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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES
EXCHANGE ACT OF 1934)
Windsor Park Properties 3,
A California Limited Partnership
(Name of Issuer)
N'Tandem Trust
Chateau Communities, Inc.
Windsor Park Properties 3,
A California Limited Partnership
(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Steven G. Waite
The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
303-741-3707
(Name, Address and Telephone number of persons authorized to receive
notices and communications on behalf of person(s) filing statement)
With copies to:
Jay L. Bernstein, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
(212) 878-8000
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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." above are preliminary copies:
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Valuation Anount 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.
Amount previously paid: $2,110.30 Filing party: Windsor Park
Properties 3, A California
Limited Partnership
Form or registration no.: Schedule 14A Date Filed: November 19, 1999
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This Transaction Statement on Schedule 13E-3 relates to the proposed sale
of the assets of Windsor Park Properties 3, A California Limited Partnership
(the "Partnership"), pursuant to a plan of liquidation (the "Plan of
Liquidation") adopted by the general partners of the Partnership (the "General
Partners").
Pursuant to the Plan of Liquidation, the Partnership will sell its four
wholly-owned properties and its partial ownership interests in four other
properties (together, the "Properties") to N'Tandem Trust, an unincorporated
California business trust ("N'Tandem"), whose advisory company, The Windsor
Corporation, is also the managing general partner of the Partnership (the
"Managing General Partner"). Chateau Communities, Inc., which owns the Managing
General Partner, also holds 9.8% of the capital stock of N'Tandem.
In accordance with the Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement"), the General Partners are seeking the consent of
the holders (the "Limited Partners") of units of limited partnership interest
(the "Units") in the Partnership to the sale of assets (the "Sales") and the
Plan of Liquidation.
The Cross Reference Sheet below is furnished pursuant to General
Instruction F to Schedule 13E-3 and shows the location of the information
required to be included in response to the items of this Schedule 13E-3 in the
Consent Solicitation Statement (the "Consent Solicitation Statement") included
in the Partnership's Schedule 14A filed on November 19, 1999, by the Partnership
with the Securities and Exchange Commission (the "Commission") pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The information in the Consent Solicitation Statement is
incorporated into this Schedule 13E-3 by reference. The Consent Solicitation
Statement is incorporated by reference as Exhibit (d) to this Schedule 13E-3.
Capitalized terms not defined herein have the meanings ascribed to them in the
Consent Solicitation Statement.
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CROSS REFERENCE SHEET
Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 1. Issuer and Class of Security
Subject to the Transaction
(a) Cover Page. SUMMARY - Purpose of the
Consent Solicitation; Proposals 1 and
2.
SUMMARY - Purpose of the Consent
Solicitation; Proposals 1 and 2.
CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
SUMMARY - No Established Trading
Market For Units.
(d)
SUMMARY - Historical Distributions.
(e) Not applicable.
(f) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions.
Item 2. Identity and Background
(a) - (d) MATERIAL RISK FACTORS AND OTHER
CONSIDERATIONS - Conflicts of
Interest. DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Information Concerning
N'Tandem and Chateau. APPENDIX B -
Information Concerning Officers and
Directors of the Managing General
Partner, N'Tandem and Chateau.
(e) Not applicable.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(f) Not applicable.
(g) APPENDIX B - Information Concerning
Officers and Directors of the
Managing General Partner, N'Tandem
and Chateau.
Item 3. Past Contacts, Transactions or
Negotiations
(a)(1) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions.
(2) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions, and- The
Purchase and Sale Agreement.
(b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions, and- The
Purchase and Sale Agreement.
Item 4. Terms of the Transaction
(a) DESCRIPTION OF THE PROPOSED
TRANSACTIONS.
(b) Not applicable.
Item 5. Plans or Proposal of the Issuer
or Affiliate
(a) - (g) DESCRIPTION OF THE PROPOSED
TRANSACTIONS.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 6. Source and Amounts of Funds
DESCRIPTION OF THE PROPOSED
(a) TRANSACTIONS -or Other Consideration
The Purchase and Sale Agreement.
(b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -The Purchase and Sale
Agreement, -Solicitation Expenses,
and-Estimate of Liquidating
Distributions Payable to Limited
Partners. CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS -
Solicitation of Consents.
(c) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -The Purchase and Sale
Agreement - Purchase Prices.
(d) Not applicable.
Item 7. Purposes, Alternatives,
Reasons and Effects
(a) - (c) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Purpose of the Consent
Solicitation; Proposals 1 and 2, and -
Background of the Proposed
Transactions. SPECIAL FACTORS -
Fairness of the Proposed Transactions;
Recommendation of the Proposed General
Partners, - Alternatives Considered,
and -N'Tandem and Chateau's Belief as
to the Fairness of the Proposed
Transactions; N'Tandem's and Chateau's
Reasons for Engaging in the Proposed
Transactions.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(d) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Purpose of the Consent
Solicitation; Proposals 1 and 2, - The
Purchase and Sale Agreement, -
Estimate of Liquidating Distributions
Payable to Limited Partners, and -
Ownership of Properties by N'Tandem
Following Sales. SPECIAL FACTORS -
Fairness of the Proposed Transactions;
Recommendation of the General
Partners. FEDERAL INCOME TAX
CONSIDERATIONS.
Item 8. Fairness of the Transaction
(a) - (b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions. SPECIAL
FACTORS -Fairness of the Proposed
Transactions; Recommendation of the
General Partners, and - N'Tandem's and
Chateau's Belief as to the Fairness of
the Proposed Transactions; N'Tandem's
and Chateau's Reasons for Engaging in
the Proposed Transactions.
(c) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
(d) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners, and -
Fairness Opinion. MATERIAL RISK
FACTORS AND OTHER CONSIDERATIONS - No
Appointment of Independent
Representative.
(e) Not applicable.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(f) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners.
Item 9. Reports, Opinions, Appraisals
and Certain Negotiations
(a) - (c) SPECIAL FACTORS - Fairness Opinion -
and Appraisals.
Item 10. Interest in Securities of the
Issuer
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
(b) Not applicable.
Item 11. Contracts, Arrangements or Not applicable.
Understandings with Respect to
the Issuer's Securities
Item 12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
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Location in Consent Solicitation
Item in Schedule 13-E-3 Statement by Caption
- ----------------------- --------------------------------
(b) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners.
Item 13. Other Provisions of the
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - No Appraisal
or Dissenters' Rights.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information
(a) FINANCIAL STATEMENTS. SUMMARY -
Historical Distributions. SUMMARY
HISTORICAL FINANCIAL DATA.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.
(b) Not applicable.
Item 15. Persons and Assets Employed,
Retained or Utilized
CONSENT PROCEDURES; TRANSACTIONS
(a) AUTHORIZED (a) BY CONSENTS -
Solicitation of Consents.
(b) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Solicitation
of Consents.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 16. Additional Information SUMMARY. SUMMARY HISTORICAL FINANCIAL
DATA. MATERIAL RICK FACTORS AND OTHER
CONSIDERATIONS. DESCRIPTION OF THE
PROPOSED TRANSACTIONS. SPECIAL
FACTORS. SUMMARY OF SELECTED TERMS OF
THE PARTNERSHIP AGREEMENT. THE
PARTNERSHIP'S PROPERTIES. FEDERAL
INCOME TAX CONSIDERATIONS. CONSENT
PROCEDURES; TRANSACTIONS AUTHORIZED BY
CONSENTS. FINANCIAL STATEMENTS.
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The name of the issuer of the class of equity securities which is the
subject of the Rule 13e-3 transaction is Windsor Park Properties 3, A California
Limited Partnership, and the address of its principal executive offices is 6160
South Syracuse Way, Greenwood Village, Colorado 80111. The information set forth
in the Consent Solicitation Statement on the cover page and under the caption
"SUMMARY - Purpose of the Consent Solicitation; Proposals 1 and 2" is
incorporated herein by reference.
(b) The class of security which is the subject of the Rule 13e-3 transaction is
units of limited partner interest of the Partnership. The information set forth
under the caption "CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS -
Record Date; Required Vote" in the Consent Solicitation Statement is
incorporated herein by reference.
(c) The information set forth under the caption "SUMMARY - No Established
Trading Market For Units" in the Consent Solicitation Statement is incorporated
herein by reference.
(d) The information set forth under the caption "SUMMARY - Historical
Distributions" in the Consent Solicitation Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in the Consent Solicitation Statement under the
caption "DESCRIPTION OF THE PROPOSED TRANSACTIONS - Background of the Proposed
Transactions" is incorporated herein by reference.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed jointly by N'Tandem Trust, an unincorporated
California business trust, which is an affiliate of the Partnership, Chateau
Communities, Inc., a Maryland corporation, an entity that controls N'Tandem and
the Managing General Partner of Partnership, and Windsor Park Properties 3, A
California Limited Partnership (the issuer of the class of equity securities
which is the subject of the Rule 13e-3 transaction). The information set forth
under the captions "DESCRIPTION
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OF THE PROPOSED TRANSACTIONS - Information Concerning N'Tandem and Chateau" and
"MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS - Conflicts of Interest," in the
Consent Solicitation Statement is incorporated herein by reference.
(a)-(d) Information required by this item relating to directors and executive
officers of N'Tandem, Chateau, and The Windsor Corporation is set forth in
APPENDIX B to the Consent Solicitation Statement, which is incorporated herein
by reference.
(e) To the knowledge of N'Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(f) To the knowledge of N'Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
(g) Information required by this item relating to directors and executive
officers of N'Tandem, Chateau and The Windsor Corporation is set forth in
APPENDIX B to the Consent Solicitation Statement, which is incorporated herein
by reference.
Item 3. Past Contacts, Transactions or Negotiations.
(a) (1) The information set forth under the caption "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Background of the Proposed Transactions" in
the Consent Solicitation Statement is incorporated herein by
reference.
(2) The information set forth under the caption "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Background of the Proposed Transactions" and
"-The Purchase and Sale Agreement" in the Consent Solicitation
Statement is incorporated herein by reference.
(b) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS - Background of the Proposed Transactions" and "- The Purchase and
Sale Agreement" in the Consent Solicitation Statement is incorporated herein by
reference.
Item 4. Terms of the Transaction.
(a) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS" in the Consent Solicitation Statement is incorporated herein by
reference.
(b) Not applicable.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(g) The Rule 13e-3 transaction provides for the sale of all of the
Partnership's assets, a dissolution and winding up of the Partnership, and a
termination of registration of the Units under the Exchange Act. The information
set forth under the caption "DESCRIPTION OF THE PROPOSED TRANSACTIONS" in the
Consent Solicitation Statement is incorporated herein by reference.
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Item 6. Source and Amounts of Funds or Other Consideration.
(a) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS - The Purchase and Sale Agreement - Purchase Prices" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth in the Consent Solicitation Statement under the
captions "DESCRIPTION OF THE PROPOSED TRANSACTIONS - The Purchase and Sale
Agreement," "- Solicitation Expenses" and "- Estimate of Liquidating
Distributions Payable to Limited Partners" and "CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Solicitation of Consents" relating to the expenses
estimated to be incurred in the transactions, is incorporated herein by
reference.
(c) The information contained in the last paragraph under the caption OF THE
PROPOSED TRANSACTIONS - The Purchase and Sale Agreement -Purchase Prices" in the
Consent Solicitation Statement is incorporated herein by reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)-(c) The information set forth under the captions "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Purpose of the Consent Solicitation; Proposals 1 and 2,"
"- Background of the Proposed Transactions," "SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation of the General Partners," "-Alternatives
Considered" and "- N'Tandem's and Chateau's Belief as to the Fairness of the
Proposed Transactions; N'Tandem's and Chateau's Reasons for Engaging in the
Proposed Transactions" in the Consent Solicitation Statement is incorporated
herein by reference.
(d) The information set forth under the captions "DESCRIPTION OF THE PROPOSED
TRANSACTIONS," "- Purpose of the Consent Solicitation; Proposals 1 and 2," "-
Estimate of Liquidating Distributions Payable to Limited Partners," "-Ownership
of Properties By N'Tandem Following Sales" and "SPECIAL FACTORS -Fairness of the
Proposed Transactions; Recommendation of the General Partners" in the Consent
Solicitation Statement is incorporated herein by reference. The information
contained under the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Consent
Solicitation Statement is incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a)-(b) N'Tandem, Chateau and the General Partners of the Partnership reasonably
believe that the transaction is fair to the unaffiliated Limited Partners. The
information set forth under the captions "DESCRIPTION OF THE PROPOSED
TRANSACTIONS - Background of the Proposed Transactions," "SPECIAL FACTORS -
Fairness of the Proposed Transactions; Recommendation of the General Partners"
and "- N'Tandem's and Chateau's Belief as to the Fairness of the Proposed
Transactions; N'Tandem's and Chateau's Reasons for Engaging in the Proposed
Transactions," in the Consent Solicitation Statement is incorporated herein by
reference.
(c) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(d) The information set forth in the Consent Solicitation Statement under the
captions "SPECIAL FACTORS - Fairness of the Proposed Transactions;
Recommendation of the General Partners," "- Fairness Opinion" and "MATERIAL RISK
FACTORS AND OTHER CONSIDERATIONS - No Appointment of Independent Representative"
is incorporated by reference.
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(e) The proposed transactions were approved by both of the General Partners of
the Partnership. As a limited partnership, the Partnership does not have
directors. All of the directors of the Managing General Partner were appointed
by Chateau. All of the directors of the Managing General Partner approved the
proposed transactions.
(f) The information contained under the caption "SPECIAL FACTORS - Fairness of
the Proposed Transactions; Recommendation of the General Partners" in the
Consent Solicitation Statement is incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)-(c) The information contained under the captions "SPECIAL FACTORS -Fairness
Opinion," and "- Appraisals" in the Consent Solicitation Statement is
incorporated herein by reference.
Item 10. Interest in Securities of the Issuer.
(a) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with
Respect to the Issuer's Securities.
Not applicable.
Item 12. Present Intention and Recommendation of Certain
Persons with Regard to the Transaction.
(a) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the caption "SPECIAL FACTORS - Fairness of
the Proposed Transactions; Recommendation of the General Partners" in the
Consent Solicitation Statement is incorporated herein by reference. No other
person has made a recommendation required to be described herein.
Item 13. Other Provisions of the Transaction.
(a) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - No Appraisal or Dissenters' Rights" in the
Consent Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth under the captions "FINANCIAL STATEMENTS,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "SUMMARY - Historical
Distributions" and "SUMMARY HISTORICAL FINANCIAL DATA" in the Consent
Solicitation Statement is incorporated herein by reference.
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(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
Item 16. Additional Information.
The information set forth in the Consent Solicitation Statement under each of
the following headings is incorporated herein by reference: "SUMMARY,"
"SUMMARY HISTORICAL FINANCIAL DATA," "MATERIAL RISK FACTORS AND OTHER
CONSIDERATIONS," "DESCRIPTION OF THE PROPOSED TRANSACTIONS," "SPECIAL
FACTORS," "SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT," "THE
PARTNERSHIP'S PROPERTIES," "FEDERAL INCOME TAX CONSIDERATIONS," "CONSENT
PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS," "FINANCIAL STATEMENTS," and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Item 17. Materials to be Filed as Exhibits.
(a) Form of Promissory Note of N'Tandem in favor of Chateau.
(b)(1) Appraisals of Whitcomb Real Estate, Inc.
(A) Ponderosa
(B) The Pines
(C) Shady Hills
(D) Trailmont
(E) Big Country Estates
(F) Apache East/Denali Park
(G) Harmony Ranch
(b)(2) Fairness Opinion of Legg Mason Wood Walker, Incorporated.
(d) Preliminary Consent Solicitation Statement and related proxy
materials.*
4 Agreement of Limited Partnership of the Partnership.
23.1 Consent of Whitcomb Real Estate, Inc.
23.2 Consent of Legg Mason Wood Walker, Incorporated.
23.3 Consent of PricewaterhouseCoopers LLP**
_____________________
* Incorporated by reference to the Consent Solicitation Statement, including
the Appendices thereto, and related proxy materials included in the
Partnership's Schedule 14A filed with the Commission on November 19, 1999.
** To be filed by amendment.
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Signature
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.
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
By: The Windsor Corporation,
general partner
By: /s/ Steve Waite
_______________________________
Name: Steve Waite
Title: President
Date: November 19, 1999
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Signature
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.
N'TANDEM TRUST
By: /s/ Gary P. McDaniel
_______________________
Name: Gary P. McDaniel
Title: Trustee
Date: November 19, 1999
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Signature
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.
CHATEAU COMMUNITIES, INC.
By: /s/ Gary P. McDaniel
_________________________
Name: Gary P. McDaniel
Title: Chief Executive Office
Date: November 19, 1999
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a) Form of Promissory Note of N'Tandem in favor of Chateau.
(b)(1) Appraisals of Whitcomb Real Estate, Inc.
(A) Ponderosa
(B) The Pines
(C) Shady Hills
(D) Trailmont
(E) Big Country Estates
(F) Apache East/Denali Park
(G) Harmony Ranch
(b)(2) Fairness Opinion of Legg Mason Wood Walker, Incorporated.
(d) Preliminary Consent Solicitation Statement and related proxy
materials.*
4 Agreement of Limited Partnership of the Partnership.
23.1 Consent of Whitcomb Real Estate, Inc.
23.2 Consent of Legg Mason Wood Walker, Incorporated.
23.3 Consent of PricewaterhouseCoopers LLP**
</TABLE>
_____________________
* Incorporated by reference to the Consent Solicitation Statement, including
the Appendices thereto, and related proxy materials included in the
Partnership's Schedule 14A filed with the Commission on November 19, 1999.
** To be filed by amendment.
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EXHIBIT 99.(a)
FORM OF UNSECURED PROMISSORY NOTE
$ _____________ ________, _____
FOR VALUE RECEIVED N'Tandem Trust, an unincorporated California
business trust having an address at 6160 South Syracuse Way, Greenwood Village,
Colorado 80111 (hereinafter referred to as "Maker"), promises to pay to the
order of Chateau Communities, Inc., a Maryland corporation having an address at
6160 South Syracuse Way, Greenwood Village, Colorado 80111 (hereinafter referred
to as "Payee"), at such address or at such place as the holder hereof may from
time to time designate in writing, the principal sum of $____________ or so much
as thereof as may be advanced and outstanding with interest on the principal
balance from the date of each advance in lawful money of the United States of
America, with interest thereon to be computed from the date of this Note at the
Applicable Interest Rate (hereinafter defined), and to be paid as follows:
ARTICLE 1: PAYMENT TERMS
Accrued interest shall be due and payable on the 31st day of ________,
_____ and on the same day of each succeeding month, and the balance of said
principal sum and all accrued, unpaid interest thereon shall be due and payable
on the 31st day of ________, _____ (the "Maturity Date"). Interest on the
principal sum of this Note shall be calculated on the basis of a three hundred
sixty (360) day year composed of twelve (12) months of thirty (30) days each
except that interest due and payable for a period less than a full month shall
be calculated by multiplying the actual number of days elapsed in such period by
a daily rate based on said 360 day year.
The term "Applicable Interest Rate" as used in this Note shall mean
one percent (1%) per annum over such base rate of interest ("Base Rate") as may
be adopted by Bank One, N.A. from time to time as its base or prime commercial
lending rate. Regardless of the term that may be used from time to time to
describe the Base Rate (such as "prime rate"), Base Rate does not necessarily
mean the lowest interest rate charged by Bank One, N.A. to other borrowers. The
Applicable Interest Rate shall be adjusted on the first day of each calendar
quarter during the term of this Note, with the adjusted rate being based upon
the Base Rate prevailing on the date of such adjustment.
ARTICLE 2: DEFAULT AND ACCELERATION
The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under this Note (all
such sums hereinafter collectively referred to as the "Debt") shall without
notice become immediately due and payable at the option of Payee (i) if any
payment required in this Note is not paid within ten (10) days of the date when
due or (ii) if the entire Debt is not paid on the Maturity Date ((i) or (ii)
hereinafter referred to as an "Event of Default"). In the event that it should
become necessary to employ counsel to collect the Debt, Maker also agrees to pay
attorney's fees for the services of such counsel whether or not suit be brought.
ARTICLE 3: DEFAULT INTEREST
Maker does hereby agree that upon the occurrence of an Event of
Default, Payee shall be entitled to receive, and Maker shall pay interest on,
the entire unpaid principal sum at the
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rate of the lesser of (i) five percent (5%) above the Applicable Interest Rate
or (ii) the maximum rate of interest which Maker may by law pay (the "Default
Rate"). The Default Rate shall be computed from the occurrence of the Event of
Default until such Event of Default is cured or the date upon which the Debt is
paid in full, as the case may be. This charge shall be added to the Debt. This
clause, however, shall not be construed as an agreement or privilege to extend
the date of the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Payee by reason of the occurrence of any Event of Default.
ARTICLE 4: PREPAYMENT
The principal balance of this Note may be prepaid in whole or in part
at anytime.
ARTICLE 5: SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Maker be obligated or required to pay interest on the Debt or any portion
thereof at a rate which could subject Payee to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Maker is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Maker is at any time required or obligated to pay interest
on the Debt or any portion thereof at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of the maximum rate shall be
deemed to have been payments in reduction of principal and not on account of the
interest due hereunder.
ARTICLE 6: LATE CHARGE
If any sum payable under this Note is not paid within ten (10) days of
the date on which it is due, Maker shall pay to Payee an amount equal to the
lesser of five percent (5%) of such unpaid sum or the maximum amount permitted
by applicable law to defray the expenses incurred by Payee in handling and
processing such delinquent payment; provided, however, no such late charge will
be charged or collected if the amount of such late charge when added to all
interest constructed for, charged or received by Payee hereunder would exceed
the maximum amount of interest allowed by applicable law. This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Payee by reason of the occurrence of any Event of Default.
ARTICLE 7: NO ORAL CHANGE
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Maker or Payee, but only by an agreement in writing signed by the party against
whom enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
<PAGE>
ARTICLE 8: JOINT AND SEVERAL LIABILITY
If Maker consists of more than one person or party, the obligations
and liabilities of each such person or party shall be joint and several.
ARTICLE 9: WAIVERS
Maker and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment. No
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note made by agreement
between Payee and any other person or party shall release, modify, amend, waive,
extend, change, discharge, terminate or affect the liability of Maker, and any
other who may become liable for the payment of all or any part of the Debt.
ARTICLE 10: AUTHORITY
Maker (and the undersigned representative of Maker, if any) represents
that Maker has full power, authority and legal right to execute, deliver and
perform its obligations pursuant to this Note and that this Note constitutes a
valid and binding obligation of Maker.
ARTICLE 11: NOTICES
All notices or other written communications hereunder shall be deemed
to have been properly given (i) upon delivery, if delivered in person or by
facsimile transmission, (ii) one (1) Business Day (defined below) after having
been deposited for overnight delivery with any reputable overnight courier
service, or (iii) three (3) Business Days after having been deposited in any
post office or mail depository regularly maintained by the U.S. Postal Service
and sent by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Maker: N'Tandem Trust
6160 South Syracuse Way
Greenwood Village, Colorado 80111
Attention: Steven G. Waite
If to Payee: Chateau Communities, Inc.
6160 South Syracuse Way
Greenwood Village, Colorado 80111
Attention: Tamara Fischer
or addressed as such party may from time to time designate by written notice to
the other parties. Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications. "Business Day"
shall mean a day upon which commercial banks are not authorized or required by
law to close in Colorado or New York.
ARTICLE 12: WAIVER OF TRIAL BY JURY
Maker hereby waives, to the fullest extent permitted by law, the right
to trial by jury in any action, proceeding or counterclaim, whether in contract,
tort or otherwise, relating
<PAGE>
directly or indirectly to the loan evidenced by this Note, the application for
the loan evidenced by this Note or any acts or omissions of Payee, its officers,
employees, directors or agents in connection therewith.
ARTICLE 13: GOVERNING LAW
This Note shall be deemed to be a contract entered into pursuant to
the laws of the State of Colorado and shall in all respects be governed,
construed, applied and enforced in accordance with the laws of the State of
Colorado and the applicable laws of the United States of America.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the day
and year first above written.
N'TANDEM TRUST, an unincorporated
California business trust
By:
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 99(b)(1)
Appraisals of Whitcomb Real Estate, Inc.
<PAGE>
EXHIBIT (b)(1)(A)
SUMMARY
REAL ESTATE APPRAISAL REPORT
148-Space Ponderosa
3559 Cossell Road
Indianapolis, Indiana
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 5, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE]
September 30, 1999
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 148-Space Ponderosa
3559 Cossell Road
Indianapolis, Indiana
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 5, 1999, based on an exposure period of six months, to be:
-TWO MILLION TWO HUNDRED THOUSAND DOLLARS -
($2,200,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Ponderosa is a fully developed 148-space manufactured home community, a
maintenance shed, basketball court and a mobile home that is used as an on-site
office.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
<PAGE>
Mr. Steve Waite
September 30, 1999
Page Two
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files. The intended
user is Windsor Corporation.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ Keith D. McFarland
Keith D. McFarland, ASA
Indiana General Certified Appraiser #CG69201433
<PAGE>
4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------
<S> <C>
Title Page
Transmittal
Table Of Contents........................................................... 4
Photographs Of Subject...................................................... 5
Summary Of Facts And Conclusions............................................ 6
Extent Of Confirming, Collecting And Reporting Data......................... 7
Purpose, Function, Intended Use And Date Of The Appraisal................... 7
Area And Neighborhood Description........................................... 8
Manufactured Home Community Market Overview................................. 9
Land And Site Improvements.................................................. 10
Improvement Description..................................................... 11
Ownership And Property History.............................................. 11
Occupancy................................................................... 11
Zoning And Other Land Use Controls.......................................... 12
Real Estate Assessment And Taxes............................................ 12
Marketability And Marketing Period.......................................... 13
Highest And Best Use........................................................ 14
Valuation Process........................................................... 14
Income Capitalization Approach.............................................. 15
Sales Comparison Approach................................................... 24
Final Estimate Of Value..................................................... 28
Certification............................................................... 29
Assumptions And Limiting Conditions......................................... 30
</TABLE>
Addenda
Legal Description
Maps
Profile Of Appraiser
<PAGE>
[PHOTOGRAPHS OF THE SUBJECT (Taken August 5, 1999) 5
[PHOTOGRAPH APPEARS HERE]
1. Entrance to Subject
[PHOTOGRAPH APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 148-Space Ponderosa
------------------- 3559 Cossell Road
Indianapolis, Marion County, Indiana
Property Rights
---------------
Appraised: Fee Simple Interest, subject to
---------- tenant leases
Land Area: Gross land area- 19.47 acres more or less
----------
Improvements: 148-manufactured home spaces, a maintenance
------------- shed, basketball court and a mobile home that
is used as an on-site office.
Owner: Windsor Park Properties 3
------
Zoning: D11, Dwelling District
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications:
------------------
Income Approach $2,200,000
Sales Comparison Approach $2,300,000
Final Estimate of Value: $2,200,000
------------------------
Date of Appraisal: August 5, 1999
------------------
Date of Inspection: August 5, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate. The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as if
free and clear of mortgages, liens, servitude's and encumbrances, except those
noted in the body of this appraisal.
PURPOSE, FUNCTION, INTENDED USE AND DATE OF THE APPRAISAL
- ---------------------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 5, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 5, 1999, corresponding with the
physical inspection of the subject. The information, opinions, and conclusions
contained in this report have been prepared as a basis for mortgage financing.
The intended user of the report is Windsor Corporation.
Market Value is defined 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, 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:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in what
he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. 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./1/
- -------------------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA AND NEIGHBORHOOD DESCRIPTION
- ---------------------------------
Location/Access
- ---------------
Pondarosa is located within the central portion of the city of
Indianapolis, Marion County, Indiana, northwest of the Central Business
District. This area is a part of the Indianapolis MSA which also encompasses
Boone, Hamilton, Hancock, Hendricks, Johnson, Morgan and Shelby Counties, and is
situated approximately 185 miles southeast of Chicago, Illinois, 110 miles
northwest of Cincinnati, Ohio and 100 miles northwest of Louisville, Kentucky.
As of 1998, the Indianapolis MSA contained a total population of 1,560,401,
and represents a 13.03 percent increase from 1990. Marion County is the largest
county within the MSA with a estimated 1998 population of 813,405. This
represents a 2.0 percent increase in total population since 1990. The
Indianapolis MSA encompasses 3,089 square miles and has exhibited a singificant
amount of population growth during the past two decades. This growth is
attributed to job growth and attractive cost of living for the surrounding area.
The labor force for the MSA numbered approximately 850,590 in July 1999 and
represents a slight increase from July 1998. As of July 1999, the estimated
unemployment rate stood at 2.0%, and represents a slight decrease from the July
1998 level of 2.9%. In addition, these figures are well below both state and
national unemployment levels. Primary employment sectors include services
(24.1%), wholesale and retail trade (25.1%), manufacturing (15.3%) and
government (13.7%). Major employers include Eli Lilly and Co., Allison
Transmission, Allison Engine and Bank One Indianapolis.
The subject is located along the south side of Cossell Road, east of Tibbs
Avenue. This location is west of the Central Business District and is at the
western edge of Marion County. The neighborhood boundaries are generally
described as Washington Avenue (U.S. Highway 40) to the south, Interstate 465 to
the west, 30th Street to the north and the Central Business District to the
east. Tibbs Avenue extends north south and serves as a primary commercial
street for the city. Cossell Road serves as a residential connector street that
ends to the west and connects to Tibbs Avenue one block east of the subject
property.
The subject is situated in a mature residential, commercial and light
industrial area that is primarily built-up with some new residential development
being noted. Land uses surrounding the subject consist of a small creek
extending along the western boundary of the site with a cemetery and a small
mobile home park being located further west. Abutting the subject to the east
is the Mt. Jackson Cemetery with the closed Central State Hospital; a former
mental institution being located further east. Located to the north is a new
condominium development that was developed by the Indianapolis Housing
Authority. Land uses further north include older single family residences and
commercial buildings with the Indianapolis Speedway being located
<PAGE>
Area And Neighborhood Description 9
further north. Located to the south is a mixture of older single family
residences and commercial buildings with both older and newer commercial
developments being located along Washington Avenue. The existing use of the
subject is compatible with surrounding land uses.
Concurrency
- -----------
Land uses for the subject's market area are controlled by the Marion County
Planning and Zoning Commission which implements and monitors local comprehensive
and growth management plans. The existing use of the subject is a legal
nonconforming use with local zoning regulations.
Summary
- -------
The real estate market in the Indianapolis MSA is strong. The suburban
office, industrial and retail real estate sectors reported decreased vacancy
levels during 1998. The growth demands on the county are very evident in light
of past trends and the projections are for further population increases. The
desirability of this area is evident and is anticipated to continue to increase
as the local economy is forecasted to continue to expand in coming years. The
subject property is situated in an older mature mixed-use residential,
commercial and light industrial area that is built-up and has reflected little
growth during recent years. However, the overall demand for manufactured
housing space is evident within this market and is anticipated to continue.
Based on these factors, real estate values are anticipated to increase barring
any near term economic reversals.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the 1998 U.S. Housing Market Map, Indiana ranked 12th among
states in the number of homes shipped in 1998. Shipments have remained
relatively stable over the last three years. Manufactured housing provides a
lower cost-housing alternative to site built homes and a sense of community to
residents. A survey of the subject's market area revealed that several of the
competing manufactured housing communities are currently reflecting occupancy
levels of 61.9% to 100%. The communities surveyed reflected rental rates that
ranged from $192.00 to $245.00 per month with the landlord being responsible for
water, sewer and trash removal. The communities located within the immediate
area are older parks with some newer manufactured home communities being located
further northwest of the subject property. In addition, it was also reported
that there is a significant amount of local opposition regarding the development
of any new manufactured housing communities within Marion County. Therefore, it
is unlikely that overbuilt market conditions will occur within the near future.
The overall demand for manufactured housing sites within this market area is
high and is reflected in the historical occupancy levels of the subject
property.
<PAGE>
10
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing a gross land
area of 19.47 acres and includes 1.53 acres of additional land that is located
immediately south of the main site (based on public records). The tract is
generally level with a gentle slope to the south and west and is at the
surrounding street grade. A tributary extends along the western boundary of the
site with the subject being protected by a dike to prevent flooding. Drainage
of the tract appears adequate and no adverse soil or subsoil conditions were
observed during the physical inspection of the site. Utility services connected
and in service on the date of valuation include water, sanitary and storm sewer,
electricity and telephone.
The individual lots in the community are accessed by roadways arranged to
maximize the use of the land. Roadway improvements include:
Street-bed: Cossell Road is an asphalt paved, two-lane residential
---------- connector street. The subject streets are asphalt paved
15-25 foot wide roadways.
Sidewalks/Curb: There are sidewalks and curbs along Cossell Road. In
-------------- addition, concrete sidewalks and curbs exist within the
subject.
Street Lights: The public and community streets are lighted with pole
------------- mounted overhead streetlights.
Landscaping: Landscaped areas extend along the perimeter and
----------- throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Marion County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains a net land area of
approximately 19.47 acres, is large enough to accommodate building improvements
and roadways as well as the playgrounds and green areas. The total developed
land area is approximately 17.94 acres and the current development of total
units equates to an overall density of approximately 8.25 units per
<PAGE>
Land and Site Improvements 11
acre, which is higher than current development standards which tend toward
larger lot sizes, wider streets and more green areas.
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 148 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size. The community contains two doublewide homes with the remaining
lots being singlewide homesites.
The common area amenities include a basketball court. We have not
estimated a separate value for this amenity, or equipment, as they are standard
items found at most manufactured home communities. This amenity is typical,
adequate and functional in use. The site is also improved with a maintenance
shed and a mobile home that is used as an on-site office.
The community and site improvements were built in 1964, and the community
is approximately 35 years old. The common areas, streets, amenities and
individual mobile homes were observed to be in average overall condition, having
been originally constructed of quality materials and having been maintained over
the years. No significant item of deferred maintenance was noted and the
current maintenance level is rated average.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Marion County, is in the name of Windsor Park Properties 3. The property has
been under the same owner ship for several years and is currently not listed for
sale on the open market. Therefore, no sales during the past three years were
noted in our analysis.
OCCUPANCY
- ---------
The property is occupied by a fully developed 148-space manufactured home
community. Our inspection confirmed that there are seven vacant lots and the
physical occupancy is 95.3%. According to the property manger, the occupancy of
the property has historically been higher than 90%. There is one employee-
occupied home and the economic occupancy is 94.5%.
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned as a D-11, Dwelling District under the Marion County
zoning ordinance. It is our opinion that the subject property is a legal
nonconforming use with the zoning code.
Concurrency
- -----------
The use of the subject represents a legal nonconforming use with the
approved comprehensive plan filed by Marion County and concurrency is not an
issue.
Flood Hazard
- ------------
A major portion of the subject property is located in a designated Zone B
Flood Hazard Area according to Flood Map Community Number 180159, Panel 0050B,
dated June 3, 1998. The subject site is protected by a dike to prevent
flooding and no historical flooding problems were noted. Therefore, this
analysis assumes that the location of the subject within this flood plain does
not impact the overall utility of the site.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. This
analysis assumes that no hazardous substances or waste currently exist at the
site and no consideration was given to the potential liabilities and cleanup
costs associated with the presence of these materials. In addition, we have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Marion County records under
Parcel Numbers 9-011115, 9-044459, 9-044455, 9-010712 and 9-010716. The
assessed value of the subject totals $174,100. It is our opinion that the
subject is under assessed. The 1999 taxes are $14,603.62.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Indiana, residential and commercial
properties are assessed at 33 and 1/3% of the market value. According to the
Tax Collector's Office, all taxes are currently delinquent.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.5% to 9.5% overall
capitalization rate requirement for all-age communities. Pricing is established
by processing gross income, reduced by a vacancy and credit loss factor,
operating expenses and an additional capital charge based on overall condition,
is deducted to arrive at a net operating income (NOI). Those surveyed indicated
that at properties not operating at stabilized occupancy, they were unwilling to
compensate a seller for any of the upside to be gained in filling the property.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 148-space, all age manufactured home community, represents the
highest and best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
/2/The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market. The first step in the Income Approach
to value involves the estimate of future net operating income to be generated by
the subject property. The estimate of net operating income is derived through
the process of estimating the total potential gross income (PGI from rentals and
other sources, less any vacancy and credit loss producing an effective gross
income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENTAL COMPARABLE SUMMARY
<TABLE>
<CAPTION>
No. Name/Location Number Monthly Services Amenities
Spaces/ Rental Rates Included In Rent
% Occ.
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 I-70 Mobile Home Park 80/ $192.00 Water, sewer and trash Playground.
3023 W. Morris Street 92.5% to collection.
Indianapolis, Marion County, Indiana $221.00
- ------------------------------------------------------------------------------------------------------------------------------------
2 Harrison Mobile Home Park 90/ $210.00 Water, sewer and trash No amenities.
4923 Rockville Road 100.0% collection.
Indianapolis, Marion County, Indiana
- ------------------------------------------------------------------------------------------------------------------------------------
3 Shrum Mobile Home Park 98/ $215.00 Trash collection. Playground.
3603 Clarks Creek Road 95.9% to
Plainfield, Hendricks County, Indiana $230.00
- ------------------------------------------------------------------------------------------------------------------------------------
4 Broad Acre Mobile Home Park 210/ $235.00 Water, sewer and trash Playground.
10408 E. County Road 100 N. 61.9% to collection.
Indianapolis, Hendricks County, Indiana $245.00
- ------------------------------------------------------------------------------------------------------------------------------------
Subj. Ponderosa 148/ $222.00 Water, sewer and trash Playground.
3559 Cossell Road 94.5% collection.
Indianapolis, Marion County, Indiana
===================================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 17
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. This ranges between $192.00 and $245.00 per month, as indicated by the
rent comparables recited in this report. As shown by our survey, the subject's
lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $32,856. The potential gross income from rentals is $394,272 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an all age community that has a physical occupancy of 95.3%,
and an economic occupancy of 94.5%. To the economic vacancy, we have added a
percentage to account for credit loss in our estimate of total economic vacancy
of 5.0% of total potential gross income, or $19,714.
Miscellaneous Income
- --------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject generated $32.97 per space in 1996, $92.09 per space
in 1997 and $113.86 per space in 1998. We have estimated miscellaneous income
at $75.00 per space or $11,100 annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus,
potential gross rental income of $394,272 less a vacancy and credit loss
allowance of $19,714, or 5.0% produces an effective gross income from rentals
estimate of $374,558. To this amount, we have added an estimated income derived
from miscellaneous sources of $11,100, arriving at an effective gross income
estimate of $385,658.
<PAGE>
<TABLE>
<CAPTION>
Income Capitalization Approach 18
====================================================================================================================================
Pondarosa - Historical Income nd Expenses
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 332,574 98.55% $ 2,247.12 $ 339,721 96.14% $2,295.41 $ 350,840 95.42% $2,370.54
Miscellaneous/Other 4,879 1.45% 32.97 13,630 3.86% 92.09 16,851 4.58% 113.86
-------------------------------------------------------------------------------------------------------------
Total Income $ 337,453 100.00% $ 2,280.09 $ 353,351 100.00% $2,387.51 $ 367,691 100.00% $2,484.40
Expenses:
Insurance $ 5,326 1.58% $ 35.99 $ 5,708 1.62% $ 38.57 $ 2,182 9.59% $ 14.74
Office/Administration 16,133 4.78% 109.01 8,534 2.42% 57.66 21,618 5.88% 146.07
Maintenance & Repairs 8,446 2.50% 57.07 9,071 2.57% 61.29 13,817 3.76% 93.36
Management Expense 16,545 4.90% 111.79 17,915 5.07% 121.05 18,671 5.08% 126.16
Wages & Benefits 24,032 7.12% 162.38 33,358 9.44% 225.39 37,010 10.07% 250.07
Property Taxes 13,621 4.04% 92.03 12,578 3.56% 84.99 13,936 3.79% 94.16
Utilities 48,066 14.24% 324.77 48,593 13.75% 328.33 60,363 16.42% 407.86
Miscellaneous 9,913 2.94% 66.98 10,683 3.02% 72.18 3,045 0.83% 20.57
-------------------------------------------------------------------------------------------------------------
Total Expenses $ 142,082 42.10% $ 960.01 $ 146,440 41.44% $ 989.46 $170,642 46.41% $1,152.99
Net Operating Income $ 195,371 57.90% $ $ 1,320.07 $ 206,911 58.56% $1,398.05 $197,049 53.59% $1,331.41
====================================================================================================================================
</TABLE>
<PAGE>
19
Income Capitalization Approach
Operating Expense Analysis
- --------------------------
Insurance
- ---------
Historically, this expense has exhibited a significant decrease from 1997
to 1998. Our estimate of this expense has been based on the historical amounts,
or $15.00 per space per year. This is equal to $2,220 annually, approximately
0.58% of the effective gross income.
Administrative/Office
- ---------------------
Historically, this expense has shown a stable trend. In the financial
statements, this expense does include some corporate expense items that we have
not considered. Our stabilized estimate is $100.00 per space per year, equal to
$14,800 or approximately 3.84% of the estimated effective gross income.
Maintenance and Repairs
- -----------------------
Historically, this expense was equal to $57.07 per space in 1996 and $61.29
per space in 1997. The 1998 figure is slightly higher at $93.36 per space. Our
estimate of $75.00 per space per year is equal to $11,100 and is believed
adequate to properly maintain the community. This amount is equal to
approximately 2.88% of the estimated effective gross income.
Management Fees
- ---------------
This expense typically includes off-site management, the oversight of the
on-site manager and monthly bookkeeping functions. We used a 5% of estimated
effective gross income, typical in the market place, equal to $19,283 or $130.29
per space per year.
Wages and Benefits
- ------------------
This expense was equal to $162.38 per space in 1996, $225.39 in 1997 and
$250.07 per space in 1998. We have estimated this expense at $250.00 per space
per year or $37,000, which is equal to 9.59% of the estimated effective gross
income.
Property Taxes
- --------------
This category is project specific due to location, and the current taxes
are higher than previous year's levels. Based on our analysis of the historical
tax trends, we have estimated the tax liability to be $14,604. This equates to
$98.68 per space per year or 3.79% of the estimated effective gross income.
<PAGE>
20
Income Capitalization Approach
Utilities
- ---------
This expense was equal to $324.77 per space in 1996 and $328.33 per space
in 1997. The 1998 amount is equal to $407.86 per space. We have estimated this
expense at $410.00 per space per year. This is equal to $60,680, or
approximately 15.73% of the estimated effective gross income.
Miscellaneous
- -------------
This expense was equal to $66.98 per space in 1996 and $72.18 per space in
1997. The 1998 amount decreased to $20.57 per space. We have estimated this
expense at $20.00 per space per year. This is equal to $2,960, or approximately
0.77% of the estimated effective gross income.
Reserves
- --------
This expense category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
We have used $25.00 per space per year, believed adequate to cover future
capital costs. This equates to $3,700 annually or approximately 0.96% of the
estimated effective gross income.
Total Expenses
- --------------
To summarize, we have stabilized total operating expenses for the subject
at $166,347. This estimate is equal to 43.13% of the Effective Gross Income
(EGI) estimate or $1,123.97 per space per year. As shown, the 1997 expense was
equal to 41.44% and the 1998 expense was equal to 46.41%.
<PAGE>
Income Capitalization Approach 21
===============================================================================
Pondarosa
Stabilized Operating Statement
<TABLE>
<CAPTION>
% of $ per
Amount EGI Space
====================================================================================
Income
Monthly Monthly
Spaces Rent Total Annualized
- ------------------------------------------------------------------------------------
148 $222.00 32,856 394,272
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Potential Rental Income $ 32,856 $394,272
Less:
Vacancy and Credit Loss 5% (19,714)
--------
Effective Gross Income From Rentals $374,558
Plus:
Miscellaneous Income $75.00 11,100
--------
Total Effective Gross Income $385,658 100.00% $2,605.80
Expenses
Insurance $ 2,220 0.58% $ 15.00
Office 14,800 3.84% 100.00
Maintenance & Repairs 11,100 2.88% 75.00
Management Expense 19,283 5.00% 130.29
Wages & Benefits 37,000 9.59% 250.00
Property Taxes 14,604 3.79% 98.68
Utilities 60,680 15.73% 410.00
Miscellaneous 2,960 0.77% 20.00
Reserves 3,700 0.96% 25.00
----------------------------------
Total Expenses $ 166,347 43.13% $1,123.97
Net Operating Income $ 219,311 56.87% $1,481.83
====================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 22
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.40% and 10.51%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
Sale Sale Date Vacancy Rate Overall Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 January 1998 3.9% 8.40%
- --------------------------------------------------------------------------------
2 August 1997 1.0% 8.78%
- --------------------------------------------------------------------------------
3 June 1997 19.9% 8.79%
- --------------------------------------------------------------------------------
4 May 1997 1.2% 9.13%
- --------------------------------------------------------------------------------
5 April 1997 5.0% 10.51%
- --------------------------------------------------------------------------------
</TABLE>
In this instance, the subject has an economic vacancy of 5.5% and was
observed to be in average overall condition. The market has been competitive in
recent years, indicating increased risk, increasing the going-in capitalization
rate. Based on these considerations, we have concluded an overall
capitalization rate of 10.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75% of
market value, based on a 20-year amortization schedule at an annual interest
rate of 8.5%, which yields an annual mortgage constant of 10.4139%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<TABLE>
<CAPTION>
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.75 0.104139 1.25 0.097630
- ----------------------------------------------------------------------------------------------------
Rounded 9.8%
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach 23
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
home community investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$219,311 divided by 0.10 $2,193,110
Rounded to $2,200,000
</TABLE>
<PAGE>
24
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
No. Name/Location Sale Price/ Total Price/ Average E.G.I.M/ O.A.R.
Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Oakwood Village Mobile Home Park $7,150,000 284/ $25,176 $262.00 8.33/ 8.40%
10800 Valette Circle January 1998 96.1% 30.0%
Miamisburg, Montgomery County, Ohio
- --------------------------------------------------------------------------------------------------------------------------------
2 Heritage Heights $6,500,000 447/ $14,541 $150.00 7.79/ 8.78%
8100 U.S. Highway 31 August 1997 99.0% 30.0%
Taylorsville, Bartholomew County, Indiana
- --------------------------------------------------------------------------------------------------------------------------------
3 Westar Mobile Home Park $3,010,000 196/ $15,051 $175.00 7.96/ 8.79%
911 Hale Street June 1997 80.1% 30.0%
Shelbyville, Shelby County, Indiana
- --------------------------------------------------------------------------------------------------------------------------------
4 Hollywood Estates Mobile Home Park $3,700,000 242/ $15,289 $175.00 7.66/ 9.13%
2400 Mounds Road May 1997 98.8% 30.0%
Anderson, Madison County, Indiana
- --------------------------------------------------------------------------------------------------------------------------------
5 Cottonwood Lane Mobile Home Park $ 650,000 57/ $11,404 $140.00 6.17/ 10.51%
750 N. County Road 225 West April 1997 95.0% 35.0%
Crawfordsville, Montgomery County, Indiana
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Sales Comparison Approach 26
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. All of the sales were fee
simple transactions, with abnormal financing reflected in the cash equivalent
price. There were no abnormal sale conditions known to have occurred and all of
the sales represent transactions that have taken place over a ten month period,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.17 and 8.33. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject has an expense ratio higher than all of the comparables. Based
on this consideration, we have concluded an EGIM slightly below the indicated
range, processing subject's Effective Gross Income of $385,658 with an EGIM of
6.0.
Thus,
$385,658 x 6.0 is $2,313,948
Rounded to $2,300,000
On a per space basis, this is equivalent to $15,541.
Price Per Space Analysis
- ------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a greater amenity package.
Rather than making a subjective percentage adjustment to the per space sales
prices, the Net Operating Income/Space (NOI/Space) reflects, in most cases, the
market perception of a property's position in the marketplace. Since investors
are mainly concerned with cash flow to service debt, the net operating income
generating capability of a particular community can be used for comparison
purposes. Typically, the higher the NOI/Space for a community, the higher the
per space sales price. The subject has a NOI/Space of $1,482. The NOI/Space
and per space
<PAGE>
Sales Comparison Approach 27
sales prices for the comparables are shown on the following table. We then
compare the percentage difference between each comparable's NOI/Space and the
subject's NOI/Space. For comparables with a higher NOI/Space, a downward
adjustment to the per space sales price is made. An upward adjustment is made
for a comparable with a lower NOI/Space.
NOI/Space and Per Space Sales Price
<TABLE>
<CAPTION>
COMP 1 COMP 2 COMP 3 COMP 4 COMP 5 SUBJECT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NOI/Space $ 2,116 $ 1,276 $ 1,323 $ 1,397 $ 1,198 $1,482
Price/Space $25,176 $14,541 $15,051 $15,289 $11,404 N/A
Percent
Adjustment -42.8% 16.1% 12.0% 6.1% 23.7% N/A
Adjusted
Price/Space $14,401 $16,778 $16,857 $16,222 $14,107 N/A
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
After adjustments, the indicated range is from $14,107 to $16,857 per space.
The subject consists of an average quality park in an average location.
Therefore, we have considered the middle of the range and concluded $15,500 per
space.
<TABLE>
<S> <C>
Thus, 148 Spaces X $15,500/Space is: $ 2,294,000
Rounded $ 2,300,000
</TABLE>
SUMMARY
- -------
The two methods indicated a narrow range and are considered mutually
supportive. Therefore, we have concluded a value of $2,300,000 via the Sales
Comparison Approach.
<PAGE>
28
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
<TABLE>
<S> <C>
Income Capitalization $2,200,000
Approach
Sales Comparison Approach $2,300,000
</TABLE>
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable. Given the relative homogeneity of the locations, the availability of
market data, we have emphasized this approach in the valuation.
The two approaches reflect a narrow range of values. We have placed
primary emphasis on the income capitalization approach. Our opinion of the
market value of the subject, based on a reasonable exposure period of six
months, as of August 5, 1999 was:
- TWO MILLION TWO HUNDRED THOUSAND DOLLARS -
($2,200,000)
<PAGE>
29
CERTIFICATION
- -------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. I have no bias with respect to the property that is the subject of
this report, or to the parties involved with this assignment.
. My engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. My compensation for completing this assignment is not contingent on
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of the
appraisal.
. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, the Code
of Professional Ethics, and the Standards of Professional Practice of
the Appraisal Institute and the American Society of Appraisers.
. The use of this report is subject to the requirements of the Appraisal
Institute and the American Society of Appraisers relating to review by
its duly authorized representatives.
. As of the date of this report, Keith D. McFarland, ASA has completed
the requirements under the continuing education program of the
American Society of Appraisers.
. Keith D. McFarland, ASA has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
/s/ Keith D. McFarland
- -------------------------------
Keith D. McFarland, ASA
Indiana Certified General Real Estate Appraiser #CG69201433
<PAGE>
30
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose, Intended Use and Function of the Report. The appraisal report may not
be reproduced, in whole or in part, and the findings of the report may not be
utilized by a third party for any purpose, without the written consent of
Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 31
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including the HVAC systems, if applicable. Should there be any question
concerning
<PAGE>
Assumptions and Limiting Conditions 32
them, it is strongly recommended that an Engineering, Construction,
and/or Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas, which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the
<PAGE>
Assumptions and Limiting Conditions 33
projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
PARCEL III:
PART OF THE SOUTHEAST QUARTER OF SECTION 5, TOWNSHIP 15 NORTH, RANGE 3 EAST IN
MARION COUNTY, STATE OF INDIANA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID QUARTER SECTION; RUNNING THENCE NORTH
02 DEGREES 08 MINUTES 49 SECONDS EAST ALONG THE EAST LINE THEREOF A DISTANCE OF
408.00 FEET TO THE POINT OF BEGINNING OF THE REAL ESTATE DESCRIBED HEREIN;
RUNNING THENCE SOUTH 89 DEGREES 58 MINUTES 22 SECONDS WEST PARALLEL TO THE SOUTH
LINE THEREOF A DISTANCE OF 687.752 FEET; RUNNING THENCE NORTH 25 DEGREES 33
MINUTES 08 SECONDS WEST A DISTANCE OF 213.87 FEET; RUNNING THENCE NORTH 00
DEGREES 02 MINUTES 02 SECONDS WEST A DISTANCE OF 507.000 FEET; RUNNING THENCE
NORTH 12 DEGREES 43 MINUTES 46 SECONDS WEST A DISTANCE OF 950.080 FEET TO A
POINT IN THE CENTERLINE OF COSSELL ROAD; RUNNING THENCE SOUTH 89 DEGREES 56
MINUTES 08 SECONDS EAST UPON AND ALONG SAID CENTERLINE A DISTANCE OF 470.000
FEET; RUNNING THENCE SOUTH 01 DEGREES 46 MINUTES 36 SECONDS WEST A DISTANCE OF
764.48 FEET (SOUTH 766.50 FEET BY DEED); RUNNING THENCE SOUTH 57 DEGREES 21
MINUTES 13 SECONDS EAST A DISTANCE OF 353.369 FEET (SOUTH 63 DEGREES EAST 344
FEET BY DEED); RUNNING THENCE SOUTH 02 DEGREES 12 MINUTES 53 SECONDS WEST A
DISTANCE OF 146.000 FEET; RUNNING THENCE SOUTH 69 DEGREES 22 MINUTES 52 SECONDS
EAST A DISTANCE OF 285.748 FEET (SOUTH 69 DEGREES 45 MINUTES EAST 286.0 FEET BY
DEED) TO A POINT ON THE EAST LINE OF SAID SOUTHEAST QUARTER SECTION; RUNNING
THENCE SOUTH 02 DEGREES 08 MINUTES 49 SECONDS WEST ON AND ALONG SAID EAST LINE A
DISTANCE OF 424.871 FEET TO THE POINT OF BEGINNING.
PARCEL IV:
PART OF BLOCKS 7 AND 8 IN SALEM PARK AS RECORDED IN PLAT BOOK 17, PAGE 150 IN
THE OFFICE OF THE RECORDER OF MARION COUNTY, INDIANA, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF THE AFOREMENTIONED BLOCK 7, SAID CORNER
ALSO BEING THE SOUTHEAST CORNER OF THE SOUTHEAST QUARTER OF SECTION 5, TOWNSHIP
15 NORTH, RANGE 3 EAST IN MARION COUNTY, INDIANA; RUNNING THENCE NORTH 02
DEGREES 08 MINUTES 49 SECONDS EAST ALONG THE EAST LINE OF SAID BLOCK 7 AND
QUARTER SECTION A DISTANCE 408.000 FEET TO THE NORTHEAST CORNER OF SAID BLOCK 7;
RUNNING THENCE SOUTH 89 DEGREES 58 MINUTES 22 SECONDS WEST ALONG THE NORTH LINE
OF SAID BLOCKS 7 AND 8 AND PARALLEL TO THE SOUTH LINE OF SAID QUARTER SECTION A
DISTANCE OF 687.752 FEET; RUNNING THENCE SOUTH 66 DEGREES 18 MINUTES 35 SECONDS
EAST A DISTANCE OF 56.81 FEET; RUNNING THENCE SOUTH 71 DEGREES 15 MINUTES 01
SECOND EAST A DISTANCE OF 101.76 FEET; RUNNING THENCE SOUTH 67 DEGREES 17
MINUTES 31 SECONDS EAST A DISTANCE OF 178.71 FEET; RUNNING THENCE SOUTH 57
DEGREES 44 MINUTES 16 SECONDS EAST A DISTANCE OF 142.71 FEET; RUNNING THENCE
SOUTH 51 DEGREES 50 MINUTES 31 SECONDS EAST A DISTANCE OF 160.45 FEET; RUNNING
THENCE SOUTH 46 DEGREES 15 MINUTES 31 SECONDS EAST A DISTANCE OF 155.56 FEET TO
THE POINT OF BEGINNING.
<PAGE>
MAPS
<PAGE>
[MAP APPEARS HERE]
Neighborhood Map
<PAGE>
[MAP APPEARS HERE]
Rent Comparable Location Map
<PAGE>
[MAP APPEARS HERE]
Comparable Sale Location Map
<PAGE>
PROFILE OF APPRAISER
<PAGE>
PROFILE OF APPRAISER
KEITH McFARLAND, ASA
REAL ESTATE EXPERIENCE
- ----------------------
Consultant
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured housing communities, self storage
facilities, hotels, manufacturing plants, office buildings, retail buildings
and other types of commercial establishments as well as special use
facilities. January 1996 to present.
Appraisal Director
Marshall and Stevens, Inc.
St. Louis, MO
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1986 to present.
PROFESSIONAL AFFILIATIONS
- -------------------------
ASA, Senior Member American Society of Appraisers
State Certified General Real Estate Appraiser
Arkansas #CG1200N Michigan #1201004617
Colorado #CG80000045 Mississippi #GA-417
Illinois #153000628 Missouri #RA-001461
Indiana #CG69201433 Ohio #398743
Kansas #G-871 Tennessee #00051023
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Allied Research Associates IBM Retirement Fund
AT&T Global Real Estate Krupp Asset Management Company
Boatmen's National Bank May Company
CalPERS Pacific Realty Corporation
Citicorp Real Estate Park Corporation
Continental Grain Company Ruff, Callahan & Hemmeter
Eastdil Realty Sears
First Tennessee Bank Wal-Mart Stores
<PAGE>
2
Profile of Appraiser
EDUCATIONAL BACKGROUND
- ---------------------
Southern Illinois University at Edwardsville, B.S.
The Appraisal Institute
American Society of Appraisers
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitecomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsiblities included management of all technical staff members
throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing plants,
office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property tax
appeals, financing and allocation of purchase price. March 1990 to May 1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- --------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser
3
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
- -----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
<PAGE>
Profile of Appraiser
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(B)
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
155 Space - The Pines
Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
PREPARED FOR
Brian Harris
Assistant Vice President
Collateral Mortgage
524 Lorna Square
Birmingham, Alabama 35216
AS OF
June 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE]
June 1, 1999
Brian Harris
Assistant Vice President
Collateral Mortgage
524 Lorna Square
Birmingham, Alabama 3521
RE: 155 Space - The Pines
Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
Dear Mr. Harris:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of June 1, 1999, based on an exposure period of six months, to be:
- SEVEN HUNDRED THOUSAND DOLLARS -
($700,000)
Our value estimate applies to the land as physically constituted and to the
improvements actually in existence. Our value estimate reflects prevailing
trends in the local real estate market. We have made a careful inspection,
study, and analysis of the property, and have considered all factors which, in
our opinion, would tend to influence the market value of the subject.
The subject was originally developed as an all-age manufactured housing
community with 204 spaces, however, as manufactured homes increased in size,
several lots were overlapped. According to management, there are 19 doubleuse
lots and several lots that are too small to place a home. Additionally, the on-
site manager indicated that the community has only one vacancy out of 155 spaces
usable spaces.
<PAGE>
Damon B. Reed
June 1, 1999
Page Two
Management is in the process of obtaining estimates to install individual
water meters. Our estimate of the expense was approximately $100,000. We have
valued the property assuming the residents will be paying for their own
utilities, therefore, the $100,000 meter installation expense was deducted from
the value estimated via the Income Capitalization and Sales Comparison Analyses.
This appraisal assignment was not based on a requested minimum value, specific
value, or the approval of a loan.
This conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation, the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and
Collateral Mortgage Company's Appraisal Guidelines.
We appreciate this opportunity to be of service to you and would like to
thank you for the help and information you provided. If you have any questions,
please feel free to contact us.
Very truly yours,
WHITCOMB REAL ESTATE
L. Drake Moore, MAI
REA#1321098-G
<PAGE>
4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Title Page
Transmittal
Table Of Contents....................................................... 4
INTRODUCTORY SECTION
Photographs Of Subject.................................................. 6
Summary Of Facts And Conclusions........................................ 8
Scope Of The Assignment................................................. 9
Purpose And Function Of The Report...................................... 11
Appraisal Definitions................................................... 11
Property Rights Appraised............................................... 12
Effective Date Of Value................................................. 12
Date Of Inspection...................................................... 12
DESCRIPTIVE SECTION
Area Description........................................................ 14
Neighborhood Description................................................ 22
Manufactured Housing Community Market Overview.......................... 25
Land And Site Improvements.............................................. 33
Improvement Description................................................. 36
Ownership And Property History.......................................... 38
Occupancy............................................................... 38
Zoning And Other Land Use Controls...................................... 39
Assessment And Taxes.................................................... 40
Marketability And Exposure Period....................................... 41
VALUATION SECTION
Highest And Best Use.................................................... 44
Valuation Process....................................................... 49
Income Capitalization Approach.......................................... 50
Sales Comparison Approach............................................... 68
Final Estimate Of Value................................................. 83
Certification........................................................... 84
Assumptions And Limiting Conditions..................................... 85
ADDENDA
Legal Description
Detailed Property Summary
Engagement Letter
Profiles Of Appraisers
</TABLE>
<PAGE>
INTRODUCTORY SECTION
<PAGE>
6
PHOTOGRAPH OF SUBJECT (Taken April 5, 1999)
[PHOTOGRAPH APPEAR HERE]
View of Entry
[PHOTOGRAPH APPEAR HERE]
Typical Interior Street Scene
<PAGE>
7
PHOTOGRAPHS OF SUBJECT (Taken April 5, 1999)
[PHOTOGRAPH APPEAR HERE]
View of Office Building
<PAGE>
8
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 155 Space - The Pines
- ------------------- Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
Property Rights Appraised: Fee Simple Interest, subject to tenant leases
- --------------------------
Land Area: 24.1 gross acres
- ----------
Improvements: 155 manufactured housing spaces, and office
- ------------- containing a gross total of approximately 400
square feet. The development also has a playground
and 21 storage sheds.
Owner: Windsor Park Properties
- ------
Zoning: "RT" Mobile Home Park by Charleston County
- -------
Highest and Best Use: As Vacant: Hold for future development as
- --------------------- predicated by market demand. As Improved: Current
use (Manufactured Housing Community)
Value Indications: Income Approach $730,000
- ------------------ Sales Comparison Approach $700,000
Final Estimate of Value: $700,000
- ------------------------
Date of Appraisal: June 1, 1999
- ------------------
Date of Inspection: April 5, 1999
- -------------------
<PAGE>
9
SCOPE OF THE ASSIGNMENT
- -----------------------
This assignment encompasses providing an "as is" market value of the fee
simple property rights, subject to tenant leases. The subject is a 155-space
manufactured housing community, known as The Pines, located in Ladson,
Charleston County, South Carolina. The date of the valuation is June 1, 1999.
The first step in the analysis is to develop a concise statement or
definition of the appraisal assignment. This sets the limits of the analysis
and eliminates any ambiguity about the nature of the assignment. This is
accomplished by: 1) identifying the real estate being analyzed, 2) stating the
effective date of value, 3) stating the purpose and use (function) of the
analysis, 4) defining market value, 5) defining and identifying the property
rights to be valued, and 6) stating the assumptions and limiting conditions
applicable to the conclusions.
After defining and accepting the assignment, the preliminary analysis,
which was previously formulated in order to determine the character and extent
of the proposed assignment, is reviewed and refined. The preliminary analysis
also determines the amount of work that will be required to gather the necessary
data. This analysis and work plan are dependent upon the character of the
assignment and the type of property being analyzed. The next step is to make a
physical inspection of the subject, which was accomplished on April 5, 1999, and
its environs, including the gathering of general and specific data.
General data consists of information on the principles, forces and factors
that affect marketability and property value. This information includes
regional and neighborhood trends, as well as social, economic, governmental and
environmental forces that could or may have an effect on the subject's
marketability and value. This general data contributes significantly to the
understanding of the marketplace. Area data for Charleston County and the
subject's immediate neighborhood was obtained from a number of published sources
that are appropriately cited in the report. Based on the data produced through
the research of the general area and neighborhood the initial searches for
market data were extended back to July 1997. As there was adequate data from
which to evaluate the subject property, during that time period, the search was
not further extended or otherwise modified.
Specific data relates to the property being appraised, including a detailed
description of both the parcel comprising the subject site and the subject's
existing site improvements, based upon the physical inspection of the premises
and the neighborhood, together with various documents and drawings obtained from
the owner, management and public services; as well as current and recent changes
in ownership of the subject, occupancy, zoning and land use regulations
affecting the subject, and assessment and real estate tax information applicable
to the subject, obtained from the appropriate governmental agencies. The
gathering of specificdata also relates, as may be applicable, to the comparable
land sales, improved sales and rentals selected. The majority of the market
transactions were originally researched through
<PAGE>
Scope of the Assignment 10
the TRW REDI subscription services, which were then visually inspected and
verified with a principle of the transaction, a broker or agent involved in the
transaction and through public records.
In addition to the physical data, locational and income and expense
information for the subject and, as available, for the comparable sales and
rentals was utilized. Also considered are financing arrangements and/or unusual
motivations of either buyer or seller that could or did affect selling prices or
rentals.
An integral part of the valuation process for the property is the
determination of the highest and best use of the subject site: 1) as if vacant,
and 2) as currently improved. The latter analysis is useful in identifying
comparable properties, and determining whether the existing improvements should
be retained, renovated or demolished. The land value estimate, as if vacant, is
required when the land's contribution to total property value is sought, or when
improvements are valued separately, as in the Cost Approach.
After determining the subject site's highest and best use and gathering the
necessary data, we integrate the information drawn from the market research and
analysis of data and consider the application of the three valuation approaches
- - the Income Capitalization Approach, the Sales Comparison Approach and the Cost
Approach - in order to derive a well-supported value estimate of the fee simple
interest. Although the three approaches are interrelated, the property type and
use will determine which approach or approaches are most appropriate. Upon
completion of the applicable approaches, we reconcile the value conclusions
derived in order to provide a final value estimate.
<PAGE>
11
PURPOSE AND FUNCTION OF THE REPORT
- ----------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of June 1, 1999.
The information, opinions, and conclusions contained in this report have
been prepared as a basis for mortgage financing.
APPRAISAL DEFINITIONS
- ---------------------
Market Value, as defined by the Office of the Comptroller of the Currency
is:
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 passing of title from
seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what
they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- 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.
Fee Simple Interest is defined as the absolute ownership unencumbered by
any other interest or estate subject only to the four powers of
government./1/
- ---------------------
/1/ The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute,
1993.
<PAGE>
12
PROPERTY RIGHTS APPRAISED
- -------------------------
The real estate interest appraised is that of ownership in fee simple
interest, subject to existing tenant leases, and the property is appraised as if
free and clear of mortgages, liens, servitudes and encumbrances, except those
noted in the body of this appraisal.
EFFECTIVE DATE OF VALUE
- -----------------------
The effective date of our value is June 1, 1999.
DATE OF INSPECTION
- ------------------
L. Drake Moore, MAI inspected the property on April 5, 1999.
<PAGE>
DESCRIPTIVE SECTION
<PAGE>
14
AREA DESCRIPTION
- ----------------
Introduction
- ------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate.
The first step in estimating the highest and best use of the subject
property is an examination of the social, economic, governmental and
environmental forces affecting property values in the Charleston area. In the
following discussion, we have attempted to present sufficient data to inform
readers unfamiliar with Charleston, South Carolina and its environs.
Introduction
- ------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate. The first step in estimating the highest and
best use of the subject is an examination of the social, economic, governmental
and environmental forces affecting property values in the Charleston-North
Charleston MSA and Berkeley County. In the following discussion, we have
attempted to present sufficient data to inform readers unfamiliar with the
Charleston metropolitan area, Berkeley County and its environs. The subject is
located within the State of South Carolina. South Carolina has a strong economic
base consisting of tourism, services, manufacturing, and retail trade.
State of South Carolina Overview
- --------------------------------
The population of South Carolina has been growing steadily since 1992, and
is projected to continue to grow at least through the Year 2000. In 1996, South
Carolina was the 26th largest state in the nation with a population of
3,698,746, but its population growth from 1990 was up 6.1% ranking it 22nd in
population growth over 1990-96. With its 30,111 square miles, population density
as of 1996 was 122.8 persons per square mile, ranking it 22nd in population
density in the country. Regarding the demographic composition of the
population, median age is 32.0 years, which is lower than the median for the
entire U.S. of 33.2 years. As shown in the following table, with the exception
of 1994, the population has grown at close to 1% per year over the past five
years. The rate of growth is projected to increase as shown by the Year 2000
projection. Additional projections show the same rate of growth through the
Year 2015.
<PAGE>
Area Description 15
South Carolina State Population Growth and Projections
<TABLE>
<CAPTION>
%
Year Population Change
- ------------------------------===============
<S> <C> <C>
1992 3,594,586 N/A
- ------------------------------===============
1993 3,628,502 +0.9%
- ------------------------------===============
1994 3,642,968 +0.4%
- ------------------------------===============
1995 3,667,000 +0.7%
- ------------------------------===============
1996 3,698,746 +0.9%
- ------------------------------===============
2000* 3,914,000 +5.8%
=============================================
</TABLE>
Source: 1997 South Carolina Statistical Abstract
*Projection
The rate of future population growth is projected to increase between 1996-
2000 to almost 1.5% per year. The result should be stronger returns on real
estate investments with sufficient demand existing for new construction
projects.
The changing demographics has impacted the South Carolina real estate
market through increasing demand for housing and the corresponding commercial
development that usually follows. Since the recession period of the early
nineties and the financial institution collapse, eastern South Carolina has been
characteristic of the southeastern states with faster than average population,
housing and commercial growth.
Geography
- ---------
The subject property is located in the city of Ladson within southeastern
South Carolina in Charleston County. Berkeley County immediately borders Ladson
on the west side of U.S. Highway 78. Williamsburg and Georgetown Counties
border the county to the north, Dorchester and Charleston Counties to the south,
Claredon and Orangeburg Counties to the west and Berkeley County to the east.
The city of Charleston is the county seat of Charleston County and the cities of
Hanahan and Goose Creek are the major populated cities in adjacent Berkeley
County. Moncks Corner, the county seat of Berkeley, is approximately 20 miles
north of Hanahan. Charleston is located approximately 105 miles southeast of
Columbia, South Carolina, 195 miles southeast of Charlotte, North Carolina and
290 miles southeast of Atlanta, Georgia.
The Charleston-North Charleston MSA contains a total of 2,591.7 square
miles, with Berkeley County having 1,099.5 square miles (3rd largest in the
state). The range of elevation is 0 to 80 feet above sea level, and its terrain
is largely flat plains. The climate is temperate to subtropical, with average
daily temperatures ranging from 47.9 Fahrenheit (January) to 80.5 (July).
Prevailing winds are out of the west, and average annual rainfall is 52 inches
with very
<PAGE>
Area Description 16
infrequent average annual snowfall. This Low Country area of South Carolina is
known for its temperate climate, resort areas and 90 miles of oceanfront.
Population
- ----------
The Charleston-North Charleston MSA, which includes the counties of
Berkeley, Charleston and Dorchester, had a 1980 population of 430,346, a 1990
population of 506,875 (average of +1.8% per year) and an estimated 1994
population of 522,276 (average of +0.75% per year). There was no data available
for Ladson, but the city of Hanahan in Berkeley County is located only 5 1/2
miles to the southeast and Goose Creek and Berkeley is less than 3 miles to the
east. Both Berkeley and Dorchester Counties grew over the 1990-94 period, while
Charleston County lost population over the same period. Over this same period,
the City of Hanahan lost population. According to the U.S. Census, the City of
Hanahan had a 1990 population of 13,176, a decrease of 0.4% over the 1980 figure
of 13,224. The 1994 population is estimated at 12,886, a decrease of 2.2% over
the 1990 figure. Both the Cities of Charleston and North Charleston gained
population over the 1980-90 period, but lost population over the 1990-94 period.
The Charleston-North Charleston MSA now ranks as the 103rd largest Metropolitan
Statistical Area in the nation, up from 122nd in 1989.
According to the U.S. Census, Charleston County had a 1990 population of
295,039, and the latest estimate of population for Charleston County is 293,550.
Berkeley County had a 1990 population of 128,776, an increase of 35.9% over the
1980 figure of 94,745. The 1997 population was estimated at 141,980 (+7.8% over
1990), with year 2002 population projected to be 152,953, up +7.7% over the next
five years.
Middle aged people make up the largest proportion of the adult aged
population, and continue to become an ever-larger proportion of the population
in Charleston and Berkeley County. The proportion of the population in the 35-
49 year old age group was 23.2% in 1997, compared to 9.4% for 18-24 year olds,
17.8% for 25-34 year olds, and 16.5% for 50 years and older. Further, this age
group has steadily increased over the same period. The surrounding counties
have similar high proportions in this age bracket, including 22.2% for
Charleston County and 24.7% for Dorchester County. The proportion of population
aged 50 years and older is low at 16.5% compared to 22.8% for Charleston County.
In-migration by younger working age population to warmer regions has been a
long-standing trend across the nation. The median age in the City of Hanahan is
30.7 years, with approximately 10% of the town's population being 65 years or
older.
According to Sales & Marketing Management's 1997 Survey of Buying Power,
Berkeley County had households in 1997 totaling 43,500, an increase of 11.5%
over the 1990 U.S. Census figure of 39,023. Year 2002 households are projected
to be 47,800, up +9.9% over the next five years. Over the 1990-2002 period,
average household size is expected to stay constant at 3.26 persons.
<PAGE>
Area Description 17
In the Charleston area, the cost of living index for all items is 97.4
below the national average of 100.0, with the cost of living index for housing
at 88.8 well below the national average. The average cost of a 1,800 square
foot 3 bedroom house in the Charleston area is $117,020. The average monthly
rental cost for a 2 bedroom, 2 bath unfurnished apartment is $597 per month plus
electric.
Economy
- -------
Professional and related services, trade and manufacturing are the industry
sectors that drive the region's economy. Together, these sectors account for
63.0% of total employment, with the services sector representing 27%, trade
representing 26% and manufacturing representing 10% of employment. The rate of
growth for the new jobs measure the momentum of the labor market, and the
Charleston region ranks 28th in projected future job growth to 2005 among the
nation's 77 metro areas with populations of 500,000 or more.
The following chart lists the top five employers in this region.
