stabilized occupancy of 95 percent between one and two years
at this rate of growth.
SUBMARKET ANALYSIS The subject property is located in the Southside and
Southside Boulevard submarkets as defined in the Third
Quarter 1996 Apartment Market Survey by Vestcor. They are
identified on the map on a previous facing page.. The
submarkets are generally within the Jacksonville City Limits
to the south and southeastern City Limit lines.
The average occupancy in the Southside Boulevard and
Southside submarkets for Third Quarter 1997 was 91.0 percent
and 93.5 percent respectively. Third Quarter 1996 indicated
an occupancy of 96.4 percent for the Southside Boulevard
submarket and thus indicates a decrease of 5.4 percentage
points or 5.6 percent. The Southside submarket had a Third
Quarter 1996 occupancy rate of 89.1 percent and indicates an
increase (for one year) to Third Quarter 1997 of 4.4
percentage points or 4.9 percent.
An average occupancy by project age for each of the two
submarkets is shown below.
<TABLE>
<CAPTION>
SOUTHSIDE SOUTHSIDE
CATEGORY BLVD.
--------------------------------------------
<S> <C> <C>
Built before 1979 95.7% 93.3%
Built 1980 -- 1989 91.5% 94.5%
Built 1990 -- 1997 88.0% --
All Properties 91.0% 93.5%
</TABLE>
The lower occupancy in the 1990-1997 built projects reflects
the effect of new construction and in the Southside
submarket no 1990-1997 built units are shown.
Average monthly rent per square foot by project age was
identified in the City's various submarkets. Of the eight
submarkets, Southside Boulevard has the second highest
average monthly rent per square foot at $0.69/SF, second
only to the Beach submarket at $0.71 per square foot.
Southside submarket is sixth at $0.57 per square foot. Shown
below is the average monthly rent per square foot for the
two submarkets and the total city.
20
<PAGE>
<TABLE>
<CAPTION>
SOUTHSIDE TOTAL
CATEGORY BLVD. SOUTHSIDE CITY
----------------------------------------------------
<S> <C> <C> <C>
Built Pre-1979 $0.54 $0.53 $0.53
Built 1980 -- 1989 $0.71 $0.70 $0.68
Built 1990 -- 1997 $0.72 - -
All Properties $0.69 $0.57 $0.60
</TABLE>
Southside Boulevard and Southside submarkets indicate
reasonably comparable monthly rental rates by period of
construction, however, since Southside does not have post-
1990 construction its overall average monthly rental rate is
greatly affected and is $0.12 per square foot per month less
than Southside Boulevard's average monthly rent. Although
both submarkets influence the subject (it is within the
1980-1989 construction category), its location is actually
in the Southside Boulevard submarket.
Average apartment rents for the two submarkets in Third
Quarter 1996 were $651 per month for the Southside Boulevard
area and $523 per month for the Southside area. In the Third
Quarter 1997 the average monthly rents were $660 and $528
respectively or increases of 1.4 percent and 1.0 percent
over the year.
The higher physical occupancy and the strong average monthly
rental rates relate to the neighborhood's increasing
popularity and proximity to major Jacksonville area shopping
and employment centers (see preceding City/Neighborhood
Analysis section of this report). In addition, the slowdown
in construction permits in the area and this submarket,
combined with a continuing demand for units in the area will
help increase rental rates.
We have recognized that a significant portion of the
apartment units constructed in the area in recent years were
built in or near the subject's submarket. In the area
apartment market analysis, a chart was presented which
illustrates that the newer apartment properties in the area
tend to command the highest rental rates. New apartment
units are under construction east and northeast of the
subject and in the Ponte Vedra area. Although, these new
units bring competition, they also will reflect higher
rental rates and with prudent management and proper
maintenance, the subject property should compete well for
its share of the market.
The subject's submarket has exhibited a stabilized occupancy
at or above 91 percent, according to the local apartment
survey. The subject property has a current physical
occupancy of 94.5 percent and is considered to be near the
stabilized occupancy level. It is forecasted that the
subject after the first year will maintain a stabilized
occupancy of 95 percent throughout the 11-year cash flow
period.
According to the Vestcor Apartment Market Survey, only 3.60
percent of the apartment projects surveyed in this submarket
were currently offering rental discounts to tenants. In the
Second Quarter of 1997 apartment projects offering
concessions were 13.1 percent and a year ago in the Third
Quarter of 1996, 13 percent of the projects surveyed gave
concessions. This data is further support for a
strengthening apartment market.
21
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE DESCRIPTION
- --------------------------------------------------------------------------------
LOCATION The subject site is located at the southwest corner of
Southside Boulevard and Creekfront Road in Jacksonville.
This location is on the southeast side of Jacksonville
about 8 aerial miles southeast of the Jacksonville CBD
and is about 1/2 mile south of the intersection of J.
Turner Butler Boulevard and Southside Boulevard. The site
is improved with the Shadowood Village Apartments, which
have a street address of 9820 Creekfront Road,
Jacksonville, Florida.
SIZE AND SHAPE While a survey of the subject site was not available, a
copy of the plat map of the site from the Duval County
Tax Office is provided to the reader on the facing page.
Information provided by the Tax Assessor's Office
indicates that the site comprises 8.14 acres and is
roughly rectangular in shape. The site has over 889 feet
of frontage along the south side of Creekfront Road and
more than 540 feet of frontage on the access road along
the west side of Southside Boulevard. The maximum width
of the site exceeds 836 feet, and the maximum depth is
more than 540 feet.
ACCESS AND VISIBILITY The property is easily visible from both Creekfront Road
and Southside Boulevard due to its adequate frontage on
both streets. Direct access into the site is provided
south from Creekfront Road just west of Southside
Boulevard. Creekfront Road is an asphalt-paved two-laned
neighborhood thoroughfare, which reaches a dead-end cul
de sac after running about 1300 feet west from Southside
Boulevard. Three apartment complexes, including the
subject, face onto this street.
The property is also visible from Southside Boulevard
along the east boundary of the subject. Southside
Boulevard is a four-laned divided roadway with a two-
laned access road along its west side, and is one of the
main north/south thoroughfares in southeastern
Jacksonville.
LEGAL DESCRIPTION A full legal description is located in the Addenda of
this report. The subject site is generally described as
being an 8.14-acre tract out of Section 24, Township 3
South, Range 27 East, Duval County, Florida.
ZONING Prior to May 1, 1991, the site was zoned RG-C by the city
of Jacksonville. New zoning designations were put in
place by the city on that date, with the subject's new
zoning designation listed as RMD-E for Residential
Medium Density, E District. Both the current and prior
designations provide for similar development
restrictions, namely to promote multifamily residential
uses with a maximum of 20 dwelling units per acre. The
subject improvements currently conform to the zoning
regulations.
UTILITIES All utilities are available to the site. Jacksonville
Suburban, a private utility supplier, provides water and
sewer service to the site; the Jacksonville Electric
Authority supplies electric service. Telephone hookups
are in place from Southern Bell, along with cable
television lines from Continental Cable.
22
<PAGE>
TERRAIN AND DRAINAGE The subject site generally slopes upward from the west
side of the site to the eastern end at Southside
Boulevard. The site contains a retention lake at the west
end and drainage appears to be adequate. A soil survey on
the subject site was not available. While the soil
appears generally supportive of a wide variety of
improvements, the appraiser is not an expert in soil
content and was unable to certify this assumption.
According to the National Flood Insurance Map 120077-
0236D dated August 15, 1989, the site is in Zone X, or in
"areas of minimal flooding." Numerous native trees are
located on the site; however, no significant obstacles to
development of the site (such as rock outcroppings, etc.)
were evident.
EASEMENTS AND
ENCUMBRANCES As stated above, a survey, which would indicate the
location of any easements or encroachments on the site,
was unavailable. A visual inspection of the property
indicated no significant easements or encumbrances, which
would adversely affect the marketability of this site.
REAL ESTATE TAXES The subject site and improvements have the following
values assessed by the Duval County Property Appraisers
Office:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total value $3,531,321 $3,637,107 $3,571,741 $3,574,835 $3,773,442
Total Taxes 75,125.23 80,626.92 78,738.32 77,941.41 80,837.69
Tax Rate per $l000 valuation 21.2739 22.1678 22.0448 21.8028 21.4228
</TABLE>
The breakdown for the tax rate for the subject-taxing
district is compared to previous years' tax rates:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
County $ 11.0199 $ 11.2131 $ 11.1196 $ 11.2158 $ 10.9883
School (State Law) 6.4290 6.6540 6.6650 7.1154 6.3450
School (Local Board) 2.2860 2.7600 2.7600 2.9516 2.7800
Inland Navigation 0.0520 0.0490 0.0400 0.0380 0.0500
Water Management 0.3550 0.4820 0.4820 0.4820 0.4820
Debt Payments (Voter Approved) 1.1320 1.0097 0.9782 - 0.7975
---------- ---------- ---------- ---------- ----------
Tax Rate per $1000 valuation $ 21.2739 $ 22.1678 $ 22.0448 $ 21.8028 $ 21.4228
</TABLE>
The assessor's parcel number for the subject site is
148522-0000-5. The subject, assessed at $34.07 per square
foot and $34,304 per unit, which is believed reasonable.
The real estate property taxes for the subject are
calculated at $80,838 based on the mileage rate and
assessed value and a payment date of March 1998. However,
a discount from the tax expense is allowed if paid in the
four months prior to March. If paid in November 1997 the
taxes for the subject are discounted 4 percent. For
purposes of this appraisal, we have assumed an on time
payment of taxes. The real estate taxes in the Income
Approach section of this report reflect an approximate 4
percent increase (inflation factor) over the 1997
property taxes. Real estate taxes for the subject in 1998
have been estimated at $84,371.
23
<PAGE>
SITE CONCLUSION The subject property is in southeastern Jacksonville about 8
aerial miles southeast of downtown. The parcel contains 8.14
acres with level and slightly sloping terrain. Drainage and
soil conditions appear to be adequate and supportive of a
variety of improvements. All utilities are available. The
site is in the Zone X area of minimal flooding. While a
survey of the site was not available, no adverse easements
or encroachments were noted during a physical inspection of
the site. Direct access and visibility is provided from
Creekfront Road with additional visibility from Southside
Boulevard abutting the site to the east. The property is
zoned by the city for multifamily residential uses including
apartment and/or condominium development, and appears to be
physically suitable for such improvements.
24
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 9.2719-acre tract of land, is improved
with a two-story apartment project known as the Shadowood
Village Apartments. The improvements consist of 110
apartment units contained in ten buildings constructed in
1986. Also situated on the site is a leasing
office/clubhouse with a kitchen, sauna, exterior mail post,
deck, swimming pool and jacuzzi surrounded by an iron fence,
lighted and fenced tennis court, lake and mechanical shed.
There are three basic floor plans for the 110 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>
28 1BR/1BA 738 20,664
46 1BR/1BA/DEN 895 41,170
36 2BR/2BA 1,081 38,916
--- ----- -------
110 916 100,750
</TABLE>
As seen in the figures above, the total net rentable area of
100,750 in 110 apartment units results in an average of 916
square feet per unit. There are a total of 74 one-bedroom
units and 36 two-bedroom units.
The land area is 8.14 acres equating to a density of 13.51
units per acre. The parking consists of 212 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 front door have an exterior light. Exterior
stairwells have metal stairs and supports with concrete
risers and landings.
The interior finish of each unit has painted gypsum board
walls and ceilings. Some walls are accented with decorative
wallpaper, and some ceilings feature boxed or other ceiling
treatments. Floors have carpeting over pad, with tile floors
in the kitchen. Batted insulation is located in the walls
and ceilings.
The kitchen is equipped with wood and fiberboard cabinetry
covered with formica countertops and a double stainless
steel sink. Appliances are made by General Electric, and
include a range/oven, vent/hood, microwave oven, dishwasher,
disposal, and refrigerator with icemaker. Each unit has an
electric water heater with a 40-gallon capacity. The kitchen
equipment appears to be in good condition.
Carpet and tile floors are found in the bathrooms, with
additional tile around the tub enclosure. The toilet,
bathtub, and sink are porcelain, and a formica countertop
covers a small vanity. Each bathroom also has a wall mirror
and an exhaust fan.
25
<PAGE>
Each of the units has miniblinds, an exterior screened-in
patio, or deck, and washer and dryer closet equipped with
these appliances. Interior doors are hollow-core wood with
some folding closet doors. Each unit is equipped with a fire
extinguisher per local fire codes.
The mechanical components include standard PVC plumbing
pipes with stainless steel fixtures. The units are equipped
with electric central heating and air-conditioning which is
individually metered. The interior wiring is copper with 125
amps designated per unit and ample electrical outlets. Each
apartment is wired for telephone and cable television.
Other than the major site amenities stated above, the
grounds feature asphalt-paved parking pads and access
roadways, concrete sidewalks, an entryway with brick pavers,
pole-mounted exterior light fixtures, and retaining walls.
The landscaping features numerous native trees as well as
decorative planted shrubbery and lawns.
The subject improvements appear to be in average to good
overall condition. In 1994, the subject property underwent
renovation, which included replacing wood on porches,
repainting all buildings, and resealing the driveways.
However, with the advent of Hurricane Josephine immediately
prior to the appraiser's inspection, some severe roof and
water damage occurred, which may be covered under warranty
and/or insurance. Several capital items were repaired or
replaced in 1997. According to ConAm Management Corporation,
property managers of the subject, the following capital
expenditures are included in the 1998 budget:
<TABLE>
<S> <C>
Rebuild screen porches.................... $ 80,000
Chimney caps.............................. 30,000
Roof repairs.............................. 36,000
Plumbing (shower pans/leeks).............. 30,000
Dumpster enclosures....................... 25,200
--------
TOTAL..................................... $201,000
</TABLE>
Considering the overall average to good condition after
capital repairs/replacements are made, we estimate the
effective age of the subject property to be equal to the
actual age of eleven years.
26
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of clubhouse/leasing office serving Shadowood, Oaktree, and
Creekside Oaks.
[PICTURE APPEARS HERE]
View of swimming pool serving the complex
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 507 living room
[PICTURE APPEARS HERE]
Interior view of Unit 507 kitchen
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 507 bedroom
[PICTURE APPEARS HERE]
Interior view of Unit 507 washer/dryer closet
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of units and parking area
[PICTURE APPEARS HERE]
Exterior view of interior street and brick paver bridge.
<PAGE>
HIGHEST AND BEST USE
- --------------------------------------------------------------------------------
The highest and best use of a property must be determined
because market value depends upon the property's most
profitable use. The Appraisal of Real Estate, Eleventh
----------------------------
Edition, defines highest and best use as:
"The reasonably probable and legal use of vacant land
or improved property, which is physically possible,
appropriately supported, financially feasible, and that
results in the highest value."
There are two distinct types of highest and best use. The
first type is the highest and best use of the land as if
vacant. The second type is the highest and best use of a
parcel as improved. This pertains to the use that should be
made of the property as it exists.
In determining the highest and best use of a site, four
items must be considered: possible physical limitations of
the site, possible legal or permissible uses, and what uses
are financially feasible, and produce the maximum return on
the site. A careful neighborhood and site analysis is
essential in estimating the highest and best use of the site
as if vacant.
The following is our analysis of the highest and best use as
it pertains to the subject property and according to the
four essential tests.
SUBJECT PROPERTY
AS IF VACANT LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site would be adaptable to multifamily
residential uses as limited by its current zoning of RMD-E
by the city of Jacksonville. This zoning designation for the
site is intended to restrict and promote the development of
the subject to medium density residential uses of up to 20
dwelling units per acre.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability, flood
plain, and surrounding patterns.
The subject site is generally pentagonal in shape and
encompasses a total of 8.14 acres, allowing for full
physical utilization of the site. The site has over 1,200
feet of frontage along the south side of Creekfront Road and
over 540 feet of frontage on Southside Boulevard. The site
can be developed up to 162 units based on the current
zoning. The topography of the site is exhibits a slight
slope upward from west to east, and drainage appears to be
adequate. The site is located in Flood Zone "X" which is
defined in the previous Site section of this report.
The subject's location is on the south side of Creekfront
Road at its southwest corner with the access road along the
west side of Southside Boulevard. Property uses along
Creekfront Road wholly consist of apartment complexes. While
the
27
<PAGE>
subject also has frontage on Southside Boulevard, a major
area thoroughfare, most of the site's street frontage is
along Creekfront Road. Creekfront Road is a two-laned
residential street with local traffic which travels
east/west from Southside Boulevard at its east end and a
dead end about 1,300 feet to the west. The subject has
adequate utility capacity, enjoys a relatively good
functional size and shape, and is not affected by any
adverse easements or restrictions as noted upon inspection.
After considering all of the physical characteristics of the
site noted above plus other data in the Site section of this
appraisal report, physically possible land uses would
include a variety of residential development such as
apartments, condominiums, cooperatives or townhouses, but
are directed to apartment development. The primary
deterrents to other types of development were zoning,
surrounding land use patterns, and the lack of significant
traffic along Creekfront Road.
FINANCIAL FEASIBILITY - Financial feasibility is directly
proportional to the amount of net income that could be
derived from the subject. Rents have slightly increased over
the previous 12 months and the apartment market overall
appears to be favorable. Area realtors report that near-term
prospects for condominium and cooperative units in
Jacksonville is becoming favorable, although there is
limited upscale condominium development occurring. Many of
the existing condominium and cooperative units have
exhibited depreciating market values over the past several
years, however, as the overall market returns prices will
also return to acceptable investor levels.
After having eliminated all other development from our
analysis, the financial feasibility of multifamily
development must be tested. The subject site is in the
"Southside Boulevard" apartment submarket area and adjacent
to the Southside submarket. According to the Vestcor
Jacksonville Apartment Market, which is prepared by Vestcor
Realty Management, Inc., occupancy for the submarket
decreased from 96.4 percent in the Third Quarter 1996 to
91.0 percent in the Third Quarter 1997. From those projects
responding to the survey, the average rent increased from
only $651 to $660 per unit over the one-year period. Through
the year 1997, there have been 978 multifamily building
permits in the city/area. This is down from the 3,284 units
permitted in 1996.
From the preceding, apartment development appears to be
feasible, although the market has some units to absorb.
Occupancy rates have decreased during the past year and have
remained at 90 percent or greater. Rental rates have risen
according to the apartment survey and there has been an
increase in apartment building activity in the subject's
submarkets indicating that development is feasible. The
following reflects apartment development costs on a square
foot basis.
<TABLE>
<S> <C>
Cost to Construct.................................. $50.00
Land Acquisitions.................................. 4.00
------
Total Cost of Development....................... $54.00
</TABLE>
28
<PAGE>
The preceding discussion indicates that development is
feasible for multifamily residential development. As
indicated in the Sales Comparison Approach in this report,
apartments developed since 1985 reflect sale prices from
$28.96 to $75.12 per square foot. The sale prices of new
projects ($75.12 S/F) are above the cost of development.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, we are of the opinion that
the demand for multifamily apartment units conducive to the
subject site would produce the highest net return over the
longest period of time. This is due to the subject's
location and the popularity of the neighborhood.
In summary, the multifamily apartment market has shown
increasingly healthy signs during the early to mid-1990s.
The site's location near major south side employment
facilities, the University of North Florida, The Avenues
Mall, and Interstate 95 gives it a large base of prospective
rent-paying tenants from which to draw. During 1996 and
1997, apartment development is occurring in or near the
submarket for the first time since 1991. Therefore, after
considering the alternatives, we believe the highest and
best use of the site, as vacant, is for multifamily
residential development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons. First,
to identify the improvements that are expected to produce
the highest overall return per invested dollar, and the
second reason is to help identify comparable properties. The
four tests or elements are also applied in this analysis to
the subject as follows:
LEGALLY PERMISSIBLE - Within the scope of a legal analysis
the subject property would be adaptable to multifamily
residential uses as limited by the zoning of the site by the
city of Jacksonville.
PHYSICAL POSSIBILITY - Based on the subject's size (8.14
acres), rectangular 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
13.5 units per acre is in line with the market sales, which
reflect a range in density from 9.4 to 27.4 units per acre;
however, it is below the maximum allowed in the zoning
regulation.
FINANCIAL FEASIBILITY - The discussion of the financial
feasibility of the subject, as if vacant, would also apply
to the test as improved. Based on the economic conditions
for alternative market segments, it was concluded that the
subject's present improvements are satisfactory to fulfill
this test.
29
<PAGE>
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that under
competent and prudent management, the subject produces an
adequate return on market value to substantiate its
existence.
In conclusion, based on the subject's current use, we have
determined that as a multifamily apartment complex it
positively contributes to the value of the site, and as a
result is presently developed according to its highest and
best use. The present improvements are not considered to be
the optimum use due to the lack of market project amenities
and the need for capital expenditures.
30
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraiser obtained 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
31
<PAGE>
selection of the analytical approach and data most
responsive to the problem in question.
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or may point to a more reliable indication of the value of
the property being appraised than the others. In some
instances, because of the inadequacy or unavailability of
data, one or two of the approaches may be given little
weight in the final value estimate.
32
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
JACKSONVILLE AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVEALL
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG./SF AT SALE /UNIT SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke 08/97 $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 Oaks of Deerwood 05/97 $15,200,000 1987 336 294,888 92% $4.00 $51.54 $45,238 7.76% 6.74
10100 Baymeadows Road 878
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 04/97 $16,700,000 1986 450 342,162 94% $4.69 $48.79 $37,111 9.60% 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 08/96 $ 7,225,000 1986 224 179,476 98% $3.85 $40.26 $32,254 9.56% 5.48
Mills
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 May 1996 to August 1997.
Reference is made to the individual sales data
included in the Addenda section of this report.
SALE 1, known as the Links at Windsor Park
Apartments, sold in August 1997 for $20,500,000.
There are 280 units totaling 296,616 square feet.
The property sold at $69.11 per square foot or
$73,214 per unit. It was built in 1995 and was in
excellent condition. The Links was 90 percent
occupied at sale date. It sits on 23.36 acres of
land and reflects density at 11.98 units per acre.
The property's construction is described as wood
frame with wood siding and some stucco.
SALE 2, known as the San Pablo Apartments, sold in
June 1997. It has 200 units and 184,750 square
feet. The sales price was $5,350,000 and the
property was 90 percent occupied at sale date.
Unit prices indicated are $28.96 per square foot
and $26,750 per unit. The sale reflected a 10.8
percent capitalization rate and was in need of
substantial repair and renovation work. The rate
is 14,24 acres and the unit density indicated is
14.04 units per acre. The property at sale date
was inferior to the subject.
SALE 3, known as Hunter's Ridge, (formerly known
as Oaks at Deerwood) sold for $15,200,000 or
$45,238 per unit in May 1987. It has 294,,888
square feet and indicates a unit price of $51.54
per square foot. Land area is 34.70 acres and
shows unit density at 9.68 units per acre. The
capitalization rate was 7.76 percent, however, the
property needed some attention and had good upside
potential.
33
<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.
34
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Sales Comparison - NOI Adjustments
----------------------------------
Sale Sale Subject Adjust. Adjust
No. Price/SF NOI/SF NOI/SF Factor Price/SF
--- -------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
1 $69.11 $5.92 $4.61 0.77872 $53.82
2 $28.96 $3.16 $4.61 1.45886 $42.25
3 $51.54 $4.00 $4.61 1.15250 $59.40
4 $48.99 $4.69 $4.61 0.98294 $48.15
5 $75.12 $6.26 $4.61 0.73642 $55.32
6 $40.26 $3.85 $4.61 1.19740 $48.21
7 $45.77 $4.65 $4.61 0.99140 $45.38
8 $42.06 $4.26 $4.61 1.08216 $45.52
Mean= $49.75
Value @ mean $5,013,320
<CAPTION>
Sale Sale Subject Adjust. Adjust.
