<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 5, L.P.
(NAME OF THE ISSUER)
ConAm Realty Investors 5, 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)
44849P503
(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
===============================================================================
$19,420,330 $3,885
Transaction Valuation(1) Amount Of Filing Fee
===============================================================================
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $3,900 Filing party: ConAm Realty Investors 5, 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 5, 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 5, 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 Property if the
proposed sale is approved.
A preliminary consent solicitation statement (the "Consent Solicitation
Statement") regarding the proposed sale was filed with the Securities and
Exchange Commission on October 30, 1998.
The following Cross-Reference Sheet is supplied pursuant to General
Instruction F of Schedule 13E-3 and cites the location in the Consent
Solicitation Statement of the information required to be included in response
to the items of this Statement, which Consent Solicitation Statement is hereby
incorporated by reference to the extent so cited. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Consent Solicitation Statement. The Consent Solicitation Statement
will be completed and, if appropriate, amended prior to the time it is first
sent or given to limited partners of the Partnership. This Statement will be
amended to reflect such completion or amendment of the Consent Solicitation
Statement.
<PAGE>
CROSS-REFERENCE SHEET
- --------------------------------------------------------------------------------
Item of Schedule 13E-3 Location in Consent Solicitation Statement
- --------------------------------------------------------------------------------
Item 1. Issuer and Class of
Security Subject to the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) Outside Front Cover Page, "SUMMARY--The
Partnership," "ACTION BY CONSENT--Record Date,"
"MARKET FOR THE UNITS," "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF."
- --------------------------------------------------------------------------------
(c) "MARKET FOR THE UNITS."
- --------------------------------------------------------------------------------
(d) "DISTRIBUTIONS."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) Not applicable.
- --------------------------------------------------------------------------------
Item 2. Identity and This Statement is being filed by the issuer and
Background certain affiliates of the issuer named in (b)
below.
- --------------------------------------------------------------------------------
(a)-(c) ConAm Property Services IV, Ltd.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
Continental American Properties, Ltd.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
ConAm DOC Affiliates LLC
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
Continental American Development, Inc.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
DJE Financial Corp.
1764 San Diego Avenue
San Diego, California 92110-1906
State of organization: California
Principal business: Real estate investment
Daniel J. Epstein
Chairman and Chief Executive Officer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
J. Bradley Forrester
President
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
E. Scott Dupree, Esq.
Senior Vice President and General Counsel
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
Robert J. Svatos
Senior Vice President and Chief Financial Officer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
Ralph W. Tilley
Senior Vice President and Treasurer
ConAm Management Corporation
1764 San Diego Avenue
San Diego, California 92110-1906
Principal business: Real estate management
- --------------------------------------------------------------------------------
(d) Daniel J. Epstein has been Chairman and Chief
Executive Officer of ConAm Management Corporation
since 1983.
J. Bradley Forrester has been President of ConAm
Management Corporation since 1994. Prior to
joining ConAm Management Corporation, Mr.
Forrester was Senior Vice President--Commercial
Real Estate for First Nationwide Bank from 1991
to 1994. First Nationwide Bank was a national
savings bank located at 700 Market Street, San
Francisco, California.
E. Scott Dupree has been Senior Vice President
and General Counsel of ConAm Management
Corporation since 1985.
Robert J. Svatos has been Senior Vice President
and Chief Financial Officer of ConAm Management
Corporation since 1988.
Ralph W. Tilley has been Senior Vice President
and Treasurer of ConAm Management Corporation
since 1980.
- --------------------------------------------------------------------------------
(e) and (f) During the last five years, neither the
Partnership nor any of the persons named in the
response to Item 2(a) hereof has been
(i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction
and, as a result of such proceeding, was or is
subject to a judgment, decree or final order
enjoining further violations of, or prohibiting
activities subject to, federal or state
securities laws or finding any violation of such
laws.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
(g) All natural persons named in the response to Item
2(a) are citizens of the United States of
America.
- --------------------------------------------------------------------------------
Item 3. Past Contacts,
Transactions or
Negotiations
- --------------------------------------------------------------------------------
(a)(1) Not applicable.
- --------------------------------------------------------------------------------
(a)(2) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the
Sale."
- --------------------------------------------------------------------------------
(b) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the
Sale."
- --------------------------------------------------------------------------------
Item 4. Terms of the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) Outside Front Cover Page, "SUMMARY," "SPECIAL
FACTORS--Effects of the Sale," "--Fairness of the
Sale," "THE PROPOSALS--The Purchaser," "--
Background of the Sale," "--Conflicts of Interest
of the General Partner," "--Terms of the Purchase
Agreements," "--The Amendment."
- --------------------------------------------------------------------------------
Item 5. Plans or Proposals
of the Issuer or Affiliate
- --------------------------------------------------------------------------------
(a)-(g) Outside Front Cover Page, "SUMMARY," "SPECIAL
FACTORS-- Effects of the Sale," "THE PROPOSALS--
The Purchaser," "--Conflicts of Interest of the
General Partner," "--Failure to Approve the
Sale."
- --------------------------------------------------------------------------------
Item 6. Source and Amounts
of Funds or Other
Consideration
- --------------------------------------------------------------------------------
(a) "THE PROPOSALS--Purchaser's Valuation," "--
Background of the Sale," "--Terms of the Purchase
Agreements."
- --------------------------------------------------------------------------------
(b) "ACTION BY CONSENT--Action by Consent."
- --------------------------------------------------------------------------------
(c) "THE PROPOSALS--Terms of the Purchase
Agreements."
- --------------------------------------------------------------------------------
(d) Not applicable.
- --------------------------------------------------------------------------------
Item 7. Purposes,
Alternatives, Reasons and
Effects
- --------------------------------------------------------------------------------
(a) "SPECIAL FACTORS--Reasons for the Sale," "THE
PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
(b) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "--Fairness of the Sale."
- --------------------------------------------------------------------------------
(c) "SPECIAL FACTORS--Reasons for the Sale," "--
Alternatives Considered to the Sale," "--Fairness
of the Sale."
- --------------------------------------------------------------------------------
(d) Outside Front Cover Page, "SUMMARY," "ACTION BY
CONSENT--Matters to be Considered," "SPECIAL
FACTORS--Effects of the Sale," "THE PROPOSALS--
The Purchaser," "--Conflicts of Interest of the
General Partner," "CERTAIN FEDERAL AND STATE
INCOME TAX CONSEQUENCES OF THE SALE," "NO
APPRAISAL RIGHTS," "MARKET FOR THE UNITS."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Item 8. Fairness of the
Transaction
- --------------------------------------------------------------------------------
(a) and (b) "SUMMARY--Fairness of the Sale and Certain
Conflicts of Interest," "SPECIAL FACTORS--
Fairness of the Sale." Each filing person
reasonably believes that the Sale is fair to the
Limited Partners and has adopted the analysis of
the General Partner with respect thereto.
- --------------------------------------------------------------------------------
(c) Outside Front Cover Page, "SUMMARY--Vote
Required," "ACTION BY CONSENT--Action by
Consent," "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(d) "SPECIAL FACTORS--Fairness of the Sale," "THE
PROPOSALS--Background of the Sale," "--Conflicts
of Interest of the General Partner."
- --------------------------------------------------------------------------------
(e) Not applicable.
- --------------------------------------------------------------------------------
(f) "SPECIAL FACTORS--Alternatives Considered to the
Sale," "THE PROPOSALS--Background of the Sale."
- --------------------------------------------------------------------------------
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
- --------------------------------------------------------------------------------
(a)-(c) "SUMMARY--Fairness of the Sale and Certain
Conflicts of Interest," "SPECIAL FACTORS--
Independent Appraisal."
- --------------------------------------------------------------------------------
Item 10. Interest in
Securities of the Issuer
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
Item 11. Contracts, Not applicable.
Arrangements or
Understandings with Respect
to the Issuer's Securities
- --------------------------------------------------------------------------------
Item 12. Present Intention
and Recommendation of
Certain Persons with Regard
to the Transaction
- --------------------------------------------------------------------------------
(a) "SUMMARY--Security Ownership and Voting Thereof,"
"VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF."
- --------------------------------------------------------------------------------
(b) No recommendation regarding the Sale has been
made to date by any person named in paragraph (a)
of this Item to any person owning Units in the
Partnership.
- --------------------------------------------------------------------------------
Item 13. Other Provisions
of the Transaction
- --------------------------------------------------------------------------------
(a) "NO APPRAISAL RIGHTS."
- --------------------------------------------------------------------------------
(b) Not applicable.
- --------------------------------------------------------------------------------
(c) Not applicable.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Item 14. Financial
Information
- --------------------------------------------------------------------------------
(a) "AVAILABLE INFORMATION," Annex 1 and Annex 2 to
Consent Solicitation Statement. The book value
per Unit as of the 1997 fiscal year end was $174.
- --------------------------------------------------------------------------------
(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 5, 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
VALUATION
OF
THE HAMPTONS AT QUAIL HOLLOW
4401 HAMPTON RIDGE DRIVE
CHARLOTTE, NORTH CAROLINA
FOR
HUTTON/CON AM REALTY INVESTORS 5
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-067
===============================================================================
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Letter of Transmittal..................................................... 1
Assumptions and Limiting Conditions....................................... 2
Certification............................................................. 4
Salient Facts and Conclusions............................................. 6
Nature of the Assignment.................................................. 7
City/Neighborhood Analysis................................................ 9
Apartment Market Analysis................................................. 17
Site...................................................................... 22
Improvements.............................................................. 24
Highest and Best Use...................................................... 27
Appraisal Procedures...................................................... 31
Sales Comparison Approach................................................. 33
Income Approach........................................................... 37
Reconciliation............................................................ 47
</TABLE>
ADDENDA
Rent Comparables
Improved Sale Comparables
Professional Qualifications
<PAGE>
[LETTERHEAD OF BACH REALTY ADVISORS APPEARS HERE]
March 6, 1998
Hutton/Con Am Realty Investors 5
1764 San Diego Avenue
San Diego, California 92110
Re: The Hamptons at Quail Hollow, an apartment complex located at 4401 Hampton
Ridge Drive, Charlotte, North Carolina; BRA: 97-067
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of November 30, 1997. This appraisal is a complete, self-contained report and is
in conformance with the guidelines of the Uniform Standards of Professional
Appraisal Practice of the Appraisal Institute. The scope of this assignment
includes the Sales Comparison and Income Approaches to value. The subject
property was inspected in December 1997 and for purposes of this appraisal, 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 Charlotte and subject area apartment markets, the sale of
comparable properties, market rent levels, appropriate operating expenses, and
acceptable investor returns.
As a result of our inspection of the property, investigation of the real estate
market, and relying on our experience with similar type properties, it is our
opinion that the leased fee market value of the subject property, all cash, on
an "as is" basis, as of November 30, 1997 is in the sum of
FOURTEEN MILLION TWO HUNDRED THOUSAND DOLLARS
($14,200,000)
There follows on the succeeding pages of this report pertinent data as to the
valuation conclusions expressed herein. Your attention is also directed to the
Assumptions and Limiting Conditions that follow this letter, as they are an
integral part of the above stated market value.
Thank you for the opportunity to be of service. If there are any questions
regarding the valuation, please contact us.
Sincerely,
BACH REALTY ADVISORS, INC.
/s/ Stevan N. Bach
Stevan N. Bach, MAI
President and Chief Executive Officer
SNB/kee
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this appraisal is subject to the
following assumptions and limiting conditions.
1. That responsibility is not taken for matters of
a legal nature affecting the property appraised
or the title thereto and that all legal
descriptions furnished are correct.
2. That the title to the property being appraised
is good and marketable and is appraised as
though under responsible ownership and/or
management.
3. That the property is free and clear of all
liens and encumbrances, except as stated
herein.
4. That a survey of the property has not been made
by the appraiser.
5. That the square footage figures are based on
floor plans and information supplied to the
appraiser by Con Am Management.
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 report 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
any legal proceeding is not a part of this
assignment; therefore, any such appearance
and/or preparation for testimony will
necessitate additional compensation than
received for this appraisal report.
10. 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.
11. All opinions of the leased fee market value are
presented as Bach Realty Advisors, Inc.'s
considered opinion based on facts and data
provided and appearing in this report. We
assume no responsibility for changes in market
conditions.
2
<PAGE>
12. 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.
-------------------------
13. 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 that to the
best of our knowledge and belief, 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 the terms of
our assignment or by the undersigned)
affecting the analyses, opinions, and
conclusions contained in this report.
4. This appraisal report has been made in
conformity with and is subject to the
requirements of the Code of Professional
Ethics and the Uniform Standards of
Professional Appraisal Practice of the
Appraisal Institute.
5. That no one other than the undersigned
prepared the analyses, conclusions, and
opinions concerning the subject property
that are set forth in this appraisal report.
Stevan N. Bach, MAI inspected the property
in December 1997.
6. That 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 November 30,
1997 is $14,200,000.
/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 Hamptons at Quail Hollow
4401 Hampton Ridge Drive
Charlotte, North Carolina
Location: Southeast corner of Quail Hollow Road
and Heathstead Place
BRA: 97-067
Legal Description: 33.11 acres, M20-730 Quail Hollow,
Charlotte, Mecklenberg County, North
Carolina
Land Size: 33.11 acres
Net Rentable Area: 245,282 square feet
Year Built: 1985/86
Mix: 20 1BR/1BA at 770-784 square feet
8 1BR/1BA at 860 square feet
48 2BR/1BA at 945-960 square feet
8 2BR/1BA at 1,040-1,055 square feet
108 2BR/2BA at 1,090-1,105 square feet
20 2BR/2BA at 1,180-1,190 square feet
16 3BR/2BA at 1,295 square feet
4 3BR/2BA at 1,400 square feet
---
No. of Units: 232
Average Unit Size: 1,057 square feet
Physical Occupancy: 95.7 percent
Economic Occupancy: 89.8 percent
Highest and Best Use
As Vacant: Multifamily residential development
As Improved: Multifamily residential, as currently
improved
Date of Value: November 30, 1997
As Is" Market Value by
Sales Comparison Approach: $14,300,000
As Is" Market Value by
Income Approach: $14,200,000
As Is" Market Value
Conclusion: $14,200,000
6
<PAGE>
NATURE OF THE ASSIGNMENT
- -------------------------------------------------------------------------------
PURPOSE OF THE
APPRAISAL The purpose of this complete, self-contained
appraisal is to give an estimate of the "as is"
leased fee market value of the subject property on
an all cash basis.
IDENTIFICATION OF
THE PROPERTY The subject property is a 232-unit apartment
complex built in 1985/86 known as The Hamptons at
Quail Hollow. The subject property is located at
the southeast corner of Quail Hollow Road and
Heathstead Place with a physical address of 4401
Hampton Ridge Drive (management office), Charlotte,
Mecklenburg County, North Carolina.
DATE OF THE APPRAISAL All opinions of value expressed in this report
reflect physical and economic conditions prevailing
as of December 1997, which are assumed to have
remained unchanged as of the date of value of
November 30, 1997.
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition,
----------------------------
1996, sponsored by the Appraisal Institute defines
Market Value as:
"The most probable price which a property
should bring in a competitive and open
market under all conditions requisite to a
fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming
the price is not affected by undue stimulus.
Implicit in this definition is the
consummation of a sale as of a specified
date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically
motivated;
(2) Both parties are well informed or
well advised, and acting in what they
consider their own best interests;
(3) A reasonable time is allowed for
exposure in the open market;
(4) Payment is made in terms of cash in
U.S. dollars or in terms of financial
arrangements comparable thereto; and
(5) The price represents the normal
consideration for the property sold
unaffected by special or creative
financing or sales concessions
granted by anyone associated with the
sale."
It is our opinion that a reasonable time period to
sell the subject is six months to one year and this
----------------------
is consistent with current marketing conditions. A
sale longer than one year may represent a value
other than market value and would require
discounting for time as per USPAP requirements.
7
<PAGE>
Leased Fee Estate: An ownership interest held by a
-----------------
landlord with the right of use and occupancy
conveyed by lease to others; the rights of lessor
or the leased fee owner and leased fee are
specified by contract terms contained within the
lease.
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the
function of this appraisal is for annual
partnership and/or internal purposes.
PROPERTY RIGHTS
APPRAISED The appraiser has appraised the "as is" leased fee
interest subject to short-term leases which are
typically 6 to 12 months in duration at the subject
property.
THREE-YEAR HISTORY According to the Mecklenberg County Assessor's
Office, the subject property is currently owned by
Hamptons Joint Venture/Con Am and has been since
May 30, 1986 (Volume 5233, page 661). No subsequent
transactions of the subject property were noted.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with
accepted techniques, standards, methods, and
procedures of the Appraisal Institute. The values
set forth herein were estimated after application
and analysis by the Sales Comparison and Income
Approaches to value. These approaches are more
clearly defined in the valuation section of this
report. The Cost Approach was not used as this
method of valuation is typically the least reliable
indicator of value in mid-life 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.
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 alone 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 apartments
in the general and immediate area. After these
various items were performed, an analysis was made
in order to estimate the leased fee market value of
the subject on an "as is" basis.
8
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[AREA MAP APPEARS HERE]
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- -------------------------------------------------------------------------------
Located along the central region of North Carolina's
southern border, the city of Charlotte relies on three
strong economic bases: finance, insurance, and real
estate; wholesale and retail trade; and services.
Uniquely, Charlotte is able to offer the opportunities
of a large urban center while maintaining the
qualities of a midsized city. The subject property is
located within south central Charlotte, one of the
city's most affluent areas which is also convenient to
Charlotte's Central Business District (CBD). The
subject's central location, within a prominent
residential area of Charlotte creates a desirable
location for an apartment complex.
CHARLOTTE CITY DATA
OVERVIEW Charlotte is conveniently located between the
Appalachian Mountains, two hours to the west, and the
Atlantic Ocean, three and one-half hours to the east.
Originally settled by Scotch-Irish immigrants in the
1740s, the City of Charlotte, named after England's
Queen Charlotte was incorporated into Mecklenburg
County in 1768. With the discovery of gold near
Charlotte in 1799, the city grew as a financial
center. In the late 1800s, the area's cotton
production along with the invention of the cotton mill
enabled Charlotte to become a leading center for the
textile industry. Soon thereafter, wholesale and
distribution facilities were constructed in
conjunction with the development of railroads and the
state highway system. Fortune magazine recently ranked
-------
Charlotte as the nation's top city with the best pro-
business attitude. Charlotte is now the second largest
banking center in the nation, controlling
approximately $367 billion in assets, according to the
Charlotte Chamber of Commerce. First Union National
Bank and NationsBank are headquartered in Charlotte
and are both in the top ten of the nation's largest
banks. As one of only three southern cities with more
than one professional sports franchise, sports have
become big business in the Charlotte-Mecklenburg MSA,
with the Charlotte Motor Speedway, NBA Charlotte
Hornets and the NFL Carolina Panthers.
DEMOGRAPHICS Over the past two decades, Charlotte's population has
experienced slow, steady growth. The U.S. Census
figures indicate that the population of Charlotte grew
from 241,420 in 1970 to 315,473 in 1980. This
indicates a compound annual growth rate (CAGR) of 2.71
percent over a ten-year period. This growth rate
declined slightly in the 1980s with a 2.30 percent
CAGR indicated by the population of 395,934 in 1990.
By 1995, the population had grown 15 percent to
455,367 or an annual average increase of 3 percent.
The population in 1996 was 465,895 an increase of 2.3
percent from 1995. The 1997 population increased more
slowly to 470,553, a 1 percent increase from 1996.
Between 1980 and 1990, the population of Mecklenburg
County grew at a CAGR of 2.38 percent, slightly
greater than the growth rate for the city of
Charlotte. The 1990 population of Mecklenburg County
was 511,433. The 1995 population total for Mecklenburg
County was 581,466 a 14 percent increase over 1990.
The population for Mecklenburg County grew 2.65
percent for 1996 to 596,875. The 1997 population of
Mecklenberg County is 612,095 representing a 2.55
percent increase over 1996. By the year 2000, this
figure is projected to increase to 661,091 or grow at
2.65 percent annually. The Charlotte-Gastonia-Rockhill
MSA
9
<PAGE>
contains an estimated 1997 population of 1,331,740,
and is projected to increase 1.72 percent annually for
an estimated population of 1,397,600 in the year 2000.
Population trends for the city of Charlotte can be
found in the following table:
CITY OF CHARLOTTE -- 1997
---------------------------------------------
YEAR POPULATION % CHANGE
---------------------------------------------
1950 134,042 ----
1960 201,564 57.1
1970 241,420 19.8
1980 315,473 30.6
1990 395,934 25.5
1995 455,367 15.0
1996 465,895 2.3
*1997 470,553 1.0
*2000 500,857 6.4
* Estimated as of August 1997
ECONOMIC BASE The Charlotte economy is based on its development as a
financial, distribution, and transportation center for
the southeastern region of the United States. The U.S.
Census Bureau ranks Charlotte as the center of the
nation's fifth largest wholesale and distribution
area. Major industries in Charlotte include
microelectronics, metalworking and vehicle assembly,
as well as research and development, high-tech and
service-oriented businesses.
The merger between NCNB and C&S Sovereign, which
formed NationsBank reinforced Charlotte's position as
a major financial center. The more than $156 billion
in total assets of both NationsBank and First Union
have helped to push Charlotte past San Francisco to
the second largest financial center in the nation.
Charlotte, with a total of $367 billion in assets, is
surpassed only by New York in the amount of financial
resources. Additionally, 9 of the nation's top 200
banks have a presence in Charlotte, the most of any
other city in the Southeast. Please refer to the table
on the following page for a listing of Charlotte's
major employers.
<TABLE>
<CAPTION>
CHARLOTTE'S LARGEST EMPLOYERS -- 1997
--------------------------------------------------------
NUMBER
EMPLOYER EMPLOYED
--------------------------------------------------------
<S> <C>
Carolinas Health Care System 11,738
First Union Corporation 11,201
Charlotte-Mecklenburg Schools 10,166
NationsBank 9,198
Duke Power Company 7,470
US Air 7,000
Presbyterian Health Services Corporation 5,557
State of North Carolina 5,509
City of Charlotte 4,900
Mecklenburg County 4,506
</TABLE>
Source: Charlotte in Detail, Charlotte Chamber of
-------------------
Commerce
10
<PAGE>
Since 1991, the number of firms and investment in
Charlotte has been impressive. In 1991, 860 new firms
came to Charlotte employing 10,376 persons. The growth
continued in the three year period from 1992 through
1994 with an average of over 1,100 new firms each year
adding approximately 35,000 new jobs over this period.
This growth continued in 1995 with 1,185 new firms and
18,425 jobs. Year end 1996 realized 1,248 new firms
and 13,134 new jobs. The year 1997 is proving to be
another impressive year. In early 1997, Charlotte
attracted three national call centers, employing over
1,000 people: Vanguard, Inc., a mutual fund group; the
life insurance arm of Equitable Companies; and
Electronic Data Systems. In addition there have been a
number of other economic announcements made recently
including: US Airways announced they plan to move 900
jobs from Winston-Salem to Charlotte in 1998; Stanley
Works plans to move a Detroit door manufacturing plant
to Charlotte creating 250 jobs; Alydaar Software
Corporation plans 250 more hires; Metropolitan
Property & Casualty Insurance of Rhode Island plans to
open a field claims office Charlotte creating 150 new
jobs; Propack, a Columbus, NC based packaging company
is relocating to Charlotte and plans to employ up to
300 workers; and Wilton Connon Packaging Inc. is
expanding and plans to add 150 jobs in its
Westinghouse Boulevard complex in southwest Charlotte.
The Charlotte unemployment rate in 1990 was 3.0
percent. In 1991, however, the Charlotte unemployment
rate jumped to 4.8 percent. The increasing
unemployment trend continued in 1992 and averaged 5.0
percent in Mecklenburg County and 5.5 percent in the
Charlotte-Gastonia-Rockhill MSA. However, in 1993 and
1994 the unemployment rate for Mecklenburg County
dropped, averaging 4.3 and 3.5 percent, respectively.
In 1995, the unemployment rate remained relatively
unchanged with 3.62 percent in Charlotte-Gastonia-
Rockhill MSA. A further decline in the unemployment
rate was witnessed in 1996 when Mecklenburg County
reported an unemployment rate of 2.9 percent. The 1997
figure for Charlotte-Gastonia- Rockhill MSA reported a
slight increase to 3.18 percent.
TRANSPORTATION Charlotte is served by various transportation
facilities including air, rail, truck, bus, and
automobile. The Charlotte/Douglas International
Airport provided service to over 7.7 million
passengers in 1989, 7.8 million passengers in 1990,
and 8.4 million passengers in 1991. In 1993, nearly
8.7 million enplanements were recorded at the
Charlotte/Douglas International Airport. With over
10.4 million passengers in 1995, Charlotte's airport
is ranked as the 17/th/ largest in total operations in
the nation, 20/th/ nationwide in total passengers,
30/th/ nationwide in cargo (freight, mail), and 34/th/
worldwide in total passengers. Eight major airlines
and six commuter carriers at this airport average 500
daily flights and offer direct and nonstop service to
more than 160 cities and a variety of international
destinations. As an expansion of the Douglas
International Airport, USAir has completed a $42
million maintenance, training and parts distribution
complex and spent $15 million to add six gates to
Concourse B. One of the airport's three runways was
extended in 1994 in an effort to reduce air traffic
congestion.
Rail service in Charlotte is provided by Norfolk
Southern Railway Corporation and CSX Transportation.
Each week, more than 270 trains pass through
Charlotte, and approximately 28,000 cars are
classified each day through Norfolk Southern's $50
million computerized facility. Also, Amtrak provides
passenger service through
11
<PAGE>
Charlotte to most of the United States with
north/south connections to east/west lines.
Charlotte ranks as the 11/th/ largest trucking center
and the 5/th/ largest trading area in the nation. Nine
of the top ten trucking firms having a base in
Charlotte, providing a full range of transport
services. Interstate Highways 85 and 77 intersect in
northern Charlotte and are part of the national
interstate system. Interstate Highway 77 links up with
Interstate Highway 40 just to the north of Mecklenburg
County, providing east/west passage. Charlotte's road
system is also facilitated by U.S. Highways 74, 29,
and 21. The State of North Carolina, through its
General Assembly approved the Highway Trust Fund in
1989, an extensive $10.0 billion program through the
year 2000 to improve rural and urban roads in North
Carolina. This program includes the completion of the
I-485 Outer Belt around the state's seven largest
cities and the completion of a four-lane highway
system, which is only 10 miles from 95 percent of the
state's population.
REAL ESTATE MARKETS Charlotte has one of the nation's most active real
estate markets. Permits for $643.8 million of
commercial real estate were issued in 1994, followed
by another $689.8 million in 1995. In 1996, permits
for almost $700 million of commercial real estate were
issued. The critical factor driving the growth of the
real estate market is the continued migration of new
business and job seekers to the Charlotte metropolitan
area.
Some important developments for Charlotte's downtown
real estate market in recent years include the $180
million Ericsson Stadium, home of the NFL Carolina
Panthers which was completed in 1996 and has become
the centerpiece of interest for the region. Located
downtown and designed by HOK Sports Facilities Group
of Kansas City, the stadium features a 72,302-seat
open air complex with 104 luxury suites and extra-wide
concourses. Additionally, the Los Angeles-based
Transamerica Life Companies has transferred three
divisions to Charlotte since 1992 and has recently
completed a 10-story building downtown with
NationsBank. NationsBank Chairman Hugh L. Macon
estimates his company will require an additional 1.2
million square feet of space in downtown Charlotte by
the year 2000 for its expanding workforce. One of the
most visible new projects has been Trammel Crow's
750,000 square foot 30-story 201 South Tryon Building.
The suburban real estate markets have also been active
especially in South Charlotte around the Coliseum,
SouthPark and I-77 and in northeast Charlotte around
University Research Park. An 18-story office tower is
currently planned across from South Park Mall, which
will be the tallest building outside downtown
Charlotte. The impending completion of I-485 through
to Independence Boulevard has set the stage for new
development in this are including Bissell Companies'
414-acre Ballantyne development in which 104,000
square feet Ballantyne One building and golf course
are nearing completion. A retail community center is
also underway as part of this development. Queens
Properties began its planned $50 million 500,000
square foot office development, Professional Office
Center at University Research Park. Crossland
Commercial is developing a major mixed-use project,
University East Business Park on a 68 acre site.
12
<PAGE>
There has been much speculation as to the development
of a fourth regional mall in Charlotte. Some possible
locations include Highway 74 in Matthews and Harris
Boulevard and I-77 in the North. Simon has announced
due diligence on a mall site in the Northeast along I-
85. Plans have been announced for a 1.5 million square
foot retail/entertainment complex at King Grant which
would be Charlotte's largest enclosed shopping mall.
In general, Charlotte's real estate market is strong
in certain sectors with most periods of high vacancy
directly related to overbuilding rather than to more
severe economic problems. Charlotte's diversified
economy and high quality of living creates an
attractive package for many relocating companies. The
following summarizes the major commercial real estate
markets in Charlotte. (An analysis of Charlotte's
apartment market will follow this section of our
report.)
RETAIL - In 1994 over 2.4 million square feet of new
retail space was added. Since 1995, the city's
Northeast submarket near the University City area, and
the South submarket near SouthPark and Carolina Place
Mall have experienced the highest growth rate. There
were two power centers anchored by Best Buy, Wal-Mart,
K-Mart, Sam's Club and Home Depot completed in 1995
which added 1.1 million square feet of retail space to
the Northeast submarket. 1996 saw considerable
activity in the grocery market, where New England
based Hannaford entered the market with five stores.
In light of this new competition, locally owned,
Harris Teeter rehabbed and expanded several locations,
built four new stores and announced three new
locations. Additionally, Win-Dixie has or is opening
nine new stores. Recent development has centered
around Pineville and Matthews in the south, the
University City area in the northeast and Davidson,
Cornelius and Huntersville in theNorth. Recent retail
development includes: Phillips Place, a specialty
retail center under construction in South Park, being
developed by the Harris Group including several
restaurants, theater and top-end retailer; Piper Glen
Center containing 467,000 square feet; and a new
467,000 square foot community center being developed
by Crossland at I-485 and Rea Road in the Southeast.
Another major retail projects include the
redevelopment of The Cotswold Mall to an upscale
shopping center.
In 1997, the Charlotte retail market contains 170
retail centers with over 30,000 square feet and over
21 million square feet of retail space. There are
three regional malls located in the Charlotte retail
market, Southpark, Eastland, and Carolina Place. The
recently completed Carolina Pavilion at the
intersection of Route 521 and Route 485 is Charlotte's
largest, unenclosed retail center totaling 800,000
square feet and featuring tenants such as, Marshall's,
Target, the Sports Authority, and an AMC Theater.
Another significant recently developed Power Center is
the villages at University Place which is
approximately 600,000 square feet.
Retail sales for Mecklenburg County in 1992, 1993, and
1994 totaled $8.94 billion, $9.99 billion, $10.88
billion, respectively and $12.07 billion in 1995.
Retail sales for Mecklenburg County totaled over $12.4
billion in 1996. The retail vacancy rate in Charlotte
averaged 8.3 percent during 1992, up slightly from 8.1
percent in 1991. The 1994 average vacancy rate in
Charlotte increased slightly to 10.02 percent but
declined again in 1995 to 9.0 percent. The 1996
average vacancy rate decreased to 7.8 percent. The
retail vacancy rate for 1997 increased to
approximately 13 percent.
13
<PAGE>
OFFICE - Charlotte's office market is comprised of
over 25 million square feet of rentable space with 3.2
million square feet currently available. The office
market in Charlotte doubled in size over a period from
1982 to 1992. However, from 1992 to 1995 only 350,000
square feet of space was added. This slow growth trend
was reversed in 1996 when 2.75 million square feet was
added. There are eight major multi-tenant buildings
currently under construction totaling 1.5 million
square feet. Development activity is concentrated in
the Uptown, Southpark, and Highway 51 markets. The
citywide vacancy rate is 13 percent, up from 10.6
percent in 1996.
Charlotte's largest concentrations of office space are
the CBD (Uptown) and the Interstate Highway
77/Southwest and Southpark submarkets which benefit
from proximity to the airport and major highways. The
downtown (referred to as Uptown) submarket is
Charlotte's largest and contains 10.7 million square
feet with a vacancy rate of 9.5 percent. The increase
in vacancy from the 9.0 percent rate last year is
primarily due to the addition of the new 30-story
NationsBank/Trammel Crow project at 201 N. Tryon
Street. Other recent developments include Morehead
Place, which opened south of Uptown on East Morehead.
Another 15-story office tower is planned for North
Tryon and several other small buildings are under
construction The 1997 average rental rate for class A
space in the uptown area is up $0.60 over the past
year to $21.04 per square foot.
The suburban office market consists of 13.8 million
square foot. Southpark is the largest and most
prestigious submarket with 3.3 million square feet.
Suburban vacancies have increased from 10.2 percent in
1996 to 15.6 percent in 1997. This increase is largely
due to the amount of new construction added over the
past two years. Recent additions include: Queens
Properties' 310,000 square foot 6000 Fairview Building
in Southpark; Five Coliseum Center, a six-story
building near the Charlotte Coliseum; a new spec
building at Koger Equity's office park on Camel Road;
two new buildings in the Carnegie development by the
Bissell Companies; and in the north, First Union's
Customer Service Center recently expanded to 2 million
square feet and added two new mid-sized office
buildings. Average rents for suburban office space
range from $11.57 per square foot in the East to
$19.43 per square foot in South Park.
INDUSTRIAL - Due to its location, labor supply, and
infrastructure, Charlotte is ranked as the nation's
6/th/ largest distribution center, providing
employment for over 50,000 workers. In addition to
traditional textile and furniture, electronics and
metal working have significant presence. The Charlotte
industrial market has a vacancy rate in the 12 percent
range which is down from 1996 when the vacancy rate
was 14.0 percent.