<TABLE>
<CAPTION>
REGION'S TOP 5 EMPLOYERS
===============================================================
NAME OF COMPANY EMPLOYEES
- ---------------------------------------------------------------
<S> <C>
Medical University of S. Carolina 7,528
- ---------------------------------------------------------------
Charleston Air Force Base 6,000
- ---------------------------------------------------------------
U.S. Navy 5,742
- ---------------------------------------------------------------
Charleston County School District 5,109
- ---------------------------------------------------------------
Roper Care Alliance 3,250
===============================================================
</TABLE>
According to the South Carolina Employment Security Commission, the total
civilian labor force for the Charleston MSA was 243,960 in 1996. Total
employment was 231,340. Unemployment in the Charleston MSA was 5.2%. This
compares to 1996 unemployment rates for South Carolina of 6.0%, and for the
nation of 5.4%.
While the civilian labor force continues to grow, the military, once a
major employment sector in this region, has been hard hit by base closings and
downsizings. In 1993, the U.S. Navy announced the Charleston Naval Base
closing, and moved submarines and personnel to King's Bay, Georgia or Norfolk,
Virginia. Military personnel were moved out between 1994-96, and the base
officially closed in April 1996. The U.S. Army reoccupied
<PAGE>
Area Description 18
a portion of the former naval base with its Combat Asia, the army's pre-combat,
rapid deployment unit.
The U.S. Navy currently has an estimated 5,700 active and civilian
employees at area facilities, including the Naval Weapons Station, Space and
Naval Warfare Systems Center Charleston (SPAWAR), and others. SPAWAR
consolidated personnel from the Maryland-D.C. and Norfolk areas, and handles
engineering, radar and technical operations for the Navy. The Charleston Air
Force Base is home for U.S. Air Force's 437th Airlift Wing and employs 6,000
active and civilian employees. Both of these employment figures are down, and
on-site management as the major factor for increased vacancy at the subject
property over the past several years attributes this.
The U.S. Bureau of Economic Analysis reported per capita income for the
Charleston MSA at $16,919 in 1993, $17,769 in 1994 and $18,840 in 1995, ranking
it 247th out of the nation's 315 MSA's. Per capita income for Berkeley County
was $13,406 in 1993, $13,360 in 1994 and $13,875 in 1995, ranking it 40th out of
the county's 46 municipalities. For 1997, Effective Buying Income (EBI) for the
Charleston MSA was $31,417, with an EBI for Berkeley County of $30,620.
Transportation
- --------------
Private automobile use is the predominant means of transportation in the
Charleston region and Berkeley County. The major highways include Interstates
26 and 526 and U.S. Routes 17, 52, 78, 176 and 701. In the vicinity of Hanahan,
U.S. Routes 52/78 and Interstate 26 are the major north-south highways.
Interstate 526 is the primary four-lane expressway providing east-west access
around Charleston to Mt. Pleasant on the east shore of the Cooper River.
Interstate 26 to the west of Hanahan provides direct access to downtown
Charleston to the east and connects with north/south Interstate 95, the main
east coast limited access highway, to the west. There are three Interstate 26
interchanges in the Hanahan area. In the subject's immediate area, North Rhett
Avenue is in the process of being converted from a two-lane road to a five-lane
artery.
There are 41 motor freight carriers with 12 truck terminals servicing the
Charleston area. Delivery time to Chicago and Houston is 3 days; New York and
St. Louis are 4 days each.
Public transportation for Charleston and the suburbs is provided by
Charleston Transit. The Rural Transit Authority provides service for outlying
areas.
Rail freight service is provided by Norfolk Southern and CSX to a variety
of markets. Amtrak provides regional rail passenger transportation.
<PAGE>
Area Description 19
The Charleston International Airport, which is located directly west of the
City of Hanahan, serves the commercial aviation needs of the region and Berkeley
County and offers six major airlines, and two commuter lines. Together, these
airlines serve over 1.4 million passengers annually, and offer almost 100
flights daily from this airport. In addition, six local airports, including
Berkeley County airport, throughout the region accommodate both corporate and
private aircraft.
The Port of Charleston is one of the largest container ports on the
Atlantic and Gulf coasts, ranking second behind only the Ports Authority of New
York and New Jersey. The Port is the fourth largest in the entire country
handling over 10 million tons of cargo annually. A recent study conducted for
the South Carolina State Ports Authority estimated that there are 14,900 port-
related jobs in the region generating $2 billion for the local economy. The
Port currently operates four terminals in the region and plans to build a fifth
state-of-the-art facility on a 1,300 acre site on the Daniel Island development
in the City of Charleston.
Tourism
- -------
The tourism industry is an important and vital aspect of the regional
economy. Millions of tourists annually visit Charleston's downtown historic
district, surrounding areas, and uncrowded beaches. The economic impact of both
pleasure and business visitors is estimated at $2.3 billion annually, with
visitors spending an average of $126 per person per day. Tourism provides an
estimated 40,000 jobs for area residents.
Recreation & Education
- ----------------------
The Charleston region has an abundance of state, county and city parks and
several nature centers. Available outdoor activities include all water sports,
sunbathing, shelling, fishing, tennis and golf. The Low Country is filled with
museums, fine arts and performing arts festivals, antique shops, forts,
churches, beach resorts and golf courses. In addition, a wide variety of
cultural events, such as concerts, ballet, theater and opera performances, art
exhibits and museum displays take place throughout the year. Some of the
cultural events include the Low Country Oyster Festival in January, Flowertown
Festival in April, Spoleto Festival USA in May-June, Worldfest-Charleston
International Film Festival in November and Christmas in Charleston in December.
There are 4 public school districts in the Charleston region with an
enrollment of approximately 89,046 students with 132 schools and a pupil/teacher
ratio of 16:1. Berkeley County has 26,672 students in 35 schools with a
pupil/teacher ratio of 18:1. In addition, there are over 100 private and
parochial schools serving the region. College curriculum is available at seven
schools in the Charleston area, including Charleston Southern University, The
Citadel, University of Charleston, Johnson & Wales University, Medical
University of South Carolina, Trident Technical College, and Webster University.
<PAGE>
Area Description 20
Conclusion
- ----------
Most real estate submarkets in Charleston County continue to improve from
the last recession. The population and household figures grew at a strong rate
during the last decade, but are now growing at a slower rate of increase during
the current decade. Projections for the future suggest that this trend will
continue. The development that has occurred emanated from Charleston, North
Charleston and the Interstate 26 corridor. Other than this path of growth, the
county remains largely rural in nature, with the middle age segments of the
population becoming ever larger proportions of the total population. These
trends continue to be projected for the future.
The economic base of the area should broaden due to commitments to attract
clean, light industrial users. Additionally, the population will require more
supporting commercial, service and industrial development throughout the area.
Overall, the near-term future outlook for job growth is strong, except for the
military sector.
<PAGE>
Area Map
[MAP APPEARS HERE]
<PAGE>
22
NEIGHBORHOOD DESCRIPTION
- ------------------------
A neighborhood is defined as a portion of a larger community, or an entire
community, containing a homogeneous group of inhabitants, buildings, or business
enterprises.
Location
- --------
The two subject property is located on the west side of U.S. Highway 78,
approximately one and 1/2 miles northwest of the College Park Road and
Interstate 26 junction, in the City of Ladson in the northern portion of
Charleston County. The subject is approximately 16 miles north of downtown
Charleston. Except for Hanahan, Goose Creek and Moncks Corner, this area of the
county is largely rural in nature.
Within Ladson the majority of commercial uses are located in the vicinity
of College Park Road, Ladson Road and University Boulevard (U.S. Route 52/78) in
adjoining North Charleston.
Access
- ------
Access to the neighborhood is rated excellent. The property is accessible
to Interstate 26 via U.S. Highway 78 to the College Park exit, which is
approximately 1.5 miles to the southeast. The access to the property is good
from both directions, as U.S. Highway 78 is a heavily traveled, two-lane
roadway. Visibility is good in both directions along U.S. Highway 78.
Interstate 26 is the primary expressway providing north-south access to downtown
Charleston.
Neighborhood Characteristics
- ----------------------------
The focus of the commercial activity in the neighborhood has been along
U.S. Highway 78 near University Boulevard. In the immediate area of the subject
property, south of the subject property on the west side of Highway 78, there is
Exchange Club Fairhounds. Residential uses are interspersed. The areas north of
the subject property on either side of Highway 78 are developed with commercial
and residential uses. Ridgewood and Woodside Manor subdivisions are located
north of the subject and to the east is Tall Pines and College Park. Further
south in North Charleston, there is the Northwoods Mall and North Rivers Market.
The Charleston Air Force Base and Charleston International Airport are located
approximately 9 to 10 miles south of the subject. No new mobile home parks have
been constructed in the town over the past several years. Further, none are
being planned or currently under review by the city.
<PAGE>
23
NEIGHBORHOOD DESCRIPTION
- ------------------------
Summary and Conclusion
- ----------------------
The subject's location in terms of local amenities, shopping, recreational
and activity centers is rated average. The subject's proximity to the area's
major highways, and the excellent access to the subject's immediate area
provided by U.S. Highway 78 and nearby Interstate 26 are positive attributes of
the neighborhood. Being a suburban location in southeastern South Carolina
state, general real estate values have improved over the last three to four year
period for properties purchased during that period. Currently, the manufactured
housing community market is soft due to the downsizing in the military sector.
On the positive side, no new manufactured housing communities are in the
planning or development stages in the City of Ladson.
<PAGE>
Neighborhood Map
[MAP APPEARS HERE]
<PAGE>
25
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW
- ----------------------------------------------
The manufactured housing industry in the state of South Carolina has
matured over the past twenty years, as a direct result of the advancements in
manufactured housing construction techniques and the continued ability of
producers and dealers to make manufactured housing a relatively inexpensive
housing alternative. Over this period the industry has progressed from it's
original "trailer park" image, to the "mobile home park" and, finally, to its
present status as "a manufactured housing community." This most recent status
is only appropriate, as most manufactured homes are typically moved only once
during their economic lifetime; from the manufacturer's or dealer's lot to the
homesite.
According to the 1996 U.S. Housing Market Map, South Carolina ranked third
among states in the number of homes shipped in 1996. As shown in the table
below, increased in 1994, 1995 and 1996. The 1995 and 1996 statewide figures
show a continued upward trend, with significant increases over the 1994 sales.
<TABLE>
<CAPTION>
1993 to 1996 Manufactured Home Sales
=====================================
YEAR SHIPMENTS
-------------------------------------
<S> <C> <C>
1993 13,484
-------------------------------------
1994 15,326
-------------------------------------
1995 19,375
-------------------------------------
1996 22,445
=====================================
</TABLE>
Source: South Carolina Manufactured Housing Institute
Unlike some states, such as Florida, Arizona and California, the
manufactured housing market in South Carolina is not well defined. Little
statistical data is available and the housing is typically considered a lower
cost alternative to site built housing. According to the South Carolina
Manufactured Housing Institute, manufactured housing accounted for 26% of new
housing in the state in 1995. Approximately half of the shipments were to
privately owned land rather than a manufactured housing community.
Approximately 40% of the units shipped were doublewide units.
Rental Rates and Occupancy
- --------------------------
There is a wide range of rates in the marketplace, based on the location,
project condition, and utilities included in the rent. Generally speaking, a
standard pad ranges between $100.00 per month to $185.00 per month. In some
cases, premiums are also attached to double-wide pads, and these can run between
$20.00 to $25.00 per month above the
<PAGE>
26
Manufactured Housing Community Market Overview
standard pad pricing. Services included in the rental rate typically include
trash collection, with some rents including water and sewer. However, most parks
are separately metered. The subject rent ranges from $130.00 to $150.00 per
month, although there are two lots currently renting for $170.00. According to
the manager, the premium rent is based upon the size of the home. In addition,
the resident also pays $20.00 per month for water. Management has started to
schedule the installation of individual meters. According to management, there
are plans to roll back the base rent $20.00 and have the resident will pay their
own utilities. The local market supports the subject's rents; therefore, income
forecasts were based upon current rent levels minus $20.00 for water, sewer and
trash pick-up, or $110.00 to $130.00 per month. With the installation of the
individual meters, the overall reduction would total $40.00.
The current owner last increased the rents at the subject by $10.00 per
space per month effective May 1998. The property manager was not aware of any
pending rent increase. Rents of all-age communities have stabilized as a result
of the weak military sector. Supply has been static for several years and no
large increases are likely until development becomes financially feasible.
Community owners in this region continue to separately meter water and sewer as
a means of increasing profitability in an era of generally stable rents.
The subject was originally developed as an all-age manufactured housing
community with 204 spaces, however, as manufactured homes increased in size,
several lots were overlapped. According to management, there are 19 doubleuse
lots and several lots that are too small to place a home. The community has
only one vacancy out of 155 spaces. The communities that are most competitive
with the subject have been detailed on the following pages. The comparable
communities are fully developed and are currently between 94.2% and 98.5%
occupied. The physical occupancy at the subject is currently 99.4%, with an
economic occupancy rate of 98.7%.
Summary
- -------
The manufactured housing market is fragmented in the state of South
Carolina. However, shipments remained fairly constant in the early 1990's, but
are now beginning to increase. Manufactured housing provides a lower cost-
housing alternative to site built homes and a sense of community to residents.
The subject's rents are in line with the market; however, the overall market has
been adversely affected by military downsizing, which has caused vacancy
problems for the marginal communities.
<PAGE>
27
Rent Comparable Number 1
Plantation Acres Mobile Home Park
9494 Highway 78
Ladson, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of Highway 78, North of Ladson Road.
Number of Spaces: 200
Property Description: All age manufactured housing community built in the
1970's.
Monthly Rental Rates: $160.00 to $185.00
Occupancy: 95.0% (190 of 200)
Services Included in Rates: Water, sewer and trash collection
Amenities: Pool (shared with adjoining campground) and playground.
Verification/Date: Community Manager on April 5, 1999.
Comments: 2 months free rent is being offered. Community is
located adjacent to KOA RV Campsite. No concessions
are offered. The property is a good quality community
in rural location.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
</TABLE>
<PAGE>
28
Rent Comparable Number 2
Creekside Mobile Home Park
1925 Bacons Bridge Road
Summerville, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of Bacons Bridge Road, West of Dorchester
Road.
Number of Spaces: 325
Property Description: All age manufactured housing community built in 1980's.
Monthly Rental Rates: $175.00 (as of June 1, 1999)
Occupancy: 94.2% (306/325)
Services Included in Rates: Trash collection.
Amenities: Pool, tennis court, basketball and playground.
Verification/Date: Community Manager on April 7, 1999.
Comments: Property is located approximately 4 miles west of the
subject. Rent is to increase from $165.00 to $175.00 as
of June 1, 1999.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
</TABLE>
<PAGE>
29
Rent Comparable Number 3
Sineath Estates
9160 Wisteria Street
Ladson, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: South side of Wisteria Road, East of Highway 78.
Number of Spaces: 130
Property Description: All age manufactured housing community.
Monthly Rental Rates: $145.00 to $150.00
Occupancy: 98.5% (128/130)
Services Included in Rates: Trash collection.
Amenities: Pool and playground.
Verification/Date: Community Manager on April 7, 1999.
Comments: No recent rent increase. Offering one month free rent.
Average quality community located approximately 1 mile
north of subject.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
- ---------------------------------------------------------------------------------------------------=================
<S> <C> <C> <C> <C> <C> <C>
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
</TABLE>
<PAGE>
30
Rent Comparable Number 4
Summercreek
1147 College Park Road
Summerville, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of College Park Road, 1/2 Mile South of
Old Summerville Road
Number of Spaces: 148
Property Description: All age manufactured housing community built in
late 1970's.
Monthly Rental Rates: $100.00 to $125.00
Occupancy: 97.3% (144/148)
Services Included in Rates: Trash collection.
Amenities: Exercise room and sauna
Verification/Date: Community Manager on April 10, 1999.
Comments: The property is in fair to poor condition, but has
a inferior location compared to the subject.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Inferior Inferior Similar Inferior Superior Inferior Inferior
====================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENTAL COMPARABLE CHART
====================================================================================================================================
NO. OF MONTHLY
SPACES/% RENTAL RATES
NO. NAME/LOCATION occ. SERVICES AMENITIES
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 Plantation Acres Mobile Home Park 190/200 $160.00 to Water, sewer and Clubhouse and pool
9494 Highway 78 95% $185.00 trash collection.
Ladson, Charleston County, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
2 Creekside Mobile Home Park 306/325 $175.00 Trash Collection Pool, tennis court, 2
1925 Bacons Bridge Road 94.2% playgrounds and
Summerville, Charleston County, South Carolina basketball court.
- ------------------------------------------------------------------------------------------------------------------------------------
3 Sineath Estates 128/130 $145.00 to Trash Collection Pool and playground
9160 Wisteria Street 98.5% $150.00
Ladson, Charleston County, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
4 Summercreek 144/148 $100.00 to Trash Collection Exercise room and sauna
1147 College Park Road 97.3% $125.00
Summerville, Charleston County, South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
Subj. The Pines 154/155 $150.00 to Water, sewer and Playground
9919 Highway 78 99.4% $170.00 trash collection
Ladson, Charleston County, South Carolina
====================================================================================================================================
</TABLE>
<PAGE>
Rent Comparable Location Map
[MAP APPEARS HERE]
<PAGE>
33
LAND AND SITE IMPROVEMENTS
- --------------------------
The subject site is an irregularly shaped parcel of land containing
approximately 24.1 acres, or approximately 1,049,796 square feet of gross area.
The tract is level and at street grade. Drainage of the tract appears adequate.
No adverse soil or subsoil conditions were noted during the physical inspection
of the site.
Utility services connected and in service on the date of valuation include
the following:
Sanitary Sewer: Charleston County
--------------
Storm Sewer: Natural run-off
-----------
Water: Charleston County
-----
Electric: South Carolina Electric and Gas (SCE&G)
--------
Gas: SGE&G
---
Cable Television: Comcast
----------------
Trash Collection: Suburban Disposal
----------------
Ingress to and egress from the subject community is via U.S. Highway 78.
Access is rated excellent. Roadways that are laid-out in a grid pattern to
maximize the natural features of the terrain access the individual lots, in the
community. Roadway improvements include:
Street-bed: U.S. Highway 78 is an asphalt paved, two-lane thoroughfare.
----------
The streets in the community are asphalt-paved roadways and
are 20 to 30-foot wide right-of-ways.
Curb: U.S. Highway 78 has neither curbs nor gutters. The subject
----
has no concrete curbs or gutters.
Sidewalk: There are no sidewalks along U.S. Highway 78. There are
--------
none in the community.
<PAGE>
34
Land and Site Improvements
Streetlights: U.S. Highway 78 has no overhead streetlights in this
------------
vicinity. There are pole-mounted lights throughout the
community.
Landscaping: Grass and other planted areas are found throughout the site.
-----------
Some lots have trees.
Arrangements between the subject ownership and municipal and/or public
utility authorities for the connection of telephone and electricity are presumed
to exist, although neither a plan specifically identifying the location of all
underground lines nor contracts providing for their installation were provided
to us.
Encumbrances
- ------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. Additionally, there are no rent controls
in effect in Charleston county.
Easements
- ---------
Standard utility easements for electricity and telephone are assumed to
exist. No other easements were identified to us.
Encroachments
- -------------
There were no obvious encroachments observed during the inspection of the
subject and neighboring properties.
Environmental
- -------------
There were no obvious areas of contamination on or about the subject site.
We are not qualified in environmental hazards and recommend an audit be
performed.
Functional Utility
- ------------------
The homesite parcel, which is slightly irregular in shape and contains
approximately 24.1 acres, is large enough to accommodate building improvements
and roadways as well recreational amenities and green areas. The site is
considered functional for various residential development scenarios. The
current development as a 155-space manufactured housing community with an
overall density of approximately 6.43 spaces per acre, is consistent with modern
standards. Therefore, the site is considered functional for use as a
manufactured housing community.
<PAGE>
[MAP APPEARS HERE]
<PAGE>
36
IMPROVEMENT DESCRIPTION
- -----------------------
Although originally configured for 204 spaces, the subject is currently
improved with 155 manufactured housing community pads that are usable. According
to the on-site manager there are 19 doubleuse lots and additional 30 lots that
are unusable. Although she indicated that 4 or 5 lots could be added to the rent
roll if some modifications were made to the existing lots. Other than a
playground there are no on-site amenities. The one-story office building
contains approximately 400 square feet, and there are 21 (8 x 8) and (8 x 10)
storage sheds that are rented to residents.
The community streets are asphalt paved and 20 to 30 feet wide. The
streets were observed to be in average to poor condition.
Age and Condition
- -----------------
The subject community and site improvements were originally built in 1972.
The community is approximately 27 years old. The asphalt streets are showing
signs of deferred maintenance, however, overall maintenance levels in the
community are rated good.
<PAGE>
THE PINES
MANUFACTURED HOME COMMUNITY
A great community for people who want to enjoy life.
----------------------------------------------------------------------
[MAP APPEARS HERE]
----------------------------------------------------------------------
Single-section and multi-section homesites and
beautiful late model resale homes available.
. Playground . Spacious Homesites
. On-site Professional . Planned Community
Management Activities
[LOGO OF CHATEAU APPEARS HERE]
9919 Highway 78 . Ladson, South Carolina 29456 . (803) 873-6872
<PAGE>
38
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Charleston County, South Carolina is in the name of Windsor Properties.
According to the property owner, the subject is not currently listed for sale or
the subject of a pending contract.
OCCUPANCY
- ---------
The subject was originally developed with 204 spaces; however, according to
the on-site manager, only 155 spaces are usable. There are currently 154 spaces
occupied including 2 spaces occupied by the manager and a part time maintenance
person. There is currently one space not producing rent. We have incorporated
no income attributable to the sale of homes in our analysis.
Rental rates at the community are $130.00 per month for a regular lot.
Approximately $10.00 to $20.00 is added to the base or regular lot price for a
mulitsectional site. Currently an additional $20.00 in rent is charged for water
and sewer, however, management is arranging for the residents to pay for their
own water and sewer as soon as individual meters are installed. According to
the rent roll, there are 32 sites that rent for $150.00 per month. The last rent
increases occurred in May 1998 and was $10.00 per month. Management is starting
to take bids on installing individual meters. When installed, the tenant would
be responsible for his or her own water and sewer bill and the base rent would
be reduced to $110.00 to $130.00 per month.
<PAGE>
39
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The subject property is located in the City of Ladson and is zoned "RT"
Mobile Home Park. According to the planning department of Charleston County,
the use as a manufactured housing community is permitted as a legal conforming
use in this district. The "RT" district currently specifies a minimum lot depth
of 50 feet, and a front setback of 25 feet.
Flood Hazard
- ------------
Charleston County is a participant in the Federal Emergency Management
Agency (FEMA) flood map system. According to Flood Map Community Number 455413,
Panel 0125F, dated September 2, 1993, the property is located in a FEMA
designated flood zone "C".
Environmental
- -------------
We observed no obvious areas of contamination on or about the site, but
recommend an environmental audit be performed.
<PAGE>
40
ASSESSMENT AND TAXES
- --------------------
The subject property is identified in the Charleston County records as
parcel number 3881000068, and owned by Windsor Park Properties. According to
records at the Assessor's office, the current (1999) appraised value of the
property is $650,400. The last appraisal was 1996 and the total tax liability
for 1998 was $7,832. According to the Tax Collector's Office, all taxes are
current.
Regarding assessing practice and commercial real property is assessed at 6%
of market values. Tangible personal property is assessed at 10.5%, but taxed at
the real estate tax rate. There is no intangible personal property tax in South
Carolina. According to the Assessor's Office, a reassessment is not planned
until the year 2000. Further, we are informed that properties are not
reassessed as a result of a property sale.
Taxes are based on a January 1 calendar year, and are due without discount
by the January 15th of the following year. Taxes paid after January 15th
through February 1st have a 3% penalty. Taxes paid after February 1st through
March 16th have a 10% penalty. Taxes paid after March 16th have a 15% penalty.
Historically, the tax rates have varied since 1995. The table below
illustrates the tax liability for the subject property since 1996.
<TABLE>
<CAPTION>
Year Total Taxes
==================================================
<S> <C>
1998 $7,832.12
==================================================
1997 $7,613.58
==================================================
1996 $7,699.44
==================================================
</TABLE>
Historically the taxes have varied, but we would expect some increase in
future years as the demand for governmental service increases. We have forecast
stabilized taxes at $7,832 reflective of the 1998 amount.
<PAGE>
41
MARKETABILITY AND EXPOSURE PERIOD
- ---------------------------------
The subject property as discussed in the Neighborhood Analysis and
Manufactured Housing Community Market Overview sections of this report is
competitive and marketable with other properties in the marketplace.
There are typically four classes of purchasers attracted to this type of
development. The first are the tenants/residents of the community, purchasing on
a cooperative or condominium basis to reduce rental rates. The second class of
purchaser would be the single owner/operator who purchases a community as an
income and investment vehicle. Third would be the "traditional" manufactured
housing community owner/developer who views the community as a safe, long-term
investment. Finally, there is the institutional investor or syndicate (REIT)
which owns several large manufactured housing communities on a
statewide/nationwide basis.
Due to the stability of manufactured housing community investments, the
REIT investors have been a major player in the marketplace. In 1994, REIT
investors bid down capitalization rates for new, large communities. However,
after the initial splash, REIT investments have slackened as property owners
have placed premium prices on their properties. Resident groups have also
increased demand for manufactured housing community investments. According to
our banking sources, resident groups are able to borrow money at debt coverage
ratios as low as 1.0 to 1. The banks view resident group loans as good quality
with minimum risk. Typical payback periods range between five and eight years.
All age communities, like the subject, typically are not candidates for resident
purchase.
Discussions with large institutional manufactured housing community
investor representatives and local area realtors, indicated that "properly
priced", stable, well kept manufactured housing communities should "be under
contract" within a six to eight month period in today's market. However, our
research has also revealed that very few communities are "listed" for sale and
that for the most part brokers solicit owners for buyers.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.50% to 9.50% overall
capitalization rate requirement for senior communities. All age communities
typically reflect higher capitalization rates due to a less stable occupancy
base. Pricing is established by processing gross income, reduced by a 2% to 3%
vacancy and credit loss factor with expenses of 35% of effective gross income.
An additional capital charge of 3% to 5%, based on overall condition, is
deducted to arrive at a net operating income (NOI). This criteria is generally
the most restrictive pricing, as other investors will tend to accept lower
expense ratios (30%), no capital charges and a lower overall rate.
In early late summer 1998, commercial mortgage backed securities (CMBS)
lenders restructured their pricing for long term fixed rate loans. These loans
had historically been priced
<PAGE>
Marketability and Exposure Period 42
based on an interest rate spread above Treasury Securities. The secondary market
for these loans became illiquid and lenders were unable to sell the loans
profitably. Consequently, although interest rates on Treasuries have fallen, the
interest rates on securitized loans have increased. Our discussions with
national lenders indicate that long term, fixed rate loans are still available,
but at a minimum interest rate of 7.25% to 8.0%.
Interest rates are low and financial institutions are again willing to lend
money for existing real estate projects with good occupancies. The presence of
life insurance companiesand conduit programs have made the financing of
manufactured housing communities a very competitive business. The insurance
companies and conduit programs will lend on a non-recourse basis, with terms
ranging from 10 to 20 years.
On the basis of the preceding analysis, in our opinion, the exposure period
for the subject would be within the range indicated by the industry
participants, and we estimate an exposure period of six months.
<PAGE>
VALUATION SECTION
<PAGE>
44
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as:
"The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible and which results in the highest value."/2/
The highest and best use of a specific parcel of land does not depend on
subjective analysis by the property owner, the developer, or the appraiser;
rather, the competitive forces within the market where the property is located
shape highest and best use. Therefore, the analysis and interpretation of
highest and best use is an economic study of market forces focused on the
subject property.
Market forces also shape market value. The general data that is collected
and analyzed to estimate property value is also used to formulate an opinion of
the property's highest and best use as of the effective date of the appraisal.
In all valuation assignments, value estimates are based on use. The highest and
best use of a property to be appraised provides the foundation for a thorough
investigation of the competitive positions of buyers and sellers in the
marketplace. Consequently, highest and best use can be described as the
foundation on which market value rests. Without interaction in the marketplace,
highest and best use would not exist and market value estimations would be
impossible.
When potential buyers contemplate purchasing real estate for personal use
or occupancy, their principal motivations are perceived benefits of enhanced
enjoyment, prestige, and privacy. Purchasers of investment property are
frequently motivated by the promise of net income or capital accumulation and
certain tax advantages. These investors are more directly concerned with
feasibility, an indication that a project has a reasonable likelihood of
satisfying their specific objectives. These objectives may include assured
occupancy, establishing operating costs at a reasonable and acceptable level,
and potential property appreciation.
- -------------------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Edition Chicago:
----------------------------
The Appraisal Institute, 1992, page 275.
<PAGE>
Highest and Best Use 45
Analysis of the highest and best use of: 1) the land as though vacant, and
2) the property as improved, is essential in the valuation process. Through
highest and best use analysis, we attempt to interpret the market forces that
influence the subject property and identify the use on which the final value
estimate will be based. This determination is based on the analysis and
interpretation of prevailing market conditions, the trends affecting the buyers
and sellers in the marketplace, and the existing use of the subject property.
Analyzing the highest and best use of the land as though vacant serves two
functions. First, it helps identify comparable properties that should have
highest and best uses of the land as though vacant, similar to that of the
subject property. The second reason is to identify the use that would produce
maximum income to the land after property income is allocated to the
improvements. In the Cost Approach and some income capitalization techniques, a
separate value estimate of the land is required. Estimating the land's highest
and best use as though vacant becomes the necessary part of deriving a land
value estimate.
There are also reasons to analyze the highest and best use of the property
as improved. The first is to help identify comparable properties that should
have the same or similar highest and best uses as the improved subject property.
The second is to decide whether the improvements should be demolished, renovated
or retained in their present condition. They should be retained as long as they
have some marketable value and the return from the property exceeds the return
that would be realized by a new use, after deducting the costs of demolishing
the old building and constructing a new one. Identification of the existing
property's most profitable use is crucial to this determination.
The highest and best use of both the land as though vacant and the property
as improved must meet four criteria. The highest and best use must be:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
These criteria are usually considered sequentially; a use may be
financially feasible, but this is irrelevant if it is physically impossible or
legally prohibited. Only when there is a reasonable possibility that one of the
prior, unacceptable conditions can be changed is it appropriate to proceed with
the analysis. If, for example, current zoning does not permit a potential
highest and best use, but there is a possibility that the zoning can be changed,
the proposed use can be considered on that basis.
<PAGE>
Highest and Best Use 46
Legally Permissible
- -------------------
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such a use and it must return
to the land the highest net return for the longest period of time.
Legal restrictions, as they apply to the subject property, are of two
types, i.e., private restrictions (deed restrictions, easements, etc.) and
public restrictions (zoning, building codes, environmental regulations and
historic district controls, etc.). These latter restrictions must be
investigated, to the best of our ability, because they may preclude many
potential highest and best uses. No information regarding private restrictions
affecting the subject was uncovered in our research or provided by the client.
It is assumed that only common restriction, i.e., utility easements, etc. are
in-place which would not be of any significant consequence to the development of
the site.
If the highest and best use of the site or property is not allowed under
current zoning, but there is a reasonable probability that a change in zoning
could be obtained due to shifting economic and social patterns, these conditions
can be considered determining highest and best use. However, we must fully
disclose all pertinent factors relating to a possible zoning change, including
that the change will not be granted. We must also be sensitive to potential
public reaction to proposed development projects since adverse reactions from
local residents and the general public have stopped many real estate
developments. The existing and/or projected use should be harmonious with the
nature and condition of existing neighborhood development.
The subject is located in an area designated by the Charleston County
Zoning Ordinance as an "RT", Mobile Home Park District. The property, as
constructed, is a special use of the land. The current use of the subject meets
the legally permissible criteria of this analysis.
Physically Possible
- -------------------
The second constraint imposed on the possible use of the property is that
dictated by the physical aspects of the site itself. Size, shape and terrain of
the parcel of land affect the uses to which it can be developed. The utility of
the parcel may depend on its frontage and depth. Also considered are the
capacity and availability of public utilities. When a site's topography or
subsoil conditions make development restrictive or costly, its potential use is
adversely affected. In general, the larger the site, the greater the potential
for achieving economies of scale or flexibility in development.
The highest and best use of a property as improved also depends on physical
considerations such as size, design and condition. The condition of the
property and its ability
<PAGE>
Highest and Best Use 47
to continue in its current use may be relevant. If the property should be
converted to another use, the cost of conversion must be analyzed in light of
the returns to be generated by the new use. Obviously, the costs of conversion
depend on the property's existing physical condition.
The primary subject site is irregular in shape and contains a total area of
24.1 acres. The site is generally level and has access from U.S. Highway 78. The
size and shape of the site does not restrict maximum flexibility and
development, and the subject's development has made an adequate use of the site
as indicated by its current density of approximately 6.43 spaces per acre.
Financially Feasible
- --------------------
After determining which uses are physically possible and legally
permissible, we have eliminated many uses from consideration. Then the uses
that meet the first two criteria are analyzed further to determine which are
likely to produce an income, or return, equal to or greater than the amount
needed to satisfy operating expenses, financial obligations and capital
amortization. All uses that are expected to produce a positive return are
regarded as financially feasible.
To determine financial feasibility, we then estimate the future gross
income that can be expected from each logical highest and best use. Vacancy and
collection losses and operating expenses are then subtracted from each gross
income to obtain the likely net operating income (NOI) from each use. A rate of
return on the invested capital can then be calculated for each use. If the net
revenue capable of being generated is enough to satisfy the required rate of
return on investment and provide a return on the land, the use is financially
feasible within some price limit.
Maximally Productive
- --------------------
Of the financially feasible uses, the use that produces the highest price,
or value, consistent with the rate of return warranted by the market for that
use is the highest and best use. To determine the highest and best use of land
as though vacant, the same rate of return is often used to capitalize income
streams from different uses into their respective values. This procedure is
appropriate if all competing uses have similar risk characteristics. If not,
differing rates of return would be required. The use that produces the highest
value is the highest and best use.
To test the highest and best use of land as though vacant or a property as
improved, an appraiser analyzes all logical, feasible alternatives. The market
usually limits the number of property uses to a few logical choices. Each
alternative use must first meet the tests of physical possibility and legal
permissibility. The uses that meet the first two tests are then analyzed to
ascertain how many financially feasible alternatives must be considered.
<PAGE>
Highest and Best Use 48
An appraiser must exercise caution in performing market analysis to support
an estimate of highest and best use. Although a given site may be particularly
well suited for a specific use, there may be a number of other sites that are
also well suited, and some may be better suited. Therefore, the appraiser must
test the highest and best conclusion to ensure that existing and potential
competition from other sites has been fully recognized.
Highest and Best Use - Vacant Land
- ----------------------------------
In determining the highest and best use of the site as vacant, the most
restrictive constraint is the legal use of the site. In the Zoning section of
this appraisal, it was noted that manufactured housing community development of
the property is a legal, specific use of the site.
We have also noted that there are a number of competitive manufactured
housing communities in the subject's neighborhood. Due to the non-availability
of space for immediate manufactured housing community development fees and a
lack of financing for speculative projects, it is unlikely that there will be
speculative manufactured housing community development in the foreseeable
future.
Current trends in the manufactured housing sales would preclude the
development of a manufactured housing community until such time as the market
has improved. In our opinion, the highest and best use of the site, as if
vacant and available for development, would be to hold the property for future
sale as the market trends might predicate.
Highest and Best Use - As Improved
- ----------------------------------
The site is currently improved with a 155-space all age manufactured
housing community. Although the site was originally developed with 204 spaces,
larger homes have infringed on adjacent lots rendering several lots unusable.
Because of the 50-foot minimum lot width required in a "RT" district and the
increasing size of manufactured homes, the optimum number of lots would appear
to be 155. In addition, the present density of 6.43 units per acre is in line
with modern standards. The present use of the site is a legal conforming use
under the current zoning code. The subject property has been in existence as a
manufactured housing community since 1972.
The site has access via U.S. Highway 78. The use of the site is physically
possible. Some demand for manufactured housing in this area is evident, as the
subject is fully developed and has a high level of occupancy. As evidenced in
the Income Capitalization Approach, the property is capable of providing an
acceptable return to an owner, demonstrating the financial feasibility of the
subject property. The property, as currently improved, is physically possible,
legally permissible, financially feasible and maximally productive. Therefore,
in our opinion, the highest and best use of the property as improved is its
current use as a 155-space all age manufactured housing community.
<PAGE>
49
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject property, we have considered the
positive and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Direct Sales Comparison Approach produces an estimate of value through a
comparison of similar properties, which have been transferred in the local
market.
In the analysis of a stabilized manufactured housing community, investors
are primarily concerned with cash flow to service any debt and the equity
positions. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of homes by offering
low space rental rates, an investor would not be willing to compensate a seller
for any more than the income to be received. The subject property is a fully
developed community, with no expansion possibilities; therefore, a potential
investor would be primarily interested in the cash flow and equity return. Due
to the subjectivity of depreciation estimates and the lack of comparable land
sales, we have omitted the cost approach.
A number of positive and negative factors were believed to affect the
overall value of the subject property.
On the positive side, the following were considered.
1. The community rental rate is somewhat below the market levels.
2. The community has a high level of occupancy.
Partially offsetting the positive influences are negative factors among
which the following were considered the most pertinent:
1. Concessions have been offered in the past at the subject property.
With the above factors in mind, the Income Capitalization and Sales
Comparison Approaches will now be discussed in detail on the following pages.
<PAGE>
50
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is of course an initial goal.
Tempered by capital gains considerations and the potential for recapture of book
depreciation accruals, a seller is often forced to consider a negotiated price
that may include such concessions as interim or permanent financing. Dictated
by market forces, the rate, term, and amount of financing may be favorable,
neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms. Within the goal of price minimization purchasers seek:
1. Cash flow relative to capital investment measured either on a pre-income
tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
property, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property.
<PAGE>
Income Capitalization Approach 51
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the property. The estimate of
net operating income is derived through the process of estimating the total
potential gross income (PGI), from lot rentals, less any vacancy and credit
loss, added to the estimate of income from other sources, producing an effective
gross income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
In our estimate of the stabilized net operating income, we have considered
the subject's current rent and expense levels and historical trends, together
with current rent and expense levels at manufactured housing communities similar
to the subject. The subject's historical income and expenses for 1997 and 1998
have been presented, in the table on the following page. It should be noted
that we have grouped a number of expense items for reporting purposes.
Although the expenses do not appear unreasonable, we have also relied on
market comparables. Current income and expense information on three comparable
manufactured housing communities has also been presented in this section.
The data on the tables has been arrayed to display the "percent of total
income" and "dollar per space" figures, consistent with industry reporting
practices. We have combined some of the owners expense categories for purposes
of comparison.
Our analysis of each component of income, vacancy and credit loss and
expenses follows these tables, and has been summarized in the Reconstructed
Operating Statement found on Page 62.
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
The Pines Manufactured Housing Summary of Historical Operations
Pct. of $ Per Pct. of $ Per
1997 Income Space 1998 Income Space
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Rents $216,242 84.32% $1,395.11 $236.981 84.35% $1,528.91
Utility Income 29,159 11.37% $ 188.12 35,580 12.66% $ 229.55
Miscellaneous/Other 11,063 4.31% $ 71.37 8,382 2.98% 54.08
---------------------------------------------------------------------------------------
Total Income $256,464 100.00% $1,654.61 $280,943 100.00% $1,812.54
Expenses:
Insurance 5,700 2.22% 36.77 2,355 0.84% 15.19
Office 35,691 13.92% 230.26 26,335 9.37% 169.90
Maintenance & Supplies 24,663 9.62% 159.12 17,083 6.08% 110.21
Management Expense 12,665 4.94% 81.71 13,612 4.85% 87.82
Wages & Benefits 36,977 14.42% 238.56 44,872 15.97% 289.50
Property Taxes 7,020 2.74% 45.29 7,516 2.68% 48.49
Utilities 149,031 58.11% 961.49 134,882 48.01% 870.21
---------------------------------------------------------------------------------------
Total Expenses $271,747 105.96% $1,753.21 $246,655 87.80% $1,591.32
Net Operating Income -$ 15,283 -5.96% -$ 98.60 $ 34,288 12.20% $ 221.21
=======================================================================================================================
</TABLE>
<PAGE>
53
Income Capitalization Approach
Income Analysis
- ---------------
The general practice in the local market is to charge a base lot rent on a
monthly basis. As previously discussed in the Manufactured Housing Community
Market Overview section of this report, this rate at the subject is $110.00 to
$130.00 after reducing the rent $20.00 per month. With the reduction in rent,
the resident is responsible for his or her own water and sewer service. The
premium is charged for 32 large lots, referred to in the rental roll as
"doubleuse" lots.
The base lot rate generally includes no services. Base lot rents typically
generate between 90% and 99% of the total income in a manufactured housing
community. Based on the market range, we are of the opinion that the subject
has a reasonable rent structure within market levels.
Potential Gross Income
- ----------------------
As any potential purchaser would incorporate a one-year forecast of
potential gross income at the existing rent levels, our analysis must, and has,
also accounted for this. In our forecast of total rental income, we have
projected 12 months at the current rent levels, based on the current rent roll.
The total potential gross income from lot rentals is $212,280.
Vacancy and Credit Loss
- -----------------------
Vacancy and credit loss is typically a very small percentage in an
established community, due primarily to the high cost of relocating homes. The
current occupancy at the subject property is 99.3%. All age communities
typically have a more transient occupancy than do senior communities.
Additionally, the subject property has several lots that are considered too
small to lease. As indicated in the Manufactured Housing Overview section of
this report, the subject currently has 154 lots occupied and one vacancy for a
total of 155. Although there are additional lots on the rent roll, management is
not optimistic about leasing them due to the limited size and configuration of
the space. The estimated stabilized vacancy and credit loss at 5.0% to account
for both physical and economic vacancy, and credit loss.
Total vacancy and credit loss has been estimated to be $10,614. The
effective gross income from rentals is estimated to be $201,666.
Utility Income
- --------------
Charleston County provides the community water and sewer, and a private vendor
picks up the trash. The landlord currently bills each resident $20.00 per month
for water. Each site will be individually metered and either billed by the
county or management within the next few months. In the past, the community
paid for the water, sewer and trash pickup.
<PAGE>
Income Capitalization Approach
54
Water income amounted to $188.12 per space in 1997 and $229.55 in 1998. As
suggested by management, we have reduced the rent eliminated the utility income.
Other Income
- ------------
Historically the subject has reported miscellaneous income, ranging from
$54.08 per space in 1998 to $71.37 in 1997. This category includes late fees,
bad check charges and other miscellaneous income items. The owner reported that
the late fee charge has been recently increased and a strict policy by
management is in force. We have weighed both the 1997 amount and 1998 amount
equally to estimate miscellaneous income at $60.00 per space or $9,300 per year.
Effective Gross Income
- ----------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated income losses due to any tenant changes. Our estimate of the
stabilized effective gross income of $210,966 is detailed below.
<TABLE>
<CAPTION>
============================================================================================
The Pines Manufactured Housing Community
Effective Gross Income
============================================================================================
Gross Potential Rental
Income:
Monthly Monthly
Spaces Rent Total Annualized
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
123 $110.00 13,530 162,360
32 $130.00 4,160 49,920
- -------------------------------------------------------------------------------------------
155 $ 17,090 $ 212,280
Less:
Vacancy & Credit Loss 5.0% (10,614)
=================
Effective Gross Income $ 201,666
From Lot Rentals
Utility Income $ -
Miscellaneous Income 9,300
=================
Effective Gross Income $ 210,966
============================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
55
Operating Expense Analysis
- --------------------------
The following discussion addresses each of the line item expenses for the
property. We have presented 1997 and 1998 amounts, together with the comparable
expense data, followed by our stabilized estimate of the expense.
The comparable expense information has been obtained from a number of
reliable sources and we have presented it in a summary form, on the following
page, to maintain confidentiality. The expense comparables range in size from
130 to 251 spaces. These communities have operations similar to the subject,
including connection to municipal or county utility systems.
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Manufactured Housing Community Comparable Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
Spaces 195 Income Space 130 Income Space 251 Income Space
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $304,839 97.35% $1,563.28 $341,763 99.44% $2,628.95 $375,664 99.57% $1,496.67
Miscellaneous/Other 8,301 2.65% 42.57 1,923 0.56% 14.79 1,619 0.43% 6.45
------------------------------------------------------------------------------------------------------------
Total Income $313,141 100.00% $1,605.85 $343,686 100.00% $2,643.74 $377,283 100.00% $1,503.12
Expenses:
Insurance $6,733 2.15% $34.53 $2,848 0.83% $21.91 $7,366 1.95% $29.35
Office/Administration 17,845 5.70% 91.51 9,264 2.70% 71.26 29,468 7.81% 117.40
Maintenance & Repairs 33,198 10.60% 170.24 21,766 6.33% 167.43 37,153 9.85% 148.02
Management Expense 3,641 1.16% 18.67 0 0.00% 0.00 5,300 1.40% 21.12
Wages & Benefits 33,590 10.73% 172.26 40,235 11.71% 309.50 29,113 7.72% 115.99
Property Taxes 39,211 12.52% 201.08 23,005 6.69% 176.96 50,000 13.25% 199.20
Utilities 16,996 5.43% 87.16 57,397 16.70% 441.52 24,181 6.41% 96.34
------------------------------------------------------------------------------------------------------------
Total Expenses $151,215 48.29% $775.46 $154,515 44.96% $1,188.58 $182,581 48.39% $727.42
Net Operating Income $161,926 51.71% $830.39 $189,171 55.04% $1,455.16 $194,702 51.61% $775.70
====================================================================================================================================
Spanish Trails Palmetto Sundance
</TABLE>
<PAGE>
57
Income Capitalization Approach
Insurance
- ---------
Insurance charges are typically property specific based on the location and
the amenity package. Historically, these charges have varied annually, ranging
from approximately $15.19 per space in 1998 to $36.77 per space in 1997. The
comparable expense data indicated a range from $21.91 to $34.53 per space. We
have placed emphasis on the historical amounts, supported by the comparables.
We have used $25.00 per space in our estimate of this expense. This is equal to
$3,875 annually and represents approximately 1.84% of the estimated effective
gross income.
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $5,700 $2,355 $6,733 $2,848 $7,366 $3,875
- ---------------------------------------------------------------------------------------------
% EGI 2.22% 0.84% 2.15% 0.83% 1.95% 1.84%
- ---------------------------------------------------------------------------------------------
$/Space $36.77 $15.19 $34.53 $21.91 $29.35 $25.00
=============================================================================================
</TABLE>
Office/Administration
- ---------------------
This expense category is also project specific due to varying
classifications of expense categories. We have attempted to include like items
in this category for both the subject and the expense comparables. For the
subject, this category includes office expense, supplies, licenses, dues,
subscriptions, professional fees, postage, advertising and telephone.
Historically, this expense has ranged from $169.90 per space in 1998 to $230.26
per space in 1997. The expense comparables indicated a range for this category
from $71.26 to $117.40 per space. We have relied primarily on the historical
data, with consideration of the comparables. We have estimated the
administrative/office expense at $140.00 per space or $21,700 per year. This
estimate is equal the equivalent of 10.29% of the effective gross income
estimate.
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $36,691 $26,335 $17,845 $9,264 $29,468 $21,700
- ---------------------------------------------------------------------------------------------
% EGI 13.92% 9.37% 5.70% 2.70% 7.81% 10.29%
- ---------------------------------------------------------------------------------------------
$/Space $230.26 $169.90 $ 91.51 $71.26 $117.40 $140.00
=============================================================================================
</TABLE>
<PAGE>
58
Income Capitalization Approach
Maintenance and Supplies
- ------------------------
These expenses are project specific based on the age and condition of the
property. Many properties expense capital items rather than capitalizing them,
which results in abnormal spikes in the expense amounts in certain years.
Historically, maintenance and repair expenses have ranged from $110.21 per
space in 1998 to $159.12 in 1997. We observed the community to be in average
condition. As the community continues to age additional maintenance efforts will
be necessary. The expense comparables indicate a wide range of expense in this
category from $148.02 per space to $170.24 per space. Our stabilized estimate
of this expense is $120.00 per space or $18,600 annually, based primarily on the
historical data. This estimate is equal to approximately 8.82% percent of the
estimated effective gross income.
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $24,663 $17,083 $33,198 $21,766 $37,153 $18,600
- ---------------------------------------------------------------------------------------------
% EGI 9.62% 6.08% 10.60% 6.33% 9.85% 8.82%
- ---------------------------------------------------------------------------------------------
$/Space $159.12 $110.21 $170.24 $167.43 $148.02 $120.00
=============================================================================================
</TABLE>
Management Fee
- --------------
Management fees are charged at two of the expense comparables and were
equal to 1.16% and 1.40%. The subject management fees ranged from 4.85% in 1998
to 4.94% in 1997. The market range for management fees was found to range from
approximately 3.0% to 5.0% of effective gross income.
We have estimated a fee of 5.0% of effective gross income, considered
adequate for the management of a property of this size, in this location.
Applying this percentage to the effective gross income estimate produces an
annual amount of $10,548 or $68.05 per space per year.
<PAGE>
59
Income Capitalization Approach
Wages and Benefits
- ------------------
This expense includes all of the costs associated with the on-site staff.
These costs including payroll, payroll and unemployment taxes and any health
insurance benefit package. At the subject, the expenses attributed to on-site
management and maintenance range from $238.56 per space for 1997 to $289.50 per
space in 1998. The on-site manager, assistant manager and part-time maintenance
man receive free rent as part of their compensation package.
The expense comparables indicate a wide range of expense in this category
from $115.99 per space to $309.50 per space. Our estimate of this expense has
been based primarily on the historical data. Our estimate of $290.00 per space,
is equal to $44,950 annually or 21.31% of the estimated effective gross income.
Our estimate appears to be within the market range regardless of the free rent.
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $36,977 $44,872 $33,590 $40,235 $29,113 $44,950
- ---------------------------------------------------------------------------------------------
% EGI 14.42% 15.97% 10.73% 11.71% 7.72% 21.31%
- ---------------------------------------------------------------------------------------------
$/Space $238.56 $289.50 $172.26 $309.50 $115.99 $290.00
=============================================================================================
</TABLE>
Property Taxes
- --------------
This category of expense represents the annual real estate tax liability of
the property. This category is project specific due to location and taxing
authority. We have not used the expense comparables for the estimate this
expense.
In our analysis we have relied on the analysis as presented and discussed
in the Assessment and Taxes section of this report. Our analysis indicated a
tax liability of $7,832. This estimate is equal to $50.53 per space or 3.71% of
the effective gross income estimate.
<PAGE>
60
Income Capitalization Approach
Utilities
- ---------
This category of expense is also project specific, due to the number and
type of services that are included in the rent. In this case, this line item
includes the costs of providing water and trash pick-up for the homesites and
water, sewer, electric and trash collection for the common areas of the
community. Only one of the expense comparables provides utilities in the base
rent. Typically, utilities are passed through to the tenant. The comparables,
as shown below, indicate a wide range from $87.16 to $441.52 per space. The
subject's utility expense appears to be excessively high when compared to other
communities. The manager indicated that there was no incentive for the
residents to conserve water. We have valued the subject property based upon the
assumption that resident will pay their own utilities. The cost of installing
the meters was deducted from our estimated value to arrive at an "as is" value.
We have estimated the utility expense at $100.00 per space or $15,500 annually.
This is equivalent to 7.35% of the effective gross income estimate.
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $149,031 $134,882 $16,996 $57,397 $24,181 $15,500
- ---------------------------------------------------------------------------------------------
% EGI 58.11% 48.01% 5.43% 16.70% 6.41% 7.35%
- ---------------------------------------------------------------------------------------------
$/Space $961.49 $870.21 $ 87.16 $441.52 $ 96.34 $100.00
=============================================================================================
</TABLE>
Reserves
- --------
Property owners do not typically account for reserves for capital
replacement. This category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
This item is typically accounted for either on a dollar per space ($20.00 to
$30.00) or a percentage (0.5% to 2.0%) of effective gross income. We have used
$30.00 per space per year, believed adequate to cover future capital costs.
This equates to $4,650 annually, equal to approximately 2.20% of the effective
gross income estimate.
<PAGE>
61
Income Capitalization Approach
Expense Summary
- ---------------
To summarize, we have estimated the stabilized total operating expenses for
the subject to be $127,655. This estimate is equal to 60.51% of the effective
gross income estimate or $823.58 per space annually.
Expense Summary
<TABLE>
<CAPTION>
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------
Total $ 271,747 $ 246,655 $151,215 $ 154,515 $182,581 $127,655
- ---------------------------------------------------------------------------------------------
% EGI 105.96% 87.80% 48.29% 44.96% 48.39% 60.51%
- ---------------------------------------------------------------------------------------------
$/Space $1,753.21 $1,591.32 $ 775.46 $1,188.58 $ 727.42 $823.58
=============================================================================================
</TABLE>
As shown on the preceding table, expenses have historically represented
between 87.80% (1998) and 105.96% (1997) of the Effective Gross Income,
reflective of the community filling. The expense comparables, as summarized
above, indicated a range from 44.96% (Comparable Number 2) and 48.39%
(Comparable Number 3).
Our estimate of total expenses is equal to 60.51% of the effective gross
income estimate. It should be noted that total expenses have been reduced due to
the resident picking ups all of the utilities, which was previously absorbed by
the community. Historical expenses did not include a reserve for capital
expenditures. Additionally, none of the expense comparables reflect a reserve
for capital expenditures, which has been included in our estimate. The
subject's historical expenses include concessions given to fill the community,
which are no longer applicable.
Our estimate of net operating income is $83,311. Our stabilized estimate
of income and expenses for the subject is presented on the following page.
<PAGE>
================================================================================
The Pines Manufactured Housing Community
Stabilized Operating Statement
<TABLE>
<CAPTION>
% of $ per
Amount EGI Space
================================================================================
<S> <C> <C> <C>
Total Effective Gross Income $ 210,966 100.00% $ 1,361.07
Expenses
Insurance $ 3,875 1.84% $ 25.00
Office 21,700 10.29% 140.00
Maintenance & Repairs 18,600 8.82% 120.00
Management Expense 10,548 5.00% 68.05
Wages & Benefits 44,950 21.31% 290.00
Property Taxes 7,832 3.71% 50.53
Utilities 15,500 7.35% 100.00
Reserves 4,650 2.20% 30.00
-----------------------------------
Total Expenses $ 127,655 60.51% $ 823.58
Net Operating Income $ 83,311 39.49% $ 537.49
================================================================================
</TABLE>
<PAGE>
63
Income Capitalization Approach
Capitalization Discussion
- -------------------------
Two alternative methods of valuation are employed in the Income Approach.
Direct capitalization is a method of converting net operating income into market
value, employing a "capitalization" rate based upon market perimeters. This
approach is particularly applicable to properties with a stable income stream,
or in cases where income, and consequently value, can be projected to increase
at a constant or stable rate.
An alternative valuation method is yield capitalization, which employs a
year-by-year projection of income and expenses, recognizing rent changes and the
cost of improvements as they occur. Yield capitalization, also known as
Discounted Cash Flow Analysis, is considered most appropriate in the valuation
of properties with uneven income streams. Since investors are unwilling to pay
for any upside from vacant units, fully developed manufactured housing
communities are typically valued by direct capitalization.
Direct Capitalization
- ---------------------
Direct capitalization of net operating income by an overall capitalization
rate extracted from the market provides an excellent indication of market value.
Purchasers of manufactured housing communities most often utilize this method.
This method is the most easily understood, closely related to the market, and
convincing if the overall rates abstracted from recent sales are from comparable
sale properties and accurate income data are available. Income data was
available from all of the comparable sale properties included in this report.
Market Data
- -----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 9.15% to 12.9%. Our
analysis of this data indicated a narrow range in overall capitalization rates,
which tend to be influenced by the size of the community and its age and
condition.
Comparable Sales
<TABLE>
<CAPTION>
============================================================
Sale Sale Date Overall
Number Capitalization Rate
- ------------------------------------------------------------
<S> <C> <C>
1 07/97 9.50%
- ------------------------------------------------------------
2 09/97 12.15%
- ------------------------------------------------------------
3 01/97 10.00%
- ------------------------------------------------------------
4 12/97 12.90%
============================================================
</TABLE>
Sale comparable one is a similar community compared to the subject in terms
of size and condition. The property is older, but has superior amenities. Sale
comparable two is slightly smaller and older, but in good condition. The
property is located just northwest of
<PAGE>
64
Income Capitalization Approach
Atlanta, but the average lot rent is higher. Sale comparable three is a larger
property and has a convenience store, but is in similar condition. The property
is located only a few miles south of the subject in North Charleston. Sale
comparable four is similar in age, but smaller in size. The property is in fair
condition and located in Moncks Corner in Berkeley County.
As discussed in the Marketability and Exposure Period section of this
report, our sources indicated that institutional investors required 8.5% to 9.5%
overall capitalization rates for projects in the 200 space range and were the
most restrictive in pricing due to stringent criteria. We also found that REIT
investors were bidding rates down even further. Our information revealed that
manufactured housing community cooperatives and associations would more likely
accept slightly lower overall rates, while the small investor would require a
slightly higher rate.
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 10.0% range. We have concluded a rate of 10.0%,
reflective of the subject's location and physical characteristics and the
current interest rate environment.
Debt Coverage Ratio Method
- --------------------------
As an alternative to market-derived overall capitalization rates, we have
developed an overall rate through the Debt Coverage Ratio analysis. The
parameters for this calculation are summarized below.
The Debt Coverage Ratio Method of income capitalization essentially
measures the risk involved in mortgage lending. Its usefulness to mortgage
underwriting takes the form of establishing a degree of safety with a given set
of loan terms.
Mortgage underwriting typically focuses on positive debt coverage, (net
operating income/annual mortgage debt service or NOI/ADS), rather than market
value, as a negative cash flow after debt service may indicate a probability
that a mortgage loan could be in jeopardy. Accordingly, if the greatest portion
of the property's value is debt capital, as established by the loan-to-value
ratio, annual debt coverage in underwriting is a major consideration. The debt
coverage ratio method is therefore market based and direct.
By multiplying this risk factor by the projected mortgage payment
requirement an estimate of the required overall rate to satisfy the lender's
minimum risk requirements can be derived.
<PAGE>
65
Income Capitalization Approach
The formula for this procedure is: M x f x DCR = R, where;
M = Loan to Value Ratio
f = Mortgage Constant
DCR = Debt Coverage Ratio
R = Overall Rate
To establish the criteria for the development of the Debt Coverage Ratio
Method, we have conducted a recent survey of lenders; the results are summarized
below:
<TABLE>
<CAPTION>
================================================================================
Contact Gene Fogarty Mike McCoy
- --------------------------------------------------------------------------------
<S> <C> <C>
Bank NationsBank Community Bank
- --------------------------------------------------------------------------------
Type Of Lender Conventional Conventional
- --------------------------------------------------------------------------------
Nominal Mortgage Interest Rate 250 Basis Points 250 Basis Points
over 3 to 7 year over 5 to 10 year
Treasuries with Treasuries with
Floor of 7.25% to Floor of 7.25% to
8.0% 8.0%
- --------------------------------------------------------------------------------
Amortization Period 15 - 20 Years 15 - 25 Years
- --------------------------------------------------------------------------------
Loan Term 3 - 7 Years 5 - 10 Years
- --------------------------------------------------------------------------------
Debt Coverage Ratio 1.20 - 1.25 1.20 - 1.25
- --------------------------------------------------------------------------------
Loan To Value Ratio 75% 75%
================================================================================
</TABLE>
Our survey of local lenders indicated an annual interest rate of 7.50%.
A mortgage loan would be available at 75% of the market value, based on a
20-year amortization schedule. Based on these criteria the indicated annual
interest rate constant is 9.6671%. Additionally, our survey indicated that a
minimum debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. An overall capitalization rate, based on these
assumptions, has been developed as shown below
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=======================================================================================================
M F DCR OAR
X X
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- --------------------------------------------------------------------------------------------------------
0.75 0.096671 1.25 0.09063
- --------------------------------------------------------------------------------------------------------
Rounded 9.1%
========================================================================================================
</TABLE>
The debt coverage ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufacturing housing
community investments has
<PAGE>
66
Income Capitalization Approach
increased, alternate sources of financing have become available through
insurance companies and conduit programs.
The presence of institutional investors in the market and the dearth of
quality real estate investments have bid down rates on manufactured housing
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
housing community investments.
The rates typically reflect a narrow range and are considered mutually
supportive. Therefore, we have estimated an overall capitalization rate of
10.0%. We have used this rate in the direct capitalization method to capitalize
the net income of $83,311. The value conclusion via the direct capitalization
method is summarized as follows:
$83,311 divided by .10 $833,110
In order to estimate the value of the subject on an "as is" basis, the
estimated cost of $100,000 was deducted from the above value for installing the
water meters. We estimated the "as is" market value of the subject property at
$733,110, rounded to $730,000.
<PAGE>
67
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions must be weighed, and the data of each
transaction must be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject must be
considered; differences in physical, functional and economic
characteristics be noted; and adjustments for the differences be made.
3. The value conclusion must be consistent with the analysis of the sales
data.
For a conveyance to qualify as a "market transaction", four factors must be
present:
1. The conveyance must be "arm's length"; that is, it must be between two
non-related parties.
2. Neither the buyer nor the seller should have been under compulsion to
act.
3. The property should be available to the class of purchasers best able
to utilize the facility.
4. The price must be expressed in the equivalent of cash, adjusted for any
special financing, concessions, or terms.
For any class of real estate, the market area for comparative data must
reflect the area prospective purchasers would consider. Comparability is also a
function of the physical character of the asset to be appraised. Classes of
real estate in which physical specifications are standardized, or in which scale
is small, and/or in which the commodity has achieved uniform market recognition
require that the sales data considered closely resemble the subject. As
specifications become more complex, as scale increases, and as market
recognition declines, the physical similarity of the sales data and the subject
tends to decline.
<PAGE>
68
Sales Comparison Approach
To judge the degree of comparability that exists between the sales selected
for analysis and the subject, several guidelines were applied.
1. Each sale is in the same market as the subject. To the extent that a
market is a meeting place for buyers and sellers of real estate of a
given type, the boundaries of the market are set by the participants in
merchandising and absorbing competitive properties and are economic not
purely physical or geographic.
2. Physical characteristics of the subject and comparables are similar.
3. The functional adequacy of each sale property and the subject are
competitive in terms of the ability of each to support similar
functions.
To draw a conclusion from the analysis of the sales data, a unit of
comparison has been selected. The calculation of a unit of comparison provides
a common denominator by which the market sales can be related to each other and
to the subject property. The commonly accepted unit of comparison in the
valuation of a manufactured housing community is the sale price per space. This
unit of comparison emphasizes the contribution of the improvements, and the
contribution of the land is merged into the unit-selling price.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For features that are dissimilar, adjustments have
been made leading to an indication of the price at which the subject could be
expected to sell. In considering adjustments, relevant factors were considered
including:
1. Nature of surrounding development.
2. Relative size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
6. Amenities and occupancy.
In our search for comparable sales, we excluded senior communities since
they tend to have a less transient occupancy base and typically trade at lower
capitalization rates than all age communities.
Based on our investigation, the following four sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
69
Sales Comparison Approach
Due to a lack of large sales in the Charleston area, we expanded our search
to elsewhere in South Carolina and neighboring Georgia. These sales occurred
between August 1997 and December 1997. The properties ranged in size from 115
to 311 spaces. The sale prices, on a per space basis, ranged from $4,838 to
$11,739. The Effective Gross Income Multipliers (EGIM) ranged from 3.1 to 7.5.
The indicated overall capitalization rates range from 9.5% to 12.9%.
The following pages detail each of the four sales, following which we have
presented a summary of the pertinent data.
<PAGE>
70
Sale Comparable Number One
Augusta Estates
2526 Milledgeville Road
Augusta, Richmond County, Georgia
[PHOTOGRAPH APPEARS HERE]
Sale Date: July 1997
PROPERTY DESCRIPTION
- --------------------
Size/Type: 148 space all age manufactured housing community
Utilities: All available
Land Description: Generally level, irregularly shaped 13.4-acre parcel of
land with adequate access. Improved with asphalt-paved
streets and streetlights.
Improvements/Amenities: Office, pool and laundry.
Year Built/Condition: 1960's/Fair
<PAGE>
71
Sale Comparable Number One
INCOME DATA
- -----------
Annual Occupancy: 70.9%
Average Lot Rent: $155.00
Effective Gross Income: $195,449
Expenses: $90,949
Net Income: $104,500
SALE DATA
- ---------
Sale Price: $1,100,000
Cash Equivalent Price: $1,100,000
Grantor: Palmetto Associates
Grantee: Palmetto Estates LLC
Financing Terms: Seller financing at market rates.
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
COMPARISON DATA
- ---------------
Sale Price/Space: $7,432
Effective Gross Income
Multiplier (EGIM): 5.63
Overall Capitalization
Rate (OAR): 9.5%
Comments: This is an older community south of Palmetto. The
lot sizes are small and many will not accommodate a
modern home.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Similar Superior Similar Superior
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
72
Sale Comparable Number Two
Ralph's Mobile Home Park
2300 Bankhead Highway
Austell, Cobb County, Georgia
[PHOTOGRAPH APPEARS HERE]
Sale Date: September 1997
PROPERTY DESCRIPTION
- --------------------
Size/Type: 115 space all age manufactured housing community
Utilities: All available
Land Description: Generally level, irregularly shaped 15.3-acre parcel of land
with adequate access. Improved with asphalt-paved streets
and streetlights.
Improvements/Amenities: None.
Year Built/Condition: 1963/Good
<PAGE>
73
Sale Comparable Number Two
INCOME DATA
- -----------
Annual Occupancy: 95%
Average Lot Rent: $225.00
Effective Gross Income: $294,975
Expenses: $130,890 (44.3% of the effective gross income)
Net Income: $ 164,085
SALE DATA
- ---------
Sale Price: $1,350,000
Cash Equivalent Price: $1,350,000
Grantor: Margaret M. O'Hara
Grantee: Carol and Larry Lawrence
Financing Terms: Cash to Seller
Sales History
(Past 3 Years): None noted.
Market Exposure: Unknown
COMPARISON DATA
- ---------------
Sale Price/Space: $11,739
Effective Gross Income
Multiplier (EGIM): 4.58
Overall Capitalization
Rate (OAR): 12.15%
Comments: This community is located in suburban northwest
Atlanta.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Superior Similar Similar Similar Similar Similar Superior
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
74
Sale Comparable Number Three
Dorchester Village
5701 Dundrum Street
North Charleston, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Sale Date: January 1997
PROPERTY DESCRIPTION
- --------------------
Size/Type: 311 space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped 38.7-acre parcel of land
with adequate access. Density is 8.04 pads per acre.
Improved with asphalt-paved streets, on street parking,
fenced lots and streetlights.
Improvements/Amenities: Convenience store and playground.
Year Built/Condition: 1973/Average
<PAGE>
75
Sale Comparable Number Three
INCOME DATA
- -----------
Annual Occupancy: 86.5% (269 of 311 spaces)
Average Lot Rent: $123.28
Effective Gross Income: $400,080
Expenses: 100,000 (25.0% of the effective gross income)
Net Income: $ 300,080
SALE DATA
- ---------
Sale Price: $3,000,000
Cash Equivalent Price: $3,000,000
Grantor: Dorchester Village Partnership
Grantee: Chatham Group Partnership
Financing Terms: Cash to seller.
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
COMPARISON DATA
- ---------------
Sale Price/Space: $9,646
Effective Gross Income
Multiplier (EGIM): 7.5
Overall Capitalization
Rate (OAR): 10.0%
Comments: Rental income includes $6,000 from an on-site
convenience store. Rents were $140 per month for
51 pads overlooking the marsh and $120 per month
for the remaining 261 pads. Water and sewer are
separately metered and paid directly by the
tenant. Each pad is fenced.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Similar Similar Similar Similar
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
76
Sale Comparable Number Four
Park City Trailer Park
112 N. Highway 52
Moncks Corner, Berkeley County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Sale Date: August 1997
PROPERTY DESCRIPTION
- --------------------
Size/Type: 37 space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped, 3.584 acres of
land with adequate access. Density is 10.32 spaces per
acre. Improved with asphalt paved streets.
Improvements/Amenities: None
Year Built/Condition: 1975/Fair
<PAGE>
77
Sale Comparable Number Four
INCOME DATA
- -----------
Annual Occupancy: 91.9% (34 of 37 spaces)
Average Lot Rent: $300.00 (includes pad and mobile home); $140 (lot
alone)
Effective Gross Income: $ 57,187
Expenses: $34,312 (60% of the effective gross income)
Net Income: $ 22,875
SALE DATA
- ---------
Sale Price: $179,000 (see Comments below)
Cash Equivalent Price: $179,000
Grantor: Marvin Wiggins
Grantee: Park City Trailer Park, Inc.
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted
Verification Source: Beth Cumbie, Grantee Representative
Date: April 15, 1998
COMPARISON DATA
- ---------------
Sale Price/Space: $ 4,838
Effective Gross Income
Multiplier (EGIM): 3.1
Overall Capitalization
Rate (OAR): 12.9%
Comments Total consideration was $375,000 for 37 spaces and
36 mobile homes. Average rent was $300 per month
including mobile home. Lot rent alone was $140 per
month. Property is located in the center of the
city and is in fair condition with no amenities.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Inferior Similar Similar Similar
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
COMPARABLE SALES SUMMARY
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name/Location Sale Price/ Number Of Price/ Average E.G.I.M./ O.A.R.
Sale Date Spaces Space Lot Rent Expense
Ratio
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Augusta Estates $1,100,000 148 $ 7,432 $155.00 5.63/ 9.5%
2526 Milledgeville Road July 1997 46.5%
Augusta, Richmond County, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
2 Ralph's Mobile Home Park $1,350,000 115 $11,739 $225.00 4.58/ 12.15%
2300 Bankhead Highway September 1997 44.3%
Austell, Cobb County, Georgia
- ------------------------------------------------------------------------------------------------------------------------------------
3 Dorchester Village $3,000,000 311 $ 9,646 $123.28 7.5/ 10.0%
5701 Dundrum Street January 1997 25.0%
North Charleston, Charleston County,
South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
4 Park City Trailer Park $ 179,000 37 $ 4,838 $140.00 3.1/ 12.9%
112 N. Highway 52 August 1997 60%
Moncks Corner, Berkeley County,
South Carolina
====================================================================================================================================
</TABLE>
<PAGE>
Improved Sales Location Map
[MAP APPEARS HERE]
<PAGE>
80
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. All of the sales were
fee simple transactions, with no abnormal financing which would effect the
price. There were no abnormal sale conditions known to have occurred, except as
noted.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
Effective Gross Income Multiplier (EGIM)
- ----------------------------------------
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 3.1 and 7.5. As previously discussed, the EGIM is essentially a
function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases and a property's expense ratio. The high end of the range
represents a community with upside potential from filling lots.
The subject is an all age community, in a rural setting. The subject has a
higher expense ratio than all of the comparables except comparable number four.
Based on these considerations, we have concluded an EGIM near the low end of the
range, processing subject's Effective Gross Income of $210,966 with an EGIM of
4.5.
Thus, $210,966 x 4.0 is: $843,864
Rounded $840,000
This equates to $5,419 per space, slightly above the range of comparables.
The subject's expense ratio is below all but one of the comparables.
Price Per Space Analysis
- ------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a greater amenity package.
Rather than making a subjective percentage adjustment to the per space sales
prices, the Net Operating Income/Space (NOI/Space) reflects, in most cases, the
market perception of a property's position in the marketplace. Since investors
are mainly concerned with cash flow to service debt, the net operating income
generating capability of a particular community can be used for comparison
purposes. Typically, the higher the NOI/Space for a community, the higher the
per space sales price. The subject has a
<PAGE>
81
Sales Comparison Approach
NOI/Space of $537.49 in our stabilized analysis. The NOI/Space and the price per
space sales prices for the comparables are shown on the following table. We then
compare the percentage difference between each comparable's NOI/Space and the
subject's NOI/Space. For comparables with a higher NOI/Space, a downward
adjustment to the per space sales price is made. An upward adjustment is made
for a comparable with a lower NOI/Space.
NOI/Space and Per Space Sales Price
<TABLE>
<CAPTION>
======================================================================================================
COMP 1 COMP 2 COMP 3 COMP 4 SUBJECT
======================================================================================================
<S> <C> <C> <C> <C> <C>
NOI/Space $706.08 $1,426.83 $964.89 $466.90 $537.49
- ------------------------------------------------------------------------------------------------------
Price/Space $ 7,432 $ 11,739 $ 9,646 $ 3,654 N/A
- ------------------------------------------------------------------------------------------------------
Percent
Adjustment -23.88% -62.33% -44.30% +15.12% N/A
- ------------------------------------------------------------------------------------------------------
Adjusted
Price/Space $ 5,658 $ 4,422 $ 5,373 $ 4,206 N/A
======================================================================================================
</TABLE>
After adjustments, the indicated range is from $4,206 to $5,658 per space.
We have placed equal emphasis on sales one and four, and concluded $5,000 per
space.
Thus, 155 Spaces x $4,900/Space is: $759,500
Rounded $760,000
This value is reflective of the indication from the EGIM method and
considered mutually supportive. We have concluded $800,000 via the Sales
Comparison Approach.
In order to estimate the value of the subject on an "as is" basis, the
estimated cost of $100,000 was deducted from the above value for installing the
water meters. We estimated the "as is" market value of the subject property via
the Sales Comparison Approach at $700,000.
<PAGE>
82
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $730,000
Sales Comparison Approach $700,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales and listings of similar properties. In
the reconciliation, we reviewed each approach to value (a) to ascertain the
reliability of the data and (b) to weight the approach that best represented the
actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject property.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable. Given the relative homogeneity of the locations, the availability of
market data, we have emphasized this approach in the valuation.