No. Price/Unit NOI/Unit NOI/Unit Factor Price/Unit
---- ---------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
1 $73,214 $6,267 $4,225 0.67417 $49,358
2 $26,750 $2,916 $4,225 1.44890 $38,758
3 $45,238 $3,510 $4,225 1.20370 $54,453
4 $37,111 $3,562 $4,225 1.18613 $44,019
5 $75,099 $6,263 $4,225 0.67460 $50,662
6 $32,254 $3,083 $4,225 1.37042 $44,201
7 $37,500 $3,811 $4,225 1.10863 $41,574
8 $41,852 $4,240 $4,225 0.99646 $41,704
Mean= $45,591
Value @ mean $5,015,038
================================================================================
</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 $4.61 per square foot or $4,225 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
$42.25 to $59.40 per square foot and $38,758 to
$54,453 per unit. The simple average adjusted
prices (not weighted) per square foot and per unit
of the comparable sales was calculated at $49.76
and $45,591, respectively. Applying an age
adjustment based on square foot area and number of
units indicates value at $48.50 per square foot
and $45,000 per unit
100,750 SF at $48.50/SF, Rounded....... $4,900,000
110 units at $45,000/unit.............. $4,950,000
A second method of comparison is by use of the
effective gross rental multiplier (EGRM). In this
analysis, the subject's effective gross income is
multiplied by a factor estimated from the sales to
derive an indication of value. The sales utilized
in this analysis reflect EGRMs ranging from 4.56
to 7.80 as shown on the following facing page.
Expense ratios range from 33.26 to 50.27 percent.
From the Direct Capitalization analysis in the
Income Approach, the subject is estimated to have
a 43.68 percent operating expense ratio (excluding
reserves). This is most similar to Sales 3, 4, 6,
and 7. These sales have EGRMs ranging from 5.47 to
6.74 with expense ratios from 42.80 to 47.70
percent.
Sale 7 was built in 1985, while 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 5.80 resulting in a
total value indication as follows:
$825,320 x 5.80, Rounded............... $4,800,000
35
<PAGE>
<TABLE>
<CAPTION>
==================================================================
SALES COMPARISON - EGRM ANALYSIS
------------------------------------------------------------------
EFFECTIVE EFFECTIVE GROSS OPERATING
SALE NO. GROSS REVENUE/S F REVENUE MULTIPLIER EXPENSES 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 $4,900,000
and $4,950,000 and the effective gross income
multiplier method indicated a value of $4,800,000.
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 $4,900,000. From this, a deduction
for rent loss of $71,728 and for capital
expenditures of $201,000 is made as follows:
Indicated Value $4,900,000
Less: Capital Expenditures (201,000)
Rent Loss (71,728)
"As Is" Value $4,627,272
----------
Rounded $4,650,000
Therefore, it is our opinion that the leased fee
market value of the subject property based on the
indication provided by the Sales Comparison
Approach, all cash, on an "as is" basis as of
December 31, 1997, is
FOUR MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($4,650,000)
36
<PAGE>
[AREA 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 Antlers Apts. 1985 400 331,780 829 90% 93% 1BR/1BA/DEN 608
8433 Southside Blvd. 1BR/1BA 529
1BR/1BA 561
1BR/1BA 576
1BR/1BA 615
1BR/1BA 630
2BR/2BA 676
2BR/2BA 169
- ----------------------------------------------------------------------------------------------------------------------------------
2 Evergreen Club 1990 240 180,800 753 93% NA% 1BR/1BA 600
9611 Southbrook Drive 1BR/1BA 700
1BR/1BA 800
2BR/2BA 1,000
- ----------------------------------------------------------------------------------------------------------------------------------
3 The Glades Apts., Phase I 1985 360 230,500 640 92% 93% 1BR/1BA 550
7524 Southside Blvd. 1BR/1BA 650
1BR/1BA 750
2BR/2BA 1,000
2BR/2BA/LOFT 1,200
- ----------------------------------------------------------------------------------------------------------------------------------
4 Oaks at Baymeadows Apts. 1985 248 246,820 995 89% 97% 1BR/1BA 685
8401 Southside Blvd. 1BR/1BA 850
1BR/1BA/DEN 1,115
2BR/1BA 1,115
2BR/1BA 1,210
2BR/2BA/DEN 1,455
- ----------------------------------------------------------------------------------------------------------------------------------
Shadowood Village Apts. 1986 110 100,750 916 95% 96% 1BR/1BA 738
8920 Creekfront Road 1BR/1BA/DEN 895
SUBJECT 2BR/2BA 1,081
==================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMP 1997 MONTHLY 1997
NO. NAME OF PROJECT RATE RENT/SF AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 The Antlers Apts. $514 $0.845 Microwave ovens, washer/dryer in units,
8433 Southside Blvd. 529 0.848 miniblinds, fireplaces, vaulted ceilings, outdoor
561 0.723 utility closets, pools, tennis courts, racquetball
576 0.720 courts, exercise/weight room, club room, lake.
615 0.693
630 0.694
676 0.646
691 0.648
- ------------------------------------------------------------------------------------------------------------------------
2 Evergreen Club $547 $0.912 Washer/dryer in units, fireplaces, swimming
9611 Southbrook Drive 587 0.839 pools, tennis courts, jacuzzi, sauna, exercise/
622 0.778 weight room, clubroom, volleyball court,
710 0.710 vaulted ceilings, lake views.
- ------------------------------------------------------------------------------------------------------------------------
3 The Glades Apts., Phase I $524 $0.953 Washer/dryer in units, miniblinds, vaulted
7524 Southside Blvd. 554 0.894 ceilings, outdoor utility closets, burglar alarms,
569 0.818 swimming pools, racquetball courts, basketball
689 0.692 court, club room, lakes
789 0.732
- ------------------------------------------------------------------------------------------------------------------------
4 Oaks at Baymeadows Apts. $500 $0.730 Washer/dryer connections, miniblinds,
8401 Southside Blvd. 560 0.659 fireplaces, ceiling fans, vaulted ceilings, pool,
650 0.583 tennis courts, jacuzzi, racquetball court, club
650 0.583 room, volleyball court, lake
690 0.570
790 0.543
- ------------------------------------------------------------------------------------------------------------------------
Shadowood Village Apts. $585 $0.793 Microwave ovens, miniblinds, fireplaces,
8920 Creekfront Road 630 0.704 vaulted ceilings, outdoor utility closets, wet
SUBJECT 675 0.624 bars, pools, tennis courts, jacuzzi,
exercise/weight room, club room, lakes
========================================================================================================================
</TABLE>
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject
property, one method used by the appraisers was
the Income Approach. The Income Approach to value
is predicated on the assumption that there is a
definite relationship between the amount of net
income a property will earn and its value.
Ultimately, the Income Approach seeks to estimate
the present worth of an anticipated net income
stream based on an analysis of its quality,
quantity, and duration. In accordance with the
principle of substitution, a prudent investor
would pay no more to receive an income stream from
a specified property than any other property
producing an equally desirable income stream.
Typically, the first step in the Income Approach
is to estimate the potential gross income
according to market rent. Market rent means the
"going rent" in the neighborhood based on past
history and present conditions. Vacancies are then
deducted to arrive at effective gross income.
Estimated annual expenses are deducted from the
effective gross income, resulting in an indication
of net operating income before debt service. From
the estimated net annual income, annual debt
service (if applicable) is subtracted to obtain
annual cash flow to equity. This cash flow can be
capitalized into an indication of equity value by
direct capitalization utilizing an overall equity
rate, or if debt does not exist, an overall
capitalization rate. It may also be projected into
the future over a selected but appropriate holding
period, and discounted along with the anticipated
equity reversion at the market discount rate and
added in order to arrive at the net present equity
value for the subject property. Since our
valuation is on a cash basis, no mortgage was
considered. In either method, the present mortgage
balance (if applicable) would be added to the
equity value to obtain the total value of the
property. The appraisers have utilized both
methods in valuing the subject property on an all
cash basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by
rental income from the various rental units, as
well as any laundry income, pet deposits,
forfeited security deposits, and miscellaneous
income. Information provided by the on-site
leasing agents indicated the subject's current
rent schedule to be as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
-------------------------------------------------------------------------
TOTAL SIZE TOTAL RENT/ MO. RENT/
PLAN UNIT TYPE UNITS (SF) (SF) MONTH TOTAL SF/MO.
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A 1BR/1BA 28 738 20,664 $585 $16,380 $0.793
B 1BR/1BA/Den 46 895 41,170 630 28,980 0.704
C 2BR/2BA 36 1,081 38,916 675 24,300 0.624
--- ----- ------- ---- ------- ------
110 916 100,750 $633 $69,660 $0.691
</TABLE>
These rents have been compared to closely located
and similarly designed apartment complexes in the
subject's neighborhood area. For the purpose of
this analysis, we have considered four apartment
complexes that were identified by
37
<PAGE>
- --------------------------------------------------------------------------------
SUBJECT-RENT ANALYSIS
SHADOWOOD VILLAGE
- --------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY PROJECT/UNIT
UNIT TYPE SIZE(SF) RENT/MONTH RENT/SF AMENITIES
- --------------------------------------------------------------------------------
SUBJECT 1BR/1BA 738 $585 $0.793 Average/Good
The Glades 1BR/1BA 750 569 0.818 Good/Good
Evergreen Club 1BR/1BA 700 587 0.839 Good/Good
The Antlers 1BR/1BA/DN 776 561 0.723 Average/Good
The Antlers 1BR/1BA/UP 800 576 0.720 Average/Good
Oaks at Baymeadows lBR/1BA 685 500 0.730 Good/Good
- --------------------------------------------------------------------------------
SUBJECT 1BR/1BA/DEN 895 $630 $0.704 Average/Good
The Antlers 1BR/1BA/DN 888 615 0.693 Average/Good
The Antlers 1BR/1BA/UP 908 630 0.694 Average/Good
Oaks at Baymeadows 1BR/1BA/DEN 1,115 650 0.583 Good/Good
- --------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,081 $675 $0.624 Average/Good
The Glades 2BR/2BA 1,000 689 0.692 Good/Good
The Antlers 2BR/2BA/DN 1,046 676 0.646 Average/Good
The Antlers 2BR/2BA/UP 1,067 691 0.648 Average/Good
Oaks at Baymeadows 2BR/2BA 1,115 650 0.583 Good/Good
- --------------------------------------------------------------------------------
DN = downstairs
UP = upstairs
<PAGE>
management and found by the appraiser to be most
comparable. They range in total unit size from 240
to 400 units and in occupancy from 90 to 93
percent. These comparable rentals are summarized
on a previous page.
All of the comparables surveyed were located
within the subject's immediate vicinity. Each is
comparable to the subject overall, particularly in
terms of overall physical condition, unit size,
rental rates, and the amenities offered. These
comparables indicate an average effective rental
rate range from $0.615 to $0.922 per square foot
per month.
On the table on the facing page, each of the
subject's three floor plans is compared to similar
floor plans obtained from the rent comparables.
All of the comparable rentals have at least
average project amenities for an apartment in this
market which include a pool, tennis court,
clubhouse, hot tub/jacuzzi, and landscaped
grounds. Apartments which have project amenities,
which are rated "good" on this chart additionally
have a car wash stand, indoor racquetball courts,
basketball court, and/or volleyball area. Unit
amenities for standard or average apartment units
include typical built-in kitchen appliances,
miniblinds, a fireplace, a patio or deck, and
average finish. Good unit amenities on a given
apartment unit also include a microwave oven,
washer and dryer, vaulted ceilings and ceiling
fans, and/or burglar alarms.
According to the Rent Analysis summary, the
subject's Plan A is most comparable to the units
offered at The Glades. This plan is also similar
to the one-bedroom unit at The Antlers. These
comparables range in monthly rental asking prices
from $561 to $569 or from $0.723 to $0.818 per
square foot. The subject's Plan A has average
asking rents of $585 per unit or $0.793 per square
foot. The subject's rent is in the mid range of
those for Plan A of the comparable properties.
Additionally, the subject units' rent is believed
at market rent.
Plan B containing 895 square feet from the subject
is also most similar in size and amenities to
similar two-bedroom units displayed from The
Antlers. There are two 1 bedroom/1 bath units at
The Antlers that are comparable. One is a
downstairs unit containing 888 square feet and
rents for $615 per month or $0.693 per square
foot. The other is an upstairs unit having 908
square feet and renting for $630 or $0.694 per
square foot per month. Plan B has average asking
rents of $630 per month or $0.704 per square foot.
Thus, the current asking rent is above the per
square foot range provided by the rent
comparables. This is due to the den that the
subject unit has and its rent is market value.
The subject's largest plan, Plan C, with 1,081
square feet has an average asking rent of $675 per
month or $0.624 per square foot. This plan is most
similar in size and amenities to the two-bedroom
plans from The Antlers. These comparable units
range in monthly rental amounts from $676 to $691,
which equates to $0.646 to $0.648 per square foot.
The subject rent is near the lower end of the
comparable rental range and is mainly due to size.
The subject quoted rents are considered market.
38
<PAGE>
There are currently ten vacant units in the
subject complex. This equates to a current
physical occupancy rate of 94.5 percent. Physical
occupancy one year ago was 96 percent. These
numbers indicate a downward movement in physical
occupancy for the subject property.
Economic occupancy is estimated near 92 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"
----------------------------------------------------------------------------
TOTAL SIZE TOTAL RENT/ MO. RENT/
PLAN UNIT TYPE UNITS (SF) (SF) MONTH TOTAL SF/MO.
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> v
A 1BR/1BA 28 738 20,664 $585 $16,380 $0.793
B 1BR/1BA/Den 46 895 41,170 630 28,980 0.704
C 2BR/2BA 36 1,081 38,916 675 24,000 0.624
-- ----- ------ --- ------ -----
110 916 100,750 $633 $69,660 $0.691
</TABLE>
Gross Annual Rental Income: $69,660 x 12 months
=$835,920
Our cash flow analysis, as well as our direct
capitalization method, indicates a gross rental
income of $852,638. This figure is the result of a
2 percent increase in rental rates during the
first year of our projection period.
OTHER INCOME In addition to rental income from apartments,
other income is generated by laundry and vending
machines, forfeited security deposits, pet
deposits, late charges, and application fees.
Other Income in 1990 was reported at $41,448 or
$0.41 per square foot. This figure fell by
approximately 39 percent during 1991 to $0.25 per
square foot, or a total of $25,229. In 1992, other
income decreased further to $24,686 or $0.25 per
square foot. For 1993, other income decreased to
$22,591 or $0.22 per square foot. The declining
trend continued in 1994 and 1995 with other income
at $19,809 and $18,527 or $0.20 and $0.18 per
square foot, respectively. Annualized figures for
the first nine months of 1996 project a total of
$14,441, or $0.14 per square foot while 1997 other
income is $15,369 or $0.15 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
$0.16 per square foot is typical for a project
such as the subject. This equates to a total
"Other Income" of $16,120 in the first year of our
projected cash flow as well as in the direct
capitalization method.
39
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
SHADOWOOD VILLAGE APARTNWNTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comparab1e No. 1 2 3 SUBJECT PROPERTY
Year Built 1984 1984 1985 1986
Net Rentable Square Feet 156,688 142,792 117,980 100,750
Number of Units 160 120 124 110
Average Unit Size 979 1,190 951 916
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1997 1997 1997 1993 1994 1995 1996-YTD 1997 BRA PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED ACTUAL CALENDAR YEAR
PSF PSF PSF PSF PSF PSF PSF PSF ENDING 12/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
/SF /UNIT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES
Real Estate Taxes $0.69 $0.72 $0.71 $0.75 $0.77 $0.76 $0.85 $0.80 $0.84 $ 767
Insurance 0.13 0.16 0.16 0.11 0.16 0.18 0.18 0.18 0.19 171
Operating Expenses 0.69 0.55 0.65 0.71 0.72 0.69 0.72 0.68 0.65 594
Utilities 0.70 0.68 0.86 0.63 0.66 0.72 0.68 0.94 0.65 594
Repairs & Maintenance 0.53 0.52 0.43 0.46 0.39 0.46 0.57 0.58 0.44 404
Contract Services 0.18 0.21 0.30 0.20 0.20 0.22 0.21 0.21 0.22 200
Management 0.32 0.34 0.39 0.34 0.35 0.35 0.37 0.38 0.40 367
General Administrative 0.15 0.15 0.18 0.11 0.18 0.16 0.21 0.18 0.19 171
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Total Expenses $3.39 $3.33 $3.68 $3.31 $3.43 $3.54 $3.79 $3.95 *$3.58 *$3,268
===================================================================================================================================
</TABLE>
* Differences may occur due to rounding
<PAGE>
From this we have arrived at our estimate of
scheduled gross income as if 100 percent occupied
for the first fiscal year of the projection
period:
Gross Rental Income $852,638
Other Income 16,120
--------
Total Potential Gross Income $868,758
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
94.5 percent physical occupancy is above the
approximate 91.0 percent Third Quarter physical
occupancy rate enjoyed by the Southside Boulevard
submarket. The subject's occupancy is above the
Third Quarter 92.8 percent citywide rate in the
Jacksonville area. The subject property has a
current economic occupancy rate of 92.1 percent,
which is considered below, but near stabilized
occupancy for the subject. A 95.0 percent
stabilized economic occupancy has been utilized
for the subject during the holding period and a
deduction is taken for rent loss as the stabilized
occupancy is believed achievable in year 2.
EXPENSE ANALYSIS The various expenses necessary in the operation of
the subject have been estimated including fixed
expenses, operating expenses, and reserves for
replacement. Proper appraisal technique demands
that an appraiser rely on typical expenses as
opposed to actual expenses, which may vary
according to management or special circumstances
that may not persist. In addition, the total
expenses per square foot should be within a range
typical for similar projects. Reserves for
replacement are estimated based on age, condition,
and construction quality. It is re-emphasized that
all income, as well as expense estimates, are
based on the assumption of competent and prudent
management.
We have based our estimate of projected expenses
on comparable apartment projects located in the
subject area, as well as the actual historical
performance of the subject property. The Expense
Analysis Chart on the facing page summarizes the
actual and/or annualized 1997 expenses reported by
three (3) "individually metered" projects, as well
as the subject property's actual 1993, 1994, 1995,
and 1996 expense figures. The 1997 actual and
budget figures were available to the appraiser at
the time of the report and are also shown in the
chart on the facing page. Bach Realty Advisors'
estimated expenses for the subject property in
Fiscal Year 1998 are also displayed.
Based upon the analysis of the comparables, we
have developed the following expense estimates for
the subject.
REAL ESTATE TAXES - The Shadowood Village
Apartments are subject to the taxing authorities
of Duval County. The county distributes the tax
receipts from property owners to different
authorities as specified in the Site section of
this report. The subject's 1997 assessed value is
$3,773,442 the total tax liability is $80,838 or
40
<PAGE>
$0.80 per square foot. After examining the tax
liabilities of the comparables used in our expense
analysis (which exhibited a range from $0.69 to
$0.72 per square foot), we have reflected the
actual 1997 real estate taxes plus an approximate
4 percent inflation factor in our estimate of the
1998 taxes (includes personal property taxes).
Thus, real estate taxes have been estimated at
$0.84 per square foot or $767 per unit and
totaling $84,371. 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 $0.19 per
square foot or $18,860. All of the expense
comparables utilized exhibit a range of insurance
costs from $0.13 to $0.16 per square foot for
1997. The subject's actual insurance costs have
been fluctuating from $0.11 to $0.21 per square
foot since 1993. The annualized 1996 insurance
costs are projected at $0.21 per square foot. The
appraisers believe that the insurance expense for
the subject is appropriate and is generally
supported by the expense comparables. The expense
per unit is $171. Insurance expense is increased 4
percent annually for the duration of the holding
period.
OPERATING EXPENSES - This category includes
salaries for office managers and leasing agents,
maid services, payroll taxes and FICA, security,
advertising, and promotional items. The subject's
actual figures for 1993, 1994, 1995, and 1996,
were $0.71, $0.72, $0.69, and $0.72 per square
foot, respectively. The annualized 1997 operating
expense is $0.68 per square foot. 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 $65,367 which is equivalent to $0.65
per square foot or $594 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 $0.86 per
square foot. The subject's annualized 1996
year-to-date expense is $0.68 per square foot. The
1997 expense is $0.94 per square foot; however,
this is unusually high and needs to be tempered to
the market and to historical occurrence. 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 $0.65 per square foot or $594 per unit, near
the lower end of the comparables range. This
equates to a total utility expense estimate of
$65,367 for the subject property in the first
year. Utility expenses are increased 4 percent
annually throughout the projection period.
REPAIRS AND MAINTENANCE - The 1996 annualized
actual year-to-date repairs and maintenance costs
are $0.57 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 $0.43 to
$0.53 per square foot and the subject's 1997
annualized expense is $0.58 per square foot.
Repairs and
41
<PAGE>
maintenance costs of $0.44 per square foot or $404
per unit and totaling $44,411 have been projected
for the subject for the first year of our cash
flow analysis and increased 4 percent annually.
CONTRACT SERVICES - The contract services category
includes mainly landscaping services. Our surveyed
expense comparables reported 1997 contract
services expenses between $0.18 and $0.30 per
square foot. Actual expenses for the subject for
the 1997 contract services expense are estimated
at $0.21 per square foot, while 1997 indicated
$0.21 per square foot. The appraiser has
emphasized the historical and budgeted expenses
for the subject when estimating the per square
foot contract services expense for the property of
$0.22 per square foot or $200 per unit and
totaling $22,006 in the first year of the cash
flow. These expenses are expected to increase
annually at a rate of 4 percent.
MANAGEMENT - This figure for apartment projects is
typically expressed as a percentage of the
effective gross income of the property. The
industry standard for an apartment complex of this
size and quality is about 5 percent of effective
gross income. This includes the fee to outside
management or ownership for managing the property.
According to the actual income and expense
statements from 1993 forward provided by the
client, management fees at the subject have been
approximately 5 percent. We have also relied upon
indicators from the market to determine typical
expenses for this category. A management fee of 5
percent of the projected effective gross income
for each year of the cash flow is estimated.
GENERAL AND ADMINISTRATIVE - This expense category
includes legal expenses, dues, fees, printing,
auto costs, postage, accounting/audit, permits,
travel, credit, reports, office equipment,
telephone, and all other miscellaneous and
administrative costs. Our surveyed expense
comparables indicated actual administrative
expenses ranging from $0.15 to $0.18 per square
foot. The subject's annualized year-to-date 1996
costs are above this range at $0.21 per square
foot. The 1997 expense was $0.18 per square foot.
The appraiser utilized an $0.19 per square foot
figure or $171 per unit and totaling $18,860,
supported by the comparables' range. This expense
increases at a rate of 4 percent for each year in
the cash flow.
EXPENSE SUMMARY In conclusion, vacancy loss has been estimated at
5 percent throughout the holding period, except
for year 1. The total estimated 1997 calendar year
expenses for the Shadowood Village Apartments,
excluding reserves for replacement, equates to
$3.58 per net rentable square foot or $3,268 per
unit. This is within the range indicated by the
expense comparables and is reasonable and well
supported by actual historical figures indicated
by the subject property.
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out
more rapidly than the building itself and must be
replaced periodically during the building's
economic life. These may include roof covering,
carpeting, appliances, compressors, parking areas,
drives, etc. The subject was constructed in 1984
and appears to have had ongoing maintenance
42
<PAGE>
since its construction. It is our opinion that a
reserve allowance of $0.33 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 totals
$33,000 and are grown at 4 percent for the
duration of the holding period. Reserves were
included in our expenses prior to concluding the
net operating income.