Charlotte's largest concentrations of industrial space
are located in its southwest submarket. This area
contains approximately 40 percent of the city's 17.5
million square feet. New developments in the Southwest
include: Childress Klein's Brookwood Business Park;
Trammell Crow's Silverlake Distribution Center; and
Crescent Reseources' new eight-building park, Lakemont
West. North has recently become the second largest
submarket with over 2 million square feet added over
the past two years. Recent developments in the North
include: Crescent Resources' Crosspoint Center near
the 77/85 Interchange; Beacon Properties' Long
14
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[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
Creek business Center; The Keith Corporation's Twin
Lakes business Park; Childress Klein's Northpark on
I-77; and Trammel Crow's $20 million 740,000 square
foot distribution center at I-77 and Westinghouse
which will include four buildings and renovation of
the old Sears building
LIVABILITY/
QUALITY OF LIFE Charlotte is located 765 feet above sea level,
situated east of the Blue Ridge Mountains and
west of the Atlantic Ocean, thereby providing a
sheltering effect from extreme temperatures.
Averages for the month of July are 79 degrees, and
January's average temperature registers at 39.3
degrees. Charlotte enjoys a frost-free season of
230 days from mid-March to mid-November. Average
annual participation totals 43 inches. Recreational
activities abound in Charlotte's 152 city-county
parks, 12 public and 13 private golf courses,
Paramount's Carowinds Entertainment Park, nearby
Lake Norman and Lake Wylie. Charlotte is home to
the NFL Carolina Panthers, NBA Charlotte Hornets,
Charlotte Knights AAA-baseball team, Charlotte Rage
(arena football), Charlotte Checkers (hockey team),
Carolina Vipers (soccer), and America's premier
NASCAR facility in the Charlotte Motor Speedway.
Cultural entertainment is available through The
Charlotte Symphony, Opera Carolina, The Mint Museum
of Art (with a collection of over 3,000 pieces),
the N.C. Dance Theatre and North Carolina
Blumenthal Performing Arts Center in uptown
Charlotte.
AREA CONCLUSION Charlotte's major assets include a diversified
economic base, a growing population, low
unemployment rate in relation to the nation, and a
currently expanding infrastructure. A diversified
balance between commerce and industry offers a
stabilized economic base, with the current
developments in Charlotte's CBD revealing an
optimistic outlook for the Charlotte economy.
Although commercial lending is more cautious, the
general forecast for the Charlotte-Mecklenburg
region is for continued growth and a recovery in
some overbuilt real estate markets.
NEIGHBORHOOD
AREA DATA The Appraisal of Real Estate, Eleventh Edition
----------------------------
1996 defines a neighborhood as: "a group of
complimentary land uses." A neighborhood may be
characterized by such uses as residential,
commercial, industrial, recreational, agricultural,
cultural, and civic activities, or a mixture of
these uses. Analysis of the neighborhood in which a
particular property is located is important since
the various economic, social, physical, and
governmental forces which affect the neighborhood
also directly influence the individual properties
located within it. A discussion of these various
factors as they affect the value of the subject
property is presented as follows.
DELINEATION The subject neighborhood is located approximately 6
miles south of Charlotte's CBD. The subject
apartments are more specifically located at the
southeast corner of Quail Hollow Road and
Heathstead Place in the south central region of
Charlotte. The Hamptons at Quail Hollow Apartments
are both visible and accessible from Quail Hollow
Road and Heathstead Place. The subject's main
entrance is located on the east side of Quail
Hollow Road, which is a two-way, two-lane, asphalt-
paved thoroughfare. For purposes of this report,
the subject neighborhood is delineated by Fairview
Road to the north, State Highway 51 (Pineville
Matthews Road) to the south, Providence Road to the
east, and Park Road to the west.
15
<PAGE>
ACCESS Access to other areas of Charlotte is direct and
convenient via several major thoroughfares, which
are in the subject neighborhood, and via several
major freeways, which are outside, but directly
service the neighborhood. Due to the residential
nature of the subject neighborhood, most streets in
the subject's area are either secondary or
residential. Most of Charlotte's major
infrastructure leads to the CBD, creating a spoke-
like effect. Approximately 3 miles west of the
subject is Interstate Highway 77, one of
Charlotte's two major freeways, which provides
access from southwest Charlotte to the CBD.
Additionally, U.S. Highway 74 (Independence
Boulevard) which provides access from southeast
Charlotte/Matthews to the CBD is approximately 6
miles east of the subject.
STAGE OF DEVELOPMENT Land uses in the area vary; however, the land uses
immediately surrounding the subject consist
primarily of single-family or multifamily
dwellings. Commercial development is found on State
Route 51 and on Fairview Road. The Southpark Mall,
which includes about 120 retailers, and other
retail and office developments are located at the
intersection of Fairview Road and Sharon Road, only
about one mile north of the subject property.
Moreover, the currently expanding Harris YMCA
which, offers members a full line of recreational
facilities is nearby at the intersection of Quail
Hollow Road and Sharon Road.
The southern area of the subject neighborhood is
considered to be one of Charlotte's growth areas.
The area between U.S. Highway 521 (Pineville Road)
and State Highway 16 (Providence Road) along State
Highway 51 (Pineville Matthews Road) is known as
Carmel Commons. This area has recently been
developed with restaurants, shopping centers, and
single-family housing developments. A large retail
and office development, The Arboretum, occupies all
four corners of the intersection of State Highways
16 and 51.
POLITICAL JURISDICTIONS The subject property is located within the city of
Charlotte, county of Mecklenburg, and the Charlotte
Independent School District. Beverly Woods
Elementary School is immediately north of the
subject property while Quail Hollow Junior High
School and Mecklenburg Senior High School are about
1-mile southwest of the subject property.
Additionally, a private school, Charlotte Country
Day School, is located about 2 miles northeast of
the subject apartment complex. The subject is
governed by the City of Charlotte zoning ordinance.
UTILITIES/SERVICES All utilities are available to the subject
neighborhood. Duke Power Company provides
electricity; Piedmont Natural Gas provides gas; the
City of Charlotte provides water and sewer;
Southern Bell provides telephone service; and the
Charlotte Department of Sanitation provides trash
service. Police and fire protection is also
provided by the City of Charlotte.
NEIGHBORHOOD CONCLUSION The subject neighborhood is considered to be
convenient to the working and shopping areas of
Charlotte. Due to its location, substantial
residential base, and nearby retail facilities, it
is concluded that the subject neighborhood should
continue to be a viable multifamily market in the
future.
16
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[MARKET AREA MAP APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
The Charlotte apartment market has recently
experienced increases in rental rates and
absorption; however, occupancies have decreased
slightly over the past year with the addition of
new apartment projects to the market. Overall, the
conservative community of Charlotte is considered
to favor single-family detached housing over
multifamily development. With steady population
growth and expanding construction of new
multifamily units underway, the Charlotte apartment
market is expected to adjust as vacancy rates begin
to rise with the completion of new construction
over the next year.
In our analysis, we have referenced statistical
data developed and published by the Charlotte
Apartment Association. The semiannual Charlotte
---------
Apartment Report divides Metropolitan Charlotte
----------------
into six pie-shaped submarkets, some of which are
broken down even further into two to four
sub-submarkets. For purposes of this report, we
have referred to the most recent issue, September
15, 1997. The subject is considered to be within
Charlotte's Southeast submarket which is generally
defined as the area south of Charlotte's CBD,
between South Road on the west and Randolph
Road/Sardis Road on the east. The Southeast
submarket is further divided into three
sub-submarkets. The subject apartment complex is
located within the "Southeast-3" sub-submarket
which is the area of the Southeast market south of
a boundary defined from west to east as Fairview
Road to Sharon Road to Old Providence Road to
Alexander Road to Pineville Matthews Road.
Reference is made to the facing map.
CHARLOTTE
APARTMENT MARKET
HISTORICAL OVERVIEW As previously stated, the Charlotte apartment
market has recently experienced increases in
construction, rental rates, and absorption. The
outlook for Charlotte's apartment market continues
to be optimistic with significant new apartment
construction and expected growth in Charlotte's
employment.
SUPPLY/INVENTORY In August 1997, the Charlotte and Mecklenburg
County apartment market consisted of 56,572 units.
Roughly 51 percent of these are two-bedroom units,
39 percent are one-bedroom, and 10 percent are
three-bedroom units. Charlotte's largest
concentrations of apartment development are in the
East submarket (19,568 units, or 34 percent of the
Charlotte apartment market), the Southeast
submarket (17,937 units, or 32 percent), and the
Northeast submarket (10,096 units, or 18 percent).
Combined, these three submarkets comprise 84
percent of the metropolitan Charlotte apartment
market.
Following is a brief history of permit activity in
the Charlotte multi-family market. Multi-family
construction activity declined sharply in 1990 to
1,555 units
17
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compared to 4,183 the previous year. The decline
continued in 1991 and 1992 when 642 and 499 units
were permitted. In 1993 and 1994 the figures began
to increase, but were still low with 697 and 1,720
units added each year. In 1995, the number of
permits more than doubled from the previous year
with 3,834 units permitted. 1996 was a record year
with 4,230 units. Although 1997, has begun to show
a decline, the number of permits is still
impressive with 3,974 units. Additionally, there
were 3,906 apartment units in 21 communities under
construction in metropolitan Charlotte as of August
1997, with approximately 2,194 units proposed.
The majority of new apartment development has been
in the North, in the University area and Lake
Norman, although construction activity has also
been strong in the South. Most of the new
development has been upscale including many
amenities. Notable new developments in the
subject's Southeast submarket include: Phillips
Place developed by Post Properties near South Park
Mall; 270 units at Preserve at Ballantyne; 140 unit
Reserve developed by Hanover Realty on Sharon Road
West; 424 units at Marquis at Carmel Valley on
Pineville-Mattews Road; and 310 units at Ballantyne
Commons on Ballantyne Commons Parkway. Other
significant new developments include: Greystone
Crossing, a 300 unit project on Stoney Glen Drive
in the East and Huntersville Commons, a 200 unit
project in the North.
DEMAND/ABSORPTION Absorption for the Charlotte apartment market is an
indicator of changes in demand for apartment units
in the Charlotte area. In 1990 and 1991, absorption
decreased from 1989 levels (2,063) to 1,643 units
and 328 units, respectively. However, absorption in
1992 increased to 2,501 units indicating "pent-up"
demand, with a decrease in 1993 to 1,097 units seen
as a corrective measure within the market. Largely
attributable to Charlotte's growing population and
the increased rate of apartment construction, the
absorption of 1,306 units in 1994 and 1,213 units
in 1995 indicated a stabilized absorption. However,
stronger than anticipated job growth during 1995 in
addition to the surge of new product in the market
caused absorption to "spike" with 3,150 units
absorbed in 1996. Absorption has continued to be
strong in 1997 with 3,073 units having been
absorbed. The average annual apartment absorption
in Charlotte for the 7-year period from 1990
through August 1997 has been 1,789 units.
Historical absorption figures for Charlotte as well
as the Southeast submarket can be found in a
following table.
PHYSICAL OCCUPANCY Continuing the decline from 94.0 percent in 1990,
the average physical occupancy rate in the
Charlotte apartment market fell to 88.5 percent in
1991, but increased slightly to 91.3 percent in
1992. According to data obtained from the Charlotte
Apartment Association, occupancy rose again to 95.0
percent in 1993 and rose again to 96.9 percent in
1994, and remained at that level in 1995. The
citywide occupancy rate for Charlotte decreased
slightly to 96.0 percent in 1996 and then decreased
again to 94.7 percent in 1997. There was an
increase in construction
18
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE PHYSICAL OCCUPANCY AND MONTHLY RENTAL RATES
CHARLOTTE, NORTH CAROLINA - AUGUST 1997
- ------------------------------------------------------------------------------------------------------------------------------------
ALL UNITS ONE-BEDROOM TWO-BEDROOM THREE-BEDROOM
- ------------------------------------------------------------------------------------------------------------------------------------
AREA AVG.PHYS. AVG.MO. NO. OF AVG.PHYS. AVG.MO. NO.OF AVG.PHYS. AVG.MO. NO.OF AVG.PHYS. AVG.MO. NO.OF
OCCUPANCY RENTS/SF UNITS OCCUPANCY RENT/SF UNITS OCCUPANCY RENT/SF UNITS OCCUPANCY RENT/SF UNITS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NE 94.7% $0.69 10,096 96.1% $0.77 3,765 93.9% $0.65 5,154 93.5% $0.63 1,177
E 95.2% 0.69 19,568 96.5% 0.76 8,335 94.5% 0.64 9,614 92.9% 0.59 1,619
SE 94.5% 0.76 17,937 94.6% 0.83 7,090 94.4% 0.72 9,167 94.7% 0.70 1,680
SW 94.3% 0.68 3,782 94.3% 0.76 1,354 94.0% 0.64 1,905 95.6% 0.58 523
NW 97.7% 0.52 3,109 97.8% 0.60 757 97.8% 0.50 1,982 97.0% 0.50 370
N 87.3% 0.80 1,480 89.1% 0.87 549 88.3% 0.75 758 77.5% 0.80 173
DN 93.7% 0.90 600 92.8% 0.92 429 95.9% 0.84 170 100% 0.28 1
- ------------------------------------------------------------------------------------------------------------------------------------
Total 94.7% $0.711 56,572 95.5% $0.79 22,279 94.4% $0.67 28,750 93.6% $0.64 5,543
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
with 4,230 new apartment units added in 1996, and a
slightly smaller amount (3,974) in 1997. These
figures indicate that it may be a couple years
before this inventory is absorbed. Therefore
occupancy rates are expected to be stable to
declining over the next few years. A history of
Charlotte's apartment construction, absorption, and
average physical occupancy is as follows:
HISTORY OF THE CHARLOTTE APARTMENT MARKET
---------------------------------------------------
ABSORPTION
-------------------
CONSTRUCTION/
BUILDING PERMITS SOUTHEAST AVERAGE
YEAR (# OF UNITS) CHARLOTTE SUBMARKET OCCUPANCY
---------------------------------------------------
1986 2,159 2,807 756 90.9%
1987 2,453 2,918 441 92.6%
1988 2,227 1,344 97 94.0%
1989 4,183 2,063 315 93.4%
1990 1,555 1,643 53 92.6%
1991 642 328 335 88.5%
1992 499 2,501 597 91.3%
1993 697 1,097 177 95.0%
1994 1,720 1,306 222 96.9%
1995 3,834 1,213 434 96.9%
1996 4,230 3,150 1,383 96.0%
1997 3,974 3,073 858 94.7%
MONTHLY RENTAL RATES Rental rates are determined by supply and demand.
Therefore, it can be expected that the trend of
apartment rents would be a reflection of the
overall multifamily environment. Rental rates
typically increase as a result of an increase in
demand, or a decrease in supply. Rental rates
stagnated from 1990-1992, measuring a paltry 0.8
percent average annual increase; however, over the
last three years rates have increased at an average
annualized pace of 7.9 percent. According to the
Charlotte Apartment Association's survey,
Charlotte's August 1997 average overall apartment
rental rates increased an average of $30.00 or
approximately 5.0 percent since August 1996. As of
August 1997, Charlotte's average monthly rents
(excluding electricity) for apartment units were:
$555 for a one-bedroom unit averaging 706 square
feet ($0.79 per square foot):, $653 for a two-
bedroom unit averaging 980 square feet ($0.67 per
square foot):, and $802 for a three-bedroom unit
averaging 1,267 square feet ($0.64 per square
foot). The average monthly rent for all Charlotte
apartment units was $0.711 per square foot. The
highest average monthly rents per square foot are
found in the Downtown and North submarkets. A
summary of August 1997 average occupancy and
monthly rental rates for the entire Charlotte
apartment market is shown on the facing page.
SUMMARY Approximately 2,240 units have been added to the
market during the six month period ending August
15, 1997, yet the Charlotte Apartment Association
reports the current supply of vacant units in
Charlotte at 2,972 units, or 5.3 percent. Adding
the 3,906 units currently under construction,
vacant apartment units would increase to 6,878.
Charlotte's healthy and expanding economy is
currently producing steady population and
employment growth estimated at an annual rate
19
<PAGE>
of 2.5 and 2.6 percent, respectively. However, as
new multifamily construction is completed vacancy
rates are expected to rise slightly. With a
projected total of 56,572 units in the market,
about 5 percent will be physically vacant due to
turnover, or 2,829 units. Over the past six years,
Charlotte's apartment market has maintained an
average annual absorption rate of approximately
1,800 units. Considering this information, annual
absorption is projected at 1,800 units; therefore,
the remaining 4,049 apartment units (6,878-2,829)
will be absorbed in approximately two to two and
one half years. As a result of new construction
combined with the potential of the 2,194 units
currently proposed, supply may begin to outpace
demand in Charlotte. The Charlotte apartment market
is expected to stabilize at 95 percent physical
occupancy.
SUBJECT APARTMENT
SUBMARKET
SUPPLY/INVENTORY The subject's Southeast apartment submarket
consists of 17,937 or 32 percent of the entire
Charlotte market. As of August 1997, there were a
total of 1,864 new apartment units under
construction in the submarket with 1,075 new units
proposed. Within this submarket, the subject's
Southeast-3 submarket consists of 10,415 units, or
58 percent of the Southeast submarket. Of the 1,864
new units under construction in the Southeast
submarket, 94% or 1,760 are in the Southeast-3
submarket. Additionally, 81% of the proposed units
in the Southeast submarket, or 872 units are
proposed for the Southeast-3 submarket.
DEMAND/ABSORPTION Recent historical absorption for the subject's
Southeast submarket is summarized on page 19. The
average annual apartment absorption in Charlotte's
Southeast submarket for the six-year period from
1990 through 1995 was 303 units. In 1996 absorption
hit an all-time high in the Southeast submarket of
1,383 units. The 1997 absorption, while still a
healthy 858 units, declined from the record level
of the previous year.
PHYSICAL OCCUPANCY The Southeast apartment submarket has one of the
highest occupancy rates in the Charlotte apartment
market. As of August 1997, the average physical
occupancy in the Southeast submarket was 94.5
percent, down from 96.0 and 96.9 percent in 1995
and 1996, respectively. Among the three Southeast
sub-submarkets, Southeast-2 indicated the highest
occupancy at 96.2 percent while the subject's
submarket (SE-3) indicated the lowest occupancy at
93.6 percent.
MONTHLY RENTAL RATES For August 1997, the average monthly rental rate
for all units in the Southeast submarket was $0.76
per square foot per month, which is about 9.1 and
2.7 percent higher than in August 1995 and 1996,
respectively. Among the three Southeast sub-
submarkets, Southeast-3 indicated the highest
average rental rate at $0.77 per square foot per
month, while Southeast-l and Southeast-2 indicated
average rental rates of $0.76 per square foot per
month. A summary of the Southeast submarket average
physical occupancy and monthly rental rates as of
August 1997 is shown on the facing page.
20
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE PHYSICAL OCCUPANCY AND MONTHLY RENTAL RATES
CHARLOTTE, NORTH CAROLINA - AUGUST 1997
- ------------------------------------------------------------------------------------------------------------------------------------
ALL UNITS ONE-BEDROOM TWO-BEDROOM THREE-BEDROOM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AREA AVG. PHYS. AVG. MO. NO. OF AVG. PHYS. AVG. MO. NO. OF AVG. PHYS. AVG. MO. NO. OF AVG. PHYS. AVG. MO. NO. OF
OCCUPANCY RENT/SF UNITS OCCUPANCY RENT/SF UNITS OCCUPANCY RENT/SF UNITS OCCUPANCY RENT/SF UNITS
SE-1 95.5% $0.76 3,561 95.8% $0.83 1,588 95.0% $0.72 1,732 95.9% $0.70 241
SE-2 96.2% 0.76 3,961 95.2% 0.86 1,272 96.9% 0.72 2,097 96.1% 0.68 592
SE-3 93.6% 0.77 10,415 93.9% 0.83 4,230 93.3% 0.72 5,338 93.4% 0.72 847
- ------------------------------------------------------------------------------------------------------------------------------------
Total 94.5% $0.76 17,937 94.6% $0.84 7,090 94.4% $0.72 9,167 94.7% $0.70 1,680
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUMMARY The August 1997 supply of vacant units in the
subject's Southeast apartment submarket was 983
units. Adding the 1,864 new apartment units under
construction reflects 2,847 vacant units. Allowing
for a 5 percent stabilized vacancy of all units
(existing and under construction) 2,704 units would
be available. Based on this analysis the market
would have to absorb 1,807 units to achieve a
stabilized occupancy of 95 percent. If much of the
1,075 units that are proposed are built, this
submarket will see a slight decrease in its
occupancy over the short term.
A recent rent roll as of November 7, 1997,
indicates the subject had 10 out of 232 units
vacant or unrented, reflecting a physical occupancy
of 95.7 percent. This figure is above the August
1997 average of 94.7 percent indicated by the
entire Charlotte apartment market, as well as the
August 1997 average indicated by the Southeast
submarket of 94.5 percent and the Southeast-3
sub-submarket of 93.6 percent. The economic
occupancy of the subject as of November 7, 1997 is
89.2 percent. The difference between physical and
economic vacancy is attributable to the difference
between contract and market rent, and rent
concessions. Due to the subject's location,
condition, and overall appeal, it is expected to
maintain an economic occupancy of 95 percent in the
first year of our discounted cash flow and remain
at that stabilized level throughout the remainder
of the projection period.
21
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE DESCRIPTION
- --------------------------------------------------------------------------------
LOCATION The subject site is located at the southeast corner
of Quail Hollow Road and Heathstead Place. The
physical address of the subject property is 4401
Hampton Ridge Drive, Charlotte, Mecklenberg County,
North Carolina.
SIZE AND SHAPE The subject site contains a total of 33.11 acres.
The tract has frontage along the east line of Quail
Hollow Road and along the south line of Heathstead
Place.
ACCESS AND VISIBILITY Access to the subject site is provided by a
doublewide, asphalt-paved driveway along Quail
Hollow Road. Additional ingress and egress is
possible on Heathstead Place, which is a two-way,
four-laned, asphalt-paved thoroughfare with
concrete curbs and sidewalks. Overall, visibility
of and accessibility to the site are considered
good.
LEGAL DESCRIPTION The subject may be legally described as 33.11
acres, M20-730 Quail Hollow, Charlotte, Mecklenberg
County, North Carolina.
ZONING The subject site is zoned "R-l2MF" Multifamily
Residential District by the City of Charlotte. The
permitted uses under this district include
single-family houses, duplexes, and multifamily
buildings and developments. Certain nonresidential
uses of a public or semipublic nature are also
permitted. Under the "R-l2MF" zoning district, the
area, yard, and height regulations applicable to
the subject as a multifamily dwelling are as
follows:
Minimum lot area.....................11,500 SF
Minimum lot width...................... 55 feet
Minimum side yard...................... 20 feet
Minimum setback........................ 30 feet
Minimum rear yard...................... 50 feet
Minimum unobstructed open space........ 50%
Maximum height......................... 40 feet
Based on the above, the subject improvements are
considered to be a legally conforming use to
current applicable zoning regulations.
EASEMENTS AND
ENCUMBRANCES A physical inspection of the site did not reveal
any easements adversely affecting the subject
property. For the purpose of this appraisal, the
appraisers assume that the subject's value or
marketability is not adversely affected by any
existing easements.
UTILITIES AND DRAINAGE All utilities are available to the site including
sanitary sewer, water, electricity, natural gas,
and telephone. According to the National Flood
Insurance Program, Flood Insurance Rate Map
(Community Panel 370158 0355 A, dated February 1,
1981) the site is located in Zone C, an area of
minimal flooding. Drainage of the
22
<PAGE>
site appears to be adequate; however, the project
manager indicated that sump pumps have been
installed in two buildings to facilitate drainage.
TOPOGRAPHY AND SOIL
CONDITIONS The subject site's topography is rolling and
generally below street grade. 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. Upon inspection,
the soil at the subject site appeared to be a dark
clay mixed soil.
SURROUNDING PROPERTY
USES North: Heathstead Place, with Beverly Woods
Elementary School beyond
South: Single-family residences
East: Condominiums
West: Quail Hollow Road, with multifamily
development (Alexander Place Apartments)
beyond
PRESENT USE The subject site is currently improved with a 232-
unit apartment project known as The Hamptons at
Quail Hollow Apartments which were constructed in
1985/86 and are considered in good condition.
Please refer to the following section of this
report for further discussion of the subject
improvements.
REAL ESTATE TAXES According to the Mecklenberg County Assessor's
Office, the subject property's tax assessor parcel
number is 209-541-01. The subject is located within
the City of Charlotte and the County of Mecklenberg
taxing jurisdictions. The subject property's 1997
assessment is unchanged since 1994 at $10,075,250,
which represents 100 percent of the assessor's
appraised value. The 1997 real estate taxes for the
subject property based on the operating statement
and actual taxes were $134,465. The subject's
estimated 1998 taxes, based on a 4% increase from
the 1997 figure, are estimated at $139,901.
SITE CONCLUSION The subject site is located in the southern portion
of the city of Charlotte in North Carolina or more
specifically, at the southeast corner of Quail
Hollow Road and Heathstead Place. The site contains
33.11 acres. The subject site has good access and
visibility and has all utilities available. The
size and shape of the subject site lend well to a
variety of development possibilities; however, the
site's location, surrounding improvements, and
current zoning make the site more conducive to
multifamily residential usage.
23
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 33.11-acre tract of land, is
improved with a two-story apartment project (with a
sublevel) known as The Hamptons at Quail Hollow
Apartments. The improvements consist of 232
apartment units contained in 24 buildings
constructed in 1985/86. The net rentable area is
245,282 square feet. Please note the net rentable
area has changed slightly from previous reports
based on the most recently provided subject rent
roll (November 7, 1997). Also situated on the site
is a leasing office/clubhouse, swimming pool,
jacuzzi, two tennis courts, and one mail room.
There are eight basic floor plans for the 232
apartment units. The basic features of these floor
plans are as follows:
<TABLE>
<CAPTION>
NO. OF UNITS DESCRIPTION SIZE (SF) TOTAL SF
--------------------------------------------------------------
<S> <C> <C> <C>
20 1BR/1BA 770-784 15,512
8 1BR/1BA* 860 6,880
48 2BR/1BA 945-960 45,780
8 2BR/1BA/* 1,040-1,055 8,380
108 2BR/2BA 1,090-1105 118,710
20 2BR/2BA* 1,180-1190 23,700
16 3BR/2BA 1,295 20,720
4 3BR/2BA* 1 400 5,600
--- ----- -------
232 1,057 245,282
</TABLE>
* sun room
As seen in the figures above, the total net
rentable area of 245,282 square feet divided by the
total of 232 apartment units results in an average
of 1,057 square feet per unit. There are a total of
28 one-bedroom units, 184 two-bedroom units, and 20
three-bedroom units.
The land area is 33.11 acres, resulting in a
density of 7.01 units per acre. Based on the zoning
regulations of 50 percent unobstructed open space,
the density is 14.01 units per acre. The parking
consists of approximately 450 open spaces, of
asphalt construction, which is 1.94 spaces per
unit. The parking ratio is within industry
standards.
FOUNDATION Steel reinforced concrete slab.
FRAMING Wood framed.
ROOF Pitched with asphalt shingles over plywood decking.
24
<PAGE>
EXTERIOR Vertical wood siding with aluminum-framed windows.
INTERIOR FINISH
Ceiling: Painted and textured gypsum board.
Walls: Painted and textured gypsum board.
Floors: Combination of carpeting over pad and vinyl tile
flooring.
PLUMBING All fixtures, drainage systems, equipment, and hot
water heaters assumed to comply with City of
Charlotte and national building codes.
HVAC All electric, individual package system which
provides heating and cooling with individually
controlled thermostats.
ELECTRICAL Switch-type circuit breakers, 120/240-volt single-
phase service, with each apartment individually
metered. Each unit has adequate electrical outlets
and ceiling-mounted light fixtures.
SITE IMPROVEMENTS Concrete sidewalks, asphalt-paved parking areas,
swimming pool, jacuzzi, two concrete tennis
courts, leasing office/clubhouse, and a mail room.
LANDSCAPING Mature trees and hedges, grass covered common
areas and well-maintained flower beds.
AGE AND CONDITION The subject property was built in 1985/86
reflecting an actual age of eleven/twelve years.
The property has been well maintained and reflects
an effective age equal to that of its actual age
of about eleven years.
SITE AREA The subject site has an irregular shape and
contains a total of 33.11 acres.
DEFERRED MAINTENANCE The subject improvements are in good condition
overall; however, some deferred maintenance was
noted upon inspection such as roof replacement,
gutter installation, carpet and appliance
replacement, pool/jacuzzi repair, and landscaping.
Based on estimations of the property manager and
further discussions with regional management, the
cost to cure the deferred maintenance is $249,152
as outlined below.
Roof replacement..........................$72,000
Gutter installation........................15,000
Tie wall replacements......................25,000
Carpet replacement.........................44,000
Appliance replacement.......................5,700
Window cleaning.............................4,000
Pressure wash...............................3,000
Pool furniture..............................6,500
HVAC replacements...........................5,000
25
<PAGE>
Interior upgrades..........................18,000
Landscaping................................30,552
Address signage.............................7,000
Pool related................................3,800
Plumbing/Electrical.........................3,000
Strom drain covers..........................2,100
Water heaters...............................4,500
--------
Total: $249,152
CONCLUSIONS The subject improvements, consisting of 232 units
contained in 24 buildings, were constructed in
1985/86 on a 33.11-acre site and are in good
condition overall. The improvements have been well
maintained.
26
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
Exterior view of clubhouse/leasing office
[PICTURE APPEARS HERE]
Exterior rear view of clubhouse/leasing office and pool area
<PAGE>
[PICTURE APPEARS HERE]
Interior view of clubhouse/leasing office entry area
[PICTURE APPEARS HERE]
Interior view of clubhouse/leasing office living room
<PAGE>
[PICTURE APPEARS HERE]
Exterior view of units
[PICTURE APPEARS HERE]
View of interior street showing units in the background
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 108 living room (model)
[PICTURE APPEARS HERE]
Interior view of Unit 108 dining area and kitchen (model)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 108 bedroom (model)
[PICTURE APPEARS HERE]
Interior view of Unit 205 living room (vacant)
<PAGE>
[PICTURE APPEARS HERE]
Interior view of Unit 205 kitchen (vacant)
<PAGE>
HIGHEST AND BEST USE
- --------------------------------------------------------------------------------
The highest and best use of a property must be
determined because market value depends upon the
property's most profitable use. The Appraisal of Real
---------------------
Estate, tenth Edition, defines highest and best use as:
------
"The reasonably probable and legal use of
vacant land or an 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 LEGAL PERMISSIBILITY - As discussed in the Site, the
subject site is zoned "R-12MF" Multifamily Residential
District by the City of Charlotte. The permitted uses
under this district include single-family houses,
duplexes, and multifamily buildings and developments.
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 has an irregular shape and encompasses
a total of 33.11 acres, allowing for full physical
utilization of the site. The site has frontage along
the east line of Quail Hollow Road and along the south
line of Heathstead Place. The topography of the site is
rolling. Drainage appears to be adequate. The site is
located in Flood Zone "C," an area of minimal flooding.
Upon inspection, it was noted that the subject site is
not adversely affected by any easements, which traverse
the property.
The subject site's location, good access, visibility,
and surrounding uses make it conducive to most
residential uses as permitted under current zoning.
However, based upon the subject site's rolling
topography and densely wooded acreage, it is believed
that apartment development is the most physically
feasible. Therefore,
27
<PAGE>
after considering all of the physical characteristics
of the site noted above plus other data in the
Description of the Site section of this appraisal
report, physically possible land uses would include a
variety of residential development such as apartments,
condominiums, townhouses, or single-family detached
dwellings.
FINANCIAL FEASIBILITY - Financial feasibility is
directly proportional to the amount of net income that
could be derived from the subject. The financial
feasibility of a development can also be viewed as a
function of supply and demand. Therefore, the
feasibility of single-family and multifamily use for
the subject site must be tested.
A brief history of Charlotte's single family home
market will provide insight into the feasibility of
this type of development. Growth for the single-family
residential market in Charlotte slowed in 1990 and
1991. From 1989 to 1990, construction of new single-
family homes in Charlotte declined from 4,283 to 3,650.
The average price of an existing home also declined
from $113,931 in 1989 to $113,570 in 1990. The median
sale price of a new home in Charlotte was approximately
$125,000 in 1990. The slowest home-building year in
Charlotte since 1985 was 1991 when only 3,413 units
were permitted. This represents a 14.3 percent decline
in permitted units from 1990. In 1992, however, permits
were up 30 percent and sales of existing houses
increased by 17.3 percent. This positive trend reversed
itself due to economic uncertainties and fluctuations
in mortgage interest rates and the annual growth rate
for residential building permits declined from 1993 to
1995. Construction permits issued for single-family
construction in 1993, 1994, and 1995 totaled 5,283,
5,505, and 5,520, respectively. These figures calculate
to annual growth rates of 16.1, 4.2, and 0.3 percent,
respectively. Then, in 1996, sales of single family
homes shot up 20 percent and are currently at record
levels. The median price increased 7.5 percent, which
was the best gain in ten years. Permits were up 20
percent in 1996 and a record 12,000 single-family homes
were built. It is not expected that this pace will
continue and approximately 10,000 single-family home
permits are estimated for 1997. Despite all the recent
new development, the market is not expected to become
overbuilt due to the stronger than predicted employment
growth which continues to attract job seekers.
The subject's neighborhood is an affluent older
residential area of Charlotte. Most of the land in this
area of Charlotte has been developed. Therefore, land
values in this area are higher than in less developed
areas, further from the CBD. Consequently, development
of this property for single-family use would have to be
high density in order to achieve the necessary return
to the land. It is our opinion that the market would
require two or more years before there is a great
enough demand for new single-family development in this
area of Charlotte.