The two approaches reflect a narrow range of values and are considered
mutually supportive. Therefore, our opinion of the market value of the subject
property, based on a reasonable exposure period of six months, as of June 1,
1999, was:
- SEVEN HUNDRED THOUSAND DOLLARS -
($700,000)
<PAGE>
83
CERTIFICATION
- -------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on 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 event.
. To the best of my knowledge and belief, the reported analyses,
opinions, and conclusions were developed and this report was prepared
in conformity with the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation, the Code of Professional Ethics,
and the Standards of Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI have completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
. I am in compliance with the competency provisions of the Uniform
Standards of Professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
--------------------------------
L. Drake Moore, MAI
<PAGE>
84
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the
conclusion in this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function. The appraisal report may not be reproduced, in whole or
in part, and a third party may not utilize the findings of the report for any
purpose, without the written consent of Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
<PAGE>
Assumptions and Limiting Conditions 85
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed in
connection with any matter that may be disclosed by a proper survey. If a
subsequent survey should reflect a differing land area and/or frontages, we
reserve the right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others and are not meant to be used as a reference in legal matters
of survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projections contained in
the appraisal assume both responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures that would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
<PAGE>
Assumption and Limiting Conditions 86
The appraisal report covering the subject property is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers; therefore we are not qualified to judge the structural
and environmental integrity of the improvements, if any. Consequently, no
warranty, representations or liability are assumed for the structural soundness,
quality, adequacy or capacities of said improvements and utility services,
including the construction materials, particularly the roof, foundations, and
equipment, including the HVAC systems, if applicable. Should there be any
question concerning same, it is strongly recommended that an
Engineering/Construction/Environmental inspection be obtained. The value
estimate stated in this appraisal, unless noted otherwise, is predicated on the
assumption that all improvements, equipment and building services, if any, are
structurally sound and suffer no concealed or latent defects or inadequacies
other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas that are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
<PAGE>
Assumption and Limiting Conditions 87
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of
the property together with a detailed analysis of the requirements of the ADA
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land being on the South of Route 78,
in the County of Charleston, State of South Carolina, identified as Tract "B" of
the Plat of a 51.1 acre subdivision near Ladson, and which plat is recorded in
the R.N.C. office for Charleston County in Plat Book AG, at Page 21.
<PAGE>
FINANCIALS
<PAGE>
- --------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 24
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 964 The Pines Time: 14:29:16
This is a PRELIM report since it contains data from the current period. Entries
are not final.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 27,500 27,210 290 1.07 54,980 54,420 560 1.03
Non Rentable Sites (2,780) (2,020) (760) -37.62 (5,290) (4,040) (1,250) -30.94
Vacancies (4,256) (4,980) 724 14.53 (9,296) (9,990) 694 6.94
Community Owned Vacancies (130) 0 (130) 0.00 (260) 0 (260) 0.00
Free Rent/Concessions 0 (420) 420 100.00 0 (840) 840 100.00
Employee Allowances (300) (270) (30) -11.11 (600) (540) (60) -11.11
Late Fees 985 775 210 27.10 1,335 1,550 (215) -13.87
------ ------ ----- ------- ------- ------ ------- -------
Net Site Rent 21,019 20,295 724 3.57 40,869 40,560 309 0.76
OTHER RENT
Home Rent 185 185 0 0.00 370 370 0 0.00
------ ------ ----- ------- ------- ------ ------- -------
Total Other Rent 185 185 0 0.00 370 370 0 0.00
UTILITY INCOME
Water Income 2,960 2,880 80 2.78 5,860 5,760 100 1.74
------ ------ ----- ------- ------- ------ ------- -------
Total Utility Income 2,960 2,880 80 2.78 5,860 5,760 100 1.74
AMENITY INCOME
Vending Income 20 10 10 100.00 20 20 0 0.00
Other Income 0 5 (5) -100.00 0 10 (10) -100.00
------ ------ ----- ------- ------- ------ ------- -------
Total Amenity Income 20 15 5 33.33 20 30 (10) -33.33
MISC. INCOME
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
------ ------ ----- ------- ------- ------ ------- -------
TOTAL REVENUE 24,184 23,375 809 3.46 47,119 46,720 399 0.85
PAYROLL EXPENSE
Salaries & Wages - Mgmt. 2,100 1,950 (150) -7.69 4,200 3,900 (300) -7.69
Salaries & Wages - Maint. 1,466 1,370 (96) -6.98 3,222 2,808 (414) -14.73
Salaries & Wages - Clerical 0 189 189 100.00 0 387 387 100.00
Payroll Taxes 315 330 15 4.64 656 667 11 1.72
Health Benefits 360 360 0 0.00 720 720 0 0.00
Pension Benefits 163 158 (5) -3.44 327 319 (8) -2.47
Workers Comp Insurance 61 61 0 0.69 121 122 1 0.69
------ ------ ----- ------- ------- ------ ------- -------
Total Payroll 4,464 4,418 (46) -1.05 9,245 8,923 (322) -3.61
UTILITY EXPENSE
Water Expense 2,412 4,805 2,393 49.79 6,416 8,193 1,777 21.70
Sewer Expense 3,569 7,498 3,929 52.40 9,648 12,826 3,178 24.78
Gas Expense 0 69 69 100.00 24 116 92 79.03
Electric Expense 300 369 69 18.71 618 761 143 18.83
Cash Expense 1,834 1,516 (318) -20.97 3,531 3,521 (10) -0.30
------ ------ ----- ------- ------- ------ ------- -------
Total Utilities Expense 8,115 14,257 6,142 43.08 20,237 25,417 5,180 20.38
REPAIRS AND MAINTENANCE
Repairs & Maint - Grounds 274 1,350 1,076 79.74 1,541 2,450 909 37.09
Repairs & Maint - Buildings 232 0 (232) 0.00 624 0 (624) 0.00
Repairs & Maint - Vehicles 90 200 110 55.10 97 400 303 75.66
Vehicle Expense 31 0 (31) 0.00 114 0 (114) 0.00
Repairs & Maint - Equipment 81 200 119 59.50 272 400 128 32.05
Repairs & Maint - Homes 74 100 26 25.97 74 200 126 62.99
Equipment Rental 60 50 (10) -19.50 333 100 (233) -232.50
Supplies- Maintenance 11 100 89 89.41 64 200 136 68.16
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 25
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 964 The Pines Time: 14:29:19
This is a PRELIM report since it contains data from the current period. Entries
are not final.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------ ------ ----- ------- ------- ------ ------- -------
Total Repairs & Maint. 852 2,000 1,148 57.40 3,119 3,750 631 16.84
MARKETING
Advertising 370 325 (45) -13.97 721 650 (71) -10.89
Promo Incentives - Dealers (1,000) 0 1,000 0.00 0 0 0 0.00
Promo Incentives - Amort. 33 83 50 59.83 67 133 66 49.86
Business Promotions 31 75 44 58.13 31 150 119 79.07
------ ------ ----- ------- ------ ------ ------- -------
Total Marketing (565) 483 1,048 216.95 819 933 114 12.23
Collections Costs
Legal-Collection Fees 0 50 50 100.00 0 100 100 100.00
Bad Debt 985 500 (485) -97.00 985 1,000 15 1.50
------ ------ ----- ------- ------ ------ ------- -------
Total Collection Costs 985 550 (435) -79.09 985 1,100 115 10.45
GENERAL & ADMINISTRATIVE
Telephone 247 230 (17) -7.35 564 460 (104) -22.61
Supplies - Office 106 175 69 39.34 929 350 (579) -165.46
Professional Fees - MRI 269 204 (65) -31.64 477 408 (69) -16.95
License & Fees 0 750 750 100.00 741 750 9 1.21
Management Fees 1,195 1,169 (26) -2.21 2,323 2,336 13 0.58
Overhead Reimbursement 944 950 6 0.61 1,888 1,900 12 0.61
Miscellaneous Expense 0 50 50 100.00 40 100 60 60.00
------ ------ ----- ------- ------ ------ ------- -------
Total G&A 2,761 3,528 767 21.75 6,962 6,304 (658) -10.44
TAXES & INSURANCE
Real Property Taxes 636 636 (0) -0.02 1,272 1,272 (0) -0.02
Personal Property Taxes 39 39 (0) -0.44 78 78 (0) -0.44
Insurance 266 266 0 0.17 531 532 1 0.17
------ ------ ----- ------- ------ ------ ------- -------
Total Taxes & Insurance 941 941 0 0.02 1,882 1,882 0 0.02
------ ------ ----- ------- ------ ------ ------- -------
TOTAL EXPENSES 17,553 26,177 8,624 32.95 43,248 48,309 5,061 10.48
------ ------ ----- ------- ------ ------ ------- -------
NET OPERATING INCOME 6,631 (2,802) 9,433 336.64 3,871 (1,589) 5,460 343.59
====== ====== ===== ======= ====== ====== ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 26
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 964 The Pines Time: 13:19:55
This is a PRELIM report since it contains data from the current period. Entries are not final.
- ---------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 27,330 27,320 10 0.04 321,200 321,720 (520) -0.16
Additional fees 0 0 0 0.00 130 0 130 0.00
Non Rentable Sites (2,510) (2,730) 220 8.06 (28,390) (27,750) (640) -2.31
Vacancies (6,208) (3,380) (2,828) -83.67 (54,109) (50,360) (3,749) -7.44
Community Owned Vacancies (130) (140) 10 7.14 (1,590) (550) (1,040) -189.09
Free Rent/Concessions (10) (130) 120 92.31 (260) (1,670) 1,410 84.43
Employee Allowances (300) (140) (160) -114.29 (3,110) (1,650) (1,460) -88.48
State Fees 345 500 (155) -31.00 8,127 6,000 2,127 35.45
-------- -------- ------- -------- -------- ------- ------- -------
Net Site Rent 18,517 21,300 (2,783) -13.07 241,998 245,740 (3,742) -1.52
OTHER RENT
Income Rent 185 0 185 0.00 2,220 1,040 1,180 113.46
-------- -------- ------- -------- -------- ------- ------- -------
Total Other Rent 185 0 185 0.00 2,220 1,040 1,180 113.46
UTILITY INCOME
Other Income 2,980 3,080 (100) -3.25 35,560 36,140 (580) -1.60
Other Utility Income 0 0 0 0.00 20 0 20 0.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Utility Income 2,980 3,080 (100) -3.25 35,580 36,140 (560) -1.55
AMENITY INCOME
Vending Income 20 15 5 33.33 100 180 (80) -44.44
Other Income 30 100 (70) -70.00 50 1,200 (1,150) -95.83
-------- -------- ------- -------- -------- ------- ------- -------
Total Amenity Income 50 115 (65) -56.52 150 1,380 (1,230) -89.13
MISC. INCOME
Other Non-operating Inc. 0 0 0 0.00 105 0 105 0.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Misc. Income 0 0 0 0.00 105 0 105 0.00
-------- -------- ------- -------- -------- ------- ------- -------
TOTAL REVENUE 21,732 24,495 (2,763) -11.28 280,053 284,300 (4,247) -1.49
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,100 1,185 (915) -77.22 16,475 14,010 (2,465) -17.59
Salaries & Wages-Maint. 2,165 977 (1,188) -121.60 9,911 10,921 1,010 9.25
Salaries & Wages-Clerical 0 798 798 100.00 8,810 8,835 25 0.29
Salaries & Wages-Bonus 0 0 0 0.00 1,879 50 (1,829) ****.**
Payroll Taxes 340 360 20 5.55 3,181 4,119 938 22.77
Health Benefits 340 340 0 0.00 4,080 4,080 0 0.00
Pension Benefits 0 0 0 0.00 176 0 (176) 0.00
Workers Comp Insurance 30 31 1 3.23 360 372 12 3.23
-------- -------- ------- -------- -------- ------- ------- -------
Total Payroll 4,975 3,691 (1,284) -34.79 44,872 42,387 (2,485) -5.86
UTILITY EXPENSE
Water Expense 2,318 3,670 1,352 36.83 42,779 48,435 5,656 11.68
Sewer Expense 2,570 7,156 4,586 64.09 67,810 84,066 16,256 19.34
Gas Expense 33 173 140 80.69 600 1,177 577 49.01
Electric Expense 203 181 (22) -11.98 4,169 4,497 328 7.29
Trash Expense 1,333 1,447 114 7.89 19,524 16,185 (3,339) -20.63
-------- -------- ------- -------- -------- ------- ------- -------
Total Utilities Expense 6,457 12,627 6,170 48.87 134,882 154,360 19,478 12.62
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 1,124 1,100 (24) -2.17 10,043 13,200 3,157 23.91
Repairs & Maint-Buildings 821 50 (771) ****.** 1,001 600 (401) -66.81
Repairs & Maint-Vehicles 20 200 180 90.03 230 2,400 2,170 90.44
Vehicle Expense 10 0 (10) 0.00 2,114 0 (2,114) 0.00
Repairs & Maint-Equipment 3 200 197 98.55 1,190 2,400 1,210 50.40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 27
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 964 The Pines Time: 13:19:57
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Repairs & Maint-Homes 0 100 100 100.00 1,391 1,200 (191) -15.90
Equipment Rental 0 100 100 100.00 274 1,200 926 77.14
Repairs & Maint-Other 0 0 0 0.00 150 0 (150) 0.00
Supplies-Maintenance 14 100 86 86.19 671 1,200 529 44.07
Exterminating Expense 0 0 0 0.00 19 0 (19) 0.00
------ ------ ----- ------- ------ ------ ------- -------
Total Repairs & Maint. 1,991 1,850 (141) -7.64 17,083 22,200 5,117 23.05
MARKETING
Advertising 656 325 (331) -101.78 3,582 3,900 318 8.16
Promo Incentives-Resident 1,000 0 (1,000) 0.00 18,000 0 (18,000) 0.00
Promo Incentives-Dealers 2,000 1,000 (1,000) -100.00 4,000 12,000 8,000 66.67
Business Promotions 0 100 100 100.00 0 1,200 1,200 100.00
------ ------ ----- ------- ------ ------ ------- -------
Total Marketing 3,656 1,425 (2,231) -156.55 25,582 17,100 (8,482) -49.60
Collection Costs
Legal-Collection Fees 0 75 75 100.00 159 900 741 82.33
Bad Debt 1,200 750 (450) -60.00 4,044 3,000 (1,044) -34.79
------ ------ ----- ------- ------ ------ ------- -------
Total Collection Costs 1,200 825 (375) -45.45 4,203 3,900 (303) -7.76
GENERAL & ADMINISTRATIVE
Telephone 554 225 (329) -146.35 2,663 2,700 37 1.36
Supplies-Office 749 175 (574) -328.17 3,083 2,100 (983) -46.83
Professional Fees-MRI 168 208 40 19.04 2,229 2,496 267 10.70
License & Fees 0 0 0 0.00 1,384 766 (618) -80.72
Natl. & State Assn. Dues 0 0 0 0.00 0 204 204 100.00
Management Fees 981 1,225 244 19.89 13,612 14,216 604 4.25
Overhead Reimbursement 944 221 (723) -327.24 11,330 2,652 (8,678) -327.24
Professional Development 0 38 38 100.00 124 1,406 1,282 91.18
Dues and Subscriptions 0 0 0 0.00 354 0 (354) 0.00
Meals & Entertainment 0 25 25 100.00 57 100 43 43.00
Travel-Community 0 200 200 100.00 307 800 493 61.59
Miscellaneous Expense 500 1,450 950 65.52 1,063 17,400 16,337 93.89
------ ------ ----- ------- ------ ------ ------ -------
Total G&A 3,898 3,767 (131) -3.47 36,207 44,840 8,633 19.25
TAXES & INSURANCE
Real Property Taxes 603 603 0 0.07 7,516 7,236 (280) -3.88
Personal Property Taxes 41 41 0 0.00 492 492 0 0.00
Insurance 196 196 (0) -0.13 2,355 2,352 (3) -0.13
------ ------ ----- ------- ------ ------ ------- -------
Total Taxes & Insurance 840 840 0 0.02 10,363 10,080 (283) -2.81
------ ------ ----- ------- ------ ------ ------- -------
TOTAL EXPENSES 23,016 25,025 2,009 8.03 273,192 294,867 21,675 7.35
------ ------ ----- ------- ------- ------- ------- -------
NET OPERATING INCOME (1,284) (530) (755) -142.36 6,861 (10,567) 17,428 164.93
======= ====== ====== ======= ======= ====== ======= =======
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 26
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 964 The Pines Time: 14:55:51
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1997 Std. Budget Variance % Dec 1997 Std. Budget Variance %
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 25,440 25,210 230 0.91 304,190 302,520 1,670 0.55
Non Rentable Sites (1,990) (480) (1,510) -314.58 (29,080) (5,760) (23,320) -404.86
Vacancies (4,606) 4,440 (166) -3.74 (53,127) (61,200) 8,073 13.19
Community Owned Vacancies (130) (150) 20 13.33 (1,830) (1,800) (30) -1.67
Free Rent/Concessions (20) (480) 460 95.83 (110) (5,760) 5,650 98.09
Employee Allowances (130) (250) 120 48.00 (1,580) (3,000) 1,420 47.33
Rate Fees 320 250 70 28.00 9,037 3,000 6,037 201.23
------ ------ ----- ------- ------- ------- ------- -------
Net Site Rent 18,884 19,660 (776) -3.95 227,500 228,000 (500) -0.22
OTHER RENT
Income Rent 185 130 55 42.31 1,260 1,560 (300) -19.23
------ ------ ----- ------- ------- ------- ------- -------
Total Other Rent 185 130 55 42.31 1,260 1,560 (300) -19.23
UTILITY INCOME
Water Income 2,982 3,120 (138) -4.42 29,102 30,300 (1,198) -3.95
Electric Income 0 0 0 0.00 57 0 57 0.00
------ ------ ----- ------- ------- ------- ------- -------
Total Utility Income 2,982 3,120 (138) -4.42 29,159 30,300 (1,141) -3.77
AMENITY INCOME
Pending Income 20 10 10 100.00 240 120 120 100.00
Other Income 5 25 (20) -80.00 1,786 300 1,486 495.36
------ ------ ----- ------- ------- ------- ------- -------
Total Amenity Income 25 35 (10) -28.57 2,026 420 1,606 382.40
MISC. INCOME
------ ------ ----- ------- ------- ------- ------- -------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
------ ------ ----- ------- ------- ------- ------- -------
TOTAL REVENUE 22,076 22,945 (869) -3.79 259,945 260,280 (335) -0.13
PAYROLL EXPENSE
Salaries & Wages - Mgmt. 1,150 1,185 35 2.95 13,800 13,835 35 0.25
Salaries & Wages - Maint. 1,699 1,553 (146) -9.41 14,699 19,904 5,205 26.15
Salaries & Wages - Bonus 0 0 0 0.00 1,750 0 (1,750) 0.00
Payroll Taxes 221 372 151 40.67 2,917 4,585 1,668 36.37
Health Benefits 170 0 (170) 0.00 1,743 0 (1,743) 0.00
Pension Benefits 0 82 82 100.00 488 1,012 524 51.78
------ ------ ----- ------- ------- ------ ------- -------
Total Payroll 3,240 3,192 (48) -1.50 35,398 39,336 3,938 10.01
UTILITY EXPENSE
Water Expense 4,430 3,500 (930) -26.57 48,752 42,000 (6,752) -16.08
Sewer Expense 7,259 4,800 (2,459) -51.23 79,437 68,670 (10,767) -15.68
Gas Expense 104 162 58 35.70 1,106 1,806 700 38.75
Electric Expense 293 350 57 16.22 3,527 5,400 1,873 34.68
Cash Expense 1,517 1,155 (362) -31.33 16,209 13,585 (2,624) -19.31
------ ------ ----- ------- ------- ------- ------- -------
Total Utilities Expense 13,603 9,967 (3,636) -36.48 149,032 131,461 (17,571) -13.37
REPAIRS AND MAINTENANCE
Repairs & Maint - Grounds 30 1,000 970 97.02 18,186 12,400 (5,786) -46.66
Repairs & Maint - Buildings 0 0 0 0.00 385 0 (385) 0.00
Repairs & Maint - Vehicles 66 125 59 47.55 342 1,500 1,158 77.19
Vehicle Expense 127 0 (127) 0.00 636 0 (636) 0.00
Repairs & Maint - Equipment 455 0 (455) 0.00 970 0 (970) 0.00
Repairs & Maint - Homes 0 50 50 100.00 1,200 600 (600) -100.00
Equipment Rental 0 0 0 0.00 787 0 (787) 0.00
Supplies- Maintenance 543 0 (543) 0.00 2,157 0 (2,157) 0.00
</TABLE>
[B
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 27
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 964 The Pines Time: 14:55:53
- ---------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1997 Std. Budget Variance % Dec 1997 Std. Budget Variance %
- ---------------------------------------------------------------------------------------------------------------------------
-------- -------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Repairs & Maint. 1,220 1,175 (45) -3.86 24,663 14,500 (10,163) -70.09
MARKETING
Advertising 521 310 (211) -68.06 3,911 3,720 (191) -5.13
Promo Incentives-Resident 3,000 0 (3000) 0.00 23,111 0 (23,111) 0.00
Promo Incentives-Dealers 0 2,000 2,000 100.00 6,000 24,000 18,000 75.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Marketing 3,521 2,310 (1,211) -52.42 33,022 27,720 (5,302) -19.13
Collection Costs
Legal-Collection Fees (357) 50 407 814.00 (24) 600 624 104.00
Bad Debt 262 2,000 1,738 86.90 3,801 8,000 4,199 52.49
-------- -------- ------- -------- -------- ------- ------- -------
Total Collection Costs (95) 2,050 2,145 104.63 3,777 8,600 4,823 56.08
GENERAL AND ADMINISTRATIVE
Telephone 291 250 (41) -16.47 1,919 3,000 1,081 36.04
Supplies-Office 890 125 (765) -611.73 2,945 1,500 (1,445) -96.35
Professional Fees-MRI 246 250 4 1.44 2,667 3,200 533 16.65
Professional Fees-Other 0 20 20 100.00 0 240 240 100.00
License & Fees 200 0 (200) 0.00 1,216 1,661 445 26.78
Management Fees 1,083 1,147 64 5.60 12,655 13,011 356 2.73
Overhead Reimbursement (380) 198 578 291.92 2,094 2,376 282 11.87
Meals & Entertainment 0 0 0 0.00 29 0 (29) 0.00
Travel-Community 121 0 (121) 0.00 326 0 (326) 0.00
Miscellaneous Expense 6,096 1,000 (5,096) -509.61 20,608 17,400 (3,208) -18.44
-------- -------- ------- -------- -------- ------- ------- -------
Total G&A 8,547 2,990 (5,557) -185.85 44,459 42,338 (2,071) -4.89
TAXES AND INSURANCE
Real Property Taxes 585 585 0 0.00 7,020 7,020 0 0.00
Personal Property Taxes 0 0 0 0.00 363 713 350 49.02
Insurance 548 458 0 0.08 5,700 5,496 (204) -3.71
-------- -------- ------- -------- -------- ------- ------- -------
Total Taxes & Insurance 1,043 1,043 0 0.04 13,083 13,229 146 1.10
-------- -------- ------- -------- -------- ------- ------- -------
TOTAL EXPENSES 13,079 22,727 (8,352) -36.75 303,433 277,234 (26,199) -9.45
-------- -------- ------- -------- -------- ------- ------- -------
NET OPERATING INCOME (9,003) 218 (9,221) ****.** (43,489) (16,954) (26,535) -156.51
======== ======== ======= ======== ======== ======= ======= =======
</TABLE>
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St.Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
- ----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Moore has also owned and operated the
L.D. Moore Company, a commercial appraisal firm in Dallas, Texas since
1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of
purchase price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial
properties. Performed appraisals for purposes of sale/purchase, financing
and allocation of purchase price. September 1985 to September 1987.
<PAGE>
Profile of the Appraiser
BANKING EXPERIENCE
- ------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and originated non-conforming single-family mortgages
in addition to investor and commercial mortgages loans for BF Saul and
Chevy Chase Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
- -------------------------------------
Apartments
- ----------
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Santa Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
Manufactured Home Communities and Recreational Vehicle Parks
- ------------------------------------------------------------
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
<PAGE>
Profile of Appraiser
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Winsdor City Sumter, SC
Self-Storage Facilities
- -----------------------
American Self-Storage Charlotte, NC American Self Storage Ocala, FL
American Self-Storage Monroe, NC Extra Closet Ft. Lauderdale
American Self-Storage Newel, NC
American Self-Storage Stallings, NC
Hotels/Resorts
- --------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
71-Room Best Western, Guymon, OK
Office Buildings
- ----------------
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, FL Okeechobee Commerce W. Palm Beach,FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
Industrial
- ----------
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
<PAGE>
Profile of Appraiser
Clients List
- ------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation National Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
- ----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
<PAGE>
[LOGO AND LETTERHEAD OF
South Carolina
Real Estate Appraisers Board]
Koger Office Park, Kingstree Building
110 Centerview Drive
Post Office Box 11847 (803) 896-4400
Columbia, SC 29211-1847 FAX: (803) 896-4404
TEMPORARY PRACTICE PERMIT
Pursuant to the requirements of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act and Section 40-60-110 of the South Carolina Real
Estate Appraiser Registration, License, and Certification Act, this Real Estate
Appraiser's Temporary Practice Permit is hereby issued to:
NAME: LAWRENCE D MOORE
STATE OF RESIDENCE: TX
APPRAISER CLASSIFICATION: CERTIFIED GENERAL
LICENSE/CERTIFICATE NUMBER IN RESIDENT STATE: TX-1321098-G
The above named appraiser has satisfied the qualifications of the South Carolina
Real Estate Appraisers Board and is hereby granted a TEMPORARY PRACTICE PERMIT.
This permit shall expire upon the completion date of the appraisal assignment
described below.
APPRAISAL ASSIGNMENT
THE PINES MHP, MOBILE HOME PARK; 9919 HWY 78, LADSON SC
Beginning Date: Ending Date:
04/13/1999 06/01/1999
SOUTH CAROLINA TEMPORARY PRACTICE PERMIT NUMBER: 059-99
Persons granted a TEMPORARY PRACTICE PERMIT shall not advertise or otherwise
hold themselves out as being a South Carolina State Certified or State Licensed
Real Estate Appraiser.
April 15, 1999
/s/ Robert L. Selman
--------------------
Robert L. Selman
Administrator
(Seal)
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
EXHIBIT (b)(1)(C)
LIMITED SCOPE APPRAISAL IN A
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
225 Space - Shady Hills
Manufactured Housing Community
1508 Dickerson Pike
Nashville, Davidson County, Tennessee 37207
PREPARED FOR
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
AS OF
October 28, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
November 8, 1999
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
RE: 225 Space - Shady Hills
Manufactured Housing Community
1508 Dickerson Pike
Nashville, Davidson County, Tennessee 37207
Dear Mr. Waite:
At your request, we have completed a desktop update of the appraisal of the
above captioned property. The subject property was previously inspected on March
26, 1999, with the appraisal issued April 30, 1999. Our analysis commenced
October 28, 1999 and was completed November 5, 1999. The effective date of our
valuation is October 28, 1999. We estimate the "as is" market value of the
property rights outlined herein, as of October 28, 1999, based on an exposure
period of six months, to be:
- TWO MILLION FOUR HUNDRED THOUSAND DOLLARS -
($2,400,000)
The purpose of this Limited Scope Appraisal is to express our opinion of
the market value/1/ of the fee simple interest in the real estate. Our opinions
are subject to the definition of value, assumptions and limiting conditions,
certifications, and engagement instructions in this report. The reader must be
acquainted with these items prior to considering the opinions and information
described within this Limited Scope Appraisal in a Complete Appraisal Report
format.
_____________________
1 Uniform Standards of Professional Appraisal Practice (Appraisal Foundation,
1999 Edition), p. 139.
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 2
We have developed our opinions based on our understanding of the Uniform
Standards of Professional Practice (USPAP), Standards Rule 1, as promulgated by
the Appraisal Foundation.
Our appraisal was based on more current information you provided regarding
both current and forecasted operating levels for the subject property. Because a
desktop update was completed and the property was not reinspected, based upon
USPAP guidelines, the report limits its use to the client and considers anyone
else using the report an unintended user/2/. The intended user of this report is
Windsor Corporation.
It is our understanding that the intended use of this appraisal report is
for the sole purpose of assisting the client for corporate planning; its use for
any other purpose or valuation date may invalidate the appraisal.
At the client's request, we have not reinspected the subject property or
conducted an in depth analysis of the subject's market area; however, we have
considered the changes in income and expenses based on current leases and
operating levels. This appraisal assumes no substantial changes in the condition
of the property or the market affecting the subject property since our previous
inspection on April 30, 1999, unless otherwise stated. The scope of the
appraisal development gathering information on improved sales, rent, operating
expenses, capitalization and yield rates, and an analysis of regional and
neighborhood trends. Our analyses and conclusions are based upon phone surveys
with market participants, and publicly available data collected by the
appraiser. All market data were verified by the buyer, seller, broker, deed,
title company, and/or leasing agent wherever possible. The accumulated data were
analyzed in relation to the income capitalization and sales comparison
approaches.
______________________________
2 USPAP, 1999 Edition, Appraisal Foundation, Standard 2-2(c), Advisory Opinions
11 and 12 .
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 3
By prior agreement with the client, the appraiser did not reinspect the
subject property,/3/ The scope of this appraisal limited by completing a desktop
update and not reinspecting the subject property. Our analysis is based on
information gathered during our original inspection and appraisal of the subject
property, and this appraisal assumes no material changes during this period.
Therefore, the physical descriptive sections and corresponding analyses therein
(from the reports) are hereby incorporated into our more current analyses
herein. We reserve the right to adjust the valuation herein reported as required
by consideration of additional or more reliable data that may become available.
It is the appraisers determination that this appraisal is not so limited as to
result in a misleading or confusing report. It is understood by Windsor
Corporation is aware of the limitations and lower level of reliability inherent
in a limited appraisal process, and that if a complete appraisal process were
undertaken, or more information were to become known, our value conclusion may
change.
Our value estimate applies to the land as physically constituted and to the
improvements actually in existence. Our value estimate reflects prevailing
trends in the local real estate market. We have made a careful inspection,
study, and analysis of the property, and have considered all factors which, in
our opinion, would tend to influence the market value of the subject.
Shady Hills is a fully developed 225-space Manufactured Housing Community,
with a 980 square foot office building, a 3,100 square foot storage building, an
833 square foot maintenance shed and a 1,230 square foot commercial building
that was previously used as a service station and is leased on a month to month
basis. The community is located along the west side of Dickerson Pike within the
northern edge of the city of Nashville. The current lot rent is $180.00 per
month for singlewide units and $188.00 per month for doublewide units.
Management bills the residents on a monthly basis for utilities. The current
physical occupancy at the subject is 86.2%. There is one employee occupied
space. The economic occupancy is approximately 85.8%.
______________________________
3 The appraisal process, therefore, involved departure from Standards Rule 1 of
USPAP.
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 4
The eastern portion of the site is improved with a 1,230 square foot
commercial garage building that was previously used as service station and is
currently leased to a cab company. According to the property manager, this
portion of the site was cleaned up with the gasoline tanks being removed and a
phase one environmental study revealed no soil contamination. This analysis
assumes that no hazardous substances or waste currently exist at the site and no
consideration was given to the potential liabilities and cleanup costs
associated with the presence of these materials. In addition, we have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
This conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the "Uniform
Standards of Professional Appraisal Practice" (USPAP) as published by the
Appraisal Standard Board of the Appraisal Foundation and Windsor Corporation's
Appraisal Guidelines.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you and would like to
thank you for the help and information you provided. If you have any questions,
please feel free to contact us.
Very truly yours,
WHITCOMB REAL ESTATE
John H. Whitcomb, MAI, CCIM
Keith D. McFarland, ASA
Tennessee General Certified Appraiser #00051023
<PAGE>
5
TABLE OF CONTENTS
<TABLE>
Title Page
Transmittal
<S> <C>
TABLE OF CONTENTS.......................................................... 5
INTRODUCTORY SECTION....................................................... 6
PHOTOGRAPHS OF SUBJECT(Taken March 26, 1999)............................... 7
SUMMARY OF FACTS AND CONCLUSIONS........................................... 9
- --------------------------------
SCOPE OF THE ASSIGNMENT.................................................... 10
- -----------------------
PURPOSE AND INTENDED USE OF THE REPORT..................................... 12
- --------------------------------------
APPRAISAL DEFINITIONS...................................................... 12
- ---------------------
EFFECTIVE DATE OF VALUE.................................................... 13
- -----------------------
DATE OF INSPECTION......................................................... 13
- ------------------
DESCRIPTIVE SECTION........................................................ 14
NEIGHBORHOOD DESCRIPTION................................................... 19
- ------------------------
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW............................. 22
- ----------------------------------------------
LAND AND SITE IMPROVEMENTS................................................. 31
- --------------------------
IMPROVEMENT DESCRIPTION.................................................... 34
- -----------------------
OWNERSHIP AND PROPERTY HISTORY............................................. 36
- ------------------------------
OCCUPANCY.................................................................. 36
- ---------
ZONNING AND OTHER LAND USE CONTROLS........................................ 36
- -----------------------------------
ASSESSMENT AND TAXES....................................................... 37
- --------------------
MARKETABILITY AND EXPOSURE PERIOD.......................................... 38
- ---------------------------------
VALUATION SECTION.......................................................... 40
HIGHEST AND BEST USE....................................................... 41
- --------------------
VALUATION PROCESS.......................................................... 46
- -----------------
INCOME CAPITALIZATION APPROACH............................................. 47
- ------------------------------
SALES COMPARISON APPROACH.................................................. 64
- -------------------------
FINAL ESTIMATE OF VALUE.................................................... 82
- -----------------------
CERTIFICATION.............................................................. 83
- -------------
ASSUMPTIONS AND LIMITING CONDITIONS........................................ 84
- -----------------------------------
ADDENDA.................................................................... 88
LEGAL DESCRIPTION.......................................................... 89
ENGAGEMENT LETTER.......................................................... 92
PROFILES OF APPRAISERS..................................................... 93
</TABLE>
<PAGE>
INTRODUCTORY SECTION
<PAGE>
7
PHOTOGRAPHS OF SUBJECT (Taken March 26, 1999)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
View of Entry for Shady Hills
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Typical Interior Street Scene in Shady Hills
<PAGE>
8
PHOTOGRAPHS OF SUBJECT (Taken March 26, 1999)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
View of Office/Laundry Building
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
View of Dickerson Pike Looking North
<PAGE>
9
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
MSA and Census Tract: Nashville MSA- 5360: Census Tract 113
- ---------------------
Property Appraised: 225 Space - Shady Hills
- -------------------
Manufactured Housing Community
1508 Dickerson Pike
Nashville, Davidson County, Tennessee 37207
Property Rights Appraised: Fee Simple Interest, subject to tenant leases
- --------------------------
Land Area: 24.89 acres or 1,084,208 square feet
- ----------
Improvements: 225 manufactured housing spaces, a 980 square foot
- ------------- masonry office building, a 3,100 square foot
masonry storage building, an 833 square foot wood
frame maintenance shed and a 1,230 square foot
masonry commercial garage building that were
developed in 1950 and 1950.
Owner: Windsor Park Properties 3
- ------
Zoning: R6, Residential and CS, Commercial Service
- ------- Districts
Highest and Best Use: As Vacant: Hold for future development as
- --------------------- predicated by market demand. As Improved: Current
use (Manufactured Housing Community)
Value Indications: Income Approach $2,400,000
- ------------------ Sales Comparison Approach $2,500,000
Final Estimate of Value: $2,400,000
- ------------------------
Date of Appraisal: October 28, 1999
- ------------------
Date of Prior Inspection: March 26, 1999
- -------------------------
<PAGE>
10
SCOPE OF THE ASSIGNMENT
- -----------------------
This limited scope assignment encompasses providing a desktop update of the
"as is" market value of the fee simple property rights, subject to tenant
leases. The subject consists of a 225-space manufactured housing community that
is situated on 24.89 acres of land. The on-site managers are Lee and Ann Lynch.
The community is located along the west side of Dickerson Pike at the northern
edge of the city limits of Nashville. The date of the valuation is October 28,
1999 and the property was previously inspected on March 26, 1999.
The first step in the analysis is to develop a concise statement or
definition of the appraisal assignment. This sets the limits of the analysis and
eliminates any ambiguity about the nature of the assignment. This is
accomplished by: 1) identifying the real estate being analyzed, 2) stating the
effective date of value, 3) stating the purpose and use (function) of the
analysis, 4) defining market value, 5) defining and identifying the property
rights to be valued, and 6) stating the assumptions and limiting conditions
applicable to the conclusions.
After defining and accepting the assignment, the preliminary analysis,
which was previously formulated in order to determine the character and extent
of the proposed assignment, is reviewed and refined. The preliminary analysis
also determines the amount of work that will be required to gather the necessary
data. This analysis and work plan are dependent upon the character of the
assignment and the type of property being analyzed. The next step is to survey
the market and its environs, including the gathering of general and specific
data. The physical and area descriptions of the subject are based on the
previous physical inspection of the subject, which was accomplished on March 26,
1999.
General data consists of information on the principles, forces and factors
that affect marketability and property value. This information includes regional
and neighborhood trends, as well as social, economic, governmental and
environmental forces that could or may have an effect on the subject's
marketability and value. This general data contributes significantly to the
understanding of the marketplace. Area data for Nashville and the subject's
immediate neighborhood was obtained from a number of published sources that are
appropriately cited in the report. Based on the data produced through the
research of the general area and neighborhood the initial searches for market
data were extended back to January 1996. As there was adequate data from which
to evaluate the subject property, during that time period, the search was not
further extended or otherwise modified.
Specific data relates to the property being appraised, including a detailed
description of both the parcel comprising the subject site and the subject's
existing site improvements, based upon the previous physical inspection of the
premises and the neighborhood, together with various documents and drawings
obtained from the owner, management and public services; as well as current and
recent changes in ownership of the subject, occupancy, zoning and land use
<PAGE>
11
Scope of the Assignment
regulations affecting the subject, and assessment and real estate tax
information applicable to the subject, obtained from the appropriate
governmental agencies. The gathering of specificdata also relates, as may be
applicable, to the comparable land sales, improved sales and rentals selected.
The majority of the market transactions were originally researched through
public records and subscription services, which were then visually inspected and
verified with a principle of the transaction, a broker or agent involved in the
transaction and through public records.
In addition to the physical data, locational and income and expense
information for the subject and, as available, for the comparable sales and
rentals was utilized. Also considered are financing arrangements and/or unusual
motivations of either buyer or seller that could or did affect selling prices or
rentals.
An integral part of the valuation process for the property is the
determination of the highest and best use of the subject site: 1) as if vacant,
and 2) as currently improved. The latter analysis is useful in identifying
comparable properties, and determining whether the existing improvements should
be retained, renovated or demolished. The land value estimate, as if vacant, is
required when the land's contribution to total property value is sought, or when
improvements are valued separately, as in the Cost Approach.
After determining the subject site's highest and best use and gathering the
necessary data, we integrate the information drawn from the market research and
analysis of data and consider the application of the three valuation approaches
- - the Income Capitalization Approach, the Sales Comparison Approach and the Cost
Approach - in order to derive a well-supported value estimate of the fee simple
interest. Although the three approaches are interrelated, the property type and
use will determine which approach or approaches are most appropriate. Upon
completion of the applicable approaches, we reconcile the value conclusions
derived in order to provide a final value estimate.
<PAGE>
12
PURPOSE AND INTENDED USE OF THE REPORT
- --------------------------------------
The purpose of the limited scope appraisal is to complete a desktop update
of our opinion of the "as is" market value of the fee simple interest, subject
to existing tenant leases, of the real estate, as of October 28, 1999.
The information, opinions, and conclusions contained in this report have
been prepared for corporate planning purposes. The intended user of the report
is Windsor Corporation.
APPRAISAL DEFINITIONS
- ---------------------
Market Value, as defined by the Office of the Comptroller of the Currency
is:
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 passing of title from
seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what
they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- 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.
Fee Simple Interest is defined as the absolute ownership unencumbered by
any other interest or estate subject only to the four powers of
government./4/
__________________________
/4/The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute,
1993.
<PAGE>
13
PROPERTY RIGHTS APPRAISED
- -------------------------
The real estate interest appraised is that of ownership in fee simple
interest, subject to existing tenant leases, and the property is appraised as if
free and clear of mortgages, liens, servitudes and encumbrances, except those
noted in the body of this appraisal.
EFFECTIVE DATE OF VALUE
- -----------------------
The effective date of our value is October 28, 1999. The property was
previously inspected on March 26, 1999.
DATE OF INSPECTION
- ------------------
Keith D. McFarland, ASA, previously inspected the property on March 26,
1999. The physical and area descriptions for the subject are based on the prior
inspection of the subject property. This appraisal assumes no substantial
changes in the condition of the property or the market affecting the subject
property since our previous inspection.
<PAGE>
DESCRIPTIVE SECTION
<PAGE>
15
AREA DESCRIPTION
- ----------------
Introduction
- ------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate.
The first step in estimating the highest and best use of the subject
property is an examination of the social, economic, governmental and
environmental forces affecting property values in the Nashville area. In the
following discussion, we have attempted to present sufficient data to inform
readers unfamiliar with Nashville, the Davidson County area and its environs.
Location
- --------
Nashville, the state capitol and county seat of Davidson County, is
centrally located in the state of Tennessee. Regional highway access is good
with three interstates, I-40, I-24, and I-65, accessible from I-440 which forms
a partial loop around the central urban core. This area is a part of the
Nashville MSA which also encompasses Cheatham, Dickson, Robertson, Rutherford,
Sumner, Williamson and Wilson Counties, and is situated approximately 285 miles
northwest of Atlanta, Georgia and 210 miles east of Memphis. The subject lies
approximately one mile north of the Central Business District.
Nashville-Davidson County is a consolidated city-county government system.
The Nashville MSA is the largest MSA in the state and serves as a center for
academic, political, research and technological activities.
Population
- ----------
As of 1998, the Nashville MSA contained a total population of 1,151,858,
and represents a 18.1 percent increase from 1990. Davidson County is the
largest county within the MSA with a estimated 1998 population of 538,796. This
represents a 5.5 percent increase in total population since 1990. The Nashville
MSA encompasses 4,004 square miles and has exhibited one the highest population
growth levels in the nation during the past two decades. This growth is
attributed to job growth and attractive cost of living for the surrounding area.
Population trends for the area are outlined on the following page.
<PAGE>
Area Description 16
================================================================================
REGIONAL POPULATION TRENDS
1980 to 1990
Compound Annual
1980 1990 1998 Growth Rate
- --------------------------------------------------------------------------------
Davidson County 477,811 511,000 538,796 0.75%
Nashville MSA 850,505 975,026 1,158,858 1.38%
State of Tennessee 4,591,023 4,877,203 5,442,000 0.67%
================================================================================
It is estimated that the population levels of the Davidson County and other
locations in the surrounding MSA area will continue to increase in coming years.
The 1997 effective buying income for the MSA was estimated to be $38,224 and
represents a 5.2 percent increase from 1996. According to data complied by the
Metropolitan County Planning Commission, average salaries in all major
industrial sectors in Davidson County exceed the state average; in Manufacturing
and Services, the average salary is 121.7% and 117.4% of the state average.
Economic Base and Employment
- ----------------------------
The Nashville MSA has a relatively diversified economic base and primary
employment sectors include services (31.5%), wholesale and retail trade (24.3%),
manufacturing (15.4%) and government (12.6%). Employment growth trends for the
MSA reflect the recession of the early 1990's and a full recovery. The
unemployment rate has continued to decline as the total labor force has
increased. This factor indicates job growth has outpaced the growth in the labor
force. It is significant to note that in the 1980-1993 period, manufacturing
continued to grow in contrast to the national experience. Nashville has also
increased a steady rate of employment growth during recent years. Much of this
growth has been in the music industry and the service jobs associated with the
continued growth of tourism. Also, there is a large concentration of employment
in the automotive industry and health management firms. Major private employers
include Vanderbuilt University and Medical Center (12,000 employed),
Columbia/HCA Healthcare Corporation (7,000), and Nissan Motor Manufacturing
Corp. USA (6,000).
The labor force for the MSA numbered approximately 614,900 in 1997 and
represents a 22.4 percent increase since 1990. Therefore, the total amount job
growth is outpacing population growth for the surrounding area. Unemployment
during 1998 averaged 2.9%, and represents a decrease from the 1997 level of
3.4%. However, these figures are well below both state and national unemployment
levels.
<PAGE>
Area Description 17
Transportation
- --------------
Davidson County and the Nashville MSA enjoy an excellent transportation
network that allows convenient access to primary cities. Primary transportation
routes include Interstates 40, 24, 65, 440 and 265. Interstate 65 connects
Nashville with Birmingham, Alabama to the south and Louisville, Kentucky to the
north. Interstate 840, an "outer loop" controlled access highway currently under
construction around Nashville's MSA and will extend through Williamson County.
Commercial air service is available from the Nashville Metropolitan Airport.
Common carrier freight service is provided by over 100+ trucking companies with
several maintaining terminals within the surrounding area. Railroad service is
provided by CSX Railroad which serves the area. Overall, transportation
facilities within the Davidson County area are sufficient to serve the needs of
both businesses and residents.
Summary
- -------
In summary, the Nashville area looks favorable with most economic sectors
experiencing strong growth from both relocations and expansions. With a
diversified economy and the seat of state government, a large measure of
stability is ensured relative to many other metropolitan areas. Although future
rates of growth are not likely to match those of the mid and late 1980's, the
overall prognosis of factors pertinent to the long-term real estate investment
decision appears positive.
<PAGE>
Area Description 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Map
<PAGE>
NEIGHBORHOOD DESCRIPTION 19
- ------------------------
A neighborhood is defined as a portion of a larger community, or an entire
community, containing a homogeneous group of inhabitants, buildings, or business
enterprises.
Location
- --------
The subject is located along the west side of Dickerson Pike, just south of
Trinity Lane. This location is approximately 2 miles south of the city limits of
Nashville within an older commercial area. The neighborhood boundaries are
generally described as Briley Parkway to the north, Gallatin Avenue to the east,
Cumberland River to the south and Interstate 65 to the west. Dickerson Pike
extends northeast/southwest and serves as a primary commercial thoroughfare for
northern Davidson County. This street extends south to the Central Business
District and allows for convenient access to Interstate 65 via Trinity Lane and
Briley Parkway. The subject property is located in the northern portion of
Davidson County.
Neighborhood Characteristics
- ----------------------------
The subject is situated in an older mature commercial area that is
primarily built-up with no new commercial or residential development having
occurred during recent years. The majority of the neighborhood remains
undeveloped. Land uses surrounding the subject consist of a mixture of older
commercial developments located along Dickerson Pike with newer commercial
properties being located further north. Surrounding developments include older
motels, a laundry building, older restaurants and retail buildings and used car
dealerships. Several of the surrounding properties reflect deferred maintenance.
Extending along the western boundary of the site is Interstate 65. Located to
the northwest is the Holiday Mobile Home Park. Located further south near the
Central Business District a new stadium is under construction and upon
completion, will likely increase traffic and revitalization of the surrounding
area. The immediate area has few vacant sites that are available for
development. The existing use of the subject is compatible with surrounding land
uses.
Access
- ------
The subject property is accessible from I-65 via Trinity Lane located
immediately north and Briley Parkway further north of the subject property.
Trinity Lane is a two lane commercial street that extends east-west and connects
to Dickerson Pike immediately north of the subject property. Briley Parkway is
a primary traffic artery that forms a circular loop around the northern portion
of Davidson County connecting to both Interstates 65 and 24. Access to the
subject is provided by Dickerson Pike, a four-lane asphalt paved street that
extends north-south and is improved older commercial properties within the
immediate vicinity of the subject property. Overall, access to the subject
property is considered good.
<PAGE>
Neighborhood Description 20
Housing
- -------
While the subject competes with all forms of housing to a certain degree,
the closest competition is other manufactured housing communities. There are
three large manufactured housing communities located in northern Davidson
County. Holiday Mobile Home Park is a older 267 space manufactured housing
community that is located to the northwest along Grizzard Avenue. Trailmont
(131 spaces) and Country Living (118 spaces) manufactured housing communities
are located further north within Goodlettsville area. Other communities within
the surrounding area include Country Meadows (296 spaces) located in Antioch and
Old Hickory Estates (286 spaces) which is located in Mount Juliet. A survey of
surrounding parks revealed increases in rental rates during the past year with
slight declines in occupancy levels being noted. The decline in occupancy is
attributed to a decline in interest rates which made single-family home
ownership more attractive. These properties are discussed further in the
Manufactured Community Market Overview section of this report.
Concurrency
- -----------
Land uses for the subject's market area are controlled by the Davidson
County Planning and Zoning Commission which implements and monitors local
comprehensive and growth management plans. The existing use of the subject is a
legal nonconforming use with local zoning regulations.
Summary and Conclusion
- -----------------------
The real estate market in Davidson County is strong. The office, industrial
and retail real estate sectors reported 1998 vacancy levels below 10 percent. In
addition, non-residential building permit values increased by 51.8 percent from
1996 to 1997 while a slight decrease was noted for residential building permits.
The growth demands on the county are very evident in light of past trends and
the projections are for further population increases. The desirability of this
area is evident and is anticipated to continue to increase as the local economy
is forecasted to continue to expand in coming years. The subject property is
situated in a mature commercial area that has exhibited economic decline during
recent years and no new commercial or residential development was noted for the
immediate area. However, the overall demand for manufactured housing space is
evident within this market and is anticipated to continue. Based on these
factors, real estate values are anticipated to increase barring any near term
economic reversals.
<PAGE>
Neighborhood Description 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neighborhood Map
<PAGE>
22
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW
- ----------------------------------------------
The manufactured housing industry in the state of Tennessee has matured
over the past twenty years, as a direct result of the advancements in
manufactured housing construction techniques and the continued ability of
producers and dealers to make manufactured housing a relatively inexpensive
housing alternative. Over this period the industry has progressed from it's
original "trailer park" image, to the "mobile home park" and, finally, to its
present status as "a manufactured housing community." This most recent status is
only appropriate, as most manufactured homes are typically moved only once
during their economic lifetime; from the manufacturer or dealer's lot to the
homesite.
According to the 1998 U.S. Housing Market Map, Tennessee ranked 7th among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Tennessee have generally increased since 1996.
Manufactured
Home Shipments
<TABLE>
<CAPTION>
============================================
Year Shipments
============================================
<S> <C>
1996 11,762
--------------------------------------------
1997 11,723
--------------------------------------------
1998 14,394
============================================
</TABLE>
Source: Tennessee Manufactured Housing Association
There is a wide range of rental rates in the marketplace. Generally
speaking, lot rent ranges between $200.00 per month to $342.00 per month. Rates
varied within some of the communities as lots for multi-section homes and larger
lots leased for higher than standard amounts. In addition higher rents were
charged at communities that provided utilities to the tenants. Typically, only
trash collection service is included in the rental rate.
The subject rental rates are $180.00 per lot, per month for singlewide
units and $188.00 per month for doublewide units. The subject rents are at the
lower end of the range of rent levels found in nearby communities. The last
rent increase was in January 1999. Currently management bills the residents on
a monthly basis for utilities in addition to rent.
Because occupancies are currently strong, there were no incentives offered
for the move-in of homes into a community. As shipments continue to increase
and existing vacancy is absorbed, the market should tighten and permit rent
increases.
<PAGE>
23
The subject is a 225-space, all age manufactured housing community. The
current physical occupancy of the subject is 86.2%. There is one employee
occupied space. The economic occupancy is approximately 85.8%. The communities
that are most competitive with the subject have been detailed on the following
pages. These five communities are fully developed and are currently ranging
from 87.6% to 100% occupied.
Summary
- -------
The manufactured housing market is sophisticated in the state of Tennessee.
Shipments have increased over the last three years. Manufactured housing
provides a lower cost-housing alternative to site built homes and a sense of
community to residents. A survey of the subject's market area revealed that
several of the competing manufactured housing communities are currently
reflecting occupancy levels of 95% to 100% with property mangers reporting that
new homes being are sold with few spaces being available for lease. A slight
increase in vacancy levels was noted is some of the communities and is
attributed to low interest rates which have made single-family home ownership
more attractive. In addition, it was also reported that there is a significant
amount of local opposition regarding the development of any new manufactured
housing communities within Davidson County. Therefore, it is unlikely that
overbuilt market conditions will occur within the near future. The overall
demand for manufactured housing sites within this market area is high.
Increasing rents and occupancies should continue to occur as the local and
national economy improves.
<PAGE>
24
Old Hickory Estates
500 Cheyenne Boulevard
Madison, Davidson County, Tennessee
=======================================================================
=======================================================================
Location: East Side of Cheyenne Boulevard, south of Hickory
Boulevard.
Number of Spaces: 286
Property Description: All age manufactured housing community built in
1970's.
Monthly Rental Rates: $215.00 to $225.00
Occupancy: 90.0%
Services Included in Rates: Trash collection and sewer service
Amenities: Swimming pool
Verification/Date: Kitty Alyea, Community Manager on October 28,
1999.
Comments: Old Hickory Estates is an older community that
rental increased rates by $15.00. This community
is approximately nine miles northeast of the
subject.
<PAGE>
25
Country Meadows
860 Richards Road
Antioch, Davidson County, Tennesse
==========================================================================
==========================================================================
Location: South side of River Road, east of Antioch Pike
Number of Spaces: 296
Property Description: All age manufactured housing community built in
1980's.
Monthly Rental Rates: $332.00 to $342.00
Occupancy: 95.9%
Services Included in Rates: Trash collection and lawn care service
Amenities: Playground and swimming pool.
Verification/Date: Katrina Garrett, Community Manager on October 28,
1999.
Comments: This is an attractive community that is located in
a superior commercial/residential area and is
located approximately 11 miles southeast of the
subject property.
<PAGE>
26
Trailmont
1341 Dickerson Pike
Unincorporated Davidson County, Tennessee
==========================================================================
==========================================================================
Location: West side of Dickerson Pike, south of Old
Dickerson Pike.
Number of Spaces: 131
Property Description: All age manufactured housing community built in
stages from 1963 to 1966.
Monthly Rental Rates: $224.00 to $229.00
Occupancy: 99%
Services Included in Rates: Trash collection.
Amenities: Two Playgrounds
Verification/Date: Millie Davis, Community Manager on November 5,
1999.
Comments: This community is located approximately six miles
north of the subject and is superior in quality
and condition.
<PAGE>
27
Holiday
201 Grizzard Avenue
Nashville, Davidson County, Tennessee
====================================================================
====================================================================
Location: Located at the end of Grizzard Avenue, west of
Dickerson Pike
Number of Spaces: 267
Property Description: All age manufactured housing community built in
1967.
Monthly Rental Rates: $200.00 to $210.00
Occupancy: 100.0%
Services Included in Rates: Water, sewer and trash collection.
Amenities: Swimming pool.
Verification/Date: Gene Gentry, Community Manager on October 28,
1999.
Comments: This is an older community that is inferior in
condition to the subject property. The park is
located approximately 1 mile northwest of the
subject property.
<PAGE>
28
Country Living
1330 Williamson Road
Goodlettsville, Davidson County, Tennessee
==========================================================================
==========================================================================
Location: South side Williamson Road, east of Dickerson
Pike
Number of Spaces: 118
Property Description: All age manufactured housing community built in
late 1960's.
Monthly Rental Rates: $205.00 to $210.00
Occupancy: 100%
Services Included in Rates: Trash collection.
Amenities: None
Verification/Date: Mrs. Vaughn, Community Manager on October 28,
1999.
Comments: This park is inferior in visibility but is
situated in a superior residential area. The
park is located approximately 9 miles northeast
of the subject property.
<PAGE>
RENTAL COMPARABLE SUMMARY
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name/Location Number Monthly Rental Services Amenities
Spaces/ Rates Included In Rent
% Occ.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Old Hickory Estates 286/ $ 215.00 Trash collection and Swimming pool.
-------------------
500 Cheyenne Boulevard 90.0% to sewer service.
Madison, Davidson County, Tennessee $ 225.00
- ---------------------------------------------------------------------------------------------------------------------------------
2 Country Meadows 296/ $ 332.00 Trash collection and Playground and
---------------
860 Richards Road 95.9% to lawn care service. swimming pool.
Antioch, Davidson County, Tennessee $ 342.00
- ------------------------------------------------------------------------------------------------------------------------------------
3 Trailmont 131/ $ 224.00 Trash collection. Two playgrounds
---------
1341 Dickerson Pike 99.0% to
Unincorporated Davidson County, Tennessee $ 229.00
- ------------------------------------------------------------------------------------------------------------------------------------
4 Holiday 267/ $ 200.00 Water, sewer, trash Swimming pool.
-------
201 Grizzard Avenue 100.0% to collection.
Nashville, Davidson County, Tennessee $ 210.00
- ------------------------------------------------------------------------------------------------------------------------------------
5 Country Living 118/ $ 205.00 Trash collection. No amenities.
--------------
1330 Williamson Road 100.0% to
Goodlettsville, Davidson County, Tennessee $ 210.00
-----------------------------------------------------------------------------------------------------------------------------------
Subj.
Shady Hills 225/ $ 180.00/ Trash collection. No amenities.
-----------
1508 Dickerson Pike 85.8% $ 188.00
Nashville, Davidson County, Tennessee
====================================================================================================================================
</TABLE>
<PAGE>
Manufactured Housing Community Market Overview 30
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Rent Comparable Location Map
<PAGE>
31
LAND AND SITE IMPROVEMENTS
- --------------------------
The subject site is an irregular shaped parcel of land containing 24.89
acres (based on public records). The tract is generally hilly and slopes gently
to the east and north with the eastern and northern portions of the site at the
surrounding street grade. Drainage of the tract appears adequate and no adverse
soil or subsoil conditions were observed during the previous physical inspection
of the site.
Utility services connected and in service on the date of valuation include
the following:
Sanitary Sewer: Metropolitan Water and Sewer
--------------
Storm Sewer: Metropolitan Water and Sewer
-----------
Water: Metropolitan Water and Sewer
-----
Telephone: Bell South
---------
Electric: Nashville Electric Service
--------
Gas: Nashville Gas
---
Ingress to and egress from the subject community is via Dickerson Pike.
Access is rated good. Roadways that are laid-out to maximize the natural
features of the terrain access the individual lots in the community. Roadway
improvements include:
Street-bed: Dickerson Pike is an asphalt paved, four-lane thoroughfare.
----------
The streets in the community are asphalt-paved roadways and
are 15 to 20-foot wide right-of-ways.
Curb: Dickerson Pike does not have curbs or gutters; however,
----
asphalt curbs exist within the subject property.
Sidewalk: There are no sidewalks along Dickerson Pike. There are none
--------
in the community.
<PAGE>
32
Streetlights: Dickerson Pike has overhead streetlights in this vicinity.
------------
There are also some pole-mounted lights throughout the
community.
Landscaping: Grass and other planted areas are found throughout the site.
-----------
Some lots have trees.
Arrangements between the subject ownership and municipal and/or public
utility authorities for the connection of telephone and electricity are presumed
to exist, although neither a plan specifically identifying the location of all
underground lines nor contracts providing for their installation were provided
to us.
Encumbrances
- ------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. Additionally, there are no rent controls
in effect in Davidson County.
Easements
- ---------
Standard utility easements for electricity and telephone are assumed to
exist. No other easements were identified to us.
Encroachments
- -------------
There were no obvious encroachments observed during the previous inspection
of the subject and neighboring properties.
Environmental
- -------------
There were no obvious areas of contamination on or about the subject site.
We are not qualified in environmental hazards and recommend an audit be
performed.
Functional Utility
- ------------------
The site, which is irregular in shape and contains a gross land area of
approximately 24.89 acres, is large enough to accommodate building improvements
and roadways as well as the green areas. The site is considered functional for
various residential development scenarios. The current development of 225 total
units equates to an overall density of approximately 9.04 units per acre, which
is higher than current development standards which tend toward larger lot sizes,
wider streets and more green areas. The site is considered functional for use
as a manufactured housing community.
<PAGE>
33
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Site Plan
<PAGE>
34
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 225 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size. The community contains five doublewide homesites with the
remaining lots being singlewide home sites.
There are no amenities and building improvements include a 980 square foot
one-story wood frame and concrete block office building, a 3,100 square foot
one-story wood frame and concrete block storage building, a one-story wood frame
and metal panel 833 square foot maintenance shed and a one-story metal frame and
panel 1,230 square foot commercial garage building. This building contains two
service bays and was previously used as a service station. It is currently
leased to Nashville Cab on a month-to-month basis for $700 per month with the
tenant paying all expenses except for real estate taxes. Due to the short-term
nature of this lease this portion of the subject was valued as additional income
to the property.
The community streets are asphalt paved and 15 to 20 feet wide. The streets
were observed to be in fair condition, although there are several areas of the
asphalt that have deteriorated and need to be attended to. On site lighting is
provided via pole mounted fixtures installed throughout the park.
Age and Condition
- -----------------
The community and site improvements were built in stages from 1950 to 1952,
and the community is approximately 48 years old. The common areas, streets and
individual mobile homes were observed to be in fair overall condition, having
been originally constructed of quality materials and having been maintained over
the years. Deferred maintenance was noted in several of the buildings and
includes the need for interior renovations. Overall, the current maintenance
level from the previous inspection was rated average.
<PAGE>
Improvement Description 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Site Layout
<PAGE>
36
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Davidson County in Deed Book 6995 at Page 501, is in the name of Windsor Park
Properties 3. The Deed was recorded in September 1986, and the indicated
consideration was $2,700,000. No other sales were noted during the past three
years.
OCCUPANCY
- ---------
The property is occupied by a fully developed 225-space manufactured home
community. According to the rent roll, there are 31 vacant lots and the physical
occupancy is 86.2%. There is one employee occupied space. The economic occupancy
is approximately 85.8%. The site is also improved with a 1,230 square foot
commercial garage building which is currently leased to Nashville Cab on a
month-to-month basis for $700 per month with the tenant paying all expenses
except for real estate taxes.
Our analysis does not incorporate any value attributable to any community
owned homes as these units are considered personal property, not a portion of
the real estate. Likewise, we have incorporated no income attributable to the
sale of homes in our analysis.
Rental rates at the community are $180.00 and $188.00 per month. The last
rent increases occurred in January 1999 and was $10.00 per month. Management
bills tenants separately for utilities and pays for trash collection.
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned as a R6, Residential and CS, Commercial Service
Districts under the Davidson County zoning ordinance. It is our opinion that the
existing use of the subject property is a legal nonconforming use with the
zoning code.
Flood Hazard
- ------------
Davidson County is a participant in the Federal Emergency Management Agency
(FEMA) flood map system. The main site portion of the subject site is not
located in a designated Flood Hazard Area with the northwestern portion of the
site being located in a Zone AE Flood Hazard Area according to Flood Map
Community Number 470040, Panel 0159C, dated June 2, 1993. No flooding problems
were reported at the subject and the location of this portion of the site within
this floodplain is not deemed to impact overall site utility.
<PAGE>
Zoning and Other Land Use Controls 37
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. The
eastern portion of the site encompassing approximately .73 acres is improved
with a 1,230 square foot commercial garage building that was previously used as
service station and is currently leased to a cab company. According to the
property manager, this portion of the site was cleaned up with the gasoline
tanks being removed and a phase one environmental study revealed no soil
contamination. This analysis assumes that no hazardous substances or waste
currently exist at the site and no consideration was given to the potential
liabilities and cleanup costs associated with the presence of these materials.
In addition, we have no qualifications in environmental hazards and recommend an
environmental audit be performed.
ASSESSMENT AND TAXES
- --------------------
The subject property is identified in the Davidson County records under
Parcel Numbers 071-11-0-002, 273 and 296. The assessed value of the subject
totals $930,785. Based on a 1998 tax rate of $4.24 per $100.00 of assessed
value, the 1998 taxes payable in 1999 are $39,465.29.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Tennessee, residential properties are
assessed at 25% of the market value while commercial properties are assessed at
40% of market value. The taxable assessment for the subject remained the same
for 1997 and 1998. The assessed value indicates a market value for the subject
of $2,919,200. According to the Tax Collector's Office, all taxes are current.
Properties are reassessed annually and equitability of assessments is a basis
for appeal.
Historically, the tax rates have varied slightly since 1997. The table on
the following page illustrates the tax liability for the subject property since
1997.
<PAGE>
38
<TABLE>
<CAPTION>
=================================================
Year Total Taxes
=================================================
<S> <C>
1999 $39,465.29
-------------------------------------------------
1998 $38,348.34
-------------------------------------------------
1997 $41,885.00
=================================================
</TABLE>
Historically the taxes have varied, but we would expect some increase in
future years as the demand for governmental service increases. We have projected
the stabilized taxes at $39,466, applying the 1998 tax rate of $4.24 to an
assessment of $4,137 per space, or $930,785.
In comparison to our market value opinion contained herein, the subject's
assessed value appears high. It is our opinion that the subject property is over
assessed.
MARKETABILITY AND EXPOSURE PERIOD
- ---------------------------------
The subject property as discussed in the Neighborhood Analysis and
Manufactured Housing Community Market Overview sections of this report is
competitive and marketable with other properties in the marketplace.
There are typically four classes of purchasers attracted to this type of
development. The first are the tenants/residents of the community, purchasing on
a cooperative or condominium basis to reduce rental rates. The second class of
purchaser would be the single owner/operator who purchases a community as an
income and investment vehicle. Third would be the "traditional" manufactured
housing community owner/developer who views the community as a safe, long-term
investment. Finally, there is the institutional investor or syndicate (REIT)
which owns several large manufactured housing communities on a
statewide/nationwide basis.
Due to the stability of manufactured housing community investments, the
REIT investors have been a major player in the marketplace. In 1994, REIT
investors bid down capitalization rates for new, large communities. However,
after the initial splash, REIT investments have slackened as property owners
have placed premium prices on their properties. Resident groups have also
increased demand for manufactured housing community investments. According to
our banking sources, resident groups are able to borrow money at debt coverage
ratios as low as 1.0 to 1. The banks view resident group loans as good quality
with minimum risk. Typical payback periods range between five and eight years.
All age communities, like the subject, typically are not candidates for resident
purchase.
<PAGE>
39
Discussions with large institutional manufactured housing community
investor representatives and local area realtors, indicated that "properly
priced", stable, well kept manufactured housing communities should "be under
contract" within a six to eight month period in today's market. However, our
research has also revealed that very few communities are "listed" for sale and
that for the most part brokers solicit owners for buyers.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.50% to 9.50% overall
capitalization rate requirement for senior communities. All age communities
typically reflect higher capitalization rates due to a less stable occupancy
base. Pricing is established by processing gross income, reduced by a 3% to 5%
vacancy and credit loss factor with expenses of 35% of effective gross income.
An additional capital charge of 3% to 5%, based on overall condition, is
deducted to arrive at a net operating income (NOI). This criteria is generally
the most restrictive pricing, as other investors will tend to accept lower
expense ratios (30%), no capital charges and a lower overall rate.
Interest rates are low and financial institutions are again willing to lend
money for existing real estate projects with good occupancies. The presence of
life insurance companies and conduit programs have made the financing of
manufactured housing communities a very competitive business. The insurance
companies and conduit programs will lend on a non-recourse basis, with terms
ranging from 10 to 20 years.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term, fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Our discussions with national lenders indicate that long term, fixed
rate loans are still available, but at a minimum interest rate of 7.25% to 8.0%.
On the basis of the preceding analysis, in our opinion, the exposure period
for the subject would be within the range indicated by the industry
participants, and we estimate an exposure period of six months.
<PAGE>
VALUATION SECTION
<PAGE>
41
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as:
"The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible and which results in the highest value."/5/
The highest and best use of a specific parcel of land does not depend on
subjective analysis by the property owner, the developer, or the appraiser;
rather, the competitive forces within the market where the property is located
shape highest and best use. Therefore, the analysis and interpretation of
highest and best use is an economic study of market forces focused on the
subject property.
Market forces also shape market value. The general data that is collected
and analyzed to estimate property value is also used to formulate an opinion of
the property's highest and best use as of the effective date of the appraisal.
In all valuation assignments, value estimates are based on use. The highest and
best use of a property to be appraised provides the foundation for a thorough
investigation of the competitive positions of buyers and sellers in the
marketplace. Consequently, highest and best use can be described as the
foundation on which market value rests. Without interaction in the marketplace,
highest and best use would not exist and market value estimations would be
impossible.
When potential buyers contemplate purchasing real estate for personal use
or occupancy, their principal motivations are perceived benefits of enhanced
enjoyment, prestige, and privacy. Purchasers of investment property are
frequently motivated by the promise of net income or capital accumulation and
certain tax advantages. These investors are more directly concerned with
feasibility, an indication that a project has a reasonable likelihood of
satisfying their specific objectives. These objectives may include assured
occupancy, establishing operating costs at a reasonable and acceptable level,
and potential property appreciation.
___________________
/5/ The Appraisal Institute, The Appraisal of Real Estate, 10th Edition
----------------------------
Chicago: The Appraisal Institute, 1992, page 275.
<PAGE>
42
Analysis of the highest and best use of: 1) the land as though vacant, and
2) the property as improved, is essential in the valuation process. Through
highest and best use analysis, we attempt to interpret the market forces that
influence the subject property and identify the use on which the final value
estimate will be based. This determination is based on the analysis and
interpretation of prevailing market conditions, the trends affecting the buyers
and sellers in the marketplace, and the existing use of the subject property.
Analyzing the highest and best use of the land as though vacant serves two
functions. First, it helps identify comparable properties that should have
highest and best uses of the land as though vacant, similar to that of the
subject property. The second reason is to identify the use that would produce
maximum income to the land after property income is allocated to the
improvements. In the Cost Approach and some income capitalization techniques, a
separate value estimate of the land is required. Estimating the land's highest
and best use as though vacant becomes the necessary part of deriving a land
value estimate.
There are also reasons to analyze the highest and best use of the property
as improved. The first is to help identify comparable properties that should
have the same or similar highest and best uses as the improved subject property.
The second is to decide whether the improvements should be demolished, renovated
or retained in their present condition. They should be retained as long as they
have some marketable value and the return from the property exceeds the return
that would be realized by a new use, after deducting the costs of demolishing
the old building and constructing a new one. Identification of the existing
property's most profitable use is crucial to this determination.
The highest and best use of both the land as though vacant and the property
as improved must meet four criteria. The highest and best use must be:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
These criteria are usually considered sequentially; a use may be
financially feasible, but this is irrelevant if it is physically impossible or
legally prohibited. Only when there is a reasonable possibility that one of the
prior, unacceptable conditions can be changed is it appropriate to proceed with
the analysis. If, for example, current zoning does not permit a potential
highest and best use, but there is a possibility that the zoning can be changed,
the proposed use can be considered on that basis.
<PAGE>
43
Legally Permissible
- -------------------
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such a use and it must return
to the land the highest net return for the longest period of time.
Legal restrictions, as they apply to the subject property, are of two
types, i.e., private restrictions (deed restrictions, easements, etc.) and
public restrictions (zoning, building codes, environmental regulations and
historic district controls, etc.). These latter restrictions must be
investigated, to the best of our ability, because they may preclude many
potential highest and best uses. No information regarding private restrictions
affecting the subject was uncovered in our research or provided by the client.
It is assumed that only common restriction, i.e., utility easements, etc. are
in-place which would not be of any significant consequence to the development of
the site.
If the highest and best use of the site or property is not allowed under
current zoning, but there is a reasonable probability that a change in zoning
could be obtained due to shifting economic and social patterns, these conditions
can be considered determining highest and best use. However, we must fully
disclose all pertinent factors relating to a possible zoning change, including
that the change will not be granted. We must also be sensitive to potential
public reaction to proposed development projects since adverse reactions from
local residents and the general public have stopped many real estate
developments. The existing and/or projected use should be harmonious with the
nature and condition of existing neighborhood development.
The existing use of the subject property is a legal nonconforming use with
the zoning code for Davidson County. Therefore, the subject meets the legally
permissible criteria of this analysis as a legal nonconforming use.
Physically Possible
- -------------------
The second constraint imposed on the possible use of the property is that
dictated by the physical aspects of the site itself. Size, shape and terrain of
the parcel of land affect the uses to which it can be developed. The utility of
the parcel may depend on its frontage and depth. Also considered are the
capacity and availability of public utilities. When a site's topography or
subsoil conditions make development restrictive or costly, its potential use is
adversely affected. In general, the larger the site, the greater the potential
for achieving economies of scale or flexibility in development.
The highest and best use of a property as improved also depends on physical
considerations such as size, design and condition. The condition of the property
and its ability
<PAGE>
44
to continue in its current use may be relevant. If the property should be
converted to another use, the cost of conversion must be analyzed in light of
the returns to be generated by the new use. Obviously, the costs of conversion
depend on the property's existing physical condition.
The subject site is irregular in shape and contains a total area of 24.89
acres. The tract is generally hilly and slopes gently to the east and north with
the eastern and northern portions of the site at the surrounding street grade.
The size and shape of the site does not restrict maximum flexibility and
development.
Financially Feasible
- --------------------
After determining which uses are physically possible and legally
permissible, we have eliminated many uses from consideration. Then the uses that
meet the first two criteria are analyzed further to determine which are likely
to produce an income, or return, equal to or greater than the amount needed to
satisfy operating expenses, financial obligations and capital amortization. All
uses that are expected to produce a positive return are regarded as financially
feasible.
To determine financial feasibility, we then estimate the future gross
income that can be expected from each logical highest and best use. Vacancy and
collection losses and operating expenses are then subtracted from each gross
income to obtain the likely net operating income (NOI) from each use. A rate of
return on the invested capital can then be calculated for each use. If the net
revenue capable of being generated is enough to satisfy the required rate of
return on investment and provide a return on the land, the use is financially
feasible within some price limit.
Maximally Productive
- --------------------
Of the financially feasible uses, the use that produces the highest price,
or value, consistent with the rate of return warranted by the market for that
use is the highest and best use. To determine the highest and best use of land
as though vacant, the same rate of return is often used to capitalize income
streams from different uses into their respective values. This procedure is
appropriate if all competing uses have similar risk characteristics. If not,
differing rates of return would be required. The use that produces the highest
value is the highest and best use.