DEFERRED MAINTENANCE/
CAPITAL EXPENDITURES The subject has numerous items requiring capital
expenditures. Capital expenditures listed by
management in the 1997 budget total $201,000 as
detailed in the Improvements section of this
report.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION A reasonable method for estimating value via the
Income Approach in a stabilized market is through
the use of Discounted Cash Flow Analysis. The
Market Value of a real estate investment under the
Discounted Cash Flow Method is defined as the
discounted sum of all net cash inflows plus the
property's discounted reversionary value.
Primarily, any given property is only worth the
value of the income derived from it.
The general methodology of Discounted Cash Flow
involves the following steps: 1) increasing each
year's cash flows by an appropriate appreciation
factor; 2) discounting each year's net cash flow
by an appropriate discount rate; 3) deriving the
property's reversionary value in the final year
and discounting it to the present; and 4) the
summation of all cash flows, including final year
reversion, into an estimate of value.
Real Estate Investment Trusts (REITS) have been
the major players among new apartment acquisitions
over the past, few years which has resulted in
upward pressure on selling prices as
capitalization rates have dropped. More recently,
REITs are strong in the market. Capitalization
rates are lower this year than last year due to
many buyers pursuing limited inventory.
Survey participants in RERC's Emerging Trends in
Real Estate: 1997 indicate that multifamily is
still a viable investment vehicle, but its
desirability is ebbing as short-term rental growth
has already peaked in some markets. Expectations
for 1998 are an increased interest in apartments
as markets stabilize and new construction comes
on-line. Since 1994 returns for apartments have
averaged near 12 percent, above all other
categories. Solid returns in the 9 to 10 percent
area are expected to continue with 9 percent and
below for new Class A product, much of which may
be pre-sold. Apartment investment fits the
portfolio profiles of pension funds and REITs who
want immediate high cash flows with predictable
capital costs and national vacancy rates in
relative equilibrium at 5 percent to 8 percent and
a growing population, the risk in the multifamily
market is steady and we anticipate that investors
will continue to find their niche the market.
DISCOUNT RATE Over the past several years, the internal rate of
return (IRR) has gained greater usefulness and
market acceptance as an investment measure. IRR is
the yield on an investment based on an initial
cash investment, annual cash flows to the
property,
43
<PAGE>
as well as resale proceeds. IRR allows for return
on investment as well as recapture of the original
investment when factoring in the reversion. To
simulate this process, we have relied upon several
investor surveys, which detail reasonable yields
or IRR requirements of purchasers. We have used
this rate as a discount rate that, when applied to
projected cash flows and net resale proceeds
(reversion), results in the present value of the
property.
According to the Third Quarter 1997 investor
survey compiled by Peter F. Korpacz & Associates,
Inc., investors for apartment properties indicated
a return requirement ranging from 10.00 to 12.50
percent with an average of 11.16 percent. This IRR
depends on the conservative or aggressive nature
of rental and expense growth assumptions, as well
as location and other factors. Real Estate is
considered riskier than bonds due to illiquidity,
competition, burden of management, and market
conditions; therefore approximately 150 basis
points or more could be added to the Corporate
"Baa" bond rate in a normal market. Based on the
previous data and recognizing new construction, we
believe a 12 percent discount rate is reasonable
in the current market based on an all cash sale
and alternative investments.
CAPITALIZATION RATE The subject property's reversionary value is
derived by capitalizing the eleventh year's net
operating income. As mortgage rates have
fluctuated over the past several years, it becomes
difficult to apply a band of investment method to
establish a capitalization rate because
capitalization rates do not react dramatically to
ups and downs of mortgage interest rates.
Additionally, the mercurial nature of the recent
market creates a large variance of returns
depending on property potential. Again, according
to the previously cited investor survey, investors
for apartment properties indicated a terminal
capitalization rate range from 8.0 to 10.25
percent or an average of 9.29 percent to attract
investment. Going-in capitalization rates of the
comparable sales in the Sales Comparison Approach
could be calculated based on the data provided.
Most had a relatively similar occupancy rate as
the subject at their respective times of sale. The
range of going-in capitalization rates from these
sales was from 7.76 to 10.9 percent (without
reserves). A going-in capitalization rate in the
middle of this range is considered appropriate.
The going-in rate is typically lower than the
terminal capitalization rate stated above due to
the older age of the property and the risk of the
market ten years hence. Based upon the
aforementioned factors, the terminal
capitalization rate for the subject should be
above the average going-in capitalization rate
exhibited by the comparable sales in the Sales
Comparison Approach. Therefore, a terminal
capitalization rate of 10.0 percent appears
appropriate for the subject property based on the
Korpacz survey.
CASH FLOW ASSUMPTIONS . Rents were based on an average rental rate of
approximately $0.691 per square foot per
month. During the projection period rents are
expected to increase at 2 percent during
1997. Rents increase 4 percent in the second
year of our analysis and each year
thereafter.
. The subject property's current physical
occupancy rate is 94.5 percent. The economic
occupancy rate of 92.1 percent as of December
1997 is below the estimated stabilized
occupancy rate of 95.0 percent. It is our
opinion
44
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Shadow Village
====================================================================================================================================
Period 1 2 3 4 5 6 7
1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Apt. Rents 852,638 886,744 922,214 959,102 997,466 1,037,365 1,078,860
Rent/SF/Mo. 0.705 0.733 0.763 0.793 0.825 0.858 0.892
Dther Income/Yr. 16,120 16,765 17,435 18,133 18,858 19,612 20,397
--------- -------- -------- -------- --------- --------- ---------
Gross Income 868,758 903,509 939,649 977,235 1,016,324 1,056,977 1,099,257
% Vacancy 7.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 60,813 45,175 46,982 48,862 50,816 52,849 54,963
--------- -------- -------- -------- --------- --------- ---------
Eff. Gross Income 807,945 858,333 892,667 928,373 965,508 1,004,129 1,044,294
-------------------
EXPENSES: Per/Unit Per/SF
-------------------
Real Estate Taxes 767 0.84 84,371 87,746 91,256 94,906 98,702 102,650 106,756
Insurance 171 0.19 18,860 19,615 20,399 21,215 22,064 22,947 23,864
Operating Expenses 594 0.65 65,367 67,981 70,701 73,529 76,470 79,528 82,710
Utilities 594 0.65 65,367 67,981 70,701 73,529 76,470 79,528 82,710
Repair & Maintenance 404 0.44 44,411 44,187 48,035 49,956 51,954 54,032 56,194
Contract Services 200 0.22 22,006 22,887 23,802 24,754 25,744 26,774 27,845
Management Fee 5.00% 0.40 40,397 42,917 44,633 46,419 48,275 50,206 52,215
General & Administrative 171 0.19 18,860 19,615 20,399 21,215 22,064 22,947 23,864
Reserves 300 0.33 33,000 34,320 35,693 37,121 38,605 40,150 41,756
--------- -------- -------- -------- --------- --------- ---------
Total Expenses $3,569 $3.90 392,639 409,248 425,618 442,643 460,349 478,763 497,913
-------------------
Per SF Per Yr. 3.90 4.06 4.22 4.39 4.57 4.75 4.94
Per Unit 3,569 3,720 3,869 4,024 4,185 4,352 4,526
--------- -------- -------- -------- --------- --------- ---------
NET OPERATING INCOME $415,306 $449,085 $467,048 $485,730 $505,159 $525,366 $546,381
========= ======== ======== ======== ======== ======== ========
Per SF $4.12 $4.46 $4.64 $4.82 $5.01 $5.21 $5.42
Per Unit $3,776 $4,083 $4,246 $4,416 $4,592 $4,776 $4,967
==================================================================================================================================
Capital Items/Deferred Maintenance: 201,000
--------- -------- -------- -------- --------- --------- ---------
Cash Flow 214,306 449,085 467,048 485,730 505,159 525,366 546,381
--------- -------- -------- -------- --------- --------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value of Cash Flow 191,345 358,008 332,436 308,690 286,641 266,167 247,155
NOI in 11th Year 639,188 Present value of Income Stream 2,630,936
Ro at Reversion 10.00% Present Value of Reversion 1,975,693
---------
---------------------------------------------------------
Indicated Reversion 6,391,879 Indicated Value of Subject 4,606,629
Less: Sales costs 4.00% 255,675 Indicated Value/SF 45.72
---------
Indicated Value/Unit 41,878
Reversion in 10th Yr 6,136,204 GIM at Indicated Value 5.40
Ro at Indicated Value 9.02%
---------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
PERIOD 8 9 10 Reversion
2005 2006 2007 2008
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME:
Apt. Rents 1,122,014 1,166,895 1,213,570 1,262,113
Rent/SF/Mo. 0.928 0.965 1.004 1.044
Dther Income/Yr. 21,213 22,061 22,944 23,862
--------- --------- --------- ---------
Gross Income 1,143,227 1,188,956 1,236,514 1,285,975
% Vacancy 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 57,161 59,448 61,826 64,299
--------- --------- --------- ---------
Eff. Gross Income 1,086,065 1,129,508 1,174,688 1,221,676
EXPENSES:
Real Estate Taxes 111,026 115,468 120,086 124,890
Insurance 24,819 25,812 26,844 27,918
Operating Expenses 86,018 89,459 93,037 96,759
Utilities 86,018 89,459 93,037 96,759
Repair & Maintenance 58,441 60,779 63,210 65,739
Contract Services 28,959 30,117 31,322 32,575
Management Fee 54,303 56,475 58,734 61,084
General & Administrative 24,819 25,812 26,844 27,918
Reserves 43,426 45,163 46,969 48,848
--------- --------- --------- ---------
Total Expenses 517,830 538,543 560,085 582,488
Per SF Per Yr. 5.14 5.35 5.56 5.78
Per Unit 4,708 4,896 5,092 5,295
--------- --------- --------- ---------
NET OPERATING INCOME $568,236 $590,965 $614,604 $639.188
========= ======== ========= =========
Per SF $5.64 $5.87 $6.10 $6.34
Per Unit $5,166 $5,372 $5,587 $5,811
==============================================================================
Capital Items/Deferred Maintenance:
--------- --------- --------- ---------
Cash Flow 568,236 590,965 614,604 639,188
--------- --------- --------- ---------
Present Value Factor 0.403883 0.360610 0.321973 1.000000
Present Value of cash Flow 229,501 213,108 197,886 639,188
</TABLE>
<PAGE>
==========================================================================
CASH FLOW SUMMARY
CALENDAR YEAR ANNUAL 12.00% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------ --------- ---------- ---------
1998 $214,306 0.892857143 $191,345
1999 449,085 0.797193878 358,008
2000 467,048 0.711780248 332,436
2001 485,730 0.635518078 308,690
2002 505,159 0.567426856 286,641
2003 525,366 0.506631121 266,167
2004 546,381 0.452349215 247,155
2005 568,236 0.403883228 229,501
2006 590,965 0.360610025 213,108
2007 614,604 0.321973237 197,886
-------
TOTAL NPV OF CASH FLOWS $2,630,936
Projected NOI - 11th Year $639,188
Terminal Capitalization Rate 10.00%
------
Estimated Value of Property at End of 10th Year $6,391,879
Less Sales Cost @ 4.00% (255,675)
---------
Value of Reversion at End of 10th Year $6,136,204
Discount Factor - 10th Year 12.00% 0.321973
--------
Present Value of the Reversion $1,975,693
Sum of Present Values of Cash Flow 2,630,936
---------
MARKET VALUE AS OF DECEMBER 31, 1997 $4,606,629
(ROUNDED) $4,600,000
==========
==========================================================================
<PAGE>
that the subject should be capable of
averaging 95.0 percent economic occupancy
throughout the holding period of our cash
flow analysis after the first year.
Occupancy for the 1998 or first year is
estimated at 93 percent.
. 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 $0.33
per square foot or $300 per unit in the
first year and also increase at 4 percent
per year thereafter.
. A discount rate of 12.0 percent was
utilized.
. A terminal capitalization rate of 10.0
percent was felt reasonable.
. A sales cost of 4 percent of the
reversionary value was estimated.
A cash flow analysis and summary for the subject
beginning January 1, 1998 may be found on the
preceding pages. The estimated leased fee market
value for the subject on an "as is" basis as of
December 31, 1997 via discounted cash flow method
is
FOUR MILLION SIX HUNDRED THOUSAND DOLLARS
($4,600,000)
45
<PAGE>
<TABLE>
<CAPTION>
================================================================================
DIRECT CAPITALIZATION
================================================================================
TOTAL /UNIT /SF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Potential Gross Rental Income $852,638 $7,751 $8.46
Ancillary Income 16,120 147 0.16
------ --- ----
Potential Gross Income $868,758 $7,898 $8.62
Less: Vacancy & Credit Loss @ 5.00% 43,438 395 0.43
------ --- ----
Effective Gross Income $825,320 $7,503 $8.19
FIXED EXPENSES
- --------------
Real Estate Taxes $84,371 $767 $0.84
Insurance 18,860 171 0.1872
------ --- ------
Total Fixed $103,231 $938 $1.02
VARIABLE EXPENSES
- -----------------
Operating Expenses $65,367 $594 $0.65
Utilities 65,367 594 0.65
Repairs and Maintenance 44,411 404 0.44
Contract Services 22,006 200 0.22
Management Fee 5.00% 41,266 375 0.41
General Administrative 18,860 171 0.19
Reserves for Replacement 33,000 300 0.33
------ --- ----
Total Variable $290,277 $2,639 $2.88
Total Expenses $393,508 $3,577 $3.91
-------- ------ -----
Net Operating Income $431,812 $3,926 $4.29
Capitalization Rate 9.00%
-----
Fee Simple Stabilized Market Value $4,797,916 $43,617 $47.62
Less: Rent Loss Due to Lease Up 71,728 652 1
Capital Expenditures 201,000 1,827 2.00
------- ----- ----
LEASED FEE "AS IS" MARKET VALUE $4,525,189 $41,138 $44.92
ROUNDED $4,530,000
==========
</TABLE>
================================================================================
RENT LOSS DUE TO LEASE-UP
-------------------------
<TABLE>
<CAPTION>
Year 1 Year 2
------ ------
<S> <C> <C>
Stabilized NOI $431,812 $431,812
Projected NOI 355,064 449,085
------- -------
Rent Loss $76,748 $0
7.00% PV Factor 0.934579 0.873439
-------- --------
PV Income Loss $71,728 $0
CUMULATIVE TOTAL $71,728
</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
$4,550,000 and is shown on the facing page.
INCOME APPROACH
CONCLUSION DCF Method............................. $4,600,000
Direct Capitalization Method........... $4,550,000
Consideration is given to both the discounted cash
flow method and the direct capitalization
approach. These have been rounded to the nearest
ten thousand dollars, however, for purposes of the
income approach conclusion, the value is rounded
to the nearest fifty thousand.
From the above analysis provided by the Income
Approach, we estimate the leased fee market value
of the subject property on an "as is" all cash
basis, as of December 31, 1997, to be
FOUR MILLION SIX HUNDRED THOUSAND DOLLARS
($4,600,000)
46
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $4,650,000
Income Approach $4,600,000
The Sales Comparison Approach utilized recent comparable
sales of similar properties in the area. The weakness of
the Sales Comparison Approach is that no two properties
are exactly alike and exact conditions of a sale are
often unknown. The strength of this approach is that it
indicates the market activity based on the willing
buyer/willing seller concept.
Eight recent sales, dating back to May 1996, were
utilized in the Sales Comparison Approach. Each is
similar to the subject property in several
characteristics including occupancy, location, age,
construction quality, amenities, and/or condition. The
data on the comparable sales was considered to be
reasonably accurate and reliable, and each property is
similarly located on the city's south and southeast
sides. The methods of comparison utilized in this
analysis were the net operating income per square foot
and the effective gross rental multiplier (EGRM)
methods. These indicators rely on a comparison of income
rather than physical attributes. Thus, adjustments for
physical factors are not necessary as economics are the
common denominator. A final market value estimate for
the subject was made based on the analysis presented in
the Sales Comparison Approach.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rents in the
immediate area of the subject, actual expenses, and
investor returns derived from the market, we have
estimated value. Actual data on the property, as well as
comparable data from nearby similar properties, were
considered to be adequate. Because the Income Approach
deals directly with income streams, we believe it is a
very good indication of current market conditions. It
tends to reflect a value, which an investor of a
property would anticipate.
In the Income Approach, comparable properties from the
subject's Southside Boulevard area were utilized when
deriving the subject property's economic market rents
and projected expenses. The Sales Comparison Approach
also contains sales from similar areas on the city's
south and southeast sides. For this reasoning, both the
Sales Comparison and Income approaches are emphasized in
the final analysis. The Income Approach was rounded down
to its value conclusion and this was given consideration
in the final value 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 December 31, 1997, is
FOUR MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($4,650,000)
47
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
Project Name The Links at Windsor Park
Address 13700 Sutton Park Drive North
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 08/97
Grantor (Seller) Windsor Park Apartments, Ltd.
Grantee (Buyer) Rancho Bernardo Corporate Center
Recorded Document 8726-846
Sale Price $20,500,000
Occupancy 95%
Sale Price per Unit $73,214
Sale Price per SF $69.11
Capitalization Rate 8.56%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $ 2,767,693
Vacancy/Collection Loss ($138,385)
Effective Gross Income $ 2,629,308
Operating Expenses $ (874,508)
Net Operating Income $ 1,754,800
PROPERTY DESCRIPTION
Year Built 1995
Number of Stories 2 and 3
Number of Units 280
Number of Bedrooms NA
Net Rentable Area 296,616 SF
Average Unit Size 1,059 SF
Land Area 23.36 acres
Unit Density 11.98 Units per Acre
Property Condition Excellent
Parking (type) Open
Construction Type Wood frame/Wood Siding/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments: Was completed in early 1995 and was in excellent
condition at time of sale. Complex amenities
include security fencing with remote entry gate,
swimming pool, sun deck, tennis courts, clubhouse
with fitness center, playground, and amenity lake
with partial frontage along golf course fairways.
Units have installation alarms, washer/dryer,
appliances ceiling fans, window coverings, and
built-in bookcases.
<PAGE>
SAN PABLO
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
Project Name San Pablo
Address 14401 Jose Vedra Blvd..
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) N/A
Grantee (Buyer) N/A
Recorded Document N/A
Sale Price $5,350,000
Occupancy 90%
Sale Price per Unit $26,750
Sale Price per SF $28.96
Capitalization Rate 10.8%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $ 1,302,800
Vacancy/Collection Loss ($130,280)
Effective Gross Income $ 1,172,520
Operating Expenses ($589,370)
Net Operating Income $ 583,150
PROPERTY DESCRIPTION
Year Built 1974
Number of Stories 2
Number of Units 200
Number of Bedrooms 350
Net Rentable Area 184,750
Average Unit Size 924 SF
Land Area 14.24 acres
Unit Density 14.04 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Concrete block with masonry and wood veneer
Confirmed With David V. Allen, CB Commercial Real Estate
Group, Inc.
Date Confirmed 11/18/97
Comments San Pablo Apartments needed new plumbing
system, wood replacement, some roof
replacement and other repairs at time of sale.
The property has tennis courts, basketball
courts, full size pool, and playground.
Expenses do not include reserves.
<PAGE>
HUNTER'S RIDGE
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
Project Name Hunter's Ridge (previously Oaks at Deerwood)
Address 10100 Baymeadows Road
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Oaks at Baymeadows II Associates, Ltd.
Grantee (Buyer) Mid-America Apartments of Duval, L.P.
Recorded Document 8653-596
Sale Price $15,200,000
Occupancy 92%
Sale Price per Unit $45,238
Sale Price per SF $51.54
Capitalization Rate 7.76%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $ 2,451,409
Vacancy/Collection Loss ($196,113)
Effective Gross Income $ 2,255,296
Operating Expenses $ 1,075,776
Net Operating Income $ 1,179,520
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms NA
Net Rentable Area 294,888 SF
Average Unit Size 878 SF
Land Area 34.70 acres
Unit Density 9.68 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Wood frame/Wood Siding/Shingle roof
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Property had a name change after the sale and
is now known as Hunter's Ridge. Clubhouse has a
tile roof covering and entry is paved with
brick pavers. Well landscaped and treed.
Amenities include a pool with hot tub, tennis
courts, fitness facility in clubhouse, car care
center, racquet ball/volleyball court, outdoor
storage for each unit, mini-blinds, and
washer/dryer connections.
<PAGE>
WOODHOLLOW
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
Project Name Woodhollow Apartments
Address 1715 Hodges Blvd.
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Woodhollow, LP
Grantee (Buyer) Mid-America Apartments, LP
Recorded Document 8590-2406
Sale Price $16,700,000
Occupancy 94%
Sale Price per Unit $37,111
Sale Price per SF $48.99
Capitalization Rate 9.60%
TERMS OF SALE Cash to mortgage of $10,350,000 @ 7.5% Due
in 7 years, based on 25 amortization
schedule
INCOME/EXPENSE DATA
Potential Gross Income $ 3,245,490
Vacancy/Collection Loss ($194,729)
Effective Gross Income $ 3,050,761
Operating Expenses ($1,447,561)
Net Operating Income $ 1,603,200
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Units 450
Number of Bedrooms 690
Net Rentable Area 342,162 SF
Average Unit Size 760 SF
Land Area 38.65 acres
Unit Density 11.6 Units per Acre
Property Condition Average Plus
Parking (type) Open parking
Construction Type Wood frame
Confirmed With David V. Allen, CB Commercial Real Estate
Group, Inc.
Date Confirmed 11/18/97
Comments The cap rate does not include a deduction
for reserves. Amenities are a 6-acre lake,
olympic size pool with large cool deck,
jacuzzi, 2 tennis courts, 2 volleyball
courts, BBQ and picnic areas, large
playground, and a gated boat storage.
<PAGE>
THE COURTS AT PONTE VEDRA
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
Project Name The Courts at Ponte Vedra
Address 101 Vera Cruz Drive
City/County/State Ponte Vedra Beach, FL
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Windsor Apartments, L.P.
Grantee (Buyer) Metropolitan Life Insurance Corporation
Recorded Document 01220-01824
Sale Price $19,000,000
Occupancy 95%
Sale Price per Unit $75,099
Sale Price per SF $75.12
Capitalization Rate 8.34%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $ 2,734,426
Vacancy/Collection Loss ($136,721)
Effective Gross Income $ 2,597,705
Operating Expenses ($1,013,105)
Net Operating Income $ 1,584,600
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Units 253
Number of Bedrooms N/A
Net Rentable Area 252,916 SF
Average Unit Size 1,000 SF
Land Area 9.23 acres
Unit Density 27.41 Units per Acre
Property Condition Excellent
Parking (type) Open parking
Construction Type Wood frame/Masonry/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Built in late 1996 and sold on 95% proforma.
Leasing was ahead of schedule at time of
sale. Complex was in excellent condition.
Property had very attractive architectural
design features at windows and roof lines.
Amenities include security gate entry,
fountain, brick pavers, lap pool, heated
spa, and clubhouse with business center.
Property had higher unit density than most
projects in Ponte Vedra.