Following is a brief history of the apartment market in
Charlotte. Beginning in 1990, the Charlotte apartment
market saw significant declines in development
activity. From 1989 to 1990, new apartment construction
declined from 4,183 to 1,555 units. Construction
activity did not resume at significant levels until
1994 when 1,720 units were built. The period from 1995
to 1997 was record levels of activity with 3,834;
4,230; and 3,974 new units each year. Despite all the
new product, vacancy has remained low at 3 percent to 4
percent from 1994 to 1996.
28
<PAGE>
The vacancy rate has increased slightly to 5.3 percent
in 1997. Absorption declined sharply from 1990 (1,643
units) to 1991 when only 328 units were absorbed.
Absorption rebounded in 1992 to 2,501 units but then
declined in 1993 to 1,097 units. Absorption was 1,306
units and 1,213 units in 1994 and 1995 and then more
than doubled in 1996 to 3,150 units. Absorption
remained strong in 1997 with 3,073 units. Rental rates
remained stable for the three year period from 1990 to
1992 at $.52 and $.53 per square foot. Rates have been
steadily increasing since then from $.55 in 1993 to
$.58 in 1994, $.63 in 1995, $.67 in 1996 and $.70 in
1997.
The Southeast submarket has witnessed similar trends in
construction activity, absorption and vacancy, but has
historically outperformed the citywide averages for
occupancy and average rental rate. The 1997 occupancy
rate in the southeast submarket was slighter lower than
the citywide average at 94.5 percent and the average
rental rate was higher at $.764 per square foot per
month. Based on the above, it is our opinion that the
subject market's rental rates and occupancies justify a
moderate amount of new construction.
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and
financial feasibility of certain land uses, more than
likely a present development of the land would produce
an adequate return on costs. 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 or high-density single-
family/townhouses conducive to the subject site would
produce the highest net return over the longest period
of time.
In summary, both the single-family home and the
multifamily apartment market have shown signs of
improvement over the past tow years after a declining
period. The subject is well located in a prominent area
of Charlotte. 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.
The first reason is 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:
LEGAL PERMISSIBILITY - The subject site is zoned
"R-12MF," Multifamily Residential District by the City
of Charlotte, allowing single-family, duplex, and
multifamily use. The subject has a lot coverage,
setbacks, and density, all of which are estimated to be
satisfying the current zoning ordinance. The subject
property is considered a legally conforming use.
29
<PAGE>
PHYSICAL POSSIBILITY - Based on the subject's size
(33.11 acres), configuration (irregular), the
improvements' positioning relative to the subject site,
and the restrictions imposed by the City of Charlotte,
it is felt that the subject's improvements employ the
maximum use of the site as developed. Moreover, the
subject property contains comparable project amenities
when compared to competing projects.
FINANCIAL FEASIBILITY - The discussion of the financial
feasibility of the subject, as if vacant, would also
apply to the test as improved. Based on the economic
conditions for alternative market segments, it was
concluded that the subject's present improvements are
satisfactory to fulfill this test. The subject property
produces a positive return on market value and hence is
financially feasible. In addition, the estimated
present value, as improved, exceeds the value of the
land.
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. However, the present
improvements are not considered to be the optimum use
due to the age of the improvements and existing
deferred maintenance.
30
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or
techniques are used in the appraisal of real
estate. These are the Cost Approach, Sales
Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an
estimate of value by adding to the land value the
estimated value of the physical improvements. This
value is derived by estimating the replacement cost
new of the improvements and, when appropriate,
deducting the reduction in value caused by accrued
depreciation. According to the Appraisal Institute,
the basic principle of the Cost Approach is that
buyers judge the value of an existing structure by
comparing it to the value of a newly constructed
building with optimal functional utility, assuming
no undue cost due to delay. Thus, the appraiser
must estimate the difference in value between the
subject property and a newly constructed building
with optimal utility.
The Cost Approach was not used as this method of
valuation is typically the least reliable indicator
of value in older projects such as the subject
since estimates of depreciation are difficult to
accurately measure in the marketplace.
Additionally, it is often the perception of
investors that cost does not necessarily equate to
value and the purchase price is not typically based
on construction costs.
SALES COMPARISON
APPROACH This approach produces an estimate of value by
comparing the subject property to sales and/or
listings of similar properties in the immediate
area or competing areas. The principle of
substitution is employed and basically states when
a property is replaceable in the market, its value
can be set by the cost of acquiring an equally
desirable and comparable property. This technique
is viewed as the value established by informed
buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is
capitalization of the net income, which the subject
property will produce during the remaining economic
life of the improvements. This process consists of
two techniques. The first technique estimates the
gross income, vacancy, expenses, and other
appropriate charges. The resulting net income or
net cash flow is then capitalized. The second
technique projects the gross income, vacancy,
expenses, other appropriate charges, net income,
and cash flow over a projected holding period. The
resulting cash flow and reversion (future value)
are discounted at an appropriate rate and added in
order to arrive at an indication of current value
from the standpoint of an investment. These methods
provide an indication of the present worth of
anticipated future benefits (net income or cash
flow) to be derived from ownership of the property.
Both techniques were utilized in analyzing the
subject property.
31
<PAGE>
SUMMARY The appraisers, in applying the tools of analysis
to the valuation problem, seek to simulate the
thought process of the most probable decision-
maker. The appraisers' judgment concerns the
applicability of alternative tools of analysis to
the facts of the problem, the data and information
needed to apply these tools, and the selection of
the analytical approach and data most responsive to
the problem in question.
Thus, depending on the type of property appraised
or the purpose of the appraisal, one approach may
carry more weight or may point to a more reliable
indication of the value of the property being
appraised than the others. In some instances,
because of the inadequacy or unavailability of
data, one or two of the approaches may be given
little weight in the final value estimate.
32
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NORTH CAROLINA AREA
IMPROVED SALES
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
SALE SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF
NO. NAME/LOCATION DATE SALE PRICE BUILT UNITS AVG/UNIT AT SALE /UNIT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Montclair Parc 08/97 $21,013,000 1995 300 284,256 96% $ 7.11
7201 Shannopin Drive 948 $6,739
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
2 The Oaks 06/97 $20,250,000 1996 318 280,948 97% $ 6.48
4915 Misty Oaks Drive 883 $5,725
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
3 Oakwood Gardens 05/97 $23,500,000 1996 288 321,190 80% $ 6.40
2305 New England Street 1,115 $7,140
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
4 Stoney Pointe 03/97 $17,305,000 1991 400 361,520 91% $ 4.27
4616 Stoney Trace Drive 904 $3,864
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
5 Providence Square 02/97 $20,510,000 1969 473 620,948 99% $ 3.68
100 Providence Square 1,313 $4,830
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
6 The Regency 12/96 $11,200,000 1988 178 164,724 94% $ 6.27
4817 Wateer Oak Drive 925 $5,801
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
7 Fairways at Piper Glen 10/96 $24,500,000 1996 336 317,208 92% $ 7.18
6200 Birkdale Valley Drive 944 $6,781
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
SUBJECT 1985/ 232 245,282 96% $ 5.36
Hampton Apartments 1986 1,057 $5,665
4401 Hampton Ridge
Charlotte, NC
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NORTH CAROLINA AREA
IMPROVED SALES
- --------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- --------------------------------------------------------------------------------------------------------------
SALE PER PER OVEALL EXPENSE
NO. NAME/LOCATION SF /UNIT RATE EGRM RATIOS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Montclair Parc $73.92 $70,043 9.62% 7.10 .31694
7201 Shannopin Drive
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
2 The Oaks $72.08 $63,679 8.99% 7.23 .34983
4915 Misty Oaks Drive
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
3 Oakwood Gardens $73.17 $81,597 8.75% 7.93 .30613
2305 New England Street
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
4 Stoney Pointe $47.87 $43,263 8.93% 6.36 .43172
4616 Stoney Trace Drive
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
5 Providence Square $33.03 $43,362 11.13% 4.60 .48752
100 Providence Square
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
6 The Regency $67.99 $62,921 9.22% 7.07 .34828
4817 Wateer Oak Drive
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
7 Fairways at Piper Glen $77.24 $72,917 9.30% 7.31 .32060
6200 Birkdale Valley Drive
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
SUBJECT .3750
Hampton Apartments
4401 Hampton Ridge
Charlotte, NC
- --------------------------------------------------------------------------------------------------------------
</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 sales used
ranged from October of 1996 to August of 1997.
Reference is made to the individual sales data
included in the Addenda section of this report.
SALE 1 is an apartment complex containing 300 units
in 284,256 square feet of rentable area. The average
unit size of a unit is 948 square feet. The apartment
community was developed in 1995 and is situated on
22.35 acres. The unit density is 13.42 units per
acre. The property sold in August of 1997 for $73.92
per square foot or $70,043 per unit and totaled
$21,013,000. This sale is inferior to the subject in
terms of average unit size, but larger in total
number of units. This sale is similar to the subject
in terms of location and occupancy. The sale is
superior to the subject in terms of age, net
operating income per square foot and per unit.
SALE 2 sold in June of 1997 for $20,250,000. The
project includes 318 units built in 1996 and is
situated on 26.5 acres. The sale equates to $63,679
per unit and $72.08 per square foot. The average unit
size is 883 square feet. This sale is superior to the
subject in terms of age, number of units, net
operating income per square foot and unit and
occupancy. This sale is inferior to the subject in
terms of average unit size and location.
33
<PAGE>
SALE 3 is a 288-unit complex built in 1996 on 25.018
acres. The sale occurred in May of 1997 in the amount
of $23,500,000 translating to $81,597 per unit and
$73.17 per square foot. The average unit size is
1,115 square feet. This sale had significant vacancy
(20%) at the time of the sale. This sale is superior
to the subject in terms of age, number of units,
average unit size, net operating per square foot and
unit. The sale is inferior to the subject in terms of
occupancy and location.
SALE 4 sold in March of 1997 for $17,305,000. The
property contains 400 units on 28.37 acres with an
average unit size of 904 square feet. The sale price
equates to $43,263 per unit or $47.87 per square
foot. The sale is superior to the subject in terms of
age and number of units. The sale is inferior to the
subject in terms of average unit size, occupancy,
location, net operating income per unit and square
foot and location.
SALE 5 contains 473 units on 62 acres with an average
unit size of 1,313 square feet. The sale occurred in
February of 1997 in the amount of $20,510,000 or
$43,362 per unit and $33.03 per square foot. The sale
is superior to the subject in terms of number of
units, average unit size, and occupancy. The sale is
inferior to the subject in terms of age and net
operating income per square foot and unit. The sale
has a similar location to subject.
SALE 6 occurred in December of 1996 for $11,200,000.
The property includes 178 units on 15.16 acres. The
sale price translates to $62,921 per unit or $67.99
per square foot. The sale is superior to the subject
in terms of age and net operating income per unit and
per square foot. The sale is inferior to the subject
in terms of number of units, occupancy, and location.
SALE 7 sold in October 1996 for $24,500,000. This
price is equivalent to $77.24 per square foot or
$72,917 per unit. The apartment buildings were built
in 1996 and contain 336 units in 317,208 square feet
of rentable space. The average unit size is 944
square feet. Unit density for this property is 13.50
units per acre. This project is newer in year of
construction (1996) and has more units than the
subject with larger total area, however, the sale has
slightly inferior average unit size. This sale is
superior in net operating income per unit and net
operating income per square foot in relation to the
subject. The sale has inferior occupancy to the
subject. The sale has a similar location to the
subject.
In lieu of specific adjustments, we compared the
improved sales based on the net operating income
(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.
34
<PAGE>
The various sales reflected NOIs per unit ranging
from $2,672 to $7,140 including reserves. The subject
NOI has been approximated at $5,665 per unit from 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. Since all the sales
occurred over the past year to year and one-half, no
adjustment for time is considered necessary or
indicated by the data. The following chart presents
the adjustment process.
<TABLE>
<CAPTION>
SALE SALE SUBJECT ADJUST. ADJUST.
NO. PRICE/UNIT NOI/UNIT NOI/UNIT FACTOR PRICE/UNIT
<S> <C> <C> <C> <C> <C>
1 $70,043 $6,739 $5,665 0.84063 $58,880
2 63,679 5,725 5,665 0.98952 63,012
3 81,597 7,140 5,665 0.79342 64,740
4 43,263 3,864 5,665 1.46610 63,428
5 43,362 4,830 5,665 1.17288 50,858
6 62,921 5,801 5,665 0.97656 61,446
7 72,917 6,781 5,665 0.83542 60,917
</TABLE>
After adjustment, the sales range in unit price from
$50,858 to $64,740 per unit. Sales 2 and 6 are most
similar to the subject in terms of economics. These
sales represent an adjusted value for the subject of
$63,012 and $61,446 per unit. Based on the
indications, we have estimated a value for the
subject of $62,000 per unit. This calculates to a
total value, as follows:
232 units at $62,000/unit ..... $14,400,000 (rounded)
A second method of comparison is by use of the
effective gross rental multiplier (EGRM). In this
analysis, the subject's effective gross rental income
is multiplied by a factor estimated from the sales to
derive an indication of value. The price for which a
property will sell is a function of its relationship
between its effective gross rental income and sale
price. Thus, in this analysis it is important that
only multipliers from properties with vacancy and
operating expense ratios similar to the subject
property be used for comparison.
35
<PAGE>
<TABLE>
<CAPTION>
OPERATING
SALE EGRM EXPENSE RATIO EGR/UNIT
------------------------------------------------
<S> <C> <C> <C>
1 7.10 0.31694 $ 9,860
2 7.23 0.34983 8,805
3 7.93 0.30613 10,290
4 6.36 0.43172 6,799
5 4.60 0.48752 9,425
6 7.07 0.34828 8,901
7 7.31 0.32060 9,981
Subject 0.3750 $ 9,064
</TABLE>
From the DCF analysis in the Income Approach, the
subject is estimated to have a 37.50 percent
operating expense ratio and an EGR per unit of
$9,063 in the first year of the holding period.
The seven sales utilized in this analysis reflect
EGRMs ranging from 4.60 to 7.93. Sales 2 and 6 are
also most similar to the subject in EGR per unit
at $8,805 and $8,901 respectively. The sales
reflect a range of 0.30613 to 0.57134 in
operating expense ratios with sales 2 and 6 again
most similar to the subject at 0.34983 and 0.34828
respectively. Sale 3, which has the highest EGRM
(7.93) and lowest Operating Expense Ratio (.30613)
is not considered to provide a reliable indication
of EGR/Unit for the subject property because of
the high vacancy (20%) at the property at the time
of sale.
Based on the preceding analysis EGRM for the
subject has been estimated at 7.0 resulting in a
total value indication as follows:
$2,102,768 x 7.0.............$14,700,000 (rounded)
The NOI per unit method presented a value
indication of $14,400,000 and the effective gross
income multiplier indicated a value of
$14,700,000. Most weight has been given to the net
operating income per unit method due to the
ability of this method to account for all the
various physical and economic differences in each
sale. The limitations of the effective gross rent
multiplier method to account for differences in
vacancy and operating expense ratios render this
approach less reliable. The NOI per unit method
indicates a market value of $14,500,000. From this
value the $249,152 in deferred maintenance is
deducted to arrive at the "as is" market value of
the subject. Therefore, it is our opinion that the
leased fee market value of the subject property
based on the indication provided by the Sales
Comparison Approach, all cash, on an "as is" basis
as of November 30, 1997 is
FOURTEEN MILLION THREE HUNDRED THOUSAND DOLLARS
($14,300,000)
36
<PAGE>
[AREA MAP OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COMPARABLE RENT SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF AVG. 1997 1997 1997
NO. NAME/LOCATION BUILT UNITS UNIT PHYS. UNIT TYPE UNIT RENT/MO. RENT/SF/M AMENITIES/COMMENTS
SIZE (SF) OCCUP. SIZE/SF O.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Alexander Place 1984- 309 1,045 89% 1BR/1BA 900 $750-775 $0.83-0.86 Unit amenities include
6316 Cameron 1985 1BR/1BA/DEN 1,063 805-830 0.76-0.78 fireplaces and W/D.
Forest Lane 2BR/2BA 1,093 825-885 0.76-0.81 Some units have microwave,
vaulted ceilings, and
ceiling fans. Project
amenities include 2
swimming pools, 2
clubhouses, tennis courts,
hot tub, golf cage, and
laundry facilities. There
are 47 enclosed garages,
which rent for $100 per
month.
Consessions: $50 off rate
for 1 BR
- ------------------------------------------------------------------------------------------------------------------------------------
2 Summit Simsbury 1985 100 874 93% 1BR/1BA 760 $720-735 $0.95-0.97 Unit amenities include
4428 Simsburyd 2BR/2BA 950 855-920 0.90-0.97 fireplaces, w/d, and
microwave. Some units
have vaulted ceilings.
Project amenities include
a pool and clubhouse.
Concessions: $75-$100
off first month rent.
Coupon in Apt. Guide for
additional $200 off 1st
mo. rent. $50 off rate
for 1 BR.
- ------------------------------------------------------------------------------------------------------------------------------------
3 Providence Court 1996 420 1,102 74% 1BR/1BA 773 $650 $0.84 Unit amenities include
8110 Providence 1BR/1BA 875 690-795 0.79-0.91 fireplaces, microwave,
1BR/1BA/DEN 1,003 750-855 0.74-0.85 vaulted ceilings, ceiling
2BR/1BA 1,192 860-1,095 0.72-0.83 fans, W/D connections,
2BR/2BA 1,372 1,020 0.79-0.87 some units have w/d.
3BR/2BA/TH 1,621 1,700 1.05 Project amenities include
2 pools, jacuzzi, tennis
court, and a clubhouse.
Concessions: 1/2 mo. off
first month with 12 mo.
lease, 1/4 mo off on 6
mo. lease
- ------------------------------------------------------------------------------------------------------------------------------------
4 Summit Ballentyne 1997 246 1,107 56% 1BR/1BA 837 $670 $0.80 Unit amenities include W/D
13901 Summit Current 2BR/1BA 996 780 0.78 connections. Some units
Commons 2BR/2BA 1,155 850 0.74 have washer/dryer,
2BR/2BA/TH 1,400 1,280 0.92 microwave, fireplace,
3BR/2BA 1,315 1,010 0.77 ceiling fan, covered
parking. Project
amenities include a pool,
clubhouse, tennis court,
exercise room, and laundry
facilities.
Concessions: Currently
offering one month's fre
rent on 12-month leases
or free vacation.
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE RENT SUMMARY (CONT'D)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR NO. OF AVG. 1997 1997 1997
NO. NAME/LOCATION BUILT UNITS UNIT PHYS. UNIT TYPE UNIT RENT/MO. RENT/SF/M AMENITIES/COMMENTS
SIZE (SF) OCCUP. SIZE/SF 0.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Crestmont 1996 282 838 74% 1BR/1BA 816 675 0.82 Unit amenities include
9200 Otter 1BR/1BA 890 700 0.78 fireplaces, W/D, covered
1BR/1BA/DE 1,040 765 0.73 parking, microwave.
N 1,115 785 0.70 Project amenities include
1BR/1BA/DE 1,201 860 0.70 a pool, 2 tennis courts,
N 1,440 1,200 0.83 jacuzzi, exercise room,
2BR/1BA clubhouse, and laundry
3BR/2BA facilities.
Concessions: 1/2 mo. free
on 2 BR/2BA.
- ------------------------------------------------------------------------------------------------------------------------------------
SUBJECT 1985 232 1,051 96% 1BR/1BA 770 665 0.84-0.91 Unit amenities include
PROPERTY 1BR/1BA 860 735 0.85 microwaves, fireplaces,
THE HAMPTONS 2BR/1BA 960 715 0.74 walk-in closets, outside
4401 HAMPTONS RIDGE 2BR/1BA 1,055 765 0.73 storage, and W/D units.
DRIVE 2BR/2BA 1,090 755 0.69 Some units have vaulted
2BR/2BA 1,180 835 0.70 ceilings or bay windows.
3BR/2BA 1,295 905 0.69 Project amenities include
3BR/2BA 1,400 975 0.68 a pool, spa, 2 tennis
courts, and a clubhouse.
Concessions: Move in by
the 5th of month and get
next month free.
====================================================================================================================================
</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. Other income is also estimated and includes
laundry income, pet deposits, etc. 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, 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 mortgages were 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 the
discounted cash flow and the direct capitalization
methods in valuing the subject property on an all cash
basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental
income from the various rental units, as well as
laundry income, pet deposits, forfeited security
deposits, and miscellaneous income. Information
provided by the on-site leasing agents indicated the
subject's current rent schedule to be as follows:
37
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================
SUBJECT - RENT ANALYSIS
- --------------------------------------------------------------------------------------------------------
UNIT BASE BASE MONTHLY
UNIT TYPE SIZE(SF) RENT/MONTH RENT/SF COMPARABILITY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 770-784 $665-765 $0.86-0.98 --
Summit Simsbury 1BR/1BA 760 730 Ave. 0.96 Superior
Providence Court 1BR/1BA 773 650 0.84 Similar
Crestmont 1BR/1BA 816 675 0.82 Similar
- --------------------------------------------------------------------------------------------------------
SUBJECT 1BR/1BA 860 $735-765 $0.85-0.89 --
Alexander Place 1BR/lBA 900 750-775 0.83-0.86 Similar
Providence Court 1BR/1BA 875 690 0.79 Similar
Summit Ballentyne 1BR/1BA 837 670 0.80 Slightly Inferior
Crestmont 1BR/1BA 890 700 0.78 Slightly Inferior
- --------------------------------------------------------------------------------------------------------
SUBJECT 2BR/1BA 945-960 $715-765 $0.76-0.80 --
Alexander Place 1BR/1BA/DEN 1,063 805-830 0.76-0.78 Similar
Summit Simsbury 2BR/2BA 950 855-920 0.90-0.97 Superior
Summit Ballentyne 2BR/1BA 996 780 0.78 Similar
- --------------------------------------------------------------------------------------------------------
SUBJECT 2BR/1BA 1,040-1,055 $765-795 $0.74-0.75 --
Providence Court 2BR/1BA 1,003 750-855 0.74-0.85 Similar
Alexander Place 1BR/1BA/DEN 1,063 805-830 0.76-0.78 Similar
- --------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,090 $755-805 $0.69-0.73 --
Alexander Place 2BR/2BA 1,093 825-885 0.76-0.81 Superior
Providence Court 2BR/2BA 1,192 840-860 0.71-0.72 Similar
Crestmont 2BR/1BA 1,201 860 0.70 Similar
- --------------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,180-1,190 $755-855 $0.64-0.72 --
Alexander Place 2BR/2BA 1,093 825-885 0.76-0.81 Similar
Summit Ballentyne 2BR/2BA 1,155 850 0.74 Similar
- --------------------------------------------------------------------------------------------------------
SUBJECT 3BR/2BA 1,295 $905-955 $0.70-0.74 --
Providence Court 3BR/2BA 1,372 1,095-1,020 0.79-0.87 Slightly Superior
Summit Ballentyne 3BR/2BA 1,315 1,010 0.77 Slightly Superior
- --------------------------------------------------------------------------------------------------------
SUBJECT 3BR/2BA 1,400 $975-1,005 $0.70-0.72 --
Providence Court 3BR/2BA 1,621 1,700 1.05 Superior
Crestmont 3BR/2BA 1,440 1,200 0.83 Superior
========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
---------------------------------------------------------------------------------
PLAN UNIT TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO. TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1A1 1BR/1BA 8 770 $ 665 $0.86 $ 5,320
1B1 2BR/1BA 12 945 715 0.76 8,580
1B1SCH 2BR/1BA 4 1,040 765 0.74 4,160
1B2 2BR/2BA 28 1,090 755 0.69 21,140
1C2 3BR/2BA 4 1,295 905 0.70 3,620
2AlB 1BR/1BA 4 770 695 0.90 2,780
2A1S 1BR/1BA 4 860 735 0.86 2,940
2B1 2BR/1BA 8 945 735 0.78 5,880
2B1B 2BR/1BA 8 960 745 0.78 5,960
2B1BVS 2BR/1BA 4 1,055 795 0.76 3,180
2B2 2BR/2BA 14 1,090 775 0.71 10,850
2B2B 2BR/2BA 24 1,105 785 0.71 18,840
2B2S 2BR/2BA 10 1,180 835 0.71 8,350
2C2 3BR/2BA 2 1,295 925 0.71 1,850
2C2B 3BR/2BA 4 1,295 935 0.72 3,740
2C2S 3BR/2BA 2 1,400 975 0.70 1,950
3A1BV 1BR/1BA 8 784 715 0.91 5,720
3A1BVS 1BR1BA 4 860 765 0.89 3,060
3B1BV 2BR/1BA 20 960 765 0.80 15,300
3B2BV 2BR/2BA 42 1,105 805 0.73 33,810
3B2BVS 2BR/2BA 10 1,190 855 0.72 8,550
3C2BV 3BR/2BA 6 1,295 955 0.74 5,730
3C2BVSV 3BR/2BA 2 1,400 1,005 0.72 2,010
--- ----- ----- ---- ------
232 1,057 $ 785 $0.74 $182,220
</TABLE>
S = sun room, B = bay window, V = vaulted ceiling
The subject's rents have been compared to closely located
and similarly designed apartment complexes in the subject's
neighborhood area. For the purpose of this analysis, we have
considered five apartment complexes that were found to be
most comparable. They range in total number of units from
100 to 309 units, in average unit size from 874 to 1,107
square feet, and in physical occupancy from 74 to 93
percent. These comparable rentals are summarized on a
preceding page.
All of the comparables surveyed were located within the
subject's Southeast submarket. Rent Comparable 1 is the most
comparable to the subject overall; specifically, in terms of
location, overall physical condition, and average unit size.
This comparable indicates an average base rental rate of
$0.791 per square foot per month and a current occupancy
rate of 89 percent. The other projects used in this analysis
were also comparable to the subject and were used as
additional indications of market rents in the subject's
area. A chart on the facing page provides a detailed rental
analysis of the subject and comparables.
38
<PAGE>
After accounting for each of the aforementioned factors and
the subject's current performance (rent roll dated November
7, 1997), we are of the opinion that all of the subject's
current quoted rental rates are at market for all floor
plans. Therefore, in consideration of the amount of
apartment construction in the overall Charlotte apartment
market, as well as the subject's "SE-3" submarket, and in
relation to the subject's occupancy and actual rates, the
projected market rental income for the subject is summarized
as follows:
Gross Annual Rental Income: $182,220 x 12 months =
$2,186,640
OTHER INCOME In addition to rental income from apartments, other income
is generated by vending machines, forfeited security
deposits, pet deposits, late charges, and application fees.
Other Income in 1989 was reported at $13,485 or $0.06 per
square foot. This figure rose by approximately 58 percent
during 1990 to $0.09 per square foot, or a total of $21,344.
Other Income in 1991 rose another 33 percent to $0.12 per
square foot or $29,762. For 1992, other income totaled
$24,591 or $0.10 per square foot, and in 1993 grew to
$29,141 or $0.12 per square foot. Actual 1994 and 1995 other
income totaled $26,115, or $0.11 per square foot and
$25,974, or $0.11 per square foot, respectively. Actual
figures for 1996 show a total of $26,778 or $0.11 per square
foot. The figure for the 12 months ending November 30, 1997
was $19,178 or $0.08/SF. Based on our experience with
similar type properties and the actual performance of the
property, it is our opinion that other income in the amount
of $0.11 per square foot is typical for a project such as
the subject. This equates to a total "Other Income" of
$26,800. Over the first year, rents are not estimated to
increase, thus, the projected potential gross income for
Year 1 of the cash flow as if 100 percent occupied is as
follows:
Gross Rental Income $2,186,640
Other Income ($0.11/SF) 26,800
---------
Total Potential Gross Income $2,213,440
VACANCY AND
COLLECTION LOSS
ESTIMATE In a stable market, economic 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, the loss of income
resulting from bad debt or other vacancies, and for the lag
time between market rent and contract rent locked-in for six
to 12 months. It also includes the continuing loss of income
due to non-revenue generating units, such as those used for
models and for employees.
According to our market analysis, the average physical
vacancy in the Charlotte apartment market was 5.3 percent in
August 1997. This is up from the 1996 average physical
vacancy of 4.0 percent and the 3.1 percent reported in
August 1994 and 1995. The subject's Southeast submarket had
a 5.5% vacancy rate in August 1997 and more specifically,
the "SE-3" sub-submarket indicated an average physical
vacancy of 6.4 percent in August 1997. In surveying the
subject's direct competition, the current physical vacancies
ranged from 7 to 11 percent for completed projects.
Apartment construction in the Charlotte market has been
strong over the past three years. In 1995, 3,834 units were
built and 4,230 and
39
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
HAMPTONS AT QUAIL HOLLOW HISTORICAL EXPENSES
RENTABLE SQUARE FEET/UNIT
- ----------------------------------------------------------------------------------------------------------------------------------
COMPARABLE 1992 1993 1994 1995 1996 1997 FY 1998 BRA
PROJECTION
S
- ----------------------------------------------------------------------------------------------------------------------------------
NRA (SF) SUBJECT PROPERTY
No. Units 243,720
Year Built 232
Average Unit Size (SF) 1985
1,051
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expense Category $/SF $/Unit $/SF $/Unit $/SF $/Unit $/SF $/Unit $/SF $/Unit $/SF $/Unit $/SF $/Unit
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Taxes 0.50 525 0.56 588 0.55 576 0.52 560 0.53 50 0.55 580 .57 603
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance 0.05 51 0.05 53 0.05 57 0.06 63 0.06 65 0.06 61 .07 75
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses 0.81 850 0.78 819 0.74 774 0.72 757 0.76 801 0.86 906 .81 858
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities 0.33 348 0.34 357 0.35 368 0.37 388 0.38 399 0.36 375 .42 440
- ----------------------------------------------------------------------------------------------------------------------------------
Repair & 0.25 267 0.30 315 0.30 320 0.32 334 0.32 330 0.29 309 .35 374
Maintenance
- ----------------------------------------------------------------------------------------------------------------------------------
Contract Services 0.17 188 0.16 168 0.17 175 0.17 181 0.16 171 0.16 1169 .19 198
(Grounds)
- ----------------------------------------------------------------------------------------------------------------------------------
General 0.05 49 0.07 74 0.06 70 0.08 86 0.07 77 0.07 76 .09 99
Administrative
- ----------------------------------------------------------------------------------------------------------------------------------
Management 0.32 334 0.34 357 0.36 381 0.39 405 0.41 429 0.41 432 .43 5%
- ----------------------------------------------------------------------------------------------------------------------------------
SUBTOTALS $2.48 $2,612 $2.60 $2,798 $2.58 $2,721 $2.63 $2,759 $2.68 $2,832 $2.76 $2,908 2.93 $3,098
EXPENSES
==================================================================================================================================
ADJUSTMENT NA NA NA NA NA NA NA NA NA NA NA NA NA NA
FACTOR
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $2.48 $2,612 $2.60 $2,798 $2.58 $2,721 $2.63 $2,759 $2.68 $2,832 $2.76 $2,908 $2.93 $3,098
==================================================================================================================================
</TABLE>
Note: Columns may not total due to rounding.
<PAGE>
3,974 units have been added to the apartment market in 1996
and 1997, respectively. An additional 2,194 units are
proposed for 1998. As new units become available, vacancy
rates will begin to increase. As of November 7, 1997, the
subject's physical vacancy was 4.3 percent, while its
economic vacancy was 10.2 percent. Economic vacancy is
calculated by dividing the collected rent by market rent.
Typically, economic vacancy can lag physical vacancy by two
to eight percent. Based on our analysis, we have applied an
economic vacancy allowance of 5 percent in the first fiscal
year and remain at that stabilized level throughout the
remainder of our cash flow analysis.
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 requires 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 the market. In addition, the total
expenses per square foot should be within a range typical
for similar projects. Reserves for replacement are estimated
based on age, condition, and construction quality. It is re-
emphasized that all income, as well as expense estimates,
are based on the assumption of competent and prudent
management.
We have based our estimate of project expenses on comparable
apartment projects as well as the actual historical
performance of the subject property. The subject property's
actual 1992, 1993, 1994, 1995, and 1996 expenses as well as
fiscal year end 1997 (the 12 months ending November 30,
1997) are shown. Bach Realty Advisor's estimated expenses
for the subject property in Fiscal Year 1998 are also
displayed. The sales comparables adjusted for time, range in
expenses from $2.88 to $3.61 generally without reserves. The
newer projects reflect the lower expenses in the range.
Primarily based upon the analysis of the subject
historically, we have developed the following expense
estimates for the subject.
REAL ESTATE TAXES - The Mecklenberg County Assessor's Office
coordinates the real estate taxes for the subject
apartments. The property is subject to the City of Charlotte
and the County of Mecklenberg taxing jurisdictions. The 1997
real estate tax amount was $134,465 according to the subject
property's operating statement. The subject's estimated
taxes for the first year of our cash flow is $139,901 or
$.057 per square foot and $603 per unit. This expense is
increased 4 percent per year for the duration of the holding
period.
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 Charlotte area. The subject's actual figures
for 1992, 1993, 1994, 1995, and 1996 were $0.05 per square
foot, $0.05 per square foot, $0.05 per square foot, $0.06
per square foot, and $0.06 per square foot, respectively.
The 1997 insurance expense was $0.06 per square foot. These
40
<PAGE>
historical expenses appear reasonable but at the lower end
of the range in relation to Expense Comparables 1 through 3
which indicated an insurance expense range from $0.07 to
$0.10 per square foot. We estimated the subject's insurance
expense at $0.07 per square foot or $75 per unit in the
first year of our projection for a total of $17,285. This
expense is increased by 4 percent annually throughout our
projection period.