To test the highest and best use of land as though vacant or a property as
improved, an appraiser analyzes all logical, feasible alternatives. The market
usually limits the number of property uses to a few logical choices. Each
alternative use must first meet the tests of
<PAGE>
45
physical possibility and legal permissibility. The uses that meet the first two
tests are then analyzed to ascertain how many financially feasible alternatives
must be considered.
An appraiser must exercise caution in performing market analysis to support
an estimate of highest and best use. Although a given site may be particularly
well suited for a specific use, there may be a number of other sites that are
also well suited, and some may be better suited. Therefore, the appraiser must
test the highest and best conclusion to ensure that existing and potential
competition from other sites has been fully recognized.
Highest and Best Use - Vacant Land
- ----------------------------------
In determining the highest and best use of the site as vacant, the most
restrictive constraint is the legal use of the site. In the Zoning section of
this appraisal, it was noted that manufactured housing community development of
the property is a legal nonconforming use of the site.
We have also noted that there are a number of competitive manufactured
housing communities in the subject's neighborhood. Due to the non-availability
of space for immediate manufactured housing community development fees and a
lack of financing for speculative projects, it is unlikely that there will be an
abundance of speculative manufactured housing community development in the
foreseeable future.
Current trends in the manufactured housing sales would facilitate the
development of a manufactured housing community. In our opinion, the highest and
best use of the site, as if vacant and available for development, would be to
hold the property for future sale as the market trends might predicate, or
develop the land for low-to-moderate priced housing.
Highest and Best Use - As Improved
- ----------------------------------
The site is currently improved with a 225-space all age manufactured
housing community. The use of the site is a legal non-conforming use under the
current zoning code. The subject property has been in existence as a
manufactured housing community since 1950. The improvements are well situated on
the site. The site has access via Dickerson Pike. The use of the site is
physically possible. The demand for manufactured housing in this area is
evident, as exhibited by competing properties. As evidenced in the Income
Capitalization Approach, the property is capable of providing an acceptable
return to an owner, demonstrating the financial feasibility of the subject
property.
The property, as currently improved, is physically possible, legally
permissible, financially feasible and maximally productive. Therefore, in our
opinion, the highest and best use of the property as improved is its current use
as a 225-space all age manufactured housing community.
<PAGE>
46
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each approach
varies with the type and age of the property under examination, as well as the
quantity and quality of applicable market data as of the appraisal date. In the
analyses and appraisal of the subject property, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an estimate
of value through an economic analysis of the net income derived from the
property and is converted to a capital sum at an appropriate rate. The Direct
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a stabilized manufactured housing community, investors
are primarily concerned with cash flow to service any debt and the equity
positions. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of homes by offering
low space rental rates, an investor would not be willing to compensate a seller
for any more than the income to be received. A potential investor would be
primarily interested in the cash flow and equity return. Due to the subjectivity
of depreciation estimates and the lack of comparable land sales, we have omitted
the cost approach.
A number of positive and negative factors were believed to affect the
overall value of the subject property. On the positive side, the following were
considered.
1. The community is established and enjoys convenient access to primary
traffic arteries.
2. The community has maintained a higher level of occupancy during recent
years.
Partially offsetting the positive influences are negative factors among
which the following were considered the most pertinent:
1. Subject is situated in a mature commercial area that has exhibited
economic decline.
2. The subject is an older community does not have an amenity package;
therefore, rents are priced to be at the lower end of the range in the
market.
With the above factors in mind, the Income Capitalization and Sales
Comparison Approaches will now be discussed in detail on the following pages.
<PAGE>
47
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is of course an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms. Within the goal of price minimization purchasers seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
property, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property.
<PAGE>
48
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the property. The estimate of
net operating income is derived through the process of estimating the total
potential gross income (PGI), from lot rentals, less any vacancy and credit
loss, added to the estimate of income from other sources, producing an effective
gross income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
In our estimate of the stabilized net operating income, we have considered
the subject's current rent and expense levels and historical trends, together
with current rent and expense levels at manufactured housing communities similar
to the subject. The subject's historical income and expenses for 1996, 1997 and
1998 have been presented, in the table on the following page. In addition, we
also compared historical income and expenses for year-to-date September 1999
which were annualized. The expenses for the subject were compiled separately
but consolidated for analysis purposes.
Although the expenses do not appear unreasonable, we have also relied on
market comparables. Current income and expense information on three comparable
manufactured housing communities has also been presented in this section.
The data on the tables has been arrayed to display the "percent of total
income" and "dollar per space" figures, consistent with industry reporting
practices. We have combined some of the owners expense categories for purposes
of comparison.
Our analysis of each component of income, vacancy and credit loss and
expenses follows these tables, and has been summarized in the Stabilized
Operating Statement found on Page 60.
<PAGE>
49
Historical Expenses
<PAGE>
Income Capitalization Approach 50
Income Analysis
- ---------------
The general practice in the local market is to charge a base lot rent on a
monthly basis. As previously discussed in the Manufactured Housing Community
Market Overview section of this report, this rate, at the subject, is $180.00
for singlewide units and $188.00 per month for doublewide units. Based upon the
most recent Rent Roll and Revenue Summary, the total gross scheduled rent is
$40,540 per month or $180.18 per month per unit.
The base lot rate generally includes trash collection. Base lot rents
typically generate between 90% and 99% of the total income in a manufactured
housing community. At the subject trash collection is included in the monthly
lot rent with the utilities being paid by the tenant (utilities are paid as
additional rent). As shown by our survey, the subject's lot rents are lower
than the market range and is considered reasonable given the lack of amenities,
the age of the community and the services provided. Based on the market range,
we are of the opinion that the subject has a reasonable rent structure.
Potential Gross Income
- ----------------------
As any potential purchaser would incorporate a forecast of potential gross
income at the existing rent levels, our analysis has also accounted for this.
In our forecast of total rental income, we have forecast an average rent of
$180.18 per month for all 225 sites. The total potential gross income from lot
rentals is $486,480.
Vacancy and Credit Loss
- -----------------------
Vacancy and credit loss is typically a very small percentage in an
established community, due primarily to the high cost of relocating homes. The
current occupancy at the subject property is 87.6%. All age communities
typically have a more transient occupancy than do senior communities. We have
estimated stabilized vacancy and credit loss at 15% to account for both physical
and economic vacancy, and credit loss.
Total vacancy and credit loss has been estimated to be $72,972. The
effective gross income from rentals is estimated to be $499,008.
Miscellaneous Income
- --------------------
Miscellaneous income at the subject is generated from sources such as
utilities reimbursements, storage fees, late fees, application fees, bad check
charges and the rental income derived from the commercial garage building.
Historically, the subject generated $387.62 per space in 1996, $389.80 per space
in 1997 and $384.00 per space in 1998. We have estimated miscellaneous income
at $380.00 per space or $85,500 annually.
<PAGE>
51
Effective Gross Income
- ----------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated income losses due to any tenant changes, added to any additional
income from miscellaneous sources. Our estimate of the stabilized effective
gross income of $499,008 is detailed below:
<TABLE>
<CAPTION>
===========================================================================
Shady Hills Manufactured Housing Community
Effective Gross Income
===========================================================================
Income:
Monthly Monthly
Spaces Rent Total Annualized
---------------------------------------------------------------------------
<S> <C> <C> <C>
220 $180.00 $39,600 $475,200
5 $188.00 940 11,280
---------------------------------------------------------------------------
Gross Potential Rental $40,540 $486,480
Income
Less:
Vacancy & Credit Loss 15.0% (72,972)
--------
Effective Gross Income From Rentals $413,508
Plus:
Miscellaneous Income $380.00 85,500
--------
Effective Gross Income $499,008
=============================================================================
</TABLE>
<PAGE>
52
Operating Expense Analysis
- --------------------------
The following discussion addresses each of the line item expenses for the
property. We have presented 1996, 1997 and the 1998 expense amounts, together
with the comparable expense data, followed by our stabilized estimate of the
expense.
The comparable expense information has been obtained from a number of
reliable sources and we have presented it in a summary form, on the following
page, to maintain confidentiality. The expense comparables range in size from
109 to 144 spaces. These communities have operations similar to the subject.
<PAGE>
53
Comparable Expenses
<PAGE>
54
Insurance
- ---------
Insurance charges are typically property specific based on the location and
the amenity package. Historically, these charges have varied annually, ranging
from approximately $13.88 per space in 1998 to $34.37 per space in 1997. The
comparable expense data indicated a range from $24.85 to $28.58 per space. We
have placed emphasis on the historical amounts. We have used $15.00 per space in
our estimate of this expense. This is equal to $3,375 annually and represents
approximately 0.68% of the estimated effective gross income.
<TABLE>
<CAPTION>
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $6,547 $7,734 $3,123 $3,131 $2,740 $4,116 $3,375
- --------------------------------------------------------------------------------------------------------------
% EGI 1.61% 1.63% 0.63% 1.29% 0.81% 1.10% 0.68%
- --------------------------------------------------------------------------------------------------------------
$/Space $29.10 $34.37 $13.88 $24.85 $25.14 $28.58 $15.00
==============================================================================================================
</TABLE>
Office
- ------
This expense category is also project specific due to varying
classifications of expense categories. We have attempted to include like items
in this category for both the subject and the expense comparables. For the
subject, this category includes office expense, supplies, licenses, dues,
subscriptions, postage, auto, travel, advertising and telephone. Historically,
this expense has ranged from $108.04 per space in 1998 to $141.43 per space in
1997. The expense comparables indicated a much lower range for this category
from $16.04 to $53.06 per space. Primary consideration was given to the
historical expense levels. We have estimated the administrative/office expense
at $100.00 per space or $22,500 per year. This estimate is equal the equivalent
of 4.51% of the effective gross income estimate.
<TABLE>
<CAPTION>
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Total $30,029 $31,822 $24,309 $2,155 $5,783 $2,310 $22,500
- --------------------------------------------------------------------------------------------------------------
% EGI 7.40% 6.71% 4.88% 0.89% 1.70% 0.62% 4.51%
- --------------------------------------------------------------------------------------------------------------
$/Space $133.46 $141.43 $108.04 $17.10 $53.06 $16.04 $100.00
==============================================================================================================
</TABLE>
<PAGE>
55
Maintenance and Repairs
- -----------------------
These expenses are project specific based on the age and condition of the
property. Many properties expense capital items rather than capitalizing them,
which results in abnormal spikes in the expense amounts in certain years.
Historically, maintenance and repair expenses have ranged from $47.18 per
space in 1997 to $67.73 in 1996. We observed the community to be in overall
average condition. However, as the community continues to age additional
maintenance efforts will be necessary. The expense comparables indicate a wide
range of expense in this category from $30.94 per space to $69.72 per space.
Our stabilized estimate of this expense is $50.00 per space or $11,250 annually,
based on both the historical and comparable expense data. This estimate is
equal to approximately 2.25% percent of the estimated effective gross income.
<TABLE>
<CAPTION>
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Total $15,240 $10,616 $11,841 $3,899 $4,100 $10,040 $11,250
- ---------------------------------------------------------------------------------------------------------------
% EGI 3.76% 2.24% 2.38% 1.61% 1.21% 2.68% 2.25%
- ---------------------------------------------------------------------------------------------------------------
$/Space $ 67.73 $ 47.18 $ 52.63 $30.94 $37.61 $ 69.72 $ 50.00
===============================================================================================================
</TABLE>
Management Fee
- --------------
Management fees at the expense comparables ranged from 2.24% to 4.83% of
effective gross income. The overall market range for management fees was found
to range from approximately 3.0% to 5.0% of effective gross income.
We have estimated a fee of 5.0% of effective gross income, considered
adequate for the management of a property of this size, in this location.
Applying this percentage to the effective gross income estimate produces an
annual amount of $24,950 or $110.89 per space per year.
<PAGE>
56
Wages and Benefits
- ------------------
This expense includes all of the costs associated with the on-site staff.
These costs including payroll, payroll and unemployment taxes and any health
insurance benefit package. Historically this expense has ranged from $213.19 in
1996 to $225.97 per space in 1998.
The expense comparables indicate a wide range of expense in this category
from $91.74 per space to $118.33 per space. Our estimate of this expense has
been based primarily on the historical expense levels. Our estimate of $225.00
per space, is equal to $50,625 annually or 10.15% of the estimated effective
gross income.
<TABLE>
<CAPTION>
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Total $47,968 $49,132 $50,844 $13,200 $10,000 $17,040 $50,625
- --------------------------------------------------------------------------------------------------------------
% EGI 11.83% 10.37% 10.21% 5.46% 2.95% 4.55% 10.15%
- --------------------------------------------------------------------------------------------------------------
$/Space $213.19 $218.36 $225.97 $104.76 $ 91.74 $118.33 $225.00
==============================================================================================================
</TABLE>
Property Taxes
- --------------
This category of expense represents the annual real estate tax liability of
the property. This category is project specific due to location and taxing
authority. We have not used the expense comparables for the estimate this
expense.
In our analysis we have relied on the analysis as presented and discussed
in the Assessment and Taxes section of this report. Our analysis indicated a
tax liability of $39,466. This estimate is equal to $175.40 per space or 7.91%
of the effective gross income estimate.
<PAGE>
57
Utilities
- ---------
This category of expense is also project specific, due to the number and
type of services that are included in the rent. In this case, this line item has
historically included the costs of providing water, sewer and trash pick-up for
the homesites and water, sewer, electric and trash collection for the common
areas of the community. This expense has ranged from $342.92 per space in 1996
to $370.41 per space in 1998. The expense comparables indicated this expense to
range from $203.44 to $399.16 per space. We have estimated this expense at
$370.00 per space per year. This is equal to $83,250, or approximately 16.68% of
the estimated effective gross income estimate.
<TABLE>
<CAPTION>
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Total $77,157 $82,630 $83,343 $25,633 $27,920 $57,479 $83,250
- --------------------------------------------------------------------------------------------------------------
% EGI 19.03% 17.43% 16.74% 10.60% 8.22% 15.35% 16.68%
- --------------------------------------------------------------------------------------------------------------
$/Space $342.92 $367.24 $370.41 $203.44 $256.15 $399.16 $370.00
==============================================================================================================
</TABLE>
Miscellaneous Expense
- ---------------------
This expense has ranged from $25.89 per space in 1998 to $46.71 per space
in 1997. We have estimated this expense at $25.00 per space per year. This is
equal to $5,625, or approximately 1.13% of the estimated effective gross income.
Reserves
- --------
Property owners do not typically account for reserves for capital
replacement. This category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
This item is typically accounted for either on a dollar per space ($20.00 to
$30.00) or a percentage (0.5% to 2.0%) of effective gross income. We have used
$30.00 per space per year, believed adequate to cover future capital costs.
This equates to $6,750 annually, equal to approximately 1.35% of the effective
gross income estimate.
<PAGE>
58
Expense Summary
- ---------------
To summarize, we have estimated the stabilized total operating expenses for
the subject to be $247,791. This estimate is equal to 49.66% of the effective
gross income estimate or $1,101.30 per space annually.
<TABLE>
<CAPTION>
Expense Summary
==============================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Total $ 234,224 $ 257,516 $ 251,412 $71,197 $105,001 $135,782 $ 247,791
- --------------------------------------------------------------------------------------------------------------
% EGI 57.76% 54.33% 50.49% 29.44% 30.93% 36.26% 49.66%
- --------------------------------------------------------------------------------------------------------------
$/Space $1,041.00 $1,144.52 $1,117.39 $565.06 $ 963.31 $ 942.93 $1,101.30
==============================================================================================================
</TABLE>
As shown on the preceding table, expenses ranged from 50.49% of the
Effective Gross Income in 1998 to 57.76% in 1996. The expense comparables, as
summarized above, indicated a range from 29.44% (Comparable Number 1) and 36.26%
(Comparable Number 3).
Our estimate of total expenses is equal to 49.66% of the effective gross
income estimate. It should be noted that the historical expenses did not
include a reserve for capital expenditures. Additionally, none of the expense
comparables reflect a reserve for capital expenditures, which has been included
in our estimate.
Our estimate of net operating income is $251,217. Our stabilized estimate of
income and expenses for the subject is presented on the following page.
<PAGE>
59
Insert Stabilized Operating Statement
<PAGE>
60
Capitalization Discussion
- -------------------------
Two alternative methods of valuation are employed in the Income Approach.
Direct capitalization is a method of converting net operating income into market
value, employing a "capitalization" rate based upon market perimeters. This
approach is particularly applicable to properties with a stable income stream,
or in cases where income, and consequently value, can be projected to increase
at a constant or stable rate.
An alternative valuation method is yield capitalization, which employs a
year-by-year projection of income and expenses, recognizing rent changes and the
cost of improvements as they occur. Yield capitalization, also known as
Discounted Cash Flow Analysis, is considered most appropriate in the valuation
of properties with uneven income streams. Since investors are unwilling to pay
for any upside from vacant units, fully developed manufactured housing
communities are typically valued by direct capitalization.
Direct Capitalization
- ---------------------
Direct capitalization of net operating income by an overall capitalization
rate extracted from the market provides an excellent indication of market value.
Purchasers of manufactured housing communities most often utilize this method.
This method is the most easily understood, closely related to the market, and
convincing if the overall rates abstracted from recent sales are from comparable
sale properties and accurate income data are available. Income data was
available from all of the comparable sale properties included in this report.
Market Data
- -----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 8.33% to 12.69% and
averaged 10.56%. Our analysis of this data indicated a relatively wide range in
overall capitalization rates, which tend to be influenced by the size of the
community and its age and condition.
<TABLE>
<CAPTION>
Comparable Sales
===============================================
Sale Sale Date Overall
Number Capitalization Rate
-----------------------------------------------
<S> <C> <C>
1 02/99 12.69%
-----------------------------------------------
2 01/99 12.10%
-----------------------------------------------
3 01/98 8.92%
-----------------------------------------------
4 12/97 8.33%
-----------------------------------------------
5 01/96 10.78%
===============================================
</TABLE>
<PAGE>
61
As discussed in the Marketability and Exposure Period section of this
report, our sources indicated that institutional investors required 8.5% to 9.5%
overall capitalization rates for projects in the 200 space range and were the
most restrictive in pricing due to stringent criteria. We also found that REIT
investors were bidding rates down even further. Our information revealed that
manufactured housing community cooperatives and associations would more likely
accept slightly lower overall rates, while the small investor would require a
slightly higher rate.
The comparable sale data represents recent sales of all age communities in
Tennessee, Mississippi, Kansas and Alabama. Sale Comparable Number One was
purchased at a below market price and would indicate a lower overall rate. Sale
Comparable Number 2 is inferior in location to the subject property and
reflected a high overall rate. Sale Comparable Number 3 is superior in
condition while Sale Comparable Number 4 is superior in location, condition and
overall amenities. Comparable Sale Number 5 is inferior in location but is
superior in terms of occupancy at the time of sale.
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 10.0% to 11.0% range. Considering the subject is located
an older mature commercial/residential area and reflects additional risk in
terms of investment, we have concluded a rate of 10.5%.
Debt Coverage Ratio Method
- --------------------------
As an alternative to market-derived overall capitalization rates, we have
developed an overall rate through the Debt Coverage Ratio analysis. The
parameters for this calculation are summarized below.
The Debt Coverage Ratio Method of income capitalization essentially
measures the risk involved in mortgage lending. Its usefulness to mortgage
underwriting takes the form of establishing a degree of safety with a given set
of loan terms.
Mortgage underwriting typically focuses on positive debt coverage, (net
operating income/annual mortgage debt service or NOI/ADS), rather than market
value, as a negative cash flow after debt service may indicate a probability
that a mortgage loan could be in jeopardy. Accordingly, if the greatest portion
of the property's value is debt capital, as established by the loan-to-value
ratio, annual debt coverage in underwriting is a major consideration. The debt
coverage ratio method is therefore market based and direct.
By multiplying this risk factor by the projected mortgage payment
requirement an estimate of the required overall rate to satisfy the lender's
minimum risk requirements can be derived.
<PAGE>
62
The formula for this procedure is: M x f x DCR = R, where;
M = Loan to Value Ratio
f = Mortgage Constant
DCR = Debt Coverage Ratio
R = Overall Rate
To establish the criteria for the development of the Debt Coverage Ratio
Method, we have conducted a recent survey of lenders; the results are summarized
below:
<TABLE>
<CAPTION>
============================================================================
Contact Gene Fogarty Mike McCoy
----------------------------------------------------------------------------
<S> <C> <C>
Bank NationsBank Community Bank
----------------------------------------------------------------------------
Type Of Lender Conventional Conventional
----------------------------------------------------------------------------
Nominal Mortgage Interest Rate Floor of 7.25% to Floor of 7.25% to
8.0% 8.0%
----------------------------------------------------------------------------
Amortization Period 15 - 20 Years 15 - 25 Years
----------------------------------------------------------------------------
Loan Term 3 - 7 Years 5 - 10 Years
----------------------------------------------------------------------------
Debt Coverage Ratio 1.20 - 1.25 1.20 - 1.25
----------------------------------------------------------------------------
Loan To Value Ratio 75% 75%
============================================================================
</TABLE>
According to US Financial Data, March 26, 1999, 5-year treasury yields were
5.11%. Our survey of lenders indicated an annual interest rate up to 400 basis
points over the 5-year treasury yields, or 9.11%.
A mortgage loan would be available at 75% of the market value, based on a
20-year amortization schedule. Based on these criteria the indicated annual
interest rate constant is 10.8818%. Additionally, our survey indicated that a
minimum debt coverage ratio (DCR) of 1.30 to 1.00 would likely be required for a
property similar to the subject. An overall capitalization rate, based on these
assumptions, has been developed as shown below.
<TABLE>
<CAPTION>
===============================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.108818 1.30 0.106097
- -----------------------------------------------------------------------------------------------
Rounded 10.6%
===============================================================================================
</TABLE>
The debt coverage ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufacturing housing
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
<PAGE>
63
The presence of institutional investors in the market and the dearth of
quality real estate investments have bid down rates on manufactured housing
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
housing community investments.
The rates typically reflect a narrow range and are considered mutually
supportive. Therefore, we have estimated an overall capitalization rate of
10.5%. We have used this rate in the direct capitalization method to capitalize
the net income of $251,217. The value conclusion of the subject's 225 developed
lots via the direct capitalization method is as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Market Value
Rate
<S> <C> <C>
$251,217 /0.105 $2,392,400
Rounded to $2,400,000
</TABLE>
<PAGE>
64
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions must be weighed, and the data of each
transaction must be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject must be
considered; differences in physical, functional and economic
characteristics be noted; and adjustments for the differences be made.
3. The value conclusion must be consistent with the analysis of the sales
data.
For a conveyance to qualify as a "market transaction", four factors must be
present:
1. The conveyance must be "arm's length"; that is, it must be between two
non-related parties.
2. Neither the buyer nor the seller should have been under compulsion to
act.
3. The property should be available to the class of purchasers best able
to utilize the facility.
4. The price must be expressed in the equivalent of cash, adjusted for any
special financing, concessions, or terms.
For any class of real estate, the market area for comparative data must
reflect the area prospective purchasers would consider. Comparability is also a
function of the physical character of the asset to be appraised. Classes of
real estate in which physical specifications are standardized, or in which scale
is small, and/or in which the commodity has achieved uniform market recognition
require that the sales data considered closely resemble the subject. As
specifications become more complex, as scale increases, and as market
recognition declines, the physical similarity of the sales data and the subject
tends to decline.
<PAGE>
65
To judge the degree of comparability that exists between the sales selected
for analysis and the subject, several guidelines were applied.
1. Each sale is in the same market as the subject. To the extent that a
market is a meeting place for buyers and sellers of real estate of a
given type, the boundaries of the market are set by the participants in
merchandising and absorbing competitive properties and are economic not
purely physical or geographic.
2. Physical characteristics of the subject and comparables are similar.
3. The functional adequacy of each sale property and the subject are
competitive in terms of the ability of each to support similar
functions.
To draw a conclusion from the analysis of the sales data, a unit of
comparison has been selected. The calculation of a unit of comparison provides
a common denominator by which the market sales can be related to each other and
to the subject property. The commonly accepted unit of comparison in the
valuation of a manufactured housing community is the sale price per space. This
unit of comparison emphasizes the contribution of the improvements, and the
contribution of the land is merged into the unit-selling price.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For features that are dissimilar, adjustments have
been made leading to an indication of the price at which the subject could be
expected to sell. In considering adjustments, relevant factors were considered
including:
1. Nature of surrounding development.
2. Relative size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
6. Amenities and occupancy.
<PAGE>
66
In our search for comparable sales, we excluded senior communities since
they tend to have a less transient occupancy base and typically trade at lower
capitalization rates than all age communities.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject. All are recent
transactions and are indicative of the actions of the manufactured housing
community market.
The sales occurred between December 1996 and February 1999. The properties
ranged in size from 89 to 486 spaces. The sale prices, on a per space basis,
ranged from $7,255 to $25,206. The Effective Gross Income Multipliers (EGIM)
ranged from 4.55 to 7.57 and the indicated overall rates ranged from 8.33% to
12.69%. The following pages detail each of the improved sales, following which
we have presented a summary of the pertinent data.
<PAGE>
Sales Comparable Number One 67
A & L Mobile Home Park
573 Long Hollow Pike
Gallatin, Sumner County, Tennessee
================================================================================
================================================================================
Sale Date: February 1999
Property Description
- --------------------
Size/Type: 89-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, 15.0-acre parcel of land with adequate
access. Improved with asphalt-paved streets and
streetlights.
Improvements/Amenities: Site is also improved with 2,500 square foot
convenience store.
Year Built/Condition: 1970's/Average
<PAGE>
Sale Comparable Number One 68
Income Data
- -----------
Annual Occupancy: 100.0%
Average Lot Rent: $160.00
Effective Gross Income: $220,000
Expenses: $55,000 (25.0% of the effective gross income)
Net Income: $165,000
Sale Data
- ---------
Sale Price: $1,300,000
Cash Equivalent Price: $1,300,000
Grantor: Sigler, Hixom and Augustine
Grantee: V & R Investments
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Grantee
Date: March 1999
Comparison Data
- ---------------
Sale Price/Space: $14,607
Effective Gross Income
Multiplier (EGIM): 5.91
Overall Capitalization
Rate (OAR): 12.69%
Comments: This all age community is located on the west
side of Gallatin. According to the buyer the
property was recently appraised at $16,854 per
unit which reflects a lower indicated overall
rate.
<PAGE>
Sale Comparable Number Two 69
The Grove
510 Lehmberg Road
Columbus, Lowndes County, Mississippi
================================================================================
Photograph Not Available
================================================================================
Sale Date: January 1999
Property Description
- --------------------
Size/Type: 107-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, 79-acre parcel of land with adequate
access. Improved with asphalt-paved streets and
streetlights. The sale included 20.0 acres of excess
that was located in floodplain and had an estimated
value of $40,000 and was deducted from the sale price.
Improvements/Amenities: Four self-storage buildings containing 104 units,
community office, maintenance building and playground.
<PAGE>
70
Year Built/Condition: 1994 and 1995/Good
Income Data
- -----------
Annual Occupancy: 88.0%
Average Lot Rent: $134.36
Effective Gross Income: $186,750
Expenses: $76,792 (41.1% of the effective gross income)
Net Income: $109,958
Sale Data
- ---------
Sale Price: $951,600
Cash Equivalent Price: $911,600
Grantor: Hometown America, Inc.
Grantee:
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Seller
Date: January 14, 1999
Comparison Data
- ---------------
Sale Price/Space: $8,520
Effective Gross Income
Multiplier (EGIM): 4.88
Overall Capitalization
Rate (OAR): 12.1%
Comments: This property is situated in an older
commercial/residential area and was purchased as part
of a package of other manufactured housing
communities.
<PAGE>
Sale Comparable Number Three 71
Grove Acres
2183 Old Brandon Road
Pearl, Rankin County, Mississippi
================================================================================
Photograph Not Available
================================================================================
Sale Date: January 1998
PROPERTY DESCRIPTION
- --------------------
Size/Type: 102-space all age manufactured home community
Utilities: All Public
Land Description: Generally level, irregularly shaped 11.158-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: None
Year Built/Condition: 1975/Good
<PAGE>
72
INCOME DATA
- -----------
Annual Occupancy: 96.1% (98 of 102 spaces)
Average Lot Rent: $120.00
Effective Gross Income: $139,536
Expenses: $73,500 (52.7% of the effective gross income)
Net Income: $66,036
SALE DATA
- ---------
Sale Price: $780,000
Cash Equivalent Price: $740,000
Grantor: Estate of Juan Herrington Eaves
Grantee: Homewood Manor Enterprises
Financing Terms: Cash to seller
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Confidential source
Date: April 13, 1998
COMPARISON DATA
- ---------------
Sale Price/Space: $7,255
Effective Gross Income
Multiplier (EGIM): 5.30
Overall Capitalization
Rate (OAR): 8.92%
Comments: The sale price is reduced to account for excess land.
The income figures reflect income in place; although
the buyer plans to install water meters and raised
rents by $20.00 per month.
<PAGE>
Sale Comparable Number Four 73
Santa Barbara Estates
1600 N. Ridgeview Road
Olathe, Johnson County, Kansas
================================================================================
Photograph Not Available
================================================================================
Sale Date: December 1997
Property Description
- --------------------
Size/Type: 486-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped 82.62-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: Clubhouse, pool, and playground.
Year Built/Condition: 1970/Average
<PAGE>
74
Income Data
- -----------
Annual Occupancy: 100.0%
Average Lot Rent: $290.00
Effective Gross Income: $1,618,000
Expenses: $598,000 (37.0% of the effective gross income)
Net Income: $1,020,000
Sale Data
- ---------
Sale Price: $12,250,000
Cash Equivalent Price: $12,250,000
Grantor: Carlsberg Realty, Inc.
Grantee: Hometown Santa Barbara L.L.C.
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Buyer.
Date: May 1998
Comparison Data
- ---------------
Sale Price/Space: $25,206
Effective Gross Income
Multiplier (EGIM): 7.57
Overall Capitalization
Rate (OAR): 8.33%
Comments: This good quality all age community is located in
Olathe Kansas.
<PAGE>
Sale Comparable Number Five 75
London Village
1801 Gadsen Highway
Trussville, Jefferson County, Alabama
================================================================================
Photograph Not Available
================================================================================
Sale Date: December 1996
PROPERTY DESCRIPTION
- --------------------
Size/Type: 219-space all age manufactured home community
Utilities: All Public
Land Description: Generally level, irregularly shaped 35.37-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: None
Year Built/Condition: 1971/Average, streets are in poor condition.
<PAGE>
76
INCOME DATA
- -----------
Annual Occupancy: 98.2% (215 of 219 spaces)
Average Lot Rent: $175.00
Effective Gross Income: $450,900
Expenses: $229,858 (51.0% of the effective gross income)
Net Income: $221,042
SALE DATA
- ---------
Sale Price: $2,050,000
Cash Equivalent Price: $2,050,000
Grantor: Hulsey and Company
Grantee: Regency Trussville, Inc.
Financing Terms: Cash
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Confidential Source
Date: December 28, 1998
COMPARISON DATA
- ---------------
Sale Price/Space: $9,361
Effective Gross Income
Multiplier (EGIM): 4.55
Overall Capitalization
Rate (OAR): 10.78%
Comments: This property is well located near Birmingham.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
==================================================================================================================================
No. Name/Location Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 A & L Mobile Home Park $ 1,300,000 89/ $14,607 $160.00 5.91/ 12.69%
573 Long Hollow Pike February 1999 100.0% 25.0%
Gallatin, Sumner County, Tennessee
- ----------------------------------------------------------------------------------------------------------------------------------
2 The Grove $ 911,600 107/ $ 8,520 $134.36 4.88% 12.1%
510 Lehmberg Road January 1999 88% 41.1%
Columbus, Lowndes County, Mississippi
- ----------------------------------------------------------------------------------------------------------------------------------
3 Grove Acres $ 740,000 102/ $ 7,255 $120.00 5.30/ 8.92%
2183 Old Brandon Road January 1998 96.1% 52.7%
Pearl, Rankin County, Mississippi
- ----------------------------------------------------------------------------------------------------------------------------------
4 Santa Barbara Estates $ 12,250,000 486/ $25,206 $290.00 7.57/ 8.33%
1600 N. Ridgeview Road December 1997 100% 37.1%
Olathe, Johnson County, Kansas
- ----------------------------------------------------------------------------------------------------------------------------------
5 London Village $ 2,050,000 219/ $ 9,361 $175.00 4.55/ 10.78%
1801 Gadsen Highway December 1996 96.1% 51.0%
Trussville, Jefferson County, Alabama
==================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 78
Comparable Sale Location Map
<PAGE>
79
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is A & L Mobile Home Park in Gallatin,
Tennessee. The all age community has 89 spaces and sold in February 1999 for
$1,300,000, or $14,607 per space. Based on an effective gross income of
$220,000, the EGIM was 5.91. The overall rate was 12.69%. The average lot rent
at the time of sale was approximately $160.00. The expenses represented
approximately 25.0% of the effective gross income. According to the owner, the
property was purchased at a below market price; therefore, a lower overall rate
is indicated from this sale. The community was 100.0% occupied at the time of
sale.
Sale Comparable Number Two is The Grove Manufactured Housing Community in
Columbus, Mississippi. This 107-space all age community sold for $951,600 in
January 1999 and included 20.0 acres of excess land with an estimated value of
$40,000 and was deducted from the sale price. The cash equivalent price equates
to a sale price per space of $8,520. Based on an effective gross income of
$186,750, the EGIM was 4.88. The expenses represented approximately 41.1% of the
effective gross income and the indicated overall capitalization rate was 12.10%,
based on a net operating income of $109,958. This community was built in 1994
and 1995 and was 88.0% occupied at the time of sale.
Sale Comparable Number Three is the Grove Acres Manufactured Housing
Community in Pearl, Mississippi. The 102-space all age community sold for
$780,000 in January 1998 and included excess land with an estimated value of
$40,000 and was deducted from the sale price. The cash equivalent price equates
to a sale price per space of $7,255. Based on an effective gross income of
$139,536, the EGIM is 5.30. The indicated overall capitalization rate was
8.92%, which would indicate a net operating income of $66,036. The average lot
rent at the time of sale was $120.00. The park was 96.1% occupied at the time
of sale.
Sale Comparable Number Four is Santa Barbara Estates Manufactured Housing
Community in Olathe, Kansas. This 486-space all age community sold for
$12,250,000 in December 1997. The price equates to a sale price per space of
$25,206. Based on an effective gross income of $1,618,000, the EGIM was 7.57.
The expenses represented 37.0% of the effective gross income and the indicated
overall capitalization rate was 8.33%, based on a net operating income of
$1,020,000. This community was 100% occupied at the time of sale.
Sale Comparable Number Five is London Village in Trussville, Alabama. This
219-space all age community sold for $2,050,000 in December 1996. The price
equates to a sale price per space of $9,361. Based on an effective gross income
of $450,900, the EGIM was 4.55. The expenses were 51.0% of the effective gross
income and the indicated overall capitalization rate was 10.78%, based on a net
operating income of $221,042. This community was 98.2% occupied at the time of
sale.
<PAGE>
Sales Comparison Approach 80
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last twenty-seven
months, having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 4.55 and 7.57. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community in a mature commercial/residential area
that has exhibited economic decline during recent years. The property has a
moderate level of occupancy with some deferred maintenance being noted. With the
exception of Sales 3 and 5, the expense ratios of the comparables are lower than
the subject's expense ratio. The comparables range from 25.0% to 52.7% and the
subject has a forecast expense ratio of 49.66%. We have relied on Sales 1, 2 and
5 as the most similar to the subject in terms of quality and location. Based on
these considerations, we have concluded an EGIM at the lower end of the range,
processing subject's Effective Gross Income of $499,008 with an EGIM of 5.0.
Thus, $499,008 x 5.0 = $2,495,040
Rounded $2,500,000
This equates to $11,089 per space, lower than two of the comparables. The
subject's average rent ($180.18) is also lower than one of the comparables.
Price Per Space Analysis
- ------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically
<PAGE>
81
willing, absent other factors, to pay more rent for a better located, newer
community with a greater amenity package. Rather than making a subjective
percentage adjustment to the per space sales prices, the Net Operating
Income/Space (NOI/Space) reflects, in most cases, the market perception of a
property's position in the marketplace. Since investors are mainly concerned
with cash flow to service debt, the net operating income generating capability
of a particular community can be used for comparison purposes. Typically, the
higher the NOI/Space for a community, the higher the per space sales price. The
subject has a NOI/Space of $1,117. The NOI/Space and per space sales prices for
the comparables are shown on the following table. We then compare the percentage
difference between each comparable's NOI/Space and the subject's NOI/Space. For
comparables with a higher NOI/Space, a downward adjustment to the per space
sales price is made. An upward adjustment is made for a comparable with a lower
NOI/Space.
NOI/Space and Per Space Sales Price
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
COMP 1 COMP 2 COMP 3 COMP 4 COMP 5 SUBJECT
<S> <C> <C> <C> <C> <C> <C>
NOI/Space $ 1,854 $ 1,028 $ 647 $ 2,099 $ 1,009 $1,117
Price/Space $ 14,607 $ 8,520 $ 7,255 $25,206 $ 9,361 N/A
Percent
Adjustment -39.8% +108.6% +172.6% -46.8% +107.0% N/A
Adjusted
Price/Space $ 8,793 $ 9,253 $12,522 $13,410 $10,016 N/A
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
After adjustments, the indicated range is from $8,793 to $13,410 per space.
The subject is an average quality park that has reflected increased operating
levels during recent years. Therefore, we have considered the upper end of the
range and concluded $11,000 per space.
Thus, 225 Spaces X $11,000/Space is: $ 2,475,000
Rounded $ 2,500,000
SUMMARY
- -------
The two methods indicated a narrow range and are considered mutually
supportive. Therefore, we have concluded a value of $2,500,000 via the Sales
Comparison Approach.
<PAGE>
82
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $2,400,000
Sales Comparison Approach $2,500,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales and listings of similar properties. In
the reconciliation, we reviewed each approach to value (a) to ascertain the
reliability of the data and (b) to weight the approach that best represented the
actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of substitution
and anticipation. This approach postulates that the value of a property derives
from the net income the property will produce during its economic life.
Investors in the market predicate their decisions on economic factors oriented
to the market and concern themselves with net income and its durability. The
income capitalization approach synthesizes the capitalized return to and of the
improvements and to the land. In the current instance, the availability of
sufficient reliable and supportable historical data for the subject, made the
income capitalization approach a reliable gage of the market value of the
subject property.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable.
The two approaches reflect a narrow range of values and are considered
mutually supportive. Since buyers are most concerned with cash flow to service
debt, we have placed primary emphasis on the income approach. Therefore, our
opinion of the market value of the subject property, based on a reasonable
exposure period of six months, as of October 28, 1999, was:
- TWO MILLION FOUR HUNDRED THOUSAND DOLLARS -
($2,400,000)
<PAGE>
83
CERTIFICATION
- -------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. I have no bias with respect to the property that is the subject of
this report, or to the parties involved with this assignment.
. My engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. My compensation for completing this assignment is not contingent on
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of the
appraisal.
. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, the Code
of Professional Ethics, and the Standards of Professional Practice of
the Appraisal Institute and the American Society of Appraisers.
. The use of this report is subject to the requirements of the Appraisal
Institute and the American Society of Appraisers relating to review by
its duly authorized representatives.
. As of the date of this report, Keith D. McFarland, ASA has completed
the requirements under the continuing education program of the
American Society of Appraisers.
. Keith D. McFarland, ASA previously made a personal inspection of the
property that is the subject of this report on March 26, 1999. The
property was not reinspected for this appraisal and is noted
throughout the report.
. No one provided significant professional assistance to the person
signing this report.
_______________________________
Keith D. McFarland, ASA
Tennessee Certified General Real Estate Appraiser #00051023
<PAGE>
84
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the
conclusion in this report are summarized below.
Per our prior agreement with the client, the appraiser did not reinspect the
subject property. The appraisal process, therefore, involves departure from
Standards Rule 1. By prior agreement with the client, the appraiser did not
reinspect the subject property./6/ The scope of this appraisal limited by
completing a desktop update and not reinspecting the subject property. Our
analysis is based on information gathered during our original inspection and
appraisal of the subject property, and this appraisal assumes no material
changes during this period. Therefore, the physical descriptive sections and
corresponding analyses therein (from the reports) are hereby incorporated into
our more current analyses herein. We reserve the right to adjust the valuation
herein reported as required by consideration of additional or more reliable data
that may become available. It is the appraisers determination that this
appraisal is not so limited as to result in a misleading or confusing report.
It is understood by Windsor Corporation is aware of the limitations and lower
level of reliability inherent in a limited appraisal process, and that if a
complete appraisal process were undertaken, or more information were to become
known, our value conclusion may change.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function. The appraisal report may not be reproduced, in whole or
in part, and a third party may not utilize the findings of the report for any
purpose, without the written consent of Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
______________________________
6 The appraisal process, therefore, involved departure from Standards Rule 1 of
USPAP.
<PAGE>
85
We are not required to give testimony or be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed in
connection with any matter that may be disclosed by a proper survey. If a
subsequent survey should reflect a differing land area and/or frontages, we
reserve the right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others and are not meant to be used as a reference in legal matters
of survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projections contained in
the appraisal assume both responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
<PAGE>
86
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures that would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
The appraisal report covering the subject property is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers; therefore we are not qualified to judge the structural
and environmental integrity of the improvements, if any. Consequently, no
warranty, representations or liability are assumed for the structural soundness,
quality, adequacy or capacities of said improvements and utility services,
including the construction materials, particularly the roof, foundations, and
equipment, including the HVAC systems, if applicable. Should there be any
question concerning same, it is strongly recommended that an
Engineering/Construction/Environmental inspection be obtained. The value
estimate stated in this appraisal, unless noted otherwise, is predicated on the
assumption that all improvements, equipment and building services, if any, are
structurally sound and suffer no concealed or latent defects or inadequacies
other than those noted in the appraisal. Any proposed construction or
rehabilitation referred to in the appraisal report is assumed to be completed
within a reasonable time and in a workmanlike manner according to or exceeding
currently accepted standards of design and methods of construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas that were previously
inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
<PAGE>
87
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our previous field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of
the property together with a detailed analysis of the requirements of the ADA
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT A
Being a parcel of land situated in Nashville, Davidson County, Tennessee said
parcel being a portion of the same property conveyed to Dwight Kendall and Dona
S. Kendall as of record in Deed Book 5779?? Page 639 in Register's Office of
Davidson County, Tennessee and being more particular, described by metes and
bounds according to a survey of Dale & Associates, Inc., dated September 23,
1986 (Job no. 8621) as follows:
Beginning at a point situated in the Westerly margin of Dickerson Pike said
point being the Northeast corner of the Dickerson Road partnership
subdivision, as recorded in Plat Book 6250, page 187 said Register's Office.
Thence, leaving said road N 84 27' 83" W, a distance of 222.39 feet to an iron
rod;
Thence, S 05 48' 23" W, a distance of 33.83 feet to an iron rod;
Thence, N 83 53' 22" W, a distance of 50.03 feet to an iron rod;
Thence, S 03 17' 33" W, a distance of 180.80 feet to an iron rod situated in the
Northerly line of the Metropolitan Government Shwab School Property;
Thence, along said line N 83 48' 41, a distance of 1073.64 feet to an iron road;
Thence, leaving said line N 08 14' 06" W, a distance of 460.85 feet to an iron
rod;
Thence, N 44 51' 46" E, a distance of 492.99 feet to an iron rod;
Thence, S 84 28' 17" E, a distance of 814.49 feet to an iron rod;
Thence, S 86 48' 18" E, a distance of 357.41 feet to an iron rod situated in the
westerly margin of Dickerson Pike;
Thence, with said margin of Dickerson Pike S 08 39' 16" W, a distance of 635.94
feet to a spike in the asphalt;
Thence, around a curve to the right having a central angle of 00 08' 25" having
a radius of 2819.00 feet a total distance of 6.91 feet to the Point of Beginning
and containing 24.89 acres of land more or less.
Being the same property conveyed to Grantor by Warranty Deed from Dwight M.
Kendall and Dona S. Kendall, Trustees recorded of even date herewith.
<PAGE>
FINANCIALS
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 30
Company: 90 Windsor Partnership Date: 03/17/99
Development ID: 967 Shady Hills Time: 14:29:25
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 40,564 44,876 ( 4,312) -9.61 81,128 89,752 ( 8,624) -9.61
Non Rentable Sites 0 ( 4,336) 4,336 100.00 0 ( 8,672) 8,672 100.00
Vacancies ( 4,791) ( 4,500) ( 291) -6.46 ( 9,839) ( 9,000) ( 839) -9.32
Free Rent/Concessions ( 540) ( 540) 0 0.00 ( 720) ( 1,080) 360 33.33
Employee Allowances ( 180) ( 180) 0 0.00 ( 360) ( 360) 0 0.00
Other Allowances ( 37) 0 ( 37) 0.00 ( 74) 0 ( 74) 0.00
Late Fees 300 600 ( 300) -50.00 1,300 1,200 100 8.33
-------- -------- -------- ------- -------- -------- -------- -------
Net Site Rent 35,316 35,920 ( 604) -1.68 71,435 71,840 ( 405) -0.56
OTHER RENT
Apt/Bldg. Rent 700 700 0 0.00 1,400 1,400 0 0.00
-------- -------- -------- ------- -------- -------- -------- -------
Total Other Rent 700 700 0 0.00 1,400 1,400 0 0.00
UTILITY INCOME
Water Income 2,737 2,600 137 5.28 4,953 5,200 ( 247) -4.76
Sewer Income 4,112 3,800 312 8.20 7,482 7,600 ( 118) -1.56
-------- -------- -------- ------- -------- -------- -------- -------
Total Utility Income 6,849 6,400 449 7.01 12,434 12,800 ( 366) -2.86
AMENITY INCOME
Other Income 443 250 193 77.38 672 500 172 34.50
-------- -------- -------- ------- -------- -------- -------- -------
Total Amenity Income 443 250 193 77.38 672 500 172 34.50
MISC. INCOME
-------- -------- -------- ------- -------- -------- -------- -------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
-------- -------- -------- ------- -------- -------- -------- -------
TOTAL REVENUE 43,308 43,270 38 0.09 85,942 86,540 ( 598) -0.69
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,187 2,390 203 8.48 4,375 4,780 405 8.48
Salaries & Wages-Maint. 1,040 1,040 0 0.00 2,080 2,132 52 2.44
Salaries & Wages-Bonus 1,000 0 ( 1,000) 0.00 1,000 0 ( 1,000) 0.00
Payroll Taxes 447 321 ( 126) -39.20 785 647 ( 138) -21.28
Health Benefits 540 540 0 0.00 1,080 1,080 0 0.00
Pension Benefits 178 172 ( 6) -3.76 357 346 ( 11) -3.16
Workers Comp Insurance 60 60 ( 0) -0.70 121 120 ( 1) -0.70
-------- -------- -------- ------- -------- -------- -------- -------
Total Payroll 5,453 4,523 ( 930) -20.56 9,797 9,105 ( 692) -7.60
UTILITY EXPENSE
Water Expense 3,993 2,600 ( 1,393) -53.56 9,046 5,200 ( 3,846) -73.96
Sewer Expense 4,432 3,800 ( 632) -16.64 9,262 7,600 ( 1,662) -21.87
Gas Expense 86 98 12 11.81 179 200 21 10.49
Electric Expense 285 282 ( 3) -0.98 568 572 4 0.71
-------- -------- -------- ------- -------- -------- -------- -------
Total Utilities Expense 8,796 6,780 ( 2,016) -29.74 19,055 13,572 ( 5,483) -40.40
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 510 500 ( 10) -1.95 510 1,000 490 49.02
Vehicle Expense 30 25 ( 5) -20.00 30 50 20 40.00
Repairs & Maint-Equipment 477 100 ( 377) -376.82 477 200 ( 277) -138.41
Supplies-Maintenance 0 25 25 100.00 0 50 50 100.00
-------- -------- -------- ------- -------- -------- -------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 31
Company: 90 Windsor Partnership Date: 03/17/99
Development ID: 967 Shady Hills Time: 14:29:28
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Repairs & Maint. 1,017 650 ( 367) -56.40 1,017 1,300 283 21.80
MARKETING
Advertising 141 175 34 19.61 389 350 ( 39) -11.21
Promo Incentives-Resident 18 0 ( 18) 0.00 18 0 ( 18) 0.00
Business Promotions 0 25 25 100.00 0 50 50 100.00
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Marketing 159 200 41 20.59 407 400 ( 7) -1.85
Collection Costs
Legal-Collection Fees 75 200 125 62.50 75 400 325 81.25
Bad Debt 0 300 300 100.00 298 600 302 50.29
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Collection Costs 75 500 425 85.00 373 1,000 627 62.68
GENERAL & ADMINISTRATIVE
Telephone 200 225 25 11.21 460 450 ( 10) -2.14
Supplies-Office 61 100 39 38.59 79 200 121 60.72
Professional Fees-MRI 467 400 ( 67) -16.83 826 800 ( 26) -3.31
Management Fees 2,114 2,164 50 2.29 4,151 4,328 177 4.09
Overhead Reimbursement 1,174 1,175 1 0.05 2,349 2,350 1 0.05
Miscellaneous Expense 0 15 15 100.00 0 30 30 100.00
-------- ----------- -------- ------ -------- ----------- -------- ------
Total G&A 4,017 4,079 62 1.51 7,864 8,158 294 3.60
TAXES & INSURANCE
Real Property Taxes 3,390 3,390 ( 0) -0.01 6,781 6,780 ( 1) -0.01
Insurance 282 282 ( 0) -0.17 565 564 ( 1) -0.17
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Taxes & Insurance 3,673 3,672 ( 1) -0.02 7,346 7,344 ( 2) -0.02
-------- ----------- -------- ------ -------- ----------- -------- ------
TOTAL EXPENSES 23,190 20,404 ( 2,786) -13.65 45,860 40,879 ( 4,981) -12.18
-------- ----------- -------- ------ -------- ----------- -------- ------
NET OPERATING INCOME 20,119 22,866 ( 2,747) -12.01 40,082 45,661 ( 5,579) -12.22
======== =========== ======== ====== ======== =========== ======== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 32
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 967 Shady Hills Time: 13:20:04
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 38,314 42,402 ( 4,088) -9.64 468,892 508,824 ( 39,932) -7.85
Non Rentable Sites 0 ( 3,926) 3,926 100.00 ( 7,820) ( 47,112) 39,292 83.40
Vacancies ( 4,340) ( 3,400) ( 940) -27.66 ( 49,763) ( 45,900) ( 3,863) -8.42
Free Rent/Concessions ( 340) ( 850) 510 60.00 ( 5,462) ( 10,200) 4,738 46.45
Employee Allowances ( 170) ( 170) 0 0.00 ( 2,040) ( 2,040) 0 0.00
Other Allowances ( 37) ( 37) 0 0.00 ( 444) ( 444) 0 0.00
Late Fees 410 475 ( 65) -13.68 8,140 5,700 2,440 42.81
-------- -------- -------- ------- -------- -------- -------- ------
Net Site Rent 33,837 34,494 ( 657) -1.91 411,503 408,828 2,675 0.65
OTHER RENT
Apt/Bldg. Rent 700 800 ( 100) -12.50 8,400 9,600 ( 1,200) -12.50
-------- -------- -------- ------- -------- -------- -------- ------
Total Other Rent 700 800 ( 100) -12.50 8,400 9,600 ( 1,200) -12.50
UTILITY INCOME
Water Income 2,564 2,833 ( 269) -9.50 30,408 33,260 ( 2,852) -8.57
Sewer Income 3,865 4,046 ( 181) -4.48 44,218 47,471 ( 3,253) -6.85
-------- -------- -------- ------- -------- -------- -------- ------
Total Utility Income 6,429 6,879 ( 450) -6.55 74,627 80,731 ( 6,104) -7.56
AMENITY INCOME
Other Income 330 100 230 230.44 3,373 1,200 2,173 181.07
-------- -------- -------- ------- -------- -------- -------- ------
Total Amenity Income 330 100 230 230.44 3,373 1,200 2,173 181.07
MISC. INCOME
-------- -------- -------- ------- -------- -------- -------- ------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
-------- -------- -------- ------- -------- -------- -------- ------
TOTAL REVENUE 41,296 42,273 ( 977) -2.31 497,903 500,359 ( 2,456) -0.49
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,187 2,391 204 8.52 25,869 28,272 2,403 8.50
Salaries & Wages-Maint. 1,300 1,150 ( 150) -13.04 13,240 13,050 ( 190) -1.46
Salaries & Wages-Bonus 0 0 0 0.00 660 750 90 12.00
Payroll Taxes 254 300 46 15.28 3,569 3,568 ( 1) -0.02
Health Benefits 510 510 0 0.00 6,120 6,120 0 0.00
Pension Benefits 0 0 0 0.00 306 0 ( 306) 0.00
Workers Comp Insurance 90 90 0 0.00 1,080 1,080 0 0.00
-------- -------- -------- ------- -------- -------- -------- ------
Total Payroll 4,342 4,441 99 2.24 50,844 52,840 1,996 3.78
UTILITY EXPENSE
Water Expense 3,882 2,848 ( 1,034) -36.30 34,386 37,068 2,682 7.24
Sewer Expense 2,163 4,324 2,161 49.98 44,801 51,146 6,345 12.41
Gas Expense 50 77 27 34.55 554 579 25 4.28
Electric Expense 278 362 84 23.22 3,603 4,442 839 18.90
Trash Expense 0 0 0 0.00 0 400 400 100.00
-------- -------- -------- ------- -------- -------- -------- ------
Total Utilities Expense 6,373 7,611 1,238 16.26 83,343 93,635 10,292 10.99
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 725 900 175 19.39 9,838 10,800 962 8.90
Repairs & Maint-Vehicles 0 100 100 100.00 30 1,200 1,170 97.53
Vehicle Expense 19 0 ( 19) 0.00 383 0 ( 383) 0.00
Repairs & Maint-Equipment 5 50 45 90.00 1,243 600 ( 643) -107.19
Equipment Rental 0 0 0 0.00 186 0 ( 186) 0.00
Repairs & Maint-Other 0 0 0 0.00 140 0 ( 140) 0.00
Supplies-Maintenance 0 50 50 100.00 22 600 578 96.38
Water Conditioning 0 100 100 100.00 0 1,200 1,200 100.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 33
Company: 90 Windsor Partnership Date: 01/13/99
Development ID: 967 Shady Hills Time: 13:20:06
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Repairs & Maint. 750 1200 450 37.53 11,841 14,400 2,559 17.77
MARKETING
Advertising 0 175 175 100.00 1,416 2,100 684 32.59
Promo Incentives-Resident 0 0 0 0.00 6 0 ( 6) 0.00
Business Promotions 46 50 4 8.38 348 600 252 42.07
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Marketing 46 225 179 79.64 1,770 2,700 930 34.46
Collection Costs
Legal-Collection Fees 0 150 150 100.00 1,384 1,800 416 23.12
Bad Debt 0 1,200 1,200 100.00 2,671 6,000 3,329 55.48
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Collection Costs 0 1,350 1,350 100.00 4,055 7,800 3,745 48.01
GENERAL & ADMINISTRATIVE
Telephone 22 135 113 83.63 2,385 1,620 ( 765) -47.22
Supplies-Office 97 140 43 30.42 1,029 1,680 651 38.73
Professional Fees-MRI 475 356 ( 119) -33.53 4,768 4,272 ( 496) -11.61
Employee Relations 0 100 100 100.00 0 175 175 100.00
License & Fees 0 0 0 0.00 320 515 195 37.86
Natl. & State Assn. Dues 0 0 0 0.00 0 249 249 100.00
Management Fees 2,081 2,114 33 1.57 24,682 25,017 335 1.34
Overhead Reimbursement 1,174 279 ( 895) -320.92 14,092 3,348 ( 10,744) -320.92
Professional Development 0 38 38 100.00 0 1,406 1,406 100.00
Dues and Subscriptions 0 0 0 0.00 251 0 ( 251) 0.00
Meals & Entertainment 0 25 25 100.00 0 100 100 100.00
Travel-Community 0 150 150 100.00 0 600 600 100.00
Miscellaneous Expense 1,000 1,324 324 24.47 1,463 15,888 14,425 90.79
-------- ----------- -------- ------ -------- ----------- -------- ------
Total G&A 4,850 4,661 ( 189) -4.06 48,991 54,870 5,879 10.71
TAXES & INSURANCE
Real Property Taxes 3,954 3,954 0 0.01 47,445 47,448 3 0.01
Insurance 260 260 ( 0) -0.10 3,123 3,120 ( 3) -0.10
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Taxes & Insurance 4,214 4,214 0 0.00 50,568 50,568 0 0.00
-------- ----------- -------- ------ -------- ----------- -------- ------
TOTAL EXPENSES 20,574 23,702 3,128 13.20 251,413 276,813 25,400 9.18
-------- ----------- -------- ------ -------- ----------- -------- ------
NET OPERATING INCOME 20,721 18,571 2,150 11.58 246,490 223,546 22,944 10.26
======== =========== ======== ====== ======== =========== ======== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 32
Company: 90 Windsor Partnership Date: 01/19/99
Development ID: 967 Shady Hills Time: 14:56:00
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 40,410 40,378 32 0.08 484,856 484,536 320 0.07
Non Rentable Sites ( 3,742) ( 3,240) ( 502) -15.49 ( 43,082) ( 38,880) ( 4,202) -10.81
Vacancies ( 4,186) ( 5,022) 836 16.64 ( 53,939) ( 65,448) 11,509 17.58
Free Rent/Concessions ( 826) ( 486) ( 340) -69.96 ( 6,309) ( 5,832) ( 477) -8.18
Employee Allowances ( 162) ( 162) 0 0.00 ( 1,944) ( 1,944) 0 0.00
Other Allowances ( 37) ( 37) 0 0.00 ( 444) ( 444) 0 0.00
Late Fees 475 477 ( 2) -0.42 7,155 5,724 1,431 25.00
-------- -------- -------- ------- -------- -------- -------- --------
Net Site Rent 31,932 31,908 24 0.07 386,293 377,712 8,581 2.27
OTHER RENT
Apt/Bldg. Rent 700 800 ( 100) -12.50 9,200 9,600 ( 400) -4.17
-------- -------- -------- ------- -------- -------- -------- --------
Total Other Rent 700 800 ( 100) -12.50 9,200 9,600 ( 400) -4.17
UTILITY INCOME
Water Income 2,592 2,496 95 3.84 31,120 31,286 ( 166) -0.53
Sewer Income 3,700 3,536 164 4.65 44,431 44,650 ( 219) -0.49
-------- -------- -------- ------- -------- -------- -------- --------
Total Utility Income 6,292 6,032 260 4.32 75,552 75,936 ( 384) -0.51
AMENITY INCOME
Other Income 239 0 239 0.00 2,953 250 2,703 1,081.12
-------- -------- -------- ------- -------- -------- -------- --------
Total Amenity Income 239 0 239 0.00 2,953 250 2,703 1,081.12
MISC. INCOME
-------- -------- -------- ------- -------- -------- -------- --------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
-------- -------- -------- ------- -------- -------- -------- --------
TOTAL REVENUE 39,163 38,740 423 1.09 473,997 463,498 10,499 2.27
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,124 2,126 2 0.09 25,649 24,792 ( 857) -3.45
Salaries & Wages-Maint. 1,250 1,196 ( 54) -4.52 13,250 13,182 ( 68) -0.52
Salaries & Wages-Bonus 0 100 100 100.00 1,325 1,200 ( 125) -10.42
Payroll Taxes 247 310 63 20.44 3,256 3,546 290 8.17
Health Benefits 510 219 ( 291) -132.88 4,301 2,509 ( 1,792) -71.43
Pension Benefits 0 103 103 100.00 1,350 1,175 ( 175) -14.92
-------- -------- -------- ------- -------- -------- -------- --------
Total Payroll 4,131 4,054 ( 77) -1.89 49,132 46,404 ( 2,728) -5.88
UTILITY EXPENSE
Water Expense 2,026 2,347 321 13.69 29,969 28,606 ( 1,363) -4.77
Sewer Expense 3,673 4,134 461 11.15 48,200 49,176 976 1.98
Gas Expense 79 150 71 47.46 573 832 259 31.14
Electric Expense 283 569 286 50.23 3,887 4,475 588 13.13
Trash Expense 0 485 485 100.00 0 970 970 100.00
-------- -------- -------- ------- -------- -------- -------- --------
Total Utilities Expense 6,061 7,685 1,624 21.14 82,630 84,059 1,429 1.70
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 432 900 468 51.97 9,530 17,100 7,570 44.27
Repairs & Maint-Buildings 7 0 ( 7) 0.00 7 0 ( 7) 0.00
Repairs & Maint-Vehicles 0 100 100 100.00 161 1,200 1,039 86.55
Vehicle Expense 82 0 ( 82) 0.00 500 0 ( 500) 0.00
Repairs & Maint-Equipment 0 0 0 0.00 14 0 ( 14) 0.00
Repairs & Maint-Other 97 0 ( 97) 0.00 307 0 ( 307) 0.00
Supplies-Maintenance 0 0 0 0.00 96 0 ( 96) 0.00
-------- -------- -------- ------- -------- -------- -------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 33
Company: 90 Windsor Partnership Date: 01/19/99
Development ID: 967 Shady Hills Time: 14:56:03
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1997 Std. Budget Variance % Dec 1997 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Repairs & Maint. 619 1,000 381 38.13 10,616 18,300 7,684 41.99
MARKETING
Advertising 267 270 3 1.22 1,745 3,240 1,495 46.13
Promo Incentives-Resident 173 0 ( 173) 0.00 173 0 ( 173) 0.00
Promo Incentives-Dealers 0 200 200 100.00 0 2,400 2,400 100.00
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Marketing 440 470 30 6.37 1,919 5,640 3,721 65.98
Collection Costs
Legal-Collection Fees 718 0 ( 718) 0.00 1,473 0 ( 1,473) 0.00
Bad Debt ( 197) 520 717 137.87 7,117 2,080 ( 5,037) -242.16
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Collection Costs 521 520 ( 1) -0.26 8,590 2,080 ( 6,510) -312.98
GENERAL & ADMINISTRATIVE
Telephone 418 125 ( 293) -234.78 2,491 1,500 ( 991) -66.06
Supplies-Office 250 200 ( 50) -24.82 1,021 2,400 1,379 57.44
Professional Fees-MRI 539 290 ( 249) -85.83 4,943 3,680 ( 1,263) -34.33
License & Fees 0 0 0 0.00 63 365 303 82.88
Management Fees 1,973 1,937 ( 36) -1.86 23,188 23,175 ( 13) -0.06
Overhead Reimbursement ( 480) 250 730 292.00 2,646 3,000 354 11.80
Travel-Community 0 0 0 0.00 47 0 ( 47) 0.00
Miscellaneous Expense 6,326 1,359 ( 4,967) -365.51 20,611 21,708 1,097 5.05
-------- ----------- -------- ------ -------- ----------- -------- ------
Total G&A 9,026 4,161 ( 4,865) -116.93 55,010 55,828 818 1.47
TAXES & INSURANCE
Real Property Taxes 3,839 2,794 ( 1,045) -37.39 41,885 33,528 ( 8,357) -24.93
Insurance 632 632 0 0.02 7,734 7,584 ( 150) -1.98
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Taxes & Insurance 4,471 3,426 ( 1,045) -30.49 49,619 41,112 ( 8,507) -20.69
-------- ----------- -------- ------ -------- ----------- -------- ------
TOTAL EXPENSES 25,269 21,316 ( 3,953) -18.54 257,515 253,423 ( 4,092) -1.61
-------- ----------- -------- ------ -------- ----------- -------- ------
NET OPERATING INCOME 13,895 17,424 ( 3,529) -20.26 216,483 210,075 ( 6,408) 3.05
======== =========== ======== ====== ======== =========== ======== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 11
Company: 90 Windsor Partnerships Date: 03/24/99
Development ID: 967 Shady Hills Time: 12:58:24
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1996 Std. Budget Variance % Dec 1996 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Gross Site Rent 35,406 35,682 ( 276) -0.77 424,696 428,184 ( 3,488) -0.81
Non Rentable Sites ( 2,840) ( 2,840) 0 0.00 ( 29,252) ( 32,376) 3,124 9.65
Vacancies ( 5,176) ( 6,674) 1,498 22.44 ( 77,685) ( 97,412) 19,727 20.25
Free Rent/Concessions ( 284) ( 1,195) 911 76.23 ( 3,156) ( 17,060) 13,904 81.50
Employee Allowances ( 142) ( 150) 8 5.33 ( 1,704) ( 1,800) 96 5.33
Other Allowances ( 37) 0 ( 37) 0.00 ( 444) 0 ( 444) 0.00
Late Fees 600 300 300 100.00 5,870 3,600 2,270 63.06
-------- -------- -------- ------- -------- -------- -------- ------
Net Site Rent 27,527 25,123 2,404 9.57 318,325 283,136 35,189 12.43
OTHER RENT
Apt/Bldg. Rent 800 700 100 14.29 9,600 8,400 1,200 14.29
Other Rent 0 100 ( 100) -100.0 0 1,200 ( 1,200) -100.00
-------- -------- -------- ------- -------- -------- -------- ------
Total Other Rent 800 800 0 0.00 9,600 9,600 0 0.00
UTILITY INCOME
Water Income 2,561 2,894 ( 333) -11.51 30,786 32,942 ( 2,156) -6.55
Sewer Income 3,657 4,129 ( 472) -11.43 43,961 47,001 ( 3,040) -6.47
Electric Income 0 0 0 0.00 0 139 ( 139) -100.00
-------- -------- -------- ------- -------- -------- -------- ------
Total Utility Income 6,218 7,023 ( 805) -11.46 74,747 80,082 ( 5,335) -6.66
AMENITY INCOME
Other Income 282 50 232 463.90 2,867 600 2,267 377.90
-------- -------- -------- ------- -------- -------- -------- ------
Total Amenity Income 282 50 232 463.90 2,867 600 2,267 377.90
MISC INCOME
-------- -------- -------- ------- -------- -------- -------- ------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
-------- -------- -------- ------- -------- -------- -------- ------
TOTAL REVENUE 34,827 32,996 1,831 5.55 405,539 373,418 32,121 8.60
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,073 2,046 ( 27) -1.34 24,089 23,832 ( 257) -1.08
Salaries & Wages-Maint. 1,000 1,100 100 9.09 12,590 12,708 118 0.93
Salaries & Wages-Bonus 758 100 ( 658) -658.07 3,458 1,200 ( 2,258) -188.17
Payroll Taxes 351 297 ( 54) -18.29 3,663 3,450 ( 213) -6.16
Health Benefits 254 294 40 13.54 2,970 3,424 454 13.27
Pension Benefits 0 97 97 100.00 1,198 1,132 ( 66) -5.86
-------- -------- -------- ------- -------- -------- -------- ------
Total Payroll 4,437 3,934 ( 503) -12.79 47,968 45,746 ( 2,222) -4.86
UTILITY EXPENSE
Water Expense ( 83) 2,543 2,626 103.26 25,780 28,949 3,169 10.95
Sewer Expense ( 30) 3,642 3,672 100.84 46,864 41,451 ( 5,413) -13.06
Gas Expense 69 0 ( 69) 0.00 425 0 ( 425) 0.00
Electric Expense 353 418 65 15.60 4,088 4,054 ( 34) -0.83
-------- -------- -------- ------- -------- -------- -------- ------
Total Utilities Expense 308 6,603 6,295 95.33 77,157 74,454 ( 2,703) -3.63
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 1,496 900 ( 596) -66.20 14,015 18,800 4,785 25.45
Repairs & Maint-Pools 0 0 0 0.00 45 0 ( 45) 0.00
Repairs & Maint-Vehicles 217 100 ( 117) -117.02 1,181 1,900 719 37.86
-------- -------- -------- ------- -------- -------- -------- ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page: 12
Company: 90 Windsor Partnership Date: 03/24/99
Development ID: 967 Shady Hills Time: 12:58:26
This is a PRELIM report since it contains data from the current period. Entries are not final.
- -------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1996 Std. Budget Variance % Dec 1996 Std. Budget Variance %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Repairs & Maint. 1,713 1,000 ( 713) -71.28 15,240 20,700 5,460 26.38
MARKETING
Advertising 196 270 74 27.26 2,141 3,240 1,099 33.93
Promo Incentives-Resident 0 300 300 100.00 1,000 3,600 2,600 72.22
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Marketing 196 570 374 65.54 3,141 6,840 3,699 54.08
Collection Costs
Legal-Collection Fees 1,250 0 ( 1,250) 0.00 1,970 0 ( 1,970) 0.00
Bad Debt 494 200 ( 294) -146.99 2,011 800 ( 1,211) -151.39
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Collection Costs 1,744 200 ( 1,544) -771.99 3,981 800 ( 3,181) -397.60
GENERAL & ADMINISTRATIVE
Telephone 118 175 57 32.36 1,413 2,100 687 32.73
Supplies-Office 157 200 43 21.52 2,175 2,400 225 9.37
Professional Fees-MRI 537 290 ( 247) -85.20 3,796 3,680 ( 116) -3.16
License & Fees 0 0 0 0.00 364 0 ( 364) 0.00
Management Fees 1,674 1,650 ( 24) -1.48 19,949 18,672 ( 1,277) -6.84
Overhead Reimbursement 262 250 ( 12) -4.80 2,937 3,000 63 2.10
Meals & Entertainment 0 0 0 0.00 28 0 ( 28) 0.00
Travel-Community 0 0 0 0.00 129 0 ( 129) 0.00
Miscellaneous Expense 1,419 1,359 ( 60) -4.45 19,186 20,858 1,672 8.02
-------- ----------- -------- ------ -------- ----------- -------- ------
Total G&A 4,168 3,924 ( 244) -6.23 49,978 50,710 732 1.44
TAXES & INSURANCE
Real Property Taxes 3,467 2,053 ( 1,414) -68.87 30,213 24,636 ( 5,577) -22.64
Insurance 782 495 ( 257) -58.03 6,547 5,940 ( 607) -10.21
-------- ----------- -------- ------ -------- ----------- -------- ------
Total Taxes & Insurance 4,249 2,548 ( 1,701) -66.77 36,760 30,576 ( 6,184) -20.22
-------- ----------- -------- ------ -------- ----------- -------- ------
TOTAL EXPENSES 16,816 18,779 1,963 10.45 234,224 229,826 ( 4,398) -1.91
-------- ----------- -------- ------ -------- ----------- -------- ------
NET OPERATING INCOME 18,011 14,217 3,794 26.68 171,315 143,592 27,723 19.31
======== =========== ======== ====== ======== =========== ======== ======
</TABLE>
<PAGE>
ENGAGEMENT LETTER
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa,FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser 3
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
<TABLE>
<S> <C>
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
</TABLE>
<PAGE>
Profile of Appraiser 4
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commerical Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
KEITH McFARLAND, ASA
REAL ESTATE EXPERIENCE
- ----------------------
Consultant
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured housing communities, self storage
facilities, hotels, manufacturing plants, office buildings, retail
buildings and other types of commercial establishment as well as special
use facilities. January 1996 to present.
Appraisal Director
Marshall and Stevens, Inc.
St. Louis, MO
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1986 to Present.
PROFESSIONAL AFFILIATIONS
- -------------------------
ASA, Senior Member American Society of Appraisers
State Certified General Real Estate Appraiser
Arkansas #CG1200N Michigan #1201004617
Colorado #CG80000045 Mississippi #GA-417
Illinois #153000628 Missouri #RA-001461
Indiana #CG69201433 Ohio #398743
Kansas #G-871 Tennessee #00051023
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Allied Research Associates IBM Retirement Fund
AT&T Global Real Estate Krupp Asset Management Company
Boatmen's National Bank May Company
CalPERS Pacific Realty Corporation
Citicorp Real Estate Park Corporation
Continental Grain Company Ruff, Callahan & Hemmeter
Eastdil Realty Sears
First Tennessee Bank Wal-Mart Stores
<PAGE>
2
Profile of Appraiser
EDUCATIONAL BACKGROUND
- ----------------------
Southern Illinois University at Edwardsville, B.S.
The Appraisal Institute
American Society of Appraisers
<PAGE>
EXHIBIT (b)(1)(D)
LIMITED SCOPE APPRAISAL IN A
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
131 Space - Trailmont
Manufactured Housing Community
1341 Dickerson Pike
Davidson County, Tennessee 37072
PREPARED FOR
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
AS OF
October 28, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
November 8, 1999
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
RE: 131 Space - Trailmont
Manufactured Housing Community
1341 Dickerson Pike
Davidson County, Tennessee 37072
Dear Mr. Waite:
At your request, we have completed a desktop update of the appraisal of the
above captioned property. The subject property was previously inspected on March
26, 1999, with the appraisal issued April 30, 1999. Our analysis commenced
October 28, 1999 and was completed November 5, 1999. The effective date of our
valuation is October 28, 1999. We estimate the "as is" market value of the
property rights outlined herein, as of October 28, 1999, based on an exposure
period of six months, to be:
- TWO MILLION THREE HUNDRED THOUSAND DOLLARS -
($2,300,000)
The purpose of this Limited Scope Appraisal is to express our opinion of
the market value/1/ of the fee simple interest in the real estate. Our opinions
are subject to the definition of value, assumptions and limiting conditions,
certifications, and engagement instructions in this report. The reader must be
acquainted with these items prior to considering the opinions and information
described within this Limited Scope Appraisal in a Complete Appraisal Report
format.
________________________
1 Uniform Standards of Professional Appraisal Practice (Appraisal Foundation,
1999 Edition),
p. 139.
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 2
We have developed our opinions based on our understanding of the Uniform
Standards of Professional Practice (USPAP), Standards Rule 1, as promulgated by
the Appraisal Foundation.