<PAGE>
THE HUNTINGTON AT HIDDEN MILLS
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-075/97-076
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 97-075/97-076
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 97-075/97-076
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 ANTLERS
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[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY DESCRIPTION
Project No. 97-076
Name of Project: The Antlers
Street Address: 8433 Southside Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: 27
Number of Stories: 2
Number of Units: 400
Net Rentable Area (SF): 331,780
Average Unit Size (SF): 829
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame and stucco with composition roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
--------------------------------------------------
<S> <C> <C> <C> <C>
56 1BR/1BA/DN 608 $514 $0.845
56 1BR/1BA/UP 624 529 0.848
56 1BR/1BA/DN 776 561 0.723
56 1BR/1BA/UP 800 576 0.720
36 1BR/1BA/DN 888 615 0.693
36 1BR/1BA/UP 908 630 0.694
52 2BR/2BA/DN 1,046 676 0.646
52 2BR/2BA/UP 1,067 691 0.648
</TABLE>
DN = downstairs; UP = upstairs
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, miniblinds, fireplaces,
vaulted ceilings, outdoor utility closets,
patio/balconies
Project Amenities: 2 swimming pools, 2 tennis courts, 2 racquetball
courts, jacuzzi, sauna, exercise/weight room, club
room, lake
ECONOMIC DATA
Percent Occupied: 90%
Avg. Monthly Rent/SF of NRA: $0.717
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $150-$200
Pets Allowed/Deposit: Yes, 25 lbs. maximum; $150 nonrefundable
Confirmed With: On-site leasing agent and ConAm survey
Date Confirmed: December 1997 - Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
EVERGREEN CLUB
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Project No. 97-076
Name of Project: Evergreen Club
Street Address: 9611 Southbrook Drive
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1990
Number of Buildings: NA
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 180,800
Average Unit Size (SF): 753
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA 600 $547 $0.912
80 1BR/1BA 700 587 0.839
48 1BR/1BA 800 622 0.778
48 2BR/2BA 1,000 710 0.710
</TABLE>
Unit Amenities: Fireplaces, washer/dryer, vaulted ceilings,
screened patios/balconies, lake views.
Project Amenities: Clubhouse, pool, fitness center, lighted tennis
and basketball courts, volleyball area, and spa.
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.807
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $200-300
Pets Allowed/Deposit: Yes, $250 nonrefundable
Confirmed With: On-site leasing agent and ConAm survey
Date Confirmed: December 1997 - Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
THE GLADES
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Name of Project: The Glades Apartments
Street Address: 7524 Southside Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: 28
Number of Stories: 2
Number of Units: 360
Net Rentable Area (SF): 230,500
Average Unit Size (SF): 640
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame and brick veneer composition roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
96 1BR/1BA 550 $524 $0.953
80 1BR/1BA 620 554 0.894
80 1BR/1BA 696 569 0.818
96 2BR/2BA 996 689 0.692
8 2BR/2BA/Loft 1,078 789 0.732
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, washer/dryer in
units, miniblinds, fireplaces, ceiling fans,
vaulted ceilings, outdoor utility closets,
patio/balconies, burglar alarms
Project Amenities: 2 swimming pools, 2 racquetball courts, 1
basketball court, clubroom, lakes
ECONOMIC DATA
Percent Occupied: 92%
Avg. Monthly Rent/SF of NRA: $0.922
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $200-1BR; $300-2BR
Pets Allowed/Deposit: Yes; 0-20 pounds - $250 deposit plus $12/month
pet fee
Confirmed With: On-site leasing agent and ConAm survey
Date Confirmed: December 1997 - Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates for individual floor
plans are due to forest or lake or pool views
($10), upstairs ($10), wetbars in 2BDs ($10) for
a maximum of $20 in 1BD and $30 in 2BDs.
<PAGE>
OAKS AT BAYMEADOWS
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[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY DESCRIPTION
Name of Project: The Oaks at Baymeadows Apartments
Street Address: 8401 Southside Boulevard
City/State: Jacksonville, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: 14
Number of Stories: 2-3
Number of Units: 248
Net Rentable Area (SF): 246,820
Average Unit Size (SF): 995
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Wood frame and brick veneer with composition
roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------
<S> <C> <C> <C> <C>
52 1BR/1BA 685 $500 $0.730
72 1BR/1BA 850 560 0.659
28 1BR/1BA/DEN 1,115 650 0.583
24 2BR/2BA 1,115 650 0.583
52 2BR/2BA 1,210 690 0.570
20 3BR/2BA 1,455 790 0.543
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, miniblinds, fireplace,
ceiling fans, vaulted ceilings, patio/balconies
Project Amenities: 1 swimming pool, 2 tennis courts, jacuzzi, 1
racquetball court, clubroom, lake, volleyball
court
ECONOMIC DATA
Percent Occupied: 89%
Avg. Monthly Rent/SF of NRA: $0.615
Electricity Paid By: Tenant
Length of Lease: 7 to 12 months
Security Deposit: $200
Pets Allowed/Deposit: Yes; 25 lbs. maximum; $250 nonrefundable pet fee
Confirmed With: On-site leasing agent and ConAm survey
Date Confirmed: December 1997 - Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
EXHIBIT "A"
-----------
LEGAL DESCRIPTION
-----------------
PARCEL A:
- ---------
A tract of land in Section 24, Township 3 South, Range 27 East,
Jacksonville, Duval County, Florida. Said tract being more particularly
described as follows:
For point of reference, commence at the point of intersection of the
Northerly right of way line of Baymeadows Road (a 100 foot right of way, as now
established) with the Westerly right of way line of Southside Boulevard (State
Road No. 115, a 300 foot right of way, as now established), and run N 00 degrees
01' 50" W, along said Westerly right of way line, a distance of 4,855.00 feet to
the Southeasterly corner of that property described in the Public Records of
said County in Official Records Volume 5141, Page 122; run thence S 89 degrees
58' 10" W, along said Southerly boundary, a distance of 670.00 feet to a point
for point of beginning.
From the point of beginning thus described, run S 0 degrees 01' 50" E a
distance of 532.65 feet to a point on the Northerly boundary of an easement for
ingress, egress, drainage and utilities, as described in the Public Records of
said County in Official Records Volume 5578, Pages 670 through 677; run thence
along said Northerly boundary, as follows: first course, S 70 degrees 58' 10" W
a distance of 96.85 feet to a point of curvature; second course, a distance of
158.84 feet, along the arc of a curve, concave Northeasterly and having a radius
of 214.14 feet, a chord distance of 155.23 feet to a point of compound
curvature, the bearing of the aforementioned chord being N 87 degrees 46' 50" W;
third course, a distance of 50.41 feet, along the arc of a curve, concave
Northeasterly and having a radius of 50.00 feet, a chord distance of 48.30 feet
to a point of reverse curvature, the bearing of the aforementioned chord being N
37 degrees 38' 46" W; fourth course, a distance of 204.24 feet, along the arc of
a curve, concave Southwesterly and having a radius of 100.00 feet, a chord
distance of 170.55 feet to a point on the Easterly boundary of that property
described in the Public Records of said County in Official Records Volume 5578,
Pages 670 through 677, the bearing of the aforementioned chord being N 67
degrees 16' 16" W; run thence along said Easterly boundary, as follows: first
course, N 56 degrees 27' 20" W a distance of 223.94 feet to a point; second
course, N 0 degrees 01' 50" W a distance of 330.00 feet to a point on the
Southerly boundary of said property described in Official Records Volume 5141,
Page 122; run thence N 89 degrees 58' 10" E, along said Southerly boundary, a
distance of 620.00 feet to the point of beginning.
PARCEL B:
- --------
A tract of land in Section 24, Township 3 South, Range 27 East,
Jacksonville, Duval County, Florida. Said tract being more particularly
described as follows:
For point of reference, commence at the point of intersection of the
Northerly right of way line of Baymeadows Road (a 100 foot right of way, as now
established) with the Westerly right of way line of Southside Boulevard (State
Road No. 115, a 300 foot right of way, as now established), and run N 00 degrees
01' 50" W, along said Westerly right of way line, a distance of 4,855.00 feet to
the Southeasterly corner of that property described in the Public Records of
said County in Official Records Volume 5141, Page 122 for point of beginning.
Page One of Two Pages
<PAGE>
From that point of beginning thus described, run S 0 degree 01'50" E,
along said Westerly right of way line of Southside Boulevard, a distance of
310.00 feet to a point of curvature, said point lying on the Nortnerly
boundary of an easement for ingress, egress, drainage and utilities
described in the Public Records of said County in Official Records Volume
5578, Pages 670 through 677; run thence along said Northerly boundary, as
follows: first course, a distance of 39.27 feet, along the arc of a curve,
concave Northwesterly and having a radius of 25.00 feet, a chord distance
of 35.36 feet to a point of tangency, the bearing of the aforementioned
chord being S 44 degrees 58'10" W; second course, S 89 degress 58'l0" W a
distance of 30.83 feet to a point of curvature; third course, a distance of
79.59 feet, along the arc of a curve, concave Southeasterly and having a
radius of 240.00 feet, a chord distance of 79.22 feet to a point of
tangency, the bearing of the aforementioned chord being S 80 degrees 28'l0"
W; fourth course, S 70 degrees 58'10" W a distance of 566.92 feet to a
point; run thence N 0 degrees 01'50" W a distance of 532.65 feet to a point
on the Southerly boundary of said property described in Official Records
Volume 5141, Page 122; run thence N 89 degrees 58'10" E, along said
Southerly boundary, a distance of 670.00 feet to the point of beginning.
[STATE OF FLORIDA DOCUMENTARY STAMPS TAX APPEAR HERE]
Page Two of Two Pages
<PAGE>
EXHIBIT "B"
-----------
LEGAL DESCRIPTION
-----------------
Together with a perpetual non-exclusive easement over, through, across, under
and above the property hereinafter described for the purpose of ingress, egress
and utilities, to-wit:
STREET PARCEL
- -------------
A tract of land in Section 24, Township 3 South, Range 27 East,
Jacksonville, Duval County, Florida. Said tract being more particularly
described as follows:
For point of reference, commence at the point of intersection of the
Northerly right of way line of Baymeadows Road (a 100 foot right of way, as now
established) with the Westerly right of way line Southside Boulevard (State
Road No. 115, a 300 foot right of way, as now established), and run N 0 degrees
0l'50" W, along said Westerly right of way line, a distance of 4,395.00 feet to
a point of curvature for point of beginning.
From the point of beginning thus described, run a distance of 39.27 feet,
along the arc of a curve, concave Southwesterly, and having a radius of 25.00
feet, a chord distance of 35.36 feet to the point of tangency of said curve, the
bearing of the aforementioned chord being N 45 degrees 0l'50" W; run thence S 89
degrees 58'10" W a distance of 146.66 feet to a point of curvature; run thence a
distance of 60.35 feet, along the arc of a curve, concave Southeasterly, and
having a radius of 182.00 feet, a chord distance of 60.08 feet to the point of
tangency of said curve, the bearing of the aforementioned chord being S 80
degrees 28'10" W; run thence S 70 degrees 58'10" W a distance of 540.57 feet to
a point of curvature, run thence a distance of 203.35 feet, along the arc of a
curve, concave Northeasterly, and having a radius of 274.14 feet, a chord
distance of 198.72 feet to a point of reverse curvature, the bearing of the
aforementioned chord being N 87 degrees 46'50" W; run thence a distance of 50.41
feet, along the arc of a curve, concave Southeasterly, and having a radius of
50.00 feet, a chord distance of 48.30 feet to a point of reverse curvature, the
bearing of the aforementioned chord being S 84 degrees 35'06" W; run thence a
distance of 515.81 feet, along the arc of a curve, concave Northwesterly, and
having a radius of 100.00 feet, a chord distance of 106.67 feet to a point of
reverse curvature, the bearing of the aforementioned chord being N 23 degrees
28'10" E; run thence a distance of 50.41 feet, along the arc of a curve, concave
Northeasterly, and having a radius of 50.00 feet, a chord distance of 48.30 feet
to a point of reverse curvature, the bearing of the aforementioned chord being S
37 degrees 38'46" E; run thence a distance of 158.84 feet, along the arc of a
curve, concave Northerly, and having a radius of 214.14 feet, a chord distance
of 155.23 feet to the point of tangency of said curve, the bearing of the
aforementioned chord being S 87 degrees 46'50" E; run thence N 70 degrees 58'
10" E a distance of 663.77 feet to a point of curvature; run thence a distance
of 79.59 feet, along the arc of a curve, concave Southeasterly, and having a
radius of 240.00 feet, a chord distance of 79.22 feet to a point of tangency,
the bearing of the aforementioned chord being N 80 degrees 28'10" E; run thence
N 89 degrees 58'10" E a distance of 30.83 feet to a point of curvature; run
thence a distance of 39.27 feet, along the arc of a curve, concave Northwesterly
and having a radius of 25.00 feet, a chord distance of 35.36 feet to the point
of tangency of said curve with the Westerly right of way line of aforementioned
Southside Boulevard, the bearing of the aforementioned chord being N 44 degress
58'10" E; run thence S 0 degrees 01'50" E, along said Westerly right of way
line, a distance of 150.00 feet to the point of beginning. The land thus
described contains 2.2422 acres, more or less.
<PAGE>
EXHIBIT "A"
A part of Section 24, Township 3 South, Range 27 East, City of Jacksonville,
Duval County, Florida more particularly described as follows: For a point of
reference commence at the point of intersection of the Northerly right-of-way
line of BAYMEADOWS ROAD (a 100 foot right-of-way as now established) with the
Westerly right-of-way line of SOUTHSIDE BOULEVARD (State Road No. 115, a 300
foot right-of-way as now established); thence N. 00 degrees 01'50" W., along the
Westerly right-of-way line of aforesaid SOUTHSIDE BOULEVARD, a distance of
3855.00 feet to the Point of Beginning; thence S. 89 degrees 58'l0" W., along
the Southerly line of an easement to the FLORIDA DEPARTMENT of TRANSPORTATION,
as described in Official Records Volume 3668, Page 440 of the current public
records of said county, a distance of 836.96 feet; thence N. 00 degrees 01'50"
W. a distance of 364.21 feet to a point on a curve concave Northerly having a
radius of 274.14 feet, said point also being on the Southerly line of an
easement for ingress and egress drainage and utilities as described in Official
Records Volume 5578, Pages 670 through 677, thence along the arc of said curve
and Southerly easement line, a chord bearing of N. 81 degrees 03'44" E. and a
chord distance of 96.08 feet to the point of tangency of said curve; thence N.
70 degrees 58'10" E., along the aforesaid easement line, a distance of 540.57
feet to the point of curve of a curve concave Southerly having a radius of
182.00 feet; thence Easterly along the arc of said curve, a chord bearing of N.
80 degrees 28'l0" E. and a chord distance of 60.08 feet to the point of tangency
of said curve; thence N. 89 degrees 58'l0" E., along said easement line, a
distance of 146.66 feet to the point of curve of a curve concave Southwesterly
having a radius of 25.00 feet; thence Southeasterly along the arc of said curve,
a chord bearing of S. 45 degrees 01'50" E. and a chord distance of 35.36 feet to
the point of tangency of said curve; thence S. 00 degrees 01'50" E., along the
Westerly right-of-way line of aforesaid SOUTHSIDE BOULEVARD, a distance of
540.00 feet to the Point of Beginning.
ALSO KNOWN AS:
A part of Section 24, Township 3 South, Range 27 East, CITY OF JACKSONVILLE,
DUVAL COUNTY, FLORIDA more particularly described as follows: For a point of
reference commence at the point of intersection of the Northerly right-of-way
line of BAYMEADOWS ROAD (A 100 foot right-of-way as now established) with the
Westerly right-of-way line of SOUTHSIDE BOULEVARD (State Road No. 115 a 300 foot
right-of-way as now established); thence N. 00 degrees 0l'50" W., along the
Westerly right-of-way line of aforesaid SOUTHSIDE BOULEVARD, a distance of
3855.00 feet to the point of beginning; thence S. 89 degrees 58'l0" W., along
the Southerly line of an easement to the FLORIDA DEPARTMENT OF TRANSPORTATION,
as described in Official Records Volume 3668, Page 440 of the current public
records of said county, a distance of 836.96 feet; thence N. 00 degrees 0l'50"
W. a distance of 364.21 feet to a point on a curve concave Northerly having a
radius of 274.14 feet, said point also being on the Southerly right-of-way line
CREEKFRONT ROAD, as recorded in Plat Book 40, Pages 24 and 24A of the current
Public Records of Duval County, Florida; thence Easterly along the arc of said
curve and along said Southerly right-of-way line, a chord bearing of N. 81
degrees 03'44" E. and a chord distance of 96.08 feet to the point of tangency of
said curve; thence N. 70 degrees 58'l0" E., along said Southerly right-of-way
line, a distance of 540.57 feet to the point of curve of a curve concave
Southerly having a radius of 182.00 feet; thence Easterly along the arc of said
curve and along said Southerly right-of-way line, a chord bearing of N. 80
degrees 28'10" E. and a chord distance of 60.08 feet to the point of tangency of
said curve; thence N. 89 degrees 58'10" E., along said Southerly right-of-way
line, a distance of 146.66 feet to the point of curve of a curve concave
Southwesterly having a radius of 25.00 feet; thence Southeasterly along the arc
of said curve, a chord bearing of S. 45 degrees 01'50" E. and a chord distance
of 35.36 feet to the point of tangency of said curve; thence S. 00 degrees 01'
50" E., along the Westerly right-of-way line of aforesaid SOUTHSIDE BOULEVARD, a
distance of 540.00 feet to the point of beginning.
[STAMP OF FLORIDA DOCUMENTARY STAMPS TAX APPEARS HERE]
<PAGE>
EXHIBIT "C"
-----------
1. Easement over the East 20 feet of the subject property for utility
purposes as reserved by Warranty Deed from Deerwood Lands Company to
Epoch Properties, Inc. dated and recorded August 2, 1983, in
Official Records Volume 5680, Page 2386, Public Records of Duval
County, Florida.
2. That certain reservation for non-exclusive easement for ingress,
egress and utilities and utility purposes reserved by Deerwood Lands
Company, in Deed dated and recorded August 2, 1983, in Official
Records Volume 5680, Page 2386, Public Records of Duval County,
Florida, over Parcel C of the subject property.
3. Easement granted by Epoch Properties, Inc. to Jacksonville Suburban
Utilities Corp. recorded in Official Records Volume 5808 Page 1878,
Public Records of Duval County, Florida.
4. That certain Bill of Sale granted by Epoch Properties, Inc. to
Jacksonville Suburban Utilities Corp. recorded in Official Records
Volume 5808, Page 1881, Public Records of Duval County, Florida
5. Those certain Covenants and Restrictions attached as Exhibit "B" to
Deed from Deerwood Lands Company to Epoch Properties, Inc. dated
August 2, 1983, and recorded in Official Records Volume 5680, Page
2386, Public Records of Duval County, Florida.
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible
value. Real estate valuation and consultation on hotels,
major urban properties, and property portfolios.
Financial and feasibility analysis, land use, and market
studies
Bach Thoreen McDermott Incorporated (July 1991 -- May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985 -- 1991)
President
Bach & Associates, Inc. (1980 -- 1984)
President
Landauer Associates, Inc. (1980 -- 1984)
Senior Vice-President and General Manager -- Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973 -- 1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971 -- 1973)
Appraiser. Real Estate research valuation on urban and
rural properties.
Ray R. Hastings, MAI (1964 -- 1971)
Appraiser. Real Estate research valuation on urban and
rural properties.
Residential Real Estate Sales (1963 -- 1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of
the Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987 -- 1992)
Appraisal Institute, Subcommittee Chairman, Admissions
Committee (1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who
meet the minimum standards of this program are awarded periodic
education certification).
Certified General Real Estate Property appraiser in the State of
Texas, Certification No. TX-1323079-G
Certified General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
<PAGE>
================================================================================
COMPLETE, SELF-CONTAINED
VALUATION
OF
VILLAGE AT THE FOOTHILLS II AND III APARTMENTS
2600 INA ROAD
TUCSON, ARIZONA
FOR
HUTTON/CON AM REALTY INVESTORS 4
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
DECEMBER 31, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-078
================================================================================
<PAGE>
TABLE OF CONTENTS
Letter of Transmittal.............................................. 1
Assumptions and Limiting Conditions................................ 2
Certification...................................................... 4
Salient Facts and Conclusions...................................... 5
Nature of the Assignment........................................... 7
City/Neighborhood Analysis......................................... 9
Apartment Market Analysis.......................................... 13
Site Analysis...................................................... 18
Improvements....................................................... 21
Highest and Best Use............................................... 24
Appraisal Procedures............................................... 27
Sales Comparison Approach.......................................... 29
Income Approach.................................................... 28
Reconciliation..................................................... 42
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
[LETTERHEAD OF BACH REALTY ADVISORS, INC. APPEARS HERE]
March 16, 1998
Hutton/Con Am Realty Investors 4
1764 San Diego Avenue
San Diego, CA 92110
Re: A Complete, Self-Contained Appraisal of Village at the Foothills II and III
Apartments Tucson, Arizona; BRA: 97-078
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of December 31, 1997. This appraisal report is in conformance with the
guidelines of the Appraisal Institute. The scope of this assignment includes the
Sales Comparison and Income Approaches to value. The property was inspected in
December 1997 and for purposes of this report it is assumed that all physical
and economic conditions are similar on the date of value as they were on the
date of inspection.
Our analysis of the property focused on the supply and demand factors
influencing the Tucson and subject area apartment market, the sale of comparable
properties; market rent levels, appropriate operating expenses, and acceptable
investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of December 31, 1997 is in the sum of
FOUR MILLION SEVEN HUNDRED THOUSAND DOLLARS
($4,700,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
BACH REALTY ADVISORS, INC.
/S/ Stevan N. Bach
Stevan N. Bach, MAI
President and Chief Executive Officer
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
The certification of this complete, self-contained
appraisal is subject to the following assumptions and
limiting conditions.
1. That responsibility is not taken for matters of a
legal nature affecting the property appraised or the
title thereto and that all legal descriptions
furnished are correct.
2. That the title to the property being appraised is good
and marketable and is appraised as though under
responsible ownership and/or management.
3. That the property is free and clear of all liens and
encumbrances, except as otherwise stated.
4. That the sketches in this report are included to
assist the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by the
appraiser.
6. That the information, estimates, and opinions
furnished the appraiser by others and contained in
this report are considered reliable and are believed
to be true and correct; however, responsibility is not
taken for their accuracy.
7. That responsibility is not taken for soil conditions
or structural soundness of the improvements that would
render the property more or less valuable.
8. That possession of this appraisal does not carry with
it the right of publication and that this report, or
any parts thereof, may not be reproduced in any form
without written permission of the appraiser.
9. That testimony or attendance in court or at a hearing
are not a part of this assignment; however, any such
appearance and/or preparation for testimony will
necessitate additional compensation than received for
this appraisal report.
10. That the valuation estimate herein is subject to an
all cash or cash equivalent purchase and does not
reflect special or favorable financing in today's
market.
11. Where discounted cash flow analyses have been
undertaken, the discount rates utilized to bring
forecasted future revenues to estimates of present
value reflect both our market investigations of yield
anticipations and our judgement as to the risks and
uncertainties in the subject property and the
consequential rates of return required to attract an
investor under such risk conditions. There is no
guarantee that projected cash flows will actually be
achieved.
2
<PAGE>
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by Con
Am Management.
13. Bach Realty Advisors, Inc. is not an expert as to
--------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous
----------------------------------------------
materials at the subject property, analysis for EPA
----------------------------------------------------
standards, its removal, and/or its encapsulation. If
-----------------------------------------------------
the reader of this report and/or any entity or person
-----------------------------------------------------
relying on the valuations in this report wishes to
---------------------------------------------------
know the exact or detailed existence (if any) of
-------------------------------------------------
asbestos or other toxic or hazardous waste at the
--------------------------------------------------
subject property, then we not only recommend, but
--------------------------------------------------
state unequivocally that they should obtain an
------------------------------------------------
independent study and analysis (including costs to
---------------------------------------------------
cure such environmental problems) of asbestos or other
------------------------------------------------------
toxic and hazardous waste.
--------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
The undersigned does hereby certify to the best of my
knowledge and belief that, except as otherwise noted in
this complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were
developed, and this report has been prepared, in
conformity with the requirements of the Code of
Professional Ethics and the Uniform Standards of
Professional Appraisal Practice of the Appraisal
Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, I, Stevan N. Bach, MAI have completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment is not contingent
upon the reporting of a predetermined value or
direction in value that favors the cause of the
client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence
of a subsequent action or event resulting from the
analyses, opinions, or conclusions in, or the use of,
this report.