OPERATING EXPENSE - This category includes salaries for
office managers and leasing agents, maid services, payroll
taxes, and FICA, security, advertising, and promotions. The
subject's actual 1992, 1993, 1994, 1995 and 1996 expenses
were $0.81 per square foot, $0.78 per square foot, $0.74 per
square foot, $0.72 and $0.76 per square foot, respectively.
The 1997 expense for the 12 months ending November 30, 1997
was $0.86 per square foot. The expense comparables indicated
an operating expense range from $0.41 to $1.17 per square
foot, or from $369 to $814 per unit. Comparable 2 had
significantly higher operating expenses on a square foot
basis due to its small average unit size. Based on the
subject's historical expenses and those of the comparables,
the appraisers have estimated a 1998 Fiscal Year operating
expense of $198,973 or $0.81 per square foot. The per unit
expense is $858. This expense is increased 4 percent
annually throughout our projection period.
UTILITIES - This expense category includes electricity, gas,
water, and sewer for the apartment's common area and vacant
units. The subject's 1992, 1993, 1994, 1995 and 1996
expenses were $0.33, $0.34, $0.35, $0.37 and $0.38 per
square foot, respectively. The subject's utility expense in
1997 was $0.36 per square foot. Utility expenses for the
comparables ranged from $0.37 to $0.49 per square foot.
Based on the subject's historical, budgeted, and year-to-
date utility expense and comparing these figures with those
of the expense comparables, the appraisers have estimated a
1998 Fiscal Year utility expense of $0.42 per square foot or
$440 per unit for a total of $102,037. This expense is
increased 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 1992, 1993,
1994, 1995, and 1996 expenses were $0.25 per square foot,
$0.30 per square foot, $0.30 per square foot, $0.32 per
square foot and $0.32 per square foot respectively. The
subject's repair and maintenance expense in 1997 was $0.29
per square foot. The expense comparables offered a repair
and maintenance expense range from $0.51 to $0.66 per square
foot. Due to the age, overall condition, and ongoing
maintenance of the subject property, the appraisers have
estimated a repair and maintenance expense of $0.35 per
square foot or $374 per unit which, is a total of $86,732.
This expense is increased 4 percent annually throughout our
projection period.
CONTRACT SERVICES - This expense category includes mainly
landscaping services. The subject's actual figures for 1992,
1993, 1994, 1995, and 1996 were $0.17 per square foot, $0.16
per square foot, $0.17 per square foot, $0.17 per square
foot, and $0.16 per square foot, respectively. The 1997
contract services expense was $0.16 per square foot.
Believing that the expense comparable's grounds expense
41
<PAGE>
category is most similar to the subject's contract services
expense category, the appraisers have compared these two
categories. The expense comparables offered a range from
$0.15 to $0.28 per square foot. Based on the subject's
expenses as well as those offered by the expense
comparables, the appraisers have estimated the Fiscal Year
1998 contract services expense to be $0.19 per square foot
or $198 per unit. The total estimated contract services
expense for the subject is $45,917. This expense is
increased 4 percent annually throughout our projection
period.
GENERAL ADMINISTRATIVE - This expense category includes
professional, legal, and accounting costs, administration
costs, etc. This expense, however, does not include
management. The actual 1992, 1993, 1994, 1995, and 1996
expenses were $0.05 per square foot, $0.07 per square foot,
$0.06 per square foot, $0.08 per square foot, and $0.07 per
square foot, respectively. The 1997 General Administrative
expense was $0.07 per square foot. The expense comparables
offered a range from $0.12 to $0.48 per square foot. For
Fiscal Year 1998, we have estimated this expense for the
subject at $0.09 per square foot or $99 per unit. Combining
administrative and operating expenses for the subject totals
$0.90 per square foot. For the comparables, the same
combination yields a range from $0.54 to $1.29 per square
foot. Therefore, the estimated General Administrative
expenses for the subject appear reasonable. This estimated
expense of $22,958 is increased 4 percent annually
throughout our projection period.
MANAGEMENT - This includes the fee to outside management or
ownership for managing the property. This expense is
typically a percentage of the effective gross income of the
property. The industry standard for an apartment complex of
this size and quality is between 3 and 5 percent of
effective gross income. The subject is reportedly at 5
percent of effective gross income. The subject's actual
1992, 1993, 1994, 1995, and 1996 expenses were $0.32, $0.34,
$0.36, $0.39, and $0.41 per square foot, respectively. The
management expense in 1997 was $0.41 per square foot. Based
on the subject's historical and annualized management
expenses, we have projected the subject's management fee at
5 percent of effective gross income in each year of our
analysis. This amount equates to $105,138 or $0.43 per
square foot in the first fiscal year. This expense equals
$453 per unit .
EXPENSE SUMMARY The subject's total expenses in 1992, 1993, 1994, 1995, and
1996 were $2.48, $2.60, $2.58, $2.63, and $2.68 per square
foot, respectively and an expense per unit range from $2,612
to $2,832. The 1997 total expense was $2.76 per square foot
or $2,908 per unit. The expense comparables offered an
adjusted total expense range from $2.51 to $3.69 per square
foot or $2,256 to $2,972 per unit. Based on the preceding
analysis, the appraisers have estimated a 1998 Fiscal Year
total expense of $2.93 per square foot or $3,098 per unit.
This is within the range indicated by the comparables and
the appraisers believe this estimation is reasonable in
relation to the market and is reflective of the subject's
current expense operations. When reserves are included the
expenses are $3.21/SF and $3,398/Unit and in line with other
complexes.
42
<PAGE>
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These may
include roof covering, carpeting, appliances, compressors,
parking areas, drives, etc. The subject was constructed in
1985/86 and appears to have had ongoing maintenance since
its construction. It is our opinion that a reserve allowance
of $0.28 per square foot or $300 per unit is adequate to
provide for the continued maintenance of the project. This
reserve allowance was included in our expenses prior to
concluding the net operating income and is consistent with
the market's handling of reserves.
DEFERRED
MAINTENANCE This category includes replacement of flooring, roof
repairs, HVAC repair, exterior repairs such as tie wall
replacements, gutter installation, asphalt repair, and
landscaping and shrubs that need to be made in 1997
according to on-site management. The subject improvements
are in good condition and exhibited only minor deferred
maintenance at the time of our inspection. Based on
information provided by the subject's regional management,
this has been estimated at $249,152 for the subject property
and is taken as a lump sum deduction of $250,000 from value
which, is what a prospective buyer would do. This amount
includes items proposed by on-site management for Fiscal
Year 1998 and an itemized list can be found in the
Improvements section of this report.
DISCOUNTED CASH
FLOW ANALYSIS
DISCUSSION A reasonable 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
43
<PAGE>
backing off on revenue growth assumptions. However,
apartment investment continues to be attractive for pension
funds and REIT's and we anticipate investors will continue
to find the apartment market a desirable investment.
DISCOUNT RATE Over the past several years, the internal rate of return
(IRR) has gained greater usefulness and market acceptance as
an investment measure. IRR is the yield on an investment
based on an initial cash investment, annual cash flows to
the property, as well as resale proceeds. IRR allows for
return on investment as well as recapture of the original
investment when factoring in the reversion. To simulate this
process, we have relied upon several investor surveys, which
detail reasonable yields or IRR requirements of purchasers.
We have used this rate as a discount rate that, when applied
to projected cash flows and net resale proceeds (reversion),
results in the present value of the property.
According to the Third Quarter 1997 Korpacz Real Estate
-------------------
Investor Survey which is compiled by Peter F. Korpacz for
---------------
apartment properties, indicated a return requirement ranging
from 10.0 to 12.5 percent which has not changed from a year
earlier. 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 50-150 basis points (0.50 to 1.5 percent)
could be added to "Baa" bond rates in a normal market. Due
to the current construction taking place in the Charlotte
apartment market and the subject's submarket, we believe
additional risk exists. Based on the previous data, we
believe additional risk is inherent in the subject property,
and therefore, a 12.0 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 7.5 to
10.5 percent.
The most comparable sales indicate "going-in" capitalization
rates as follows:
<TABLE>
<CAPTION>
SALE IDENTIFICATION SALE DATE CAPITALIZATION RATE
------------------------------------------------------------------
<S> <C> <C> <C>
1 Montclair Park 08/97 9.62%
2 The Oaks 06/97 8.99%
3 Oakwood Gardens 05/97 8.75%
4 Stoney Point 03/97 8.93%
5 Providence Square 02/97 11.13%
6 The Regency 12/96 9.22%
7 Fairway @ Piper Glen 10/96 9.30%
</TABLE>
44
<PAGE>
The 8.75 to 11.13 percent capitalization rate range
presented above includes reserves. The sales most similar to
the subject in terms of net operating income per unit are
Sales 2 and 6 and these sales reflect "going-in"
capitalization rates of 8.99 and 9.22 percent respectively.
The most recent sales are Sales 1 and 2 with 9.62 percent
and 8.99 percent capitalization rates. Therefore, after
consideration of the above discussion it is our opinion that
a 9.25 percent "going-in" capitalization rate is appropriate
and reasonable in this market for the subject property.
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, 0.75 percent is added to the
"going-in" capitalization rate for these factors. A terminal
capitalization rate of 10.0 percent is felt to be
appropriate for the subject property.
CASH FLOW
ASSUMPTIONS Rents were based on an average current monthly rental rate
of approximately $0.74 per square foot per month. During the
projection period, rents were not increased during the first
fiscal year (1998) and they were increased at a rate of 4
percent every year thereafter. As construction continues,
rents are expected to level off while new units are absorbed
and then increase at a 4 percent per year rate.
Other Income is held flat for the first year of the cash
flow, then increased at the same rate as rents.
The subject's current physical vacancy rate is 4.3% while
the economic vacancy rate is 10.2%. The difference between
the two vacancy rates is attributable to the difference
between contract and market rents as well as concessions. It
is our opinion that the subject will maintain a 5.0 percent
economic vacancy rate in the first year and remain at that
stabilized economic vacancy rate throughout the remainder of
the cash flow projection.
. 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 percent was utilized.
. A terminal capitalization rate of 10.0 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 facing page. The estimated leased fee
market value for the subject on an "as is" basis via
the discounted cash flow method is
FOURTEEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($14,400,000)
45
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
The Hamptons at Quail Hollow
Period 1 2 3 4 5 6 7
Fiscal Year ending Nov 30 1998 1999 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apt. Rents 2,186,640 2,274,106 2,365,070 2,459,673 2,558,060 2,660,382 2,766,797
Rent/SF/Mo. 0.743 0.773 0.804 0.836 0.869 0.904 0.940
Other Income/Yr. 0.11 26,800 27,872 28,987 30,146 31,352 32,606 33,911
--------- --------- --------- --------- --------- --------- ---------
Gross Income: 2,213,440 2,301,978 2,394,057 2,489,819 2,589,412 2,692,988 2,800,708
% Vacancy 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 110,672 115,099 119,703 124,491 129,471 134,649 140,035
--------- --------- --------- --------- --------- --------- ---------
Eff. Gross Income: 2,102,768 2,186,879 2,274,354 2,365,328 2,459,941 2,558,339 2,660,672
--------------
Expenses: Unit SF
--------------
Real Estate Taxes 603 0.57 139,901 145,497 151,317 157,370 163,664 170,211 177,019
Insurance 75 0.07 17,285 17,976 18,695 19,443 20,221 21,030 21,871
Operating Expenses 858 0.81 198,973 206,932 215,209 223,817 232,770 242,081 251,764
Utilities 440 0.42 102,037 106,119 110,364 114,778 119,369 124,144 129,110
Repairs & Maintenance 374 0.35 86,732 90,201 93,809 97,561 101,464 105,522 109,743
Contract Services 198 0.19 45,917 47,753 49,664 51,650 53,716 55,865 58,099
General & Administrative 99 0.09 22,958 23,877 24,832 25,825 26,858 27,932 29,050
Management Fee 5.00% 0.43 105,138 109,344 113,718 118,266 122,997 127,917 133,034
Reserves 300 0.28 69,600 72,384 75,279 78,291 81,422 84,679 88,066
----- ---- --------- --------- --------- --------- --------- --------- ---------
Total Expenses: 3,399 3.21 788,541 820,083 852,886 887,002 922,482 959,381 997,756
--------------
Per SF Per Yr. 3.21 3.34 3.48 3.62 3.76 3.91 4.07
Per Unit Per Yr. 3,399 3,535 3,676 3,823 3,976 4,135 4,301
--------- --------- --------- --------- --------- --------- ---------
Net Operating Income: 1,314,227 1,366,796 1,421,468 1,478,326 1,537,460 1,598,958 1,662,916
Per SF Per Yr. 5.36 5.57 5.80 6.03 6.27 6.52 6.78
Per Unit Per Yr. 5,665 5,891 6,127 6,372 6,627 6,892 7,168
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Items:
Deterred Maintenance 250,000
--------- --------- --------- --------- --------- --------- ---------
Cash Flow: 1,064,227 1,366,796 1,421.468 1,478,326 1,537,460 1,598,958 1,662,916
--------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value of Cash Flow 950,203 1,089,601 1,011,773 939.503 872,396 810,082 752,219
NOI in 11th Year 1,945,377 Present Value of Income Stream 8,375,130
Ro at Reversion 10.00% Present Value of Reversion 6,013,049
---------- ----------------------------------------------
Indicated Reversion 19,453,768 Indicated Value of Subject 14,388,179
Less: Sales Costs 4.00% 778,151 Indicated Value/SF 58.66
----------
Reversion in 11th Yr 18,675,617 Indicated Value/Unit 62,018
GIM at Indicated Value 6.58
Ro at Indicated Value 9.13%
----------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Period 8 9 10 11
Fiscal Year ending Nov 30 2005 2006 2007 2008
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Apt. Rents 2,877,469 2,992,568 3,112,271 3,236,761
Rent/SF/Mo. 0.978 1.017 1.057 1.100
Other Income/Yr. 35,267 36,678 38,145 39,671
--------- --------- --------- ---------
Gross Income: 2,912,736 3,029,245 3,150,415 3,276,432
% Vacancy 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 145,637 151,462 157,521 163,822
--------- --------- --------- ---------
Eff. Gross Income: 2,767,099 2,877,783 2,992,895 3,112,610
Expenses:
Real Estate Taxes 184,100 191,464 199,123 207,088
Insurance 22,746 23,655 24,602 25,586
Operating Expenses 261,835 272,308 283,200 294,528
Utilities 134,274 139,645 145,231 151,040
Repairs & Maintenance 114,133 118,698 123,446 128,384
Contract Services 60,423 62,840 65,354 67,968
General & Administrative 30,212 31,420 32,677 33,984
Management Fee 138,355 143,889 149,645 155,631
Reserves 91,589 95,252 99,063 103,025
Total Expenses: 1,037,666 1,079,173 1,122,340 1,167,234
Per SF Per Yr. 4.23 4.40 4.58 4.76
Per Unit Per Yr. 4,473 4,652 4,838 5,031
--------- --------- --------- ---------
Net Operating Income: 1,729,433 1,798,610 1,870,555 1,945,377
Per SF Per Yr. 7.05 7.33 7.63 7.93
Per Unit Per Yr. 7,454 7,753 8,063 8,385
- -----------------------------------------------------------------------------------------
Capital Items:
Deterred Maintenance
--------- --------- --------- ---------
Cash Flow: 1,729,433 1,798,610 1,870,555 1,945,377
--------- --------- --------- ---------
Present Value Factor 0.403883 0.360610 0.321973 0.287476
Present Value of Cash Flow 698,489 648,597 602,269 559,249
NOI in 11th Year
Ro at Reversion
Indicated Reversion
Less: Sales Costs
Reversion in 11th Yr
</TABLE>
<PAGE>
================================================================================
CASH FLOW SUMMARY
------------------------------------------------------------------
Fiscal Year Annual 12.00% PV of
Ending 11/30 Cash Flows NPV Factor Cash Flows
------------------------------------------------------------------
1998 $1,064,227 0.892857 $950,203
1999 $1,366,796 0.797194 1,089,601
2000 $1,421,468 0.711780 1,011,773
2001 $1,478,326 0.635518 939,503
2002 $1,537,460 0.567427 872,396
2003 $1,598,958 0.506631 810,082
2004 $1,662,916 0.452349 752,219
2005 $1,729,433 0.403883 698,489
2006 $1,798,610 0.360610 648,597
2007 $1,870,555 0.321973 602,269
-------
Total $8,375,130
Projected NOI in 11th Year $1,945,377
Going-out Capitalization Rate 10.00%
-----
Estimated Value of Property at End of 10th Year $19,453,768
Less Sales Cost @ 4.00% (778,151)
---------
Value of Reversion at End of 10th Year $18,675,617
Discount Factor 12.00% 0.321973
--------
Present Value of the Reversion $6,013,049
Sum of Present Values of Cash Flow 8,375,130
---------
Market Value as of November 30, 1997 $14,388,179
Rounded $14,400,000
================================================================================
<PAGE>
<TABLE>
=========================================================================================================
DIRECT CAPITALIZATION
<S> <C> <C> <C>
Gross Potential Rental Income 2,186,640
Other Income 26,800
Total 2,213,440
Gross Income 2,213,440
Vacancy 5.00% 110,672
Effective Gross Income 2,102,768
Expenses
Real Estate Taxes 139,901
Insurance 17,285
Operating Expenses 198,973
Utilities 102,037
Repairs & Maintenance 86,732
Contract Services 45,917
General Administrative 22,958
Management Fee 105,138
Reserves for Replacement 69,600
Total Expenses 788,541
Net Operating Income 1,314,227
Capitalization Rate 9.25%
Fee Simple Stabilized Market value 14,207,858
Less: Deferred Maintenance 250,000
Rent Loss Due to Lease Up 7,120
Leased Fee "As Is" Market Value 13,950,737
(Rounded) 14,000,000
Rent Loss Due to Lease-up
- ---------------------------------------------------------------------------------------------------------
Year 1 Year 2
------------- -------------
Stabilized NOI 1,314,227 1,314,227
Projected NOI 1,306,608 1,366,796
------------- -------------
Rent Loss 7,619 0
PV Factor 7.00% 0.934579439 0.873438728
------------- -------------
PV Income Loss 7,120 0
Cumulative Total 7,120
=========================================================================================================
</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 adjusted for reserves from 8.75 to
11.13 percent. As previously discussed, a "going-in"
capitalization rate of 9.25 percent was deemed appropriate
after adjusting for reserves.
Since the subject is estimated to have attained a stabilized
occupancy in Year 1, it is not necessary to deduct the rent
loss due to lease-up/contract rents. However, deferred
maintenance expenditures are deducted to derive the
subject's "as is" value by this approach. This methodology
is illustrated above. The final value by this method is as
follows:
FOURTEEN MILLION DOLLARS
($14,000,000)
INCOME APPROACH
CONCLUSION DCF Method......................................$14,400,000
Direct Capitalization Method....................$14,000,000
The two methods of comparison are supportive of each other.
We are of the opinion that the "as is" leased fee market
value of the subject property, as of November 30, 1997 is
$14,200,000 as indicated by the Income Approach.
46
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH $14,300,000
INCOME APPROACH $14,200,000
The Sales Comparison Approach utilized recent comparable
sales of similar properties in the area. The weakness of the
Sales Comparison Approach is that no two properties are
exactly alike and exact conditions of a sale are often
unknown. The strength of this approach is that it indicates,
that market activity based on the willing buyer/willing
seller concept. Because the market data provided a number of
recent sales which are considered relatively comparable and
in the subject's general area, we have placed weight on this
approach.
The Income Approach attempts to measure investment qualities
of the property. Based on rental rates in the immediate area
of the subject, estimated 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 also placed weight on the Income Approach.
The two approaches are supportive of each other. Therefore,
it is our opinion that the "as is" leased fee market value
of the subject property, on an all cash basis, as of
November 30, 1997 is
THIRTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
($14,200,000)
47
<PAGE>
MONTCLAIR PARC
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name Montclair Parc
Address 7201 Shannopin Drive
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 08/97
Grantor (Seller) Charlotte Montclair L.P.
Grantee (Buyer) CWS Harbor Cove/Montclair Associates Ltd., et al.
Recorded Document 9199-105
Sale Price $21,013,000
Occupancy 96%
Sale Price per Unit $70,043
Sale Price per SF $73.92
Capitalization Rate 9.62%
TERMS OF SALE Cash to seller; $16,000,000 mortgage to Connecticut
General Life
INCOME/EXPENSE DATA
Potential Gross Income $3,082,980
Vacancy/Collection Loss $ (123,319)
Effective Gross Income $2,959,661
Operating Expenses $ (938,045) est.
Net Operating Income $2,021,616 est.
PROPERTY DESCRIPTION
Year Built 1995
Last Year Renovated NA
Number of Stories 2-3
Number of Units 300
Number of Bedrooms 468
Net Rentable Area 284,256 SF
Average Unit Size 948 SF
Land Area 22.35 Acres
Unit Density 13.42 Units per Acre
Property Condition Excellent
Parking (type) Open, asphalt paved and carport, some garages
Construction Type Wood frame with brick and wood siding, composition
roof
Confirmed With Harvey Jeffers, Yandle-Jeffers Group & Charlotte
Apartment Report (9/97)
Date Confirmed 11/14/97 and 11/24/97 by Stevan Bach, Bach Realty
Advisors
Comments Amenities include swimming pool, clubhouse, rec
center, business center, and security alarm. Garage
parking is $65/month and carports are $20/month
premium in the monthly rent.
<PAGE>
THE OAKS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name The Oaks
Address 4915 Misty Oaks Drive
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) Allegience Group, AGI
Grantee (Buyer) Merryland
Recorded Document 9111-675
Sale Price $20,250,000
Occupancy 97.2%
Sale Price per Unit $63,679
Sale Price per SF $72.08
Capitalization Rate 8.99%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $2,880,658
Vacancy/Collection Loss $(80,658)
Effective Gross Income $2,800,000
Operating Expenses $(979,525)
Net Operating Income $1,820,475
PROPERTY DESCRIPTION
Year Built 1996
Last Year Renovated NA
Number of Stories 2
Number of Units 318
Number of Bedrooms 460
Net Rentable Area 280,948 SF
Average Unit Size 883 SF
Land Area 26.5 Acres
Unit Density 12 Units per Acre
Property Condition Excellent
Parking (type) 112 Garages
Construction Type Wood frame with masonite siding and brick veneer
Project Amenities: Outdoor pool, tennis court, sport court, clubhouse,
fitness center, picnic/grill areas, controlled
access gate.
Confirmed With Murray Williams, First Union Corp.
Date Confirmed 11/12/97 by Stevan Bach, Bach Realty Advisors, Inc.
<PAGE>
OAKWOOD GARDENS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name Oakwood Gardens
Address 2305 New England Street
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Dominion HBA, L.P.
Grantee (Buyer) Oakwood Gardens -- Coronado, L.P.
Recorded Document 9061-147
Sale Price $23,500,000
Occupancy 80%
Sale Price per Unit $81,597
SalePriceper SF $73.17
Capitalization Rate 8.75%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $3,704,313
Vacancy/Collection Loss $ (740,863)
Effective Gross Income $2,963,450
Operating Expenses $ (907,200)
Net Operating Income $2,056,250
PROPERTY DESCRIPTION
Year Built 1996
Last Year Renovated NA
Number of Stories 2 and 3
Number of Units 288
Number of Bedrooms 518
Net Rentable Area 321,190 SF
Average Unit Size 1,115 SF
Land Area 25.018 Acres
Unit Density 11.51 Units per Acre
Property Condition Excellent
Parking (type) 38 detached and 37 attached garages
Construction Type Wood frame w/stone veneer/Board siding
Project Amenities Tennis, exercise facility, outdoor pool,
basketball court, clubhouse, picnic area, laundry
room, volleyball court, business center
Confirmed With Murray Williams, First Union Corporation
Date Confirmed 11/12/97 by Stevan Bach, Bach Realty Advisors, Inc.
Comments Approximately 30% of the units were planned for
conversion to corporate apartment rental by buyer
<PAGE>
STONEY POINTE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name Stoney Pointe
Address 4616 Stoney Trace Drive
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 03/97
Grantor (Seller) Capers Properties, L.P.
Grantee (Buyer) UDRT of N.C., L.L.C.
Recorded Document 8955-483
Sale Price $17,305,000
Occupancy 91%
Sale Price per Unit $43,263
Sale Price per SF $47.87
Capitalization Rate 8.93%
TERMS OF SALE Cash to assumed mortgage of $12,629,698
INCOME/EXPENSE DATA
Potential Gross Income $2,988,480 est.
Vacancy/Collection Loss $(268,963)
Effective Gross Income $2,719,517
Operating Expenses $(1,174,063)
Net Operating Income $1,545,454
PROPERTY DESCRIPTION
Year Built 1991
Last Year Renovated NA
Number of Stories 3
Number of Units 400
Number of Bedrooms 800
Net Rentable Area 361,520 SF
Average Unit Size 904 SF
Land Area 28.37 Acres
Unit Density 14.10 Units per Acre
Property Condition Good
Parking (type) Open asphalt
Construction Type Wood frame with wood siding and gable composition
shingle roof
Project Amenities Clubhouse, pool, tennis court, exercise facility,
laundry, and fireplaces
Confirmed With Harvey Jeffers, Yandle-Jeffers Group & Charlotte
Apartment Report (9/97)
Date Confirmed 11/14/97 and 11/24/97 by Stevan Bach, Bach Realty
Advisors, Inc.
<PAGE>
PROVIDENCE SQUARE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name Providence Square
Address 100 Providence Square
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 02/97
Grantor (Seller) 100 Providence Square, L.P.
Grantee (Buyer) The Corner, L.P.
Recorded Document 8939-490
Sale Price $20,510,000
Occupancy 99%
Sale Price per Unit $43,362
Sale Price per SF $33.03
Capitalization Rate 11.13%
TERMS OF SALE Cash to mortgage with balance of $16,789,620
INCOME/EXPENSE DATA
Potential Gross Income $4,502,915
Vacancy/Collection Loss $($45,029)
Effective Gross Income $4,457,886
Operating Expenses $(2,173,318) est.
Net Operating Income $2,284,568
PROPERTY DESCRIPTION
Year Built 1969
Last Year Renovated Unknown
Number of Stories 2
Number of Units 473
Number of Bedrooms 1,187
Net Rentable Area 620,948 SF
Average Unit Size 1,313 SF
Land Area 62 Acres
Unit Density 7.63 Units per Acre
Property Condition Good
Parking (type) Open spaces, asphalt paved
Construction Type Wood frame with brick and wood exterior, gable
composition shingle roof
Confirmed With Harvey Jeffers, Yandle-Jeffers Group
Date Confirmed 11/14/97 by Stevan Bach, Bach Realty Advisors, Inc.
Comments Amenities are clubhouse, pool, tennis court,
playground, storage and fireplaces.
<PAGE>
THE REGENCY
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name The Regency
Address 4817 Water Oak Road
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 12/96
Grantor (Seller) PERA Regency, Inc. (Invesco Realty Advisors)
Grantee (Buyer) Merry Land
Recorded Document NA
Sale Price $11,200,000
Occupancy 94%
Sale Price per Unit $62,921
Sale Price per SF $67.99
Capitalization Rate 9.22%
TERMS OF SALE Cash to seller
INCOME/EXPENSE DATA
Potential Gross Income $1,645,821
Vacancy/Collection Loss $(61,485)
Effective Gross Income $1,584,336
Operating Expenses $(551,800)
Net Operating Income $1,032,536
PROPERTY DESCRIPTION
Year Built 1988
Last Year Renovated N/A
Number of Stories 2 and 3
Number of Units 178
Number of Bedrooms 314
Net Rentable Area 164,724 SF
Average Unit Size 925 SF
Land Area 15.16 Acres
Unit Density 11.74 Units per Acre
Property Condition Good
Parking (type) Open, asphalt paved and carports
Construction Type Wood frame/stucco and brick exterior
Project Amenities Clubhouse, pool, tennis court, and laundry rooms.
Units have microwaves and some units have fireplaces
Confirmed With Murray Williams, First Union Corp.
Date Confirmed 11/12/97 by Stevan Bach, Bach Realty Advisors, Inc.
Comments Carports bring a $25/month rent premium
<PAGE>
FAIRWAYS AT PIPER GLEN
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-067
Project Name Fairways at Piper Glen
Address 6200 Birkdale Valley Drive
City/ State Charlotte, N.C.
TRANSACTION DATA
Sale Date 10/97
Grantor (Seller) Fairfield Communities/Graystone Realty, Ing.
Grantee (Buyer) Ing
Recorded Document 6777-646
Sale Price $24,500,000
Occupancy 92%
Sale Price per Unit $72,917
Sale Price per SF $77.24
Capitalization Rate 9.30%
TERMS OF SALE Cash to seller, assumed mortgage of $12,629,698
INCOME/EXPENSE DATA
Potential Gross Income $3,645,326
Vacancy/Collection Loss $(291,626)
Effective Gross Income $3,353,700
Operating Expenses $(1,075,200)
Net Operating Income $2,278,500
PROPERTY DESCRIPTION
Year Built 1996
Last Year Renovated NA
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms 520
Net Rentable Area 317,208 SF
Average Unit Size 944 SF
Land Area 24.884 Acres
Unit Density 13.50 Units per Acre
Property Condition Excellent
Parking (type) Detached and attached garages and open asphalt paved
spaces
Construction Type Wood frame/Brick veneer/Board siding, composition
shingle roof
Project Amenities Pool, clubhouse, exercise facility
Unit Amenities Fireplaces, microwaves, ceiling fans, 9 ft.
ceilings, crown molding, security alarm
Confirmed With Murray Williams, First Union Corporation
Date Confirmed 11/12/97 by Stevan Bach, Bach Realty Advisors, Inc.
Comments Luxury class apartments. This was a pre-sale of a
property that was in lease-up at sale date.
<PAGE>
ALEXANDER PLACE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Name of Project: Alexander Place
Street Address: 6316 Cameron Forest Lane
City/State: Charlotte, North Carolina
PROPERTY DESCRIPTION
Year Built/Renovated: 1984/85
Number of Buildings: 22
Number of Stories: 2 and 3
Number of Units: 309
Net Rentable Area (SF): 323,019
Average Unit Size (SF): 1,045
Parking Surface: Asphalt
Type of Construction: Wood siding with pitched composition shingle
roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
------------------------------------------------------------
<S> <C> <C> <C> <C>
66 1BR/1BA 900 $750-775 $0.833-0.861
66 1BR/1BA/DEN 1,063 805-830 0.757-0.781
177 2BR/2BA 1,093 825-885 0.755-0.81
</TABLE>
Unit Amenities: Fireplaces and washer/dryer. Some units have
microwave, vaulted ceilings, and ceiling fans.
Project Amenities: (2) swimming pools, (2) tennis courts, (2) hot
tubs, clubrooms, golf cage, and laundry
facility
ECONOMIC DATA
Percent Occupied: 89%
Avg. Monthly Rent/SF of NRA: $0.791
Electricity Paid By: Tenant
Length of Lease: 6 through 12 months
Security Deposit: $150/1 BR $250/2 BR
Pets Allowed/Deposit: $300 deposit with $10 monthly pet fee ($150
nonrefundable)
Confirmed With: 1997 Carolinas Real Data and on-site
management
Date Confirmed: 12/97 by Stevan Bach, Bach Realty Advisors,
Inc.
Comments: This management company requires a $150
application fee. Across the street from
subject property. This property resurfaced and
restriped parking areas and painted the
exteriors of its buildings in 1996. There are
47 newly constructed enclosed garages at $100
per month additional rent.
Concessions $75-$ 100 off each month rent. Coupon in
Apartment Guides gives additional $200 off 1st
month rent.
<PAGE>
SUMMIT SIMSBURY
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Name of Project: Summit Simsbury
Street Address: 4428 Simsbury Road
City/State: Charlotte, North Carolina
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: Unknown
Number of Stories: 2-3
Number of Units: 100
Net Rentable Area (SF): 87,400
Average Unit Size (SF): 874
Parking Surface: Asphalt
Type of Construction: Wood frame with brick and wood
exterior, composition shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-----------------------------------------------------
<S> <C> <C> <C> <C>
40 1BR/1BA 760 $720-735 $0.947-
60 2BR/2BA 950 855-920 0.967
0.900-0.968
</TABLE>
Unit Amenities: Washer/dryer units and connections,
microwaves, fireplaces, storage.
Project Amenities: Indoor/outdoor swimming pool, laundry
room, clubroom, and security alarms.
ECONOMIC DATA
Percent Occupied: 93%
Avg. Monthly Rent/SF of NRA: $0.942
Electricity Paid By: Tenant
Length of Lease: 6 and 12 months
Security Deposit: $300
Pets Allowed/Deposit: $400
Confirmed With: On-site management and 1997 Carolinas
Real Data
Date Confirmed: 12/97 by Stevan Bach, Bach Realty
Advisors, Inc.
Comments: $50 off rent for 1 bedroom
<PAGE>
PROVIDENCE COURT
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY IDENTIFICATION
Name of Project: Providence Court
Street Address: 8110 Providence Court Lane
City/State: Charlotte, North Carolina
Property Description
Year Built/Renovated: 1996
Number of Buildings: Unknown
Number of Stories: 2
Number of Units: 420
Net Rentable Area (SF): 453,804
Average Unit Size (SF): 1,080
Parking Surface: Asphalt
Type of Construction: Wood frame with brick and wood siding,
composition shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------------------
<S> <C> <C> <C> <C>
72 lBR/lBA 773 $650 $0.841
72 lBR/1BA 875 690-795 0.789-0.909
36 2BR/lBA 1,003 750-855 0.748-0.852
168 2BR/2BA 1,192 860-985 0.721-0.826
72 3BR/lBA 1,372 1,090-1,200 0.794-0.875
</TABLE>
Unit Amenities: Washer/dryer connections (some w/d),
fireplaces, microwave, vaulted
ceilings, and ceiling fans
Project Amenities: 2 swimming pools, fitness center, spa,
tennis court, clubroom, controlled
access, storage, security alarm.