Our appraisal was based on more current information you provided regarding
both current and forecasted operating levels for the subject property. Because a
desktop update was completed and the property was not reinspected, based upon
USPAP guidelines, the report limits its use to the client and considers anyone
else using the report an unintended user./2/ The intended user of this report is
Windsor Corporation.
It is our understanding that the intended use of this appraisal report is
for the sole purpose of assisting the client for corporate planning; its use for
any other purpose or valuation date may invalidate the appraisal.
At the client's request, we have not reinspected the subject property or
conducted an in depth analysis of the subject's market area; however, we have
considered the changes in income and expenses based on current leases and
operating levels. This appraisal assumes no substantial changes in the condition
of the property or the market affecting the subject property since our previous
inspection on April 30, 1999, unless otherwise stated. The scope of the
appraisal development gathering information on improved sales, rent, operating
expenses, capitalization and yield rates, and an analysis of regional and
neighborhood trends. Our analyses and conclusions are based upon phone surveys
with market participants, and publicly available data collected by the
appraiser. All market data were verified by the buyer, seller, broker, deed,
title company, and/or leasing agent wherever possible. The accumulated data were
analyzed in relation to the income capitalization and sales comparison
approaches.
__________________________
2 USPAP, 1999 Edition, Appraisal Foundation, Standard 2-2(c), Advisory Opinions
11 and 12.
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 3
By prior agreement with the client, the appraiser did not reinspect the
subject property,/3/. The scope of this appraisal limited by completing a
desktop update and not reinspecting the subject property. Our analysis is based
on information gathered during our original inspection and appraisal of the
subject property, and this appraisal assumes no material changes during this
period. Therefore, the physical descriptive sections and corresponding analyses
therein (from the reports) are hereby incorporated into our more current
analyses herein. We reserve the right to adjust the valuation herein reported as
required by consideration of additional or more reliable data that may become
available. It is the appraisers determination that this appraisal is not so
limited as to result in a misleading or confusing report. It is understood by
Windsor Corporation is aware of the limitations and lower level of reliability
inherent in a limited appraisal process, and that if a complete appraisal
process were undertaken, or more information were to become known, our value
conclusion may change.
Our value estimate applies to the land as physically constituted and to the
improvements actually in existence. Our value estimate reflects prevailing
trends in the local real estate market. We have made a careful inspection,
study, and analysis of the property, and have considered all factors which, in
our opinion, would tend to influence the market value of the subject.
Trailmont is a fully developed 131-space Manufactured Housing Community,
with two playgrounds, a maintenance shed and a 20' x 50' mobile home that is
used an on-site office. The community is located along the west side of
Dickerson Pike, just south of Dickerson Pike in unincorporated Davidson County,
Tennessee. The current lot rent is $224.00 per month for singlewide units and
$229.00 per month for doublewide units. Management bills the residents on a
monthly basis for utilities. The current physical occupancy at the subject is
100%. There is one employee occupied space. The economic occupancy is
approximately 99.0%.
____________________________
3 The appraisal process, therefore, involved departure from Standards Rule 1 of
USPAP.
<PAGE>
Mr. Steve Waite
November 8, 1999
Page 4
This conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the "Uniform
Standards of Professional Appraisal Practice" (USPAP) as published by the
Appraisal Standard Board of the Appraisal Foundation and Windsor Corporation's
Appraisal Guidelines.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you and would like to
thank you for the help and information you provided. If you have any questions,
please feel free to contact us.
Very truly yours,
WHITCOMB REAL ESTATE
John H. Whitcomb, MAI, CCIM
Keith D. McFarland, ASA
Tennessee General Certified Appraiser #00051023
<PAGE>
5
TABLE OF CONTENTS
<TABLE>
<S> <C>
Title Page
Transmittal
Table Of Contents......................................................... 5
INTRODUCTORY SECTION
Photographs Of Subject.................................................... 7
Summary Of Facts And Conclusions.......................................... 9
Scope Of The Assignment................................................... 10
Purpose And Intended Use Of The Report.................................... 12
Appraisal Definitions..................................................... 12
Property Rights Appraised................................................. 13
Effective Date Of Value................................................... 13
Date Of Inspection........................................................ 13
DESCRIPTIVE SECTION
Area Description.......................................................... 15
Neighborhood Description.................................................. 19
Manufactured Housing Community Market Overview............................ 22
Land And Site Improvements................................................ 31
Improvement Description................................................... 34
Ownership And Property History............................................ 35
Occupancy................................................................. 35
Zoning And Other Land Use Controls........................................ 35
Assessment And Taxes...................................................... 36
Marketability And Exposure Period......................................... 37
VALUATION SECTION
Highest And Best Use...................................................... 40
Valuation Process......................................................... 45
Income Capitalization Approach............................................ 46
Sales Comparison Approach................................................. 63
Final Estimate Of Value................................................... 81
Certification............................................................. 82
Assumptions And Limiting Conditions....................................... 83
</TABLE>
ADDENDA
Legal Description
Financials (recap)
Profiles Of Appraisers
<PAGE>
INTRODUCTORY SECTION
<PAGE>
7
PHOTOGRAPHS OF SUBJECT (Taken March 26, 1999)
--------------------------------------------------------------
--------------------------------------------------------------
View of Entry for Trailmont
--------------------------------------------------------------
--------------------------------------------------------------
Typical Interior Street Scene in Trailmont
<PAGE>
8
PHOTOGRAPHS OF SUBJECT (Taken March 26, 1999)
--------------------------------------------------------------
---------------------------------------------------------------
View of Playground
--------------------------------------------------------------
--------------------------------------------------------------
View of Additional Land Area
<PAGE>
9
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
MSA and Census Tract: Nashville MSA- 5360: Census Tract 102
- ---------------------
Property Appraised: 131 Space - Trailmont
- -------------------
Manufactured Housing Community
1341 Dickerson Pike
Davidson County, Tennessee 37072
Property Rights Appraised: Fee Simple Interest, subject to tenant leases
- --------------------------
Land Area: Gross land area - 32.48 acres more or less; net
- ----------
land area -30.22 acres
Improvements: 131 manufactured housing spaces, two playgrounds,
- -------------
a maintenance building and a 20' x 50' mobile home
that is used as an on-site office.
Owner: Windsor Park Properties 3
- ------
Zoning: R20, Residential and CS, Commercial Service
- -------
Districts
Highest and Best Use: As Vacant: Hold for future development as
- ---------------------
predicated by market demand.
As Improved: Current use (Manufactured Housing
Community)
Value Indications: Income Approach $2,300,000
- ------------------
Sales Comparison Approach $2,250,000
Final Estimate of Value: $2,300,000
- -----------------------
Date of Appraisal: October 28, 1999
- ------------------
Date of Prior Inspection: March 26, 1999
- -------------------------
<PAGE>
10
SCOPE OF THE ASSIGNMENT
- -----------------------
This limited scope assignment encompasses providing a desktop update of the
"as is" market value of the fee simple property rights, subject to tenant
leases. The subject consists of a 131-space manufactured housing community that
is situated on 32.48 acres of land. The on-site manager is Millie Davis. The
community is located along the west side of Dickerson Pike, just south of Old
Dickerson Pike and the city limits of Goodlettsville in unincorporated Davidson
County, Tennessee. The date of the valuation is October 28, 1999 and the
property was previously inspected on March 26, 1999.
The first step in the analysis is to develop a concise statement or
definition of the appraisal assignment. This sets the limits of the analysis and
eliminates any ambiguity about the nature of the assignment. This is
accomplished by: 1) identifying the real estate being analyzed, 2) stating the
effective date of value, 3) stating the purpose and use (function) of the
analysis, 4) defining market value, 5) defining and identifying the property
rights to be valued, and 6) stating the assumptions and limiting conditions
applicable to the conclusions.
After defining and accepting the assignment, the preliminary analysis,
which was previously formulated in order to determine the character and extent
of the proposed assignment, is reviewed and refined. The preliminary analysis
also determines the amount of work that will be required to gather the necessary
data. This analysis and work plan are dependent upon the character of the
assignment and the type of property being analyzed. The next step is to survey
the market and its environs, including the gathering of general and specific
data. The physical and area descriptions of the subject are based on the
previous physical inspection of the subject, which was accomplished on March 26,
1999.
General data consists of information on the principles, forces and factors
that affect marketability and property value. This information includes regional
and neighborhood trends, as well as social, economic, governmental and
environmental forces that could or may have an effect on the subject's
marketability and value. This general data contributes significantly to the
understanding of the marketplace. Area data for Davidson County and the
subject's immediate neighborhood was obtained from a number of published sources
that are appropriately cited in the report. Based on the data produced through
the research of the general area and neighborhood the initial searches for
market data were extended back to January 1996. As there was adequate data from
which to evaluate the subject property, during that time period, the search was
not further extended or otherwise modified.
Specific data relates to the property being appraised, including a detailed
description of both the parcel comprising the subject site and the subject's
existing site improvements, based upon the physical inspection of the premises
and the neighborhood, together with various documents and drawings obtained from
the owner, management and public services; as well as current and recent changes
in ownership of the subject, occupancy, zoning and land use
<PAGE>
11
regulations affecting the subject, and assessment and real estate tax
information applicable to the subject, obtained from the appropriate
governmental agencies. The gathering of specific data also relates, as may be
applicable, to the comparable land sales, improved sales and rentals selected.
The majority of the market transactions were originally researched through
public records and subscription services, which were then visually inspected and
verified with a principle of the transaction, a broker or agent involved in the
transaction and through public records.
In addition to the physical data, locational and income and expense
information for the subject and, as available, for the comparable sales and
rentals was utilized. Also considered are financing arrangements and/or unusual
motivations of either buyer or seller that could or did affect selling prices or
rentals.
An integral part of the valuation process for the property is the
determination of the highest and best use of the subject site: 1) as if vacant,
and 2) as currently improved. The latter analysis is useful in identifying
comparable properties, and determining whether the existing improvements should
be retained, renovated or demolished. The land value estimate, as if vacant, is
required when the land's contribution to total property value is sought, or when
improvements are valued separately, as in the Cost Approach.
After determining the subject site's highest and best use and gathering the
necessary data, we integrate the information drawn from the market research and
analysis of data and consider the application of the three valuation approaches-
the Income Capitalization Approach, the Sales Comparison Approach and the Cost
Approach - in order to derive a well-supported value estimate of the fee simple
interest. Although the three approaches are interrelated, the property type and
use will determine which approach or approaches are most appropriate. Upon
completion of the applicable approaches, we reconcile the value conclusions
derived in order to provide a final value estimate.
<PAGE>
12
PURPOSE AND INTENDED USE OF THE REPORT
- --------------------------------------
The purpose of the limited scope appraisal is to complete a desktop update
of the "as is" market value of the fee simple interest, subject to existing
tenant leases, of the real estate, as of October 28, 1999.
The information, opinions, and conclusions contained in this report have
been prepared for corporate planning purposes. The intended user of the report
is Windsor Corporation.
APPRAISAL DEFINITIONS
- ---------------------
Market Value, as defined by the Office of the Comptroller of the Currency
is:
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 passing of title from
seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what
they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- 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.
Fee Simple Interest is defined as the absolute ownership unencumbered by
any other interest or estate subject only to the four powers of
government./4/
_______________________________
/4/ The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute,
1993.
<PAGE>
13
PROPERTY RIGHTS APPRAISED
- -------------------------
The real estate interest appraised is that of ownership in fee simple
interest, subject to existing tenant leases, and the property is appraised as if
free and clear of mortgages, liens, servitudes and encumbrances, except those
noted in the body of this appraisal.
EFFECTIVE DATE OF VALUE
- -----------------------
The effective date of our value is October 28, 1999. The property was
previously inspected on March 26, 1999.
DATE OF INSPECTION
- ------------------
Keith D. McFarland, ASA, previously inspected the property on March 26,
1999. The physical and area descriptions for the subject are based on the prior
inspection of the subject property. This appraisal assumes no substantial
changes in the condition of the property or the market affecting the subject
property since our previous inspection.
<PAGE>
DESCRIPTIVE SECTION
<PAGE>
15
AREA DESCRIPTION
- ----------------
Introduction
- ------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate.
The first step in estimating the highest and best use of the subject
property is an examination of the social, economic, governmental and
environmental forces affecting property values in the Nashville area. In the
following discussion, we have attempted to present sufficient data to inform
readers unfamiliar with the Davidson County area and its environs.
Location
- --------
Nashville, the state capitol and county seat of Davidson County, is
centrally located in the state of Tennessee. Regional highway access is good
with three interstates, I-40, I-24, and I-65, accessible from I-440 which forms
a partial loop around the central urban core. This area is a part of the
Nashville MSA which also encompasses Cheatham, Dickson, Robertson, Rutherford,
Sumner, Williamson and Wilson Counties, and is situated approximately 285 miles
northwest of Atlanta, Georgia and 210 miles east of Memphis. The subject lies
approximately 7 miles northeast of the Central Business District of Nashville
and just south of the city limits of Goodlettsville in unincorporated Davidson
County.
Nashville-Davidson County is a consolidated city-county government system.
The Nashville MSA is the largest MSA in the state and serves as a center for
academic, political, research and technological activities.
Population
- ----------
As of 1998, the Nashville MSA contained a total population of 1,151,858,
and represents a 18.1 percent increase from 1990. Davidson County is the largest
county within the MSA with a estimated 1998 population of 538,796. This
represents a 5.5 percent increase in total population since 1990. The Nashville
MSA encompasses 4,004 square miles and has exhibited one the highest population
growth levels in the nation during the past two decades. This growth is
attributed to job growth and attractive cost of living for the surrounding area.
Population trends for the area are outlined on the following page.
<PAGE>
16
<TABLE>
<CAPTION>
================================================================================
REGIONAL POPULATION TRENDS
1980 to 1990
Compound Annual
1980 1990 1998 Growth Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Davidson County 477,811 511,000 538,796 0.75%
Nashville MSA 850,505 975,026 1,158,858 1.38%
State of Tennessee 4,591,023 4,877,203 5,442,000 0.67%
================================================================================
</TABLE>
It is estimated that the population levels of the Davidson County and other
locations in the surrounding MSA area will continue to increase in coming years.
The 1997 effective buying income for the MSA was estimated to be $38,224 and
represents a 5.2 percent increase from 1996. According to data complied by the
Metropolitan County Planning Commission, average salaries in all major
industrial sectors in Davidson County exceed the state average; in Manufacturing
and Services, the average salary is 121.7% and 117.4% of the state average.
Economic Base and Employment
- ----------------------------
The Nashville MSA has a relatively diversified economic base and primary
employment sectors include services (31.5%), wholesale and retail trade (24.3%),
manufacturing (15.4%) and government (12.6%). Employment growth trends for the
MSA reflect the recession of the early 1990's and a full recovery. The
unemployment rate has continued to decline as the total labor force has
increased. This factor indicates job growth has outpaced the growth in the labor
force. It is significant to note that in the 1980-1993 period, manufacturing
continued to grow in contrast to the national experience. Nashville has also
increased a steady rate of employment growth during recent years. Much of this
growth has been in the music industry and the service jobs associated with the
continued growth of tourism. Also, there is a large concentration of employment
in the automotive industry and health management firms. Major private employers
include Vanderbuilt University and Medical Center (12,000 employed),
Columbia/HCA Healthcare Corporation (7,000), and Nissan Motor Manufacturing
Corp. USA (6,000).
The labor force for the MSA numbered approximately 614,900 in 1997 and
represents a 22.4 percent increase since 1990. Therefore, the total amount job
growth is outpacing population growth for the surrounding area. Unemployment
during 1998 averaged 2.9%, and represents a decrease from the 1997 level of
3.4%. However, these figures are well below both state and national unemployment
levels.
<PAGE>
17
Transportation
- --------------
Davidson County and the Nashville MSA enjoy an excellent transportation
network that allows convenient access to primary cities. Primary transportation
routes include Interstates 40, 24, 65, 440 and 265. Interstate 65 connects
Nashville with Birmingham, Alabama to the south and Louisville, Kentucky to the
north. Interstate 840, an "outer loop" controlled access highway currently under
construction around Nashville's MSA and will extend through Williamson County.
Commercial air service is available from the Nashville Metropolitan Airport.
Common carrier freight service is provided by over 100+ trucking companies with
several maintaining terminals within the surrounding area. Railroad service is
provided by CSX Railroad which serves the area. Overall, transportation
facilities within the Davidson County area are sufficient to serve the needs of
both businesses and residents.
Summary
- -------
In summary, the Nashville area looks favorable with most economic sectors
experiencing strong growth from both relocations and expansions. With a
diversified economy and the seat of state government, a large measure of
stability is ensured relative to many other metropolitan areas. Although future
rates of growth are not likely to match those of the mid and late 1980's, the
overall prognosis of factors pertinent to the long-term real estate investment
decision appears positive.
<PAGE>
18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Map
<PAGE>
19
NEIGHBORHOOD DESCRIPTION
- ------------------------
A neighborhood is defined as a portion of a larger community, or an entire
community, containing a homogeneous group of inhabitants, buildings, or business
enterprises.
Location
- --------
The subject is located along the west side of Dickerson Pike, just south of
Old Dickerson Pike and the city limits of Goodlettsville. The subject is located
at the northern edge of Davidson County within a mixed use commercial,
residential and agricultural area that has exhibited new development during
recent years. The neighborhood boundaries are generally described as Interstate
65 to the north, Gallatin Pike to the east, Briley Parkway to the south and
Brick Church Pike to the west. Dickerson Pike extends northeast/southwest and
serves as a primary commercial thoroughfare for northern Davidson County. This
street extends south to the Central Business District and allows for convenient
access to Interstate 65 via Old Hickory Boulevard to the south and Long Hollow
Pike to the north.
Neighborhood Characteristics
- ----------------------------
The subject is an older manufactured housing community that is situated in
a mixed-use commercial, residential and agricultural area that has exhibited new
commercial and residential development during recent years. The immediate area
located north along Dickerson Pike is primarily built-up with undeveloped tracts
of agricultural land being located to the south and southwest. Land uses
surrounding the subject consist of a mixture of older commercial buildings and
farmland located along Dickerson Pike with newer commercial properties being
located further north. Surrounding developments include older single family
residences, a car wash, tire store, a used car dealership and a service station
with retail buildings, strip shopping centers, and small office developments
located further north. New commercial and residential development was noted
within subject's market area and is anticipated to continue. The existing use of
the subject is compatible with surrounding land uses.
Access
- ------
The subject property is accessible from I-65 via Hickory Boulevard located
approximately 2.5 miles south and Long Hollow Pike three miles to the north.
Interstate 65 is a primary traffic artery that serves the Nashville metropolitan
area. Located further south is Briley Parkway, a primary commercial
thoroughfare that forms a circular loop around the northern portion of Davidson
County connecting to both Interstates 65 and 24. Access to the subject is
provided by Dickerson Pike, a four-lane asphalt paved street that extends north-
south and is improved older commercial and residential properties within the
immediate vicinity of the subject property. Overall, access to the subject
property is considered good.
<PAGE>
20
Housing
- -------
While the subject competes with all forms of housing to a certain degree,
the closest competition is other manufactured housing communities. There are
three large manufactured housing communities located in northern Davidson
County. Located to the southwest is the Holiday Mobile Home Park (267 spaces)
and Shady Hills (225 spaces) which are older manufactured housing communities.
Located to the northeast is the Country Living Mobile Home Park (118 spaces).
Other communities within the surrounding area include Country Meadows (296
spaces) located in Antioch and Old Hickory Estates (286 spaces) which is located
in Mount Juliet. A survey of surrounding parks revealed increases in rental
rates during the past year with slight declines in occupancy levels being noted.
The decline in occupancy is attributed to a decline in interest rates which made
single-family home ownership more attractive. These properties are discussed
further in the Manufactured Community Market Overview section of this report.
Concurrency
- -----------
Land uses for the subject's market area are controlled by the Davidson
County Planning and Zoning Commission which implements and monitors local
comprehensive and growth management plans. The existing use of the subject is a
legal nonconforming use with local zoning regulations.
Summary and Conclusion
- ----------------------
The real estate market in Davidson County is strong. The office, industrial
and retail real estate sectors reported 1998 vacancy levels below 10 percent. In
addition, non-residential building permit values increased by 51.8 percent from
1996 to 1997 while a slight decrease was noted for residential building permits.
The growth demands on the county are very evident in light of past trends and
the projections are for further population increases. The desirability of this
area is evident and is anticipated to continue to increase as the local economy
is forecasted to continue to expand in coming years. The subject property is
situated in a mixed-use commercial, residential and agricultural area that has
exhibited new commercial and residential area that has exhibited new commercial
and residential development during recent years. The overall demand for
manufactured housing space is evident within this market and is anticipated to
continue. Based on these factors, real estate values are anticipated to increase
barring any near term economic reversals.
<PAGE>
21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neighborhood Map
<PAGE>
22
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW
- ----------------------------------------------
The manufactured housing industry in the state of Tennessee has matured
over the past twenty years, as a direct result of the advancements in
manufactured housing construction techniques and the continued ability of
producers and dealers to make manufactured housing a relatively inexpensive
housing alternative. Over this period the industry has progressed from it's
original "trailer park" image, to the "mobile home park" and, finally, to its
present status as "a manufactured housing community." This most recent status is
only appropriate, as most manufactured homes are typically moved only once
during their economic lifetime; from the manufacturer or dealer's lot to the
homesite.
According to the 1998 U.S. Housing Market Map, Tennessee ranked 7/th/ among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Tennessee have generally increased since 1996.
Manufactured
Home Shipments
==================================================
Year Shipments
--------------------------------------------------
1996 11,762
--------------------------------------------------
1997 11,723
--------------------------------------------------
1998 14,394
==================================================
Source: Tennessee Manufactured Housing Association
There is a wide range of rental rates in the marketplace. Generally
speaking, lot rent ranges between $180.00 per month to $342.00 per month. Rates
varied within some of the communities as lots for multi-section homes and larger
lots leased for higher than standard amounts. In addition higher rents were
charged at communities that provided utilities to the tenants. Typically, only
trash collection service is included in the rental rate.
The subject rental rates are $224.00 per lot, per month for singlewide
units and $229.00 per month for doublewide units. The subject rents are at the
lower end of the range of rent levels found in nearby communities. The last rent
increase was in January 1999. Currently management bills the residents on a
monthly basis for utilities in addition to rent.
Because occupancies are currently strong, there were no incentives offered
for the move-in of homes into a community. As shipments continue to increase and
existing vacancy is absorbed, the market should tighten and permit rent
increases.
The subject is a 131-space, all age manufactured housing community. As of
the date of our inspection, the physical occupancy was 100%. There is one
employee occupied space.
<PAGE>
Manufactured Housing Community Market Overview 23
The economic occupancy is approximately 99.0%. The communities that are most
competitive with the subject have been detailed on the following pages. These
five communities are fully developed and are currently ranging from 85.8% to
100% occupied.
Summary
- -------
The manufactured housing market is sophisticated in the state of Tennessee.
Shipments have increased over the last three years. Manufactured housing
provides a lower cost-housing alternative to site built homes and a sense of
community to residents. A survey of the subject's market area revealed that
several of the competing manufactured housing communities are currently
reflecting occupancy levels of 95% to 100% with property mangers reporting that
new homes being are sold with few spaces being available for lease. A slight
increase in vacancy levels was noted is some of the communities and is
attributed to low interest rates which have made single-family home ownership
more attractive. In addition, it was also reported that there is a significant
amount of local opposition regarding the development of any new manufactured
housing communities within Davidson County. Therefore, it is unlikely that
overbuilt market conditions will occur within the near future. The overall
demand for manufactured housing sites within this market area is high.
Increasing rents and occupancies should continue to occur as the local and
national economy improves.
<PAGE>
24
Old Hickory Estates
500 Cheyenne Boulevard
Madison, Davidson County, Tennessee
====================================================================
====================================================================
Location: East Side of Cheyenne Boulevard, south of Hickory
Boulevard.
Number of Spaces: 286
Property Description: All age manufactured housing community built in
1970's.
Monthly Rental Rates: $215.00 to $225.00
Occupancy: 90.0%
Services Included in Rates: Trash collection and sewer service
Amenities: Swimming pool
Verification/Date: Kitty Alyea, Community Manager on October 28, 1999.
Comments: Old Hickory Estates is an older community that
rental increased rates by $15.00. This community is
approximately nine miles northeast of the subject.
<PAGE>
25
Country Meadows
860 Richards Road
Antioch, Davidson County, Tennessee
====================================================================
====================================================================
Location: South side of River Road, east of Antioch Pike
Number of Spaces: 296
Property Description: All age manufactured housing community built in
1980's.
Monthly Rental Rates: $332.00 to $342.00
Occupancy: 95.9%
Services Included in Rates: Trash collection and lawn care service
Amenities: Playground and swimming pool.
Verification/Date: Katrina Garrett, Community Manager on October 28,
1999.
Comments: This is an attractive community that is located in
a superior commercial/residential area and is
located approximately 11 miles southeast of the
subject property.
<PAGE>
26
Shady Hills
1508 Dickerson Pike
Nashville, Davidson County, Tennessee
====================================================================
====================================================================
Location: West side of Dickerson Pike, south of Trinity Lane.
Number of Spaces: 225
Property Description: All age manufactured housing community built in
stages from 1950 to 1952.
Monthly Rental Rates: $180.00 to $188.00
Occupancy: 85.8%
Services Included in Rates: Trash collection.
Amenities: No amenities.
Verification/Date: Lee Lynch, Community Manager on November 5, 1999.
Comments: This community is located approximately six miles
south of the subject and is inferior in quality and
condition.
<PAGE>
27
Holiday
201 Grizzard Avenue
Nashville, Davidson County, Tennessee
====================================================================
====================================================================
Location: Located at the end of Grizzard Avenue, west of
Dickerson Pike
Number of Spaces: 267
Property Description: All age manufactured housing community built in
1967.
Monthly Rental Rates: $200.00 to $210.00
Occupancy: 100.0%
Services Included in Rates: Water, sewer and trash collection.
Amenities: Swimming pool.
Verification/Date: Gene Gentry on October 28, 1999.
Comments: This is an older community that is inferior in
condition to the subject property. The park is
located approximately 1 mile northwest of the
subject property.
<PAGE>
28
Country Living
1330 Williamson Road
Goodlettsville, Davidson County, Tennessee
====================================================================
====================================================================
Location: South side Williamson Road, east of Dickerson Pike
Number of Spaces: 118
Property Description: All age manufactured housing community built in
late 1960's.
Monthly Rental Rates: $205.00 to $210.00
Occupancy: 100%
Services Included in Rates: Trash collection.
Amenities: None
Verification/Date: Mrs. Vaughn, Community Manager on October 28, 1999.
Comments: This park is inferior in visibility and condition
and is situated approximately 4 miles northeast of
the subject property.
<PAGE>
RENTAL COMPARABLE SUMMARY
<TABLE>
<CAPTION>
================================================================================================================================
No. Name/Location Number Monthly Services Amenities
Spaces/ Rental Included In Rent
% Occ. Rates
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 Old Hickory Estates 286/ $ 215.00 Trash collection and Swimming pool.
------------------- 90.0% to sewer service.
500 Cheyenne Boulevard $ 225.00
Madison, Davidson County, Tennessee
- --------------------------------------------------------------------------------------------------------------------------------
2 Country Meadows 296/ $ 332.00 Trash collection and Playground and
860 Richards Road 95.9% to lawn care service. swimming pool.
Antioch, Davidson County, Tennessee $ 342.00
- --------------------------------------------------------------------------------------------------------------------------------
3 Shady Hills 225/ $ 180.00 Trash collection. No amenities.
1508 Dickerson Pike 85.8% to
Nashville, Davidson County, Tennessee $ 188.00
- --------------------------------------------------------------------------------------------------------------------------------
4 Holiday 267/ $ 200.00 Water, sewer, trash Swimming pool.
------- 100.0% to collection.
201 Grizzard Avenue $ 210.00
Nashville, Davidson County, Tennessee
- --------------------------------------------------------------------------------------------------------------------------------
5 Country Living 118/ $ 205.00 Trash collection. No amenities.
1330 Williamson Road 100.0% to
Goodlettsville, Davidson County, Tennessee $ 210.00
- --------------------------------------------------------------------------------------------------------------------------------
Subj.
Trailmont 131/ $224.00/ Trash collection. Two playgrounds.
1341 Dickerson Pike 99.0% $ 229.00
Unincorporated Davidson County, Tennessee
================================================================================================================================
</TABLE>
<PAGE>
30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rent Comparable Location Map
<PAGE>
31
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing a gross land
area of 32.48 acres and a net land area of 30.22 areas (based on public
records). The tract is generally hilly and slopes to the east and north with
the eastern and northern portions of the site at the surrounding street grade.
The southwestern portion of the site is at a higher elevation and consists of
heavily wooded areas that are hilly and is not suitable for future development.
In addition, a transmission line extends east/west through this portion of the
site resulting in additional inutility of this area (represents additional land
that would likely not be developed). Drainage of the tract appears adequate and
no adverse soil or subsoil conditions were observed during the previous physical
inspection of the site.
Utility services connected and in service on the date of valuation include
the following:
Sanitary Sewer: Metropolitan Water and Sewer
--------------
Storm Sewer: Metropolitan Water and Sewer
-----------
Water: Metropolitan Water and Sewer
-----
Telephone: Bell South
---------
Electric: Nashville Electric Service
--------
Gas: Nashville Gas
---
Ingress to and egress from the subject community is via Dickerson Pike.
Access is rated good. Roadways that are laid-out to maximize the natural
features of the terrain access the individual lots in the community. Roadway
improvements include:
Street-bed: Dickerson Pike is an asphalt paved, four-lane
----------
thoroughfare. The streets in the community are asphalt-
paved roadways and are 15 to 25-foot wide right-of-ways.
Curb: Dickerson Pike does not have curbs or gutters; however,
----
asphalt curbs exist within the subject property.
Sidewalk: There are no sidewalks along Dickerson Pike. There are
--------
none in the community.
Streetlights: Dickerson Pike has overhead streetlights in this vicinity.
------------
There are also some pole-mounted lights throughout the
community.
<PAGE>
32
Landscaping: Grass and other planted areas are found throughout the site.
-----------
Some lots have trees.
Arrangements between the subject ownership and municipal and/or public
utility authorities for the connection of telephone and electricity are presumed
to exist, although neither a plan specifically identifying the location of all
underground lines nor contracts providing for their installation were provided
to us.
Encumbrances
- ------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. Additionally, there are no rent controls
in effect in Davidson County.
Easements
- ---------
Standard utility easements for electricity and telephone are assumed to
exist. A transmission line utility easement extends through the southwestern
portion of the site; this area is currently undeveloped and does not impact
overall utility of the site. No other easements were identified to us.
Encroachments
- -------------
There were no obvious encroachments observed during the previous inspection
of the subject and neighboring properties.
Environmental
- -------------
There were no obvious areas of contamination on or about the subject site.
We are not qualified in environmental hazards and recommend an audit be
performed.
Functional Utility
- ------------------
The site, which is irregular in shape and contains a net land area of
approximately 30.22 acres, is large enough to accommodate building improvements
and roadways as well as the green areas. The additional land encompasses 14.12
acres and is not deemed to be suitable for development. The main site is
considered functional for various residential development scenarios. The total
developed land area containing 131 total units equates to an overall density of
approximately 8.14 units per acre, which is higher than current development
standards which tend toward larger lot sizes, wider streets and more green
areas. The site is considered functional for use as a manufactured housing
community.
<PAGE>
33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Site Plan
<PAGE>
34
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 131 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size. The community contains four doublewide home-sites with the
remaining lots being singlewide home sites.
The common area amenities include two playgrounds. We have not estimated a
separate value for this amenity, or equipment, as they are standard items found
at most manufactured housing communities. This amenity is typical, adequate and
functional in use. The site is also improved with a maintenance shed and a 20'
x 50' mobile home that is used as an on-site office.
The community streets are asphalt paved and 15 to 20 feet wide. The
streets were observed to be in fair condition, although there are several areas
of the asphalt that have deteriorated and need to be attended to. On site
lighting is provided via pole mounted fixtures installed throughout the park.
Age and Condition
- -----------------
The community and site improvements were built in stages from 1950 to 1952,
and the community is approximately 48 years old. The common areas, streets and
individual mobile homes were observed to be in fair overall condition, having
been originally constructed of quality materials and having been maintained over
the years. Deferred maintenance was noted in several of the buildings and
includes the need for interior renovations. Overall, the current maintenance
level from the previous inspection was rated average.
<PAGE>
35
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records of
Davidson County in Deed Book 9920 at Page 534, is in the name of Windsor Park
Properties 3. The Deed was recorded in January 1996, and the indicated
consideration was $2,030,000. No other sales were noted during the past three
years.
OCCUPANCY
- ---------
The property is occupied by a fully developed 131-space manufactured home
community. Our inspection confirmed that there are no vacant lots and the
physical occupancy is 100.0%. There is one employee occupied space. The
economic occupancy is approximately 99.0%. According to the property manager,
the occupancy of the property has been 100% during the past four years.
Our analysis does not incorporate any value attributable to any community
owned homes as these units are considered personal property, not a portion of
the real estate. Likewise, we have incorporated no income attributable to the
sale of homes in our analysis.
Rental rates at the community are $224.00 and $229.00 per month. The last
rent increases occurred in January 1999 and was $11.00 per month. Management
bills tenants separately for utilities and pays for trash collection.
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned as a R20, Residential and CS, Commercial Service
Districts under the Davidson County zoning ordinance. It is our opinion that
the existing use of the subject property is a legal nonconforming use with the
zoning code.
Flood Hazard
- ------------
Davidson County is a participant in the Federal Emergency Management Agency
(FEMA) flood map system. The subject site is not located in a designated Flood
Hazard Area according to Flood Map Community Number 470040, Panel 0111B, dated
June 15, 1982.
<PAGE>
36
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. The
southwestern portion of the site (additional land area) was previously used as a
dumpsite. According to the property manager, this portion of the site was
cleaned up and a phase one environmental study revealed no soil contamination.
This analysis assumes that no hazardous substances or waste currently exist at
the site and no consideration was given to the potential liabilities and cleanup
costs associated with the presence of these materials. In addition, we have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
ASSESSMENT AND TAXES
- --------------------
The subject property is identified in the Davidson County records under
Parcel Numbers 33-00-0-061, 061.02 and 141. The assessed value of the subject
totals $443,010. Based on a 1998 tax rate of $3.39 per $100.00 of assessed
value, the 1998 taxes payable in 1999 are $15,018.04.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Tennessee, residential properties are
assessed at 25% of the market value while commercial properties are assessed at
40% of market value. The taxable assessment for the subject remained the same
for 1997 and 1998. The assessed value indicates a market value for the subject
of $1,434,000. According to the Tax Collector's Office, all taxes are current.
Properties are reassessed annually and equitability of assessments is a basis
for appeal. In comparison to our market value opinion contained herein, the
subject's assessed value appears low. It is our opinion that the subject
property is under assessed. This not uncommon for manufactured housing
communities since large parts of the value can be attributed to the
entrepreneurial skill in acquiring the land and filling the community.
Historically, the tax rates have varied slightly since 1997. The table on
the following page illustrates the tax liability for the subject property since
1997.
<PAGE>
37
Year Total Taxes
=========================================
1999 $15,018.04
-----------------------------------------
1998 $14,486.42
-----------------------------------------
1997 $10,101.90
=========================================
Historically the taxes have varied, but we would expect some increase in
future years as the demand for governmental service increases. We have
projected the stabilized taxes at $15,018, applying the 1998 tax rate of $3.39
to an assessment of $3,382 per space, or $443,010.
MARKETABILITY AND EXPOSURE PERIOD
- ---------------------------------
The subject property as discussed in the Neighborhood Analysis and
Manufactured Housing Community Market Overview sections of this report is
competitive and marketable with other properties in the marketplace.
There are typically four classes of purchasers attracted to this type of
development. The first are the tenants/residents of the community, purchasing on
a cooperative or condominium basis to reduce rental rates. The second class of
purchaser would be the single owner/operator who purchases a community as an
income and investment vehicle. Third would be the "traditional" manufactured
housing community owner/developer who views the community as a safe, long-term
investment. Finally, there is the institutional investor or syndicate (REIT)
which owns several large manufactured housing communities on a
statewide/nationwide basis.
Due to the stability of manufactured housing community investments, the
REIT investors have been a major player in the marketplace. In 1994, REIT
investors bid down capitalization rates for new, large communities. However,
after the initial splash, REIT investments have slackened as property owners
have placed premium prices on their properties. Resident groups have also
increased demand for manufactured housing community investments. According to
our banking sources, resident groups are able to borrow money at debt coverage
ratios as low as 1.0 to 1. The banks view resident group loans as good quality
with minimum risk. Typical payback periods range between five and eight years.
All age communities, like the subject, typically are not candidates for resident
purchase.
Discussions with large institutional manufactured housing community
investor representatives and local area realtors, indicated that "properly
priced", stable, well kept
<PAGE>
38
manufactured housing communities should "be under contract" within a six to
eight month period in today's market. However, our research has also revealed
that very few communities are "listed" for sale and that for the most part
brokers solicit owners for buyers.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.50% to 9.50% overall
capitalization rate requirement for senior communities. All age communities
typically reflect higher capitalization rates due to a less stable occupancy
base. Pricing is established by processing gross income, reduced by a 3% to 5%
vacancy and credit loss factor with expenses of 35% of effective gross income.
An additional capital charge of 3% to 5%, based on overall condition, is
deducted to arrive at a net operating income (NOI). This criteria is generally
the most restrictive pricing, as other investors will tend to accept lower
expense ratios (30%), no capital charges and a lower overall rate.
Interest rates are low and financial institutions are again willing to lend
money for existing real estate projects with good occupancies. The presence of
life insurance companies and conduit programs have made the financing of
manufactured housing communities a very competitive business. The insurance
companies and conduit programs will lend on a non-recourse basis, with terms
ranging from 10 to 20 years.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term, fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Our discussions with national lenders indicate that long term, fixed
rate loans are still available, but at a minimum interest rate of 7.25% to 8.0%.
On the basis of the preceding analysis, in our opinion, the exposure period
for the subject would be within the range indicated by the industry
participants, and we estimate an exposure period of six months.
<PAGE>
VALUATION SECTION
<PAGE>
40
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as:
"The reasonably probable and legal use of vacant land or an
improved property, which is physically possible,
appropriately supported, financially feasible and which
results in the highest value."/5/
The highest and best use of a specific parcel of land does not depend on
subjective analysis by the property owner, the developer, or the appraiser;
rather, the competitive forces within the market where the property is located
shape highest and best use. Therefore, the analysis and interpretation of
highest and best use is an economic study of market forces focused on the
subject property.
Market forces also shape market value. The general data that is collected
and analyzed to estimate property value is also used to formulate an opinion of
the property's highest and best use as of the effective date of the appraisal.
In all valuation assignments, value estimates are based on use. The highest and
best use of a property to be appraised provides the foundation for a thorough
investigation of the competitive positions of buyers and sellers in the
marketplace. Consequently, highest and best use can be described as the
foundation on which market value rests. Without interaction in the marketplace,
highest and best use would not exist and market value estimations would be
impossible.
When potential buyers contemplate purchasing real estate for personal use
or occupancy, their principal motivations are perceived benefits of enhanced
enjoyment, prestige, and privacy. Purchasers of investment property are
frequently motivated by the promise of net income or capital accumulation and
certain tax advantages. These investors are more directly concerned with
feasibility, an indication that a project has a reasonable likelihood of
satisfying their specific objectives. These objectives may include assured
occupancy, establishing operating costs at a reasonable and acceptable level,
and potential property appreciation.
/5/ The Appraisal Institute, The Appraisal of Real Estate, 10th Edition
----------------------------
Chicago: The Appraisal Institute, 1992, page 275.
<PAGE>
41
Analysis of the highest and best use of: 1) the land as though vacant, and
2) the property as improved, is essential in the valuation process. Through
highest and best use analysis, we attempt to interpret the market forces that
influence the subject property and identify the use on which the final value
estimate will be based. This determination is based on the analysis and
interpretation of prevailing market conditions, the trends affecting the buyers
and sellers in the marketplace, and the existing use of the subject property.
Analyzing the highest and best use of the land as though vacant serves two
functions. First, it helps identify comparable properties that should have
highest and best uses of the land as though vacant, similar to that of the
subject property. The second reason is to identify the use that would produce
maximum income to the land after property income is allocated to the
improvements. In the Cost Approach and some income capitalization techniques, a
separate value estimate of the land is required. Estimating the land's highest
and best use as though vacant becomes the necessary part of deriving a land
value estimate.
There are also reasons to analyze the highest and best use of the property
as improved. The first is to help identify comparable properties that should
have the same or similar highest and best uses as the improved subject property.
The second is to decide whether the improvements should be demolished, renovated
or retained in their present condition. They should be retained as long as they
have some marketable value and the return from the property exceeds the return
that would be realized by a new use, after deducting the costs of demolishing
the old building and constructing a new one. Identification of the existing
property's most profitable use is crucial to this determination.
The highest and best use of both the land as though vacant and the property
as improved must meet four criteria. The highest and best use must be:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
These criteria are usually considered sequentially; a use may be
financially feasible, but this is irrelevant if it is physically impossible or
legally prohibited. Only when there is a reasonable possibility that one of the
prior, unacceptable conditions can be changed is it appropriate to proceed with
the analysis. If, for example, current zoning does not permit a potential
highest and best use, but there is a possibility that the zoning can be changed,
the proposed use can be considered on that basis.
<PAGE>
42
Legally Permissible
- -------------------
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such a use and it must return
to the land the highest net return for the longest period of time.
Legal restrictions, as they apply to the subject property, are of two
types, i.e., private restrictions (deed restrictions, easements, etc.) and
public restrictions (zoning, building codes, environmental regulations and
historic district controls, etc.). These latter restrictions must be
investigated, to the best of our ability, because they may preclude many
potential highest and best uses. No information regarding private restrictions
affecting the subject was uncovered in our research or provided by the client.
It is assumed that only common restriction, i.e., utility easements, etc. are
in-place which would not be of any significant consequence to the development of
the site.
If the highest and best use of the site or property is not allowed under
current zoning, but there is a reasonable probability that a change in zoning
could be obtained due to shifting economic and social patterns, these conditions
can be considered determining highest and best use. However, we must fully
disclose all pertinent factors relating to a possible zoning change, including
that the change will not be granted. We must also be sensitive to potential
public reaction to proposed development projects since adverse reactions from
local residents and the general public have stopped many real estate
developments. The existing and/or projected use should be harmonious with the
nature and condition of existing neighborhood development.
The existing use of the subject property is a legal nonconforming use with
the zoning code for Davidson County. Therefore, the subject meets the legally
permissible criteria of this analysis as a legal nonconforming use.
Physically Possible
- -------------------
The second constraint imposed on the possible use of the property is that
dictated by the physical aspects of the site itself. Size, shape and terrain of
the parcel of land affect the uses to which it can be developed. The utility of
the parcel may depend on its frontage and depth. Also considered are the
capacity and availability of public utilities. When a site's topography or
subsoil conditions make development restrictive or costly, its potential use is
adversely affected. In general, the larger the site, the greater the potential
for achieving economies of scale or flexibility in development.
The highest and best use of a property as improved also depends on physical
considerations such as size, design and condition. The condition of the
property and its ability
<PAGE>
43
to continue in its current use may be relevant. If the property should be
converted to another use, the cost of conversion must be analyzed in light of
the returns to be generated by the new use. Obviously, the costs of conversion
depend on the property's existing physical condition.
The subject site is irregular in shape and contains a total net land area
of 30.22 acres. The tract is generally hilly and slopes gently to the east and
north with the eastern portion of the site at the surrounding street grade. The
size and shape of the site does not restrict maximum flexibility and
development.
Financially Feasible
- --------------------
After determining which uses are physically possible and legally
permissible, we have eliminated many uses from consideration. Then the uses
that meet the first two criteria are analyzed further to determine which are
likely to produce an income, or return, equal to or greater than the amount
needed to satisfy operating expenses, financial obligations and capital
amortization. All uses that are expected to produce a positive return are
regarded as financially feasible.
To determine financial feasibility, we then estimate the future gross
income that can be expected from each logical highest and best use. Vacancy and
collection losses and operating expenses are then subtracted from each gross
income to obtain the likely net operating income (NOI) from each use. A rate of
return on the invested capital can then be calculated for each use. If the net
revenue capable of being generated is enough to satisfy the required rate of
return on investment and provide a return on the land, the use is financially
feasible within some price limit.
Maximally Productive
- --------------------
Of the financially feasible uses, the use that produces the highest price,
or value, consistent with the rate of return warranted by the market for that
use is the highest and best use. To determine the highest and best use of land
as though vacant, the same rate of return is often used to capitalize income
streams from different uses into their respective values. This procedure is
appropriate if all competing uses have similar risk characteristics. If not,
differing rates of return would be required. The use that produces the highest
value is the highest and best use.
To test the highest and best use of land as though vacant or a property as
improved, an appraiser analyzes all logical, feasible alternatives. The market
usually limits the number of property uses to a few logical choices. Each
alternative use must first meet the tests of
<PAGE>
44
physical possibility and legal permissibility. The uses that meet the first two
tests are then analyzed to ascertain how many financially feasible alternatives
must be considered.
An appraiser must exercise caution in performing market analysis to support
an estimate of highest and best use. Although a given site may be particularly
well suited for a specific use, there may be a number of other sites that are
also well suited, and some may be better suited. Therefore, the appraiser must
test the highest and best conclusion to ensure that existing and potential
competition from other sites has been fully recognized.
Highest and Best Use - Vacant Land
- ----------------------------------
In determining the highest and best use of the site as vacant, the most
restrictive constraint is the legal use of the site. In the Zoning section of
this appraisal, it was noted that manufactured housing community development of
the property is a legal nonconforming use of the site.
We have also noted that there are a number of competitive manufactured
housing communities in the subject's neighborhood. Due to the non-availability
of space for immediate manufactured housing community development fees and a
lack of financing for speculative projects, it is unlikely that there will be an
abundance of speculative manufactured housing community development in the
foreseeable future.
Current trends in the manufactured housing sales would facilitate the
development of a manufactured housing community. In our opinion, the highest
and best use of the site, as if vacant and available for development, would be
to hold the property for future sale as the market trends might predicate, or
develop the land for low-to-moderate priced housing.
Highest and Best Use - As Improved
- ----------------------------------
The site is currently improved with a 131-space all age manufactured
housing community. The use of the site is a legal non-conforming use under the
current zoning code. The subject property has been in existence as a
manufactured housing community since 1963. The improvements are well situated
on the site. The site has access via Dickerson Pike. The use of the site is
physically possible. The demand for manufactured housing in this area is
evident, as exhibited by competing properties. As evidenced in the Income
Capitalization Approach, the property is capable of providing an acceptable
return to an owner, demonstrating the financial feasibility of the subject
property.
The property, as currently improved, is physically possible, legally
permissible, financially feasible and maximally productive. Therefore, in our
opinion, the highest and best use of the property as improved is its current use
as a 131-space all age manufactured housing community.
<PAGE>
45
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject property, we have considered the
positive and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Direct Sales Comparison Approach produces an estimate of value through a
comparison of similar properties, which have been transferred in the local
market.
In the analysis of a stabilized manufactured housing community, investors
are primarily concerned with cash flow to service any debt and the equity
positions. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of homes by offering
low space rental rates, an investor would not be willing to compensate a seller
for any more than the income to be received. A potential investor would be
primarily interested in the cash flow and equity return. Due to the
subjectivity of depreciation estimates and the lack of comparable land sales, we
have omitted the cost approach.
A number of positive and negative factors were believed to affect the
overall value of the subject property. On the positive side, the following were
considered.
1. The community is established and enjoys convenient access to primary
traffic arteries.
2. The community has maintained a high level of occupancy during recent
years.
Partially offsetting the positive influences are negative factors among
which the following were considered the most pertinent:
1. Subject is an older community that has few amenities offered to
tenants.
With the above factors in mind, the Income Capitalization and Sales
Comparison Approaches will now be discussed in detail on the following pages.
<PAGE>
46
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is of course an initial goal.
Tempered by capital gains considerations and the potential for recapture of book
depreciation accruals, a seller is often forced to consider a negotiated price
that may include such concessions as interim or permanent financing. Dictated
by market forces, the rate, term, and amount of financing may be favorable,
neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms. Within the goal of price minimization purchasers seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
property, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property.
<PAGE>
Income Capitalization Approach 47
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the property. The estimate of net
operating income is derived through the process of estimating the total
potential gross income (PGI), from lot rentals, less any vacancy and credit
loss, added to the estimate of income from other sources, producing an effective
gross income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
In our estimate of the stabilized net operating income, we have considered
the subject's current rent and expense levels and historical trends, together
with current rent and expense levels at manufactured housing communities similar
to the subject. The subject's historical income and expenses for 1996, 1997 and
1998 have been presented, in the table on the following page. In addition, we
also compared historical income and expenses for year-to-date September 1999
which were annualized. The expenses for the subject were compiled separately but
consolidated for analysis purposes.
Although the expenses do not appear unreasonable, we have also relied on
market comparables. Current income and expense information on three comparable
manufactured housing communities has also been presented in this section.
The data on the tables has been arrayed to display the "percent of total
income" and "dollar per space" figures, consistent with industry reporting
practices. We have combined some of the owners expense categories for purposes
of comparison.
Our analysis of each component of income, vacancy and credit loss and
expenses follows these tables, and has been summarized in the Stabilized
Operating Statement found on Page 59.
<PAGE>
48
Historical Expenses
<PAGE>
49
Income Analysis
- ---------------
The general practice in the local market is to charge a base lot rent on a
monthly basis. As previously discussed in the Manufactured Housing Community
Market Overview section of this report, this rate, at the subject, is $224.00
for singlewide units and $229.00 per month for doublewide units. Based upon the
most recent Rent Roll and Revenue Summary, the total gross scheduled rent is
$29,364 per month or $224.15 per month per unit.
The base lot rate generally includes trash collection. Base lot rents
typically generate between 90% and 99% of the total income in a manufactured
housing community. At the subject trash collection is included in the monthly
lot rent with the utilities being paid by the tenant (utilities are paid as
additional rent). As shown by our survey, the subject's lot rents are at the
lower end of the market range and is considered reasonable given the lack of
amenities, the age of the community and the services provided. Based on the
market range, we are of the opinion that the subject has a reasonable rent
structure.
Potential Gross Income
- ----------------------
As any potential purchaser would incorporate a forecast of potential gross
income at the existing rent levels, our analysis has also accounted for this.
In our forecast of total rental income, we have forecast an average rent of
$224.15 per month for all 131 sites. The total potential gross income from lot
rentals is $352,368.
Vacancy and Credit Loss
- -----------------------
Vacancy and credit loss is typically a very small percentage in an
established community, due primarily to the high cost of relocating homes. The
current occupancy at the subject property is 99.0%. All age communities
typically have a more transient occupancy than do senior communities. We have
estimated stabilized vacancy and credit loss at 5% to account for both physical
and economic vacancy, and credit loss.
Total vacancy and credit loss has been estimated to be $17,618. The
effective gross income from rentals is estimated to be $334,750.
Miscellaneous Income
- --------------------
Miscellaneous income at the subject is generated from sources such as
utilities reimbursements, storage fees, late fees, application fees, and bad
check charges. Historically, the subject generated $282.82 per space in 1996,
$328.36 per space in 1997 and $326.68 per space in 1998. We have estimated
miscellaneous income at $330.00 per space or $43,230 annually.
<PAGE>
50
Effective Gross Income
- ----------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated income losses due to any tenant changes, added to any additional
income from miscellaneous sources. Our estimate of the stabilized effective
gross income of $377,980 is detailed below:
<TABLE>
<CAPTION>
================================================================================
Trailmont Manufactured Housing Community
Effective Gross Income
================================================================================
Income:
Monthly Monthly
Spaces Rent Total Annualized
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
127 $224.00 $28,448 $341,376
4 $229.00 916 10,992
--------------------------------------------------------------------------------
Gross Potential Rental Income $29,364 $352,368
Less:
Vacancy & Credit Loss 5.0% (17,618)
--------
Effective Gross Income From Rentals $334,750
Plus:
Miscellaneous Income $330.00 43,230
--------
Effective Gross Income $377,980
================================================================================
</TABLE>
<PAGE>
51
Operating Expense Analysis
- --------------------------
The following discussion addresses each of the line item expenses for the
property. We have presented 1996, 1997 and the 1998 expense amounts, together
with the comparable expense data, followed by our stabilized estimate of the
expense.
The comparable expense information has been obtained from a number of
reliable sources and we have presented it in a summary form, on the following
page, to maintain confidentiality. The expense comparables range in size from
109 to 144 spaces. These communities have operations similar to the subject.
<PAGE>
52
Comparable Expenses
<PAGE>
53
Insurance
- ---------
Insurance charges are typically property specific based on the location and
the amenity package. Historically, these charges have varied annually, ranging
from approximately $11.25 per space in 1998 to $31.05 per space in 1997. The
comparable expense data indicated a range from $24.85 to $28.58 per space. We
have placed emphasis on the historical amounts. We have used $12.00 per space in
our estimate of this expense. This is equal to $1,572 annually and represents
approximately 0.42% of the estimated effective gross income.
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $1,774 $4,067 $1,474 $3,131 $2,740 $4,116 $1,572
- ---------------------------------------------------------------------------------------------------
% EGI 0.55% 1.13% 0.39% 1.29% 0.81% 1.10% 0.42%
- ---------------------------------------------------------------------------------------------------
$/Space $13.54 $31.05 $11.25 $24.85 $25.14 $28.58 $12.00
===================================================================================================
</TABLE>
Office
- ------
This expense category is also project specific due to varying
classifications of expense categories. We have attempted to include like items
in this category for both the subject and the expense comparables. For the
subject, this category includes office expense, supplies, licenses, dues,
subscriptions, postage, auto, travel, advertising and telephone. Historically,
this expense has ranged from $123.27 per space in 1997 to $133.63 per space in
1996. The expense comparables indicated a much lower range for this category
from $16.04 to $53.06 per space. Primary consideration was given to the
historical expense levels. We have estimated the administrative/office expense
at $125.00 per space or $16,375 per year. This estimate is equal the equivalent
of 4.33% of the effective gross income estimate.
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $17,505 $16,148 $16,243 $2,155 $5,783 $2,310 $16,375
- ---------------------------------------------------------------------------------------------------
% EGI 5.42% 4.48% 4.33% 0.89% 1.70% 0.62% 4.33%
- ---------------------------------------------------------------------------------------------------
$/Space $133.63 $123.27 $123.99 $17.10 $53.06 $16.04 $125.00
===================================================================================================
</TABLE>
<PAGE>
54
Maintenance and Repairs
- -----------------------
These expenses are project specific based on the age and condition of the
property. Many properties expense capital items rather than capitalizing them,
which results in abnormal spikes in the expense amounts in certain years.
Historically, maintenance and repair expenses have ranged from $57.40 per
space in 1997 to $99.01 in 1998. We observed the community to be in overall
average condition. However, as the community continues to age additional
maintenance efforts will be necessary. The expense comparables indicate a wide
range of expense in this category from $30.94 per space to $69.72 per space.
Our stabilized estimate of this expense is $58.00 per space or $7,598 annually,
based on both the historical and comparable expense data. This estimate is
equal to approximately 2.01% percent of the estimated effective gross income.
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $7,899 $7,519 $12,970 $3,899 $4,100 $10,040 $7,598
- ---------------------------------------------------------------------------------------------------
% EGI 2.44% 2.09% 3.46% 1.61% 1.21% 2.68% 2.01%
- ---------------------------------------------------------------------------------------------------
$/Space $60.30 $57.40 $ 99.01 $30.94 $37.61 $ 69.72 $58.00
- ---------------------------------------------------------------------------------------------------
</TABLE>
Management Fee
- --------------
Management fees at the expense comparables ranged from 2.24% to 4.83% of
effective gross income. The overall market range for management fees was found
to range from approximately 3.0% to 5.0% of effective gross income.
We have estimated a fee of 5.0% of effective gross income, considered
adequate for the management of a property of this size, in this location.
Applying this percentage to the effective gross income estimate produces an
annual amount of $18,899 or $144.27 per space per year.
<PAGE>
55
Wages and Benefits
- ------------------
This expense includes all of the costs associated with the on-site staff.
These costs including payroll, payroll and unemployment taxes and any health
insurance benefit package. Historically this expense has ranged from $190.32 in
1996 to $288.30 per space in 1998.
The expense comparables indicate a wide range of expense in this category
from $91.74 per space to $118.33 per space. Our estimate of this expense has
been based primarily on the historical expense levels. Our estimate of $250.00
per space, is equal to $32,750 annually or 8.66% of the estimated effective
gross income.
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $24,932 $30,592 $37,767 $13,200 $10,000 $17,040 $32,750
- ---------------------------------------------------------------------------------------------------
% EGI 7.72% 8.49% 10.07% 5.46% 2.95% 4.55% 8.66%
- ---------------------------------------------------------------------------------------------------
$/Space $190.32 $233.53 $288.30 $104.76 $ 91.74 $118.33 $250.00
===================================================================================================
</TABLE>
Property Taxes
- --------------
This category of expense represents the annual real estate tax liability of
the property. This category is project specific due to location and taxing
authority. We have not used the expense comparables for the estimate this
expense.
In our analysis we have relied on the analysis as presented and discussed
in the Assessment and Taxes section of this report. Our analysis indicated a
tax liability of $15,018. This estimate is equal to $114.64 per space or 3.97%
of the effective gross income estimate.
<PAGE>
56
Utilities
- ---------
This category of expense is also project specific, due to the number and
type of services that are included in the rent. In this case, this line item has
historically included the costs of providing water, sewer and trash pick-up for
the homesites and water, sewer, electric and trash collection for the common
areas of the community. This expense has ranged from $383.40 per space in 1996
to $414.37 per space in 1997. The expense comparables indicated this expense to
range from $203.44 to $399.16 per space. We have estimated this expense at
$395.00 per space per year. This is equal to $51,745, or approximately 13.69% of
the estimated effective gross income estimate.
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $50,226 $54,282 $51,718 $25,633 $27,920 $57,479 $51,745
- ---------------------------------------------------------------------------------------------------
% EGI 15.55% 15.07% 13.79% 10.60% 8.22% 15.35% 13.69%
- ---------------------------------------------------------------------------------------------------
$/Space $383.40 $414.37 $394.79 $203.44 $256.15 $399.16 $395.00
===================================================================================================
</TABLE>
Miscellaneous Expense
- ---------------------
This expense has ranged from $14.16 per space in 1998 to $34.76 per space
in 1997. We have estimated this expense at $20.00 per space per year. This is
equal to $2,620, or approximately 0.69% of the estimated effective gross income.
Reserves
- --------
Property owners do not typically account for reserves for capital
replacement. This category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
This item is typically accounted for either on a dollar per space ($20.00 to
$30.00) or a percentage (0.5% to 2.0%) of effective gross income. We have used
$25.00 per space per year, believed adequate to cover future capital costs.
This equates to $3,275 annually, equal to approximately 0.87% of the effective
gross income estimate.
<PAGE>
57
Expense Summary
- ---------------
To summarize, we have estimated the stabilized total operating expenses for
the subject to be $149,852. This estimate is equal to 39.65% of the effective
gross income estimate or $1,143.91 per space annually.
Expense Summary
<TABLE>
<CAPTION>
===================================================================================================
1996 1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $130,682 $ 144,918 $ 150,946 $71,197 $105,001 $135,782 $ 149,852
- ---------------------------------------------------------------------------------------------------
% EGI 40.45% 40.24% 40.24% 29.44% 30.93% 36.26% 39.65%
- ---------------------------------------------------------------------------------------------------
$/Space $ 997.57 $1,106.24 $1,152.26 $565.06 $ 963.31 $ 942.93 $1,143.91
===================================================================================================
</TABLE>
As shown on the preceding table, expenses ranged from 40.24% of the
Effective Gross Income in 1998 to 40.45% in 1996. The expense comparables, as
summarized above, indicated a range from 29.44% (Comparable Number 1) and 36.26%
(Comparable Number 3).
Our estimate of total expenses is equal to 39.65% of the effective gross
income estimate. It should be noted that the historical expenses did not
include a reserve for capital expenditures. Additionally, none of the expense
comparables reflect a reserve for capital expenditures, which has been included
in our estimate.
Our estimate of net operating income is $228,128. Our stabilized estimate of
income and expenses for the subject is presented on the following page.
<PAGE>
58
Insert Stabilized Operating Statement
<PAGE>
59
Capitalization Discussion
- -------------------------
Two alternative methods of valuation are employed in the Income Approach.
Direct capitalization is a method of converting net operating income into market
value, employing a "capitalization" rate based upon market perimeters. This
approach is particularly applicable to properties with a stable income stream,
or in cases where income, and consequently value, can be projected to increase
at a constant or stable rate.
An alternative valuation method is yield capitalization, which employs a
year-by-year projection of income and expenses, recognizing rent changes and the
cost of improvements as they occur. Yield capitalization, also known as
Discounted Cash Flow Analysis, is considered most appropriate in the valuation
of properties with uneven income streams. Since investors are unwilling to pay
for any upside from vacant units, fully developed manufactured housing
communities are typically valued by direct capitalization.
Direct Capitalization
- ---------------------
Direct capitalization of net operating income by an overall capitalization
rate extracted from the market provides an excellent indication of market value.
Purchasers of manufactured housing communities most often utilize this method.
This method is the most easily understood, closely related to the market, and
convincing if the overall rates abstracted from recent sales are from comparable
sale properties and accurate income data are available. Income data was
available from all of the comparable sale properties included in this report.
Market Data
- -----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 8.33% to 12.69% and
averaged 10.94%. Our analysis of this data indicated a relatively wide range in
overall capitalization rates, which tend to be influenced by the size of the
community and its age and condition.
Comparable Sales
==========================================================
Sale Sale Date Overall
Number Capitalization Rate
----------------------------------------------------------
1 02/99 12.69%
----------------------------------------------------------
2 01/99 12.10%
----------------------------------------------------------
3 01/98 8.92%
----------------------------------------------------------
4 12/97 8.33%
----------------------------------------------------------
5 01/96 10.78%
==========================================================
<PAGE>
60
As discussed in the Marketability and Exposure Period section of this
report, our sources indicated that institutional investors required 8.5% to 9.5%
overall capitalization rates for projects in the 200 space range and were the
most restrictive in pricing due to stringent criteria. We also found that REIT
investors were bidding rates down even further. Our information revealed that
manufactured housing community cooperatives and associations would more likely
accept slightly lower overall rates, while the small investor would require a
slightly higher rate.
The comparable sale data represents recent sales of all age communities in
Tennessee, Mississippi, Kansas and Alabama. Sale Comparable Number One was
purchased at a below market price and would indicate a lower overall rate. This
sale is also inferior in quality to the subject property. Sale Comparable
Number 2 is inferior in location to the subject property and reflected a high
overall rate. Sale Comparable Number 3 is superior in condition while Sale
Comparable Number 4 is superior in overall amenities. Comparable Sale Number 5
is also inferior in location to the subject property.
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 9.5% to 10.5% range. Considering the subject is an older
manufacturing housing community and reflects additional risk in terms of
investment, we have concluded a rate of 10.0%.
Debt Coverage Ratio Method
- --------------------------
As an alternative to market-derived overall capitalization rates, we have
developed an overall rate through the Debt Coverage Ratio analysis. The
parameters for this calculation are summarized below.
The Debt Coverage Ratio Method of income capitalization essentially
measures the risk involved in mortgage lending. Its usefulness to mortgage
underwriting takes the form of establishing a degree of safety with a given set
of loan terms.
Mortgage underwriting typically focuses on positive debt coverage, (net
operating income/annual mortgage debt service or NOI/ADS), rather than market
value, as a negative cash flow after debt service may indicate a probability
that a mortgage loan could be in jeopardy. Accordingly, if the greatest portion
of the property's value is debt capital, as established by the loan-to-value
ratio, annual debt coverage in underwriting is a major consideration. The debt
coverage ratio method is therefore market based and direct.
By multiplying this risk factor by the projected mortgage payment
requirement an estimate of the required overall rate to satisfy the lender's
minimum risk requirements can be derived.
<PAGE>
61
The formula for this procedure is: M x f x DCR = R, where;
M = Loan to Value Ratio
f = Mortgage Constant
DCR = Debt Coverage Ratio
R = Overall Rate
To establish the criteria for the development of the Debt Coverage Ratio
Method, we have conducted a recent survey of lenders; the results are summarized
below:
Contact Gene Fogarty Mike McCoy
--------------------------------------------------------------------
Bank NationsBank Community Bank
--------------------------------------------------------------------
Type Of Lender Conventional Conventional
--------------------------------------------------------------------
Nominal Mortgage Interest Rate Floor of 7.25% to Floor of 7.25% to
8.0% 8.0%
--------------------------------------------------------------------
Amortization Period 15 - 20 Years 15 - 25 Years
--------------------------------------------------------------------
Loan Term 3 - 7 Years 5 - 10 Years
--------------------------------------------------------------------
Debt Coverage Ratio 1.20 - 1.25 1.20 - 1.25
--------------------------------------------------------------------
Loan To Value Ratio 75% 75%
=====================================================================
According to US Financial Data, March 26, 1999, 5-year treasury yields were
5.11%. Our survey of lenders indicated an annual interest rate up to 400 basis
points over the 5-year treasury yields, or 9.11%.
A mortgage loan would be available at 75% of the market value, based on a
20-year amortization schedule. Based on these criteria the indicated annual
interest rate constant is 10.8818%. Additionally, our survey indicated that a
minimum debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. An overall capitalization rate, based on these
assumptions, has been developed as shown below.
<TABLE>
<CAPTION>
==============================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.108818 1.25 0.102017
- ----------------------------------------------------------------------------------------------
Rounded 10.2%
==============================================================================================
</TABLE>
The debt coverage ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufacturing housing
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
<PAGE>
62
The presence of institutional investors in the market and the dearth of
quality real estate investments have bid down rates on manufactured housing
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
housing community investments.
The rates typically reflect a narrow range and are considered mutually
supportive. Therefore, we have estimated an overall capitalization rate of
10.0%. We have used this rate in the direct capitalization method to capitalize
the net income of $228,128. The value conclusion of the subject's 131 developed
lots via the direct capitalization method is as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$228,128 / 0.10 $2,281,280
Rounded to $2,300,000
</TABLE>
<PAGE>
63
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions must be weighed, and the data of each
transaction must be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject must be
considered; differences in physical, functional and economic
characteristics be noted; and adjustments for the differences be made.
3. The value conclusion must be consistent with the analysis of the sales
data.
For a conveyance to qualify as a "market transaction", four factors must be
present:
1. The conveyance must be "arm's length"; that is, it must be between two
non-related parties.
2. Neither the buyer nor the seller should have been under compulsion to
act.
3. The property should be available to the class of purchasers best able
to utilize the facility.
4. The price must be expressed in the equivalent of cash, adjusted for any
special financing, concessions, or terms.
For any class of real estate, the market area for comparative data must
reflect the area prospective purchasers would consider. Comparability is also a
function of the physical character of the asset to be appraised. Classes of
real estate in which physical specifications are standardized, or in which scale
is small, and/or in which the commodity has achieved uniform market recognition
require that the sales data considered closely resemble the subject. As
specifications become more complex, as scale increases, and as market
recognition declines, the physical similarity of the sales data and the subject
tends to decline.
<PAGE>
64
Sales Comparison Approach
To judge the degree of comparability that exists between the sales selected
for analysis and the subject, several guidelines were applied.
1. Each sale is in the same market as the subject. To the extent that a
market is a meeting place for buyers and sellers of real estate of a
given type, the boundaries of the market are set by the participants in
merchandising and absorbing competitive properties and are economic not
purely physical or geographic.
2. Physical characteristics of the subject and comparables are similar.
3. The functional adequacy of each sale property and the subject are
competitive in terms of the ability of each to support similar
functions.
To draw a conclusion from the analysis of the sales data, a unit of
comparison has been selected. The calculation of a unit of comparison provides a
common denominator by which the market sales can be related to each other and to
the subject property. The commonly accepted unit of comparison in the valuation
of a manufactured housing community is the sale price per space. This unit of
comparison emphasizes the contribution of the improvements, and the contribution
of the land is merged into the unit-selling price.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For features that are dissimilar, adjustments have
been made leading to an indication of the price at which the subject could be
expected to sell. In considering adjustments, relevant factors were considered
including:
1. Nature of surrounding development.
2. Relative size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
6. Amenities and occupancy.
<PAGE>
65
In our search for comparable sales, we excluded senior communities since
they tend to have a less transient occupancy base and typically trade at lower
capitalization rates than all age communities.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject. All are recent
transactions and are indicative of the actions of the manufactured housing
community market.
The sales occurred between December 1996 and February 1999. The properties
ranged in size from 89 to 486 spaces. The sale prices, on a per space basis,
ranged from $7,255 to $25,206. The Effective Gross Income Multipliers (EGIM)
ranged from 4.55 to 7.57 and the indicated overall rates ranged from 8.33% to
12.69%. The following pages detail each of the improved sales, following which
we have presented a summary of the pertinent data.
<PAGE>
Sale Comparable Number One 66
A & L Mobile Home Park
573 Long Hollow Pike
Gallatin, Sumner County, Tennessee
================================================================================
Photograph Not Available
================================================================================
Sale Date: February 1999
Property Description
- --------------------
Size/Type: 89-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, 15.0-acre parcel of land with adequate
access. Improved with asphalt-paved streets and
streetlights.
Improvements/Amenities: Site is also improved with 2,500 square foot
convenience store.
Year Built/Condition: 1970's/Average
<PAGE>
67
Income Data
- -----------
Annual Occupancy: 100.0%
Average Lot Rent: $160.00
Effective Gross Income: $220,000
Expenses: $55,000 (25.0% of the effective gross income)
Net Income: $165,000
Sale Data
- ---------
Sale Price: $1,300,000
Cash Equivalent Price: $1,300,000
Grantor: Sigler, Hixom and Augustine
Grantee: V & R Investments
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Grantee
Date: March 1999
Comparison Data
- ---------------
Sale Price/Space: $14,607
Effective Gross Income
Multiplier (EGIM): 5.91
Overall Capitalization
Rate (OAR): 12.69%
Comments: This all age community is located on the west side
of Gallatin. According to the buyer the property
was recently appraised at $16,854 per unit which
reflects a lower indicated overall rate.
<PAGE>
Sale Comparable Number Two 68
The Grove
510 Lehmberg Road
Columbus, Lowndes County, Mississippi
================================================================================
Photograph Not Available
================================================================================
Sale Date: January 1999
Property Description
- --------------------
Size/Type: 107-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, 79-acre parcel of land with adequate
access. Improved with asphalt-paved streets and
streetlights. The sale included 20.0 acres of excess
that was located in floodplain and had an estimated
value of $40,000 and was deducted from the sale price.
Improvements/Amenities: Four self-storage buildings containing 104 units,
community office, maintenance building and playground.
Year Built/Condition: 1994 and 1995/Good
<PAGE>
69
Income Data
- -----------
Annual Occupancy: 88.0%
Average Lot Rent: $134.36
Effective Gross Income: $186,750
Expenses: $76,792 (41.1% of the effective gross income)
Net Income: $109,958
Sale Data
- ---------
Sale Price: $951,600
Cash Equivalent Price: $911,600
Grantor: Hometown America, Inc.
Grantee:
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Seller
Date: January 14, 1999
Comparison Data
- ---------------
Sale Price/Space: $8,520
Effective Gross Income
Multiplier (EGIM): 4.88
Overall Capitalization
Rate (OAR): 12.1%
Comments: This property is situated in an older
commercial/residential area and was purchased as
part of a package of other manufactured housing
communities.
<PAGE>
Sale Comparable Number Three 70
Grove Acres
2183 Old Brandon Road
Pearl, Rankin County, Mississippi
================================================================================
Photograph Not Available
================================================================================
Sale Date: January 1998
PROPERTY DESCRIPTION
- --------------------
Size/Type: 102-space all age manufactured home community
Utilities: All Public
Land Description: Generally level, irregularly shaped 11.158-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: None
Year Built/Condition: 1975/Good
<PAGE>
71
INCOME DATA
- -----------
Annual Occupancy: 96.1% (98 of 102 spaces)
Average Lot Rent: $120.00
Effective Gross Income: $139,536
Expenses: $73,500 (52.7% of the effective gross income)
Net Income: $66,036
SALE DATA
- ---------
Sale Price: $780,000
Cash Equivalent Price: $740,000
Grantor: Estate of Juan Herrington Eaves
Grantee: Homewood Manor Enterprises
Financing Terms: Cash to seller
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Confidential source
Date: April 13, 1998
COMPARISON DATA
- ---------------
Sale Price/Space: $7,255
Effective Gross Income
Multiplier (EGIM): 5.30
Overall Capitalization
Rate (OAR): 8.92%
Comments: The sale price is reduced to account for excess
land. The income figures reflect income in place;
although the buyer plans to install water meters
and raised rents by $20.00 per month.
<PAGE>
Sale Comparable Number Four 72
Santa Barbara Estates
1600 N. Ridgeview Road
Olathe, Johnson County, Kansas
================================================================================
Photograph Not Available
================================================================================
Sale Date: December 1997
Property Description
- --------------------
Size/Type: 486-space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped 82.62-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: Clubhouse, pool, and playground.
Year Built/Condition: 1970/Average
<PAGE>
Sale Comparable Number Four 73
Income Data
- -----------
Annual Occupancy: 100.0%
Average Lot Rent: $290.00
Effective Gross Income: $1,618,000
Expenses: $598,000 (37.0% of the effective gross income)
Net Income: $1,020,000
Sale Data
- ---------
Sale Price: $12,250,000
Cash Equivalent Price: $12,250,000
Grantor: Carlsberg Realty, Inc.
Grantee: Hometown Santa Barbara L.L.C.
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted.
Verification Source: Buyer.