4
<PAGE>
10. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as is,"
of the subject property on an all cash basis, as of
December 31, 1997, is $4,700,000.
/s/ Stevan N. Bach
-------------------
Stevan N. Bach, MAI
President and Chief Executive Officer
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
Identification: Village at the Foothills II and III Apartments
2600 Ina Road
Tucson, Arizona
Location: North side of Ina Road and the west side of North
Mona Lisa Road (excluding the exact corner)
BRA: 97-078
Legal Description: Tract in the southwest quarter of the southeast
quarter and lying west of Mona Lisa Road containing
1.6 and 7.84 acres in Section 33-12-13, Pima
County, Arizona
Land Size: 9.5 acres or 413,820 square feet
Building Area: 116,036 square feet of net rentable area
Year Built: 1986
Unit Mix: 32 1BR/1BA at 780 square feet
40 1BR/1BA/DEN at 947 square feet
36 2BR/2BA at 1,081 square feet
12 2BR/2BA/TH at 1,190 square feet
No. of Units: 120
Average Unit Size: 967 square feet
Physical Occupancy: 94 percent
Economic Occupancy: 84 percent
Highest and Best Use
As Vacant: Multifamily
As Improved: Multifamily
Date of Value: December 31, 1997
"As Is" Market Value by
Sales Comparison Approach: $4,600,000
"As Is" Market Value by
Income Approach: $4,700,000
"As Is" Market Value
Conclusion: $4,700,000
6
<PAGE>
NATURE OF THE ASSIGNMENT
PURPOSE OF THE
APPRAISAL The purpose of this 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 14 two-story apartment
buildings with 120 units and a total net rentable area of
116,036 square feet. It was constructed in 1986 on 9.5
acres. It is identified as the Village at the Foothills II
and III Apartments located in Tucson, Arizona at 2600 Ina
Road or along the north side of Ina Road and the west side
of North Mona Lisa Road (excluding the exact corner).
DATE OF THE
APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as of December
31, 1997 which are assumed to be the same as of our most
recent inspection date 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 appraisers that the function
of this appraisal is for annual partnership and/or internal
reporting purposes.
PROPERTY RIGHTS
APPRAISED The appraisers have appraised the "as is" leased fee
interest subject to short-term leases which are typically 6
to 12 months in duration at the subject property.
THREE-YEAR HISTORY According to the Pima County records, the current owner of
record is Hutton/Con Am Realty Investors 4. No sale or
listing of the subject property is believed to have
occurred over the past three years.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with accepted
techniques, standards, methods, and procedures of the
Appraisal Institute. The values set forth herein were
estimated after application and analysis by the Sales
Comparison and Income Approaches to value. These approaches
are more clearly defined in the valuation section of this
report. The Cost Approach was not utilized in our analysis
due to the age of the property since depreciation is
difficult to accurately measure in older properties.
Additionally, it is often the perception of investors that
cost does not necessarily equate to value and the purchase
price is not typically based on construction costs.
The scope of our assignment included obtaining pertinent
property data from the client regarding income and expense
figures, tenant rent rolls, and permission to inspect the
subject. Additionally, the appraisers conducted research
either personally or through associates to obtain current
market rental rates, construction trends, the sale of
comparable improved properties, anticipated investor
returns, and the supply and demand of competitive apartment
projects in the general and immediate area. After these
examinations were performed, an analysis was made in order
to estimate the leased fee market value of the subject on
an "as is" basis.
- -------------------------
/1/The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
8
<PAGE>
[AREA MAP 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 semi-private golf courses in the
area as well as more than 30 private and public tennis
facilities.
The University of Arizona dominates the field of higher
education with a current enrollment of approximately 40,000
students. The University operates 7 colleges, 5 schools,
114 departments, and a medical school/center and is
acknowledged as a leader in studies of optical sciences,
electronics, scientific instrumentation, and astronomy.
Other institutions of higher education in the area are the
Pima Community College and the University of Phoenix
(private).
POPULATION Tucson is the second largest city in Arizona, following
Phoenix. Tucson is located in Pima County or the Tucson
Metropolitan Area, which has shown strong population
growth. In 1980, the estimated population for Pima County
was 527,289. This grew at an average annual compound rate
of 2.4 percent to 668,501 in 1990. Since 1990 the
population has also grown at an average annual
9
<PAGE>
compound rate of 2.5 percent to 794,933 in 1997. The Pima
Association of Governments projects the population to grow
to 846,000 by the year 2000 and to over 1 million by the
year 2010. This would represent an average annual compound
growth rate of about 1.8 percent.
ECONOMY The economic base of the TMA is heavily oriented toward
governmental and educational employment. The U.S. Army Fort
Huachuca and the University of Arizona are reported to be
the two largest employers with 11,193 and 10,311 employees,
respectively. Other substantial government employers
include the State of Arizona, Davis-Monthan Air Force Base,
Tucson Unified School District, Pima County, and the City
of Tucson. During the military cutbacks several years ago,
the Davis-Monthan Air Force Base was expected to suffer
huge losses however, employment at the base actually
increased. Manufacturing employment in metropolitan Tucson
has more than doubled in the past ten years. This growth is
due to the increase of high technology manufacturers
locating and expanding in Pima County. These manufacturers
include AlliedSignal, Weiser Lock, 3M, Burr-Brown,
Environmental Air Products, Inc., Krueger Industries, Inc.,
and Hughes Missile Company. Hughes Missile Systems and BHP
Copper Company are the largest private sector employers. In
January 1997 it was announced that Hughes Corporation had
been purchased by Raytheon, one of the largest defense
contractors in the nation. It is expected that the Hughes
operation will increase their engineering employment in
Tucson as a result of the acquisition. Another positive
impact on the local economy has been Allied Signal's
decision to not only remain in Tucson, but to expand their
operations. Another area of growth for the local economy is
the increase in tourism. According to the Tucson Planning
Department, approximately one in four new jobs in the TMA
is positively affected by tourism. The following summarizes
the Tucson Metropolitan Area Employment as of September
1997.
<TABLE>
<S> <C>
Total Employment 365,000
Total Wage and Salary Employment 314,600
Manufacturing 29,800
Durable 23,900
Non-durable 5,900
Mining 2,300
Contract Construction 19,300
Transport., Communications and Public Utilities 13,500
Finance, Insurance and Real Estate 12,800
Trade 68,400
Wholesale 10,500
Retail 57,900
Services 100,200
Government 68,300
Total Civilian Labor Force 378,300
Unemployment Rate (Seasonally Adjusted) 3.2%
</TABLE>
10
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
ECONOMIC OUTLOOK Over the past few years, Tucson's economy has been
mixed. Citywide, job growth fell off in the late
1980's and early 1990's and the unemployment rate
began to creep up. However, since 1995 this trend
appears to have subsided. The unemployment rate
has decreased from 3.6 percent in March 1995 to
3.2 percent in September 1997. It is important to
note that the Davis-Monthan Air Force base was not
included on the Base Realignment and Closure
Commission's list. However, in recent years there
has been a closing of Lockheed Aeromod, which was
reportedly, offset somewhat by the expansions at
Gates Learjet. Both the City of Tucson and Pima
County are actively seeking new employees to
relocate to the area. The Tucson Economic
Development Corporation reports that over 6,000
new jobs could be added to Tucson due to the
entrance of new companies.
Moderate and steady growth is projected for the
Tucson economy in the coming year. Population and
job growth is expected to increase. Single family
home-building and sales activity has improved over
the last two years. The multi-family home market
experienced it's first growth since recovery from
the overbuilding of the 1980's. However, caution
is warranted in order to not recreate the same
scenario of oversupply. Renewed consumer
confidence, along with the decline in mortgage
interest rates are the primary factors behind the
strong sales performance. The commercial sector
continues to exhibit oversupply in all sectors,
retail, industrial, and office. However, with
little new, construction taking place all markets
are improving and equilibrium is forecasted within
approximately two years.
Tucson's long-range outlook is optimistic due to
its diversified economic base featuring industry
sectors expected to prosper over time, a growing
tourism industry, and expanding service sector.
This coupled with the relative affordability of
real estate compared with either east or west
coast is expected to continue to lure
employers/employees as well as retirement in-
migration.
NEIGHBORHOOD The subject is situated in the northwest portion
of Tucson. It is about 10 miles north of the
Central Business District (CBD). More
specifically, it is situated along the north side
of Ina Road just west of North Mona Lisa Road. The
neighborhood boundaries may be defined as
Thornydale Road to the west, La Canada Drive to
the east, Magee Road to the north, and Orange
Grove Road to the south.
The general area is sporadically developed with
significant vacant land available. The majority of
vacant parcels are large tracts and are north of
the subject. The major thoroughfares south of the
subject area tend to include a variety of
residential and commercial development. Ina Road
has a number of development types such as
restaurants, retail, office, and some residential
projects. This thoroughfare provides the most
extensive variety of commercial development to the
subject area. One of the most significant retail
projects is the Foothills Mall at Ina Road and
LaCholla Boulevard, which is anchored by Foley's
and Dillard's. Neighborhood and community centers
along Ina Road include Heritage Plaza, Drug
Emporium Plaza, North Pima Center, and Gold Canyon
Plaza. Some of the older apartment complexes in
the area on Ina Road include the Foothill Shadows
and Tierra Ricon. Some of the newer apartment
complexes include Casa Madera situated just
northeast of the subject on Mona Lisa Road, Centre
Point located about a mile west of the subject on
Ina Road, and Catalina Canyon which was
11
<PAGE>
remodeled about a year ago just east of the subject.
Additionally, a second phase of the Casa Madera Apartments
was constructed just east of the subject.
Ina Road is an east/west artery, which connects the subject
area to other major thoroughfares and business centers. The
other east/west thoroughfares in the area, Cortaro Farms
Road/Magee Road and Orange Grove Road are sporadically
developed with mainly single-family residential. As a
result of the residential development, there are some
support facilities and amenities in proximity to the
subject. These include the Tucson National Golf Course to
the northwest and the Arthur Pack Desert Golf Course along
Thornydale at Overton Road. Schools within or near the
neighborhood are Mountainview High School and Tortolita
Junior High School.
The residential development in the area is mainly middle-
to upper-income housing. In order to better understand the
general make-up of the subject area, we analyzed
demographics within a 3- and 5-mile radii of the immediate
subject area. According to this study, the population in
the neighborhood has grown significantly over the past
decade. The population estimates for 1990 were estimated at
37,440 within a 3-mile radius and 70,798 within a 5-mile
radius. Within 3 miles, the population during 1970-1980
experienced a 324.64 percent increase and 74.81 percent
from 1980 to 1990. Within a 5-mile radius, the population
growth from 1970-1980 increased 207.00 percent and 55.64
percent from 1980 to 1990.
Residential units in the subject area within a 1-mile
radius are predominately owner-occupied as opposed to
renter-occupied (84 and 16 percent, respectively). These
figures are consistent with the impressions by visual
inspection of the area that there are a greater number of
single-family residences than apartment complexes.
Estimated 1990 income levels for households within a 1- and
3-mile radius of the subject property indicate a median
income of $37,413 and $37,380 per year, respectively.
The education level of the area population is high and most
probably contributes to the income levels. Approximately 34
percent of the area residents are high school graduates and
27 percent have completed college. The population is
predominately between 25 and 44 years old with about 15
percent being 65 years and older.
NEIGHBORHOOD
CONCLUSION Overall, the subject neighborhood is projected to continue
to prosper in future years and it is estimated to be about
50 to 60 percent developed. The immediate area is mainly
developed with residential subdivisions and commercial
projects, which are situated along major thoroughfares. The
residential development in the area is geared toward
middle-to upper-income. Zoning helps regulate future
development patterns, and the neighborhood is believed to
have a healthy future. For the most part, the subject
property is perceived as being a positive attribute to the
area providing a quality multifamily facility well screened
by it's extensive landscaping.
12
<PAGE>
[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
In our analysis of the Tucson Metropolitan (Metro) housing
market and more specifically the Northwest and Catalina
Foothills submarkets, we utilized data from the
Metropolitan Tucson Land Use Study with information from
the Statistics/Trends Summary published by RealData, Inc.
It is important to note that prior to 1995, a publication
titled "Market Strategies Apartment Survey Report" was
utilized for the data now reported by RealData, Inc.
Therefore, there could be some discrepancies in the
presentation of data between 1995 and 1996. Both the
Northwest and Catalina Foothills submarkets were included
due to proximity and similarities; however, the subject is
actually situated in the Northwest submarket. The study
revealed an ever-changing market and a summary of the data
follows.
INVENTORY The rapid residential growth of the mid-1980s slowed during
the late 1980s as a result of the general slowdown in the
local economy and overbuilding. The multifamily sector
experienced declines in activity with a drastic decrease in
new building. Nevertheless, over the past two years there
have been a number of new projects completed and more are
under construction or are in the planning stage. As of the
Third Quarter 1997, the metro Tucson area had a total
inventory of 90,680 multi-family units with 6,928 units in
the Northwest submarket and 8,185 units in the Catalina
Foothills submarket. The submarkets represent about 17
percent of the total inventory.
As of the Third Quarter 1997, there were 811 multi-family
units under construction citywide and this does not include
a number of units which are nearing completion and have
begun lease-up. There are 1,277 units permitted across the
city; however, all of these projects may not proceed.
VACANCY Vacancy levels for Metro Tucson and the submarkets showed
improvements from 1990 to 1994. However, in 1995, there was
a noticeable upswing. The following table summarizes the
vacancy rates from the Second Quarter 1990 through the
Third Quarter 1997. It is important to note that there is
typically a swing in vacancy during the year due to
seasonal demand. The summer months tend to report higher
vacancies as some residents temporarily move and the winter
months are much stronger due to the increase of extended
stay visitors.
13
<PAGE>
<TABLE>
<CAPTION>
VACANCY RATES
--------------------------------------------------------------------------
Metro Catalina
Q:Year Tucson Northwest Foothills
--------------------------------------------------------------------------
<S> <C> <C> <C>
III:97 8.66% 7.55% 7.02%
II:97 10.39% 8.82% 8.98%
I:97 8.3% 7.92% 8.6%
IV:96 9.2% 7.72% 10.71%
III:96 9.38% 7.5% 12.46%
II:96 11.1% 9.3% 15.5%
I:96 7.4% 7.9% 8.1%
IV:95 7.9% 7.6% 8.6%
III:95 7.9% 6.3% 11.0%
II:95 8.9% 9.7% 9.0%
I:95 3.6% 3.9% 3.8%
IV:94 4.0% 5.0% 3.4%
III:94 4.2% 4.2% 2.4%
II:94 5.9% 4.4% 4.1%
I:94 3.8% 3.4% 3.2%
IV:93 5.8% 4.1% 3.9%
III:93 7.9% 5.6% 6.2%
II:93 8.3% 3.9% 7.7%
I:93 6.6% 3.8% 5.6%
IV:92 7.7% 5.4% 5.5%
III:92 9.9% 8.2% 5.8%
II:92 10.8% 8.9% 7.7%
I:92 8.6% 7.7% 4.4%
IV:91 8.0% 7.7% 4.3%
III:91 10.4% 7.7% 5.9%
II:91 14.5% 8.9% 9.8%
I:91 11.4% 7.9% 8.0%
IV:90 12.3% 8.7% 8.5%
III:90 14.8% 10.6% 14.5%
II:90 18.7% 19.8% 18.9%
</TABLE>
Source: Marketing Strategies from 11:90 to 1:95 RealData,
Inc. from 11:95 to 111:97
In summary, the overall vacancy citywide and in the
submarkets declined from the Second Quarter 1990 through
the First Quarter 1995. The vacancy in Metro Tucson dropped
from 18.7 percent in the Second Quarter 1990 to 3.6 percent
in the First Quarter 1995. There were similar drops in both
of the submarkets with the Northwest submarket dropping
from 19.8 percent in the Second Quarter 1990 to 3.9 percent
in the First Quarter 1995. The Catalina Foothills dropped
from 18.9 percent in the Second Quarter 1990 to 3.8 percent
in the First Quarter 1995. However, in 1995, both the
citywide apartment market and the submarkets noticed an
upswing in vacancies. The Metro Tucson vacancy rate
increased to 8.9 percent in the Second Quarter of 1995 and
has fluctuated from 7.9 percent to 11.1 percent since then.
The overall vacancy rate as of the Third Quarter 1997 was
8.66 percent, which was down from the 9.38 percent rate for
the same period the previous year. The Northwest and
Catalina markets saw similar trends with vacancy increasing
to 9.7 and 9.0 percent respectively in the Second Quarter
1995.
14
<PAGE>
In the Northwest submarket, the Third Quarter 1997 vacancy
rate was 7.55 percent virtually unchanged from 7.5 percent
the previous year. In the Catalina Foothills, the Third
Quarter 1997 vacancy rate was 7.02 percent down from 12.46
percent the previous year. The higher vacancy rates since
1995 are a direct result of the affordability of home
ownership and the over saturation of the market with new
apartments. Overall, Pima County is continuing to see
population increases, due primarily to an in-migration of
people seeking affordable housing and a higher than average
per capita income. With the slowdown in apartment
development, the Metro Tucson apartment market should
continue to stabilize from the effects of excessive
building.
However, due to the amount of new construction many
projects are feeling the impact and have sacrificed rents
in order to maintain their occupancy levels. The following
summarizes the current physical occupancy level at some of
the competitive properties.
<TABLE>
<CAPTION>
CURRENT PHYSICAL
APARTMENT COMPLEX YEAR BUILT NO. OF UNITS OCCUPANCY
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tierra Catalina 1983 120 99%
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 1,171 $0.69
L'Auberge Canyon View Ventana 1,019 $0.82
The Greens at Ventana Canyon 1,011 $0.80
The Arboretum 811 $0.73
Villa Sin Vacas 1,114 $0.87
Colonia Del Rio 1,010 $0.68
Boulders at La Reserve 999 $0.72
La Reserve Villas 900 $0.77
Legends at La Paloma 1,034 $0.79
Skyline Bel Aire 1,125 $0.64
Pinnacle Canyon 1,107 $0.76
</TABLE>
CONCLUSION In 1995, vacancies for the Tucson Metro area began to
increase after several years at low levels. As of the Third
Quarter 1995, the overall vacancy level was 7.9 percent up
from 4.0 percent at the same period in 1994. The vacancy
rate for Third Quarter 1996 was 9.38 percent. The Third
Quarter 1997 figures show a decrease to 8.66 percent,
reflecting movement towards occupancy to stabilization.
Absorption levels began to decline in 1994 with negative
absorption in 1995 due to the significant amount of new
construction primarily in the Northwest and Catalina
Foothills submarkets. Absorption levels appear to be
stabilizing in 1997 although
16
<PAGE>
there remains a significant amount of new construction. The
Northwest and Catalina Foothills submarkets have
traditionally been healthier than the overall citywide market
with a lower vacancy and generally higher rents. However,
there is a considerable amount of vacant land zoned for
multifamily development in these submarkets and a number of
new projects have been developed with a few more planned.
This could pose a threat to the market if supply is not
carefully monitored in keeping pace with demand. Also, the
single-family residential market provides an alternative to
the housing rental market. Home loan interest rates have been
reasonable and many potential homebuyers appear to be
electing home ownership.
17
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE ANALYSIS
- --------------------------------------------------------------------------------
LOCATION The subject is located along the north side of Ina Road and
the west side of North Mona Lisa Road in Tucson, Pima County,
Arizona. It is more specifically situated at 2600 Ina Road.
SIZE AND SHAPE The site is irregularly shaped with a total of 9.5 acres or
413,820 square feet. It has frontage on the north side of Ina
Road and the west side of North Mona Lisa Road.
ACCESS AND
VISIBILITY The subject property is located along the north side of Ina
Road and the west side of North Mona Lisa Road (except the
exact corner). The site is situated about ten miles north of
the Tucson CBD and about 12 miles north of the Tucson
International Airport. Access to the subject from these major
activity centers is provided by a number of north/south and
east/west thoroughfares. From both the CBD and the airport,
one of the most direct routes is by heading north on
Interstate Highway 10 to Ina Road then east to North Mona
Lisa Road. Other major north/south thoroughfares, which lead
to Ina Road are La Cholla, La Canada, and Oracle Roads.
Immediate access to the subject is provided by Ina Road and
North Mona Lisa Road. The main entry to the complex is off
Ina Road. There is one curb cut along the east/west artery
providing access. Within the subject site, this entry drive
is Crystal Cave Drive. It is shared with Phase I and leads to
North Mona Lisa Road, which also provides access.
North Mona Lisa Road is a two-laned, asphalt-paved,
north/south artery with gravel shoulder and turn lanes.
Ina Road is a four-laned, asphalt-paved, east/west artery
with concrete curbs, paved shoulder, and planted median.
ZONING The subject property is zoned "CB-1" Local Business under the
City of Tucson Zoning Ordinance. Permitted uses include
single-family dwelling, accessory buildings, church, park,
public or private school, agricultural use, duplex dwelling,
multiple dwelling, recreational facilities, mobile housing,
college, community service agency, library or museum,
hospital, clinic, club, private club, community storage
garage, child care center, professional office, real estate
office, motel/hotel, research facility, a variety of retail,
service station, supermarket, service outlets, theater, etc.
UTILITIES The site is serviced by the following authorities.
Electricity...................................Tucson Electric
Telephone..........U.S. West Communications and Mountain Bell
Sewer.............................................Pima County
18
<PAGE>
[ZONING MAP APPEARS HERE]
<PAGE>
[FLOOD PLAIN MAP APPEARS HERE]
<PAGE>
TERRAIN AND
DRAINAGE The site is basically level and slightly above street
grade. Upon site inspection, the drainage appeared to be
adequate. According to the Federal Flood Insurance Rate
Maps, the subject lies within Zone C. Zone C is defined as
"areas of minimal flooding."
SOIL AND SUBSOIL
CONDITIONS No soil engineer's report was available to the appraisers,
and no soil tests were performed. The soils are assumed to
have an adequate load-bearing capacity.
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal any
easements adversely affecting the subject property. For
purposes of this assignment, the appraisers assume that the
subject's value or marketability is not adversely affected
by the typical utility easements, which traverse the
property. The following lists some of the more significant
easements at various areas of the subject site.
- drainage and flood control easement along the northwest
property line
- various water and sewer easements throughout the property
- various access easements throughout the property
RELATIONSHIP OF
SITE TO
SURROUNDINGS North: Village at the Foothills I
South: Single-family residential
East: Two-story office building, Coronado Apartments, and
Windsail Apartments
West: Floodway and Desert Shadows Apartments
REAL ESTATE TAXES Real estate taxes and assessments for the Village at the
Foothills II and III 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 an 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. The following is
a summary of the tax parcel numbers used to identify the
subject parcel, the primary and secondary assessed values,
and the total tax for 1997.
<TABLE>
<CAPTION>
PRIMARY SECONDARY
ASSESSED ASSESSED
VALUE (FULL CASH)
TAX PARCEL NO. (LIMITED) VALUE TOTAL TAX
------------------------------------------------------------
<S> <C> <C> <C>
225 43 03405 $ 11,514 $ 14,006 $ 2,033.48
225 43 03209 410,550 410,550 67,181.18
------- ------- ---------
$422,064 $424,556 $69,214.66
</TABLE>
19
<PAGE>
The 1997 tax based on the subject property operating
statement was $69,215. The 1998 taxes have been estimated at
$71,983.
CONCLUSION The subject site is irregularly shaped with 9.5 acres and
relatively level terrain. There are a few easements, which
traverse the property; however, none are believed to
adversely affect the site. The parcel is easily accessible
with frontage on Ina Road and North Mona Lisa Road. The
subject is zoned "CB-l" Local Business by the City of Tucson,
and it is believed to be in compliance. The size and shape of
the site provide flexibility for a variety of development and
it blends well with the predominately multifamily projects
which surround it.