ECONOMIC DATA
Percent Occupied: 74%
Avg. Monthly Rent/SF of NRA: $0.808
Electricity Paid By: Tenant
Length of Lease: 6 and 12 months
Security Deposit: $150/1BR $250/2 BR
Pets Allowed/Deposit: $300
Confirmed With: On-site management and Carolina Real
Data
Date Confirmed: 12/97 by Stevan Bach, Bach Realty
Advisors, Inc.
Comments: Move in by December 25/th/, 1/2 month
off 1/st/ month rent with 12 month
lease - 1/4month off on 6 month lease
<PAGE>
SUMMIT BALLENTYNE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Name of Project: Summit Ballentyne
Street Address: 13901 Summit Commons
City/State: Charlotte, North Carolina
PROPERTY DESCRIPTION
Year Built/Renovated: 1997
Number of Buildings: Unknown
Number of Stories: 3
Number of Units: 220 (current) -- take over 240
Net Rentable Area (SF): 243,503
Average Unit Size (SF): 1,107
Parking Surface: Asphalt
Type of Construction: Wood frame with brick and wood exterior,
composition shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
----------------------------------------------------
<S> <C> <C> <C> <C>
52 1BR/1BA 837 $670 $0.80
26 2BR/1BA 996 780 0.78
84 2BR/2BA 1,155 850 0.74
13 2BR/2BATH 1,400 1,280 0.92
45 3BR/2BA 1,315 1,010 0.77
</TABLE>
Unit Amenities: Washer/dryer connections, some units have
w/d, microwave, fireplace, ceiling fan,
covered parking.
Project Amenities: Swimming pool, tennis court, clubhouse,
laundry facility, fitness center, garages
ECONOMIC DATA
Percent Occupied: 56% (in lease-up)
Avg. Monthly Rent/SF of NRA: $0.78
Electricity Paid By: Tenant
Length of Lease: 6, 9, and 12 months
Security Deposit: $200/1 BR $300/2 BR
Pets Allowed/Deposit: $300/$150 refundable per pet (refundable)
Confirmed With: On-site management and Carolina Real Data
Date Confirmed: 12/97 by Stevan Bach, Bach Realty
Advisors, Inc.
Comments: Free vacation or 1 month free for 12 to 18
month leases. Still finishing
construction.
<PAGE>
CRESTMONT
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Name of Project: Crestmont at Ballantyne
Street Address: 9200 Otter Creek Drive
City/State: Charlotte, North Carolina
PROPERTY DESCRIPTION
Year Built/Renovated: 1997
Number of Buildings: Unknown
Number of Stories: 2-3
Number of Units: 282
Net Rentable Area (SF): 237,275
Average Unit Size (SF): 838
Parking Surface: Asphalt
Type of Construction: Wood frame with brick and wood veneer,
composition shingle roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SF) RENT RENT/SF
-------------------------------------------------------------
<S> <C> <C> <C> <C>
36 lBR/1BA 816 $675 $0.82
24 lBR/lBA 890 700 0.78
31 1BR/1BA/DEN 1,040 765 0.73
20 lBR/lBA/DEN 1,115 785 0.70
146 2BR/1BA 1,201 860 0.70
26 3BR/2BA 1,440 1,200 0.83
</TABLE>
Unit Amenities: Washer/dryer, fireplaces, covered parking,
microwaves
Project Amenities: Swimming pool, 2 tennis courts, hot tub,
exercise room, clubroom, laundry
ECONOMIC DATA
Percent Occupied: 74% (in lease-up)
Avg. Monthly Rent/SF of NRA: $0.74
Electricity Paid By: Tenant
Length of Lease: 6-12 months
Security Deposit: $200
Pets Allowed/Deposit: $250 nonrefundable pet fee
Confirmed With: On-site management and Carolina Real Data
Date Confirmed: 12/97 by Stevan Bach, Bach Realty
Advisors, Inc.
Comments: Half month free on any 2 BR/2 BA
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991-May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985-1991)
President
Bach & Associates, Inc. (1980-1984)
President
Landauer Associates, Inc. (1980-1984)
Senior Vice-President and General Manager-Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973-1980)
Vice-President and Manager, Appraisal Services.
Appraisal Research Associates (1971-1973)
Appraiser. Real Estate research valuation on urban and
rural properties.
Ray R. Hastings, MAI (1964-1971)
Appraiser. Real Estate research valuation on urban and
rural properties.
Residential Real Estate Sales (1963-1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal Institute
Appraisal Institute, Houston Chapter 33
Appraisal Institute, Chairman of the Grievance Committee of the
Regional Ethics Panel
Appraisal Institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal Institute, Co-Chairman of the Education Committee
(1980)
Appraisal Institute, Chairman of the Education Committee (1983)
Appraisal Institute, Candidate Guidance Committee (1987-1992)
Appraisal Institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who
meet the minimum standards of this program are awarded
periodic education certification).
Certified General Real Estate Property appraiser in the
State of Texas, Certification No. TX-1323079-G Certified
General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
<PAGE>
================================================================================
A COMPLETE, SELF-CONTAINED APPRAISAL
OF
THE LAKEVIEW VILLAGE APARTMENTS 100 LAKE VISTA DRIVE
PONTE VEDRA BEACH, FLORIDA
FOR
HUTTON/CON AM REALTY INVESTORS 5
1764 SAN DIEGO AVENUE
SAN DIEGO, CALIFORNIA 92110
AS OF
NOVEMBER 30, 1997
BY
BACH REALTY ADVISORS, INC.
1221 LAMAR, SUITE 1325
HOUSTON, TEXAS 77010
BRA: 97-068
================================================================================
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter of Transmittal.............................. 1
Assumptions and Limiting Conditions................ 2
Certification...................................... 4
Salient Facts and Conclusions...................... 6
Nature of the Assignment........................... 7
City/Neighborhood Analysis......................... 9
Apartment Market Analysis..........................19
Site Description...................................24
Improvements.......................................26
Highest and Best Use...............................28
Appraisal Procedures...............................31
Sales Comparison Approach..........................33
Income Approach....................................37
Reconciliation.....................................47
</TABLE>
ADDENDA
Improved Sales Comparables
Rent Comparables
Legal Description
Professional Qualifications
<PAGE>
BACH
Realty Advisors, Inc.
Appraisal, Consultation & Litigation
March 14, 1998
Hutton/Con Am Realty Investors 5
1764 San Diego Avenue
San Diego, California 92110
Re: A Complete, Self-Contained Appraisal Of The 240-Unit Multifamily Apartment
Complex Known As the Lakeview Village Apartments Located At 100 Lake Vista
Drive in Ponte Vedra Beach, Florida;
BRA: 97-068
Gentlemen:
By your request and authorization, we have inspected the above-referenced
property and have investigated the real estate market in the subject area in
order to provide the value of the leased fee estate of the subject property as
of November 30, 1997. This 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 November 30, 1997 is in the sum of
ELEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS
($11,700,000)
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
Four Houston Center
1221 Lamar, Suite 1325
Houston, TX 77010
(713) 739-0200
Fax (713) 739-0208
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
The certification of this appraisal is subject to the
following assumptions and limiting conditions.
1. That responsibility is not taken for matters of a
legal nature affecting the property appraised or the
title thereto and that any legal descriptions
furnished are correct.
2. That the title to the property being appraised is good
and marketable and is appraised as though under
responsible ownership and/or management.
3. That the property is free and clear of all liens and
encumbrances except as otherwise stated.
4. That the sketches in this report are included to
assist the reader in visualizing the property and
responsibility is not assumed for their accuracy.
5. That a survey of the property has not been made by the
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 appraisal
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
2
<PAGE>
actually be achieved. Further, deductions from the
cash flow for deferred maintenance are based on our
conversations with representatives of ConAm
Management.
12. That the square footage figures are based on floor
plans and information supplied to the appraiser by
ConAm Management.
13. Bach Realty Advisors. Inc. is not an expert as to
-------------------------------------------------
asbestos and will not take any responsibility for its
-----------------------------------------------------
existence or the existence of other hazardous
---------------------------------------------
materials at the subject property, analysis for EPA
---------------------------------------------------
standards, its removal, and/or its encapsulation. If
----------------------------------------------------
the reader of this report and/or any entity or person
-----------------------------------------------------
relying on the valuations in this report wishes to
--------------------------------------------------
know the exact or detailed existence (if any) of
------------------------------------------------
asbestos or other toxic or hazardous waste at the
-------------------------------------------------
subject property, then we not only recommend, but
-------------------------------------------------
state unequivocally that they should obtain an
----------------------------------------------
independent study and analysis (including costs to
--------------------------------------------------
cure such environmental problems) of asbestos or other
------------------------------------------------------
toxic and hazardous waste.
-------------------------
14. In addition, an audit on the subject property to
determine its compliance with the Americans with
Disabilities Act of 1990 was not available to the
appraiser. The appraiser is unable to certify
compliance regarding whether the removal of any
barriers which may be present at the subject are
readily achievable.
3
<PAGE>
CERTIFICATION
- --------------------------------------------------------------------------------
The undersigned does hereby certify to the best of his
knowledge and belief that, except as otherwise noted in
this complete, self-contained appraisal report:
1. I do not have any personal interest or bias with
respect to the subject matter of this appraisal report
or the parties involved.
2. The statements of fact contained in this appraisal
report, upon which the analyses, opinions, and
conclusions expressed herein are gauged, are true and
correct.
3. This appraisal report sets forth all of the limiting
conditions (imposed by terms of our assignment or by
the undersigned) affecting the analyses, opinions, and
conclusions contained in this report.
4. The analysis, opinions, and conclusions were
developed, and this report has been prepared, in
conformity with the requirements of the Code of
Professional Ethics and the Uniform Standards of
Professional Appraisal Practice of the Appraisal
Institute.
5. That no one other than the undersigned prepared the
analyses, opinions, and conclusions concerning the
subject property that are set forth in this appraisal
report. Stevan N. Bach, MAI inspected the property in
December 1997.
6. The use of this report is subject to the requirements
of the Appraisal Institute relating to review by its
duly authorized representatives.
7. The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
8. The Appraisal Institute conducts a program of
continuing education for its members. Members who meet
the minimum standards of this program are awarded
periodic educational certification. As of the date of
this report, Stevan N. Bach, MAI has completed the
requirements under the continuing education program of
the Appraisal Institute.
9. Compensation for this assignment is not contingent
upon the reporting of a predetermined value or
direction in value that favors the cause of the
client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence
of a subsequent action or event resulting from the
analyses, opinions, or conclusions in, or the use of,
this report.
10. That all physical and economic conditions are the same
on the date of value as they were on the date of
inspection.
4
<PAGE>
11. Based on the knowledge and experience of the
undersigned and the information gathered for this
report, the estimated leased fee market value, "as
is," of the subject property on an all cash basis, as
of November 30, 1997 is $11,700,000.
/s/ Stevan N. Bach
------------------------------------------------
Stevan N. Bach, MAI
President
Certified General Real Property Appraiser
State of Texas TX-1323079-G
5
<PAGE>
SALIENT FACTS AND CONCLUSIONS
- --------------------------------------------------------------------------------
Identification: Lakeview Village Apartments
100 Lake Vista Drive
Ponte Vedra Beach, Florida
Location: West of State Highway AlA on the north side of
Ponte Vedra Lakes Drive south of the Duval/St.
Johns county line in Ponte Vedra Beach, Florida
BRA: 97-068
Legal Description: 19.47-acre tract out of Government Lot 2, Section
16, Township 3 South, Range 29 East, St. Johns
County, Florida
Land Size: 19.47 acres or 848,113 square feet
Building Area: 263,424 square feet of net rentable space plus a
1,500-square-foot clubhouse/leasing office
Year Built: 1984
Unit Mix: 48 lBR/1BA at 867 square feet
80 lBR/1BA/DEN at 1,059 square feet
112 2BR/2BA at 1,224 square feet
Total Units: 240
No. of Units: 240
Average Unit Size: 1,098 square feet
Occupancy
Physical: 91.25 percent
Economic: 84.2 percent
Highest and Best Use
As Vacant: An apartment development
As Improved: Current use (as apartments)
Date of Value: November 30, 1997
"As Is" Market Value by
Sale Comparison Approach: $11,500,000
"As Is" Market Value by
Income Approach: $11,700,000
"As Is" Market Value
Conclusion: - $11,700,000
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 of this appraisal report is the Lakeview
Village Apartments located at 100 Lake Vista Drive, Ponte
Vedra Beach, Florida.
DATE OF THE APPRAISAL All opinions of value expressed in this report reflect
physical and economic conditions prevailing as of
November 30, 1997
DEFINITION OF
SIGNIFICANT TERMS The Appraisal of Real Estate, Eleventh Edition, 1996,
----------------------------
sponsored by the Appraisal Institute defines Market Value
as:
"The most probable price which a property should bring in
a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a
specified date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and
acting in what they consider their own best
interests;
(3) A reasonable time is allowed for exposure in the
open market;
(4) Payment is made in terms of cash in U.S. dollars or
in terms of financial arrangements comparable
thereto; and
(5) The price represents the normal consideration for
the property sold unaffected by special or creative
financing or sales concessions granted by anyone
associated with the sale."
Leased Fee Estate - An ownership interest held by a
-----------------
landlord with the rights of use and occupancy conveyed by
lease to others. The rights of the lessor (the leased fee
owner) and the leased fee are specified by contract terms
contained within the lease./1/
- ----------------------------------
/1/ The Dictionary of Real Estate Appraisal, Third Edition, p. 204.
---------------------------------------
7
<PAGE>
FUNCTION OF THE
APPRAISAL It is the understanding of the appraiser that the function
of this appraisal is for annual partnership and/or internal
purposes.
PROPERTY RIGHTS
APPRAISED The appraiser have appraised the "as is" leased fee
interest subject to short-term leases which are typically 6
to 12 months in duration at the subject property.
THREE-YEAR HISTORY No transfers of ownership to the subject were discovered
during the past three years upon interviews with real
estate brokers in the area and research into the
grantor/grantee deed records of St. Johns County, Florida.
SCOPE/BASIS OF
THE APPRAISAL This appraisal has been made in accordance with accepted
techniques, standards, methods, and procedures of the
Appraisal Institute. The values set forth herein were
estimated after application and analysis by the Sales
Comparison and Income Approaches to value. These approaches
are more clearly defined in the valuation section of this
report.
The Cost Approach was not used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily
reflect value. Moreover, estimates of depreciation are
difficult to accurately measure in the marketplace, thereby
compounding the speculative nature of the opinions derived
in the cost method of valuation.
The scope of our assignment included obtaining pertinent
property data from the client regarding income and expense
figures, tenant rent rolls, and permission to inspect the
subject. Additionally, the 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>
(AREA MAP APPEARS HERE)
---------------------
<PAGE>
CITY/NEIGHBORHOOD ANALYSIS
- --------------------------------------------------------------------------------
Jacksonville is the seat of Duval County and is situated
near the northeastern corner of Florida on the St. Johns
River. This location is approximately 150 miles north of
Orlando, 165 miles east of Tallahassee, and 15 miles west
of the Atlantic Ocean.
The city of Jacksonville was consolidated with Duval County
in the 1960s and has since been recognized as one of the
largest incorporated municipalities in the nation in terms
of land area with 841 square miles. In population,
Jacksonville is one of the 20 largest cities in the United
States and the most populous incorporated city in Florida.
In 1990 the U.S. Bureau of the Census estimated the city's
population at 648,200 persons. In 1995 this estimate
increased to 676,718. The Jacksonville Metropolitan
Statistical Area (MSA) includes Duval, Clay, St. Johns, and
Nassau Counties. The 1990 MSA population was estimated at
906,727 according to the Census bureau, which indicates
that the MSA is the fifth largest MSA in Florida after
Tampa-St. Petersburg-Clearwater, Miami-Hialeah, Fort
Lauderdale-Hollywood-Pompano Beach, and Orlando. As of
January 1, 1997 the Jacksonville MSA stood at 1,025,600 or
13.1 percent higher than the 1990 population. The following
chart depicts the Jacksonville MSA population and
employment growth over the past two decades.
<TABLE>
<CAPTION>
1970 1980 1990 1994 1995 2005*
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Population 612,600 722,300 906,727 981,600 994,900 1,140,700
Employment 159,400 281,800 422,700 437,474 460,245 625,690
</TABLE>
Source: U.S. Bureau of the Census, Florida Department of
Labor and Employment Security
*Projection
Historical population growth for the Jacksonville MSA from
1980 to 1990 averaged 2.3 percent per year. The growth has
decreased slightly to 1.7 percent annually from 1990 to
1995. Population increases are anticipated to continue as
job growth rises and as stated above the population
estimated as of January 1, 1997 was 1,025,600. The Bureau
of Business & Economic Research at the University of
Florida projects the Jacksonville MSA population to be
between 967,000 and 1,178,000 by the year 2000. The median
projection for this time period is a population of
1,063,700. The greatest population growth has recently
occurred to the south and east of the St. Johns River in
Duval County. Other notable growth has been observed in
northeastern Clay County near Orange Park, and in northern
St. Johns County particularly along the Atlantic Coast
beaches.
The median age of the population in the Jacksonville MSA is
lower than that found in the retirement havens of southern
Florida. The median age in this MSA is 34 years according
to the Census Bureau. This compares to about 36 years in
Miami, 39 years in Fort Lauderdale, and 40 years in Tampa.
The medium age in the city of Jacksonville is slightly less
(33.3 years) than for the MSA.
9
<PAGE>
Jacksonville was originally known as Florida's industrial
city due to its port, shipyards, paper mills, and food
processing plants. More recently, however, Jacksonville has
become known as a regional center for banking, insurance,
medicine and distribution. The Research Department of the
Jacksonville Chamber of Commerce reported that the six
largest private sector employers in the area were: Winn-
Dixie Grocery Company, AT&T, Publix Super Market, Blue
Cross/Blue Shield of Florida, Barnett Banks, and CSX
Transportation. Two of Florida's largest banks, Barnett
Bank and First Union, are officed in Jacksonville, along
with 30 insurance companies. Jacksonville is also becoming
a major back-office hub, as large corporations set up
customer service centers and data processing operations in
the area, including Merrill Lynch & Company, AT&T
Corporation, and America Online, Inc. in the past few
years. In addition, the world-renowned Mayo Clinic has one
of its two regional medical centers located in southeastern
Jacksonville. The recent additions in these medical and
service-related industries have contributed to a more
diverse economy in the area, and have helped civic leaders'
attempts to transform the city's image from that of an
industrial town to a regional distribution, service, and
financial center.
The largest contributor to the Jacksonville employment
market is its three naval installations which include:
Cecil Field Naval Air Station, located in the southwest
sector of Duval County; Jacksonville Naval Air Station,
located on the west bank of the St. Johns River a few miles
south of the Central Business District (CBD), and the
Mayport Naval Training Center, situated at the mouth of the
St. Johns River near the Atlantic Ocean. These military
establishments in Jacksonville employ approximately 31,200
civilian and military personnel. More recently, Cecil Field
has been placed on the government's list of possible
closures due to budget cutting measures. It is due to be
closed in August 1999, which should result in the loss of
approximately 7,500 military and civilian jobs.
Jacksonville created the Cecil Field Development Commission
with the task of developing a reuse plan for Cecil Field.
The commission was dissolved in May 1997 as it had
completed its task and transferred duties and functions to
the Jacksonville Economic Development Commission.
Infrastructure improvements are being discussed and to date
funding has been secured for three major projects: survey
of the land for city incorporation; three-phased conversion
of the water and sewer systems to the city systems; and a
transportation study (completed). The Naval Air Station is
increasing in size because of the consolidation of units to
the Jacksonville Naval Air Station. The net result in the
closure and consolidation is little change in the present
number of personnel.
Total civilian employment in the Jacksonville MSA as of
April 1996 was 480,100 persons according to the Florida
Department of Labor and Employment Security. The
unemployment rate as of that date was 3.3 percent down from
3.7 percent in February 1996, or lower than the U.S.
Department of Labor's 4.8 percent rate for the state of
Florida as of the same date. The above is the latest
information received from the Jacksonville Chamber of
Commerce.
10
<PAGE>
The breakdown of nonagricultural employment as of November
1995 in the Jacksonville area is presented below and
illustrates the growing diversity of the local employment
base.
<TABLE>
<CAPTION>
NONAGRICULTURAL EMPLOYMENT NUMBER PERCENT
---------------------------------------------------------------
<S> <C> <C>
Manufacturing 35,500 7.4
Construction 24,200 5.0
Transportation, Communications, Utilities 32,000 6.7
Trade 117,600 24.5
Finance, Insurance, Real Estate 50,300 10.5
Services & Miscellaneous 152,900 31.8
Government 67,200 14.0
Other 400 0.1
------- -----
Total 480,100 100.0
</TABLE>
Source: Florida Department of Labor and Employment
Security, November 1995.
Note: The 480,100 estimates varies from the earlier
stated estimate of 460,245.
A surge of new jobs in Jacksonville earned the city a spot
as the ninth fastest-growing metro labor market in 1996,
according to the latest figures from the U.S. Bureau of
Labor Statistics between 1993 and 1995, non-farm employment
in Duval, St. Johns, Nassau and Clay Counties jumped 9.6
percent from 438,600 to 480, 800. Despite its Florida
location, the tourist/convention industry has a smaller
impact on the Jacksonville MSA economy than in other parts
of the state. Most area beaches and recreation facilities
cater to local residents. The exception would be the Amelia
Island Resort located 20 miles northeast of the city on the
Atlantic Ocean. Amelia Island features world-class golf and
tennis and luxury resort accommodations and is designed to
attract vacationers from around the country. The most
recent addition to this resort was the 450-room Ritz
Carlton Hotel, which opened in June of 1991.
The increase in service-oriented industries in Jacksonville
has resulted in a
substantial increase in income for the area's residents.
Per Capita income rose
by an average of approximately 1.4 percent per year from
1986 to 1995.
<TABLE>
<CAPTION>
JACKSONVILLE MSA
YEAR PER CAPITA INCOME
--------------------------
<S> <C>
1986 $14,629
1987 15,482
1988 16,490
1989 14,973
1990 15,695
1995 16,920
</TABLE>
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
According to a demographic profile of Duval County, the
medium household effective buying income was $15,712 as of
January 1, 1997. Additionally there were 278,800 households
with 48 percent owner-occupied. Total Duval County
population was 733,500 with projections of 787,000 by the
year 2005.
11
<PAGE>
Jacksonville is a major distribution center of durable
goods for Florida and Georgia. Transportation facilities
include an international airport, rail service from various
railroad companies, numerous private freight distribution
companies, and bus service. Jacksonville has rail
facilities with multi-modal transportation capabilities.
The Port of Jacksonville, which utilizes the St. Johns
River from the east end of the CBD to the Atlantic Ocean,
is a leading import center for foreign automobiles. This
facility consists of both the Blount Island Marine Terminal
(867 acres) and the Talleyrand Docks and Terminals (173
acres) and features a 38-foot-deep channel. The
Jacksonville Port Authority has acquired 589 acres of
property on Dames Point for its third terminal development,
which is the result of demand from new ship lines. A
$300,000,000 project to deepen the harbor from 38 to 42
feet has been proposed. The international airport, operated
by the Jacksonville Port Authority, has undergone $100
million of improvements, which added two new terminals,
twelve new gates, and extended a runway to accommodate
larger planes for transcontinental flights.
Two major Interstate Highways, Interstate 10 and Interstate
95, intersect near downtown Jacksonville. Interstate 10
travels west from the city to the Gulf Coast communities in
the Southeastern U.S., then continues west through the
Southwestern U.S. to Los Angeles. Interstate 95 runs
north/south along the Eastern Seaboard of the U.S.
Interstate 295 provides a bypass around the major urbanized
areas of the city to the northeast, northwest, west, and
south. Completion of the eastern section of Interstate 295,
which would create a beltway around the city, has been
proposed with limited access approach roads expected to be
in place by 2000. Many of the express roads and highways in
Jacksonville formerly were toll roads; however, the toll
charges were removed in the mid-1980s.
The unified city/county government in Jacksonville and
Duval County has been a unique feature of the area since
the 1960s. A singular taxing authority collects for
schools and municipal services for all residents. Excepted
from Jacksonville city authority are the communities of
Atlantic Beach, Neptune Beach, and Jacksonville Beach,
which are separate incorporated municipalities within Duval
County.
Twenty miles of beaches along the Atlantic Ocean provide a
wealth of recreational opportunities for area residents.
The wide St. Johns River south of the CBD is popular with
local pleasure craft. The average annual temperature in
Jacksonville is 71 degrees with annual rainfall averaging
55 inches. Residents' needs for higher education in the
area are served by several local colleges and universities
such as Jacksonville University, the University of North
Florida, and Florida Community College. Jacksonville is the
headquarters for both the Professional Golf Association and
Association of Tennis Professionals tours. It is also the
home of the newest member of the expanded National Football
League, the Jacksonville Jaguars. The team plays in the
City's Gator Bowl Stadium, which seats 82,000 after
renovation. The area boasts six museums, an active arts
association, and one major daily newspaper. In addition,
St. Augustine in neighboring St. Johns County to the south
is the oldest city in
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<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, 1997 issue of Commercial Real
Estate indicate a tightening and strong market with new
construction justified. Vacancy is now in single digits
city-wide and all submarkets have lower vacancy than one
year ago except for one submarket. Rents city-wide have
increased $1.50 to $3.00 per square foot from 1996 levels
and proposed projects are expected to obtain rents in
excess of $20 per square foot.
The increasing household income in Jacksonville has
attracted a substantial amount of retail development in
recent years. Most of this development has occurred in
suburban markets on the south side and in the beach
communities. In September 1990, The Avenues Mall was
completed offering over 1.4 million square feet of retail
space at Southside Boulevard and U.S. Highway 1. Food Lion,
a North Carolina-based grocery chain, constructed 17 strip
centers throughout the Jacksonville area during 1988 and
1989. Beach area redevelopment featured the opening of two
regional centers known as Sandcastle Plaza and South Beach
Center, and several large "power" centers were constructed
near two of the regional malls in the area.
As of December 31, 1996 the Jacksonville MSA showed total
retail sales at $10.155 million, up 30.5 percent since
year end 1991. Duval County, which encompasses
Jacksonville, had retail sales of 7.644 million or an
increase of 26.3 percent since 1991. Based on information
from the ULI Market Profiles: 1996
-------------------------
13
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
rents for retail space have stabilized since 1987 ranging
from $30.00 to $50.00 per square foot per year for enclosed
mall space. Typical rent levels for smaller centers
experienced a slight increase to a range between $9.00 and
$14.00 per square foot. Rental rates for older strip
centers range from $4.00 to $8.00 per square foot.
Retail development is projected to be stable until vacant
space within the market is reasonably absorbed. Residential
growth in the northern and middle St. Johns County areas,
southside-Intracoastal west, and the Avenue-U.S. Highway 1-
Southside Boulevard areas of the city is expected to
produce retail activity in these markets. Residential, both
single and multi-family remains active in development. The
October 31, 1997 edition of Homefront identifies over 320
single family developments that are active today.
The industrial real estate sector has not experienced the
significant vacancy problems incurred by the office and
retail markets. This sector is very strong in the
Jacksonville area and is experiencing heavy demand for
build-to-suit space from industry entering the market. New
construction during 1995 totaled over 1.5 million square
feet, a new record high. The major projects in the area
include Sara Lee's Coach subsidiary; NatureForm, Inc.;
Pilot Pen Corporation; Sally Industries; H.J. Heinz
Company's Portion Pac, Inc.; Viking Office Products and a
Georgia Pacific expansion. The majority of new construction
is taking place in the south and west sides of
Jacksonville. As established by the NAIOP report in August
1997, the south side submarket has favorably responded to
the one-year supply of space, however, there remains
300,000 square feet within six buildings that has not been
leased. Activity for this space has been slow. The west
side market continues to grow and is said to be a strong
market. The north side submarket is strong with minimal
vacancy and the Port Authority is expected to spend about
$100 million on airport and seaport capital improvements,
which were to begin October 1997. Industrial parks of
tradeport and Imeson will benefit most from the
expenditures.
The apartment market is discussed in the Apartment Market
Analysis section that follows.
NEIGHBORHOOD
ANALYSIS The subject is located in the northeast area of St. Johns
County approximately 18 aerial miles from the Jacksonville
CBD. The neighborhood is generally described as the
northernmost portion of St. Johns County, or that area
lying west of the Atlantic Ocean and south and east of the
St. Johns/Duval County Line immediately south of the city
of Jacksonville Beach. Although unincorporated, this
neighborhood is better known as the community of Ponte
Vedra Beach.
Florida State Highway AlA (Highway AlA) is a major
thoroughfare, which runs the length of Florida's Atlantic
Coast areas from Fernandina Beach at the north end to Miami
Beach in the south. Through the subject neighborhood, this
divided fourlaned road cuts through the neighborhood in a
similar north/south fashion. Just north of the subject
neighborhood boundary in Jacksonville Beach, Highway AlA
intersects with J. Turner Butler Boulevard, a major roadway
connecting
14
<PAGE>
Jacksonville with its suburban beach communities. Highway
AlA runs generally about 5 blocks west of the Atlantic
coast in this neighborhood except at its southern end,
where it merges with State Road 203/Ponte Vedra Boulevard.
Ponte Vedra Boulevard continues northward from this point
immediately along the oceanfront. Major crossroads between
these two neighborhood roadways include Corona Road, about
1 mile south of the Duval County Line, and Solana Road,
several blocks north of Corona Road. Solana Road is a two-
laned street, which continues west from Highway AlA, then
turning southwest, and south along the Intracoastal
Waterway where its name changes to Roscoe Boulevard.
Finally, Palm Valley Road, a two-laned street, branches off
to the southwest from Highway AlA about 2 miles south of
the county line; Palm Valley Road, also known as State Road
210, continues southwestward providing access to the
neighborhood from U.S. Highway 1 and Interstate 95 at the
north end of St. Johns County. Approximately half of the
land within the neighborhood boundaries is east of the
Intracoastal Waterway; this half is approximately 60
percent developed. The area west of this canal lies largely
undeveloped and is predominantly marshland.
Ponte Vedra Beach enjoys a reputation as a popular resort
community and affluent suburban enclave in the Jacksonville
MSA. While no official population count exists, area real
estate professionals estimate the population of Ponte Vedra
Beach to be over 15,000 persons. The area is popular with
retirees for its proximity to beaches and for its numerous
resort-style subdivisions which often include country
clubs, golf courses, and tennis facilities. However, this
location within approximately 30 minutes of downtown
Jacksonville and even closer to large suburban office parks
on the city's south side has attracted local suburban
residents as well. The Mayo Clinic's regional facility at
San Pablo Road and J. Turner Butler Boulevard is just 4
miles northwest of this neighborhood. The Southpoint and
Southside Boulevard office centers to the west are a
reasonable 15-minute commute from the neighborhood along
Highway AlA and J. Turner Butler Boulevard, which
eventually intersects with Interstate 95 to the west.
In the retail sector, several neighborhood shopping centers
are noted along either side of Highway AlA. Ponte Vedra
Square is situated in this neighborhood at the southwest
corner of Highway AlA and Solana Road, which Ponte Vedra
Point shopping center is at the southwest corner of this
highway and Palm Valley Road. Between these two
neighborhood centers is a third, known as Sawgrass Village
along the west side of the street. Regional shopping can be
found at South Beach Regional Center, located just to the
north of the neighborhood boundary at the northwest corner
of Highway AlA and J. Turner Butler Boulevard in
Jacksonville Beach. A planned 250,000-square-foot center
was announced in late 1993 and was completed at the
southwest corner of Highway AlA and J. Turner Butler
Boulevard. Anchor tenants include Target, Publix, and Ace
Hardware. Currently there is a zoning change requested for
land adjacent to the subject Lakeview Village Apartments
for a new shopping center.
All of these retail developments are supported by the
growth and affluence of the residential sector in Ponte
Vedra Beach. The affluence of the neighborhood is
illustrated by the location of six country club
developments in the area over the past twelve years which
feature custom homes generally priced from $150,000 to
15
<PAGE>
over $400,000, well above the median home price in the
Jacksonville MSA. The residential neighborhoods tend to
become more prestigious at the southern end of Ponte Vedra
Beach. This southern part of the community is the location
of both the Sawgrass and Tournament Players Club (TPC)
country club/golf course developments. The Professional
Golf Association and the Association of Tennis
Professionals both have headquarter offices in Ponte Vedra
Beach at the Tournament Players Club development, and each
has sponsored major professional tournaments within the
community in the last several years.
Office development in the Beaches area, which includes
Ponte Vedra, is primarily smaller sized buildings less than
30,000 square feet in size. The August 1997 Commercial Real
Estate publication surveyed 19 office buildings totaling
approximately 600,000 square feet and only 2 buildings were
in excess of 30,000 square feet. The current supply of
immediately available office space is low. The Ponte Vedra
market has more supply, but also has more demand
particularly in the law, medical professionals, financial
planners, and insurance professionals. Rental rates are in
the $19.00 to $21.00 per square foot full service category.
Demand is strong in Ponte Vedra and over 150,000 square
feet is proposed along the `hot' AlA corridor south of
State 202.