Date: May 1998
Comparison Data
- ---------------
Sale Price/Space: $25,206
Effective Gross Income
Multiplier (EGIM): 7.57
Overall Capitalization
Rate (OAR): 8.3%
Comments: This good quality all age community is located in
Olathe Kansas.
<PAGE>
Sale Comparable Number Five 74
London Village
1801 Gadsen Highway
Trussville, Jefferson County, Alabama
================================================================================
Photograph Not Available
================================================================================
Sale Date: December 1996
PROPERTY DESCRIPTION
- --------------------
Size/Type: 219-space all age manufactured home community
Utilities: All Public
Land Description: Generally level, irregularly shaped 35.37-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: None
Year Built/Condition: 1971/Average, streets are in poor condition.
<PAGE>
Sale Comparable Number Five 75
INCOME DATA
- -----------
Annual Occupancy: 98.2% (215 of 219 spaces)
Average Lot Rent: $175.00
Effective Gross Income: $450,900
Expenses: $229,858 (51.0% of the effective gross income)
Net Income: $221,042
SALE DATA
- ---------
Sale Price: $2,050,000
Cash Equivalent Price: $2,050,000
Grantor: Hulsey and Company
Grantee: Regency Trussville, Inc.
Financing Terms: Cash
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Confidential Source
Date: December 28, 1998
COMPARISON DATA
- ---------------
Sale Price/Space: $9,361
Effective Gross Income
Multiplier (EGIM): 4.55
Overall Capitalization
Rate (OAR): 10.78%
Comments: This property is well located near Birmingham.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name/Location Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 A & L Mobile Home Park $ 1,300,000 89/ $14,607 $160.00 5.91/ 12.69%
573 Long Hollow Pike February 1999 100.0% 25.0%
Gallatin, Sumner County, Tennessee
- ------------------------------------------------------------------------------------------------------------------------------------
2 The Grove $ 911,600 107/ $ 8,520 $134.36 4.88/ 12.1%
510 Lehmberg Road January 1999 88% 41.1%
Columbus, Lowndes County, Mississippi
- ------------------------------------------------------------------------------------------------------------------------------------
3 Grove Acres $ 740,000 102/ $ 7,255 $120.00 5.30/ 8.92%
2183 Old Brandon January 1998 96.1% 52.7%
Road
Pearl, Rankin County, Mississippi
- ------------------------------------------------------------------------------------------------------------------------------------
4 Santa Barbara Estates $12,250,000 486/ $25,206 $290.00 7.57/ 8.33%
1600 N. Ridgeview Road December 1997 100% 37.1%
Olathe, Johnson County, Kansas
- ------------------------------------------------------------------------------------------------------------------------------------
5 London Village $ 2,050,000 219/ $ 9,361 $175.00 4.55/ 10.78%
1801 Gadsen Highway December 1996 96.1% 51.0%
Trussville, Jefferson County, Alabama
====================================================================================================================================
</TABLE>
<PAGE>
Comparable Sale Location Map 77
<PAGE>
Sale Comparable Approach 78
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is A & L Mobile Home Park in Gallatin,
Tennessee. The all age community has 89 spaces and sold in February 1999 for
$1,300,000, or $14,607 per space. Based on an effective gross income of
$220,000, the EGIM was 5.91. The overall rate was 12.69%. The average lot rent
at the time of sale was approximately $160.00. The expenses represented
approximately 25.0% of the effective gross income. According to the owner, the
property was purchased at a below market price; therefore, a lower overall rate
is indicated from this sale. The community was 100.0% occupied at the time of
sale.
Sale Comparable Number Two is The Grove Manufactured Housing Community in
Columbus, Mississippi. This 107-space all age community sold for $951,600 in
January 1999 and included 20.0 acres of excess land with an estimated value of
$40,000 and was deducted from the sale price. The cash equivalent price equates
to a sale price per space of $8,520. Based on an effective gross income of
$186,750, the EGIM was 4.88. The expenses represented approximately 41.1% of the
effective gross income and the indicated overall capitalization rate was 12.10%,
based on a net operating income of $109,958. This community was built in 1994
and 1995 and was 88.0% occupied at the time of sale.
Sale Comparable Number Three is the Grove Acres Manufactured Housing
Community in Pearl, Mississippi. The 102-space all age community sold for
$780,000 in January 1998 and included excess land with an estimated value of
$40,000 and was deducted from the sale price. The cash equivalent price equates
to a sale price per space of $7,255. Based on an effective gross income of
$139,536, the EGIM is 5.30. The indicated overall capitalization rate was
8.92%, which would indicate a net operating income of $66,036. The average lot
rent at the time of sale was $120.00. The park was 96.1% occupied at the time
of sale.
Sale Comparable Number Four is Santa Barbara Estates Manufactured Housing
Community in Olathe, Kansas. This 486-space all age community sold for
$12,250,000 in December 1997. The price equates to a sale price per space of
$25,206. Based on an effective gross income of $1,618,000, the EGIM was 7.57.
The expenses represented 37.0% of the effective gross income and the indicated
overall capitalization rate was 8.33%, based on a net operating income of
$1,020,000. This community was 100% occupied at the time of sale.
Sale Comparable Number Five is London Village in Trussville, Alabama. This
219-space all age community sold for $2,050,000 in December 1996. The price
equates to a sale price per space of $9,361. Based on an effective gross income
of $450,900, the EGIM was 4.55. The expenses were 51.0% of the effective gross
income and the indicated overall capitalization rate was 10.78%, based on a net
operating income of $221,042. This community was 98.2% occupied at the time of
sale.
<PAGE>
Sales Comparison Approach 79
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last twenty-seven
months, having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 4.55 and 7.57. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community in a rural commercial/residential area
that has exhibited new development during recent years. The property has a high
level of occupancy with a minimal amount of deferred maintenance being noted.
With the exception of Sales 1 and 4, the expense ratios of the comparables are
higher than the subject's expense ratio. The comparables range from 25.0% to
52.7% and the subject has a forecast expense ratio of 39.65%. We have relied on
Sales 1 and 5 as the most similar to the subject in terms of quality and
location. Based on these considerations, we have concluded an EGIM in the upper
end of the range, processing subject's Effective Gross Income of $377,980 with
an EGIM of 6.0.
Thus, $377,980 x 6.0 = $2,267,880
Rounded $2,250,000
This equates to $17,176 per space, lower than one of the comparables. The
subject's average rent ($224.15) is also lower than one of the comparables.
Price Per Space Analysis
- ------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a
<PAGE>
80
greater amenity package. Rather than making a subjective percentage adjustment
to the per space sales prices, the Net Operating Income/Space (NOI/Space)
reflects, in most cases, the market perception of a property's position in the
marketplace. Since investors are mainly concerned with cash flow to service
debt, the net operating income generating capability of a particular community
can be used for comparison purposes. Typically, the higher the NOI/Space for a
community, the higher the per space sales price. The subject has a NOI/Space of
$1,741. The NOI/Space and per space sales prices for the comparables are shown
on the following table. We then compare the percentage difference between each
comparable's NOI/Space and the subject's NOI/Space. For comparables with a
higher NOI/Space, a downward adjustment to the per space sales price is made. An
upward adjustment is made for a comparable with a lower NOI/Space.
NOI/Space and Per Space Sales Price
<TABLE>
<CAPTION>
==================================================================================================================
COMP 1 COMP 2 COMP 3 COMP 4 COMP 5 SUBJECT
<S> <C> <C> <C> <C> <C> <C>
NOI/Space $ 1,854 $ 1,028 $ 647 $ 2,099 $ 1,009 $1,741
Price/Space $14,607 $ 8,520 $ 7,255 $25,206 $ 9,361 N/A
Percent
Adjustment -6.1% +169.4% +269.1% -17.1% +172.5% N/A
Adjusted
Price/Space $13,716 $14,433 $19,523 $20,896 $16,148 N/A
==================================================================================================================
</TABLE>
After adjustments, the indicated range is from $13,716 to $20,896 per
space. The subject is a good quality park that has reflected high operating
levels during recent years. Therefore, we have considered the upper end of the
range and concluded $17,000 per space.
Thus, 131 Spaces X $17,000/Space is: $ 2,227,000
Rounded $ 2,230,000
SUMMARY
- -------
The two methods indicated a narrow range and are considered mutually
supportive. Therefore, we have concluded a value of $2,250,000 via the Sales
Comparison Approach.
<PAGE>
81
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $2,300,000
Sales Comparison Approach $2,250,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales and listings of similar properties. In
the reconciliation, we reviewed each approach to value (a) to ascertain the
reliability of the data and (b) to weight the approach that best represented the
actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject property.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable.
The two approaches reflect a narrow range of values and are considered
mutually supportive. Since buyers are most concerned with cash flow to service
debt, we have placed primary emphasis on the income approach. Therefore, our
opinion of the market value of the subject property, based on a reasonable
exposure period of six months, as of October 28, 1999, was:
- TWO MILLION THREE HUNDRED THOUSAND DOLLARS -
($2,300,000)
<PAGE>
82
CERTIFICATION
- -------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. I have no bias with respect to the property that is the subject of
this report, or to the parties involved with this assignment.
. My engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. My compensation for completing this assignment is not contingent on
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of the
appraisal.
. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, the Code
of Professional Ethics, and the Standards of Professional Practice of
the Appraisal Institute and the American Society of Appraisers.
. The use of this report is subject to the requirements of the Appraisal
Institute and the American Society of Appraisers relating to review by
its duly authorized representatives.
. As of the date of this report, Keith D. McFarland, ASA has completed
the requirements under the continuing education program of the
American Society of Appraisers.
. Keith D. McFarland, ASA previously made a personal inspection of the
property that is the subject of this report on March 26, 1999. The
property was not reinspected for this appraisal and is noted
throughout the report.
. No one provided significant professional assistance to the person
signing this report.
_______________________________
Keith D. McFarland, ASA
Tennessee Certified General Real Estate Appraiser #00051023
<PAGE>
83
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the
conclusion in this report are summarized below.
Per our prior agreement with the client, the appraiser did not reinspect the
subject property. The appraisal process, therefore, involves departure from
Standards Rule 1. By prior agreement with the client, the appraiser did not
reinspect the subject property/6/. The scope of this appraisal limited by
completing a desktop update and not reinspecting the subject property. Our
analysis is based on information gathered during our original inspection and
appraisal of the subject property, and this appraisal assumes no material
changes during this period. Therefore, the physical descriptive sections and
corresponding analyses therein (from the reports) are hereby incorporated into
our more current analyses herein. We reserve the right to adjust the valuation
herein reported as required by consideration of additional or more reliable data
that may become available. It is the appraisers determination that this
appraisal is not so limited as to result in a misleading or confusing report.
It is understood by Windsor Corporation is aware of the limitations and lower
level of reliability inherent in a limited appraisal process, and that if a
complete appraisal process were undertaken, or more information were to become
known, our value conclusion may change.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function. The appraisal report may not be reproduced, in whole or
in part, and a third party may not utilize the findings of the report for any
purpose, without the written consent of Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
_________________________
6 The appraisal process, therefore, involved departure from Standards Rule 1
of USPAP.
<PAGE>
84
We are not required to give testimony or be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed in
connection with any matter that may be disclosed by a proper survey. If a
subsequent survey should reflect a differing land area and/or frontages, we
reserve the right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others and are not meant to be used as a reference in legal matters
of survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projections contained in
the appraisal assume both responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
<PAGE>
85
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures that would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
The appraisal report covering the subject property is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers; therefore we are not qualified to judge the structural
and environmental integrity of the improvements, if any. Consequently, no
warranty, representations or liability are assumed for the structural soundness,
quality, adequacy or capacities of said improvements and utility services,
including the construction materials, particularly the roof, foundations, and
equipment, including the HVAC systems, if applicable. Should there be any
question concerning same, it is strongly recommended that an
Engineering/Construction/Environmental inspection be obtained. The value
estimate stated in this appraisal, unless noted otherwise, is predicated on the
assumption that all improvements, equipment and building services, if any, are
structurally sound and suffer no concealed or latent defects or inadequacies
other than those noted in the appraisal. Any proposed construction or
rehabilitation referred to in the appraisal report is assumed to be completed
within a reasonable time and in a workmanlike manner according to or exceeding
currently accepted standards of design and methods of construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas that were previously
inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
<PAGE>
86
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our previous field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of
the property together with a detailed analysis of the requirements of the ADA
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "A"
BEING a parcel of land in the Second Civil District of Nashville, Davidson
County, Tennessee, located on the west margin of U.S. Highway 31W (Dickerson
Pike) at its intersection with Old Dickerson Pike, being known as Trailmont
Trailer Park and being particularly described as follows:
BEGINNING at an iron pin in the westerly margin of Dickerson Pike, said point
being 6 feet, more or less, southerly along said margin from the southerly
margin of Old Dick Pike;
THENCE, leaving said margin, with the North line of Harold Hudgins of record in
Deed 635A, page 611, Register's Office for Davidson County, Tennessee, North 05
(degrees), 02', 13" W. 1241.24 feet to a point;
THENCE, with the East line of subject property South 03 (degrees), 34', 59"
West, 879.10 feet to iron pin;
THENCE, with the West line of Walter Wells of record in Deed Book S165, page
402, Register's Office for Davidson County, Tennessee, South 03 (degrees), 50',
36" West, 315.35 feet to planted stone;
THENCE, with the North line of John Gibbs, et. ux. of record in Deed Book 8901,
page ? Register's Office for Davidson County, Tennessee, North 87 (degrees),
31', 45" West, 377.55 feet to an iron pin;
THENCE, with the East line of Roy S. Jackson, et. ux. of record in Deed Book
1227, page 285, Register's Office for Davidson County, Tennessee, North 03
(degrees) 28', 04" East, 1627.63 feet to a corner post;
THENCE, with the South line of Gayle G. Ballou of record in Deed Book 3869, page
876, Register's Office for Davidson County, Tennessee, South 85 (degrees), 20',
19" East, 382.76 feet to planted stone;
THENCE, North 03 (degrees), 56', 07" East, 221.82 feet to a planted stone;
THENCE, with the South line of John Hensley Jones, et. ux. of record in Deed
Book 6086, page 307, Register's Office for Davidson County, Tennessee, North 88
(degrees), 06', 15" East, 175 feet to an iron pin;
THENCE, with the South line of William T. Williams, et. ux. of record in Deed
Book 8178, page 451, Register's Office for Davidson County, Tennessee, North 47
(degrees), 49', 03" East 265 feet to an iron pin;
THENCE, with the South line of Delphia L. Holcomb of record in Deed Book 8780,
page 763, Register's Office for Davidson County, Tennessee, South 89 (degrees),
04', 23" East, 316.56 feet to a point;
THENCE, with the West line of George H. Montgomery of record in Deed Book 5289,
page 731, Register's Office for Davidson County, Tennessee and Deed Book 5194,
page 653, Register's Office for Davidson County, Tennessee, South 22 (degrees),
03', 00" West, 509.10 feet to a concrete monument;
THENCE, South 67 (degrees), 15', 00" East, 343.45 feet to an iron pin in the
westerly margin of Dickerson Pike;
THENCE, with said margin and a curve concave to the East having a central angle
of 1 (degree), 00', 54", a radius of 2914.93 and a chord of South 28 (degrees),
00', 44" West, 51.64 feet for an arc length of 51.64 feet to a point;
THENCE, South 27 (degrees), 22', 00" West, 135.22 feet to the point of
beginning, containing 1,415,002 square feet or 32.48 acres, more or less.
BEING the same property conveyed to Trailmont MHP, Ltd., by Deed of Record in
Book 6719, page 52, Register's Office for Davidson County, Tennessee.
<PAGE>
FINANCIALS
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 42
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 974 Trailmont MHP Time: 14:29:45
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Current Period
1 Month 1 Month
Thru: Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Gross Site Rent 27,923 27,923 0 0.00
Vacancies (107) (213) 107 50.00
Employee Allowances (213) (213) 0 0.00
Late Fees 110 225 (115) -51.11
------------ ----------- ----------- ------
Net Site Rent 27,714 27,722 (9) -0.03
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 1,452 1,389 63 4.57
Sewer Income 2,272 2,207 65 2.96
------------ ----------- ----------- ------
Total Utility Income 3,725 3,596 129 3.58
AMENITY INCOME
Other Income 119 125 (6) -4.80
------------ ----------- ----------- ------
Total Amenity Income 119 125 (6) -4.80
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 31,557 31,443 114 0.36
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 1,643 1,440 (203) -14.07
Salaries & Wages-Maint. 669 800 131 16.42
Salaries & Wages-Clerical 0 75 75 100.00
Salaries & Wages-Bonus 500 0 (500) 0.00
Payroll Taxes 306 231 (75) -32.65
Health Benefits 540 540 0 0.00
Pension Benefits 118 116 (2) -1.29
Workers Comp Insurance 34 34 0 0.50
------------ ----------- ----------- ------
Total Payroll 3,809 3,236 (573) -17.71
UTILITY EXPENSE
Water Expense 733 730 (3) -0.38
Sewer Expense 1,876 2,089 213 10.20
Gas Expense 210 0 (210) 0.00
Electric Expense 300 418 118 28.23
Trash Expense 877 827 (50) -6.05
------------ ----------- ----------- ------
Total Utilities Expense 3,996 4,064 68 1.68
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 1,711 400 (1,311) -327.68
Vehicle Expense 14 100 86 86.35
------------ ----------- ----------- ------
Total Repairs & Maint. 1,724 500 (1,224) -244.87
MARKETING
Advertising 180 150 (30) -20.06
Business Promotions 60 25 (35) -139.92
------------ ----------- ----------- ------
</TABLE>
<TABLE>
<CAPTION>
Year-to-Date
2 Months 2 Months
Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Gross Site Rent 55,846 55,846 0 0.00
Vacancies (107) (426) 320 75.00
Employee Allowances (426) (426) 0 0.00
Late Fees 430 450 (20) -4.44
------------ ----------- ----------- ------
Net Site Rent 55,744 55,444 300 0.54
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 2,728 2,728 (20) -0.71
Sewer Income 4,090 4,253 (163) -3.83
------------ ----------- ----------- ------
Total Utility Income 6,819 7,001 (182) -2.61
AMENITY INCOME
Other Income 242 250 (8) -3.20
------------ ----------- ----------- ------
Total Amenity Income 242 250 (8) -3.20
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 62,804 62,695 109 0.17
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 3,285 2,880 (405) -14.07
Salaries & Wages-Maint. 1,342 1,600 258 16.10
Salaries & Wages-Clerical 0 150 150 100.00
Salaries & Wages-Bonus 500 0 (500) 0.00
Payroll Taxes 559 462 (97) -20.98
Health Benefits 1,080 1,080 0 0.00
Pension Benefits 235 232 (3) -1.29
Workers Comp Insurance 68 68 0 0.50
------------ ----------- ----------- ------
Total Payroll 7,069 6,472 (597) -9.23
UTILITY EXPENSE
Water Expense 1,335 1,433 (98) 6.81
Sewer Expense 3,781 4,510 729 16.17
Gas Expense 210 0 (210) 0.00
Electric Expense 714 842 128 15.17
Trash Expense 1,704 1,654 (50) -3.02
------------ ----------- ----------- ------
Total Utilities Expense 7,744 8,439 695 8.23
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 1,711 800 (911) -113.84
Vehicle Expense 14 200 186 93.18
------------ ----------- ----------- ------
Total Repairs & Maint. 1,724 1,000 (724) -72.44
MARKETING
Advertising 468 300 (168) -56.08
Business Promotions 60 50 (10) -19.96
------------ ----------- ----------- ------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 43
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 974 Trailmont MHP Time: 14:29:46
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Thru: Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Marketing 240 175 (65) -37.18
Collection Costs
Legal-Collection Fees 400 100 (300) -300.00
Bad Debt 0 50 50 100.00
------ ------ ------ ------
Total Collection Costs 400 150 (250) -166.67
GENERAL & ADMINISTRATIVE
Telephone 80 90 10 10.63
Supplies-Office 36 95 59 62.44
Professional Fees-MRI 154 131 (23) -17.75
Natl. & State Assn. Dues 0 131 131 100.00
Management Fees 786 1,572 786 50.01
Overhead Reimbursement 688 688 0 0.04
Miscellaneous Expense 0 10 10 100.00
------ ------ ------ ------
Total G&A 1,744 2,717 973 35.81
TAXES & INSURANCE
Real Property Taxes 1,281 1,281 0 0.02
Insurance 149 149 0 0.13
------ ------ ------ ------
Total Taxes & Insurance 1,430 1,430 0 0.03
------ ------ ------ ------
TOTAL EXPENSES 13,343 12,272 (1,071) -8.73
------ ------ ------ ------
NET OPERATING INCOME 18,215 19,171 (956) -4.99
====== ====== ====== ======
- -------------------------------------------------------------------------------
Year-to-Date
2 Months 2 Months
Feb 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Marketing 528 350 (178) -50.92
Collection Costs
Legal-Collection Fees 400 200 (200) -100.00
Bad Debt 0 100 100 100.00
------ ------ ------ ------
Total Collection Costs 400 300 (100) -33.33
GENERAL & ADMINISTRATIVE
Telephone 164 180 16 8.77
Supplies-Office 49 190 141 74.29
Professional Fees-MRI 322 262 (60) -22.95
Natl. & State Assn. Dues 0 131 131 100.00
Management Fees 2,337 3,135 798 25.45
Overhead Reimbursement 1,376 1,376 1 0.04
Miscellaneous Expense 0 20 20 100.00
------ ------ ------ ------
Total G&A 4,248 5,294 1,046 19.76
TAXES & INSURANCE
Real Property Taxes 2,561 2,562 1 0.02
Insurance 298 298 0 0.13
------ ------ ------ ------
Total Taxes & Insurance 2,859 2,860 1 0.03
------ ------ ------ ------
TOTAL EXPENSES 24,573 24,715 142 0.57
------ ------ ------ ------
NET OPERATING INCOME 38,231 37,980 251 0.66
====== ====== ====== ======
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 45
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 974 Trailmont MHP Time: 13:20:23
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Dec 1998 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 27,923 27,923 0 0.00
Vacancies 0 0 0 0.00
Employee Allowances (213) (213) 0 0.00
Late Fees 240 200 40 20.00
------------ ----------- ----------- ------
Net Site Rent 27,950 27,910 40 0.14
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 1,290 1,439 (149) -10.35
Sewer Income 1,914 2,267 (353) -15.59
------------ ----------- ----------- ------
Total Utility Income 3,204 3,706 (502) -13.56
AMENITY INCOME
Other Income 153 175 (22) -12.81
------------ ----------- ----------- ------
Total Amenity Income 153 175 (22) -12.81
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 31,306 31,791 (485) -1.52
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 1,643 1,442 (201) -13.91
Salaries & Wages-Maint. 669 618 (51) -8.19
Salaries & Wages-Clerical 0 170 170 100.00
Salaries & Wages-Bonus 300 0 (300) 0.00
Payroll Taxes 201 202 1 0.48
Health Benefits 510 510 0 0.00
Pension Benefits 0 0 0 0.00
Workers Comp Insurance 38 38 0 0.00
------------ ----------- ----------- ------
Total Payroll 3,360 2,980 (380) -12.76
UTILITY EXPENSE
Water Expense 700 757 57 7.53
Sewer Expense 1,500 1,791 291 16.25
Gas Expense 69 0 (69) 0.00
Electric Expense 385 433 48 10.98
Trash Expense 1,654 828 (826) -99.76
------------ ----------- ----------- ------
Total Utilities Expense 4,309 3,809 (500) -13.12
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 435 300 (135) -45.10
Repairs & Maint-Buildings 0 0 0 0.00
Repairs & Maint-Vehicles 0 50 50 100.00
Vehicle Expense 74 0 (74) 0.00
Repairs & Maint-Equipment 0 200 200 100.00
Repairs & Maint-Homes 220 0 (220) 0.00
Supplies-Maintenance 0 100 100 100.00
------------ ----------- ----------- ------
- -------------------------------------------------------------------------------
Year-to-Date
12 Months 12 Months
Dec 1998 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 331,539 331,539 0 0.00
Vacancies 0 (630) 630 100.00
Employee Allowances (2,529) (2,529) 0 0.00
Late Fees 3,267 2,400 867 36.13
------------ ----------- ----------- ------
Net Site Rent 332,277 330,780 1,497 0.45
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 16,098 16,646 (548) -3.29
Sewer Income 25,052 23,223 1,829 7.87
------------ ----------- ----------- ------
Total Utility Income 41,150 39,869 1,281 3.21
AMENITY INCOME
Other Income 1,645 2,100 (455) -21.66
------------ ----------- ----------- ------
Total Amenity Income 1,645 2,100 (455) -21.66
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 375,072 372,749 2,323 0.62
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 19,437 17,052 (2,385) -13.99
Salaries & Wages-Maint. 7,864 7,308 (556) -7.61
Salaries & Wages-Clerical 0 1,979 1,979 100.00
Salaries & Wages-Bonus 1,065 0 (1,065) 0.00
Payroll Taxes 2,698 2,388 (310) -13.00
Health Benefits 6,120 6,120 0 0.00
Pension Benefits 126 0 (126) 0.00
Workers Comp Insurance 456 456 0 0.00
------------ ----------- ----------- ------
Total Payroll 37,767 35,303 (2,464) -6.98
UTILITY EXPENSE
Water Expense 9,263 10,898 1,635 15.00
Sewer Expense 27,649 30,675 3,026 9.86
Gas Expense 323 0 (323) 0.00
Electric Expense 4,725 4,400 (325) -7.39
Trash Expense 9,757 9,917 160 1.61
------------ ----------- ----------- ------
Total Utilities Expense 51,718 55,890 4,172 7.46
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 12,187 3,600 (8,587) -238.52
Repairs & Maint-Buildings 25 0 (25) 0.00
Repairs & Maint-Vehicles 161 750 589 78.51
Vehicle Expense 304 0 (304) 0.00
Repairs & Maint-Equipment 48 2,400 2,352 98.01
Repairs & Maint-Homes 220 0 (220) 0.00
Supplies-Maintenance 26 1,200 1,174 97.86
------------ ----------- ----------- ------
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 46
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 974 Trailmont MHP Time: 13:20:25
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Thru: Dec 1999 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Repairs & Maint. 730 650 (80) -12.27
MARKETING
Advertising 45 155 110 70.97
Promo Incentives-Resident 0 0 0 0.00
Promo Incentives-Dealers 0 0 0 0.00
Business Promotions 35 5 (30) -602.60
------ ------ ------ ------
Total Marketing 80 160 80 49.92
Collection Costs
Legal-Collection Fees 0 60 60 100.00
Bad Debt 0 600 600 100.00
------ ------ ------ ------
Total Collection Costs 0 660 660 100.00
GENERAL & ADMINISTRATIVE
Telephone 200 62 (138) -221.84
Supplies-Office 155 95 (60) -63.61
Professional Fees-MRI 200 177 (23) -12.85
Professional Fees-Other 0 0 0 0.00
License & Fees 0 33 33 100.00
Natl. & State Assn. Dues 0 0 0 0.00
Management Fees 1,549 1,590 41 2.57
Overhead Reimbursement 688 142 (546) -384.33
Professional Development 0 38 38 100.00
Dues and Subscriptions 0 0 0 0.00
Meals & Entertainment 18 25 7 27.08
Travel-Community 0 100 100 100.00
Miscellaneous Expense 500 987 487 49.34
------ ------ ------ ------
Total G&A 3,310 3,249 (61) -1.87
TAXES & INSURANCE
Real Property Taxes 853 853 0 0.02
Insurance 123 123 0 0.14
------ ------ ------ ------
Total Taxes & Insurance 976 976 0 0.03
------ ------ ------ ------
TOTAL EXPENSES 12,765 12,484 (281) -2.25
------ ------ ------ ------
NET OPERATING INCOME 18,542 19,307 (765) -3.96
====== ====== ====== ======
- -------------------------------------------------------------------------------
Year-to-Date
12 Months 12 Months
Dec 1998 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Repairs & Maint. 12,970 7,950 (5,020) -63.15
MARKETING
Advertising 1,355 1,860 505 27.12
Promo Incentives-Resident 0 250 250 100.00
Promo Incentives-Dealers 0 500 500 100.00
Business Promotions 442 60 (382) -636.28
------- ------- ------ ------
Total Marketing 1,797 2,670 873 32.69
Collection Costs
Legal-Collection Fees 58 720 662 91.98
Bad Debt 0 2,400 2,400 100.00
------- ------- ------ ------
Total Collection Costs 58 3,120 3,062 98.15
GENERAL & ADMINISTRATIVE
Telephone 1,275 744 (531) -71.35
Supplies-Office 1,003 1,140 137 12.03
Professional Fees-MRI 2,176 2,124 (52) -2.46
Professional Fees-Other 2,471 0 (2,471) 0.00
License & Fees 0 396 396 100.00
Natl. & State Assn. Dues 0 131 131 100.00
Management Fees 18,685 18,637 (48) -0.26
Overhead Reimbursement 8,253 1,704 (6,549) -384.33
Professional Development 0 1,406 1,406 100.00
Dues and Subscriptions 129 0 (129) 0.00
Meals & Entertainment 63 100 37 36.77
Travel-Community 0 400 400 100.00
Miscellaneous Expense 873 11,844 10,971 92.63
------- ------- ------ ------
Total G&A 34,928 38,626 3,698 9,57
TAXES & INSURANCE
Real Property Taxes 10,234 10,236 2 0.02
Insurance 1,474 1,476 2 0.14
------- ------- ------ ------
Total Taxes & Insurance 11,708 11,712 4 0.03
------- ------- ------ ------
TOTAL EXPENSES 150,946 155,271 4,325 2.79
------- ------- ------ ------
NET OPERATING INCOME 224,126 217,478 6,648 3.06
======= ======= ====== ======
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 45
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 974 Trailmont MHP Time: 14:56:25
This is a PRELIM report since it contains data from the current period.
Entries are not final.
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Thru: Dec 1997 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 26,744 26,744 0 0.00
Vacancies 0 (204) 204 100.00
Employee Allowances (204) (204) 0 0.00
Late Fees 265 100 165 165.00
------------ ----------- ----------- ------
Net Site Rent 26,805 26,436 369 1.40
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 1,314 1,326 (12) -0.91
Sewer Income 1,982 1,734 248 14.31
Trash Income 0 774 (774) -100.00
Other Utility Income 0 0 0 0.00
------------ ----------- ----------- ------
Total Utility Income 3,296 3,834 (538) -14.03
AMENITY INCOME
Other Income 164 50 114 227.00
------------ ----------- ----------- ------
Total Amenity Income 164 50 114 227.00
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 30,264 30,320 (56) -0.18
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 1,597 1,455 (142) -9.75
Salaries & Wages-Maint. 644 620 (24) -3.84
Salaries & Wages-Bonus 0 0 0 0.00
Payroll Taxes 173 227 54 23.81
Health Benefits 340 125 (215) -172.00
Pension Benefits 0 62 62 100.00
------------ ----------- ----------- ------
Total Payroll 2,754 2,489 (265) -10.63
UTILITY EXPENSE
Water Expense 676 1,275 599 47.01
Sewer Expense 1,928 2,856 928 32.49
Gas Expense 0 0 0 0.00
Electric Expense 412 350 (62) -17.62
Trash Expense 1,565 799 (766) -95.88
------------ ----------- ----------- ------
Total Utilities Expense 4,580 5,280 700 13.25
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 46 600 554 92.31
Repairs & Maint-Buildings 0 0 0 0.00
Repairs & Maint-Pools 0 0 0 0.00
Repairs & Maint-Vehicles 0 50 50 100.00
Vehicle Expense 26 0 (26) 0.00
Repairs & Maint-Other 0 0 0 0.00
Supplies-Maintenance 0 0 0 0.00
------------ ----------- ----------- ------
- -------------------------------------------------------------------------------
Year-to-Date
12 Months 12 Months
Dec 1997 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 317,391 317,391 0 0.00
Vacancies (390) (2,421) 2,031 83.89
Employee Allowances (2,421) (2,421) 0 0.00
Late Fees 2,560 1,200 1,360 113.33
------------ ----------- ----------- ------
Net Site Rent 317,140 313,749 3,391 1.08
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 16,046 16,285 (239) -1.46
Sewer Income 24,797 20,582 4,215 20.48
Trash Income 0 6,966 (6,966 -100.00
Other Utility Income 90 0 90 0.00
------------ ----------- ----------- ------
Total Utility Income 40,934 43,833 (2,899) -6.61
AMENITY INCOME
Other Income 2,081 600 1,481 246.80
------------ ----------- ----------- ------
Total Amenity Income 2,081 600 1,481 246.80
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 360,154 358,182 1,972 0.55
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 19,003 17,460 (1,543) -8.84
Salaries & Wages-Maint. 7,642 7,440 (202) -2.72
Salaries & Wages-Bonus 175 0 (175) 0.00
Payroll Taxes 2,391 2,724 333 12.21
Health Benefits 1,020 1,500 480 32.00
Pension Benefits 360 744 384 51.58
------------ ----------- ----------- ------
Total Payroll 30,592 29,868 (724) -2.42
UTILITY EXPENSE
Water Expense 10,221 10,747 526 4.90
Sewer Expense 29,140 28,974 (166) -0.57
Gas Expense 16 0 (16) 0.00
Electric Expense 4,558 4,269 (289) -6.76
Trash Expense 10,348 9,588 (760) -7.93
------------ ----------- ----------- ------
Total Utilities Expense 54,282 53,578 (704) -1.31
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 6,594 7,200 606 8.42
Repairs & Maint-Buildings 311 0 (311) 0.00
Repairs & Maint-Pools 0 2,050 2,050 100.00
Repairs & Maint-Vehicles 222 750 528 70.40
Vehicle Expense 94 0 (94) 0.00
Repairs & Maint-Other 58 0 (58) 0.00
Supplies-Maintenance 241 0 (241) 0.00
------------ ----------- ----------- ------
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 46
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 974 Trailmont MHP Time: 14:56:28
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Thru: Dec 1997 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Repairs & Maint. 72 650 578 88.85
MARKETING
Advertising 128 152 24 15.79
Promo Incentives-Resident 100 0 (100) 0.00
Promo Incentives-Bonuses 10 0 (10) 0.00
------ ------ ------ ------
Total Marketing 238 152 (86) -56.47
Collection Costs
Legal-Collection Fees 0 50 50 100.00
Bad Debt 0 600 600 100.00
------ ------ ------ ------
Total Collection Costs 0 650 650 100.00
GENERAL & ADMINISTRATIVE
Telephone 82 100 18 17.81
Supplies-Office 105 150 45 30.27
Professional Fees-MRI 254 150 (104) -69.47
Professional Fees-Other 4 25 21 84.00
License & Fees 0 33 33 100.00
Management Fees 1,473 1,516 43 2.81
Overhead Reimbursement (180) 150 330 220.00
Meals & Entertainment 0 0 0 0.00
Miscellaneous Expense 2,131 725 (1,406) -193.90
------ ------ ------ ------
Total G&A 3,869 2,849 (1,020) -35.80
TAXES & INSURANCE
Real Property Taxes 828 828 0 0.00
Insurance 282 282 (0) -0.13
------ ------ ------ ------
Total Taxes & Insurance 1,110 1,110 (0) -0.03
------ ------ ------ ------
TOTAL EXPENSES 12,624 13,180 556 4.22
------ ------ ------ ------
NET OPERATING INCOME 17,641 17,140 501 2.92
====== ====== ====== ======
- -------------------------------------------------------------------------------
Year-to-Date
12 Months 12 Months
Dec 1997 Std. Budget Variance %
- -------------------------------------------------------------------------------
Total Repairs & Maint. 7,519 10,000 2,481 24.81
MARKETING
Advertising 1,466 1,824 359 19.65
Promo Incentives-Resident 159 0 (159) 0.00
Promo Incentives-Bonuses 10 0 (10) 0.00
------- ------- ------ ------
Total Marketing 1,634 1,824 190 10.39
Collection Costs
Legal-Collection Fees 1,556 600 (956) -159.25
Bad Debt 1,365 2,400 1,035 43.14
------- ------- ------ ------
Total Collection Costs 2,920 3,000 80 2.66
GENERAL & ADMINISTRATIVE
Telephone 818 1,200 382 31.86
Supplies-Office 899 1,800 901 50.03
Professional Fees-MRI 2,376 2,000 (376) -18.82
Professional Fees-Other 4 300 296 98.67
License & Fees 187 396 210 52.90
Management Fees 17,820 17,909 89 0.50
Overhead Reimbursement 1,312 1,800 488 27.11
Meals & Entertainment 13 0 (13) 0.00
Miscellaneous Expense 10,539 14,100 3,561 25.25
------- ------- ------ ------
Total G&A 33,968 39,505 5,537 14.02
TAXES & INSURANCE
Real Property Taxes 9,936 9,936 0 0.00
Insurance 4,067 3,384 (683) -20.19
------- ------- ------ ------
Total Taxes & Insurance 14,003 13,320 (683) -5.13
------- ------- ------ ------
TOTAL EXPENSES 144,919 151,095 6,176 4.09
------- ------- ------ ------
NET OPERATING INCOME 215,236 207,087 8,149 3.93
======= ======= ====== ======
<PAGE>
- -------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 13
Company: 90 Windsor Partnerships Date: 03/24/99
Development ID: 974 Trailmont MHP Time: 12:58:27
- -------------------------------------------------------------------------------
Current Period
1 Month 1 Month
Thru: Dec 1996 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 25,565 25,565 0 0.00
Vacancies (226) (390) 164 42.05
Free Rent/Concessions 0 0 0 0.00
Employee Allowances (195) (390) 195 50.00
Late Fees 225 100 125 125.00
------------ ----------- ----------- ------
Net Site Rent 25,369 24,885 484 1.94
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 1,373 1,250 123 9.86
Sewer Income 1,874 1,250 624 49.95
------------ ----------- ----------- ------
Total Utility Income 3,248 2,500 748 29.90
AMENITY INCOME
Vending Income 0 60 (60) -100.00
Other Income 356 0 356 0.00
------------ ----------- ----------- ------
Total Amenity Income 356 60 296 493.33
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 28,973 27,445 1,528 5.57
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 1,573 1,400 (173) -12.33
Salaries & Wages-Maint. 645 350 (295) -84.29
Salaries & Wages-Bonus 72 0 (72) 0.00
Payroll Taxes 199 193 (6) -2.96
Health Benefits 0 105 105 100.00
Pension Benefits 0 53 53 100.00
------------ ----------- ----------- ------
Total Payroll 2,489 2,101 (388) -18.45
UTILITY EXPENSE
Water Expense 722 1,458 736 50.47
Sewer Expense 1,709 1,458 (251) -17.19
Electric Expense 413 500 87 17.43
Trash Expense 783 850 67 7.93
------------ ----------- ----------- ------
Total Utilities Expense 3,626 4,266 640 15.00
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 955 750 (205) -27.35
Repairs & Maint-Pools 0 0 0 0.00
Repairs & Maint-Vehicles 0 50 50 100.00
------------ ----------- ----------- ------
Total Repairs & Maint. 955 800 (155) -19.40
MARKETING
Advertising 198 125 (73) -58.47
------------ ----------- ----------- ------
- -------------------------------------------------------------------------------
Year-to-Date
12 Months 12 Months
Dec 1996 Std. Budget Variance %
- -------------------------------------------------------------------------------
REVENUE
Gross Site Rent 288,868 288,704 164 0.06
Vacancies (1,561) (4,404) 2,843 64.54
Free Rent/Concessions (195) 0 (195) 0.00
Employee Allowances (2,865) (4,404) 1,539 34.95
Late Fees 1,791 1,148 643 56.01
------------ ----------- ----------- ------
Net Site Rent 286,037 281,044 4,993 1.78
OTHER RENT
------------ ----------- ----------- ------
Total Other Rent 0 0 0 0.00
UTILITY INCOME
Water Income 15,601 14,355 1,246 8.68
Sewer Income 19,540 14,355 5,185 36.12
------------ ----------- ----------- ------
Total Utility Income 35,141 28,710 6,431 22.40
AMENITY INCOME
Vending Income 0 689 (689) -100.00
Other Income 1,909 0 1,909 0.00
------------ ----------- ----------- ------
Total Amenity Income 1,909 689 1,220 177.10
MISC. INCOME
------------ ----------- ----------- ------
Total Misc. Income 0 0 0 0.00
------------ ----------- ----------- ------
TOTAL REVENUE 323,087 310,443 12,644 4.07
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 16,635 16,077 (558) -3.47
Salaries & Wages-Maint. 6,028 6,896 868 12.58
Salaries & Wages-Bonus 72 0 (72) 0.00
Payroll Taxes 2,196 2,529 333 13.15
Health Benefits 0 1,378 1,378 100.00
Pension Benefits 0 692 692 100.00
------------ ----------- ----------- ------
Total Payroll 24,932 27,572 2,640 9.57
UTILITY EXPENSE
Water Expense 9,707 16,744 7,037 42.03
Sewer Expense 27,554 16,744 (10,810) -64.56
Electric Expense 3,992 5,742 1,750 30.48
Trash Expense 8,973 9,761 788 8.07
------------ ----------- ----------- ------
Total Utilities Expense 50,226 48,991 (1,235) -2.52
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 7,727 8,613 886 10.28
Repairs & Maint-Pools 0 3,500 3,500 100.00
Repairs & Maint-Vehicles 172 724 552 76.29
------------ ----------- ----------- ------
Total Repairs & Maint. 7,899 12,837 4,938 38.47
MARKETING
Advertising 1,395 1,435 40 2.77
------------ ----------- ----------- ------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT: ACTUAL-BUDGET Page 14
Company: 90 Windsor Partnerships Date: 03/24/99
Development ID: 974 Trailmont MHP Time: 12:58:29
- ------------------------------------------------------------------------------------------------------------------------------------
Current Period Year to Date
1 Month 1 Month 12 Months 12 Months
Thru Dec 1996 Std. Budget Variance % Dec 1996 Std. Budget Variance %
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Marketing 198 125 ( 73) -58.47 1,395 1,435 40 2.77
Collection Costs
Legal-Collection Fees 0 50 50 100.00 272 574 302 52.61
Bad Debt 338 350 12 3.53 1,559 1,400 ( 159) -11.35
--------- --------- -------- -------- -------- -------- ------- -------
Total Collection Costs 338 400 62 15.59 1,831 1,974 143 7.25
GENERAL & ADMINISTRATIVE
Telephone 64 200 136 67.81 701 2,297 1,596 69.48
Supplies-Office 32 100 68 67.95 1,369 1,148 ( 221) -19.27
Professional Fees-MRI 325 150 ( 175) -116.63 1,834 1,923 89 4.65
Professional Fees-Other 0 83 83 100.00 125 953 828 86.88
License & Fees 0 33 33 100.00 131 379 248 65.44
Management & Fees 1,400 1,372 ( 28) -2.07 15,764 15,520 ( 244) -1.57
Overhead Reimbursement 133 0 ( 133) 0.00 1,371 0 ( 1,371) 0.00
Travel-Community 146 0 ( 146) 0.00 220 0 ( 220) 0.00
Miscellaneous Expense 914 725 ( 189) -26.10 11,754 12,876 1,122 8.72
--------- -------- -------- -------- -------- -------- ------- -------
Total G&A 3,015 2,663 ( 352) -13.24 33,269 35,269 1,827 5.21
TAXES & INSURANCE
Real Property Taxes 786 833 47 5.62 9,356 9,566 210 2.19
Personal Property Taxes 0 67 67 100.00 0 769 769 100.00
Insurance 629 247 ( 382) -154.55 1,774 2,837 1,063 37.47
--------- -------- -------- -------- -------- -------- ------- -------
Total Taxes & Insurance 1,415 1,147 ( 268) -23.36 11,130 13,172 2,042 15.50
--------- -------- -------- -------- -------- -------- ------- -------
TOTAL EXPENSES 12,036 11,502 ( 534) -4.64 130,683 141,077 10,394 7.37
--------- -------- -------- -------- -------- -------- ------- -------
NET OPERATING INCOME 16,936 15,943 993 6.23 192,404 169,366 23,038 13.60
========= ======== ======== ======== ======== ======== ======= =======
</TABLE>
<PAGE>
ENGAGEMENT LETTER
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
KEITH McFARLAND, ASA
REAL ESTATE EXPERIENCE
- ----------------------
Consultant
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured housing communities, self storage
facilities, hotels, manufacturing plants, office buildings, retail
buildings and other types of commercial establishments as well as special
use facilities. January 1996 to present.
Appraisal Director
Marshall and Stevens, Inc.
St. Louis, MO
Specialized in preparing for land and buildings in industrial, commercial
and residential uses. Performed appraisals for purposes of sale/purchase,
property tax appeals, syndication, financing and allocation of purchase
price. September 1986 to Present.
PROFESSIONAL AFFILIATIONS
- -------------------------
ASA, Senior Member American Society of Appraisers
State Certified General Real Estate Appraiser
Arkansas #CG1200N Michigan #1201004617
Colorado #CG80000045 Mississippi #GA-417
Illinois #153000628 Missouri #RA-001461
Indiana #CG69201433 Ohio #398743
Kansas #G-871 Tennessee #00051023
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Allied Research Associates IBM Retirement Fund
AT&T Global Real Estate Krupp Asset Management Company
Boatmen's National Bank May Company
CalPERS Pacific Realty Corporation
Citicorp Real Estate Park Corporation
Continental Grain Company Ruff, Callahan & Hemmeter
Eastdil Realty Sears
First Tennessee Bank Wal-Mart Stores
<PAGE>
Profile of Appraiser
2
EDUCATIONAL BACKGROUND
- ----------------------
Southern Illinois University at Edwardsville, B.S.
The Appraisal Institute
American Society of Appraisers
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St. Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicles
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical stall
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser 3
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
<TABLE>
<S> <C>
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
</TABLE>
<PAGE>
Profile of Appraiser 4
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(E)
SUMMARY
REAL ESTATE APPRAISAL REPORT
253-Space Big Country
Manufactured Housing Community
3400 South Greeley Highway
Cheyenne, Laramie County, Wyoming
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
AS OF
September 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE]
September 15, 1999
Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
RE: 253-Space Big Country
Manufactured Housing Community
3400 South Greeley Highway
Cheyenne, Laramie County, Wyoming
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of September 1, 1999, based on an exposure period of six months, to
be:
- TWO MILLION EIGHT HUNDRED TEN THOUSAND DOLLARS -
($2,810,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Big Country is a fully developed 253-space manufactured home community,
with a playground/recreation area. The park owns eleven mobile homes of which
nine are rented on a monthly basis and three are available for sale. As of
February 1, 1999, individual meters were installed and the resident is billed
for water and sewer. Due to the recent pass-through of water and sewer to the
resident, the base rent was reduced $18.00 per month and currently ranges from
$179.00 to $189.00, including trash pick-up.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation.
<PAGE>
Mr. Steve Waite
September 15, 1999
Page Two
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ L. Drake Moore
L. Drake Moore, MAI
St. Cert. Gen. REA #1321098-G
Permit No. 456
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------
<S> <C>
Table Of Contents.......................................................... 4
Photographs Of The Subject................................................. 5
Summary Of Facts And Conclusions........................................... 6
Extent Of Confirming, Collecting And Reporting Data........................ 7
Purpose, Function And Date Of The Appraisal................................ 7
Area/Neighborhood Description.............................................. 8
Manufactured Home Community Market Overview................................ 9
Land And Site Improvements................................................. 10
Improvement Description.................................................... 12
Ownership And Property History............................................. 12
Occupancy.................................................................. 12
Zoning And Other Land Use Controls......................................... 13
Real Estate Assessment And Taxes........................................... 13
Marketability And Marketing Period......................................... 14
Highest And Best Use....................................................... 15
Valuation Process.......................................................... 15
Income Capitalization Approach............................................. 16
Sales Comparison Approach.................................................. 24
Final Estimate Of Value.................................................... 28
Certification.............................................................. 29
Assumptions And Limiting Conditions........................................ 30
</TABLE>
Addenda
Legal Description
Maps
Profile Of Appraiser
<PAGE>
PHOTOGRAPHS OF THE SUBJECT (Taken August 25, 1999) 5
[PHOTOGRAPH APPEARS HERE]
1. Entrance to Subject
[PHOTOGRAPH APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 253 Space Big Country Estates
------------------- Manufactured Home Community
3400 South Greeley Highway
Cheyenne, Laramie County, Wyoming
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 30.84 +/- acres, or 1,343,390 square feet
----------
Improvements: 253-manufactured home spaces, a clubhouse and
------------ office and playground/recreation area.
Owner: Windsor Park Properties
------
Zoning: MR-2, Medium Density Residential, Cheyenne
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $2,810,000
------------------ Sales Comparison Approach $3,110,000
Final Estimate of Value: $2,810,000
------------------------
Date of Appraisal: September 1, 1999
------------------
Date of Inspection: August 25, 1998
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of September 1, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The subject was physically inspected on August 25, 1999, and the date
of this appraisal is September 1, 1999.
Market Value is defined 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, 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:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. 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./1/
- -----------------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The property is located approximately three miles south of the central
business district of Cheyenne, just outside the city limits in unincorporated
Laramie County. The property is accessible from South Greeley Highway. Cheyenne
is located in the southeastern corner of Wyoming, approximately 10 miles north
of Colorado/Wyoming state line. Cheyenne is the largest city in Wyoming.
Cheyenne is located at the intersection of Interstates 80 and 25.
Interstate 25 extends north from Denver, Colorado to Casper and Sheridan,
Wyoming. Interstate 25 extends in an east/west direction and provides access to
Lincoln, Nebraska. Interstate 85, also known as South Greeley Highway, is a
four lane roadway that is parallel to Interstate 25 and extends north through
the central business district of Cheyenne and south through Greeley to Denver,
Colorado.
State Highway 212, also known as College Drive is a beltway surrounding the
southeastern area of Cheyenne and connects with I-25 on the south side of the
city. The subject is located on the west side of South Greeley Highway,
approximately 1/2 mile south of College Drive. Access to the neighborhood is
excellent, offering all amenities, shopping, schools, churches, medical
facilities and entertainment and recreation. Ingress and egress of the subject
is rated adequate.
The neighborhood is rural in nature. Development has taken the form of
mixed-use residential, commercial and light industrial type properties located
along the major road frontages, typical of rural areas. Land use in the
immediate vicinity of the subject is characteristic of the entire neighborhood.
Existing uses along South Greeley are typical of older, industrial and retail
strip types of development. The neighborhood is estimated to be 50% developed.
There remain large contiguous tracts of land available for in-fill development.
Population
- ----------
According to the 1990 census, the population for Cheyenne was 50,008 and
the population of Laramie County was 73,142, representing respectively a 3.3%
and 6.5% increase from 1980. The most recent population figure for Cheyenne as
of 1996 was 54,132, representing a population increase of approximately 8.25%.
The population of Laramie County also increased approximately 8.25% from 1990 to
1996 to 79,175. Future projections indicate a continued modest population
growth.
<PAGE>
Area/Neighborhood Description 9
Employment
- ----------
Cheyenne's employment base is made up of the military, education, and
governmental sectors. As the seat of Laramie County and the capital of Wyoming,
Cheyenne supports many local, state and federal employees. The city's largest
employer is F.E. Warren Air Force Base, which employs 4,200 people in military
and civilian capacities. Local, state and federal government employs
approximately 7,0000 people. Cheyenne also serves as a center for
transportation, retail trade, service industries and light manufacturing. Up to
90 freight trains pass through the city each day on Union Pacific and Burlington
Northern tracks. Cheyenne is a regional center for retail and wholesale trade
serving the northern boundary of the Rocky Mountain Front Range. Cheyenne's
Dell Range Boulevard has remained as the state's biggest retail shopping
corridor.
Transportation
- --------------
Cheyenne was formed as a result of the transcontinental railroad in 1867.
The city's strategic location at the intersection of Interstates 80 and 25 has
proven advantageous for motor freight carrier. The Cheyenne Municipal Airport
has three paved runways capable of handling heavy air transport planes and is
used by the Air Force and Wyoming Air National Guard. Other forms of
transportation include two bus lines, shuttle service to the Denver Airport,
taxi services and a city-operated bus system.
Summary and Conclusion
- ----------------------
The subject is located in Laramie County just outside the southern
incorporated city limits of Cheyenne, Wyoming. The subject's location in regard
to the local amenities in the form of shopping, recreational and activity
centers is considered excellent due to the proximity of the City of Cheyenne.
General real estate values have been static over the last three to four year
period.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the 1998 U.S. Housing Market Map, Wyoming ranked 39th among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Wyoming have increased annually since 1996.
Manufactured
Home Shipments
<TABLE>
<CAPTION>
Year Shipments
================================================
<S> <C>
1996 954
------------------------------------------------
1997 1,054
------------------------------------------------
1998 1,188
================================================
</TABLE>
Source: Wyoming Manufactured Housing Association
<PAGE>
10
Land And Site Improvements
New communities are not being developed in the urban areas due to
restrictive zoning ordinances. There is a wide range of rental rates in the
marketplace. Generally speaking, lot rent ranges between $190.00 per month to
$210.00 per month. Rates varied within some of the communities as lots on a
corner, lots for multi-section homes and larger lots leased for higher than
standard amounts. Typically, services included in the rental rate vary.
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing approximately
30.84 +/- acres, or approximately 1,343,390 square feet of gross area. The
tract is generally level and at grade with the Greeley Highway Service Road and
West Wallick Road. Drainage of the tract appears adequate and no adverse soil
or subsoil conditions were observed during the physical inspection of the site.
Utility services connected and in service on the date of valuation include
water, sanitary and storm sewer, electricity and telephone.
Roadways arranged to maximize the use of the land access the individual
lots in the community. Roadway improvements include:
Street-bed: Greeley Highway Service Road is an asphalt paved, two-lane
---------- roadway. The subject streets are asphalt paved 25-foot
wide roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public streets
-------------- or in the subject.
Street Lights: Greeley Highway Service Road and West Wallick Road do not
------------- have streetlights. The subject park has pole mounted
overhead streetlights along the right of way.
Landscaping: Sodded and planted areas extend along the entire
----------- perimeter and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. There are no rent controls in effect in
Laramie County.
<PAGE>
11
Land And Site Improvements
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 30.84 +/-
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development equates to
an overall density of approximately 8.2 units per acre, which is above current
development standards that tend toward larger lot sizes, wider streets and more
green areas.
<PAGE>
12
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 253 manufactured housing community pads,
arranged along streets configured to maximize the available lot spaces. All of
the lots vary slightly in size and the density of the park is equal to 8.2
spaces per acre.
The common area amenities include the clubhouse, a storm shelter, and
adjoining children's playground area. We have not estimated a separate value
for these amenities, or equipment, as they are standard items found at most
manufactured home communities. These amenities are typical, adequate and
functional in use.
The community and site improvements were built in two phases. The most
recent phase according to the county records is 1979. The manager indicated
that the first phase was constructed in the 1950's. The common areas, streets,
amenities and individual mobile homes were observed to be in average overall
condition, having been originally constructed of quality materials and having
been maintained over the years. No significant item of deferred maintenance was
noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property is in the name of Windsor Park
Properties. In the past three years, there have been no sales or other
transfers of the property of which the appraisers are aware. The subject is
currently not listed for sale nor is there pending offers or current contracts
for the sale of the property.
OCCUPANCY
- ---------
A fully developed 253-space manufactured home community occupies the
property. According to the manager, there are currently 13 vacant lots and the
physical occupancy is 94.9%. In addition, employees occupy three lots. The
August 1st rent roll indicated there were 16 vacancies.
<PAGE>
13
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned MR-2, Medium Density Residential. According to the
ordinance number 41.413 specified by the Cheyenne Development Plan, a
manufactured housing park requires board approval. The subject has been in
existence prior to the current code and it is our opinion that the subject
property is in conformance with the zoning code.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "X" according
to Flood Map Community Number 560029, Panel 0655E, dated March 2, 1994. Zone X
is defined as an area outside the flood hazard area.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. We
noted that there is an on-site waster water treatment plant and we have
previously mentioned the spaces that have individual septic systems. We have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Laramie County records under
thirteen tax property numbers. The appraised value of the subject totals
$1,611,825 and the assessed value is $153,135. It is our opinion that the
subject is under assessed. This not uncommon for manufactured housing
communities since large parts of the value can be attributed to the
entrepreneurial skill in acquiring the land and filling the community. Based
upon the 1998 mil levy of $74.98 the current taxes are $11,482.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Wyoming, manufactured housing
communities are assessed at 9.5% of the market value. Properties are reassessed
annually and equitability of assessments is not a basis for assessment in the
state of Kansas.
In the State of Wyoming, property taxes are paid in arrears. Taxes are due
and payable in two installments with the first half due on or before December
31, 1998, and the second half due on or before May 10, 1999.
<PAGE>
14
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Based upon a recent survey by John B. Levy & Company of selected CMBS
spreads and whole loans a spread between 195 and 200 basis points over 10-year
U.S. Treasuries is available for an A rated security. BBB rated CMBS
securities may have a spread ranging from 240 to 250 basis points over the 10-
year treasury. A prime mortgage rate ranging from 8.02 to 8.12 is available for
a loan with a ten-year term.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
15
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 253-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
- ----------------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
16
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENT COMPARABLE SUMMARY
<TABLE>
<CAPTION>
===================================================================================================================================
No. Name Total Monthly Services Amenities
Address Spaces/ Rental Rate Included In Rent
% Occ.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 West Winds Home Park 295/ $195.00 Water, sewer and Playground and pool.
505 Williams Street 95.3% trash pick-up.
Cheyenne, Laramie County, Wyoming
- -----------------------------------------------------------------------------------------------------------------------------------
2 Cimmaron Village Mobile Home Park 155/ $190.00 None Clubhouse
300 E. Prosser Road 84.5%
Cheyenne, Laramie County, Wyoming
- -----------------------------------------------------------------------------------------------------------------------------------
3 Circle Park Mobile Home Park 52/ $210.00 None None
609 E. Prosser Road 100%
Cheyenne, Laramie County, Wyoming
- -----------------------------------------------------------------------------------------------------------------------------------
4 South Fork Mobile Home Park 344/ $190.00 Water, sewer and None
4000 S. Greeley Highway 90.4% trash pick-up.
Cheyenne, Laramie County, Wyoming
- -----------------------------------------------------------------------------------------------------------------------------------
Subj. Big Country MHP 253/ $179.00 to Trash collection. Playground
3400 S. Greeley Road 94.9% $189.00
Cheyenne, Laramie County, Wyoming
===================================================================================================================================
</TABLE>
<PAGE>
18
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $190.00 to $210.00 per month, as
indicated by the rent comparables recited in this report. As shown by our
survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $47,177 and the average monthly rental rate for the 253 units is
equivalent to $186.47. The potential gross income from rentals is $566,124 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 94.9% physically occupied with
240 of the 253 sites occupied. The subject occupancy level has varied in the
past, but appears to have recently stabilized. According to management, the
remaining vacant lots are too small to lease. The market currently ranges from
84.5% to 100%. We have estimated vacancy at 5.0% of total potential gross
income, or $28,306.
Utility Income
- --------------
The subject property recently had individual meters installed and started
billing for water and sewer in February 1999. We have estimated approximately
$300.00 per space will be recovered or $75,900 annually.
Other Income
- ------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $33.99 per space (6 months
annualized 1999) to $52.23 (1996), in other income. We have based our estimate
of other income on the historical levels, estimating this income at $35.00 per
space or $8,855 annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $566,124 less a vacancy and credit loss
allowance in the amount of $28,306 or 5.0% produces an effective gross income
from rentals estimate of $537,818. To this we add income derived from other
sources, which totals $84,755, arriving at an effective gross income estimate of
$622,573.
<PAGE>
Big Country Manufactured Housing Summary of Historical Operations
<TABLE>
<CAPTION>
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $441,005 97.09% $1,743.10 $496,663 98.10% $1,963.09 $555,087 98.25% $2,194.02
Utility Income - 0.00% - 19 0.20% 0.08 - 0.00% -
Miscellaneous/Other 13,214 2.91% 52.23 9,610 1.90% 37.98 9,911 1.75% 39.17
-----------------------------------------------------------------------------------------------------------
Total Income $454,219 100.00% $1,795.33 $506,292 100.19% 2,001.15 $564,998 100.00% $2,233.19
Expenses:
Insurance 9,673 2.13% 38.23 9,476 1.87% 37.45 1,195 0.21% 4.72
Office 52,489 11.56% 207.47 49,730 9.82% 196.56 38,104 6.74% 150.61
Maintenance & Supplies 41,472 9.13% 163.92 38,058 7.52% 150.43 36,049 6.38% 142.49
Management Expense 26,875 5.92% 106.23 27,572 5.45% 108.98 30,344 5.37% 119.94
Wages & Benefits 55,149 12.14% 217.98 64,356 12.71% 254.37 76,562 13.55% 302.62
Property Taxes 11,266 2.48% 44.53 11,206 2.21% 44.29 10,084 1.78% 39.86
Utilities 118,655 26.12% 468.99 123,088 24.31% 486.51 137,147 24.27% 542.08
-----------------------------------------------------------------------------------------------------------
Total Expenses $315,579 69.48% $1,247.35 $323,486 63.89% $1,278.60 $329,485 58.32% $1,302.31
Net Operating Income $138,640 30.52% $ 547.98 $182,806 36.11% $ 722.55 $235,513 41.68% $ 930.88
===========================================================================================================
<CAPTION>
6 Months
Annualized Pct. of $ Per
1999 Income Space
-----------------------------------
<S> <C> <C> <C>
Income:
Rents $505,706 86.86% $1,998.84
Utility Income 67,917 11.67% 268.45
Miscellaneous/Other 8,600 1.48% 33.99
-----------------------------------
Total Income $582,223 100.00% $2,301.28
Expenses:
Insurance 3,644 0.63% 14.40
Office 38,242 6.57% 151.15
Maintenance & Supplies 23,058 3.96% 91.14
Management Expense 29,576 5.08% 116.90
Wages & Benefits 64,418 11.06% 254.62
Property Taxes 11,218 1.93% 44.34
Utilities 126,508 21.73% 500.03
-----------------------------------
Total Expenses $296,664 50.95% $1,172.58
Net Operating Income $285,559 49.05% $1,128.69
===================================
</TABLE>
<PAGE>
Income Capitalization Approach 20
Operating Expense Analysis
- --------------------------
Insurance: Historically, this expense has exhibited an increasing trend. Our
- ----------
estimate of this expense has been stabilized based on the historical amounts, or
$25.00 per space per year. This is equal to $6,325 annually or approximately
1.02% of the effective gross income.
Administrative/Office: Historically, this expense has shown a variable trend.
- ----------------------
In the financial statements, this expense does include some corporate expense
items, which we have not considered. We have stabilized our estimate of this
expense at $150.00 per space per year, which is equal to $37,950 or
approximately 6.10% of the estimated effective gross income.
Maintenance and Repair: Historically, this expense has decreased since 1996. We
- -----------------------
have based our estimate on the indicated historical trend at $120.00 per space
per year or $30,360 annually, believed adequate to properly maintain the
community. This amount is equal to approximately 4.88% of the estimated
effective gross income.
Management Fees: This expense typically includes off-site management, the
- ----------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $31,129 or $123.04 per space per year.
Wages and Benefits: Historically, this expense has steadily increased, except in
- -------------------
annualized 1999. We have based our estimate on the historical data at $300.00
per space per year or $75,900, which is equal to 12.19% of the estimated
effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$11,482. This equates to $45.38 per space per year or approximately 1.84% of
the estimated effective gross income.
Utilities: Meters were recently installed at the subject property and the
- ----------
residents are billed for water and sewer. We have estimated this expense at
$500.00 per space per year. This expense is expected to cover the cost of
water, sewer and trash pick-up and the utility expense related to the common
area. This is equal to $126,500, or approximately 20.31% of the estimated
effective gross income.
Reserves: This expense category represents the inclusion of set-asides for major
- ---------
recurring or capital type expenditures experienced periodically by any property.
We have used $30.00 per space per year, believed adequate to cover future
capital costs. This equates to $7,590 annually or approximately 1.22% of the
estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- --------------
the subject property at $327,236. This estimate is equal to 52.56% of the
Effective Gross Income (EGI) estimated or $1,293.42 per space per year. As
shown, expenses have historically ranged between 50.95% (6 months annualized
1999) and 69.48% (1996).
<PAGE>
<TABLE>
==============================================================================================
Big Country Manufactured Housing Community
Stabilized Operating Statement
% of $ per
Amount EGI Space
==============================================================================================
<S> <C> <C> <C>
Total Effective Gross Income $ 622,573 100.00% $ 2,460.76
Expenses
Insurance $ 6,325 1.02% $ 25.00
Office 37,950 6.10% 150.00
Maintenance & Repairs 30,360 4.88% 120.00
Management Expense 31,129 5.00% 123.04
Wages & Benefits 75,900 12.19% 300.00
Property Taxes 11,482 1.84% 45.38
Utilities 126,500 20.32% 500.00
Reserves 7,590 1.22% 30.00
--------------------------------------
Total Expenses $ 327,236 52.56% $ 1,293.42
Net Operating Income $ 295,337 47.44% $ 1,167.34
==============================================================================================
</TABLE>
<PAGE>
22
Income Capitalization Approach
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
9.0% and 11.4%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
======================================================================================================
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 November 1997 5.0% 36.6% 10.0%
- ------------------------------------------------------------------------------------------------------
2 March 1997 5.0% 38.0% 11.3%
- ------------------------------------------------------------------------------------------------------
3 October 1996 5.0% 41.5% 11.4%
- ------------------------------------------------------------------------------------------------------
4 October 1996 5.0% 45.2% 10.6%
- ------------------------------------------------------------------------------------------------------
5 July 1996 5.0% 42.3% 9.0%
======================================================================================================
</TABLE>
The subject has a market vacancy and expense ratio. Sale Comparable 3 and
4 are located near the subject in Cheyenne and a good indicator of value,
however, we were unable to locate sales of other comparable manufactured housing
communities within the last two years. The most recent sales, comparable 1 and
2, were located in Colorado. Comparable 1 is located in the community of
Fountain near Colorado Springs and comparable 2 is located in Greeley,
approximately 50 miles south of the subject. These properties had a slightly
higher rental rate and were older than the subject. In addition, the South Fork
MHP located just south of the subject on Greeley Highway continues to expand and
is offering concessions. Based on these considerations, we have concluded an
overall capitalization rate of 10.5%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 15-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 11.468%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<PAGE>
23
Income Capitalization Approach
<TABLE>
<CAPTION>
====================================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.10112 1.25 0.10751
- ----------------------------------------------------------------------------------------------------
Rounded 10.75%
====================================================================================================
</TABLE>
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The rate via the debt coverage ratio is supportive of the rate concluded
from the market data. Our estimate of the market value of the subject, indicated
by the Income Capitalization Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$295,337 divided by 0.105 $2,812,733
Rounded to $2,810,000
</TABLE>
<PAGE>
24
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales of all age communities
are the most significant transactions for direct comparison with the subject.
<PAGE>
25
Summary of Sale Comparables
<TABLE>
<CAPTION>
===================================================================================================================================
No. Name Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Address Sale Date Spaces/ Space Lot Rent Expense %
(Adj. For Cash Occupancy
Equivalency)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Fountain Mobile Home Park $1,880,000 106/ $16,981 $235.00 6.34/ 10.0%
512 Windsor Lane November 1997 95.0% 36.6%
Fountain, Colorado
- ---------------------------------------------------------------------------------------------------------------------------------
2 Mobile Estates MHP $1,400,000 106/ $13,208 $211.00 5.49/ 11.3%
1717 & 1823 5th March 1997 95.0% 38.0%
Street
Greeley, Colorado
- ---------------------------------------------------------------------------------------------------------------------------------
3 Englewood Village MHP 707,720 61/ $11,520 $195.00 5.07/ 11.4%
2334 McCann Avenue October 1996 95.0% 41.5%
Cheyenne, Wyoming
- --------------------------------------------------------------------------------------------------------------------------------
4 Cimarron Village MHP $1,647,280 156/ $10,559 $180.00 5.16/ 10.6%
300 East Prosser Road October 1996 95.0% 45.2%
Cheyenne, Wyoming
- ---------------------------------------------------------------------------------------------------------------------------------
5 Canyon Ridge Mobile $4,200,000 250/ $16,800 $230.00 6.41/ 9.0%
Home Park October 1996 95.0% 42.3%
5150 Airport Road
Colorado Springs, Colorado
===================================================================================================================================
</TABLE>
<PAGE>
26
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is a 106-space all age community is located in
Fountain, Colorado. The property sold for $1,800,000 in November 1997. The
price equates to a sale price per space of $16,981. Based on an effective gross
income of $283,974, the EGIM was 6.34. The expenses represented 36.6% of the
effective gross income and the indicated overall capitalization rate was 10.0%,
based on a net operating income of $180,000. This pro forma was estimated
utilizing 95.0% occupancy. Rents were increased $20.00 in April 1997 to
approximately $235.00 per month.
Sale Comparable Number Two is Mobile Estates located in Greeley, Colorado.
This 106-space community sold for $1,400,000 in March 1997, which resulted in a
sale price per space of $13,208. Based on an effective gross income of
$254,972, the EGIM was 5.49. The overall rate was 11.3%. The average lot rent
at the time of sale was approximately $211.00.
Sale Comparable Number Three, Englewood Village, is located in Cheyenne,
Wyoming. The property is part of a $2,350,000 sale to Affordable Residential
Communities consisting of Englewood Village and Cimarron Village, (Comparable
Number Four). The indicated price allocated for this 61-space community was
$702,720 in October 1996. This price equates to a sale price per space of
$11,520. Based on an effective gross income of $138,660, the EGIM was 5.07.
The overall rate was 11.4%. The average lot rent at the time of sale was
approximately $195.00.
Sale Comparable Number Four, Cimarron Village, is located in Cheyenne,
Wyoming. Affordable Residential Community purchased this community with
Englewood Village. The property contains 156 spaces and the allocated price was
$1,647,280. The price equates to a sale price per space of $10,559. Based on
the buyer's Pro-forma, the effective gross income of $319,533 indicated an EGIM
was 5.16. The expenses were estimated at 45.2% of the effective gross income
and the indicated overall capitalization rate was 10.6%, based on a net
operating income of $175,096. This community was 95.0% occupied at the date of
sale. The average rent was $180.00 per month plus $5.00 for trash collection.
Sale Comparable Number Five is Canyon Ridge Mobile Home Park located in
Colorado Springs, Colorado. This 250-space community sold for $4,200,000 in
October 1996. This resulted in a sale price per space of $16,800. Based on an
effective gross income of $655,500, the EGIM was 6.41. The overall rate was
9.0%. The average lot rent at the time of sale was approximately $230.00.
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last nine months,
having traded under similar market conditions.
<PAGE>
27
Sales Comparison Approach
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the Effective Gross Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 5.07 and 6.41. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community with a 5.1% physical vacancy. The
subject was observed to be in average condition and has a good location in
Cheyenne. The comparables all had the same occupancy rate as the subject, but
the expense ratios are lower, ranging from 36.6% to 45.2%. By comparison, the
subject has a forecast expense ratio of 52.56%. Based on these considerations,
we have concluded an EGIM slightly below the indicated range, processing the
subject's Effective Gross Income of $622,573 with an EGIM of 5.0.
Thus $622,573 x 5.0 is $3,112,865
Rounded to $3,110,000
On a per space basis, this is equivalent to $12,292.
<PAGE>
28
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $2,810,000
Sales Comparison Approach $3,110,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of September 1, 1999 was:
- TWO MILLION EIGHT HUNDRED TEN THOUSAND DOLLARS -
($2,810,000)
<PAGE>
29
CERTIFICATION
- -------------
I certify that, to the best of my knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions and is my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on 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 event.
. To the best of my knowledge and belief, the reported analyses, opinions,
and conclusions were developed and this report was prepared in
conformity with the Uniform Standards of Professional Appraisal Practice
of the Appraisal Foundation, the Code of Professional Ethics, and the
Standards of Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI has completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property that
is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
. I am in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
- -------------------------------
L. Drake Moore, MAI
St. Cert. Gen. REA #1321098-G
Permit No. 456
<PAGE>
30
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
31
Assumptions and Limiting Conditions
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including
<PAGE>
32
Assumptions and Limiting Conditions
the HVAC systems, if applicable. Should there be any question
concerning them, it is strongly recommended that an Engineering, Construction,
and/or Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal
<PAGE>
33
Assumptions and Limiting Conditions
tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
PARCEL 1:
Lots 1 through 30, inclusive, Block 1; Lots 1 through 5, inclusive, Block 2;
Lots 1 through 10, inclusive, Block 3; Lots 1 through 10, inclusive, Block 4;
Lots 1 through 10, inclusive, Block 5; Lots 1 through 10, inclusive, Block 6;
Lots 1 through 10, inclusive, Block 7; Lots 1 through 8, inclusive, Block 8;
Lots 1 through 8, inclusive, Block 9; Lots 1 through 8, inclusive, Block 10;
Lots 1 through 7, inclusive, Block 11; and Lots 1 through 8, inclusive, Block
12, ALL in Big Country Estates, a Replat of Tract 10 and Part of Tracts 2 and 3,
Wallick and Murray Tracts, Laramie County, Wyoming.
PARCEL 2:
All of Tracts 1 and 2, Wallick and Murray Tracts, being a subdivision of part of
Section 20, T. 13 N., R. 66 W., of the 6th P.M., Laramie County, Wyoming, EXCEPT
------
the South 40 feet of said Tract 2, AND EXCEPT that portion of said Tract 1, more
----------
particularly described as follows:
Beginning at the northwest property corner, which point is located S 89
degrees 16 minutes 58 seconds E a distance of 290.22 feet from the northwest
corner of Tract 1; thence S 0 degrees 59 minutes 31 seconds W a distance of
182.25 feet; thence S 89 degrees 13 minutes 38 seconds E a distance of 115.14
feet; thence N 2 degrees 51 minutes 32 seconds W a distance of 48.80 feet;
thence S 86 degrees 23 minutes 18 seconds E, a distance of 47.52 feet; thence N
3 degrees 36 minutes 42 seconds E a distance of 8.82 feet; thence S 86 degrees
23 minutes 18 seconds E a distance of 12.56 feet; thence N 0 degree 43 minutes
02 seconds E a distance of 127.81 feet; thence N 89 degrees 16 minutes 58
seconds W a distance of 176.54 feet to the point of beginning.