20
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 9.5-acre tract of land, is improved with
a two-story apartment project known as the Village at the
Foothills II and III. The improvements consist of 120
apartment units contained in 14 buildings constructed in
1986. Also situated on the site is a clubhouse, swimming
pool, tennis court, and covered parking.
There are four basic floor plans for the 120 apartment units.
The basic features of these floor plans are as follows:
<TABLE>
<CAPTION>
SIZE TOTAL SF
UNIT TYPE NO. OF UNITS DESCRIPTION (SF)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
A 32 1BR/lBA 780 24,960
D 40 1BR/1BA/DEN 947 37,880
B 36 2BR/2BA 1,081 38,916
C 12 2BR/2BA/TH 1,190 14,280
--- ----- -------
120 967 116,036
</TABLE>
Please note the total net rentable area (116,036 square feet)
has changed slightly from previous reports (116,084
previously) based on a change in the reported size of unit
type C from 1,194 square feet to 1,190 square feet according
to the rent roll received from property owner dated November
7, 1997. As seen in the figures above, the total net rentable
area of 116,036 square feet and a total of 120 apartment
units result in an average of 967 square feet per unit. There
are a total of 72 one-bedroom units and 48 two-bedroom units.
The land area is 9.5 acres, resulting in a density of 12.63
units per acre. The parking consists of approximately 191
spaces, of asphalt construction, which is 1.6 spaces per
unit. The parking ratio is within industry standards.
A more detailed description is as follows:
FOUNDATION Steel reinforced concrete slab with perimeter and interior
wire mesh. Second floors include wood frame, plywood
subfloor, and lightweight concrete.
FRAMING Wood.
ROOF A combination of composition built-up roofs with pitched red
tile fronts.
EXTERIOR Masonry with painted stucco finish.
SECOND-STORY
ACCESS Wrought iron supports and handrails with cement stair
risers and landings.
BALCONIES Concrete and wood supports with metal handrails.
21
<PAGE>
INTERIOR FINISHES
Living, Dining,
and Bedrooms: Painted and textured gypsum board walls and ceilings,
carpeting over pad, hollow-core wood doors, miniblinds,
incandescent lighting, and fireplaces.
Bathrooms: Vinyl tile floor coverings, porcelain tub with ceramic tile
shower, textured and painted gypsum board walls and ceilings,
fiberboard vanities with laminate counters, porcelain sink,
and commode.
Kitchens: Vinyl tile floor coverings, formica countertops, laminated
fiberboard cabinets. Kitchen equipment includes a range/oven,
refrigerator, disposal, microwave oven, and dishwasher.
PLUMBING Adequate and meets city code.
HVAC Central air-conditioning and heating provided by individual
compressor units.
ELECTRICAL Switch-type circuit breakers, 120/240-volt, 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 eleven years which
approximates the actual age and the remaining economic life
is estimated to be 29 years.
SITE AREA 9.5 acres or 413,820 square feet.
DEFERRED
MAINTENANCE Visual inspection of the property as well as estimates by
the management revealed a few items of deferred maintenance.
Some of these include appliance repair, replacement of
flooring and drapes, air-conditioning repair, general
interior and exterior repairs, landscaping, roof repairs,
painting, and water heater replacement. The deferred
maintenance was estimated at $105,000. A breakdown of these
deferred maintenance items is shown below.
22
<PAGE>
<TABLE>
<CAPTION>
ITEM COST ITEM COST
------------------------- -------------------------------
<S> <C> <C> <C>
Appliances $ 2,400 General Interior $ 2,400
Carpet 21,600 Landscape 8,000
Motor RDC 2,000 Exterior Paint 6,000
Window Co 720 Pool 10,600
Exterior 2,200 Asphalt Paving 8,000
Furniture 1,400 Stairs 2,000
Air Conditioning 8,000 Roof 24,000
Water Heaters 2,400
--------
Total (Rounded) $105,000
</TABLE>
CONCLUSION Upon a detailed inspection of the property, the facility is
believed to be of good quality and workmanship. The design
and layout are felt to be functional and aesthetically
appealing. The project has been well maintained and has an
ongoing maintenance program; however, there are a few items
previously listed as deferred maintenance. Overall, the
apartments are in reasonably good shape and we believe the
effective age of the improvements is about eleven years with
a remaining economic life of 29 years.
23
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of entry drive, monument sign, and exterior of units.
[PICTURE APPEARS HERE]
View of interior drive and exteriors of various units.
<PAGE>
[PICTURE APPEARS HERE]
View of clubhouse/leasing office exterior.
[PICTURE APPEARS HERE]
Interior view of clubhouse.
<PAGE>
[PICTURE APPEARS HERE]
Swimming pool behind clubhouse.
[PICTURE APPEARS HERE]
View of tennis courts.
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of Building 21.
[PICTURE APPEARS HERE]
Interior of living room in Building 21 model unit.
<PAGE>
[PICTURE APPEARS HERE]
Interior of bedroom in Building 21 model unit.
[PICTURE APPEARS HERE]
Interior view of kitchen in Building 21 model unit.
<PAGE>
HIGHEST AND BEST USE
- ------------------------------------------------------------------------------
The highest and best use of a property must be determined
because market value depends upon the property's most
profitable use. The Appraisal of Real Estate, Eleventh
----------------------------
Edition, defines highest and best use as:
"The reasonably probable and legal use of vacant land
or improved property, which is physically possible,
appropriately supported, financially feasible, and that
results in the highest value."
There are two distinct types of highest and best use. The
first type is the highest and best use of the land as if
vacant. The second type is the highest and best use of a
parcel as improved. This pertains to the use that should be
made of the property as it currently exists.
In determining the highest and best use of a site, four
items must be considered: possible physical limitations of
the site, possible legal or permissible uses, and what uses
are financially feasible, and produce the maximum return on
the site. A careful neighborhood and site analysis is
essential in estimating the highest and best use of the
site as if vacant.
The following is our analysis of the highest and best use
as it pertains to the subject property and according to the
four essential tests.
SUBJECT PROPERTY
AS IF VACANT LEGALLY PERMISSIBLE - Within the scope of a legal analysis,
the subject site is zoned "CB-1" Local Business under the
City of Tucson Zoning Ordinance. Permitted uses include
single-family dwelling, accessory buildings, church, park,
public or private school, agricultural use, duplex
dwelling, multiple dwelling, recreational facilities,
mobile housing, college, community service agency, library
or museum, hospital, clinic, club, private club, community
storage garage, child care center, professional office,
real estate office, motel/hotel, research facility, a
variety of retail, service station, supermarket, service
outlets, theater, etc.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability,
flood plain, and surrounding patterns.
The subject site is irregularly shaped and encompasses 9.5
acres, allowing for reasonable flexibility in developing
the site. It has frontage along the north side of Ina Road.
The topography of the site is sloping and drainage appears
to be good. Development in the immediate area is primarily
multifamily and single-family residential. The area appears
most conducive to multifamily development given the
surrounding projects and terrain. The subject site has
adequate utility capacity, enjoys a functional size and
shape, and is not affected by any adverse easements or
restrictions.
24
<PAGE>
After considering all of the physical characteristics of
the site noted above plus other data in the Site section of
this appraisal report, physically possible land uses are
limited to multifamily development. The primary deterrents
to other types of development were the subject's location,
terrain, zoning, and surrounding use patterns which helped
to eliminate other site improvements such as commercial,
single-family, and office development from our analysis.
FINANCIAL FEASIBILITY - In view of the present market
conditions, financial feasibility is directly proportional
to the amount of net income that could be derived from the
subject. After having eliminating all other development
from our analysis, the financial feasibility of multifamily
development must be tested.
The subject is located in the Northwest submarket, which is
experiencing an overall annual vacancy of about 7.6
percent. Physical vacancy at the subject property is 6
percent. The average vacancy level has increased in the
submarket significantly from 3.9 percent reported in the
first quarter of 1995 due to an abundance of new apartment
construction. In the early 1990's, rental rates had been
increasing at a strong pace; however, with the large number
of new units under construction or recently completed,
rental rates have stabilized and most complexes are
offering rent concessions. The average rents in the
submarket range from $0.62 to $0.82 per square foot
depending on the size of each unit. The average rental rate
at newer complexes typically ranges from $0.75 to $1.00 per
square foot, which is within the feasible range in which to
build. However, as previously mentioned the market has
experienced an abundance of new construction and new
projects are offering rent concessions of up to one month
free. Therefore, given the amount of new supply, additional
apartment construction does not appear to be feasible at
this time until the supply has been reasonably absorbed.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, more than likely a
present development of the land would 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 the demand for multifamily apartment units conducive
to the subject site would produce the highest net return
over the longest period of time. The site's location along
the north side of Ina Road 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,
25
<PAGE>
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.
PHYSICAL POSSIBILITY - Based on the subject's land size
(9.5 acres), terrain, configuration, and the improvement's
positioning relative to the subject site, it is felt that
it would not be physically possible to increase the size of
the current improvements and remain competitive. The
density of the subject is approximately 12.63 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 existing subject "as improved" is a
feasible entity.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that
under competent and prudent management, the subject could
produce an adequate return to substantiate its existence.
Based on the subject's current use, we have determined that
as a multifamily apartment complex, it positively
contributes to the value of the site, and as a result is
presently developed according to its highest and best use.
However, the subject does not represent the "optimum" use
due to some deferred maintenance and some state of the arts
amenities.
26
<PAGE>
APPRAISAL PROCEDURES
- ------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of
the physical improvements. This value is derived by
estimating the replacement cost new of the improvements
and, when appropriate, deducting the reduction in value
caused by accrued depreciation. According to the Appraisal
Institute, the basic principle of the Cost Approach is that
buyers judge the value of an existing structure by
comparing it to the value of a newly constructed building
with optimal functional utility, assuming no undue cost due
to delay. Thus, the appraiser must estimate the difference
in value between the subject property and a newly
constructed building with optimal utility.
The Cost Approach was not used as this method of valuation
is typically the least reliable indicator of value in mid-
life to 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.
27
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more
weight or may point to a more reliable indication of the
value of the property being appraised than the other
approach. In some instances, because of the inadequacy
or unavailability of data, one of the approaches may be
given little weight in the final value estimate.
28
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TUCSON AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF PER PER OVEALL
NO. NAME/LOCATION DATE SALES PRICE BUILT UNITS AVG/UNIT AT SALE /UNIT SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Pinnacle Canyon 11/97 $11,727,000 1995 225 228,931 98% N/A $51.23 $52,120 N/A 5.69
7050 E. Sunrise Drive 1,017
Tuscon, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
2 Pinnacle Heights 11/97 $16,364,000 1995 310 339,364 97% N/A $48.22 $52,787 N/A 5.60
7990 E. Snyder Road. 1,095
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
3 Foothills 11/97 $ 7,600,000 1984 270 167,910 97% N/A $45.26 $28,148 N/A 5.38
5441 N. Swan Road 622
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
4 Sandstone 06/97 $ 8,849,000 1986 330 181,167 100% $ 4.88 $48.84 $26,815 10.0% N/A
405 E. Prince Road 549 $2,682
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
5 Hilands I 06/97 $12,500,000 1985 426 234,324 95% $ 5.87 $53.34 $29,343 11.0% N/A
5755 E. River Road 550 $3,228
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
Windsail 03/97 $10,037,000 1985 300 243,952 94% $ 4.11 $41.14 $33,457 10.0% 5.74
7300 N. Mona Lisa Road 813 $3,346
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
7 Cobble Creek 01/97 $ 9,250,000 1980 301 217,382 91% N/A $42.55 $30,731 N/A 6.35
7700 E. Speedway Blvd. 722
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
8 Sundown Village 12/96 $11,350,000 1984 330 279,758 90% $ 3.97 $40.57 $34,394 10.09% 5.53
8215 Oracle Road 848 $3,367
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
9 Rio Cancion 12/96 $17,400,000 1983 379 343,370 90% $ 4.77 $50.67 $45,910 9.42% 6.31
2400 E. River Road 906 $4,324
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
10 Sonoran Terraces 08/96 $18,750,000 1985 374 416,256 95% $ 4.23 $45.04 $50,134 9.39% 6.59
7887 N. La Cholla Blvd. 1,113 $4,710
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 1986 120 116,036 94% $ 3.90
Village at the Foothills
II and III 967 $3,772
2600 Ina Road
Tucson, AZ
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
The Sales Comparison Approach is considered a good valuation
method in the event that a sufficient number of similar and
recent transactions can be found and accurately verified.
The key to the Sales Comparison Approach is that a
sufficient number of comparable sales be present to reflect
an accurate indication of value. In such an event, market
value can be derived directly from the sales, since all
complexities involved are properly weighed according to
their significance to actual buyers and sellers.
This approach is based upon prices paid in actual market
transactions. It is a process of correlating and analyzing
recently sold properties, which are similar to the subject.
The reliability of this technique depends upon (a) the
degree of comparability of the property appraised with each
sale, (b) the length of time since the sale, (c) the
accuracy of the sales data, and (d) the absence of unusual
conditions affecting the sale.
The comparison process must be based on sales, which
constitute acceptable evidence of motivations inherent to
the market, occurring under similar market conditions, of
similar or reasonably similar apartment projects. These
projects were selected since they are reasonably comparable
to the subject property. A map and a summary of the
comparable sales can be found on the preceding pages. The
sales ranged in time from August 1996 to November 1997.
Reference is made to the individual sales data included in
the Addenda section of this report.
In our analysis of the sales data, important considerations
as to comparability were condition of the property, gross
income when combined with percent (%) occupied at sale date,
unit size, terms of sale, location, and motivation. The
sales provide units of comparison, which can be adjusted and
then applied, to the subject to derive an estimate of value.
Because these individual factors often overlap and are
difficult to quantify, we compared the improved sales based
on net operating income (NOI) per square foot and per unit.
Theoretically, the NOI takes into consideration the various
physical factors, which influence value. An analysis of NOI
likewise considers economic differences in each improved
property sale because income is also a function of the
current market. Thus, with this analysis, all the factors
affecting a sale can be reduced to the common denominator of
net operating income. Also, we considered the effective
gross income multiplier method. There follows a discussion
of our analysis and value conclusion by the Sales Comparison
Approach.
SALES ADJUSTMENT
ANALYSIS
PROPERTY RIGHTS Property rights consists of ownership, legal estate,
economic benefits, and financial components. Our valuation
is of the leased fee estate on an all cash basis. Since all
the sales were reported to be of the leased fee estate, no
adjustment was necessary.
29
<PAGE>
CASH EQUIVALENCY Standard definitions of market value include payment in
"cash or its equivalent." The equivalent includes financing
terms generally available in the market. In many cases
comparable sales carry atypical financing terms that require
an adjustment to cash equivalency. There are basically two
areas, which may require adjustments for terms. One is the
amount of cash down payment and the other is favorable
financing or a low interest rate on the note/mortgage. Where
terms were considered to be more favorable than the market
at the time of sale, cash equivalency adjustments are made.
All of the sales used in this analysis were cash
transactions or were considered equivalent and therefore,
did not require a cash equivalent adjustment.
CONDITION OF SALE Adjustments for condition of sale usually 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 $3.90 per square foot or $3,772 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.
30
<PAGE>
SALE SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/SF NOI/SF NOI/SF FACTOR PRICE/SF
---------------------------------------------------------------
1 $51.23 NA $3.90 NA NA
2 48.22 NA $3.90 NA NA
3 45.26 NA $3.90 NA NA
4 48.84 $4.88 $3.90 0.79918 $39.03
5 53.34 5.87 $3.90 0.66440 35.44
6 41.14 4.11 $3.90 0.94891 39.04
7 42.55 NA $3.90 NA NA
8 40.57 3.97 $3.90 0.98237 39.85
9 50.67 4.77 $3.90 0.81761 41.43
10 45.04 4.23 $3.90 0.92199 41.53
After adjustments, the sales reflected a range in value for the subject
from $35.44 to $41.53 per square foot. Sales 6 and 8 have the most
similar net operating incomes per square foot and they reflect values of
$39.04 and $39.85 per square foot. Placing emphasis on these sales,
tempered with the other sales, and recognizing the slight age difference,
a value of $40.50 per square foot is estimated for the subject. From this
value the $105,000 in deferred maintenance is deducted to arrive at the
"as is" value of the subject. The calculation is shown below.
116,036 SF x $40.50/SF....................... $4,699,458
Less Deferred Maintenance.................... (105,000)
--------
"As Is" Value via NOI/SF..................... $4,594,458
Rounded $4,600,000
SALE SALE SALE SUBJECT ADJUST. ADJUST.
No. PRICE/UNIT NOI/UNIT NOI/UNIT FACTOR PRICE/UNIT
---------------------------------------------------------------------
1 $ 52,120 NA $3,772 NA NA
2 52,787 NA 3,772 NA NA
3 28,148 NA 3,772 NA NA
4 26,815 $2,682 3,772 1.40641 $ 37,713
5 29,343 3,228 3,772 1.16852 34,288
6 33,457 3,346 3,772 1.12732 37,717
7 30,731 NA 3,772 NA NA
8 34,394 3,367 3,772 1.12029 38,531
9 45,910 4,324 3,772 0.87234 40,049
10 50,134 4,710 3,772 0.80085 40,150
After adjustments, the sales reflected a range in value for the subject
from $34,288 to $40,150 per unit. Sales 6 and 8 reflected the most
similar NOI per unit to the subject and had adjusted values of $37,717
and $38,531 per unit. Additionally, we recognized some age differences
and based on all the data, we estimated a value for the subject of
$38,500 per unit. The following indication reflects an "as is" value per
unit for the subject considering the subject's deferred maintenance.
120 units x $38,500/unit.......................$4,620,000
Less: Deferred maintenance..................... (105,000)
--------
Value via NOI Price/Unit Method................$4,515,000
Rounded $4,500,000
31
<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.
SALE DATE OF SALE EGIM OCCUPANCY EXPENSE RATIO
--------------------------------------------------------
1 11/97 5.59 98% N/A
2 11/97 5.60 97% N/A
3 11/97 5.38 97% N/A
6 03/97 5.74 94% 42.58%
7 01/97 6.35 91% NA
8 12/96 5.53 90% 45.86%
9 12/96 6.31 90% 40.57%
10 8/96 6.59 90% 39.48%
Subject 94% 46.82%
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 $851,215....................$4,937,047
Less: Deferred maintenance...........(105,000)
--------
Value via EGIM Method..............$4,832,047
Rounded $4,800,000
CONCLUSION THE NOI per square foot and per unit methods presented
a value range indication of $4,500,000 to $4,600,000
and the effective gross income multiplier method
indicated a value of $4,800,000. Weight has been given
to the net operating income comparisons because this
method reflects both income and expense information.
The EGIM method only accounts for income and does not
take into consideration expenses, which can vary from
property to property. Therefore, it is our opinion that
the leased fee market value of the subject property
based on the indication provided by the Sales
Comparison Approach, all cash, on an "as is" basis as
of December 31, 1997, is
FOUR MILLION SIX HUNDRED THOUSAND DOLLARS
($4,600,000)
32
<PAGE>
[COMPARABLE RENTALS MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT
YEAR NO.OF AVG. UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE (SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO. RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Tierra Catalina 1983 120 1,171 99% 1BR/1BA 900 $ 640-730 0.71-0.81 Amenities include
3201 E Skyline 1BR/1BA 916 625-680 0.68-0.74 a swimming pool,
Drive 2BR/2BA 1,207 790 0.65 spa, tennis court,
2BR/2BA 1,233 850-950 0.69-0.77 clubroom, covered
2BR/2BA/TH 1,304 890-950 0.68-0.73 parking,
3BR/2BA/TH 1,525 950-1,070 0.62-0.70 washer/dryer,
hook-ups,
microwave,
fireplace.
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
2 L'Auberge Canyon 1987 264 1,019 96% 1BR/1BA 724 $ 725 1.00 Amenities include
View 6650-55 N 2BR/2BA 909 775 0.85 a swimming pool,
Kolb Road 2BR/2BA 1,049 825 0.79 tennis court,
2BR/2BA 1,095 875 0.80 washer/dryer,
3BR/2BA 1,223 1,010 0.82 microwave,
3BR/2BA 1,243 1,010 0.81 fireplace,
3BR/2BA 1,291 1,010 0.78 jacuzzi, clubroom,
and covered
parking.
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
3 The Greens at 1986 265 1,011 89% 1BR/1BA/DEN 818 $ 714 0.87 Amenities include
Ventana 5800 N 1BR/1BA/DEN 847 740 0.87 3 swimming pools,
Kolb Road 2BR/2BA 945 775 0.82 spa, washer/dryer,
2BR/2BA 974 739 0.76 microwave,
2BR/2BA 1,018 787-837 0.77-0.82 fireplace,
2BR/2BA 1,050 800 0.76 clubroom, and
2BR/2BA/DEN 1,169 914-964 0.78-0.82 covered parking.
2BR/2BA/DEN 1,207 950 0.79 Concessions: One-
half month free.
- ------------------------------------------------------------------------------------------------------------------------------------
4 The Arboretum 1986 496 811 99% 1BR/1BA 520 475 0.91 Amenities include
4700 N Kolb Rd. 1BR/1BA 616 500 0.81 3 swimming pools,
1BR/1BA 686 510 0.74 clubroom, exercise
1BR/1BA 767 560 0.73 room, laundry
2BR/1BA 984 650 0.66 facilities,
2BR/2BA 995 710 0.71 washer/dryer hook-
2BR/2BA 1,001 735 0.73 ups, fireplace,
3BR/2BA 1,200 799 0.67 and covered
parking.
Concessions: One-
half month free
rent. $175 off if
deposit on 1/st/
visit.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Villa Sin Vacas 1985 72 1,114 90's% 1BR/1BA/DEN 930 835 0.90 Amenities include
7601 N. Calle 2BR/2BA 1,195 1,050 0.88 washer dryer,
Sin Envidia 3BR/2BA 1,458 1,200 0.82 fireplace,
microwave, covered
parking,
clubhouse, pool.
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
6 Colonia Del Rio 1985 176 1,010 90's% 1BR/1BA 713 560 0.79 Amenities include
4601 N. Via 1BR/1BA 796 590 0.74 washer/dryer,
Entrada 1BR/1BA 1,022 655 0.64 microwave, pool,
2BR/1BA 1,068 680 0.64 covered parking,
2BR/2BA/TH 1,170 795 0.68 fireplace,
3BR/2BA 1,345 795-810 0.59-0.60 exercise facility,
playground, spa.
Concessions: $200
off first month's
rent.
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CURRENT
YEAR NO. OF AVG. UNIT PHYSICAL UNIT EFFECTIVE EFFECTIVE
NO. NAME/LOCATION BUILT UNITS SIZE (SF) OCCUP. UNIT TYPE SIZE/SF RENT/MO. RENT/SF/MO. AMENITIES/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 Boulders at La 1995 240 999 N/A 1BR/1BA 725 595 0.82 Amenities include
Reserve 1500 1BR/1BA/DEN 929 655 0.71 pool, spa,
E. Pusch Wilderness 2BR/2BA 1,057 740 0.70 washer/dryer,
3BR/2BA 1,268 860 0.68 microwave, some
fireplaces,
garages, fitness
center
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
10700 N. La 2BR/2BA 943 690 0.73 2 pools, spa,
Reserve 2BR/2BA 957 750 0.78 washer/dryer,
3BR/2BA 1,111 875 0.79 microwave, some
fireplaces,
fitness center,
clubhouse.
Concessions: None
- ------------------------------------------------------------------------------------------------------------------------------------
9 Legends at La Paloma 1995 312 1,034 90's% 1BR/1BA 745 675 0.91 Amenities include
3750 E. Via Palomita 2BR/2BA 1,036 795 0.77 2 pools, spa,
3BR/2BA 1,258 975 0.78 washer/dryer,
microwave,
fireplace, fitness
center, clubhouse.