Several multifamily condominium and apartment projects are
located in Ponte Vedra Beach. Condos are typically found
immediately along the ocean or with the Sawgrass or TPC
developments, while apartments are located at the north end
of the neighborhood and along Highway AlA. According to the
Jacksonville Planning Department, which publishes a
quarterly apartment survey for the region, the Beach area
submarket in which Ponte Vedra Beach is located has among
the highest monthly average apartment rental rate of the
six submarkets in the Jacksonville MSA. Physical occupancy
rates in each of the existing apartment communities
surveyed were over 90 percent. At subject valuation date,
there were several apartment projects being constructed in
or near Ponte Vedra. Apartment development was occurring
west of AlA and south of J. Turner Butler Boulevard (State
202) and along Hodges Road north of J. Turner Butler
Boulevard. The apartment construction in or near Ponte
Vedra is more specifically identified as west of the
subject apartment complex near the Landing Parkway/Ponte
Vedra Lakes Boulevard intersection.
Despite the growth in the area, which has generally
occurred over the past twelve years, about one-third of the
land in the neighborhood lies vacant and ready for
development. To the south and west of this neighborhood are
typically vacant areas, which contain marshes or land
within the Guana River State Park; to the north is the
older city of Jacksonville Beach, and to the east is the
Atlantic Ocean. The St. Johns District provides bus service
to children in the neighborhood attending public schools;
Ponte Vedra Beach has its own elementary school at Highway
AlA and Corona Road. The University of North Florida is
located about 6 miles northwest of this neighborhood at J.
Turner Butler Boulevard and St. Johns Bluff Road. Police
and fire protection is provided by the county.
16
<PAGE>
The neighborhood's access to supporting facilities,
Atlantic beaches, along with the location of prestigious
golf club communities within Ponte Vedra Beach have made
the neighborhood one of the most attractive areas in
Jacksonville. Physical occupancy rates in many multifamily
developments in this area are above 90 percent. As the
result of an improving local economy, there has been new
development in retail and multifamily housing. As the
economy continues to recover, the appraiser anticipates
that the demand for residential units and retail space will
become greater, and that space in the subject neighborhood
will actively participate in this increased absorption due
to all of the neighborhood's positive features stated
above. However, as the neighborhood becomes more built-out,
it will likely experience a period of stability as it
matures in the long-term compared to the period of rapid
development this neighborhood enjoyed throughout most of
the 1980s.
CONCLUSION Jacksonville, with a January 1997 U.S. Census Bureau
population of 1,025,600 in its MSA, was known in the past
as a military and industrial port city at the northeastern
end of Florida. However, the employment base has grown and
diversified over the past two decades as major banks,
insurance companies and medical service industries have
opened regional or headquarter offices in the area. This
activity has increased the income of area residents and
spurred significant job growth through much of the 1980s.
Although Jacksonville is not noted as a major tourist
center compared to southern areas of Florida, the area has
attractive beaches and a redeveloped downtown riverfront
area to serve the local population.
The diversification of the employment base ignited office
development both downtown and in the south side suburbs
during the past ten years. Numerous large retail centers
have been built in recent years to support the growing
Jacksonville area population and income. Major private
employers include Barnett Bank, Blue Cross/Blue Shield of
Florida, and CSX Transportation. Nonetheless, the city's
naval presence, with over 30,000 personnel, still dominates
employment in the area.
While new industries and employers such as America Online
and AT&T have continued to enter the local employment
market with new back-office operation centers, the
appraisers anticipate less office development as the focus
in the marketplace switches to absorption and renovation of
existing vacant space. Bright spots in the Jacksonville
real estate market include improving occupancy rates in the
apartment market and a relatively low industrial space
vacancy rate compared to other industrial markets
nationwide.
The city of Jacksonville appears to be enjoying a favorable
economic climate. Construction permits and absorption of
space in some sectors such as single-family residential
have increased, while unemployment figures remain low.
Although the closing of the Cecil Field Naval Air Station
is not favorable, many of the lost jobs could potentially
be offset by additions to the area's other two Naval bases
and to the reuse plan of Cecil Field. The city's
diversifying economic base, good supporting facilities,
Florida sunbelt location, and good quality of life should
support growth and absorption in all sectors.
17
<PAGE>
The Ponte Vedra area is in demand and development activity
is present in the apartment, retail, and office areas. This
is in the Beaches area and reflects tourism, a retirement
population, etc. with a growing need/demand for medical,
financial, insurance, and law professionals. It is expected
that demand for apartments will continue into the near
future.
18
<PAGE>
[MAP OF MARKET AREA APPEARS HERE]
<PAGE>
APARTMENT MARKET ANALYSIS
- --------------------------------------------------------------------------------
Information from two surveys was utilized in the analysis of
the Jacksonville apartment market analysis. The first is the
Apartment Market Survey for Greater Jacksonville, Florida,
Second Quarter, 1996 prepared by the Jacksonville Planning
and Development Department and the Northeast Florida
Apartment Council. The second is the Jacksonville Apartment
Market Survey, Third Quarter 1997, published by Vestcor
Realty Management, Inc. Most references are made to the
survey prepared by the Vestcor Realty Management, Inc. AS
THE FIRST SURVEY WAS NOT MADE IN 1997 BY THE PLANNING
DEPARTMENT AND NORTHEAST FLORIDA APARTMENT COUNCIL.
Construction of apartment projects in Jacksonville during
the late 1980s continued but at lower levels each year from
1985 through 1989. The credit restrictions by lenders and
their regulators following the savings and loan scandals in
the mid-1980s contributed to make construction funds scarce
for apartment developers nationwide. The chart below
illustrates the units constructed per year in Jacksonville
since 1985.
<TABLE>
<CAPTION>
YEAR TOTAL UNITS PERMITTED
-------------------------------
<S> <C>
1985 5,079
1986 4,521
1987 2,656
1988 1,949
1989 1,407
1990 1,707
1991 1,170
1992 0
1993 278
1994 912
1995 1,073
1996 3,284
1997 978
</TABLE>
Source: Jacksonville Planning and Development Department
In 1996 3,284 units were permitted for five or more dwelling
units. In 1997 there were 978 units permitted. The outlook
for future development of apartment projects in the
Jacksonville area appears to be good as occupancies are in
the 90 percent to 95 percent range and the economy remains
healthy. Construction was visible to the appraiser in the
south part of Jacksonville.
According to the Jacksonville Planning Department, the
current number of apartment units existing in the
metropolitan area is approximately 54,000. The Planning
Department conducts a survey of the city and area apartment
market. This survey is done by mail to the owners and/or
managers of apartment complexes in Duval County as well as
in northern Clay and St. Johns Counties, and the results of
the survey are published every quarter year in the
department's Apartment Market Survey. The Second Quarter of
-----------------------
this survey, which is stated to reflect the area apartment
market as of the end of June 1996, is the most recent
19
<PAGE>
available; this survey is compiled based on the responses of
owners and/or managers of 27 percent of the total existing
apartment units in the area. Of the 27 percent or 14,575
units, there was a physical occupancy rate of 95.58 percent
with one bedroom apartments with the highest rate at 96.23
percent and efficiencies with the lowest average occupancy
rate this quarter at 92.25 percent. The physical occupancy
rates and average monthly rents as of the Second Quarter
1996 are generally higher among those properties, which were
built since 1990. The Third Quarter 1997 market survey by
Vestcor Realty Management, Inc. reflects the following
statistics for average occupancy.
<TABLE>
<CAPTION>
3rd QTR 3rd QTR CHANGE
CATEGORY 1997 1996 IN 1 YEAR
---------------------------------------------------------
<S> <C> <C> <C>
All units 92.8% 92.2% 0.6%
Built before 1979 92.1% 89.2% 2.9%
Built 1980--1989 94.0% 95.6% (1.6%)
Built 1990--1997 90.1% 92.2% (2.1%)
</TABLE>
The survey indicates a slight increase in occupancy for all
units from one year ago with pre-1979 constructed units
receiving the positive occupancy while post 1980 and post
1990 construction showed 1.6 to 2.1 percent decreases in
occupancy. The major reason for the decrease appears to be
home-buying alternatives.
The Vestcor apartment market survey includes every apartment
community with more than 100 units. They compared the
information received from on-site personnel to their
electric meter analysis. Properties undergoing renovation or
in lease-up were removed from the database. If occupancy
data on properties was not consistent with the electric
meter analysis, these properties were also removed. The
result was a review of 186 apartment complexes containing
41,572 units or nearly 70 to 75 percent of the units in the
Jacksonville area by a 1996 count.
Average monthly rental rates per unit were obtained by
Vestcor and are delineated below by year of construction.
<TABLE>
<CAPTION>
3rd QTR 3rd QTR CHANGE
CATEGORY 1997 1996 IN 1 YEAR
--------------------------------------------------------
<S> <C> <C> <C>
All units $ 568 $ 565 +3--0.5%
Built before 1979 $ 509 $ 504 +5--1.0%
Built 1980--1989 $ 605 $ 596 +9--1.5%
Built 1990-- 1997t $ 809 $ 791 +18--2.3%
</TABLE>
The Vestcor survey for the First Quarter 1996 reported an
average monthly rental rate per unit for the Jacksonville
area of $540. This compared to $565 per unit during the
Third Quarter 1996 indicates an increase in rental rates
during the 6 months from the Vestcor survey is 4.6 percent.
The survey indicates a slight monthly rental rate increase
for all apartment units surveyed, but increases of 1 percent
to 2.3 percent for various construction dated classified
units. It is important to note that the increases in
categories by year built tend to counter the findings of
rental increases for all units and indicate that
20
<PAGE>
the increase for all units should be between 1 percent to
2.3 percent or on average about 1.65 percent. Secondly, the
2nd Quarter 1997 average monthly rental for all units was
$574, which would indicate a $6.00 reduction to the 3rd
Quarter 1997 average monthly rent of $568.
Overall, the Jacksonville apartment market appears to be
healthy. Construction permits recorded for 1992 and 1993
were at their lowest levels in years, or from a high of
5,079 units in 1985 to 0 units permitted for 1992 and 278 in
1993. For 1994 and 1995, there were 912 and 1,073 units
permitted, respectively. In 1996, there were 3,284 units
permitted, while in 1997 there were 978 units permitted.
Physical occupancy as of the Third Quarter 1997 was at 92.8
percent, which is a drop from 1996, but reflects the new
construction. Absorption rates in new apartment projects
have remained healthy over the past two years. Vacancies of
the various apartment markets range from 3 to 7 percent. The
appraisers project that the citywide market should reach a
stabilized occupancy of 95 percent between one and two years
at this rate of growth.
SUBMARKET ANALYSIS The subject property is located in the Beaches submarket.
This submarket is generally described as the northeastern
area of St. Johns County along the Atlantic Ocean at Ponte
Vedra Beach and including the Duval County beachfront
municipalities of Atlantic Beach, Neptune Beach, and
Jacksonville Beach.
Vestcor Realty Management, Inc.'s Third Quarter 1997 survey
features data on the apartment market within the city of
Jacksonville as well as the area within the subject
submarket and other immediate suburbs. This Third Quarter
1997 report, which is the most recent published to date,
states that the Beaches submarket had a 94.0 percent
physical occupancy rate, slightly higher than the average
occupancy rate of 92.8 percent of the eight submarkets
surveyed. This is a large increase from the 81.4 percent
physical occupancy rate experienced in this submarket during
the previous quarter and an increase from 93.6 percent in
the Third Quarter 1996. Reference is made to the following
table:
21
<PAGE>
<TABLE>
<CAPTION>
PHYSICAL OCCUPANCY
QUARTER/YEAR RATE BEACHES SUBMARKET
--------------------------------------
<S> <C>
01/92 93.63%
02/92 86.74%
03/92 88.13%
04/92 92.82%
01/93 94.43%
02/93 96.88%
03/93 91.95%
04/93 91.43%
01/94 92.57%
02/94 94.16%
03/94 95.34%
04/94 91.70%
01/95 98.46%
02/95 91.81%
03/95 95.38%
04/95 95.73%
01/96 94.89%
02/96 93.19%
03/96 93.60%
02/97 81.40%
03/97 94.30%
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
The Beaches area apartments tend to attract more transient
tenants than the city of Jacksonville as a whole. This can
be noted in the wide occupancy rate changes from the above
table. Beaches area tenants are usually most attracted to
the area during the summer months. In addition, the pool of
prospective tenants in this submarket fluctuates with the
personnel movements at the nearby Mayport Naval Air Station
and with the attraction of the retirement populace.
The average monthly rental rate in the Beaches submarket,
at $606 as of the Second Quarter 1996, was among the
highest of all the submarkets in the area. In the Second
Quarter of 1997 the average monthly rental increased about
13 percent to $687 and then decreased 1 percent to $680 in
Third Quarter 1997. It is believed that some of the changes
in rental rates and occupancy is affected by new
construction of multi-family, condo, and single family
development in the Beaches and adjacent areas. The
following table illustrates the trend in rental rates for
the subject market according to the surveys by the
Jacksonville Planning and Development Department and
Vestcor.
22
<PAGE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY RENTAL
QUARTER/YEAR RATE BEACHES SUBMARKET
---------------------------------------
<S> <C>
01/92 $470
02/92 563
03/92 577
04/92 510
01/93 500
02/93 582
03/93 496
04/93 570
01/94 598
02/94 571
03/94 551
04/94 560
01/95 546
02/95 523
03/95 662
04/95 644
01/96 689
02/96 606
03/96 674
02/97 687
03/97 680
</TABLE>
Source: Vestcor Apartment Market Survey for Greater
Jacksonville, Florida, Third Quarter 1997
Information regarding the number of new apartment projects,
proposed or under construction, was not made available in
the Third Quarter survey because the Beaches submarket is
located in St. Johns County and construction permits are
recorded in that county, not Duval County. There are
projects located near US Highway A1A being built in the
Ponte Vedra area and Beaches submarket. There are
additional projects being built along Hodges Road north of
J. Turner Butler Boulevard (State 202) which will
contribute competition to the Ponte Vedra apartment
communities.
The subject's submarket has exhibited a stabilized
occupancy of between 90 and 95 percent (with one exception)
according to one local apartment survey. The subject
property has a current economic occupancy of 84 percent and
is considered to be able to reach occupancy stabilization
within three years.. Although the Beaches submarket has
been an active market in the past, the future expected
development of additional apartment units may cause
problems for absorption of the existing vacant units unless
demand can remain commensurate with construction.
Additionally, there is some concern from the effect of the
proposed shopping center adjacent to Lakeview Village on
rental rates and/or occupancy.
23
<PAGE>
[SITE PLAN APPEARS HERE]
<PAGE>
SITE DESCRIPTION
- --------------------------------------------------------------------------------
LOCATION The subject site is located along the north side of Ponte
Vedra Lakes Drive west of Highway AlA just south of the
Duval/St. Johns county line. This location is in the
northeastern area of St. Johns County in the community of
Ponte Vedra Beach about 18 aerial miles southeast of the
Jacksonville CBD. The site is improved with the Lakeside
Village Apartments, which have a street address of 100
Lake Vista Drive, Ponte Vedra Beach, Florida.
SIZE AND SHAPE A survey of the subject site was not available. A tax
plat map is provided to the reader on the facing page.
However, information provided by the client indicates
that the site comprises 19.47 acres. The front footage
along the north line of Ponte Vedra Lakes Drive was not
provided; however, a visual inspection of the property
indicated that the site has significant frontage on the
street.
ACCESS AND VISIBILITY The property is easily visible from Ponte Vedra Lakes
Drive due to its adequate frontage on this street. Access
into the site is provided by Lake Vista Drive, a private
roadway running north from Ponte Vedra Lakes Drive into
the site. Ponte Vedra Lakes Drive is an asphalt-paved,
two-laned neighborhood thoroughfare which runs west from
Highway AlA through an area predominated by residential
apartments and town homes.
Indirect access to the property is provided via Highway
AlA to the east of the subject. Highway AlA is a four-
laned divided roadway and is the main thoroughfare in
Ponte Vedra Beach.
LEGAL DESCRIPTION A legal description of the subject is contained in the
Addenda of this report. The subject site is generally
described as being a 19.47-acre tract out of Government
Lot 2, Section 16, Township 3 South, Range 29 East, St.
Johns County, Florida.
ZONING The site is zoned R-PUD 83-59, Ordinance 84-3, as part of
a residential planned development area by St. Johns
County. This zoning allows for higher density residential
uses such as apartments or condominiums.
UTILITIES All utilities are available to the site. Jacksonville
Suburban Utilities provides water and sewer service to
the site; the Jacksonville Beach Electric Authority
supplies electrical service. Telephone hookups are in
place from Southern Bell, along with cable television
lines from Continental Cable.
TERRAIN AND DRAINAGE The subject site is generally level to street grade, with
minor landscaped berms within the site. The site contains
three retention lakes and drainage appears to be
adequate. A soil survey was not available on the subject
site. While the soil appears generally supportive of a
wide variety of improvements, the appraiser is not an
expert in soil content and was unable to certify this
assumption. According to the National Flood Insurance Map
125147-0184D dated September 18, 1985, the site is in
Zone C, or "areas of minimal flooding." Numerous native
trees are located on the site; however, no significant
obstacles to development of the site (such as rock
outcroppings, etc.) were evident.
24
<PAGE>
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 St. Johns County Property Appraiser's
Office:
<TABLE>
<S> <C>
Property Value..............................$10,339,660
Personal Property Value.....................$ 134,427
Total Value.................................$10,474,087
Total Taxes.................................$ 179,199
Approximate Tax Rate per $1000 Valuation..........17.11
</TABLE>
The assessor's parcel number for the subject site is
051070-0000. The subject, assessed for $39.76 per square
foot or $43,642 per unit including personal property.
The real estate property taxes for the subject are
calculated at $179,199 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. Therefore, the 1998 property taxes will
be paid in 1999. 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 $186,366.
SITE CONCLUSION The subject property is in the northeastern area of St.
Johns County, Florida, just south of the Duval county line.
This location is about 18 aerial miles southeast of
downtown Jacksonville. The parcel contains 19.47 acres with
level terrain. Drainage and soil conditions appear to be
adequate and supportive of a variety of improvements. All
utilities are available. The site is in the Zone C area of
minimal flooding. 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 Ponte Vedra Lakes Drive, with
indirect access from Highway AlA just east of the site. The
property is zoned by the county for high-density
residential uses including condominium and/or apartment
development, and appears to be physically suitable for such
improvements.
25
<PAGE>
IMPROVEMENTS
- --------------------------------------------------------------------------------
The subject site, a 19.47-acre tract of land, is improved
with a two-story apartment project known as the Lakeview
Village Apartments. The improvements consist of 240
apartment units contained in 30 buildings constructed in
1984. Also situated on the site is a leasing
office/clubhouse with a kitchen and laundry facility,
sauna, exterior mail post, deck, swimming pool and jacuzzi
surrounded by an iron fence, lighted and fenced tennis
court, gazebo, three lakes, and a mechanical shed.
There are three basic floor plans for the 240 apartment
units. The basic features of these floor plans are as
follows:
<TABLE>
<CAPTION>
NO. OF
UNITS UNIT TYPE SIZE (SF) TOTAL NRA
---------------------------------------------
<C> <S> <C> <C>
24 lBR/lBA/DN 867 20,808
24 lBR/1BA/UP 867 20,808
40 2BR/2BA/DN 1,059 42,360
40 2BR/2BA/UP 1,059 42,360
56 2BR/2BA/DN 1,224 68,544
56 2BR/2BA/UP 1 224
--- ----- -------
240 1,098 263,424
</TABLE>
DN = downstairs; UP = upstairs
As seen in the figures above, the total net rentable area
of 263,424 in 240 apartment units results in an average of
1,098 square feet per unit. There are a total of 48 one-
bedroom units and 192 two-bedroom units.
The land area is 19.47 acres equating to a density of 12.33
units per acre. The parking consists of 350 asphalt-paved
open spaces or 1.46 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 except for a flat surface at the top of some of
the buildings covered by a built-up tar and gravel surface.
Windows are of single-hung aluminum thermal pane
construction, with six panel exterior doors. Porches by
each exterior door have an exterior light. Upper-level
units can be reached using exterior staircases with metal
supports and handrails and cement risers and landings.
The interior finish of each unit has painted gypsum board
walls and ceilings. Some ceilings feature vaulted or boxed
ceilings, while a few walls are accented with decorative
wallpaper. Floors have carpeting over pad with tile floors
in the kitchen and bathrooms. 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
26
<PAGE>
has an electric water heater with a 40-gallon capacity.
Kitchen equipment appears to be original, but in good
condition.
Carpet and tile floors are found in the bathrooms, with
additional tile around the tub enclosure. The toilet,
bathtub and sink are porcelain, and a formica countertop
covers a small vanity. Each bathroom also has a wall mirror
and an exhaust fan.
Each apartment unit in this project typically has a
fireplace, ceiling fans, wet bars, washer and dryer closet
with connections, miniblinds, and an exterior screened-in
porch or deck. 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, two bridges with brick
pavers, and pole-mounted exterior light fixtures. The
landscaping features numerous native trees as well as
decorative planted shrubbery and lawns.
The subject improvements appear to be in average overall
condition. The project underwent renovation in 1994 and
1995, which included the re-roofing of several buildings.
According to ConAm Management Corporation, there are
several expenditures due in 1998, which are listed as
follows:
<TABLE>
<S> <C>
Chimney Cap Repair $ 38,000
Irrigation Time Clocks/ Line Repair Pumps 30,000
Plumbing Shower Pans/Leaks 40,000
Asphalt Repair/Seal Parking Lot 40,000
Traffic Control Gating/Front Entry 50,000
TOTAL $198,000
</TABLE>
Considering the current condition of the property at the
time of inspection, the effective age is estimated to be
equal to the actual age of thirteen years. Further, the
wooded areas of vacant land to the north and east of the
subject site which front on major roadways have been
partially cleared because of retail development. The
clearing of land and the loss of the wooded buffer from the
roadways to the east and north of the subject and new
retail construction may have a detrimental effect upon the
aesthetics of the subject and therefore rents and/or
occupancy.
27
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SUBJECT PHOTOGRAPHS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
View of clubhouse/leasing office exterior
[PICTURE APPEARS HERE]
View of apartment building and interior lake.
<PAGE>
[PICTURE APPEARS HERE]
View of interior street, bridge, and clubhouse/leasing office.
[PICTURE APPEARS HERE]
View of swimming poo1 as part of clubhouse.
<PAGE>
[PICTURE APPEARS HERE]
View of interior of clubhouse/leasing office.
[PICTURE APPEARS HERE]
Interior view of the living room in Unit 131.
<PAGE>
[PICTURE APPEARS HERE]
Interior view of kitchen in Unit 131.
[PICTURE APPEARS HERE]
Interior view of dining room in Unit 239
<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 R-PUD
83-59 Ordinance 84-3 by St. Johns County. This zoning
designation for the site is intended to restrict and
promote the development of the subject to multifamily
residential uses.
PHYSICAL POSSIBILITY - Many physical characteristics of a
site can affect the use to which it can be put. These
characteristics can include size, shape, location, road
frontage, topography, easements, utility availability,
flood plain, and surrounding patterns.
The subject site is generally trapezoidal in shape and
encompasses a total of 19.47 acres, allowing for full
physical utilization of the site. The site appears to have
significant frontage along the north side of Ponte Vedra
Lakes Drive. The topography of the site is generally level,
and drainage appears to be adequate. The site is located in
Flood Zone "C" which is defined in the previous Site
Description section of this report.
The subject's location is on the north side of Ponte Vedra
Lakes Drive just west of its corner with State Highway AlA,
the major thoroughfare in Ponte Vedra Beach. Property uses
along Ponte Vedra Lakes Drive Road predominantly consist of
apartment complexes with some town homes and vacant land.
Ponte Vedra Lakes
28
<PAGE>
Drive is a two-laned residential street with local traffic,
which travels east/west from State Highway AlA at its east
end. 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 surrounding
land use patterns and the lack of significant traffic along
Ponte Vedra Lakes Drive.
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 indicate
that condominium and cooperative unit developments favor
on-beach locations and the subject is a distance from the
actual beach.
After having eliminated all other development from our
analysis, the financial feasibility of multifamily
development must be tested. The subject site is in the
"Beaches" apartment submarket area. The survey conducted by
Vestcor Realty Management, Inc., the occupancy level for
the apartment projects in the Beaches submarket was 94.3
percent during the Third Quarter 1997. This reflects a 0.7
percent increase from one year earlier and 15.8 percent
increase from the previous quarter (Second Quarter 1997).
During the same one-year period between the Third Quarters
1996 and 1997, rental rates have increased about 1.0
percent from $674 to $680 per month. Apartment development
has been taking place in the Beaches submarket.
From the preceding, apartment development appears feasible.
Occupancy rates have increased only slightly during the
past year and rental rates have risen moderately according
to the most recent apartment survey. The following reflects
apartment development costs on a square foot basis.
<TABLE>
<CAPTION>
<S> <C>
Cost to Construct (Class C Average to Good)........ $50.00
Land Acquisitions.................................. 4.00
------
Total Cost of Development.......................... $54.00
</TABLE>
The preceding indicates that development is feasible for
multifamily residential development. As indicated in the
Sales Comparison Approach in this report, apartments
developed since 1995 reflect sale prices in the $60 to $75
per square foot category. Most of the sale prices are above
the cost of development.
29
<PAGE>
MAXIMUM PRODUCTIVITY - After considering the current
economic climate and the subject's location and financial
feasibility of certain land uses, we are of the opinion
that the demand for multifamily apartment units conducive
to the subject site would produce the highest net return
over the longest period of time. This is due to the
subject's location and the popularity of the neighborhood.
In summary, the multifamily apartment market has shown
signs of increasing health. The site's location near
Jacksonville area beaches in the exclusive Ponte Vedra
residential and resort communities, and within easy
commuting distance to major south side employment
facilities, gives it a large base of prospective rent-
paying tenants from which to draw. The subject is in an
area that is relatively stable after a decade of growth.
Therefore, after considering the alternatives, we believe
the highest and best use of the site, as vacant, is for
multifamily residential development.
SUBJECT PROPERTY
AS IMPROVED The property, as improved, is tested for two reasons.
First, to identify the improvements that are expected to
produce the highest overall return per invested dollar, and
the second reason is to help identify comparable
properties. The four tests or elements are also applied in
this analysis to the subject as follows:
LEGALLY PERMISSIBLE - Within the scope of a legal analysis
the subject property would be adaptable to multifamily
residential uses as limited by the zoning of the site by
St. Johns County.
PHYSICAL POSSIBILITY - Based on the subject's size (19.47
acres), configuration (roughly trapezoidal), 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 12.33 units per acre is in line with the market
sales, which reflect a range in density from 10 to 20.5,
units per acre.
FINANCIAL FEASIBILITY - The discussion of the financial
feasibility of the subject, as if vacant, would also apply
to the test as improved. Based on the economic conditions
for alternative market segments, it was concluded that the
subject's present improvements are satisfactory to fulfill
this test.
MAXIMUM PRODUCTIVITY - The test for this element is also
from the market. The comparables analyzed suggest that
under competent and prudent management, the subject could
produce 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 project's amenities are considered average
compared to other projects in the area. Some of the
comparables have better project amenities and the subject
requires capital expenditures for deferral maintenance.
Therefore, the subject's improvements are not considered to
be the optimum use.
30
<PAGE>
APPRAISAL PROCEDURES
- --------------------------------------------------------------------------------
Traditionally, three valuation approaches or techniques are
used in the appraisal of real estate. These are the Cost
Approach, Sales Comparison Approach, and Income Approach.
COST APPROACH In the Cost Approach, the appraisers obtain an estimate of
value by adding to the land value the estimated value of
the physical improvements. This value is derived by
estimating the replacement cost new of the improvements
and, when appropriate, deducting the reduction in value
caused by accrued depreciation. According to the Appraisal
Institute, the basic principle of the Cost Approach is that
buyers judge the value of an existing structure by
comparing it to the value of a newly constructed building
with optimal functional utility, assuming no undue cost due
to delay. Thus, the appraiser must estimate the difference
in value between the subject property and a newly
constructed building with optimal utility.
The Cost Approach was not used as a method of valuation in
this appraisal. The Cost Approach is typically the least
reliable indicator because cost does not necessarily
reflect value. Moreover, estimates of depreciation are
difficult to accurately measure in the marketplace, thereby
compounding the speculative nature of the opinions derived
in the cost method of valuation.
SALES COMPARISON
APPROACH This approach produces an estimate of value by comparing
the subject property to sales and/or listings of similar
properties in the immediate area or competing areas. The
principle of substitution is employed and basically states
when a property is replaceable in the market, its value can
be set by the cost of acquiring an equally desirable and
comparable property. This technique is viewed as the value
established by informed buyers and sellers in the market.
INCOME APPROACH The measure of value in this approach is capitalization of
the net income, which the subject property will produce
during the remaining economic life of the improvements.
This process consists of two techniques. The first
technique estimates the gross income, vacancy, expenses,
and other appropriate charges. The resulting net income or
net cash flow is then capitalized. The second technique
projects the gross income, vacancy, expenses, other
appropriate charges, net income, and cash flow over a
projected holding period. The resulting cash flow and
reversion (future value) are discounted at an appropriate
rate and added in order to arrive at an indication of
current value from the standpoint of an investment. These
methods provide an indication of the present worth of
anticipated future benefits (net income or cash flow) to be
derived from ownership of the property. Both techniques
were utilized in analyzing the subject property.
SUMMARY The appraiser, in applying the tools of analysis to the
valuation problem, seek to simulate the thought process of
the most probable decision-maker. The appraiser's judgment
concerns the applicability of alternative tools of analysis
to the facts of the problem, the data and information
needed to apply these tools, and the selection of the
analytical approach and data most responsive to the problem
in question.
31
<PAGE>
Thus, depending on the type of property appraised or the
purpose of the appraisal, one approach may carry more
weight or may point to a more reliable indication of the
value of the property being appraised than the others. In
some instances, because of the inadequacy or unavailability
of data, one or two of the approaches may be given little
weight in the final value estimate.
32
<PAGE>
[IMPROVED SALES MAP APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
JACKSONVILLE AREA
IMPROVED SALES SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
SALE NAME/LOCATION SALE CASH EQUIV. YEAR NO. OF NRA OCCUP. NOI/SF
NO. DATE SALE PRICE BUILT UNITS AVG/SF AT SALE /UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke 08/97 $20,500,000 1995 280 296,616 95% $5.92
13700 Sutton Park Dr. North 1,059
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
2 San Pablo 06/97 $ 5,350,000 1974 200 184,750 90% $3.16
14401 Jose Vedra Blvd. 924
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
3 Hunter's Ridge(formerly Oaks of 05/97 $15,200,000 1987 336 294,888 92% $4.00
Deerwood) 878
10100 Baymeadows Road
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
4 Woodhollow 04/97 $16,700,000 1986 450 342,162 94% $4.69
1715 Hodges Blvd. 760
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra 01/97 $19,000,000 1996 253 252,162 95% $6.26
101 Vera Cruz Drive 1,000
Ponte Vedra, FL
- ------------------------------------------------------------------------------------------------------------------------------------
6 The Huntington @ Hidden Mills 08/96 $ 7,225,000 1986 224 179,476 98% $3.85
3333 Monument Road 801
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
7 The Antlers 05/96 $15,000,000 1985 400 327,728 97% $4.65
8433 Southside Blvd. 819
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
8 Westland Park 05/96 $16,950,000 1989 405 403,010 97% $4.26
6710 Collins Road 995
Jacksonville, FL
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SALE NAME/LOCATION PER PER OVEALL
NO. SF /UNIT RATE EGIM
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 The Links @ Windsor Parke $69.11 $73,214 8.56% 7.80
13700 Sutton Park Dr. North
Jacksonville, FL
- ------------------------------------------------------------------------------
2 San Pablo $28.96 $26,750 10.90% 4.56
14401 Jose Vedra Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------
3 Hunter's Ridge(formerly Oaks of $51.54 $45,238 7.76% 6.74
Deerwood)
10100 Baymeadows Road
Jacksonville, FL
- ------------------------------------------------------------------------------
4 Woodhollow $48.79 $37,111 9.60% 5.47
1715 Hodges Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------
5 The Courts @ Ponte Vedra $75.12 $75,099 8.34% 7.31
101 Vera Cruz Drive
Ponte Vedra, FL
- ------------------------------------------------------------------------------
6 The Huntington @ Hidden Mills $40.26 $32,254 9.56% 5.48
3333 Monument Road
Jacksonville, FL
- ------------------------------------------------------------------------------
7 The Antlers $45.77 $37,500 10.20% 5.63
8433 Southside Blvd.
Jacksonville, FL
- ------------------------------------------------------------------------------
8 Westland Park $42.06 $44,852 10.10% 6.01
6710 Collins Road
Jacksonville, FL
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
- --------------------------------------------------------------------------------
The Sales Comparison Approach is considered a good
valuation method in the event that a sufficient number of
similar and recent transactions can be found and accurately
verified. The key to the Sales Comparison Approach is that
a sufficient number of comparable sales be present to
reflect an accurate indication of value. In such an event,
market value can be derived directly from the sales, since
all complexities involved are properly weighed according to
their significance to actual buyers and sellers.
This approach is based upon prices paid in actual market
transactions. It is a process of correlating and analyzing
recently sold properties, which are similar to the subject.
The reliability of this technique depends upon (a) the
degree of comparability of the property appraised with each
sale, (b) the length of time since the sale, (c) the
accuracy of the sales data, and (d) the absence of unusual
conditions affecting the sale.
The comparison process must be based on sales, which
constitute acceptable evidence of motivations inherent to
the market, occurring under similar market conditions, of
similar or reasonably similar apartment projects. These
projects were selected since they are reasonably similar to
the subject property. A map and a summary of the comparable
sales can be found on the preceding pages. The transaction
dates of the sales used ranged from October 1994 to August
1996. Reference is made to the individual sales data
included in the Addenda section of this report.