<PAGE>
MAPS
<PAGE>
Area Map
[AREA MAP APPEARS HERE]
<PAGE>
Neighborhood Map
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
Rent Comparable Location Map
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
Sale Conparable Location Map
[SALE COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
PROFILE OF APPRAISER
<PAGE>
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St.Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
- ----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Moore has also owned and operated the
L.D. Moore Company, a commercial appraisal firm in Dallas, Texas since
1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of
purchase price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial
properties. Performed appraisals for purposes of sale/purchase, financing
and allocation of purchase price. September 1985 to September 1987.
<PAGE>
Profile of the Appraiser
BANKING EXPERIENCE
- ------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and orginated non-conforming single-family mortgages
in addition to investor and commercial mortgages loans for BF Saul and
Chevy Chase Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Apartments
- ----------
<S> <C> <C> <C>
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Santa Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
</TABLE>
Manufactured Home Communities and Recreational Vehicle Parks
- ------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
</TABLE>
<PAGE>
Profile of Appraiser
<TABLE>
<S> <C> <C> <C>
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Windsor City Sumter, SC
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
American Self Storage Charlotte, NC American Self Storage Ocala, FL
American Self Storage Monroe, NC Extra Closet Ft Lauderdale, FL
American Self Storage Newel, NC
American Self Storage Stallings, NC
</TABLE>
Hotels/Resorts
- --------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
160-Room Ramada Inn, Kingsland, GA
71-Room Best Western, Guymon, OK
Office Buildings
- ----------------
<TABLE>
<S> <C> <C> <C>
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, FL Okeechobee Commerce W Palm Beach, FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
</TABLE>
Industrial
- ----------
<TABLE>
<S> <C> <C> <C>
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
</TABLE>
<PAGE>
Profile of Appraiser
Clients List
- ------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation National Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
- ----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
<PAGE>
================================================================================
STATE OF WYOMING NON TRANSFERABLE
Permit Number 456 No 05119
-
CERTIFIED REAL ESTATE APPRAISER PERMIT
LAWRENCE DRAKE MOORE Expires: 9/06/2002
CERTIFIED GENERAL APPRAISER
AS PROVIDED FOR BY THE LAWS OF WYOMING.
AUTHORIZED BY THE WYOMING CERTIFIED REAL ESTATE APPRAISER BOARD
WITNESS MY HAND AND THE OFFICIAL SEAL AT CHEYENNE, WYOMING.
Issued: 9/07/1999
THE L.D. MOORE CO.
5948 WOODLAND DRIVE
DALLAS, TX 75225 /s/ Constance K. Anderson
================================================================================
THIS LICENSE SHALL BE KEPT IN THE CUSTODY OF THE RESPONSIBLE BROKER
AND RETURNED TO THE REAL ESTATE DIRECTOR UPON TERMINATION.
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser 3
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
<TABLE>
<S> <C>
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D. C.
</TABLE>
<PAGE>
Profile of Appraiser 4
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhatten Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(F)
SUMMARY
REAL ESTATE APPRAISAL REPORT
285-Space Denali Park Estates and Apache East Estates
Manufactured Housing Community
3405 and 3500 South Tomahawk Road
Apache Junction, Pinal County, Arizona
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
AS OF
September 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LOGO OF WHITCOMB REAL ESTATE]
September 15, 1999
Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
RE: 285-Space Denali Park Estates and Apache East Estates
Manufactured Housing Community
3505 and 3500 South Tomahawk Road
Apache Junction, Pinal County, Arizona
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of September 1, 1999, based on an exposure period of six months, to
be:
- FIVE MILLION FOUR HUNDRED FIFTY THOUSAND DOLLARS -
($5,450,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Denali Park Estates and Apache East Estates are fully developed adult
manufactured housing communities containing a total of 285 spaces, with two
clubhouses, a laundry, two pools with spas, and eight shuffleboard courts. In
addition there is approximately 10 acres of excess land currently utilized as a
desert golf course at Denali Park Estates. The parks have no sewer and are on
septic tank systems.
<PAGE>
Mr. Steve Waite
September 15, 1999
Page Two
The rental rate at Denali Park is currently $222.00 to $232.00 plus water,
sewer and trash. The rental rate at Apache East Estates is $232.00 per month,
which includes sewer and trash. The residents at Denali Park Estates are charged
additionally $16.31 per month for utility service. The physical occupancy of
the subject is currently 93%. Due to an increasing supply within the market,
the subject like other communities currently offers 1/2 rent for two years for
new permanent move-ins.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ L. Drake Moore
L. Drake Moore, MAI
St. Cert. Gen. REA #TP40569
<PAGE>
4
TABLE OF CONTENTS
- -----------------
<TABLE>
<CAPTION>
<S> <C>
Table Of Contents.......................................... 4
Photographs Of The Subject................................. 5
Summary Of Facts And Conclusions........................... 6
Extent Of Confirming, Collecting And Reporting Data........ 7
Purpose, Function And Date Of The Appraisal................ 7
Area/Neighborhood Description.............................. 8
Manufactured Home Community Market Overview................ 10
Land And Site Improvements................................. 11
Improvement Description.................................... 12
Ownership And Property History............................. 12
Occupancy.................................................. 12
Zoning And Other Land Use Controls......................... 13
Real Estate Assessment And Taxes........................... 13
Marketability And Marketing Period......................... 14
Highest And Best Use....................................... 15
Valuation Process.......................................... 15
Income Capitalization Approach............................. 16
Sales Comparison Approach.................................. 28
Final Estimate Of Value.................................... 32
Certification.............................................. 33
Assumptions And Limiting Conditions........................ 34
Addenda
Legal Description
Maps
Profile Of Appraiser
</TABLE>
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 26, 1999)
[PHOTO APPEARS HERE]
1. Entrance to Subject
[PHOTO APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 285-Space Denali Park Estates and Apache East Estates
------------------- Manufactured Home Community
3405 and 3500 South Tomahawk Road
Apache Junction, Pinal County, Arizona
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: Denali Park - 32.9 acres, or 1,433,124 square feet
---------- Apache East - 16.03 acres, or 698,267 square feet
Improvements: 285-manufactured home spaces, two clubhouses with
------------- office and recreation area.
Owner: Windsor Park Properties 345
------
Zoning: MH, Manufactured/Mobile Home Zone
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $5,450,000
------------------ Sales Comparison Approach $5,610,000
Final Estimate of Value: $5,450,000
------------------------
Date of Appraisal: September 1, 1999
------------------
Date of Inspection: August 26, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of September 1, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The subject was physically inspected on August 26, 1999, and the date
of this appraisal is September 1, 1999.
Market Value is defined 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, 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:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. 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./1/
- ---------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The property is located approximately two miles east of the boundary line
of Pinal and Maricopa County in Apache Junction, Arizona. Apache Junction is
located approximately 30 miles west of the central business district of Phoenix.
The property is accessible from U.S. Highway 60, the Superstition Freeway.
Apache Junction is located at the junction of U.S. Highway 60 and 89 and
State Highway 88. Apache Junction lies primarily in Pinal County, and was
incorporated in 1978. U.S. Highways 60 and 89 and State Highway 88 connect the
City of Phoenix and Apache Junction to all areas in the west and mid-western
United States. Superstition Freeway is a major freeway that serves the East
Valley, especially the cities of Mesa, Tempe, Chandler, Gilbert and Apache
Junction.
The subject is located on the east and west sides of Tomahawk Road, south
of the Superstition Freeway. Access to the neighborhood is excellent, offering
all amenities, shopping, schools, churches, medical facilities and entertainment
and recreation. Ingress and egress of the subject is rated adequate.
The neighborhood is rural in nature. Development has taken the form of
mixed-use residential, commercial and light industrial type properties located
along the major road frontages, typical of rural areas. Land use in the
immediate vicinity of the subject is characteristic of the entire neighborhood.
Existing uses along South Tomahawk Road are typical of residential and
manufactured housing types of development. The neighborhood is estimated to be
50% developed. There remain large contiguous tracts of land available for in-
fill development.
Population
- ----------
According to the 1990 census, the population for Apache Junction was 18,100
and the population of Pinal County was 116,379, representing respectively a
82.2% and 28% increase from 1980. The most recent population figure for Apache
Junction as of 1995 was 19,525, representing a population increase of
approximately 7.9%. The population of Pinal County also increased approximately
19.5% from 1990 to 1995 to 139,050. Future projections indicate a similar trend
of continued population growth. The 1995 population of Metro Phoenix was
2,551,765, which represented a 17% increase from 1990.
<PAGE>
9
Area/Neighborhood Description
Employment
- ----------
The economy of Apache Junction is based almost exclusively on recreation
and retirement. Most commercial services in the area cater to tourist and
recreation seekers on their way to Arizona's central lakes and forests. Apache
Junction attracts upwards of 35,000 winter visitors and retirees annually due to
its climate and proximity to many of Arizona's outstanding recreational and
historical areas. The civilian labor force is approximately 8,444 and the
unemployment rate is less than 4%. The Phoenix-Mesa Metropolitan Area (which
includes Maricopa and Pinal counties) represents 67% of the Arizona Labor
Market. Maricopa County job market had a total of 1,467,700 jobs at the end of
September 1997. Unemployment in September 1997 was 2.9%, compared to 4.2% for
Arizona.
Transportation
- --------------
Sky Harbor International Airport, the world's 18th largest, provides
service via twenty-six domestic and international airlines. Sky Harbor handles
approximately 27 million passengers a year and is projected to have over 40
million passengers by the year 2007. Cheyenne was formed as a result of the
transcontinental railroad in 1867. Southern Pacific Railway, and the Atchison,
Topeka and Santa Fe Railways provide freight rail transportation from
transcontinental origins from and to the Metro area. Amtrak provides passenger
rail service to the area. Greyhound and seven other charter bus services serve
the city as well. Interstate and intrastate truck lines, household good
carrier, United Parcel Service and Air Couriers International provide other
transportation.
Summary and Conclusion
- ----------------------
The subject is located in Pinal County just outside the southern
incorporated city limits of Apache Junction, Arizona. The subject's location in
regard to the local amenities in the form of shopping, recreational and activity
centers is considered excellent due to the proximity of Apache Junction and to
other cities in the East Valley including Tempe, Chandler and Gilbert. General
real estate values have been static over the last three to four year period.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the 1998 U.S. Housing Market Map, Arizona ranked 13th among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Arizona have varied annually since 1996.
<PAGE>
10
Land And Site Improvements
Manufactured
Home Shipments
<TABLE>
<CAPTION>
---------------------------------------------
Year Shipments
---------------------------------------------
<S> <C>
1996 8,095
---------------------------------------------
1997 9,315
---------------------------------------------
1998 8,611
---------------------------------------------
Source: Arizona Manufactured Housing Association
</TABLE>
New communities are not being developed in the urban areas due to
restrictive zoning ordinances. There is a wide range of rental rates in the
marketplace. Generally speaking, lot rent ranges between $230.00 per month to
$263.00 per month, although several communities are offering 1/2 rent for up a
limited time. Rates varied within some of the communities as lots on a corner,
lots for multi-section homes and larger lots leased for higher than standard
amounts. Typically, services included in the rental rate vary. Overall
occupancy for the eastern portion of the Phoenix Metropolitan area is relatively
stable at approximately 95%; however, approximately 1,900 pads have been added
to the market since 1995. There are approximately 52,200 existing mobile home
site in the Valley and 8,200 sites in the Apache Junction area where recently
three new parks were developed with a total of 550 mobile home pad sites near
the subject south of Highway 60.
LAND AND SITE IMPROVEMENTS
- --------------------------
Both sites are irregularly shaped. Denali Park Estates contains
approximately 32.9 acres, or approximately 1,433,124 square feet of gross area.
Apache East Estates contains approximately 16.03 acres or 698,266 square feet.
The tracts are generally level and at grade with the South Tomahawk Road.
Drainage of the tract appears adequate and no adverse soil or subsoil conditions
were observed during the physical inspection of the site. Utility services
connected and in service on the date of valuation include water, electricity and
telephone. Sewer is provided by a septic system.
Roadways arranged to maximize the use of the land access the individual
lots in the community. Roadway improvements include:
Street-bed: South Tomahawk Road is an asphalt paved, two-lane roadway.
---------- The subject streets are asphalt paved 25-foot wide
roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public streets
-------------- or in the subject.
Street Lights: South Tomahawk Road does not have streetlights. The
------------- subject park has pole mounted overhead streetlights along
the right of way.
<PAGE>
11
Land and Site Improvements
Landscaping: Sodded and planted areas extend along the entire
----------- perimeter and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Pinal County.
Functional Utility
- ------------------
The sites, which are irregular in shape and contain approximately 32.9 and
16.03 acres, respectively are large enough to accommodate building improvements
and roadways as well recreational amenities and green areas. The sites are
considered functional for various residential development scenarios. The
current development equates to an overall density of approximately 5.8 units per
acre, which is above current development standards that tend toward larger lot
sizes, wider streets and more green areas.
<PAGE>
12
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 285 manufactured housing community pads,
arranged along streets configured to maximize the available lot spaces. All of
the lots vary slightly in size and the density of the park is equal to 5.8
spaces per acre.
The common area amenities include two clubhouses, two pools and spa,
laundry building, and eight shuffleboard courts. We have not estimated a
separate value for these amenities, or equipment, as they are standard items
found at most manufactured home communities. These amenities are typical,
adequate and functional in use.
Both communities and site improvements were built in 1989. The common
areas, streets, amenities and individual mobile homes were observed to be in
excellent overall condition, having been originally constructed of quality
materials and having been maintained over the years. No significant item of
deferred maintenance was noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property is in the name of Windsor Park
Properties 345. The Windsor Corporation purchased the subject property in
February 1997. Prior to the purchase, Denali Park Estates was owned by Denali
Park Estates MHP and Apache East Estates was owned by Apache East Estates MHP.
There have been no other sales or other transfers of the property of which the
appraisers are aware. The subject is currently not listed for sale nor is there
pending offers or current contracts for the sale of the property.
OCCUPANCY
- ---------
Two fully developed manufactured home communities with 285 total spaces
occupy the property. According to the manager, there are currently 20 vacant
lots and the physical occupancy is 93%. In addition, the manager occupies one
lot. The August 1st rent roll also indicated there were 20 vacancies.
<PAGE>
13
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned MH, Manufactured Housing/Mobile Home. It is our
opinion that the subject property is in conformance with the zoning code.
Flood Hazard
- ------------
According to Flood Map Community Number 040077, Panel 0125D, dated March 5,
1990, the subject is located in Zone "C", which indicates areas of minimal
flooding.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. We
noted that there is an on-site waster water treatment plant and we have
previously mentioned the spaces that have individual septic systems. We have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Pinal County records under tax
parcel numbers: 103-22-011C (Denali Park) and 102-20-004F (Apache East). The
Full Cash Value (FCV) of the subject totals $2,378,936 and the Limited Primary
Value (LPV) is $2,352,666. It is our opinion that the subject is under
assessed. This not uncommon for manufactured housing communities since large
parts of the value can be attributed to the entrepreneurial skill in acquiring
the land and filling the community.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Arizona, manufactured housing
communities are assessed at 10% of the Full Cash Value and Limited Primary
Value. Properties are reassessed annually and equitability of assessments is
not a basis for assessment in the state of Arizona. Based upon the 1998 levy of
$12.061 per $100 of assessed value for the FCV and $5.9875 for the LPV the
current taxes total $42,794.
In the State of Arizona, property taxes are paid in arrears. Taxes are due
and payable on or before December 31st.
<PAGE>
14
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Based upon a recent survey by John B. Levy & Company of selected CMBS
spreads and whole loans a spread between 195 and 200 basis points over 10-year
U.S. Treasuries is available for an A rated security. BBB rated CMBS
securities may have a spread ranging from 240 to 250 basis points over the 10-
year treasury. A prime mortgage rate ranging from 8.02 to 8.12 is available for
a loan with a ten-year term.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
15
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
Although the market is relatively stable, approximately 1,900 pads have
been added since 1995 and there are concessions available, therefore, it would
be prudent to develop the 10 acres of excess land with approximately 60
manufactured housing spaces when the economics of development are warranted. We
have considered all of the potential uses to which the subject is legally and
physically adaptable. It is our opinion that the current use of the subject, as
a 285-space, manufactured home community, represents the highest and best use of
the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
- ----------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
16
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENT COMPARABLE SUMMARY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
No. Name Total
Address Spaces/ Monthly Rental Rate Services
% Occ. Concession Included In Rent Amenities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Coral Sands Home Park 151/ $242.00 to $252.00 None. Clubhouse, pool with spa,
11425 E. University Drive 98% (3 mos. plus laundry and shuffleboard.
Apache Junction, Arizona $1,000)
- -----------------------------------------------------------------------------------------------------------------------------------
2 Pueblo Mobile Manor MHP 180/ $251.00 to $263.00 None Clubhouse, pool with spa,
834 S. Meridian 98.3% (1/2 rent 6 mos.) and laundry.
Apache Junction, Arizona
- -----------------------------------------------------------------------------------------------------------------------------------
3 Raindance Mobile Home Park 280/ $230.00 to $244.00 Sewer Clubhouse, pool, laundry
2605 S. Tomahawk Road 100% and shuffleboard.
Apache Junction, Arizona
- -----------------------------------------------------------------------------------------------------------------------------------
4 Quail Run Mobile Home Park 104/ $160.00 None Clubhouse and pool.
S. Tomahawk Road 96.2% (Rent set at $160
Apache Junction, Arizona till 2001)
- -----------------------------------------------------------------------------------------------------------------------------------
5 Silverado Estates Mobile Home Park 129/ $237.00 to $248.00 Sewer and trash Clubhouse, pool, laundry
2900 W. Superstition 98.4% pick-up. and shuffleboard.
Apache Junction, Arizona
- -----------------------------------------------------------------------------------------------------------------------------------
Subj. Denali Park Estates and Apache
East Estates MHP 285/ $222.00 to $232.00 Sewer included at Clubhouse, pool with spa,
3405 and 3500 S. Tomahawk Road 93% (1/2 rent-2 Yrs) Apache East laundry and shuffleboard.
Apache Junction, Arizona
===================================================================================================================================
</TABLE>
<PAGE>
18
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $160.00 to $263.00 per month, as
indicated by the rent comparables recited in this report. Due to the move-in
special of 1/2 rent for two years there is a wide variance. As shown by our
survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $64,720 and the average monthly rental rate for the 285 units is
equivalent to $227.09. The potential gross income from rentals is $776,640 per
year.
Free Rent
- ---------
Like several competitors, the subject offers 1/2 rent for two years on new
move-ins. Historically, free rent has increased from $46.08 per space in 1997
to $233.31 per space for six months annualized 1999. Due to an increasing
supply of new manufactured housing within the area, concessions should remain
prevalent during the next two years, until new construction subsides. We have
estimated free rent at $130.00 per space annually, or $37,050.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 93% physically occupied with
20 of the 285 sites vacant. The subject continues to lease the vacant sites to
RV's during the season and has typically maintained a lower occupancy level.
The market currently ranges from 96.2% to 100%. We have estimated vacancy at
7.0% of total potential gross income, or $54,365.
RV Income
- ---------
Denali Park will rent any vacant space to seasonal RV renters while Apache
East does not rent vacant spaces to seasonal renters. RV rent has ranged from
$68.46 per space in 1997 to $120.23 per space in 1998. We have estimated RV
rental income at $100.00 per space, or $28,500 annually.
Utility Income
- --------------
Denali Park Estates receives $16.31 for sewer, trash pick-up and for billing
water. All of the utilities are passed through except sewer, which is included
in the rent for Apache East Estates residents. Utility income ranged from
$122.15 per space in 1997 to $155.87 for 6 months annualized 1999. We have
estimated utility income at $150.00 per space or $45,600 annually.
<PAGE>
19
Income Capitalization Approach
Other Income
- ------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $24.81 per space in 1998 to $32.80
per space in 1997, in other income. We have based our estimate of other income
on the historical levels, estimating this income at $30.00 per space or $8,550
annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $776,640 less a vacancy and credit loss
allowance in the amount of $54,365 or 7.0% and $37,050 in free rent, produces an
effective gross income from rentals estimate of $685,225. To this we add income
derived from other sources, which totals $82,650, arriving at an effective gross
income estimate of $767,875.
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Denali Park and Apache East Manufactured Housing Summary of Historical
Operations Combined
6 Months
Pct. of $ Per Pct. of $ Per Annualized Pct. of $ Per
1997 Income Space 1998 Income Space 1999 Income Space
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 479,486 90.46% $ 1,682.41 $ 606,686 93.66% $ 2,128.72 $ 688,916 98.54% $ 2,417.25
Free Rent - 13,133 -2.48% - 46.08 - 39,612 -6.12% - 138.99 - 66,492 -9.51% - 233.31
RV Rent 19,512 3.68% 68.46 34,266 5.29% 120.23 24,900 3.56% 87.37
Utility Income 34,814 6.57% 122.15 39,310 6.07% 137.93 44,422 6.35% 155.87
Miscellaneous/Other 9,349 1.76% 32.80 7,070 1.09% 24.81 7,372 1.05% 25.87
------------------------------------------------------------------------------------------------------------
Total Income $ 530,028 100.00% 1,859.75 $ 647,720 100.00% $ 2,272.70 $ 699,118 100.00% $ 2,453.05
Expenses:
Insurance 3,239 0.61% 11.36 3,804 0.59% 13.35 5,908 0.85% 20.73
Office 38,327 7.23% 134.48 57,758 8.92% 202.66 51,894 7.42% 182.08
Maintenance & Supplies 26,533 5.01% 93.10 30,610 4.73% 107.40 23,504 3.36% 82.47
Management Expense 25,900 4.89% 90.88 31,819 4.91% 111.65 34,496 4.93% 121.04
Wages & Benefits 62,174 11.73% 218.15 85,708 13.23% 300.73 72,946 10.43% 255.95
Property Taxes 41,140 7.76% 144.35 41,564 6.42% 145.84 43,394 6.21% 152.26
Utilities 77,581 14.64% 272.21 86,870 13.41% 304.81 95,764 13.70% 336.01
------------------------------------------------------------------------------------------------------------
Total Expenses $ 274,894 51.86% $ 964.54 $ 338,133 52.20% $ 1,186.43 $ 327,906 46.90% $ 1,150.55
Net Operating Income $ 255,134 48.14% $ 895.21 $ 309,587 47.80% $ 1,086.27 $ 371,212 53.10% $ 1,302.50
====================================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 21
Operating Expense Analysis
- --------------------------
Insurance: Historically, this expense has exhibited a increasing trend. Our
- ----------
estimate of this expense has been stabilized based on the historical amounts, or
$20.00 per space per year. This is equal to $5,700 annually or approximately
0.75% of the effective gross income.
Administrative/Office: Historically, this expense has varied since 1997. In the
- ----------------------
financial statements, this expense does include some corporate expense items,
which we have not considered. We have stabilized our estimate of this expense at
$125.00 per space per year, which is equal to $35,625 or approximately 4.64% of
the estimated effective gross income.
Maintenance and Repair: Historically, this expense has varied. We have based
- -----------------------
our estimate on the indicated historical trend at $80.00 per space per year or
$22,800 annually, believed adequate to properly maintain the community. This
amount is equal to approximately 2.97% of the estimated effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $38,323 or $134.71 per space per year.
Wages and Benefits: Historically, this expense has steadily increased, except in
- -------------------
annualized 1999. We have based our estimate on the historical data at $250.00
per space per year or $71,250, which is equal to 9.28% of the estimated
effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$42,794. This equates to $150.15 per space per year or approximately 5.57% of
the estimated effective gross income.
Utilities: The residents are billed for water and trash pick-up at Denali Park,
- ----------
but all of the utilities are passed through at Apache East Estates.
Historically this expense has increased since 1997. We have estimated the
utility expense at $310.00 per space per year. The expense is expected to cover
the cost of water, trash pick-up and the utility expense related to the common
area. This is equal to $88,350, or approximately 11.51% of the estimated
effective gross income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $25.00 per space per year, believed adequate to cover
future capital costs. This equates to $7,125 annually or 0.93% of (EGI).
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $312,038. This estimate is equal to 40.64% of the
Effective Gross Income (EGI) estimate or $1,094.87 per space per year. As
shown, expenses have historically ranged between 46.90% (6 months annualized
1999) and 52.20% (1998).
<PAGE>
===============================================================================
Apache East Estates and Denali Manufactured Housing Community
Stabilized Operating Statement
<TABLE>
<CAPTION>
% of $ per
Amount EGI Space
===============================================================================
<S> <C> <C> <C>
Total Effective Gross Income $767,875 100.00% $2,694.30
Expenses
Insurance $ 5,700 0.74% $ 20.00
Office 35,625 4.64% 125.00
Maintenance & Repairs 22,800 2.97% 80.00
Management Expense 38,394 5.00% 134.71
Wage & Benefits 71,250 9.28% 250.00
Property Taxes 42,794 5.57% 150.15
Utilities 88,350 11.51% 310.00
Reserves 7,125 0.93% 25.00
--------------------------------------------
Total Expenses $312,038 40.64% $1,094.87
Net Operating Income $455,837 59.36% $1,599.43
================================================================================
</TABLE>
<PAGE>
23
Income Capitalization Approach
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.22% and 10.30%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
======================================================================================================
<S> <C> <C> <C> <C>
1 February 1999 3.0% 32.2% 9.78%
- -----------------------------------------------------------------------------------------------------
2 February 1999 7.0% 35.0% 9.00%
- -----------------------------------------------------------------------------------------------------
3 December 1998 1.0% 29.5% 10.30%
- -----------------------------------------------------------------------------------------------------
4 June 1998 1.96% 35.6% 8.22%
- -----------------------------------------------------------------------------------------------------
5 January 1998 5.0% 25.6% 9.00%
======================================================================================================
</TABLE>
The subject has a market vacancy and expense ratio. Sale Comparable 1, 4
and 5 are located near the subject in Mesa, however, Sale 1 is an older
property. Sales 2 and 3 were located in Tucson and inferior in location, quality
and amenities. Comparable 4 and 5 are similar in condition. These properties
had a slightly higher rental rate and Mesa is considered superior in location to
Apache Junction due to its proximity to Phoenix. Based on these considerations,
we have concluded an overall capitalization rate of 9.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 20-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 10.037%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<PAGE>
24
Income Capitalization Approach
<TABLE>
<CAPTION>
=====================================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.10037 1.20 0.09033
- -----------------------------------------------------------------------------------------------------
Rounded 9.0%
=====================================================================================================
</TABLE>
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The rate via the debt coverage ratio is supportive of the rate concluded
from the market data. Our estimate of the market value of the subject, indicated
by the Income Capitalization Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$455,837 divided by 0.09 $5,064,856
</TABLE>
Excess Land Valuation
- ---------------------
As discussed in the Highest Best Use Analysis, the present density of the
subject is 5.8 units per acre and there is approximately 10 acres of excess
land. The manager indicated approximately 60 spaces could be developed.
Although we were unable to confirm with Pinal County the number of additional
spaces that would be allowed, we have gathered three recent land sales in order
to estimate the value of the excess land. So that a conclusion from the analysis
of the sales data can be drawn, a unit of comparison is commonly selected.
Calculation of a unit of comparison provides a common denominator by which the
market sales can be related to each other and to the subject property. The
commonly accepted unit of comparison in the valuation of manufactured housing
tracts of vacant land is the sale price per space; however, when the density is
not defined, the sale price per square foot is utilized.
The sales selected for direct comparison should be those transactions that
are most similar to the subject. Adjustments are made to the comparables for
any dissimilar features, leading to an indication of the price at which the
property appraised could be expected to sell. In this analysis, all relevant
factors were considered, including:
1. Locational dissimilarities and the nature of surrounding development.
<PAGE>
25
Income Capitalization Approach
2. Availability of competing sites.
3. Physical features such as frontage, shape, depth, access, topography,
water and tree coverage, and plot size.
4. Availability of utilities and site preparation costs.
5. Effect of time on selling prices.
6. Zoning.
Numerous sales of vacant land were investigated. Our investigation
revealed two recent transactions for mobile home development or related
residential development in the East Valley. Demand for development land
subsided and few manufactured housing community land sales occurred. Therefore,
we utilized local development land with similar locational and use
characteristics. Three land sales have been identified on the following pages.
Based on our investigation these are considered the most significant
transactions.
<PAGE>
SUMMARY OF LAND SALES
---------------------
<TABLE>
<CAPTION>
===================================================================================================================================
Sale No. Location Grantor/ Sale Sale Land Area/ Sale Price/
Grantee Date Price Acres SqFt
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 56th Street, South of Main Street Pueblo Seco (LLC)/ Saxton 5/98 $850,000 13.972 $1.40
Mesa, Maricopa County, Arizona Incorporated
- -----------------------------------------------------------------------------------------------------------------------------------
2 71 MHP Sites Piedmont Investments/ AMT 5/97 $660,000 16.066 $0.94
NW of Southern & Crimson Rd. Development Co. LLC
Mesa, Maricopa County, Arizona
===================================================================================================================================
</TABLE>
<PAGE>
27
Income Capitalization Approach
Comparable Sale Number One is the May 1998 sale of a 13.972-acre tract of
land for $850,000. This property is located on 56th Street, south of Main in
Mesa, Arizona. The property is zoned PAD and is classified as residential. The
sale price is equivalent to $1.40 per foot. A downward adjustment was made to
this sale for location. The indicated price per square foot for the subject was
$0.98.
Comparable Sale Number Three is the May 1997 sale of a 16.066-acre tract of
land for $660,000. This property is within a couple of miles west of the
subject. The property is to be developed with 71 manufactured housing spaces.
The sale price is equivalent to $9,296 per available space, or $0.94 per square
foot. A slight downward adjustment was made for location. No other adjustments
were appropriate. The indicated price per square foot for the subject was $0.89
Based on the indicated value produced through the adjustment of the three
land sales, it is our opinion that the "as is" market value of the subject land
is equivalent to $0.90 per square foot, as indicated by the available sale data
which ranged between $0.89 and $0.98 per space after adjustments. Our estimate
is further supported by our discussions with those knowledgeable with
manufactured housing development. Based on the total development potential of
10 acres, we have estimated the value of the excess land at $0.90 per square
foot, or $390,000, rounded.
The value conclusion of the subject property with excess land via the
direct capitalization method is summarized as follows:
$5,064,856 + $390,000 = $5,454,856
Rounded $5,450,000
<PAGE>
28
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following sales are of adult and all age
communities are the most significant transactions for direct comparison with the
subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
===================================================================================================================================
No. Name Sale Price/ Total Price/ Average E.G.I.M./E O.A.R.
Address Sale Date Spaces/ Space Lot Rent xpense %
(Adj. For Cash Occupancy
Equivalency)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Mesa Dunes Mobile Home Park $9,500,000 451/ $21,064 $235.00 6.94/ 9.78%
7807 E. Main Street February 1999 97.0% 32.16%
Mesa, Maricopa
County, Arizona
- ---------------------------------------------------------------------------------------------------------------------------------
2 Cactus Garden Mobile Home Park 1,685,000 75/ $22,467 $200.00 7.22/ 9.0%
2333 W. Irvington Place May 1999 93.0% 35.0%
Tucson, Pima County, Arizona
- ---------------------------------------------------------------------------------------------------------------------------------
3 El Molina Mobile Home Park $1,675,000 103/ $16,262 $200.00 6.84/
1552 W. Miracle Mile May 1999 99.0% 29.5% 10.3%
Tucson, Pima County, Arizona
- ---------------------------------------------------------------------------------------------------------------------------------
4 Sierra Mobile Manor Park $5,100,000 203/ $25,123 $233.00 7.83/
9431 E. Coralbel Avenue June 1998 98.04% 35.62% 8.22%
Mesa, Pima County, Arizona
- ---------------------------------------------------------------------------------------------------------------------------------
5 Silver Spur Mobile Home Park $5,600,000 185/ $30,270 $278.00 8.27/ 9.0%
9333 E. University Drive January 1998 95.0% 25.55%
Mesa, Pima County, Arizon
====================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 30
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is a 451-space adult community is located in
Mesa, Arizona. The property sold for $9,500,000 in May 1999. The price equates
to a sale price per space of $16,981. Based on an effective gross income of
$1,368,869, the EGIM was 6.94. The expenses represented 32.16% of the effective
gross income and the indicated overall capitalization rate was 9.78%, based on a
net operating income of $928,665. This pro forma was estimated utilizing 97.0%
occupancy. The comparable is superior in location to the subject, but older.
Sale Comparable Number Two is Cactus Garden Mobile Home Park located in
Tucson, Arizona. This 75-space all age community sold for $1,685,000 in May
1999, which resulted in a sale price per space of $22,467. Based on an
effective gross income of $233,308, the EGIM was 7.22. The overall rate was
9.0%. The average lot rent at the time of sale was approximately $200.00.
Sale Comparable Number Three, El Molina Mobile Home Park, is located in
Tucson, Arizona. The all age property sold for $1,675,000 in May 1999. This
price equates to a sale price per space of $16,262. Based on an effective gross
income of $244,728, the EGIM was 6.84. The overall rate was 10.3%. The average
lot rent at the time of sale was approximately $200.00.
Sale Comparable Number Four is Sierra Mobile Home Park located in Mesa,
Arizona. This 203-space adult community sold for $5,100,000 in June 1998. This
resulted in a sale price per space of $25,123. Based on an effective gross
income of $651,306, the EGIM was 7.83. The overall rate was 8.22%. Six lots
were vacant at sale, but pro forma utilized a 1.96-% vacancy factor. The average
lot rent at the time of sale was approximately $233.00.
Sale Comparable Number Five, Silver Spur Mobile Home Park, is located in
Mesa, Arizona. The property contains 185 spaces and the sale price was
$5,600,000. The price equates to a sale price per space of $30,270. Based on
the buyer's Pro-forma, the effective gross income of $677,000 indicated an EGIM
was 8.27. The expenses were estimated at 25.55% of the effective gross income
and the indicated overall capitalization rate was 10.6%, based on a net
operating income of $175,096. This community was 100% occupied at the date of
sale, but a 5% vacancy factor was applied. The average rent was $278.00 per
month plus $5.00 for trash collection.
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last nine months,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other
<PAGE>
Sales Comparison Approach 31
factors, to pay more lot rent for a better located, newer community. This also
holds true for amenities, age and other factors. The average lot rent reflects,
in most cases, the market perception of a property's position in the
marketplace. It is also typical that lot rent increases contribute to increases
in net operating income. Alternatively, we have employed the Effective Gross
Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.84 and 8.27. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an adult community with a 7.0% physical vacancy. The
subject was observed to be in excellent condition and has a good location in
near Superstition Freeway in Apache Junction, Arizona. The comparables all had
a much higher occupancy rate than at the subject and the expense ratios are
lower, ranging from 25.55% to 35.62%. By comparison, the subject has a forecast
expense ratio of 40.64%. Based on these considerations, we have concluded an
EGIM slightly below the indicated range, processing the subject's Effective
Gross Income of $767,875 with an EGIM of 6.80.
Thus $767,875 x 6.8 is $5,221,550
On a per space basis, this is equivalent to $18,231.
The value conclusion of the subject property with excess land via the sales
comparison method is summarized as follows:
$5,221,550 + $390,000 = $5,611,550
Rounded $5,610,000
<PAGE>
32
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $5,450,000
Sales Comparison Approach $5,610,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of September 1, 1999 was:
- FIVE MILLION FOUR HUNDRED FIFTY THOUSAND DOLLARS -
($5,450,000)
<PAGE>
33
CERTIFICATION
- -------------
I certify that, to the best of my knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions and is my personal, unbiased
professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on 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 event.
. To the best of my knowledge and belief, the reported analyses, opinions,
and conclusions were developed and this report was prepared in conformity
with the Uniform Standards of Professional Appraisal Practice of the
Appraisal Foundation, the Code of Professional Ethics, and the Standards of
Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI has completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property that is
the subject of this report.
. No one provided significant professional assistance to the person signing
this report.
. I am in compliance with the competency provisions of the Uniform Standards
of professional Appraisal Practice of the Appraisal Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
- ------------------------------
L. Drake Moore, MAI
St. Cert. Gen. REA #TP40569
<PAGE>
34
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
35
Assumptions and Limiting Conditions
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including
<PAGE>
36
Assumptions and Limiting Conditions
the HVAC systems, if applicable. Should there be any question concerning them,
it is strongly recommended that an Engineering, Construction, and/or
Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal
<PAGE>
37
Assumptions and Limiting Conditions
tax or regulatory laws. Therefore, the actual results achieved during the
projected holding period and investor requirements relative to anticipated
annual returns and overall yields could vary from the projection. Thus,
variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
LEGAL DESCRIPTION
I. DENALI ESTATES LEGAL DESCRIPTION
--------------------------------
PARCEL NO. 1:
The South half of the Northwest quarter of the Southwest quarter of Section
34, Township 1 North, Range 8 East, Gila and Salt River Base and Meridian, Pinal
County, Arizona.
TOGETHER WITH a right of reasonable access to Tomahawk Drive as shown on the
maps and plans of Project F-028-1 in the office of the State Engineer, Phoenix,
Arizona.
EXCEPTING all coal, oil, gas and other mineral deposits as reserved unto the
United State of American in the Patent of said land.
PARCEL NO. 2:
The North half of the Northwest quarter of the Southwest quarter of Section 34,
Township 1 North, Range 8 East, Gila and Salt River Base and Meridian, Pinal
County, Arizona.
EXCEPT the following described parcels:
BEGINNING at the Northwest corner of said Northwest quarter of the Southwest
quarter of Section 34,
THENCE run Easterly along the North line, a distance of 558.5 feet;
THENCE Southerly, parallel to the West line 234 feet;
THENCE Westerly parallel to the North line, 558.5 feet;
THENCE Northerly, parallel to the West line, to the TRUE POINT OF BEGINNING.
ALSO EXCEPT, BEGINNING 234 feet South of the Northwest corner of said Northwest
quarter of the Southwest quarter of Section 34;
THENCE South 200.00 feel along the West section line;
THENCE East parallel to the North line 435.6 feet;
THENCE North 200 feet parallel to the West section line;
THENCE West 435.6 feet to the POINT OF BEGINNING.
ALSO EXCEPT, BEGINNING at the Northwest corner of said Northwest quarter of the
Southwest quarter of Section 34,
THENCE run Easterly along the North line of said Northwest quarter of the
Southwest quarter a distance of 558.5 feet to the POINT OF BEGINNING;
13
<PAGE>
THENCE Westerly parallel to the North line a distance of 186.1 feet;
THENCE Northerly, along the East line, to the TRUE POINT OF BEGINNING.
ALSO EXCEPTING:
TRACT 1:
- -------
That portion of the Northwest quarter of the Southwest quarter of Section 34,
Township 1 North, Range 8 East, Gila and Salt River Base and Meridian, Pinal
County, Arizona, which lies Northerly of the following described line:
BEGINNING at a point on the West line of said Section 34, which point bears
South 0 degrees 06 minutes 00 seconds East 434.00 feet from the West quarter
corner of said Section 34;
THENCE North 89 degrees 54 minutes 00 seconds East 56.99 feet;
THENCE North 7 degrees 01 minutes 37 seconds East 346.63 feet;
THENCE North 86 degrees 16 minutes 50 seconds East 1103.58 feet to the POINT OF
ENDING on the North line of said Northwest quarter of the Southwest quarter of
Section 34.
TRACT 2:
- -------
That portion of the Northwest quarter of the Southwest quarter of Section 34,
Township 1 North, Range 8 East, Gila and Salt River Base and Meridian, Pinal
County, Arizona, which lies within the following described tract of land;
BEGINNING at the West quarter corner of said Section 34;
THENCE South 0 degrees 06 minutes 00 seconds East along the West line thereof, a
distance of 434.00 feet;
THENCE North 89 degrees 54 minutes 00 seconds East 50.00 feet to the TRUE POINT
OF BEGINNING on the existing Easterly right of way line of Tomahawk Drive;
THENCE continuing North 89 degrees 57 minutes 30 seconds East 360.00 feet;
THENCE North 0 degrees 06 minutes 00 seconds West 200.00 feet;
THENCE North 89 degrees 57 minutes 30 seconds East 197.90 feet;
THENCE South 0 degrees 06 minutes 00 seconds East 50.00 feet;
THENCE South 89 degrees 57 minutes 30 seconds West 147.90 feet;
THENCE South 0 degrees 06 minutes 00 seconds East 200.00 feet;
14
<PAGE>
THENCE South 89 degrees 57 minutes 39 seconds West 410.60 feet to the aforesaid
existing Easterly right of way line;
THENCE North 0 degrees 06 minutes 00 seconds West along said existing Easterly
right of way line, a distance of 50.00 feet to the TRUE POINT OF BEGINNING.
EXCEPTING all cola, oil, gas and other mineral deposits, as reserved unto the
United States of America in the Patent of said land.
II. APACHE ESTATES LEGAL DESCRIPTION
--------------------------------
The South 594 feet of the Northeast quarter of the Southeast quarter of Section
33 Township 1 North, Range 8 East, Gila and Salt River Base and Meridian, Pinal
County, Arizona.
EXCEPT the South 30 feet and the West 30 feet thereof.
15
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[SALE COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
PROFILE OF APPRAISER
<PAGE>
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St.Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
- ----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Moore has also owned and operated the
L.D. Moore Company, a commercial appraisal firm in Dallas, Texas since
1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for a land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of
purchase price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial
properties. Performed appraisals for purposes of sale/purchase, financing
and allocation of purchase price. September 1985 to September 1987.
<PAGE>
Profile of the Appraiser
BANKING EXPERIENCE
- ------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and originated non-conforming single-family mortgages
in addition to investor and commercial mortgages loans for BF Saul and
Chevy Chase Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Apartments
- ----------
<TABLE>
<S> <C> <C> <C>
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Santa Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
Manufactured Home Communities and Recreational Vehicle Parks
- ------------------------------------------------------------
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
</TABLE>
<PAGE>
Profile of Appraiser
<TABLE>
<S> <C> <C> <C>
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Windsor City Sumter, SC
Self-Storage Facilities
- -----------------------
American Self Storage Charlotte, NC American Self Storage Ocala, FL
American Self Storage Monroe, NC Extra Closet Ft. Lauderdale, FL
American Self Storage Newel, NC
American Self Storage Stallings, NC
</TABLE>
Hotels/Resorts
- --------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
160-Room Ramada Inn, Kingsland, GA
71-Room Best Western, Guymon, OK
Office Buildings
- ----------------
<TABLE>
<S> <C> <C> <C>
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, FL Okeechobee Commerce West Palm Beach, FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
Industrial
- ----------
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
</TABLE>
<PAGE>
Profile of Appraiser
Clients List
- ------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation Nations Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
- ----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
<PAGE>
STATE OF ARIZONA
BOARD OF APPRAISAL
BE IT KNOWN THAT
LAWRENCE D. MOORE
HAS MET ALL THE REQUIREMENTS AS A
TEMPORARY
Certified General Real Estate Appraiser
[SEAL OF STATE OF ARIZONA BOARD OF APPRAISAL APPEARS HERE]
<TABLE>
<S> <C>
In accordance with Arizona Revised Statutes In witness whereof the Arizona Board of Appraisal
and on authority of the Board of Appraisal, caused to be signed by the Chair of the Board
State of Arizona. and the Executive Director
This certificate shall remain evidence thereof
unless or until the same is suspended, revoked /s/ ^^ illegible signature 9-8-99
or expires in accordance with the provisions of ---------------------------------------------------
law. Chair, Board of Appraisal Date
CERTIFICATE NUMBER /s/ ^^ illegible signature 9-8-99
TP40569 ----------------------------------------------------
EXPIRATION DATE Executive Director of the Board of Appraisal Date
SEPTEMBER 8, 2000
</TABLE>
SHALL REMAIN PROPERTY OF ARIZONA BOARD OF APPRAISAL
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Meyers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser
Recreational Vehicle Parks
- --------------------------
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
<PAGE>
Profile of Appraiser
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(G)
SUMMARY
REAL ESTATE APPRAISAL REPORT
192-Space Harmony Ranch
10321 Main Street
Thonotosassa, Unincorporated Hillsborough County, Florida
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 15, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE]
September 22, 1999
Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 192-Space Harmony Ranch
10321 Main Street
Thonotosassa, Hillsborough County, Florida
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 15, 1999, based on an exposure period of six months, to be:
- TWO MILLION THREE HUNDRED THOUSAND DOLLARS -
($2,300,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Harmony Ranch is a fully developed 194-space manufactured home community,
with a clubhouse and office and playground/recreation area. The
office/clubhouse and playground area are not income producing spaces and the
subject is effectively a 192-space community.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan. The intended user of this report is
the Windsor Corporation.
<PAGE>
Mr. Steve Waite
September 22, 1999
Page Two
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ William G. Trask
William G. Trask
St. Cert. Gen. REA #0002347
<PAGE>
4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------
<S> <C>
Table Of Contents..................................... 3
Photographs Of The Subject............................ 5
Summary Of Facts And Conclusions...................... 6
Extent Of Confirming, Collecting And Reporting Data... 7
Purpose, Function And Date Of The Appraisal........... 7
Area/Neighborhood Description......................... 8
Manufactured Home Community Market Overview........... 9
Land And Site Improvements............................ 9
Improvement Description............................... 11
Ownership And Property History........................ 11
Occupancy............................................. 11
Zoning And Other Land Use Controls.................... 12
Real Estate Assessment And Taxes...................... 12
Marketability And Marketing Period.................... 13
Highest And Best Use.................................. 14
Valuation Process..................................... 14
Income Capitalization Approach........................ 15
Sales Comparison Approach............................. 23
Final Estimate Of Value............................... 27
Certification......................................... 28
Assumptions And Limiting Conditions................... 29
</TABLE>
Addenda
Legal Description
Maps
Profiles Of Appraisers
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 23, 1999)
[PHOTOGRAPH APPEARS HERE]
1. Entrance to Subject
[PHOTOGRAPH APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 192-Space Harmony Ranch
------------------- Manufactured Home Community
10321 Main Street
Thonotosassa, Unincorporated Hillsborough County
Florida
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 30.0 acres, or 1,306,800 square feet
----------
Improvements: 192-manufactured home spaces, a clubhouse and
------------- office, laundry and playground/recreation area.
Owner: Windsor Park Properties 3 and 4
------
Zoning: R3MH, Residential Mobile Home, Hillsborough County
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $2,300,000
------------------ Sales Comparison Approach $2,400,000
Final Estimate of Value: $2,300,000
------------------------
Date of Appraisal: August 15, 1999
------------------
Date of Inspection: August 23, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered
and applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as if
free and clear of mortgages, liens, servitude's and encumbrances, except those
noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 15, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 15, 1999. The intended user of
this report is the Windsor Corporation.
Market Value is defined 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, 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:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in what he
considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. 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. /1/
- -----------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The property is located southerly side of Main Street, approximately 1/2
mile west of Mango Road (State Road 579), within the limits of incorporated
Thonotosassa. Thonotosassa is located in the northeastern portion of
Hillsborough County. Hillsborough County is one of four counties in the Tampa
Bay Region. The Tampa Bay Region is strategically situated in the center of
Florida's West Coast and is the commercial and industrial hub of the area.
Access to Thonotosassa is primarily via Main Street, which extends in a
west to east direction, as an extension of Fowler Avenue, a main surface
arterial in eastern Tampa. U.S. Highway 301, known as Fort King Highway,
bisects Thonotosassa from southwest to northeast. Interstate 75 lies
approximately 2 miles west of Thonotosassa and Interstate 4 lies approximately 3
miles south. Access to the neighborhood is excellent and Thonotosassa is
located in proximity to Tampa, offering all amenities, shopping, schools,
churches, medical facilities and entertainment and recreation. Ingress and
egress of the subject is rated adequate.
The neighborhood is rural in nature. Development has taken the form of
mixed-use residential, commercial and light industrial type properties located
along the major road frontages, typical of rural areas. Land use in the
immediate vicinity of the subject is characteristic of the entire neighborhood.
The neighborhood is estimated to be 50% developed. There remain large
contiguous tracts of land available for in-fill development.
Population
- ----------
The Tampa Bay area has emerged as one of the nation's leading markets. The
1990 MSA population figure was 2,069,959 indicating a 28.2% increase in
population between 1980 and 1990. The most recent MSA population figure was
2,254,756 for 1997, and represents approximately 15.3% of Florida's entire
population (14,712,922). Future projections indicate a continued population
growth although at a declining rate.
Employment
- ----------
The Tampa Bay market has a well-balanced employment base with no single
industry dominating. This diversified industrial base will continue to be the
driving force for continued growth in this metropolitan area. Reflecting the
health of the local economic climate, all sectors of the area's major industries
have shown growth in the past decade. The Hillsborough County civilian work
force stood at 514,896 as of December 1998, with a 4.0% unemployment rate, well
below the state and national averages over the same period.
<PAGE>
Area/Neighborhood Description 9
Transportation
- --------------
The Tampa Bay area is accredited as a major Florida transportation center.
It is served by 14 airlines, Greyhound Bus Lines, Amtrak and CSX rail service,
cruise and freight shipping, as well as the interstate highway system. Its
prime geographic location provides easy access to all markets. Over 40
interstate and intrastate freight carriers service the area, with virtually all
the major trucking firms maintaining terminals throughout the Tampa Bay area.
Concurrency
- -----------
The State of Florida's Local Government Comprehensive Planning Act of 1975
required all counties and municipalities in the state to develop, implement and
monitor local comprehensive growth and management plans. Pursuant to this law,
each county was required to publish Land Use Policy Guides, both in written and
map form, which designate desired types of land use and probable zoning for all
county lands not within their boundaries.
Summary and Conclusion
- ----------------------
The subject is located in the Thonotosassa area, which is located in the
east central portion of Hillsborough County. The subject's location in regard
to the local amenities in the form of shopping, recreational and activity
centers is considered excellent due to the proximity of the City of Tampa.
General real estate values have been static over the last three to four year
period.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the Florida Manufactured Housing Association's 1998
Statistical Package, there are 574 manufactured home communities in Hillsborough
County. Of this total, there are 82 communities (approximately 14% of the
total), with 101 or more spaces. Additionally, 139 of the communities, or
approximately 24% of the total, are in the 26 to 100-space range. Approximately
61% of the manufactured home communities in Hillsborough County have 100 or less
spaces. The large percentage of small communities points to a fragmented
marketplace, with a variety of ownership forms. The subject, at 192 spaces, is
one of the mid sized communities in Hillsborough County.
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing approximately
30.0 acres, or approximately 1,306,800 square feet of gross area. The north
half of the tract is generally level and at the Main Street grade, while the
southern half of the tract slopes from north to south. Drainage of the tract
appears adequate and no adverse soil or subsoil conditions were observed during
the physical inspection of the site. Utility services connected and in service
on the date of
<PAGE>
Land And Site IMprovements 10
valuation include water, sanitary and storm sewer, electricity, natural gas and
telephone. According to the Community Manager, 45 of the spaces are on
individual septic systems.
Roadways arranged to maximize the use of the land access the individual
lots in the community. Roadway improvements include:
Street-bed: Main Street is an asphalt paved, two-lane thoroughfare. The
---------- subject streets are asphalt paved 15-foot wide roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public streets
-------------- or in the subject.
Street Lights: Main Street and the subject park have pole mounted
------------- overhead streetlights along the right of way.
Landscaping: Sodded and planted areas extend along the entire
----------- perimeter and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Hillsborough County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 30 acres,
is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development equates to
an overall density of approximately 6.40 units per acre, which is consistent
with current development standards that tend toward larger lot sizes, wider
streets and more green areas.
<PAGE>
11
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 192 manufactured housing community pads,
arranged along streets configured to maximize the available lot spaces. All of
the lots vary slightly in size, generally 40' x 80' and the density of the park
is equal to 6.40 spaces per acre.
It has been noted that the property is described in the Prospectus as a
194-space community. The office/clubhouse is not appropriately considered an
income producing space, nor is the playground area and the subject is
effectively a 192-space community.
The common area amenities include the clubhouse and adjoining children's
playground area. We have not estimated a separate value for these amenities, or
equipment, as they are standard items found at most manufactured home
communities. These amenities are typical, adequate and functional in use.
The community and site improvements were built in the early 1970's, and the
community is approximately 25 years old. The common areas, streets, amenities
and individual mobile homes were observed to be in average overall condition,
having been originally constructed of quality materials and having been
maintained over the years. No significant item of deferred maintenance was
noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Hillsborough County in Deed Book 4990 at Page 1907, is in the name of Windsor
Park Properties 3 and 4. The Deed was recorded on December 1, 1986 and the
indicated consideration was $2,100,000. On December 27, 1997 the rear of the
property flooded. The waters never reached the top of the homes' skirting, but
three residents moved out of the community.
OCCUPANCY
- ---------
A fully developed 192-space manufactured home community occupies the
property. Our inspection confirmed that there are 29 vacant lots and the
physical occupancy is 85.1%. Over the last three year period, the property has
undergone an extensive clean-up and tenant turnover. According to our review of
the current rent roll, 45 spaces are actually leased by one individual,
increasing the risk of rent collection. The subject is governed, as required by
law, by a prospectus, dated April 8, 1991 (Revised).
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned R3MH, Residential Mobile Home. It is our opinion
that the subject property is in conformance with the zoning code.
Concurrency
- -----------
The subject is in conformance with the approved comprehensive plan filed by
Hillsborough County and concurrency is not an issue.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "X" according
to Flood Map Community Number 120112, Panel 0190D, dated August 3, 1992. Zone X
is defined as "Areas of 500-year flood; and areas of 100-year flood with average
depths of less than 1 foot..."
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. We
noted that there is an on-site waster water treatment plant and we have
previously mentioned the spaces that have individual septic systems. We have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Hillsborough County records under
Folio Number 060393-0000. The assessed value of the subject totals $1,498,321.
It is our opinion that the subject is under assessed. The 1998 taxes were
$38,846.16.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Florida, properties are assessed at
100% of the market value, as required by Florida Statute, Chapter 192.042.
Properties are reassessed annually and equitability of assessments is not a
basis for assessment in the state of Florida.
Taxes are due and payable on the first day of the year, although tax bills
are issued in arrears. Discounts up to 4% of the total bill are available for
early payment and taxes become delinquent after March 31. Our discussions with
a number of owner's of investment real estate and Manufactured Housing
Communities has indicated that "early" payment of real estate taxes is a very
common practice. Additionally, prudent management would also dictate the
payment of real estate taxes to take advantage of any discounts offered. Our
estimate of taxes, in the amount of $37,665, reflects this practice.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Our discussions with national lenders indicate that long term, fixed
rate loans are still available, but at a minimum interest rate of 7.25% to 8.0%.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 192-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
- -----------------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENT COMPARABLE SUMMARY
<TABLE>
<CAPTION>
=================================================================================================================================
No. Name Total Monthly Services Amenities
Address Spaces/ Rental Rate Included In Rent
% Occ.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Lamplighter on the River 425/ $267.00 to Trash collection. Clubhouse, pool, laundry,
8415 East Fowler Avenue 98.8% $277.00 tennis courts and
Tampa, Hillsborough County, Florida playground.
- ---------------------------------------------------------------------------------------------------------------------------------
2 Paradise Village 614/ $291.00 Water, sewer and Clubhouse, two pools,
9304 Paradise Drive 91.9% trash collection. laundry and four playrounds.
Tampa, Hillsborough County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
3 DavPam Mobile Home Park 384/ $258.00 Water, sewer and Pool, shuffleboard, laundry
Williams Road 85.7% trash collection. and driving range.
Tampa, Hillsborough County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
4 Grandview Mobile Home Park 122/ $249.00 Trash collection. Clubhouse, picnic area and
5220 State Road 579 100.0% playground.
Tampa, Hillsborough County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
5 Camelot Mobile Home Park 120/ $225.00 Water, sewer and Clubhouse and laundry.
121 Fountain Drive 91.7% trash collection.
Thonotosassa, Hillsborough County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
Subj. Harmony Ranch 192/ $251.00 to Water, sewer and Clubhouse and playground.
10321 Main Street 86.5% $254.00 trash collection.
Thonotosassa, Hillsborough County, Florida
=================================================================================================================================
</TABLE>
<PAGE>
17
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $225.00 to $291.00 per month, as
indicated by the rent comparables recited in this report. As shown by our
survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $48,195 and the average monthly rental rate for the 192 units is
equivalent to $251.02. The potential gross income from rentals is $578,340 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 85.1% physically occupied with
29 of the 192 sites vacant. To the physical vacancy, we have added a small
percentage to account for credit loss in our estimate of economic vacancy of
20.0% of total potential gross income, or $115,668.
Miscellaneous Income
- --------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $45.9 per space (1998) to $54.34
(1997), in other income. We have based our estimate of other income on the
historical levels, estimating this income at $50.00 per space.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $578,340 less a vacancy and credit loss
allowance in the amount of $115,668, or 20.0% produces an effective gross income
from rentals estimate of $462,672. To this we add income derived from other
sources, which totals $9,600, arriving at an effective gross income estimate of
$472,272.
<PAGE>
Harmony Ranch - Summary of Historical Operations
<TABLE>
<CAPTION>
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $457,034 97.79% $2,380.39 $460,704 97.79% $2,399.50 $467,181 98.16% $2,433.23
Other Income 10,338 2.21% 53.84 10,433 2.21% 54.34 8,734 1.84% 45.49
-----------------------------------------------------------------------------------------------------------
Total Income $467,372 100.00% $2,434.23 $471,137 100.00% $2,453.84 $475,915 100.00% $2,478.72
Expenses:
Administration/Office $ 32,996 7.05% $171.70 $38,146 8.10% $198.68 $39,545 8.31% $205.96
Insurance 6,435 1.38% 33.52 7,342 1.56% 38.24 2,885 0.61% 15.03
Maintenance & Repairs 11,317 2.42% 58.94 10,677 2.27% 55.61 12,828 2.70% 66.81
Management Expense 23,032 4.93% 119.96 23,359 4.96% 121.66 22,488 4.73% 117.13
Wages & Benefits 29,463 6.30% 153.45 27,466 5.83% 143.05 35,717 7.50% 186.03
Property Taxes 38,001 8.13% 197.92 37,285 7.91% 194.19 36,784 7.73% 191.58
Utilities 55,620 11.90% 289.69 49,922 10.60% 260.01 48,589 10.21% 253.07
-----------------------------------------------------------------------------------------------------------
Total Expenses $196,834 42.12% $1,025.18 $194,197 41.22% $1,011.44 $198,836 41.78% $1,035.60
Net Operating Income $270,538 57.88% $1,409.05 $276,940 58.78% $2,442.40 $277,079 58.22% $1,443.12
===========================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 19
Operating Expense Analysis
- --------------------------
Administrative/Office: Historically, this expense has shown an increasing trend.
- ----------------------
In the financial statements, this expense does include some corporate expense
items, which we have not considered. We have stabilized our estimate of this
expense at $225.00 per space per year, which is equal to $43,200 or
approximately 9.15% of the estimated effective gross income.
Insurance: Historically, this expense has exhibited a varying decreasing trend.
- ----------
Our estimate of this expense has been stabilized based on the historical
amounts, or $25.00 per space per year. This is equal to $4,800 annually or
approximately 1.02% of the effective gross income.
Maintenance and Repair: Historically, this expense has varied, increasing
- -----------------------
slightly since 1996. We have based our estimate on the indicated historical
trend at $80.00 per space per year or $15,360 annually, believed adequate to
properly maintain the community. This amount is equal to approximately 3.25% of
the estimated effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $23,614 or $122.99 per space per year.
Wages and Benefits: Historically, this expense has varied since 1996. We have
- -------------------
based our estimate on the historical data at $200.00 per space per year or
$38,400, which is equal to 8.13% of the estimated effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$37,665. This equates to $196.17 per space per year or approximately 7.98% of
the estimated effective gross income.
Utilities: We have estimated this expense at $270.00 per space per year. This
- ----------
is equal to $51,840, or approximately 10.98% of the estimated effective gross
income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $25.00 per space per year, believed adequate to cover
future capital costs. This equates to $4,800 annually or approximately 1.02% of
the estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $219,679. This estimate is equal to 46.52% of the
Effective Gross Income (EGI) estimate or $1,144.16 per space per year. As
shown, expenses have historically ranged between 41.22% (1997) and 42.12%
(1996).
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Harmony Ranch
Reconstructed Operating Statement
====================================================================================================
Income
Spaces Monthly Rent Monthly Total Annualized
===============================================================================
<S> <C> <C> <C>
191 $251.00 $47,941 $574,292
1 $254.00 254 3,048
===============================================================================
192 $251.02 $48,195
Pct. $
of EGI Per Space
---------------------------------
<S> <C> <C> <C>
Gross Potential Rental Income $ 578,340 122.46% $3,012.19
Less:
Vacancy $ Credit Loss (115,668) 20.0% $ (602.44)
------------------------------------------
Effective Gross Income From Rentals $ 462,672 97.97% $2,409.75
Add:
Miscellaneous Income 9,600 2.03% $ 50.00
------------------------------------------
Total Effective Gross Income $ 472,272 100.00% $2,459.75
Expenses
Administrative/Office $ 43,200 9.15% $ 225.00
Insurance 4,800 1.02% 25.00
Maintenance & Repairs 15,360 3.25% 80.00
Management Expense 23,614 5.00% 122.99
Wages & Benefits 38,400 8.13% 200.00
Property Taxes 37,665 7.98% 196.17
Utilities 51,840 10.98% 270.00
Reserves 4,800 1.02% 25.00
------------------------------------------
Total Expenses $ 219,679 46.52% $1,144.16
Net Operating Income $ 252,593 53.48% $ 1,315.59
================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 21
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.51% and 9.79%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 March 1997 5.0% 40.7% 9.79%
- --------------------------------------------------------------------------------------------
2 December 1996 3.1% 32.8% 9.17%
- --------------------------------------------------------------------------------------------
3 September 1996 9.6% 37.4% 8.51%
- --------------------------------------------------------------------------------------------
4 July 1997 9.1% 52.7% 9.53%
- --------------------------------------------------------------------------------------------
5 March 1997 10.8% 38.4% 9.30%
============================================================================================
</TABLE>
The subject has an above market vacancy and expense ratio. The rear of the
community flooded in December 1997 and any potential purchaser would require a
higher yield to compensate for the risk of another flood. Based on these
considerations, we have concluded an overall capitalization rate of 11.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 15-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 11.4678%. A minimum
debt coverage ratio (DCR) of 1.20 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<TABLE>
<CAPTION>
====================================================================================================
M f DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.114678 1.20 0.103210
- ---------------------------------------------------------------------------------------------------
Rounded 10.3%
===================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 22
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The rate via the debt coverage ratio is supportive of the rate concluded
from the market data. Our estimate of the market value of the subject, indicated
by the Income Capitalization Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$252,593 Divided by 0.110 $2,296,300
Rounded to $2,300,000
</TABLE>
<PAGE>
23
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales of all age communities
are the most significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
No. Name Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Address Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Coral Lake Mobile Home Park $6,500,000 235/ $27,660 $363.88 6.05/ 9.79%
4701 Lyons Road March 1997 95.0% 40.7%
Coconut Creek, Broward County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
2 Imperial Estates Mobile Home Park $8,000,000 261/ $30,651 $372.00 7.33/ 9.17%
5601 North State Road 7 June 1998 96.9% 32.8%
Fort Lauderdale, Broward County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
3 Country Lakes Mobile Home Park $15,400,000 499/ $29,860 $382.80 7.35/ 8.51%
6800 Northwest 39th Avenue January 1999 90.4% 37.4%
Coconut Creek, Broward County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
4 Village of Tampa $7,200,000 463/ $15,551 $240.08 4.97/ 9.53%
1201 Skipper Road June 1997 90.9% 52.7%
Tampa, Unincorporated Hillsborough County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
5 Golden Hills $2,160,000 185/ $11,676 $159.39 6.63/ 9.30%
7865 West Highway 40 March 1997 89.2% 38.4%
Ocala, Unincorporated Marion County, Florida
==================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 25
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Coral Lake Mobile Home Park in Coconut Creek.
This 235-space all age community sold for $6,500,000 in March 1997. The price
equates to a sale price per space of $27,660. Based on an effective gross
income of $1,073,850, the EGIM was 6.05. The expenses represented 40.7% of the
effective gross income and the indicated overall capitalization rate was 9.79%,
based on a net operating income of $636,406. This community was 95.0% occupied
at the time of sale with 223 of the 255 spaces leased.
Sale Comparable Number Two is Imperial Estates Mobile Home Park in Fort
Lauderdale. This 261-space all age community sold for $8,000,000 in June 1998.
The price equates to a sale price per space of $30,651. Based on an effective
gross income of $1,091,720, the EGIM was 7.33. The expenses represented
approximately 32.8% of the effective gross income and the indicated overall
capitalization rate was 9.17%, based on a net operating income of $733,950. This
community was 96.9% occupied at the time of sale with 253 of the 261 spaces
leased.
Sale Comparable Number Three is Country Lakes Mobile Home Park in Coconut
Creek. This 499-space all age community sold in January 1999 for $14,900,000.
The price equates to a sale price per space of $30,862. Based on the Buyer's
Pro-forma, the effective gross income of $2,026,471 indicated an EGIM was 7.35.
The expenses were estimated at 37.4% of the effective gross income and the
indicated overall capitalization rate was 8.51%, based on a net operating income
of $1,268,440. This community is 90.4% occupied with 451 of the 499 spaces
leased.
Sale Comparable Number Four is Village of Tampa in Tampa. This 463-space
all age community sold for $7,200,000 in June 1997. This price equates to a
sale price per space of $15,551. Based on the Buyer's Pro-forma the effective
gross income of $1,450,044 indicated an EGIM was 4.97. The expenses were
estimated at 52.7% of the effective gross income and the indicated overall
capitalization rate was 9.53%, based on a net operating income of $686,496. This
community was 90.9% occupied at the time of sale with 421 of the 463 spaces
leased.
Sale Comparable Number Five is Golden Hills in Ocala. This 185-space all
age community sold for $2,160,000 in March 1997. This price equates to a sale
price per space of $11,676. Based on the Buyer's Pro-forma the effective gross
income of $325,992 indicated an EGIM was 6.63. The expenses were estimated at
38.4% of the effective gross income and the indicated overall capitalization
rate was 9.30%, based on a net operating income of $200,851. This community was
89.2% occupied at the time of sale with 170 of the 185 spaces leased.
<PAGE>
Sales Comparison Approach 26
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last nine months,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the Effective Gross Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 4.97 and 7.35. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community with a 15.1% physical vacancy. The
subject was observed to be in average condition and has a good location in
Hillsborough County, Florida. The comparables all had a much higher occupancy
rate than at the subject and with the exception of Comparable Number Four, the
expense ratios are lower, ranging from 32.8% to 40.7%. By comparison, the
subject has a forecast expense ratio of 46.52%. The subject experienced
flooding in December 1997. Based on these considerations, we have concluded an
EGIM at the low end of the indicated range, processing the subject's Effective
Gross Income of $472,272 with an EGIM of 5.00.
Thus $472,272 x 5.00 is $2,361,360
Rounded to $2,400,000
On a per space basis, this is equivalent to $12,500.
<PAGE>
27
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $2,300,000
Sales Comparison Approach $2,400,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of August 15, 1999 was:
- TWO MILLION THREE HUNDRED THOUSAND DOLLARS -
($2,300,000)
<PAGE>
28
CERTIFICATION
- -------------
We certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are our personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
. We have no bias with respect to the property that is the subject of
this report or to the parties involved with this assignment.
. Our engagement in this assignment was not contingent upon developing
or reporting predetermined results.
. Our compensation for completing this assignment is not contingent upon
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this
appraisal.
. Our analysis, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, John H. Whitcomb, MAI, CCIM has
completed the requirements under the continuing education program of
the Appraisal Institute.
. John H. Whitcomb, MAI, CCIM and William G. Trask have made a personal
inspection of the property that is the subject of this report.
. No one provided significant professional assistance to the persons
signing this report.
. We are in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ John H. Whitcomb /s/ William Trask
- --------------------------- ----------------------------
John H. Whitcomb, MAI, CCIM William G. Trask
St. Cert. Gen. REA #0001234 St. Cert. Gen. REA #0002347
<PAGE>
29
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 30
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations,
<PAGE>
Assumptions and Limiting Conditions 31
and equipment, including the HVAC systems, if applicable. Should there be any
question concerning them, it is strongly recommended that an Engineering,
Construction, and/or Environmental inspection be obtained. The value estimate
stated in this appraisal, unless otherwise noted, is predicated on the
assumption that all of the improvements, equipment and building services, if
any, are structurally sound and suffer no concealed or latent defects or
inadequacies other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state
<PAGE>
Assumptions and Limiting Conditions 32
and/or federal tax or regulatory laws. Therefore, the actual results achieved
during the projected holding period and investor requirements relative to
anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
The East 1/4 of the Southwest 1/4 of the Southeast 1/4 and the West 1/2 of the
Southeast 1/4 of the Southeast 1/4 of Section 9, Township 28 South, Range 20
East, less Right-of-Way for the Tampa-Thonotosassa Road off the North side
thereof and also less the East 140 feet of the South 151 feet of the North 191
feet of the West 1/2 of the Southeast 1/4 of the Southeast 1/4 of Section 9, all
being in Hillsborough County, Florida.
<PAGE>
MAPS
<PAGE>
[FLORIDA AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[FLORIDA MANUFACTURED HOME COMMUNITIES COMPARABLE SALES MAP APPEARS HERE]
<PAGE>
[MAP OF HARMONY RANCH APPEARS HERE]
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
3
Profile of Appraiser
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
- -----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
</TABLE>
<PAGE>
4
Profile of Appraiser
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
WILLIAM G. TRASK
St.Cert. Gen. REA #0002347
REAL ESTATE APPRAISAL EXPERIENCE
- --------------------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specializing in real estate valuations and consulting projects for lending
institutions, public and private corporations and individuals, for a
variety of uses. Property types appraised include manufactured housing
communities, recreational vehicle parks, manufacturing plants, office
buildings, apartment complexes, retail properties and other types of
commercial establishments. February 1998 to Present.
Appraiser
Atlas Real Estate Group, Inc.
Tampa, FL
Specialized in real estate condemnation valuations and related studies.
Property types appraised include agricultural, industrial, residential,
office buildings, retail properties and other types of commercial land and
establishments. August 1991 to January 1998.
PROFESSIONAL AFFILIATIONS
- -------------------------
State Certified General Real Estate Appraiser
Florida # 0002347
Georgia # CG007464
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
A Garden Walk Palm Beach Gardens, FL Honeymoon Park Dunedin, FL
Bear Creek Ormond Beach, FL La Buona Vita Port St. Lucie, FL
Bonfire Leesburg, FL Lincolnshire Largo, FL
Briarwood Lake Worth, FL Meadowbrook Lakeland, FL
Camelot East Sarasota, FL Mobiland By The Sea Melbourne, FL
Camelot Lakes Sarasota, FL Oak View Arcadia, FL
Carefree Village Tampa, FL Palmetto Hallandale, FL
Clover Leaf Brooksville, FL Plaza Bradenton, FL
Coquina Crossing St. Augustine, FL Ranchero Village Largo, FL
</TABLE>
<PAGE>
2
Profile of Appraiser
William G. Trask
Manufactured Home Communities (Cont.)
- -------------------------------------
<TABLE>
<S> <C> <C> <C>
Country Club Estates Venice, FL River Bay Tampa, FL
Country Lakes Coconut Creek, FL Riverview Micco, FL
Country Life Leesburg, FL Serendipity Clearwater, FL
Crystal River Village Crystal River, FL Southern Acres St. Cloud, FL
Diamond Point Leesburg, FL Spanish Trails Zephyrhills, FL
Friendly Village Sellersburg, IN Sun Village Largo, FL
Hammock Lake Fort Meade, FL Sundance Zephyrhills, FL
Heron Cay Vero Beach, FL Sunshine Village Lake Worth, FL
Hibiscus Mount Dora, FL Tall Pines Fort Pierce, FL
Hidden Village St. Petersburg, FL Tanglewood Fort Pierce, FL
High Point Clearwater, FL Vero Palms Vero Beach, FL
Recreational Vehicle Parks
- --------------------------
Lazy Lakes RV Sugarloaf Key, FL Ridgecrest RV Leesburg, FL
Lions Lair RV Marathon, FL Sunshine RV Vero Beach, FL
Pioneer Village North Fort Myers, FL Topics RV Spring Hill, FL
Other
- -----
ABC Pizza House Tampa, FL Fabian Enterprises Tampa, FL
Blakie's Restaurant Tampa, FL Florida Power & Light St. Petersburg, FL
Breed Automotive Lakeland, FL Mobil Oil Lakeland, FL
Discount Auto Parts Lakeland, FL Pier 1 Imports Hoover, AL
Discount Auto Parts Sarasota, FL Pizza Hut Brandon, FL
Discount Auto Parts Land O'Lakes, FL Pizza Hut Lakeland, FL
Financial
- ---------
Belgravia Capital Heller Financial
Collateral Mortgage, Ltd. Lehman Brothers
Executive Commercial Funding NationsBank
First Federal Savings Bank, Leesburg, FL Republic Bank, Port Richey, FL
First National Bank, St. Lucie, FL Signature Financial Services, Inc.