Concessions: 1 mo.
free
- ------------------------------------------------------------------------------------------------------------------------------------
10 Skyline Bel Aire 1979 137 1,125 90's% lBR/1BA/DEN 968 615 0.64 Amenities include
6255 Camino 2BR/2BA 1,263 815 0.65 pool, spa, 2
Pimeria Alta tennis courts,
washer/dryer,
fireplace, covered
parking, clubhouse
Concessions: 1 BR
$590/mo.; $300 off
first mo. on a 12
mo. lease and $150
off first mo. on a
6 mo. lease.
- ------------------------------------------------------------------------------------------------------------------------------------
11 Pinnacle Canyon 1995 225 1,017 98% 1BR/1BA 795 650 0.82 Amenities include
7050 E. Sunrise 1BR/1BA 840 675 0.80 pool, spa,
Road 2BR/2BA 1,124 775 0.69 washer/dryer,
2BR/2BA 1,152 800 0.69 microwave, built
3BR/2BA 1,351 935 0.69 in TV, garages
available,
clubhouse,
exercise facility,
computer center
Concessions: 1 mo.
free for 12 mo.
lease.
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT PROPERTY 1986 120 967 94% 1BR/1BA 780 529 0.68 Amenities include
Village at 1BR/1BA/DEN 947 629 0.67 a swimming pool,
Foothills II & III 2BR/2BA 1,081 659 0.61 tennis court, spa,
2600 Ina Road 2BR/2BA/TH 1,190 759 0.64 clubroom, and
covered parking.
====================================================================================================================================
</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 32 780 $529 $0.68 $16,928
1BR/1BA/Den 40 947 629 0.67 25,160
2BR/2BA 36 1,081 659 0.61 23,724
2BR/2BA/TH 12 1,190 759 0.64 9,108
--- ----- ---- ----- -------
120 967 $624 $0.65 $74,920
</TABLE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
general area. For the purpose of this analysis, we have
considered eleven apartment complexes that were found to be
most comparable. They range in total size from 80,178 to
402,276 square feet, in average unit size from 811 to 1,172
square feet, and in physical occupancy from 89 to 99
percent. The comparable rentals are summarized on the
previous page.
33
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUBJECT - RENT ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT AVG. AVG. MONTHLY
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF COMPARABILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 780 $529 $0.68
L'Auberge Canyon View lBR/1BA 724 725 1.00 Superior
Greens at Ventana 1BR/1BA/DEN 818 714 0.87 Superior
Tierra Catalina 1BR/1BA 900 640 0.71 Comparable
The Arboretum 1BR/1BA 767 560 0.73 Comparable
Colonia Del Rio 1BR/1BA 796 590 0.74 Comparable
Boulders at La Reserve 1BR/lBA 725 595 0.82 Superior
La Reserve Villas 1BR/1BA 697 580 0.83 Superior
Legends at La Paloma 1BR/1BA 745 675 0.91 Superior
Pinnacle Canyon 1BR/1BA 795 650 0.82 Superior
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 1BR/1BA/DEN 947 629 0.67
Tierra Catalina 1BR/1BA 916 680 0.74 Comparable
The Arboretum 2BR/lBA 984 650 0.66 Comparable
Villa Sin Vacas 1BR/1BA/DEN 930 835 0.90 Superior
Colonia Del Rio lBR/lBA 1,022 655 0.64 Comparable
Boulders at La Reserve 1BR/1BA/DEN 929 655 0.71 Superior
Skyline Bel Aire 1BR/1BA/DEN 968 615 0.64 Comparable
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,081 659 0.61
L'Auberge Canyon View 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Superior
Tierra Catalina 2BR/2BA 1,207 790 0.65 Comparable
Arboretum 2BR/2BA 1,001 735 0.73 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/1BA 1,068 680 0.64 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Superior
La Reserve Villas 2BR/2BA 957 750 0.78 Superior
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Superior
Pinnacle Canyon 2BR/2BA 1,124 775 0.69 Superior
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BATH 1,190 759 0.64
L'Auberge Canyon 2BR/2BA 1,095 875 0.80 Superior
The Greens at Ventana 2BR/2BA 1,050 800 0.76 Superior
Tierra Catalina 2BR/2BA/TH 1,304 890 0.68 Comparable
Villa Sin Vacas 2BR/2BA 1,195 1,050 0.88 Superior
Colonia Del Rio 2BR/2BA/TH 1,170 795 0.68 Comparable
Boulders at La Reserve 2BR/2BA 1,057 740 0.70 Superior
Legends at La Paloma 2BR/2BA 1,036 795 0.77 Superior
Skyline Bel Aire 2BR/2BA 1,263 815 0.65 Comparable
Pinnacle Canyon 2BR/2BA 1,124 775 0.69 Superior
====================================================================================================================================
</TABLE>
<PAGE>
All of the comparables surveyed were located within the
subject's general vicinity. Rent Comparables 1, 4 and 6 are
believed to be most comparable to the subject overall;
specifically, in terms of overall physical condition,
location, rental rates, and the amenities offered. These
comparables indicate average quoted rental rates from $0.59
to $0.91 per square foot per month with the higher unit
rental being a small 1 bedroom. The other projects were
relatively comparable to the subject and were used as
additional indications of market rents in the subject's
area.
It is important to note that these rents are reflective of
the current market. The Tucson area is somewhat seasonal and
rents do not tend to be increased during the summer months.
Also, a number of new units within the immediate area of the
subject have recently opened; therefore, rents are not
expected to increase over the short term. In fact, rent
concessions are being offered at most of the new projects.
The current asking average monthly rent for the subject is
$0.65 per square foot and the average actual contract rent
for the subject is $0.55 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 94 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 32 780 24,960 $529 $16,928 $0.68
1BR/1BA/Den 40 947 37,880 629 25,160 0.67
2BR/2BA 36 1,081 38,916 659 23,724 0.61
2BR/2BA/TH 12 1,190 14,280 759 9,108 0.64
--- ----- ------- ---- ------- -----
120 967 116,036 $624 $74,920 $0.65
</TABLE>
Gross Annual Rental Income: $72,920 x 12 months = $899,040
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, late charges, and miscellaneous. Other
income in 1991 was reported at $14,691 or $0.13 per square
foot. This figure dropped during 1992 to $10,618 or $0.09
per square foot. However, it increased to $13,794 or $0.12
per square foot in 1993, $13,336 or $0.11 per square foot in
1994, $13,864 or $0.12 per square foot in 1995, and $12,692
or $0.11 per square foot in 1996. The annualized figure for
1997 was $15,029 or $0.13 per square foot. Based on our
experience with similar type properties and the actual
performance of the property, it is our opinion that other
income in the amount of $16,245 or $0.14 per square foot
before vacancy and $0.13 per square foot after vacancy is
reasonable. This is typical for a project such as the
subject.
From this we have arrived at our estimate of scheduled gross
income as if 100 percent occupied:
34
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================================
VILLAGE AT THE FOOTHILLS II AND III
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 $0.58 $ 561 $0.55 $ 532 $0.55 $ 532 $0.54 $ 522
Insurance $0.05 $ 48 $0.05 $ 48 0.06 $ 58 $0.06 $ 58
Personnel $0.46 $ 445 $0.48 $ 464 0.53 $ 512 $0.56 $ 542
Utilities $0.45 $ 435 $0.42 $ 406 0.44 $ 425 $0.47 $ 454
Repairs & Maintenance $0.30 $ 290 $0.31 $ 300 0.34 $ 329 $0.39 $ 377
Contract Services $0.13 $ 126 $0.13 $ 126 0.12 $ 116 $0.13 $ 126
General Administrative $0.09 $ 87 $0.05 $ 48 0.04 $ 39 $0.05 $ 48
Management $0.28 $ 271 $0.29 $ 280 0.30 $ 290 $0.32 $ 309
----- ------ ----- ------ ----- ------ ----- ------
TOTAL $2.34 $2,263 $2.28 $2,205 $2.38 $2,301 $2.52 $2,437
=====================================================================================================================
<CAPTION>
- ----------------------------------------------------------------------------------------------
EXPENSE ACTUAL 1995 ACTUAL 1996 ACTUAL 1997
CATEGORY PER SF PER UNIT PER SF PER UNIT PER SF PER UNIT
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Taxes $0.57 $ 551 $0.59 $ 570 $0.58 $ 565
Insurance $0.07 $ 68 $0.07 $ 69 $0.07 $ 67
Personnel $0.60 $ 580 $0.61 $ 587 $0.60 $ 577
Utilities $0.53 $ 512 $0.59 $ 575 $0.60 $ 576
Repairs & Maintenance $0.41 $ 396 $0.39 $ 376 $0.41 $ 392
Contract Services $0.19 $ 184 $0.18 $ 177 $0.15 $ 149
General Administrative $0.05 $ 48 $0.16 $ 150 $0.21 $ 199
Management $0.34 $ 329 $0.34 $ 326 $0.33 $ 323
----- ------ ----- ------ ----- ------
TOTAL $2.76 $2,669 $2.93 $2,831 $2.94 $2,848
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================
COMPARABLE
EXPENSE ANALYSIS
- --------------------------------------------------------------------------------------------------
COMPARABLE 1 2 3 BRA PROJECTIONS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Year 1997 1997 1997 1998
NRA 167,500 140,564 58,018 116,036
No. Units 168 120 60 120
Year Built 1985 1983 1986 1986
Average Unit Size (SF) 997 1l71 967 967
<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 $ 0.60 $ 595 $ 0.65 $ 759 $0.55 $ 534 $0.59 $ 575
Insurance $ 0.06 $ 61 $ 0.05 57 $0.07 $ 70 $0.07 $ 70
Personnel $ 0.57 $ 567 $ 0.64 753 $0.66 $ 638 $0.67 $ 644
Utilities $ 0.39 $ 387 $ 0.50 588 $0.60 $ 577 $0.61 $ 593
Repairs & Maintenance $ 0.43 $ 431 $ 0.38 451 $0.42 $ 407 $0.44 $ 422
Contract Services $ 0.09 $ 93 $ 0.19 222 $0.21 $ 200 $0.22 $ 211
General Administrative $ 0.21 $ 212 $ 0.26 308 $0.23 $ 222 $0.16 $ 151
Management $ 0.35 $ 350 $ 0.36 407 $0.34 $ 325 $0.35 $ 343
------- ------ ------ ------ ----- ------ ----- ------
TOTAL EXPENSES $ 2.70 $2,696 $ 3.03 $3,545 $3.08 $2,973 $3.11 $3,010
==================================================================================================
</TABLE>
<PAGE>
Gross Rental Income $899,040
Other Income ($0.14/SF) 16,245
-------
Total Potential Gross Income $915,285
VACANCY AND COLLECTION
LOSS ESTIMATE In a stable market, vacancy and collection loss for an
apartment complex will be in the 3 to 7 percent range.
This covers the time lag during re-leasing and normal
refurbishing of apartment units, and the loss of income
resulting from bad debt or other vacancies. According
to our market analysis, the subject's Northwest area
had an annual physical vacancy of 7.6 percent in the
Third Quarter 1997 and the overall market was
reportedly at 8.7 percent. Quarterly vacancies tend to
fluctuate as a result of a seasonal decline in demand
during the summer months. The vacancy level for both
the overall market and the submarket have increased
significantly over the past year due to a number of new
projects, which have recently been completed. In
surveying the direct competition, the current physical
vacancies for the established projects ranged from 1 to
11 percent. Currently, the subject reportedly has a 6
percent physical vacancy and an economic vacancy of 16
percent. The primary difference between the physical
and economic vacancy is due to the below market
contract rents. Therefore, given this data we have
projected a 10 percent economic vacancy in Fiscal Year
1998. We estimate after the first year of the
projection period, some of the excess inventory will be
absorbed and the subject property should be capable of
maintaining a stabilized vacancy of 7 percent each year
thereafter.
EXPENSE ANALYSIS The various expenses necessary in the operation of the
subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement.
Proper appraisal technique demands that an appraiser
rely on typical expenses as opposed to actual expenses,
which may vary according to management or special
circumstances that may not persist. In addition, the
total expenses per square foot should be within a range
typical for similar projects. Reserves for replacement
are estimated based on age, condition, and construction
quality. It is re-emphasized that all income, as well
as expense estimates, are based on the assumption of
competent and prudent management.
We have based the following estimate of project
expenses on comparable apartment projects located in
the subject area, as well as the actual historical
performance of the subject property. The facing table
summarizes the annualized 1997 expenses reported by
three "individually metered" comparable projects, as
well as the subject property's actual expenses from
1991 to 1996, and annualized 1997 expenses.
REAL ESTATE TAXES - The Pima County Assessor's Office
coordinates the real estate taxes for the Village at
the Foothills II and III. The property is subject to a
number of different taxing authorities and there are
two assessments. In 1997, the limited cash value
assessment was $410,550 and the full cash value
assessment was $410,550. The 1997 assessments have
reportedly increased to $424,556 in full cash value and
$422,064 in limited cash value including personal
property. According to the subject property operating
statement, the 1997 tax was $69,215 or $0.60 per
35
<PAGE>
square foot. We have projected the real estate taxes
for the first year of our projection at $71,983 or
$0.62 per square foot. This was increased at 4 percent
per year thereafter.
INSURANCE - This category includes fire and extended
coverage. Insurance costs can vary from one property to
another depending upon the type and whether a blanket
policy is used. Often times a property owner will
insure multiple properties on one policy in an effort
to reduce the cost of insurance per project. Our
expense estimate is based upon typical costs for an
individually insured apartment project in the Tucson
area. The subject's actual insurance costs were $0.06
per square foot in 1993, $0.06 per square foot in 1994,
$0.07 per square foot in 1995, and $0.07 for 1996.
Annualized 1997 insurance expense was also $0.07 per
square foot. The comparables reflected this expense
between $0.05 and $0.07 per square foot. Based on this
data, we estimated insurance at $0.07 per square foot
in the first year or $8,477. This expense is expected
to increase 4 percent annually throughout our
projection period.
PERSONNEL - This category includes salaries for office
managers, leasing agents, maid services, payroll taxes,
and FICA. This category is not to be confused with the
category of Management. The expense comparables
reflected a personnel expense ranging from $0.57 to
$0.66 per square foot. Annualized figures for the
subject in 1997 indicate this expense at $0.60 per
square foot. The subject's actual figures for 1993,
1994, 1995, and 1996 were $0.53, $0.56, $0.60, and
$0.61 per square foot, respectively. Based on
historical figures at the subject property and
tempering them with the market data, we have estimated
this expense at $77,234 or $0.67 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 $0.44, $0.47, $0.53, and $0.59 per square
foot, respectively. Annualized figures for 1997
indicate this expense at $0.60 per square foot. The
comparables indicated a range from $0.39 to $0.60 per
square foot. Based on this data, we have estimated this
expense at $0.61 per square foot, or $71,200. This
expense is expected to increase 4 percent annually
throughout our projection period.
REPAIR AND MAINTENANCE - These expenses are necessary
in order to keep the property in good repair including
plumbing, air-conditioners, electrical, draperies,
carpets, janitorial supplies, and decorative costs. The
expense comparables indicated a range from $0.38 to
$0.43 per square foot. Annualized figures for 1997
indicate this expense at $0.41 per square foot, while
actual figures for 1993, 1994, 1995, and 1996 were
$0.34, $0.39, $0.41, and $0.39 per square foot,
respectively. Due to the age, overall condition, and
the ongoing maintenance at the subject property, an
estimate of $0.42 per square foot or $48,735 has been
projected for the subject. This expense is expected to
increase 4 percent annually throughout our projection
period.
36
<PAGE>
CONTRACT SERVICES - This expense category includes
landscaping, security, etc. The comparables indicated a
range from $0.09 to $0.21 per square foot,
respectively. The subject's actual figures for 1993,
1994, 1995, and 1996 were $0.12, $0.13, $0.19, and
$0.18 per square foot, respectively. Annualized figures
for 1997 indicate this expense at $0.15 per square
foot. We have estimated this expense for the subject at
$0.19 per square foot or $22,047 and this expense is
expected to increase 4 percent annually throughout our
projection period.
GENERAL ADMINISTRATIVE - This expense category includes
professional, legal, and accounting costs,
administration costs, promotional expenses, etc. The
expense comparables indicate a range of $0.21 to $0.26
per square foot. Actual figures for the subject in
1993, 1994, 1995, and 1996 were $0.04, $0.05, $0.05,
and $0.16 per square foot, respectively. Annualized
figures for 1997 indicate this expense at $0.21 per
square foot. We have estimated this expense for the
subject at $0.16 per square foot or $18,102. 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 $0.30, $0.32, $0.34, and $0.34 per
square foot, respectively. Annualized figures for 1997
indicate this expense at $0.33 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 $2.38 per square foot
in 1993, $2.52 per square foot in 1994, $2.76 per
square foot in 1995 and $2.93 per square foot in 1996.
Annualized figures for 1997 indicate this expense at
$2.94 per square foot. The comparables ranged from
$2.70 to $3.08 per square foot and from $2,696 to
$3,545 per unit. Considering the size and quality of
the subject, the overall expenses appear reasonable.
Our estimate of the total expenses for Fiscal Year 1998
is $3.09 per square foot or $2,991 per unit.
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These
may include roof covering, carpeting, appliances,
compressors, parking areas, drives, etc. The subject
was constructed in 1986 and appears to have had ongoing
maintenance since its construction. It is our opinion
that a reserve allowance of $300 per unit or about
$0.31 per square foot is adequate to provide for the
continued maintenance of the project. This was included
in our expenses prior to concluding the net operating
income.
37
<PAGE>
DEFERRED MAINTENANCE The subject improvements are in good condition and
exhibited only minor deferred maintenance at the time
of our inspection. This has been estimated at $105,000.
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.
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.
38
<PAGE>
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This IRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. Corporate "Baa" bonds are typically viewed as
an alternative investment. Real estate is considered
riskier due to illiquidity, competition, burden of
management, and market conditions; therefore,
approximately 150 basis points or more could be added
to this percentage rate in a normal market. Based on
the previous data and considering the amount of new
construction in the market and the lease-up time
required to regain stabilization, we believe a 12.50
percent discount rate is reasonable based on an all
cash sale and alternative investments. While this is
134 basis points higher than the indicated average by
the previously mentioned survey, we believe it reflects
the added risk in the Tucson 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
9.14 percent, which results from the lower than
stabilized occupancy expectation.
CASH FLOW ASSUMPTIONS . Rents were based on an average current rental rate
of approximately $0.65 per square foot. During the
projection period rents were increased at a rate
of 0 percent in Year 1 and 4 percent per year
thereafter. As previously discussed in the
"Apartment Market Analysis" section of this
report, the subject area's average rental rates
have increased at a healthy pace in the early
1990's; however, with the significant amount of
new construction the growth has slowed.
39
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
VILLAGE AT THE FOOTHILLS II APARTMENTS
Fiscal Year Ending 12/31 1998 1999 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Apt. Rents 899,040 935,002 972,402 1,011,298 1,051,750 1,093,820 1,137,572
Rent/SF/Mo. 0.646 0.671 0.698 0.726 0.755 0.786 0.817
Other Income/Yr. 16,245 16,895 17,571 18,273 19,004 19,765 20,555
-------- -------- -------- --------- --------- ---------- ----------
Gross Income 915,285 951,896 989,972 1,029,571 1,070,754 1,113,584 1,158,128
% Vacancy 10.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Vacancy Allowance 91,529 66,633 69,298 72,070 74,953 77,951 81,069
-------- -------- -------- --------- --------- ---------- ----------
Effective Gross Income 823,757 885,264 920,674 957,501 995,801 1,035,633 1,077,059
------------
Expenses: UNIT /SF
------------
Real Estate Taxes 600 0.62 71,983 74,862 77,857 80,971 84,210 87,578 91,081
------------
Insurance 70 0.07 8,447 8,785 9,137 9,502 9,882 10,278 10,689
------------
Personnel 644 0.67 77,234 80,323 83,536 86,877 90,352 93,966 97,725
------------
Utilities 593 0.61 71,200 74,048 77,010 80,090 83,294 86,625 90,090
------------
Repairs and Maintenance 406 0.42 48,735 50,685 52,712 54,820 57,013 59,294 61,665
------------
Contract Services 184 0.19 22,047 22,929 23,846 24,800 25,792 26,823 27,896
------------
General Administrative 151 0.16 18,102 18,826 19,579 20,362 21,176 22,023 22,904
------------
Management Fee 5.00% 0.35 41,188 44,263 46,034 47,875 49,790 51,782 53,853
------------
Reserves for Replacement 300 0.31 36,000 37,440 38,938 40,495 42,115 43,800 45,551
------------
-------- -------- -------- --------- --------- ---------- ----------
Total Expenses 394,935 412,160 428,647 445,793 463,624 482,169 501,456
Per SF 3.40 3.55 3.69 3.84 4.00 4.16 4.32
-------- -------- -------- --------- --------- ---------- ----------
Net Operating Income 428,821 473,103 492,028 511,709 532,177 553,464 575,603
Per SF 3.70 4.08 4.24 4.41 4.59 4.77 4.96
Capital Items: 105,000 0 0 0 0 0 0
-------- -------- -------- --------- --------- ---------- ----------
Cash Flow 323,821 473,103 492,028 511,709 532,177 553,464 575,603
-------- -------- -------- --------- --------- ---------- ----------
Present Value Factor 12.50% 0.888889 0.790123 0.702332 0.624295 0.554929 0.493270 0.438462
Present Value of Cash Flow 287,841 373,810 345,567 319,457 295,320 273,007 252,380
NOI in 10th Year 673,374 Present Value of Income Stream 2,795,765
Ro at Reversion 10.50% Present Value of Reversion 1,895,889
---------
---------------------------------------------------------------
Indicated Reversion 6,413,082 Indicated Value of Subject $4,691,654
Less: Sales Costs 4.00% 256,523 Indicated Value/SF 40.43
---------
Reversion in 10th Yr 6,156,559 Indicated Value/Unit 39,097
GIM at Indicated Value (rent income only) 5.22
Ro at Indicated Value 9.14%
================================================================================================================================
<CAPTION>
===================================================================================
2005 2006 2007 2008
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Apt. Rents 1,183,075 1,230,398 1,279,614 1,330,799
Rent/SF/Mo. 0.850 0.884 0.919 0.956
Other Income/Yr. 21,377 22,232 23,122 24,047
--------- --------- --------- ---------
Gross Income 1,204,453 1,252,631 1,302,736 1,354,845
% Vacancy 7.00% 7.00% 7.00% 7.00%
Vacancy Allowance 84,312 87,684 91,192 94,839
--------- --------- --------- ---------
Effective Gross Income 1,120,141 1,164,947 1,211,544 1,260,006
Expenses:
Real Estate Taxes 94,725 98,514 102,454 106,552
Insurance 11,116 11,561 12,023 12,504
Personnel 101,634 105,699 109,927 114,325
Utilities 93,694 97,442 101,339 105,393
Repairs and Maintenance 64,132 66,697 69,365 72,140
Contract Services 29,012 30,173 31,380 32,635
General Administrative 23,820 24,773 25,764 26,795
Management Fee 56,007 58,247 60,577 63,000
Reserves for Replacement 47,374 49,268 51,239 53,289
-------- -------- -------- --------
Total Expenses 521,514 542,375 564,070 586,633
Per SF 4.49 4.67 4.86 5.06
-------- -------- -------- --------
Net Operating Income 598,627 622,572 647,475 673,374
Per SF 5.16 5.37 5.58 5.80
Capital Items: 0 0 0 0
-------- -------- -------- --------
Cash Flow 598,627 622,572 647,475 673,374
-------- -------- -------- --------
Present Value Factor 0.389744 0.346439 0.307946 0.000000
Present Value of Cash Flow 233,311 215,683 199,387 0
NOI in 10th Year
Ro at Reversion
Indicated Reversion
Less: Sales Costs
Reversion in 10th Yr
===================================================================================
</TABLE>
<PAGE>
===============================================================================
CASH FLOW SUMMARY
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL 12.50% PV OF
ENDING 12/31 CASH FLOW NPV FACTOR CASH FLOW
------------ --------- ----------- ---------
<S> <C> <C> <C>
1998 $323,821 0.888888889 $ 287,841
1999 473,103 0.790123457 373,810
2000 492,028 0.702331962 345,567
2001 511,709 0.624295077 319,457
2002 532,177 0.554928957 295,320
2003 553,464 0.493270184 273,007
2004 575,603 0.438462386 252,380
2005 598,627 0.389744343 233,311
2006 622,572 0.346439416 215,683
2007 647,475 0.307946148 199,387
----------
TOTAL NPV OF CASH FLOWS $2,795,765
Projected NOI - 11th Year $ 673,374
Terminal Capitalization Rate 10.50%
----------
Estimated Value of Property at End of 10th Year $6,413,082
Less Sales Cost @ 4.00% (256,523)
----------
Value of Reversion at End of 10th Year $6,156,559
Discount Factor - 10th Year 12.50% 0.307946
----------
Present Value of the Reversion $1,895,889
Sum of Present Values of Cash Flow 2,795,765
----------
MARKET VALUE AS OF DECEMBER 31, 1997 $4,691,654
(ROUNDED) $4,700,000
===========
===============================================================================
</TABLE>
<PAGE>
. The subject's current physical vacancy is 6
percent and the economic vacancy rate is about 16
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 a
7 percent vacancy rate for the for the remainder
of the holding.