SALE 1, known as the Links at Windsor Park Apartments, sold
in August 1997 for $20,500,000. There are 280 units
totaling 296,616 square feet. The property sold at $69.11
per square foot or $73,214 per unit. It was built in 1995
and was in excellent condition. The Links was 90 percent
occupied at sale date. It sits on 23.36 acres of land and
reflects density at 11.98 units per acre. The property's
construction is described as wood frame with wood siding
and some stucco.
SALE 2, known as the San Pablo Apartments, sold in June
1997. It has 200 units and 184,750 square feet. The sales
price was $5,350,000 and the property was 90 percent
occupied at sale date. Unit prices indicated are $28.96 per
square foot and $26,750 per unit. The sale reflected a 10.8
percent capitalization rate and was in need of substantial
repair and renovation work. The rate is 14,24 acres and the
unit density indicated is 14.04 units per acre. The
property at sale date was inferior to the subject.
SALE 3, known as Hunter's Ridge, (formerly known as Oaks at
Deerwood) sold for $15,200,000 or $45,238 per unit in May
1987. It has 294,,888 square feet and indicates a unit
price of $51.54 per square foot. Land area is 34.70 acres
and shows unit density at 9.68 units per acre. The
capitalization rate was 7.76 percent, however, the property
needed some attention and had good upside potential.
33
<PAGE>
SALE 4, known as the Woodhollow Apartments sold 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>
================================================================================
Sales Comparison - NOI Adjustments
-----------------------------------
<TABLE>
<CAPTION>
Sale Sale Subject Adjust. Adjust.
No. Price/SF NOI/SF NOI/SF Factor Price/SF
- ---- -------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
1 $ 69.11 $ 5.92 $ 4.44 0.750000 $51.83
2 $ 28.96 $ 3.16 $ 4.44 1.405063 $40.69
3 $ 51.54 $ 4.00 $ 4.44 1.110000 $57.21
4 $ 48.99 $ 4.69 $ 4.44 0.946695 $46.38
5 $ 75.12 $ 6.26 $ 4.44 0.709265 $53.28
6 $ 40.26 $ 3.85 $ 4.44 1.153247 $46.43
7 $ 45.77 $ 4.65 $ 4.44 0.954839 $43.70
8 $ 42.06 $ 4.26 $ 4.44 1.042254 $43.84
Mean= $47.92
Value @ mean $12,623,278
<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 4,871 0.777246 56,905
2 $26,750 $2,916 4,871 1.670439 44,684
3 $45,238 $3,510 4,871 1.387749 62,779
4 $37,111 $3,562 4,871 1.367490 50,749
5 $75,099 $6,263 4,871 0.777742 58,408
6 $32,254 $3,083 4,871 1.579955 50,960
7 $37,500 $3,811 4,871 1.278142 47,930
8 $41,852 $4,240 4,871 1.148821 48,080
Mean= $52,562
Value @ mean $12,614,830
================================================================================
</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 $4.44 per square foot or $4,871 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 $40.69 to
$57.21 per square foot and $44,684 to $62,779 per unit. The
simple average adjusted prices (not weighted) per square
foot and per unit of the comparable sales was calculated at
$47.92 and $52,562, respectively. Applying an age
adjustment based on square foot area and number of units
indicates value at $46.00 per square foot and $52,000 per
unit
263,424 SF at $46.00/SF, Rounded...............$12,100,000
240 units at $52,000/unit......................$12,000,000
A second method of comparison is by use of the effective
gross rental multiplier (EGRM). In this analysis, the
subject's effective gross income is multiplied by a factor
estimated from the sales to derive an indication of value.
The sales utilized in this analysis reflect EGRMs ranging
from 4.56 to 7.80 as shown on the facing page. Expense
ratios range from 33.26 to 50.27 percent. From the
capitalization rate in the Income Approach, the subject is
estimated to have a 44.69 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.
Sales 4 and 6 were apartments built in 1986 and Sale 3 was
built in 1987. Sale 7 was constructed in 1985. Based on the
preceding analysis, an EGRM for the subject has been
estimated at 6.00 resulting in a total value indication as
follows:
$1,983,246 x 6.00, Rounded......................$11,900,000
The NOI per square foot and per unit methods presented a
value indication between $12,100,000 and $12,000,000 and
the effective gross income multiplier method indicated a
value of $11,900,000. Weight has been given to all methods
with emphasis on the method using net operating income
because these methods
35
<PAGE>
<TABLE>
<CAPTION>
==============================================================
SALES COMPARISON - EGRM ANALYSIS
--------------------------------------------------------------
EFFECTIVE EFFECTIVE GROSS OPERATING
SALE NO. GROSS REVENUE/SF REVENUE MULTIPLIER EXPENSE RATIO
--------------------------------------------------------------
<S> <C> <C> <C>
1 $ 8.86 7.80 33.26%
2 6.35 4.56 50.27%
3 7.65 6.74 47.70%
4 8.92 5.47 47.45%
5 10.27 7.31 39.00%
6 7.35 5.48 47.63%
7 8.13 5.63 42.80%
8 7.00 6.01 39.14%
==============================================================
</TABLE>
<PAGE>
reflect both income and expense information. The EGRM
method was used as support. From the proceeding, a value
for the subject is estimated at $12,000,000. From this, a
deduction for capital expenditures of $198,000 and for rent
loss of $340,605 is made as follows:
<TABLE>
<S> <C>
Indicated Value $12,000,000
Less: Capital Expenditures (198,000)
Rent Loss (340,605)
"As Is" Value $11,461,395
Rounded $11,500,000
</TABLE>
Therefore, it is our opinion that the leased fee market
value of the subject property based on the indication
provided by the Sales Comparison Approach, all cash, on an
"as is" basis as of November 30, 1997, is
ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($11,500,000)
36
<PAGE>
[SITE PLAN OF COMPARABLE RENTALS APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
RENT COMPARABLE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------------
COMP. YEAR NO. NRA AVERAGE 1997 1996 SQUARE 1997 MONTHLY
NO. NAME OF PROJECT BUILT UNITS (SF) UNIT SIZE OCCUP. RATE OCCUP. RATE FLOOR PLANS FEET RATE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 The Remington Apts. 1985 344 302,904 881 95.0% 92.6% 1BR/1BA 683 605-615
611 Ponte Vedra Blvd. 1BR/1BA 755 635-670
2BR/1BA 886 670-680
2BR/2BA 977 735-745
2BR/2BA 1,043 765-775
2BR/2BA 1,155 825-835
- -----------------------------------------------------------------------------------------------------------------------------
2 Marsh Cove Apts. 1983 86 96,176 1,118 95.0% 99% 2BR/2BA/FL 908 740
1220 Marsh Cove Lane 2BR/2BA/FL 1,100 780
2BR/2BA/LOFT 1,242 850
2BR/2.5BA/TH 1,050 760
2BR/2.5BA/TH 1,220 810
3BR/3BA 1,430 1,010
- -----------------------------------------------------------------------------------------------------------------------------
3 The Fairways Apts. 1984 216 186,600 864 88.0% 93% 1BR/1BA 550 555
100 Fairway Park Blvd. 1BR/1BA 600 615
2BR/2BA/FL 950 700
1BR/1BA/TH 750 650
2BR/2BA/TH 1,100 740
2BR/1.5BA/TH 1,050 705
- -----------------------------------------------------------------------------------------------------------------------------
4 Colonial Grand 1987 240 211,640 882 97.0% 99.5% 1BR/1BA 672 575-615
125 Great Harbour Way 1BR/1BA 760 620-660
1BR/1BA/DEN 937 670-710
2BR/2BA 974 705-745
- -----------------------------------------------------------------------------------------------------------------------------
5 Arbor Club Apts. 1992 251 288,924 1,151 100% 95% 1BR/1BA 881 655-685
1 Arbor Club Drive 1BR/1BA/LOFT 1,102 740-760
2BR/2BA 1,181 790-820
2BR/2BA 1,254 825-855
3BR/2BA 1,426 980-1,000
3BR/2BA 1,493 1,025-1,050
- -----------------------------------------------------------------------------------------------------------------------------
Lakeview Village 1984 240 263,424 1,098 96% 94% 1BR/1BA/DN 867 615
100 Lake Vista 1BR/1BA/UP 867 625
SUBJECT 2BR/2BA/DN 1,059 680
2BR/2BA/UP 1,059 690
2BR/2BA/DN 1,224 740
2BR/2BA/UP 1,224 750
=============================================================================================================================
<CAPTION>
- ----------------------------------------------------------------------------------------------------
COMP. 1997
NO. NAME OF PROJECT RENT/SF AMENITIES/COMMENTS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
1 The Remington Apts. 0.886-0.900 Microwave ovens, miniblinds, vaulted ceilings,
611 Ponte Vedra Blvd. O.841-0.887 ceiling fans, outdoor utility closets, pools, tennis
0.756-0.767 court, racquetball court, hot tub, sauna,
0.752-0.763 exercise/weight room, clubroom, lake
0.733-0.743
0.714-0.723
- ----------------------------------------------------------------------------------------------------
2 Marsh Cove Apts. 0.755 Microwave ovens, washer/dryer connections,
1220 Marsh Cove Lane 0.709 fireplaces, outdoor utility closets, pool, tennis
0.684 court, hot tub
0.724
0.664
0.706
- ----------------------------------------------------------------------------------------------------
3 The Fairways Apts. 1.01
100 Fairway Park Blvd. 1.03 Washer/dryer connections, miniblinds, fireplaces,
0.737 pool, tennis courts, hot tub, exercise/weight
0.867 room, clubroom, laundry facility, lake
0.673
0.671
- ----------------------------------------------------------------------------------------------------
4 Colonial Grand 0.856-0.915 Microwave ovens. washer/dryer connections,
125 Great Harbour Way 0.816-0.868 miniblinds, fireplaces, ceiling fans vaulted
0.715-0.758 ceilings, outdoor utility closets, pool, tennis court,
0.724-0.765 racquetball courts, basketball court, hot tub, sauna,
exercise/weight room, clubroom, volleyball court
- ----------------------------------------------------------------------------------------------------
5 Arbor Club Apts. 0.743-0.778 Microwave ovens. washer/dryer connections,
1 Arbor Club Drive 0.672-0.690 miniblinds, fireplaces, vaulted ceilings, burglar
0.669-0.694 alarms, pool, tennis courts, jacuzzi,
0.658-0.682 exercise/weight room, clubroom, laundry facility,
0.687-0.701 garages
0.687-0.703
- ----------------------------------------------------------------------------------------------------
Lakeview Village 0.709 Washer/dryer connections, miniblinds, fireplaces,
100 Lake Vista 0.721 outdoor utility closets, wet bars, pool, tennis
SUBJECT 0.642 court, hot tub, sauna, exercise/weight room,
0.652 clubroom, laundry facility, lake
0.605
0.613
====================================================================================================
</TABLE>
DN = downstairs; UP = upstairs; TH = townhouse
<PAGE>
INCOME APPROACH
- --------------------------------------------------------------------------------
In estimating the market value of the subject property, one
method used by the appraisers was the Income Approach. The
Income Approach to value is predicated on the assumption
that there is a definite relationship between the amount of
net income a property will earn and its value. Ultimately,
the Income Approach seeks to estimate the present worth of
an anticipated net income stream based on an analysis of
its quality, quantity, and duration. In accordance with the
principle of substitution, a prudent investor would pay no
more to receive an income stream from a specified property
than any other property producing an equally desirable
income stream.
Typically, the first step in the Income Approach is to
estimate the potential gross income according to market
rent. Market rent means the "going rent" in the
neighborhood based on past history and present conditions.
Vacancies are then deducted to arrive at effective gross
income. Estimated annual expenses are deducted from the
effective gross income, resulting in an indication of net
operating income before debt service. From the estimated
net annual income, annual debt service (if applicable) is
subtracted to obtain annual cash flow to equity. This cash
flow can be capitalized into an indication of equity value
by direct capitalization utilizing an overall equity rate,
or if debt does not exist, an overall capitalization rate.
It may also be projected into the future over a selected
but appropriate holding period, and discounted along with
the anticipated equity reversion at the market discount
rate and added in order to arrive at the net present equity
value for the subject property. Since our valuation is on a
cash basis, no mortgage was considered. In either method,
the present mortgage balance (if applicable) would be added
to the equity value to obtain the total value of the
property. The appraisers have utilized both methods in
valuing the subject property on an all cash basis.
ESTIMATED GROSS
RENTAL INCOME Income for the subject property is produced by rental
income from the various rental units, as well as any
laundry income, pet deposits, forfeited security deposits,
and miscellaneous income. Information provided by the on-
site leasing agents indicated the subject's current rent
schedule to be as follows:
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
------------------------------------------------------------------------------
UNIT TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO. TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 1BR/1BA 24 867 $615 $0.709 $14,760
A 1BR/1BA 24 867 $625 $0.721 $15,000
B 2BR/2BA 40 1,059 $680 $0.642 $27,200
B 2BR/2BA 40 1,059 $690 $0.652 $27,600
C 2BR/2BA 56 1,224 $740 $0.605 $41,440
C 2BR/2BA 56 1,224 $750 $0.613 $42,000
--- --------
240 $168,000
</TABLE>
The separate A, B, and C plans above represent
differentials in asking rent between upper and lower level
units. Upper-level units carry the premium asking rent for
each plan.
37
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
SUBJECT - RENT ANALYSIS
LAKEVIEW VILLAGE
- ---------------------------------------------------------------------------------------------------
UNIT AGV. AVG.MONTHLY PROJECT/UNIT
UNIT TYPE SIZE (SF) RENT/MONTH RENT/SF AMENITIES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT 1BR/1BA 867 $615-625 $ 0.709-0.721 Average/Good
The Remington 1BR/1BA 755 $635-670 $ 0.841-0.887 Good/Good
Arbor Club 1BR/1BA 881 $655-685 $ 0.743-0.777 Good/Good
- ---------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,059 $680-690 $ 0.642-0.652 Average/Good
The Remington 2BR/2BA 1,043 $765-775 $ 0.733-0.743 Good/Good
Polos at Ponte Vedra 2BR/2BA 974 $705-745 $ 0.724-0.765 Good/Good
Arbor Club 2BR/2BA 1,181 $790-820 $ 0.669-0.694 Good/Good
- ---------------------------------------------------------------------------------------------------
SUBJECT 2BR/2BA 1,224 $740-750 $ 0.605 0.613 Average/Good
The Remington 2BR/2BA 1,155 $825-835 $ 0.714-0.723 Good/Good
Marsh Cove 2BR/2BA 1,100 $ 780 $ 0.709 Average/Average
Arbor Club 2BR/2BA 1,254 $825-855 $ 0.658-0.682 Good/Good
===================================================================================================
</TABLE>
<PAGE>
These rents have been compared to closely located and
similarly designed apartment complexes in the subject's
neighborhood area. For the purpose of this analysis, we
have considered five apartment complexes that were
identified by management and found by the appraiser to be
most comparable. They range in total unit size from 86 to
344 units and in occupancy from 88 to 100 percent. These
comparable rentals are summarized on a previous page.
(Note: Other Comparables: The Tides At Marsh Landing, Ocean
Links, The Greens At Marsh Landings, Bay Club, The Courts
At Ponte Vedra, The Boardwalk, and Marsh Cove were
surveyed; however, the five comparables used were believed
adequate for the appraiser to estimate market rents for the
subject.
All of the comparables surveyed were located within the
subject's immediate vicinity. Each is comparable to the
subject overall, particularly in terms of overall physical
condition, unit size, rental rates, and the amenities
offered. These comparables indicate an average effective
rental rate range from $0.693 to $0.79 per square foot per
month.
On the table on the facing page, each of the subject's
three floor plans is compared to similar floor plans
obtained from the rent comparables. All of the comparable
rentals have at least average project amenities for an
apartment in this market which include a pool, tennis
court, clubhouse, hot tub/jacuzzi, and landscaped grounds.
Apartments which have project amenities, which are rated
"good" on this chart additionally have a car wash stand,
indoor racquetball courts, basketball court, and/or
volleyball area. Unit amenities for standard or average
apartment units include typical built-in kitchen
appliances, miniblinds, a fireplace, a patio or deck, and
average finish. Good unit amenities on a given apartment
unit also include a microwave oven, washer and dryer,
vaulted ceilings and ceiling fans, and/or burglar alarms.
According to the Rent Analysis summary, the subject's Plan
A is most comparable to the units offered at Arbor Club.
This plan is also similar to the one-bedroom unit at
Remington. These comparables range in monthly rental asking
prices from $635 to $655 or from $0.743 to $0.887 per
square foot. The subject's Plan A has average asking rents
of $620 per unit or $0.715 per square foot. The subject's
rent is below the low end of the range of those for Plan A
of the comparable properties. This is due to the superior
amenities of the comparable properties. Additionally, the
subject units' rent for $530 and $540 per month for
downstairs and upstairs units respectively and these rents
are believed market.
Plan B containing 1,059 square feet from the subject is
also most similar in size and amenities to similar two-
bedroom units displayed from Arbor Club and Remington..
These comparable units have a monthly rental rate of $770
and $805 or $0.682 to $0.738 per square foot. Thus, the
current subject asking rent is below the per square foot
range provided by the rent comparables. This again is due
to the superior amenities of the comparables and again the
subject rent differs from up or down units. The current
asking rent of $680 to $690 for the subject is believed to
be market.
38
<PAGE>
The subject's largest plan, Plan C, with 1,224 square feet
has an average asking rent of $745 per month or $0.609 per
square foot. This plan is most similar in size and
amenities to the two-bedroom plan from the Arbor Club. This
comparable unit ranges in monthly rental from $825 to $855,
which equates to $0.658 to $0.682 per square foot. Each has
a higher rent per square foot than the subject because of
superior amenities. The subject plan at $740 and $750 per
month is accepted as market rent.
There are currently twenty-one (21) vacant units in the
subject complex. This equates to a current physical
occupancy rate of 91.25 percent. Physical occupancy one
year ago was 91.67 percent. These numbers indicate a slight
downward movement in physical occupancy for the subject
property, but it can be considered as about equal to last
year.
Economic occupancy is estimated near 84 percent. The most
recent leases for Plans A, B, and C indicate that the
subject is obtaining the quoted rental rates. Therefore, we
estimate that the current quoted rental rates for the
subject are indicative of market rates.
After considering the subject's physical occupancy and
actual rates the projected market rental rates for the
subject are summarized below.
<TABLE>
<CAPTION>
BASED ON "RESIDENT PAYS UTILITIES"
------------------------------------------------------------------------------
UNIT TYPE UNITS SIZE (SF) RENT/MO. RENT/SF MO. TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 1BR/1BA 24 867 $615 $0.709 $14,760
A 1BR/1BA 24 867 $625 $0.721 $15,000
B 2BR/2BA 40 1,059 $680 $0.642 $27,200
B 2BR/2BA 40 1,059 $690 $0.652 $27,600
C 2BR/2BA 56 1,224 $740 $0.605 $41,440
C 2BR/2BA 56 1,224 $750 $0.613 $42,000
--- --------
240 $168,000
</TABLE>
Gross Annual Rental Income: $168,000 x 12 months =
$2,016,000
Our cash flow analysis, as well as our direct
capitalization method, indicates a gross apartment rental
income of $2,056,320. This figure is the result of a 2
percent increase in rental rates during the first year of
our projection period.
OTHER INCOME In addition to rental income from apartments, other income
is generated by laundry and vending machines, forfeited
security deposits, pet deposits, late charges, and
application fees.
The 1997 figures for other income showed $30,693 or about
$0.12 per square foot for this category. In comparison with
other similar type apartment projects in the subject area
other income was approximately $0.15 to $0.25 per square
foot. Based on our experience with similar type properties
and the actual performance of the subject property it is
our opinion that other income in the amount of $0.12 per
square foot is typical for a project such as the subject.
This equates to a total "Other Income" of $31,307 in the
first fiscal year of our projected cash flow as
39
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SUBJECT - EXPENSE ANALYSIS
LAKEVIEW VILLAGE APARTMENTS
(FISCAL YEAR ENDING 11/30)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comparable No. 1 2 3 SUBJECT PROPERTY
Year Built 1984 1985 1986 1985
Net Rentable Square Feet 142,792 117,980 156,688 263,424
Number of Units 120 124 160 240
Average Unit Size 1,190 951 979 1,098
-----------------------------------------------------------------------------------------------------------------------------------
1997 1997 1995 1993 1994 1995 1996-YTD 1997-YTD BTM PROJECTIONS
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ANNUALIZED ANNUALIZED FISCAL YEAR
PSF PSF PSF PSF PSF PSF PSF PSF ENDING 11/30/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
10 MONTHS /SF /UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES
Real Estate Taxes $ 0.72 $ 0.71 $ 0.69 $ 0.63 $ 0.64 $ 0.64 $ 0.66 $ 0.70 $ 0.71 $ 777
Insurance 0.16 0.16 0.13 0.09 0.15 0.17 0.17 0.17 0.19 205
Operating Expenses 0.55 0.65 0.69 0.49 0.53 0.55 0.56 0.72 0.61 673
Utilities 0.68 0.86 0.70 0.50 0.55 0.56 0.55 0.49 0.59 651
Repairs & Maintenance 0.52 0.43 0.53 0.34 0.34 0.35 0.37 0.63 0.36 400
Contract Services 0.21 0.30 0.18 0.14 0.12 0.12 0.14 0.14 0.14 148
Management 0.34 0.39 0.32 0.32 0.32 0.33 0.35 0.32 0.34 370
General Administrative 0.15 0.18 0.15 0.08 0.11 0.11 0.11 0.15 0.11 126
-------- -------- -------- ------ ------ ------ -------- ------ ------ -------
Total Expenses $ 3.33 $ 3.68 $ 3.39 $ 2.59 $2.76 $2.83 $ 2.91 $ 3.32 $ 3.05 $ 3,350
====================================================================================================================================
</TABLE>
* There may be differences due to rounding
<PAGE>
well as in our direct capitalization method. This
figure is grown at the same rate as the rental rates
after the first year of the holding period.
Gross Rental Income $2,056,320
Other Income 31,307
----------
Total Potential Gross Income $2,087,627
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 91.25 percent physical occupancy is
below the approximate 94.3 percent Third Quarter
physical occupancy rate enjoyed by the Beaches
submarket. The subject property has a current economic
occupancy rate of 84 percent, which is below stabilized
occupancy for the subject. A 95.0 percent stabilized
economic occupancy has been utilized for the subject
during the holding period beginning in year three and
deduction is taken for rent loss in years 1 and 2 of
the cash flow.
EXPENSE ANALYSIS The various expenses necessary in the operation of the
subject have been estimated including fixed expenses,
operating expenses, and reserves for replacement.
Proper appraisal technique demands that an appraiser
rely on typical expenses as opposed to actual expenses,
which may vary according to management or special
circumstances that may not persist. In addition, the
total expenses per square foot should be within a range
typical for similar projects. Reserves for replacement
are estimated based on age, condition, and construction
quality. It is re-emphasized that all income, as well
as expense estimates, are based on the assumption of
competent and prudent management.
We have based our estimate of projected expenses on
comparable apartment projects located in the subject
area, as well as the actual historical performance of
the subject property. The following Expense Analysis
Chart on the facing page summarizes the actual and/or
annualized 1997 expenses reported by three (3)
"individually metered" projects, as well as the subject
property's actual 1993, 1994, 1995, and 1996 expense
figures. The 1997 actual figures were available to the
appraisers at the time of the report and are shown in
the chart on the facing page. Bach Realty Advisors'
estimated expenses for the subject property in Fiscal
Year 1998 are also displayed.
Based upon the analysis of the comparables, we have
developed the following expense estimates for the
subject.
REAL ESTATE TAXES - The Lakeview Village Apartments are
subject to the taxing authorities of St. Johns County.
The county distributes the tax receipts from property
owners to different authorities as specified in the
Site section of this report. The subject's 1997
assessed value is $10,474,087 the total tax liability
is $179,199 or $0.68 per square foot. After examining
the tax liabilities of the comparables used in our
expense analysis (which exhibited a range from $0.69 to
40
<PAGE>
$0.72 per square foot), we have reflected the actual 1997
real estate taxes plus an approximate 2 percent inflation
factor in our estimate of the 1998 taxes. Thus, real estate
taxes have been estimated at $0.71 per square foot or $777
per unit and total $186,366. 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
$49,312. 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 $0.09 to $0.17 per square foot since
1993. The annualized 1996 insurance costs are projected at
$0.19 per square foot. The appraisers believe that the
insurance expense for the subject is appropriate, but is
generally higher than the expense comparables. The expense
per unit is $205. Insurance expense is increased 4 percent
annually for the duration of the holding period.
OPERATING EXPENSES - This category includes salaries for
office managers and leasing agents, maid services, payroll
taxes and FICA, security, advertising, and promotional
items. The subject's actual figures for 1993, 1994, 1995,
and 1996, ranged between $0.49 to $0.72 with the latter
expense appearing to be an anomaly. The annualized 1997
operating expense is $0.61 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 $161,637 which is equivalent
to $0.61 per square foot or $673 per unit. This expense is
expected to increase 4 percent annually throughout our
projection period.
UTILITIES - The expense comparables' 1997 utility expenses
have a range from $0.68 to $0.87 per square foot. The
subject's annualized 1996 year-to-date expense was $0.55
per square foot. The 1997 expense is $0.49 per square foot.
This expense category includes electricity to the common
areas, water, sewer, and garbage collection. The subject's
1998 expense for utilities has been estimated by the
appraiser to be $0.59 per square foot or $651 per unit,
below the lower end of the comparables range. The appraiser
relied on subject historical utility expenses.
REPAIRS AND MAINTENANCE - The 1996 annualized actual year-
to-date repairs and maintenance costs are $0.63 per square
foot for the subject, which shows a increase in expenses of
$0.26 per square foot from the previous year. Repairs and
maintenance expenses are necessary in order to keep the
property in good repair and consist of repairs required on
plumbing, air-conditioners, electrical components,
miniblinds, carpeting, janitorial services, and decorative
costs. The expense comparables indicate a range from $0.43
to $0.53 per square foot and the subject's 1997 annualized
expense is $0.63 per square foot. The subject's historical
repair and maintenance is in a range from $0.34 to $0.37
per square foot and the 1997 expense at $0.63 per square
foot was substantially uncommon. The appraiser believes
that some deferred maintenance or capitalization
expenditures may have been included. The 1997 expense of
$0.63 per square foot was tempered and the
41
<PAGE>
1998 expense estimate was returned to $0.36 per square
foot. This expense is increased 4 percent annually.
CONTRACT SERVICES - The contract services category includes
mainly landscaping services. Our surveyed expense
comparables reported 1997 contract services expenses
between $0.18 and $0.30 per square foot. Actual expenses
for the subject in for the 1996 contract services expense
are estimated at $0.14 per square foot, while 1997
indicated $0.14 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 $0.14 per square foot
or $148 per unit and totaling $35,615 in the first year of
the cash flow. These expenses are expected to increase
annually at a rate of 4 percent.
MANAGEMENT - This figure for apartment projects is
typically expressed as a percentage of the effective gross
income of the property. The industry standard for an
apartment complex of this size and quality is about 5
percent of effective gross income. This includes the fee to
outside management or ownership for managing the property.
According to the actual income and expense statements from
1992 forward provided by the client, management fees at the
subject have been approximately 5 percent including both
on-site and headquarter charges. We have also relied upon
indicators from the market to determine typical expenses
for this category. A management fee of 5 percent of the
projected effective gross income for each year of the cash
flow is estimated.
GENERAL AND ADMINISTRATIVE - This expense category includes
legal expenses, dues, fees, printing, auto costs, postage,
accounting/audit, permits, travel, credit, reports, office
equipment, telephone, and all other miscellaneous and
administrative costs. Our surveyed expense comparables
indicated actual administrative expenses ranging from $0.15
to $0.18 per square foot. The subject's annualized year-to-
date 1996 costs are in this range at $0.15 per square foot.
The subject's historical G&A expense has ranged from $0.08
to $0.11 per square foot and has stayed at $0.11 for 3
years. The 1997 expense was $0.15 per square foot. The
appraiser utilized an $0.11 per square foot figure or $126
per unit and totaling $30,134, supported by the
comparables' range and the subject's history. This expense
increases at a rate of 4 percent for each year in the cash
flow.
EXPENSE SUMMARY In conclusion, stabilized vacancy loss has been estimated
at 5 percent beginning in year three and continuing
throughout the holding period. The total estimated 1997
calendar year expenses for the Lakeview Village Apartments,
excluding reserves for replacement, equates to $3.05 per
net rentable square foot or $3,350 per unit. This is below
the range indicated by the expense comparables but is
reasonable and is well supported by actual historical
figures indicated by the subject property.
RESERVES FOR
REPLACEMENT A replacement allowance provides for the periodic
replacement of building components that wear out more
rapidly than the building itself and must be replaced
periodically during the building's economic life. These may
include roof covering, carpeting, appliances, compressors,
parking areas, drives, etc. The
42
<PAGE>
subject was constructed in 1985 and appears to have had
ongoing maintenance since its construction. It is our
opinion that a reserve allowance of $0.27 per square
foot or $300 per unit is adequate to provide for the
continued maintenance of the project given the on-going
termite problem and weather related conditions as
mentioned below. Reserves for replacement total $72,000
and are grown at 4 percent for the duration of the
holding period. Reserves were included in our expenses
prior to concluding the net operating income.
DEFERRED MAINTENANCE/
CAPITAL EXPENDITURES The subject has numerous items requiring capital
expenditures. Capital expenditures listed by management
in the 1997 budget total $138,000 as detailed in the
Improvements section of this report.
DISCOUNTED CASH FLOW
ANALYSIS DISCUSSION A reasonable method for estimating value via the Income
Approach in a stabilized market is through the use of
Discounted Cash Flow Analysis. The Market Value of a
real estate investment under the Discounted Cash Flow
Method is defined as the discounted sum of all net cash
inflows plus the property's discounted reversionary
value. Primarily, any given property is only worth the
value of the income derived from it.
The general methodology of Discounted Cash Flow
involves the following steps: 1) increasing each year's
cash flows by an appropriate appreciation factor; 2)
discounting each year's net cash flow by an appropriate
discount rate; 3) deriving the property's reversionary
value in the final year and discounting it to the
present; and 4) the summation of all cash flows,
including final year reversion, into an estimate of
value.
Real Estate Investment Trusts (REITS) have been the
major players among new apartment acquisitions over the
past, few years which has resulted in upward pressure
on selling prices as capitalization rates have dropped.
More recently, REITs are strong in the market.
Capitalization rates are lower this year than last year
due to many buyers pursuing limited inventory.
Survey participants in RERC's Emerging Trends in Real
Estate: 1997 indicate that multifamily is still a
viable investment vehicle, but its desirability is
ebbing as short-term rental growth has already peaked
in some markets. Expectations for 1998 are an increased
interest in apartments as markets stabilize and new
construction comes on-line. Since 1994 returns for
apartments have averaged near 12 percent, above all
other categories. Solid returns in the 9 to 10 percent
area are expected to continue with 9 percent and below
for new Class A product, much of which may be pre-sold.
Apartment investment fits the portfolio profiles of
pension funds and REITs who want immediate high cash
flows with predictable capital costs and national
vacancy rates in relative equilibrium at 5 percent to 8
percent and a growing population, the risk in the
multifamily market is steady and we anticipate that
investors will continue to find their niche the market.
43
<PAGE>
DISCOUNT RATE Over the past several years, the internal rate of
return (IRR) has gained greater usefulness and market
acceptance as an investment measure. IRR is the yield
on an investment based on an initial cash investment,
annual cash flows to the property, as well as resale
proceeds. IRR allows for return on investment as well
as recapture of the original investment when factoring
in the reversion. To simulate this process, we have
relied upon several investor surveys, which detail
reasonable yields or IRR requirements of purchasers. We
have used this rate as a discount rate that, when
applied to projected cash flows and net resale proceeds
(reversion), results in the present value of the
property.
According to the Third Quarter 1997 investor survey
compiled by Peter F. Korpacz & Associates, Inc.,
investors for apartment properties indicated a return
requirement ranging from 10.00 to 12.50 percent with an
average of 11.16 percent. This IRR depends on the
conservative or aggressive nature of rental and expense
growth assumptions, as well as location and other
factors. 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 $0.63 8 per square foot per month.
During the projection period rents are expected to
increase at 2 percent during 1997. Rents increase
4 percent in the second year of our analysis and
each year thereafter.