First Union National Bank Union Capital Investments, LLC
GE Capital Corporation United Southern Bank, Eustis, FL
Greentree Financial
</TABLE>
<PAGE>
3
Profile of Appraiser
William G. Trask
Real Estate/Real Estate Investment
- ----------------------------------
Continental Communities National Home Communities
Martin Newby Management Pacific Life
Munao Partnership Windsor Corporation
EDUCATIONAL BACKGROUND
- ----------------------
Florida State University
University of South Florida
Edison Community College
Hillsborough Community College
Appraisal Institute
International Right of Way Association
<PAGE>
EXHIBIT 99(b)(2)
LEGG MASON
Corporate Finance
Legg Mason Wood Walker, Incoporated
100 Light Street, 34/th/ Floor, Baltimore, MD 21202
410-539-0000 Fax: 410-454-4508
Member New York Stock Exchange, Inc./Member SIPC
November 15, 1999
The General Partners of
Windsor Park Properties 3, A California Limited Partnership
c/o The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
General Partners:
We have been advised by the managing general partner (the "Managing
General Partner") of Windsor Park Properties 3, A California Limited Partnership
(the "Partnership"), that the Partnership intends to sell its four wholly-owned
properties and its partial ownership interests in four other properties
(collectively, the "Properties") to N'Tandem Trust, a California business trust
("N'Tandem"), for a net aggregate amount of $7,813,600 on terms and conditions
more fully described in the consent solicitation statement (the "Consent
Solicitation Statement") relating to the purchase and sale of the Properties
(the transaction is referred to herein as the "Sale").
You have requested our opinion, as investment bankers, as to the
fairness to the limited partners (the "Limited Partners") of the Partnership,
from a financial point of view, of the aggregate purchase price to be paid by
N'Tandem in the Sale.
In connection with our opinion, we have, among other things, reviewed:
(i) the management agreement between the Partnership and the
Managing General Partner and other agreements pertaining to the
operation and management of the Properties;
(ii) the partnership agreement of the Partnership;
(iii) the financial statements and the related filings of the
Partnership on Form 10-K for the year ended December 31, 1998
and Form 10-Q for the six months ended June 30, 1999;
(iv) certain market and economic data applicable to the Sale;
(v) an analysis of comparable publicly traded real estate
investment trusts;
<PAGE>
The General Partners of the Windsor Park Properties 3, A California Limited
Partnership
November 15, 1999
Page 2
(vi) the draft Consent Solicitation Statement;
(vii) certain financial and other information relating to the
Partnership and the Properties that was furnished to Legg Mason
by the Managing General Partner, including certain internal
financial analyses, financial and operating forecasts and
reports and other information prepared by the Managing General
Partner or its representatives;
(viii) the appraisals of the Properties prepared by Whitcomb Real
Estate, Inc; and
(ix) conducted such other financial studies, analyses and
investigations and considered such other information as we
deemed appropriate.
In connection with our review, we relied, without independent
verification, on the accuracy and completeness of all information that was
publicly available, supplied or otherwise communicated to Legg Mason on behalf
of the Partnership and we have further relied upon the assurances of the
Managing General Partner that it is unaware of any facts that would make the
information provided to us incomplete or misleading.
Legg Mason has also relied upon the Managing General Partner as to the
reasonableness and achievability of the financial forecasts and projections (and
the assumptions and bases therein) provided to us for the Partnership, and we
have assumed such forecasts and projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments of management as
to the future operating performance of the Partnership. Neither the Managing
General Partner nor the Partnership publicly discloses internal management
forecasts and projections of the type provided to Legg Mason. Such forecasts and
projections were not prepared with the expectation of public disclosure. The
forecasts and projections were based on numerous variables and assumptions that
are inherently uncertain, including, without limitation, facts related to
general economic conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts and projections. Legg Mason
has relied on these forecasts and does not in any respect assume any
responsibility for the accuracy or completeness thereof.
Legg Mason has not been requested to make, and has not made, an
independent evaluation or appraisal of the assets, properties, facilities, or
liabilities (contingent or otherwise) of the Partnership and, with the exception
of the appraisal of the underlying properties of the Partnership referred to
above, we have not been furnished with any such appraisals or evaluations.
Estimates of value of the Partnership and its assets do not purport to be
appraisals or necessarily reflect the prices at which the Partnership and assets
may actually be sold. Because such estimates are inherently subject to
uncertainty, Legg Mason assumes no responsibility for their accuracy. We note
that the Managing General Partner and N'Tandem are under common control of the
parent of the Managing General Partner, and we have assumed that this potential
conflict of interest had no effect on the Sale. Our opinion is necessarily based
upon financial, economic, market and other conditions and circumstances existing
and disclosed to us on the date hereof. We were not requested to, nor did we,
solicit the interest of any other party in acquiring interests in the
Partnership or its assets. We have also assumed that the Sale will be
consummated on the terms and conditions described in the Consent Solicitation
Statement, without any waiver of material terms or conditions by the
Partnership.
It is understood that this letter is directed to the General Partners.
The opinion expressed herein is provided for the use of the General Partners in
their evaluation of the Sale and
<PAGE>
The General Partners of the Windsor Park Properties 3, A California Limited
Partnership
November 15, 1999
Page 3
our opinion does not constitute a recommendation to the General Partners or to
any Limited Partner as to how such partners should vote or otherwise respond on
the Sale. In addition, this letter does not constitute a recommendation of the
Sale over any other alternative transaction which may be available to the
Partnership and does not address the underlying business decision of the
Managing General Partner to proceed with or effect the Sale. This letter is not
to be quoted or referred to, in whole or in part, in any registration statement,
prospectus, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without the prior written consent of Legg Mason; provided that this opinion may
be included in its entirety in any filing made by the Partnership or N'Tandem
with the Securities and Exchange Commission with respect to the Sale.
Legg Mason will receive a fee for providing this opinion to the
General Partners.
Based upon and subject to the foregoing, we are of the opinion that,
as of the date hereof, the aggregate amount of consideration to be paid by
N'Tandem in the Sale is fair to the Limited Partners from a financial point of
view.
Very truly yours,
/s/ Legg Mason Wood Walker, Incorporated
Legg Mason Wood Walker, Incorporated
<PAGE>
EXHIBIT 4
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. FORMATION OF LIMITED PARTNERSHIP................................................................... 1
1.01 FORMATION AND AGREEMENT OF LIMITED PARTNERSHIP..................................................... 1
1.02 NAME AND PRINCIPAL PLACE OF BUSINESS............................................................... 1
1.03 TERM OF PARTNERSHIP................................................................................ 1
1.04 DEFINITIONS........................................................................................ 1
1.05 PURPOSE OF PARTNERSHIP AND INVESTMENT OBJECTIVES................................................... 3
1.06 GENERAL AND LIMITED PARTNERS....................................................................... 3
(A) GENERAL PARTNERS................................................................................... 3
(B) GENERAL PARTNERS CAPITAL CONTRIBUTION.............................................................. 3
(C) GENERAL PARTNERS PURCHASE OF UNITS................................................................. 4
(D) AUTHORIZED UNITS AND ORIGINAL AND ADDITIONAL LIMITED PARTNERS...................................... 4
(E) ADMISSION OF LIMITED PARTNERS...................................................................... 4
II. MANAGEMENT OF THE PARTNERSHIP...................................................................... 4
2.01 POWERS AND DUTIES OF THE GENERAL PARTNERS.......................................................... 4
2.02 INDEMNIFICATION.................................................................................... 5
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.......................................................... 5
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL"......................................................... 6
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP TO THE PARTNERSHIP SHALL BE DETERMINED BY
THE FOLLOWING RULES................................................................................ 7
2.0 COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.................................................... 7
(1) PROPERTY MANAGEMENT FEE............................................................................ 7
(2) AFFILIATE ACQUISITION FEES......................................................................... 7
(3) LIMITATION......................................................................................... 8
2.05 INVESTMENT IN PROPERTIES........................................................................... 8
2.06 CERTAIN MORTGAGING................................................................................. 8
2.07 REINVESTMENT....................................................................................... 8
III. FINANCING OF THE PARTNERSHIP....................................................................... 9
3.01 CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNERS...................................................... 9
3.02 CAPITAL CONTRIBUTIONS OF THE LIMITED PARTNERS...................................................... 9
(A) PARTNERSHIP UNITS.................................................................................. 9
(B) INITIAL SUBSCRIPTIONS.............................................................................. 9
3.03 ADDITIONAL CONTRIBUTIONS........................................................................... 9
3.04 INTEREST........................................................................................... 9
3.05 TIME FOR RETURN OF CONTRIBUTIONS................................................................... 9
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
3.06 LOANS BY THE PARTNERS.............................................................................. 9
3.07 ALLOCATION OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS FROM CASH AVAILABLE FOR DISTRIBUTION.... 9
3.08 CONDITIONS AND CONSENT TO ALLOCATIONS AND DISTRIBUTIONS............................................ 11
3.09 PARTNERSHIP EXPENSES............................................................................... 11
IV.. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS.......................................... 12
4.01 BOOKS OF ACCOUNT................................................................................... 12
4.02 REPORTS AND FINANCIAL STATEMENTS................................................................... 13
(A) ANNUAL REPORT...................................................................................... 13
(B) REPORT OF FEES..................................................................................... 13
(C) QUARTERLY REPORTS.................................................................................. 13
(D) TAX INFORMATION.................................................................................... 13
(E) SPECIAL REPORTS.................................................................................... 13
(F) REPORTS DURING OFFERING............................................................................ 14
(G) FILING OF REPORTS.................................................................................. 14
4.03 TAX RETURNS AND RECORDS............................................................................ 14
4.04 FISCAL YEAR........................................................................................ 14
4.05 BANK ACCOUNTS, FUNDS AND ASSETS.................................................................... 14
4.06 ADJUSTMENT OF TAX BASIS............................................................................ 14
4.07 INSURANCE.......................................................................................... 15
4.08 APPRAISALS......................................................................................... 15
4.08 TAX MATTERS PARTNER................................................................................ 15
V ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS....................................................... 15
5.01 LIMITED PARTNERS' INTEREST......................................................................... 15
5.02 FURTHER RESTRICTION ON TRANSFERS................................................................... 15
5.03 SUBSTITUTED PARTNERS............................................................................... 16
5.04 ADDITIONAL RESTRICTIONS............................................................................ 16
5.05 WITHDRAWAL OF LIMITED PARTNER...................................................................... 16
5.06 DEATH OF LIMITED PARTNER........................................................................... 16
5.07 RECOGNITION OF SUBSTITUTED AND ASSIGNEE LIMITED PARTNERS........................................... 16
VI REPURCHASE OF UNITS................................................................................ 16
VII RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH...................................... 17
VIII TERMINATION OF A GENERAL PARTNER................................................................... 17
8.01 CEASING TO BE A GENERAL PARTNER.................................................................... 17
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
8.02 CONTINUATION OF BUSINESS OF REMAINING GENERAL PARTNER.............................................. 18
8.03 REMOVAL OF A GENERAL PARTNER....................................................................... 18
8.04 DISSOLUTION OF PARTNERSHIP AND CONTINUANCE OF PARTNERSHIP BUSINESS................................. 18
8.05 PAYMENT TO TERMINATED GENERAL PARTNER.............................................................. 18
8.06 TERMINATION OF EXECUTORY CONTRACTS................................................................. 18
IX DISTRIBUTION ON TERMINATION........................................................................ 19
9.01 EVENTS OF DISSOLUTION.............................................................................. 19
9.02 GAIN AND LOSS ON DISSOLUTION AND ORDER OF DISTRIBUTION............................................. 19
9.03 EMINENT DOMAIN..................................................................................... 19
9.04 PERIOD OF LIQUIDATION.............................................................................. 19
X CERTIFICATES AND OTHER DOCUMENTS................................................................... 19
10.01 GENERAL PARTNERS ATTORNEYS FOR LIMITED PARTNERS.................................................... 19
10.02 MAKING, FILING, ETC. OF CERTIFICATES, ETC.......................................................... 20
XI NOTICES............................................................................................ 21
XII CONVEYANCES, CONTRACTS AND DOCUMENTS............................................................... 21
XIII DISPUTES AND ARBITRATION........................................................................... 21
XIV MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS................................................... 21
XV CAPTIONS-PRONOUNS.................................................................................. 23
XVI BINDING EFFECT AND EXHIBITS........................................................................ 23
XVII AMENDMENT OF THE AGREEMENT......................................................................... 24
XVIII ENTIRE AGREEMENT................................................................................... 24
XIX TAX CONTROVERSIES.................................................................................. 24
XX COUNTERPARTS AND EXECUTION......................................................................... 24
XXI LIABILITY AND INDEMNIFICATION...................................................................... 25
XXII INVESTMENT IN OTHER PROGRAMS OF SPONSOR............................................................ 25
XXIII PROCEEDS FROM FINANCING PROPERTIES................................................................. 26
</TABLE>
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
Table of Contents Page
----
An extra section break has been inserted above this paragraph. Do not
delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
This Agreement of Limited Partnership is made August 7, 1985, as amended to
the date stated on the signature page, by and among The Windsor Corporation, a
California corporation (Corporate General Partner) and John A. Coseo, Jr.
(Individual General Partner), as General Partners and Patricia Ann Coseo as the
original Limited Partner.
The original Limited Partner and each other person, partnership, corporation,
trust or other entity who or which shall thereafter be admitted to the
Partnership as a limited partner as hereinafter provided, are referred to
collectively as "Limited Partners" and individually as "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby form
a limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporation Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership is
Windsor Park Properties 3, A California Limited Partnership, and the office and
principal place of business shall be 120 West Grand Avenue, Suite 206,
Escondido, California 92025, and hereafter such other place or places as the
General Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date of
this Agreement (the "effective date") and shall continue for a period ending the
earlier of:
(a) Six months after the commencement of its public offering registered
with the Securities and Exchange Commission, provided that on said date the
Partnership has not received a minimum of $1,250,000 of capital contributions
from Limited Partners;
(b) December 31, 1999;
(c) The date on which all of the assets acquired by the Partnership are
sold or otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by the
agreement of the Partners;
(e) The date on which the Partnership is dissolved by operation of law or
judicial decree; or
(f) The date on which the last remaining original General Partner retires,
dies, becomes legally incapacitated, dissolves, withdraws, is adjudicated
bankrupt or is removed, unless a majority in interest of the Limited Partners
by written consent or vote elect one or more new General Partners to continue
the Partnership business.
1.04 Definitions. The following terms used in this Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
(a-1) "Acquisition Fees" shall mean the total of all fees and commissions
paid by any party, including any sponsor, in connection with the purchase or
development of any property by the Partnership, whether designated as a real
estate commission, acquisition fee, development fee, nonrecurring management
fee or any fee of a similar nature (except a development fee paid to a person
non-affiliated with the sponsors in connection with the actual development of
a project after acquisition of the land by the partnership), and including the
fee
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described in (a-2) next. "Development Fee" means a fee for the packaging of a
Partnership property, including negotiating and approving plans and
undertaking to assist in obtaining zoning and necessary variances and
necessary financing for the specific property, either initially or at a later
date.
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to the
General Partners for their services in the acquisition of partnership
properties. This fee shall not exceed 7% of the public offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly
controlling, controlled by or under common control with another person, (ii) a
person owning or controlling 10% or more of the outstanding voting securities
of such other persons, (iii) any officer, director, partner, general trustee
or anyone acting in a substantially similar capacity as to such person, and
(iv) any person who is an officer, director, general partner, trustee, or
holder of 10% or more of the voting securities or beneficial interests of any
of the foregoing.
(c) "Appraised Value" means value according to an appraisal made by an
independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided from
Partnership operations, including lease payments on net leases from builders
and sellers, without deduction for depreciation, but after deducting cash
funds used to pay all other expenses, debt payments, capital improvements,
amounts set aside for restoration or creation of reserves, and replacements.
(e) "Capital Contributions" means the total investment and contribution to
the capital of the Partnership in cash by Limited or General Partners without
deduction of selling, organization or other expenses.
(f) "Distributions" shall mean any cash or other property distributed to
the Limited and General Partners arising from their interests in the
Partnership, but shall not include any payments to the General Partners under
the provisions of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal fees
and expenses, travel and communication expense, costs of appraisals, non-
refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of properties, whether or not acquired.
(h) "Invested Capital" means General or Limited Partner's capital
contribution less the sum of surplus funds distributed to such Limited
Partners as of the date of calculation.
(i) "Net Profits and Net Losses" means the profits or losses of the
Partnership in accordance with accounting method followed for federal income
tax purposes.
(j) "Person" means any natural person, partnership, corporation,
association or other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale of a
particular property, including the amount of acquisition fees and all liens
and mortgages on the property, but excluding points and prepaid interest.
(l) "Sponsor" shall mean any person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, or any person who will manage
or participate in the management of the Partnership, including the General
Partners and any affiliate of such person, excluding any person whose only
relation with the Partnership is that of independent property manager and
whose only relation with the Partnership is that of independent property
manager and whose only compensation is as such. Sponsor shall not include
wholly independent third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional services rendered in
connection with the offering of Partnership interest.
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(m) "Units" shall mean the partnership interests of the Limited and General
Partners, and each unit shall represent a capital contribution of $100 to the
Partnership and entitle the holder thereof to the rights and interests of
Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital contribution
paid for each Unit reduced by any return of capital and further reduced by the
total cash distributed from net proceeds from refinancing and net proceeds
from the sale of Properties with respect to each Unit.
(o) "Organization and Offering Expenses" means those expenses incurred in
connection with and in preparing the Partnership for registration and
subsequently offering and distributing the offering to the public, including
sales commissions paid to broker-dealers in connection with the distribution
of the Partnership's units and all advertising expenses.
1.05 Purpose of Partnership and Investment Objectives. The principal purpose
of the Partnership is to acquire, own, operate, improve, lease and otherwise
manage for investment purposes, either alone or in association with others, a
portfolio of improved, income-producing mobile home properties as shall from
time to time be acquired by the Partnership and which offers the potential for
(i) preserving and protecting the Limited Partners' original invested capital;
(ii) generating an annual cash flow for distribution to the partners; and (iii)
to engage in any and all general business activities related to and incidental
to those purposes; provided however that the Partnership shall not own or lease
property jointly in partnership with others unless (a) such partner or joint
owner is an independent third person who is not a sponsor, (b) the management of
such partnership or joint ownership is under control of the Partnership which
has a majority interest therein, (c) the Partnership, as a result of such joint
ownership or partnership ownership of an investment property, is not charged,
directly or indirectly, more than once for the same services, (d) the joint
ownership or partnership does not authorize or require the Partnership to do
anything as a partner or joint venture with respect to the property which the
Partnership or the General Partners could not do directly because of this
Agreement; and (e) the General Partners and their affiliates are prohibited from
receiving any compensation, fee or expenses which are not permitted to be paid
by this Agreement.
Until invested in properties (except for reserves), the Partnership may
temporarily invest all or a part of its capital contributions in short-term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
All properties, except those acquired after January 1, 1995, are to be
acquired free and clear of any encumbrances. Unimproved or non income producing
property will not be acquired. Investment in junior trust deeds or similar
obligations shall be prohibited.
In view of the exclusive purposes of the Partnership, none of the parties
shall have any obligation with respect to the Partnership or to any of the other
parties insofar as making other real estate opportunities available to the
Partnership or to any of the other parties. The General Partners and each
Limited Partner may, notwithstanding the existence of this Agreement, engage in
whatever activities they choose, whether the same is competitive with the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to the Partnership or any party hereto. The
obligations of the parties shall, therefore, be limited solely to those arising
from the acquisition and holding of the Partnership property.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows: 120
West Grand Avenue, Suite 206, Escondido, California 92025. The General Partners'
interest in net profits, net losses and distributions shall be allocated between
them (so long as they act as General Partners) as they determine.
(b) General Partners Capital Contribution. The General Partners will, as
General Partners, contribute to the capital of the Partnership that amount of
capital over the next five years so that the partnership will not be required to
register with the Internal Revenue Service as a tax shelter.
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(c) General Partners Purchase of Units. On or before the closing of the
public offering the General Partners will purchase a minimum of that number of
limited partnership units equal to 1% (but not more than $100,000) of units sold
in the Partnership's public offering, less, however, the amount of capital they
may be required to contribute pursuant to subsection 1.06(b).
(d) Authorized Units and Original and Additional Limited Partners. Patricia
Ann Coseo, the original Limited Partner, has contributed the sum of $1,000 cash
to the capital of the Partnership and has received 10 units for such
contribution. The Partnership intends to make a public offering of 200,000 units
of limited partnership interests ("Units") and to admit as additional Limited
Partners the persons whose subscriptions for such Units are accepted by the
General Partners. The names and places of residence of such Limited Partners
will be set forth in the Subscription Agreements and Signature Pages attached
hereto. The General Partners may admit an unlimited number of additional Limited
Partners who subscribe from time to time for Units upon such terms and
conditions and in such amount as the General Partners in their sole discretion
shall deem reasonable. No action or consent by Limited Partners shall be
required in connection with such admission of additional Limited Partners
pursuant to this Section 1.06. This Agreement shall be executed by the General
Partners, and an amendment of any Certificate of Limited Partnership, reflecting
such admissions, shall be executed by the General Partners and filed, if and
when and in such jurisdictions as may be required or appropriate. The offering
period of program interests shall cease not later than one year from the date of
the partnership's registration statement as filed with the Securities and
Exchange Commission.
(e) Admission of Limited Partners. The Subscribers for Units of the
Partnership shall be admitted to the Partnership as Limited Partners within
thirty (30) days after such subscribers' capital contributions are released by
the depository thereof to the Partnership. Thereafter, subscriptions for Units
shall be accepted or rejected by the General Partners within thirty (30) days
after their receipt by the General Partners, and subscribers whose subscriptions
are acceptable shall be admitted to the Partnership as additional Limited
Partners on or before the last day of the calendar month during which such
subscriptions were accepted. All moneys deposited by subscribers whose
subscriptions are rejected by the General Partners will be returned to such
subscriber without any interest thereon forthwith after such rejection.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. The General Partners shall
have full and complete charge of all affairs of the Partnership, and the
management and control of the Partnership's business shall rest exclusively with
the General Partners, subject to the terms and conditions of this Agreement.
The General Partners shall have a fiduciary responsibility for the safekeeping
and use of all funds of the Partnership, whether or not in the General Partners'
immediate possession or control. The General Partners shall not employ or
permit another to employ such funds or assets in any manner except for the
exclusive benefit of the Partnership. The General Partners shall have the
rights, powers and authority granted to the General Partners hereunder or by
law, or both, to obligate and bind the Partnership and, on behalf and in the
name of the Partnership, to take such action as the General Partners deem
necessary or advisable including, without limitation, making, executing and
delivering purchase and sale, management and other agreements; leases,
assignments, deeds and other transfers and conveyances; agreements to purchase,
sell, lease or otherwise deal with personal property; escrow instructions;
checks, drafts and other negotiable instruments; and all other documents and
agreements which the General Partners deem reasonable or necessary in connection
with the purchase of the Partnership's properties and the operation and
management thereof. The execution and delivery of any such instrument by the
General Partners shall be sufficient to bind the Partnership.
The General Partners or their affiliates may acquire Units from time to time
on their own behalf and for their own benefit.
The General Partners or their affiliates may from time to time employ on
behalf of the Partnership such persons, firms or corporations as they in their
sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment, shall determine, provided,
however, that the Partnership shall not: (1) make any loans to any sponsor; (2)
grant an exclusive right to sell or exclusive employment to sell property for
the Partnership to a sponsor; (3) offer
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Limited Partnership interests in exchange for property; (4) employ a sponsor to
construct or develop Partnership property; (5) after two years after the public
offering terminates, invest any surplus funds; (6) purchase limited partnership
interests in other partnerships; and (7) incur any indebtedness or place any
loans or encumbrances against Partnership properties (except as provided in
Article XXIII).
The Partnership shall not purchase or lease property in which a sponsor has an
interest. The Partnership shall not acquire property from any person in whom a
sponsor has an interest. Notwithstanding the foregoing, a sponsor may purchase
property in its own name and temporarily hold title thereto for the purpose of
facilitating the acquisition of such property, or any other purpose related to
the business of the Partnership, provided that such property is purchased by the
Partnership for a price no greater than the cost of such property to the sponsor
and provided there is no difference in interest rates of the loans secured by
the property at the time acquired by the sponsor and the time acquired by the
program, and no other benefit is provided to the sponsor arising out of such
transaction apart from compensation otherwise permitted by this Agreement. The
Partnership shall not sell or lease property to a sponsor.
Sponsors shall not receive a rebate, give-up or similar payment or enter into
any reciprocal business arrangement which would circumvent any provisions
contained in this Agreement.
No sponsor shall: (1) commingle the Partnership funds with those of any other
person or entity; (2) operate the Partnership in such a manner as to have the
Partnership classified as an "investment company" for purposes of the Investment
Company Act of 1940; (3) cause the Partnership to enter into any agreements with
the General Partner or their affiliates which shall not be subject to
termination without penalty by either party upon not more than sixty (60) days'
written notice.
Neither the Partnership nor any sponsor shall, directly or indirectly, pay or
award any finder's fees, commissions or other compensation to any person engaged
by a potential investor for investment advice as an inducement to such advisor
to advise the potential investor to purchase Limited Partnership interests of
the Partnership, provided, however, that the Partnership shall not be prohibited
from paying the normal sales commissions payable to registered broker dealers or
other properly licensed persons for selling Units.
The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
The Partnership shall provide from the offering proceeds adequate reserves for
normal repair, replacements and contingencies.
2.02 Indemnification. Except in the case of negligence or misconduct, the
General Partners and agents acting on their behalf shall not be liable,
responsible or accountable in damages or otherwise to the Partnership (in a
Partnership derivative suit) or to any of the Limited Partners for the doing of
any act or the failure to do any act, the effect of which may cause or result in
loss or damage to the Partnership, if done in good faith to promote the best
interests of the Partnership. The General Partners and their agents shall be
entitled to be indemnified by the Partnership from the assets of the
Partnership, or as an expense of the Partnership, but not from the Limited
Partners, against any liability or loss, as a result of any claim or legal
proceeding (whether or not the same proceeds to judgment or is settled or
otherwise brought to a conclusion) relating to the performance or non-
performance of any act concerning the activities of the Partnership (including
all liabilities under federal and state securities acts as permitted by law),
except in the case where the General Partners or their agents are guilty of bad
faith, negligence, misconduct or reckless disregard of duty, provided such act
or omission was done in good faith to promote the best interests of the
Partnership. The indemnification authorized by this paragraph shall include the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners shall
not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership, or have any power or
authority to bind or obligate the Partnership.
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2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner does
not participate in the control of the business within the meaning of Section
2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership or of a
General Partner, or an officer, director, or shareholder of the Corporate
General Partner.
(2) Consulting with and advising a General Partner with respect to the
business of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more specific
debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership Agreement.
(5) Voting on or calling a meeting of the partners for one or more of the
following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in the
ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than in the
ordinary course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the Partnership.
(F) The removal of a General Partner.
(G) An election to continue the business of the Partnership other than
under the circumstances described in subparagraph (I) or (J) of this paragraph
(5).
(H) The admission of a General Partner other than under the
circumstances described in subparagraph (I) or (J) of this paragraph (5).
(I) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other than by removal where there is no remaining or surviving General
Partner.
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner
where there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the California
Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of the
California Corporations Code or a certificate of amendment pursuant to Section
15625 of the California Corporations Code or a certificate of dissolution
pursuant to paragraph (1) of subdivision (a) of Section 15623 of the California
Corporations Code or a certificate of cancellation of certificate of limited
partnership pursuant to paragraph (1) of subdivision (b) of Section 15623 of the
California Corporations Code.
(8) Serving on an audit committee or committee performing the functions of an
audit committee.
The enumeration in this Section 2.03-2 does not mean that any other conduct or
the possession or exercise of any other power by a Limited Partner constitutes
participation by the Limited Partner in the control of the business of the
Partnership.
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2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall be Determined by the Following Rules: (a) No Limited Partner
shall be required to make any additional contribution to the Partnership.
(b) No Limited Partner shall have a priority over any other Limited Partner,
as to return of contributions or as to compensation as a Limited Partner by way
of income.
(c) The obligation of a partner to make a contribution or return money or
property distributed in violation of this chapter may be compromised only by the
written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other than
money upon any distribution.
(e) A partner may not be compelled to accept a distribution of any asset in
kind from the Partnership in lieu of a proportionate distribution of money being
made to other partners.
(f) The Limited Partners shall have the right to vote on all matters specified
in subparagraphs (A) to (G), inclusive, of paragraph (5) of Section 2.03-2 and
the actions specified therein may be taken by the General Partners only with the
affirmative vote of a majority in interest of the Limited Partners, and without
the necessity of the consent of the General Partners.
(g) The Limited Partners shall also have the right to vote on matters
specified in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2.
Notwithstanding any other provision of the Partnership Agreement to the
contrary, the actions specified in such subparagraphs may only be taken by the
affirmative vote of a majority in interest of the limited partners.
2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall be
entitled to receive, as an expense of the Partnership, each and all of the
following amounts:
(1) Property Management Fee. For providing property management services
(including all rentup, leasing and re-leasing fees and bonuses, and leasing
services paid to any person; and including bookkeeping services for property
management and fees paid to unrelated persons for property management
services) actually rendered, the General Partners will be paid a fee of 5% of
actual gross receipts collected and received from all sources; but said
property management fees shall not exceed in any event an amount which is
competitive in price and terms with other non-affiliated persons rendering
comparable services which would reasonably be made available to the
Partnership. "Property Management" means the day-to-day professional
management services in connection with the Partnership's properties. Property
management fees paid by anyone to anyone may not exceed the lesser of (i) the
competitive rate, or (ii) 5% of actual gross receipts collected and received
from all sources. On site personnel for maintenance, etc., will be paid by the
Partnership. Property management services must be rendered pursuant to a
written agreement which precisely describes the services to be rendered. Such
agreement may only be modified by a majority in interest of limited partners,
and may be terminated by majority vote or consent of the limited partners
following sixty days prior notice thereof by the limited partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an
Affiliate Acquisition Fee as defined and in the amount stated in Section 1.04
(a-2); provided, however, that Acquisition Fees paid in connection with the
purchase and development of Partnership properties (including, but not limited
to, Affiliate Acquisition Fees paid to the General Partners and any
commissions to non-affiliated brokers) shall not exceed the lesser of the
compensation customarily charged in arms-length transactions by others
rendering similar services as an ongoing public activity in the same
geographical location and for comparable property, or an amount equal to 9% of
the initial capital contributions (less any uninvested funds returned to
Limited Partners pursuant to Section 3.05 relating to funds not invested
within two years) of Limited Partners applicable to the property which is the
subject of the transaction (adjusted to include a pro-rata amount of any
selling expenses).
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(3) Limitation. No sponsor shall render any service to the Partnership
nor receive any fee or other compensation from the Partnership other than
those explicitly provided for herein, except for amounts otherwise permitted
pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original invested capital
from the proceeds from the sale or refinancing of properties and cumulative
distributions (including distributed cash from operations and financing) equal
to a 9% cumulative, noncompounded, annual return, commencing at the time each
Limited Partner is admitted to the Partnership, with respect to his adjusted
invested capital.
2.05 Investment in Properties.
(a) The General Partners will commit at least 80% of the Partnership's
capital contributions toward Investment in Properties. The remaining capital
contributions may be used to pay Front-End Fees. When "Acquisition Fees" are
paid by the seller of properties, such fees shall not be included in satisfying
the required minimum Investment in Properties. Additionally, in determining the
amount committed to Investment in Properties, such calculation shall not take
into account any Front-End Fees.
(b) The following definitions apply to this section:
(1) Front-End Fees -- fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition
phase including organization and offering expenses, acquisition fees,
acquisition expenses, and any other similar fees, however designated by the
General Partners.
(2) Investment in Properties -- the amount of capital contributions
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Partnership (including the
purchase of properties, working capital reserves allocable thereto (except
that working capital reserves in excess of 5% shall not be included), and
other cash payments such as interest and taxes but excluding Front-End
Fees).
2.06 Certain Mortgaging. The partnership will not obtain first mortgage
financing, including wrap-around deeds of trust, containing a balloon payment
which does not contain the following provisions, unless prior approval of the
California Department of Corporations has been attained: (i) Such balloon
payment will not become due and payable prior to the earlier of (a) ten years
from the date the partnership acquires the property, or (b) two years beyond the
anticipated holding period of the property, provided that in no event may the
balloon payment become due sooner than 7 years from the date the partnership
acquires the property, and (ii) such loan will provide for regular payments in
an amount which would be sufficient to self-liquidate the loan over a 20 to 30
year period. Secondary financing incurred in connection with the purchase, if
any, shall be fully amortizing, or if not fully amortizing, shall not be due and
payable during the expected holding period of the property. The foregoing shall
not apply to financing representing, in aggregate, 25% or less of the total
purchase price of the properties acquired, or to interim financing, including
construction financing, with a full take-out commitment.
2.07 Reinvestment. Partnership shall not pay, directly or indirectly, a
commission or fee to a sponsor in connection with the reinvestment of the
proceeds of the resale, exchange, or refinancing of partnership property. There
shall be no reinvestment of cash flow, cash available for distribution or
proceeds from sale or refinancing of property.
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III.
FINANCING OF THE PARTNERSHIP
3.01 Capital Contributions of the General Partners. The General Partners
shall contribute capital to the Partnership in their capacity as General
Partners as provided in Section 1.06(b), and shall purchase units as Limited
Partners as provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the capital of
the Partnership, for each Unit subscribed, cash in the amount determined by the
General Partners; provided, however, that all Units subscribed for as part of
the initial public offering of such Units, as contemplated by Section 1.06(d),
shall be paid for in cash in an amount equal to One Hundred Dollars ($100) for
each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed in
a separate interest-bearing account in a bank or savings and loan association,
or invested in short term highly liquid investments as provided in Section 1.05,
and if not more than $1,250,000 is subscribed and contributed on or before six
months after the public offering commences, the Partnership will not be formed
and each subscriber will promptly receive his or her original investment
together with interest actually earned thereon.
3.03 Additional Contributions. In no event shall any Limited Partner be
required to make any additional contributions to the capital of the Partnership
in excess of those set forth in Section 3.02 hereof.
3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either General
or Limited, shall be entitled to a return of the capital contribution made by
any of them until the full and complete winding up and liquidation of the
business and affairs of the Partnership, except as may be permitted pursuant to
Article VI hereof; provided, however, that those portions of the proceeds of a
public offering of Units raised during the first year of such offering which
have not been invested, committed for investment (evidenced by executed written
agreements in principle or letters of understanding) in investment properties
within two (2) years of the effective date of the qualification of the sale of
Units in such offering shall, and such offering proceeds (except for necessary
operating capital) which is committed for investment within such two year
period, but not actually invested within 12 months from the date of commitment,
shall be distributed to the Limited Partners who purchased such Units in
pr oportion to the number of such Units so purchased and such limitation shall
apply by analogy to any proceeds raised during second and subsequent years of a
public offering.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall be required to make loans to the Partnership. No financing may be
made by or obtained from any sponsor of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From Cash
Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year of
the Partnership shall be allocated 99% to the Limited Partners and 1% to the
General Partner. Net Profits and Net Losses to be allocated to the Limited
Partners will be allocated to Limited Partners based on the number of Units held
by each Limited Partner and the period during the fiscal year that the Limited
Partner owned the Units. Upon the transfer of a Partnership Unit, the transferor
and the transferee shall be allocated a pro rata share of Net Profits and Net
Losses based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
3.07.2 Cash Available for Distribution, if any, shall be determined for each
quarter and, within 30 days after the close of each quarter, shall be
distributed 95% to the Limited Partners pro rata in accordance with their
respective ownership of Units and 5% to the General Partner. Cash Available for
Distribution shall be distributed to the persons who are Unit holders of record
as of the last day of the quarter for which such distribution is made.
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3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties, to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner;
and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from each
Limited Partner's respective date of admission to the Partnership, over total
prior distributions of Cash Available For Distribution with respect to the
Units.
(b) To the extent of any balance remaining, 85% to the Limited Partners to
be shared on a pro rata basis in accordance with their respective ownership of
Units and 15% to the General Partner.
Provided, however, that notwithstanding the provisions of this Section 3.07 to
the contrary, the General Partners shall receive at least 1% of the
distributions of net proceeds from refinancing or net proceeds from the sale of
properties.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on the
sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to each
Partner with a negative Capital Account proratably in an amount equal to (or
in proportion to if less than) the amount of the negative Capital Account of
each Partner;
(b) Profit on the sale of properties shall next be allocated to the Limited
Partners until each Limited Partner's Capital Account shall be a positive
amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner;
and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
(c) To the extent of any remaining profit on the sale of properties, 85% to
the Limited Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners;
(d) To the extent that there is a loss on the sale of properties arising
from a transaction, such loss on the sale of properties shall be allocated
among the Partners with positive balances in their Capital Accounts pro rata
in accordance with their respective positive balances until the aggregate
positive balance of their Capital Accounts is reduced to zero, and any balance
shall be allocated in accordance with the allocation of Net Profits and Net
Loss pursuant to Section 3.07.1 hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General
Partner shall be allocated at least 1% of the profit or loss on the sale of
properties, and, to the extent possible, in characterizing the allocated
profit on the sale of properties, that portion which constitutes ordinary
income by reason of recapture of depreciation under Sections 1245 or 1250 of
the Internal Revenue Code or investment tax credit recapture, shall be
allocated among the Partners such that a Partner (or successor) who realized
the benefit of the deduction or credit will bear the tax burden of the
corresponding recapture.
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3.07.5 A Capital Account shall be maintained by the Partnership on behalf of
each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profits
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties and with the amount of any distributions or return of capital made
by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited, as
the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from an Internal Revenue Code Section 754 election shall
not be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
3.07.7 If upon the liquidation of the Partnership, there is a deficit balance
in the Capital Account of the General Partner, after making the allocations
provided in this Agreement, then the General Partner will contribute an amount
equal to such deficit balance in its Capital Account, provided that in no event
shall the General Partner be required to contribute to the Partnership, as its
pro rata share, more than 1% of the total capital contributed by the Partners
plus four-fifths of the Cash Available For Distribution received by the General
Partner pursuant this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General Partners
will receive at least 1% of the distributions of net proceeds from the sale of
properties and, at such time as the Partnership is to be liquidated hereunder,
such adjustments, if any, as are appropriate to properly reflect such minimum
distribution shall be made with respect to the allocation of profit or loss on
the sale of properties pursuant to Section 3.07.4 and with respect to the
Capital Accounts of the Partners. Provided, further, that any deduction which
might accrue to the Partnership and which is attributable to said 1% minimum
distribution requirement shall be specially allocated to the General Partners.
3.07.9 The General Partners shall also distribute, after the completion of
each calendar year, such amount of cash from sales or financing sufficient to
allow a Limited Partner in a 36% federal tax bracket to pay the income taxes due
with respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08 Conditions and Consent to Allocations and Distributions. The methods,
hereinabove set forth, by which Net Profits and Net Losses are allocated and by
which Distributions of Cash Available For Distribution and surplus funds are
allocated and distributed, are hereby expressly consented to by each General and
Limited Partner as an express condition to becoming a General or Limited
Partner. All Distributions of Cash Available For Distribution and surplus funds
are subject to the payment of Partnership expenses and to the maintenance of
reasonable working capital reserves deemed sufficient for Partnership business
by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or
their affiliates may be made for the actual cost to the General Partners or
their affiliates of goods and materials provided by unaffiliated parties and
used for or by the Partnership. The General Partners will pay: (i) salaries and
other compensation of their affiliates and their officers, directors and
employees incidental to the organization of the Partnership, the sale of Units
and the acquisition of Partnership properties; (ii) expenses incurred by the
General Partners or their affiliates in connection with the administration of
the Partnership, including the overhead expenses (including rent, utilities,
capital equipment, other administrative items, etc.) of the General Partners or
their affiliates; (iii) expenses related to the performance of those services
for which the General Partners or their affiliates are entitled to compensation.
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the lesser
of cost of such services to the General Partners or 90% of the competitive price
which would be charged by non-affiliated persons rendering similar services in
the same or comparable geographic location. Cost of services as used herein
means the pro rata
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cost of personnel, including an allocation of overhead directly attributable to
such personnel spent on such services, or other method of allocation acceptable
to the Partnership's independent certified public accountant.
(3) This provision may be modified only with a vote of a majority of the
limited partnership interests. This provision may be terminated without penalty
on 60 days' notice.
(4) The General Partners represent that they have adequate staff which they
utilize in the conduct of their business and are able to render such services to
the Partnership. The General Partners have been previously and are now rendering
such services to other programs as an ordinary and ongoing business.
(5) Any general or administrative overhead incurred by the General Partners in
connection with the administration of the Partnership which is not directly
attributable to the rendering of services authorized by this section 3.09(b)
shall not be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead. Excluded from allowable
reimbursement shall be (i) rent or depreciation, utilities, capital equipment,
other administrative items; and (ii) salaries, fringe benefits, travel expenses,
and other administrative items incurred or allocated to any controlling persons
of the General Partners or their affiliates. Controlling person, for purpose of
the subsection, includes but is not limited to, any person, whatever his or her
title who performs functions for the General Partners similar to those of: (1)
chairman or member of the board of directors; (2) executive management, such as
(i) president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer; (3) senior management, such as the vice president of
an operating division who reports directly to executive management; or (4) those
holding 5% or more equity interest in the General Partners or a person having
the power to direct or cause the direction of the General Partners whether
through the ownership of voting securities, by contract, or otherwise.
(6) No payment will be made for services for which the General Partners or
their affiliates are entitled to compensation by way of a separate fee, other
than as specifically permitted by this Agreement.
(c) All other expenses of the Partnership shall be billed directly to and paid
by the Partnership as follows: (1) costs of taxes and assessments on Partnership
properties and other taxes applicable to the Partnership; (2) legal, audit,
accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax purposes,
keep on an accrual or a cash basis (to be determined at their discretion upon
filing the initial federal and state tax returns of the Partnership), adequate
books of account of the Partnership wherein shall be recorded and reflected all
of the capital contributions of the Partnership and all of the expenses and
transactions of the Partnership. Such books of account shall be kept at the
principal place of business of the Partnership, and each Limited Partner and his
or her authorized representatives shall have at all times, during reasonable
business hours, free access to and the right to inspect and copy such books of
account and all records of the Partnership, including the right to obtain by
mail or to inspect a list of the names and addresses and interests owned of the
Limited Partners. All books and records of the Partnership shall be kept on the
basis of an annual accounting period ending December 31, except for the final
accounting period which shall end on the dissolution or termination of the
Partnership without reconstitution, provided, however, that the General Partners
in their sole discretion may, subject to approval by the Internal Revenue
Service and applicable state taxing
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authorities, at any time, without approval of the Limited Partners, change the
Partnership's accounting period and tax year to a period to be determined by the
General Partners. All references herein to a "year of the Partnership" are to
such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide
the following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal year, (1) a
balance sheet as of the end of such fiscal year, together with statements of
income, Partners' equity, change in financial position and a cash flow
statement for such year. The balance sheet and such statements (other than the
cash flow statement) shall be prepared in accordance with generally accepted
accounting principles and shall be accompanied by an auditor's report
containing an unqualified opinion of the independent certified public
accountants preparing such report; (2) a report of the activities of the
Partnership for such year; (3) a report on distributions to the Limited
Partners for such period, separately identifying distributions from (a) funds
from operations during such period, (b) reserved funds from operations from
prior periods, (c) proceeds from disposition of property and investments, (d)
reserves from the proceeds of public offerings of Units; (4) a detailed
statement of any transactions with the General Partners or their affiliates
and fees, commissions, compensation, and other benefits paid or accrued to the
General Partners or their affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed; and
(5) the annual report must contain a breakdown of the costs reimbursed to the
General Partners. Within the scope of the annual audit if the General
Partner's financial statement, the independent certified public accountants
must verify the allocation of such costs to the Partnership. The method of
verification shall at minimum provide:
(1) A review of the time records of individual employees, the costs of
whose services were reimbursed;
(2) A review of the specific nature of the work performed by each such
employee.
The methods of verification shall be in accordance with general accepted
auditing standards and shall accordingly include such tests of the
accounting records and such other auditing procedures which the General
Partners' independent certified public accountants consider appropriate in
the circumstance. The additional costs of such verification will be
itemized by said accountants on a Partnership by Partnership basis and may
be reimbursed to the General Partners by the Partnership in accordance with
subsection 3.09 only to the extent that such reimbursement when added to
the cost for administrative services rendered does not exceed the allowable
rate as determined in subsection 3.09.
(b) Report of Fees. Within 45 days of the end of each quarter of a fiscal
year during which a sponsor received fees for services from the Partnership, a
report setting forth (i) a statement of the services rendered and (ii) the
amount of fees received. This report may generally be set forth in a footnote
in the quarterly report under section 402(c).
(c) Quarterly Reports. Within 45 days after the end of each fiscal quarter
a report for such period containing an unaudited balance sheet, statement of
income, statement of changes in financial position and a cash flow statement
and a report covering the activities of the Partnership for such quarter which
contains the information specified on Form 10-Q (if such report is required to
be filed with the Securities and Exchange Commission).
(d) Tax Information. Within 75 days after the end of each fiscal year, all
information necessary for the preparation of the Limited Partners' federal
income tax returns.
(e) Special Reports. A Special Report of real property acquisitions shall
be distributed within 45 days after the end of each quarter until the capital
contributions of the Partnership (other than retained reserves) shall be fully
invested. Such Special Report shall include:
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(i) description of the properties, (ii) descriptions of the geographic
locale and of the market upon which successful operation is dependent,
(iii) the Appraised Value, (iv) date of appraisal, (v) actual purchase
price and terms, (vi) cash expended from capital contributions to acquire
each property, and (vii) the amount which then remains unexpended, stated
in terms of both dollar amount and percentage of the total amount of
capital contributions. This report may be in substance the information
included in Forms 8-K (if such reports are required to be filed with the
Securities and Exchange Commission).
(f) Reports During Offering. During the offering period and until the
Partnership is fully invested, the Partnership will file any prospectus
required by Section 10(a)(3) of the Securities Act of 1933 as post-effective
amendments to the registration statement. The Partnership will additionally
file after the end of the distribution period, a current report on Form 8-K
containing the financial statements and any additional information required by
Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of
a binding purchase agreement) made after the end of the distribution period
involving the use of 10% or more (on a cumulative basis) of the net proceeds
of the offering and to provide the information contained in such report to the
limited partners at least once each quarter after the distribution period of
the offering has ended. The Partnership will also file a sticker supplement
pursuant to Rule 424(c) under the Securities Act of 1933 during the offering
period describing each property not identified in the prospectus at such time
as there arises a reasonable probability that such property will be acquired
(also disclosing all compensation and fees received by the General Partners
and their affiliates in connection with such acquisition) and to consolidate
all such stickers into a post-effective amendment filed at least once every
three months, with the information contained in such amendment provided
simultaneously to the existing Limited Partners. Lastly, the Partnership will
provide the Limited Partners the Financial Statements required by Form 10-K
for the first full fiscal year of operations of the Partnership.
(g) Filing of Reports. The Partnership will file with the Commissioner of
Corporations of the State of California and any other appropriate federal or
state regulatory agency requiring the same a copy of each report made pursuant
to subdivisions (a), (b), (c) and (d) of this Section 4.02, concurrently with
their transmittal to the Limited Partners, if the filing is required by any
such state.
4.03 Tax Returns and Records. The General Partners, at Partnership expense,
shall cause income tax returns for the Partnership to be prepared and timely
filed with the appropriate authorities. The General Partners, at Partnership
expense, shall cause to be prepared and timely filed, with appropriate federal
and state regulatory and administrative bodies, all reports required to be filed
with such entities under then current applicable laws, rules and regulations.
Such reports shall be prepared on the accounting or reporting basis required by
such regulatory bodies. Any Limited Partner shall be provided with a copy of any
such report upon request without expense to him or her. The General Partners, at
Partnership expense, shall maintain a record of the information obtained to
indicate that a Limited Partner meets the suitability standards set forth in the
Prospectus.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the
first day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall be
deposited in such bank or banks as the General Partners shall deem appropriate.
Subject to the provisions of Article XII, such funds shall be withdrawn only by
the General Partners or their duly authorized agents. Sponsors shall have a
fiduciary responsibility for the safekeeping and use of all funds of the
Partnership, whether or not in their immediate possession or control, and they
shall not employ or permit another to employ such funds or assets in any manner
except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The
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election, if made, will be filed with the Partnership information income tax
return for the first taxable year to which the election applies.
4.07 Insurance. The Partnership shall at all times maintain public liability
insurance in amounts determined by the General Partners for the protection of
the Partnership and each of its members. In addition, the Partnership shall
carry appropriate Workmen's Compensation Insurance and such other insurance with
respect to the real property owned by it as shall be customary for similar
property, similarly located, from time to time (for purposes hereof losses
catastrophic in nature, e.g., war, earthquakes and floods, shall not be deemed
customary insurance coverages and shall not be required). No sponsor or
affiliate of a sponsor shall receive an insurance brokerage fee or commission or
write any insurance policy covering the Partnership or any of the property of
the Partnership.
4.08 Appraisals.
(a) An appraisal by an independent qualified appraiser shall be obtained for
each investment property. Such qualification may be demonstrated by membership
in a nationally recognized appraisal society such as Member Appraisal Institute
("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their equivalent,
but is not limited thereto. The appraisal shall be maintained in the records of
the Partnership for at least five years and shall be available for inspection
and duplication by any Limited Partner.
(b) All persons retained by the Partnership to provide the Partnership reports
of their opinions of appraised values of investment properties being considered
by the Partnership for acquisition or otherwise shall be members in good
standing of a recognized professional appraisal organization and shall certify
to the Partnership as follows: (1) that he or she has no present or contemplated
future interest in the property being appraised; (2) that he or she has no
personal interest or bias with respect to the subject matter of or the parties
involved in the appraisal; and (3) that his or her employment and compensation
for rendering an opinion and report are not contingent upon the value so
determined, or on any other condition other than the delivery of the report or
opinion for a predetermined fee.
4.08 Tax Matters Partner.
JOHN A. COSEO, JR. is selected and has the right, power and authorization to
represent the Partnership and each Limited Partner as the tax matters partner in
connection with all examinations of the Partnership affairs by tax authorities,
including resulting administrative and judicial proceedings, and to expend
Partnership funds for professional services and costs connected therewith. Each
Limited Partner agrees to cooperate with JOHN A. COSEO, JR. and to do or refrain
from doing any and all things reasonably required by JOHN A. COSEO, JR. to
conduct such proceedings.
V.
ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (20 for certain fiduciaries) may be
transferred.
No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
5.02 Further Restriction on Transfers. No Partner shall make any assignment
of all or any part of his or her interest in the Partnership if said transfer or
assignment would, when considered with all other transfers during the same
applicable twelve (12) month period, cause a termination of the Partnership for
federal or any applicable state income tax purposes.
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5.03 Substituted Partners. No assignee of the whole or any portion of a
Limited Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners: (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept, adopt and approve in writing of all
of the terms and provisions of this Agreement, as the same may have been
amended; and (v) the written consent of the General Partners to the
substitution, which may be granted or denied within the General Partners' sole
and absolute discretion, is obtained if the substituted Limited Partner is not
the transferring Limited Partner's spouse, ancestor, lineal descendent or trust
for the benefit of such person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer shall
be void ab initio. All documents and records evidencing a Limited Partnership
interest, whether issued originally or subsequently, owned by California
residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab initio."
(c) "Assignees of this security may become substituted Limited Partners
only with the consent of the General Partners."
5.05 Withdrawal of Limited Partner. Except as provided in Article VI, no
Limited Partner shall be entitled to withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
5.07 Recognition of Substituted and Assignee Limited Partners. The
Certificate of Limited Partnership of the Partnership shall be amended and
recorded pursuant to Section 1.01 in any jurisdiction where it may be required
not less often than quarterly to recognize the admission of substituted Limited
Partners. Assignees of Limited Partners shall be recognized as such not later
than the first of the calendar month following the General Partners' receipt of
notice of such assignment.
VI.
REPURCHASE OF UNITS
The Partnership, in its sole discretion, may repurchase Units, after the
offering of its Units has closed, at a negotiated price, if such repurchase does
not impair the capital or operations of the Partnership. The Partnership may not
reserve or apply more than an aggregate of .5% of the gross proceeds of its
offering of Units toward any such repurchases.
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VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property other
than cash in return for his or her contribution. However, the General Partners
may, in their sole discretion, make such distribution of property other than
cash to any or all of the Partners.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General
Partner of this Partnership upon the happening of any of the following events:
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order for
relief against the General Partner is entered under Chapter 7 of the federal
bankruptcy law, or the General Partner (1) makes a general assignment for the
benefit of creditors, (2) files a voluntary petition under the federal
bankruptcy law, (3) files a petition or answer seeking for that partner any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation, (4) files
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against that partner in any proceeding of this
nature, or (5) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of that partner's properties.
(d) 60 days after the commencement of any proceeding against the General
Partner seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law, or
regulation, the proceeding has not been dismissed, or if within 60 days after
the appointment without that partner's consent or acquiescence of a trustee,
receiver, or liquidator of the General Partner or of all or any substantial
part of that partner's properties, the appointment is not vacated or stayed,
or within 60 days after the expiration of any such stay, the appointment is
not vacated.
(e) In the case of a General Partner who is an individual, either of the
following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order
adjudicating the partner incompetent to manage the General Partner's person
or estate.
(f) In the case of a General Partner who is acting as a General Partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee, in which case the new trustee
automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership, the
dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the distribution by
the fiduciary of the estate's entire interest in the limited partnership.
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Notwithstanding the provisions of subsections (a) and (h) above, without the
concurrence of a majority of the outstanding limited partnership interests, a
General Partner may not withdraw or retire as a General Partner or dissolve
itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one General
Partner ceases to be a General Partner pursuant to the provisions of Section
8.01, the remaining General Partner may elect to continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a majority
in interest of the Units may remove any or all of the General Partners. Written
notice of such determination setting forth the effective date of such removal
shall be served upon the General Partner or General Partners so removed and as
of the effective date, shall terminate all of such persons' rights and powers as
a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business.
After the occurrence of a terminating event with respect to the last remaining
General Partner, as described in Section 8.01, the Limited Partners shall meet
within sixty (60) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the Partnership
business, in which event, upon the filing of a new Certificate of Limited
Partnership to reflect the new General Partner, this Partnership shall
continue in business; or
(b) Elect to terminate and liquidate the Partnership under the provisions
of Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a
terminating event, if such terminating event relates to a General Partner who is
the last remaining original General Partner and if the business of the
Partnership is continued, as aforesaid, the Terminated General Partner shall be
entitled to receive from the Partnership the then present fair market value of
his allocated interest in Net Profits, Net Losses, Distributions of Cash
Available for Distribution, surplus Funds upon liquidation, determined by
agreement of the Terminated General Partner and the Partnership, or, if they
cannot agree, by arbitration in accordance with the then current rules of the
American Arbitration Association. The expense of such arbitration shall be borne
equally by the Partnership and the General Partners. For this purpose, the fair
market value of the interest of the Terminated General Partner shall be deemed
to be the amount the Terminated General Partner would receive upon dissolution
and termination of the Partnership under Section 9.02, assuming (a) such
dissolution or termination occurred on the date of the dissolving event
specified above, and (b) the assets of the Partnership were sold for their then
fair market value without compulsion of the Partnership to sell such assets.
The Partnership forthwith either shall (a) pay to the Terminated General Partner
an amount in cash equal to eighty percent (80%) of the present fair market value
of the interest so determined, and such payment when made shall constitute
complete and full discharge of all amounts to which the Terminated General
Partner is entitled for such interest, or (b) execute and deliver to the
Terminated General Partner a promissory note of the Partnership, payable to the
order of the Terminated General Partner, which promissory note shall include the
following provisions: (i) be in a principal amount equal to the present fair
market value of the interest so determined; (ii) bearing interest at a rate per
annum which is the lesser of two percent over the prime rate of the Bank of
America, NT&SA or ten percent per annum, principal and all unpaid accrued
interest payable from time to time, with the remaining unpaid principal balance
and unpaid accrued interest on the promissory note to be due and payable five
years from the date of such terminating event, and (iii) such other provisions
as would be usual and customary in a commercial promissory note, including the
right of the holder upon default to accelerate otherwise unmatured installments
and to recover costs of collection including reasonable attorney's fees.
Notwithstanding the foregoing, where the termination is voluntary, the method of
payment will be by a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the Terminated General
Partner otherwise would have received under the partnership agreement had the
General Partner not terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner,
all executory contracts between the Partnership and the terminating General
Partner or any affiliate thereof (unless such affiliate is also an affiliate of
a continuing General Partner) may be terminated by the Partnership effective
upon written notice to the party so terminated. The terminating General Partner
or any affiliate (unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty
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(60) days' prior written notice of such termination and cancellation given to
the new General Partner, if any, or to the Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and
dissolved, prior to the end of its term, in accordance with any other provision
of this Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the
Partnership determine, by written consent or approving vote, that the
Partnership should be dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership, unless
the remaining Partners elect to continue the business of the Partnership as
provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
(b) The aggregate net profit and net loss realized by the Partnership upon the
sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
(c) The proceeds of such liquidation shall be applied and distributed in the
order of priority and in the same manner as provided in Section 3.07(d) hereof
after providing for the debts and liabilities of the Partnership.
(d) All distributions under Section 9.02(c) shall be made in money arising
from the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the
Partnership's property and assets in condemnation or by eminent domain shall be
treated in all respects as a sale of the Partnership's property and assets upon
the dissolution and liquidation of the Partnership, pursuant to this Article IX
In such event any portion of the property and assets of the Partnership not so
taken shall be sold and/or distributed, together with the condemnation award, in
the manner provided for in this Article IX
9.04 Period of Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership, so as to enable the
General Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited Partner,
by becoming a Limited Partner, hereby constitutes and appoints each of the
General Partners and his successors the true and lawful attorneys of, and in the
name, place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or hereafter
amended, that may be appropriate to reflect solely:
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(i) A change of the name or the location of the principal place of
business of the Partnership;
(ii) The disposal by a Limited Partner of his or her interest in the
Partnership, in any manner permitted by this Agreement and any return of
the capital contribution of a Limited Partner (or any part thereof), if
any, provided for by this Agreement;
(iii) A person becoming a Limited Partner of the Partnership as permitted
by this Agreement;
(iv) A change in any provision of this Agreement or the exercise by any
person of any right or rights thereunder not requiring the consent of said
Limited Partner; and
(v) The exercise by any person of any right or rights under this
Agreement requiring the consent or approval of a majority or a specified
percentage of the Limited Partners and the required consent or approval has
been given.
(b) To make such certificates, instruments and documents, including
Fictitious Business Name Statements, as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business in connection with the use of
the name of the Partnership by the Partnership; and
(c) To make such certificates, instruments and documents, including
amendments to this Agreement and the Certificate of Limited Partnership, as
said Limited Partner may be required or as may be appropriate for said Limited
Partner to make, by the laws of any state or other jurisdiction solely to
reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or pertaining to
the Partnership, of any kind referred to in paragraph (a) of this
subsection; and
(iii) Any other changes in or amendments to this Agreement but only if
and when said Limited Partner has agreed to such other changes or
amendments by signing, either personally or by duly appointed attorney, an
agreement amending this Agreement.
Each of said agreements, certificates, instruments and documents shall be in
such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
Each Limited Partner authorizes said attorney to take any further action which
said attorney shall consider necessary or convenient in connection with any of
the foregoing and hereby gives said attorney full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the foregoing as fully as said Limited Partner might or could
do if personally present, and hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The powers hereby conferred shall continue from the date said Limited Partner
becomes a Limited Partner in the Partnership until said Limited Partner shall
cease to be such a Limited Partner and, being coupled with an interest, shall be
irrevocable.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners agree,
when authorized pursuant to Section 10.01, or otherwise, to make, file or record
with the appropriate public authority and (if required) publish the Certificate,
any amendments thereof, and such other certificates, instruments and documents
as may be required or appropriate in connection with the business and affairs of
the Partnership.
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XI.
NOTICES
All notices (except notices required under Section XIV hereof), requests and
other communications provided for herein shall be in writing and, unless
otherwise specified, shall be forwarded by first class mail, directed to the
parties at the addresses set forth in the Subscription Agreement and Signature
Pages attached hereto or to such other addresses as any party may from time to
time designate in writing, and given in accordance with the provisions of this
Article XI. Notices or communications given, as set forth herein, shall be
conclusively deemed to have been received by the party to whom addressed three
business days after the same are deposited in the United States mail.
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
Any deed, bill of sale, mortgage, deed of trust, lease, contract of sale, or
other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
DISPUTES AND ARBITRATION
Any dispute or controversy arising under, out of, or in connection with or in
relation to this Agreement and any amendments thereof, or the breach thereof, or
in connection with the dissolution of the Partnership, shall be determined and
settled by arbitration to be held in the city where the office of the
Partnership is located, in accordance with the rules then applicable of the
American Arbitration Association. Any award rendered therein shall be final and
binding on each and all of the Partners, and judgment may be entered thereon in
a court of appropriate jurisdiction. Arbitration of alleged securities
violations is not allowed.
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at any place within or without this state
as may be fixed by the General Partners. If no other place is so fixed,
partners' meetings shall be held at the principal executive office of the
Partnership.
(b) A meeting of the partners may be called by any of the General Partners or
by Limited Partners representing more than 10 percent of the interests of
Limited Partners for any matters on which the Limited Partners may vote.
(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given not less than 15, nor
more than 60, days before the date of the meeting to each partner entitled to
vote at the meeting. The notice shall state the place, date, and hour of the
meeting and the general nature of the business to be transacted, and no other
business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either
personally or by mail or other means of written communication, addressed to the
partner at the address of the If any notice or report addressed to the partner
at the address of the partner appearing on the books of the Partnership or given
by the partner to the Partnership for the purpose of notice, or, if no address
appears or is given, at the place where the principal executive office of the
partnership is located or by publication at least once in a newspaper of general
circulation in the county in which the principal executive office is located.
The notice or report shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice or report in accordance
with the provisions of this article, executed by a General Partner, shall be
prima facie evidence of the giving of the notice or report. Included with the
notice shall be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for adoption by the
limited partners and of any proposed amendment to the partnership agreement.
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If any notice or report addressed to the partner appearing on the books of the
Partnership is returned to the Partnership by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice or report to the partner at the address, all future notices or
reports shall be deemed to have been duly given without further mailing if they
are available for the partner at the principal executive office of the
Partnership for a period of one year from the date of the giving of the notice
or report to all other partners.
(3) Upon written request to the General Partners by any person entitled to
call a meeting of partners, the General Partners immediately shall cause notice
to be given to the partners entitled to vote that a meeting will be held at a
time requested by the person calling the meeting, not less than 15, nor more
than 60, days after the receipt of the request. If the notice is not given
within 20 days after receipt of the request, the person entitled to call the
meeting may give the notice or, upon the application of such person, the
superior court of the county in which the principal executive office of the
Partnership is located, or if the principal executive office is not in this
state, the county in which the Partnership's address in this state is located,
shall summarily order the giving of the notice, after notice to the Partnership
giving it an opportunity to be heard. The procedure provided in subdivision (c)
of Section 305 of the California Corporations Code shall apply to the
application. The court may issue any order as may be appropriate, including,
without limitation, an order designating the time and place of the meeting, the
record date for determination of partners entitled to vote, and the form of
notice,
(d) When a partners' meeting is adjourned to another time or place, unless the
Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and noticed,
and wherever held, are as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. All
waivers, consents, and approvals shall be filed with the Partnership records or
made a part of the minutes of the meeting. Attendance of a person at a meeting
shall constitute a waiver of notice of the meeting, except when the person
objects, at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this chapter to be included in the notice
but not so included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any meeting of partners need
be specified in any written waiver of notice, unless otherwise provided in the
partnership agreement, except as provided in subdivision (f).
(f) Any partner approval at a meeting, other than unanimous approval by those
entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section 15632
of the California Corporations Code shall be valid only if the general nature of
the proposal so approved was stated in the notice of meeting or in any written
waiver of notice.
(g) (1)A majority in interest of the Limited Partners represented in person
or by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough partners to leave less than a quorum, if any action taken
(other than adjournment) is approved by the requisite percentage of interests of
Limited Partners specified in California Revised Limited Partnership Act or in
the Partnership Agreement.
(3) In the absence of a quorum, any meeting of partners may be adjourned from
time to time by the vote of a majority of the interests represented either in
person or by proxy, but no other business may be transacted, except as provided
in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action which
may be taken at any meeting of the partners may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed
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by partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the "action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in the
same manner as in the case of corporations formed under the General Corporation
Law of California. The Partnership will provide for proxies or written consents
which specify a choice between approval and disapproval of each matter to be
acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record
entitled to notices of any meeting or to vote, or entitled to receive any
distribution or to exercise any rights in respect of any other lawful action,
the General Partners, or Limited Partners representing more than 10 percent of
the interests of Limited Partners, may fix, in advance, a record date, which is
not more than 60 or less than 15 days prior to the date of the meeting and not
more than 60 days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of or to vote
at a meeting of partners shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
(2) The record date for determining partners entitled to give consent to
Partnership action in writing without a meeting shall be the day on which the
first written consent is given.
(3) The record date for determining partners for any other purpose shall be at
the close of business on the day on which the general partners adopt it, or the
60th day prior to the date of the other action, whichever is later.
(4) The determination of partners of record entitled to notice of or to vote
at a meeting of partners shall apply to any adjournment of the meeting unless
the general partners, or the limited partners who called the meeting, fix a new
record date for the adjourned meeting, but the general partners, or the limited
partners who called the meeting, shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original meeting.
XV.
CAPTIONS-PRONOUNS
Any titles or captions of articles or paragraphs contained in this Agreement
are for convenience only and shall not be deemed part of the context of this
Agreement. All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identification of
the person or persons, firm or firms, corporation or corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
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XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified or
amended only by a majority vote of the Limited Partners; provided, however, this
Agreement may be amended from time to time by the General Partners, without the
consent of any of the Limited Partners, but only if such amendment does not
affect the rights of the limited partners, (i) to add to the representations,
duties or obligations of the General Partners or their Affiliates or to
surrender any right or power granted to the General Partners or their Affiliates
herein, for the benefit of the Limited Partners; (ii) to cure any ambiguity, to
correct or supplement any provision which may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under this Agreement which will not be inconsistent with the provisions
of this Agreement; (iii) to reflect reductions in the capital contributions of
the Limited Partners resulting from the return of capital to the Limited
Partners in accordance with the requirements of this Agreement; (iv) to delete
or add any provision of this Agreement required to be so deleted or added by the
Staff of the Securities and Exchange Commission or by a State "Blue Sky"
Administrator or similar official, which addition or deletion is deemed by the
Administrator or official to be for the benefit or protection of the Limited
Partners; (v) to elect for the Partnership to be governed by any successor
California statute governing limited partnerships; and (vi) as otherwise
provided for pursuant to this Partnership Agreement. The General Partner shall
notify the Limited Partners within a reasonable time of the adoption of any
amendment. Notwithstanding anything to the contrary contained in this Agreement,
this Agreement may not be amended without the consent of all Partners to be
adversely affected by the amendment that:
a. Converts a Limited Partner into a general partner;
b. Modifies the limited liability of a Limited Partner;
c. Alters the interest of the General Partner or Limited Partners in net
income or net loss or distributions from the Partnership; or
d. Adversely affects the status of the Partnership as a partnership for
federal income tax purposes.
XVIII.
ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreements between the
parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be governed
by and construed in accordance with the laws of the State of California and,
unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or any other
taxing authority involving the Partnership or an individual Partner or Partners,
the outcome of which may adversely affect the Partnership, either directly or
indirectly, the Partnership may incur expenses it deems necessary and advisable
in the interest of the Partnership to oppose such proposed deficiency,
including, without being limited thereto, legal and accounting fees.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts; each of which shall
be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
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XXI.
LIABILITY AND INDEMNIFICATION
21.01 Notwithstanding the provisions of Section 2.02, the partnership shall
not provide for indemnification of the general partners for any liability or
loss suffered by the general partners, nor shall it provide that the general
partners be held harmless for any loss or liability suffered by the partnership,
unless all of the following conditions are met:
(i) the general partners have determined, in good faith, that the course
of conduct which caused the loss or liability was in the best interests of the
partnership, and
(ii) such liability or loss was not the result of negligence or misconduct
by the general partners, and
(iii) such indemnification or agreement to hold harmless is recoverable
only out of the assets of the partnership and not from the limited partners.
21.02 Indemnification of the General Partners or their affiliates will not be
allowed for any liability arising from or out of a violation of state or federal
securities laws.
21.03 In the event the Partnership enters into any selling agreement with
securities broker-dealers that provides, in any way, directly or indirectly, for
indemnification by the Partnership to such broker-dealers or other persons for
any violations of securities laws, then and in such event the General Partners
will indemnify and hold the Partnership harmless from any liability, claim,
costs, attorneys fees, etc., which may arise pursuant to such selling broker-
dealer indemnification agreements. The General Partners will pay all such items
from their own personal funds and may not be reimbursed, directly or indirectly,
from Partnership funds for such items.
21.04 The purpose, intent and effect of sections 21.02 and 21.03 are that no
Partnership funds shall ever be used to indemnify any person (including General
Partners) against violations of federal or state securities laws.
XXII.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
22.01 The provisions of this Article are effective notwithstanding anything
to the contrary in Sections 1.05 and 2.01.
22.02 Investments in limited partnership interests of another program shall
be prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 22.03). In such event,
duplicate property management or other fees shall not be permitted.
22.03 This partnership shall be permitted to invest in joint venture
arrangements with another program formed by the sponsor if all the following
conditions are met.
(a) The two programs have substantially identical investment objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in each
program.
(d) The partnership must have a right of first refusal to buy if the other
program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms and
conditions.
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(f) The prospectus must disclose the potential right of impasse on joint
venture decisions since neither program controls and the potential risk that
while one program may buy the property from the other joint venturer, in the
event of a sale, it may not have the resources to do so.
XXIII.
PROCEEDS FROM FINANCING PROPERTIES
23.1 After the Partnership has owned a property for two years or more, or
after January 1, 1995, the Partnership may borrow money and mortgage such
property subject to the following:
(a) the mortgage must be a lien only on one specific property owned by the
Partnership.
(b) the holder of the note evidencing the borrowing may have recourse only
to the property secured by the mortgage for payment of the note; no recourse
may be had against any other property owned by the Partnership, or against
any General or Limited Partner personally.
(c) all net financing proceeds received after January 5, 1995 may either be
distributed to the Limited and General Partners as provided in this Agreement
or be reinvested in manufactured home communities.
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited PATRICIA ANN COSEO August 7, 1985, as amended
-----------------------------
Partner: Patricia Ann Coseo to June 8, 1995
Individual General JOHN A. COSEO, JR. August 7, 1985, as amended
-----------------------------
Partner: John A. Coseo, Jr. to June 8, 1995
Corporate General The Windsor Corporation
Partner:
JOHN A. COSEO, JR. August 7, 1985, as amended
-----------------------------
John A. Coseo, Jr. to June 8, 1995
President
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Exhibit 23.1
Consent of Appraiser
--------------------
This Firm prepared valuation appraisals during the period of June 1999 through
October 1999 for the following properties for Windsor Park Properties 3, A
California Limited Partnership ("Windsor 3"):
1. The manufactured home community located at 3559 Cossell Road in
Indianapolis, Indiana known as Ponderosa.
2 The manufactured home community located at 9919 Highway 78 in Ladson, South
Carolina known as The Pines.
3. The manufactured home community located at 3400 South Greeley Highway in
Cheyenne, Wyoming known as Big Country Estates.
4 The manufactured home community located at 1508 Dickerson Pike in
Nashville, Tennessee known as Shady Hills.
5. The manufactured home community located at 1341 Dickerson Pike in
Nashville, Tennessee known as Trailmont.
6. The manufactured home community located at 3800 South Tomahawk Road in
Apache Junction, Arizona known as Apache East.
7. The manufactured home community located at 3405 South Tomahawk Road in
Apache Junction, Arizona known as Denali Park Estates.
8. The manufactured home community located at 10321 Main Street in
Thonotosassa, Florida known as Harmony Ranch.
A description of such appraisals (the "Appraisals") is included in the Consent
Solicitation Statement of Windsor 3 to be filed on or about November 19, 1999
(the "Consent Solicitation Statement"), a copy of which Consent Solicitation
Statement has been supplied to and reviewed by this Firm.
This Firm hereby:
(i) consents to the inclusion of the Appraisals (with or without
exhibits) in the Consent Solicitation Statement and related Schedule 14A of
Windsor 3 (the "Schedule 14A") and related Transaction Statement on Schedule
13e-3 (the "Schedule 13E-3"), as an appendix or otherwise, in any form (whether
in paper or digital format, including any electronic media);
(ii) consents to Windsor 3's inclusion of descriptions of the Appraisals
and this Firm in the Consent Solicitation Statement, Schedule 14A and Schedule
13E-3;
(iii) consents to the naming of our Firm as an expert under the caption
"Experts" in such Consent Solicitation Statement, Schedule 14A and Schedule 13E-
3 and the filing of this Consent as an Exhibit to the Schedule 14A and Schedule
13E-3; and
<PAGE>
(iv) consents to the photocopying and transmittal of copies of the
Appraisals, or excerpts thereof, to any or all limited partners of the
Partnership and such other parties as Windsor 3 deems appropriate.
Date: November 15, 1999 WHITCOMB REAL ESTATE
By: /s/ John Whitcomb
---------------------------
Name: John Whitcomb
Title: Owner
<PAGE>
EXHIBIT 23.2
The General Partners of
Windsor Park Properties 3, A California Limited Partnership
c/o The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
We hereby consent to the use of our name and to the description of our opinion
letter, dated November 15, 1999, under the caption "Fairness Opinion" in, and to
the inclusion of such opinion letter as Appendix A to, the Consent Solicitation
Statement filed as part of the Proxy Statement on Schedule 14A of Windsor Park
Properties 3, A California Limited Partnership ("WPP 3"). In addition we hereby
consent to the inclusion of our opinion letter as an exhibit to WPP 3's
Transaction Statement on Schedule 13E-3 and the incorporation relating to us
into such Transaction Statement from WPP 3's Proxy Statement.
LEGG MASON WOOD WALKER, INCORPORATED
By: /s/ Thomas E. Robinson
-------------------------
Thomas E. Robinson
Managing Director