. The property has been appraised based on a
"resident pays utilities" status.
. Expenses (with the exception of management) have
been increased at an average growth rate of 4
percent annually over the 11-year projection
period. Management expenses are based on a
percentage of effective gross income and increase
with occupancy and rental increases.
. A discount rate of 12.50 percent was utilized.
. A terminal capitalization rate of 10.5 percent was
believed reasonable.
. A sales cost of 4 percent of the reversionary
value was estimated.
A cash flow analysis for the subject may be found on
the following pages. The estimated leased fee market
value for the subject on an "as is" basis via
discounted cash flow method is
FOUR MILLION SEVEN HUNDRED THOUSAND DOLLARS
($4,700,000)
40
<PAGE>
<TABLE>
<CAPTION>
================================================================================
VILLAGE AT THE FOOTHILLS II APARTMENTS
Fiscal Year Ending 12/84 ==> 1998
----
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Apt. Rents $ 899,040
Rent/SF/Mo. 0.646
Other Income/Yr. 16,245
----------
Gross Income $ 915,285
% Vacancy 7.00%
Vacancy Allowance 64,070
----------
Effective Gross Income $ 851,215
-----------------------
Expenses: $/Unit $/SF
-----------------------
Real Estate Taxes 600 0.62 $ 71,983
-----------------------
Insurance 70 0.07 8,447
-----------------------
Personnel 644 0.67 77,234
-----------------------
Utilities 593 0.61 71,200
-----------------------
Repairs and Maintenance 406 0.42 48,735
-----------------------
Contract Services 184 0.19 22,047
-----------------------
General Administrative 151 0.16 18,102
-----------------------
Management Fee 5.00% 0.35 42,561
-----------------------
Reserves for Replacement 300 0.31 36,000
----------------------- ----------
Total Expenses $ 396,308
Per SF 3.42
----------
Net Operating Income $ 454,907
Per SF 3.92
Capitalization Rate 9.50%
----------
Fee Simple Stabilized Market Value $4,788,496
Less: Rent Loss Due to Lease-up $ 34,324
Deferred Maintenance $105,000
----------
Leased Fee "As Is" Market Value $4,649,171
Leased Fee "As Is" Market Value (Rounded) $4,650,000
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RENT LOSS DUE TO LEASE-UP/CONTRACT RENT
---------------------------------------
Year 1
---------
<S> <C>
Stabilized NOI $ 454,907
Projected NOI 418,180
---------
Rent Loss $ 36,727
PV Factor @ 7.00% 0.934579
---------
PV Income Loss $ 34,324
CUMULATIVE LOSS $ 34,324
================================================================================
</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 $4,764,687
with deductions for rent loss due to lease-up and
deferred maintenance made subsequently to reflect a
value of $4,630,000 or $4,600,000 rounded.
INCOME APPROACH
CONCLUSION DCF Method .............................. $4,700,000
Direct Capitalization Method ............ $4,600,000
The two methods of comparison are supportive of each
other and we gave equal reliance to each. We are of
the opinion that the "as is" market value of the
subject property, as of December 31, 1997 is
$4,700,000
41
<PAGE>
RECONCILIATION
- -------------------------------------------------------------------------------
Sales Comparison Approach $4,600,000
Income Approach $4,700,000
The Sales Comparison Approach utilized relatively
recent comparable sales of similar properties in the
area. The weakness of the Sales Comparison Approach
is that no two properties are exactly alike and exact
conditions of a sale are often unknown. The strength
of this approach is that it indicates market activity
based on the willing buyer/willing seller concept. We
placed supportive weight on this approach to the
Income Approach.
The Income Approach attempts to measure investment
qualities of the property. Based on actual rental
rates in the immediate area of the subject, actual
expenses, and investor returns derived from the
market, we have estimated value. Actual data on the
property, as well as comparable data was considered
adequate. Because the Income Approach deals directly
with income streams, we feel it is a very good
indication of current market conditions. It tends to
reflect a value, which an investor of a property
would anticipate. We have placed emphasis on the
Income Approach.
Therefore, it is our opinion that the "as is" leased
fee market value of the subject property, on an all
cash basis, as of December 31, 1997 is
FOUR MLLION SEVEN HUNDRED THOUSAND DOLLARS
($4,700,000)
42
<PAGE>
PINNACLE CANYON
- -------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Pinnacle Canyon
Address 7050 E. Sunrise Drive
City/ State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Canyon Joint Venture
Grantee (Buyer) BRE Property Investors, Inc.
Recorded Document 10677-1104
Sale Price $11,727,000
Occupancy 98%
Sale Price per Unit $52,120
Sale Price per SF $51.23
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 20
Number of Units 225
Number of Bedrooms 428
Net Rentable Area 228,931
Average Unit Size 1,017 SF
Land Area 15.290 Acres
Unit Density 14.71 Units per Acre
Property Condition Excellent
Parking (type) Open, carport and detached garage (500 spaces)
Construction Type Wood frame, stucco exterior, concrete foundation,
tile roof
Unit Amenities Washer/dryer, built-in television, roman tub,
microwave
Project Amenities Swimming pool, spa, clubhouse, exercise room,
computer center
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and
Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Detailed income and expense information was not
available. The NOI/SF, expenses, and capitalization
could not be derived, however, the EGIM is estimated
at 5.69.
<PAGE>
PINNACLE HEIGHTS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Pinnacle Heights
Address 7990 East Snyder
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Pinnacle Heights Associates
Grantee (Buyer) BRE Property Investors, LLC
Recorded Document 10677-1112
Sale Price $16,364,000
Occupancy 97%
Sale Price per Unit $52,787
Sale Price per SF $48.22
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2
Number of Buildings 25
Number of Units 310
Number of Bedrooms 562
Net Rentable Area 339,364
Average Unit Size 1,095 SF
Land Area 30 Acres
Unit Density 10.33 Units per Acre
Property Condition Excellent
Parking (type) Open, carport, and detached garage (590
spaces)
Construction Type Wood frame, stucco exterior, Spanish tile
roof
Unit Amenities Washer/dryer, microwave, ceiling fans
Project Amenities Swimming pool, two spas, exercise room,
computer center, and clubhouse
Confirmed With Real Data, Inc., Newspaper article
(11/30/97), and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach
Realty Advisors, Inc.
Comments Detailed income and expense information was
not available, however, a 5.60 EGIM has
been estimated.
<PAGE>
FOOTHILLS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Foothills
Address 5441 N. Swan Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 11/97
Grantor (Seller) Foothills APB, LP
Grantee (Buyer) AIMCO/Foothill LP
Recorded Document 10677-2151
Sale Price $7,600,000
Occupancy 97%
Sale Price per Unit $28,148
Sale Price per SF $45.26
Capitalization Rate NA
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 2
Number of Buildings 11
Number of Units 270
Number of Bedrooms 300
Net Rentable Area 167,910
Average Unit Size 622 SF
Land Area 7.5 Acres
Unit Density 36 Units per Acre
Property Condition Good
Parking (type) Open and covered (380 spaces)
Construction Type Wood frame, stucco exterior, and tile roof
Unit Amenities Patio/balcony, storage
Project Amenities Swimming pool, clubhouse, weight room, racquetball,
tennis courts, laundry facility
Confirmed With Real Data, Inc., Newspaper article (11/30/97), and Bruce
Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty Advisors,
Inc.
Comments No economic information was available, a 5.38 EGIM was
estimated from knowledge of sales price, rents, and
occupancy.
<PAGE>
SANDSTONE
- ------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Sandstone Apartments
Address 405 E. Prince Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Tucson Park Ridge, Ltd.
Grantee (Buyer) Feigal Sandstone LP
Recorded Document 10569-1839
Sale Price $8,849,000
Occupancy 100%
Sale Price per Unit $26,815
Sale Price per SF $48.84
Capitalization Rate 10.0%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1986
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 330
Number of Bedrooms 363
Net Rentable Area 181,167
Average Unit Size 549 SF
Land Area 8.42 Acres
Unit Density 39.19 Units per Acre
Property Condition Good
Parking (type) Covered and open
Construction Type Wood frame, stucco exterior, Spanish tile roof
Unit Amenities Washer/dryer available, covered parking, balconies
Project Amenities Swimming pool, spa, tennis courts, volleyball, laundry
room, clubhouse, exercise room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty Advisors,
Inc.
<PAGE>
HILANDS I
- ------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Highlands I
Address 5755 E. River Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Doubletree Finance, Inc.
Grantee (Buyer) Northland Hilands Portfolio, LP
Recorded Document 10565/255
Sale Price $12,500,000
Occupancy 95%
Sale Price per Unit $29,343
Sale Price per SF $53.34
Capitalization Rate 11%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 3
Number of Buildings NA
Number of Units 426
Number of Bedrooms 468
Net Rentable Area 234,324
Average Unit Size 550 SF
Land Area 14.71 Acres
Unit Density 28.95 Units per Acre
Property Condition Good
Parking (type) Open and carport (527 spaces)
Construction Type Wood frame, stucco exterior, concrete
foundation, tile roof
Unit Amenities Washer/dryer, patio or balcony w/storage,
covered parking
Project Amenities 2 Swimming pools, spa, lounge, exercise
room, racquetball court, tennis courts,
laundry room
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data available.
<PAGE>
WINDSAIL
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Windsail
Address 7300 North Mona Lisa Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 03/97
Grantor (Seller) PTR Holdings
Grantee (Buyer) Windsail Properties LLC
Recorded Document 10513/2196
Sale Price $10,037,000
Occupancy 94%
Sale Price per Unit $33,457
Sale Price per SF $41.14
Capitalization Rate 10%
TERMS OF SALE Cash
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 21
Number of Units 300
Number of Bedrooms 548
Net Rentable Area 243,952
Average Unit Size 813 SF
Land Area 11.65 Acres
Unit Density 25.8 Units per Acre
Property Condition Good
Parking (type) Open (150) and Covered (300)
Construction Type Wood frame, stucco exterior, Spanish tile
roof
Unit Amenities Washer/dryer connection, fireplace,
microwave, balcony/patio
Project Amenities Swimming pool, spa, sauna, exercise room,
tennis courts, playground
Confirmed With Real Data, Inc. and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments Limited economic data reveals estimated EGIM
of 5.74
<PAGE>
COBBLE CREEK
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
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 97-073/97-078
Project Name Sundown Village
Address 8215 North Oracle Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Sundown Associates, LLC
Recorded Document 10438/1085
Sale Price $11,350,000
Occupancy 90%
Sale Price per Unit $34,394
Sale Price per SF $40.57
Capitalization Rate 10.09%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,187,240
Vacancy/Collection Loss 10% $(218,724)
Other Income $83,970
Effective Gross Income $2,052,486
Operating Expenses $(941,265)
Net Operating Income $1,111,221
PROPERTY DESCRIPTION
Year Built 1984
Last Year Renovated NA
Number of Stories 1, 2 & 3
Number of Buildings 37
Number of Units 330
Number of Bedrooms 486
Net Rentable Area 279,758
Average Unit Size 848 SF
Land Area 14.99 Acres
Unit Density 22 Units per Acre
Property Condition Good
Parking (type) Open (82) Covered (250) and Detached Garage
(17)
Construction Type Wood frame with stucco exterior, tile roof
Unit Amenities Fireplace, microwave, washer/dryer hook-up
Project Amenities Swimming pool, spa, sauna, clubhouse
Confirmed With Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
RIO CANCION
- -------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 9
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Rio Cancion
Address 2400 East River Road
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) Rio Cancion Associates, LC
Recorded Document 10438/1044
Sale Price $17,400,000
Occupancy 90%
Sale Price per Unit $45,910
Sale Price per SF $50.67
Capitalization Rate NA
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,956,200
Vacancy/Collection Loss 10% $(295,620)
Other Income $97,200
Effective Gross Income $2,757,780
Operating Expenses $1,118,846)
Net Operating Income $1,638,934
PROPERTY DESCRIPTION
Year Built 1983
Last Year Renovated NA
Number of Stories 1 & 2
Number of Buildings 35
Number of Units 379
Number of Bedrooms 613
Net Rentable Area 343,370
Average Unit Size 906 SF
Land Area 16.323 Acres
Unit Density 23.21 Units per Acre
Property Condition Good
Parking (type) Open and carport (878 spaces)
Construction Type Wood frame with stucco exterior, concrete
foundation, Spanish tile roof
Unit Amenities Fireplace, vaulted ceilings, microwave,
balcony/patio, w/d hookup
Project Amenities 3 swimming pools, spa, fitness room,
basketball court, tennis court, carports,
clubhouse
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
SONORAN TERRACES
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COMPARABLE APARTMENT SALE 10
PROPERTY IDENTIFICATION
Job Number 97-073/97-078
Project Name Sonoran Terraces
Address 7887 N. La Cholla Boulevard
City/State Tucson, Arizona
TRANSACTION DATA
Sale Date 08/96
Grantor (Seller) Security Capital Pacific Trust
Grantee (Buyer) NA Sonoran Terraces 5-1
Recorded Document 10357/907
Sale Price $18,750,000
Occupancy 95%
Sale Price per Unit $50,134
Sale Price per SF $45.04
Capitalization Rate 9.39%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,995,238
Vacancy/Collection Loss 5% $(149,762)
Effective Gross Income $2,845,476
Operating Expenses $1,084,034
Net Operating Income $1,761,442
PROPERTY DESCRIPTION
Year Built 1985
Last Year Renovated NA
Number of Stories 2
Number of Buildings 60
Number of Units 374
Number of Bedrooms 632
Net Rentable Area 416,256 SF
Average Unit Size 1,113 SF
Land Area 25.810 Acres
Unit Density 14.49 Units per Acre
Property Condition Good
Parking (type) Open and Covered (674 spaces)
Construction Type Brick veneer, concrete foundation, Spanish
tile roof
Unit Amenities Washer/dryer
Project Amenities Swimming pools, clubhouse, tennis courts,
weight room, covered parking
Confirmed With Real Data, Inc and Bruce Greenberg, MAI
Date Confirmed December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Comments None
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TIERRA CATALINA
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RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: Tierra Catalina
Street Address: 3201 East Skyline Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Stories: 2
Number of Units: 120
Net Rentable Area (SF): 140,561
Average Unit Size (SF): 1,171
Parking Surface: Asphalt
Type of Construction: Painted stucco exterior with flat built-up roofs
and red tile pitched roof fronts
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
23 1BP/1BA 900 $ 640-730 $0.71-0.81
18 1BR/1BA 916 625-680 0.68-0.74
19 2BR/2BA 1,207 790 0.65
25 2BR/2BA 1,233 850-950 0.69-0.77
17 2BR/2BA/TH 1,304 890-950 0.68-0.73
18 3BR/2BA/TH 1,525 950-1,070 0.62-0.70
----------------------------------------------------------------------------------
</TABLE>
Concession: None
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer connections, fireplaces,
patio/balconies, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi, picnic
area, clubroom, laundry facility
ECONOMIC DATA
Percent Occupied: 99%
Avg. Monthly Rent/SF of
NRA: $0.69
Electricity Paid By: Tenant
Length of Lease: 6, 9, and 12 months
Security Deposit: $175-$275
Confirmed With: On-site agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
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L' AUBERGE CANYON VIEW
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RENT COMPARABLE 2
PROPERTY DESCRIPTION
Job Number: 97-073/97-078
Name of Project: L'Auberge Canyon View
Street Address: 6650-55 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Stories: 2
Number of Units: 264
Net Rentable Area (SF): 269,048
Average Unit Size (SF): 1,019
Parking Surface: Asphalt
Type of Construction: Masonry with flat built-up roofs
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 724 $ 725 $1.00
64 2BR/2BA 909 775 0.85
60 2BR/2BA 1,049 825 0.79
66 2BR/2BA 1,095 875 0.80
12 3BR/2BA 1,223 1,010 0.82
19 3BR/2BA 1,243 1,010 0.81
11 3BR/2BA 1,291 1,010 0.78
----------------------------------------------------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Dishwashers, garbage disposals, microwave ovens,
washer/dryer in units, fireplaces, outdoor-utility
closets, covered parking
Project Amenities: 1 swimming pool, 1 tennis court, jacuzzi, clubroom
ECONOMIC DATA
Percent Occupied: 96%
Avg. Effective Monthly
Rent/SF of NRA: $0.82
Electricity Paid By: Tenant
Length of Lease: 7 and 12 months
Security Deposit: $225; $200 refundable
Confirmed With: RealData Inc./On-Site Agent
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
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THE GREENS AT VENTANA CANYON
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RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
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.
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THE ARBORETUM
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RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: The Arboretum
Street Address: 4700 North Kolb Road
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1986
Number of Stories: 2
Number of Units: 496
Net Rentable Area (SF): 402,272
Average Unit Size (SF): 811
Parking Surface: Asphalt
Parking Spaces: 322 open; 352 covered
Type of Construction: Frame with stucco exterior and flat built-up
roofs and pitched tile and shingle roofs
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Monthly Monthly
Units Type W(SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
32 1BR/1BA 520 $475 $0.91
128 1BR/1BA 616 500 0.81
96 1BR/1BA 686 510 0.74
32 1BR/1BA 767 560 0.73
64 2BR/1BA 984 650 0.66
48 2BR/2BA 995 710 0.71
48 2BR/2BA 1,001 735 0.73
48 3BR/2BA 1,200 799 0.67
----------------------------------------------------------------------------------
</TABLE>
Concessions: 1/2 month free rent. $175 off if deposit on 1st
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.
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VILLAS SIN VACAS
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RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: Villas Sin Vacas
Street Address: 7601 North Calle Sin Envidia
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 72
Net Rentable Area (SF): 80,178
Average Unit Size (SF): 1,114
Parking Surface: Asphalt
Type of Construction: Open and 72 carports
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
38 1BR/1BA/DEN 930 $ 835 $0.90
18 2BR/2BA 1,195 1,050 0.88
16 3BR/2BA 1,458 1,200 0.82
----------------------------------------------------------------------------------
</TABLE>
Concessions: None
Unit Amenities: Fireplace, washer and dryer, microwave, covered
parking
Project Amenities: Swimming pool, clubhouse
ECONOMIC DATA
Percent Occupied: Mid to high 90's%
Avg. Monthly Rent/SF of
NRA: $0.871
Electricity Paid By: Tenant
Length of Lease: 9 and 12 months
Security Deposit: $200
Pets Allowed/Deposit $200
Confirmed With: On-Site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
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COLONIA DEL RIO
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<PAGE>
RENT COMPARABLE 6
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: Colonia Del Rio
Street Address: 4601 N. Via Entrada
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Stories: 2
Number of Units: 176
Net Rentable Area (SF): 177,760
Average Unit Size (SF): 1,010
Parking Surface: Asphalt
Parking Spaces: 261
Type of Construction: Masonry exterior with red tile roofs
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Eff.Mo. Eff. Mo.
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
22 1BR/1BA 713 $ 560 $ 0.79
44 1BR/1BA 796 590 0.74
22 1BR/1BA 1,022 655 0.64
22 2BR/1BA 1,068 680 0.64
44 2BR/2BA/TH 1,170 795 0.68
22 3BR/2BA 1,345 795-810 0.59-0.60
----------------------------------------------------------------------------------
</TABLE>
Concessions: $200 off 1st month's rent
Unit Amenities: Fireplace, washer and dryer, microwave, covered
parking
Project Amenities: Swimming pool, spa, exercise room, playground
ECONOMIC DATA
Percent Occupied: 90's%
Avg. Effective Monthly
Rent/SF of NRA: $0.683
Electricity Paid By: Tenant
Length OF LEASE: NA
SECURITY DEPOSIT: $75
Pets Allowed/Deposit: Yes/$150
Confirmed With: On-site Agent and Real Data, Inc.
Date Confirmed: 12/97 by SNB/Bach Realty Advisors, Inc.
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BOULDERS AT LA RESERVE
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RENT COMPARABLE 7
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: Boulders at La Reserve
Street Address: 1500 E. Pusch Wilderness Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1995
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 239,792
Average Unit Size (SF): 999
Parking Surface: Asphalt
Parking Spaces: 375, same garages
Type of Construction: Masonry exterior with flat built-up and red tile
pitched roofs
Unit Mix:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/1BA 725 $ 595 $ 0.82
48 1BR/1BA/DEN 929 655 0.71
64 2BR/2BA 1,057 740 0.70
64 3BR/2BA 1,268 860 0.68
----------------------------------------------------------------------------------
</TABLE>
Concessions: 1/2 month free rent on 1BR or 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.
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LA RESERVE VILLAS
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RENT COMPARABLE 8
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
Name of Project: La Reserve Villas
Street Address: 10700 N. La Reserve Drive
City/State: Tucson, Arizona
PROPERTY DESCRIPTION
Year Built/Renovated: 1988
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 216,008
Average Unit Size (SF): 900
Parking Surface: Asphalt
Parking Spaces: Yes, but 240 carports
Type of Construction: Masonry exterior with flat built-up and red
tile pitched roofs
Unit Mix:
---------------------------------------------
Total Unit Size Monthly Monthly
Units Type (SF) Rent Rent/SF
---------------------------------------------
64 lBR/lBA 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 lBR, $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.
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LEGENDS AT LA PALOMA
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RENT COMPARABLE 9
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
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 1BR/1BA 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.
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SKYLINE BEL AIRE
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RENT COMPARABLE 10
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
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 lBR/lBA/DEN 968 $615 $0.64
73 2BR/2BA 1,263 815 0.65
---------------------------------------------
Concessions: $25 off rent 1BR $300 off lst month rent
w/12 month lease $150 off lst month rent
w/6 month lease
Unit Amenities: Fireplaces, washer and dryer, covered parking
Project Amenities: Swimming pool, spa, tennis court, billard
room, skylight in several bedrooms
ECONOMIC DATA
Percent Occupied: Mid 90's%
Avg. Effective Monthly Rent/SF
of NRA: $0.641
Electricity Paid By: Tenant
Length of Lease: 6 mos., 9 mos., 1 year
Security Deposit: $125 lBR 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
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RENT COMPARABLE 11
PROPERTY IDENTIFICATION
Job Number: 97-073/97-078
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/lBA 795 $650 $0.82
37 lBR/lBA 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)