44
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
LAKEVIEW 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 2,056,320 2,138,573 2,224,116 2,313,080 2,405,604 2,501,828 2,601,901
Rent/SF/Mo. 0.651 0.677 0.704 0.732 0.761 0.791 0.823
Other Income/Yr. 31,307 32,559 33,862 35,216 36,625 38,090 39,613
--------- --------- --------- --------- --------- --------- ---------
Gross Income 2,087,627 2,171,132 2,257,977 2,348,296 2,442,228 2,539,917 2,641,514
% Vacancy 15.000/, 10.00% 5.00% 5.00% 5.00'/o 5.00% 5.00%
Vacancy Allowance 313,144 217,113 112,899 117,415 122,111 126,996 132,076
--------- --------- --------- --------- --------- --------- ---------
Eff. Gross Income 1,774,483 1,954,019 2,145,078 2,230,882 2,320,117 2,412,922 2,509,438
--------------------
Expenses: $/unit $/SF
--------------------
Real Estate Taxes 777 0.71 186,366 193,821 201,573 209,636 218,022 226,743 235,812
Insurance 205 0.19 49,312 51,284 53,335 55,469 57,688 59,995 62.395
Operating Expenses 673 0.61 161,637 168,102 174,826 181,819 189,092 196,656 204,522
Utilities 651 0.59 156,156 162,402 168,898 175,654 182,680 189,988 197,587
Repairs & Maintenance 400 0.36 95,888 99,724 103,712 107,861 112,175 116,662 121,329
Contract Services 148 0.14 35,615 37,039 38,521 40,062 41,664 43,331 45,064
Management 5.00% 0.34 88,724 97,701 107,254 111,544 116,006 120,646 125,472
General & Administrative 126 0.11 30,134 31,339 32,593 33,897 35,253 36,663 38,129
Reserves 300 0.27 72,000 74,880 77,875 80,990 84,230 87,599 91,103
---- -----
--------- --------- --------- --------- --------- --------- ---------
Total Expenses 875,831 916,292 958,589 996,933 1,036,810 1,078,282 1,121,414
Per SF 332 3.48 3.64 3.78 3.94 4.09 4.26
Per Unit 3,649 3,818 3,994 4,154 4,320 4,493 4,673
--------- --------- --------- --------- --------- --------- ---------
Net Operating Income 898,652 1,037,726 1,186,489 1,233,949 1,283,307 1,334,639 1,388,025
Per Sf 3.41 3.94 4.50 4.68 4.87 5.07 5.27
Per Unit 3,744 4,324 4,944 5,141 5,347 5,561 5,783
====================================================================================================================================
Capital Items: 198,000
--------- --------- --------- --------- --------- --------- ---------
Cash Flow 700,652 1,037,726 1,186,489 1,233,949 1,283,307 1,334,639 1,388,025
--------- --------- --------- --------- --------- --------- ---------
Present Value Factor 12.00% 0.892857 0.797194 0.711780 0.635518 0.567427 0.506631 0.452349
Present Value of Cash Flow 625,582 827,269 844,520 784,197 728,183 676,170 627,872
NOI in 11th Year 1,523,793 Present Value of Income Stream 6,740,905
Ro at Reversion 10.00% Present Value of Reversion 5,071,333
----------
Indicated Reversion 16,237,927
Less: Sales Costs 3.00% 487,138
----------
Reversion in 10th Yr 15,750,789
-------------------------------------------------------------
Indicated Value of Subject 11,812,237
Indicated Value/SF 44.84
Indicated Value/Unit 49,218
GIM At Indicated Value 5.74
Ro at Indicated Value 7.61%
-------------------------------------------------------------
<CAPTION>
================================================================================
Period 8 9 10
- -----------------------------------------------------------------------------------------------------------------------------------
Reversion
2005 2006 2007 2008
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Apt. Rents 2,705,977 2,814,216 2,926,785 3,043,856
Rent/sf/mo. 0.856 0.890 0.926 0.963
Other Income/yr. 41,198 42,846 44,560 46,342
---------- --------- ---------- ----------
Gross Income 2,747,175 2,857,062 2,971,344 3,090,198
% Vacancy 5.00% 5.00% 5.00% 5.00%
Vacancy Allowance 137,359 142,853 148,567 154,510
---------- --------- ---------- ----------
2,609,816 2,714,209 2,822,777 2,935,688
Eff. Gross Income
Expenses:
Real Estate Taxes 245,245 255,055 265,257 275,867
Insurance 64,891 67,486 70,186 72,993
Operating Expenses 212,703 221,211 230,060 239,262
Utilities 205,491 213,710 222,259 231,149
Repairs& Maintenance 126,182 131,229 136,479 141,938
Contract Services 46,867 48,741 50,691 52,719
Management 130,491 135,710 141,139 146,784
General & Administrative 39,654 41,240 42,890 44,606
Reserves 94,747 98,537 102,478 106,578
---------- --------- ---------- ----------
Total Expenses 1,166,270 1,212,921 1,261,438 1,311,895
Per Sf 4.43 4.60 4.79 4.98
Per Unit 4,859 5,054 5,256 5,466
---------- --------- --------- ---------
Net Operating Income 1,443,546 1,501,288 1,561,339 1,623,793
Per Sf 5.48 5.70 5.93 6.16
Per Unit 6,015 6,255 6,506 6,766
=============================================================================
Capital Items:
---------- --------- --------- ---------
Cash Flow 1,443,546 1,501,288 1,561,339 1,623,793
---------- --------- --------- ---------
Present Value Factor 0.403883 0.360610 0.321973 1.000000
Present Value Of Cash Flow 583,024 541,379 502,709 1,623,793
Not In 11th Year
Ro At Reversion
Indicated Reversion
Less: Sales Costs
Reversion In 10th Yr
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================
CASH FLOW SUMMARY
----------------------------------------------------------------------
Fiscal Year Annual 12.00% PV of
Ending 11/30 Cash Flows NPV Factor Cash Flows
----------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ 700,652 0.892857 $625,582
1999 1,037,726 0.797194 827,26
2000 1,186,489 0.711780 844,520
2001 1,233,949 0.635518 784,197
2002 1,283,307 0.567427 728,183
2003 1,334,639 0.506631 676,170
2004 1,388,025 0.452349 627,872
2005 1,443,546 0.403883 583,024
2006 1,501,288 0.360610 541,379
2007 1,561,339 0.321973 502,709
-------
Total $ 6,740,905
Projected NOI in 11th Year $ 1,623,793
Going-out Capitalization Rate 10.00%
------------
Estimated Value of Property at End of 10th Year $16,237,927
Less Sales Cost @ 3.00% (487.138)
-----------
Value of Reversion at End of 10th Year $15,750,789
Discount Factor 12.00% 0.321973
-----------
Present Value of the Reversion $ 5,071,333
Sum of Present Values of Cash Flow 6,740,905
-----------
Market Value as of November 30, 1997 $11,812,237
Rounded $11,810,000
================================================================================
</TABLE>
<PAGE>
. The subject property's current physical occupancy rate
is 91.25 percent. The economic occupancy rate of 84
percent as of November 1997 is below the estimated
stabilized occupancy rate of 95.0 percent. It is our
opinion that the subject should be capable of
averaging 95.0 percent economic occupancy beginning in
year three and throughout the holding period of our
cash flow analysis.
. Other income is increased at 4 percent per year after
the first year of the cash flow.
. The property has been appraised based on a "resident
pays utilities" status.
. Expenses (with the exception of management) have been
increased at an average growth rate of 4 percent
annually over the ten-year projection period.
Management expenses are based on a percentage of gross
income and increase with occupancy and rental
increases. Reserves are calculated at $0.273 per
square foot or $300 per unit in the first year and
also increase at 4 percent per year thereafter.
. A discount rate of 12.0 percent was utilized.
. A terminal capitalization rate of 10.0 percent was
felt reasonable.
. A sales cost of 3 percent of the reversionary value
was estimated.
A cash flow analysis and summary for the subject beginning
December 1, 1997 may be found on the preceding pages. The
estimated leased fee market value for the subject on an "as is"
basis as of November 30, 1997 via discounted cash flow method is
ELEVEN MILLION EIGHT HUNDRED TEN THOUSAND DOLLARS
($11,810,000)
45
<PAGE>
================================================================================
DIRECT CAPITALIZATION
Gross Potential Rental Income $2,056,320
Other Income 31,307
------
Total $2,087,627
Gross Income $2,087,627
Vacancy @ 5.00% (104,381)
--------
Effective Gross Income $ 1,983,246
Expenses:
Real Estate Taxes $186,366
Insurance 49,312
Operating Expenses 161,637
Utilities 156,156
Repairs & Maintenance 95,888
Contract Services 35,615
Management Fee 5.00% 99,162
General Administrative 30,134
Reserves for Replacement 72,000
------
Total Expenses 886,269
-------
Net Operating Income $ 1,096,976
Capitalization Rate 9.00%
----
Fee Simple Stabilized Market Value $12,188,624
Less: Deferred Maintenance 198,000
Rent Loss Due to Lease Up 340,605
-------
Lease Fee "As Is" Market Value $11,650,019
$11,650,000
================================================================================
Rent Loss Due to Lease Up
- ----------- ----------- ------------ ----------- ----------- -----------
Year 1 Year 2
----------- -----------
Stabilized NOI $1,096,976 $1,096,976
Projected NOI 787,902 1,037,726
--------- ---------
Rent Loss $ 309,074 $ 59,250
PV Factor 7.00% 0.934579 0.873439
--------- ---------
PV Income Loss $ 288,854 $ 51,751
$ 340,605
================================================================================
<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 $11,650,000 and
is shown on the facing page.
INCOME APPROACH
CONCLUSION DCF Method...................................... $11,810,000
Direct Capitalization Method.................... $11,650,000
Consideration is given to both the discounted cash flow
method and the direct capitalization approach. These have
been rounded to the nearest ten thousand dollars, however,
for purposes of the income approach conclusion, the value is
rounded to the nearest fifty thousand.
From the above analysis provided by the Income Approach, we
estimate the leased fee market value of the subject property
on an "as is" all cash basis, as of November 30, 1997, to be
ELEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS
($11,700,000)
46
<PAGE>
RECONCILIATION
- --------------------------------------------------------------------------------
Sales Comparison Approach $11,500,000
Income Approach $11,700,000
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.
Eleven recent sales, dating from May 1996 through August
1997 were utilized in the Sales Comparison Approach. Each is
similar to the subject property in one or more
characteristics including occupancy, location, age,
construction quality, amenities, and/or condition. The data
on the comparable sales was considered to be reasonably
accurate and reliable. The methods of comparison utilized in
this analysis were the net operating income per square foot
and per unit and the effective gross rental multiplier
(EGRM) methods. These indicators rely on a comparison of
income rather than physical attributes. Thus, adjustments
for physical factors are not necessary as economics are the
common denominator. A final market value estimate for the
subject was made based on the analysis presented in the
Sales Comparison Approach.
The Income Approach attempts to measure investment qualities
of the property. Based on actual rents in the immediate area
of the subject, actual expenses, and investor returns
derived from the market, we have estimated value. Actual
data on the property, as well as comparable data from nearby
similar properties, were considered to be adequate. Because
the Income Approach deals directly with income streams, we
believe it is a very good indication of current market
conditions. It tends to reflect a value, which an investor
of a property would anticipate.
In the Income Approach, comparable properties from the
subject Ponte Vedra Beach area were utilized when deriving
the subject property's economic market rents and projected
expenses. For this reasoning, the Income Approach is given
greatest weight in the final analysis.
Therefore, it is our opinion that the market value of the
leased fee estate of the subject property on an "as is" all
cash basis, as of November 30, 1997, is
ELEVEN MILLION SEVEN HUNDRED THOUSAND DOLLARS
($11,700,000)
47
<PAGE>
It is important to note that the development of a shopping
center adjacent to the subject property during 1998 may have
an adverse effect on the Lakeview Village market rents or
occupancy.
48
<PAGE>
THE LINKS AT WINDSOR PARKE
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
COMPARABLE APARTMENT SALE 1
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name The Links at Windsor Park
Address 13700 Sutton Park Drive North
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 08/97
Grantor (Seller) Windsor Park Apartments, Ltd.
Grantee (Buyer) Rancho Bernardo Corporate Center
Recorded Document 8726-846
Sale Price $20,500,000
Occupancy 95%
Sale Price per Unit $73,214
Sale Price per SF $69.11
Capitalization Rate 8.56%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,767,693
Vacancy/Collection Loss ($138,385)
Effective Gross Income $2,629,308
Operating Expenses $(874,508)
Net Operating Income $1,754,800
PROPERTY DESCRIPTION
Year Built 1995
Number of Stories 2 and 3
Number of Units 280
Number of Bedrooms NA
Net Rentable Area 296,616 SF
Average Unit Size 1,059 SF
Land Area 23.36 acres
Unit Density 11.98 Units per Acre
Property Condition Excellent
Parking (type) Open
Construction Type Wood frame/Wood Siding/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments: Was completed in early 1995 and was in excellent
condition at time of sale. Complex amenities include
security fencing with remote entry gate, swimming pool,
sun deck, tennis courts, clubhouse with fitness center,
playground, and amenity lake with partial frontage
along golf course fairways. Units have installation
alarms, washer/dryer, appliances ceiling fans, window
coverings, and built-in bookcases.
<PAGE>
SAN PABLO
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 2
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name San Pablo
Address 14401 Jose Vedra Blvd..
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 06/97
Grantor (Seller) N/A
Grantee (Buyer) N/A
Recorded Document N/A
Sale Price $5,350,000
Occupancy 90%
Sale Price per Unit $26,750
Sale Price per SF $28.96
Capitalization Rate 10.8%
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,302,800
Vacancy/Collection Loss ($130,280)
Effective Gross Income $1,172,520
Operating Expenses ($589,370)
Net Operating Income $583,150
PROPERTY DESCRIPTION
Year Built 1974
Number of Stories 2
Number of Units 200
Number of Bedrooms 350
Net Rentable Area 184,750
Average Unit Size 924 SF
Land Area 14.24 acres
Unit Density 14.04 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Concrete block with masonry and wood veneer
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments San Pablo Apartments needed new plumbing system, wood
replacement, some roof replacement and other repairs at
time of sale. The property has tennis courts,
basketball courts, full size pool, and playground.
Expenses do not include reserves.
<PAGE>
HUNTER'S RIDGE
- --------------------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
COMPARABLE APARTMENT SALE 3
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Hunter's Ridge (previously Oaks at Deerwood)
Address 10100 Baymeadows Road
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 05/97
Grantor (Seller) Oaks at Baymeadows II Associates, Ltd.
Grantee (Buyer) Mid-America Apartments of Duval, L.P.
Recorded Document 8653-596
Sale Price $15,200,000
Occupancy 92%
Sale Price per Unit $45,238
Sale Price per SF $51.54
Capitalization Rate 7.76%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,451,409
Vacancy/Collection Loss ($196,113)
Effective Gross Income $2,255,296
Operating Expenses $1,075,776
Net Operating Income $1,179,520
PROPERTY DESCRIPTION
Year Built 1987
Number of Stories 2 and 3
Number of Units 336
Number of Bedrooms NA
Net Rentable Area 294,888 SF
Average Unit Size 878 SF
Land Area 34.70 acres
Unit Density 9.68 Units per Acre
Property Condition Average
Parking (type) Open parking
Construction Type Wood frame/Wood Siding/Shingle roof
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Property had a name change after the sale and is now
known as Hunter's Ridge. Clubhouse has a tile roof
covering and entry is paved with brick pavers. Well
landscaped and treed. Amenities include a pool with
hot tub, tennis courts, fitness facility in
clubhouse, car care center, racquet ball/volleyball
court, outdoor storage for each unit, mini-blinds,
and washer/dryer connections.
<PAGE>
WOODHOLLOW
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 4
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name Woodhollow Apartments
Address 1715 Hodges Blvd.
City/County/State Jacksonville, Florida
TRANSACTION DATA
Sale Date 04/97
Grantor (Seller) Woodhollow, LP
Grantee (Buyer) Mid-America Apartments, LP
Recorded Document 8590-2406
Sale Price $16,700,000
Occupancy 94%
Sale Price per Unit $37,111
Sale Price per SF $48.99
Capitalization Rate 9.60%
TERMS OF SALE Cash to mortgage of $10,350,000 @ 7.5%
Due in 7 years, based on 25 amortization schedule
INCOME/EXPENSE DATA
Potential Gross Income $3,245,490
Vacancy/Collection Loss ($194,729)
Effective Gross Income $3,050,761
Operating Expenses ($1,447,561)
Net Operating Income $1,603,200
PROPERTY DESCRIPTION
Year Built 1986
Number of Stories 2
Number of Units 450
Number of Bedrooms 690
Net Rentable Area 342,162 SF
Average Unit Size 760 SF
Land Area 38.65 acres
Unit Density 11.6 Units per Acre
Property Condition Average Plus
Parking (type) Open parking
Construction Type Wood frame
Confirmed With David V. Allen, CB Commercial Real Estate Group, Inc.
Date Confirmed 11/18/97
Comments The cap rate does not include a deduction for
reserves. Amenities are a 6-acre lake, olympic size
pool with large cool deck, jacuzzi, 2 tennis courts,
2 volleyball courts, BBQ and picnic areas, large
playground, and a gated boat storage.
<PAGE>
THE COURTS AT PONTE VEDRA
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 5
PROPERTY IDENTIFICATION
Job Number 97-075
Project Name The Courts at Ponte Vedra
Address 101 Vera Cruz Drive
City/County/State Ponte Vedra Beach, FL
TRANSACTION DATA
Sale Date 01/97
Grantor (Seller) Windsor Apartments, L.P.
Grantee (Buyer) Metropolitan Life Insurance Corporation
Recorded Document 01220-01824
Sale Price $19,000,000
Occupancy 95%
Sale Price per Unit $75,099
Sale Price per SF $75.12
Capitalization Rate 8.34%
TERMS OF SALE Said to be cash
INCOME/EXPENSE DATA
Potential Gross Income $2,734,426
Vacancy/Collection Loss ($136,721)
Effective Gross Income $2,597,705
Operating Expenses ($1,013,105)
Net Operating Income $1,584,600
PROPERTY DESCRIPTION
Year Built 1996
Number of Stories 3
Number of Units 253
Number of Bedrooms N/A
Net Rentable Area 252,916 SF
Average Unit Size 1,000 SF
Land Area 9.23 acres
Unit Density 27.41 Units per Acre
Property Condition Excellent
Parking (type) Open parking
Construction Type Wood frame/Masonry/Stucco
Confirmed With Steve Coley, Barnett Bank
Date Confirmed 11/18/97
Comments Built in late 1996 and sold on 95% proforma. Leasing
was ahead of schedule at time of sale. Complex was in
excellent condition. Property had very attractive
architectural design features at windows and roof
lines. Amenities include security gate entry,
fountain, brick pavers, lap pool, heated spa, and
clubhouse with business center. Property had higher
unit density than most projects in Ponte Vedra.
<PAGE>
THE HUNTINGTON AT HIDDEN MILLS
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[PICTURE APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 6
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Huntington at Hidden Mills (formerly Cozumel)
Address 3333 Monument Road
Location East side of Monument Road, north of SR 10
(Atlantic Blvd.)
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Date of Sale 8/8/96
Grantor (Seller) Private Syndication
Grantee (Buyer) Walden Residential
Recorded Document NA
Sale Price $7,225,000
Occupancy 98%
Sale Price per Unit $32,254.46
Sale Price per SF $40.26
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $1,356,839
Vacancy/Collection Loss 2.8% $ 37,991
Effective Gross Income $1,318,848
Operating Expenses $ 628,166
Net Operating Income $ 690,682
PHYSICAL DATA
Year Built 1986
Number of Stories 2-3
Number of Units 224
Number of Bedrooms 376
Net Rentable Area 179,476 SF
Average Unit Size 801 SF
Land Area 14.92 acres
Unit Density 15
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments Price adjusted upward by $350,000 for required re-
plumbing and was a credit given by the seller.
The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE ANTLERS
----------------------------------------------------------------------
[PICTURES APPEARS HERE]
<PAGE>
COMPARABLE APARTMENT SALE 7
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name The Antlers
Address 8433 Southside Blvd.
Location East side of Southside Blvd., south of J. Turner
Butler Blvd.
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Balcor
Grantee (Buyer) United Dominion Real Estate
Date of Sale 5/29/96
Sale Price $15,000,000
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $37,500.00
Sale Price per SF $45.77
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,752,915
Vacancy/Collection Loss 3.2% $88,093
Effective Gross Income $2,664,822
Operating Expenses $1,140,493
Net Operating Income $1,524,329
PHYSICAL DATA
Year Built 1985
Number of Stories 2-3
Number of Units 400
Number of Bedrooms 504
Site Area 42.51 acre(s)
Net Rentable Area 327,728 SF
Average Unit Size 819 SF
Land Area 42.51 acres
Unit Density 9.4
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
WESTLAND PARK
----------------------------------------------------------------------
[PICTURES APPEAR HERE]
<PAGE>
COMPARABLE APARTMENT SALE 8
PROPERTY IDENTIFICATION
Job Number 97-071
Project Name Westland Park
Address 6710 Collins Road
Location North side of Collins Road, north of I-295
City/County/State Jacksonville, Duval, Florida
TRANSACTION DATA
Grantor (Seller) Vestcor
Grantee (Buyer) United Dominion Real Estate
Sale Date 5/9/96
Sale Price $16,950,060
Occupancy 97%
Terms of Sale Cash
Sale Price per Unit $41,852.00
Sale Price per SF $42.06
TERMS OF SALE Cash
INCOME/EXPENSE DATA
Potential Gross Income $2,929,883
Vacancy/Collection Loss 3.7% $108,406
Effective Gross Income $2,821,477
Operating Expenses $1,104,247
Net Operating Income $1,717,230
PHYSICAL DATA
Year Built 1989
Number of Stories 2-3
Number of Units 405
Number of Bedrooms 723
Net Rentable Area 403,010 SF
Average Unit Size 995 SF
Land Area 27.17
Unit Density 14.9
Property Condition Average
Parking (type) Asphalt, open
Construction Type Stucco/Wood siding with composition roofs
Confirmed With Dan Allen/CB Commercial/(904) 630-6362
Date Confirmed 10/10/96/LW/Bach Thoreen McDermott Inc.
Comments The net operating income (NOI) does not include an
allowance for reserve for replacement expenses.
<PAGE>
THE REMINGTON
- --------------------------------------------------------------------------------
[PICTURE APPEARS]
<PAGE>
RENT COMPARABLE 1
PROPERTY IDENTIFICATION
Job No. 97-068/97-069
Name of Project: The Remington Apartments
Street Address: 611 Ponte Vedra Lakes Boulevard
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1985
Number of Buildings: 43
Number of Stories: 2
Number of Units: 344
Net Rentable Area (SF): 302,904
Average Unit Size (SF): 881
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Stucco walls with tile roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
Units Type (SE) Rent Rent/SF
--------------------------------------------
<S> <C> <C> <C> <C>
64 1BR/lBA 683 $605-615 $0.886-0.900
72 1BR/1BA 755 635-670 0.841-0.887
64 2BR/1BA 886 670-680 0.756-0.767
72 2BR/2BA 977 735-745 0.752-0.763
48 2BR/2BA 1,043 765-775 0.733-0.743
24 2BR/2BA 1,155 825-835 0.714-0.723
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, miniblinds, fireplaces, ceiling fans,
vaulted ceilings, outdoor utility closets,
patio/balconies
Project Amenities: 2 swimming pools, 1 tennis court, 1
racquetball court, hot tub, sauna,
exercise/weight room, clubroom, lake
ECONOMIC DATA
Percent Occupied: 95.0%
Avg. Monthly Rent/SF of NRA: $0.79
Electricity Pald By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $220 for 1BR; $270 for 2BR
Pets Allowed/Deposit: Yes, $200-300, 1/2 refundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Upper units lease at a premium; some upper
units have ceiling treatments and fireplaces.
<PAGE>
MARSH COVE
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 2
PROPERTY IDENTIFICATION
Job No. 97-068/97-074
Name of Project: Marsh Apartments
Street Address: 1220 Marsh Cove Lane
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1983
Number of Buildings: 15
Number of Stories: 1-2
Number of Units: 86
Net Rentable Area (SF): 96,176
Average Unit Size (SF): 1,118
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Frame and stucco walls with composition
roofs
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
UNITS TYPE (SE) RENT RENT/SF
--------------------------------------------
<S> <C> <C> <C> <C>
18 2BR/2BA/FL 980 $ 740 $0.755
12 2BR/2BA/FL 1,100 780 0.709
8 2BR/2BA/LOFT 1,242 850 0.684
26 2BR/2.5BA/TH 1,050 760 0.724
16 2BR/2.5BA/TH 1,220 810 0.664
6 3BR/3BA 1,430 1,010 0.706
</TABLE>
FL = flat; TH = townhouse
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer connections, miniblinds,
fireplaces, outdoor utility closets,
patio/balconies
Project Amenities: 1 swimming pool, 1 tennis court, hot tub
ECONOMIC DATA
Percent Occupied: 95.0%
Avg. Monthly Rent/SF of NRA: $0.71
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $200
Pets Allowed/Deposit: Yes, 25 pounds maximum $200 nonrefundable
Confirmed With: Leasing agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: There is an extra $10/month rent surcharge
for seven-month leases. There is also a
premium of $10 per month for lake view units.
<PAGE>
THE FAIRWAYS
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 3
PROPERTY DESCRIPTION
Project No. 97-068/97-069
Name of Project: The Fairways
Street Address: 100 Fairway Park Boulevard
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1984
Number of Buildings: 21
Number of Stories: 2-3
Number of Units: 216
Net Rentable Area (SF): 186,600
Average Unit Size (SF): 864
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Frame and stucco walls with composition
roof
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
Units Type (SE) Rent Rent/SF
--------------------------------------------
<S> <C> <C> <C> <C>
8 1BR/1BA 550 $555 $ 1.01
18 1BR/1BA 600 615 1.03
86 2BR/2BA/FL 950 700 0.737
68 2BR/1BA/TH 750 650 0.867
18 2BR/2BA/TH 1,100 740 0.673
18 2BRIl.SBAFFH 1,050 705 0.671
</TABLE>
FL = flat; TH = townhouse
Unit Amenities: Dishwashers, garbage disposals, washer/dryer
connections, miniblinds, fireplaces,
patio/balconies
Project Amenities: 1 swimming pool, 2 tennis courts, hot tub,
exercise/weight room, clubroom, laundry
facility, lake
ECONOMIC DATA
Percent Occupied: 88%
Avg. Monthly Rent/SF of NRA: $0.782
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $275
Pets Allowed/Deposit: Yes, 20 pounds maximum, $300-500
nonrefundable
Confirmed With: Leasing agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
<PAGE>
COLONIAL GRAND
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 4
PROPERTY IDENTIFICATION
Job No. 97-068/97-069
Name of Project: Colonial Grand
Street Address: 125 Great Harbour Way
City/State: Ponte Vedra, Florida
PROPERTY DESCRIPTION
Year Built/Renovated: 1987
Number of Buildings: 31
Number of Stories: 2
Number of Units: 240
Net Rentable Area (SF): 211,640
Average Unit Size (SF): 882
Parking Surface: Asphalt
Parking Spaces: Open parking
Type of Construction: Stucco walls with tile roofs
Unit Mix:
<TABLE>
<CAPTION>
Total Unit Size Monthly Monthly
Units Type (SE) Rent Rent/SF
----------------------------------------------
<S> <C> <C> <C> <C>
40 1BR/1BA 672 $575-615 $0.856-0.915
40 1BR/1BA 760 620-660 0.816-0.868
40 1BR/1BA/DEN 937 670-710 0.715-0.758
120 2BR/2BA 974 705-745 0.724-0.765
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer connections, miniblinds,
fireplaces, ceiling fans, vaulted ceilings,
walk-in closets, outdoor utility closets,
patio/balconies
Project Amenities: 1 swimming pool, 1 tennis court, 2 racquetball
courts, 1 basketball court, hot tub, sauna,
exercise/weight room, clubroom, lakes,
volleyball court
ECONOMIC DATA
Percent Occupied: 97.0%
Avg. Monthly Rent/SF of NRA: $0.775
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
Security Deposit: $175
Pets Allowed/Deposit: Yes, 25-pound weight limit; $300
nonrefundable
Confirmed With: Leasing Agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: Differences in rental rates of individual
floor plans are due to location and
fireplaces. Upstairs units cost an additional
$10 per month. There is an additional charge
of $10 per month for seven-month leases.
<PAGE>
THE ARBOR CLUB
- --------------------------------------------------------------------------------
[PICTURE APPEARS HERE]
<PAGE>
RENT COMPARABLE 5
PROPERTY IDENTIFICATION
Project No. 97-068/97-069/97-074
Name of Project: Arbor Club Apartments
Street Address: 1 Arbor Club Drive
City/State: Ponte Vedra, Florida
Property Description
Year Built/Renovated: 1992
Number of Buildings: 13 plus 12 garage buildings
Number of Stories: 2-3
Number of Units: 251
Net Rentable Area (SF): 288,924
Average Unit Size (SF): 1,151
Parking Surface: Asphalt
Parking Spaces: Open and garage space ($55/month)
Type of Construction: Wood/stucco siding
Unit Mix:
<TABLE>
<CAPTION>
TOTAL UNIT SIZE MONTHLY MONTHLY
Units Type (SE) Rent Rent/SF
----------------------------------------------------
<S> <C> <C> <C> <C>
52 1BR/1BA 881 $ 655-685 $0.743-0.778
52 1BR/1BA/LOFT 1,102 740-760 0.672-0.690
60 2BR/2BA 1,181 790-820 0.669-0.694
60 2BR/2BA 1,254 825-855 0.658-0.682
9 3BR/2BA 1,426 980-1,000 0.687-0.701
18 3BR/2BA 1,493 1,025-1,050 0.687-0.703
</TABLE>
Unit Amenities: Dishwashers, garbage disposals, microwave
ovens, washer/dryer connections, miniblinds,
fireplaces, vaulted ceilings, walk-in
closets, burglar alarms
Project Amenities: 1 swimming pool, 2 tennis courts, jacuzzi,
exercise/weight room, clubroom, laundry
facility, on-site security, garages
ECONOMIC DATA
Percent Occupied: 100%
Avg. Monthly Rent/SF of NRA: $0.693
Electricity Paid By: Tenant
Length of Lease: 7 or 12 months
SECURITY DEPOSIT: $175
Pets Allowed/Deposit: 25-pound limit; $300 pet fee (nonrefundable)
Confirmed With: Leasing agent and ConAm on-site agent survey
Date Confirmed: December 1997 by Stevan N. Bach, Bach Realty
Advisors, Inc.
Remarks: This project opened in April 1992.
Differences in rental rates for individual
units are due to fireplaces, lake view, and
upstairs/downstairs. There is also a $70 per
month garage fee.
<PAGE>
ORDINANCE NUMBER: 84-3 P.U.D. OFF. REC.
INTRODUCED BY: Commissioner Waldron BOOK B PAGE 1
-- --
AN ORDINANCE OF THE COUNTY OF ST. JOHNS, STATE OF FLORIDA,
REZONING LANDS DESCRIBED REFERENCED HEREIN AS (GOVERNMENT LOT
2, SECTION 16, TOWNSHIP 3 SOUTH, RANGE 29 EAST, ST. JOHNS
COUNTY, FLORIDA, CONTAINING 40 ACRES MORE OR LESS) FROM PRESENT
ZONING CLASSIFICATION OF OPEN RURAL TO PLANNED UNIT
DEVELOPMENT.
BE IT ORDAINED BY THE BOARD OF COUNTY COMMISSIONERS OF ST. JOHNS COUNTY,
FLORIDA:
SECTION 1. As requested by Epoch Properties, Inc., in its application for
- ---------
zoning change filed November 17, 1983. (hereinafter called the "Lakeview Village
PUD Application"), the zoning classification of the real property described in
said application is hereby changed from Open Rural to Planned Unit Development
(Hereinafter called the "Lakeview Village PUD").
SECTION 2. All materials, stipulations, exhibits, surveys, site plans, traffic
- ---------
studies and other maps included in and attached to the Lakeview Village PUD
Application No. R-PUD-83-59 which are described as, but are not limited to, the
following: The Planned Unit Development Application for Zoning Change,
Compliance with Article 8 (Planned Unit Development-PUD) Exhibits attached to
the Compliance with Article 8 (Warranty Deeds (2), Authorizations of Agency (3),
List of Adjacent Property Owners, Survey of the subject Real Property,
Topographical Survey of the Subject Real Property, Schedule of Development,
Lakeview Village Project Data, Lakeview Village Land Usage Data, Lakeview
Village Building Data, Lakeview Village Apartment Community Planned Unit
Development Plan (and other information thereto), revised Schedule of
Development, revised Lakeview Village Apartment Community Planned Unit
Development Plan and other such renderings necessary of the Lakeview Village
Planned Unit Development - all of which are hereby incorporated in and made a
part of this Ordinance.
ORDINANCE B00K 5 PAGE 492
<PAGE>
PROFESSIONAL QUALIFICATIONS
STEVAN N. BACH
EXPERIENCE Bach Realty Advisors, Inc. (since June 1997)
President. Emphasis in ad valorem tax and intangible value.
Real estate valuation and consultation on hotels, major
urban properties, and property portfolios. Financial and
feasibility analysis, land use, and market studies
Bach Thoreen McDermott Incorporated (July 1991-May 1997)
Chief Executive Officer.
Bach Thoreen & Associates, Inc. (1985-1991)
President
Bach & Associates, Inc. (1980-1984)
President
Landauer Associates, Inc. (1980-1984)
Senior Vice-President and General Manager-Southwestern
Region
Coldwell Banker Commercial Group, Inc. (1973-1980)
Vice-president and Manager, Appraisal Services.
Appraisal Research Associates (1971-1973)
Appraiser. Real Estate research valuation on urban and
rural properties.
Ray R. Hastings, MAI (1964-1971)
Appraiser. Real Estate research valuation on urban and
rural properties.
Residential Real Estate Sales (1963-1964)
Salesman. Residential real estate salesman Covina,
California.
PROFESSIONAL
ACTIVITIES
Member: Appraisal institute
Appraisal institute, Houston Chapter 33
Appraisal institute, Chairman of the Grievance Committee of the
Regional Ethics panel
Appraisal institute, Chairman of the Review and Counseling
Committee of the Regional Ethics Panel
Appraisal institute, Co-Chairman of the Education Committee
(1980)
Appraisal institute, Chairman of the Education Committee (1983)
Appraisal institute, Candidate Guidance Committee (1987-1992)
Appraisal institute, Subcommittee Chairman, Admissions Committee
(1984)
AIREA Nonresidential Appraisal Report Grading Committee (1984)
Appraisal Institute Expert Witness Video Committee (1990)
Licenses: Real Estate Broker, State of Texas
Certification: Certified in the Appraisal Institute's voluntary program of
continuing education for its designated members (MAIs who
meet the minimum standards of this program are awarded
periodic education certification).
Certified General Real Estate Property appraiser in the
State of Texas, Certification No. TX-1323079-G Certified
General Real Estate Property appraiser in the State of
Colorado, Certification No. CG01323975
EDUCATION B.S. Marketing, University of Southern California (1962)
